LEASE AGREEMENT
by and between
CNL RETIREMENT MA3 PENNSYLVANIA, LP
a Delaware limited partnership,
(as "Landlord"),
and
MARRIOTT CONTINUING CARE, LLC,
a Delaware limited liability company,
(as "Tenant")
for
The Quadrangle Continuing Care Retirement Community
0000 Xxxxx Xxxx; Haverford, Pennsylvania 19041-1095
DATED AS OF MARCH 28, 2003
TABLE OF CONTENTS
I. DEFINITIONS...................................................................................................1
II. LEASED PROPERTY AND TERM....................................................................................14
Section 2.1 Leased Property..................................................................14
Section 2.2 Condition of Leased Property.....................................................15
Section 2.3 Fixed Term.......................................................................15
Section 2.4 Extended Term....................................................................15
III. RENT.......................................................................................................16
Section 3.1 Rent.............................................................................16
Section 3.2 Late Payment of Rent, Etc........................................................19
Section 3.3 Net Lease........................................................................20
Section 3.4 Lifecare Bonds...................................................................21
IV. USE OF THE LEASED PROPERTY..................................................................................23
Section 4.1 Permitted Use....................................................................23
Section 4.2 Necessary Approvals..............................................................23
Section 4.3 Lawful Use, Etc..................................................................23
Section 4.4 Compliance with Legal/Insurance Requirements, Etc................................23
Section 4.5 Environmental Matters............................................................23
Section 4.6 Title Encumbrances...............................................................25
V. MAINTENANCE AND REPAIRS......................................................................................26
Section 5.1 Maintenance and Repair...........................................................26
Section 5.2 Tenant's Personal Property.......................................................31
Section 5.3 Yield Up.........................................................................31
VI. IMPROVEMENTS, ETC...........................................................................................32
Section 6.1 Improvements to the Leased Property..............................................32
Section 6.2 Construction.....................................................................32
Section 6.3 Salvage..........................................................................32
Section 6.4 Equipment Leases.................................................................32
VII. LIENS......................................................................................................33
VIII. PERMITTED CONTESTS........................................................................................33
IX. INSURANCE...................................................................................................34
Section 9.1 General Insurance Requirements...................................................34
Section 9.2 General Insurance Provisions.....................................................36
Section 9.3 Costs and Expenses...............................................................37
Section 9.4 Indemnification of Landlord......................................................37
Section 9.5 Indemnification of Tenant........................................................38
Section 9.6 Limitation on Liability..........................................................38
X. CASUALTY.....................................................................................................38
Section 10.1 Damage and Repair................................................................38
Section 10.2 Tenant's Property................................................................39
Section 10.3 Restoration of Tenant's Property.................................................40
Section 10.4 No Abatement of Rent.............................................................40
Section 10.5 Waiver...........................................................................40
XI. CONDEMNATION................................................................................................40
Section 11.1 Total Condemnation, Etc..........................................................40
Section 11.2 Partial Condemnation.............................................................40
Section 11.3 Disbursement of Award............................................................41
Section 11.4 Abatement of Rent................................................................41
XII. DEFAULTS AND REMEDIES......................................................................................41
Section 12.1 Events of Default................................................................41
Section 12.2 Remedies.........................................................................43
Section 12.3 Waiver of Jury Trial.............................................................44
Section 12.4 Application of Funds.............................................................44
Section 12.5 Landlord's Right to Cure Tenant's Default........................................45
Section 12.6 Good Faith Dispute...............................................................45
XIII. HOLDING OVER..............................................................................................45
XIV. LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT............................................................45
Section 14.1 Landlord Notice Obligation.......................................................45
Section 14.2 Landlord's Default...............................................................46
XV. TRANSFERS BY LANDLORD.......................................................................................47
Section 15.1 Tenant Consent to Transfer by Landlord...........................................47
Section 15.2 Conditions of Landlord Transfer..................................................47
Section 15.3 Transfer of Interest in Landlord.................................................48
XVI. SUBLETTING AND ASSIGNMENT..................................................................................49
Section 16.1 Subletting and Assignment........................................................49
Section 16.2 Required Sublease Provisions.....................................................50
Section 16.3 Permitted Sublease and Assignment................................................50
Section 16.4 Sublease Limitation..............................................................50
XVII. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS............................................................51
Section 17.1 Estoppel Certificates............................................................51
Section 17.2 Financial Statements.............................................................51
Section 17.3 Annual Operating Projection......................................................52
XVIII. LANDLORD'S RIGHT TO INSPECT..............................................................................53
XIX. FACILITY MORTGAGES.........................................................................................53
Section 19.1 Landlord May Xxxxx Xxxx..........................................................53
Section 19.2 Subordination of Lease...........................................................54
Section 19.3 Notices..........................................................................55
XX. ADDITIONAL COVENANTS OF TENANT..............................................................................55
Section 20.1 Conduct of Business..............................................................55
Section 20.2 Certain Debt Prohibited..........................................................55
Section 20.3 Expert Decisions.................................................................56
Section 20.4 Distributions, Payments to Affiliates, Etc.......................................56
XXI. MISCELLANEOUS..............................................................................................57
Section 21.1 Limitation on Payment of Rent....................................................57
Section 21.2 No Waiver........................................................................57
Section 21.3 Remedies Cumulative..............................................................57
Section 21.4 Severability.....................................................................57
Section 21.5 Acceptance of Surrender..........................................................58
Section 21.6 No Merger of Title...............................................................58
Section 21.7 Conveyance by Landlord...........................................................58
Section 21.8 Quiet Enjoyment..................................................................58
Section 21.9 Memorandum of Lease..............................................................58
Section 21.10 Notices..........................................................................59
Section 21.11 Construction; Non-recourse.......................................................60
Section 21.12 Counterparts; Headings...........................................................60
Section 21.13 Applicable Law, Etc..............................................................61
Section 21.14 Right to Make Agreement..........................................................61
Section 21.15 Disclosure of Information........................................................61
Section 21.16 Competing Facilities.............................................................62
Section 21.17 Facility Manager.................................................................62
EXHIBITS
A- Other Leases
B- The Land
C- Property Expenses
D- Existing Title Encumbrances
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this 28th day of March,
2003, by and between CNL RETIREMENT MA3 PENNSYLVANIA, LP, a Delaware limited
partnership, as landlord ("Landlord"), and MARRIOTT CONTINUING CARE, LLC, a
Delaware limited liability company, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord has acquired fee simple title to the Leased Property
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article I) which is improved as a
continuing care retirement community; and
WHEREAS, Landlord desires to lease the Leased Property to Tenant and
Tenant desires 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:
I. 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 I 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.
"Accounting Period" shall mean each calendar month.
"Accounting Year" shall mean each period of twelve (12) Accounting
Periods of which the first Accounting Period shall commence on the first day of
the first full Accounting Period and ending upon the expiration of eleven (11)
Accounting Periods after such first Accounting Period. Each successor Accounting
Year shall be each period of twelve (12) Accounting Periods thereafter.
"Additional Charges" shall have the meaning given such term in Section
3.1.3.
"Additional Rent" shall mean that amount, if any, by which (A) the
product of (i) fourteen percent (14%), multiplied by (ii) the sum of Landlord's
Computation Basis and Landlord's Additional Investment exceeds (B) Minimum Rent
for each Fiscal Quarter.
"Affiliate(s)" means any individual or entity directly or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with a party. The term "control," as used in the immediately preceding
sentence, means, with respect to a corporation, the right to the exercise,
directly or indirectly, of more than fifty percent (50%) of the voting rights
attributable to the shares of the controlled corporation, and, with respect to
an entity that is not a corporation, the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of the
controlled entity.
"Agreement" shall mean this Lease Agreement, including all Exhibits
hereto, as it and they may be amended from time to time as herein provided.
"Annual Financial Report" shall have the meaning given such term in
Section 17.2.1.
"Annual Operating Projection" shall have the meaning given such term in
Section 17.3.
"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, relating
to (a) the operation of a continuing care retirement community and the
facilities included therein, or (b) injury to, or the protection of, real or
personal property or human health (except those requirements which, by
definition, are solely the responsibility of employers) or 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 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.
"Applicable Percentage" shall mean, with respect to any Accounting
Period, or portion thereof, five percent (5%).
"Assumption Agreement" means that certain Assumption and Reimbursement
Agreement dated as of March 28, 2003 by and among Marriott International, Inc.
and Tenant, as assignors, and CNL Retirement Properties, Inc., Landlord, and CNL
Retirement MA3 Virginia, LP, as assignees.
"Award" shall mean all compensation, sums or other value awarded, paid
or received by virtue of a total or partial Condemnation of the Leased Property
(after deduction of all reasonable legal fees and other reasonable costs and
expenses, including, without limitation, expert witness fees, incurred by
Landlord or Tenant in connection with obtaining any such award).
"Base Tenant Fee" means an amount payable to Tenant equal to six
percent (6%) of Total Facility Revenues (exclusive of Non-Refundable Entrance
Fees).
"Business Day(s)" means Monday through Friday except for New Year's
Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day, or any other day on which banks or other financial
institutions located in the State are authorized by law to close.
"Calculation Period" shall mean each successive period of twelve (12)
consecutive Accounting Periods commencing with the first Accounting Period
following the Commencement Date.
"Capital Expenditure" shall mean expenditures necessary for major
repairs, alterations, improvements, renewals and replacements to the structure
or exterior facade of the Facility, or to the mechanical, electrical, heating,
ventilating, air conditioning, plumbing, or vertical transportation elements of
the Facility, or required under Section 4.4, 4.5 or Article V.
"Case Goods" shall mean furniture and furnishings used in the Facility,
including, without limitation: chairs, beds, chests, headboards, desks, lamps,
tables, television sets, mirrors, pictures, wall decorations and similar items.
"Claim" shall have the meaning given such term in Article VIII.
"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.
"Collective Leased Properties" shall mean, collectively, the Leased
Property and every other Leased Property (as defined therein) under the Other
Leases, but shall in any event exclude any Leased Property with respect to which
the applicable Other Lease has been terminated pursuant to its terms.
"Commencement Date" shall mean the date of this Agreement.
"Competitor" shall mean a Person that owns or has an equity interest in
a continuing care retirement community, assisted living facility, and/or senior
living facility brand, trade name, system or chain (a "Brand") which comprises
at least ten (10) continuing care retirement communities, assisted living
facilities and/or senior living facilities; provided that such Person shall not
be deemed a Competitor if it holds its interest in a Brand merely as a mere
passive investor that has no control or influence over the business decisions of
the Brand at issue, such as a mere limited partner in a partnership, a mere
shareholder in a corporation or a mere payee of royalties based on a prior sale
transaction. A mere passive investor that is represented by a Mere Director on
the board of directors of a Competitor shall not be deemed to have control or
influence over the business decisions of that Competitor.
"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.
"Continuing Care Agreement" shall mean an agreement entered into
between Tenant and each resident of the Facility, setting forth the terms and
conditions of such residency, including a "Residence with Continuing Care
Agreement" or similar agreement entered into between a resident and Tenant with
respect to the Retirement Community.
"Controlling Interest" shall mean with respect to a corporation, the
right to the exercise, directly or indirectly, of more than fifty percent (50%)
of the voting rights attributable to the shares of the controlled corporation,
and, with respect to an entity that is not a corporation, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of the controlled entity.
"CRP" shall mean CNL Retirement Properties, Inc., a Maryland
corporation.
"Date of Taking" shall mean the date the Condemnor has the right to
possession of the Leased Property, or any portion thereof, in connection with a
Condemnation.
"Day(s)" means one or more calendar days(s).
"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
Prime Rate plus one percentage point (1%).
"Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) 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 or
membership interests in Tenant, if Tenant is a partnership or 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 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 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 or members in Tenant, if Tenant is a partnership or limited
liability company.
"Draft Annual Operating Projection" shall have the meaning given such
term in Section 17.3.
"Emergency Requirements" shall mean any of the following events or
circumstances: (i) an emergency threatening the Retirement Community, or the
life or property of its residents, invitees or employees; (ii) a Legal
Requirement; (iii) a condition, the continuation of which is likely to subject
Landlord or the Tenant to civil or criminal liability; or (iv) a Force Majeure
event that prevents Tenant from managing or operating the Retirement Community
pursuant to industry standards.
"Employee Claim(s)" means any and all claims (including all fines,
judgments, penalties, costs, Litigation and/or arbitration expenses, attorneys'
fees and expenses, and costs of settlement with respect to any such claim) by
any employee or employees of Tenant against Landlord or Tenant with respect to
the employment at the Retirement Community of such employee or employees.
"Employee Claims" shall include, without limitation, the following: (i) claims
which are eventually resolved by arbitration, by Litigation or by settlement;
(ii) claims which also involve allegations that any applicable
employment-related contracts affecting the employees at the Retirement Community
have been breached; and (iii) claims which involve allegations that one or more
of the Employment Laws has been violated; provided, however, that "Employee
Claims" shall not include claims for worker compensation benefits or for
unemployment benefits.
"Employment Law(s)" means any federal, state or local law (including
the common law), statute, ordinance, rule, regulation, order or directive with
respect to employment, conditions of employment, benefits, compensation, or
termination of employment that currently exists or may exist at any time during
the Term of this Agreement, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Workers
Adjustment and Retraining Act, the Occupational Safety and Health Act, the
Immigration Reform and Control Act of 1986, the Polygraph Protection Act of 1988
and the Americans With Disabilities Act of 1990.
"Encumbrance" shall have the meaning given such term in Section 19.1.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, limited liability partnership, stock company or
association, joint venture, company, trust, bank, trust company, land trust,
business trust, cooperative, any government or agency or political subdivision
thereof or any other entity.
"Entrance Fees" shall mean any Refundable Entrance Fees and any
Non-Refundable Entrance Fees paid by residents entering into Continuing Care
Agreements.
"Environment" shall mean soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"Environmental Law(s)" shall mean: (i) the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., as
now or hereafter amended and the Resource Conservation and Recovery Act of 1976,
as now or hereafter amended; (ii) the regulations promulgated thereunder, from
time to time; and (iii) all federal, state and local laws, rules and regulations
(now or hereafter in effect) dealing with the use, generation, treatment,
management, storage, disposal or abatement of Hazardous Substances or protection
of human health or the environment.
"Environmental Notice" shall have the meaning given such term in
Section 4.5.1.
"Environmental Obligation" shall have the meaning given such term in
Section 4.5.1.
"Event of Default" shall have the meaning given such term in Section
12.1.
"Existing Title Encumbrances" shall mean as of the Commencement Date,
the Title Encumbrances as identified on Exhibit "D" attached hereto and by this
reference incorporated herein.
"Expert" shall mean an independent, nationally recognized continuing
care retirement community consulting firm or individual who is qualified to
resolve the issue in question, and who is appointed in each instance by
agreement of the parties or, failing agreement, each party shall select one (1)
such nationally recognized consulting firm or individual and the two (2)
respective firms and/or individuals so selected shall select another such
nationally recognized consulting firm or individual to be the Expert. Each party
agrees that it shall not appoint an individual as an Expert hereunder if the
individual is, as of the date of appointment or within six (6) months prior to
such date, employed by such party, either directly or as a consultant, in
connection with any other matter. In the event that either party calls for an
Expert determination pursuant to the terms hereof, the parties shall have ten
(10) Days from the date of such request to agree upon an Expert and, if they
fail to agree, each party shall have an additional ten (10) Days to make its
respective selection of a firm or individual, and within ten (10) Days of such
respective selections, the two (2) respective firms and/or individuals so
selected shall select another such nationally recognized consulting firm or
individual to be the Expert. If either party fails to make its respective
selection of a firm or individual within the ten (10) Day period provided for
above, then the other party's selection shall be the Expert. Also, if the two
(2) respective firms and/or individuals so selected shall fail to select a third
nationally recognized consulting firm or individual to be the Expert, then such
Expert shall be appointed by the American Arbitration Association and shall be a
qualified person having at least ten (10) years recent professional experience
as to the subject matter in question. Prior to the actual occurrence of a
dispute hereunder, upon request by either party, the parties shall in good faith
select and agree upon the firm or individual who will perform the duties of the
Expert hereunder with respect to one, some or all of the issues that may be
referred to an Expert pursuant to the provisions of this Agreement; provided
that at any time after such pre-approval of an Expert, upon the request of
either party based upon a reasonable objection to such Expert, the parties shall
in good faith discuss the replacement of such Expert with respect to one, some
or all of the issues that may be referred to such Expert hereunder.
"Extended Terms" shall have the meaning given such term in Section 2.4.
"Facility" shall mean the continuing care retirement community being
operated on the Leased Property.
"Facility Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article XIX.
"Facility Mortgagee" shall mean the holder of any Facility Mortgage.
"FAS" shall mean items included within "Property and Equipment" under
GAAP, including, but not limited to, linen, china, glassware, silver, uniforms,
and similar items, whether used in connection with public space or in resident
rooms.
"First Amendment of the Purchase and Sale Agreement" shall mean that
certain First Amendment to the Purchase and Sale Agreement dated as of March 28,
2003 by and among (i) Tenant, (ii) CNL Retirement MA3, LP, a Delaware limited
partnership, or assigns, (iii) Marriott International, Inc., a Delaware
corporation and (iv) CNL Retirement Properties, Inc., a Maryland corporation,
pertaining to purchase and sale of the Leased Property.
"Fiscal Quarter" shall mean, with respect to the first, second, third
and fourth quarter of any Fiscal Year, Accounting Periods one (1) through three
(3), four (4) through six (6), seven (7) through nine (9) and ten (10) through
twelve (12), respectively, of such Fiscal Year.
"Fiscal Year" shall mean the calendar year.
"Fixed Term" shall have the meaning given such term in Section 2.3.
"FF&E" means furniture, furnishings, fixtures, Soft Goods, Case Goods,
vehicles and equipment (including, but not limited to, telephone systems,
facsimile machines, communications and computer systems hardware) but shall not
include FAS or any Software.
"Fixtures" shall have the meaning given such term in Section 2.1(d).
"Force Majeure" means acts of God, acts of war, civil disturbance,
governmental action (including the revocation or refusal to grant licenses or
permits, where such revocation or refusal is not due to the fault of the party
whose performance is to be excused for reasons of Force Majeure), strikes,
lockouts, fire, unavoidable casualties or any other causes beyond the reasonable
control of either party.
"Future Title Encumbrances" shall have the meaning given such term in
Section 4.6.2.
"GAAP" means Generally Accepted Accounting Principles as adopted by the
Financial Standards Accounting Board.
"GDP Deflator" shall mean the "Gross Domestic Product Implicit Price
Deflator" issued from time to time by the United States Bureau of Economic
Analysis of the Department of Commerce, or if the aforesaid GDP Deflator is not
at such time so prepared and published, any comparable index selected by Tenant
and reasonably acceptable to Landlord, (a "Substitute Index") then prepared and
published by an agency of the Government of the United States, appropriately
adjusted for changes in the manner in which such index is prepared and/or year
upon which such index is based. Except as otherwise expressly stated herein,
whenever a number or amount is required to be "adjusted by the GDP Deflator," or
similar terminology, such adjustment shall be equal to the percentage increase
or decrease in the GDP Deflator which is issued for the month in which such
adjustment is to be made (or, if the GDP Deflator for such month is not yet
publicly available, the GDP Deflator for the most recent month for which the GDP
Deflator is publicly available) as compared to the GDP Deflator which was issued
for the month in which the Commencement Date occurred.
"Government Agencies" shall mean any court, agency, authority, board
(including, without limitation, 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 Retirement Community operated
thereon.
"Hazardous Substances" shall mean and include, biocontaminants, such as
mold, and any substance or material containing one or more of any of the
following: "hazardous material," "hazardous waste," "hazardous substance,"
"regulated substance," "petroleum," "pollutant," "contaminant," or "asbestos" as
such terms are defined in any applicable Environmental Law in such
concentration(s) or amount(s) as may impose clean-up, removal, monitoring or
other responsibility under the Environmental Laws, as the same may be amended
from time to time, or which may present a significant risk of harm to residents,
invitees or employees of the Retirement Community.
"Impositions" means all real estate and personal property taxes,
levies, assessments and similar charges including, without limitation, the
following: all water, sewer or similar fees, rents, rates, charges, excises or
levies; vault license fees or rentals; License fees; inspection fees and other
authorization fees and other governmental charges of any kind or nature
whatsoever, whether general or special, ordinary or extraordinary, foreseen or
unforeseen, or hereinafter levied or assessed of every character (including all
interest and penalties thereon), which at any time during or in respect of the
Term of this Agreement may be assessed, levied, confirmed or imposed on Landlord
or Tenant with respect to the Retirement Community or the operation thereof, or
otherwise in respect of or be a lien upon the Retirement Community (including,
without limitation on any of the FF&E, Inventories or FAS now or hereafter
located therein). Impositions shall not include any franchise, corporate,
estate, inheritance, succession, capital levy or transfer tax imposed on
Landlord or Tenant, or any income tax imposed on any income of Landlord or
Tenant (including the Rent payable pursuant to this Agreement), all of which
shall be paid solely by Landlord or Tenant as the recipient of such income, not
from Total Facility Revenues nor from the FF&E Reserve.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.
"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.
"Interest Rate" shall mean ten percent (10%) per annum.
"Interim Report" shall have the meaning given such term in Section
17.2.2.
"Inventories" means "Inventories" as defined by GAAP such as, but not
limited to, provisions in storerooms, refrigerators, pantries and kitchens;
medical supplies; other merchandise intended for sale; fuel; mechanical
supplies; stationery; and other expensed supplies and similar items.
"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 permitted successors and assigns.
"Landlord Default" shall have the meaning given such term in Section
14.2.
"Landlord Liens" shall mean liens on or against the Leased Property or
any payment of Rent (a) which result from any act of, or any claim against,
Landlord or any owner (other than Tenant) of a direct or indirect interest in
the Leased Property, or which result from any violation by Landlord of any terms
of this Agreement or the Purchase Agreement, or (b) which result from liens in
favor of any taxing authority by reason of any tax owed by Landlord or any fee
owner of a direct or indirect interest in the Leased Property; provided,
however, that "Landlord Lien" shall not include any lien resulting from any tax
for which Tenant is obligated to pay or indemnify Landlord against until such
time as Tenant shall have already paid to or on behalf of Landlord the tax or
the required indemnity with respect to the same.
"Landlord's Additional Funding Obligation" shall mean the sum of
$980,000.00 less any amount paid to Marriott International, Inc. pursuant to
Section 3 of the First Amendment to the Purchase and Sale Agreement as relating
to expenditures made by Marriott International, Inc. on the Leased Property
prior to the Commencement Date.
"Landlord's Additional Investment" shall mean the cost of any repairs,
maintenance, renovations or replacements pursuant to (x) Sections 5.1.3(c) or
Section 5.1.5(b), and not paid out of Total Facility Revenues, from the Reserve
or from insurance proceeds and (y) the cost of any repairs or replacements
funded by Landlord from Landlord's own funds pursuant to Section 10.1.1 by
reason of insufficient insurance proceeds.
"Landlord's Computation Basis" is Sixty-One Million Five Hundred
Fifty-Six Thousand Nine Hundred Fifty-Nine and 00/100 Dollars ($61,556,959.00).
"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 Intangible Property (as
defined in the Purchase and Sale Agreement) acquired by Landlord with respect to
the Leased Property pursuant to the Purchase Agreement.
"Leased Personal Property" shall have the meaning given such term in
Section 2.1(e).
"Leased Property" shall have the meaning given such term in Section
2.1.
"Legal Requirement(s)" means any federal, state or local law, code,
rule, ordinance, regulation or order of any governmental authority or agency
having jurisdiction over the business or operation of the Retirement Community
or the matters which are the subject of this Agreement, including, without
limitation, any resident care or health care, building, zoning or use laws,
ordinances, regulations or orders, environmental protection laws and fire
department rules.
"License(s)" means any license, permit, decree, act, order,
authorization, registration, certificate of authority, disclosure statement or
other approval (including Medicare/Medicaid certification to the extent
applicable), mandatory filing or instrument which is necessary in order to
operate the Facility in accordance with Legal Requirements.
"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 purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors.
"Lifecare Bonds" means those certain bonds previously or hereafter (as
the context may require) issued to residents of the Retirement Community to
secure Tenant's performance under a "Residence with Continuing Care Agreement"
or similar agreement entered into between such resident and Tenant with respect
to the Retirement Community.
"Lifecare Bond Reserve" shall have the meaning given such term in
Section 3.4.2.
"Litigation" means: (i) any cause of action commenced in a federal,
state or local court; or (ii) any claim brought before an administrative agency
or body (for example, without limitation, employment discrimination claims)
relating to the Retirement Community and/or the ownership and/or operation
thereof.
"Marketing Fee" means an amount payable to Tenant equal to four and one
half percent (4.5%) of Non-Refundable Entrance Fees.
"Mere Director" shall mean a Person who holds the office of director of
a corporation and who, as such director, has the right to vote not more than
twelve and one-half percent (12.5%) of the total voting rights on the board of
directors of such corporation, and who represents or acts on behalf of a mere
passive investor which neither (i) owns more than three percent (3%) of the
total voting rights attributable to all shares or ownership interests of a
Competitor, nor (ii) otherwise has the power to direct or cause the direction of
the management or policies of a Competitor.
"Minimum Rent" shall mean the Rent payable pursuant to Section 3.1.1,
subject to adjustment pursuant to the terms of this Lease.
"Minor Casualty" shall mean any fire or other casualty which results in
damage to the Facility and/or its contents, to the extent that the total cost
(in Landlord's reasonable judgment) of repairing and/or replacing of the damaged
portion of the Facility to the same condition as existed previously does not
exceed the dollar amount of Two Million Dollars ($2,000,000), said dollar amount
to be adjusted by the GDP Deflator.
"Non-Refundable Entrance Fees" means any entrance fees paid by any
resident upon commencing residence at the Facility which do not have to be
repaid pursuant to the terms of the Continuing Care Agreement or any other
agreement with said resident, including but not limited to any "Entrance Fee,"
"Lifecare Fee" and "Additional Occupant Lifecare Fee."
"Notice" shall mean a notice given in accordance with Section 22.10.
"Operating Profit" shall mean, any excess of Total Facility Revenues
over Property Expenses.
"Other Leases" shall mean, collectively, the Lease Agreements between
Landlord, or an Affiliate of Landlord, and Tenant with respect to the properties
described on Exhibit A, but excluding any Lease Agreements terminated pursuant
to their terms or by mutual agreement of the parties.
"Overdue Rate" shall mean, on any date, a per annum rate of interest
equal to the lesser of (i) twelve percent (12%) or (ii) the maximum rate then
permitted under applicable law.
"Parent" shall mean, with respect to any Person, any Person which
directly, or indirectly through one or more Subsidiaries or Affiliates, (i) owns
fifty-one percent (51%) or more 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.
"Permitted Use" shall mean any use of the Leased Property permitted
pursuant to Section 4.1.
"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.
"Pooling Agreement" shall mean the Pooling Agreement, dated as of the
date hereof, made by Tenant, Landlord and Affiliates of Landlord with respect to
the Collective Leased Properties, as may be amended from time to time.
"Prime Rate" means the "prime rate" as published in the "Money Rates"
section of The Wall Street Journal; however, if such rate is, at any time during
the Term, no longer so published, the term "Prime Rate" means the average of the
prime interest rates which are announced, from time to time, by the three (3)
largest banks (by assets) headquartered in the United States which publish a
"prime rate."
"Property Expenses" is defined in Exhibit C attached hereto.
"Proprietary Information" shall mean (a) all computer software and
accompanying documentation (including all future upgrades, enhancements,
additions, substitutions and modifications thereof), other than that which is
commercially available to the retail customer, which are used by Tenant in
connection with the property management system and all future electronic systems
developed by Tenant or any Affiliate of Tenant for use in the Retirement
Community, (b) all manuals, brochures and directives used by Tenant at the
Retirement Community regarding the procedures and techniques to be used in
operating the Retirement Community, (c) customer lists, and (d) employee records
which must remain confidential either under Legal Requirements or under
reasonable corporate policies of Tenant or any Affiliate of Tenant.
"Purchase Agreement" shall mean the Purchase and Sale Agreement, dated
as of December 20, 2002, by and between CNL Retirement MA3, LP, as purchaser,
Marriott Continuing Care, LLC, as seller, Marriott International, Inc., as may
be amended from time to time.
"Refundable Entrance Fees" means any entrance fees paid by residents
upon commencing residence at the Facility pursuant to a Continuing Care
Agreement, which fees residents or their estates are entitled to receive back in
accordance with the terms of such Continuing Care Agreements and which repayment
obligations are secured by Lifecare Bonds.
"Related Person" shall mean any entity in which Landlord, or any direct
or indirect partner of Landlord, has a direct or indirect interest, and any
individual or Entity whose ownership of the lease of Property would cause such
Leased Property to be a "related party tenant", with respect to the Landlord or
any direct or indirect partner of the Landlord, within the meaning of Section
865(d)(2)(B) of the Code.
"Rent" shall mean, collectively, the Minimum Rent, Additional Rent and
Additional Charges.
"Reserve" shall have the meaning given such term in Section 5.1.2(a).
"Reserve Estimate" shall have the meaning given such term in Section
5.1.2(d).
"Retirement Community" shall mean the Leased Property and all FF&E, FAS
and Inventories installed therein.
"Sale of the Entity" shall have the meaning given such term in Section
15.3.
"SEC" shall mean the Securities and Exchange Commission.
"Soft Goods" shall mean all fabric, textile and flexible plastic
products (not including items which are classified as "Fixed Asset Supplies"
under GAAP) which are used in furnishing the Facility, including, without
limitation: carpeting, drapes, bedspreads, wall and floor coverings, mats,
shower curtains and similar items.
"Software" means all computer software and accompanying documentation
(including all future upgrades, enhancements, additions, substitutions and
modifications thereof), other than computer software which is commercially
available to the retail customer, which are used by Tenant in connection with
its operations at the Facility.
"State" shall mean the State in which the Leased Property 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
Affiliates, (a) owns fifty-one percent (51%) or more 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).
"Tenant" shall have the meaning given such term in the preamble to this
Agreement and shall include its permitted successors and assigns.
"Tenant Incentive Fee" shall mean, to the extent available after
payment of Property Expenses, payments to the Reserve and payment of Minimum
Rent to Landlord, an additional management fee paid to Tenant equal to two
percent (2%) of Total Facility Revenues.
"Tenant's Personal Property" shall mean all motor vehicles,
Inventories, FAS and any other tangible personal property of Tenant, if any,
acquired by Tenant at its election and with its own funds on and after the date
hereof and located at the Leased Property or used in Tenant's business at the
Leased Property and all modifications, replacements, alterations and additions
to such personal property installed at the expense of Tenant, other than any
items included within the definition of Proprietary Information.
"Term" shall mean, collectively, the Fixed Term and the Extended Terms,
to the extent properly exercised pursuant to the provisions of Section 2.4,
unless sooner terminated pursuant to the provisions of this Agreement.
"Title Encumbrance" means any covenant, easement, condition,
restriction or agreement affecting title to the Retirement Community but not
including any mortgage.
"Total Casualty" shall mean any fire or other casualty which results in
damage to the Facility and its contents to the extent that the total cost of
repairing and/or replacing the damaged portion of the Facility to the same
condition as existed previously would be fifty percent (50%) or more of the then
total replacement cost of the Facility.
"Total Facility Revenues" shall mean, for each Accounting Period, all
revenues and receipts of every kind derived from operating the Retirement
Community and all departments and parts thereof, including, but not limited to:
income (from both cash and credit transactions) from monthly occupancy fees,
interest earned (if any) on Refundable Entrance Fees held by Tenant, health care
fees and ancillary services fees received pursuant to various agreements with
residents of the Retirement Community; income from food and beverage, and
catering sales; income from telephone charges; income from vending machines; and
proceeds, if any, from business interruption or other loss of income insurance,
all determined in accordance with GAAP; provided, however, that Total Facility
Revenues shall not include: (i) gratuities to employees at the Retirement
Community; (ii) federal, state or municipal excise, sales or use taxes or
similar taxes imposed at the point of sale and collected directly from residents
or guests of the Retirement Community or included as part of the sales price of
any goods or services; (iii) proceeds from the sale of FF&E (iv) interest
received or accrued with respect to the monies in any operating or reserve
accounts of the Retirement Community; (v) any cash refunds, rebates or discounts
to residents of the Retirement Community, or cash discounts and credits of a
similar nature, given, paid or returned in the course of obtaining Total
Facility Revenues or components thereof; (vi) proceeds from any sale of the
Retirement Community, or any other capital transaction; (vii) proceeds of any
financing transaction affecting the Retirement Community; (viii) security
deposits until such time as the same are applied to current fees and other
charges due and payable; (ix) awards of damages, settlement proceeds and other
payments received by Tenant in respect of any Litigation other than Litigation
to collect fees due for services rendered from the Retirement Community; (x)
proceeds of any condemnation; (xi) proceeds of any casualty insurance, other
than loss of rents or business interruption insurance; (xii) payments under any
policy of title insurance; (xiii) Non-Refundable Entrance Fees and (xiv)
Refundable Entrance Fees.
"Transfer" shall have the meaning given such term in Section 15.1.
II. LEASED PROPERTY AND TERM
Section 2.1 Leased Property
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
right, title and interest in and to all of the following (collectively, the
"Leased Property"):
(a) the land that is more particularly described in Exhibit B,
attached hereto and made a part hereof (the "Land");
(b) all buildings, structures and other improvements of every kind
including, but not limited to, the Retirement Community, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site and
off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) 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, but specifically excluding all items included within the category of
Tenant's Personal Property (collectively, the "Fixtures");
(e) all 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, except items, if any, included within the category of Fixtures,
but specifically excluding all items included within the category of Tenant's
Personal Property (collectively, the "Leased Personal Property"); and
(f) all of the Leased Intangible Property.
Section 2.2 Condition of Leased Property
Tenant acknowledges receipt and delivery of possession of the Leased
Property and Tenant accepts the Leased Property in its "as is" condition,
subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, reservations, mineral leases,
easements and other matters of record or that are visible or apparent on the
Leased Property, all applicable Legal Requirements, the lien of any financing
instruments, mortgages and deeds of trust permitted by the terms of this
Agreement, and such other matters which would be disclosed by an inspection of
the Leased Property and the record title thereto or by an accurate survey
thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND TENANT
WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE
LEASED PROPERTY. EXCEPT AS EXPRESSLY SET FORTH HEREIN, LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in title, contractors and materialmen for breaches of
warranties or representations or for latent defects in the Leased Property.
Landlord shall fully cooperate with Tenant in the prosecution of any such
claims, in Landlord's or Tenant's name, all at Tenant's sole cost and expense.
Section 2.3 Fixed Term
The initial term of this Agreement (the "Fixed Term") shall commence on
the Commencement Date and shall expire on the fifteenth (15th) anniversary of
the Commencement Date.
Section 2.4 Extended Term
Tenant shall have (a) one (1) renewal option for a first renewal term
of ten (10) years (the "First Extended Term"), which Tenant may exercise at
Tenant's option upon at least twelve (12) months Notice for all, and not less
than all, of the Collective Leased Properties, and (b) a second renewal option
(conditional on exercise of the first renewal option) for an additional four (4)
years and eleven (11) Accounting Periods (the "Second Extended Term") which
Tenant may exercise at Tenant's option upon at least twelve (12) months Notice
for all, and not less than all, of the Collective Leased Properties. The First
Extended Term and the Second Extended Term, if exercised are collectively
referred to as the "Extended Terms."
Unless Tenant gives Landlord written Notice of Tenant's decision not to
exercise an Extended Term on or before the date which is twelve (12) months
prior to the date of the expiration of the Fixed Term or the First Extended Term
(as the case may be), Tenant shall be deemed to have exercised the First
Extended Term or the Second Extended Term, as applicable, subject to the
conditions set forth in the first paragraph of Section 2.4 above.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Second Extended Term. Otherwise, the extension of this
Agreement shall be effected without the execution of any additional documents;
it being understood and agreed, however, that Tenant and Landlord shall execute
such documents and agreements as either party shall reasonably require to
evidence the same.
III. RENT
Section 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), Minimum Rent and Additional Rent to Landlord and Additional
Charges to the party to whom such Additional Charges are payable, during the
Term. 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.
3.1.1 Minimum Rent.
(a) Payment of Minimum Rent. Minimum Rent for each Accounting
Period shall be payable in an amount equal to one-twelfth (1/12th) of the
then-applicable Minimum Rent, determined pursuant to Section 3.1.1(b) below.
Minimum Rent for each Accounting Period shall be paid on the twenty-second
(22nd) day of the next Accounting Period. If the 22nd day of any Accounting
Period is not a Business Day, then Minimum Rent shall be payable on the next
Business Day.
(b) Computation of Minimum Rent.
(i) Minimum Rent for the period commencing on March 29,
2003 and ending on March 31, 2003, shall equal $51,860.00 and be paid with
Tenant's payment of Minimum Rent due May 22, 2003.
(ii) For the Accounting Year that begins on April 1,
2003, Minimum Rent shall equal the product of (x) Landlord's Computation Basis
and (y) 10.25%.
(iii) At any time that Landlord expends funds that
constitute Landlord's Additional Investment hereunder, Minimum Rent shall
increase by the product of (x) the amount of such expenditure and (y) 10.25%.
Any adjustment to Minimum Rent pursuant hereto shall be memorialized in an
amendment to this Agreement fully executed by Landlord and Tenant. Any such
increase shall be effective on the date on which Landlord expends such funds,
or, in the case of amounts expended by Landlord pursuant to the second sentence
of Section 5.1.5(c), shall be effective as of January 1, 2005, and shall be
payable when the Minimum Rent for the Accounting Period in which such increase
is effective is payable as provided in Section 3.1.1(a); provided, if any such
expenditure (other than an expenditure pursuant to the second sentence of
Section 5.1.5(c)) is made on a day other than the first (1st) day of an
Accounting Period, the monthly payment of Minimum Rent for such Accounting
Period shall be pro rated on a per diem basis to reflect that such expenditure
was made subsequent to the commencement of the Accounting Period.
(iv) Tenant shall receive a credit against the amount of
Minimum Rent due each Accounting Period equal to the sum of all Non-Refundable
Entrance Fees paid to Landlord during such Accounting Period (or paid to Tenant
and remitted to Landlord by Tenant). To the extent that Non-Refundable Entrance
Fees paid to Landlord during any Accounting Period exceed the amount of Minimum
Rent due for such Accounting Period, Tenant shall receive a credit equal to such
excess against the amount of Minimum Rent due for the immediately following
Accounting Period(s).
(v) Commencing on the first day of each Accounting Year
subsequent to the Accounting Year that begins on April 1, 2003, during the Term
(including any Extension Term), Minimum Rent shall increase by three percent
(3%) over the then current Minimum Rent.
3.1.2 Additional Rent.
(a) Payment of Additional Rent. For each Fiscal Year Lessee shall
pay Additional Rent, to the extent that such funds are available after payment
of Property Expenses, payment of Minimum Rent, payments to the Reserve and
payment of the Tenant Incentive Fee. To the extent that funds are not available
to pay Additional Rent, any shortfall shall accrue and be payable from future
distributions of funds which remain after payment of Property Expenses, payment
of Minimum Rent, payments to the Reserve, payments of the Tenant Incentive Fee
and payment of any shortfalls then owing to the Reserve.
(b) Installments. Installments of Additional Rent for each Fiscal
Year or portion thereof shall be paid within twenty-two (22) days after the
close of each Accounting Period. Installments of Additional Rent due with
respect to each Accounting Period shall be equal to the Additional Rent due for
all Accounting Periods elapsed during the applicable Fiscal Year less amounts
previously paid with respect thereto by Tenant. If the Additional Rent due and
payable for such elapsed Accounting Periods, as shown on the statement for the
last Accounting Period, is less than the amount previously paid with respect
thereto by Tenant, Tenant shall be entitled to offset the amount of such
difference against Rent next coming due under this Agreement, such offset to be
applied together with interest at the Disbursement Rate accruing from the date
of payment by Tenant until the date the offset is applied. If the Additional
Rent for such elapsed Accounting Periods, as shown on the statement for the last
Accounting Period, is more than the amount previously paid with respect thereto
by Tenant, Tenant shall pay to Landlord the amount of such difference,
simultaneously with the delivery of such statement, together with interest on
the amount of such difference at the Disbursement Rate accruing from the due
date of such payment to the date such payment is received by Landlord.
3.1.3 Additional Charges.
In addition to the Minimum Rent and Additional Rent payable hereunder,
Tenant shall pay to the appropriate parties and discharge as and when due and
payable the following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article VIII relating to permitted
contests, Tenant shall pay, or cause to be paid, all Impositions before any
fine, penalty, interest or cost (other than any opportunity cost as a result of
a failure to take advantage of any discount for early payment) may be added for
non-payment, such payments to be made directly to the taxing authorities where
feasible, and shall promptly, upon request, furnish to Landlord copies of
official receipts or other reasonably satisfactory proof evidencing such
payments. If any such Imposition may, at the option of the taxpayer, lawfully be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Tenant may exercise the option to pay the same (and any
accrued interest on the unpaid balance of such Imposition) in installments and,
in such event, shall pay such installments during the Term as the same become
due and before any fine, penalty, premium, further interest or cost may be added
thereto. Landlord, at its expense, shall, to the extent required or permitted by
Applicable Law, prepare and file all tax returns and pay all taxes due in
respect of Landlord's net income, gross receipts, sales and use, single
business, ad valorem, franchise taxes and taxes on its capital stock, and
Tenant, at its expense, shall, to the extent required or permitted by Applicable
Laws, prepare and file all other tax returns and reports in respect of any
Imposition as may be required by Government Agencies. If any refund shall be due
from any taxing authority in respect of any Imposition paid by Tenant, the same
shall be paid over to or retained by Tenant. Landlord and Tenant shall, upon
request of the other, provide such data as is maintained by the party to whom
the request is made with respect to the Leased Property as may be necessary to
prepare any required returns and reports. In the event Government Agencies
classify any property covered by this Agreement as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses the same, provide
the other, upon request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property. Where Landlord is
legally required to file personal property tax returns for property covered by
this Agreement and/or gross receipts tax returns for Rent received by Landlord
from Tenant, Landlord shall file the same with reasonable cooperation from
Tenant. Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to prepare a protest which Landlord shall file, at
Tenant's written request. All Impositions assessed against such personal
property shall be (irrespective of whether Landlord or Tenant shall file the
relevant return) paid by Tenant not later than the last date on which the same
may be made without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge; provided,
however, that Landlord's failure to give any such Notice shall in no way
diminish Tenant's obligation hereunder to pay such Impositions (except that
Landlord shall be responsible for any interest or penalties incurred as a result
of Landlord's failure promptly to forward the same).
(b) Utility Charges. Tenant shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in
connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article IX.
(d) 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 assumed by Landlord pursuant to the
provisions of this Agreement or expressly stated not to be an obligation of
Tenant pursuant to this Agreement. Without limitation, Tenant shall pay or cause
to be paid all amounts, liabilities and obligations arising in connection with
the Contracts, as defined in the Purchase Agreement.
(e) Reimbursement for Additional Charges. If Tenant pays or causes
to be paid property taxes or similar or other Additional Charges attributable to
periods after the end of the Term, whether upon expiration or sooner termination
of this Agreement, Tenant may, within a reasonable time after the end of the
Term, provide Notice to Landlord of its estimate of such amounts. Landlord shall
promptly reimburse Tenant for all payments of such taxes and other similar
Additional Charges. If any Additional Charges have not been reimbursed to Tenant
as of the fifth (5th) day after the Landlord receives Tenant's Notice therefor,
Landlord shall pay to Tenant such reimbursement with interest at the Overdue
Rate from fifth (5th) day after Tenant's Notice therefor to the date of payment
thereof.
Section 3.2 Late Payment of Rent, Etc.
If any installment of Minimum Rent, Additional Rent or Additional
Charges (but only as to those Additional Charges which are payable directly to
Landlord) shall not be paid within ten (10) days after its due date, Tenant
shall pay Landlord, within five (5) days after Landlord's written demand
therefor, as Additional Charges, a late charge (to the extent permitted by law)
computed at the Overdue Rate on the amount of such installment, from the due
date of such installment to the date of payment thereof. To the extent that
Tenant pays any Additional Charges directly to Landlord or any Facility
Mortgagee pursuant to any requirement of this Agreement, Tenant shall be
relieved of its obligation to pay such Additional Charges to the Entity to which
they would otherwise be due and Landlord shall pay when due, or cause the
applicable Facility Mortgagee to pay when due, such Additional Charges to the
Entity to which they are due. If any payment due from Landlord to Tenant shall
not be paid within ten (10) days after its due date, Landlord shall pay to
Tenant, on demand, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment from the due date of such
installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional Charges
when due, except as expressly provided in Section 3.1.3(a) with respect to
permitted contests pursuant to Article VIII, Tenant shall promptly pay (unless
payment thereof is in good faith being contested and enforcement thereof is
stayed) and discharge, as Additional Charges, every fine, penalty, interest and
cost which may be added for non-payment or late payment of such items. Landlord
shall have all legal, equitable and contractual rights, powers and remedies
provided either in this Agreement or by statute or otherwise in the case of
non-payment of the Additional Charges as in the case of non-payment of the
Minimum Rent and Additional Rent.
Section 3.3 Net Lease
The Rent shall be absolutely net to Landlord so that this Agreement
shall yield to Landlord the full amount of the installments or amounts of the
Rent throughout the Term, subject to any other provisions of this Agreement
which expressly provide otherwise, including, without limitation, those
provisions for adjustment, refunding or abatement of such Rent and for the
funding of Landlord's obligations pursuant to Sections 5.1.5. This Agreement is
a net lease and, except to the extent otherwise expressly specified in this
Agreement, it is agreed and intended that Rent payable hereunder by Tenant shall
be paid without notice, demand, counterclaim, setoff, deduction or defense and
without abatement, suspension, deferment, diminution or reduction and that
Tenant's obligation to pay all such amounts, throughout the Term and all
applicable Extended Terms is absolute and unconditional and except to the extent
otherwise expressly specified in this Agreement, 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 all Applicable Laws, including any inability to occupy
or use the Leased Property by reason of such noncompliance; (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 conditions 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 proceeding; (g) any right or claim
that Tenant has or might have against any Person, including without limitation
Landlord (other than a monetary default) or any vendor, manufacturer, contractor
of or for the Leased Property; (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 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; provided, however, that the
foregoing shall not apply or be construed to restrict Tenant's rights in the
event of any act or omission by Landlord constituting negligence or willful
misconduct or that constitutes a breach of the Lease by Landlord. Except as
specifically set forth in this Agreement, this Agreement shall be noncancellable
by Tenant or Landlord 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. Section
3.4 Lifecare Bonds.
3.4.1 Entrance Fees.
Tenant shall be permitted to charge Entrance Fees to each new resident
of the Retirement Community in connection with any Continuing Care Agreement
entered into between Tenant and each such new resident. Tenant shall be entitled
to retain its Marketing Fee from monies collected as Non-Refundable Entrance
Fees.
3.4.2 Sale of Lifecare Bonds.
On behalf of the Landlord, Tenant shall be permitted to sell and issue
Lifecare Bonds to residents or potential residents of the Facility. Provided
that there are adequate funds in the Lifecare Bond Reserve or the Landlord
provides the funds pursuant to Section 3.4.4 below, Tenant, on behalf of the
Landlord, shall be responsible for repayment of the Refundable Entrance Fees
evidenced by the Lifecare Bonds to residents at the Facility or their estates as
they become due pursuant to the terms of the Lifecare Bonds and any provisions
of the Continuing Care Agreements relating to the same.
3.4.3 Proceeds from Sales of Lifecare Bonds.
On the Commencement Date, Tenant shall establish an interest bearing
reserve account "Lifecare Bond Reserve") in CNLBank or, at the Tenant's option,
another bank designated by Tenant and reasonably approved by Landlord, and any
funds in the Lifecare Bond Reserve shall be used solely for the repayment of
Refundable Entrance Fees. On the Commencement Date, Landlord shall deposit Two
Hundred Fifty Thousand Dollars ($250,000) in the Lifecare Bond Reserve.
Commencing on the Commencement Date, Tenant shall deposit in the Lifecare Bond
Reserve all Refundable Entrance Fees received from residents of the Retirement
Community. Funds deposited by the Tenant to the Lifecare Bond Reserve shall not
be considered Rent under this Agreement. Any amounts remaining in the Lifecare
Bond Reserve on the date of termination of this Agreement shall be promptly
remitted to the Landlord.
3.4.4 Lifecare Bond Reporting.
Within thirty (30) days after the end of each Fiscal Quarter, Tenant
shall deliver to Landlord (i) a quarterly accounting setting forth all Lifecare
Bonds issued and the proceeds from such Lifecare Bonds received and deposited
into the Lifecare Bond Reserve, all Lifecare Bonds matured or redeemed and the
amount paid to residents out of the Lifecare Bond Reserve pursuant to such
maturity or redemption, and the resulting balance of the Lifecare Bond Reserve
at the end of the period covered in such quarterly accounting, together with
(ii) an amount equal to the excess of such resulting balance over $250,000.
3.4.5 Lifecare Bond Reserve Deficiencies; Payment of LifeCare
Bonds.
If, at any time prior to the expiration or earlier termination of this
Agreement, the LifeCare Bond Reserve has insufficient funds to pay any
obligations coming due under maturing or redeemed LifeCare Bonds, Tenant shall
provide a notice to Landlord of such deficiency setting forth the amount of such
deficiency and Landlord shall pay to the LifeCare Bond Reserve such amount of
deficiency within five (5) Business Days after receipt of such notice. If
Landlord shall fail to so fund the LifeCare Bond Reserve within such five (5)
Business Day period, Tenant shall be entitled to use its own funds to pay the
obligations due under the maturing or redeemed LifeCare Bonds in question, and
Landlord shall reimburse Tenant for any such funds, including any costs,
expenses or liabilities incurred by Tenant, or, at the option of Tenant, Tenant
may offset the appropriate amount against any Rent owed by Tenant to Landlord
under this Agreement.
Following the expiration or earlier termination of this Agreement,
Landlord shall pay the full amount of any obligations due under maturing or
redeemed LifeCare Bonds in accordance with the terms thereof. In the event that,
following the expiration or earlier termination of this Agreement, demand is
made upon Tenant under any maturing or redeemed LifeCare Bond, Tenant may pay
the amount of the maturing or redeemed LifeCare Bond to the party entitled
thereto or Tenant may notify Landlord, in which event Landlord shall pay the
amount of the maturing or redeemed LifeCare Bond to the party entitled thereto
within five (5) Business Days after Tenant notifies Landlord of such demand. If
Landlord shall fail to pay the amount of the maturing or redeemed LifeCare Bond
within such five (5) Business Day period, Tenant shall be entitled to use its
own funds to pay the obligations due under the maturing or redeemed LifeCare
Bond in question. In the event Tenant uses its own funds to pay the obligations
due under any maturing or redeemed LifeCare Bond under either of the foregoing
sentences or otherwise, Landlord shall reimburse Tenant for any such funds,
including any costs, expenses or liabilities incurred by Tenant, within five (5)
Business Days after Tenant notifies Landlord thereof.
Any amounts owing from Landlord to Tenant for any costs, expenses or
liabilities incurred by Tenant in connection with any payments made by Tenant
pursuant to this Section shall accrue interest at the Prime Rate plus two
percent (2%) until paid. Landlord shall indemnify Tenant and its Affiliates for
any costs, expenses or liabilities incurred by Tenant or its Affiliates in
connection with any payments (including the amount of such payments) made by
Tenant pursuant to this Section 3.4 which remain unreimbursed by Landlord.
Landlord's obligations under this Section 3.4 shall survive the expiration or
earlier termination of this Agreement.
IV. USE OF THE LEASED PROPERTY
Section 4.1 Permitted Use.
Tenant shall, at all times during the Term and at any other time that
Tenant shall be in possession of the Leased Property, continuously use and
operate the Leased Property as a continuing care retirement community, and any
uses incidental thereto. Subject to Section 16.3, Tenant shall not use the
Leased Property or any portion thereof for any other use without the prior
written consent of Landlord. Tenant shall, at its sole cost (except as expressly
provided in Section 5.1.5(b)), comply with all Insurance Requirements. Subject
to Article X (Casualty) and Article XI (Condemnation).
Section 4.2 Necessary Approvals.
Tenant shall proceed with all due diligence and exercise commercially
reasonable efforts to obtain and maintain all Licenses and approvals necessary
to use and operate, for its Permitted Use, the Leased Property and the Facility
located thereon under applicable law. Landlord shall cooperate with Tenant in
this regard, including executing all applications and consents required to be
signed by Landlord in order for Tenant to obtain and maintain such approvals as
of the Commencement Date.
Section 4.3 Lawful Use, Etc.
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) may 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.
Section 4.4 Compliance with Legal/Insurance Requirements, Etc.
Subject to the provisions of Article V, Article X and Article XI,
Tenant, at its sole expense, shall (i) comply with Legal Requirements and
Insurance Requirements in respect of the use, operation, maintenance, repair,
alteration and restoration of the Leased Property, and (ii) comply with all
appropriate Licenses, and other authorizations and agreements required for any
use of the Leased Property and Tenant's Personal Property, if any, then being
made and which are material to the operation of the Leased Property as a
continuing care retirement community, and for the proper operation and
maintenance of the Leased Property or any part thereof.
Section 4.5 Environmental Matters.
4.5.1 Restriction on Use, Etc.
If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Environmental Laws)
are discovered on the Leased Property, subject to Tenant's right to contest the
same in accordance with Article VIII, Tenant shall take all actions and incur
any and all expenses, as may be reasonably necessary and as may be required by
any Government Agency, (i) to clean up and remove from and about the Leased
Property all Hazardous Substances thereon, (ii) to contain and prevent any
further release or threat of release of Hazardous Substances on or about the
Leased Property and (iii) to use good faith efforts to eliminate any further
release or threat of release of Hazardous Substances on or about the Leased
Property. Tenant shall promptly: (a) upon receipt of Notice or knowledge, notify
Landlord in writing of any material change in the nature or extent of Hazardous
Substances at the Leased Property, (b) transmit to Landlord a copy of any
Community Right to Know report which is required to be filed by Tenant with
respect to the Leased Property pursuant to XXXX Title III or any other
Environmental Law, (c) transmit to Landlord copies of any citations, orders,
notices or other governmental communications received by Tenant or its agents or
representatives with respect thereto (collectively, "Environmental Notice"),
which Environmental Notice requires a written response or any action to be taken
and/or if such Environmental Notice gives notice of and/or presents a material
risk of any material violation of any Environmental Law and/or presents a
material risk of any material cost, expense, loss or damage (an "Environmental
Obligation"), (d) observe and comply with all Environmental Laws relating to the
use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction relating
to the use or maintenance or requiring the removal, treatment, containment or
other disposition thereof, and (e) pay or otherwise dispose of any fine, charge
or Imposition related thereto, unless Tenant shall contest the same in good
faith and by appropriate proceedings and the right to use and the value of the
Leased Property is not materially and adversely affected thereby.
Tenant's liability and obligations pursuant to the terms of this
Section 4.5.1 are subject to the provisions of Sections 5.1.3 and 5.1.5 and
Landlord's compliance with its funding obligations under Section 5.1.5.
4.5.2 Indemnification.
Tenant and Landlord shall each protect, indemnify and hold harmless the
other, its trustees, directors, officers, agents, employees and beneficiaries,
and any of their respective successors or assigns with respect to this Agreement
(collectively, the "Indemnitees" and, individually, an "Indemnitee") for, from
and against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorney's fees and expenses) imposed upon, incurred by
or asserted against any Indemnitee resulting from, either directly or
indirectly, the presence during the Term in, upon or under the soil or ground
water of the Leased Property or any properties surrounding the Leased Property
of any Hazardous Substances in violation of any Applicable Law or otherwise
(collectively, the "Environmental Claims"), provided that any of the foregoing
arises by reason of the gross negligence or willful misconduct of the
indemnifying party, except to the extent the same arise from the gross
negligence or willful misconduct of the other party or any other Indemnitee.
This duty includes, but is not limited to, costs associated with personal injury
or property damage claims as a result of Environmental Claims prior to the
expiration or sooner termination of the Term and the surrender of the Leased
Property to Landlord in accordance with the terms of this Agreement free of
Hazardous Substances in, upon or under the soil or ground water of the Leased
Property in violation of an Environmental Law. Upon Notice from the indemnified
party and any other of the Indemnitees, the indemnifying party shall undertake
the defense, at its sole cost and expense, of any indemnification duties set
forth herein, in which event, the indemnifying party shall not be liable for
payment of any duplicative attorneys' fees incurred by the other party or any
Indemnitee.
4.5.3 Survival.
As to conditions which exist prior to the expiration or sooner
termination of this Agreement, the provisions of this Section 4.5 shall survive
the expiration or sooner termination of this Agreement for a period of one (1)
year after such expiration or termination.
Section 4.6 Title Encumbrances.
4.6.1 Existing Title Encumbrances.
Tenant hereby acknowledges and consents to all Existing Title
Encumbrances. All costs, expenses and charges which are imposed on the
Retirement Community under the Existing Title Encumbrances shall be a Property
Expense.
4.6.2 Future Title Encumbrances.
Title Encumbrances which are entered into, or become encumbrances on
the Retirement Community and/or the Leased Property, after the Commencement Date
shall be referred to in this Agreement as "Future Title Encumbrances." Landlord
agrees that it will give Tenant Notice of its intention to execute any Future
Title Encumbrances, such Notice to be reasonably in advance of the execution
thereof. Landlord covenants that, during the Term of this Agreement, there will
not be any Future Title Encumbrances affecting the Leased Property or the
Retirement Community, unless the Tenant has given prior written consent thereto,
which consent shall not be unreasonably withheld by Tenant if such Future Title
Encumbrance: (i) would not impose any material financial obligations on the
Retirement Community; (ii) would not prohibit or limit Tenant from operating the
Retirement Community, including dining and other facilities customarily a part
of or related to a similar retirement community, in accordance with the industry
standards; (iii) would not allow the Facility's facilities (for example, parking
spaces) to be used by persons other than residents, invitees or employees of the
Facility; and (iv) would not adversely affect the value or future use of the
Retirement Community.
4.6.3 Financial Obligations.
All financial obligations imposed on Tenant and/or on the Retirement
Community pursuant to any Future Title Encumbrances shall be paid by Landlord
from its own funds, and not as a Property Expense or from the Reserve, unless
Tenant has given its prior written consent in accordance with the terms of
Section 4.6.2 to the payment of such obligations as Property Expenses.
V. MAINTENANCE AND REPAIRS
Section 5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Tenant shall, at Tenant's sole cost and expense (except as expressly
provided in Sections 5.1.2 and 5.1.3(b) and 5.1.5(b)), keep the Leased Property
in good order and repair and in conformity with all laws governing continuing
care retirement communities and all agreements with residents, reasonable wear
and tear excepted, and shall promptly make all necessary and appropriate routine
and preventive maintenance, repairs and minor alterations, as Tenant from time
to time deems necessary for such purposes. The phrase "routine maintenance,
repairs and minor alterations" as used in this Section 5.1.1 shall include only
those which are normally expensed under GAAP. For purposes of this Section 5.1.1
and except as provided in Section 5.1.2, the cost of routine maintenance,
repairs and minor alterations shall be borne by Tenant and funded by the
operations of the Leased Property (and not taken out of the Reserve). All
repairs shall be made in a good, workmanlike manner, consistent with industry
standards for like continuing care retirement communities 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. Tenant shall
provide prompt written notification to Landlord of any material adverse change
to the Leased Property, such as material changes to any environmental condition,
including without limitation, the presence of biocontaminants, such as mold
(and, if applicable, promptly notify the applicable insurance carriers and
submit all claim information related thereto pursuant to Section 10.1). Tenant
also shall promptly undertake appropriate assessment, remedial and preventative
action sufficient to meet any guidelines or regulations adopted by applicable
authoritative bodies or regulatory agencies in connection with a determination
of any material adverse change, and, in any event with respect to mold
contamination, and subject to and in accordance with Section 10.1, Tenant shall
undertake (a) removal of the mold, (b) abatement of the underlying cause of mold
(including water intrusion), and (c) repair of any leaks and associated water
damage at or to the Leased Property.
Tenant's obligations under this Section 5.1.1 shall be limited in the
event of any casualty or Condemnation as set forth in Articles X and XI and
Tenant's obligations with respect to Hazardous Substances are as set forth in
Section 4.5.
5.1.2 Reserve.
(a) Tenant shall establish an interest bearing reserve account
(the "Reserve") in CNLBank or such other bank designated by Tenant and
reasonably approved by Landlord. All interest earned on the Reserve shall be
added to and remain a part of the Reserve. Except as set forth in Section
5.1.2(e), Tenant shall be the only party entitled to withdraw funds from the
Reserve. The purpose of the Reserve is to cover the cost of:
(i) Replacements and renewals to the Facility's FF&E and
(ii) Certain routine repairs and maintenance to the
Facility building (which are normally capitalized under GAAP) such as exterior
and interior repainting, resurfacing building walls, floors, roofs and parking
areas, and replacing folding walls and the like, but which are not Capital
Expenditures; and
(iii) Capital Expenditures which may be paid from the
Reserve pursuant to Section 5.1.5(c) below.
(b) Commencing with the Commencement Date and continuing
throughout the Term, Tenant shall transfer (as of the end of each Accounting
Period of the Term), into the Reserve an amount equal to the Applicable
Percentage of Total Facility Revenues for such Accounting Period.
(c) Tenant shall (endeavoring in good faith to comply with the
applicable Reserve Estimate, unless there has been a change in circumstance from
time to time) make such expenditures for the replacements, renewals, repairs,
and maintenance described in this Section 5.1.2, as Tenant deems necessary, up
to the balance in the Reserve in order to maintain the Retirement Community
consistent with industry standards and in conformity with Legal Requirements. No
expenditures will be made in excess of said balance without the approval of
Landlord. In addition, Tenant shall not, without Landlord's approval, make any
expenditures from the Reserve that, in the aggregate, exceed the total aggregate
amount of expenditures set forth in the then-applicable Reserve Estimate;
provided, however, that Tenant shall be authorized to take appropriate remedial
action (including making any necessary expenditures from the Reserve above the
total aggregate amount set forth in the then-applicable Reserve Estimate),
without receiving Landlord's prior approval, to remedy or respond to any of the
Emergency Requirements (provided further that Tenant shall notify Landlord of
any such remedial action that requires more than a de minimus expenditure of
funds from the Reserve). At the end of each Fiscal Year, any amounts remaining
in the Reserve shall be carried forward to the next Fiscal Year. Proceeds from
the sale of FF&E no longer necessary to the operation of the Retirement
Community shall be deposited in the Reserve, as shall any interest which accrues
on amounts placed in the Reserve. Neither: (x) proceeds from the disposition of
FF&E nor (y) interest which accrues on amounts held in the Reserve, shall result
in any reduction in the required Reserve payments or be included in Total
Facility Revenues. Upon a sale of the Retirement Community, funds in the Reserve
will not be affected, and all dispositions of such funds (both before and after
such sale of the Retirement Community) will continue to be made exclusively
pursuant to the provisions of this Agreement. Tenant is authorized to lease
(rather than purchase) shuttle vans, postal machines, photocopiers and other
office equipment. Lease payments with respect to such leases shall be paid as a
Property Expense.
(d) 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 by no later than October 15th of each year.
Tenant will endeavor to follow the applicable Reserve Estimate, but shall be
entitled to depart therefrom, in its reasonable discretion, provided that: (A)
such departures from the applicable Reserve Estimate result from circumstances
which could not reasonably have been foreseen at the time of the submission of
such Reserve Estimate; and (B) such departures from the applicable Reserve
Estimate result from circumstances which require prompt repair and/or
replacement or are necessary to comply with Legal Requirements; and (C) Tenant
has submitted to Landlord a revised Reserve Estimate setting forth and
explaining such departures.
(e) Tenant shall from time to time make expenditures from the
Reserve as it deems necessary in accordance with Section 5.1.2(a) and (c).
Tenant shall provide to Landlord, within twenty (20) days after the end of each
Accounting Period, a statement setting forth Reserve expenditures made to date
during the Fiscal Year. Expenditures from the Reserve shall not be subject to
Landlord's approval.
(f) All funds in the Reserve, all interest earned thereon and all
property purchased with funds from the Reserve shall be and remain the property
of Tenant during the Term. 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 5.1.2 out
of the Reserve, Tenant's rights hereunder relating to the Reserve and property
purchased with funds from the Reserve shall be transferred from Tenant to
Landlord.
(g) It is understood and agreed that during the term of the
Pooling Agreement, the Reserve pursuant to this Agreement shall (i) also serve
as the reserve, and be pooled with the Reserves, under the Other Leases in
accordance with the provisions of the Pooling Agreement, and (ii) include
amounts transferred to the Reserve under this Agreement and the Other Leases.
(h) If Landlord wishes to grant a security interest in or create
another encumbrance on the rights of Landlord with respect to the Reserve, the
instrument granting such security interest or creating such other encumbrance
shall expressly provide that such security interest or encumbrance is subject to
the rights of Tenant with respect to the Reserve as set forth herein. The form
and substance of such provision shall be subject to obtaining Tenant's prior
written approval, which approval shall not be unreasonably withheld, delayed or
conditioned.
5.1.3 Capital Expenditures.
(a) Tenant shall prepare and deliver to Landlord, for Landlord's
approval, an annual estimate of the reasonably foreseeable Capital Expenditures
(the "Building Estimate") no later than the fifteenth (15th) of October of each
year. Landlord's consent shall not be required with respect to Capital
Expenditures ("Required Capital Expenditures") (i) which are required by reason
of any Legal Requirement, or (ii) required under Tenant's then current
life-safety standards, if applicable, (provided that, in order for any such
life-safety standards to be "required" within the meaning of this Section 5.1.3,
such standards must be part of the standards of the Tenant of the Retirement
Community), or (iii) otherwise required for the continued safety of residents or
employees or prevention of material damage to property, including the removal of
Hazardous Substances, together with all contaminated soils and containers, and
to contain and prevent any further release or threat of release of Hazardous
Substances on or about the Leased Premises, in compliance with all Environmental
Laws, or (iv) required to obtain or maintain a material License. If Tenant does
not receive Notice of Landlord's disapproval of the Building Estimate or any
item therein, within thirty (30) days after delivery of the Building Estimate to
Landlord, then Landlord shall be deemed to have approved the Building Estimate
or such items, as applicable. In the event Landlord disapproves the Building
Estimate, Landlord's Notice shall identify disputed items on a line item basis.
Items not identified as disputed in such Landlord's Notice shall be deemed
approved by Landlord.
(b) In the event of (x) an emergency threatening the Retirement
Community, its residents, invitees or employees, or (y) the receipt by Tenant of
a governmental order or other Legal Requirement regarding any Required Capital
Expenditures, Tenant shall give Notice thereof to Landlord within five (5)
Business Days thereafter or sooner if circumstances reasonably warrant. Tenant
shall then be authorized (but not obligated) to take appropriate remedial action
without receiving Landlord's prior consent as follows: (i) in an emergency
threatening the Retirement Community, its residents, invitees or employees; or
(ii) if the continuation of the given condition could (in Tenant's reasonable
judgment) either (a) subject Landlord and/or Tenant to either criminal or more
than de minimis civil liability, or (b) result in the suspension or revocation
of a material License and Tenant has either failed to remedy the situation or
has failed to take appropriate legal action to stay the effectiveness of any
applicable Legal Requirement. Tenant shall cooperate with Landlord in the
pursuit of any such action and shall have the right to participate therein.
Landlord shall reimburse Tenant for any costs incurred by Tenant in connection
with any such remedial action within thirty (30) days after Landlord's receipt
of Notice from Tenant, of the amount of such costs. Capital Expenditures made
pursuant to this Section 5.1.3(b) shall be deemed approved by Landlord.
(c) The cost of all approved, deemed approved or non-approvable
Capital Expenditures shall be borne by Landlord in accordance with the
provisions of Section 5.1.5(b) and shall increase the Minimum Rent as set forth
in Section 3.1.1.
5.1.4 Landlord Approval Rights During the Last Two Years of the
Term.
Except for expenditures required to remedy or respond to a Legal
Requirement or an Emergency Requirement, no expenditures, including expenditures
to be paid out of the Reserve, in excess of the Reserve shall be made by Tenant
without Landlord's prior consent (i) during the last Fiscal Year of the Fixed
Term, if Tenant elects, pursuant to the provisions of Section 2.4 hereunder, not
to extend the Term of this Agreement beyond such Fixed Term, (ii) during the
last Fiscal Year of the first (1st) Extended Term of this Agreement if Tenant
elects, pursuant to the provisions of Section 2.4 hereunder, not to extend the
Term beyond such first (1st) Extended Term, and (iii) during the last two (2)
Fiscal Years of the second (2nd) Extended Term of this Agreement.
5.1.5 Landlord's Funding Obligations.
(a) Landlord shall not, except as provided in subsection (c)
below, under any circumstances, be required to build or rebuild any improvement
on the Leased Property, or to make any repairs, replacements, alterations,
restorations or renewals of any nature or description to the Leased Property,
whether ordinary or extraordinary, structural or nonstructural, foreseen or
unforeseen, to maintain the Leased Property in any way, or, except as provided
in Section 5.1.5(b), to make any expenditure whatsoever with respect thereto.
Except as otherwise expressly provided in this Agreement, Tenant for itself and
any Person claiming by, through or under Tenant hereby waives, to the maximum
extent permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect on the date hereof or hereafter enacted. Landlord
shall have the right to give, record and post, as appropriate, notices of
non-responsibility under any mechanic's lien laws now or hereafter existing.
(b) If, at any time, (i) funds in the Reserve shall be
insufficient or are reasonably projected by Tenant to be insufficient for
necessary and permitted expenditures thereof, or (ii) funding is necessary for
approved, deemed approved or non-approvable Capital Expenditures (other than
costs related to Hazardous Substances under Section 4.5 resulting from Tenant's
gross negligence or willful misconduct (or that of any Person claiming by,
through or under Tenant), which costs shall be Tenant's sole cost and expense;
but specifically including the costs associated with the assessment, remedial
and preventative actions taken in connection with biocontaminants as
contemplated by Section 5.1.1 above), (iii) funding is necessary pursuant to
Section 4.5.1(d) and/or 4.5.1(e) or (iv) Landlord is otherwise obligated under
the terms of this Lease to provide funds to Tenant, then Tenant may, at its
election, 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. Landlord shall, within ten (10) Business Days after such
Notice, or such later dates as Tenant may direct, disburse such required funds
to Tenant (or, if Tenant shall so elect, directly to any Person performing the
required work) and, upon such disbursement, the Minimum Rent shall be adjusted
as provided in Section 3.1.1(b); provided, however, that if the disbursement of
funds relates to the Hazardous Substances under Section 4.5 resulting from
Landlord's gross negligence or willful misconduct, there shall be no adjustment
to the Minimum Rent. If Landlord disputes its obligation to disburse such funds,
it shall give Tenant Notice of such dispute within such ten (10) Business Day
period, and failure to give Tenant Notice of such dispute shall be deemed a
waiver of any right to dispute Landlord's obligation to disburse such funds. To
the extent reasonably possible, Landlord shall identify disputed items on a line
item basis. In no event shall Landlord be entitled to dispute the request for
funds for any expenditure which was approved or deemed approved pursuant to the
provisions of Section 5.1.3(a) and (b). In the event of such a dispute, the
dispute shall be submitted to the Expert in accordance with the provisions of
Section 20.3 below. To the extent that the Expert rules in favor of Tenant,
Landlord shall fund any such amounts due within ten (10) days of Notice of the
Expert's decision. If Landlord fails to fund any amounts due hereunder within
the time periods required, Tenant shall have the right, but not the obligation,
to fund any such disbursements directly and offset such amounts owing from its
next scheduled payment of Rent.
(c) Notwithstanding anything to the contrary in this Agreement,
the Landlord hereby agrees, that during the twenty-four (24) month period after
the Commencement Date, Landlord shall expend not less than the Landlord
Additional Funding Obligation in making or for reimbursing others for making
repairs, Capital Expenditures and improvements relating to the roof, facade,
and/or the balconies of the Leased Property. Further, Landlord will fund up to
Two Million One Hundred Thirteen Thousand Nine Hundred Seventy-Nine Dollars
($2,113,979) of additional Capital Expenditures on the Leased Property and the
property subject to the Other Leases during such time, provided that Tenant does
not have sufficient funds in the Reserve to pay for the same. To the extent
Landlord funds any such Capital Expenditures associated with the $2,113,979 with
respect to the Facility on or before December 31, 2004, the Minimum Rent shall
not increase on account of such Capital Expenditures prior to January 1, 2005
and Tenant may reimburse Landlord for such Capital Expenditures prior to January
1, 2005 out of its own funds or, at its option, to the extent available, out of
the Reserve. To the extent Landlord funds any such Capital Expenditures with
respect to the Facility and Tenant does not reimburse Landlord for all of such
Capital Expenditures prior to January 1, 2005, commencing January 1, 2005, such
unreimbursed Capital Expenditures shall constitute Landlord's Additional
Investment hereunder and the Minimum Rent shall be adjusted accordingly as of
January 1, 2005.
5.1.6 Non-responsibility of Landlord, Etc.
All materialmen, contractors, artisans, mechanics and laborers and
other persons contracting with Tenant with respect to the Leased Property, or
any part thereof, are hereby charged with notice that liens on the Leased
Property or on Landlord's interest therein are expressly prohibited and that
they must look solely to Tenant to secure payment for any work done or material
furnished by Tenant or for any other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any way as
constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any Mechanic's Lien Law of the State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.1.7 Limitation on Tenant's Obligations.
Tenant's obligations under Section 5.1 shall be limited in the event of
any casualty or Condemnation as set forth in Articles X and XI and Tenant's
obligations with respect to Hazardous Substances are as set forth in Section
4.5.
Section 5.2 Tenant's Personal Property.
At the expiration or sooner termination of the Term, Landlord may, in
its sole and absolute discretion, elect either (i) to remove all FAS and
Inventories from the Leased Property or (ii) to give Tenant Notice that Tenant
shall be required, within ten (10) Business Days after such expiration or
termination, to deliver and transfer to Landlord all FAS and Inventories located
at the Leased Property, in which event Landlord shall acquire such FAS and
Inventories. Failure of Landlord to make such election shall be deemed an
election to proceed in accordance with clause (ii) preceding.
Section 5.3 Yield Up.
Upon the expiration or sooner termination of this Agreement, Tenant
shall vacate and surrender the Leased Property to Landlord in substantially the
same condition in which the Leased Property was in on the Commencement Date,
except as repaired, replaced, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Agreement, reasonable wear and
tear and Condemnation (and casualty damage, in the event that this Agreement is
terminated following a casualty in accordance with Article X) excepted.
In addition, as of the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith, commercially reasonable efforts to transfer to and cooperate with
Landlord or Landlord's nominee in connection with the processing of all
applications for licenses, operating permits and other governmental
authorizations and all contracts entered into by Tenant, including contracts
with governmental or quasi-governmental Entities which may be necessary for the
use and operation of the Retirement Community as then operated, but excluding
(i) all insurance contracts and multi-property contracts not limited in scope to
the Collective Leased Properties, the Lease Agreements for which are being
terminated simultaneously, (ii) all contracts and leases with Affiliates, (iii)
utility deposits and (iv) telephone numbers. Landlord shall indemnify and hold
Tenant harmless for all claims, costs and expenses (including reasonable
attorneys' fees and paralegals' fees) arising from acts or omissions by Landlord
under such contracts subsequent to the date of transfer thereof to Landlord; and
Tenant shall indemnify and hold Landlord harmless for all claims, costs and
expenses (including reasonable attorney's fees and paralegals' fees) arising
from acts or omission by Tenant under such contracts prior to the date of
transfer thereof to Landlord.
VI. IMPROVEMENTS, ETC.
Section 6.1 Improvements to the Leased Property.
Tenant shall not finance the cost of any construction by the granting
of a lien on or security interest in the Leased Property, or Tenant's interest
therein, without the prior written consent of Landlord, which consent may be
withheld by Landlord in Landlord's sole discretion. Any such improvements shall,
upon the expiration or sooner termination of this Agreement, remain or pass to
and become the property of Landlord, free and clear of all encumbrances other
than Title Encumbrances.
Section 6.2 Construction
During the Term, any renovation, rebuilding and/or expansion of the
Facility shall be accomplished in conformity with Legal Requirements and in
substantial accordance with this Article VI and consistent with standards of
quality of similarly situated continuing care retirement communities. During the
Term, neither Landlord nor Tenant shall proceed with any major renovation,
rebuilding and/or expansion of the Facility without first obtaining the other
party's prior, written approval of such proposed work, and the plans and
specifications therefor, which consent shall not be unreasonably withheld,
conditioned or delayed.
Section 6.3 Salvage.
Other than Tenant's Personal Property, all materials which are scrapped
or removed in connection with the making of repairs, alterations, improvements,
renewals, replacements and additions pursuant to Article V shall be disposed of
by Tenant and the net proceeds thereof, if any, shall be deposited in the
Reserve.
Section 6.4 Equipment Leases.
Landlord shall enter into such leases of equipment and personal
property as Tenant may reasonably request from time to time, provided that the
form and substance thereof shall be reasonably satisfactory to Landlord. Tenant
shall prepare and deliver to Landlord all such lease documents for which
Landlord's execution is necessary and Landlord shall promptly, upon approval
thereof, execute and deliver such documents to Tenant. Tenant shall, throughout
the Term, be responsible for performing all of Landlord's obligations under all
such documents and agreements, including without limitation, all Contracts, as
defined in the Purchase Agreement.
VII. LIENS
Subject to Article VIII, Tenant shall not, directly or indirectly,
create or allow to remain and shall promptly discharge, at its expense, any
lien, attachment, title retention agreement or claim upon the Leased Property or
Tenant's leasehold interest therein or any attachment, levy, claim or
encumbrance in respect of the Rent, other than (a) Existing Title Encumbrances
(b) Future Title Encumbrances if approved by Tenant in accordance with the
provisions of Section 4.6.2, (c) restrictions, liens and other encumbrances
which are consented to in writing by Landlord, (d) liens for those taxes of
Landlord which Tenant is not required to pay hereunder, (e) subleases permitted
by Article XVI, (f) liens for Impositions or for sums resulting from
noncompliance with Legal Requirements so long as (A) the same are not yet due
and payable, or (B) are being contested in accordance with Article VIII, (g)
liens of mechanics, laborers, materialmen, suppliers or vendors incurred in the
ordinary course of business that are not yet due and payable (but will be paid
in full by Tenant) or are for sums that are being contested in accordance with
Article VIII, (h) any Facility Mortgages or other liens which are the
responsibility of Landlord pursuant to the provisions of Article XIX, and (i)
Landlord Liens.
VIII. PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien (excluding any Landlord Liens), attachment, levy, encumbrance, charge or
claim (collectively, "Claims") as to the Leased Property, by appropriate legal
proceedings, conducted in good faith and with due diligence, provided that (a)
the foregoing shall in no way be construed as relieving, modifying or extending
Tenant's obligation to pay any Claims required hereunder to be paid by Tenant as
finally determined, (b) such contest shall not cause Landlord or Tenant to be in
default under any mortgage, deed of trust or other agreement encumbering the
Leased Property or any part thereof (Landlord agreeing that any such mortgage,
deed of trust or other agreement shall permit Tenant to exercise the rights
granted pursuant to this Article VIII) or any interest therein or result in a
lien attaching to the Leased Property, unless such lien is fully bonded or is
otherwise secured to the reasonable satisfaction of Landlord, and (c) no part of
the Leased Property nor any Rent therefrom shall be in any immediate danger of
sale, forfeiture, attachment or loss, and (d) Tenant hereby indemnifies and
holds harmless Landlord from and against any cost, claim, damage, penalty or
reasonable expense, including reasonable attorneys' fees and paralegals' fees,
incurred by Landlord in connection therewith or as a result thereof. Landlord
agrees to join in any such proceedings if required legally to prosecute such
contest, provided that Landlord shall not thereby be subjected to any liability
therefor (including, without limitation, for the payment of any costs or
expenses in connection therewith) unless Tenant agrees to assume and indemnify
Landlord with respect to the same. Tenant shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Tenant or paid by Landlord to the extent that Landlord has been reimbursed by
Tenant. If Tenant shall fail (x) to pay or cause to be paid any Claims when
finally determined, (y) to provide reasonable security therefor, or (z) to
prosecute or cause to be prosecuted any such contest diligently and in good
faith, Landlord may, upon Notice to Tenant, pay such charges, together with
interest and penalties due with respect thereto, and Tenant shall reimburse
Landlord therefor, upon demand, as Additional Charges.
IX. INSURANCE
Section 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, at Tenant's sole cost and
expense, keep the Leased Property and all property located therein or thereon,
insured against the risks and in the amounts as follows:
(a) Property insurance, including boiler and machinery coverage,
on the Retirement Community building(s) and contents including, but not limited
to coverage for signs, awnings, canopies, gazebos, fences and retaining walls
against loss or damage by fire, lightning, windstorm, sprinkler leakage, water
damage, vandalism, malicious mischief and other hazards generally included under
extended coverage and all other risks as commonly covered by an "all-risk of
physical loss" policy of insurance, in an amount not less than the full
replacement cost (less excavation and foundation costs) of the Retirement
Community buildings and contents and law and ordinance coverage in an amount
equal to ten percent (10%) of the replacement value or One Million Dollars
($1,000,000) whichever is greater and is available under commercially reasonable
terms;
(b) Business interruption insurance including extra expense
covering at least one (1) year loss of profits, necessary continuing expenses,
and if applicable, Rent, for interruptions at the Retirement Community caused by
any occurrence covered by the insurance referred to in Section 9.1(a) above, and
9.1(c) and 9.1(d) below to the extent available at commercially reasonable
terms;
(c) Flood insurance, if the Retirement Community is located in
whole or in part within an area identified as having a special flood hazard
under the National Flood Insurance Program in commercially reasonable amounts;
(d) If the Retirement Community is located in an "earthquake prone
zone" as reasonably determined by Landlord and Tenant, Tenant shall maintain
coverage for loss or damage caused by earthquake, but only to the extent that
the same is available on commercially reasonable terms (for example, Tenant
shall not be required to carry earthquake insurance if coverage is completely
unavailable or if the cost is unreasonable) and Tenant shall provide Landlord
with prompt Notice of unavailability or material restriction of earthquake
coverage. Tenant may provide such earthquake insurance through a blanket
insurance program with limits adequate to protect the regional aggregate
probable maximum loss for all properties in the applicable region in which the
Retirement Community is located under the blanket program and Tenant shall
provide written Notice to Landlord if actual losses meet or exceed such limits.
In the event that Landlord and Tenant shall fail to agree if the Retirement
Community is located in an "earthquake prone zone" the issue shall be promptly
referred to EQE International, Inc. for its determination, which shall be
binding on Tenant and Landlord. Tenant and Landlord agree that if EQE
International, Inc. is not available or willing to make such determination,
Landlord and Tenant shall select another recognized earthquake analysis company
to make such determination;
(e) Such other property insurance as is customarily maintained by
Tenant at similar retirement communities;
(f) Such additional insurance as may be reasonably required from
time to time, by (A) Existing Title Encumbrances in effect on the date hereof
and any Future Title Encumbrances, approved in writing by Tenant, or (B) a
Facility Mortgagee approved or permitted pursuant to Article XIX hereof,
provided the same is customarily carried by a majority of comparable high
quality retirement communities in the area;
(g) Commercial general liability insurance against claims for
bodily injury, death or property damage, fire, legal liability, and if
applicable liquor liability occurring on, in or in conjunction with the
operations of the Retirement Community, and automobile liability insurance on
owned, non-owned and hired vehicles operated in conjunction with the Retirement
Community, with limits of not less than One Million Dollars ($1,000,000.00) per
occurrence and not less than Two Million Dollars ($2,000,000.00) aggregate;
(h) Umbrella/Excess liability against claims for damages covered
under the commercial general liability, automobile liability, if applicable
liquor liability and employer's liability with limits of not less than
$50,000,000 per occurrence or limits and coverage terms that are reasonable and
available in the commercial market;
(i) Workers' compensation coverage as may be required under
applicable laws covering all of Tenant's employees at the Retirement Community,
and employer's liability insurance of not less than One Million Dollars
($1,000,000.00) per accident/disease;
(j) Fidelity bond coverage in an amount not less than Two Million
Dollars ($2,000,000.00) covering Tenant at the Retirement Community;
(k) Employment practices liability insurance covering all of
Tenant's employees at the Retirement Community, to the extent available at
commercially reasonable rates and terms, in an amount not less than One Million
Dollars ($1,000,000);
(l) To the extent applicable, garage keepers legal liability
covering both comprehensive and collision-type losses with a limit of liability
of not less than One Million Dollars ($1,000,000.00) per occurrence;
(m) Professional liability insurance with limits of not less than
$2,000,000 per occurrence and a $5,000,000 aggregate to cover the professional
medical care providers employed by the Tenant at the Retirement Community. If
the professional liability insurance is written on a claims-made basis, and if
the existing primary policies are canceled and non-renewed or canceled and
rewritten, an Extended Period of Discovery coverage shall be purchased for the
existing policy for not less than one (1) year (in the event the insurance
coverage required by this subparagraph is no longer available at commercially
reasonable terms, the parties hereto agree to negotiate in good faith to modify
or replace the existing required insurance coverage).
(n) Such other insurance in amounts as Landlord, in its reasonable
judgment, deems advisable for protection against claims, liabilities and losses
arising out of or connected with the operation of the Retirement Community.
Section 9.2 General Insurance Provisions
(a) All insurance described in Section 9.1 may be obtained through
blanket insurance programs, provided that such blanket programs substantially
fulfill the requirements specified herein. The blanket insurance programs may
include deductibles or risk retention levels; however, the Retirement
Community's responsibility for such deductibles or risk retention levels shall
be limited to the Insurance Retention as defined in Section 9.3(c). The
Retirement Community's allocated Insurance Retention for general liability
insurance and workers' compensation insurance shall not exceed One Hundred
Thousand Dollars ($100,000) unless such greater amount is agreeable to both
Landlord and Tenant. The Retirement Community's property insurance deductible
shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) unless such
greater amount is agreeable to both Landlord and Tenant, or if a higher
deductible for high hazard risks (i.e., earthquake, wind or flood) is mandated
by the insurance carrier.
(b) All insurance described in Section 9.1 shall be carried in the
name of Tenant. The insurance required under Section 9.1 (excluding coverages
9.1.i, j, and k) shall include Landlord and Tenant and any Facility Mortgagees
specified by Landlord, in writing, as additional insureds, mortgagee or loss
payee as their interest may appear, as applicable. Any property losses covered
by insurance obtained pursuant to Section 9.1 shall be payable to the respective
parties as their interests may appear. Any Facility Mortgage on the Retirement
Community shall contain provisions to the effect that proceeds of the Section
9.1(a), (c) and (d) insurance shall be available for repair and restoration of
the Retirement Community. With respect to the Retirement Community, all
insurance policies pursuant to Section 9.1 shall provide that the coverage shall
be primary and any insurance carried by any additional insured shall be excess
and non-contributory.
(c) Tenant, upon request, shall deliver to Landlord certificates
of insurance evidencing the insurance coverages required under Section 9.1 and
any renewals thereof. All such certificates of insurance shall, to the extent
obtainable, state that the insurance shall not be canceled or materially reduced
without at least thirty (30) days' prior written notice to the certificate
holder. Excluding workers' compensation and earthquake coverage, all insurance
policies pursuant to this Article IX, shall be issued by insurance carrier
having an AM Best rating of at least A-, VII and all excess insurance policies
above Twenty-Five Million Dollars ($25,000,000) shall be issued by insurance
carriers having an AM Best rating of at least B+, VII. All such insurance shall
be evaluated by Tenant from time to time to ensure that the limits and coverages
are adequate.
(d) The parties agree that the insurance coverages and deductibles
maintained by Tenant pursuant to this Article IX shall be adjusted throughout
the Term in accordance with Tenant's or Tenant's standard insurance policies, as
applicable which shall be consistent with industry standards for similar
facilities.
Section 9.3 Costs and Expenses
(a) With respect to Section 9.1, all insurance premiums, costs and
other expenses, including any Insurance Retention (as defined below), shall be
treated as an Imposition payable by Tenant as Additional Charges. All charges
under the blanket programs shall be allocated to the Retirement Community and
other similar participating retirement communities on a reasonable basis. Any
losses and associated costs and expenses, that are uninsured shall be treated as
a cost of insurance and shall also be treated as an Imposition.
(b) While this Agreement is in effect, a reserve in an amount
determined by Tenant based on loss projections, shall be established from Total
Facility Revenues to cover the amount of any Insurance Retention and all other
costs and expenses that will eventually have to be paid by Tenant with respect
to pending or contingent claims, including those that arise after the
termination of this Agreement for causes arising during the Term. If Total
Facility Revenues are insufficient to meet the requirements of such reserve,
Landlord shall deliver to Tenant within ten (10) days after receipt of Tenant's
written request thereof, the sums necessary to establish such reserve; and if
Landlord fails to timely deliver such sums to Tenant, Tenant shall have the
right to withdraw the amount of such expenses from the operating accounts of the
Retirement Community, the FF&E Reserve or any other funds of Tenant or Landlord,
as applicable, held by or under the control of the Tenant.
(c) "Insurance Retention" shall mean the insurance policy
deductible; however, for any insurance obtained through the blanket insurance
programs, "Insurance Retention" shall mean the Retirement Community's per
occurrence limit for any loss or reserve as established for the Retirement
Community, which limit shall be the same as is applied to other similar
retirement communities participating in the blanket insurance programs, or such
higher amount if mandated by the insurer for high hazard risks such as
earthquake, flood and wind.
(d) If any Facility Mortgagee requires that insurance proceeds be
applied to reduce any indebtedness of Landlord secured by the Facility, the
Landlord's Computation Basis shall be reduced by the amount paid to such
Facility Mortgagee.
Section 9.4 Indemnification of Landlord
Tenant shall indemnify and hold harmless Landlord (and any officer,
director, employee, advisor, partner or shareholder of Landlord) in respect of,
and, at Landlord's request, shall defend any action, cause of action, suit,
debt, cost, expense (including without limitation reasonable attorneys' fees),
claim or demand whatsoever brought or asserted by any third person whomsoever,
at law or in equity, arising by reason of: (i) liabilities stemming from general
corporate matters of Tenant or its Affiliates, to the extent the same are not
directly and primarily related to the Retirement Community; (ii) infringement
and other claims relating to the Tenant's use of the proprietary marks of
Landlord; (iii) if Tenant fails to maintain insurance coverage that it is
required to maintain pursuant to this Agreement, the excess of the amount of any
liability or loss that would have been covered over the amount of any applicable
deductible; or (iv) the bad faith or willful misconduct of Tenant or its
Affiliates, or any of their employees, servants or agents or other persons for
whom they are responsible, result in a claim for bodily injury, death or
property damage occurring on, in or in conjunction with the business of the
Retirement Community, to the extent that such claim exceeds the insurance
proceeds (including Insurance Retention) which are available to pay such claim.
Section 9.5 Indemnification of Tenant
Landlord shall indemnify and hold harmless Tenant (and any officer,
director, employee, advisor, partner or shareholder of Tenant) in respect of,
and, at Tenant's request, shall defend any action, cause of action, suit, debt,
cost, expense (including without limitation reasonable attorneys' fees), claim
or demand whatsoever brought or asserted by any third person whomsoever, at law
or in equity, arising by reason of: (i) liabilities stemming from general
corporate matters of Landlord or its Affiliates, to the extent the same are not
directly and primarily related to the Retirement Community and (ii) the bad
faith or willful misconduct of Landlord or its Affiliates, or any of their
employees, servants or agents or other persons for whom they are responsible,
result in a claim for bodily injury, death or property damage occurring on, in
or in conjunction with the business of the Retirement Community, to the extent
that such claim exceeds the insurance proceeds (including Insurance Retention)
which are available to pay such claim.
Section 9.6 Limitation on Liability
To the maximum extent permitted by applicable law, and except to
Landlord in its capacity as guarantor, no shareholder, director, officer or
employee of any party to this Agreement shall have any personal liability with
respect to the liabilities or obligations of such party hereunder. Furthermore,
Landlord and Tenant agree that if Landlord is in default hereunder, the
liability of Landlord shall be absolutely limited to the Landlord's Computation
Basis as of the date of the Lease. Notwithstanding the foregoing, Landlord's
liability shall remain unlimited as to its duty to repay obligations arising
with respect to Lifecare Bonds as set forth in Section 3.4.5 above.
X. CASUALTY
Section 10.1 Damage and Repair.
If, during the Term, the Retirement Community is damaged by a Minor
Casualty, Tenant, shall, with all reasonable diligence, proceed to process the
claim with the applicable insurance carriers, including settling such claim, and
to make the necessary arrangements with appropriate contractors and suppliers to
repair and/or replace the damaged portion of the Facility.
If, during the Term, the Facility suffers a Total Casualty, this
Agreement shall be terminable at the sole option of Tenant, except that this
Agreement shall be terminable at the option of either party upon ninety (90)
days' written notice to the other party, if such Total Casualty occurs during
the last five (5) years of the Initial Term or the First Extended Term, or at
any time during the Second Extended Term. Such notice must be sent within thirty
(30) days after the date of the Total Casualty.
If, during the Term, the Facility is damaged by fire, casualty or other
cause to a greater extent than a Minor Casualty, but not to the extent of a
Total Casualty, or if the Facility suffers a Total Casualty but neither party
elects to terminate under Section 10.1, Tenant shall, with all reasonable
diligence, repair and/or replace the damaged portion of the Facility to the same
condition as existed previously, any cost incurred in connection with such
repairs and/or replacements, to the extent not covered by insurance, shall be
reimbursed to Tenant by Landlord and included in Landlord's Additional
Investment. Tenant shall have the right to discontinue operating the Facility to
the extent it deems necessary to comply with applicable Legal Requirements or as
necessary for the safe and orderly operation of the Facility. To the extent
available, casualty insurance proceeds shall be applied to such repairs and/or
replacements. If, after fund are made available by Landlord for repairs, Tenant
fails to promptly commence and complete the repair and/or replacement of the
Facility so that it shall be substantially the same as it was prior to such
damage or destruction, such failure shall be a Tenant Default. Landlord's
failure to make funds available for such repairs within a reasonable time shall
be a Landlord Default. The parties agree that Tenant's obligations to repair
and/or replace pursuant to the provisions of this Section 10.1 shall be limited
to the extent of available casualty insurance proceeds (plus the amount of any
applicable deductibles). The parties further agree that if Landlord is obligated
to utilize such available casualty insurance proceeds to repay any obligations
pursuant to any mortgage, then Landlord shall be entitled to an equitable
extension of time (in which Landlord has to fulfill its obligations pursuant to
the provisions of this Section 10.1) sufficient to allow Landlord to obtain the
necessary funding to replace such spent casualty insurance proceeds necessary
for Tenant to make the repairs and/or replacements required hereunder. The
parties further agree that Landlord's obligation to fund repairs and Tenant's
obligations to repair and/or replace pursuant to the provisions of this Section
10.1 shall be subject to Landlord's and Tenant's ability to obtain such
entitlements and/or other governmental approvals as may be necessary to
undertake such repair and/or replacement; provided that Landlord and Tenant
shall undertake good faith efforts to obtain such entitlements and/or approvals.
10.1.1 Insufficient Insurance Proceeds.
If the cost of the repair or restoration of the Leased Property exceeds
the sum of the deductible and the amount of casualty insurance proceeds received
by Landlord pursuant to Section 9.1 (other than Section 9.1(b)), Landlord shall
give Tenant Notice thereof, within sixty (60) days after notice of such
deficiency, which Notice shall set forth in reasonable detail the nature of such
deficiency and whether Landlord shall pay and assume the amount of such
deficiency (Landlord having no obligation to do so, except that, if Landlord
shall elect to make such funds available, the same shall become an irrevocable
obligation of Landlord pursuant to this Agreement). If Landlord elects to make
such deficiency available for restoration, the Minimum Rent shall be adjusted by
the amount of the same as provided in Section 3.1.1(b). In the event that
Landlord does not elect to make such deficiency available for restoration,
either Landlord or Tenant may terminate this Agreement by Notice to the other,
whereupon, this Agreement shall terminate as provided in Section 10.1. It is
expressly understood and agreed, however, that, notwithstanding anything in this
Agreement to the contrary, Landlord shall be solely responsible for the amount
of any deductible.
Section 10.2 Tenant's Property.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property shall be paid solely to Landlord and, to the
extent necessary to repair or replace Tenant's Personal Property in accordance
with Section 10.3, Landlord shall hold such proceeds in trust to pay the cost of
repairing or replacing damaged Tenant's Personal Property. If after paying the
costs associated with replacing and repairing Tenant's Personal Property in
accordance with Section 10.3 any insurance proceeds remain, Landlord shall pay
such remaining proceeds to Tenant.
Section 10.3 Restoration of Tenant's Property.
If Landlord is required to restore the Leased Property as hereinabove
provided, Landlord 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.
Section 10.4 No Abatement of Rent.
Subject to the provisions set forth in Section 10.1 and 10.1.1, 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 damage
involving 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 X shall be considered an express agreement governing any cause of
damage or destruction to the Leased Property and, to the maximum extent
permitted by Applicable Laws, no Applicable Laws in effect during the Term which
provide for such a contingency shall have any application in such case.
Section 10.5 Waiver.
Tenant hereby waives, to the maximum extent permitted by Applicable
Laws, any statutory rights of termination which may arise by reason of any
damage or destruction of the Leased Property.
XI. CONDEMNATION
Section 11.1 Total Condemnation, Etc.
In the event all or substantially all of the Facility shall be taken in
any Condemnation or in the event a portion of the Facility shall be so taken,
but the result is that Tenant reasonably believes it impracticable to continue
to operate the Facility in accordance with the standards required by this
Agreement, this Agreement shall terminate effective as of the date of such
taking or similar proceeding. Landlord and Tenant shall each have the right to
initiate such proceedings as they deem advisable to recover any Award to which
they may be entitled.
Section 11.2 Partial Condemnation.
In the event a portion of the Facility shall be taken by Condemnation
or the entire Facility is affected but on a temporary basis, and the result is
not to make it unreasonable to continue to operate the Facility, this Agreement
shall not terminate. However, so much of any Award for any such partial taking
or condemnation as shall be necessary to render the Facility equivalent to its
condition prior to such event shall be used by Tenant for such purpose; and
Tenant shall have the right to discontinue operating the Facility or portion of
the Facility to the extent it deems necessary for the safe and orderly operation
of the Facility. If Tenant elects to continue operations after a partial taking
or condemnation, Landlord's Computation Basis shall be reduced by that amount of
any Award which has been received by Landlord as the result of such partial
taking or condemnation and not used to restore the Facility, provided that such
partial taking or condemnation reduced the existing space available for lease by
the Tenant to residents within the Facility. In the event a partial taking or
condemnation does not result in the loss of existing space available for lease
by the Tenant to residents, then Landlord's Computation Basis shall remain
unchanged.
Section 11.3 Disbursement of Award.
Any Award received by any mortgagee shall be deemed to be an Award
received by Landlord.
Section 11.4 Abatement of Rent.
Other than as specifically provided in this Agreement, 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 XI
shall be considered an express agreement governing any Condemnation involving
the Leased Property and, to the maximum extent permitted by law, no Applicable
Laws in effect during the Term which provide for such a contingency shall have
any application in such case.
XII. DEFAULTS AND REMEDIES
Section 12.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of Minimum Rent or
Additional Rent within three (3) Business Days after Notice thereof from
Landlord to Tenant, or fail to make payment of any other Rent or any other sum
(including, but not limited to, funding of the Reserve), payable hereunder when
due and such failure shall continue for a period of ten (10) days after Notice
thereof from Landlord to Tenant; or
(b) should Tenant fail to maintain the insurance coverage required
under Article IX and such failure shall continue for three (3) Business Days
after Notice thereof; or
(c) subject to Article VIII relating to permitted contests, should
Tenant default in the due observance or performance of any of the terms,
covenants or agreements contained herein to be performed or observed by it
(other than as specified in clauses (a) and (b) above) and such default shall
continue for a period of thirty (30) days after Notice thereof from Landlord to
Tenant; provided, however, that if such default is susceptible of cure but such
cure cannot be accomplished with commercially reasonable efforts within such
period of time and if, in addition, Tenant commences to cure or cause to be
cured such default within thirty (30) days after Notice thereof from Landlord
and thereafter prosecutes the curing of such default with commercially
reasonable efforts, such period of time shall be extended to such period of time
(not to exceed one hundred eighty (180) days) as may be necessary to cure such
default with commercially reasonable efforts; or
(d) should Tenant generally not be paying its debts as they become
due or should Tenant make a general assignment for the benefit of creditors; or
(e) should any petition be filed by or against Tenant under the
Federal bankruptcy laws, or should any other proceeding be instituted by or
against Tenant seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for
Tenant or for any substantial part of the property of Tenant and such proceeding
is not dismissed within ninety (90) days after institution thereof, or should
Tenant take any action to authorize any of the actions set forth above in this
paragraph; or
(f) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(g) should an event of default occur and be continuing under any
mortgage or deed of trust which is secured by Tenant's leasehold interest
hereunder or should the mortgagee under any such mortgage accelerate the
indebtedness secured thereby or commence a foreclosure action in connection with
said mortgage and such default shall continue for a period of thirty (30) days
after Notice thereof from Landlord to Tenant; provided, however, that if such
default is susceptible of cure but such cure cannot be accomplished with due
diligence within such period of time and if, in addition, Tenant commences to
cure or cause to be cured such default within fifteen (15) days after Notice
thereof from Landlord and thereafter prosecutes the curing of such default with
all due diligence, such period of time shall be extended to such period of time
as may be necessary to cure such default with all due diligence; or
(h) unless Tenant shall be contesting such lien or attachment in
good faith in accordance with Article VIII, should the estate or interest of
Tenant in the Leased Property or any part thereof be levied upon or attached in
any proceeding and the same shall not be vacated, discharged or fully bonded or
otherwise secured to the reasonable satisfaction of Landlord within the later of
(x) one hundred and twenty (120) days after such attachment or levy, unless the
amount in dispute is less than $500,000 (as adjusted each year by increases in
the GDP Deflator), in which case Tenant shall give Notice to Landlord of the
dispute but Tenant may defend in any suitable way, and (y) thirty (30) days
after receipt by Tenant of Notice thereof from Landlord; it being understood and
agreed that Tenant may commence a contest of such matter pursuant to Article
VIII above following such Notice from Landlord; or
(i) should Tenant, its successors and assigns, cause an "Event of
Default" as defined in each of the Other Leases with respect to any of the Other
Leases.
Then, and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement by giving Notice thereof to Tenant
and upon the expiration of the time fixed in such Notice but in any event not
less than seventy-five (75) days, this Agreement shall terminate and all rights
of Tenant under this Agreement shall cease, provided that the obligations of
Landlord under Section 3.4.5 shall survive such termination. Landlord shall have
and may exercise all rights and remedies available at law and in equity to
Landlord as a result of Tenant's breach of this Agreement, including, without
limitation, the right of re-entry upon the Leased Property upon and at any time
after the occurrence of an Event of Default.
Section 12.2 Remedies.
None of (a) the termination of this Agreement pursuant to Section 12.1,
(b) the repossession of the Leased Property or any portion thereof, (c) the
failure of Landlord to re-let the Leased Property or any portion thereof, nor
(d) the re-letting of all or any portion of the Leased Property, shall relieve
Tenant of its liability and obligations hereunder, all of which shall survive
any such termination, repossession or re-letting. In the event of any such
termination, repossession or re-letting, Tenant shall forthwith pay to Landlord
all Rent due and payable with respect to the Leased Property through and
including the date of such termination, repossession or re-letting. Thereafter,
Tenant, until the end of what would have been the Term of this Agreement
(assuming no extension beyond the then-current Term) in the absence of such
termination, repossession or re-letting, and whether or not the Leased Property
or any portion thereof shall have been re-let, shall be liable to Landlord for,
and shall pay to Landlord, as current damages, the Rent and other charges which
would be payable hereunder for the remainder of the Term had such termination,
repossession or re-letting not occurred, less the net proceeds, if any, of any
re-letting of the Leased Property or any other operation of the Leased Property
by Landlord (if Landlord repossesses the Leased Property), after deducting all
reasonable expenses in connection with such re-letting or operation, as
applicable, including, without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such re-letting
(such expenses being hereinafter referred to as the "Re-letting Expenses").
Tenant shall pay such current damages to Landlord monthly on the days on which
the Minimum Rent would have been payable hereunder if this Agreement had not
been so terminated with respect to such of the Leased Property.
At any time after such termination, repossession or re-letting, in
addition to Landlord's right to receive any Rent owing and due up to and
including the date of termination, repossession or re-letting under the
preceding paragraph, Tenant shall pay to Landlord, at Landlord's election, as
liquidated final damages incurred beyond the date of such termination,
repossession or re-letting and in lieu of Landlord's right to receive any
further damages due to the such termination, repossession or re-letting, the
Re-letting Expenses incurred to date (and not theretofore paid by Tenant or
deducted by Landlord as set forth herein) and an amount equal to the present
value (discounted at the Interest Rate) of the excess, if any, of the Rent and
other charges which would be payable hereunder from the date of such
termination, repossession or re-letting (assuming that, for the purposes of this
paragraph, annual payments by Tenant on account of Impositions and Additional
Rent would be the same as payments required for the immediately preceding
thirteen Accounting Periods, or if less than thirteen Accounting Periods have
expired since the Commencement Date, the payments required for such lesser
period projected to an annual amount) for what would be the then unexpired Term
of this Agreement (assuming no extension beyond the then-current Term) if the
same remained in effect, over the fair market rental for the same period, but
excluding any period after the date of such termination, repossession or
re-letting for which amounts have become payable by Tenant under the first
paragraph of this Section 12.2. Nothing contained in this Agreement shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above. Notwithstanding the foregoing, Landlord shall use commercially
reasonable efforts to mitigate its damages which may be incurred in connection
with this Article XII.
In case of any Event of Default, re-entry, expiration or dispossession
by summary proceedings or otherwise, Landlord may (a) re-let the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to re-let the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of re-letting the Leased Property; and the making
of such alterations, repairs and decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Subject to the last
sentence of this paragraph, Landlord shall in no event be liable in any way
whatsoever for any failure to re-let all or any portion of the Leased Property,
or, in the event that the Leased Property is re-let, for failure to collect the
rent under such re-letting. To the maximum extent permitted by law, Tenant
hereby expressly waives any and all rights of redemption granted under any
present or future laws in the event of Tenant being evicted or dispossessed, or
in the event of Landlord obtaining possession of the Leased Property, by reason
of the occurrence and continuation of an Event of Default hereunder. Landlord
covenants and agrees, in the event of any such termination, repossession or
re-letting as a result of an Event of Default, to use reasonable efforts to
mitigate its damages.
Section 12.3 Waiver of Jury Trial.
Landlord and Tenant hereby waive, to the maximum extent permitted by
Applicable Laws, trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other or in respect of any matter
whatsoever arising out of or in any way connected with this Agreement, the
relationship of Landlord and Tenant hereunder, Tenant's occupancy of the Leased
Property, and/or any claim for injury or damage.
Section 12.4 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.
Section 12.5 Landlord's Right to Cure Tenant's Default.
If an Event of Default shall have occurred and be continuing, Landlord,
after Notice to Tenant (which Notice shall not be required if Landlord shall
reasonably determine immediate action is necessary to protect person or
property), without waiving or releasing any obligation of Tenant and without
waiving or releasing any Event of Default, may (but shall not be obligated to),
at any time thereafter, make such payment or perform such act for the account
and at the expense of Tenant, and may, to the maximum extent permitted by law,
enter upon the Leased Property or any portion thereof for such purpose and take
all such action thereon as, in Landlord's sole and absolute discretion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and paralegals' fees) incurred by Landlord in
connection therewith, together with interest thereon (to the extent permitted by
Applicable Laws) at the Overdue Rate from the date such sums are paid by
Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
Section 12.6 Good Faith Dispute.
If Tenant shall in good faith dispute the occurrence of any Default and
Tenant, before the expiration of the applicable cure period, shall give Notice
thereof to Landlord, setting forth, in reasonable detail, the basis therefor
and, provided Tenant shall escrow disputed amounts, if any, pursuant to an
escrow arrangement reasonably acceptable to Landlord and Tenant, no Event of
Default shall be deemed to have occurred; provided, however, that in the event
of any eventual adverse determination, Tenant shall pay to Landlord interest on
any disputed funds at the Disbursement Rate, from the date demand for such funds
was made by Landlord until the date of final adverse determination and,
thereafter, at the Overdue Rate until paid.
XIII. HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to one and one-half (1.50) times the Rent and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord all
damages (direct or indirect) sustained by reason of any such holding over.
Otherwise, such holding over shall be on the terms and conditions set forth in
this Agreement, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Agreement. In the
event of any holding over by Tenant, upon demand by Landlord, Tenant's right to
possession of the Leased Property will terminate immediately and Tenant will
forthwith surrender possession of the Leased Property.
XIV. LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
Section 14.1 Landlord Notice Obligation.
Landlord shall give prompt Notice to Tenant of any materially adverse
matters affecting the Leased Property of which Landlord receives written Notice
or actual, conscious, present knowledge and, to the extent Tenant otherwise has
no notice or actual knowledge thereof. Landlord shall be liable for any
liabilities, costs, damages or claims (including reasonable attorney fees)
arising from failure to deliver such Notice to Tenant. Subject to Article XIX,
Landlord shall not enter into or amend any agreement directly affecting the
operation of Leased Property without Tenant's prior written consent which
consent shall not be unreasonably withheld, conditioned or delayed. As used in
this Agreement, "Landlord's knowledge" or words of similar import shall mean the
actual (and not constructive or imputed), conscious, present knowledge, without
independent investigation or inquiry of Xxxxxxx X. Xxxxxxxx, Xx. or Xxxx Xxxx or
any subsequent officer or employee of Landlord, or any Affiliate as to Landlord,
having direct oversight responsibility for the transactions contemplated in this
Agreement.
Section 14.2 Landlord's Default.
Subject to Landlord's right to dispute its obligation in accordance
with Section 5.1.5(b), if Landlord shall default in the performance or
observance of any of its covenants or obligations set forth in this Agreement,
and any such default shall continue for a period of ten (10) days after Notice
thereof with respect to monetary defaults, and thirty (30) days after Notice
thereof with respect to non-monetary defaults, from Tenant to Landlord and,
subject to Section 19.3, any applicable Facility Mortgagee, or such additional
period as may be reasonably required to correct such non-monetary defaults,
Tenant may declare the occurrence of a "Landlord Default" under this Agreement
by giving Notice of such declaration to Landlord and to such Facility Mortgagee.
Thereafter, Tenant may (but shall have no obligation to) cure the same and,
subject to the provisions of the following paragraph, invoice Landlord for costs
and expenses (including reasonable attorneys' fees, paralegals' fees and court
costs) incurred by Tenant in curing the same. If any such costs and expenses
have not been reimbursed to Tenant as of the fifth (5th) day after the Landlord
receives Tenant's Notice therefor, Landlord shall pay to Tenant, a late charge
computed at the Overdue Rate on the amount of such reimbursement from the
expiration of the applicable cure period to the date of payment thereof. If
Landlord has not disputed its obligation to pay Tenant and has failed to
reimburse Tenant as required and within the time periods set forth herein,
Tenant shall then have the right to offset such payment of Minimum Rent by the
amount then owing from Landlord to Tenant under this Section. If Landlord fails
to pay any disputed funds plus interest owed as provided herein within ten (10)
Business Days of an adverse determination, Tenant shall have the right to offset
such amounts owing from its next scheduled payment of Rent, and all subsequent
payments of Rent, until satisfied. Except as otherwise expressly provided herein
to the contrary, Tenant shall have no right to terminate this Agreement for any
default by Landlord hereunder or under the Other Leases and no right, for any
such default, to offset or counterclaim against any Rent or other charges due
hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof; provided, however, that in the event of any such adverse determination,
Landlord shall pay to Tenant interest on any disputed funds at the Disbursement
Rate, from the date demand for such funds was made by Tenant until the date of
final adverse determination and, thereafter, at the Overdue Rate until paid. If
Landlord fails to pay any disputed funds plus interest owed as provided herein
within ten (10) Business Days of an adverse determination, Tenant shall have the
right to offset such amounts owing from its next scheduled payment of Rent, and
all subsequent payments of Rent, until satisfied.
XV. TRANSFERS BY LANDLORD
Section 15.1 Tenant Consent to Transfer by Landlord
Except for liens, encumbrances or title retention agreements which are
governed by Article 19, Landlord shall not, without the prior written consent of
Tenant (which consent may be given or withheld by Tenant in Tenant's sole and
absolute discretion), sell, assign, transfer, convey or otherwise dispose of (a
"Transfer") the Leased Property, or any portion thereof or interest therein,
directly or indirectly (other than an interest, directly or indirectly, in
Landlord which is governed by Section 15.3), to any Person which, in Tenant's
reasonable judgment: (i) is not a Person in which CRP owns and holds, directly
or indirectly, a Controlling Interest and does not have sufficient financial
resources to fulfill Landlord's obligations hereunder; (ii) is known in the
community as being of bad moral character and/or is in control of or controlled
by Persons who have been convicted of felonies in any state or federal court;
(iii) itself is, or any of its Affiliates is, a Competitor; or (iv) fails
expressly to assume, in writing, the obligations of Landlord under this
Agreement.
For purposes of this Section 15.1, a Person shall not be deemed to be a
Competitor solely by virtue of (x) the ownership of senior housing facilities,
either directly or indirectly through Subsidiaries, Affiliates and Entities, or
(y) holding a mortgage or mortgages secured by one or more assisted living
facilities. Within five (5) days following any request by Tenant, Landlord shall
provide Tenant such information concerning the proposed transferee's financial
condition, affiliations, ownership, business interests, and operations as may be
reasonably necessary or appropriate in order for Tenant to determine if such
proposed Transfer is consistent with the above provisions.
Section 15.2 Conditions of Landlord Transfer.
Any Transfer of the Leased Property permitted by Section 15.1 shall be
subject to the prior or simultaneous satisfaction of the following conditions:
(a) Any transferee of Landlord pursuant to this Article 15 shall
expressly assume, in writing reasonably satisfactory to Tenant, the obligations
of Landlord under this Agreement and, upon such assumption and so long as such
transferee is not an Affiliate of Landlord or CRP, then Landlord shall be
released from all liabilities and obligations of the landlord hereunder accruing
after the date of the transfer, assignment and assumption;
(b) Any overpayments of Rent (to the extent determinable) held by
Landlord shall be refunded to Tenant prior to such Transfer;
(c) If the transferee is an Affiliate of CRP, then Landlord and
CRP shall expressly guarantee in writing reasonably satisfactory to Tenant, or
confirm in writing reasonably satisfactory to Tenant their continuing guarantee
of, the obligations of such transferee under this Agreement;
(d) Any amounts owed by Landlord to Tenant shall be paid in full;
and
(e) The transferee shall satisfy any Legal Requirements and obtain
any regulatory approvals required as a result of the transfer.
Section 15.3 Transfer of Interest in Landlord.
For purposes of this Article 15, any sale, assignment, transfer or
other disposition, for value or otherwise, voluntary or involuntary, by merger,
operation of law or otherwise, in a single transaction or a series of
transactions, of any interest in Landlord or any Person having an interest in
Landlord, directly or indirectly, shall be and constitute a Transfer of the
Leased Property. Provided, however, that if the proposed transferee is not, in
Tenant's reasonable judgment, (i) known in the community as being of bad moral
character or in which any Person who has been convicted of a felony in any state
or federal court holds a Controlling Interest, or (ii) itself a Competitor, and
none of its Affiliates is a Competitor, then so long as (x) such purchaser has
satisfied any Legal Requirements and obtained any regulatory approvals required
as a result of such Transfer , (y) the interest to be transferred to such
transferee is less than a Controlling Interest, and (z) immediately following
such transfer CRP, directly or indirectly, continues to own and hold a
Controlling Interest in Landlord, the other restrictions set forth in Section
15.1.1 shall not apply to such transfer. Provided further, however, that the
provisions of Section 15.1.1 shall not apply to any transfer of interests in
CRP, directly or indirectly, or in any Entity that has an interest in CRP,
directly or indirectly, so long as CRP is a publicly traded company (whether or
not such interests are traded on a public stock exchange), (a) if and so long as
such transfer does not result, directly or indirectly, in a Competitor owning a
Controlling Interest in CRP, and (b) so long as such purchaser satisfies any
Legal Requirements and obtains any regulatory approvals required as a result of
the transfer of such interests, and (c) if the purchaser is obtaining a
controlling interest in CRP, the purchaser has sufficient financial strength, in
Tenant's reasonable judgment, to perform the obligations of CRP under such
guaranty. So long as the Landlord is a limited partnership, the provisions of
Section 15.1.1 shall not apply to any transfer of interests in Landlord,
directly or indirectly (or in any Entity that has an interest in Landlord,
directly or indirectly), to any Person which is not an Affiliate of Landlord or
CRP, if and so long as such transfer does not result in or entail, directly or
indirectly, either concurrent with the transfer or subsequent thereto, CRP or a
wholly-owned Subsidiary of CRP no longer continuing to possess the sole power,
as the sole general partner of Landlord, to direct or cause the direction of the
management and policies of Landlord, whether such cessation of power occurs by
contract, by conversion of the general partner interest of CRP or its
wholly-owned Subsidiary in Landlord to a limited partner interest, by conversion
of Landlord to a corporation or other Entity, or otherwise.
Landlord shall deliver to Tenant at least sixty (60) days prior Notice
of any transfer of interests herein contemplated, other than transfers of
limited partner interests in Landlord (specifically excluding any general
partner interests in Landlord), and other than transfers of interests in any
publicly traded company (whether or not such interests are traded on a public
stock exchange).
Notwithstanding anything to the contrary herein contained, a voluntary
sale, assignment, transfer or other disposition, for value, by merger, operation
of law or otherwise, in a single transaction or a related series of
transactions, of all or substantially all of the interests in CRP, or all or
substantially all of the assets of CRP (in either event, a "Sale of the
Entity"), shall not be deemed a Transfer of the Leased Property. For purposes
hereof, "substantially all of the interests in CRP" shall mean not less than
ninety percent (90%) of the outstanding capital stock of CRP; and "substantially
all of the assets of CRP" shall mean not less than ninety percent (90%) of the
respective total assets owned by CRP. Notwithstanding the foregoing, so long as
CRP is guaranteeing the obligations of Landlord under Section 3.4 hereof, no
Sale of the Entity shall be permitted unless (i) the purchaser assumes the
obligations of CRP under such guaranty (or, if requested by Tenant, executes a
replacement guaranty) and has sufficient financial strength, in Tenant's
reasonable judgment, to perform the obligations of CRP under such guaranty and
(ii) such purchaser satisfies any Legal Requirements and obtains any regulatory
approvals required as a result of such Sale of the Entity.
XVI. SUBLETTING AND ASSIGNMENT
Section 16.1 Subletting and Assignment.
(a) Except as provided in Sections 16.2, Tenant shall not, without
Landlord's prior written consent (which may be given or withheld by Landlord in
its sole discretion), assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer this Agreement or sublease (which term shall be deemed to
include the granting of concessions, licenses and the like), all or any part of
the Leased Property or suffer or permit this Agreement or the leasehold estate
created hereby or any other rights arising under this Agreement to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily, involuntarily or by operation of law, or permit the
use or operation of the Leased Property by anyone other than Tenant, or the
Leased Property to be offered or advertised for assignment or subletting. For
purposes of this Section 16.1, an assignment of this Agreement shall be deemed
to include any direct or indirect transfer of any interest in Tenant such that
Tenant shall cease to be directly or indirectly owned by Sunrise Assisted
Living, Inc. or any transaction pursuant to which Tenant is merged or
consolidated with another Entity which is not owned by Sunrise Assisted Living,
Inc. or pursuant to which all or substantially all of Tenant's assets are
transferred to any other Entity, as if such change in control or transaction
were an assignment of this Agreement.
(b) If this Agreement is assigned or if the Leased Property or any
part thereof is sublet (or occupied by anybody other than Tenant) in violation
of this Agreement, Landlord may collect the rents from such assignee, subtenant
or occupant, as the case may be, and apply the net amount collected to the Rent
herein reserved, but no such collection shall be deemed a waiver of the
provisions set forth in the first paragraph of this Section 16.1, the acceptance
by Landlord of such assignee, subtenant or occupant, as the case may be, as a
tenant, or a release of Tenant from the future performance by Tenant of its
covenants, agreements or obligations contained in this Agreement.
(c) No subletting or assignment shall in any way impair the
continuing primary liability of Tenant hereunder (unless Landlord and Tenant
expressly otherwise agree that Tenant shall be released from all obligations
hereunder), and no consent to any subletting or assignment in a particular
instance shall be deemed to be a waiver of the prohibition set forth in this
Section 16.1. No assignment, subletting or occupancy shall affect any Permitted
Use. Any subletting, assignment or other transfer of Tenant's interest under
this Agreement in contravention of this Section 16.1 shall be voidable at
Landlord's option.
Section 16.2 Required Sublease Provisions.
Any sublease of all or any portion of the Leased Property entered into
on or after the date hereof in accordance with and subject to the provisions of
Section 16.3 shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and, except as provided
below, such subtenant shall, at Landlord's option, attorn to Landlord pursuant
to the then executory provisions of such sublease, except that neither Landlord
nor any Facility Mortgagee, as holder of a mortgage or as Landlord under this
Agreement, if such mortgagee succeeds to that position, shall (i) be liable for
any act or omission of Tenant under such sublease, (ii) be subject to any
credit, counterclaim, offset or defense which theretofore accrued to such
subtenant against Tenant, (iii) be bound by any previous prepayment of more than
one (1) Accounting Period, (iv) be bound by any covenant of Tenant to undertake
or complete any construction work on the Leased Property or any portion thereof,
(v) be required to account for any security deposit of the subtenant other than
any security deposit actually delivered to Landlord by Tenant, (vi) be bound by
any obligation to make any payment to such subtenant or grant any credits,
except for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person occupying any portion of the Leased
Property; and (c), in the event that such subtenant receives a written Notice
from Landlord or any Facility Mortgagee stating that an Event of Default has
occurred and is continuing, such subtenant shall thereafter be obligated to pay
all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct. All rentals received from such subtenant by
Landlord or the Facility Mortgagee, as the case may be, shall be credited
against the amounts owing by Tenant under this Agreement and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. An original
counterpart of each such sublease duly executed by Tenant and such subtenant
shall be delivered promptly to Landlord and Tenant shall remain liable for the
payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder. The provisions of
this Section 16.2 shall not be deemed a waiver of the provisions set forth in
Section 16.1(a).
Section 16.3 Permitted Sublease and Assignment.
Notwithstanding the foregoing, but subject to the provisions of Section
16.4 and any other express conditions or limitations set forth herein, Tenant
may, without Landlord's consent, sublease space at the Leased Property so long
as such subleases do not demise, in the aggregate, in excess of six hundred
(600) square feet of area.
Section 16.4 Sublease Limitation.
For so long as Landlord or any Affiliate as to Landlord shall seek to
qualify as a real estate investment trust, anything contained in this Agreement
to the contrary notwithstanding, Tenant shall not sublet the Leased Property on
any basis such that the rental to be paid by any sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of such sublessee, or (b) any other formula such that any
portion of such sublease rental would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto.
XVII. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
Section 17.1 Estoppel Certificates.
At any time and from time to time, upon not less than ten (10) Business
Days prior Notice by either party, the party receiving such Notice shall furnish
to the other a certificate certifying that this Agreement is unmodified and in
full force and effect (or that this Agreement is in full force and effect as
modified and setting forth the modifications), the date to which the Rent has
been paid, that to its knowledge no Default or an Event of Default by the other
party has occurred and is continuing or, if a Default or an Event of Default
shall exist, specifying in reasonable detail the nature thereof, and the steps
being taken to remedy the same, and such additional information as the
requesting party may reasonably request. If such additional information
reasonably requires more than ten (10) Business Days to provide, the party
furnishing such information shall be entitled to such additional period to
respond to such request as may be reasonably required under the circumstances.
Any such certificate furnished pursuant to this Section 17.1 may be relied upon
by the requesting party, its lenders and any prospective purchaser or mortgagee
of the Leased Property or the leasehold estate created hereby.
Section 17.2 Financial Statements.
17.2.1 Books of control and account shall be kept on the accrual
basis. Landlord may, at reasonable intervals during Tenant's normal business
hours examine, copy (including copying any such records contained in Software
other than records relating to current or former residents of the Retirement
Community to the extent such records must be kept confidential under Legal
Requirements), and audit such records. Within seventy-five (75) Days after the
end of each Fiscal Year, Tenant shall submit to Landlord a financial report in
reasonable detail summarizing the operations of the Retirement Community for
such Fiscal Year and, including a certificate of Landlord's chief accounting
officer certifying that such year-end statement is true and correct (the "Annual
Financial Report"). The parties shall, within thirty (30) Business Days after
the receipt of such statement, make any adjustments, by cash payment, needed
because of the final figures set forth in the Annual Financial Report, or send a
Notice of disputed items or matters in appropriate detail. Final adjustments, if
any, will be made at the time any disputed items or matters are resolved by the
parties. If Landlord desires, at its own expense, to audit, examine and/or
review, the Annual Financial Report and supporting records and/or certain
procedures at the Retirement Community, as may be agreed upon by Landlord and
Tenant, with respect to internal financial controls, accounting policies and
accounting procedures, or other procedures at the Retirement Community, Landlord
shall notify Tenant in writing within sixty (60) Days after receipt of such
statement of its intention to audit and/or review such procedures and begin such
audit and/or review no sooner than thirty (30) Days and no later than sixty (60)
Days after Tenant's receipt of such notice. Landlord shall complete such audit
and/or review within ninety (90) Days after commencement thereof. If Landlord
does not make such an audit and/or review, then such Annual Financial Report and
procedures shall be deemed to be conclusively accepted by Landlord as being
correct, and Landlord shall have no right thereafter, except in the event of
fraud by Tenant, to question or examine the same. If such review by Landlord
determines that the procedures specified above are not in compliance with the
terms of this Agreement, Landlord will provide Tenant with written notice of
such deficiency and Tenant shall remedy such deficiency. If any audit by
Landlord discloses an underpayment of any amounts to Landlord, Tenant shall
promptly pay Landlord such amounts found to be due, plus interest thereon (at
the Prime Rate plus one percentage point (1%) per annum) from the date such
amounts should originally have been paid. If, however, the audit discloses that
Landlord has received any amounts not due it, Landlord shall pay Tenant such
amounts, plus interest thereon (at the Prime Rate plus one percentage point (1%)
per annum) from the date such amounts should originally have been paid.
17.2.2 Within twenty-two (22) Days after the close of each
Accounting Period, Tenant shall deliver to Landlord (i) an interim accounting to
Owner ("Interim Report") showing gross revenues, operating expenses, operating
profit, and applications and distributions thereof, and (ii) a statement in
reasonable detail summarizing any and all contributions to, and expenditures
from, the FF&E Reserve.
Section 17.3 Annual Operating Projection.
At least thirty (30) Days prior to the beginning of each Fiscal Year,
Tenant shall submit to Landlord a draft projection (the "Draft Annual Operating
Projection") of the estimated financial results of the operation of the
Retirement Community during the next Fiscal Year. Such Draft Annual Operating
Projection shall be a narrative report including the estimated Total Facility
Revenues, Property Expenses and Operating Profits for the forthcoming Fiscal
Year for the Facility in comparison to the forecasted gross revenues, operating
expenses and operating profit for the current Fiscal Year, taking into account
the Retirement Community's market area. Such comparison will, each in a
reasonably itemized and detailed as well as summary form, include the estimated
percentage changes in such items for the forthcoming Fiscal Year compared to the
current Fiscal Year. In addition, the Draft Annual Operating Projection will
include, in spreadsheet format, the forecasted gross revenues, operating
expenses and operating profit for each Accounting Period of the forthcoming
Fiscal Year. Landlord shall have fifteen (15) Days after receipt of the Draft
Annual Operating Projection to review and approve such Projection. If Landlord
fails to provide any objection within such fifteen (15) Day period, the annual
operating projection as submitted by Tenant shall be deemed approved and shall
be herein referred as the "Annual Operating Projection." If Landlord disapproves
any category in the Draft Annual Operating Projection, Landlord shall provide
Tenant, in writing, with the specific reasons for its disapproval, by category,
within such fifteen (15) Day period. The parties will attempt to resolve in good
faith any objections by Landlord within twenty (20) Days following Tenant's
receipt of Landlord's disapproval. Notwithstanding the foregoing, Landlord shall
not be entitled to withhold its approval based on its objection to: (i) Tenant's
reasonable projections of either gross revenues or the components thereof; (ii)
projected costs and expenses that are "system charges" (that is, costs and
expenses that are generally uniform throughout Tenant's chain of retirement
communities, such as chain-wide marketing programs, employee wages, benefits and
other compensation programs); (iii) costs and expenses that are not within the
control of Landlord and Tenant, such as Impositions and the costs of utilities;
and (iv) increases in projected costs and expenses of operating the Retirement
Community, which increases are primarily caused by projected increases in gross
revenues. In the event that the parties are unable to resolve all or some of
Landlord's objections, such disputed objections shall be resolved by the Expert
and the Draft Annual Operating Projection as so resolved shall be herein
referred as the "Annual Operating Projection." Pending such Expert
determination, Tenant shall operate the Retirement Community with respect to
those categories that are in dispute based on the previous Fiscal Year's
approved Annual Operating Projection, adjusted in accordance with changes in the
GDP Deflator for the previous Fiscal Year and anticipated changes in gross
revenues. In preparing the Annual Operating Projection for each Fiscal Year,
Tenant's goal will be the maximization of the long-term operating profit of the
Retirement Community, in keeping with Legal Requirements, and the general
standards of the retirement industry for similar properties.
Tenant shall use its best efforts to adhere to the Annual Operating
Projection. It is understood, however, that the Annual Operating Projection is
only a projection by Tenant of estimated results and that various circumstances
such as, but not limited to, the costs of labor, material, services and
supplies, casualty, operation of law, or economic and market conditions may make
achievement of the Annual Operating Projection impracticable or not obtainable.
Subject to any Facility Mortgagee (other than Marriott International or
its Affiliates) entering into such confidentiality agreement with Tenant, as
Tenant may reasonably require, Landlord may at any time, and from time to time,
provide any Facility Mortgagee with copies of any of the foregoing statements.
XVIII. LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property at reasonable times of the day upon not less than
twenty-four (24) hours' Notice to Tenant, provided that any inspection by
Landlord or its representatives will not unreasonably interfere with Tenant's
use and operation of the Leased Property and further provided that in the event
of an emergency, as determined by Landlord in its reasonable discretion, prior
Notice shall not be necessary.
XIX. FACILITY MORTGAGES
Section 19.1 Landlord May Xxxxx Xxxx.
Upon Notice from Landlord to Tenant, Landlord may from time to time,
directly or indirectly, create or otherwise cause to exist any lien, encumbrance
or title retention agreement ("Encumbrance") upon the Leased Property, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing. Any Encumbrance upon the Leased Property
shall be non-recourse to the Tenant. The aggregate principal balance of all
Encumbrances upon the Leased Property shall be no greater than seventy-five
percent (75%) of the fair market value of the Retirement Community without the
prior written consent of Tenant. For the purposes hereof, the fair market value
of the Retirement Community shall mean the dollar amount resulting by
multiplying the excess of Total Facility Revenues over Property Expenses during
the twelve (12) full Accounting Periods immediately preceding the Accounting
Period in which the calculation is made by ten (10).
Section 19.2 Subordination of Lease.
Subject to Section 19.1 and this Section 19.2, upon Notice from
Landlord, Tenant shall execute and deliver an agreement, in form and substance
reasonably satisfactory to Landlord and Tenant, subordinating this Agreement to
any Encumbrance permitted pursuant to Section 19.1; provided, however, that such
subordination shall be on the express condition that the terms of this Agreement
shall be recognized by the mortgagee or holder of the deed of trust and any
purchaser of the Leased Property at any foreclosure sale (a "Successful
Purchaser") and that such mortgagee, holder or Successful Purchaser shall honor
and be bound by this Agreement and that, notwithstanding any default by Landlord
under such Encumbrance or any foreclosure thereof, Tenant's possession of the
Leased Property and rights and obligations under this Agreement shall not be
affected thereby and this Agreement shall not be terminated other than in
accordance with its terms. The foregoing agreements shall be binding on any
purchaser of the Leased Property at foreclosure. Any mortgage or deed of trust
to which this Agreement is, at the time referred to, subject and subordinate, is
herein called "Superior Mortgage" and the holder, trustee or beneficiary of a
Superior Mortgage is herein called "Superior Mortgagee". Tenant shall have no
obligations under any Superior Mortgage other than those expressly set forth in
this Section 19.2. If any Superior Mortgagee or the nominee or designee of any
Superior Mortgagee or any Successful Purchaser, shall succeed to the rights of
Landlord under this Agreement (any such person, "Successor Landlord"), whether
through possession or foreclosure action or delivery of a new lease or deed, or
otherwise, such Successor Landlord shall recognize Tenant's rights under this
Agreement as herein provided and Tenant shall attorn to and recognize the
Successor Landlord as Tenant's landlord under this Agreement and Tenant shall
promptly execute and deliver any instrument that such Successor Landlord may
reasonably request to evidence such attornment (provided that such instrument
does not alter the terms of this Agreement), whereupon, this Agreement shall
continue in full force and effect as a direct lease between the Successor
Landlord and Tenant upon all of the terms, conditions and covenants as are set
forth in this Agreement, except that the Successor Landlord (unless formerly the
landlord under this Agreement or its nominee or designee) shall not be (a)
liable in any way to Tenant for any act or omission, neglect or default on the
part of any prior Landlord under this Agreement, (b) responsible for any monies
owing by or on deposit with any prior Landlord to the credit of Tenant (except
to the extent actually paid or delivered to the Successor Landlord), (c) bound
by any modification of this Agreement subsequent to such Superior Mortgage, or
by any previous prepayment of Minimum Rent or Additional Rent for more than one
(1) month in advance of the date due hereunder, which was not approved in
writing by the Superior Mortgagee thereto, (d) liable to Tenant beyond the
Successor Landlord's interest in the Leased Property and the rents, income,
receipts, revenues, issues and profits issuing from the Leased Property, or (e)
required to remove any Person occupying the Leased Property or any part thereof,
except if such person claims by, through or under the Successor Landlord. Tenant
agrees at any time and from time to time to execute a suitable instrument in
confirmation of Tenant's agreement to attorn, as aforesaid and Landlord agrees
to provide Tenant with an instrument of nondisturbance and attornment from each
such Superior Mortgagee in form and substance reasonably satisfactory to Tenant.
Notwithstanding the foregoing, Landlord, any Successor Landlord and/or Superior
Mortgagee shall be liable to pay to Tenant any portions of insurance proceeds or
Awards received by the Landlord, Successor Landlord and/or Superior Mortgagee,
respectively, and required to be paid to Tenant or otherwise applied to the cost
of repair, restoration or rebuilding of the Leased Property pursuant to the
terms of this Agreement, and, as a condition to any mortgage, lien or lease in
respect of the Leased Property, and the subordination of this Agreement thereto,
the mortgagee, lienholder or lessor, as applicable, shall expressly agree, for
the benefit of Tenant, to make such payments, which agreement shall be embodied
in an instrument in form reasonably satisfactory to Tenant.
Section 19.3 Notices.
Subsequent to the receipt by Tenant of Notice from Landlord as to the
identity of any Facility Mortgagee (which Notice shall be accompanied by a copy
of the applicable Encumbrance and the address of such Facility Mortgagee), no
Notice from Tenant to Landlord as to any default by Landlord under this
Agreement shall be effective unless and until a copy of the same is given to
such Facility Mortgagee at the address set forth in the above described Notice,
and the curing of any of Landlord's defaults by such Facility Mortgagee shall be
treated as performance by Landlord.
XX. ADDITIONAL COVENANTS OF TENANT
Section 20.1 Conduct of Business.
Tenant 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 existence and
its rights and licenses necessary to conduct business and operate the Facility.
Section 20.2 Certain Debt Prohibited.
Tenant shall not incur any Indebtedness with respect to the Leased
Property except the following:
(a) Indebtedness of Tenant to Landlord under this Agreement;
(b) Indebtedness of Tenant in respect of loans, the proceeds of
which are used to pay amounts owed under this Agreement and which are by their
terms expressly subordinate to the payment and performance of Tenant's
obligations under this Agreement;
(c) Indebtedness of Tenant for Impositions, to the extent that
payment thereof shall not at the time be required to be made in accordance with
the provisions of Article VIII;
(d) Indebtedness of Tenant in respect of judgments or awards (i)
which have been in force for less than the applicable appeal period and in
respect of which execution thereof shall have been stayed pending such appeal or
review, or (ii) which are fully covered by insurance payable to Tenant, or (iii)
which are for an amount not in excess of $750,000 in the aggregate at any one
time outstanding and (x) which have been in force for not longer than the
applicable appeal period, so long as execution is not levied thereunder or (y)
in respect of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article VIII, and
in respect of which execution thereof shall have been stayed pending such appeal
or review;
(e) Unsecured borrowings of Tenant from its Affiliates which are
by their terms expressly subordinate to the payment and performance of Tenant's
obligations under this Agreement; or
(f) Indebtedness for purchase money financing and other
indebtedness incurred in the ordinary course of Tenant's business, including the
leasing of personal property.
Section 20.3 Expert Decisions.
Where this Agreement calls for a matter to be referred to arbitration
or an Expert for determination, the following provisions shall apply:
A. Unless specifically stated to the contrary, the use of the
Expert shall be the exclusive remedy of the parties and neither party shall
attempt to adjudicate any dispute in any other forum. The decision of the Expert
shall be final and binding on the parties and shall not be capable of challenge,
whether by arbitration, in court or otherwise;
B. Each party shall be entitled to make written submissions to the
Expert, and if a party makes any submission it shall also provide a copy to the
other party and the other party shall have the right to comment on such
submission. The parties shall make available to the Expert all books and records
relating to the issue in dispute and shall render to the Expert any assistance
requested of the parties. The costs of the Expert and the proceedings shall be
treated as Property Expense(s);
C. The Expert shall make its decision with respect to the matter
referred for determination by applying the standards applicable to first-class
continuing care retirement communities and determining whether the matter at
issue is necessary to satisfy such standards; and
D. The terms of engagement of the Expert shall include an
obligation on the part of the Expert to: (i) notify the parties in writing of
his decision within forty-five (45) Days from the date on which the Expert has
been selected (or such other period as the parties may agree or as set forth
herein); and (ii) establish a timetable for the making of submissions and
replies. Section 20.4 Distributions, Payments to Affiliates, Etc.
Tenant shall not declare, order, pay or make, directly or indirectly,
any Distributions of funds from Total Facility Revenues if, at the time of such
proposed action, or immediately after giving effect thereto, any Event of
Default with respect to the payment of Rent shall have occurred and be
continuing; provided, however, that Tenant may resume making such Distributions
if (i) Landlord shall not commence, within ninety (90) days after Notice by
Landlord to Tenant of the occurrence of any such Event of Default, to enforce
its rights and remedies arising on account of such Event of Default with respect
to the payment of Rent, and diligently pursue enforcement of such rights and
remedies thereafter, and (ii) no other Event of Default (i.e., an Event of
Default arising from a cause other than the non-payment of Rent) has occurred as
to which Landlord has commenced enforcing and is continuously and diligently
pursuing the enforcement of its rights and remedies arising on account of any
such Event of Default.
XXI. MISCELLANEOUS
Section 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 Applicable Laws, 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.
Section 21.2 No Waiver.
No failure by Landlord or Tenant to insist upon the strict performance
of any term hereof or to exercise any right, power or remedy consequent upon a
breach thereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. To the maximum extent permitted by law, no waiver of any
breach shall affect or alter this Agreement, which shall continue in full force
and effect with respect to any other then existing or subsequent breach.
Section 21.3 Remedies Cumulative.
To the maximum extent permitted by law, each legal, equitable or
contractual right, power and remedy of Landlord or Tenant, now or hereafter
provided either in this Agreement or by Applicable Laws 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 or Tenant
(as applicable) of any one or more of such rights, powers and remedies shall not
preclude the simultaneous or subsequent exercise by Landlord or Tenant of any or
all of such other rights, powers and remedies.
Section 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.
Section 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.
Section 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.
Section 21.7 Conveyance by Landlord.
If Landlord or any successor owner of all or any portion of the Leased
Property shall convey all or any portion of the Leased Property in accordance
with the terms of this Agreement (specifically including Article XV) other than
as security for a debt, and the grantee or transferee of such of the Leased
Property shall expressly assume all obligations of Landlord hereunder arising or
accruing from and after the date of such conveyance or transfer, Landlord or
such successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Landlord under this Agreement with respect
to such of the Leased Property arising or accruing from and after the date of
such conveyance or other transfer and all such future liabilities and
obligations shall thereupon be binding upon the new owner.
Section 21.8 Quiet Enjoyment.
Landlord covenants that, so long as Tenant is not in Default under this
Agreement, Tenant shall quietly hold, occupy, enjoy and manage the Retirement
Community throughout the Term hereof free from hindrance, ejection or
molestation by Landlord or any other party claiming under, through or by right
of Landlord. Landlord agrees to pay and discharge any payments and charges and,
at its expense, to prosecute all appropriate actions, judicial or otherwise,
necessary to assure such free and quiet occupation. Additionally, Landlord
covenants that the Title Encumbrances shall not materially and adversely affect
the Tenant's use and occupancy of the Retirement Community under the terms of
this Agreement.
Section 21.9 Memorandum of Lease.
Tenant shall not record this Agreement without obtaining the prior
written consent of Landlord. Tenant or Landlord shall promptly, upon the request
of the other party, enter into a short form memorandum of this Agreement, in
form suitable for recording under the laws of the State in which reference is
made to this Agreement and to such provisions herein that Landlord reasonably
deems acceptable to include in such memorandum. All costs and expenses of
recording such memorandum shall be payable by the party that records such
memorandum.
Section 21.10 Notices.
(a) Notices, statements and other communications to be given under
the terms of this Agreement shall be in writing and delivered by hand against
receipt or sent by certified or registered mail or Express Mail service, postage
prepaid, return receipt requested or by nationally utilized overnight delivery
service, addressed to the parties as follows:
(b) All such Notices shall be addressed as follows,
if to Landlord to:
CNL Retirement MA3 Pennsylvania, LP
c/o CNL Retirement Corp.
CNL Center at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Attn: Chief Operating Officer
Phone: (000) 000-0000
Fax : (000) 000-0000
with a copy to:
Lowndes Drosdick Xxxxxx Xxxxxx and Xxxx, P.A.
000 Xxxxx Xxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Tenant:
Sunrise Senior Living Services, Inc.
0000 Xxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with copy to:
Sunrise Senior Living Services, Inc.
0000 Xxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxx, General Counsel
Phone: (000) 000-0000
Fax: (000) 000-0000
with copy to:
Xxxxx & Xxxxxxx, L.L.P.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000
XxXxxx, Xxxxxxxx 00000
Attn: Xxx Xxxxxx, Esq.
Phone: (000) 000-0000
Fax: (000) 000-0000
or at such other address as is from time to time designated by the
party receiving the Notice. Any such Notice that is mailed in accordance
herewith shall be deemed received when delivery is received or refused, as the
case may be.
Section 21.11 Construction; Non-recourse.
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. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated except
by an instrument in writing signed by all the parties thereto. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns. 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 exercise of any rights of Tenant or Landlord under this Agreement. 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; provided,
however, that each party shall be required to give the other Notice of any such
surviving and unsatisfied obligations within one year after the expiration or
sooner termination of this Agreement. 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 or Tenant hereunder. Further, in the
event Landlord shall be in default under this Agreement, and if as a consequence
of such default, Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment against the right, title and interest of Landlord in
the Leased Property and the Collective Leased Properties or proceeds from the
sale of the Leased Property and/or the Collective Leased Properties.
Section 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. Headings in this Agreement are for
purposes of reference only and shall not limit or affect the meaning of the
provisions hereof.
Section 21.13 Applicable Law, Etc.
This Agreement shall be interpreted, construed, applied and enforced in
accordance with the laws of the State applicable to contracts between residents
of the State which are to be performed entirely within the State, regardless of
(i) where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State; or (vii) any combination of the
foregoing.
To the maximum extent permitted by Applicable Laws, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State as is provided by Applicable Laws; and the parties consent to the
jurisdiction of said court or courts located in the State and to service of
process by registered mail, return receipt requested, or by any other manner
provided by Applicable Laws.
Section 21.14 Right to Make Agreement.
Each party warrants, with respect to itself, that neither the execution
of this Agreement, nor the consummation of any transaction contemplated hereby,
shall violate any provision of any Applicable Laws, or any judgment, writ,
injunction, order or decree of any court or governmental authority having
jurisdiction over it; nor result in or constitute a breach or default under any
indenture, 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.
Section 21.15 Disclosure of Information.
(a) Any Proprietary Information obtained by Landlord with respect
to Tenant pursuant to the provisions of this Agreement shall be treated as
confidential, except that such information may be used, subject to
confidentiality safeguards mutually acceptable to Landlord and Tenant, in any
litigation between the parties and except further that, subject to the terms of
Section 22.16, Landlord may disclose such information to its prospective
lenders, provided that Landlord shall direct and obtain the agreement of such
lenders to maintain such information as confidential.
(b) The parties hereto agree that the matters set forth in this
Agreement and any revenue, expense, net profit, fee rates and occupancy
information provided by Tenant or any of the Affiliates of Tenant are strictly
confidential and each party will make every effort to ensure that the
information is not disclosed to any Person that is not an Affiliate as to any
party (including the press), without the prior written consent of the other
party, except as may be required by Applicable Laws and as may be reasonably
necessary to obtain licenses, permits and other public approvals necessary for
the refurbishment or operation of the Retirement Community, or, subject to the
restrictions of Section 22.15(c) relative to the contents of any Prospectus, in
connection with a Landlord financing, a sale of the Retirement Community, or a
sale of a controlling interest in Landlord.
(c) No reference to Tenant, or any of Tenant's Affiliates will be
made in any prospectus, private placement memorandum, offering circular or
offering documentation related thereto (collectively, the "Prospectus"), issued
by Landlord or any of its Affiliates, which is designed to interest potential
investors in the Retirement Community, unless Tenant has previously received a
copy of all such references and has approved in writing the use of such
references. No Prospectus shall include fee rate and occupancy data or revenue,
expense or net profit information pertaining to the Retirement Community.
Regardless of whether Tenant so receives a copy of the Prospectus or has
approved any references to Tenant or any of Tenant's Affiliates in the
Prospectus, neither Tenant nor Tenant's Affiliates will be deemed a sponsor of
the offering described in the Prospectus, nor will they have any responsibility
for the Prospectus, and the Prospectus will so state. Unless Tenant agrees in
advance, the Prospectus will not include any trademark, symbols, logos or
designs of Tenant, or any of Tenant's Affiliates. Landlord shall indemnify,
defend and hold Tenant and Tenant's Affiliates harmless from and against all
loss, costs, liability and damage (including reasonable attorneys' fees and
expenses, and all costs of litigation) arising out of any Prospectus or the
offering described therein; and this obligation of Landlord shall survive the
termination of this Agreement.
(d) The obligations of Tenant and Landlord contained in this
Section 22.15 shall survive the expiration or earlier termination of this
Agreement.
Section 21.16 Competing Facilities.
Neither this Agreement nor anything implied by the relationship
between Landlord and Tenant shall prohibit Tenant, from constructing, operating,
promoting, and/or authorizing others to construct, operate, or promote one or
more assisted living facilities, continuing care retirement communities, or any
other business operations of any type, at any location, including a location
proximate to the Land. Landlord acknowledges, accepts and agrees further that
Tenant and Tenant's Affiliates retain the right, from time to time, to construct
or operate, or both, or promote or acquire, or authorize or otherwise license
others to construct or operate, or both, or promote or acquire any assisted
living facilities or other business operations of any type whatsoever,
including, but not by way of limitation, those listed above, at any location
including one or more sites which may be adjacent, adjoining or proximate to the
Land, which business operations may be in direct competition with the Leased
Improvements and that any such exercise may adversely affect the operation of
the Leased Improvements.
Section 21.17 Facility Manager.
Tenant is expressly permitted to hire a third party to manage the
Facility on Tenant's behalf, provided that any such third party which is not an
Affiliate of Tenant shall be subject to Landlord's prior written approval, which
approval shall not be unreasonably withheld, conditioned or delayed. The hiring
of such a third party or Affiliate shall in no way limit, reduce or diminish
Tenant's responsibilities under this Lease, nor shall such an action create any
relationship, contractual or otherwise, between Landlord and such third party or
Affiliate.
[SIGNATURES BEGIN ON THE NEXT PAGE.]
IN WITNESS WHEREOF, the parties have executed this Lease Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
CNL RETIREMENT MA3 PENNSYLVANIA, LP, a Delaware
limited partnership
By: CNL Retirement MA3 GP Holding, LLC,
a Delaware limited liability company,
Its sole general partner
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx
Senior Vice President
TENANT:
MARRIOTT CONTINUING CARE, LLC,
a Delaware limited liability company
By: Marriott Senior Living Services, Inc., a
Delaware corporation, its sole member and
manager
By: /s/ Xxxxxx Xxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxx
-------------------------------------
Title: President
-------------------------------------
EXHIBIT "A"
Lease Agreement by and between CNL Retirement MA3 Virginia, LP, a Delaware
limited partnership and Marriott Continuing Care, LLC, a Delaware limited
liability company dated March 28, 2003 with respect to the Fairfax continuing
care community located at 0000 Xxxxxxx Xxxxx Xxxxxxx, Xx. Belvoir in Fairfax
County, Virginia.
EXHIBIT "B"
The Land
PREMISES "A"
ALL THAT CERTAIN lot or piece of ground, Situate in Haverford Township, Delaware
County, Pennsylvania, described in accordance with and shown on a certain Plan
#8748, Sheet 1, dated July 14, 1983 prepared by SMC Xxxxxx Inc., Consulting
Engineers and Land Surveyors, King of Prussia, Pennsylvania as follows, to wit:
BEGINNING at a spike set in the bed of Xxxxx Road a corner of land now or late
of Xxxxx and Xxxxx Xxxxxxxx; thence extending through the bed of Xxxxx Road the
following nine courses and distances: (1) South 54 degrees 26 minutes 59 seconds
East 314.75 feet to a point; (2) South 37 degrees 12 minutes 11 seconds East
crossing Xxxxx Road 252.73 feet to a corner of a stone wall; (3) South 49
degrees 56 minutes 19 seconds East recrossing Xxxxx Road 270.86 feet to a point;
(4) South 50 degrees 09 minutes 47 seconds East 332.50 feet to a point; (5)
South 51 degrees 04 minutes 54 seconds East 231.31 feet to a point; (6) South 52
degrees 33 minutes 17 seconds East 134.10 feet; (7) South 62 degrees 26 minutes
15 seconds East 260.25 feet to a point; (8) South 45 degrees 06 minutes 40
seconds East 237.37 feet to a point and (9) South 32 degrees 30 minutes 30
seconds East, 639.08 feet to a point in the Intersection of Darby and Marple
Roads; thence along the title line of Xxxxxx Road the following three courses
and distances: (1) South 74 degrees 31 minutes 06 seconds West 313.87 feet to a
spike found;(2) South 72 degrees 26 minutes 25 seconds West 746.21 feet to a
spike found; and (3) South 74 degrees 10 minutes 30 seconds West 294.13 feet to
a spike found; thence leaving Xxxxxx Road; North 55 degrees 33 minutes 15
seconds West 377.69 feet to an iron pin found on line with land now or late of
Haverford State Hospital; thence along said lands North 33 degrees 37 minutes 00
seconds East, 73.25 feet to a concrete monument found; thence still by same
North 70 degrees 37 minutes 30 seconds West 574.21 feet to an iron pin passing
over a concrete monument, 147.98 feet from the terminus of this line; still by
same, North 70 degrees 48 minutes 31 seconds West 819.77 feet to a stone found;
thence still by same; North 45 degrees 43 minutes 36 seconds 468.60 feet to a
point on line with lands of aforementioned Xxxxx and Xxxxx Xxxxxxxx; thence
along said land the following nine courses and distances: (1) North 47 degrees
36 minutes 31 seconds East 337.23 feet to a point; (2) South 44 degrees 07
minutes 34 seconds East 60.55 feet to an iron pin found on the Easterly side of
a certain stone wall; (3) along said wall North 34 degrees 07 minutes 31 seconds
East 13.79 feet to an iron pin found; (4) still along said wall, North 46
degrees 03 minutes 11 seconds East 109.16 feet to an iron pin found; (5) still
by same, North 53 degrees 27 minutes 31 seconds East 15.05 feet to an iron pin
found; (6) leaving said wall, North 15 degrees 30 minutes 51 seconds East,
210.55 feet to an iron pin found; (7) North 12 degrees 37 minutes 59 seconds
West 220.31 feet to a point; (8) North 10 degrees 37 minutes 01 seconds East
220.31 feet to a point; and (9) North 44 degrees 41 minutes 01 seconds East
240.73 feet to the point and place of BEGINNING.
PREMISES "B"
ALL THAT CERTAIN lot or parcel of land, Situated in the Township of Haverford,
County of Delaware and Commonwealth of Pennsylvania as shown on a Plan of Survey
and topography dated November 11, 1986, prepared by Xxxxxxxx Associates, Inc.,
Centre Square, Pennsylvania bounded and described as follows, to wit:
BEGINNING at a point in the centerline of Xxxxx Road (33' wide) widened to (50')
as per Pennsylvania Department of Highways, a corner of Haverford State
Hospital; thence extending along said centerline of Xxxxx Road South 64 degrees
27 minutes 00 seconds East a distance of 105.85 feet to a point in the same;
thence through the Southwesterly side of Xxxxx Road and along lands of Linden
Associates South 44 degrees 41 minutes 01 seconds West, a distance of 240.73
feet to a spike found; thence still along lands of Linden Associates the
following eight courses and distances: (1) South 10 degrees 37 minutes 01
seconds West a distance of 220.31 feet to a spike found; thence (2) South 12
degrees 37 minutes 59 seconds East a distance of 220.31 feet to an iron pin
found; thence (3) South 15 degrees 30 minutes 15 seconds West a distance of
210.55 feet to an iron pin found; thence (4) South 53 degrees 27 minutes 31
seconds West a distance of 15.05 feet to a point; thence (5) South 46 degrees 03
minutes 11 seconds West a distance of 103.06 feet to a point; thence (6) South
34 degrees 07 minutes 31 seconds West a distance of 13.79 feet to a point;
thence (7) North 44 degrees 07 minutes 34 seconds West a distance of 60.55 feet
to a point; thence (8) South 47 degrees 36 minutes 31 seconds West a distance of
337.23 feet to an iron pin found; a corner of the Haverford State Hospital;
thence along the said lands the three following courses and distances: (1) North
49 degrees 38 minutes 04 seconds West a distance of 442.77 feet to a stone
monument found; thence (2) North 45 degrees 37 minutes 00 seconds East a
distance of 630.45 feet to a stone monument found; thence (3) North 44 degrees
40 minutes 28 seconds East a distance of 567.42 feet to the first mentioned
point and place of BEGINNING.
BEING known as 0000 Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxxx.
BEING the same premises which Host Marriott Corporation, a Delaware corporation
by Quit Claim Deed dated 3/26/1998 and recorded 4/24/1998 in the County of
Delaware in Volume 1708 page 730, granted and conveyed unto Marriott Continuing
Care Inc., in fee.
EXHIBIT "C"
PROPERTY EXPENSES
"Property Expenses" shall mean any or all, as the context requires, of
the following:
1. All costs of operating the Retirement Community, including, without
limitation, the Base Tenant Fee, all salaries, wages, fringe benefits, payroll
taxes and other costs related to the Retirement Community's employees, Employee
Claims, all departmental expenses, administrative and general expenses, computer
services/support, the cost of advertising, marketing and business promotion for
the Retirement Community, heat, light, power, electricity, gas, telephone, cable
and other utilities, and routine repairs, maintenance and minor alterations
treated as Property Expenses under Section 5.1.1 of this Agreement;
2. The cost of Inventories and FAS consumed in the operation of the
Retirement Community;
3. A reasonable reserve for uncollectible accounts receivable;
4. All reasonable costs and fees of audit, legal, technical and other
independent professionals or other third parties who are retained by Tenant to
perform services required or permitted hereunder; provided Tenant will notify
Landlord at least thirty (30) days in advance of any proposed expenditure under
this paragraph 4 which is in excess of Twenty-Five Thousand Dollars ($25,000.00)
in any Fiscal Year (to be adjusted by the GDP Deflator) and which was not
specifically identified in the Annual Operating Projection; and Tenant shall
consider in good faith any comments which Landlord may have with respect to such
proposed expenditure; and provided, further, that if such expenditure involves
immediately-needed repair work to the Retirement Community or if immediate
action is otherwise required, the above-described requirement regarding thirty
(30) days prior Notice shall be modified to require whatever notice period is
reasonable under the circumstances;
5. The reasonable cost and expense of technical consultants and
operational experts who are employees of Tenant or an Affiliate of Tenant, and
who perform specialized services in connection with Retirement Community work;
provided, however, that the costs and expenses so incurred shall only be
Property Expenses to the extent such costs and expenses are reasonable and
competitively priced, as compared to similar work done by outside consultants or
experts; and provided, further, that Tenant will notify Landlord at least thirty
(30) days in advance of any proposed expenditure under this paragraph 5 which is
in excess of Twenty-Five Thousand Dollars ($25,000.00) in any Fiscal Year (to be
adjusted by GDP Deflator) and which is not specifically identified in the Annual
Operating Projection, and Tenant shall consider in good faith any comments which
Landlord may have with respect to such proposed expenditure; and provided,
further, that if such expenditure involves immediately-needed repair work to the
Retirement Community or if immediate action is otherwise required, the
above-described requirement regarding thirty (30) days prior Notice shall be
modified to require whatever notice period is reasonable under the
circumstances;
6. Costs and expenses for preparation of Medicare and Medicaid cost
reports and billing submissions, if applicable;
7. Insurance costs and expenses as provided in Article IX;
8. All Additional Charges;
9. [Intentionally Omitted]
10. Such other non-capital costs and expenses incurred by Tenant as are
reasonably necessary for the proper and efficient operation of the Retirement
Community; all as determined in accordance with GAAP;
11. Lease payments for any equipment leases entered into in the
ordinary course of operating the Retirement Community; provided, however, that
Tenant shall obtain Landlord's prior written approval, which approval shall not
be unreasonably withheld, conditioned or delayed, of any equipment lease in
which the rent and other amounts payable under such equipment lease is greater
than Twenty-Five Thousand Dollars ($25,000.00) in the aggregate over any Fiscal
Year or with a term in excess of one (1) year unless such equipment lease is set
forth in the Annual Operating Projection; and
12. All other amounts treated as Property Expenses under the provisions
of this Lease.
It is understood that the term "Property Expenses" shall not include:
(i) debt service payments pursuant to any Encumbrance or any other loans or
borrowings of Landlord; nor (ii) rental payments pursuant to any ground lease,
nor (iii) any other payments which are designated as Landlord's responsibility
under any of the provisions of this Agreement, all of which shall be paid by
Landlord from its own funds, and not from Total Facility Revenues nor from the
Reserve. Unless otherwise specifically set forth in this Agreement, all the
costs and expenses of the Retirement Community shall be Property Expenses.
EXHIBIT "D"
EXISTING TITLE ENCUMBRANCES
1. State, County and Municipal Taxes and other charges (including, but
not limited to, assessments by any State, County, Township, Municipality, School
District, Metropolitan District or Commission) for 2002 and subsequent years, a
lien not yet due and payable.
2. Water and Sewer Rents for 2002 and subsequent years, a lien not yet
due and payable.
3. Rights granted to Philadelphia Electric Company and Xxxx Telephone
Company as in Deed Book 1085, page 96.
4. Rights granted to Philadelphia Electric Company as in Volume 640,
page 2302.
5. Rights granted to Xxxx Telephone Company of Pennsylvania as in
Volume 875, pages 13, 18, 23, 25, 30 and 35.
6. Rights granted to Philadelphia Suburban Water Company as in Volume
849, page 458.
7. Terms and conditions contained in Sanitary Sewer Easement Agreement
as in Volume 1251, page 496.
8. Terms and conditions contained in Right of Entry Agreement to
UltraCom of Xxxxxxxxxx County, Inc., as in Volume 1595, page 1885.
9. Terms and conditions as disclosed on Plan as in Case 19, page 247.
10. That part of premises in the right of way of Xxxxx Road and Xxxxxx
Road is subject to public and private rights therein.
11. Grant and Vacation of Easements between Marriott Continuing Care,
Inc. and Philadelphia Suburban Water Company dated 6/9/1998 and recorded
12/28/1998 in Volume 1814 page 1300.
12. Grant and Vacation of Easements between Marriott Continuing Care,
Inc. and Philadelphia Suburban Water Company dated 6/9/1998 and recorded
12/28/1998 in Volume 1814 page 1313.
13. Rights of occupants of the continuing care retirement community
operated on the Leased Property as month-to-month occupants only.
14. All matters shown on a Survey prepared for The Xxxxxxxx Company,
Inc. dated November 14, 2002, last revised December 16, 2002, as Job No. 23832.
