EXHIBIT 10.7
LEASE AGREEMENT
by and between
FREEDOM PLAZA LIMITED PARTNERSHIP
an Arizona limited partnership
as "Landlord"
and
AMERICAN RETIREMENT CORPORATION
a Tennessee corporation
as "Tenant"
TABLE OF CONTENTS
1. TERM....................................................................3
1.1 TERM...........................................................3
1.2 RENEWAL TERMS..................................................3
2. RENT....................................................................3
2.1 ADDITIONAL CHARGES.............................................3
2.2 DIRECT PAYMENT TO GROUND LESSORS...............................4
2.3 PRORATION FOR PARTIAL PERIODS..................................4
2.4 ABSOLUTE NET LEASE.............................................4
2.5 DELINQUENT NOTE PAYMENT........................................5
3. TAXES, ASSESSMENTS AND OTHER CHARGES:...................................5
3.1 TENANT'S OBLIGATIONS...........................................5
3.2 PRORATION......................................................5
3.3 RIGHT TO PROTEST...............................................6
3.4 TAX BILLS......................................................6
3.5 OTHER CHARGES..................................................6
4. INSURANCE...............................................................6
4.1 REQUIRED COVERAGE..............................................6
4.2 NOTICE TO LANDLORD.............................................7
4.3 NAMED INSUREDS.................................................7
4.4 NOTICE OF CLAIMS...............................................7
5. USE, MAINTENANCE AND ALTERATION OF THE PREMISES.........................8
5.1 TENANT'S MAINTENANCE OBLIGATIONS...............................8
5.2 REGULATORY COMPLIANCE..........................................8
5.3 PERMITTED USE..................................................9
5.4 NO LIENS; PERMITTED CONTESTS...................................9
5.5 ALTERATIONS BY TENANT..........................................9
6. CONDITION AND TITLE OF PREMISES........................................10
6.1 CONDITION AND TITLE OF PREMISES...............................10
6.2 RIGHT OF FIRST REFUSAL TO PURCHASE PREMISES...................11
7. TENANT PERSONAL PROPERTY...............................................11
7.1 TENANT PERSONAL PROPERTY......................................11
7.2 REQUIREMENTS FOR TENANT PERSONAL PROPERTY.....................11
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8. REPRESENTATIONS, WARRANTIES AND COVENANTS..............................12
8.1 MUTUAL REPRESENTATIONS AND WARRANTIES.........................12
8.2 COVENANTS OF LANDLORD.........................................13
9. FINANCIAL REPORTS......................................................15
9.1 QUARTERLY STATEMENTS..........................................15
9.2 MONTHLY REPORTS...............................................15
9.3 ANNUAL STATEMENTS.............................................16
9.4 BUDGETS.......................................................16
9.5 REPORTS RECEIVED BY LANDLORD..................................20
9.6 AUDITED FINANCIAL STATEMENTS OF LANDLORD. ...................20
10. EVENTS OF DEFAULT; REMEDIES............................................20
10.1 EVENTS OF DEFAULT.............................................20
10.2 LANDLORD'S REMEDIES...........................................22
10.3 RECEIVERSHIP..................................................24
10.4 REMEDIES CUMULATIVE; NO WAIVER................................24
10.5 PERFORMANCE OF TENANT'S OBLIGATIONS BY LANDLORD...............25
10.6 TENANT'S RIGHT OF SETOFF......................................26
11. DAMAGE BY FIRE OR OTHER CASUALTY.......................................26
11.1 RECONSTRUCTION USING INSURANCE................................26
11.2 SURPLUS PROCEEDS..............................................26
11.3 NO RENT ABATEMENT.............................................26
11.4 END OF TERM...................................................26
12. CONDEMNATION...........................................................27
12.1 COMPLETE TAKING...............................................27
12.2 PARTIAL TAKING................................................27
12.3 LEASE REMAINS IN EFFECT.......................................28
13. PROVISIONS ON TERMINATION OF TERM......................................28
13.1 SURRENDER OF POSSESSION.......................................28
13.2 REMOVAL OF PERSONAL PROPERTY..................................28
13.3 MANAGEMENT OF PREMISES........................................29
13.4 ASSIGNMENT OF RESIDENCY AGREEMENTS............................31
13.5 CERTAIN AGREEMENTS RELATING TO THE NOTE.......................32
14. NOTICES AND DEMANDS....................................................32
15. RIGHT OF ENTRY; EXAMINATION OF RECORDS.................................33
16. QUIET ENJOYMENT........................................................33
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17. APPLICABLE LAW.........................................................34
18. HAZARDOUS MATERIALS....................................................34
18.1 HAZARDOUS MATERIAL COVENANTS..................................34
18.2 TENANT NOTICES TO LANDLORD....................................34
18.3 PARTICIPATION IN HAZARDOUS MATERIALS CLAIMS...................35
18.4 ENVIRONMENTAL ACTIVITIES......................................35
18.5 HAZARDOUS MATERIALS...........................................35
18.6 HAZARDOUS MATERIALS CLAIMS ...................................36
18.7 HAZARDOUS MATERIALS LAWS......................................36
19. ASSIGNMENT AND SUBLETTING..............................................36
19.1 ..............................................................37
19.2 ..............................................................38
20. INDEMNIFICATION........................................................38
20.1 ..............................................................38
20.2 ..............................................................38
21. TENANT AS PROVIDER; MLR DEPOSITS.......................................39
21.1 PROVIDER......................................................39
21.2 MLR DEPOSITS..................................................39
21.3 TENANT MLR DEPOSITS...........................................39
21.4 MLR INCOME....................................................39
22. EXISTING LOAN; REFINANCING INDEBTEDNESS................................40
22.1 ..............................................................40
22.2 ..............................................................40
22.3 ..............................................................41
23. HOLDING OVER...........................................................42
24. ESTOPPEL CERTIFICATES..................................................42
25. ATTORNEYS' FEES........................................................43
26. SEVERABILITY...........................................................43
27. COUNTERPARTS...........................................................43
28. BINDING EFFECT.........................................................43
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29. WAIVER AND SUBROGATION.................................................43
30. MEMORANDUM OF LEASE....................................................44
31. INCORPORATION OF RECITALS AND ATTACHMENTS..............................44
32. TITLES AND HEADINGS....................................................44
33. NATURE OF RELATIONSHIP; USURY SAVINGS CLAUSE...........................44
34. ENTIRE AGREEMENT.......................................................45
35. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS..................45
36. RIGHT TO RELY ON TENANT WITHOUT JOINDER OF LANDLORD....................45
37. INTERPRETATION, ETC....................................................45
37.1 ..............................................................45
37.2 ..............................................................45
37.3 ..............................................................46
38. .......................................................................46
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EXHIBITS
EXHIBIT A-1 - LEGAL DESCRIPTION OF PREMISES
EXHIBIT A-2 - LANDLORD PERSONAL PROPERTY
EXHIBIT A-3 - PERMITTED EXCEPTIONS
EXHIBIT B- APPRAISAL PROCEDURE
SCHEDULE 1- MINIMUM RENT
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LEASE AGREEMENT
THIS LEASE AGREEMENT ("LEASE") is made and entered into as of the 1st
day of April, 2002 by and between FREEDOM PLAZA LIMITED PARTNERSHIP, an Arizona
limited partnership ("LANDLORD"), and AMERICAN RETIREMENT CORPORATION, a
Tennessee corporation ("TENANT").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Ground Lease dated August 1, 1988, by
and between Plaza II Limited Partnership, an Arizona limited partnership ("PLAZA
II"), as lessor, and Landlord, as lessee, as amended by that certain Amendment
to Ground Lease dated August 1, 1988 by and between Plaza II and Landlord, as
further amended by that certain Amendment to Ground Lease effective September 1,
1992, by and between Plaza III Limited Partnership, an Arizona limited
partnership (successor in interest to Plaza II) ("FREEDOM PLAZA GROUND LESSOR"),
and Landlord, and as further amended by that certain Amendment to Ground Lease
dated January 31, 1996, by and between Freedom Plaza Ground Lessor and Landlord
(as amended, the "FREEDOM PLAZA GROUND LEASE"), Landlord has a long-term
leasehold interest (the "INDEPENDENT LIVING LEASEHOLD INTEREST") in and to that
certain real property located in Maricopa County, Arizona and more specifically
described in Exhibit "A-1" attached hereto, together with all improvements
thereon and all appurtenances thereto, presently used as a continuing care
retirement community known as "FREEDOM PLAZA";
WHEREAS, pursuant to that certain Ground Lease (as the same amended
from time to time, the "PLAZA DEL RIO GROUND LEASE"; the Freedom Plaza Ground
Lease and the Plaza del Rio Ground
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Lease sometimes referred to herein individually or collectively as the "GROUND
LEASE") dated 1998, by and between Sun Health Properties Leasing, an Arizona
corporation (the "PLAZA DEL RIO GROUND LESSOR"; the Freedom Plaza Ground Lessor
and the Plaza del Rio Ground Lessor sometimes referred to herein individually or
collectively as the "GROUND LESSOR"), Landlord has a long-term leasehold
interest (the "PLAZA DEL RIO LEASEHOLD INTEREST") in and to that certain real
property located in Maricopa County, Arizona and more specifically described in
Exhibit "A-1" attached hereto, together with all improvements thereon and all
appurtenances thereto, presently used as a skilled nursing facility known as
"PLAZA DEL RIO".
WHEREAS, Landlord owns the existing furniture, machinery, equipment,
appliances, fixtures, and other personal property currently used in connection
with the operation of Freedom Plaza and/or Plaza del Rio ("LANDLORD PERSONAL
PROPERTY"), which includes, without limitation, those items described in Exhibit
"A-2" attached hereto. The Freedom Plaza Leasehold Interest and the Plaza del
Rio Leasehold Interest and the Landlord Personal Property shall be collectively
referred to in this Lease as the "PREMISES"; and
WHEREAS, Landlord desires to lease the Premises to Tenant, and Tenant
desires to lease the Premises from Landlord.
NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein, Landlord hereby leases and lets unto Tenant the
Premises for the term and upon the conditions and provisions hereinafter set
forth.
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1. TERM.
1.1 TERM. The term of this Lease shall commence on April
1, 2002 (the "COMMENCEMENT Date") and shall end on July 13, 2018 (the "INITIAL
TERM") unless extended pursuant to Section 1.2 of this Lease or earlier
terminated in accordance with the provisions hereof. The Initial Term and all
Renewal Terms (as hereinafter defined) are referred to collectively as the
"TERM". (The 12 month period commencing on the first day of the first full month
of the Initial Term and each subsequent 12 month period shall be referred to
herein as a "LEASE YEAR".)
1.2 RENEWAL TERMS. The Term may be extended for two (2)
separate renewal terms (each a "RENEWAL TERM"), the first Renewal Term being for
a term of ten (10) years (which shall extend the Term through July 13, 2028),
and the second Renewal Term being for a term of five (5) years, five (5) months
and eighteen (18) days (which shall extend the Term through December 31, 2033),
upon the satisfaction of all of the following terms and conditions:
1.2.1 Not less than one hundred eighty (180) days
before the date on which the then current Term expires, Tenant shall
give Landlord written notice that Tenant desires to exercise its right
to extend the then current Term for one (1) Renewal Term.
1.2.2 All other provisions of this Lease shall remain
in full force and effect and shall continuously apply throughout the
Renewal Term(s).
2. RENT. During the Initial Term and, if applicable, all Renewal
Terms, minimum rent ("MINIMUM RENT") shall be paid by Tenant to Landlord monthly
in advance on the first business day of each month in the amounts set forth on
Schedule 1 attached hereto and incorporated herein.
2.1 ADDITIONAL CHARGES. Tenant will also pay, and
discharge as and when due, (a) all other amounts, liabilities, obligations and
taxes which Tenant assumes or agrees to pay under this
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Lease directly to the applicable taxing authority or other appropriate payee,
and (b) in the event of any failure on the part of Tenant to pay any of those
items referred to in clause (a) above, Tenant will also promptly pay and
discharge every fine, penalty, interest and cost which may be added for
non-payment or late payment of such items (such liabilities, charges, etc. being
referred to as "ADDITIONAL CHARGES"). Landlord shall have all rights, powers and
remedies provided in this Lease, by statute or otherwise, in the case of
non-payment of the Additional Charges, as well as the Minimum Rent. To the
extent that Tenant pays any Additional Charges to Landlord pursuant to any
requirement of this Lease, Tenant shall be relieved of its obligation to pay
such Additional Charges to the entity to which such Additional Charges would
otherwise be due.
2.2 DIRECT PAYMENT TO GROUND LESSORS. Tenant shall pay
any rent or additional charges due under the Ground Lease (the "GROUND LEASE
RENT") directly to the Ground Lessor(s) entitled thereto.
2.3 PRORATION FOR PARTIAL PERIODS. The Rent for any month
during the Term that begins or ends on other than the first or last calendar day
of a month shall be prorated based on actual days elapsed.
2.4 ABSOLUTE NET LEASE. All Rent payments shall be
absolutely net to the Landlord free of taxes (other than federal or state
income, or similar taxes calculated on the income, revenue or receipts of
Landlord), assessments, utility charges, operating expenses, refurnishings,
insurance premiums or any other charge or expense in connection with the
Premises. All expenses and charges in connection with the Premises (including
without limitation all expenses and charges due under the Ground Lease) whether
for upkeep, maintenance, repair, refurnishing, refurbishing,
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restoration, replacement, insurance premiums, real estate or other property
taxes, utilities and other operating or other charges of a like nature or
otherwise, shall be paid by Tenant.
2.5 DELINQUENT NOTE PAYMENT. Notwithstanding anything to
the contrary set forth herein, in the event Landlord shall fail to make any
payments of principal and/or interest under that certain Promissory Note (the
"NOTE") of even date herewith in the principal amount of $18,756,374 when due
(each a "DELINQUENT NOTE PAYMENT"), and so long as no Event of Default then
exists under this Lease, Tenant shall have the right to reduce the next monthly
installment of Minimum Rent by an amount equal to the Delinquent Note Payment.
The reduction in Minimum Rent set forth in this Section 2.5 shall not be
construed as a novation of the Note or as a waiver of the right of acceleration
thereunder or of the right of any holder thereafter to insist upon strict
compliance with the terms of the Note or to prevent the exercise of such right
of acceleration or any other right granted thereunder or by applicable laws
3. TAXES, ASSESSMENTS AND OTHER CHARGES:
3.1 TENANT'S OBLIGATIONS. Tenant agrees to pay and
discharge (including the filing of all required returns) any and all taxes,
including but not limited to real estate and personal property taxes and lease
or rent taxes (but excluding federal or state income, franchise, excise or
similar taxes calculated on the income, revenue, or receipts of Landlord), and
other assessments levied or assessed against the Premises or any interest
therein during the Term, prior to delinquency or imposition of any fine,
penalty, interest or other cost.
3.2 PRORATION. At the end of the Term, all such taxes and
assessments under Section 3.1 shall be prorated.
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3.3 RIGHT TO PROTEST. Tenant shall have the right, but
not the obligation, to protest the amount or payment of any real or personal
property taxes or assessments levied against the Premises, this Lease or the
Rent payable hereunder; provided that in the event of any protest by Tenant,
Landlord shall not incur any expense because of any such protest, Tenant shall
diligently and continuously prosecute any such protest and shall provide
security satisfactory to Landlord in connection with such protest.
3.4 TAX BILLS. Tenant shall endeavor to have all tax
bills relating to the Premises delivered directly to Tenant by the applicable
taxing authorities; provided, however, that Landlord shall promptly forward to
Tenant copies of all tax bills and payment receipts relating to the Premises
received by Landlord. Notwithstanding anything to the contrary herein, Landlord
shall be solely responsible for any fees, penalties or interest that accrue
solely as a result of Landlord's failure to promptly forward such copies.
3.5 OTHER CHARGES. Tenant agrees to pay and discharge,
prior to delinquency, all electricity, gas, garbage collection, cable
television, telephone, water, sewer, and other utilities costs and all other
charges, obligations or deposits assessed against the Premises during the Term.
4. INSURANCE.
4.1 REQUIRED COVERAGE. Tenant shall maintain insurance of
such kinds and amounts as Tenant and Tenant's affiliates maintain for similar
communities that they own or manage and as required pursuant to the provisions
of any Approved Loan Documents (as hereinafter defined). Notwithstanding the
foregoing, Tenant shall at all times maintain so-called "all-risk" casualty
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insurance, with reasonable deductibles, in an amount equal to the full insurable
value of the Premises (as determined by Tenant in its reasonable discretion).
4.2 NOTICE TO LANDLORD. At the commencement of the Term,
and, upon Landlord's request, promptly following each anniversary of the date of
this Lease, Tenant shall furnish Landlord with a schedule setting forth the
kinds and amounts of insurance Tenant intends to procure in connection with the
operation of the Premises, which schedule shall include, in addition to the
kinds and amounts of insurance required to be maintained pursuant to any
Approved Loan Documents, such other kinds and amounts of insurance as may be
required under the terms of this Lease.
4.3 NAMED INSUREDS. All policies of liability insurance
shall name the Landlord, Tenant and such other parties as may be required by the
provisions of any note, loan agreement or mortgage as the insured thereunder, as
their respective interests may appear. All policies of hazard insurance and
business interruption insurance shall include loss payment clauses in the form
required by any Approved Loan Documents. All insurance shall be obtained at the
Tenant's expense. The originals of all policies of insurance and duplicates
thereof shall be delivered to Landlord and to any lender, as Landlord shall
direct.
4.4 NOTICE OF CLAIMS. Landlord and Tenant each shall give
prompt notice to the other of any third party claims made against either or both
of them, and shall cooperate fully with each other and with any insurance
carrier to the end that all such claims will be properly investigated, defended
and adjusted.
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5. USE, MAINTENANCE AND ALTERATION OF THE PREMISES.
5.1 TENANT'S MAINTENANCE OBLIGATIONS.
5.1.1 Except as provided in Sections 11 and 12,
Tenant will keep and maintain the Premises in good appearance, repair
and condition. Tenant shall make or cause to be made all repairs,
interior and exterior, structural and nonstructural, ordinary and
extraordinary, foreseen and unforeseen, necessary to keep the Premises
in good order and condition, ordinary wear and tear excepted.
5.1.2 As part of Tenant's obligations under this
Section 5.1, Tenant shall maintain in good condition, repair and
replace all material items of personal property, ordinary wear and tear
excepted, consistent with prudent business practices.
5.2 REGULATORY COMPLIANCE.
5.2.1 Tenant shall comply in all material respects
with any federal, state and local licensing and other laws and
regulations applicable to the continuing care retirement community on
the Premises (the "RETIREMENT CARE FACILITIES"). Tenant shall maintain,
subject to all applicable notice or cure periods or procedures, all
licenses, certificates, permits and approvals necessary for the
operation of the Retirement Care Facilities issued by the State of
Arizona or any other governmental authority having jurisdiction over
the Retirement Care Facilities. Neither Landlord nor Tenant shall
commit any act or omission that would in any way violate such
compliance.
5.2.2 During the Term, all inspection fees, costs and
charges associated with a change of any licensure or certification
shall be borne solely by Tenant.
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5.3 PERMITTED USE. Tenant shall use and occupy the
Premises during the Term primarily as a facility for senior housing, retirement
housing, independent living, assisted living, skilled and intermediate nursing,
subacute care, Alzheimer's care, and/or related or ancillary uses (the
"PERMITTED USE").
5.4 NO LIENS; PERMITTED CONTESTS. Except as contemplated
by Section 22 hereof, Tenant shall not cause or permit any liens, levies or
attachments to be placed or assessed against Landlord's interest in the Premises
for any reason. However, Tenant shall be permitted in good faith and at its
expense to contest the existence, amount or validity of any lien upon the
Premises by appropriate proceedings sufficient to prevent the collection or
other realization of the lien or claim so contested, as well as the sale,
forfeiture or loss of any of the Premises. Tenant shall provide Landlord with
security satisfactory to Landlord in Landlord's reasonable judgment to assure
the foregoing if the amount in dispute exceeds $150,000. Each contest permitted
by this Section 5.4 shall be promptly and diligently prosecuted to a final
conclusion by Tenant.
5.5 ALTERATIONS BY TENANT. Tenant shall have the right of
altering, improving, replacing, modifying or expanding the facilities, equipment
or appliances in the Premises from time to time as it may determine in its
discretion; provided, however, that any structural alteration or modification to
the Premises that materially alters or changes the character or use of any
material portion of the improvements comprising the Premises shall require the
prior written consent of the Landlord, which consent shall not be unreasonably
withheld, conditioned, or delayed. The cost of all alterations, improvements,
replacements, modifications, expansions or other purchases covered by this
Section 5.5 shall be borne solely and exclusively by Tenant and shall
immediately become a part
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of the Premises and be subject to the terms and conditions of this Lease. All
work performed in connection therewith shall be done in a good and workmanlike
manner and in material compliance with all existing codes and regulations
pertaining to the Premises and shall comply with the requirements of insurance
policies required under this Lease. In the event any material item of the
Premises has become inadequate, obsolete or worn out or requires replacement (by
direction of any regulatory body or otherwise), Tenant shall remove such item(s)
and exchange or replace the same at Tenant's sole cost and the same shall become
part of the Premises.
6. CONDITION AND TITLE OF PREMISES.
6.1 CONDITION AND TITLE OF PREMISES. Tenant accepts the
Premises on an "AS IS, WHERE IS, WITH ALL FAULTS" basis and will assume all
responsibility and cost for the correction of any observed or unobserved
deficiencies or violations. In making its decision to enter into this Lease,
Tenant has not relied on any representations or warranties, express or implied,
of any kind from Landlord. Notwithstanding any other provision of this Lease to
the contrary, Tenant accepts the Premises in their present condition, AS IS,
WHERE IS, WITH ALL FAULTS, and without any representations or warranties
whatsoever, express or implied, including, without limitation, any express or
implied representations or warranties as to the fitness, use, suitability, or
condition of the Premises. Tenant hereby represents and warrants to Landlord
that Tenant is thoroughly familiar with the Premises and the condition thereof,
that Tenant is relying on Tenant's own personal knowledge of the condition of
the Premises, that neither Landlord nor any person or entity acting or allegedly
acting for or on behalf of Landlord has made any representations, warranties,
agreements, statements, or expressions of opinions in any way or manner
whatsoever
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related to the condition of the Premises. Tenant acknowledges that title to the
Premises is subject to the encumbrances and other exceptions to title set forth
more fully on Exhibit "A-3" (the "PERMITTED EXCEPTIONS").
6.2 RIGHT OF FIRST REFUSAL TO PURCHASE PREMISES.
Intentionally Omitted.
7. TENANT PERSONAL PROPERTY.
7.1 TENANT PERSONAL PROPERTY. Tenant shall install,
place, and use on the Premises such fixtures, furniture, equipment, inventory
and other personal property in addition to Landlord Personal Property as Tenant
may, from time to time, deem necessary or useful to operate the Premises for its
permitted purposes. All fixtures, furniture, equipment, inventory, and other
personal property installed, placed, or used on the Premises which is owned by
Tenant or leased by Tenant from third parties is hereinafter referred to as
"TENANT PERSONAL PROPERTY."
7.2 REQUIREMENTS FOR TENANT PERSONAL PROPERTY. Tenant
shall comply with all of the following requirements in connection with Tenant
Personal Property:
7.2.1 Tenant shall, at Tenant's sole cost and
expense, maintain, repair, and replace Tenant Personal Property;
7.2.2 Tenant shall, at Tenant's sole cost and
expense, keep Tenant Personal Property insured against loss or damage
by fire, vandalism and malicious mischief, and other physical loss
perils commonly covered by "all risk" insurance. Tenant shall use the
proceeds for any such policy for the repair and replacement of Tenant
Personal Property. The insurance shall meet the requirements of Section
4.1.
7.2.3 Tenant shall pay all taxes applicable to Tenant
Personal Property.
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7.2.4 Unless an Event of Default has occurred, Tenant
may remove Tenant Personal Property from the Premises from time to time
provided that (i) the items removed are not required to operate the
Premises for the Permitted Use hereunder (unless such items are being
replaced by Tenant); and (ii) Tenant repairs any damage to the Premises
resulting from the removal of Tenant Personal Property.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS.
8.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Landlord and
Tenant do hereby each for itself represent and warrant to each other as follows:
8.1.1 DUE AUTHORIZATION AND EXECUTION. This Lease and
all agreements, instruments and documents executed or to be executed in
connection herewith by either Landlord or Tenant were duly authorized
and shall be binding upon the party that executed and delivered the
same.
8.1.2 DUE ORGANIZATION. Landlord and Tenant are duly
organized, validly existing and in good standing under the laws of the
State of their respective formations and are duly authorized and
qualified to do all things required of the applicable party under this
Lease within the State of Arizona.
8.1.3 NO BREACH OF OTHER AGREEMENTS. Neither this
Lease nor any agreement, document or instrument executed or to be
executed in connection herewith by either Landlord or Tenant, violates
the terms of any other agreement to which either Landlord or Tenant is
a party where such violation would have a material adverse effect.
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8.2 COVENANTS OF LANDLORD. Landlord hereby makes the
following covenants and agreements:
8.2.1 NO CONVEYANCE. During the Term, the Premises
will not be sold, transferred, encumbered or conveyed by Landlord, nor
shall Landlord permit the sale, transfer, encumbrance, pledge,
hypothecation or conveyance of any interest in Landlord or any interest
in any equity holder in Landlord, without, in each instance, Tenant's
prior written consent, which consent shall not be unreasonably
withheld. Without limiting the foregoing, any such sale, transfer,
encumbrance, pledge, hypothecation or conveyance shall be made
expressly subject to the terms and provisions of this Lease. Landlord
shall not sell, transfer, take, remove or convey any assets or items or
personal property associated with, or comprising any portion of, the
Premises, or associated or related to, the Premises without first
obtaining the prior written consent of Tenant, which shall be granted
or denied in Tenant's sole discretion.
8.2.2 NO INDEPENDENT LANDLORD ACTIONS. For so long as
Tenant is in compliance with the terms of this Lease, Landlord shall
take no action with respect to any aspect of the business or operation
of the Premises without Tenant's prior written consent, which may be
granted or denied by Tenant in its sole discretion. Neither party shall
take any action that constitutes, or could constitute or give rise to,
a breach under any Approved Loan Document or any other agreement that
is material to the Premises.
8.2.3 NO INCURRENCE OF INDEBTEDNESS. Landlord will
not incur any indebtedness, obligation or liability, directly or
indirectly, that is secured or to be secured by
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all or a portion of the Premises, without the prior written consent of
Tenant, which may be granted or denied in Tenant's sole discretion.
8.2.4 NO OTHER ACTIVITIES. Landlord will not engage
in any business activity other than those activities required to own
the Premises subject to the provisions of this Lease and performance of
its obligations hereunder.
8.2.5 TAX ACCOUNTING POLICIES. Landlord will not
change any federal or state tax accounting policies without Tenant's
prior written consent, which may be granted or denied in Tenant's sole
discretion.
8.2.6 COOPERATION. Landlord shall cooperate with
Tenant in good faith with respect to all aspects of the operation of
the Premises.
8.2.7 PERMITTED EXCEPTIONS. There are no liens or
encumbrances affecting the Premises, other than the Permitted
Exceptions, and Landlord shall not allow any liens or encumbrances to
affect the Premises other than the Permitted Exceptions.
8.2.8 RESIDENCY AGREEMENTS; LANDLORD'S SUBORDINATION.
As used in this Lease, "RESIDENCY AGREEMENTS" shall mean all residency
agreements, lifecare contracts, service agreements, occupancy
agreements, leases or similar agreements with residents, tenants or
occupants, of any unit or portion of the Premises, whether now or
hereafter existing. Landlord has assigned to Tenant all Residency
Agreements existing on the date of this Lease, and Tenant has assumed
Landlord's obligations thereunder, all pursuant to the Assignment and
Assumption Agreement of even date herewith (the "ASSIGNMENT AND
ASSUMPTION AGREEMENT"). During the term of this Lease, Tenant shall
have the right to enter
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into Residency Agreements with tenants, residents or occupants of the
Premises on such terms as Tenant shall deem advisable or desirable in
Tenant's sole discretion and without the consent of Landlord. All of
Landlord's right, title and interest in the Premises (including,
without limitation, Landlord's reversion interest in the Premises)
shall automatically be subordinate to the rights of residents, tenants
and occupants under the Residency Agreements and Landlord shall
recognize the rights of, and shall not disturb, the residents, tenants
and occupants under the Residency Agreements before and after
termination of this Lease. At the request of any such resident, tenant
or occupant, Landlord shall deliver satisfactory evidence that Landlord
has so subordinated all of its right, title and interest in the
Premises. The residents under the Residency Agreements are express,
intended third-party beneficiaries of the provisions of this Section
8.2.8.
9. FINANCIAL REPORTS.
9.1 QUARTERLY STATEMENTS. On or before the twenty-fifth
(25th) day after the end of each calendar quarter, Tenant shall deliver to
Landlord, and to any persons designated by Landlord, a balance sheet of the
Premises as of the end of such quarter, and a statement of income and a
statement of changes in cash flows and capital accounts of the Premises for such
quarter and for the portion of the operating year ended on the last day of such
quarter.
9.2 MONTHLY REPORTS. Tenant shall deliver to the Landlord
monthly a written summary of results as reasonably necessary to inform Landlord
of the status of the affairs of the Premises and of the status and resolution of
any written, material complaints received by Tenant from
15
residents of the Premises, the Department (as hereinafter defined) or any other
governmental authorities having jurisdiction over the Premises.
9.3 ANNUAL STATEMENTS. Tenant shall deliver to Landlord,
and to any persons designated by Landlord, within three (3) months after
the end of each operating year, a balance sheet of the Premises as of
the end of such year, and a statement of income and a statement of
changes in cash flows and capital accounts for such year, in form
reasonably satisfactory to Landlord. Landlord may, at Landlord's
expense, request an audited financial statement prepared by certified
public accountants designated by Landlord and approved by Tenant. Tenant
shall prepare and timely submit for Landlord's approval the annual
report (the "ANNUAL REPORT") to be submitted to the Arizona Insurance
Department (the "DEPARTMENT") and any reports required in connection
with the Existing Loan (as hereinafter defined) or Refinancing
Indebtedness (as hereinafter defined).
9.4 BUDGETS.
9.4.1 Upon Landlord's request, not more than 60 days
prior to commencement of each full fiscal year during the term of this
Lease (commencing with fiscal year 2003), Tenant shall submit to
Landlord, for Landlord's approval in accordance with the standards set
forth below, a proposed annual operating budget for the Premises (the
"ANNUAL BUDGET"), which Annual Budget shall include estimated revenues,
operating expenses, capital expenditures and any proposed new
indebtedness for the ensuing fiscal year. Tenant may revise the Annual
Budget from time to time to reflect any unanticipated items of revenue
or expense or any unanticipated or other unforeseen event or
circumstance. Any such revision shall be
16
submitted to Landlord for approval based upon the standards set forth
below. Tenant may reallocate all or any portion of any amount budgeted
with respect to any item(s) in the Annual Budget to another item(s)
budgeted therein provided that the aggregate expenditures in the Annual
Budget are not increased by more than ten percent (10%) during any
fiscal year. Upon the request of Landlord, Tenant shall provide
Landlord with the data and information utilized in preparing the Annual
Budget (or any revisions thereto) to the extent reasonably necessary to
allow Landlord to evaluate the proposed Annual Budget (or revisions
thereto).
9.4.2 Tenant agrees that Tenant will establish an appropriate
rate structure (in compliance with any required regulatory approvals)
and/or secure financing or capital through other prudent means set
forth in the Annual Budget (or revisions thereto) to provide sufficient
funds for the maintenance and operation of the Premises as a "first
class" community and in accordance with the terms of this Lease.
9.4.3 Tenant shall not be deemed to have made, and Tenant
specifically disclaims, any assurance, guarantee, warranty or
representation whatsoever in connection with the Annual Budget, any
revision thereto, or with respect to any item or matter shown or
reflected therein, including (without limitation) any guaranty or
assurance that actual results or performance will be consistent with
any Annual Budget. Landlord acknowledges that the Annual Budget
(including revisions thereto)
17
and all estimates and projections furnished in connection therewith or
reflected therein are intended only to be reasonable estimates based on
Tenant's professional judgment at the time of preparation, and that
actual results will differ. Under no circumstance shall a difference
between actual results and those projected or forecast in an Annual
Budget (or any revision thereto) result in an Event of Default
hereunder or give rise to a cause of action by Landlord against Tenant.
9.4.4 Any approval of Landlord required under this Section 9.4
shall not be unreasonably withheld, conditioned or delayed, and shall
be deemed given unless a specific written objection (including a
detailed explanation of the reasons underlying such objection) is
delivered by Landlord to Tenant within thirty (30) days after
submission of the proposed Annual Budget or revisions thereto, as the
case may be. Notwithstanding anything herein to the contrary, Landlord
may disapprove any Annual Budget (or revision thereto) only if Landlord
reasonably and in good faith determines that (i) the operating plans
and assumptions underlying such Annual Budget are materially
detrimental to the long-term financial viability of the Retirement Care
Facilities, and (ii) Tenant does not have the financial resources
necessary to satisfy its obligations under this Lease as and when they
come due.
9.4.5 Neither Landlord's disapproval or objection to any
proposed Annual Budget (or revision thereto) or any dispute relating to
matters referred to in this Section 9.4 shall under any circumstances
be deemed to be an Event of Default
18
under this Lease. In the event Landlord shall disapprove any proposed
Annual Budget (or revision thereto), or in the event of a dispute with
respect to the matter referred to in this Section 9.4, and Landlord and
Tenant are unable to resolve the disputed matters submitted by Landlord
within fifteen (15) days, then such disputed or objectionable matters
shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. Any such arbitration shall be
conducted in Phoenix, Arizona. Until such time as Landlord and Tenant
are able to resolve the disputed or objectionable matters, through
arbitration or otherwise, the aggregate amount of expenses reflected in
the Annual Budget for the preceding fiscal year, plus or minus, at
Tenant's discretion, the greater of (x) ten percent (10%) thereof or
(y) the increase in the cost of living from the first day of the
preceding fiscal year based upon the Consumer Price Index - United
States (1982=100), Medical Costs, published by the bureau of Labor
Statistics of the United States Department of Labor, shall be the
amount of expenses authorized by the Annual Budget in effect until such
time as a new Annual Budget has been approved by Landlord.
9.4.6 Notwithstanding anything to the contrary herein,
Landlord's approval of any Annual Budget (or revision thereto) shall
not be required if the Premises had an actual debt service coverage
ratio of 1.6 to 1.0 for the previous fiscal year and the
19
Premises are reasonably projected to have a debt service coverage ratio
of 1.6 to 1.0 for the current fiscal year.
9.5 REPORTS RECEIVED BY LANDLORD. Landlord shall within
five (5) days of receipt thereof deliver to the Tenant all federal, state and
local licensing, regulatory, reimbursement or other governmental reports
received by Landlord as to the Premises or any portion thereof, and all written
complaints received by Landlord from residents of the Premises.
9.6 AUDITED FINANCIAL STATEMENTS OF LANDLORD. For each
fiscal year of Landlord during the Term of this Lease (which shall be the
calendar year), Landlord shall prepare annual audited financial statements of
Landlord, and shall timely deliver such statements to Tenant to be filed by
Tenant as a supplement to the Annual Report. So long as Landlord is in
compliance with this provisions of this Lease, (a) the cost of such audit shall
be paid by Tenant and (b) Tenant shall, with all reasonable assitance of
Landlord, maintain the books and records of Landlord to the extent reasonably
practicable based upon Tenant's knowledge of Landlord's interest in the
Premises.
10. EVENTS OF DEFAULT; REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an event of default on the part of Tenant hereunder
("EVENT OF DEFAULT"):
10.1.1 The failure to pay within ten (10) calendar
days of the date when due any Minimum Rent;
10.1.2 The appointment of a receiver, trustee, or
liquidator for Tenant, or any of the property of Tenant, if within ten
(10) business days of such appointment Tenant does
20
not inform Landlord in writing that Tenant intends to cause such
appointment to be discharged or Tenant does not thereafter diligently
prosecute such discharge to completion within one hundred and twenty
(120) days after the date of such appointment;
10.1.3 The filing by Tenant of a voluntary petition
under any federal bankruptcy law or under the law of any state to be
adjudicated as bankrupt or for any arrangement or other debtor's
relief, or in the alternative, if any such petition is involuntarily
filed against Tenant by any other party and Tenant does not within ten
(10) business days of any such filing inform Landlord in writing of the
intent by Tenant to cause such petition to be dismissed, if Tenant does
not thereafter diligently prosecute such dismissal, or if such filing
is not dismissed within one hundred and twenty (120) days after filing
thereof;
10.1.4 The failure to make any payment required under
the Ground Lease or under the Existing Loan, subject in each case to
all applicable grace and/or notice and cure periods or procedures;
10.1.5 The failure to make any monetary payment
required by Tenant under this Lease not covered in Section 10.1.1 or
Section 10.1.4 or the failure to perform or comply in any material
respect with any other term or provision of this Lease not requiring
the payment of money, or the breach of any representation or warranty
of Tenant in this Lease; provided, however, if the default described in
this Section 10.1.5 is curable it shall be deemed cured, if within
thirty (30) business days of Tenant's receipt of a notice of default
from Landlord, Tenant cures such default; provided, further, that if
such default cannot with due
21
diligence be cured within a period of thirty (30) days because of the
nature of the default or delays beyond the control of Tenant, then such
default shall not constitute an Event of Default if Tenant uses its
best efforts to cure such default by promptly commencing and diligently
pursuing such cure to the completion thereof;
10.1.6 In the event that any resident or former
resident does not timely receive any refund of entry fees pursuant to
the terms of any applicable Residency Agreement (an "ENTRY FEE REFUND")
that is due during the Term of this Lease, and Tenant does not promptly
make such Entry Fee Refund after receiving notice of such failure;
10.1.7 If Tenant shall vacate, abandon or otherwise
cease to operate the Premises for a period of twenty-four (24)
consecutive hours or shall notify Landlord that Tenant intends to
vacate, abandon or cease to transact business from and upon the
Premises (a "VOLUNTARY ABANDONMENT"); and
10.1.8 If the Department initiates proceedings to
assume control over Plaza del Rio and Freedom Plaza, and any such
proceeding is not dismissed or stayed within ninety (90) days of
commencement of such proceeding.
10.2 LANDLORD'S REMEDIES. Upon the occurrence of an Event
of Default and during the continuance thereof, Landlord may exercise all rights
and remedies under this Lease and the laws of the State of Arizona available to
a lessor of real and personal property in the event of a default by its lessee.
Without limiting the foregoing, Landlord shall have the right to do any of the
following:
10.2.1 Xxx for the specific performance of any
covenant of Tenant under this Lease as to which Tenant is in breach;
22
10.2.2 Upon compliance with the requirements of
applicable law and to the extent allowed thereunder, Landlord may do
any of the following: enter upon the Premises, terminate this Lease,
dispossess Tenant from the Premises and/or collect money damages by
reason of Tenant's breach, including without limitation all rent which
would have accrued after such termination and all obligations and
liabilities of Tenant under this Lease which survive the termination of
the Term;
10.2.3 Elect to leave this Lease in place and xxx for
rent and/or other money damages as the same come due;
10.2.4 Before or after repossession of the Premises
pursuant to Section 10.2.2, and whether or not this Lease has been
terminated, Landlord shall have the right (but shall be under no
obligation except to the extent required by applicable law) to relet
any portion of the Premises to such tenant or tenants, for such term or
terms (which may be greater or less than the remaining balance of the
Term), for such rent, or such conditions (which may include concessions
or free rent) and for such uses, as Landlord, in its absolute
discretion, may determine, and Landlord may collect and receive any
rents payable by reason of such reletting. Tenant agrees to pay
Landlord, immediately upon demand, all reasonable expenses incurred by
Landlord in obtaining possession and in reletting any of the Premises,
including fees, commissions and costs of attorneys, architects, agents
and brokers;
10.2.5 If the Event of Default shall be or include a
Voluntary Abandonment,
23
Landlord may, in addition to any other remedy authorized or permitted
herein or by applicable law, either directly or acting by and through a
duly appointed Receiver, enter upon and take possession of the Premises
without terminating this Lease and thereupon and thereafter, Section
8.2.2 hereof notwithstanding, conduct and operate the business and
operations of the Premises on behalf of and for the account of Tenant,
and for such purposes Tenant shall and does hereby designate,
constitute and appoint Landlord and/or such Receiver, as Tenant's true
and lawful attorney in fact, which appointment shall conclusively be
deemed coupled with an interest, and which appointment shall not be
revocable prior to the expiration of a period of one (1) year from and
after the occurrence of such Event of Default.
10.3 RECEIVERSHIP. Tenant acknowledges that one of the
rights and remedies available to Landlord under applicable law is to secure a
court-appointed receiver to take possession of the Premises or any portion
thereof, to collect the rents, issues, profits and income of the Premises or any
portion thereof, and to manage the operation of the Premises or any portion
thereof. The receiver shall be entitled to a reasonable fee for its services as
a receiver. All such fees and other expenses of the receivership estate shall be
added to the monthly rent due to Landlord under this Lease.
10.4 REMEDIES CUMULATIVE; NO WAIVER. No right or remedy
herein conferred upon or reserved to Landlord is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No failure of Landlord to insist at any time
24
upon the strict performance of any provision of this Lease or to exercise any
option, right, power or remedy contained in this Lease shall be construed as a
waiver, modification or relinquishment thereof as to any similar or different
breach (future or otherwise) by Tenant. A receipt by Landlord of any rent or
other sum due hereunder with knowledge of the breach of any provision contained
in this Lease shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been made unless
expressed in a writing signed by Landlord.
10.5 PERFORMANCE OF TENANT'S OBLIGATIONS BY LANDLORD. If
Tenant at any time after applicable notice and cure periods shall fail to make
any payment or perform any act on its part required to be made or performed
under this Lease, then Landlord may, without waiving or releasing Tenant from
any obligations or default of Tenant hereunder, make any such payment or perform
any such act for the account and at the expense of Tenant, and may enter upon
the Premises for the purpose of taking all such action thereon as may be
reasonably necessary therefor. No such entry shall be deemed an eviction of
Tenant. All reasonable sums so paid by Landlord and all necessary and incidental
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred in connection with the performance of any such act by
Landlord, together with interest at the rate of the Prime Rate as reported daily
by the Wall Street Journal plus 5% (or if said interest rate is violative of any
applicable statute or law, then the maximum interest rate allowable) from the
date of the making of such payment or the incurring of such costs and expenses
by Landlord, shall be payable by Tenant to Landlord on demand.
10.6 TENANT'S RIGHT OF SETOFF. In addition to any other
right or remedy that Tenant
25
may have at law, equity or otherwise, Tenant shall have the express right to
offset against Rent or other sums due hereunder any amount(s) to which Tenant is
due, directly or indirectly, as a result of Landlord's breach of any provision
of this Lease.
11. DAMAGE BY FIRE OR OTHER CASUALTY.
11.1 RECONSTRUCTION USING INSURANCE. In the event of
damage or destruction of the Premises, Tenant shall forthwith notify Landlord
and diligently repair or reconstruct the same to a condition similar to that
which existed prior to such damage or destruction. In the event of any material,
structural damage or destruction of the Premises, Tenant shall undertake such
repair or reconstruction work pursuant to plans and specifications reasonably
acceptable to Landlord. Any net insurance proceeds payable with respect to the
casualty shall be used for the repair or reconstruction of the Premises. If such
proceeds are insufficient for such purposes, Tenant shall provide the required
additional funds.
11.2 SURPLUS PROCEEDS. If there remains any surplus of
insurance proceeds after the completion of the repair or reconstruction of the
Premises, such surplus shall belong to and be paid to Tenant.
11.3 NO RENT ABATEMENT. The rent payable under this Lease
shall not xxxxx by reason of any damage or destruction of the Premises by reason
of an insured or uninsured casualty. Tenant hereby waives all rights under
applicable law to xxxxx, reduce or offset rent by reason of such damage or
destruction.
11.4 END OF TERM. Notwithstanding any other provision of this
Section 11, if the
26
Premises are more than 30% destroyed (measured by square footage) by casualty
during the last twenty-four (24) months of the Initial Term or any Renewal Term,
Tenant may terminate this Lease by written notice to Landlord delivered within
thirty (30) days after the date of such casualty, in which event Landlord shall
retain all insurance proceeds and Tenant shall have no obligation to repair or
reconstruct the Premises.
12. CONDEMNATION.
12.1 COMPLETE TAKING. If during the Term all or
substantially all of the Premises is taken or condemned by any competent public
or quasi-public authority (which shall include a taking of a part of the
Premises such that the remaining portion is unsuitable or not economically
feasible for continued operation by Tenant as contemplated hereby, as determined
by Tenant), then Tenant may, at Tenant's election, made within thirty (30) days
of such taking by condemnation, terminate this Lease, and the current Minimum
Rent shall be prorated as of the date of such termination. The award payable
upon such taking shall be allocated between Landlord and Tenant as so allocated
by the taking authority. In the absence of such allocation by the taking
authority, the award shall be allocated as agreed by Landlord and Tenant.
Failing such agreement within thirty (30) days after the effective date of such
taking, the award shall be allocated between Landlord and Tenant pursuant to the
appraisal procedure described on Exhibit "B" attached hereto.
12.2 PARTIAL TAKING. If during the Term any portion of the
Premises it taken or condemned and this Lease is not terminated pursuant to
ss. 12.1, the Minimum Rent shall be abated to the same extent as the diminution
in the fair market value of the Premises by reason of the
27
condemnation; provided, however, in no event shall Minimum Rent be reduced to an
amount less than $1,268,076 per annum. Such diminution in the fair market value
shall be as agreed between Landlord and Tenant, but failing such agreement
within thirty (30) days of the effective date of the condemnation the same will
be determined by appraisal pursuant to Exhibit "B" attached hereto. Landlord
shall be entitled to receive and retain any and all awards for the partial
taking and damage and Tenant shall not be entitled to receive or retain any such
award for any reason.
12.3 LEASE REMAINS IN EFFECT. Except as provided above,
this Lease shall not terminate and shall remain in full force and effect in the
event of a taking or condemnation of the Premises, or any portion thereof, and
Tenant hereby waives all rights under applicable law to xxxxx, reduce or offset
rent by reason of such taking.
13. PROVISIONS ON TERMINATION OF TERM.
13.1 SURRENDER OF POSSESSION. Tenant shall, on or before
the last day of the Term, or upon earlier termination of this Lease, surrender
to Landlord the Premises (including all resident charts and records) in good
condition and repair, excepting only (i) ordinary wear and tear, (ii) any damage
caused by condemnation pursuant to Section 12 above, or (iii) any damage caused
by fire or other casualty resulting in the termination of the Lease pursuant to
Section 11.4 above.
13.2 REMOVAL OF PERSONAL PROPERTY. If Tenant is not then
the subject of an Event of DEFAULT hereunder, Tenant shall have the right in
connection with the surrender of the Premises to remove from the Premises all
Tenant Personal Property but not the Landlord Personal Property (including the
Landlord Personal Property replaced by Tenant). Any such removal shall be done
in a
28
workmanlike manner leaving the Premises in good and presentable condition and
appearance, including repair of any damage caused by such removal. At the end of
the Term or upon the earlier termination of this Lease (unless Tenant has
terminated this Lease pursuant to Sections 11.4 or 12.1) Tenant shall return the
Premises to Landlord with the Landlord Personal Property (or replacements
thereof) in the same condition and utility as was delivered to Tenant at the
commencement of the Term, normal wear and tear excepted.
13.3 MANAGEMENT OF PREMISES.
13.3.1 Upon the expiration or earlier termination of
the Term (unless Tenant has purchased the Premises), Landlord shall use
its best efforts to enter into a management, lease or other agreement
with an entity qualified under the laws of the State of Arizona
(including without limitation A.R.S. xx.xx. 20-1802 and 20-1808(A) or
any successor statutes) and other applicable laws (a "QUALIFIED
MANAGER") to assume the responsibilities and obligations for the
management and operation of the Premises (including all obligations
under all Residency Agreements affecting the Premises).
13.3.2 Until such time as Landlord enters into a
management agreement for the management and operation of the Premises
with a Qualified Manager, Tenant and Landlord shall enter into a
management agreement the ("ARC MANAGEMENT AGREEMENT") for the
management and operation of the Premises, which management agreement
shall be in a form that is substantially the same as the customary form
of management agreement then in use by Tenant and its affiliates,
subject to the provisions of this Section 13.3.2. The ARC
29
Management Agreement shall provide that it shall terminate
simultaneously with a Qualified Manager's assumption of all
responsibilities and obligations relating to the operation of the
Premises. The ARC Management Agreement shall further provide that, in
consideration of Tenant's management and operation of the Premises,
Tenant shall be entitled to receive a management fee equal to (a) if
this Lease is terminated prior to the expiration of the Term on account
of an Event of Default pursuant to Section 10.2.2 hereof, One Thousand
Dollars ($1,000.00) per month; or (b) for each month, one hundred
percent (100%) of the Available Cash Flow from the Premises (as
hereinafter defined), in all other circumstances (including Tenant's
management following the expiration of the Term). Furthermore, if this
Lease is terminated for any reason other than Tenant's Event of Default
pursuant to Section 10.2.2, then the provisions of Section 8.2 shall
remain effective and be incorporated into the ARC Management Agreement.
As used in this section 13.3, "AVAILABLE CASH FLOW FROM THE PREMISES"
means the amount by which (i) all income and revenue of any kind
whatsoever directly or indirectly arising or derived from or out of the
ownership, operation or use of the Premises, exceeds (ii) all expenses
of operating the Premises, including any debt service on any loan
directly associated with the Premises that is incurred in compliance
with this Lease, all as calculated on a cash basis.
13.3.3 Tenant agrees to cooperate with Landlord or
its designee to accomplish the transfer of such management and
operation without interrupting the operation of the Premises. Tenant
shall not commit any act or be remiss in the undertaking of any act
that
30
would jeopardize any licensure or certification of the facility, and
Tenant shall comply with all reasonable requests for an orderly
transfer of the licenses and certifications for the Premises, and
possession at the time of any such surrender. Upon the expiration or
earlier termination of the Term, Tenant shall deliver copies of all of
Tenant's books and records relating to the Premises and its operations
to Landlord.
13.4 ASSIGNMENT OF RESIDENCY AGREEMENTS. Automatically
upon the expiration or termination of this Lease (unless Tenant has purchased
the Premises), the Residency Agreements shall be deemed to have been assigned by
Tenant to Landlord, and to have been assumed by Landlord, to the extent
permitted by applicable law, all as more particularly set forth in the
Assignment and Assumption Agreement.
31
13.5 CERTAIN AGREEMENTS RELATING TO THE NOTE.
Notwithstanding any provision of the Note to the contrary and so long as
Landlord is not in default thereunder, if Tenant elects not to exercise its
right to extend the Term for the first or second Renewal Term so that the Term
expires on either July 13, 2018 or July 13, 2028, then (a) Landlord shall have
the right to reduce the outstanding principal amount of the Note as of the day
that the Term expires by the Offset Amount (as hereinafter defined), and (b) to
the extent that the Offset Amount exceeds the principal balance of the Note as
of the expiration of the Term, Tenant shall issue to Landlord on the date the
Term expires a promissory note in the amount of such excess (the "EXCESS NOTE").
The Excess Note shall be in the same form as the Note and shall bear interest at
the rate of six percent (6%) per annum, shall mature 37 years after issuance,
with level payments of the principal and interest due under a 37-year
amortization schedule. As used herein, the term "OFFSET AMOUNT" shall mean
Tenant's tax basis (as reflected in Tenant's tax books and records) in any
liabilities to residents of the Premises that are actually assumed by Landlord
pursuant to Section 13.4 of this Lease or the Assignment and Assumption
Agreement, which liabilities will include, if applicable, all refundable
entrance fee deposits and the amount of nonrefundable entrance fees that Tenant
has not reported as taxable income as of the date of termination. The terms of
this Section 13.5 shall control over any inconsistent provision(s) in the Note.
14. NOTICES AND DEMANDS. All notices and demands, certificates,
requests, consents, approvals, and other similar instruments under this Lease
shall be in writing and shall be deemed to
32
have been properly given upon actual receipt thereof or within two (2) business
days of being placed in the United States certified or registered mail, return
receipt requested, postage prepaid (a) if to Tenant, addressed to American
Retirement Corporation, 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx
00000, Attn: Chief Executive Officer Facsimile No. (000) 000-0000 with a copy to
Bass, Xxxxx & Xxxx PLC, 000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, XxXxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxx 00000, Attn: T. Xxxxxx Xxxxx, Esq., Facsimile No. (615)
742-2766 or at such other address as Tenant from time to time may have
designated by written notice to Landlord, (b) if to Landlord, addressed to
Freedom Plaza Limited Partnership, 0000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxx, Xxxxxxx 00000 Attn: Chief Executive Officer, Fax No. (000) 000-0000
with a copy to 0000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxx 00000,
Attn: Xxxxxxx X. Xxxxxxxxx, Fax No. (000) 000-0000, or at such address as
Landlord may from time to time have designated by written notice to Tenant.
Refusal to accept delivery shall be deemed delivery.
15. RIGHT OF ENTRY; EXAMINATION OF RECORDS. Landlord and its
representative may enter the Premises at any reasonable time after reasonable
notice to Tenant for the purpose of inspecting the Premises for any reason
including, without limitation, Tenant's default under this Lease. Any such entry
shall not unreasonably interfere with residents, resident care, or any of
Tenant's operations.
16. QUIET ENJOYMENT. So long as no Event of Default is existing
and continuing Landlord covenants and agrees that Tenant shall peaceably and
quietly have, hold and enjoy the Premises for the Term, free of any claim or
other action not caused or created by Tenant (excepting, however,
33
intrusion of Tenant's quiet enjoyment occasioned by condemnation or destruction
of the property as referred to in Sections 11 and 12 hereof).
17. APPLICABLE LAW. This Lease shall be governed by and construed
in accordance with the internal laws of the State of Arizona without regard to
the conflict of laws rules of such State.
18. HAZARDOUS MATERIALS.
18.1 HAZARDOUS MATERIAL COVENANTS. Tenant's use of the
Premises shall comply in all material respects with all Hazardous Materials Laws
(as hereinafter defined). In the event any Environmental Activities (as
hereinafter defined) occur or are suspected to have occurred in violation in any
material respect of any Hazardous Materials Laws or if Tenant has received any
Hazardous Materials Claim (as hereinafter defined) against the Premises, Tenant
shall promptly obtain all permits and approvals necessary to remedy any such
actual or suspected problem through the removal of Hazardous Materials (as
hereinafter defined) or otherwise, and upon Landlord's approval of the
remediation plan, remedy any such problem to the satisfaction of Landlord, in
accordance with all Hazardous Materials Laws and good business practices.
18.2 TENANT NOTICES TO LANDLORD. Tenant shall immediately
advise Landlord in writing of:
18.2.1 any Environmental Activities in violation of
any Hazardous Materials Laws,
18.2.2 any Hazardous Materials Claims against Tenant
or the Premises,
34
18.2.3 any remedial action taken by Tenant in
response to any Hazardous Materials Claims or any Hazardous Materials
on, under or about the Premises in violation of any Hazardous Materials
Laws,
18.2.4 Tenant's discovery of any occurrence or
condition on or in the vicinity of the Premises that materially
increase the risk that the Premises will be exposed to Hazardous
Materials,
18.2.5 all communications to or from Tenant, any
governmental authority or any other person relating to Hazardous
Materials Laws or Hazardous Materials Claims with respect to the
Premises, including copies thereof.
18.3 PARTICIPATION IN HAZARDOUS MATERIALS CLAIMS. Landlord
shall have the right, at Landlord's cost and expense and with counsel chosen by
Landlord, to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims.
18.4 ENVIRONMENTAL ACTIVITIES shall mean the use,
generation, transportation, handling, discharge, production, treatment, storage,
release or disposal of any Hazardous Materials at any time to or from the
Premises or located on or present on or under the Premises.
18.5 HAZARDOUS MATERIALS shall mean (i) any petroleum
products and/or by-products (including any fraction thereof), flammable
substances, explosives, radioactive materials, hazardous or toxic wastes,
substances or materials, known carcinogens or any other materials, contaminants
or pollutants which pose a hazard to the Premises or to persons on or about the
Premises
35
or cause the Premises to be in violation of any Hazardous Materials Laws; (ii)
asbestos in any form which is friable; (iii) urea formaldehyde in foam
insulation or any other form; (iv) transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million or any other more restrictive standard then
prevailing; (v) medical wastes and biohazards; (vi) radon gas; and (vii) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or may or could pose a hazard to the
health and safety of the occupants of the Premises or the owners and/or
occupants of property adjacent to or surrounding the Premises.
18.6 HAZARDOUS MATERIALS CLAIMS shall mean any and all
enforcement, clean-up, removal or other governmental or regulatory actions or
orders threatened, instituted or completed pursuant to any Hazardous Material
Laws, together with all claims made or threatened by any third party against the
Premises, Landlord or Tenant relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials.
18.7 HAZARDOUS MATERIALS LAWS shall mean any laws,
ordinances, regulations, rules, orders, guidelines or policies relating to the
environment, health and safety, Environmental Activities, Hazardous Materials,
air and water quality, waste disposal and other environmental matters, if the
failure to comply with the same does or would have a material adverse effect on
the Premises or the operation thereof.
19. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord, which Landlord may not unreasonably withhold,
condition or delay, voluntarily or involuntarily assign or hypothecate this
Lease or any interest herein or sublet the Premises. Any of
36
the foregoing acts without such consent shall be void but shall, at the option
of Landlord in its sole discretion, constitute an Event of Default giving rise
to Landlord's right, among other things, to terminate this Lease. Without
limiting the foregoing, this Lease shall not be assigned or encumbered by
operation of law without the prior written consent of Landlord which may be
withheld at Landlord's reasonable discretion. Notwithstanding the foregoing to
the contrary, the provisions of this Section 19 shall be subject to the
provisions of Section 22 hereof, and Tenant may without Landlord's consent
assign this Lease or sublet the Premises or any portion thereof to a Successor
(as such term is defined below) of Tenant, or a direct or indirect, wholly-owned
subsidiary of Tenant (including a Successor of Tenant) (each, a "SUBSIDIARY"),
provided that such Successor or Subsidiary fully assumes the obligations of
Tenant under this Lease, no such assignment or sublease shall relieve Tenant of
its obligations hereunder or be valid (and no such Successor shall take
possession of the Premises) until an executed counterpart of such assignment or
sublease has been delivered to Landlord, and each such sublease shall be
expressly subordinate to this Lease.
19.1 Notwithstanding anything in this Section 19 to the
contrary, Tenant may undertake the following without Landlord's prior consent:
(i) enter into Residency Agreements, as contemplated by Section 8.2.8 hereof,
(ii) lease a unit or bed to a resident of the Premises pursuant to agreements
that are terminable upon 30 days notice, (iii) sublease any space in the
Premises to an individual or entity that provides services to residents or
occupants of the Premises, and (iv) sublease any space for uses ancillary or
incidental to the primary use of the Premises.
37
19.2 As used herein, a "SUCCESSOR" is any entity which
succeeds to materially all of the assets, operations and business of Tenant by
merger, reorganization, recapitalization or similar transaction.
20. INDEMNIFICATION.
20.1 To the fullest extent permitted by law, Tenant agrees
to protect, indemnify, defend and save harmless Landlord, its directors,
officers, shareholders, agents and employees from and against any and all
liability, expense loss, costs, deficiency, fine, penalty, or damage (including
without limitation punitive or consequential damages) of any kind or nature,
including reasonable attorneys' fees, from any suits, claims or demands arising
out of any action or inaction on the part of Tenant or caused by any negligence,
willful misconduct or bad faith of Tenant, or the breach by Tenant of any of its
obligations hereunder. Upon receiving knowledge of any suit, claim or demand
asserted by a third party that Landlord believes is covered by this indemnity,
Landlord shall give Tenant notice of the matter. Tenant shall defend Landlord
against such matter at Tenant's sole cost and expense and with counsel
reasonably acceptable to Landlord.
20.2 Landlord agrees to indemnify and save Tenant and its
officers, directors, shareholders and employees harmless from and against any
and all claims, losses, damages and expenses, including reasonable attorney's
fees through all appeals, arising out of any action or inaction on the part of
Landlord or attributable to the negligence, willful misconduct or bad faith or
Landlord or breach of this Lease by Landlord.
38
21. TENANT AS PROVIDER; MLR DEPOSITS.
21.1 PROVIDER. Landlord and Tenant intend that Tenant be
the sole "provider" at the Premises for purposes of A.R.S. ss. 20-1801, et seq.,
and any successor or replacement statute.
21.2 MLR DEPOSITS. Landlord has previously made so called
"minimum liquid reserve deposits" with respect to the Premises as required by
applicable Arizona statutes in an aggregate amount of $1,763,153.00 (the
"LANDLORD MLR DEPOSITS"). The Landlord MLR Deposits shall constitute Landlord's
Personal Property, but shall remain on deposit for the benefit of the Premises
pursuant to applicable Arizona statutes for the Term of this Lease. The Landlord
shall not allow Landlord MLR Deposits to have a value that is at any time less
than $1,763,153.00.
21.3 TENANT MLR DEPOSITS. In the event that applicable
Arizona statutes require minimum liquid reserve deposits that exceed the
Landlord MLR Deposits, Tenant shall make, from time to time as required, such
excess deposits (the "TENANT MLR DEPOSITS"). The parties acknowledge that as of
the date hereof Tenant has made Tenant MLR Deposits in the aggregate amount of
$-0-. The Tenant MLR Deposits, whether now in existence or hereafter made, shall
constitute, and shall remain, Tenant's personal property. So long as Tenant is
not in default hereunder, in the event that the amount of the minimum liquid
reserve deposits required for the Premises pursuant to applicable Arizona law is
ever reduced in the future the Tenant MLR Deposits shall be returned first to
Tenant, before reduction in the amount of Landlord MLR Deposits. Upon expiration
of this Lease, and so long as Tenant is not in default hereunder, Tenant shall
be entitled to receive the Tenant MLR Deposits.
21.4 MLR INCOME. Landlord hereby guarantees that the
Landlord MLR Deposits shall generate actual, collected interest or investment
income (the "LANDLORD MLR INTEREST
39
INCOME") in each calendar year that equals or exceeds $40,000 (the "THRESHOLD
AMOUNT"). In the event that the Landlord MLR Interest Income is less than the
Threshold Amount in any calendar year (an "MLR INTEREST INCOME DEFICIT"), then
the Landlord shall pay to Tenant the amount of such MLR Interest Income Deficit
before December 31 of each year. In the event that the Landlord MLR Interest
Income is greater than the Threshold Amount in any calendar year, such excess
shall be paid directly to Landlord. Tenant shall be entitled to retain all
interest and investment income relating to Tenant's MLR Deposits, which deposits
(including all interest and investment income thereon) shall remain Tenant's
personal property, and Landlord shall have no interest therein.
22. EXISTING LOAN; REFINANCING INDEBTEDNESS.
22.1 The Premises is currently subject to a loan (the
"EXISTING LOAN") from Aid Association for Lutherans, a Wisconsin corporation
("AAL") in the original principal amount of $11,850,000. Tenant shall cause the
Premises to be in compliance with the provisions of the documents evidencing or
securing the Existing Loan (such documents, together with any documents
evidencing or securing a hereinafter described Refinancing Indebtedness, being
referred to herein as the "APPROVED LOAN DOCUMENTS"). Without limiting the
generality of the foregoing sentence, Tenant shall be responsible for making
payments on the Existing Loan in accordance with the terms of the Approved Loan
Documents and such payments shall be tendered directly to AAL.
22.2 Subject to the terms of this Section 22.2, Tenant
shall have the right from time to time to incur additional indebtedness(es) and
to refinance the Existing Loan, all secured by the Premises, including
Landlord's and Tenant's interest therein (a "REFINANCING INDEBTEDNESS"). Tenant
shall have the right, from time to time, to direct Landlord to execute and
deliver all documents
40
necessary to consummate a Refinancing Indebtedness. Tenant shall pay all costs
incurred in connection with any Refinancing Indebtedness, including, without
limitation, any prepayment penalties. Landlord shall have the right to approve
the incurrence of any such indebtedness in excess of the original principal
balance of the Existing Loan (i.e., $11,850,000); provided, however, that such
approval shall not be unreasonably withheld, conditioned or delayed if the
reasonably projected debt service coverage ratio of the Premises equals or
exceeds 1.6 to 1.0 (after giving effect to the incurrence of the additional
indebtedness). Landlord shall not be obligated to execute and deliver documents
in connection with Refinancing Indebtedness unless (i) the terms provided
therein are reasonable and customary (including reasonable amortization
provisions); (ii) interest on such Refinancing Indebtedness is payable not less
often than quarterly and (iii) the principal of such Refinancing Indebtedness is
amortized such that the principal amount of the Existing Loan (if still
outstanding) and any Refinancing Indebtedness outstanding on the expiration of
the Initial Term will not be greater than the principal amount of the Existing
Loan that would be outstanding on such date under the documents relating to the
Existing Loan currently in effect (the parties agree that such amount is
$10,743,216), and (iv) such Refinancing Indebtedness does not require the
guaranty of any limited partner of Landlord.
22.3 If (a) this Lease is terminated by Landlord due to
Tenant's breach hereof prior to the expiration of the Initial Term, (b) the
principal amount of any Refinancing Indebtedness outstanding on the date of such
termination exceeds the principal amount of the Existing Loan that would have
been outstanding on such date if the Existing Loan had not been refinanced and
the Landlord had continued to make principal payments on the Existing Loan in
accordance with the
41
terms of the documents relating thereto as of the date of this Lease (the
"EXCESS INDEBTEDNESS"), and (c) the present value of the remaining scheduled
debt service payments on the Refinancing Indebtedness (discounted at the
interest rate applicable to the Existing Loan) as of the date of such
termination exceeds the present value of the debt service payments on the
Existing Loan that would have remained outstanding as of the date of such
termination if the Existing Loan had not been refinanced (discounted at the
interest rate applicable to the Existing Loan) (the "EXCESS DEBT SERVICE"),
Tenant shall either (x) deposit with Landlord or make a principal payment on the
Refinancing Indebtedness in an amount equal to the Excess Indebtedness, or (y)
deposit with Landlord an amount equal to the Excess Debt Service.
23. HOLDING OVER. Intentionally Omitted.
24. ESTOPPEL CERTIFICATES. Tenant shall, at any time upon not less
than fifteen (15) days prior written request by Landlord, execute, acknowledge
and deliver to Landlord or its designee a statement in writing, executed by an
officer or general partner of Tenant, certifying that this Lease is unmodified
and in full force and effect (or, if there have been any modifications, that
this Lease is in full force and effect as modified, and setting forth such
modifications), the dates to which Minimum Rent, Additional Charges and
additional amounts due hereunder have been paid, certifying that no default by
either Landlord or Tenant exists hereunder or specifying each such default and
as to other matters as Landlord may reasonably request.
Landlord shall, at any time upon not less than fifteen (15) days prior
written request by Tenant, execute, acknowledge and deliver to Tenant or its
designee a written statement certifying that this Lease is unmodified and in
full force and effect (or, if there have been any modifications, that this
42
Lease is in full force and effect as modified, and setting forth such
modifications), the dates to which Minimum Rent, Additional Charges and
additional amounts due hereunder have been paid, certifying that no default by
either Landlord or Tenant exists hereunder or specifying each such default and
as to other matters as Tenant may reasonably request.
25. ATTORNEYS' FEES. If Landlord or Tenant brings any action to
interpret or enforce this Lease, or for damages for any alleged breach hereof,
the prevailing party in any such action shall be entitled to reasonable
attorneys' fees and costs as awarded by the court in addition to all other
recovery, damages and costs.
26. SEVERABILITY. In the event any part or provision of the Lease
shall be determined to be invalid or unenforceable, the remaining portion of
this Lease shall nevertheless continue in full force and effect.
27. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.
28. BINDING EFFECT. Subject to the provisions of Section 19 above,
this Lease shall be binding upon and inure to the benefit of Landlord and Tenant
and their respective heirs, personal representatives, successors in interest and
assigns.
29. WAIVER AND SUBROGATION. Landlord and Tenant hereby waive to
each other all rights of subrogation which any insurance carrier, or either of
them, may have as to the Landlord or Tenant by reason of any provision in any
policy of insurance issued to Landlord or Tenant, provided such waiver does not
thereby invalidate the policy of insurance.
43
30. MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon
the request of either, enter into a short form or memorandum of the Lease, in
form suitable for recording under the laws of the State of Arizona in which
reference to this Lease shall be made. Such memorandum may provide written
notice of Landlord's covenants in this Agreement, and may further provide that
any person or entity that deals directly with Landlord and does not ensure
compliance with the provisions of this Lease shall, among other things, be
liable to Tenant for tortious interference with this Lease. The party requesting
such recordation shall pay all costs and expenses of preparing and recording
such memorandum of this Lease.
31. INCORPORATION OF RECITALS AND ATTACHMENTS. The recitals and
exhibits, schedules, addenda and other attachments to this Lease are hereby
incorporated into this Lease and made a part hereof.
32. TITLES AND HEADINGS. The titles and headings of sections of
this Lease are intended for convenience only and shall not in any way affect the
meaning or construction of any provision of this Lease.
33. NATURE OF RELATIONSHIP; USURY SAVINGS CLAUSE. The parties
intend that their relationship shall be that of lessor and lessee only. Nothing
contained in this Lease shall be deemed or construed to constitute an extension
of credit by Landlord to Tenant, nor shall this Lease be deemed to be a
partnership or venture agreement between Landlord and Tenant. Notwithstanding
the foregoing, in the event any payment made to Landlord hereunder is deemed to
violate any applicable laws regarding usury, the portion of any payment deemed
to be usurious shall be held by Landlord to pay the future obligations of Tenant
as such obligations arise and, in the event Tenant discharges and
44
performs all obligations hereunder, such funds will be reimbursed to Tenant upon
the expiration of the Term. No interest shall be paid on any such funds held by
Landlord.
34. ENTIRE AGREEMENT. This Lease sets forth the entire agreement
of the parties hereto with respect to the Premises and cannot be changed or
modified by except by another agreement in writing signed by the party sought to
be charged therewith or by its duly authorized agent.
35. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of
the representations, warranties and covenants of Landlord and Tenant under this
Lease shall survive the expiration or earlier termination of the Term and this
Lease.
36. RIGHT TO RELY ON TENANT WITHOUT JOINDER OF LANDLORD. No
person, entity or governmental authority dealing with the Premises shall be
required to inquire into, or obtain any other documentation as to, the authority
of Tenant acting alone to take any action relating to the Premises, or to obtain
the signature of Landlord on any instrument or agreement relating to, or
affecting, the Premises.
37. INTERPRETATION, ETC.
37.1 Both Landlord and Tenant have been represented by
counsel and this Lease has been freely and fairly negotiated. Consequently, all
provisions of this Lease shall be interpreted according to their fair meaning
and shall not be strictly construed against any party.
37.2 All consents or approvals to be granted or withheld
under this Lease shall not be unreasonably withheld, conditioned or delayed,
except to the extent that any consent or approval is expressly conditioned
pursuant to the terms hereof upon the sole discretion of the "consenting" party.
45
37.3 Except as explicitly set forth in Section 8.2.8
above, it is the intention of the parties that there shall be no third-party
beneficiaries of this Lease, and that no third party shall have the benefit of,
or any rights under, any provision hereof.
38. FURTHER ASSURANCES. Both parties hereto shall take all actions
reasonably requested by the other party to give effect to the agreement
contemplated in this Lease.
46
IN WITNESS WHEREOF, the parties have caused this Lease Agreement to be
executed as of the day and year first above written.
TENANT:
AMERICAN RETIREMENT CORPORATION, a
Tennessee corporation
By:
--------------------------------
Title:
-----------------------------
LANDLORD:
FREEDOM PLAZA LIMITED PARTNERSHIP, an
Arizona limited partnership
By:
--------------------------------
Title:
-----------------------------
Acknowledgment and Consent
Sun Health Properties, as lessor of Plaza del Rio under the Plaza del Rio
Ground Lease hereby joins in the execution of this Lease for the purpose of
consenting to the execution of this Lease, and for the purpose of agreeing that,
in the event the Plaza del Rio Ground Lease expires or terminates for any reason
whatsoever prior to the expiration or termination of the term (including renewal
terms) of this Lease, Sun Health Properties, its successors and assigns, shall
honor the terms of this Lease and shall not disturb Tenant's possession of the
Plaza del Rio Leasehold Interest under the terms of this Lease, except in
accordance with the terms of this Lease.
SUN HEALTH PROPERTIES LEASING,
an Arizona corporation
By:
---------------------------------
Title:
------------------------------
Acknowledgment and Consent
Plaza III Limited Partnership, as lessor of Freedom Plaza under the Freedom
Plaza Ground Lease joins in the execution of this Lease for the purpose of
consenting to the execution of this Lease, and for the purpose of agreeing that,
in the event the Freedom Plaza Ground Lease expires or terminates for any reason
whatsoever prior to the expiration or termination of the term (including renewal
terms) of this Lease, Plaza III Limited Partnership, its successors and assigns,
shall honor the terms of this Lease and shall not disturb Tenant's possession of
the Freedom Plaza Leasehold Interest under the terms of this Lease, except in
accordance with the terms of this Lease.
PLAZA III LIMITED PARTNERSHIP,
an Arizona limited partnership
By:
---------------------------------
Title:
------------------------------
EXHIBIT "A-1"
LEGAL DESCRIPTION OF PREMISES
1. FREEDOM PLAZA
2. PLAZA DEL RIO
EXHIBIT "A-2"
LANDLORD PERSONAL PROPERTY
EXHIBIT "A-3"
PERMITTED EXCEPTIONS
EXHIBIT "B"
APPRAISAL PROCESS
If Landlord and Tenant are unable to agree upon the fair market value
of the Premises within any relevant period provided in this Lease, each shall
within ten (10) days after written demand by the other select one MAI Appraiser
to participate in the determination of fair market value. For all purposes under
this Lease, the fair market value of the Premises shall be based on the fair
market value of the Premises unencumbered by this Lease. Within ten (10) days of
such selection, the MAI Appraisers so selected by Landlord and Tenant shall
select a third MAI Appraiser. The three (3) selected MAI Appraisers shall each
determine the fair market value of the Premises within thirty (30) days of the
selection of the third appraiser. Each of Tenant and Landlord shall pay the fees
and expenses of any MAI Appraiser which such party appoints pursuant to this
Exhibit plus 50% of the cost of the third appraiser.
In the event either Landlord or Tenant fails to select a MAI Appraiser
within the time period set forth in the foregoing paragraph, the MAI Appraiser
selected by the other party shall alone determine the fair market value of the
Premises in accordance with the provisions of this Exhibit and the fair market
value so determined shall be binding upon Landlord and Tenant.
In the event the MAI Appraisers selected by Landlord and Tenant are
unable to agree upon a third MAI Appraiser within the time period set forth in
the first paragraph of this Exhibit, either Landlord or Tenant shall have the
right to apply at their mutual expense to the presiding judge of the court of
original trial jurisdiction in the county in which the Premises is located to
name the third MAI Appraiser.
Within five (5) days after completion of the third MAI Appraiser's
appraisal, all three MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the fair market value of the Premises. If
a majority are unable to determine the fair market value at such meeting, the
three appraisals shall be added together and their total divided by three. The
resulting quotient shall be the fair market value of the Premises. If, however,
either or both of the low appraisal or the high appraisal are more than ten
percent (10%) lower or higher than the middle appraisal, any such lower or
higher appraisal shall be disregarded. If only one appraisal is disregarded, the
remaining two appraisals shall be added together and their total divided by two,
and the resulting quotient shall be such fair market value. If both the lower
appraisal and higher appraisal are disregarded as provided herein, the middle
appraisal shall be such fair market value. In any event, the result of the
foregoing appraisal process shall be final and binding.
Landlord and Tenant will exercise their respective best efforts to
expedite the appraisal process and will cooperate fully and with all deliberate
speed with each other and with all appraisers in order to allow the
determination of fair market value to be finally completed. Notwithstanding
anything else in this Exhibit, if any appraiser appointed hereunder fails to
complete his or her report within 60 days of his or her appointment, the fair
market value of the Premises will be determined by reference to the other report
or reports completed within such period.
"MAI APPRAISER" shall mean an appraiser licensed or otherwise qualified
to do business in Arizona and who has substantial experience in performing
appraisals of facilities similar to the Premises and is certified as a member of
the American Institute of Real Estate Appraisers or certified as a SRPA by the
Society of Real Estate Appraisers, or, if such organizations no longer exist or
certify appraisers, such successor organization or such other organization as is
approved by Landlord.
SCHEDULE 1
Minimum Rent for any month included in this Schedule 1 that precedes the
Commencement Date shall be inapplicable to Tenant's obligation to pay Rent
under this Lease.
MONTH MONTH RENT MONTH MONTH RENT MONTH MONTH RENT
PAYMENT PAYMENT PAYMENT
1 Jan-02 217,053 44 Aug-05
210,592
23 Nov-03 223,907
2 Feb-02
210,592 217,053 45 Sep-05
3 Mar-02 24 Dec-03 223,907
210,592 217,053 46 Oct-05
4 Apr-02 25 Jan-04 223,907
210,592 217,053 47 Nov-05
5 May-02 26 Feb-04 223,907
210,592 217,053 48 Dec-05
6 Jun-02 27 Mar-04 223,907
210,592 217,053 49 Jan-06
7 Jul-02 28 Apr-04 223,907
213,775 217,053 50 Feb-06
8 Aug-02 29 May-04 223,907
213,775 217,053 51 Mar-06
9 Sep-02 30 Jun-04 223,907
213,775 217,053 52 Apr-06
10 Oct-02 31 Jul-04 223,907
213,775 220,429 53 May-06
11 Nov-02 32 Aug-04 223,907
213,775 220,429 54 Jun-06
12 Dec-02 33 Sep-04 223,907
213,775 220,429 55 Jul-06
13 Jan-03 34 Oct-04 227,489
213,775 220,429 56 Aug-06
14 Feb-03 35 Nov-04 227,489
213,775 220,429 57 Sep-06
15 Mar-03 36 Dec-04 227,489
213,775 220,429 58 Oct-06
16 Apr-03 37 Jan-05 227,489
213,775 220,429 59 Nov-06
17 May-03 38 Feb-05 227,489
213,775 220,429 60 Dec-06
18 Jun-03 39 Mar-05 227,489
213,775 220,429 61 Jan-07
19 Jul-03 40 Apr-05 227,489
217,053 220,429 62 Feb-07
20 Aug-03 41 May-05 227,489
217,053 220,429 63 Mar-07
21 Sep-03 42 Jun-05 227,489
217,053 220,429 64 Apr-07
22 Oct-03 43 Jul-05 227,489
223,907 65 May-07
MONTH MONTH RENT MONTH MONTH RENT MONTH MONTH RENT
PAYMENT PAYMENT PAYMENT
227,489 70 Oct-07 231,179
66 Jun-07 231,179 75 Mar-08
227,489 71 Nov-07 231,179
67 Jul-07 231,179 76 Apr-08
231,179 72 Dec-07 231,179
68 Aug-07 231,179
231,179 73 Jan-08
69 Sep-07 231,179
231,179 74 Feb-08
77 May-08 99 Mar-10 121 Jan-12
231,179 238,894 247,078
78 Jun-08 100 Apr-10 122 Feb-12
231,179 238,894 247,078
79 Jul-08 101 May-10 123 Mar-12
234,979 238,894 247,078
80 Aug-08 102 Jun-10 124 Apr-12
234,979 238,894 247,078
81 Sep-08 103 Jul-10 125 May-12
234,979 242,925 247,078
82 Oct-08 104 Aug-10 126 Jun-12
234,979 242,925 247,078
83 Nov-08 105 Sep-10 127 Jul-12
234,979 242,925 251,355
84 Dec-08 106 Oct-10 128 Aug-12
234,979 242,925 251,355
85 Jan-09 107 Nov-10 129 Sep-12
234,979 242,925 251,355
86 Feb-09 108 Dec-10 130 Oct-12
234,979 242,925 251,355
87 Mar-09 109 Jan-11 131 Nov-12
234,979 242,925 251,355
88 Apr-09 110 Feb-11 132 Dec-12
234,979 242,925 251,355
89 May-09 111 Mar-11 133 Jan-13
234,979 242,925 251,355
90 Jun-09 112 Apr-11 134 Feb-13
234,979 242,925 251,355
91 Jul-09 113 May-11 135 Mar-13
238,894 242,925 251,355
92 Aug-09 114 Jun-11 136 Apr-13
238,894 242,925 251,355
93 Sep-09 115 Jul-11 137 May-13
238,894 247,078 251,355
94 Oct-09 116 Aug-11 138 Jun-13
238,894 247,078 251,355
95 Nov-09 117 Sep-11 139 Jul-13
238,894 247,078 255,761
96 Dec-09 118 Oct-11 140 Aug-13
238,894 247,078 255,761
97 Jan-10 119 Nov-11 141 Sep-13
238,894 247,078 255,761
98 Feb-10 120 Dec-11 142 Oct-13
238,894 247,078 255,761
143 Nov-13 171 Xxx-00 000 Xxx-00
255,761 264,973 279,853
144 Dec-13 172 Apr-16 200 Aug-18
255,761 264,973 279,853
145 Jan-14 173 May-16 201 Sep-18
255,761 264,973 279,853
146 Feb-14 174 Jun-16 202 Oct-18
255,761 264,973 279,853
147 Mar-14 175 Jul-16 203 Nov-18
255,761 269,787 279,853
148 Apr-14 176 Aug-16 204 Dec-18
255,761 269,787 279,853
149 May-14 177 Sep-16 205 Jan-19
255,761 269,787 279,853
150 Jun-14 178 Oct-16 206 Feb-19
255,761 269,787 279,853
151 Jul-14 179 Xxx-00 000 Xxx-00
260,299 269,787 279,853
152 Aug-14 180 Dec-16 208 Apr-19
260,299 269,787 279,853
153 Sep-14 181 Jan-17 209 May-19
260,299 269,787 279,853
154 Oct-14 182 Feb-17 210 Jun-19
260,299 269,787 279,853
155 Nov-14 183 Xxx-00 000 Xxx-00
260,299 269,787 285,113
156 Dec-14 184 Apr-17 212 Aug-19
260,299 269,787 285,113
157 Jan-15 185 May-17 213 Sep-19
260,299 269,787 285,113
158 Feb-15 186 Jun-17 214 Oct-19
260,299 269,787 285,113
159 Mar-15 187 Jul-17 215 Nov-19
260,299 274,745 285,113
160 Apr-15 188 Aug-17 216 Dec-19
260,299 274,745 285,113
161 May-15 189 Sep-17 217 Jan-20
260,299 274,745 285,113
162 Jun-15 190 Oct-17 218 Feb-20
260,299 274,745 285,113
163 Jul-15 191 Xxx-00 000 Xxx-00
264,973 274,745 285,113
164 Aug-15 192 Dec-17 220 Apr-20
264,973 274,745 285,113
165 Sep-15 193 Jan-18 221 May-20
264,973 274,745 285,113
166 Oct-15 194 Feb-18 222 Jun-20
264,973 274,745 285,113
167 Nov-15 195 Xxx-00 000 Xxx-00
264,973 274,745 290,531
168 Dec-15 196 Apr-18 224 Aug-20
264,973 274,745 290,531
169 Jan-16 197 May-18 225 Sep-20
264,973 274,745 290,531
170 Feb-16 198 Jun-18 226 Oct-20
264,973 274,745 290,531
227 Nov-20 255 Xxx-00 000 Xxx-00
290,531 301,861 320,161
228 Dec-20 256 Apr-23 284 Aug-25
290,531 301,861 320,161
229 Jan-21 257 May-23 285 Sep-25
290,531 301,861 320,161
230 Feb-21 258 Jun-23 286 Oct-25
290,531 301,861 320,161
231 Mar-21 259 Jul-23 287 Nov-25
290,531 307,781 320,161
232 Apr-21 260 Aug-23 288 Dec-25
290,531 307,781 320,161
233 May-21 261 Sep-23 289 Jan-26
290,531 307,781 320,161
234 Jun-21 262 Oct-23 290 Feb-26
290,531 307,781 320,161
235 Jul-21 263 Xxx-00 000 Xxx-00
296,112 307,781 320,161
236 Aug-21 264 Dec-23 292 Apr-26
296,112 307,781 320,161
237 Sep-21 265 Jan-24 293 May-26
296,112 307,781 320,161
238 Oct-21 266 Feb-24 294 Jun-26
296,112 307,781 320,161
239 Nov-21 267 Xxx-00 000 Xxx-00
296,112 307,781 326,631
240 Dec-21 268 Apr-24 296 Aug-26
296,112 307,781 326,631
241 Jan-22 269 May-24 297 Sep-26
296,112 307,781 326,631
242 Feb-22 270 Jun-24 298 Oct-26
296,112 307,781 326,631
243 Mar-22 271 Jul-24 299 Nov-26
296,112 313,880 326,631
244 Apr-22 272 Aug-24 300 Dec-26
296,112 313,880 326,631
245 May-22 273 Sep-24 301 Jan-27
296,112 313,880 326,631
246 Jun-22 274 Oct-24 302 Feb-27
296,112 313,880 326,631
247 Jul-22 275 Xxx-00 000 Xxx-00
301,861 313,880 326,631
248 Aug-22 276 Dec-24 304 Apr-27
301,861 313,880 326,631
249 Sep-22 277 Jan-25 305 May-27
301,861 313,880 326,631
250 Oct-22 278 Feb-25 306 Jun-27
301,861 313,880 326,631
251 Nov-22 279 Xxx-00 000 Xxx-00
301,861 313,880 333,295
252 Dec-22 280 Apr-25 308 Aug-27
301,861 313,880 333,295
253 Jan-23 281 May-25 309 Sep-27
301,861 313,880 333,295
254 Feb-23 282 Jun-25 310 Oct-27
301,861 313,880 333,295
311 Nov-27 339 Xxx-00 000 Xxx-00
333,295 347,228 369,735
312 Dec-27 340 Apr-30 368 Aug-32
333,295 347,228 369,735
313 Jan-28 341 May-30 369 Sep-32
333,295 347,228 369,735
314 Feb-28 342 Jun-30 370 Oct-32
333,295 347,228 369,735
315 Mar-28 343 Jul-30 371 Nov-32
333,295 354,510 369,735
316 Apr-28 344 Aug-30 372 Dec-32
333,295 354,510 369,735
317 May-28 345 Sep-30 373 Jan-33
333,295 354,510 369,735
318 Jun-28 346 Oct-30 374 Feb-33
333,295 354,510 369,735
319 Jul-28 347 Xxx-00 000 Xxx-00
340,158 354,510 369,735
320 Aug-28 348 Dec-30 376 Apr-33
340,158 354,510 369,735
321 Sep-28 349 Jan-31 377 May-33
340,158 354,510 369,735
322 Oct-28 350 Feb-31 378 Jun-33
340,158 354,510 369,735
323 Nov-28 351 Xxx-00 000 Xxx-00
340,158 354,510 377,692
324 Dec-28 352 Apr-31 380 Aug-33
340,158 354,510 377,692
325 Jan-29 353 May-31 381 Sep-33
340,158 354,510 377,692
326 Feb-29 354 Jun-31 382 Oct-33
340,158 354,510 377,692
327 Mar-29 355 Jul-31 383 Nov-33
340,158 362,010 377,692
328 Apr-29 356 Aug-31 384 Dec-33
340,158 362,010 377,692
329 May-29 357 Sep-31 385 Jan-34
340,158 362,010 377,692
330 Jun-29 358 Oct-31 386 Feb-34
340,158 362,010 377,692
331 Jul-29 359 Xxx-00 000 Xxx-00
347,228 362,010 377,692
332 Aug-29 360 Dec-31 388 Apr-34
347,228 362,010 377,692
333 Sep-29 361 Jan-32 389 May-34
347,228 362,010 377,692
334 Oct-29 362 Feb-32 390 Jun-34
347,228 362,010 377,692
335 Nov-29 363 Xxx-00 000 Xxx-00
347,228 362,010 385,888
336 Dec-29 364 Apr-32 392 Aug-34
347,228 362,010 385,888
337 Jan-30 365 May-32 393 Sep-34
347,228 362,010 385,888
338 Feb-30 366 Jun-32 394 Oct-34
347,228 362,010 385,888
395 Nov-34 411 Xxx-00 000 Xxx-00
385,888 394,330 411,980
396 Dec-34 412 Apr-36 428 Aug-37
385,888 394,330 411,980
397 Jan-35 413 May-36 429 Sep-37
385,888 394,330 411,980
398 Feb-35 414 Jun-36 430 Oct-37
385,888 394,330 411,980
399 Mar-35 415 Jul-36 431 Nov-37
385,888 403,025 411,980
400 Apr-35 416 Aug-36 432 Dec-37
385,888 403,025 411,980
401 May-35 417 Sep-36 433 Jan-38
385,888 403,025 411,980
402 Jun-35 418 Oct-36 434 Feb-38
385,888 403,025 411,980
403 Jul-35 419 Xxx-00 000 Xxx-00
394,330 403,025 411,980
404 Aug-35 420 Dec-36 436 Apr-38
394,330 403,025 411,980
405 Sep-35 421 Jan-37 437 May-38
394,330 403,025 411,980
406 Oct-35 422 Feb-37 438 Jun-38
394,330 403,025 411,980
407 Nov-35 423 Mar-37
394,330 403,025
408 Dec-35 424 Apr-37
394,330 403,025
409 Jan-36 425 May-37
394,330 403,025
410 Feb-36 426 Jun-37
394,330 403,025
