<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ------------------------------------------------------------
FORM 10-Q
- ------------------------------------------------------------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT 1934
For the quarterly period ended September 30, 1996.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-14012
EMERITUS CORPORATION
(Exact name of registrant as specified in its charter)
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
WASHINGTON 91-1605464
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
(Address of principal executive offices)
(206) 298-2909
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(X) Yes ( ) No
As of November 13, 1996, there were 11,000,000 shares of the
Registrant's Common Stock, par value $.0001, outstanding.
<PAGE>
EMERITUS CORPORATION
Index
Part I. Financial Information
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Financial Statements: Page No.
---------
Condensed Consolidated Balance Sheets as of
December 31, 1995 and September 30, 1996..... 1
Condensed Consolidated Statements of
Operations for the Three and Nine Months
Ended September 30, 1995 and 1996............ 2
Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended
September 30, 1995 and 1996.................. 3
Notes to Condensed Consolidated Financial
Statements................................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............. 24
Signatures................................... 26
Note: Items 1-5 of Part II are omitted because they
are not applicable
</TABLE>
<PAGE>
EMERITUS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1995 and September 30, 1996
(In thousands, except share data)
<TABLE>
<CAPTION>
ASSETS
September
30,
December 31, 1996
1995 (unaudited)
------------ -----------
<S> <C> <C>
Current Assets:
Cash.......................................... $ 9,507 $ 9,967
Restricted cash............................... 1,025 1,158
Trade accounts receivable..................... 212 1,437
Prepaid expenses and other current assets..... 1,835 6,733
------------ -----------
Total current assets.................. 12,579 19,295
Property and equipment, net..................... 81,041 76,777
Property held for development................... 14,111 5,477
Investment securities available for sale........ 2,825 2,338
Notes receivable from and investments in
affiliates.................................... 644 3,671
Other assets, net............................... 4,435 18,020
------------ -----------
Total assets.......................... $115,635 $125,578
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings......................... $ 520 $ 251
Current portion of long-term debt............. 352 1,836
Accounts payable.............................. 4,249 3,169
Other current liabilities..................... 3,367 5,203
------------ -----------
Total current liabilities............. 8,488 10,459
Security deposits............................... 740 1,303
Other long-term liabilities..................... 242 3,996
Deferred gain on sale of communities............ 2,227 9,777
Deferred income................................. -- 992
Convertible debentures.......................... -- 32,000
Long-term debt, less current portion............ 66,814 35,108
------------ -----------
Total liabilities..................... 78,511 93,635
------------ -----------
Minority interest............................... 2,229 2,057
Shareholders' Equity:
Preferred stock, $.0001 par value. Authorized
5,000,000 shares; no shares issued and
outstanding.................................. -- --
Common stock, $.0001 par value. Authorized
40,000,000 shares; issued and outstanding
11,000,000 shares............................ 1 1
Additional paid-in capital.................... 44,910 44,788
Unrealized gain on investment securities...... 400 172
Accumulated deficit........................... (10,416) (15,075)
------------ -----------
Total shareholders' equity............ 34,895 29,886
------------ -----------
Total liabilities and shareholders'
equity............................. $115,635 $125,578
============ ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations.
1
<PAGE>
EMERITUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months and Nine Months Ended September 30, 1995 and 1996
(unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rent............................ $6,116 $16,617 $11,618 $42,853
Service fees.................... 725 956 1,356 3,293
--------- --------- --------- ---------
Total operating revenues.... 6,841 17,573 12,974 46,146
--------- --------- --------- ---------
Expenses:
Community operations............ 5,122 12,908 9,577 32,508
General and administrative...... 632 1,835 1,801 4,218
Depreciation and amortization... 1,102 724 1,850 2,142
Rent............................ 203 4,264 592 9,881
--------- --------- --------- ---------
Total operating expenses... 7,059 19,731 13,820 48,749
--------- --------- --------- ---------
Loss from operations....... (218) (2,158) (846) (2,603)
--------- --------- --------- ---------
Other income (expense):
Interest expense, net........... (1,929) (500) (3,775) (2,037)
Other, net...................... (1,147) 297 (1,145) 175
--------- --------- --------- ---------
Net other expense.......... (3,076) (203) (4,920) (1,862)
--------- --------- --------- ---------
Net loss................... $(3,294) $(2,361) $(5,766) $(4,465)
========= ========= ========= =========
Net loss per share................ $ (0.30) $ (0.21) $ (0.52) $ (0.41)
========= ========= ========= =========
Pro Forma
Net loss (Note 2)............... $(3,104) $(2,642) $(7,625) $(4,706)
========= ========= ========= =========
Net loss per share.............. $ (0.28) $ (0.24) $ (0.69) $ (0.43)
========= ========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding............ 11,000 11,000 11,000 11,000
========= ========= ========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations.
2
<PAGE>
EMERITUS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1995 and 1996
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Net cash used in operating activities (including
changes in all operating assets and liabilities).... $(1,227) $(2,542)
--------- ---------
Cash flows from investing activities:
Acquisition of property and equipment............... (59,912) (22,903)
Acquisition of property held for development........ (8,142) (947)
Deferred marketing and pre-opening costs............ -- (542)
Proceeds from sale of property and equipment........ -- 49,757
Advances to affiliates.............................. -- (3,027)
(Purchase)/sale of investment securities............ (2,425) 259
Leasehold improvement advances...................... -- (1,824)
Other............................................... (370) --
--------- ---------
Net cash provided by (used in) investing
activities..................................... (70,849) 20,773
--------- ---------
Cash flows from financing activities:
Increase in restricted cash......................... (1,184) (6,432)
Deferred lease costs................................ -- (6,344)
Proceeds from (repayment of) short-term borrowings.. 9,833 (269)
Proceeds from long-term borrowings.................. 73,384 14,531
Proceeds from convertible subordinated debentures... -- 30,720
Repayment of long-term borrowings................... (9,883) (49,855)
Deferred loan fees.................................. (672) --
Sale of preferred stock............................. 1,080 --
Other............................................... -- (122)
--------- ---------
Net cash provided by (used in) financing
activities..................................... 72,558 (17,771)
--------- ---------
Net increase in cash........................ 482 460
Cash at the beginning of the period................... 220 9,507
--------- ---------
Cash at the end of the period......................... $ 702 $ 9,967
========= =========
Supplemental disclosure of cash flow information --
cash paid during the period for interest.............. $ 3,758 $ 1,702
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations.
3
<PAGE>
EMERITUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited interim financial information furnished
herein, in the opinion of management, reflects all adjustments
which are necessary to state fairly the consolidated financial
position, results of operations, and cash flows of Emeritus
Corporation, ("the Company") as of September 30, 1996 and for the
three and nine month periods ended September 30, 1996 and
1995. The Company presumes that users of the interim financial
information herein have read or have access to the Company's 1995
audited consolidated financial statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations contained in Form 10-K filed March 29, 1996 by the
Company under the Securities Act of 1934 and that the adequacy
of additional disclosure needed for a fair presentation, except
in regard to material contingencies, may be determined in that
context. Accordingly, footnote and other disclosures which would
substantially duplicate the disclosures contained in Form 10-K
have been omitted. The financial information herein is not
necessarily representative of a full year's operations.
Certain reclassifications of the 1995 amounts have been made
to conform to the 1996 presentation.
2. Acquisitions
During the year ended December 31, 1995 and the nine months
ended September 30, 1996, the Company completed several
acquisitions of assisted-living, independent-living and skilled
nursing communities. These acquisitions have been accounted for
as purchases and, accordingly, the assets and liabilities of the
acquired communities were recorded at their estimated
fair values at the dates of acquisition. No goodwill was
recorded with respect to any of the acquisitions. The results of
operations of the communities acquired have been included in the
Company's consolidated financial statements from the dates of the
acquisitions.
4
<PAGE>
EMERITUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
Total
Communities acquired Acquisition date purchase price Units
--------------------- ---------------- -------------- -----
(in thousands)
<S> <C> <C> <C>
Vickery Towers (formerly
Belmont Towers)............ March 31, 1995 $10,000 237
Beneva Park Club (2)......... June 30, 1995 4,594 97
Central Park Village (2)..... June 30, 1995 8,477 177
College Park Club (2)........ June 30, 1995 3,415 86
Park Club of Brandon (2)..... June 30, 1995 4,219 89
Park Club of Ft Myers (2).... June 30, 1995 3,671 77
Park Club of Oakbridge (2)... June 30, 1995 4,799 88
Laurel Lake Estates (1)...... July 19, 1995 6,950 116
Other 1995 acquisitions...... Various 8,860 210
Heritage Hills Retirement.... February 1, 1996 4,338 100
Lakewood Inn (3)............. March 1, 1996 2,800 47
Laurel Place (formerly Golden
Park)...................... April 25, 1996 2,100 72
Madison Glen (formerly
Sunshine Manor)............ May 15, 1996 3,842 140
-------------- ---------
$68,065 1,536
============== =========
(1) Refinanced through a sale/leaseback with a Real Estate
Investment Trust ("REIT"). Lease includes an initial
term of 12 years, three five-year renewal options and
an annual lease payment of approximately $644,000.
(2) Refinanced through sale/leaseback with a REIT. Lease
includes an initial term of 11 years, four five-year
renewal options and annual lease payments aggregating
approximately $3.5 million.
(3) Refinanced through a sale/leaseback with a REIT.
Lease includes an initial term of 13 years and four
five-year renewal options. Upon completion of a $7.1
million expansion project annual lease payments will
be approximately $690,000.
</TABLE>
5
<PAGE>
EMERITUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
The foregoing purchases have generally been financed through
borrowings.
During the nine months ended September 30, 1996, the Company
completed several acquisitions of communities through lease
financing transactions with a REIT, pursuant to which the REIT
leased such communities to the Company under operating
leases. The results of operations of the communities acquired
have been included in the Company's consolidated financial
statements from the dates of the acquisitions.
<TABLE>
<CAPTION>
Lease Initial Renewal Annual
Communities leased Acquisition date Lease Term Options Rent Units
- ------------------- ---------------- ----------- -------- ------ -----
<S> <C> <C> <C> <C> <C>
Carolina
Communities (1).. February 1996 15 years Three five-year $4,146,000 648
Evergreen Lodge.... April 1996 13 years Four five-year 573,000 98
Rosewood Court (2). April 1996 15 years Three five-year 393,000 71
Barrington Place... May 1996 12 years Four five-year 414,000 80
Springtree......... May 1996 12 years Four five-year 1,410,000 185
The Terrace (2).... August 1996 11 yrs/8 mos Four five-year 417,000 88
Lodge at Mainlands. August 1996 11 yrs/7 mos Four five-year 925,000 154
Colonial Park Club. August 1996 11 yrs/7 mos Four five-year 771,000 90
---------- ------
$9,049,000 1,414
========== ======
(1) Consists of 10 long-term-care communities located
in North and South Carolina.
(2) Refinanced through a sale/leaseback with a REIT.
</TABLE>
6
<PAGE>
EMERITUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS - (Continued)
The following summary, prepared on a pro forma basis,
combines the results of operations as if the acquisitions,
acquisitions through lease financings and sale/leaseback
financings had been consummated as of January 1, 1995, after
including the impact of certain adjustments such as depreciation
on assets acquired, interest expense on acquisition financing and
rent expense under leases entered into in lease transactions.
Pro forma net loss per share also gives effect to the issuance of
preferred stock on April 17, 1995, and subsequent conversion to
common stock and the completion of an initial public offering of
the Company's common stock on November 21, 1995 as if they had
occurred on January 1, 1995.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1996 1995 1996
--------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenue.............. $17,187 $18,104 $49,672 $54,043
Net loss............. (3,104) (2,642) (7,625) (4,706)
Net loss per share... $ (0.28) $ (0.24) $ (0.69) $ (0.43)
</TABLE>
The unaudited pro forma results are not necessarily
indicative of what actually might have occurred if the
acquisitions had been completed as of the beginning of the
periods presented. In addition, they are not intended to be a
projection of future results of operations and do not reflect any
of the synergies that might be achieved from combined operations.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since it's organization in July 1993, the Company has
achieved significant growth in revenues, primarily due to the
acquisition and operation of residential communities. The Company
believes that it is one of the largest providers of assisted-
living services in the United States. The Company's revenues are
derived primarily from rents and service fees charged to its
residents. For the nine months ended September 30, 1995 and 1996,
the Company generated total operating revenues of $13.0 million
and $46.1 million, respectively. For the three months ended
September 30, 1995 and 1996, the Company generated total
operating revenues of $6.8 million and $17.6 million,
respectively. As of September 30, 1996, the Company's cumulative
net losses since inception were $15.1 million and its total
shareholders' equity was $29.9 million. For the nine months
ended September 30, 1995 and 1996, the Company generated losses
from operations of $846,000 and $2.6 million, respectively. For
the three months ended September 30, 1995 and 1996, the Company
generated losses from operations of $218,000 and $2.2 million,
respectively.
The Company's operating strategy is to increase operating
margins at each acquired or newly developed community, whether
leased or owned, primarily by increasing occupancy levels,
encouraging residents to remain at the Company's communities
longer by offering them a range of service options, increasing
revenues through modifications in rate structures, where
appropriate, and identifying opportunities to create operating
efficiencies and reduce costs.
As of November 13, 1996, the Company holds ownership,
leasehold or management interests in 70 residential communities
(the "Operating Communities") consisting of approximately 5,800
units, located in 18 states. Three of the 70 communities were
newly developed by the Company in the first quarter of 1996, two
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
were newly developed by the Company in the second quarter of
1996, one was newly developed by the Company in the third quarter
of 1996 and one new development was acquired by the Company
through a lease acquisition in the third quarter of 1996. As of
November 13, 1996, three newly developed communities, two
developed by the Company and one acquired through a lease
acquisition, were opened in the fourth quarter of 1996. The
Company has an agreement to purchase one existing community
representing approximately 100 units located in Nevada which is
expected to close in the fourth quarter of 1996. Additionally,
the Company has agreements to purchase, letters of intent to
purchase or letters of intent to lease eight additional existing
communities representing approximately 1,000 units located in
four states which are expected to close in the first quarter of
1997. ("Pending Acquisitions"). The Company owns, has a
leasehold interest in or has acquired an option to purchase
development sites for 41 new assisted-living communities (the
"Development Communities"). Twenty-one of the Development
Communities are currently under construction, five of which are
scheduled to open throughout the remainder of 1996. The Company
leases 43 of its residential communities, typically from a
financial institution such as a REIT, owns 14 communities,
manages eleven communities and has a joint venture interest in
two communities. Assuming completion of the Pending Acquisitions
and Development Communities scheduled to open throughout the
remainder of 1996, the Company will own, lease or manage 76
properties in 18 states, containing an aggregate of approximately
6,300 units. There can be no assurance, however, that the
Pending Acquisitions and Development Communities will be
completed on schedule and will not be affected by construction
delays, the effects of government regulation or other unforeseen
factors.
When used in this discussion, the words "believes,"
"anticipates," "intends" and similar expressions are intended to
identify forward-looking statements. Such statements are subject
to certain risks and uncertainties that could cause actual
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
results to differ materially from those projected. See "Factors
Affecting Future Results and Regarding Forward-Looking
Statements" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995. Readers are cautioned not
to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes
no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect
recent events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. The Company
presumes that users of the interim financial information herein
have read or have access to the Company's 1995 audited
consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations
contained in Form 10-K filed March 29, 1996 by the Company and
the Company's first quarter Form 10-Q and second quarter Form 10-
Q filed May 15, 1996 and August 14, 1996, respectively, by the
Company under the Securities Act of 1934.
RECENT EVENTS
Subsequent to the end of the third quarter of 1996, the
Company opened two newly developed communities, completed a lease
financing transaction on five communities located in Idaho, South
Carolina and Washington and acquired a community located in
Washington which consists of both assisted-living and independent-
living. Additionally, the Company entered into two management
agreements, one with an affiliate to provide management services
for an independent-living community located in Idaho and one with
an affiliate to provide management services for nine assisted-
living communities located in New York. See "Liquidity and
Capital Resources".
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated,
certain items of the Company's Condensed Consolidated Statements
of Operations as a percentage of total revenues and the percentage
change of the dollar amounts from period to period.
<TABLE>
<CAPTION>
Period to Period
Percentage Increase
Percentage of Revenues (Decrease)
Three Months Nine Months
Ended Ended Three Months Nine Months
September 30, September 30, Ended Ended
-------------- --------------
1995 1996 1995 1996 September 30,
------ ------ ------ ------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... 100 % 100 % 100 % 100 % 157 % 256 %
Expenses:
Community operations............ 75 74 74 70 152 239
General and administrative...... 9 10 14 9 190 134
Depreciation and amortization... 16 4 14 5 (34) 16
Rent............................ 3 24 5 21 2001 1569
------ ------ ------ ------ ------------ ------------
Total operating expenses..... 103 112 107 105 180 253
------ ------ ------ ------ ------------ ------------
Loss from operations......... (3) (12) (7) (5) 890 208
------ ------ ------ ------ ------------ ------------
Other expense:
Interest expense, net........... 28 3 29 4 (74) (46)
Other, net...................... 17 (2) 9 -- (126) (115)
------ ------ ------ ------ ------------ ------------
Net loss..................... (48)% (13)% (45)% (9)% (28)% (23)%
====== ====== ====== ====== ============ ============
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS
ENDED SEPTEMBER 30, 1995
REVENUES. Total operating revenues for the nine months
ended September 30, 1996 were $46.1 million, representing a $33.2
million, or 256%, increase over operating revenues of $13.0
million for the comparable period in 1995. Substantially all of
this increase resulted from the opening of new developments and
the acquisition of 32 communities after September 30, 1995
compared to 20 total communities operating at September 30, 1995.
COMMUNITY OPERATIONS. Expenses for community operations for
the nine months ended September 30, 1996 were $32.5 million,
representing a $22.9 million, or 239% increase over expenses
for community operations of $9.6 million for the comparable
period in 1995, primarily due to the Company's opening of new
developments and the acquisition of 32 communities after
September 30, 1995 compared to 20 total communities operating at
September 30, 1995. As a percentage of total operating revenues,
expenses for community operations decreased to 70% for the nine
months ended September 30, 1996, from 74% for the comparable
period in 1995 primarily due to efficiencies created by the
implementation of operating strategies and the acquisitions in
the first nine months of 1996 of communities operating more
efficiently.
GENERAL AND ADMINISTRATIVE. General and administrative
expenses for the nine months ended September 30, 1996 were $4.2
million, representing an increase of $2.4 million, or 134% from
general and administrative expenses of $1.8 million for the
comparable period in 1995. As a percentage of total operating
revenues, general and administrative expenses decreased to 9% for
the nine months ended September 30, 1996, from 14% for the
comparable period in 1995 primarily as a result of an increase in
revenue. The $2.4 million dollar increase in general and
administrative expenses was attributable to salaries, related
payroll taxes, and employee benefits relating to additional
employment associated with new business, increased accounting
costs and higher travel and other costs relating to the Company's
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
acquisition and development program. General and administrative
costs are expected to continue to increase at least through 1996
as the Company acquires additional existing communities and
develops new communities.
DEPRECIATION AND AMORTIZATION. Depreciation and
amortization for the nine months ended September 30, 1996 was
$2.1 million, or 5% of total operating revenues, compared to $1.9
or 14% of total operating revenues, for the comparable period in
1995. The dollar increase was primarily due to the Company's
opening new developments and the acquisition of seven communities
after September 30, 1995. The decrease as a percentage of
revenue was due to refinancing completed through sale/leaseback
transactions on previously owned communities.
RENT. Rent expense for the nine months ended September 30,
1996 was $9.9 million, representing an increase of $9.3 million,
or 1569% from rent expense of $592,000 for the comparable period
in 1995. As a percentage of total operating revenues, rent
expense increased to 21% for the nine months ended September 30,
1996, from 5% for the comparable period in 1995. The dollar and
percentage increases were due to the Company entering into lease
financing or sale/leaseback transactions with respect to 35 out
of 52 of its residential communities as of September 30, 1996
compared to two out of 20 communities as of September 30, 1995.
INTEREST EXPENSE, NET. Interest expense, net, for the nine
months ended September 30, 1996 was $2.0 million, compared to
$3.8 million for the comparable period in 1995, decreasing as a
percentage of total operating revenues to 4% for the nine months
ended September 30, 1996 from 29% for the comparable period in
1995. The dollar decrease was due to the repayment of existing
mortgage debt with lower rate convertible debenture proceeds and
refinancing of mortgage indebtedness through sale/leaseback
transactions.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
OTHER INCOME AND EXPENSE, NET. Other income and expense,
net, for the nine months ended September 30, 1996 was income of
$175,000 compared to expense of $1.1 million for the comparable
period in 1995. The dollar variance was primarily due to a
reduction in the carrying value and subsequent write-down in
1995, of a note receivable from Extended Care Corporation, an
entity that operated three long-term-care communities. The write-
down occurred due to Extended Care Corporation's continued losses
and the holder of the first mortgage's initiation of foreclosure
proceedings. Additionally, during the third quarter of 1996, the
Company recognized a gain on sale of approximately $242,000 from
the sale of investment securities held in The Standish Care
Company.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS
ENDED SEPTEMBER 30, 1995
REVENUES. Total operating revenues for the three months
ended September 30, 1996 were $17.6 million, representing a $10.7
million, or 157% increase over operating revenues of $6.8
million for the comparable period in 1995. Substantially all of
this increase resulted from the opening of new developments and
the acquisition of 32 communities after September 30, 1995
compared to 20 total communities operated at September 30, 1995.
COMMUNITY OPERATIONS. Expenses for community operations for
the three months ended September 30, 1996 were $12.9 million,
representing a $7.8 million, or 152% increase over expenses for
community operations of $5.1 million for the comparable period in
1995, primarily due to the Company's opening new developments and
the acquisition of 32 communities after September 30, 1995
compared to 20 total communities operated at September 30, 1995.
As a percentage of total operating revenues, expenses for
community operations decreased to 74% for the three months ended
September 30, 1996, from 75% for the comparable period in 1995
primarily due to efficiencies created by the implementation of
operating strategies and the acquisitions in the first nine
months of 1996 from communities operating more efficiently.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
GENERAL AND ADMINISTRATIVE. General and administrative
expenses for the three months ended September 30, 1996 were $1.8
million, representing an increase of $1.2 million, or 190% from
general and administrative expenses of $632,000 for the
comparable period in 1995. As a percentage of total operating
revenues, general and administrative expenses increased to 10%
for the three months ended September 30, 1996, from 9% for the
comparable period in 1995. The dollar and percentage increases
in general and administrative expenses were attributable to
salaries, related payroll taxes, and employee benefits relating
to additional employment associated with new business, increased
accounting costs and higher travel and other costs relating to
the Company's acquisition and development program. These
increases are expected to continue at least through 1996 as the
Company acquires additional existing communities and develops new
communities.
DEPRECIATION AND AMORTIZATION. Depreciation and
amortization for the three months ended September 30, 1996 was
$724,000, or 4% of total operating revenues, compared to $1.1
million or 16% of total operating revenues, for the comparable
period in 1995. The dollar and percentage decrease was primarily
due to refinancing completed through sale/leaseback transactions
on previously owned communities.
RENT. Rent expense for the three months ended September 30,
1996 was $4.3 million, representing an increase of $4.1 million,
or 2001% from rent expense of $203,000 for the comparable period
in 1995. As a percentage of total operating revenues, rent
expense increased to 24% for the three months ended September 30,
1996, from 3% for the comparable period in 1995. The dollar and
percentage increases were due to the Company entering into lease
financing or sale/leaseback transactions with respect to 35 out
of 52 of its residential communities as of September 30, 1996
compared to two out of 20 of its residential communities as of
September 30, 1995. As the Company enters into additional lease
financing and sale/leaseback transactions, its rent expense will
continue to increase.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
INTEREST EXPENSE, NET. Interest expense, net, for the three
months ended September 30, 1996 was $500,000, compared to $1.9
million for the comparable period in 1995, decreasing as a
percentage of total operating revenues to 3% for the three
months ended September 30, 1996 from 28% for the comparable
period in 1995. The dollar decrease was due to the repayment of
existing mortgage debt with lower rate convertible debenture
proceeds and refinancing of mortgage indebtedness through
sale/leaseback transactions.
OTHER INCOME AND EXPENSE, NET. Other income and expense,
net, for the three months ended September 30, 1996 was income of
$297,000 compared to expense of $1.1 million for the comparable
period in 1995. The dollar variance was due primarily to a
reduction in the carrying value and subsequent write-down in
1995, of a note receivable from Extended Care Corporation, an
entity that operated three long-term-care communities. The write-
down occurred due to Extended Care Corporation's continued losses
and the holder of the first mortgage's initiation of foreclosure
proceedings. Additionally, during the third quarter of 1996, the
Company recognized a gain on sale of approximately $242,000 from
the sale of investment securities held in The Standish Care
Company.
STABILIZED, OPERATIONAL AND START-UP/REPOSITION COMMUNITIES
COMPARISON
As of September 30, 1996, the Company had 17 communities
that it had operated as assisted-living communities for at least
12 months ("Stabilized Communities"). Net losses for the third
quarter of 1996 for Stabilized Communities were $83,000,
representing a $259,000 or 76% decrease from net losses of
$342,000 for the fourth quarter of 1995.
The decrease in net losses between the third quarter of 1996
and the fourth quarter of 1995 was primarily due to decreasing
operating expense, together with increases in operating revenue
due to higher rents and service fees, resulting in an increase in
operating margins from 27% to 30%. Lower lease expense compared
to depreciation and interest expense was also recognized as a
result of refinancings through sale/leaseback transactions.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
The change from net income of $283,000 for the second quarter
of 1996, to net losses of $83,000 for the third quarter of 1996
were primarily due to lower operating revenues resulting from a
decrease in average occupancy between the two quarters, as well as
increases in operating expenses.
As of September 30, 1996, the Company had an ownership, leasehold
or management interest in 40 communities as operational assisted-living
communities ("Operational Communities") and 12 communities as newly
opened developments and/or communities with significant ongoing
repositioning and/or refurbishment ("Start-up/Reposition Communities").
The following tables set forth a comparison of operational and start-up/
reposition communities results of operations for the three months ended
September 30, 1996.
<TABLE>
<CAPTION>
Three Months Ended September 30, 1996
(In thousands, except per share information)
Start-up/ Three
Operational Reposition Months Ended
Communities (1) Communities (2) Overhead September 30, 1996
--------------- --------------- -------- ------------------
<S> <C> <C> <C> <C>
Revenue................................ $16,210 $ 1,336 $ 27 $17,573
Community operating expense............ 11,488 1,420 -- 12,908
--------------- --------------- -------- ------------------
Community operating income (loss)... 4,722 (84) 27 4,665
--------------- --------------- -------- ------------------
General and administrative............. -- -- 1,835 1,835
Depreciation and amortization.......... 361 248 115 724
Rent................................... 3,800 377 87 4,264
--------------- --------------- -------- ------------------
Operating income (loss)............. 561 (709) (2,010) (2,158)
--------------- --------------- -------- ------------------
Interest income (expense), net......... (425) (327) 252 (500)
Other income (expense)................. 151 (76) 222 297
--------------- --------------- -------- ------------------
Net income (loss)................... $ 287 $(1,112) $(1,536) $(2,361)
=============== =============== ======== ==================
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
(1) Operational Communities are those that have been
operated as assisted-living (or the intended use) by the
Company (40 out of 52 communities are included in this
category) for at least one month during the third quarter.
Overhead has not been allocated to the communities included
in this column.
(2) Start-up/Reposition Communities are those that have
been newly developed and opened by the Company and those
communities that are currently being repositioned to
operate as assisted-living communities (12 out of 52
communities are included in this category). Overhead has
not been allocated to the communities in this column.
Net income for the three months ended September 30, 1996 for
the Operational Communities was $287,000, representing a $759,000
or 73% decrease from net income of $1.0 million for the three
months ended June 30, 1996. The dollar and percentage decrease
in net income included an increase in operating expenses of
approximately $559,000 for the 35 communities operational for all
three months of both quarters, as well as additional net losses
of approximately $246,000 for the communities that became
operational during the second and third quarters.
The net losses for the three months ended September 30, 1996
for Start-up/Reposition Communities were $1.1 million,
representing a $475,000 or 75% increase over the net losses of
$637,000 for the three months ended June 30, 1996. The dollar
and percentage increases resulted primarily from the addition of
six communities (three newly opened communities and three
acquired communities being repositioned) after April 1996 that
had longer periods of operation in the third quarter than in the
second quarter.
During the three months ended September 30, 1996, the
Company completed one repositioning of a community, Fulton Villa
located in Stockton, California, and reclassified it as an
Operational Community.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1995 and 1996, net
cash flow used in operating activities was $1.2 million and $2.5
million, respectively. During the nine months ended September
30, 1996, the Company obtained $49.8 million in proceeds from the
sale of communities in sale/leaseback financing transactions and
repaid related mortgage indebtedness of $33.7 million as well as
$16.2 million of unrelated mortgage indebtedness. The Company
also incurred additional long-term debt of $45.3 million,
including $30.7 million of net proceeds from the private
placement of convertible subordinate debentures and purchased
additional property and equipment and property held for
development of $23.9 million. During the nine months ended
September 30, 1995, the Company used $68.1 million to acquire
property and equipment and property held for development and
obtained $72.6 million in net cash provided by financing
activities primarily related to net proceeds from long and short-
term borrowings. As of September 30, 1996, the Company had
working capital of $8.8 million compared to a working capital of
$4.1 million as of December 31, 1995.
The Company has been, and expects to continue to be,
dependent on third-party financing for its acquisition and
development programs. There can be no assurance that financing
for the Company's acquisition and development programs will be
available to the Company on acceptable terms. Moreover, to the
extent the Company acquires communities that do not generate
positive cash flow, the Company may be required to seek
additional capital or borrowings for working capital and
liquidity purposes.
On July 1, 1996, the Company moved its executive offices to
a new location in Seattle, Washington where the Company leases
approximately 22,000 square feet of new space. The agreement
includes a lease term of 10 years with two five-year renewal
options.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
On July 10, 1996, the Company completed $7.4 million in
lease financing for a total of 100 assisted-living units in two
to-be-constructed communities located in Amarillo, Texas and
Clarksville, Tennessee. Both developments will contain 50
assisted-living units. Construction on the Amarillo development
commenced in the second quarter of 1996 and construction on the
Clarksville development commenced in the third quarter of 1996.
The communities will be constructed and operated by the Company
pursuant to an operating lease and leasehold improvement
agreement with a REIT.
On July 23, 1996, the Company refinanced approximately $5.3
million of its mortgage indebtedness secured by an 80 unit newly
developed assisted living community, Garrison Creek Lodge located
in Walla Walla, Washington through a sale/leaseback with a REIT,
which was the original lender during the construction period.
The lease consists of an initial term of 11 years, with six five-
year renewal options and annual base rent of approximately
$593,000.
On July 26, 1996, the Company reached an agreement in
principle to acquire 20% of the fully-diluted outstanding stock
of Alert Care Corporation ("Alert"), an Ontario, Canada based
owner/operator of assisted-living communities. The transaction
would involve the Company purchasing approximately 6.9 million
newly issued Preferred Shares of Alert at prices ranging from
$0.67 (Cdn) to $0.74 (Cdn) per share for total proceeds of $5.0
million (Cdn). The Preferred Shares would be convertible into
class A non-voting shares of Alert on a one-for-one basis. The
company would also receive an option to acquire an additional 4
million Preferred Shares at an exercise price of $1 (Cdn) per
share. On a fully-diluted basis, the exercise of this option
would increase the Company's ownership to approximately 31%. In
addition, the Company would receive an option to purchase an
aggregate of 10 million common and Class A shares of Alert held
by Eclipse Capital corporation ("Eclipse") (constituting
approximately 50% of the currently issued Alert common and class
A shares and approximately 29% of such shares on a fully-diluted
basis). This option is at $3.25 (Cdn) per share.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Binding agreements have been negotiated by the parties and
the transaction has been approved by the board of directors of
Alert and Eclipse. The transaction is still subject to approval
by the directors of the Company. Approval by the shareholders of
Alert and Eclipse is expected to occur by the end of November
1996.
Alert is an owner/operator of assisted-living communities
based in Ontario, Canada. As a party to the transaction, Alert
would enter into an exclusive management agreement to manage the
Company's future assisted-living communities in Ontario.
Eclipse, through its wholly-owned subsidiary, Eclipse
Construction Inc., develops and constructs retirement homes for
Alert on a contract basis. Under the agreement, Eclipse would
enter into an exclusive development agreement with the Company
and Alert to develop their construction projects in Ontario.
Additionally, Eclipse would develop one facility in the United
States for the Company.
On August 1, 1996, the Company completed $9.3 million in
lease financing for a total of 208 assisted-living units in three
to-be-constructed communities located in Ocean Shores,
Washington, Wichita Falls, Texas and San Angelo, Texas. The two
developments located in Texas and the one development located in
Washington will contain 79, 79 and 50 assisted-living units,
respectively. Construction on all three developments commenced
in the third quarter of 1996. The communities will be
constructed and operated by the Company pursuant to operating
leases and leasehold improvement agreements with a REIT.
On August 1, 1996, the Company completed a $4.6 million
lease financing transaction on an assisted-living community,
Ridge Wind located in Chubbuck, Idaho. The community contains
approximately 80 units and was acquired by the Company pursuant
to an operating lease with a REIT. The lease includes an
initial term of 11 years and 8 months, with four five-year
renewal options and annual base rent of approximately $458,000.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
On August 2, 1996, the Company refinanced approximately $2.1
million of its mortgage indebtedness secured by an 88 unit
assisted-living community, The Terrace located in Grand Terrace,
California through a sale/leaseback transaction with a REIT. The
lease includes an initial lease term of 11 years and 8 months,
with four five-year renewal options and annual base rent of
approximately $417,000.
On August 20, 1996, the Company completed a $17.2 million
lease financing transaction on two assisted-living communities,
Lodge at Mainlands and Colonial Park Club located in Pinellas
Park, Florida and Sarasota, Florida. The communities contain
approximately 244 units and were acquired by the Company pursuant
to operating leases with a REIT. The leases include initial
terms of 11 years and 7 months, with four five-year renewal
options and annual base rent of $771,000 and $925,000,
respectively.
On August 23, 1996, the Company refinanced approximately
$5.1 million of its mortgage indebtedness secured by a 79 unit
newly developed assisted-living community, Cambria located in El
Paso, Texas through a sale/leaseback transaction with a REIT,
which was the original lender during the construction period. The
lease includes an initial lease term of 11 years, with six five-
year renewal options and annual base rent of approximately
$544,000. The community commenced operations on October 2, 1996.
On September 3, 1996, the Company opened one newly developed
74 unit assisted-living community, Cobblestones at Fairmont
located in Manassas, Virginia.
On September 12, 1996, Painted Post Partners, a general
partnership affiliated with the Company, signed a leasehold
agreement with Wegman Companies, Inc. to acquire a long-term
leasehold interest in nine assisted-living communities located
throughout the state of New York. The Company has signed an
agreement with Painted Post Partners to provide certain services
to the communities during the life of the leases. The
acquisition closed on November 3, 1996. Eight of the nine
communities are existing assisted-living communities and one
community is a new development which commenced operations in the
fourth quarter of 1996.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
On September 17, 1996, the Company refinanced approximately
$4.9 million of its mortgage indebtedness secured by a 79 unit
newly developed assisted-living community, Sherwood Place located
in Odessa, Texas through a sale/leaseback transaction with a
REIT, which was the original lender during the construction
period. The lease includes an initial lease term of 11 years,
with six five-year renewal options and annual base rent of
approximately $529,000. The community commenced operations on
October 1, 1996.
Subsequent to the end of the third quarter, on October 1,
1996, the Company completed a $17.7 million lease financing
transaction on five communities located in Idaho, South Carolina
and Washington. The two communities located in Idaho and
Washington consist of 49 and 50 units, respectively. The three
communities located in South Carolina consists of 75 independent
living cottages, 30 assisted-living units and a 44 bed skilled
nursing facility. All five communities were acquired by the
Company pursuant to an operating lease with a REIT. The leases
include initial terms of 11 years, with four five-year renewal
options and annual base rent aggregating approximately $1.8
million.
On November 1, 1996, the Company completed a $5.2 million
acquisition of a community located in Moses Lake, Washington.
The community has 84 units consisting of 42 assisted-living and
42 independent-living. Also on November 1, 1996, the Company
entered into a management agreement with Columbia House, LLC, an
affiliate of the Company, to provide management services for an
88 unit independent-living community located in Couer d'Alene,
Idaho.
In part, the Company's future capital needs depend on
arranging sale/leaseback financing for existing assisted-living
communities that have achieved stabilized occupancy rates,
resident mix and operating margins after initial development or
repositioning. There can be no assurance that the Company will
generate sufficient cash flow during such time to fund its
working capital, rent, debt service requirements or growth. In
such event, the Company would have to seek additional financing
through debt or equity offerings, bank borrowings or other
sources.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (Continued)
Impact of Inflation
To date, inflation has not had a significant impact on the
Company. Inflation could, however, affect the Company's future
revenues and operating income due to the Company's dependence on
its senior resident population, most of whom rely on relatively
fixed incomes to pay for the Company's services. As a result,
the Company's ability to increase revenues in proportion to
increased operating expenses may be limited. The Company
typically does not rely to a significant extent on governmental
reimbursement programs. In pricing its services, the Company
attempts to anticipate inflation levels, but there can be no
assurance that the Company will be able to respond to
inflationary pressures in the future.
23
<PAGE>
PART II OTHER INFORMATION
Items 1-5 are not applicable.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.1 The Lodge at Mainlands in Pinellas Park, Florida,
Colonial Park Club in Sarasota, Florida, Fairhaven
Estates in Bellingham, Washington, Highland Hills in
Pocatello, Idaho and Anderson Place in Anderson, South
Carolina. The following agreement is representative of
those executed in connection with these properties:
10.1.1 Lease Agreement dated August and October 1996
between Emeritus Properties I, Inc ("Lessee")
and Meditrust Acquisition Corporation I
("Lessor").
10.2 Colonial Park Club in Sarasota, Florida.
10.2.1 Leasehold Improvement Agreement dated August
21, 1996 between Emeritus Properties I, Inc.
("Lessee") and Meditrust Acquisition Corporation
I ("Lessor").
10.3 Garrison Creek Lodge in Walla Walla, Washington,
Cambria in El Paso, Texas and Sherwood Place in Odessa,
Texas. The following agreement is representative of
those executed in connection with these properties:
10.3.1 Lease Agreement dated July, August and
September 1996 between the registrant
("Lessee") and American Health Properties,
Inc. ("Lessor").
24
<PAGE>
10.4 Colonie Manor in Latham, New York, Bassett Manor in
Williamsville, New York, West Side Manor in Liverpool,
New York, Bellevue Manor in Syracuse, New York,
Perinton Park Manor in Fairport, New York, Bassett Park
Manor in Williamsville, New York, Woodland Manor in
Vestal, New York, East Side Manor in Fayetteville, New
York and West Side Manor in Rochester, New York. The
following agreements are representative of those
executed in connection with these properties:
10.4.1 Lease Agreement dated September 1, 1996 between
Philip Wegman ("Landlord")and Painted Post
Partners ("Tenant").
10.4.2 Management Services Agreement dated September
2, 1996 between the registrant and Painted
Post Partners ("Operator").
10.5 Heritage Health Center in Hendersonville, North
Carolina.
10.5.1 Management Services Agreement between the
registrant and Servicemaster Diversified
Health Services, L.P. ("Manager") dated June
27, 1996.
10.6 Camlu in Couer d'Alene, Idaho.
10.6.1 Management Services Agreement between the
registrant ("Manager") and Columbia House,
LLC ("Lessee") dated November 1, 1996.
10.7 The Hearthstone in Moses Lake, Washington.
10.7.1 Purchase and Sale Agreement dated August 20,
1996 between the registrant("Purchaser") and
Hearthstone-5K Family Limited Partnership
("Seller").
10.7.2 Loan Agreement dated October 30, 1996 between
the registrant and Washington Mutual Bank
("Holder").
10.7.3 Deed of Trust, Security Agreement, Assignment
of Leases and Rents and Fixture Filing dated
October 30, 1996 by the registrant ("Grantor"),
Chicago Title Insurance Company ("Trustee"),
and Washington Mutual Bank ("Beneficiary").
11.1 Statement re computation of per share earnings.
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: November 13, 1996
EMERITUS CORPORATION
(Registrant)
Kelly J. Price
--------------------
Kelly J. Price, Chief Financial Officer
James S. Keller
--------------------
James S. Keller, Controller and Director of Accounting
(Principal Accounting Officer)
26
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- --------- ----------------------------------------------------------- -------------
<S> <C> <C>
10.1 The Lodge at Mainlands in Pinellas Park, Florida, Colonial
Park Club in Sarasota, Florida, Fairhaven Estates in
Bellingham, Washington, Highland Hills in Pocatello, Idaho,
and Anderson Place in Anderson, South Carolina. The
following agreements are representative of those executed
in connection with these properties:
10.1.1 Lease Agreement dated August and September 1996
between Emeritus Properties I, Inc. ("Lessee")
and Meditrust Acquisition Corporation I ("Lessor").
10.2 Colonial Park Club in Sarasota, Florida.
10.2.1 Leasehold Improvement Agreement dated August 21,
1996 between Emeritus Properties I, Inc. ("Lessee")
and Meditrust Acquisition Corporation I ("Lessor").
10.3 Garrison Creek Lodge in Walla Walla, Washington, Cambria
in El Paso, Texas and Sherwood Place in Odessa, Texas. The
following agreement is representative of those executed in
connection with these properties:
10.3.1 Lease Agreement dated July, August and September,
1996 between the registrant ("Lessee") and
American Health Properties, Inc. ("Lessor").
10.4 Colonie Manor in Latham, New York, Bassett Manor in
Williamsville, New York, West Side Manor in Liverpool, New
York, Bellevue Manor in Syracuse, New York, Perinton Park
Manor in Fairport, New York, Bassett Park Manor in
Williamsville, New York, Woodland Manor in Vestal, New
York, East Side Manor in Fayetteville, New York and West
Side Manor in Rochester, New York. The following agreement
is representative of those executed in connection with
these properties:
10.4.1 Lease Agreement dated September 1, 1996 between
Philip Wegman ("Landlord") and Painted Post
Partners ("Tenant").
27
<PAGE>
10.4.2 Management Services Agreement dated September 2,
1996 between the registrant and Painted Post
Partners ("Operator").
10.5 Heritage Health Center in Hendersonville, North Carolina.
10.5.1 Management Services Agreement between the
registrant and Servicemaster Diversified Health
Services, L.P. ("Manager") dated June 27, 1996.
10.6 Camlu in Couer d'Alene, Idaho.
10.6.1 Management and Services Agreement between the
registrant ("Manager") and Columbia House, LLC
("Lessee") dated November 1, 1996.
10.7 The Hearthstone in Moses Lake, Washington.
10.7.1 Purchase and Sale Agreement dated August 20, 1996
between the registrant ("Purchaser") and
Hearthstone-5K Family Limited Partnership
("Seller").
10.7.2 Loan Agreement dated October 30, 1996 between the
registrant and Washington Mutual Bank ("Holder").
10.7.3 Deed of Trust, Security Agreement, Assignment of
Leases and Rents and Fixture Filing dated October
30, 1996 by the registrant("Grantor"), Chicago
Title Insurance Company ("Trustee"), and Washington
Mutual Bank ("Beneficiary").
11.1 Statement re computation of per share earnings.
27.1 Financial Data Schedule.
</TABLE>
28
<PAGE>
THE FOLLOWING AGREEMENT IS SUBSTANTIALLY THE SAME
EXCEPT FOR THE FOLLOWING:
COMMUNITY BASE RENT
Colonial Park Club Original Meditrust
Investment multiplied
by 9.83%
Lodge at Mainlands $924,530.37
Fairhaven Estates Original Meditrust
Investment multiplied
by 9.9%
Highland Hills Original Meditrust
Investment multiplied
by 9.9%
Anderson Place Original Meditrust
Investment multiplied
by 9.9%
ORIGINAL
COMMUNITY INVESTMENT
Colonial Park Club $7,841,931
Lodge at Mainlands $9,405,192
Fairhaven Estates $3,677,423
Highland Hills $3,360,000
Anderson Place $10,669,705
NOTE: Colonial Park Club's lease commenced August 21, 1996 and
ends March 31, 2008; Lodge at Mainland's lease commenced
August 20, 1996 and ends March 31, 2008; Fairhaven Estates,
Highland Hills and Anderson Place leases commenced October 1,
1996 and ends September 30, 2007.
<PAGE>
EMERITUS
SARASOTA
FACILITY LEASE AGREEMENT
MEDITRUST ACQUISITION CORPORATION I
(A Massachusetts corporation)
as
Lessor
AND
EMERITUS PROPERTIES I, INC.
(A Washington corporation)
as
Lessee
Dated as of August __, 1996
For Premises Located AT
________, __________, __________
<PAGE>
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of
the _____ day of August, 1996 and is between MEDITRUST
ACQUISITION CORPORATION I ("Lessor"), a Massachusetts corporation
having its principal office at 197 First Avenue, Needham Heights,
Massachusetts 02194, and EMERITUS PROPERTIES I, INC. ("Lessee"), a
Washington corporation, having its principal office at c/o Emeritus
Corporation, 3131 Elliott Avenue, Suite 500, Seattle, Washington 98121-
2162.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 LEASED PROPERTY. Upon and subject to the terms
and conditions hereinafter set forth, Lessor leases to Lessee and Lessee
rents and leases from Lessor all of Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A
attached hereto (the "Land");
(b) all buildings, structures, Fixtures (as hereinafter
defined) and other improvements of every kind including, but not limited
to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits and
lines, and parking areas and roadways appurtenant to such buildings and
structures presently or hereafter situated upon the Land (collectively, the
"Leased Improvements");
(c) all easements, rights and appurtenances of every
nature and description now or hereafter relating to or benefitting any or all
of the Land and the Leased Improvements;
(d) all equipment, machinery, building fixtures, and
other items of property (whether realty, personalty or mixed), including all
components thereof, now or hereafter located in, on or used in connection
with, and permanently affixed to or incorporated into the Leased
Improvements, including, without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, and built-in oxygen and vacuum systems, all of
which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically excluding
all items included within the category of Tangible Personal Property (as
hereinafter defined) which are not permanently affixed to or incorporated in
the Leased Property (collectively, the "Fixtures"); and
<PAGE>
The Leased Property is leased in its present condition, AS IS,
without representation or warranty of any kind, express or implied, by
Lessor and subject to: (i) the rights of parties in possession; (ii) the
existing state of title including all covenants, conditions, Liens (as
hereinafter defined) and other matters of record (including, without
limitation, the matters set forth in EXHIBIT B); (iii) all applicable laws
and (iv) all matters, whether or not of a similar nature, which would be
disclosed by an inspection of the Leased Property or by an accurate survey
thereof.
1.2 TERM. The term of this Lease shall consist of: the
"Initial Term", which shall commence on [August 21, 1996] (the
"Commencement Date") and end on March 31, 2008 (the "Expiration
Date"); provided, however, that this Lease may be sooner terminated as
hereinafter provided. In addition, Lessee shall have the option(s) to extend
the Term (as hereinafter defined) as provided for in Section 1.3.
1.3 EXTENDED TERMS. Provided that this Lease has not
been previously terminated, and as long as there exists no Lease Default (as
hereinafter defined) at the time of exercise and on the last day of the Initial
Term or the then current Extended Term (as hereinafter defined), as the
case may be, Lessee is hereby granted the option to extend the Initial Term
of this Lease for four (4) additional periods (collectively, the "Extended
Terms") as follows: four (4) successive five (5) year periods for a
maximum Term, if all such options are exercised, which ends on March 31,
2028. Lessee's extension option rights shall be exercised by Lessee by
giving written notice to Lessor of each such extension at least one hundred
eighty (180) days, but not more than three hundred sixty (360) days, prior
to the termination of the Initial Term or the then current Extended Term, as
the case may be. Lessee shall have no right to rescind any such notice once
given. Lessee may not exercise its option for more than one Extended
Term at a time. During each effective Extended Term, all of the terms and
conditions of this Lease shall continue in full force and effect, except that
the Base Rent (as hereinafter defined) for each such Extended Term shall be
adjusted as set forth in Section 3.1(a).
Notwithstanding anything to the contrary set forth herein, Lessee's
rights to exercise the options granted in this Section 1.3 are subject to the
further condition that concurrently with the exercise of any extension option
hereunder, Lessee shall have exercised its option to extend the terms of all
of the Related Leases in accordance with the provisions of the Agreement
Regarding Related Transactions and the provisions of Section 1.3 of each of
the Related Leases.
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ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 DEFINITIONS. For all purposes of this Lease and the
other Lease Documents (as hereinafter defined), except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular and (ii) all references in this
Lease or any of the other Lease Documents to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this Lease or the other applicable Lease
Document.
ACCOUNTS: As defined in the UCC.
ACCREDITATION BODY: Any person, including any Person
having or claiming jurisdiction over the accreditation, certification,
evaluation or operation of the Facility.
ADDED VALUE PERCENTAGE: The proportion of the Fair
Market Added Value of Capital Additions paid for or financed by Lessee to
the Fair Market Value of the entire Leased Property, expressed as a
percentage.
ADDITIONAL CHARGES: As defined in Article 3.
ADDITIONAL LAND: As defined in Section 9.3.
ADDITIONAL RENT: As defined in Article 3.
ADDITIONAL RENT COMMENCEMENT DATE: As defined
in Article 3.
AFFILIATE: With respect to any Person (i) any other Person
which, directly or indirectly, controls or is controlled by or is under
common control with such Person, (ii) any other Person that owns,
beneficially, directly or indirectly, five percent (5%) or more of the
outstanding capital stock, shares or equity interests of such Person or (iii)
any officer, director, employee, general partner or trustee of such Person, or
any other Person controlling, controlled by, or under common control with,
such Person (excluding trustees and Persons serving in a fiduciary or
similar capacity who are not otherwise an Affiliate of such Person). For the
purposes of this definition, "control" (including the correlative meanings of
the terms "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
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such Person, through the ownership of voting securities, partnership
interests or other equity interests provided, however, that, (a) for purposes
of determining a Related Party Default, the percentage of outstanding
capital stock, shares or equity interests referenced in (ii) above shall be
fifty percent (50%) and (b) any Person who is an Affiliate by virtue of
the ownership thereof by Daniel R. Baty or his status therein as an officer or
director shall not be deemed an Affiliate for purposes of determining a
Related Party Default.
AFFILIATED PARTY SUBORDINATION AGREEMENT: That
certain Affiliated Party Subordination Agreement of even date by and
among Lessee, the Guarantor, various Affiliates of Lessee and various
Affiliates of Lessor.
AGREEMENT REGARDING RELATED TRANSACTIONS
(ACQUISITION): The Fourth Amended and Restated Agreement
Regarding Related Transactions (Acquisition) of even date, as amended
from time to time, between Lessee, Lessor and any Related Party that is
party to any Related Lease or Related Party Agreement. Lessor and Lessee
anticipate that the Agreement Regarding Related Transactions will be
amended from time to time to include Affiliates of Lessor and Lessee as
parties thereto in connection with future transactions and acknowledge and
agree that for all purposes under this Lease Agreement such amendments
shall be deemed to be included in this definition.
ANNUAL FACILITY UPGRADE EXPENDITURE: An
aggregate annual amount equal to the product of TWO HUNDRED
DOLLARS ($200) (as increased as of the first day of each Lease Year in
which the Annual Facility Upgrade Expenditure is to be made by an amount
equal to the product of the CPI Increase multiplied by TWO HUNDRED
DOLLARS ($200)) times the number of units in the Facility, such amount
to be spent on Upgrade Renovations. The term "CPI Increase" means a
fraction, the numerator of which is the Price Index in effect as of the first
day of the Lease Year in which the Annual Facility Upgrade Expenditure is
to be made and the denominator of which is the Price Index in effect as of
the date hereof. The term "Price Index" means the Consumer Price Index
for Urban Wage Earners and Clerical Workers, All Items-Series A (1982-
84=100), published by the Bureau of Labor Statistics, U.S. Department of
Labor. If the Bureau of Labor Statistics should cease to publish such Price
Index in its present form and calculated on the present basis, then the most
similar index published by the same Bureau shall be used for the same
purpose. If there is no such similar index, a substitute index which is then
generally recognized as being similar to such Price Index, such substitute
index to be reasonably selected by Lessor.
APPURTENANT AGREEMENTS: Collectively, all instruments,
documents and other agreements that now or hereafter create any utility,
access or other rights or appurtenances benefiting or relating to the Leased
Property.
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AWARD: All compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
BASE GROSS REVENUES: The annualized Gross Revenues of
the Facility for the period from and including [___________] and including
[___________], initially as shown by Lessee's certified Consolidated
Financial Statements and as later verified by Lessee's Consolidated
Financial Statements.
BASE RENT: As defined in Section 3.1.
BUSINESS DAY: Any day which is not a Saturday or Sunday or
a public holiday under the laws of the United States of America, the
Commonwealth of Massachusetts, the State or the state in which Lessor's
depository bank is located.
CAPITAL ADDITIONS: Collectively, all new buildings and
additional structures annexed to any portion of any of the Leased
Improvements and material expansions of any of the Leased Improvements
which are constructed on any portion of the Land during the Term,
including, without limitation, the construction of a new wing or new story,
the renovation of any of the Leased Improvements on the Leased Property
and any expansion, construction, renovation or conversion in connection
therewith (a) in order to provide a functionally new facility that is needed or
used to provide services not previously offered or (b) in order to (i) increase
the bed capacity of a Facility, (ii) change the purpose for which such beds
are utilized and/or (iii) change the utilization of any material portion of any
of the Leased Improvements provided that for the purposes of Article 9
hereof the Project shall not be treated as a Capital Addition.
CAPITAL ADDITION COST: The cost of any Capital Addition
made by Lessee whether paid for by Lessee or Lessor. Such cost shall
include all costs and expenses of every nature whatsoever incurred directly
or indirectly in connection with the development, permitting, construction
and financing of a Capital Addition as reasonably determined by, or to the
reasonable satisfaction of, Lessor.
CASH COLLATERAL: As defined in the Deposit Pledge
Agreement.
CASH FLOW: The Consolidated Net Income (or Consolidated
Net Loss) before federal and state income taxes for any period plus (i) the
amount of the provision for depreciation and amortization actually deducted
on the books of the applicable Person for the purposes of computing such
Consolidated Net Income (or Consolidated Net Loss) for the period
involved, plus (ii) Rent and interest on all other Indebtedness which is fully
subordinated to the Lease Obligations, plus (iii) any indebtedness which is
fully subordinated to the Lease Obligations pursuant to the Affiliated Party
Subordination Agreement or the Management Subordination Agreement.
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CASUALTY: As defined in Section 13.1.
CHATTEL PAPER: As defined in the UCC.
CLOSING: As defined in Section 18.3.6.
CODE: The Internal Revenue Code of 1986, as amended.
COLLATERAL: All of the property in which security interests
are granted to Lessor and the other Meditrust Entities pursuant to the Lease
Documents and the Related Party Agreements to secure the Lease
Obligations, including, without limitation, the Cash Collateral.
COMPETITIVE ACTIVITY: As defined in Section 11.5.
COMPLETION DATE: As defined in the Leasehold
Improvement Agreement.
COMPLETION OF THE PROJECT: As defined in the Leasehold
Improvement Agreement.
CONDEMNATION: With respect to the Leased Property or any
interest therein or right accruing thereto or use thereof (i) the exercise of
any governmental authority, whether by legal proceedings or otherwise, by
a Condemnor or (ii) a voluntary sale or transfer by Lessor to any
Condemnor, either under threat of Condemnation or Taking or while legal
proceedings for Condemnation or Taking are pending.
CONDEMNOR: Any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
CONSOLIDATED: The consolidated accounts of the relevant
Person and its Subsidiaries consolidated in accordance with GAAP.
CONSOLIDATED FINANCIALS: For any fiscal year or other
accounting period for any Person and its consolidated Subsidiaries,
statements of earnings and retained earnings and of changes in financial
position for such period and for the period from the beginning of the
respective fiscal year to the end of such period and the related balance sheet
as at the end of such period, together with the notes thereto, all in
reasonable detail and setting forth in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year, and
prepared in accordance with GAAP, and disclosing all liabilities of such
Person and its consolidated Subsidiaries, including, without limitation,
contingent liabilities.
CONSULTANTS: Collectively, the architects, engineers,
inspectors, surveyors and other consultants that are engaged from time to
time by Lessor to perform services for Lessor in connection with this Lease.
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CONTRACTS: All agreements (including, without limitation,
Provider Agreements, to the extent applicable, and any Residency
Agreement), contracts (including without limitation, construction contracts,
subcontracts, and architects' contracts), contract rights, warranties and
representations, franchises, and records and books of account benefiting,
relating to or affecting the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy,
possession, or operation thereof, or the operation of any programs or
services in conjunction with the Facility and all renewals, replacement and
substitutions therefor, now or hereafter issued to any member of the
Leasing Group by, or entered into by any member of the Leasing Group
with, any Governmental Authority, Accreditation Body or Third Party
Payor or maintained or used by any member of the Leasing Group or
entered into by any member of the Leasing Group with any third Person.
CURRENT ASSETS: All assets of any Person which would, in
accordance with GAAP, be classified as current assets.
CURRENT LIABILITIES: All liabilities of any Person which
would, in accordance with GAAP, be classified as current liabilities.
DATE OF TAKING: The date the Condemnor has the right to
possession of the property being condemned.
DEBT COVERAGE RATIO: The ratio of (i) Cash Flow for each
applicable period to (ii) the total of all Rent (excluding Additional Rent due
under this Lease) paid or payable during such period or accrued for such
period.
DECLARATION: As defined in Article 23.
DEED: As defined in Section 18.3.
DEPOSIT: As defined in Section 18.3.
DEPOSIT PLEDGE AGREEMENT: The pledge and security
agreement so captioned and dated as of even date herewith between Lessee
and Lessor.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section 20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT: The
Environmental Indemnity Agreement of even date herewith by and among
Lessee the Guarantor and Lessor.
ENVIRONMENTAL LAWS: As defined in the Environmental
Indemnity Agreement.
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ERISA: The Employment Retirement Income Security Act of
1974, as amended.
EVENT OF DEFAULT: As defined in Article 16.
EXCESS GROSS REVENUES: Gross Revenues less Base Gross
Revenues.
EXPIRATION DATE: As defined in Section 1.2.
EXTENDED TERMS: As defined in Section 1.4.
FACILITY: The 90 unit, 110 bed, fully licensed assisted living
facility known as American House Sarasota on the Land (together with
related parking and other amenities), together with (after the Completion
Date) the fully licensed assisted living facility addition (the assisted living
facility addition is defined as the Project under the Leasehold Improvement
Agreement) to be constructed on the Land (together with related parking
and other amenities).
FAILURE TO OPERATE: As defined in Article 16.
FAILURE TO PERFORM: As defined Article 16.
FAIR MARKET ADDED VALUE: The Fair Market Value of the
Leased Property (including all Capital Additions) minus the Fair Market
Value of the Leased Property determined as if no Capital Additions paid for
by Lessee had been constructed.
FAIR MARKET VALUE OF THE CAPITAL ADDITION: The
amount by which the Fair Market Value of the Leased Property upon the
completion of a particular Capital Addition exceeds the Fair Market Value
of the Leased Property just prior to the construction of the particular Capital
Addition.
FAIR MARKET VALUE OF THE LEASED PROPERTY: The
fair market value of the Leased Property, including all Capital Additions,
and including the Land and all other portions of the Leased Property, and
(a) assuming the same is unencumbered by this Lease, (b) determined in
accordance with the appraisal procedures set forth in Section 18.2 or in
such other manner as shall be mutually acceptable to Lessor and Lessee and
(c) not taking into account any reduction in value resulting from any Lien to
which the Leased Property is subject and which Lien Lessee or Lessor is
otherwise required to remove at or prior to closing of the transaction.
However, the positive or negative effect on the value of the Leased
Property attributable to the interest rate, amortization schedule, maturity
date, prepayment provisions and other terms and conditions of any Lien on
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the Leased Property which is not so required or agreed to be removed shall
be taken into account in determining the Fair Market Value of the Leased
Property. The Fair Market Value shall be determined as the overall value
based on due consideration of the "income" approach, the "comparable
sales" approach, and the "replacement cost" approach.
FEE MORTGAGE: As defined in Section 20.3.
FEE MORTGAGEE: As defined in Section 20.3.
FINANCING PARTY: Any Person who is or may be participating
with Lessor in any way in connection with the financing of any Capital
Addition.
FINANCING STATEMENTS: Uniform Commercial Code
financing statements evidencing the security interests granted to Lessor in
connection with the Lease Documents.
FISCAL QUARTER: Each of the three (3) month periods
commencing on January 1st, April 1st, July 1st and October 1st.
FISCAL YEAR: The twelve (12) month period from January 1st
to December 31st.
FIXTURES: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently
applied throughout the relevant period.
GENERAL INTANGIBLES: As defined in the UCC.
GOVERNMENTAL AUTHORITIES: Collectively, all agencies,
authorities, bodies, boards, commissions, courts, instrumentalities,
legislatures, and offices of any nature whatsoever of any government,
quasi-government unit or political subdivision, whether with a federal,
state, county, district, municipal, city or otherwise and whether now or
hereinafter in existence.
GROSS REVENUES: Collectively, all revenues generated by
reason of the operation of the Leased Property (including any Capital
Additions), directly or indirectly received or to be received by Lessee or
any Affiliate of Lessee, including, without limitation, all resident revenues
received or receivable for the use of, or otherwise by reason of, all rooms,
units and other facilities provided, meals served, services performed, space
or facilities subleased or goods sold on or from the Leased Property and
further including, without limitation, except as otherwise specifically
provided below, any consideration received under any subletting, licensing,
or other arrangements with any Person relating to the possession or use of
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the Leased Property and all revenues from all ancillary services provided at
or relating to the Leased Property; provided, however, that Gross Revenues
shall not include non-operating revenues such as interest income or gain
from the sale of assets not sold in the ordinary course of business; and
provided, further, that there shall be excluded or deducted (as the case may
be) from such revenues:
(i) all applicable contractual allowances (relating to any
period during the Term of this Lease and thereafter until the Rent
hereunder is paid in full), if any, for billings not paid by or
received from the appropriate Governmental Agencies or Third
Party Payors,
(ii) all applicable allowances according to GAAP for
uncollectible accounts,
(iii) all proper resident billing credits and adjustments
according to GAAP, if any, relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts and
excise taxes and any tax based upon or measured by said Gross
Revenues which is added to or made a part of the amount billed to
the resident or other recipient of such services or goods, whether
included in the billing or stated separately,
(v) provider discounts for hospital or other medical
facility utilization contracts, if any,
(vi) the cost, if any, of any federal, state or local govern-
mental program imposed specially to provide or finance indigent
resident care (other than Medicare, Medicaid and the like),
(vii) deposits refundable to residents of the Facility, and
(viii) payments received on behalf of, and paid to, Persons who
are not Affiliates of Lessee.
To the extent that the Leased Property is subleased or occupied by
an Affiliate of Lessee, Gross Revenues calculated for all purposes of this
Lease (including, without limitation, the determination of the Additional
Rent payable under this Lease) shall include the Gross Revenues of such
Sublessee with respect to the premises demised under the applicable
Sublease (i.e., the Gross Revenues generated from the operations conducted
on such subleased portion of the Leased Property) and the rent received or
receivable from such Sublessee pursuant to such Subleases shall be
excluded from Gross Revenues for all such purposes. As to any Sublease
between Lessee and a non-Affiliate of Lessee, only the rental actually
received by Lessee from such non-Affiliate shall be included in Gross
Revenues.
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GROUP TWO ACQUISITION FACILITIES: As defined in the
Agreement Regarding Related Transactions.
GUARANTOR: Emeritus Corporation, a Washington corporation,
and its successors and assigns.
GUARANTY OF LEASE OBLIGATIONS: The Guaranty of
Lease Obligations of even date executed by Guarantor in favor of Lessor,
relating to the Lease Obligations.
HAZARDOUS SUBSTANCES: As defined in the Environmental
Indemnity Agreement.
IMPOSITIONS: Collectively, all taxes (including, without
limitation, all capital stock and franchise taxes of Lessor, all ad valorem,
property, sales and use, single business, gross receipts, transaction privilege,
rent or similar taxes), assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term), ground rents, water and sewer rents, water
charges or other rents and charges, excises, tax levies, fees (including,
without limitation, license, permit, inspection, authorization and similar
fees), transfer taxes and recordation taxes imposed as a result of this Lease
or any extensions hereof, and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of either or both of the Leased
Property and the Rent (including all interest and penalties thereon due to
any failure in payment by Lessee), which at any time prior to, during or in
respect of the Term hereof and thereafter until the Leased Property is
surrendered to Lessor as required by the terms of this Lease, may be
assessed or imposed on or in respect of or be a Lien upon (a) Lessor or
Lessor's interest in the Leased Property, (b) the Leased Property or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, sales from, or activity conducted on, or in
connection with, the Leased Property or the leasing or use of the Leased
Property. Notwithstanding the foregoing, nothing contained in this Lease
shall be construed to require Lessee to pay (1) any tax based on net income
(whether denominated as a franchise or capital stock or other tax) imposed
on Lessor or any other Person, except Lessee or its successors, (2) any net
revenue tax of Lessor or any other Person, except Lessee and its successors,
(3) any tax imposed with respect to the sale, exchange or other disposition
by Lessor of the Leased Property or the proceeds thereof, or (4) except as
expressly provided elsewhere in this Lease, any principal or interest on any
Encumbrance on the Leased Property; provided, however, the provisos set
forth in clauses (1) and (2) of this sentence shall not be applicable to the
extent that any real or personal property tax, assessment, tax levy or charge
which Lessee is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is
totally or partially repealed, and a tax, assessment, tax levy or charge set
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forth in clause (1) or (2) is levied, assessed or imposed expressly in lieu
thereof. In computing the amount of any franchise tax or capital stock tax
which may be or become an Imposition, the amount payable by Lessee
shall be equitably apportioned based upon all properties owned by Lessor
that are located within the particular jurisdiction subject to any such tax.
INDEBTEDNESS: The total of all obligations of a Person,
whether current or long-term, which in accordance with GAAP would be
included as liabilities upon such Person's balance sheet at the date as of
which Indebtedness is to be determined, and shall also include (i) all capital
lease obligations and (ii) all guarantees, endorsements (other than for
collection of instruments in the ordinary course of business), or other
arrangements whereby responsibility is assumed for the obligations of
others, whether by agreement to purchase or otherwise acquire the
obligations of others, including any agreement contingent or otherwise to
furnish funds through the purchase of goods, supplies or services for the
purpose of payment of the obligations of others.
INDEMNIFIED PARTIES: As defined in Section 12.2.2.
INDEX: The rate of interest of actively traded marketable United
States Treasury Securities bearing a fixed rate of interest adjusted for a
constant maturity of ten (10) years as calculated by the Federal Reserve
Board.
INITIAL TERM: As defined in Section 1.2.
INSTRUMENTS: As defined in the UCC.
INSURANCE REQUIREMENTS: All terms of any insurance
policy required by this Lease, all requirements of the issuer of any such
policy with respect to the Leased Property and the activities conducted
thereon and the requirements of any insurance board, association or
organization or underwriters' regulations pertaining to the Leased Property.
LAND: As defined in Article 1.
LEASE: As defined in the preamble of this Lease.
LEASE DEFAULT: The occurrence of any default or breach of
condition continuing beyond any applicable notice and/or grace periods
under this Lease and/or any of the other Lease Documents.
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LEASE DOCUMENTS: Collectively, this Lease, the Guaranty of
Lease Obligations, the Agreement Regarding Related Transactions, the
Leasehold Improvement Agreement, the Security Agreement, the Deposit
Pledge Agreement, the Negative Pledge Agreement, the Permits
Assignment, the Financing Statements, the Affiliated Party Subordination
Agreement, the Environmental Indemnity Agreement, and any and all other
instruments, documents, certificates or agreements executed or furnished by
any member of the Leasing Group in connection with the transactions
evidenced by the Lease and/or any of the foregoing documents.
LEASE OBLIGATIONS: Collectively, all indebtedness,
covenants, liabilities, obligations, agreements and undertakings (other than
Lessor's obligations) under this Lease and the other Lease Documents.
LEASE YEAR: A twelve month period ending on March 31st of
each year; provided, that the first Lease Year shall begin on the
Commencement Date and shall end on March 31, 1997.
LEASED IMPROVEMENTS: As defined in Article 1.
LEASED PROPERTY: As defined in Article 1.
LEASEHOLD IMPROVEMENT AGREEMENT: The Leasehold
Improvement Agreement of even date by and between Lessee and Lessor.
LEASING GROUP: Collectively, Lessee, the Guarantor, the
General Partner, any Sublessee which is an Affiliate of Lessee and any
Manager which is an Affiliate of Lessee.
LEGAL REQUIREMENTS: Collectively, all statutes, ordinances,
by-laws, codes, rules, regulations, restrictions, orders, judgments, decrees
and injunctions (including, without limitation, all applicable building,
health code, zoning, subdivision, and other land use and assisted living
licensing statutes, ordinances, by-laws, codes, rules and regulations),
whether now or hereafter enacted, promulgated or issued by any
Governmental Authority, Accreditation Body or Third Party Payor
affecting Lessor, any member of the Leasing Group or the Leased Property
or the ownership, construction, development, maintenance, management,
repair, use, occupancy, possession or operation thereof or the operation of
any programs or services in connection with the Leased Property, including,
without limitation, any of the foregoing which may (i) require repairs,
modifications or alterations in or to the Leased Property, (ii) in any way
affect (adversely or otherwise) the use and enjoyment of the Leased
Property or (iii) require the assessment, monitoring, clean-up, containment,
removal, remediation or other treatment of any Hazardous Substances on,
under or from the Leased Property. Without limiting the foregoing, the
term Legal Requirements includes all Environmental Laws and shall also
include all Permits and Contracts issued or entered into by any
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Governmental Authority, any Accreditation Body and/or any Third Party
Payor and all Permitted Encumbrances.
LESSEE: As defined in the preamble of this Lease and its
successors and assigns.
LESSEE'S ELECTION NOTICE: As defined in Section 14.3.
LESSEE'S PURCHASE OPTION NOTICE: As defined in Section
18.3.
LESSOR: As defined in the preamble of this Lease and its
successors and assigns.
LIEN: With respect to any real or personal property, any
mortgage, easement, restriction, lien, pledge, collateral assignment,
hypothecation, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment or other encumbrance of any
kind in respect of such property, whether or not inchoate, vested or
perfected.
LIMITED PARTIES: As defined in Section 11.5.4; provided,
however, in no event shall the term Limited Parties include any Person in
its capacity as a shareholder of a public entity, unless such shareholder is a
member of the Leasing Group or an Affiliate thereof.
MANAGED CARE PLANS: All health maintenance
organizations, preferred provider organizations, individual practice
associations, competitive medical plans, and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement, whether
written or oral, between Lessee or any Sublessee and any other Person
pursuant to which Lessee or such Sublessee provides any payment, fee or
other consideration to any other Person to operate or manage the Facility.
MANAGEMENT SUBORDINATION AGREEMENT: The
Management Subordination Agreement as of even date herewith between
Lessee and Lessor.
MANAGER: Any Person who has entered into a Management
Agreement with Lessee or any Sublessee.
MATERIAL STRUCTURAL WORK: Any (i) structural
alteration, (ii) structural repair or (iii) structural renovation to the Leased
Property, which would customarily require or which require the design
and/or involvement of a structural engineer or architect or which would
require the issuance of a Permit.
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MEDICAID: The medical assistance program established by Title
XIX of the Social Security Act (42 USC 1396 et seq.) and any statute
succeeding thereto.
MEDICARE: The health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 USC
1395 et seq.) and any statute succeeding thereto.
MEDITRUST: As defined in Article 23.
MEDITRUST/EMERITUS TRANSACTION AFFILIATE: An
Affiliate of Lessee, the business and activities of which are limited to those
subject to Meditrust/Emeritus Transaction Documents (other than the
Affiliated Party Subordination Agreement, the Agreement Regarding
Related Transactions and comparable agreement now or hereafter in effect
among Affiliates of Lessee and of Lessor) to which such Affiliate is a party.
MEDITRUST/EMERITUS TRANSACTION DOCUMENTS: As
defined in the Agreement Regarding Related Transactions.
MEDITRUST ENTITIES: Collectively, Meditrust, Lessor and any
other Affiliate of Lessor which may now or hereafter be a party to any
Related Party Agreement.
MEDITRUST INVESTMENT: The sum of (i) the Original
Meditrust Investment plus (ii) the aggregate amount of all Subsequent
Investments plus (iii) so much of the Project Funds as Lessor has expended
from time to time less the sum of any Net Award Amounts and/or Net
Proceeds Amounts.
MONTHLY DEPOSIT DATE: As defined in Section 4.6.
NEGATIVE PLEDGE AGREEMENT: The Group Two Negative
Pledge Agreement (Acquisition) of even date by and between Guarantor,
Lessee and Lessor.
NET AWARD AMOUNT: As defined in Section 3.7.
NET INCOME (OR NET LOSS): The net income (or net loss,
expressed as a negative number) of a Person for any period, after all taxes
actually paid or accrued and all expenses and other charges determined in
accordance with GAAP.
NET PROCEEDS AMOUNT: As defined in Section 3.7.
NET WORTH: An amount determined in accordance with GAAP
equal to the total assets of any Person, minus the total liabilities of such
Person.
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OBLIGATIONS: Collectively, the Lease Obligations and the
Related Party Obligations.
OFFICER'S CERTIFICATE: A certificate of Lessee signed on
behalf of Lessee by the Chairman of the Board of Directors, the President,
any Vice President or the Treasurer of Lessee, or another officer authorized
to so sign by the Board of Directors or By-Laws of Lessee, or any other
Person whose power and authority to act has been authorized by delegation
in writing by any of the Persons holding the foregoing offices.
ORIGINAL MEDITRUST INVESTMENT: The sum of SEVEN
MILLION EIGHT HUNDRED FORTY-ONE THOUSAND NINE
HUNDRED THIRTY-ONE DOLLARS ($7,841,931).
OTHER PERMITTED USES: To the extent permitted under
applicable Legal Requirements and under Insurance Requirements, and so
long as the same do not detract in any material manner from the Primary
Intended Use and do not occupy more than ten percent (10%) of the useable
floor area of the building comprising the Facility, such uses as Lessee
reasonably determines are appropriate and incidental to the Primary
Permitted Use.
OVERDUE RATE: On any date, a rate of interest per annum
equal to the greater of: (i) a variable rate of interest per annum equal to one
hundred twenty percent (120%) of the Prime Rate, or (ii) eighteen percent
(18%) per annum; provided, however, in no event shall the Overdue Rate
be greater than the maximum rate then permitted under applicable law to be
charged by Lessor.
PBGC: Pension Benefit Guaranty Corporation.
PERMITS: Collectively, all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditation, certificates,
certifications, consents, agreements, contracts, contract rights, franchises,
interim licenses, permits and other authorizations of every nature
whatsoever required by, or issued under, applicable Legal Requirements
relating or affecting the Leased Property or the construction, development,
maintenance, management, use or operation thereof, or the operation of any
programs or services in conjunction with the Facility and all renewals,
replacements and substitutions therefor, now or hereafter required or issued
by any Governmental Authority, Accreditation Body or Third Party Payor
to any member of the Leasing Group, or maintained or used by any member
of the Leasing Group, or entered into by any member of the Leasing Group
with any third Person with respect to the Leased Property.
PERMITS ASSIGNMENT: The Collateral Assignment of Permits,
Licenses and Contracts of even date granted by Lessee to Lessor.
PERMITTED ENCUMBRANCES: As defined in Section 10.1.18.
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PERMITTED PRIOR SECURITY INTERESTS: As defined in
Section 6.1.2.
PERSON: Any individual, corporation, general partnership,
limited partnership, joint venture, stock company or association, company,
bank, trust, trust company, land trust, business trust, unincorporated
organization, unincorporated association, Governmental Authority or other
entity of any kind or nature.
PLANS AND SPECIFICATIONS: As defined in Section 13.1.3.
PRIMARY INTENDED USE: The use of the Facility as an
assisted living facility with ninety (90) units, one hundred-ten (110) beds
prior to the Completion Date, and additional units and beds after the
Completion Date consisting of (i) an existing facility with ninety (90) units
one hundred-ten (110) beds; and (ii) an assisted living addition as provided
in the Leasehold Improvement Agreement; or such additional number of
units or beds as may hereafter be permitted under this Lease, and such
ancillary uses as are permitted by law and may be necessary in connection
therewith or incidental thereto.
PRIME RATE: The variable rate of interest per annum from time
to time announced by the Reference Bank as its prime rate of interest and in
the event that the Reference Bank no longer announces a prime rate of
interest, then the Prime Rate shall be deemed to be the variable rate of
interest per annum which is the prime rate of interest or base rate of interest
from time to time announced by any other major bank or other financial
institution reasonably selected by Lessor.
PRINCIPAL PLACE OF BUSINESS: As defined in Section
10.1.28.
PROCEEDS: As defined in the UCC.
PROJECT: As defined in the Leasehold Improvement Agreement.
PROJECT FUNDS: As defined in the Leasehold Improvement
Agreement.
PROVIDER AGREEMENTS: All participation, provider and
reimbursement agreements or arrangements, if any, now or hereafter in
effect for the benefit of Lessee or any Sublessee in connection with the
operation of the Facility relating to any right of payment or other claim
arising out of or in connection with Lessee's or such Sublessee's
participation in any Third Party Payor Program.
PURCHASE OPTION: As defined in Section 18.3.
PURCHASE OPTION DATE: As defined in Section 18.3.
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PURCHASE OPTION PURCHASE PRICE: As defined in Section
18.3.
PURCHASER: As defined in Section 11.5.
RECEIVABLES: Collectively, (i) all rights to payment for goods
sold or leased or services rendered by Lessee or any other party, whether
now in existence or arising from time to time hereafter and whether or not
yet earned by performance, including, without limitation, obligations
evidenced by an account, note, contract, security agreement, chattel paper,
or other evidence of indebtedness, including Accounts and Proceeds, and
(ii) a license to use such Instruments, Documents, Accounts, Proceeds,
General Intangibles and Chattel Paper as are reasonably required for
purposes of exercising the rights set forth in (i) above.
REFERENCE BANK: Fleet Bank of Connecticut, N.A.
RELATED LEASES: The Group Two Acquisition Facility Leases
(as defined in the Agreement Regarding Related Transactions), together
with such other new leases identified from time to time in the Agreement
Regarding Related Transactions.
RELATED PARTIES: Collectively, each Person that may now or
hereafter be a party to any Related Party Agreement other than the
Meditrust Entities.
RELATED PARTY AGREEMENT: Any agreement, document or
instrument now or hereafter evidencing or securing any Related Party
Obligation, including, without limitation, the Related Leases.
RELATED PARTY DEFAULT: The occurrence of a default or
breach of condition continuing beyond the expiration of any applicable
notice and grace periods, if any, under the terms of any Related Party
Agreement.
RELATED PARTY OBLIGATIONS: Collectively, all
indebtedness, covenants, liabilities, obligations, agreements and
undertakings due to, or made for the benefit of, Lessor or any of the other
Meditrust Entities by Lessee or any other member of the Leasing Group or
any of their respective Affiliates in connection with any of the properties
described in EXHIBIT E to the Agreement Regarding Related Transactions,
as the same may be modified and amended from time to time; whether such
indebtedness, covenants, liabilities, obligations, agreements and/or
undertakings are direct or indirect, absolute or contingent, liquidated or
unliquidated, due or to become due, joint, several or joint and several,
primary or secondary, now existing or hereafter arising.
RENT: Collectively, the Base Rent, Additional Rent, the
Additional Charges and all other sums payable under this Lease and the
other Lease Documents.
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RENT ADJUSTMENT DATE: The first day of any of the
Extended Terms.
RENT ADJUSTMENT RATE: 325 basis points over the Index.
RENT INSURANCE PROCEEDS: As defined in Section 13.8.
RESIDENCY AGREEMENT: All contracts, agreements and
consents executed by or on behalf of any resident or other Person seeking
services at the Facility, including, without limitation, assignments of
benefits and guarantees.
RETAINAGE: As defined in Section 13.1.3.
SECURITY AGREEMENT: The Security Agreement as of even
date herewith between Lessee and Lessor.
SELLER: American House Sarasota Limited Partnership, a
Michigan limited partnership.
STATE: The state or commonwealth in which the Leased Property
is located.
SUBLEASE: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements and other occupancy
agreements of every kind and nature (but excluding any Residency
Agreement), whether oral or in writing, now in existence or subsequently
entered into by Lessee, encumbering or affecting the Leased Property.
SUBLESSEE: Any sublessee, licensee, concessionaire, tenant or
other occupant under any of the Subleases.
SUBSEQUENT INVESTMENTS: The aggregate amount of all
sums expended and liabilities incurred by Lessor in connection with Capital
Additions.
SUBSIDIARY OR SUBSIDIARIES: With respect to any Person,
any corporation or other entity of which such Person, directly, or indirectly,
through another entity or otherwise, owns, or has the right to control or
direct the voting of, fifty percent (50%) or more of the outstanding capital
stock or other ownership interest having general voting power (under
ordinary circumstances).
TAKING: A taking or voluntary conveyance during the Term of
the Leased Property, or any interest therein or right accruing thereto, or use
thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain proceeding affecting the Leased Property whether or not
the same shall have actually been commenced.
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TANGIBLE PERSONAL PROPERTY: All machinery,
equipment, furniture, furnishings, movable walls or partitions, computers or
trade fixtures, goods, inventory, supplies, and other personal property
owned or leased (pursuant to equipment leases) by Lessee and used in the
operation of the Leased Property.
TERM: Collectively, the Initial Term and each Extended Term
which has become effective pursuant to Section 1.4, as the context may
require, unless earlier terminated pursuant to the provisions hereof.
THIRD PARTY PAYOR PROGRAMS: Collectively, all third
party payor programs in which Lessee or any Sublessee presently or in the
future may participate, including without limitation, Medicare, Medicaid,
Blue Cross and/or Blue Shield, Managed Care Plans, other private
insurance plans and employee assistance programs.
THIRD PARTY PAYORS: Collectively, Medicare, Medicaid,
Blue Cross and/or Blue Shield, private insurers and any other Person which
presently or in the future maintains Third Party Payor Programs.
TIME OF CLOSING: As defined in Section 18.3.
UCC: The Uniform Commercial Code as in effect from time to
time in the State.
UNITED STATES TREASURY SECURITIES: The uninsured
treasury securities issued by the United States Federal Reserve Bank.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: As used
anywhere in this Lease, the term "Unsuitable For Its Primary Intended Use"
shall mean that, by reason of Casualty, or a partial or temporary Taking by
Condemnation, in the good faith judgment of Lessor, the Facility cannot be
operated on a commercially practicable basis for the Primary Intended Use,
taking into account, among other relevant factors, the number of usable
units or beds affected by such Casualty or partial or temporary Taking.
UNAVOIDABLE DELAYS: Delays due to strikes, lockouts,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or
other causes beyond the control of the party responsible for performing an
obligation hereunder, provided that lack of funds shall not be deemed a
cause beyond the control of either party hereto.
UPGRADE RENOVATIONS: Repair and refurbishing other than
normal janitorial, cleaning and maintenance activities.
WORK: As defined in Section 13.1.1.
WORK CERTIFICATES: As defined in Section 13.1.3.
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WORKING CAPITAL LOAN: As defined in Section 6.1.3.
WORKING CAPITAL STOCK PLEDGE: As defined in Section
16.1(h).
2.2 RULES OF CONSTRUCTION. The following rules of
construction shall apply to the Lease and each of the other Lease
Documents: (a) references to "herein", "hereof" and "hereunder" shall be
deemed to refer to this Lease or the other applicable Lease Document, and
shall not be limited to the particular text or section or subsection in which
such words appear; (b) the use of any gender shall include all genders and
the singular number shall include the plural and vice versa as the context
may require; (c) references to Lessor's attorneys shall be deemed to include,
without limitation, special counsel and local counsel for Lessor; (d)
reference to attorneys' fees and expenses shall be deemed to include all
costs for administrative, paralegal and other support staff and to exclude
any fees and expenses of attorneys who are employees of an Affiliate of
Lessor; (e) references to Leased Property shall be deemed to include
references to all of the Leased Property and references to any portion
thereof; (f) references to the Lease Obligations shall be deemed to include
references to all of the Lease Obligations and references to any portion
thereof; (g) references to the Obligations shall be deemed to include
references to all of the Obligations and references to any portion thereof;
(h) the term "including", when following any general statement, will not be
construed to limit such statement to the specific items or matters as
provided immediately following the term "including" (whether or not non-
limiting language such as "without limitation" or "but not limited to" or
words of similar import are also used), but rather will be deemed to refer to
all of the items or matters that could reasonably fall within the broadest
scope of the general statement; (i) any requirement that financial statements
be Consolidated in form shall apply only to such financial statements as
relate to a period during any portion of which the relevant Person has one
or more Subsidiaries; (j) all accounting terms not specifically defined in the
Lease Documents shall be construed in accordance with GAAP and (k) all
exhibits annexed to any of the Lease Documents as referenced therein shall
be deemed incorporated in such Lease Document by such annexation and/or
reference.
ARTICLE 3
RENT
3.1 RENT FOR LAND, LEASED IMPROVEMENTS, RELATED
RIGHTS AND FIXTURES. Lessee will pay to Lessor, in lawful money of
the United States of America, at Lessor's address set forth herein or at such
other place or to such other Person as Lessor from time to time may
designate in writing, rent for the Leased Property, as follows.
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3.1.1 BASE RENT: From and after the Commencement
Date, Lessee shall pay to Lessor a base rent (the "Base Rent") per
annum which is equal to the product of (i) the Original Meditrust
Investment plus so much of the Project Funds as Lessor has
expended from time to time multiplied by (ii) nine and eighty-
three one hundredths percent (9.83%) calculated on a daily basis
and that is payable in arrears in consecutive monthly installments
due on the first day of each calendar month commencing on
September 1, 1996; provided, however, that on each Rent
Adjustment Date, the Base Rent shall be adjusted to equal the
greater of (i) the then current Base Rent or (ii) the Original
Meditrust Investment plus so much of the Project Funds as Lessor
has expended from time to time plus Subsequent Investments
multiplied by the Rent Adjustment Rate calculated on a daily basis
and further provided, however, that Base Rent shall be prorated for
any partial month.
3.1.2 ADDITIONAL RENT: In addition to the Base
Rent, Lessee shall also pay to Lessor additional rent (the
"Additional Rent") in an amount equal to five percent (5%) of
Excess Gross Revenues. Additional Rent shall accrue
commencing, September 1, 1998 (in each case, an "Additional
Rent Accrual Date") and shall be payable during the Term,
quarterly in arrears, commencing on the first day of the first fiscal
quarter occurring following the Additional Rent Accrual Date and
there shall be an annual reconciliation as provided in Section 3.2
below.
3.2 CALCULATION AND PAYMENT OF ADDITIONAL
RENT; ANNUAL RECONCILIATION.
3.2.1 OFFICER'S CERTIFICATE AND
PRORATION. Each quarterly payment of Additional Rent shall be
delivered to Lessor, together with an Officer's Certificate setting
forth the calculation thereof, within thirty (30) days after the end of
the corresponding quarter. Additional Rent due for any portion of
any calendar year shall be prorated accordingly.
3.2.2 ANNUAL STATEMENT. In addition, on or
before the first day of April of each year following any calendar
year for which Additional Rent is payable hereunder, Lessee shall
deliver to Lessor an Officer's Certificate, reasonably acceptable to
Lessor and certified by the chief financial officer of Lessee, setting
forth the Gross Revenues for the immediately preceding calendar
year.
3.2.3 DEFICITS. If the Additional Rent, as finally
determined for any calendar year (or portion thereof), exceeds the
sum of the quarterly payments of Additional Rent previously paid
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by Lessee with respect to said calendar year, within thirty (30)
days after such determination is required to be made hereunder,
Lessee shall pay such deficit to Lessor and, if the deficit exceeds
five percent (5%) of the Additional Rent which was previously
paid to Lessor with respect to said calendar year, then Lessee shall
also pay Lessor interest on such deficit at the Overdue Rate from
the date that such payment should have been made by Lessee to the
date that Lessor receives such payment.
3.2.4 OVERPAYMENTS. If the Additional Rent, as
finally determined for any calendar year (or portion thereof), is less
than the amount previously paid with respect thereto by Lessee,
Lessee shall notify Lessor either (a) to pay to Lessee an amount
equal to such difference or (b) to grant Lessee a credit against
Additional Rent next coming due in the amount of such difference.
3.2.5 FINAL DETERMINATION. The obligation to
pay Additional Rent shall survive the expiration or earlier
termination of the Term (as to Additional Rent payments that are
due and payable prior to the expiration or earlier termination of the
Term and during any periods that Lessee remains in possession of
the Leased Property), and a final reconciliation, taking into
account, among other relevant adjustments, any contractual
allowances which related to Gross Revenues that accrued prior to
the date of such expiration or earlier termination, but which have
been determined to be not payable and Lessee's good faith best
estimate of the amount of any unresolved contractual allowances,
shall be made not later than two (2) years after said expiration or
termination date. Within sixty (60) days after the expiration or
earlier termination of the Term, Lessee shall advise Lessor of
Lessee's best estimate of the approximate amount of such
adjustments, which estimate shall not be binding on Lessee or have
any legal effect whatsoever.
3.2.6 BEST EFFORTS TO MAXIMIZE. Lessee
further covenants that the operation of the Facility shall be
conducted in a manner consistent with the prevailing standards and
practices recognized in the assisted living industry as those
customarily utilized by reputable business operations. Subject to
any applicable Legal Requirements, the members of the Leasing
Group shall use their best efforts to maximize the Facility's Gross
Revenues.
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3.3 CONFIRMATION AND AUDIT OF ADDITIONAL
RENT.
3.3.1 MAINTAIN ACCOUNTING SYSTEMS.
Lessee shall utilize, or cause to be utilized, an accounting system
for the Leased Property in accordance with usual and customary
practices in the assisted living industry and in accordance with
GAAP which will accurately record all Gross Revenues. Lessee
shall retain, for at least three (3) years after the expiration of each
calendar year (and in any event until the final reconciliation
described in Section 3.2 above has been made), adequate records
conforming to such accounting system showing all Gross Revenues
for such calendar year.
3.3.2 AUDIT BY LESSOR. Lessor, at its own
expense except as provided hereinbelow, shall have the right from
time to time to have its accountants or representatives audit the
information set forth in the Officer's Certificate referred to in
Section 3.2 and in connection with such audits, to examine Lessee's
records with respect thereto (including supporting data, income tax
and sales tax returns), subject to any prohibitions or limitations on
disclosure of any such data under applicable law or regulations.
3.3.3 DEFICIENCIES AND OVERPAYMENTS. If
any such audit discloses a deficiency in the reporting of Gross
Revenues, and either Lessee agrees with the result of such audit or
the matter is compromised, Lessee shall forthwith pay to Lessor the
amount of the deficiency in Additional Rent which would have
been payable by it had such deficiency in reporting Gross
Revenues not occurred, as finally agreed or determined, together
with interest on the Additional Rent which should have been
payable by it, calculated at the Overdue Rate, from the date when
said payment should have been made by Lessee to the date that
Lessor receives such payment. Notwithstanding anything to the
contrary herein, with respect to any audit that is commenced more
than two (2) years after the date Gross Revenues for any calendar
year are reported by Lessee to Lessor, the deficiency, if any, with
respect to Additional Rent shall bear interest as permitted herein
only from the date such determination of deficiency is made,
unless such deficiency is the result of gross negligence or willful
misconduct on the part of Lessee (or any Affiliate thereof). If any
audit conducted for Lessor pursuant to the provisions hereof
discloses that (a) the Gross Revenues actually received by Lessee
for any calendar year exceed those reported by Lessee by more
than five percent (5%), Lessee shall pay the reasonable cost of such
audit and examination or (b) Lessee has overpaid Additional Rent,
Lessor shall so notify Lessee and Lessee shall direct Lessor either
(i) to refund the overpayment to Lessee or (ii) grant a credit against
Additional Rent next coming due in the amount of such difference.
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3.3.4 SURVIVAL. The obligations of Lessor and
Lessee contained in this Section shall survive the expiration or
earlier termination of this Lease.
3.4 ADDITIONAL CHARGES. Subject to the rights to
contest as set forth in Article 15, in addition to the Base Rent and
Additional Rent, (a) Lessee will also pay and discharge as and when due
and payable all Impositions, all amounts, liabilities and obligations under
the Appurtenant Agreements and all other amounts, liabilities and
obligations which Lessee assumes or agrees to pay under this Lease, and (b)
in the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) above, Lessee will also promptly pay and discharge
every fine, penalty, interest and cost which may be added for non-payment
or late payment of such items (the items referred to in clauses (a) and (b)
above being referred to herein collectively as the "Additional Charges"),
and Lessor shall have all legal, equitable and contractual rights, powers and
remedies provided in this Lease, by statute or otherwise, in the case of non-
payment of the Additional Charges, as well as the Base Rent and Additional
Rent. To the extent that Lessee pays any Additional Charges to Lessor
pursuant to any requirement of this Lease, Lessee shall be relieved of its
obligation to pay such Additional Charges to any other Person to which
such Additional Charges would otherwise be due.
3.5 NET LEASE. The Rent shall be paid absolutely net to
Lessor, so that this Lease shall yield to Lessor the full amount of the
installments of Base Rent, and the payments of Additional Rent and, if and
to the extent payable to Lessor, Additional Charges throughout the Term.
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3.6 NO LESSEE TERMINATION OR OFFSET.
3.6.1 NO TERMINATION. Except as may be
otherwise specifically and expressly provided in this Lease, Lessee,
to the extent not prohibited by applicable law, shall remain bound
by this Lease in accordance with its terms and shall neither take
any action without the consent of Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the
Rent, nor shall the respective obligations of Lessor and Lessee be
otherwise affected by reason of (a) any Casualty or any Taking of
the Leased Property, (b) the lawful or unlawful prohibition of, or
restriction upon, Lessee's use of the Leased Property or the
interference with such use by any Person (other than Lessor, except
to the extent permitted hereunder) or by reason of eviction by
paramount title; (c) any claim that Lessee has or might have against
Lessor, (d) any default or breach of any warranty by Lessor or any
of the other Meditrust Entities under this Lease, any other Lease
Document or any Related Party Agreement, (e) any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor or (f) for any other cause
whether similar or dissimilar to any of the foregoing, other than a
discharge of Lessee from any of the Lease Obligations as a matter
of law.
3.6.2 WAIVER. Lessee to the fullest extent not
prohibited by applicable law, hereby specifically waives all rights,
arising from any occurrence whatsoever, which may now or
hereafter be conferred upon it by law to (a) modify, surrender or
terminate this Lease or quit or surrender the Leased Property or (b)
entitle Lessee to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder,
except as otherwise specifically and expressly provided in this
Lease.
3.6.3 INDEPENDENT COVENANTS. The
obligations of Lessor and Lessee hereunder shall be separate and
independent covenants and agreements and the Rent and all other
sums payable by Lessee hereunder shall continue to be payable in
all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or (except in those
instances where the obligation to pay expressly survives the
termination of this Lease) by termination of this Lease other than
by reason of an Event of Default.
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3.7 ABATEMENT OF RENT LIMITED. There shall be no
abatement of Rent on account of any Casualty, Taking or other event,
except that (a) in the event of a partial Taking or a temporary Taking as
described in Section 14.3, the Base Rent shall be abated as follows: (i) in
the case of such a partial Taking, the Meditrust Investment shall be reduced
for the purposes of calculating Base Rent pursuant to Section 3.1 by
subtracting therefrom, as applicable, the net amount of the Award received
by Lessor, and (ii) in the case of such a temporary Taking, by reducing the
Base Rent for the period of such a temporary Taking, by the net amount of
the Award received by Lessor and (b) in the event of a Casualty, the Base
Rent shall be abated as follows: the Meditrust Investment shall be reduced
for the purposes of calculating Base Rent pursuant to Section 3.1 by
subtracting therefrom, as applicable, the net amount of the insurance
proceeds.
For the purposes of this Section 3.7, the "net amount of the Award
received by Lessor" shall mean the Award paid to Lessor or Lessor's
mortgagee on account of such Taking, minus all costs and expenses
incurred by Lessor in connection therewith, and minus any amounts paid to
or for the account of Lessee to reimburse for the costs and expenses of
reconstructing the Facility following such Taking in order to create a viable
and functional Facility under all of the circumstances ("Net Award
Amount") and the "net amount of the insurance proceeds" shall mean the
insurance proceeds paid to Lessor or Lessor's mortgagee on account of such
Casualty, minus all costs and expenses incurred by Lessor in connection
therewith and minus any amounts paid to or for the account of Lessee to
reimburse for the costs and expenses of reconstructing the Facility
following such Casualty in order to create a viable and functional Facility
under all of the circumstances ("Net Proceeds Amount").
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 PAYMENT OF IMPOSITIONS.
4.1.1 LESSEE TO PAY. Subject to the provisions of
Article 15, Lessee will pay or cause to be paid all Impositions
before any fine, penalty, interest or cost may be added for non-
payment, such payments to be made directly to the taxing authority
where feasible, and Lessee will promptly furnish Lessor copies of
official receipts or other satisfactory proof evidencing payment not
later than the last day on which the same may be paid without
penalty or interest. Subject to the provisions of Article 15 and
Section 4.1.2, Lessee's obligation to pay such Impositions shall be
deemed absolutely fixed upon the date such Impositions become a
lien upon the Leased Property or any part thereof.
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4.1.2 INSTALLMENT ELECTIONS. If any such
Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Lessee may exercise the option to pay
the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term hereof (subject to Lessee's right to
contest pursuant to the provisions of Section 4.1.5 below) as the
same respectively become due and before any fine, penalty,
premium, further interest or cost may be added thereto.
4.1.3 RETURNS AND REPORTS. Lessor, at its
expense, shall, to the extent permitted by applicable law, prepare
and file all tax returns and reports as may be required by
Governmental Authorities in respect of Lessor's net income, gross
receipts, franchise taxes and taxes on its capital stock, and Lessee,
at its expense, shall, to the extent permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in
respect of any Imposition as may be required by Governmental
Authorities. Lessor and Lessee shall, upon request of the other,
provide such data as is maintained by the party to whom the
request is made with respect to the Leased Property as may be
necessary to prepare any required returns and reports. In the event
that any Governmental Authority classifies any property covered
by this Lease as personal property, Lessee shall file all personal
property tax returns in such jurisdictions where it may legally so
file. Lessor, to the extent it possesses the same, and Lessee, to the
extent it possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing
returns for any portion of Leased Property so classified as personal
property. Where Lessor is legally required to file personal
property tax returns, if Lessee notifies Lessor of the obligation to
do so in each year at least thirty (30) days prior to the date any
protest must be filed, Lessee will be provided with copies of
assessment notices so as to enable Lessee to file a protest.
4.1.4 REFUNDS. If no Lease Default shall have
occurred and be continuing, any refund due from any taxing
authority in respect of any Imposition paid by Lessee shall be paid
over to or retained by Lessee. If a Lease Default shall have
occurred and be continuing, at Lessor's option, such funds shall be
paid over to Lessor and/or retained by Lessor and applied toward
Lease Obligations which relate to the Leased Property in
accordance with the Lease Documents.
4.1.5 PROTEST. Upon giving notice to Lessor, at
Lessee's option and sole cost and expense, and subject to
compliance with the provisions of Article 15, Lessee may contest,
protest, appeal, or institute such other proceedings as Lessee may
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deem appropriate to effect a reduction of any Imposition and
Lessor, at Lessee's cost and expense as aforesaid, shall fully
cooperate in a reasonable manner with Lessee in connection with
such protest, appeal or other action.
4.2 NOTICE OF IMPOSITIONS. Lessor shall give prompt
notice to Lessee of all Impositions payable by Lessee hereunder of which
Lessor at any time has knowledge, but Lessor's failure to give any such
notice shall in no way diminish Lessee's obligations hereunder to pay such
Impositions.
4.3 ADJUSTMENT OF IMPOSITIONS. Impositions
imposed in respect of the period during which the expiration or earlier
termination of the Term occurs shall be adjusted and prorated between
Lessor and Lessee, whether or not such Impositions are imposed before or
after such expiration or termination, and Lessee's obligation to pay its
prorated share thereof shall survive such expiration or termination.
4.4 UTILITY CHARGES. Lessee will pay or cause to be paid
all charges for electricity, power, gas, oil, water, telephone, cable television
and other utilities used in the Leased Property during the Term and
thereafter until Lessee surrenders the Leased Property in the manner
required by this Lease.
4.5 INSURANCE PREMIUMS. Lessee will pay or cause to
be paid all premiums for the insurance coverage required to be maintained
pursuant to Article 12 during the Term, and thereafter until Lessee yields up
the Leased Property in the manner required by this Lease. All such
premiums shall be paid annually in advance and Lessee shall furnish Lessor
with evidence satisfactory to Lessor that all such premiums have been so
paid prior to the commencement of the Term and thereafter at least thirty
(30) days prior to the due date of each premium which thereafter becomes
due. Notwithstanding the foregoing, Lessee may pay such insurance
premiums to the insurer in monthly installments so long as the applicable
insurer is contractually obligated to give Lessor not less than a sixty (60)
days notice of non-payment and so long as no Lease Default has occurred
and is continuing. In the event of the failure of Lessee either to comply
with the insurance requirements in Article 12, or to pay the premiums for
such insurance, or to deliver such policies or certificates thereof to Lessor at
the times required hereunder, Lessor shall be entitled, but shall have no
obligation, to effect such insurance and pay the premiums therefor, which
premiums shall be a demand obligation of Lessee to Lessor.
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4.6 DEPOSITS.
4.6.1 LESSOR'S OPTION. At the option of Lessor
upon the occurrence of an event or circumstance which, with the
giving of notice and/or the passage of time, would constitute a
Lease Default, which may be exercised at any time thereafter,
Lessee shall, upon written request of Lessor, on the first day on the
calendar month immediately following such request, and on the
first day of each calendar month thereafter during the Term (each
of which dates is referred to as a "Monthly Deposit Date"), pay to
and deposit with Lessor a sum equal to one-twelfth (1/12th) of the
Impositions to be levied, charged, filed, assessed or imposed upon
or against the Leased Property within one (1) year after said
Monthly Deposit Date and a sum equal to one-twelfth (1/12th) of
the premiums for the insurance policies required pursuant to
Article 12 which are payable within one (1) year after said
Monthly Deposit Date. If the amount of the Impositions to be
levied, charged, assessed or imposed or insurance premiums to be
paid within the ensuing one (1) year period shall not be fixed upon
any Monthly Deposit Date, such amount for the purpose of
computing the deposit to be made by Lessee hereunder shall be
estimated by Lessor based upon the most recent available
information concerning said Impositions with an appropriate
adjustment to be promptly made between Lessor and Lessee as
soon as such amount becomes determinable. In addition, Lessor
may, at its option, from time to time require that any particular
deposit be greater than one-twelfth (1/12th) of the estimated
amount payable within one (1) year after said Monthly Deposit
Date, if such additional deposit is required in order to provide to
Lessor a sufficient fund from which to make payment of all
Impositions on or before the next due date of any installment
thereof, or to make payment of any required insurance premiums
not later than the due date thereof.
4.6.2 USE OF DEPOSITS. The sums deposited by
Lessee under this Section 4.6 shall be held by Lessor and shall be
applied in payment of the Impositions or insurance premiums, as
the case may be, when due. Any such deposits may be
commingled with other assets of Lessor, and shall be deposited by
Lessor at such bank as Lessor may, from time to time select, and,
provided that Lessor has invested such deposits in one or more of
the investment vehicles described on SCHEDULE 4.6.2 attached
hereto and incorporated by reference, Lessor shall not be liable to
Lessee or any other Person (a) based on Lessor's (or such bank's)
choice of investment vehicles, (b) for any consequent loss of
principal or interest or (c) for any unavailability of funds based on
such choice of investment. Furthermore, Lessor shall bear no
responsibility for the financial condition of, nor any act or
omission by, Lessor's depository bank. The income from such
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investment or interest on such deposit shall be paid to Lessee on a
semi-annual basis as long as no Lease Default has occurred and is
then continuing, and as long as no fact or circumstance exists
which, with the giving of notice and/or the passage of time, would
constitute a Lease Default. Lessee shall give not less than ten (10)
days prior written notice to Lessor in each instance when an
Imposition or insurance premium is due, specifying the Imposition
or premium to be paid and the amount thereof, the place of
payment, and the last day on which the same may be paid in order
to comply with the requirements of this Lease. If Lessor, in
violation of its obligations under this Lease, does not pay any
Imposition or insurance premium when due, for which a sufficient
deposit exists, Lessee shall not be in default hereunder by virtue of
the failure of Lessor to pay such Imposition or such insurance
premium and Lessor shall pay any interest or fine assessed by
virtue of Lessor's failure to pay such Imposition or insurance
premium.
4.6.3 DEFICITS. If for any reason any deposit held
by Lessor under this Section 4.6 shall not be sufficient to pay an
Imposition or insurance premium within the time specified therefor
in this Lease, then, within ten (10) days after demand by Lessor,
Lessee shall deposit an additional amount with Lessor, increasing
the deposit held by Lessor so that Lessor holds sufficient funds to
pay such Imposition or premium in full (or in installments as
otherwise provided for herein), together with any penalty or
interest due thereon. Lessor may change its estimate of any
Imposition or insurance premium for any period on the basis of a
change in an assessment or tax rate or on the basis of a prior
miscalculation or for any other good faith reason; in which event,
within ten (10) days after demand by Lessor, Lessee shall deposit
with Lessor the amount in excess of the sums previously deposited
with Lessor for the applicable period which would theretofore have
been payable under the revised estimate.
4.6.4 OTHER PROPERTIES. If any Imposition shall
be levied, charged, filed, assessed, or imposed upon or against the
Leased Property, and if such Imposition shall also be a levy,
charge, assessment, or imposition upon or for any other real or
personal property that does not constitute a part of the Leased
Property but for which a lien exists or can exist upon the Leased
Property, then, at Lessor's reasonable discretion, the computation
of the amounts to be deposited under this Section 4.6 shall be
based upon the entire amount of such Imposition and Lessee shall
not have the right to apportion any deposit with respect to such
Imposition.
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4.6.5 TRANSFERS. In connection with any
assignment of Lessor's interest under this Lease, the original Lessor
named herein and each successor in interest shall transfer all
amounts deposited pursuant to the provisions of this Section 4.6
and still in its possession to such assignee (as the subsequent holder
of Lessor's interest in this Lease) and upon such transfer, the
original Lessor named herein or the applicable successor in interest
transferring the deposits shall thereupon be completely released
from all liability with respect to such deposits so transferred and
Lessee shall look solely to said assignee, as the subsequent holder
of Lessor's interest under this Lease, in reference thereto.
4.6.6 SECURITY. All amounts deposited with Lessor
pursuant to the provisions of this Section 4.6 shall be held by
Lessor as additional security for the payment and performance of
the Obligations and, upon the occurrence of any Lease Default,
Lessor may, in its sole and absolute discretion, apply said amounts
towards payment or performance of such Obligations.
4.6.7 RETURN. Upon the expiration or earlier
termination of this Lease, provided that all of the Lease Obligations
relating to the Leased Property have been fully paid and
performed, any sums then held by Lessor under this Section 4.6
shall be refunded to Lessee.
4.6.8 RECEIPTS. Lessee shall deliver to Lessor
copies of all notices, demands, claims, bills and receipts in relation
to the Impositions and insurance premiums upon the earlier to
occur of (a) ten (10) days following receipt thereof by Lessee and
(b) in the case of an invoice, demand or bill for the payment of an
Imposition, prior to the date when such Imposition is due and
payable.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY;
5.1 OWNERSHIP OF THE LEASED PROPERTY. Lessee
acknowledges that the Leased Property is the property of Lessor and that
Lessee has only the right to the exclusive possession and use of the Leased
Property upon the terms and conditions of this Lease.
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5.2 PERSONAL PROPERTY; REMOVAL AND
REPLACEMENT OF PERSONAL PROPERTY.
5.2.1 LESSEE TO EQUIP FACILITY. If and to the
extent not included in the Leased Property, Lessee, at its sole cost
and expense, shall install, affix or assemble or place on the Leased
Property, sufficient items of Tangible Personal Property, to enable
the operation of the Facility in accordance with the requirements of
this Lease for the Primary Intended Use, and such Tangible
Personal Property and replacements thereof, shall be at all times
the property of Lessee.
5.2.2 SUFFICIENT PERSONAL PROPERTY.
Lessee shall maintain, during the entire Term, the Tangible
Personal Property in good order and repair and shall provide at its
expense all necessary replacements thereof, as may be necessary in
order to operate the Facility in compliance with all applicable
Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Primary
Intended Use and, if applicable, Other Permitted Uses. In addition,
Lessee shall furnish all necessary replacements of such obsolete
items of the Tangible Personal Property during the Term as are
necessary to enable the operation of the Facility in accordance with
the requirements of this Lease for the Primary Intended Use.
5.2.3 REMOVAL AND REPLACEMENT;
LESSOR'S OPTION TO PURCHASE. Lessee shall not remove
from the Leased Property any one or more items of Tangible
Personal Property (whether now owned or hereafter acquired), the
fair market value of which exceeds TWENTY-FIVE THOUSAND
DOLLARS ($25,000), individually or ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) collectively, if such
Tangible Personal Property is necessary to enable the operation of
the Facility in accordance with the requirements of this Lease for
the Primary Intended Use. At its sole cost and expense, Lessee
shall restore the Leased Property to the condition required by
Article 8, including repair of all damage to the Leased Property
caused by the removal of the Tangible Personal Property, whether
effected by Lessee or Lessor. Upon the expiration or earlier
termination of this Lease, Lessor shall have the option, which may
be exercised by giving notice thereof within twenty (20) days prior
to such expiration or termination, of (a) acquiring the Tangible
Personal Property (pursuant to a bill of sale and assignments of any
equipment leases, all in such forms as are reasonably satisfactory to
Lessor) upon payment of its fair market value or (b) requiring
Lessee to remove the Tangible Personal Property. If Lessor
exercises its option to purchase the Tangible Personal Property, the
price to be paid by Lessor shall be (i) reduced by the amount of all
payments due on any equipment leases or any other Permitted Prior
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Security Interests assumed by Lessor and (ii) applied to the Lease
Obligations before any payment to Lessee. If Lessor requires the
removal of the Tangible Personal Property, then all of the Tangible
Personal Property that is not removed by Lessee within ten (10)
days following such request shall be considered abandoned by
Lessee and may be appropriated, sold, destroyed or otherwise
disposed of by Lessor without first giving notice thereof to Lessee,
without any payment to Lessee and without any obligation to
account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 SECURITY FOR LESSEE'S OBLIGATIONS;
PERMITTED PRIOR SECURITY INTERESTS.
6.1.1 SECURITY. In order to secure the payment and
performance of all of the Obligations, Lessee agrees to provide or
cause there to be provided the following security:
(a) a first lien and exclusive security
interest in the Collateral, as more particularly provided for
in the Security Agreement;
(b) the Cash Collateral.
(c) a first lien and exclusive pledge and
assignment of, and security interest in, all Permits and
Contracts, as more particularly provided for in the
Collateral Assignment of Permits and Contracts; and
(d) in the event that, at any time during the
Term, Lessee holds the fee title to or a leasehold interest
in any real property and/or personal property which is
used as an integral part of the operation of the Leased
Property (but is not subject to this Lease), Lessee shall (i)
provide Lessor with prior notice of such acquisition and
(ii) shall take such actions and enter into such agreements
as Lessor shall reasonably request in order to grant Lessor
a first priority mortgage or other security interest in such
real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably
acceptable to Lessor. Without limiting the foregoing, it is
acknowledged and agreed that all revenues generated from
the operation of such additional real property shall be
included in the determination of Gross Revenues (subject
to such adjustments as agreed upon hereunder).
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Notwithstanding the foregoing, Lessor shall
subordinate its security interest in Receivables to a prior
security interest to secure a working capital line as
provided in Section 6.1.3.
6.1.2 PURCHASE-MONEY SECURITY
INTERESTS AND EQUIPMENT LEASES.
Notwithstanding any other provision hereof regarding the
creation of Liens, Lessee may (a) grant priority purchase
money security interests in items of Tangible Personal
Property, (b) lease Tangible Personal Property from
equipment lessors as long as: (i) the aggregate value of
such Tangible Personal Property shall not exceed TWO
HUNDRED THOUSAND DOLLARS ($200,000) or (ii)
(A) the secured party or equipment lessor enters into an
intercreditor agreement with, and satisfactory to, Lessor,
pursuant to which, without limiting the foregoing, (1)
Lessor shall be afforded the option of curing defaults and
the option of succeeding to the rights of Lessee and (2)
Lessor's security interest in Tangible Personal Property
shall be subordinated to the security interest granted to
such secured party, (B) all of the terms, conditions and
provisions of the financing, security interest or lease are
reasonably acceptable to Lessor, (C) Lessee provides a
true and complete copy, as executed, of each such
purchase money security agreement, financing document
and equipment lease and all amendments thereto and (D)
no such security interest, financing agreement or lease is
cross-defaulted or cross-collateralized with any other
obligation. Security interests granted by Lessee in full
compliance with the provisions of this Section 6.1.2 are
referred to as "Permitted Prior Security Interests".
6.1.3 RECEIVABLES FINANCING.
Notwithstanding any other provision hereof regarding the
creation of Liens, Lessee shall also be permitted to grant a
prior security interest in Receivables (with the Lessor
retaining a junior security interest therein) to an
institutional lender which is providing a working capital
line of credit (a "Working Capital Loan") for the exclusive
use of Guarantor, Lessee and Affiliates of Lessee as long
as such Lender enters into an intercreditor agreement with,
and satisfactory to, Lessor pursuant to which, without
limiting the foregoing, (1) Lessor shall be provided with
notice with respect to defaults under the Working Capital
Loan simultaneously with the delivery of such notice to
Lessee and shall be afforded the option of curing defaults
thereunder, (2) such lender's use of Instruments,
Documents, General Intangibles and Chattel Paper shall
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be limited to a license only for the purpose of collecting
Receivables and (3) the subordination of Lessor's interest
in the Receivables shall be of no force and effect and
Lessor's first priority security interest shall be reinstated
from and after the occurrence of an Event of Default if,
upon or following such Event of Default, Lessor either
exercises any of its remedies set forth in Article 16 or
Lessor notifies in writing such lender of Lessor's intention
to invoke its right to reinstate its first priority security
interest in the Receivables.
6.2 GUARANTY. All of the Lease Obligations shall be
unconditionally and irrevocably guaranteed by the Guarantor pursuant to
the Guaranty of Lease Obligations.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 CONDITION OF THE LEASED PROPERTY. Lessee
acknowledges that Lessee has caused the Leased Property to be sold to
Lessor and has concurrently entered into this Lease. Lessee acknowledges
receipt and delivery of possession of the Leased Property and that Lessee
has examined and otherwise has acquired knowledge of the condition of the
Leased Property prior to the execution and delivery of this Lease and has
found the same to be in good order and repair and satisfactory for its
purposes hereunder. Lessee is leasing the Leased Property "AS-IS" in its
present condition, provided, however, that nothing herein contained in this
Section 7.1 shall be deemed to modify the terms and provisions of the
Leasehold Improvement Agreement. Lessee waives any claim or action
against Lessor in respect of the condition of the Leased Property. LESSOR
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, EITHER AS
TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS
DESIGN OR CONDITION OR OTHERWISE, OR AS TO DEFECTS IN
THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT; IT BEING AGREED THAT ALL RISKS
RELATING TO THE DESIGN, CONDITION AND/OR USE OF THE
LEASED PROPERTY ARE TO BE BORNE BY LESSEE. LESSEE
HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF
THE LEASED PROPERTY, THE SUITABILITY OF THE LEASED
PROPERTY FOR LESSEE'S PURPOSES, AND THE COMPLIANCE OR
NON-COMPLIANCE OF THE LEASED PROPERTY WITH ALL
APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT NOT
LIMITED TO ENVIRONMENTAL LAWS AND ZONING OR LAND
USE LAWS.
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Upon the request of Lessor, at any time and from time to time
during the Term, Lessee shall engage one (1) or more independent
professional consultants, engineers and inspectors, qualified to do business
in the State and acceptable to Lessor to perform any environmental and/or
structural investigations and/or other inspections of the Leased Property and
the Facility as Lessor may reasonably request in order to detect (a) any
structural deficiencies in the Leased Improvements or the utilities servicing
the Leased Property or (b) the presence of any condition that (i) may be
harmful or present a health hazard to the residents and other occupants of
the Leased Property or (ii) constitutes a breach or violation of any of the
Lease Documents. In the event that Lessor reasonably determines that the
results of such testing or inspections are unsatisfactory, within thirty (30)
days of notice from Lessor, Lessee shall commence such appropriate
remedial actions as may be reasonably requested by Lessor to correct such
unsatisfactory conditions and, thereafter, shall diligently and continuously
prosecute such remedial actions to completion within the time limits
prescribed in this Lease or the other Lease Documents.
7.2 USE OF THE LEASED PROPERTY; COMPLIANCE;
MANAGEMENT.
7.2.1 OBLIGATION TO OPERATE. Lessee shall
continuously operate the Leased Property in accordance with the
Primary Intended Use and the Other Permitted Uses and maintain
its qualifications for licensure and accreditation as required by all
applicable Legal Requirements.
7.2.2 PERMITTED USES. During the entire Term,
Lessee shall use the Leased Property, or permit the Leased
Property to be used, only for the Primary Intended Use and, if
applicable, the Other Permitted Uses. Lessee shall not use the
Leased Property or permit the Leased Property to be used for any
other use without the prior written consent of Lessor, which
consent may be withheld in Lessor's sole and absolute discretion.
7.2.3 COMPLIANCE WITH INSURANCE
REQUIREMENTS. No use shall be made or permitted to be made
of the Leased Property and no acts shall be done which will cause
the cancellation of any insurance policy covering the Leased
Property, nor shall Lessee, any Manager or any other Person sell or
otherwise provide to residents, other occupants or invitees therein,
or permit to be kept, used or sold in or about the Leased Property,
any article which may be prohibited by any of the Insurance
Requirements. Furthermore, Lessee shall, at its sole cost and
expense, take whatever other actions that may be necessary to
comply with and to insure that the Leased Property complies with
all Insurance Requirements.
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7.2.4 NO WASTE. Lessee shall not commit or suffer
to be committed any waste on, in or under the Leased Property, nor
shall Lessee cause or permit any nuisance thereon.
7.2.5 NO IMPAIRMENT. Lessee shall neither permit
nor knowingly suffer the Leased Property to be used in such a
manner as (a) might reasonably tend to impair Lessor's title thereto
or (b) may reasonably make possible a claim or claims of adverse
usage or adverse possession by the public or of implied dedication
of the Leased Property.
7.2.6 NO LIENS. Except as permitted pursuant to
Section 6.1.2, Lessee shall not permit or suffer any Lien to exist on
the Tangible Personal Property and shall in no event cause, permit
or suffer any Lien to exist with respect to the Leased Property other
than as set forth in Section 11.5.2.
7.3 COMPLIANCE WITH LEGAL REQUIREMENTS.
Lessee covenants and agrees that the Leased Property shall not be used for
any unlawful purpose and that Lessee, at its sole cost and expense, will
promptly (a) comply with, and shall cause every other member of the
Leasing Group to comply with, all applicable Legal Requirements relating
to the use, operation, maintenance, repair and restoration of the Leased
Property, whether or not compliance therewith shall require structural
change in any of the Leased Property or interfere with the use and
enjoyment of the Leased Property and (b) procure, maintain and comply
with (in all material respects), and shall cause every other member of the
Leasing Group to procure, maintain and comply with (in all material
respects), all Contracts and Permits necessary or desirable in order to
operate the Leased Property for the Primary Intended Use and/or, if
applicable, Other Permitted Uses, and for compliance with all of the terms
and conditions of this Lease. Unless a Lease Default has occurred or any
event has occurred which, with the passage of time and/or the giving of
notice would constitute a Lease Default, Lessee may, upon prior written
notice to Lessor, contest any Legal Requirement to the extent permitted by,
and in accordance with, Article 15 below.
7.4 MANAGEMENT AGREEMENTS. Throughout the
Term, Lessee shall not enter into any Management Agreement without the
prior written approval of Lessor, in each instance, which approval shall not
be unreasonably withheld. Lessee shall not, without the prior written
approval of Lessor, in each instance, which approval shall not be
unreasonably withheld, agree to or allow: (a) any change in the Manager or
change in the ownership or control of the Manager, (b) the termination of
any Management Agreement (other than in connection with the exercise by
Lessee of any of its remedies under the Management Agreement as a result
of any default by the Manager thereunder), (c) any assignment by the
Manager of its interest under the Management Agreement or (d) any
material amendment of the Management Agreement. In addition, Lessee
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shall, at its sole cost and expense, promptly and fully perform or cause to be
performed every covenant, condition, promise and obligation of the
licensed operator of the Leased Property under any Management
Agreement.
Each Management Agreement shall provide that Lessor shall be
provided notice of any defaults thereunder and, at Lessor's option, an
opportunity to cure such default. Lessee shall furnish to Lessor, within
three (3) days after receipt thereof, or after the mailing or service thereof by
Lessee, as the case may be, a copy of each notice of default which Lessee
shall give to, or receive from any Person, based upon the occurrence, or
alleged occurrence, of any default in the performance of any covenant,
condition, promise or obligation under any Management Agreement.
Whenever and as often as Lessee shall fail to perform, promptly
and fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under
and pursuant to any Management Agreement, Lessor, or a lawfully
appointed receiver of the Leased Property, may, at their respective options
(and without any obligation to do so), after five (5) days' prior notice to
Lessee (except in the case of an emergency) enter upon the Leased Property
and perform, or cause to be performed, such work, labor, services, acts or
things, and take such other steps and do such other acts as they may deem
advisable, to cure such defaulted covenant, condition, promise or
obligation, and any amount so paid or advanced by Lessor or such receiver
and all costs and expenses reasonably incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court costs),
shall be a demand obligation of Lessee to Lessor or such receiver, and,
Lessor shall have the same rights and remedies for failure to pay such costs
on demand as for Lessee's failure to pay any other sums due hereunder.
7.5 PARTICIPATION IN THIRD PARTY PAYOR
PROGRAMS. No provision of this Lease shall be deemed to require
Lessee to commence participation in any Third Party Payor Program or any
Managed Care Plan.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 MAINTENANCE AND REPAIR.
8.1.1 LESSEE'S RESPONSIBILITY. Lessee, at its sole
cost and expense, shall keep the Leased Property (with respect to
the Project, to the extent consistent with the stage of construction
of the Project) and all private roadways, sidewalks and curbs
appurtenant thereto which are under Lessee's control in good order
and repair (whether or not the need for such repairs occurs as a
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result of Lessee's use, any prior use, the elements or the age of the
Leased Property or such private roadways, sidewalks and curbs or
any other cause whatsoever other than Lessor's gross negligence or
willful misconduct) and, subject to Articles 9, 13 and 14, Lessee
shall promptly, with the exercise of all reasonable efforts,
undertake and diligently complete all necessary and appropriate
repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or
exterior, structural or non-structural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition
(concealed or otherwise) existing prior to the commencement of, or
during, the Term and thereafter until Lessee surrenders the Leased
Property in the manner required by this Lease. In addition, Lessee,
at its sole cost and expense, shall make all repairs, modifications,
replacements, renovations and alterations of the Leased Property
(and such private roadways, sidewalks and curbs) that are
necessary to comply with all applicable Legal Requirements and
Insurance Requirements so that the Leased Property can be legally
operated for the Primary Intended Use and, if applicable, the Other
Permitted Uses. All repairs, replacements, renovations, alterations,
and modifications required by the terms of this Section 8.1 shall be
(a) performed in a good and workmanlike manner in compliance
with all applicable Legal Requirements, Insurance Requirements
and the requirements of Article 9 hereof, using new materials well
suited for their intended purpose and (b) consistent with the
operation of the Facility in a reputable manner. Lessee will not
take or omit to take any action the taking or omission of which
might materially impair the value or the usefulness of the Leased
Property for the Primary Intended Use and, if applicable, the Other
Permitted Uses. To the extent that any of the repairs,
replacements, renovations, alterations or modifications required by
the terms of this Section 8.1 constitute Material Structural Work,
Lessee shall obtain Lessor's prior written approval (which approval
shall not be unreasonably withheld) of the specific repairs,
replacements, renovations, alterations and modifications to be
performed by or on behalf of Lessee in connection with such
Material Structural Work. Notwithstanding the foregoing, in the
event of a bona fide emergency during which Lessee is unable to
contact the appropriate representatives of Lessor, Lessee may
commence such Material Structural Work as may be necessary in
order to address such emergency without Lessor's prior approval,
provided, however, that Lessee shall immediately thereafter advise
Lessor of such emergency and the nature and scope of the Material
Structural Work commenced and shall obtain Lessor's approval of
the remaining Material Structural Work to be completed.
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8.1.2 NO LESSOR OBLIGATION. Lessor shall not,
under any circumstances, be required to build or rebuild any
improvements on the Leased Property (or any private roadways,
sidewalks or curbs appurtenant thereto), or to make any repairs,
replacements, renovations, alterations, restorations, modifications,
or renewals of any nature or description to the Leased Property (or
any private roadways, sidewalks or curbs appurtenant thereto),
whether ordinary or extraordinary, structural or non-structural,
foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto in connection with this Lease, or to maintain
the Leased Property (or any private roadways, sidewalks or curbs
appurtenant thereto) in any way.
8.1.3 LESSEE MAY NOT OBLIGATE LESSOR.
Nothing contained herein nor any action or inaction by Lessor shall
be construed as (a) constituting the consent or request of Lessor,
express or implied, to any contractor, subcontractor, laborer,
materialman or vendor to or for the performance of any labor or
services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) except as otherwise
provided in this Lease, giving Lessee any right, power or
permission to contract for or permit the performance of any labor
or services or the furnishing of any materials or other property in
such fashion as would permit the making of any claim against
Lessor for the payment thereof or to make any agreement that may
create, or in any way be the basis for, any right, title or interest in,
or Lien or claim against, the estate of Lessor in the Leased
Property. Without limiting the generality of the foregoing and
except as otherwise provided in this Lease, the right title and
interest of Lessor in and to the Leased Property shall not be subject
to liens or encumbrances for the performance of any labor or
services or the furnishing of any materials or other property
furnished to the Leased Property at or by the request of Lessee or
any other Person other than Lessor. Lessee shall notify any
contractor, subcontractor, laborer, materialman or vendor
providing any labor, services or materials to the Leased Property of
this provision.
8.2 ENCROACHMENTS; TITLE RESTRICTIONS. If any
of the Leased Improvements shall, at any time, encroach upon any property,
street or right-of-way adjacent to the Leased Property, or shall violate the
agreements or conditions contained in any lawful restrictive covenant or
other Lien now or hereafter affecting the Leased Property, or shall impair
the rights of others under any easement, right-of-way or other Lien to which
the Leased Property is now or hereafter subject, then promptly upon the
request of Lessor, Lessee shall, at its sole cost and expense, subject to
Lessee's right to contest the existence of any encroachment, violation or
impairment as set forth in Article 15, (a) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each such
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encroachment, violation or impairment or (b) make such alterations to the
Leased Improvements, and take such other actions, as Lessee in the good
faith exercise of its judgment deems reasonably practicable, to remove such
encroachment, or to end such violation or impairment, including, if
necessary, the alteration of any of the Leased Improvements.
Notwithstanding the foregoing, Lessee shall, in any event, take all such
actions as may be reasonably necessary in order to be able to continue the
operation of the Leased Improvements for the Primary Intended Use and, if
applicable, the Other Permitted Uses substantially in the manner and to the
extent that the Leased Improvements were operated prior to the assertion of
such encroachment, violation or impairment and nothing contained herein
shall limit Lessee's obligations to operate the Leased Property in accordance
with its Primary Intended Use. Any such alteration made pursuant to the
terms of this Section 8.2 shall be completed in conformity with the
applicable requirements of Section 8.1 and Article 9. Lessee's obligations
under this Section 8.2 shall be in addition to and shall in no way discharge
or diminish any obligation of any insurer under any policy of title or other
insurance. If and to the extent any obligation of an insurer under any policy
of title or other insurance exists and Lessee has incurred costs and expenses
with respect to the subject matter of such obligation and provided Lessor is
reasonably satisfied with the resolution of such subject matter, at the request
of Lessee, Lessor, at Lessor's option, shall either assign to Lessee any right
it may have to proceed against such insurer or remit to Lessee any amount
which Lessor recovers from such insurer, minus any amounts needed to
reimburse Lessor for its reasonable costs and expenses, for the costs and
expenses incurred by Lessee in reconstructing the Facility or taking such
other action reasonably required in order to create a viable and functional
Facility under all of the circumstances.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 LESSOR'S APPROVAL. Without the prior written
consent of Lessor, which consent may be withheld by Lessor, in its sole and
absolute discretion, Lessee shall make no Capital Addition or Material
Structural Work to the Leased Property (including, without limitation, any
change in the size or unit capacity of the Facility), except as may be
otherwise expressly required pursuant to Article 8.
9.2 GENERAL PROVISIONS AS TO CAPITAL
ADDITIONS AND CERTAIN MATERIAL STRUCTURAL WORK. As
to any Capital Addition or Material Structural Work (other than such
Material Structural Work that is required to be performed pursuant to the
terms of Section 8.1) for which Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in Lessor's written approval.
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9.2.1 NO LIENS. Lessee shall not be permitted to
create any Lien on the Leased Property in connection with any
Capital Addition or Material Structural Work (including, without
limitation, Liens relating to the provision of financing for a Capital
Addition) other than Liens expressly permitted by the terms and
provisions of this Lease Agreement.
9.2.2 LESSEE'S PROPOSAL REGARDING
CAPITAL ADDITIONS AND MATERIAL STRUCTURAL
WORK. If Lessee desires to undertake any Capital Addition or
Material Structural Work, Lessee shall submit to Lessor in writing
a proposal setting forth in reasonable detail any proposed Capital
Addition or Material Structural Work and shall provide to Lessor
copies of, or information regarding, the applicable plans and
specifications, Permits, Contracts and any other materials
concerning the proposed Capital Addition or Material Structural
Work, as the case may be, as Lessor may reasonably request.
Without limiting the generality of the foregoing, each such
proposal pertaining to any Capital Addition shall indicate the
approximate projected cost of constructing such Capital Addition,
the use or uses to which it will be put and a good faith estimate of
the change, if any, in the Gross Revenues that Lessee anticipates
will result from the construction of such Capital Addition.
9.2.3 LESSOR'S OPTIONS REGARDING CAPITAL
ADDITIONS AND MATERIAL STRUCTURAL WORK. Lessor
shall have the options of: (a) denying permission for the
construction of the applicable Capital Addition or Material
Structural Work, (b) offering to finance the construction of the
Capital Addition pursuant to Section 9.3 on such terms as may be
specified by Lessor, including the terms of any amendment to this
Lease, including, without limitation, an increase in Base Rent
based on Lessor's then existing terms and prevailing conditions to
compensate Lessor for the additional funds advanced by it, (c)
allowing Lessee to separately pay for or finance the construction of
the Capital Addition, subject to compliance with the terms and
conditions of Section 9.2.1, Section 9.4, Section 13.1.3, all
applicable Legal Requirements, all other requirements of this Lease
and to such other terms and conditions as Lessor may in its
discretion reasonably impose or (d) any combination of the
foregoing. Unless Lessor notifies Lessee in writing of a contrary
election within thirty (30) days of Lessee's request or unless Lessor
is required to consent thereto pursuant to this Section 9.2.3, Lessor
shall be deemed to have denied the request for the Capital Addition
or Material Structural Work. In the event and to the extent Lessor
has granted permission for the construction of the applicable
Capital Addition or Material Structural Work and (x) Lessor has
not offered to finance the construction of the same or (y) Lessee
declines to accept the financing offered by Lessor, Lessee may
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separately finance such construction, subject to the limitation on
Liens set forth in Section 9.2.1, or pay for such construction itself.
In the event Lessee declines to accept the financing offered by
Lessor or if Lessor has not offered such financing to Lessee and
proposes to obtaining financing from another Person, Lessee shall
inform Lessor in writing of the terms and conditions of such
financing and shall provide Lessor with a copy of a commitment
letter evidencing the same and Lessor may, by giving notice
thereof to Lessee within twenty (20) days following being so
informed, elect to provide financing to Lessee at the effective rate
of interest as such financing. Lessor shall not unreasonably
withhold its permission for the construction of Material Structural
Work which is necessary to protect the safety or welfare of
residents of the Facility.
9.2.4 LESSOR MAY ELECT TO FINANCE
CAPITAL ADDITIONS. If Lessor elects to offer financing for the
proposed Capital Addition and Lessee accepts Lessor's financing
proposal, the provisions of Section 9.3 shall apply.
9.3 CAPITAL ADDITIONS FINANCED BY LESSOR.
9.3.1 ADVANCES. All advances of funds for any
such financing shall be made in accordance with Lessor's then
standard construction loan requirements and procedures, which
may include, without limitation, the requirements and procedures
applicable to Work under Sections 13.1.3 and 13.1.4.
9.3.2 LESSOR'S GENERAL REQUIREMENTS. If
Lessor agrees to finance the proposed Capital Addition and Lessee
accepts Lessor's proposal therefor, in addition to all other items
which Lessor or any applicable Financing Party may reasonably
require, Lessee shall provide to Lessor the following:
(a) prior to any advance of funds, (i) any
information, opinions, certificates, Permits or documents
reasonably requested by Lessor or any applicable
Financing Party which are necessary to confirm that
Lessee is reasonably expected to be able to use the Capital
Addition upon completion thereof in accordance with the
Primary Intended Use and/or, if applicable, the Other
Permitted Uses and (ii) evidence satisfactory to Lessor and
any applicable Financing Party that all Permits required
for the construction and use of the Capital Addition have
been received, are in full force and effect and are not
subject to appeal, except only for those Permits which
cannot in the normal course be obtained prior to
commencement or completion of the construction;
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provided, that Lessor and any applicable Financing Party
are furnished with reasonable evidence that the same is
reasonably expected to be available in the normal course
of business without unusual condition;
(b) prior to any advance of funds, an
Officer's Certificate and, if requested, a certificate from
Lessee's architect, setting forth in reasonable detail the
projected (or actual, if available) Capital Addition Cost;
(c) bills of sale, instruments of transfer and
other documents required by Lessor so as to vest title to
the Capital Addition in Lessor free and clear of all Liens
(except to the extent a Lien is being duly contested in
accordance with the terms and provisions of this Lease),
and amendments to this Lease and any recorded notice or
memorandum thereof, duly executed and acknowledged,
in form and substance reasonably satisfactory to Lessor,
providing for any changes required by Lessor including,
without limitation, changes in the Base Rent and the legal
description of the Land;
(d) upon payment therefor, a deed
conveying to Lessor title to any land acquired for the
purpose of constructing the Capital Addition ("Additional
Land") free and clear of any Liens except those approved
by Lessor;
(e) upon completion of the Capital
Addition, a final as-built survey thereof reasonably
satisfactory to Lessor, if required by Lessor;
(f) during and following the advance of
funds and the completion of the Capital Addition,
endorsements to any outstanding policy of title insurance
covering the Leased Property satisfactory in form and
substance to Lessor (i) updating the same without any
additional exception except as may be reasonably
permitted by Lessor and (ii) increasing the coverage
thereof by an amount equal to the Fair Market Value of
the Capital Addition and/or increasing the coverage
thereof by an amount equal to the Fair Market Value of
the Additional Land and including the Additional Land in
the premises covered by such title insurance policy;
(g) simultaneous with the initial advance of
funds, if appropriate, (i) an owner's policy of title
insurance insuring fee simple title to any Additional Land
conveyed to Lessor pursuant to subparagraph (d) free and
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clear of all Liens except those approved by Lessor and (ii)
an owner's policy of title insurance reasonably satisfactory
in form and substance to Lessor and a lender's policy of
title insurance reasonably satisfactory in form and
substance to any applicable Financing Party;
(h) following the completion of the Capital
Addition, if reasonably deemed necessary by Lessor, an
appraisal of the Leased Property by an M.A.I. appraiser
acceptable to Lessor, which states that the Fair Market
Value of the Leased Property upon completion of the
Capital Addition exceeds the Fair Market Value of the
Leased Property prior to the commencement of such
Capital Addition by an amount not less than one hundred
twenty-five percent (125%) of the Capital Addition Cost;
and
(i) during or following the advancement of
funds, prints of architectural and engineering drawings
relating to the Capital Addition and such other materials,
including, without limitation, the modifications to
outstanding policies of title insurance contemplated by
subsection (f) above, opinions of counsel, appraisals,
surveys, certified copies of duly adopted resolutions of the
board of directors of Lessee authorizing the execution and
delivery of the lease amendment and any other documents
and instruments as may be reasonably required by Lessor
and any applicable Financing Party.
9.3.3 PAYMENT OF COSTS. By virtue of making a
request to finance a Capital Addition, whether or not such
financing is actually consummated, Lessee shall be deemed to have
agreed to pay, upon demand, all costs and expenses reasonably
incurred by Lessor and any Person participating with Lessor in any
way in the financing of the Capital Addition Cost, including, but
not limited to (a) fees and expenses of their respective attorneys,
(b) all photocopying expenses, if any, (c) the amount of any filing,
registration and recording taxes and fees, (d) documentary stamp
taxes and intangible taxes (e) title insurance charges and appraisal
fees.
9.4 GENERAL LIMITATIONS. Without in any way limiting
Lessor's options with respect to proposed Capital Additions or Material
Structural Work: (a) no Capital Addition or Material Structural Work shall
be completed that could, upon completion, significantly alter the character
or purpose or detract from the value or operating efficiency of the Leased
Property, or significantly impair the revenue-producing capability of the
Leased Property, or adversely affect the ability of Lessee to comply with
the terms of this Lease; (b) no Capital Addition or Material Structural Work
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shall be completed which would tie in or connect any Leased Improvements
on the Leased Property with any other improvements on property adjacent
to the Leased Property (and not part of the Land covered by this Lease)
including, without limitation, tie-ins of buildings or other structures or
utilities, unless Lessee shall have obtained the prior written approval of
Lessor, which approval may be withheld in Lessor's sole and absolute
discretion and (c) all proposed Capital Additions and Material Structural
Work shall be architecturally integrated and consistent with the Leased
Property.
9.5 NON-CAPITAL ADDITIONS. Lessee shall have the
obligation and right to make repairs, replacements and alterations which are
not Capital Additions as required by the other Sections of this Lease, but in
so doing, Lessee shall always comply with and satisfy the conditions of
Section 9.4. Lessee shall have the right, from time to time, to make
additions, modifications or improvements to the Leased Property which do
not constitute Capital Additions or Material Structural Work as it may deem
to be desirable or necessary for its uses and purposes, subject to the same
limits and conditions imposed under Section 9.4. The cost of any such
repair, replacement, alteration, addition, modification or improvement shall
be paid by Lessee and the results thereof shall be included under the terms
of this Lease and become a part of the Leased Property, without payment
therefor by Lessor at any time. Notwithstanding the foregoing, all such
additions, modifications and improvements which affect the structure of
any of the Leased Improvements, or which involve the expenditure of more
than FIFTY THOUSAND DOLLARS ($50,000.00), shall be undertaken
only upon compliance with the provisions of Section 13.1.3, all applicable
Legal Requirements and all other applicable requirements of this Lease;
provided, however, that in the event of a bona fide emergency during which
Lessee is unable to contact the appropriate representatives of Lessor, Lessee
may commence such additions, modifications and improvements as may be
necessary in order to address such emergency without Lessor's prior
approval, as long as Lessee immediately thereafter advises Lessor of such
emergency and the nature and scope of the additions, modifications and
improvements performed and obtains Lessor's approval of the remaining
work to be completed. Any such addition, modification and improvement
which affects the structure of any of the Leased Improvements which is not
a Capital Addition or Material Structural Work shall be exempt from the
requirements of Section 9.2 hereof.
9.6 COMPENSATION TO LESSEE FOR CAPITAL
ADDITIONS PAID FOR OR FINANCED BY LESSEE. Upon the
expiration or earlier termination of this Lease, except by reason of the
default by Lessee hereunder, Lessor shall compensate Lessee for all Capital
Additions paid for or financed by Lessee in any of the following ways,
determined in the sole discretion of Lessor:
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(a) By purchasing all Capital Additions paid for or financed
by Lessee from Lessee for cash in the amount of the Fair Market Added
Value (determined as of the date of such purchase) of all such Capital
Additions paid for or financed by Lessee; or
(b) By purchasing such Capital Addition from Lessee by
delivering to Lessee Lessor's purchase money promissory note in the
amount of said Fair Market Added Value, due and payable no later than
eighteen (18) months after the date of expiration or other termination of this
Lease, bearing interest at a rate equal to one hundred ten percent (110%) of
the applicable federal rate (determined at the time of execution of such note
pursuant to Section 1274 of the Code or any successor section thereto),
compounded semiannually, or, if no such rate exists, or such rate is in
excess of that permitted under applicable law, at the Prime Rate, which
interest shall be payable monthly, and which note shall be secured by a
mortgage on the Leased Property, subject to all Liens on the Leased
Property at the time of such purchase; or
(c) By Lessor assigning to Lessee under appropriate written
instruments the right to receive an amount equal to the Added Value
Percentage (determined as of the expiration of earlier termination of this
Lease) from all rent and other consideration receivable by Lessor under any
re-letting or other disposition of the Leased Property, after deducting all
costs and expenses incurred by Lessor in connection with such re-letting or
other disposition of the leased Property and all costs and expenses of
operating and maintaining the Leased Property during any such new lease
which are not borne by the tenant thereunder. The provisions of this
Subparagraph (c) shall remain in effect until the sale or other final
disposition of the Leased Property in which event Lessor shall pay to
Lessee the outstanding balance of the Fair Market Added Value in
accordance with Subparagraph (a), (b), or (d) of this Section 9.6, after
deducting any amounts received by Lessee under this Subparagraph (c); or
(d) Such other arrangement regarding such compensation as
shall be mutually acceptable to Lessor and Lessee.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 REPRESENTATIONS AND WARRANTIES. Lessee
hereby represents and warrants to, and covenants and agrees with, Lessor
that:
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10.1.1 EXISTENCE; POWER; QUALIFICATION.
Lessee is a corporation duly organized, validly existing
and in good standing under the laws of the State of Washington.
Lessee has all requisite corporate power to own and operate its
properties and to carry on its business as now conducted and is
duly qualified to transact business and is in good standing in each
jurisdiction where such qualification is necessary or desirable in
order to carry out its business as presently conducted. As of the
date of this Agreement, Lessee does not have any Subsidiaries and
Lessee is not a member of any partnership or joint venture.
Attached hereto as EXHIBIT C is a true and correct list of all of the
shareholders of Lessee and their respective ownership interests in
Lessee;
10.1.2 VALID AND BINDING. Lessee is duly
authorized to make and enter into all of the Lease Documents to
which Lessee is a party and to carry out the transactions
contemplated therein. All of the Lease Documents to which Lessee
is a party have been duly executed and delivered by Lessee, and
each is a legal, valid and binding obligation of Lessee, enforceable
in accordance with its terms.
10.1.3 SINGLE PURPOSE. Lessee is, and during the
entire time that this Lease remains in force and effect shall be,
engaged in no business, trade or activity other than the operation
and development of the Leased Property for the Primary Intended
Use and such other activities in which Lessee may be permitted to
engage by the provisions of Meditrust/Emeritus Transaction
Documents. The fiscal year of Lessee, and the Guarantor is the
Fiscal Year.
10.1.4 NO VIOLATION. The execution, delivery and
performance of the Lease Documents by the members of the
Leasing Group and the consummation by the members of the
Leasing Group of the transactions thereby contemplated shall not
result in any breach of, or constitute a default under, or result in the
acceleration of, or constitute an event which, with the giving of
notice or the passage of time, or both, could result in default or
acceleration of any obligation of any such member of the Leasing
Group under any of the Permits or Contracts or any other contract,
mortgage, lien, lease, agreement, instrument, franchise, arbitration
award, judgment, decree, bank loan or credit agreement, trust
indenture or other instrument to which any member of the Leasing
Group is a party or by which any member of the Leasing Group
may be bound or affected and do not violate or contravene any
Legal Requirement.
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10.1.5 CONSENTS AND APPROVALS. Except as
already obtained or filed or, with respect to the Project, reasonably
expected to be obtained in the ordinary course of business prior to
or upon the Completion of the Project, as the case may be, no
consent or approval or other authorization of, or exemption by, or
declaration or filing with, any Person and no waiver of any right by
any Person is required to authorize or permit, or is otherwise
required as a condition of the execution, delivery and performance
of its obligations under the Lease Documents by any member of
the Leasing Group or as a condition to the validity (assuming the
due authorization, execution and delivery by Lessor of the Lease
Documents to which it is a party) and the first priority of any Liens
granted under the Lease Documents, except the filing of the
Financing Statements.
10.1.6 NO LIENS OR INSOLVENCY
PROCEEDINGS. Each member of the Leasing Group in existence
as of the date hereof is financially solvent and there are no actions,
suits, investigations or proceedings including, without limitation,
outstanding federal or state tax liens, garnishments or insolvency or
bankruptcy proceedings, pending or, to the best of Lessee's
knowledge and belief, threatened:
(a) against or affecting any member of the
Leasing Group, which if adversely resolved to such
member of the Leasing Group, would materially adversely
affect the ability of any of the foregoing to perform their
respective obligations under the Lease Documents;
(b) against or affecting the Leased Property
or the ownership, construction, development,
maintenance, management, repair, use, occupancy,
possession or operation thereof; or
(c) which may involve or affect the
validity, priority or enforceability of any of the Lease
Documents, at law or in equity, or before or by any
arbitrator or Governmental Authority.
10.1.7 INTENTIONALLY DELETED.
10.1.8 COMMERCIAL ACTS. Lessee's performance
of and compliance with the obligations and conditions set forth
herein and in the other Lease Documents will constitute
commercial acts done and performed for commercial purposes.
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10.1.9 ADEQUATE CAPITAL, NOT INSOLVENT.
After giving effect to the consummation of the transactions
contemplated by the Lease Documents, each member of the
Leasing Group:
(a) will be able to pay its debts as they
become due;
(b) will have sufficient funds or available
capital to carry on its business as now conducted or as
contemplated to be conducted (in accordance with the
terms of the Lease Documents); and
(c) will not be rendered insolvent as
determined by applicable law.
10.1.10 NOT DELINQUENT. Except as permitted
under Section 11.3.8, no member of the Leasing Group which
exists as of the date hereof is delinquent or claimed to be
delinquent under any obligation for the payment of borrowed
money.
10.1.11 NO AFFILIATE DEBT. Lessee has not created,
incurred, guaranteed, endorsed, assumed or suffered to exist any
liability (whether direct or contingent) for borrowed money from
the Guarantor (or any of its Affiliates) or any Affiliate of Lessee
which has not been fully subordinated to the Lease Obligations.
10.1.12 TAXES CURRENT. Each member of the
Leasing Group which exists as of the date hereof has filed all
federal, state and local tax returns which are required to be filed as
to which extensions are not currently in effect and has paid all
taxes, assessments, impositions, fees and other governmental
charges (including interest and penalties) which have become due
pursuant to such returns or pursuant to any assessment or notice of
tax claim or deficiency received by each such member of the
Leasing Group. No tax liability has been asserted by the Internal
Revenue Service against any member of the Leasing Group or any
other federal, state or local taxing authority for taxes, assessments,
impositions, fees or other governmental charges (including interest
or penalties thereon) in excess of those already paid.
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10.1.13 FINANCIALS COMPLETE AND ACCURATE.
The financial statements of each member of the Leasing Group given to
Lessor in connection with the execution and delivery of the Lease
Documents were true, complete and accurate, in all material respects, and
fairly presented the financial condition of each such member of the Leasing
Group as of the date thereof and for the periods covered thereby, having
been prepared in accordance with GAAP and such financial statements
disclosed all liabilities, including, without limitation, contingent
liabilities, of each such member of the Leasing Group as of the date thereof.
There has been no material adverse change since such date with respect to the
Net Worth of any such member of the Leasing Group or with respect to any
other matters contained in such financial statements, nor have any
additional material liabilities, including, without limitation, contingent
liabilities, of any such member of the Leasing Group arisen or been
incurred or asserted since such date except as otherwise disclosed to Lessor.
The projections heretofore delivered to Lessor continue to be reasonable
(with respect to the material assumptions upon which such projections are
based) and Lessee reasonably anticipates based on information currently
available to it after due inquiry the results projected therein will be
achieved, there having been (a) no material adverse change in the business,
assets or condition, financial or otherwise of any such member of the
Leasing Group or the Leased Property and (b) no material depletion of the
cash or decrease in working capital of any such member of the Leasing
Group.
10.1.14 PENDING ACTIONS, NOTICES AND
REPORTS.
(a) There is no action or investigation pending or, to
the best knowledge and belief of Lessee, threatened, anticipated or
contemplated (nor, to the knowledge of Lessee, is there any
reasonable basis therefor) against or affecting the Leased Property
or any member of the Leasing Group (or any Affiliate thereof)
before any Governmental Authority which could prevent or hinder
the consummation of the transactions contemplated hereby or call
into question the validity of any of the Lease Documents or any
action taken or to be taken in connection with the transactions
contemplated thereunder or which in any single case or in the
aggregate might result in any material adverse change in the
business, prospects, condition, affairs of any member of the
Leasing Group or the Leased Property (including, without
limitation, any action to revoke, withdraw or suspend any Permit
necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Use and any action to
transfer or relocate any such Permit to a location other than the
Leased Property) or any material impairment of the right or ability
of any member of the Leasing Group to carry on its operations as
presently conducted or, with respect to the Project, proposed upon
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Completion of the Project to be conducted with respect to the
Leased Property or with respect to its obligations under the Lease
Documents.
(b) Neither the Facility nor any member of the
Leasing Group has received any notice of any claim, requirement
or demand of any Governmental Authority, Accreditation Body, if
any, Third Party Payor or any insurance body having or claiming
any licensing, certifying, supervising, evaluating or accrediting
authority over the Leased Property to rework or redesign the
Leased Property, its professional staff or its professional services,
procedures or practices in any material respect or to provide
additional furniture, fixtures, equipment or inventory or to
otherwise take action so as to make the Leased Property conform
to or comply with any Legal Requirement;
(c) The most recent utilization reviews, if any,
relating to the Leased Property by all applicable Third Party
Payors, Accreditation Bodies and Governmental Authorities and
all applicable reviews or scrutiny by any managed care or
utilization review companies, if any, have not had a material
adverse impact on the utilization of units or programs at any of the
Leased Property. No claims or assertions have been made in any
utilization review that any of the practices or procedures used at
the Leased Property are improper or inappropriate other than such
claims or assertions which singly and in the aggregate will not
have a material adverse impact on the Leased Property; and
(d) Lessee has delivered or caused to be delivered
to Lessor true and correct copies of all licenses, inspection surveys
and accreditation reviews, if any, relating to the Leased Property,
issued by any Governmental Authority during the most recent
licensing period, together with all plans of correction relating
thereto.
10.1.15 COMPLIANCE WITH LEGAL AND OTHER
REQUIREMENTS.
(a) Lessee and the Leased Property (with respect to
the Project, to the extent consistent with the stage of construction
of the Project) and the ownership, construction, development,
maintenance, management, repair, use, occupancy, possession and
operation thereof comply with all applicable Legal Requirements
and there is no claim of any violation thereof known to Lessee.
Without limiting the foregoing, Lessee has obtained all Permits
that are necessary or desirable to operate the Leased Property in
accordance with its Primary Intended Use or, with respect to the
Project, reasonably expects to obtain such Permits prior to, or
upon, the Completion of the Project.
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(b) Except as previously delivered to Lessor
pursuant to Section 10.1.14(d) hereof, there are no outstanding
notices of deficiencies, notices of proposed action or orders of any
kind relating to the Leased Property, if any, issued by any
Governmental Authority requiring conformity to any of the
applicable Legal Requirements.
10.1.16 NO ACTION BY GOVERNMENTAL
AUTHORITY OR ACCREDITATION BODY. There is no action
pending or, to the best knowledge and belief of Lessee,
recommended, by any Governmental Authority to revoke, repeal,
cancel, modify, withdraw or suspend any Permit or Contract or to
take any other action of any other type which could have a
material adverse effect on the Leased Property.
10.1.17 PROPERTY MATTERS.
(a) The Leased Property is free and clear of
agreements, covenants and Liens, except those agreements,
covenants and Liens to which this Lease is expressly subject,
whether presently existing, as are listed on EXHIBIT B or were
listed on the UCC lien search results delivered to Lessor at or prior
to the execution and delivery of this Lease (and were not required
to be terminated as a condition of the execution and delivery of
this Lease), or which may hereafter be created in accordance with
the terms hereof (collectively referred to herein as the "Permitted
Encumbrances"); and Lessee shall warrant and defend Lessor's
title to the Leased Property against any and all claims and demands
of every kind and nature whatsoever;
(b) There is no Condemnation or similar proceeding
pending with respect to or affecting the Leased Property, and
Lessee is not aware, to the best of Lessee's knowledge and belief,
that any such proceeding is contemplated;
(c) No part of the Collateral or the Leased Property
has been damaged by any fire or other casualty. The Leased
Improvements (except the Project prior to completion of the
Project) are in good operating condition and repair, ordinary wear
and tear excepted, free from known defects in construction or
design;
(d) None of the Permitted Encumbrances has or is
likely to have a material adverse impact upon, nor interfere with or
impede, in any material respect, the operation of the Leased
Property in accordance with the Primary Intended Use;
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(e) All buildings, facilities and other improvements
necessary, both legally and practically, for the proper and efficient
operation of the Facility are (or in the case of the Project, will be)
located upon the Leased Property and all real property and
personal property currently utilized by Lessee is (or in the case of
the Project, will be) included within the definition of the Leased
Property or the Collateral;
(f) The Leased Property abuts on and has direct
vehicular access to a public road or access to a public road via
permanent, irrevocable, appurtenant easements;
(g) The Leased Property constitutes a parcel(s) for
real estate tax purposes separate from any real property that does
not constitute a portion of the Leased Property and no portion of
any real property that does not constitute a portion of the Leased
Property is part of the same tax parcel as any part of the Leased
Property;
(h) All utilities necessary for the use and operation
of the Facility are available to the lot lines of the Leased Property:
(i) in sufficient supply and capacity;
(ii) through validly created and existing
easements of record appurtenant to or encumbering the
Leased Property (which easements shall not impede or
restrict the operation of the Facility);
(iii) without need for any Permits and/or
Contracts to be issued by or entered into with any
Governmental Authority, except as already obtained or
executed, as the case may be, or as otherwise shown to
the satisfaction of Lessor to be readily obtainable; and
(iv) Lessee has made no structural
alterations or improvements to any of the Leased
Improvements that changed the foot-print of any of the
Leased Improvements, added an additional story to any of
the Leased Improvements, decreased the amount of
parking available on the Leased Property or otherwise
involved any alteration which would be regulated by
applicable zoning requirements, in each case without the
express written consent of Lessor. Except for matters
which have been disclosed to Lessor or concerning which
Lessor has independent actual knowledge, Lessee has no
actual knowledge of any such structural alteration or
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improvement made to any of the Leased Improvements
during the last ten (10) years and has no knowledge of
any such structural alteration or renovation made to any
of the Leased Improvements or any such decrease in
parking during such period.
10.1.18 THIRD PARTY PAYOR AGREEMENTS.
Neither Lessee nor the Facility is qualified as a provider
of services under or participates in any Third Party Payor
Programs and neither Lessor nor the Facility is accredited by any
Accreditation Body.
10.1.19 RATE LIMITATIONS. The State currently
imposes no restrictions or limitations on rates which may be
charged to private pay residents receiving services at the Facility.
10.1.20 FREE CARE. There are no Contracts, Permits
or applicable Legal Requirements which require that, a percentage
of units in any program at the Facility be reserved for Medicaid or
Medicare eligible residents or that the Facility provide a certain
amount of welfare, free or charity care or discounted or
government assisted resident care.
10.1.21 NO PROPOSED CHANGES. Lessee has no
actual knowledge of any applicable Legal Requirements which
have been enacted, promulgated or issued within the eighteen (18)
months preceding the date of this Lease or any proposed
applicable Legal Requirements currently pending in the State
which may materially adversely affect rates at the Facility (or any
program operated by a member of the Leasing Group in
conjunction with the Facility) or may result in the likelihood of
increased competition at the Facility or the imposition of
Medicaid, Medicare, charity, free care, welfare or other discounted
or government assisted residents at the Facility or require that
Lessee or the Facility obtain a certificate of need, Section 1122
approval or the equivalent, which Lessee or the Facility does not
currently possess.
10.1.22 ERISA. No employee pension benefit plan
maintained by any member of the Leasing Group has any
accumulated funding deficiency within the meaning of the ERISA,
nor does any member of the Leasing Group have any material
liability to the PBGC established under ERISA (or any successor
thereto) in connection with any employee pension benefit plan (or
other class of benefit which the PBGC has elected to insure), and
there have been no "reportable events" (not waived) or "prohibited
transactions" with respect to any such plan, as those terms are
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defined in Section 4043 of ERISA and Section 4975 of the Internal
Revenue Code of 1986, as now or hereafter amended, respectively.
10.1.23 NO BROKER. No member of the Leasing
Group nor any of their respective Affiliates has dealt with any
broker or agent in connection with the transactions contemplated
by the Lease Documents.
10.1.24 NO IMPROPER PAYMENTS. No member of
the Leasing Group nor any of their respective Affiliates has:
(a) made any contributions, payments or
gifts of its funds or property to or for the private use of
any government official, employee, agent or other Person
where either the payment or the purpose of such
contribution, payment or gifts is illegal under the laws of
the United States, any state thereof or any other
jurisdiction (foreign or domestic);
(b) knowingly established or maintained
any unrecorded fund or asset for any purpose or
knowingly made any false or artificial entries on any of its
books or records for any reason;
(c) made any payments to any Person with
the intention or understanding that any part of such
payment was to be used for any other purpose other than
that described in the documents supporting the payment;
or
(d) made any contribution, or reimbursed
any political gift or contribution made by any other
Person, to candidates for public office, whether federal,
state or local, where such contribution would be in
violation of applicable law.
10.1.25 NOTHING OMITTED. Neither this Lease, nor
any of the other Lease Documents, nor any certificate, agreement,
statement or other document, including, without limitation, any
financial statements concerning the financial condition of any
member of the Leasing Group, furnished to or to be furnished to
Lessor or its attorneys in connection with the transactions
contemplated by the Lease Documents, contains or will contain
any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to prevent all statements
contained herein and therein from being misleading. There is no
fact within the special knowledge of Lessee which has not been
disclosed herein or in writing to Lessor that materially adversely
affects, or in the future, insofar as Lessee can reasonably foresee
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based on the information currently available to it after due inquiry,
may materially adversely affect the business, properties, assets or
condition, financial or otherwise, of any member of the Leasing
Group or the Leased Property.
10.1.26 NO MARGIN SECURITY. Lessee is not
engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Meditrust Investment
will be used to purchase or carry any margin security or to extend
credit to others for the purpose of purchasing or carrying any
margin security or in any other manner which would involve a
violation of any of the regulations of the Board of Governors of
the Federal Reserve System. Lessee is not an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
10.1.27 NO DEFAULT. No event or state of facts which
constitutes, or which, with notice or lapse of time, or both, could
constitute, a Lease Default has occurred and is continuing.
10.1.28 PRINCIPAL PLACE OF BUSINESS. The
principal place of business and chief executive office of Lessee is
located at 3131 Elliott Avenue, Suite 500, Seattle, Washington
98121-2162 (the "Principal Place of Business").
10.1.29 LABOR MATTERS. There are no proceedings
now pending, nor, to the best of Lessee's knowledge, threatened
with respect to the operation of the Facility before the National
Labor Relations Board, State Commission on Human Rights and
Opportunities, State Department of Labor, U.S. Department of
Labor or any other Governmental Authority having jurisdiction of
employee rights with respect to hiring, tenure and conditions of
employment, and no member of the Leasing Group has
experienced any material controversy with any Facility
administrator or other employee of similar stature or with any
labor organization which has, or is likely, to have a materially
adverse effect upon the financial condition and/or operations of the
Facility.
10.1.30 INTELLECTUAL PROPERTY. Lessee is duly
licensed or authorized to use all (if any) copyrights, rights of
reproduction, trademarks, trade-names, trademark applications,
service marks, patent applications, patents and patent license
rights, (all whether registered or unregistered, U.S. or foreign),
inventions, franchises, discoveries, ideas, research, engineering,
methods, practices, processes, systems, formulae, designs,
drawings, products, projects, improvements, developments,
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know-how and trade secrets which are used in or necessary for the
development and/or operation of the Facility in accordance with its
Primary Intended Use, without conflict with or infringement of
any, and subject to no restriction, lien, encumbrance, right, title or
interest in others.
10.1.31 MANAGEMENT AGREEMENTS. There is no
Management Agreement in force and effect as of the date hereof.
10.2 CONTINUING EFFECT OF REPRESENTATIONS
AND WARRANTIES. All representations and warranties contained in this
Lease and the other Lease Documents shall constitute continuing
representations and warranties which shall remain true, correct and
complete throughout the Term. Notwithstanding the provisions of the
foregoing sentence but without derogation from any other terms and
provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be
satisfied on the part of Lessee, the representations and warranties contained
in Sections 10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c),
10.1.17(i), 10.1.18, 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.27, 10.1.29, in
the second sentence of Section 10.1.12, in the second and third sentences of
Section 10.1.13 and in the second sentence of Section 10.1.25 shall not
constitute continuing representations and warranties throughout the Term
provided, however, that nothing contained in the first sentence of Section
10.1.25 shall be construed as imposing any obligation on Lessee to update
after the Commencement Date the information furnished to Lessor prior to
the execution and delivery of this Lease but without derogation of any other
obligation Lessee has under this Lease to provide information to Lessor.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 STATUS CERTIFICATES. At any time, and from time
to time, upon request from the other, Lessee and Lessor shall furnish to the
other, within ten (10) Business Days' after receipt of such request, an
Officer's Certificate certifying that this Lease is unmodified and in full
force and effect (or that this Lease is in full force and effect as modified
and setting forth the modifications) and the dates to which the Rent has been
paid. Any Officer's Certificate furnished pursuant to this Section at the
request of Lessor shall be addressed to any prospective purchaser or
mortgagee of the Leased Property as Lessor may request and may be relied
upon by Lessor and any such prospective purchaser or mortgagee of the
Leased Property.
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11.2 FINANCIAL STATEMENTS; REPORTS; NOTICE
AND INFORMATION.
11.2.1 OBLIGATION TO FURNISH. Lessee will
furnish and shall cause to be furnished to Lessor the following
statements, information and other materials:
(a) ANNUAL STATEMENTS. Within
ninety (90) days after the end of each of their respective
fiscal years, (i) a copy of the Consolidated Financials for
each of (x) Lessee, (y) the Guarantor and (z) any
Sublessee which is an Affiliate of Lessee for the preceding
fiscal year, certified and, in the case of Guarantor, audited
by, and with the unqualified opinion of, independent
certified public accountants acceptable to Lessor and
certified as true and correct by Lessee, the Guarantor or
the applicable Sublessee, as the case may be (and, without
limiting anything else contained herein, the Consolidated
Financials for Lessee and for each such Sublessee shall
include a detailed balance sheet for Leased Property as of
the last day of such fiscal year and a statement of earnings
from the Leased Property for such fiscal year showing,
among other things, all rents and other income therefrom
and all expenses paid or incurred in connection with the
operation of the Leased Property); (ii) separate statements,
certified as true and correct by Lessee, the Guarantor, any
Manager which is an Affiliate of Lessee and each such
Sublessee which is an Affiliate of Lessee, stating whether,
to the best of the signer's knowledge and belief after
making due inquiry, Lessee, the Guarantor, such Manager
or any such Sublessee, as the case may be, is in default in
the performance or observance of any of the terms of this
Lease or any of the other Lease Documents and, if so,
specifying all such defaults, the nature thereof and the
steps being taken to immediately remedy the same; (iii) a
copy of all letters from the independent certified
accountants engaged to perform the annual audits referred
to above, directed to the management of the Guarantor
regarding the existence of any reportable conditions or
material weaknesses; (iv) a statement certified as true and
correct by Lessee setting forth all Subleases as of the last
day of such fiscal year, the respective areas demised
thereunder, the names of the Sublessees thereunder, the
respective expiration dates of the Subleases, the respective
rentals provided for therein, and such other information
pertaining to the Subleases as may be reasonably
requested by Lessor; and (v) evidence satisfactory to
Lessor that Lessee has fulfilled its obligation to make the
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Annual Facility Upgrade Expenditure, provided, however,
that no such evidence shall be required to be submitted
until the fourth Lease Year with respect to that portion of
the Leased Property comprised only of the Project.
(b) MONTHLY STATEMENTS OF
LESSEE. Within thirty (30) days after the end of each
calendar month during the pendency of this Lease, (i) a
statement certified as true and correct by Lessee setting
forth the Gross Revenues of the Leased Property for the
immediately preceding month, (ii) an unaudited, detailed
month and year to date income and expense statement for
the Leased Property which shall include a comparison to
corresponding budget figures, occupancy statistics
(including the actual number of residents, the number of
units available and total resident days for such month) and
resident mix breakdowns (for each resident day during
such month classifying residents by the type of care
required and source of payment) and (iii) an express
written calculation showing the compliance or non-
compliance, as the case may be, with the specific financial
covenants set forth in Section 11.3 for the applicable
period, including, with respect to the calculation of
Lessee's Debt Coverage Ratio, a schedule substantially in
the form attached hereto as EXHIBIT E.
(c) QUARTERLY STATEMENTS.
Within thirty (30) days after the end of each respective
fiscal quarter, unaudited Consolidated Financials for each
of (i) Lessee and (ii) each Sublessee which is an Affiliate
of Lessee certified as true and correct by Lessee or such
applicable Sublessee, as the case may be and within thirty
(30) days after each calendar quarter, Lessee shall also
provide Lessor with a calculation of the Additional Rent
payable for such quarter.
(d) QUARTERLY STATEMENTS OF
THE GUARANTOR. Within forty-five (45) days after the
end of each fiscal quarter, unaudited Consolidated
Financials for the Guarantor certified as true and correct
by the Guarantor.
(e) PERMITS AND CONTRACTS.
Within ten (10) days after the issuance or the execution
thereof, as the case may be, true and complete copies of (i)
all Permits which constitute operating licenses for the
Facility issued by any Governmental Authority having
jurisdiction over assisted living matters and (ii) Contracts
(involving payments in the aggregate in excess of
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$100,000 per annum), including, without limitation, all
Provider Agreements.
(f) CONTRACT NOTICES. Promptly but
in no event more than ten (10) days after the receipt
thereof, true and complete copies of any notices, consents,
terminations or statements of any kind or nature relating to
any of the Contracts (involving payments in the aggregate
in excess of ONE HUNDRED THOUSAND DOLLARS
($100,000) per annum) other than those issued in the
ordinary course of business.
(g) PERMIT OR CONTRACT
DEFAULTS. Promptly but in no event more than ten (10)
days after the receipt thereof, true and complete copies of
all surveys, follow-up surveys, licensing surveys,
complaint surveys, examinations, compliance certificates,
inspection reports, statements (other than those statements
that are issued in the ordinary course of business), if any,
terminations and notices of any kind (other than those
notices that are furnished in the ordinary course of
business) issued or provided to Lessee, the Manager or
any Sublessee by any Governmental Authority,
Accreditation Body, or any Third Party Payor, including,
without limitation, any notices pertaining to any
delinquency in, or proposed revision of, Lessee's, the
Manager's or any Sublessee's obligations under the terms
and conditions of any Permits or Contracts now or
hereafter issued by or entered into with any Governmental
Authority, Accreditation Body, or Third Party Payor and
the response(s) thereto made by or on behalf of Lessee,
the Manager or any Sublessee.
(h) OFFICIAL REPORTS. Upon
completion or filing thereof, complete copies of all
applications (other than those that are furnished in the
ordinary course of business), notices (other than those that
are furnished in the ordinary course of business),
statements, annual reports, cost reports and other reports
or filings of any kind (other than those that are furnished
in the ordinary course of business) provided by Lessee,
the Manager or any Sublessee to any Governmental
Authority, Accreditation Body, or any Third Party Payor
with respect to the Leased Property.
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(i) OTHER INFORMATION. With
reasonable promptness, such other information as Lessor
may from time to time reasonably request respecting (i)
the financial condition and affairs of each member of the
Leasing Group and the Leased Property and (ii) the
licensing and operation of the Leased Property; including,
without limitation, financial statements, certificates and
consents from accountants and all other financial and
licensing/operational information as may be required or
requested by any Governmental Authority.
(j) DEFAULT CONDITIONS. As soon as
possible, and in any event within five (5) days after the
occurrence of any Lease Default, or any event or
circumstance which, with the giving of notice or the
passage of time, or both, would constitute a Lease Default,
a written statement of Lessee setting forth the details of
such Lease Default, event or circumstance and the action
which Lessee proposes to take with respect thereto.
(k) OFFICIAL ACTIONS. Promptly but in
no event more than ten (10) days after the commencement
thereof, notice of all actions, suits and proceedings before
any Governmental Authority or Accreditation Body,
which could have a material adverse effect on any
member of the Leasing Group or the Leased Property.
(l) AUDIT REPORTS. Promptly but in no
event more than ten (10) days after receipt, a copy of all
audits or reports submitted to Lessee by any independent
public accountant in connection with any annual, special
or interim audits of the books of Lessee and, if requested
by Lessor, any letter of comments directed by such
accountant to the management of Lessee.
(m) ADVERSE DEVELOPMENTS.
Promptly but in no event more than ten (10) days after
Lessee acquires knowledge thereof, written notice of:
(i) the potential termination of any
Permit or Provider Agreement
necessary for the operation of the
Leased Property;
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(ii) any loss, damage or destruction
to or of the Leased Property in
excess of TWENTY-FIVE
THOUSAND DOLLARS
($25,000) (regardless of whether
the same is covered by
insurance);
(iii) any material controversy
involving Lessee or any
Sublessee which is an Affiliate of
Lessee and (x) Facility
administrator or Facility
employee of similar stature or (y)
any labor organization or (z) the
Manager or any employee of the
Manager which has, or is
reasonably likely to have, a
materially adverse effect on the
financial condition and/or
operations of the Facility;
(iv) any controversy that calls into
question the eligibility of the
Facility for the participation in
any Medicaid, Medicare or other
Third Party Payor Program in
which the Facility is
participating;
(v) any refusal of reimbursement by
any Third Party Payor which,
singularly or together with all
other such refusals by any Third
Party Payors, could reasonably
be expected to have a material
adverse effect on the financial
condition of Lessee or any
Sublessee which is an Affiliate of
Lessee; and
(vi) any fact within the special
knowledge of any member of the
Leasing Group, or any other
development in the business or
affairs of any member of the
Leasing Group, which could
reasonably be expected to be
materially adverse to the
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business, properties, assets or
condition, financial or otherwise,
of any member of the Leasing
Group or the Leased Property.
(n) RESPONSES TO INSPECTION
REPORTS. Within thirty (30) days after receipt of an
inspection report relating to the Leased Property from
Lessor, a written response describing in detail prepared
plans to address concerns raised by the inspection report.
(o) PUBLIC INFORMATION. Upon the
completion or filing, mailing or other delivery thereof,
complete copies of all financial statements, reports,
notices and proxy statements, if any, sent by any member
of the Leasing Group (which is a publicly held
corporation) to its shareholders and of all reports, if any,
filed by any member of the Leasing Group (which is a
publicly held corporation) with any securities exchange or
with the Securities Exchange Commission.
(p) ANNUAL BUDGETS. Prior to the end
of each Fiscal Year, Lessee, any Sublessee which is an
Affiliate of Lessee and/or any Manager which is an
Affiliate of Lessee shall submit to Lessor a preliminary
annual financial budget for the Facility for the next Fiscal
Year, a preliminary capital expenditures budget for the
Facility for the next Fiscal Year and a report detailing the
capital expenditures made in the then current Fiscal Year
and on or before the end of the first month of each Fiscal
Year, Lessee, any such Sublessee and/or any such
Manager shall submit to Lessor revised finalized versions
of such budgets and report.
(q) WORKING CAPITAL LOAN.
Promptly after receipt thereof, copies of any notices with
respect to default from a lender of a Working Capital
Loan.
11.2.2 RESPONSIBLE OFFICER. Any certificate,
instrument, notice, or other document to be provided to Lessor
hereunder by any member of the Leasing Group shall be signed by
an executive officer of such member (in the event that any of the
foregoing is not an individual), having a position of Vice President
or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief
financial officer of such member.
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11.2.3 NO MATERIAL OMISSION. No certificate,
instrument, notice or other document, including without limitation,
any financial statements furnished or to be furnished to Lessor
pursuant to the terms hereof or of any of the other Lease
Documents shall contain any untrue statement of a material fact or
shall omit to state any material fact necessary in order to prevent
all statements contained therein from being misleading.
11.2.4 CONFIDENTIALITY. Lessor shall afford any
information received pursuant to the provisions of the Lease
Documents the same degree of confidentiality that Lessor affords
similar information proprietary to Lessor; provided, however, that
Lessor shall have the unconditional right to (a) disclose any such
information as Lessor deems necessary or appropriate in
connection with any sale, transfer, conveyance, participation or
assignment of the Leased Property or any of the Lease Documents
or any interest therein and (b) use such information in any
litigation or arbitration proceeding between Lessor and any
member of the Leasing Group. Without limiting the foregoing,
Lessor may also utilize any information furnished to it hereunder
as and to the extent (i) counsel to Lessor determines that such
utilization is necessary pursuant to 15 U.S.C. 77a-77aa or 15
U.S.C. 78a-78jj and the rules and regulations promulgated
thereunder, (ii) Lessor is required or requested by any
Governmental Authority to disclose any such information and/or
(iii) Lessor is requested to disclose any such information by any of
the Meditrust Entities' lenders or potential lenders. Lessor shall
not be liable in any way for any subsequent disclosure of such
information by any Person to which Lessor has provided such
information in accordance with the terms hereof. Nevertheless, in
connection with any such disclosure, Lessor shall inform the
recipient of any such information of the confidential nature
thereof. Lessor shall observe any prohibitions or limitations on the
disclosure of any such information under applicable confidentiality
law or regulations, to the extent that the same are applicable to
such information.
11.3 FINANCIAL COVENANTS. Lessee covenants and
agrees that, throughout the Term and as long as Lessee is in possession of
the Leased Property:
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11.3.1 DEBT COVERAGE RATIO OF LESSEE.
From and after the second anniversary of the date hereof until the
fourth anniversary hereof, Lessee shall maintain with respect to the
Facility and all other Group Two Acquisition Facilities for each
Fiscal Quarter an aggregate Debt Coverage Ratio equal to or
greater than 1.1 to 1 and from and after the fourth anniversary
thereof and for the remainder of the Term, Lessee shall maintain
with respect to the Facility and all other Group Two Acquisition
Facilities each Fiscal Quarter an aggregate Debt Coverage Ratio
equal to or greater than 1.2 to 1.
11.3.2 INTENTIONALLY DELETED.
11.3.3 INTENTIONALLY DELETED.
11.3.4 INTENTIONALLY DELETED.
11.3.5 CURRENT RATIO - GUARANTOR. From
and after December 31, 1999 and for the remainder of the Term,
the Guarantor shall maintain a ratio of Consolidated Current Assets
to Consolidated Current Liabilities equal to or greater than 1 to 1
as of the end of each fiscal year.
11.3.6 INTENTIONALLY DELETED.
11.3.7 NET WORTH - GUARANTOR. The
Guarantor shall maintain, at all times, a Net Worth of not less than
TWENTY MILLION DOLLARS ($20,000,000).
11.3.8 NO INDEBTEDNESS. Lessee shall not
create, incur, assume or suffer to exist any liability for borrowed
money except (i) Indebtedness to Lessor under the Lease
Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred
upon customary terms in the ordinary course of business,
(iv) Indebtedness created in connection with any financing of any
Capital Addition, provided, that each such financing has been
approved by Lessor in accordance with the terms of Article 9
hereof, (v) Indebtedness to any Affiliate, provided, that, such
Indebtedness is fully subordinated to this Lease pursuant to the
Affiliated Party Subordination Agreement, (vi) other Indebtedness
of Lessee in the aggregate amount not to exceed TWO HUNDRED
THOUSAND DOLLARS ($200,000) incurred, for the exclusive
use of the Leased Property, on account of purchase money
indebtedness or finance lease arrangements, each of which shall
not exceed the fair market value of the assets or property acquired
or leased and shall not extend to any assets or property other than
those purchased or leased and purchase money security interests in
equipment and equipment leases which comply with the provisions
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of Section 6.1.2 and (vii) Indebtedness specifically permitted by
the Meditrust/Emeritus Transaction Documents.
11.3.9 NO GUARANTIES. Lessee shall not
assume, guarantee, endorse, contingently agree to purchase or
otherwise become directly or contingently liable (including,
without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise to invest in any debtor or otherwise to assure
any creditor against loss) in connection with any Indebtedness of
any other Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business and except for a guaranty of the
Indebtedness of the Guarantor in connection with a Working
Capital Loan which expressly limits recourse under such guaranty
to the Receivables.
11.4 AFFIRMATIVE COVENANTS. Lessee covenants and
agrees that throughout the Term and any periods thereafter that Lessee
remains in possession of the Leased Property:
11.4.1 MAINTENANCE OF EXISTENCE. If
Lessee is a corporation, trust or partnership, during the entire time
that this Lease remains in full force and effect, Lessee shall keep in
effect its existence and rights as a corporation, trust or partnership
under the laws of the state of its incorporation or formation and its
right to own property and transact business in the State.
11.4.2 MATERIALS. Except as provided in Section
6.1.2, Lessee shall not suffer the use in connection with any
renovations or other construction relating to the Leased Property of
any materials, fixtures or equipment intended to become part of the
Leased Property which are purchased upon lease or conditional bill
of sale or to which Lessee does not have absolute and
unencumbered title, and Lessee covenants to cause to be paid
punctually all sums becoming due for labor, materials, fixtures or
equipment used or purchased in connection with any such
renovations or construction, subject to Lessee's right to contest to
the extent provided for in Article 15.
11.4.3 COMPLIANCE WITH LEGAL
REQUIREMENTS AND APPLICABLE AGREEMENTS. Lessee
and the Leased Property and all uses thereof shall comply with (i)
all applicable Legal Requirements (except to the extent being duly
contested in accordance with the terms hereof), (ii) all Permits and
Contracts, (iii) all Insurance Requirements, (iv) the Lease
Documents, (v) the Permitted Encumbrances and (vi) the
Appurtenant Agreement.
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11.4.4 BOOKS AND RECORDS. Lessee shall
cause to be kept and maintained, and shall permit Lessor and its
representatives to inspect at all reasonable times and upon
reasonable notice, accurate books of accounts in which complete
entries will be made in accordance with GAAP reflecting all
financial transactions of Lessee (showing, without limitation, all
materials ordered and received and all disbursements, accounts
payable and accounts receivable in connection with the operation
of the Leased Property).
11.4.5 PARTICIPATION IN THIRD PARTY
PAYOR PROGRAMS. If Lessee or a Sublessee which is an
Affiliate of Lessee elects to participate in Third Party Payor
Programs, Lessee or such Sublessee shall remain eligible to
participate in such Third Party Payor Programs in accordance with
all requirements thereof (including, without limitation, all
applicable Provider Agreements), if and to the extent remaining
eligible shall be necessary for the prudent operation of the Facility
in the good faith exercise of commercially reasonable business
judgment.
11.4.6 CONDUCT OF ITS BUSINESS. Lessee will
maintain, and cause any Sublessee and any Manager to maintain,
experienced and competent professional management with respect
to its business and with respect to the Leased Property. Lessee,
any Sublessee and any Manager shall conduct, in the ordinary
course, the operation of the Facility, and Lessee and any Sublessee
which is an Affiliate of Lessee shall not enter into any other
business or venture during the Term or such time as Lessee or any
such Sublessee is in possession of the Leased Property other than
activities in which Lessee or such Sublessee are permitted to
engage by the provisions of the Meditrust/Emeritus Transaction
Documents.
11.4.7 ADDRESS. Lessee shall provide Lessor
thirty (30) days' prior written notice of any change of its Principal
Place of Business from its current Principal Place of Business.
Lessee shall maintain the Collateral, including without limitation,
all books and records relating to its business, solely at its Principal
Place of Business and at the Leased Property. Lessee shall not (a)
remove the Collateral, including, without limitation, any books or
records relating to Lessee's business from either the Leased
Property or Lessee's Principal Place of Business or (b) relocate its
Principal Place of Business until after receipt of a certificate from
Lessor, signed by an officer thereof, stating that Lessor has, to its
satisfaction, obtained all documentation that it deems necessary or
desirable to obtain, maintain, perfect and confirm the first priority
security interests granted in the Lease Documents.
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11.4.8 SUBORDINATION OF AFFILIATE
TRANSACTIONS. Without limiting the provisions of any other
Section of this Lease or the Affiliated Party Subordination
Agreement, any payments to be made by Lessee to (a) any
member of the Leasing Group (or any of its Affiliates) or (b) any
Affiliate of Lessee, in connection with any transaction between
Lessee and such Person, including, without limitation, the
purchase, sale or exchange of any property, the rendering of any
service to or with any such Person (including, without limitation,
all allocations of any so-called corporate or central office costs,
expenses and charges of any kind or nature) or the making of any
loan or other extension of credit or the making of any equity
investment, shall be subordinate to the complete payment and
performance of the Lease Obligations; provided, however, that all
such subordinated payments may be paid at any time unless: (x)
after giving effect to such payment, Lessee shall be unable to
comply with any of its obligations under any of the Lease
Documents or (y) a Lease Default has occurred and is continuing
and has not been expressly waived in writing by Lessor or an event
or state of facts exists, which, with the giving of notice or the
passage of time, or both, would constitute a Lease Default.
11.4.9 INSPECTION. At reasonable times and
upon reasonable notice, Lessee shall permit Lessor and its
authorized representatives (including, without limitation, the
Consultants) to inspect the Leased Property as provided in Section
7.1 above, provided, however, that, in the event results of any such
testing or inspection reflect the same satisfactory results as the
results of a similar testing or inspection initiated by Lessor within
the prior twelve (12) months period, the costs and expense of such
testing or inspection shall be the responsibility of Lessor.
11.4.10 ANNUAL FACILITY UPGRADE
EXPENDITURE. Lessee shall spend an amount equal to the
Annual Facility Upgrade Expenditure on Upgrade Renovations to
the Facility each Lease Year provided, however, that such
expenditures shall not be required until the fourth Lease Year with
respect to that portion of the Leased Property consisting of units
added to the Leased Property through construction of the Project.
Lessee will furnish and shall cause to be furnished to Lessor
evidence satisfactory to Lessor that Lessee has fulfilled its
obligation to make the Annual Facility Upgrade Expenditure
within ninety (90) days after the end of Lessee's Fiscal year,
provided, however, that no such evidence shall be required to be
submitted until the fourth Lease Year with respect to that portion
of the Leased Property comprised only of the Project.
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11.5 ADDITIONAL NEGATIVE COVENANTS. Lessee
covenants and agrees that, throughout the Term and such time as Lessee
remains in possession of the Leased Property:
11.5.1 RESTRICTIONS RELATING TO LESSEE.
Except as may otherwise be expressly provided in Section 19.4 or
in any of the other Lease Documents, Lessee shall not, without the
prior written consent of Lessor, in each instance, which consent
may be withheld in the sole and absolute discretion of Lessor:
(a) convey, assign, hypothecate, transfer,
dispose of or encumber, or permit the conveyance,
assignment, transfer, hypothecation, disposal or
encumbrance of all or any part of any legal or beneficial
interest in this Lease, its other assets or the Leased
Property except as expressly permitted by the terms of this
Lease Agreement; provided, however, that this restriction
shall not apply to (i) the Permitted Encumbrances that
may be created after the date hereof pursuant to the Lease
Documents; (ii) Liens created in accordance with Section
6.1.2 against Tangible Personal Property securing
Indebtedness permitted under Section 11.3.8(v); (iii) the
sale, conveyance, assignment, hypothecation, lease or
other transfer of any material asset or assets (whether now
owned or hereafter acquired), the fair market value of
which equals or is less than TWENTY-FIVE
THOUSAND DOLLARS ($25,000), individually, or ONE
HUNDRED THOUSAND DOLLARS ($100,000)
collectively; (iv) without limitation as to amount, the
disposition in the ordinary course of business of any
obsolete, worn out or defective fixtures, furnishings or
equipment used in the operation of the Leased Property
provided that the same are replaced with fixtures,
furnishings or equipment of equal or greater utility or
value or Lessee provides Lessor with an explanation
(reasonably satisfactory to Lessor) as to why such fixtures,
furnishings or equipment is no longer required in
connection with the operation of the Leased Property; (v)
without limitation as to amount, any sale of inventory by
Lessee in the ordinary course of business; and (vi) subject
to the terms of the Negative Pledge Agreement and the
Affiliated Party Subordination Agreement, distributions to
the shareholders of Lessee;
(b) permit the use of the Facility for any
purpose other than the Primary Intended Use and the
Other Permitted Uses; or
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(c) liquidate, dissolve or merge or
consolidate with any other Person except, subject to
Lessor's prior written consent, which consent shall not be
unreasonably withheld, a Meditrust/Emeritus Transaction
Affiliate.
11.5.2 NO LIENS. Lessee will not directly or
indirectly create or allow to remain and will promptly discharge at
its expense any Lien, title retention agreement or claim upon or
against the Leased Property (including Lessee's interest therein) or
Lessee's interest in this Lease or any of the other Lease
Documents, or in respect of the Rent, excluding (a) this Lease and
any permitted Subleases, (b) the Permitted Encumbrances,
(c) Liens which are consented to in writing by Lessor, (d) Liens for
those taxes of Lessor which Lessee is not required to pay
hereunder, (e) Liens of mechanics, laborers, materialmen,
suppliers or vendors for sums either not yet due or being contested
in strict compliance with the terms and conditions of Article 15, (f)
any Liens which are the responsibility of Lessor pursuant to the
provisions of Article 20, (g) Liens for Impositions which are either
not yet due and payable or which are in the process of being
contested in strict compliance with the terms and conditions of
Article 15 (h) the Liens incurred pursuant to the provisions of
Section 6.1.2 and (i) involuntary Liens caused by the actions or
omissions of Lessor.
11.5.3 LIMITS ON AFFILIATE TRANSACTIONS.
Lessee shall not enter into any transaction with any Affiliate,
including, without limitation, the purchase, sale or exchange of
any property, the rendering of any service to or with any Affiliate
and the making of any loan or other extension of credit, except in
the ordinary course of, and pursuant to the reasonable
requirements of, Lessee's business and upon fair and reasonable
terms no less favorable to the Lessee than would be obtained in a
comparable arms'-length transaction with any Person that is not an
Affiliate.
11.5.4 NON-COMPETITION. Lessee acknowledges
that upon and after any termination of this Lease, any competition
by any member of the Leasing Group with any subsequent owner
or subsequent lessee of the Leased Property (the "Purchaser")
would cause irreparable harm to Lessor and any such Purchaser.
To induce Lessor to enter into this Lease, Lessee agrees that, from
and after the date hereof and thereafter until (a) in the case of the
expiration of the Initial Term or a termination of this Lease, the
fifth (5th) anniversary of the termination hereof or of the
expiration of the Initial Term, as applicable, and (b) in the case of
an expiration of any of the Extended Terms, the second (2nd)
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anniversary of the expiration of the applicable Extended Term, no
member of the Leasing Group nor any Person holding or
controlling, directly or indirectly, any interest in any member of
the Leasing Group (collectively, the "Limited Parties") shall be
involved in any capacity in or lend any of their names to or engage
in any capacity in any assisted living facility, center, unit or
program (or in any Person engaged in any such activity or any
related activity competitive therewith) other than (a) those set forth
on Schedule 11.5.4 annexed hereto, (b) those activities in which a
Meditrust/Emeritus Transaction Affiliate is permitted to engage by
the provisions of the Meditrust/Emeritus Transaction Documents
which relate to any such facility, center, unit or program and (c)
the acquisition of an ownership interest in any such facility, center,
unit or program which is part of a single transaction in which an
ownership interest in at least four (4) other facilities, centers, units
or programs (provided, however, that if such acquisition occurs
within the last twelve month period of the Initial Term or any of
the Extended Terms, Lessee shall have the benefit of this clause (c)
only if at the time such acquisition occurs Lessee has already (x)
exercised in that twelve month period its right under Section 1.3
hereof to extend the Term for another Extended Term or (y) given
a Purchase Option Notice and has waived any right to rescind the
same based upon the determination of the Fair Market Value of the
Leased Property), whether such competitive activity shall be as an
officer, director, owner, employee, agent, advisor, independent
contractor, developer, lender, sponsor, venture capitalist,
administrator, manager, investor, partner, joint venturer, consultant
or other participant in any capacity whatsoever with respect to an
assisted living facility, center, unit or program located within a five
(5) mile radius of the Leased Property.
Lessee hereby acknowledges and agrees that none of the
time span, scope or area covered by the foregoing restrictive
covenants is or are unreasonable and that it is the specific intent of
Lessee that each and all of the restrictive covenants set forth
hereinabove shall be valid and enforceable as specifically set forth
herein. Lessee further agrees that these restrictions are special,
unique, extraordinary and reasonably necessary for the protection
of Lessor and any Purchaser and that the violation of any such
covenant by any of the Limited Parties would cause irreparable
damage to Lessor and any Purchaser for which a legal remedy
alone would not be sufficient to fully protect such parties.
Therefore, in addition to and without limiting any other
remedies available at law or hereunder, in the event that any of the
Limited Parties breaches any of the restrictive covenants hereunder
or shall threaten breach of any of such covenants, then Lessor and
any Purchaser shall be entitled to obtain equitable remedies,
including specific performance and injunctive relief, to prevent or
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otherwise restrain a breach of this Section 11.5.4 (without the
necessity of posting a bond) and to recover any and all costs and
expenses (including, without limitation, reasonable attorneys' fees
and expenses and court costs) incurred in enforcing the provisions
of this Section 11.5.4. The existence of any claim or cause of
action of any of the Limited Parties or any member of the Leasing
Group against Lessor or any Purchaser, whether predicated on this
Lease or otherwise, shall not constitute a defense to the
enforcement by Lessor or any Purchaser of the foregoing
restrictive covenants and the Limited Parties shall not defend on
the basis that there is an adequate remedy at law.
Without limiting any other provision of this Lease, the
parties hereto acknowledge that the foregoing restrictive covenants
are severable and separate. If at any time any of the foregoing
restrictive covenants shall be deemed invalid or unenforceable by a
court having jurisdiction over this Lease, by reason of being vague
or unreasonable as to duration, or geographic scope or scope of
activities restricted, or for any other reason, such covenants shall
be considered divisible as to such portion and such covenants shall
be immediately amended and reformed to include only such
covenants as are deemed reasonable and enforceable by the court
having jurisdiction over this Lease to the full duration, geographic
scope and scope of restrictive activities deemed reasonable and
thus enforceable by said court; and the parties agree that such
covenants as so amended and reformed, shall be valid and binding
as through the invalid or unenforceable portion has not been
included therein.
The provisions of this Section 11.5.4 shall survive the
termination of the Lease and any satisfaction of the Lease
Obligations in connection therewith or subsequent thereto. The
parties hereto acknowledge and agree that any Purchaser may
enforce the provisions of this Section 11.5.4 as a third party
beneficiary.
11.5.5 INTENTIONALLY DELETED.
11.5.6 INTENTIONALLY DELETED.
11.5.7 INTENTIONALLY DELETED.
11.5.8 ERISA. Lessee shall not establish or permit any
Sublessee to establish any new pension or defined benefit plan or
modify any such existing plan for employees subject to ERISA,
which plan provides any benefits based on past service without the
advance consent of Lessor (which consent shall not be
unreasonably withheld) to the amount of the aggregate past service
liability thereby created.
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11.5.9 FORGIVENESS OF INDEBTEDNESS. Lessee
will not waive, or permit any Sublessee or Manager which is an
Affiliate to waive any debt or claim, except in the ordinary course
of its business.
11.5.10 VALUE OF ASSETS. Except as disclosed in
the financial statements provided to Lessor as of the date hereof,
Lessee will not write up (by creating an appraisal surplus or
otherwise) the value of any assets of Lessee above their cost to
Lessee, less the depreciation regularly allowable thereon.
11.5.11 CHANGES IN FISCAL YEAR AND
ACCOUNTING PROCEDURES. Upon notice to Lessor, Lessee
may (a) change its fiscal year or capital structure or (b) change,
alter, amend or in any manner modify in accordance with GAAP
any of its current accounting procedures related to the method of
revenue recognition, billing procedures or determinations of
doubtful accounts or bad debt expenses or permit any of its
Subsidiaries to so change its fiscal year, provided that, in the event
of such change, modification or alteration, Lessee and Lessor shall
make such adjustments to the calculation of Additional Rent and
the financial covenants contained herein as Lessor shall reasonably
require to make the same consistent in result with the calculation
thereof immediately prior to such change, modification or
alteration.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 GENERAL INSURANCE REQUIREMENTS. During
the Term of this Lease and thereafter until Lessee surrenders the Leased
Property in the manner required by this Lease, Lessee shall at its sole cost
and expense keep the Leased Property, the Tangible Personal Property
located thereon and the business operations conducted on the Leased
Property insured as set forth below.
12.1.1 TYPES AND AMOUNTS OF INSURANCE.
Lessee's insurance shall include the following:
(a) property loss and physical damage
insurance on an all-risk basis (with only such exceptions
as Lessor may in its reasonable discretion approve)
covering the Leased Property (exclusive of Land) for its
full replacement cost, which cost shall be reset once a year
at Lessor's option, with an agreed-amount endorsement
and a deductible not in excess of TWENTY FIVE
THOUSAND DOLLARS ($25,000). Such insurance shall
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include, without limitation, the following coverages: (i)
increased cost of construction, (ii) cost of demolition, (iii)
the value of the undamaged portion of the Facility and (iv)
contingent liability from the operation of building laws,
less exclusions provided in the normal "All Risk"
insurance policy. During any period of construction, such
insurance shall be on a builder's-risk, completed value,
non-reporting form (including all risk and extended
coverage, collapse, cost of demolition, increased cost of
construction and value of undamaged portion of the
improvements protection) with permission to occupy;
(b) flood insurance (if the Leased Property
or any portion thereof is situated in an area which is
considered a flood risk area by the U.S. Department of
Housing and Urban Development or any future
governmental authority charged with such flood risk
analysis in the future) in limits reasonably acceptable to
Lessor and subject to the availability of such flood
insurance;
(c) boiler and machinery insurance
(including related electrical apparatus and components)
under a standard comprehensive form, providing coverage
against loss or damage caused by explosion of steam
boilers, pressure vessels or similar vessels, now or
hereafter installed on the Leased Property, in limits
acceptable to Lessor;
(d) earthquake insurance (if reasonably
deemed necessary by Lessor) in limits and with
deductibles acceptable to Lessor;
(e) environmental impairment liability
insurance (if available on commercially reasonable terms
and deemed reasonably necessary by Lessor) in limits and
with deductibles acceptable to Lessor;
(f) business interruption insurance in an
amount equal to the annual Base Rent due hereunder plus
the aggregate sum of the Impositions relating to the
Leased Property due and payable during one year;
(g) comprehensive general public liability
insurance including coverages commonly found in the
Broad Form Commercial Liability Endorsements with
amounts not less than FIVE MILLION DOLLARS
($5,000,000) per occurrence with respect to bodily injury
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and death and THREE MILLION DOLLARS
($3,000,000) for property damage and with all limits
based solely upon occurrences at the Leased Property
without any other impairment;
(h) professional liability insurance in an
amount not less than TEN MILLION DOLLARS
($10,000,000) for each medical incident;
(i) physical damage insurance on an all-
risk basis (with only such exceptions as Lessor in its
reasonable discretion shall approve) covering the Tangible
Personal Property for the full replacement cost thereof and
with a deductible not in excess of one percent (1%) of the
full replacement cost thereof;
(j) "Workers' Compensation and
Employers' Liability Insurance providing protection
against all claims arising out of injuries to all employees
of Lessee or of any Sublessee (employed on the Leased
Property or any portion thereof) in amounts equal for
Workers' Compensation, to the statutory benefits payable
to employees in the State and for Employers' Liability, to
limits of not less than ONE HUNDRED THOUSAND
DOLLARS ($100,000) for injury by accident, ONE
HUNDRED THOUSAND DOLLARS ($100,000) per
employee for disease and FIVE HUNDRED THOUSAND
DOLLARS ($500,000) disease policy limit;
(k) subsidence insurance (if deemed
necessary by Lessor) in limits acceptable to Lessor; and
(l) such other insurance as Lessor from
time to time may reasonably require and also, as may from
time to time be required by applicable Legal Requirements
and/or by any Fee Mortgagee.
12.1.2 INSURANCE COMPANY
REQUIREMENTS. All such insurance required by this Lease or
the other Lease Documents shall be issued and underwritten by
insurance companies licensed to do insurance business by, and in
good standing under the laws of, the State and which companies
have and maintain a rating of A:X or better by A.M. Best Co.
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12.1.3 POLICY REQUIREMENTS. Every policy
of insurance from time to time required under this Lease or any of
the other Lease Documents (other than worker's compensation)
shall name Lessor as owner, loss payee, secured party (to the extent
applicable) and additional named insured as its interests may
appear. If an insurance policy covers properties other than the
Leased Property, then Lessor shall be so named with respect only
to the Leased Property. Each such policy, where applicable or
appropriate, shall:
(a) include an agreed amount endorsement
and loss payee, additional named insured and secured
party endorsements, in forms acceptable to Lessor in its
reasonable discretion;
(b) include mortgagee, secured party, loss
payable and additional named insured endorsements
reasonably acceptable to each Fee Mortgagee;
(c) provide that the coverages may not be
cancelled or materially modified except upon thirty (30)
days' prior written notice to Lessor and any Fee
Mortgagee;
(d) be payable to Lessor and any Fee
Mortgagee notwithstanding any defense or claim that the
insurer may have to the payment of the same against any
other Person holding any other interest in the Leased
Property;
(e) be endorsed with standard
noncontributory clauses in favor of and in form
reasonably acceptable to Lessor and any Fee Mortgagee;
(f) expressly waive any right of
subrogation on the part of the insurer against Lessor, any
Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be
reasonably acceptable to Lessor.
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12.1.4 NOTICES; CERTIFICATES AND
POLICIES. Lessee shall promptly provide to Lessor copies of any
and all notices (including notice of non-renewal), claims and
demands which Lessee receives from insurers of the Leased
Property. At least ten (10) days prior to the expiration of any
insurance policy required hereunder, Lessee shall deliver to Lessor
certificates and evidence of insurance relating to all renewals and
replacements thereof, together with evidence, satisfactory to
Lessor, of payment of the premiums thereon. Lessee shall deliver
to Lessor original counterparts or copies certified by the insurance
company to be true and complete copies, of all insurance policies
required hereunder not later than ten (10) days after receipt thereof
by Lessee. Lessee shall use its best efforts to obtain such
counterparts or copies within ninety (90) days after the effective
date of each such policy.
12.1.5 LESSOR'S RIGHT TO PLACE
INSURANCE. If Lessee shall fail to obtain any insurance policy
required hereunder by Lessor, or shall fail to deliver the certificate
and evidence of insurance relating to any such policy to Lessor, or
if any insurance policy required hereunder (or any part thereof)
shall expire or be cancelled or become void or voidable by reason
of any breach of any condition thereof, or if Lessor reasonably
determines that such insurance coverage is unsatisfactory by reason
of the failure or impairment of the capital of any insurance
company which wrote any such policy, upon demand by Lessor,
Lessee shall promptly but in any event in not more than ten (10)
days thereafter obtain new or additional insurance coverage on the
Leased Property, or for those risks required to be insured by the
provisions hereof, satisfactory to Lessor, and, in the event Lessee
fails to perform its obligations under this Section and at its option,
Lessor may obtain such insurance and pay the premium or
premiums therefor; in which event, any amount so paid or
advanced by Lessor and all costs and expenses incurred in
connection therewith (including, without limitation, reasonable
attorneys' fees and expenses and court costs), shall be a demand
obligation of Lessee to Lessor, payable as an Additional Charge.
12.1.6 PAYMENT OF PROCEEDS. All insurance
policies required hereunder (except for general public liability,
professional liability and workers' compensation and employers
liability insurance) shall provide that in the event of loss, injury or
damage, subject to the rights of any Fee Mortgagee, all proceeds
shall be paid to Lessor alone (rather than jointly to Lessee and
Lessor). Lessor is hereby authorized to adjust and compromise any
such loss with the consent of Lessee or, following any Lease
Default, whether or not cured, without the consent of Lessee, and
to collect and receive such proceeds in the name of Lessor and
Lessee, and Lessee appoints Lessor (or any agent designated by
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Lessor) as Lessee's attorney-in-fact with full power of substitution,
to endorse Lessee's name upon any check in payment thereof.
Subject to the provisions of Article 13, such insurance proceeds
shall be applied first toward reimbursement of all costs and
expenses reasonably incurred by Lessor in collecting said
insurance proceeds, then toward payment of the Lease Obligations
or any portion thereof, which have not been paid when due and
payable or within any applicable cure period, in such order as
Lessor determines, and then in whole or in part toward restoration,
repair or reconstruction of the Leased Property for which such
insurance proceeds shall have been paid.
12.1.7 IRREVOCABLE POWER OF
ATTORNEY. The power of attorney conferred on Lessor pursuant
to the provisions of Section 12.1, being coupled with an interest,
shall be irrevocable for as long as this Lease is in effect or any
Lease Obligations are outstanding, shall not be affected by any
disability or incapacity which Lessee may suffer and shall survive
the same. Such power of attorney, is provided solely to protect the
interests of Lessor and shall not impose any duty on Lessor to
exercise any such power, and neither Lessor nor such attorney-in-
fact shall be liable for any act, omission, error in judgment or
mistake of law, except as the same may result from its gross
negligence or wilful misconduct.
12.1.8 BLANKET POLICIES. Notwithstanding
anything to the contrary contained herein, Lessee's obligations to
carry the insurance provided for herein may be brought within the
coverage of a so-called blanket policy or policies of insurance
carried and maintained by Lessee and its Affiliates; provided,
however, that the coverage afforded to Lessor shall not be reduced
or diminished or otherwise be different from that which would
exist under a separate policy meeting all other requirements of this
Lease by reason of the use of such blanket policy of insurance, and
provided, further that the requirements of Section 12.1 are
otherwise satisfied.
12.1.9 NO SEPARATE INSURANCE. Lessee
shall not, on Lessee's own initiative or pursuant to the request or
requirement of any other Person, take out separate insurance
concurrent in form or contributing in the event of loss with the
insurance required hereunder to be furnished by Lessee, or increase
the amounts of any then existing insurance by securing an
additional policy or additional policies, unless (a) all parties having
an insurable interest in the subject matter of the insurance,
including Lessor, are included therein as additional insureds and
(b) losses are payable under said insurance in the same manner as
losses are required to be payable under this Lease. Lessee shall
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immediately notify Lessor of the taking out of any such separate
insurance or of the increasing of any of the amounts of the then existing
insurance by securing an additional insurance policy or policies.
12.1.10 ASSIGNMENT OF UNEARNED PREMIUMS. Lessee
hereby assigns to Lessor all rights of Lessee in and to any unearned
premiums on any insurance policy required hereunder to be furnished by
Lessee which may become payable or are refundable after the occurrence of
an Event of Default hereunder, which premium, upon receipt thereof,
Lessor shall at Lessor's option apply toward the Lease Obligations or hold
as security therefor. In the event that this Lease is terminated for any
reason (other than the purchase of the Leased Property by Lessee), the
insurance policies required to be maintained hereunder, including all right,
title and interest of Lessee thereunder, shall become the absolute property
of Lessor subject to any limitation on assignment provided for therein.
12.2 INDEMNITY.
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12.2.1 INDEMNIFICATION. Except with respect
to the gross negligence or wilful misconduct of Lessor or any of
the other Indemnified Parties, as to which no indemnity is
provided, Lessee hereby agrees to defend with counsel reasonably
acceptable to Lessor, against all claims and causes of action and to
indemnify and hold harmless Lessor and each of the other
Indemnified Parties from and against all damages, losses,
liabilities, obligations, penalties, costs and expenses (including,
without limitation, reasonable attorneys' fees, court costs and other
expenses of litigation) suffered by, or claimed or asserted against,
Lessor or any of the other Indemnified Parties, directly or
indirectly, by any Person other than a member of the Leasing
Group who prevails in such claim or action based on, arising out of
or resulting from (a) the use and occupancy of the Leased Property
or any business conducted therein, (b) any act, fault, omission to
act or misconduct by (i) any member of the Leasing Group, (ii) any
Affiliate of Lessee or (iii) any employee, agent, licensee, business
invitee, guest, customer, contractor or sublessee of any of the
foregoing parties, relating to, directly or indirectly, the Leased
Property, (c) any accident, injury or damage whatsoever caused to
any Person, including, without limitation, any claim of malpractice,
or to the property of any Person in or about the Leased Property or
outside of the Leased Property where such accident, injury or
damage results or is claimed to have resulted from any act, fault,
omission to act or misconduct by any member of the Leasing
Group or any Affiliate of Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (d) any
Lease Default, (e) any claim brought or threatened against Lessor
by any member of the Leasing Group or by any other Person on
account of (i) Lessor's relationship with any member of the Leasing
Group pertaining in any way to the Leased Property and/or the
transaction evidenced by the Lease Documents and/or (ii) Lessor's
negotiation of, entering into and/or performing any of its
obligations and/or exercising any of its right and remedies under
any of the Lease Documents, (f) any attempt by any member of the
Leasing Group or any Affiliate of Lessee to transfer or relocate any
of the Permits to any location other than the Leased Property
and/or (g) the enforcement of this indemnity. Any amounts which
become payable by Lessee under this Section 12.2.1 shall be a
demand obligation of Lessee to Lessor, payable as an Additional
Charge. The indemnity provided for in this Section 12.2.1 shall
survive any termination of this Lease.
12.2.2 INDEMNIFIED PARTIES. As used in this
Lease the term "Indemnified Parties" shall mean the Meditrust
Entities, any Fee Mortgagee and their respective successors,
assigns, employees, servants, agents, attorneys, officers, directors,
shareholders, partners and owners.
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12.2.3 LIMITATION ON LESSOR LIABILITY.
Neither Lessor nor any Affiliate of Lessor shall be liable to any
member of the Leasing Group or any Affiliate of any member of
the Leasing Group, or to any other Person whatsoever for any
damage, injury, loss, compensation, or claim (including, but not
limited to, any claim for the interruption of or loss to any business
conducted on the Leased Property) based on, arising out of or
resulting from any cause whatsoever, including, but not limited to,
the following: (a) repairs to the Leased Property, (b) interruption
in use of the Leased Property; (c) any accident or damage resulting
from the use or operation of the Leased Property or any business
conducted thereon; (d) the termination of this Lease by reason of
Casualty or Condemnation, (e) any fire, theft or other casualty or
crime, (f) the actions, omissions or misconduct of any other
Person, (g) damage to any property, or (h) any damage from the
flow or leaking of water, rain or snow. All Tangible Personal
Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of Lessee and Lessor shall
not in any manner be held responsible therefor (except in the event
of loss caused by the gross negligence or willful misconduct of
Lessor). Notwithstanding the foregoing, Lessor shall not be
released from liability for any injury, loss, damage or liability
suffered by Lessee to the extent caused directly by the gross
negligence or willful misconduct of Lessor, its servants, employees
or agents acting within the scope of their authority on or about the
Leased Property or in regards to the Lease; provided, however, that
in no event shall Lessor, its servants, employees or agents have any
liability based on any loss for any indirect or consequential
damages. or
12.2.4 RISK OF LOSS. During the Term of this
Lease, the risk of loss or of decrease in the enjoyment and
beneficial use of the Leased Property in consequence of any
damage or destruction thereof by fire, the elements, casualties,
thefts, riots, wars or otherwise, or in consequence of foreclosures,
levies or executions of Liens (other than those created by Lessor in
accordance with the provisions of Article 20) is assumed by Lessee
and, in the absence of the gross negligence or willful misconduct as
set forth in Section 12.2.3, Lessor shall in no event be answerable
or accountable therefor (except for the obligation to account for
insurance proceeds and Awards to the extent provided for in
Articles 13 and 14) nor shall any of the events mentioned in this
Section entitle Lessee to any abatement of Rent (except for an
abatement, if any, as specifically provided for in Section 3.7).
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ARTICLE 13
FIRE AND CASUALTY
13.1 RESTORATION FOLLOWING FIRE OR OTHER
CASUALTY.
13.1.1 FOLLOWING FIRE OR CASUALTY. In
the event of any damage or destruction to the Leased Property by
reason of fire or other hazard or casualty (a "Casualty"), Lessee
shall give immediate written notice thereof to Lessor and, subject
to the terms of this Article 13 and any applicable Legal
Requirements, Lessee shall proceed with reasonable diligence, in
full compliance with all applicable Legal Requirements, to perform
such repairs, replacement and reconstruction work (referred to
herein as the "Work") to restore the Leased Property to the
condition it was in immediately prior to such damage or
destruction and to a condition adequate to operate the Facility for
the Primary Intended Use and, if applicable, the Other Permitted
Uses and in compliance with applicable Legal Requirements. All
Work shall be performed and completed in accordance with all
applicable Legal Requirements and the other requirements of this
Lease within one hundred and twenty (120) days following the
occurrence of the damage or destruction plus a reasonable time to
compensate for Unavoidable Delays (including for the purposes of
this Section, delays in obtaining Permits and in adjusting insurance
losses), but in no event beyond two-hundred and seventy (270)
days following the occurrence of the Casualty.
13.1.2 PROCEDURES. In the event that any
Casualty results in non-structural damage to the Leased Property in
excess of FIFTY THOUSAND DOLLARS ($50,000) or in any
structural damage to the Leased Property, regardless of the extent
of such structural damage, prior to commencing the Work, Lessee
shall comply with the following requirements:
(a) Lessee shall furnish to Lessor complete
plans and specifications for the Work (collectively and as
the same may be modified and amended from time to time
pursuant to the terms hereof, the "Plans and
Specifications"), for Lessor's approval, in each instance,
which approval shall not be unreasonably withheld. The
Plans and Specifications shall bear the signed approval
thereof by an architect, licensed to do business in the
State, reasonably satisfactory to Lessor (in the event
Lessor reasonably determines that the Work is of a nature
for which the involvement of an architect is appropriate)
and shall be accompanied by a written estimate from the
architect, bearing the architect's seal, of the entire cost of
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completing the Work, and to the extent feasible, the Plans
and Specifications shall provide for Work of such nature,
quality and extent, that, upon the completion thereof, the
Leased Property shall be at least equal in value and
general utility to its value and general utility prior to the
Casualty and shall be adequate to operate the Leased
Property for the Primary Intended Use and, if applicable,
the Other Permitted Uses;
(b) Lessee shall furnish to Lessor certified
or photostatic copies of all Permits and Contracts required
by all applicable Legal Requirements in connection with
the commencement and conduct of the Work to the extent
the same can be secured in the ordinary course prior to the
commencement of construction;
(c) Lessee shall furnish to Lessor a cash
deposit or a payment and performance bond sufficient to
pay for completion of and payment for the Work in an
amount not less than the architect's estimate of the entire
cost of completing the Work, less the amount of property
insurance proceeds (net of costs and expenses incurred by
Lessor in collecting the same), if any, then held by Lessor
and which Lessor shall be required to apply toward
restoration of the Leased Property as provided in Section
13.2;
(d) Lessee shall furnish to Lessor such
insurance with respect to the Work (in addition to the
insurance required under Section 12.1 hereof) in such
amounts and in such forms as is reasonably required by
Lessee; and
(e) Lessee shall not commence any of the
Work until Lessee shall have complied with the
requirements set forth in clauses (a) through (d)
immediately above, as applicable, and, thereafter, Lessee
shall perform the Work diligently, in a good and
workmanlike fashion and in good faith in accordance with
(i) the Plans and Specifications referred to in clause (a)
immediately above, (ii) the Permits and Contracts referred
to in clause (b) immediately above and (iii) all applicable
Legal Requirements and other requirements of this Lease;
provided, however, that in the event of a bona fide
emergency during which Lessee is unable to contact the
appropriate representatives of Lessor, Lessee may
commence such Work as may be necessary in order to
address such emergency without Lessor's prior approval,
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as long as Lessee immediately thereafter advises Lessor of
such emergency and the nature and scope of the Work
performed and obtains Lessor's approval of the remaining
Work to be completed.
13.1.3 DISBURSEMENT OF INSURANCE
PROCEEDS. If, as provided in Section 13.2, Lessor is required to
apply any property insurance proceeds toward repair or restoration
of the Leased Property, then as long as the Work is being diligently
performed by Lessee in accordance with the terms and conditions
of this Lease, Lessor shall disburse such insurance proceeds from
time to time during the course of the Work in accordance with and
subject to satisfaction of the following provisions and conditions.
Lessor shall not be required to make disbursements more often
than at thirty (30) day intervals. Lessee shall submit a written
request for each disbursement at least ten (10) Business Days in
advance and shall comply with the following requirements in
connection with each disbursement:
(a) Prior to the commencement of any
Work, Lessee shall have received Lessor's written
approval of the Plans and Specifications (which approval
shall not be unreasonably withheld) and the Work shall be
supervised by an experienced construction manager with
the consultation of an architect or engineer qualified and
licensed to do business in the State (in the event Lessor
reasonably determines that the Work is of a nature for
which the involvement of such architect or engineer is
appropriate). Lessee shall not make any changes in, and
shall not permit any changes in, the quality of the
materials to be used in the Work, the Plans and
Specifications or the Work, whether by change order or
otherwise, without the prior written consent of Lessor, in
each instance (which consent may be withheld in Lessor's
sole and absolute discretion); provided, however, that such
consent shall not be required for any individual change
which has been approved by the architect, which does not
materially affect the structure or exterior of the Facility,
and the cost of which does not exceed TEN THOUSAND
DOLLARS ($10,000) or which changes, in the aggregate,
do not exceed ONE HUNDRED THOUSAND DOLLARS
($100,000) in cost. Notwithstanding the foregoing, prior
to making any change in Plans and Specifications, copies
of all change orders shall be submitted by Lessee to
Lessor and Lessee shall also deliver to Lessor evidence
satisfactory to Lessor, in its reasonable discretion, that all
necessary Permits and/or Contracts required by any
Governmental Authority in connection therewith have
been obtained or entered into, as the case may be.
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(b) Each request for payment shall be
accompanied by (x) a certificate of the architect or
engineer, bearing the architect's or engineer's seal, and
(y) a certificate of the general contractor, qualified and
licensed to do business in the State, that is performing the
Work (collectively, the "Work Certificates"), each dated
not more than ten (10) days prior to the application for
withdrawal of funds, and each stating:
(i) that all of the Work performed as of the
date of the certificates has been
completed in compliance with the
approved Plans and Specifications,
applicable Contracts and all applicable
Legal Requirements;
(ii) that the sum then requested to be
withdrawn has been paid by Lessee or
is justly due to contractors,
subcontractors, materialmen, engineers,
architects or other Persons, whose
names and addresses shall be stated
therein, who have rendered or furnished
certain services or materials for the
Work, and the certificate shall also
include a brief description of such
services and materials and the principal
subdivisions or categories thereof and
the respective amounts so paid or due to
each of said Persons in respect thereof
and stating the progress of the Work up
to the date of said certificate;
(iii) that the sum then requested to be
withdrawn, plus all sums previously
withdrawn, does not exceed the cost of
the Work insofar as actually
accomplished up to the date of such
certificate;
(iv) that the remainder of the funds held by
Lessor will be sufficient to pay for the
full completion of the Work in
accordance with the Plans and
Specifications;
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(v) that no part of the cost of the services
and materials described in the
applicable Work Certificate has been or
is being made the basis of the
withdrawal of any funds in any
previous or then pending application;
and
(vi) that, except for the amounts, if any,
specified in the applicable Work
Certificate to be due for services and
materials, there is no outstanding
indebtedness known, after due inquiry,
which is then due and payable for work,
labor, services or materials in
connection with the Work which, if
unpaid, might become the basis of a
vendor's, mechanic's, laborer's or
materialman's statutory or other similar
Lien upon the Leased Property.
(c) Lessee shall deliver to Lessor
satisfactory evidence that the Leased Property and all
materials and all property described in the Work
Certificates are free and clear of Liens, except (i) Liens, if
any, securing indebtedness due to Persons (whose names
and addresses and the several amounts due them shall be
stated therein) specified in an applicable Work Certificate,
which Liens shall be discharged upon disbursement of the
funds then being requested or duly contested in
accordance with the terms of this Lease Agreement, (ii)
any Fee Mortgage and (iii) the Permitted Encumbrances.
Lessor shall accept as satisfactory evidence of the
foregoing lien waivers in customary form from the general
contractor and all subcontractors performing the Work,
together with an endorsement of its title insurance policy
(relating to the Leased Property) in form acceptable to
Lessor, dated as of the date of the making of the then
current disbursement, confirming the foregoing.
(d) If the Work involves alteration or
restoration of the exterior of any Leased Improvement that
changes the footprint of any Leased Improvement, Lessee
shall deliver to Lessor, upon the request of Lessor, an "as-
built" survey of the Leased Property dated as of a date
within ten (10) days prior to the making of the first and
final advances (or revised to a date within ten (10) days
prior to each such advance) showing no encroachments
other than such encroachments, if any, by the Leased
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Improvements upon or over the Permitted Encumbrances
as are in existence as of the date hereof.
(e) Lessee shall deliver to Lessor (i) an
opinion of counsel (satisfactory to Lessor both as to
counsel and as to the form of opinion) prior to the first
advance opining that all necessary Permits for the repair,
replacement and/or restoration of the Leased Property
which can be obtained in the ordinary course as of said
date have been obtained and that the Leased Property, if
repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and
such Permits, shall comply with all applicable Legal
Requirements subject to such limitations as may be
imposed on such opinion under local law and (ii) if
applicable, an architect's certificate (satisfactory to Lessor
both as to the architect and as to the form of the
certificate) prior to the final advance, certifying that the
Leased Property was repaired, replaced or rebuilt in
accordance, in all material respects, with the approved
Plans and Specifications and complies with all applicable
Legal Requirements, including, without limitation, all
Permits referenced in the foregoing clause (i).
(f) There shall be no Lease Default or any
state of facts or circumstance existing which, with the
giving of notice and/or the passage of time, would
constitute any Lease Default.
Lessor, at its option, may waive any of the foregoing requirements
in whole or in part in any instance. Upon compliance by Lessee
with the foregoing requirements (except for such requirements, if
any, as Lessor may have expressly elected to waive), and to the
extent of (x) the insurance proceeds, if any, which Lessor may be
required to apply to restoration of the Leased Property pursuant to
the provisions of this Lease and (y) all other cash deposits made by
Lessee, Lessor shall make available for payment to the Persons
named in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%)
as to all hard costs of the Work (the "Retainage"). It is understood
that the Retainage is intended to provide a contingency fund to
assure Lessor that the Work shall be fully completed in accordance
with the Plans and Specifications and the requirements of Lessor.
Upon the full and final completion of all of the Work in accordance
with the provisions hereof, the Retainage shall be made available
for payment to those Persons entitled thereto.
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Upon completion of the Work, and as a condition precedent to
making any further advance, in addition to the requirements set
forth above, Lessee shall promptly deliver to Lessor:
(i) if applicable, written certificates of the architect
or engineer, bearing the architect's or engineer's
seal, and the general contractor, certifying that
the Work has been fully completed in a good and
workmanlike manner in material compliance
with the Plans and Specifications and all
applicable Legal Requirements;
(ii) an endorsement of its title insurance policy
(relating to the Leased Property) in form
reasonably acceptable to Lessor insuring the
Leased Property against all mechanic's and
materialman's liens accompanied by the final
lien waivers from the general contractor and all
subcontractors;
(iii) a certificate by Lessee in form and substance
reasonably satisfactory to Lessor, listing all costs
and expenses in connection with the completion
of the Work and the amount paid by Lessee with
respect to the Work; and
(iv) a temporary certificate of occupancy (if
obtainable) and all other applicable Permits and
Contracts issued by or entered into with any
Governmental Authority with respect to the
Primary Intended Use not already delivered to
Lessor and, to the extent applicable, the Other
Permitted Uses and by the appropriate Board of
Fire Underwriters or other similar bodies acting
in and for the locality in which the Leased
Property is situated with respect to the Facility;
provided, that within thirty (30) days after
completion of the Work, Lessee shall obtain and
deliver to Lessor a permanent certificate of
occupancy for the Leased Property, subject to
seasonal delays.
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Upon completion of the Work and delivery of the
documents required pursuant to the provisions of this Section 13.1,
Lessor shall pay the Retainage to Lessee or to those Persons
entitled thereto and if there shall be insurance proceeds or cash
deposits, other than the Retainage, held by Lessor in excess of the
amounts disbursed pursuant to the foregoing provisions, then
provided that no Lease Default has occurred and is continuing, nor
any state of facts or circumstances which, with the giving of notice
and/or the passage of time would constitute a Lease Default, Lessor
shall pay over such proceeds or cash deposits to Lessee.
No inspections or any approvals of the Work during or
after construction shall constitute a warranty or representation by
Lessor, or any of its agents or Consultants, as to the technical
sufficiency, adequacy or safety of any structure or any of its
component parts, including, without limitation, any fixtures,
equipment or furnishings, or as to the subsoil conditions or any
other physical condition or feature pertaining to the Leased
Property. All acts, including any failure to act, relating to Lessor
are performed solely for the benefit of Lessor to assure the
payment and performance of the Lease Obligations and are not for
the benefit of Lessee or the benefit of any other Person.
13.2 DISPOSITION OF INSURANCE PROCEEDS.
13.2.1 PROCEEDS TO BE RELEASED TO PAY
FOR WORK. In the event of any Casualty, except as provided for
in Section 13.2.2, Lessor shall release proceeds of property
insurance held by it to pay for the Work in accordance with the
provisions and procedures set forth in this Article 13, only if:
(a) all of the terms, conditions and
provisions of Sections 13.1 and 13.2.1 are satisfied;
(b) Lessee demonstrates to Lessor's
satisfaction that Lessee has the financial ability to satisfy
the Lease Obligations during such repair or restoration;
and
(c) no Sublease material to the operation of
the Facility immediately prior to such damage or taking
shall have been cancelled or terminated, nor contain any
still exercisable right to cancel or terminate, due to such
Casualty if and to the extent that the income from such
Sublease is necessary in order to avoid the violation of any
of the financial covenants set forth in this Lease or
otherwise to avoid the creation of an Event of Default.
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If a Fee Mortgagee prevents Lessor from releasing proceeds of
property insurance notwithstanding the satisfaction of the
foregoing requirements, Lessee shall have no obligation to restore
the Casualty to which such proceeds pertain.
13.2.2 PROCEEDS NOT TO BE RELEASED. If,
as the result of any Casualty, the Leased Property is damaged to
the extent it is rendered Unsuitable For Its Primary Intended Use
and if either: (a) Lessee, after exercise of diligent efforts, cannot
within a reasonable time (not in excess of ninety (90) days) obtain
all necessary Permits in order to be able to perform all required
Work and to again operate the Facility for its Primary Intended Use
and, if applicable, the Other Permitted Uses within two hundred
and seventy (270) days from the occurrence of the damage or
destruction in substantially the manner as immediately prior to
such damage or destruction or (b) such Casualty occurs during the
last twenty-four (24) months of the Term and would reasonably
require more than nine (9) months to obtain all Permits and
complete the Work, then Lessee may either (i) acquire the Leased
Property from Lessor for a purchase price equal to the greater of
(x) the Meditrust Investment or (y) the Fair Market Value of the
Leased Property minus the Fair Market Added Value, with the Fair
Market Value and the Fair Market Added Value to be determined
as of the day immediately prior to such Casualty and prior to any
other Casualty which has not been fully repaired, restored or
replaced, in which event, Lessee shall be entitled upon payment of
the full purchase price to receive all property insurance proceeds
(less any costs and expenses incurred by Lessor in collecting the
same), or (ii) terminate this Lease, in which event (subject to the
provisions of the last sentence of this Section 13.2.2) Lessor shall
be entitled to receive and retain the insurance proceeds; provided,
however, that Lessee shall only have such right of termination
effective upon payment to Lessor of all Rent and other sums due
under this Lease and the other Lease Documents through the date
of termination plus an amount, which when added to the sum of
(1) the Fair Market Value of the Leased Property as affected by all
unrepaired or unrestored damage due to any Casualty (and giving
due regard for delays, costs and expenses incident to completing all
repair or restoration required to fully repair or restore the same)
plus (2) the amount of insurance proceeds actually received by
Lessor (net of costs and expenses incurred by Lessor in collecting
the same) equals (3) the greater of the Meditrust Investment or the
Fair Market Value of the Leased Property minus the Fair Market
Added Value, with the Fair Market Value and the Fair Market
Added Value to be determined as of the day immediately prior to
such Casualty and prior to any other Casualty which has not been
fully repaired. Any acquisition of the Leased Property pursuant to
the terms of this Section 13.2.2 shall be consummated in
accordance with the provisions of Article 18, mutatis, mutandis. If
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such termination becomes effective, Lessor shall assign to Lessee
any outstanding insurance claims and, at Lessee's expense, shall
cooperate in Lessee's efforts to secure the same. In the event this
Lease is terminated pursuant to the provisions of this Section
13.2.2 and the insurance proceeds received by Lessor in connection
therewith (net of costs and expenses incurred in obtaining such
proceeds) exceeds one hundred fifteen percent (115%) of the Fair
Market Value of the Leased Premises at the time of such
termination, Lessor shall pay to Lessee fifty percent (50%) of the
amount of such excess.
13.3 TANGIBLE PERSONAL PROPERTY. All insurance
proceeds payable by reason of any loss of or damage to any of the Tangible
Personal Property shall be paid to Lessor as secured party, subject to the
rights of the holders of any Permitted Prior Security Interests, and,
thereafter, provided that no Lease Default, nor any fact or circumstance
which with the giving of notice and/or the passage of time could constitute
a Lease Default, has occurred and is continuing, Lessor shall pay such
insurance proceeds to Lessee to reimburse Lessee for the cost of repairing
or replacing the damaged Tangible Personal Property, subject to the terms
and conditions set forth in the other provisions of this Article 13, mutatis
mutandis.
13.4 RESTORATION OF CERTAIN IMPROVEMENTS AND
THE TANGIBLE PERSONAL PROPERTY. If Lessee is required or elects
to restore the Facility, Lessee shall either (a) restore (i) all alterations and
improvements to the Leased Property made by Lessee and (ii) the Tangible
Personal Property or (b) replace such alterations and improvements and the
Tangible Personal Property with improvements or items of the same or
better quality and utility in the operation of the Leased Property provided,
however, that Lessee shall be obligated to so restore or replace the Tangible
Personal Property only to the extent desirable for the prudent operation of
the Facility in the good faith exercise of commercially reasonable business
judgment.
13.5 NO ABATEMENT OF RENT. In no event shall any Rent
abate as a result of any Casualty except as expressly provided in Section
3.7.
13.6 TERMINATION OF CERTAIN RIGHTS. Any
termination of this Lease pursuant to this Article 13 shall cause any right of
Lessee to extend the Term of this Lease granted to Lessee herein and any
right of Lessee to purchase the Leased Property contained in this Lease to
be terminated and to be without further force or effect.
13.7 WAIVER. Lessee hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction to the
Leased Property due to any Casualty which Lessee is obligated to restore or
may restore under any of the provisions of this Lease.
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13.8 APPLICATION OF RENT LOSS AND/OR BUSINESS
INTERRUPTION INSURANCE. Lessor shall direct all proceeds of rent
loss and/or business interruption insurance (collectively, "Rent Insurance
Proceeds") to be paid to Lessee, provided no fact or circumstance exists
which constitutes, or with notice, or passage of time, or both, would
constitute, a Lease Default pertaining to the Facility or the Leased Property.
If a Lease Default or such fact or circumstance exists, Lessor may rescind
such direction and apply all such insurance proceeds towards the Lease
Obligations pertaining to the Facility or the Leased Property or hold such
proceeds as security therefor.
13.9 OBLIGATION TO ACCOUNT. Upon Lessee's written
request, which may not be made not more than once in any three (3) month
period, Lessor shall provide Lessee with a written accounting of the
application of all insurance proceeds received by Lessor.
ARTICLE 14
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the
Term there is any Taking of all or any part of the Leased Property or any
interest in this Lease, the rights and obligations of the parties shall be
determined by this Article 14.
14.2 TOTAL TAKING. If there is a permanent Taking of all
or substantially all of the Leased Property, this Lease shall terminate on the
Date of Taking. In the event this Lease is terminated pursuant to the
provisions of this Section 14.2 and the Award received by Lessor in
connection therewith (net of costs and expenses incurred in obtaining such
Award) exceeds one hundred fifteen percent (115%) of the Fair Market
Value of the Leased Premises at the time of such termination, Lessor shall
pay to Lessee fifty percent (50%) of the amount of such excess.
14.3 PARTIAL OR TEMPORARY TAKING. If there is a
Permanent Taking of a portion of the Leased Property, or if there is a
temporary Taking of all or a portion of the Leased Property, this Lease shall
remain in effect so long as the Leased Property is not thereby rendered
permanently Unsuitable For Its Primary Intended Use or temporarily
Unsuitable For Its Primary Intended Use for a period not likely to, or which
does not, exceed two hundred and seventy (270) days. If, however, the
Leased Property is thereby so rendered permanently or temporarily
Unsuitable For Its Primary Intended Use: (a) if only rendered temporarily
Unsuitable For Its Primary Intended Use, Lessee shall have the right to
restore the Leased Property, at its own expense (subject to the right under
certain circumstances as provided for in Section 14.5 to receive the net
proceeds of an Award for reimbursement), to the extent possible, to
substantially the same condition as existed immediately before the partial or
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temporary Taking or (b) Lessee shall have the right to acquire the Leased
Property from Lessor (i) upon payment of all Rent due through the date that
the purchase price is paid, for a purchase price equal to the greater of (x) the
Meditrust Investment or (y) the Fair Market Value of the Leased Property
minus the Fair Market Added Value, with the Fair Market Value of the
Leased Property and the Fair Market Added Value to be determined as of
the day immediately prior to such partial or temporary Taking and (ii) in
accordance with the terms and conditions set forth in Article 18; in which
event, this Lease shall terminate upon payment of such purchase price and
the consummation of such acquisition. Notwithstanding the foregoing,
Lessor may overrule Lessee's election under clause (a) or (b) and instead
either (1) terminate this Lease (with no obligation on the part of Lessee to
acquire the Leased Property as a result thereof) as of the date when Lessee
is required to surrender possession of the portion of the Leased Property so
taken if (X) such portion comprises more than thirty percent (30%) of the
Leased Property or of the residential building(s) located thereon or (Y)
possession thereof is to be surrendered within two years of the expiration of
the Term or (2) compel Lessee to keep the Lease in full force and effect and
to restore the Leased Property as provided in clause (a) above, but only if
the Leased Property may be operated for at least eighty percent (80%) of
the licensed unit capacity of the Facility in effect prior to the Taking.
Lessee shall exercise its election under this Section 14.3 by giving Lessor
notice thereof ("Lessee's Election Notice") within sixty (60) days after
Lessee receives notice of the Taking. Lessor shall exercise its option to
overrule Lessee's election under this Section 14.3 by giving Lessee notice
of Lessor's exercise of its rights under Section 14.3 within thirty (30) days
after Lessor receives Lessee's Election Notice. If, as the result of any such
partial or temporary Taking, this Lease is not terminated as provided above,
Lessee shall be entitled to an abatement of Rent, but only to the extent, if
any, provided for in Section 3.7, effective as of the date upon which the
Leased Property is rendered Unsuitable For Its Primary Intended Use.
14.4 RESTORATION. If there is a partial or temporary Taking
of the Leased Property and this Lease remains in full force and effect
pursuant to Section 14.3, Lessee shall accomplish all necessary restoration
and Lessor shall release the net proceeds of such Award to reimburse
Lessee for the actual reasonable costs and expenses thereof, subject to all of
the conditions and provisions set forth in Article 13 as though the Taking
was a Casualty and the Award was insurance proceeds. If the cost of the
restoration exceeds the amount of the Award (net of costs and expenses
incurred in obtaining the Award), Lessee shall be obligated to contribute
any excess amount needed to restore the Facility or pay for such costs and
expenses. To the extent that the cost of restoration is less than the amount
of the Award (net of cost and expenses incurred in obtaining the Award),
the remainder of the Award shall be retained by Lessor and Rent shall be
abated as set forth in Section 3.7.
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14.5 AWARD DISTRIBUTION. In the event Lessee
completes the purchase of the Leased Property, as described in Section
14.3, the entire Award shall, upon payment of the purchase price and all
Rent and other sums due under this Lease and the other Lease Documents,
belong to Lessee and Lessor agrees to assign to Lessee all of Lessor's rights
thereto or, to the extent Lessor has received payment of the Award, the
amount of such payment shall be credited against the purchase price. In
any other event, the entire Award (except for such portion thereof which the
Condemner designates as allocable to Lessee's loss of business or Tangible
Personal Property) shall belong to and be paid to Lessor.
14.6 CONTROL OF PROCEEDINGS. Subject to the rights of
any Fee Mortgagee, unless and until Lessee completes the purchase of the
Leased Property as provided in Section 14.3, all proceedings involving any
Taking and the prosecution of claims arising out of any Taking against the
Condemnor shall be conducted, prosecuted and settled by Lessor; provided,
however, that Lessor shall keep Lessee apprised of the progress of all such
proceedings and shall solicit Lessee's advice with respect thereto and shall
give due consideration to any such advice. In addition, Lessee shall
reimburse Lessor (as an Additional Charge) for all costs and expenses,
including reasonable attorneys' fees, appraisal fees, fees of expert witnesses
and costs of litigation or dispute resolution, in relation to any Taking,
whether or not this Lease is terminated; provided, however, if this Lease is
terminated as a result of a Taking, Lessee's obligation to so reimburse
Lessor shall be diminished by the amount of the Award, if any, received by
Lessor which is in excess of the Meditrust Investment.
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ARTICLE 15
PERMITTED CONTESTS
15.1 LESSEE'S RIGHT TO CONTEST. To the extent of the
express references made to this Article 15 in other Sections of this Lease,
Lessee, any Sublessee or any Manager on their own or on Lessor's behalf
(or in Lessor's name), but at their sole cost and expense, may contest, by
appropriate legal proceedings conducted in good faith and with due
diligence (until the resolution thereof), the amount, validity or application,
in whole or in part, of any Imposition, Legal Requirement, the decision of
any Governmental Authority related to the operation of the Leased Property
for its Primary Intended Use and/or, if applicable, any of the Other
Permitted Uses or any Lien or claim relating to the Leased Property not
otherwise permitted by this Agreement; provided, that (a) prior written
notice of such contest is given to Lessor, (b) in the case of an unpaid
Imposition, Lien or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Lessor and/or
compliance by any applicable member of the Leasing Group with the
contested Legal Requirement or other matter may be legally delayed
pending the prosecution of any such proceeding without the occurrence or
creation of any Lien, charge or liability of any kind against the Leased
Property, (c) neither the Leased Property nor any rent therefrom would be
in any immediate danger of being sold, forfeited, attached or lost as a result
of such proceeding, (d) in the case of a Legal Requirement, neither Lessor
nor any member of the Leasing Group would be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings, (e) in the event that any such contest shall
involve a sum of money or potential loss in excess of TWENTY FIVE
THOUSAND DOLLARS ($25,000), Lessee shall deliver to Lessor an
Officer's Certificate and opinion of counsel, if Lessor deems the delivery of
an opinion to be appropriate, certifying or opining, as the case may be, as to
the validity of the statements set forth to the effect set forth in clauses (b),
(c) and (d), to the extent applicable, (f) Lessee shall give such cash security
as may be demanded in good faith by Lessor to insure ultimate payment of
any fine, penalty, interest or cost and to prevent any sale or forfeiture of the
affected portion of the Leased Property by reason of such non-payment or
non-compliance, (g) if such contest is finally resolved against Lessor or any
member of the Leasing Group, Lessee shall promptly pay, as Additional
Charges due hereunder, the amount required to be paid, together with all
interest and penalties accrued thereon and/or comply (and cause any
Sublessee and any Manager to comply) with the applicable Legal
Requirement, and (h) no state of facts or circumstance exists which
constitutes, or with the passage of time and/or the giving of notice, could
constitute a Lease Default; provided, however, but without limiting any
other right Lessee may have under the Lease Documents to contest the
payment of Rent, the provisions of this Article 15 shall not be construed to
permit Lessee to contest the payment of Rent or any other sums payable by
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Lessee to Lessor under any of the Lease Documents. If such contest is
finally resolved in favor of Lessee, Lessee shall be entitled to any refund
resulting therefrom.
15.2 LESSOR'S COOPERATION. Lessor, at Lessee's sole cost
and expense, shall execute and deliver to Lessee such authorizations and
other documents as may reasonably be required in any such contest, so long
as the same does not expose Lessor to any civil or criminal liability, and, if
reasonably requested by Lessee or if Lessor so desires, Lessor shall join as a
party therein.
15.3 LESSEE'S INDEMNITY. Lessee, as more particularly
provided for in Section 12.2, shall indemnify, defend (with counsel
acceptable to Lessor) and save Lessor harmless against any liability, cost or
expense of any kind, including, without limitation, attorneys' fees and
expenses that may be imposed upon Lessor in connection with any such
contest and any loss resulting therefrom and in the enforcement of this
indemnification.
ARTICLE 16
DEFAULT
16.1 EVENTS OF DEFAULT. Each of the following shall
constitute an "Event of Default" hereunder and shall entitle Lessor to
exercise its remedies hereunder and under any of the other Lease
Documents:
(a) any failure of Lessee to pay any amount due
hereunder or under any of the other Lease Documents within ten
(10) days following the date when such payment was due;
(b) any failure in the observance or
performance of any other covenant, term, condition or warranty
provided in this Lease or any of the other Lease Documents, other
than the payment of any monetary obligation and other than as
specified in subsections (c) through (v) below (a "Failure to
Perform"), continuing for thirty (30) days after the giving of notice
by Lessor to Lessee specifying the nature of the Failure to Perform;
except as to matters not susceptible to cure within thirty (30) days,
provided that with respect to such matters, (i) Lessee commences
the cure thereof within thirty (30) days after the giving of such
notice by Lessor to Lessee, (ii) Lessee continuously prosecutes
such cure to completion, (iii) such cure is completed within one
hundred twenty (120) days after the giving of such notice by
Lessor to Lessee and (iv) such Failure to Perform does not impair
the value of, or Lessor's rights with respect to, the Leased Property
or otherwise impair the Collateral or Lessor's security interest
therein;
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(c) the occurrence of any default or breach of
condition continuing beyond the expiration of the applicable notice
and grace periods, if any, under any of the other Lease Documents,
including, without limitation, the Agreement Regarding Related
Transactions;
(d) if any representation, warranty or statement
contained herein or in any of the other Lease Documents proves to
be untrue in any material respect as of the date when made or at
any time during the Term if such representation or warranty is a
continuing representation or warranty pursuant to Section 10.2;
(e) if any member of the Leasing Group shall
(i) voluntarily be adjudicated a bankrupt or insolvent, (ii) seek or
consent to the appointment of a receiver or trustee for itself or for
the Leased Property, (iii) file a petition seeking relief under the
bankruptcy or other similar laws of the United States, any state or
any jurisdiction, (iv) make a general assignment for the benefit of
creditors, (v) make or offer a composition of its debts with its
creditors or (vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or
decree appointing, without the consent of any member of the
Leasing Group, a receiver or trustee for such member or for any of
its property and such order, judgment or decree shall remain in
force, undischarged or unstayed, ninety (90) days after it is entered;
(g) if a petition is filed against any member of
the Leasing Group which seeks relief under the bankruptcy or other
similar laws of the United States, any state or any other
jurisdiction, and such petition is not dismissed within ninety (90)
days after it is filed;
(h) in the event that:
i. all or any portion of the interest of any
partner, shareholder, member in any
member of the Leasing Group (other than
Guarantor) shall be, on any one or more
occasions, directly or indirectly, sold,
assigned, hypothecated or otherwise
transferred (whether by operation of law or
otherwise), if such member of the Leasing
Group shall be a partnership, joint venture,
syndicate or other group, without the prior
written consent of Lessor, in each instance,
which consent may be withheld by Lessor in
its reasonable discretion with respect to a
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sale, assignment, hypothecation or other
transfer to a Meditrust/Emeritus Transaction
Affiliate and in all other cases, in its sole
and absolute discretion;
ii. the shares of the issued and outstanding
capital stock of any member of the Leasing
Group (other than Guarantor) shall be, on
any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or
otherwise transferred (whether by operation
of law or otherwise), if such member of the
Leasing Group shall be a corporation,
without the prior written consent of Lessor,
in each instance, which consent may be
withheld by Lessor in its reasonable
discretion with respect to a sale, assignment,
hypothecation or other transfer to a
Meditrust/Emeritus Transaction Affiliate
and in all other cases, in its sole and
absolute discretion; or
iii. all or any portion of the beneficial interest in
any member of the Leasing Group (other
than Guarantor) shall be, directly or
indirectly, sold or otherwise transferred
(whether by operation of law or otherwise),
if such member of the Leasing Group shall
be a trust, without the prior written consent
of Lessor, in each instance, which consent
may be withheld by Lessor in its reasonable
discretion with respect to a sale, assignment,
hypothecation or other transfer to a
Meditrust/Emeritus Transaction Affiliate
and in all other cases, in its sole and
absolute discretion;
Notwithstanding the foregoing, no consent of Lessor to a pledge by
Lessee of its stock to the lender of a Working Capital Loan
satisfying the requirements of Section 6.1.3 shall be required (a
"Working Capital Stock Pledge").
(i) the death, incapacity, liquidation,
dissolution or termination of existence of any member of the
Leasing Group or the merger or consolidation of any member of
the Leasing Group with any other Person except as expressly
permitted by the terms of this Lease Agreement;
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(j) except as provided in Section 19.1 hereof,
if, without the prior written consent of Lessor, in each instance,
which consent may be withheld by Lessor in its sole and absolute
discretion, Lessee's or any interest of a Sublessee which is an
Affiliate of Lessee in the Leased Property shall be, directly or
indirectly, mortgaged, encumbered (by any voluntary or
involuntary Lien other than the Permitted Encumbrances),
subleased, sold, assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise);
(k) the occurrence of a default or breach of
condition continuing beyond the expiration of the applicable notice
and grace periods, if any, in connection with the payment or
performance of any other material obligation of Lessee or any
Sublessee which is an Affiliate of Lessee, if the applicable creditor
or obligee elects to declare the obligations of Lessee or the
applicable Sublessee under the applicable agreement due and
payable or to exercise any other right or remedy available to such
creditor or obligee, or, whether or not such creditor or obligee has
so elected or exercised, such creditor's or obligee's rights and
remedies, if exercised, may involve or result in the taking of
possession of, or the creation of a Lien on, the Leased Property;
provided, however, that in any event, the election by the applicable
creditor or obligee to declare the obligations of Lessee under the
applicable agreement due and payable or to exercise any other right
or remedy available to such creditor or obligee shall be an Event of
Default hereunder only if such obligations, individually or in the
aggregate, are in excess of TWO HUNDRED FIFTY THOUSAND
DOLLARS ($250,000);
(l) the occurrence of a Related Party Default;
(m) the occurrence of any default or breach of
condition which is not cured within any applicable cure period
under a Working Capital Loan secured by a Working Capital Stock
Pledge (or any documents executed in connection therewith) or the
exercise of any ownership rights by the lender of a Working
Capital Loan secured by a Working Capital Stock Pledge;
(n) except as a result of Casualty or a partial or
complete Condemnation (including a temporary taking), if Lessee
or any Sublessee ceases operation of the Facility for a period in
excess of thirty (30) days (a "Failure to Operate");
(o) if one or more judgments against Lessee or
any Sublessee which is an Affiliate of Lessee or attachments
against Lessee's interest or any such Sublessee's interest in the
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Leased Property, which in the aggregate exceed TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000) or which may
materially and adversely interfere with the operation of the
Facility, remain unpaid, unstayed on appeal, undischarged,
unbonded or undismissed for a period of thirty (30) days;
(p) if any malpractice award or judgment
exceeding any applicable professional liability insurance coverage
by more than FIVE HUNDRED THOUSAND DOLLARS
($500,000) shall be rendered against any member of the Leasing
Group and either (i) enforcement proceedings shall have been
commenced by any creditor upon such award or judgment or
(ii) such award or judgment shall continue unsatisfied and in effect
for a period of ten (10) consecutive days without an insurance
company satisfactory to Lessor (in its sole and absolute discretion)
having agreed to fund such award or judgment in a manner
satisfactory to Lessor (in its sole and absolute discretion) and in
either case such award or judgment shall, in the reasonable opinion
of Lessor, have a material adverse affect on the ability of Lessee or
any Sublessee to operate the Facility;
(q) if any Provider Agreement material to the
operation or financial condition of the Leased Property shall be
terminated prior to the expiration of the term thereof or, without
the prior written consent of Lessor, in each instance, which consent
may be withheld in Lessor's reasonable discretion, shall not be
renewed or extended upon the expiration of the stated term thereof;
(r) if, after Lessee or any Sublessee has
obtained approval for Medicare and/or Medicaid funding, a final
unappealable determination is made by the applicable
Governmental Authority that Lessee or any Sublessee shall have
failed to comply with applicable Medicare and/or Medicaid
regulations in the operation of the Facility, as a result of which
failure Lessee or such Sublessee is declared ineligible to continue
its participation in the Medicare and/or Medicaid programs and
such determination could reasonably be expected to have a
material adverse effect on the operation or financial condition of
the Leased Property;
(s) if any member of the Leasing Group
receives notice of a final unappealable determination by applicable
Governmental Authorities of the revocation of any Permit required
for the lawful construction or operation of the Facility in
accordance with the Primary Intended Use and, if applicable, the
Other Permitted Uses or the loss of any Permit under any other
circumstances under which any member of the Leasing Group is
required to permanently cease the construction or operation of the
Facility in accordance with the Primary Intended Use and the Other
Permitted Uses; and
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(t) any failure to maintain the insurance
required pursuant to Section 13 of this Lease in force and effect at
all times until the Lease Obligations are fully paid and performed;
(u) the appointment of a temporary manager (or
operator) for the Leased Property by any Governmental Authority;
(v) the entry of an order by a court with
jurisdiction over the Leased Property to close the Facility, to
transfer one or more residents the Facility as a result of an
allegation of abuse or neglect or to take any action to eliminate an
emergency situation then existing at the Facility, if such order has
not been stayed pending appeal within ten (10) following such
entry; or
(w) the occurrence of any default or breach of
condition continuing for more than thirty (30) days under any
credit agreement, loan agreement or other agreement establishing a
major line of credit (including, without limitation, a major line of
credit or a Working Capital Loan which is not secured by a
Working Capital Stock Pledge)(or any documents executed in
connection with such lines of credit) on behalf of Guarantor
without regard to whether the applicable creditor has elected to
declare the indebtedness due and payable under such line of credit
or to exercise any other right or remedy available to it or the
occurrence of any such default or breach of condition if the
applicable creditor has elected to declare the indebtedness due and
payable under such line of credit or to exercise any other right or
remedy available to it. For the purpose of this provision, a major
line of credit shall mean and include any line of credit established
in an amount equal to or greater than ONE MILLION DOLLARS
($1,000,000) with respect to a line of credit for which Guarantor is
an obligor, endorser, surety or guarantor.
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16.2 REMEDIES.
(a) If any Lease Default shall have occurred, Lessor may at its
option terminate this Lease by giving Lessee not less than ten (10) days'
notice of such termination, or exercise any one or more of its rights and
remedies under this Lease or any of the other Lease Documents, or as
available at law or in equity and upon the expiration of the time fixed in
such notice, the Term shall terminate (but only if Lessor shall have
specifically elected by a written notice to so terminate the Lease) and all
rights of Lessee under this Lease shall cease. Notwithstanding the
foregoing, in the event of Lessee's failure to pay Rent, if such Rent remains
unpaid beyond ten (10) days from the due date thereof, Lessor shall not be
obligated to give ten (10) days notice of such termination or exercise of any
of its other rights and remedies under this Lease, or the other Lease
Documents, or otherwise available at law or in equity, and Lessor shall be
at liberty to pursue any one or more of such rights or remedies without
further notice. No taking of possession of the Leased Property by or on
behalf of Lessor, and no other act done by or on behalf of Lessor, shall
constitute an acceptance of surrender of the Leased Property by Lessee or
reduce Lessee's obligations under this Lease or the other Lease Documents,
unless otherwise expressly agreed to in a written document signed by an
authorized officer or agent of Lessor.
(b) To the extent permitted under applicable law, Lessee shall
pay as Additional Charges all costs and expenses (including, without
limitation, attorneys' fee and expenses) reasonably incurred by or on behalf
of Lessor as a result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not
this Lease has been terminated pursuant to Paragraph (a) of this Section,
Lessee shall, to the extent permitted under applicable law, if required by
Lessor so to do, upon not less than ten (10) days' prior notice from Lessor,
immediately surrender to Lessor the Leased Property pursuant to the
provisions of Paragraph (a) of this Section and quit the same, and Lessor
may enter upon and repossess the Leased Property by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Lessee and
all other Persons and any and all of the Tangible Personal Property from the
Leased Property, subject to the rights of any residents of the Facility and
any Sublessees who are not Affiliates of any member of the Leasing Group
and to any requirements of applicable law, or Lessor may claim ownership
of the Tangible Personal Property as set forth in Section 5.2.3 hereof or
Lessor may exercise its rights as secured party under the Security
Agreement. Lessor shall use reasonable, good faith efforts to relet the
Leased Property or otherwise mitigate damages suffered by Lessor as a
result of Lessee's breach of this Lease.
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(d) In addition to all of the rights and remedies of Lessor set
forth in this Lease and the other Lease Documents, if Lessee shall fail to
pay any rental or other charge due hereunder (whether denominated as Base
Rent, Additional Rent, Additional Charges or otherwise) within ten (10)
days after same shall have become due and payable, then and in such event
Lessee shall also pay to Lessor (i) a late payment service charge (in order to
partially defray Lessor's administrative and other overhead expenses) equal
to TWO HUNDRED FIFTY DOLLARS ($250) and (ii) to the extent
permitted by applicable law, interest on such unpaid sum at the Overdue
Rate; it being understood, however, that nothing herein shall be deemed to
extend the due date for payment of any sums required to be paid by Lessee
hereunder or to relieve Lessee of its obligation to pay such sums at the time
or times required by this Lease.
16.3 DAMAGES. None of (a) the termination of this Lease
pursuant to Section 16.2, (b) the eviction of Lessee or the repossession of
the Leased Property, (c) the inability after reasonable diligence of Lessor,
notwithstanding reasonable good faith efforts, to relet the Leased Property,
(d) the reletting of the Leased Property or (e) the failure of Lessor to collect
or receive any rentals due upon any such reletting, shall relieve Lessee of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In any such event, Lessee shall
forthwith pay to Lessor all Rent due and payable with respect to the Leased
Property to and including the date of such termination, repossession or
eviction. Thereafter, Lessee shall forthwith pay to Lessor, at Lessor's
option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later to
occur of termination, repossession or eviction, together
with interest thereon at the Overdue Rate to the date of
payment, plus (y) the worth (calculated in the manner
stated below) of the amount by which the unpaid Rent for
the balance of the Term after the later to occur of the
termination, repossession or eviction exceeds the fair
market rental value of the Leased Property for the balance
of the Term, plus (z) any other amount necessary to
compensate Lessor for all damage proximately caused by
Lessee's failure to perform the Lease Obligations or which
in the ordinary course would be likely to result therefrom
and less the amount of rent that has actually been received
by Lessor following the termination of this Lease from a
Person other than an Affiliate of Lessor (which for
purposes hereof shall include the net income received by
Lessor or an Affiliate of Lessor from its own operation of
the Leased Property in the event it elects to resume
operation thereof in lieu of hiring a third party manager or
re-letting the Leased Property); or
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(ii) each payment of Rent as the same would have become due
and payable if Lessee's right of possession or other rights
under this Lease had not been terminated, or if Lessee had
not been evicted, or if the Leased Property had not been
repossessed which Rent, to the extent permitted by law,
shall bear interest at the Overdue Rate from the date when
due until the date paid, and Lessor may enforce, by action
or otherwise, any other term or covenant of this Lease.
There shall be credited against Lessee's obligation under
this Clause (ii) amounts actually collected by Lessor from
another tenant to whom the Leased Property may have
actually been leased or, if Lessor is operating the Leased
Property for its own account, the actual Cash Flow of the
Leased Property.
In making the determinations described in subparagraph (i) above,
the "worth" of unpaid Rent shall be determined by a court having
jurisdiction thereof using the lowest rate of capitalization (highest present
worth) reasonably applicable at the time of such determination and allowed
by applicable law and the Additional Rent shall be deemed to be the same
as the average Additional Rent of the preceding five (5) full calendar years,
or if shorter, the average Additional Rent for the calendar years or portions
thereof since the date that Additional Rent commenced to accrue or such
other amount as either party shall prove reasonably could have been earned
during the remainder of the Term or any portion thereof.
16.4 LESSEE WAIVERS. If this Lease is terminated pursuant
to Section 16.2, Lessee waives, to the extent not prohibited by applicable
law, (a) any right of redemption, re-entry or repossession, (b) any right to a
trial by jury in the event of summary proceedings to enforce the remedies
set forth in this Article 16, and (c) the benefit of any laws now or hereafter
in force exempting property from liability for rent or for debt.
16.5 APPLICATION OF FUNDS. Any payments otherwise
payable to Lessee which are received by Lessor under any of the provisions
of this Lease during the existence or continuance of any Lease Default shall
be applied to the Lease Obligations in the order which Lessor may
reasonably determine or as may be required by the laws of the State.
16.6 FAILURE TO CONDUCT BUSINESS. For the purpose
of determining rental loss damages or Additional Rent, in the event Lessee
fails to conduct business upon the Leased Property, exact damages or the
amount of Additional Rent being unascertainable, it shall be deemed that
the Additional Rent for such period would be equal to the average annual
Additional Rent during the five (5) preceding calendar years or such shorter
period of time as may have existed between the date Additional Rent
commenced to accrue and the date of computation.
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16.7 LESSOR'S RIGHT TO CURE. If Lessee shall fail to
make any payment, or to perform any act required to be made or performed
under this Lease and to cure the same within the relevant time periods
provided in Section 16.1, Lessor, after five (5) Business Days' prior notice
to Lessee (except in an emergency when such shorter notice shall be given
as is reasonable under the circumstances), and without waiving or releasing
any obligation or Event of Default, may (but shall be under no obligation
to) at any time thereafter make such payment or perform such act for the
account and at the expense of Lessee, and may, to the extent permitted by
law, enter upon the Leased Property for such purpose and take all such
action thereon as, in Lessor's opinion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Lessee. All sums so
paid by Lessor and all costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses, in each case, to the extent
permitted by law) so incurred shall be paid by Lessee to Lessor on demand
as an Additional Charge. The obligations of Lessee and rights of Lessor
contained in this Article shall survive the expiration or earlier termination
of this Lease.
16.8 NO WAIVER BY LESSOR. Lessor shall not by any act,
delay, omission or otherwise (including, without limitation, the exercise of
any right or remedy hereunder) be deemed to have waived any of its rights
or remedies hereunder or under any of the other Lease Documents unless
such waiver is in writing and signed by Lessor, and then, only to the extent
specifically set forth therein. No waiver at any time of any of the terms,
conditions, covenants, representations or warranties set forth in any of the
Lease Documents (including, without limitation, any of the time periods set
forth therein for the performance of the Lease Obligations) shall be
construed as a waiver of any other term, condition, covenant, representation
or warranty of any of the Lease Documents, nor shall such a waiver in any
one instance or circumstances be construed as a waiver of the same term,
condition, covenant, representation or warranty in any subsequent instance
or circumstance. No such failure, delay or waiver shall be construed as
creating a requirement that Lessor must thereafter, as a result of such
failure, delay or waiver, give notice to Lessee or any Guarantor, or any
other Person that Lessor does not intend to, or may not, give a further
waiver or to refrain from insisting upon the strict performance of the terms,
conditions, covenants, representations and warranties set forth in the Lease
Documents before Lessor can exercise any of its rights or remedies under
any of the Lease Documents or before any Lease Default can occur, or as
establishing a course of dealing for interpreting the conduct of and
agreements between Lessor and Lessee, the Guarantor or any other Person.
The acceptance by Lessor of any payment that is less than payment
in full of all amounts then due under any of the Lease Documents at the
time of the making of such payment shall not: (a) constitute a waiver of the
right to exercise any of Lessor's remedies at that time or at any subsequent
time, (b) constitute an accord and satisfaction or (c) nullify any prior
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exercise of any remedy, without the express written consent of Lessor. Any
failure by Lessor to take any action under this Lease or any of the other
Lease Documents by reason of a default hereunder or thereunder,
acceptance of a past due installment, or indulgences granted from time to
time shall not be construed as a novation of this Lease or any of the other
Lease Documents or as a waiver of such right or of the right of Lessor
thereafter to insist upon strict compliance with the terms of this Lease or
any of the other Lease Documents, or (d) prevent the exercise of such right
of acceleration or any other right granted hereunder or under applicable law
for purposes of obtaining the damages set forth in Section 16.3, specific
performance or equitable remedies; and to the maximum extent not
prohibited by applicable law, Lessee hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter
be provided, which would produce a result contrary to or in conflict with
the foregoing.
16.9 RIGHT OF FORBEARANCE. Whether or not for
consideration paid or payable to Lessor and, except as may be otherwise
specifically agreed to by Lessor in writing, no forbearance on the part of
Lessor, no extension of the time for the payment of the whole or any part of
the Obligations, and no other indulgence given by Lessor to Lessee or any
other Person, shall operate to release or in any manner affect the original
liability of Lessee or such other Persons, or to limit, prejudice or impair any
right of Lessor, including, without limitation, the right to realize upon any
collateral, or any part thereof, for any of the Obligations evidenced or
secured by the Lease Documents; notice of any such extension, forbearance
or indulgence being hereby waived by Lessee and all those claiming by,
through or under Lessee.
16.10 CUMULATIVE REMEDIES. The rights and remedies set
forth under this Lease are in addition to all other rights and remedies
afforded to Lessor under any of the other Lease Documents or at law or in
equity, all of which are hereby reserved by Lessor, and this Lease is made
and accepted without prejudice to any such rights and remedies. All of the
rights and remedies of Lessor under each of the Lease Documents shall be
separate and cumulative and may be exercised concurrently or successively
in Lessor's sole and absolute discretion.
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ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 SURRENDER. Lessee shall, upon the expiration or prior
termination of the Term (unless occasioned by Lessee's purchase of the
Leased Property pursuant to the terms of this Lease Agreement), vacate and
surrender the Leased Property to Lessor in good repair and condition, in
compliance with all applicable Legal Requirements, all Insurance
Requirements, and in compliance with the provisions of Article 8, except
for: (a) ordinary wear and tear (subject to the obligation of Lessee to
maintain the Leased Property in good order and repair during the entire
Term of the Lease), (b) damage caused by the gross negligence or willful
acts of Lessor, and (c) any damage or destruction resulting from a Casualty
or Taking that Lessee is not required by the terms of this Lease to repair or
restore.
17.2 TRANSFER OF CONTRACTS AND PERMITS. In
connection with the expiration or any earlier termination of this Lease
(unless occasioned by Lessee's purchase of the Leased Property pursuant to
the terms of this Lease Agreement), upon any request made from time to
time by Lessor, Lessee shall (a) promptly and diligently use its best efforts
to (i) transfer and assign all Permits and Contracts necessary or desirable for
the operation of the Leased Property in accordance with its Primary
Intended Use to Lessor or its designee to the extent the same are assignable
under applicable Legal Requirements and/or (ii) arrange for the transfer or
assignment of such Permits and Contracts to Lessor or its designee and (b)
cooperate in every respect (and to the fullest extent possible) and assist
Lessor or its designee in obtaining such Permits and Contracts (whether by
transfer, assignment or otherwise) provided, however, that unless a
termination is the result of a Lease Default, Casualty or Condemnation,
Lessee's efforts and cooperation shall not require Lessee to pay the costs
and expenses incurred by Lessor or Lessor's designated transferee of the
Contracts and Permits. Such efforts and cooperation on the part of Lessee
shall include, without limitation, the execution, delivery and filing with
appropriate Governmental Authorities and Third Party Payors of any
applications, petitions, statements, notices, requests, assignments and other
documents or instruments requested by Lessor. Furthermore, Lessee shall
not take any action or refrain from taking any action which would defer,
delay or jeopardize the process of Lessor or its designee obtaining said
Permits and Contracts (whether by transfer, assignment or otherwise).
Without limiting the foregoing, Lessee shall not seek to transfer or relocate
any of said Permits or Contracts to any location other than the Leased
Property. The provisions of this Section 17.2 shall survive the expiration or
earlier termination of this Lease.
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Lessee hereby appoints Lessor as its attorney-in-fact, with full
power of substitution to take such actions, in the event that Lessee fails to
comply with any request made by Lessor hereunder, as Lessor (in its sole
absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on Lessor by
the provisions of this Section 17.2, being coupled with an interest, shall be
irrevocable until the Obligations are fully paid and performed and shall not
be affected by any disability or incapacity which Lessee may suffer and
shall survive the same. Such power of attorney is provided solely to protect
the interests of Lessor and shall not impose any duty on the Lender to
exercise any such power and neither Lessor nor such attorney-in-fact shall
be liable for any act, omission, error in judgment or mistake of law, except
as the same may result from its gross negligence or willful misconduct.
17.3 NO ACCEPTANCE OF SURRENDER. Except at the
expiration of the Term in the ordinary course, no surrender to Lessor of this
Lease or of the Leased Property or any interest therein shall be valid or
effective unless agreed to and accepted in writing by Lessor and no act by
Lessor or any representative or agent of Lessor, other than such a written
acceptance by Lessor, shall constitute an acceptance of any such surrender.
17.4 HOLDING OVER. If, for any reason, Lessee shall remain
in possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time Lessee shall pay as rental each month, one and one-half
times the aggregate of (i) one-twelfth of the aggregate Base Rent, and
Additional Rent payable at the time of such expiration or earlier termination
of the Term; (ii) all Additional Charges accruing during the month and (iii)
all other sums, if any, payable by Lessee pursuant to the provisions of this
Lease with respect to the Leased Property. During such period of tenancy,
Lessee shall be obligated to perform and observe all of the terms, covenants
and conditions of this Lease, but shall have no rights hereunder other than
the right, to the extent given by law to tenants at sufferance, to continue its
occupancy and use of the Leased Property. Nothing contained herein shall
constitute the consent, express or implied, of Lessor to the holding over of
Lessee after the expiration or earlier termination of this Lease.
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ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 PURCHASE OF THE LEASED PROPERTY. In the
event Lessee purchases the Leased Property from Lessor pursuant to any of
the terms of this Lease, Lessor shall, upon receipt from Lessee of the
applicable purchase price, together with full payment of any unpaid Rent
due and payable with respect to any period ending on or before the date of
the purchase, deliver to Lessee a deed with covenants only against acts of
Lessor conveying the entire interest of Lessor in and to the Leased Property
to Lessee subject to all applicable Legal Requirements, all of the matters
described in clauses (a), (b), (e) and (g) of Section 11.5.2, Impositions, any
Liens created by Lessee, any Liens created in accordance with the terms of
this Lease (except to the extent specifically excluded by the terms hereof)
or consented to by Lessee, the claims of all Persons claiming by, through or
under Lessee, any other matters assented to by Lessee and all matters for
which Lessee has responsibility under any of the Lease Documents, but
otherwise not subject to any other Lien created by Lessor from and after the
Commencement Date (other than an Encumbrance permitted under Article
20 which Lessee elects to assume). The applicable purchase price shall be
paid in cash to Lessor, or as Lessor may direct, in federal or other
immediately available funds except as otherwise mutually agreed by Lessor
and Lessee. All expenses of such conveyance, including, without
limitation, the cost of title examination or standard or extended coverage
title insurance, attorneys' fees incurred by Lessor in connection with such
conveyance, recording and transfer taxes and recording fees and similar
charges and specifically excluding any prepayment penalties, if any, due
Lessor's mortgagee, shall be paid by Lessee.
18.2 APPRAISAL.
18.2.1 DESIGNATION OF APPRAISERS. In the
event that it becomes necessary to determine the Fair Market Value
of the Leased Property for any purpose of this Lease, the party
required or permitted to give notice of such required determination
shall include in the notice the name of a Person selected to act as
appraiser on its behalf. Within ten (10) days after receipt of any
such notice, Lessor (or Lessee, as the case may be) shall by notice
to Lessee (or Lessor, as the case may be) either accept such Person
to be the sole appraiser to determine the Fair Market Value of the
Leased Property or appoint a second Person as appraiser on its
behalf.
18.2.2 APPRAISAL PROCESS. The appraisers thus
appointed, each of whom must be a member of the American
Institute of Real Estate Appraisers (or any successor organization
thereto), shall, within forty-five (45) days after the date of the
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notice appointing the first appraiser, proceed to appraise the Leased
Property to determine the Fair Market Value of the Leased
Property as of the relevant date (giving effect to the impact, if any,
of inflation from the date of their decision to the relevant date);
provided, however, that if only one appraiser shall have been so
appointed, or if two appraisers shall have been so appointed but
only one such appraiser shall have made such determination within
fifty (50) days after the making of Lessee's or Lessor's request, then
the determination of such appraiser shall be final and binding upon
the parties. If two appraisers shall have been appointed and shall
have made their determinations within the respective requisite
periods set forth above and if the difference between the amounts
so determined shall not exceed ten per cent (10%) of the lesser of
such amounts, then the Fair Market Value of the Leased Property
shall be an amount equal to fifty percent (50%) of the sum of the
amounts so determined. If the difference between the amounts so
determined shall exceed ten percent (10%) of the lesser of such
amounts, then such two appraisers shall have twenty (20) days to
appoint a third appraiser, but if such appraisers fail to do so, then
either party may request the American Arbitration Association or
any successor organization thereto to appoint an appraiser within
twenty (20) days of such request, and both parties shall be bound
by any appointment so made within such twenty (20) day period.
If no such appraiser shall have been appointed within such twenty
(20) days or within ninety (90) days of the original request for a
determination of Fair Market Value of the Leased Property,
whichever is earlier, either Lessor or Lessee may apply to any
court having jurisdiction to have such appointment made by such
court. Any appraiser appointed by the original appraisers, by the
American Arbitration Association or by such court shall be
instructed to determine the Fair Market Value of the Leased
Property within thirty (30) days after appointment of such
Appraiser. The determination of the appraiser which differs most
in terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and fifty percent (50%) of the sum of
the remaining two determinations shall be final and binding upon
Lessor and Lessee as the Fair Market Value of the Leased Property.
18.2.3 SPECIFIC ENFORCEMENT AND COSTS.
This provision for determination by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding
upon the parties except as otherwise provided by applicable law.
Lessor and Lessee shall each pay the fees and expenses of the
appraiser appointed by it and each shall pay one-half of the fees
and expenses of the third appraiser and one-half of all other cost
and expenses incurred in connection with each appraisal.
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18.3 LESSEE'S OPTION TO PURCHASE.
18.3.1 CONDITIONS TO OPTION. On the
conditions (which conditions Lessor may waive, at its sole option,
by notice to Lessee at any time) that (a) at the time of exercise of
the Purchase Option and on the applicable Purchase Option Date,
there then exists no Lease Default, nor any state of facts or
circumstance which constitutes, or with the passage of time and/or
the giving of notice, would constitute a Lease Default and
(b) Lessee strictly complies with the provisions of this Section
18.3, then Lessee shall have the option to purchase the Leased
Property, at the price and upon the terms hereinafter set forth (the
"Purchase Option").
18.3.2 EXERCISE OF OPTION; DEPOSIT. Such
Purchase Option shall permit Lessee to purchase the Leased
Property (a) on the last day of the Initial Term or (b) on the last day
of any Extended Term effectively exercised by Lessee (each of
such dates are referred to herein as a "Purchase Option Date") and
shall be exercised by notice given by Lessee to Lessor (the
"Lessee's Purchase Option Notice") at least one hundred eighty
(180) days (but not more than three hundred sixty (360) days) prior
to the relevant Purchase Option Date. Notwithstanding anything to
the contrary set forth in this Lease, Lessee's right to purchase the
Leased Property is subject to the further conditions that (i)
concurrently with the exercise of the option set forth under this
Section 18.3, the Lessee shall have exercised its right to purchase
the premises demised under each of the Related Leases in
accordance with the provisions of Section 18.3 of each of the
Related Leases, (ii) the conveyance of the Leased Property
pursuant to the provisions of this Section 18.3 shall occur
simultaneously with the conveyance of the premises demised under
each of the Related Leases pursuant to Section 18.3 of each of the
Related Leases and (iii) all conditions contained in the Agreement
Regarding Related Transactions pertaining to the Purchase Option
are satisfied. Lessee shall have no right to rescind Lessee's
Purchase Option Notice once given unless (a) a notice of such
rescission is given (i) within ten (10) days following receipt of the
final determination of the Fair Market Value of the Leased
Property or (ii) within thirty (30) days following an event of
Casualty or Condemnation as to which Lessee has waived any right
of termination set forth in Section 13.2.2 hereof and (b)
simultaneously with such notice of rescission, Lessee, by notice
given pursuant to Section 1.3 hereof extends the Term.
18.3.3 CONVEYANCE. If the Purchase Option is
exercised by Lessee in accordance with the terms hereof, the
Leased Property shall be conveyed by a good and sufficient deed
with covenants only against acts of Lessor (the "Deed") running to
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Lessee or to such grantee as Lessee may designate by notice to
Lessor at least seven (7) days before the Time of Closing.
18.3.4 CALCULATION OF PURCHASE PRICE.
The price to be paid by Lessee for the acquisition of the Leased
Property pursuant to this Purchase Option (the "Purchase Price")
shall be equal to the greater of (a) the Meditrust Investment or (b)
an amount equal to the then Fair Market Value of the Leased
Property minus the Fair Market Added Value, subject to the terms
of the Agreement Regarding Related Transactions.
18.3.5 PAYMENT OF PURCHASE PRICE. The
Purchase Price shall be paid by Lessee at the Time of Closing by
certified, cashier's, treasurer's or bank check(s) or wire transfer
pursuant to instructions received from Lessor in accordance with
the terms of the Agreement Regarding Related Transactions as
reduced by the principal balance of any Fee Mortgage which
Lessee has elected to, and has the right to, assume in accordance
with the terms hereof.
18.3.6 PLACE AND TIME OF CLOSING. If this
Purchase Option is exercised, the closing shall occur and the Deed
shall be delivered (the "Closing") at the office of Lessor at 12:00
o'clock noon (E.S.T.) on the applicable Purchase Option Date (such
time, as the same may be extended by mutual written agreement of
Lessor and Lessee, being hereinafter referred to as the "Time of
Closing") in accordance with the terms of the Agreement
Regarding Related Transactions. It is agreed that time is of the
essence of this Purchase Option.
18.3.7 CONDITION OF LEASED PROPERTY. The
Leased Property is to be purchased "AS IS" and "WHERE IS" as of
the Time of Closing.
18.3.8 QUALITY OF TITLE. If Lessor shall be
unable to give title or to make conveyance, as stipulated in this
Section 18.3, then, at Lessor's option, Lessor shall use reasonable
efforts to remove all defects in title and the applicable Purchase
Option Date and Time of Closing shall be extended for period of
thirty (30) days other than with respect to any Encumbrances
which Lessor has caused to exist. Lessor shall not be required to
expend more than FIFTY THOUSAND DOLLARS ($50,000)
(inclusive of attorney's fees) in order to have used "reasonable
efforts."
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18.3.9 LESSOR'S INABILITY TO PERFORM. If at
the expiration of the extended time Lessor shall have failed so to
remove any such defects in title, then all other obligations of all
parties hereto under Section 18.3 shall cease and Section 18.3 shall
be void and without recourse to the parties hereto.
Notwithstanding the foregoing, Lessee shall have the election, at
either the original or extended Purchase Option Date and Time of
Closing, to accept such title as Lessor can deliver to the Leased
Property in its then condition and to pay therefor the Purchase
Price without reduction, in which case Lessor shall convey such
title; provided, that, in the event of such conveyance, if any portion
of the Leased Property shall have been taken by Condemnation
prior to the applicable Purchase Option Date and Time of Closing,
Lessor shall pay over or assign to Lessee at the Time of Closing, all
Awards recovered on account of such Taking, less any amounts
reasonably expended by Lessor in obtaining such Award and less
any amounts expended for restoration pursuant to the provisions of
Article 14 hereof, or, to the extent such Awards have not been
recovered as of the applicable Purchase Option Date and Time of
Closing, Lessor shall assign to Lessee all its rights with respect to
any claim therefor and further provided, that, in the event of such
conveyance, if any portion of the Leased Property shall have
suffered a Casualty prior to the applicable Purchase Option Date
and Time of Closing, Lessor shall pay over or assign to Lessee at
the Time of Closing, all insurance proceeds recovered on account
of such Casualty, less any amounts reasonably expended by Lessor
in obtaining such proceeds and less any amounts expended for
restoration pursuant to the provisions of Article 13 hereof, or, to
the extent such proceeds have not been recovered as of the
applicable Purchase Option Date and Time of Closing, Lessor shall
assign to Lessee all its rights with respect to any claim therefor.
18.3.10 MERGER BY DEED. The acceptance of the
Deed by Lessee or the grantee designated by Lessee, as the case
may be, shall be deemed to be a full performance and discharge of
every agreement and obligation to be performed by Lessor
contained or expressed in this Lease.
18.3.11 USE OF PURCHASE PRICE TO CLEAR
TITLE. To enable Lessor to make conveyance as provided in this
Section, Lessor may, at the Time of Closing, use the Purchase Price
or any portion thereof to clear the title of any Lien, provided that
all instruments so procured are recorded contemporaneously with
the Closing or reasonable arrangements are made for a recording
subsequent to the Time of Closing in accordance with customary
conveyancing practices.
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18.3.12 LESSEE'S DEFAULT. If Lessee delivers
Lessee's Purchase Option Notice and fails to consummate the
purchase of the Leased Property in accordance with the terms
hereof for any reason other than Lessor's willful and unexcused
refusal to deliver the Deed or exercise of the right of rescission in
Section 18.3.2 hereof, (a) Lessee shall thereafter have no further
right to purchase the Leased Property pursuant to this Section,
although this Lease shall otherwise continue in full force and effect
and (b) Lessor shall have the right to sue for specific performance
of Lessee's obligations to purchase the Leased Property provided
such suit for specific performance is commenced within one (1)
year after the applicable Purchase Option Date on which such sale
was supposed to occur.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 SUBLETTING AND ASSIGNMENT. Lessee may not,
without the prior written consent of Lessor, which consent may be withheld
in Lessor's sole and absolute discretion, assign or pledge all or any portion
of its interest in this Lease or any of the other Lease Documents (whether
by operation of law or otherwise) or sublet all or any part of the Leased
Property. For purposes of this Section 19.1, the term "assign" shall be
deemed to include, but not be limited to, any one or more sales, pledges,
hypothecations or other transfers (including, without limitation, any transfer
by operation of law) of any of the capital stock of or partnership interest in
Lessee or sales, pledges, hypothecations or other transfers (including,
without limitation, any transfer by operation of law) of the capital or the
assets of Lessee. Any such assignment, pledge, sale, hypothecation or other
transfer made without Lessor's consent shall be void and of no force and
effect. Notwithstanding the foregoing, Lessors consent shall not be
unreasonably withheld with respect to an assignment or pledge of an
interest of Lessee in this Lease or a sublet of all or a part of the Leased
Property to a Meditrust/Emeritus Transaction Affiliate.
19.2 ATTORNMENT. Lessee shall insert in each Sublease
approved by Lessor, provisions to the effect that (a) such Sublease is
subject and subordinate to all of the terms and provisions of this Lease and
to the rights of Lessor hereunder, (b) in the event this Lease shall terminate
before the expiration of such Sublease, the Sublessee thereunder will, at
Lessor's option, attorn to Lessor and waive any right the Sublessee may
have to terminate the Sublease or to surrender possession thereunder, as a
result of the termination of this Lease and (c) in the event the Sublessee
receives a written notice from Lessor stating that Lessee is in default under
this Lease, the Sublessee shall thereafter be obligated to pay all rentals
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accruing under said Sublease directly to Lessor or as Lessor may direct. All
rentals received from the Sublessee by Lessor shall be credited against the
amounts owing by Lessee under this Lease.
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 NO MERGER OF TITLE. Except as otherwise provided
in Section 18.3.10, there shall be no merger of this Lease or of the leasehold
estate created hereby with the fee estate in the Leased Property by reason of
the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate and (b) the fee estate in the
Leased Property.
20.2 TRANSFERS BY LESSOR. If the original Lessor named
herein or any successor in interest shall convey the Leased Property in
accordance with the terms hereof, other than as security for a debt, and the
grantee or transferee of the Leased Property shall expressly assume all
obligations of Lessor hereunder arising or accruing from and after the date
of such conveyance or transfer, the original Lessor named herein or the
applicable successor in interest so conveying the Leased Property shall
thereupon be released from all future liabilities and obligations of Lessor
under this Lease arising or accruing from and after the date of such
conveyance or other transfer as to the Leased Property and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
20.3 LESSOR MAY GRANT LIENS. Without the consent of
Lessee, but subject to the terms and conditions set forth below in this
Section 20.3, Lessor may, from time to time, directly or indirectly, create or
otherwise cause to exist any lien, encumbrance or title retention agreement
upon the Leased Property or any interest therein ("Encumbrance"), whether
to secure any borrowing or other means of financing or refinancing,
provided that Lessee shall have no obligation to make payments under such
Encumbrances. Lessee shall subordinate this Lease to the lien of any such
Encumbrance, on the condition that the beneficiary or holder of such
Encumbrance executes a non-disturbance agreement in conformity with the
provisions of Section 20.4. To the extent that any such Encumbrance
consists of a mortgage or deed of trust on Lessor's interest in the Leased
Property the same shall be referred to herein as a "Fee Mortgage" and the
holder thereof shall be referred to herein as a "Fee Mortgagee".
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20.4 SUBORDINATION AND NON-DISTURBANCE.
Concurrently with the execution and delivery of any Fee Mortgage entered
into after the date hereof, provided that the Lessee executes and delivers an
agreement of the type described in the following paragraph, Lessor shall
obtain and deliver to Lessee an agreement by the holder of such Fee
Mortgage, pursuant to which, (a) the applicable Fee Mortgagee consents to
this Lease and (b) agrees that, notwithstanding the terms of the applicable
Fee Mortgage held by such Fee Mortgagee, or any default, expiration,
termination, foreclosure, sale, entry or other act or omission under or
pursuant to such Fee Mortgage or a transfer in lieu of foreclosure, (i) Lessee
shall not be disturbed in peaceful enjoyment of the Leased Property nor
shall this Lease be terminated or cancelled at any time, except in the event
that Lessor shall have the right to terminate this Lease under the terms and
provisions expressly set forth herein, (ii) Lessee's option to purchase the
Leased Property shall remain in force and effect pursuant to the terms
hereof and (iii) in the event that Lessee elects its option to purchase the
Leased Property and performs all of its obligations hereunder in connection
with any such election, the holder of the Fee Mortgage shall release its Fee
Mortgage upon payment by Lessee of the purchase price required
hereunder, provided, that (1) such purchase price is paid to the holder of the
Fee Mortgage, in the event that the Indebtedness secured by the applicable
Fee Mortgage is equal to or greater than the purchase price or (2) in the
event that the purchase price is greater than the Indebtedness secured by the
Fee Mortgage, a portion of the purchase price equal to the Indebtedness
secured by the Fee Mortgage is paid to the Fee Mortgagee and the
remainder of the purchase price is paid to Lessor.
At the request from time to time by any Fee Mortgagee, Lessee
shall (a) subordinate this Lease and all of Lessee's rights and estate
hereunder to the Fee Mortgage held by such Fee Mortgagee and (b) agree
that Lessee will attorn to and recognize such Fee Mortgagee or the
purchaser at any foreclosure sale or any sale under a power of sale
contained in any such Fee Mortgage as Lessor under this Lease for the
balance of the Term then remaining. To effect the intent and purpose of the
immediately preceding sentence, Lessee agrees to execute and deliver such
instruments in recordable from as are reasonably requested by Lessor or the
applicable Fee Mortgagee; provided, however, that such Fee Mortgagee
simultaneously executes, delivers and records a written agreement of the
type described in the preceding paragraph.
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ARTICLE 21
LESSOR OBLIGATIONS
21.1 QUIET ENJOYMENT. As long as Lessee shall pay all
Rent and all other sums due under any of the Lease Documents as the same
become due and shall fully comply with all of the terms of this Lease and
the other Lease Documents and fully perform its obligations thereunder,
Lessee shall peaceably and quietly have, hold and enjoy the Leased
Property throughout the Term, free of any claim or other action by Lessor
or anyone claiming by, through or under Lessor, but subject to all the
Permitted Encumbrances and such Liens as may hereafter be consented to
by Lessee. No failure by Lessor to comply with the foregoing covenant
shall give Lessee any right to cancel or terminate this Lease, or to fail to
perform any other sum payable under this Lease, or to fail to perform any
other obligation of Lessee hereunder. Notwithstanding the foregoing,
Lessee shall have the right by separate and independent action to pursue
any claim it may have against Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this Article 21.
21.2 MEMORANDUM OF LEASE. Lessor and Lessee shall,
promptly upon the request of either, enter into a short form memorandum of
this Lease, in form suitable for recording under the laws of the State, in
which reference to this Lease and all options contained herein shall be
made. Lessee shall pay all recording costs and taxes associated therewith.
21.3 DEFAULT BY LESSOR. Lessor shall be in default of its
obligations under this Lease only if Lessor shall fail to observe or perform
any term, covenant or condition of this Lease on its part to be performed
and such failure shall continue for a period of thirty (30) days after notice
thereof from Lessee (or such shorter time as may be necessary in order to
protect the health or welfare of any residents of the Facility or to ensure the
continuing compliance of the Facility with applicable Legal Requirements),
unless such failure cannot with due diligence be cured within a period of
thirty (30) days, in which case such failure shall not be deemed to continue
if Lessor, within said thirty (30) day period, proceeds promptly and with
due diligence to cure the failure and diligently completes the curing thereof
within one hundred twenty (120) days after notice thereof.
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ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder
or under any of the other Lease Documents shall be in writing and shall be
deemed duly given if personally delivered, sent by certified mail, return
receipt requested, or sent by a nationally recognized commercial overnight
delivery service with provision for a receipt, postage or delivery charges
prepaid, and shall be deemed given when so personally delivered, three (3)
business days following the date postmarked or the next business day when
placed in the possession of such mail delivery service and addressed as
follows:
If to Lessee: c/o Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121-2162
Attention: Daniel R. Baty, Chief
Executive Officer
With a copy to: The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, WA 98101
Attn: Randi S. Nathanson, Esquire
If to the Guarantor: Emeritus Corporation
Market Place One
3131 Elliott Avenue, Suite 500
Seattle, WA 98121-2162
Attention: Daniel R. Baty, Chief
Executive Officer
With a copy to: The Nathanson Group
1411 Fourth Avenue, Suite 905
Seattle, WA 98101
Attn: Randi S. Nathanson, Esquire
If to Lessor: Meditrust Acquisition Corporation I
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Acquisition Corporation I
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
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and Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Joshua Davis, Esquire
or such other address as Lessor, Lessee or the Guarantor shall hereinafter
from time to time designate by a written notice to the others given in such
manner. Any notice given to Lessee or the Guarantor by Lessor at any time
shall not imply that such notice or any further or similar notice was or is
required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
The Declaration of Trust establishing the sole shareholder of
Lessor, Meditrust, a Massachusetts business trust ("Meditrust"), dated
August 6, 1985 (the "Declaration"), as amended, a copy of which is duly
filed in the office of the Secretary of State of the Commonwealth of
Massachusetts, provides that the name "Meditrust" refers to the trustees
under the Declaration collectively as trustees, but not individually or
personally; and that no trustee, officer, shareholder, employee or agent of
Meditrust or any of its Subsidiaries shall be held to any personal liability,
jointly, or severally, for any obligation of, or claim against Meditrust or any
of its Subsidiaries. All Persons dealing with Meditrust or Lessor, in any
way, shall look only to the assets of Meditrust or Lessor, as applicable, for
the payment of any sum or the performance of any obligation.
Furthermore, in no event shall Meditrust or Lessor ever be liable to Lessee
or any other Person for any indirect or consequential damages incurred by
Lessee or such other Person resulting from any cause whatsoever.
Notwithstanding the foregoing, Lessee hereby acknowledges and agrees
that Meditrust is not a party to this Lease and that Lessee shall look only to
the assets of Lessor for the payment of any sum or performance of any
obligation due by or from Lessor pursuant to the terms and provisions of
the Lease Documents.
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ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 BROKER'S FEE INDEMNIFICATION. Lessee and
Lessor each shall and hereby agrees to indemnify, defend (with counsel
acceptable to the other) and hold the other harmless from and against any
and all claims for premiums or other charges, finder's fees, taxes, brokerage
fees or commissions and other similar compensation due to a broker or
finder allegedly employed or retained by it in connection with any of the
transactions contemplated by the Lease Documents. Notwithstanding the
foregoing, the indemnified party shall have the option of conducting its
own defense against any such claims with counsel of such party's choice,
but at the expense of the indemnifying party, as aforesaid. This
indemnification shall include all reasonable attorneys' fees and expenses
and court costs reasonably incurred by the indemnified party in connection
with the defense against any such claims and the enforcement of this
indemnification agreement and shall survive the termination of this Lease.
24.2 NO JOINT VENTURE OR PARTNERSHIP. Neither
anything contained in any of the Lease Documents, nor the acts of the
parties hereto, shall create, or be construed to create, a partnership or joint
venture between Lessor and Lessee. Lessee is not the agent or
representative of Lessor and nothing contained herein or in any of the other
Lease Documents shall make, or be construed to make, Lessor liable to any
Person for goods delivered to Lessee, services performed with respect to the
Leased Property at the direction of Lessee or for debts or claims accruing
against Lessee.
24.3 AMENDMENTS, WAIVERS AND MODIFICATIONS.
None of the terms, covenants, conditions, warranties or representations
contained in this Lease or in any of the other Lease Documents may be
renewed, replaced, amended, modified, extended, substituted, revised,
waived, consolidated or terminated except by an agreement in writing
signed by all parties to this Lease or the other Lease Documents, as the case
may be, in the case of any renewal, replacement, amendment, modification,
extension, substitution, revisions, consolidation or termination and by the
Person against whom enforcement is sought in the case of a waiver or
except as otherwise expressly provided for herein or in any other Lease
Document. The provisions of this Lease and the other Lease Documents
shall extend and be applicable to all renewals, replacements, amendments,
extensions, substitutions, revisions, consolidations and modifications of any
of the Lease Documents, the Management Agreements, the Related Party
Agreements, the Permits and/or the Contracts. References herein and in the
other Lease Documents to any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the Permits and/or the
Contracts shall be deemed to include any renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations or
modifications thereof.
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Notwithstanding the foregoing, any reference contained in any of
the Lease Documents, whether express or implied, to any renewal,
replacement, amendment, extension, substitution, revisions, consolidation
or modification of any of the Lease Documents or any Management
Agreement, Related Party Agreement, Permit and/or the Contract is not
intended to constitute an agreement or consent by Lessor to any such
renewal, replacement, amendment, substitution, revision, consolidation or
modification; but, rather as a reference only to those instances where Lessor
may give, agree or consent to any such renewal, replacement, amendment,
extension, substitution, revision, consolidation or modification as the same
may be required pursuant to the terms, covenants and conditions of any of
the Lease Documents.
24.4 CAPTIONS AND HEADINGS. The captions and
headings set forth in this Lease and each of the other Lease Documents are
included for convenience and reference only, and the words contained
therein shall in no way be held or deemed to define, limit, describe, explain,
modify, amplify or add to the interpretation, construction or meaning of, or
the scope or intent of, this Lease, any of the other Lease Documents or any
parts hereof or thereof.
24.5 TIME IS OF THE ESSENCE. Time is of essence of each
and every term, condition, covenant and warranty set forth herein and in the
other Lease Documents.
24.6 COUNTERPARTS. This Lease and the other Lease
Documents may be executed in one or more counterparts, each of which
taken together shall constitute an original and all of which shall constitute
one in the same instrument.
24.7 ENTIRE AGREEMENT. This Lease and the other Lease
Documents set forth the entire agreement of the parties with respect to the
subject matter and shall supersede in all respect the letter of intent, dated
January 31, 1996 (and all prior iterations thereof), from Meditrust to
Lessee.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM
EXTENT PERMITTED BY APPLICABLE LAW, LESSOR AND
LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY
HERETO MAY NOW OR HEREAFTER HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THE LEASE OR ANY OF THE LEASE
DOCUMENTS. Lessee hereby certifies that neither Lessor nor any of
Lessor's representatives, agents or counsel has represented expressly or
otherwise that Lessor would not, in the event of any such suit, action or
proceeding seek to enforce this waiver to the right of trial by jury and
acknowledges that Lessor has been induced by this waiver (among other
things) to enter into the transactions evidenced by this Lease and the other
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Lease Documents and further acknowledges that Lessee (a) has read the
provisions of this Lease, and in particular, the paragraph containing this
waiver, (b) has consulted legal counsel, (c) understands the rights that it is
granting in this Lease and the rights that it waiving in this paragraph in
particular and (d) makes the waivers set forth herein knowingly, voluntarily
and intentionally.
24.9 SUCCESSORS AND ASSIGNS. This Lease and the
other Lease Documents shall be binding upon and inure to the benefit of (a)
Lessee and Lessee's legal representatives and permitted successors and
assigns and (b) Lessor and any other Person who may now or hereafter hold
the interest of Lessor under this Lease and their respective successors and
assigns.
24.10 NO THIRD PARTY BENEFICIARIES. This Lease and
the other Lease Documents are solely for the benefit of Lessor, its
successors, assigns and participants (if any), the Meditrust Entities, Lessee,
the Guarantor, the other members of the Leasing Group and their respective
permitted successors and assigns, and, except as otherwise expressly set
forth in any of the Lease Documents, nothing contained therein shall confer
upon any Person other than such parties any right to insist upon or to
enforce the performance or observance of any of the obligations contained
therein. All conditions to the obligations of Lessor to advance or make
available proceeds of insurance or Awards, or to release any deposits held
for Impositions or insurance premiums are imposed solely and exclusively
for the benefit of Lessor, its successors and assigns. No other Person shall
have standing to require satisfaction of such conditions in accordance with
their terms, and no other Person shall, under any circumstances, be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lessor at any time, if, in Lessor's sole and absolute
discretion, Lessor deems it advisable or desirable to do so.
24.11 GOVERNING LAW. This Lease shall be construed and
the rights and obligations of Lessor and Lessee shall be determined in
accordance with the laws of the State.
Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the
Leased Property is situated as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of
any suit, action or other proceeding arising out of or with respect to any of
the Lease Documents, the negotiation and/or consummation of the
transactions evidenced by the Lease Documents, the Lessor's relationship of
any member of the Leasing Group in connection with the transactions
evidenced by the Lease Documents and/or the performance of any
obligation or the exercise of any remedy under any of the Lease Documents
and expressly waives any and all objections Lessee may have as to venue in
any of such courts.
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24.12 GENERAL. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents
or any application thereof shall be invalid or unenforceable, the remainder
of this Lease or the other applicable Lease Document, as the case may be,
and any other application of such term or provision shall not be affected
thereby. Notwithstanding the foregoing, it is the intention of the parties
hereto that if any provision of any of this Lease is capable of two (2)
constructions, one of which would render the provision void and the other
of which would render the provision valid, then such provision shall be
construed in accordance with the construction which renders such provision
valid.
If any late charges provided for in any provision of this Lease or
any of the other Lease Documents are based upon a rate in excess of the
maximum rate permitted by applicable law, the parties agree that such
charges shall be fixed at the maximum permissible rate.
Lessee waives all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, and
notices of acceptance and waives all notices of the existence, creation, or
incurring of new or additional obligations, except as to all of the foregoing
as expressly provided for herein.
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ARTICLE 25
SUBSTITUTION OF PROPERTY
25.1 SUBSTITUTION OF PROPERTY FOR THE LEASED
PROPERTY. Provided that no Event of Default has occurred under this
Lease (excluding any Event of Default which has been waived, in writing,
by the Lessor), nor any event which, with the giving of notice or the
passage of time or both, would constitute such an Event of Default, Lessee
shall have the right from time to time (referred to herein as the "Substitution
Right"), exercisable upon not less than ninety (90) days' prior written notice
to Lessor (referred to herein as a "Substitution Notice") to substitute, on a
date specified in such Substitution Notice (such date, as the same may be
extended by express written agreement of lessor, shall be referred to herein
as a "Substitution Date"), the Leased Property with a Comparable Facility.
As used herein, the term "Comparable Facility" shall be defined as a health
care facility or facilities which Lessor determines (a) has an appraised Fair
Market Value greater than or equal to the greater of (i) the appraised Fair
Market Value of the Leased Property as of the Completion Date or (ii) the
appraised Fair Market Value of the Leased Property at the time that the
applicable Substitution Notice is furnished to Lessor (based on appraisal
criteria then in effect), (b) has a Facility Debt Coverage Ratio greater than
or equal to the greater of (i) the Facility Debt Coverage Ratio of the Leased
Property as of the Commencement Date, (ii) the Facility Debt Coverage
Ratio of the Leased Property at the time that the applicable Substitution
Notice is furnished to Lessor, (c) provides a mix of services similar to the
Leased Property and (d) is otherwise reasonably acceptable, in all respects,
to Lessor (based on Lessor's usual and customary property evaluation
criteria then in effect). Lessee may not exercise its Substitution Right more
than once in any calendar year.
25.2 CONDITIONS TO SUBSTITUTION. Without limiting
the foregoing, as conditions precedent to the consummation of any
proposed substitution:
(a) as of the applicable Substitution Date, no Event of Default
shall have occurred under the Lease (excluding any Event of Default which
has been waived, in writing, by Lessor), nor any event which with the
giving of notice or the passage of time or both would constitute such an
Event of Default;
(b) Lessor shall have received engineering and inspection
reports relating to the assisted living facility identified by Lessee in the
applicable Substitution Notice (referred to herein as a "Proposed Facility"),
reasonably satisfactory in all respects to Lessor;
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(c) Lessee shall have delivered to Lessor (i) an MAI appraisal
of the Proposed Facility (prepared by an appraiser selected by Lessee and
approved by Lessor), in form and substance reasonably satisfactory to
Lessor and (ii) an instrument survey of the premises upon which the
Proposed Facility is located acceptable to Lessor and the title insurance
company providing insurance with respect to the Proposed Facility;
(d) Lessor shall be satisfied as to compliance of Lessee, the
Proposed Facility, the owner of the Proposed Facility (to the extent such
owner is not Lessee as provided in subsection (l) below) and/or the
proposed substitution, as the case may be, with (i) all applicable land use,
zoning, subdivision and environmental laws and regulations, (ii) all
applicable assisted living licensure laws and regulations and (iii) such other
matters as Lessor reasonably deems relevant (including, without limitation,
whether the conveyance of the property to Lessor in connection with the
proposed substitution may be avoided under the Bankruptcy Code);
(e) Lessee shall have delivered to Lessor a valid and binding
owner's or lessee's (as applicable) title insurance commitment issued by a
title insurer reasonably acceptable to Lessor (the "Title Company"), in an
amount equal to the Fair Market Value of the Proposed Facility, with such
endorsements and affirmative coverages, and in such form, as Lessor may
reasonably require insuring Lessor's fee title or leasehold title to the
Proposed Facility, subject to no Liens except those approved or assumed by
Lessor and arrangements satisfactory to Lessor shall have been made for the
issuance of a title insurance policy on the Substitution Date in accordance
with such title insurance commitment;
(f) Lessee shall have delivered an environmental site
assessment report relating to the Proposed Facility, in form and substance
reasonably acceptable to Lessor and prepared by an environmental
consultant reasonably acceptable to Lessor;
(g) Lessor shall have obtained, at Lessee's cost, an opinion of
Lessor's counsel, in form and substance acceptable to Lessor, confirming
that (i) the substitution of the Proposed Facility for the Leased Property will
qualify as an exchange solely of property of a like-kind under Section 1031
of the Code, in which, generally, except for "boot" such as cash needed to
equalize exchange values or discharge indebtedness, no gain or loss is
recognized to Lessor, (ii) the substitution or sale will not result in ordinary
recapture income to Lessor pursuant to Code Section 1250(d)(4) or any
other Code provision, (iii) the substitution or sale will result in income, if
any, to Lessor of a type described in Code Section 856(c)(2) or (3) and will
not result in income of the types described in Code Section 856(c)(4) or
result in the tax imposed under Code Section 857(b)(6) and (iv) the
substitution or sale, together with all other substitutions and sales made or
requested by Lessee or any Affiliate of Lessee or of any Guarantor pursuant
to any other leases with Lessor (or any of its Affiliates) or any other
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transfers of the Leased Property or the properties leased under other such
leases, during the relevant time period, will not jeopardize the qualification
of Lessor as a real estate investment trust under Code Sections 856-860;
(h) Lessor shall have received opinions of Lessee's counsel as
to (i) the compliance of the Proposed Facility with land use, zoning,
subdivision and environmental laws and regulations, (ii) the compliance of
Lessee, the owner of the Proposed Facility (to the extent such owner is not
Lessee as provided in subsection (l) below), the proposed substitution and
the Proposed Facility with applicable assisted living laws and regulations,
(iii) the due authorization, execution and enforceability of the Substitution
Documents and (iv) such other matters as are reasonably requested; in form
and substance reasonably acceptable to Lessor;
(i) Lessee and each Guarantor shall have executed and
delivered, or caused to be executed and delivered, such documents as are
reasonably required by Lessor to effectuate the substitution (collectively,
the "Substitution Documents"), including, without limitation, (i) a deed with
full warranties or assignment of a leasehold estate with full warranties (as
applicable) conveying to Lessor title to the Proposed Facility free and clear
of all Liens, except those approved or assumed by Lessor, (ii) a facility
lease (the "Substitution Lease") duly executed, acknowledged and delivered
by Lessee, containing the same terms and conditions as are contained herein
except that (1) the legal description of the land shall refer to the Proposed
Facility, (2) the Minimum Repurchase Price of the Proposed Facility shall
be an amount equal to the Minimum Repurchase Price of the Leased
Property increased by any Cash Adjustment paid by Lessor, (3) the Rent
under the Substitution Lease in all respects shall provide Lessor with a
substantially equivalent yield at the time of the substitution (i.e., annual
return on its equity in such Proposed Facility) to that received (and
reasonably expected to be received thereafter) from the Leased Property,
taking into account the Cash Adjustment, if any, paid by Lessor and any
other relevant factors and (4) such other changes therein as may be
necessary or appropriate under the circumstances shall be made; (iii) a
collateral assignment of permits, licenses, approvals and contracts relating
to the Proposed Facility, substantially in the form of the Permits
Assignment; (iv) UCC financing statements; (v) a guaranty substantially in
the form of the Guaranty of Lease Obligations shall be executed by
Guarantor, (vi) an affiliated party subordination agreement, substantially in
the form of the Affiliated Party Subordination Agreement, shall be executed
by the Lessee, and such other Affiliates of the Lessee as are deemed
necessary or appropriate by the Lessor and (vii) the Agreement Regarding
Related Transactions shall be amended to reflect the substitution of the
Proposed Facility. The Substitution Documents shall be based upon and
contain the same terms and conditions as are set forth in Lessee Documents
in effect prior to the substitution, except that such changes shall be made as
may be necessary or reasonably appropriate under the circumstances to
effectuate the substitution and secure the protection and priority of the
property and security interests conveyed and/or granted to Lessor;
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(j) without limiting any other provision contained herein,
Lessee shall have delivered to Lessor such other information and materials
relating to Lessee, the owner of the Proposed Facility (to the extent that
such owner is not Lessee as provided in subsection (l) below) and the
Proposed Facility as Lessor may reasonably request, including, without
limitation, leases, receipted bills, management agreements and other
Contracts, Provider Agreements, cost reports, Permits, evidence of legal
and actual access to the Proposed Facility, evidence of the availability and
sufficiency of utilities servicing the Proposed Facility, historical and current
operating statements, detailed budgets and financial statements and Lessor
shall have found the same to be satisfactory in all respects;
(k) Lessee or an Affiliate of Lessee shall be the licensed
operator of the Proposed Facility as of the date of the consummation of the
substitution;
(l) the Proposed Facility shall be owned or leased by Lessee
or an Affiliate of Lessee; provided, however that in the event that the
Proposed Facility is owned by any such Affiliate, (i) said Affiliate shall
execute and deliver to Lessor such Substitution Documents as may be
reasonably required by Lessor and (ii) Lessor shall be provided with such
evidence as it may require to determine that the conveyance of the Proposed
Facility (or a leasehold interest therein) to Lessor does not constitute a
fraudulent conveyance (under applicable federal or state law);
(m) Lessee shall have delivered to Lessor an insurance
certificate evidencing compliance with all of the insurance requirements set
forth in the Substitution Documents;
(n) Lessee shall have delivered to Lessor an Officer's
Certificate certifying as of the Substitution Date that (i) the Proposed
Facility has been accepted by Lessee for all purposes of the Substitution
Lease and there has been no material damage to the improvements located
on the Proposed Facility, nor is any condemnation or eminent domain
proceeding pending with respect thereto; (ii) all Permits (including, but not
limited to, a permanent, unconditional certificate of occupancy and all
certificates of need, licenses and Provider Agreements) which are necessary
to permit the use of the Proposed Facility in accordance with the provisions
of the Substitution Lease have been obtained and are in full force and
effect; (iii) under applicable zoning and use laws, ordinances, rules and
regulations, the Proposed Facility may be used for the purposes
contemplated by Substitution Documents and all necessary subdivision
approvals have been obtained; (iv) to the best knowledge of Lessee, there
exists no Event of Default under this Lease, and no defense, offset or claim
exists with respect to any sums to be paid by Lessee hereunder, and (v) any
exceptions to Lessor's title to the Proposed Facility do not materially
interfere with the intended use of the Proposed Facility by Lessee;
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(o) Lessor shall have determined that the Proposed Facility
constitutes a Comparable Facility, and
(p) Lessor shall have received all Rent due and payable
hereunder through the Substitution Date.
In the event that the equity value of the Proposed Facility (i.e., the
Fair Market Value of the Proposed Facility minus the Liens to which Lessor
will take the Proposed Facility subject) as of the Substitution Date is greater
than the equity value of the Leased Property (i.e., the Fair Market Value of
the Leased Property minus the Liens to which Lessee will take the Leased
Property subject other than those Liens which Lessee is obligated to pay or
discharge pursuant to the terms of this Lease) as of the Substitution Date,
subject to the limitation set forth below, Lessor shall pay an amount equal
to the difference to Lessee; provided, however, that Lessor shall not be
obligated to consummate such substitution if Lessor would be required to
make a payment to Lessee of an amount equal to or in excess of fifteen
percent (15%) of said Fair Market Value of the Leased Property (the
amount of cash paid by Lessor to Lessee being referred to herein as the
"Cash Adjustment"). Without limiting the generality or effect of the
preceding sentence, in the event that, on the Substitution Date, Lessor is
obligated to pay a Cash Adjustment to Lessee and Lessor does not have
sufficient funds available, or elects not to make such payment in cash,
Lessor shall provide Lessee with (and Lessee shall accept) a purchase
money note and mortgage for a term not to exceed eighteen (18) months
from the Substitution Date and bearing interest, payable monthly, at the rate
described in Section 10.2.
25.3 CONVEYANCE TO LESSEE. If the Lessor shall have
determined that the Proposed Facility constitutes a Comparable Facility, on
the Substitution Date, after the consummation of a substitution in
accordance with the terms hereof, Lessor will convey the Leased Property
to Lessee in accordance with the provisions of Article 18 (except as to
payment of any expenses in connection therewith which shall be governed
by Section 22.4 below) and this Lease shall thereupon terminate as to the
Leased Property. Upon completion of the purchase of the Leased Property,
no Rent shall thereafter accrue with respect thereto.
25.4 EXPENSES. Whether or not any proposed substitution is
consummated, Lessee shall pay all of the out-of-pocket expenses and other
costs incurred or expended by Lessor in connection with any proposed
substitution (collectively referred to herein as "Substitution Closing Costs"),
including, without limitation, reasonable attorneys' fees and expenses,
engineering costs, consultants' fees, appraisal costs, audit and tax review
costs, out-of-pocket travel expenses, inspection fees, title insurance
premiums and other title fees, survey expenses, mortgage taxes, transfer,
documentary stamp and other taxes, search charges of any nature,
recording, registration and filing costs, broker's fees and commissions, if
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any, escrow fees, fees and expenses, if any, incurred in qualifying Lessor
and maintaining its right to do business in the state where the Proposed
Facility is located, the cost of obtaining, preparing and recording a release
of the Leased Property from the lien of any Fee Mortgage on the Facility
(other than the amount necessary to payoff such Fee Mortgage) and any
other costs expended or incurred by Lessor in connection with the
preparation for and the documentation and/or the closing of the proposed
substitution. The Substitution Closing Costs shall be a demand obligation of
Lessee to Lessor and, if not paid within ten (10) days after demand, shall
thereafter (to the extent permitted by applicable law) bear interest at the
Overdue Rate until the date of payment.
25.5 LIMITATION. In the event that Lessee exercises its right to
construct the Project pursuant to the Leasehold Improvement Agreement,
no Substitution Right may be exercised earlier than the fifth anniversary of
the Completion Date.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Lease to be
executed and attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE: EMERITUS PROPERTIES I,
INC., a Washington
corporation
/s/ Catherine L. Pasquan By: /s/ Kelly J. Price
- ----------------------------- ------------------------
Name: Catherine L. Pasquan Name: Kelly J. Price
Title: Secretary
WITNESS: LESSOR: MEDITRUST
ACQUISITION
CORPORATION I, a
Massachusetts corporation
/s/ Kim M. Priesing By: /s/ Michael S. Benjamin
- ------------------------- ---------------------------------
Name: Kim M. Priesing Name: Michael S. Benjamin, ESQ.
Title: Senior Vice President
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SARASOTA
LEASEHOLD IMPROVEMENT AGREEMENT
AMONG
MEDITRUST ACQUISITION CORPORATION I
AND
EMERITUS PROPERTIES I, INC.
AND
EMERITUS CORPORATION
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LEASEHOLD IMPROVEMENT AGREEMENT
THIS LEASEHOLD IMPROVEMENT AGREEMENT is made as of
August 21, 1996 by and among EMERITUS PROPERTIES I, INC., a
Washington corporation (the "Lessee"), and MEDITRUST ACQUISITION
CORPORATION I, a Massachusetts corporation (the "Lessor").
1. BACKGROUND
1.1 Lessee.
Lessee is a corporation which is a wholly-owned Subsidiary the
Guarantor (as hereinafter defined). The Guarantor is a corporation the stock
of which is publicly traded on the American Stock Exchange.
1.2 The Land and Existing Improvements.
Lessor is the owner of a certain parcel of land located in Sarasota,
Sarasota County, Florida and more particularly described on EXHIBIT A
(the "Land").
1.3 The Facility Lease.
Lessor and Lessee have entered into that certain Facility Lease
Agreement of even date herewith, relating to the Land (the "Facility
Lease"), a Memorandum of which is to be recorded with the Sarasota
County, Florida real estate records.
1.4 Project.
Lessee is currently contemplating a proposal to construct an addition of [
] units and [ ] beds to the existing assisted living facility and other
improvements, including, without limitation, accessory parking and
landscaping on the Land (collectively, the "Improvements"). The Land and
the Improvements are collectively referred to herein as the "Project". Lessee
shall have until December 15, 1996 to notify Lessor in writing of its
decision to construct the Project, and Lessor shall have no obligation to
fund or permit the construction of the Project contemplated hereunder until
such time as Lessee has so elected in writing to proceed with the
construction of the Project. The obligations contained in this Leasehold
Improvement Agreement shall not take effect until Lessor receives such
notice from Lessee of its election to proceed with the construction of the
Project. Notwithstanding any other provision contained herein, this
Leasehold Improvement Agreement shall become null and void if such
notice is not received by Lessor by December 15, 1996.
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1.5 Lessor's Agreement to Fund the Project and Lessee's
Agreement to Supervise the Project.
Lessee and Lessor have agreed that the Project will be a benefit to the
premises demised under the Facility Lease and to Lessee's and Lessor's
respective interests therein. Lessor and Lessee have further agreed that,
pursuant to, and in accordance with, the terms and conditions of this
Agreement, Lessor shall fund an amount not to exceed TWO MILLION
FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) of the cost of the
Project (the "Project Funds"). Lessee has agreed to supervise and manage
the construction of the Project and Lessor has agreed to advance the Project
Funds to pay for the cost of the construction of the Project; all pursuant to
the terms and conditions of this Agreement.
1.6 Plans; the Architect and Architect's Contract.
The Improvements are to be constructed and equipped in accordance
with the plans and specifications to be delivered as provided herein
(collectively, the "Project Plans"), prepared or be prepared by an architect
to be approved by Lessor, which approval shall not be unreasonably
withheld (the "Architect") pursuant to the contract to be entered into by and
between Lessee and the Architect and approved by Lessor (the "Architect's
Contract").
1.7 Construction Contracts.
All of the Improvements are to be constructed pursuant to a guaranteed
maximum contract (the "Construction Contract") to be delivered as
provided herein by and between Lessee and a contractor to be approved by
Lessor, which approval shall not be unreasonably withheld, and approved
by Lessor (the "General Contractor").
1.8 Schedule of Work and Completion Date; Schedule of Draws.
The work necessary to complete and fully equip the Project is to be (a)
undertaken and completed in accordance with the schedule of work and
schedule of values ("Schedules") to be delivered as provided herein and
approved by Lessor; and (b) substantially completed by the first anniversary
of the date hereof (the "Completion Date") in accordance with the terms
hereof.
1. 9 Project Budget.
Lessee shall submit in accordance with the terms hereof prior to the
making of the first advance which includes amounts to be expended on the
construction or equipping of the Improvements, to Lessor a line item budget
(the "Project Budget"), for the design and construction of the Project,
including (a) a breakdown of construction costs (itemized as to trade
category, subdivision of the work to be performed and the
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names of each contractor), (b) a breakdown of all soft costs in connection
with the construction of the Project, including, without limitation, costs for
such items as real estate taxes, legal and accounting fees, survey costs,
permits and inspection fees, insurance premiums, architect's and engineer's
fees, marketing, management, leasing and advertising expenses, and all
amounts due in connection with the Advance of Project Funds pursuant to
this Agreement, (c) a projected draw schedule and (d) a projected progress
schedule for the construction of the Project.
1.10 Use of Project Funds.
The Project Funds are to be used, to the extent sufficient therefore,
solely for the payment of Project costs set forth in the Project Budget.
1.11 Project Funds.
Subject to all of the terms, conditions and provisions of
this Agreement, and of the agreements and instruments referred to herein,
Lessor agrees to advance the Project Funds and Lessee agrees to supervise
and manage the construction of the Project and to pay the Rent (as
hereinafter defined) due under the Facility Lease (as the same may from
time to time be adjusted pursuant to the terms and conditions set forth
therein); it being understood that Lessee shall be liable for the payment of
Rent regarding such sums as shall have been advanced from time to time
under this Agreement to Lessee.
1.12 Guaranties and Indemnities.
As an inducement to Lessor to enter into this Agreement, advance the
Project Funds and enter into the Facility Lease, the Guarantor has agreed to
furnish certain guaranties as hereinafter described.
2. DEFINITIONS
In this Agreement, except as otherwise expressly provided in the text of
this Agreement or unless the context otherwise requires, all capitalized
terms shall have the meaning ascribed to them in EXHIBIT E.
3. LEASEHOLD IMPROVEMENT FEE.
Lessee shall pay the Leasehold Improvement Fee to Lessor
simultaneously with the execution of this Agreement; provided, however,
that, at Lessor's option, the Leasehold Improvement Fee shall be held in an
escrow account established with a Person designated by Lessor pursuant to
an escrow arrangement satisfactory to Lessor, with interest thereon
benefiting Lessor. If Lessor exercises its option to require that the
Leasehold Improvement Fee be held in such an escrow
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account (a) the Leasehold Improvement Fee shall be disbursed from
said escrow account only upon the joint instructions of Lessee and Lessor
which instructions from Lessee shall be immediately given upon he request
of Lessor) and in no event shall the Leasehold Improvement Fee be
disbursed therefrom, in whole or in part, unless and until so requested by
Lessor and (b) Lessor shall bear he risk of loss of or misappropriation of the
Leasehold Improvement Fee by such escrow agent.
4. LEASE DOCUMENTS; COLLATERAL SECURITY
4.1 Lease Documents.
The Project Funds shall be advanced, evidenced, administered and
governed by all of the terms, conditions and provisions of each of the
following:
A. an Agreement Regarding Related Transactions of even date
herewith by and among Lessee, Lessor and ESC G.P. I Inc., as
the same may be amended from time to time;
B. this Agreement;
C. the Facility Lease;
D. a Collateral Assignment of Permits, Approvals, Licenses, and
Contracts of even date granted by Lessee to Lessor (the
"Permits Assignment") and related UCC Financing Statements;.
E. a Security Agreement of even date by and between Lessee and
Lessor (the "Security Agreement")
F. a Completion Guaranty of even date executed by the Guarantor
for the benefit of Lessor guarantying the completion of the
Project and the satisfaction of the other Guarantied Obligations
(the "Completion Guaranty");
G. by the Guarantor for the benefit of Lessor guarantying the
payment and performance of the Lease Obligations (the
"Guaranty of Lease Obligations");
H. an Environmental Indemnity Agreement of even date by and
among Lessee, the Guarantor and Lessor (the "Environmental
Indemnity Agreement");
I. a Deposit Pledge Agreement of even date by and between
Lessee and Lessor (the "Deposit Pledge Agreement");
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J. a Group Two Negative Pledge (Acquisition) Agreement dated
May l, 1996 by and among Lessee, Lessor and Guarantor (the
"Negative Pledge Agreement");
K. an Assignment of Construction Contract granted by Lessee to
Lessor and containing the consent of the General Contractor
(the "Construction Assignment");
L. an Assignment of Architect's Contract of even date granted by
Lessee to Lessor and containing the consent of the Architect (the
"Architect's Assignment");
M. an Affiliated Party Subordination Agreement of even date by
and among Lessee, the Guarantor, various Affiliates of Lessee
and Lessor (the "Affiliated Party Subordination Agreement");
and
N. all other documents, instruments, or agreements now or hereafter
evidencing or securing the obligations under this Agreement and
the Facility Lease.
Items (A) through (N) above, as the same from time to time may be
hereinafter amended, modified or supplemented, are referred to herein as
the "Lease Documents".
4.2 Lease Obligations.
Lessee agrees to pay and perform all indebtedness, covenants, liabilities,
obligations, agreements and undertakings (other than Lessor's obligations)
under this Agreement and all of the other Lease Documents (collectively,
the "Lease Obligations").
4.3 Collateral Security.
The Lease Obligations shall be secured by the following:
A. a perfected first priority security interest in all Permits and
Contracts pursuant to the Permits Assignment;
B. a security interest in Tangible Personal Property, and certain
other Collateral and a security interest in Receivables, all
pursuant to the Security Agreement;
C. the Completion Guaranty;
D. the Guaranty of Lease Obligations;
E. the Environmental Indemnity;
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F. a perfected first priority interest in the Cash Collateral pursuant
to the Deposit Pledge Agreement;
G. all other security interests in such other property for which
provision is made in the Lease Documents or at law or in equity;
and
H. certain other Related Party Agreements.
All of the property in which security interests are granted as described in
items (A) through (H) above are referred to herein as the "Collateral".
5. REPRESENTATIONS AND WARRANTIES
In order to induce Lessor to advance the Project Funds pursuant to the
terms and conditions of this Agreement, Lessee represents and warrants to
Lessor that:
5.1 Architect's Contract and Construction Contract.
The Architect's Contract and the Construction Contract, at the time of
the execution thereof will be, validly executed by, and will upon execution
be binding upon Lessee. Lessee has no reason to believe that such
agreements will not be validly executed by and binding upon the other
parties thereto;
5.2 Project Plans.
The Project Plans which will be delivered to Lessor by Lessee in
accordance with Section 7.1 will be filed with and approved by all
appropriate Governmental Authorities. All necessary Permits relating to the
Project Plans to be issued or granted by any applicable Governmental
Authority having or claiming jurisdiction over the Leased Property which
can be obtained in the ordinary course as of the date hereof have been
obtained and all such Permits are in full force and effect, are not subject to
any unexpired appeal periods or any appeals or challenges which have not
been fully resolved in favor of Lessee, and do not contain any conditions or
terms relating to the Leased Property which have not been fully satisfied or
which will not be fully satisfied by the completion of the construction of the
Project (in accordance with the Project Plans and the terms and provisions
of this Agreement). Furthermore, the Project Plans will be the plans and
specifications which shall be approved in writing by Lessor and all future
construction on the Project shall be performed in accordance with the
Project Plans, as the same may be amended or modified from time in
accordance with section 6.3.2 hereof, and the terms and conditions of this
Agreement. There are no structural defects in the
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Project of which Lessee has been advised or of which Lessee has notice or
knowledge except as otherwise described in writing to Lessor or actually
known by Lessor. Lessee has not received any notice claiming that, and
Lessee has no knowledge that, the Project Plans violate any Legal
Requirement;
5.3 Prior Construction Work.
No Person has performed any construction work or furnished any
services in connection with any construction carried on or to be carried on
at the Leased Property who or which remains unpaid at the time of
execution of this Agreement, except as indicated in the requisition
submitted simultaneously herewith or otherwise expressly approved by
Lessor and, if applicable, the Other Permitted Uses;
5.4 Suitability of Project Plans.
The Project Plans shall provide for the construction and renovation of all
buildings and related improvements necessary, both legally and practically,
for the construction of the Project in accordance with
the terms of this Agreement and, after the completion of the construction
thereof, for the operation of the project for its Primary Intended Use;
5.5 Compliance with Legal Requirements and Applicable Agreements.
Upon the completion of construction of the Project, which
shall be constructed in accordance with the Project Plans and the terms and
provisions of this Agreement, the Project shall be in compliance with (a) all
Legal Requirements; (b) all Permits and Contracts and (c) all applicable by-
laws, codes, rules, regulations and restrictions of the Board of Fire
Underwriters or other insurance underwriters or similar bodies.
5. 6 Permits and Contracts.
All Permits and Contracts required by or entered into with any
Governmental Authority or quasi-governmental authority or agency for, or
in connection with, the construction of the Project which can be obtained in
the ordinary course as of the date hereof have been obtained or executed, as
the case may be. All such Permits and Contracts are in full force and effect,
are not subject to any unexpired appeal periods or any appeals or challenges
which have not been conclusively resolved in favor of any member of the
Leasing Group, and do not contain any conditions or terms which have not
been fully satisfied or which will not be fully satisfied by the completion of
the construction of the Project (if constructed in accordance with the Project
Plans and the terms and provisions of this Agreement). There is
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no action pending, or, to the best knowledge and belief of Lessee,
recommended by the applicable Governmental Authority having
jurisdiction thereof, either to revoke, repeal, cancel, modify, withdraw or
suspend any such Permit or Contract relating o the construction of the
Project, or any other action of any other type which would have a material
adverse effect on the Project. All other Permits and Contracts required for
the completion of the construction of the Project and the operation of the
Facility are described on SCHEDULE 5.6 annexed hereto and Lessee has
no reason to believe such Permits and Contracts shall not be obtainable as
and when needed.
5.7 First Advance.
As of the date of the first advance of Project Funds to
Lessee pursuant to this Agreement, the amount of the money expended by
Lessee on account of the construction of the Project in accordance with the
Project Plans and the items listed on Project Budget will not be less than the
amount of such first advance.
5.8 Valid and Binding.
Lessee is duly authorized to make and enter into all of the Lease
Documents to which Lessee is a party and to carry out the transactions
contemplated therein. All of the Lease Documents to which Lessee is a
party have been duly executed and delivered by Lessee, and each is a legal,
valid and binding obligation of Lessee, enforceable in accordance with its
terms.
5.9 No Violation.
The execution, delivery and performance of the Lease Documents and
the consummation of the transactions thereby contemplated shall not result
in any breach of, or constitute a default under, or result in
the acceleration of, or constitute an event which, with the giving of notice
or the passage of time, or both, would result in default or acceleration of
any obligation of any member of the Leasing Group under any of the
Permits or Contracts or any other contract, mortgage, lien, lease, agreement,
instrument, franchise, arbitration award, judgment, decree, bank loan or
credit agreement, trust indenture or other instrument to which any member
of the Leasing Group is a party or by which any member of the Leasing
Group may be bound or affected and do not violate or contravene any Legal
Requirement.
5.10 Consents and Approvals.
Except as already obtained or filed or as reasonably expected to be
obtained in the ordinary course of business prior to or upon the Completion
of the Project, as the case may be, no consent or approval or other
authorization of, or exemption by, declaration or filing with,
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any Person and no waiver of any right by any Person is required to
authorize or permit, or is otherwise required as a condition of the execution,
delivery and performance of its obligations under the Lease Documents, the
Construction Contract if and when the same is duly executed by the parties
thereto or the Architect's Agreement by any member of the Leasing Group
or as a condition to the validity (assuming the due authorization; execution
and delivery by Lessor of the Lease Documents to which it is a party) and
the priority of any Liens granted to Lessor under the Lease Documents,
except the filing of the Financing Statements.
5.11 Pending Actions, Notices and Reports.
(a) There is no action or investigation pending or, to the best knowledge
and belief of Lessee, threatened, anticipated or contemplated (nor, to the
knowledge of Lessee, is there any reasonable basis therefor) against or
affecting the Leased Property or any member of the Leasing Group (or any
Affiliate thereof) before any Governmental Authority, which could prevent
or hinder the consummation of the transactions contemplated hereby or call
into question the validity of any of the Lease Documents or any action
taken or to be taken in connection with the transactions contemplated
thereunder or which in any single case or in the aggregate might result in
any material adverse change in the business, prospects, condition, affairs or
operations of any member of the Leasing Group or the Leased Property
(including, without limitation, any action to revoke, withdraw or suspend
any Permit necessary or desirable for the construction of the Project for its
Primary Intended Use. (b) No member of the Leasing Group has received
any notice of any claim, requirement or demand of any Governmental
Authority, to take action so as to make the Project or the Leased Property
conform to or comply with any applicable Legal
Requirement.
6. COVENANTS
6.1 Collection and Enforcement Costs.
Upon demand, Lessee shall reimburse Lessor for all costs and expenses,
including, without limitation, attorneys' fees and expenses and court costs,
paid or reasonably incurred by Lessor in connection with the collection of
any sum due hereunder, or in connection with the enforcement of any of
Lessor's rights or any member of the Leasing Group's obligations under this
Agreement or any of the other Lease Documents. Any amount due and
payable to Lessor pursuant to the provisions of this Section shall be a
demand obligation and, to the extent permitted by law, shall be added to the
Lease Obligations and shall be secured by the Liens created by the Lease
Documents as fully and effectively and with the same priority as every
other obligation of
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Lessee secured thereby and, if not paid within ten (10) days after demand,
shall thereafter, to the extent permitted by applicable law, bear interest at
the Overdue Rate until the date of payment. The obligation of Lessee to pay
all costs, charges and sums due hereunder or under any of the other Lease
Documents shall continue in full force and effect and in no way shall be
impaired, until the actual payment thereof to Lessor. In the rent of (a) a
sale, conveyance, transfer or other disposition of the Leased Property, (b)
any further agreement given to secure the payment of the obligations set
forth herein or (c) any agreement or stipulation extending the time or
modifying the terms of payment set forth herein, Lessee shall nevertheless
remain obligated to pay the indebtedness evidenced by this Agreement, as
extended or modified by any such agreement or stipulation, unless Lessee is
released and discharged from such obligation by a written agreement
executed by Lessor.
6.2 Continuing Effect of Representation and Warranties.
All representations and warranties contained in this Leasehold
Improvement Agreement shall constitute continuing representations and
warranties which shall remain true, correct and complete throughout the
Term.
6.3 Construction Covenants.
6.3.1 Commencement of Construction.
If construction of the Project has not already begun, Lessee shall
commence construction of the Project within thirty (30) days from the later
of the date hereof or of issuance of a building permit for the Project. Lessee
shall diligently and continuously cause the Project to be constructed and
completed and made ready for occupancy and use in accordance with the
Project Plans all in a manner satisfactory to Lessor on or before the
Completion Date. Notwithstanding anything to the contrary contained
herein, Lessee shall be and shall remain unconditionally liable to Lessor for
(a) the complete construction of the Project in accordance with the Project
Plans on or before the Completion Date and whether or not proceeds of the
Project Funds remaining to be disbursed hereunder, if any, are sufficient to
cover all costs of construction and (b) the complete performance of all
other obligations, covenants, agreements and liabilities of Lessee hereunder.
6.3.2 Quality of Materials and Workmanship.
The materials used in the Project shall be of the quality called for by the
Project Plans, and the workmanship shall be in conformity with the
Construction Contract and this Agreement, and both the quality of such
materials and such workmanship shall be satisfactory to Lessor. Lessee
shall not make any changes in, and shall not permit the General
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Contractor or the Architect to make any changes in, the quality of such
materials, the Project Plans or the Project Budget, whether by change order
or otherwise, without the prior written consent of Lessor, in each instance
(which consent may be withheld in Lessor's reasonable discretion);
provided, however, that such consent shall not be required for any
individual change which has been approved by the Architect, which does
not materially affect the structure or exterior of the Project, and the cost of
which does not exceed TEN THOUSAND DOLLARS ($10,000) or which
changes, in the aggregate, do not exceed ONE HUNDRED THOUSAND
DOLLARS ($100,000) in cost. Notwithstanding the foregoing, prior to
making any change in Project Plans, copies of all change orders shall be
submitted by Lessee to Lessor and Lessee shall also deliver to Lessor
evidence satisfactory to Lessor, in its reasonable discretion, that all
necessary Permits and/or Contracts required by any Governmental
Authority in connection therewith have been obtained or entered into, as the
case may be.
6.3.3 Project Budget.
Upon the request of Lessor, Lessee shall furnish Lessor with revisions
for the Project Budget to reflect (a) any changes approved by Lessor to the
Project Budget, (b) the total cost of the construction of the Project
completed through any specific date and (c) the remaining cost to complete
the construction of the Project in accordance with the Project Plans and the
terms and provisions of this Agreement.
6.3.4 Architect Certificates.
Lessee agrees to cause the Architect to furnish such statements as to
progress and certificates of completion as Lessor may reasonably require
from time to time during such period as this Agreement may be in effect, all
without expense to Lessor; provided, however, that to the extent the
delivery of such certificates will require a visit to the Project, Lessee shall
have no obligation to deliver the same more frequently than with every
other advance request hereunder. Lessee agrees to cause the Architect to
make the Project Plans available to Lessor without expense to Lessor, and
to agree that, in the event that Lessor shall take over the Project by reason
of an occurrence of a Lease Default, Lessor shall be entitled to use said
Project Plans without any additional compensation to the Architect above
what is required (and was not previously paid) under the Architect's.
Contract.
6.3.5 Intentionally Deleted.
6.3.6 Lessor's Consultants.
Lessee agrees to pay the costs and expenses reasonably incurred by
Lessor
to retain the Consultants to perform various services to Lessor in
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connection with the construction of the Project and the advances of Project
Funds contemplated hereunder, including, without limitation, the following:
A. to review and analyze the Project Plans and advise Lessor
whether the same are satisfactory for the intended purposes
thereof;
B. to make periodic inspections of the Leased Property for the
purpose of assuring that construction performed in connection
with the Project prior to the date of such inspection has been
completed in accordance with the Project Plans and Agreement;
C. to review Lessee's then current requisition to determine whether
it is consistent with the obligations of Lessee under this
Agreement, and to advise Lessor of the anticipated costs of, and
the time for, the completion of the Project in accordance with
the Project Plans, and the adequacy of reserves and
contingencies related thereto;
D. to review and analyze any proposed changes to the Project Plans
and advise Lessor regarding the same;
E. to review and analyze the Project Budget and advise Lessor as to
the sufficiency thereof; and
F. to review and analyze the Architect's Contract and the
Construction Contract entered into by Lessee in connection with
the construction of the Project and advise Lessor regarding the
same. Except as otherwise expressly provided herein, Lessee
agrees promptly to make such changes or corrections in the
construction of the Project as may be required by Lessor, based
on the recommendation of any of the Consultants, unless Lessee
demonstrates to Lessor's satisfaction that such corrective work is
inconsistent with the Project Plans
6.3.7 Title To Materials and Security Interest Granted to
Lessor
Except as otherwise expressly provided herein, Lessee shall not
suffer the use in connection with any construction relating to the Project of
any materials, fixtures or equipment intended to become part of the Project
which are purchased upon lease or conditional bill of sale or to which
Lessee does not have absolute and unencumbered title. Lessee covenants to
cause to be paid punctually all sums becoming due for labor, materials,
fixtures or equipment used or purchased in connection with any such
construction and, in recognition of the fact that it is intended that the
Project Funds be used to pay for the costs of
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the construction of the Project on behalf of the Lessor, Lessee agrees that
title to all materials, fixtures and equipment that are incorporated into the
Project shall automatically pass to Lessor upon such incorporation without
the need for the execution or delivery of any further instrument of
conveyance. Notwithstanding the foregoing, in order to more fully secure
Lessor with reference to all advances of Project Funds made hereunder,
Lessee hereby conveys to Lessor a security interest in all of Lessee's right,
title and interest in materials on the Leased Property which are not at any
relevant time incorporated into the Project and materials, wherever located,
intended for incorporation into the Project. Lessee agrees:
A. that Lessor shall have all the rights, with reference to such
security, as a secured party is entitled to hold with
reference to any security interest under the UCC;
B. that such security interest shall cover cash and
non-cash proceeds of such materials;
C. that such materials will not be held for sale to
others or disposed of by Lessee without the prior
written consent of Lessor and, if at any time
located on the Leased Property shall be suitably
stored, secured and insured and furthermore, shall
not be removed from the Leased Property; and
D. that such security interest shall be prior to the
rights of any other Person other than the
Permitted Prior Security Interests.
The undertakings of Lessee in this Section shall also be applicable to any
personal property that is owned by Lessee and that is used (or to be used) in
connection with the Project, whether or not the purchase thereof was
financed by advances of Project Funds made by Lessor.
Lessee agrees to execute such instruments as Lessor may from time to time
request to perfect the security interest of Lessor in any and all rights under
this Agreement and the other Lease Documents, and any and all property of
Lessee which, under applicable provisions of this Agreement and/or any of
the other Lease Documents, may or shall stand as security for advances of
Project Funds under this Agreement and for the complete performance of
the Lease Obligations.
6.3.8 Compliance With Legal Requirements And
Applicable Agreements.
Lessee, the Project Plans and the Leased Property and all uses thereof
(including, without limitation, the construction of the Project) shall comply
with (a) all Legal Requirements, (b) all Permits and Contracts, (c) all
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applicable by-laws, codes, rules, regulations and restrictions of the Board of
Fire Underwriters or other insurance underwriters or similar body and (d)
the Lease Documents, except to the extent any of the matters represented in
clause (a) or (c) are being duly contested in accordance with the terms of
the Lease.
6.3.9 Liens.
The Leased Property shall at all times be free from any attachment,
encumbrance, lis pendens, mechanic's or materialmen's lien or notice
arising from the furnishing of materials or labor and, with the exception of
the Permitted Encumbrances, all other Liens of any kind except to the
extent the same is being duly contested in accordance with the terms of the
Lease or the terms hereof. Lessee shall not permit the recording of any
notice of contract or mechanic's or materialmen's lien relating to
construction of the Project or otherwise affecting the Leased Property
except to the extent the same is being duly contested in accordance with the
terms of the Lease or the terms hereof. Notwithstanding the foregoing
provisions of this. Section 6.3.09, the existence of an attachment or lis
pendens for a period not in excess of thirty (30) days shall not be deemed to
be a default hereunder provided that (a) there shall be no cessation of
construction of the Project, (b) a Lease Default has not occurred and (c)
Lessee shall proceed promptly to cause such attachment or lis pendens to be
removed, but Lessor shall not be obliged to make any further advance under
this Agreement while such attachment or lis pendens remains outstanding,
unless a bond, satisfactory to Lessor, has been posted as security for such
attachment or lis pendens.
6.3.10 Books And Records.
Lessee shall cause to be kept and maintained, and shall permit Lessor
and its representatives to inspect at all reasonable times, accurate books of
accounts in which complete entries will be made in accordance with GAAP,
if applicable, reflecting all financial transactions of Lessee relating to the
Project (showing, without limitation, all materials ordered and received and
all disbursements, accounts payable and accounts receivable in connection
with the construction of the Project and the operation of the Leased
Property). Such books and records must accurately reflect that all funds
advanced hereunder for construction of the Project have been used solely
for the payment of obligations and expenses properly incurred in
accordance with the Project Budget.
6.3.11 Inspection Of Construction.
Lessor and its representatives including, without limitation, the
Consultants, shall, at all times as long as this Agreement remains in effect,
have the right to enter the Leased Property, upon reasonable
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notice to Lessee and at reasonable times (except in the event of an
emergency) for the purpose of inspecting the Project and the progress of the
work and materials thereon, and if any such inspection reveals that Lessee
is not in compliance herewith (in its sole and absolute discretion), then
Lessor shall not be obligated to make any further advances under this
Agreement to Lessee.
6.3.12 Notice Of Delay.
Lessee shall give to Lessor prompt written notice of any fire, explosion,
accident, flood, storm, earthquake or other casualty or strike, lock out, act
of God or interruption of the construction of the Project which is reasonably
anticipated to interfere with the ability of Lessee to complete the Project by
the Completion Date.
6.3.13 Bonds.
Performance, payment and lien bonds, in form and substance and
guaranteed by sureties satisfactory to Lessor (in its sole and absolute
discretion), shall be furnished to Lessor in connection with the Construction
Contract in amounts at least equivalent to the amount of such contract,
naming Lessor as a dual obligee and shall be furnished to Lessor prior to
the commencement of any work pursuant to such contract.
6.3.14 Use of Project Funds.
Lessee shall utilize all advances by Lessor pursuant to the terms of this
Agreement only for those items for which requisitions are permitted under
this Agreement or for reimbursement of expenditures already made for
items for which requisitions are so permitted. Lessee agrees to hold all
advances by Lessor hereunder as a trust fund for the purpose of payment of
the costs and expenses permitted under this Agreement.
6.3.15 Occupancy of the Project.
Lessee shall not permit any occupancy of the
Project (other than such occupancy as is required in connection with the
construction thereto) prior to (a) the substantial completion of that portion
of the Project being occupied and (b) the issuance by the appropriate
Governmental Authorities of a Certificate of Occupancy (or its equivalent)
permitting the occupancy of the Project for its Primary Intended Use and, if
applicable, the Other Permitted Uses. The Project shall not be deemed to
have been completed unless and until constructed in accordance with this
Agreement and a Certificate of Occupancy (or its equivalent) permitting the
occupancy of the Project for its Primary Intended Use has been issued by
the applicable Governmental Authorities.
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7. CONSTRUCTION ADVANCES
7.1 Conditions Precedent to First Advance of Project Funds.
Prior to the first advance of Project Funds contemplated by this
Agreement, and as a condition of Lessee's right to receive any of the
proceeds of the Project Funds, there shall have been furnished to Lessor:
A. An owner's title insurance policy in form and substance
satisfactory to Lessor, in its sole and absolute discretion,
issued by a title insurance company or companies satisfactory
to Lessor (the "Title Company") with such endorsements,
reinsurance and/or co-insurance as Lessor may require,
insuring Lessor's fee title to the Leased Property free from all
Liens and without exception for (i) filed or unfiled mechanics'
liens, (ii) survey matters, (iii) rights of parties in possession,
(iv) environmental liens and (v) any other matters of any kind
or nature whatsoever other than the Permitted Encumbrances
(the "Title Policy");
B. Such evidence as Lessor may require that the use
contemplated for the Project, and all of the improvements and
construction contemplated by the Project Plans, comply with
all applicable Legal Requirements, to the extent in force and
applicable;
C. Insurance policies and/or Certificates of Insurance required
pursuant to the terms and provisions of the Facility Lease;
D. Such evidence as Lessor may require to determine that
the total cost of completion of the Project in all
respects, including all related direct and indirect
costs as previously approved by Lessor, will not exceed
the amount set forth in the Project Budget;
E. Such evidence as Lessor may require that Lessee's
representations and warranties contained herein and in
all of the other Lease Documents are true and correct
in every material respect;
F. Such evidence as Lessor may require as to the
satisfaction of such of the terms and conditions of
this Agreement and of the other Lease Documents as may
by their nature be satisfied prior to the making of
such advance;
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G. Such evidence as Lessor may require that all
outstanding Impositions which are due and payable as of
the date of the First Advance pertaining to the Leased
Property have been paid in full in accordance with the
terms of the Facility Lease;
H. A current instrument survey, satisfactory in form and
content to Lessor, prepared in accordance with the
requirements set forth in EXHIBIT G (the "Survey") and
a certificate substantially in the form of EXHIBIT H
(the "Surveyor's Certificate"), prepared and signed by
a surveyor licensed to do business in the state where
the Leased Property is located with his or her seal
affixed thereto;
I. True and correct copies of the Construction Contract and the
Architect's Contract in effect with respect to the Project,
as well as all receipted bills paid by Lessee to the General
Contractor and the Architect for goods and/or
services rendered with respect to the Project prior to the date
hereof;
J. A certificate from an engineer and/or architect, registered as
such in the state where the Leased Property is located,
substantially in the form attached hereto as EXHIBIT H,
certifying as to the (i) compliance of the Leased Property with
all , applicable Legal Requirements, (ii) the availability and
adequacy of access/egress to and from the Leased Property
and (iii) the availability and adequacy of sewer, drainage,
water, electric and other utility services to the lot line of the
Leased Property; together with such other assurances
concerning the design of the Project as Lessor may require;
K. Lessor's receipt of opinions, in forms satisfactory to
Lessor (in its sole and absolute discretion), from Lessee's
counsel and the Guarantor's counsel, regarding (i) the due
execution, authority and enforceability of the Lease
Documents; (ii) the compliance of the Leased Property and the
Project, in all material respects, with applicable zoning and
other land-use Legal Requirements (except in such instances
in which a satisfactory title insurance zoning endorsement has
been issued); (iii) the valid issuance of the Certificate of Need,
if applicable, and all other Permits required for the
construction of the Project, the continuing effectiveness of
said Certificate of Need, if applicable, and other Permits and
Lessee's and Project's compliance therewith and (iv) such
other matters as Lessor may reasonably request (collectively,
the "Opinions");
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L. Payment of the Leasehold Improvement Fee (subject,
however, to the provisions of Section 3 hereof);
M. True and correct copies of all Permits and Contracts
relating to the construction and operation of the Project
(including, without limitation, an
unconditional building permit or a building permit
which is subject only to such conditions as will be fully
satisfied by the completion of the construction of the Project
in accordance with the Project Plans and this Agreement);
N. Such evidence as Lessor may require that there has been
no material adverse change in the financial condition
and strength of Lessee and the Guarantor, and that the
Leased Property shall have sustained no impairment,
reduction, loss or damage which has not been fully
restored and repaired, and that no Condemnation
proceedings or other governmental action is or shall be
pending against or with respect thereto;
O. Such evidence as Lessor may require that the General
Contractor and the Architect maintain adequate
insurance, as determined in Lessor's reasonable.
discretion;
P. True and correct copies of all payment, performance and
completion bonds required pursuant to 6.3.13 hereof;
Q. A fully executed Construction Assignment, in form and
substance satisfactory to Lessor; and
R. A fully executed and authorized Architect's Assignment, in
form and substance satisfactory to Lessor.
S. The Project Plans, in form and substance satisfactory
to Lessor;
T. The Schedules, in form and substance satisfactory to
Lessor;
U. The Project Budget, in form and substance satisfactory
to Lessor;
V. Funding forecasts, in form and substance satisfactory
to Lessor.
7.2 Lessor's Right to Advance the Project Funds.
Without at any time waiving any of Lessor's rights hereunder, Lessor
shall have the right to make the first advance of a portion of the
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Project Funds hereunder without the satisfaction of each and every
condition precedent to Lessor's obligation to make such advance, and
Lessee agrees to accept such advance as Lessor may elect to make. The
making of any advance hereunder shall not constitute an approval or
acceptance by Lessor of any work on the Project theretofore completed.
7.3 Submission of Requests for Advances of the Project Funds.
Advances under this Agreement shall be made not more than once each
month and at least ten (10) days before the date upon which an advance is
requested, Lessee shall give notice to Lessor, specifying the total advance
which will be desired, accompanied by :
A. Itemized requisitions for advances or, at Lessee's
option, for reimbursements to Lessee for prepaid items,
signed by Lessee, the Architect and the General
Contractor on A.I.A. Forms G702, G702A or G703 or such
other form(s) as Lessor may reasonably require
(together with copies of invoices or receipted bills
relating to items covered by such requisitions when so
requested by Lessor). All such requisitions shall
include an indemnification of Lessor by the Architect,
the General Contractor and Lessee, jointly and
severally, to the extent such indemnification is
available from the General Contractor and the Architect
upon Lessee's best efforts to obtain such
indemnification, against any and all claims of any
subcontractors, laborers and suppliers;
B. A certificate executed by Lessee substantially in the
form attached hereto as EXHIBIT I;
C. A certificate executed by the General Contractor
substantially in the form attached hereto as EXHIBIT
J;
D. With respect to every other Advance requested, a
certificate executed by the Architect substantially in the
form attached hereto as EXHIBIT K.
E. At Lessor's request, certificates executed by the
Consultants in such form as Lessor may reasonably
require;
F. To the event the Advance is not clearly subject to
effective coverage, an endorsement of the Title Policy
issued by the Title Company, satisfactory in form and
substance to Lessor, redating the Title Policy to the
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date that the then current advance will be made,
increasing the coverage afforded by the Title Policy so
that the same shall constitute insurance in an amount
at, least equal to the sum of the amount of the
insurance then existing under the Title Policy plus the
amount of the then current advance of Project Funds to
be disbursed to Lessee under this Agreement and subject
to no additional exceptions other than the Permitted
Encumbrances;
G. If and when reasonably requested by Lessor,
satisfactory assurance that the construction of the
Project has been performed in accordance with the
requirements of the Construction Contract, the Project
Plans, this Agreement and all of the other Lease
Documents and has been inspected and found satisfactory
by the parties hereto;
H. If and when reasonably requested by Lessor, an updated
Surveyor's Certificate substantially in the form
attached hereto as EXHIBIT G and/or updated
Engineer's/Architect's Certificate substantially in the
form attached hereto as EXHIBIT H;
I. If and when requested by Lessor, updated Opinions from
Lessee's counsel and the Guarantor's counsel (in form
and substance satisfactory to Lessor in its sole and
absolute discretion);
J. If and when requested by Lessor, satisfactory evidence
that the funds remaining unadvanced under this
Agreement are sufficient for the payment of all related
direct and indirect costs for the completion of the
Project in accordance with the terms and provisions
hereof. If the evidence furnished shall not be
satisfactory to Lessor, in its sole and absolute
discretion, it shall be a condition to the making of
any further advance hereunder that Lessee will provide
Lessor with such financial guaranties (whether in the
form of a bond, cash deposit, letter of credit or
otherwise) as are acceptable to Lessor, in its sole and
absolute discretion, to assure the completion of the
construction of the Project in accordance with the
Project Plans and the terms and conditions of this
Agreement. In the event that Lessor requires a cash
deposit from Lessee, Lessee shall deposit with Lessor
such funds, to be held in an interest bearing account
with the interest accruing thereon to the benefit of
Lessee, which, together with such unadvanced funds of
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the Loan, shall be sufficient to pay all of the
aforesaid costs. All funds so deposited with Lessor
along with the proceeds thereof, shall be disbursed
prior to any further advance hereunder and upon
completion of the Project any remaining funds so
deposited or any unadvanced portion of the Project
Funds, shall be remitted to Lessee;
K. A certification of work completed by the General
Contractor, together with a statement of the payment
due therefor;
L. Partial lien waivers from the General Contractor for
all work theretofore performed, and from all other
contractors and all subcontractors and suppliers for
all work, the cost of which in each instance exceeds
ONE THOUSAND DOLLARS ($1,000.00), which was the
subject of a requisition in the immediately preceding month;
M. If and when reasonably requested, Lessee shall deliver
to Lessor an updated Survey of the Leased Property,
acceptable to Lessor (in its reasonable discretion);
N. Evidence satisfactory to Lessor (in its reasonable
discretion) that all materials and other property
furnished by any contractors, subcontractors,
materialmen or other Persons, the cost of which will be
paid with the proceeds of the advance to be made by
Lessor, are free and clear of all Liens, except
(a) encumbrances, if any, (securing indebtedness due to
Persons whose names, addresses and amounts due to them
are identified to Lessor) that shall be discharged upon
the disbursement of the funds then being requested, (b)
the Liens created by the Lease Documents and (c) the
Permitted Encumbrances;
O. Such evidence as Lessor may require that there has been no
material adverse change in the financial condition and
strength of Lessee and the Guarantor, and that the Leased
Property shall have sustained no impairment,reduction, loss or
damage which has not been fully restored and repaired and that
no condemnation is or shall be pending against or with respect
thereto; and
P. Prior to the first advance which includes amounts to be
expended on the construction or equipping of the
Improvements, Lessee shall, to the extent not previously delivered
to Lessor, submit to Lessor true and
correct copies of (i) the Project Budget, (ii) the Project Plans,
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(iii) the Schedules and (iv) the Construction Contract, each of
which shall be in form and content satisfactory to Lessor (in its
sole and absolute discretion);
Lessee hereby designates George Lenes as Lessee's construction
representative with authority to approve requisitions and to execute
certificates to be delivered pursuant to Section 13.3B on behalf of Lessee.
7.4 Advances by Wire Transfer.
All advances hereunder shall be made by wire transfer of funds into a
bank account maintained by either Lessee or an authorized agent of Lessee.
7.5 Conditions Precedent to All Advances:
A. Advances hereunder shall be made solely for the payment
of the costs and expenses incurred by Lessee directly in
connection with the construction of the Project;
consistent with the Project Budget, which are required to
be paid out-of-pocket to all other Persons or to reimburse
Lessee for out-of-pocket costs incurred by it pursuant to
the Project Budget. No funds advanced by Lessor shall be
utilized for any purpose other than as specified
herein and none of the Project Funds shall be paid over to
any officer, stockholder or employee of any member of
the Leasing Group or to any of the Persons collectively
constituting any member of the Leasing Group or those
holding a beneficial interest in any member of the Leasing
Group, or any employee thereof, except to the extent
funds are used to pay compensation to an employee for
and with respect to activity of such employee
in construction of the Project.
B. The amount of each requisition shall represent (i) the cost
of the work completed on the Project as of the date of
such requisition, which has not been paid for under prior
requisitions, (ii) the cost of all equipment, fixtures and
furnishings included within the Project Budget approved
by Lessor, which has not been paid for under prior
requisitions, but not incorporated into any contract
and which have been delivered to the Leased Property for
incorporation into the Project; provided that, in Lessor's
judgment, such materials are suitably stored, secured and
insured and that Lessee can furnish Lessor with evidence
satisfactory to Lessor of Lessee's unencumbered title
thereto and (iii) approved soft costs, which have not been
paid for under prior requisitions.
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C. All requisitions for the first fifty percent (50%) of the
Project Funds shall be subject to a ten percent (l0%)
retainage for the completion of the Project, and no
retainage shall be required with respect to all requisitions
thereafter. It is understood that such retainage is intended
to provide a contingency fund to assure that the
construction of the Project shall be fully completed in
accordance with the Project Plans and the terms
and provisions of this Agreement. All amounts so withheld
shall be disbursed after (i) construction of the Project has
been fully completed in accordance with the Project Plans
and the terms and provisions of this Agreement, (ii) all of
the items set forth in Section 7.6 hereof have been
delivered to Lessor and (iii) the expiration of the period
during which liens may be perfected with respect to any
work performed or labor or materials supplied in
connection with the construction of the Project or the
receipt of such evidence as may be required to assure
Lessor that no claim may thereafter arise with respect to
any work performed or labor or materials supplied in
connection with the construction of the Project.
D. At the time of each advance, no event which constitutes, or
which, with notice or lapse of time, or both, would
constitute, a Lease Default shall have occurred and be
continuing.
E. Without at any time waiving any of Lessor's rights under
this Agreement, Lessor shall always have the right to
make an advance hereunder without satisfaction of each
and every condition upon Lessor's obligation to make an
advance under this Agreement, and Lessee agrees to
accept any advance which Lessor may elect to make
under this Agreement. Notwithstanding the foregoing,
Lessor shall have the right, notwithstanding a waiver
relative to the first advance or any subsequent advance
hereunder, to refuse to make any and all subsequent
advances under this Agreement until each and every
condition set forth in this Section has been satisfied. The
making of any advance hereunder shall not constitute an
approval or acceptance by Lessor of any work on the
Project theretofore completed.
F. If, while this Agreement is in effect, a claim is made that
the Project does not comply with any Legal Requirement
or an action is instituted before any Governmental
Authority with jurisdiction over the Leased Property or
Lessee in which a claim is made as to whether the Project
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does so comply, Lessor shall have the right to defer any
advance of Project Funds which Lessor would otherwise
be obligated to make until such time as any such claim is
finally disposed of favorably to the position of Lessee,
without any obligation on the part of Lessor to make a
determination of, or judgment on, the merits of any such
claim. For the purposes of the foregoing sentence, the
term "claim" shall mean an assertion by any
Governmental Authority or Person as to which, in each
case, Lessor has made a good faith determination that the
assertion may properly be made by the party asserting the
same, that the assertion, on its face, is not without
foundation and that the interests of Lessor require that
the assertion be treated as presenting a bona fide risk of
liability or adverse effect on the Project.
If any such proceeding is not favorably resolved within
thirty (30) days after the commencement thereof, Lessor
shall also have the right, at its option, to treat the
commencement of such action as a Lease Default, for
which Lessor shall have all rights herein specified for a
Lease Default. As aforesaid, Lessor shall have no
obligation to make a determination with reference to the
merits of any such claim. No waiver of the foregoing right
shall be implied from any forbearance by Lessor in
making such election or any continuation by Lessor in
making advances under this Agreement.
In all events, Lessee agrees to notify Lessor forthwith
upon learning of the assertion of any such claim or the
commencement of any such proceedings.
G. It is contemplated that all advances of the Project Funds
made by Lessor to Lessee will be pursuant to this
Agreement.
H. No inspections or any approvals of the Project during or
after construction shall constitute a warranty or
representation by Lessor or any of the Consultants as to
the technical sufficiency, adequacy or safety of any
structure or any of its component parts, including, without
limitation, any fixtures,
equipment or furnishings, or as to the subsoil conditions
or any other physical condition or feature pertaining to
the Leased Property. All acts, including any failure to
act, relating to the Leased Property by any agent,
representative or designee of Lessor (including, without
limitation, the Consultants) are performed solely for the
benefit of Lessor to assure the payment and performance
of the Obligations and are not for the benefit of Lessee or
the benefit of any other Person.
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7.6 Completion of the Project.
Upon the completion of the construction of the Project in accordance
with the Project Plans and the terms and provisions of this Agreement,
Lessee shall provide Lessor with (A) true, correct and complete copies of (i)
a final unconditional Certificate of Occupancy (or its equivalent) issued by
the appropriate governmental authorities, permitting the occupancy and use
of the Project for its Primary Intended Use and (ii) all Permits issued by the
appropriate Governmental Authorities which are necessary in order to
operate the Project as a fully-licensed assisted living facility, (B) a
certification from the Architect or the Consultants stating that the Project
was completed in accordance with the Project Plans, (C) an updated Survey
of the Leased Property, acceptable to Lessor (in its sole and absolute
discretion), (D) updated Opinions and (E) such other items relating to the
operation and/or construction of the Project as may be reasonably requested
by Lessor.
8. LESSOR'S RIGHT TO MAKE PAYMENTS AND TAKE
OTHER ACTION
Lessor may, after ten (10) Business Days' prior notice to Lessee of its
intention so to do (except in an emergency when such shorter notice shall
be given as is reasonable under the circumstances), under Lessee
demonstrates the same has already been paid, pay any sums due or claimed
to be due for labor or materials furnished in connection with the ownership,
construction, development, maintenance, management, repair, use or
operation of the Leased Property, and any other sums which in the
reasonable opinion of Lessor, or its attorneys, it is expedient to pay, and
may take such other and further action which in the reasonable opinion of
Lessor is reasonably necessary in order to secure (A) the completion of the
Project in accordance with the Project Plans and the terms and conditions of
this Agreement, (B) the protection and priority of the security interests
granted to Lessor pursuant to the Lease Documents and (C) the
performance of all obligations under the Lease Documents. Lessor, in its
sole and absolute discretion, may charge any such payments against any
advance that may otherwise be due hereunder to Lessee or may otherwise
collect such amounts from Lessee, and Lessee agrees to repay
to Lessor all such amounts, which may exceed the line item amount therefor
in the Project Budget. Any amount which is not so charged against
advances due hereunder and all costs and expenses reasonably incurred by
Lessor in connection therewith (including, without limitation, attorneys'
fees and expenses and court costs) shall be a demand obligation of Lessee
and, to the extent permitted by applicable law, shall be added to the Lease
Obligations and secured by the Liens created by the Lease Documents, as
fully and effectively and with the same priority as every other obligation of
Lessee thereunder and, if not paid within ten (10) days after demand, shall
thereafter, to the extent
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permitted under applicable law, bear interest at the Overdue Rate until the
date of payment.
If Lessee fails to observe or cause to be observed any of the provisions
of this Agreement and such failure continues beyond any applicable notice
or cure period provided for under this Agreement, Lessor or a lawfully
appointed receiver of the Leased Property, at their respective options, from
time to time may perform, or cause to be performed, any and all repairs and
such other work as they deem necessary to bring the Leased Property into
compliance with the provisions of this Agreement may enter upon the
Leased Property for any of the foregoing purposes, and Lessee hereby
waives any claim against Lessor or such receiver arising out of such entry
or out of any other act carried out pursuant to this Section. All amounts so
expended or incurred by Lessor and by such receiver and all costs and
expenses reasonably incurred in connection therewith (including, without
limitation, attorneys' fees and expenses and court costs), shall be a demand
obligation of Lessee to Lessor or such receiver, and, to the extent permitted
by law, shall be added to the Obligations and shall be secured by the Liens
created by the Lease Documents as fully and effectively and with the same
priority as every other obligation of Lessee secured thereunder and, if not
paid within ten (10) days after demand, shall hereafter, to the extent
permitted by applicable law, bear interest at the Overdue Rate until the date
of payment.
9. INSURANCE; CASUALTY; TAKING
9.1 General Insurance Requirements.
Lessee shall at its sole cost and expense keep the Leased Property and
the business operations conducted thereon insured as required under the
Facility Lease.
9.2 Fire or Other Casualty or Condemnation.
In the event of any damage or destruction to the Leased Property
by reason of fire or other hazard or casualty (a "Casualty") or a taking by
power of eminent domain or conveyance in lieu thereof of allor any portion
of the Leased Property (a "Condemnation"), Lessee shall give immediate
written notice hereof to Lessor and comply with the provisions of the
Facility ease governing Casualties and Condemnations.
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10. EVENTS OF DEFAULT
Each of the following shall constitute an "Event of Default" hereunder
and shall entitle Lessor to exercise its remedies hereunder and under any of
the other Lease Documents:
A. any failure of Lessee to pay any amount due hereunder or under
any of the other Lease Documents within ten (10) days
following the date when such payment was due;
B. any failure in the observance or performance of any other
covenant, term, condition or warranty provided in this
Agreement or any of the other Lease Documents, other than the
payment of any monetary obligation and other than as
specified in subsections (C) through (F) below (referred to
herein as a "Failure to Perform"), continuing for thirty (30) days
after the giving of notice by Lessor to Lessee specifying the
nature of the Failure to Perform; except as to matters not
susceptible to cure within thirty (30) days, provided that with
respect to such matters, (i) Lessee commences the cure thereof
within thirty (30) days after the giving of such notice by Lessor
to Lessee, (ii) Lessee continuously prosecutes such cure to
completion, (iii) such cure is completed within one hundred
twenty (120) days after the giving of such notice by Lessor to
Lessee and (iv) such Failure to Perform does not impair
Lessor's rights with respect to the Leased Property or otherwise
impair the Collateral or Lessor's security interest therein;
C. the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace
periods, if any, under any of the other Lease Documents;
D. if any representation, warranty or statement contained herein or
in any of the other Lease Documents proves to be untrue in any
material respect as of the date when made or at any time during
the Term if such representation or warranty is a continuing
representation or warranty pursuant to Section 6.2;
E. except as a result of any Casualty or a partial or complete
Condemnation, if a suspension of any work in connection with
the construction of the Project occurs for a period in excess
of ten (10) Business Days, irrespective of the cause thereof,
provided that Lessee shall not be deemed to be in default under
this Subsection if such suspension is for circumstances not
reasonably within its control, but only if Lessor, in its sole and
absolute discretion, shall determine that such suspension shall
not create any risk that the construction of the Project will not be
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completed (in accordance with the Project Plans and the terms
and conditions of this Agreement) on or before the Completion
Date; and
F. if construction of the Project shall not be completed in
accordance with the Project Plans and this Agreement (including,
without limitation, satisfaction of the conditions set forth in
Section 7.6) on or before the Completion Date.
11. REMEDIES IN EVENT OF DEFAULT
Upon the occurrence of an Event of Default, at the option of Lessor,
which may be exercised at any time after an Event of Default shall have
occurred, Lessor shall have all rights and remedies available to it, at law or
in equity, including, without limitation, all of the rights and remedies under
the Facility Lease and the other Lease Documents. Subject to the
requirements f applicable law, all materials at that time on or near the
Leased Property which are the property of Lessee and which are to be used
in connection with the completion of the Project shall be subject to the
Liens created by the Lease Documents.
In addition to, and without limitation of, the foregoing, Lessor is authorized
to charge all money expended for completion the Project against sums
hereunder which have not already been advanced (even if the aggregate
amount of such sums expended and all amounts previously advanced
hereunder exceed the amount of the Project Funds which Lessor has agreed
to advance hereunder); and Lessee agrees to pay to Lessor Rent under the
Facility Lease calculated, in part, thereunder based upon all sums advanced
hereunder, including, without limitation, all sums expended in good faith by
Lessor in connection with the completion of the project), and, in addition
thereto, Lessee agrees to pay to Lessor (as Rent under the Facility Lease),
for services in connection with said completion of the Project, such
additional sums as shall compensate Lessor for the time and effort Lessor
and its employees shall have expended in connection therewith. Lessor is
authorized, but not obligated in any event, to do all such things in
connection with the construction of the Project as Lessor, in its sole and
absolute discretion, may deem advisable, including, without limitation, the
right to make any payments with respect to any obligation of Lessee to
Lessor or to any other Person in connection with the completion of
construction of the Project and to make additions and changes in the Project
Plans, to employ contractors, subcontractors and agents and to take any and
all such action, either in Lessor's own name or in the name of Lessee, and
Lessee hereby grants Lessor an irrevocable power of attorney to act in its
name in connection with the foregoing. This power of attorney, being
coupled with an interest, shall be irrevocable until all of the Obligations are
fully paid and performed and shall not be affected by any disability or
incapacity which Lessee may suffer and shall survive the same. The power
of attorney conferred on Lessor by the provisions of this Section 11 is
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provided solely to protect the interests of Lessor and shall not impose any
duty on Lessor to exercise any such power and neither Lessor nor such
attorney-in-fact shall be liable for any act, omission, error in judgment or
mistake of law, except as the same may result from its gross negligence or
wilful misconduct. In the event that Lessor takes possession of the Leased
Property and assumes control of the project as aforesaid, it shall not be
obligated to continue the construction of the Project and/or the operation of
the Project for any period of time longer than Lessor shall see fit (in its sole
and absolute discretion), and Lessor may thereafter, at any time, abandon its
efforts and refuse to make further payments for the account of Lessee,
whether or not the Project has been completed.
In addition, at Lessor's option and without demand, notice or protest, the
occurrence of any Event of Default shall also constitute a default under any
one or more of the Related Party Agreements.
12. GENERAL
The provisions set forth in Article 23 and Sections 2.2, 16.8 through
16.10, 24.2 through 24.6, and 24.8 through 24.12 of the Lease are hereby
incorporated by reference, mutatis, mutandis, and shall be applicable to this
Agreement as if set forth in full herein.
This Agreement, the other Lease Documents and the other Lease
Documents set forth the entire agreement of the parties with respect to the
subject matter and shall supersede in all respect the Letter of Intent.
13. LEASE PROVISIONS PARAMOUNT.
In the event of a conflict between the provisions hereof and the
provisions of the Lease, the provisions of the Lease are paramount.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the day and year first above written.
WITNESS: LESSEE:
EMERITUS PROPERTIES I, INC.
/s/ Catherine L. Pasquan By: /s/ Kelly J. Price
- ----------------------------- ----------------------
Name: Catherine L. Pasquan Name: Kelly J. Price
Title: Secretary
WITNESS: LESSOR:
MEDITRUST ACQUISITION
CORPORATION I, a
Massachusetts corporation
/s/ Kim M. Priesing By: /s/ Michael S. Benjamin,
- ------------------------ --------------------------
Name: Kim M. Priesing Name: Michael S. Benjamin, ESQ.
Title: Senior Vice President
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__________ LEASE
by and between
AHP OF TEXAS, INC.
"Landlord"
and
EMERITUS CORPORATION
"Tenant"
Dated as of ____,1996
<PAGE>
LEASE
This LEASE is executed as of ______, 1996, by and between AHP
OF TEXAS, INC., a Texas corporation, having its principal office at 6400
South Fiddler's Green Circle, Suite 1800, Englewood, Colorado 80111, as
Landlord, ("LANDLORD") and EMERITUS CORPORATION, a
Washington corporation, having its principal office at 3131 Elliott Avenue,
Suite 500, Seattle, Washington 98121 as Tenant ("TENANT")
RECITALS
A. Landlord's parent, American Health Properties, Inc., a Delaware
corporation (the "LENDER"), and Emeritus Real Estate III, L.L.C., a
Delaware limited liability company ("BORROWER") entered into a
Construction Loan Agreement, dated as of August 21, 1995 (the "LOAN
AGREEMENT"), pursuant to which Lender has agreed to advance funds
for the purpose of constructing an eighty-unit assisted living facility on a
parcel of land in ____. Landlord and Lender have entered into a Purchase
Agreement dated as of August 21, 1995 (the "PURCHASE
AGREEMENT") with Borrower, pursuant to which Landlord has agreed to
purchase the land and improvements comprising the facility which
constitutes the Property which is subject to this Lease, upon completion
of construction of the improvements.
B. As an inducement to Lender to enter into the Loan Agreement and
to Landlord to enter into the Purchase Agreement, Tenant has agreed
hereby to lease the land and improvements comprising the facility from
Landlord and to secure its obligations to Landlord under this Lease as
provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Lease, unless otherwise expressly provided in
this Agreement or the context in which such term is used indicates a
contrary intent, (a) the terms defined in this Article shall have the meanings
ascribed to them in this Article, (b) all accounting terms not otherwise
defined in this Article shall have the meanings ascribed to them in
<PAGE>
accordance with generally accepted accrual method accounting
principles 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.
"ADDITIONAL AGREEMENTS" shall mean all contracts and
agreements between Landlord and Tenant, or between any member of the
Landlord Group and Tenant or any Affiliates thereof, other than this lease
and any Additional Leases.
"ADDITIONAL CHARGES" shall have the meaning ascribed to
such term in Section 4.5.
"ADDITIONAL LEASES" shall mean all leases between any
member of the Landlord Group, as Landlord, and Tenant or any Affiliates
thereof, as Tenant, in effect on any date of determination.
"ADDITIONAL RENT" shall have the meaning ascribed to such
term in Section 4.4.
"ADDITIONAL RENT COMMENCEMENT DATE" shall mean
with respect to the Fixed Term, the first day of the first calendar month
which commences after the Base Year; and with respect to each Extended
Term, the one year anniversary of the first day of such Extended Term.
"ADDITIONAL RENT PERCENTAGE" shall mean a percentage
amount equal to the greater of (a) two and one half percent (2-1 /2 %) and
(b) the percentage increase (if any) in the Consumer Price Index for All
Urban Consumers (1982-84=100), for the region which includes the
Property, published by the U.S. Department of Labor, (the "Index")
from the Index in effect on the commencement of the preceding Base Year
or Calculation Period, as the case may be to the Index in effect on the
commencement of the current Calculation Period.
"AFFILIATE" of any person or entity (the "Subject") shall mean (a)
any person which, directly or indirectly, controls or is controlled b or is
under common control with the Subject, (b) any person owning,
beneficially, directly or indirectly, ten percent (10%) or more of the
outstanding capital stock, shares or equity interests of the Subject or
(c) any officer, director, employee, general partner or trustee of the Subject
or any person controlling, controlled by or under common control with the
Subject (excluding trustees and persons serving in similar capacities who
are not otherwise an Affiliate of the Subject). As used in this definition, the
term "person" means and includes governmental agencies and authorities,
political subdivisions, individuals, corporations, limited liability
companies, general partnerships, limited partnerships, stock companies or
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associations, joint ventures, associations, trusts, banks, trust companies,
land trusts, business trusts and any other entity of any form whatsoever, and
"control" (including the correlative meanings of the terms "controlled by"
and "under common control with"), as used with respect to any person,
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
through the ownership of voting securities, partnership interests or other
equity interests, or through any other means.
"AHP" shall mean American Health Properties, Inc., a Delaware
corporation.
"APPRECIATION AMOUNT" shall mean the amount, if any, by
which the Fair Market Value of the Property exceeds Landlord's Total
Investment.
"AWARD" shall have the meaning ascribed to such term in Section
16.1(c).
"BASE RENT" shall mean, with respect to the Fixed Term, an
amount, determined as of the Commencement Date, calculated by
multiplying (x) the Initial Investment Cost by (y) the Base Rent Interest
Rate.
"BASE RENT INTEREST RATE" shall mean an interest rate equal to
350 basis points in excess of the Ten Year Treasury Rate as of such date,
and, with respect to each Extended Term, the amount determined pursuant
to Section 3.2; provided, however, that in no event shall the Base Rent
Interest Rate be less than 10.5 % nor more than 11.5 %.
"BASE YEAR" shall mean, with respect to the Fixed Term, the first
period of 12 full months period following the Commencement Date and,
with respect to each Extended Term, the first 12-month period commencing
on, or immediately following, the first day of such Extended Term.
"BUSINESS DAY" shall mean any day on which banking institutions
in Denver, Colorado are open for the conduct of normal banking business.
"CALCULATION PERIOD" shall mean, with respect to the Fixed
Term and each Extended Term, a 12-month period commencing on the
Additional Rent Commencement Date or any anniversary of such date
through the Fixed Term or each Extended Term, as the case may be.
"CAPITAL ADDITIONS" shall mean (a) one or more new buildings
located on the Land or to be used, directly or indirectly, as part of the
Facility, (b) one or more additional structures annexed to any portion of any
of the Improvements, (c) the material expansion of existing Improvements,
(d) the construction of a new wing or new story on existing Improvements,
or (e) any expansion, construction, renovation or conversion of
3
<PAGE>
existing Improvements to (i) increase the bed or service capacity of the
Facility or (ii) change the purpose for which the Facility is utilized.
Notwithstanding anything to the contrary contained in Article XI, in the
event it is necessary to abate or otherwise take corrective action with
respect to the existence of a Hazardous Substance (as hereinafter
defined) located in, on or under the Property or in the Improvements, such
abatement or corrective action shall not be deemed to be a Capital Addition
and shall be the sole responsibility of Tenant at its sole cost and expense.
"CAPITAL ADDITIONS COST" shall mean the cost of any Capital
Additions made by Tenant, whether paid for by Tenant or Landlord. Such
cost shall include (a) the costs of constructing the Capital Additions,
including site preparation and improvement, materials, labor, supervision,
developer and administrative fees, the costs of design, engineering and
architectural services, the costs of fixtures, the costs of construction
financing (including but not limited to capitalized interest) and other similar
costs approved in writing by Landlord, (b) if agreed to by Landlord in
writing in advance, the purchase price and other acquisition costs, or
applicable ground lease rental payable for any period such ground lease is
in effect to and including the date upon which such Capital Addition is
completed and occupied or in operation, as the case may be, of any
land which is acquired or leased for the purpose of placing thereon all or
any portion of the Capital Additions or for providing means of access
thereto, or parking facilities therefor (including the costs of surveying the
same and recording, title insurance and escrow fees and charges), (c)
insurance premiums, real estate taxes, water and sewage charges and other
carrying charges for such Capital Additions during their construction, (d)
fees and expenses of legal counsel, (e) any documentary transfer or similar
taxes, (f) any applicable regulatory or administrative fees and charges, and
any costs, charges, fees or expenses paid or incurred in connection with
obtaining any applicable permits, licenses, franchises, authorizations,
certificates of need, certificates of occupancy and similar authorizations and
entitlements and (g) all other reasonable costs and expenses of
Landlord or Tenant, as applicable, and any lending institution which has
committed to finance the Capital Additions, including, but not limited to, (i)
the fees and expenses of their respective legal counsel, (ii) any printing,
duplicating and messenger expenses, (iii) any filing, registration and
recording taxes and fees, (iv) any documentary transfer or similar taxes, (v)
any title insurance charges and appraisal fees, (vi) any rating agency
fees and (vii) any commitment or similar fees charged by any lending
institution financing or offering to finance any portion of such Capital
Additions.
"CLAIMS" shall have the meaning specified in Section 22.1.
"CASH FLOW" shall mean, for any period of determination, an
amount equal to the sum of the amounts for such period of (i) net income
before income taxes, (ii) depreciation, amortization and other similar non-
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cash charges, including depreciation and interest expense related to the
Equipment, (iii) Base Rent and (iv) Additional Rent.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMENCEMENT DATE" shall have the meaning ascribed to
such term in Section 3.1.
"CONDEMNATION" shall have the meaning ascribed to such term in
Section 16.1(a).
"CONDEMNOR" shall have the meaning ascribed to such term in
Section 16.1(d).
"CONSOLIDATED FINANCIALS" shall mean, for any fiscal year
(or other accounting period) for Tenant and Affiliates thereof statements of
earnings and retained earnings and of changes in financial position for such
period and for the period from the beginning of the respective fiscal year to
the end of such period and the related balance sheet as at the end of such
period, together with the notes thereto, all in reasonable detail
and setting forth in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year (or period), all of which
shall be prepared in accordance with generally accepted accounting
principles.
"DATE OF TAKING" shall have the meaning ascribed to such term
in Section 16.1(b).
"DEED OF TRUST" means the Deed of Trust from Landlord for the
benefit of Tenant securing. Tenant's rights under Section 26.2.
"ENCUMBRANCE" shall have the meaning ascribed to such term in
Article XXVII.
"EVENT OF DEFAULT" shall have the meaning ascribed to such
term in Section 17.1.
"EXTENDED TERM" shall have the meaning ascribed to such term
in Section 3.2.
"FACILITY" shall mean the assisted living facility presently operated
on the Land, or with Landlord's consent, such other general health care
facility, nursing home, retirement center, congregate living facility, health
care related apartments or hotel, being operated or proposed to be operated
on the Land from time to time in accordance with
the Provisions of this Lease.
"FACILITY MORTGAGE" shall have the meaning ascribed to such
term in Section 14.1.
5
<PAGE>
"FACILITY MORTGAGEE" shall have the meaning ascribed to such
term in Section 14.1.
"FAIR MARKET RENTAL" shall mean, with respect to the Property
(including any Capital Additions or portions thereof paid for by Landlord)
the rental paid on a net basis as provided in Section 4.8 hereof which a
willing Tenant not compelled to rent would pay to a willing Landlord not
compelled to lease for the highest and best medical use and occupancy of
such Property permitted pursuant to this Lease for the term in
question, assuming that Tenant is not in default under this Lease, but
without taking into account Additional Rent. For purposes of this Lease,
Fair Market Rental shall be determined in accordance with the appraisal
procedures set forth in Article XXV.
"FAIR MARKET VALUE" shall mean, with respect to the Property,
including all Capital Additions, the price that a willing buyer not compelled
to buy would pay to a willing seller not compelled to sell for such Property
(except as otherwise provided below), assuming that (a) this Lease is not in
effect with respect to the Property, (b) such seller must pay any closing
costs and title insurance premiums with respect to such sale, and (c) the
Property is fully licensed by all governmental agencies having jurisdiction
thereof, and is and will continue to be operated for the Primary Intended
Use and is otherwise a going concern. Notwithstanding the foregoing, the
computation of Fair Market Value shall assume that this Lease is in effect
with respect to the Property in the event that Tenant elects to acquire the
Property pursuant to Section 15.2(b). For purposes of this Lease, Fair
Market Value shall be determine in accordance with the appraisal
procedures set forth in Article XXV.
"FISCAL YEAR" shall mean the 12-month period commencing
January 1 and terminating December 31.
"FIXED TERM" shall have the meaning ascribed to such term in
Section 3.1.
"FIXTURES" shall have the meaning ascribed to such term in clause
(d) of Article II.
"HAZARDOUS SUBSTANCES" shall mean those substances,
materials, and wastes listed in the United States Department of
Transportation Table (49 CFR 172 101) or by the Environmental Protection
Agency as hazardous substances (40 CFR Part 302) and amendments
thereto, or such substances, materials and wastes which are or become
regulated under any applicable local, state or federal law including, without
limitation, any material, waste or substance which is (i) hydrocarbons,
petroleum and petroleum products, (ii) asbestos, (iii) polychlorinated
biphenyls, (iv) formaldehyde, (v) radioactive substances, (vi) flammables
and explosives, (vii) described as a "hazardous substance" pursuant to
6
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Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33
U. S. C. Section 1321 or listed pursuant to Section 307 of the Clean Water
Act (33 U. S. C. Section 1317), (viii) defined as a "hazardous waste "
pursuant to Section 1004 of the Resource Conservation and Recovery Act,
42 U. S. C. Section 6901 et seq. (42 U. S. C. Section 6903), (ix) defined as
a " hazardous substance " pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et. seq. (42 U.S.C. Section 9601), as the same may be
amended from time to time, or (x) any other substance, waste or material
which could presently or at any time in the future cause a detriment to or
impair the value or beneficial use of the Land or other Property (which, for
purposes of this definition shall include all air, soils, ground water, surface
water and soil vapor) or constitute or cause a health, safety or
environmental hazard on, under or about the Land or other Property or to
any person who may enter on, under, or about the Land or other Property or
require remediation at the behest of any governmental agency.
"IMPACTED FACILITY" shall have the meaning specified in Section
15.2.
"IMPOSITIONS" shall mean all taxes (including without limitation all
real properly taxes imposed upon the Land, Improvements or other portions
of the Property, including, but not limited to all tangible and intangible
personal Property, ad valorem, sales, use, single business, gross receipts,
transaction privilege, documentary stamp (if any are associated with this
Lease or the transactions contemplated hereby), rent or similar taxes
relating to or imposed upon Landlord, any portion of the Property, Tenant
or its business conducted upon the Land), assessments (including without
limitation all supplemental real Property tax assessments or assessments for
public improvements or benefit, whether or not commenced or completed
prior to the date hereof and whether or not to be completed within the
Term), ground rents, water, sewer or other rents and charges, excises, tax
levy, fees (including without limitation license, permit, franchise,
inspection, authorization and similar fees) and all other governmental
charges, in each case whether general or special, ordinary or extraordinary,
foreseen or unforeseen, of every character or nature whatsoever with
respect to or connected with the Property or the business conducted thereon
by Tenant (including all interest, penalties and fines thereon due to any
failure or delay in payment thereof) which at any time prior to, during
or with respect to the Term hereof may be assessed or imposed on or with
respect to, or may be a lien upon (a) Landlord's interest in the Property, (b)
the Property, or (d) any occupancy thereof or any Rent therefrom or any
estate, right, title or interest therein, (c) Landlord's capital invested in the
State as represented by the Property, or (d) any occupancy, operation, use
or possession of, or sales from, or activity conducted on or in connection
with the Property or the leasing or use of the Property or any part thereof by
Tenant. Impositions shall not include (1) any tax based on revenue or
income (whether denominated as a franchise, capital stock or other tax)
7
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imposed upon Landlord or any other person, whether imposed on "net
taxable earned surplus" or otherwise, (2) any transfer tax imposed upon
Landlord or any other person or (3) any tax imposed with respect to the
sale, exchange or other disposition by Landlord of any Property or the
proceeds thereof, nor any tax, assessment, tax levy or charge described in
the first sentence of this paragraph which is in effect at any time during the
Term hereof to the extent such tax, assessment, tax levy or charge is totally
or partially repealed, unless a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof, in
which case the substitute tax, assessment, tax levy or charge shall be
deemed to be an Imposition.
"IMPROVEMENTS" shall have the meaning ascribed to such term in
clause (b) of Article II.
"INITIAL INVESTMENT COST" shall mean, as of the date of
determination, an amount equal to the "Purchase Price" paid by Landlord to
the Seller under the terms of the Purchase Agreement.
"INITIAL RENT" shall mean the initial rent payable by Tenant to
Landlord pursuant to clause (i) of Section 4.1.
"INSURANCE REQUIREMENTS" shall mean all terms and
conditions of any insurance policy required by this Lease and all
requirements of the issuer of any such insurance policy.
"LAND" shall mean all of that certain real Property situated in the
City and County of E1 Paso, State of Texas and more particularly described
in Exhibit A attached hereto and incorporated herein by reference, and any
other parcel of land acquired or leased and made subject to this Lease in
connection with a Capital Addition.
"LANDLORD GROUP" shall mean any one or more of Landlord,
AHP, any Affiliate of Landlord or AHP and any shareholder of AHP.
"LANDLORD'S LENDER" shall have the meaning ascribed to that
term in Section 14.1.
"LANDLORD'S MINIMUM RETURN ALLOCATION" shall mean
an amount that yields an internal rate of return on Landlord's Total
Investment, for the period commencing on the Commencement Date and
ending on the closing date of the purchase provided for in Section 26.2
hereof, which internal rate of return is expressed as a percentage equal to
the sum of (y) Base Rent Interest Rate and (z) 350 basis points.
"LANDLORD'S TOTAL INVESTMENT" shall mean an amount
equal to the sum of (y) the Initial Investment Cost and (z) all Capital
Additions Costs pertaining to the Property paid for by Landlord pursuant to
Section 11.2 of the Lease.
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"LANDLORD'S TRANSACTION EXPENSES" shall mean all out-of
pocket expenses incurred by Landlord in connection with (i) the preparation
of this Lease, the Purchase Agreement and any Substitute Lease and the
instruments contemplated hereunder and thereunder, and any other
instruments required to be executed and delivered by Tenant
to Landlord in connection, herewith or therewith (whether or not the
transactions hereby or thereby contemplated shall be consummated) and (ii)
the transactions contemplated to be performed hereunder and thereunder,
including but not limited to the fees and disbursements of Landlord's legal
counsel, title insurance premiums, recording taxes and fees, survey fees,
valuation or appraisal fees, engineering fees and architects ' fees.
"LEASE" shall mean this document, as the same may be amended
from time to time in accordance herewith.
"LEGAL REQUIREMENTS" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, common law, decrees and injunctions affecting the
Properly or the maintenance, construction, use, alteration, occupancy or
operation thereof, whether now or hereafter enacted and in force (including
any of the foregoing which may require repairs, modifications or alterations
in or to the Property), all permits, licenses, certificates, franchises,
authorizations, land use entitlements, zoning and regulations relating
thereto, and all Covenants, conditions, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to
Tenant (other than encumbrances created by Landlord without the consent
of Tenant), at any time in force affecting the Property.
"MINIMUM REPURCHASE PRICE" shall mean the Initial
Investment Cost, plus the Capital Additions Cost of any Capital Additions
financed or paid for by Landlord, less the net amount (after deduction of all
reasonable legal fees and other costs and expenses, including without
limitation expert witness fees, incurred by Landlord in connection with
obtaining any such proceeds or awards) of any proceeds of insurance paid
to and retained by Landlord in accordance with Article XV of this Lease
and of any Awards received by Landlord and not applied to restoration of
the Property in accordance with Article XVI
"NOTICE" shall mean a notice given pursuant to Section 30.8 hereof.
"OFFICER'S CERTIFICATE" shall mean a certificate of Tenant
signed by the chief financial officer or another officer authorized so to sign
by resolutions adopted by the board of directors or the articles of
incorporation or by-laws of the general partner of the Tenant or by any
other person whose power and authority to act has been authorized by
delegation in writing by the chief financial officer of the general partner
of the Tenant.
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"OVERDUE RATE" shall mean, as of a specified date, a rate of
interest equal to the Prime Rate plus three percent, but in no event greater
than the maximum rate of interest then permitted under applicable law.
"PAYMENT DATE" shall mean any due date for the payment of any
installment of Base Rent.
"PERMITTED ENCUMBRANCES" shall mean the matters, if any,
set forth in Exhibit B attached hereto and incorporated herein by reference.
A "PERSON" shall mean any natural person, corporation, limited
liability company, business trust, association, company, partnership or
government (or any agency or political subdivision thereof) or, for purposes
of the definition of "Change of Control" herein, any group acting in concert
(within the meaning of Section 13(d) of the Securities
Exchange Act of 1934).
"PRIMARY INTENDED USE" shall mean an assisted living facility
licensed by the State, and such additional uses which are licensed or applied
for on the date hereof or are permitted by Landlord from time to time
hereunder.
"PRIME RATE" shall mean the fluctuating rate of interest most
recently announced by Wells Fargo at its principal office in San Francisco,
California as its "Prime Rate". The "Prime Rate" is one of Wells Fargo's
base rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto. The "Prime Rate" is
evidenced by the recording thereof after its announcement in such internal
publication or publications as Wells Fargo may designate and may not be
the lowest of Wells Fargo's base rates. Any change in any of the interest
rates chargeable hereunder resulting from a change in the Prime Rate shall
become effective as of the Business Day on which each change in the
"Prime Rate" is announced.
"PROPERTY" shall have the meaning ascribed to such term in Article
II.
"PURCHASE AGREEMENT" shall have the meaning given to that
term in the Recitals to this Lease.
"REMEDIAL WORK" shall have the meaning specified in Section
8.4.
"RENT" shall mean the Base Rent, Additional Rent and Additional
Charges.
"SECURITY AGREEMENT" shall mean the Security and Pledge
Agreement of even date between Tenant, as Debtor, and Landlord, as
Secured Party.
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"SECURITY LETTER OF CREDIT" shall have the meaning ascribed
thereto in Section 29. 3.
"SHARED APPRECIATION PURCHASE PRICE" shall mean an
amount determined by subtracting from (y) the Fair Market Value, (z)
Tenant's Share of the Appreciation Amount.
"SHORTFALL" shall have the meaning specified in Section 15.2.
"STATE" shall mean the State of Texas.
"TAKING" shall mean a taking or voluntary conveyance during the
Term hereof of all or any part of the Property, or any interest therein, right
with respect thereto or use thereof, as a result of, incidental to, or in
settlement of any condemnation or other eminent domain proceedings
affecting such Properly, regardless of whether such Proceedings shall have
actually been commenced.
"TANGIBLE NET WORTH" shall mean, as of the date of
determination, the sum of the following for Tenant and its consolidated
subsidiaries, if any, on a consolidated basis, determined in accordance with
generally accepted accounting principles (a) the amount of capital or stated
capital (after deducting the cost of any shares held in the applicable entity's
treasury); (b) plus the amount of capital surplus and retained earnings;
or (c) in the case of a capital or retained earnings deficit, minus the amount
of such deficit, (d) less the amount, if any, carried on the books of the entity
and any consolidated subsidiaries of the entity for goodwill, patents,
trademarks, copyrights, licenses, and other assets which are properly
classified as intangible assets under generally accepted accounting
principles, (e) plus the amount of the Security Letter of
Credit.
"TEN-YEAR TREASURY RATE" shall mean, as of the date of
determination, the monthly average yield to maturity of actively traded
marketable United States Treasury securities bearing a fixed rate of interest,
adjusted for a constant maturity of ten years, as calculated by the Federal
Reserve Board for the four preceding calendar weeks and published in said
board's Statistical Release H. 15.
"TENANT'S PERSONAL PROPERTY" shall mean all machinery,
equipment, furniture, furnishings, movable walls or partitions, computers or
other personal Property, and consumable inventory and supplies, including,
without limiting the generality of the foregoing, mail boxes, desks, lamps,
chairs, beds, bedstands, non-affixed cabinetry, tables, and similar movable
equipment, owned by Tenant and used or useful in Tenant's business on the
Land, but in no event any items included within the definition of
Equipment or Fixtures.
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"TENANT'S SHARE OF THE APPRECIATION AMOUNT" shall
mean an amount determined by (x) subtracting the sum of Landlord's Total
Investment and the Appreciation Amount from (y)Landlord's Minimum
Return Allocation, and (z) multiplying the resultant amount by one-half.
"TERM" shall mean the Fixed Term and any Extended Terms, as the
context may require, unless earlier terminated pursuant to the Provisions of
this Lease.
"TOTAL RENT" shall mean the sum of Base Rent, Additional Rent
and Additional Charges.
"UNAVOIDABLE DELAYS" shall mean delays due to strikes,
lockouts, inability to procure materials, power failures, acts of God,
governmental restrictions, enemy action, civil commotion, unavoidable
casualty and 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.
"WELLS FARGO" shall mean Wells Fargo Bank, N.A., a national
banking association.
ARTICLE II
LEASE OF PROPERTY
Landlord hereby leases, demises and lets to Tenant, and Tenant
hereby hires, takes and leases from Landlord, upon the terms and subject to
the conditions hereinafter set forth, TO HAVE AND TO HOLD, all of
Landlord's right, title and interest in and to all of the following (the
"PROPERTY"):
(a) the Land;
(b) all buildings, structures and other improvements of every kind,
including but not limited to the Facility, all buildings and structures
hereafter constructed upon the Land and all alleyways and connecting
tunnels, sidewalks, utility pipes, conduits and lines (on-site and off site),
parking areas, roadways and other related on-site and off- site
improvements appurtenant to such buildings and structures presently or
hereafter situated upon the Land, and any and all Capital Additions paid for
by Landlord pursuant to Section 11.2 of this Lease (the
"IMPROVEMENTS");
(c) all easements, licenses, rights-of way and appurtenances relating
to the Land and the Improvements; and
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(d) all " fixtures " as that term is defined in the State now and
hereafter located in, on or used and incorporated into the Land or
Improvements (the "FIXTURES").
ARTICLE III
TERM OF LEASE
3.1 TERM OF LEASE. The initial term of this Lease shall commence
on _____, 1996 ("COMMENCEMENT DATE"), and, unless extended or
terminated earlier in accordance with the provisions of this Lease, shall
remain in effect until October 31, 2006 (the "FIXED TERM").
Notwithstanding the foregoing, if, for any reason, through
no fault of Landlord, Landlord cannot deliver possession of the Property to
Tenant on the Commencement Date, Landlord shall not be subject to any
liability, nor shall such failure affect the validity of this Lease or the
obligations of Tenant hereunder or extend the Term hereof, but in such
case, Tenant shall not be obligated to pay Rent or to perform any
other obligation of Tenant under this Lease until possession of the Property
is tendered to Tenant.
3.2 OPTION TO EXTEND TERM OF LEASE.
(a) Landlord hereby grants to Tenant an option to extend the term
of this Lease for six additional consecutive five-year renewal terms (each,
an "EXTENDED TERM, " and collectively, the "EXTENDED TERMS").
Each of the Extended Terms shall be upon the same terms and conditions as
those set forth for the Fixed Term except that (i) Base Rent shall be the then
current Fair Market Rental which, unless otherwise mutually agreed to by
Landlord and Tenant, shall be determined by appraisal pursuant
to the provisions of Article XXV; provided that the annual Base Rent for
each Extended Term shall not be less than 102.50% of the sum of Base
Rent plus Additional Rent payable during the last year of the Initial Term or
preceding Extended Term, as the case may be, and (ii) the Base Year
utilized for calculation of Additional Rent shall change as provided in
Article I. Each such option may only be exercised by Tenant if, at the time
such option is exercised, (iii) an Event of Default shall not exist and be
continuing, and (iv) the Tenant under each Additional Lease in effect at
such time which contains an option permitting such Tenant to extend the
term thereof, is concurrently electing to extend the term of such Additional
Lease. Each such option to extend the term hereof shall be exercised by
Tenant by delivery of Notice to that effect to Landlord not less than
180 days but not more than 360 days prior to the date upon which this
Lease otherwise would terminate. Tenant's exercise of any option to extend
the term of this Lease for an extended term pursuant to this Section 3.2 shall
constitute Tenant's irrevocable and binding commitment to lease the
Property on the terms stated in this Lease for the whole of such Extended
Term. If Tenant is unable to exercise any option due to the provisions
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of this Lease, the time during which such option may be exercised shall not
be extended or enlarged. The failure of Tenant to exercise any of the
options for the Extended Terms within the respective times specified in this
Section shall thereby terminate any remaining such options.
(b) Time is strictly of the essence with respect to the requirement
that Tenant give timely Notice of its exercise of any options hereunder,
including, but not limited to, the options for the Extended Terms, and
Tenant's failure timely to exercise any option strictly in accordance with its
terms shall constitute a material, irredeemable and incurable failure to
satisfy a condition precedent to the vesting of any rights in Tenant
pursuant to such option, and Tenant hereby expressly waives any right to
claim relief from forfeiture, or any other form of equitable relief, from
consequences of an untimely exercise of any such option strictly in
accordance with its terms. The implied covenant of good faith and fair
dealing under this Lease shall not be construed to impose upon
Landlord any obligation to notify Tenant in advance of the impending
deadline for the exercise of any option hereunder, nor shall it obligate
Landlord to excuse the tardy exercise of any option however slight.
ARTICLE IV
RENT
4.1 PAYMENT OF INITIAL RENT AND LANDLORD'S
TRANSACTION EXPENSES. On the Commencement Date Tenant (i)
shall pay to Landlord, as Initial Rent, an amount equal to three fourths of
one percent (3/4 % ) of the Initial Investment Cost, without right
of offset, in the manner specified in Section 4.2 hereof, and (ii) shall pay to
Landlord all Landlord's Transaction Expenses.
4.2 PAYMENT OF BASE RENT, ADDITIONAL RENT AND
ADDITIONAL CHARGES. During the Term, Tenant shall pay to
Landlord at the times specified herein, in lawful money of the United States
of America, without right of abatement, deduction, counterclaim, defense,
reduction, recoupment or offset, by wire transfer of Federal Funds
to such account or accounts as Landlord may designate from time-to-time
in a Notice, the Base Rent, the Additional Rent and the Additional Charges.
4.3 BASE RENT. Commencing on the first Business Day of the first
full calendar month occurring coincident with or after the Commencement
Date, and thereafter on the first day of each calendar month occurring
during the Term hereof, for the period beginning on such first Business Day
and ending on the last day of the Term hereof, Tenant shall pay to Landlord
an amount calculated by dividing (x) Base Rent by (y) 12, provided that the
first payment of Base Rent shall include an additional pro rata payment for
any partial calendar month occurring between the Commencement Date and
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the date of the first payment of Base Rent. Any payment of Base Rent for a
period of less than one calendar month shall be prorated based upon the
number of days for which such Base Rent is due divided by 30.
4.4 ADDITIONAL RENT. From and after the Additional Rent
Commencement Date, during each Calculation Period, "Additional Rent"
shall accrue, in the manner and at the times set forth in this Section 4.4.
With respect to the first Calculation Period Additional Rent shall be an
amount equal to the Additional Rent Percentage of total Base Rent payable
for the Base Year. With respect to the second and subsequent
calculation Periods, Additional Rent shall be an amount equal to (a)
Additional Rent for the immediately preceding Calculation Period, plus (b)
an amount equal to the Additional Rent Percentage of the sum of Base Rent
and Additional Rent payable for the immediately preceding Calculation
Period. Notwithstanding the foregoing, in no event shall Base Rent
and Additional Rent payable in any Calculation Period be more than 104%
of Base Rent and Additional Rent payable in the preceding Calculation
Period. On the 45th day after the last day of the calendar quarter which
commences on the Additional Rent Commencement Date, and, thereafter,
on the 45th day after the last day of every calendar quarter commencing
during the Term of this Lease, Tenant shall pay Additional Rent on
a quarterly basis. The quarterly payment shall be one fourth of the
Additional Rent payable for such Calculation Period.
4.5 ADDITIONAL CHARGES. Subject to Article XIII hereof, Tenant
shall pay and discharge as and when due and payable all Impositions and
other amounts, liabilities and obligations which Tenant assumes or agrees to
pay under this Lease. If Tenant fails or refuses to pay any of the items
referred to in the immediately preceding sentence, Tenant shall promptly
pay and discharge every fine, penalty, interest and cost which may
arise or accrue for the non-payment or late payment of such items. The
aforementioned amounts, liabilities, obligations, Impositions, fines,
penalties, interest and costs are referred to herein as " ADDITIONAL
CHARGES. " The Additional Charges shall constitute Rent hereunder. If
any Rent (but as to Additional Charges, only those which are payable
directly to Landlord) shall not be paid on its due date, Tenant shall pay to
Landlord on demand, as an Additional Charge, a late charge to the extent
permitted by law, computed at the Overdue Rate on the amount of such
Rent from the due date of such Rent to the date such Rent is paid. Any
payment by Tenant of Additional Charges to Landlord pursuant to any
requirement of this Lease shall relieve Tenant of its obligation to pay
such Additional Charges to the entity to which they would otherwise be
paid.
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4.6 TRIPLE NET LEASE.
(a) TRIPLE NET LEASE. This Lease is what is commonly called a
"net net net lease ", it being understood that Landlord shall receive all Rent
as provided in this Article free and clear of any and all Impositions,
encumbrances, charges, obligations or expenses of any nature whatsoever
in connection with the ownership and operation of the Property. In addition
to the Rent reserved by this Article, except as expressly provided herein to
the contrary, Tenant shall pay to the parties respectively entitled thereto all
Impositions, insurance premiums, operating charges, maintenance charges,
construction costs and any other charges, costs and expenses which arise or
may be contemplated under any provisions of this Lease during the Term
hereof. All of such charges, costs and expenses shall constitute Rent, and
upon the failure of Tenant to pay any such costs, charges or expenses,
Landlord shall have the same rights and remedies as otherwise provided in
this Lease for the failure of Tenant to pay Rent and Landlord shall be
indemnified and saved harmless by Tenant from and against the same. It is
the intention of the parties hereto that this Lease shall not be terminable for
any reason by the Tenant and that Tenant shall in no event be entitled to
any abatement of or reduction in Rent payable under this Lease except as
herein expressly provided. Any present or future law to the contrary shall
not alter this agreement of the parties.
(b) BANKRUPTCY. Provided that there has been no rejection
hereof by Landlord or any trustee or receiver of Landlord, Tenant
covenants and agrees that it shall remain obligated under this Lease in
accordance with its terms, and that Tenant shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding the bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding-up or other proceeding affecting Landlord or any
assignee of Landlord in any such proceeding and notwithstanding any
action with respect to this Lease which may be taken by any trustee or
receiver of Landlord or any such assignee in any such proceeding or by any
court in any such proceeding.
(i) In the event that Tenant shall file a petition, or an order
for relief is entered against Tenant, under Chapter 7, 9, 11 or 13 of the
Bankruptcy Code, 11 U.S.C.S. 101 et seq. (the "BANKRUPTCY CODE")
and the trustee of Tenant shall elect to assume this Lease for the purpose of
assigning the same, such assumption or assignment may only be made if all
the conditions of subsections (ii) and (iii) of this Section 4.8(b) are
satisfied. If Tenant's trustee or debtor-in-possession, as the case may be,
shall fail to elect to assume this Lease within 60 days (or additional time
fixed by the court) after such trustee shall have been appointed, or the date of
filing of the petition, at Landlord's election (and in its sole and absolute
discretion) this Lease shall be deemed to have been rejected and, in such
event, Landlord shall thereupon immediately be entitled to possession of the
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Property without further obligation to the trustee or Tenant,
and this Lease shall be cancelled, but Landlord's right to be compensated
for damages in the bankruptcy proceedings shall survive such cancellation.
(ii) No election to assume this Lease shall be effective
unless in writing and addressed to Landlord and unless, in Landlord's
business judgment, all the following conditions, which Landlord and
Tenant acknowledge to be commercially reasonable, have been satisfied:
(A) The trustee (or Tenant, as debtor-in-possession)
has cured or has provided Landlord adequate assurance that:
(I) within ten days from the date of such
assumption, the trustee (or debtor-in-possession) will cure all monetary
defaults under this Lease; and
(II) within 30 days from the date of such
assumption, the trustee (or debtor-in-possession) will cure all non-monetary
defaults under this Lease or commence to cure within 30 days and
thereafter diligently pursue to completion.
(B) The trustee (or debtor-in-possession) has
compensated, or has provided to Landlord adequate assurance that within
ten days from the date of assumption Landlord will be compensated, for
any pecuniary loss incurred by Landlord arising from the default of the
Tenant or the trustee (or the debtor-in possession) as recited in Landlord's
written statement of pecuniary loss sent to the trustee (or debtor-
in-possession);
(C) The trustee (or debtor-in possession) has provided
Landlord with adequate assurance of the future performance of each of
Tenant's obligations under this Lease, provided that:
(I) the trustee (or debtor-in-possession) shall
also deposit with Landlord, as security for the timely payment of Rent, an
amount equal to (w) three months' Base Rent and (x) the last quarterly
payment of Percentage Rent and (y) the other monetary charges accruing
under this Lease; and
(II) the obligations imposed upon the trustee
(or debtor-in-possession) shall continue with respect to Tenant after
completion of bankruptcy proceedings.
(D) Landlord has determined that the assumption of
the Lease will not:
(I) breach any provision in any agreement by
which Landlord is bound relating to the Property; or
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(II) disrupt, in Landlord's reasonable
judgment, the reputation and profitability of the Property.
(E) For purposes of this subsection, "adequate
assurance" shall mean:
(I) Landlord shall determine that the trustee
(or debtor-in-possession) has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administrative expenses to assure Landlord that the trustee (or debtor-in-
possession) will have sufficient funds to fulfill the obligations of Tenant
under this Lease; and
(II) an order shall have been entered
segregating sufficient cash payable to Landlord, or there shall have been
granted a valid and perfected first lien and security interest in Property of
the Tenant or trustee (or debtor-in-possession), acceptable as to value and
kind to Landlord, to secure to Landlord the obligation of the Trustee (or
debtor-in-possession) to cure the monetary or non-monetary defaults under
this Lease within the time periods set forth above.
(iii) If the trustee (or debtor-in-possession) has assumed the
Lease pursuant to all the provisions of subsections (i) and (ii) of this Section
4 8(b), for the purpose of assigning (or electing to assign) Tenant's interest
under this Lease or the estate created thereby to any other person, such
interest or estate may be so assigned only if Landlord shall acknowledge in
writing that the intended assignee has provided adequate assurance of future
performance of all the terms, covenants and conditions of this Lease
to be performed by Tenant. For purposes of this subsection (iii), "adequate
assurance of future performance " means that Landlord shall have
ascertained that each of the following conditions has been satisfied:
(A) the assignee has submitted a current financial
statement audited by a certified public accountant which shows tangible net
worth and working capital in amounts determined to be sufficient by
Landlord to assure the future performance by such assignee of Tenant's
obligations under this Lease;
(B) if requested by Landlord, the assignee shall have
obtained guarantees in form and substance satisfactory to Landlord from
one or more persons who satisfy Landlord's standards of creditworthiness.
(C) Landlord has obtained all consents to waivers
from any third parties required under any lease, mortgage, financing
arrangement or other agreement by which Landlord is bound to enable
Landlord to permit such assignment;
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(D) the assignee has deposited an adequate security
deposit with Landlord; and
(E) the assignee has demonstrated that its intended
use of the Property is consistent with the terms of this Lease and will not
diminish the reputation of the Facility, or violate any "exclusive" which has
been granted by Tenant to any permitted subtenant in the Property.
(iv) When, pursuant to the Bankruptcy Code, the trustee (or
debtor-in-possession) shall be obligated to pay reasonable use and
occupancy charges for the use of the Property or any portion thereof, such
charges shall not be less than the Rent.
(v) Neither Tenant's interest in the Lease, nor any lesser
interest of Tenant herein, nor any estate of Tenant hereby created, shall pass
to any trustee, receiver, assignee for the benefit of creditors or any other
person by operation of law or otherwise unless Landlord shall consent to
such transfer in writing. No acceptance by Landlord of rent or any other
payments from any such trustee, receiver, assignee or person shall be
deemed to have waived, nor shall it waive the need to obtain
Landlord's consent to, or Landlord's right to terminate this Lease for, any
transfer of Tenant's interest under this Lease without such consent.
(vi) Any person to whom this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act
or deed to have assumed all the obligations arising under this Lease on or
after the date of such assignment. Any such assignee shall, upon demand,
execute and deliver to Landlord an instrument confirming such assumption.
ARTICLE V
IMPOSITIONS
5.1 PAYMENT OF IMPOSITIONS. Tenant shall pay, or cause to
be paid, all impositions prior to delinquency and before any fine, penalty,
interest or cost may be added for non-payment (subject to Tenant's rights of
contest pursuant to the provisions of Article XIII). Such payments shall be
made directly to the authorities levying such Impositions, if possible.
Tenant shall, promptly upon request by Landlord, furnish to
Landlord original or certified copies of receipts or other reasonably
satisfactory evidence of such payments. Tenant's obligation to pay
Impositions shall be deemed absolutely fixed upon the date such
Impositions become a lien upon the Property or any part thereof.
Notwithstanding the foregoing, if any such Imposition may, at the option of
the payor, lawfully be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), and so long as no Event
of Default shall have occurred hereunder and be continuing, Tenant may
pay the same (and shall pay any accrued interest on the unpaid balance of
such Imposition) in installments, and in such event shall pay such
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installments (subject to Tenant's right of contest pursuant to the provisions
of Article XIII) as the same become due and before any fine, penalty,
premium, further interest or cost is added thereto. Landlord shall, at its
expense and to the extent required or permitted by applicable laws and
regulations, prepare and file all returns with respect to Landlord's net
income, gross receipts, sales, use, single business, transaction privilege,
rent, ad valorem and franchise taxes, and with respect to taxes on
Landlord's capital stock. Tenant shall, at its expense, and to the extent
required or permitted by applicable laws and regulations, prepare and file
all other tax returns and reports with respect to any Imposition as may be
required of Tenant by governmental agencies or authorities. If any
refund shall be due from any taxing authority with respect to any
Imposition paid by Tenant, the same shall be paid over to and retained by
Tenant unless an Event of Default shall have occurred hereunder and be
continuing, in which case such refund shall be paid over to and retained by
Landlord. Any such funds retained by Landlord due to an Event
of Default shall be applied as provided in Article XVII. Landlord and
Tenant shall, each upon a request by the other, provide such information as
is maintained by the party to whom the request is made with respect to the
Property as may be reasonably necessary to prepare any required returns or
reports. If any governmental agency or authority classifies any Property
covered by this Lease personal Property, Tenant shall file all
personal Property tax returns in such jurisdictions where it may legally so
file. Landlord, to the extent possesses the same, and Tenant, to the extent it
possesses the same, will provide to the other party, promptly upon request,
cost and depreciation records reasonably necessary for filing returns for any
Property so classified as personal Property. If Landlord is legally required
to file any personal properly tax returns, Landlord shall provide Tenant with
copies of any assessment notices with respect thereto in sufficient
time for Tenant to file a protest with respect thereto if it so elects pursuant
to Article XIII. If no Event of Default is then continuing, Tenant may at its
option and sole cost and expense, upon written notice to Landlord, protest,
appeal or institute such other proceedings as Tenant reasonably may deem
appropriate to effect a reduction of real estate or personal Property
assessments so long as such action is conducted in good faith
and with due diligence. In such event, Landlord, at Tenant's sole cost and
expense, shall fully cooperate with Tenant in such protest, appeal, or other
action. Tenant hereby agrees to indemnify, defend, save and hold Landlord
harmless from and against any and all losses, demands, claims, obligations
and liabilities against or incurred by Landlord in connection with such
cooperation by Landlord. Billings by either party to the other for
reimbursement of personal Property taxes shall be accompanied by copies
of a bill therefor and evidence of payments thereof which identify the
personal Property with respect to which such payments have been made.
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5.2 NOTICE OF IMPOSITIONS. Landlord shall give prompt Notice
to Tenant of all Impositions payable by Tenant hereunder of which
Landlord at any time has knowledge. Notwithstanding the foregoing,
however, Landlord's failure to give any such Notice shall in no way
diminish Tenant's obligations hereunder to pay such Impositions,
but Landlord shall be responsible for any fine, penalty or interest resulting
from its failure to give such notice and any default by Tenant hereunder
shall be obviated for a reasonable time after Tenant receives Notice of any
Imposition which it is obligated to pay.
5.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed with
respect to the tax period during which the Term expires or terminates shall
be adjusted and prorated between Landlord and Tenant, whether or not such
Imposition is imposed before or after such expiration or termination, so that
Tenant is only obligated to pay that portion of such Imposition(s) pertaining
to the tax period within the Term. The obligation of Tenant to pay its
prorated share of Impositions shall survive expiration or earlier termination
of this Lease.
5.4 UTILITY CHARGES. Tenant shall pay or cause to be paid all
charges for all utilities, including but not limited to electricity, power, gas,
oil and water, used in the Property during the Term.
5.5 INSURANCE PREMIUMS. Tenant shall pay or cause to be paid
all premiums for insurance coverage required to be maintained pursuant to
Article XIV.
ARTICLE VI
TERMINATION OR ABATEMENT OF LEASE
Without limiting the provisions of Section 4.6, Tenant, to the full
extent permitted by law, shall remain bound by this Lease in accordance
with its terms. Tenant shall not take any action without the prior written
consent of Landlord to modify, surrender or terminate this Lease. The
obligations of Landlord and Tenant hereunder shall be separate and
independent covenants and agreements, and Rent and all other sums
shall continue to be payable by Tenant hereunder in any event unless the
obligation of Tenant to pay the same terminates pursuant to the express
provisions of this Lease or by termination of this Lease (other than by
reason of an Event of Default). Without limiting the generality of the
immediately preceding sentence, Tenant shall not seek or be entitled
to any abatement, deduction, deferment or reduction of Rent, or set-off
against Rent, nor shall the respective obligations of Landlord and Tenant be
otherwise affected (except as set forth in this Lease) by reason of: (a) any
damage to, or destruction of, all or any portion of the Property from
whatever cause or any Taking of all or any portion of the
Property; (b) the lawful or unlawful prohibition of, or restriction upon,
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Tenant's use of all or any portion of the Property, or the interference with
such use or with Tenant's quiet enjoyment of the Property by any person or
entity other than Landlord, or by reason of eviction by paramount title; (c)
any claim which Tenant has or may have against Landlord by reason of any
default or breach of any warranty by Landlord under this Lease or under
any other agreement between Landlord and Tenant or to which Landlord
and Tenant are parties; (d) any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceeding affecting Landlord or any assignee or transferee of Landlord; or
(e) any other cause, whether similar or dissimilar to any of the foregoing
(other than a discharge of Tenant from any such obligations as a matter of
law). Except as specifically set forth in this Lease to the contrary, Tenant
hereby specifically waives all rights, arising from any occurrence
whatsoever, which (i) may now or hereafter be conferred upon it by law to
modify, surrender or terminate this Lease or quit or surrender all or any
portion of the Property or (ii) entitle Tenant to any abatement, reduction,
suspension or deferment of Rent or other sums payable by Tenant
hereunder.
ARTICLE VII
OWNERSHIP OF PROPERTY
7.1 OWNERSHIP OF THE PROPERTY. As between Landlord and
Tenant the Properly is, and throughout the Term shall continue to be, the
Property of Landlord. Tenant has only the right to the exclusive possession
and use of the Property, upon the terms and subject to the conditions set
forth in this Lease.
7.2 TENANT'S PERSONAL PROPERTY; SECURITY INTEREST.
Tenant may, at its expense, install, affix, assemble or place on the Property
any items of Tenant's Personal Property and may, subject to the conditions
set forth below, remove Tenant's Personal Property upon the expiration or
earlier termination of this Lease or in the ordinary course of business (other
than a termination upon an Event of Default) so long as any damage
caused by such removal shall be promptly repaired by Tenant.
Notwithstanding the foregoing, in order to secure the payment and the
performance of all of Tenant's obligations under this Lease, Tenant hereby
grants to Landlord a security interest in (and hereby pledges and collaterally
assigns to Landlord) all of Tenant's rights, title and interest in and to
Tenant's Personal Property, all whether now existing or hereafter
acquired and hereby further agrees to execute and deliver to Landlord,
forthwith after demand by Landlord from time to time, any security
agreement in a reasonable form determined by Landlord and such
additional writings and instruments, including without limitation financing
statements, as may be reasonably required by Landlord for the
purpose of effectuating the intent of this sentence and Tenant agrees that
Landlord shall have with respect to all Personal Property all rights and
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remedies of a secured party under the Uniform Commercial Code as
adopted in the State, including, but not limited to, the right after the
occurrence of an Event of Default to use or sell Tenant's Personal
Property, and Landlord shall not be required to remove any of such
Personal Property from the Property and in no event shall Landlord be
liable to Tenant for use of such Personal Property. Pending disposition of
such Personal Property by Landlord, Landlord shall be entitled to use such
Personal Property in connection with the operation (if any) of the Facility.
Tenant shall not permit the Property or Personal Property to become
subject to any liens or encumbrances of any kind without first obtaining the
prior written consent of Landlord, except for liens or encumbrances
permitted by Section 29.1 (a). This Lease and the security interest granted
Landlord hereby shall be subordinate to any purchase money security
interest or capital lease permitted under Section 29.1 (a).
Landlord further agrees that Tenant may lease Personal Property, and
Landlord shall execute and deliver such agreements as may be reasonably
required by any permitted equipment lessor or the holder of a permitted
purchase money security interest to confirm that Landlord's lien on the
Personal Property in question is subordinate to the rights of
such equipment lessor or lender and in each case Tenant shall use its best
efforts to obtain from the holder of the purchase money debt or lessor of
Personal Property, as the case may be, its agreement to (i) notify Landlord
or its successors and assigns of any default by Tenant, (ii) allow Landlord
or its successors and assigns an opportunity to cure any default, (iii)
recognize Landlord or its successors and assigns as succeeding to Tenant's
rights under the agreement in question and to the undisturbed use of the
equipment, provided that Landlord fully complies with the terms of such
agreement. Tenant shall provide and maintain on the Property during the
entire Term such Tenant's Personal Property as shall be necessary to operate
the Facility in compliance with all licensure and certification requirements,
in substantial compliance with all Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the
health care industry with respect to the Primary Intended Use or other uses
then conducted on the Property by Tenant and permitted hereunder. All
Tenant's Personal Properly not removed by Tenant within thirty days
following the expiration or earlier termination of this Lease shall be
considered abandoned by Tenant and may be appropriated, sold,
destroyed or otherwise disposed of by Landlord without first giving Notice
thereof to Tenant and without any payment or obligation to account to
Tenant. Tenant shall, at its sole cost and expense, restore the Property to
the condition required by Section 10.1(d), including repair of all damage to
the Property caused by the removal of Tenant's Personal Property, whether
effected by Tenant or Landlord, except that caused by the gross
negligence or willful misconduct of Landlord.
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ARTICLE VIII
CONDITION AND USE OF PROPERTY
8.1 CONDITION OF THE PROPERTY. LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AND
SHALL BE SUBJECT TO NO LIABILITY WITH RESPECT TO, NOR
SHALL THE VALIDITY OF THIS LEASE BE AFFECTED BY ANY
CLAIM, DEMAND OR CAUSE OF ACTION REGARDING THE
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS DESIGN,
CONDITION OR FITNESS FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, OR AS TO THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT.
TENANT ACKNOWLEDGES AND AGREES THAT THE PROPERTY
HAS BEEN INSPECTED BY TENANT, HAS BEEN APPROVED FOR
OCCUPANCY BY ALL GOVERNMENT AGENCIES HAVING
JURISDICTION THEREOVER AND IS SATISFACTORY TO IT IN ALL
RESPECTS, INCLUDING FOR ITS PRIMARY INTENDED USE, AND
THAT TENANT IS LEASING THE PROPERTY "AS IS" IN ITS
PRESENT CONDITION AND SUBJECT TO (A) THE EXISTING
STATE OF TITLE, INCLUDING ALL COVENANTS, CONDITIONS,
RESTRICTIONS, EASEMENTS, LICENSES, LEGAL REQUIREMENTS,
MORTGAGES, DEEDS OF TRUST, ASSIGNMENTS OF LEASES,
FIXTURE FILINGS AND OTHER FINANCING INSTRUMENTS AND
ANY AND ALL OTHER MATTERS OF RECORD AND OTHERWISE
EXCEPT TO THE EXTENT ANY OF THE FOREGOING WERE
CAUSED OR CREATED BY LANDLORD, AND (B) MATTERS
WHICH WOULD BE DISCLOSED BY AN INSPECTION OF THE
PROPERTY OR BY AN ACCURATE SURVEY OF THE LAND.
TENANT WAIVES ANY AND ALL CLAIMS, DEMANDS AND CAUSE
OR CAUSES OF ACTION HERETOFORE OR HEREAFTER ARISING
AGAINST LANDLORD WITH RESPECT TO THE CONDITION OF
THE PROPERTY.
8.2 USE OF THE PROPERTY.
(a) Tenant has obtained or duly applied for and shall maintain in
effect all permits, licenses, authorizations and approvals needed to use and
operate the Property and the Facility for Tenant's Primary Intended Use in
accordance with all Legal Requirements.
(b) Throughout the entire Term, Tenant shall use or cause to be
used the Property in accordance with its Primary Intended Use and for such
other uses as may be necessary in connection with or incidental to such use.
Tenant shall not use the Property or any portion thereof for any other
purpose whatsoever without the prior written consent of Landlord. The
parties agree that Landlord's consent will not be deemed to be unreasonably
withheld if, in the reasonable opinion of Landlord, the Tenant's proposed
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use of the Property will significantly alter the character or purpose or
detract from the value or operating efficiency of the Property, or
significantly impair the revenue-producing capability of the Property. No
use shall be made or permitted to be made of the Property and no acts shall
be done which violate any Legal Requirements or Insurance Requirements
or which will cause the cancellation of any insurance policy covering the
Property or any part thereof, nor shall Tenant sell or otherwise provide to
patients therein, or permit to be kept, used or sold in, about or under the
Property any Hazardous Substance (except in strict compliance with all
Legal Requirements, but only as may be necessary to the operation of the
Facility, with respect to such substances other than asbestos and
hydrocarbons) or any other article which may be prohibited by the
Legal Requirements or Insurance Requirements. Tenant shall, at its sole
cost, comply with all of the requirements pertaining to the Property of any
insurance board, association, organization or company necessary for the
maintenance of the insurance required pursuant to this Lease,
(c) Tenant shall not commit or suffer to be committed any waste
nor shall Tenant cause or permit any nuisance on the Property.
(d) Tenant shall neither suffer nor permit all or any portion of
Tenant's Personal Property or the Property, including any Capital Addition
whether or not financed or paid for by Landlord, to be used in such a
manner as (i) may impair the owner's title thereto or to any portion thereof
or (ii) may make possible a claim or claims of adverse usage, adverse
possession or implied dedication of all or any portion of the Property to the
public, except as is necessary in the ordinary and prudent operation of the
Property.
8.3 LANDLORD TO GRANT EASEMENTS. Subject to the
provisions of this Section 8.3, Landlord shall, from time to time so long as
no Event of Default has occurred and is. continuing, at the request of
Tenant and at Tenant's sole cost and expense (but subject to the approval of
Landlord, which approval shall not be unreasonably withheld or delayed),
(a) grant easements and other rights in the nature of easements burdening
the Property for the benefit of real Property adjacent to the Land or for the
exclusive use and enjoyment of persons or entities specified by Tenant in
such request but only as may be necessary for the operations of the Facility;
(b) dedicate or transfer unimproved portions of the Property for road,
highway or other public purposes but only as may be necessary for the
operation of the Facility; (c) execute petitions to have the Property annexed
to any municipal corporation or utility district; and (d) execute
amendments to any covenant, conditions, restrictions and equitable
servitudes affecting the Property, but only if each such grant, dedication,
transfer, petition or amendment is not detrimental to the proper conduct of
the business of Tenant on the Property and does not materially reduce the
value of the Property in Landlord's reasonable discretion.
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8. 4 HAZARDOUS SUBSTANCES.
(a) All operations or activities upon, or any use or occupancy of
the Property, or any portion thereof, by Tenant, or any agent, contractor,
employee or subtenant of Tenant shall at all times during the Term be in all
respects in strict compliance with any and all Legal Requirements and
Insurance Requirements relating to Hazardous Substances, including, but
not limited to, the discharge and removal of Hazardous Substances. Tenant
will keep the Property free and clear of all Hazardous Substances other than
those Hazardous Substances which are necessary for the operation
of the Facility for the Primary Intended Use (which Hazardous Substances
shall be handled, used and disposed of in strict compliance with the Legal
Requirements and Insurance Requirements) and Tenant shall pay all costs
required properly to use, handle and dispose of all Hazardous Substance
and shall keep the Property free and clear of any lien relating to Hazardous
Substances which may be imposed pursuant to the Legal Requirements and
Insurance Requirements. Neither Tenant, nor any agent, contractor
employee or Subtenant of Tenant shall allow the manufacture, storage,
voluntary transmission or presence of any Hazardous Substances over or
upon the Property (except in strict compliance with the Legal Requirements
and Insurance Requirements). Landlord shall have the right at any time with
notice to Tenant (but not more often than once in any calendar year) to
conduct an environmental audit of the Property and Tenant shall
cooperate in the conduct of such environmental audit Furthermore, neither
Tenant, nor any agent, contractor, employee or any subtenant of Tenant
shall install or permit to be installed in or on the Property friable asbestos
or any substance containing asbestos or similarly deemed hazardous by
governmental authorities or the Legal Requirements respecting such
materials, and with respect to any such materials currently present in the
Property, shall promptly either (x) remove any material which such Legal
Requirements deem hazardous and require be removed, at its sole cost and
expense, or (y) otherwise comply with the Legal Requirements. Tenant
shall promptly notify Landlord in writing of any order, receipt of any notice
of violation or noncompliance with any applicable law, rule, regulation,
standard or order, any threatened or pending action by any regulatory
agency or other governmental authority or any claims made by any third
party relating to Hazardous Substances on, emanations on or from, releases
on or from, or threats of releases on or from any of the Property and shall
promptly furnish Landlord with copies of any correspondence, notices or
legal pleadings in connection therewith. Landlord shall have the right, but
shall not be obligated, to notify any governmental authority of any
state of facts which may come to its attention with respect to Hazardous
Substances on, released from or emanating on or from any part of the
Property.
(b) Without limiting Section 22.1, Tenant shall, with the right to
participate in the applicable proceedings, indemnify, protect, defend (with
counsel reasonably approved by Landlord) and hold Landlord, and the
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directors, officers, shareholders, employees and agents of Landlord,
harmless from any claims (including, but not limited to, third party claims
for personal injury or real or personal Property damage), or natural
resources damage, actions, administrative proceedings (including
informal proceedings), judgments, damages, punitive damages, penalties,
fines, costs, liabilities (including sums paid in settlements of claims),
interest or losses, including reasonable attorneys' and paralegals' fees and
expenses (including any such fees and expenses incurred in enforcing the
covenants and obligations of Tenant under this Lease or collecting any
sums due hereunder), consultant fees, and expert fees, together with all
other costs and expenses of any kind or nature ( " Costs " ) that arise
directly or indirectly from or in connection with the presence, suspected
presence, release or threatened release of any Hazardous Substance in or
into or at, on, about, under or within the Property, to the extent that such
Costs are not attributable to the gross negligence or willful misconduct of
Landlord. The indemnification provided in this Section 8.4(b) shall
specifically apply to and include claims or actions brought by or on behalf
of employees or contractors of Tenant or employees or contractors of
Tenant, and Tenant hereby expressly waives any immunity to which Tenant
may otherwise be entitled under any industrial or workers' compensation
laws. In the event Landlord shall suffer or incur any such Costs, Tenant
shall pay to Landlord the total of all such Costs suffered or incurred
by Landlord upon demand therefor by Landlord. Without limiting the
generality of the foregoing, the indemnification provided by this Section
8.4(b) shall specifically cover Costs, including capital, operating and
maintenance costs, incurred in connection with any investigation or
monitoring of site conditions, any cleanup, containment, remedial,
removal or restoration work required or performed by any federal, state or
local governmental agency or political subdivision or performed by any
non-governmental entity or person because of the presence; suspected
presence, release or suspected release of any Hazardous Substance in or
into the air, soil, groundwater, surface water or soil vapor at, on, about,
under or within the Property (or any portion thereof, and any claims
of third parties for loss or damage due to such Hazardous Substance, to the
extent that such Costs are not attributable to the gross negligence or willful
misconduct of Landlord. In addition, such indemnification shall include, but
not be limited to, all loss or damage sustained by Landlord or any third
party to whom Landlord may be liable due to any Hazardous Substance (i)
that is present or suspected to be present on, about, under or within the
Property or (ii) that migrates, flows, percolates, diffuses or in any way
moves onto, into or under the air soil groundwater surface water or soil
vapor at, on, about, under or within the Property, irrespective of whether
such Hazardous Substance shall be present or suspected to be present on,
about, under or within the Property as a result of any release, discharge,
disposal, dumping, spilling or leaking (accidental or otherwise) onto the
Property or caused by any person or entity; provided, however, that the
indemnification obligation arising out of clauses (i) and (ii) above shall
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apply solely to the extent that such loss or damage is not attributable to the
gross negligence or willful misconduct of Landlord.
(c) In the event any investigation or monitoring of site conditions
or any clean-up, containment, restoration, removal or other such work
("REMEDIAL WORK " ) is required under any applicable Legal
Requirements, including, but not limited to, any judicial order or order of
any governmental entity, or in order to comply with any agreements
affecting the Property because of, or in connection with, any occurrence or
event described in Section 8. 4(b), Tenant shall perform or cause to be
performed the Remedial Work in compliance with such law, regulation,
order or agreement and subject to the final review and approval of
Landlord, which approval shall not be unreasonably withheld or delayed;
provided, however, that Tenant may withhold such performance
pursuant to a good faith dispute regarding the application, interpretation or
validity of the law, regulation, order, or agreement, subject to the
requirements of Section 8.4(d); provided, further, however, that Landlord
shall reasonably cooperate with Tenant to the extent necessary to deliver
such authorizations as may be required in order for Tenant to
perform its obligations under this Section 8.4(c). All Remedial Work shall
be performed by one or more contractors, selected by Tenant and approved
in advance in writing by Landlord, which approval shall not be
unreasonably withheld or delayed, and under the supervision of a
consulting engineer, selected by Tenant and approved in advance in
writing by Landlord, which approval shall not be unreasonably withheld or
delayed. All costs and expenses of Remedial Work shall be paid by Tenant,
including, but not limited to, the charges of such contractors and consulting
engineer, and Landlord's reasonable attorneys' and paralegals' fees and
other costs incurred in connection with the monitoring or review of such
Remedial Work. In performing its obligations hereunder, Tenant shall
be subrogated to any rights Landlord may have under any indemnifications
or warranties from any present, future or former owners, Tenants or
occupants or users of the Property, to the extent available. In the event
Tenant shall fail timely to commence, diligently to
prosecute to completion or to complete to Landlord's reasonable satisfaction
any necessary Remedial Work, Landlord may, but shall not be required to,
cause such Remedial Work to be performed, and all costs and expenses
thereof paid or incurred by Landlord in connection therewith shall be Costs
within the meaning of Section 8.4(b). Landlord's disapproval of or
dissatisfaction with any Remedial Work shall be deemed to
be reasonable so long as Landlord's requirements for any Remedial Work
are consistent with the then current requirements and standards imposed by
prudent institutional investors in connection with their management of real
Property. All such Costs shall be due and payable upon demand therefor by
Landlord. If Tenant fails to perform its obligations hereunder, Landlord
shall be subrogated to any rights Tenant may have under any
indemnifications from any present, future or former owners, Tenants or
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other occupants or users of the Property relating to the matters covered by
this Section 8.4.
Notwithstanding any provision of this Section 8.4 to the
contrary, but without limiting the provisions of Article XIII, Tenant shall be
permitted to contest or cause to be contested, subject to compliance with the
requirements of this Section 8.4(d) and Article XIII, by appropriate action
any Remedial Work requirement, and Landlord shall not perform such
requirement on its behalf, so long as Tenant has given Landlord written
notice that Tenant is contesting or shall contest or cause to be contested the
same, and Tenant actually contests or causes to be contested the application,
interpretation or validity of the law, regulation, order or agreement
pertaining to the Remedial Work by appropriate proceedings conducted in
good faith with due diligence, provided that such contest shall not subject
Landlord to civil liability nor jeopardize Landlord's interest in the Property
or affect in any way the payment of any sums to be paid to Landlord.
Tenant shall give such security or assurances as may be reasonably
required by Landlord to insure compliance with the Legal Requirements
pertaining to the Remedial Work (and payment of all costs, expenses,
interest and penalties in connection therewith) and to prevent any sale,
forfeiture or loss by reason of such nonpayment or noncompliance.
(e) The provisions of this Section may be enforced by Landlord
without regard to any other rights and remedies Landlord may have against
Tenant under this Lease and without regard to any limitations on Landlord's
recourse as may be otherwise provided in this Lease. Tenant agrees that,
notwithstanding any provision in this Lease to the contrary, a separate
action or actions to enforce Tenant's obligations under this Section 8.4 may
be brought and prosecuted against Tenant. Any costs and other payments
required to be paid by Tenant to Landlord under this Section 8.4 which
are not paid within fifteen days of demand therefor shall thereupon be
considered delinquent. Tenant shall pay to Landlord immediately upon
demand therefor interest on such overdue amounts, from the date when due
until paid, at the Overdue Rate.
ARTICLE IX
LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS
9.1 COMPLIANCE WITH LEGAL REQUIREMENTS,
INSURANCE REQUIREMENTS AND INSTRUMENTS. Subject to the
rights of Tenant as provided in Article XIII relating to permitted contests,
Tenant, at its sole cost and expense, shall promptly (a) comply with
all applicable Legal Requirements and Insurance Requirements with respect
to the use, operation, maintenance, repair and restoration of the Property,
whether or not compliance therewith shall require structural change in any
of the Improvements or interfere with the use and enjoyment of the
Property, and (b) procure, maintain and comply with all appropriate
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licenses, certificates of need, provider agreements and other permits,
licenses, franchises and authorizations required for any use of the Property
and Tenant's Personal Property then being made, and for the proper
erection, installation, operation and maintenance of the Property or any
part thereof, including without limitation any Capital
Additions.
9. 2 COVENANTS REGARDING LEGAL REQUIREMENTS.
Tenant Covenants and agrees that it shall not use the Property or Tenant's
Personal Property for any purpose which violates the Legal Requirements.
Tenant has obtained or duly applied for and shall maintain all appropriate
licenses, certificates, permits, provider agreements, franchises,
authorizations and approvals necessary to operate the Property in its
customary manner for the Primary Intended Use, and any other use
conducted on the Property by Tenant and permitted by Landlord hereunder
Tenant may, however, contest the legality or applicability of any such Legal
Requirement as provided in Article XIII hereof.
ARTICLE X
CONDITION OF THE PROPERTY
10.1 MAINTENANCE AND REPAIR.
(a) Tenant, at its sole cost and expense, shall keep the Property
and all private roadways, sidewalks and curbs appurtenant thereto and
which are under Tenant's control in good order, condition and repair and,
except as otherwise expressly provided to the contrary in Article XlV, XV,
or XVI with reasonable promptness, shall make all necessary and
appropriate repairs and replacements thereto of every kind and
nature, whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, patent or latent, foreseen or unforeseen, or arising by reason
of a condition existing prior to the commencement of the Term of this
Lease and regardless of the cause necessitating repair. Tenant shall also be
obligated at its expense to make all repairs, modifications and renovations
necessary to comply with all licensing, safety and health and building
code, regulations applicable to the Property so that it can be legally
operated for its Primary Intended Use. All repairs by Tenant shall, to the
extent reasonably achievable, be at least equal in quality to the original
work. Tenant shall not take or omit to take any action, the taking or
omission of which might materially impair the value or the usefulness of all
or any portion of the Property for the Primary Intended Use. Tenant
shall give Landlord ten days prior written notice of any repair, replacement,
modification or renovation pursuant to this Section the cost of which
exceeds $200,000 and, prior to commencing any such repair, replacement,
modification or renovation, shall provide to Landlord either (i) a lien
payment and completion bond in form and substance and issued
by a surety reasonably acceptable to Landlord or (ii) a payment and
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completion guaranty in form and substance and executed by a guarantor
reasonably acceptable to Landlord, as Tenant may elect.
(b) Landlord shall not under any circumstances be required to
make any repairs, replacements, alterations, restorations or renewals of any
nature or description to the Property, whether interior or exterior, structural
or non-structural, ordinary or extraordinary, patent or latent, foreseen or
unforeseen, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease, nor shall Landlord under any circumstances be
required to maintain the Property in any other way, except as specifically
provided herein. Tenant hereby waives, to the fullest extent permitted by
law, the right to make repairs at the expense of Landlord pursuant to any
law or equitable principle in effect at the time of the execution of this Lease
or hereafter enacted. Landlord shall have the right to give, record and post,
as appropriate, notices of non-responsibility under any mechanic's lien laws
now or hereafter existing, and any other notices of a similar nature that
Landlord may reasonably elect to give, record or post from time to time
during the Term.
(c) Nothing contained in this Lease, and no action or inaction by
Landlord, shall be deemed or construed in any manner as (i) constituting
the consent or request of Landlord, expressed or implied; to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of
any labor or services or the furnishing of any materials or other properly for
the construction, alteration, addition, repair or demolition of or to all or any
portion of the Property or (ii) giving Tenant any right, power or permission
to contract for or permit the performance of any labor or services or the
furnishing of any materials or other Property in such a manner as would
permit the making of any claim against Landlord with respect thereto, or to
make any agreement that may create, or in any way may be the basis for the
assertion of any right, title, interest, lien, claim or other encumbrance upon
the estate of Landlord in all or any portion of the Property.
(d) Unless Landlord conveys title to any of the Property to Tenant
pursuant to the provisions of this Lease, Tenant shall, upon the expiration or
earlier termination of this Lease, vacate and surrender the Property to
Landlord in the condition in which the Property was originally received
from Landlord, except as repaired, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Lease, and except for or
ordinary wear and tear (but subject to the obligation of Tenant under this
Section to maintain the Property in good order, condition and repair during
the entire Term of this Lease) and except for damage or destruction by
casualty or condemnation which Tenant is not required to repair by the
provisions of this Lease.
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10.2 ENCROACHMENTS AND RESTRICTIONS. If any of the
Improvements shall at any time during the Term violate any agreement or
condition contained in any lawful covenant, condition, restriction, equitable
servitude or other agreement affecting all or any portion of the Property, or
shall impair the rights of others under any easement or right-of-way
burdening the Property, provided that such agreement , covenant, condition,
restriction or easement has not been created by Landlord, then promptly
upon the request of Landlord, or at the behest of any person affected by
violation or impairment and in such case, in the event of an adverse final
determination, Tenant shall either (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
Landlord or Tenant, provided that Landlord shall consent to all such
settlements or waivers or (b) make such changes in the Improvements and
take such other actions as Tenant in the reasonable and good faith exercise
of its judgment deems practicable to remove such encroachment and to end
such violation or impairment, including, if necessary, the alteration of any
of the Improvements provided that Landlord shall consent to all such
alterations and the changes are not the result of any condition created solely
by Landlord. With respect to any encroachments identified on the ALTA
surveys of the Property delivered by Tenant to Landlord pursuant to the
Purchase Agreement, Landlord agrees that it shall not require Tenant to
obtain a waiver of or otherwise correct any such encroachment unless and
until an affected third party notifies Landlord of its objection to any such
encroachment. In any event Tenant shall, subject to Landlord's consent,
take all such actions as may be necessary in order to be able to continue the
operation of the Improvements for the Primary Intended Use substantially
in the manner and to the extent the Improvements were operated prior to the
assertion of such violation or impairment. Tenant shall not be responsible
for any claims covered by Landlord's title insurance policy, and Landlord
agrees that any proceeds recovered under such title insurance policy
shall be made available to Tenant to remedy the claimed violation or
restriction.
ARTICLE XI
CAPITAL ADDITIONS
11.1 CONSTRUCTION OF CAPITAL ADDITIONS.
(a) If no Event of Default shall have occurred and be continuing,
Tenant may, subject to the terms and conditions contained in this Article,
construct or install Capital Additions on the Property with the prior written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed as expressly provided herein. Tenant shall not be permitted to
create any Encumbrance on the Property in connection with any such
Capital Addition, except upon Landlord's prior written consent.
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(b) Prior to commencing construction of any Capital Addition,
Tenant shall submit to Landlord in writing a proposal setting forth in
reasonable detail any proposed Capital Addition and shall provide to
Landlord such plans and specifications, permits, licenses, contracts and
other information concerning the proposed Capital Addition as Landlord
may reasonably request. Without limiting the generality of the foregoing,
such proposal shall indicate the approximate projected cost of constructing
such Capital Addition, the use or uses to which it will be put and a good
faith estimate of the change, if any, in the Gross Revenues that Tenant
anticipates will be caused by such Capital Addition.
(c) No Capital Addition shall be made which would tie in or
connect any Improvements with any other improvements on Property
adjacent to the Property (and not part of the Property), including without
limitation, tie-ins of buildings or other structures or utilities unless Tenant
shall have obtained the prior written consent of Landlord, which consent
Landlord may grant, withhold or delay in its sole discretion. All proposed
Capital Additions shall be architecturally integrated and consistent with the
Property.
11.2 CAPITAL ADDITIONS FINANCED OR PAID FOR BY
LANDLORD.
(a) Tenant shall be required to request that Landlord provide or
arrange financing for any Capital Addition by providing to Landlord such
information about such Capital Addition as Landlord may reasonably
request. Landlord may, but shall be under no obligation to, meet the
request, and within 60 days of receipt of such information, Landlord shall
notify Tenant 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 (including, without limitation, the
increase in Base Rent described in clause (iii) of subparagraph (b), below to
compensate Landlord for the additional funds advanced by it).
Notwithstanding the foregoing, Landlord shall not finance the cost of any
proposed Capital Addition if such cost is less than $100,000. In no event
shall the portion of the material, labor charges and fixtures of the Capital
Additions Cost be less than seventy-five percent (75 %) of the total amount
of such cost. Tenant shall, within thirty (30) days of Tenant's receipt of
Landlord's affirmative notice that Landlord will finance the proposed
Capital Addition, give Landlord a notice accepting or rejecting Landlord's
proposed financing.
(b) If Landlord finances the Capital Additions Cost of the proposed
Capital Addition, Tenant shall provide Landlord with the following (unless
waived by Landlord in writing):
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(i) prior to any disbursement of funds, such information,
certificates, licenses, permits, authorizations, evidence of zoning and other
documents reasonably requested by Landlord, or by any third party lender
with whom Landlord has agreed or may agree to provide financing, as
necessary to confirm that Tenant will be able to use the Capital Addition
upon completion thereof in accordance with the Primary intended Use for
such Capital Addition, including all required federal, state or local
government licenses, permits, authorizations and approvals.
(ii) prior to any disbursement of funds, an Officer's
Certificate and, if requested, a certificate from Tenant's architect, setting
forth in reasonable detail the projected (or actual, if available) Capital
Additions Cost;
(iii) prior to or coincident with the first disbursement of
funds, an amendment to this Lease (together with a memorandum thereof in
recordable form), duly executed and acknowledged, in form and substance
reasonably satisfactory to Landlord, providing for an increase in the Base
Rent equal to the product of (x) the Capital Additions Cost of such Capital
Addition and (y) 350 basis points in excess of the Ten-Year Treasury Rate
determined as of the date of such amendment to the Lease, along
with the legal description of any land obtained in connection with such
Capital Addition and such other provisions as may be necessary or
appropriate;
(iv) prior to or coincident with the first disbursement of
funds, a construction and development agreement setting forth the terms for
Landlord's financing and Tenant's construction of such Capital Additions;
(v) prior to or coincident with payment for any land
obtained in connection with such Capital Addition, a deed conveying to
Landlord title to such land, or, if applicable, a ground lease on terms
acceptable to Landlord, which title or leasehold shall be free and clear of
any liens, encumbrances or other exceptions to or matters affecting title
except those approved by Landlord, and, upon completion of the
Capital Addition, a final as-built survey thereof reasonably satisfactory to
Landlord;
(vi) during construction and following completion of the
Capital Addition, endorsements to any outstanding policy of title insurance
covering the Property, or commitments therefor reasonably satisfactory in
form and content to Landlord (x) updating the same without any additional
exception except such as may be reasonably permitted by Landlord and (y)
adding to its coverage any land acquired or leased in connection with such
Capital Addition and 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);
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(vii) following the advance of funds, if appropriate, (x) an
extended coverage owner's policy of title insurance insuring fee simple title
to any land conveyed to Landlord pursuant to subparagraph (v), free and
clear of all liens and encumbrances except those approved by Landlord, and
(y) a lender's policy of title insurance reasonably satisfactory in form and
substance to Landlord and to any Lender with whom Landlord has agreed
or may. agree to provide financing; and
(viii) during or following the advancement of funds, prints
or architectural and engineering drawings relating to the Capital Addition
and such other certificates (including, but not limited to, endorsements
increasing the insurance coverage, if any, at the time required by Section
14.1), documents, opinions or counsel, appraisals, surveys, certified copies
of duly adopted resolutions of the board of directors of Tenant
authorizing the execution and delivery of the lease amendment,
construction and development agreement and any other instruments as may
be reasonably required by Landlord and any lender from whom Landlord
has agreed or may agree to obtain financing.
(c) Any new mortgage or supplement to any existing mortgage
entered into by Landlord with any lending institution covering the Property
or any land referred to in subparagraph (iv) above shall be subject to the
rights of Tenant under this Lease, as this Lease may be amended from time
to time.
(d) If Landlord finances the cost of any such Capital Addition,
Tenant will reimburse Landlord for all fees, costs and expenses (including
fees and costs of in-house and outside attorneys) incurred by Landlord in
connection therewith.
11. 3 CAPITAL ADDITIONS PAID FOR BY TENANT. If Landlord
does not finance the cost of a Capital Addition under the terms of Section
11.2 and Tenant elects nevertheless to construct or cause to be constructed
such Capital Addition, (i) Tenant shall not Commence any construction
with respect to such Capital Addition without first obtaining the prior
written consent of Landlord (which Landlord shall not unreasonably
withhold so long as the proposed Capital Addition will not, in Landlord's
reasonable opinion, either (x) diminish the value of the Property or (y)
impair the Facility's ability to produce Gross Revenues and which consent
shall be delivered to Tenant within 60 days of receipt by Landlord of
Tenant's written proposal with respect to such Capital Addition), and (ii)
Tenant shall pay the cost of such Capital Addition, and there shall be
no adjustment in the Rent by reason of any such Capital Addition.
11.4 DISPOSITION OF CAPITAL ADDITIONS UPON
EXPIRATION OR TERMINATION OF LEASE. Upon the expiration or
earlier termination of this Lease, all Capital Additions shall pass to and
become the Property of Landlord, free and clear of all encumbrances.
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11.5 NON-CAPITAL ADDITIONS. Tenant shall have the right to
make additions, modifications or improvements to the Property which are
not Capital Additions from time to time as it, in its reasonable discretion,
may deem to be desirable for the Property's uses and purposes permitted
hereunder, provided that such action does not (i) significantly and adversely
alter the character or purpose or detract in any manner from the value or
operating efficiency of the Property, (ii) significantly impair the
revenue-producing capability of the Property, (iii) materially and adversely
affect the ability of Tenant to comply with the provisions of this Lease, or
(iv) result in a violation of any of the provisions of this Lease (including,
but not limited to Articles XII or XXIX), and provided that, if the cost of
such non-capital additions, modifications or improvements exceed
$200,000 in any 12-month period, Tenant gives Landlord ten days'
prior Notice of such addition, modification or improvement. The cost of
such non-capital additions, modifications or improvements to the Property
shall be paid by Tenant, and all such non-capital additions, modifications
and improvements shall, without payment by Landlord 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
Landlord.
11.6 SALVAGE. All materials which are scrapped or removed in
connection with the construction of either Capital Additions permitted by
Section 11.1, non-capital additions permitted by Section 11. 5, or repairs
required by Article X shall be or become the Property of the party which
paid for, or provided the financing for such work.
11.7 NO LIENS ON LANDLORD'S INTEREST. In no event shall the
interest of Landlord be subject to liens for improvements made by Tenant,
whether under Article 10, this Article 11, Article 15 or otherwise, and
Tenant shall notify any and all contractors making any improvements,
repairs or additions to any portion of the Property that any lien to which
such contractor may- be entitled pursuant to the laws of the State shall not
extend to the interest of Landlord in the Property.
ARTICLE XII
LIENS
Subject to the provisions of Article XIII relating to permitted contests,
Tenant shall not directly or indirectly create or allow to remain and shall
promptly discharge at its expense any lien, encumbrance, security interest,
attachment, title retention agreement or claim upon the Property or any
attachment, levy, claim or encumbrance in respect of Rent, not including,
however, (a) this Lease, (b) Permitted Encumbrances, (c) restrictions, liens
and other encumbrances which are consented to in writing by Landlord or
expressly permitted under Section 29.1 (a) hereof, (d) liens for those taxes
of Landlord which Tenant is not required to pay hereunder, (e) subleases
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permitted by Article XXIII, (f) liens for Impositions or for sums resulting
from noncompliance with Legal Requirements so long as the same are not
yet payable or are payable without the addition of any fine or penalty and
are in the process of being contested as permitted by Article XIII, (g) liens
of mechanics, laborers, materialmen, suppliers or vendors for sums either
disputed or not yet due, provided that (i) the payment of such sums shall not
be postponed for more than five days after the completion of the action
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 (ii) any such liens are in the process of being
contested as permitted by Article XIII, and (h) any liens which are the
responsibility of Landlord pursuant to the provisions of Article XXVII or
are directly created or permitted by Landlord.
ARTICLE XIII
CONTESTS
If no Event of Default has occurred and is then continuing, Tenant, on
its own or on Landlord's behalf (or in Landlord's name ), but at Tenant's
sole cost and expense, upon ten days' prior Notice to Landlord, may contest,
by appropriate legal proceedings conducted in good faith and with due
diligence, without prejudice to Landlord's rights hereunder the amount,
validity or application, in whole or in part, of any Imposition, Legal
Requirement, Insurance Requirement, lien, attachment, levy,
encumbrance, charge or claim not otherwise permitted by Article XII,
provided that (a) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the Commencement and continuation of
such proceedings shall suspend the collection thereof from Landlord and
from the Properly, (b) neither the Property nor any Rent therefrom nor any
part thereof or interest therein would be subject to any risk of being
sold, forfeited, attached, foreclosed, or lost, (c) in the case of a Legal
Requirement; Landlord would not be in any danger of incurring any lien,
charge, fine, penalty, or other 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
$100,000 then, in any such event, Tenant shall deliver to Landlord an
Officer' s Certificate to the effect set forth in clauses (a), (b) and (c), to
the extent applicable, (e) in the case of a Legal Requirement or an Imposition,
lien, encumbrance or charge, Tenant shall give such reasonable security as
may be demanded by Landlord to insure ultimate payment of the same and
to prevent any loss or injury to Landlord, including but not limited to any
sale or forfeiture of the affected portion of the Property or the Rent by
reason of such non-payment or non-compliance; provided, however, the
provisions of this Article shall not be construed to permit Tenant to contest
the payment of Rent (except as to contests concerning the method of
computation or the basis of levy of any Imposition) or any other sums
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payable by Tenant to Landlord hereunder, (f) in the case of an Insurance
Requirement, the coverage required by Article XIV shall be maintained,
and (g) if such contest be finally resolved against Landlord or Tenant,
Tenant shall, as Additional Charges due hereunder, promptly pay
the amount required to be paid, together with all interest and penalties
accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement. Landlord, at Tenant's expense, shall execute and
deliver to Tenant such authorizations and other documents as may
reasonably be required in any such contest and, if reasonably requested
by Tenant or if Landlord so desires, Landlord shall join as a party therein.
Tenant shall indemnify and save Landlord harmless against any liability,
cost or expense of any kind that may be imposed upon Landlord in
connection with any such contest and any loss resulting therefrom.
ARTICLE XIV
INSURANCE
14.1 GENERAL INSURANCE REQUIREMENTS. Tenant shall at all
times maintain policies of insurance insuring the Property, and all Property
located in or on the Property, against the kind of risks and in the amounts of
coverage described below. All such insurance shall be written by companies
of recognized responsibility authorized to conduct an insurance business in
the State. All such insurance (other than insurance with respect to Tenant's
Personal Property) shall name Landlord as an additional insured. Proceeds
of insurance policies payable to compensate any loss shall be payable to
Landlord or Tenant as provided in Article XV. All such insurance shall
name as an additional insured or loss payee, as appropriate, the holder (a
"FACILITY MORTGAGEE") of any mortgage, deed of trust or other
security agreement securing any Encumbrance placed on the Property
in accordance with the provisions of Article XXVII ("FACILITY
MORTGAGES") by way of a standard form of mortgagee's loss payable
endorsement. Any loss adjustment or other settlement in excess of $250,000
shall require the written consent of Landlord and each Facility Mortgagee
and any other lender of Landlord or its Affiliates ("LANDLORD
LENDER") having any contractual insurance requirements which would
impact on the insurance requirements of this Lease to the extent so required
and Landlord has given Tenant written notice thereof. Originals or certified
copies of all insurance policies obtained pursuant to this Article shall be
deposited with Landlord and, if requested, with any Facility Mortgagee(s)
or Landlord Lender(s). The policies on the Property, including
the Improvements, Fixtures and Tenant's Personal Property, shall insure
against the following risks:
(a) loss or damage by fire, vandalism and malicious mischief,
extended coverage perils, and all physical loss perils insurance including
but not limited to sprinkler leakage, in an amount not less than 100% of the
then full replacement cost thereof (as defined below in Section 14.2) or
such lesser amount as is approved by Landlord in writing;
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(b) loss or damage by explosion of steam boilers, pressure vessels
or similar apparatus, now or hereafter installed in the Facility in such
amounts with respect to any one accident as may be reasonably requested
by Landlord from time to
time;
(c) business interruption or loss of rental under a rental value
insurance policy covering risk of loss during the lesser of the first 12
months of reconstruction or the actual reconstruction period necessitated by
the occurrence of any of the hazards described in Sections 14.1(a) or
14.1(b), in an amount sufficient to prevent Landlord from becoming a
coinsurer:
(d) claims for personal injury or Property damage under a policy
of comprehensive general public liability insurance, in an amount not less
than one million dollars per occurrence with respect to bodily injury and
death and three million dollars with respect to Property damage;
(e) flood (when the Property is located in whole or in part within
an area designated by an appropriate agency or authority of the United
States as a flood plain) and such other hazards and in such amounts as may
be customary for comparable properties in the area and as may be available
from insurance companies, insurance pools, or other appropriate companies
authorized to do business in the State; and
During any period during which any Capital Addition is under
construction, course of construction insurance and all risks insurance in
such amounts as Landlord shall reasonably require.
14.2 REPLACEMENT COST. The term "full replacement cost" as
used herein shall mean the actual replacement cost of the Property requiring
replacement from time to time, less exclusions provided in a normal fire
insurance policy. If either party believes that full replacement cost (the then
replacement cost less such exclusions) has increased or decreased at any
time during the Lease Term, it may have such full replacement cost
redetermined by the insurer then providing the largest amount of fire
insurance coverage carried on the Property.
14.3 ADDITIONAL INSURANCE. In addition to the insurance
described. in Section 14.1, throughout the Term Tenant shall maintain such
additional insurance as may be required from time to time by Landlord
provided that the types and amounts of any such additional insurance
required by Landlord is then customarily maintained by the
operators of similar assisted living facilities in the region in which the
Facility is located. Tenant shall further maintain adequate workers'
compensation insurance coverage for all persons employed by Tenant on
the Property. Such workers' compensation insurance shall be in accordance
with the requirements of applicable local, state and federal law.
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14.4 WAIVER OF SUBROGATION. All insurance policies carried
by Landlord or Tenant covering the Property, the Fixtures, the Facility or
Tenant's Personal Property shall expressly waive any right of subrogation
on the part of the insurer against the other party. Landlord and Tenant agree
that the respective policies of insurance carried by them will include such
waiver clauses or endorsements so long as the same are obtainable
without extra cost. If such clauses and endorsements are only available
upon the payment of an extra charge, the other party, at its election, may
pay the same, but shall not be obligated to do so; provided that the Tenant
shall at all times be obligated to carry the policies or insurance required
under this Article regardless of whether the waiver of subrogation required
under this Section 14.4 is available.
14.5 FORM OF INSURANCE. All of the policies of insurance
referred to in this Article shall be written in a form, and issued by insurance
companies, satisfactory to Landlord. Landlord agrees that it will not
unreasonably withhold or delay its approval as to the form of the policies or
the insurance companies selected by Tenant. Tenant shall pay all of the
premiums therefor, and shall deliver an original or certified copy of
any policy, or renewal thereof, to Landlord, any Facility Mortgagee and any
Landlord Lender at least 10 days prior to the expiration of the existing
policy to which such renewal policy relates. If Tenant either fails to effect
such insurance as herein required or to pay the premiums therefor, or to
deliver such policies or certified copies thereof to Landlord at the times
required, Landlord shall be entitled, but shall have no obligation,
to effect such insurance and pay the premiums therefor, which premiums
shall be repayable to Landlord upon demand therefor in a Notice, and
failure by Tenant to repay the same shall constitute an Event of Default
within the meaning of Section 17.1 (d). Each insurer mentioned in this
Article shall agree, by endorsement on the policy or policies issued by it, or
by independent instrument furnished to Landlord, that it will give
to Landlord (and to any Facility Mortgagee and Landlord Lender of which
Tenant has notice, if required) 30 days prior written notice before such
policy or policies expire, are altered or are cancelled.
14.6 CHANGE IN LIMITS. If either party shall at any time deem the
limits of the personal injury or Property damage public liability insurance
or malpractice insurance then carried by Tenant to be insufficient or
excessive, the parties shall endeavor in good faith to agree promptly upon
the proper and reasonable limits for such insurance to be carried, and such
insurance shall thereafter be carried with the limits thus agreed upon until
further change pursuant to the provisions of this Section.
14.7 BLANKET POLICY. Notwithstanding anything to the contrary
contained in this Article, Tenant'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 Tenant so
long as (a) the coverage afforded to Landlord is not reduced or diminished
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or otherwise altered from that which would exist under a separate policy
meeting all other requirements of this Lease by reason of the use of such
blanket policy of insurance and (b) the requirements of this Article are
otherwise satisfied.
14.8 NO SEPARATE INSURANCE. Tenant shall not obtain separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article XIV to be furnished by, or which may reasonably be
required to be furnished by Tenant, nor shall Tenant increase the amount of
any then existing insurance 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 Landlord and all Facility
Mortgagees, are named therein as additional insureds, and the loss is
payable under said insurance in the same manner as losses are payable
under this Lease. Tenant shall immediately notify Landlord of the obtaining
of any such separate insurance or of the increasing of any of the amounts of
the then existing insurance.
ARTICLE XV
INSURANCE PROCEEDS
15.1 HANDLING OF INSURANCE PROCEEDS. Subject to Section
15. 4 hereof, all proceeds from any policy of insurance required by Article
XIV of this Lease shall be paid to Landlord and held in trust by Landlord
(subject to the provisions of Section 15.7) and shall be made available for
reconstruction, repair or replacement, as the case may be, of any damage to
or destruction of all or any portion of the Property to which such proceeds
relate, and shall be paid out by Landlord from time to time subject to the
provisions hereof for the cost of such reconstruction, repair or replacement.
Any unused portion shall be retained by Landlord free and clear upon
completion of such repair and restoration but shall be applied by Landlord
against Tenant's obligations for Rent next coming due under this Lease. If
neither Landlord nor Tenant is required or elects to repair and restore, and
the Lease is terminated without purchase by Tenant as described in Section
15.2(a), then all such insurance proceeds shall be retained by Landlord. All
salvage resulting from any risk covered by insurance shall belong to
Landlord, except that any salvage relating to Tenant's Personal Property
shall be the properly of Tenant.
15. 2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR
DESTRUCTION COVERED BY INSURANCE.
(a) Except as provided in Section 15.7, if during the Term a
portion of the Property is totally or substantially destroyed by a risk covered
by the insurance described in Article XIV so that the Facility thereby is
rendered unsuitable for its Primary Intended Use, in Tenant's reasonable
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opinion (taking into account all relevant factors, including but not limited to
the number of useable beds, the amount of square footage reasonably
available for use by Tenant and the type and amount of Gross
Revenues lost) (the "IMPACTED FACILITY"), Tenant shall at its option
either (i) restore the Impacted Facility to substantially the same condition as
existed immediately before the damage or destruction or (ii) acquire the
Property from Landlord for a purchase price equal to the greater of the
Minimum Repurchase Price or the Fair Market Value Purchase
Price of the Property immediately prior to such damage or destruction, or
(iii) terminate the Lease with respect to the Property effective upon
Landlord' s receipt of the insurance proceeds and any "Shortfall" (as
hereinafter defined) and in such event Landlord shall be
entitled to retain or collect for its own benefit the insurance proceeds,
provided that, in the event the amount of the insurance proceeds received
by Landlord are less than the amount which would be payable in the
aggregate under the insurance policies specified in Section 14.1(a) such
termination shall not be effective until Tenant pays Landlord the
amount of such shortfall ("SHORTFALL") in cash. If Tenant restores the
Impacted Facility, the insurance proceeds shall be paid out by Landlord to
Tenant or its designee from time to time as reasonably requested by Tenant
to pay for the reasonable costs of such restoration and any excess proceeds
remaining after such restoration shall be retained by Tenant. If Tenant
acquires the Property, all applicable insurance proceeds shall be the
property of Tenant.
(b) Except as provided in Section 15.7, if during the Term, the
Improvements or Fixtures are partially destroyed due to a risk covered by
the insurance described in Article XIV but the Impacted Facility is not
thereby rendered unsuitable for the Primary Intended Use, in Tenant's
reasonable opinion (taking into account all relevant factors, including but
not limited to the number of useable beds, the amount of square footage
reasonably available for use by Tenant and the type and amount of Gross
revenues lost), Tenant shall restore the Impacted Facility to substantially the
same condition as existed immediately before the damage or destruction.
Such damage or construction shall not terminate this Lease; provided,
however, that if Tenant cannot, with reasonable diligence and within a
reasonable time, obtain all government approvals, including building
permits, licenses, conditional use permits and any certificates of need,
necessary to perform all required repair and restoration work and to operate
the Impacted Facility in substantially the same manner and for the Primary
Intended Use, Tenant shall either (i) offer to purchase the Property for a
purchase price equal to the greater of the Minimum Repurchase Price or the
Fair Market Value Purchase Price immediately prior to such damage or
destruction or (ii) continue to operate under the Lease which shall
remain in full force and effect and Landlord shall be entitled to retain the
insurance proceeds, less the amount needed to restore the Property so that
the portion of the Facility unaffected by the casualty can be used as a
complete architectural unit. If Tenant shall make such offer and Landlord
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does not accept the same within 120 days of Landlord's receipt of such
offer, Tenant may either (x) withdraw such offer, in which case this Lease
shall remain in full force and effect and Tenant shall proceed to restore the
Impacted Facility as soon as reasonably practicable to substantially the
same condition as existed immediately before such damage or destruction,
or (y) terminate this Lease after recovery by Landlord of all insurance
proceeds and the payment by Tenant of any Shortfall in cash. If Tenant so
restores the Impacted Facility, insurance proceeds shall be paid out
by Landlord from time to time as reasonably requested by Tenant to pay for
the reasonable costs of such restoration, and any excess proceeds remaining
after such restoration shall be retained by Tenant.
(c) If Tenant elects to repair or restore any damage or destruction
to the Property and the cost of such repair or restoration exceeds the amount
of proceeds received by Landlord from the insurance required under Article
XIV, Tenant shall contribute any and all excess amounts necessary to repair
or restore the Facility.
(d) If Landlord accepts Tenant's offer to purchase the Property this
Lease shall terminate as to the Property upon payment of the purchase price
therefor and Landlord shall thereupon remit to Tenant all insurance
proceeds pertaining to the Property less Landlord's reasonable expenses,
including attorneys' fees, and assign Landlord's rights in any uncollected
insurance proceeds to Tenant.
15. 3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR
DESTRUCTION NOT COVERED BY INSURANCE. Except as provided
in Section 15.7 below, if during the Term the Facility is totally destroyed or
materially damaged (i) from a risk not covered by insurance described in
Article XIV but that would have been covered if Tenant carried the
insurance customarily maintained by, and generally available to, the
operators of reputable facilities which are used for the Primary Intended
Use in the region in which the Facility is located, (ii) from a risk for which
insurance coverage is voided due to any act or omission by Tenant, or (iii)
as result of an earthquake, whether or not such damage or destruction
renders the Impacted Facility unsuitable for their Primary Intended Use
(taking into account all relevant factors, including but not limited to the
number of useable beds, the amount of square footage reasonably available
for use by Tenant and the type and amount of Gross Revenues lost), Tenant
shall restore the Impacted Facility to substantially the same condition as
existed immediately before such damage or destruction and not terminate
this Lease. Otherwise, if the Facility is totally destroyed or materially
damaged by a risk not covered by insurance such that the Facility shall be
unusable for its Primary Intended Use, this Lease shall terminate within 90
days of such destruction or damage, provided that the Tenant may elect to
restore the Impacted Facility, in which event, this Lease shall continue in
full force and effect. If such damage or destruction does not render the
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Impacted Facility unusable for its Primary Intended Use, in Tenant's
reasonable opinion, Tenant shall also restore the Facility to substantially the
same condition as existed immediately before the damage or destruction.
15.4 PAYMENT OF PROCEEDS ON TENANT'S PROPERTY AND
CAPITAL ADDITIONS PAID BY TENANT. Notwithstanding any
provision herein, all insurance proceeds payable by reason of any loss of or
damage to any of Tenant's Personal Property or Capital Additions paid for
by Tenant shall be paid to Tenant and Tenant shall hold such insurance
in trust to pay the cost of repairing or replacing damaged Tenant's Personal
Property or Capital Additions paid for by Tenant; provided, however, that if
the damaged Tenant's Personal Property or Capital Additions paid for by
Tenant were no longer necessary to Tenant's operations prior to their
destruction, Tenant shall not be obligated to repair or replace them.
15.5 RESTORATION OF TENANT'S PROPERTY. Upon any
restoration of the Impacted Facility as provided in Section 15.2 or 15.3,
Tenant shall either (i) at Tenant's sole cost and expense, restore all
alterations and improvements made by Tenant, Tenant's Personal Property
and all Capital Additions paid for by Tenant, or (ii) at Tenant's sole cost
and expense, replace such alterations and improvements, Tenant's Personal
Property or Capital Additions with improvements or items of the same or
better quality and utility in the operation of the Property; provided,
however, that if the damaged Tenant's Personal Property or Capital
Additions paid for by Tenant were no longer necessary to Tenant's
operations prior to their destruction, Tenant shall not be obligated to replace
them.
15. 6 ABATEMENT OF RENT. Unless and until Tenant shall pay the
purchase price for the Property to Landlord in accordance with this Article
XV (and this Lease is thereby terminated or otherwise terminated as
provided in this Article XV), in the event of any damage or destruction of
the Properly, this Lease shall remain in full force and effect and Tenant's
obligation to make rental payments and to pay all other charges required by
this Lease shall not be abated by reason of any damage or destructions to
the Property or the subsequent loss of Landlord's entitlement to the
Property.
15. 7 DAMAGE NEAR END OF TERM. Notwithstanding any
provisions of this Article XV to the contrary, if damage to or destruction of
the Facility occurs during the last 12 months of the then applicable term
(whether Fixed or Extended), if Tenant has not elected to extend such term,
and if such damage or destruction cannot be fully repaired and restored
within six months immediately following the date of loss, then Tenant shall
have the right to terminate this Lease by giving written Notice thereof to
Landlord within 30 days after the date of such damage or destruction, in
which event, Landlord shall collect any insurance proceeds to which it is
entitled, and Tenant shall assign Tenant's rights in any additional insurance
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proceeds. In the event that the Facility is totally destroyed or damaged (i)
from a risk not covered by insurance described in Article XIV but that
would have been covered if Tenant carried the insurance customarily
maintained by, and generally available to, the operators of reputable
facilities which are used for the Primary Intended Use in the region in
which the Facility is located, (ii) from a risk for which insurance coverage
is voided due to any act or omission by Tenant, or (iii) as a result of an
earthquake, whether or not such damage or destruction renders the Facility
unsuitable for its Primary Intended Use (taking into account all relevant
factors, including but not limited to the number of useable beds, the amount
of square footage reasonably available for use by Tenant and the type and
amount of Gross Revenues lost), then Tenant shall pay to Landlord a sum
equal to the amount reasonably necessary to repair such
damage or destruction.
15. 8 TERMINATION OF OPTION TO PURCHASE. Any
termination of this Lease pursuant to this Article shall cause any option to
purchase granted to Tenant under this Lease and the right to extend the
Term by any Extended Term to be terminated and to be without further
force or effect.
15.9 WAIVER. Tenant hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction of the
Facility which Landlord is obligated to restore or may restore under any of
the provisions of this Lease.
ARTICLE XVI
CONDEMNATION
16.1 DEFINITIONS.
For purposes of this Article XVI the following terms have the
meanings specified in this Section 16.1.
(a) " CONDEMNATION " means (a) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a
Condemnor, or (b) a voluntary sale or transfer by Landlord with Tenant's
consent (provided no Event of Default has occurred and is continuing at
such time) to any Condemnor, either under threat of condemnation or while
legal proceedings for condemnation are pending.
(b) "DATE OF TAKING" means the first date the Condemnor has
the right to immediate possession of the Property being condemned.
(c) "AWARD" means all compensation, sums and any other value
awarded, paid or received on a total or partial condemnation.
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(d) "CONDEMNOR" means any public or quasi-public authority,
or private corporation or individual, having the power of condemnation
16.2 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term
there is any Taking of all or any part of the Property or of any interest in
this Lease by Condemnation; the rights and obligations of the parties with
respect to such Condemnation shall be determined by this Article.
16. 3 TOTAL TAKING. If title to the whole of Tenant' s interest in
the Property shall be taken or condemned by any Condemnor, this Lease
shall cease and terminate as of the Date of Taking. If title to less than the
whole of the Property shall be so taken or condemned, which nevertheless
renders the Property unsuitable for its Primary Intended Use, in Tenant's
reasonable opinion (taking into account all relevant factors, including but
not limited to the number of useable beds, the amount of square footage
reasonably available for use by Tenant, and the type and amount of gross
Revenues lost), Tenant and Landlord each shall have the option by Notice
to the other, at any time prior to the taking of possession by, or the date of
vesting of title in, such Condemnor, whichever first occurs, to terminate
this Lease as of such earlier to occur date. Upon such earlier to occur date,
if such Notice has been given, this Lease shall cease and terminate. In either
of such events, all Rent paid or payable by Tenant hereunder shall be
apportioned as of the date the Lease shall have been so terminated as
aforesaid.
16.4 ALLOCATION OF PORTION OF AWARD. Subject to the
rights of any Facility Mortgagee, the total Condemnation Award made with
respect to all or any portion of the Property shall be distributed to Landlord
and Tenant ratably in accordance with the value of their respective interests
in and to such Property as hereafter set forth in this Section 16.4. All of the
Award shall be the sole and exclusive Property of Landlord and shall be
payable to Landlord, subject to the rights of any Facility Mortgagee;
provided that any portion of such Condemnation Award which is expressly
allocated by the Condemnor to the taking of Tenant's leasehold interest in
the Property, Tenant's Share of Appreciation Amount (if any), the taking of
any Capital Additions (or any portion thereof paid for by Tenant, any loss
of business by Tenant during the remaining Term of this Lease, the taking
of Tenant's Personal Property, or any removal and relocation expenses of
Tenant in any such proceedings shall be the sole Property of and payable to
Tenant. In any Condemnation proceedings Landlord and Tenant each
shall seek their own Award in conformity herewith, at their own expense.
16.5 PARTIAL TAKING. If title to less than the whole of the
Property shall be taken or condemned, and the Property is still suitable for
its then Primary Intended Use, in Tenant's reasonable opinion, or if Tenant
or Landlord shall be entitled (but shall not elect) to terminate this Lease as
provided in Section 16.3 hereof, Tenant at its own cost and expense shall
with all reasonable diligence restore the untaken portion of any
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Improvements so that such improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as
may be possible under the circumstances) as the Improvements existing
immediately prior to such Condemnation or Taking. Landlord and Tenant
shall each contribute to the cost of restoration that part of their Award
specifically allocated to such restoration, if any (or if no such specific
allocation is made, a just, fair and reasonable portion of its Award as
reasonably determined by Landlord and Tenant or by arbitration in
accordance with Section 28.14 if Landlord and Tenant are unable to agree
within 30 days of the Award), together with any and all severance and other
damages awarded for any taken Improvements; provided, however, the
amount of such contribution shall not exceed such cost. If such amounts
are not sufficient to cover the cost of restoration Landlord and Tenant shall
contribute any additional amounts needed for restoration in proportion to
the amounts already contributed by them, provided that in no event shall
Landlord contribute any amount to such restoration in excess of its Award.
Thereafter, any excess restoration cost shall be borne solely be Tenant.
Landlord agrees that Tenant shall be entitled to an equitable abatement
of Base Rent in the event of a partial taking of the Property, but such
abatement shall be strictly limited to any amount of excess Award paid to
Landlord after the restoration cost has been paid.
16.6 TEMPORARY TAKING. If the whole or any part of the
Property or of Tenant's interest under this Lease shall be taken or
condemned by any Condemnor for its temporary use or occupancy for a
period of not more than one hundred-eighty (180) days, this Lease shall not
terminate, and Tenant shall continue to pay, in the manner and at the times
herein specified, the full amounts of Base Rent, Additional Rent, if any, and
Additional Charges, provided that during any such Temporary Taking
Tenant shall pay Additional Rent at a rate equal to the average Additional
Rent during the three immediately preceding Fiscal Years (or if three Fiscal
Years shall not have elapsed, the average during the last preceding Fiscal
Years occurring during the Term). Except to the extent Tenant may be
prevented from so doing pursuant to the terms of the order of the
Condemnor, Tenant shall continue to perform and observe all of the other
terms, covenants, conditions and obligations hereof on the part of the
Tenant to be performed and observed as though such Taking or
Condemnation had not occurred. Upon any such Taking or Condemnation
described in this Section, the entire amount of any such Award made for
such Taking or Condemnation allocable to the Term of this Lease, whether
paid by way of damages, Rent or otherwise, shall be paid to Tenant. Tenant
Covenants that upon the termination of any such Taking or Condemnation
set forth in this Section Tenant will, at its sole cost and expense (subject to
any contribution by Landlord as set forth in Section 16.5), restore the
Property as nearly as may be reasonably possible to the condition in which
the same was immediately prior to such Taking or Condemnation, unless
such period of temporary use or occupancy shall expire less than six months
prior to termination of this Lease or extend beyond the expiration of the
Term, in which case Tenant shall not be required to make such restoration.
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ARTICLE XVII
DEFAULTS AND REMEDIES
17.1 EVENTS OF DEFAULT. Any one or more of the following
events shall be deemed an "EVENT OF DEFAULT" hereunder:
(a) Tenant shall fail to pay Rent payable by Tenant under this
Lease when the same becomes due and payable and such failure continues
for three days after notice of such failure (except that Landlord shall not be
required to give more than one such notice in any 12-month period);
(b) Tenant shall violate the covenant described in Section 29.3(c)
hereof:
(c) Any representation or warranty made by the Tenant in
connection with this Lease or the Security Agreement, or in any report,
certificate, financial statement or other instrument furnished in connection
herewith or therewith, from time to time, whether under Article XXIV of
this Lease or otherwise, shall prove to be false or misleading in any material
respect and shall not be remedied within 30 days after Tenant receives
notice thereof;
(d) Tenant shall fail to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Tenant
within a period of 30 days after Notice thereof from Landlord, 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 Tenant proceeds
promptly and with due diligence to cure the failure and diligently completes
the curing thereof;
(e) Tenant shall: (i) admit in writing its inability to pay its debts
generally as they mature, (ii) make a general assignment for the benefit of
its creditors; (iii) have appointed a trustee, receiver or liquidator pursuant
to an order of a court of competent jurisdiction of itself or of the whole or
any part of its Property which is not discharged in sixty (60) days, (iv)
terminate or suspend its business, (v) have any of its assets executed upon,
attached or judicially seized and such execution, attachment or seizure is not
vacated or set aside within sixty (60) days;
(f) Tenant shall: (i) file a voluntary case under any applicable
bankruptcy, insolvency, debtor relief or other similar law or statute of the
United States of America or any State thereof now or hereinafter in effect
("Bankruptcy Laws"), (ii) consent to or acquiesce in the appointment of a
receiver, liquidator, assignee, trustee, custodian or sequestrator (or similar
official of itself or of the whole or any part of its property) which is not
discharged in thirty (30) days, or (iii) fail generally to pay its debts
as they mature or become due;
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(g) Tenant shall, on a petition filed under any applicable
Bankruptcy Laws against any of them, be adjudicated a bankrupt or have an
order for relief thereunder entered against it or fail to oppose any such
proceeding or if a court of competent jurisdiction shall enter an order or
decree appointing, without its consent, a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of itself or of the
whole or any part of its Property and such judgment, order or decree shall
not be vacated or set aside or stayed within sixty (60) days from the date of
the entry thereof; or
(h) Tenant shall be liquidated or dissolved, or shall voluntarily
begin proceedings toward such liquidation or dissolution, or shall, in any
manner, permit the sale or divestiture of substantially all of its assets;
(i) an Event of Default under the terms of the Security Agreement
shall occur and be continuing;
(j) Tenant shall fail to make when due any scheduled payment
with respect to indebtedness (other than indebtedness which is subordinated
to this Lease), unless such failure is being diligently contested in
accordance with the requirements of this Lease or any lease pursuant to
which it enjoys the use of any real or personal property and such failure
shall continue for five days following its receipt of written
advice with respect thereto, if the effect of such failure is to have a material
adverse effect on the business, operations, properties or condition (financial
or otherwise) of Tenant.
(k) any Notification Event described in Section 29. 2(c) shall
occur, which is reasonably likely to result in liability to the Tenant having a
material adverse effect on the business, operations, properties or condition
(financial or otherwise) of Tenant and Tenant shall fail to cure (to
Landlord's reasonable satisfaction) the events or state of affairs constituting
such Notification Event within thirty days after notice thereof was due from
Tenant pursuant to Section 29.2(c);
(1) Tenant shall fail to maintain a Tangible Net Worth of at least
$5.0 million, as evidenced by Tenant's balance sheet included in its
financial statements furnished by Tenant pursuant to Section 24.2(a); or
(m) an Event of Default shall occur under any of the Additional
Leases or Additional Agreements.
No Event of Default (other than a failure to make a payment of
money) shall by deemed to exist under clause (d) above during any time the
curing thereof is prevented by an Unavoidable Delay, provided that upon
the cessation of such Unavoidable Delay, Tenant immediately shall remedy
such default.
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Tenant shall immediately notify Landlord of the occurrence of any
event set forth in subsections 17.1(b) through (1).
17. 2 CERTAIN REMEDIES. Upon any Event of Default, Landlord
shall have all legal, equitable and contractual rights, powers and remedies
provided either in this Lease, at Common law or in equity, or by statute or
otherwise. Tenant expressly acknowledges and agrees that the Landlord
will also have the right of injunction in accordance with applicable law.
Without limiting the foregoing, if an Event of Default occurs, is not
cured within the period, if any, for any such cure provided in Section 17.1,
and is continuing, Tenant shall, to the extent permitted by law and if
required by Landlord so to do, immediately surrender to Landlord the
Property and quit the same. Landlord may enter upon and repossess the
Property by reasonable force, summary proceedings, ejectment
or otherwise, and may remove Tenant and all other persons and any and all
personal Property from the Property subject to rights of any residents or
patients and to any requirement of law. No such entry or repossession by
Landlord shall be deemed an election by Landlord to terminate this Lease
unless specifically stated by Landlord in writing from Landlord to Tenant.
Thereafter Landlord shall use reasonable, good faith efforts to relet the
Property or otherwise mitigate Landlord's damages. Landlord may
so terminate Tenant's right of possession and may repossess the Premises
without liability for trespass or conversion, without demand or notice of any
kind to Tenant and without terminating this Lease, in which event Landlord
may, but shall be under no obligation to, relet the same for the account of
Tenant for such rent and upon such terms as shall be satisfactory to
Landlord. For the purpose of such reletting, Landlord is authorized to
decorate or to make any repairs, changes, alterations, or additions in or to
the Premises that may be necessary or convenient. If Landlord exercises the
remedies provided in this subparagraph, Tenant shall pay to Landlord, and
Landlord shall be entitled to recover from Tenant, an amount equal to the
total of the following: (A) unpaid Rent, plus interest at the Overdue Rate,
owing under the Lease for all periods of time that the Premises are
not relet (including any period prior to Landlord's repossession); plus (B)
the reasonable costs of recovering possession, and all of the reasonable
costs and expenses of such decorations, repairs, changes, alterations, and
additions, and the reasonable expense of such reletting and of the collection
of the rent accruing therefrom to satisfy the Rent provided for in the Lease
to be paid; plus (C) any deficiency in the rentals and other sums
actually received by Landlord from any such reletting from the Rent
required to be paid under this Lease with respect to the periods the Premises
are so relet, and Tenant shall satisfy and pay any such deficiency upon
demand therefor from time to time. Neither the repossession of the
Property, the failure of Landlord to relet the Properly, nor the
reletting of all or any portion of the Property, shall relieve Tenant of its
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liability and obligation hereunder, all of which shall survive any such
repossession or reletting. Tenant agrees that Landlord may file suit to
recover any sums falling due under the terms of this subparagraph from
time to time; and that no delivery or recovery of any portion
due Tenant hereunder shall be a defense in any action to recover any
amount not theretofore reduced to judgment in favor of Landlord, nor shall
such reletting be construed as an election on the part of Landlord to
terminate this Lease unless specifically stated by Landlord in writing from
Landlord to Tenant. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this
Lease for such previous breach in accordance with the procedure
hereinafter provided.
Without limiting the foregoing, whether or not this Lease has been
terminated, Landlord shall have the right to offset against any Rent,
damages, or other sums of money owed by Tenant any advance Rent
applicable to any time period after the occurrence of the Event of Default.
17.3 TERMINATION. Upon the occurrence of any Event of Default,
Landlord may terminate this Lease by giving Tenant not less than ten days'
Notice of such termination during which time Tenant shall have the
opportunity to cure any such Event of Default. Upon the expiration of the
time fixed in such Notice, unless such Event of Default is cured, the Term
shall terminate and all rights of Tenant under this Lease shall cease.
Landlord shall have all rights at law and in equity available to Landlord as a
result of Tenant's breach of this Lease. If any litigation is commenced
with respect to any alleged default under this Lease whether under this
Section 17. 3 or under Section 17. 2, the prevailing party in such litigation
shall receive, in addition to its damages incurred, its reasonable attorneys'
fees, and all costs and expenses incurred in connection therewith. Neither
the termination of this Lease pursuant to this Section 17. 3, the repossession
of the Properly, the failure of Landlord to relet the Property, nor the
reletting of all or any portion of the Property, shall relieve Tenant of its
liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. Upon any such termination, Tenant
shall forthwith pay to Landlord as damages a sum of money equal to the
total of (A) the costs of recovering the Premises, (B) the unpaid Rent due
and payable at the termination, plus interest thereon at the Overdue Rate,
(C) the present value of the balance of the Rent for the remainder of the
term less the fair market rental value of the Premises for such period, and
(D) the present value of any other sum of money rental owed by Tenant to
Landlord and the amount of other damages suffered by Landlord as a result
of Tenant's default.
Additional Rent, for the purposes of Section 17.2 and this Section
17.3, shall be a sum equal to the average of the amounts of the Additional
Rent for the three Calculation Periods immediately preceding the
Calculation Period in which the termination, re-entry or repossession takes
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place, or if three Calculation Periods shall not have elapsed, the average of
the Additional Rent during the last Preceding Calculation Periods occurring
during the Term.
17.4 APPLICATION OF FUNDS. Any payments normally made to
Tenant hereunder which are made to and received by Landlord under any of
the provisions of this Lease during the continuance of any Event of Default
shall be applied to Tenant's obligations in the order which Landlord may
determine or as may be prescribed by applicable laws.
17.5 LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT. If
an Event of Default occurs under this Lease and is not cured within the
time provided under this Lease with respect to such Event of Default,
Landlord, without waiving or releasing any obligation of Tenant, and
without waiving any such Event of Default, may (but shall be under no
obligation to) at any time thereafter cure such default for the account and at
the expense of Tenant, and may, to the extent permitted by law, enter upon
the Property for such purpose and take all such action thereon as, in
Landlord's sole judgment, may be necessary or appropriate with respect
thereto. No such entry by Landlord on the Property shall be deemed an
eviction of Tenant. All sums so paid by Landlord and all reasonable costs
and expenses (including, without limitation, reasonable attorneys' fees
and expenses) so incurred; together with a late charge thereon computed at
the Overdue Rate from the date on which such sums or expenses are paid or
incurred by Landlord until the date reimbursed, shall be reimbursed by
Tenant to Landlord on demand. The obligations of Tenant and rights of
Landlord contained in this Article shall survive the expiration or earlier
termination of this Lease.
17.6 WAIVER. If this Lease is terminated pursuant to the provisions
of this Article, Tenant waives, to the extent permitted by applicable law, (a)
any right of redemption, re-entry or repossession, (b) any right to trial by
jury in the event of summary proceedings to enforce the remedies set forth
in this Article, and (c) the benefit of any laws now or hereafter enforced
exempting Property from liability for rent or for debt.
ARTICLE XVIII
CURE BY TENANT OF LANDLORD DEFAULTS
Landlord shall be in default of its obligations under this Lease if
Landlord 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 Notice thereof from Tenant (or such shorter time as
may be necessary in order to protect the health or welfare of any patient or
other resident of the Property), unless such failure cannot be cured with due
diligence within a period of 30 days, in which case such failure shall not be
deemed to continue if Landlord, within said 30 day period, proceeds
promptly and with due diligence to cure the failure and diligently completes
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the curing thereof. The time within which Landlord shall be obligated to
cure any such failure shall also be subject to extension of time due to the
occurrence of any Unavoidable Delay. If Landlord fails to commence or
complete such cure as provided herein, Tenant may cure such default, and
for so long as Tenant continues to pay Rent, Tenant shall have the right
by separate and independent action to pursue any claim it may have against
Landlord for Landlord's failure to cure such default and, in the event Tenant
acquires the Property pursuant to the option granted hereunder, offset
against the purchase price the amount of any damages owing from Landlord
to Tenant.
ARTICLE XIX
PURCHASE OF PROPERTY BY TENANT
19.1 PURCHASE OF THE PROPERTY. If Tenant purchases the
Property from Landlord pursuant to any of the terms of this Lease,
Landlord shall, except as otherwise expressly provided, upon receipt from
Tenant of the applicable purchase price, together with full payment of any
unpaid Rent due and payable with respect to any period ending
on or before the date of such purchase, deliver to Tenant an ALTA Owner
Policy of Title Insurance or such equivalent policy of title insurance as may
be available in the State, together with such endorsements, reinsurance
agreements and direct access agreements as Tenant may reasonably request,
together with an appropriate special warranty deed or other conveyance
conveying marketable fee simple title in and to the Property to Tenant
in the condition set forth in Article XXVI, except that the Property shall be
free and clear of all mortgages and encumbrances other than (a) those
Tenant has agreed hereunder to pay or discharge, (b) those mortgages
which Tenant has agreed in writing to accept and to take title subject to on
the date the Property was originally conveyed to Landlord and which are
not in default, (c) encumbrances required to be imposed on the Property
under Section 8.3, and (d) any other encumbrances permitted to be imposed
on the Property under the provisions of Article XXVII which are assumable
at no cost or expense to Tenant or to which Tenant may take subject
without cost or expense to Tenant. The difference between the applicable
purchase price and the total amount of the encumbrances assumed or taken
subject to, if a positive number, shall be paid in cash to Landlord or as
Landlord may direct, in federal or other immediately available funds,
unless otherwise mutually agreed by Landlord and Tenant; provided,
Landlord shall be obligated to pay to Tenant in cash any negative difference
between the applicable purchase price and the total amount of the
encumbrances so assumed or taken subject to by Tenant. All reasonable
expenses of conveying the Property to Tenant, including, without
limitation, the cost of the aforementioned title insurance and attorneys' fees
incurred by Landlord in connection with such conveyance and release, and
documentary transfer and similar taxes, recording fees and expenses of
Tenant's counsel, shall be paid by Tenant.
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19.2 FAILURE TO CLOSE PURCHASE. The closing of any such
sale shall be contingent upon and subject to Tenant obtaining all required
governmental consents and approvals for such transfer. If such sale shall
fail to be consummated by reason of the inability of Tenant to obtain all
such approvals and consents, then this Lease shall remain in effect on a
month-to-month basis until the consummation of the purchase or until
Tenant's inability to obtain the approvals and consents is confirmed,
whereupon this Lease will continue in effect in accordance with its terms.
ARTICLE XX
HOLDING OVER
If Tenant for any reason remains in possession of the Property after
the expiration or earlier termination of the Term, such possession shall be a
month-to-month tenancy during which time Tenant shall pay to Landlord as
rental each month the aggregate of (i) one and one half (1-1/2) times one-
twelfth of the aggregate total Base Rent and Additional Rent payable with
respect to the last 12-month period of the Term just expired or terminated,
(ii) all Additional Charges accruing during the month with respect to which
such payment relates, and (iii) all other sums, if any, payable by Tenant
pursuant to the provisions of this Lease with respect to the Property. During
such period of month-to-month tenancy, Tenant shall be obligated to
perform and observe all of the terms, covenants and conditions of this
Lease, but shall have no rights hereunder other than the right, to the extent
given by law to month-to-month tenancy, to continue its occupancy and use
of the Property. Nothing contained herein shall constitute the consent,
express or implied, of Landlord to the holding over of Tenant after the
expiration or earlier termination of the Term.
ARTICLE XXI
RISK OF LOSS
During the Term of this Lease, Tenant shall bear the risk of loss or of
decrease in the enjoyment and beneficial use of the Property resulting from
the damage or destruction thereof by fire, the elements, casualties, thefts,
riots, wars or any other cause, or resulting from foreclosures, attachments,
levies or executions (other than those caused by Landlord and those
claiming from, through or under Landlord) and, in the absence of the gross
negligence, willful misconduct or breach of this Lease by Landlord,
Landlord shall in no event be responsible therefor nor shall any of the
events mentioned in this Section entitle Tenant to any abatement of Rent
except as specifically provided in this Lease.
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ARTICLE XXII
LIABILITY OF PARTIES
22.1 INDEMNIFICATION BY TENANT. Notwithstanding the
existence of any insurance provided for in Article XIV, and
notwithstanding the policy limits of any such insurance, Tenant shall
indemnify, defend, save and hold Landlord harmless from and
against any and all liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses ("CLAIMS") (including, without
limitation, reasonable attorneys' fees and expenses), to the extent permitted
by law, imposed upon, incurred by or asserted against Landlord arising out
of, connected with or incidental to:
(a) any Hazardous Substance located at, in, on, under or about the
Property due to the act or omission of Tenant, including any improvements,
repairs, handling, removal or other actions taken by Landlord in order to
comply with all rules and regulations promulgated by any applicable
federal, state, or local government rule and regulation with respect to any
such Hazardous Substance or related problems that Landlord becomes
aware of;
(b) any accident, injury to or death of persons, or loss of or
damage to Property, occurring on or about the Property or adjoining
sidewalks, alleys or roadways, including without limitation any claims of
malpractice;
(c) any past, present or future use, misuse, non-use, condition,
management, maintenance or repair by Tenant of the Property or Tenant's
Personal Property and any litigation, proceeding or claim by governmental
entities or other third parties to which Landlord is made a party or other
participant related to the Property or Tenant's Personal Property or such use,
misuse, non-use, condition, management, maintenance or repair thereof,
including but not limited to any failure to perform obligations (other than
condemnation proceedings) to which Landlord is made a party;
(d) any Impositions which are the obligations of Tenant to pay
pursuant to the applicable provisions of this Lease:
(e) any failure on the part of Tenant to perform or comply with
any of the terms of this Lease; and
the non-performance of any of the terms and provisions of any
and all existing and future subleases of the Property to be performed by
Tenant thereunder.
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Any amounts payable by Tenant under this Section shall be paid
within ten days after Tenant's liability therefor is determined by litigation or
otherwise. If such amounts are not timely paid, they shall bear a late charge
(to the extent permitted by law) at the Overdue Rate from the date of such
determination to the date paid. Tenant, at its expense, shall contest, resist
and defend any such claim, action or proceeding asserted or instituted
against Landlord, or may compromise or otherwise dispose of the same as
Tenant sees fit. Nothing herein shall be construed as requiring Tenant to
indemnify, defend or hold Landlord harmless against its own sole or gross
negligence or willful misconduct.
22.2 INDEMNIFICATION BY LANDLORD. Landlord shall
indemnify, defend, have and hold Tenant harmless from and against any
and all liabilities, obligations, claims, damages, penalties, causes of action,
costs and expenses (including, without limitation, reasonable attorneys '
fees and expenses) imposed upon, incurred by or asserted against Tenant
arising out of, connected with or incidental to the sole or gross negligence
or willful misconduct of Landlord; provided, however, that Tenant's right to
indemnification as provided herein, shall be subject to the limitation set
forth in Article XXVIII.
22.3 CONTINUING LIABILITY. Tenant's and Landlord's liability
under this Article shall survive any termination of this Lease and shall
continue for the term provided herein or as permitted by the laws of the
State, whichever is longer.
ARTICLE XXIII
ASSIGNMENT AND SUBLETTING
23.1 ASSIGNMENT AND SUBLETTING. Subject to the provisions
of Section 23.3 below and any other express conditions or limitations set
forth in this Lease, Tenant may, without the consent of Landlord, (a) sublet
up to an aggregate of 25% of the rentable square footage of the Facility, to
concessionaires or other third party users or operators thereof, provided that
(i) any subletting to any party shall not individually as to any one such
subletting, or in the aggregate, materially diminish the actual or
potential Additional Rent payable under this Lease and (ii) Tenant, at the
request of Landlord, executes an Assignment of Subleases and Rents in
favor of Landlord in a form reasonably acceptable to Landlord as security
for the obligations of Tenant hereunder, or (b) transfer or assign its rights
hereunder (iii) to a joint venture, partnership or other entity in which Tenant
holds a controlling interest and, in the case of a partnership, Tenant is the
general partner, or (iv) in connection with a public offering of equity
interests in an Affiliate of Tenant, to such Affiliate, provided that Landlord
reasonably determines that such Affiliate has a Tangible Net Worth at least
equal to that of Tenant. except as otherwise permitted in the immediately
preceding sentence, an assignment or subletting of a11 or any portion of the
Property shall not be permitted unless the consent of Landlord is first
obtained. Such consent by Landlord will not be unreasonably withheld if
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(x) the assignee assumes all obligations of Lessee under the Lease in a
writing in form and content reasonably acceptable to Landlord, (y) such
assignee meets the financial covenants applicable to Tenant hereunder and
demonstrates such fact to Landlord' s reasonable satisfaction, and (z) no
Event of Default is in effect and continuing hereunder. Landlord shall not
unreasonably withhold its consent to any subletting or assignment, provided
that the assignee or sublessee has a financial condition comparable
to the greater of (i) Tenant's financial condition as of the Commencement
Date or (ii) Tenant's financial condition as of the date of the proposed
assignment or subletting and (w) in the case of a subletting the sublessee
shall comply with the provisions or Section 23.2, (x) in the case of an
assignment, (i) the assignee assumes in writing and agrees to keep and
perform all of the terms of this Lease on the part of Tenant to be kept
and performed, (ii) the assignee complies with the covenants set forth in
Section 28 hereof, (iii) the assignment causes no violation of any other
covenants under this Lease by Tenant or the assignee, and (iv) the assignee
becomes jointly and severally liable with Tenant for the performance
thereof, (y) an original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such sublessee or
assignee, as the case may be, in form and substance satisfactory to
Landlord, is delivered promptly to Landlord, and (z) in case of either an
assignment or subletting, Tenant remains primarily liable, as principal
rather than as surety, for the prompt payment of Rent and
for the performance and observance of all covenants and agreements to be
performed by Tenant hereunder.
23. 2 ATTORNMENT. Tenant shall insert in each sublease permitted
under Section 23.1 provisions reasonably satisfactory to Landlord which
provide for the benefit of Landlord that (a) such sublease is subject and
subordinate to all of the terms and provisions of this Lease and to the rights
of Landlord hereunder, (b) in the event this Lease Shall terminate before the
expiration of such sublease, the sublessee thereunder will, at Landlord's
option, either attorn to Landlord and waive any right the sublessee may
have to terminate the sublease or surrender possession under such sublease,
and (c) in the event the sublessee receives Notice from Landlord or
Landlord's assignees, if any, stating that Tenant 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 otherwise direct. All rentals received from the sublessee by Landlord
or Landlord's assignees, if any, as the case may be, shall be credited against
the amounts owed to Landlord under this Lease.
23. 3 SUBLEASE LIMITATION. Anything contained in this Lease to
the contrary notwithstanding, Tenant shall not sublet the Property 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 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.
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ARTICLE XXIV
INFORMATION FROM TENANT
24.1 OFFICER'S CERTIFICATES. At any time and from time to
time, upon not less than 20 days Notice by Landlord, Tenant shall furnish to
Landlord 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), the date to which the Rent has
been paid, whether there exists any Event of Default or any situation which,
with the giving of notice, passage of time, or both, would constitute an
Event of Default hereunder based upon Tenant's current knowledge,
whether Tenant contends that Landlord is in default hereunder, and if
Tenant so contends, the basis for such contention, the date upon which the
Term terminates, and such other information as Landlord reasonably may
request. Any such certificate furnished pursuant to this Section 24.1 may be
relied upon by Landlord, any prospective purchaser of the Property,
and any Facility Mortgagee or Landlord Lender.
24.2 FINANCIAL INFORMATION. Tenant shall furnish, the
following statements to landlord:
(a) within 90 days after the end of each Fiscal Year, preliminary
drafts of (i) a balance sheet and statements of revenues and expenses and
changes in retained earnings and cash flows for Tenant, all certified by
independent public accountants of recognized standing acceptable to
Landlord, such statements to be prepared in accordance with generally
accepted accounting principles consistently applied, to be
for such Fiscal Year and the immediately preceding Fiscal Year and to be in
comparative columnar form and (ii) a schedule of capital expenditures or
reserves therefor for such Fiscal Year. Within 120 days after the end of
each Fiscal Year, Tenant shall furnish to Landlord final versions of the
statements referred to in (i) and (ii) hereof;
(b) within 45 days after the end of each of the first three fiscal
quarters of each Fiscal Year, financial statements similar to those referred to
in clause (a) above, but only certified by the principal financial or other
appropriate officer of Tenant as having been prepared in accordance with
generally accepted accounting principles consistently applied (but which
may exclude footnote disclosures), such financial statements to be for the
period from the beginning of such Fiscal Year (and immediately preceding
Fiscal Year) to the end of such quarter (and comparable quarter);
(c) concurrent with the statements furnished pursuant to clauses
(a) and (b) above, an Officer's Certificate stating that, after making due
inquiry, Tenant is not in default in the performance or observance of any of
the terms of this Lease, or if Tenant shall be in default to its knowledge,
specifying all such defaults, the nature of such defaults, and the steps being
taken to remedy the same;
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(d) within 30 days after the end of each month, financial
statements similar to those referred to in clause (b) together with operating
statistics; and
(e) with reasonable promptness, such other information respecting
the financial condition and affairs of Tenant as Landlord may reasonably
request from time to time.
24. 3 LICENSING INFORMATION. Tenant shall promptly furnish to
Landlord complete copies of all surveys, examinations, inspections,
compliance certificates and similar reports of any kind issued to Tenant by
any governmental agencies or authorities having jurisdiction over the
licensing of the operation of the Property which are material to the Properly
or the Facility, their ownership or operation.
ARTICLE XXV
APPRAISALS OF THE PROPERTY AND OPTIONS
25.1 APPRAISERS. If at any time it becomes necessary to determine
the Fair Market Value, Fair Market Value Purchase Price or Fair Market
Rental of the Property for any purpose under this Lease, and the parties are
unable to agree thereupon, the party required or permitted to give Notice of
such required determination shall include in the Notice the name of a
person selected to act as appraiser on its behalf. Within ten days after such
Notice, Landlord or Tenant, as the case may be, shall by Notice to Tenant
or Landlord, as the case may be, either agree to the appointment of the
appraiser identified in such initial Notice, in which case such appraiser shall
be the sole appraiser for purposes of determining the Fair Market Value,
Fair Market Value Purchase Price or Fair Market Rental, as the case may
be, or shall appoint a second person as an appraiser on its behalf. Any
appraiser appointed pursuant to this Section must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto). The appraiser(s) thus appointed shall, within 45 days after the date
of the Notice appointing the first appraiser, proceed to appraise the Property
to determine the Fair Market Value, Fair Market Value Purchase Price or
Fair Market Rental thereof (as the case may be) as of the relevant date
(giving effect to the impact, if any, of inflation from the date of their
decision to the relevant date). In the case of two appraisers, except as
provided in Section 25.2, the two appraisals shall be averaged to
determine the Fair Market Value, Fair Market Value Purchase Price or Fair
Market Rental, as the case may be. In any event, the appraised value
determined in accordance with this Section shall be final and binding on
Landlord and Tenant.
25.2 METHOD OF APPRAISAL. Any appraisal required or
permitted by the terms of this Lease shall be conducted in a manner
consistent with sound appraisal practice, taking into account market and
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cost approaches and shall not include the income approach to valuation or
the going concern or business enterprise value attributable to factors other
than the highest and best use of the Property. Notwithstanding the
provisions of Section 25.1, if the difference between the appraisal amounts
determined by the appraisers appointed pursuant to Section 25.1 exceeds
ten percent of the lesser of such appraisal amounts, then the two appraisers
shall have 20 days to appoint a third appraiser. If no such appraiser is
appointed within such 20 days or within 90 days of the original request for
a determination of Fair Market Value, Fair Market Value Purchase Price or
Fair Market Rental (as the case may be), whichever is earlier, either
Landlord or Tenant may apply to any court having jurisdiction to have such
appointment made by such court. Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the Fair Market
Value, Fair Market Value Purchase Price or Fair Market Rental (as the case
may be) within 45 days after the appointment of such appraiser. The
determination of the three appraisers which differs most in the 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
the appraised value, which a[praised value shall be final and binding upon
Landlord and Tenant as the Fair Market Value, Fair Market Value Purchase
Price or Fair Market Rental of the Property, as the case may be. If the
lowest and highest appraised values are equidistant in amount from
the middle appraised value, then such middle appraised value shall be the
Fair Market Value, Fair Market Value Purchase Price or Fair Market Rental
(as the case may be). The provisions of this Article 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. Landlord and Tenant each
shall 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 XXVI
OPTIONS TO PURCHASE
26.1 LANDLORD'S OPTION TO PURCHASE TENANT'S
PERSONAL PROPERTY; TRANSFER OF LICENSES. Provided Tenant
has not exercised its option pursuant to Section 26.2 hereof, effective upon
not less than ninety (90) days prior notice given at any time within one
hundred eighty ( 180) days prior to the expiration of the Term of this
Lease, or upon such shorter Notice as shall be reasonable if this Lease is
terminated prior to its expiration date, Landlord shall have the option to
purchase all (but not less than all) of Tenant's Personal Property, if any, at
the expiration or termination of this Lease, for an amount equal to the then
fair market value thereof, taking into account and with appropriate price
adjustments for, all equipment leases, conditional sale contracts, UCC-1
financing statements and other encumbrances to which such Tenant's
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Personal Property is subject. Upon the expiration or termination of the
Lease and such purchase by Landlord, Tenant shall use good faith efforts, at
Landlord's sole cost and expense, to transfer and assign to Landlord or its
designee, or assist Landlord or its designee in obtaining, any contracts,
licenses, and certificates required for the then operation of the
Facility.
26.2 TENANT'S OPTION TO PURCHASE THE PROPERTY.
Provided no Event of Default specified in Sections 17.1 (a), (e), (f) or (g)
hereof has occurred and is continuing, Tenant shall have the option,
exercisable on not less than one hundred eighty (180) days nor more than
three hundred sixty (360) days' prior Notice, to purchase the
Property at the expiration of the Fixed Term, or at the expiration of any
Extended Term, at the greater of (y) the Shared Appreciation Purchase
Price as of the date of expiration of the then current Term, less the Fair
Market Value at the time of exercise of the option of any improvements to
the Property made and funded by Tenant pursuant to Sections 9.1
and 11, or (z) the Landlord's Total Investment. Tenant shall also have the
right, during any Extended Term, to exercise such option in the event that,
during any Extended Term, (a) Landlord defaults with respect to its
agreements, covenants, obligations, representations or warranties under this
Lease and such default is not cured within any applicable cure period or (b)
Landlord or its Affiliates default under one or more Additional Leases and
such default is not cured within any applicable cure period. Tenant's rights
to exercise the purchase option is further conditioned upon a concurrent
exercise by the Tenant under each Additional Lease of any Tenant's option
to purchase the leased Property provided for therein. Upon exercise by
Tenant of its option to purchase the Property, Landlord shall, at the election
of Tenant, either convey the Property as a sale of assets or as a sale of the
stock of a corporation whose sole assets consist of the Property. The
foregoing option to purchase the Property shall be secured by the Deed
of Trust.
If Tenant shall timely and properly exercise the foregoing option, the
sale of the Property shall be consummated through an escrow to be opened
with a mutually acceptable title or escrow company and shall close within
ten Business Days following the expiration of the Fixed Term or Extended
Term in connection with which Tenant exercised such purchase option. The
purchase price of the Property (net of the principal balance of any Facility
Mortgages placed on the Property by Landlord and expressly assumed by
Tenant and the amount of any damages owing by Landlord to Tenant) shall
be deposited into escrow by wire transfer of Federal Funds at least two
business days prior to close of escrow and shall be paid to Landlord at close
of escrow by wire transfer of Federal Funds to such account as Landlord
shall designate. Tenant acknowledges and agrees that it shall purchase the
Property from Landlord "AS IS" and subject to all faults, defects in title and
other matters whatsoever, including, but not limited to, all matters of
record, other than (a) Facility Mortgages not expressly assumed by Tenant
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and (b) any other liens, encumbrances, attachments, levies or claims
encumbering, at the instance of Landlord, the Property., all of which shall
be removed of record prior to purchase. Landlord shall make no warranty or
representation regarding the title, condition or other status of the Property
whatsoever, except that it has removed all liens and encumbrances
referenced in clauses (a) and (b) in the preceding sentence. All title
insurance premiums and other closing costs associated with the purchase of
the Property by Tenant pursuant to this Section shall be paid by Tenant.
ARTICLE XXVII
FACILITY MORTGAGES
Without the consent of Tenant, Landlord may, subject to the terms
and conditions set forth below in this Section, from time to time, directly or
indirectly, create or otherwise cause to exist any lien, encumbrance, security
interest or title retention agreement ("ENCUMBRANCE") upon the
Property, or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing provided that the
principal amount of such borrowing, financing or refinancing does not
exceed 80% of the then Fair Market Value of the Property. Any such
Encumbrance (I) shall contain the right to prepay (whether or not subject to
a prepayment penalty, which penalty shall be paid by Landlord), (ii) shall
provide that it is subject to the rights of Tenant under this Lease, including
the rights of Tenant to acquire the Property pursuant to the applicable
provisions of this Lease; provided, however, that Tenant agrees that it
will not unreasonably withhold its consent to any request by Landlord that
Tenant subordinate this Lease to any mortgage or deed of trust that may
hereafter from time to time be recorded on the Property, and to any and all
advances made or to be made thereunder, and to renewals, replacements
and extensions thereof and (iii) shall be paid in full and released and
reconveyed in the event Tenant purchases the Property pursuant to this
Lease, unless Tenant elects to assume such Encumbrance. Any such
subordination, however, shall be subject to the condition precedent that the
mortgagee under such mortgage or the beneficiary under such deed of trust
enter into a written non- disturbance and attornment agreement with
Tenant, in form and content satisfactory to Tenant, whereunder it is agreed
that in the event of a sale or foreclosure under such mortgage or deed of
trust, the purchaser of the Properly (including the mortgagee or beneficiary
under such mortgage or deed of trust), shall acquire or hold the Property
subject to this Lease so long as Tenant is not in default hereunder, and so
long as Tenant recognizes such purchaser as the Landlord under this Lease
and agrees, if requested to do so, to attorn to such purchaser and, if
instructed to do so by such purchaser, to make rental payments directly to
it.
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ARTICLE XXVIII
LIMITATION OF LIABILITY
Tenant specifically agrees that neither AHP nor Landlord nor any
officer, shareholder, employee or agent of AHP or Landlord (each of which
shall, for purposes of this Article XXVII, be considered an Affiliate of
Landlord) shall be held to any personal liability, jointly or severally, for any
obligation of, or claims against Landlord, Tenant agreeing to look solely to
Landlord's equity interest in the Property or to Landlord s interests or
interests of subsidiaries of Landlord in other properties leased to
Tenant or Affiliates of Tenant for recovery of any judgment from Landlord,
except that Landlord s obligations under Section 19.1 and Article XXVII,
clause (iii) shall be a general and unlimited liability of Landlord. The
provisions contained in the foregoing sentence are not intended to, and shall
not, limit any right that Tenant might otherwise have to obtain injunctive
relief against Landlord or Landlord's successors in interest, or any action
not involving the personal liability of Landlord (original or successor). In
no event shall Landlord (original or successor) or any Affiliate of Landlord
be required to respond in monetary damages from Landlord's assets other
than Landlord's equity interest in the Property. Furthermore, except as
otherwise expressly provided herein, in no event shall Landlord or any
Affiliate of Landlord (original or successor) ever be liable to Tenant for any
indirect or consequential damages suffered by Tenant from whatever
cause.
ARTICLE XXIX
ADDITIONAL COVENANTS OF TENANT
29.1 ADDITIONAL NEGATIVE COVENANTS. Tenant covenants
and agrees with Landlord that, during the Term hereof, Tenant shall not,
either directly or indirectly:
(a) LIENS. Incur, create, assume or permit to exist any mortgage
pledge, lien, charge or other encumbrance of any nature whatsoever
(including conditional sales or other title retention agreements) on Tenant's
leasehold interest under this Lease and Tenant's Personal Property, other
than:
(i) deposits or pledges to secure payment of workmen's
compensation, unemployment insurance, old age pensions or other social
security;
(ii) liens for taxes or assessments or other governmental
charges or levies if not yet due and payable, or if in good faith being
contested or litigated, provided that a reserve against such taxes,
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assessments, charges and levies deemed adequate by Landlord shall be
maintained and Tenant shall furnish security reasonably satisfactory to
Landlord for the payment of such taxes, assessments, charges
and levies;
(iii) liens in favor of Landlord;
(iv) purchase money security interests securing the payment
of not more than 75% of the purchase price of any item of personal
property;
(v) security interests in accounts receivable under working
capital lines of credit securing indebtedness not exceeding 80% of the net
book value of such accounts receivable;
(vi) judgments and other similar liens, provided that the
execution or other enforcement of such liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings in accordance with the requirements of this Lease;
(vii) liens constituting renewals, extensions or replacements
of liens described in the foregoing clauses, but only, in the case of each
such renewal, extension or replacement lien, to the extent of the principal
amount of the obligation so secured at the time of the extension, renewal or
replacement, and to the extent that such renewal, extension or replacement
lien is limited to all or part of the Property that secured the lien extended,
renewed or replaced;
(viii) liens being contested in accordance with the provisions
of Article XIII; and
(ix) the Acquisition Lien and the Sanyo Lien, as such terms
are defined in the Loan Agreement.
(b) FIXED CHARGE COVERAGE RATIO. Commencing on the
first day of the month which is at least six full months after the effective
date hereof, permit the ratio of: (i) (a) Tenant's Cash Flow to (b) the sum of
Total Rent payable hereunder and principal and interest payments payable
by Tenant for any calendar quarter to be less than 2.5 to 1.0 nor (ii) (a)
Tenant's Cash Flow to (b) Base Rent payable by Tenant hereunder
for any calendar quarter to be less than 1.4 to 1.0; provided, however, that
the failure of Tenant to comply with either of the foregoing ratios shall not
constitute an Event of Default if a Security Letter of Credit in the amount of
six monthly installments of Base Rent is in effect or is obtained within ten
days after such failure.
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(c) SALE OF ASSETS. Sell, lease, transfer or otherwise dispose of
all or any substantial part of its properties or assets, except for (x)
equipment which is worn or no longer useful in its business and (y) during
any 12-month period, equipment with an aggregate market value exceeding
$1,000,000.
(d) CONSOLIDATION OR MERGER. Consolidate with or
merge into any other entity or permit any other corporation to merge into it
unless, after giving pro forma effect to the merger, based on its financial
statements and the financial statements of the other entity or entities
participating in the merger, for, in each case, its most recently completed
fiscal year or quarter; there is no violation of any of the covenants of
this Lease to be observed or performed by Tenant.
(e) GUARANTEES. Except for guaranties of obligations of
Affiliates and endorsement of negotiable instruments for deposit or
collection, guarantee or otherwise incur liability for the. obligations of
others.
(f) MINIMUM NET WORTH. Fail to maintain, as of the end of
each calendar quarter, Tangible Net Worth of at least $10 million; provided,
however, that the failure of Tenant to comply with such minimum Tangible
Net Worth Requirement shall not constitute an Event of Default if a
Security Letter of Credit in the amount of six monthly installments of Base
Rent is in effect or obtained within ten days after such failure. For purposes
of such calculation, the amount of the Security Letter of Credit
shall be considered tangible assets.
(g) DIVIDENDS. Declare or pay any dividend or make any
distribution or make any redemption with respect to any capital stock of
Tenant unless (i) Tenant is not in default under the Lease and (ii) after
giving effect thereto, Tenant shall have a Tangible Net Worth of not less
than $5.0 million and (iii) Tenant has been in compliance with the financial
ratio in Section 29.1(b)(ii) above for at least four consecutive fiscal
quarters; provided, however, that Tenant may make distributions due
and payable with respect to 1,080,000 currently outstanding shares of
Tenant's outstanding Series A Convertible Preferred Stock insofar as any
payments are due pursuant to the currently-existing terms of such stock.
(h) MANAGEMENT FEE. Agree to pay any person or entity a
management fee in connection with the management and operation of the
Facility unless payment of any such management fee is subordinated to the
Tenant's payment obligations under the Lease on terms acceptable to
Landlord.
29.2 ADDITIONAL AFFIRMATIVE COVENANTS. Tenant
covenants and agrees with Landlord that, during the Term hereof, Tenant
shall:
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(a) MAINTENANCE OF PROPERTIES AND INTANGIBLE
ASSETS.
(i) Maintain its corporate existence in good standing.
(ii) Do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its existence and, with such
exceptions, if any, as are not material in the aggregate, to obtain and,
having obtained, preserve, renew and keep in full force and effect all
customary accreditation, rights, licenses and permits and, with such
exceptions, if any, as are not material in the aggregate, comply with all laws
and regulations applicable to it and conduct and operate the Facility in
substantially the manner, with such changes as may from time to time be
considered by management as necessary or appropriate, in which it is
presently conducted and operated, and at all times, with such exceptions as
are not material in the aggregate, to obtain, maintain, preserve and protect
all necessary franchises, provide agreements, contract rights, trademarks
and trade names used or useful in its operations and preserve all its assets
which are used or useful in the conduct of its operations, and keep the same
in working order and condition, and, with such exceptions as are not
material in the aggregate, from time to time to make, or cause to be made,
all necessary repairs, renewals, replacements, betterments and
improvements thereto, so that the operation of the Facility may be
properly and advantageously conducted at all times. Without limiting the
generality of the foregoing, Tenant shall use or cause the Property to be
used for the Primary Intended Use and only for such other uses as may be
necessary in connection with or incidental to said use or as may be agreed
to by Landlord in its sole and absolute determination. with such exceptions
as are not material in the aggregate, no use shall be made or permitted to be
made of the Property and no acts shall be done which violate any Legal
Requirements or Insurance Requirements or which will cause the
cancellation of any insurance policy covering the Property or any part
thereof or any provider agreements. Tenant shall comply in all material
respects with all Legal Requirements and all of the requirements pertaining
to the Property of any insurance board, association, organization or
company necessary for the maintenance of the insurance required pursuant
to this Lease.
(iii) Without limiting the provisions of Section 10.1, expend
or reserve for expenditure not less than $250 per unit in capital expenditures
per Fiscal Year.
(iv) Tenant, immediately upon obtaining knowledge of facts
which are reasonably likely to result in an action by any Federal, state or
local agency (or the staff thereof) to revoke, withdraw or suspend any
permit, license, conditional use permit, variance certificate, certificate of
need, letter of nonreviewability, provider agreement or other governmental
approval, or an action of any other type, which would have a material
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adverse effect on the Tenant or the operations of the Facility, shall notify
the Landlord thereof immediately.
(b) OBLIGATIONS AND TAXES. With such exceptions as
are not material individually or in the aggregate, none of which exceptions
results in the creation of a lien prohibited by this Lease on any Property of
Tenant, pay all indebtedness and obligations in accordance with customary
trade practices and pay and discharge promptly shall taxes, assessments and
governmental charges or levies imposed on it or upon its income and profit,
or upon any of its Property, real, personal or mixed, or upon any part
thereof, before the same shall become in default, as well as pay before they
shall become in default all lawful claims for labor, material and supplies or
otherwise which, if unpaid, might become a lien or charge upon such
Property or any part thereof.
(c) PENSION PLANS. Tenant shall notify Landlord within ten
business days of the occurrence of any of the following events
("Notification Events") with respect to Tenant's Plans (as defined in
ERISA) and within ten days of obtaining knowledge of any Notification
Event with respect to Plans of its Affiliates: (i) the termination of a Plan,
unless such Plan can be terminated without material adverse effect
on the business, properties or condition (financial or otherwise) of Tenant;
(ii) the failure to make contributions to any of Tenant's Plans (including any
Multiemployer Plans) in timely manner and in sufficient amount to comply
with the requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"); (iii) the failure to comply with all material
requirements of ERISA and the Code which relate to such Plans and
Multthemployer Plans (as defined by ERISA), where such failure to comply
would have a material adverse effect on the business, properties or
condition (financial or otherwise) of Tenant; (iv) receipt by Tenant of any
notice of the institution of any proceeding or other action which may
directly result in the termination of any Plans or Multiemployer Plans; (v) a
Termination Event or Reportable Event (as defined by ERISA) with respect
to a Plan; and (vi) any event or condition which would cause the lien
provided for under Section 4068 of ERISA to attach to the assets of Tenant.
Tenant shall not fail to make any payments to any Multthemployer Plan that
Tenant may be required to make under any agreement relating to any
Multthemployer Plan, ERISA or any other law pertaining thereto, except
for any payments being contested in good faith in accordance with Article
XIII with respect to which Tenant has established adequate reserves or
which, if not made, would not have a material adverse effect on the
business, properties or condition (financial or otherwise) of Tenant.
29. 3 SECURITY FOR THE LEASE.
(a) SECURITY AGREEMENT. On or before the Commencement
Date Tenant shall execute and deliver to Landlord the Security Agreement.
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(b) ABSOLUTE ASSIGNMENT. Tenant shall, at Landlord's
request, on or before the Commencement Date, or thereafter, execute and
deliver to Landlord an absolute assignment of subleases and rents pursuant
to which Tenant shall assign to Landlord, subject to a license to Tenant to
retain so long as no Event of Default is permitted under this Lease and the
proceeds thereof.
(c) SECURITY LETTER OF CREDIT. As security for the timely
and faithful performance by Tenant of each and every one of Tenant's
obligations under this Lease, Tenant shall, on the Commencement Date and
thereafter as provided herein, deliver and maintain a letter of credit which
(A) is issued or confirmed by a bank having capital or surplus of at least $1
billion and whose senior unsecured debt securities are rated "A2" or better
by Moody's or "A" or better by S&P, provided none of such securities is
subject to a "credit watch with negative implications", (B) is payable, in
whole or in part, "at sight" upon Landlord's presentation to the issuing or
confirming bank of a draft or other document in the amount therein stated
to be due and (C) is otherwise in form and substance reasonably satisfactory
to Landlord (such security letter of credit, as the same may be augmented,
increased, renewed or replaced as hereinafter provided, is referred to herein
as the "Security Letter of Credit"), and which contains the undertaking of
such bank in the amount of the sum of six monthly installments of Base
Rent. If Landlord shall draw any amount, representing an amount equal to
the obligation or obligations of Tenant hereunder, against the Security
Letter of Credit, which it shall be entitled to do if an Event of Default has
occurred and is continuing, and apply the proceeds of such drawing against
any obligation or obligations of Tenant hereunder in such amount or
amounts as Landlord, in its sole discretion, shall decide, Tenant shall
cause either (i) an additional Security Letter of Credit to be issued or (ii)
the bank's undertaking under the original Security Letter of Credit to be
increased, in either case in an amount equal to the amount of such drawing
within five Business Days following Tenant s receipt of notice of such
drawing. Tenant shall (x) renew the Security Letter of Credit at least
annually and shall deliver to Landlord such renewal Security Letter of
Credit at least 30 days prior to the expiration of the previous Security Letter
of Credit and (y) replace the Security Letter of Credit with a new Security
Letter of Credit in favor of any permitted assignee of Landlord's interest
under this Lease (provided Tenant shall have received 30 days' prior notice
of such assignment) and shall deliver to Landlord's assignee such
replacement Security Letter of Credit in time for the scheduled closing of
Landlord s assignment of its interest under this Lease. After the Security
Letter of Credit is established, Tenant may reduce the amount of the
Security Letter of Credit to three monthly installments of Base Rent if, for
the period of four consecutive calendar quarters most recently completed as
of the date of determination, Tenant is in compliance with Sections 29.1 (b)
and 29.1 (f) hereof, as reflected in financial statements prepared in
accordance with generally accepted accounting principals as set forth in an
Officer's Certificate delivered not later than sixty (60) days after the end of
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such most recent quarter. Such Officer's Certificate shall be accompanied
by an appropriate cash flow statement and a compilation report thereon,
without material qualification, of Tenant's independent public accountants.
If and after Tenant's obligation to maintain the Security Letter of Credit has
been so reduced, Tenant will be obligated to increase such letter to
six monthly installments of Base Rent within ten (10) business days after
each time it delivers financial information to Landlord pursuant to Section
24. 2 hereof which indicates that Tenant has failed to comply with any
requirement of Sections 29.1(b) or 29.1(f) for the most recent period of four
consecutive calendar quarters and such obligation will remain in effect until
Tenant has subsequently satisfied the cash flow ratio condition described
above for another period of four consecutive calendar quarters.
Tenant's failure to timely deliver or maintain any Security Letter of
Credit in accordance with this Section 29.3(b) shall constitute an immediate
Event of Default (which shall not require the giving of Notice) and, in such
event, Landlord shall have the right to draw the entire balance of the
Security Letter of Credit, as the case may be, and apply the proceeds against
any obligation or obligations of Tenant hereunder in such amount or
amounts as Landlord, in its sole discretion, shall decide and exercise any
other remedies permitted Landlord hereunder, at law or in equity. Landlord
shall not be deemed to hold any funds drawn under the Security Letter of
Credit in trust but shall not commingle such funds with other assets of
landlord. Tenant shall not be entitled to any interest with respect to any
such funds held by Landlord.
ARTICLE XXX
MISCELLANEOUS
30.1 TRANSFERS BY TENANT. Except as permitted by Article
XXIII, Tenant shall not transfer or assign its rights or obligations hereunder
without the prior written consent of Landlord, which shall not be withheld
unreasonably if (a) the transferee or assignee executes an instrument in
form reasonably acceptable to Landlord assuming and agreeing to perform
all obligations of Tenant under the Lease; (b) the transferee or assignee
demonstrates to Landlord's reasonable satisfaction that the transferee or
assignee complies with all covenants, including financial covenants,
applicable to the Tenant hereunder;. (c).such assignment or transfer will not
cause an Event of Default under this Lease; (d) no default exists by Tenant
under the Lease; and (e) Tenant meets the requirements of Section 29.1(g),
clause (ii) immediately after the proposed transfer. Unless Tenant is in
compliance with Section 29.1(g) above, and subject to the foregoing
requirements, Tenant shall not assign or transfer any interest herein to any
Affiliate of Tenant, and will not enter into any contract, agreement,
understanding, loan, advance or guaranty with, or for the benefit of, any
Affiliate of Tenant relating to Tenant's rights and obligations hereunder,
except (d) in the ordinary course of business, (e) on terms no less
favorable than those that could have been obtained by Tenant in an arms'-
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length transaction with a Person not an Affiliate of Tenant, and (f)
involving an aggregate value of interests of Tenant herein not exceeding
$1,000,000 in any twelve-month period. Any transfer, assignment or
sublease requiring Landlord's prior written consent which is attempted to
be made by Tenant without such prior written consent of Landlord shall be
void and ineffective.
30.2 LANDLORD'S RIGHT TO INSPECT. Landlord and its
authorized representatives may, at any time and from time to time, upon
reasonable notice to Tenant, inspect the Property during usual business
hours subject to any security, health, safety or patient business
confidentiality requirements of Tenant or any governmental agency, or
created by any Insurance Requirement or Legal Requirement relating to the
Property.
30.3 NO WAIVER. No failure by Landlord or Tenant to insist upon
the strict performance of any term hereof or to exercise any right, power or
remedy provided hereunder, and no acceptance of full or partial payment of
Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the extent permitted by applicable
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.
30.4 REMEDIES CUMULATIVE. To the extent permitted by law,
each legal, equitable or contractual right, power and remedy of Landlord or
Tenant 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 the exercise or beginning of the
exercise by Landlord or Tenant of any one or more of such rights, powers
and remedies shall not preclude the simultaneous or subsequent exercise by
Landlord or Tenant of any or all of such other rights, powers and remedies.
30.5 ACCEPTANCE OF SURRENDER. No surrender to Landlord of
this Lease or of all or any portion of or interest in the Property shall be
valid or effective unless agreed to and accepted in writing by Landlord, and no
act by Landlord or any representative or agent of Landlord, other than such
a written acceptance by Landlord, shall constitute an acceptance of any
such surrender by Tenant.
30.6 NO MERGER OF TITLE. There shall be no merger of this Lease
or of the leasehold estate created hereby if the same person, firm,
corporation or other entity acquires, owns or holds, directly or indirectly,
this Lease or the leasehold estate created hereby or any interest in this Lease
or such leasehold estate, and the fee estate in the Property.
30.7 CONVEYANCE BY LANDLORD. Simultaneously with any
transfer of interest in the Property (except pursuant to Article XXVII),
Landlord shall cause to be transferred to the same transferee a similar
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interest in all properties owned by Landlord or its Affiliates and leased to
Tenant or its Affiliates. If Landlord or any successor owner of the Property
conveys the Property in accordance with the terms hereof (other than as
security for a debt), and the grantee or transferee of the Property expressly
assumes all obligations of Landlord hereunder arising or accruing from and
after the date of such conveyance or transfer, Landlord or such successor
owner, as the case may be, thereupon shall be released from all liabilities
and obligations of Landlord under this Lease.
30.8 QUIET ENJOYMENT. So long as Tenant pays all Rent as the
same becomes due and fully complies with all of the terms of this Lease
and fully performs its obligations hereunder, Landlord warrants, represents
and covenants that Tenant shall peaceably and quietly have, hold and enjoy
the Property for the Term hereof, free of any claim or other action by
landlord or anyone claiming by, through or under Landlord, but
subject to all liens and encumbrances of record as of the date hereof or
hereafter consented to by Tenant. Except as otherwise provided in this
Lease, no failure by Landlord to comply with the foregoing covenant shall
give Tenant any right to cancel or terminate this Lease or abate, reduce or
make a deduction from or offset against the Rent or any other sum payable
under this Lease, or to fail or refuse to perform any other obligation of
Tenant hereunder. Notwithstanding the foregoing, Tenant shall have the
right, by separate and independent action, to pursue any claim it may. have
against Landlord as a result of a breach by Landlord of the covenant of
quiet enjoyment contained in this Section and, in the event Tenant acquires
the Property pursuant to the option granted hereunder, offset against the
purchase price the amount of any damages owing from Landlord to Tenant.
30.9 NOTICES. All notices, demands, requests, consents, approvals
and other Communications ("Notice" or "Notices") hereunder shall be in
writing and delivered by personal delivery, courier or messenger service,
express or overnight mail, or by registered or certified mail, return receipt
requested and postage prepaid, or by facsimile, addressed to the respective
parties as follows: .
If to Tenant: Emeritus Corporation
3131 Elliott Avenue
Suite 500
Seattle, Washington 98121
Attention: Raymond Brandstrom
FAX: (206) 443-5432
If to Landlord: AHP of Texas, Inc.
c/o American Health Properties, Inc.
6400 South Fiddler's Green Circle
Suite 1800
Englewood, Colorado 80111
Attention: Chief Investment Officer
FAX: (303) 796-9708
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or to such other address as either party may hereafter designate. Personally
delivered Notices sent by courier or messenger service or by express or
overnight mail or by facsimile shall be effective upon receipt, and Notices
given by mail shall be complete at the time of deposit in the U. S. mail
system, but any prescribed period of Notice and any right or duty to do any
act or make any response within any prescribed period or on a date certain
after the service of such Notice given by mail shall be extended five (5)
days.
30.10 SURVIVAL OF TERMS; APPLICABLE LAW. Anything
contained in this Lease to the contrary notwithstanding, all claims against,
and liabilities of, Tenant or Landlord arising prior to any date of
termination of this Lease shall survive such termination for two years,
except for third party claims based on alleged tortious actions.
and omissions of Tenant during the term of this Lease, which third party
claims shall. survive the term of this Lease. If any term or provision of this
Lease or any application thereof shall be invalid or unenforceable for any
reason whatsoever, the remainder of this Lease and any other application of
such term or provisions shall not be affected thereby. If any late charge or
any interest rate provided for in any provision of this Lease based
upon a rate in excess of the maximum rate permitted by applicable law,
such charges shall be fixed at the maximum permissible rate. Neither this
Lease nor any provision hereof may be changed, waived, discharged,
modified or terminated except by an instrument in writing and in recordable
form, signed by Landlord and Tenant. Subject to any limitations on
assignment contained in this Lease, 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 OF TEXAS, BUT NOT INCLUDING ITS CONFLICTS OF
LAWS RULES.
30.11 EXCULPATION OF LANDLORD'S AND TENANT'S
OFFICERS AND AGENTS. This Lease is made on behalf of Landlord and
Tenant by an officer thereof, not individually, but solely in such officer's
capacity in such office as authorized by the directors of Landlord or Tenant.
The obligations of this Lease are not binding upon, nor shall resort be had
to, the private Property of any of the directors, shareholders, members,
officers, employees or agents of Landlord or Tenant personally, but bind
only Landlord's and Tenant's property. The provision contained in the
foregoing sentence is not intended to, and shall not, limit any right that
Landlord or Tenant might otherwise have to obtain injunctive relief against
the other party or its successors in interest, or any action not involving the
personal liability of the directors, shareholders, members, officers,
employees or agents of Landlord or Tenant. Except as otherwise expressly
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provided herein, in no event shall either party ever be liable to the other
party for any indirect or consequential damages suffered by a party from
whatever cause.
30.12 TRANSFERS FOLLOWING TERMINATION. Upon the
expiration or earlier termination of the Term, Tenant shall use good faith
efforts to transfer to Landlord or Landlord's nominee, or to cooperate with
Landlord or Landlord's nominee in connection with the processing by
Landlord or Landlord's nominee of any applications for, all licenses,
operating permits and other governmental authorizations and all contracts
(including contracts with governmental or quasi-governmental entities)
which may be necessary for the operation of the Facility; provided,
however, that the costs and expenses of any such transfer or the processing
of any such application shall be paid by Landlord or Landlord's nominee.
30.13 TENANT'S WAIVERS. Tenant waives all presentments,
demands for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor; and notices of acceptance and waives all
notices of the existence, creation, or incurring of new or additional
obligations, except as expressly granted herein.
30.14 MEMORANDUM OF LEASE. Landlord and Tenant shall,
promptly upon the request of either party, enter into a short form
memorandum of this Lease and all options contained herein, in form
suitable for recording under the laws of the State in which the Property is
located. Tenant shall pay all costs and expenses of recording such
memorandum of this Lease,
30.15 ARBITRATION. Any controversy involving $1,000,000 or less
exclusive of interest and costs) arising out of, connected with or incidental
to this Agreement (except disputes concerning determinations of Fair
Market Value which shall be resolved exclusively as provided in Article
XXI shall be decided by binding arbitration in Seattle, Washington under
the expedited procedures of the American Arbitration Association, provided
that claim is made within the applicable period of limitation. Depositions to
obtain discovery may be taken upon good cause, upon leave
to do so granted by the arbitrator. If either party hereto alleges in a court
action that such controversy exceeds $1,000,000, such party. shall be
deemed to have waived the right to interest and costs in any award obtained
therein if such award does not exceed $1,000,000.
30.16 MODIFICATIONS. No provision of this Lease may be
amended, supplemented or otherwise modified except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
30.17 ATTORNEYS' FEES. If either party commences an action
against the other to interpret or enforce any of the terms of this Lease or
because of the breach by the other party of any of the terms hereof, the
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losing or defaulting party shall pay to the prevailing party reasonable
attorneys' fees, costs and expenses incurred in connection with the
prosecution or defense of such action.
30.18 COUNTERPARTS. This Lease may be executed in
counterparts, and when a copy hereof has been executed by Landlord and
Tenant, each such counterpart shall constitute an original copy hereof.
IN WITNESS WHEREOF, Tenant and Landlord have executed this
Lease as of the date first above written.
EMERITUS
By: /s/ Raymond R. Brandstrom
----------------------------------
Raymond R. Brandstrom,
President
AHP OF TEXAS, INC.
By: /s/ Thomas T. Schleck,
---------------------------
Thomas T. Schleck,
Vice President
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this __ day of ____ ,1996, before me, a Notary Public in and
for the State of Washington duly commissioned and sworn, personally
appeared /s/ Raymond R. Brandstom, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person who signed the
instrument; on oath stated that he was authorized to execute this instrument
as the President of EMERITUS CORPORATION, the corporation that
executed the instrument; acknowledged it as the free and voluntary act and
deed of said corporation for the uses and purposes therein
mentioned; and on oath stated that he was duly elected, qualified and acting
as said officer of Emeritus Corporation.
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IN WITNESS WHEREOF, I have hereunto set my hand and official seal
the day and year first above written.
[SEAL]
/s/ Catherine L. Pasquan
NOTARY PUBLIC in and for the State of
Washington, residing at Seattle
My appointment expires 3-30-99
Print Name: Catherine L. Pasquan
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
This instrument was acknowledged before me on this 21st day of
August , 1996, by Thomas T. Schleck, a Vice President of AHP of Texas,
Inc., a Texas corporation.
My commission expires: Aug. 9, 1999
Witness my hand and official seal.
[SEAL]
/s/ Ruth Anne Moorehouse
--------------------------------
NOTARY PUBLIC
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THE FOLLOWING AGREEMENT IS SUBSTANTIALLY THE SAME
EXCEPT FOR THE FOLLOWING:
ANNUAL
COMMUNITY BASE RENT RENT INCREASE
West Side Manor - Liverpool $439,500 $ 9,800
Bassett Manor $730,500 $16,200
Woodland Manor $390,700 $ 8,700
Ease Side Manor $461,300 $10,300
Bassett Park Manor $637,300 $14,200
Bellevue Manor $458,800 $10,200
Colonie Manor $842,600 $18,600
West Side Manor - Rochester $539,300 $12,000
Perinton Park Manor BASE RENT: $450,000 first year; payable $25,000
per month for the first six months
and $50,000 for the second six
months. $600,000 second year
through the remaining lease term;
payable $50,000 per month.
RENT INCREASE: $13,200
ALL RENT INCREASES COMMENCE ON THE EXPIRATION OF THE
FIFTH LEASE YEAR AND CONTINUE ANNUALLY THEREAFTER.
ALL LEASES ARE FOR AN INITIAL 15 YEAR TERM WITH TWO
FIVE-YEAR RENEWAL OPTIONS.
<PAGE>
LEASE AGREEMENT
By and Between
PHILIP R. WEGMAN ("Landlord")
and
PAINTED POST PARTNERS ("Tenant").
[FACILITY]
Dated as of September 1,1996
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT (the "Lease") is made and entered into this
1st day of September, 1996 by and between PHILIP R. WEGMAN
("Landlord"), and PAINTED POST PARTNERS, a Washington general
partnership ("Tenant").
In consideration of the mutual undertakings and covenants hereinafter
contained and the acts to be performed hereunder, Landlord and Tenant
hereby agree to the within Lease for that certain __ unit proprietary adult
home located in ______, New York, commonly known and described
as _______ and hereinafter more particularly described (the "Facility"). The
parties hereby agree as follows:
PART I
SECTION 1. THE PREMISES.
SECTION 1.1. REAL PROPERTY. Landlord hereby demises and
leases to Tenant and Tenant hereby leases and takes from Landlord, the real
estate (the "Real Property") and the improvements thereon which comprise
the Facility as more particularly described in Exhibit A attached hereto and
by this reference made a part hereof.
SECTION 1.2. PERSONAL PROPERTY. Landlord hereby demises
and leases to Tenant, and Tenant hereby leases and takes from Landlord,
the equipment, furniture, furnishings, and fixtures listed on
Exhibit B, attached hereto and by this reference made a part hereof and any
additional items added thereto from time to time by written agreement
between Landlord and Tenant (such equipment, furniture, furnishings,
vehicles and fixtures, together with all additions thereto or replacements
thereof will hereinafter be referred to as the "Personal Property"). If any
equipment, in addition to the Personal Property is "necessary" (as that term
is defined below) to operate the Facility, Tenant shall so advise Landlord
and all such additional equipment shall be acquired by and at the cost of
Tenant and at the expiration or earlier termination of this Lease shall
become the property of Landlord and shall remain upon and be surrendered
with the Premises as a part thereof at the end of the Lease Term unless (i)
where the Lease is terminated as a result of the purchase of the Premises
by Tenant in accordance with the terms of Section 21 hereof, (ii) an
agreement reached between Landlord and Tenant to the contrary is reached
at the time of the installation or acquisition of said additional equipment, or
(iii) a contrary election by Landlord is made in writing to Tenant delivered
within thirty (30) days prior to the expiration or earlier termination of this
Lease. If any equipment, in addition to the Personal Property is deemed by
Tenant to be convenient to operate the Facility, Tenant shall be entitled to
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acquire the same at its sole cost and expense and the same shall be and
remain the property of Tenant in accordance with the terms of SECTION
1.2.1 below. The term "necessary " as used in this Section 1.2 above shall
mean and refer to the procurement of any such equipment, furnishings and
other personal property as shall be required pursuant to the requirements
of any applicable ordinances, rules, laws, regulations and/or statutes which
govern or control the operation and/or ownership of the Facility.
SECTION 1.2.1. MAINTENANCE OF PERSONAL PROPERTY:
TENANT'S EQUIPMENT. Tenant shall keep all of the Personal Property in
good working order and condition at Tenant's sole cost and expense
and at the expiration or termination of the Lease Term (as defined below)
shall return and deliver all of such property to Landlord in as good order
and condition as when received hereunder, reasonable wear and tear
excepted. If necessary for the proper operation of the Facility, Tenant shall
during the Lease Term replace part or all of the items of Personal Property
which have been damaged or destroyed or become worn out or obsolete,
and such replacement shall be at the sole cost of Tenant, but any such
replaced equipment shall be and remain the property of Landlord. Tenant
may place additional property on the Premises (not required for
replacement of property covered in this Lease), including furniture, fixtures,
equipment and computer hardware and software and the
same shall be and remain the property of Tenant ("Tenant's Equipment").
Notwithstanding anything herein contained to the contrary, all fixtures,
including trade fixtures, attached to the Premises and which Tenant does
not elect to remove at the expiration or earlier termination of the Lease
Term shall become Landlord's property at the end of the Lease Term and
shall be surrendered to Landlord in good condition, reasonable wear and
tear excepted; provided, however, that in connection with
any such removal, Tenant shall be required to repair any damage to the
Premises caused by such removal; and provided, further, that this provision
shall not apply in the event of the termination of the Lease due to the
Tenant's purchase of the Premises.
SECTION 1.3. PREMISES. Throughout this Lease Agreement, the
Real Property, the Facility and the Personal Property will collectively be
referred to as the "Premises". The Premises shall in no event include
Tenant's Equipment as defined in SECTION 1.2.1. Subject to the
satisfaction or waiver by Tenant of the condition to the effectiveness of this
Lease set forth in Part II, Section 5.7 and to the representations and
warranties of Landlord set forth in Part II, Section 1.2, all of which
the representations and warranties shall survive the commencement of the
Lease Term, Tenant accepts the Premises in its existing condition and state
of repair and without any representation by or on behalf of Landlord, except
those representations specifically set forth herein, and Tenant agrees that
Landlord shall not be liable for any latent, patent or other defects in the
Premises unless Tenant is able to demonstrate that Landlord had knowledge
of and failed to disclose the same to Tenant prior to the commencement of
the Lease Term.
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SECTION 1.4. FACILITY NAME. Throughout the term of this Lease
Agreement, Landlord hereby consents to the Tenant's use of the tradenames
set forth in Exhibit C.
SECTION 2. TERM.
SECTION 2.1. INITIAL LEASE TERM. The Term of this Lease shall
commence as of the first day of the next calendar following the date Tenant
is issued all approvals and licenses as may be required in order to fully
operate the Facility for the permitted use as set forth in SECTION 1.4
below, provided that all of the conditions set forth in Part II, Sections 5 and
6 have been satisfied (or waived in writing by Tenant or Landlord,
respectively) (the "Commencement Date") and shall extend for a
period of fifteen ( 15) years thereafter, unless extended or earlier terminated
as provided herein (the "Initial Lease Term"). Landlord and Tenant agree to
attach as Exhibit D hereto a written confirmation of the Commencement
Date. Landlord and Tenant further agree that in the event all
of the conditions set forth in Part II, Sections 5 and 6 have been satisfied or
waived other than the financing conditions set forth in Sections 5.11 and
6.5, Landlord may, but shall not be obligated to, upon Tenant's request,
waive such condition and the term thereof shall commence notwithstanding
that the same have not yet been satisfied.
SECTION 2.2. RENEWAL. Tenant shall have the right to renew this
Lease beyond the Initial Lease Term for two (2) successive five (5) year
renewal terms (the "Renewal Terms" and together with the Initial Lease
Term, the "Lease Term") by giving notice of the exercise of its renewal
option at least one hundred and eighty days prior to the expiration of the
Initial Lease Term and each Renewal Term, as applicable. In the event
Tenant is in default on the date of the giving of notice of its intent to renew
the Lease, the notice shall be ineffective; in the event Tenant is in default on
the date the applicable Renewal Term is to commence, then the Renewal
Term shall not commence and this Lease shall expire as of the end of the
Initial Lease Term or the applicable Renewal Term. Tenant shall have no
right to renew this Lease beyond the expiration of the final Renewal Term.
SECTION 2.2.1. TERMINATION OF LEASE. Upon the termination
of this Lease, whether by forfeiture, lapse of time or otherwise, or upon
termination of Tenant's right to possession of the Premises, Tenant will at
once surrender and deliver the Premises, together with all improvements
thereof, to Landlord, (but specifically excluding Tenant's Equipment) in
good condition and repair, reasonable wear and tear excepted. At the time
of surrender, Tenant shall remove Tenant's Equipment; provided, however,
that Tenant shall repair any injury or damage done to the Premises
which may result from such removal and shall restore the Premises to the
same condition as existed prior to the installation thereof; provided, further,
that the provisions of this SECTION 2. 1. 2 shall not apply in the event of
the termination of this Lease as a result of Tenant's purchase of the
Premises pursuant to SECTION 21.
3
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SECTION 3. RENT.
SECTION 3.1. BASIC RENT: INITIAL TERM AND RENEWAL
TERMS. During the Initial Lease Term, the annual rent due hereunder (the
"Basic Rent") shall be equal to _________ Dollars ($______) subject to
increases as provided for in SECTION 3.4 below, and shall be payable at
the times and in manner provided for in SECTION 3.2 below.
The Basic Rent shall be allocated between the Real Property and the
Personal Property in the manner set forth in Exhibit E attached hereto and
by this reference made a part hereof.
SECTION 3.2. LEASE YEAR DEFINED. For purposes of this
SECTION 3, a Lease Year shall be the twelve ( 12) month period
commencing on the Commencement Date. In the event the
Commencement Date shall be other than the first day of the month, Tenant
shall pay to Landlord a pro rata portion of rent for the month. All annual
rental payments shall be made in advance in equal monthly installments in
the amounts specified and shall be paid on the tenth day of each month;
provided, however, that the first monthly payment shall be due on the tenth
day after the Commencement Date.
SECTION 3.3. PAYMENT OF BASIC RENT. Except as specifically
provided for herein, the Basic Rent shall be payable without offset,
abatement or other deduction (including offsets resulting from
any defaults by Landlord under any other agreement to which he or his
affiliates and Tenant or its affiliates may be a party, unless expressly set
forth herein) to Landlord at the address set forth in Part
III, SECTION 1. 6, or to such other person, firm or corporation at such
other address as Landlord may designate by notice in writing to Tenant.
SECTION 3.3.1. NET LEASE. This Lease is intended to be triple net
to Landlord, and Tenant shall pay to Landlord, net throughout the Initial
Lease Term and any Renewal Term, the Basic Rent described by SECTION
3. 1. , free of any offset, abatement, or other deduction, except as may be
expressly set forth herein. Tenant is hereby obligated to make all rental
payments set forth herein to Landlord. Landlord shall not be required to
make any payment of any kind with respect to the Premises, except as may
otherwise be expressly set forth herein. Accordingly, Tenant agrees to pay
all additional rent payments described in SECTION 3. 5. and all charges
described in SECTION 6 as they become due and payable. Notwithstanding
the foregoing, Landlord shall be responsible for making all payments due
with respect to any mortgage or deed of trust secured by the Premises (the
"Facility Mortgage").
SECTION 3.3.2. NO RELEASE. This Lease shall continue in full force
and effect, and the obligations of Tenant hereunder shall not be released,
discharged or otherwise affected, by reason of: (i) except as otherwise
provided for in SECTION 10, any damage to or destruction of the Premises
4
<PAGE>
or any part thereof or, except as otherwise provided for in SECTION 11,
the taking of the Premises or any part thereof by condemnation, requisition
or otherwise for any reason, (ii) except as otherwise provided for in
SECTION 17. 2, any claim which Tenant has or might have against
Landlord, or (iii) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing. Notwithstanding the foregoing, Landlord
acknowledges and agrees that in the event Tenant's right to quiet enjoyment
of Premises as set forth in Part I, Section 14 is disturbed as a result of a
title defect created by Landlord (including title exceptions related to defects
shown by a survey of the Premises) and Landlord fails or is unable within
thirty (30) days thereafter to take corrective action to reinstate
Tenant's undisturbed right of occupancy, Tenant shall have the right to
terminate this Lease as a result thereof upon written notice to Landlord
delivered no less than ten (10) days prior to the effective date of said
termination.
SECTION 3.3.3. LATE CHARGES. If any payment of any sums
required to be paid by Tenant to Landlord under this Lease and payments
made by Landlord under any provision hereof for which Landlord is
entitled to reimbursement by Tenant is not paid when due or within ten (10)
days after written notice of nonpayment from Landlord, a late charge of one
percent (1%) per month on the sums so overdue shall become immediately
due and payable to Landlord. No failure by Landlord to insist upon the
strict performance by Tenant of Tenant's obligation to pay late charges shall
constitute a waiver by Landlord of his rights to enforce the provisions of
this Section in any instance thereafter occurring.
SECTION 3.4 RENT INCREASES. The Basic Rent shall be increased
commencing on the expiration of the fifth Lease Year and continuing
annually thereafter during the Lease Term by an amount equal to _____
Dollars ($_____).
SECTION 3.5. ADDITIONAL RENT.
SECTION 3.5.1. TAXES AND OTHER CHARGES. The additional
rent shall consist of all real estate taxes, general and special assessments,
personal property taxes, and other public charges which are
assessed, levied, confirmed, or imposed upon the Premises during the Lease
Term, and all sales taxes and other taxes that are now or hereafter may be
payable in connection with the Basic Rent payable hereunder during the
Initial Lease Term and any Renewal Term (other than income taxes owing
by Landlord as a result of Tenant's payment of Basic Rent hereunder and
principal and interest payments owing under the Facility Mortgage) and all
costs of complying with or payments due as a result of the existence of any
covenants, conditions and restrictions of record which affect the
Premises (the "CCRs"). Any such taxes, assessments or CCR payments
which can lawfully be paid in installments may be so paid by Tenant using
the longest payment period permitted by the applicable taxing authority.
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SECTION 3.5.2. PRORATION. Any taxes and assessments relating
to a fiscal period of any authority, a part of which is already included within
the Initial Lease Term or any Renewal Term and a part of which is included
in a period of time before or after the Initial Lease Term or any Renewal
Term, shall be adjusted pro rata between Landlord and Tenant and each
party shall be responsible for his or its pro rata share of any such taxes and
assessments.
SECTION 3.5.3. INCOME TAXES. Nothing herein shall require
Tenant to pay income taxes assessed against Landlord, or estate, succession
or inheritance taxes of Landlord.
SECTION 3.5.4. Due Contest. Tenant may contest, in its own name or
in the name of Landlord, with Landlord's cooperation, which Landlord
agrees to give, the legality or validity of any such tax or assessment or of
any law under which the same shall be imposed. This must be done in
good faith, with due diligence, and at Tenant's own expense. If Tenant does
so contest such tax or assessment beyond the time limit for payment thereof
by Tenant, Tenant shall either pay such amount under protest or procure
and maintain a stay of all proceedings with adequate bond to
enforce collection of such tax or assessment. Once such action is taken by
Tenant, Tenant shall not be considered to be in default hereunder with
respect thereto. Notwithstanding anything to the contrary, Tenant shall not
exercise its contest rights in contravention of any of the terms and
conditions of any Facility Mortgage.
SECTION 3.5.5. REFUND CLAIMS. Tenant shall have, and Landlord
hereby irrevocably grants to Tenant, the power and authority, at Tenant's
cost to make and file and prosecute any statement or report or claim for
refund which may be required or permitted by law, as the basis of or in
connection with the assessment, determination, equalization, reduction or
payment of any and every tax or assessment or license or charge which
Tenant is required to pay or discharge hereunder. Landlord agrees that
Tenant shall thereafter be entitled retain for its own account all or any
portion of such refunds, rebates or reduction in assessed value which relate
to tax periods on and after the Commencement Date.
SECTION 3.5.6. LANDLORD'S PARTICIPATION. Landlord shall
not be required to join in any proceedings referred to in this Section, unless
the provisions of any law, rule or regulation at the time in effect shall
require that such proceedings be brought by and/or in the name of
Landlord, in which event Landlord shall join in such proceedings or permit
the same to be brought in his name. Landlord shall not ultimately be
subjected to any liability for the payment of any costs or expenses
in connection with any such proceedings, and Tenant will indemnify,
defend and save harmless Landlord from any such costs and expenses.
Tenant shall be entitled to any refund of any Taxes and Assessments and
penalties or interest thereon received by Landlord but previously paid or
reimbursed in full by Tenant.
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SECTION 3.5.7. FINAL PAYMENT. Upon the termination of any
such proceeding, Tenant shall pay the amount of such taxes and
assessments or part thereof as finally determined in such
proceedings, the payment of which may have been deferred during the
prosecution of such proceedings, together with any costs, fees, interest,
penalties or other liabilities in connection
therewith.
SECTION 3.5.8. TIME OF PAYMENT. Tenant shall pay before
delinquency any and all real and personal property taxes and assessments,
payable hereunder by Tenant. In the event of a late payment, Tenant shall
pay all interest and penalties plus the amount due. Tenant shall further
provide Landlord with evidence of payment as soon as practicable after
Landlord's written request therefor, but in no event beyond thirty (30) days.
SECTION 4. USE OF THE PREMISES/COMPLIANCE WITH
LAWS.
SECTION 4.1. NECESSARY APPROVALS. Tenant covenants upon
execution of this Lease to proceed with all due diligence to obtain prior to
the Commencement Date all approvals and licensing needed to operate the
Facility under applicable state and federal law as a __ unit proprietary home
for adults or under such designation as may be adopted by the State of New
York during the Term hereof and certified to participate in Medicare and/or
Medicaid to the extent such participation is available and Tenant elects to
participate in either or both of such programs, it being understood and
agreed that Tenant shall have no obligation hereunder to seek certification
at anytime during the Term under either Medicare or Medicaid even if such
certification is available to the Facility. Tenant further covenants and agrees
to maintain such licensure and, if applicable, certification in full
force and effect throughout the Lease Term. Landlord agrees to assist
Tenant, at Tenant's sole cost and expense, as reasonably necessary to obtain
such approvals. Tenant may not at anytime reduce the licensed capacity of
the Facility or change the licensed category of the units at the Facility
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld.
SECTION 4.2. GENERAL INSURANCE REQUIREMENTS. After
the Commencement Date, Tenant shall neither use nor permit to be used the
Premises, or any part thereof, for any purpose which will cause
the cancellation of any insurance policy covering the Premises or any part
thereof, nor shall Tenant sell or permit to be kept, used or sold in or about
the Premises any article which may be prohibited by the standard form of
fire insurance policies. Tenant shall, at its sole cost, comply with all of the
requirements pertaining to the Premises of any insurance organization or
company necessary for the maintenance of insurance, as herein provided,
covering the Premises.
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SECTION 4.3. UNLAWFUL PURPOSES PROHIBITED. Tenant
covenants and agrees that the Premises shall not be used for any unlawful
purpose. Tenant shall not commit or suffer to be committed any waste on
the Premises, nor shall Tenant cause or permit any nuisance thereon.
Tenant further covenants and agrees to comply with the CCRs and that
Tenant's use of the Premises and maintenance, alteration, and operation
thereof shall at all times conform to all applicable and lawful local, state,
and federal laws. Tenant may, however, contest the legality or applicability
thereof. This must be done in good faith, with due diligence, without
prejudice to Landlord's rights hereunder, and at Tenant's own expense.
While such a contest is pending Tenant shall not be considered in default
under this SECTION 4.3. Notwithstanding anything to the contrary, Tenant
shall not exercise its rights to contest under this section in contravention of
the terms and conditions of any Facility Mortgage.
SECTION 4.4. NO ADVERSE CLAIMS. Tenant shall neither suffer
nor permit the Premises or the Facility or any portion thereof to be used in
such a manner as (i) might reasonably tend to impair Landlord's interest in
the Premises or any portion thereof or (ii) may reasonably make possible a
claim or claims of adverse usage or adverse possession by the public, as
such, or of implied dedication of the Premises or any portion thereof.
SECTION 4.5. SURVEYS, INVESTIGATIONS AND INSPECTIONS.
Upon request, Tenant shall deliver to Landlord a copy of the results of all
surveys, investigations and inspections of the Facility and its operation
performed by state or federal authorities.
SECTION 4.6. ENVIRONMENTAL LAWS. Tenant shall use the
Premises in compliance with all applicable Environmental Laws (as defined
below). Tenant shall, at its sole cost and expense, promptly remove or clean
up any hazardous substances introduced onto the Premises by Tenant or
with its permission or at its sufferance in excess of those substances on the
Premises as of the Commencement Date. Tenant may elect to procure at
any time during the Lease Term, at Tenant's expense, a Phase I
environmental assessment ("Phase I Report") for the Premises. If any such
Phase I Report is obtained by Tenant at any time during the first six (6)
months of the Initial Lease Term then, for purposes of the first sentence of
this Section 4.6, the information provided for in the Phase I Report
regarding the type, nature and level of any hazardous substances existing at
the Premises shall be prima facie evidence of the substances present at the
Premises as of the Commencement Date. Any such removal or cleanup
required of Tenant hereunder shall be in compliance with all
applicable Environmental Laws. Tenant hereby agrees to indemnify and
hold Landlord harmless and agrees to defend Landlord from all losses,
damages, claims and liabilities and fines, including costs and reasonable
attorneys' fees, of any nature whatsoever in connection with the actual
presence upon the Premises of any hazardous substance introduced by
Tenant. For purposes hereof, the term Environmental Laws shall mean any
and all applicable governmental laws, regulations and requirements relating
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to environmental and occupational health and safety matters and hazardous
materials, substances or wastes (as defined from time to time under any
applicable federal, state or local laws, regulations or ordinances).
SECTION 5. TENANT'S COMPLIANCE WITH MORTGAGE.
SECTION 5.1. FACILITY MORTGAGE. Anything in this Lease
contained to the contrary notwithstanding, with respect to any mortgage or
mortgages encumbering all or any part of the Premises (each a "Facility
Mortgage"), and provided that Landlord has notified Tenant in writing
with respect to the existence and substance thereof, Tenant shall at all times
and in all respects fully, timely and faithfully comply with and observe each
and all of the conditions, covenants, and provisions required on the part of
the Landlord and of which Tenant has received notice under any
Facility Mortgage (and to any renewals, modifications, extensions,
replacements and/or consolidations thereof of which Tenant has received
notice) to which this Lease is subordinate or to which it later may become
subordinate, including, without limitation, such conditions, covenants
and provisions thereof as relate to the care, maintenance, repair, insurance,
restoration, preservation and condemnation of the Premises, provided such
conditions, covenants and provisions do not require compliance and
observance to a standard or degree in excess of that required by the
provisions of this Lease or require performance not required by the
provisions of this Lease.
SECTION 5.2. COMPLIANCE WITH FACILITY MORTGAGE.
Subject to the foregoing limitations on Tenant's obligations hereunder,
Tenant shall not do or permit to be done anything which would
constitute a breach of or default under any obligation of the Landlord under
any Facility Mortgage, it being the intention hereof that Tenant shall so
comply with and observe each and all of such covenants, conditions and
provisions of any such Facility Mortgage so that it will at all times be in
good standing and there will not be any default on the part of the Landlord
thereunder. However, nothing in this Section contained shall be construed
to obligate Tenant to pay any part of the principal or interest secured by any
Facility Mortgage or to perform any obligations in excess of
those imposed on its under this Agreement.
SECTION 5.3. MORTGAGE RESERVES. Any tax, insurance or
replacement reserve required by the holder of any Facility Mortgage during
the Term of this Lease, and not otherwise paid by Tenant pursuant to
SECTION 3.4, shall be paid by the Tenant to or as directed by Landlord.
SECTION 6. MAINTENANCE, REPAIR, ALTERATIONS AND
UTILITIES.
SECTION 6. I. MAINTENANCE AND REPAIR. Except as otherwise
provided herein, Tenant shall, at its own cost, and without expense to the
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Landlord, keep and maintain the Premises, including but
not by way of limitation, all sidewalks, buildings, roof, walls, mechanical
systems, surface parking lots and improvements of any kind which may be
a part thereof in good, sanitary and neat order, condition and repair,
ordinary wear and tear and obsolescence in spite of repair and acts of God
excepted, and, except as specifically provided in SECTION 10, below,
restore and rehabilitate any of the Premises which may be destroyed or
damaged by fire, casualty or any other cause whatsoever and in such a
manner as may be necessary to operate the Facility in accordance with
applicable state and/or federal laws or regulations. Tenant shall perform all
interior and exterior painting, and maintain the grounds of the Facility in a
good and sightly appearance.
SECTION 6.2. ALTERATIONS. Tenant will not remove or demolish any
improvement or building which is part of the Premises or any portion
thereof or allow it to be removed or demolished, without the prior written
consent of Landlord, which consent may be withheld in Landlord's sole and
absolute discretion other than where such removal is required to comply
with law or in the event of an emergency, in which case said consent shall
not be unreasonably withheld. Tenant further agrees that it will not make,
authorize or permit to be made any changes or alterations in or to the
Premises without first obtaining the Landlord's written consent thereto,
which consent shall not be unreasonably withheld if Landlord is satisfied
that (i) Tenant has the financial resources to undertake such changes or
alterations and (ii) such changes or alterations will not adversely affect the
licensure, certification, if applicable, or value of the Premises. All
alterations, improvements and additions to the Premises shall be in quality
and class at least equal to the original work and shall become the
property of the Landlord and shall meet all building and fire codes, and all
other applicable codes, rules, regulations, laws and ordinances. Nothing
herein shall be deemed or construed to require Tenant to obtain Landlord's
consent to non-structural changes or alterations such as painting, the
replacement of wall coverings or the replacement of floor coverings;
provided, however, that all such work shall also be in quality and class at
least equal to the original work and shall become the property of the
Landlord and shall meet all building and fire codes, and all other applicable
codes, rules, regulations, laws and ordinances.
SECTION 6.3. UTILITIES. Tenant shall pay all charges for water,
electricity, gas, sewage, waste, trash and garbage disposal, telephone, cable
television, and other services furnished to the Premises from and after the
Commencement Date.
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SECTION 7. LIENS AGAINST THE PREMISES.
SECTION 7.1. NO LIENS BY TENANT. Tenant will not permit the
Premises or Tenant's leasehold estate hereunder to become subject to any
lien, charge, or encumbrance. Tenant shall maintain the Premises free from
all orders, notices, and violations filed or entered by any public or
quasi-public authorities. Notwithstanding the foregoing, in the event any
such lien, charge, or encumbrance is imposed, Tenant may contest any such
lien, charge, encumbrance, order, notice or violation. This must be done in
good faith, with due diligence and at Tenant's own expense and
Tenant shall not be considered in default of the provisions of this SECTION
7.1. as a result of such contest.
SECTION 7.2. DISCHARGE BY LANDLORD. Should a judgment on
any lien, charge, encumbrance, order, notice or violation be rendered
against the Premises and should Tenant fail to discharge such judgment or
take action to protest such judgment, Landlord shall have the right, but
not the obligation, to discharge said judgment. If Landlord exercises that
option, any amounts paid by Landlord shall be due from Tenant as
additional rent. Such additional rent shall be due and payable on the next
date after the expense is incurred that Basic Rent is otherwise due.
SECTION 7.3. MECHANICS LIENS. Tenant shall take all reasonable
steps necessary to ensure that no lien arising under New York law as a
result of construction done at the Premises at Tenant's request shall extend
to the interest of Landlord in the Premises. Tenant shall pay all costs
incurred by Tenant in connection with the construction, alteration,
demolition, maintenance and repair of any and all improvements on the
Premises. Should a lien or claim of lien be filed against the Landlord's
interest in the Premises by any contractor, subcontractor, mechanic, laborer,
materialman or any other person whomsoever retained by Tenant, Tenant
shall, within sixty (60) days after the filing thereof, cause the same to be
discharged of record.
SECTION 8. NON-LIABILITY AND INDEMNIFICATION. During
the Term, Tenant agrees to protect, indemnify and save harmless Landlord
from and against all claims arising out of or connected with Tenant's use
and occupancy of the Premises and shall pay all costs and expenses
incurred by Landlord in connection with such claims, including without
limitation, court costs and reasonable attorney's fees for trial and appellate
proceedings. Landlord shall be protected hereby from all claims arising
during the Term from loss of or damage to property, or death or injury to
persons unless such loss, damage, death or injury is caused solely by the
negligence or willful actions of Landlord.
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SECTION 9. INSURANCE.
SECTION 9.1. LANDLORD'S INTEREST. During the term of this
Lease, Tenant shall at all times keep the Premises insured with the kinds
and amounts of insurance described below through an insurance carrier
qualified to do business in the State of New York. The policies must name
Landlord as an additional insured or loss payee (other than with respect to
the loss of rental insurance described in Section 9.1.4 the proceeds of which
shall be payable solely to Tenant). In addition, the policies shall name as an
additional named insured and loss payee any mortgagee under any Facility
Mortgage by way of a standard form of mortgagee's loss payable
endorsement if required by the terms of any Facility Mortgage. Any loss
adjustment shall require the written consent of Landlord and Tenant and
shall be in accordance with the terms of any Facility Mortgage. Evidence of
insurance shall be deposited with Landlord and, if requested, with
Landlord's Mortgagee. The policies on the Premises shall insure against the
following risks:
SECTION 9.1.1. CASUALTY. Loss or damage by fire and such other
risks as may be included in the broadest form of extended coverage
insurance from time to time available, including but not limited to, flood
insurance if the Premises are located in a designated flood zone, and
earthquake insurance (provided that such flood and earthquake insurance
are reasonably available at commercially reasonable rates), in amounts
sufficient to prevent Landlord or Tenant from becoming a coinsurer within
the terms of the applicable policies and in any event in an amount not less
than one hundred percent (l00%) of the then full replacement value thereof
(as defined below in SECTION 9.2.1);
SECTION 9.1.2. SPRINKLER. Loss or damage from leakage of any
sprinkler system now or hereafter installed on the Premises to the extent it
is included in Tenant's applicable insurance policy as a covered peril;
SECTION 9.1.3. BOILER COVERAGE. Loss or 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 Landlord from time to time; provided,
however, in no event shall such coverage be in an amount greater than that
required by the terms of any Facility mortgage;
SECTION 9.1.4. RENT LOSS. Loss of rental under a rental value
insurance policy covering risk of loss during the reconstruction resulting
from the occurrence of any of the hazards described in SECTIONS 9.1.1.,
9.1.2. or 9.1.3. in an amount sufficient to pay the rental required under this
Lease for a period of at least 6 months;
SECTION 9.1.5. LIABILITY. Claims for personal injury or property
damage under a policy of general public liability insurance with amounts of
not less than One Million Dollars ($ 1,000,000) (combined single limit for
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personal injury, including bodily injury or death, property damage)
together with an excess "umbrella" liability policy providing liability
insurance in excess of the comprehensive general liability coverage with a
limit of not less than Five Million Dollars ($5,000,000). If obtainable at a
reasonable cost, the public liability insurance shall be on an
occurrence basis as opposed to a claims made basis. If Tenant in unable to
obtain such an occurrence basis policy, then Tenant shall obtain a claims
made policy but shall also obtain, if obtainable at a reasonable cost, an
owner's protective policy on an occurrence basis with the limits
as set forth above;
SECTION 9.1.6. PROFESSIONAL LIABILITY. Claims arising out of
professional liability in an amount not less than One Million Dollars ($
1,000,000) for each occurrence and Three Million Dollars ($3,000,000) in
the aggregate. If obtainable at a reasonable cost, the professional liability
insurance shall be on an occurrence basis as opposed to a claims made
basis. If Tenant in unable to obtain such an occurrence basis policy, then
Tenant shall obtain a claims made policy but shall also obtain, if obtainable
at a reasonable cost, an owner's protective policy on an occurrence basis
with the limits as set forth above; and
SECTION 9.1.7. WORKERS COMPENSATION. Claims for employee
injuries covered by worker's compensation in accordance with the
requirements of New York law.
SECTION 9.2. FULL REPLACEMENT VALUE DEFINED. The term
"full replacement value" as used herein, shall mean the actual replacement
cost thereof from time to time, less exclusions provided in the normal fire
insurance policy. At the commencement of this Lease, the parties agree that
the full replacement value is as set forth in Exhibit F.
SECTION 9.3. ADDITIONAL INSURANCE. In addition to the
insurance described above, Tenant shall maintain such additional insurance
as may be reasonably required from time to time by any mortgagee under
the terms of any Facility Mortgage.
SECTION 9.4. RATING. All insurance policies carried by either party
covering the Premises including without limitation contents, fire and
casualty insurance, shall expressly waive any right of subrogation on the
part of the insurer against the other party. The insurance company or
companies issuing the above referenced policies shall have a financial
strength rating (Best's rate) of at least an A and a financial size of at least
Class X, as reported in the most recent edition of Best's Key Rating Guide
Property/Casualty.
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SECTION 9.5. CLAIMS. To the extent that either Landlord or Tenant
may have claims against the other for fire or casualty damage to the
Premises or any portion thereof (including business interruption caused
thereby), which claims are covered by insurance payable to and protecting
the claiming party, the claiming party hereby agrees to exhaust all claims
under such insurance before asserting any claims against the other party.
The foregoing shall apply to claims for damage whether
such damage is caused, wholly or partially, by the negligence or other fault
of the other party or his or its agent, employees, subtenants, licensees, or
assignees.
SECTION 9.6. PAYMENT AND CERTIFICATES. Tenant shall pay
all of the insurance premiums, and deliver certificates evidencing such
coverage to Landlord prior to their effective date (and, with respect to any
renewal policy ten (10) days prior to the expiration of the existing policy),
and in the event of the failure of Tenant either to effect such insurance in
the names herein called for or to pay the premiums therefor, or to deliver
such certificates to Landlord at the times required, Landlord shall be
entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, which premiums shall be repayable to Landlord upon
written demand therefor.
SECTION 9. 7. BLANKET POLICIES. Notwithstanding anything to
the contrary contained in this Section, Tenant'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
Tenant; provided, however, that the coverage afforded Landlord will not be
reduced or diminished or otherwise be different from that which would
exist under a separate policy meeting all other requirements of this Lease by
reason of the use of such blanket policy of insurance, and provided
further that the requirements of this SECTION 9 are otherwise satisfied.
SECTION 10. DAMAGE AND DESTRUCTION.
SECTION 10.1. REPAIR BY TENANT. In the event that any part of
the improvements located on the Premises or the Personal Property shall be
damaged or destroyed by fire or other casualty whether or not the same is
insured by the insurance required by the terms hereof (any such event
being called a "Casualty"), Tenant shall promptly replace, repair and restore
the same as nearly as possible to its condition immediately prior to such
Casualty, in accordance with all of the terms, covenants and conditions and
other requirements of this Lease and any mortgage applicable in the
event of such Casualty; provided, however, that in the event of a Casualty
occurring during the last six months of the Initial Term or any Extended
Term or in the event as a result of said Casualty, the Premises have been
rendered Unsuitable for their Primary Intended Use (as defined below),
then Tenant shall have the right to terminate this Lease upon forty-five (45)
days written notice to Landlord and, in such event, all insurance proceeds
shall be payable to Landlord. The Premises and the Personal Property shall
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be so replaced, repaired and restored as to be of at least equal value and
substantially the same character as prior to such Casualty. If the estimated
cost of any such restoring, replacing or repairing is Ten Thousand Dollars
($ 10,000) or more, the plans and specifications for same shall be first
submitted to and approved in writing by Landlord, which
approval shall not be unreasonably withheld but which approval may be
conditioned on the receipt by Landlord of the approval of the holder of any
Facility Mortgage, and, if reasonably required by Landlord or by the holder
of any Facility Mortgage, Tenant shall immediately select an independent
architect, approved by Landlord, who shall be in charge of such repairing,
restoring or replacing. Tenant covenants that it will give to Landlord
prompt written notice of any Casualty affecting the Premises or any portion
thereof.
SECTION 10.2. COMMENCEMENT AND COMPLETION OF
REPAIR. Within thirty (30) days after a Casualty or within fifteen ( 15)
days after approval of the plans and specifications, whichever is later,
Tenant shall commence to restore the affected portion of the Premises and
Tenant shall complete the same within 180 days thereafter, provided,
however, that in the case of damage resulting from a Casualty which cannot
with due diligence be restored within said 180 day period, Tenant shall
have an additional period of time to complete the repair or reconstruction,
provided Tenant is proceeding promptly and with due diligence to complete
the repair or restoration. Tenant may utilize all insurance proceeds available
for any such repair or restoration, which Landlord covenants and agrees
to make available to Tenant subject to the terms of SECTIONS 6 and 10.3
hereof and any required approval of any mortgagee. Tenant's obligation to
make Rent payments and to pay all other charges required by this Lease
shall not be abated during the period of the repair or restoration.
SECTION 10.3. CONDITIONS OF RELEASE OF INSURANCE
PROCEEDS. No sums shall be disbursed by Landlord toward such
repairing, rebuilding, restoring or replacing unless Tenant shall not be in
default hereunder and it shall be first made to appear to the reasonable
satisfaction of Landlord that either (i) the amount received from such
insurance proceeds is sufficient to complete such work or (ii) if there is an
amount required in excess of the amount received from such insurance
proceeds, either said excess amount has been expended by Tenant or that
Tenant has deposited such excess funds with Landlord so that, in either
case, the total amount available will be sufficient to complete
such repairing, rebuilding, restoring or replacing in accordance with the
provisions of any mortgage and any plans and specifications submitted in
connection herewith or in the event there is no mortgage to Landlord's
reasonable satisfaction, free from any liens or encumbrances of any kind
whatsoever and the funds held by Landlord shall be disbursed only upon
the presentment of architect's or general contractor's certificates, waivers of
lien, contractor's sworn statements, and other evidence of cost and
payments as may be reasonably required by Landlord or the holder of any
Facility Mortgage.
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SECTION 10.4. IMPOSSIBILITY OF REPAIR. Notwithstanding
anything to the contrary contained in this SECTION 10, Tenant shall not be
obligated to rebuild if the repairs or reconstruction of the damage cannot be
made under existing laws, ordinances, statutes or regulations of any
governmental authority applicable thereto or in the event the holder of the
Facility Mortgage fails or refuses to make the insurance proceeds available
to the Landlord or Tenant. In the event Tenant is unable to rebuild in
accordance with the provisions hereof, this Lease shall terminate effective
thirty (30) days after the damage occurs and Tenant shall remit or Landlord
shall be entitled to retain all insurance proceeds to Landlord within ten (10)
days of said Lease termination date free and clear of all liens or claims and
shall promptly, at its own expense, remove from the Premises any of
Tenant's Equipment not so damaged or destroyed.
SECTION 10.5. PRIMARY INTENDED USE DEFINED. For the
purposes of this SECTION 10 and SECTION 11, the Premises shall be
deemed to have been rendered unsuitable for its primary intended
use if, in the good faith judgment of Tenant reasonably exercised, the
Facility cannot after any such loss be operated on a commercially
practicable basis as an proprietary home for adults of the type
and quality existing and licensed immediately prior to such loss, taking into
account, among other relevant factors, the number of licensed and
operational units affected by such loss.
SECTION 10.6. NO ABATEMENT. This Lease shall remain in full
force and effect and Tenant's obligation to make rental payments and to pay
all other charges required by this Lease shall remain unabated during any
period of repair or reconstruction.
SECTION 11. CONDEMNATION.
SECTION 11.1. TAKING OF WHOLE. If, during the Lease Term, so
much of the Premises are taken or condemned in fee for a public or quasi-
public use that the Premises are rendered Unsuitable For Its Primary
Intended Use, this Lease shall terminate. Termination will be effective
without entry or notice. Termination shall occur as of the day when
possession is required to be surrendered to the taking or condemning
authority.
SECTION 11.2. TAKING OF A PORTION. If, during the Lease Term,
a portion of the Premises and/or the Facility is taken or condemned in fee
for a public or quasi-public use such that the Premises is not rendered
Unsuitable For Its Primary Intended Use, this Lease shall not terminate.
If, however, as a result of the taking, the number of units available for
operation of the Facility in existence immediately prior to the taking has
been or must be reduced, Tenant shall be entitled to an abatement of rent.
The rent abatement shall be to the extent that is fair, just and equitable to
both Tenant and Landlord, taking into consideration, among other relevant
factors, the number of licensed units or suites and/or parking lots,
driveways or walkways affected by such loss.
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SECTION 11.3. DAMAGES FOR TAKING. All damages awarded in
connection with the taking of the Premises shall vest in Landlord; provided,
however, that Landlord shall make the same available to Tenant for the
repair or reconstruction of the Premises. All damages awarded in
connection with the taking of the leasehold estate and Tenant's Equipment
shall vest in Tenant.
SECTION 12. DEFAULT.
SECTION 12.1. EVENTS OF DEFAULT. The occurrence of any of
the events, acts or circumstances described in this SECTION 12.1 shall
constitute an Event of Default under this Lease.
SECTION 12.1.1. FAILURE IN PAYMENT. Failure by Tenant to pay
in full any rent payable under this Lease when due and the continuance of
such failure for ten ( 10) days after Landlord has given Tenant written
notice of such failure.
SECTION 12.1.2. FAILURE IN OTHER PERFORMANCE. Failure by
Tenant to observe, perform or comply with any of the terms, covenants,
agreements or conditions contained in this Lease (other than as specified in
SECTION 12.1.1), and the continuance of such failure for thirty (30) days
after Landlord has given Tenant notice of such failure. If Tenant has
promptly commenced and diligently pursued remedial action within said
thirty (30) day period but has been unable to cure its default (except for any
default that can be reasonably cured by the payment of money) prior to the
expiration thereof, said thirty (30) day period shall be extended for the
minimum time reasonably required for the completion of Tenant's remedial
action.
SECTION 12.1.3. BANKRUPTCY/INSOLVENCY. The making by
Tenant of an assignment for the benefit of its creditors or the
commencement of proceedings in a court of competent jurisdiction for
reorganization, liquidation or involuntary dissolution of Tenant or for the
adjudication of Tenant as a bankrupt or insolvent or for the appointment of
a receiver of the property of Tenant, which proceedings are not dismissed
and any receiver, trustee or liquidator appointed therein is not discharged,
within ninety (90) days after the institution thereof.
SECTION 12.1.4. ABANDONMENT. The abandonment of the
Premises by Tenant other than as a result of the damage, destruction or
taking thereof.
SECTION 12.1.5. REVOCATION OR TERMINATION OF
LICENSE. The final, non-appealable revocation or termination by any
governmental agency having jurisdiction over the Facility of
Tenant's license to operate the Facility.
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SECTION 12.1.6. OTHER AGREEMENTS. Failure by Tenant or any
affiliate of Tenant to observe, perform or comply with any of the terms,
covenants, agreements or conditions of any other lease or agreement with
Landlord, which failure continues beyond any grace period specified
therein.
SECTION 12.1.7. DISSOLUTION. The failure by Tenant to maintain
its existence as a partnership, dissolves or disposes of all or substantially
all of its assets, other than in conjunction with an assignment of the Lease to
Emeritus Corporation ("Emeritus") or a wholly owned subsidiary thereof
if and to the extent Emeritus or said subsidiary is at anytime permitted
under New York law to be the licensed operator of the Facility.
SECTION 12.1.8. JUDGMENTS. The entry of a final, non-appealable
judgment or series of judgments, which is or are not covered by insurance,
in an amount individually or in the aggregate exceeding $500,000, which
judgments remain unsatisfied for a period of 60 days.
SECTION 12.1.9. REMOVAL OF GENERAL PARTNERS. If any of
the general partnership interests of Tenant are sold, assigned, conveyed,
transferred or changed at any time when Tenant is the tenant
hereunder and such sale, assignment, conveyance, transfer or change results
in the withdrawal or removal of both of the persons who were general
partners of Tenant on the Commencement Date unless said replacement
general partners are approved by Landlord, which approval shall not be
unreasonably withheld if he is satisfied as to (A) their operational expertise
or the operational expertise of any manager retained by them and (B) their
ability to meet the financial obligations imposed on Tenant hereunder and
which approval shall be granted in the event Emeritus continues
to operate the Facility under the Administrative Services Agreement (as
defined below).
SECTION 12.2. REMEDIES.
SECTION 12.2.1. RIGHT OF RE-ENTRY. Upon the occurrence of
any Event of Default, Landlord, in addition to the other rights or remedies
he may have, shall have the immediate right of re-entry without any
additional notice to Tenant.
SECTION 12.2.2. RIGHT OF TERMINATION. Should Landlord elect
to re-enter, as herein provided, or should it take possession pursuant to legal
proceedings or pursuant to any notice provided for by law, Landlord may
either terminate this Lease or it may from time to time, without terminating
this Lease, relet the Premises or any part thereof for the account of Tenant
for such term or terms, which may be for a term shorter than or for a term
extending beyond the Lease Term, and at such rental or rentals and on such
other terms and conditions as Landlord, in his reasonable discretion, may
deem advisable. Should Landlord at any time terminate this Lease as a
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result of any Event of Default, in addition to any other remedy he may
have, Landlord may recover from Tenant all damages incurred
by reason of such Event of Default, including the cost of recovering the
Premises.
SECTION 12.2.3. RIGHT TO TERMINATE POSSESSION.
Notwithstanding the foregoing, should Landlord terminate this Lease,
Tenant shall have the right to re-enter the Premises within ten (10)
days of the termination of Tenant's possession of the Premises for the sole
purpose of removing any of Tenant's Equipment located thereon or therein.
Whether or not Landlord elects to terminate this Lease, Landlord may
terminate Tenant's right to possession of the Premises by any lawful means,
in which case all of Tenant's rights in this Lease shall terminate and Tenant
shall immediately surrender possession of the Premises to Landlord.
Possession of the Premises includes possession of all Personal Property,
residents, resident records, Campus business records, general intangibles
and proceeds but specifically excludes possession of Tenant's Equipment.
SECTION 12.2.4. DAMAGES. Any termination of this Lease by
Landlord shall not in any event terminate Tenant's obligation to pay Basic
Rent, additional rent and other amounts owed by Tenant pursuant to this
Lease for the full Lease term (collectively for purposes of this paragraph the
"Rent"). Landlord shall have the right to recover from Tenant (a) the worth,
at the time of the award, of the unpaid Rent that had been earned at the
termination of this Lease, and (b) the worth, at the time of
the award, of the amount by which the unpaid Rent that would have been
earned after the date of termination of this Lease until the time of the award
exceeds the amount of the loss of Rent that Tenant proves could have been
reasonably or has actually been avoided by Landlord, and (c) the
present value, at the time of the award, of the amount by which the unpaid
Rent for the balance of the Lease Term after the time of the award exceeds
the amount of the loss of Rent that Tenant proves could have been
reasonably or actually has been avoided by Landlord, and (d) any other
amount, and court costs and reasonable attorneys' fees, necessary to
compensate Landlord for all detriment and damage proximately caused by
Tenant's default. The worth at the time of the award as used in (a)
and (b) of the preceding sentence is to be computed by allowing interest at
an annual rate of interest of two percent (2%) above the prime rate of
interest published in The Wall Street Journal, but in no event at a rate which
would be deemed to be usurious under New York law (the "Prime Rate").
In the event that The Wall Street Journal ceases or fails to publish or
announce a prime rate, the amounts due hereunder shall bear interest at the
Prime Rate announced by the bank designated by Landlord, provided such
a bank is among the top twenty-five (25) banks in the United States in terms
of deposits. The present value at the time of the award as referred to in (c)
above is to be computed by discounting the amount at the annual discount
rate of the Federal Reserve Bank of New York at the time of the award,
plus l%; provided, however, notwithstanding any provision herein to the
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contrary, Landlord shall be entitled to a minimum recovery equal to the
amount actually paid by Landlord in whole or in partial satisfaction of any
Facility Mortgage if and to the extent the same as a result of the Tenant's
default hereunder.
SECTION 12.3. NO REMEDY EXCLUSIVE. No remedy herein
conferred upon or reserved to Landlord or Tenant is intended to be
exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Lease or now or hereafter existing at law or
in equity or by statute. No delay or omission to exercise any right, remedy,
or power accruing upon any Event of Default shall impair any such
right, remedy or power or shall be construed to be a waiver thereof unless
and until such Event of Default has been cured.
SECTION 13. LANDLORD'S RIGHT TO PERFORM TENANT'S
COVENANTS.
SECTION 13.1. LANDLORD'S OPTION TO PERFORM. If Tenant
defaults in the making of any of the payments, or the performance of any of
the obligations provided for in this Lease, Landlord may, at his option and
on behalf of Tenant, make any such payments or perform any such
obligations.
SECTION 13.2. NOTICE TO TENANT. Before exercising that option,
however, Landlord must give Tenant written notice of Tenant's default and
of Landlord's intention to correct that default. If thirty (30) days after such
notice, or such shorter time period as Landlord may specify in the notice if
further delay would impair materially any substantial right, property, or
benefit of Landlord, Tenant has not corrected such default, Landlord may
exercise his rights under this SECTION 13.
SECTION 13.3. REIMBURSEMENT TO LANDLORD. In the event
Landlord performs any obligation on Tenant's behalf, Tenant shall
reimburse Landlord for any amounts reasonably paid or expended.
This reimbursement shall be due and payable on the next rent payment date
after the expense is incurred that rent is otherwise due. Landlord shall not
be held liable or in any way responsible for any loss, inconvenience,
annoyance or damage resulting to Tenant on account of such performance
by Landlord, unless Landlord is found to have been negligent or engaged in
willful misconduct in his performance. All amounts payable by Tenant to
Landlord under any of the provisions of this Lease, if not paid when the
same become due as in this Lease provided or within ten ( 10) days after
written demand therefor from Landlord, shall bear interest from the date
they become due until paid, at the Prime Rate.
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SECTION 14. QUIET ENJOYMENT. Landlord covenants and agrees
that, so long as Tenant observes and performs all of the covenants,
conditions, and stipulations of this Lease, Tenant may lawfully and quietly
hold, occupy and enjoy the Premises during the Lease Term subject to the
terms of any Facility Mortgage and any Subordination, Non-Disturbance
and Attornment Agreement executed in conjunction therewith.
SECTION 15. ASSIGNMENT AND SUBLETTING.
SECTION 15.1. AFFILIATE ASSIGNMENTS. Tenant may, without
prior approval from Landlord, sublease the Premises or assign its rights and
obligations under this Lease to Emeritus or any sister or subsidiary
corporation of Emeritus or a limited liability company or other legal entity
owned at lease 50% by Tenant, Emeritus or a sister or subsidiary
corporation of Emeritus (an "Affiliate"). Tenant shall give Landlord thirty
(30) days prior written notice of any such assignment or subletting,
and shall give to Landlord, concurrently with such assignment, an executed
original assignment agreement wherein such assignee agrees to be bound by
the terms and conditions of this Lease. No such assignment shall serve to
relieve Tenant (or to the extent they may be severally liable for the
obligations of Tenant, its general partners) of liability hereunder unless such
a release is specifically approved by Landlord based in his satisfaction with
the credit worthiness and operational expertise of the assignee, in which
case Landlord shall executed a full release of Tenant and its general
partners from any further liability hereunder other than liability, if any, for
the acts or omissions of Tenant prior to the date of such assignment. The
sale or transfer of the capital stock of Emeritus on a national stock exchange
and the issuance of additional shares of stock in Emeritus in an
underwritten public offering or a qualified private placement transaction
shall not constitute an assignment of this Lease for purposes hereof.
SECTION 15.2. OTHER SUBLEASES AND ASSIGNMENTS.
Tenant may sublease the Premises or assign its rights and obligations under
this Lease to a person or entity that is not an Affiliate with the prior written
consent of Landlord, which consent shall not be unreasonably withheld. For
purposes hereof, Tenant shall be deemed to have assigned its rights
hereunder in the event of a voluntary or involuntary sale or assignment of
the stock or other ownership interest in Tenant and Landlord shall
not be deemed to have unreasonably withheld his consent if he is not
reasonably satisfied with the ability of the proposed assignee or sublessee to
fulfill the operational and financial obligations imposed on Tenant
hereunder or in the event any Facility Mortgage fails or refuses to consent
thereto to the extent such consent is required by the terms of any Facility
Mortgage. No such sublease or assignment shall serve to relieve Tenant (or
to the extent they may be severally liable for the obligations of Tenant, its
general partners) of liability hereunder unless such a release is specifically
approved by Landlord based in his satisfaction with the credit worthiness
and operational expertise of the assignee or sublessee, in which case
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Landlord shall executed a full release of Tenant and its general partners
from any further liability hereunder other than liability, if any, for the acts
or omissions of Tenant prior to the date of such assignment.
SECTION 15.3. LANDLORD ASSIGNMENT RIGHTS. Landlord
may at any time assign his rights and obligations under this Lease,
provided, however, that Landlord shall furnish to Tenant a written
statement from Landlord's assignee that such assignee recognizes all of
Tenant's rights under this Lease. Notwithstanding the failure of Landlord to
obtain said recognition from Landlord's assignee, any assignment of
Landlord's rights and obligations shall be subject to Tenant's rights under
this Lease.
SECTION 15.4. SUBSEQUENT ASSIGNMENTS AND
SUBLEASES. No assignment or subletting that is approved pursuant to this
SECTION 15 shall be deemed to remove any subsequent assignment or
subletting from the provisions of this SECTION 15, it being the intent
hereof that every assignment and subletting, whenever occurring, shall
require the same approval as is set forth herein for an original
assignment or subletting.
SECTION 16. ADMINISTRATIVE SERVICES AGREEMENT.
Landlord acknowledges and agrees that Tenant shall be permitted, without
the consent of Landlord, to enter into an Agreement to Provide
Administrative Services (the "Administrative Services Agreement") with
Emeritus or any Affiliate, pursuant to which Emeritus or such Affiliate shall
provide to Tenant administrative and consulting services in connection with
the operation of the Facility. The Administrative Services Agreement
shall be substantially in the form of Exhibit G attached hereto and
incorporated herein by this reference, subject to amendment.
SECTION 17. ATTORNMENT; RIGHT TO CURE LANDLORD'S
DEFAULT.
SECTION 17.1. ATTORNMENT. Tenant covenants and agrees that, if
by reason of a default upon the part of the Landlord herein in the
performance of any of the terms and conditions of any Facility
Mortgage, the estate of Landlord thereunder is terminated by summary
disposition proceedings or otherwise, Tenant will attorn to the then holder
of such Facility Mortgage or the purchaser in such foreclosure proceedings,
as the case may be, and will recognize such holder of the Facility Mortgage
or such purchaser as the Landlord under this Lease; provided, however, that
the holder of such Facility Mortgage or the purchaser in foreclosure
proceedings agrees in writing not to disturb Tenant's quiet enjoyment of the
Premises so long as Tenant is not in default hereunder. Tenant
covenants and agrees to execute and deliver, at any time and from time to
time, upon reasonable request of Landlord or the holder of such Facility
Mortgage or the purchaser in foreclosure, any instrument which may be
necessary to evidence such attornment.
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SECTION 17.2. TENANT'S CURE RIGHT. Tenant shall have the
right to cure any default by Landlord in the payment of any amounts due
under any Facility Mortgage secured by the Premises and to offset any such
sums against its rent next coming due under the terms of this Lease.
SECTION 18. LANDLORD INSPECTION. Landlord may enter upon
the Premises during normal business hours and upon prior notice for the
purpose of inspecting the same provided that such inspection shall not
disrupt or materially interfere with Tenant's operations at the Premises and
provided further that Landlord shall have the right to enter with or without
notice in the event of an emergency or to conduct visual inspections of the
Premises only.
SECTION 19. ESTOPPEL STATEMENTS. The parties hereto shall,
at any time and from time to time upon not less than ten (10) days prior
written notice from the other party, execute, acknowledge and deliver to
such other party, in form reasonably satisfactory to such other party or to
such other party's mortgagee, a written statement certifying (if true) that this
Lease is unmodified and in full force and effect (or if there have been
modifications stating the nature thereof, that such other party
is not in default hereunder (or specifying the nature of any default), the date
to which rental and other charges have been paid and such other
information as may be reasonably required by such other
party. It is intended that any such statement delivered pursuant to this
subsection may be relied upon by any prospective purchaser or mortgagee
of the Premises and their respective successors and assigns.
SECTION 20. SUBORDINATION. This Lease is and shall be subject
and subordinate to the lien of any Facility Mortgage which may now or
hereafter affect the Premises and to all renewal, modifications,
consolidations, replacements and extensions thereof. Tenant agrees to
execute and deliver upon demand such further instruments subordinating
this Lease to any such liens or encumbrances as shall be reasonably
requested by Landlord.
SECTION 21. RIGHT OF FIRST REFUSAL. During the Lease Term,
Landlord shall not sell the Premises to a third party ("Third Party") at any
time when this Lease is not in default unless and until (i) Landlord has
received and, subject to Tenant's right of first refusal, accepted a bona fide
written offer ("Offer") from Third Party containing the sales price and all of
the terms and conditions upon which Landlord is willing to sell the
Premises to Third Party, and (ii) Landlord has provided Tenant
with a copy of the Offer and twenty (20) days in which to advise Landlord
that it will acquire the Premises on the same terms and conditions as
reflected in the Offer or that it will waive its right of first refusal with
respect to the Offer. In the event Tenant elects to purchase the Premises on
the terms reflected in the Offer, the closing of the sale of the Premises shall
occur in accordance with the Offer. In the event Tenant elects to waive its
right to purchase the Premises on the terms reflected in the Offer, said
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waiver shall not affect Tenant's right of first refusal with respect to any
future offers. Further, in the event Tenant elects to waive its right to
purchase the Premises on the terms reflected in said Offer and the closing of
the transaction provided for therein fails to close within ninety (90) days
after said waiver or the terms of the sale are revised to be more favorable to
the purchaser than those reflected in the Offer, Landlord shall not be
permitted to sell the Premises without first offering Tenant the right to
purchase the same on the terms reflected in the Offer or in the revised
Offer, as applicable, all in accordance with the terms hereof.
SECTION 22. TRANSFER OF OPERATIONS.
SECTION 22.1. GENERAL OBLIGATIONS. The date on which this
Lease either terminates pursuant to its terms or is terminated by either party
whether pursuant to a right granted to it hereunder or otherwise other than
as a result of the exercise by Tenant purchase of the Premises pursuant to
Section 21 shall be referred to as the "Transfer Date" in this Section. On the
Transfer Date, this Lease shall be deemed and construed as an absolute
assignment for purposes of vesting in Landlord all of Tenant's right, title
and interest in and to the following intangible property which is now or
hereafter used in connection with the operation of the Premises (the
"Intangibles") and an assumption by Landlord of Tenant's obligations under
the Intangibles:
(a) service contracts for the benefit of the Premises to which Tenant is
a party, and which can be terminated without penalty by Tenant or within
thirty (30) or fewer days' notice;
(b) any provider agreements with Medicare, Medicaid or any other
third-party payor programs (excluding the right to any reimbursement for
periods on or prior to the Transfer Date) entered in connection with the
Premises to the extent assignable by Tenant;
(c) all licenses, permits, accreditations, and certificates of occupancy
issued by any federal, state, municipal or quasi-governmental authority for
the use, maintenance or operation of the Premises, running to or in favor of
Tenant, to the extent assignable by Tenant;
(d) all documents, charts, personnel records, property manuals, resident
records and lists maintained with respect to the Premises (subject to the
resident's rights to access to his/her medical records as provided by law and
confidentiality requirements), books, records, files and other
business records attributable to the business or operations of the Premises
except to the extent included within Tenant's Equipment as defined in
Section 1.2.1, in which case the same shall be and remain the property of
Tenant;
(e) all existing agreements with residents and any guarantors thereof of
the Premises, to the extent assignable by Tenant (excluding the right to any
payments for periods prior to the Transfer Date);
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(f) all assignable guaranties and warranties in favor of Tenant with
respect to the Premises and/or the Personal Property;
(g) all other assignable intangible property not enumerated herein
which is now or hereafter used in connection with the operation of the
Premises as an assisted living facility except to the extent such intangible
property is included in Tenant's Equipment, in which case the same
shall be and remain the property of Tenant; and
(h) the business of the Tenant as conducted at the Premises as a going
concern, including but not limited to the names of the business conducted
thereon and all telephone numbers presently in use therein but specifically
excluding the name "Emeritus" and any variations thereof
and any proprietary materials developed by Tenant and used in connection
with its operations at locations other than the Facility.
SECTION 22.2. REVENUES AND EXPENSES. Tenant shall be
responsible for and pay all accrued expenses with respect to the Premises
and Personal Property accruing on or before 12:00 am on the
Transfer Date and shall be entitled to receive all revenues from the Premises
for the period through 12:00 am on the Transfer Date. Landlord shall be
responsible for and pay all accrued expenses with respect to the Premises
and the Personal Property accruing on or after 12:01 a.m. on the day after
the Transfer Date and shall be entitled to receive and retain all revenues
from the Premises accruing on or after 12:01 a.m. on the day after the
Transfer Date. Within fifteen (15) business days after the Transfer Date, the
following adjustments and prorations shall be determined as of the Transfer
Date and the party to whom payment is owed shall receive said payment
within said fifteen (15) day period:
(a) Real estate taxes, ad valorem taxes, school taxes, assessments and
personal property, intangible and use taxes, if any. If the actual ad valorem
taxes are not available on the Transfer Date for the tax year in which the
Transfer Date occurs, the proration of such taxes shall be estimated at the
Transfer Date based upon reasonable information available to the parties,
including information disclosed by the local tax office or other public
information, and an adjustment shall be made when actual figures are
published or otherwise become available.
(b) Tenant will terminate the employment of all employees on the
Transfer Date. The obligation for wages and the obligation, if any, to pay to
employees of the Premises accrued vacation and sick leave pay or employee
severance pay or other accrued benefits which may be payable as the result
of any termination of any employee on or prior to the Transfer Date for the
period prior to the Transfer Date shall remain the Tenant's obligation after
the Transfer Date.
(c) Landlord shall receive a credit equal to any advance payments by
residents of the Premises to the extent attributable to periods following the
Transfer Date.
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(d) The present insurance coverage on the Premises shall be terminated
as of the day next following the Transfer Date.
(e) All other income from, and expenses of, the Premises (other than
mortgage interest, principal and trustee fees), including but not limited to
public utility charges and deposits, maintenance charges and service
charges shall be prorated between Tenant and Landlord as of the
Transfer Date. Tenant shall, if possible, obtain final utility meter readings as
of the Transfer Date. To the extent that information for any such proration
is not available on the Transfer Date, Tenant and Landlord shall effect such
proration within ninety (90) days after the Transfer Date.
(f) Tenant shall receive a credit equal to (i) any sums held in escrow
by Landlord or the holder of any mortgage for taxes or insurance premiums
and paid by Tenant; and (ii) any other sums paid by Tenant and being held
by Landlord for the benefit of Tenant provided that any such
sums are not needed to pay costs and expenses which relate to the period
prior to the Transfer Date, in accordance with the applicable provisions of
this Lease.
(g) Landlord shall receive a credit for any amounts due by Tenant
pursuant to the terms of this Lease, including payments due to third party
vendors, which are paid by Landlord on behalf of Tenant.
SECTION 22.3. POSSESSION. All necessary arrangements shall be
made to provide possession of the Premises to Landlord on the Transfer
Date, at which time of possession Tenant shall deliver to Landlord all
medical records, resident records and other personal information
concerning all residents residing at the Premises as of the Transfer Date and
other relevant records used or developed in connection with the business
conducted at the Premises other than Tenant's corporate business records,
manuals, forms and systems documentation except to the extent specifically
excluded under Section 22.1. Such transfer and delivery shall be in
accordance with all applicable laws, rules and regulations concerning the
transfer of medical records and other types of resident
records.
SECTION 22.4. RESIDENT FUNDS. Within fifteen ( 15) days
following the Transfer Date, Tenant shall provide Landlord with an
accounting of all funds belonging to residents at the Premises which
are held by Tenant in a custodial capacity, if any. Such accounting shall set
forth the names of the residents for whom such funds are held, the amounts
held on behalf of each such resident and the Tenant's warranty that, to the
actual current knowledge of Tenant, the accounting is true, correct and
complete. Additionally, Tenant, in accordance with all applicable rules and
regulations, shall make all necessary arrangements to transfer such funds to
a bank account designated by Landlord, and Landlord shall in writing
acknowledge receipt of and expressly assume all the Tenant's financial and
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custodial obligations with respect thereto, it being the intent and purpose of
this provision that, on the Transfer Date, Tenant will be relieved of all
fiduciary and custodial obligations, and that Landlord will assume all such
obligations and be directly accountable to the residents, with respect
thereto. Notwithstanding the foregoing, Tenant will indemnify and hold
Landlord harmless from all liabilities, claims and demands, including
reasonable attorney's fees, in the event the amount of funds, if any,
transferred to Landlord's bank account as provided above, did not represent
the full amount of the funds then or thereafter shown to have been delivered
to Tenant as custodian that remain undisbursed for the benefit of the
resident for whom such funds were deposited, or with respect to any matters
relating to resident funds which accrue during the Term of this Lease.
SECTION 22.5. Accounts Receivable. All cash, checks and cash
equivalents at the Premises and deposits in bank accounts (other than
resident trust accounts) relating to the Premises on the Transfer Date shall
remain Tenant's property after the Transfer Date. All accounts receivable,
loans receivable and other receivables of Tenant, whether derived from
operation of the Premises or otherwise, shall remain the property of Tenant
after the Transfer Date. Tenant shall retain full responsibility for the
collection thereof. Landlord shall assume responsibility for the billing and
collection of payment on account of services rendered by it on and after the
Transfer Date. In order to facilitate Tenant's collection efforts, Tenant
agrees to deliver to Landlord, within a reasonable time after the Transfer
Date, a schedule identifying all of those balances owing for the month prior
to the Transfer Date and Landlord agrees to apply any payments received
which are specifically designated as being applicable to services rendered in
the case of the Facility prior to the Transfer Date to reduce the pre-Closing
balances of said residents by promptly remitting said payments to Tenant.
In the event payments specifically indicate that they relate to services
rendered or rental periods post-Transfer, such payments shall be retained by
Landlord. In the event no designation is made, such payments shall be
applied first to Tenant's accounts receivable, with the balance, if any,
applied to Landlord's accounts receivable. Landlord shall cooperate with
Tenant in Tenant's collection of its pre-Transfer Date accounts receivable.
Subject to the provisions of Section 22.6, Landlord shall have no liability
for uncollectible receivables and shall not be obligated to bear any expense
as a result of such activities on behalf of Tenant. Subject to the provisions
of Section 22.6, Landlord shall remit to Tenant or its assignee those
portions of any payments received by Landlord which are
specifically designated as repayment or reimbursement received by
Landlord arising out of cost reports filed for the cost reporting periods
ending on or prior to the Transfer Date.
SECTION 22. 6. THIRD PARTY PAYOR PAYMENTS. With respect
to residents in the Premises on the Transfer Date receiving payments from
Medicare, Medicaid or any other third party payor, Landlord
and Tenant agree as follows:
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(a) With respect to Medicare and Medicaid residents, if any, Landlord
and Tenant agree that payment for in-house residents covered by Medicare
or Medicaid on the Transfer Date will, under current regulations, be paid by
Medicare or Medicaid directly to Tenant for services rendered at the
Premises prior to the Transfer Date allocated on the per diem basis. Said
payments shall be the sole responsibility of Tenant and, except as provided
in SECTION 22. 6(b), Landlord shall in no way be liable therefor. After the
Transfer Date, Landlord and Tenant shall each have the right
to review supporting books, records and documentation that are in the
possession of the other relating to Medicare or Medicaid payments.
(b) If, following the Transfer Date, Landlord receives payment from
any state or federal agency or third-party payor which represents
reimbursement with respect to services provided at the Premises prior to the
Transfer Date, including payments arising from rate adjustments occurring
after the Transfer Date, Landlord agrees that it shall remit such payments to
Tenant. Payments by Landlord to Tenant shall be accompanied by a copy of
the appropriate remittance advices.
SECTION 22.7. FURTHER ASSURANCES. In addition to the
obligations required to be performed hereunder by Tenant and Landlord at
the Transfer Date, Tenant and Landlord agree to perform such
other acts, and to execute, acknowledge, and/or deliver subsequent to the
Transfer Date such other instruments, documents and materials, as the other
may reasonably request in order to effectuate the consummation of the
transaction contemplated herein. The obligations hereunder shall survive
termination or expiration of the Lease.
SECTION 22.8. INDEMNIFICATION. Tenant and Landlord each, for
himself, itself, and his and its successors and assigns hereby indemnifies
and agrees to defend and hold the other and his and its successors and
assigns harmless from any and all claims, demands, obligations, losses,
liabilities, damages, recoveries and deficiencies (including interest,
penalties and reasonable attorney's fees, costs and expenses) (hereinafter
collectively "the Claims") which either of them may suffer as a result of the
breach by the other party in the performance of any of his or its
commitments, covenants, or obligations under this SECTION 22. Tenant
does further agree to indemnify, defend and hold harmless Landlord from
any such Claims or with respect to any suits, arbitration proceedings,
administrative actions or investigations which relate to the use by Tenant of
the Premises prior to the Transfer Date or any liability which may arise
from operation of the Premises as an assisted living facility prior to the
Transfer Date. Landlord does further agree to indemnify, defend and hold
harmless Tenant from any such Claims or with respect to any suits,
arbitration proceedings, administrative actions or investigations which
relate to the ownership of the Premises by Landlord or the use of the
Premises by Landlord or the operation thereon of the Facility after the
Transfer Date. The rights of Landlord under this paragraph are without
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prejudice to any other remedies not inconsistent herewith which Landlord
may have against Tenant pursuant to the terms of this Lease
and the rights of Tenant hereunder are subject to SECTION 8.3. hereof.
SECTION 22.9. EFFECT OF DEFAULT. Anything to the contrary
contained in this SECTION 22 notwithstanding, in the event the termination
of this Lease is due to a default by Tenant, none of the provisions of this
SECTION 22 shall in any way limit, reduce, restrict or modify the rights
granted to Landlord pursuant to SECTIONS 12.2 AND 12.3 of this Lease.
If the termination of this Lease is a result of an Event of Default, then to the
extent any monies are due to Tenant pursuant to this SECTION 22,
such sums shall first be applied by Landlord to any damages suffered by
Landlord as a result of Tenant's Event of Default, with any excess remitted
to Tenant subject to the terms of this SECTION 22.
PART II
Landlord and Tenant hereby enter into this Lease in reliance on the
following representations and warranties and covenants and subject to the
following conditions:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
SECTION 1.1. TENANT'S REPRESENTATIONS. Tenant represents,
warrants and covenants to Landlord as follows:
SECTION 1.1.1. Tenant is a general partnership duly organized and
validly existing under the laws of the state of Washington and is duly
qualified to do business in the State of New York.
SECTION 1.1.2. This Agreement is valid, binding and enforceable
against Tenant in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, or other
similar laws relating to the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The execution of this
Agreement and the consummation of the transactions contemplated herein
do not and will not result in a breach of the terms and conditions
of nor constitute a default under or violation of Tenant's partnership
agreement or any law, regulation, court order, mortgage, note, bond,
indenture, agreement, license or other instrument or obligation to which
Tenant is now a party or by which any of its assets may be bound or
affected, subject, however, to Tenant obtaining those third party consents
and regulatory approvals for which
it is responsible under the terms hereof.
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SECTION 1.1.3. Subject to obtaining the third party consents and
regulatory approvals which it and/or Landlord are required to use their best
efforts to secure, Tenant has full power and authority to execute and to
deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein and therein.
SECTION 1.1.4. Tenant has duly and properly taken or obtained or
caused to be taken or obtained, or prior to the Commencement Date will
have duly and properly taken or obtained or caused to be taken or obtained,
all action necessary for Tenant (i) to enter into and to deliver this
Agreement and any and all documents and agreements executed by Tenant
in connection herewith or in furtherance hereof and (ii) to carry out the
terms hereof and thereof and the transactions contemplated herein and
therein, which action shall include, but not be limited to, using its best
efforts to obtain the third party consents and regulatory approvals for which
it is responsible under the terms hereof. No other action by or on behalf of
Tenant is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements
executed by Tenant in connection herewith or consummation of the
transactions contemplated herein, other than securing those third party
consents and regulatory approvals for which Tenant is responsible
under the terms hereof. Nothing herein shall be construed as a guarantee by
Tenant that it will be able to secure the third party consents or regulatory
approvals for which it is responsible, but rather this paragraph shall be
limited to Tenant's representation and warranty that it will use its best
efforts to secure such third party consents and regulatory approvals.
SECTION 1.1.5. There is no, nor has Tenant received written or verbal
notice of any, litigation, administrative investigation or other proceeding
pending or, to the best of Landlord's knowledge based on written notice
with respect thereto, threatened by any governmental authority having
jurisdiction over Tenant or by any other party against or relating to Tenant
where the amount claimed exceeds $1,000,000 in any single action or
$10,000,000 in the aggregate. Tenant is not a party to or bound by any
orders, judgments, injunctions, decrees or settlement agreements under
which it may have continuing obligations as of the date hereof or as of the
Commencement Date and which are likely to materially restrict or affect the
present business operations of Tenant taken as a whole. The right or ability
of Tenant to consummate the transaction contemplated herein has not
been challenged by any governmental agency or any other person and
Tenant has no knowledge of the occurrence of any event which would
provide a reasonable basis for any such litigation, investigation or other
proceeding.
SECTION 1.1.6. Tenant has not (i) made any contributions, payments
or gifts to or for the private use of any governmental official, employee or
agent where either the payment or the purpose of such contribution,
payment or gift is illegal under the laws of the United States or the
jurisdiction in which made, (ii) established or maintained any unrecorded
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fund or asset for any purpose or made any false or artificial entries on its
books, (iii) given or received any payments or other forms of remuneration
in connection with the referral of residents which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social
Security Act, 42 USC Section 1320a-7b(b) or any analogous state statute or
(iv) made any payments to any person with the intention or understanding
that any part of such payment was to be used for any purpose other than
that described in the documents supporting the payment.
SECTION 1.1.7. No representation or warranty by or on behalf of
Tenant contained in this Agreement, as those representations have been
modified by the terms of any written disclosure to Landlord and no
statement contained in any certificate, list, exhibit, or other instrument
furnished or to be furnished to Landlord pursuant hereto contains or will
contain any untrue statement of a material fact, or omits or will omit to state
any material facts which are necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading.
SECTION 1.2. LANDLORD REPRESENTATIONS. Landlord
represents, warrants and covenants to Tenant as follows:
SECTION 1.2.1. This Agreement is valid, binding and enforceable
against Landlord in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization other
similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Except to
the extent consent may be required under the Facility Mortgage if the same
is encumbering the Premises on the Commencement Date or under any
written financing commitment issued to Landlord as of the Commencement
Date, the execution of this Agreement and the consummation of the
transactions contemplated herein in accordance with the terms hereof do not
and will not result in a breach of the terms and conditions of nor constitute
a default under or violation of any law, regulation, court order, mortgage,
note, bond, indenture, agreement, license or other instrument or obligation
to which Landlord is now a party or by which any of Landlord's assets may
be bound or affected.
SECTION 1.2.2. Landlord has authority to execute and to deliver this
Agreement and all related documents, and to carry out the transactions
contemplated herein and therein and (i) to own the Premises as the same is
presently owned and (ii) to conduct his business as the same is now being
conducted.
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SECTION 1.2.3. True and correct copies of the financial statements
requested by Tenant relating to the operations of Landlord at the Facility for
the fiscal year ended December 31,1995 are attached hereto as Exhibit H.
Except as otherwise noted therein, all such financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied, fairly represent the financial condition, and
accurately set forth in all material respects as and to the extent required by
GAAP the results of the operations of Landlord at the Facility for the
periods covered thereby subject to customary year end adjustments (the
"Landlord Financials"). Any financial statements prepared by Landlord
subsequent to the date of the Landlord Financials or the date hereof will
fairly represent the financial condition, and will accurately set forth in all
material respects the results of the operations, of Landlord for the periods
covered thereby and will be provided to Tenant within ten (10) days after
the completion thereof.
SECTION 1.2.4. Since the date of the Landlord Financials there has not
been any material adverse change in the financial condition (including, but
not limited to, the working capital), business, assets, liabilities or results
of operations of the Facility, whether in the ordinary course of
business or otherwise.
SECTION 1.2.5. Landlord has all material licenses, permits and
authorizations necessary for the lawful ownership and operation of the
Facility ( the "Landlord Licenses"). True and correct copies of the licenses
issued most recently by the applicable health care authority with respect to
the operation of the Facility are attached hereto as Exhibit I. Landlord has
not received written or verbal notice of any action or proceeding which has
been initiated or is proposed to be initiated by the appropriate state or
federal agency having jurisdiction thereof, to either revoke, withdraw or
suspend any of the Landlord Licenses [or to terminate the participation of
the Facility in either the Medicare or Medicaid Programs (to the extent it
participates therein)] or any judicial or administrative agency
judgment or decision not to renew any of the Landlord Licenses or any
licensure or certification action of any other type, which would have a
material adverse effect on the business, assets or financial condition of the
Facility.
SECTION 1.2.6. With respect to the compliance of the Facility with
law:
(a) Set forth in Exhibit J is a list of the most recent licensure or
certification surveys for the Facility, copies of which have been made
available to Tenant as of the date hereof. The Facility and its current
operation and use is in substantial compliance with all applicable
municipal, county, state and federal laws, regulations, ordinances, standards
and orders and with all municipal health, building and zoning by-laws and
regulations (including, without limitation, the building, zoning and life
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safety codes) where the failure to comply therewith would have a material
adverse effect on the business, property, condition (financial or otherwise)
or operation thereof;
(b) Except as set forth in Exhibit K, there are no outstanding cited
deficiencies or written work orders of any authority having jurisdiction over
the Facility requiring conformity to any applicable statute, regulation,
ordinance or bylaw, which have not been corrected as of the date hereof
and all such outstanding deficiencies and work orders will be satisfied by
Landlord prior to the Commencement Date; provided, however, that in the
event said deficiencies or work orders are of a nature that they cannot be
completed prior to the Commencement Date, Tenant shall permit Landlord
such reasonable access to the Facility as he may need to complete the same
and Landlord shall proceed with all due diligence to complete the same as
soon as practicable after the Commencement Date;
(c) Landlord has not received written or, to the best of Landlord's
knowledge, verbal notice from any licensing or certifying agency
supervising or having authority over the Facility requiring it to be reworked
or redesigned or additional furniture, fixtures, equipment or inventory to be
provided thereat so as to conform to or comply with any existing law, code
or standard except where the requirement either (i) has been fully satisfied
prior to the date hereof, (ii) will be satisfied by Landlord prior to the
Commencement Date, (iii) will be in the process of being satisfied in the
ordinary course of Landlord's business pursuant to the terms of a Plan of
Correction or other documentation submitted to and approved by the
appropriate authority or (iv) will be the subject of a valid written waiver
issued by the applicable licensing or certifying agency; and
(d) If and to the extent applicable, Landlord has no knowledge based
on the results of facility surveys or complaint investigations provided
verbally or in writing to the Facility by the applicable supervising agency or
authority that the Facility participating in the Medicare or Medicaid
Programs is not in substantial compliance with all Conditions and Standards
of Participation in the Medicare and Medicaid Programs.
(e) There is no action pending or threatened against the Facility to
revoke or suspend its license or to ban or limit admissions thereto or, to the
extent applicable, to terminate or not renew its participation in the Medicare
or Medicaid Programs.
SECTION 1.2.7. There are no agreements not terminable at will with
residents of the Facility which provide for the provision of the care
routinely provided at said facility for the duration of the resident's stay at
the Facility for no consideration nor will Landlord enter into any such
agreements between the date hereof and the Commencement Date.
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SECTION 1.2.8. All of the books and records of the Facility, including
resident records and patient trust fund records, are true and correct in all
material respects.
SECTION 1.2.9. Landlord has fee title to the Premises free and clear of
all liens, charges and encumbrances other than the liens provided for in Part
II, Section 5.4.
SECTION 1.2.10. There are no union contracts in effect between
Landlord, on the one hand, and the employees of the Facility, on the other
hand. To the best of Landlord's knowledge, none of his employees who are
not currently members of a labor union are actively seeking the formation
of a labor union at the Facility. Landlord is not a party to any labor dispute,
it being agreed that a claim for wrongful termination shall not, for purposes
of this Section 1.2.11 be deemed to be a labor dispute. Landlord is not a
party to any union contracts with respect to the Facility.
SECTION 1.2.11. All tax and other returns, reports and filings of any
kind or nature, required to be filed by Landlord with respect to his
ownership of and operations at the Facility prior to date of execution of this
Agreement have been properly completed and timely filed, or extensions
for the filing thereof have been timely secured, with all such flings being in
material compliance with all applicable requirements and all taxes due with
respect to Landlord have been timely paid, except to the extent that the
same are being duly contested in good faith in accordance with applicable
law and adequate reserves therefor are reflected on the Landlord Financials
or will be reflected in any subsequent financials prepared in accordance
with the representations and warranties contained in this Agreement.
SECTION 1.2.12. Except in accordance, and in compliance, with any
and all applicable local, state and federal governmental laws, regulations
and requirements (collectively, the "Environmental Laws") relating to
environmental and occupational health and safety matters, and hazardous
materials, substances or wastes (as defined from time to time under any
applicable Environmental Laws), Landlord has not released into the
environment or discharged, placed or disposed of any such hazardous
materials, substances or wastes or caused the same to be so released into the
environment or discharged, placed or disposed of at, on or under the
Facility other than to the extent the same will not have a material adverse
affect on the condition, financial or otherwise, of the Premises. With
respect to the Premises to the Landlord's actual knowledge, (i) except to the
extent permitted by applicable Environmental Laws, no hazardous
materials, substances or wastes are located on or at the Premises have been
released into the environment or discharged, placed or disposed of in, on or
under the Premises, (ii) except to the extent permitted by applicable
Environmental Laws, no underground storage tanks are or have been
located at the Premises, (iii) the Premises are not located on property which
was used as a dump for waste material, and (iv) the Premises comply with,
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and at all times during the period of their ownership by Landlord have
complied with, all Environmental Laws, except to the extent in each of the
foregoing clauses (i) through (iv) that any such non-compliance would not
have a material adverse effect on the Facility. Landlord has not received
any written notice from any governmental authority or any written
complaint from any third party with respect to his alleged noncompliance
with, or potential liability under, any Environmental Laws at the Premises
which remains unresolved as of the date hereof. All written environmental
assessments prepared by or on behalf of Landlord regarding hazardous
waste conditions at the Premises which are in the possession of Landlord
have been made available to Tenant.
SECTION 1.2.13. Landlord has duly and properly taken or obtained or
caused to be taken or obtained, or prior to Closing will have duly and
properly taken or obtained or caused to be taken or obtained, all action
necessary for Landlord (i) to enter into and to deliver this Agreement and
any and all documents and agreements executed by Landlord in connection
herewith or in furtherance hereof and (ii) to carry out the terms hereof and
thereof and the transaction contemplated herein and therein. No other action
by or on behalf of Landlord is or will be necessary to authorize the
execution, delivery and performance of this Agreement and any documents
and agreements executed by Landlord in connection herewith or the
transactions contemplated herein. No other action by or on behalf of
Landlord is or will be necessary to authorize the execution, delivery and
performance of this Agreement and any documents and agreements
executed by Landlord in connection herewith or consummation of the
transactions contemplated herein, other than securing those third party
consents and regulatory approvals for which Landlord is responsible under
the terms hereof. Nothing herein shall be construed as a guarantee by
Landlord that it will be able to secure the third party consents or regulatory
approvals for which it is responsible, but rather this paragraph shall be
limited to Landlord's representation and warranty that it will use his best
efforts to secure such third party consents and regulatory approvals.
SECTION 1.2.14. Except as set forth in Exhibit L there is no, nor has
Landlord received written or verbal notice of any, litigation, administrative
investigation or other proceeding pending or, to the best of Landlord's
knowledge based on written notice with respect thereto, threatened by any
governmental authority having jurisdiction over Landlord or the Premises
or by any other party where the amount claimed exceeds $50,000 in any
single action or $100,000 in the aggregate. Landlord is not a party to nor is
Landlord or the Premises bound by any orders, judgments,
injunctions, decrees or settlement agreements under which it may have
continuing obligations as of the date hereof or as of the Commencement
Date and which are likely to materially restrict or affect the present business
operations of the Facility. The right or ability of Landlord to consummate
the transaction contemplated herein has not been challenged by any
governmental agency or any other person and Landlord has no knowledge
of the occurrence of any event which would provide a reasonable basis for
any such litigation, investigation or other proceeding.
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SECTION 1.2.15. Landlord has not (i) made any contributions,
payments or gifts to or for the private use of any governmental official,
employee or agent where either the payment or the purpose
of such contribution, payment or gift is illegal under the laws of the United
States or the jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial
entries on his books, [(iii) given or received any payments or other forms of
remuneration in connection with the referral of residents which would
violate the Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the
Social Security Act, 42 USC Section 1320a-7b(b) or any analogous state
statute) or (iv) made any payments to any person with the intention or
understanding that any part of such payment was to be used for any purpose
other than that described in the documents supporting the payment.
SECTION 1.2.16. The Facility is duly licensed as an adult proprietary
home to operate __ units and , to the extent applicable, is duly certified to
participate in Medicare and Medicaid. The Facility is in good condition and
repair and all of the Personal Property and major mechanical systems
located at or used in connection with the operation of the Facility are in
good working order, condition and repair ordinary wear and tear and
damage due to casualty excepted. The roof of the Facility does not as of the
date hereof leak in any material respect. The Personal Property is all of
the property necessary for the operation of the Facility at its current
occupancy level. There is no action pending, or to the best knowledge of
Landlord, recommended by the appropriate state or federal agencies having
jurisdiction thereof which, if decided adversely to Landlord, would have
a material adverse effect on the Facility, its operations or business.
SECTION 1.2.17. On the Commencement Date, the Facility shall have
an inventory of non-perishable food, central supplies, linens, housekeeping
supplies, kitchen supplies, nursing supplies and other supplies, which will
be sufficient in condition and quantity to operate the Facility at its
normal capacity for a period of two weeks and an inventory or perishable
food at the levels normally maintained by Landlord.
SECTION 1.2.18. Set forth in Exhibit C is a true and complete list of
the trade names under which Landlord is doing business in connection with
his operations at the Facility. Landlord has not sought protection for such
names under state or federal trademark or tradename laws. Landlord has
not received any notice from any person challenging or questioning the
right of Landlord to use any such trade names.
SECTION 1.2.19. Attached hereto as Exhibit M is a true and correct
copy of an exemplar of the forms of rental or admission agreement entered
into by Landlord with each of the current residents of the Facility and each
of the rental or admission agreements entered into by Landlord is in
substantially the form as the exhibit attached hereto. Each of the rental or
admission agreements executed by Landlord with the residents of the
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Facility (the "Leases") is in full force and effect and none of the Leases has
been modified or amended except as set forth in Exhibit M. Landlord is not
in default of any of his obligations under the Leases nor is Landlord aware
of any default or any action which, with the passage of time or the giving of
notice or both would constitute a default under the Leases by any of the
tenants who are parties thereto. On the Commencement Date Landlord shall
deliver to Tenant duly executed assignments of the Leases.
SECTION 1.2.20. Attached hereto as Exhibit N is a true and correct
rent roll as of August 1, 1996 which identifies each of the residents of the
Facility, the monthly rent currently being paid by each such resident or
tenant and the date to which said rent has been paid and, in the event of any
rent delinquencies, an explanation of the reasons therefor and the efforts
being undertaken by Landlord to collect said rent. Landlord shall update the
rent roll on the Commencement Date.
SECTION 1.2.21. Set forth in Exhibit O is a true and correct list of the
operating contracts to which Landlord is a party in connection with his
operations at the Facility (the "Operating Contracts"). Each of the Operating
Contracts is in full force and effect and none of the Operating Contracts has
been modified or amended except as set forth in Exhibit O Landlord is not
in default of any of his obligations under the Operating Contracts nor is
Landlord aware of any default or any action or omission which, with the
passage of time or the giving of notice or both, would constitute a default
under the Operating Contracts by any other party thereto. On the
Commencement Date, Landlord shall deliver to Tenant a duly executed
assignment of any of the Operating Contracts which Tenant elects to
assume pursuant to Part II, Section 3.1.2.
SECTION 1.2.22. No representation or warranty by or on behalf of
Landlord contained in this Agreement, as those representations have been
modified by any written exceptions thereto delivered by Landlord to Tenant
and no statement contained in any certificate, list, exhibit, or other
instrument furnished or to be furnished to Tenant pursuant hereto contains
or will contain any untrue statement material fact, or omits or will omit to
state any material facts which are necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading.
SECTION 1.3. Each party hereby represents, covenants, and warrants
to the other that it has employed no broker or finder in connection with the
transaction contemplated herein. Each party agrees to pay any commission
or finder's fee which may be due on account of the transaction
contemplated herein to any other broker or finder employed by it, and to
indemnify the other party hereto against any claim for any commission or
finder's fee made by any other broker allegedly employed by it and from
and against any and all costs and expenses incurred in connection
therewith, including, but not limited to, reasonable attorneys fees and costs.
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SECTION 2 COVENANTS OF LANDLORD. Landlord covenants
and agrees for the benefit of Tenant as follows:
SECTION 2.1. Between the date hereof and the Commencement Date,
except as contemplated by this Agreement or with the consent of Tenant,
which consent shall not be unreasonably withheld, conditioned or delayed:
SECTION 2.1.1. Landlord will operate the Facility only in the
ordinary course and with due regard to the proper maintenance and repair
of the Real Property and the Personal Property;
SECTION 2.1.2. Landlord will take all reasonable action to preserve
the goodwill and the present occupancy level of the Facility;
SECTION 2.1.3. Except in the ordinary course of business, Landlord
will not make any material change in the operation of the Facility nor sell or
agree to sell any items of machinery, equipment or other fixed assets of the
Facility nor otherwise enter into any agreements materially affecting the
Facility or the operation thereof;
SECTION 2.1.4. Landlord will use his reasonable efforts to retain the
goodwill of the employees of Landlord located at or connected with the
operation of the Facility and will provide Tenant with notice in the event of
any union organizing activities or contract negotiations are commenced
after the date hereof;
SECTION 2.1.5 Except in the ordinary course of business, Landlord
will not increase the compensation or bonuses payable or to become
payable to any of his employees located at or connected with the operation
of the Facility or the Landlord corporate or regional offices or grant
any severance benefits to any such employees other than to the extent such
bonuses or severance payments impose no obligation on Tenant after the
Commencement Date;
SECTION 2.1.6. Landlord will not enter into any written employment
agreements in connection with the operation of the Facility;
SECTION 2.1.7. Landlord will not, except in the ordinary course of
business, enter into any contract or commitment affecting the Premises or
incur any additional indebtedness or amend, extend or renew any current
debt instruments, whether in the ordinary course of business or
otherwise, nor will Landlord declare or pay any dividend or other
distribution with respect to any of the Landlord's assets used in connection
with the operation of the Facility;
SECTION 2.1.8. During normal business hours, Landlord will
provide Tenant and its agents and employees with access on twenty-four
(24) hours notice to the books and records of Landlord and the Facility
provided they do not interfere with the operation thereof;
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SECTION 2.1.9. Landlord will operate the Facility in substantial
compliance with all applicable municipal, county, state and federal laws,
regulations, ordinances, standards and orders as now in effect (including,
without limitation, the building, zoning and life safety codes as currently
applied with respect thereto) where the failure to comply therewith could
have a material adverse effect on the business, property, condition
(financial or otherwise) or operation thereof;
SECTION 2.1.10. Landlord will take all reasonable action to achieve
substantial compliance with any laws, regulations, ordinances, standards
and orders applicable to the Facility which are enacted or issued after
execution of this Agreement and prior to the Commencement Date where
the failure to comply therewith could have a material adverse effect on the
business, property, condition (financial or otherwise) or operation thereof;
SECTION 2.1.11. Landlord will maintain the Premises in substantially
the same condition as they were in at the date hereof, ordinary wear and
tear, insured casualty loss and taking by eminent domain excepted;
SECTION 2.1.12. Landlord will provide Tenant with copies of
monthly financial statements prepared in the ordinary course of business;
SECTION 2.1.13. Landlord will provide Tenant with copies of all
licensure or certification surveys received by Landlord and the related Plans
of Correction prepared by Landlord;
SECTION 2.1.14. Landlord will pay as and when due the accounts
payable which arise in the ordinary course of business, except to the extent
that the amount owing is being duly contested by Landlord and such contest
does not materially affect Landlord or the Facility;
SECTION 2.1.15. As soon as practicable after the date hereof but in
no event later than October 1, 1996, Landlord will deliver to Tenant (i) a
UCC-1 search report in the name of Landlord and the Facility conducted at
the state and county level, (ii) at Tenant's expense, a title insurance
commitment for the Premises with a value equal to the present value of the
aggregate rent due hereunder during the Initial Term and each Renewal
Term (the "Title Commitment") and (iii) copies of any existing survey maps
for the Premises (the "Survey");
SECTION 2.1.16. Within five (5) days after Landlord's receipt of
Tenant's title, UCC search and survey objections pursuant to Part II, Section
3.1.1, Landlord shall advise Tenant whether it intends to correct the defects
to which Tenant has objected.
SECTION 2.1.17. Landlord will maintain in force the existing
insurance coverage with respect to the Facility;
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SECTION 2.1.18. Landlord will file all returns, reports and filings of
any kind or nature, or to secure timely extensions for the filing thereof,
required to be filed by Landlord [including, but not limited to, state and
federal tax returns and Medicare and Medicaid cost reports with respect to
the Facility] and will timely pay all taxes or other obligations which are due
and payable with respect thereto, except to the extent that the same are
being duly contested in good faith in accordance with applicable law and
such contest does not materially affect Landlord or the Premises;
SECTION 2.1.19. Landlord will use reasonable efforts to cause all of
the conditions set forth in Part II, Sections 5 and 6 which are within
Landlord's control to be satisfied and Landlord will not take any action
inconsistent with its obligations under this Agreement or which could
hinder or delay the consummation of the transaction contemplated by this
Agreement or which is intended to cause any representation, warranty or
covenant made by Landlord in this Agreement or in any certificate,
list, exhibit, or other instrument furnished or to be furnished pursuant
hereto, or in connection with the transaction contemplated hereby, to be
untrue in any material respect as of the Commencement Date;
SECTION 2.1.20. Neither Landlord nor any of his advisors or others
authorized to act on his behalf shall directly initiate or solicit discussions
relating to any alternative acquisition proposal or similar transaction
including, without limitation, a merger or other business combination
involving Landlord or the Premises or any part thereof, or offer to acquire
or convey in any manner, directly or indirectly, all or substantially all of the
equity interests in Landlord or the Premises; provided, however, that public
announcements of the transaction contemplated by this Agreement shall not
be prohibited hereby;
SECTION 2.1.21. Landlord will provide to Tenant copies of all
material documents which relate to, and, upon request, with verbal or
written updates concerning the status of, any litigation filed as of the date
hereof or filed from and after the date hereof by or against Landlord after
the date of this Agreement but prior to the Commencement Date where the
amount claimed or assessed by management of Landlord as likely to be
claimed exceeds $500,000;
SECTION 2.1.22. Landlord will not agree to do or to cause to be done
any of the acts which it has covenanted not to do under this Part II, Section
2.1 ; and
SECTION 2.1.23. Landlord will proceed with all due diligence to
secure the regulatory approvals and third party consents for which it is
responsible under the terms hereof.
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SECTION 2.2. On the Commencement Date, Landlord will deliver to
Tenant the following:
SECTION 2.2.1. The Resident Deposits (as defined in Part II, Section
7.2);
SECTION 2.2.2. The Benefits Schedule (as defined in Part II, Section
7.1 );
SECTION 2.2.3. The Premises in good condition and repair, ordinary
wear and tear excepted;
SECTION 2.2.4. The Vacation Pay to Tenant in accordance with the
provisions of Part II, Section 7.1;
SECTION 2.2.5. A certificate of Landlord dated as of the
Commencement Date, certifying in such detail as Tenant may reasonably
specify the fulfillment of the conditions set forth in Part II, Section 5.2;
SECTION 2.2.6. A duly executed Assignment of the Operating
Contracts described in Part II, Section 1.2.22 to the extent Tenant elects to
assume the same in accordance with the provisions of Part II, Section 3.1.2,
which shall be in substantially the form attached hereto as Exhibit P (the
"Operating Contract Assignment Agreement");
SECTION 2.2.7. A duly executed Assignment of the Leases, which
Assignment shall include an assignment of all of Landlord's right, title and
interest in and to any resident deposits or security deposits being held by
Landlord under the terms thereof and shall be in substantially the form
attached hereto as Exhibit Q (the "Lease Assignment Agreement"); and
SECTION 2.2.8. The Title Insurance Policy (as defined in Part II,
Section 5.4).
SECTION 2.3. From and after the Commencement Date, Landlord
shall:
SECTION 2.3.1. Cooperate with Tenant in the event it is required to
include audited financial statements with respect to the Facility in its filings
with the United States Securities and Exchange Commission; and
SECTION 2.3.2. Take such actions and properly execute and delivery
to Tenant such further instruments of assignment, conveyance and transfer
as, in the reasonable opinion of counsel for Tenant and Landlord, may be
reasonably necessary to assure, complete an evidence the transaction
provided for herein.
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SECTION 3. TENANT'S COVENANTS. Tenant covenants and agrees
with Landlord as follows:
SECTION 3.1. Between the date hereof and the Commencement Date,
except as contemplated by this Agreement or with the consent of Landlord,
which consent shall not be unreasonably withheld, conditioned or delayed:
SECTION 3.1.1. Within ten ( 10) days after its receipt of the Title
Commitment and the Survey and within ten (10) days after its receipt of the
UCC search report, Tenant shall advise Landlord in writing of its
objections, if any, to the Title Commitment and Survey and the UCC search
report, respectively. If Landlord refuses to correct some or all of the title,
survey or lien defects objected to by Tenant or to give Tenant reasonable
assurances that the same will be corrected as of the Commencement Date,
Tenant shall have ten ( 10) days to advise Landlord of its decision to close,
notwithstanding the defects, or of its election to terminate this Agreement,
in which case neither party shall have any further rights or obligations
hereunder. Any matter reflected on the Title Commitment or Survey and
not objected to by Tenant in accordance with the terms hereof, shall be
deemed accepted by Tenant;
SECTION 3.1.2. Within fifteen (15) days after the date hereof, Tenant
will advise Landlord in writing which, if any of the Operating Contracts it
elects to assume as of the Commencement Date;
SECTION 3.1.3. Tenant will proceed with all due diligence to obtain
any third party consents and regulatory approvals for which it is responsible
under the terms hereof and/or which it is otherwise required to obtain for its
operation of the Premises as a proprietary home for adults.
SECTION 3.1.4. Unless specifically prohibited by law, Tenant will use
its best efforts to cause all of the conditions set forth in Part II, Sections 5
and 6 which are within its control to be satisfied and Tenant will not take
any action inconsistent with its obligations under this Agreement or which
could hinder or delay the consummation of the transaction contemplated by
this Agreement or which is intended to cause any representation, warranty
or covenant made by Tenant in this Agreement or in any certificate, list,
exhibit, or other instrument furnished or to be furnished pursuant hereto, or
in connection with the transaction contemplated hereby, to be untrue in any
material respect as of the Commencement Date; and
SECTION 3.1.5. Tenant will not agree to do or to cause to be done any
of the acts which it has covenanted not to do under this Part II, Section 3.
SECTION 3.2. On the Commencement Date, Tenant will deliver to
Landlord the following documents:
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SECTION 3.2.1. A certificate of a responsible partner of Tenant dated
as of the Commencement Date certifying on behalf of Tenant in such detail
as Landlord may reasonably specify the fulfillment of the condition set
forth in Part II, Section 6.2;
SECTION 3.2.2. The executed Operating Contract Assignment
Agreement.
SECTION 3.2.3. The executed Lease Assignment Agreement.
SECTION 3.2.4. The executed Guaranty (as hereinafter defined).
SECTION 3.3. After the Commencement Date, Tenant will:
SECTION 3.3.1. Provide Landlord with access during normal business
hours to any books or records which Landlord may need to file or to defend
tax returns or other filings filed prior to or subsequent to the
Commencement Date which relate to the period prior to the
Commencement Date; and
SECTION 3.3.2 Take such actions and properly execute and delivery
such further instruments as Landlord may reasonably request to assure,
complete and evidence the transaction provided for in this Agreement.
SECTION 4. MUTUAL COVENANTS. Following the execution of
this Agreement, Landlord and Tenant agree:
SECTION 4.1. If any event should occur, either within or without the
knowledge or control of any party, which would prevent fulfillment of the
conditions to the obligations of any party hereto to consummate the
transactions contemplated by this Agreement, to use his, its or their
reasonable efforts to cure the same as expeditiously as possible;
SECTION 4.2. To cooperate fully with each other in preparing, fling,
prosecuting, and taking any other actions which are or may be reasonable
and necessary to obtain the consent of any governmental instrumentality or
any third party, to accomplish the transactions contemplated by this
Agreement;
SECTION 4.3. To deliver such other instruments of title, certificates,
consents, endorsements, assignments, assumptions and other documents or
instruments, in form reasonably acceptable to the party requesting the same
and his/its counsel, as may be reasonably necessary to carry out and/or to
comply with the terms of this Agreement and the transactions contemplated
herein;
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SECTION 4.4. To confer on a regular basis with the other, report on
material operational matters and promptly advise the other orally and in
writing of any change or event having, or which, insofar as can reasonably
be foreseen could have, a material adverse effect on such party or which
would cause or constitute a material breach of any of the representations,
warranties or covenants of such party contained herein;
SECTION 4.5. To promptly provide the other (or his/its counsel) with
copies of all other filings made by such party with any state or federal
governmental entity in connection with this Agreement or the transactions
contemplated hereby;
SECTION 4.6. Each of Tenant and Landlord will use his/its best
efforts to obtain prior to the Commencement Date all consents, approvals
and licenses necessary to permit the consummation of the transactions
contemplated by this Agreement, including, but not limited to, such
licensure and certification approval as may be necessary to enable Tenant to
lawfully own and/or operate the Facility from and after the Commencement
Date and the consent of his/its lenders, lessors and other third parties to the
extent required under any loan documents, lease agreements, management
agreements or other instruments to which it is a party.
SECTION 4.7. The parties shall consult with each other prior to the
issuance by either party of any press release or any written statement with
respect to this Agreement or the transactions contemplated hereby.
SECTION 5. TENANT'S CONDITIONS TO EFFECTIVENESS OF
LEASE. The commencement of the term of this Lease on the
Commencement Date shall be subject to the satisfaction, by said
Commencement Date, of the following conditions to the reasonable
satisfaction of Tenant, any or all of which may be waived by Tenant in
writing:
SECTION 5.1. Tenant shall have received all third party consents and
regulatory approvals, including but not limited to, all licenses necessary to
operate the Facility subject to no conditions not acceptable to Tenant, and
shall have satisfied any and all conditions to the effectiveness thereof.
SECTION 5.2. All of the representations and warranties of Landlord
set forth herein shall be true and correct as of the Commencement Date in
all material respects and Landlord shall have performed as of the
Commencement Date all of his obligations hereunder which it is required to
perform as of said date.
SECTION 5.3. Tenant shall be satisfied that the zoning of the Facility
permits it to be operated as currently operated and imposes no conditions
which would limit the right or ability of Tenant to rebuild or repair the same
in the event of any damage or destruction thereto.
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SECTION 5.4. A title insurance policy providing for extended
leasehold coverage shall have been issued to Tenant with respect to the
Premises subject only to the following exceptions: (i) the lien for taxes
which are not yet due and payable and (ii) covenants, easements and
restrictions of record, provided the improvements do not encroach upon any
easement or such covenants, easements and restrictions of record do not
adversely affect Tenant's ability to operate the Facility as a proprietary
home for adults, (iii) liens and encumbrances created by the Facility
Mortgage, and (iv) such other liens and encumbrances of record as may be
reasonably approved by Tenant, it being understood and agreed that the
parties in possession and mechanics lien exceptions shall not be
approved by Tenant (the "Title Policy").
SECTION 5.5. Tenant shall be satisfied with the Survey of the
Premises.
SECTION 5.6. Tenant shall be satisfied with the results of the UCC
Search.
SECTION 5.7. Tenant shall be satisfied with the results of its due
diligence investigation of Landlord and the Premises, which investigation
shall include, but not be limited to, a review of (I) the books and records of
Landlord related to the Facility, (ii) the books and records of the Facility,
including records relating to escrow accounts, accounts payable, leases or
occupancy agreements in effect with the residents of the Facility, operating
statements for the prior three (3) years, rent rolls for the prior three (3)
years, operating contracts with vendors and other third parties providing
goods and services to the Facility, (iii) any MAI appraisals of the Premises
in the possession of Landlord, (iv) a structural inspection of the Premises
conducted by an engineer retained by Tenant and (v) any seismic
assessments, wetlands and soils reports in Landlord's possession and
delivered to Tenant or otherwise acquired by Tenant at its own cost and
expense.
SECTION 5.8. Tenant shall be satisfied with the results of any Phase I
Report which Tenant elects to obtain prior to the Commencement Date.
SECTION 5.9. Landlord shall not be in default with respect to the
Leases or any of the Operating Contracts assumed by Tenant.
SECTION 5.10. The Premises shall not have been damaged or
destroyed nor taken by condemnation or eminent domain proceeds nor
subject to any pending condemnation action or eminent domain proceeding.
SECTION 5.11. The refinancing of the Facility debt shall have been
completed on terms acceptable to Landlord and its lender.
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SECTION 5.12. Landlord and Tenant shall have entered into Lease
Agreements in substantially the same form as this Lease Agreement with
respect to those proprietary homes for adults listed in Exhibit R (the
"Related Facilities") and the term of each of such leases shall have
commenced, except in the case of the Perinton Park facility, where the term
may commence after the Commencement Date hereof if the construction of
such facility has not been completed as of the Commencement Date hereof.
SECTION 6. LANDLORD'S CONDITIONS TO EFFECTIVENESS.
The commencement of the term of this Lease on the Commencement Date
shall be subject to the satisfaction of the following conditions to the
reasonable satisfaction of Landlord, any or all of which may be waived by
Landlord in writing:
SECTION 6.1. Landlord shall have received all third party consents
and regulatory approvals necessary for Landlord to lawfully lease the
Premises to Tenant.
SECTION 6.2. All of the representations and warranties of Tenant set
forth herein shall be true and correct as of the Commencement Date in all
material respects and Tenant shall have performed as of the
Commencement Date all of its obligations hereunder which it is required to
perform as of said date.
SECTION 6.3. Tenant shall have received all third party consents and
regulatory approvals, including, but not limited to, all licenses necessary to
operate the Facility and shall have satisfied any and all conditions to the
effectiveness thereof.
SECTION 6.4. Landlord shall have received from Emeritus a duly
executed Guaranty in substantially the same form as that attached hereto as
Exhibit S (the "Guaranty").
SECTION 6.5. The refinancing of the Facility debt shall have been
completed on terms acceptable to Landlord.
SECTION 6.6. Landlord and Tenant shall have entered into Lease
Agreements in substantially the same form as this Lease Agreement with
respect to the Related Facilities and the term of each of such leases shall
have commenced.
SECTION 7. TRANSITIONAL ISSUES.
SECTION 7.1. On the Commencement Date, Landlord shall deliver to
Tenant a schedule which reflects all earned and accrued vacation, holiday
and sick pay and retirement and severance benefits and earned bonuses due
to and/or coming due to the employees of the Facility as of or subsequent
to the Closing Date (the "Benefits Schedule"): On the Commencement
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Date, Landlord shall deliver to Tenant the amount reflected on the Benefits
Schedule (the "Vacation Pay") and Tenant shall agree from and after the
Commencement Date, to pay said benefits to the employees of the Facility
as and when due in accordance with Landlord's personnel policies prior to
the Commencement Date and Tenant's personnel policies from and after the
Commencement Date.
SECTION 7.2. On the Commencement Date Landlord shall provide
Tenant with an accounting of all Facility resident deposits or prepayments
(the "Resident Deposits") and resident trust funds (the "Resident Trust
Funds") being held by Landlord as of the Commencement Date.
Such accounting shall set forth the names of the residents or prospective
residents and tenants or prospective tenants for whom such funds are held,
the amounts held on behalf of each such resident or prospective resident or
tenant or prospective tenant and the Landlord's warranty that the
accounting is true, correct and complete.
SECTION 7.3. Notwithstanding the foregoing, Landlord will
indemnify and hold Tenant harmless from all liabilities, claims and
demands in the event the amount of the Resident Deposits and Resident
Trust Funds transferred to the Tenant's bank account as provided in Section
7.2 did not represent the full amount of such Resident Deposits and
Resident Trust Funds then or thereafter shown to have been delivered to
Landlord by the current residents or prospective residents of the
SECTION 7.4. Accounts Receivable related to services rendered at the
Facility shall be handled as follows:
SECTION 7.4.1. All cash, checks and cash equivalents at the Premises
and deposits in bank accounts (other than Resident Deposits and Resident
Trust Funds) relating to the Premises on the Commencement Date shall
remain Landlord's property after the Commencement Date. All accounts
receivable, loans receivable and other receivables of Landlord, whether
derived from operation of the Premises or otherwise, shall remain the
properly of Landlord after the Commencement Date. Landlord shall retain
full responsibility for the collection thereof.
SECTION 7.4.2. Tenant shall assume responsibility for the billing and
collection of payment on account of services rendered by it on and after the
Commencement Date.
SECTION 7.4.3. In order to facilitate Landlord's collection efforts,
Landlord agrees to deliver to Tenant, within a reasonable time after the
Commencement Date, a schedule identifying all of those balances owing
from the residents of the Facility for the month prior to the Commencement
Date and Tenant agrees to apply any payments received which are
specifically designated as being applicable to services rendered prior to the
Commencement Date to reduce the pre-Commencement Date balances of
said residents and tenants by promptly remitting said payments to Landlord.
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In the even payments specifically indicate that they relate to services
rendered after the Commencement Date in the case of the Facility, such
payments shall be retained by Tenant. In the event no designation is made,
such payments shall first be applied to Tenant's current accounts receivable
with the balance applied to Landlord's accounts receivable.
SECTION 7.4.4. Tenant shall cooperate with Landlord in Landlord's
collection of his pre-Commencement Date accounts receivable. Tenant shall
have no liability for uncollectible receivables and shall not be obligated to
bear any expense as a result of such activities on behalf of Landlord. If and
to the extent applicable, Tenant shall remit to Landlord those portions of
any payments received by Tenant which are specifically designated as
repayment or reimbursement received by Landlord arising out of cost
reports filed for the cost reporting periods ending on or prior
to the Commencement Date.
SECTION 7.4.5. With respect to residents in the Premises on the
Commencement Date receiving payments from Medicare, Medicaid or any
other third party payor, Landlord and Tenant
agrees as follows:
(a) With respect to Medicare and Medicaid residents, If any, Landlord
and Tenant agree that payment for in-house residents covered by Medicare
or Medicaid on the Commencement Date will, under current regulations, be
paid by Medicare or Medicaid directly to Landlord for services rendered at
the Premises prior to the Commencement Date allocated on the per diem
basis. Said payments shall be the sole responsibility of Landlord and, except
as provided in Section 7. 5(b), Tenant shall in no way be liable therefor.
After the Commencement Date, Landlord and Tenant shall each have the
right to review supporting books, records and documentation that are in the
possession of the other relating to Medicare or Medicaid payments.
(b) If, following the Commencement Date, Tenant receives payment
from any state or federal agency or third-party payor which represents
reimbursement with respect to services provided at the Premises prior to the
Commencement Date, including payments arising from rate adjustments
occurring after the Commencement Date, Tenant agrees that it shall remit
such payments to Landlord. Payments by Tenant to Landlord shall be
accompanied by a copy of the appropriate remittance advices.
(c) If, following the Commencement Date, Landlord receives payment
from any state or federal agency or third-party payor which represents
reimbursement with respect to services provided at the Premises after the
Commencement Date, including payments arising from rate adjustments
occurring after the Commencement Date, Landlord agrees that it shall remit
such payments to Tenant. Payments by Landlord to Tenant shall be
accompanied by a copy of the appropriate remittance advices.
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SECTION 8. TERMINATION.
SECTION 8.1. This Agreement may be terminated by Tenant or
Landlord prior to the Commencement Date upon the following conditions:
(a) By mutual consent of the parties;
(b) By Tenant if the conditions set forth in Part II, Section 5 have not
been satisfied or waived by the Outside Commencement Date;
(c) By Landlord if the conditions set forth in Part II, Section 6 have not
been satisfied or waived by the Outside Commencement Date; and
(d) By either party if the Lease Term has not commenced by December 1,
1996 (the "Outside Commencement Date"); provided, however, that in the
event all of the conditions to the effectiveness of this Lease have been
satisfied or waived by the Outside Commencement Date, other than the
receipt by Tenant of a license and such other regulatory approvals as it may
need to operate the Facility under New York law, provided, Tenant is
diligently pursuing the issuance of such licensure and related approvals, the
Outside Commencement Date shall automatically be extended for up to an
additional sixty (60) days in order to permit Tenant additional time to
secure the same.
SECTION 8.2. Neither party to this Agreement may claim termination
or pursue any other remedy referred to in Section 8.1 on account of a
breach of a condition, covenant or warranty by the other, without first given
such other party written notice of such breach and not less than ten ( 10)
days within which to cure such breach. The Commencement Date shall be
postponed if necessary to afford such opportunity to cure provided,
however, in no event shall it be postponed beyond the Outside
Commencement Date.
SECTION 8.3. In the event of the termination of this Agreement by
Landlord under either Section 8.1 (c) or Section 8.1 (d) where, in either
case the term has failed to commence as a result of a material breach by
Tenant of its obligations hereunder, Landlord shall be entitled to terminate
this Agreement and sue to recover any damages suffered by it as a result of
said breach.
SECTION 8.4. In the event of the termination of this Agreement by
Tenant under either Section 8.1 (b) or Section 8.1 (d) where, in either case
the term has failed to commence as a result of a material breach by
Landlord of his obligations hereunder, Tenant shall have the right either (A)
to seek specific performance of Landlord's obligations hereunder or (B) to
terminate this Agreement and sue to recover any damages suffered by it as a
result of said breach.
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SECTION 8.5. In the event of the termination of this Agreement
pursuant to Section 8.1 (a) neither party shall have any further rights or
obligations hereunder.
SECTION 9. INDEMNIFICATION
SECTION 9.1. Landlord shall indemnify and hold Tenant harmless
from and against:
SECTION 9.1.1. Except as otherwise provided in this Agreement, any
and all obligations relating to the ownership and the operation of the
Premises which exist at the Commencement Date, including, but not limited
to, any obligations under the Operating Contracts which Tenant elects to
assume as of the Commencement Date;
SECTION 9.1.2. Any and all damage, loss or liability arising from and
after the Commencement Date under any of the Operating Contracts which
Tenant does not elect to assume as of the Commencement Date;
SECTION 9.1.3. Any and all damage, loss or liability resulting from
any misrepresentation of a material fact, breach of warranty or
nonfulfillment of any agreement on the part of Landlord under this
Agreement or from any misrepresentations in any certificate furnished or to
be furnished to Tenant hereunder;
SECTION 9.1.4. Any and all liability or loss arising out of or relating
to any failure in connection with the transaction contemplated herein to
comply with the requirements of any laws or regulations relating to bulk
sales or transfers;
SECTION 9.1.5. Any and all liability or loss resulting from the
bankruptcy of Landlord or the foreclosure of any liens related to the
Premises prior to the Commencement Date; and
SECTION 9.1.6. Any and all actions, suits, proceedings, demands,
assessments, judgments, reasonable costs and other reasonable expenses,
including, but not limited to, reasonable attorney's fees, incident to the
foregoing.
SECTION 9.1.7. Notwithstanding the foregoing, Landlord shall have
no obligation to provide indemnification pursuant to this Section 9, except
to the extent the aggregate amount of indemnification to which Tenant, but
for this Section 9.1.7, otherwise shall have become entitled shall exceed
$10,000, at which time Landlord shall be obligated to indemnify Tenant for
any and all amounts to which it is entitled under the terms hereof and not
merely for those amounts in excess of $10,000.
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For purposes of Section 9.1.1, an obligation shall be deemed to "exist"
as of the Commencement Date if it relates to events which occurred prior to
the Commencement Date even if it is not asserted until after the
Commencement Date.
SECTION 9.2. Tenant shall indemnify and hold Landlord harmless
from and against:
SECTION 9.2.1. Except as otherwise provided in this Agreement, any
and all obligations relating to the leasing of the Premises and the operation
of the Facility from and after the Commencement Date, including, but not
limited to, any obligations under the Operating Contracts which Tenant
elects to assume as of the Commencement Date;
SECTION 9.2.2. Any and all damage, loss or liability resulting from
any misrepresentation of a material fact, breach of warranty or
nonfulfillment of any agreement on the part of Tenant under this
Agreement or from any misrepresentations in any certificate furnished or to
be furnished to Landlord hereunder;
SECTION 9.2.3. Any and all actions, suits, proceedings, demands,
assessments, judgments, reasonable costs and other reasonable expenses,
including, but not limited to, reasonable attorney's fees, incident to the
foregoing.
SECTION 9.2.4. Notwithstanding the foregoing, Tenant shall have no
obligation to provide indemnification pursuant to this Section 9, except to
the extent the aggregate amount of indemnification to which Landlord. but
for this Section 92.4. otherwise shall have become entitled shall exceed
$10,000, at which time Tenant shall be obligated to indemnify Landlord for
any and all amounts to which it is entitled under the terms hereof and not
merely for those amounts in excess of $l0,000.
PART III
SECTION 1. MISCELLANEOUS.
SECTION 1.1. The captions in this Lease are for convenience of
reference only. In no way do those captions define, limit or describe the
scope or intent of this Lease.
SECTION 1.2. Words showing number shall be taken to include both
the singular and the plural forms. Words showing gender shall be taken to
include masculine, feminine and neuter.
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SECTION 1.3. Subject to the restrictions on transfers set forth herein,
this Lease shall inure to the benefit of and be binding upon Landlord and
Tenant and their respective successors and assigns. The definition of
"Landlord" and "Tenant" herein refer to the Landlord and Tenant at the
time in question.
SECTION 1.4. This Lease shall be governed, construed, and enforced
in accordance with the laws of the State of New York.
SECTION 1.5. This Lease represents the entirety of the agreement
among the parties hereto shall be deemed to supersede any prior discussions
or agreements among the parties hereto. This Lease may not be amended or
modified except by written instrument signed by the parties hereto.
Each of Landlord and Tenant agree to enter into such amendments to this
Lease as may be requested by Fleet Bank in connection with the financing
referenced in Part II, Section 6.5.
SECTION 1.6. The failure of either party to insist upon strict
performance of any of the covenants, agreements, terms and conditions of
this Lease in any one or more instances shall not be construed as a waiver
or relinquishment of any such covenant, agreement, terms, or condition and
the same shall remain in full force and effect.
SECTION 1.7. In the event either party brings an action to enforce any
of the terms hereof or in connection herewith, the prevailing party in such
action shall be entitled to and the losing party agrees to pay the reasonable
attorneys' fees and expenses, including attorneys' fees and expenses of
appellate proceedings, of the prevailing party.
SECTION 1.8. Landlord and Tenant shall execute a Memorandum of
this Lease in a form acceptable to Landlord and Tenant. The Memorandum
shall be recorded in the public records of Monroe County, New York.
Landlord and Tenant shall share the cost of recording.
SECTION 1. 9. Each term and provision of this Lease shall be enforced
to the fullest extent permitted by law. Should any term or provision of this
Lease, or the application thereof, prove illegal or unenforceable, the
remainder of this Lease shall still be valid and enforced.
SECTION 1.10. Landlord and Tenant each represent to the other that
there are no claims for brokerage or other commissions or finder's or other
similar fees in connection with the transactions contemplated by this Lease
insofar as such claims shall be based on arrangements or agreements
made by or on behalf of the party so representing.
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SECTION 1.11. Neither this Lease nor any provision hereof may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the parties hereto and approved in writing
by Landlord's Mortgagee if required under the terms of the Facility
mortgage.
SECTION 1.12. This Lease may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall comprise but a single instrument.
SECTION 1.13. No provision of this Lease shall be construed against
or interpreted to the disadvantage of either Landlord or Tenant by any court
or other governmental or judicial authority by reason of such party's having
or being deemed to have structured, written, drafted or dictated such
provisions.
SECTION 1.14. Time is of the essence of this Lease.
SECTION 1.15. Nothing in this Lease shall be construed to render or
constitute Landlord in any way or for any purpose a partner, joint venturer
or associate in any relationship with Tenant other than that as Landlord and
Tenant, nor shall this Lease be construed to authorize either party to act
as agent for the other party except as expressly provided to the contrary in
this Lease.
SECTION 1.16. All notices provided for in this Lease or related to this
Lease shall be in writing and shall be delivered to the parties at the
addresses set forth below. All such notices or other papers or instruments
related to this Lease shall be deemed sufficiently served or delivered on
the date of receipt or refusal of delivery, provided that they are sent by
United States Registered or Certified Mail, postage prepaid return receipt
requested, by hand delivery, by overnight courier or by facsimile
transmission:
To Landlord: Philip R. Wegman
550 Latona Road, Building A
Rochester, New York 14626-2730
Telephone: 716-225-7370
Facsimile: 716-225-0887
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To Tenant: Painted Post Partners
3131 Elliott Avenue
Suite 500
Seattle, WA 98121
Attention: Mr. Raymond Brandstrom
Telephone: 206-298-2909
Facsimile: 206-301-4500
Both Landlord and Tenant may change the address or the name of the
addressee applicable
to subsequent notices by giving notice as provided above.
IN WITNESS WHEREOF, the parties hereby execute this Lease
Agreement on the day and
first written above.
LANDLORD : PHILIP R. WEGMAN
/s/ Philip R. Wegman
----------------------------
TENANT: PAINTED POST PARTNERS,
a Washington general partnership
By:
-------------------------------------
Raymond Brandstrom, Partner
By:
-----------------------------
Daniel R. Baty, Partner
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To Tenant: Painted Post Partners
3131 Elliott Avenue
Suite 500
Seattle, WA 98121
Attention: Mr. Raymond Brandstrom
Telephone: 206-298-2909
Facsimile: 206-301-4500
Both Landlord and Tenant may change the address or the name of the
addressee applicable
to subsequent notices by giving notice as provided above.
IN WITNESS WHEREOF, the parties hereby execute this Lease
Agreement on the day and
first written above.
LANDLORD : PHILIP R. WEGMAN
----------------------------
TENANT: PAINTED POST PARTNERS,
a Washington general partnership
By: /s/ Raymond R. Brandstom
-------------------------------------
Raymond Brandstrom, Partner
By:/s/ Daniel R. Baty
-----------------------------
Daniel R. Baty, Partner
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AGREEMENT TO PROVIDE ADMINISTRATIVE SERVICES
TO ADULT HOMES
<PAGE>
AGREEMENT TO PROVIDE ADMINISTRATIVE
SERVICES TO ADULT HOMES
This Agreement made this 2nd day of Sept., 1996, between Emeritus
Corporation, a Washington corporation (hereinafter referred to as
"Emeritus"), and Painted Post Partners, a Washington general partnership
(hereinafter collectively referred to as "Operator").
WHEREAS, Operator has agreed to lease those assisted living facilities
located in the State of New York and more fully described in Exhibit A (the
"Facilities");
WHEREAS, Operator wants someone to assist it with the day to day
operation of the Facilities once its lease of the Facilities is effective;
WHEREAS, Emeritus is experienced and qualified in the field of
operating assisted living
WHEREAS, Operator has determined that Emeritus's price is
economical in light of the range of services which it provides; and
WHEREAS, Emeritus is willing to assist Operator with its day to day
operation of the Facilities, pursuant to the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the foregoing premises and
the mutual covenants herein contained, IT IS AGREED AS FOLLOWS:
I. RESPONSIBILITIES OF EMERITUS: Operator hereby engages
Emeritus and Emeritus hereby accepts such engagement and agrees to
provide administrative and consulting services to Operator in connection
with the operation of the Facilities, upon the terms and conditions set forth
in this Agreement. By entering into this Agreement, Operator does not
delegate to Emeritus any powers, duties or responsibilities which it is
prohibited by law from delegating. Operator also retains such
other authority as shall not have been expressly delegated to Emeritus
pursuant to this Agreement. Subject to the foregoing, Emeritus shall
provide the following services all of which shall be subject
to the review and approval of Operator:
A. OPERATIONAL POLICIES AND FORMS: Emeritus shall
implement operational policies and procedures and develop such new
policies and procedures as it deems necessary to insure the establishment
and maintenance of operational standards appropriate for the nature of the
Facilities.
B. CHARGES: Emeritus shall establish the schedules of
recommended charges, including any and all special charges for services
rendered to the patients at the Facilities.
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C. INFORMATION: Emeritus shall develop any informational
material, mass media releases, and other related publicity materials, which
it deems necessary for the operation of the Facilities.
D. REGULATORY COMPLIANCE: Emeritus, with the assistance
of Operator if requested by Emeritus, shall use its best efforts to assist
Operator to maintain all licenses, permits, qualifications and approvals from
any applicable governmental or regulatory authority for the operation of the
Facilities, shall assist Operator with respect to the operation of the
Facilities in full compliance with all applicable laws and regulations and shall
comply with all such laws and regulations in performing its obligations under
this Agreement; provided, however, that nothing herein shall be construed as
relieving Operator, as the licensed operator of the Facilities, from
liability in the event that the operations at the Facilities fail to comply with
applicable law.
E. EQUIPMENT AND IMPROVEMENTS: Emeritus shall advise
Operator as to equipment and improvements which are needed to maintain
or upgrade the quality of the Facilities and said equipment, to replace
obsolete or run-down equipment or to correct any other survey
deficiencies which may be cited during the term of this Agreement.
Operator shall review and act upon Emeritus's recommendations as
expeditiously as reasonably possible. Emeritus shall not be
liable for any cost or liability which Operator may incur in the event
Operator disregards Emeritus's recommendations. Emeritus shall make all
necessary and approved repairs, replacements and maintenance and shall
acquire all necessary equipment, including replacement equipment;
provided, however, that the same shall be within the budgetary limits set
forth in the annual capital budget prepared by Emeritus pursuant to
Paragraph L and, in the case of repairs and maintenance, shall be
undertaken in a workmanlike and lien free manner.
F. ACCOUNTING: Emeritus shall provide home office and
accounting support to the Facilities. All accounting procedures and systems
utilized in providing said support shall be in accordance with the operating
capital and cash programs developed by Emeritus, which programs
shall conform to generally accepted accounting principles and shall not
materially distort income or loss. In addition, Emeritus shall prepare or
cause to be prepared all tax returns, including payroll tax returns and shall
cause all local, state and federal taxes to be timely paid or contested, as
appropriate. Any out of pocket costs incurred by Emeritus in preparing
such returns shall not be included in Emeritus's fee, but shall be separately
reimbursed from the revenues of the Facilities. The taxes shall
be deemed to be operating expenses of the Facilities and shall be paid out of
the revenues of the Facilities. Nothing herein shall preclude Emeritus from
delegating to a third party a portion of the accounting duties provided for in
this section; provided, that such delegation shall not relieve Emeritus from
ultimate liability for the timely and complete performance of the obligations
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provided for herein. Nothing herein shall be construed as delegating to
Emeritus responsibility for the maintenance of the books and records of the
Facilities which is and shall remain the obligation of
Operator.
G. REPORTS: Emeritus shall prepare and provide to the Operator
any reasonable operational information which may from time to time be
specifically requested by Operator, including any information needed to
assist Operator in completing its tax returns and in complying with any
reporting obligations imposed by any mortgagees or lessors. In addition, (i)
within thirty (30) days after the end of each calendar month, Emeritus shall
provide Operator with an unaudited balance sheet of each of the Facilities,
dated the last day of such month, and an unaudited statement
of income and expenses for such month relating to the operation of each of
the Facilities and (ii) within ninety (90) days after the end of the fiscal year
of the Facilities, Emeritus shall provide Operator with unaudited financial
statements including a balance sheet of each of the Facilities,
dated the last day of said fiscal year, and a statement of income and expense
for the year then ended relating to the operation of each of the Facilities.
H. BANK ACCOUNTS: Emeritus shall establish a new checking
account in the name of each of the Facilities and shall deposit therein all
money received during the term of this Agreement in the course of the
operation of each such Facility. Withdrawals and payments from this
account shall be made only on checks signed by a person or persons
designated by Emeritus. Operator shall be given notice as to the identity of
said authorized signatories. All expenses incurred in the operation of the
Facilities in accordance with the terms of the Budgets submitted to Operator
under Paragraph I(L), including, but not limited to, Facilities' lease
payments for which Operator is responsible under the terms of the Facilities
Leases, payroll and employee benefits and payment of Emeritus' fee, shall
be paid by check drawn on these accounts. Withdrawals from these
accounts shall be made first to pay any debt service or rent due with respect
to the Facilities, next to pay the operating expenses of the Facilities in such
order of priority as Emeritus deems appropriate to the operation of the
Facilities (other than Emeritus's fee) and thereafter to pay Emeritus's fee.
Any fee due to Emeritus which is not paid when due as a result of an
insufficiency of revenues to cover the same shall accrue and shall be due
and payable at such time as there are sufficient revenues to pay
the same; provided, however, that all such accrued and unpaid fees shall be
due and payable in full upon termination of this Agreement unless
otherwise agreed by Operator and Emeritus or unless this Agreement is
terminated by Operator, as a result of an Event of Default, by Emeritus, in
which case the fees due shall be offset against any damages due to Operator
as a result of said Event of Default.
I. PERSONNEL: Except as otherwise provided herein, Emeritus
shall recruit, train, promote, direct and discipline personnel of the
Facilities; establish salary levels, personnel policies and employee benefits;
and establish employee performance standards, all as needed during the term
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of this Agreement to ensure the efficient operation of all departments within
and services offered by the Facilities. All of the foregoing obligations shall
be undertaken in accordance with the operating budgets of the Facilities, the
policies and procedures of the Facilities and all applicable state and
federal laws. All of the personnel at the Facilities shall be the employees of
Operator. Accordingly, Operator shall retain full power and authority to
hire and fire the personnel at the Facilities.
J. SUPPLIES AND EQUIPMENT: Emeritus shall purchase
supplies and non-capital equipment needed to operate the Facilities within
the budgetary limits set forth in the annual operating budget prepared by
Emeritus pursuant to Paragraph I(L) and subject to the availability of
operating revenues from the Facilities. In purchasing said supplies and
equipment, if possible, Emeritus shall take advantage of any national or
group purchasing agreements to which Emeritus
may be a party.
K. LEGAL PROCEEDINGS: Emeritus shall, through its legal
counsel, coordinate all legal matters and proceedings with Operator's
counsel.
L. BUDGETS: The Facilities shall be operated on a fiscal year of
January 1 through December 31. Within forty-five (45) days prior to the
start of each fiscal year, Emeritus shall prepare and submit to Operator for
its review and approval, which approval shall not be unreasonably withheld,
an annual operating budget, an annual capital expenditure budget, and an
annual cash flow projection for each of the Facilities. In the event a budget
has not been agreed upon by the beginning of the fiscal year, the budget in
effect for the prior fiscal year shall continue in effect until the new budget
is agreed upon. Any expenditures made during the year pursuant to an
approved budget or the prior fiscal year's budget, as applicable, and/or any
expenditures on an item-by-item basis exceeding by no more than 10% the
amounts set forth therein for the applicable expense item (the "Budget
Threshold") may be made without Operator's prior approval. Any
budgeted expenditures and/or any expenditures in excess of the Budget
Threshold shall be subject to Operator's prior approval, which approval
shall not be unreasonably withheld. Furthermore, all such expenditures such
be subject to the availability of the Facilities' revenues.
M. COLLECTION OF ACCOUNTS: Emeritus shall issue bills and
collect accounts and monies owed for goods and services furnished by the
Facilities, including, but not limited to, enforcing the rights of Operator and
the Facilities as creditor under any contract or in connection with the
rendering of any services; provided, however, that any expenses incurred
by Emeritus in so doing shall be treated as operating expenses of the
Facilities, which shall be payable out of Facilities' funds deposited in the
bank account described in Section I(H). Any actions taken by
Emeritus to collect said accounts receivable shall be in accordance with the
applicable laws, rules and regulations governing the collection of accounts
receivable.
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N. COMPLIANCE WITH FACILITIES LEASES. Emeritus shall
take such other actions as may be reasonably requested by Operator to
enable Operator to comply with its obligations under the Lease Agreements
of even date herewith between Phillip Wegman, as lessor, and Operator, as
lessee (the "Facilities Leases").
II. INSURANCE: Emeritus shall arrange for and maintain all necessary
and proper hazard insurance covering the Facilities, the furniture, fixtures,
and equipment situated thereon, and all necessary and proper malpractice
and public liability insurance for Operator's protection and for the
protection of Operator's officers, partners, agents and employees. Operator
shall provide all employee health and worker's compensation insurance for
its employees, which insurance shall be administered by Emeritus. Emeritus
shall arrange for and maintain all necessary and proper malpractice and
public liability insurance for the protection of itself, its officers, agents
and employees. Any insurance provided pursuant to this paragraph shall
comply with the requirements of any applicable Facilities mortgage or lease
and, with the exception of the insurance maintained by Emeritus for its own
protection, shall be paid from the revenues of the Facilities.
III. PROPRIETARY INTEREST: The systems, methods, procedures
and controls employed by Emeritus and any written materials or brochures
developed by Emeritus to document the same are to remain the property of
Emeritus and are not, at any time during or after the term of this
Agreement, to be utilized, distributed, copied or otherwise employed or
acquired by Operator, except as authorized by Emeritus.
IV. TERM OF AGREEMENT: The initial term of this Agreement
shall commence as to each of the Facilities on the applicable
Commencement Date (as defined in the applicable Facilities
Lease) (the "Commencement Date") and shall terminate as to each of the
Facilities at the end of the second year after the first Commencement Date
hereunder (the "Initial Term") unless sooner terminated upon the
occurrence of an Event of Default or unless extended by mutual agreement
of Operator and Emeritus. Operator and Emeritus acknowledge and agree
that it is the intent of the parties that the Commencement Date shall be the
same as to all of the Facilities other than Perinton Park Manor, which is
under construction and the term of which Lease may accordingly
commence later than the term of the other Facilities Leases commences but
that the Termination Date shall be the same as to all of the Facilities.
V. DEFAULT: Either party may terminate this Agreement, as
specified in this Section V, in the event of a default ("Event of Default") by
the other party.
(a) With respect to Emeritus, it shall be an "Event of Default"
hereunder:
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(i) If Emeritus shall fail to keep, observe or perform any
material agreement, term or provision of this Agreement, and such default
shall continue for a period of thirty (30) days after notice thereof shall have
been given to Emeritus by Operator, which notice shall specify the
event or events constituting the default; or
(ii) If Emeritus shall apply for or consent to the appointment
of a receiver, trustee or liquidator of Emeritus of all or a substantial part of
its assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a general assignment for
the benefit of creditors, file a petition or an answer seeking reorganization
or arrangement with creditors or taking advantage of any insolvency law, or
if an order judgment or decree shall be entered by a court of competent
jurisdiction, on the application of a creditor, adjudicating Emeritus, a
bankrupt or insolvent or approving a petition seeking reorganization of
Emeritus, or appointing a receiver, trustee or liquidator of Emeritus, of all
or a substantial part of its assets.
(b) With respect to Operator, it shall be an Event of Default
hereunder:
(i) If Operator shall take any action in exercising the rights
granted to it or performing the obligations imposed on it hereunder and, as
a result thereof, Emeritus incurs any liabilities, losses, damages, expenses,
costs, suits, legal or administrative proceedings in connection with its
provision of the services provided for herein or the operation of the
Facilities unless (i) such action was recommended, suggested or approved
by Emeritus, (ii) Emeritus, fails within ten ( 10) days after receiving written
notice of Operator's intention to take any such action, to notify Operator
in writing of Emeritus' objections thereto or (iii) Operator takes such action
as a result of Emeritus' failure to perform one or more of its obligations
under this Agreement as and when the same are to be performed pursuant
hereto or within any cure period provided herein; or
(ii) If Operator shall at anytime be a corporation or other legal
entity and shall be dissolved (other than as a result of a transfer of
ownership of the Facilities to a limited partnership in which Operator's
partners are general and/or limited partners) or shall apply for or
consent to the appointment of a receiver, trustee or liquidator of Operator or
of all or a substantial part of its assets, file a voluntary petition in
bankruptcy, or admit in writing its inability to pay its debts as they become
due, make a general assignment for the benefit or creditors, file a petition or
an answer seeking reorganization or arrangement with creditors or taking
advantage of any insolvency law, or if an order, judgment or decree shall be
entered by a court of competent jurisdiction, on the application of a
creditor, adjudicating Operator a bankrupt or insolvent or approving a
petition seeking reorganization of Operator or appointing a receiver, trustee
or liquidator of Operator of all or a substantial part of its assets.
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VI. REMEDIES UPON DEFAULT:
(a) If any Event of Default by Operator shall occur, Emeritus may,
in addition to any other remedy available to it in law or equity on account
of such Event of Default, forthwith terminate this Agreement, and neither
party shall have any further obligations whatsoever under this
Agreement, but Emeritus shall immediately be entitled to receive payment
of all amounts theretofore unpaid but earned to the date of termination.
(b) If any Event of Default by Emeritus shall occur, Operator may,
in addition to any other remedy available to it in law or equity on account
of such Event of Default, forthwith terminate this Agreement, and neither
party shall have any further obligation whatsoever under this
Agreement; provided, however, that Emeritus' right to receive payment of
all amounts theretofore unpaid but earned to date of termination shall be
subject to Operator's right to receive payment of damages from Emeritus.
VII. FACILITIES OPERATIONS:
A. NO GUARANTEE OF PROFITABILITY: Emeritus does not
guarantee that operation of the Facilities will be profitable, but Emeritus
shall use its best efforts to operate the Facilities in as cost efficient and
profitable a manner as possible.
B. STANDARD OF PERFORMANCE: In performing its
obligations under this Agreement, Emeritus shall use its best efforts and act
in good faith and with professionalism in accordance with acceptable and
prevailing standards of health care and the policies adopted by, and
resources available to, the Facilities.
C. FORCE MAJEURE: Neither party will be deemed to be in
violation of this Agreement if it is prevented from performing any of its
obligations hereunder for any reason beyond its control, including, without
limitation, strikes, shortages, war, acts of God, or any statute, regulation or
rule of federal, state or local government or agency thereof.
VIII. WITHDRAWAL OF FUNDS BY OPERATOR:
Operator and Emeritus acknowledge and agree that the efficient
operation of the Facilities requires that Emeritus have ready access to the
capital required therefore. Accordingly, unless otherwise agreed by
Operator and Emeritus, Operator agrees not to withdraw any excess
funds from the Facilities' bank account.
IX. FEE: During the Initial Term of this Agreement, Emeritus shall
receive a monthly fee equal to $58,333.00; provided, however, that from
and after the date on which Emeritus begins to provide administrative
services to the Perinton Park Facility, the monthly fee hereunder shall be
equal to $60,000.00. In the event this Agreement is extended beyond the
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expiration of the Initial Term, the fee shall be such amount as may be
agreed upon by Operator and Emeritus in conjunction with said extension,
and failing that shall be the fee payable during the Initial Term of this
Agreement increased, but not decreased, on each anniversary of the
Commencement Date (the "Adjustment Date") by the percentage change in
the Consumer Price Index All Cities (1984=100) (the "CPI") from the
Commencement Date to the Adjustment Date. In the event of a decrease in
the CPI from the Commencement Date to the Adjustment Date, the fee shall
remain fixed at the amount in effect on the Adjustment Date until the next
Adjustment Date on which an increase in the CPI occurs.
A. PRORATION OF FEE. If the services of Emeritus commence
or terminate (for any reason, including those set forth in Paragraph V) other
than on the first day of the month, the fee shall be prorated in proportion to
the number of days for which services are actually rendered.
B. PAYMENT OF FEE. The fee provided for herein shall be
disbursed by Emeritus to itself out of the applicable Facilities' bank account
and shall be subject to the accrual provisions of Section I(H) to the extent
there are not sufficient funds available to pay the fee in any month(s).
X. ASSIGNMENT: This Agreement shall not be assigned by either
party without the prior written consent of the other party, which consent
shall not be unreasonably withheld; provided, however, that nothing herein
shall be construed as precluding the assignment or delegation of duties
provided for in Section I(F).
XI. NOTICES: All notices required or permitted hereunder shall be
given in writing by hand delivery, by registered or certified mail, postage
prepaid, by overnight delivery or by facsimile transmission (with receipt
confirmed with the recipient). Notice shall be delivered or mailed to the
parties at the following addresses or at such other places as either party
shall designate in writing.
To Emeritus: Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, WA 98121
Phone: 206-298-2909
Fax: 206-301-4500
Attention: Michelle Bickford, Director
of Acquisitions
To Operator: Painted Post Partners
313 I Elliott Avenue, Suite 500
Seattle, WA 98121
Phone: 206-298-2909
Fax: 206-301-4500
Attention: Raymond R. Brandstrom,
General Partner
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XII. RELATIONSHIP OF THE PARTIES: The relationship of the
parties shall be that of a principal and independent contractor and all acts
performed by Emeritus during the term hereof shall be deemed to be
performed in its capacity as an independent contractor. Nothing contained
in this Agreement is intended to or shall be construed to give rise to or
create a partnership or joint venture or lease between Operator, its
successors and assigns on the one hand, and Emeritus, its successors
and assigns on the other hand.
XIII. INDEMNIFICATION: Emeritus shall indemnify, defend and
hold harmless Operator from any loss incurred by or damage to Operator
resulting from a breach by Emeritus of its obligations hereunder. Operator
shall indemnify, defend and hold Emeritus harmless from any loss incurred
by or damage to Emeritus resulting from a breach by Operator its
obligations hereunder.
XIV. ENTIRE AGREEMENT: This Agreement and any documents
executed in connection herewith contain the entire agreement between the
parties and shall be binding upon and inure to the benefit of their successors
and assigns, and shall be construed in accordance with the laws of the
State of New York. This Agreement may not be modified or amended
except by written instrument signed by both of the parties hereto.
XV. CAPTIONS: The captions used herein are for convenience of
reference only and shall not be construed in any manner to limit or modify
any of the terms hereof.
XVI. ATTORNEY'S FEES: In the event either party brings an action
to enforce this Agreement, the prevailing party in such action shall be
entitled to recover from the other all costs incurred in connection therewith,
including reasonable attorney's fees.
XVII. SEVERABILITY: In the event one or more of the provisions
contained in this Agreement is deemed to be invalid, illegal or
unenforceable in any respect under applicable law, the validity,
legality and enforceability of the remaining provisions hereof shall not in
any way be impaired thereby.
XVIII. CUMULATIVE; NO WAIVER: No right or remedy herein
conferred upon or reserved to either of the parties hereto is intended to be
exclusive of any other right or remedy, and each and every right and
remedy shall be cumulative and in addition to any other right or remedy
given hereunder, or now or hereafter legally existing upon the occurrence
of an Event of Default hereunder. The failure of either party hereto to insist
at any time upon the strict observance or performance of any of the
provisions of this Agreement or to exercise any right or remedy as provided
in this Agreement shall not impair any such right or remedy or be construed
as a waiver or relinquishment thereof with respect to subsequent defaults.
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Every right and remedy given by this Agreement to the parties hereof may
be exercised from time to time and as often as may be deemed expedient by
the parties thereto, as the case may be.
XIX. AUTHORIZATION FOR AGREEMENT: The execution and
performance of this Agreement by Operator and Emeritus have been duly
authorized by all necessary laws, resolutions or corporate action, and this
Agreement constitutes the valid and enforceable obligations of Operator
and Emeritus in accordance with its terms.
XX. COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, and each such
counterpart shall together constitute but one and the same Agreement.
IN WITNESS WHEREOF, the parties have hereto caused this
Agreement to be duly executed, as of the day and year first above written.
OPERATOR: PAINTED POST PARTNERS
By: /s/ Raymond R. Brandstrom
---------------------------------------
Its: Partner
By: /s/ Daniel R. Baty
--------------------------
Its: Partner
EMERITUS : EMERITUS CORPORATION
By: /s/ Daniel R. Baty
--------------------------
Its: Chairman
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AGREEMENT TO PROVIDE MANAGEMENT SERVICES
TO A LONG TERM CARE FACILITY
<PAGE>
AGREEMENT TO PROVIDE MANAGEMENT
SERVICES TO A LONG TERM CARE FACILITY
This Agreement made as of this 27th day of June, 1996, between
SERVICEMASTER DIVERSIFIED HEALTH SERVICES, L.P., a
Tennessee limited partnership (hereinafter referred to as "Manager"), and
EMERITUS CORPORATION, a Washington corporation (hereinafter
referred to as "Owner").
WHEREAS, Owner is the lessee of a long term care facility located at
200 Heritage Way Hendersonville, NC 28791 (the "Facility"); and
WHEREAS, Owner wants someone to manage the Facility on its behalf;
WHEREAS, Manager is experienced and qualified in the field of health
care management
WHEREAS, Owner has determined that Manager's price is economical
in light of the range of services which it provides; and
WHEREAS, Manager is willing to operate the Facility on Owner's
behalf, pursuant to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenant; herein contained, IT IS AGREED AS FOLLOWS:
I. Management and Consulting Responsibilities of Manager: Owner
hereby engages Manager and Manager hereby accepts such engagement
and agrees to provide management consulting and advisory services to
Owner in connection with the operation of the Facility, upon the
terms and conditions set forth in this Agreement. By entering into this
Agreement, Owner does not delegate to Manager any powers, duties or
responsibilities which it is prohibited by law from delegating. Owner also
retains such other authority as shall not have been expressly delegated to
Manager pursuant to this Agreement. Subject to the foregoing, Manager
shall provide the following services:
A. Operational Policies and Forms: Manager shall implement
operational policies and procedures and develop such new policies and
procedures as it deems necessary to insure the establishment and
maintenance of operational standards appropriate for the nature of the
Facility.
B. Charges: Consistent with the operating budget developed by
Manager and approved by Owner pursuant to Paragraph I(L), Manager
shall establish the schedules of recommended charges including any and all
special charges for services rendered to the patients at the Facility. Owner
shall have the right to review the charge schedules established by Manager.
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C. Information: Manager shall develop any informational material,
mass media releases, and other related publicity materials, which it deems
necessary for the operation of the Facility. Owner shall have the right to
review and approve all such materials.
D. Regulatory Compliance: Manger, with the assistance of Owner if
requested by Manager, shall use its best efforts to maintain all licenses,
permits, qualifications and approvals from any applicable governmental or
regulatory authority for the operation of the Facility, including without
limitation certification of the Facility as a provider of services under Titles
XVIII (Medicare) and XIX (Medicaid) of the Social Security Act, and to
manage the operations of the Facility in full compliance with all applicable
laws and regulations.
E. Equipment and Improvements: Manager shall advise Owner as to
equipment and improvements which are needed to maintain or upgrade the
quality of the Facility and said equipment, to replace obsolete or run-down
equipment or to correct any other survey deficiencies which may be cited
during the term of this Agreement. Owner shall review and act upon
Manger's recommendations as expeditiously as possible. Manager shall not
be liable for any cost or liability which Owner may incur in the event
Owner disregards Manger's recommendations. Manager shall make all
necessary and approved repairs, replacements and maintenance within the
budgetary limits set forth I the annual capita budget prepared by Manager
pursuant to Paragraph I(L) and in a workmanlike and lien free manner.
F: Accounting: Manager shall provide home office and accounting
support to the Facility. All accounting procedures and systems utilized in
providing said support shall be in accordance with the operating capital and
cash programs developed by Manager, which programs shall conform to
generally accepted accounting principles and shall not materially distort
income or loss. In addition, Manger shall maintain all of the Facility books
and records in such manner as may be required to ensure that Owner is able
to prepare or cause to be prepared its applicable local, state, and federal tax
returns in accordance with the requirements of law, it being understood and
agreed that Owner, and not Manger, shall be obligated to prepare or cause
to be prepared all such tax returns. Manager shall also prepare and timely
file all necessary cost reports for the Facility in order to seek the maximum
amount of Medicare and Medicaid reimbursement available to it at law.
The taxes and any reimbursement obligations due to Medicare and/or
Medicaid shall be deemed to be Facility operating expenses and shall be
paid out of the revenues of the Facility or the working capital provided by
Owner.
G: Reports: Manager shall prepare and provide to the Owner any
reasonable operational information which may from time to time be
specifically requested by Owner, including any information needed to assist
Owner in completing its tax returns and in complying with any reporting
obligations imposed by any mortgagees. In addition, (i) within twenty-
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eight (28) days after the end of each calendar month, Manger shall provide
Owner with an unaudited balance sheet of the Facility, dated the last day of
such month, and an unaudited statement of income and expenses for such
month relating to the operation of the Facility and (ii) within forty-five (45)
days after the end of the fiscal year o the Facility, Manger shall provide
Owner with unaudited financial statements including a balance sheet of the
Facility, dated the last day of said fiscal year, and a statement of income
and expense for the year then ended relating to the operation of the Facility.
Manger will cooperate with Owner in cross-referencing Owner's chart of
accounts.
H. Bank Accounts: Manager shall, on behalf of Owner, establish and
maintain a checking account in the name of Owner doing business under
the name of the Facility and shall deposit therein all money received during
the term of this Agreement in the course of the operation of the Facility;
provided, however, that during the term hereof, withdrawals and payments
from this account shall be made only on checks signed by a person or
persons designated by Manager and Owner. Owner shall be given notice as
to the identity of said authorized signatories. Withdrawals from this account
shall be made in the order of priority set forth in Section X.(B) below. In
the event the revenues generated by the Facility are at any time insufficient
to pay all of the expenses associated with its operation and to pay
Manager's "Base Fee" (as that term is defined below), Owner
shall, within five (5) days of its receipt of a written demand by Manager,
deposit in the Facility bank account sufficient funds to satisfy the then
working capital needs of the Facility. The amounts so advanced shall be
deemed to be loans by Owner (the "Owner Loans") to the Facility and shall
be repaid by Manager from future Facility revenues in accordance with the
provisions of Section IX hereof.
I. Personnel: Manager shall recruit, employ, train, promote, direct,
discipline, suspend and discharge Facility personnel; establish salary levels
consistent with the amounts reflected in the operating budget prepared by
Manager and approved by Owner pursuant to Paragraph (L); and establish
employee performance standards, all as needed during the term of this
Agreement to ensure the efficient operation of all departments within and
services offered by the Facility. Excluding the Facility administrator, all of
the Facility personnel, including the Facility Medical Director, shall be the
employees of Owner and, accordingly, shall be subject to Owner's
employee benefit plans and personnel policies and procedures; provided,
however, that Manager may be responsible for all payroll related services,
including the issuance of payroll checks and assisting Owner with the filing
of payroll tax returns. The Facility administrator, the Facility Medical
Director and all department heads shall be subject to the prior written
approval of Owner. Owner is responsible for all compensation and other
employee benefits, of any nature, associated with Manager's employment
of the administrator, to the extent such amounts have been approved by
Owner as part of the annual operating budget, and shall promptly reimburse
Manager therefor.
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J. Supplies and Equipment: Manager shall have the authority to
purchase, on behalf of Owner, supplies and non-capital equipment needed
to operate the Facility within the budgetary limits set forth in the annual
operating budget prepared by Manager and approved by
Owner pursuant to Paragraph I(L). To the extent available, and subject to
applicable law, Manager will offer Owner participation in Manager's
national purchasing contracts. Owner consents to and authorizes Manager's
purchase of required supplies and equipment from Manger's affiliates,
provided that the prices to be paid to any such affiliate are comparable to
the prices which would be available to Owner from non-affiliate suppliers
in the marketplace. Any purchasing agreement or lease of capital equipment
that will obligate Owner beyond the Term, shall be subject to approval
of Owner.
K. Legal Proceedings: Manager shall coordinate all legal matters and
proceedings with Owner's counsel.
L. Budgets: The Facility shall be operated on a fiscal year of January
1 through December 31. Within forty-five (45) days after the
commencement of the term of the Agreement and within forty-five (45)
days prior to the start of each fiscal year commencing with fiscal 1997 (if
applicable), Manager shall prepare and submit to Owner for its review and
approval, which approval shall not be unreasonably withheld, an annual
operating budget, an annual capital expenditure budget, and an annual cash
flow projection. In the event a budget has not been agreed upon by the
beginning of the fiscal year, the budget in effect for the prior fiscal year
shall continue in effect until the new budget is agreed upon. Thereafter, any
expenditures made during the year pursuant to said budgets and/or any
expenditures on an item-by-item basis exceeding by no more than l0% the
amounts set forth therein for the applicable expense item (the "Budget
Threshold") may be made without Owner's prior approval. Any
unbudgeted expenditures and/or any expenditures in excess
of the Budget Threshold shall be subject to Owner's prior approval, which
approval shall not be unreasonably withheld. Manager shall be allowed to
make emergency expenditure or expend money for matters outside the
budget plus ten percent (l0%) to preserve licensure and/or certification of
the facility and the health and safety of patients so long as said expenditures
are promptly explained in writing to Owner, to Owner's reasonable
satisfaction, fifteen (15) days following the date said expenditure is made.
M. Collection of Accounts: Manager shall issue bills and collect
accounts and monies owed for goods and services furnished by the Facility,
including, but not limited to, enforcing the rights of Owner and the Facility
as creditor under any contract or in connection with the rendering of any
services; provided, however, that any expenses incurred by Manager in so
doing shall be treated as Facility operating expenses, which shall be payable
out of Facility funds deposited in the bank account described in Section
I(H).
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N. Ancillary Services: Manager shall provide ancillary and Medicare
Part B type services and products at Manager's option with all said products
and services being billable to Medicare or third parties. No such products or
services shall be billable to the Facility except as billable to (and
collectible from) Medicare or other third parties by the Facility.
II. Insurance: Owner shall maintain insurance covering all risks normally
insured by nursing homes, including (i) comprehensive general liability in
adequate amounts as determined by Owner but no less than the amount of
One Million Dollars ($ 1,000,000) per occurrence and Three Million
Dollars ($3,000,000) in the aggregate, (ii) professional liability coverage in
an amount not less than One Million Dollars ($1,000,000) per occurrence
and Three Million Dollars ($3,000,000) in the aggregate, and (iii)
statutorily required coverage, including workers' compensation, as
provided below, with respect to employees of the Facility other than
Manger's employees. All liability policies shall name Manager as a co-
insured and ServiceMaster Diversified Health Services, Inc. And the
ServiceMaster Company, Limited Partnership, as additional insureds and
shall not be cancelable except on thirty (30) days prior notice to Manager.
Owner shall also maintain casualty insurance covering normal hazards to
the Facility at not less than eighty percent (80%) replacement
value of all permanent structures. Manager shall obtain, at its expense,
workers' compensation and other statutorily required coverage with respect
to its own employees. Owner shall provide workers' compensation and
other statutorily required coverage for its employees. Manager and Owner
may agree that some or all of the foregoing insurance may be obtained
through policies obtained by Manager, in which event Owner shall be
named as a co-insured.
III. Proprietary Interest: The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by
Manager to document the same are to remain the property of Manager and
are not, at any time during or after the term of this Agreement, to be
utilized, distributed, copied or otherwise employed or acquired by Owner,
exceptas authorized by Manager.
IV. Term of Agreement: The term of this Agreement shall commence on
July 1,1996 (the "Commencement Date"), and shall continue for a period of
three (3) years thereafter, unless sooner terminated (i) due to the fact that
50% or more of the Facility is damaged or destroyed or taken by
condemnation proceedings or otherwise, whether Owner elects to rebuild or
repair or (ii) upon the occurrence of an Event of Default or (iii) by Health
Care Property Investors, Inc. ("HCPI"), as the owner of the Facility, in the
event of the termination of the lease under which Owner operates
the Facility upon the occurrence of an event of default thereunder. Owner
shall have the option to extend the term of this Agreement for five (5)
successive one (1) year periods, which extension right shall be exercisable
by written notice delivered to Manager not later than ninety (90) days prior
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to the commencement of each such one (1) year extension. Any such option
to extend shall be subject to the consent of Manager which shall be given or
denied within ten ( 10) days following receipt of Owner' s written notice. If
Manager fails to notify Owner within said ten ( I 0) day period, Manager
shall be deemed to have given its consent to said extension.
V. Default: Either party may terminate this Agreement, as specified in
this Section V, in the event of a default ("Event of Default") by the other
party.
(a) With respect to Manager, it shall be an "Event of Default"
hereunder:
(i) If Manager shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement, and such default shall
continue for a period of thirty 30) days after notice thereof shall have been
given to Manager by Owner, which notice shall specify the event or events
constituting the default; provided, however, that if any such failure by
Manager has caused or threatens to cause any injury to the life or safety of
any of the patients and/or employees of the Facility which may result in the
revocation of the Facility's operating license, there shall be no cure period
provided to Manager hereunder and Owner shall have the right to
immediately terminate this Agreement upon written notice to Manager; or
(ii) If Manager shall apply for or consent to the appointment of a
receiver, trustee or liquidator of Manager of all or a substantial part of its
assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a general
assignment for the benefit of creditors, file a petition or an answer seeking
reorganization or arrangement with creditors or taking advantage of any
insolvency law, or if an order judgment or decree shall be entered by a
court of competent jurisdiction, on the application of a creditor,
adjudicating Manager, a bankrupt or insolvent or approving a petition
seeking reorganization of Manager, or appointing a receiver, trustee or
liquidator of Manager, of all or a substantial part of its
assets.
(b) With respect to Owner, it shall be an Event of Default hereunder:
(i) If Owner shall fail to make or cause to be made any payment to
Manager required to be made hereunder (other than its working capital
obligation), and such failure shall continue for a period of thirty (30) days;
(ii) If Owner shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement and such default shall
continue for a period of thirty (30) days after notice, which notice shall
specify an event or events constituting the default thereof by Manager
to Owner; provided, however, that in the case of Owner's failure to provide
necessary working capital upon demand by Manager, it shall be deemed to
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<PAGE>
be an Event of Default hereunder if the same is not paid within ten ( 10)
days of Manager's initial demand therefor without any further notice from
Manager being required;
(iii) If Owner shall fail to make payments, or keep any covenants,
owing to any third party which are beyond the control of Manager to make
or keep, and which would cause Owner to lose possession of the Facility or
any personal property which would be required to operate the Facility in the
normal course; or
(iv) If Owner shall be dissolved (other than as a result of a transfer
of the ownership of the Facility to a limited partnership in which Owner's
shareholders are general and/or limited partners) or shall apply for or
consent to the appointment of a receiver, trustee or liquidator of Owner or
of all or a substantial part of its assets, file a voluntary petition in
bankruptcy, or admit in writing its inability to pay its debts as they become
due, make a general assignment for the benefit or creditors, file a petition or
an answer seeking reorganization or arrangement with creditors or
taking advantage of any insolvency law, or if an order, judgment or decree
shall be entered by a court of competent jurisdiction, on the application of a
creditor, adjudicating Owner a bankrupt or insolvent or approving a petition
seeking reorganization of Owner or appointing a receiver, trustee
or liquidator of Owner of all or a substantial part of its assets.
VI. Remedies Upon Default:
(a) If any Event of Default by Owner shall occur, Manager may, in
addition to any other remedy available to it in law or equity on account of
such Event of Default, forthwith terminate this Agreement, and neither
party shall have any further obligations whatsoever under this
Agreement, but Manager shall immediately be entitled to receive payment
of all amounts theretofore unpaid but earned to the date of termination.
(b) If any Event of Default by Manager shall occur, Owner may, in
addition to any other remedy available to it in law or equity on account of
such Event of Default, forthwith terminate this Agreement, and neither
party shall have any further obligation whatsoever under this
Agreement; provided, however, that Manager shall immediately be entitled
to receive payment of all amounts theretofore unpaid but earned to date of
termination, subject to Owner's right to receive payment of damages from
Manager, the amount of which damages shall not exceed the aggregate
amount of all "Management Fees" (as that term is defined below) paid to
Manager through the date of the occurrence of the Event of Default;
provided, however, said limitation on damages shall not apply as a
limitation on the indemnity obligations of Manager as set forth in Section
XXII below.
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VII. Owner's Inspection: During the term hereof, Owner shall have the
right, upon request and at reasonable times, to inspect the Facility and to
inspect and/or audit all books and records pertaining to the operation
thereof.
VIII. Facility Operations:
A. No Guarantee of Profitability: Manager does not guarantee that
operation of the Facility will be profitable, but Manager shall use its best
efforts to operate the Facility in as cost efficient and profitable a manner as
possible.
B. Standard of Performance: In performing its obligations under this
Agreement, Manager shall use its best efforts and act in good faith and with
professionalism in accordance with acceptable and prevailing standards of
health care and the policies adopted by, and resources available to, the
Facility.
C. Force Majeure: Manager will not be deemed to be in violation of
this Management Agreement if it is prevented from performing any of its
obligations hereunder for any reason beyond its control, including, without
limitation, strikes, shortages, war, acts of God, lack of the Owner's financial
resources, or any statute, regulation or rule of federal, state or local
government or agency thereof.
IX. Withdrawal of Funds by Owner; Minimum Bank Balance:
Owner may withdraw the then accumulated operating cash surplus
(as determined by Owner and Manager) from the Facility bank account in
excess of Five Thousand Dollars ($5,000.00). Owner shall maintain such
minimum balance in the bank account, if any, as Owner and Manager deem
to be appropriate to effectively and efficiently operate the Facility, which
minimum balance may be zero if Owner and Manager agree to sweep said
account on a daily basis, Manager shall advise Owner within ten ( 10) days
in the event there is a surplus cash balance in the Facility bank
account.
X. Distribution of Facility Revenues: Management Fee:
A. Management Fee. In consideration for the services provided
hereunder, Manager shall receive, on a monthly basis, the amounts
identified in Section X. (B) below to be distributed to Manager in
accordance with the priority of distribution set forth therein (collectively,
the "Management Fees").
B. Distribution of Facility Revenues. The "gross revenues" (as
defined below) generated each month by the Facility shall be computed and
distributed monthly commencing one (1) month following the
Commencement Date in the following order of priority:
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(i) First, to pay to Manager an amount equal to three percent (3%)
of all such gross revenues (the "Base Fee");
(ii) Second, to pay all costs and expenses incurred said month with
respect to the ownership and operation of the Facility, including without
limitation, all rent and additional rent due under the Lease with HCPI, but
excluding all federal, state and local taxes which are assessed based on the
revenues derived from the operations at the Facility;
(iii) Third, to pay to Owner a twelve percent ( 12%) per annum
cumulative return on Owner's initial investment in the Facility, which
investment is equal to Four Hundred Ninety-Six Thousand Five Hundred
Eighty-Three Dollars ($496,583.00);
(iv) Fourth, to pay to Manager an amount equal to fifty percent
(50%) of all "net income" (as that term is defined below), after payment of
the foregoing distributions (the "Additional Fee"); provided, however, the
total of the Base Fee and the Additional Fee shall not exceed five percent
(5%) of the total gross revenues generated by the Facility for said month;
and
(v) Fifth, all remaining net income following the distributions of
the foregoing sums, shall be distributed twenty percent (20%) to Manager
(the "Residual Fee") and eighty percent (80%) to Owner.
For purposes hereof, (a) the term "gross revenues" shall mean all
revenues received each month from the operations at the Facility, but shall
specifically excluding the proceeds from the sale of any Facility equipment
and any insurance and condemnation proceeds and (b) the term
"net income" shall mean all gross revenues less those amounts paid each
month which are referred to in subparagraphs "(i)", "(ii)" and "(iii)" of
Section X. (B) above.
C. Proration of Fee. If the services of Manager commence or terminate
(for any reason, including those set forth in Paragraph V) other than on the
first day of the month, the Base Fee and the Additional Fee reflected above
shall be prorated in proportion to the number of days for which services are
actually rendered. The Residual Fee shall not be subject to proration but
shall only be due and payable if this Agreement has been in effect for the
full month to which said Residual Fee relates.
E. Payment of Fee. The Base Fee and the Additional Fee provided for
herein shall be disbursed by Manager to itself out of the Facility bank
account in the order of priority reflected in Section I(H). The Residual Fee
shall be payable by Owner to Manager monthly within fifteen (15) days
following Owner's receipt of Manager's monthly financial report as
provided for in Section I. (G) above, it being understood and agreed that
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Manager shall have no right to pay the same to itself from the Facility bank
account unless specifically authorized to do so in writing by
Owner.
F. Distributions to Owner. Owner shall be permitted to withdraw from
the Facility operating account any amounts owed to it in accordance with
the foregoing priority of distributions.
XI. Manager's Designated Representative. In any situation in which,
pursuant to the terms of this Agreement, Manager shall be required or
permitted to take any action with respect to Owner, give any report or
make any request to or of Owner, Manager shall act by and through
"Manager's Representative" (as defined below) and Owner shall be
permitted to rely on any such approval or action so taken by the Manager's
Representative as an approval or action taken by the Manager hereunder.
The "Manager's Representative" shall mean and refer to Judy Ullery or
such other individual as shall be designated by Manager and approved by
Owner as provided below. In the event Manager at any time wishes to
replace the then current Manager's Representative whichhas been approved
by Owner, Manager shall notify Owner in writing of the proposed
replacement and provide such information as Owner shall reasonably
request regarding the qualifications and experience of said replacement. In
the event Owner disapproves of Manager's designated replacement and
Owner and Manager are unable to agree on an alternative replacement,
Owner shall have the right to terminate this Agreement by written notice to
Manager.
XII. Assignment: This Agreement shall not be assigned by either party
without the prior written consent of the other party, which consent shall not
be unreasonably withheld; provided, however, that Owner shall have the
right to assign this Agreement without Manager's consent to a
limited partnership in which the shareholders of Owner are general or
limited partners and to which ownership of the Facility is transferred.
XIII. Notices: All notices required or permitted hereunder shall be given
in writing by hand delivery, by registered or certified mail, postage prepaid,
by overnight delivery or by facsimile transmission (with receipt confirmed
with the recipient). Notice shall be delivered or mailed to the
parties at the following addresses or at such other places as either party
shall designate in writing.
To Manager: ServiceMaster Diversified Health Services, L.P.
5050 Poplar Avenue, I 8th Floor
Memphis, Tennessee 38157
Attn. : President
Telephone: (901) 821-5533
Facsimile: (901) 761-5576
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To Owner: Emeritus Corporation
3131 Elliott Avenue
Seattle, WA 98 I 21
Telephone: 800-429-4828
Facsimile: 206-301-4500
XIV. Relationship of the Parties: The relationship of the parties shall be
that of Owner and Independent Contractor and all acts performed by
Manager during the term hereof as Manager of the Facility shall be deemed
to be performed in its capacity as an independent contractor. Nothing
contained in this Agreement is intended to or shall be construed to give rise
to or create a partnership or joint venture or lease between Owner, its
successors and assigns on the one hand, and Manager, its successors and
assigns on the other hand.
XV. Entire Agreement: This Agreement contains the entire agreement
between the parties and shall be binding upon and inure to the benefit of
their successors and assigns, and shall be construed in accordance with the
laws of the State of Washington. This Agreement may not be
modified or amended except by written instrument signed by both of the
parties hereto.
XVI. Captions: The captions used herein are for convenience of
reference only and shall not be construed in any manner to limit or modify
any of the terms hereof.
XVII. Attorney's Fees: In the event either party brings an action to
enforce this Agreement, the prevailing party in such action shall be entitled
to recover from the other all costs incurred in connection therewith,
including reasonable attorney's fees.
XVIII. Severability: In the event one or more of the provisions contained
in this Agreement is deemed to be invalid, illegal or unenforceable in any
respect under applicable law, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be impaired
thereby.
XIX. Cumulative; No Waiver: A right or remedy herein conferred upon
or reserved to either of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be
cumulative and in addition to any other right or remedy given
hereunder, or now or hereafter legally existing upon the occurrence of an
Event of Default hereunder. The failure of either party hereto to insist at
any time upon the strict observance or performance of any of the provisions
of this Agreement or to exercise any right or remedy as provided in this
Agreement shall not impair any such right or remedy or be construed as a
waiver or relinquishment thereof with respect to subsequent defaults. Every
right and remedy given by this Agreement to the parties hereof may be
exercised from time to time and as often as may be deemed expedient by
the parties thereto, as the case may be.
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XX. Authorization for Agreement: The execution and performance of
this Agreement by Owner and Manager have been duly authorized by all
necessary laws, resolutions or corporate action, and this Agreement
constitutes the valid and enforceable obligations of Owner and Manager in
accordance with its terms.
XXI. Disclaimer of Employment of Facility Employees: No person
employed by the Facility will be an employee of Manager, and Manager
shall have no liability for payment of their wages, payroll taxes, and other
expenses of employment, except that Manager shall have the obligation to
exercise reasonable care in its management of the Facility and to apply
available funds to the payment of such wage and payroll taxes. All such
persons will be employees of the Facility or independent contractors or the
employees of independent contractors, as appropriate under the
terms of this Agreement.
XXII. Indemnification: Except as provided in this Section XXII. below,
Manager will have no liability whatsoever for damages suffered on account
of and Owner agrees to indemnify and hold Manager entirely harmless
from, the willful misconduct or negligence of any employee of Owner.
Manager hereby agrees to indemnify and hold Owner harmless from and
against, any and all liability, loss, cost and/or expense which is determined
by a court of competent jurisdiction to have arisen as a result of the active
negligence or willful misconduct of Manager or any of its employees or
agents. Notwithstanding the foregoing, each of the parties agree that prior
to making a claim under the foregoing indemnity, the indemnified party
agrees to first make a claim against any applicable insurance policy which
is required to be maintain hereunder for the loss or damage incurred by the
indemnified party. Based on said prior insurance claim, the foregoing
indemnity shall apply only to the extent the indemnified party did not
receive reimbursement from any available insurance
proceeds.
XXIII. Access of the Government to Books and Records: In the event the
services provided hereunder have a 12-month cost or value of $10,000 or
more (or such other amount as may hereafter be established by law):
(a) Until the expiration of four years after the furnishing of services
pursuant to this Agreement, Manager shall make available upon written
request to the Secretary of the United States Department of Health and
Human Services, or upon request to the Comptroller General of the
United States, or any of their duly authorized representatives, this
Agreement, and books, documents and records that are necessary to certify
the nature and extent of such costs.
(b) If Manager or its affiliates carries out any of the duties of this
Agreement through a subcontract, with a related organization, such
subcontract shall contain a clause to the effect that until the expiration of
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four years after the furnishing of such services pursuant to such
subcontract, the related organization shall make available, upon written
request to the Secretary of the United States Department of Health and
Human Services, or upon request to the Comptroller General of the United
States, or any of their duly authorized representatives, the subcontract, and
books, documents and records of such organization that are necessary to
certify the nature and extent of such costs.
(c) The parties agree that any applicable attorney-client or other legal
privileges shall not be deemed waived by virtue of this Agreement.
XXIV. Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
XXV. Non-Solicitation/No-Hire: Manager acknowledges and agrees that
for a period of one hundred and twenty days ( 120) after the termination or
expiration of the term of this Agreement, it will not, without Owner's prior
written consent, directly or indirectly solicit the employment of or
hire any of the employees of Owner associated with the operation of the
Facility at anytime during the term hereof. Manager further acknowledges
and agrees that in the event of a breach by Manager of its obligations
hereunder, the damages suffered by Owner may be difficult to ascertain and
accordingly Owner shall have the right to seek an injunction barring
Manager from any such violation or from any future violations of the terms
of this Section XXV.
IN WITNESS WHEREOF, the parties have hereto caused this
Agreement to be duly executed, as of the day and year first above written.
[Signatures of the parties on following page]
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OWNER: EMERITUS CORPORATION
By: /s/ Raymond R. Brandstrom
-------------------------------
Its: President
MANAGER: SERVICEMASTER DIVERSIFIED
HEALTH SERVICES, L.P.
By: /s/ Joseph K. Piper
----------------------
Its: Pres. Capital Serv.
<PAGE>
CAMLU RETIREMENT APARTMENTS
COEUR D'ALENE, IDAHO
AGREEMENT TO PROVIDE MANAGEMENT SERVICES
TO AN INDEPENDENT LIVING FACILITY
<PAGE>
This Agreement made this 1st day of November, 1996 by and between
Emeritus Corporation, a Washington corporation (hereinafter referred to as
"Manager"), and Columbia House, LLC, a Washington limited liability
company (hereinafter referred to as "Lessee").
WHEREAS, Lessee is the lessee of property located at 606 Best Avenue
in Coeur d'Alene Idaho ("the Property") including an independent living
facility (the "Facility"), pursuant to the terms of that certain Commercial
Lease Agreement dated October 11, 1996 between Donald E. Morris and
Jeanne Morris, husband and wife, as Lessor, and Lessee, as lessee (the
"Facility Lease");
WHEREAS, Lessee wants someone to manage the Facility on its behalf
and to provide certain consulting and construction supervisory services;
WHEREAS, Manager is experienced and qualified in the field of
independent living facility development and management;
WHEREAS, Lessee has determined that Manager's price is economical
in light of the range of services which it provides; and
WHEREAS, Manager is willing to operate the Facility on Lessee's
behalf and provide consulting and, under certain circumstances,
construction supervision services, pursuant to the terms and conditions set
forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, IT IS AGREED AS FOLLOWS:
I. MANAGEMENT AND CONSULTING RESPONSIBILITIES OF
MANAGER: Lessee hereby engages Manager and Manager hereby accepts
such engagement and agrees to provide management, consulting, advisory
and supervisory services to Lessee in connection with the operation of the
Facility, upon the terms and conditions set forth in this Agreement. By
entering into this Agreement, Lessee does not delegate to Manager any
powers, duties or responsibilities which it is prohibited by law from
delegating. Lessee also retains such other authority as shall not have been
expressly delegated to Manager pursuant to this Agreement. Subject to the
foregoing, Manager shall provide the following services:
A. OPERATIONAL POLICIES AND FORMS: Manager shall
implement operational policies and procedures and develop such new
policies and procedures as it deems necessary to insure the establishment
and maintenance of operational standards appropriate for the nature of the
Facility.
B. CHARGES: Manager shall establish the schedules of
recommended charges, including any and all special charges for services
rendered to the patients at the Facility. Lessee shall have the right to review
the charge schedules established by Manager.
<PAGE>
C. INFORMATION: Manager shall develop any informational
material, mass media releases, and other related publicity materials, which
it deems necessary for the operation of the Facility.
D. REGULATORY COMPLIANCE: Manager, with the assistance of
Lessee if requested by Manager, shall use its best efforts to maintain all
licenses, permits, qualifications and approvals from any applicable
governmental or regulatory authority for the operation of the Facility and to
manage the operations of the Facility in full compliance with all applicable
laws and regulations.
E. EQUIPMENT AND IMPROVEMENTS: Manager shall advise
Lessee as to equipment and improvements which are needed to maintain or
upgrade the quality of the Facility, to replace obsolete or run-down
equipment or to correct any other survey deficiencies which may be cited
during the term of this Agreement. Lessee shall review and act upon
Manager's recommendations as expeditiously as possible. Manager shall not
be liable for any cost or liability which Lessee may incur in the event
Lessee disregards Manager's recommendations. Manager shall make all
necessary and approved repairs, replacements and maintenance within the
budgetary limits set forth in the annual capital budget prepared by Manager
pursuant to Paragraph I.L. hereof and in a workmanlike and lien free
manner.
F. ACCOUNTING: Manager shall provide home office and
accounting support to the Facility. All accounting procedures and systems
utilized in providing said support shall be in accordance with the operating
capital and cash programs developed by Manager, which programs
shall conform to generally accepted accounting principles and shall not
materially distort income or loss. In addition, if Lessee so elects by notice to
Manager, Manager shall prepare or cause to be prepared all tax returns
required in connection with operation of the Facility, including payroll tax
returns (but excluding Lessee's income tax returns), and Manager at
Lessee's sole cost and expense shall cause all local, state and federal taxes
to be timely paid or contested, as appropriate. If Lessee elects to have
Manager prepare such returns, the costs incurred by Manager in preparing
such returns shall not be included in Manager's management fee, but shall
be separately reimbursed by Lessee. The taxes shall be deemed to be
Facility operating expenses and shall be paid out of the revenues of the
Facility or the working capital provided by Lessee. Nothing herein shall
preclude Manager from delegating to a third party a portion of the
accounting duties provided for in this section; provided, that such
delegation shall not relieve Manager from ultimate liability for the timely
and complete performance of the obligations provided for herein.
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G. REPORTS: Manager shall prepare and provide to the Lessee any
reasonable operational information which may from time to time be
specifically requested by Lessee, including any information needed to assist
Lessee in completing its tax returns and in complying with any reporting
obligations imposed by the owner or any mortgagees of the Facility. In
addition, (i) within thirty (30) days after the end of each calendar month,
Manager shall provide Lessee with an unaudited balance sheet of the
Facility, dated the last day of such month, and an unaudited statement
of income and expenses for such month relating to the operation of the
Facility and (ii) within ninety (90) days after the end of the fiscal year of
the Facility, Manger shall provide Lessee with unaudited financial
statements including a balance sheet of the Facility, dated the last day of
said fiscal year, and a statement of income and expense for the year then
ended relating to the operation of the Facility.
H. BANK ACCOUNTS: Manager shall open a new checking account
in the name of the Facility and shall deposit therein all money received
during the term of this Agreement in the course of the operation of the
Facility; provided, however, that during the term hereof, withdrawals
and payments from this account shall be made only on checks signed by a
person or persons designated by Manager. Lessee shall be given notice as to
the identity of said authorized signatories. All expenses incurred in the
operation of the Facility in accordance with the terms of the Budgets
submitted to Lessee under Paragraph I.L. hereof, including, but not limited
to, Facility mortgage or lease payments, payroll and employee benefits and
payment of Manager's fees, shall be paid by check drawn on this account.
Withdrawals from this account shall be made first to pay Manager's fees
and thereafter to pay Facility expenses in such order of priority as Manager
deems appropriate to the operation of the Facility. In the event the revenues
generated by the Facility are at any time insufficient to pay all of the
expenses associated with its operation, including, but not limited to,
Manager's fees, Lessee shall, within five (5) days of its receipt of a written
demand by Manager, deposit in the Facility bank account sufficient funds to
satisfy the then working capital needs of the Facility.
I. PERSONNEL: Manager shall recruit, employ, train, promote,
direct, discipline, suspend and discharge Facility personnel; establish salary
levels, personnel policies and employee benefits; and establish employee
performance standards, all as needed during the term of this Agreement to
ensure the efficient operation of all departments within and services offered
by the Facility. All of the Facility personnel shall be the employees of
Manager and all salaries, benefits, payroll taxes and other costs related to
the Facility personnel shall not be included in Manager's management fee
but shall be Facility operating expenses and paid out of the revenues of the
Facility or the working capital provided by Lessee.
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J. SUPPLIES AND EQUIPMENT: Manager shall purchase supplies
and non-capital equipment needed to operate the Facility within the
budgetary limits set forth in the annual operating budget prepared by
Manager pursuant to Paragraph I.L hereof. In purchasing said supplies and
equipment, if possible, Manager shall take advantage of any national or
group purchasing agreements to which Manager may be a party.
K. LEGAL PROCEEDINGS: Manager shall, through its legal
counsel, coordinate all legal matters and proceedings with Lessee's counsel.
L. BUDGETS: The Facility shall be operated on a fiscal year of
January I through December 31. Within forty-five (45) days prior to the
start of each fiscal year, Manager shall prepare and submit to Lessee for its
review and approval, which approval shall not be unreasonably withheld,
an annual operating budget, an annual capital expenditure budget, and an
annual cash flow projection. In the event a budget has not been agreed
upon by the beginning of the fiscal year beginning in fiscal year 1997, the
budget in effect for the prior fiscal year shall continue in effect
until the new budget is agreed upon. Thereafter, any expenditures made
during the year pursuant to said budgets and/or any expenditures on an
item-by-item basis exceeding by no more than 10% the amounts set forth
therein for the applicable expense item (the "Budget Threshold") may be
made without Lessee's prior approval. Any unbudgeted expenditures and/or
any expenditures in excess of the Budget Threshold shall be subject to
Lessee's prior approval, which approval shall not be unreasonably withheld.
M. COLLECTION OF ACCOUNTS: Manager shall issue bills and
collect accounts and monies owed for goods and services furnished by the
Facility, including, but not limited to, enforcing the rights of Lessee and the
Facility as creditor under any contract or in connection with the rendering
of any services; provided, however, that any expenses incurred by Manager
in so doing shall be treated as Facility operating expenses, which shall be
payable out of Facility funds deposited in the bank account described in
Section I.H. hereof.
N. CONSTRUCTION SUPERVISION. Lessee and Manager may
agree that Manager shall act as construction supervisor with respect to any
construction work for the Facility or on the Property after the
Commencement Date (as hereinafter defined), in which event Manager will
supervise, oversee and administer each and every aspect of any such
improvements and construction work. "Construction work" is defined as
any construction, reconstruction or alteration of any improvements
constituting part of the Property, but does not include usual maintenance
and repairs made to the Property. Without limitation of the foregoing, if
Lessee and Manager agree that Manager shall act as construction
supervisor, and subject to Lessee's approval in each instance, Manager will
(a) negotiate contracts for architectural, design, engineering and
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construction services, (b) secure any and all necessary approvals, (c)
oversee the administration of construction contracts, and (d) act as project
manager with respect to the construction work.
II. INSURANCE: Upon request, Manager, at Lessee's sole cost and
expense, shall arrange for and maintain all necessary and proper hazard
insurance covering the Facility, the furniture, fixtures, and equipment
situated thereon, and all necessary and proper malpractice and public
liability insurance for Lessee's protection and for the protection of Lessee's
officers, agents and employees. Until such a request is made and/or in the
event Manager is unable to secure insurance coverage for the Facility for
any reason whatsoever, Lessee shall be responsible for obtaining and
maintaining said insurance. In addition, Manager shall provide employee
health and worker's compensation insurance for its employees at the
Facility in accordance with Manager's policies therefor, and the costs
thereof shall be Facility operating expenses. Manager shall arrange for and
maintain all necessary and proper malpractice and public liability insurance
for the protection of itself, its officers, agents and employees. Any
insurance provided by Lessee pursuant to this paragraph shall comply with
the requirements of any applicable lease of or mortgage or deed of trust
encumbering the Facility, and any insurance provided by Manager pursuant
to this paragraph shall comply with such requirements provided that Lessee
shall have provided Manager with a copy of such lease, mortgage or deed
of trust.
III. PROPRIETARY INTEREST: The systems, methods, procedures and
controls employed by Manger and any written materials or brochures
developed by Manager to document the same are to remain the property of
Manger and are not, at any time during or after the term of this Agreement,
to be utilized, distributed, copied or otherwise employed or acquired by
Lessee, except, as authorized by Manager.
IV. TERM OF AGREEMENT: The Term of this Agreement shall be the
period commencing on November 1,1996 (the "Commencement Date") and
ending on October 31,1999, and the Term automatically shall be extended
for successive two year terms thereafter unless terminated prior to
such date (as the same may be extended) upon the occurrence of any of the
following events:
(a) either party giving the other party notice of termination not later than
thirty (30) days prior to the end of the initial term or any extended term, in
which event the Term will end on the last day of the initial term or then
current extended term, as applicable;
(b) due to the fact that 50% or more of the Facility is damaged or
destroyed or taken by condemnation proceedings or otherwise, whether or
not Lessee elects to rebuild or repair;
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(c) upon the occurrence of an Event of Default (as defined in Section V);
(d) at the option of either Lessee or Manager in the event of termination
or Lessee's assignment of the Facility Lease; provided, however, that said
option must be exercised in writing within ten ( 10) days after Lessee
accepts a bona fide offer for the purchase of Lessee' s interest in the
Facility (the "Offer"), in the case of a termination by Lessee, or within ten
(10) days after Lessee provides Manager with a copy of the Offer, in the
case of a termination by Manager, or each party shall be deemed to have
waived its right to so terminate this Agreement; or
(e) at any time by Manager or Lessee with or without cause on no less
than thirty (30) days prior written notice to the other party.
V. DEFAULT: Either party may terminate this Agreement, as specified
in this Section in the event of a default by the other party that is an "Event
of Default" as provided below.
(a) With respect to Manager, it shall be an "Event of Default"
hereunder:
(i) If Manager shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement, and such default shall
continue for a period of thirty (30) days after notice thereof shall have been
given to Manager by Lessee, which notice shall specify the event or events
constituting the default; or
(ii) If Manager shall apply for or consent to the appointment of a
receiver; trustee or liquidator of Manager of all or a substantial part of its
assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a general
assignment for the benefit of creditors, file a petition or an answer seeking
reorganization or arrangement with creditors or taking advantage of any
insolvency law, or if an order, judgment or decree shall be entered by a
court of competent jurisdiction, on the application or a creditor,
adjudicating Manger, a bankrupt or insolvent or approving a petition
seeking reorganization of manger or appointing a receiver, trustee or
liquidator of Manager or of all or a substantial part of
its assets.
(b) With respect to Lessee, it shall be an Event of Default hereunder:
(i) If Lessee shall fail to make or cause to be made any payment to
Manager required to be made hereunder (other than its working capital
obligation), and such failure shall continue for a period of thirty (30) days;
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(ii) If Lessee shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement and such default shall
continue for a period of thirty (30) days after notice, which notice shall
specify an event or events constituting the default thereof by Manager
to Lessee; provided, however, that in the case of Lessee's failure to provide
necessary working capital upon demand by Manager, it shall be deemed to
be an Event of Default hereunder if the same is not paid within ten ( 10)
days of Manager's initial demand therefor without any further notice from
Manager being required;
(iii) If Lessee shall fail to make payments, or keep any covenants,
owing to any third party which are beyond the control of Manager to make
or keep, and which would cause Lessee to lose possession of the Facility or
any personal property which would be required to operate the Facility in the
normal course; or
(iv) If Lessee shall be dissolved or shall apply for or consent to the
appointment of a receiver, trustee or liquidator of Lessee or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as they become due, make a
general assignment for the benefit or creditors, file a petition or an answer
seeking reorganization or arrangement with creditors or taking advantage of any
insolvency law, or if an order, judgment or decree shall be entered by a
court of competent jurisdiction, on the application of a creditor,
adjudicating Lessee a bankrupt or insolvent or approving a petition seeking
reorganization of Lessee or appointing a receiver, trustee or liquidator of
Lessee or of all or a substantial part of its assets.
VI. REMEDIES UPON DEFAULT:
(a) If any Event of Default by Lessee shall occur, Manager may, in
addition to any other remedy available to it in law or equity on account of
such Event of Default, forthwith terminate this Agreement, and neither
party shall have any further obligations whatsoever under this Agreement,
but Manager shall immediately be entitled to receive payment of all
amounts theretofore unpaid but earned to the date of termination.
(b) If any Event of Default by Manger shall occur, Lessee may, in
addition to any other remedy available to it in law or equity on account of
such Event of Default, forthwith terminate this Agreement, and neither
party shall have any further obligation whatsoever under this Agreement;
provided, however, that Manger shall immediately be entitled to receive
payment of all amounts theretofore unpaid but earned to date of
termination, subject to Lessee's right to receive payment of damages from
Manager.
VII. LESSEE'S INSPECTION: During the term hereof, Lessee shall
have the right, upon request and at reasonable times, to inspect the Facility
and to inspect and/or audit all books and records pertaining to the operation
thereof.
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VIII. FACILITY OPERATIONS :
A. NO GUARANTEE OF PROFITABILITY: Manager does not
guarantee that operation of the Facility will be profitable, but Manager shall
use its commercially reasonable, diligent good faith efforts to operate the
Facility in as cost efficient and profitable a manner as possible.
B. STANDARD OF PERFORMANCE: In performing its obligations
under this Agreement, Manager shall use its commercially reasonable,
diligent efforts and act in good faith and with professionalism in accordance
with acceptable and prevailing standards of health care and the policies
adopted by, and resources available to, the Facility.
C. FORCE MAJEURE: Manager will not be deemed to be in
violation of this Management Agreement if it is prevented from performing
any of its obligations hereunder for any reason beyond its control,
including, without limitation, strikes, shortages, war, acts of God, Lessee's
failure to perform its obligations hereunder, or any statute, regulation or
rule of federal, state or local government or agency thereof.
IX. WITHDRAWAL OF FUNDS BY LESSEE; MINIMUM BANK
BALANCE:
A. From time to time Lessee may withdraw the then accumulated
operating cash surplus (as determined by Manager) from the Facility bank
account subject to the right of Manager to restrict withdrawal by Lessee of
any Facility funds in accordance with the provisions of subparagraph B,
below.
B. At a11 times Manager shall maintain a minimum cash balance in
the checking account established for the Facility equal to the sum of:
(i) All current and unpaid invoices (both those received and
those pending), any mortgage or lease payments, note or installment payments,
payrolls, rents, expenses management fees and other charges incident to the
operation of the Facility which will become due and payable within the
ensuing forty-five (45) days; plus
(ii) An amount deemed necessary by Manger to be adequate for
unanticipated contingencies, which amount initially shall be $5,000 and
which amount shall be adjusted as reasonable determined by Manager.
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X. MANAGEMENT FEES:
A. PRE-COMMENCEMENT SERVICES FEE. Manager shall be
reimbursed for all of Manager's out of pocket expenses incurred in
connection with pre-commencement services rendered by Manager with
respect to the Facility, and in addition Manager shall receive a fee in the
amount of $2,000.00 with respect to such pre-commencement services.
Such reimbursement and fee shall be paid to Manager at the same time as
the first management fee payment as provided herein.
B. MANAGEMENT FEE. Throughout the term of this Agreement,
Manager shall receive a monthly fee equal to six percent (6%) of the gross
revenues generated each month by the Facility, payable on or before the
10th day of each month with respect to the gross revenues for the
prior month. For purposes hereof, "gross revenues" shall mean all revenues
generated by the Facility, but shall specifically exclude the proceeds from
the sale of any Facility equipment and any insurance and condemnation
proceeds. If the services of Manager commence or terminate (for any
reason, including those set forth in Paragraph V hereof other than on the
first day of the month, the fee shall be prorated in proportion to the number
of days for which services are actually rendered.
C. CONSTRUCTION SUPERVISION FEE. For its services
performed pursuant to Paragraph I.N. above, Manager shall receive a
construction supervision fee equal to five percent (5%) times the total
amount of construction costs approved by Lessee, payable concurrently
with the applicable payments to the contractor(s).
D. PAYMENT OF FEES. The Manager's fee provided for herein
shall be disbursed by Manager to itself out of the Facility bank account on a
priority basis prior to the payment of any other Facility expenses and prior
to the repayment of any working capital loans made by Lessee
pursuant to the terms hereof.
XI. ASSIGNMENT: Except as otherwise provided in Section I.F.
hereof, this Agreement shall not be assigned by either party without the
prior written consent of the other party, which consent shall not be
unreasonably withheld.
XII. NOTICES: All notices required or permitted hereunder shall be
given in writing by hand delivery, by registered or certified mail, postage
prepaid, by overnight delivery or by facsimile transmission (with receipt
confirmed with the recipient). Notice shall be delivered or mailed to the
parties at the following addresses or at such other places as either party
shall designate in writing.
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To Manager: Emeritus Corporation
3131 Elliott Avenue
Suite 500
Seattle, WA 98121
Phone: 206-301-4495
Fax: 206-301-4500
Attn: Jeff Mikus
To Lessee: Columbia House, LLC
3131 Elliott Avenue
Seattle, WA 98121
Phone: 206-301-4546
Fax: 206-301-4500
Attn: Dick Sontgerath
XIII. RELATIONSHIP OF THE PARTIES: The relationship of the
parties shall be that of Lessee and independent contractor and all acts
performed by Manager during the term hereof as Manager of the
Facility shall be deemed to be performed in its capacity as an independent
contractor. Nothing contained in this Agreement is intended to or shall be
construed to give rise to or create a partnership or joint venture or lease
between Lessee, its successors and assigns on the one hand, and Manager,
its successors and assigns on the other hand.
XIV. INDEMNIFICATION: Manager shall indemnify, defend and hold
Lessee harmless form any loss incurred by or damage to Lessee where such
loss or damage results form the negligence or willful misconduct of
Manager in performing its obligations under this Agreement. Lessee shall
indemnify, defend and hold Manager harmless from any loss incurred by or
damage to Manager where such loss or damage result from the negligence
or willful misconduct of Lessee in performing its obligations under the
Agreement.
XV. ENTIRE AGREEMENT: This Agreement contains the entire
agreement between the parties and shall be binding upon and inure to the
benefit of their successors and assigns, and shall be construed in accordance
with the laws of the State of Washington. This Agreement may not be
modified or amended except by written instrument signed by both of the
parties hereto.
XVI. CAPTIONS: The captions used herein are for convenience of
reference only and shall not be construed in any manner to limit or modify
any of the terms hereof.
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XVII. ATTORNEY'S FEES: In the event either party brings an action to
enforce this Agreement, the prevailing party in such action shall be entitled
to recover from the other all costs incurred in connection therewith,
including reasonable attorney's fees.
XVIII. SEVERABILITY: In the event one or more of the provisions
contained in this Agreement is deemed to be invalid, illegal or
unenforceable in any respect under applicable law, the validity,
legality and enforceability of the remaining provisions hereof shall not in
any way be impaired thereby.
XIX. CUMULATIVE; NO WAIVER: A right or remedy herein
conferred upon or reserved to either of the parties hereto is intended to be
exclusive of any other right or remedy, and each and every right and
remedy shall be cumulative and in addition to any other right or remedy
given hereunder, or now or hereafter legally existing upon the occurrence
of an Event of Default hereunder. The failure of either party hereto to insist
at any time upon the strict observance or performance of any of the
provisions of this Agreement or to exercise any right or remedy as provided
in this Agreement shall not impair any such right or remedy or be construed
as a waiver or relinquishment thereof with respect to subsequent defaults.
Every right and remedy given by this Agreement to the parties hereof may
be exercised from time to time and as often as may be deemed expedient by
the parties thereto, as the case may be.
XX. AUTHORIZATION FOR AGREEMENT: The execution and
performance of this Agreement by Lessee and Manager have been duly
authorized by all necessary laws, resolutions or corporate action, and this
Agreement constitutes the valid and enforceable obligations of Lessee and
Manager in accordance with its terms.
XXI. COUNTERPARTS: This Agreement may be executed in any
number of counterparts, each of which shall be an original, and each such
counterpart shall together constitute but one and the same Agreement.
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IN WITNESS WHEREOF, the parties have hereto caused this
Agreement to be duly executed, as of the day and year first above written.
COLUMBIA HOUSE, LLC
By: /s/ Richard K. Sontgerath
---------------------------------
Its :
EMERITUS CORPORATION
By: /s/ Raymond R. Brandstrom
------------------------------------
Its: President
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PURCHASE AND SALE AGREEMENT
This Agreement is made and entered into this 20 day of August 1996, by
and between HEARTHSTONE-5K FAMILY LIMITED PARTNERSHIP, a
Washington limited partnership ("Seller"), and EMERITUS
CORPORATION, a Washington corporation ("Purchaser").
PURCHASE AND SALE
1. On the terms and conditions set forth herein, Seller shall sell to
Purchaser and Purchaser shall purchase from Seller the following:
a. The real property situated in the state of Washington, which is more
particularly described in Exhibit A attached hereto (the "Real Property")
and the improvements on the Real Property that constitute the 42 unit
congregate care and 42-unit assisted living facility commonly known as
Hearthstone Retirement Inn and located in Moses Lake, Washington
(the "Facility").
b. All equipment, furniture, fixtures, inventory (including linens, dietary
supplies and housekeeping supplies but specifically excluding food and
other consumable inventories) and other tangible and intangible personal
property owned by Seller and located on the Real Properly or used in
connection with the operation of the Facility, including but not limited
to, entitlements, telephone numbers, any right, title or interest which Seller
may have in and to any service marks, trademarks or trade names owned or
employed by Seller in conjunction with the operation of the Facility
specifically including the name "Hearthstone Retirement Inn" and any trade
names and trade marks related thereto and goodwill associated therewith,
and all motor vehicles owned or leased by Seller and used in conjunction
with the operation of the business conducted at the Facility, but specifically
excluding cash, cash equivalents and accounts receivable for the period
prior to the Closing Date (as defined below) (the "Personal Property"),
which Personal Property is more particularly described in Exhibit B.
c. The food and other consumable inventories located at, and usable in the
operation of, the Facility on the Closing Date (the "Consumables").
Hereinafter the foregoing shall sometimes be collectively referred to as
"Seller's Assets."
PURCHASE PRICE
The purchase price payable by Purchaser to Seller for Seller's Assets shall
be Five Million Two Hundred Thousand and no/100 Dollars ($5,200,000)
and shall be payable as follows:
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a. Fifty Thousand and no/100 Dollars ($50,000) on execution of this
Agreement (the "Earnest Money") shall be delivered by Purchaser to
Chicago Title Insurance Company, Commercial Escrow, 2601 S. 35th
Street, Tacoma, WA 98409 (the "Escrow Agent"). In the
event the purchase and sale contemplated by this Agreement is
consummated, then the Earnest Money will be credited against the Purchase
Price at Closing. In the event the purchase and sale contemplated by this
Agreement fails to occur, the Earnest Money shall be remitted to Seller or
Purchaser, as appropriate, in accordance with the provisions of
Paragraph 17 hereof. The Escrow Agent shall be authorized, at Purchaser's
option, to invest the Earnest Money in such manner as Purchaser may direct
with Seller's reasonable written approval; provided, however, that the
Escrow Agent shall invest the Earnest Money only in such manner as will
allow Escrow Agent to disburse the Earnest Money on two (2) days'
notice. All interest or other earnings on the Earnest Money shall become
part of the Earnest Money and shall be disbursed to the party who becomes
entitled to the Earnest Money pursuant to the provisions of this Agreement.
b. The balance, as reduced by the Earnest Money and any accrued interest
thereon and as adjusted by the costs and prorations provided for in
Paragraph 5, shall be due and payable by wire transfer of immediately
available funds at Closing (as defined below); provided, however, that One
Hundred Twenty Five Thousand and no/100 Dollars ($125,000) of said
proceeds shall be held in escrow by Escrow Agent (the "Escrowed Funds")
for the period specified in Paragraph 26 as security for Seller's indemnity
obligations under Paragraph 15(c) with respect to Seller's representations
and warranties in Paragraphs 7(c) and 7(d), subject to the following terms
and conditions:
(i) The Escrowed Funds shall be deposited in an interest bearing account
with interest accruing to the benefit of Seller, except as otherwise ordered
by a court of law pursuant to clause (iv). The cost of such escrow shall be
shared by Seller and Purchaser on a 50-50 basis.
(ii) Subject to clauses (iii) and (iv), Purchaser shall be entitled to obtain
the release of any or all of the Escrowed Funds upon the delivery to Seller
and to Escrow Agent of a written demand therefor setting forth the nature
of Seller's breach of said representations and warranties and accompanied
by an invoice or bid showing the amount which Purchaser has expended or
proposes to expend to undertake the repair required as a result thereof.
(iii) Seller shall have a period of ten (10) days after its receipt of
Purchaser's demand for the release of any or all of the Escrowed Funds, to
advise Purchaser and the Escrow Agent if Seller objects to Purchaser's
demand and the basis therefor, which basis shall be limited to those set
forth in Paragraph 15(c).
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(iv) Seller and Purchaser shall have a period of fifteen ( 15) days after
the delivery of Seller's objection pursuant to clause (iii) to negotiate in good
faith respect to the release of the Escrowed Funds requested by Purchaser
and in the event they are unable to resolve their dispute with respect thereto
within said period, the Escrow Agent shall be required to retain the funds
which are the subject of said dispute pending a resolution of said dispute by
an arbitrator selected by mutual agreement of Seller and Purchase, or, if
Purchaser and Seller cannot agree on an arbitrator within twenty (20) days,
by a panel of three arbitrators selected within twenty (20) days after the end
of such initial twenty (20) day period, comprised of one arbitrator
selected by Seller, one arbitrator selected by Purchaser and a third arbitrator
selected by the first two arbitrators, and to release said funds, along with the
accrued interest thereon, pursuant to the order of said arbitrator.
(v) Any of the Escrowed Funds which remain in escrow at the
expiration of the two year period provided for in Paragraph 26, along with
the accrued interest thereon, shall be released by Escrow Agent after its
receipt of written notice delivered by Seller to Escrow Agent and Purchaser,
which notice shall be delivered by Seller within ten ( 10) days following the
expiration of the two year period, subject to the following: If Purchaser,
within such ten (10) day period, provides to Seller and the Escrow Agent
written notice (the "Objection Notice") that the two (2) year period
provided for in Paragraph 26 has been extended by the filing of one or more
claims within said two year period which then remains unresolved and
identifies the amount requested in such claim(s), the amount so requested in
such claim(s) shall be retained by the Escrow Agent pending the final
resolution of such claim(s) and the remaining balance of the Escrowed
Funds, if any, along with the accrued interest thereon, shall be disbursed to
Seller; provided that if Seller provides the Escrow Agent and
Purchaser with a written notice that it disputes the claim(s) (to the extent it
has not already disputed the claim(s)) or the Objection Notice, then such
dispute, and the release of the funds which are the subject of such claim(s)
and Objection Notice, shall be resolved in accordance with clauses (iii) and
(iv) of this Paragraph 2(b).
c. The purchase price shall be allocated among Seller's Assets in the
manner set forth in Exhibit C.
Except as specifically provided in this Agreement, Purchaser does not
hereby or in connection herewith assume any liability of Seller whatsoever
in relation to Seller's Assets, the Real Property, the Personal Property or the
Facility which relates to the period prior to Closing.
CLOSING
3. The Closing of the purchase and sale under this Agreement (the
"Closing") shall take place on or before October 1,1996 (provided all of the
conditions to closing set forth in Paragraphs 13 and 14 have been satisfied
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or waived) (the "Closing Date"); provided, however, that Purchaser shall
have the right on written notice to Seller delivered on or prior to the Closing
Date to extend the Closing Date for a period of up to thirty (30) days.
Closing shall occur at the offices of Escrow Agent or at such other place as
Purchaser and Seller may mutually agree. Time is of the essence hereto.
CONVEYANCE
4. Conveyance of the Seller's Assets to Purchaser shall be effected by a
Warranty Deed, Bill of Sale and Assignment of Contracts in form and
substance substantially the same as those attached hereto as Exhibits D, E
and F; provided, however, that Purchaser acknowledges and agrees that title
to the Real Property may be conveyed by Webko Partnership on behalf of
Seller and Seller acknowledges and agrees that such conveyance shall not
affect Seller's responsibility for the representations and warranties set forth
in this Purchase Agreement with respect to title to the Real Property. Fee
simple insurable title to the Real Property and indefeasible title to the
Personal Property shall be conveyed from Seller to Purchaser free and clear
of all liens, charges, easements and encumbrances of any kind, other than
the following:
a. Liens for real estate taxes not yet due and payable;
b. Such items of record as described in the Title Report (as defined below)
which are Permitted Exceptions (as defined in Paragraph 1 I(a)(ii));
c. All laws, ordinances and governmental regulations, including, but not
limited to, all applicable building, zoning, land use and environmental
ordinances and regulations; provided, however, that the provisions of this
clause (c) shall be subject to Purchaser's right to object thereto and Seller's
agreement to take corrective action in response to said objections all as
specified more fully in Paragraph 11(a)(ii); and
d. The rights of the residents of the Facility under written rental
agreements.
e. The terms of any leases or contracts assumed by Purchaser at Closing
pursuant to the terms of this Agreement to the extent the same create any
liens, charges, easements or encumbrances on Seller's Assets.
COSTS, PRORATIONS AND ADJUSTMENTS
5. The costs of the transaction and the expenses related to the ownership
and operation of the Seller's Assets shall be allocated among Seller and
Purchaser as follows:
a. Seller shall pay any transfer or documentary stamp or excise tax due on
the recording of the Deed.
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b. Seller shall pay any sales tax due on the sale of the Personal Property.
c. Seller and Purchaser shall share on a 50-50 basis the cost of the Title
Report and title insurance policy issued pursuant thereto and Purchaser
shall pay the cost of any title endorsements requested by Purchaser. Seller
shall pay the cost of the ALTA survey required
to deliver the title insurance policy.
d. Seller shall pay for the cost of the environmental assessments of the
Seller's Assets which the Purchaser elects to secure prior to Closing, it
being understood and agreed that such assessment shall be limited to a
Phase I Assessment unless the Phase I Assessment by its terms recommends
that a further assessment or investigation be conducted, in which case
such assessment shall include such further assessment or investigation as
may be recommended in the Phase I Assessment; provided, however, that
Seller shall in no event be obligated to pay more than $5,000 pursuant to
this Paragraph 5(d) and accordingly any amount owed in excess of $5,000
shall be paid by Purchaser.
e. All revenues (including but not limited to rent due from the residents of
the Facility) and expenses (including but not limited to payroll and
employee benefits) related to the ownership or operation of the Seller's
Assets shall be prorated as of the Closing Date, with Seller responsible
therefor for the period prior to the Closing Date and with Purchaser
responsible therefor for the period from and after the Closing Date.
f. Real and Personal Property taxes shall be prorated as of the Closing
Date, with Seller responsible therefor for the period prior to the Closing
Date and with Purchaser responsible therefor for the period from and after
the Closing Date.
g. Seller shall arrange for a final statement with respect to all utilities
serving the Real Property and the Facility as of the Closing Date and shall
pay all fees identified thereon and Purchaser shall arrange for all such
utilities to be billed in its name from and after the Closing Date and shall
pay all fees due therefor as of the Closing Date.
h. Purchaser and Seller shall each pay their own attorney's fees incurred in
connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transaction provided for herein.
i. Purchaser and Seller shall share recording fees related to the recording
of the Deed and any escrow fees on a 50-50 basis.
j. In the event Seller elects to cure any objections Purchaser makes to the
items described in the Title Report or the UCC-1 search report, then Seller
shall pay the cost of obtaining and recording any releases necessary to
deliver title to the Seller's Assets in accordance with the terms of this
Agreement. Seller shall have the right to use the proceeds from the
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transaction contemplated by this Agreement to discharge all such liens and
to pay all costs and prorations for which it is responsible hereunder.
POSSESSION
6. At Closing, Purchaser shall be entitled to possession of the Seller's
Assets, subject only to the rights of the residents of the Facility under the
Facility Leases (as defined below) and the rights of any parties to the
Operating Contracts (as defined below) but only to the extent such
Operating Contracts grant such parties any possessory rights with respect to
the Seller's Assets.
REPRESENTATIONS AND WARRANTIES
7. Seller hereby warrants and represents to Purchaser that:
a. Status of Seller. Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Washington.
b. Seller's Authority. Seller has full power and authority to execute and to
deliver this Agreement and all related documents, and to carry out the
transaction contemplated herein. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by creditors' rights laws and applicable
principles of equity. The execution of this Agreement and the
consummation of the transaction contemplated herein do not result in a
breach of the terms and conditions of nor constitute a default under or
violation of Seller's Partnership Agreement or any law, regulation,
court order, mortgage, note, bond, indenture, agreement, license or other
instrument or obligation to which Seller is now a party or by which Seller
or any of the assets of Seller may be bound or affected.
c. Title. Seller has good and insurable fee simple title to the Real Property,
and the Facility, which at Closing will be subject only to the easements,
reservations and encumbrances, if any, permitted under Paragraph 4, and
good and indefeasible title to the Personal Property free and clear of all
leases, liens and encumbrances other than any leases, liens and
encumbrances evidenced by any of the Operating Contracts assumed by
Purchaser at Closing. The Personal Property is, and at Closing will be, in
good operating condition and repair and accordingly in the same or better
condition and repair, and in sufficient quantity and quality to meet all
governmental requirements applicable to the Facility, as on the date
of Purchaser's inspection thereof pursuant to Paragraph 11 (a)(iv).
d. The Real Property. The Facility is located on that certain parcel of land
more particularly described in Exhibit A attached hereto. The Facility and
the roof and all major mechanical systems at the Facility, including, but not
limited to, the Air Conditioning, Electrical and Heating and Ventilating
Systems, are, and at Closing shall be, in the good operating condition and
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repair and accordingly in the same or better condition and repair as
on the date of Purchaser's inspection thereof pursuant to Paragraph 11
(a)(iv) and have a remaining useful life of no less than two (2) years with
nothing more than ordinary maintenance and repair thereof being required
to be undertaken by Purchaser with respect thereto.
e. Necessary Action. Seller will proceed with all due diligence to take all
action and obtain all consents prior to Closing necessary for it to lawfully
enter into and carry out the terms of this Agreement.
f. Taxes and Tax Returns. All tax returns, reports and filings of any kind or
nature required to be filed by Seller prior to Closing with respect to its
ownership and operation of the Facility and its ownership of the Real
Property and the Personal Property have been properly completed and
timely filed in material compliance with all applicable requirements
and all taxes or other obligations which are due and payable by Seller have
been timely paid.
g. Litigation. There is no litigation, investigation, or other proceeding
pending or, to the best of Seller's knowledge, threatened against or relating
to Seller, its properties or business, which is material to Seller's Assets, the
Facility, the Real Property or the Personal Property or to this Agreement, or
which would prevent Seller from performing its obligations hereunder, and
the transaction contemplated herein has not been challenged by any
governmental agency or any other person, nor does Seller know or have
reasonable grounds to know, of any basis for any such litigation,
investigation or other proceeding. For purposes hereof, litigation, an
investigation or other proceeding shall be deemed to be pending if the
same has been served on Seller or Seller has otherwise been advised either
orally or in writing of the pendency thereof.
h. Books and Records. All of the books and records maintained by Seller
with respect to its ownership and/or operation of the Seller's Assets are true
and correct in all material respects.
i. The Facility Leases. Attached hereto as Exhibit G is a true and correct
copy of an exemplar of the forms of rental or admission agreement entered
into by Seller with each of the current residents of the Facility and each of
the rental or admission agreements entered into by Seller is in substantially
the form as the exhibit attached hereto (the "Facility Leases"), modified
only by ordinary rent increases. A true and correct copy of each of the
Facility Leases entered into by Seller with each of the current residents of
the Facility has been provided by Seller to Purchaser. Each of the Facility
Leases executed by Seller with the residents of the Facility is in full force
and effect and none of the Facility Leases has been modified or amended
except as set forth in Exhibit G. Seller has no knowledge or notice that
it is in default of any of its obligations under the Facility Leases nor is
Seller aware of any default or any action which, With the passage or time or
the giving of notice or both would constitute a default, under the Facility
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Leases by any of the residents who are parties thereto. At Closing Seller
shall deliver to Purchaser duly executed assignments of the Facility Leases.
j. Rent Roll. Attached hereto as Exhibit H is a true and correct rent roll as of
July 1, 1996, which identifies each of the residents of the Facility, the
monthly rent currently being paid by each such tenant and the date to which
said rent has been paid and, in the event of any rent delinquencies, an
explanation of the reason therefor and the efforts being undertaken
by Seller to collect said rent. Seller shall update the rent roll on a monthly
basis between the date hereof and the Closing Date. Seller further represents
and warrants that it has the right under the Facility Leases to increase the
rents and related fees and charges paid by the residents of the Facility on no
more than sixty (60) days notice and that it has not agreed orally or in
writing to provide room, board or other services to any resident or
prospective resident for a reduced or nominal fee or without charge.
k. Liens. There are no mechanics', materialmen's or similar liens presently
claimed or, to the best of Seller's knowledge, which will be claimed against
the Seller's Assets for work, performed or commenced prior to the date
hereof at the request of Seller or of which Seller has knowledge, Seller
having made or caused to be made arrangements for payment of all
those improvements now under construction or development.
l. Environmental Matters. Except in accordance with, and in full
compliance with, any and all applicable governmental laws, regulations and
requirements (collectively, the "Environmental Laws") relating to
environmental and occupational health and safety matters and
hazardous materials, substances or wastes (as defined from time to time
under any applicable federal, state or local laws, regulations or ordinances),
Seller has not released into the environment, or discharged, placed or
disposed of any such hazardous materials, substances or wastes or caused
the same to be so released into the environment or discharged, placed or
disposed of at, on or under the Seller's Assets. Seller has not installed any
underground storage tanks on the Real Property and Seller has not used the
Real Property as a dump for hazardous waste material. To the actual
knowledge of Seller's general partner based on a review of any Phase I or
other environmental assessments which may be in Seller's possession or
under Seller's control as of the date hereof and on any other information
actually known by Seller's general partner, (i) no hazardous materials,
substances or wastes are located on the Real Property or the Facility or have
been released into the environment or discharged, placed or disposed of in,
on or under the Real Property or the Facility except in accordance with
applicable laws and regulations; (ii) no underground storage tanks are
located on the Real Property; (iii) the Real Property has not been used by
Seller as a dump for waste material; and (iv) the Facility and the prior uses
of the Real Property and the Facility by Seller at all times complied with all
Environmental Law.
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m. Employees. Unions. None of the employees of the Facility are members
of a labor union or subject to collective bargaining agreement with respect
to their employment at the Facility. There are no labor disputes or
grievances pending with respect to the operations at the Facility, except as
otherwise provided in Exhibit I. For purposes hereof, a labor dispute
or grievance shall be deemed to be pending if the same has been served on
Seller or Seller has otherwise been advised either orally or in writing of the
pendency thereof.
n. Compliance with Law
(i) To the best knowledge of the Seller's general partner, the Seller's
Assets are in compliance with all currently applicable municipal, county,
state and federal laws, regulations, ordinances, standards and orders and
with all municipal, health, building and zoning by-laws and regulations
(including, without limitation, the building and zoning codes) where
the failure to comply therewith or to obtain a waiver therefrom could have a
material adverse effect on the business, property, condition (financial or
otherwise) or operation of the Seller's Assets;
(ii) There are no outstanding deficiencies or work orders of any
authority having jurisdiction over the Seller's Assets requiring conformity
to any applicable statute, regulation, ordinance or by-law pertaining thereto;
and
(iii) Seller is not aware of any claim, requirement or demand of any
agency supervising or having authority over the Facility to rework or
redesign it or to provide additional furniture, fixtures or equipment so as to
conform to or comply with any existing law, code or standard which has not
been fully satisfied prior to the date hereof or which will not be
satisfied prior to the Closing Date.
o. Operating Contracts. Set forth in Exhibit J are true and correct copies of
all operating contracts (including personal property leases) to which Seller
or the Facility is a party in connection with the operation of the Facility (the
"Operating Contracts"). Each of the Operating Contracts is in full force and
effect and none of the Operating Contracts has been modified or amended
except as set forth in Exhibit J. Seller has no notice or knowledge that it or
the Facility, as applicable, is in default of any obligations under the
Operating Contracts nor is Seller aware of any default or any action which,
with the passage or time or the giving of notice or both would constitute a
default, under the Operating Contracts by any other party thereto. At
Closing Seller shall deliver, or cause to be delivered, to Purchaser duly
executed assignments of any of the Operating Contracts which Purchaser
elects to assume pursuant to Paragraph II (a)(v).
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p. The Facility The Facility is a congregate care and assisted living facility
licensed, with respect to the assisted living unit included therein, by the
State of Washington as a boarding home with a total of 42 licensed units
and 42 unlicensed congregate care units. The Facility is certified to
participate in Medicaid. There is no action pending or, to the best
knowledge of Seller, recommended by the appropriate state agency having
jurisdiction thereof, to terminate the Facility's license or to take any action
of any other type which would have a material adverse effect on the
Facility, its operations or business.
q. Inventory. All inventories of non-perishable food; central supplies, linen,
housekeeping and other supplies located at the Facility are in sufficient
condition and quantity to operate the Facility at normal capacity for two
weeks. All inventories of perishable food are at the level normally
maintained at the Facility.
r. Disclosure. No representation or warranty by Seller contained in this
Agreement and no statement contained in any certificate, list, exhibit, or
other instrument furnished or to be furnished to Purchaser pursuant hereto,
or in connection with the transaction contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the
statements contained herein or therein not misleading.
The representations and warranties of Seller in this Paragraph 7 shall be
true and correct in all respects, are made by Seller both as of the date hereof
and as of the date of Closing.
8. Purchaser hereby warrants and represents to Seller that:
a. Status of Purchaser. Purchaser is a corporation duly organized and
validly existing under the laws of the state of Washington and is in good
standing under the laws thereof.
b. Authority. Subject to Purchaser obtaining the approval of its Board of
Directors on or before September 1,1996, Purchaser has full power and
authority to execute and to deliver this Agreement and all related
documents, and to carry out the transactions contemplated
herein. This Agreement is valid, binding and enforceable as against
Purchaser in accordance with its terms, except as such enforceability may
be limited by creditors' rights laws and applicable principles of equity. The
execution of this Agreement and the consummation of the transaction
contemplated herein do not result in a breach of the terms and conditions of
nor constitute a default under or violation of Purchaser's Articles of
Incorporation or By-laws or any law, regulations, court order, mortgage,
note, bond, indenture, agreement, license or other instrument or obligation
to which Purchaser is a party or by which Purchaser or any of the assets or
Purchaser may be bound or affected.
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c. Litigation. There is no litigation, investigation or other proceeding
pending or, to the best of Purchaser's knowledge, threatened against or
relating to Purchaser, its properties or business which is material to this
Agreement, or which would prevent Purchaser from performing its
obligations hereunder, nor does Purchaser know or have reasonable
grounds to know of any basis for any such action. For purposes hereof,
litigation, an investigation or a proceeding shall be deemed to be pending if
the same has been served on Purchaser or Purchaser has been advised either
orally or in writing of the pendency thereof.
d. Necessary Action. Purchaser will proceed with all due diligence to take
all action and obtain all consents prior to Closing necessary for it to
lawfully enter into and carry out the terms of this Agreement, including, but
not limited to, using its best efforts to obtain the consent of its Board of
Directors.
e. Disclosure. No representation or warranty by Purchaser contained in this
Agreement and no statement contained in any certificate, list, exhibit, or
other instrument furnished or to be furnished to Seller pursuant hereto, or in
connection with the transaction contemplated hereby, contains or will
contain any untrue statement of a material fact, or omits or will omit
to state any material facts which are necessary in order to make the
statements contained herein or therein not misleading.
The representations and warranties of Purchaser in this Paragraph 8 shall
be true and correct in all respects, are made by Purchaser both as of the date
hereof and as of the date of Closing.
9. BROKER
Each party hereby represents and warrants to the other party that it has not
contacted or entered into any agreement with any real estate broker, agent,
finder, or any other party in connection with this transaction and that it has
not taken any action which would result in any real estate broker's, finder
or other fees or commissions being due and payable to any other party with
respect to the transaction contemplated by this Agreement, other than Carey
Dean Erwin, who has been retained and shall be compensated by Seller.
Each party hereby indemnifies and agrees to hold the other party harmless
from any loss, liability, damage, cost, or expense (including reasonable
attorney's fees) resulting to the other party by reason of a breach of the
representation and warranty made by the indemnifying party in this
paragraph. Notwithstanding anything to the contrary contained in this
Agreement, the indemnity set forth in this paragraph and any sums due
pursuant to such indemnity shall constitute separate agreements in causes of
action in addition to any liquidated damages provided for in this
Agreement.
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COVENANTS
10. Seller
a. Pre-Closing. Between the date hereof and the Closing Date, except as
contemplated by this Agreement or with the consent of Purchaser:
i. Seller will file all tax returns, reports and filings of any kind or nature
required to be filed by Seller and will timely pay all taxes or other
obligations which are due and payable with respect to Seller's Assets;
ii. Seller will not take any action inconsistent with its obligations under
this Agreement or which could hinder or delay the consummation of the
transactions contemplated by this Agreement, and Seller will continue until
the Closing to fulfill any obligations which it may have under the Facility
Leases;
iii. Seller will operate the Facility only in the ordinary course and will
continue to maintain and repair the Facility and the Personal Property in the
same manner as previously done by Seller;
iv. Seller will take all reasonable action to preserve the goodwill of the
residents of the Facility;
v. Seller will not make any material change in the operation of the
Facility nor sell or agree to sell any of the items which comprise the
Personal Property nor otherwise enter into an agreement materially
affecting any of the Seller's Assets;
vi. Seller will use its reasonable efforts to retain the services and
goodwill of the employees located at or connected with the operation of the
Facility;
vii. Seller will maintain in force the existing hazard and liability
insurance policies, or comparable coverage, for the Seller's Assets as now
in effect;
viii. Seller will not increase the compensation or other benefits or
bonuses payable or to become payable to any of the Seller's employees
connected with the operation of the Facility, except for increases, if any,
substantially in accordance with existing employment practices disclosed to
Purchaser, if any or except for increases which will not affect Purchaser's
operations at the Facility after closing;
ix. Seller will not enter into any contract or commitment affecting the
Seller's Assets except in the ordinary course of business and Seller will
advise Purchaser of any contracts or commitments which it enters, whether
in the ordinary course of business or otherwise;
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x. During normal business hours, Seller will provide Purchaser and its
agents with access (in the company of a representative of Seller) on 24
hours notice to the Real Property and the Facility, provided Purchaser does
not interfere with the operation of the Facility and provided Purchaser uses
its best efforts not to disturb any residents of the Facility during the course
of such inspections and at such times Seller shall permit Purchaser to
inspect the books and records and the physical and structural condition of
the Facility, the Real Property and the Personal Property, which inspection
shall be completed by Purchaser prior to September 7, 1996;
xi. Seller will timely pay all obligations which are due and payable with
respect to the Seller's Assets;
xii. Seller will operate the Facility in substantial compliance with all
applicable municipal, county, state and federal laws, regulations,
ordinances, standards and orders as now in effect (including without
limitation, the building and zoning codes as currently applied with respect
thereto) and with the Environmental Laws, where the failure to comply
therewith could have a material adverse effect on the business, property,
condition (financial or otherwise) or operation of the Facility or on the
Seller's Assets;
xiii. Seller will take all reasonable action to achieve substantial
compliance with any laws, regulations, ordinances, standards and orders
applicable to the Seller's Assets which are enacted after execution of this
Agreement and prior to Closing and which require compliance prior to
Closing;
xiv. Seller will proceed with all due diligence to secure any consents
which may be necessary for the assignment of the Facility Leases and
Operating Contracts;
xv. As soon as practicable after the date hereof but in no event later than
twenty (20) days following full execution of this Agreement, Seller will (a)
deliver to Purchaser a UCC-1 search report (herein so called), (b) shall
cause Chicago Title Insurance Company to furnish to Purchaser a current
title commitment (the "Title Report") for the issuance to Purchaser of
an extended coverage Owner's title insurance policy with a value equal to
the purchase price (the "Title Policy"), insuring Purchaser's interest in the
Real Property and the Facility, subject to no exceptions other than those of
the usual printed exceptions, which are acceptable to Purchaser and the
Permitted Exceptions (hereafter defined) and (c) arrange with a survey firm
acceptable to Purchaser for the preparation and delivery of an ALTA
Survey of the Real Property and the Facility (the "Survey");
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xvi. Seller will provide Purchaser within ten (10) days after execution of
this Agreement with copies of any environmental reports, structural report
or geological reports which may be in Seller's possession with respect to the
Facility and the Real Property, it being understood and agreed, however,
that Seller makes no representation or warranty as to the accuracy of any
such reports; and
xvii. Seller will cooperate with Purchaser in any efforts which Purchaser
may undertake to audit Seller's financial statements with respect to the
Facility for the periods prior to the Closing if and to the extent such an audit
is required for Purchaser's compliance with applicable securities laws
provided that Purchaser shall pay all costs thereof.
b. Closing. On the Closing Date, if Purchaser has fully performed its
obligations pursuant to the terms of this Agreement, Seller agrees that it
will:
i. Execute and deliver to Purchaser a good and sufficient Warranty Deed
to the Real Property (including the Facility), Bill of Sale with respect to the
Personal Property and such endorsements, assignments and other
instruments of transfer and conveyance as shall be necessary to transfer and
assign Seller's Assets to Purchaser as herein provided;
ii. Deliver to Purchaser a certificate dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably specify the fulfillment
of the conditions set forth in Paragraph(s) 13(a) and (b) subject to the
limitations set forth in Paragraph 26 and setting forth the incumbency of the
partners executing documents on behalf of Seller, a copy of the
resolutions adopted by Seller's partners authorizing the transaction provided
for herein and the execution of this Purchase Agreement and the other
documents contemplated herein;
iii. Deliver the tangible property included in the Seller's Assets to
Purchaser in the condition and repair required by the terms of this
Agreement;
iv. Execute and deliver to Purchaser an assignment and assumption
agreement with respect to the Facility Leases (the "Facility Leases
Assignment Agreement");
v. Pay its share of the Closing costs, including, but not limited to, the
Title Report, Title Policy and Survey described in Paragraph 10(a)(xv);
vi. Execute and deliver to Purchaser an Assignment and Assumption
Agreement with respect to any of the Operating Contracts which Purchaser
elects to assume at Closing pursuant to Paragraph 11(a)(v) (the "Operating
Contract Assumption Agreement");
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vii. Deliver to Purchaser the Resident Deposits (as defined in Paragraph
19);
viii. Deliver to Purchaser the Benefits Schedule (as defined in Paragraph
18) and pay the Vacation Pay to the employees in accordance with the
provisions of Paragraph 18; and
ix. Deliver to Purchaser evidence of the designation of a duly authorized
representative to act with full power and authority on behalf of Seller with
respect to any post-closing obligations imposed on Seller hereunder.
c. Post-Closing. After the Closing of this Agreement, Seller agrees that, at
Purchaser's sole cost and expense, it will take such actions and properly
execute and deliver to Purchaser such further instruments of assignment,
conveyance and transfer as, in the reasonable opinion of counsel
for Purchaser and Seller, may be reasonably necessary to assure, complete
and evidence the full and effective transfer and conveyance of Seller's
Assets and cooperate with Purchaser in any efforts which it may undertake
to audit Seller's financial statements with respect to the Facility for the
periods prior to the Closing if and to the extent such an audit is required for
Purchaser's compliance with applicable securities laws.
11. Purchaser
a. Pre-Closing. Between the date hereof and the Closing Date, except as
contemplated by this Agreement or with the consent of Seller, Purchaser
agrees that:
i. Purchaser will not take any action inconsistent with its obligations
under this agreement or which could hinder or delay the consummation of
the transaction contemplated by this Agreement;
ii. Within ten ( 10) days after its receipt of the UCC-1 Search Report, the
Title Report and the Survey, Purchaser shall advise Seller in writing of its
objections, if any, to each of the UCC-1 Search Report, the Title Report and
the Survey. In the event Purchaser fails to notify Seller in writing of
Purchaser's objections within said ten ( 10) day period, Purchaser shall be
deemed to have waived its right to object. Within five (5) days of Seller's
receipt of Purchaser's objections, Seller shall advise Purchaser whether it
intends to correct the defects to which Purchaser has objected. Seller shall
be obligated to act in good faith in responding to Purchaser's title
objections; provided, however, that if Seller fails to respond to Purchaser's
objections within the five day period provided for herein, Seller shall be
deemed to have elected not to take any corrective action with respect to the
matters which are the subject thereof. For purposes hereof, Seller shall be
deemed to have failed to act in good faith if, and only if, its refuses to
correct any matter which is the subject of such title objections where the
only costs to it in doing are normal filing or recording fees or delivery
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charges and where the objections relate to liens which appear of record but
relate to previously discharged debt. If Seller refuses to correct some or all
of such defects, Purchaser shall have five (5) days to advise Seller of its
decision to close, notwithstanding the defects, in which case Purchaser shall
waive any and all claims against Seller relating to such defects,
or to terminate this Agreement, in which case neither party shall have any
further rights or obligations hereunder, other than Seller's obligation to
return or to direct the return of Purchaser's Earnest Money. Any matter
reflected in the UCC-1 Search Report, the Title Report or the Survey not
objected to in accordance with the terms hereof or any objection
raised by Purchaser and thereafter waived by Purchaser in accordance with
the terms hereof shall be deemed accepted by Purchaser and to be
"Permitted Exceptions" (herein so called). Notwithstanding anything
contained herein to the contrary, in the event Seller requires
additional time to prepare either the Survey or the title Report, then Seller
shall have such additional time to deliver the same to Purchaser, however,
in no event shall such extension be longer than fifteen (15) additional days;
iii. Purchaser will proceed with all due diligence to obtain all consents
and approvals necessary to permit the consummation of the transaction
contemplated by this Agreement and/or necessary to permit Purchaser to
own and to operate the Facility, including, but not limited to, a license from
the Washington Department of Health;
iv. Purchaser will proceed with all due diligence and at its sole cost and
expense and without interference with any of the residents of the Facility to
conduct such investigations with respect to Seller's Assets as it deems to be
reasonably necessary in connection with its purchase thereof, including, but
not limited to, zoning investigations, soil studies, environmental
assessments, seismic assessments, wetlands reports and investigations of
Seller's and the Facility's books and records and operations, including a
review of the licensure files maintained by the State of Washington with
respect to the Facility to the extent the same are publicly available, and
structural inspections and to complete the same by (A) in the case of any
physical inspections of the Seller's Assets included in Purchaser's
Due Diligence Review (as defined below), September 7,1996 and (B) with
respect to any other aspects of Purchaser's Due Diligence Review the earlier
to occur, (i) forty five (45) days after the date of this Agreement or (ii) the
Closing Date, provided no investigations will be physically intrusive on the
Real Property or the Facility unless Seller consents thereto, which consent
shall not be unreasonably withheld (the "Due Diligence Review");
provided, however, nothing herein shall be construed as amending or
modifying in any manner the representations or warranties of Seller set
forth in this Agreement or relieving Seller from its obligation to ensure that
said representations and warranties are true and correct at Closing, which
representations and warranties shall be separate from and unaffected by
Purchaser's Due Diligence Review except to the extent that Seller is able to
demonstrate that Purchaser acquired actual knowledge prior to Closing of
any facts or circumstances inconsistent with any of Seller's representations
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and warranties, Seller failed to take any corrective action with respect to
said inconsistency and Purchaser nonetheless elected to close the
transaction provided for herein; and provided, further, that Purchaser shall
maintain the confidentiality of any documents or information obtained by it
during the course of its Due Diligence Review and shall return the same to
Seller in the event the transaction provided for herein fails close for any
reason whatsoever. Purchaser shall indemnify, defend and hold Seller and
the Seller's Assets harmless of and from any and all losses, liabilities,
costs, expenses (including without limitation, reasonable attorney's fees and
costs of court at trial and on appeal), damages, liens, claims (including,
without limitation mechanics' or materialmans' liens or claims of liens),
actions and causes of action arising from or relating to Purchaser's (or
Purchaser's Agents, employees, or representatives) entering on the Real
Property and/or the Facility to test, study, investigate or inspect the same or
any part thereof, whether pursuant to this paragraph or otherwise. The
foregoing indemnity shall expressly survive the Closing or the earlier
termination of this Agreement; and
v. Within fifteen ( 15) days after the later of the date hereof or the date
of their delivery to Purchaser, Purchaser will advise Seller in writing which,
if any of the Operating Contracts it elects to assume as of the Closing Date.
b. Closing. On the Closing Date, if Seller has fully performed its obligations
pursuant to this Agreement, Purchaser agrees that it will:
i. Pay the balance of the Purchase Price due at Closing;
ii. Pay its share of the Closing costs as herein provided;
iii. Deliver to Seller a certificate of a responsible officer dated as of
the Closing Date, certifying in such detail as Seller may reasonably specify the
fulfillment of the conditions set forth in Paragraph(s) 14(a) and (b) subject
to the limitations set forth in Paragraph 26 and setting forth the incumbency
of the officers executing documents on behalf of Purchaser, a copy of the
resolutions adopted by Purchaser's Board of Directors authorizing the
transaction provided for herein and the execution of this Purchase
Agreement and the other documents contemplated herein and attaching a
certificate of good standing issued by the Washington Secretary of State
within no more than thirty (30) days prior to Closing;
iv. Execute and deliver to Seller the Operating Contract Assumption
Agreement, if applicable; and
v. Execute and deliver to Seller the Facility Leases Assignment
Agreement.
c. Post-Closing. After the Closing of this Agreement, Purchaser agrees that
it will:
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i. Provide Seller with access during normal business hours to any books
or records which Seller may need to file or to defend tax returns or other
filings filed prior or subsequent to the Closing Date which relate to periods
prior to the Closing Date; and
ii. Take such actions and properly execute and deliver such further
instruments as Seller may reasonably request to assure, complete and
evidence the transaction provided for in this Agreement.
12. Mutual
Following the execution of this Agreement, Purchaser and Seller agree:
a. If any event should occur, either within or without the knowledge or
control of Purchaser or Seller, which would prevent fulfillment of the
conditions to the obligations of any party hereto to consummate the
transaction contemplated by this Agreement, to use its or their reasonable
efforts to cure the same as expeditiously as possible; and
b. To cooperate fully with each other in preparing, filing, prosecuting, and
taking any other actions which are or may be reasonable and necessary to
obtain the consent of any governmental instrumentality or any third party or
to accomplish the transaction contemplated by this Agreement.
CONDITIONS
13. All obligations of Purchaser under this Agreement are subject to
fulfillment, prior to or at Closing, of each of the following conditions, any
one or all or which may be waived in writing by Purchaser:
a. Seller's Representations and Warranties True at Closing. Seller's
representations and warranties contained in this Agreement or in any
certificate delivered in connection with this Agreement or the transactions
contemplated herein shall be true in all material respects at and as of the
date of Closing as though such representations and warranties were then
again made.
b. Seller's Performance. Seller shall have performed all of its obligations
under this Agreement that are to be performed prior to or at Closing to the
extent the same have not been waived by Purchaser in accordance with the
terms hereof.
c. No Defaults. Seller shall not be in default, where said default cannot be
cured by Closing, under any mortgage, contract, lease or other agreement to
which Seller is a party or by which Seller is bound and which affects or
relates to the Real Property, the Personal Property or the Facility, including,
but not limited to, the Facility Leases.
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d. Due Diligence Review. Purchaser shall be satisfied with the results of its
Due Diligence Review, including, but not limited to the results of an EPA
Phase I Assessment of the Real Properly and the Facility within the period
specified in Paragraph I 1(a) (iv); provided, however, nothing herein shall
be construed as amending or modifying in any manner the representations
or warranties of Seller set forth in this Agreement or relieving Seller from
its obligation to ensure that said representations and warranties are true and
correct at Closing, which representations and warranties shall be separate
from and unaffected by Purchaser's Due Diligence Review except to the
extent that Seller is able to demonstrate that Purchaser acquired actual
knowledge prior to Closing of any facts or circumstances inconsistent with
any of Seller's representations and warranties, Seller failed to take any
corrective action with respect to said inconsistency and Purchaser
nonetheless elected to close the transaction provided for herein. In the event
Purchaser elects to terminate this Agreement within the period specified in
Paragraph 11 (a)(iv) and this Paragraph 13(d), the parties shall have no
further rights or obligations hereunder, other than Purchaser's right to the
return of its Earnest Money and Seller's obligation to pay any title
cancellation and UCC search fees incurred as a result of such termination.
e. Title. The Title Insurer shall issue to Purchaser as of the date of Closing,
an Owner's extended coverage policy of title insurance for the Real
Property and the Facility in accordance with the requirements of Paragraph
4.
f. Survey. Purchaser shall be satisfied as to the results of the ALTA Survey
in accordance with the provisions of Paragraph 11 (a)(ii).
g. UCC Search. Purchaser shall be satisfied with the results of the UCC
search conducted by Seller pursuant to Paragraph 10(a)(xv) in accordance
with the provisions of Paragraph 11 (a)(ii).
i. Approvals. Purchaser shall have received all consents and approvals as
may be necessary for it to own and to operate the Facility, including, but
not limited to, the issuance by the Washington Department of Health to
Purchaser of a license to operate the Facility and the approval of Purchaser's
Board of Directors; provided, however, Purchaser shall be deemed to have
waived the condition with respect to the approval of its Board of Directors
unless Purchaser has advised Seller on or before September I, 1996 that its
Board of Directors has refused to approve the transaction.
j. Financing Commitment. Purchaser shall have secured a written
commitment from an institutional lender to finance the transaction provided
for herein on terms acceptable to Purchaser [and all of the documents
necessary to implement said financing commitment shall have been
executed by Purchaser and said lender and delivered into escrow].
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Subject to the limitations set forth in the foregoing Paragraph 13, in the
event any of the foregoing conditions is not satisfied by Seller or Purchaser,
as appropriate, or waived by Purchaser prior to Closing, Purchaser shall
have the right to terminate this Agreement in accordance with the
provisions of Paragraph 17.
14. CONDITIONS TO SELLER'S OBLIGATIONS
All obligations of Seller under this Agreement are subject to the
fulfillment, prior to or at Closing, of each of the following conditions, any
one or all of which may be waived by Seller in
writing:
a. Purchaser's Representations and Warranties True at Closing. Purchaser's
representations and warranties contained in this Agreement or in any
certificate or document delivered in connection with this Agreement or the
transactions contemplated herein shall be true in all material respects at and
as of the date of Closing as though such representations and warranties
were then again made.
b. Purchaser's Performance. Purchaser shall have performed its obligations
under this Agreement that are to be performed prior to or at Closing to the
extent the same have not been waived by Seller in accordance with the
terms hereof.
INDEMNIFICATION
15. Seller shall indemnify and hold Purchaser harmless from and against:
a. Except as otherwise provided in this Agreement, any and all obligations
relating to the ownership of Seller's Assets and the operation of the Facility
which exist at the Closing Date, including, but not limited to (i) any
obligations of Seller which are to be paid or performed prior to the Closing
Date under the Facility Leases or the Operating Contracts which Purchaser
elects to assume at Closing, (ii) any obligations of Seller which are to be
paid or performed prior to the Closing Date with respect to the Resident
Deposits and (iii) any matters related to or arising from any prior
bankruptcy or foreclosure proceedings related to the Seller's Assets;
b. Any and all damage, loss or liability arising either before or after the
Closing Date under any of the Operating Contracts which Purchaser does
not elect to assume at Closing;
c. Subject to the limitations set forth in Paragraph 26, any and all damage,
loss, or liability resulting from any misrepresentation of a material fact,
breach of warranty or nonfulfillment of any agreement on the part of Seller
under this Agreement or from any misrepresentation in any certificate
furnished or to be furnished to Purchaser hereunder; provided, however,
that Seller's liability for breach of the representations and warranties set
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forth in Paragraphs 7(c) and 7(d) shall be limited to the amount of the
Escrowed Funds and to repairs necessitated by a defect in workmanship or
materials or by Seller's deferred maintenance and shall not, in any event,
apply, to (i) repairs required due to fire or other casualty, (ii) repairs
required due to actual wear and tear to, Purchaser's misuse of, or
Purchaser's failure to maintain with ordinary maintenance, the Seller's
Assets, (iii) the cost of any repairs which are covered by insurance proceeds
or manufacturer's, suppliers or contractor's warranties which are made
available to Purchaser or (iii) repairs required due to the acts of any third
party, other than Seller or Purchaser, or any Act of God.
d. Any and all liability or loss arising out of or relating to any failure in
connection with the transaction contemplated herein to comply with the
requirements of any laws or regulations relating to bulk sales or transfers;
and
e. Any and all actions, suits, proceedings, demands, assessments,
judgments, reasonable costs, and other reasonable expenses, including, but
not limited to, reasonable attorney's fees, incident to any of the foregoing.
For purposes of Paragraph 15(a), an obligation shall be deemed to "exist"
as of the Closing Date if it relates to events which occurred prior to the
Closing Date even if it is not asserted until after the Closing Date.
16. Purchaser shall indemnify and hold Seller harmless from and against:
a. Except as otherwise provided in this Agreement, any and all obligations
relating to the ownership of the Seller's Assets and the operation of the
Facility from and after the Closing Date, including, but not limited to any
obligations under any of the Facility Leases or Operating Contracts which
Purchaser elects to assume at Closing and any obligations with respect to
the Resident Deposits;
b. Subject to the limitations set forth in Paragraph 26, any and all damage,
loss or liability resulting from any misrepresentation of a material fact,
breach of warranty or nonfulfillment of any agreement on the part of
Purchaser under this agreement or from any misrepresentation in any
certificate furnished or to be furnished to Seller hereunder;
c. Any and all damage, loss or liability resulting from the conduct by or
the negligence or willful misconduct of Purchaser in performing its Due
Diligence Review; and
d. Any and all actions, suits, proceedings, demands, assessments,
judgments, reasonable costs and other reasonable expenses, including, but
not limited to, reasonable attorney's fees, incident to any of the foregoing.
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TERMINATION
17. a. This Agreement may be terminated and the transaction contemplated
herein abandoned at any time prior to Closing:
i. By mutual agreement of the parties;
ii. By Seller, if any of the conditions set forth in Paragraph 14 shall have
become incapable of fulfillment prior to the Closing Date or such earlier
date as may be specifically provided for the performance thereof (as the
same may be extended) through no fault of Seller and the same shall not
have been waived by Seller;
iii. By Purchaser, if any of the conditions set forth in Paragraph 13 shall
have become incapable of fulfillment prior to the Closing Date or such
earlier date as may be specifically provided for the performance thereof (as
the same may be extended) through no fault of Purchaser and the same shall
not have been waived by Purchaser;
iv. By either Seller or Purchaser in the event of a material breach by the
other party of its obligations hereunder;
v. If the Closing has not occurred by October 1,1996 (the "Outside
Closing Date"), unless extended by mutual agreement of the parties;
provided, however, that in the event all of the conditions to Closing
provided for in Paragraph 13 have been satisfied or waived by
the Outside Closing Date other than the Purchaser's receipt of the License
pursuant to Paragraph 13(i), provided Purchaser is diligently pursuing the
issuance of the License by the Washington Department of Health, the
Outside Closing Date shall automatically be extended for such additional
period of time as may be necessary to permit Purchaser to secure the
License; provided, further that in the event Purchaser has not secured the
License by December 1,1996, this Agreement shall thereafter terminate in
accordance with the terms hereof and the parties shall have no further rights
or obligations hereunder other than Purchaser's right to the return of its
Earnest Money.
b. In the event that prior to the Closing Date, a material portion of the Real
Property, the Facility or the Personal Property shall have been damaged or
destroyed by fire or other casualty, or shall have been taken or condemned
by any public or quasi-public authority under the power of eminent domain,
Purchaser shall have the right to terminate this Agreement on written notice
to Seller which notice must be delivered within ten (10) days after
Purchaser receives notice of such damage, destruction or condemnation. In
the event Purchaser fails to exercise its termination rights hereunder, then it
shall be conclusively deemed to have waived said right and all claims
against Seller relating to such damage or destruction, in which case Seller
shall assign to Purchaser all of its rights to any insurance proceeds or
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condemnation award and all claims in the connection therewith. In the
event Purchaser exercises its termination rights hereunder, the parties shall
have no further rights or obligations hereunder other than Purchaser's right
to the return of its Earnest Money.
c. Neither party to this Agreement may claim termination or pursue any
other remedy referred to in Paragraph 17(a) on account of a breach of a
condition, covenant or warranty by the other, without first giving such other
party written notice of such breach and not less than ten (10) days within
which to cure such breach; provided, however, in no event shall the
Closing Date be postponed beyond the Outside Closing Date.
d. In the event of the termination of this Agreement by Seller under
Paragraphs 17(a)(ii) or (iv) or under Paragraph 17(a)(v) in the event the
Closing has failed to occur as a result of a material breach by Purchaser of
its obligations hereunder, Seller's sole remedy shall be to terminate this
Agreement and to retain Purchaser's Earnest Money as full and complete
liquidated damages, the parties acknowledge and agreeing that the amount
of damages which Seller may incur as a result of such termination may be
difficult to ascertain and that the amount of the Earnest Money is a
reasonable and fair estimate thereof, after which the parties shall have no
further rights or obligations hereunder.
e. In the event of the termination of this Agreement by Purchaser under
Paragraphs 17(a)(iii) or (iv) or under Paragraph 17(a)(v) in the event the
Closing has failed to occur as of a material breach by Seller of its
obligations hereunder, Purchaser shall have the right as Purchaser's sole and
exclusive remedies either to (i) terminate this Agreement and demand
the return of its Earnest Money after which neither party shall have any
further rights or obligations hereunder or (ii) seek specific performance of
Seller's obligations hereunder.
f. In the event of the termination of this Agreement by Purchaser under
Paragraph 17(a)(iii) as a result of the failure of the conditions to Closing set
forth in Paragraphs 13 (i) and (j), $10,000 of the Earnest Money and 1/5 of
the interest accrued on the Earnest Money shall be remitted to Seller in full
and complete settlement of any obligations of Purchaser hereunder and the
balance of the Earnest Money along with the balance of the accrued
interest thereon shall be remitted to Purchaser, after which neither
Purchaser nor Seller shall have any further rights or obligations hereunder.
EMPLOYEE BENEFITS
18. At Closing, Seller shall terminate all of the Facility employees and pay
to the employees of the Facility, all wages, earned and accrued vacation
pay, sick pay, holiday pay and other benefits due to such employees as of
the Closing Date, but only in the case of those employees hired by
Purchaser effective as of the day after the Closing Date.
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RESIDENT SECURITY DEPOSITS
19. At Closing, Seller shall provide Purchaser with an accounting of a11
resident security deposits being held by Seller as of the Closing Date (the
"Resident Deposits"). Such accounting shall set forth the names of the
residents or prospective residents for whom such funds are held, the
amounts held on behalf of each resident or prospective resident and the
Seller's warranty that the accounting is true, correct and complete.
20. On the Closing Date, Seller shall transfer the Resident Deposits to the
bank account designated by the Purchaser and Purchaser shall in writing
acknowledge to Seller receipt of and expressly assume all Seller's financial
and custodial obligations with respect thereto, it being the intent and
purpose of this provision that, at Closing, Seller will be relieved of all
fiduciary and custodial obligations, and that Purchaser will assume all such
obligations and be directly accountable to the residents and prospective
residents of the Facility, with respect thereto.
21. Notwithstanding the foregoing, Seller will indemnify and hold
Purchaser harmless from all liabilities, claims and demands in the event the
amount of the Resident Deposits transferred to the Purchaser's bank
account as provided in Paragraph 21 did not represent the full amount of
such Resident Deposits then or thereafter shown to have been delivered to
Seller by the current residents or prospective residents of the Facility.
NOTICES
22. Any notice, request or other communication to be given by any party
hereunder shall be in writing and shall be sent by registered or certified
mail, postage prepaid, by overnight courier guaranteeing overnight delivery
or by facsimile transmission (if confirmed verbally or in writing by
mail as aforesaid), to the following address:
To Seller: Hearthstone 5 Ks Family Limited Partnership
1617 S. E. Talton Avenue
Vancouver, WA 98606
Attn: Mr. William Wagner
Phone No.: 360-256-8513
FAX No.: 360-896-9393
To Purchaser: Emeritus Corporation
3131 Western Avenue
Suite 500
Seattle, WA 98121
Phone No. : (206) 298-2909
FAX No. : (206) 301-4500
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Notice shall be deemed given three (3) business days after deposit in the
mail, on the next day if sent by overnight courier and on receipt if sent by
facsimile (and confirmed verbally or by mail as aforesaid).
SOLE AGREEMENT
23. This Agreement may not be amended or modified in any respect
whatsoever except by instrument in writing signed by the parties hereto.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes all prior negotiations, discussions, writings and
agreements between them.
SUCCESSORS
24. The terms of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by and against the heirs and successors of the
parties hereto, it being specifically understood and agreed that Purchaser
shall have the right to assign in whole or in part its rights and
obligations hereunder to an affiliate; provided no such assignment shall
relieve Purchaser of its obligations hereunder and provided, further, that
Purchaser shall provide Seller with notice of any such assignment and such
assignee shall assume all of Purchaser's obligations hereunder in writing.
In addition, Purchaser shall have the right, on written notice to Seller, to
assign its rights hereunder to a real estate investment trust (the "REIT") in
connection with its financing of the transaction provided for herein. In the
event of such an assignment, Purchaser shall advise Seller as to those
documents and deliveries contemplated by this Agreement which are to run
in favor of the REIT rather than Purchaser and those documents and
deliveries contemplated by this Agreement which will be delivered by the
REIT rather than Purchaser, if any, it being understood and agreed that in
the event of such an assignment, the only right which the REIT will assume
is Purchaser's right to take title to the Seller's Assets and the only
obligation which the REIT will assume is Purchaser's obligation to pay the
purchase price in accordance with the terms hereof and that, in any event,
Purchaser shall not be relieved of any of its obligations hereunder in the
event of such an assignment. In addition, in the event of an assignment of
this Agreement, Purchaser shall not be able to assign its rights under
Paragraph 15(c) with respect to the breach of Seller's representations and
warranties se forth in Paragraphs 7(c) and (d), it being understood and
agreed that said representations and warranties are personal to Purchaser
and shall be retained by Purchaser in the event of any such assignment.
CAPTIONS
25. The captions of this Agreement are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.
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SURVIVAL/LIMITATION OF ACTION,
26. All covenants, warranties and representations of Purchaser and Seller
herein other than Seller's representation and warranty in Paragraph 7(1),
which shall survive for the applicable statute of limitations period, shall
survive for two years after Closing after which they shall automatically
expire; provided, however, that in the event notice of a claim is delivered
by Seller or Purchaser prior to expiration of said two year period or
applicable statute of limitation period in the case of a claim brought under
Paragraph 7(1), the representation, warranty or covenant which is the
subject of said claim shall survive until the final, non-appealable resolution
thereof.
GOVERNING LAW
27. This Agreement shall be governed by and construed in accordance with
the laws of the State of Washington.
SEVERABILITY
28. Should any one or more of the provisions of this Agreement be
determined to be invalid, unlawful or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby.
COUNTERPARTS
29. This Agreement may be executed in any number of counterparts, each
of which shall be an original; but such counterparts shall together constitute
but one and the same instrument. This Agreement may be executed (i) on
an original, (ii) a copy of an original, or (iii) by a facsimile transmission
copy of an original followed within five (5) calendar days with execution of
an original.
THIRD PARTY BENEFICIARY
30. The provisions of this Agreement are not intended to confer any
benefits upon any person or entity not a party to this Agreement.
ACCOUNTS RECEIVABLE
31. Within ten days prior to the Closing Date, Seller shall provide
Purchaser with a detailed listing of Seller's accounts receivable which are
anticipated to be outstanding on the Closing Date.
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32. From and after the Closing Date, Purchaser shall assume responsibility
for the billing for and collection of payments on account of services
rendered or goods sold by it on and after the Closing Date and Seller shall
retain all right, title and interest in and to and all responsibility for the
collection of its accounts receivable for services rendered or goods sold
prior to the Closing Date.
33. Any payments received by Purchaser after the Closing Date from
residents with balances due for the periods prior to and after the Closing
Date which designate the period to which they relate shall be applied in
accordance with said designation; any payments received by Purchaser after
the Closing Date from residents with balances due for the period prior to
and after the Closing Date which do not designated the period to which they
relate, shall for the first thirty days after Closing, be remitted by Purchaser
to Seller, to the extent necessary to reduce any pre-Closing Date balances
from the resident(s) making said payment(s), with the excess, if any,
retained by Purchaser to reduce post-Closing Date balances due from said
resident(s) and thereafter such payments shall first be applied by Purchaser
to reduce any post-Closing Date balances due from said resident(s) with the
excess, if any, remitted to Seller to reduce pre-Closing Date balances due
from said resident(s).
34. Seller shall have the right during normal business hours and on
reasonable notice to Purchaser to inspect Purchaser's books and records
with respect to the accounts receivable received by it after the Closing Date
from residents with balances due as of the Closing Date.
ATTORNEYS FEES
35. In the event of a dispute between the parties hereto with respect to the
interpretation or enforcement of the terms hereof, the prevailing party shall
be entitled to collect from the other its reasonable costs and attorneys fees,
including its costs and fees on appeal.
CONSTRUCTION
36. Both parties acknowledge and agree that they have participated in the
negotiation and drafting of this Agreement and accordingly that no
provision hereof shall be construed so as to favor or disfavor either party
hereto.
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IN WITNESS WHEREOF, the parties hereby execute this Agreement as
of the day and year first set forth above.
SELLER: HEARTHSTONE FIVE Ks FAMILY LIMITED
PARTNERSHIP.
By: /s/ William Wagner
------------------------
Managing Partner
PURCHASER: EMERITUS CORPORATION
By: /s/ Raymond R. Brandstrom
----------------------------------
President
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[Loan No. 04-751-610092-9]
PROMISSORY NOTE
$4,160,000 (U.S.) Seattle, Washington
October 30, 1996
FOR VALUE RECEIVED, the undersigned (individually and
collectively, "Borrower"), jointly and severally, promise to pay to
the order of WASHINGTON MUTUAL BANK, a Washington corporation,
at its office at 1201 Third Avenue, Seattle, Washington 98101, or at
such other place as the holder of this Note (hereinafter, "holder")
may from time to time designate in writing, the sum of FOUR MILLION
ONE HUNDRED SIXTY THOUSAND DOLLARS ($4,160, 000) in lawful
money of the United States, with interest thereon from the date of this Note
until paid at the rates set forth below, computed on monthly
balances. Interest for each full calendar month during the term of
this Note shall be calculated on the basis of a 360-day year and
twelve 30-day months. Interest for any partial calendar month at
the beginning or end of the term of this Note shall be calculated
on the basis of a 365 or 366-day year and the actual number of days
in that month.
SECTION 1. INITIAL INTEREST RATE.
The per annum interest rate hereunder (the "Note Rate") shall
initially be eight and three-eighths percent (8. 375%) (the "Initial
Rate"). The Note Rate is subject to adjustment as provided below.
SECTION 2. INTEREST RATE ADJUSTMENTS.
Beginning on May 1, 1997 (the "Initial Interest Adjustment
Date") the Note Rate shall be adjusted every six (6) months to a
rate that is three percent (3.00%) per annum above the
then-applicable "Adjustable Index Rate" (as hereinafter defined)
rounded upward to the nearest one-eighth of one percent (.125%).
Any date on which the Note Rate is to be adjusted as provided in
this Note is referred to herein as the "Interest Adjustment Date".
For purposes of this Note, the "Adjustable Index Rate" shall
be based on the weekly average constant maturity yields reported in
Federal Reserve Statistical Release H.15 (519), Selected Interest
Rates ("Publication H.15"). The figures in the most recent edition
of Publication H.15 available as of the Interest Adjustment Date
that appear in the column for the week ending immediately preceding
the date of such edition shall be used for purposes of the
Adjustable Index Rate calculation. The Adjustable Index Rate shall
be the yield adjusted to constant maturities stated in Publication
H.15 for six (6) month United States government securities.
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<PAGE>
Holder may, in its reasonable discretion, select an
alternative source of the Adjustable Index Rate if Publication H.15
ceases to be available, or if the method of calculating treasury
constant maturity yield figures set forth therein changes so as to
substantially impact the calculation of the Adjustable Index Rate.
SECTION 3. MONTHLY PAYMENTS.
Beginning on December l, 1996 and on the same day of each and
every calendar month thereafter throughout the term of this Note
(the "Monthly Payment Dates"), Borrower shall make monthly payments
to holder (the "Monthly Payment Amounts") of accrued interest only.
SECTION 4. MATURITY.
Unless sooner repaid by Borrower, the entire unpaid principal
balance of this Note, plus all accrued but unpaid interest, and all
other amounts owing hereunder or under the Security Documents (as
defined in Section 8) shall be due and payable in full on
November 1, 1999 (the "Maturity Date").
SECTION 5. APPLICATION OF PAYMENTS.
Payments shall be applied: (i) first, to the payment of
accrued interest; (ii) second, at the option of holder, to the
payment of any other amounts owing under this Note or secured by
the Security Documents, other than accrued interest and principal,
including, but not limited to advances holder may have made for
attorneys' fees or for taxes, assessments, insurance premiums or
other charges on any property given as security for this Note and
late charges due hereunder; and (iii) third, to the reduction of
principal of this Note.
SECTION 6. PREPAYMENT.
Borrower may, upon thirty (30) days, prior written notice to
holder, prepay its obligation under this Note in full or in part on
any Monthly Payment Date without premium or penalty.
SECTION 7. LATE CHARGE.
If any amount payable hereunder is paid more than ten (10)
days after the due date thereof, Borrower promises to pay a late
charge of five percent (5%) of the delinquent amount as liquidated
damages for the extra expense in handling past due payments.
2
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SECTION 8. SECURITY.
This Note is secured by a deed of trust, security agreement,
assignment of leases and rents and fixture filing (the "Deed of
Trust" ) of even date herewith and executed by Borrower, encumbering
real property located in Grant County, Washington. The Deed of
Trust and any and all other documents securing this Note are
collectively referred to as the "Security Documents"; provided,
however, that "Security Documents" specifically shall not mean and
shall not include the certificate and indemnity agreement regarding
hazardous substances being delivered concurrently herewith to
holder by Borrower (the "Indemnity Agreement"). The real property
and the other collateral provided for in the Security Documents are
collectively referred to as the "Property".
SECTION 9. DEFAULT; REMEDIES.
If default is made in the payment of any amount payable
hereunder when due or in the keeping of any covenant of the
Security Documents, then, at the option of holder, the entire
indebtedness evidenced hereby shall become immediately due and
payable. Upon default, and without notice or demand, all amounts
owed under this Note, including all accrued but unpaid interest,
shall thereafter bear interest at a variable rate, adjusted at the
times at which the Note Rate would otherwise have been adjusted
pursuant to Section 2, of five percent (5%) per annum above the
Note Rate which would have been applicable from time to time had
there been no default (the "Default Rate") until such default is
cured. Failure to exercise any option granted to holder hereunder
shall not waive the right to exercise the same in the event of any
subsequent default. Interest at the Default Rate shall commence to
accrue upon default under this Note, including the failure to pay
this Note at maturity.
SECTION 10. ATTORNEYS' FEES.
In the event of any default under this Note, or in the event
that any dispute arises relating to the interpretation, enforcement
or performance of this Note, holder shall be entitled to collect
from Borrower on demand all reasonable fees and expenses incurred
in connection therewith, including but not limited to fees of
attorneys, accountants, appraisers, environmental inspectors,
consultants, expert witnesses, arbitrators, mediators and court
reporters. Without limiting the generality of the foregoing,
Borrower shall pay all such costs and expenses incurred in
connection with: (a) arbitration or other alternative dispute
resolution proceedings, trial court actions and appeals;
(b) bankruptcy or other insolvency proceedings of Borrower, any
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guarantor or other party liable for any of the obligations of this
Note or any party having any interest in any security for any of
those obligations; (c) judicial or nonjudicial foreclosure on, or
appointment of a receiver for, any property securing this Note;
(d) post-judgment collection proceedings; (e) all claims,
counterclaims, cross-claims and defenses asserted in any of the
foregoing whether or not they arise out of or are related to this
Note or any security for this Note; (f) all preparation for any of
the foregoing; and (g) all settlement negotiations with respect to
any of the foregoing.
SECTION 11. MISCELLANEOUS.
(a) Every person or entity at any time liable for the payment
of the indebtedness evidenced hereby waives presentment for
payment, demand and notice of nonpayment of this Note. Every such
person or entity further hereby consents to any extension of the
time of payment hereof or other modification of the terms of
payment of this Note, the release of all or any part of the
security herefor or the release of any party liable for the payment
of the indebtedness evidenced hereby at any time and from time to
time at the request of anyone now or hereafter liable therefor.
Any such extension or release may be made without notice to any of
such persons or entities and without discharging their liability.
(b) Each person or entity who signs this Note is jointly and
severally liable for the full repayment of the entire indebtedness
evidenced hereby and the full performance of each and every
obligation contained in the Security Documents.
(c) The headings to the various sections have been inserted
for convenience of reference only and do not define, limit, modify,
or expand the express provisions of this Note.
(d) Time is of the essence under this Note and in the
performance of every term, covenant and obligation contained
herein.
(e) This Note is made with reference to and is to be
construed in accordance with the laws of the state of Washington.
(f) Each married person who executes this Note as a Borrower
agrees that recourse hereunder can be had to his or her separate
property as well as the assets of his or her marital community.
DATED as of the day and year first above written.
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ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
EMERITUS CORPORATION, a Washington
corporation
By /s/ Kelly J. Price
--------------------
Its Secretary
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[Loan No. 04-751-610092-9]
AFTER RECORDING RETURN TO:
Washington Mutual Bank
1201 Third Avenue, WMT1013
Seattle, Washington 98101
Attention: Commercial Real Estate
Department
BE ADVISED THAT THE PROMISSORY NOTE SECURED BY THIS
DEED OF TRUST PROVIDES FOR A VARIABLE RATE OF
INTEREST.
DEED OF TRUST, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FILING
THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT
OF LEASES AND RENTS AND FIXTURE FILING ( "Deed of Trust" ), is
made this 30th day of October, 1996 among EMERITUS CORPORATION,
a Washington corporation, the address of which is 3131 Elliott Avenue,
Suite 500, Seattle, Washington 98121 ("Grantor") ; CHICAGO TITLE
INSURANCE COMPANY, a Missouri corporation, the address of which is
P.O. Box 1090, Ephrata, Washington 98823, and its successors in
trust and assigns ("Trustee"), and WASHINGTON MUTUAL BANK, a
Washington corporation, the address of which is 1201 Third Avenue,
Seattle, Washington 98101 ( "Beneficiary" ).
l. GRANTING CLAUSE. Grantor, in consideration of the
acceptance by Trustee of the trust hereunder, and of other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and in order to secure the obligations
described in Section 3 below, grants, bargains, sells, and conveys
to Trustee and its successors in trust and assigns, forever, in
trust, with power of sale, all of Grantor's estate, right, title,
interest, claim and demand in and to the property in the county of
Grant, state of Washington, described as follows, whether now
existing or hereafter acquired (all of the property described in
all parts of this Section 1 and all additional property, if any,
described in Section 2 is herein called the "Property"):
1.1 LAND AND APPURTENANCES. The land described on
Exhibit A hereto, and all tenements, hereditaments, rights-of-way,
easements, appendages and appurtenances thereto belonging or in any
way appertaining, including without limitation all of the right,
title and interest of Grantor in and to any avenues, streets, ways,
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alleys, vaults, strips or gores of land adjoining that property,
and all claims or demands of Grantor either in law or in equity in
possession or expectancy of, in and to that property; and
1.2 IMPROVEMENTS AND FIXTURES. All buildings,
structures and other improvements now or hereafter erected on the
property described in 1.1 above, and all facilities, fixtures,
machinery, apparatus, installations, goods, equipment, inventory,
furniture and other properties of whatsoever nature (including
without limitation all heating, ventilating, air conditioning,
plumbing and electrical equipment, all elevators and escalators,
all sprinkler systems, all engines and motors, all lighting,
laundry, cleaning, fire prevention and fire extinguishing
equipment, all ducts and compressors, all refrigerators, stoves and
other appliances, attached cabinets, partitions, rugs, carpets and
draperies, all building materials and supplies, and all
construction forms, tools and equipment), now or hereafter located
in or used or procured for use in connection with that property, it
being the intention of the parties that all property of the
character hereinabove described which is now owned or hereafter
acquired by Grantor and which is affixed or attached to, stored
upon or used in connection with the property described in l.1 above
shall be, remain or become a portion of that property and shall be
covered by and subject to the lien of this Deed of Trust, together
with all contracts, agreements, permits, plans, specifications,
drawings, surveys, engineering reports and other work products
relating to the construction of the existing or any future
improvements on the Property, any and all rights of Grantor in, to
or under any architect's contracts or construction contracts
relating to the construction of the existing or any future
improvements on the Property, and any performance and/or payment
bonds issued in connection therewith, together with all trademarks,
trade names, copyrights, computer software and other intellectual
property used by Grantor in connection with the Property; and
1.3 ENFORCEMENT AND COLLECTION. Any and all rights of
Grantor, including, without limitation, to make claim for, collect,
receive and receipt for any and all rents, income, revenues,
issues, royalties, and profits, including mineral, oil and gas
rights and-profits, insurance proceeds, condemnation awards and
other moneys, payable or receivable from or on account of any of
the Property, including interest thereon, or to enforce all other
provisions of any other agreement (including those described in
Section 1.2 above) affecting or relating to any of the Property, to
bring any suit in equity, action at law or other proceeding for the
collection of such moneys or for the specific or other enforcement
of any such agreement, award or judgment, in the name of Grantor or
otherwise, and to do any and all things which Grantor is or may be
or become entitled to do with respect thereto, provided, however,
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that no obligation of Grantor under the provisions of any such
agreements, awards or judgments shall be impaired or diminished by
virtue hereof, nor shall any such obligation be imposed upon
Trustee or Beneficiary; and
1. 4 ACCOUNTS AND INCOME. Any and all rights of Grantor
in any and all accounts, rights to payment, contract rights,
chattel paper, documents, instruments, licenses, contracts,
agreements and general intangibles relating to any of the Property,
including, without limitation, income and profits derived from the
operation of any business on the Property or attributable to
services that occur or are provided on the Property or generated
from the use and operation of the Property; and
1. 5 LEASES. All of Grantor ' s rights as landlord in and
to all existing and future leases and tenancies, whether written or
oral and whether for a definite term or month to month or
otherwise, now or hereafter demising all or any portion of the
property described in 1.1 and 1. 2 above, including all renewals and
extensions thereof and all rents, deposits and other amounts
received or receivable thereunder. In accepting this Deed of Trust
neither Beneficiary nor Trustee assumes any liability for the
performance of any such lease.
1. 6 BOOKS AND RECORDS. All books and records of Grantor
relating to the foregoing in any form and all computer software
necessary or useful to reading such books and records.
2. SECURITY AGREEMENT. To the extent any of the property
described in Section 1 is personal property, Grantor, as debtor,
grants to Beneficiary, as secured party, a security interest
therein together with a security interest in all other personal
property of whatsoever nature which is located on or used or to be
used in connection with any of the property described in Section l,
and any products or proceeds of any thereof, pursuant to the
Uniform Commercial Code of the state of Washington (the "UCC"), on
the terms and conditions contained herein. Beneficiary hereby
assigns such security interest to Trustee, in trust, for the
benefit of Beneficiary to be dealt with as a portion of the
"Property" except as otherwise specified herein.
3. OBLIGATIONS SECURED. This Deed of Trust is given for the
purpose of securing:
3.1 PERFORMANCE AND PAYMENT. The performance of the
obligations contained herein and the payment of FOUR MILLION ONE
HUNDRED SIXTY THOUSAND DOLLARS ($4,160,000) with interest
thereon and all other amounts payable according to the terms of a
promissory note of even date herewith made by Grantor, payable to
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Beneficiary or order, and any and all extensions, renewals,
modifications or replacements thereof, whether the same be in
greater or lesser amounts (the "Note"), which Note contains
provision for a variable rate of interest; and
3.2 FUTURE ADVANCES. The repayment of any and all sums
advanced or expenditures made by Beneficiary subsequent to the
execution of this Deed of Trust for the maintenance or preservation
of the Property or advanced or expended by Beneficiary pursuant to
any provision of this Deed of Trust subsequent to its execution,
together with interest thereon.
4. WARRANTIES AND COVENANTS OF GRANTOR. Grantor warrants,
covenants, and agrees:
4.1 WARRANTIES.
(a) Grantor has full power and authority to grant the
Property to Trustee and warrants the Property to be free and clear
of all liens, charges, and other encumbrances except those, if any,
noted on Exhibit B hereto.
(b) None of the Property is used principally or at all
for agricultural or farming purposes.
(c) The Property is free from damage and no matter has
come to Grantor's attention (including, but not limited to,
knowledge of any construction defects or nonconforming work) that
would materially impair the value of the Property as security.
(d) The loan evidenced by the Note and secured by this
Deed of Trust is primarily for commercial, industrial or business
purposes and is not primarily for personal, family or household
purposes.
(e) Grantor has obtained all federal, state and local
licenses, permits, approvals, franchises, authorizations and
certifications required to operate the Property and the
improvements thereon as a boarding home or as a skilled nursing
facility; all such licenses, permits, approvals, franchises,
authorizations and certifications are current and in good standing;
the Property and the improvements thereon are in compliance with
all applicable statutes, rules and regulations; and none of Grantor
or any manager or operator of the Property on behalf of Grantor has
received any notice of the failure of the Property or the
improvements thereon, or of Grantor or any manager or operator of
the Property on behalf of Grantor, to comply with the requirements
of such licenses, permits, approvals, franchises, authorizations
and certifications or applicable statutes, rules and regulations.
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<PAGE>
4.2 PRESERVATION OF LIEN. Grantor will preserve and
protect the priority of this Deed of Trust as a first lien on the
Property.
4.3 REPAIR AND MAINTENANCE OF PROPERTY. Grantor will
keep the Property in good condition and repair, which duty shall
include but is not limited to continual cleaning, painting,
landscaping, repairing and refurbishing of the Property
without the express written consent of Beneficiary; will underpin
and support when necessary any such building or other improvement
and protect and preserve the same; will complete or restore
promptly and in good and workmanlike manner any such building or
other improvement which may be damaged or destroyed and pay when
due all claims for labor performed and materials furnished
therefor; will not commit, suffer or permit any act upon the
Property in violation of law; and will do all other acts which from
the character or use of the Property may be reasonably necessary
for the continued operation of the Property in a safe and legal
manner, the specific enumerations herein not excluding the general.
4.4 INSURANCE.
4.4.1 HAZARD. Grantor will provide, maintain and
deliver to Beneficiary, as further security for the faithful
performance of this Deed of Trust, insurance covering fire,
casualty and such other hazards as may be specified by Beneficiary
(including insurance against flood, if the Property is situated in
a designated flood zone) in an amount equal to one hundred percent
(100%) of the replacement cost of the Property and naming
Beneficiary as first loss payee pursuant to a standard first-
mortgage endorsement on Form 438BFU or on a loss-payee form
substantially equivalent to the New York standard mortgage
endorsement, with such deductibles as approved by Beneficiary but
that are, in any event, not more than $10,000. Grantor shall be
responsible for any uninsured losses and any deductibles. All
existing and future policies for such insurance, and the proceeds
thereof, are hereby assigned to Beneficiary, but no such assignment
shall be effective to invalidate or impair any insurance policy.
Should the Property or any part thereof be damaged by reason of any
cause covered by insurance, Beneficiary may, at its option,
commence, appear in and prosecute, in its own name, any action or
proceeding, or make any reasonable compromise or settlement in
connection with such damage, and obtain all proceeds, or other
relief therefor, and Grantor agrees to pay Beneficiary's costs and
reasonable attorneys' fees in connection therewith. No insurance
proceeds at any time assigned to or held by Beneficiary shall be
deemed to be held in trust, and Beneficiary may commingle such
proceeds with its general assets and shall not be liable for the
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payment of any interest thereon. The amount collected under any
insurance policies required to be maintained by Grantor pursuant to
this Section 4.4.1 may be applied by Beneficiary upon any
indebtedness secured hereby and in such order as Beneficiary may
determine, or at the option of Beneficiary, the entire amount so
collected or any part thereof may be released to Grantor.
Beneficiary Shall in no case be obligated to see to the proper
application of any amount paid over to Grantor. Such application
or release shall not cure or waive any default or notice of default
hereunder or invalidate any act done pursuant to such notice.
4.4.2 LIABILITY. Grantor will maintain
comprehensive general liability insurance covering the legal
liability of Grantor against claims for bodily injury, death, or
property damage occurring on, in, or about the Property with
coverage of One Million Dollars ($1,000,000) combined single limit,
and naming Beneficiary an additional insured.
4.4.3 RENTAL INTERRUPTION. Grantor will maintain
rental or business interruption insurance in an amount equal to at
least twelve (12) months' gross rental income from the Property,
and naming Beneficiary as first loss payee, provided that Grantor
may collect and retain any payments under said policies so long as
it is not in default hereunder; provided, however, Grantor will not
be required to maintain rental or business interruption insurance
if the Property is used exclusively as a mobile home park.
4. 4. 4 INSURANCE SURVEY. During the last thirty (30)
days of every third year computed from the date hereof, Grantor
will have an insurance survey of the Property made. Grantor shall
at these times obtain such additional coverages or make such
increases in the amounts of existing coverage as may be requested
by Beneficiary on the basis of such survey.
4.4.5 GENERAL PROVISIONS. All policies of insurance
required to be maintained by Grantor pursuant to this Section 4.4
shall be in form and substance and with companies acceptable to
Beneficiary and which have a current rating of A-/10 or better from
the current Best Key Rating Guide, and contain waiver of any
co-insurance clauses. Beneficiary reserves the right, in its
reasonable discretion, to increase the amount of the required
coverages, require insurance against additional risks, or withdraw
approval of any insurance company at any time. Grantor shall
deliver to Beneficiary an original of all policies of insurance and
shall obtain renewals of any policies which expire and deliver
evidence of such renewals to Beneficiary no later than ten (10)
days prior to the expiration date of the policy being replaced.
All policies and renewals thereof shall contain provision for
thirty (30) days' notice to Beneficiary prior to any cancellation
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thereof. Notwithstanding any of the foregoing, neither Trustee nor
Beneficiary shall be responsible for any such insurance or for the
collection of any insurance moneys, or for any insolvency of any
insurer or insurance underwriter. Any and all unexpired insurance
shall inure to the benefit of and pass to the purchaser of the
Property at any trustee's or sheriff's sale held hereunder.
4.5 RIGHT OF INSPECTION. Grantor shall permit
Beneficiary or its agents, at all reasonable times with reasonable
notice, to enter upon and inspect the Property.
4.6 PRESERVATION OF LICENSES ETC. Grantor shall
observe and comply with all requirements necessary to the continued
existence and validity of all rights, licenses, permits,
privileges, franchises and concessions relating to any existing or
presently contemplated use of the Property, including but not
limited to any zoning variances, special exceptions and
nonconforming use permits.
4.7 FURTHER ASSURANCES. Grantor will, at its expense,
from time to time execute and deliver any and all such instruments
of further assurance and other instruments and do any and all such
acts, or cause the same to be done, as Trustee or Beneficiary deems
necessary or advisable to grant to Trustee the Property or to carry
out more effectively the purposes of this Deed of Trust.
4.8 LEGAL ACTIONS. Grantor will appear in and defend
any action or proceeding before any court or administrative body
purporting to affect the security hereof or the rights or powers of
Beneficiary or Trustee; and will pay all reasonable costs and
expenses, including cost of evidence of title, title insurance
premiums and any fees of attorneys, appraisers, environmental
inspectors and others, incurred by Beneficiary or Trustee, in a
reasonable sum, in any such action or proceeding in which
Beneficiary or Trustee may appear, and in any suit brought by
Beneficiary or Trustee to foreclose this Deed of Trust and in any
non-judicial foreclosure of this Deed of Trust.
4.9 TAXES, ASSESSMENTS AND OTHER LIENS. Grantor will
pay not later than when due all taxes, assessments, encumbrances,
charges, and liens with interest, on the Property or any part
thereof, which at any time appear to be or are alleged to be prior
and superior hereto, including but not limited to any tax on or
measured by rents of the Property, the Note, this Deed of Trust, or
any obligation or part thereof secured hereby.
Notwithstanding the above, Grantor shall have the right to
contest diligently and in good faith the validity or amount of any
tax, assessment, encumbrance, charge or lien affecting the Property
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or any part thereof and so long as the validity or amount thereof
is being contested diligently and in good faith, Grantor may, to
the extent permitted by law, defer payment of such tax, assessment,
encumbrance, charge or lien, provided that Grantor protects the
Property against any lien arising out of the failure to pay such
amount when due by obtaining a surety bond in form and substance
satisfactory to Beneficiary, in its reasonable discretion, and
issued by a corporate surety satisfactory to Beneficiary, in its
reasonable discretion.
4.10 EXPENSES. Grantor will pay all costs, fees and
expenses reasonably incurred by Beneficiary or Trustee in
connection with this Deed of Trust.
4.11 REPAYMENT OF EXPENDITURES. Grantor will pay
immediately and without demand all amounts secured by this Deed of
Trust, other than principal of and interest on the Note, with
interest from date of expenditure at the default rate of interest
specified in. the Note (the "Default Rate") and the repayment
thereof shall be secured hereby.
4.12 FINANCIAL & OPERATING INFORMATION. Grantor will,
within sixty (60) days of the close of Grantor's fiscal year,
furnish to Beneficiary in such form as it may request, financial
statements and balance sheets of Grantor and the entities and
individuals who are liable for repayment of the Note, and itemized
annual statements of income and expense in connection with the
operation of the Property, including but not limited to utilization
and property inspection reports, and such other financial and
operating statements of Grantor as Beneficiary may from time to
time require and such operating statements, occupancy reports,
variance reports and financial information for the Property as
Beneficiary may from time to time require.
If Grantor defaults in its obligation to provide Beneficiary
with any of the financial and operating information required to be
provided under this subsection 4.12 within the time periods
required under this subsection 4.12 and such default continues
after Beneficiary has provided Grantor with thirty (30) days'
notice and opportunity to cure such default, Grantor shall pay to
Beneficiary, as liquidated damages for the extra expense in
servicing the loan secured hereby, Five Hundred Dollars ($500) on
the first day of the month following the expiration of such thirty
(30) day period and One Hundred Dollars ($100) on the first day of
each month thereafter until such default is cured. All such
amounts shall be secured by this Deed of Trust.
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4.13 SALE TRANSFER OR ENCUMBRANCE OF PROPERTY.
Grantor shall not sell, transfer or otherwise convey the Property or any
interest therein, further encumber the Property or any interest
therein, cause or permit any change in the entity or control of
Grantor or agree to do any of the foregoing without first repaying
in full the Note and all other sums secured hereby.
4.14 INFORMATION FOR PARTICIPANTS. Grantor agrees to
furnish such information and confirmation as may be required from
time to time by Beneficiary on request of potential loan
participants and agrees to make reasonable adjustments in this Deed
of Trust, the Note, and the other documents evidencing or securing
the loan secured hereby to accommodate such participant's
requirements, provided that such requirements do not vary the
economic terms of the loan secured hereby and are otherwise
reasonably acceptable to Grantor.
4.15 GRANTOR EXISTENCE. Except as otherwise provided in
Section 4.13:
(a) If Grantor is a corporation, Beneficiary is
making this loan in reliance on Grantor's continued existence
ownership and control in its present corporate form. Grantor will
not alter such corporate structure (in any significant way) or
control without the prior written consent of Beneficiary, and will
do all things necessary to preserve and maintain said corporate
existence and to insure its continuous right to carry on its
business, including but not limited to, filing within the
prescribed time all corporate tax returns and reports, and paying
when due all such taxes.
(b) If Grantor is a partnership, Beneficiary is
making this loan in reliance on the continued existence of Grantor
partnership and upon the business and financial reputation of
Grantor partnership as a business entity and each of the general
partners thereof. Therefore, the general partners of Grantor
hereby agree that they will take no action to dissolve Grantor
partnership and will do all things within their power to prevent
the dissolution and winding up of Grantor partnership,
notwithstanding the death, withdrawal or expulsion of any general
partner. They further agree that without the prior written consent
of Beneficiary, none of the general partners of Grantor will
withdraw or be removed as a general partner of Grantor. The
withdrawal or expulsion of any general partner from Grantor
partnership shall not in any way affect the liability of the
withdrawing or expelled general partner hereunder or on the Note.
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(c) If Grantor is a limited liability company,
Beneficiary is making this loan in reliance on Grantor's continued
existence, ownership and control in its present limited liability
company form. Grantor will not alter such limited liability
company structure, ownership or control without the prior written
consent of Beneficiary and will do all things necessary to preserve
and maintain said limited liability company existence and to insure
its continuous right to carry on its business.
4.16 TAG AND INSURANCE RESERVES. In addition to the
payments required by the Note, Grantor agrees to pay Beneficiary,
at Beneficiary's request, such sums as Beneficiary may from time to
time estimate will be required to pay, at least 30 days before due,
the next due taxes, assessments, insurance premiums, and similar
charges affecting the Property, less all sums already paid therefor
divided by the number of months to elapse before one month prior to
the date when such taxes, assessments and premiums will become
delinquent, such sums to be held by Beneficiary without interest or
other income to the Grantor to pay such taxes, assessments and
premiums. Should this estimate as to taxes, assessments and
premiums prove insufficient, the Grantor upon demand agrees to pay
Beneficiary such additional sums as may be required to pay them
before delinquent.
If the total of the above-described payments in any one year
shall exceed the amounts actually paid by Beneficiary for taxes,
assessments and premiums, such excess may be credited by
Beneficiary on subsequent payments under this section. If there
shall be a default hereunder for which Beneficiary elects to
realize upon this Deed of Trust, then at any time after default and
prior to the trustee's sale or sheriff's sale, Beneficiary may
apply any balance of funds it may hold pursuant to this Section
4.16 to any amount secured by this Deed of Trust and in such order
as Beneficiary may elect. If Beneficiary does not so apply such
funds at or prior to the trustee's sale or sheriff's sale, the
purchaser at such sale shall be entitled to all such funds. If
Beneficiary acquires the Property in lieu of realizing on this Deed
of Trust, the balance of funds it holds shall become the property
of Beneficiary.
Any transfer in fee of all or a part of the Property shall
automatically transfer to the grantee all or a proportionate part
of Grantor, s rights and interest in the fund accumulated hereunder.
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4.17 LEASES.
(a) Grantor will in all respects promptly and
faithfully keep, perform and comply with all of the terms,
provisions, covenants, conditions and agreements in each of the
agreements pursuant to which any tenant of any part of the Property
is occupying the Property (the "Leases") to be kept, performed and
complied with by the lessor therein, and will require, demand and
strictly enforce, by all available means, the prompt and faithful
performance of and compliance with all of the terms, provisions,
covenants, conditions and agreements in the Leases to be performed
and complied with by the lessees therein.
(b) Grantor shall not receive or collect any rents
from any present or future tenant of the Property or any part
thereof in advance in excess of five percent (5.00%) of gross
annual rental income from the Property or collect a security
deposit in excess of two (2) months, rent.
(c) Grantor shall promptly deposit and maintain all
security deposits received by Grantor from tenants in a segregated
trust account in a federally insured bank or savings and loan
association and shall notify and direct in writing each and every
present or future tenant or occupant of the Property or any part
thereof that any se security deposit or other deposit heretofore
delivered to Grantor has been retained by Grantor or assigned and
delivered to Beneficiary as the case may be.
(d) In the event any lessee under the Leases should
be the subject of any proceeding under the United States Bankruptcy
Code or any other type of insolvency proceeding, Grantor covenants
and agrees that in the event Grantor has a claim in such proceeding
in respect of any of the Leases, no settlement thereof shall be
made without the prior written consent of Beneficiary; and further
that any check in payment of damages for rejection of any such
Lease shall be made payable both to Grantor and Beneficiary; and
Grantor hereby assigns any such payment to Beneficiary and further
covenants and agrees that upon request of Beneficiary it will duly
endorse to the order of Beneficiary any such check, the proceeds of
which will be applied to any portion of the indebtedness secured by
this Deed of Trust as Beneficiary may elect. In addition, after
the occurrence of and during the continuance of any Event of
Default, Beneficiary shall be entitled to assert, in its own name
or in the name of Grantor, any claim in respect of the Leases in
any such proceeding.
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4.18 HAZARDOUS WASTE.
(a) For purposes of this Deed of Trust, "hazardous
substance" means any hazardous or toxic substances, materials or
wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation
Hazardous Materials Table (49 CFR 172.101) or by the Environmental
Protection Agency as hazardous substances (40 CFR Part 302) and
amendments thereto, or such substances, materials and wastes which
are or become regulated under any applicable local, state or
federal law including, without limitation, any material, waste or
substance which is (i) petroleum, (ii) asbestos, (iii) poly-
chlorinated biphenyls, (iv) defined as a "hazardous waste"
"extremely hazardous waste"; "restricted hazardous waste" or
"hazardous substance" under RCW Chapter 70.105 (Hazardous Waste
Management) or RCW Chapter 70.105D (Hazardous-Waste Cleanup--
Model Toxics Control Act), (v) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. 1251 et
seq. (33 U.S.C. 1321) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. 1317), (vi) defined as a "hazardous
waste" pursuant to Section 1004 of the Resource Conservation and
Recovery Act, 42 U.S.C. 6903), or (vii) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
9601, et seq. (42 U.S.C. 9601), all as amended, replaced or
succeeded, and any other substance or matter defined as a toxic or
hazardous substance or material or pollutant or contaminant under
any other federal, state or local laws, ordinances or regulations
or under any reported decision of a state or federal court, or any
substance or matter imposing liability for clean-up costs or
expenses on any person or entity under any statutory or common law
theory.
(b) To Grantor's best knowledge and after due and
diligent inquiry based on the Phase I Environmental Site Assessment
dated October 18, 1996 prepared by Atec Associates, Inc. as Job No.
42-07-96-00331, Grantor represents and warrants that neither
Grantor nor any previous owner or user of the Property has used,
generated, stored or disposed of above, in, on, under or around the
Property any hazardous substance and that there is not now, nor
have there ever been tanks or facilities on, under or at the
Property which contained materials which, if known to be present in
soils or ground water, would require cleanup, removal or some other
remedial action under any federal, state or local law or
regulation. Except as otherwise permitted by law, Grantor hereby
covenants and agrees that Grantor will not conduct, permit or
authorize the generation, transportation, storage, treatment or
disposal at the Property of any hazardous substance, and neither
Grantor or any agent, servant or employee shall generate, store,
12
<PAGE>
bury or dispose of any hazardous substance on or in a location that
will adversely affect the Property. Grantor shall promptly and
diligently comply with all requirements of federal, state or local
laws, statutes, ordinances or regulations, or court or
administrative orders or decrees, or private agreements pertaining
to hazardous substances.
(c) If the presence, release, threat of release,
placement on or in the Property, or the generation, transportation,
storage, treatment or disposal at the Property of any hazardous
substance: (i) gives rise to liability (including but not limited
to, a response action, remedial action or removal action) under
RCRA, CERCLA, state toxic waste laws, or otherwise, or (ii) causes
a significant public health effect, or (iii) pollutes or threatens
to pollute the environment, Grantor shall, at its sole expense,
promptly take any and all remedial and removal action necessary to
clean up the Property and mitigate exposure to liability arising
from the hazardous substance, whether or not-required by law. Any
provision of this Deed of Trust to the contrary notwithstanding, if
Grantor fails to perform its obligations under this subsection
4.18(c), any funds advanced by Beneficiary to pay for any and all
remedial and removal action to clean up the Property and mitigate
exposure to liability from the hazardous substance shall not be
secured by the lien of this Deed of Trust but rather shall be
covered by the separate Certificate and Indemnity Agreement
Regarding Hazardous Substances executed concurrently herewith.
(d) Grantor shall promptly give Beneficiary:
(i) written notice and a copy of any notice or correspondence it
receives from any federal, state or other government authority
regarding hazardous substances on the Property or hazardous
substances which affect or will affect the Property, (ii) written
notice of any knowledge or information Grantor obtains regarding
hazardous substances on the Property or hazardous substances which
will affect the Property or expenses or losses incurred or expected
to be incurred by Grantor or any government agency to study,
assess, contain or remove any hazardous substances on or near the
Property, and (iii) written notice of any knowledge or information
Grantor obtains regarding the release or discovery of hazardous
substances on the Property or on other property owned by Grantor or
for which Grantor is or may be responsible.
(e) In the event Beneficiary requires, from time to
time, Grantor to implement an operations and maintenance plan
because of the presence or potential presence of asbestos, or lead
containing paint or other hazardous substances on the Property,
Grantor shall implement and follow the requirements of any such
operations and maintenance plan, maintain records of such
compliance at the Property and make such records immediately
13
<PAGE>
available to Beneficiary upon request by Beneficiary. If Grantor
defaults in its obligation to provide Beneficiary with any
information or reports required to be provided under the operations
and maintenance plan or this subsection 4.18(e) and such default
continues after Beneficiary has provided Grantor with thirty (30)
days, notice and opportunity to cure such default, Grantor shall
pay to Beneficiary, as liquidated damages for the extra expense in
servicing the loan secured hereby, Five Hundred Dollars ($500) on
the first day of the month following the expiration of such thirty
(30) day period and One Hundred Dollars ($100) on the first day of
each month thereafter until such default is cured. All such
amounts shall be secured by this Deed of Trust.
4.19 MANAGEMENT OF THE PROPERTY. Beneficiary is making
this loan in reliance on the business experience and financial
reputation of Grantor as an experienced operator and owner of
assisted living facilities. Therefore, Grantor agrees that it will
not appoint or hire any management company to operate the Property
or make any material change in the type of business conducted by
Grantor on the Property.
4.20 LICENSES AND PERMITS. Grantor shall maintain and
furnish or cause to be maintained and furnished to Beneficiary upon
request, all federal, state and local licenses, permits, approvals,
franchises, authorizations and certifications required to operate
the Property and the improvements thereon as a boarding home or as
a-skilled nursing facility, including, but not limited to,
administrator licenses, qualifications and certificates necessary
to receive Medicare and Medicaid reimbursements or entitlements,
income or revenues from any governmental agency or other source.
Grantor agrees that it shall not take any action or allow any event
to occur that would jeopardize such licenses, permits, approvals,
franchises, authorizations or certificates or its right to receive
Medicare or Medicaid reimbursements or entitlements, income or
revenues from any governmental entity or agency or other source.
Grantor shall, immediately upon receipt by Grantor, furnish to
Beneficiary copies of all inspection reports on the Property from
any governmental agency or other source, copies of renewals of all
licenses, permits, approvals, franchises, authorizations and
certifications and copies of all notices of the failure of the
Property, Grantor or any manager or operator of the Property to
comply with the requirements of any licenses, permits, approvals,
franchises, authorizations and certifications or with any
applicable statutes, rules and regulations and notices of any and
all enforcement or remedial actions taken by any governmental
agency.
14
<PAGE>
4.21 LIFE CARE CONTRACTS. Grantor agrees that it shall
not enter into nor allow any lessee of the Property or the
improvements thereon to enter into any life care contracts or other
agreements pursuant to which Grantor or its lessee agrees to
provide housing, nursing or other services that are of a duration
measured by the life of the other party entering into such
agreements.
5. DEFAULT.
5.1 DEFINITION. Any of the following shall constitute
an "Event of Default" as that term is hereinafter used:
(a) Any representation or warranty made by or for
the benefit of Grantor herein or elsewhere in connection with the
loan secured hereby, including but not limited to any
representations in connection with the security therefor, shall
prove to have been incorrect or misleading in any material respect;
(b) Grantor or any other person or entity liable
therefor shall fail to pay when due any indebtedness secured
hereby;
(c) Grantor or any other signatory thereto shall
default in the performance of any covenant or agreement contained
in this Deed of Trust, the Note, or any other agreement securing
the indebtedness secured hereby;
(d) Grantor or any other person or entity liable
for the repayment of the indebtedness secured hereby shall become
unable or admit in writing its inability to pay its debts as they
mature, or file, or have filed against it, a voluntary or
involuntary petition in bankruptcy, or make a general assignment
for the benefit of creditors, or become the subject of any other
receivership or insolvency proceeding;
(e) Grantor or any other signatory thereto shall
default in the performance of any covenant or agreement contained
in any mortgage or deed of trust encumbering the Property, or the
note or any other agreement evidencing or securing the indebtedness
evidenced thereby;
(f) A tax, charge or lien shall be placed upon or
measured by the Note, this Deed of Trust, or any obligation secured
hereby which Grantor does not or may not legally pay in addition to
the payment of all principal and interest as provided in the Note;
or
15
<PAGE>
(g) The failure of the Property or the improvements
thereon or Grantor or any manager or operator of the Property to
comply with any and all applicable statutes, rules and regulations,
the failure to renew or the revocation of any license, permit,
approval, franchise, authorization or certification required to
operate the Property and the improvements thereon as a boarding
home or as a skilled nursing facility or any qualification or
certification necessary to receive Medicare and Medicaid
reimbursements or entitlements, income or revenues from any
governmental agency or other source or the commencement of any
enforcement or remedial action by any governmental agency,
including, without limitation, the appointment of a receiver or
manager of the Property.
5. 2 BENEFICIARY'S AND TRUSTEE'S RIGHT TO PERFORM.
Upon the occurrence of any Event of Default, Beneficiary or Trustee, but
without the obligation so to do and without notice to or demand
upon Grantor and without releasing Grantor from any obligations
hereunder, may: make any payments or do any acts required of
Grantor hereunder in such manner and to such extent as either may
deem necessary to protect the security hereof, Beneficiary or
Trustee being authorized to enter upon the Property for such
purposes; commence, appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of
Beneficiary or Trustee; pay, purchase, contest or compromise any
encumbrance, charge or lien in accordance with the following
paragraph; and in exercising any such powers, pay necessary
expenses, employ counsel and pay a reasonable fee therefor. All
sums so expended shall be payable on demand by Grantor, be secured
hereby (except as otherwise provided in Section 4.18) and bear
interest at the Default Rate from the date advanced or expended
until repaid.
Beneficiary or Trustee in making any payment approved in this
Section 5.2 and hereby authorized, in the place and stead of the
Grantor, in the case of a payment of taxes, assessments, water
rates, sewer rentals and other governmental or municipal charges,
fines, impositions or liens asserted against the Property, may make
such payment in reliance on any bill, statement or estimate
procured from the appropriate public office without inquiry into
the accuracy of the bill, statement or estimate or into the
validity of any tax, assessment, sale, forfeiture, tax lien or
title or claim thereof; in the case of any apparent or threatened
adverse claim of title, lien, statement of lien, encumbrance, deed
of trust, claim or charge Beneficiary or Trustee, as the case-may
be, shall be the sole judge of the legality or validity of same;
and in the case of a payment for any other purpose herein and
hereby authorized, but not enumerated in this paragraph, such
payment may be made whenever, in the sole judgment and discretion
16
<PAGE>
of Trustee or Beneficiary, as the case may be, such advance or
advances shall seem necessary or desirable to protect the full
security intended to be created by this instrument, provided
further, that in connection with any such advance, Beneficiary at
its option may and is hereby authorized to obtain a continuation
report of title prepared by a title insurance company, the cost and
expenses of which shall be repayable by the Grantor without demand
and shall be secured hereby.
5.3 REMEDIES ON DEFAULT. Upon the occurrence of any
Event of Default all sums secured hereby shall become immediately
due and payable, without notice or demand, at the option of
Beneficiary and Beneficiary may:
(a) Have a receiver appointed as a matter of right,
without regard to the sufficiency of the Property or any other
security for the indebtedness secured hereby and, without the
necessity of posting any bond or other security, such receiver
shall take possession and control of the Property and shall collect
and receive all of the rents, issues and profits thereof;
(b) Foreclose this Deed of Trust as a mortgage or
otherwise realize upon the Property;
(c) Cause Trustee to exercise its power of sale; or
(d) Sue on the Note according to law.
5. 4 NO WAIVER. By accepting payment of any sum secured
hereby after its due date, Beneficiary does not waive its right
either to require prompt payment when due of all other sums so
secured or to declare an Event of Default for failure to do so.
6. CONDEMNATION. Any award of damages, whether paid as a
result of judgment or prior settlement, in connection with any
condemnation or other taking of any portion of the Property, for
public or private use, or for injury to any portion of the Property
is hereby assigned and shall be paid to Beneficiary which may apply
such moneys received by it in the same manner and with the same
effect as provided in Section 4.4.1 above for disposition of
proceeds of hazard insurance. Should the Property or any part or
appurtenance thereof or right or interest therein be taken or
threatened to be taken by reason of any public or private
improvement, condemnation proceeding (including change of grade),
or in any other manner, Beneficiary may, at its option, commence,
appear in and prosecute, in its own name, any action or proceeding,
or make any reasonable compromise or settlement in connection with
such taking or damage, and obtain all compensation, awards or other
relief therefor, and Grantor agrees to pay Beneficiary's costs and
17
<PAGE>
reasonable attorneys' fees incurred in connection therewith. No
condemnation award at any time assigned to or held by Beneficiary
shall be deemed to be held in trust, and Beneficiary may commingle
such award with its general assets and shall not be liable for the
payment of any interest thereon.
7. TRUSTEE.
7.1 GENERAL POWERS AND DUTIES OF TRUSTEE. At any time
or from time to time, without liability therefor and without notice
and without affecting the liability of any person for the payment
of the indebtedness secured hereby, upon written request of
Beneficiary, payment of its own fees and presentation of this Deed
of Trust and the Note for endorsement (in case of full
reconveyance, for cancellation or retention), Trustee may:
(a) Consent to the making of any map or plat of the
Property;
(b) Join in granting any easement or creating any
restriction thereon;
(c) Join in any subordination or other agreement
affecting this Deed of Trust or the lien or charge thereof; or
(d) Reconvey, without warranty, all or any part of
the Property.
7.2 RECONVEYANCE. Upon written request of Beneficiary
stating that all sums secured hereby have been paid, and upon
surrender of this Deed of Trust and the Note to Trustee for
cancellation and retention and upon payment of its fees, Trustee
shall reconvey, without warranty, the Property then held hereunder.
The recitals in any reconveyance executed under this Deed of Trust
of any matters of fact shall be conclusive proof of the
truthfulness thereof. The grantee in such reconveyance may be
described as "the person or persons legally entitled thereto".
7. 3 POWERS AND DUTIES ON DEFAULT. Upon written request
therefor by Beneficiary specifying the nature of the default, or
the nature of the several defaults, and the amount or amounts due
and owing, Trustee shall execute a written notice of default and of
its election to cause the Property to be sold to satisfy the
obligation secured hereby, and shall cause such notice to be
recorded and otherwise given according to law.
18
<PAGE>
Notice of sale having been given as then required by law and
not less than the time then required by law having elapsed after
recordation of such notice of breach, Trustee, without demand on
Grantor, shall sell the Property at the time and place of sale
specified in the notice, as provided by statute, either as a whole
or in separate parcels and in such order as it may determine, at
public auction to the highest and best bidder for cash in lawful
money of the United States, payable at time of sale. Grantor
agrees that such a sale (or a sheriff's sale pursuant to judicial
foreclosure) of all the Property as real estate constitutes a
commercially reasonable disposition thereof, but that with respect
to all or any part of the Property which may be personal property
Trustee shall have and exercise, at Beneficiary's sole election,
all the rights and remedies of a secured party under the UCC.
Whenever notice is permitted or required hereunder or under the
UCC, ten (l0) days shall be deemed reasonable. Trustee may
postpone sale of all or any portion of the Property, and from time
to time thereafter may postpone such sale, as provided by statute.
Trustee shall deliver to the purchaser its deed and bill of sale
conveying the Property so sold, but without any covenant or
warranty, express or implied. The recital in such deed and bill of
sale of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person other than Trustee, including
Grantor or Beneficiary, may purchase at such sale.
After deducting all costs, fees and expenses of Trustee and of
this trust, including the cost of evidence of title search and
title insurance and reasonable counsel fees in connection with
sale, Trustee shall apply the proceeds of sale to payment of: all
sums secured hereby in such order as Beneficiary may determine; and
the remainder, if any, to the clerk of the superior court of the
county in which the sale took place, as provided in RCW 61.24.080.
7.4 REASSIGNMENT OF SECURITY INTEREST. At the request
of Beneficiary, Trustee shall reassign to Beneficiary the security
interest created hereby and after such reassignment Beneficiary
shall have the right, upon the occurrence or continuance of any
Event of Default, to realize upon the personal property subject to
this Deed of Trust, independent of any action of Trustee, pursuant
to the UCC.
7.5 ACCEPTANCE OF TRUST. Trustee accepts this trust
when this Deed of Trust, duly executed and acknowledged, is made a
public record as provided by law. Trustee is not obligated to
notify any party hereto except Beneficiary of pending sale under
any other deed of trust or of any action or proceeding in which
Grantor, Beneficiary or Trustee shall be a party unless brought by
Trustee.
20
<PAGE>
7.6 RELIANCE. Trustee, upon presentation to it of an
affidavit signed by Beneficiary setting forth facts showing a
default by Grantor under this Deed of Trust, is authorized to
accept as true and conclusive all facts and statements therein, and
to act thereon hereunder.
7.7 REPLACEMENT OF TRUSTEE. Beneficiary may, from time
to time, as provided by statute, appoint another trustee in place
and stead of Trustee herein named, and thereupon Trustee herein
named shall be discharged and the trustee so appointed shall be
substituted as Trustee hereunder, with the same effect as if
originally named Trustee herein.
8. APPLICATION OF RENTS. Grantor hereby gives to and
confers upon Beneficiary the right, power and authority during the
continuance of this Deed of Trust to collect the rents, issues and
profits of the Property, reserving unto Grantor the right, prior to
any Event of Default in payment of any indebtedness secured hereby
or hereunder, to collect and retain such rents, issues and profits
as they become due and payable. Upon any such Event of Default,
Grantor's right to spend or retain any rents, issues or profits of
the Property shall cease immediately and without notice or demand
and Beneficiary may at any time and without notice, either in
person, by agent, or by a receiver to be appointed by a court,
without regard to the adequacy of any security for the indebtedness
hereby secured and without the necessity for posting any bond or
other security, enter upon and take possession of the Property or
any part thereof, or in its own name sue for or otherwise collect
such rents, issues, and profits, including those past due and
unpaid, and apply the same, less costs and expenses of operation
and collection, including reasonable attorneys, fees, upon any
indebtedness secured hereby, and in such order as Beneficiary may
determine. The entering upon and taking possession of the
Property, the collection of such rents, issues and profits and the
application thereof as aforesaid, shall not cure or waive any
default or notice of default hereunder or invalidate any act done
pursuant to such notice.
9. NOTICES.
9.1 TRUSTEE. Any notice or demand upon Trustee may be
given or made at:
Chicago Title Insurance Company
P.O. Box 1090
Ephrata, Washington 98823
20
<PAGE>
9.2 GRANTOR AND BENEFICIARY. Any notice to or demand
upon Grantor (including any notice of default or notice of sale) or
notice to or demand upon Beneficiary shall be deemed to have been
sufficiently made for all purposes when deposited in the United
States mails, postage prepaid, registered or certified, return
receipt requested, addressed as follows:
Grantor: Emeritus Corporation
3131 Elliott Avenue, Suite 500
Seattle, Washington 98121
Attention: Ray Brandstrom
Beneficiary: Washington Mutual Bank
1201 Third Avenue, WMT1013
Seattle, Washington 98101
Attention: Commercial Real Estate
Department
or to such other address as may be filed in writing by Grantor or
Beneficiary with Trustee.
9.3 WAIVER OF NOTICE. The giving of notice may be
waived in writing by the person or persons entitled to receive such
notice, either before or after the time established for the giving
of such notice.
10. MODIFICATIONS. Upon written request of any party then
liable for any sum secured hereby, Beneficiary reserves the right
to extend the term, or otherwise modify the terms, hereof or of the
Note as Beneficiary and such person may from time to time deem
appropriate and any such change shall not operate to release, in
any manner, the liability of the original Grantor or Grantor's
successors in interest.
11. SUCCESSORS AND ASSIGNS. All provisions herein contained
shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties.
12. GOVERNING LAW; SEVERABILITY. This Deed of Trust shall be
governed by the law of the state of Washington. In the event that
any provision or clause of this Deed of Trust or the Note conflicts
with applicable law, the conflict shall not affect other provisions
of this Deed of Trust or the Note which can be given effect without
the conflicting provision and to this end the provisions of this
Deed of Trust and the Note are declared to be severable.
13. GRANTOR'S RIGHT TO POSSESSION. Grantor may be and remain
in possession of the Property for so long as it is not in default
hereunder or under the terms of the Note and Grantor may, while it
is entitled to possession of the Property, use the same.
21
<PAGE>
14. MAXIMUM INTEREST. No provision of this Deed of Trust or
of the Note shall require the payment or permit the collection of
interest in excess of the maximum permitted by law. If any excess
of interest in such respect is herein or in the Note provided for,
neither Grantor nor its successors or assigns shall be obligated to
pay that portion of such interest which is in excess of the maximum
permitted by law, and the right to demand the payment of any such
excess shall be and is hereby waived and this Section 14 shall
control any provision of this Deed of Trust or the Note which is
inconsistent herewith.
15. ATTORNEYS, FEES AND LEGAL EXPENSES. In the event of any
default under this Deed of Trust, or in the event that any dispute
arises relating to the interpretation, enforcement or performance
of any obligation secured by this Deed of Trust, Beneficiary shall
be entitled to collect from Grantor on demand all reasonable fees
and expenses incurred in connection therewith, including but not
limited to fees of attorneys, accountants, appraisers,
environmental inspectors, consultants, expert witnesses,
arbitrators, mediators and court reporters. Without limiting the
generality of the foregoing, Grantor shall pay all such costs and
expenses incurred in connection with: (a) arbitration or other
alternative dispute resolution proceedings, trial court actions and
appeals; (b) bankruptcy or other insolvency proceedings of Grantor,
any guarantor or other party liable for any of the obligations
secured by this Deed of Trust or any party having any interest in
any security for any of those obligations; (c) judicial or
nonjudicial foreclosure on, or appointment of a receiver for, any
of the Property; (d) post-judgment collection proceedings; (e) all
claims, counterclaims, cross-claims and defenses asserted in any of
the foregoing whether or not they arise out of or are related to
this Deed of Trust; (f) all preparation for any of the foregoing;
and (g) all settlement negotiations with respect to any of the
foregoing.
16. TIME OF ESSENCE. Time is of the essence under this Deed
of Trust and in the performance of every term, covenant and
obligation contained herein.
17. MISCELLANEOUS.
17.1 Whenever the context so requires the singular number
includes the plural herein, and the impersonal includes the
personal.
17.2 The headings to the various sections have been
inserted for convenient reference only and shall not modify,
define, limit or expand the express provisions of this Deed of
Trust.
22
<PAGE>
17.3 This Deed of Trust, the Note and the other
documents, instruments and agreements entered into by Grantor and
Beneficiary in connection therewith (collectively, the "Loan
Documents") constitute the final expression of the entire agreement
of the parties with respect to the transactions set forth therein.
No party is relying upon any oral agreement or other understanding
not expressly set forth in the Loan Documents. The Loan Documents
may not be amended or modified except by means of a written
document executed by the party sought to be charged with such
amendment or modification.
Dated as of the day and year first above written.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND
MONEY EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW
GRANTOR: EMERITUS CORPORATION, a Washington
corporation
By /s/ Kelly J. Price
-------------------
Its Secretary
23
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that
Kelly J. Price is the person who appeared before me,
and said person acknowledged that said person signed this
instrument, on oath stated that said person was authorized to
execute the instrument and acknowledged it as the secretary of
EMERITUS CORPORATION, a corporation, to be the free and voluntary
act of such corporation for the uses and purposes mentioned in
the instrument.
Dated this 30th day of October, 1996
/s/ Catherine L. Pasquan
------------------------------
(Signature of Notary)
Catherine L. Pasquan
-------------------------------------
(Legibly Print or Stamp Name of Notary)
Notary public in and for the state of
[SEAL] Washington, residing at Seattle
My appointment expires 3-30-99
24
EMERITUS CORPORATION
Exhibit 11.1
Statement Re: Computation of Pro Forma Per Share Loss (1)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1996 1995 1996
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
FOR PRIMARY LOSS PER SHARE (2)
Shares outstanding at beginning of period 100 100 100 100
Adjustment for 9200-for-1 stock split in April 1995 919,900 919,900 919,900 919,900
Adjustment for 3.85-for-1 stock split is September 1995 2,622,000 2,622,000 2,622,000 2,622,000
Shares issued upon conversion of Preferred Stock (3) 4,158,000 4,158,000 4,158,000 4,158,000
Shares issued in the initial public offering 3,300,000 3,300,000 3,300,000 3,300,000
------------ ------------ ----------- -----------
Weighted average number of common and common
equivalent shares outstanding 11,000,000 11,000,000 11,000,000 11,000,000
============ ============ =========== ===========
Pro forma net loss (3,103,801) (2,641,546) (7,624,825) (4,706,271)
============ ============ =========== ===========
Pro forma primary loss per common share (0.28) (0.24) (0.69) (0.43)
============ ============ =========== ===========
</TABLE>
1. Pursuant to the rules of the Securities and Exchange Commission, only
pro forma net loss per common share has been included above as historical
net loss per common share is not considered relevant due to significant
changes in the Company's operations. Pro forma net loss per common share
combines the results of operations of the Company with facilities acquired
or leased as if they had been consummated as of January 1, 1995.
Additionally, common and common equivalent shares issued, represented by the
convertible preferred stock, during the 12 months immediately preceding the
Company's initial public offering have been included in the calculation of
common and common equivalent shares as if they were outstanding for all
periods presented, including loss years where the impact of the incremental
shares is antidilutive, using the treasury stock method and the initial
public offering price of $15 per share.
2. No calculation of fully diluted loss per share has been provided as fully
diluted loss per share is equal to primary loss per share.
3. Preferred shares have been adjusted for the effect of a 3.85-for-1 stock
split effective September 28, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOUND ON PAGES 1 AND 2 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,125
<SECURITIES> 2,338
<RECEIVABLES> 1,481
<ALLOWANCES> (44)
<INVENTORY> 226
<CURRENT-ASSETS> 19,295
<PP&E> 79,888
<DEPRECIATION> (3,111)
<TOTAL-ASSETS> 125,578
<CURRENT-LIABILITIES> 10,459
<BONDS> 69,195
0
0
<COMMON> 1
<OTHER-SE> 29,885
<TOTAL-LIABILITY-AND-EQUITY> 125,578
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</TABLE>
