THE FOLLOWING DOCUMENT IS SUBSTANTIALLY
THE SAME FOR THE XXXXXXXXXX PROPERTY AND
THE RIDGELAND PROPERTY WITH THE EXCEPTION
OF THE ORIGINAL MEDITRUST INVESTMENT IN
THE XXXXXXXXXX PROPERTY IS $9,600,000 AND
THE ORIGINAL MEDITRUST INVESTMENT IN THE
RIDGELAND PROPERTY IS $6,250,000.
EMERITUS
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 March 15,
1996
For Premises
Located At
________,
__________, _______
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT
("Lease") is dated as of the 15 day of
March, 1996 and is between MEDITRUST
ACQUISITION CORPORATION I ("Lessor"), a
Massachusetts corporation having its
principal office at 000 Xxxxx Xxxxxx,
Xxxxxxx Xxxxxxx, Xxxxxxxxxxxxx 00000, and
EMERITUS PROPERTIES I, INC. ("Lessee"), a
Washington corporation, having its
principal office at c/o Emeritus
Corporation, 0000 Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxxxxx 00000-0000.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION;
EXTENSIONS
1.1 LEASED PROPERTY. Upon and
subject to the terms and conditions
hereinafter set forth, Lessor leases to
Lessee and Lessee rents and leases from
Lessor all of Lessor's rights and
interests in and to the following real and
personal property (collectively, the
"Leased Property"):
(a) the real property described
in EXHIBIT A attached hereto (the "Land");
(b) all buildings, structures,
Fixtures (as hereinafter defined) and
other improvements of every kind
including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility
pipes, conduits and lines, and parking
areas and roadways appurtenant to such
buildings and structures presently or
hereafter situated upon the Land
(collectively, the "Leased Improvements");
(c) all easements, rights and
appurtenances of every nature and
description now or hereafter relating to
or benefitting any or all of the Land and
the Leased Improvements;
(d) all equipment, machinery,
building fixtures, and other items of
property (whether realty, personalty or
mixed), including all components thereof,
now or hereafter located in, on or used in
connection with, and permanently affixed
to or incorporated into the Leased
Improvements, including, without
limitation, all furnaces, boilers,
heaters, electrical equipment, heating,
plumbing, lighting, ventilating,
refrigerating, incineration, air and water
pollution control, waste disposal, air-
cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and
theft protection equipment, and built-in
oxygen and vacuum systems, all of which,
to the greatest extent permitted by law,
are hereby deemed by the parties hereto to
constitute real estate, together with all
replacements, modifications, alterations
and additions thereto, but specifically
excluding all items included within the
category of Tangible Personal Property (as
hereinafter defined) which are not
permanently affixed to or incorporated in
the Leased Property (collectively, the
"Fixtures"); and
The Leased Property is leased in its
present condition, AS IS, without
representation or warranty of any kind,
express or implied, by Lessor and subject
to: (i) the rights of parties in
possession; (ii) the existing state of
title including all covenants, conditions,
Liens (as hereinafter defined) and other
matters of record (including, without
limitation, the matters set forth in
EXHIBIT B); (iii) all applicable laws and
(iv) all matters, whether or not of a
similar nature, which would be disclosed
by an inspection of the Leased Property or
by an accurate survey thereof.
1.2 TERM. The term of this Lease
shall consist of: the "Initial Term",
which shall commence on [March 15, 1996]
(the "Commencement Date") and end on March
31, 2009 (the "Expiration Date");
provided, however, that this Lease may be
sooner terminated as hereinafter provided.
In addition, Lessee shall have the
option(s) to extend the Term (as
hereinafter defined) as provided for in
Section 1.3.
1.3 EXTENDED TERMS. Provided that
this Lease has not been previously
terminated, and as long as there exists no
Lease Default (as hereinafter defined) at
the time of exercise and on the last day
of the Initial Term or the then current
Extended Term (as hereinafter defined), as
the case may be, Lessee is hereby granted
the option to extend the Initial Term of
this Lease for four (4) additional periods
(collectively, the "Extended Terms") as
follows: four (4) successive five (5)
year periods for a maximum Term, if all
such options are exercised, which ends on
March 31, 2029. Lessee's extension option
rights shall be exercised by Lessee by
giving written notice to Lessor of each
such extension at least one hundred eighty
(180) days, but not more than three
hundred sixty (360) days, prior to the
termination of the Initial Term or the
then current Extended Term, as the case
may be. Lessee shall have no right to
rescind any such notice once given.
Lessee may not exercise its option for
more than one Extended Term at a time.
During each effective Extended Term, all
of the terms and conditions of this Lease
shall continue in full force and effect,
except that the Base Rent (as hereinafter
defined) for each such Extended Term shall
be adjusted as set forth in Section
3.1(a).
Notwithstanding anything to the
contrary set forth herein, Lessee's rights
to exercise the options granted in this
Section 1.3 are subject to the further
condition that concurrently with the
exercise of any extension option
hereunder, Lessee shall have exercised its
option to extend the terms of all of the
Related Leases in accordance with the
provisions of the Agreement Regarding
Related Transactions and the provisions of
Section 1.3 of each of the Related Leases.
2
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 DEFINITIONS. For all purposes
of this Lease and the other Lease
Documents (as hereinafter defined), except
as otherwise expressly provided or unless
the context otherwise requires, (i) the
terms defined in this Article have the
meanings assigned to them in this Article
and include the plural as well as the
singular and (ii) all references in this
Lease or any of the other Lease Documents
to designated "Articles", "Sections" and
other subdivisions are to the designated
Articles, Sections and other subdivisions
of this Lease or the other applicable
Lease Document.
ACCOUNTS: As defined in the UCC.
ACCREDITATION BODY: Any person,
including any Person having or claiming
jurisdiction over the accreditation,
certification, evaluation or operation of
the Facility.
ADDED VALUE PERCENTAGE: The
proportion of the Fair Market Added Value
of Capital Additions paid for or financed
by Lessee to the Fair Market Value of the
entire Leased Property, expressed as a
percentage.
ADDITIONAL CHARGES: As defined in
Article 3.
ADDITIONAL LAND: As defined in
Section 9.3.
ADDITIONAL RENT: As defined in
Article 3.
ADDITIONAL RENT COMMENCEMENT DATE:
As defined in Article 3.
AFFILIATE: With respect to any
Person (i) any other Person which,
directly or indirectly, controls or is
controlled by or is under common control
with such Person, (ii) any other Person
that owns, beneficially, directly or
indirectly, five percent (5%) or more of
the outstanding capital stock, shares or
equity interests of such Person or (iii)
any officer, director, employee, general
partner or trustee of such Person, or any
other Person controlling, controlled by,
or under common control with, such Person
(excluding trustees and Persons serving in
a fiduciary or similar capacity who are
not otherwise an Affiliate of such
Person). For the purposes of this
definition, "control" (including the
correlative meanings of the terms
"controlled by" and "under common control
with"), as used with respect to any
Person, shall mean the possession,
directly or indirectly, of the power to
direct or cause the direction of the
management and policies of
3
such Person, through the ownership of
voting securities, partnership interests
or other equity interests provided,
however, that, (a) for purposes of
determining a Related Party Default, the
percentage of outstanding capital stock,
shares or equity interests referenced in
(ii) above shall be fifty percent (50%)
and (b) any Person who is an Affiliate by
virtue of
the ownership thereof by Xxxxxx X. Xxxx or
his status therein as an officer or
director shall not be deemed an Affiliate
for purposes of determining a Related
Party Default.
AFFILIATED PARTY SUBORDINATION
AGREEMENT: That certain Affiliated Party
Subordination Agreement of even date by
and among Lessee, the Guarantor, various
Affiliates of Lessee and various
Affiliates of Lessor.
AGREEMENT REGARDING RELATED
TRANSACTIONS (ACQUISITION): The Fourth
Amended and Restated Agreement Regarding
Related Transactions (Acquisition) of even
date, as amended from time to time,
between Lessee, Lessor and any Related
Party that is party to any Related Lease
or Related Party Agreement. Lessor and
Lessee anticipate that the Agreement
Regarding Related Transactions will be
amended from time to time to include
Affiliates of Lessor and Lessee as parties
thereto in connection with future
transactions and acknowledge and agree
that for all purposes under this Lease
Agreement such amendments shall be deemed
to be included in this definition.
ANNUAL FACILITY UPGRADE EXPENDITURE:
An aggregate annual amount equal to the
product of TWO HUNDRED DOLLARS ($200) (as
increased as of the first day of each
Lease Year in which the Annual Facility
Upgrade Expenditure is to be made by an
amount equal to the product of the CPI
Increase multiplied by TWO HUNDRED DOLLARS
($200)) times the number of units in the
Facility, such amount to be spent on
Upgrade Renovations. The term "CPI
Increase" means a fraction, the numerator
of which is the Price Index in effect as
of the first day of the Lease Year in
which the Annual Facility Upgrade
Expenditure is to be made and the
denominator of which is the Price Index in
effect as of the date hereof. The term
"Price Index" means the Consumer Price
Index for Urban Wage Earners and Clerical
Workers, All Items-Series A (1982-84=100),
published by the Bureau of Labor
Statistics, U.S. Department of Labor. If
the Bureau of Labor Statistics should
cease to publish such Price Index in its
present form and calculated on the present
basis, then the most similar index
published by the same Bureau shall be used
for the same purpose. If there is no such
similar index, a substitute index which is
then generally recognized as being similar
to such Price Index, such substitute index
to be reasonably selected by Lessor.
APPURTENANT AGREEMENTS:
Collectively, all instruments, documents
and other agreements that now or hereafter
create any utility, access or other rights
or appurtenances benefiting or relating to
the Leased Property.
4
AWARD: All compensation, sums or
anything of value awarded, paid or
received on a total or partial
Condemnation.
BASE GROSS REVENUES: The annualized
Gross Revenues of the Facility for the
period from and including [___________]
and including [___________], initially as
shown by Lessee's certified Consolidated
Financial Statements and as later verified
by Lessee's Consolidated Financial
Statements.
BASE RENT: As defined in Section
3.1.
BUSINESS DAY: Any day which is not a
Saturday or Sunday or a public holiday
under the laws of the United States of
America, the Commonwealth of
Massachusetts, the State or the state in
which Lessor's depository bank is located.
CAPITAL ADDITIONS: Collectively, all
new buildings and additional structures
annexed to any portion of any of the
Leased Improvements and material
expansions of any of the Leased
Improvements which are constructed on any
portion of the Land during the Term,
including, without limitation, the
construction of a new wing or new story,
the renovation of any of the Leased
Improvements on the Leased Property and
any expansion, construction, renovation or
conversion in connection therewith (a) in
order to provide a functionally new
facility that is needed or used to provide
services not previously offered or (b) in
order to (i) increase the bed capacity of
a Facility, (ii) change the purpose for
which such beds are utilized and/or (iii)
change the utilization of any material
portion of any of the Leased Improvements
provided that for the purposes of Article
9 hereof the Project shall not be treated
as a Capital Addition.
CAPITAL ADDITION COST: The cost of
any Capital Addition made by Lessee
whether paid for by Lessee or Lessor.
Such cost shall include all costs and
expenses of every nature whatsoever
incurred directly or indirectly in
connection with the development,
permitting, construction and financing of
a Capital Addition as reasonably
determined by, or to the reasonable
satisfaction of, Lessor.
CASH COLLATERAL: As defined in the
Deposit Pledge Agreement.
CASH FLOW: The Consolidated Net
Income (or Consolidated Net Loss) before
federal and state income taxes for any
period plus (i) the amount of the
provision for depreciation and
amortization actually deducted on the
books of the applicable Person for the
purposes of computing such Consolidated
Net Income (or Consolidated Net Loss) for
the period involved, plus (ii) Rent and
interest on all other Indebtedness which
is fully subordinated to the Lease
Obligations, plus (iii) any indebtedness
which is fully subordinated to the Lease
Obligations pursuant to the Affiliated
Party Subordination Agreement or the
Management Subordination Agreement.
5
CASUALTY: As defined in Section
13.1.
CHATTEL PAPER: As defined in the
UCC.
CLOSING: As defined in Section
18.3.6.
CODE: The Internal Revenue Code of
1986, as amended.
COLLATERAL: All of the property in
which security interests are granted to
Lessor and the other Meditrust Entities
pursuant to the Lease Documents and the
Related Party Agreements to secure the
Lease Obligations, including, without
limitation, the Cash Collateral.
COMPETITIVE ACTIVITY: As defined in
Section 11.5.
COMPLETION DATE: As defined in the
Leasehold Improvement Agreement.
COMPLETION OF THE PROJECT: As
defined in the Leasehold Improvement
Agreement.
CONDEMNATION: With respect to the
Leased Property or any interest therein or
right accruing thereto or use thereof (i)
the exercise of any governmental
authority, whether by legal proceedings or
otherwise, by a Condemnor or (ii) a
voluntary sale or transfer by Lessor to
any Condemnor, either under threat of
Condemnation or Taking or while legal
proceedings for Condemnation or Taking are
pending.
CONDEMNOR: Any public or quasi-
public authority, or private corporation
or individual, having the power of
condemnation.
CONSOLIDATED: The consolidated
accounts of the relevant Person and its
Subsidiaries consolidated in accordance
with GAAP.
CONSOLIDATED FINANCIALS: For any
fiscal year or other accounting period for
any Person and its consolidated
Subsidiaries, statements of earnings and
retained earnings and of changes in
financial position for such period and for
the period from the beginning of the
respective fiscal year to the end of such
period and the related balance sheet as at
the end of such period, together with the
notes thereto, all in reasonable detail
and setting forth in comparative form the
corresponding figures for the
corresponding period in the preceding
fiscal year, and prepared in accordance
with GAAP, and disclosing all liabilities
of such Person and its consolidated
Subsidiaries, including, without
limitation, contingent liabilities.
CONSULTANTS: Collectively, the
architects, engineers, inspectors,
surveyors and other consultants that are
engaged from time to time by Lessor to
perform services for Lessor in connection
with this Lease.
6
CONTRACTS: All agreements
(including, without limitation, Provider
Agreements, to the extent applicable, and
any Residency Agreement), contracts
(including without limitation,
construction contracts, subcontracts, and
architects' contracts), contract rights,
warranties and representations,
franchises, and records and books of
account benefiting, relating to or
affecting the Leased Property or the
ownership, construction, development,
maintenance, management, repair, use,
occupancy, possession, or operation
thereof, or the operation of any programs
or services in conjunction with the
Facility and all renewals, replacement and
substitutions therefor, now or hereafter
issued to any member of the Leasing Group
by, or entered into by any member of the
Leasing Group with, any Governmental
Authority, Accreditation Body or Third
Party Payor or maintained or used by any
member of the Leasing Group or entered
into by any member of the Leasing Group
with any third Person.
CURRENT ASSETS: All assets of any
Person which would, in accordance with
GAAP, be classified as current assets.
CURRENT LIABILITIES: All liabilities
of any Person which would, in accordance
with GAAP, be classified as current
liabilities.
DATE OF TAKING: The date the
Condemnor has the right to possession of
the property being condemned.
DEBT COVERAGE RATIO: The ratio of
(i) Cash Flow for each applicable period
to (ii) the total of all Rent (excluding
Additional Rent due under this Lease) paid
or payable during such period or accrued
for such period.
DECLARATION: As defined in Article
23.
DEED: As defined in Section 18.3.
DEPOSIT: As defined in Section 18.3.
DEPOSIT PLEDGE AGREEMENT: The pledge
and security agreement so captioned and
dated as of even date herewith between
Lessee and Lessor.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section
20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT:
The Environmental Indemnity Agreement of
even date herewith by and among Lessee the
Guarantor and Lessor.
ENVIRONMENTAL LAWS: As defined in
the Environmental Indemnity Agreement.
7
ERISA: The Employment Retirement
Income Security Act of 1974, as amended.
EVENT OF DEFAULT: As defined in
Article 16.
EXCESS GROSS REVENUES: Gross
Revenues less Base Gross Revenues.
EXPIRATION DATE: As defined in
Section 1.2.
EXTENDED TERMS: As defined in
Section 1.4.
FACILITY: The 90 unit, 110 bed,
fully licensed assisted living facility
known as American House Sarasota on the
Land (together with related parking and
other amenities), together with (after the
Completion Date) the fully licensed
assisted living facility addition (the
assisted living facility addition is
defined as the Project under the Leasehold
Improvement Agreement) to be constructed
on the Land (together with related parking
and other amenities).
FAILURE TO OPERATE: As defined in
Article 16.
FAILURE TO PERFORM: As defined
Article 16.
FAIR MARKET ADDED VALUE: The Fair
Market Value of the Leased Property
(including all Capital Additions) minus
the Fair Market Value of the Leased
Property determined as if no Capital
Additions paid for by Lessee had been
constructed.
FAIR MARKET VALUE OF THE CAPITAL
ADDITION: The amount by which the Fair
Market Value of the Leased Property upon
the completion of a particular Capital
Addition exceeds the Fair Market Value of
the Leased Property just prior to the
construction of the particular Capital
Addition.
FAIR MARKET VALUE OF THE LEASED
PROPERTY: The fair market value of the
Leased Property, including all Capital
Additions, and including the Land and all
other portions of the Leased Property, and
(a) assuming the same is unencumbered by
this Lease, (b) determined in accordance
with the appraisal procedures set forth in
Section 18.2 or in such other manner as
shall be mutually acceptable to Lessor and
Lessee and (c) not taking into account any
reduction in value resulting from any Lien
to which the Leased Property is subject
and which Lien Lessee or Lessor is
otherwise required to remove at or prior
to closing of the transaction. However,
the positive or negative effect on the
value of the Leased Property attributable
to the interest rate, amortization
schedule, maturity date, prepayment
provisions and other terms and conditions
of any Lien on
8
the Leased Property which is not so
required or agreed to be removed shall be
taken into account in determining the Fair
Market Value of the Leased Property. The
Fair Market Value shall be determined as
the overall value based on due
consideration of the "income" approach,
the "comparable sales" approach, and the
"replacement cost" approach.
FEE MORTGAGE: As defined in Section
20.3.
FEE MORTGAGEE: As defined in Section
20.3.
FINANCING PARTY: Any Person who is
or may be participating with Lessor in any
way in connection with the financing of
any Capital Addition.
FINANCING STATEMENTS: Uniform
Commercial Code financing statements
evidencing the security interests granted
to Lessor in connection with the Lease
Documents.
FISCAL QUARTER: Each of the three
(3) month periods commencing on January
1st, April 1st, July 1st and October 1st.
FISCAL YEAR: The twelve (12) month
period from January 1st to December 31st.
FIXTURES: As defined in Article 1.
GAAP: Generally accepted accounting
principles, consistently applied
throughout the relevant period.
GENERAL INTANGIBLES: As defined in
the UCC.
GOVERNMENTAL AUTHORITIES:
Collectively, all agencies, authorities,
bodies, boards, commissions, courts,
instrumentalities, legislatures, and
offices of any nature whatsoever of any
government, quasi-government unit or
political subdivision, whether with a
federal, state, county, district,
municipal, city or otherwise and whether
now or hereinafter in existence.
GROSS REVENUES: Collectively, all
revenues generated by reason of the
operation of the Leased Property
(including any Capital Additions),
directly or indirectly received or to be
received by Lessee or any Affiliate of
Lessee, including, without limitation, all
resident revenues received or receivable
for the use of, or otherwise by reason of,
all rooms, units and other facilities
provided, meals served, services
performed, space or facilities subleased
or goods sold on or from the Leased
Property and further including, without
limitation, except as otherwise
specifically provided below, any
consideration received under any
subletting, licensing, or other
arrangements with any Person relating to
the possession or use of
9
the Leased Property and all revenues from
all ancillary services provided at or
relating to the Leased Property; provided,
however, that Gross Revenues shall not
include non-operating revenues such as
interest income or gain from the sale of
assets not sold in the ordinary course of
business; and provided, further, that
there shall be excluded or deducted (as
the case may be) from such revenues:
(i) all applicable contractual
allowances (relating to any period
during the Term of this Lease and
thereafter until the Rent hereunder
is paid in full), if any, for
xxxxxxxx not paid by or received from
the appropriate Governmental Agencies
or Third Party Payors,
(ii) all applicable allowances
according to GAAP for uncollectible
accounts,
(iii) all proper resident billing
credits and adjustments according to
GAAP, if any, relating to health care
accounting,
(iv) federal, state or local sales,
use, gross receipts and excise taxes
and any tax based upon or measured by
said Gross Revenues which is added to
or made a part of the amount billed
to the resident or other recipient of
such services or goods, whether
included in the billing or stated
separately,
(v) provider discounts for
hospital or other medical facility
utilization contracts, if any,
(vi) the cost, if any, of any
federal, state or local governmental
program imposed specially to provide
or finance indigent resident care
(other than Medicare, Medicaid and
the like),
(vii) deposits refundable to
residents of the Facility, and
(viii) payments received on behalf
of, and paid to, Persons who are not
Affiliates of Lessee.
To the extent that the Leased Property
is subleased or occupied by an Affiliate
of Lessee, Gross Revenues calculated for
all purposes of this Lease (including,
without limitation, the determination of
the Additional Rent payable under this
Lease) shall include the Gross Revenues of
such Sublessee with respect to the
premises demised under the applicable
Sublease (i.e., the Gross Revenues
generated from the operations conducted on
such subleased portion of the Leased
Property) and the rent received or
receivable from such Sublessee pursuant to
such Subleases shall be excluded from
Gross Revenues for all such purposes. As
to any Sublease between Lessee and a non-
Affiliate of Lessee, only the rental
actually received by Lessee from such non-
Affiliate shall be included in Gross
Revenues.
10
GROUP TWO ACQUISITION FACILITIES: As
defined in the Agreement Regarding Related
Transactions.
GUARANTOR: Emeritus Corporation, a
Washington corporation, and its successors
and assigns.
GUARANTY OF LEASE OBLIGATIONS: The
Guaranty of Lease Obligations of even date
executed by Guarantor in favor of Lessor,
relating to the Lease Obligations.
HAZARDOUS SUBSTANCES: As defined in
the Environmental Indemnity Agreement.
IMPOSITIONS: Collectively, all taxes
(including, without limitation, all
capital stock and franchise taxes of
Lessor, all ad valorem, property, sales
and use, single business, gross receipts,
transaction privilege, rent or similar
taxes), assessments (including, without
limitation, all assessments for public
improvements or benefits, whether or not
commenced or completed prior to the date
hereof and whether or not to be completed
within the Term), ground rents, water and
sewer rents, water charges or other rents
and charges, excises, tax levies, fees
(including, without limitation, license,
permit, inspection, authorization and
similar fees), transfer taxes and
recordation taxes imposed as a result of
this Lease or any extensions hereof, and
all other governmental charges, in each
case whether general or special, ordinary
or extraordinary, or foreseen or
unforeseen, of every character in respect
of either or both of the Leased Property
and the Rent (including all interest and
penalties thereon due to any failure in
payment by Lessee), which at any time
prior to, during or in respect of the Term
hereof and thereafter until the Leased
Property is surrendered to Lessor as
required by the terms of this Lease, may
be assessed or imposed on or in respect of
or be a Lien upon (a) Lessor or Lessor's
interest in the Leased Property, (b) the
Leased Property or any rent therefrom or
any estate, right, title or interest
therein, or (c) any occupancy, operation,
use or possession of, sales from, or
activity conducted on, or in connection
with, the Leased Property or the leasing
or use of the Leased Property.
Notwithstanding the foregoing, nothing
contained in this Lease shall be construed
to require Lessee to pay (1) any tax based
on net income (whether denominated as a
franchise or capital stock or other tax)
imposed on Lessor or any other Person,
except Lessee or its successors, (2) any
net revenue tax of Lessor or any other
Person, except Lessee and its successors,
(3) any tax imposed with respect to the
sale, exchange or other disposition by
Lessor of the Leased Property or the
proceeds thereof, or (4) except as
expressly provided elsewhere in this
Lease, any principal or interest on any
Encumbrance on the Leased Property;
provided, however, the provisos set forth
in clauses (1) and (2) of this sentence
shall not be applicable to the extent that
any real or personal property tax,
assessment, tax levy or charge which
Lessee is obligated to pay pursuant to the
first sentence of this definition and
which is in effect at any time during the
Term hereof is totally or partially
repealed, and a tax, assessment, tax levy
or charge set
11
forth in clause (1) or (2) is levied,
assessed or imposed expressly in lieu
thereof. In computing the amount of any
franchise tax or capital stock tax which
may be or become an Imposition, the amount
payable by Lessee shall be equitably
apportioned based upon all properties
owned by Lessor that are located within
the particular jurisdiction subject to any
such tax.
INDEBTEDNESS: The total of all
obligations of a Person, whether current
or long-term, which in accordance with
GAAP would be included as liabilities upon
such Person's balance sheet at the date as
of which Indebtedness is to be determined,
and shall also include (i) all capital
lease obligations and (ii) all guarantees,
endorsements (other than for collection of
instruments in the ordinary course of
business), or other arrangements whereby
responsibility is assumed for the
obligations of others, whether by
agreement to purchase or otherwise acquire
the obligations of others, including any
agreement contingent or otherwise to
furnish funds through the purchase of
goods, supplies or services for the
purpose of payment of the obligations of
others.
INDEMNIFIED PARTIES: As defined in
Section 12.2.2.
INDEX: The rate of interest of
actively traded marketable United States
Treasury Securities bearing a fixed rate
of interest adjusted for a constant
maturity of ten (10) years as calculated
by the Federal Reserve Board.
INITIAL TERM: As defined in Section
1.2.
INSTRUMENTS: As defined in the UCC.
INSURANCE REQUIREMENTS: All terms of
any insurance policy required by this
Lease, all requirements of the issuer of
any such policy with respect to the Leased
Property and the activities conducted
thereon and the requirements of any
insurance board, association or
organization or underwriters' regulations
pertaining to the Leased Property.
LAND: As defined in Article 1.
LEASE: As defined in the preamble of
this Lease.
LEASE DEFAULT: The occurrence of any
default or breach of condition continuing
beyond any applicable notice and/or grace
periods under this Lease and/or any of the
other Lease Documents.
12
LEASE DOCUMENTS: Collectively, this
Lease, the Guaranty of Lease Obligations,
the Agreement Regarding Related
Transactions, the Leasehold Improvement
Agreement, the Security Agreement, the
Deposit Pledge Agreement, the Negative
Pledge Agreement, the Permits Assignment,
the Financing Statements, the Affiliated
Party Subordination Agreement, the
Environmental Indemnity Agreement, and any
and all other instruments, documents,
certificates or agreements executed or
furnished by any member of the Leasing
Group in connection with the transactions
evidenced by the Lease and/or any of the
foregoing documents.
LEASE OBLIGATIONS: Collectively, all
indebtedness, covenants, liabilities,
obligations, agreements and undertakings
(other than Lessor's obligations) under
this Lease and the other Lease Documents.
LEASE YEAR: A twelve month period
ending on March 31st of each year;
provided, that the first Lease Year shall
begin on the Commencement Date and shall
end on March 31, 1997.
LEASED IMPROVEMENTS: As defined in
Article 1.
LEASED PROPERTY: As defined in
Article 1.
LEASEHOLD IMPROVEMENT AGREEMENT: The
Leasehold Improvement Agreement of even
date by and between Lessee and Lessor.
LEASING GROUP: Collectively, Lessee,
the Guarantor, the General Partner, any
Sublessee which is an Affiliate of Lessee
and any Manager which is an Affiliate of
Lessee.
LEGAL REQUIREMENTS: Collectively,
all statutes, ordinances, by-laws, codes,
rules, regulations, restrictions, orders,
judgments, decrees and injunctions
(including, without limitation, all
applicable building, health code, zoning,
subdivision, and other land use and
assisted living licensing statutes,
ordinances, by-laws, codes, rules and
regulations), whether now or hereafter
enacted, promulgated or issued by any
Governmental Authority, Accreditation Body
or Third Party Payor affecting Lessor, any
member of the Leasing Group or the Leased
Property or the ownership, construction,
development, maintenance, management,
repair, use, occupancy, possession or
operation thereof or the operation of any
programs or services in connection with
the Leased Property, including, without
limitation, any of the foregoing which may
(i) require repairs, modifications or
alterations in or to the Leased Property,
(ii) in any way affect (adversely or
otherwise) the use and enjoyment of the
Leased Property or (iii) require the
assessment, monitoring, clean-up,
containment, removal, remediation or other
treatment of any Hazardous Substances on,
under or from the Leased Property.
Without limiting the foregoing, the term
Legal Requirements includes all
Environmental Laws and shall also include
all Permits and Contracts issued or
entered into by any
13
Governmental Authority, any Accreditation
Body and/or any Third Party Payor and all
Permitted Encumbrances.
LESSEE: As defined in the preamble of
this Lease and its successors and assigns.
LESSEE'S ELECTION NOTICE: As defined
in Section 14.3.
LESSEE'S PURCHASE OPTION NOTICE: As
defined in Section 18.3.
LESSOR: As defined in the preamble of
this Lease and its successors and assigns.
LIEN: With respect to any real or
personal property, any mortgage, easement,
restriction, lien, pledge, collateral
assignment, hypothecation, charge,
security interest, title retention
agreement, levy, execution, seizure,
attachment, garnishment or other
encumbrance of any kind in respect of such
property, whether or not inchoate, vested
or perfected.
LIMITED PARTIES: As defined in
Section 11.5.4; provided, however, in no
event shall the term Limited Parties
include any Person in its capacity as a
shareholder of a public entity, unless
such shareholder is a member of the
Leasing Group or an Affiliate thereof.
MANAGED CARE PLANS: All health
maintenance organizations, preferred
provider organizations, individual
practice associations, competitive medical
plans, and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement,
whether written or oral, between Lessee or
any Sublessee and any other Person
pursuant to which Lessee or such Sublessee
provides any payment, fee or other
consideration to any other Person to
operate or manage the Facility.
MANAGEMENT SUBORDINATION AGREEMENT:
The Management Subordination Agreement as
of even date herewith between Lessee and
Lessor.
MANAGER: Any Person who has entered
into a Management Agreement with Lessee or
any Sublessee.
MATERIAL STRUCTURAL WORK: Any (i)
structural alteration, (ii) structural
repair or (iii) structural renovation to
the Leased Property, which would
customarily require or which require the
design and/or involvement of a structural
engineer or architect or which would
require the issuance of a Permit.
14
MEDICAID: The medical assistance
program established by Title XIX of the
Social Security Act (42 USC 1396 et seq.)
and any statute succeeding thereto.
MEDICARE: The health insurance
program for the aged and disabled
established by Title XVIII of the Social
Security Act (42 USC 1395 et seq.) and any
statute succeeding thereto.
MEDITRUST: As defined in Article 23.
MEDITRUST/EMERITUS TRANSACTION
AFFILIATE: An Affiliate of Lessee, the
business and activities of which are
limited to those subject to
Meditrust/Emeritus Transaction Documents
(other than the Affiliated Party
Subordination Agreement, the Agreement
Regarding Related Transactions and
comparable agreement now or hereafter in
effect among Affiliates of Lessee and of
Lessor) to which such Affiliate is a
party.
MEDITRUST/EMERITUS TRANSACTION
DOCUMENTS: As defined in the Agreement
Regarding Related Transactions.
MEDITRUST ENTITIES: Collectively,
Meditrust, Lessor and any other Affiliate
of Lessor which may now or hereafter be a
party to any Related Party Agreement.
MEDITRUST INVESTMENT: The sum of (i)
the Original Meditrust Investment plus
(ii) the aggregate amount of all
Subsequent Investments plus (iii) so much
of the Project Funds as Lessor has
expended from time to time less the sum of
any Net Award Amounts and/or Net Proceeds
Amounts.
MONTHLY DEPOSIT DATE: As defined in
Section 4.6.
NEGATIVE PLEDGE AGREEMENT: The Group
Two Negative Pledge Agreement
(Acquisition) of even date by and between
Guarantor, Lessee and Lessor.
NET AWARD AMOUNT: As defined in
Section 3.7.
NET INCOME (OR NET LOSS): The net
income (or net loss, expressed as a
negative number) of a Person for any
period, after all taxes actually paid or
accrued and all expenses and other charges
determined in accordance with GAAP.
NET PROCEEDS AMOUNT: As defined in
Section 3.7.
NET WORTH: An amount determined in
accordance with GAAP equal to the total
assets of any Person, minus the total
liabilities of such Person.
15
OBLIGATIONS: Collectively, the Lease
Obligations and the Related Party
Obligations.
OFFICER'S CERTIFICATE: A certificate
of Lessee signed on behalf of Lessee by
the Chairman of the Board of Directors,
the President, any Vice President or the
Treasurer of Lessee, or another officer
authorized to so sign by the Board of
Directors or By-Laws of Lessee, or any
other Person whose power and authority to
act has been authorized by delegation in
writing by any of the Persons holding the
foregoing offices.
ORIGINAL MEDITRUST INVESTMENT: The
sum of SIX MILLION TWO HUNDRED FIFTY
THOUSAND DOLLARS ($6,250,000).
OTHER PERMITTED USES: To the extent
permitted under applicable Legal
Requirements and under Insurance
Requirements, and so long as the same do
not detract in any material manner from
the Primary Intended Use and do not occupy
more than ten percent (10%) of the useable
floor area of the building comprising the
Facility, such uses as Lessee reasonably
determines are appropriate and incidental
to the Primary Permitted Use.
OVERDUE RATE: On any date, a rate of
interest per annum equal to the greater
of: (i) a variable rate of interest per
annum equal to one hundred twenty percent
(120%) of the Prime Rate, or (ii) eighteen
percent (18%) per annum; provided,
however, in no event shall the Overdue
Rate be greater than the maximum rate then
permitted under applicable law to be
charged by Lessor.
PBGC: Pension Benefit Guaranty
Corporation.
PERMITS: Collectively, all permits,
licenses, approvals, qualifications,
rights, variances, permissive uses,
accreditation, certificates,
certifications, consents, agreements,
contracts, contract rights, franchises,
interim licenses, permits and other
authorizations of every nature whatsoever
required by, or issued under, applicable
Legal Requirements relating or affecting
the Leased Property or the construction,
development, maintenance, management, use
or operation thereof, or the operation of
any programs or services in conjunction
with the Facility and all renewals,
replacements and substitutions therefor,
now or hereafter required or issued by any
Governmental Authority, Accreditation Body
or Third Party Payor to any member of the
Leasing Group, or maintained or used by
any member of the Leasing Group, or
entered into by any member of the Leasing
Group with any third Person with respect
to the Leased Property.
PERMITS ASSIGNMENT: The Collateral
Assignment of Permits, Licenses and
Contracts of even date granted by Lessee
to Lessor.
PERMITTED ENCUMBRANCES: As defined in
Section 10.1.18.
16
PERMITTED PRIOR SECURITY INTERESTS:
As defined in Section 6.1.2.
PERSON: Any individual, corporation,
general partnership, limited partnership,
joint venture, stock company or
association, company, bank, trust, trust
company, land trust, business trust,
unincorporated organization,
unincorporated association, Governmental
Authority or other entity of any kind or
nature.
PLANS AND SPECIFICATIONS: As defined
in Section 13.1.3.
PRIMARY INTENDED USE: The use of the
Facility as an assisted living facility
with ninety (90) units, one hundred-ten
(110) beds prior to the Completion Date,
and additional units and beds after the
Completion Date consisting of (i) an
existing facility with ninety (90) units
one hundred-ten (110) beds; and (ii) an
assisted living addition as provided in
the Leasehold Improvement Agreement; or
such additional number of units or beds as
may hereafter be permitted under this
Lease, and such ancillary uses as are
permitted by law and may be necessary in
connection therewith or incidental
thereto.
PRIME RATE: The variable rate of
interest per annum from time to time
announced by the Reference Bank as its
prime rate of interest and in the event
that the Reference Bank no longer
announces a prime rate of interest, then
the Prime Rate shall be deemed to be the
variable rate of interest per annum which
is the prime rate of interest or base rate
of interest from time to time announced by
any other major bank or other financial
institution reasonably selected by Lessor.
PRINCIPAL PLACE OF BUSINESS: As
defined in Section 10.1.28.
PROCEEDS: As defined in the UCC.
PROJECT: As defined in the Leasehold
Improvement Agreement.
PROJECT FUNDS: As defined in the
Leasehold Improvement Agreement.
PROVIDER AGREEMENTS: All
participation, provider and reimbursement
agreements or arrangements, if any, now or
hereafter in effect for the benefit of
Lessee or any Sublessee in connection with
the operation of the Facility relating to
any right of payment or other claim
arising out of or in connection with
Lessee's or such Sublessee's participation
in any Third Party Payor Program.
PURCHASE OPTION: As defined in
Section 18.3.
PURCHASE OPTION DATE: As defined in
Section 18.3.
17
PURCHASE OPTION PURCHASE PRICE: As
defined in Section 18.3.
PURCHASER: As defined in Section
11.5.
RECEIVABLES: Collectively, (i) all
rights to payment for goods sold or leased
or services rendered by Lessee or any
other party, whether now in existence or
arising from time to time hereafter and
whether or not yet earned by performance,
including, without limitation, obligations
evidenced by an account, note, contract,
security agreement, chattel paper, or
other evidence of indebtedness, including
Accounts and Proceeds, and (ii) a license
to use such Instruments, Documents,
Accounts, Proceeds, General Intangibles
and Chattel Paper as are reasonably
required for purposes of exercising the
rights set forth in (i) above.
REFERENCE BANK: Fleet Bank of
Connecticut, N.A.
RELATED LEASES: The Group Two
Acquisition Facility Leases (as defined in
the Agreement Regarding Related
Transactions), together with such other
new leases identified from time to time in
the Agreement Regarding Related
Transactions.
RELATED PARTIES: Collectively, each
Person that may now or hereafter be a
party to any Related Party Agreement other
than the Meditrust Entities.
RELATED PARTY AGREEMENT: Any
agreement, document or instrument now or
hereafter evidencing or securing any
Related Party Obligation, including,
without limitation, the Related Leases.
RELATED PARTY DEFAULT: The occurrence
of a default or breach of condition
continuing beyond the expiration of any
applicable notice and grace periods, if
any, under the terms of any Related Party
Agreement.
RELATED PARTY OBLIGATIONS:
Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and
undertakings due to, or made for the
benefit of, Lessor or any of the other
Meditrust Entities by Lessee or any other
member of the Leasing Group or any of
their respective Affiliates in connection
with any of the properties described in
EXHIBIT E to the Agreement Regarding
Related Transactions, as the same may be
modified and amended from time to time;
whether such indebtedness, covenants,
liabilities, obligations, agreements
and/or undertakings are direct or
indirect, absolute or contingent,
liquidated or unliquidated, due or to
become due, joint, several or joint and
several, primary or secondary, now
existing or hereafter arising.
RENT: Collectively, the Base Rent,
Additional Rent, the Additional Charges
and all other sums payable under this
Lease and the other Lease Documents.
18
RENT ADJUSTMENT DATE: The first day
of any of the Extended Terms.
RENT ADJUSTMENT RATE: 325 basis
points over the Index.
RENT INSURANCE PROCEEDS: As defined
in Section 13.8.
RESIDENCY AGREEMENT: All contracts,
agreements and consents executed by or on
behalf of any resident or other Person
seeking services at the Facility,
including, without limitation, assignments
of benefits and guarantees.
RETAINAGE: As defined in Section
13.1.3.
SECURITY AGREEMENT: The Security
Agreement as of even date herewith between
Lessee and Lessor.
SELLER: American House Sarasota
Limited Partnership, a Michigan limited
partnership.
STATE: The state or commonwealth in
which the Leased Property is located.
SUBLEASE: Collectively, all
subleases, licenses, use agreements,
concession agreements, tenancy at will
agreements and other occupancy agreements
of every kind and nature (but excluding
any Residency Agreement), whether oral or
in writing, now in existence or
subsequently entered into by Lessee,
encumbering or affecting the Leased
Property.
SUBLESSEE: Any sublessee, licensee,
concessionaire, tenant or other occupant
under any of the Subleases.
SUBSEQUENT INVESTMENTS: The aggregate
amount of all sums expended and
liabilities incurred by Lessor in
connection with Capital Additions.
SUBSIDIARY OR SUBSIDIARIES: With
respect to any Person, any corporation or
other entity of which such Person,
directly, or indirectly, through another
entity or otherwise, owns, or has the
right to control or direct the voting of,
fifty percent (50%) or more of the
outstanding capital stock or other
ownership interest having general voting
power (under ordinary circumstances).
TAKING: A taking or voluntary
conveyance during the Term of the Leased
Property, or any interest therein or right
accruing thereto, or use thereof, as the
result of, or in settlement of, any
Condemnation or other eminent domain
proceeding affecting the Leased Property
whether or not the same shall have
actually been commenced.
19
TANGIBLE PERSONAL PROPERTY: All
machinery, equipment, furniture,
furnishings, movable walls or partitions,
computers or trade fixtures, goods,
inventory, supplies, and other personal
property owned or leased (pursuant to
equipment leases) by Lessee and used in
the operation of the Leased Property.
TERM: Collectively, the Initial Term
and each Extended Term which has become
effective pursuant to Section 1.4, as the
context may require, unless earlier
terminated pursuant to the provisions
hereof.
THIRD PARTY PAYOR PROGRAMS:
Collectively, all third party payor
programs in which Lessee or any Sublessee
presently or in the future may
participate, including without limitation,
Medicare, Medicaid, Blue Cross and/or Blue
Shield, Managed Care Plans, other private
insurance plans and employee assistance
programs.
THIRD PARTY PAYORS: Collectively,
Medicare, Medicaid, Blue Cross and/or Blue
Shield, private insurers and any other
Person which presently or in the future
maintains Third Party Payor Programs.
TIME OF CLOSING: As defined in
Section 18.3.
UCC: The Uniform Commercial Code as
in effect from time to time in the State.
UNITED STATES TREASURY SECURITIES:
The uninsured treasury securities issued
by the United States Federal Reserve Bank.
UNSUITABLE FOR ITS PRIMARY INTENDED
USE: As used anywhere in this Lease, the
term "Unsuitable For Its Primary Intended
Use" shall mean that, by reason of
Casualty, or a partial or temporary Taking
by Condemnation, in the good faith
judgment of Lessor, the Facility cannot be
operated on a commercially practicable
basis for the Primary Intended Use, taking
into account, among other relevant
factors, the number of usable units or
beds affected by such Casualty or partial
or temporary Taking.
UNAVOIDABLE DELAYS: Delays due to
strikes, lockouts, inability to procure
materials, power failure, acts of God,
governmental restrictions, enemy action,
civil commotion, fire, unavoidable
casualty or other causes beyond the
control of the party responsible for
performing an obligation hereunder,
provided that lack of funds shall not be
deemed a cause beyond the control of
either party hereto.
UPGRADE RENOVATIONS: Repair and
refurbishing other than normal janitorial,
cleaning and maintenance activities.
WORK: As defined in Section 13.1.1.
WORK CERTIFICATES: As defined in
Section 13.1.3.
20
WORKING CAPITAL LOAN: As defined in
Section 6.1.3.
WORKING CAPITAL STOCK PLEDGE: As
defined in Section 16.1(h).
2.2 RULES OF CONSTRUCTION. The
following rules of construction shall
apply to the Lease and each of the other
Lease Documents: (a) references to
"herein", "hereof" and "hereunder" shall
be deemed to refer to this Lease or the
other applicable Lease Document, and shall
not be limited to the particular text or
section or subsection in which such words
appear; (b) the use of any gender shall
include all genders and the singular
number shall include the plural and vice
versa as the context may require; (c)
references to Lessor's attorneys shall be
deemed to include, without limitation,
special counsel and local counsel for
Lessor; (d) reference to attorneys' fees
and expenses shall be deemed to include
all costs for administrative, paralegal
and other support staff and to exclude any
fees and expenses of attorneys who are
employees of an Affiliate of Lessor; (e)
references to Leased Property shall be
deemed to include references to all of the
Leased Property and references to any
portion thereof; (f) references to the
Lease Obligations shall be deemed to
include references to all of the Lease
Obligations and references to any portion
thereof; (g) references to the Obligations
shall be deemed to include references to
all of the Obligations and references to
any portion thereof; (h) the term
"including", when following any general
statement, will not be construed to limit
such statement to the specific items or
matters as provided immediately following
the term "including" (whether or not non-
limiting language such as "without
limitation" or "but not limited to" or
words of similar import are also used),
but rather will be deemed to refer to all
of the items or matters that could
reasonably fall within the broadest scope
of the general statement; (i) any
requirement that financial statements be
Consolidated in form shall apply only to
such financial statements as relate to a
period during any portion of which the
relevant Person has one or more
Subsidiaries; (j) all accounting terms not
specifically defined in the Lease
Documents shall be construed in accordance
with GAAP and (k) all exhibits annexed to
any of the Lease Documents as referenced
therein shall be deemed incorporated in
such Lease Document by such annexation
and/or reference.
ARTICLE 3
RENT
3.1 RENT FOR LAND, LEASED
IMPROVEMENTS, RELATED RIGHTS AND FIXTURES.
Lessee will pay to Lessor, in lawful money
of the United States of America, at
Lessor's address set forth herein or at
such other place or to such other Person
as Lessor from time to time may designate
in writing, rent for the Leased Property,
as follows.
21
3.1.1 BASE RENT: (a) Pre-
Conversion Base Rent: From and after
the Commencement Date and until the
Conversion Date, Lessee shall pay,
commencing on April 1, 1996, and on
the first day of each calendar month
thereafter and on the Conversion
Date, a base rent (the "Pre-
Conversion Base Rent") in arrears
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) the Pre-Conversion
Rent Adjustment Rate in effect from
time to time, calculated on a daily
basis.
(b) Post-Conversion Base Rent:
From and after the Conversion Date,
Lessee shall pay a base rent (the
"Post-Conversion Base Rent") per
annum which is equal to the product
of (i) the Original Meditrust
Investment plus the aggregate amount
of the Project Funds as Lessor has
expended as of the Conversion Date
multiplied by (ii) the Rent
Adjustment Rate which is in effect or
calculated on the Conversion Date,
payable in advance in equal,
consecutive monthly installments due
on the first day of each calendar
month; provided, however, that on
each Rent Adjustment Date, the Base
Rent shall be adjusted to equal the
greater of (i) the then current Post-
Conversion Base Rent or (ii) an
amount equal to Original Meditrust
Investment plus the aggregate amount
of the Project Funds as Lessor has
expended as of the Conversion Date
plus the Subsequent Advances
multiplied by the Rent Adjustment
Rate then in effect on such
Subsequent Rent Adjustment Date and
further, provided, however, that on
the Conversion Date, Lessee shall pay
to Lessor (x) the proportionate share
of the Post-Conversion Base Rent due
for the period from (and including)
such date through the end of the
calendar month during which such date
occurred.
3.1.2 ADDITIONAL RENT: In
addition to the Base Rent, Lessee
shall also pay to Lessor additional
rent (the "Additional Rent") in an
amount equal to five percent (5%) of
Excess Gross Revenues. Additional
Rent shall accrue commencing,
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
22
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
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.
23
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.
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,
24
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.
3.3.4 SURVIVAL. The obligations
of Lessor and Lessee contained in
this Section shall survive the
expiration or earlier termination of
this Lease.
3.4 ADDITIONAL CHARGES. Subject to
the rights to contest as set forth in
Article 15, in addition to the Base Rent
and Additional Rent, (a) Lessee will also
pay and discharge as and when due and
payable all Impositions, all amounts,
liabilities and obligations under the
Appurtenant Agreements and all other
amounts, liabilities and obligations which
Lessee assumes or agrees to pay under this
Lease, and (b) in the event of any failure
on the part of Lessee to pay any of those
items referred to in clause (a) above,
Lessee will also promptly pay and
discharge every fine, penalty, interest
and cost which may be added for non-
payment or late payment of such items (the
items referred to in clauses (a) and (b)
above being referred to herein
collectively as the "Additional Charges"),
and Lessor shall have all legal, equitable
and contractual rights, powers and
remedies provided in this Lease, by
statute or otherwise, in the case of non-
payment of the Additional Charges, as well
as the Base Rent and Additional Rent. To
the extent that Lessee pays any Additional
Charges to Lessor pursuant to any
requirement of this Lease, Lessee shall be
relieved of its obligation to pay such
Additional Charges to any other Person to
which such Additional Charges would
otherwise be due.
3.5 NET LEASE. The Rent shall be
paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full
amount of the installments of Base Rent,
and the payments of Additional Rent and,
if and to the extent payable to Lessor,
Additional Charges throughout the Term.
25
3.6 NO LESSEE TERMINATION OR OFFSET.
3.6.1 NO TERMINATION. Except as
may be otherwise specifically and
expressly provided in this Lease,
Lessee, to the extent not prohibited
by applicable law, shall remain bound
by this Lease in accordance with its
terms and shall neither take any
action without the consent of Lessor
to modify, surrender or terminate the
same, nor seek nor be entitled to any
abatement, deduction, deferment or
reduction of Rent, or set-off against
the Rent, nor shall the respective
obligations of Lessor and Lessee be
otherwise affected by reason of (a)
any Casualty or any Taking of the
Leased Property, (b) the lawful or
unlawful prohibition of, or
restriction upon, Lessee's use of the
Leased Property or the interference
with such use by any Person (other
than Lessor, except to the extent
permitted hereunder) or by reason of
eviction by paramount title; (c) any
claim that Lessee has or might have
against Lessor, (d) any default or
breach of any warranty by Lessor or
any of the other Meditrust Entities
under this Lease, any other Lease
Document or any Related Party
Agreement, (e) any bankruptcy,
insolvency, reorganization,
composition, readjustment,
liquidation, dissolution, winding up
or other proceedings affecting Lessor
or any assignee or transferee of
Lessor or (f) for any other cause
whether similar or dissimilar to any
of the foregoing, other than a
discharge of Lessee from any of the
Lease Obligations as a matter of law.
3.6.2 WAIVER. Lessee to the
fullest extent not prohibited by
applicable law, hereby specifically
waives all rights, arising from any
occurrence whatsoever, which may now
or hereafter be conferred upon it by
law to (a) modify, surrender or
terminate this Lease or quit or
surrender the Leased Property or (b)
entitle Lessee to any abatement,
reduction, suspension or deferment of
the Rent or other sums payable by
Lessee hereunder, except as otherwise
specifically and expressly provided
in this Lease.
3.6.3 INDEPENDENT COVENANTS. The
obligations of Lessor and Lessee
hereunder shall be separate and
independent covenants and agreements
and the Rent and all other sums
payable by Lessee hereunder shall
continue to be payable in all events
unless the obligations to pay the
same shall be terminated pursuant to
the express provisions of this Lease
or (except in those instances where
the obligation to pay expressly
survives the termination of this
Lease) by termination of this Lease
other than by reason of an Event of
Default.
26
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.
27
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
28
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.
29
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
30
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.
31
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 xxxx 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.
32
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 xxxx of sale
and assignments of any equipment
leases, all in such forms as are
reasonably satisfactory to Lessor)
upon payment of its fair market value
or (b) requiring Lessee to remove the
Tangible Personal Property. If
Lessor exercises its option to
purchase the Tangible Personal
Property, the price to be paid by
Lessor shall be (i) reduced by the
amount of all payments due on any
equipment leases or any other
Permitted Prior
33
Security Interests assumed by
Lessor and (ii) applied to the Lease
Obligations before any payment to
Lessee. If Lessor requires the
removal of the Tangible Personal
Property, then all of the Tangible
Personal Property that is not removed
by Lessee within ten (10) days
following such request shall be
considered abandoned by Lessee and
may be appropriated, sold, destroyed
or otherwise disposed of by Lessor
without first giving notice thereof
to Lessee, without any payment to
Lessee and without any obligation to
account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 SECURITY FOR LESSEE'S
OBLIGATIONS; PERMITTED PRIOR SECURITY
INTERESTS.
6.1.1 SECURITY. In order to
secure the payment and performance of
all of the Obligations, Lessee agrees
to provide or cause there to be
provided the following security:
(a) a first lien and
exclusive security interest in
the Collateral, as more
particularly provided for in the
Security Agreement;
(b) the Cash
Collateral.
(c) a first lien and
exclusive pledge and assignment
of, and security interest in,
all Permits and Contracts, as
more particularly provided for
in the Collateral Assignment of
Permits and Contracts; and
(d) in the event
that, at any time during the
Term, Lessee holds the fee title
to or a leasehold interest in
any real property and/or
personal property which is used
as an integral part of the
operation of the Leased Property
(but is not subject to this
Lease), Lessee shall (i) provide
Lessor with prior notice of such
acquisition and (ii) shall take
such actions and enter into such
agreements as Lessor shall
reasonably request in order to
xxxxx Xxxxxx 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).
34
Notwithstanding the
foregoing, Lessor shall
subordinate its security
interest in Receivables to a
prior security interest to
secure a working capital line as
provided in Section 6.1.3.
6.1.2 PURCHASE-
MONEY SECURITY INTERESTS AND
EQUIPMENT LEASES.
Notwithstanding any other
provision hereof regarding the
creation of Liens, Lessee may
(a) grant priority purchase
money security interests in
items of Tangible Personal
Property, (b) lease Tangible
Personal Property from equipment
lessors as long as: (i) the
aggregate value of such Tangible
Personal Property shall not
exceed TWO HUNDRED THOUSAND
DOLLARS ($200,000) or (ii) (A)
the secured party or equipment
lessor enters into an
intercreditor agreement with,
and satisfactory to, Lessor,
pursuant to which, without
limiting the foregoing, (1)
Lessor shall be afforded the
option of curing defaults and
the option of succeeding to the
rights of Lessee and (2)
Lessor's security interest in
Tangible Personal Property shall
be subordinated to the security
interest granted to such secured
party, (B) all of the terms,
conditions and provisions of the
financing, security interest or
lease are reasonably acceptable
to Lessor, (C) Lessee provides a
true and complete copy, as
executed, of each such purchase
money security agreement,
financing document and equipment
lease and all amendments thereto
and (D) no such security
interest, financing agreement or
lease is cross-defaulted or
cross-collateralized with any
other obligation. Security
interests granted by Lessee in
full compliance with the
provisions of this Section 6.1.2
are referred to as "Permitted
Prior Security Interests".
6.1.3 RECEIVABLES
FINANCING. Notwithstanding any
other provision hereof regarding
the creation of Liens, Lessee
shall also be permitted to grant
a prior security interest in
Receivables (with the Lessor
retaining a junior security
interest therein) to an
institutional lender which is
providing a working capital line
of credit (a "Working Capital
Loan") for the exclusive use of
Guarantor, Lessee and Affiliates
of Lessee as long as such Lender
enters into an intercreditor
agreement with, and satisfactory
to, Lessor pursuant to which,
without limiting the foregoing,
(1) Lessor shall be provided
with notice with respect to
defaults under the Working
Capital Loan simultaneously with
the delivery of such notice to
Lessee and shall be afforded the
option of curing defaults
thereunder, (2) such lender's
use of Instruments, Documents,
General Intangibles and Chattel
Paper shall
35
be limited to a
license only for the purpose of
collecting Receivables and (3)
the subordination of Lessor's
interest in the Receivables
shall be of no force and effect
and Lessor's first priority
security interest shall be
reinstated from and after the
occurrence of an Event of
Default if, upon or following
such Event of Default, Lessor
either exercises any of its
remedies set forth in Article 16
or Lessor notifies in writing
such lender of Lessor's
intention to invoke its right to
reinstate its first priority
security interest in the
Receivables.
6.2 GUARANTY. All of the Lease
Obligations shall be unconditionally and
irrevocably guaranteed by the Guarantor
pursuant to the Guaranty of Lease
Obligations.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 CONDITION OF THE LEASED PROPERTY.
Lessee acknowledges that Lessee has caused
the Leased Property to be sold to Lessor
and has concurrently entered into this
Lease. Lessee acknowledges receipt and
delivery of possession of the Leased
Property and that Lessee has examined and
otherwise has acquired knowledge of the
condition of the Leased Property prior to
the execution and delivery of this Lease
and has found the same to be in good order
and repair and satisfactory for its
purposes hereunder. Lessee is leasing the
Leased Property "AS-IS" in its present
condition, provided, however, that nothing
herein contained in this Section 7.1 shall
be deemed to modify the terms and
provisions of the Leasehold Improvement
Agreement. Lessee waives any claim or
action against Lessor in respect of the
condition of the Leased Property. LESSOR
MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT TO THE
LEASED PROPERTY, EITHER AS TO ITS FITNESS
FOR ANY PARTICULAR PURPOSE OR USE, ITS
DESIGN OR CONDITION OR OTHERWISE, OR AS TO
DEFECTS IN THE QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT; IT
BEING AGREED THAT ALL RISKS RELATING TO
THE DESIGN, CONDITION AND/OR USE OF THE
LEASED PROPERTY ARE TO BE BORNE BY LESSEE.
LESSEE HEREBY ASSUMES ALL RISK OF THE
PHYSICAL CONDITION OF THE LEASED PROPERTY,
THE SUITABILITY OF THE LEASED PROPERTY FOR
LESSEE'S PURPOSES, AND THE COMPLIANCE OR
NON-COMPLIANCE OF THE LEASED PROPERTY WITH
ALL APPLICABLE REQUIREMENTS OF LAW,
INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL
LAWS AND ZONING OR LAND USE LAWS.
36
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.
37
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
38
shall, at its sole cost and expense,
promptly and fully perform or cause to be
performed every covenant, condition,
promise and obligation of the licensed
operator of the Leased Property under any
Management Agreement.
Each Management Agreement shall
provide that Lessor shall be provided
notice of any defaults thereunder and, at
Lessor's option, an opportunity to cure
such default. Lessee shall furnish to
Lessor, within three (3) days after
receipt thereof, or after the mailing or
service thereof by Lessee, as the case may
be, a copy of each notice of default which
Lessee shall give to, or receive from any
Person, based upon the occurrence, or
alleged occurrence, of any default in the
performance of any covenant, condition,
promise or obligation under any Management
Agreement.
Whenever and as often as Lessee shall
fail to perform, promptly and fully, at
its sole cost and expense, any covenant,
condition, promise or obligation on the
part of the licensed operator of the
Leased Property under and pursuant to any
Management Agreement, Lessor, or a
lawfully appointed receiver of the Leased
Property, may, at their respective options
(and without any obligation to do so),
after five (5) days' prior notice to
Lessee (except in the case of an
emergency) enter upon the Leased Property
and perform, or cause to be performed,
such work, labor, services, acts or
things, and take such other steps and do
such other acts as they may deem
advisable, to cure such defaulted
covenant, condition, promise or
obligation, and any amount so paid or
advanced by Lessor or such receiver and
all costs and expenses reasonably incurred
in connection therewith (including,
without limitation, attorneys' fees and
expenses and court costs), shall be a
demand obligation of Lessee to Lessor or
such receiver, and, Lessor shall have the
same rights and remedies for failure to
pay such costs on demand as for Lessee's
failure to pay any other sums due
hereunder.
7.5 PARTICIPATION IN THIRD PARTY
PAYOR PROGRAMS. No provision of this
Lease shall be deemed to require Lessee to
commence participation in any Third Party
Payor Program or any Managed Care Plan.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 MAINTENANCE AND REPAIR.
8.1.1 LESSEE'S RESPONSIBILITY.
Lessee, at its sole cost and expense,
shall keep the Leased Property (with
respect to the Project, to the extent
consistent with the stage of
construction of the Project) and all
private roadways, sidewalks and curbs
appurtenant thereto which are under
Lessee's control in good order and
repair (whether or not the need for
such repairs occurs as a
39
result of Lessee's use, any
prior use, the elements or the age of
the Leased Property or such private
roadways, sidewalks and curbs or any
other cause whatsoever other than
Lessor's gross negligence or willful
misconduct) and, subject to Articles
9, 13 and 14, Lessee shall promptly,
with the exercise of all reasonable
efforts, undertake and diligently
complete all necessary and
appropriate repairs, replacements,
renovations, restorations,
alterations and modifications thereof
of every kind and nature, whether
interior or exterior, structural or
non-structural, ordinary or
extraordinary, foreseen or unforeseen
or arising by reason of a condition
(concealed or otherwise) existing
prior to the commencement of, or
during, the Term and thereafter until
Lessee surrenders the Leased Property
in the manner required by this Lease.
In addition, Lessee, at its sole cost
and expense, shall make all repairs,
modifications, replacements,
renovations and alterations of the
Leased Property (and such private
roadways, sidewalks and curbs) that
are necessary to comply with all
applicable Legal Requirements and
Insurance Requirements so that the
Leased Property can be legally
operated for the Primary Intended Use
and, if applicable, the Other
Permitted Uses. All repairs,
replacements, renovations,
alterations, and modifications
required by the terms of this Section
8.1 shall be (a) performed in a good
and workmanlike manner in compliance
with all applicable Legal
Requirements, Insurance Requirements
and the requirements of Article 9
hereof, using new materials well
suited for their intended purpose and
(b) consistent with the operation of
the Facility in a reputable manner.
Lessee will not take or omit to take
any action the taking or omission of
which might materially impair the
value or the usefulness of the Leased
Property for the Primary Intended Use
and, if applicable, the Other
Permitted Uses. To the extent that
any of the repairs, replacements,
renovations, alterations or
modifications required by the terms
of this Section 8.1 constitute
Material Structural Work, Lessee
shall obtain Lessor's prior written
approval (which approval shall not be
unreasonably withheld) of the
specific repairs, replacements,
renovations, alterations and
modifications to be performed by or
on behalf of Lessee in connection
with such Material Structural Work.
Notwithstanding the foregoing, in the
event of a bona fide emergency during
which Lessee is unable to contact the
appropriate representatives of
Lessor, Lessee may commence such
Material Structural Work as may be
necessary in order to address such
emergency without Lessor's prior
approval, provided, however, that
Lessee shall immediately thereafter
advise Lessor of such emergency and
the nature and scope of the Material
Structural Work commenced and shall
obtain Lessor's approval of the
remaining Material Structural Work to
be completed.
40
8.1.2 NO LESSOR OBLIGATION.
Lessor shall not, under any
circumstances, be required to build
or rebuild any improvements on the
Leased Property (or any private
roadways, sidewalks or curbs
appurtenant thereto), or to make any
repairs, replacements, renovations,
alterations, restorations,
modifications, or renewals of any
nature or description to the Leased
Property (or any private roadways,
sidewalks or curbs appurtenant
thereto), whether ordinary or
extraordinary, structural or non-
structural, foreseen or unforeseen,
or to make any expenditure whatsoever
with respect thereto in connection
with this Lease, or to maintain the
Leased Property (or any private
roadways, sidewalks or curbs
appurtenant thereto) in any way.
8.1.3 LESSEE MAY NOT OBLIGATE
LESSOR. Nothing contained herein nor
any action or inaction by Lessor
shall be construed as (a)
constituting the consent or request
of Lessor, express or implied, to any
contractor, subcontractor, laborer,
materialman or vendor to or for the
performance of any labor or services
for any construction, alteration,
addition, repair or demolition of or
to the Leased Property or (b) except
as otherwise provided in this Lease,
giving Lessee any right, power or
permission to contract for or permit
the performance of any labor or
services or the furnishing of any
materials or other property in such
fashion as would permit the making of
any claim against Lessor for the
payment thereof or to make any
agreement that may create, or in any
way be the basis for, any right,
title or interest in, or Lien or
claim against, the estate of Lessor
in the Leased Property. Without
limiting the generality of the
foregoing and except as otherwise
provided in this Lease, the right
title and interest of Lessor in and
to the Leased Property shall not be
subject to liens or encumbrances for
the performance of any labor or
services or the furnishing of any
materials or other property furnished
to the Leased Property at or by the
request of Lessee or any other Person
other than Lessor. Lessee shall
notify any contractor, subcontractor,
laborer, materialman or vendor
providing any labor, services or
materials to the Leased Property of
this provision.
8.2 ENCROACHMENTS; TITLE
RESTRICTIONS. If any of the Leased
Improvements shall, at any time, encroach
upon any property, street or right-of-way
adjacent to the Leased Property, or shall
violate the agreements or conditions
contained in any lawful restrictive
covenant or other Lien now or hereafter
affecting the Leased Property, or shall
impair the rights of others under any
easement, right-of-way or other Lien to
which the Leased Property is now or
hereafter subject, then promptly upon the
request of Lessor, Lessee shall, at its
sole cost and expense, subject to Lessee's
right to contest the existence of any
encroachment, violation or impairment as
set forth in Article 15, (a) obtain valid
and effective waivers or settlements of
all claims, liabilities and damages
resulting from each such
41
encroachment, violation or impairment or
(b) make such alterations to the Leased
Improvements, and take such other actions,
as Lessee in the good faith exercise of
its judgment deems reasonably practicable,
to remove such encroachment, or to end
such violation or impairment, including,
if necessary, the alteration of any of the
Leased Improvements. Notwithstanding the
foregoing, Lessee shall, in any event,
take all such actions as may be reasonably
necessary in order to be able to continue
the operation of the Leased Improvements
for the Primary Intended Use and, if
applicable, the Other Permitted Uses
substantially in the manner and to the
extent that the Leased Improvements were
operated prior to the assertion of such
encroachment, violation or impairment and
nothing contained herein shall limit
Lessee's obligations to operate the Leased
Property in accordance with its Primary
Intended Use. Any such alteration made
pursuant to the terms of this Section 8.2
shall be completed in conformity with the
applicable requirements of Section 8.1 and
Article 9. Lessee's obligations under
this Section 8.2 shall be in addition to
and shall in no way discharge or diminish
any obligation of any insurer under any
policy of title or other insurance. If
and to the extent any obligation of an
insurer under any policy of title or other
insurance exists and Lessee has incurred
costs and expenses with respect to the
subject matter of such obligation and
provided Lessor is reasonably satisfied
with the resolution of such subject
matter, at the request of Lessee, Lessor,
at Lessor's option, shall either assign to
Lessee any right it may have to proceed
against such insurer or remit to Lessee
any amount which Lessor recovers from such
insurer, minus any amounts needed to
reimburse Lessor for its reasonable costs
and expenses, for the costs and expenses
incurred by Lessee in reconstructing the
Facility or taking such other action
reasonably required in order to create a
viable and functional Facility under all
of the circumstances.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 LESSOR'S APPROVAL. Without the
prior written consent of Lessor, which
consent may be withheld by Lessor, in its
sole and absolute discretion, Lessee shall
make no Capital Addition or Material
Structural Work to the Leased Property
(including, without limitation, any change
in the size or unit capacity of the
Facility), except as may be otherwise
expressly required pursuant to Article 8.
9.2 GENERAL PROVISIONS AS TO CAPITAL
ADDITIONS AND CERTAIN MATERIAL STRUCTURAL
WORK. As to any Capital Addition or
Material Structural Work (other than such
Material Structural Work that is required
to be performed pursuant to the terms of
Section 8.1) for which Lessor has granted
its prior written approval, the following
terms and conditions shall apply unless
otherwise expressly set forth in Lessor's
written approval.
42
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
43
separately finance such
construction, subject to the
limitation on Liens set forth in
Section 9.2.1, or pay for such
construction itself. In the event
Lessee declines to accept the
financing offered by Lessor or if
Lessor has not offered such financing
to Lessee and proposes to obtaining
financing from another Person, Lessee
shall inform Lessor in writing of the
terms and conditions of such
financing and shall provide Lessor
with a copy of a commitment letter
evidencing the same and Lessor may,
by giving notice thereof to Lessee
within twenty (20) days following
being so informed, elect to provide
financing to Lessee at the effective
rate of interest as such financing.
Lessor shall not unreasonably
withhold its permission for the
construction of Material Structural
Work which is necessary to protect
the safety or welfare of residents of
the Facility.
9.2.4 LESSOR MAY ELECT TO FINANCE
CAPITAL ADDITIONS. If Lessor elects
to offer financing for the proposed
Capital Addition and Lessee accepts
Lessor's financing proposal, the
provisions of Section 9.3 shall
apply.
9.3 CAPITAL ADDITIONS FINANCED BY
LESSOR.
9.3.1 ADVANCES. All advances of
funds for any such financing shall be
made in accordance with Lessor's then
standard construction loan
requirements and procedures, which
may include, without limitation, the
requirements and procedures
applicable to Work under Sections
13.1.3 and 13.1.4.
9.3.2 LESSOR'S GENERAL
REQUIREMENTS. If Lessor agrees to
finance the proposed Capital Addition
and Lessee accepts Lessor's proposal
therefor, in addition to all other
items which Lessor or any applicable
Financing Party may reasonably
require, Lessee shall provide to
Lessor the following:
(a) prior to any
advance of funds, (i) any
information, opinions,
certificates, Permits or
documents reasonably requested
by Lessor or any applicable
Financing Party which are
necessary to confirm that Lessee
is reasonably expected to be
able to use the Capital Addition
upon completion thereof in
accordance with the Primary
Intended Use and/or, if
applicable, the Other Permitted
Uses and (ii) evidence
satisfactory to Lessor and any
applicable Financing Party that
all Permits required for the
construction and use of the
Capital Addition have been
received, are in full force and
effect and are not subject to
appeal, except only for those
Permits which cannot in the
normal course be obtained prior
to commencement or completion of
the construction;
44
provided, that
Lessor and any applicable
Financing Party are furnished
with reasonable evidence that
the same is reasonably expected
to be available in the normal
course of business without
unusual condition;
(b) prior to any
advance of funds, an Officer's
Certificate and, if requested, a
certificate from Lessee's
architect, setting forth in
reasonable detail the projected
(or actual, if available)
Capital Addition Cost;
(c) bills of sale,
instruments of transfer and
other documents required by
Lessor so as to vest title to
the Capital Addition in Lessor
free and clear of all Liens
(except to the extent a Lien is
being duly contested in
accordance with the terms and
provisions of this Lease), and
amendments to this Lease and any
recorded notice or memorandum
thereof, duly executed and
acknowledged, in form and
substance reasonably
satisfactory to Lessor,
providing for any changes
required by Lessor including,
without limitation, changes in
the Base Rent and the legal
description of the Land;
(d) upon payment
therefor, a deed conveying to
Lessor title to any land
acquired for the purpose of
constructing the Capital
Addition ("Additional Land")
free and clear of any Liens
except those approved by Lessor;
(e) upon completion
of the Capital Addition, a final
as-built survey thereof reason
ably satisfactory to Lessor, if
required by Lessor;
(f) during and
following the advance of funds
and the completion of the
Capital Addition, endorsements
to any outstanding policy of
title insurance covering the
Leased Property satisfactory in
form and substance to Lessor (i)
updating the same without any
additional exception except as
may be reasonably permitted by
Lessor and (ii) increasing the
coverage thereof by an amount
equal to the Fair Market Value
of the Capital Addition and/or
increasing the coverage thereof
by an amount equal to the Fair
Market Value of the Additional
Land and including the
Additional Land in the premises
covered by such title insurance
policy;
(g) simultaneous with
the initial advance of funds, if
appropriate, (i) an owner's
policy of title insurance
insuring fee simple title to any
Additional Land conveyed to
Lessor pursuant to subparagraph
(d) free and
45
clear of all
Liens except those approved by
Lessor and (ii) an owner's
policy of title insurance
reasonably satisfactory in form
and substance to Lessor and a
lender's policy of title
insurance reasonably
satisfactory in form and
substance to any applicable
Financing Party;
(h) following the
completion of the Capital
Addition, if reasonably deemed
necessary by Lessor, an
appraisal of the Leased Property
by an M.A.I. appraiser
acceptable to Lessor, which
states that the Fair Market
Value of the Leased Property
upon completion of the Capital
Addition exceeds the Fair Market
Value of the Leased Property
prior to the commencement of
such Capital Addition by an
amount not less than one hundred
twenty-five percent (125%) of
the Capital Addition Cost; and
(i) during or
following the advancement of
funds, prints of architectural
and engineering drawings
relating to the Capital Addition
and such other materials,
including, without limitation,
the modifications to outstanding
policies of title insurance
contemplated by subsection (f)
above, opinions of counsel,
appraisals, surveys, certified
copies of duly adopted resolu
tions of the board of directors
of Lessee authorizing the
execution and delivery of the
lease amendment and any other
documents and instruments as may
be reasonably required by Lessor
and any applicable Financing
Party.
9.3.3 PAYMENT OF COSTS. By
virtue of making a request to finance
a Capital Addition, whether or not
such financing is actually
consummated, Lessee shall be deemed
to have agreed to pay, upon demand,
all costs and expenses reasonably
incurred by Lessor and any Person
participating with Lessor in any way
in the financing of the Capital
Addition Cost, including, but not
limited to (a) fees and expenses of
their respective attorneys, (b) all
photocopying expenses, if any, (c)
the amount of any filing,
registration and recording taxes and
fees, (d) documentary stamp taxes and
intangible taxes (e) title insurance
charges and appraisal fees.
9.4 GENERAL LIMITATIONS. Without in
any way limiting Lessor's options with
respect to proposed Capital Additions or
Material Structural Work: (a) no Capital
Addition or Material Structural Work shall
be completed that could, upon completion,
significantly alter the character or
purpose or detract from the value or
operating efficiency of the Leased
Property, or significantly impair the
revenue-producing capability of the Leased
Property, or adversely affect the ability
of Lessee to comply with the terms of this
Lease; (b) no Capital Addition or Material
Structural Work
46
shall be completed which would tie in or
connect any Leased Improvements on the
Leased Property with any other
improvements on property adjacent to the
Leased Property (and not part of the Land
covered by this Lease) including, without
limitation, tie-ins of buildings or other
structures or utilities, unless Lessee
shall have obtained the prior written
approval of Lessor, which approval may be
withheld in Lessor's sole and absolute
discretion and (c) all proposed Capital
Additions and Material Structural Work
shall be architecturally integrated and
consistent with the Leased Property.
9.5 NON-CAPITAL ADDITIONS. Lessee
shall have the obligation and right to
make repairs, replacements and alterations
which are not Capital Additions as
required by the other Sections of this
Lease, but in so doing, Lessee shall
always comply with and satisfy the
conditions of Section 9.4. Lessee shall
have the right, from time to time, to make
additions, modifications or improvements
to the Leased Property which do not
constitute Capital Additions or Material
Structural Work as it may deem to be
desirable or necessary for its uses and
purposes, subject to the same limits and
conditions imposed under Section 9.4. The
cost of any such repair, replacement,
alteration, addition, modification or
improvement shall be paid by Lessee and
the results thereof shall be included
under the terms of this Lease and become a
part of the Leased Property, without
payment therefor by Lessor at any time.
Notwithstanding the foregoing, all such
additions, modifications and improvements
which affect the structure of any of the
Leased Improvements, or which involve the
expenditure of more than FIFTY THOUSAND
DOLLARS ($50,000.00), shall be undertaken
only upon compliance with the provisions
of Section 13.1.3, all applicable Legal
Requirements and all other applicable
requirements of this Lease; provided,
however, that in the event of a bona fide
emergency during which Lessee is unable to
contact the appropriate representatives of
Lessor, Lessee may commence such
additions, modifications and improvements
as may be necessary in order to address
such emergency without Lessor's prior
approval, as long as Lessee immediately
thereafter advises Lessor of such
emergency and the nature and scope of the
additions, modifications and improvements
performed and obtains Lessor's approval of
the remaining work to be completed. Any
such addition, modification and
improvement which affects the structure of
any of the Leased Improvements which is
not a Capital Addition or Material
Structural Work shall be exempt from the
requirements of Section 9.2 hereof.
9.6 COMPENSATION TO LESSEE FOR
CAPITAL ADDITIONS PAID FOR OR FINANCED BY
LESSEE. Upon the expiration or earlier
termination of this Lease, except by
reason of the default by Lessee hereunder,
Lessor shall compensate Lessee for all
Capital Additions paid for or financed by
Lessee in any of the following ways,
determined in the sole discretion of
Lessor:
47
(a) By purchasing all Capital
Additions paid for or financed by Lessee
from Lessee for cash in the amount of the
Fair Market Added Value (determined as of
the date of such purchase) of all such
Capital Additions paid for or financed by
Lessee; or
(b) By purchasing such Capital
Addition from Lessee by delivering to
Lessee Lessor's purchase money promissory
note in the amount of said Fair Market
Added Value, due and payable no later than
eighteen (18) months after the date of
expiration or other termination of this
Lease, bearing interest at a rate equal to
one hundred ten percent (110%) of the
applicable federal rate (determined at the
time of execution of such note pursuant to
Section 1274 of the Code or any successor
section thereto), compounded semiannually,
or, if no such rate exists, or such rate
is in excess of that permitted under
applicable law, at the Prime Rate, which
interest shall be payable monthly, and
which note shall be secured by a mortgage
on the Leased Property, subject to all
Liens on the Leased Property at the time
of such purchase; or
(c) By Lessor assigning to Lessee
under appropriate written instruments the
right to receive an amount equal to the
Added Value Percentage (determined as of
the expiration of earlier termination of
this Lease) from all rent and other
consideration receivable by Lessor under
any re-letting or other disposition of the
Leased Property, after deducting all costs
and expenses incurred by Lessor in
connection with such re-letting or other
disposition of the leased Property and all
costs and expenses of operating and
maintaining the Leased Property during any
such new lease which are not borne by the
tenant thereunder. The provisions of this
Subparagraph (c) shall remain in effect
until the sale or other final disposition
of the Leased Property in which event
Lessor shall pay to Lessee the outstanding
balance of the Fair Market Added Value in
accordance with Subparagraph (a), (b), or
(d) of this Section 9.6, after deducting
any amounts received by Lessee under this
Subparagraph (c); or
(d) Such other arrangement regarding
such compensation as shall be mutually
acceptable to Lessor and Lessee.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 REPRESENTATIONS AND WARRANTIES.
Lessee hereby represents and warrants to,
and covenants and agrees with, Lessor
that:
48
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.
49
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.
50
10.1.9 ADEQUATE CAPITAL, NOT
INSOLVENT. After giving effect to
the consummation of the transactions
contemplated by the Lease Documents,
each member of the Leasing Group:
(a) will be able to
pay its debts as they become
due;
(b) will have
sufficient funds or available
capital to carry on its business
as now conducted or as
contemplated to be conducted (in
accordance with the terms of the
Lease Documents); and
(c) will not be
rendered insolvent as determined
by applicable law.
10.1.10 NOT DELINQUENT.
Except as permitted under Section
11.3.8, no member of the Leasing
Group which exists as of the date
hereof is delinquent or claimed to be
delinquent under any obligation for
the payment of borrowed money.
10.1.11 NO AFFILIATE
DEBT. Lessee has not created,
incurred, guaranteed, endorsed,
assumed or suffered to exist any
liability (whether direct or
contingent) for borrowed money from
the Guarantor (or any of its
Affiliates) or any Affiliate of
Lessee which has not been fully
subordinated to the Lease
Obligations.
10.1.12 TAXES CURRENT.
Each member of the Leasing Group
which exists as of the date hereof
has filed all federal, state and
local tax returns which are required
to be filed as to which extensions
are not currently in effect and has
paid all taxes, assessments,
impositions, fees and other
governmental charges (including
interest and penalties) which have
become due pursuant to such returns
or pursuant to any assessment or
notice of tax claim or deficiency
received by each such member of the
Leasing Group. No tax liability has
been asserted by the Internal Revenue
Service against any member of the
Leasing Group or any other federal,
state or local taxing authority for
taxes, assessments, impositions, fees
or other governmental charges
(including interest or penalties
thereon) in excess of those already
paid.
51
10.1.13 FINANCIALS
COMPLETE AND ACCURATE. The financial
statements of each member of the Leasing
Group given to Lessor in connection with
the execution and delivery of the Lease
Documents were true, complete and
accurate, in all material respects, and
fairly presented the financial condition
of each such member of the Leasing Group
as of the date thereof and for the periods
covered thereby, having been prepared in
accordance with GAAP and such financial
statements disclosed all liabilities,
including, without limitation, contingent
liabilities, of each such member of the
Leasing Group as of the date thereof.
There has been no material adverse change
since such date with respect to the Net
Worth of any such member of the Leasing
Group or with respect to any other matters
contained in such financial statements,
nor have any additional material
liabilities, including, without
limitation, contingent liabilities, of any
such member of the Leasing Group arisen or
been incurred or asserted since such date
except as otherwise disclosed to Lessor.
The projections heretofore delivered to
Lessor continue to be reasonable (with
respect to the material assumptions upon
which such projections are based) and
Lessee reasonably anticipates based on
information currently available to it
after due inquiry the results projected
therein will be achieved, there having
been (a) no material adverse change in the
business, assets or condition, financial
or otherwise of any such member of the
Leasing Group or the Leased Property and
(b) no material depletion of the cash or
decrease in working capital of any such
member of the Leasing Group.
10.1.14 PENDING ACTIONS,
NOTICES AND REPORTS.
(a) There is no action or
investigation pending or, to the best
knowledge and belief of Lessee,
threatened, anticipated or
contemplated (nor, to the knowledge
of Lessee, is there any reasonable
basis therefor) against or affecting
the Leased Property or any member of
the Leasing Group (or any Affiliate
thereof) before any Governmental
Authority which could prevent or
hinder the consummation of the
transactions contemplated hereby or
call into question the validity of
any of the Lease Documents or any
action taken or to be taken in
connection with the transactions
contemplated thereunder or which in
any single case or in the aggregate
might result in any material adverse
change in the business, prospects,
condition, affairs of any member of
the Leasing Group or the Leased
Property (including, without
limitation, any action to revoke,
withdraw or suspend any Permit
necessary or desirable for the
operation of the Leased Property in
accordance with its Primary Intended
Use and any action to transfer or
relocate any such Permit to a
location other than the Leased
Property) or any material impairment
of the right or ability of any member
of the Leasing Group to carry on its
operations as presently conducted or,
with respect to the Project, proposed
upon
52
Completion of the Project to
be conducted with respect to the
Leased Property or with respect to
its obligations under the Lease
Documents.
(b) Neither the Facility nor
any member of the Leasing Group has
received any notice of any claim,
requirement or demand of any
Governmental Authority, Accreditation
Body, if any, Third Party Payor or
any insurance body having or claiming
any licensing, certifying,
supervising, evaluating or
accrediting authority over the Leased
Property to rework or redesign the
Leased Property, its professional
staff or its professional services,
procedures or practices in any
material respect or to provide
additional furniture, fixtures,
equipment or inventory or to
otherwise take action so as to make
the Leased Property conform to or
comply with any Legal Requirement;
(c) The most recent
utilization reviews, if any, relating
to the Leased Property by all
applicable Third Party Payors,
Accreditation Bodies and Governmental
Authorities and all applicable
reviews or scrutiny by any managed
care or utilization review companies,
if any, have not had a material
adverse impact on the utilization of
units or programs at any of the
Leased Property. No claims or
assertions have been made in any
utilization review that any of the
practices or procedures used at the
Leased Property are improper or
inappropriate other than such claims
or assertions which singly and in the
aggregate will not have a material
adverse impact on the Leased
Property; and
(d) Lessee has delivered or
caused to be delivered to Lessor true
and correct copies of all licenses,
inspection surveys and accreditation
reviews, if any, relating to the
Leased Property, issued by any
Governmental Authority during the
most recent licensing period,
together with all plans of correction
relating thereto.
10.1.15 COMPLIANCE WITH
LEGAL AND OTHER REQUIREMENTS.
(a) Lessee and the Leased
Property (with respect to the
Project, to the extent consistent
with the stage of construction of the
Project) and the ownership,
construction, development,
maintenance, management, repair, use,
occupancy, possession and operation
thereof comply with all applicable
Legal Requirements and there is no
claim of any violation thereof known
to Lessee. Without limiting the
foregoing, Lessee has obtained all
Permits that are necessary or
desirable to operate the Leased
Property in accordance with its
Primary Intended Use or, with respect
to the Project, reasonably expects to
obtain such Permits prior to, or
upon, the Completion of the Project.
53
(b) Except as previously
delivered to Lessor pursuant to
Section 10.1.14(d) hereof, there are
no outstanding notices of
deficiencies, notices of proposed
action or orders of any kind relating
to the Leased Property, if any,
issued by any Governmental Authority
requiring conformity to any of the
applicable Legal Requirements.
10.1.16 NO ACTION BY
GOVERNMENTAL AUTHORITY OR
ACCREDITATION BODY. There is no
action pending or, to the best
knowledge and belief of Lessee,
recommended, by any Governmental
Authority to revoke, repeal, cancel,
modify, withdraw or suspend any
Permit or Contract or to take any
other action of any other type which
could have a material adverse effect
on the Leased Property.
10.1.17 PROPERTY MATTERS.
(a) The Leased Property is free
and clear of agreements, covenants
and Liens, except those agreements,
covenants and Liens to which this
Lease is expressly subject, whether
presently existing, as are listed on
EXHIBIT B or were listed on the UCC
lien search results delivered to
Lessor at or prior to the execution
and delivery of this Lease (and were
not required to be terminated as a
condition of the execution and
delivery of this Lease), or which may
hereafter be created in accordance
with the terms hereof (collectively
referred to herein as the "Permitted
Encumbrances"); and Lessee shall
warrant and defend Lessor's title to
the Leased Property against any and
all claims and demands of every kind
and nature whatsoever;
(b) There is no Condemnation or
similar proceeding pending with
respect to or affecting the Leased
Property, and Lessee is not aware, to
the best of Lessee's knowledge and
belief, that any such proceeding is
contemplated;
(c) No part of the Collateral
or the Leased Property has been
damaged by any fire or other
casualty. The Leased Improvements
(except the Project prior to
completion of the Project) are in
good operating condition and repair,
ordinary wear and tear excepted, free
from known defects in construction or
design;
(d) None of the Permitted
Encumbrances has or is likely to have
a material adverse impact upon, nor
interfere with or impede, in any
material respect, the operation of
the Leased Property in accordance
with the Primary Intended Use;
54
(e) All buildings, facilities
and other improvements necessary,
both legally and practically, for the
proper and efficient operation of the
Facility are (or in the case of the
Project, will be) located upon the
Leased Property and all real property
and personal property currently
utilized by Lessee is (or in the case
of the Project, will be) included
within the definition of the Leased
Property or the Collateral;
(f) The Leased Property abuts
on and has direct vehicular access to
a public road or access to a public
road via permanent, irrevocable,
appurtenant easements;
(g) The Leased Property
constitutes a parcel(s) for real
estate tax purposes separate from any
real property that does not
constitute a portion of the Leased
Property and no portion of any real
property that does not constitute a
portion of the Leased Property is
part of the same tax parcel as any
part of the Leased Property;
(h) All utilities necessary for
the use and operation of the Facility
are available to the lot lines of the
Leased Property:
(i) in sufficient
supply and capacity;
(ii) through
validly created and existing
easements of record appurtenant
to or encumbering the Leased
Property (which easements shall
not impede or restrict the
operation of the Facility);
(iii) without need
for any Permits and/or Contracts
to be issued by or entered into
with any Governmental Authority,
except as already obtained or
executed, as the case may be, or
as otherwise shown to the
satisfaction of Lessor to be
readily obtainable; and
(iv) Lessee has
made no structural alterations
or improvements to any of the
Leased Improvements that changed
the foot-print of any of the
Leased Improvements, added an
additional story to any of the
Leased Improvements, decreased
the amount of parking available
on the Leased Property or
otherwise involved any
alteration which would be
regulated by applicable zoning
requirements, in each case
without the express written
consent of Lessor. Except for
matters which have been
disclosed to Lessor or
concerning which Lessor has
independent actual knowledge,
Lessee has no actual knowledge
of any such structural
alteration or
55
improvement
made to any of the Leased
Improvements during the last ten
(10) years and has no knowledge
of any such structural
alteration or renovation made to
any of the Leased Improvements
or any such decrease in parking
during such period.
10.1.18 THIRD PARTY PAYOR
AGREEMENTS.
Neither Lessee nor the Facility
is qualified as a provider of
services under or participates in any
Third Party Payor Programs and
neither Lessor nor the Facility is
accredited by any Accreditation Body.
10.1.19 RATE LIMITATIONS.
The State currently imposes no
restrictions or limitations on rates
which may be charged to private pay
residents receiving services at the
Facility.
10.1.20 FREE CARE. There
are no Contracts, Permits or
applicable Legal Requirements which
require that, a percentage of units
in any program at the Facility be
reserved for Medicaid or Medicare
eligible residents or that the
Facility provide a certain amount of
welfare, free or charity care or
discounted or government assisted
resident care.
10.1.21 NO PROPOSED
CHANGES. Lessee has no actual
knowledge of any applicable Legal
Requirements which have been enacted,
promulgated or issued within the
eighteen (18) months preceding the
date of this Lease or any proposed
applicable Legal Requirements
currently pending in the State which
may materially adversely affect rates
at the Facility (or any program
operated by a member of the Leasing
Group in conjunction with the
Facility) or may result in the
likelihood of increased competition
at the Facility or the imposition of
Medicaid, Medicare, charity, free
care, welfare or other discounted or
government assisted residents at the
Facility or require that Lessee or
the Facility obtain a certificate of
need, Section 1122 approval or the
equivalent, which Lessee or the
Facility does not currently possess.
10.1.22 ERISA. No
employee pension benefit plan
maintained by any member of the
Leasing Group has any accumulated
funding deficiency within the meaning
of the ERISA, nor does any member of
the Leasing Group have any material
liability to the PBGC established
under ERISA (or any successor
thereto) in connection with any
employee pension benefit plan (or
other class of benefit which the PBGC
has elected to insure), and there
have been no "reportable events" (not
waived) or "prohibited transactions"
with respect to any such plan, as
those terms are
56
defined in Section 4043 of
ERISA and Section 4975 of the
Internal Revenue Code of 1986, as now
or hereafter amended, respectively.
10.1.23 NO BROKER. No
member of the Leasing Group nor any
of their respective Affiliates has
dealt with any broker or agent in
connection with the transactions
contemplated by the Lease Documents.
10.1.24 NO IMPROPER
PAYMENTS. No member of the Leasing
Group nor any of their respective
Affiliates has:
(a) made any
contributions, payments or gifts
of its funds or property to or
for the private use of any
government official, employee,
agent or other Person where
either the payment or the
purpose of such contribution,
payment or gifts is illegal
under the laws of the United
States, any state thereof or any
other jurisdiction (foreign or
domestic);
(b) knowingly
established or maintained any
unrecorded fund or asset for any
purpose or knowingly made any
false or artificial entries on
any of its books or records for
any reason;
(c) made any payments
to any Person with the intention
or understanding that any part
of such payment was to be used
for any other purpose other than
that described in the documents
supporting the payment; or
(d) made any
contribution, or reimbursed any
political gift or contribution
made by any other Person, to
candidates for public office,
whether federal, state or local,
where such contribution would be
in violation of applicable law.
10.1.25 NOTHING OMITTED.
Neither this Lease, nor any of the
other Lease Documents, nor any
certificate, agreement, statement or
other document, including, without
limitation, any financial statements
concerning the financial condition of
any member of the Leasing Group,
furnished to or to be furnished to
Lessor or its attorneys in connection
with the transactions contemplated by
the Lease Documents, contains or will
contain any untrue statement of a
material fact or omits or will omit
to state a material fact necessary in
order to prevent all statements
contained herein and therein from
being misleading. There is no fact
within the special knowledge of
Lessee which has not been disclosed
herein or in writing to Lessor that
materially adversely affects, or in
the future, insofar as Lessee can
reasonably foresee
57
based on the information
currently available to it after due
inquiry, may materially adversely
affect the business, properties,
assets or condition, financial or
otherwise, of any member of the
Leasing Group or the Leased Property.
10.1.26 NO MARGIN
SECURITY. Lessee is not engaged in
the business of extending credit for
the purpose of purchasing or carrying
margin stock (within the meaning of
Regulation U of the Board of
Governors of the Federal Reserve
System), and no part of the proceeds
of the Meditrust Investment will be
used to purchase or carry any margin
security or to extend credit to
others for the purpose of purchasing
or carrying any margin security or in
any other manner which would involve
a violation of any of the regulations
of the Board of Governors of the
Federal Reserve System. Lessee is
not an "investment company" within
the meaning of the Investment Company
Act of 1940, as amended.
10.1.27 NO DEFAULT. No
event or state of facts which
constitutes, or which, with notice or
lapse of time, or both, could
constitute, a Lease Default has
occurred and is continuing.
10.1.28 PRINCIPAL PLACE
OF BUSINESS. The principal place of
business and chief executive office
of Lessee is located at 0000 Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxxxx 00000-0000 (the "Principal
Place of Business").
10.1.29 LABOR MATTERS.
There are no proceedings now pending,
nor, to the best of Lessee's
knowledge, threatened with respect to
the operation of the Facility before
the National Labor Relations Board,
State Commission on Human Rights and
Opportunities, State Department of
Labor, U.S. Department of Labor or
any other Governmental Authority
having jurisdiction of employee
rights with respect to hiring, tenure
and conditions of employment, and no
member of the Leasing Group has
experienced any material controversy
with any Facility administrator or
other employee of similar stature or
with any labor organization which
has, or is likely, to have a
materially adverse effect upon the
financial condition and/or operations
of the Facility.
10.1.30 INTELLECTUAL
PROPERTY. Lessee is duly licensed or
authorized to use all (if any)
copyrights, rights of reproduction,
trademarks, trade-names, trademark
applications, service marks, patent
applications, patents and patent
license rights, (all whether
registered or unregistered, U.S. or
foreign), inventions, franchises,
discoveries, ideas, research,
engineering, methods, practices,
processes, systems, formulae,
designs, drawings, products,
projects, improvements, developments,
58
know-how and trade secrets
which are used in or necessary for
the development and/or operation of
the Facility in accordance with its
Primary Intended Use, without
conflict with or infringement of any,
and subject to no restriction, lien,
encumbrance, right, title or interest
in others.
10.1.31 MANAGEMENT
AGREEMENTS. There is no Management
Agreement in force and effect as of
the date hereof.
10.2 CONTINUING EFFECT OF
REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained
in this Lease and the other Lease
Documents shall constitute continuing
representations and warranties which shall
remain true, correct and complete
throughout the Term. Notwithstanding the
provisions of the foregoing sentence but
without derogation from any other terms
and provisions of this Lease, including,
without limitation, those terms and
provisions containing covenants to be
performed or conditions to be satisfied on
the part of Lessee, the representations
and warranties contained in Sections
10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.15,
10.1.17(b), 10.1.17(c), 10.1.17(i),
10.1.18, 10.1.19, 10.1.20, 10.1.21,
10.1.22, 10.1.27, 10.1.29, in the second
sentence of Section 10.1.12, in the second
and third sentences of Section 10.1.13 and
in the second sentence of Section 10.1.25
shall not constitute continuing
representations and warranties throughout
the Term provided, however, that nothing
contained in the first sentence of Section
10.1.25 shall be construed as imposing any
obligation on Lessee to update after the
Commencement Date the information
furnished to Lessor prior to the execution
and delivery of this Lease but without
derogation of any other obligation Lessee
has under this Lease to provide
information to Lessor.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 STATUS CERTIFICATES. At any
time, and from time to time, upon request
from the other, Lessee and Lessor shall
furnish to the other, within ten (10)
Business Days' after receipt of such
request, an Officer's Certificate
certifying that this Lease is unmodified
and in full force and effect (or that this
Lease is in full force and effect as
modified and setting forth the
modifications) and the dates to which the
Rent has been paid. Any Officer's
Certificate furnished pursuant to this
Section at the request of Lessor shall be
addressed to any prospective purchaser or
mortgagee of the Leased Property as Lessor
may request and may be relied upon by
Lessor and any such prospective purchaser
or mortgagee of the Leased Property.
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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
61
$100,000 per
annum), including, without
limitation, all Provider
Agreements.
(f) CONTRACT NOTICES.
Promptly but in no event more
than ten (10) days after the
receipt thereof, true and
complete copies of any notices,
consents, terminations or
statements of any kind or nature
relating to any of the Contracts
(involving payments in the
aggregate in excess of ONE
HUNDRED THOUSAND DOLLARS
($100,000) per annum) other than
those issued in the ordinary
course of business.
(g) PERMIT OR
CONTRACT DEFAULTS. Promptly but
in no event more than ten (10)
days after the receipt thereof,
true and complete copies of all
surveys, follow-up surveys,
licensing surveys, complaint
surveys, examinations,
compliance certificates,
inspection reports, statements
(other than those statements
that are issued in the ordinary
course of business), if any,
terminations and notices of any
kind (other than those notices
that are furnished in the
ordinary course of business)
issued or provided to Lessee,
the Manager or any Sublessee by
any Governmental Authority,
Accreditation Body, or any Third
Party Payor, including, without
limitation, any notices
pertaining to any delinquency
in, or proposed revision of,
Lessee's, the Manager's or any
Sublessee's obligations under
the terms and conditions of any
Permits or Contracts now or
hereafter issued by or entered
into with any Governmental
Authority, Accreditation Body,
or Third Party Payor and the
response(s) thereto made by or
on behalf of Lessee, the Manager
or any Sublessee.
(h) OFFICIAL REPORTS.
Upon completion or filing
thereof, complete copies of all
applications (other than those
that are furnished in the
ordinary course of business),
notices (other than those that
are furnished in the ordinary
course of business), statements,
annual reports, cost reports and
other reports or filings of any
kind (other than those that are
furnished in the ordinary course
of business) provided by Lessee,
the Manager or any Sublessee to
any Governmental Authority,
Accreditation Body, or any Third
Party Payor with respect to the
Leased Property.
62
(i) OTHER
INFORMATION. With reasonable
promptness, such other
information as Lessor may from
time to time reasonably request
respecting (i) the financial
condition and affairs of each
member of the Leasing Group and
the Leased Property and (ii) the
licensing and operation of the
Leased Property; including,
without limitation, financial
statements, certificates and
consents from accountants and
all other financial and
licensing/operational
information as may be required
or requested by any Governmental
Authority.
(j) DEFAULT
CONDITIONS. As soon as
possible, and in any event
within five (5) days after the
occurrence of any Lease Default,
or any event or circumstance
which, with the giving of notice
or the passage of time, or both,
would constitute a Lease
Default, a written statement of
Lessee setting forth the details
of such Lease Default, event or
circumstance and the action
which Lessee proposes to take
with respect thereto.
(k) OFFICIAL ACTIONS.
Promptly but in no event more
than ten (10) days after the
commencement thereof, notice of
all actions, suits and
proceedings before any
Governmental Authority or
Accreditation Body, which could
have a material adverse effect
on any member of the Leasing
Group or the Leased Property.
(l) AUDIT REPORTS.
Promptly but in no event more
than ten (10) days after
receipt, a copy of all audits or
reports submitted to Lessee by
any independent public
accountant in connection with
any annual, special or interim
audits of the books of Lessee
and, if requested by Lessor, any
letter of comments directed by
such accountant to the
management of Lessee.
(m) ADVERSE
DEVELOPMENTS. Promptly but in
no event more than ten (10) days
after Lessee acquires knowledge
thereof, written notice of:
(i)
the potential
termination of any
Permit or Provider
Agreement
necessary for the
operation of the
Leased Property;
63
(ii) any loss,
damage or
destruction to or
of the Leased
Property in excess
of TWENTY-FIVE
THOUSAND DOLLARS
($25,000)
(regardless of
whether the same
is covered by
insurance);
(iii) any material
controversy
involving Lessee
or any Sublessee
which is an
Affiliate of
Lessee and (x)
Facility
administrator or
Facility employee
of similar stature
or (y) any labor
organization or
(z) the Manager or
any employee of
the Manager which
has, or is
reasonably likely
to have, a
materially adverse
effect on the
financial
condition and/or
operations of the
Facility;
(iv) any
controversy that
calls into
question the
eligibility of the
Facility for the
participation in
any Medicaid,
Medicare or other
Third Party Payor
Program in which
the Facility is
participating;
(v)
any refusal of
reimbursement by
any Third Party
Payor which,
singularly or
together with all
other such
refusals by any
Third Party
Payors, could
reasonably be
expected to have a
material adverse
effect on the
financial
condition of
Lessee or any
Sublessee which is
an Affiliate of
Lessee; and
(vi) any fact
within the special
knowledge of any
member of the
Leasing Group, or
any other
development in the
business or
affairs of any
member of the
Leasing Group,
which could
reasonably be
expected to be
materially adverse
to the
64
business,
properties, assets
or condition,
financial or
otherwise, of any
member of the
Leasing Group or
the Leased
Property.
(n) RESPONSES TO
INSPECTION REPORTS. Within
thirty (30) days after receipt
of an inspection report relating
to the Leased Property from
Lessor, a written response
describing in detail prepared
plans to address concerns raised
by the inspection report.
(o) PUBLIC
INFORMATION. Upon the
completion or filing, mailing or
other delivery thereof, complete
copies of all financial
statements, reports, notices and
proxy statements, if any, sent
by any member of the Leasing
Group (which is a publicly held
corporation) to its shareholders
and of all reports, if any,
filed by any member of the
Leasing Group (which is a
publicly held corporation) with
any securities exchange or with
the Securities Exchange
Commission.
(p) ANNUAL BUDGETS.
Prior to the end of each Fiscal
Year, Lessee, any Sublessee
which is an Affiliate of Lessee
and/or any Manager which is an
Affiliate of Lessee shall submit
to Lessor a preliminary annual
financial budget for the
Facility for the next Fiscal
Year, a preliminary capital
expenditures budget for the
Facility for the next Fiscal
Year and a report detailing the
capital expenditures made in the
then current Fiscal Year and on
or before the end of the first
month of each Fiscal Year,
Lessee, any such Sublessee
and/or any such Manager shall
submit to Lessor revised
finalized versions of such
budgets and report.
(q) WORKING CAPITAL
LOAN. Promptly after receipt
thereof, copies of any notices
with respect to default from a
lender of a Working Capital
Loan.
11.2.2 RESPONSIBLE OFFICER. Any
certificate, instrument, notice, or
other document to be provided to
Lessor hereunder by any member of the
Leasing Group shall be signed by an
executive officer of such member (in
the event that any of the foregoing
is not an individual), having a
position of Vice President or higher
and with respect to financial
matters, any such certificate,
instrument, notice or other document
shall be signed by the chief
financial officer of such member.
65
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:
66
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
67
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 xxxx 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.
68
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.
69
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.
70
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)
72
anniversary of the
expiration of the applicable Extended
Term, no member of the Leasing Group
nor any Person holding or
controlling, directly or indirectly,
any interest in any member of the
Leasing Group (collectively, the
"Limited Parties") shall be involved
in any capacity in or lend any of
their names to or engage in any
capacity in any assisted living
facility, center, unit or program (or
in any Person engaged in any such
activity or any related activity
competitive therewith) other than (a)
those set forth on Schedule 11.5.4
annexed hereto, (b) those activities
in which a Meditrust/Emeritus
Transaction Affiliate is permitted to
engage by the provisions of the
Meditrust/Emeritus Transaction
Documents which relate to any such
facility, center, unit or program and
(c) the acquisition of an ownership
interest in any such facility,
center, unit or program which is part
of a single transaction in which an
ownership interest in at least four
(4) other facilities, centers, units
or programs (provided, however, that
if such acquisition occurs within the
last twelve month period of the
Initial Term or any of the Extended
Terms, Lessee shall have the benefit
of this clause (c) only if at the
time such acquisition occurs Lessee
has already (x) exercised in that
twelve month period its right under
Section 1.3 hereof to extend the Term
for another Extended Term or (y)
given a Purchase Option Notice and
has waived any right to rescind the
same based upon the determination of
the Fair Market Value of the Leased
Property), whether such competitive
activity shall be as an officer,
director, owner, employee, agent,
advisor, independent contractor,
developer, lender, sponsor, venture
capitalist, administrator, manager,
investor, partner, joint venturer,
consultant or other participant in
any capacity whatsoever with respect
to an assisted living facility,
center, unit or program located
within a five (5) mile radius of the
Leased Property.
Lessee hereby acknowledges and
agrees that none of the time span,
scope or area covered by the
foregoing restrictive covenants is or
are unreasonable and that it is the
specific intent of Lessee that each
and all of the restrictive covenants
set forth hereinabove shall be valid
and enforceable as specifically set
forth herein. Lessee further agrees
that these restrictions are special,
unique, extraordinary and reasonably
necessary for the protection of
Lessor and any Purchaser and that the
violation of any such covenant by any
of the Limited Parties would cause
irreparable damage to Lessor and any
Purchaser for which a legal remedy
alone would not be sufficient to
fully protect such parties.
Therefore, in addition to and
without limiting any other remedies
available at law or hereunder, in the
event that any of the Limited Parties
breaches any of the restrictive
covenants hereunder or shall threaten
breach of any of such covenants, then
Lessor and any Purchaser shall be
entitled to obtain equitable
remedies, including specific
performance and injunctive relief, to
prevent or
73
otherwise restrain a breach
of this Section 11.5.4 (without the
necessity of posting a bond) and to
recover any and all costs and
expenses (including, without
limitation, reasonable attorneys'
fees and expenses and court costs)
incurred in enforcing the provisions
of this Section 11.5.4. The
existence of any claim or cause of
action of any of the Limited Parties
or any member of the Leasing Group
against Lessor or any Purchaser,
whether predicated on this Lease or
otherwise, shall not constitute a
defense to the enforcement by Lessor
or any Purchaser of the foregoing
restrictive covenants and the Limited
Parties shall not defend on the basis
that there is an adequate remedy at
law.
Without limiting any other
provision of this Lease, the parties
hereto acknowledge that the foregoing
restrictive covenants are severable
and separate. If at any time any of
the foregoing restrictive covenants
shall be deemed invalid or
unenforceable by a court having
jurisdiction over this Lease, by
reason of being vague or unreasonable
as to duration, or geographic scope
or scope of activities restricted, or
for any other reason, such covenants
shall be considered divisible as to
such portion and such covenants shall
be immediately amended and reformed
to include only such covenants as are
deemed reasonable and enforceable by
the court having jurisdiction over
this Lease to the full duration,
geographic scope and scope of
restrictive activities deemed
reasonable and thus enforceable by
said court; and the parties agree
that such covenants as so amended and
reformed, shall be valid and binding
as through the invalid or
unenforceable portion has not been
included therein.
The provisions of this Section
11.5.4 shall survive the termination
of the Lease and any satisfaction of
the Lease Obligations in connection
therewith or subsequent thereto. The
parties hereto acknowledge and agree
that any Purchaser may enforce the
provisions of this Section 11.5.4 as
a third party beneficiary.
11.5.5 INTENTIONALLY DELETED.
11.5.6 INTENTIONALLY DELETED.
11.5.7 INTENTIONALLY DELETED.
11.5.8 ERISA. Lessee shall not
establish or permit any Sublessee to
establish any new pension or defined
benefit plan or modify any such
existing plan for employees subject
to ERISA, which plan provides any
benefits based on past service
without the advance consent of Lessor
(which consent shall not be
unreasonably withheld) to the amount
of the aggregate past service
liability thereby created.
74
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
75
include,
without limitation, the
following coverages: (i)
increased cost of construction,
(ii) cost of demolition, (iii)
the value of the undamaged
portion of the Facility and (iv)
contingent liability from the
operation of building laws, less
exclusions provided in the
normal "All Risk" insurance
policy. During any period of
construction, such insurance
shall be on a builder's-risk,
completed value, non-reporting
form (including all risk and
extended coverage, collapse,
cost of demolition, increased
cost of construction and value
of undamaged portion of the
improvements protection) with
permission to occupy;
(b) flood insurance
(if the Leased Property or any
portion thereof is situated in
an area which is considered a
flood risk area by the U.S.
Department of Housing and Urban
Development or any future
governmental authority charged
with such flood risk analysis in
the future) in limits reasonably
acceptable to Lessor and subject
to the availability of such
flood insurance;
(c) boiler and
machinery insurance (including
related electrical apparatus and
components) under a standard
comprehensive form, providing
coverage against loss or damage
caused by explosion of steam
boilers, pressure vessels or
similar vessels, now or
hereafter installed on the
Leased Property, in limits
acceptable to Lessor;
(d) earthquake
insurance (if reasonably deemed
necessary by Lessor) in limits
and with deductibles acceptable
to Lessor;
(e) environmental
impairment liability insurance
(if available on commercially
reasonable terms and deemed
reasonably necessary by Lessor)
in limits and with deductibles
acceptable to Lessor;
(f) business
interruption insurance in an
amount equal to the annual Base
Rent due hereunder plus the
aggregate sum of the Impositions
relating to the Leased Property
due and payable during one year;
(g) comprehensive
general public liability
insurance including coverages
commonly found in the Broad Form
Commercial Liability
Endorsements with amounts not
less than FIVE MILLION DOLLARS
($5,000,000) per occurrence with
respect to bodily injury
76
and death and
THREE MILLION DOLLARS
($3,000,000) for property damage
and with all limits based solely
upon occurrences at the Leased
Property without any other
impairment;
(h) professional
liability insurance in an amount
not less than TEN MILLION
DOLLARS ($10,000,000) for each
medical incident;
(i) physical damage
insurance on an all-risk basis
(with only such exceptions as
Lessor in its reasonable
discretion shall approve)
covering the Tangible Personal
Property for the full
replacement cost thereof and
with a deductible not in excess
of one percent (1%) of the full
replacement cost thereof;
(j) "Workers'
Compensation and Employers'
Liability Insurance providing
protection against all claims
arising out of injuries to all
employees of Lessee or of any
Sublessee (employed on the
Leased Property or any portion
thereof) in amounts equal for
Workers' Compensation, to the
statutory benefits payable to
employees in the State and for
Employers' Liability, to limits
of not less than ONE HUNDRED
THOUSAND DOLLARS ($100,000) for
injury by accident, ONE HUNDRED
THOUSAND DOLLARS ($100,000) per
employee for disease and FIVE
HUNDRED THOUSAND DOLLARS
($500,000) disease policy limit;
(k) subsidence
insurance (if deemed necessary
by Lessor) in limits acceptable
to Lessor; and
(l) such other
insurance as Lessor from time to
time may reasonably require and
also, as may from time to time
be required by applicable Legal
Requirements and/or by any Fee
Mortgagee.
12.1.2 INSURANCE COMPANY
REQUIREMENTS. All such insurance
required by this Lease or the other
Lease Documents shall be issued and
underwritten by insurance companies
licensed to do insurance business by,
and in good standing under the laws
of, the State and which companies
have and maintain a rating of A:X or
better by A.M. Best Co.
77
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.
78
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
79
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
80
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).
83
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
84
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,
85
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.
86
(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;
87
(v) that no
part of the cost of
the services and
materials described in
the applicable Work
Certificate has been
or is being made the
basis of the
withdrawal of any
funds in any previous
or then pending
application; and
(vi) that,
except for the
amounts, if any,
specified in the
applicable Work
Certificate to be due
for services and
materials, there is no
outstanding
indebtedness known,
after due inquiry,
which is then due and
payable for work,
labor, services or
materials in
connection with the
Work which, if unpaid,
might become the basis
of a vendor's,
mechanic's, laborer's
or materialman's
statutory or other
similar Lien upon the
Leased Property.
(c) Lessee shall
deliver to Lessor satisfactory
evidence that the Leased
Property and all materials and
all property described in the
Work Certificates are free and
clear of Liens, except (i)
Liens, if any, securing
indebtedness due to Persons
(whose names and addresses and
the several amounts due them
shall be stated therein)
specified in an applicable Work
Certificate, which Liens shall
be discharged upon disbursement
of the funds then being
requested or duly contested in
accordance with the terms of
this Lease Agreement, (ii) any
Fee Mortgage and (iii) the
Permitted Encumbrances. Lessor
shall accept as satisfactory
evidence of the foregoing lien
waivers in customary form from
the general contractor and all
subcontractors performing the
Work, together with an
endorsement of its title
insurance policy (relating to
the Leased Property) in form
acceptable to Lessor, dated as
of the date of the making of the
then current disbursement,
confirming the foregoing.
(d) If the Work
involves alteration or
restoration of the exterior of
any Leased Improvement that
changes the footprint of any
Leased Improvement, Lessee shall
deliver to Lessor, upon the
request of Lessor, an "as-built"
survey of the Leased Property
dated as of a date within ten
(10) days prior to the making of
the first and final advances (or
revised to a date within ten
(10) days prior to each such
advance) showing no
encroachments other than such
encroachments, if any, by the
Leased
88
Improvements
upon or over the Permitted
Encumbrances as are in existence
as of the date hereof.
(e) Lessee shall
deliver to Lessor (i) an opinion
of counsel (satisfactory to
Lessor both as to counsel and as
to the form of opinion) prior to
the first advance opining that
all necessary Permits for the
repair, replacement and/or
restoration of the Leased
Property which can be obtained
in the ordinary course as of
said date have been obtained and
that the Leased Property, if
repaired, replaced or rebuilt in
accordance, in all material
respects, with the approved
Plans and Specifications and
such Permits, shall comply with
all applicable Legal
Requirements subject to such
limitations as may be imposed on
such opinion under local law and
(ii) if applicable, an
architect's certificate
(satisfactory to Lessor both as
to the architect and as to the
form of the certificate) prior
to the final advance, certifying
that the Leased Property was
repaired, replaced or rebuilt in
accordance, in all material
respects, with the approved
Plans and Specifications and
complies with all applicable
Legal Requirements, including,
without limitation, all Permits
referenced in the foregoing
clause (i).
(f) There shall be no
Lease Default or any state of
facts or circumstance existing
which, with the giving of notice
and/or the passage of time,
would constitute any Lease
Default.
Lessor, at its option, may waive any
of the foregoing requirements in
whole or in part in any instance.
Upon compliance by Lessee with the
foregoing requirements (except for
such requirements, if any, as Lessor
may have expressly elected to waive),
and to the extent of (x) the
insurance proceeds, if any, which
Lessor may be required to apply to
restoration of the Leased Property
pursuant to the provisions of this
Lease and (y) all other cash deposits
made by Lessee, Lessor shall make
available for payment to the Persons
named in the Work Certificate the
respective amounts stated in said
certificate(s) to be due, subject to
a retention of ten percent (10%) as
to all hard costs of the Work (the
"Retainage"). It is understood that
the Retainage is intended to provide
a contingency fund to assure Lessor
that the Work shall be fully
completed in accordance with the
Plans and Specifications and the
requirements of Lessor. Upon the
full and final completion of all of
the Work in accordance with the
provisions hereof, the Retainage
shall be made available for payment
to those Persons entitled thereto.
89
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.
90
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.
91
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
92
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 xxxxx 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.
93
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
94
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;
100
(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
102
(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.
104
(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
105
(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.
106
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
107
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.
109
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.
110
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.
111
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
112
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.
113
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
114
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."
115
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.
116
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 xxx 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
117
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".
118
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.
119
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.
120
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
0000 Xxxxxxx
Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-
2162
Attention:
Xxxxxx X. Xxxx, Chief
Exec
utiv
e
Offi
cer
With a copy to: The Xxxxxxxxx
Group
0000 Xxxxxx Xxxxxx,
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx X.
Xxxxxxxxx, Esquire
If to the Guarantor:
Emeritus Corporation
Market Place One
0000 Xxxxxxx Xxxxxx,
Xxxxx 000
Xxxxxxx, XX 00000-
2162
Attention:
Xxxxxx X. Xxxx, Chief
Exec
utiv
e
Offi
cer
With a copy to: The Xxxxxxxxx
Group
0000 Xxxxxx Xxxxxx,
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxx X.
Xxxxxxxxx, Esquire
If to Lessor: Meditrust
Acquisition Corporation I
000 Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx,
Xxxxxxxxxxxxx
00000
Attn: President
With copies to: Meditrust
Acquisition Corporation I
000 Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx,
Xxxxxxxxxxxxx
00000
Attn: General Counsel
121
and
Mintz, Levin,
Cohn, Ferris,
Glovsky
and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxx,
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.
122
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.
123
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
124
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.
125
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.
126
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;
127
(c) Lessee shall have delivered to
Lessor (i) an MAI appraisal of the
Proposed Facility (prepared by an
appraiser selected by Lessee and approved
by Lessor), in form and substance
reasonably satisfactory to Lessor and (ii)
an instrument survey of the premises upon
which the Proposed Facility is located
acceptable to Lessor and the title
insurance company providing insurance with
respect to the Proposed Facility;
(d) Lessor shall be satisfied as to
compliance of Lessee, the Proposed
Facility, the owner of the Proposed
Facility (to the extent such owner is not
Lessee as provided in subsection (l)
below) and/or the proposed substitution,
as the case may be, with (i) all
applicable land use, zoning, subdivision
and environmental laws and regulations,
(ii) all applicable assisted living
licensure laws and regulations and (iii)
such other matters as Lessor reasonably
deems relevant (including, without
limitation, whether the conveyance of the
property to Lessor in connection with the
proposed substitution may be avoided under
the Bankruptcy Code);
(e) Lessee shall have delivered to
Lessor a valid and binding owner's or
lessee's (as applicable) title insurance
commitment issued by a title insurer
reasonably acceptable to Lessor (the
"Title Company"), in an amount equal to
the Fair Market Value of the Proposed
Facility, with such endorsements and
affirmative coverages, and in such form,
as Lessor may reasonably require insuring
Lessor's fee title or leasehold title to
the Proposed Facility, subject to no Liens
except those approved or assumed by Lessor
and arrangements satisfactory to Lessor
shall have been made for the issuance of a
title insurance policy on the Substitution
Date in accordance with such title
insurance commitment;
(f) Lessee shall have delivered an
environmental site assessment report
relating to the Proposed Facility, in form
and substance reasonably acceptable to
Lessor and prepared by an environmental
consultant reasonably acceptable to
Lessor;
(g) Lessor shall have obtained, at
Lessee's cost, an opinion of Lessor's
counsel, in form and substance acceptable
to Lessor, confirming that (i) the
substitution of the Proposed Facility for
the Leased Property will qualify as an
exchange solely of property of a like-kind
under Section 1031 of the Code, in which,
generally, except for "boot" such as cash
needed to equalize exchange values or
discharge indebtedness, no gain or loss is
recognized to Lessor, (ii) the
substitution or sale will not result in
ordinary recapture income to Lessor
pursuant to Code Section 1250(d)(4) or any
other Code provision, (iii) the
substitution or sale will result in
income, if any, to Lessor of a type
described in Code Section 856(c)(2) or (3)
and will not result in income of the types
described in Code Section 856(c)(4) or
result in the tax imposed under Code
Section 857(b)(6) and (iv) the
substitution or sale, together with all
other substitutions and sales made or
requested by Lessee or any Affiliate of
Lessee or of any Guarantor pursuant to any
other leases with Lessor (or any of its
Affiliates) or any other
128
transfers of the Leased Property or the
properties leased under other such leases,
during the relevant time period, will not
jeopardize the qualification of Lessor as
a real estate investment trust under Code
Sections 856-860;
(h) Lessor shall have received
opinions of Lessee's counsel as to (i) the
compliance of the Proposed Facility with
land use, zoning, subdivision and
environmental laws and regulations, (ii)
the compliance of Lessee, the owner of the
Proposed Facility (to the extent such
owner is not Lessee as provided in
subsection (l) below), the proposed
substitution and the Proposed Facility
with applicable assisted living laws and
regulations, (iii) the due authorization,
execution and enforceability of the
Substitution Documents and (iv) such other
matters as are reasonably requested; in
form and substance reasonably acceptable
to Lessor;
(i) Lessee and each Guarantor shall
have executed and delivered, or caused to
be executed and delivered, such documents
as are reasonably required by Lessor to
effectuate the substitution (collectively,
the "Substitution Documents"), including,
without limitation, (i) a deed with full
warranties or assignment of a leasehold
estate with full warranties (as
applicable) conveying to Lessor title to
the Proposed Facility free and clear of
all Liens, except those approved or
assumed by Lessor, (ii) a facility lease
(the "Substitution Lease") duly executed,
acknowledged and delivered by Lessee,
containing the same terms and conditions
as are contained herein except that (1)
the legal description of the land shall
refer to the Proposed Facility, (2) the
Minimum Repurchase Price of the Proposed
Facility shall be an amount equal to the
Minimum Repurchase Price of the Leased
Property increased by any Cash Adjustment
paid by Lessor, (3) the Rent under the
Substitution Lease in all respects shall
provide Lessor with a substantially
equivalent yield at the time of the
substitution (i.e., annual return on its
equity in such Proposed Facility) to that
received (and reasonably expected to be
received thereafter) from the Leased
Property, taking into account the Cash
Adjustment, if any, paid by Lessor and any
other relevant factors and (4) such other
changes therein as may be necessary or
appropriate under the circumstances shall
be made; (iii) a collateral assignment of
permits, licenses, approvals and contracts
relating to the Proposed Facility,
substantially in the form of the Permits
Assignment; (iv) UCC financing statements;
(v) a guaranty substantially in the form
of the Guaranty of Lease Obligations shall
be executed by Guarantor, (vi) an
affiliated party subordination agreement,
substantially in the form of the
Affiliated Party Subordination Agreement,
shall be executed by the Lessee, and such
other Affiliates of the Lessee as are
deemed necessary or appropriate by the
Lessor and (vii) the Agreement Regarding
Related Transactions shall be amended to
reflect the substitution of the Proposed
Facility. The Substitution Documents
shall be based upon and contain the same
terms and conditions as are set forth in
Lessee Documents in effect prior to the
substitution, except that such changes
shall be made as may be necessary or
reasonably appropriate under the
circumstances to effectuate the
substitution and secure the protection and
priority of the property and security
interests conveyed and/or granted to
Lessor;
129
(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;
130
(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
131
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]
132
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
Wash
ingt
on
corp
orat
ion
/s/ Xxxxxxx X. Day By: /s/
Xxxxxxx X. Brandstom
----------------------------- -------
-----------------
Name: Xxxxxxx X. Day
Name: Xxxxxxx X. Brandstom
Title: President
WITNESS: LESSOR:
MEDITRUST
ACQU
ISIT
ION
CORP
ORAT
ION
I, a
Mass
achu
sett
s
corp
orat
ion
/s/ Xxxx X. Xxxxxx By: /s/
Xxxxxxx X. Xxxxxxxx
-------------------------
---------------------------------
Name: Xxxx X. Xxxxxx Name:
Xxxxxxx X. Xxxxxxxx, ESQ.
Title: Senior Vice
President
133
