LEASE AGREEMENT
ALCO IV, L.L.C.
a North Carolina limited liability company
( "LESSOR")
AND
EMERITUS CORPORATION
a Washington corporation
("LESSEE")
September 10, 1997
for
ASSISTED LIVING FACILITY
located at
Urbana, Illinois
LEASE
THIS LEASE ("Lease") dated as of September
10, 1997, is entered into between ALCO IV, L.L.C.,
a North Carolina limited liability company, having
its principal office at ▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇. ("Lessor"), and EMERITUS
CORPORATION, a Washington corporation, having its
principal office at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lessee").
ARTICLE
1.
LEASED PROPERTY; TERM
Upon and subject to the terms and conditions
hereinafter set forth, Lessor leases to Lessee and
Lessee rents from Lessor all of Lessor's rights
and interest in and to the following real property
located in Urbana, Illinois(collectively, the
"Leased Property"):
(a) the real property more particularly
described on Exhibit A attached hereto together
with all covenants, licenses, privileges and
benefits thereto belonging, and any easements,
rights-of way, rights of ingress and egress or
other interests of Lessor in, on or to any land,
highway, street, road or avenue, open or proposed,
in, on, across, in front of, abutting or adjoining
such real property, including all strips and gores
adjacent to or lying between such real property
and any adjacent real property (the "Land");
(b) the 100-unit assisted living facility
(the "Facility") to be constructed on the Land
together with all buildings, structures, Fixtures
(as hereinafter defined) and other improvements of
every kind (including all alleyways and connecting
tunnels, crosswalks, sidewalks, landscaping,
parking lots and structures and roadways
appurtenant to such buildings and structures
presently or hereafter situated upon the Land,
drainage and all above-ground and underground
utility structures) (collectively, together with
the Facility, and any Capital Additions financed
by Lessor, the "Leased Improvements");
(c) all permanently affixed equipment,
machinery, fixtures and other items of real and/or
personal property, including all components
thereof, now and hereafter located in, on or used
in connection with, and permanently affixed to or
incorporated into the Leased Improvements,
including 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, carpet, moveable or
immoveable walls or partitions and built-in oxygen
and vacuum systems, all of which 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 Personal Property (collectively
the "Fixtures");
(d) the Personal Property;
(e) to the extent permitted by law, all
permits, approvals and other intangible property
or any interest therein now or hereafter owned or
held by Lessor in connection with the Leased
Property or any business or businesses now or
hereafter conducted by Lessee or any Tenant or
with the use thereof, including all leases,
contract rights, agreements, trade names, water
rights and reservations, zoning rights, business
licenses and warranties (including those relating
to construction or fabrication) related to the
Leased Property or any part thereof, but
specifically excluding the general corporate
trademarks, service marks, logos, insignia or
books and records of Lessee; and
(f) all site plans, surveys, soil and
substrata studies, architectural drawings, plans
and specifications, engineering plans and studies,
floor plans, landscape plans, and other plans and
studies that relate to the Land or the Leased
Improvements and are in Lessor's possession or
control.
SUBJECT, HOWEVER, to the matters set forth on
Exhibit B attached hereto (the "Permitted
Exceptions"), to have and to hold for a fixed term
of 10 years (the "Initial Term") commencing on the
earlier date to occur (the "Commencement Date") of
(i) two years after the date a certificate of
occupancy is issued for the Facility by the
applicable governing body, and (ii) the Breakeven
Date (as defined below), and ending at midnight on
the last day of the 120th month after the
Commencement Date, as may be extended pursuant to
the terms of Article 34. "Breakeven Date" means
the first day of the first month following the
month in which the revenues generated from the
operation of the Facility exceed the sum of the
monthly operating expenses of the Facility, plus
the monthly Minimum Rent projected to be due
hereunder.
ARTICLE 2
RENT
2.1 MINIMUM RENT AND ADJUSTMENTS TO MINIMUM
RENT. Lessee shall pay to Lessor, without notice,
demand, set off (except as set forth in Section
30.2 or Article 32 hereof) or counterclaim, in
advance an lawful money of the United States of
America, at Lessor's address set forth herein or
at such other place or to such other person, firms
or corporations as Lessor from time to time may
designate in writing, Minimum Rent, as adjusted
annually pursuant to Section 2.1(b) during the
Term, as follows:
(a) MINIMUM RENT. Lessee will pay to Lessor
as rent (as adjusted from time to time in
accordance with Sections 2.1(b) and 2.1(e), the
"Minimum Rent") for the Leased Property the annual
sum equal to the lesser of (i) l.1 times the
Project Amount and (ii) the Project Amount plus
$750,000.00, times the sum of (A) the rate, as of
such date, equal to the weekly average yield on
United States Treasury Securities - Constant
Maturity Series for a term of ten years plus (B)
350 basis points. The Minimum Rent shall be
payable in advance in 12 equal, consecutive
monthly installments on the first day of each
calendar month during the Term. The parties shall
execute an acknowledgment of the Commencement Date
and the calculation of the initial Minimum Rent
pursuant to this Section 2.1(a) as soon as
reasonably practicable after the Commencement
Date. The Minimum Rent shall be prorated for any
partial month, and is subject to adjustment as
provided in Sections 2.1(b), 2.1(e) and 9.3(b)(iv)
below. As used herein, the term "Project Amount"
means the total amount funded or to be funded for
the acquisition of the Land and the Personal
Property and the development and construction of
the Facility and the other Leased Improvements by
Lessor pursuant to that certain Building and Term
Loan Agreement of even date herewith (the "Loan
Agreement") between Capstone Capital Corporation
(the "Lender") and Lessor, as borrower, in the
amount of $7,670,000 ("Loan Amount"). The Loan
Amount was based on a projected budget, a copy of
which has been previously furnished Lessee. Lessor
agrees to provide Lessee copies of all change
orders in connection with the construction of the
Facility. The obligation of Lessee to commence
rental payments in connection with this section
will be secured by an irrevocable letter of credit
in favor of the Lender in the amount of
$383,500.00.
(b) INCREASES TO MINIMUM RENT. On each
anniversary of the Commencement Date (each such
annual date individually referred to as the
"Adjustment
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Date") throughout the Term, the then-current
Minimum Rent shall be increased annually effective
as of such Adjustment Date by the increase in the
Consumer Price Index from
the Commencement Date to the first Adjustment Date
and, thereafter, from one Adjustment Date to the
then-current Adjustment Date, provided that in no
event will the
annual change in the Minimum Rent be more than
3.5% of the Minimum Rent for the prior year.
(c) CAPITAL EXPENDITURES. Lessee will make
expenditures for repairs and replacements for the
Facility as approved by Lessor, the costs of which
according to generally accepted accounting
principles must be depreciated over periods
greater than one year in the amounts and for the
periods set forth on Exhibit C attached herein.
Within 45 days after each anniversary of the
Commencement Date, Lessee provide evidence of such
expenditures satisfactory to Lessor. In the event
such expenditures are not made, then within such
45- day period following each anniversary of the
Commencement Date, Lessee will pay to Lessor for
deposit in a money market account in a federally
insured bank in Birmingham, Alabama acceptable to
Lessor and Lessee the difference between the
expenditures required and the amount actually
spent for such purposes, which funds (the "Capital
Replacement Account") shall be made available to
Lessee to make such repairs and replacements. The
Capital Replacement Account shall be in the name
of Lessor, and interest earned on such account
shall be retained in the Capital Replacement
Account. Lessee shall make detailed requests for
such funds in writing to Lessor in the same form
as a Request pursuant Section 9.3 hereof. Within
30 days of such Request, Lessor shall reasonably
approve the amount of requested funds and make
mutually agreeable arrangements for the
disbursement of the funds, or provide Lessee with
written notice in reasonable detail specifying
Lessor's objections to such Request. So long as
this Lease is still in effect at the end of the
Term, up to $100,000.00 of the Capital Replacement
Account will be paid to Lessee and the balance of
such account shall be the sole property of Lessor.
Until released or until the end of the Term, such
escrow funds will constitute security for Lessee's
obligations under this Lease in the event of a
termination of Lessee's interest hereunder, and
Lessee hereby grants to Lessor an assignment of, a
security interest in and a right of setoff against
all such escrow funds.
(d) PAYMENT OF MINIMUM RENT. All payments of
Minimum Rent shall be made in lawful money of the
United States by wire transfer of same day funds
to such account or location specified by Lessor
from time to time in writing. In the event that
Lessor fails to timely provide such notice, Lessee
shall make the payment to Lessor at the address
provided for notices below or such other address
as Lessor may from time to time designate in
writing to Lessee.
(e) RECALCULATION OF MINIMUM RENT. The
parties agree that the Project Amount may be
estimated as of the Commencement Date. As soon as
reasonably practicable after the determination of
the final Project Amount, Lessor will recalculate
the Minimum Rent pursuant to Section 2.1(a)
whereupon the parties will execute an
acknowledgment of the recalculated Minimum Rent,
the Commencement Date and the termination date of
the Initial Term; provided, however, that if the
increase in the Project Amount is a result of
Lessor's actions (other than increases (i)
approved by Lessee or (ii) resulting from causes
beyond the control of Lessor), the Minimum Rent
shall not be increased.
2.2 CALCULATION OF INCREASES TO MINIMUM RENT.
On or about each Adjustment Date, Lessor will
calculate the increase in the Minimum Rent
pursuant to the provisions of Section 2.1(b) and
will provide Lessee with written notice of same.
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2.3 ADDITIONAL CHARGES. Lessee will also pay
and discharge as and when due (a) all other
amounts, liabilities, obligations and Impositions,
which Lessee assumes or agrees to pay under this
Lease including, to the extent applicable, any
condominium association dues, assessments or other
charges, and (b) in the event of any failure on
the
part of Lessee to pay any of those items referred
to in clause (a) above, Lessee will also promptly
pay and discharge every fine, penalty, interest
and cost which may be added for nonpayment or late
payment of such items (the items referred to in
clauses (a) and (b) above being referred to herein
collectively as the "Additional Charges"), and
Lessor shall have all legal, equitable and
contractual rights, powers and remedies provided
in this Lease, by statute or otherwise, in the
case of non-payment of the Additional Charges, as
well as the Minimum Rent. If any installment of
Minimum Rent or Additional Charges
(but only as to those Additional Charges which are
payable directly to Lessor) shall not be paid
within ten days after the date when due, Lessee
will pay Lessor on demand, as Additional Charges,
interest (to the extent permitted by law) computed
at the Overdue Rate on the amount of such
installment, from the due date when due to the
date of payment in full thereof. In the event
Lessor provides Lessee with written notice of
failure to timely pay 3ny installment of Minimum
Rent or any Additional Charges pursuant to Section
15.1(b) more than three times within any twelve-
month period, Lessee shall pay an administrative
fee to Lessor in the amount of $500.00 for each
additional written notice Lessor gives pursuant to
Section 15.1(b) during the next twelve months. To
the extent that Lessee pays any Additional Charges
to Lessor or the Facility Mortgagee pursuant to
any requirement of this Lease, Lessee shall be
relieved of its obligation to pay such Additional
Charges to the entity to which such Additional
Charges would otherwise be due. Additional Charges
shall be deemed Rent hereunder.
2.4 NET LEASE. The Rent shall be paid
absolutely net to Lessor, so that this Lease shall
yield to Lessor the full amount of the
installments of Minimum Rent and the payments of
Additional Charges throughout the Term but subject
to any provisions of this Lease which expressly
provide for payments by Lessor or the adjustment
of the Rent or other charges.
2.5 RENT RESERVE DEPOSIT. On or prior to the
Commencement Date, Lessee will deposit, as
security for the performance of Lessee's covenants
and obligations under this Lease, the sum of three
times the monthly amount of Minimum Rent computed
in accordance with Section 2.1 (a) above (together
with any undistributed accrued interest, the "Rent
Reserve Deposit") in an interest bearing account
in Birmingham, Alabama to be maintained by and in
the name of Lessor. Lessee shall have no right to
receive, pledge, borrow or otherwise obtain the
benefits of the Rent Reserve Deposit except as
provided in this Section 2.6 and Section 15.2
hereof. So long as no Event of Default has
occurred and is continuing, Lessor shall pay to
Lessee all accrued and unpaid interest, but
interest only, under the Rent Reserve Deposit on
each anniversary of the Commencement Date, except
to the extent that such accrued interest is
required to maintain the balance of the Rent
Reserve Deposit equal to three times the then
current monthly payment of the Minimum Rent.
Lessor may, from time to time, without prejudice
to any other remedy apply or appropriate funds
from the Rent Reserve Deposit to make good any
arrearage of Rent, to satisfy any other covenant
or obligation of Lessee hereunder, to compensate
Lessor for any other loss or damage which Lessor
may suffer by reason of any Event of Default by
Lessee; provided that the Rent Reserve Deposit
shall not be considered a limit on the measure of
Lessor' s damages in case of an Event of Default
by Lessee. At such time as Lessee has discharged
its obligations under all of the provisions of
this Lease to be performed by Lessee, including
surrender of the Leased Property in accordance
with the provisions hereof, the Rent Reserve
Deposit, or the then existing balance thereof,
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shall be returned by Lessor to Lessee. Until
released or until the end of the Term, such escrow
funds will constitute security for Lessee's
obligations under this Lease, and Lessee hereby
grants to Lessor an assignment of, a security
interest in and a right of setoff against all such
escrow funds.
ARTICLE 3
IMPOSITIONS
3.1 PAYMENT OF IMPOSITIONS. Subject to
Article 11 relating to permitted contests, Lessee
will pay, or cause to be paid, all Impositions
before any fine, penalty, interest or cost may be
added for nonpayment, such payments to be made
directly to the taxing authorities where feasible,
and Lessee will promptly, upon request, furnish to
Lessor copies of official receipts or other
satisfactory proof evidencing such payments.
Lessee's obligation to pay such impositions and
the amount thereof shall be deemed absolutely
fixed upon the date such Impositions become a lien
upon the Leased Property or any part thereof. If
any such Imposition may 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
as the same become due and before any fine,
penalty, premium, further interest or cost may be
added thereto. Lessor, at its expense, shall, to
the extent permitted by applicable law, prepare
and file all tax returns and reports as may be
required by governmental authorities in respect of
Lessor's net income, gross receipts, franchise
taxes and taxes on its capital stock. Lessee, at
its expense, shall, to the extent permitted by
applicable laws and regulations, prepare and file
all other tax returns and reports in respect of
any Imposition as may be required by governmental
authorities. If any refund shall be due from any
taxing authority in respect of any Imposition paid
by Lessee, the same shall be paid over to or
retained by Lessee if no Event of Default shall
have occurred hereunder and be continuing. Any
such funds retained by Lessor due to an Event of
Default shall be applied as provided in Article
15. Lessor and Lessee shall, upon request of the
other, provide such data as is maintained by the
party to whom the request is made with respect to
the Leased Property as may be necessary to prepare
any required returns and reports. In the event
governmental authorities classify any property
covered by this Lease as personal property, Lessee
shall file all personal property tax returns in
such jurisdictions where filing is required.
Lessor and Lessee will provide the other party,
upon request, with cost and depreciation records
necessary for filing returns for any property so
classified as personal property. Where Lessor is
legally required to file personal property tax
returns, and Lessee is obligated for the same
hereunder, Lessee will be provided with copies of
assessment notices in sufficient time for Lessee
to file a protest. Lessee may, upon giving 30
days' prior written notice to Lessor, at Lessee's
option and at Lessee's sole cost and expense,
protest, appeal, or institute such other
proceedings as Lessee may deem appropriate to
effect a reduction of real estate or personal
property assessments and Lessor, if requested by
Lessee and at Lessee's expense as aforesaid, shall
fully cooperate with Lessee in such protest,
appeal, or other action. ▇▇▇▇▇▇▇▇ for
reimbursement by Lessee to Lessor of personal
property taxes shall be accompanied by copies of
an invoice therefor and payments thereof which
identify the personal property with respect to
which such payments are made. Lessor will
cooperate with Lessee in order that Lessee may
fulfill its obligations hereunder, including the
execution of any instruments or documents
reasonably requested by Lessee.
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3.2 PRORATION OF IMPOSITIONS. Impositions
imposed in respect of the tax-fiscal period during
which the Term terminates shall be prorated
between Lessor and
Lessee, whether or not such Imposition is imposed
before or after such termination, and Lessee's and
Lessor's obligation to pay their respective
prorated shares thereof shall survive such
termination.
3.3 UTILITY CHARGES. Lessee will, or will
cause Tenants to, contract for, in its own name,
and will pay or cause to be paid all charges for,
electricity, power, gas, oil, water and other
utilities used in the Leased Property during the
Term.
3.4 INSURANCE PREMIUMS. Lessee will contract
for, in its own name, and will pay or cause to be
paid all premiums for, the insurance coverage
required to be maintained by Lessee pursuant to
Article 12 during the Term.
ARTICLE 4
NO TERMINATION
Except as provided in this Lease, Lessee
shall remain bound by this Lease in accordance
with its terms and shall neither take any action
without the consent of Lessor to modify, surrender
or terminate the same, nor seek nor be entitled to
any abatement, deduction, deferment or reduction
of Rent, or set-off against the Rent, nor shall
the respective obligations of Lessor and Lessee be
otherwise affected by reason of (a) any damage to,
or destruction of, the Leased Property or any
portion thereof from whatever cause or any Taking
of the Leased Property or any portion thereof,
except as otherwise provided in Articles 13 or 14,
(b) the lawful or unlawful prohibition of, or
restriction upon, Lessee's use of the Leased
Property, or any portion thereof, or the
interference with such use by any person,
corporation, partnership or other entity, or by
reason of eviction by paramount title, (c) any
claim which Lessee has or might have against
Lessor or by reason of any default or breach of
any warranty by Lessor under this Lease or any
other agreement between Lessor and Lessee or to
which Lessor and Lessee are parties, (d) any
bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation,
dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of
Lessor, or (e) for any other cause whatsoever
whether similar or dissimilar to any of the
foregoing. Lessee hereby specifically waives all
rights arising from any occurrence whatsoever
which may now or hereafter be conferred upon it by
law to (i) modify, surrender or terminate this
Lease or quit or surrender the Leased Property or
any portion thereof, or (ii) entitle Lessee to any
abatement, reduction, suspension or deferment of
the Rent or other sums payable by Lessee
hereunder, except as otherwise specifically
provided in this Lease. The obligations of Lessor
and Lessee hereunder shall be separate and
independent covenants and agreements and the Rent
and all other sums payable by Lessee hereunder
shall continue to be payable in all events unless
the obligations to pay the same shall be
terminated pursuant to the express provisions of
this Lease. Notwithstanding the foregoing, Lessee
shall have the right by separate and independent
action to pursue any claim or seek any damages it
may have against Lessor as a result of a breach by
Lessor of the terms of this Lease.
ARTICLE 5
OWNERSHIP OF LEASSED PROPERTY
5.1 OWNERSHIP OF THE PROPERTY. Lessee
acknowledges that the Leased Property is the
property of Lessor and that Lessee has only the
right to the possession and use of the Leased
Property upon the terms and conditions of this
Lease.
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5.2 PERSONAL PROPERTY. Lessee may (and shall
as provided hereinbelow), at its expense, install,
affix or assemble or place on any parcels of the
Land or in any of the Leased Improvements any
items of the Personal Property, and may remove,
replace or substitute for the same from time to
time in the Ordinary Course of Business. Lessee
shall provide and maintain during the entire Term
all such Personal Property as shall be necessary
in order to operate the Facility in compliance
with all licensure and certification requirements,
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.
ARTICLE 6
CONDITION AND USE OF LEASED PROPERTY
6.1 CONDITION OF THE LEASED PROPERTY. Lessor
hereby assigns for Lessee's benefit any covenants,
representations and warranties made in favor of
Lessor with respect to the design and construction
of the Improvements pursuant to the Loan
Agreement. Lessee will examine and otherwise
acquire knowledge of the condition of the Leased
Property prior to the occupancy of the Leased
Property. Lessee is leasing the Leased Property
"as is" in its condition at the time of occupancy.
Lessee waives any claim or action against Lessor
in respect of the condition of the Leased
Property. LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS
TO ITS FITNESS FOR USE, SUITABILITY, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO QUALTTY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY
LESSEE. LESSEE ACKNOWLEDGES THAT THE LEASED
PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS
SATISFACTORY TO IT IN ALL RESPECTS.
6.2 USE OF THE LEASED PROPERTY.
(a) After the Commencement Date and during
the entire Term, Lessee shall use or cause to be
used the Facility and the Leased Property as a 100-
unit assisted living facility and for such other
uses as may be necessary in connection with or
incidental to such use (the "Primary Intended
Use"). Lessee shall not use the Leased Property or
any portion thereof for any other use without the
prior written consent of Lessor, which consent
shall not be unreasonably withheld or delayed.
(b) Lessee covenants that it will obtain and
maintain all material approvals needed to use and
operate the Leased Property and the Facility for
the Primary Intended Use in compliance with all
applicable Legal Requirements.
(c) Lessee covenants and agrees that during
the Term it will use its reasonable best efforts
to operate continuously the Leased Property in
accordance with its Primary Intended Use and to
maintain its certifications for reimbursement, if
any, and licensure and its accreditation, if
compliance with accreditation standards is
required to maintain the operations of the
Facility and if a failure to comply would
adversely affect operations of the Facility.
(d) Lessee shall not commit or suffer to be
committed any waste on the Leased Property, or in
the Facility or cause or permit any nuisance
thereon.
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(e) Lessee shall neither suffer nor permit
the Leased Property or any portion thereof,
including any Capital Addition whether or not
financed by Lessor, to be used in such a manner as
(i) is reasonably likely to impair Lessor's estate
therein or in any portion thereof, or (ii) is
reasonably likely to result in a claim or claims
of adverse usage or adverse possession by the
public, as such, or of implied dedication of the
Leased Property or any portion thereof.
(f) Lessee will not utilize any Hazardous
Materials on the Leased Property except in
accordance with applicable Legal Requirements and
will not permit any contamination which may
require remediation under any applicable Hazardous
Materials Law. Lessee agrees not to dispose of any
Hazardous Materials or substances within the
sewerage system of the Leased Property, and that
it will handle all "red bag" wastes in accordance
with applicable Hazardous Materials Laws.
6.3 MANAGEMENT OF FACILITY. Unless otherwise
agreed to in writing by Lessor (i) Lessee shall
cause the Facility to be managed and leased to
Residents and Tenants at all times by Lessee or an
Affiliate of Lessee, (ii) Lessee shall not enter
into any agreement (oral or written) with respect
to such management and leasing activities unless
the terms thereof and the proposed manager or
leasing agent have been approved in writing by
Lessor, (iii) all such management or leasing
agreements must be in writing, and (iv) all
management or leasing agreements with an Affiliate
of Lessee must contain provisions to the effect
that (A) the obligation of Lessee to pay
management fees is subordinate to its obligation
to pay the Rent, and (B) the manager shall not
have the right to collect any management fees
during the continuance of an Event of Default.
6.4 LESSOR TO GRANT EASEMENTS. Lessor will,
from time to time, at the request of Lessee and at
Lessee's cost and expense, but subject to the
approval of Lessor (a) grant easements and other
rights in the nature of easements, (b) release
existing easements or other rights in the nature
of easements which are for the benefit of the
Leased Property, (c) dedicate or transfer
unimproved portions of the Leased Property for
road, highway or other public purposes, (d)
execute petitions to have the Leased Property
annexed to any municipal corporation or utility
district, (e) execute amendments to any covenants
and restrictions affecting the Leased Property,
and (f) execute and deliver to any person such
instruments as may be necessary or appropriate to
confirm or effect such grants, releases,
dedications and transfers (to the extent of its
interest in the Leased Property), but only upon
delivery to Lessor of an Officer's Certificate
stating (and such other information as Lessor may
reasonably require confirming) that such grant,
release, dedication, transfer, petition or
amendment is required or beneficial for and not
detrimental to the proper conduct of the business
of Lessee on the Leased Property and does not
reduce the value thereof.
ARTICLE 7
LEGAL, INSURANCE AND FINANCIAL REQUIREMENTS
7.1 COMPLIANCE WITH LEGAL AND INSURANCE
REQUIREMENTS. Subject to Article 11 relating to
permitted contests, Lessee, at its expense, will
promptly (a) comply with all material Legal
Requirements and Insurance Requirements in respect
of the use, operation, maintenance, repair and
restoration of the Leased Property, whether or not
compliance therewith shall require structural
change in any of the Leased Improvements or
interfere with the use and enjoyment of the Leased
Property, and (b) directly or indirectly with the
cooperation of Lessor, but at Lessee's sole cost
and expense, procure, maintain and comply with all
material licenses, certificates of need, if
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any, and other authorizations required for (i) any
use of the Leased Property then being made, and
for (ii) the proper erection, installation,
operation and maintenance of the Leased
Improvements or any part thereof, including any
Capital Additions.
7.2 LEGAL REQUIREMENT COVENANTS. Lessee
covenants and agrees that the Leased Property
shall not be used for any unlawful purpose. Lessee
shall, directly or indirectly with the cooperation
of Lessor, but at Lessee's sole cost and expense,
acquire and maintain all material licenses,
certificates, permits and other authorizations and
approvals needed to operate the Leased Property in
its customary manner for the Primary Intended Use
and any other use conducted on the Leased Property
as may be permitted from time to time hereunder.
Lessee further covenants and agrees that Lessee's
use of the Leased Property and Lessee's
maintenance, alteration, and operation of the
same, and all pacts thereof, shall at alt times
conform to all applicable Legal Requirements.
7.3 RENT AND DEBT SERVICE COVERAGE -
FACILITY. As used herein, the term "Coverage
Ratio" means EBITDAR (as defined below) for the
Facility only for the applicable period minus
assumed management fees of five percent of the
total revenues (regardless of the amount of the
management fees actually paid or incurred) earned
from the Facility divided by the principal
(excluding any prepayments or principal at
maturity), interest and lease (capital and
operating) payment obligations of Lessee
(including the Rent) for the same period. As used
herein, the term "EBITDAR" means, for any period,
the sum of (i) the income (or deficit) from all
operations before provision of income taxes for
such period and without deduction for actual
management fees paid or incurred, plus (ii) the
interest charges paid or accrued during such
period (including imputed interest on lease
(capital or operating) obligations (including this
Lease), but excluding amortization of debt
discount and expense), plus (iii) all amounts in
respect of depreciation and amortization for such
period, plus (iv) the rent due under all leases
(capital or operating, including this Lease) for
such period. Lessee agrees and covenants with
Lessor that so long as this Lease is in effect,
Lessee will achieve and within 45 days after the
end of each calendar quarter (end of each March,
June, September or December) during the Term,
provide evidence to Lessor of the achievement of
the Coverage Ratio equal to or greater than 1.2 to
1.0 for the previous period (the " Applicable
Period") equal to the lessor of (A) 12 months or
(B) the number of months elapsed between the
Commencement Date and the then current calendar
quarter.
ARTICLE 8
REPAIRS; RESTRICTIONS AND ANNUAL INSPECTIONS
8.1 MAINTENANCE AND REPAIR.
(a) Lessee, at its expense, will keep the
Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto in
reasonably 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, the age
of the Leased Property or any portion thereof, and
except as otherwise provided in Articles 13 and
14, with reasonable promptness will make all
necessary and appropriate repairs thereto of every
kind and nature (including remodeling to the
extent necessary to maintain the Leased Property
in a condition substantially the same as exists on
the date hereof, whether interior or exterior,
structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen or arising
by reason of a condition existing prior to or
after the commencement of the Term of this Lease
(concealed or otherwise). All repairs and
remodeling shall, to the extent reasonably
9
achievable, be at least equivalent in quality to
the original work and shall be accomplished by
Lessee or a party selected by Lessee. Lessee will
not take or omit to take any action the taking or
omission of which might materially impair the
value or usefulness of the Leased Property or any
part thereof for the Primary Intended Use. If
Lessee fails to perform any of its obligations
hereunder, or if Lessor reasonably determines that
action is necessary and is not being taken, Lessor
may, on giving 30 days' written notice to Lessee
(other than in a case reasonably deemed by Lessor
to be an emergency, in which case no such notice
shall be required), without demand on Lessee,
perform any such obligations in such manner and to
such extent and take such other action as Lessor
may deem appropriate in the event that Lessee has
not timely commenced to perform such obligation or
take such action, and all costs, expenses and
charges of Lessor relating to any such action
shall constitute Additional Charges and shall be
payable by Lessee to Lessor in accordance with
Section 2.3.
(b) Except for the use of any insurance
proceeds (to the extent required by Sections 13.1
and 13.2) and any Award (to the extent required by
Section 14.3) Lessor shall not under any
circumstances be required to build or rebuild any
improvements on the Leased Property, or to make
any repairs, replacements, alterations,
restorations, or renewals of any nature or
description to the Leased Property, whether
ordinary or extraordinary, structural or
nonstructural, foreseen or unforeseen, or to make
any expenditure whatsoever with respect thereto in
connection with this Lease, or to maintain the
Leased Property in any way.
(c) Nothing contained in this Lease and no
action or inaction by Lessor shall be construed as
(i) constituting the consent or request of Lessor,
expressed or implied, to any contractor,
subcontractor, laborer, materialman or vendor to
or for the performance of any particular labor or
services or the furnishing of any particular
materials or other property for the construction,
alteration, addition, repair or demolition of or
to the Leased Property or any part thereof, or
(ii) giving Lessee any right, power or permission
to contract for or permit the performance of any
labor or services or the finishing of any
materials or other property in such fashion as
would permit the making of any claim against
Lessor in respect thereof or to make any agreement
that may create, or in any way be the basis for,
any right, title, interest, lien, claim or other
encumbrance upon the estate of Lessor in the
Leased Property or any portion thereof.
(d) Unless Lessor shall convey any of the
Leased Property to Lessee pursuant to the
provisions of this Lease, Lessee will, upon the
expiration or prior termination of this Lease,
vacate and surrender the Leased Property to Lessor
in the condition in which the Leased Property was
originally received from Lessor, except for
ordinary wear and tear (subject to the obligation
of Lessee to maintain the Property in good order
and repair during the entice Term), damage caused
by the gross negligence or willful acts of Lessor,
and damage or destruction described in Article 13
or resulting from a Taking described in Article 14
which Lessee is not required by the terms of this
Lease to repair or restore, and except as
repaired, rebuilt, restored, altered or added to
as permitted or required by the provisions of this
Lease.
8.2 ENCROACHMENTS; RESTRICTIONS. If any of
the Improvements shall, at any time, encroach upon
any property, street or right-of-way adjacent to
the Leased Property, or shall violate the
agreements or conditions contained in any
applicable Legal Requirement, lawful restrictive
covenant or other agreement affecting the Leased
Property, or any part thereof, or shall impair the
rights of others under any easement or right of
way to which the Leased Property is subject, then
promptly upon the request of Lessor, Lessee shall
at its expense, subject to its right to contest
the existence of any such
10
encroachment, violation or impairment, (a) obtain
valid and effective waivers or settlements of all
claims, liabilities and damages resulting from
each such encroachment, violation or impairment,
whether the same shall affect Lessor or Lessee, or
(b) make such changes in the Improvements, and
take such other actions, as Lessor in the good
faith exercise of its judgment deems reasonably
practicable, to remove such encroachment, or to
end such violation or impairment, including, if
necessary, the alteration of any of the Leased
Improvements, and in any event take all such
actions as may be necessary in order to be able to
continue the operation of the Facility for the
Primary Intended Use substantially in the manner
and to the extent the Facility was operated prior
to the assertion of such violation or
encroachment. Any such alteration shall be made in
conformity with the applicable requirements of
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 and Lessee shall be entitled to a credit
for any sums recovered by Lessor under any such
policy of title or other insurance.
8.3 INSPECTIONS. From time to time during the
Term but no more often than one time per year,
Lessor and its agents shall have the right to
inspect the Leased Property and all systems
contained therein at any reasonable time to
determine Lessee's compliance with its obligations
under this Lease, including those obligations set
forth in Article 7 and this Article 8. Lessee
shall pay Lessor the sum of $2,000.00 per year to
cover the time and expense associated with such
inspections.
ARTICLE 9
CAPITAL ADDITIONS
9.1 CONSTRUCTION OF CAPITAL ADDITIONS TO THE
LEASED PROPERTY.
(a) If no Event of Default shall have
occurred and be continuing, Lessee shall have the
right, upon and subject to the terms and
conditions set forth below, to construct or
install Capital Additions on the Leased Property
with the prior written consent of Lessor which
consent shall not be unreasonably withheld;
provided that Lessee shall not be permitted to
create any Encumbrance on the Leased Property in
connection with such Capital Addition without
first complying with Section 9.1(b) hereof. Prior
to commencing construction of any Capital
Addition, Lessee shall submit to Lessor in writing
a proposal setting forth in reasonable detail any
proposed Capital Addition and shall provide to
Lessor such plans and specifications, permits,
licenses, contracts and other information
concerning the proposed Capital Addition as Lessor
may reasonably request. Without limiting the
generality of the foregoing, such proposal shall
indicate the approximate projected cost of
constructing such Capital Addition and the use or
uses to which it will be put.
(b) Prior to commencing construction of any
Capital Addition, Lessee shall first request
Lessor to provide funds to pay for such Capital
Addition in accordance with the provisions of
Section 9.3. If Lessor declines or is unable to
provide such financing on terms acceptable to
Lessee and Lessee rejects Lessor's offer of
financing, Lessee may arrange or provide other
financing, subject to the provisions of Section
9.2. Lessor will reasonably cooperate with Lessee
regarding the grant of any consents or easements
or the like necessary or appropriate in connection
with any Capital Addition; provided that no
Capital Addition shall be made which would tie in
or connect any Leased Improvements on the Leased
Property with any other improvements on property
adjacent to the Leased Property (and not part of
the Land covered by this Lease) including tie-ins
of buildings or other structures or utilities,
unless Lessee shall have obtained the prior
written approval
11
of Lessor, which approval shall not be
unreasonably withheld. All proposed Capital
Additions shall be architecturally integrated into
and consistent with the Leased Property.
9.2 CAPITAL ADDITIONS FINANCED BY LESSEE. If
Lessee finances or arranges to finance any Capital
Addition with a party other than Lessor or if
Lessee pays cash for any Capital Addition, this
Lease shall be and hereby is amended to provide as
follows:
(a) There shall be no adjustment in the
Minimum Rent by reason of any such Capital
Addition.
(b) Upon the expiration or earlier
termination of this Lease, Lessor shall compensate
Lessee for all Capital Additions paid for or
financed by Lessee in any of the following ways:
(i) By purchasing all Capital Additions paid
for by Lessee from Lessee for cash in the amount
of the Fair Market Added Value at the time of
purchase by Lessor of all such Capital Additions
paid for or financed by Lessee; or
(ii) Such other arrangement regarding such
compensation as shall be mutually
acceptable to Lessor and Lessee.
Any amount owed by Lessee to Lessor under this
Lease at such termination or expiration may be
deducted from any compensation for Capital
Additions payable by Lessor to Lessee under this
Section 9.2.
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR.
(a) Lessee shall request that Lessor provide
or arrange financing for a Capital Addition by
providing to Lessor such information about the
Capital Addition as Lessor may reasonably request
(a "Request"), including all information referred
to in Section 9.1 above. Lessor may, but shall be
under no obligation to provide or obtain the funds
necessary to meet the Request. Within 30 days of
receipt of a Request, Lessor shall notify Lessee
as to whether it will finance the proposed Capital
Addition and, if so, the terms and conditions upon
which it would do so, including the terms of any
amendment to this Lease. In no event (i) shall the
portion of the projected Capital Addition Cost
comprised of land (if any), materials, labor
charges, fixtures and out of-pocket expenses
(including a reasonable construction management
fee) be less than 100% of the total amount of such
cost, or (ii) shall Lessee or any of its
Affiliates be entitled to any commission or
development fee, directly or indirectly, as a
portion of the Capital Addition Cost. Any Capital
Addition not financed by Lessor, which Lessee
intends to finance or arrange financing for
pursuant to Section 9.2, must shall be approved in
writing by Lessor pursuant to the terms of Section
9.1 hereof, which consent will not be unreasonably
withheld. Lessee may withdraw its Request by
notice to Lessor at any time before or after
receipt of Lessor's terms and conditions.
(b) If Lessor agrees to finance the proposed
Capital Addition, Lessor's obligation to advance
any funds shall be subject to receipt of all of
the following, in form and substance reasonably
satisfactory to Lessor:
(i) such loan documentation as may be
required by Lessor ;
12
(ii) any information, certificates, licenses,
permits or documents requested by Lessor, or by
any lender with whom Lessor has agreed or may
agree to provide financing, which are necessary or
appropriate to confirm that Lessee will be able to
use the Capital Addition upon completion thereof
in accordance with the Primary Intended Use,
including all required federal, state or local
government licenses and approvals;
(iii) an Officer's Certificate and, if
requested, a certificate from Lessee's architect,
setting forth in detail reasonably satisfactory to
Lessor the projected (or actual, if available)
cost of the proposed Capital Addition;
(iv) an amendment to this Lease, duly
executed and acknowledged, in form and substance
satisfactory to Lessor and Lessee (the "Lease
Amendment"), containing such provisions as may be
necessary or appropriate due to the Capital
Addition, including any appropriate changes in the
legal description of the Land and the Rent, all
such changes to be mutually agreed upon by Lessor
and Lessee;
(v) if appropriate, a deed conveying title to
Lessor to any land and improvements or other
rights acquired for the purpose of constructing
the Capital Addition, free and clear of any liens
or encumbrances except those approved in writing
by Lessor and, both prior to and following
completion of the Capital Addition, an as-built
survey thereof reasonably satisfactory to Lessor;
(vi) if appropriate, endorsements to any
outstanding policy of title insurance covering the
Leased Property or a supplemental policy of title
insurance covering the Leased Propecty reasonably
satisfactory in form and substance to Lessor (A)
updating the same without any additional
exceptions, except as may be permitted by Lessor;
and (B) increasing the coverage thereof by an
amount equal to the Fair Market Value of the
Capital Addition (except to the extent covered by
the owner's policy of title insurance referred to
in subparagraph (vii) below);
(vii) if required by Lessor, (A) an owner's
policy of title insurance insuring fee simple
title to any land conveyed to Lessor pursuant to
subparagraph (v), free and clear of all liens and
encumbrances except those approved by Lessor and
(B) a lender's policy of title insurance
satisfactory in form and substance to Lessor and
the Lending Institution advancing any portion of
the Capital Addition Cost;
(viii) if required by Lessor upon completion
of the Capital Addition, an M.A.I appraisal of the
Leased Property ; and
(ix) such other certificates (including
endorsements increasing the insurance coverage, if
any, at the time required by Section 12.1),
documents, customary opinions of Lessee's counsel,
appraisals, surveys, certified copies of duly
adopted resolutions of the Board of Directors of
Lessee authorizing the execution and delivery of
the Lease Amendment and any other instruments or
documents as may be reasonably required by Lessor.
(c) Upon making a Request to finance a
Capital Addition, whether or not such financing is
actually consummated, Lessee shall pay the
reasonable costs and expenses of Lessor and any
Lending Institution which has committed to finance
such Capital Addition paid or incurred in
connection with the financing of the Capital
Addition, including (i) the fees and expenses of
their respective counsel, (ii) the amount of any
recording or transfer taxes and fees, (iii)
documentary stamp taxes, if any, (iv) title
insurance charges, (v) appraisal fees, if any, and
(vi) commitment fees, if any.
13
Notwithstanding the foregoing, Lessee shall have
no obligation to reimburse Lessor for any of the
fees, charges and expenses described in this
Section 9.3(c), if such Capital Addition financing
fails to close subsequent to Lessor issuing Lessee
a written commitment to finance said Capital
Additions; provided that this provision shall not
apply if such financing fails to close due to the
acts or omissions of Lessee.
9.4 REMODELING AND NON-CAPITAL ADDITIONS.
Lessee shall have the right and the obligation to
make additions, modifications or improvements to
the Leased Property which ace not Capital
Additions, including tenant improvements made in
connection with the Tenant Leases, from time to
time as may reasonably be necessary for its uses
and purposes and to permit Lessee to comply fully
with its obligations set forth in this Lease;
provided that such action will be undertaken
expeditiously, in a workmanlike manner and will
not significantly alter the character or purpose
or detract from the value or operating efficiency
of the Leased Property and will not significantly
impair the revenue producing capability of the
Leased Property or adversely affect the ability of
Lessee to comply with the provisions of this
Lease. Title to all non-Capital Additions,
modifications and improvements shall, without
payment by Lessor at any time, be included under
the terms of this Lease and, upon expiration or
earlier termination of this Lease, shall pass to
and become the property of Lessor.
9.5 SALVAGE. All materials which are scrapped
or removed in connection with the making of either
Capital Additions permitted by Section 9.1 or
repairs required by Article 8 shall be or become
the property of Lessor; provided that Lessor may
require Lessee to dispose of such materials and
remit the net proceeds thereof to Lessor within 15
days of such disposal.
ARTICLE 10
LIENS
Subject to the provisions of Article 11
relating to permitted contests, Lessee will not
directly or indirectly create or suffer to exist
and will promptly discharge at its expense any
lien, encumbrance, attachment, title retention
agreement or claim upon the Leased Property or any
attachment, levy, claim or encumbrance in respect
of the Rent, not including, however, (a) this
Lease, (b) the matters, if any, set forth in
Exhibit B attached hereto, (c) restrictions, liens
and other encumbrances which are consented to in
writing by Lessor, or any easements granted
pursuant to the provisions of Section 6.4 of this
Lease, (d) liens for those taxes of Lessor which
Lessee is not required to pay hereunder, (e)
subleases permitted by Article 23, (f) liens for
Impositions or for sums resulting from
noncompliance with Legal Requirements so long as
(1) the same are not yet payable or are payable
without the addition of any fine or penalty or (2)
such liens are in the process of being contested
in accordance with the provisions of Article 11,
(g) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either disputed or
not yet due, provided that (1) the payment of such
sums shall not be postponed for more than 60 days
after the completion of the action (including any
appeal from any judgment rendered therein) giving
rise to such lien and such reserve or other
appropriate provisions as shall be required by law
or generally accepted accounting principles shall
have been made therefor or (2) any such liens are
in the process of being contested in accordance
with the provisions of Article 11, and (h) any
Encumbrance placed on the Leased Property by
Lessor.
ARTICLE 11
PERMITTED CONTESTS
14
Lessee, after ten days' prior written notice
to Lessor, on its own or on Lessor's behalf (or in
Lessor's name), but at Lessee's expense, may
contest, by appropriate legal proceedings
conducted in good faith and with due diligence,
the amount, validity or application, in whole or
in part, of any Imposition, Legal Requirement,
Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim (collectively
"Charge") not otherwise permitted by Article 10,
which is required to be paid or discharged by
Lessee, any Resident or any Tenant; provided that
(a) in the case of an unpaid Charge, the
commencement and continuation of such proceedings,
or the posting of a bond or certificate of deposit
as may be permitted by applicable law, shall
suspend the collection thereof from Lessor and
from the Leased Property; (b) neither the Leased
Property nor any Rent therefrom nor any part
thereof or interest therein would be in any
immediate danger of being sold, forfeited,
attached or lost; (c) Lessor would not be in any
immediate danger of civil or criminal liability
for failure to comply therewith pending the
outcome of such proceedings; (d) in the event that
any such contest shall involve a sum of money or
potential loss in excess of $50,000.00, then
Lessee shall deliver to Lessor and its counsel an
Officer's Certificate as to the matters set forth
in clauses (a), (b) and (c) and such opinions of
legal counsel as Lessor may reasonably request;
(e) in the case of an Insurance Requirement, the
coverage required by Article 12 shall be
maintained; and (f) if such contest be finally
resolved against Lessor or Lessee, Lessee shall,
as Additional Charges due hereunder, promptly pay
the amount required to be paid, together with All
interest and penalties accrued thereon, or
otherwise comply with the applicable Charge;
provided further that nothing contained herein
shall be construed to permit Lessee to contest the
payment of the Rent, or any other sums payable by
Lessee to Lessor hereunder. Lessor, at Lessee's
expense, shall execute and deliver to Lessee such
authorizations and other documents as may
reasonably be required in any such contest and, if
reasonably requested by Lessee or if Lessor so
desires and then at its own expense, Lessor shall
join as a party therein. Lessor shall do all
things reasonably requested by Lessee in
connection with such action. Lessee shall
indemnify and save Lessor harmless against any
liability, cost or expense of any kind that may be
imposed upon Lessor in connection with any such
contest and any loss resulting therefrom.
ARTICLE 12
INSURANCE
12.1 GENERAL INSURANCE REQUIREMENTS. During
the Term of this Lease, Lessee shall at all times
keep the Leased Property, and all property located
in or on the Leased Property insured with the
kinds and amounts of insurance described below and
written by companies reasonably acceptable to
Lessor authorized to do insurance business in the
state in which the Leased Property is located. The
policies must name Lessor as an additional insured
and losses shall be payable to Lessor and/or
Lessee as provided in Article 13. In addition, the
policies shall name as an additional insured the
holder ("Facility Mortgagee") of any mortgage,
deed of trust or other security agreement securing
any Encumbrance placed on the Leased Property or
any part thereof in accordance with the provisions
of Article 32 ("Facility Mortgage"), if any, by
way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment in excess of
$100,000.00 shall require the written consent of
Lessor and each affected Facility Mortgagee.
Evidence of insurance shall be deposited with
Lessor and, if requested, with any Facility
Mortgagee(s). If any provision of any Facility
Mortgage which constitutes a first lien on the
Leased Property requires deposits of insurance to
be made with such Facility Mortgagee, Lessee shall
either pay to Lessor monthly the amounts required
and Lessor shall transfer such amounts to such
Facility Mortgagee or, pursuant to written
direction by Lessor, Lessee shall make such
deposits directly with such Facility
15
Mortgagee. The policies on the Leased Property,
including the Leased Improvements, the Fixtures
and the Personal Property, shall insure against
the following risks:
(a) Loss or damage by fire, vandalism and
malicious mischief, extended coverage perils
commonly known as "All Risk" and all physical loss
perils, including sprinkler leakage and business
interruption, in aa amount not less than 90% of
the then Full Replacement Cost thereof (as defined
below in Section 12.2) after deductible with a
replacement cost endorsement sufficient to prevent
Lessee from becoming a co-insurer together with an
agreed value endorsement;
(b) Loss pr damage by explosion of steam
boilers, [pressure vessels or similar apparatus
now or hereafter installed in the Facility, in
such limits with respect to any one accident as
may be reasonably requested by Lessor from time to
time;
(c) Loss or damage by hurricane and
earthquake in the amount of the Full Replacement
Cost, after deductible;
(d) Loss of rental under a business
interruption insurance policy covering risk of
loss during the first 12 months of reconstruction
necessitated by the occurrence of any of the
hazards described in Sections 12.1(a),12.1(b) or
12.1 (c), in an amount sufficient to prevent
Lessee from becoming a co-insurer; provided that
in the event that Lessee shall not be in default
hereunder and Lessor shall receive any proceeds
from such rental insurance which, when added to
rental amounts i-2ceived with respect to the
applicable time period, exceed the amount of
rental owed by Lessee hereunder, Lessor shall
immediately pay such excess to Lessee;
(e) Claims for personal injury or property
damage under a policy of comprehensive general
public liability insurance including insurance
against assumed or contractual liability including
indemnities under this Lease, with amounts not
less than $5,000,000.00 per occurrence in respect
of bodily injury and death and $10,000,000.00 for
property damage; provided that if it becomes
customary for tenants occupying similar buildings
in the same City where the Leased Property is
located to be required to provide liability
coverage with higher limits than the foregoing,
then Lessee shall provide Lessor with an insurance
policy with coverage limits that are not less than
such customary limits; and
(f) Flood (when the Leased Property is
located in whole or in part within a designated
flood plain area) and such other hazards and in
such amounts as may be customary for comparable
properties in the area and if available from
insurance companies authorized to do business in
the state in which the Leased Property is located.
12.2 REPLACEMENT COST. The term "Full
Replacement Cost" as used herein shall mean the
actual replacement cost of the Facility from time
to time, including increased cost of construction
endorsement, less exclusions provided in the
normal fire insurance policy. In the event Lessor
or Lessee believes that the Full Replacement Cost
has increased or decreased at any time during the
Term, it shall have the right at its own expense
to have such Full Replacement Cost redetermined by
the insurance company which is then providing the
largest amount of casualty insurance carried on
the Leased Property, hereinafter referred to as
the "impartial appraiser". The party desiring to
have the Full Replacement Cost so redetermined
shall forthwith , on receipt of such determination
by the impartial appraiser, give written notice
thereof to the other party hereto. The
determination of such impartial appraiser shall be
final and binding on the
16
parties hereto, and Lessee shall forthwith
increase, or may decrease, the amount of the
insurance carried pursuant to this Article to the
amount so determined by the impartial appraiser.
12.3 ADDITIONAL INSURANCE. In addition to
the insurance described above, Lessee shall
maintain such additional insurance as may be
reasonably required from time to time by any
Facility Mortgagee which is consistent with
insurance coverage for similar properties in the
city, county and state where the Leased Property
is located, or required pursuant to any applicable
Legal Requirement, and shall at all times maintain
or cause to be maintained adequate worker's
compensation insurance coverage for all persons
employed by Lessee on the Leased Property, in
accordance with all applicable Legal Requirements.
12.4 WAIVER OF SUBROGATION. All insurance
policies carried by either party covering the
Leased Property, the Fixtures, the Facility and/or
the Personal Property, including contents, fire
and casualty insurance, shall expressly waive any
right of subrogation on the pact of the insurer
against the other party. The parties hereto agree
that their policies will include such a waiver
clause or endorsement so long as the same is
obtainable without extra cost, and in the event of
such an extra charge the other party, at its
election, may request and pay the same. but shall
not be obligated to do so.
12.5 FORM OF INSURANCE. All of the policies
of insurance referred to in this Section shall be
written in from reasonably satisfactory to Lessor
by insurance companies reasonably satisfactory to
Lessor; provided that the deductibles for
insurance required by Sections 12.1(a) through
12.1 (d) shall be no greater than $50,000.00 and
the deductible for coverage required by Section
12.1(e) shall be no greater than $100,000.00.
Lessee shall pay all premiums therefor, and
deliver such policies or certificates thereof to
Lessor prior to their effective date (and, with
respect to any renewal policy, at least 30 days
prior to the expiration of the existing policy).
In the event of the failure of Lessee to effect
such insurance in the names herein called for or
to pay the premiums therefor, or to deliver such
policies or certificates thereof to Lessor at the
times required, Lessor shall be entitled, but
shall have no obligation, to enact such insurance
and pay the premiums therefor, which premiums
shall be repayable by Lessee to Lessor upon
written demand therefor, and failure to repay the
same shall constitute an Event of Default within
the meaning of Section 15.1(c). Each insurer
mentioned in this Section shall agree, by
endorsement on the policy or policies issued by
it, or by independent instrument furnished to
Lessor, that it will give to Lessor prior written
notice before the policy or policies in question
shall be altered, allowed to expire or canceled.
12.6 CHANGE IN LIMITS. In the event that
Lessor shall at any time reasonably and in good
faith believe the limits of the personal injury,
property damage or general public liability
insurance then carried to be insufficient, the
parties shall endeavor to agree on the proper and
reasonable limits for such insurance to be carried
and such insurance shall thereafter be carried
with the limits thus agreed on until further
change pursuant to the provisions of this Section.
If the parties shall be unable to agree thereon,
the proper and reasonable limits for such
insurance shall be determined by an impartial
third party selected by the parties the costs of
which shall be divided equally between the
parties. Such redeterminations, whether made by
the parties or by arbitration, shall be made no
more frequently than every year. Nothing herein
shall permit the amount of insurance to be reduced
below the amount or amounts reasonably required by
any Facility
Mortgagee.
17
12.7 BLANKET POLICY. Notwithstanding anything
to the contrary contained in this Section,
Lessee's obligations to carry the insurance
provided for herein may be brought within the
coverage of a so-called blanket policy or policies
of insurance carried and maintained by Lessee ;
provided that the coverage afforded Lessor will
not be reduced or diminished or otherwise be
different from that which would exist under
separate policies meeting all other requirements
of this Lease; provided further that the
requirements of this Article 12 are otherwise
satisfied.
12.8 NO SEPARATE INSURANCE. Without the
prior written consent of Lessor, Lessee shall not,
on Lessee' s own initiative or pursuant to the
request or requirement of any third party, take
out separate insurance concurrent in form or
contributing in the event of loss with that
required in this Article 12 to be furnished by, or
which may reasonably be required by a Facility
Mortgagee to be furnished by, Lessee, or increase
the amounts of any then-existing insurance
required under this Article 12 by securing an
additional policy or additional policies, unless
all parties having an insurable interest in the
subject matter of the insurance, including-in all
cases Lessor and all Facility Mortgagees, are
included therein as additional insureds and the
loss is 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 required under fhis
Article 12 by securing an additional policy or
additional policies.
12.9 INSURANCE FOR CONTRACTORS. If Lessee
shall engage or cause to be engaged any contractor
to perform work on the Leased Property, Lessee
shall require such contractor to carry and
maintain insurance coverage comparable to the
foregoing requirements, at no expense to Lessor;
provided that in cases where such coverage is
excessive in relation to the work being done,
Lessee may allow any such contractor to carry or
maintain alternative coverage in reasonable
amounts upon Lessor's prior written consent, which
shall not be unreasonably withheld.
ARTICLE 13
FIRE AND CASUALTY
13.1 INSURANCE PROCEEDS. All proceeds payable
by reason of any loss or damage to the Leased
Property or any portion thereof, and insured under
any policy of insurance required by Article 12 of
this Lease shall be paid to Lessor and held by
Lessor in trust (subject to the provisions of
Section 13.7) and shall be made available for
reconstruction or repair, as the case may be, of
any damage to or destruction of the Leased
Property, or any portion thereof, and shall be
paid out by Lessor from time to time for the
reasonable cost of such reconstruction or repair
in accordance with this Article 13 after Lessee
has expended an amount equal to or exceeding the
deductible under any applicable insurance policy.
Any excess proceeds of insurance remaining after
the completion of the restoration or
reconstruction of the Leased Property shall be
retained by Lessee free and clear upon completion
of any such repair and restoration except as
otherwise specifically provided below in this
Article 13; provided that in the event neither
Lessor nor Lessee is required or elects to repair
or restore the Leased Property, then all such
insurance proceeds shall be retained by Lessor.
All salvage resulting from any risk covered by
insurance shall belong to Lessee, including any
salvage relating to Capital Additions paid for by
Lessee.
13.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR
DESTRUCTION COVERED BY INSURANCE.
18
(a) Except as provided in Section 13.7, if
during the Term, the Facility is totally or
partially destroyed from a risk covered by the
insurance described in Article 12 and the Facility
thereby is rendered Unsuitable for its Primary
Intended Use, such damage or destruction shall not
terminate this Lease and all of Lessee's
obligations with respect to payment of Rent shall
continue in full force and effect and shall not be
affected thereby and Lessee shall either:
(i) apply all proceeds payable with respect
thereto to restore the Facility to substantially
the same condition as existed immediately prior to
such damage or destruction, or
(ii) offer either (A) to acquire the Leased
Property from Lessor for a purchase price equal to
the Minimum Purchase Price of the Leased Property
immediately prior to such damage or destruction or
(B) to substitute a new property or properties for
the Leased Property pursuant to and in accordance
with the provisions of Article 20 (which offer to
substitute Lessor may in its reasonable discretion
refuse).
Lessee shall give written notice to Lessor within
60 days after the date of such damage or
destruction whether Lessee chooses option (i) or
option (ii), and if option (ii) is chosen, such
notice shall be accompanied by the offer referred
to therein. In the event Lessee fails to give such
notice or does not make an offer under option
(ii), Lessee shall promptly proceed to restore the
Facility to substantially the same condition as
existed immediately prior to the damage or
destruction. If Lessee's offer to substitute for
the Leased Property is reasonably refused by
Lessor, Lessee shall promptly proceed to restore
the Facility to substantially the same condition
as existed immediately prior to such damage for
destruction or acquire the Leased Property from
Lessor for a purchase price equal to the Minimum
Purchase Price of the Leased Property immediately
prior to such damage or destruction.
(b) FACILITY NOT RENDERED UNSUITABLE FOR ITS
PRIMARY INTENDED USE . Except as provided in
Section 13.7, if during the Term, the Facility is
partially destroyed from a risk covered by the
insurance described in Article 12, but the
Facility is not thereby rendered Unsuitable for
its Primary Intended Use, Lessee shall restore the
Facility to substantially the same condition as
existed immediately prior to the damage or
destruction and such damage or destruction shall
not terminate this Lease and all of Lessee's
obligations hereunder, including Lessee's
obligations with respect to the payment of the
Rent, shall continue in full force and effect and
shall not be affected thereby; provided that if
Lessee cannot within a reasonable time obtain all
necessary governmental approvals, including
building permits, licenses, conditional use
permits and any certificates of need, after
diligent efforts to do so, in order to be able to
perform all required repair and restoration work
and to operate the Facility for its Primary
Intended Use in substantially the same manner as
immediately prior to such damage or destruction,
then Lessee shall offer:
offer, either (i) to acquire the Leased
Property from Lessor for a purchase price equal to
the Minimum Purchase Price immediately prior to
such damage or destruction, or (ii) to substitute
a new property or properties for the Leased
Property pursuant to and in accordance with the
provisions of Article 20 (which offer to
substitute Lessor in its reasonable discretion may
refuse).
Lessee shall give written notice to Lessor within
60 days after the date of such damage or
destruction whether Lessee chooses option (i) or
(ii) and such notice shall be accompanied by the
offer referred to therein. In the event Lessee
fails to give such notice
19
or does not make an offer, Lessee shall promptly
proceed to restore the Facility to substantially
the same condition as existed immediately prior to
the damage or destruction. If Lessee's offer to
substitute for the Leased Property is reasonably
refused by Lessor, Lessee shall promptly proceed
to restore the Facility to substantially the same
condition as existed immediately prior to such
damage for destruction or acquire the Leased
Property from Lessor for a purchase price equal to
the Minimum Purchase Price of the Leased Property
immediately prior to such damage or destruction.
13.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR
DESTRUCTION NOT COVERED BY INSURANCE. Except as
provided in Section 13.7, if during the Term the
Facility is totally or materially destroyed from a
risk (including earthquake) not covered by the
insurance described in Article 12, whether or not
such damage or destruction renders the Facility
Unsuitable for Its Primary Intended Use, Lessee
shall:
(i) restore the Facility to substantially the
same condition it was in immediately prior to such
damage or destruction and such damage or
destruction shall not terminate this Lease, and
all of Lessee's obligations hereunder, including
Lessee's obligations with respect to the payment
of the Rent, shall continue in full force and
effect and not be affected thereby, or
(ii) offer either (A) to acquire the Leased
Property from Lessor for a purchase price equal to
the Minimum Purchase Price immediately prior to
such damage or destruction, or (B) to substitute a
new property or properties for the Leased Property
pursuant to and in accordance with the provisions
of Article 20 (which offer to substitute Lessor in
its reasonable discretion may refuse); provided
that if such damage or destruction is not material
in the reasonable opinion of Lessor, Lessee shall
restore the Facility to substantially the same
condition as existed immediately prior to any such
damage or destruction.
Lessee shall give written notice to Lessor within
60 days after the date of such damage or
destruction whether Lessee chooses option (i),
(ii)(A) or (ii)(B) and, in the event of either
option (ii)(A) or (ii) (B), such notice shall be
accompanied by the offer referred to therein. In
the event Lessee fails to give such notice or does
not make an offer, Lessee shall promptly proceed
to restore the Facility to substantially the same
condition as existed immediately prior to the
damage or destruction. If Lessor does not accept
Lessee's offer to substitute for or purchase the
Leased Property within 30 days after the date of
such offer, Lessee's offer shall be deemed
withdrawn on such 30th day and Lessee shall
promptly proceed to restore the Facility to
substantially the same condition as existed
immediately prior to such damage for destruction;
provided that if such damage or destruction occurs
during any Extended Term, then Lessor must accept
Lessee's offer to acquire the Leased Property from
Lessor for a purchase price equal to the Minimum
Purchase Price immediately prior to such damage or
destruction.
13.4 PERSONAL PROPERTY. Lessee shall use any
insurance proceeds payable by reason of any loss
of or damage to any of the Personal Property to
restore such Personal Property to the Leased
Property with items of substantially equivalent
value to the items being replaced.
13.5 RESTORATION OF PERSONAL PROPERTY. If
Lessee is required or elects to restore the
Facility as provided in Sections 13.2 or 13.3,
Lessee shall also restore the Personal Property
related thereto as required by Section 13.4 and
all Capital Additions paid for or financed by
Lessor. Insurance proceeds payable by reason of
20
damage to Capital Additions paid for or financed
by Lessor shall be paid to Lessor and Lessor shall
hold such insurance proceeds in trust to pay the
cost of repairing or replacing such Capital
Additions in the event Lessee does not purchase or
substitute other property or properties for the
Leased Property.
13.6 NO ABATEMENT OF THE RENT. This Lease
shall remain in full force and effect and Lessee's
obligation to make rental payments and to pay all
other charges required by this Lease shall remain
unabated during any period required for repair and
restoration.
13.7 DAMAGE NEAR END OF TERM. Notwithstanding
any provisions of Sections 13.2 or 13.3 to the
contrary, if damage to or destruction of the
Facility occurs during the last 12 months of the
Term, and if such damage or destruction cannot be
fully repaired and restored within the lesser of
(i) six months or (ii) the period remaining in the
Term immediately following the date of loss, then
either party shall have the right to terminate
this Lease by giving notice of termination to the
other within 30 days after the date of such damage
or destruction, in which event Lessor shall be
entitled to retain the insurance proceeds and
Lessee shall pay to Lessor on demand the amount of
any deductible or uninsured loss arising in
connection therewith; provided that any such
notice given by Lessor shall be void and of no
force and effect if Lessee exercises an available
option to extend the Term for one Extended Term,
or one additional Extended Term, as the case may
be, within 30 days following receipt of such
termination notice.
13.8 PURCHASE OR SUBSTITUTION. In the event
Lessor accepts any offer by Lessee to purchase the
Leased Property or to substitute a property or
properties for the Leased Property, this Lease
shall terminate upon payment of the purchase price
and execution and delivery of all documentation in
accordance with Article 17, or execution and
delivery of all documents required in connection
with a Substitute Property under Article 20.
Lessor shall remit to Lessee, or in the case of a
purchase allow Lessee a credit toward the purchase
price, an amount equal to all insurance proceeds
being held in trust by Lessor.
13.9 WAIVER. Lessee hereby knowingly and
expressly waives any statutory or common law
rights of termination which may arise by reason of
any damage or destruction of the Facility.
ARTICLE 14
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If
during the Term there is any Taking of all or any
part of the Leased Property or any interest in
this Lease by Condemnation, the rights and
obligations of the parties shall be determined by
this Article 14.
14.2 TOTAL TAKING. If there is a Taking of
all of the Leased Property by Condemnation, this
Lease shall terminate on the Date of Taking, and
the Minimum Rent and all Additional Charges paid
or payable hereunder shall be apportioned and paid
to the Date of Taking.
14.3 PARTIAL TAKING. If there is a Taking of
a portion of the Leased Property by Condemnation
such that the Facility is not thereby rendered
Unsuitable for Its Primary Intended Use, this
Lease shall not terminate and all of Lessee's
obligations hereunder, including Lessee's
obligations with respect to the payment of the
Rent, shall
21
continue in full force and effect and shall not be
affected thereby. If, however, the Facility is
thereby rendered Unsuitable for Its Primary
Intended Use, Lessee shall either:
(i) at Lessee's expense, restore the
Facility, to the extent possible, to substantially
the same condition as existed immediately prior to
the partial Taking, in which case the proceeds of
any Award shall be applied to such restoration to
the extent necessary or appropriate, or
(ii) offer either (A) to acquire the Leased
Property from Lessor for a purchase price equal to
the Minimum Purchase Price of the Leased Property
immediately prior to such partial Taking, or (B)
to substitute a new property or properties for the
Leased Property pursuant to and in accordance with
the provisions of Article 20 (which offer to
substitute Lessor may in its reasonable discretion
refuse), or
(iii) terminate this Lease effective upon the
effective date of such Taking.
Lessee will give written notice to Lessor within
60 days after Lessee receives notice of the Taking
which option Lessee chooses, and if option (ii) is
chosen, such notice shall be accompanied by the
offer referred to therein. In the event Lessor
does not accept Lessee's offer to so purchase the
Leased Property within 30 days after receipt of
the notice described in the preceding sentence,
Lessee may either (a) withdraw its offer to
purchase the Leased Property and proceed to
restore the Facility, to the extent possible, to
substantially the same condition as existed
immediately before the partial Taking, or (b)
terminate the offer and this Lease by written
notice to Lessor.
14.4 RESTORATION. If there is a partial
Taking of the Leased Property and this Lease
remains in full force and effect pursuant to any
provision of this Article 14, Lessee shall
accomplish all necessary restoration in order that
the Leased Property may continue to be used for
its Primacy Intended Use.
14.5 AWARD DISTRIBUTION. In the event Lessee
purchases the Leased Property pursuant to Section
14.3 or Lessor accepts any offer by Lessee to
purchase the Leased Property or to provide a
Substitute Property therefor pursuant to this
Article 14, then the entire Award shall belong to
Lessee and Lessor agrees to assign to Lessee all
of its rights thereto. Except as otherwise
expressly provided in this Article 14, in any
other event the entire Award shall belong to and
be paid to Lessor; provided that if this Lease is
terminated in accordance with Section 14.2(b) or
14.3(a), and subject to the rights of any Facility
Mortgagees, Lessee shall be entitled to receive
from the Award any sum attributable to any Capital
Additions for which Lessee would be entitled to
reimbursement at the end of the Term pursuant to
the provisions of Section 9.2(b), but only if any
to the extent such Award expressly includes such
items and allocates a value thereto. If Lessee is
required or elects to restore the Facility, Lessor
agrees that, subject to the rights of the Facility
Mortgagees, its portion of the Award shall be used
for such restoration and it shall hold such
portion of the Award in trust, for application to
the costs of the restoration.
14.6 TEMPORARY TAKING. The Taking of the
Leased Property, or any part thereof, by military
or other public authority shall constitute a
Taking by Condemnation only when the use and
occupancy by the Taking authority has continued
for longer than six months. During any such six-
month period all the provisions of this Lease
shall remain in full force and effect and the Rent
shall not be abated or reduced during such period
of Taking; provided that to the extent any
compensation is paid by the Taking authority as a
result of such temporary Taking, Lessee will
retain such compensation.
22
14.7 PURCHASE OR SUBSTITUTION. In the event
Lessor accepts any offer by Lessee to purchase the
Leased Property or to substitute a property or
properties for the Leased Property, this Lease
shall terminate upon payment of the purchase price
and execution and delivery of all appropriate
documentation in accordance with Article 17, or
execution and delivery of all documents required
in connection with a Substitute Property under
Article 20.
ARTTCLF 15
DEFAULT
15.1 EVENTS OF DEFAULT. The occurrence of any
one or more of the following events shall
constitute events of default (individually, an
"Event of Default" and, collectively, "Events of
Default") hereunder:
(a) An event of default shall occur under any
other lease (the "Related Leases") between Lessor
or any of its Affiliates and Lessee or any of its
Affiliates, which event of default is not cured
within the applicable grace period set forth
therein;
(b) Lessee shall fail to make a payment of
the Rent payable by Lessee under this Lease when
the same becomes due and payable and such failure
continues for a period of ten calendar days after
written notice from Lessor to Lessee;
(c) lessee shall fail to observe or perform
any other term, covenant or condition of this
Lease or any document executed in connection
herewith and such failure is not cured by Lessee
within a period of 30 days after receipt by Lessee
of notice thereof from Lessor, unless such failure
cannot with due diligence be cured within a period
of 30 days, in which case such failure shall not
be deemed to continue if Lessee proceeds promptly
and with due diligence to cure the failure and
diligently completes the curing thereof (as soon
as reasonably possible);
(d) Lessee shall :
(i) admit in writing its inability to pay its
debts generally as they become due,
(ii) file a petition in bankruptcy or a
petition to take advantage of any insolvency law,
(iii) make an assignment for the benefit of
its creditors,
(iv) consent to the appointment of a receiver
of itself or of the whole or any substantial part
of its property, or
(v) file a petition or answer seeking
reorganization or arrangement under the Federal
bankruptcy laws or any other applicable law or
statute of the United States of America or any
state thereof; or
(e) Lessee shall default beyond any
applicable grace period contained in one or more
major credit facilities which by their terms would
permit an outstanding balance equal to or greater
than $10,000,000.00 in the aggregate and the same
shall be accelerated by the lenders or other
applicable parties.
15.2 REMEDIES. If an Event of Default shall
have occurred, Lessor may, at its election, then
or at any time thereafter, apply or appropriate,
as the case may be, the Rent Reserve Deposit, or
the then remaining balance thereof, as its remedy
for any damages
23
sustained by Lessor caused by a continuing Event
of Default. If (i) Lessor elects not to apply or
appropriate the Rent Reserve Deposit, (ii) the
full balance of the Rent Reserve Deposit is
inadequate to compensate Lessor for damages
sustained arising out of said continuing Event of
Default, or (iii) should an Event of Default occur
and be continuing after the Rent Reserve Deposit
is fully depleted, then, in such event, Lessor
may, at its election, then or at any time
thereafter, pursue any one or more of the
following remedies, in addition to any remedies
which may be permitted by law or by other
provisions of this Lease, without further notice
or demand, except as hereinafter provided:
(a) Without any notice or demand whatsoever,
Lessor may take any one or more actions
permissible at law to ensure performance by Lessee
of Lessee's covenants and obligations under this
Lease. In this regard, it is agreed that if Lessee
abandons or vacates the Leased Property, Lessor
may enter upon and take possession of such Leased
Property in order to protect it from deterioration
and continue to demand from Lessee the monthly
rentals and other charges provided in this Lease.
Lessor shall use reasonable efforts to relet but
shall have no absolute obligation to relet: If
Lessor does, at its sole discretion, elect to
relet the Leased Property, such action by Lessor
shall not be deemed as an acceptance of Lessee's
surrender of the Leased Property unless Lessor
expressly notifies Lessee of such acceptance in
writing, Lessee hereby acknowledging that Lessor
shall otherwise be reletting as Lessee's agent. It
is further agreed in this regard that in the event
of any Event of Default described in this Article
15, Lessor shall have the right to enter upon the
Leased Property and do whatever Lessee is
obligated to do under the terms of this Lease.
Lessee agrees to reimburse Lessor on demand for
any reasonable expenses which Lessor may incur m
thus effecting compliance with Lessee's obligation
under this Lease, and further agrees that Lessor
shall not be liable for any damages resulting to
Lessee from such action, except as may result from
Lessor's gross negligence or willful misconduct.
(b) Lessor may terminate this Lease by
written notice to Lessee, in which event Lessee
shall immediately surrender the Leased Property to
Lessor, and if Lessee fails to do so, Lessor may,
without prejudice to any other remedy which Lessor
may have for possession or arrearage in rent
(including any interest which may have accrued
pursuant to Section 2.3 of this Lease or
otherwise), enter upon and take possession of the
Leased Property and expel or remove Lessee and any
other person who may be occupying said premises or
any part thereof other than Residents pursuant to
Resident Agreements or Tenants pursuant to Tenant
Leases. In addition, Lessee agrees to pay to
Lessor on demand the amount of all loss and damage
which Lessor may suffer by reason of any
termination effected pursuant to this subsection
(b), said loss and damage to be determined, at
Lessor's option, by either of the following
alternative measures of damages:
(i) Although Lessor shall be under no
absolute obligation to attempt and shall be
obligated only to use reasonable efforts, to relet
the Leased Property, until the Leased Property is
relet Lessee shall pay to Lessor on or before the
first day of each calendar month the monthly
rentals and other charges provided in this Lease.
After the Leased Property has been relet by
Lessor, Lessee shall pay to Lessor on the 10th day
of each calendar month the difference between the
monthly rentals and-other charges provided in this
Lease for the preceding calendar month and that
actually collected by Lessor for such month. If it
is necessary for Lessor to bring suit in order to
collect any deficiency, Lessor shall have a right
to allow such deficiencies to accumulate and to
bring an action on several or all of the accrued
deficiencies at one time. Any such suit shall not
prejudice
24
in any way the right of Lessor to bring a similar
action for any subsequent deficiency or
deficiencies. Any amount collected by Lessor from
subsequent tenants for any calendar month in
excess of the monthly rentals and other charges
provided in this Lease shall be credited to Lessee
in reduction of Lessee's liability for any
calendar month for which the amount collected by
Lessor will be less than the monthly rentals and
other charges provided in this Lease, bat Lessee
shall have no right to such excess other than the
above described credit; or
(ii) When Lessor desires, Lessor may demand a
final settlement not to exceed the Minimum
Purchase Price at the time of such final
settlement. Upon demand for a final settlement,
Lessor shall have a right to, and Lessee hereby
agrees to pay, the difference between the total of
all monthly rentals and other charges provided in
this Lease for the remainder of the Term and the
reasonable rental value of the Leased Property for
such period (including a reasonable time to relet
the Leased Property), as determined pursuant to
the provisions of Article 28 hereof, such
difference to be discounted to present value at a
rate equal to. the Treasury Yield then in effect
with maturity periods substantially equivalent to
the balance of the Initial Term or any Extended
Term then in effect.
The rights and remedies of Lessor hereunder
are cumulative, and pursuit of any of the above
remedies shall not preclude pursuit of any other
remedies prescribed in other sections of this
Lease and any other remedies provided by law or
equity. Forbearance by Lessor to enforce one or
more of the remedies herein provided upon an Event
of Default shall not be deemed or construed to
constitute a waiver of such Event of Default.
Exercise by Lessor of any one or more remedies
shall not constitute an acceptance of surrender of
the Leased Property by Lessee, it being understood
that such surrender can be effected only by the
prior written agreement of Lessor and Lessee.
15.3 ADDITIONAL EXPENSES. In addition to
payments required pursuant to subsections (a) and
(b) of Section 15.2 above, Lessee shall compensate
Lessor for all reasonable expenses incurred by
Lessor in repossessing the Leased Property
(including any increase in insurance premiums
caused by the vacancy of the Leased Property), all
reasonable expenses incurred by Lessor in
reletting (including repairs, remodeling,
replacements, advertisements and brokerage fees),
all reasonable concessions granted to a new tenant
upon reletting (including renewal options), all
fees and expenses incurred by Lessor as a direct
or indirect result of any appropriate action by a
Facility Mortgagee and a reasonable allowance for
Lessor's administrative efforts, salaries and
overhead attributable directly or indirectly to
Lessee's default and Lessor's pursuing the rights
and remedies provided herein and under applicable
law.
15.4 WAIVER. If this Lease is terminated
pursuant to law or the provisions of this Article
15, Lessee waives, to the extent permitted by
applicable law, (a) any right of redemption,
reentry or repossession and (b) the benefit of any
laws now or hereafter in force exempting property
from liability for rent or for debt.
15.5 APPLICATION OF FUNDS. All payments
otherwise payable to Lessee which are received by
Lessor under any of the provisions of this Lease
during the existence or continuance of any Event
of Default shall be applied to Lessee's
obligations in the order which Lessor may
reasonably determine or as may be prescribed by
the laws of the state in which the Facility is
located.
15.6 NOTICES BY LESSOR. The provisions of
this Article 15 concerning notices shall be
liberally construed insofar as the contents of
such notices are concerned,
25
and any such notice shall be sufficient if it
shall generally apprise Lessee of the nature and
approximate extent of any default.
15.7 LESSOR'S SECURITY INTEREST. Lessee
hereby grants to Lessor, a valid and continuing
security interest to secure payment of all rentals
and other sums of money becoming due hereunder
from Lessee, and to secure payment of any damages
or loss which Lessor may suffer by reason of the
breach by Lessee of any covenant, agreement or
condition contained herein, upon all of the
Personal Property presently, or which may
hereafter be, situated in or about and used in
connection with the operation of the Leased
Property, and all proceeds therefrom and
accessions thereto and, except as a result of
sales made in the ordinary course of Lessee's
business, such property shall not be removed
without the consent of Lessor until any arrearage
in rent as well as any and all other sums of money
then due to Lessor or to become due to Lessor
hereunder shall first have been paid and
discharged and all the covenants, agreements and
conditions hereof have been fully complied with
and performed by Lessee. Upon the occurrence of an
Event of Default by Lessee, Lessor may, in
addition to any other remedies provided herein,
enter upon the Leased Property and take possession
of any and all of the Personal Property, without
liability for trespass or conversion, and sell the
same at public or private sale, with or without
having such property at the sale, after giving
Lessee reasonable notice of the time and place of
any public sale or of the time after which any
private sale is to be made, at which sale Lessor
or its assigns may purchase unless otherwise.:
prohibited by law. Unless otherwise provided by
law, and without intending to exclude any other
manner of giving Lessee reasonable notice, the
requirement of reasonable notice shall be met, if
such notice is given in the manner prescribed in
this Lease at least seven days prior to the time
of sale. Any sale made pursuant to the provision
of this paragraph shall be deemed to have been a
public sale conducted in commercially reasonable
manner if held in the above described premises or
where the property is located after the time,
place and method of sate and a general description
of the types of property to be sold have been
advertised in a daily newspaper published in the
county in which the property is located, for five
consecutive days before the date of the sale. The
proceeds from any such disposition, less any and
all expenses collected with the taking of
possession, holding and selling of the property
(including reasonable attorneys' fees and legal
expenses), shall be applied as a credit against
the indebtedness secured by the security interest
granted in this paragraph. Any surplus shall be
paid to Lessee or as otherwise required by law;
Lessee shall pay any deficiencies forthwith. Upon
request by Lessor, Lessee agrees to execute and
deliver to Lessor a financing statement in form
sufficient to perfect the security interest of
Lessor in the aforementioned property and proceeds
thereof under the provision of the Uniform
Commercial Code (or corresponding state statute or
statutes) in force in the state in which the
Leased Property is located, as well as any other
state the laws of which Lessor may at any time
consider to be applicable. Notwithstanding
anything to the contrary contained in this
Section, Lessor's security interest in the
property of Lessee described above shall be
subject to and absolutely subordinate to any and
all purchase money security interests at any time
given by Lessee to third parties.
ARTICLE 16
LESSOR'S RIGHT TO CURE
If Lessee, without the prior written consent
of Lessor, shall fail to make any payment, or to
perform any act required to be made or performed
under this Lease and to cure the same within the
relevant time periods provided in Section 15.1,
Lessor, without waiving or releasing any
obligation or Event of Default, may (but shall be
under no obligation to) make such payment or
perform such act for the account and at the
expense
26
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,
together with a late charge thereon (to the extent
permitted by law) at the Overdue Rate from the
date on which such sums or expenses are paid or
incurred by Lessor, and all costs and expenses
(including 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. The obligations of Lessee and rights of
Lessor contained in this Article shall survive the
expiration or earlier termination of this Lease.
ARTICLE 17
PURCHASE OF THE LEASED PROPERTY
In the event Lessee purchases the Leased
Property from Lessor pursuant to any of the terms
of this Lease, Lessor shall, upon receipt from
Lessee of the applicable purchase price (after
credit for the balance of the Capital Replacement
Account), 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 and
any other amounts owing to Lessor hereunder,
deliver to Lessee an appropriate special warranty
deed (in substantially the same form used to
convey the Leased Property to Lessor) and any
other documents reasonably requested by Lessee to
convey the interest of Lessor in and to the Leased
Property to Lessee, and such other standard
documents usually and customarily prepared in
connection with such transfers, free and clear of
all encumbrances other than (a) those that Lessee
has agreed hereunder to pay or discharge, (b)
those mortgage liens, if any, which Lessee has
agreed in writing to accept and to take title
subject to, (c) any other Encumbrances permitted
to be imposed on the Leased Property under the
provisions of Article 32 which are assumable at no
cost to Lessee, and (d) any matters affecting the
Leased Property on or as of the Commencement Date.
The difference between the applicable purchase
price and the total of the encumbrances assigned
or taken subject to 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.
The closing of any such sale shall be contingent
upon and subject to Lessee obtaining all required
governmental consents and approvals for such
transfer. If such sale shall fail to be
consummated by reason of the inability of Lessee
to obtain all such approvals and consents, any
options to extend the Term which otherwise would
have expired during the period from the date when
Lessee elected or became obligated to purchase the
Leased Property until Lessee's inability to obtain
the approvals and consents is confirmed shall be
deemed to remain in effect for 30 days after the
end of such period. The closing with respect to
any such sale shall be appropriately timed to
accommodate the determination of the Minimum
Purchase Price in accordance with Article 28. All
expenses of such conveyance, including the cost of
title examination or standard coverage title
insurance, reasonable attorneys' fees incurred by
Lessor in connection with such conveyance,
transfer taxes and recording fees shall be paid by
Lessee. Additionally, any sale to Lessee shall be
subject to delivery of an opinion of Lessor' s
counsel confirming that (i) the sale will not
result in ordinary recapture income to Lessor
pursuant to Code Section 1245 or 1250 or any other
Code provision, (ii) the sale will result in
income, if any, to Lessor of a type described in
Code Section 856(c)(2) or 856(c)(3) and will not
result in income of the types described in Code
Section 856(c)(4) or result in the tax imposed
under Code Section 857(b)(6), and (iii) the sale,
together with all other substitutions and sales
made or requested by Lessee pursuant to any other
leases with Lessor of properties hereto or any
other transfers of the Leased Property or the
properties leased under other such operating
leases, during the relevant time period, will not
jeopardize the qualification of Lessor as a real
estate investment trust under Code Sections 856-
860.
27
ARTICLE I 8
HOLDING OVER
If Lessee shall for any reason remain in
possession of the Leased Property after the
expiration of the Term or any earlier termination
of the Term hereof, such possession shall be as a
tenancy at will during which time Lessee shall pay
as rental each month an amount equal to the sum of
(a) 150% of the aggregate of 1/12 of the aggregate
Minimum Rent payable with respect to the last
complete year prior to the- expiration of the
Term, plus (b) all Additional Charges accruing
during such month, plus (c) all other sums, if
any, payable pursuant t4 the provisions of this
Lease with respect to the Leased Property. During
such period of tenancy, Lessee and Lessor shall be
obligated to perform and observe all of the terms,
covenants and conditions of this Lease and to
continue its occupancy and use of the Leased
Property. Nothing contained herein shall
constitute the consent, express or implied, of
Lessor to the holding over of Lessee after the
expiration or earlier termination of this Lease.
ARTICLE 19
ABANDONMENT
19.1 DISCONTINUANCE OF OPERATIONS ON THE
LEASED PROPERTY; OFFER OF SUBSTITUTION. If Lessee
has discontinued use of the Leased Property for
its Primary Intended Use for 90 consecutive days
without Lessor's prior written consent for
alterations or remodeling pursuant to Article 9,
repairs or restoration pursuant to Article 13 or
Article 14 or otherwise, then provided Lessor has
not terminated this Lease pursuant to Section
15.2, Lessee may offer to substitute a new
property or properties for the Leased Property
pursuant to and in accordance with the provisions
of Article 20 (which offer to substitute Lessor
may in its reasonable discretion refuse).
19.2 OBSOLESCENCE OF THE LEASED PROPERTY;
OFFER TO PURCHASE. If the Leased Property becomes
Unsuitable for its Primary Intended Use, all as
set forth in an Officer's Certificate delivered to
Lessor. Lessee may on or after the fifteenth
anniversary of the Commencement Date (provided
this Lease is still in effect), purchase the
Leased Property for the Minimum Purchase Price on
the first Payment Date occurring not less than 120
days after the date of such Officer's Certificate.
19.3 CONVEYANCE OF LEASED PROPERTY. In the
event Lessee elects to purchase the Leased
Property pursuant to Section 192, then on the
first Payment Date occurring not less than 120
days after the date of the Officer's Certificate
referred to in Section 19.2, Lessor shall, upon
receipt from Lessee of the Minimum Purchase Price
as of the date of such purchase and all Rent and
or other sums then due and payable under this
Lease (excluding any installment of Minimum Rent
due on such Payment Date), convey the Leased
Property to Lessee on such date in accordance with
the provisions of Article 17 and this Lease shall
thereupon terminate as to the Leased Property.
ARTICLE 20
SUBSTITUTION OF PROPERTY
20.1 SUBSTITUTION OF PROPERTY FOR THE LEASED
PROPERTY.
(a) In the event Lessor accepts an offer by
Lessee to substitute other property for the Leased
Property under Article 13, Article 14 or Article
19, and provided that no Event of Default shall
have occurred and be continuing, Lessee shall have
the right (subject to the conditions set forth
below in this Article 20, and upon notice to
Lessor) to
28
substitute one or more properties (collectively
referred to as "Substitute Properties" or
individually as a "Substitute Property") for the
Leased Property on a monthly Payment Date
specified in such notice (the "Substitution Date")
occurring not less than 90 days after receipt by
Lessor of such notice. The notice shall be in the
form of an Officer's Certificate and shall specify
the reason(s) for the proposed substitution and
the proposed Substitution Date. Notwithstanding
anything contained herein to the contrary, any
other substitution for the Leased Property shall
require the prior written consent of Lessor which
shall be within the sole discretion of Lessor.
(b) If Lessee gives the notice referred to in
Section 20.1(a) above, Lessee shall present to
Lessor one or more properties (or groups of
properties) each of which property (or groups of
properties) shall provide Lessor with a yield
(i.e. , an annual return on its equity in such
property) equal to or greater than the Current
Yield (and the yield reasonably expected to be
received thereafter throughout the remainder of
the term) from the Leased Property at the time of
such proposed substitution (or in the case of a
proposed substitution as a result of damage,
destruction or Condemnation, the Current Yield
immediately prior to such damage, destruction or
Condemnation) and as reasonably projected over the
remaining Term of this Lease and shall have a Fair
Market Value substantially equivalent to the Fair
Market Value of the Leased Property. Lessor shall
have a period of 90 days within which to review
such information and either to accept or to reject
the Substitute Property or Substitute Properties
so presented; provided that if Lessee is required
by a court order or administrative action to
divest or otherwise dispose of the Leased Property
within a shorter time period, in which ease the
time period shall be shortened appropriately to
meet the reasonable needs of Lessee, but in no
event shall said period be less than 15 Business
Days after Lessor' s receipt of said notice
(subject to further extension for any period of
time in which Lessor is not timely provided with
the information provided for in Section 20.2 and
Section 20.3 below); provided that if Lessor shall
contend that the Substitute Properties fail to
meet all the conditions for substitution set forth
in this Article 20, including the provisions of
Sections 20.1(c), (d) and (e) below, the matter
shall be submitted to arbitration in accordance
with Article 31 and the time periods for Lessor's
approval or rejection shall be tolled during the
period of such arbitration.
(c) It shall be a condition to consummation
of any substitution hereunder that all of the
conditions set forth in Section 20.2 below, shall
have been satisfied with respect to such
substitution, and to the delivery of an opinion of
counsel for Lessor confirming that (i) the
substitution of the Substitute Property for the
Leased Property will qualify as an exchange solely
of property of a like-land under Section 1031 of
the Code, in which, generally, except for "boot"
such as cash needed to equalize exchange values or
discharge indebtedness, no gain or loss is
recognized to Lessor, (ii) the substitution or
sale wil1 not result in ordinary recapture income
to Lessor pursuant to Code Section 1245 or 1250 or
any other Code provision, (iii) the substitution
or sale will result in income, if any, to Lessor
of a type described in Code Section 856(c)(2) or
856(c)(3) and will not result in income of the
types described in Code Section 856(c)(4) or
result in the tax imposed under Code Section
857(b)(6), and (iv) the substitution or sale,
together with all other substitutions and sales
made or requested by Lessee pursuant to any other
leases with Lessor of properties hereto or any
other transfers of the Leased Property or the
properties leased under other such operating
leases, during the relevant time period, will not
jeopardize the qualification of Lessor as a real
estate investment trust under Code Sections 856-
860.
(d) In the event that the equity value of the
Substitute Property or group of Substitute
Properties (i.e., the Fair Market Value of the
Substitute Property or group of
29
Substitute Properties minus the encumbrances
subject to which Lessor will take the Substitute
Property or group of Substitute Properties) as of
the Substitution Date is greater than the equity
value of the Leased Property (i.e. , the Fair
Market Value of the Leased Property minus the
encumbrances subject to which Lessee will take the
Leased Property) as of the Substitution Date (or
in the case of damage destruction or Condemnation,
the Fair Market Value immediately prior to such
damage, destruction or Condemnation), Lessor shall
pay to Lessee an amount equal to the difference,
subject to the limitation set forth below. In the
event that said equity value of the Substitute
Property or group of Substitute Properties is less
than said equity value of the Leased Property,
Lessee shall pay to Lessor an amount equal to the
difference, subject to the limitation set forth
below. Notwithstanding the foregoing, neither
Lessor nor Lessee shall be obligated to consummate
any substitution if such party would be required
to make a payment to the other in excess of an
amount equal to ten percent of said Fair Market
Value of the Leased Property (the amount of cash
paid by one party to the other being hereinafter
referred to as the "Cash Adjustment").
(e) The Rent for such Substitute Property in
all respects shall provide Lessor with a yield at
the time of such substitution (i.e. , annual
return on its investment in such Substitute
Property) not less than the Current Yield (and the
yield reasonably expected to be received
thereafter throughout the remainder of the Term)
from the Leased Property prior to any damage,
destruction or Condemnation, taking into account
the Cash Adjustment paid or received by Lessor and
any other relevant factors.
(f) The Minimum Purchase Price of any
Substitute Property or Substitute Properties shall
be an amount equal to the Minimum Purchase Price
of the Leased Property on the Substitution Date
(i) increased by any Cash Adjustment paid by
Lessor pursuant to Section 20.1(d) above, or (ii)
decreased by any Cash Adjustment paid by Lessee
pursuant to Section 20.1(d) above.
20.2 CONDITIONS TO SUBSTITUTION. On the
Substitution Date, the Substitute Property will
become the Leased Property hereunder upon delivery
by Lessee to Lessor of the following items in form
and substance reasonably satisfactory to Lessor:
(a) an Officer's Certificate representing,
warranting and certifying that (i) the Substitute
Property has been accepted by Lessee for all
purposes of this Lease and there has been no
material damage to the improvements located on the
Substitute Property nor is any condemnation or
eminent domain proceeding pending with respect
thereto; (ii) all permits, licenses and
certificates (including a permanent, unconditional
certificate of occupancy and, to the extent
permitted by law, all certificates of need and
licenses) which are necessary to permit the use of
the Substitute Property in accordance with the
provisions of this Lease have been obtained and
are in full force and effect; (iii) under
applicable zoning and use laws, ordinances, rules
and regulations the Substitute Property may be
used for the purposes contemplated by Lessee and
all necessary subdivision approvals have been
obtained; (iv) there are no mechanic' s or
materialmen's liens outstanding or threatened to
the knowledge of Lessee against the Substitute
Property arising out of or in connection with the
construction of the improvements thereon, other
than those being contested by Lessee pursuant to
Article 11; (v) any mechanic's or materialmen's
liens being contested by Lessee will be promptly
paid by Lessee if such contest is resolved in
favor of the mechanic or materialman; (vi) to the
best knowledge of Lessee, there exists no Event of
Default under this Lease, and no defense, offset
or claim exists with respect to any sums to be
paid by Lessee hereunder; and (vii) any exceptions
to Lessor's title to the Substitute Property do
not materially interfere with the intended use of
the Substitute Property by Lessee;
30
(b) a special warranty deed with warranties
against claims arising under Lessee conveying to
Lessor tide to the Substitute Property free and
clear of any liens and encumbrances except those
approved in writing or assumed by Lessor;
(c) a lease duly executed, acknowledged and
delivered by Lessee, containing the same terms and
conditions as are contained herein, except that
(i) the legal description of the Land shall refer
to the Substitute Property, (ii) the Minimum
Purchase Price, Rent and any Additional Charges
for the Substitute Property shall be consistent
with the requirements of Section 20.1 and (iii)
such other changes therein as may be necessary or
appropriate under the circumstances shall be made
;
(d) a standard owner's or lessee's (as
applicable) policy of title insurance covering the
Substitute Property (or a valid, binding,
unconditional commitment therefor), dated the
Substitution Date, in current form and including
mechanics' and materialmen's lien coverage, issued
to Lessor by a title insurance company reasonably
satisfactory to Lessor. Such policy shall (i)
insure (A) Lessor's fee title to the Substitute
Property, subject to no liens or encumbrances
except those approved or assumed by Lessor, and
(B) that any restrictions affecting the Substitute
Property have not been violated and that a further
violation thereof will not result in a forfeiture
or reversion of title, (ii) be in an amount at
least equal to the Fair Market Value of the
Substitute Property, and (iii) contain such
endorsements as may be reasonably requested by
Lessor;
(e) certificates of insurance with respect to
the Substitute Property fulfilling the
requirements of Article 12;
(f) current appraisals or other evidence
satisfactory to Lessor, in its sole discretion, as
to the current Fair Market Values of such
Substitute Property;
(g) all available revenue data relating to
the Substitute Property for the period from the
date of opening for business of the Substitute
Property to the date of Lessee's most recent
Fiscal-Year end, or for the most recent three
years, whichever is less; and
(h) such other certificates, documents,
opinions of counsel (which may be in-house
counsel), and other instruments as may be
reasonably required by Lessor.
20.3 CONVEYANCE TO LESSEE. On the
Substitution Date Lessor will convey the Leased
Property to Lessee in accordance with the
provisions of Article 17 (except as to payment of
any expenses in connection therewith which shall
be governed by Section 20.4 below) upon either (a)
payment in cash therefor or (b) conveyance to
Lessor of the Substitute Property, as appropriate.
20.4 EXPENSES. Lessee shall pay or cause to
be paid, on demand, all reasonable costs and
expenses paid or incurred by Lessor in connection
with the substitution and conveyance of the Leased
Property and the Substitute Property, including
(a) fees and expenses of Lessor's counsel, (b) the
amount of any recording taxes and filing fees, (c)
the cost of preparing and recording, if
appropriate, a release of the Leased Property from
the lien of any mortgage, (d) broker's fees and
commissions for Lessee, if any, (e) documentary
stamp and transfer taxes, if any, (f) title
insurance;. charges, and (g) escrow fees, if any.
ARTICLE 21
RISK OF LOSS
31
Except as otherwise provided in this Lease,
during the Term of this Lease, the risk of loss or
of decrease in the enjoyment and beneficial use of
the Leased Property in consequence of the damage
or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or
in consequence of foreclosures, attachments,
levies or executions (other than by Lessor and
those claiming from, through or under Lessor) is
assumed by Lessee and, Lessor shall in no event be
answerable or accountable therefor nor shall any
of the events mentioned in this Section entitle
Lessee to any abatement of the Rent except as
specifically provided in this Lease.
ARTICLE 22
INDEMNIFICATION
Notwithstanding the existence of any
insurance or self insurance provided for in
Article 12, and without regard to the policy
limits of any such insurance or self insurance,
Lessee will protect, indemnify, save harmless and
defend Lessor from and against all liabilities,
obligations, claims, damages, penalties, causes of
action, costs and expenses (including reasonable
attorneys' fees and expenses), to the extent
permitted by law, imposed upon or incurred by or
asserted against Lessor by reason of: (a) any
accident, injury to or death of person or loss to
property occurring on or about the Leased
Property, including any claims of malpractice, (b)
any use, misuse, no use, condition, maintenance or
repair by Lessee of the Leased Property, (c) any
Impositions (which are the obligations of Lessee
to pay pursuant to the applicable provisions of
this Lease), (d) any failure on the part of Lessee
to perform or comply with any of the terms of this
Lease, (e) the nonperformance of any of the terms
and provisions of any and all existing and future
subleases of the Leased Property to be performed
by Lessee as landlord thereunder and (f) the
violation of any Hazardous Materials Law. Any
amounts which become payable by Lessee under this
Section shall be paid within ten days after
liability therefor on the part of Lessor is
finally determined by litigation or otherwise
(including the expiration of any time for appeals)
and, if not timely paid, shall bear interest (to
the extent permitted by law) at the Overdue Rate
from the date of such determination to the date of
payment. Lessee, at its expense, shall contest,
resist and defend any such claim, action or
proceeding asserted or instituted against Lessor
or may compromise or otherwise dispose of the same
as Lessee sees fit. Lessor shall cooperate with
Lessee in a reasonable manner to permit Lessee to
satisfy Lessee's obligations hereunder, including
the execution of any instruments or documents
reasonably requested by Lessee. Nothing herein
shall be construed as indemnifying Lessor or its
agents for their own negligent acts or omissions
or willful misconduct. Lessee's liability for a
breach of the provisions of this Article shall
survive any termination of this Lease.
ARTICLE 23
SUBLETTING AND ASSIGNMENT
23.1 SUBLETTING AND ASSIGNMENT. Subject to
the rights of (i) Residents under existing
Resident Agreements, (ii) Tenants under existing
Tenant Leases, (iii) the provisions of Section
23.3 below and (iv) any other express conditions
or limitations set forth herein, Lessee may,
without the consent of Lessor, sublet all or any
part of the Leased Property consistently with the
Primary Intended Use. Lessor shall not
unreasonably withhold its consent to any other or
further subletting or assignment; provided that
(a) in the case of a subletting, the sublessee
shall comply with the provisions of Section 23.2,
(b) in the case of an assignment, the assignee
shall assume in writing and agree to keep and
perform all of the terms of this Lease on the part
of Lessee to be kept and performed and shall be
and become jointly and severally liable with
Lessee for the performance thereof, (c) an
original counterpart of each such sublease and
32
assignment and assumption, duly executed by Lessee
and such sublessee or assignee, as the case may
be, in form and substance reasonably satisfactory
to Lessor, shall be delivered promptly to, Lessor,
and (d) in case of either an assignment or
subletting, Lessee shall remain primarily liable,
as principal rather than as surety, for the prompt
payment of the Rent and for the performance and
observance of all of the covenants and conditions
to be performed by Lessee hereunder. In addition
to Lessee's rights to sublet and assign as
provided in this section above, Lessee shall also
have the right (upon Lessor's prior consent, which
consent shall not unreasonably be withheld) to
enter into Tenant Leases which extend beyond the
Term of this Lease. To the extent that any such
Tenant Leases extend beyond the Term of this
Lease, Lessor shall receive the rents from, and be
responsible for any obligations on the part of the
landlord or lessor under such Tenant Leases. Any
and all such Tenant Leases shall, to the extent
applicable, be subject to the provisions of this
Section and Section 23.2.
23.2 NON-DISTURBANCE, SUBORDINATION AND
ATTORNMENT. Lessee shall insect in each sublease
permitted under Section 23.1 provisions to the
effect that (a) such sublease is subject and
subordinate to all of the terms and provisions of
this Lease and to the rights of Lessor hereunder,
(b) in the event this Lease shall terminate before
the expiration of such sublease, the sublessee
thereunder will, at Lessor's option, attorn to
Lessor and waive any right the sublessee may have
to terminate the sublease or to surrender
possession thereunder as a result of the
termination of this Lease and (c) in the event the
sublessee receives a written notice from Lessor or
Lessor's assignees, if any, 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 the party
giving such notice, or as such party may direct.
All rentals received from the sublessee by Lessor
or Lessor's assignees, if any, shall be credited
against amounts owing by Lessee under this Lease.
Lessor agrees that notwithstanding any default,
termination, expiration, sale, entry or other act
or omission of Lessee pursuant to the terms of
this Lease, or at law or in equity, Tenant's
possession shall not be disturbed unless such
possession may otherwise be terminated pursuant to
the terms of the applicable Tenant Lease. Lessor
hereby agrees, upon Lessee's request, to execute a
nondisturbance agreement in favor of any Tenant or
in favor of any sublessee under any sublease
permitted under Section 23.1 above; provided that
the Tenant or any such sublessee has acknowledged
all of the foregoing provisions and executed all
documents required by this Section 23.2.
23.3 SUBLEASE LIMITATION. Notwithstanding
anything contained in this Lease to the contrary,
Lessee shall not sublet the Leased Property,
including any of the Resident Agreements and
Tenant Leases, on any basis such that the rental
to be paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the
income or profits derived by the business
activities of the sublessee, or (b) any other
formula such that any portion of the sublease
rental received by Lessor would fail to qualify as
"rents from real property" within the meaning of
Section 856(d) of the Code, or any similar or
successor provision thereto.
ARTICLE 24
OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS
24.1 ESTOPPEL CERTIFICATE. At any time and
from time to time within 20 days following written
request by Lessor, Lessee will furnish to Lessor
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
such Officer's Certificate furnished pursuant to
this Article may be relied upon by Lessor, any
prospective purchaser of the Leased
33
Property and any third parties who have an
interest in the Leased Property, including any
Lender or professional advisor or Lessor.
24.2 FINANCIAL STATEMENTS AND CERTIFICATES.
Lessee will furnish the following statements to
Lessor; provided that Lessor shall keep
confidential terms furnished by Lessee which are
not generally available to the public:
(i) within 120 days after the end of each
Fiscal Years (A) a copy of the Consolidated
Financial Statements for such Fiscal Year; (B) an
Officer's Certificate stating (x) that no Event of
Default, or event which, with the giving of notice
or the passage of time, or both, would constitute
an Event of Default, has occurred and is
continuing and has not been waived, or, if there
shall have occurred and be continuing such an
Event of Default, specifying the nature thereof
and the steps being taken to remedy the same, and
(y) that to the best of the signer's knowledge and
belief, Lessee is not in default in the
performance or observance of any of the terms of
any loans or credit facilities, which by their
terms would permit an outstanding balance equal to
or greater than $10,000,000.00 in the aggregate,
which default would permit the holder thereof to
accelerate its stated maturity; (C) a current rent
or lease roll for the Leased Property setting
forth rental information in reasonable detail
regarding all of the Tenants and Tenant Leases,
including any space utilized by Lessee; (D) a
statement of revenues and expenses of the Leased
Property for the twelve-month period then ended in
detail reasonably satisfactory to Lessor; and (E)
a certificate in form satisfactory to Lessor
setting forth the Coverage Ratio for the twelve-
month period then ended;
(ii) within 45 days after the end of each
calendar quarter, a statement of all revenues and
expenses relating to the operation of the Facility
during such calendar quarter in each case
certified by Lessee to Lessor in a certificate in
substantially the form attached hereto as Exhibit
E.
(iii) within 15 days after request by Lessor,
(A) a statement of the number of units available
and the actual resident-days for the most recent
month, quarter and year, (B) census information
for the Facility in sufficient detail to show
resident-mix on a daily average basis for the
prior quarter and year, and (C) an aged accounts
receivable report in sufficient detail to show
amounts due from each class of resident-mix (such
as private, Medicare, Medicaid and V.A.) by the
account age classifications of 30 days, 60 days,
90 days, 120 days, and over 120 days;
(iv) if applicable, within 15 days after
filing or receipt, as the case may be, (A) all
cost reports filed with any regulatory or
licensing agency (including any cost reports for
Medicare or Medicaid) and any amendments thereto,
together with all responses, audit reports or
inquiries with respect to such cost reports, (B)
copies of all licensure and certification survey
reports and statements of deficiencies with
respect to the Facility (with correction plans
attached thereto), (C) copies of the Medicaid rate
calculation worksheet (or equivalent thereof, if
any, issued by the applicable Medicaid Agency, (D)
copies of all notices (regardless of form) from
any and all licensing and/or certifying agencies
that the license or applicable reimbursement
certification for the Facility is being downgrade
to a substandard category, revoked or suspended or
that action is pending or being considered to
downgrade to a substandard category, revoke or
suspend the Facility's license or certification,
and (E) evidence of the payment of any bed taxes
or similar taxes;
(v) within ten days after receipt, copies of
all licensure and certification surveys, reports
and statements of deficiencies with respect to the
Facility together with any plans
34
of correction applicable thereto, if any, within
the time prescribed by any applicable Legal
Requirement;
(vi) within 30 days after filing copies of
the 10-Q and 10-K Reports of Lessee tiled with the
United States Securities and Exchange Commission;
(vii) within 45 days after the end of each
quarter, a certificate in form acceptable to
Lessor that the required Coverage Ratio for the
quarter then ended has been achieved; and
(viii) with reasonable promptness, such other
information respecting the financial condition,
affairs and properties of Lessee as Lessor may
reasonably request from time to time.
ARTICLE 25
INSPECTION
Upon reasonable prior notice, Lessee shall
permit Lessor, any Facility Mortgagee and their
authorized representatives to inspect the Leased
Property during usual business hours subject to
any security, health, safety or confidentiality
requirements of Lessee, the rights of the
Residents, the rights of the Tenants, any
Insurance Requirements relating to the Leased
Property, or any other restrictions imposed by law
or applicable regulations.
ARTICLE 26
QUIET ENJOYMENT
So long as Lessee shall pay all Rent as the
same becomes due and shall fully comply with all
of the terms of this Lease and fully perform its
obligations hereunder, Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property
for the Term hereof, free of any claim or other
action by Lessor or anyone claiming by, through or
under Lessor, but subject to all liens and
encumbrances of record as of the date hereof or
hereafter consented to by Lessee. No failure by
Lessor to comply with the foregoing covenant shall
give Lessee any right to cancel or terminate this
:..ease, or to fail to pay 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 or seek any damages it may have against
Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this
Article.
ARTICLE 27
NOTICES
Any notices, demands, approvals and other
communications provided for herein shall be in
writing and shall be delivered by telephonic
facsimile, overnight air courier, personal
delivery or registered or certified U.S. Mail with
return receipt requested, postage paid, to the
appropriate party at its address as follows:
If to Lessor :
ALCO IV, L.L.C. ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
35
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Lessee :
Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone :
Telecopy:
With a copy to:
The ▇▇▇▇▇▇▇▇▇ Group
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: 206-623-1738
Addresses for notice may be changed from time
to time by written notice to all other parties.
Any communication given by mail will be effective
(i) upon the earlier of (a) three business days
following deposit in a post office or other
official depository under the care and custody of
the United States Postal Service or (b) actual
receipt, as indicated by the return receipt; (ii)
if given by telephone facsimile, when sent; and
(iii) if given by personal delivery or by
overnight air courier, when delivered to the
appropriate address set forth.
ARTICLE 28
APPRAISAL
In the event that it becomes necessary to
determine the Fair Market Value, Fair Market Value
Purchase Price, the Fair Market Added Value, the
Minimum Purchase Price or the Fair market Rental
Value of the Leased Property or a Substitute
Property for any purpose of this Lease, the party
required or permitted to give notice of such
required determination shall include in the notice
the name of a person selected to act as an
appraiser on its behalf. Within ten days after
receipt of any such notice, Lessor (or Lessee, as
the case may be) shall by notice to Lessee (or
Lessor, as the case may be) appoint a second
person as an appraiser on its behalf. The
appraisers thus appointed (each of whom must be a
member of the American Institute of Real Estate
Appraisers or any successor organization thereto)
shall, within 45 days after the date of the notice
appointing the first appraiser, proceed to
appraise the Leased Property or the Substitute
Property, as the case may be, to determine any of
the foregoing values as of the relevant date
(giving effect to the impact, if any, of inflation
from the date of their decision to the relevant
date); provided that if only one appraiser shall
have been so appointed, or if two appraisers shall
have been so appointed but only one such appraiser
shall have made such determination within 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
2ppcaisers shall have been appointed and shall
have made their determinations within the
respective requisite periods set forth above and
if the difference between the amounts so
determined shall not exceed ten percent of the
lesser of such amounts, then the Fair
36
Market Value or Fair Market Added Value or the
Fair Market Rental Value shall be an amount equal
to 50% of the sum of the amounts so determined. If
the difference between the amounts so determined
shall exceed 10% of the lesser of such amounts,
then such two appraisers shall have 20 days to
appoint a third appraiser, but if such appraisers
fail to do so, then either party may request the
American Arbitration Association or any successor
organization thereto to appoint an appraiser
within 20 days of such request, and both parties
shall be bound by any appointment so made within
such 20-day period. If no such appraiser shall
have been appointed within such 20 days or within
90 days of the original request for a
determination of Fair Market Value or Fair Market
Added Value or the Fair Market Rental Value,
whichever is earlier, either Lessor or Lessee may
apply to any court having jurisdiction to have
appointment made by such court. Any appraiser
appointed, by the American Arbitration Association
or by such court, shall be instructed to determine
the Fair Market Value or Fair Market Added Value
or the Fair Market Rental Value within 30 days
after appointment of such appraiser. The
determination of the appraiser which differs most
in terms of dollar amount from the determinations
of the other two appraisers shall be excluded, and
50% of the sum of the remaining two determinations
shall be final and binding upon Lessor and Lessee
as the Fair Market Value or Fair Market Added
Value or the Fair Market Rental Value for such
interest. However, in the event that following the
appraisal performed by said third appraiser, the
dollar amount of two of such appraisals are higher
and lower, respectively, than the dollar amount of
the remaining appraisal in equal degrees, the
determinations of both the highest and lowest
appraisal, respectively, shall be rejected and the
determination of the remaining appraisal shall be
final and binding upon Lessor and Lessee as the
Fair Market Value or Fair Market Added Value or
the Fair Market Rental Value for such interest.
This provision for determination by appraisal
shall be specifically enforceable to the extent
such remedy is available under applicable law, and
any determination hereunder shall be final and
binding upon the parties except as otherwise
provided by applicable law. Lessor and Lessee
shall each pay the fees and expenses of the
appraiser appointed by it and each shall pay one-
half of the fees and expenses of the third
appraiser and one-half of all other costs and
expenses incurred in connection with each
appraisal.
ARTICLE 29
PURCHASE RIGHTS
29.1 RIGHT OF FIRST REFUSAL. During the Term
hereof (provided that no Event of Default has
occurred and is continuing), Lessee shall have a
first refusal option to purchase the Leased
Property upon the same terms and conditions as
Lessor, or its successors and assigns, shall
propose to sell the Leased Property, or shall have
received an offer from a third party to purchase
the Leased Property, which Lessor intends to
accept (or has accepted subject to Lessee's right
of first refusal granted herein). If, during the
Term, Lessor receives such an offer or reaches
such agreement with a third party or proposes to
offer the Leased Property for sale, Lessor shall
promptly notify Lessee of the purchase price for
the Leased Property and all other material terms
and conditions of such agreement or proposed sale
together with a copy of such offer, and Lessee
shall have 30 days after receipt of such notice
from Lessor within which time to exercise Lessee's
option to purchase. If Lessee exercises its
option, then such purchase shall be consummated
within the time set forth in the third-party offer
and in accordance with the provisions of Article
17 hereof to the extent not inconsistent herewith.
If Lessee shall not exercise Lessee' s option to
purchase within said 30-day period after receipt
of said notice from Lessor; Lessor shall be free
for a period of 90 days after the expiration of
said 30-day period to sell the Leased Property to
the third party at the price and terms set forth
in such offer. Whether or not such sale is
consummated, Lessee shall be entitled to exercise
its right of first refusal as provided in this
Article, as to any subsequent sale of the Leased
Property during the Term of this Lease.
37
29.2 OPTION TO PURCHASE. Within 180 days
prior to the end of the Initial Term and each
Extended Term exercised by Lessee pursuant to the
terms of Article 34, Lessee shall have the option
to purchase the Leased Property upon written
notice to Lessor for a purchase price equal to the
Minimum Purchase Price. If not sooner exercised,
the option to purchase granted hereby will expire
and be of no further force and effect upon the
expiration of the Term or the earlier termination
of this Lease.
ARTICLE 30
DEFAULT BY LESSOR
30.1 DEFAULT BY LESSOR. Lessor shall be in
default of its obligations under this Lease if
Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to
be performed and such failure shall continue for a
period of 30 days after written notice thereof is
received by Lessor, unless such failure cannot
with due diligence be cured within a period of 30
days, in which case such failure shall not be
deemed to continue if Lessor, within said 30-day
period, proceeds promptly and with due diligence
to cure the failure and diligently completes the
curing thereof. The time within which Lessor shall
be obligated to cure any such failure shall also
be subject to extension or time due to the
occurrence of any Unavoidable Delay. In the event
Lessor fails to cure any such default, Lessee,
without waiving or releasing any obligations
hereunder, and in addition to all other remedies
available to Lessee hereunder or at law or in
equity, may purchase the Leased Property from
Lessor for a purchase price equal to the greater
of the Fair Market Value Purchase Price or the
Minimum Purchase Price of the Leased Property
minus an amount equal to any damage suffered by
Lessee by reason of such default. In the event
Lessee elects to purchase the Leased Property, it
shall deliver a notice thereof to Lessor
specifying a Payment Date occurring no less than
90 days subsequent to the date of such notice on
which it shall purchase the Leased Property, and
the same shall be thereupon conveyed in accordance
with the provisions of Article 17. Any sums owed
Lessee by Lessor hereunder shall bear interest at
the Overdue Rate from the date due and payable
until the date paid.
30.2 LESSEE'S RIGHT TO CURE. Subject to the
provisions of Section 30.1, if Lessor shall breach
any covenant to be performed by it under this
Lease, Lessee, after giving notice to and demand
upon Lessor in accordance with Section 30.1,
without waiving or releasing any obligation of
Lessor hereunder, and in addition to all other
remedies available to Lessee hereunder and at law
or in equity, Lessee may (but shall be under no
obligation at any time thereafter to) make such
payment or perform such act for the account and at
the expense of Lessor. All sums so paid by Lessee
and all costs and expenses (including reasonable
attorneys' fees) so incurred, together with
interest thereon at the Overdue Rate from the date
on which such sums or expenses are paid or
incurred by Lessee, shall be paid by Lessor to
Lessee on demand or set off against the Rent. The
rights of Lessee hereunder to cure and to secure
payment from Lessor in accordance with this
Section 30.2 shall survive the termination of this
Lease.
ARTICLE 31
ARBITRATION
31.1 CONTROVERSIES. Except with respect to
the payment of Minimum Rent hereunder, in case any
controversy shall arise between the parties hereto
as to any of the requirements of this Lease or the
performance thereof which controversy the parties
shall be unable to settle by agreement or as
otherwise provided herein, such controversy shall
be determined by arbitration to be initiated and
conducted as provided in this Article 31.
38
31.2 APPOINTMENT OF ARBITRATORS. The party or
parties requesting arbitration shall serve upon
the other a written demand therefor specifying the
matter to be submitted to arbitration, and
nominating an arbitrator who is a member in good
standing of the American Arbitration Association
("AAA"). Within 20 days after receipt of such
written demand and notification, the other party
shall, in writing, nominate a person who is a
member in good standing with AAA and the two
arbitrators so designated shall, within ten days
thereafter, select a third arbitrator who is a
person who is a member in good standing with AAA
and give immediate written notice of such
selection to the parties and shall fix in said
notice a time and place for the first meeting of
the arbitrators, which meeting shall be held as
soon as conveniently possible after the selection
of all arbitrators, at which time and place the
patties to the controversy may appear and be
heard.
31.3 THIRD ARBITRATOR. In case the notified
party or parties shall fail to make a selection
upon notice, as aforesaid, or in case the first
two arbitrators selected shall fail to agree upon
a third arbitrator within ten days after their
selection, then such arbitrator or arbitrators
may, upon application made by either of the
parties to the controversy, after 20 days' written
notice thereof to the other party or parties, have
a third arbitrator appointed by any judge of any
United States court of record having jurisdiction
in the state in which the Leased Property is
located or, if such office shall not then exist,
by a judge holding an office most nearly
corresponding thereto.
31.4 ARBITRATION PROCEDURE. Said arbitrators
shall give each of the parties not less than ten
days' written notice of the time and place of each
meeting at which the parties or any of them may
appear and be heard and after hearing the parties
in regard to the matter in dispute and taking such
other testimony and making such other examinations
and investigations as justice shall require and as
the arbitrators may deem necessary, they shall
decide the questions submitted to them in
accordance with the rules of AAA. The decision of
said arbitrators in writing signed by a majority
of them shall be final and binding upon the
parties to such controversy. In rendering such
decisions and award, the arbitrators shall not add
to, subtract from or otherwise modify the
provisions of this Lease.
31.5 EXPENSES. Unless otherwise specified in
the decision of the arbitrators, the prevailing
party in any arbitration proceeding shall be
reimbursed its reasonable out-of-pocket expenses
by the non-prevailing party, including travel
expenses and reasonable attorneys' fees and
expenses, and the non-prevailing party shall pay
all other costs of such proceeding.
ARTICLE 32
FINANCING OF LEASED PROPERTY
Lessor agrees that it will not grant or
create any mortgage, deed of trust, lien,
encumbrance or other title retention agreement
upon the Leased Property to secure any
indebtedness of Lessor (an " Encumbrance " ),
unless each holder of such an Encumbrance agrees
(a) to give Lessee the same notice, if any, given
to Lessor of any default or acceleration of any
obligation underlying any such Encumbrance or any
sale in foreclosure of such Encumbrance, (b) to
permit Lessee to appear with its representatives
and to bid at any public foreclosure sale with
respect to any such Encumbrance, (c) agrees to
release the Leased Property from the Encumbrance
upon the exercise by Lessee of a right to purchase
contained in this Lease and the payment by Lessee
of the applicable purchase price, and (d) enters
into an agreement with Lessee containing the
provisions described in Article 33 of this Lease.
Lessee agrees to execute and deliver to
39
Lessor or the holder of an Encumbrance any written
agreement required by this Article within ten days
of written request thereof by Lessor or such
holder of an Encumbrance. Lessee hereby consents
to the assignment of and grant of a security
interest and lien in this Lease together with the
other documents and instruments delivered to
Lessor by Lessee pursuant hereto and in connection
herewith (collectively, the "Assigned Documents"),
including all rights of Lessor in, to and under
each Assigned Document, by Lessor to any Facility
Mortgagee requesting same. Lessee hereby further
agrees to execute a Consent to Assignment in
substantially the form attached hereto as Exhibit
F,
ARTICLE 33
SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE
At the request from time to time by one or
more holders of an Encumbrance that may hereafter
be placed upon the Leased Property or any part
thereof, and any and all renewals, replacements,
modifications, consolidations, spreaders and
extensions thereof, Lessee will subordinate this
Lease and all of Lessee's rights and estate
hereunder to each such Encumbrance and will attorn
to and recognize such holder (or the purchaser at
any foreclosure sale or any sale under a power of
sale contained in any such Encumbrance or a holder
by a deed in lieu of foreclosure, as the case may
be) as Lessor under this Lease for the balance of
the Term then remaining, subject to all of the
terms and provisions of this Lease; provided that
each such institutional holder simultaneously with
or prior to recording any such Encumbrance
executes and delivers a written agreement in
recordable form (a) consenting to this Lease and
agreeing that, notwithstanding any such other
lease, mortgage, deed of trust, right, title or
interest, or any default, expiration, termination,
foreclosure, sale, entry or other act or omission
under, pursuant to or affecting any of the
foregoing, Lessee shall not be disturbed in
peaceful enjoyment of the Leased Property nor
shall this Lease be terminated or canceled at any
time, except in the event Lessor shall have the
right to terminate this Lease under the terms and
provisions expressly set forth herein; (b)
agreeing that it will be bound by all the terms of
this Lease, perform and observe all of Lessor's
obligations set forth herein; and (c) agreeing
that all proceeds of the casualty insurance
described in Article 13 of this Lease and all
Awards described in Article 14 will be made
available to Lessor for restoration of the Leased
Property as and to the extent required by this
Lease, subject only to reasonable regulation
regarding the manner of disbursement and
application thereof. Lessee agrees to execute and
deliver to Lessor or the holder of an Encumbrance
any written agreement required by this Article
within ten days of written request thereof by
Lessor or such holder of an Encumbrance. Lessee
agrees to execute from time to time, at the
request of Lessor, an institutional investor of
Lessor's or a Facility Mortgagee, a certificate
setting forth any defaults of Lessor hereunder and
the dates through which Rent has been paid and
such other matters as may be reasonably requested.
ARTICLE 34
EXTENDED TERMS
If no Event of Default shall have occurred
and be continuing, Lessee is hereby granted the
right to extend the Term of this Lease for three
additional, consecutive five-year periods (each
such period, an "Extended Term") for a maximum
possible Term of 25 years, by giving written
notice to Lessor of each such extension at least
180 days, but not more than 270 days, prior to the
expiration of the then-current Term; subject,
however, to the provisions of Section 13.7 hereof.
Lessee may not exercise its option for more than
one Extended Term at a time and may exercise the
option to extend for an Extended Term if all of
the Related Leases are simultaneously extended by
Lessee or its Affiliates, as the case may be.
During each Extended Term, all of the terms and
40
conditions of this Lease shall continue in full
force and effect, except that the Minimum Rent for
and during each of the Extended Terms shall be the
greater of (i) the Fair Market Rental Value on the
first day of such Extended Term or (ii) the
Minimum Rent in effect immediately prior to the
first day of such Extended Term. In any event, the
Minimum Rent shall continue to be increased
throughout the Extended Terms in accordance with
the provisions of Section 2.1(b) hereof.
ARTICLE 35
MISCELLANEOUS
35.1 NO WAIVER. No failure by Lessor or
Lessee to insist upon the strict performance of
any term hereof or to exercise any right, power or
remedy consequent upon a breach thereof, and no
acceptance of full or partial payment of the Rent
during the continuance of any such breach, shall
constitute a waiver of any such breach or any such
term. To the extent permitted by law, no waiver of
any breach shall affect or alter this Lease, which
shall continue in full force and effect with
respect to any other then existing or subsequent
breach.
35.2 REMEDIES CUMULATIVE. To the extent
permitted by law, each legal, equitable or
contractual right, power and remedy of Lessor or
Lessee now or hereafter provided either in this
Lease or by statute or otherwise shall be
cumulative and concurrent and shall be in addition
to every other right, power and remedy and the
exercise or beginning of the exercise by Lessor or
Lessee of any one or more of such rights, powers
and remedies shall not preclude the simultaneous
or subsequent exercise by Lessor or Lessee of any
or all of such other rights, powers and remedies.
35.3 SURRENDER. No surrender to Lessor of
this Lease or of the Leased Property or any part
thereof, or of any interest therein, shall be
valid or effective unless agreed to and accepted
in writing by Lessor and no act by Lessor or any
representative or agent of Lessor, other than such
a written acceptance by Lessor, shall constitute
an acceptance of any such surrender.
35.4 NO MERGER OF TITLE. There shall be no
merger of this Lease or of the leasehold estate
created hereby by reason of the fact that the same
person, firm, corporation or other entity may
acquire, own or hold, directly or indirectly, (a)
this Lease or the leasehold estate created hereby
or any interest in this Lease or (b) such
leasehold estate and the fee estate in the Leased
Property.
35.5 TRANSFERS BY LESSOR. If Lessor or any
successor owner of the Leased Property shall
convey the Leased Property in accordance with the
terms hereof, other than as security for a debt,
the guarantee or transferee of the Leased Property
shall expressly assume all obligations of Lessor
hereunder arising or accruing from and after the
date of such conveyance or transfer, and shall be
reasonably capable of performing the obligations
of Lessor hereunder and Lessor or such successor
owner, as the case may be, shall thereupon be
released from all future liabilities and
obligations of Lessor under this Lease arising or
accruing from and after the date of such
conveyance or other transfer and all such future
liabilities and obligations shall thereupon be
binding upon the new owner.
35.6 GENERAL. Anything contained in this
Lease to the contrary notwithstanding, all claims
against, and liabilities of, Lessee and Lessor
against the other arising out of or relating to
this Lease and arising prior to any date of
termination of this Lease shall survive such
termination. If any term or provision of this
Lease or any
41
application thereof shall be invalid or
unenforceable, the remainder of this Lease and any
other application of such term or provision shall
not be affected thereby. If any late charges
provided for in any provision of this Lease are
based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree
that such charges shall be fixed at the maximum
permissible rate. Neither this Lease nor any
provision hereof may be changed, waived,
discharged or terminated except by an instrument
in writing and
in recordable form signed by Lessor and Lessee.
All the terms and provisions of this Lease shall
be binding upon and inure to the benefit of the
parties hereto and their respective successors and
assigns. The headings in this Lease are for
convenience of reference only and shall not limit
or otherwise affect the meaning hereof. This Lease
shall be governed by and construed in accordance
with the laws of the state where the Land is
located, but not including its conflict of laws
rules. This Lease may be executed in one or more
counterparts, each of which shall be an original
but, when taken together, shall constitute but one
document.
35.7 MEMORANDUM OF LEASE. Lessor and Lessee
shall, promptly upon the request of either, enter
into a short form memorandum of this Lease in form
suitable for recording under the laws of the state
in which the Leased Property is located in which
reference to this Lease, and all options contained
herein, shall be made.
35.8 TRANSFER OF LICENSES. Upon the
expiration or earlier termination of the Term,
Lessee shall take all action necessary or
appropriate to effect (or useful in effecting) the
transfer, to the extent permitted by any Legal
Requirement, to Lessor or Lessor's nominee of all
licenses, operating permits and other governmental
authorizations and all service contracts which may
be necessary or useful in the operation of the
Facility and which relate exclusively to the
Facility which have not previously been
transferred or assigned to Lessor.
ARTICLE 36
GLOSSARY OF TERMS
36.1 For purposes of this Lease, except as
otherwise expressly provided or unless the context
otherwise requires, (a) the terms defined in this
Article 36 have the meanings assigned to them in
this Article 36 and include the plural as well as
the singular, (b) all accounting terms not
otherwise defined herein have the meanings
assigned to them in accordance with generally
accepted accounting principles as at the time
applicable, (c) all references in this Lease to
designated "Articles", "Sections" and other
subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease, and
(d) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this
Lease as a whole and not to any particular
Article, Section or other subdivision, (e) the
word "including" shall mean "including without
limitation," and (f) all consents required of
Lessor hereunder shall be in Lessor's sole and
absolute discretion, unless otherwise specifically
set forth herein. For purposes of this Lease, the
following terms shall have the meanings indicated:
"AAA" means the American Arbitration
Association.
"Additional Charges" has the meaning set
forth in Section 2.3 hereof together with all
other items specifically included as "Additional
Charges" in this Lease.
"Adjustment Date" has the meaning set forth
in Section 2.1(b) hereof.
42
"Affiliate", when used with respect to
Lessee, means any Person directly or indirectly
controlling, controlled by or under direct or
indirect common control with Lessee. For the
purposes of this definition,
"control", as used with respect to any
Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the
direction of the management and policies of such
Person, through the ownership of voting
securities, partnership interests or other equity
interests.
" Agent" has the meaning set forth in Article
32 hereof.
" Applicable Period" has the meaning set
forth in Section 7. 3.
"Assigned Documents" has the meaning set
forth in Article 32 hereof.
"Award" means all compensation, sums or
anything of value awarded, paid or received on a
total or partial Condemnation.
"Breakeven Date" has the meaning set forth in
Article 1.
"Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day
on which national banks in the City of Birmingham,
.Alabama are closed.
"Capital Additions" means one or more new
buildings or one or more additional structures
annexed to any portion of any of the Leased
Improvements, which are constructed on any parcel
or portion of the Land during the Term, including
the construction of a new wing or new story, or
the rebuilding of the existing Leased Improvements
or any portion thereof not normal, ordinary or
recurring to maintain the Leased Property,
excluding, however, any construction governed by
the provisions of Article 13.
"Capital Addition Cost" means the cost of any
Capital Additions proposed to be made by Lessee
whether paid for by Lessee or Lessor. Such cost
shall include and be limited to (a) the cost of
construction of the Capital Additions, including
site preparation and improvement, materials,
labor, supervision and certain related design,
engineering and architectural services and the
cost of any fixtures, construction financing and
miscellaneous items approved in writing by Lessor,
(b) if agreed to by Lessor in writing in advance,
the cost of any land contiguous to the Leased
Property purchased for the purpose of placing
thereon the Capital Additions or any portion
thereof or for providing means of access thereto,
or parking facilities therefor, including the cost
of surveying the same, (c) the cost of insurance,
real estate taxes, water and sewage charges and
other carrying charges for such Capital Additions
during construction, (d) the cost of title
insurance, (e) reasonable fees and expenses of
legal counsel and accountants, (f) filing,
registration and recording taxes and fees, (g)
documentary stamp taxes, if any, (h) environmental
assessments and boundary surveys and (i) all
reasonable costs and expenses of Lessor and any
Lending Institution which has committed to finance
the Capital Additions, including, (A) the
reasonable fees and expenses of their respective
legal counsel, (B) all printing expenses, (C) the
amount of any filing, registration and recording
taxes and fees, (D) documentary stamp taxes, if
any, (E) title insurance charges, appraisal fees,
if any, (F) rating agency fees, if any, and (G)
commitment fees, if any, charged by any Lending
Institution advancing or offering to advance any
portion of the financing for such Capital
Additions.
43
"Capital Replacement Account" has the meaning
set forth in Section 2.1(c).
"Cash Adjustment" has the meaning set forth
in Section 20.1(d).
" Charge " has the meaning set forth in
Article 11 hereof.
"Code" means the Internal Revenue Code of
1986, as amended.
"Commencement Date" has the meaning set forth
in Article 1.
"Condemnation" means the transfer of all or
any part of the Leased Property as a result of (i)
the exercise of any governmental power, 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
while legal proceedings for condemnation are
pending.
"Condemnor" means any public or quasi-public
authority, or private corporation or individual,
having the power of Condemnation.
"Consolidation Financial Statements" means
for any fiscal year or other accounting period for
Lessee and its respective consolidated Affiliates,
audited 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 of Lessee 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 of Lessee, and prepared in
accordance with generally accepted accounting
principles consistently applied, except as noted.
"Consumer Price Index" or "CPI" means the
Consumer Price Index for All Urban Consumers for
the U.S. City Average for all Items (1982-
1984=100) as published by the United States
Department of Labor, Bureau of Labor Statistics.
If the manner in which the Consumer Price Index is
determined by the Bureau of Labor Statistics shall
be substantially revised (including a change in
the base index year), an adjustment shall be made
by Lessor in such revised index which would
produce results equivalent, as nearly as possible,
to those which would have been obtained if the
Consumer Price Index had not been so revised. If
the Consumer Price Index shall become unavailable
to the public because publication is discontinued
or otherwise, or if equivalent data is not readily
available to enable Lessor to make the adjustment
referred to in the preceding sentence, Lessor will
substitute therefor a comparable index based upon
changes in the cost of living or purchasing power
of the consumer dollar published by any other
governmental agency, or if no such index shall be
available, then a comparable index published by a
major bank or other financial institution or by a
university or a recognized financial publication.
" Coverage Ratio " has the meaning set forth
in Section 7. 3.
"Credit Enhancements" means all cash
collateral, security deposits, security interests,
letters of credit, pledges, prepaid rent or other
sums, deposits or interests held by Lessee, if
any, to secure obligations with respect to the
Leased Property, the Resident Agreements, the
Residents, the Tenant Leases or the Tenants.
44
"Current Yield" means as of any date the
annual Minimum Rent, as adjusted from time-to-time
pursuant to the terms of this Lease, divided by
the sum of (i) the purchase price as set forth in
the Purchase and Sale Agreement plus (ii) all
Capital Additions Costs paid for or financed by
Lessor which have not been repaid by Lessee.
"Date of Taking" means the date the Condemnor
has the right to possession of the property being
condemned.
"EBITDAR" has the meaning set forth in
Section 7.3.
"Encumbrance" has the meaning set forth in
Article 32.
"Event of Default" has the meaning set forth
in Section 15.1.
"Extended Term" has the meaning set forth in
Article 34.
"Facility" has the meaning set forth in
Article 1.
"Facility Mortgage" has the meaning set forth
in Section 12.1.
"Facility Mortgagee" has the meaning set
forth in Section 12. l.
"Fair Market Added Value" means the Fair
Market Value (as hereinafter defined) of the
Leased Property (including all Capital Additions)
less the Fair Market Value of the Leased Property
determined as if no Capital Additions paid for by
Lessee without financing by Lessor had been
constructed.
"Fair Market Rental Value" means the fair
market rental value of the Leased Property or any
Substitute Property, (a) assuming the same is
unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth
in Article 28 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 an indebtedness to which the Leased
Property or Substitute Property may be subject.
"Fair Market Value" means the fair market
value of the Leased Property or any Substitute
Property, including all Capital Additions, (a)
assuming the same is unencumbered by this Lease,
(b) determined in accordance with the appraisal
procedures set forth in Article 28 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
indebtedness to which the Leased Property or such
Substitute Property is subject or which
encumbrance Lessee or Lessor is otherwise required
to remove pursuant to any provision of this Lease
or agrees to remove at or prior to the closing of
the transaction as to which such Fair Market Value
determination is being made. The positive or
negative effect on the value of the Leased
Property or Substitute Property attributable to
the interest rate, amortization schedule, maturity
date, prepayment penalty and other terms and
conditions of any Encumbrance on the Leased
Property or any Substitute Property, as the case
may be, which is not so required or agreed to be
removed shall be taken into account in determining
such Fair Market Value. ,
"Fair Market Value Purchase Price" means the
Fair Market Value less the Fair Market Added
Value.
"Fiscal Year" means the 12-month period from
January I to December 31.
45
"Fixtures" has the meaning set forth in
Article I.
"Full Replacement Cost" has the meaning set
forth in Section 12.2.
"Hazardous Materials" means any substance,
including asbestos or any substance containing
asbestos, the group of organic compounds known as
polychlorinated biphenyls, flammable explosives,
radioactive materials, medical waste, chemicals,
pollutants, effluents, contaminants, emissions or
any other related materials and items included in
the definition of hazardous or toxic wastes,
materials or substances under any Hazardous
Materials Law.
"Hazardous Materials Law" means any law,
regulation or ordinance relating to environmental
conditions, medical waste and industrial hygiene,
including the Resource Conservation and Recovery
Act of 1976 ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA"), as amended by the
Superfund Amendments and Reauthorization Act of
1986 ("▇▇▇▇"), the Hazardous Materials
Transportation Act, the Federal Water Pollution
Control Act, the Clean Air Act, the Clean Water
Act, the Toxic Substances Control Act, the Safe
Drinking Water Act, the Atomic Energy Act and all
similar federal, state and local environmental
statutes and ordinances, whether heretofore or
hereafter enacted or effective and all
regulations, orders, or decrees heretofore or
hereafter promulgated thereunder.
"Impositions" means, collectively, all taxes
relating to the Leased Property, including all ad
valorem, sales and use, gross receipts, action,
privilege, rent (with respect to the Resident
Agreements and the Tenant Leases) or similar
taxes, assessments (including 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), water, sewer or other rents and charges,
excises, tax levies, fees (including license,
permit, inspection, authorization and similar
fees), 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 the Leased Property and/or
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 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
Rent, the Leased Property or any part thereof 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, the Resident Agreements or the Tenant
Leases or use of the Leased Property or any part
thereof; provided that 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, (2) any transfer or
net revenue tax of Lessor, (3) any tax imposed
with respect to the sale, exchange or other
disposition by Lessor of any portion of the Leased
Property or the proceeds thereof, (4) except as
expressly provided elsewhere in this Lease, any
principal or interest on any Encumbrance on the
Leased Property, or (5) any judgment lien against
Lessor which does not relate to or arise out of
any amount or obligation that Lessee is required
to pay or perform pursuant to the terms of this
Lease, except to the extent that any tax,
assessment, tax levy or charge which Lessee is
obligated to pay pursuant to 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), (2) or (3) is levied, assessed or
imposed expressly in lieu thereof.
"Initial Term" has the meaning set forth in
Article 1.
46
"Insurance Requirements" means all terms of
any insurance policy required by this Lease and
all requirements of the issuer of any such policy.
"Land" has the meaning set forth in Article
1.
"Lease" means this Lease.
"Lease Amendment" has the meaning set forth
in Section 9.3(b)(iv).
"Lease Assignment" means that certain
Assignment of Rents and Leases, substantially in
the form attached hereto as Exhibit D to be dated
on or about the date hereof executed by Lessee to
the Lender, pursuant to the terms of which Lessee
assigns to the Lender each of the Resident
Agreements, the Tenant Leases and Credit
Enhancements, if any, as security for the
obligations of Lessee under this Lease, and any
other obligations of Lessee, or any Affiliate of
Lessee to Lessor or the Lender.
"Leased Improvements" and "Leased Property"
have the meanings set forth in Article 1.
"Legal Requirements" means all federal,
state, county, municipal and other governmental
statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions
affecting the Leased Property or the construction,
use or alteration thereof, whether now or
hereafter enacted and in force, including any
which may (a) require repairs, modifications or
alterations of or to the Leased Property, or (b)
in any way adversely affect the use and enjoyment
thereof, and all permits, licenses, authorizations
and regulations relating thereto, and all
covenants, agreements, actions and encumbrances
contained in any instruments, either of record or
known to Lessee (other than encumbrances created
by Lessor without the consent of Lessee), at any
time in force affecting the Leased Property.
"Lender" has the meaning set forth in Section
2.1(a).
"Lending Institution" means any insurance
company, federally insured commercial or savings
bank, national banking association, savings and
loan association, employees' welfare, pension or
retirement fund or system, corporate profit-
sharing or pension plan, college or university, or
real estate investment company including any
corporation qualified to be treated for federal
tax purposes as a real estate investment trust
having a net worth of at least $50,000,000.
"Lessee" means EMERITUS CORPORATION, a
Washington corporation, its successors and
assigns.
"Lessor" means ALCO IV, L.L.C., a North
Carolina limited liability company, and its
successors and assigns.
"Loan Agreement" has the meaning set forth in
Section 2. 1(a).
"Minimum Rent" has the meaning set forth in
Section 2.1(a).
"Minimum Purchase Price" means the greater of
(i) the Fair Market Value of the Leased Property
at the time of purchase hereunder by Lessee and
(ii) the Project Amount (and in the case of a
substitution pursuant to Article 20, as adjusted
pursuant to Section 20.1(f)) as such amount is
increased at the rate of three percent compounded
annually for
47
each year (to be prorated for partial years)
between the Commencement Date and the date of
repurchase by Lessee, plus the sum of all Capital
Addition Costs relating to the Leased Property
paid for or financed by Lessor which as of the
date of repurchase of the Leased Property have not
been repaid by Lessee, less the net amount (after
deduction of all reasonable legal fees and other
costs and expenses, including expert witness fees,
incurred by Lessor in connection with obtaining
any such award or proceeds) of all Awards received
by Lessor from Condemnation of the Leased Property
and all insurance proceeds received by Lessor from
any damage or destruction of the Leased Property.
"Officer's Certificate" means a certificate
of Lessee signed by the Chairman of the Board of
Directors, the President, any Vice President 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.
"Ordinary Course of Business" means the
ordinary course of business for Lessee consistent
with past custom and practice (including quantity
and frequency).
"Overdue Rate" means as of any date, a rate
per annum equal to the Prime Rate as of such date,
plus two percent, but in no event greater than the
maximum rate then permitted under applicable law.
"Payment Date" means any due date for the
payment of the installments of Minimum Rent under
this
Lease.
"Permitted Exception's has the meaning set
forth in Article 1 hereof.
"Permitted Liens" means (i) the Permitted
Exceptions, (ii) pledges or deposits made to
secure payments of worker's compensation insurance
(or to participate in any fund in connection with
worker's compensation insurance), unemployment
insurance, pensions or social security programs,
(iii) liens imposed by mandatory provisions of law
such as for materialmen, mechanics, warehousemen
and other like liens arising in the Ordinary
Course of Business, securing indebtedness whose
payment is not yet due and payable, (iv) liens for
taxes, assessments and governmental charges or
levies if the same are not yet due and payable or
if the same are being contested in good faith and
as to which adequate cash reserves have been
provided, (v) liens arising from good faith
deposits in connection with tenders, leases, real
estate bids or contracts (other than contracts
involving the borrowing of money), pledges or
deposits to secure public or statutory obligations
and deposits to secure (or in lieu of surety,
stay, appeal or customs bonds and deposits to
secure the payment of taxes, assessments, duties
or other similar charges, (vi) liens to secure
purchase money indebtedness, so long as the
indebtedness incurred to purchase the new asset is
secured only by such asset, or (vii) encumbrances
consisting of zoning restrictions, easements or
other restrictions on the use of real property;
provided that such items do not impair the use of
such property for the purposes intended, none of
which is violated by existing or proposed
structures or land use.
"Person" means a natural person, corporation,
partnership, trust, association, limited liability
company or other entity.
"Personal Property" means all machinery,
equipment, furniture, furnishings, computers,
signage, trade fixtures or other personal property
and consumable inventory and supplies used in the
operation of the Leased Property for its Primary
Intended Use,
48
together with all replacements and substitutions
therefor, except for any portion of the Leased
Property, all as more specifically set forth on
Exhibit C attached hereto or to be attached once
the complete list is available.
"Primary Intended Use" has the meaning set
forth in Section 6.2(a).
"Prime Rate" means the annual rate reported
by The Wall Street Journal, Eastern Edition (or,
if The Wall Street Journal shall no longer be
published or shall cease to report such rates,
then a publication or journal generally acceptable
in the financial industry as authoritative
evidence of prevailing commercial lending raves)
from time to time as being the prevailing prime
rate (or, if more than one such rate shall be
published in any given edition, the arithmetic
mean of such rates). The prime rate is an index
rate used by The Wall Street Journal to report
prevailing lending rates and may not necessarily
be its most favorable lending rate available. Any
change in the Prime Rate hereunder shall take
effect on the effective date of such change in the
prime rate as reported by The Wall Street Journal,
without notice to Lessee or any other action by
Lessor. Interest shall be computed on the basis
that each year contains 360 days, by multiplying
the principal amount by the per annum rate set
forth above, dividing the product so obtained by
360, and multiplying the quotient thereof by the
actual number of days elapsed.
"Project Amount" has the meaning set forth in
Section 2.1(a).
"Related Leases" has the meaning set forth in
Section 15.1(a).
"Rent" means, collectively, the Minimum Rent
and the Additional Charges.
"Rent Reserve Deposit" has the meaning set
forth in Section 2.5.
"Resident" means the lessee or tenant under
Resident Agreement.
"Resident Agreements" means all leases,
rental agreements and other agreements (written or
otherwise) that grant a possessory interest in and
to any space within the Facility, other than the
Tenant Leases, together with all Credit
Enhancements, if any, held in connection
therewith.
"Request" has the meaning set forth in
Section 9.3(a).
"Security Agreement" means that certain
Security Agreement of even date herewith executed
by Lessee to Lessor, pursuant to the terms of
which Lessee has granted to Lessor a first lien
and security interest in and to all of the
Personal Property, including but not limited to,
fixed and movable equipment, including
replacements and substitutions, as security for
the obligations of Lessee under this Lease, and
any and all other obligations of Lessee.
"Substitution Date" has the meaning set forth
in Section 20. 1.
"Substitute Properties" has the meaning set
forth in Section 20.1.
"Taking" means a taking or voluntary
conveyance during the Term hereof of all or part
of the Leased Property, or any interest therein or
right accruing thereto or use thereof, as the
result of, or in settlement of any Condemnation or
other eminent domain proceeding affecting the
Leased Property whether or not 2he same shall have
actually been commenced.
49
"Tenant" means the lessees or tenants under
the Tenant Leases, if any.
"Tenant Leases" means all leases, subleases,
assignments and other rental agreements (written
or verbal, now or hereafter in effect), if any,
that grant a possessory interest in and to any
space in the Improvements, or that otherwise grant
possessory or occupancy rights with regard to the
Leased Property (except for the Resident
Agreements), together with all Credit
Enhancements, if any, held in connection
therewith.
"Term" means the Initial Term and any
Extended Term as to which Lessee has exercised its
options to extend contained in Article 34 hereof
unless earlier terminated pursuant to the
provisions hereof.
"Treasury Yield" means as of any date the
weekly average yield on United States Treasury
Securities Constant Maturity Series issued by the
United States Government, as most recently
published by the Federal Reserve Board in Federal
Reserve Statistical Release H.15(519). If, with
respect to the Treasury Yield, Lessor determines
that the sale of Treasury Securities by the United
States Government has been suspended, or Treasury
Securities are not being offered for sale, or the
weekly average yield is no longer printed by the
Federal Reserve Hoard in Federal Reserve
Statistical Release H.15(519) or for any other
reason Lessor is not able to obtain a quotation
from the Federal Reserve for the sale of such
Treasury Securities, then Lessor will promptly
give notice to Lessee and advise Lessee of a new
index for determining the interest rate to be used
in connection with this Lease, which rate, in the
good faith judgment of Lessor, will be
substantially equivalent to the Treasury Yield.
"Unavoidable Delays" means delays due to
strikes, lockouts, inability to procure materials
after the exercise of reasonable efforts, power
failure, acts of God, governmental restrictions,
enemy action, evil commotion, fire, unavoidable
casualty or other causes beyond the control of the
party responsible for performing an obligation
hereunder, provided that lack of funds shall not
be deemed a cause beyond the control of either
party hereto unless such lack of funds is caused
by the failure of the other party hereto to
perform any obligations of such other party under
this Lease.
"Unsuitable for Its Primary Intended Use" as
use anywhere in this Lease, shall mean that, by
reason of damage or destruction, or a partial
Taking, (i) the Facility i ; required to be
demolished pursuant to any Legal Requirement, (ii)
Lessee is unable within 12 months to obtain any
governmental approval pursuant to any Legal
Requirement, or (iii) in the good faith judgment
of Lessee, reasonably exercised, the Facility
cannot be profitably operated for its Primary
Intended Use, taking into account, among other
relevant factors, the number of usable suites and
number and diversity of the Residents and the
Tenants affected by such damage or destruction or
partial Taking.
SIGNATURES ON FOLLOWING PAGE
50
IN WITNESS WHEREOF, the parties have caused
this Lease to be executed and their respective
corporate seals to be hereunto affixed and
attested by their respective officers thereunto
duly authorized as to the date first written
above.
LESSOR:
ALCO IV, L.L.C.,
a North Carolina limited liability company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Its: Manager
LESSEE:
EMERITUS CORPORATION,
A Washington corporation
By: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Its: V.P. - Business Development
51