Lease Agreement Dated 12/29/00

Exhibit 10.64.2


LEASE AGREEMENT


THIS AGREEMENT is made and entered into as of the 29th day of December, 2000 by and between MELCHOR BALAZS AND ISABEL BALAZS as trustees for the MELCHOR & ISABEL BALAZS FAMILY LIVING TRUST DATED OCTOBER 21, 1997, MELCHOR BALAZS, individually, JOSE AND AMALIA CHAVEZ, husband and wife, and GLAURO TRONCOSO AND ANA INES LOPEZ (collectively "Landlord") and EMERITUS CORPORATION, a Washington corporation ("Tenant").


RECITALS


A. Tenant was the owner and licensed operator of the facility with 99 assisted living beds and units and known as Villa Ocotillo, 3327 N. Civic Center Plaza, Scottsdale, Arizona 85251 (the "Facility").


B. Landlord has purchased the Facility from Tenant effective as of December 29, 2000 (the "Closing Date").


C. In order to facilitate the closing of the sale of the Facility, Tenant agreed to continue to operate the Facility for up to one year after the Closing Date under the terms of a lease agreement with Landlord.


D. Landlord and Tenant are interested in documenting the terms and conditions of such lease.


NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:


1. The Premises. Landlord does hereby lease to Tenant and Tenant does hereby lease from Landlord the real property described in Exhibit A hereto and the improvements thereon and furniture, fixtures and equipment located therein which collectively comprise the Facility.


2. Term.


(a) The initial term of this Lease shall commence on the Closing Date and shall terminate on the earlier to occur of (i) June 30, 2001 or (ii) the date specified in writing by Landlord to Tenant as the date on which Landlord has identified a tenant to lease the Facility (the "New Operator") and the New Operator has confirmed that it will be duly licensed to operate the Facility by the State of Arizona (the "Initial Term").


(b) Upon the payment by Landlord to Tenant in immediately available funds of the sum of Fifty Thousand and no/100 Dollars ($50,000) (the "Extension Payment"), Landlord shall have the right to extend the term of this Lease beyond the expiration of the Initial Term for an additional period which shall end on the earlier to occur of December 29, 2001 or (ii) the date specified in writing by Landlord to Tenant as the date on which Landlord has identified the New


Operator and the New Operator has confirmed that it will be duly licensed to operate the Facility by the State of Arizona (the "Extension Term"). Hereinafter the Initial Term and the Extension Term will be collectively referred to as the "Lease Term."


(c) At the end of the Term, Landlord shall be required to take such action as may be necessary to ensure that the Facility can be lawfully operated as an assisted living facility, it being understood and agreed that Tenant shall not be required to operate the Facility beyond June 30, 2001 or, if the Extension Payment is timely remitted by Landlord to Tenant, December 29, 2001 whether or not a New Operator has been identified and licensed as of that date.


(d) At the end of the Term, all of Tenant's right, title and interest in and to any leases or other agreements with the residents of the Facility shall automatically be assigned to the persons and entities identified herein as comprising Landlord without the need for any further action, or the execution of any further documents, by such persons or entities or Tenant.


(e) At the end of the Term, Tenant shall cooperate, at no cost to Tenant, in Landlord's or New Operator's efforts to obtain a license to operate the Facility in its name.


3. The Rent. Throughout the Lease Term, the monthly rent due from Tenant to Landlord shall be $42,558.00 and shall be due by no later th ...