AMENDED AND RESTATED LEASE Between LTC-K2 LIMITED PARTNERSHIP, as Lessor and ALTERRA HEALTHCARE CORPORATION, as Lessee Dated: December 15, 2002
Exhibit 99.8
AMENDED AND RESTATED LEASE
Between
LTC-K2 LIMITED PARTNERSHIP,
as Lessor
and
ALTERRA HEALTHCARE CORPORATION,
as Lessee
Dated: December 15, 2002
AMENDED AND RESTATED LEASE
THIS AMENDED AND RESTATED LEASE (this "Lease") is made effective as of December 15, 2002, by and between LTC-K2 LIMITED PARTNERSHIP, a Delaware limited partnership, successor-in-interest to LTC Properties, Inc., a Maryland corporation ("Lessor"), and ALTERRA HEALTHCARE CORPORATION, a Delaware corporation, successor-in-interest to Sterling House Corporation, a Kansas corporation ("Lessee"), subject to the terms, conditions and contingencies set forth below.
RECITALS
WHEREAS Lessor is the landlord, and Lessee is the tenant, under the seven (7) leases identified on Schedule 1 attached hereto (the "Existing Leases") covering certain real property and improvements (as more particularly defined below, the "Facilities"), and desires to amend, restate and consolidate the Existing Leases in their entirety and hereafter lease the Facilities to Lessee pursuant to the terms and conditions of a single, master lease; and
WHEREAS it the parties' intention to set forth their respective covenants and obligations in a single agreement, not merely as matter of convenience, but because the leasing of the seven (7) Facilities as an inseparable unit is a special and essential inducement to Lessor to amend, restate and consolidate the Existing Leases, and but for the leasing of the seven (7) Facilities together as an inseparable whole, Lessor would not have entered into this Lease; and
WHEREAS the parties agree and acknowledge that the amount set forth as Minimum Rent (defined below) is calculated on the basis of leasing of the seven (7) Facilities together as a single, inseparable group and is non-allocable among the seven (7) Facilities, and that it would be impossible to allocate to any one or more of the Facilities a divisible portion of the Minimum Rent. In addition to the foregoing, it is Lessor's intention to fund various capital improvements that are to be performed by Lessee at and among the seven (7) Facilities without any predetermined allocation. Were it not for the leasing the seven (7) Facilities as a single, inseparable group, Lessor would not have committed to funding such capital improvements without a predetermined allocation.
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt, sufficiency and mutuality of which are hereby acknowledged, the Existing Leases are hereby amended and restated in their entirety and replaced with this Lease, and it is further agreed as follows:ARTICLE I
1.1. Leased Property. Upon and subject to the terms and conditions hereinafter set forth, Lessor leases to Lessee, and Lessee rents or hires from Lessor all of the following (the "Leased Property"):
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(b) All of its right, title and interest in and to the 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 (on-site and offsite), parking areas and roadways appurtenant to such buildings and structures presently situated upon the Land, including without limitation the Facilities (as defined below) (collectively, the "Leased Improvements"); (c) All of its right, title and interest in and to the easements, rights and appurtenances relating to the Land and the Leased Improvements; (d) All of its right, title and interest in and to the permanently affixed equipment, machinery, fixtures, and other items of real and/or personal property, including all components thereof, now and hereafter located in, on or used in connection with, or 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, 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 Lessee's Personal Property as defined in Article II below (collectively the "Fixtures"); and (e) All of its right, title and interest in and to personal tangible and intangible property including all components thereof, owned by Lessor and now and hereafter located in, on or used in connection with the Leased Improvements. Except with respect to the representations and warranties of Lessor set forth herein, the Leased Property is demised subject to all covenants, conditions, restrictions, easements and all other matters affecting title, whether or not of record, the conditions and limitations expressly set forth herein, and any and all matters created by or known to Lessee. Lessor represents and warrants for the benefit of Lessee that as of the date of this Lease, (i) Lessor is the fee simple title holder of the Land and the Leased Improvements as of the Commencement Date and (ii) as of the Commencement Date, there is no mortgage, deed of trust, ground lease, or other comparable instrument executed by Lessor in favor of any lender or ground lessor or other obligee of Lessor, nor any lien, judgment, or other similar encumbrance affecting or encumbering the Leased Property or any portion thereof and arising by, through or under Lessor (expressly excluding any such lien, judgment or other encumbrance arising as a result of Lessee or Lessee's agents, representatives or assigns) except for the Existing Encumbrances (defined below). Lessee represents and warrants for the benefit of Lessor (i) as of the date of this Lease, there are no mechanic's liens or liens of any type recorded against the Leased Property that were recorded or attached during the period of Lessee's occupancy of the Leased Property and that arose as a result of Lessee's or Lessee's agents, representatives or assigns activities thereon that remain unsatisfied of record as of the Commencement Date, and (ii) there are no Impositions currently outstanding that have become delinquent.
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1.2 Term. The term of this Lease (the "Term") shall commence on January 1, 2003. From and after the Commencement Date, the Term shall continue for a period of eighteen (18) years, expiring (if not sooner terminated) at midnight (California time) on December 31, 2020.
ARTICLE II
2. Definitions. For all purposes of this Lease, except as otherwise expressly provided, (i) the terms defined in this Article II have the meanings assigned to them in this Article II and include the plural as well as the singular, (ii) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles at the time applicable, and (iii) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or other subdivision:
Additional Charges. As defined in Article III. Affiliate. When used with respect to any corporation, the term "Affiliate" shall mean any person which, directly or indirectly, controls or is controlled by or is under common control with such corporation. 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 such person, through the ownership of voting securities, partnership interests or other equity interests. For the purposes of this definition, "person" shall mean any natural person, trust, partnership, corporation, joint venture or other legal entity. Business Day. Each Monday, Tuesday, Wednesday, Thursday and Friday, which is not a day on which national banks in the City of Los Angeles, California, are authorized, or obligated, by law or executive order, to close. Change of Control. As defined in Article XVIII below. Code. The Internal Revenue Code of 1986, as amended. Controlling Entity. As defined in Article XVIII below. Encumbrance. As defined in Article XXXII. Event of Default. As defined in Article XVI. Existing Debt. The indebtedness secured by the Existing Encumbrances (defined below). Existing Encumbrances. The mortgages identified on Schedule 2 attached hereto. Existing Lender. The holder of the Existing Encumbrances, and its heirs, successors and assigns. Existing Leases. As defined in the Preamble.-3-
Existing SNDA. The subordination, non-disturbance and attornment agreements of even date with the Existing Encumbrances, as amended, affecting the Leased Property executed by Lessee, Lessor and Existing Lender. Extended Term. As defined in Article XXXIV. Facilities. Those certain assisted living facilities which are part of the Leased Property, a schedule of which is attached hereto as Exhibit "B". Facility. As the context requires, any one of the Facilities. Facility Mortgage. As defined in Article XIII. Facility Mortgagee. As defined in Article XIII. Fiscal Year. The twelve (12) month period from January 1 through December 31 of the same calendar year (as prorated for any partial Fiscal Year during the Term). Fixtures. As defined in Article I.
GAAP. As defined in Section 16.1.
Impositions. Collectively, all taxes (including, without limitation, all ad valorem, sales and use, single business, gross receipts, transaction privilege, rent or similar taxes as the same relate to or are imposed upon Lessee or its business conducted upon the Leased Property), 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), water, sewer or other rents and charges, excises, tax levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental or public charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Leased Property or the business conducted thereon by Lessee (including all interest and penalties thereon due to any failure in payment by Lessee), and all increases in all the above from any cause whatsoever, including reassessment, which at any time prior to, during or in respect of the Term may be assessed or imposed on or in respect of or be a lien upon (a) Lessor's interest in the Leased Property, (b) the Leased Property or any part thereof, or any rent therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Leased Property or the leasing or use of the Leased Property or any part thereof by Lessee. Provided, however, nothing contained in this Lease shall be construed to require Lessee to pay (1) any tax based on income (or any tax based on outstanding corporate shares of Lessor or Lessor's equity or capitalization, regardless of whether denominated as an income tax, franchise tax, or capital stock tax or other tax) imposed on Lessor, or (2) any transfer, or net revenue tax of Lessor, or (3) any sales, income, capital gain, transfer, documentary, mortgage, intangible or other tax imposed with respect to the sale, exchange, mortgaging or other disposition or financing by Lessor of any Leased Property or the proceeds thereof, or (4) any single business, gross receipts (other than a tax on any rent received by Lessor from Lessee), transaction, privilege, rent or similar taxes as the same relate to or are imposed upon Lessor, and are unrelated to the Leased Property, or (5) estate, inheritance, gift taxes or documentary transfer taxes.-4-
Insurance Requirements. All terms of any insurance policy required by this Lease and all requirements of the issuer of any such policy. Land. As defined in Article I. Lease. As defined in the Preamble. Leased Improvements. As defined in Article I. Leased Property. As defined in Article I. Legal Requirements. All federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting either the Leased Property or the construction, use or alteration thereof, whether now or hereafter enacted and in force, including any which may (i) require repairs, modifications or alterations in or to the Leased Property, or (ii) in any way affect the use and enjoyment thereof, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments (whether or not of record) or otherwise known to Lessee, at any time in force affecting the Leased Property; provided, however, as it relates to covenants, agreements, restrictions and encumbrances contained in any Encumbrance, Lessee need comply only with (i) the Existing Encumbrances, and (ii) any Encumbrances subsequently entered into in accordance with the provisions of Section 32.1 below where Lessee receives the non-disturbance agreement described in such Section 32.1 and where such Encumbrances do not, without Lessee's consent, materially adversely affect Lessee's rights hereunder, or materially increase Lessee's duties or obligations hereunder). Lessee. As defined in the Preamble. Lessee's Personal Property. All machinery, equipment, furniture, furnishings, movable walls or partitions, computers or trade fixtures or other personal property, and consumable inventory/and supplies, used in Lessee's business on the Leased Property, including without limitation, all items of furniture, furnishings, equipment, supplies and inventory, except items (i) included within the definition of Fixtures; and (ii) personal property described in Section 1.1(e), above. Lessor. As defined in the Preamble. Minimum Rent. As defined in Section 3.1. NOI. Individually or collectively, as the case may be, with respect to the Leased Property or a Separated Leased Property (defined below in Section 32.5), (a) resident service fees and revenues for the latest preceding full twelve (12)-month period, less, (b) operating expenses (excluding Leased Property rent, depreciation and amortization and management fees) for the latest preceding full twelve (12)-month period. All such amounts used in determining NOI shall prepared in accordance with GAAP.
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Notice. A notice given pursuant to Article XXXI hereof. Overdue Rate. On any date, a rate equal to the Prime Rate (defined below), plus two percent (2%); provided, however, that it is the intent of Lessor and Lessee that the Overdue Rate (and all other interest rates provided for hereunder) be in strict compliance with applicable usury laws of the State of California, and that in the event the Overdue Rate (or other interest rate provided for hereunder) shall be deemed to exceed that permitted to be charged by the laws of the State of California, any and all excess sums collected by Lessor shall be credited against the Rent payable under this Lease or if there is no Rent due, promptly refunded to Lessee. Payment Date. Any due date for the payment of the installments of Minimum Rent. Primary Intended Use. As defined in Section 7.2.2. Prime Rate. On any date, a rate equal to the annual rate on such date announced by Citibank, N.A. to be its prime rate for 90-day unsecured loans to its corporate borrowers of the highest credit standing or, if not available, such other rate as may be published by The Wall Street Journal as the prime rate in its listing of "Money Rates." Rent. Any monetary obligations of Lessee owing under this Lease, including, without limitation, Minimum Rent and Additional Charges. Term. Collectively, the Initial Term plus any Extended Terms. Unsuitable for its Primary Intended Use. A state or condition of any Facility such that by reason of damage or destruction, or a partial taking by Condemnation in the good faith judgment of Lessor and Lessee, reasonably exercised, such Facility cannot be operated on a commercially practicable basis for its Primary Intended Use taking into account, among other relevant factors, the number of usable beds affected by such damage or destruction or partial Condemnation. Unavoidable Delays. Delays due to strikes, lock-outs, 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. The above does not include all the definitions to be used in this Lease. Various definitions are included in the Sections below.
ARTICLE III 3.1. Minimum Rent. Lessee will pay to Lessor in lawful money of the United States of America which shall be legal tender for the payment of public and private debts at Lessor's address set forth in Article XXXI or at such other place or to such other person, firms or corporations as Lessor from time to time may designate in a Notice, Minimum Rent (as defined below), during the Term, as follows:
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(a) Initial Term. The initial annual "Minimum Rent" payable hereunder shall be One Million Six Hundred Eleven Thousand One Hundred Eleven and 55/100 Dollars ($1,611,111.55), payable in equal monthly installments of One Hundred Thirty Four Thousand Two Hundred Fifty Nine and 30/100 Dollars ($134,259.30) on the first (1st) calendar day of each calendar month of the Term. If necessary, Minimum Rent shall be prorated for any partial month at the beginning or end of the Term.
(b) Extended Terms. The Minimum Rent during the Extended Terms shall be as stated in Article XXXIV.
(c) Annual Escalation of Minimum Rent. Commencing on the one-year anniversary of the Commencement Date (if the Commencement Date is the first (1st) day of a calendar month, or, if not, on the first (1st) day of the first (1st) full month following the Commencement Date), and continuing on each subsequent one-year anniversary thereof during the Term (including any Extended Term) (each, an "Adjustment Date"), the Minimum Rent (irrespective of any prorations made pursuant to Section 3.1(a) above) shall increase to an amount equal to the Minimum Rent for the one-year period immediately preceding the Adjustment Date multiplied by a fraction, the numerator of which shall be the C.P.I. (defined below) for the month in which the Adjustment Date occurs, and the denominator of which shall be the C.P.I. for the month that was one year prior to the Adjustment Date; provided, however, that the product of said multiplication shall not result in an increase of the Minimum Rent by more than two percent (2%) per year on a cumulative basis ("Annual Multiplier"). If, however, the Annual Multiplier is less than two percent (2%) on any Adjustment Date (a "Less Than 2% Adjustment Date"), then at such time as the Annual Multiplier is determined for subsequent Adjustment Dates, the Minimum Rent for each Less Than 2% Adjustment Date shall be retroactively recalculated such that subsequent Annual Multipliers (whether less than or greater than 2%) shall be first applied to increase the Annual Multiplier for each Less Than 2% Adjustment Date to an amount up to, but not greater than, 2%, with such recalculations to be made in chronological order beginning with the earliest Less Than 2% Adjustment Date and continuing, so long as there is Annual Multiplier remaining, until recalculations have been made with respect to all Less Than 2% Adjustment Dates. After each such recalculation has been made, the shortfall in the Minimum Rent for the newly recalculated Less Than 2% Adjustment Dates shall be billed to Lessee and Lessee shall pay such shortfall amount to Lessor together with the next payment of Minimum Rent otherwise coming due hereunder. Such recalculations and shortfall xxxxxxxx shall be made on each Adjustment Date where there remain prior Less Than 2% Adjustment Dates which have not yet been recalculated to 2%. For purposes of example only, if the Commencement Date is June 1, 2002 and the initial Minimum Rent equals $1,020,000, and if (a) the C.P.I. increased 1.5% as of June 1, 2003, the Minimum Rent as of June 1, 2003 would increase to $1,035,300; (b) the C.P.I. increased 1.5% as of June 1, 2004, the Minimum Rent as of June 1, 2004 would increase to $1,050,830; (c) the C.P.I. increased 6% as of June 1, 2005, the Minimum Rent as of June 1, 2005 would increase to $1,082,354, which is the Minimum Rent increased by 2% per year for three years (i.e. the average annual increases have been 3% (1.5% + 1.5% + 6% for the three years, respectively) subject to the 2% annual limitation), and the total shortfall amount to be billed to Lessee would be $5,100 for the 2003 Adjustment Date and $10,378 for the 2004 Adjustment Date. The "overage" in the C.P.I. increase (i.e., the remaining 3% increase that could not be applied towards the increase in Minimum Rent on June 1, 2005 by virtue of the 2% cap), would be "banked" and would be used to increase Minimum Rent in subsequent years if the C.P.I. increase in such years were less than 2%. By way of demonstration, if the C.P.I. as of June 1, 2006 and June 1, 2007 do not increase at all, then Minimum Rent would nonetheless increase by 2% on June 1, 2006, and 1% on June 1, 2007 (such increases having been "banked" from the remaining portion of the 6% C.P.I. increase on June 1, 2005). "C.P.I." shall mean and refer to the Consumer Price Index of the Bureau of Labor Statistics of the Department of Labor, U.S. Cities Average, All Items (1982-84=100); provided that if compilation of the C.P.I. is discontinued or transferred to any other governmental department or bureau, then the index most nearly the same as the C.P.I. shall be used. If Lessor is unable to determine the C.P.I. by any Adjustment Date, Lessee shall continue to pay the Minimum Rent at the rate paid for the period immediately prior to that Adjustment Date, and once the C.P.I. for that Adjustment Date is published, the new Minimum Rent (as increased by the Annual Multiplier) shall be effective retroactively as of such Adjustment Date and the aggregate amount of any additional Minimum Rent shall be paid by Lessee promptly after written notice thereof from Lessor (but not later than the date of the next monthly installment of Minimum Rent, unless the next installment falls due within five (5) days after Lessor's notice, in which case not later than the date of the second next monthly installment of Minimum Rent). No delay by Lessor in providing notice of any such increase in Minimum Rent shall be deemed a waiver of Lessor's right to increase the Minimum Rent as provided hereunder.
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(d) All payments of Minimum Rent shall be delivered to Lessor by Lessee in a single payment (whether by wire transfer or check).
3.2. Additional Charges. In addition to Minimum Rent, (1) Lessee, subject to its rights under Article XII, will also pay and discharge as and when due and payable all other amounts, liabilities, obligations and Impositions which Lessee assumes or agrees to pay under this Lease, including but not limited to those set forth in Articles IX and XIII, below, and (2) in the event of any failure on the part of Lessee to pay any of those items referred to in clause (1) 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 (1) and (2) above being referred to herein collectively as the "Additional Charges"), and Lessor shall have all legal equitable and contractual rights, powers and remedies provided either in this Lease or by statute or otherwise in the case of nonpayment of the Additional Charges. If any elements of Additional Charges are not be paid within seven (7) Business Days after due (after taking into account applicable time periods during which Lessee may contest the Additional Charges under Article XII) and Lessor pays any such amount (which Lessor shall have the right, but not the obligation to do), then, in addition to Lessor's other rights and remedies, Lessee will pay Lessor on demand, as Additional Charges, interest on such unpaid Additional Charges computed at the Overdue Rate from the due date of such installment to the date of Lessee's payment thereof. To the extent that Lessee pays any Additional Charges directly to Lessor (as opposed to the applicable third party payee) pursuant to any requirement of this Lease, Lessee shall be relieved of its obligation to pay such Additional Charges to the entity to which they would otherwise be due, and within than three (3) Business Days after its receipt, Lessor shall remit such payment(s) to the entity to which such payment(s) is due . 3.3. Net Lease. Notwithstanding any provisions in this Lease to the contrary (except with respect to Lessee's rights set forth in Article V), Minimum Rent shall be paid absolutely net to Lessor, so that this Lease shall yield to Lessor the full amount of the installments of Minimum Rent throughout the Term, all as more fully set forth in Articles IV, IX and XIII, and other provisions of this Lease.-8-
3.4. Non-Allocable Minimum Rent. Notwithstanding any language contained in this Lease to the contrary, the parties agree and acknowledge that the amount set forth as Minimum Rent is calculated on the basis of leasing of all seven (7) Facilities together as a single, inseparable group and is non-allocable among the seven (7) Facilities. Further notwithstanding any language contained in this Lease to the contrary, the parties further agree and acknowledge that it would be impossible to allocate to any one or more of the Facilities a divisible portion of the Minimum Rent. Further notwithstanding any language contained in this Lease to the contrary, Lessee agrees and acknowledges that the leasing of the seven (7) Facilities as an inseparable whole was accepted by Lessor as a special and essential inducement to enter into this transaction, and but for Lessee's agreement to lease all seven (7) Facilities as an inseparable whole, Lessor would not have entered into this Lease. 3.5. Late Charge. LESSEE HEREBY ACKNOWLEDGES THAT LATE PAYMENT BY LESSEE TO LESSOR OF RENT (INCLUDING WITHOUT LIMITATION MINIMUM RENT) WILL CAUSE LESSOR TO INCUR COSTS NOT CONTEMPLATED BY THIS LEASE, THE EXACT AMOUNT OF WHICH WILL BE EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS INCLUDE, BUT ARE NOT LIMITED TO, PROCESSING AND ACCOUNTING CHARGES. ACCORDINGLY, IF ANY INSTALLMENT OF RENT SHALL NOT BE RECEIVED BY LESSOR WITHIN SEVEN (7) BUSINESS DAYS AFTER SUCH AMOUNT SHALL BE DUE, THEN WITHOUT ANY REQUIREMENT FOR NOTICE TO LESSEE, LESSEE SHALL PAY TO LESSOR A LATE CHARGE EQUAL TO FIVE PERCENT (5%) OF SUCH OVERDUE AMOUNT. THE PARTIES HEREBY AGREE THAT SUCH LATE CHARGE REPRESENTS A FAIR AND REASONABLE ESTIMATE OF THE COSTS LESSOR WILL INCUR BY REASON OF LATE PAYMENT BY LESSEE. ACCEPTANCE OF SUCH LATE CHARGE BY LESSOR SHALL IN NO EVENT CONSTITUTE A WAIVER OF LESSEE'S DEFAULT OR BREACH WITH RESPECT TO ANY UNPAID OVERDUE AMOUNTS, NOR PREVENT LESSOR FROM EXERCISING ANY OF THE OTHER RIGHTS AND REMEDIES GRANTED UNDER THIS LEASE, AT LAW OR IN EQUITY. NOTWITHSTANDING THE FOREGOING, HOWEVER, THE ABOVE-REFERENCED LATE CHARGE SHALL NOT BE IMPOSED ON ADDITIONAL PAYMENTS SO LONG AS LESSEE IS CONTESTING SUCH ADDITIONAL PAYMENTS IN ACCORDANCE WITH ARTICLE XII BELOW.
INITIAL: Lessor Lessee______________
ARTICLE IV
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4.2. Notice of Impositions. Upon its receipt of same, Lessor shall give prompt Notice to Lessee for all Impositions payable by Lessee hereunder of which Lessor obtains actual knowledge, but Lessor's failure to give any such Notice shall in no way diminish Lessee's obligations hereunder to pay such Impositions but such failure shall obviate any default hereunder for a reasonable time after Lessee receives notice (from any source) of any Imposition which it is obligated to pay. However, notwithstanding the foregoing, it shall be Lessee's sole duty to inquire and determine all of the Impositions for which it is liable as provided herein and shall promptly pay such Impositions when due, and Lessor shall have no duty of inquiry concerning Impositions. 4.3. .Adjustment of Impositions. Impositions imposed in respect of the tax-fiscal periods during which the Term commences and terminates shall be adjusted and prorated between Lessor and Lessee, whether or not such Imposition is imposed before or after such commencement or termination, and Lessee's obligation to pay its prorated share thereof after termination shall survive such termination. . 4.4. Utility Charges. Lessee will pay or cause to be paid all charges for electricity, power, gas, oil, water and other utilities used in the Leased Property and all operating expenses of every kind and nature during the Term. 4.5 Insurance Premiums. Lessee will pay or cause to be paid all premiums for the insurance coverages required to be maintained pursuant to Article XIII during the Term.
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ARTICLE V
5. Facility Mortgage Offset. Should Lessor default under the terms of any Facility Mortgage, or should Lessor's representations and warranties set forth in Section 1.1 be untrue and Lessee's leasehold estate is jeopardized as a result thereof, and, provided no Event of Default hereunder exists, Lessee shall have the right, but not the obligation, to perform Lessor's obligations under any such Facility Mortgage and offset the amounts expended thereunder against the payment of Minimum Rent. No other offset against the payment of Minimum Rent (or any other Rent) of any kind is permitted.
ARTICLE VI
ARTICLE VII
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7.2. Use of the Leased Property. 7.2.1 Lessee covenants that it will proceed with due diligence and will exercise commercially reasonable efforts to obtain and to maintain all approvals needed to use and operate the Leased Property and each Facility in accordance with Legal Requirements. 7.2.2. During the Term, Lessee shall use or cause to be used the Facilities as assisted living or residential care facilities, and for such other uses as may be necessary or incidental to such use (the particular such use to which the Leased Property is put is herein referred to as the "Primary Intended Use"). Lessee shall not use the Leased Property or any portion thereof for any use other than the Primary Intended Use without the prior written consent of Lessor, which consent may be withheld in Lessor's sole and absolute discretion; provided, however, that Lessor may not unreasonably withhold its consent to any alternate use that is within the long term care industry. No use shall 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 or any part thereof, nor shall Lessee sell or otherwise provide to residents or patients therein, or permit to be kept, used or sold in or about the Leased Property any article which may be prohibited by Insurance Requirements or Legal Requirements. Lessee shall, at its sole cost, comply with all Insurance Requirements and Legal Requirements. 7.2.3. Lessee covenants and agrees that during the Term it will operate continuously the Leased Property in accordance with its Primary Intended Use and will maintain its certifications for reimbursement and its licensure. 7.2.4. Lessee shall not commit or suffer to be committed any waste on the Leased Property, or in any Facility, nor shall Lessee cause or permit any nuisance thereon. Lessor acknowledges that Lessee's operation of the Facilities in accordance with the Primary Intended Use will not constitute waste or nuisance. 7.2.5. Lessee shall neither suffer nor permit the Leased Property or any portion thereof, including Lessee's Personal Property, to be used in such a manner as it might reasonably tend to impair Lessor's (or Lessee's, as the case may be) title thereto or to any portion thereof, or (ii) may reasonably make possible a claim or claims of adverse usage or adverse possession by the public, as such, or of implied dedication of the Leased Property or any portion thereof. 7.3. Lessor to Grant Easements, etc. Lessor will, from time to time so long as no Event of Default exists, at the request of Lessee and at Lessee's sole cost and expense (but subject to Lessor's approval), (i) grant easements and other rights in the nature of easements with respect to the Leased Property to third parties, (ii) release existing easements or other rights in the nature of easements which are for the benefit of the Leased Property, (iii) dedicate or transfer unimproved portions of the Leased Property for road, highway or other public purposes, (iv) execute petitions to have the Leased Property annexed to any municipal corporation or utility district, (v) execute amendments to any covenants and restrictions affecting the Leased Property and (vi) execute and deliver to any person any instrument appropriate to confirm or effect such grants, releases, dedications, transfers, petitions and amendments (to the extent of its interests in the Leased Property), but only upon delivery to Lessor of a signed affidavit by an executive officer or equivalent person of authority at Lessee stating that such grant, release, dedication, transfer, petition or amendment is (a) reasonably required for the continued operation of the Leased Property in accordance with the Primary Intended Use, (b) not detrimental to the proper conduct of the business of Lessee on the Leased Property and (c) does not reduce the value of the Leased Property.
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ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements, Instruments, etc. Subject to Article XII relating to permitted contests, Lessee, at its expense, will, during the Term, (a) comply with all Legal Requirements and Insurance Requirements in respect of the use, operation, maintenance, repair and restoration of the Leased Property, whether or not compliance therewith requires structural changes in any of the Leased Improvements or interfere with the use and enjoyment of the Leased Property and (b) procure, maintain and comply with all licenses, certificates of need, provider agreements and other authorizations required for any use of the Leased Property and/or Lessee's Personal Property then being made, and for the proper erection, installation, operation and maintenance of the Leased Property or any part thereof. 8.2 Legal Requirements Covenants. Lessee shall acquire and maintain all licenses, certificates, permits, provider agreements and other authorizations and approvals needed to operate the Leased Property in its customary manner for the Primary Intended Use. Lessee further covenants and agrees to perform all maintenance and alterations necessary to operate the Leased Property in accordance with all Legal Requirements and Insurance Requirements. Lessee, may, however, contest the legality or applicability of any such law, ordinance, rule or regulation, or any licensure or certification decision if Lessee maintains such action in good faith, with due diligence, without prejudice to Lessee's rights hereunder, and at Lessee's sole cost and expense. If by the terms of any such law, ordinance, rule or regulation, compliance therewith pending the prosecution of any such proceeding may legally be delayed without the occurrence of any fine, charge or liability of any kind against the Leased Property or Lessee's leasehold interest therein and without subjecting Lessee or Lessor to any liability, civil or criminal, for failure so to comply therewith, Lessee may delay compliance therewith until the final determination of such proceeding. If any lien, charge or civil or criminal liability would be incurred by reason of any such delay, Lessee, on the prior written consent of Lessor, may nonetheless contest as aforesaid and delay as aforesaid provided that such delay would not subject Lessor to criminal liability and Lessee both (a) furnishes to Lessor security satisfactory to Lessor (in its sole and absolute discretion) against any loss or injury by reason of such contest or delay, and (b) prosecutes the contest with due diligence and in good faith.ARTICLE IX
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9.1.1 Lessee, at its sole expense, will, during the Term, keep the Leased Property and all private roadways, sidewalks and curbs appurtenant thereto and which are under Lessee's control (and Lessee's Personal Property) in good order and repair (whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of the Leased Property, or any portion thereof), and, except as provided in Article XIV, with reasonable promptness, make all necessary and appropriate repairs thereto 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 existing prior to or during the Term, provided, however, that Lessee shall be permitted to prosecute claims against Lessee's predecessors (but not Lessor except as herein provided) in title for (i) breach of any representation or warranty, or (ii) any latent defects in the Leased Property. All repairs shall be at least equivalent in quality to the original work. 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 or any part thereof for its Primary Intended Use. 9.1.2 Lessor shall not under any circumstances be required to build or rebuild any improvements on the Leased Property, or to make any repairs, replacements, alterations, restorations or renewals of any nature or description to the Leased Property, whether ordinary or extraordinary, structural or non-structural, foreseen/unforeseen, in connection with this Lease, or to maintain the Leased Property in any way. Lessee hereby waives, to the extent permitted by law, the right to make repairs at the expense of Lessor pursuant to any law in effect at the time of the execution of this Lease or hereafter enacted. Lessor shall have the right to give, record and post, as appropriate, notices of non-responsibility (or similar notices) under any mechanics' lien laws now or hereafter existing.
9.1.3 Lessee shall not make any modifications, alterations or improvements to the Leased Improvements or any portion thereof, whether by addition or deletion, without Lessor's prior written consent, which consent may be given or withheld in Lessor's reasonable discretion; provided, however, that Lessor's consent shall not be required in connection with any non-structural modifications, alterations or improvements that do not constitute capital improvements and that are otherwise made in compliance with this Lease, so long as the total cost thereof, with respect to any single Facility, does not exceed $50,000 and the total cost with respect to any single Facility in any twelve (12) month period does not exceed $100,000. Nothing contained in this Lease and no action or inaction by Lessor shall be construed as constituting the consent or request of Lessor, expressed or implied, to any contractor, subcontractor, laborer, materialman or vendor to or for the performance of any labor or services or the furnishing of any materials or other property for the construction, alteration, addition, repair or demolition of or to the Leased Property or any part thereof, or (ii) giving Lessee any right, power or permission to contract for or permit the performance of any labor or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against Lessor in respect thereof or to make any agreement that may create, or in any way be the basis for any right, title, interest, lien, claim or other encumbrance upon the estate of Lessor in the Leased Property, or any portion thereof.
9.1.4 Lessee will, upon the expiration or prior termination of the Term, vacate and surrender the Leased Property to Lessor in the condition in which the Leased Property was originally received from Lessor, except as repaired, rebuilt, restored, altered or added to as permitted or required by the provisions of this Lease, and except for ordinary wear and tear (subject to the obligation of Lessee to maintain the Leased Property in good order and repair during the Term).-14-
9.2. Expenditures to Comply with Law. Without limiting Lessee's obligations as set forth elsewhere in this Lease, during the Term, Lessee will, at its sole cost and expense, make whatever expenditures (including but not limited to capital and non-capital expenditures) that are required to conform the Leased Property to such standards as may from time to time be required by Legal Requirements, or capital improvements required by any governmental agency having jurisdiction over the Leased Property as a condition of the continued operation of the Leased Property for its Primary Intended Use, pursuant to present or future Legal Requirements. 9.3. Encroachments, Restrictions. If any of the Leased Improvements shall, at any time during the Term 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 agreement affecting the Leased Property, or any part thereof, or shall impair the rights of others under any easement or right-of-way to which the Leased Property is subject, then promptly upon the request of Lessor or at the behest of any person affected by any such encroachment, violation or impairment, Lessee shall, at its sole cost and expense, (and after Lessor's prior approval) subject to Lessee's right to xxx Xxxxxx'x predecessor in title (but not Lessor) with respect thereto or contest the existence of any encroachment, violation or impairment and in such case, in the event of an adverse final determination, either (i) obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation or impairment, whether the same shall affect Lessor or the Leased Property or (ii) make such changes in the Leased Improvements, and take such other actions, as Lessee in the good faith exercise of its judgment deems reasonably practicable and necessary, to remove such encroachment, and to end such violation or impairment, including, if necessary, the alteration of any of the Leased Improvements, and in any event take all such actions as may be necessary in order to be able to continue the operation of the Leased Improvements for the Primary Intended Use substantially in the manner and to the extent the Leased Improvements were operated prior to the assertion of such violation, impairment or encroachment. Any such alteration shall be made in conformity with the applicable requirements of Article IX. Lessee's obligations under this Section 9.3 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.
ARTICLE X
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10.2 Definition of Hazardous Materials. For purposes of this Lease, Hazardous Materials shall mean any biologically or chemically active or other toxic or hazardous wastes, pollutants or substances, including, without limitation, asbestos, PCBs, petroleum products and by-products, substances defined or listed as "hazardous substances" or "toxic substances" or similarly identified in or pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., as amended, and as hazardous wastes under the Resource Conservation and Recovery Act, 42 U.S.C. § 6010, et seq., any chemical substance or mixture regulated under the Toxic Substance Control Act of 1976, as amended, 15 U.S.C.; 2601 et seq., any "toxic pollutant" under the Clean Water Act, 33 U.S.C. § 466 et seq., as amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C. § 7401 et seq., hazardous materials identified in or pursuant to the Hazardous Materials Transportation Act, 49 U.S.C. § 1802, et seq., and any hazardous or toxic substances or pollutant regulated under any other Legal Requirements.
ARTICLE XI
11. Liens. Subject to the provisions of Article XII relating to permitted contests, Lessee will not directly or indirectly create or allow to remain and will promptly discharge at its expense any lien, encumbrance, attachment, title retention agreement or claim upon any part of the Leased Property or any attachment, levy, claim or encumbrance in respect of the Rent, not including, however, (a) this Lease, (b) restrictions, liens and other encumbrances which are consented to in writing by Lessor or any easements granted pursuant to the provisions of Section 7.3 of this Lease, (c) liens for those taxes of Lessor which Lessee is not required to pay hereunder, (d) subleases permitted by Article XXII, (e) liens for Impositions or for sums resulting from noncompliance with any Legal Requirements so long as (1) the same are not yet payable or are payable without the addition of any fine or penalty or (2) such liens are in the process of being contested as permitted by Article XII, (f) liens of mechanics, laborers, materialmen, suppliers or vendors for sums either disputed or not yet due, provided that any such liens are in the process of being contested as permitted by Article XII, or (g) any lien, encumbrance, attachment, title retention agreement or claim upon any part of the Leased Property or any attachment, levy, claim or encumbrance in respect of the Rent arising by, through or under Lessor.
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12. Permitted Contests. Lessee shall have the right to contest the amount or validity of any Imposition or any Legal Requirement or Insurance Requirement or any attachment, levy, encumbrance, charge or claim ("Claims") not otherwise permitted by Article XI, by appropriate legal proceedings in good faith and with due diligence (but this shall not be deemed or construed in any way as relieving, modifying or extending Lessee's covenants to pay or its covenants to cause to be paid any such charges at the time and in the manner as in this Lease provided), on condition, however, that such legal proceedings cannot result in the sale of the Leased Property, or any part thereof, to satisfy the same or cause Lessor or Lessee to be in default under any mortgage or deed of trust encumbering any portion of the Leased Property or any interest therein. Upon the reasonable request of Lessor, Lessee shall provide to Lessor reasonable security satisfactory to Lessor to assure the payment of all Claims which may be assessed against the Leased Property together with interest and penalties, if any, thereon. Lessor agrees to join in any such proceedings (at Lessee's sole cost and expense) if the same be required to legally prosecute such contest of the validity of such Claims; provided, however, that Lessor shall not thereby be subjected to any liability for the payment of any costs or expenses in connection with any proceedings brought by Lessee; and Lessee shall indemnify and save harmless Lessor from any such costs or expenses, including reasonable attorneys' fees and costs incurred by Lessor. In the event that Lessee fails to pay any Claims when due or, upon Lessor's request, to provide the security therefor as provided in this Article XII and to diligently prosecute any contest of the same, Lessor may, upon thirty (30) days advance written Notice to Lessee, pay such charges together with any interest and penalties and the same shall be repayable to Lessee to Lessor at the next Payment Date provided for in this Lease. Provided, however, that should Lessor reasonably determine that the giving of such Notice would risk loss to the Leased Property or impair the value of the Leased Property or in any way cause damage to Lessor, then Lessor shall give such written Notice as is practical under the circumstances. Lessee shall be entitled to any refund of any Claims and such charges and penalties or interest thereon which have been paid by Lessee or paid by Lessor and for which Lessor has been fully reimbursed.
ARTICLE XIII
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13.1.1 Insurance against loss or damage by fire, casualty and other hazards as now are or subsequently may be covered by an "all risk" policy or a policy covering "special" causes of loss, with such endorsements as Lessor (or a Facility Mortgagee) may from time to time reasonably require and which are customarily required by institutional lenders of similar properties similarly situated, including, without limitation, building ordinance law, lightning, windstorm, civil commotion, hail, riot, strike, water damage, sprinkler leakage, collapse, malicious mischief, explosion, smoke, aircraft, vehicles, vandalism, falling objects and weight of snow, ice or sleet, and covering the Leased Property in an amount equal to 100% of the full insurable replacement value of the Leased Property (exclusive of footings and foundations below the lowest basement floor) without deduction for depreciation. The determination of the replacement cost amount shall be adjusted annually to comply with the requirements of the insurer issuing the coverage or, at Lessor's (or a Facility Mortgagee's) election, by reference to such indexes, appraisals or information as Lessor's (or a Facility Mortgagee's) determines in its reasonable discretion, and, unless the insurance required by this paragraph shall be effected by blanket and/or umbrella policies in accordance with the requirements of this Lease, the policy shall include inflation guard coverage that ensures that the policy limits will be increased over time to reflect the effect of inflation. Each policy shall, subject to Lessor's (or a Facility Mortgagee's) approval, contain (i) a replacement cost endorsement, without deduction for depreciation, (ii) either an agreed amount endorsement or a waiver of any co-insurance provisions, and (iii) an ordinance or law coverage or enforcement endorsement if the Improvements or the use of the Property constitutes any legal nonconforming structures or uses, and shall provide for deductibles in such amounts as Lessor (or a Facility Mortgagee) may permit in its sole discretion.; 13.1.2 If the Leased Property contains steam boilers, steam pipes, steam engines, steam turbines or other high pressure vessels, insurance covering the major components of the central heating, air conditioning and ventilating systems, boilers, other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed in the Leased Improvements, in an amount equal to one hundred percent (100%) of the full replacement cost of the Leased Improvements, which policies shall insure against physical damage to and loss of occupancy and use of the Leased Improvements arising out of an accident or breakdown covered thereunder; 13.1.3 Business and rental interruption insurance (i) covering the same perils of loss as are required to be covered by the property insurance required under Section 13.1.1 and 13.1.2 above, (ii) in an amount equal to the projected annual net income from the Leased Property plus carrying costs and extraordinary expenses of the Leased Property for a period of twelve (12) months, based upon Lessee's reasonable estimate thereof as approved by Lessor (or a Facility Mortgagee), (iii) including either an agreed amount endorsement or a waiver of any co-insurance provisions, so as to prevent Lessee, Lessor and any other insured thereunder from being a co-insurer, and (iv) providing that any covered loss thereunder shall be payable to Lessor;
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13.1.4 Commercial general liability insurance under a policy containing "Comprehensive General Liability Form" of coverage (or a comparably worded form of coverage) and the "Broad Form CGL" endorsement (or a policy which otherwise incorporates the language of such endorsement), which policy shall include, without limitation, coverage against claims for personal injury, bodily injury, death and property damage liability without respect to the Leased Property and the operations related thereto, whether on or off the Leased Property, and the following coverages: Employee as Additional Insured, Product Liability/Completed Operations; Broad Form Contractual Liability, Independent Contractor, Personal Injury and Advertising Injury Protection, Medical Payment (with a minimum limit of $5,000 per person), Broad Form Cross Suits Liability Endorsement, where applicable, hired and non-owned automobile coverage (including rented and leased vehicles), and, if any alcoholic beverages shall be sold, manufactured or distributed in the Leased Property, liquor liability coverage, all of which shall be in such amounts as Lessor may from time to time reasonably require, but not less than One Million Dollars ($1,000,000) per occurrence, and Five Million Dollars ($5,000,000) in the aggregate. If any swimming pool is located at any Facility in the future, umbrella coverage shall be provided in the amount of Ten Million Dollars ($10,000,000). Such liability policy shall delete the contractual exclusion under the personal injury coverage, if possible, and if available, shall include the following endorsements: Notice of Accident, Knowledge of Occurrence, and Unintentional Error and Omission; 13.1.5 Professional liability insurance coverage in an amount equal to not less than One Million Dollars ($1,000,000) per occurrence and Five Million Dollars ($5,000,000) in the aggregate; 13.1.6 Flood insurance in an amount equal to the full insurable value of the Leased Property or the maximum amount available, whichever is less, if the Leased Property is located in an area designated by the Secretary of Housing and Urban Development or the Federal Emergency Management Agency as having special flood hazards; and 13.1.7 Workers' compensation insurance and/or other similar insurance which may be required by governmental authorities or applicable legal requirements in an amount at least equal to the minimum required by law, and employer's liability insurance with a limit of One Hundred Thousand Dollars ($100,000) per accident and per disease per employee, and Five Hundred Thousand Dollars ($500,000) in the aggregate for disease arising in connection with the operation of the Leased Property; and 13.1.8 During the period of any new construction on the Leased Property, a so-called "Builder's All-Risk Completed Value" or "Course of Construction" insurance policy in non-reporting form for any improvements under construction, including, without limitation, for demolition and increased cost of construction or renovation, in an amount equal to 100% of the estimated replacement cost value on the date of completion, including "soft cost" coverage, and Workers' Compensation Insurance covering all persons engaged in such construction, in an amount at least equal to the minimum required by law. In addition, each contractor and subcontractor shall be required to provide Facility Mortgagee with a certificate of insurance for (i) workers' compensation insurance covering all persons engaged by such contractor or subcontractor in such construction in an amount at least equal to the minimum required by law, and (ii) general liability insurance showing minimum limits of at least $5,000,000, including coverage for products and completed operations. Each contractor and subcontractor also shall cover Lessee and Lessor (and any Facility Mortgagee) as an additional insured under such liability policy and shall indemnify and hold Lessee and Lessor (and any Facility Mortgagee) harmless from and against any and all claims, damages, liabilities, costs and expenses arising out of, relating to or otherwise in connection with its performance of such construction.
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13.2. Replacement Cost. The term "full replacement cost" as used herein, shall mean the actual replacement cost of the Leased Property requiring replacement from time to time including an increased cost of construction endorsement, less exclusions provided in the standard form of fire insurance policy. In the event either party believes that full replacement cost (the then replacement cost less such exclusions) has increased or decreased at any time during the Term, it shall have the right to have such full replacement cost redetermined. 13.3. Additional Insurance. In addition to the insurance described above, Lessee shall maintain such additional insurance as may be reasonably required from time to time by Lessor or any Facility Mortgagee and shall further at all times maintain, to the extent required by applicable law, worker's compensation insurance coverage (including self-insurance) for all persons employed by Lessee (or its agent or operator) on the Leased Property. 13.4. Waiver of Subrogation. All insurance policies carried by either party covering any part of the Leased Property, the Fixtures, the Facilities, or Lessee's Personal Property including without limitation, contents, fire and casualty insurance, shall expressly waive any right of subrogation on the part of the insurer against the other party. The parties hereto agree that their policies will include such waiver clause or endorsement so long as the same are obtainable without extra cost, and in the event of such an extra charge the other party, at its election, may pay the same, but shall not be obligated to do so. 13.5. Form Satisfactory, etc. All of the policies of insurance referred to in this Article XIII shall be written in a form reasonably satisfactory to Lessor and by insurance companies reasonably satisfactory to Lessor (and, as applicable, any Facility Mortgagee). Subject to the foregoing, Lessor agrees that it will not unreasonably withhold or delay its approval as to the form of the policies of insurance or as to the insurance companies selected by Lessee. Lessee shall pay all of the premiums therefor, and deliver such policies or certificates thereof to Lessor prior to their effective date (and, with respect to any renewal policy, prior to the expiration of the existing policy), and in the event of the failure of Lessee either to effect such insurance as herein called for or to pay the premiums therefor, or to deliver such policies or certificates thereof to Lessor at the times required, Lessor shall be entitled, but shall have no obligation, to effect such insurance and pay the premiums therefor, which premiums shall be repayable by Lessee to Lessor upon written demand therefor, and failure to repay the same shall constitute an Event of Default within the meaning of Section 16.1. Each insurer mentioned in this Article XIII shall agree, by endorsement on the policy or policies issued by it, or by independent instrument furnished to Lessor, that it will give to Lessor (and to any Facility Mortgagee, if required by the same) thirty (30) days' written notice before the policy or policies in questions shall be altered, allowed to expire or canceled.
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13.6 Increase in Limits. In the event that a Facility Mortgagee shall at any time reasonably determine the limits of the personal injury or property damage, or public liability insurance then carried to be insufficient, Lessee shall thereafter carry the insurance with increased limits until further change pursuant to the provisions of this Section; provided that if Lessor desires to increase the limits of insurance, and such is not pursuant to the request of a Facility Mortgagee, then Lessor may not demand an increase in limits above the limits generally consistent with the requirements of owners of long term care properties in the state in which the applicable Facility is located. 13.7. Blanket Policy. Notwithstanding anything to the contrary contained in this Article XIII, Lessee's obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Lessee; provided, however, that the coverage afforded Lessor will not be reduced or diminished or otherwise be different from that which would exist under a separate policy meeting all other requirements of this Lease by reason of the use of such blanket policy of insurance, and provided further that the requirements of this Article XIII shall be met in any such blanket policy. 13.8. No Separate Insurance. Lessee shall not on Lessee's own initiative or pursuant to the request or requirement of any third party take out separate insurance concurrent in form or contributing in the event of loss with that required in this Article, to be furnished or which may reasonably be required to be furnished, by Lessee or increase the amount of any then existing insurance by securing any additional policy or additional policies, unless all parties having an insurable interest in the subject matter of the insurance, including in all cases Lessor and all Facility Mortgagees are included therein as additional insureds, and the loss is payable under said insurance in the same manner as losses are payable under the Lease. Lessee shall immediately notify Lessor of the taking out of any such separate insurance or of the increasing of any of the amount of the then existing insurance. 13.9. Continuous Coverage. Prior to the Commencement Date, Lessee was the tenant and operator of the Leased Property, and prior to that, Lessee was the owner and operator of the Leased Property. Therefore, Lessee already has in place insurance with respect to the Leased Property. Lessee shall assure that there is no gap in the insurance coverage provided in connection with the Leased Property at or after the Commencement Date, and therefore, the insurance provided by Lessee shall be continuous, with the types and amounts of coverage, described herein to be applicable on the Commencement Date. To the extent there is not full, complete and continuous coverage for all issues, no matter when arising, claimed or occurring, Lessee shall, at its sole cost, obtain such insurance.
ARTICLE XIV
14.1. Insurance Proceeds. Subject to the rights of any Facility Mortgagee, all proceeds payable by reason of any loss of or damage to the Leased Property, or any portion thereof, which is insured under any policy of insurance required by Article XIII of the Lease, where the total proceeds paid by the insurer are less than $150,000.00, shall be paid to Lessee and applied to the reconstruction or repair, as the case may be, of any damage to or destruction of the Leased Property, or any portion thereof. All proceeds payable by reason of any loss of or damage to the Leased Property, or any portion thereof, which is insured under any policy of insurance required by Article XIII of this Lease where the total proceeds paid by the insurer are equal to or in excess of $150,000.00 shall be paid to Lessor and held by Lessor in trust and shall be made available for reconstruction or repair, as the case may be, of any damage to or destruction of the Leased Property, or any portion thereof, and shall be paid out by Lessor from time-to-time for the reasonable costs of such reconstruction or repair. Any excess proceeds of insurance remaining after the completion of the restoration or reconstruction of the Leased Property shall go to Lessee, provided the Lease is in force and there exists no uncured Event of Default; otherwise such excess shall be paid to Lessor for application as set forth in Article XVI hereof. All insurance proceeds that are awarded and not applied to the restoration or repair of the Leased Property shall be retained by Lessor. All salvage resulting from any risk covered by insurance shall belong to Lessor except that any salvage relating to Lessee's Personal Property shall belong to Lessee.-21-
14.2 Reconstruction in the Event Damage of Destruction Covered by Insurance Proceeds.
14.2.1 If during the Term, the Leased Property is totally or partially destroyed by a risk covered by the insurance described in Article XIII and whether or not any Facility thereby is rendered Unsuitable for its Primary Intended Use, Lessee shall restore the Leased Property to substantially the same condition as existed immediately before the damage or destruction. 14.2.2 If the cost of the repair or restoration exceeds the amount of proceeds received by Lessee or Lessor from the insurance required under Article XIII as provided in Section 14.1, above, Lessee shall be obligated, prior to commencing the repair and restoration, to contribute any excess amount needed to restore the Leased Property or to provide Lessor with satisfactory evidence that such funds are, and throughout the entire period of reconstruction will be, available. If Lessee contributes such excess in cash, such excess shall be paid by Lessee to Lessor to be held in trust, together with any insurance proceeds, for application to the cost of repair and restoration. 14.3 Reconstruction in the Event of Damage of Destruction Not Covered by Insurance. If during the Term, the Leased Property is damaged or destroyed irrespective of the extent of the damage from a risk not covered by the insurance described in Article XIII, whether or not such damage renders any portion of the Leased Property Unsuitable for Its Primary Intended Use, Lessee shall restore the damaged Leased Property to substantially the same condition it was in immediately before such damage or destruction and such damage or destruction shall not terminate this Lease nor result in any reduction in Rent (including without limitation Minimum Rent). 14.4 Lessee's Property. All insurance proceeds payable by reason of any loss of or damage to any of Lessee's Personal Property shall be paid to Lessee, and Lessee shall hold such insurance proceeds in trust to pay the cost of repairing or replacing damaged Lessee's Personal Property.-22-
14.5. Restoration of Lessee's Property. Without limiting Lessee's obligation to restore the Leased Property as provided in Sections 14.2 and 14.3, Lessee shall also restore all alterations and improvements made by Lessee, including Lessee's Personal Property but only to the extent that Lessee's Personal Property is necessary to the operation of the Leased Property for its Primary Intended Use in accordance with applicable Legal Requirements. 14.6. No Abatement of Rent. This Lease shall remain in full force and effect and Lessee's obligation to make rental payments and to pay all other charges required by this Lease shall not be abated during the pendency of repair or restoration. 14.7. Substitution of Leased Property. Notwithstanding anything to the contrary contained in this Lease, in the event of the total destruction of any single Facility, Lessor shall make available to Lessee and add to the Leased Property a facility of equal or approximate value to the destroyed Facility. If necessary, Lessor shall apply insurance proceeds received by it towards the replacement of the destroyed Facility. Lessor may elect to satisfy the foregoing obligation either by purchasing an already existing facility, by constructing a new facility, or otherwise.
ARTICLE XV
15. Condemnation.
15.1.1 Definitions. 15.1.2 "Condemnation" means (a) the exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor, (b) a voluntary sale or transfer by Lessor to any Condemnor, either under threat of Condemnation or while legal proceedings for Condemnation are pending. 15.1.3 "Date of Taking" means the date the Condemnor has the right to possession of the property being condemned. 15.1.4 "Award" means all compensation, sums or anything of value awarded, paid or received on a total or partial Condemnation. 15.1.4 "Condemnor" means any public or quasi-public authority, or private corporation or individual, having the power of Condemnation. 15.2 Parties' Rights and Obligations. If during the Term there is any taking of all or any part of the Leased Property or any interest in this Lease by Condemnation, the rights and obligations of the parties shall be determined by this Article XV.-23-
15.3 Total Condemnation. If title to the fee of the whole of the Leased Property shall be taken or condemned by any Condemnor, this Lease shall cease and terminate as of the Date of Condemnation by said Condemnor. Upon the termination of the Lease following a total Condemnation, all Rent (including, without limitation, Minimum Rent, Additional Rent and Additional Charges) paid or payable by Lessee hereunder shall be apportioned as of the date of termination. Notwithstanding anything to the contrary contained in this Lease, in the event of the total condemnation of any single Facility, Lessor shall make available to Lessee and add to the Leased Property a facility of equal or approximate value to the condemned Facility. If necessary, Lessor shall apply any Award received by it towards the replacement of the condemned Facility. Lessor may elect to satisfy the foregoing obligation either by purchasing an already existing facility, by constructing a new facility, or otherwise. Upon the substitution of any such Facility in accordance with this Section 15.3, so long as the Existing Debt is still outstanding, (i) Lessor shall execute and deliver to the Existing Lender a new mortgage in form and substance similar to the mortgage that had secured the condemned Facility (subject to any applicable requirements of the jurisdiction in which the substituted Facility is located), (ii) Lessor and Lessee shall execute and deliver to Existing Lender a subordination, attornment and non-disturbance agreement in form and substance of the Existing SNDA recorded in connection with the substituted Facility, and (iii) such other documents and instruments as may be necessary or reasonably required by Existing Lender. Further provided however, and notwithstanding anything to the contrary contained in this Section 15.3, in the event of the total condemnation of any single Facility, and so long as the Existing Debt is still outstanding, Existing Lender may elect to require Lessor and Lessee to terminate the Lease with respect to such Facility, in which case such Facility shall be deemed to be a "Separated Property" (as provided in Section 32.5 below), and Minimum Rent shall be reduced by an amount equal to what would have been the Allocated Minimum Rent for the condemned Facility had it become the subject of a New Lease (as provided in Section 32.5 below) as opposed to being terminated altogether. The foregoing election shall automatically occur upon the consummation of the condemnation proceedings unless Existing Lender delivers Notice of non-election to Lessor and Lessee prior to the consummation of the condemnation proceedings. Upon the exercise of such election, Lessor and Lessee shall execute an amendment to this Lease comparable to the type of amendment described in Section 32.5.2 below, modifying the Lease only to reflect (i) the removal of the condemned Facility from the Leased Property and (ii) the reduction in Minimum Rent, and no other changes whatsoever. In addition to the foregoing amendment, Lessee and Lessor shall take such actions and execute and deliver such documents, as are reasonably necessary and appropriate to effectuate the provisions and intent of this Section 15.3. Each party shall bear its own costs and expenses in connection with the actions described and documents entered into in accordance with this Section 15.3. If Existing Lender elects not to exercise the election described in this Section 15.3, the other applicable terms and conditions set forth in this Section 15.3 shall govern. 15.4 Allocation of Portion of Award. Any Award made with respect to all or any portion of the Leased Property or for loss of rent, or for loss of business, whether or not beyond the Term of this Lease, or for the loss of value of the leasehold (including the bonus value of the Lease) shall be solely the property of and payable to Lessor. Lessee shall be entitled to make a separate claim for the taking of Lessee's Personal Property (as long as such claim will not diminish Lessor's Award), for the removal or relocation expenses of Lessee (as long as such claim will not diminish Lessor's Award), or for any other loss that can be awarded to Lessee separately from Lessor's claim and which will not in any respect whatsoever diminish or threaten to diminish the total amounts to be awarded to Lessor as set forth above or otherwise for Lessee's full fee simple interest in the Leased Property. In any Condemnation proceedings, each of the Lessor and Lessee shall each seek its own claim in conformity herewith, at its own expense. Lessor's obligation to contribute part of its Award for restoration is set forth in Section 15.5, below.
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15.5 Partial Taking. If title to the fee of less than the whole of the Leased Property shall be so taken or condemned, this Lease shall continue in full force and effect, there shall be no reduction in Rent (including, without limitation, Minimum Rent and Additional Charges). 15.6 Temporary Taking. Lessee agrees that if, at any time after the date hereof, the whole or any part of the Leased Property or of Lessee's interest under this Lease, shall be Condemned by any Condemnor for its temporary use or occupancy, this Lease shall not terminate by reason thereof, and Lessee shall continue to pay, in the manner and at the times herein specified, the full amounts of Rent (including Minimum Rent, Additional Charges and Additional Rent). Except only to the extent that Lessee may be prevented from doing so pursuant to the terms of the order of the Condemnor, Lessee shall also continue to perform and observe all of the other terms, covenants, conditions and obligations hereof, on the part of the Lessee to be performed and observed, as though such Condemnation had not occurred. In the event of any such Condemnation as in this Section 15.6 described, the entire amount of any such Award made for such temporary use, whether paid by way of damages, rent or otherwise, shall be paid to Lessee, Lessee covenants that upon the termination of any such period of temporary use of occupancy as set forth in this Section 15.6, it will, at its sole cost and expense, restore the Leased Property as nearly as may be reasonably possible, to the condition in which the same was immediately prior to the Condemnation, unless such period of temporary use or occupancy shall extend beyond the expiration of the Term, in which case Lessee shall not be required to make such restoration, and in such case, Lessee shall contribute to the cost of such restoration that portion of its entire Award which is specifically allocated to such restoration in the judgment or order of the court, if any.
ARTICLE XVI
(b) if Lessee fails to observe or perform any other term, covenant or condition of this Lease and such failure is not cured by Lessee within a period of thirty (30) days after Notice thereof from Lessor, 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 an Event of Default if Lessee proceeds promptly and with due diligence to cure the failure and diligently completes the curing thereof within ninety days of receipt of Lessor's Notice. No Event of Default shall be deemed to exist under this clause (b) during any time the curing thereof is prevented by an Unavoidable Delay, provided that upon the cessation of such Unavoidable Delay, Lessee shall remedy such default without further delay;
(c) Intentionally Omitted.-25-
(d) if Lessee does any of the following: (i) admit in writing its inability to pay its debts generally as they become due; (ii) file a petition in bankruptcy or a petition to take advantage of any federal or state insolvency law; (iii) make a general assignment for the benefit of its creditors; (iv) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property; or (v) file a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof, or (e) if Lessee, on a petition in bankruptcy filed against it, is adjudicated a bankrupt or an order for relief thereunder is entered against it or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of Lessee, a receiver for Lessee or of the whole or substantially all of its property, or approving a petition filed against Lessee seeking reorganization or arrangement of Lessee under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof and such judgment, order or decree shall not be vacated or set aside or stayed within ninety (90) days from the date of the entry thereof; or (f) if Lessee shall be liquidated or dissolved, or shall begin proceedings toward such liquidation or dissolution, or shall, in any manner, permit the sale or divestiture of substantially all of its assets; or (g) if the estate or interest of Lessee in the Leased Property or any part thereof be levied upon or attached in a proceeding and the same shall not be vacated or discharged within the later of ninety (90) days after commencement thereof or thirty (30) days after Notice thereof from Lessor, (unless Lessee shall be contesting such lien or attachment in good faith in accordance with Article XII hereof); or (h) if Lessee voluntarily ceases operations on the Leased Property for a period in excess of two (2) days; or (i) if any of Lessee's representations or warranties set forth in this Lease proves to be untrue when made in any material respect which materially and adversely affects Lessor; or (j) Intentionally Omitted; or (k) if Lessee attempts to assign or sublease, in violation of the provisions of this Lease; or (l) subject to the provisions of Article XII hereof, if Lessee ceases to maintain in effect any license, permit, certificate or approval necessary or otherwise required to operate any Facility in accordance with its Primary Intended Use; or (m) any Change in Control (as defined below) of Lessee following the Commencement Date of this Lease. As used in this Section 16.1(m), the term "Change of Control" shall mean any change (voluntary or involuntary, by operation of law or otherwise) in the Person or Persons (as defined below) which ultimately exert effective control over the management of the affairs of Lessee (a "Controlling Entity") as of the date hereof. A Change of Control shall specifically include, but not be limited to, any of the occurrences described in subparagraphs (i) through (iii) below in this Section 16.1(m).
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Notwithstanding anything to the contrary set forth in this Section 16.1(m), any Change of Control which either (a) has been previously agreed to in writing by Lessor, or (b) constitutes a Permitted Transaction (as defined below), shall not constitute an Event of Default under this Lease. For the purpose of this Section 16.1(m), the term "Permitted Transaction" shall mean any transaction, whether by operation of law or otherwise, resulting in a Change in Control in which, immediately following such Change in Control, the Person or Persons which ultimately exert effective control over the management of the affairs of Lessee and/or Lessee's Controlling Entity (such Person or Persons, the "Successor Person") meet both of the following tests: (A) such Successor Person or Persons has or have an audited consolidated tangible net worth, determined in accordance with generally accepted accounting principles consistently applied ("GAAP"), equal to or greater than One Hundred Fifty Million and No/100 Dollars ($150,000,000.00), and (B) such Successor Person or Persons then has or have issued and outstanding securities which are publicly traded on the New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), or the NASDAQ-National Markets System ("NASDAQ"). From and after the occurrence of a Permitted Transaction, the failure by the Successor Person or Persons to (AA) maintain an audited consolidated tangible net worth, determined in accordance with GAAP, equal to or greater than One Hundred Fifty Million and No/100 Dollars ($150,000,000.00), and (BB) continue to have issued and outstanding securities which are publicly traded on the NYSE, the AMEX, or the NASDAQ, shall constitute an Event of Default.
For purposes of this Section 16.1(m), a Change of Control shall include, but not be limited to, any of the following occurrences:
(i) any Person (defined below) is or becomes the Beneficial Owner (defined below), directly or indirectly, of securities of Lessee and/or Lessee's Controlling Entity, whether by operation of law or otherwise, representing thirty percent (30%) or more of the combined voting power of the then outstanding securities of Lessee and/or its Controlling Entity (whereupon such Person shall be deemed a Successor Person hereunder); or
(ii) the stockholders of Lessee or its Controlling Entity approve a merger or consolidation of Lessee or its Controlling Entity (as applicable) with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of Lessee or its Controlling Entity (as applicable) which are outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of Lessee or its Controlling Entity or such surviving entity immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of Lessee or its Controlling Entity (or similar transaction) in which no Person acquires more than thirty percent (30%) of the combined voting power of the then outstanding securities of Lessee and/or its Controlling Entity shall not constitute a Change in Control; or
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(iii) the stockholders of Lessee or its Controlling Entity approve a plan of complete liquidation of Lessee or its Controlling Entity (as applicable) or an agreement for the sale or disposition by Lessee or its Controlling Entity of all or substantially all of the assets of Lessee or its Controlling Entity.
For purposes of this Section 16.1(m), the term "Person" shall have the meaning ascribed thereto in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the term "Beneficial Owner" shall have the meaning ascribed thereto in Rule 13d-3 of the Exchange Act. Upon the occurrence of an Event of Default, in addition to all of Lessor's other remedies, Lessor may terminate this Lease by giving Lessee not less than ten (10) Business Days' Notice of such termination and upon the expiration of the time fixed in such Notice, the Term shall terminate and all rights of Lessee under this Lease shall cease. In the event litigation is commenced with respect to any alleged default under this Lease, the prevailing party in such litigation shall receive, in addition to its damages incurred, such sum as the court shall determine as its reasonable attorneys' fees, and all costs and expenses incurred in connection therewith. Lessor's fees, costs and expenses, including those related to any insolvency proceedings filed by Lessee, shall constitute Additional Charges hereunder. Notwithstanding the foregoing, Lessor acknowledges and agrees that the following shall not constitute Events of Default hereunder: (i) the occurrence of any default by Lessee under Sections 16(d) and (e) prior to January 31, 2003, (ii) the occurrence of any default by Lessee under Sections 16(d) and (e) after January 31, 2003 but only during the pendency of a bankruptcy proceeding in which Lessee is a debtor, which proceeding was filed prior to January 31, 2003, (iii) the occurrence of any default by Lessee under Section 16(m) prior to January 31, 2003 or after January 31, 2003 but only during the pendency of or the confirmation plan issued pursuant to a bankruptcy proceeding in which Lessee is a debtor which proceeding was filed prior to January 31, 2003, or (iv) the occurrence of any default by Lessee under Section 16(c) or 16(j) resulting from any of the actions described in (i) - (iii) hereof prior to January 31, 2003 or during the pendency or the confirmation plan issued pursuant to a bankruptcy proceeding in which Lessee is a debtor which proceeding was filed prior to January 31, 2003.Lessee further agrees that if any of the events described in Sections 16(d) and (e) should occur at anytime during the Term, Lessee shall affirm this Lease and all of its obligations as set forth hereunder.
16.2 Certain Remedies. In addition to all of its rights under this Lease, Lessor shall have all remedies and rights provided in law and equity as a result of an Event of Default or Lessee's other breach under this Lease. Without limiting the foregoing, if an Event of Default occurs (and the event giving rise to such Event of Default has not been cured within the curative period relating thereto as set forth in Section 16.1 above) whether or not this Lease has been terminated pursuant to Section 16.1, Lessee shall, to the extent permitted by law, if required by Lessor so to do, immediately surrender to Lessor the Leased Property pursuant to the provisions of Section 16.1 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 personal property from the Leased Property subject to rights of any residents or patients and to Legal Requirements.-28-
16.3. Damages. Neither (a) the termination of this Lease pursuant to Section 16.1, (b) the repossession of the Leased Property, nor (c) the failure of Lessor, notwithstanding reasonable good faith efforts, to relet the Leased Property, shall relieve Lessee of its liability and obligations hereunder, all of which shall survive any such termination, repossession or reletting. In the event of any such termination, Lessee shall forthwith pay to Lessor all Rent due and payable through and including the date of such termination. Lessor shall not be deemed to have terminated this Lease unless Lessor delivers Notice to Lessee of such election. If Lessee voluntarily elects to terminate this Lease, then in addition to all remedies available to Lessor, Lessor may recover the sum of: (i) the worth at the time of award of the unpaid Rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided, and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including reasonable attorney fees, court costs and reasonable out-of-pocket expenses in the enforcement of Lessor's rights hereunder. The "worth at the time of award" of the amounts referred to in subparagraphs (i) and (ii) above is computed by allowing interest at the maximum legal rate of interest permitted in accordance with the laws of the State of California. The worth at the time of award of the amount referred to in subparagraph (iii) is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). Without limiting Lessor's other remedies provided herein and provided by law, Lessor may continue the Lease in effect after Lessee's breach and abandonment and recover Rent as it becomes due, provided that, in such event, Lessee has the right to sublet or assign subject only to reasonable conditions imposed by Lessor. Accordingly, without termination of Lessee's right to possession of the Leased Property, Lessor may demand and recover each installment of Rent and other sums payable by Lessee to Lessor under this Lease as the same becomes due and payable, which Rent and other sums shall bear interest at the maximum interest rate permitted in accordance with the laws of the State of California, from the date when due until paid, and Lessor may enforce, by action or otherwise, any other term or covenant of this Lease. 16.4 Application of Funds. Any payments received by Lessor under any of the provisions of this Lease during the existence or continuance of any Event of Default shall be applied to Lessee's obligations in the order which Lessor may determine or as may be prescribed by the laws of the State of California.
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16.5 Executory Contract. Should Lessee file any proceeding under federal bankruptcy or other comparable federal or state insolvency laws, it shall, in addition to any other requirement under 11 U.S.C., Section 365 or other applicable provisions, be required to cure any and all obligations hereunder prior to being allowed to assume this Lease.
ARTICLE XVII
ARTICLE XVIII
ARTICLE XIX
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ARTICLE XX
ARTICLE XXI
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ARTICLE XXII
ARTICLE XXIII
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ARTICLE XXIV
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(c) Notwithstanding the foregoing, Lessor shall have the option, which may be exercised by Notice to Lessee, to require Lessee to furnish the Periodic Operating Statements and the Occupancy Information on a monthly basis (within thirty (30) days after the end of each calendar month) for a period of twelve successive calendar months, commencing with the first full calendar month following the date of such notice. (d) To the extent that Lessee, or any Controlling Entity of Lessee, is required by any regulatory agency to file financial statements or reports, within ten (10) calendar days of such filing, Lessee shall deliver to Lessor a copy of any such filing(s) and report(s). To the extent prepared, Lessee shall also provide to Lessor on an annual basis, copies of such financial statements and/or reports and/or filings (whether audited or unaudited, depending on the practice of such entities) prepared by any Controlling Entity. (e) Lessee shall provide to Lessor (i) quarterly operating statements (unaudited) of Lessee, detailing the revenues received, the expenses incurred and the net operating income for that quarter and containing appropriate year to date information, to be provided within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year and within ninety (90) days after the end of the fourth fiscal quarter of each fiscal year; and (ii) an annual operating statement (audited) of Lessee, detailing the total revenues received, total expenses incurred, and total net operating income, to be provided within ninety (90) days after the close of each fiscal year of the Lessee. Whether or not expressly stated elsewhere above in this Section 24.3, all information, reports, filings, etc. provided by Lessee to Lessor under this Section 24.3 shall be (i) prepared in accordance with GAAP (but omitting footnotes), and (ii) accompanied with a written certificate from a duly authorized officer of Lessee certifying that to the best knowledge of the officer executing such certificate, all accompanying information is true and complete. In addition to all of the items expressly identified and required elsewhere in this Section 24.3 (or elsewhere in this Lease), Lessee shall promptly comply with any request by Lessor or any Facility Mortgagee for the production of additional financial information (whether relating to Lessee, or a Controlling Entity of Lessee) as may deemed relevant or prudent by Lessor and/or any Facility Mortgagee.
ARTICLE XXV
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ARTICLE XXVI
ARTICLE XXVII
ARTICLE XXVIII
ARTICLE XXIX
ARTICLE XXX
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ARTICLE XXXI
If to Lessor:
LTC-K2 Limited Partnership
000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxxxxxx
Telephone: (000) 000-0000
with a copy to:
LTC-K2 Limited Partnership
000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Legal Department
Telephone: (000) 000-0000
If to Lessee:
Alterra Healthcare Corporation
00000 Xxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
with a copy to:
Xxxxxx and Xxxxxx
0000 Xxxxxxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
or to such other address or person as either party may hereafter designate by a Notice pursuant to this Section. In all instances, Notice shall be deemed effective upon proof of receipt.
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ARTICLE XXXII
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32.4 Breach by Lessor It shall be a breach of this Lease if Lessor fails 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 written Notice thereof from Lessee, 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. The time within which Lessor shall be obligated to cure any such failure shall also be subject to extension of time due to the occurrence of any Unavoidable Delay.
32.5. New Lease.Any successor to Lessor following (or in conjunction with) a foreclosure, deed-in-lieu of foreclosure, or any similar action or transaction (a "Successor Lessor") shall have the right, at any time and from time to time during the Term for any purpose, by written notice to Lessee, to require Lessee to execute an amendment to this Lease whereby one or more of the Facilities (individually, a "Separated Property" or collectively, the "Separated Properties") is separated and removed from this Lease, and to simultaneously execute a substitute lease with respect to such Separated Property(ies), in which case: 32.5.1 the Successor Lessor that is the owner of such Separated Property and Lessee shall execute a new lease (the "New Lease") for such Separated Property(ies), effective as of the date specified in Section 32.5.3 below (the "New Lease Effective Date"), in the same form and substance as this Lease, but with such changes thereto as necessary to reflect the separation of the Separated Property(ies) from the balance of the Leased Property, including specifically the following:(a) The total monthly Minimum Rent payable under such New Lease shall be the total applicable monthly Allocated Minimum Rent (defined below) with respect to such Separated Property(ies);
(b) All Minimum Rent rental escalations under the New Lease shall be at the times and in the amounts set forth in this Lease for Minimum Rent increases; (c) Intentionally omitted. (d) (i) The New Lease shall provide that the lessee thereunder (the "New Lessee") shall be responsible for the payment, performance and satisfaction of all duties, obligations and liabilities arising under this Lease, insofar at they relate to the Separated Property(ies), that were not paid, performed and satisfied in full prior to the effective date of the New Lease, (ii) Lessee shall remain responsible for the payment, performance and satisfaction of the aforesaid duties, obligations and liabilities as they relate to the Separated Property(ies) not paid, performed and satisfied in full prior to the effective date of such New Lease), and (iii) New Lessee shall be released from any duties, obligations and liabilities under this Lease as to the balance of the Leased Property (i.e., all Leased Property other than the Separated Property(ies)) first accruing after the effective date of the New Lease. 32.5.2 Lessor and Lessee shall also execute an amendment to this Lease effective as of the New Lease Effective Date reflecting the separation of the Separated Property(ies) from the balance of the Leased Property and making such modifications to this Lease as are necessitated thereby.-38-
32.5.3 In the case of any New Lease that is entered into in accordance with this Section 32.5 such New Lease shall be effective on the date which is the earlier of (i) the date the New Lease is fully executed and delivered by the parties thereto and (ii) the date specified in the written notice from Lessor to Lessee requiring a New Lease as described above, which date shall be no sooner than ten (10) days after the date such notice is issued. The amendment contemplated in Section Section 32.5.2 above shall be effective on the same date as the New Lease. 32.5.4 The amendment contemplated in Section 32.5.2 above and the New Lease shall be such that the obligations of Lessee under this Lease (as amended) and those of New Lessee under the New Lease shall not be greater or less than the obligations of Lessee under this Lease (prior to such amendment) and the rights and entitlements of such lessees under this Lease (as amended) and those of New Lessee under the New Lease shall not be less than the rights and entitlements of Lessee under this Lease (prior to such amendment). 32.5.5 Intentionally omitted. 32.5.6 Lessee, New Lessee, and Lessor shall take such actions and execute and deliver such documents, including without limitation the New Lease and the amendment contemplated in Section 32.5.2 above, as are reasonably necessary and appropriate to effectuate the provisions and intent of this Section 32.5. 32.5.7 Each party shall bear its own costs and expenses in connection with any New Lease entered into in accordance with this Section 32.5. 32.5.8 For purposes of this Section 32.5, "Allocated Minimum Rent" shall mean that portion of the Minimum Rent allocated to any one or more Separated Property which shall be calculated as follows: Minimum Rent shall be multiplied by a fraction the numerator of which shall be the NOI of the Separated Property and the denominator of which shall be the aggregate NOI for all of the Leased Property (including the NOI of the Separated Property). By way of example only, assume the Leased Property consists of ten (10) facilities, assume Minimum Rent is Ten Million Dollars ($10,000,000.00), assume that only one (1) Facility is to become a Separate Property, assume that the NOI of the Separate Property is One Million Dollars ($1,000,000.00), and further assume that the aggregate NOI for all of the Leased Property is Ten Million Dollars ($10,000,000.00). In that scenario, the Allocated Minimum Rent for the Separate Property would be One Million Dollars ($1,000,000.00), which is the product of the Minimum Rent ($10,000,000.00) multiplied by a fraction the numerator of which is One Million Dollars ($1,000,000.00) and the denominator of which is Ten Million Dollars ($10,000,000.00).
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ARTICLE XXXIII
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33.10. Prior and Future Agreements. This Lease contains the entire agreement of Lessor and Lessee with respect to the subject matter covered or mentioned in this Lease, and no prior or contemporaneous agreements or understanding pertaining to any such matters shall be effective for any purpose. No provision of this Lease may be amended or supplemented except by an agreement in writing signed by both Lessor and Lessee or their respective successor in interest. This Lease shall not be effective or binding on any party until fully executed by both Lessor and Lessee. 33.11. Partial Invalidity. Any provision of this Lease which shall be held by a court of competent jurisdiction to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision or term of this Lease, and such other provision or terms shall remain in full force and effect. 33.12. Attorneys Fees. In the event of any action or proceeding brought by one party against the other under this Lease, the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs in such action or proceeding from the other party, including all attorneys, fees incurred in connection with any appeals, and any post-judgment attorneys' fees incurred in efforts to collect on any judgment. 33.13. Authority of Lessor and Lessee. Lessor and Lessee each hereby represent and warrant that the individuals signing on its behalf are duly authorized to execute and deliver this Lease in their respective capacities, and that this Lease is binding upon the entity for which it has been executed. 33.14. Relationship of the Parties. Nothing contained in this Lease shall be deemed or construed by Lessor or Lessee, nor by any third party, as creating the relationship of principal and agent or a partnership, or a joint venture by Lessor or Lessee, it being understood and agreed that no provision contained in this Lease nor any acts of Lessor and Lessee shall be deemed to create any relationship other than the relationship of landlord and tenant. 33.15. Counterparts; Signatures by Facsimile. This Lease may be executed in one or more separate counterparts, each of which, once they are executed, shall be deemed to be an original. Such counterparts shall be and constitute one and the same instrument. The parties may accept and rely upon signatures delivered via facsimile. 33.16. Brokers. Lessor and Lessee each warrants that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease and it knows of no real estate broker or agent who is entitled to a commission in connection with this Lease. Lessor and Lessee hereby agree to indemnify the other and to hold the other harmless from and against any and all costs, expenses, claims, damages, suits, including attorneys' fees, in any way resulting from claims or demands for commissions or other compensation from any real estate brokers claiming through such party with respect to this Lease.
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33.17. Condition on Termination. Upon any termination of the Lease or any abandonment for whatever reason by Lessee of the Leased Property, Lessee shall deliver up to Lessor the Leased Property in substantially the same or better condition than it was at the commencement of the Lease, reasonable wear and tear only excepted, and in a clean and sanitary state. 33.18 Intentionally Omitted.
33.19. Joint and Several. If either Lessor or Lessee is comprised of more than one person or entity, then all such persons and/or entities comprising Lessor or Lessee, respectively, shall be jointly and severably liable hereunder.
33.20. Lessor Estoppel Certificates; Lessee's Obligations Independent. Upon reasonable request (and in connection with Lessee's efforts to obtain financing), Lessor shall deliver to Lessee a certificate in form and substance to be determined solely by Lessor (but containing fundamentally the same information as is required of Lessee pursuant to Section 24.2 above). Any breach, or alleged breach, by Lessor of the foregoing covenant (or any other covenant to be performed by Lessor under this Lease) shall not entitle Lessee to any right of offset or provide an excuse for non-performance by Lessee of its obligations under this Lease, all of which shall continue and survive irrespective and independent of any such breach or alleged breach by Lessor. To the extent permitted by law, Lessee hereby waives any and all rights of offset and other "self-help" remedies available at law or in equity.ARTICLE XXXIV
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34.2 Minimum Rent During Extended Terms. The Minimum Rent at the commencement of the first Extended Term shall be the higher of: (i) the previous year's Minimum Rent amount increased by two percent (2%); or (ii) the Minimum Rent during the first lease year of the Initial Term (i.e., June 1, 2002 through May 31, 2003) multiplied by a fraction the numerator of which is the C.P.I. as of the commencement date of the first Extended Term and the denominator of which is the C.P.I. as of the Commencement Date. Provided, however, in no event shall the Minimum Rent for the first year of the first Extended Term exceed by fifteen percent (15%) or more the amount of Minimum Rent at the end of the Initial Term. The initial Minimum Rent payable during the second Extended Term, shall be the higher of (i) the Minimum Rent payable during the last twelve (12) months of the previous Extended Term increased by two percent (2%), or (ii) the Fair Market Rent, as determined in Section 34.3 below, or (iii) the Minimum Rent during the first lease year of the first Extended Term multiplied by a fraction the numerator of which is the C.P.I. as of the commencement date of the second Extended Term and the denominator of which is the C.P.I. as of the commencement date of the first Extended Term Minimum Rent during the Extended Term shall be subject to annual adjustments as provided in Section 3.1. Provided, however, in no event shall the Minimum Rent for the first year of the Second Extended Term exceed by fifteen percent (15%) or more the amount of Minimum Rent at the end of the first Extended Term. 34.3. Determination of Fair Market Rent.
(i) If Lessor and Lessee cannot agree on the Fair Market Rent within thirty (30) days after the date of any Notice to Extend with respect to the first or second Extended Term, each party shall, by notice to the other, appoint a disinterested and licensed M.A.I. Real Estate Appraiser of national reputation and renown with at least five years of experience in appraising assisted living facilities throughout the United States with the same types of operating licenses then being in effect at each respective Facility to determine the Fair Market Rent. If any party should fail to appoint an appraiser within ten (10) days after notice, the appraiser selected by the other party shall determine the Fair Market Rent. In determining the Fair Market Rent, each appraiser shall give appropriate consideration to, among other things, generally applicable minimum rent for tenancies of property comparable to the Leased Property in the area in which the Leased Property is located.
(ii) If the two appraisers selected pursuant to Section 34.3(i) above, cannot agree upon the Fair Market Rent within forty-five (45) days, they shall immediately give written notice of such inability ("Notice of Disagreement") to both Lessor and Lessee setting forth the Fair Market Rent determinations of each of the appraisers. If the determinations of each of the two appraisers of the Fair Market Rent at the commencement of such Extended Term differ by less than ten percent (10%) of the lower determination, the Fair Market Rent shall be fixed at an amount equal to the average of the two determinations. (iii) If the determinations of each of the two appraisers selected pursuant to Section 34.3(i), above, differ by ten percent (10%) or more of the lower determination with respect to the Fair Market Rent to be paid at the commencement of such Extended Term, then within thirty (30) days after the giving of the Notice of Disagreement, the two appraisers shall appoint a third disinterested and licensed M.A.I. Real Estate Appraiser of national reputation and renown with at least five (5) years of experience appraising assisted living facilities throughout the United States with the same types of operating licenses then being in effect at each respective Facility. If the parties cannot then agree on the Fair Market Rent, the third appraiser shall determine the Fair Market Rent, and in so doing, shall give appropriate consideration to those items described in Section 34.3(i). The third appraiser shall not select a Fair Market Rent either (i) higher than the highest of the two appraisals made pursuant to Section 34.3(i); or (ii) lower than the lowest of the two appraisals made pursuant to Section 34.3(i), above. If the first two appraisers cannot agree on the selection of a third appraiser within such thirty (30) days, or if the first two appraisers fail to provide a Notice of Disagreement (as stated above in Section 34.3(ii), above, then the Fair Market Rent shall be determined by a third appraiser selected by the American Arbitration Association upon application by Lessor.-43-
(iv) During the time before the determination of the Fair Market Rent, Lessee shall pay Minimum Rent at the rate paid immediately preceding such Extended Term, increased by two percent (2%); provided, however, that, if the Fair Market Rent is determined to be higher than such amount, the Minimum Rent owed by Lessee at the Fair Market Rent shall be effective retroactively as of the first day of such Extended Term. If, after the Minimum Rent for an Extended Term is adjusted and applied retroactively as of the first day of such Extended Term, it is determined that additional Minimum Rent is due Lessor, the aggregate amount of any such additional Minimum Rent shall be paid to Lessor within thirty (30) days of the determination of the Fair Market Rent for such Extended Term.
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34.4 Appraisal Fee. Each of the parties shall pay the fees of the appraiser that it selects pursuant to Section 34.3(i), above, and shall equally share the cost of the third appraiser, if necessary, and shall equally share the cost of arbitration (excluding attorneys' fees), if necessary.
WHEREFORE, each of the parties has accepted and agreed by affixing their respective authorized signatures below as of the date first above written.
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"LESSOR" |
LTC-K2 LIMITED PARTNERSHIP, |
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By: /s/ Xxxxx X. Xxxxxxx |
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"LESSEE" |
ALTERRA HEALTHCARE CORPORATION, |
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By: /s/ Xxxx X. Xxxxxxxxx |
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LIST OF EXHIBITS AND SCHEDULES
Schedule "1" Existing Leases
Schedule "2" Existing Encumbrances
Exhibit "A-1"
through
Exhibit "A-7" Land
Exhibit "B" List of Facilities by Name and Address
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SCHEDULE "1"
Existing Leases
- Lease dated as of August 29, 1997, by and between LTC Properties, Inc., a Maryland corporation, as Lessor, and Sterling House Corporation, a Kansas corporation, as Lessee, for premises located at 0000 Xxxxx Xxxxx Xx Xxxxxx, Xxxxxx, Xxxxxxxx, as the same may have been amended from time to time.
- Lease dated as of June 13, 1997, by and between LTC Properties, Inc., a Maryland corporation, as Lessor, and Sterling House Corporation, a Kansas corporation, as Lessee, for premises located at 0000 Xxxx 00xx Xxxxxx, Xxxxx, Xxxxxxxx, as the same may have been amended from time to time.
- Lease dated as of February 28, 1997, by and between LTC Properties, Inc., a Maryland corporation, as Lessor, and Sterling House Corporation, a Kansas corporation, as Lessee, for premises located at 0000 Xxxxx Xxxxx Xxxx, Xxxxx, Xxxxxxxx, as the same may have been amended from time to time.
- Lease dated as of December 27, 1996, by and between Texas-LTC Limited Partnership, a Texas limited partnership, as Lessor, and Sterling House Corporation, a Kansas corporation, as Lessee, for premises located at 0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx, Xxxxx, as the same may have been amended from time to time.
- Lease dated as of May 1, 1997, by and between Texas-LTC Limited Partnership, a Texas limited partnership, as Lessor, and Sterling House Corporation, a Kansas corporation, as Lessee, for premises located at 00000 Xxxxxxxxxxx Xxxx, Xxx Xxxxxxx, Xxxxx, as the same may have been amended from time to time.
- Lease dated as of June 13, 1997, by and between LTC Properties, Inc., a Maryland corporation, as Lessor, and Sterling House Corporation, a Kansas corporation, as Lessee, for premises located at 00000 Xxxxx Xxxx/Xxxxxxxxxxx Xxxx, Xxx Xxxxxxx, Xxxxx, as the same may have been amended from time to time.
- Lease dated as of April 23, 1998, by and between LTC Properties, Inc., a Maryland corporation, as Lessor, and Sterling House Corporation, a Kansas corporation, as Lessee, for premises located at 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxx, as the same may have been amended from time to time.
SCHEDULE "2"
Existing Encumbrances
EXHIBIT "A-1"
LEGAL DESCRIPTION
Edmond, Oklahoma
EXHIBIT "A-2"
LEGAL DESCRIPTION
Tulsa, Oklahoma
EXHIBIT "A-3"
LEGAL DESCRIPTION
Tulsa (Xxxxx), Oklahoma
EXHIBIT "A-4"
LEGAL DESCRIPTION
Tyler, Texas
EXHIBIT "A-5"
LEGAL DESCRIPTION
San Antonio, Texas
EXHIBIT "A-6"
LEGAL DESCRIPTION
San Antonio (Maltsberger), Texas
EXHIBIT "A-7"
LEGAL DESCRIPTION
Tallahassee, Florida
EXHIBIT "B"
List of Facilities by Address and Name
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Sterling House of Santa Fe Square |
1500 North Santa Fe Avenue, Edmond, Oklahoma |
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Sterling House of Tulsa |
0000 Xxxx 00xx Xxxxxx, Xxxxx, Xxxxxxxx |
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Sterling House of Tulsa-Xxxxx |
0000 Xxxxx Xxxxx Xxxx, Xxxxx, Xxxxxxxx |
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Sterling House of Tyler |
0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx, Xxxxx |
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Sterling House of San Antonio |
00000 Xxxxxxxxxxx Xxxx, Xxx Xxxxxxx, Xxxxx |
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Sterling House of Xxxxxxxxxxx |
00000 Xxxxx Xxxx/Xxxxxxxxxxx Xxxx, Xxx Xxxxxxx, Xxxxx |
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Sterling House of Tallahassee |
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxxxx, Xxxxxxx |
