LEASE

 

 

6.2    Exceptions to Insurance Requirements. Tenant has advised Landlord that, to the extent described on Schedule 1, it is not in compliance as of the Effective Date with the requirements set forth in Section 6.1. Tenant nonetheless represents and warrants to Landlord that the policies of insurance (including the deductible or self-insured retention provisions thereof) and risk management programs that Tenant has in effect as of the Effective Date are, and as may be in effect at any time during the Term will be, consistent with custom, practice and prudent management standards in the business and industry in which Tenant is engaged. As and when insurance meeting the requirements set forth in Section 6.1 becomes generally available to operators of assisted living facilities owned by institutional landlords and similar to the Facility at commercially reasonable rates, as jointly determined by Landlord and Tenant in their respective reasonable judgment, Tenant shall purchase and maintain such insurance. Tenant’s non-compliance with the requirements of Section 6.1 shall not give rise to an Event of Default so long as (i) no other Event of Default then exists, (ii) such non-compliance is limited to the matters described on Schedule 1, as it may be amended from time to time during the Term with the consent of Landlord in its sole discretion, (iii) the representations and warranties set forth in this Section 6.2 remain true, correct and complete in all respects, and (iv) Tenant is in compliance with the other covenants contained in this Section 6.2 and Section 6.3. Notwithstanding anything to the contrary set forth herein, if any insurance provided by Tenant in accordance with Schedule 1 provides for coverage on a "claims-made" basis, every "claims made" renewal or replacement policy shall continue to show the first date of claims made coverage as of the Effective Date, or a date prior thereto, as its prior acts/retroactive or continuity date. Furthermore, if any "claims made" policy is cancelled or non-renewed, and not replaced by an "occurrence" policy with "full prior acts", Tenant will purchase an "Extended Reporting Provision Option" (i.e., tail coverage), for a minimum of two (2) years, and if any "claims made" policy is subsequently replaced by an "occurrence" policy, Tenant agrees that said "occurrence" policy will contain a "full prior acts" provision.

 

 

 

6.3    Reimbursement of Landlord’s Insurance Costs. During any Lease Year or portion thereof in which Tenant is not in compliance with the provisions of Section 6.1 (without consideration of the effect of Section 6.2), Tenant shall reimburse Landlord, within ten (10) days of Landlord’s demand therefor, for the costs of the premiums of the general liability and environmental insurance policies maintained by Landlord, or contributions to self-insurance in lieu thereof, in connection with the Premises, which amount shall not exceed in any Lease Year the sum of eleven cents ($.11) multiplied by the total square footage of the Facility located on the Premises (as adjusted at the end of each Lease Ye ar for increases since the Effective Date in the CPI). Tenant shall have no right to receive any proceeds or other benefits from any such insurance. For purposes of this Section 6.3, Tenant shall not be in compliance with Section 6.1 (without consideration of the effect of Section 6.2) at any such time that any insurance required hereunder is provided to Tenant by or through a "captive" insurance company.

 

 

6.4    Determination of Commercial Reasonableness. In the event that Landlord and Tenant are unable to agree on any matter in this Section 6 requiring a determination of commercial reasonableness, such determination shall be made by a reputable insurance company, consultant or expert (an "Insurance Arbitrator") with experience in the assisted living insurance in dustry as mutually identified by Landlord and Tenant in the exercise of their reasonable judgment. As a condition to a determination of commercial reasonableness with respect to any particular matter, the Insurance Arbitrator shall be capable of providing, procuring or identifying particular policies or coverages that would be available to Tenant and would satisfy the requirement in issue. The determinations made by any such experts shall be binding on Landlord and Tenant for purposes of Section 6, and the costs, fees and expenses of the same shall be shared equally by Tenant and Landlord. If Tenant and Landlord are unable to mutually agree upon an Insurance Arbitrator, each party shall within ten (10) days after written demand by the other select one Insurance Arbitrator. Within ten (10) days of such selection, the Insurance Arbitrators so selected by the parties shall select a third (3^rd) Insurance Arbitrator who shall be solely responsible for rendering a final determination of commercial reasonableness. If either party fails to select an Insurance Arbitrator within the time period set forth above, the Insurance Arbitrator selected by the other party shall alone render the final determination of commercial reasonableness in accordance with the foregoing provisions and such final determination shall be binding upon the parties. If the Insurance Arbitrators selected by the parties are unable to agree upon a third (3^rd) Insurance Arbitrator within the time period set forth above, either party shall have the right to apply at Tenant’s and Landlord’s joint expense to the presiding judge of the court of original trial jurisdiction in the county in which the Premises are located to n ame the third (3^rd) Insurance Arbitrator.

 

 

6.5    Insurance Required under Freddie Mac Loan Documents. Notwithstanding any provision set forth in this Section 6, in the event that the insurance coverages and policy amounts required to be maintained under the terms of the Freddie Mac Loan Documents are greater than the insurance coverages and policy amounts required under the terms of this Lease and Freddie Mac has not agreed to waive such requirements under the terms of any documents to which Freddie Mac and Tenant may be a party with respect to the Facility,

 

Tenant shall be obligated to maintain such insurance policies and coverages as are necessary to comply with the requirements under the Freddie Mac Loan Documents so long as any amounts remain outstanding under the terms of the Freddie Mac Loan Documents or in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage. Landlord covenants and agrees that it shall not enter into any agreement to modify the insurance requirements under the Freddie Mac Loan Documents without the prior consent of Tenant, which consent shall not be unreasonably withheld or delayed. < /font>

 

7.    Use, Regulatory Compliance and Preservation of Business.

 

7.1    Permitted Use; Qualified Care. Tenant shall continuously use and occupy the Facility during the Term as a licensed assisted living facility with not less than one hundred one (101) units and for ancillary services relating thereto, but for no other purpose. Landlord acknowledges and agrees that (a) following the repayment of the obligations due to Freddie Mac under the terms of the Freddie Mac Loan Documents, or (b) with the prior written approval of Freddie Mac, during any period in which any amounts remain outstanding under the terms of the Freddie Mac Loan Documents, or of Freddie Mac or any other party which becomes the owner of the Premises after a foreclosure or conveyance in lieu of foreclosure ("Successor Landlord"), in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage, Tenant shall have the right to (i) combine units at the Facility at the request of a resident or to provide for their use by multiple residents, and (ii) reduce the licensed units at the Facility by no more than five (5) units (but not to exceed 5% of the total units at the Facility) in order to enable Tenant to operate special care units and/or to provide other ancillary services at the Facility; provided, however, in no event shall the total reductions in the Facility and Related Facilities exceed thirty (30) units. Tenant shall not allow the average occupancy of the Facility for any trailing three (3) month period to be less than sixty percent (60%). Tenant shall provide care, treatment and services to the residents of the Facility and the Business conducted thereon in a manner consistent with all applicable laws. So long as any amounts remain outstanding under the terms of the Freddie Mac Loan Documents or in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage, Tenant shall not, without the prior written consent of Freddie Mac or Successor Landlord (which may be withheld or conditioned in the sole discretion of Freddie Mac or Successor Landlord, as the case may be) use or occupy the Facility or any part thereof as a facility certified for participation in Medicare or Medicaid except to the extent that Tenant is required by law to do so.

 

7.2    Regulatory Compliance . Tenant, the Facility and the other portions of the Premises shall comply in all material respects with all licensing and other laws and all CC&R’s and other use or maintenance requirements applicable to the Business conducted thereon and, to the extent Tenant elects to participate in the same or as may be required by law to serve its resident population, all Medicare, Medic aid and other third-party payor certification requirements, including timely filing properly completed cost and other required reports, timely paying all expenses shown thereon, and ensuring that, to the extent Tenant has elected to participate in the same or as required by law to serve its respective resident population, the Facility continues to be fully certified for participation in Medicare and Medicaid throughout the Term and when it is returned to Landlord, all without any suspension, revocation, decertification

 

or other material limitation. Further, Tenant shall not commit any act or omission that would in any way violate any certificate of occupancy affecting the Facility, result in closure of the Business conducted at the Facility or result in the sale or transfer of all or any portion of any related certificate of need, bed rights or other similar certificate or license. All inspection fees, costs and charges associated with a change of such licensure or certification shall be borne solely by Tenant.

 

7.3    Preservation of Business. Tenant acknowledges that a fair return to Landlord on and protection of its investment in the Premises is dependent, in part, on Tenant’s dedication to the Business and the concentration on the Facility of similar businesses of Tenant and its Affiliates in the geographical area of the Facility. Tenant further acknowledges that the diversion of residents or patient care activities from the Facility to other facilities owned or operated by Tenant or its Affiliates at any time during the Term will have a material adverse affect on the value and utility of the Facility. Therefore, Tenant agrees that during the Term and for a period of one (1) year thereafter, neither Tenant nor any of its Affiliates shall, without the prior written consent of Landlord: (i) operate, own, participate in or otherwise receive revenues from any other business providing services similar to those of the Business of the Facility within a ten (10) mile radius of the Facility; provided, however, the foregoing shall not be deemed or construed to apply to any facilities acquired by Tenant or its Affiliates after the Effective Date (except during the last three (3) Leases Years of the Initial Term or any applicable Renewal Term unless Tenant has elected to renew this Lease for the next applicable Renewal Term), whether by acquisition, lease or management agreement, as part of a transaction or series of related transactions involving three (3) or more facilities, provided that, ( A) less than fifty percent (50%) of the facilities involved in any such transaction are located within the area protected by this Section 7.3 and Section 7.3 of each of the Related Leases, and (B) without the prior written consent of Landlord no such transactions may collectively have the affect of allowing Tenant to operate more than five (5) facilities within the area protected by this Section 7.3 and Section 7.3 of each of the Related Leases, or (ii) except as is necessary to provide residents or patients with an alternative level of care or as is otherwise necessary as a result of an admissions ban or non payment of stay or to ensure the health and welfare of other residents of the Facility, (A) recommend or solicit the removal or transfer of any resident or patient from the Facility to any other nursing, health care, senior housing or retirement housing facility or (B) divert actual or potential residents or patients of the Business conducted at the Facility to any other facilities owned or operated by Tenant or its Affiliates or to facilities from which Tenant or its Affiliates receive any type of referral fees or other compensation for transfers. Tenant further agre es that during the last two (2) years of the Initial Term or any applicable Renewal Term (unless Tenant has elected to renew this Lease for the next applicable Renewal Term) and for a period of one (1) year after the expiration or earlier termination of the Term, Tenant shall not employ any management or supervisory personnel working at the Facility for any other business without the consent of Landlord in its reasonable discretion. Notwithstanding the foregoing, unless this Lease terminates as a result of an Event of Default by Tenant, the prohibition of employment during the one (1) year period after the expiration or earlier termination of the Term shall not apply to unsolicited personnel who approach Tenant directly and request employment by Tenant.

 

 

8.    Acceptance, Maintenance, Upgrade, Alteration and Environmental.

 

8.1    Acceptance "AS IS"; No Liens. Tenant acknowledges that it is presently engaged in operations like the Business conducted at the Facility in the state where the Facility is located and has expertise in such industry and, in deciding to enter into this Lease, has not relied on any representations or warranties, express or implied, of any kind from Landlord. Tenant has examined the condition of title to and thoroughly investigated the Premises, has selected the Premises to its own specifications, h as concluded that no improvements or modifications to them are required in order to conduct the Business, and accepts them on an "AS IS" basis and assumes all responsibility and cost for the correction of any observed or unobserved deficiencies or violations. Except with respect to the liens which are being duly protested in accordance with Section 5.1, and liens on furniture, fixtures and equipment located at the Facility and acquired by Tenant during the Term, provided the value of the furniture, fixtures and equipment secured by such liens does not exceed Seventy Five Thousand and no/100 Dollars ($75,000), Tenant shall not cause or permit any lien, levy or attachment to be placed or assessed against any portion of the Premises or the operation thereof (a "Lien") for any reason (excluding, however, any such Liens arising from the acts or omissions of Landlord or its predecessors in interest in the Premises or any Liens granted in favor of Freddie Mac pursuant to any collateral documents executed by Tenant in favor of Freddie Mac (the "Tenant Collateral Documents") in connection with Landlord’s acquisition of the Premises and assumption of the Loan).

 

8.2    Tenant’s Maintenance Obligations. Tenant shall (a) keep and maintain the Premises in good appearance, repair and condition and maintain proper housekeeping, (b) promptly make all repairs (interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen) necessary to keep the Facility in good and lawful order and condition and in substantial compliance with all applicable requirements and laws relating to the Business conducted thereon, including if applicable certification for participation in Medicare and Medicaid, and (c) keep and maintain all Landlord and Tenant Personal Property in good condition, ordinary wear and tear excepted, and repair and replace such property consistent with prudent industry practice. In addition, Tenant shall, within one (1) year following the Effective Date and at Tenant’s sole cost and expense, diligently make the repa irs and/or improvements to the Facility set forth on Exhibit G attached hereto (the "Mandatory Repairs").

 

8.3    Upgrade Expenditures.

 

 

(a)    Tenant shall deliver to Landlord, with each payment of Minimum Rent, a deposit to be added to a reserve (the "Upgrade Reserve") equal to the sum of (a) of one-twelfth (1/12^th) of the Applicable Annual Reserve (as hereinafter defined and as adjusted annually after the tenth (10^th) Lease Year for increases in the CPI since the commencement of the tenth (10^th) Lease Year), multiplied by (b) the aggregate number of assisted living units in the Facility (the "Upgrade Minimum") minus (c) the Upgrade Overage (as hereinafter defined). As used herein, the "Applicable Annual Reserve" means:

 

 

 

Lease Years                Applicable Annual Reserve

 

 

One through Four                $ 360.00

 

Five through Seven                $ 460.00

 

Eight through Ten                 $ 500.00

 

Each Lease Year thereafter            $ 500.00¹

 

 

From time to time, but not more often than twice in any calendar month and provided that no Event of Default is then continuing, Landlord will disburse to Tenant amounts from the Upgrade Reserve for the payment of costs incurred by Tenant with respect to the Premises, subject to the following conditions: (i) the costs incurred by Tenant shall be for the purposes of making capital improvements to the Facility, acquiring furniture and fixtures needed for the operation of the Facility or making Upgrade Expenditures (the "Per mitted Expenditures"); provided, however, in no event shall the Permitted Expenditures be deemed or construed to include the costs of the Mandatory Repairs to be made by Tenant pursuant to Section 8.2 above; and (ii) Tenant’s request for disbursement shall be accompanied with such invoices or purchase orders evidencing the expenditure as Landlord may reasonably require. Landlord shall make the reimbursements to Tenant required hereunder within fourteen (14) days after satisfaction of all conditions to such disbursement. Upon reasonable advance request, Landlord may require Tenant to procure mechanic’s lien waivers, in form and substance reasonably satisfactory to Landlord, in connection with any Upgrade Expenditures in excess of Twenty-Five Thousand Dollars ($25,000). A s used herein, "Upgrade Expenditures" means expenditures in commercially reasonable amounts to Persons not affiliated with Tenant for (x) upgrades or improvements to the Facility that have the effect of maintaining or improving its competitive position in its respective marketplace, including new or replacement wallpaper, tiles, window coverings, lighting fixtures, painting, upgraded landscaping, carpeting, architectural adornments, common area amenities and the like, but excluding capital improvements or repairs such as repairs or replacements of the roof, structural elements of the walls, parking area or the el ectrical, plumbing, HVAC or other mechanical or structural systems, and (y) other improvements to the Facility as reasonably approved by Landlord. Any amount remaining in the Upgrade Reserve at the expiration of the Term or earlier termination of this Lease shall be retained by Landlord as additional or supplemental Rent hereunder. As used herein "Upgrade Overage" means any amounts expended by Tenant on the Permitted Expenditures in the two immediately preceding Lease Years in excess of the Upgrade Minimum (excluding any such amounts that are financed by Tenant and secured by a lien on the personal property relat ing thereto).

 

 

(b)    Notwithstanding the provisions of Section 8(a) above, in the event the monthly deposits required to be made to the Replacement Reserve (as defined in the Freddie Mac Loan Documents) under the terms of the Freddie Mac Loan Documents are greater than the amount that Tenant would be otherwise be required to deliver under the terms of Section 8(a), so long as any amounts remain outstanding under the terms of the Freddie Mac Loan Documents or in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage, the monthly Upgrade Minimum shall be equal to the

 

amount of the monthly Replacement Reserve deposits required to be made under the Freddie Mac Loan Documents, and any disbursement request made by Tenant shall be accompanied with copies of such invoices or purchase orders, lien waivers and other documentation as may be required by Freddie Mac in order to make disbursements from the Replacement Reserve. Landlord covenants and agrees that it (i) will cooperate with Tenant and execute such documents as may reasonably be necessary to cause Freddie Mac to make required disbursements from the Replacement Reserve, and (ii) shall not enter into any agreement to increase the Replacement Reserve requirements under the Freddie Mac Loan Documents without the prior consent of Tenant, which consent shall not be unreasonably withheld or delayed.

 

8.4    Alterations by Tenant. With the prior written approval of Freddie Mac (during any period in which any amounts remain outstanding under the terms of the Freddie Mac Loan Documents) or Successor Landlord (in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage), or to the extent that Tenant and/or Landlord is required or permitted to make alterations or improvements to the Premises under the terms of the Freddie Mac Loan Documents, Tenant may alter, improve, exchange, replace, modify or expand (collectively, "Alterations") the Facility, equipment or appliances in the Premises from time to time as it may determine is desirable for the continuing and proper use and maintenance of the Premises; provided, that any Alterations in excess of Two Hundred Fifty Thousand Dollars ($250,000) during any Lease Year with respect to the Facility shall further require Landlord’s prior written consent, which consent shall not be unreasonably withheld or delayed; provided further, that any Alterations to the Premises must satisfy the requirem ents set forth in Sections 4.04 (2) and (3) of Revenue Procedure 2001-28, 2001-19 I.R.B. 1156. All Alterations shall immediately become a part of the Premises and the property of Landlord subject to this Lease, and except to the extent that Landlord in its sole discretion agrees to fund them following Tenant’s written request therefor, the cost of all Alterations or other purchases, whether undertaken as an on-going licensing, Medicare, Medicaid or other regulatory requirement, or otherwise shall be borne solely by Tenant. All Alterations shall be done in a good and workmanlike manner in compliance with all applicable laws and the insurance required under this Lease.

 

8.5    Hazardous Materials. Tenant’s use of the Premises shall comply with all Hazardous Materials Laws. If any Environmental Activities occur or are suspected to have occurred in violation of any Hazardous Materials Laws or if Tenant has received notice of any Hazardous Materials Claim against any portion of the Premises, Tenant shall promptly obtain all permits and approvals necessary to remedy any such actual or suspected problem through the removal of Hazardous Materials or otherwise, and upon Landlord’s approval of the remediation plan, remedy any such problem to the satisfaction of Landlord and all applicable governmental authorities, in accordance with all Hazardous Materials Laws and good business practices. Tenant shall immediately advise Landlord in writing of (a) any Environmental Activities in violation of any Hazardous Materials Laws; (b) any Hazardous Materials Claims against Tenant or any portion of the Premises; (c) any remedial action taken by Tenant in response to any Hazardous Materials Claims or any Hazardous Materials on, under or about any portion of the Premises in violation of any Hazardous Materials Laws; (d) Tenant’s discovery of any occurrence or condition on or in the vicinity of the Premises that materially increases the risk that any portion of the Premises will be exposed to Hazardous Materials; and (e) all communications to or from Tenant, any governmental authority or any other Person relating to Hazardous

 

Materials Laws or Hazardous Materials Claims with respect to the Premises, including copies thereof. Notwithstanding any other provision of this Lease, if any Hazardous Materials are discovered on, under or about any portion of the Premises in violation of any Hazardous Materials Law, the Term shall be automatically extended and this Lease shall remain in full force and effect until the earlier to occur of the completion of all remedial action or monitoring, as approved by Landlord, in accordance with all Hazardous Materials Laws, or the date specified in a written notice from Landlord to Tenant terminating this Lease (which date may be subsequent to, but not earlier than, the date upon which the Term was to have expired). Landlord shall have the right, at Tenant’s sole cost and expense (including, without li mitation, Landlord’s reasonable attorneys’ fees and costs) and with counsel chosen by Landlord, to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims.

 

9.    Tenant Property and Security Interest.

 

9.1    Tenant Property. Tenant shall obtain and install all items of furniture, fixtures, supplies and equipment not included as Landlord Personal Property as shall be necessary or reasonably appropriate to operate the Facility in compliance with this Lease ("Tenant Personal Property"). (Tenant Personal Pro perty and "Tenant Intangible Property" shall be collectively referred to herein as "Tenant Property".) As used herein, "Tenant Intangible Property" means all the following at any time owned by Tenant in connection with its use of the Premises during the Term: Medicare, Medicaid and other accounts and proceeds thereof; rents, profits, income or revenue derived from such operation or use; all documents, chattel paper, instru ments, contract rights (including contracts with residents, employees and third-party payors), deposit accounts, general intangibles and choses in action; refunds of any Taxes or Other Charges; licenses and permits necessary or desirable for Tenant’s use of the Premises, including any certified Medicaid beds, any applicable certificate of need or other similar certificate, and, to the extent permitted by law, the exclusive right to transfer, move or apply for the foregoing and manage the Business conducted at the Premises (including the right to apply for permission to reduce the licensed bed complement, take any of the licensed beds out of service or move the beds to a different location); and the right to use the name "Manor at Essington" and any other trade or other name or logo now or hereafter associated with Tenant’s operation of the Premises (excluding the "Emeritus" or "ESC" name or any variation thereof and any name that now or hereafter begins with "Loyalton of").

 

9.2    Landlord’s Security Interest and Financing Statements. The parties intend that upon the occurrence of an Event of Default under this Lease, Landlord will have the right, subject to any limitations imposed by applicable law, including any requirements that Landlord or its designee must be licensed to operate the Facility before assuming operational control with respect thereto, to control the Tenant Property so that Landlord or its designee can operate or re-let the Facility and associated p ersonal property intact for use as a licensed facility engaged in the applicable Business. Therefore, to implement the intention of the parties, and for the purpose of securing the payment and performance of Tenant’s obligations under this Lease, subject to any limitations imposed by applicable law, including any licensure laws, Tenant, as debtor, hereby grants to Landlord, as secured party, in addition to any statutory lien provided to Landlord under applicable law, a security interest in and an express contractual Lien upon, all of Tenant’s right, title and interest in and to the Tenant Property and any and all products and

 

proceeds thereof, which Tenant now owns or leases or at anytime during the Term acquires an interest or right. This Lease constitutes a security agreement covering all such Tenant Property and Tenant shall keep such Tenant Property free and clear of all Liens other than Liens in favor of Landlord and Assumable Tenant Property Liens (as defined below). The security interest granted to Landlord hereunder is intended by the parties to be subordinate to any security interest granted in Tenant Personal Property in connection with the financing or leasing of all or any portion thereof, so long as, if the value of the property which is subject to such financing exceeds Seventy Five Thousand and no/100 Dollars ($75,000) with respect to the Facility, the lessor or financier agrees to give Landlord written notice of any def ault by Tenant under the terms of such arrangement and a reasonable time following such notice to cure any such default and to consent to Landlord’s written assumption of such arrangement upon curing such default ("Assumable Tenant Property Liens"); provided, however, that Landlord shall have no obligation to subordinate its security interest to any third party other than Freddie Mac, during any period in which any amounts remain outstan ding under the terms of the Freddie Mac Loan Documents, and Successor Landlord, in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage. Following the repayment of the obligations due to Freddie Mac under the terms of the Freddie Mac Loan Documents, Landlord agrees to execute and deliver such subordination or intercreditor agreements as may be reasonably required by a third party creditor of Tenant in connection with Assumable Tenant Property Liens in favor of such creditor. With respect to any of the Tenant’s Property now owned or acquired by Tenant during the Term, this security interest and agreement shall survive the termination of this Lease resulting from an Event of Default. Tenant shall pay all filing and reasonable record search fees and other costs for such additional security agreements, financing statements, fixture filings and other documents as Landlord may reasonably require to perfect or continue the perfe ction of its security interest. Tenant shall have the right to review and approve, which approval shall not be unreasonably withheld, any financing statements or continuation statements which Landlord proposes to file. To the extent any amounts collected by Landlord upon the exercise of its rights under this Section 9.2 exceed the amounts due from Tenant to Landlord under this Lease, including any amounts due as a result of the occurrence of an Event of Default hereunder, Landlord shall be required to remit such excess to Tenant.

 

10.    Financial, Management and Regulatory Reports. Tenant shall provide Landlord with the reports listed in Exhibit E at the times described therein, and such other information about it or the operations of the Premises and Business as Landlord may reasonably request from time to time. All financial information provided shall be prepared in accordance with generally accepted accounting principles consistently applied except with respect to the method of accounting for resident move in fees, which are on a cash basis. If Tenant is or becomes subject to any reporting requirements of the Securities and Exchange Commission during the Term, it shall concurrently deliver to Landlord such reports as are delivered pursuant to applicable securities laws. Tenant shall be assessed with a $500 administrative fee for each instance in which Tenant fails to provide Landlord with the monthly, quarterly or annual financial reports listed in Exhibit E within the time spec ified therein, which administrative fee shall be immediately due and payable to Landlord. Notwithstanding the foregoing, such administrative fee shall not be assessed to Tenant so long as (a) Tenant is not delinquent in the delivery of such financial reports more than two (2) times in any consecutive twelve (12) month period, and (b) Tenant remits an y delinquent report to Landlord within five (5) business days of

 

Landlord’s written request therefor. In the event that the reporting requirements under the Freddie Mac Loan Documents are greater than the requirements under the term of this Lease and Freddie Mac has not agreed to waive such requirements under the terms of any documents to which Freddie Mac and Tenant may be a party with respect to the Facility, Tenant shall be obligated to provide such reports as are necessary to comply with the requirements under the Freddie Mac Loan Documents, so long as any amounts remain outstanding under the terms of the Freddie Mac Loan Documents or in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage. Landlor d covenants and agrees that it shall not enter into any agreement to modify the reporting requirements under the Freddie Mac Loan Documents without the prior consent of Tenant, which consent shall not be unreasonably withhold or delayed.

 

11.    Representations and Warranties. Each party represents and warrants to the other that: (a) this Lease and all other documents executed or to be executed by it in connection herewith have been duly authorized and shall be binding upon it; (b) it is duly organized, validly existing and in good standing under the laws of the state of its formation and is duly authorized and qualified to perform this Lease within the state in which the Premises is located; and (c) neither this Lease nor any other document executed or to be executed in connection herewith violates the terms of any other agreement of such party.

 

12.    Events of Default. So long as there is no Event of Default, Tenant shall peaceably and quietly have, hold and enjoy the Premises for the Term, free of any claim or other action not caused or created by Tenant or pursuant to Sections 17 or 18. The occurrence of any of the following events will constitute an "Event of Default" on the part of Tenant, and there shall be no cure period therefor except as otherwise expressly provided:

 

(a)    Tenant’s failure to pay within two (2) business days of when due any Rent, tax impound deposits, Upgrade Reserve Deposits, Other Charges or other required payments;

 

(b)    (i) The revocation of any license which would have a material adverse affect on the operation of the Premises or the certification of the Premises for provider status under Medicare or Medicaid, if applicable; (ii) the closure of a material portion (as hereinafter defined) of the Business other than during a perio d of repair or reconstruction following damage or destruction thereto or a Taking (as hereinafter defined) thereof; (iii) the sale or transfer, without Landlord’s consent, of all or any portion of any certificate of need, bed rights or other similar certificate or license relating to the Business or the Premises; or (iv) the use of any portion of the Premises other than for a licensed facility engaged in the Business and for ancillary services relating thereto (each a "Catastrophic Event of Default"), it being understood and agreed that for purposes of clause (ii) above the phrase "a material portion" shall mean any portion of the Premises that is equal to or greater than ten percent (10%) of the units at the Facility;

 

(c)    Any other material suspension, termination or restriction placed upon Tenant, any license to operate the Business, the Premises or the ability to admit residents or patients (e.g., an admissions ban or non-payment for new admissions by Medicare or Medicaid resulting from an inspection survey); provided, however, if any such material suspension or restriction is curable by Tenant it shall not constitute an Event of Default if Tenant promptly commences to cure such breach and thereafter diligently pursues such cure to the completion thereof within the

 

lesser of: (i) the time period in which the applicable governmental agency has given Tenant to undertake corrective action, or (ii) one hundred twenty (120) days after the occurrence of any such material suspension or restriction;

 

(d)    A material default by Tenant or any Affiliate of Tenant as of the date of such default [including, without limitation, Alterra Healthcare Corporation ("Alterra") if such entity subsequently becomes an Affiliate of Tenant (an "Alterra Event")] (i) under any other lease, agreement or obligation between it and NHP or Landlord or any of their Affiliates, which is not cured within any applicable cure period specified therein, or (ii) with respect to any obligation under (A) any other lease or leases with any other party under which Tenant or its Affiliate is obligated to make annual rental payments in excess of One Hundred Thousand Dollars ($100,0 00) which is not cured within any applicable cure period specified therein, or (B) any financing agreement with a then outstanding principal balance in excess of $1 million with any other party which is not cured within any applicable cure period specified therein; provided, however, that the Events of Default set forth in this Section 12(d) shall be of no force or effect during any period in which any amounts remain outstanding under the terms of the Freddie Mac Loan Documents or in the event that Freddie Mac exercises the right to foreclose its security interest in the Premises pursuant to the terms of the Mortgage;

 

(e)    (i) the occurrence of a default by Tenant under the Tenant Collateral Documents which continues beyond the expiration of any applicable cure period set forth therein, or (ii) any material misstatement or omission of fact in any written report, notice or communication from Tenant to Landlord with respect to Tenant, the Premi ses or the Business;

 

(f)    The failure to perform or comply with the provisions of Sections 6, 16 or 24;

 

(g)    (i) Tenant shall generally not pay its debts as they become due, or shall admit in writing its inability to pay its debts generally, or shall make an assignment of all or substantially all of its property for the benefit of creditors; or (ii) a receiver, trustee or liquidator shall be appointed for Tenant or any o f its property, if within three (3) business days of such appointment Tenant does not inform Landlord in writing that Tenant intends to cause such appointment to be discharged or such discharge is not diligently prosecuted to completion within sixty (60) days after the date of such appointment; (iii) the filing by Tenant of a voluntary petition under any federal bankruptcy or state law to be adjudicated as bankrupt or for any arrange ment or other debtor’s relief; or (iv) the involuntary filing of such a petition against Tenant by any other party, unless Tenant within three (3) business days of such filing informs Landlord in writing of its intent to cause such petition to be dismissed, such dismissal is diligently prosecuted and such petition is dismissed within ninety (90) days after filing; or

 

(h)    The failure to perform or comply with any other provision of this Lease not requiring the payment of money unless (i) within three (3) business days of Tenant’s receipt of a notice of default from Landlord, Tenant gives Landlord not ice of its intent to cure such default; and (ii) Tenant cures it either (x) within thirty (30) days after such notice from Landlord or (y) if such default cannot with due diligence be so cured because of the nature of th e default or delays beyond the control of Tenant and cure after such period will not have a materially adverse effect upon the Premises or the Business, then such default shall not constitute an Event of Default if Tenant uses its commercially reasonable efforts to cure such default by promptly commencing

 

and diligently pursuing such cure to the completion thereof and cures it within one hundred twenty (120) days after such notice from Landlord.

 

13.    Remedies. Upon the occurrence of an Event of Default, Landlord may exercise all rights and remedies under this Lease and the laws of the state where the Facility is located that are available to a lessor of real and personal property in the event of a default by its lessee, and as to the Tenant Property, all remedies granted under the laws of such state to a secured party under its Uniform Commercial Code. Landlord shall have no duty to mitigate damages unless required by applicable law and, abs ent gross negligence or willful misconduct, shall not be responsible or liable for any failure to relet any of the Premises or to collect any rent due upon any such reletting. Tenant shall pay Landlord, immediately upon demand, all expenses incurred by it in obtaining possession and reletting any of the Premises, including fees, commissions and costs of attorneys, architects, agents and brokers.

 

13.1    General. Without limiting the foregoing, Landlord shall have the right (but not the obligation) to do any of the following upon an Event of Default: (a) sue for the specific performance of any covenant of Tenant as to which it is in breach; (b) enter upon any portion of the Premises, terminate this Lease, dispossess Tenant from the Premises and/or collect money damages by reason of Tenant’s breach, including the acceleration of all Rent which would have accrued after such termination and all obligations and liabilities of Tenant under this Lease which survive the termination of the Term; (c) elect to leave this Lease in place and sue for Rent and other money damages as the same come due; (d ) (before or after repossession of the Premises pursuant to clause (b) above and whether or not this Lease has been terminated) relet any portion of the Premises to such tenant(s), for such term(s) (which may be greater or less than the remaining balance of the Term), rent, conditions (which may include concessions or free rent) and uses as it may determine in its sole discretion and collect and receive any rents payable by reason of such reletting; and (e) sell any Tenant Property in a non-judicial foreclosure sale.

 

13.2    Receivership. Tenant acknowledges that a Catastrophic Event of Default will materially and irreparably impair the value of Landlord’s investment in the Premises. Therefore, in addition to its other rights and remedies, upon a Catastrophic Event of Default Landlord shall have the right to petition any appropriate court for the appointment of a receiver to take possession of the Facility, to manage the operation of the Premises, to collect and disburse all rents, issues, profits and income g enerated thereby and to the extent applicable and possible, to preserve or replace any affected license or provider certification for the Premises or to otherwise substitute the licensee or provider thereof (the "Receivership"). If Landlord commences the Receivership, the receiver shall be paid a reasonable fee for its services and all such fees and other expenses of the Receivership shall be paid in addition to, and not in limitation of, the Rent otherwise due to Landlord hereunder. Tenant irrevocably consents to the Receivership upon a Catastrophic Event of Default and thus stipulates to and agrees not to contest the appointment of a receiver under such circumstances and for such purposes.

 

13.3    Remedies Cumulative; No Waiver. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. Any notice or cure period provided herein shall run concurrently with any provided by applicable law. No failure of

 

Landlord to insist at any time upon the strict performance of any provision of this Lease or to exercise any option, right, power or remedy contained herein shall be construed as a waiver, modification or relinquishment thereof as to any similar or different breach (future or otherwise) by Tenant. Landlord’s receipt of any rent or other sum due hereunder (including any late charge) with knowledge of any breach shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be effective unless expressed in a writing signed by it.

 

13.4    Performance of Tenant’s Obligations. If Tenant at any time shall fail to make any payment or perform any act on its part required to be made or performed under this Lease, then Landlord may, without waiving or releasing Tenant from any obligations or default hereunder, make such payment or perform such act for the account and at the expense of Tenant, and enter upon any portion of the Premises for the purpose of taking all such action as may be reasonably necessary. No such entry shall be deemed an eviction of Tenant. All sums so paid by Landlord and all necessary and incidental costs and expenses (including reasonable attorneys’ fees and expenses) incurred in connection with the performance of any such act by it, together with interest at the Agreed Rate from the date of the making of such payment or the incurring of such costs and expenses, shall be payable by Tenant to Landlord upon Landlord’s written demand therefor.

 

14.    Provisions on Termination.

 

14.1    Surrender of Possession. On the expiration of the Term or earlier termination or cancellation of this Lease (the "Termination Date"), Tenant shall deliver to Landlord or its designee possession of (a)< /strong> the Facility and associated Landlord Personal Property in a neat and clean condition and in as good a condition as existed at the date of their possession and occupancy pursuant to this Lease, after taking into consideration and giving effect to any improvements, renovations or upgrades required to be made by Tenant as of the commencement of the Term, ordinary wear and tear excepted, (b) a fully operational, licensed and, if applicable, certified Business at the Facility but specifically excluding any Alterations necessitated by, or imposed in connection with, a change of ownership inspection survey for the transfer of operation of any portion of the Premises to Landlord or its designee unless Landlord is able to demonstrate that such Alterations were previously required by the applicable licensing authorities to be undertaken by Tenant and Tenant failed to do so, and (c) all patient charts and resident records, along with appropriate resident consents if necessary, and copies of all its books and records relating to the Business and the Premises, other than Tenant’s corporate financial books and records and other proprietary materials. Accordingly, Tenant shall not at any time during or after the Term seek to transfer, surrender, allow to lapse, or grant any security interest or any other interest in and to the licenses, ot her than those interests granted to Landlord under the terms of this Lease (to the extent permitted by applicable law), permits or certifications relating to any portion of the Business or the Premises, nor shall Tenant knowingly commit or omit any act that would jeopardize any the Business or any licensure or certification of the Premises. Upon request, Tenant shall cooperate fully with Landlord or its designee in transferring or obtaining all necessary licenses and, if applicable, certifications for Landlord or its designee, and Tenant shall comply with all requests for an orderly transfer of the Business, Facility licenses, and, if applicable, Medicare and Medicaid certifications and possession at the time of its surrender of the Premises to Landlord or its designee but Tenant shall have no liability