EXHIBIT 00.0
Xxxxxx Xxxxx Xxxxxxx
Xxx Xxxx, Xxxx Xxxxxx, Xxxxxxxx
LEASE AGREEMENT
DATED AS OF FEBRUARY 11, 2002
BY AND BETWEEN
CNL RETIREMENT-AM/ILLINOIS LP,
a Delaware limited partnership,
AS LANDLORD,
AND
ARC XXXXXX COURT, LLC,
a Tennessee limited liability company
AS TENANT
TABLE OF CONTENTS
ARTICLE 1...........................................................................................1
DEFINITIONS......................................................................................1
ARTICLE 2..........................................................................................11
LEASED PROPERTY AND TERM........................................................................11
2.1 Leased Property.....................................................................11
2.2 Condition of Leased Property........................................................12
2.3 Initial Term........................................................................13
2.4 Extended Term.......................................................................13
2.5 Yield Up............................................................................13
ARTICLE 3..........................................................................................13
RENT............................................................................................13
3.1 Rent................................................................................13
3.2 Minimum Rent........................................................................14
3.3 Percentage Rent.....................................................................15
3.4 Additional Charges..................................................................16
3.5 Landlord Advances...................................................................17
3.6 Late Payment of Rent................................................................18
3.7 Net Lease...........................................................................18
3.8 No Abatement of Rent................................................................19
3.9 INTENTIONALLY OMITTED...............................................................19
3.10 Tenant Security Deposit.............................................................19
3.11 Security for all ARC-Related Leases.................................................20
3.12 Security Agreement..................................................................20
ARTICLE 4..........................................................................................20
USE OF THE LEASED PROPERTY; CONFLICTING BUSINESS................................................20
4.1 Permitted Use.......................................................................20
4.2 Environmental Matters...............................................................22
4.3 Conflicting Businesses Prohibited...................................................22
4.4 Continuous Operations...............................................................23
4.5 Compliance With Restrictions, Etc...................................................23
4.6 Standard of Operation...............................................................24
4.7 Resident Agreements and Service Licenses............................................25
4.8 Standards, Not Control..............................................................25
4.9 Survival............................................................................25
ARTICLE 5..........................................................................................26
MAINTENANCE AND REPAIRS.........................................................................26
5.1 Tenant's Obligations................................................................26
5.2 Reserve.............................................................................26
ARTICLE 6..........................................................................................29
IMPROVEMENTS, ETC...............................................................................29
6.1 Prohibition.........................................................................29
6.2 Permitted Renovations...............................................................29
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6.3 Conditions to Reserve Expenditures, Permitted Renovations and Major Alterations.....30
6.4 Salvage.............................................................................31
ARTICLE 7..........................................................................................31
LANDLORD'S INTEREST NOT SUBJECT TO LIENS........................................................31
7.1 Liens, Generally....................................................................31
7.2 Construction or Mechanics Liens.....................................................31
7.3 Contest of Liens....................................................................32
7.4 Notices of Commencement of Construction.............................................32
ARTICLE 8..........................................................................................32
TAXES AND ASSESSMENTS...........................................................................32
8.1 Obligation to Pay Taxes and Assessments.............................................32
8.2 Tenant's Right to Contest Taxes.....................................................33
8.3 Tax and Insurance Escrow Account....................................................33
ARTICLE 9..........................................................................................34
INSURANCE.......................................................................................34
9.1 General Insurance Requirements......................................................34
9.2 Waiver of Subrogation...............................................................36
9.3 General Provisions..................................................................36
9.4 Blanket Policy......................................................................37
9.5 Indemnification of Landlord.........................................................37
ARTICLE 10.........................................................................................38
CASUALTY........................................................................................38
10.1 Restoration and Repair..............................................................38
10.2 Escrow and Disbursement of Insurance Proceeds.......................................38
10.3 No Abatement of Rent................................................................39
10.4 Tenant's Property and Business Interruption Insurance...............................39
10.5 Restoration of Tenant's Property....................................................39
10.6 Waiver..............................................................................40
ARTICLE 11.........................................................................................40
CONDEMNATION....................................................................................40
11.1 Total Condemnation, Etc.............................................................40
11.2 Partial Condemnation................................................................40
11.3 Disbursement of Award...............................................................40
11.4 No Abatement of Rent................................................................41
11.5 Disputes............................................................................41
ARTICLE 12.........................................................................................41
DEFAULTS AND REMEDIES...........................................................................41
12.1 Events of Default...................................................................41
12.2 Remedies on Default.................................................................44
12.3 Application of Funds................................................................47
12.4 Landlord's Right to Cure Tenant's Default...........................................47
12.5 Landlord's Lien.....................................................................48
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ARTICLE 13.........................................................................................48
HOLDING OVER....................................................................................48
ARTICLE 14.........................................................................................48
LIABILITY OF LANDLORD; INDEMNIFICATION..........................................................48
14.1 Liability of Landlord...............................................................48
14.2 Indemnification of Landlord.........................................................49
14.3 Notice of Claim or Suit.............................................................50
14.4 Limitation on Liability of Landlord.................................................50
ARTICLE 15.........................................................................................50
REIT AND UBTI REQUIREMENTS......................................................................50
15.1 Limitations on Rents Attributable to Personal Property..............................50
15.2 Basis for Sublease Rent Restricted..................................................51
15.3 Landlord Affiliate Subleases Restricted.............................................51
15.4 Landlord Interests in Tenant Restricted.............................................51
15.5 Rents from Personal Property Restricted.............................................51
15.6 Landlord Services...................................................................52
15.7 Certain Subtenants Prohibited.......................................................52
15.8 Future Amendment....................................................................52
ARTICLE 16.........................................................................................52
SUBLETTING AND ASSIGNMENT.......................................................................52
16.1 Transfers Prohibited Without Consent................................................52
16.2 Indirect Transfer Prohibited Without Consent........................................53
16.3 Adequate Assurances.................................................................53
ARTICLE 17.........................................................................................53
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS..................................................53
17.1 Estoppel Certificates...............................................................53
17.2 Monthly Financial Statements........................................................53
17.3 Annual Financial Statements.........................................................54
17.4 Records.............................................................................54
17.5 General Operations Budget...........................................................55
17.6 Quarterly Meetings..................................................................55
ARTICLE 18.........................................................................................55
LANDLORD'S RIGHT TO INSPECT.....................................................................55
ARTICLE 19.........................................................................................55
FACILITY MORTGAGES..............................................................................55
19.1 Subordination.......................................................................55
19.2 Attornment..........................................................................56
19.3 Rights of Mortgagees and Assignees..................................................56
ARTICLE 20.........................................................................................57
ADDITIONAL COVENANTS OF TENANT..................................................................57
20.1 Conduct of Business.................................................................57
20.2 Additional Covenants of Tenant......................................................57
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20.3 Tenant a Single Purpose Entity......................................................59
20.4 Intentionally Omitted...............................................................59
ARTICLE 21.........................................................................................59
MISCELLANEOUS...................................................................................59
21.1 Limitation on Payment of Rent.......................................................59
21.2 No Waiver...........................................................................60
21.3 Remedies Cumulative.................................................................60
21.4 Severability........................................................................60
21.5 Acceptance of Surrender.............................................................60
21.6 No Merger of Title..................................................................60
21.7 Tenant's Representations............................................................60
21.8 Quiet Enjoyment.....................................................................62
21.9 Recordation of Memorandum of Lease..................................................62
21.10 Notices. (a).......................................................................63
21.11 Construction; Nonrecourse...........................................................64
21.12 Counterparts; Headings..............................................................64
21.13 Applicable Law......................................................................64
21.14 Right to Make Agreement.............................................................64
21.15 Brokerage...........................................................................65
21.16 No Partnership or Joint Venture.....................................................65
21.17 Entire Agreement....................................................................65
21.18 Costs and Attorneys' Fees...........................................................65
21.19 Approval of Landlord................................................................65
21.20 Successors and Assigns..............................................................66
21.21 Waiver of Jury Trial................................................................66
21.22 Treatment of Lease..................................................................66
21.23 Transfer of Licenses................................................................66
21.24 Tenant's Personal Property..........................................................66
21.25 Landlord's Representations..........................................................67
21.26 Guaranty of Lease...................................................................67
21.27 Guaranty of ARC-Related Leases......................................................67
21.28 Landlord's Assumed Financing........................................................67
EXHIBITS
Exhibit "A" - The Land
Exhibit "B" - Minimum Rent
Exhibit "C" - Appraisal Process
Exhibit "D" - Tenant Estoppel Certificate
Exhibit "E" - Memorandum of Lease
Exhibit "F" - Single Purpose Entity Requirements
Exhibit "G" - Tenant Equity Ownership
Exhibit "H" - Property Expenses
Exhibit "I" - Initial Landlord P&E
Exhibit "J" - Initial Tenant Personal Property
Exhibit "K" - Landlord's Financing Terms
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LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of February 11, 2002 by and
between CNL RETIREMENT-AM/ILLINOIS LP, a Delaware limited partnership, as
landlord ("Landlord"), and ARC XXXXXX COURT, LLC, a Tennessee limited liability
company, as tenant ("Tenant").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Landlord has heretofore acquired fee simple title to the Land
and the Facility (these and other capitalized terms used and not otherwise
defined herein having the meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and
Tenant wishes to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article and used in this Agreement shall have the meanings assigned to them in
this Article and include the plural as well as the singular, (ii) all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
accordance with GAAP, (iii) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Agreement, and (iv) the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular Article, Section or other subdivision.
"Accessibility Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to accessibility for the disabled or handicapped, including, but not limited to,
any applicable provisions of The Architectural Barriers Act of 1968, The
Rehabilitation Act of 1973, The Fair Housing Act of 1988, The Americans With
Disabilities Act, the accessibility code(s), if any, of the State in which the
Leased Property is located, and all regulations and guidelines promulgated under
any all of the foregoing, as the same may be amended from time to time.
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"Accounting Period" shall mean each calendar month accounting period of
Tenant. If Tenant shall, for a bona fide business reason, change its accounting
period during the Term, appropriate adjustments, if any, shall be made with
respect to the timing of applicable accounting and reporting requirements of
this Agreement; provided, however, that in no event shall any such change or
adjustment alter the amount or frequency of payment of Minimum Rent within any
Fiscal Year, or alter the frequency of payment of Percentage Rent to less than
four (4) times within any Fiscal Year, or otherwise increase or reduce any
monetary obligation under this Agreement.
"Accounting Year" shall mean each period of twelve (12) consecutive
Accounting Periods during the Term of this Agreement; the first Accounting Year
shall commence with the first full Accounting Period after the Commencement Date
of this Agreement.
"Additional Charges" shall have the meaning given such term in Section
3.4.
"Additional Rent" shall have the meaning given such term in Section 3.5.
"Affiliated Person" shall mean, with respect to any Person, (i) any
Person directly or indirectly Controlling, Controlled by or under common Control
with any such Person, (ii) in the case of any such Person which is a
partnership, any partner in such partnership, (iii) in the case of any such
Person which is a limited liability company, any member of such company, (iv) in
the case of any such Person which is a corporation, any officer, director or
stockholder of such corporation, (v) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (i) through (iv), (vi)
any other Person who is an officer, director, trustee or employee of, or partner
in, such Person or any Person referred to in the preceding clauses (i) through
(v) and (vii) any other Person who is a member of, or trustee of any trust for
the benefit of, the Immediate Family of such Person or of any Person referred to
in the preceding clauses (i) through (vi). Provided, however, a Person shall not
be deemed to be an Affiliated Person solely by virtue of the ownership of shares
of stock registered under the Securities Act of 1934, as amended, unless such
Person, as holder of such stock, is required to file a Schedule 13 D, pursuant
to Section 13(d) of such Act and Rule 13 d-1 promulgated thereunder.
"Agreement" shall mean this Lease Agreement, including all Exhibits
hereto, as it and they may be amended or restated from time to time as herein
provided.
"Annual Operations Statement" shall have the meaning given such term in
Section 3.3.2.
"Applicable Laws" shall mean all applicable laws, statutes, regulations,
rules, ordinances, codes, licenses, permits and orders, from time to time in
existence, of all courts of competent jurisdiction and Government Agencies, and
all applicable judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations of any kind, including
without limitation, those relating to (i) damage to, or the protection of real
or personal property, (ii) human health and safety (except those requirements
which, by definition, are solely the responsibility of employers), (iii) the
Environment, including, without limitation, all valid and lawful requirements of
courts and other Government Agencies pertaining to reporting, licensing,
permitting, investigation, remediation and removal of underground
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improvements (including, without limitation, treatment or storage tanks, or
water, gas or oil xxxxx), or emissions, discharges, releases or threatened
releases of Hazardous Substances, chemical substances, pesticides, petroleum or
petroleum products, pollutants, contaminants or hazardous or toxic substances,
materials or wastes whether solid, liquid or gaseous in nature, into the
Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil xxxxx), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, (iv) Accessibility Laws, (v) independent living, assisted living and/or
dementia care facility licensure (as applicable) or (vi) participation in
Medicare or Medicaid programs (if applicable).
"Applicable Reserve Percentage" shall mean, with respect to any
Accounting Period, or portion thereof, the greater of (x) $350.00 per year per
licensed bed (if applicable) or living unit located on the Leased Property,
prorated for such Accounting Period and divided by and expressed as a percentage
of Total Facility Revenues for such Accounting Period, or (y) with respect to
(i) the period beginning on the Commencement Date and ending on the last day of
the sixtieth (60th) full Accounting Period next following the Commencement Date,
two percent (2%) of Total Facility Revenue, and, (ii) with respect to each
Accounting Period thereafter, three percent (3%) of Total Facility Revenue.
"Approved Reserve Estimate" shall have the meaning given such term in
Section 5.2.3.
"ARC-Related Leases" shall mean, collectively, all present and future
property leases between Landlord or CNL Retirement, or any Affiliated Person of
Landlord or CNL Retirement, as landlord, and Tenant or Guarantor or any
Affiliated Person of Tenant or Guarantor, as tenant.
"Business Day" shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State are authorized by law or
executive action to close.
"CNL Retirement" shall mean CNL Retirement Properties, Inc., a Maryland
corporation.
"Code" shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as amended
from time to time.
"Commencement Date" shall mean the date of this Agreement.
"Condemnation" shall mean (a) the exercise of any governmental power
with respect to the Leased Property, whether by legal proceedings or otherwise,
by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer of
the Leased Property by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting the
Leased Property, whether or not the same shall have actually been commenced.
"Condemnor" shall mean any public or quasi-public authority, or Person
having the power of Condemnation.
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"Conflicting Business" shall have the meaning given such term in Section
4.3.
"Control" (including the correlative meanings of the terms
"Controlling", "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 policies of such Person
whether through the ownership of voting securities, by contract or otherwise.
"CRC" shall mean CNL Retirement Corp., a Florida corporation.
"Default" shall mean any event or condition existing which with the
giving of notice and/or lapse of time would ripen into an Event of Default.
"Disbursement Rate" shall mean an annual rate of interest equal to the
greater of, as of the date of determination, (i) ten percent (10.00%) and (ii)
the per annum rate for ten (10) year U.S. Treasury Obligations as published in
The Wall Street Journal plus three hundred fifty (350) basis points.
"Distribution" shall mean (a) any declaration or payment of any dividend
on or in respect of any shares of any class of capital stock of Tenant, if
Tenant is a corporation, or any cash distributions in respect of any partnership
interests or membership interests in Tenant, if Tenant is a partnership or a
limited liability company, (b) any purchase, redemption, retirement or other
acquisition of any shares of any class of capital stock of Tenant, if Tenant is
a corporation, or any purchase, redemption, retirement or other acquisition of
any partnership or membership interests in Tenant, if Tenant is a partnership or
a limited liability company, (c) any other distribution on or in respect of any
shares of any class of capital stock of Tenant, if Tenant is a corporation, or
any other distribution in respect of any partnership interests or membership
interests in Tenant, if Tenant is a partnership or a limited liability company,
or (d) any return of capital to shareholders of Tenant, if Tenant is a
corporation, or any return of capital to partners of Tenant, if Tenant is a
partnership or a limited liability company.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, cooperative, any government or agency or political subdivision thereof or
any other entity.
"Environment" shall mean soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"Event of Default" shall have the meaning given such term in Section
12.1.
"Extended Terms" shall have the meaning given such term in Section 2.4.
"Facility" shall mean the independent living, and/or assisted living and
dementia care ( if applicable), facility located and operated on the Land.
"Facility Mortgage" shall mean any encumbrance placed upon the Leased
Property as referenced in Article 19.
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"Fiscal Quarter" shall mean the first, second, third and fourth
three-month period (each consisting of three Accounting Periods) during each
Fiscal Year.
"Fiscal Year" shall mean Tenant's Fiscal Year which as of the
Commencement Date begins on January 1 and ends on December 31 in each calendar
year. Any partial Fiscal Year between the Commencement Date and the commencement
of the first full Fiscal Year (except with respect to the calculation and
payment of Minimum Rent as referenced in Section 3.1 of this Agreement), shall
constitute a separate Fiscal Year. A partial Fiscal Year between the end of the
last full Fiscal Year and the termination of this Agreement shall also
constitute a separate Fiscal Year. If Tenant's Fiscal Year is changed in the
future, appropriate adjustments to this Agreement's reporting and accounting
procedures shall be made; provided, however, that no such change or adjustment
shall alter the Term of this Agreement or in any way reduce the distribution of
Percentage Rent or other payments due hereunder. Each full Fiscal Year shall
consist of twelve Accounting Periods.
"Force Majeure Event" means any circumstance which is not in the
reasonable control of either party hereto, caused by any of the following:
strikes, lockouts; acts of God; civil commotion; fire or any other casualty;
governmental action; or other similar cause or circumstance which is not in the
reasonable control of either party hereto. Neither lack of financing nor general
economic and/or market factors is a Force Majeure Event.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Guarantor" shall mean American Retirement Corporation, a Tennessee
corporation ("Guarantor").
"Government Agencies" shall mean any legislative body, court, agency,
authority, board (including, without limitation, health and long term care,
environmental protection, planning and zoning), bureau, commission, department,
office or instrumentality of any nature whatsoever of any governmental or
quasi-governmental unit of the United States or the State or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Tenant or the Leased Property or any portion
thereof or the Facility operated thereon.
"Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local
statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and the
regulations promulgated thereunder; or
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(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, any
state of the United States, or any political subdivision thereof; or
(d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased
Property or to adjacent properties or poses or materially threatens to
pose a hazard to the Leased Property or to the health or safety of
persons on or about the Leased Property; or
(e) without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, parents, brothers, sisters, children (natural or adopted),
stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law,
sisters-in-law, nephews and nieces.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.
"Initial Landlord P&E" shall mean and refer to all P&E of any kind or
description which are located on or in the Leased Improvements as of the
Commencement Date, including without limitation those items enumerated on
Exhibit "I" attached hereto and made a part hereof, but specifically excluding
any specific items of Tenant's Personal Property identified on Exhibit "J"
attached hereto and made a part hereof.
"Initial Term" shall have the meaning given such term in Section 2.3.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and regulations and any other requirements of the National
Board of Fire Underwriters (or any other body exercising similar functions)
binding upon Landlord, Tenant or the Leased Property.
"Inventories" shall mean all inventories, as such term is customarily
used and defined in its most broad and inclusive sense including, but not
limited to, all inventories of food, beverages and other consumables held by
Tenant for sale or use at or from the Leased Property or the Facility, and soap,
cleaning supplies, paper supplies, operating supplies, china, glassware, silver,
6
linen, uniforms, building and maintenance supplies, spare parts and attic stock,
medical supplies, drugs and all other such goods, wares and merchandise held by
Tenant for sale to or for consumption by residents or patients of the Leased
Property or the Facility and all such other goods returned to or repossessed by
Tenant.
"Land" shall have the meaning given such term in Section 2.1(a).
"Landlord" shall have the meaning given such term in the preambles to
this Agreement and shall include its successors and assigns.
"Landlord's Original Investment" shall mean the sum of Eighteen Million
Four Hundred Sixty-Nine Thousand Two Hundred Seventy-Five and No/100 Dollars
($18,469,275.00), which represents, for purposes of this Lease, Landlord's total
acquisition and transactional costs incurred in acquiring the Leased Property.
"Lease" shall mean this Lease Agreement, including all Exhibits hereto,
as it and they may be amended or restated from time to time as herein provided.
"Lease Year" shall mean any Fiscal Year during the Term and any partial
Fiscal Year at the beginning or end of the Term.
"Leased Improvements" shall have the meaning given such term in Section
2.1(b).
"Leased Intangible Property" shall mean all transferable or assignable
(a) governmental permits, including licenses and authorizations, required for
the construction, ownership and operation of the Leased Improvements, including
without limitation, certificates of need, certificates of authority,
certificates of occupancy, building permits, signage permits, site use
approvals, zoning certificates, environmental and land use permits and any and
all necessary approvals from state or local authorities and other approvals
granted by any public body or by any private party pursuant to a recorded
instrument relating to such Leased Improvements or the Land; (b) development
rights, trade names, telephone exchange numbers identified with the Leased
Property, if any (specifically excluding, however, any specific items of
Tenant's Personal Property identified on Exhibit "J" hereto); and (c)
certificates, licenses, warranties and guarantees and contracts other than such
permits, operating permits, certificates, licenses and approvals which are to
held by, or transferred to, the Tenant in order to permit the Tenant to operate
such Leased Improvements properly and in accordance with the terms of this
Agreement.
"Leased Property" shall have the meaning given such term in Section 2.1.
"Legal Requirements" shall mean all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Property or the
maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate the Leased Property for its Permitted Use, (b) all covenants,
agreements, declarations, restrictions and encumbrances contained in any
instruments at any time in force affecting the Leased Property or to which
Tenant has consented or which are required to be granted pursuant to Applicable
Laws, including those which may (i) require material repairs, modifications or
7
alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment thereof, but excluding any requirements
arising as a result of Landlord's status as a real estate investment trust, and
(c) Applicable Laws.
"Lien" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, or any transfer of
property or assets for the payment of Indebtedness or performance of any other
obligation in priority to payment of the obligor's general creditors.
"Major Alterations" shall have the meaning given such term in Section
6.2.2.
"Major Violation" shall mean any violation of Applicable Laws relating
to the use, operation or maintenance of the Facility or to the care of residents
which presents an imminent danger to the residents or guests of the Facility or
a substantial probability that death or serious harm would result therefrom.
"Minimum Rent" shall mean annual rent as set forth in Section 3.2,
subject to prorations and adjustments as set forth in Section 3.2.
"Minor Alterations" shall have the meaning given such term in Section
6.2.1.
"Mortgagee" shall mean the holder of any Facility Mortgage.
"Notice" shall mean a notice given in accordance with Section 21.10.
"Opening Date" shall mean the date on which the Facility first opened
for business to the general public.
"Overdue Rate" shall mean, on any date, a per annum rate of interest
equal to the lesser of (i) fifteen percent (15%) or (ii) the maximum rate then
permitted under applicable law.
"P&E" shall mean all items of personal property, as defined under the
Model Uniform Commercial Code, including, but not limited to: (a) all equipment,
machinery, fixtures, and other items of property, now or hereafter 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 maximum extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements, modifications,
alterations and additions thereto; (b) all furniture, furnishings, movable walls
or partitions, computers or trade fixtures or other personal property of any
kind or description used or useful in Tenant's business on or in the Leased
Improvements, and located on or in the Leased Improvements, and all
modifications, replacements, alterations and additions to such personal
property; (c) all linen, china, glassware, tableware, uniforms and similar
items, whether used in connection with public space or tenant rooms; and (d)
"Property and Equipment," "P&E," and "FF&E" (as such terms are customarily used
and defined in the most broad and inclusive sense), as well as all other items
included within the category of Inventory;
8
and all including, without limitation, the Initial Landlord P&E, but not
including, however, any item of Tenant's Personal Property identified in Exhibit
"J" hereto.
"P&E Replacements" shall mean all items purchased with funds from the
Reserve established under Article 5 of this Lease and all other items of P&E
added and used at the Leased Property during the Term of this Lease, together
with all leasehold improvements made by Tenant during the Term of this Lease to
the extent not constituting real property affixed to the Land, whether purchased
from the Reserve or with other funds of Tenant, all subject to disposal and
further replacement at the end of their useful lives.
"Parent" shall mean, with respect to any Person, any Person which
directly, or indirectly through one or more Subsidiaries or Affiliated Persons,
(i) owns more than fifty percent (50%) of the voting or beneficial interest in,
or (ii) otherwise has the right or power (whether by contract, through ownership
of securities or otherwise) to control, such Person.
"Percentage Rent" shall have the meaning given such term in Section 3.3.
"Permits" means all licenses, permits and certificates used or useful in
connection with the ownership, operation, use or occupancy of the Leased
Property or the Facility, including, without limitation, business licenses,
state health department licenses, food service licenses, licenses to conduct
business, certificates of need and all such other permits, licenses and rights,
obtained from any governmental, quasi-governmental or private person or entity
whatsoever.
"Permitted Encumbrances" shall mean all rights, restrictions, and
easements of record set forth on Schedule B to the applicable owner's title
insurance policy issued to Landlord for the Land, plus any other such
encumbrances as may have been consented to in writing by Landlord from time to
time.
"Permitted Renovations" shall have the meaning given that term in
Section 6.2.
"Permitted Use" shall mean any use of the Leased Property permitted
pursuant to Section 4.1.1.
"Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Property Expenses" shall mean those expenses more particularly
described on Exhibit "H" attached hereto.
"Proscribed Area" shall have the meaning given such term in Section 4.3.
"Reimbursement Contracts" means all third party reimbursement contracts
for the Facility which are now or hereafter in effect with respect to residents
or patients qualifying for coverage under the same, including private insurance
agreements, Medicare and Medicaid and any successor program or other similar
reimbursement program and/or private insurance agreements.
"Rent" shall mean, collectively, Minimum Rent, Percentage Rent and
Additional Rent.
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"Reserve" shall have the meaning given such term in Section 5.2.
"Reserve Estimate" shall have the meaning given such term in Section
5.2.
"Reserve Expenditures" shall have the meaning given such term in Section
5.2.
"SEC" shall mean the Securities and Exchange Commission.
"Security Deposit" shall have the meaning given such term in Section
3.10.
"Single Purpose Entity" shall have the meaning given such term in
Exhibit "F" attached hereto.
"State" shall mean the State in which the Facility is located.
"Subsidiary" shall mean, with respect to any Person, any Entity in which
such Person directly, or indirectly through one or more Subsidiaries or
Affiliated Persons, (a) owns more than fifty percent (50%) of the voting or
beneficial interest or (b) which such Person otherwise has the right or power to
control (whether by contract, through ownership of securities or otherwise).
"Tax and Insurance Account" shall have the meaning given such term in
Section 8.3.
"Tax and Insurance Escrow Amount" shall have the meaning given such term
in Section 8.3.
"Tenant" shall be the entity identified in the preamble to this
Agreement and shall include its successors and assigns expressly permitted
hereunder.
"Tenant's Personal Property" shall mean any specific items of P&E listed
in Exhibit "J" to this Lease, or replacements for such items or items within any
specific categories of P&E listed in Exhibit "J" to this Lease which hereafter
are acquired by Tenant with its own funds after the Commencement Date and
located at the Leased Property (but not including any property purchased with
funds from the Reserve established under Section 5.2).
"Term" shall mean, collectively, the Initial Term and the Extended
Terms, unless sooner terminated pursuant to the provisions of this Agreement.
"Threshold" shall mean the sum of Total Facility Revenue for the twelve
(12) Accounting Periods ending on the end of the twenty-fourth (24th) full
Accounting Period following the Commencement Date.
"Total Facility Revenue" shall mean, for the applicable period of time,
but without duplication, all gross revenues and receipts of every kind derived
by or for the benefit of Tenant, or its Affiliated Persons from operating or
causing the operation of the Leased Property and all parts thereof, including,
but not limited to: income from both cash and credit transactions (after
reasonable deductions for bad debts and discounts for prompt or cash payments
and refunds) from rental or subleasing of every kind; entrance fees, fees for
health care and personal care services, license, lease and concession fees and
rentals, off premises catering, if any, and parking
10
(not including gross receipts of licensees, lessees and concessionaires); income
from vending machines; health club membership fees; food and beverage sales;
wholesale and retail sales of merchandise (other than proceeds from the sale of
furnishings, fixtures and equipment no longer necessary to the operation of the
Facility, which shall be deposited in the Reserve) and service charges, to the
extent not distributed to employees at the Facility as gratuities; provided,
however, that Total Facility Revenue shall not include the following: (a)
gratuities to Facility employees; (b) federal, state or municipal excise, sales,
occupancy, use or similar taxes collected directly from residents or included as
part of the sales price of any goods or services; (c) insurance proceeds; (d)
any proceeds from any sale of the Leased Property or from the refinancing of any
debt encumbering the Leased Property; (e) proceeds from the disposition of
furnishings, fixture and equipment no longer necessary for the operation of the
Facility; and (f) interest which accrues on amounts deposited in the Reserve.
"Unsuitable for Its Permitted Use" shall mean a state or condition of
the Leased Property such that following any damage or destruction involving the
Leased Property, the Leased Property cannot be operated in the reasonable
judgement of Landlord (after conferring with Tenant) on a commercially
practicable basis for its Permitted Use and it cannot reasonably be expected to
be restored to substantially the same condition as existed before such damage or
destruction and as is otherwise required by Article 12 within (i) twelve (12)
months following such damage or destruction, or (ii) eighteen (18) months
following such damage or destruction in the event that Tenant has extended the
term of the business income insurance to pay at least eighteen (18) months Rent
for the benefit of Landlord or provides other reasonably acceptable security for
any uninsured portion of the eighteen (18) months Rent.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord all of Landlord's right, title and interest in and to all of the
following (collectively, the "Leased Property"):
(a) all that certain tract, piece and parcel of land, as more
particularly described in Exhibit "A", attached hereto and made a part
hereof (the "Land");
(b) the Facility, all buildings, structures and other
improvements of every kind, including without limitation all roofs,
plumbing systems, electric systems and HVAC systems, roadways,
alleyways, parking areas, sidewalks, curbs, connecting tunnels, utility
pipes, conduits and lines (on-site and off-site) appurtenant to or
presently situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
11
(d) all P&E and Inventory;
(e) all moveable machinery, equipment, furniture, furnishings,
moveable walls or partitions, computers or trade fixtures located on or
in the Leased Improvements, and all modifications, replacements,
alterations and additions to such property, but specifically excluding
all items included within the category of Tenant's Personal Property;
(f) all of the Leased Intangible Property;
(g) any and all subleases of space in the Leased Improvements to
subtenants thereof; and
(h) all other property and interests in property conveyed or
assigned to Landlord pursuant to the Real Estate Purchase and Sale
Agreement governing the sale and conveyance of the Leased Property from
Tenant to Landlord on or about the effective date hereof (the "Purchase
Agreement").
2.2 Condition of Leased Property. Tenant acknowledges and agrees that
the Leased Property is and shall be leased by Landlord to Tenant and from
Landlord by Tenant in its present "as is" condition, subject to the existing
state of title and all applicable legal or governmental requirements, and
Landlord makes absolutely no representations or warranties whatsoever with
respect to the Leased Property or the condition thereof. Tenant acknowledges
that Landlord has not investigated and does not warrant or represent to Tenant
that the Leased Property is fit for the purposes intended by Tenant or for any
other purpose or purposes whatsoever, and Tenant acknowledges that the Leased
Property is to be leased to Tenant in its existing condition, i.e., "as-is", and
"where-is", without any representation or warranty as to habitability or fitness
for any particular purpose, on and as of the Commencement Date. Tenant
represents and acknowledges that all permits, licenses and approvals required by
any governmental or quasi-governmental body, department, commission, board,
bureau, instrumentality or officer, or otherwise appropriate with respect to the
construction, operation, leasing, maintenance or use of the Leased Property or
any part thereof, have been issued, are past all appeals periods and are valid
and in full force and effect and that no provision, condition or limitation of
any of the same has been breached or violated. Tenant acknowledges that Tenant
shall be solely responsible for any and all actions, repairs, permits, approvals
and costs required for the rehabilitation, renovation, use, occupancy and
operation of the Leased Property in accordance with applicable governmental
requirements, foreseen or unforeseen, including, without limitation, all
governmental charges and fees, if any, which may be due or payable to applicable
authorities. Tenant agrees that, by leasing the Leased Property, Tenant warrants
and represents that Tenant has examined and approved all things concerning the
Leased Property which Tenant deems material to Tenant's leasing and use of the
Leased Property. Tenant further acknowledges and agrees that (a) neither
Landlord nor any agent of Landlord has made any representation or warranty,
express or implied, concerning the Leased Property or which have induced Tenant
to execute this Agreement and (b) any other representations and warranties are
expressly disclaimed by Landlord.
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2.3 Initial Term. The initial term of this Agreement (the "Initial
Term") shall commence on the Commencement Date and shall terminate and expire at
11:59 p.m. on the last calendar day of the month on which the fifteenth (15th)
annual anniversary of the Commencement Date shall occur.
2.4 Extended Term. Tenant shall have and is hereby granted two (2)
option(s) to extend this Agreement for an additional five (5) years each
(individually an "Extended Term"), upon the same terms, covenants, conditions
and rental as set forth herein; provided there exists no continuing Event of
Default hereunder, or Default which Tenant has had an opportunity but failed to
cure as provided hereunder, during any applicable cure hereunder at the
commencement of the respective Extended Term. Tenant may exercise each such five
(5) year option successively by giving written notice to Landlord not less than
twelve (12) months nor more than eighteen (18) months prior to the respective
expiration of the Initial Term of this Agreement or of the then applicable
Extended Term. Should Tenant fail to give Landlord such timely written notice
during the required period, all remaining rights of renewal shall automatically
expire.
2.5 Yield Up. Tenant shall, on or before the last day of the Term or
upon the sooner termination thereof, peaceably and quietly surrender and deliver
to Landlord the Leased Property, including, without limitation, all Leased
Improvements and P&E and all additions thereto and replacements thereof made
from time to time during the Term, together with and including without
limitation the P&E Replacements, in good order, condition and repair, reasonable
wear and tear excepted, and free and clear of all liens and encumbrances (other
than Permitted Encumbrances, liens or encumbrances in favor of or granted by
Landlord, and any other encumbrances expressly permitted under the terms of this
Agreement). Tenant acknowledges that both the Initial Landlord P&E described on
Exhibit "I" attached hereto and consumable items of Inventory located at the
Leased Property as of the Commencement Date may be completely consumed and/or
otherwise disposed of in the course of operation of the Leased Property during
the Term of this Agreement. Tenant agrees that, at the expiration or earlier
termination of this Agreement, at Landlord's option: (i) Tenant shall fully
restore the Initial Landlord P&E, inclusive with and after consideration of all
P&E Replacements which will become the property of Landlord, to at least the
approximate types and amounts (with reasonably equivalent value) as shown on
Exhibit "I", and shall fully restore an adequate supply of Inventory consistent
with the full stocking levels to be maintained by Tenant pursuant to Section 4.6
of this Lease (or a full thirty days supply, which ever is greater), or (ii)
Landlord shall deduct the then-current value of amounts needed to fully restore
the required P&E and Inventory, as aforesaid, to the extent that this sum
exceeds the Reserve amount to be transferred to Landlord under Section 5.2.6
hereof, from the Security Deposit.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Rent to Landlord
13
during the Term at the address to which notices to Landlord are to be given or
to such other party or to such other address as Landlord may designate from time
to time by written notice to Tenant. All payments to Landlord shall be made by
wire transfer of immediately available federal funds or by other means
acceptable to Landlord in its sole discretion and all such payments shall, upon
receipt by Landlord, be and remain the sole and absolute property of Landlord.
If Landlord shall at any time accept any such Rent or other sums after the same
shall become due and payable, or any partial payment of Rent, such acceptance
shall not excuse a delay upon subsequent occasions, or constitute or be
construed as a waiver of any of Landlord's rights hereunder.
3.2 Minimum Rent. Tenant shall pay annual base minimum rent ("Minimum
Rent") to Landlord in equal installments in advance, on the first (1st) Business
Day of each Accounting Period; provided, however, that the first payment of
Minimum Rent shall be payable on the Commencement Date. Further, if applicable,
the first payment of Minimum Rent and the last payment of Minimum Rent shall be
prorated on a per diem basis provided, however, that for purposes of Minimum
Rent, any prorated payment for any partial Accounting Period prior to the first
full Accounting Period shall be prorated based upon the installment of Minimum
Rent payable for the first full Accounting Period, and any prorated Rent at the
end of the Term shall be prorated based upon the installment of Minimum Rent
payable for the last full Accounting Period.
3.2.1 Calculation of Initial Term Minimum Rent. Subject to
proration as set forth above, Tenant shall pay Minimum Rent during each
Accounting Year of the Initial Term of this Agreement in the amounts set
forth on Exhibit "B" attached hereto and made a part hereof.
3.2.2 Calculation of Extended Term Minimum Rent. Subject to
proration as set forth above, Tenant shall pay Minimum Rent under this
Agreement during the first Accounting Year of each Extended Term in an
amount equal to the greater of:
(a) two and five-tenths percent (2.5%) over the amount
of Minimum Rent due in the immediately preceding Accounting
Year; or
(b) the product of the fair market value of the Leased
Property on the date of Tenant's Notice of exercise pursuant to
Section 2.4, multiplied by Ten Percent (10.00%).
Minimum Rent for each Accounting Year after the first Accounting Year in
an Extended Term shall increase by one percent (1%) over the amount of
Minimum Rent due in the immediately preceding Accounting Year.
If within ten (10) days of the date of Tenant's Notice of exercise
pursuant to Section 2.4, Landlord and Tenant are unable to agree on the
fair market value of the Premises for purposes of this calculation, such
fair market value shall be established by the appraisal process
described on Exhibit "C" attached hereto. Landlord and Tenant
acknowledge and agree that this Section is designed to establish a fair
market Minimum Rent for the Leased Property during each applicable
Extended Term. In the event that the Minimum
14
Rent for the applicable Extended Term is not finally determined by such
appraisal process prior to the commencement of the Extended Term, then
in such event until such amount is finally determined the Tenant shall
pay to Landlord as "Interim Rent" for the Extended Term an amount equal
to one hundred twenty-five percent (125%) of the established Minimum
Rent as of the end of the Accounting Year immediately preceding the
Extended Term until such appraisal process and any dispute relating
thereto is finally resolved. In such an event, the amount of any
differential between the Interim Rent and Minimum Rent established
shall, if resulting in an underpayment, be paid by Tenant to Landlord
within fifteen (15) days, or if resulting in an overpayment be credited
by Landlord against the next installment(s) of Rent coming due
hereunder.
3.3 Percentage Rent. In addition to and not in lieu of Minimum Rent,
Tenant shall pay percentage rent ("Percentage Rent") to Landlord for each Fiscal
Year or portion thereof. Installments of Percentage Rent shall be due and
payable in arrears within thirty (30) days after the end of each Fiscal Quarter
of the Term hereof, based upon Total Facility Revenue for such Fiscal Quarter
and an allocation of one-quarter of the Threshold amount to each such Fiscal
Quarter; provided, however, that no Percentage Rent shall be payable hereunder
with respect to the initial portion of the Term ending on the end of the
twenty-fourth (24th) full Accounting Period following the Commencement Date.
Along with each Percentage Rent payment Tenant shall submit to Landlord an
unaudited (but certified by a duly authorized officer or managing member of
Tenant) statement showing a detailed breakdown of the calculation of Percentage
Rent for that Fiscal Quarter and Fiscal Year-to-date on a cumulative basis.
Percentage Rent for any partial Fiscal Quarter in the final Fiscal Year shall be
prorated proportionately. Tenant's obligation to pay Percentage Rent for the
Fiscal Quarter which includes the date of termination of this Agreement shall
survive the termination hereof.
3.3.1 Calculation of Percentage Rent. Subject to proration as
set forth above, Tenant shall pay Percentage Rent in respect of each
Fiscal Year under this Agreement equal to (a) ten percent (10%) of the
Total Facility Revenue for such Fiscal Year in excess of the Threshold,
less (b) the amount by which annual Minimum Rent in the Fiscal Year for
which Percentage Rent is being calculated exceeds the amount of annual
Minimum Rent due for the first (1st) Accounting Year under this
Agreement.
3.3.2 Annual Reconciliation of Percentage Rent. Tenant shall, no
later than ninety (90) days following the end of each Fiscal Year during
the Term hereof furnish to Landlord for such Fiscal Year a complete
statement (the "Annual Operations Statement") certified true and correct
by the Chief Financial Officer of Tenant's general partner or managing
member and the Chief Financial Officer of the Guarantor, setting forth,
with respect to such Fiscal Year in reasonable detail the Total Facility
Revenue derived by or for the benefit of Tenant in respect of such
Fiscal Year. If the Annual Operations Statement for any Fiscal Year
indicates that the aggregate of the installment payments theretofore
made with respect to such Fiscal Year pursuant to Section 3.3.1 exceeds
the Percentage Rent due for such Fiscal Year, Landlord shall credit such
overpayment against the next installment or installments of Minimum Rent
falling due (or will pay the amount of such overpayment to Tenant if
this Agreement shall have terminated other than by reason of Tenant's
default or if Landlord so elects to do so). If, on the other hand, the
Annual Operations Statement indicates that the aggregate of the
installment payments
15
theretofore made with respect to such Fiscal Year is less than the
Percentage Rent due for such Fiscal Year then Tenant shall pay the
balance or excess, as the case may be, together with interest thereon
determined as set forth below in this paragraph, to Landlord
concurrently with the submission of the Annual Operations Statement.
Interest shall accrue on payments pursuant to this paragraph at the
Disbursement Rate from the date when first due and payable until the
date when the adjusted amount is fully paid in the manner as set forth
above, except to the extent of de minimus adjustments of not more than
ten percent (10%) of the amount initially paid resulting from the
calculation method used or unintentional errors which could not
reasonably have been avoided by reasonable care and diligence.
3.3.3 Landlord Audit of Annual Operations Statement.
Notwithstanding the foregoing, Landlord at its own expense, except as
provided hereinbelow, shall have the right, exercisable by Notice to
Tenant given within 270 days after receipt of the applicable Annual
Operations Statement, by its accountants or representatives, to commence
within such 270 day period an audit of the information set forth in such
Annual Operations Statement and, in connection with such audit, to
examine all of Tenant's books and records with respect thereto
(including supporting data and sales and excise tax returns); provided,
however, if Landlord reasonably believes Tenant has intentionally
misrepresented Total Facility Revenue on any such Annual Operations
Statement, the said 270 day period shall commence to run on the date
Landlord obtains credible evidence that Tenant has intentionally
misrepresented Total Facility Revenue on any such Annual Operations
Statement. If Landlord does not commence an audit with such 270 day
period, such Annual Operations Statement shall be deemed to be accepted
by Landlord as correct. Landlord shall use commercially reasonable
efforts to complete any such audit as soon as practicable. If such audit
discloses a deficiency in the payment of Percentage Rent, Tenant shall
forthwith pay to Landlord the amount of the deficiency, together with
interest at the Disbursement Rate from the date such payment should have
been made to the date of payment therefore. If such deficiency is more
than three percent (3%) of the Total Facility Revenue reported by Tenant
for such Fiscal Year, Tenant shall also pay the costs of such audit and
examination.
3.4 Additional Charges. In addition to the Minimum Rent and Percentage
Rent payable hereunder, Tenant shall pay to the appropriate parties and
discharge as and when due and payable hereunder the following (collectively the
"Additional Charges"):
3.4.1 Taxes and Assessments. Tenant shall pay or cause to be
paid all taxes and assessments required to be paid pursuant to Article
8.
3.4.2 Utility Charges. Tenant shall be liable for and shall
promptly pay directly to the utility company all deposits, charges and
fees (together with any applicable taxes or assessments thereon) when
due for water, gas, electricity, air conditioning, heat, septic, sewer,
refuse collection, telephone and any other utility charges, impact fees,
or similar items in connection with the use or occupancy of the Leased
Property. Landlord shall not be responsible or liable in any way
whatsoever for the quality, quantity, impairment, interruption,
stoppage, or other interference with any utility service, including,
without limitation, water, air conditioning, heat, gas, electric current
for light and power,
16
telephone, or any other utility service provided to or serving the
Leased Property. No interruption, termination or cessation of utility
services shall relieve Tenant of its duties and obligations pursuant to
this Agreement, including, without limitation, its obligation to pay all
Rent as and when the same shall be due hereunder.
3.4.3 Insurance Premiums. Tenant shall pay or cause to be paid
all premiums for the insurance coverage required to be maintained
pursuant to Article 9.
3.4.4 Licenses and Permits. Tenant shall pay or cause to be paid
all fees, dues and charges of any kind which are necessary in order to
acquire and keep in effect and good standing all licenses and permits
required for operation of the Leased Property in accordance with the
terms of Article 4.
3.4.5 Sales Tax. Simultaneously with each payment of Rent and
Additional Charges hereunder, Tenant shall pay to Landlord the amount of
any applicable sales, use, excise or similar or other tax on any such
Rent and Additional Charges, whether the same be levied, imposed or
assessed by the State in which the Leased Property is located or any
Governmental Agencies, but specifically excluding any income taxes
imposed on Landlord's net income. Landlord shall, upon written request
by Tenant, provide to Tenant on an annual basis such reasonable
information in Landlord's possession or control as shall be necessary to
enable Tenant to pay such tax.
3.4.6 Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations arising in connection with
the Leased Property except those obligations expressly stated not to be
an obligation of Tenant pursuant to this Agreement.
3.4.7 Penalties and Interest. Tenant shall pay or cause to be
paid every fine, penalty, interest and cost which may be added for
non-payment or late payment of the items referenced in this Section 3.4.
Tenant shall prepare and file at its expense, to the extent required or
permitted by Applicable Laws, all tax returns and other reports in respect of
any Additional Charge as may be required by Governmental Agencies.
3.5 Landlord Advances. Except as specifically provided otherwise in this
Agreement, if Tenant does not pay or discharge all Additional Charges, and
provide proof of payment if requested by Landlord, at least fifteen (15) days
prior to delinquency, Landlord shall have the right but not the obligation to
pay such Additional Charges on behalf of Tenant. If Landlord shall make any such
expenditure for which Tenant is responsible or liable under this Agreement, or
if Tenant shall become obligated to Landlord under this Agreement for any other
sum besides Minimum Rent or Percentage Rent as hereinabove provided, the amount
thereof shall be deemed to constitute "Additional Rent" and shall be due and
payable by Tenant to Landlord, together with interest at the Overdue Rate and
all applicable sales or other taxes thereon, if any, simultaneously with the
next succeeding monthly installment of Minimum Rent or at such other time as may
be expressly provided in this Agreement for the payment of the same.
17
3.6 Late Payment of Rent. If Tenant fails to make any payment of Rent on
or before the fifth business day after the date such payment is due and payable,
Tenant shall pay to Landlord an administrative late charge of five percent (5%)
of the amount of such payment. In addition, such past due payment shall bear
interest at the Overdue Rate from the date first due until paid. Such late
charge and interest shall constitute Additional Rent and shall be due and
payable with the next installment of Rent due hereunder.
3.7 Net Lease. Landlord and Tenant acknowledge and agree that both
parties intend that this Agreement shall be and constitute what is generally
referred to in the real estate industry as a "triple net" or "absolute net"
lease, such that Tenant shall be obligated hereunder to pay all costs and
expenses incurred with respect to, and associated with, the Leased Property and
all personal property thereon and therein and the business operated thereon and
therein, including, without limitation, all taxes and assessments, utility
charges, insurance costs, maintenance costs and repair, replacement and
restoration expenses (all as more particularly herein provided), together with
any and all other assessments, charges, costs and expenses of any kind or nature
whatsoever related to, or associated with, the Leased Property and the business
operated thereon and therein, other than Landlord's financing costs and expenses
and related debt service; provided, however, that Landlord shall nonetheless be
obligated to pay Landlord's personal income taxes with respect to the Rent and
other amounts received by Landlord under this Agreement. Except as expressly
hereinabove provided, Landlord shall bear no cost or expense of any type or
nature with respect to, or associated with, the Leased Property. Except to the
extent otherwise expressly provided in this Agreement, it is agreed and intended
that Rent payable hereunder by Tenant shall be paid without notice, demand,
counterclaim, set-off, deduction or defense and without abatement, suspension,
deferment, diminution or reduction and that Tenant's obligation to pay Rent
throughout the Term and any applicable Extended Term is absolute and
unconditional and the respective obligations and liabilities of Tenant and
Landlord hereunder shall in no way be released, discharged or otherwise affected
for any reason, including without limitation: (a) any defect in the condition,
merchantability, design, quality or fitness for use of the Leased Property or
any part thereof, or the failure of the Leased Property to comply with
Applicable Laws, including any inability to occupy or use the Leased Property by
reason of such non-compliance; (b) any damage to, removal, abandonment, salvage,
loss, condemnation, theft, scrapping or destruction of or any requisition or
taking of the Leased Property or any part thereof, or any environmental
condition on the Leased Property or any property in the vicinity of the Leased
Property; (c) any restriction, prevention or curtailment of or interference with
any use of the Leased Property or any part thereof, including eviction; (d) any
defect in title to or rights to the Leased Property or any lien on such title or
rights to the Leased Property; (e) any change, waiver, extension, indulgence or
other action or omission or breach in respect of any obligation or liability of
or by any Person; (f) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceedings relating to
Tenant or any other Person or any action taken with respect to this Agreement by
any trustee or receiver of Tenant or any other Person or by any court, in any
such proceedings; (g) any right or claim that Tenant has or might have against
any Person, including, without limitation, Landlord or any vendor, manufacturer
or contractor of or for the Leased Property (other than a claim resulting from
any willful misconduct or gross negligence of Landlord); (h) any failure on the
part of Landlord or any other Person to perform or comply with any of the terms
of this Agreement, or of any other agreement; (i) any invalidity,
unenforceability, rejection or disaffirmance of this Agreement by
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operation of law or otherwise against or by Tenant or any provision hereof; (j)
the impossibility of performance by Tenant or Landlord, or both; (k) any action
by any court, administrative agency or other Government Agencies; (l) any
interference, interruption or cessation in the use, possession or quiet
enjoyment of the Leased Property or otherwise; or (m) any other occurrence
whatsoever whether similar or dissimilar to the foregoing, whether foreseeable
or unforeseeable, and whether or not Tenant shall have notice or knowledge of
any of the foregoing. Except as specifically set forth in this Agreement, this
Agreement shall be non-cancellable by Tenant for any reason whatsoever and,
except as expressly provided in this Agreement Tenant, to the extent now or
hereafter permitted by Applicable Laws, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this Agreement
or to any diminution, abatement or reduction of Rent payable hereunder. Except
as specifically set forth in this Agreement, under no circumstances or
conditions shall Landlord be expected or required to make any payment of any
kind hereunder or have any obligations with respect to the use, possession,
control, maintenance, alteration, rebuilding, replacing, repair, restoration or
operation of all or any part of the Leased Property, so long as the Leased
Property or any part thereof is subject to this Agreement, and Tenant expressly
waives the right to perform any such action at the expense of Landlord pursuant
to any law.
3.8 No Abatement of Rent. No abatement, diminution or reduction (a) of
Rent, charges or other compensation, or (b) of Tenant's other obligations
hereunder shall be allowed to Tenant or any person claiming under Tenant, under
any circumstances or for any reason whatsoever and to the maximum extent
permitted by law, Tenant hereby waives the application of any local or state
statutes, land rules, regulations or ordinance providing to the contrary.
3.9 INTENTIONALLY OMITTED
3.10 Tenant Security Deposit. On the Commencement Date Tenant shall
deposit with Landlord in cash the sum of Seven Hundred Thirty-Eight Thousand
Seven Hundred Seventy-One and No/100 Dollars ($738,771.00), as a security
deposit (the "Security Deposit"), for Tenant's faithful performance of all of
Tenant's obligations under this Agreement. If Tenant fails to pay Rent or
Additional Charges due hereunder, fails to fund Reserve Expenditures which
exceed available funds in the Reserve, or otherwise defaults with respect to any
provision of this Agreement, then in addition to and not exclusive of any other
remedies available under this Agreement, Landlord may use, apply or retain all
or any portion of the Security Deposit for the payment of any Rent, the funding
of Additional Charges or Reserve Expenditures or other charges in default, or
for the payment of any sum to which Landlord may become obligated by reason of
Tenant's default. If Landlord so uses or applies all or any portion of the
Security Deposit, Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to the full amount of the Security Deposit. Landlord shall not
be required to keep the Security Deposit separate from its general accounts. If
Tenant performs all of Tenant's obligations hereunder, at the expiration of the
Term, and after Tenant has vacated the Leased Property, the Security Deposit, or
so much thereof as has not been applied or used by Landlord as provided in this
Agreement, shall be returned to Tenant, without payment of interest or other
increment for its use. No trust relationship is created herein between Landlord
and Tenant with respect to the Security Deposit. The Security Deposit shall be
paid by Tenant to Landlord upon the Commencement Date.
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3.11 Security for all ARC-Related Leases. Tenant acknowledges that the
Security Deposit constitutes security for the faithful observance and
performance by Tenant of all the terms, covenants and conditions of this
Agreement and of all ARC-Related Leases (whether now in effect or entered into
in the future) to be observed and performed. If any Event of Default shall occur
and be continuing under this Agreement, Landlord may, at its option and without
prejudice to any other remedy which Landlord may have on account thereof,
appropriate and apply, first, the amount of the Security Deposit in accordance
with the terms set forth herein and, second, the amount of any other security
deposits under all ARC-Related Leases (herein the "Collective Security Deposit")
as may be necessary to compensate Landlord toward the payment of the Rent or
other sums due Landlord under this Agreement as a result of such breach by
Tenant. Additionally, Landlord may, if any Event of Default shall occur and be
continuing under any other ARC-Related Lease, appropriate and apply the Security
Deposit after first applying the security deposit under such other ARC-Related
Lease that is in default. It is understood and agreed that neither the Security
Deposit nor the Collective Security Deposit is to be considered as prepaid rent,
nor shall damages be limited to the amount of the Collective Security Deposit.
3.12 Security Agreement. Tenant hereby grants to Landlord a security
interest in the Security Deposit and the Reserve as set forth below, as security
for all obligations of the Guarantor and as further security for Tenant's
obligations to Landlord hereunder, and agrees to execute and deliver all such
instruments as may be required by Landlord to evidence and perfect these
security interests.
ARTICLE 4
USE OF THE LEASED PROPERTY; CONFLICTING BUSINESS
4.1 Permitted Use.
4.1.1 Permitted Use. Tenant covenants and agrees that it shall,
throughout the Term of this Agreement, continuously use and occupy the
Leased Property solely and exclusively as a first class independent
living facility (and, subject to Landlord's consent pursuant to Section
4.1.2 below, as a first class licensed assisted living and dementia care
facility), and for such other uses as may be necessary or incidental to
such use (such as services provided directly to residents by Tenant or
under Service Licenses, as such term is defined below), with appropriate
amenities for the same and for no other purpose without interruption
except for minimum necessary interruptions in respect to portions of the
Leased Property for periods provided herein for repairs, renovations,
replacements and rebuilding all of which shall be carried out pursuant
to, and in accordance with the applicable provisions of this Agreement
(the foregoing being referred to as the "Permitted Use"). Without the
prior written consent of the Landlord, no Affiliated Person of Tenant
may be a subtenant or concessionaire in the Leased Property, provided
however that Landlord hereby consents and agrees that a qualified and
fully-insured Affiliated Person of Tenant may provide therapy and
therapy-related services at the Facility for customary and appropriate
charges. No use shall be made or permitted to be made of the Leased
Property and no acts shall be done thereon which will cause the
cancellation of any
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insurance policy covering the Leased Property or any part thereof
(unless another adequate policy is available), nor shall Tenant sell or
otherwise provide or permit to be kept, used or sold in or about the
Leased Property any article which may be prohibited by law or by the
standard form of fire insurance policies, or any other insurance
policies required to be carried hereunder, or fire underwriter's
regulations. Tenant shall, at its sole cost, comply with all Insurance
Requirements. Tenant shall not take or omit to take any action, the
taking or omission of which materially impairs the value or the
usefulness of the Leased Property or any part thereof for its Permitted
Use, or causes the Leased Property to no longer be considered a first
class facility.
4.1.2 Assisted Living Units Conversion. Landlord shall not
unreasonably withhold its consent to the use of portions of the Leased
Property for licensed assisted living residential purposes provided that
Tenant first provides to Landlord direct written evidence that (i)
Tenant has received all necessary government licenses and approvals
required for such use; (ii) Tenant remains in compliance with all
applicable terms and requirements under any Facility Mortgage and at
Tenant's sole expense but with Landlord's good faith cooperation has
obtained any and all consents and approvals as may be required
thereunder in respect of any proposed change in use and related
construction and alterations; (iii) all required alterations and
improvements will be made in accordance with plans and specifications
reasonably acceptable to Landlord at no cost, expense or liability to
Landlord; (iv) Tenant has secured all necessary funds for the costs of
such alternations and improvements (insuring completion on a lien-free
basis) and to cover all revenue losses resulting from the construction
and interim vacancy of the units to be converted; and (v) Tenant
provides updated appraisal and cash flow analyses acceptable to Landlord
reflecting that the value of the Leased Property and anticipated
revenues and profits (cash flow) should not be diminished as a result of
such changes and any related alterations.
4.1.3 Necessary Approvals. Tenant shall maintain all Permits and
approvals necessary to use and operate, for its Permitted Use, the
Leased Property and the Facility located thereon under Applicable Law
and shall provide to Landlord a copy of Tenant's federal, state and
Medicare survey regarding the Facility, and such other information or
documents pertaining to said approvals. Landlord shall at no cost or
liability to Landlord cooperate with Tenant in this regard, limited to
executing all applications and consents required to be signed by
Landlord in order for Tenant to obtain and maintain such approvals.
4.1.4 Lawful Use, Etc. Tenant shall not use or suffer or permit
the use of the Leased Property or Tenant's Personal Property, if any,
for any unlawful purpose. Tenant shall not commit or suffer to be
committed any waste on the Leased Property, or in the Facility, nor
shall Tenant cause or permit any unlawful nuisance thereon or therein.
Tenant shall not suffer nor permit the Leased Property, or any portion
thereof, to be used in such a manner as (i) might reasonably impair
Landlord's title thereto or to any portion thereof, or (ii) might
reasonably allow a claim or claims for adverse usage or adverse
possession by the public, as such, or of implied dedication of the
Leased Property or any portion thereof.
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4.1.5 Compliance with Legal Requirements. Tenant shall at all
times at its sole cost and expense, keep and maintain the Leased
Property in compliance with all Legal Requirements. Tenant agrees to
give Landlord Notice of any notices, orders or other communications
relating to Legal Requirements affecting the Leased Property which is or
are enacted, passed, promulgated, made, issued or adopted, a copy of
which is served upon, or received by, Tenant, or a copy of which is
posted on or fastened or attached to the Leased Property, within ten
(10) business days after service, receipt, posting, fastening or
attaching. At the same time, the Tenant will inform Landlord as to the
work or steps which Tenant proposes to do or take in order to comply
therewith.
4.2 Environmental Matters. Except as permitted by Applicable Law, Tenant
shall at all times during the Term keep the Leased Property free of Hazardous
Substances. Neither Tenant nor any of its employees, agents, invitees,
licensees, contractors, guests, or subtenants (if permitted) shall use,
generate, manufacture, refine, treat, process, produce, store, deposit, handle,
transport, release, or dispose of Hazardous Substances in, on or about the
Leased Property or the groundwater thereof, in violation of any federal, state
or municipal law, decision, statute, rule, ordinance or regulation currently in
existence or hereafter enacted or rendered. Tenant shall give Landlord prompt
Notice of any claim received by Tenant from any person, entity, or Governmental
Agencies that a release or disposal of Hazardous Substances has occurred on the
Leased Property or the groundwater thereof.
Tenant shall not discharge or permit to be discharged into any septic
facility or sanitary sewer system serving the Leased Property any toxic or
hazardous sewage or waste other than that which is permitted by Applicable Law
or which is normal domestic waste water for the type of business contemplated by
this Agreement to be conducted by Tenant on, in or from the Leased Property. Any
toxic or hazardous sewage or waste which is produced or generated in connection
with the use or operation of the Leased Property shall be handled and disposed
of as required by and in compliance with all applicable local, state and federal
laws, ordinances and rules or regulations or shall be pre-treated to the level
of domestic wastewater prior to discharge into any septic facility or sanitary
sewer system serving the Leased Property.
4.3 Conflicting Businesses Prohibited. Landlord and Tenant hereby
recognize and acknowledge (a) that the Minimum Rent and the Percentage Rent
payable by Tenant to Landlord under this Agreement have been established at the
levels specified in this Agreement upon the premise and with the expectation
that the Minimum Rent and Percentage Rent may determine the market value of the
Leased Property and constitute a material consideration for Landlord's
willingness to execute this Agreement and thereby lease and demise the Leased
Property to Tenant, and (b) that the operation, management, franchising or
ownership by Tenant or an Affiliated Person of Tenant of another Facility of the
Permitted Use as specified in Section 4.1.1 above (such other Facility being
referred to herein as a "Conflicting Business") within a ten (10) mile radius of
the Leased Property (the "Proscribed Area") will tend to result in a decrease in
the amount of Total Facility Revenue which would otherwise reasonably be
expected to be made upon, within and from the Leased Property and thereby result
in a reduction of the market value of the Leased Property and a reduction in the
Rent which would otherwise be received by Landlord pursuant to this Agreement in
the absence of the operation of a Conflicting Business by Tenant or any such
Affiliated Person of Tenant within the Proscribed Area. Accordingly, Tenant on
behalf of itself and such Affiliated Persons, agrees that during the Term of
this Agreement
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neither Tenant, nor any Affiliated Person of Tenant shall open, develop,
operate, manage, franchise, own, lease or have any other interest in a
Conflicting Business within the Proscribed Area. In the event of a breach of
this covenant, Landlord shall have the right to terminate this Agreement and
retain the Security Deposit, and pursue any other remedy at law available to
Landlord, including injunctive relief, or in lieu thereof but not in addition
thereto, Landlord may, at its election, require that forty percent (40%) of all
revenues (calculated in the same manner as if such revenues were Total Facility
Revenue) of such Conflicting Business opened, operated, managed, leased,
developed or owned by Tenant or any affiliated person of Tenant as defined in
this Section within the Proscribed Area be included in the amount of Total
Facility Revenue made from the Leased Property for purposes of the determination
and calculation of the Percentage Rent due from Tenant to Landlord under this
Agreement (i.e., as though such Total Facility Revenue of the Conflicting
Business had actually been made upon, within and from the Leased Property). If
Landlord so elects, all provisions of Article 17 of this Agreement relating to
Tenant's maintenance and submission to Landlord of books, records and statements
shall be applicable to all books, records and statements pertaining to any such
Conflicting Businesses. Further, Tenant agrees that Tenant's sole business shall
be to lease, and Tenant shall not incur any expenses or liability related to any
business or activity other than leasing and operating, the Leased Property and
other premises owned or hereinafter owned by Landlord or its Affiliated Persons
pursuant to terms acceptable to Landlord and Tenant. Landlord will not
unreasonably withhold its consent to a waiver of this Conflicting Business
restriction for any Conflicting Business which is approximately five (5) or more
miles away so long as Landlord is provided with evidence reasonably acceptable
to it that the proposed Conflicting Business is not likely to draw from the
demographic base otherwise available to support full occupancy of the Facility
and/or a revenue protection agreement acceptable to Landlord with respect to
adverse affects on Facility occupancy or residents tied to the Facility's
identified demographic base served at the Conflicting Business.
4.4 Continuous Operations. Tenant shall continuously operate the Leased
Property and maintain sufficient skilled staff and employees, either directly or
through a qualified manager approved by Landlord, and shall maintain adequate
levels and quality of Tenant's Personal Property, to operate the Leased Property
as a first class independent living facility (and, subject to Landlord's consent
pursuant to Section 4.1.2 above, as a first class licensed assisted living and
dementia care facility) as herein required at its sole cost and expense
throughout the entire Term of this Agreement.
4.5 Compliance With Restrictions, Etc. Tenant, at its expense, shall
comply with all restrictive covenants and other title exceptions affecting the
Leased Property as of the date of this Lease and comply with and perform all of
the obligations set forth in the same to the extent that the same are applicable
to the Leased Property or to the extent that the same would, if not complied
with or performed, impair or prevent the continued use, occupancy and operation
of the Leased Property for the purposes set forth in this Agreement. Further, in
addition to Tenant's payment obligations under this Agreement, Tenant shall pay
all sums charged, levied or assessed under any restrictive covenants,
declaration, reciprocal easement agreement or other title exceptions (not
including obligations of Landlord only under the GMACCMC Loan Documents
identified in Exhibit "K" hereto), equipment leases, leases and all other
agreements affecting the Leased Property as of the date of this Lease promptly
as the same become due and shall promptly furnish Landlord evidence of payment
thereof.
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4.6 Standard of Operation. Throughout the Term of this Agreement, Tenant
shall continuously operate the Leased Property in full compliance with the terms
hereof in a manner consistent with the level of operation of a national, first
class independent living or licensed assisted living and dementia care facility,
as applicable, including without limitation, the following:
(a) to maintain the standard of care for the residents/patients
of the Facility at all times at a level necessary to ensure quality care
for the residents/patients of the Facility in accordance with customary
and prudent industry standards;
(b) to operate the Facility in a prudent manner and in
compliance with applicable laws and regulations relating thereto and
cause all Permits, Reimbursement Contracts and any other agreements
necessary for the use and operation of the Facility or as may be
necessary for participation in applicable reimbursement programs;
(c) to maintain sufficient P&E and Inventories, and Tenant
Personal Property, of types and quantities at the Facility to enable
Tenant adequately to perform operations of the Facility; and
(d) to keep all Leased Improvements and P&E located on or used
or useful in connection with the Facility in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time
make all needed and proper repairs, renewals, replacements, additions
and improvements thereto to keep the same in good operating condition.
(e) to maintain sufficient working capital to operate the Leased
Property as a first class facility (working capital shall mean assets
which are reasonably necessary and used for the day to day operation of
the Leased Property, including, without limitation, amounts sufficient
for the maintenance of change and xxxxx cash funds, amounts deposited in
operating bank accounts, receivables, prepaid expenses, and funds
required to maintain Inventories and pay all operating expenses as they
become due, less accounts payable and accrued current liabilities).
(f) to operate and use the Leased Property to a standard
consistent with national chain first class independent living or
licensed assisted living and dementia care facilities, as applicable, at
least equal to or better in quality than independent living and licensed
assisted living and dementia care facilities (as applicable) operated by
Guarantor and its Affiliated Persons at the Commencement Date, and to
operate the Facility only under the Guarantor's name, trademarks, logos
and service marks, with all required licenses and permits for such
operation, if any.
(g) to follow and conform to all of the same operating,
employment, marketing, insurance, risk management and management
standards and practices
24
employed at first class independent living and licensed assisted living
and dementia care facilities (as applicable) operated by Guarantor and
its Affiliated Persons.
(h) to recruit, train and employ appropriate personnel, or
retain management services from Guarantor or other qualified operator or
service-provider approved by Landlord for same.
(i) to provide prompt written notice to Guarantor and to
Landlord of material or extraordinary developments, lawsuits, violation
of any Legal Requirements and fines relating to the use and operation of
the Facility.
Throughout the term of the Lease, Tenant shall continuously operate the
Leased Property as a national, first-class independent living and/or licensed
assisted living and dementia care facility (as applicable) in the manner set
forth above, and to a standard consistent with national chain, first-class
independent living and licensed assisted living and dementia care facilities (as
applicable) at least equal to or better in quality than independent living and
licensed assisted living and dementia care facilities (as applicable) operated
currently by Guarantor under Guarantor's name, trademarks, logos and service
marks. Tenant shall endeavor and use its best efforts to maximize Total Facility
Revenue for the Leased Property. Tenant shall further provide, or cause to be
provided, all group services, facilities and benefits generally available to a
national chain, first-class independent living and licensed assisted living and
dementia care facilities (as applicable) of a similar type operated elsewhere by
Guarantor or any successor to Guarantor (or by other national operators of
first-class independent living and licensed assisted living and dementia care
facilities, such as those operated by Marriott Senior Living Services).
4.7 Resident Agreements and Service Licenses. Tenant shall comply in all
material respects with the terms and provisions of each agreement and
undertaking entered into with or provided to the residents of the Facility
("Resident Agreements"), including without limitation to fulfill or cause to be
fulfilled all undertakings and representations regarding the use, condition and
operation of the Facility and services to provided the residents and the
standards and services of and benefits to be provided by the Guarantor and its
Affiliated Persons. In addition, Tenant shall comply in all material respects
with the terms and conditions of any contract or license entered into with
respect to the provision of services to the residents at the Facility ("Service
Licenses").
4.8 Standards, Not Control. Landlord and Tenant stipulate and agree that
Tenant is obligated to undertake such actions as are reasonably necessary to
properly achieve the highest standard of operation for the Facility as set forth
herein, and that although Landlord shall have the right to undertake all
enforcement rights as provided herein in the event that the required standard of
operation is not maintained by Tenant, the means and methods used and actions
taken to operate the Facility are within the sole control and election of
Tenant, and are not specified by or under the control of Landlord. Accordingly,
Landlord shall have no responsibility for any action taken by Tenant in order to
manage or operate the Facility.
4.9 Survival. As to conditions and uses of Tenant existing or occurring
prior to the expiration or sooner termination of this Agreement, the provisions
of this Article 4 shall survive
25
the expiration or sooner termination of this Agreement to extent of any ongoing
effects on Landlord or its successors with respect to the Facility (specifically
including the prohibitions relating to conflicting businesses under Section 4.3.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Tenant's Obligations. Tenant shall, at its sole cost and expense,
keep the Leased Property in good order and repair, and shall promptly make all
necessary and appropriate repairs and replacements thereto of every kind and
nature, whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term and whether or not necessitated
by wear, tear, obsolescence or defects, latent or otherwise, and shall use all
reasonable precautions to prevent damage or injury. All repairs shall be made in
a good, workmanlike manner, consistent with the industry standards for like
independent living and licensed assisted living and dementia care facilities, as
applicable, in like locales, in accordance with all applicable federal, state
and local statutes, ordinances, by-laws, codes, rules and regulations relating
to any such work. In addition, Tenant shall also, at its sole cost and expense,
put, keep, replace and maintain Tenant's Personal Property in good repair and in
good, safe and substantial order, howsoever the necessity or desirability for
repairs may occur, and whether or not necessitated by wear, tear, obsolescence
or defects. Tenant may at any time and from time to time remove and dispose of
any of Tenant's Personal Property which has become obsolete or unfit for use or
which is no longer useful in the operation of the Facility's business conducted
by Tenant on the Leased Property; provided, however, that Tenant's Personal
Property so disposed of shall be promptly replaced with other Tenant's Personal
Property not necessarily of the same character, but of at least equal usefulness
and quality as, and having a value at least equal to the value of, those
disposed of, and in any event in accordance with and in compliance with the
standards required by and the provisions of this Agreement. Tenant shall further
at all times maintain the Leased Property, including the grounds and
landscaping, in an aesthetically pleasing manner.
5.2 Reserve.
5.2.1 Tenant shall establish an interest bearing reserve account
(the "Reserve") in a bank designated by Tenant and approved by Landlord.
All interest earned on the Reserve shall be added to and remain a part
of the Reserve. Both Tenant and Landlord shall be signatories on the
Reserve, provided only one signature shall be required to withdraw funds
and Landlord agrees that so long as Tenant is not in default hereunder,
Landlord shall not be required to sign on any checks and Landlord shall
not withdraw any funds from such account. Upon the occurrence and
continuation of any Default or Event of Default hereunder the Tenant
signatory party shall no longer be an authorized signatory on the
Reserve account. Such account shall be established in Landlord's name
and control for the benefit of Tenant and shall not include or
contemplate "overdraft protection" and Tenant shall not request or
attempt to draw or draft any funds which are not actually on deposit in
such account. The purpose of the Reserve is to cover the cost
26
of the following, to the extent carried out in accordance with this
Agreement (collectively, "Reserve Expenditures"):
(a) Replacements (including P&E Replacements), renewals
and additions to the P&E at the Facility; and
(b) repairs, alterations, improvements, renewals,
replacements and additions, whether routine, non-routine or
major, to the Leased Improvements, including without limitation
those which are normally capitalized under GAAP such as repairs,
alterations, improvements, renewals, replacements and additions
to the structure, the exterior facade, the mechanical,
electrical, heating, ventilating, air conditioning, plumbing and
vertical transportation elements of the Leased Improvements,
which expenditures Tenant believes should be made for the Leased
Property for the following Fiscal Year.
5.2.2 Commencing with the Commencement Date and continuing
throughout the Term, Tenant shall on the last day of each Accounting
Period during the Term, transfer into the Reserve an amount equal to the
Applicable Reserve Percentage of Total Facility Revenues for such
Accounting Period (based upon estimates of Total Facility Revenue if
necessary, to be adjusted as soon as Tenant has had an opportunity to
confirm actual Total Facility Revenue). At the time Tenant provides
Landlord the documentation described in Section 3.3, Tenant shall also
deliver to Landlord a statement setting forth the total amount of
deposits made to and expenditures from the Reserve for the preceding
Fiscal Year.
5.2.3 On or before December 1 of each Fiscal Year, Tenant shall
prepare an estimate (the "Reserve Estimate") of Reserve Expenditures
anticipated during the ensuing Fiscal Year and shall submit such Reserve
Estimate to Landlord for its review. Such Reserve Estimate shall reflect
by line item the projected budget for Reserve Expenditures for the
Leased Property and assumptions on the basis of which such line items
were prepared in narrative form if necessary, including separate budget
items for all projected expenditures for replacements, substitutions and
additions to Tenant's Personal Property. Tenant shall provide to
Landlord reasonable additional detail, information and assumptions used
in the preparation of the Reserve Estimate as requested by Landlord and
shall also submit to Landlord with the Reserve Estimate good faith
longer-range projections of planned Reserve Expenditures for an
additional three (3) Fiscal Years. Tenant shall review the Reserve
Estimate with Landlord, and subject to Landlord's approval, Tenant shall
implement such Reserve Estimate for the successive Fiscal Year (during
which it shall, if approved by Landlord, be referred to as the "Approved
Reserve Estimate"). In addition, Landlord shall have the right to
disapprove any expenditures to be made pursuant to the Reserve Estimate
which are not in compliance with Applicable Laws. Further, Landlord's
approval of any expenditure pursuant to the Reserve Estimate shall not
be, or be deemed to be, an assumption by Landlord of any liability in
connection with the expenditures made. Pending resolution of any
dispute, the specific disputed item of the Reserve Estimate shall be
suspended and replaced for the Fiscal Year in question by an amount
equal to the lesser of (a) that proposed by Tenant for such Fiscal Year
or (b) such budget item for the Fiscal Year prior thereto. Tenant shall
not make any
27
expenditures from the Reserve, nor shall Tenant deviate from the
Approved Reserve Estimate without the prior approval of Landlord, except
in the case of emergency where immediate action is necessary to prevent
imminent danger to person or property.
5.2.4 Tenant shall, consistent with the Approved Reserve
Estimate, from time to time make Reserve Expenditures from the Reserve
as it reasonably deems necessary in accordance with Section 5.2.1 and
Section 5.2.3. Tenant shall provide to Landlord, within thirty (30) days
after the end of each Fiscal Quarter, an itemized statement setting
forth Reserve Expenditures made to date during the Fiscal Year.
5.2.5 In the event Reserve Expenditures not set forth in the
Approved Reserve Estimate are required (i) as a result of Legal
Requirements or are otherwise required for the continued safe and
orderly operation of the Leased Property, (ii) due to an emergency
threatening the Leased Property, its residents, patients, guests,
invitees or employees, or (iii) because the continuation of a given
condition will subject Tenant or Landlord to civil or criminal
liability, Landlord agrees that it will not unreasonably withhold its
approval of such expenditures.
5.2.6 All interest earned on the Reserve shall be added to and
become a part thereof, and all property purchased with funds from the
Reserve shall be and remain the property of Tenant until the end of the
Term of the Lease or earlier expiration or termination of this Agreement
(subject to Landlord's lien rights hereunder), at which time all P&E at
the Leased Property, including without limitation all P&E Replacements
or other items purchased with funds from the Reserve (but not including
Tenant's Personal Property except as specifically provided herein) shall
be and become the sole property of Landlord. All funds in the Reserve
shall be and remain the property of Tenant throughout the Lease Term,
subject to the control rights and liens and security interests of
Landlord, but following expiration or earlier termination of this
Agreement and payment in full on all contracts entered into prior to
such expiration or termination for work to be done or furniture,
furnishings, fixtures and equipment to be supplied in accordance with
this Section 5.2 out of the Reserve, ownership of the Reserve shall be
transferred from Tenant to Landlord except (provided Tenant is not in
Default at the time of termination) to the extent of the amount, if any,
by which Tenant's cumulative cash expenditures on P&E used solely at the
Leased Property (not including any of Tenant's Personal Property which
is not used at the Leased Property throughout the useful life thereof),
less all amounts received upon any disposition thereof, exceeds the
cumulative amount deposited by Tenant into the Reserve. It is understood
and agreed that the Reserve pursuant to this Agreement shall be
maintained and used solely in connection with the Leased Property.
5.2.7 If Landlord wishes to grant a security interest in or
create another encumbrance on its interest in the Reserve in connection
with a Facility Mortgage, all or any part of the existing or future
funds therein, or any general intangible in connection therewith, the
instrument granting such security interest or creating such other
encumbrance shall expressly provide that such security interest or
encumbrance is prior in right to the rights of Tenant with respect to
the Reserve as set forth herein, provided that the same is subject to a
Tenant non-disturbance agreement as provided herein and the
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Mortgagee thereunder agrees to be responsible to Tenant and to properly
disburse all amounts of the Reserve received by it for use and
disposition as provided herein.
5.2.8 If, at any time, funds in the Reserve shall be
insufficient or are reasonably projected by Tenant to be insufficient
for necessary and permitted expenditures thereof or funding is necessary
for Reserve Expenditures, Tenant shall give Landlord Notice thereof,
which Notice shall set forth, in reasonable detail, the nature of the
required or permitted action and the estimated cost thereof, and Tenant
shall thereafter fund such additional Reserve Expenditures.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Prohibition. Except for work funded by Reserve Expenditures and
Minor Alterations as hereinafter expressly provided in Section 6.2, no portion
of the Leased Property shall be demolished, removed or altered by Tenant in any
manner whatsoever without the prior written consent and approval of Landlord.
Notwithstanding the foregoing, however, Tenant shall be entitled and obligated
to undertake all alterations to the Leased Property required by any Legal
Requirements and, in such event, Tenant shall comply with the provisions of
Section 6.2 below.
6.2 Permitted Renovations. The activities permitted pursuant to Section
6.2.1 and Section 6.2.2 below shall collectively constitute "Permitted
Renovations".
6.2.1 Minor Alterations. Landlord acknowledges that certain
minor alterations and renovations may be undertaken by Tenant from time
to time ("Minor Alterations"). Landlord hereby agrees that Tenant shall
be entitled to perform such Minor Alterations on or about the Leased
Improvements; provided, however, that the cost of the same shall not
exceed $20,000.00 and the same shall not weaken or impair the structural
strength of the Leased Improvements, or alter their exterior design or
appearance, materially impair the use of any of the service facilities
located in, or fundamentally affect the character or suitability of, the
Leased Improvements for the Permitted Use specified in Section 4.1.1
above or materially lessen or impair their value.
6.2.2 Additions, Expansions and Structural Alterations. Except
as expressly permitted in Section 6.1 and Section 6.2.1 above, nothing
in this Article 6 or elsewhere in this Agreement shall be deemed to
authorize Tenant to construct and erect any additions to or expansions
of the Leased Improvements, or perform any alterations of a structural
nature whatsoever (collectively referred to herein as the "Major
Alterations"); it being understood that Tenant may do so only with the
prior written consent and approval of Landlord, which consent and
approval may be withheld by Landlord in its sole and absolute discretion
and may be conditioned upon the payment by Tenant to Landlord of all
reasonable costs incurred by Landlord in evaluating the same.
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6.3 Conditions to Reserve Expenditures, Permitted Renovations and Major
Alterations. In connection with any Reserve Expenditures, Permitted Renovations
or Major Alterations of the Leased Property the following conditions shall be
met, to wit:
(a) Before the commencement of any such work, plans and
specifications therefor or a detailed itemization thereof
prepared by a licensed architect approved by Landlord or other
design professional appropriate under the circumstances approved
by Landlord and Tenant shall be furnished to Landlord for its
review and approval. Such approval shall not constitute
Landlord's agreement that the plans and specification are in
compliance with Applicable Laws or an assumption by Landlord of
any liability in connection with the renovation work
contemplated thereby.
(b) Before the commencement of any such work Tenant
shall obtain the approval thereof by all Governmental Agencies
having or claiming jurisdiction of or over the Leased Property,
and with any public utility companies having an interest
therein. In connection with any such work Tenant shall comply
with all Legal Requirements and Applicable Laws, of all other
Governmental Agencies having or claiming jurisdiction of or over
the Leased Property and of all their respective departments,
bureaus and offices, and with the requirements and regulations,
if any, of such public utilities, of the insurance underwriting
board or insurance inspection bureau having or claiming
jurisdiction, or any other body exercising similar functions,
and of all insurance companies then writing policies covering
the Leased Property or any part thereof.
(c) Tenant represents and warrants to Landlord that all
such work will be performed in a good and workmanlike manner and
in accordance with the plans and specifications therefor
approved by Landlord, the terms, provisions and conditions of
this Agreement and all governmental requirements.
(d) Landlord shall have the right, at Tenant's expense,
to inspect any such work at all times during normal working
hours using such inspector(s) as it may deem necessary so long
as such inspections do not unreasonably interfere with Tenant's
work (but Landlord shall not thereby assume any responsibility
for the proper performance of the work in accordance with the
terms of this Agreement, nor any liability arising from the
improper performance thereof).
(e) All such work shall be performed free of any liens
on Landlord's fee simple interest on or Tenant's leasehold
interest in the Leased Property.
(f) Upon substantial completion of any such work, Tenant
shall procure a certificate of occupancy or other final
approvals, if applicable, from the appropriate Governmental
Agencies and provide copies of same to Landlord.
(g) Tenant shall, and hereby agrees to, indemnify and
save and hold Landlord and its Affiliated Parties harmless from
and against and reimburse Landlord for any and all loss, damage,
cost, liability, fee and expense (including,
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without limitation, reasonable attorney's fees based upon
service rendered at hourly rates) incurred by or asserted
against Landlord which is occasioned by or results, directly or
indirectly, from any such work conducted upon the Leased
Property; whether or not the same is caused by, or is the fault
of Tenant or any agent, employee, manager, contractor,
subcontractor, laborer, supplier, materialman or any other third
party; but Tenant shall not be obligated to indemnify Landlord
from any loss as aforesaid caused by Landlord's gross negligence
or willful misconduct.
6.4 Salvage. Other than Tenant's Personal Property, all materials which
are scrapped or removed in connection with maintenance and repair performed
pursuant to Article 5 and the making of Permitted Renovations pursuant to
Article 6 shall be disposed of by Tenant and the net proceeds thereof, if any,
shall be deposited in the Reserve.
ARTICLE 7
LANDLORD'S INTEREST NOT SUBJECT TO LIENS
7.1 Liens, Generally. Tenant shall not, directly or indirectly, create
or cause to be imposed, claimed or filed upon the Leased Property, or Tenant's
assets, properties or income or any portion thereof, or upon the interest of
Landlord therein, any Lien of any nature whatsoever. If, because of any act or
omission of Tenant, any such Lien shall be imposed, claimed or filed by any
party whosoever or whatsoever, Tenant shall, at its sole cost and expense, cause
the same to be promptly (and in no event later than thirty (30) days following
receipt of notice of such Lien) fully paid and satisfied or otherwise promptly
discharged of record (by bonding or otherwise) and Tenant shall indemnify and
save and hold Landlord harmless from and against any and all costs, liabilities,
suits, penalties, claims and demands whatsoever, and from and against any and
all reasonable attorney's fees, at both trial and all appellate levels,
resulting or on account thereof and therefrom. In the event that Tenant shall
fail to comply with the foregoing provisions of this Section 7, Landlord shall
have the option, but not the obligation, of paying, satisfying or otherwise
discharging (by bonding or otherwise) such Lien and Tenant agrees to reimburse
Landlord, upon demand and as Additional Rent, for all sums so paid and for all
costs and expenses incurred by Landlord in connection therewith, together with
interest thereon, until paid.
7.2 Construction or Mechanics Liens. Landlord's interest in the Leased
Property shall not be subjected to Liens of any nature by reason of Tenant's
construction, alteration, renovation, repair, restoration, replacement or
reconstruction of any improvements on or in the Leased Property, or by reason of
any other act or omission of Tenant (or of any person claiming by, through or
under Tenant) including, but not limited to, construction, mechanics' and
materialmen's liens. All persons dealing with Tenant are hereby placed on notice
that such persons shall not look to Landlord or to Landlord's credit or assets
(including Landlord's interest in the Leased Property) for payment or
satisfaction of any obligations incurred in connection with the construction,
alteration, renovation, repair, restoration, replacement or reconstruction
thereof by or on behalf of Tenant. Tenant has no power, right or authority to
subject Landlord's interest in the Leased Property to any construction,
mechanic's or materialmen's lien or claim of
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lien. If a Lien, a claim of lien or an order for the payment of money shall be
imposed against the Leased Property on account of work performed, or alleged to
have been performed, for or on behalf of Tenant, Tenant shall, within thirty
(30) days after written notice of the imposition of such Lien, claim or order,
cause the Leased Property to be released therefrom by the payment of the
obligation secured thereby or by furnishing a bond or by any other method
prescribed or permitted by law. If a Lien is released, Tenant shall thereupon
furnish Landlord with a written instrument of release which has been recorded or
filed in the appropriate office of land records of the County in which the
Leased Property is located, and otherwise sufficient to establish the release as
a matter of record.
7.3 Contest of Liens. Tenant may, at its option, contest the validity of
any Lien or claim of lien if Tenant shall have first posted an appropriate and
sufficient bond in favor of the claimant or paid the appropriate sum into court,
if permitted by and in strict compliance with Applicable Laws, and thereby
obtained the release of the Leased Property from such Lien. If judgment is
obtained by the claimant under any Lien, Tenant shall pay the same immediately
after such judgment shall have become final and the time for appeal therefrom
has expired without appeal having been taken. Tenant shall, at its own expense,
using counsel reasonably approved by Landlord, diligently defend the interests
of Tenant and Landlord in any and all such suits; provided, however, that
Landlord may, nonetheless, at its election and expense, engage its own counsel
and assert its own defenses, in which event Tenant shall cooperate with Landlord
and make available to Landlord all information and data which Landlord deems
necessary or desirable for such defense.
7.4 Notices of Commencement of Construction. If required by the laws of
the State in which the Leased Property is located, prior to commencement by
Tenant of any work on the Leased Property which shall have been previously
permitted by Landlord as provided in this Agreement, Tenant shall record or file
a notice of the commencement of such work or similar notice required by
Applicable Law (the "Notice of Commencement") in the land records of the County
in which the Leased Property is located, identifying Tenant as the party for
whom such work is being performed, stating such other matters as may be required
by law and requiring the service of copies of all notices, Liens or claims of
lien upon Landlord. Any such Notice of Commencement shall clearly reflect that
the interest of Tenant in the Leased Property is that of a leasehold estate and
shall also clearly reflect that the interest of Landlord as the fee simple owner
of the Leased Property shall not be subject to construction, mechanics or
materialmen's liens on account of the work which is the subject of such Notice
of Commencement. A copy of any such Notice of Commencement shall be furnished to
and approved by Landlord and its attorneys prior to the recording or filing
thereof, as aforesaid.
ARTICLE 8
TAXES AND ASSESSMENTS
8.1 Obligation to Pay Taxes and Assessments. Throughout the entire Term,
Tenant shall bear, pay and discharge as Additional Charges and not later than
the last day on which payment may be made without penalty or interest, any and
all taxes, assessments, charges, levies,
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fees (including, without limitation, license, permit, inspection, authorization
and similar fees) and other impositions and charges of every kind and nature
whatsoever, extraordinary as well as ordinary, foreseen or unforeseen, and each
and every installment thereof which shall or may during or with respect to the
Term hereof be charged, laid, levied, assessed, or imposed upon, or arise in
connection with, the use, occupancy, operation or possession of the Leased
Property or any part thereof or the business conducted thereon, including,
without limitation, ad valorem real and personal property taxes, all taxes
charged, laid, levied, assessed or imposed in lieu of or in addition to any of
the foregoing by virtue of all present or future laws, ordinances, requirements,
orders, directions, rules or regulations of Governmental Agencies, and all
assessments and charges imposed pursuant to the Permitted Encumbrances (other
than obligations of Landlord only under the GMACCM Loan Documents as described
in Exhibit "K" hereto) or other documents of record affecting title to the
Leased Property (provided however that such documents have been approved by
Tenant, which approval shall not unreasonably be withheld, delayed or
conditioned provided that the same are appropriate and reasonably necessary in
connection with the normal and ordinary course of ownership and use of the
Facility), whether or not such Additional Charges become due and payable during
or after the Term. Notwithstanding the foregoing, Tenant shall not be
responsible for Additional Charges due and payable after the expiration of the
Term to the extent that the same relate and apply interests and benefits
accruing to Landlord after the Lease Term. Upon payment, Tenant shall promptly
furnish to Landlord satisfactory evidence of the payment of all such taxes,
assessments, impositions or charges. Tenant shall have no right to approve, nor
shall Tenant be obligated for any amounts due by virtue of, any Facility
Mortgage or other documents relating to indebtedness of Landlord.
8.2 Tenant's Right to Contest Taxes. Notwithstanding the foregoing,
Tenant shall have the right, after prior written notice to Landlord, to contest
at its own expense the amount and validity of any taxes affecting the Leased
Property by appropriate proceedings under Applicable Law conducted in good faith
and with due diligence and to postpone or defer payment thereof, provided and so
long as:
(a) Such proceedings shall operate to suspend the collection of
such taxes with respect to the Leased Property;
(b) Neither the Leased Property nor any part thereof would be in
immediate danger of being forfeited or lost by reason of such
proceedings, postponement or deferment; and
(c) Tenant shall have furnished Landlord with security for
payment of the contested taxes which is satisfactory to Landlord, and,
in the event that the preconditions set forth in (a) and (b) above are
no longer met, Landlord shall have the right to draw upon such security
to pay and discharge the taxes in question and any liens against the
Leased Property arising thereunder.
8.3 Tax and Insurance Escrow Account. In the event Tenant fails to
timely pay any tax, assessment, imposition or charge required to be paid by
Tenant pursuant to Section 8.1, Landlord shall have the right, by written notice
to Tenant effective as of the date of such notice, to require Tenant to pay or
cause to be paid into a separate account (the "Tax and Insurance Account") to be
established by Tenant with a lending institution designated by Landlord (which
33
Tax and Insurance Account shall not be removed from such lending institution
without the express prior approval of Landlord), and which Landlord may draw
upon, a reserve amount sufficient to discharge the obligations of Tenant under
Section 8.1 and Article 9 hereof (other than worker's compensation insurance
premiums) with respect to real estate taxes and insurance premiums for the
applicable Fiscal Year as and when they become due (such amounts, the "Tax and
Insurance Escrow Amount"). During each month commencing with the first full
calendar month following the receipt of said notice from Landlord, Tenant shall
deposit into the Tax and Insurance Account one twelfth of the Tax and Insurance
Escrow Amount so that as each installment of insurance premiums and real estate
taxes becomes due and payable, there are sufficient funds in the Tax and
Insurance Account to pay the same. If the amount of such insurance premiums and
real estate taxes has not been definitively ascertained by Tenant at the time
when any such monthly deposit is to be paid, Landlord shall require payment of
the Tax and Insurance Escrow Amount based upon the amount of premiums and real
estate taxes paid for the preceding year, subject to adjustment as and when the
amount of such premiums and real estate taxes are ascertained by Tenant. The Tax
and Insurance Escrow Amount in the Tax and Insurance Account shall be and
constitute additional security for the performance of Tenant's obligations
hereunder and shall be subject to Landlord's security interest therein and
shall, if there are sufficient funds in escrow, be used to pay taxes and
insurance premiums when due. Landlord and Tenant shall execute such
documentation as may be necessary to create and maintain Landlord's security
interest in the Tax and Insurance Account.
ARTICLE 9
INSURANCE
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property and all property located therein or thereon,
insured against the following risks in the following amounts:
(a) "All-risk" property insurance (and to the extent applicable,
Builder's Risk Insurance) on the Leased Improvements and all items of business
personal property, including but not limited to signs, awnings, canopies,
gazebos, fences and retaining walls, and all P&E, including without limitation,
insurance against loss or damage from the perils under "All Risk" (Special)
form, including but not limited to the following: fire, windstorm, sprinkler
leakage, vandalism and malicious mischief, water damage, explosion of steam
boilers, pressure vessels and other similar apparatus, and other hazards
generally included under extended coverage, all in an amount equal to one
hundred percent (100%) of the replacement value of the Leased Improvements
(excluding excavation and foundation costs), business personal property and P&E,
without a co-insurance provision, and shall include an Agreed Value endorsement;
(b) Ordinance or Law Coverage with limits of not less than the Leased
Improvements for Coverage A (Loss to the undamaged portion of the building),
limits not less than $500,000.00 for Coverage B (Demolition Cost Coverage), and
limits not less than $500,000.00 for Coverage C (Increased Cost of Construction
Coverage);
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(c) Business income insurance to be written on "Special Form" (and on
"Earthquake" and "Flood" forms if such insurance for those risks is required)
including "Extra Expense", without a provision for co-insurance, including an
amount sufficient to pay at least twelve (12) months of Rent for the benefit of
Landlord, as its interest may appear, and at least twelve (12) months of "Net
Operating Income" less Rent for the benefit of Tenant;
(d) Occurrence form commercial general liability insurance, including
bodily injury and property damage, liquor liability (if applicable), fire legal
liability, contractual liability and independent contractor's hazard and
completed operations coverage in an amount not less than $1,000,000.00 per
occurrence and $2,000,000.00 per location, aggregate;
(e) Umbrella liability coverage which shall be on a following form for
the General Liability, Automobile Liability, Employers' Liability, Malpractice
and Liquor Liability (if applicable), with limits in a minimum amount of not
less than $20,000,000.00 per occurrence/aggregate;
(f) Malpractice insurance/professional liability insurance in an amount
not less than $5,000,000.00 for each person and each occurrence to cover the
professional medical care providers working on the Leased Property;
(g) Flood insurance (if the Leased Property is located in whole or in
part within an area identified as an area having special flood hazards under the
National Flood Insurance Program) for the full (100%) replacement value of the
improvements and all items of business personal property or any greater amount
as may be required by the National Flood Insurance Program;
(h) Worker's compensation coverage for all persons employed by Tenant on
the Leased Property with statutory limits, and Employers' Liability insurance in
an amount of at least $1,000,000.00 per accident/disease;
(i) Business auto liability insurance, including owned, non-owned and
hired vehicles for combined single limit of bodily injury and property damage of
not less than $1,000,000.00 per occurrence;
(j) [Intentionally Omitted];
(k) "Earthquake" insurance, if the Leased Property is currently, or at
any time in the future, located within a major earthquake disaster area, in
amount, and in such form and substance and with such limits and deductibles as
are satisfactory to Landlord; and
(l) Crime insurance covering employee theft in an amount not less than
$1,500,000.
(m) Such additional insurance or increased insurance limits as may be
reasonably required, from time to time, by Landlord (including, without
limitation, any mortgage, security agreement or other financing permitted
hereunder and then affecting the Leased Property, as well as any declaration,
ground lease or easement agreement affecting the Leased Property), or any
Mortgagee, provided the same is customarily carried by a majority of comparable
independent living and/or licensed assisted living and dementia care facilities
(as applicable) in the area.
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Without limiting the generality of the foregoing Section 9.1(m), the required
commercial liability insurance and umbrella liability coverage limits and
deductible amounts pertaining thereto as set forth in this Article 9 shall in no
event provide less coverage (lower limits or higher deductibles) than the
"Comparable Insurance Coverage" carried on any of the other independent living
or licensed assisted living and dementia care facilities, as applicable, leased
or owned by Tenant and Guarantor and their Affiliated Persons, and the insurance
coverage for the Leased Property shall immediately be increased by Tenant to
equal any greater or increased "Comparable Insurance Coverage" carried or
obtained for such other facilities. For purposes of the foregoing, "Comparable
Insurance Coverage" shall mean insurance coverage levels adjusted for relevant
variations in risk and insurability characteristics between the insured
facilities being compared, including without limitation consideration of
variations in insurance coverages carried by Guarantor and its Affiliated
Persons between different insurance markets (states or other jurisdictional
subdivisions) where insured risks or insurance pricing or availability varies
materially. Tenant shall use all reasonable efforts to obtain increased umbrella
liability coverage of not less than $50,000,000 per occurrence/aggregate, and
decreased liability insurance deductibles, at such time as the same can be
obtained at commercially reasonable or economically feasible rates for the
Leased Property. Until such increased coverages are obtained the Tenant shall
provide to Landlord a thorough annual update and review of the overall liability
insurance coverage program and strategy for Tenant and Guarantor and their
Affiliated Persons, which shall include an analysis of market rates for the
current and desired liability insurance coverages. In addition, Tenant shall
have the right to provide commercial general liability insurance coverage on a
"claims made" basis, so long as the general liability insurance coverages
otherwise required hereunder are maintained or continued in existence at all
times throughout the Lease Term for all periods that Tenant or its Affiliates
have had any ownership or use of the Leased Property, and evidence thereof has
been provided to Landlord.
9.2 Waiver of Subrogation. Landlord and Tenant agree that with respect
to any property loss which is covered by insurance then being carried by
Landlord or Tenant, respectively, the party carrying such insurance and
suffering said loss releases the other of and from any and all claims with
respect to such loss; and they further agree that their respective insurance
companies shall have no right of subrogation against the other on account
thereof.
9.3 General Provisions. The Facility's allocated chargeback/deductible
for general liability insurance shall not exceed $1,000,000 for independent
living or assisted living and $1,000,000 for Memory Impaired, to the extent
commercially available, and $350,000.00 for workmen's compensation insurance, to
the extent commercially available, unless any greater amounts are agreeable to
both Landlord and Tenant. The Facility's property insurance deductible shall not
exceed $25,000.00 unless such greater amount is agreeable to both Landlord and
Tenant, or if a higher deductible for high hazard risks (i.e., wind or flood) is
mandated by the insurance carrier. All insurance policies pursuant to this
Article 9 shall be issued by insurance carriers having a general policy holder's
rating of no less than A-/VII in Best's latest rating guide, and shall contain
clauses or endorsements to the effect that (a) Landlord shall not be liable for
any insurance premiums thereon or subject to any assessments thereunder, and (b)
the coverages provided thereby will be primary and any insurance carried by any
additional insured shall be excess and non-contributory to the extent of the
indemnification obligation pursuant to Section 9.5 below. All such policies
described in Section 9.1 shall name Landlord, CRC and CNL Retirement and any
Mortgagee whose name and address has been provided to Tenant as
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additional insureds, loss payees, or mortgagees, as their interests may appear
and to the extent of their indemnity. All loss adjustments shall be payable as
provided in Article 10. Tenant shall deliver certificates thereof to Landlord
prior to their effective date (and, with respect to any renewal policy, no less
than thirty (30) days prior to the expiration of the existing policy), which
certificates shall state the nature and level of coverage reported thereby, as
well as the amount of the applicable deductible. Upon Landlord's request,
duplicate original copies of all insurance policies to be obtained by Tenant
shall be provided to Landlord by Tenant. All such policies shall provide
Landlord (and any Mortgagee whose name and address has been provided to Tenant
if required by the same) thirty (30) days prior written notice of any material
change or cancellation of such policy.
In the event Tenant shall fail to effect such insurance as herein
required, to pay the premiums therefor or to deliver such certificates to
Landlord or any Mortgagee at the times required, Landlord shall have the right,
but not the obligation, subject to the provisions of Section 12.4, to acquire
such insurance and pay the premiums therefor, which amounts shall be payable to
Landlord, upon demand, as Additional Rent, together with interest accrued
thereon at the Overdue Rate from the date such payment is made until (but
excluding) the date repaid.
9.4 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant, so long as such policies otherwise
meet all requirements under this Article 9.
9.5 Indemnification of Landlord. Except as expressly provided herein,
Tenant shall protect, indemnify and hold harmless Landlord for, from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon or
incurred by or asserted against Landlord by reason of: (a) any accident, injury
to or death of persons or loss of or damage to property of third parties
occurring on or about the Leased Property or adjoining sidewalks or rights of
way under Tenant's control, and (b) any use, misuse, condition, management,
maintenance or repair by Tenant or anyone claiming under Tenant of the Leased
Property or Tenant's Personal Property or any litigation, proceeding or claim by
Governmental Agencies relating to such use, misuse, condition, management,
maintenance, or repair thereof to which Landlord is made a party; provided,
however, that Tenant's obligations hereunder shall not apply to any liability,
obligation, claim, damage, penalty, cause of action, cost or expense arising
from any gross negligence or willful misconduct of Landlord, its employees,
agents, contractors or invitees. Any such claim, action or proceeding asserted
or instituted against Landlord covered under this indemnity shall be defended by
counsel selected by Tenant and reasonably acceptable to Landlord, at Tenant's
expense. Notwithstanding the foregoing, indemnification with respect to
Hazardous Substances is governed by Section 4.3. The obligations of Tenant under
this Section 9.5 shall survive the expiration or any early termination of this
Agreement.
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ARTICLE 10
CASUALTY
10.1 Restoration and Repair. If during the Term the Leased Property
shall be totally or partially destroyed and thereby rendered Unsuitable for Its
Permitted Use, Tenant shall give Landlord prompt Notice thereof. Either Landlord
or Tenant may, by the giving of Notice thereof to the other party within sixty
(60) days after such casualty occurs, terminate this Agreement, whereupon
Landlord shall be entitled to retain the insurance proceeds payable on account
of such damage and Tenant shall pay to Landlord the amount of any deductible.
Tenant further expressly acknowledges, understands and agrees that in the event
that the Agreement is terminated as aforesaid, Landlord may settle any insurance
claims and Tenant shall, upon request of Landlord, cooperate in any such
settlement. If during the Term, the Leased Property shall be destroyed or
damaged in whole or in part by fire, windstorm or any other cause whatsoever,
but the Leased Property either (i) is not rendered Unsuitable for Its Permitted
Use or (ii) is rendered Unsuitable for Its Permitted Use but neither Landlord
nor Tenant terminate this Agreement in the manner provided above, then, Tenant
shall give Landlord immediate Notice thereof and Tenant shall, subject to the
provisions of Section 10.2 below, repair, reconstruct and replace the Leased
Property, or the portion thereof so destroyed or damaged, at least to the extent
of the value and character thereof existing immediately prior to such occurrence
and in compliance with all Legal Requirements, including any alterations to the
Leased Property required to be made by any Governmental Agencies due to any
changes in code or building regulations (which Tenant acknowledges may increase
the replacement value of the Leased Property which Tenant will then be required
to insure, due to any changes in code or building regulations). All such
restoration work shall be started as promptly as practicable and diligently
completed at Tenant's sole cost and expense (using available insurance
proceeds). Tenant shall, however, immediately take such action as is necessary
to assure that the Leased Property (or any portion thereof), does not constitute
a nuisance or otherwise present or constitute a health or safety hazard.
Notwithstanding the foregoing the Tenant shall have the right to elect not to
repair any material casualty damage (estimated to cost greater than $250,000 to
repair) occurring within twelve (12) months prior to the scheduled expiration of
the then-current Term, provided and on the condition that: (i) Tenant promptly
pays to Landlord the full amount of all deductibles applying to the insured
loss, as well as of all uninsured amounts thereof, and Landlord or its Mortgagee
also receive and retain all insurance proceeds; (ii) Tenant has provided
adequate assurance that applicable business interruption insurance will continue
to be available through the end of the then-current Term to cover all resulting
loss of income or else adequate security therefor as requested by Landlord; and
(iii) Tenant, at Tenant's sole cost and expense, properly secures and protects
and preserves any damaged portion of the Facility in such a fashion as to insure
the safety of all Facility Residents, guest, invitees and others (to the extent
that such persons are reasonably expected to continue to occupy or come upon the
relevant portions of the Leased Property), and the value of the affected
improvements.
10.2 Escrow and Disbursement of Insurance Proceeds. If this Agreement is
not otherwise terminated pursuant to Section 10.1, then in the event of a
casualty resulting in a loss to the Leased Improvements and/or P&E in an amount
greater than Fifty Thousand and No/100 Dollars ($50,000.00) (as determined by an
architect or engineer selected by Landlord), the
38
proceeds of all insurance policies maintained by Tenant shall be deposited in
Landlord's name in an escrow account at a bank or other financial institution
designated by Landlord, and shall be used by Tenant for the repair,
reconstruction or restoration of the Leased Property to its original condition.
Tenant shall, at the time of establishment of such escrow account and from time
to time thereafter until said work shall have been completed and paid for,
furnish Landlord with adequate evidence acceptable to Landlord that at all times
the undisbursed portion of the escrowed insurance proceeds, together with any
funds made available by Tenant, is sufficient to pay for the repair,
reconstruction or restoration in its entirety. Landlord may, at its option,
require, prior to advancement of said escrowed insurance proceeds (i) approval
of plans and specifications by an architect or other design professional
appropriate under the circumstances and approved by Landlord and Tenant (which
approval shall not be unreasonably withheld or delayed), (ii) general
contractors' estimates, (iii) architect's certificates, (iv) unconditional lien
waivers of general contractors, if available, (v) evidence of approval by all
Governmental Agencies and other regulatory bodies whose approval is required,
and (vi) such other terms as a Mortgagee or lender of Landlord may reasonably
require. The escrowed insurance proceeds shall be disbursed by Landlord, not
more than monthly, upon (i) certification of the architect or engineer selected
by Landlord and having supervision of the work that such amounts are the amounts
paid or payable for the repair, reconstruction or restoration and (ii) submittal
by Tenant of a written requisition and substantiation therefor on AIA Forms G702
and G703 (or on such other form or forms as may be reasonably acceptable to
Landlord). Tenant shall obtain, and make available to Landlord, receipted bills
and, upon completion of said work, full and final waivers of lien. In the event
of a casualty resulting in a loss payment for the Leased Improvements in an
amount equal to or less than the amount stated above, the proceeds shall be paid
to Tenant, and shall be applied towards repair, reconstruction and restoration.
Any and all loss adjustments with respect to losses payable hereunder shall
require the prior written consent of Landlord. All salvage resulting from any
risk covered by insurance shall belong to Tenant, provided any rights to the
same have been waived by the insurer. In addition, notwithstanding anything in
this Agreement to the contrary, Tenant shall be strictly liable and solely
responsible for the amount of any deductible and shall pay for all repairs,
reconstruction or alterations up to the full amount of such deductible (and
provide evidence of such payment to Landlord by documentation reasonably
acceptable to Landlord) before any insurance proceeds are used for repairs,
reconstruction or alterations.
10.3 No Abatement of Rent. Unless terminated in accordance with the
provisions of Section 10.1 above, this Agreement shall remain in full force and
effect and Tenant's obligation to make all payments of Rent and to pay all
Additional Charges as and when required under this Agreement shall remain
unabated during the Term notwithstanding any casualty to the Leased Property
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any event of casualty involving the
Leased Property and, to the maximum extent permitted by law, Tenant hereby
waives the application of any local or state statute, law, rule, regulation or
ordinance in effect during the Term which provides for such abatement.
10.4 Tenant's Property and Business Interruption Insurance. All
insurance proceeds payable by reason of any loss of or damage to any of Tenant's
Personal Property and the business interruption insurance maintained for the
benefit of Tenant shall be paid to Tenant;
39
provided, however, no such payments shall diminish or reduce the insurance
payments otherwise payable to or for the benefit of Landlord hereunder.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
the Leased Property as hereinabove provided, Tenant shall either (i) restore all
alterations and improvements made by Tenant and Tenant's Personal Property, or
(ii) replace such alterations and improvements and Tenant's Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
10.6 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property
and agrees that its rights shall be limited to those set forth in Section 10.1.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If the whole of the Leased Property shall
be taken or condemned for any public or quasi-public use or purpose, by right of
eminent domain or by purchase in lieu thereof, or if a substantial portion of
the Leased Property shall be so taken or condemned that the portion or portions
remaining is or are not sufficient and suitable, in the mutual reasonable
judgment of Landlord and Tenant, for the continued operation thereof as required
herein, so as to effectively render the Leased Property Unsuitable for Its
Permitted Use, then this Agreement and the Term hereby granted shall cease and
terminate (without prejudice to Landlord's and Tenant's respective rights to an
award under Section 11.3 below), as of the date on which the Condemnor takes
possession and all Rent shall be paid by Tenant to Landlord up to that date or
refunded by Landlord to Tenant if Rent has previously been paid by Tenant beyond
that date.
11.2 Partial Condemnation. If a portion of the Leased Property is taken,
and the portion or portions remaining can, in the mutual reasonable judgment of
Landlord and Tenant, be adapted and used for the conduct of Tenant's business
operation in accordance with the terms of this Agreement, such that the Leased
Property is not effectively rendered Unsuitable for Its Permitted Use, then the
Tenant shall, utilizing condemnation proceeds paid to Landlord from the
Condemnor, promptly restore the remaining portion or portions thereof to a
condition comparable to their condition at the time of such taking or
condemnation, less the portion or portions lost by the taking, and this
Agreement shall continue in full force and effect except that the Rent payable
hereunder shall, if necessary, be equitably adjusted to take into account the
proportionate reduction in the number of licensed beds or living units located
on the Leased Property as a result of the taking.
11.3 Disbursement of Award. The entire award for the Leased Property or
the portion or portions thereof so taken shall be apportioned between Landlord
and Tenant as follows: (a) if this Agreement terminates due to a taking or
condemnation, Landlord shall be entitled to the entire award; provided, however,
that any portion of the award expressly made for the taking of
40
Tenant's leasehold interest in the Leased Property, loss of business during the
remainder of the Term, and the taking of Tenant's Personal Property shall be the
sole property of and payable to Tenant, and (b) if this Agreement does not
terminate due to such taking or condemnation, Tenant shall be entitled to the
award to the extent required for restoration of the Leased Property, and
Landlord shall be entitled to the balance of the award not applied to
restoration. In any condemnation proceedings, Landlord and Tenant shall each
seek its own award in conformity herewith, at its own expense. If this Agreement
does not terminate due to a taking or condemnation, Tenant shall, with due
diligence, restore the remaining portion or portions of the Leased Property in
the manner hereinabove provided. In such event, the proceeds of the award to be
applied to restoration shall be deposited with a bank or financial institution
designated by Landlord as if such award were insurance proceeds, and the amount
so deposited will thereafter be treated in the same manner as insurance proceeds
are to be treated under Section 10.2 of this Agreement until the restoration has
been completed and Tenant has been reimbursed for all the costs and expenses
thereof. If the award is insufficient to pay for the restoration, Tenant shall
be responsible for the remaining cost and expense of such restoration.
11.4 No Abatement of Rent. This Agreement shall remain in full force and
effect and Tenant's obligation to make all payments of Rent and to pay all other
charges as and when required under this Agreement shall remain unabated during
the Term notwithstanding any Condemnation involving the Leased Property. The
provisions of this Article 11 shall be considered an express agreement governing
any Condemnation involving the Leased Property and, to the maximum extent
permitted by law, no local or State statute, law, rule, regulation or ordinance
in effect during the Term which provides for such abatement shall have any
application in such case.
11.5 Disputes. If Landlord and Tenant cannot agree in respect of any
matters to be determined under this Article, a determination shall be requested
of the court having jurisdiction over the taking or condemnation; provided,
however, that if said court will not accept such matters for determination,
either party may have the matters determined by a court otherwise having
jurisdiction over the parties.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. Each of the following events shall be an Event
of Default hereunder by Tenant and shall constitute a breach of this Agreement:
(a) If Tenant shall fail to (i) pay, when due, any Rent or any
Additional Charge due hereunder; (ii) fully fund and maintain the
Security Deposit as required by Section 3.11; or (iii) fully fund and
maintain the Reserve and fund all Reserve Expenditures as required by
Section 5.2, and such failure in each such event shall continue for a
period of five (5) days after such amounts become due and payable.
41
(b) If Tenant shall violate or fail to comply with or perform
any other term, provision, covenant, agreement or condition to be
performed or observed by Tenant under this Agreement which is not
otherwise identified in this Section 12.1, and such violation or failure
shall continue for a period of thirty (30) days after written notice
thereof from Landlord; provided, however, if such violation or failure
is incapable of cure by Tenant within such thirty (30) days after
Tenant's diligent and continuous efforts to cure the same, Tenant shall
have an additional period of sixty (60) days to cure the same.
(c) If any assignment, transfer, sublease or encumbrance shall
be made or deemed to be made that is in violation of the provisions of
this Agreement.
(d) If Tenant shall cease the actual and continuous operation of
the business contemplated by this Agreement to be conducted by Tenant
upon the Leased Property (and such cessation is not the result of
casualty, condemnation or renovation and accompanying restoration or is
not otherwise permitted by Landlord or is not the result of a legal
requirement or during an emergency); or if Tenant shall vacate, desert
or abandon the Leased Property; or if the Leased Property shall become
empty and unoccupied; or if the Leased Property or Leased Improvements
are used or are permitted to be used for any purpose, or for the conduct
of any activity, other than the Permitted Use.
(e) If, at any time during the Term of this Agreement, Tenant or
Guarantor shall file in any court, pursuant to any statute of either the
United States or of any State, a petition in bankruptcy or insolvency,
or for reorganization or arrangement, or for the appointment of a
receiver or trustee of all or any portion of Tenant's or Guarantor's
property, including, without limitation, the leasehold interest in the
Leased Property, or if Tenant or Guarantor shall make an assignment for
the benefit of its creditors or petitions for or enters into an
arrangement with its creditors.
(f) If, at any time during the Term of this Agreement, there
shall be filed against Tenant or Guarantor in any court pursuant to any
statute of the United States or of any State, a petition in bankruptcy
or insolvency, or for reorganization, or for the appointment of a
receiver or trustee of all or a portion of Tenant's or Guarantor's
property, including, without limitation, the leasehold interest in the
Leased Property, and any such proceeding against Tenant or Guarantor
shall not be dismissed within sixty (60) days following the commencement
thereof.
(g) If Tenant's leasehold interest in the Leased Property or any
property therein (including without limitation Tenant's Personal
Property and the P&E Replacements) shall be seized under any levy,
execution, attachment or other process of court where the same shall not
be vacated or stayed on appeal or otherwise within thirty (30) days
thereafter, or if Tenant's leasehold interest in the Leased Property is
sold by judicial sale and such sale is not vacated, set aside or stayed
on appeal or otherwise within thirty (30) days thereafter.
(h) If any of the Facility's Permits material to the Facility's
operation for its Permitted Use are at any time suspended and the
suspension is not stayed pending appeal
42
within five (5) days, or voluntarily terminated without the prior
written consent of Landlord.
(i) If any Governmental Agencies having jurisdiction over the
operation of the Facility removes ten percent (10%) or more of the total
number of patients or residents located in the Facility at the time of
such removal.
(j) If Tenant voluntarily transfers ten (10) or more patients or
residents located in the Facility in any one (1) year period (except as
necessitated by a casualty), provided that any such transfer to a
different type of care facility as a result of such patient's or
resident's special needs that cannot be met at the Facility shall not be
deemed a voluntary transfer.
(k) If Tenant fails to give notice to Landlord not later than
ten (10) days after Tenant's receipt of any fine notice from any
Government Agency relating to a Major Violation at the Facility.
(l) If Tenant fails to notify Landlord within twenty-four (24)
hours after receipt of any notice from any Governmental Agency
terminating or suspending or reflecting a material risk of an imminent
termination or suspension, of any material Permit relating to the
Facility.
(m) If Tenant fails during the Term of this Lease to cure or
xxxxx any Major Violation occurring during the Term that is claimed by
any Governmental Agency of any law, order, ordinance, rule or regulation
pertaining to the operation of the Facility, and within the time
permitted by such authority for such cure or abatement.
(n) The failure of Tenant to correct, within the time deadlines
set by any Governmental Agency, any deficiency which would result in the
following actions by such agency with respect to the Facility:
(i) a termination of any Reimbursement Contract or
any Permit material to the operation of the
Facility; or
(ii) the issuance of a stop placement order or ban on
new admissions generally.
(o) If a final unappealable determination is made by applicable
state authorities of the revocation or limitation of any Permit required
for the lawful operation of the Leased Property in accordance with its
Permitted Use or there occurs the loss or material limitation of any
Permit under any other circumstances under which Tenant is required to
cease its operation of the Leased Property in accordance with its
Permitted Use at the time of such loss or limitation.
(p) If Tenant or the Facility should be assessed fines or
penalties by any state health or licensing agency having jurisdiction
over such Persons or the Facility in excess of $25,000.00 in any Fiscal
Year.
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(q) If Tenant or Guarantor or an Affiliated Person of Tenant or
Guarantor shall default under any other ARC-Related Lease (whether now
in effect or entered into in the future) and shall fail to cure such
default in the time period provided for in that lease.
(r) If Guarantor shall default under the Guaranty and any such
default shall remain uncured through any applicable notice and cure
period thereunder.
12.2 Remedies on Default. If any of the Events of Default hereinabove
specified shall occur, Landlord, at any time thereafter, shall have and may
exercise any of the following rights and remedies:
(a) Landlord may, pursuant to written notice thereof to Tenant,
immediately terminate this Agreement and, peaceably or pursuant to
appropriate legal proceedings, re-enter, retake and resume possession of
the Leased Property for Landlord's own account without liability for
trespass (Tenant hereby waiving any right to notice or hearing prior to
such taking of possession by Landlord) and, for Tenant's breach of and
default under this Agreement, recover immediately from Tenant any and
all sums and damages due or in existence at the time of such
termination, including, without limitation, (i) all Rent and other sums,
charges, payments, costs and expenses agreed and/or required to be paid
by Tenant to Landlord hereunder prior to such termination, (ii) all
costs and expenses of Landlord in connection with the recovery of
possession of the Leased Property, including reasonable attorney's fees
based upon services rendered at hourly rates and court costs, and (iii)
all costs and expenses of Landlord in connection with any reletting or
attempted reletting of the Leased Property or any part or parts thereof,
including, without limitation, brokerage fees, advertising costs,
reasonable attorney's fees based upon services rendered at hourly rates
based upon service rendered at hourly rates and the cost of any
alterations or repairs or tenant improvements which may be reasonably
required to so relet the Leased Property, or any part or parts thereof.
(b) Landlord may, pursuant to any prior notice required by law,
and without terminating this Agreement, peaceably or pursuant to
appropriate legal proceedings, re-enter, retake and resume possession of
the Leased Property for the account of Tenant, make such alterations of
and repairs and improvements to the Leased Property as may be reasonably
necessary in order to relet the same or any part or parts thereof and,
directly or through a qualified management or operating company which
may include an Affiliated Person of Landlord, operate and manage the
Leased Property, and relet or attempt to relet the Leased Property or
any part or parts thereof for such term or terms (which may be for a
term or terms extending beyond the Term of this Agreement), at such
rents and upon such other terms and provisions as Landlord, in its sole
discretion, may deem advisable. If Landlord takes possession and control
of the Leased Property and operates the same, Tenant shall, for so long
as Landlord is actively operating the Leased Property, have no
obligation to operate the Leased Property but agrees that Landlord, any
contract manager or operator, or any new tenant or sublessee may, to the
extent permitted by law, operate the Facility under Tenant's Permits,
including its Medicaid and Medicare provider agreements, if any, until
same are issued in the name of the Landlord or the new manager/operator
or tenant or sublessee, as applicable. If Landlord relets or attempts to
44
relet the Leased Property, or obtains a contract manager or operator for
the Leased Property, Landlord shall at its sole discretion determine the
terms and provisions of any new lease or sublease, or management or
operating agreement, and whether or not a particular proposed manager or
operator, or new tenant or sublessee, is acceptable to Landlord. Upon
any such reletting, or the operation of the Leased Property by a
contract manager or operator, all rents or incomes received by the
Landlord from such reletting or otherwise from the operation of the
Leased Property shall be applied, (i) first, to the payment of all costs
and expenses of recovering possession of the Leased Property, (ii)
second, to the payment of any costs and expenses of such reletting and
or operation, including brokerage fees, advertising costs, reasonable
attorney's fees based upon service rendered at hourly rates, a
management fee of between five percent (5%) and ten percent (10%) of the
gross revenues generated, and the cost of any alterations and repairs
reasonably required for such reletting or operation of the Leased
Property; (iii) third, to the payment of any indebtedness, other than
Rent, due hereunder from Tenant to the Landlord, (iv) fourth, to the
payment of all Rent and other sums due and unpaid hereunder, and (v)
fifth, the residue, if any, shall be held by the Landlord and applied in
payment of future Rent as the same may become due and payable hereunder.
If the rents received from such reletting or net income from the
operation of the Leased Property during any period shall be less than
the Rent and Additional Charges required to be paid during that period
by the Tenant hereunder, Tenant shall promptly pay any such deficiency
to the Landlord and failing the prompt payment thereof by Tenant to
Landlord, Landlord shall immediately be entitled to institute legal
proceedings for the recovery and collection of the same. Such deficiency
shall be calculated and paid at the time each payment of Minimum Rent,
Percentage Rent or any other sum shall otherwise become due under this
Agreement, or, at the option of Landlord, at the end of the Term of this
Agreement. Landlord shall, in addition, be immediately entitled to xxx
for and otherwise recover from Tenant any other damages occasioned by or
resulting from any abandonment of the Leased Property or other breach of
or default under this Agreement other than a default in the payment of
Rent. No such re-entry, retaking or resumption of possession of the
Leased Property by the Landlord for the account of Tenant shall be
construed as an election on the part of Landlord to terminate this
Agreement unless a written notice of such intention shall be given to
the Tenant or unless the termination of this Agreement be decreed by a
court of competent jurisdiction. Notwithstanding any such re-entry and
reletting or attempted reletting of the Leased Property or any part or
parts thereof for the account of Tenant without termination, Landlord
may at any time thereafter, upon written notice to Tenant, elect to
terminate this Agreement or pursue any other remedy available to
Landlord for Tenant's previous breach of or default under this
Agreement.
(c) Landlord may, without re-entering, retaking or resuming
possession of the Leased Property, xxx for all Rent and all other sums,
charges, payments, costs and expenses due from Tenant to Landlord
hereunder (discounted to present value) either: (i) as they become due
under this Agreement, taking into account that Tenant's right and option
to pay the Rent hereunder on a monthly basis in any particular Fiscal
Year is conditioned upon the absence of a Default on Tenant's part in
the performance of its obligations under this Agreement, or (ii) at
Landlord's option, accelerate the maturity and
45
due date of the whole or any part of the Rent for the entire
then-remaining unexpired balance of the Term of this Agreement, as well
as all other sums, charges, payments, costs and expenses required to be
paid by Tenant to Landlord hereunder, including, without limitation,
damages for breach or default of Tenant's obligations hereunder in
existence at the time of such acceleration, such that all sums due and
payable under this Agreement shall, following such acceleration, be
treated as being and, in fact, be due and payable in advance as of the
date of such acceleration. Landlord may then proceed to recover and
collect all such unpaid Rent and other sums so sued for from Tenant by
distress, levy, execution or otherwise. Regardless of which of the
foregoing alternative remedies is chosen by Landlord under this
subparagraph (c), Landlord shall not be required to relet the Leased
Property nor exercise any other right granted to Landlord pursuant to
this Agreement, nor, except as may be required by Applicable Laws, shall
Landlord be under any obligation to minimize or mitigate Landlord's
damages or Tenant's loss as a result of Tenant's breach of or default
under this Agreement. Notwithstanding the foregoing, following such time
as Landlord may obtain possession of the Leased Property, Landlord or
its successor Landlord at the time of any Lease termination, shall
continue to make the Leased Property available for lease, on an "as is"
basis, and shall turn over the net proceeds thereof to Tenant to the
extent actually received by Landlord in respect of any time period for
which Landlord shall have received the full amount of Rent payable with
respect thereto (albeit perhaps on a basis reasonably discounted for the
time value of money or present-value basis).
(d) Landlord may, in addition to any other remedies provided
herein, enter upon the Leased Property or any portion thereof and take
possession of (i) any and all of Tenant's Personal Property, if any,
(ii) Tenant's books and records necessary to operate the Leased
Property, and (iii) all the bank accounts concerning, or established
for, the Leased Property, without liability for trespass or conversion
(Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same by public or private
sale, after giving Tenant reasonable notice of the time and place of any
public or private sale, at which sale Landlord or its assigns may
purchase all or any portion of Tenant's Personal Property, if any,
unless otherwise prevented by law. Unless otherwise provided by law and
without intending to exclude any other manner of giving Tenant
reasonable notice, the requirement of reasonable notice shall be met if
such notice is given at least ten (10) days before the date of sale. The
proceeds from any such disposition, less all expenses incurred in
connection with the taking of possession, holding and selling of such
Property (including reasonable attorneys' fees based upon services
rendered at hourly rates) shall be credited against Rent which is due
hereunder.
(e) Tenant acknowledges that one of the rights and remedies
available to Landlord under Applicable Law is to apply to a court of
competent jurisdiction for the appointment of a receiver to collect the
rents, issues, profits and income of the Leased Property and to manage
the operation of the Leased Property. Tenant hereby further acknowledges
that the revocation, suspension or material limitation of any
certification of the Leased Property for provider status under Medicare
or Medicaid (or successor programs), if applicable, and/or the
revocation, suspension or material limitation of any licenses for the
use of the Leased Property as an independent living or licensed assisted
living and dementia care facility, as applicable, under the laws of the
State will materially
46
and irreparably impair the value of Landlord's investment in the Leased
Property. Therefore, in any of such events, and in addition to any other
right or remedy of Landlord under this Agreement, Landlord may petition
any appropriate court for appointment of a receiver to manage the
operation of the Leased Property (or any portion thereof as to which
Tenant has suffered the revocation, suspension or material limitation of
any license), to collect and disburse all rents, issues, profits and
income generated thereby and to preserve or replace to the extent
possible the operating license and provider certification of the Leased
Property or to otherwise substitute the licensee or provider thereof.
The receiver shall be entitled to a reasonable fee for his services as
receiver. All such fees and other expenses of the receivership estate
shall be payable as Additional Charges under this Agreement. Tenant
hereby irrevocably stipulates to the appointment of a receiver under
such circumstances and for such purposes and agrees not to contest such
appointment.
(f) In addition to the remedies hereinabove specified and
enumerated, Landlord shall have and may exercise the right to invoke any
other remedies allowed at law or in equity as if the remedies of
re-entry, unlawful detainer proceedings and other remedies were not
herein provided. Accordingly, the mention in this Agreement of any
particular remedy shall not preclude Landlord from having or exercising
any other remedy at law or in equity. Nothing herein contained shall be
construed as precluding the Landlord from having or exercising such
lawful remedies as may be and become necessary in order to preserve the
Landlord's right or the interest of the Landlord in the Leased Property
and in this Agreement, even before the expiration of any notice periods
provided for in this Agreement, if under the particular circumstances
then existing the allowance of such notice periods will prejudice or
will endanger the rights and estate of the Landlord in this Agreement
and in the Leased Property. In addition, any provision of this Agreement
to the contrary notwithstanding, no provision of this Agreement shall
delay or otherwise limit Landlord's right to seek injunctive relief or
Tenant's obligation to comply with any such injunctive relief.
12.3 Application of Funds. Any payments received by Landlord under any
of the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State.
12.4 Landlord's Right to Cure Tenant's Default. If Tenant shall default
in the performance of any term, provisions, covenant or condition on its part to
be performed hereunder, Landlord may, but shall have no obligation to perform
the same for the account and at the expense of Tenant. If, at any time and by
reason of such default, Landlord is compelled to pay, or elects to pay, any sum
of money or do any act which will require the payment of any sum of money, or is
compelled to incur any expense in the enforcement of its rights hereunder or
otherwise, such sum or sums, together with interest thereon at the Overdue Rate
shall be deemed Additional Rent hereunder and shall be repaid to Landlord by
Tenant promptly when billed therefor, and Landlord shall have all the same
rights and remedies in respect thereof as Landlord has in respect of the rents
herein reserved.
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12.5 Landlord's Lien. Landlord shall have at all times during the Term
of this Agreement, a valid lien for all rents and other sums of money becoming
due hereunder from Tenant, upon all goods, accounts, wares, merchandise,
inventory, furniture, fixtures, equipment, vehicles and other personal property
and effects of Tenant situated in or upon the Leased Property, including
Tenant's Personal Property and any interest of Tenant in P&E Replacements, but
specifically excluding the trade names "ARC," "American Retirement Corporation,"
or any derivation or replacement thereof or addition thereto applied by
Affiliated Persons of Guarantor to other facilities, and such property shall not
be removed therefrom except in accordance with the terms of this Agreement
without the approval and consent of Landlord until all arrearages in Rent as
well as any and all other sums of money then due to Landlord hereunder shall
first have been paid and discharged in full. Alternatively, the lien hereby
granted may be foreclosed in the manner and form provided by law for foreclosure
of security interests or in any other manner and form provided by law. The
statutory lien for Rent, if any, is not hereby waived and the express
contractual lien herein granted is in addition thereto and supplementary
thereto. Tenant agrees to execute and deliver to Landlord from time to time
during the Term of this Agreement such Financing Statements as may be required
by Landlord in order to perfect the Landlord's lien provided herein or granted
or created by state law. Tenant further agrees that during an Event of Default,
Tenant shall not make any distributions to its shareholders, partners, members
or other owners and any such distributions shall be considered and deemed to be
fraudulent and preferential and subordinate to Landlord's claim for Rent and
other sums hereunder.
ARTICLE 13
HOLDING OVER
If Tenant or any other person or party shall remain in possession of the
Leased Property or any part thereof following the expiration of the Term or
earlier termination of this Agreement without an agreement in writing between
Landlord and Tenant with respect thereto, the person or party remaining in
possession shall be deemed to be a tenant at sufferance, and during any such
holdover, the Rent payable under this Agreement by such tenant at sufferance
shall be double the rate or rates in effect immediately prior to the expiration
of the Term or earlier termination of this Agreement. In no event, however,
shall such holding over be deemed or construed to be or constitute a renewal or
extension of this Agreement.
ARTICLE 14
LIABILITY OF LANDLORD; INDEMNIFICATION
14.1 Liability of Landlord. Landlord and its affiliates shall not be
liable to Tenant, its employees, agents, invitees, licensees, customers,
clients, residents and their respective family members or guests for any damage,
injury, loss, compensation or claim, including, but not limited to, claims for
the interruption of or loss to Tenant's business, based on, arising out of or
resulting from any cause whatsoever (other than Landlord's gross negligence or
willful misconduct), including, but not limited to: (a) repairs to any portion
of the Leased Property; (b)
48
interruption in Tenant's use of the Leased Property; (c) any accident or damage
resulting from the use or operation (by Landlord, Tenant or any other person or
persons) of any equipment within the Leased Property, including without
limitation, heating, cooling, electrical or plumbing equipment or apparatus; (d)
the termination of this Agreement by reason of the condemnation or destruction
of the Leased Property in accordance with the provisions of this Agreement; (e)
any fire, robbery, theft, mysterious disappearance or other casualty; (f) the
actions of any other person or persons; and (g) any leakage or seepage in or
from any part or portion of the Leased Property, whether from water, rain or
other precipitation that may leak into, or flow from, any part of the Leased
Property, or from drains, pipes or plumbing fixtures in the Leased Improvements.
Any goods, property or personal effects stored or placed by the Tenant or its
employees in or about the Leased Property including Tenant's Personal Property,
shall be at the sole risk of the Tenant.
14.2 Indemnification of Landlord. Tenant shall defend, indemnify and
save and hold Landlord harmless from and against any and all liabilities,
obligations, losses, damages, injunctions, suits, actions, fines, penalties,
claims, demands, costs and expenses of every kind or nature, including
reasonable attorneys' fees and court costs, incurred by Landlord, arising
directly or indirectly from or out of: (a) any failure by Tenant to perform any
of the terms, provisions, covenants or conditions of this Agreement, on Tenant's
part to be performed including but not limited to the payment of any fee, cost
or expense which Tenant is obligated to pay and discharge hereunder, (b) any
accident, injury or damage which shall happen at, in or upon the Leased
Property, however occurring; (c) any matter or thing growing out of the
condition, occupation, maintenance, alteration, repair, use or operation by any
person of the Leased Property, or any part thereof, or the operation of the
business contemplated by this Agreement to be conducted thereon, thereat,
therein, or therefrom; (d) any failure of Tenant to comply with the Legal
Requirements; (e) any contamination of the Leased Property, or the groundwaters
thereof, arising on or after the date Tenant takes possession of the Leased
Property and occasioned by the use, transportation, storage, spillage or
discharge thereon, therein or therefrom of any toxic or hazardous chemicals,
compounds, materials or substances, whether by Tenant or by any agent or invitee
of Tenant; (f) any discharge of toxic or hazardous sewage or waste materials
from the Leased Property into any septic facility or sanitary sewer system
serving the Leased Property arising on or after the date Tenant takes possession
of the Leased Property, whether by Tenant or by any agent of Tenant; or (g) any
other act or omission of Tenant, its employees, agents, invitees, customers,
licensees or contractors, provided, however, Tenant shall not be liable for or
be obligated to indemnify Landlord from and against any damages resulting from
Landlord's gross negligence or willful misconduct.
THE INDEMNIFICATION OF LANDLORD HEREUNDER IS INTENDED TO AND SHALL
EXPRESSLY INCLUDE INDEMNIFICATION AGAINST LANDLORD'S OWN NEGLIGENCE,
UNLESS SPECIFICALLY OTHERWISE PROVIDED.
Tenant's indemnity obligations under this Article and elsewhere in this
Agreement arising prior to the termination or permitted assignment of this
Agreement shall survive any such termination or assignment.
49
14.3 Notice of Claim or Suit. Tenant shall promptly notify Landlord of
any claim, action, proceeding or suit instituted or threatened against Tenant or
Landlord of which Tenant receives notice or of which Tenant acquires knowledge.
In the event Landlord is made a party to any action for damages or other relief
against which Tenant has indemnified Landlord, as aforesaid, Tenant shall at its
own expense using counsel reasonably approved by Landlord, diligently defend
Landlord, pay all costs in such litigation or, at Landlord's option, and
expense, Landlord may nonetheless engage its own counsel in connection with its
own defense or settlement of said litigation in which event Tenant shall
cooperate with Landlord and make available to Landlord all information and data
which Landlord deems necessary or desirable for such defense. In the event
Landlord is required to secure its own counsel due to a conflict in the
interests of Tenant and Landlord in any action for damages or other relief
against which Tenant has indemnified Landlord, Tenant shall pay all of
Landlord's costs in such litigation. Tenant is required to approve a settlement
agreement for any such claim or suit as requested by Landlord and which is
consistent with applicable insurance company requirements, unless Tenant posts a
bond or other security acceptable to Landlord for any potentially uninsured
liability amounts.
14.4 Limitation on Liability of Landlord. In the event Tenant is awarded
a money judgment against Landlord, Tenant's sole recourse for satisfaction of
such judgment shall be limited to execution against the Landlord's interest in
the Leased Property. In no event shall any partner, member, officer, director,
stockholder or shareholder of Landlord or any partner thereof or Affiliated
Person or Subsidiary thereof, be personally liable for the obligations of
Landlord hereunder.
ARTICLE 15
REIT AND UBTI REQUIREMENTS
Tenant understands that, in order for Landlord to qualify as a real
estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"), the following requirements must be satisfied. The parties
intend that amounts to be paid by Tenant hereunder and received or accrued,
directly or indirectly, by Landlord with respect to the Leased Property
(including any rents attributable to personal property that is leased with
respect thereto) will qualify as "rents from real property" (within the meaning
of Code Section 856(d) and Section 512(b)(3)), and that neither party will take,
or permit to take, any action that would cause any amount received by the
Landlord under this Agreement to fail to qualify as such under the Code.
Consistent with this intent, the parties agree that:
15.1 Limitations on Rents Attributable to Personal Property. "Rents
attributable to any personal property" leased to the Tenant cannot exceed
fifteen percent (15%) of the total rent received or accrued by Landlord under
this Agreement for the Fiscal Year of the Landlord. Consistent therewith, the
average of the adjusted tax bases of the personal property (within the meaning
set forth in Section 1.512(b)-1(c)(3)(ii) of the applicable Treasury
Regulations) that is leased to Tenant with respect to the Leased Property at the
beginning and end of a Fiscal Year cannot exceed fifteen percent (15%) of the
average of the aggregate adjusted tax bases of the real and personal property
comprising such Leased Property that is leased to Tenant under such lease
50
at the beginning and end of such Fiscal Year (the "REIT Personal Property
Limitation"). If Landlord reasonably anticipates that the REIT Personal Property
Limitation will be exceeded with respect to the Leased Property for any Fiscal
Year, Landlord shall notify Tenant, and Landlord and Tenant shall negotiate in
good faith the purchase by Tenant of items of personal property anticipated by
Landlord to be in excess of the Personal Property Limitation. Provided, however,
that Tenant's responsibility to purchase such personal property will be offset
by Landlord in some mutually agreeable manner, which would not result in the
Landlord earning income which would constitute "unrelated business taxable
income" within the meaning of Section 512 of the Code, if the Landlord was a
"qualified trust" within the meaning of Section 856(h)(3)(E) of the Code.
15.2 Basis for Sublease Rent Restricted. Tenant cannot sublet the
property that is leased to it by Landlord, or enter into any similar
arrangement, on any basis such that the rental or other amounts paid by the
sublessee thereunder would be based, in whole or in part, on either (a) the net
income or profits derived by the business activities of the sublessee or (b) any
other formula such that any portion of the rent paid by Tenant to Landlord would
fail to qualify as "rent from real property" within the meaning of Section
856(d) and Section 512(b)(3) of the Code and regulations promulgated thereunder.
15.3 Landlord Affiliate Subleases Restricted. Anything to the contrary
in this Agreement notwithstanding, Tenant shall not sublease the Leased Property
to, or enter into any similar arrangement with, any person in which Landlord
owns, directly or indirectly, a ten percent (10%) or more interest, with the
meaning of Section 856(d)(2)(B) of the Code, and any such action shall be deemed
void ab initio. Anything to the contrary in this Agreement notwithstanding,
Tenant shall not sublease the Leased Property to, or enter into any similar
arrangement with, any Person that Landlord would be deemed to control within the
meaning of Section 512 (b)(13) of the Code.
15.4 Landlord Interests in Tenant Restricted. Anything to the contrary
in this Agreement notwithstanding, neither party shall take, or permit to take,
any action that would cause Landlord to own, directly or indirectly, a ten
percent (10%) or greater interest in the Tenant within the meaning of Section
856(d)(2)(B) of the Code, and any similar or successor provision thereto, and
any such action shall be deemed void ab initio. In addition, anything to the
contrary in this Agreement notwithstanding, Tenant shall not take or permit to
take, any action that would cause Landlord to own, directly or indirectly, such
interest in Tenant such that amounts received from Tenant would represent
amounts received from a controlled entity within the meaning of Section
512(b)(13) of the Code.
15.5 Rents from Personal Property Restricted. Rents attributable to
personal property within the meaning of Treasury Regulation Section
1.512(b)-1(c)(3)(ii) that is leased to Tenant with respect to the Leased
Property will not exceed 10 percent (10%) of the total Rents per year (the "UBTI
Personal Property Limitation"). If Landlord reasonably anticipates that the UBTI
Personal Property Limitation will be exceeded with respect to the Leased
Property for any Fiscal Year, Landlord shall notify Tenant, and Landlord and
Tenant shall negotiate in good faith the purchase by Tenant of items of personal
property anticipated by Landlord to be in excess of the UBTI Personal Property
Limitation; provided, However, that Tenant's responsibility to purchase such
personal property will be offset by Landlord in some mutually agreeable manner
which will
51
not result in the Landlord earning income which would constitute "unrelated
business taxable income" within the meaning of Section 512 of the Code if the
Landlord was a "qualified trust" within the meaning of Section 856(h)(3)(E) of
the Code.
15.6 Landlord Services. Any services provided by, or on behalf of,
Landlord will not prevent any amounts received or accrued from qualifying as
"Rents from real property" (within the meaning of Section 856(d)(2) or Section
512(b)(3) of the Code).
15.7 Certain Subtenants Prohibited. Anything to the contrary in this
Agreement notwithstanding, Tenant shall not sublease the Leased Property to, or
enter into any similar arrangement with, any Person that would be described in
Section 514(c)(9)(B)(iii) or (iv) of the Code.
15.8 Future Amendment. Tenant hereby agrees to amend this Article 15
from time to time as Landlord deems necessary or desirable in order to
effectuate the intent hereof.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Transfers Prohibited Without Consent. Tenant shall not, without the
prior written consent of Landlord in each instance which may be withheld in
Landlord's sole opinion and discretion, sell, assign or otherwise transfer this
Agreement, or Tenant's interest in the Leased Property together with all
interests of Tenant in all property of any nature located and used at the Leased
Property (including without limitation Tenant's Personal Property and the P&E
Replacements), in whole or in part, or any rights or interest which Tenant may
have under this Agreement, or sublet any part of the Leased Property, or grant
or permit any lien or encumbrance on or security interest in Tenant's interest
in this Agreement; notwithstanding the foregoing, Tenant shall be permitted to
grant sublease, rental or other occupancy rights in the Facility to individual
residents in connection with the operation of the Leased Property in accordance
with the Permitted Use. Notwithstanding the foregoing, Tenant may sell, assign
or otherwise transfer this Agreement, or Tenant's interest in the Leased
Property, in whole but not in part, without the consent of the Landlord, to an
Affiliated Person or to Guarantor provided (i) Tenant gives Landlord prior
written notice of such sale or assignment, (ii) Tenant shall remain liable under
this Agreement for the remaining Term, and (iii) such assignee or purchaser
shall continue to operate the Leased Property as a first-class independent
living and/or licensed assisted living and dementia care facility, as
applicable, consistent with other independent living and licensed assisted
living and dementia care facilities (as applicable) being operated by Guarantor
and its Affiliated Persons.
Landlord shall not, without the prior written consent of Tenant in each
instance which may be withheld in Tenant's sole opinion and discretion, sell,
assign or otherwise transfer this Agreement, or Landlord's interest in the
Leased Property, in whole or in part, or any rights or interest which Landlord
may have under this Agreement, either directly or indirectly in the form of a
Facility Mortgage as contemplated under Article 19 hereof, to a direct
competitor of Tenant
52
or Guarantor. In the event that a direct competitor of Tenant or Guarantor
becomes a Mortgagee of the Leased Property the subordination provisions of
Section 19.1 shall not apply.
16.2 Indirect Transfer Prohibited Without Consent. A sale, assignment,
pledge, transfer, exchange or other disposition of (a) the stock of Tenant or
any general partner interest in Tenant or (b) any interest of a member or
members of Tenant which results in a change or transfer of management or control
of Tenant, or a merger, consolidation or other combination of Tenant with
another entity which results in a change or transfer of management or control of
Tenant, shall be deemed an assignment hereunder and shall be subject to Section
16.1 hereof. For purposes hereof, exchange or transfer of management or control
or effective control, shall mean a transfer of 50% or more of the economic
benefit of, or Control of, any such entity.
16.3 Adequate Assurances. Without limiting any of the foregoing
provisions of this Article, if, pursuant to the U.S. Bankruptcy Code, as the
same may be amended from time to time, Tenant is permitted to assign or
otherwise transfer its rights and obligations under this Agreement in disregard
of the restrictions contained in this Article, the assignee shall be deemed to
agree to provide adequate assurance to Landlord (a) that any Percentage Rent
shall not decline substantially after the date of such assignment, (b) of the
continued use of the Leased Property solely in accordance with the Permitted Use
thereof, (c) of the continuous operation of the business in the Leased Property
in strict accordance with the requirements of Article 4 hereof, and (d) of such
other matters as Landlord may reasonably require at the time of such assumption
or assignment. Without limiting the generality of the foregoing, adequate
assurance shall include the requirement that any such assignee shall have a net
worth (exclusive of good will) of not less than the aggregate of the Rent due
and payable for the previous Fiscal Year and is or can be licensed to operate
the Facility by the appropriate Governmental Agencies. Such assignee shall
expressly assume this Agreement by an agreement in recordable form, an original
counterpart of which shall be delivered to Landlord prior to an assignment of
the Agreement.
Any approval of such successor Tenant shall not affect or alter
Landlord's approval rights of each manager of the Leased Property.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. Tenant shall from time to time, within
fifteen (15) days after request by Landlord and without charge, give a Tenant
Estoppel Certificate in the form (or substantially the form) attached hereto as
Exhibit "D" and containing such other matters as may be reasonably requested by
Landlord to any person, firm or corporation specified by Landlord.
17.2 Monthly Financial Statements. Throughout the Term of this
Agreement, Tenant shall prepare and deliver to Landlord at or prior to the end
of each month during the Term hereof, an income (or profit and loss) statement
and operating balance sheet showing the results of the operation of the Leased
Property for the immediately preceding month and for the Fiscal Year to date.
This information shall be provided to Landlord under a complete financial
statement for
53
the Facility which shall be delivered prior to the end of the next following
month, in the form customarily provided in the industry and approved in advance
by the Landlord, and which shall: (a) be taken from the books and records
maintained by Tenant, Guarantor and any manager in the form specified herein;
(b) follow a consistent form as approved in advance in writing by Landlord; and
(c) indicate variances from budgeted results for each line item against the
Tenant's budget for the Leased Property for such Fiscal Year. The aforesaid
financial statements shall be accompanied by an Officer's Certificate which, for
purposes hereof shall mean a Certificate of the Chief Financial Officer of
Tenant or Tenant's sole or Managing Member, and of Guarantor's Chief Financial
Officer, in which such Officer shall certify (a) that such statements have been
properly prepared in accordance with GAAP and are true, correct and complete in
all material respects and fairly present the consolidated financial condition of
the Tenant at and as of the dates thereof and the results of its operations for
the period covered thereby, and (b) that no Event of Default has occurred and is
continuing hereunder.
17.3 Annual Financial Statements. Tenant shall deliver to Landlord
within ninety (90) days after the end of each Fiscal Year, a profit and loss
statement, balance sheet and statement of cash flow certified by an independent
certified public accountant who is actively engaged in the practice of his
profession and who is acceptable to Landlord (which statement shall also be
certified by an officer, partner or member in Tenant) together with copies of
all reports and communications furnished to Guarantor, Tenant's other Affiliated
Persons or any manager of the Leased Property, showing results from the
operation of the Leased Property during such Fiscal Year, and reasons for
material variations from the approved budget for such year. Tenant shall also
deliver to Landlord at Landlord's expense at any time and from time to time,
upon not less than twenty (20) days notice from Landlord, any financial
statements or other financial reporting information required to be filed by
Landlord with the SEC or any other governmental authority or required pursuant
to any order issued by any Governmental Agencies or arbitrator in any litigation
to which Landlord is a party for purposes of compliance therewith. The financial
statements required herein are in addition to the statements required under
Section 3.3.2 hereof. Notwithstanding the foregoing, in the event that Tenant's
financial records are not otherwise being reviewed or audited by an independent
certified public accountant then the Landlord will accept financial statements
certified true and correct by the Chief Financial Officer of Tenant or Tenant's
sole or Managing Member and by the Guarantor's Chief Financial Officer.
17.4 Records. Tenant shall keep and maintain at all times in accordance
with GAAP (separate and apart from its other books, records and accounts)
complete and accurate up-to-date books and records adequate to reflect clearly
and correctly the results of operations of the Leased Property, on an accrual
basis, including but not limited to, each calculation of Percentage Rent. Such
books and records shall be kept and maintained at the Leased Property or
Tenant's principal office in Nashville, Tennessee. Landlord or its
representatives shall have, at all reasonable times during normal business
hours, reasonable access, on reasonable advance notice, to examine and copy the
books and records pertaining to the Leased Property. Such books and records
shall be available for at least four (4) years after the applicable quarterly
calculation of Percentage Rent for Landlord's inspection, copying, review and
audit at Landlord's expense during reasonable business hours and upon reasonable
notice for the purpose of verifying the accuracy of Tenant's calculation of
Percentage Rent.
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17.5 General Operations Budget. In addition to the Reserve Estimate,
Tenant shall furnish to Landlord, on or before December 1 of each Fiscal Year
proposed annual budgets in a form satisfactory to Landlord and consistent with
the then standards for the same brand of independent living and/or licensed
assisted living and dementia care facilities (as applicable) as the Facility
setting forth projected income and costs and expenses projected to be incurred
by Tenant in managing, leasing, maintaining and operating the Facility during
the following Fiscal Year.
17.6 Quarterly Meetings. At Landlord's request, Tenant shall make the
Tenant's property management team and the executive officers of Tenant or its
sole or Managing Member available to meet with Landlord on a quarterly basis to
discuss the Reserve Estimate, the annual budgets and any other items related to
the operation of the Facility, which Landlord wishes to discuss. Tenant agrees
to give good faith consideration to any suggestions or requests that Landlord
may have.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Landlord, Mortgagee and their agents shall have the right to enter upon
the Leased Property or any portion thereof at any reasonable time to inspect the
same, including but not limited to, the operation, sanitation, safety,
maintenance and use of the same, or any portions of the same and to assure
itself that Tenant is in full compliance with its obligations under this
Agreement (but Landlord and Mortgagee shall not thereby assume any
responsibility for the performance of any of Tenant's obligations hereunder, nor
any liability arising from the improper performance thereof). In making any such
inspections, neither Landlord nor Mortgagee shall unduly interrupt or interfere
with the conduct of Tenant's business.
ARTICLE 19
FACILITY MORTGAGES
19.1 Subordination. This Agreement, Tenant's interest hereunder and
Tenant's leasehold interest in and to the Leased Property are hereby agreed by
Tenant to be and are hereby made junior, inferior, subordinate and subject in
right, title, interest, lien, encumbrance, priority and all other respects to
any mortgage or mortgages and security interests now or hereafter in force and
effect upon or encumbering Landlord's interest in the Leased Property, or any
portion thereof, and to all collateral assignments by Landlord to any third
party or parties of any of Landlord's rights under this Agreement or the rents,
issues and profits thereof or therefrom as security for any liability or
indebtedness, direct, indirect or contingent, of Landlord to such third party or
parties, and to all future modifications, extensions, renewals, consolidations
and replacements of, and all amendments and supplements to any such mortgage,
mortgages or assignments, and upon recording of any such mortgage, mortgages or
assignments, the same shall be deemed to be prior in dignity, lien and
encumbrance to this Agreement, Tenant's interest
55
hereunder and Tenant's leasehold interest in and to the Leased Property
irrespective of the dates of execution, delivery or recordation of any such
mortgage, mortgages or assignments (such mortgages, mortgages, security
interests, assignments, modifications, extensions, renewals, amendments,
supplements and replacement being a "Facility Mortgage"). The subordination of
this Lease shall be upon the express condition that the validity of this Lease
shall be recognized by the Mortgagee, and that, notwithstanding any default by
the mortgagor, with respect to such mortgage, Tenant's possession and right of
use under this Lease in and to the Leased Property (including without limitation
rights to have insurance and condemnation proceeds made available for proper
reconstruction of the Leased Property and the right to convert units within the
Facility to assisted living and/or dementia care uses in accordance with Section
4.1.2 above) shall not be disturbed by such Mortgagee unless and until Tenant
shall breach any of the provisions hereof and this Lease or Tenant's right to
possession hereunder shall have been terminated or shall be terminable in
accordance with the provisions of this Lease. The foregoing subordination and
non-disturbance provisions of this Section shall be automatic and self-operative
without the necessity of the execution of any further instrument or agreement of
subordination on the part of Tenant. Tenant acknowledges and agrees that
notwithstanding the foregoing automatic subordination, if Landlord or Mortgagee
shall request that Tenant execute and deliver any further instrument or
agreement of subordination of this Agreement or Tenant's interest hereunder or
Tenant's leasehold interest in the Leased Property to any such Facility
Mortgage, in confirmation or furtherance of or in addition to the foregoing
subordination provisions of this Section, Tenant shall promptly execute and
deliver the same to the requesting party (provided that such instrument or
agreement also reflects the non-disturbance provisions set forth above).
Further, Tenant agrees that it will, from time to time, execute such
documentation as may be requested by Landlord and any Mortgagee (a) to assist
Landlord and such Mortgagee in establishing or perfecting any security interest
in Landlord's interest in the Reserve and the funds therein; and (b) to
facilitate or allow Landlord to encumber the Leased Property as herein
contemplated. If, within thirty (30) days following Tenant's receipt of a
written request by Landlord or the holder or proposed holder of any such
Facility Mortgage, Tenant shall fail or refuse or shall have not executed any
such further instrument or agreement of subordination, for whatever reason,
Tenant shall be in breach and default of its obligation to do so and of this
Agreement and Landlord shall be entitled thereupon to exercise any and all
remedies available to Landlord pursuant to this Agreement or otherwise provided
by law.
19.2 Attornment. Tenant shall and hereby agrees to attorn, and be bound
under all of the terms, provisions, covenants and conditions of this Agreement,
to any successor of the interest of Landlord under this Agreement for the
balance of the Term of this Agreement remaining at the time of the succession of
such interest to such successor. In particular, in the event that any
proceedings are brought for the foreclosure of any Facility Mortgage, Tenant
shall attorn to the purchaser at any such foreclosure sale and recognize such
purchaser as Landlord under this Agreement. Tenant agrees that neither the
purchaser at any such foreclosure sale nor the foreclosing Mortgagee or holder
of any such Facility Mortgage shall have any liability for any act or omission
of Landlord, be subject to any offsets or defenses which Tenant may have as
claims against Landlord, or be bound by any advance rents which may have been
paid by Tenant to Landlord for more than the current period in which such rents
come due.
19.3 Rights of Mortgagees and Assignees. Provided Landlord has given
Tenant notice thereof, any Mortgagee shall have the right to unilateral
enjoyment, exercise or control over the
56
rights, remedies, powers and interests of Landlord hereunder, or otherwise
arising under Applicable Law, as assigned or granted to such Mortgagee by
Landlord or as provided in any Facility Mortgage. At the time of giving any
notice of default to Landlord, Tenant shall mail or deliver to any Mortgagee of
whom Tenant has notice, a copy of any such notice. No notice of default or
termination of this Agreement by Tenant shall be effective until each Mortgagee
shall have been furnished a copy of such notice by Tenant. In the event Landlord
fails to cure any default by it under this Agreement, the Mortgagee shall have,
at its option, a period of thirty (30) days after expiration of any cure period
of Landlord within which to remedy such default of Landlord or to cause such
default to be remedied. In the event that the Mortgagee elects to cure any such
default by Landlord, then Tenant shall accept such performance on the part of
such Mortgagee as though the same had been performed by Landlord, and for such
purpose Tenant hereby authorizes any Mortgagee to enter upon the Leased Property
to the extent necessary to exercise any of Landlord's rights, powers and duties
under this Agreement. If, in the event of any default by Landlord which is
reasonably capable of being cured by a Mortgagee, the Mortgagee promptly
commences and diligently pursues to cure the default, then Tenant will not
terminate this Agreement or cease to perform any of its obligations under this
Agreement so long as the Mortgagee is, with due diligence, engaged in the curing
of such default.
ARTICLE 20
ADDITIONAL COVENANTS OF TENANT
20.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Leased Property for the Permitted Use and
activities incidental thereto, including without limitation the delivery of
services to the Facility residents under the Service Licenses or otherwise, and
shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect and in good standing its legal entity existence and its
rights and licenses necessary to conduct such business. Promptly upon receipt of
same, Tenant shall provide Landlord with copies of all licenses, licensure and
certification surveys and related plans of correction, and notices of corrective
action required, of loss of licensure or certification of the Facility, or of
any limits imposed upon admissions to the Facility.
20.2 Additional Covenants of Tenant. In addition to the other covenants
and representations of Tenant herein and in this Agreement, Tenant hereby
covenants, acknowledges and agrees that Tenant shall:
(a) Not guaranty any obligation of any Person other than
the tenant under any ARC-Related Lease;
(b) Pay or cause to be paid all lawful claims for labor
and rents with respect to the Leased Property;
(c) Pay or cause to be paid all trade payables;
(d) Not declare, order, pay or make, directly or
indirectly, any Distribution or any payments to any members or
Affiliated Persons as to Tenant
57
(including payments in the ordinary course of business and
payments pursuant to any management agreements with any such
Affiliate), or set apart any sum of property therefor, or agree
to do so, if, at the time of such proposed action or immediately
after giving effect thereto, any Event of Default shall exist;
(e) Except as otherwise permitted by this Agreement, not
sell, lease (as lessor or sublessor), transfer or otherwise
dispose of or abandon, all or any material portion of its assets
or business to any Person, or sell, lease, transfer or otherwise
dispose of or abandon any of Tenant's Personal Property,
provided, however, Tenant may dispose of portions of Tenant's
Personal Property which have become inadequate, obsolete,
worn-out, unsuitable, undesirable or unnecessary, provided
substitute equipment or fixtures having equal or greater value
and utility have been provided.
(f) Provide and maintain throughout the Term, all
Tenant's Personal Property and P&E Replacements as shall be
necessary in order to operate the Leased Property in compliance
with applicable legal requirements and insurance requirements
and otherwise in accordance with customary practice in the
industry for the Permitted Use. If, from and after the
Commencement Date, Tenant acquires an interest in any items of
tangible personal property (other than motor vehicles) on, or in
connection with the Leased Property which belong to anyone other
than Tenant, Tenant shall require the agreement permitting such
use to provide that Landlord or its designee may assume Tenant's
rights and obligations under such agreement upon the termination
of this Agreement and any assumption of management or operation
of the Leased Property by Landlord or its designee.
(g) Deliver to Landlord within thirty (30) days after
receipt of or after modification thereof, copies of all licenses
authorizing Tenant to operate the Leased Property for its
Permitted Use.
(h) Undertake a risk management analysis and report
regarding the operation of the Facility annually for compliance
with all Applicable Laws governing the ongoing use and operation
of the Facility for the Permitted Use and provide Landlord with
a copy of the report and any other results of the analysis.
(i) Give prompt notice to Landlord of any litigation or
any administrative proceeding involving Tenant, Landlord or the
Leased Property of which Tenant has notice or actual knowledge
and which involves a potential uninsured liability equal to or
greater than $100,000.00 or which, in Tenant's reasonable
opinion, may otherwise result in any material adverse change in
the business, operations, property, prospects, results of
operation or conditions, financial or otherwise, of Tenant or
the Facility.
(j) Not, except as approved in writing by Landlord,
either directly or indirectly, for itself, or through, or on
behalf of, or in connection with any Person, divert or attempt
to divert any business or customer of the Leased Property to any
competitor, by direct or indirect inducement or otherwise, or do
or perform,
58
directly or indirectly, any other act injurious or prejudicial
to the good will associated with the Landlord or the Leased
Property.
(k) Except for liabilities incurred in the ordinary
course of business, not create, incur, assume or guarantee, or
permit to exist or become or remain liable directly or
indirectly upon, any Indebtedness except Indebtedness of Tenant
to Landlord (or, if unsecured and expressly subject to the terms
of this Agreement and Landlord's interest hereunder, and payable
solely out of excess cash flow after payment of all Rent
hereunder, to Tenant's shareholders, partners or members, as
applicable). Tenant further agrees that the obligee in respect
of any such Indebtedness shall agree in writing, in form and
substance satisfactory to Landlord that (w) the payment of such
Indebtedness shall be expressly subordinated in all respects to
all of Tenant's obligations under this Agreement, (x) no
remedies may be exercised by the obligee with respect to
enforcement or collection of such Indebtedness until such time
as this Agreement shall be terminated and all of Tenant's
obligations hereunder shall have been discharged in full; (y)
such Indebtedness shall not be assigned by the obligee to any
other party; and (z) the obligee shall not initiate or join in
any bankruptcy proceedings against Tenant. As used in this
Section 20.2(k) (and notwithstanding any other definition of
Indebtedness herein), Indebtedness shall mean all obligations,
contingent or otherwise, to pay or repay monies irrespective of
whether, in accordance with GAAP, such obligations should be
reflected on the obligor's balance sheet as debt.
20.3 Tenant a Single Purpose Entity. Tenant represents, agrees and
warrants that Tenant is, and throughout the Term will remain, a Single Purpose
Entity as described and contemplated on Exhibit "F" hereof. Notwithstanding the
foregoing, the Landlord agrees that the requirements for an Independent Director
or Independent Member thereunder shall not apply so long as Tenant is an
Affiliated Person of Guarantor.
20.4 Intentionally Omitted.
ARTICLE 21
MISCELLANEOUS
21.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under Applicable Laws, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
59
21.2 No Waiver. No release, discharge or waiver of any provision hereof
shall be enforceable against or binding upon Landlord or Tenant unless in
writing and executed by Landlord or Tenant, as the case may be. Neither the
failure of Landlord or Tenant to insist upon a strict performance of any of the
terms, provisions, covenants, agreements and conditions hereof, nor the
acceptance of any Rent by Landlord with knowledge of a breach of this Agreement
by Tenant in the performance of its obligations hereunder, or the following of
any practice or custom at variance with the terms hereof, shall be deemed or
constitute a waiver of any rights or remedies that Landlord or Tenant may have
or a waiver of any subsequent breach or default in any of such terms,
provisions, covenants, agreements and conditions or the waiver of the right to
demand exact compliance with the terms hereof.
21.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord, now or
hereafter provided either in this Agreement or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Landlord of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord of any or all of such other rights, powers
and remedies.
21.4 Severability. Any clause, sentence, paragraph, section or provision
of this Agreement held by a court of competent jurisdiction to be invalid,
illegal or ineffective shall not impair, invalidate or nullify the remainder of
this Agreement, but rather the effect thereof shall be confined to the clause,
sentence, paragraph, section or provision so held to be invalid, illegal or
ineffective, and this Agreement shall be construed as if such invalid, illegal
or ineffective provisions had never been contained therein.
21.5 Acceptance of Surrender. No surrender to Landlord of this Agreement
or of the Leased Property or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Landlord and
no act by Landlord or any representative or agent of Landlord, other than such a
written acceptance by Landlord, shall constitute an acceptance of any such
surrender.
21.6 No Merger of Title. It is expressly acknowledged and agreed that it
is the intent of the parties that there shall be no merger of this Agreement or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
21.7 Tenant's Representations. In addition to any other representation
or warranty set forth herein and as an inducement to Landlord to enter into this
Agreement, Tenant hereby represents and warrants to Landlord as follows:
(a) Tenant is a limited liability company duly organized and
validly existing and in good standing under the laws of the State of
Tennessee. Tenant has all requisite power and authority under the laws
of the State of Tennessee and the laws of the State of Illinois and its
limited liability company operating agreement or other charter documents
to enter into and perform its obligations under this Agreement and to
consummate the
60
transactions contemplated hereby. Tenant is duly authorized to transact
business in any jurisdiction in which the nature of the business
conducted by it requires such qualification.
(b) Tenant has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and upon the
execution and delivery of any document to be delivered by Tenant, prior
to the date hereof, such document shall constitute the valid and binding
obligation and agreement of Tenant, enforceable against Tenant in
accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors and
except to the extent that the availability of equitable relief may be
subject to the discretion of the court before which any proceeding may
be brought.
(c) There are no judgments presently outstanding and unsatisfied
against Tenant or any of its properties, and neither Tenant nor any of
its properties are involved in any material litigation at law or in
equity or any proceeding before any court, or by or before any
governmental or administrative agency, which litigation or proceeding
could materially adversely affect Tenant, and no such material
litigation or proceeding is, to the knowledge of Tenant, threatened
against Tenant and no investigation looking toward such a proceeding has
begun or is contemplated.
(d) To the knowledge of Tenant, neither this Agreement nor any
other document, certificate or statement furnished to Landlord by or on
behalf of Tenant in connection with the transaction contemplated herein
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein
or therein not misleading. To the knowledge of Tenant there is no fact
or condition which materially and adversely affects the business,
operations, affairs, properties or condition of Tenant which has not
been set forth in this Agreement or in other documents, certificates or
statements furnished to Landlord in connection with the transaction
contemplated hereby.
(e) Tenant hereby represents to Landlord that, in the reasonable
opinion of Tenant, the Leased Property and the Leased Improvements
therein are adequately furnished and contain adequate P&E and
Inventories consistent with the amount of P&E and Inventories which is
customarily maintained in an independent living or licensed assisted
living and dementia care facility, as applicable, of the type and
character of the Leased Property as otherwise required to operate the
Leased Property in a manner contemplated by this Agreement and in
compliance with all legal requirements.
(f) Tenant acknowledges that Tenant's failure or repeated delays
in making prompt payment in accordance with the terms of any agreement,
leases, invoices or statements for purchase or lease of P&E, Inventories
or other goods or services will be detrimental to the reputation of
Landlord and Tenant.
(g) All employees of Tenant are solely employees of Tenant and
not Landlord. Tenant is not Landlord's agent for any purpose in regard
to Tenant's employees or
61
otherwise. Further, Tenant expressly acknowledges and agrees that
Landlord does not exercise any direction or control over the employment
policies or employment decisions of Tenant.
(h) Tenant has not (i) made any contributions, payments or gifts
to or for the private use of any governmental official, employee or
agent where either the payment or the purpose of such contribution,
payment or gift is illegal under the laws of the United States or the
jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial
entries on its books, (iii) given or received any payments or other
forms of remuneration in connection with the referral of patients which
would violate the Medicare/Medicaid Anti-kickback Law, Section 1128(b)
of the Social Security Act, 42 U.S.C. Section 1320a-7b(b), the federal
physician self-referral law, 42 U.S.C. Section 1395 nn, or any analogous
state statute or (iv) made any payments to any person with the intention
or understanding that any part of such payment was to be used for any
purpose other than that described in the documents supporting the
payment. Tenant shall not take any such actions during the Term of this
Agreement.
(i) Tenant's equity is directly and (if applicable) indirectly
owned as shown on Exhibit "G". Tenant shall promptly provide to
Landlord, upon the occurrence thereof but in any event not more than
fifteen (15) days following a written request therefor, written notice
of any change in the executive officers, directors, shareholders,
partners, and/or members of Tenant, as applicable to Tenant's formation
and structure, and of any change in the respective interests in Tenant
held by each of such Persons.
21.8 Quiet Enjoyment. Landlord covenants and agrees that so long as
Tenant shall timely pay all rents due to Landlord from Tenant hereunder and
keep, observe and perform all covenants, promises and agreements on Tenant's
part to be kept, observed and performed hereunder, Tenant shall and may
peacefully and quietly have, hold and occupy the Leased Property free of any
interference from Landlord or any Person claiming by, through or under Landlord;
subject, however, and nevertheless to the terms, provisions and conditions of
this Agreement, the Permitted Encumbrances, any other documents affecting record
title to or the use and occupancy of the Leased Property immediately prior to
the conveyance thereof to Landlord on or about the date hereof, and documents
affecting title to the Leased Property approved by Tenant. Landlord shall not,
without the prior written approval of Tenant, enter into or record any document
which purports to or which by its terms will materially and adversely affect the
Tenant, Tenant's use and enjoyment of the Leased Property or Tenant's rights
under this Agreement (such approval not to be unreasonably withheld, delayed or
conditioned provided that the same is appropriate and reasonably necessary in
connection with the normal and ordinary course of ownership and use of the
Facility).
21.9 Recordation of Memorandum of Lease. At either party's option, a
short form memorandum of this Agreement, in the form attached hereto as Exhibit
"E" shall be recorded or filed among the appropriate land records of the County
in which the Leased Property is located, and Tenant shall pay the transfer and
all recording costs associated therewith. In the event of a discrepancy between
the provisions of this Agreement and such short form memorandum thereof, the
provisions of this Agreement shall prevail.
62
21.10 Notices. (a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
If to Landlord to:
CNL Retirement-AM/Illinois LP
CNL Center at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxxx, Xx.
Or Chief Operating Officer
Phone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Lowndes, Drosdick, Doster, Xxxxxx & Xxxx, P.A.
000 Xxxxx Xxxx Xxxxx
Post Office Box 2809
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esquire
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Tenant to:
ARC Xxxxxx Court, LLC
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Mr. Xxxxxx Xxxxx, Chief Financial Officer
Phone: (000) 000-0000
Fax: (000) 000-0000
63
With a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: T. Xxxxxx Xxxxx, Esquire
Phone: (000) 000-0000
Fax: (000) 000-0000
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
21.11 Construction; Nonrecourse. Anything contained in this Agreement to
the contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. Each term or provision of this Agreement to be performed by Tenant
shall be construed as an independent covenant and condition. Time is of the
essence with respect to the performance by Tenant of its obligations under this
Agreement, including, without limitation, obligations for the payment of money.
Except as otherwise set forth in this Agreement, any obligations arising prior
to the expiration or sooner termination of this Agreement of Tenant (including
without limitation, any monetary, repair and indemnification obligations) and
Landlord shall survive the expiration or sooner termination of this Agreement.
In addition, solely with respect to Landlord, nothing contained in this
Agreement shall be construed to create or impose any liabilities or obligations
and no such liabilities or obligations shall be imposed on any of the
shareholders, beneficial owners, direct or indirect, officers, directors,
trustees, employees or agents of Landlord or Tenant for the payment or
performance of the obligations or liabilities of Landlord hereunder. The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
21.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Captions and
headings in this Agreement are for purposes of reference only and shall in no
way define, limit or describe the scope or intent of, or otherwise affect, the
provisions of this Agreement.
21.13 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State in which the Leased Property is
located.
21.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution and delivery of this Agreement, nor the
compliance with the terms and provisions
64
hereof, shall violate any provision of any law, or any judgment, writ,
injunction, order or decree of any court or Governmental Authority; nor result
in or constitute a breach or default under or the creation of any lien, charge
or encumbrance upon any of its property or assets under, any indenture,
mortgage, deed of trust, contract, other commitment or restriction to which it
is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
21.15 Brokerage. Landlord and Tenant hereby represent and warrant to
each other that they have not engaged, employed or utilized the services of any
business or real estate brokers, salesmen, agents or finders in the initiation,
negotiation or consummation of the business and real estate transaction
reflected in this Agreement. On the basis of such representation and warranty,
each party shall and hereby agrees to indemnify and save and hold the other
party harmless from and against the payment of any commissions or fees to or
claims for commissions or fees by any real estate or business broker, salesman,
agent or finder resulting from or arising out of any actions taken or agreements
made by them with respect to the business and real estate transaction reflected
in this Agreement.
21.16 No Partnership or Joint Venture. Landlord shall not, by virtue of
this Agreement, in any way or for any purpose, be deemed to be a partner of
Tenant in the conduct of Tenant's business upon, within or from the Leased
Property or otherwise, or a joint venturer or a member of a joint enterprise
with Tenant.
21.17 Entire Agreement. This Agreement contains the entire agreement
between the parties and, except as otherwise provided herein, can only be
changed, modified, amended or terminated by an instrument in writing executed by
the parties. It is mutually acknowledged and agreed by Landlord and Tenant that
there are no verbal agreements, representations, warranties or other
understandings affecting the same; and that Tenant hereby waives, as a material
part of the consideration hereof, all claims against Landlord for rescission,
damages or any other form of relief by reason of any alleged covenant, warranty,
representation, agreement or understanding not contained in this Agreement.
21.18 Costs and Attorneys' Fees. In addition to Landlord's rights under
Sections 12.2 and 14.2, if either party shall bring an action to recover any sum
due hereunder, or for any breach hereunder, and shall obtain a judgment or
decree in its favor, the court may award to such prevailing party its reasonable
costs and reasonable attorney's fees based upon service rendered at hourly
rates, specifically including reasonable attorney's fees incurred in connection
with any appeals (whether or not taxable as such by law). Landlord shall also be
entitled to recover its reasonable attorney's fees based upon service rendered
at hourly rates and costs incurred in any bankruptcy action filed by or against
Tenant, including, without limitation, those incurred in seeking relief from the
automatic stay, in dealing with the assumption or rejection of this Agreement,
in any adversary proceeding, and in the preparation and filing of any proof of
claim.
21.19 Approval of Landlord. Whenever Tenant is required under this
Agreement to do anything to meet the satisfaction or judgement of Landlord, the
reasonable satisfaction or
65
judgement of Landlord shall be deemed sufficient. The foregoing provision of
this Section shall not apply in any instance where the provisions of this
Agreement expressly state that the provisions of this Section do not apply or
where the provisions of this Agreement expressly state that such consent,
approval or satisfaction are subject to the sole and absolute discretion or
judgement of Landlord, and in each such instance Landlord's approval or consent
may be unreasonably withheld or unreasonable satisfaction or judgement may be
exercised by Landlord.
21.20 Successors and Assigns. The agreements, terms, provisions,
covenants and conditions contained in this Agreement shall be binding upon and
inure to the benefit of Landlord and Tenant and, to the extent permitted herein,
their respective successors and assigns.
21.21 Waiver of Jury Trial. TENANT AND LANDLORD HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAWS, THE RIGHT EITHER OF THEM OR THEIR HEIRS, PERSONAL
REPRESENTATIVES, SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY LITIGATION PROCEEDINGS OR COUNTERCLAIM, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, THE RELATIONSHIP OF LANDLORD AND TENANT HEREUNDER, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LANDLORD'S
ACCEPTING THIS AGREEMENT.
21.22 Treatment of Lease. Landlord and Tenant each agree to treat this
Agreement as a true lease for tax purposes and as an operating lease for
generally accepted accounting principles.
21.23 Transfer of Licenses. Upon the expiration or sooner termination of
this Agreement, Tenant shall use its best efforts to transfer and assign to
Landlord or its designee or assist Landlord or its designee in obtaining
transfer or assignment of all Leased Intangible Property, including without
limitation and together with any contracts, licenses (including without
limitation all licenses identified as part of the Initial Tenant Personal
Property and any replacements thereof and additions thereto), permits,
development rights, trade names (except for trade names as included within the
Initial Tenant Personal Property), telephone exchange numbers identified with
the Leased Property, approvals and certificates and all other intangible rights,
benefits and privileges of any kind or character with respect to the Leased
Property, useful or required for the then operation of the Leased Property
(except for proprietary software as included within the Initial Tenant Personal
Property). If requested by Landlord and to the extent permitted by law the
Tenant shall provide a collateral assignment of such licenses and other
intangible rights as further security for Tenant's obligations hereunder.
21.24 Tenant's Personal Property. Upon the expiration or sooner
termination of the Term of this Agreement, Landlord may, in its sole and
absolute discretion, elect to either (i) give Tenant Notice that Tenant shall be
required, within ten (10) Business Days after such expiration or termination, to
remove all of Tenant's Personal Property from the Leased Property, or (ii) pay
Tenant's book value of such Tenant's Personal Property (not including, however,
trade names and proprietary software listed as part of the Initial Tenant
Personal Property, which shall remain
66
the sole property of Tenant). Failure of Landlord to make such election shall be
deemed an election to proceed in accordance with clause (ii) preceding.
21.25 Landlord's Representations. Landlord hereby represents and
warrants to Tenant as follows:
(a) Landlord is a limited partnership duly organized and validly
existing and in good standing under the laws of the State of Delaware.
Landlord has all requisite power and authority under the laws of the
State of Delaware and its charter documents to enter into and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
(b) Landlord has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and upon the
execution and delivery hereof, this Agreement shall constitute the valid
and binding agreement of Landlord.
21.26 Guaranty of Lease. The Landlord has entered into this Lease in
reliance upon the Unconditional Guaranty of Payment and Performance by the
Guarantor in favor of Landlord dated of even date herewith (the "Guaranty"),
pursuant to which the Guarantor has unconditionally guaranteed all of the
obligations of the Tenant under this Lease, including without limitation the
covenants of Tenant in Section 4.4 and Section 4.6 hereof, and all of the
additional covenants of Tenant in Article 20 hereof.
21.27 Guaranty of ARC-Related Leases. The obligations of each tenant
under each ARC-Related Lease (whether now in effect or entered into in the
future) also shall be and are hereby unconditionally guaranteed by Tenant.
Tenant agrees that its guaranty of the ARC-Related Leases hereunder shall be a
material inducement for the execution of each ARC-Related Lease, is and shall be
a guaranty of payment and performance and not of collection solely, and shall be
effective in accordance with the terms and conditions of the Guaranty, which are
incorporated herein by this reference. Notwithstanding the foregoing, and the
automatic and unconditional guaranty of all ARC-Related Leases hereunder, Tenant
shall upon request of the Landlord or its Affiliated Persons promptly execute
and deliver a separate Unconditional Guaranty of Payment and Performance with
respect to each ARC-Related Lease.
21.28 Landlord's Assumed Financing. The obligations of Landlord and
Tenant are subject to the additional provisions set forth in Exhibit "K"
attached hereto relating to certain terms and conditions of the GMACCM Loan
Documents assumed and executed by Landlord which affect Tenant's performance and
obligations under this Lease.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
67
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date above first written.
NOTICE: THIS AGREEMENT CONTAINS WAIVERS AND INDEMNITIES BY THE TENANT OF THE
LANDLORD'S OWN NEGLIGENCE.
LANDLORD: TENANT:
CNL RETIREMENT - AM/ILLINOIS LP, a ARC XXXXXX COURT, LLC, a Tennessee
Delaware limited liability company limited liability company
By: CNL Retirement - GP/Illinois Corp, By: ARC Xxxxxx Court Management, Inc.,
a Delaware corporation, as its a Tennessee corporation, its
General Partner Managing Member
By: /S/ By: /S/
----------------------- ------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxxx X. Xxxxx
----------------------- ------------------------
Its: EVP-Finance, CFO,
------------------------
Its: Exec. V. P. Secretary and Treasurer
----------------------- ------------------------
(CORPORATE SEAL)
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EXHIBIT "A"
The Land
A-1
EXHIBIT "B"
Initial Term Minimum Rent
The amount of Minimum Rent due during the Initial Term is as follows:
For Accounting Year 1 - $1,846,927.50
Commencing with the 2nd Accounting Year, and on the first day of each
Accounting Year thereafter during the Initial Term, Minimum Rent shall
increase by one percent (1%) over the Minimum Rent owing in the
immediately preceding Accounting Year. Accordingly, the Minimum Rent
owing from the 2nd Accounting Year through the end of the Initial Term
of this Agreement shall be as follows:
For Accounting Year 2 - $1,865,396.78;
For Accounting Year 3 - $1,884,050.74;
For Accounting Year 4 - $1,902,891.25;
For Accounting Year 5 - $1,921,920.16;
For Accounting Year 6 - $1,941,139.36;
For Accounting Year 7 - $1,960,550.76;
For Accounting Year 8 - $1,980,156.27;
For Accounting Year 9 - $1,999,957.83;
For Accounting Year 10 - $2,019,957.41;
For Accounting Year 11 - $2,040,156.98;
For Accounting Year 12 - $2,060,558.55;
For Accounting Year 13 - $2,081,164.14;
For Accounting Year 14 - $2,101,975.78;
For Accounting Year 15 - $2,122,995.53.
B-1
EXHIBIT "C"
Appraisal Process
If Landlord and Tenant are unable to agree upon the fair market value
of the Leased Property within any relevant period provided in this Agreement,
each shall within ten (10) days after written demand by the other select one MAI
Appraiser to participate in the determination of fair market value. Within ten
(10) days of such selection, the MAI Appraisers so selected by Landlord and
Tenant shall select a third MAI Appraiser. The three (3) selected MAI Appraisers
shall each determine the fair market value of the Leased Property within thirty
(30) days of the selection of the third appraiser. To the extent consistent with
sound appraisal practices as then existing at the time of any such appraisal,
and if requested by Landlord, such appraisal, shall be made on a basis
consistent with the basis on which the Leased Property was appraised at the time
of its acquisition by Landlord. Tenant shall pay the fees and expenses of any
MAI Appraiser retained pursuant to this Exhibit.
In the event either Landlord or Tenant fails to select a MAI Appraiser
within the time period set forth in the foregoing paragraph, the MAI Appraiser
selected by the other party shall alone determine the fair market value of the
Leased Property in accordance with the provisions of this Exhibit and the fair
market value so determined shall be binding upon Landlord and Tenant.
In the event the MAI Appraisers selected by Landlord and Tenant are
unable to agree upon a third MAI Appraiser within the time period set forth in
the first paragraph of this Exhibit, either Landlord or Tenant shall have the
right to apply at Tenant's expense to the presiding judge of the court of
original trial jurisdiction in the county in which the Leased Property is
located to name the third MAI Appraiser.
Within five (5) days after completion of the third MAI Appraiser's
appraisal, all three MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the fair market value of the Leased
Property. If a majority is unable to determine the fair market value at such
meeting, the three appraisals shall be added together and their total divided by
three. The resulting quotient shall be the fair market value of the Leased
Property. If, however, either or both of the low appraisal or the high appraisal
are more than ten percent (10%) lower or higher than the middle appraisal, any
such lower or higher appraisal shall be disregarded. If only one appraisal is
disregarded, the remaining two appraisals shall be added together and their
total divided by two, and the resulting quotient shall be such fair market
value. If both the lower appraisal and the higher appraisal are disregarded as
provided herein, the middle appraisal shall be such fair market value. In any
event, the result of the foregoing appraisal process shall be final and binding.
"MAI APPRAISER" shall mean an appraiser licensed or otherwise qualified
to do business in the State and who has substantial experience in performing
appraisals of facilities similar to the Leased Property and is certified as a
member of the American Institute of Real Estate Appraisers or certified as a
SRPA by the Society of Real Estate Appraisers, or, if such organizations no
longer exist or certify appraisers, such successor organization or such other
organization as is approved by Landlord.
C-1
EXHIBIT "D"
Tenant Estoppel Certificate
THIS TENANT'S ESTOPPEL CERTIFICATE ("Certificate") is given this __ day
of ___, 20___ by ___________ ("Tenant") in favor of _____________________, a
__________, with principal office and place of business at______________________
("Beneficiary").
RECITALS:
A. Pursuant to the terms and conditions of that certain Lease Agreement
("Lease") dated ________, ___________________________ ("Landlord") leased to
Tenant certain real property in ______ County, _____ ("Leased Property"), which
Leased Property are more particularly described in the Lease.
B. Pursuant to the terms and conditions of the Lease, the Beneficiary has
requested that the Tenant execute and deliver this Certificate with respect to
the Lease.
NOW, THEREFORE, in consideration of the above Leased Property, the
Tenant hereby makes the following statements for the benefit of the Assignee:
1. The copy of the Lease attached hereto and made a part hereof as
Exhibit "A" is a true, correct and complete copy of the Lease, which Lease is in
full force and effect as of the date hereof, and has not been modified or
amended.
2. The Lease sets forth the entire agreement between the Landlord and
the Tenant relating to the leasing of the Leased Property, and there are no
other agreements, written or oral, relating to the leasing of the Leased
Property.
3. There exists no uncured or outstanding defaults or events of default
under the Lease, or events which, with the passage of time, and the giving of
notice, or both, would be a default or event of default under the Lease.
4. No notice of termination has been given by Landlord or Tenant with
respect to the Lease.
5. All payments due the Landlord under the Lease through and including
the date hereof have been made, including the monthly installment of Minimum
Rent (as defined in the Lease) for the period of ______________ to
________________ in the amount of $___________.
6. As of the date hereof, the annual Minimum Rent under the Lease is
$__________.
7. Percentage Rent (as defined in the Lease) has been paid through and
including the Fiscal Year ending ______________________.
8. There are no disputes between the Landlord and the Tenant with
respect to any rental due under the Lease or with respect to any provision of
the Lease.
9. Notwithstanding any provisions of the Lease to the contrary, the
Tenant hereby consents to the collateral assignment of the Lease by the Landlord
to the Beneficiary, and agrees that no terms and conditions of the Lease shall
be altered, amended or changed as a result of such assignment.
D-1
10. The Tenant hereby agrees that from and after the date hereof copies
of all notices which Tenant is required to deliver to the Landlord under the
Lease with respect to defaults, events of default or failure to perform by the
Landlord under the Lease, shall be delivered to Beneficiary at the following
address:
----------------------
----------------------
----------------------
----------------------
11. The Tenant represents and warrants that (a) all improvements
constructed on the Leased Property have been approved and accepted by Tenant,
(b) all utility sources and utility companies which service the Leased Property
have been approved and accepted by Tenant and utility service is available to
the Leased Property, (c) Tenant is in occupancy of the Leased Property pursuant
to the Lease, and (d) Tenant has no offsets, counterclaims or defenses with
respect to its obligations under the Lease.
12. The Tenant understands and acknowledges that Beneficiary is relying
upon the representations set forth in this Certificate, and may rely thereon in
connection with the [COLLATERAL] assignment of the Lease to Beneficiary.
IN TESTIMONY WHEREOF, witness the signature of the Tenant as of the day
and year first set forth above.
-----------------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
STATE OF _______
COUNTY OF _______
The foregoing instrument was acknowledged before me this ___ day of
_____, 20___ by _________________, as _________________ of ____________, a
____________, on behalf of the _________. He/she is personally known to me or
has produced ________ as identification.
_________________________________________
Notary Public
Printed Name:____________________________
expires: __________________
(NOTARY SEAL)
D-2
EXHIBIT "E"
Memorandum of Lease
THIS MEMORANDUM OF LEASE, entered into as of this ____ day of
_________, 20___, by and between __________________________________________,
whose address is 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, as Landlord,
and ____________________, a ______________, whose address is___________________
___________________, as Tenant.
W I T N E S E T H:
-----------------
THAT, Landlord and Tenant have heretofore entered into a certain Lease
Agreement dated ____________, 20___ (the "Lease") covering certain Leased
Property consisting of, among other things, certain real property located in
______ County, ______, more particularly described on Exhibit "A" attached
hereto upon which there is constructed and located certain improvements
(together the "Leased Property"), and
WHEREAS, it is the desire of both Landlord and Tenant to memorialize the
Lease and set forth certain pertinent data with respect thereto,
NOW THEREFORE, with respect to the Lease, Landlord and Tenant hereby
acknowledge and agree as follows:
1. Demise. The Leased Property have been and are hereby demised, let and
leased by Landlord to Tenant, and taken and accepted by Tenant from Landlord,
all pursuant to and in accordance with the Lease.
2. Term. The initial Term of the Lease is from February 11, 2002, until
February 10, 2017. Tenant has the right, privilege and option to renew and
extend the initial Term of the Lease for up to two (2) additional periods of
five (5) years each, subject to the provisions and conditions of the Lease.
3. Possession. Landlord has delivered possession of the Leased Property
to Tenant and Tenant has accepted delivery and taken possession of the Leased
Property from Landlord in the "as is" condition of the Leased Property on the
Commencement Date.
4. Liens on Landlord's Interest Prohibited. By the terms of the Lease,
Landlord's interest in the Leased Property may not be subjected to liens of any
nature by reason of Tenant's construction, alteration, repair, restoration,
replacement or reconstruction of any improvements on or in the Leased Property,
including those arising in connection with or as an incident to the renovation
of the improvements located on the Leased Property, or by reason of any other
act or omission of Tenant (or of any person claiming by, through or under
Tenant) including, but not limited to, construction, mechanics' and
materialmen's liens. Accordingly, all persons dealing with Tenant are hereby
placed on notice that such persons shall not look to Landlord or to
E-1
Landlord's credit or assets (including Landlord's interest in the Leased
Property) for payment or satisfaction of any obligations incurred in connection
with the construction, alteration, repair, restoration, renovation, replacement
or reconstruction thereof by or on behalf of Tenant. Tenant has no power, right
or authority to subject Landlord's interest in the Leased Property to any
construction, mechanic's or materialmen's lien or claim of lien.
5. Subordination and Attornment. The Lease specifically provides that
the Lease and Tenant's leasehold interest in and to the Leased Property are
junior, inferior, subordinate and subject in all respects to any mortgage or
mortgages now or hereafter in force and effect upon or encumbering the Leased
Property or any portion thereof, and that Tenant shall, and has agreed to,
attorn to any successor of the interest of Landlord under the Lease, including
the purchaser at any foreclosure sale occasioned by the foreclosure of any such
mortgage or mortgages, for the balance of the Term of the Lease remaining at the
time of the succession of such interest to such successor. Such subordination
shall be upon the express condition that the validity of this Lease shall be
recognized by the mortgagee, and that, notwithstanding any default by the
mortgagor, with respect to such mortgage, Tenant's possession and right of use
under this Lease in and to the Premises (including rights to have insurance and
condemnation proceeds made available for proper reconstruction of the Premises)
shall not be disturbed by such mortgagee unless and until Tenant shall breach
any of the provisions hereof and this Lease or Tenant's right to possession
hereunder shall have been terminated in accordance with the provisions of this
Lease.
6. Inconsistent Provisions. The provisions of this Memorandum constitute
only a general description of the content of the Lease with respect to matters
set forth herein. Accordingly, third parties are advised that the provisions of
the Lease itself shall be controlling with respect to all matters set forth
herein. In the event of any discrepancy between the provisions of the Lease and
this Memorandum, the provisions of the Lease shall take precedence and prevail
over the provisions of this Memorandum.
7. Termination of Lease. All rights of Tenant shall terminate upon the
expiration or earlier termination of the Lease, which may be evidenced by a
written notice of such expiration or termination recorded or filed by Landlord
among the appropriate land records of the County in which the Leased Property is
located.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
E-2
IN WITNESS WHEREOF, Landlord and Tenant have caused this Memorandum of
Lease to be duly executed on or as of the day and year first above written.
Signed, sealed and delivered
in the presence of: , a
--------------------------------------
-----------------------------------------
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
(CORPORATE SEAL)
"LANDLORD"
, a
--------------------------------------
-----------------------------------------
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
"TENANT"
STATE OF _______________
COUNTY OF _____________
The foregoing instrument was acknowledged before me this _____ day of
_______________, 20___ by ____________________, as _________ of
____________________, a ______________________, on behalf of the _____________.
He/she is personally known to me or has produced _______________________ as
identification.
-----------------------------------------
Notary Public
Notary Public, State of
-----------------
Commission #:
----------------------------
My commission expires:
-------------------
(NOTARY SEAL)
E-3
STATE OF __________
COUNTY OF __________
The foregoing instrument was acknowledged before me this _____ day of
_______________, 20___, by ___________________, as ______________ of
___________________, a _______________________, on behalf of the _____________.
He/she is personally known to me or has produced _______________________ as
identification.
-------------------------------------------
Notary Public
Notary Public, State of ___________________
Commission No.: __________________________
My Commission Expires: ___________________
(SEAL)
E-4
EXHIBIT "F"
Single Purpose Entity Requirements
Tenant or its assignee shall throughout the Term hereof do all things
necessary to continue to be and remain a Single Purpose Entity (including
without limitation, if Tenant is a partnership, insuring that each General
Partner of Tenant, continues as a Single Purpose Entity and shall not amend its
Articles of Organization or Operating Agreement (or if Tenant is a corporation,
Tenant shall not amend its Articles of Incorporation or Bylaws, or if Tenant is
a partnership, Tenant shall prevent any general partner from amending such
general partner's Articles of Organization or Bylaws or other formation
documents). For purposes hereof, Single Purpose Entity shall mean a Person,
other than an individual, which (a) is formed, organized or reorganized solely
for the purpose of holding, directly, the leasehold interest in the Leased
Property, (b) does not engage in any business unrelated to the Leased Property
and the operation and management thereof, (c) has not and will not have any
assets other than those related to its interest in the Leased Property and has
not and will not have any indebtedness other than incurred in the ordinary
course of business and paid pursuant to the terms of financing applicable to
such trade payables and indebtedness expressly authorized in Section 20.2(f) of
the Agreement, (d) maintains its own separate books and records and its own
accounts, in each case which are separate and apart from the books and records
of any other Person, (e) holds itself out as being a Person separate and apart
from any other Person, (f) does not and will not commingle its funds or assets
with those of any other Person, (g) conducts its own business in its own name,
(h) maintains separate financial statements, (i) pays its own liabilities out of
its own funds, (j) observes all limited liability company formalities,
partnership formalities or corporate formalities, as applicable, (k) maintains
an arm's-length relationship with its Affiliated Persons, (l) pays the salaries
of its own employees and maintains a sufficient number of employees in light of
its contemplated business operation, (m) does not guarantee or otherwise
obligate itself with respect to the debts of any other Person or hold out its
credit as being available to satisfy the obligations of any other Person except
as required or expressly authorized under the Agreement, (n) does not acquire
obligations or securities of its partners, members or shareholders, (o)
allocates fairly and reasonably shared expenses, including without limitation,
any overhead for shared office space, (if any), (p) uses separate stationary,
invoices and checks, (q) except as required or expressly authorized under the
Agreement, does not and will not pledge its assets for the benefit of any Person
other than Landlord or make any loans or advances to any other Person, (r) does
and will correct any known misunderstanding regarding its separate identity, (s)
maintains adequate capital in light of its contemplated business operations, and
(t) has and will have an Operating Agreement, partnership agreement, certificate
of incorporation or other organization document which complies with the
standards and requirements for a Single Purpose Entity set by Rating Agencies
(as hereinafter defined) as of the date hereof applicable to a limited liability
company, partnership or corporation, as applicable. In addition, if such Person
is a limited liability company, (i) the managing member shall be a corporation
or limited liability company (or if a partnership, shall have as its sole
general partner a corporation or limited liability company) that is a Single
Purpose Entity whose organization documents shall comply
F-1
with the standards and requirements for a Single Purpose Entity set by the
Rating Agencies as of the date hereof applicable to such managing members, (ii)
its Articles of Organization, Certificate of Formation and/or Operating
Agreement, as applicable, shall provide that such entity will dissolve only upon
the bankruptcy of the managing member, (iii) if such Person has more than one
managing member, at least one member shall be a corporation or limited liability
company that qualifies as a Single Purpose Entity and the Organization Documents
shall provide that such Person shall continue (and not dissolve) for so long as
a solvent managing member exists (iv) such corporate member or limited liability
company shall conform to the requirements hereof for Persons that are
corporations or limited liability company and (v) such Person shall have at
least one Independent Member. In addition, if such Person is a partnership, (a)
all general partners of such Person shall be Single Purpose Entities whose
organizational documents shall comply with the standards and requirements for a
Single Purpose Entity set by the Rating Agencies as of the date hereof
applicable to such general partners, (b) if such Person has more than one
general partner, then the organization documents shall provide that such Person
shall continue (and not dissolve) for so long as a solvent general partner
exists. In addition, if such Person is a corporation, then at all times, (i)
such Person shall have at least one Independent Director, and (ii) Board of
Directors of such Person may not take any action relating to such Person's
bankruptcy, dissolution or status as a Single Purpose Entity without the
unanimous affirmative vote of 100% of the members of the Board of Directors
unless all of the directors, including the Independent Director shall have
participated in such vote. In addition, such Person which is formed or organized
solely for the purpose of holding, directly, the leasehold interest in the
Leased Property (i) without the unanimous consent of all of the partners,
directors or members, as applicable, has not and will not with respect to itself
or any other single purpose entity that owns an interest in the Leased Property
in which it has a direct or indirect legal or beneficial interest (a) seek or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or other similar official for itself for all or any
portion of its properties, or (b) take any action which might cause it to become
insolvent, (ii) has held and will hold its assets in its own name, (iii) has and
will maintain its financial statements, accounting records and other entity
documents separate and apart form any other Person, and (iv) has not and will
not identify its partners, members or shareholders or any of its affiliates of
any of them as a division or part of it. For purposes hereof, "Rating Agencies"
shall mean any three of the following: Standards & Poor's Rating Services, a
division of the XxXxxx-Xxxx Companies, Inc., Duff and Xxxxxx Credit Rating Co.,
Xxxxx'x Investors Services, Inc. and Fitch Investors Services, L.P. or if any
such corporation shall for any reason no longer perform the functions of a
securities rating agency, any other nationally recognized statistical rating
agency designated by Landlord. In addition, for purposes hereof, "Independent
Director" or "Independent Member" shall mean an individual appointed by CT
Corporation System, AMACAR Group, L.L.C., CSC Special Services or similar
corporate service or an individual reasonably satisfactory to Landlord, who in
any case shall not have been at the time of such individual's appointment, and
may not have been at any time during the preceding two years (i) a shareholder
of, or an officer or employee of, or a member or manager of Tenant or any of its
respective shareholders, subsidiaries or Affiliated
F-2
Persons, (ii) a customer of, or supplier to Tenant or any member, manager or
general partner or any of its respective shareholders, subsidiaries or
Affiliated Persons, (iii) a Person or other entity controlling any such
shareholder, supplier, customer, member or manager, or (iv) a member of the
immediate family of any such shareholder, officer, employee, supplier, customer,
member or manager or of any other director of Tenant or any general partner
thereof.
In addition to the foregoing, and consistent with the Single Purpose
Entity requirements hereof, Tenant covenants and agrees that throughout the Term
hereof, Tenant shall not voluntarily file or consent to the filing of a petition
for bankruptcy, insolvency, reorganization, assignment for the benefit of
creditors or similar proceedings under any federal or state bankruptcy,
insolvency, reorganization or other similar law or otherwise seek any relief
under any laws relating to the relief of debts or the protection of debtors
generally, without the unanimous consent of its manager(s), which shall at all
times include the affirmative consent of the Independent Director, and if Tenant
is a partnership without the unanimous consent of its general partners
(including the unanimous consent of the directors of the corporate general
partners or shareholders as the case may be which shall at all times include the
consent of the Independent Director).
F-3
EXHIBIT "G"
Tenant Equity Ownership
ARC Xxxxxx Court, LLC is a Tennessee limited liability company with two members:
American Retirement Corporation, a Tennessee corporation:
100% economic member
ARC Xxxxxx Court Management, Inc., a Tennessee corporation:
non-economic member
ARC Xxxxxx Court Management, Inc. is a wholly-owned subsidiary of American
Retirement Corporation
G-1
EXHIBIT "H"
Property Expenses
The term "Property Expenses" shall mean for the requisite period the sum
of the following items:
1. the cost of sales, including without limitation, compensation, fringe
benefits, payroll taxes and other costs relating to employees of Tenant (the
foregoing costs shall not include salaries and other employee costs of executive
personnel of Tenant who do not work at the Leased Property on a regular basis;
except that the foregoing costs shall include the allocable portion of the
salary and other employee costs of any general manager or other supervisory
personnel (not including regional vice presidents or regional sales people)
assigned to a "cluster" of independent living or assisted living and dementia
care facilities which includes the Leased Property);
2. departmental expenses incurred at departments within the Leased
Property; administrative and general expenses; the cost of marketing incurred by
the Leased Property; advertising and business promotion incurred by the Leased
Property; heat, light, and power; and computer line charges;
3. the cost of Inventories and P&E consumed in the operation of the
Leased Property;
4. a reasonable reserve for uncollectible accounts receivable as
determined by the Tenant;
5. all costs and fees of independent professionals or other third
parties who are retained by Tenant to perform services required or permitted
hereunder;
6. all costs and fees of technical consultants and operational experts
who are retained or employed by Tenant for specialized services (including,
without limitation, quality assurance inspectors) and the cost of attendance by
employees of the Leased Property at training and manpower development programs
sponsored by Tenant;
7. Additional Charges as referenced in Section 3.4 of the Agreement;
8. payments made into the Reserve pursuant to Section 5.2 of the
Agreement;
9. management fees paid to any approved manager and such other costs and
expenses incurred by an approved manager as are specifically provided for under
any approved management agreement or are otherwise reasonably necessary for the
proper and efficient operating of the Leased Property;
10. the term "Property Expenses" shall not include (a) debt service
payments pursuant to any Facility Mortgage, (b) payments pursuant to equipment
leases or other forms of financing obtained for the Tenant's Personal Property,
(c) rental payments pursuant to any ground lease of the Land, (d) any
indebtedness of Tenant, or (e) any employee claim which is not covered by
H-1
insurance and where the basis of such employee claim is conduct by Tenant or its
manager which is (i) a substantial violation of the standards of responsible
labor relations as generally practiced by prudent owners or operators of similar
retirement community operations in the state in which the Facility is situated,
and (ii) not the isolated act of individual employees, but rather is a direct
result of corporate policies of Tenant or any manager. Neither revenues from the
Facility, nor any disbursement from the Reserve, shall be used by Tenant to pay
the amounts not constituting Property Expenses under clauses 9(b), 9(c), 9(d) or
9(e) above.
Notwithstanding the foregoing definition of "Property Expenses," the financial
and other informational reports and statements to be provided pursuant to the
Lease may be provided by Tenant consistent with Tenant's standard information
reporting practices, provided that any omitted or varying item under such
practices is identified and separately scheduled as adjustments if necessary to
determine any financial or economic amount relevant to the Lease or if otherwise
requested in writing by Landlord.
H-2
EXHIBIT "I"
Initial Landlord P&E
I-1
EXHIBIT "J"
Initial Tenant Personal Property
(a) The right to use the tradename "ARC," "American Retirement Corporation,"
and any variations thereof;
(b) Independent living facility licenses and Assisted living and
Alzheimer's/dementia care licenses, if any, and any liquor licenses;
(c) Any vans, cars or other motor vehicles; and
(d) Any proprietary software of Tenant and its Affiliated Persons not
including, however, information and data relating to the Leased Property
and the ownership, operation and occupancy thereof, which information
and data shall remain available to Landlord at all times during and be
transferred to Landlord immediately upon the expiration or any early
termination of the Lease Term.
J-1
EXHIBIT "K"
Landlord's Assumed Financing
1. The Leased Property is subject to certain existing GMAC Commercial
Mortgage Corporation ("GMACCM") Loan Documents ("Loan Documents") as
defined under that certain Agreement of Assumption and Modification of
Mortgage, Note and Other Loan Documents dated of even date with this
Lease and entered into by Tenant, Landlord, GMACCM and others (the
"Assumption Agreement") to reflect Landlord's assumption of the Loan
Documents and the first mortgage loan thereunder (the "Loan") in
connection with the sale of the Leased Property from Tenant to Landlord.
2. Tenant has assigned to Landlord the tax, insurance and debt service
reserve escrows held by GMACCM under the Loan Documents, and the current
balance thereof has been credited (and will continue to be credited,
regardless of whether or not the funds remain in escrow under the Loan
Documents) by Landlord towards the Security Deposit required to be paid
by Tenant under this Lease. In the event that any further deposits are
required under the terms of the Loan Documents then the same shall, at
the request of Landlord, be made and deposited by Tenant to and for the
benefit of Landlord, as an additional Security Deposit under this Lease,
and any such additional deposits in excess of the required amount of the
Security Deposit as stated in this Lease which are released by GMACCM
shall be refunded to Tenant as a release and reduction of any such
additional Security Deposit amounts paid by Tenant hereunder.
3. Notwithstanding any provision of the Lease to the contrary, Tenant may
and shall enter into all Loan Documents in respect of Tenant's interests
in the Facility as are required by GMACCM and provided for under and in
connection with the Assumption Agreement, and agrees with and in favor
of Landlord, as an additional covenant under this Lease, to fully and
timely perform and satisfy all of Tenant's obligations thereunder and
that the indemnification of Landlord by Tenant under Article 14 of this
Lease shall include any and all liabilities and damages incurred or
suffered by Landlord arising directly or indirectly form or out of
Tenant's failure to fully and timely perform all such obligations.
4. Pursuant to and consistent with the provisions of Section 3.7 of the
Lease, and the agreement of Tenant and Landlord that this Lease shall
constitute an absolute triple net lease, Tenant further covenants and
agrees with Landlord to perform and undertake all obligations set forth
in the Loan Documents relating to the use, operation, condition and
status of the Facility and the obligations of Tenant (including any
provisions to the effect that Landlord shall or may cause Tenant to
undertake or refrain from some act or action) and all undertakings and
agreements in connection therewith, not including however: (a) any
obligation to pay scheduled payments of principal and interest or any
sums due and payable at the scheduled maturity of the Loan; or (b) any
obligation which by its terms or nature relates solely to Landlord, is
susceptible to being performed solely by Landlord, or would not
constitute a type of obligation which would reasonably be considered
within the scope of a tenant obligation under an absolute triple net
lease.
K-1