EXHIBIT 10.5
OPERATING LEASE
THIS OPERATING LEASE ("Lease"), made as of the first day of July,
2001, between MAYBROOK REALTY, INC., a New York corporation ("Landlord") and ARC
HDV, LLC, a Tennessee limited liability company ("Tenant").
WITNESSETH:
WHEREAS, Landlord is the lessee under that certain Ground Lease
Agreement with Hacienda De Vida Corporation, an Arizona non-profit corporation,
dated September 30, 1999, as amended from time to time, for the land described
on Exhibit A (the "SNF Parcel") attached hereto and incorporated herein (the
"SNF Lease"); and
WHEREAS, Landlord is the owner of all of the personal property,
erections, additions, fixtures and improvements (the "SNF Improvements")
currently located on the SNF Parcel; and
WHEREAS, Landlord is also the lessee under that certain Ground Lease
Agreement with Sun Health Properties dated September 30, 1999, as amended from
time to time, for the land described on Exhibit B (the "ALF Parcel") attached
hereto and incorporated herein (the "ALF Lease"; the ALF Lease and the SNF Lease
are collectively referred to herein as the "Ground Leases");
WHEREAS, Landlord is the owner of all of the personal property,
erections, additions, fixtures and improvements (the "ALF Improvements"; the
"ALF Improvements; the ALF Improvements and the SNF Improvements are
collectively referred to herein as the "Improvements") currently located on the
ALF parcel.
NOW, THEREFORE, the parties hereto hereby covenant and agree as
follows:
1. Premises. Landlord leases to Tenant and Tenant leases from
Landlord all of Landlord's right, title and interest in the SNF Parcel and the
ALF Parcel (the "Land") together with the Improvements (the Land and the
Improvements are collectively referred to herein as the "Premises").
2. Term. The term of this Lease shall be for a period of fourteen
(14) years and six (6) months commencing the first day of July, 2001 and
terminating on the 31st day of December, 2015, unless terminated earlier
according to the terms of this Lease.
3. Rent; Additional Rent. The rental for the Premises throughout
the term shall be payable in accordance with the following schedule:
July, 2001 through September, 2001 - $90,000 per month
October , 2001 through December, 2001 - $154,112 per month
January, 2002 through December, 2002 - $169,475 per month
January, 2003 through December, 2007 - $194,868 per month
January, 2008 through December, 2010 - $154,112 per month
January, 2011 through December, 2015 - $177,229 per month
All monthly installments ("monthly rental") shall be paid in arrears, on or
before the 1st day of each month, without demand, to Landlord at the address set
forth hereafter and if not paid when due shall be subject to a late charge equal
to five percent (5%) of such payment.
If Landlord shall be charged for additional rent or other sums pursuant
to the provisions of the Ground Leases and such rents or other sums accrue
during the term hereof, Tenant shall pay such additional rent or other sums on
demand of Landlord.
4. Renewal Terms. So long as Tenant is not then in default under
this Lease, at Tenant's option, and upon receipt of a written request from
Tenant to Landlord given at least ninety (90) days prior to the end of the term,
Landlord agrees to extend the term of this Lease for one (1) additional five (5)
year period. Any such extension of the term shall be made on all the same
conditions as this Lease; provided, however, that the annual rental for the
renewal term shall be $2,126,748, payable in monthly installments of $177,229.
5. Ground Leases. This Lease, as it relates to the SNF Parcel and
the ALF Parcel, is subject and subordinate to the Ground Leases. Except as may
be inconsistent with the specific terms hereof, all the terms, covenants, and
conditions contained in the Ground Leases shall be applicable to this Lease with
the same force and effect as if Landlord were the lessor under any of the Ground
Leases and Tenant were the lessee thereunder; and in case of any breach hereof
by Tenant, Landlord shall have all the right against Tenant as would be
available to the lessors against the lessee under any of the Ground Leases if
such breaches were by the lessee thereunder.
Tenant shall neither do nor permit anything to be done which would
cause any of the Ground Leases to be terminated or forfeited by reasons of any
right of termination or forfeiture reserved or vested in the lessors under the
Ground Leases.
Tenant represents that it has read and is familiar with the terms of
the Ground Leases. The SNF Lease is attached hereto and incorporated herein as
Exhibit C. The ALF Lease is attached hereto and incorporated herein as Exhibit
D.
6. Utilities and Taxes. Tenant shall be responsible for all
utilities, including without limitation, electricity, gas, phone, and water, and
all taxes and assessments, including real estate, personal property or any other
impositions or assessments levied upon the Premises attributable to the period
covered by this Lease. Except as hereafter provided Tenant shall pay all such
utilities, taxes and assessments directly to the appropriate utility company or
officer of the taxing authority, respectively, before they become delinquent.
Tenant shall deliver to Landlord not more than thirty (30) days after the due
date of each such imposition a copy of the original receipt evidencing such
payment or proof of payment reasonably satisfactory to Landlord.
Tenant shall have the right, but not the obligation, to protest the
amount or payment of any such impositions, provided that in the event of any
protest by Tenant, Landlord shall not incur any expense because of any such
protest.
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7. Repairs; Casualty Insurance. Tenant will keep the Premises,
including without limitation, all furniture, fixtures and equipment located
thereon and the roof, exterior walls, sprinkler system, HVAC system, electrical
wiring and plumbing system, yard, parking lot, underground water and sewerage
pipes and interior walls, floors, ceiling, and light fixtures, as clean and in
as good repair as same are at the commencement of this term or may be put in
during the continuance thereof, and will promptly replace all glass broken
during the said term with glass of the same quality.
Tenant will keep the improvements on the Premises insured against
damage by fire, with broad form all risk coverage, in an amount equal to at
least 100% of the full replacement cost thereof. Such insurance shall be written
in favor of Landlord, Tenant, and any mortgagee as their interests may appear
with a company approved by Landlord. The policy shall provide that it will not
be canceled without 30 days prior notice to Landlord and that no act or omission
of Tenant will invalidate coverage as to Landlord.
8. Fire or Other Casualty. If the Premises should be damaged or
destroyed by fire or other casualty Tenant shall promptly repair, replace,
and/or rebuild the Premises. There shall be no abatement of rent as a result of
such fire or other casualty.
9. Right of Entry. Landlord may at reasonable times and on
reasonable notice to Tenant enter the Premises to inspect them and make any
repairs required by Section 7 that Tenant has failed to make, provided Tenant's
occupancy is not materially interfered with. If Landlord makes any repairs
required to be made by Tenant under Section 7, Tenant shall pay Landlord as
additional rent a sum equal to the amounts expended by Landlord plus interest
thereon at the maximum legal contract rate within ten (10) days after Landlord
presents Tenant with a statement setting forth the repairs made and the amounts
expended.
10. Renovations and Alterations of Premises. Tenant shall have the
right, at its sole cost and expense, to develop, alter, add to, and repair the
Premises; provided, however, that if such alterations will cost in excess of
$10,000 or are structural in nature, Tenant must obtain the consent of Landlord,
which consent shall not be unreasonably withheld, conditioned or delayed. Tenant
shall allow no lien to be placed against the Premises. During any such
development, alteration, addition and repair of the Premises Tenant shall carry,
or cause Tenant's agents to carry, all insurance necessary to protect Landlord
from liability associated with such development, alteration, addition and repair
of the Premises. All development, alteration, addition, repair, replacement and
improvement made to or upon the Premises shall be deemed to be part of the
Premises and shall become the property of Landlord upon the expiration or
termination of this Lease; provided, however, that trade fixtures, machinery,
and equipment that are installed by Tenant and removable without materially
injuring the Premises shall remain the property of Tenant (the "Tenant Personal
Property") unless Tenant fails to remove such prior to the termination of this
Lease. Notwithstanding the foregoing, upon the expiration of the term, Landlord
shall have the option to purchase the Tenant Personal Property for an amount
equal to its depreciated value determined in accordance with GAAP. If Landlord
wishes to exercise its option to purchase, Landlord shall notify Tenant at least
ninety (90) days prior to the expiration of the term. Landlord's Option to
Purchase the Tenant Personal Property shall not include such property as bears
the tradenames, trademarks or
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patents of American Retirement Corporation, Tenant, or any affiliate, successor
or assign thereof or any rights in and to such tradenames, trademarks or
patents.
11. Surrender of Premises. At the expiration of the term of this
Lease, Tenant shall peaceably yield up to Landlord the Premises and all
improvements, furniture, fixtures and equipment and additions made thereto
except as hereinbefore provided, in good condition and repair in all respects.
12. Use of Premises. Tenant shall continuously use and occupy the
Premises during the term of this Lease as a skilled nursing facility, an
assisted living facility and related purposes. All rights and decision making
related to the day to day operations of Tenant's use of the Premises, and any
development of the Premises, shall be vested in Tenant, subject to the terms and
provisions of that certain Management Agreement, dated July 14, 1998, as amended
from time to time (the "Management Agreement"), by and between Tenant and A.R.C.
Management Corporation ("ARC"). Tenant will not at any time use or occupy the
Premises in violation of laws, ordinances, or regulations of any government or
agency having jurisdiction or in violation of Tenant's or Landlord's insurance
contracts.
13. Regulatory Compliance.
(a) Tenant and the Premises shall comply in all material
respects with all federal, state and local licensing and other laws and
regulations applicable to the continuing care retirement community on the
Premises (the "Retirement Care Facility") as well as with the certification
requirements of Medicare and Medicaid (or any successor program) as currently
exist or as are obtained by Tenant at a later date, as well as with the
healthcare compliance covenants set forth on Exhibit F attached hereto. Further,
Tenant shall not commit any act or omission that would in any way violate any
certificate of occupancy affecting the Premises. Tenant shall deliver to
Landlord complete copies of any material surveys, examinations, certification
and licensure inspections, compliance certificates, and other similar reports
issued to Tenant by any governmental agency within 10 days after Tenant's
receipt of each item.
(b) During the Term, all inspection fees, costs and
charges associated with a change of any licensure or certification shall be
borne solely by Tenant. Tenant shall at its sole cost make any additions or
alterations to the Premises necessitated by, or imposed in connection with, a
change of ownership inspection survey for the transfer of operation of the
Premises from Tenant or Tenant's assignee or subtenant to Landlord or Landlord's
designee at the expiration or earlier termination of the Term in accordance
herewith.
14. Insurance. All property of any kind that may at any time be
used, left or placed on the Premises during the term of this Lease shall be at
the sole risk of the Tenant. Tenant shall carry contents coverage insurance on
its contents.
To the extent not covered by insurance, Tenant will save, indemnify and
hold Landlord free and harmless from any and all liability or any injury, loss,
or damage to person or property arising
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out of any cause associated with its business or use of the Premises, including
its development thereof and its omission to act.
Tenant agrees to provide public liability insurance naming Landlord as
additional insured to protect Landlord from loss customarily covered by such
insurance. The policy shall provide that it will not be canceled without thirty
(30) days prior notice to Landlord and that no act or omission of Tenant will
invalidate coverage as to Landlord. The policy shall provide coverage in an
amount reasonably satisfactory to Landlord.
Tenant shall maintain, at its expense, business interruption insurance
insuring a period of not less than three (3) months.
A copy of the policies or certificates of insurance required pursuant
to this Lease, together with proof of premium payment shall be delivered to
Landlord initially and at each renewal thereof.
15. Purchase Option. So long as Tenant is not in default
hereunder, Landlord hereby grants to Tenant the right and option (the "Option")
to purchase, for the price and upon the following terms and conditions: (i)
Landlord's leasehold interest in, to and under the Ground Leases (the "Leasehold
Interest"), (ii) the Improvements, and (iii) all other real and personal
property and interests or rights in property owned or leased by Landlord in
connection with, or relating to the Ground Leases (the "Personal Property"; the
Leasehold Interest, the Improvements and the Personal Property are sometimes
referred to herein as the "Property"). The purchase and sale of the Property may
only be closed during the period beginning October 1 and ending December 31 (the
"Fourth Quarter") of any year of the term or renewal term of this Lease. If
Tenant exercises the Option and the Ground Lessors consent to the assignment of
the Leasehold Interest, the purchase price for the Property (the "Purchase
Price") shall be payable in an amount equal to the following:
If the closing occurs: Purchase Price
during the Fourth Quarter of 2001......................................$18,569,447
during the Fourth Quarter of 2002......................................$18,584,689
during the Fourth Quarter of 2003......................................$20,143,386
during the Fourth Quarter of 2004......................................$19,796,198
during the Fourth Quarter of 2005......................................$19,414,553
during the Fourth Quarter of 2006......................................$18,995,031
during the Fourth Quarter of 2007......................................$18,533,872
during the Fourth Quarter of 2008......................................$18,493,436
during the Fourth Quarter of 2009......................................$18,493,436
during the Fourth Quarter of 2010......................................$18,493,436
during the Fourth Quarter of 2011-2015, and
during the renewal term................................................$21,267,480
(a) If Tenant desires to exercise the Option it must give
written notice of its election to Landlord not later than July 1 but
prior to September 30 of the lease year in which Tenant intends to
close the transaction and at least 90 days prior to the date upon which
it
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intends to close the transaction. Upon the giving of such notice, a
contract of purchase and sale of the Property shall be deemed to
exist between the parties on the terms and conditions herein set out.
(b) Title to the Leasehold Interest shall be good and
marketable and free and clear of all liens and encumbrances except
those exceptions listed on Exhibit E attached hereto and any easements,
liens or encumbrances approved or created by Tenant, taxes for the
current year, and any sublease or occupancies made or suffered by
Tenant. If any title report or binder obtained by or furnished to
Tenant shall disclose any defect, Tenant shall give notice of any
objection to title and Landlord shall have a reasonable time (not to
exceed 60 days) to cure or remove such defect.
(c) There shall be no credit of any kind on the purchase
price for any of the rents paid by Tenant hereunder. Taxes and other
charges against the Premises which are the obligation of the Tenant
hereunder will not be prorated and the Tenant will take title to the
Property subject to the same.
(d) The purchase and sale of the Property shall be closed
on a mutually agreeable business day during the Fourth Quarter of the
year in which Tenant exercised the Option and ninety (90) days
following the exercise of the Option. Upon such closing, Landlord will
deliver to Tenant a standard form of an assignment conveying the
Leasehold Interest, a ▇▇▇▇ of sale conveying the Improvements and
Personal Property, and the parties will execute such other documents as
may be necessary to carry out the intent hereof. Landlord shall cause
an owner's title insurance policy (most recent ALTA form) to be
furnished to Tenant in the amount of the purchase price, at Tenant's
expense. Tenant may obtain a survey at Tenant's expense. All recording
costs, all other closing costs of Landlord and Tenant, and any
prepayment premium assessed to Landlord in connection with any loans to
Landlord which are secured by the Property shall be paid by Tenant.
16. Quiet Enjoyment. As long as Tenant is not in default
hereunder, Landlord covenants that Tenant shall peaceably hold and enjoy the
Premises, subject to the terms of this Lease. All entrances, exits, approaches
and means of entrance and approach, and all access to light and air now enjoyed
by the Premises, shall be and remain intact and uninterrupted by any act of
Landlord during the term of this Lease.
17. Eminent Domain. If the whole of the Premises shall be taken or
condemned by any competent authority for any public use or purpose or if such
portion thereof shall be taken or condemned as shall materially change the
character of the Premises so as to prevent Tenant from using them in
substantially the same manner as theretofore used, the term hereby granted shall
cease on the day prior to the taking of possession by such authority or the day
prior to vesting of title in such authority, whichever first occurs, and an
appropriate pro rata portion of any rent paid in advance by Tenant shall be
refunded.
If a portion of the Premises shall be condemned or taken, and if such
taking does not result in a material alteration in the character of the Premises
so as to prevent Tenant from using them in
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substantially the same manner as theretofore used, then this Lease shall
continue in effect, and any damage to the Premises shall be repaired by Tenant.
The entire award of damages or compensation for a taking of the
Premises, whether such taking be in whole or in part, shall belong to and be the
property of Landlord, except for such compensation as may be made for Tenant's
moving or relocation expenses, Tenant's business interruption losses, and for
the taking of Tenant's trade fixtures, which compensation shall belong to and be
the property of Tenant.
If the Premises shall be taken or condemned by any governmental
authority for temporary use or occupancy, this Lease shall continue in full
force and effect without reduction or abatement of rent, and the rights of the
parties shall be unaffected by the other provisions of this Section. In the
event of such temporary taking the entire award of damages in respect of the
Premises shall belong to Landlord and Tenant assigns Landlord any and all
interest it may have in such award. To the extent Tenant is prevented by such
temporary taking or occupancy from fulfilling its obligations hereunder,
Tenant's failure to do so shall not be deemed a default under this Lease.
18. Assignment and Subleasing. Tenant may not assign or encumber
this Lease or sublet the Premises, either in whole or in part. The transfer or
assignment of the membership interests in Tenant, and any transfer by operation
of law will be deemed "assignments" pursuant to this Section.
19. Indemnification of Landlord. Tenant hereby waives all claims
against Landlord for damage to personal property in and about the Premises and
for injuries, including death, to persons in or about the Premises, from any
cause other than Landlord's gross negligence or willful misconduct. Tenant shall
hold Landlord harmless for and on account of any and all injury to any person or
all damage to personal property arising from the failure of Tenant to keep the
Premises in good condition as herein provided. Tenant shall indemnify, protect,
defend and hold Landlord harmless from and against any and all claims,
liabilities, losses, damages and suits arising from Tenant's use, occupancy or
enjoyment of the Premises or the conduct of Tenant's business or from any
activity, work or things done, permitted or suffered by Tenant, or its agents,
contractors, or employees in or about the Premises, and Tenant further agrees to
indemnify, protect, defend and hold Landlord harmless from and against any and
all claims arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease or
arising from any negligence of Tenant, or any of its agents, contractors,
employees, invitees, or licensees, and from and against all costs, attorneys'
fees, expenses and liabilities of any kind incurred in or about any such claim
or any action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's sole cost and expense by
counsel reasonably satisfactory to Landlord.
20. Financial, Management and Regulatory Reports.
(a) Annual Financial Statement. Within one hundred twenty (120)
days of the fiscal year end of Tenant, Tenant shall deliver to Landlord the
annual financial statement of Tenant, with respect to Tenant's business
operations on the Premises, prepared in accordance with generally
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accepted accounting principles consistently applied ("GAAP"), and audited by a
certified public accounting firm reasonably acceptable to Landlord. Within
forty-five (45) days after each fiscal quarter ends, Tenant shall deliver to
Landlord unaudited financial statements of Tenant, with respect to Tenant's
business operations on the Premises, prepared in accordance with GAAP.
Notwithstanding any of the other terms of this Section 20, if Tenant be subject
to any reporting requirements of the Securities and Exchange Commission (the
"SEC") during the Term, Tenant shall concurrently deliver to Landlord such
reports as are delivered to the SEC pursuant to applicable security laws.
(b) Regulatory Reports. In addition, Tenant shall within ten (10)
business days of receipt thereof deliver to Landlord all federal, state and
local licensing and reimbursement certification surveys, inspection and other
reports received by Tenant as to the Premises or any portion thereof and the
operation of business thereon, including, without limitation, state department
of health licensing surveys, Medicare and Medicaid (and successor programs)
certification surveys (if applicable) and life safety code reports. Within ten
(10) business days of receipt thereof, Tenant shall give Landlord written notice
of any violation of any federal, state or local licensing or reimbursement
certification statute or regulation including without limitation Medicare and
Medicaid or successor programs (if applicable to the Premises or any portion
thereof), any suspension, termination or restriction placed upon Tenant or the
Premises or any portion thereof, the operation of business thereon or the
ability to admit residents, or any violation of any other permit, approval or
certification in connection with the Premises or any portion thereof or its
business, by any federal, state or local authority including without limitation
Medicare and Medicaid or successor programs if applicable to the Premises or any
portion thereof.
21. Attorney's Fees and Costs. In the event it becomes necessary
for Landlord to employ an attorney to enforce collection of the rents agreed to
be paid, or to enforce compliance with any of the covenants or agreements herein
contained, Tenant shall be liable for reasonable attorney's fees, costs and
expenses incurred by the Landlord.
22. Notice. Any notices required to be sent hereunder shall be
hand delivered or sent by certified mail to the following addresses:
LANDLORD: Maybrook Realty, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: 716/328-0787
TENANT: ARC HDV, LLC
c/o American Retirement Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: 615/221-2269
23. Default and Remedies. Each of the following events shall
constitute a default or breach of this Lease by Tenant:
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(a) If Tenant, or any successor or assignee of Tenant
while in possession, shall file a petition in bankruptcy or insolvency
or for reorganization under any bankruptcy act, or shall voluntarily
take advantage of any such act or shall make assignment for the benefit
of creditors.
(b) If involuntary proceedings under any bankruptcy laws
or insolvency act shall be instituted against Tenant, or if a receiver
or trustee shall be appointed for all or substantially all of the
property of Tenant, and such proceedings shall not be dismissed or the
receivership or trusteeship vacated within sixty (60) days after the
institution or appointment.
(c) If Tenant shall fail to pay Landlord any rent or
additional rent together with any interest thereon within fifteen (15)
days after Landlord notifies Tenant that it is unpaid.
(d) If Tenant shall fail to perform or comply with any of
the other conditions of this Lease within thirty (30) days after notice
by Landlord to Tenant specifying the condition to be performed or
complied with; or, if the performance cannot be reasonably had within
the 30-day period, Tenant shall not in good faith have commenced
performance within the 30-day period and shall not diligently proceed
to completion of performance.
In the event of any default hereunder, Landlord may exercise all rights
and remedies under this Lease and the laws of Arizona available to a lessor of
real and personal property in the event of a default by its lessee. Without
limiting the foregoing, Landlord shall have the right to do any of the
following:
(e) re-enter and take possession of the Premises without
terminating the Lease, and lease the Premises for the account of
Tenant, holding Tenant liable for all costs of the Landlord in
reletting the Premises and for the difference in the amount received by
such reletting and the amounts payable by Tenant under the Lease;
(f) terminate this Lease, exclude Tenant from possession
of the Premises and lease the Premises to others, holding Tenant liable
for the difference in the amounts received from such reletting and the
amounts payable by Tenant under the Lease;
(g) re-enter the Premises and have, repossess and enjoy
the Premises as if the Lease had not been made, and in such event,
Tenant and its successors and assigns shall remain liable for any
contingent or unliquidated obligations or sums owing at the time of
such repossession;
(h) have access to and inspect, examine and make copies
of the books and records and any and all accounts, data an income tax
and other returns of Tenant insofar as they pertain to the Premises;
(i) accelerate all of the unpaid rent hereunder so that
the aggregate rent for the unexpired term of this Lease becomes
immediately due and payable;
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(j) take whatever action at law or in equity as may
appear necessary or desirable to collect the rent and other amounts
payable under the Lease then due and thereafter to become due, or to
enforce performance and observance of any obligations, agreements or
covenants of Tenant under this Lease; and
(k) before or after repossession of the Premises and
whether or not this Lease has been terminated, Landlord shall have the
right (but shall be under no obligation except to the extent required
by applicable law) to relet any portion of the Premises to such tenant
or tenants, for such term or terms (which may be greater or less than
the remaining balance of the Term), for such rent, or such conditions
(which may include concessions or free rent) and for such uses, as
Landlord, in its absolute discretion, may determine, and Landlord may
collect and receive any rents payable by reason of such reletting.
Tenant agrees to pay Landlord, immediately upon demand, all reasonable
expenses incurred by Landlord in obtaining possession and in reletting
any of the Premises, including fees, commissions and costs of
attorneys, architects, agents and brokers.
All actions taken by Landlord pursuant to this Section shall be without
prejudice to any other remedies that otherwise might be used for the collection
of arrears of rent or for the preceding breach of covenant or conditions.
Landlord may elect, but shall not be obligated, to comply with any
condition, agreement, or term required hereby to be performed by Tenant, and
Landlord shall have the right to enter the Premises for the purpose of
correcting or remedying any such default and to remain until the default has
been corrected or remedied, but any expenditure for such correction by Landlord
shall not be deemed to waive or release the default of Tenant or the right of
Landlord to take any action as may be otherwise permissible hereunder in the
case of any default. In the event Landlord expends any funds to correct or
remedy a default of Tenant, Tenant shall reimburse Landlord for such
expenditures within five (5) days of Landlord's written demand therefor, and if
not paid when due such sums shall bear interest at the maximum legal contract
rate.
24. No Waiver. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed a waiver of any preceding breach of any obligation
hereunder by Tenant other than the failure to pay the particular rental so
accepted, and the waiver of any breach of any covenant or condition by Landlord
shall not constitute a waiver of any other breach regardless of knowledge
thereof.
25. Gender. Wherever appropriate herein, the words "Landlord" and
"Tenant" and the pronouns referring thereto, shall be construed singular or
plural, masculine, feminine or neuter as the facts warrant.
26. Broker. Landlord and Tenant warrant to each other that they
have dealt with no brokers in connection with this Lease. In the event a broker
claims a fee or commission in connection with this Lease, the party whose
conduct gave rise to such claim will hold the other harmless therefrom.
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27. Waiver of Subrogation. Landlord and Tenant hereby waive all
rights of recovery and causes of action that either has or may have or that may
arise hereafter against the other, whether caused by negligence, intentional
misconduct, or otherwise, for any damage to premises, property or business
caused by any perils covered by fire and extended coverage, building, contents,
and business interruption insurance, or for which either party may be reimbursed
as a result of insurance coverage affecting any loss suffered by it; provided,
however, that the foregoing waivers shall apply only to the extent of any
recovery made by the parties hereto under any policy of insurance now or
hereafter issued, and further provided that the foregoing waivers shall be
ineffective if they invalidate any policy of insurance of the parties hereto,
now or hereafter issued. Landlord and Tenant will use their best efforts to have
their respective insurance companies waive their rights of subrogation as
contemplated herein.
28. Signs. Tenant shall have the right to erect, affix or paint
signs on or about the Premises and the right at its option to remove said signs
upon the termination of this Lease, it being agreed that Tenant shall repair any
damage to the exterior of the Improvements caused by the removal of said signs.
29. Subordination. Upon written notice by Landlord to Tenant, this
Lease shall be and become subject and subordinate to any and all mortgages or
deeds of trust now existing, or that hereafter may be executed, covering the
Premises, for the full amount of all advances made or to be made thereunder and
without regard to the time or character of such advances, together with interest
thereon, and subject to all the terms and provisions thereof. Tenant agrees to
execute, acknowledge and deliver upon request any and all documents or
instruments requested by Landlord or necessary or proper to insure the
subordination of this Lease to any such mortgages or deeds of trust; provided,
however, that the foregoing provisions with respect to such subordination shall
not be effective unless the owner or holder of any such mortgage or deed of
trust shall execute with Tenant a nondisturbance and attornment agreement under
which said owner or holder shall agree to accept the attornment of Tenant upon
foreclosure of any such mortgage or deed of trust, if Tenant has not been in
default. Tenant hereby agrees to attorn to any person, firm or corporation
purchasing or otherwise acquiring the Premises at any sale or other proceeding
or pursuant to the exercise of any other rights, power or remedies under such
mortgages or deeds of trust, as if such person, firm, or corporation had been
named as Landlord herein.
30. Estoppel Letters. Either party hereto shall at any time and
from time to time upon not less than ten (10) days prior written notice from the
other execute, acknowledge and deliver to the requesting party a statement in
writing certifying that this Lease is unmodified and in full force and effect
(or if modified, stating the nature of such modification and certifying that
this Lease, as so modified, is in full force and effect), and the dates to which
the rental and other charges are paid in advance, if any, and acknowledging that
there are not, to the certifying party's knowledge, any uncured defaults on the
part of the other party hereunder, and that no event has occurred that, by the
giving of notice or the passage of time or both, would constitute a default, or
specifying such defaults or events if they are claimed. Any such statement
requested by either party may be relied upon by any prospective purchaser or
encumbrancer of the Premises. Failure of a party to deliver such statement
within such time shall be conclusive upon such party that this Lease is in full
force and effect, without modification, except as may be represented by the
requesting party, that there are
11
no uncured defaults in the requesting party's performance, and that not more
than two months rental has been paid in advance.
31. No Default Under Permitted Mortgage Loans. For so long as this
Lease is in effect and any Permitted Mortgage Loan (as hereinafter defined) is
outstanding, Tenant shall comply with the terms and conditions of the documents
evidencing such Permitted Mortgage Loans (the "Permitted Mortgage Loan
Documents"); provided, however, Tenant shall not be required to take any action
or otherwise cause compliance with or be deemed responsible for performance of
any affirmative or negative obligation of Landlord that does not relate to the
management or operation of the Premises, including, without limitation, accuracy
and delivery of Landlord's financial statements, and the maintenance by Landlord
of its good standing in any states required by the Permitted Mortgage Loan
Documents. For so long as this Lease is in effect and any Permitted Mortgage
Loan is outstanding, Landlord covenants and agrees to comply, or cause
compliance, with the Permitted Mortgage Loan Documents with respect to each
affirmative or negative obligation of Landlord that does not relate solely to
management or operation of the Premises, including, without limitation, accuracy
and delivery of Landlord's financial statements, and the maintenance by Landlord
of its good standing in any states required by the Permitted Mortgage Loan
Documents. For purposes of this Section, "Permitted Mortgage Loan" shall mean
any loan to Landlord that is secured by a valid mortgage lien on the Premises;
provided that (i) the terms and conditions of such loan, and all of the
documents relating to such loan, shall be commercially reasonable and customary,
(ii) Tenant shall have consented to such documents and their terms and
conditions in advance of such loan (which consent shall not be unreasonably
withheld), (iii) the amount of such loan shall not, when aggregated with the
outstanding principal amount of any other Permitted Mortgage Loans then in
effect, exceed eighty percent (80%) of the Fair Market Value of the Premises at
the time that such loan is first made, and (iv) such loan is permitted by, and
will not constitute a default under, any other Permitted Mortgage Loan.
32. Management of the Premises Upon Termination or Expiration of
the Lease. Upon the expiration or earlier termination of the term of this Lease
(unless Tenant has purchased the Premises pursuant to Section 15), Landlord or
its designee, upon written notice to Tenant, may elect to assume the
responsibilities and obligations for the management and operation of the
Premises and Tenant agrees to cooperate fully with Landlord or its designee to
accomplish the transfer of such management and operation without interrupting
the operation of the Premises. Tenant shall not commit any act or be remiss in
the undertaking of any act that would jeopardize any licensure or certification
of the facility, and Tenant shall comply with all requests for an orderly
transfer of the Retirement Care Facility license, Medicare and Medicaid (or any
successor program) certifications and possession at the time of any such
surrender. Upon the expiration or earlier termination of the Term, Tenant shall
promptly deliver copies of all of Tenant's books and records relating to the
Premises and its operations to Landlord.
33. No Other Activities; Single Purpose Entity Requirements.
Tenant hereby agrees that it will not engage in any business activity other than
those activities relating to the ownership of the Premises and performance of
its obligations hereunder, and shall comply with the single purpose entity
covenants and requirements set forth on Exhibit G attached hereto.
12
34. Entire Agreement. The entire understanding between the parties
is set out in this Lease, this Lease supersedes and voids all prior proposals,
letters and agreements, oral or written, and no modification or alteration of
this Lease shall be effective unless evidenced by an instrument in writing
signed by both parties. The law of the State of Arizona shall be applicable.
35. Heirs, Successors, and Assigns. All the terms, covenants, and
conditions hereof shall be binding upon and inure to the benefit of the heirs,
executors, administrators, successors, and assigns of the parties hereto.
36. Memorandum Lease. This Lease shall not be recorded, but, upon
the request of either party, a short form lease will be executed and recorded.
37. Acknowledgment and Consent of Ground Lessors. Hacienda Da Vida
Corporation, the lessor under the SNF Lease, joins in this instrument for the
purposes of acknowledging and consenting thereto. Sun Health, the lessor under
the ALF Lease, joins in this instrument for the purpose of acknowledging and
consenting thereto.
(Signature Page Follows)
13
IN WITNESS WHEREOF, the parties hereto have set their respective hands
or caused this instrument to be duly executed on or as of the day and date first
above written.
LANDLORD:
MAYBROOK REALTY, INC.
By:
-----------------------------------------
Title:
--------------------------------------
TENANT:
ARC HDV, LLC
By:
-----------------------------------------
Title:
--------------------------------------
Acknowledgment and Consent
Hacienda Da Vida Corporation, as lessor of the SNF Parcel under SNF Lease hereby
acknowledges and consents to this Lease.
HACIENDA DA VIDA CORPORATION
By:
-----------------------------
Title:
--------------------------
Acknowledgment and Consent
Sun Health Properties, as lessor of the ALF Parcel under ALF Lease hereby
acknowledges and consents to this Lease.
SUN HEALTH PROPERTIES
By:
-----------------------------
Title:
--------------------------
EXHIBIT A
[SNF PARCEL]
EXHIBIT B
[ALF PARCEL]
EXHIBIT C
[SNF LEASE]
EXHIBIT D
[ALF LEASE]
EXHIBIT E
[PERMITTED EXCEPTIONS]
EXHIBIT F
TENANT'S HEALTHCARE COMPLIANCE COVENANTS
I. Tenant hereby makes the following representations, warranties and
covenants as of the date hereof and throughout the term of the Lease, which
representations, warranties and covenants are in addition to those found within
the body of the Lease:
(a) Tenant is using and operating the Premises as a
Retirement Care Facility (as modified from time to time with Landlord
and any mortgage lender's consent, which consent shall not be
unreasonably withheld, the "LICENSED USE"). Tenant will comply in all
material respects, with all applicable federal, state and local laws,
regulations, quality and safety standards, accreditation standards and
requirements of the applicable state department of health (each a
"DOH") and all other applicable federal, state or local governmental
authorities including those relating to the quality and adequacy of
medical care, distribution of pharmaceuticals, rate setting, equipment,
personnel, operating policies, additions to facilities and services and
fee splitting. The Retirement Care Facility and any other assisted
and/or independent senior housing and/or skilled nursing facilities
which is owned, leased or operated by Tenant (a "FACILITY") shall be
operated at all times in compliance in all material respects with such
laws and requirements. Nothing in this subsection (a) or anywhere else
in this Exhibit F to the contrary, Landlord acknowledges that pursuant
to the Lease, Tenant is responsible for all of the covenants set forth
in this Exhibit F (other than those pertaining to Landlord's own acts),
and that performance of such covenants by American Retirement
Corporation as guarantor (the "GUARANTOR") shall constitute performance
by Tenant thereof.
(b) All governmental licenses, permits, regulatory
agreements or other approvals or agreements necessary or desirable for
the licensed use of the Retirement Care Facility are held by Tenant,
Guarantor or an affiliate of Tenant ("AFFILIATE") in the name of
Tenant, Guarantor or Affiliate as required under applicable law and are
in full force and effect, including a valid certificate of need ("CON")
or similar certificate, license, or approval issued by the DOH for the
requisite number of beds and units in the Retirement Care Facility, and
a provider agreement or other required documentation of approved
provider status for each provider payment or reimbursement program
effecting the Retirement Care Facility, if applicable. So long as the
Lease remains in effect, Tenant and Guarantor shall operate the
Retirement Care Facility or cause the Retirement Care Facility to be
operated in a manner such that the Licenses shall remain in full force
and effect.
(c) The Licenses for the Retirement Care Facility,
including without limitation, if applicable, the CON:
(i) May not be, and have not been, and will not
be transferred to any location other than the Premises;
Exhibit F - Page 1
(ii) Are not now and will not be pledged as
collateral security for any other loan or indebtedness; and
(iii) Are held free and will remain free from
restrictions or known conflicts which would materially impair the use
or operation of the Retirement Care Facility for the licensed use, and
shall not be provisional, probationary or restricted in any way.
II. None of Affiliate, Guarantor or Tenant shall:
(i) Rescind, withdraw, revoke, amend, modify, supplement,
or otherwise alter the nature, tenor or scope of the licenses for the Retirement
Care Facility;
(ii) Amend or otherwise change the Retirement Care
Facility's authorized units/beds capacity and/or the number of units/beds
approved by the DOH;
(iii) Replace or transfer all or any part of the Retirement
Care Facility's units/beds to another site or location; or
(iv) Voluntarily transfer or encourage the transfer of any
resident of the Retirement Care Facility to any other facility, unless such
transfer is at the request of the resident or is for reasons relating to the
health, required level of medical care or safety of the resident to be
transferred.
(e) If and when Tenant, Affiliate or Guarantor participates in any
Medicare or Medicaid or other third party payor program with respect to the
Retirement Care Facility, the Retirement Care Facility will remain in compliance
with all requirements for participation in Medicare and Medicaid, including the
Medicare and Medicaid Patient Protection Act of 1987, and other federal or state
third party payor programs. The Retirement Care Facility is and will remain in
conformance in all material respects with all insurance, reimbursement and cost
reporting requirements, and if applicable, has a current provider agreement
which is in full force and effect under Medicare and Medicaid.
(f) There is no, and during the term of the Lease shall be no,
threatened, existing or pending revocation, suspension, termination, probation,
restriction, limitation, or nonrenewal affecting Tenant, Guarantor, Affiliate or
the Retirement Care Facility or any participation or provider agreement with any
third-party payor, including Medicare, Medicaid, Blue Cross and/or Blue Shield,
other and any other private commercial insurance managed care and employee
assistance program (such programs, the "THIRD-PARTY PAYOR PROGRAMS") to which
Tenant, Guarantor or Affiliate may presently be subject with respect to the
Retirement Care Facility or any other Facility, or at any time hereafter is
subject. All Medicaid, Medicare, and private insurance cost reports and
financial reports submitted by Tenant, Affiliate or Guarantor, if any, are and
will be materially accurate and complete and have not been and will not be
misleading in any material respects. No cost reports for the Retirement Care
Facility remain open or unsettled. Nothing in this subsection (f) shall be
interpreted as requiring Tenant, Affiliate or Guarantor to
Exhibit F - Page 2
participate in Medicare, Medicaid or any other federal or state health care
programs; such participation shall be solely at the option of Tenant or
Guarantor.
(g) None of Tenant, Affiliate or Guarantor or the Retirement Care
Facility is or will be the subject of any proceeding by any governmental agency,
and no notice of any violation has been or will be issued by a governmental
agency that would, directly or indirectly, or with the passage of time:
(i) Have a material adverse impact on Tenant's or
Guarantor's ability to accept and/or retain patients or operate the Retirement
Care Facility for the licensed use or result in the imposition of a fine, a
sanction, a lower rate certification or a lower reimbursement rate for services
rendered to eligible patients;
(ii) Modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of any of the licenses;
or
(iii) If applicable, affect Tenant's or Guarantor's
continued participation in the Medicaid or Medicare programs or any other of the
Third-Party Payor Programs, or any successor programs thereto, at current rate
certifications.
(h) The Retirement Care Facility and the use thereof complies and
will continue to comply in all material respects with all applicable local,
state and federal building codes, fire codes, health care, senior housing and
other regulatory requirements (the "PHYSICAL PLANT STANDARDS").
(i) The Retirement Care Facility has not received a "Level A" (or
equivalent) violation, and no statement of charges or deficiencies has been made
or penalty enforcement action has been undertaken against the Retirement Care
Facility, Tenant or Guarantor or against any officer, director, partner, member,
stockholder or affiliate of Tenant or Guarantor by any governmental agency
during the last three calendar years, and there have been no violations over the
past three years which have threatened the Retirement Care Facility's, Tenant's,
Affiliate's or Guarantor's certification for participation in Medicare or
Medicaid, or the other Third-Party Payor Programs.
(j) There are no current, pending or outstanding Medicaid,
Medicare, or other Third-Party Payor Programs reimbursement audits or appeals
pending at the Retirement Care Facility, and there are no years that are subject
to audit.
(k) There are no current or pending Medicaid, Medicare, or other
Third-Party Payor Programs recoupment efforts at the Retirement Care Facility.
Tenant, Affiliate and Guarantor are not participants in any federal program
whereby any governmental agency may have the right to recover funds by reason of
the advance of federal funds, including those authorized under the ▇▇▇▇-▇▇▇▇▇▇
Act (42 U.S.C. 291, et seq.).
Exhibit F - Page 3
(l) Tenant will not pledge its receivables as collateral security
for any other loan or indebtedness.
(m) All patient or resident records at the Retirement Care
Facility, including patient or resident trust fund accounts, are true and
correct in all material respects, and will remain true and correct in all
material respects.
(n) Tenant and Guarantor shall not, nor shall the Retirement Care
Facility, other than in the normal course of business, change the terms of any
of the Third-Party Payor Programs now or hereinafter in effect or their normal
billing payment or reimbursement policies and procedures with respect thereto
(including the amount and timing of finance charges, fees and write-offs).
(o) Tenant and Guarantor shall at all times comply with all
obligations under the contracts and leases with residents of the Retirement Care
Facility, and shall not commit or permit any default thereunder. Tenant hereby
indemnifies and holds harmless Landlord and agrees to defend Landlord from and
against (collectively, the "INDEMNIFIED CLAIMS") any (i) claims, proceedings or
causes of action brought by any resident of the Retirement Care Facility, and
(ii) loss, damage, cost or expense, including attorney's fees, incurred or
suffered by Landlord as a result of any (x) breach by Tenant or Guarantor of any
contract or lease with a resident of the Retirement Care Facility or (y)
violation of any license or any federal, state or local law governing the
Retirement Care Facility or the use, operation or maintenance thereof for the
licensed use.
Exhibit F - Page 4
EXHIBIT G
TENANT'S SINGLE PURPOSE ENTITY REQUIREMENTS
A. Without limiting any other provision of this Lease, the
following requirements are applicable to Tenant:
1. Tenant's purpose should be limited to owning the
Premises.
2. Tenant shall be prohibited from engaging in any
dissolution, liquidation, consolidation, merger, or asset sale, except as
expressly permitted by this Lease.
3. Tenant shall be prohibited from engaging in any other
business activity.
4. Tenant shall be prohibited from amending Tenant's
Operating Agreement or Articles of Organization.
5. The consent of all of the members of the Tenant shall
be required in order to voluntarily:
(a) file a bankruptcy or insolvency petition or otherwise
institute insolvency proceedings;
(b) dissolve, liquidate, consolidate, merge, or sell all
or substantially all of the assets of the
Tenant;
6. Tenant agrees:
(a) to maintain books and records and bank accounts
separate from any other person or entity;
(b) not to commingle assets or funds with those of any
other person or entity;
(c) to conduct its own business in its own name;
(d) to maintain its assets in such a manner that it is
not costly or difficult to segregate,
identify or ascertain such assets;
(e) to prepare separate tax returns and financial
statements, or if part of a consolidated
group, to be shown as a separate member of
such group;
(f) to pay its own liabilities out of its own funds;
(g) to observe all limited liability company formalities;
Exhibit G - Page 1
(h) to transact all business with affiliates on an
arm's-length basis and pursuant to
enforceable agreements;
(i) to pay the salaries of its own employees;
(j) not to guarantee or become obligated for the debts of
any other person or entity or hold out its
credit as being available to satisfy the
obligations of others or pay the debts or
obligations of any other person or entity;
(k) to allocate and charge fairly and reasonably any
common employee or overhead shared with
affiliates;
(l) to use separate stationary, invoices, and checks;
(m) not to pledge its assets for the benefit of any other
person or entity.
(n) to hold itself out to creditors and the public as a
legal entity separate and distinct from any
other person or entity.
B. The above requirements are applicable so long as the Tenant is
a limited liability company. If the entity structure of Tenant is different,
Landlord shall formulate requirements that are specific to Tenant's actual
entity structure, but similar in concept to the requirements set forth above.
Exhibit G - Page 2
