EXHIBIT 10.38
Lease Agreement between
CNL Retirement AM/Tennessee LP and
Homewood at Brookmont Terrace, LLC dated October 31, 2002, relating to
the Homewood Residence at Brookmont Terrace - Nashville, Tennessee
Homewood Residence at Brookmont Terrace
Nashville, Davidson County, Tennessee
LEASE AGREEMENT
DATED AS OF October 31, 2002
BY AND BETWEEN
CNL RETIREMENT - AM/TENNESSEE LP,
a Delaware limited partnership,
AS LANDLORD,
AND
Homewood at Brookmont Terrace, LLC,
a Tennessee limited liability company
AS TENANT
iv
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.........................................................1
ARTICLE 2 LEASED PROPERTY AND TERM...........................................12
-------------------------
2.1 Leased Property.....................................................12
---------------
2.2 Condition of Leased Property........................................13
----------------------------
2.3 Initial Term........................................................13
------------
2.4 Extended Term.......................................................13
-------------
2.5 Yield Up............................................................13
--------
ARTICLE 3 RENT...............................................................14
-----
3.1 Rent................................................................14
----
3.2 Minimum Rent........................................................14
------------
3.3 Percentage Rent.....................................................15
---------------
3.4 Additional Charges..................................................17
------------------
3.5 Landlord Advances...................................................18
-----------------
3.6 Late Payment of Rent................................................18
--------------------
3.7 Net Lease...........................................................18
---------
3.8 No Abatement of Rent................................................19
--------------------
3.9 Tenant Shortfall Reserve Requirement................................19
------------------------------------
3.10Tenant Security Deposit.............................................21
-----------------------
3.11Security for all ARC-Related Leases.................................21
-----------------------------------
3.12Security Agreement..................................................22
------------------
ARTICLE 4 USE OF THE LEASED PROPERTY; CONFLICTING BUSINESS...................22
-------------------------------------------------
4.1 Permitted Use.......................................................22
-------------
4.2 Environmental Matters...............................................23
---------------------
4.3 Conflicting Businesses Prohibited...................................23
---------------------------------
4.4 Continuous Operations...............................................24
---------------------
4.5 Compliance With Restrictions, Etc...................................24
---------------------------------
4.6 Standard of Operation...............................................25
---------------------
4.7 Resident Agreements and Service Licenses............................26
----------------------------------------
4.8 Standards, Not Control..............................................26
----------------------
4.9 Survival............................................................26
--------
ARTICLE 5 MAINTENANCE AND REPAIRS............................................27
------------------------
5.1 Tenant's Obligations................................................27
--------------------
5.2 Reserve.............................................................27
-------
ARTICLE 6 IMPROVEMENTS, ETC..................................................30
-------------------
6.1 Prohibition.........................................................30
-----------
6.2 Permitted Renovations...............................................30
---------------------
6.3 Conditions to Reserve Expenditures, Permitted Renovations and Major
Alterations.........................................................30
-------------------------------------------------------------------
6.4 Salvage.............................................................31
-------
ARTICLE 7 LANDLORD'S INTEREST NOT SUBJECT TO LIENS...........................32
-----------------------------------------
7.1 Liens, Generally....................................................32
----------------
7.2 Construction or Mechanics Liens.....................................32
-------------------------------
7.3 Contest of Liens....................................................33
----------------
7.4 Notices of Commencement of Construction.............................33
----------------------------------------
ARTICLE 8 TAXES AND ASSESSMENTS..............................................33
----------------------
8.1 Obligation to Pay Taxes and Assessments.............................33
---------------------------------------
8.2 Tenant's Right to Contest Taxes.....................................34
-------------------------------
8.3 Tax and Insurance Escrow Account....................................34
--------------------------------
ARTICLE 9 INSURANCE..........................................................35
----------
9.1 General Insurance Requirements......................................35
-------------------------------
9.2 Waiver of Subrogation...............................................37
---------------------
9.3 General Provisions..................................................37
------------------
9.4 Blanket Policy......................................................38
--------------
9.5 Indemnification of Landlord.........................................38
---------------------------
ARTICLE 10 CASUALTY..........................................................38
---------
10.1Restoration and Repair..............................................38
----------------------
10.2Escrow and Disbursement of Insurance Proceeds.......................39
---------------------------------------------
10.3No Abatement of Rent................................................40
--------------------
10.4Tenant's Property and Business Interruption Insurance...............40
-----------------------------------------------------
10.5Restoration of Tenant's Property....................................40
--------------------------------
10.6Waiver..............................................................40
------
ARTICLE 11 CONDEMNATION......................................................40
-------------
11.1Total Condemnation, Etc.............................................40
-----------------------
11.2Partial Condemnation................................................41
--------------------
11.3Disbursement of Award...............................................41
---------------------
11.4No Abatement of Rent................................................41
--------------------
11.5Disputes............................................................42
--------
ARTICLE 12 DEFAULTS AND REMEDIES.............................................42
----------------------
12.1Events of Default...................................................42
-----------------
12.2Remedies on Default.................................................44
-------------------
12.3Application of Funds................................................47
--------------------
12.4Landlord's Right to Cure Tenant's Default...........................47
-----------------------------------------
12.5Landlord's Lien.....................................................48
---------------
ARTICLE 13 HOLDING OVER......................................................48
-------------
ARTICLE 14 LIABILITY OF LANDLORD; INDEMNIFICATION............................49
---------------------------------------
14.1Liability of Landlord...............................................49
---------------------
14.2Indemnification of Landlord.........................................49
---------------------------
14.3Notice of Claim or Suit.............................................50
-----------------------
14.4Limitation on Liability of Landlord.................................50
-----------------------------------
ARTICLE 15 REIT AND UBTI REQUIREMENTS........................................50
---------------------------
15.1Limitations on Rents Attributable to Personal Property..............50
------------------------------------------------------
ARTICLE 16 SUBLETTING AND ASSIGNMENT.........................................52
--------------------------
16.1Transfers Prohibited Without Consent................................52
------------------------------------
16.2Indirect Transfer Prohibited Without Consent........................53
--------------------------------------------
16.3Adequate Assurances.................................................53
-------------------
ARTICLE 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS....................53
-----------------------------------------------
17.1Estoppel Certificates...............................................53
---------------------
17.2Monthly Financial Statements........................................53
----------------------------
17.3Annual Financial Statements.........................................54
---------------------------
17.4Records.............................................................54
-------
17.5General Operations Budget...........................................54
-------------------------
17.6Quarterly Meetings..................................................55
------------------
ARTICLE 18 LANDLORD'S RIGHT TO INSPECT.......................................55
----------------------------
ARTICLE 19 FACILITY MORTGAGES................................................55
19.1Subordination.......................................................55
-------------
19.2Attornment..........................................................56
----------
19.3Rights of Mortgagees and Assignees..................................56
----------------------------------
ARTICLE 20 ADDITIONAL COVENANTS OF TENANT....................................57
-------------------------------
20.1Conduct of Business.................................................57
-------------------
20.2Additional Covenants of Tenant......................................57
------------------------------
20.3Tenant a Single Purpose Entity......................................59
------------------------------
20.4Intentionally Omitted...............................................59
ARTICLE 21 MISCELLANEOUS.....................................................59
--------------
21.1Limitation on Payment of Rent.......................................59
-----------------------------
21.2No Waiver...........................................................59
---------
21.3Remedies Cumulative.................................................59
-------------------
21.4Severability........................................................60
------------
21.5Acceptance of Surrender.............................................60
-----------------------
21.6No Merger of Title..................................................60
------------------
21.7Tenant's Representations............................................60
------------------------
21.8Quiet Enjoyment.....................................................62
---------------
21.9Recordation of Memorandum of Lease..................................62
----------------------------------
21.10 Notices........................................................62
-------
21.11 Construction; Nonrecourse......................................64
-------------------------
21.12 Counterparts; Headings.........................................64
----------------------
21.13 Applicable Law.................................................64
--------------
21.14 Right to Make Agreement........................................64
-----------------------
21.15 Brokerage......................................................64
---------
21.16 No Partnership or Joint Venture................................65
-------------------------------
21.17 Entire Agreement...............................................65
----------------
21.18 Costs and Attorneys' Fees......................................65
-------------------------
21.19 Approval of Landlord...........................................65
--------------------
21.20 Successors and Assigns.........................................65
----------------------
21.21 Waiver of Jury Trial...........................................65
--------------------
21.22 Treatment of Lease.............................................66
------------------
21.23 Transfer of Licenses...........................................66
--------------------
21.24 Tenant's Personal Property.....................................66
--------------------------
21.25 Landlord's Representations.....................................66
--------------------------
21.26 Guaranty of Lease..............................................66
-----------------
21.27 Guaranty of ARC-Related Leases.................................67
------------------------------
EXHIBITS
Exhibit "A" - The Land
Exhibit "B" - Minimum Rent
Exhibit "C" - Appraisal Process
Exhibit "D" - Tenant Estoppel Certificate
Exhibit "E" - Memorandum of Lease
Exhibit "F" - Single Purpose Entity Requirements
Exhibit "G" - Tenant Equity Ownership
Exhibit "H"- Property Expenses
Exhibit "I" - Initial Landlord P&E
Exhibit "J" - Initial Tenant Personal Property
Exhibit "K" - Fallback Shortfall Assumption
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of October 31, 2002, by and
between CNL RETIREMENT - AM/TENNESSEE LP, a Delaware limited partnership, as
landlord ("Landlord"), and HOMEWOOD AT BROOKMONT TERRACE, LLC, a Tennessee
limited liability company, as tenant ("Tenant").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Landlord has heretofore acquired fee simple title to the Land
and the Facility (these and other capitalized terms used and not otherwise
defined herein having the meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and
Tenant wishes to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows: ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article and used in this Agreement shall have the meanings assigned to them in
this Article and include the plural as well as the singular, (ii) all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
accordance with GAAP, (iii) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Agreement, and (iv) the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular Article, Section or other subdivision.
"Accessibility Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to accessibility for the disabled or handicapped, including, but not limited to,
any applicable provisions of The Architectural Barriers Act of 1968, The
Rehabilitation Act of 1973, The Fair Housing Act of 1988, The Americans With
Disabilities Act, the accessibility code(s), if any, of the State in which the
Leased Property is located, and all regulations and guidelines promulgated under
any all of the foregoing, as the same may be amended from time to time.
"Accounting Period" shall mean each calendar month accounting period of
Tenant. If Tenant shall, for a bona fide business reason, change its accounting
period during the Term, appropriate adjustments, if any, shall be made with
respect to the timing of applicable accounting and reporting requirements of
this Agreement; provided, however, that in no event shall any such change or
adjustment alter the amount or frequency of payment of Minimum Rent within any
Fiscal Year, or alter the frequency of payment of Percentage Rent to less than
four (4) times within any Fiscal Year, or otherwise increase or reduce any
monetary obligation under this Agreement.
"Accounting Year" shall mean each period of twelve (12) consecutive
Accounting Periods during the Term of this Agreement; the first Accounting Year
shall commence with the first full Accounting Period after the Commencement Date
of this Agreement.
"Additional Charges" shall have the meaning given such term in Section
3.4.
"Additional Rent" shall have the meaning given such term in Section
3.5.
"Affiliated Person" shall mean, with respect to any Person, (i) any
Person directly or indirectly Controlling, Controlled by or under common Control
with any such Person, (ii) in the case of any such Person which is a
partnership, any partner in such partnership, (iii) in the case of any such
Person which is a limited liability company, any member of such company, (iv) in
the case of any such Person which is a corporation, any officer, director or
stockholder of such corporation, (v) any other Person which is a Parent, a
Subsidiary, or a Subsidiary of a Parent with respect to such Person or to one or
more of the Persons referred to in the preceding clauses (i) through (iv), (vi)
any other Person who is an officer, director, trustee or employee of, or partner
in, such Person or any Person referred to in the preceding clauses (i) through
(v) and (vii) any other Person who is a member of, or trustee of any trust for
the benefit of, the Immediate Family of such Person or of any Person referred to
in the preceding clauses (i) through (vi). Provided, however, a Person shall not
be deemed to be an Affiliated Person solely by virtue of the ownership of shares
of stock registered under the Securities Act of 1934, as amended, unless such
Person, as holder of such stock, is required to file a Schedule 13 D, pursuant
to Section 13(d) of such Act and Rule 13 d-1 promulgated thereunder.
"Agreement" shall mean this Lease Agreement, including all Exhibits
hereto, as it and they may be amended or restated from time to time as herein
provided.
"Annual Operations Statement" shall have the meaning given such term in
Section 3.3.2.
"Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations of any
kind, including without limitation, those relating to (i) damage to, or the
protection of real or personal property, (ii) human health and safety (except
those requirements which, by definition, are solely the responsibility of
employers), (iii) the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil xxxxx), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil xxxxx), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, (iv) Accessibility Laws, (v) dementia care/assisted facility licensure
or (vi) participation in Medicare or Medicaid programs.
"Applicable Reserve Percentage" shall mean, with respect to any
Accounting Period, or portion thereof, the greater of $250.00 per year per
licensed bed or living unit located on the Leased Property, prorated for such
Accounting Period and divided by and expressed as a percentage of Total Facility
Revenues for such Accounting Period, or (i) with respect to the period beginning
on the later to occur of the Opening Date or the Commencement Date and ending on
the last day of the twenty-fourth (24th) full Accounting Period next following,
one percent (1%) of Total Facility Revenue; (ii) with respect to the
twenty-fifth (25th) through sixtieth (60th) full Accounting Periods next
following the Opening Date, two percent (2%) of Total Facility Revenue; and
(iii) with respect to each Accounting Period thereafter, three percent (3%) of
Total Facility Revenue.
"Approved Reserve Estimate" shall have the meaning given such term in
Section 5.2.3.
"ARC-Related Leases" shall mean, collectively, all present and future
property leases between Landlord or CNL Retirement, or any Affiliated Person of
Landlord or CNL Retirement, as landlord, and Tenant or Guarantor or any
Affiliated Person of Tenant or Guarantor, as tenant.
"Business Day" shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State are authorized by law or
executive action to close.
"Calculation Period" shall mean each successive period of four (4)
consecutive Fiscal Quarters commencing with the first Fiscal Quarter following
the acquisition by Landlord of the Leased Property.
"Cash Available for Lease Payments" shall mean for any Calculation
Period the remainder of (i) Total Facility Revenue for the Leased Property
during such Calculation Period, less (ii) Property Expenses for the Leased
Property for the same Calculation Period.
"CNL Retirement" shall mean CNL Retirement Properties, Inc., a Maryland
corporation.
"Code" shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as amended
from time to time.
"Commencement Date" shall mean the date of this Agreement.
"Condemnation" shall mean (a) the exercise of any governmental power
with respect to the Leased Property, whether by legal proceedings or otherwise,
by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer of
the Leased Property by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting the
Leased Property, whether or not the same shall have actually been commenced.
"Condemnor" shall mean any public or quasi-public authority, or Person
having the power of Condemnation.
"Conflicting Business" shall have the meaning given such term in
Section 4.3.
"Control" (including the correlative meanings of the terms
"Controlling", "Controlled by", and "under common Control with") as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of such Person
whether through the ownership of voting securities, by contract or otherwise.
"CRC" shall mean CNL Retirement Corp., a Florida corporation.
"Default" shall mean any event or condition existing which with the
giving of notice and/or lapse of time would ripen into an Event of Default.
"Disbursement Rate" shall mean an annual rate of interest equal to the
greater of, as of the date of determination, (i) ten percent (10%) and (ii) the
per annum rate for ten (10) year U.S. Treasury Obligations as published in The
Wall Street Journal plus three hundred fifty (350) basis points.
"Distribution" shall mean (a) any declaration or payment of any
dividend on or in respect of any shares of any class of capital stock of Tenant,
if Tenant is a corporation, or any cash distributions in respect of any
partnership interests or membership interests in Tenant, if Tenant is a
partnership or a limited liability company, (b) any purchase, redemption,
retirement or other acquisition of any shares of any class of capital stock of
Tenant, if Tenant is a corporation, or any purchase, redemption, retirement or
other acquisition of any partnership or membership interests in Tenant, if
Tenant is a partnership or a limited liability company, (c) any other
distribution on or in respect of any shares of any class of capital stock of
Tenant, if Tenant is a corporation, or any other distribution in respect of any
partnership interests or membership interests in Tenant, if Tenant is a
partnership or a limited liability company, or (d) any return of capital to
shareholders of Tenant, if Tenant is a corporation, or any return of capital to
partners of Tenant, if Tenant is a partnership or a limited liability company.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, cooperative, any government or agency or political subdivision thereof or
any other entity.
"Environment" shall mean soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"Event of Default" shall have the meaning given such term in Section
12.1.
"Extended Terms" shall have the meaning given such term in Section 2.4.
"Facility" shall mean the assisted living and dementia care facility
located and operated on the Land.
"Facility Mortgage" shall mean any encumbrance placed upon the Leased
Property as referenced in Article 19.
"Fiscal Quarter" shall mean the first, second, third and fourth
three-month period (each consisting of three Accounting Periods) during each
Fiscal Year.
"Fiscal Year" shall mean Tenant's Fiscal Year which as of the
Commencement Date begins on January 1 and ends on December 31 in each calendar
year. Any partial Fiscal Year between the Commencement Date and the commencement
of the first full Fiscal Year (except with respect to the calculation and
payment of Minimum Rent as referenced in Section 3.1 of this Agreement), shall
constitute a separate Fiscal Year. A partial Fiscal Year between the end of the
last full Fiscal Year and the termination of this Agreement shall also
constitute a separate Fiscal Year. If Tenant's Fiscal Year is changed in the
future, appropriate adjustments to this Agreement's reporting and accounting
procedures shall be made; provided, however, that no such change or adjustment
shall alter the Term of this Agreement or in any way reduce the distribution of
Percentage Rent or other payments due hereunder. Each full Fiscal Year shall
consist of twelve Accounting Periods.
"Force Majeure Event" means any circumstance which is not in the
reasonable control of either party hereto, caused by any of the following:
strikes, lockouts; acts of God; civil commotion; fire or any other casualty;
governmental action; or other similar cause or circumstance which is not in the
reasonable control of either party hereto. Neither lack of financing nor general
economic and/or market factors is a Force Majeure Event.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Guarantor" shall mean American Retirement Corporation, a Tennessee
corporation ("Guarantor").
"Government Agencies" shall mean any legislative body, court, agency,
authority, board (including, without limitation, health and long term care,
environmental protection, planning and zoning), bureau, commission, department,
office or instrumentality of any nature whatsoever of any governmental or
quasi-governmental unit of the United States or the State or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Tenant or the Leased Property or any portion
thereof or the assisted living and dementia care facility operated thereon.
"Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste", "hazardous
material" or "hazardous substance" or "pollutant" or "contaminant"
under any present or future federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. et seq.) and the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.) and the regulations
promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, any
state of the United States, or any political subdivision thereof; or
(d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased
Property or to adjacent properties or poses or materially threatens to
pose a hazard to the Leased Property or to the health or safety of
persons on or about the Leased Property; or
(e) without limitation, which contains gasoline, diesel fuel or
other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated biphenyls
(PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or may
hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, parents, brothers, sisters, children (natural or adopted),
stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law,
sisters-in-law, nephews and nieces.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.
"Initial Landlord P&E" shall mean and refer to all P&E of any kind or
description which are located on or in the Leased Improvements as of the
Commencement Date, including without limitation those items enumerated on
Exhibit "I" attached hereto and made a part hereof, but specifically excluding
any specific items of Tenant's Personal Property identified on Exhibit "J"
attached hereto and made a part hereof.
"Initial Term" shall have the meaning given such term in Section 2.3.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and regulations and any other requirements of the National
Board of Fire Underwriters (or any other body exercising similar functions)
binding upon Landlord, Tenant or the Leased Property.
"Inventories" shall mean all inventories, as such term is customarily
used and defined in its most broad and inclusive sense including, but not
limited to, all inventories of food, beverages and other consumables held by
Tenant for sale or use at or from the Leased Property or the Facility, and soap,
cleaning supplies, paper supplies, operating supplies, china, glassware, silver,
linen, uniforms, building and maintenance supplies, spare parts and attic stock,
medical supplies, drugs and all other such goods, wares and merchandise held by
Tenant for sale to or for consumption by residents or patients of the Leased
Property or the Facility and all such other goods returned to or repossessed by
Tenant.
"Land" shall have the meaning given such term in Section 2.1(a).
"Landlord" shall have the meaning given such term in the preambles to
this Agreement and shall include its successors and assigns.
"Landlord's Original Investment" shall mean the sum of EIGHT MILLION
NINE HUNDRED FIFTY-SEVEN THOUSAND EIGHT HUNDRED FIFTY AND NO/100 DOLLARS
($8,957,850.00), which represents, for purposes of this Lease, Landlord's total
acquisition and transactional costs incurred in acquiring the Leased Property.
"Lease" shall mean this Lease Agreement, including all Exhibits hereto,
as it and they may be amended or restated from time to time as herein provided.
"Lease Year" shall mean any Fiscal Year during the Term and any partial
Fiscal Year at the beginning or end of the Term.
"Leased Improvements" shall have the meaning given such term in Section
2.1(b).
"Leased Intangible Property" shall mean all transferable or assignable
(a) governmental permits, including licenses and authorizations, required for
the construction, ownership and operation of the Leased Improvements, including
without limitation, certificates of need, certificates of authority,
certificates of occupancy, building permits, signage permits, site use
approvals, zoning certificates, environmental and land use permits and any and
all necessary approvals from state or local authorities and other approvals
granted by any public body or by any private party pursuant to a recorded
instrument relating to such Leased Improvements or the Land; (b) development
rights, trade names, telephone exchange numbers identified with the Leased
Property, if any (specifically excluding, however, any specific items of
Tenant's Personal Property identified on Exhibit "J" hereto, but including
without limitation the use of "Homewood" or "Brookmont Terrace" as part of a
trade name); and (c) certificates, licenses, warranties and guarantees and
contracts other than such permits, operating permits, certificates, licenses and
approvals which are to held by, or transferred to, the Tenant in order to permit
the Tenant to operate such Leased Improvements properly and in accordance with
the terms of this Agreement.
"Leased Property" shall have the meaning given such term in Section
2.1.
"Legal Requirements" shall mean all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Property or the
maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate the Leased Property for its Permitted Use, (b) all covenants,
agreements, declarations, restrictions and encumbrances contained in any
instruments at any time in force affecting the Leased Property or to which
Tenant has consented or which are required to be granted pursuant to Applicable
Laws, including those which may (i) require material repairs, modifications or
alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment thereof, but excluding any requirements
arising as a result of Landlord's status as a real estate investment trust, and
(c) Applicable Laws.
"Lien" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, or any transfer of
property or assets for the payment of Indebtedness or performance of any other
obligation in priority to payment of the obligor's general creditors.
"Major Alterations" shall have the meaning given such term in Section
6.2.2.
"Major Violation" shall mean any violation of Applicable Laws relating
to the use, operation or maintenance of the Facility or to the care of residents
which presents an imminent danger to the residents or guests of the Facility or
a substantial probability that death or serious harm would result therefrom.
"Minimum Rent" shall mean annual rent as set forth in Section 3.2,
subject to prorations and adjustments as set forth in Section 3.2.
"Minimum Rent Coverage" shall mean the quotient, expressed as a ratio,
of (i) the total Cash Available for Lease Payments during the Calculation Period
divided by the (ii) total Minimum Rent paid under this Agreement for the Leased
Property during such Calculation Period.
"Minor Alterations" shall have the meaning given such term in Section
6.2.1.
"Mortgagee" shall mean the holder of any Facility Mortgage.
"Notice" shall mean a notice given in accordance with Section 21.10.
"Opening Date" shall mean the date on which the Facility first opened
for business to the general public.
"Overdue Rate" shall mean, on any date, a per annum rate of interest
equal to the lesser of (i) fifteen percent (15%) or (ii) the maximum rate then
permitted under applicable law.
"P&E" shall mean all items of personal property, as defined under the
Model Uniform Commercial Code, including, but not limited to: (a) all equipment,
machinery, fixtures, and other items of property, now or hereafter permanently
affixed to or incorporated into the Leased Improvements, including, without
limitation, all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, all of
which, to the maximum extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements, modifications,
alterations and additions thereto; (b) all furniture, furnishings, movable walls
or partitions, moveable machinery, moveable equipment, computers or trade
fixtures or other personal property of any kind or description used or useful in
Tenant's business on or in the Leased Improvements, and located on or in the
Leased Improvements, and all modifications, replacements, alterations and
additions to such personal property; (c) all linen, china, glassware, tableware,
uniforms and similar items, whether used in connection with public space or
tenant rooms; and (d) "Property and Equipment," "P&E," and "FF&E" (as such terms
are customarily used and defined in the most broad and inclusive sense), as well
as all other items included within the category of Inventory; and including,
without limitation, the Initial Landlord P&E, but not including, however, any
item of Tenant's Personal Property identified in Exhibit "J" hereto.
"P&E Replacements" shall mean all items purchased with funds from the
Reserve established under Article 5 of this Lease and all other items of P&E
added and used at the Leased Property during the Term of this Lease, together
with all leasehold improvements made by Tenant during the Term of this Lease to
the extent not constituting real property affixed to the Land, whether purchased
from the Reserve or with other funds of Tenant, all subject to disposal and
further replacement at the end of their useful lives.
"Parent" shall mean, with respect to any Person, any Person which
directly, or indirectly through one or more Subsidiaries or Affiliated Persons,
(i) owns more than fifty percent (50%) of the voting or beneficial interest in,
or (ii) otherwise has the right or power (whether by contract, through ownership
of securities or otherwise) to control, such Person.
"Percentage Rent" shall have the meaning given such term in Section
3.3.
"Permits" means all licenses, permits and certificates used or useful
in connection with the ownership, operation, use or occupancy of the Leased
Property or the Facility, including, without limitation, business licenses,
state and local health and environmental department licenses, any other licenses
required in connection with the operation of the Facility for assisted living
and dementia care purposes, food service licenses, licenses to conduct business,
certificates of need and all such other permits, licenses and rights, obtained
from any governmental, quasi-governmental or private person or entity
whatsoever.
"Permitted Encumbrances" shall mean all rights, restrictions, and
easements of record set forth on Schedule B to the applicable owner's title
insurance policy issued to Landlord for the Land, plus any other such
encumbrances as may have been consented to in writing by Landlord from time to
time.
"Permitted Renovations" shall have the meaning given that term in
Section 6.2.
"Permitted Use" shall mean any use of the Leased Property permitted
pursuant to Section 4.1.1.
"Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Property Expenses" shall mean those expenses more particularly
described on Exhibit "H" attached hereto.
"Proscribed Area" shall have the meaning given such term in Section
4.3.
"Reimbursement Contracts" means all third party reimbursement contracts
for the Facility which are now or hereafter in effect with respect to residents
or patients qualifying for coverage under the same, including private insurance
agreements, Medicare and Medicaid and any successor program or other similar
reimbursement program and/or private insurance agreements.
"Rent" shall mean, collectively, Minimum Rent, Percentage Rent and
Additional Rent.
"Reserve" shall have the meaning given such term in Section 5.2.
"Reserve Estimate" shall have the meaning given such term in Section
5.2.
"Reserve Expenditures" shall have the meaning given such term in
Section 5.2.
"SEC" shall mean the Securities and Exchange Commission.
"Security Deposit" shall have the meaning given such term in Section
3.10.
"Shortfall" shall mean, for any Accounting Period, the amount, if any,
by which (i) all Minimum Rent paid by Tenant (or payable pursuant to the terms
of this Agreement, whichever is greater) plus all Property Expenses paid during
such Accounting Period, exceeds (ii) the total amount of Total Facility Revenue
derived from the Leased Property during such Accounting Period. The Shortfall
for any Accounting Period shall in no event be less than zero.
"Shortfall Amount Funded" shall mean, for any period, the cumulative
amount of any and all Shortfalls funded by or on behalf of Tenant during such
period.
"Shortfall Forecast" shall mean, for each Calculation Period beginning
during the Term of the Lease until such time, if ever, as the Shortfall Reserve
Requirement shall no longer apply, the cumulative sum of any and all forecasted
Shortfalls as estimated in good faith and certified to Landlord by Tenant and
approved by Landlord for such Calculation Period in accordance with Section 3.9.
"Shortfall Reserve Period" shall mean the period commencing with the
Commencement Date and ending only at such time as the Shortfall Reserve
Requirement is no longer applicable as provided in Section 3.9.
"Shortfall Reserve Requirement" shall at any time mean the greater of
(a) one hundred twenty-five percent (125%) of the Shortfall Forecast, if any,
for the then current and following three (3) Fiscal Quarters (calculated as of
the commencement of the then-current Fiscal Quarter), less the amount of any
Shortfall Amount Funded during the current Fiscal Quarter; or (b) three hundred
percent (300%) of the Shortfall, if any, during the most recent Accounting
Period.
"Single Purpose Entity" shall have the meaning given such term in
Exhibit "F" attached hereto.
"State" shall mean the State in which the Facility is located.
"Subsidiary" shall mean, with respect to any Person, any Entity in
which such Person directly, or indirectly through one or more Subsidiaries or
Affiliated Persons, (a) owns more than fifty percent (50%) of the voting or
beneficial interest or (b) which such Person otherwise has the right or power to
control (whether by contract, through ownership of securities or otherwise).
"Tax and Insurance Account" shall have the meaning given such term in
Section 8.3.
"Tax and Insurance Escrow Amount" shall have the meaning given such
term in Section 8.3.
"Tenant" shall be the entity identified in the preamble to this
Agreement and shall include its successors and assigns expressly permitted
hereunder.
"Tenant Shortfall Reserve" shall have the meaning given such term in
Section 3.9.
"Tenant's Personal Property" shall mean any specific items of P&E
listed in Exhibit "J" to this Lease, or replacements for such items or items
within any specific categories of P&E listed in Exhibit "J" to this Lease which
hereafter are acquired by Tenant with its own funds after the Commencement Date
and located at the Leased Property (but not including any property purchased
with funds from the Reserve established under Section 5.2).
"Term" shall mean, collectively, the Initial Term and the Extended
Terms, unless sooner terminated pursuant to the provisions of this Agreement.
"Threshold" shall mean the sum of Total Facility Revenue for the twelve
(12) Accounting Periods ending on the earlier to occur of (i) the end of the
thirty-sixth (36th) full Accounting Period following the Commencement Date, or
(ii) the end of the first (1st) Accounting Period where occupancy of the
Facility has averaged ninety-three percent (93%) or more for the preceding
twelve (12) Accounting Periods, inclusive of such Accounting Period.
"Total Facility Revenue" shall mean, for the applicable period of time,
but without duplication, all gross revenues and receipts of every kind derived
by or for the benefit of Tenant, or its Affiliated Persons from operating or
causing the operation of the Leased Property and all parts thereof, including,
but not limited to: income from both cash and credit transactions (after
reasonable deductions for bad debts and discounts for prompt or cash payments
and refunds) from rental or subleasing of every kind; entrance fees, fees for
health care and personal care services, license, lease and concession fees and
rentals, off premises catering, if any, and parking (not including gross
receipts of licensees, lessees and concessionaires); income from vending
machines; health club membership fees; food and beverage sales; wholesale and
retail sales of merchandise (other than proceeds from the sale of furnishings,
fixtures and equipment no longer necessary to the operation of the Facility,
which shall be deposited in the Reserve) and service charges, to the extent not
distributed to employees at the Facility as gratuities; provided, however, that
Total Facility Revenue shall not include the following: gratuities to Facility
employees; federal, state or municipal excise, sales, occupancy, use or similar
taxes collected directly from residents or included as part of the sales price
of any goods or services; insurance proceeds; any proceeds from any sale of the
Leased Property or from the refinancing of any debt encumbering the Leased
Property; proceeds from the disposition of furnishings, fixture and equipment no
longer necessary for the operation of the Facility; and interest which accrues
on amounts deposited in the Reserve.
"Unsuitable for Its Permitted Use" shall mean a state or condition of
the Leased Property such that following any damage or destruction involving the
Leased Property, the Leased Property cannot be operated in the reasonable
judgment of Landlord (after conferring with Tenant) on a commercially
practicable basis for its Permitted Use and it cannot reasonably be expected to
be restored to substantially the same condition as existed before such damage or
destruction and as is otherwise required by Article 12 within (i) twelve (12)
months following such damage or destruction, or (ii) eighteen (18) months
following such damage or destruction in the event that Tenant has extended the
term of the business income insurance to pay at least eighteen (18) months Rent
for the benefit of Landlord or provides other reasonably acceptable security for
any uninsured portion of the eighteen (18) months Rent.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord all of Landlord's right, title and interest in and to all of the
following (collectively, the "Leased Property"):
(a) all that certain tract, piece and parcel of land, as more
particularly described in Exhibit "A", attached hereto and made a part
hereof (the "Land");
(b) the Facility, all buildings, structures and other improvements
of every kind, including without limitation all roofs, plumbing
systems, electric systems and HVAC systems, roadways, alleyways,
parking areas, sidewalks, curbs, connecting tunnels, utility pipes,
conduits and lines (on-site and off-site) appurtenant to or presently
situated upon the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(d) all P&E and Inventory;
(e) [Intentionally Omitted.]
(f) all of the Leased Intangible Property;
(g) any and all subleases of space in the Leased Improvements to
subtenants thereof; and
(h) All other property and interests in property conveyed or
assigned to Landlord pursuant to the Real Estate Purchase and Sale
Contract governing the sale and conveyance of the Leased Property from
Tenant to Landlord dated as of even date herewith (the "Purchase
Agreement").
2.2 Condition of Leased Property. Tenant acknowledges and agrees that
the Leased Property is and shall be leased by Landlord to Tenant and from
Landlord by Tenant in its present "as is" condition, subject to the existing
state of title and all applicable legal or governmental requirements, and
Landlord makes absolutely no representations or warranties whatsoever with
respect to the Leased Property or the condition thereof. Tenant acknowledges
that Landlord has not investigated and does not warrant or represent to Tenant
that the Leased Property is fit for the purposes intended by Tenant or for any
other purpose or purposes whatsoever, and Tenant acknowledges that the Leased
Property is to be leased to Tenant in its existing condition, i.e., "as-is", and
"where-is", without any representation or warranty as to habitability or fitness
for any particular purpose, on and as of the Commencement Date. Tenant
represents and acknowledges that all permits, licenses and approvals required by
any governmental or quasi-governmental, body, department, commission, board,
bureau, instrumentality or officer, or otherwise appropriate with respect to the
construction, operation, leasing, maintenance or use of the Leased Property or
any part thereof, have been issued, are past all appeals periods and are valid
and in full force and effect and that no provision, condition or limitation of
any of the same has been breached or violated. Tenant acknowledges that Tenant
shall be solely responsible for any and all actions, repairs, permits, approvals
and costs required for the rehabilitation, renovation, use, occupancy and
operation of the Leased Property in accordance with applicable governmental
requirements, foreseen or unforeseen, including, without limitation, all
governmental charges and fees, if any, which may be due or payable to applicable
authorities. Tenant agrees that, by leasing the Leased Property, Tenant warrants
and represents that Tenant has examined and approved all things concerning the
Leased Property which Tenant deems material to Tenant's leasing and use of the
Leased Property. Tenant further acknowledges and agrees that (a) neither
Landlord nor any agent of Landlord has made any representation or warranty,
express or implied, concerning the Leased Property or which have induced Tenant
to execute this Agreement and (b) any other representations and warranties are
expressly disclaimed by Landlord.
2.3 Initial Term. The initial term of this Agreement (the "Initial
Term") shall commence on the Commencement Date and shall terminate and expire at
11:59 p.m. on the last calendar day of the month on which the fifteenth (15th)
annual anniversary of the Commencement Date shall occur.
2.4 Extended Term. Tenant shall have and is hereby granted two (2)
option(s) to extend this Agreement for an additional five (5) years each
(individually an "Extended Term"), upon the same terms, covenants, conditions
and rental as set forth herein; provided there exists no continuing Event of
Default hereunder, or Default which Tenant has had an opportunity but failed to
cure as provided hereunder, during any applicable cure hereunder at the
commencement of the respective Extended Term. Tenant may exercise each such five
(5) year option successively by giving written notice to Landlord not less than
twelve (12) months nor more than eighteen (18) months prior to the respective
expiration of the Initial Term of this Agreement or of the then applicable
Extended Term. Should Tenant fail to give Landlord such timely written notice
during the required period, all remaining rights of renewal shall automatically
expire.
2.5 Yield Up. Tenant shall, on or before the last day of the Term or
upon the sooner termination thereof, peaceably and quietly surrender and deliver
to Landlord the Leased Property, including, without limitation, all Leased
Improvements and P&E and all additions thereto and replacements thereof made
from time to time during the Term, together with and including without
limitation the P&E Replacements, in good order, condition and repair, reasonable
wear and tear excepted, and free and clear of all liens and encumbrances (other
than Permitted Encumbrances, liens or encumbrances in favor of or granted by
Landlord, and any other encumbrances expressly permitted under the terms of this
Agreement). Tenant acknowledges that both the Initial Landlord P&E described on
Exhibit "I" attached hereto and consumable items of Inventory located at the
Leased Property as of the Commencement Date may be completely consumed and/or
otherwise disposed of in the course of operation of the Leased Property during
the Term of this Agreement. Tenant agrees that, at the expiration or earlier
termination of this Agreement, at Landlord's option: (i) Tenant shall fully
restore the Initial Landlord P&E, inclusive with and after consideration of all
P&E Replacements which will become the property of Landlord, to at least the
approximate types and amounts (with reasonably equivalent value) as shown on
Exhibit "I", and shall fully restore an adequate supply of Inventory consistent
with the full stocking levels to be maintained by Tenant pursuant to Section 4.6
of this Lease (or a full thirty days supply, which ever is greater), or (ii)
Landlord shall deduct the then-current value of amounts needed to fully restore
the required P&E and Inventory, as aforesaid, to the extent that this sum
exceeds the Reserve amount to be transferred to Landlord under Section 5.2.6
hereof, from the Security Deposit.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Rent to Landlord during the Term at the address to
which notices to Landlord are to be given or to such other party or to such
other address as Landlord may designate from time to time by written notice to
Tenant. All payments to Landlord shall be made by wire transfer of immediately
available federal funds or by other means acceptable to Landlord in its sole
discretion and all such payments shall, upon receipt by Landlord, be and remain
the sole and absolute property of Landlord. If Landlord shall at any time accept
any such Rent or other sums after the same shall become due and payable, or any
partial payment of Rent, such acceptance shall not excuse a delay upon
subsequent occasions, or constitute or be construed as a waiver of any of
Landlord's rights hereunder. The parties hereby agree that Rent shall be
allocted as follows: 6.68% to personal property and 93.32% to real property.
3.2 Minimum Rent. Tenant shall pay annual base minimum rent ("Minimum
Rent") to Landlord in equal installments in advance, on the first (1st) Business
Day of each Accounting Period; provided, however, that the first payment of
Minimum Rent shall be payable on the Commencement Date. Further, if applicable,
the first payment of Minimum Rent and the last payment of Minimum Rent shall be
prorated on a per diem basis provided, however, that for purposes of Minimum
Rent, any prorated payment for any partial Accounting Period prior to the first
full Accounting Period shall be prorated based upon the installment of Minimum
Rent payable for the first full Accounting Period, and any prorated Rent at the
end of the Term shall be prorated based upon the installment of Minimum Rent
payable for the last full Accounting Period.
3.2.1 Calculation of Initial Term Minimum Rent. Subject to
proration as set forth above, Tenant shall pay Minimum Rent during each
Accounting Year of the Initial Term of this Agreement in the amounts set forth
on Exhibit "B" attached hereto and made a part hereof.
3.2.2 Calculation of Extended Term Minimum Rent. Subject to
proration as set forth above, Tenant shall pay Minimum Rent under this Agreement
during the first Accounting Year of each Extended Term in an amount equal to the
greater of:
(a) Two and one half percent (2.5%) over the amount of
Minimum Rent due in the immediately preceding Accounting Year; or
(b) the product of the fair market value of the Leased
Property on the date of Tenant's Notice of exercise pursuant to
Section 2.4, times ten and one quarter percent (10.25%).
Minimum Rent for each Accounting Year after the first Accounting Year
in an Extended Term shall increase by two percent (2%) over the amount
of Minimum Rent due in the immediately preceding Accounting Year.
If within ten (10) days of the date of Tenant's Notice of exercise
pursuant to Section 2.4, Landlord and Tenant are unable to agree on the
fair market value of the Premises for purposes of this calculation,
such fair market value shall be established by the appraisal process
described on Exhibit "C" attached hereto. Landlord and Tenant
acknowledge and agree that this Section is designed to establish a fair
market Minimum Rent for the Leased Property during each applicable
Extended Term. In the event that the Minimum Rent for the applicable
Extended Term is not finally determined by such appraisal process prior
to the commencement of the Extended Term, then in such event until such
amount is finally determined the Tenant shall pay to Landlord as
"Interim Rent" for the Extended Term an amount equal to one hundred
twenty-five percent (125%) of the established Minimum Rent as of the
end of the Accounting Year immediately preceding the Extended Term
until such appraisal process and any dispute relating thereto is
finally resolved. In such an event, the amount of any differential
between the Interim Rent and Minimum Rent established shall, if
resulting in an underpayment, be paid by Tenant to Landlord within
fifteen (15) days, or if resulting in an overpayment be credited by
Landlord against the next installment(s) of Rent coming due hereunder.
3.3 Percentage Rent. In addition to and not in lieu of Minimum Rent,
Tenant shall pay percentage rent ("Percentage Rent") to Landlord for each Fiscal
Year or portion thereof. Installments of Percentage Rent shall be due and
payable in arrears within thirty (30) days after the end of each Fiscal Quarter
of the Term hereof, based upon Total Facility Revenue for such Fiscal Quarter
and an allocation of one-quarter of the Threshold amount to each such Fiscal
Quarter; provided, however, that no Percentage Rent shall be payable hereunder
with respect to the initial portion of the Term ending on the earlier of (i) the
end of the Thirty-Sixth (36th) full Accounting Period following the Commencement
Date, or (ii) the end of the first (1st) Accounting Period where occupancy of
the Facility has averaged ninety-three percent (93%) or more for the preceding
twelve (12) Accounting Periods, inclusive of such Accounting Period. Along with
each Percentage Rent payment Tenant shall submit to Landlord an unaudited (but
certified by a duly authorized officer of Tenant or Tenant's general partner or
managing member, if applicable) statement showing a detailed breakdown of the
calculation of Percentage Rent for that Fiscal Quarter and Fiscal Year-to-date
on a cumulative basis. Percentage Rent for any partial Fiscal Quarter in the
final Fiscal Year shall be prorated proportionately. Tenant's obligation to pay
Percentage Rent for the Fiscal Quarter which includes the date of termination of
this Agreement shall survive the termination hereof.
3.3.1 Calculation of Percentage Rent. Subject to proration as set
forth above, Tenant shall pay Percentage Rent in respect of each Fiscal Year
under this Agreement equal to (a) ten percent (10%) of the Total Facility
Revenue for such Fiscal Year in excess of the Threshold, less (b) the amount by
which annual Minimum Rent in the Fiscal Year for which Percentage Rent is being
calculated exceeds the amount of annual Minimum Rent due for the first (1st)
Accounting Year under this Agreement.
3.3.2 Annual Reconciliation of Percentage Rent. Tenant shall, no
later than ninety (90) days following the end of each Fiscal Year during the
Term hereof furnish to Landlord for such Fiscal Year a complete statement (the
"Annual Operations Statement") certified true and correct by the Chief Financial
Officer of Tenant, or of Tenant's general partner or managing member, if
applicable, and the Chief Financial Officer of the Guarantor, setting forth,
with respect to such Fiscal Year in reasonable detail the Total Facility Revenue
derived by or for the benefit of Tenant in respect of such Fiscal Year. If the
Annual Operations Statement for any Fiscal Year indicates that the aggregate of
the installment payments theretofore made with respect to such Fiscal Year
pursuant to Section 3.3.1 exceeds the Percentage Rent due for such Fiscal Year,
Landlord shall credit such overpayment against the next installment or
installments of Minimum Rent falling due (or will pay the amount of such
overpayment to Tenant if this Agreement shall have terminated other than by
reason of Tenant's default or if Landlord so elects to do so). If, on the other
hand, the Annual Operations Statement indicates that the aggregate of the
installment payments theretofore made with respect to such Fiscal Year is less
than the Percentage Rent due for such Fiscal Year then Tenant shall pay the
balance or excess, as the case may be, together with interest thereon determined
as set forth below in this paragraph, to Landlord concurrently with the
submission of the Annual Operations Statement. Interest shall accrue on payments
pursuant to this paragraph at the Disbursement Rate from the date when first due
and payable until the date when the adjusted amount is fully paid in the manner
as set forth above, except to the extent of de minimus adjustments of not more
than ten percent (10%) of the amount initially paid resulting from the
calculation method used or unintentional errors which could not reasonably have
been avoided by reasonable care and diligence.
3.3.3 Landlord Audit of Annual Operations Statement.
Notwithstanding the foregoing, Landlord at its own expense, except as provided
hereinbelow, shall have the right, exercisable by Notice to Tenant given within
270 days after receipt of the applicable Annual Operations Statement, by its
accountants or representatives, to commence within such 270 day period an audit
of the information set forth in such Annual Operations Statement and, in
connection with such audit, to examine all of Tenant's books and records with
respect thereto (including supporting data and sales and excise tax returns);
provided, however, if Landlord reasonably believes Tenant has intentionally
misrepresented Total Facility Revenue on any such Annual Operations Statement,
the said 270 day period shall commence to run on the date Landlord obtains
credible evidence that Tenant has intentionally misrepresented Total Facility
Revenue on any such Annual Operations Statement. If Landlord does not commence
an audit with such 270 day period, such Annual Operations Statement shall be
deemed to be accepted by Landlord as correct. Landlord shall use commercially
reasonable efforts to complete any such audit as soon as practicable. If such
audit discloses a deficiency in the payment of Percentage Rent, Tenant shall
forthwith pay to Landlord the amount of the deficiency, together with interest
at the Disbursement Rate from the date such payment should have been made to the
date of payment therefore. If such deficiency is more than three percent (3%) of
the Total Facility Revenue reported by Tenant for such Fiscal Year, Tenant shall
also pay the costs of such audit and examination.
3.4 Additional Charges. In addition to the Minimum Rent and Percentage
Rent payable hereunder, Tenant shall pay to the appropriate parties and
discharge as and when due and payable hereunder the following (collectively the
"Additional Charges"): 3.4.1 Taxes and Assessments. Tenant shall pay or cause to
be paid all taxes and assessments required to be paid pursuant to Article 8.
3.4.2 Utility Charges. Tenant shall be liable for and shall
promptly pay directly to the utility company all deposits, charges and fees
(together with any applicable taxes or assessments thereon) when due for water,
gas, electricity, air conditioning, heat, septic, sewer, refuse collection,
telephone and any other utility charges, impact fees, or similar items in
connection with the use or occupancy of the Leased Property. Landlord shall not
be responsible or liable in any way whatsoever for the quality, quantity,
impairment, interruption, stoppage, or other interference with any utility
service, including, without limitation, water, air conditioning, heat, gas,
electric current for light and power, telephone, or any other utility service
provided to or serving the Leased Property. No interruption, termination or
cessation of utility services shall relieve Tenant of its duties and obligations
pursuant to this Agreement, including, without limitation, its obligation to pay
all Rent as and when the same shall be due hereunder.
3.4.3 Insurance Premiums. Tenant shall pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 9.
3.4.4 Licenses and Permits. Tenant shall pay or cause to be paid
all fees, dues and charges of any kind which are necessary in order to acquire
and keep in effect and good standing all licenses and permits required for
operation of the Leased Property in accordance with the terms of Article 4.
3.4.5 Sales Tax. Simultaneously with each payment of Rent and
Additional Charges hereunder, Tenant shall pay to Landlord the amount of any
applicable sales, use, excise or similar or other tax on any such Rent and
Additional Charges, whether the same be levied, imposed or assessed by the State
in which the Leased Property is located or any Governmental Agencies, but
specifically excluding any income taxes imposed on Landlord's net income.
Landlord shall, upon written request by Tenant, provide to Tenant on an annual
basis such reasonable information in Landlord's possession or control as shall
be necessary to enable Tenant to pay such tax.
3.4.6 Other Charges. Tenant shall pay or cause to be paid all
other amounts, liabilities and obligations arising in connection with the Leased
Property except those obligations expressly stated not to be an obligation of
Tenant pursuant to this Agreement.
3.4.7 Penalties and Interest. Tenant shall pay or cause to be paid
every fine, penalty, interest and cost which may be added for non-payment or
late payment of the items referenced in this Section 3.4.
Tenant shall prepare and file at its expense, to the extent required or
permitted by Applicable Laws, all tax returns and other reports in respect of
any Additional Charge as may be required by Governmental Agencies.
3.5 Landlord Advances. Except as specifically provided otherwise in
this Agreement, if Tenant does not pay or discharge all Additional Charges, and
provide proof of payment if requested by Landlord, at least fifteen (15) days
prior to delinquency, Landlord shall have the right but not the obligation to
pay such Additional Charges on behalf of Tenant. If Landlord shall make any such
expenditure for which Tenant is responsible or liable under this Agreement, or
if Tenant shall become obligated to Landlord under this Agreement for any other
sum besides Minimum Rent or Percentage Rent as hereinabove provided, the amount
thereof shall be deemed to constitute "Additional Rent" and shall be due and
payable by Tenant to Landlord, together with interest at the Overdue Rate and
all applicable sales or other taxes thereon, if any, simultaneously with the
next succeeding monthly installment of Minimum Rent or at such other time as may
be expressly provided in this Agreement for the payment of the same.
3.6 Late Payment of Rent. If Tenant fails to make any payment of Rent
on or before the fifth (5th) business day after the date such payment is due and
payable, Tenant shall pay to Landlord an administrative late charge of five
percent (5%) of the amount of such payment. In addition, such past due payment
shall bear interest at the Overdue Rate from the date first due until paid. Such
late charge and interest shall constitute Additional Rent and shall be due and
payable with the next installment of Rent due hereunder.
3.7 Net Lease. Landlord and Tenant acknowledge and agree that both
parties intend that this Agreement shall be and constitute what is generally
referred to in the real estate industry as a "triple net" or "absolute net"
lease, such that Tenant shall be obligated hereunder to pay all costs and
expenses incurred with respect to, and associated with, the Leased Property and
all personal property thereon and therein and the business operated thereon and
therein, including, without limitation, all taxes and assessments, utility
charges, insurance costs, maintenance costs and repair, replacement and
restoration expenses (all as more particularly herein provided), together with
any and all other assessments, charges, costs and expenses of any kind or nature
whatsoever related to, or associated with, the Leased Property and the business
operated thereon and therein, other than Landlord's financing costs and expenses
and related debt service; provided, however, that Landlord shall nonetheless be
obligated to pay Landlord's personal income taxes with respect to the Rent and
other amounts received by Landlord under this Agreement. Except as expressly
hereinabove provided, Landlord shall bear no cost or expense of any type or
nature with respect to, or associated with, the Leased Property. Except to the
extent otherwise expressly provided in this Agreement, it is agreed and intended
that Rent payable hereunder by Tenant shall be paid without notice, demand,
counterclaim, set-off, deduction or defense and without abatement, suspension,
deferment, diminution or reduction and that Tenant's obligation to pay Rent
throughout the Term and any applicable Extended Term is absolute and
unconditional and the respective obligations and liabilities of Tenant and
Landlord hereunder shall in no way be released, discharged or otherwise affected
for any reason, including without limitation: (a) any defect in the condition,
merchantability, design, quality or fitness for use of the Leased Property or
any part thereof, or the failure of the Leased Property to comply with
Applicable Laws, including any inability to occupy or use the Leased Property by
reason of such non-compliance; (b) any damage to, removal, abandonment, salvage,
loss, condemnation, theft, scrapping or destruction of or any requisition or
taking of the Leased Property or any part thereof, or any environmental
condition on the Leased Property or any property in the vicinity of the Leased
Property; (c) any restriction, prevention or curtailment of or interference with
any use of the Leased Property or any part thereof, including eviction; (d) any
defect in title to or rights to the Leased Property or any lien on such title or
rights to the Leased Property; (e) any change, waiver, extension, indulgence or
other action or omission or breach in respect of any obligation or liability of
or by any Person; (f) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceedings relating to
Tenant or any other Person or any action taken with respect to this Agreement by
any trustee or receiver of Tenant or any other Person or by any court, in any
such proceedings; (g) any right or claim that Tenant has or might have against
any Person, including, without limitation, Landlord or any vendor, manufacturer
or contractor of or for the Leased Property (other than a claim resulting from
any willful misconduct or gross negligence of Landlord); (h) any failure on the
part of Landlord or any other Person to perform or comply with any of the terms
of this Agreement, or of any other agreement; (i) any invalidity,
unenforceability, rejection or disaffirmance of this Agreement by operation of
law or otherwise against or by Tenant or any provision hereof; (j) the
impossibility of performance by Tenant or Landlord, or both; (k) any action by
any court, administrative agency or other Government Agencies; (l) any
interference, interruption or cessation in the use, possession or quiet
enjoyment of the Leased Property or otherwise; or (m) any other occurrence
whatsoever whether similar or dissimilar to the foregoing, whether foreseeable
or unforeseeable, and whether or not Tenant shall have notice or knowledge of
any of the foregoing. Except as specifically set forth in this Agreement, this
Agreement shall be non-cancellable by Tenant for any reason whatsoever and,
except as expressly provided in this Agreement Tenant, to the extent now or
hereafter permitted by Applicable Laws, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this Agreement
or to any diminution, abatement or reduction of Rent payable hereunder. Except
as specifically set forth in this Agreement, under no circumstances or
conditions shall Landlord be expected or required to make any payment of any
kind hereunder or have any obligations with respect to the use, possession,
control, maintenance, alteration, rebuilding, replacing, repair, restoration or
operation of all or any part of the Leased Property, so long as the Leased
Property or any part thereof is subject to this Agreement, and Tenant expressly
waives the right to perform any such action at the expense of Landlord pursuant
to any law.
3.8 No Abatement of Rent. No abatement, diminution or reduction (a) of
Rent, charges or other compensation, or (b) of Tenant's other obligations
hereunder shall be allowed to Tenant or any person claiming under Tenant, under
any circumstances or for any reason whatsoever and to the maximum extent
permitted by law, Tenant hereby waives the application of any local or state
statutes, land rules, regulations or ordinance providing to the contrary.
3.9 Tenant Shortfall Reserve Requirement. Tenant shall, commencing with
the Commencement Date and at all times required by this Section 3.9, maintain a
minimum liquid net worth (i.e., a net worth in cash or other available cash
equivalent funds of Tenant, and not of any other Person, acceptable to and
approved by Landlord and maintained in such bank accounts or other investments
or accounts as are approved in advance by Landlord) at all times equal to the
amount of the Shortfall Reserve Requirement (the "Tenant Shortfall Reserve").
Subject to the rights and security interests of Landlord as provided herein, the
Tenant shall continue to be the owner of and shall be entitled to all interest,
proceeds and profits of the Tenant Shortfall Reserve. For purposes hereof the
initial amount of the Tenant Shortfall Reserve has been established by the
parties as FOUR Hundred EIGHTY Thousand NO and No/100 Dollars ($480,000.00).
3.9.1 Disbursements from the Shortfall Reserve. Provided that no
uncured Default shall exist and the Lease is in good standing in all respects,
and Landlord has approved and verified in its reasonable discretion the most
recently updated Shortfall Reserve Requirement and the existence and amount of
the Tenant Shortfall Reserve:
(a) Tenant may, from time to time and at its option, withdraw or
disburse sums from the Shortfall Reserve to cover (or reimburse Tenant
or its designee for) Shortfall Amounts Funded since the commencement of
the then-current Fiscal Quarter so long as (a) contemporaneously with
such withdrawal or disbursement Tenant delivers written notice thereof
to Landlord, and (b) the withdrawal or disbursement of funds does not
cause the amount of the Tenant Shortfall Reserve to fall below the
Shortfall Reserve Requirement; and
(b) any amount of the Tenant Shortfall Reserve in excess of the
Shortfall Reserve Requirement, as determined hereunder, may be
withdrawn by Tenant at any time so long as Tenant provides
contemporaneous written notice of such withdrawal to Landlord.
3.9.2 Reporting and Calculation of the Shortfall Reserve
Requirement. Throughout the Shortfall Reserve Period, in addition to other
financial information to be reported to Landlord hereunder Tenant shall provide
to Landlord, on or before the tenth (10th) business day of each Accounting
Period, updated evidence of the existence and amount of the Tenant Shortfall
Reserve as herein required, as of the last day of the prior Accounting Period,
in the form of bank account ledgers and statements, together with (a) a
statement, certified by the Chief Financial Officer of Tenant (or of Tenant's
general partner or managing member, if applicable), of the amount of the
Shortfall for the immediately preceding Accounting Period and the Shortfall
Reserve Requirement amount as of the first day of the current Accounting Period
as calculated by Tenant; (b) evidence that the Tenant Shortfall Reserve has been
increased, if necessary, to equal the full amount of the updated Shortfall
Reserve Requirement; and (c) such other documentation reasonably requested by
Landlord to evidence the foregoing. In addition, no more than twenty (20) and
not less than ten (10) days prior to the commencement of each Fiscal Quarter
during the Shortfall Reserve Period the Tenant shall provide to Landlord an
updated pro forma income statement/revenue and expense budget for the following
four Fiscal Quarters, prepared on a cash basis, all in a form approved in
writing by Landlord as sufficient to provide a reasonable Shortfall Forecast of
potential Shortfalls during such Calculation Period. In the event that Tenant
fails to provided an acceptable Shortfall Forecast within the time required or
if the Shortfall Forecast is not approved by Landlord in its reasonable
discretion, then in any such events the Landlord shall have the option to
specify the Shortfall Reserve Requirement by written notice to Tenant, based on
the Fallback Shortfall Assumption amounts set forth in Exhibit "K" hereto
("Fallback Shortfall Assumption") and the most recent Facility occupancy levels
as determined by Landlord from the reports and other information provided by
Tenant hereunder.
3.9.3 Term of the Shortfall Reserve Requirement. The Tenant
Shortfall Reserve Requirement shall remain in full force and effect until the
earlier to occur of (a) the last day of the first Calculation Period during
which the Minimum Rent Coverage averages 1.10 to 1 or higher, or the last
calendar day of the month on which the second (2nd) annual anniversary of the
Commencement Date shall occur, whichever is later, or (b) the day on which a
termination of this Agreement occurs pursuant to the terms hereof, other than a
termination due to an Event of Default by Tenant; but thereafter shall
terminate, and be of no further force or effect (in which event the balance of
the Tenant Shortfall Reserve shall be disbursed to or at the direction of
Tenant).
3.10 Tenant Security Deposit. On the Commencement Date Tenant shall
deposit with Landlord in cash the sum of Three Hundred Fifty Eight Thousand
Three Hundred Fourteen and No/100 Dollars ($358,314.00), as a security deposit
(the "Security Deposit"), for Tenant's faithful performance of all of Tenant's
obligations under this Agreement. If Tenant fails to pay Rent or Additional
Charges due hereunder, fails to fund Reserve Expenditures which exceed available
funds in the Reserve, or otherwise defaults with respect to any provision of
this Agreement, then in addition to and not exclusive of any other remedies
available under this Agreement, Landlord may use, apply or retain all or any
portion of the Security Deposit for the payment of any Rent, the funding of
Additional Charges or Reserve Expenditures or other charges in default, or for
the payment of any sum to which Landlord may become obligated by reason of
Tenant's default. If Landlord so uses or applies all or any portion of the
Security Deposit, Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to the full amount of the Security Deposit. Landlord shall not
be required to keep the Security Deposit separate from its general accounts. If
Tenant performs all of Tenant's obligations hereunder, at the expiration of the
Term, and after Tenant has vacated the Leased Property, the Security Deposit, or
so much thereof as has not been applied or used by Landlord as provided in this
Agreement, shall be returned to Tenant, without payment of interest or other
increment for its use. No trust relationship is created herein between Landlord
and Tenant with respect to the Security Deposit. The Security Deposit shall be
paid by Tenant to Landlord upon the Commencement Date.
3.11 Security for all ARC-Related Leases. Tenant acknowledges that the
Security Deposit constitutes security for the faithful observance and
performance by Tenant of all the terms, covenants and conditions of this
Agreement and of all ARC-Related Leases (whether now in effect or entered into
in the future) to be observed and performed. If any Event of Default shall occur
and be continuing under this Agreement, Landlord may, at its option and without
prejudice to any other remedy which Landlord may have on account thereof,
appropriate and apply, first, the amount of the Security Deposit in accordance
with the terms set forth herein and, second, the amount of any other security
deposits under all ARC-Related Leases (herein the "Collective Security Deposit")
as may be necessary to compensate Landlord toward the payment of the Rent or
other sums due Landlord under this Agreement as a result of such breach by
Tenant. Additionally, Landlord may, if any Event of Default shall occur and be
continuing under any other ARC-Related Lease, appropriate and apply the Security
Deposit after first applying the security deposit under such other ARC-Related
Lease that is in default. It is understood and agreed that neither the Security
Deposit nor the Collective Security Deposit is to be considered as prepaid rent,
nor shall damages be limited to the amount of the Collective Security Deposit.
3.12 Security Agreement. Tenant hereby grants to Landlord a security
interest in the Security Deposit, Tenant Shortfall Reserve and the Reserve as
set forth below, as security for all obligations of the Guarantor and as further
security for Tenant's obligations to Landlord hereunder, and agrees to execute
and deliver all such instruments as may be required by Landlord to evidence and
perfect these security interests.
ARTICLE 4
USE OF THE LEASED PROPERTY; CONFLICTING BUSINESS
4.1 Permitted Use.
4.1.1 Permitted Use. Tenant covenants and agrees that it shall,
throughout the Term of this Agreement, continuously use and occupy the Leased
Property solely and exclusively as a first class licensed assisted living and
dementia care facility, and for such other uses as may be necessary or
incidental to such use (such as services provided directly to residents by
Tenant or under Service Licenses, as such term is defined below), with
appropriate amenities for the same and for no other purpose without interruption
except for minimum necessary interruptions in respect to portions of the Leased
Property for periods provided herein for repairs, renovations, replacements and
rebuilding all of which shall be carried out pursuant to, and in accordance with
the applicable provisions of this Agreement (the foregoing being referred to as
the "Permitted Use"). Without the prior written consent of the Landlord, no
Affiliated Person of Tenant may be a subtenant or concessionaire in the Leased
Property, provided however that Landlord hereby consents and agrees that a
qualified and fully-insured Affiliated Person of Tenant may provide therapy and
therapy-related services at the Facility for customary and appropriate charges.
No use shall be made or permitted to be made of the Leased Property and no acts
shall be done thereon which will cause the cancellation of any insurance policy
covering the Leased Property or any part thereof (unless another adequate policy
is available), nor shall Tenant sell or otherwise provide or permit to be kept,
used or sold in or about the Leased Property any article which may be prohibited
by law or by the standard form of fire insurance policies, or any other
insurance policies required to be carried hereunder, or fire underwriter's
regulations. Tenant shall, at its sole cost, comply with all Insurance
Requirements. Tenant shall not take or omit to take any action, the taking or
omission of which materially impairs the value or the usefulness of the Leased
Property or any part thereof for its Permitted Use, or causes the Leased
Premises to no longer be considered a first class facility.
4.1.2 Necessary Approvals. Tenant shall maintain in good standing
all Permits and approvals necessary to use and operate, for its Permitted Use,
the Leased Property and the Facility located thereon under Applicable Law and
shall provide to Landlord a copy of Tenant's federal, state and Medicare survey
regarding the Facility, and such other information or documents pertaining to
said approvals. Landlord shall at no cost or liability to Landlord cooperate
with Tenant in this regard, limited to executing all applications and consents
required to be signed by Landlord in order for Tenant to obtain and maintain
such approvals.
4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or permit
the use of the Leased Property or Tenant's Personal Property, if any, for any
unlawful purpose. Tenant shall not commit or suffer to be committed any waste on
the Leased Property, or in the Facility, nor shall Tenant cause or permit any
unlawful nuisance thereon or therein. Tenant shall not suffer nor permit the
Leased Property, or any portion thereof, to be used in such a manner as (i)
might reasonably impair Landlord's title thereto or to any portion thereof, or
(ii) might reasonably allow a claim or claims for adverse usage or adverse
possession by the public, as such, or of implied dedication of the Leased
Property or any portion thereof.
4.1.4 Compliance with Legal Requirements. Tenant shall at all
times at its sole cost and expense, keep and maintain the Leased Property in
compliance with all Legal Requirements. Tenant agrees to give Landlord Notice of
any notices, orders or other communications relating to Legal Requirements
affecting the Leased Property which is or are enacted, passed, promulgated,
made, issued or adopted, a copy of which is served upon, or received by, Tenant,
or a copy of which is posted on or fastened or attached to the Leased Property,
within ten (10) Business Days after service, receipt, posting, fastening or
attaching. At the same time, the Tenant will inform Landlord as to the work or
steps which Tenant proposes to do or take in order to comply therewith.
4.2 Environmental Matters. Except as permitted by Applicable Law,
Tenant shall at all times during the Term keep the Leased Property free of
Hazardous Substances. Neither Tenant nor any of its employees, agents, invitees,
licensees, contractors, guests, or subtenants (if permitted) shall use,
generate, manufacture, refine, treat, process, produce, store, deposit, handle,
transport, release, or dispose of Hazardous Substances in, on or about the
Leased Property or the groundwater thereof, in violation of any federal, state
or municipal law, decision, statute, rule, ordinance or regulation currently in
existence or hereafter enacted or rendered. Tenant shall give Landlord prompt
Notice of any claim received by Tenant from any person, entity, or Governmental
Agencies that a release or disposal of Hazardous Substances has occurred on the
Leased Property or the groundwater thereof.
Tenant shall not discharge or permit to be discharged into any septic
facility or sanitary sewer system serving the Leased Property any toxic or
hazardous sewage or waste other than that which is permitted by Applicable Law
or which is normal domestic waste water for the type of business contemplated by
this Agreement to be conducted by Tenant on, in or from the Leased Property. Any
toxic or hazardous sewage or waste which is produced or generated in connection
with the use or operation of the Leased Property shall be handled and disposed
of as required by and in compliance with all Applicable Laws or shall be
pre-treated to the level of domestic wastewater prior to discharge into any
septic facility or sanitary sewer system serving the Leased Property.
4.3 Conflicting Businesses Prohibited. Landlord and Tenant hereby
recognize and acknowledge (a) that the Minimum Rent and the Percentage Rent
payable by Tenant to Landlord under this Agreement have been established at the
levels specified in this Agreement upon the premise and with the expectation
that the Minimum Rent and Percentage Rent may determine the market value of the
Leased Property and constitute a material consideration for Landlord's
willingness to execute this Agreement and thereby lease and demise the Leased
Property to Tenant, and (b) that the operation, management, franchising or
ownership by Tenant or an Affiliated Person of Tenant of another Facility of the
Permitted Use as specified in Section 4.1.1 above (such other Facility being
referred to herein as a "Conflicting Business") within a ten (10) mile radius of
the Leased Property (the "Proscribed Area") will tend to result in a decrease in
the amount of Total Facility Revenue which would otherwise reasonably be
expected to be made upon, within and from the Leased Property and thereby result
in a reduction of the market value of the Leased Property and a reduction in the
Rent which would otherwise be received by Landlord pursuant to this Agreement in
the absence of the operation of a Conflicting Business by Tenant or any such
Affiliated Person of Tenant within the Proscribed Area. Accordingly, Tenant on
behalf of itself and such Affiliated Persons, agrees that during the Term of
this Agreement neither Tenant, nor any Affiliated Person of Tenant shall open,
develop, operate, manage, franchise, own, lease or have any other interest in a
Conflicting Business within the Proscribed Area. In the event of a breach of
this covenant, Landlord shall have the right to terminate this Agreement and
retain the Security Deposit, and pursue any other remedy at law available to
Landlord, including injunctive relief, or in lieu thereof but not in addition
thereto, Landlord may, at its election, require that forty percent (40%) of all
revenues (calculated in the same manner as if such revenues were Total Facility
Revenue) of such Conflicting Business opened, operated, managed, leased,
developed or owned by Tenant or any affiliated person of Tenant as defined in
this Section within the Proscribed Area be included in the amount of Total
Facility Revenue made from the Leased Property for purposes of the determination
and calculation of the Percentage Rent due from Tenant to Landlord under this
Agreement (i.e., as though such Total Facility Revenue of the Conflicting
Business had actually been made upon, within and from the Leased Property). If
Landlord so elects, all provisions of Article 17 of this Agreement relating to
Tenant's maintenance and submission to Landlord of books, records and statements
shall be applicable to all books, records and statements pertaining to any such
Conflicting Businesses. Further, Tenant agrees that Tenant's sole business shall
be to lease, and Tenant shall not incur any expenses or liability related to any
business or activity other than leasing and operating, the Leased Property and
other premises owned or hereinafter owned by Landlord or its Affiliated Persons
pursuant to terms acceptable to Landlord and Tenant. Landlord will not
unreasonably withhold its consent to a waiver of this Conflicting Business
restriction for any Conflicting Business which is approximately five (5) or more
miles away so long as Landlord is provided with evidence reasonably acceptable
to it that the proposed Conflicting Business is not likely to draw from the
demographic base otherwise available to support full occupancy of the Facility
and/or a revenue protection agreement acceptable to Landlord with respect to
adverse affects on Facility occupancy or residents tied to the Facility's
identified demographic base served at the Conflicting Business.
4.4 Continuous Operations. Tenant shall continuously operate the Leased
Property and maintain sufficient skilled staff and employees, either directly or
through a qualified manager approved by Landlord, and shall maintain adequate
levels and quality of Tenant's Personal Property, to operate the Leased Property
as a first class assisted living and dementia care facility as herein required
at its sole cost and expense throughout the entire Term of this Agreement.
4.5 Compliance With Restrictions, Etc. Tenant, at its expense, shall
comply with all restrictive covenants and other title exceptions affecting the
Leased Property as of the date of this Lease and comply with and perform all of
the obligations set forth in the same to the extent that the same are applicable
to the Leased Property or to the extent that the same would, if not complied
with or performed, impair or prevent the continued use, occupancy and operation
of the Leased Property for the purposes set forth in this Agreement. Further, in
addition to Tenant's payment obligations under this Agreement, Tenant shall pay
all sums charged, levied or assessed under any restrictive covenants,
declaration, reciprocal easement agreement or other title exceptions, equipment
leases, leases and all other agreements affecting the Leased Property as of the
date of this Lease promptly as the same become due and shall promptly furnish
Landlord evidence of payment thereof.
4.6 Standard of Operation. Throughout the Term of this Agreement,
Tenant shall continuously operate the Leased Property in full compliance with
the terms hereof in a manner consistent with the level of operation of a
national, first class assisted living and dementia care facility, including
without limitation, the following:
(a) to maintain the standard of care for the
residents/patients of the Facility at all times at a level
necessary to ensure quality care for the residents/patients of the
Facility in accordance with customary and prudent industry
standards;
(b) to operate the Facility in a prudent manner and in
compliance with applicable laws and regulations relating thereto
and cause all Permits, Reimbursement Contracts and any other
agreements necessary for the use and operation of the Facility or
as may be necessary for participation in applicable reimbursement
programs to remain in good standing;
(c) to maintain sufficient P&E and Inventories, and Tenant
Personal Property, of types and quantities at the Facility to
enable Tenant adequately to perform operations of the Facility;
and
(d) to keep all Leased Improvements and P&E located on or
used or useful in connection with the Facility in good repair,
working order and condition, reasonable wear and tear excepted,
and from time to time make all needed and proper repairs,
renewals, replacements, additions and improvements thereto to keep
the same in good operating condition.
(e) to maintain sufficient working capital to operate the
Leased Premises as a first class facility (working capital shall
mean assets which are reasonably necessary and used for the day to
day operation of the Leased Premises, including, without
limitation, amounts sufficient for the maintenance of change and
xxxxx cash funds, amounts deposited in operating bank accounts,
receivables, prepaid expenses, and funds required to maintain
Inventories and pay all operating expenses as they become due,
less accounts payable and accrued current liabilities).
(f) to operate and use the Leased Premises to a standard
consistent with national chain first class assisted living and
dementia care facilities at least equal to or better in quality
than assisted living and dementia care facilities operated by
Guarantor and its Affiliated Persons at the Commencement Date, and
to operate the Facility only under the Guarantor's name,
trademarks, logos and service marks, with all required licenses
and permits for such operation, if any.
(g) To follow and conform to all of the same operating,
employment, marketing, insurance, risk management and management
standards and practices employed at first class assisted living
and dementia care facilities operated by Guarantor and its
Affiliated Persons.
(h) Recruit, train and employ appropriate personnel, or
retain management services from Guarantor or other qualified
operator or service-provider approved by Landlord for same.
(i) Provide prompt written notice to Guarantor and to
Landlord of material or extraordinary developments, lawsuits,
violation of any Legal Requirements and fines relating to the use
and operation of the Facility.
Throughout the term of the Lease, Tenant shall continuously operate the
Leased Property as a national, first-class assisted living and dementia care
facility in the manner set forth above, and to a standard consistent with
national chain, first-class assisted living and dementia care facilities at
least equal to or better in quality than assisted living and dementia care
facilities operated currently by Guarantor under Guarantor's name, trademarks,
logos and service marks. Tenant shall endeavor and use its best efforts to
maximize Total Facility Revenue for the Leased Property. Tenant shall further
provide, or cause to be provided, all group services, facilities and benefits
generally available to a national chain, first-class assisted living and
dementia care facilities of a similar type operated elsewhere by Guarantor or
any successor to Guarantor (or by other national operators of first class
assisted living and dementia care facilities, such as those operated by Marriott
Senior Living Services).
4.7 Resident Agreements and Service Licenses. Tenant shall comply in
all material respects with the terms and provisions of each agreement and
undertaking entered into with or provided to the residents of the Facility
("Resident Agreements"), including without limitation to fulfill or cause to be
fulfilled all undertakings and representations regarding the use, condition and
operation of the Facility and services to provided the residents and the
standards and services of and benefits to be provided by the Guarantor and its
Affiliated Persons. In addition, Tenant shall comply in all material respects
with the terms and conditions of any contract or license entered into with
respect to the provision of services to the residents at the Facility ("Service
Licenses").
4.8 Standards, Not Control. Landlord and Tenant stipulate and agree
that Tenant is obligated to undertake such actions as are reasonably necessary
to properly achieve the highest standard of operation for the Facility as set
forth herein, and that although Landlord shall have the right to undertake all
enforcement rights as provided herein in the event that the required standard of
operation is not maintained by Tenant, the means and methods used and actions
taken to operate the Facility are within the sole control and election of
Tenant, and are not specified by or under the control of Landlord. Accordingly,
Landlord shall have no responsibility for any action taken by Tenant in order to
manage or operate the Facility.
4.9 Survival. As to conditions and uses of Tenant existing or occurring
prior to the expiration or sooner termination of this Agreement, the provisions
of this Section 4 shall survive the expiration or sooner termination of this
Agreement to extent of any ongoing effects on Landlord or its successors with
respect to the Facility (specifically including the prohibitions relating to
conflicting businesses under Section 4.3.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Tenant's Obligations. Tenant shall, at its sole cost and expense,
keep the Leased Property in good order and repair, and shall promptly make all
necessary and appropriate repairs and replacements thereto of every kind and
nature, whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term and whether or not necessitated
by wear, tear, obsolescence or defects, latent or otherwise, and shall use all
reasonable precautions to prevent damage or injury. All repairs shall be made in
a good, workmanlike manner, consistent with the industry standards for like
assisted living and dementia care facilities in like locales, in accordance with
all applicable federal, state and local statutes, ordinances, by-laws, codes,
rules and regulations relating to any such work. Tenant shall provide prompt
written notification to Landlord of any material adverse change to the Leased
Property, such as material changes to any environmental condition, including,
without limitation, the presence of biocontaminants, such as mold and shall
promptly undertake appropriate assessment, remedial and preventative actions
sufficient to meet any guidelines or regulations adopted by applicable
authoritative bodies or regulatory agencies in connection with a determination
of any material adverse change, and, in any event with respect to mold
contamination, Tenant shall undertake (a) removal of the mold, (b) abatement of
the underlying cause of mold (including water intrusion), and (c) repair of any
leaks and associated water damage at the Leased Property. In addition, Tenant
shall also, at its sole cost and expense, put, keep, replace and maintain
Tenant's Personal Property in good repair and in good, safe and substantial
order, howsoever the necessity or desirability for repairs may occur, and
whether or not necessitated by wear, tear, obsolescence or defects. Tenant may
at any time and from time to time remove and dispose of any of Tenant's Personal
Property which has become obsolete or unfit for use or which is no longer useful
in the operation of the Facility's business conducted by Tenant on the Leased
Property; provided, however, that Tenant's Personal Property so disposed of
shall be promptly replaced with other Tenant's Personal Property not necessarily
of the same character, but of at least equal usefulness and quality as, and
having a value at least equal to the value of, those disposed of, and in any
event in accordance with and in compliance with the standards required by and
the provisions of this Agreement. Tenant shall further at all times maintain the
Leased Property, including the grounds and landscaping, in an aesthetically
pleasing manner.
5.2 Reserve.
5.2.1 Tenant shall establish an interest bearing reserve account
(the "Reserve") in a bank designated by Tenant and approved by Landlord. All
interest earned on the Reserve shall be added to and remain a part of the
Reserve. Both Tenant and Landlord shall be signatories on the Reserve, provided
only one signature shall be required to withdraw funds and Landlord agrees that
so long as Tenant is not in default hereunder, Landlord shall not be required to
sign on any checks and Landlord shall not withdraw any funds from such account.
Upon the occurrence and continuation of any Default or Event of Default
hereunder the Tenant signatory party shall no longer be an authorized signatory
on the Reserve account. Such account shall be established in Landlord's name and
control for the benefit of Tenant and shall not include or contemplate
"overdraft protection" and Tenant shall not request or attempt to draw or draft
any funds which are not actually on deposit in such account. The purpose of the
Reserve is to cover the cost of the following, to the extent carried out in
accordance with this Agreement (collectively, "Reserve Expenditures"):
(a) Replacements (including P&E Replacements), renewals and
additions to the P&E at the Facility; and
(b) repairs, alterations, improvements, renewals,
replacements and additions, whether routine, non-routine or major,
to the Leased Improvements, including without limitation those
which are normally capitalized under GAAP such as repairs,
alterations, improvements, renewals, replacements and additions to
the structure, the exterior facade, the mechanical, electrical,
heating, ventilating, air conditioning, plumbing and vertical
transportation elements of the Leased Improvements, which
expenditures Tenant believes should be made for the Leased
Property for the following Fiscal Year.
5.2.2 Commencing with the Commencement Date and continuing
throughout the Term, Tenant shall on the last day of each Accounting Period
during the Term, transfer into the Reserve an amount equal to the Applicable
Reserve Percentage of Total Facility Revenues for such Accounting Period (based
upon estimates of Total Facility Revenue if necessary, to be adjusted as soon as
Tenant has had an opportunity to confirm actual Total Facility Revenue). At the
time Tenant provides Landlord the documentation described in Section 3.3, Tenant
shall also deliver to Landlord a statement setting forth the total amount of
deposits made to and expenditures from the Reserve for the preceding Fiscal
Year.
5.2.3 On or before December 1 of each Fiscal Year, Tenant shall
prepare an estimate (the "Reserve Estimate") of Reserve Expenditures anticipated
during the ensuing Fiscal Year and shall submit such Reserve Estimate to
Landlord for its review. Such Reserve Estimate shall reflect by line item the
projected budget for Reserve Expenditures for the Leased Property and
assumptions on the basis of which such line items were prepared in narrative
form if necessary, including separate budget items for all projected
expenditures for replacements, substitutions and additions to Tenant's Personal
Property. Tenant shall provide to Landlord reasonable additional detail,
information and assumptions used in the preparation of the Reserve Estimate as
requested by Landlord and shall also submit to Landlord with the Reserve
Estimate good faith longer-range projections of planned Reserve Expenditures for
an additional three (3) Fiscal Years. Tenant shall review the Reserve Estimate
with Landlord, and subject to Landlord's approval, Tenant shall implement such
Reserve Estimate for the successive Fiscal Year (during which it shall, if
approved by Landlord, be referred to as the "Approved Reserve Estimate"). In
addition, Landlord shall have the right to disapprove any expenditures to be
made pursuant to the Reserve Estimate which are not in compliance with
Applicable Laws. Further, Landlord's approval of any expenditure pursuant to the
Reserve Estimate shall not be, or be deemed to be, an assumption by Landlord of
any liability in connection with the expenditures made. Pending resolution of
any dispute, the specific disputed item of the Reserve Estimate shall be
suspended and replaced for the Fiscal Year in question by an amount equal to the
lesser of (a) that proposed by Tenant for such Fiscal Year or (b) such budget
item for the Fiscal Year prior thereto. Tenant shall not make any expenditures
from the Reserve, nor shall Tenant deviate from the Approved Reserve Estimate
without the prior approval of Landlord, except in the case of emergency where
immediate action is necessary to prevent imminent danger to person or property.
5.2.4 Tenant shall, consistent with the Approved Reserve Estimate,
from time to time make Reserve Expenditures from the Reserve as it reasonably
deems necessary in accordance with Section 5.2.1 and Section 5.2.3. Tenant shall
provide to Landlord, within thirty (30) days after the end of each Fiscal
Quarter, an itemized statement setting forth Reserve Expenditures made to date
during the Fiscal Year.
5.2.5 In the event Reserve Expenditures not set forth in the
Approved Reserve Estimate are required (i) as a result of Legal Requirements or
are otherwise required for the continued safe and orderly operation of the
Leased Property, (ii) due to an emergency threatening the Leased Property, its
residents, patients, guests, invitees or employees, or (iii) because the
continuation of a given condition will subject Tenant or Landlord to civil or
criminal liability, Landlord agrees that it will not unreasonably withhold its
approval of such expenditures.
5.2.6 All interest earned on the Reserve shall be added to and
become a part thereof, and all property purchased with funds from the Reserve
shall be and remain the property of Tenant until the end of the Term of the
Lease or earlier expiration or termination of this Agreement (subject to
Landlord's lien rights hereunder), at which time all P&E at the Leased Property,
including without limitation all P&E Replacements or other items purchased with
funds from the Reserve (but not including Tenant's Personal Property except as
specifically provided herein) shall be and become the sole property of Landlord.
All funds in the Reserve shall be and remain the property of Tenant throughout
the Lease Term, subject to the control rights and liens and security interests
of Landlord, but following expiration or earlier termination of this Agreement
and payment in full on all contracts entered into prior to such expiration or
termination for work to be done or furniture, furnishings, fixtures and
equipment to be supplied in accordance with this Section 5.2 out of the Reserve,
ownership of the Reserve shall be transferred from Tenant to Landlord except
(provided Tenant is not in Default at the time of termination) to the extent of
the amount, if any, by which Tenant's cumulative cash expenditures on P&E used
solely at the Leased Property (not including any of Tenant's Personal Property
which is not used at the Leased Property throughout the useful life thereof),
less all amounts received upon any disposition thereof, exceeds the cumulative
amount deposited by Tenant into the Reserve. It is understood and agreed that
the Reserve pursuant to this Agreement shall be maintained and used solely in
connection with the Leased Property.
5.2.7 If Landlord wishes to grant a security interest in or create
another encumbrance on its interest in the Reserve in connection with a Facility
Mortgage, all or any part of the existing or future funds therein, or any
general intangible in connection therewith, the instrument granting such
security interest or creating such other encumbrance shall expressly provide
that such security interest or encumbrance is prior in right to the rights of
Tenant with respect to the Reserve as set forth herein, provided that the same
is subject to a Tenant non-disturbance agreement as provided herein and the
Mortgagee thereunder agrees to be responsible to Tenant and to properly disburse
all amounts of the Reserve received by it for use and disposition as provided
herein.
5.2.8 If, at any time, funds in the Reserve shall be insufficient
or are reasonably projected by Tenant to be insufficient for necessary and
permitted expenditures thereof or funding is necessary for Reserve Expenditures,
Tenant shall give Landlord Notice thereof, which Notice shall set forth, in
reasonable detail, the nature of the required or permitted action and the
estimated cost thereof, and Tenant shall thereafter fund such additional Reserve
Expenditures.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Prohibition. Except for work funded by Reserve Expenditures and
Minor Alterations as hereinafter expressly provided in Section 6.2, no portion
of the Leased Property shall be demolished, removed or altered by Tenant in any
manner whatsoever without the prior written consent and approval of Landlord.
Notwithstanding the foregoing, however, Tenant shall be entitled and obligated
to undertake all alterations to the Leased Property required by any Legal
Requirements and, in such event, Tenant shall comply with the provisions of
Section 6.2 below.
6.2 Permitted Renovations. The activities permitted pursuant to Section
6.2.1 and Section 6.2.2 below shall collectively constitute "Permitted
Renovations".
6.2.1 Minor Alterations. Landlord acknowledges that certain minor,
alterations and renovations may be undertaken by Tenant from time to time
("Minor Alterations"). Landlord hereby agrees that Tenant shall be entitled to
perform such Minor Alterations on or about the Leased Improvements; provided,
however, that the cost of the same shall not exceed $20,000.00 and the same
shall not weaken or impair the structural strength of the Leased Improvements,
or alter their exterior design or appearance, materially impair the use of any
of the service facilities located in, or fundamentally affect the character or
suitability of, the Leased Improvements for the Permitted Use specified in
Section 4.1.1 above or materially lessen or impair their value.
6.2.2 Additions, Expansions and Structural Alterations. Except as
expressly permitted in Section 6.1 and Section 6.2.1 above, nothing in this
Article 6 or elsewhere in this Agreement shall be deemed to authorize Tenant to
construct and erect any additions to or expansions of the Leased Improvements,
or perform any alterations of a structural nature whatsoever (collectively
referred to herein as the "Major Alterations"); it being understood that Tenant
may do so only with the prior written consent and approval of Landlord, which
consent and approval may be withheld by Landlord in its sole and absolute
discretion and may be conditioned upon the payment by Tenant to Landlord of all
reasonable costs incurred by Landlord in evaluating the same.
6.3 Conditions to Reserve Expenditures, Permitted Renovations and
Major Alterations. In connection with any Reserve Expenditures, Permitted
Renovations or Major Alterations of the Leased Property the following conditions
shall be met, to wit:
(a) Before the commencement of any such work, plans and
specifications therefor or a detailed itemization thereof prepared
by a licensed architect approved by Landlord or other design
professional appropriate under the circumstances approved by
Landlord and Tenant shall be furnished to Landlord for its review
and approval. Such approval shall not constitute Landlord's
agreement that the plans and specification are in compliance with
Applicable Laws or an assumption by Landlord of any liability in
connection with the renovation work contemplated thereby.
(b) Before the commencement of any such work Tenant shall
obtain the approval thereof by all Governmental Agencies having or
claiming jurisdiction of or over the Leased Property, and with any
public utility companies having an interest therein. In connection
with any such work Tenant shall comply with all Legal Requirements
and Applicable Laws, of all other Governmental Agencies having or
claiming jurisdiction of or over the Leased Property and of all
their respective departments, bureaus and offices, and with the
requirements and regulations, if any, of such public utilities, of
the insurance underwriting board or insurance inspection bureau
having or claiming jurisdiction, or any other body exercising
similar functions, and of all insurance companies then writing
policies covering the Leased Property or any part thereof.
(c) Tenant represents and warrants to Landlord that all such
work will be performed in a good and workmanlike manner and in
accordance with the plans and specifications therefor approved by
Landlord, the terms, provisions and conditions of this Agreement
and all governmental requirements.
(d) Landlord shall have the right, at Tenant's expense, to
inspect any such work at all times during normal working hours
using such inspector(s) as it may deem necessary so long as such
inspections do not unreasonably interfere with Tenant's work (but
Landlord shall not thereby assume any responsibility for the
proper performance of the work in accordance with the terms of
this Agreement, nor any liability arising from the improper
performance thereof).
(e) All such work shall be performed free of any liens on
Landlord's fee simple interest on or Tenant's leasehold interest
in the Leased Property.
(f) Upon substantial completion of any such work, Tenant
shall procure a certificate of occupancy or other final approvals,
if applicable, from the appropriate Governmental Agencies and
provide copies of same to Landlord.
(g) Tenant shall, and hereby agrees to, indemnify and save
and hold Landlord and its Affiliated Parties harmless from and
against and reimburse Landlord for any and all loss, damage, cost,
liability, fee and expense (including, without limitation,
reasonable attorney's fees based upon service rendered at hourly
rates) incurred by or asserted against Landlord which is
occasioned by or results, directly or indirectly, from any such
work conducted upon the Leased Property; whether or not the same
is caused by, or is the fault of Tenant or any agent, employee,
manager, contractor, subcontractor, laborer, supplier, materialman
or any other third party; but Tenant shall not be obligated to
indemnify Landlord from any loss as aforesaid caused by Landlord's
gross negligence or willful misconduct.
6.4 Salvage. Other than Tenant's Personal Property, all materials which
are scrapped or removed in connection with maintenance and repair performed
pursuant to Article 5 and the making of Permitted Renovations pursuant to
Article 6 shall be disposed of by Tenant and the net proceeds thereof, if any,
shall be deposited in the Reserve.
ARTICLE 7
LANDLORD'S INTEREST NOT SUBJECT TO LIENS
7.1 Liens, Generally. Tenant shall not, directly or indirectly, create
or cause to be imposed, claimed or filed upon the Leased Property, or Tenant's
assets, properties or income or any portion thereof, or upon the interest of
Landlord therein, any Lien of any nature whatsoever. If, because of any act or
omission of Tenant, any such Lien shall be imposed, claimed or filed by any
party whomsoever or whatsoever, Tenant shall, at its sole cost and expense,
cause the same to be promptly (and in no event later than thirty (30) days
following receipt of notice of such Lien) fully paid and satisfied or otherwise
promptly discharged of record (by bonding or otherwise) and Tenant shall
indemnify and save and hold Landlord harmless from and against any and all
costs, liabilities, suits, penalties, claims and demands whatsoever, and from
and against any and all reasonable attorney's fees, at both trial and all
appellate levels, resulting or on account thereof and therefrom. In the event
that Tenant shall fail to comply with the foregoing provisions of this Section
7, Landlord shall have the option, but not the obligation, of paying, satisfying
or otherwise discharging (by bonding or otherwise) such Lien and Tenant agrees
to reimburse Landlord, upon demand and as Additional Rent, for all sums so paid
and for all costs and expenses incurred by Landlord in connection therewith,
together with interest thereon, until paid.
7.2 Construction or Mechanics Liens. Landlord's interest in the Leased
Property shall not be subjected to Liens of any nature by reason of Tenant's
construction, alteration, renovation, repair, restoration, replacement or
reconstruction of any improvements on or in the Leased Property, or by reason of
any other act or omission of Tenant (or of any person claiming by, through or
under Tenant) including, but not limited to, construction, mechanics' and
materialmen's liens. All persons dealing with Tenant are hereby placed on notice
that such persons shall not look to Landlord or to Landlord's credit or assets
(including Landlord's interest in the Leased Property) for payment or
satisfaction of any obligations incurred in connection with the construction,
alteration, renovation, repair, restoration, replacement or reconstruction
thereof by or on behalf of Tenant. Tenant has no power, right or authority to
subject Landlord's interest in the Leased Property to any construction,
mechanic's or materialmen's lien or claim of lien. If a Lien, a claim of lien or
an order for the payment of money shall be imposed against the Leased Property
on account of work performed, or alleged to have been performed, for or on
behalf of Tenant, Tenant shall, within thirty (30) days after written notice of
the imposition of such Lien, claim or order, cause the Leased Property to be
released therefrom by the payment of the obligation secured thereby or by
furnishing a bond or by any other method prescribed or permitted by law. If a
Lien is released, Tenant shall thereupon furnish Landlord with a written
instrument of release which has been recorded or filed in the appropriate office
of land records of the County in which the Leased Property is located, and
otherwise sufficient to establish the release as a matter of record. Before
commencing any work relating to alterations, additions, or improvements
affecting the Leased Property, Tenant shall notify Landlord in writing of the
expected date of commencement thereof. Landlord shall then have the right at any
time and from time to time to post and maintain on the Land and Improvements
such notices as Landlord reasonably deems necessary to protect the Leased
Property and Landlord from mechanics' liens, materialmen's liens, or any other
liens. In any event, subject to Section 7.3 below, Tenant shall pay when due all
claims for labor or materials furnished to or for Tenant at or for use in the
Land and Improvements. Subject to Section 7.3 below, Tenant shall not permit any
mechanics' or materialmen's liens to be levied against the Leased Property for
any labor or material furnished to Tenant or claimed to have been furnished to
Tenant or to Tenant's agents or contractors in connection with work of any
character performed or claimed to have been performed on the Land or the
Improvements by or at the direction of Tenant, and shall immediately cause the
release of any such liens as provided hereinabove.
7.3 Contest of Liens. Tenant may, at its option, contest the validity
of any Lien or claim of lien if Tenant shall have first posted an appropriate
and sufficient bond in favor of the claimant or paid the appropriate sum into
court, if permitted by and in strict compliance with Applicable Laws, and
thereby obtained the release of the Leased Property from such Lien. If judgment
is obtained by the claimant under any Lien, Tenant shall pay the same
immediately after such judgment shall have become final and the time for appeal
therefrom has expired without appeal having been taken. Tenant shall, at its own
expense, using counsel reasonably approved by Landlord, diligently defend the
interests of Tenant and Landlord in any and all such suits; provided, however,
that Landlord may, nonetheless, at its election and expense, engage its own
counsel and assert its own defenses, in which event Tenant shall cooperate with
Landlord and make available to Landlord all information and data which Landlord
deems necessary or desirable for such defense.
7.4 Notices of Commencement of Construction. If required by the laws of
the State in which the Leased Property is located, prior to commencement by
Tenant of any work on the Leased Property which shall have been previously
permitted by Landlord as provided in this Agreement, Tenant shall record or file
a notice of the commencement of such work or similar notice required by
Applicable Law (the "Notice of Commencement") in the land records of the County
in which the Leased Property is located, identifying Tenant as the party for
whom such work is being performed, stating such other matters as may be required
by law and requiring the service of copies of all notices, Liens or claims of
lien upon Landlord. Any such Notice of Commencement shall clearly reflect that
the interest of Tenant in the Leased Property is that of a leasehold estate and
shall also clearly reflect that the interest of Landlord as the fee simple owner
of the Leased Property shall not be subject to construction, mechanics or
materialmen's liens on account of the work which is the subject of such Notice
of Commencement. A copy of any such Notice of Commencement shall be furnished to
and approved by Landlord and its attorneys prior to the recording or filing
thereof, as aforesaid.
ARTICLE 8
TAXES AND ASSESSMENTS
8.1 Obligation to Pay Taxes and Assessments. Throughout the entire
Term, Tenant shall bear, pay and discharge as Additional Charges and not later
than the last day on which payment may be made without penalty or interest, any
and all taxes, assessments, charges, levies, fees (including, without
limitation, license, permit, inspection, authorization and similar fees) and
other impositions and charges of every kind and nature whatsoever, extraordinary
as well as ordinary, foreseen or unforeseen, and each and every installment
thereof which shall or may during or with respect to the Term hereof be charged,
laid, levied, assessed, or imposed upon, or arise in connection with, the use,
occupancy, operation or possession of the Leased Property or any part thereof or
the business conducted thereon, including, without limitation, ad valorem real
and personal property taxes, all taxes charged, laid, levied, assessed or
imposed in lieu of or in addition to any of the foregoing by virtue of all
present or future laws, ordinances, requirements, orders, directions, rules or
regulations of Governmental Agencies, and all assessments and charges imposed
pursuant to the Permitted Encumbrances or other documents of record affecting
title to the Leased Property (provided however that such documents have been
approved by Tenant, which approval shall not unreasonably be withheld, delayed
or conditioned provided that the same are appropriate and reasonably necessary
in connection with the normal and ordinary course of ownership and use of the
Facility), whether or not such Additional Charges become due and payable during
or after the Term. Notwithstanding the foregoing, Tenant shall not be
responsible for Additional Charges due and payable after the expiration of the
Term to the extent that the same relate and apply to interests and benefits
accruing to Landlord after the Lease Term. Upon payment, Tenant shall promptly
furnish to Landlord satisfactory evidence of the payment of all such taxes,
assessments, impositions or charges. Tenant shall have no right to approve, nor
shall Tenant be obligated for any amounts due by virtue of, any Facility
Mortgage or other documents relating to indebtedness of Landlord.
8.2 Tenant's Right to Contest Taxes. Notwithstanding the foregoing,
Tenant shall have the right, after prior written notice to Landlord, to contest
at its own expense the amount and validity of any taxes affecting the Leased
Property by appropriate proceedings under Applicable Law conducted in good faith
and with due diligence and to postpone or defer payment thereof, provided and so
long as:
(a) Such proceedings shall operate to suspend the collection
of such taxes with respect to the Leased Property;
(b) Neither the Leased Property nor any part thereof would be
in immediate danger of being forfeited or lost by reason of such
proceedings, postponement or deferment; and
(c) Tenant shall have furnished Landlord with security for
payment of the contested taxes which is satisfactory to Landlord,
and, in the event that the preconditions set forth in (a) and (b)
above are no longer met, Landlord shall have the right to draw
upon such security to pay and discharge the taxes in question and
any liens against the Leased Property arising thereunder.
8.3 Tax and Insurance Escrow Account. In the event any of the Events of
Default specified in Section 12.1 hereunder shall occur, Landlord shall have the
right, by written notice to Tenant effective as of the date of such notice, to
require Tenant to pay or cause to be paid into a separate account (the "Tax and
Insurance Account") to be established by Tenant with a lending institution
designated by Landlord (which Tax and Insurance Account shall not be removed
from such lending institution without the express prior approval of Landlord),
and which Landlord may draw upon, a reserve amount sufficient to discharge the
obligations of Tenant under Section 8.1 and Article 9 hereof (other than
worker's compensation insurance premiums) with respect to real estate taxes and
insurance premiums for the applicable Fiscal Year as and when they become due
(such amounts, the "Tax and Insurance Escrow Amount"). During each month
commencing with the first full calendar month following the receipt of said
notice from Landlord, Tenant shall deposit into the Tax and Insurance Account
one twelfth of the Tax and Insurance Escrow Amount so that as each installment
of insurance premiums and real estate taxes becomes due and payable, there are
sufficient funds in the Tax and Insurance Account to pay the same. If the amount
of such insurance premiums and real estate taxes has not been definitively
ascertained by Tenant at the time when any such monthly deposit is to be paid,
Landlord shall require payment of the Tax and Insurance Escrow Amount based upon
the amount of premiums and real estate taxes paid for the preceding year,
subject to adjustment as and when the amount of such premiums and real estate
taxes are ascertained by Tenant. The Tax and Insurance Escrow Amount in the Tax
and Insurance Account shall be and constitute additional security for the
performance of Tenant's obligations hereunder and shall be subject to Landlord's
security interest therein and shall, if there are sufficient funds in escrow, be
used to pay taxes and insurance premiums when due. Landlord and Tenant shall
execute such documentation as may be necessary to create and maintain Landlord's
security interest in the Tax and Insurance Account.
ARTICLE 9
INSURANCE
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property and all property located therein or thereon,
insured against the following risks in the following amounts:
(a) "All-risk" property insurance (and to the extent applicable,
Builder's Risk Insurance) on the Leased Improvements and all items of business
personal property, including but not limited to signs, awnings, canopies,
gazebos, fences and retaining walls, and all P&E, including without limitation,
insurance against loss or damage from the perils under "All Risk" (Special)
form, including but not limited to the following: fire, windstorm, sprinkler
leakage, vandalism and malicious mischief, water damage, explosion of steam
boilers, pressure vessels and other similar apparatus, and other hazards
generally included under extended coverage, all in an amount equal to one
hundred percent (100%) of the replacement value of the Leased Improvements
(excluding excavation and foundation costs), business personal property and P&E,
without a co-insurance provision, and shall include an Agreed Value endorsement;
(b) Ordinance or Law Coverage with limits of not less than the Leased
Improvements for Coverage A (Loss to the undamaged portion of the building),
limits not less than $500,000.00 for Coverage B (Demolition Cost Coverage), and
limits not less than $500,000.00 for Coverage C (Increased Cost of Construction
Coverage);
(c) Business income insurance to be written on "Special Form" (and on
"Earthquake" and "Flood" forms if such insurance for those risks is required)
including "Extra Expense", without a provision for co-insurance, including an
amount sufficient to pay at least twelve (12) months of Rent for the benefit of
Landlord, as its interest may appear, and at least twelve (12) months of "Net
Operating Income" less Rent for the benefit of Tenant;
(d) Occurrence form commercial general liability insurance, including
bodily injury and property damage, liquor liability (if applicable), fire legal
liability, contractual liability and independent contractor's hazard and
completed operations coverage in an amount not less than $1,000,000.00 per
occurrence and $2,000,000.00 per location, aggregate;
(e) Umbrella liability coverage which shall be on a following form for
the General Liability, Automobile Liability, Employers' Liability, Malpractice
and Liquor Liability (if applicable), with limits in a minimum amount of not
less than $15,000,000.00 per occurrence/aggregate;
(f) Malpractice insurance/professional liability insurance in an amount
not less than $5,000,000.00 for each person and each occurrence to cover the
professional medical care providers working on the Leased Property;
(g) Flood insurance (if the Leased Property is located in whole or in
part within an area identified as an area having special flood hazards under the
National Flood Insurance Program) for the full (100%) replacement value of the
improvements and all items of business personal property or any greater amount
as may be required by the National Flood Insurance Program;
(h) Worker's compensation coverage for all persons employed by Tenant
on the Leased Property with statutory limits, and Employers' Liability insurance
in an amount of at least $1,000,000.00 per accident/disease;
(i) Business auto liability insurance, including owned, non-owned and
hired vehicles for combined single limit of bodily injury and property damage of
not less than $1,000,000.00 per occurrence;
(j) [Intentionally Omitted];
(k) "Earthquake" insurance, if the Leased Property is currently, or at
any time in the future, located within a major earthquake disaster area, in
amount, and in such form and substance and with such limits and deductibles as
are satisfactory to Landlord; and
(l) Crime insurance covering employee theft in an amount not less than
$1,500,000.
(m) Such additional insurance or increased insurance limits as may be
reasonably required, from time to time, by Landlord (including, without
limitation, any mortgage, security agreement or other financing permitted
hereunder and then affecting the Leased Property, as well as any declaration,
ground lease or easement agreement affecting the Leased Property), or any
Mortgagee, provided the same is customarily carried by a majority of comparable
assisted living facilities in the area.
Without limiting the generality of the foregoing Section 9.1(m), the required
commercial liability insurance and umbrella liability coverage limits and
deductible amounts pertaining thereto as set forth in this Article 9 shall in no
event provide less coverage (lower limits or higher deductibles) than the
"Comparable Insurance Coverage" carried on any of the other assisted living
facilities leased or owned by Tenant and Guarantor and their Affiliated Persons,
and the insurance coverage for the Leased Property shall immediately be
increased by Tenant to equal any greater or increased "Comparable Insurance
Coverage" carried or obtained for such other facilities. For purposes of the
foregoing, "Comparable Insurance Coverage" shall mean insurance coverage levels
adjusted for relevant variations in risk and insurability characteristics
between the insured facilities being compared, including without limitation
consideration of variations in insurance coverages carried by Guarantor and its
Affiliated Persons between different insurance markets (states or other
jurisdictional subdivisions) where insured risks or insurance pricing or
availability varies materially. Tenant shall use all reasonable efforts to
obtain increased umbrella liability coverage of not less than $100,000,000 per
occurrence/aggregate, and decreased liability insurance deductibles, at such
time as the same can be obtained at commercially reasonable or economically
feasible rates for the Lease Property. Until such increased coverages are
obtained the Tenant shall provide to Landlord a thorough annual update and
review of the overall liability insurance coverage program and strategy for
Tenant and Guarantor and their Affiliated Persons, which shall include an
analysis of market rates for the current and desired liability insurance
coverages. In addition, Tenant shall have the right to provide commercial
general liability insurance coverage on a "claims made" basis, so long as the
general liability insurance coverages otherwise required hereunder are
maintained or continued in existence at all times throughout the Lease Term for
all periods that Tenant or its Affiliates have had any ownership or use of the
Leased Property, and evidence thereof has been provided to Landlord.
9.2 Waiver of Subrogation. Landlord and Tenant agree that with respect
to any property loss which is covered by insurance then being carried by
Landlord or Tenant, respectively, the party carrying such insurance and
suffering said loss releases the other of and from any and all claims with
respect to such loss; and they further agree that their respective insurance
companies shall have no right of subrogation against the other on account
thereof.
9.3 General Provisions. The Facility's allocated chargeback/deductible
for general liability insurance shall not exceed $1,000,000 for assisted living
and $1,000,000 for memory impaired, to the extent commercially available, and
$250,000.00 for workmen's compensation insurance, to the extent commercially
available, unless any greater amounts are agreeable to both Landlord and Tenant.
The Facility's property insurance deductible shall not exceed $25,000.00 unless
such greater amount is agreeable to both Landlord and Tenant, or if a higher
deductible for high hazard risks (i.e., wind or flood) is mandated by the
insurance carrier. All insurance policies pursuant to this Article 9 shall be
issued by insurance carriers having a general policy holder's rating of no less
than A-/VII in Best's latest rating guide, and shall contain clauses or
endorsements to the effect that (a) Landlord shall not be liable for any
insurance premiums thereon or subject to any assessments thereunder, and (b) the
coverages provided thereby will be primary and any insurance carried by any
additional insured shall be excess and non-contributory to the extent of the
indemnification obligation pursuant to Section 9.5 below. All such policies
described in Section 9.1 shall name Landlord, CRC and CNL Retirement and any
Mortgagee whose name and address has been provided to Tenant as additional
insureds, loss payees, or mortgagees, as their interests may appear and to the
extent of their indemnity. All loss adjustments shall be payable as provided in
Article 10. Tenant shall deliver certificates thereof to Landlord prior to their
effective date (and, with respect to any renewal policy, no less than thirty
(30) days prior to the expiration of the existing policy), which certificates
shall state the nature and level of coverage reported thereby, as well as the
amount of the applicable deductible. Upon Landlord's request, duplicate original
copies of all insurance policies to be obtained by Tenant shall be provided to
Landlord by Tenant. All such policies shall provide Landlord (and any Mortgagee
whose name and address has been provided to Tenant if required by the same)
thirty (30) days prior written notice of any material change or cancellation of
such policy.
In the event Tenant shall fail to effect such insurance as herein
required, to pay the premiums therefor or to deliver such certificates to
Landlord or any Mortgagee at the times required, Landlord shall have the right,
but not the obligation, subject to the provisions of Section 12.4, to acquire
such insurance and pay the premiums therefor, which amounts shall be payable to
Landlord, upon demand, as Additional Rent, together with interest accrued
thereon at the Overdue Rate from the date such payment is made until (but
excluding) the date repaid.
9.4 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant, so long as such policies otherwise
meet all requirements under this Article 9.
9.5 Indemnification of Landlord. Except as expressly provided herein,
Tenant shall protect, indemnify and hold harmless Landlord for, from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon or
incurred by or asserted against Landlord by reason of: (a) any accident, injury
to or death of persons or loss of or damage to property of third parties
occurring on or about the Leased Property or adjoining sidewalks or rights of
way under Tenant's control, and (b) any use, misuse, condition, management,
maintenance or repair by Tenant or anyone claiming under Tenant of the Leased
Property or Tenant's Personal Property or any litigation, proceeding or claim by
Governmental Agencies relating to such use, misuse, condition, management,
maintenance, or repair thereof to which Landlord is made a party; provided,
however, that Tenant's obligations hereunder shall not apply to any liability,
obligation, claim, damage, penalty, cause of action, cost or expense arising
from any gross negligence or willful misconduct of Landlord, its employees,
agents, contractors or invitees. Any such claim, action or proceeding asserted
or instituted against Landlord covered under this indemnity shall be defended by
counsel selected by Tenant and reasonably acceptable to Landlord, at Tenant's
expense. Notwithstanding the foregoing, indemnification with respect to
Hazardous Substances is governed by Section 4.3. The obligations of Tenant under
this Section 9.5 shall survive the expiration or any early termination of this
Agreement.
ARTICLE 10
CASUALTY
10.1 Restoration and Repair. If during the Term the Leased Property
shall be totally or partially destroyed and thereby rendered Unsuitable for Its
Permitted Use, Tenant shall give Landlord prompt Notice thereof. Either Landlord
or Tenant may, by the giving of Notice thereof to the other party within sixty
(60) days after such casualty occurs, terminate this Agreement, whereupon
Landlord shall be entitled to retain the insurance proceeds payable on account
of such damage and Tenant shall pay to Landlord the amount of any deductible.
Tenant further expressly acknowledges, understands and agrees that in the event
that the Agreement is terminated as aforesaid, Landlord may settle any insurance
claims and Tenant shall, upon request of Landlord, cooperate in any such
settlement. If during the Term, the Leased Property shall be destroyed or
damaged in whole or in part by fire, windstorm or any other cause whatsoever,
but the Leased Property either (i) is not rendered Unsuitable for Its Permitted
Use or (ii) is rendered Unsuitable for Its Permitted Use but neither Landlord
nor Tenant terminate this Agreement in the manner provided above, then, Tenant
shall give Landlord immediate Notice thereof and Tenant shall, subject to the
provisions of Section 10.2 below, repair, reconstruct and replace the Leased
Property, or the portion thereof so destroyed or damaged, at least to the extent
of the value and character thereof existing immediately prior to such occurrence
and in compliance with all Legal Requirements, including any alterations to the
Leased Property required to be made by any Governmental Agencies due to any
changes in code or building regulations (which Tenant acknowledges may increase
the replacement value of the Leased Property which Tenant will then be required
to insure, due to any changes in code or building regulations). All such
restoration work shall be started as promptly as practicable and diligently
completed at Tenant's sole cost and expense (using available insurance
proceeds). Tenant shall, however, immediately take such action as is necessary
to assure that the Leased Property (or any portion thereof), does not constitute
a nuisance or otherwise present or constitute a health or safety hazard.
Notwithstanding the foregoing the Tenant shall have the right to elect not to
repair any material casualty damage (estimated to cost greater than $250,000 to
repair) occurring within twelve (12) months prior to the scheduled expiration of
the then-current Term, provided and on the condition that: (i) Tenant promptly
pays to Landlord the full amount of all deductibles applying to the insured
loss, as well as of all uninsured amounts thereof, and Landlord or its Mortgagee
also receive and retain all insurance proceeds; (ii) Tenant has provided
adequate assurance that applicable business interruption insurance will continue
to be available through the end of the then-current Term to cover all resulting
loss of income or else adequate security therefor as requested by Landlord; and
(iii) Tenant, at Tenant's sole cost and expense, properly secures and protects
and preserves any damaged portion of the Facility in such a fashion as to insure
the safety of all Facility Residents, guest, invitees and others (to the extent
that such persons are reasonably expected to continue to occupy or come upon the
relevant portions of the Leased Property), and the value of the affected
improvements.
10.2 Escrow and Disbursement of Insurance Proceeds. If this Agreement
is not otherwise terminated pursuant to Section 10.1, then in the event of a
casualty resulting in a loss to the Leased Improvements and/or P&E in an amount
greater than FiftY Thousand and No/100 Dollars ($50,000.00) (as determined by an
architect or engineer selected by Landlord), the proceeds of all insurance
policies maintained by Tenant shall be deposited in Landlord's name in an escrow
account at a bank or other financial institution designated by Landlord, and
shall be used by Tenant for the repair, reconstruction or restoration of the
Leased Property to its original condition. Tenant shall, at the time of
establishment of such escrow account and from time to time thereafter until said
work shall have been completed and paid for, furnish Landlord with adequate
evidence acceptable to Landlord that at all times the undisbursed portion of the
escrowed insurance proceeds, together with any funds made available by Tenant,
is sufficient to pay for the repair, reconstruction or restoration in its
entirety. Landlord may, at its option, require, prior to advancement of said
escrowed insurance proceeds (i) approval of plans and specifications by an
architect or other design professional appropriate under the circumstances and
approved by Landlord and Tenant (which approval shall not be unreasonably
withheld or delayed), (ii) general contractors' estimates, (iii) architect's
certificates, (iv) unconditional lien waivers of general contractors, if
available, (v) evidence of approval by all Governmental Agencies and other
regulatory bodies whose approval is required, and (vi) such other terms as a
Mortgagee or lender of Landlord may reasonably require. The escrowed insurance
proceeds shall be disbursed by Landlord, not more than monthly, upon (i)
certification of the architect or engineer selected by Landlord and having
supervision of the work that such amounts are the amounts paid or payable for
the repair, reconstruction or restoration and (ii) submittal by Tenant of a
written requisition and substantiation therefor on AIA Forms G702 and G703 (or
on such other form or forms as may be reasonably acceptable to Landlord). Tenant
shall obtain, and make available to Landlord, receipted bills and, upon
completion of said work, full and final waivers of lien. In the event of a
casualty resulting in a loss payment for the Leased Improvements in an amount
equal to or less than the amount stated above, the proceeds shall be paid to
Tenant, and shall be applied towards repair, reconstruction and restoration. Any
and all loss adjustments with respect to losses payable hereunder shall require
the prior written consent of Landlord. All salvage resulting from any risk
covered by insurance shall belong to Tenant, provided any rights to the same
have been waived by the insurer. In addition, notwithstanding anything in this
Agreement to the contrary, Tenant shall be strictly liable and solely
responsible for the amount of any deductible and shall pay for all repairs,
reconstruction or alterations up to the full amount of such deductible (and
provide evidence of such payment to Landlord by documentation reasonably
acceptable to Landlord) before any insurance proceeds are used for repairs,
reconstruction or alterations.
10.3 No Abatement of Rent. Unless terminated in accordance with the
provisions of Section 10.1 above, this Agreement shall remain in full force and
effect and Tenant's obligation to make all payments of Rent and to pay all
Additional Charges as and when required under this Agreement shall remain
unabated during the Term notwithstanding any casualty to the Leased Property
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any event of casualty involving the
Leased Property and, to the maximum extent permitted by law, Tenant hereby
waives the application of any local or state statute, law, rule, regulation or
ordinance in effect during the Term which provides for such abatement.
10.4 Tenant's Property and Business Interruption Insurance. All
insurance proceeds payable by reason of any loss of or damage to any of Tenant's
Personal Property and the business interruption insurance maintained for the
benefit of Tenant shall be paid to Tenant; provided, however, no such payments
shall diminish or reduce the insurance payments otherwise payable to or for the
benefit of Landlord hereunder.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
the Leased Property as hereinabove provided, Tenant shall either (i) restore all
alterations and improvements made by Tenant and Tenant's Personal Property, or
(ii) replace such alterations and improvements and Tenant's Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
10.6 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property
and agrees that its rights shall be limited to those set forth in Section 10.1.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If the whole of the Leased Property shall
be taken or condemned for any public or quasi-public use or purpose, by right of
eminent domain or by purchase in lieu thereof, or if a substantial portion of
the Leased Property shall be so taken or condemned that the portion or portions
remaining is or are not sufficient and suitable, in the mutual reasonable
judgment of Landlord and Tenant, for the continued operation thereof as required
herein, so as to effectively render the Leased Property Unsuitable for its
Intended Use, then this Agreement and the Term hereby granted shall cease and
terminate (without prejudice to Landlord's and Tenant's respective rights to an
award under Section 11.3 below), as of the date on which the Condemnor takes
possession and all Rent shall be paid by Tenant to Landlord up to that date or
refunded by Landlord to Tenant if Rent has previously been paid by Tenant beyond
that date.
11.2 Partial Condemnation. If a portion of the Leased Property is
taken, and the portion or portions remaining can, in the mutual reasonable
judgment of Landlord and Tenant, be adapted and used for the conduct of Tenant's
business operation in accordance with the terms of this Agreement, such that the
Leased Property is not effectively rendered Unsuitable for its Intended Use,
then the Tenant shall, utilizing condemnation proceeds paid to Landlord from the
Condemnor, promptly restore the remaining portion or portions thereof to a
condition comparable to their condition at the time of such taking or
condemnation, less the portion or portions lost by the taking, and this
Agreement shall continue in full force and effect except that the Rent payable
hereunder shall, if necessary, be equitably adjusted to take into account the
proportionate reduction in the number of licensed beds or living units located
on the Leased Property as a result of the taking.
11.3 Disbursement of Award. The entire award for the Leased Property or the
portion or portions thereof so taken shall be apportioned between Landlord and
Tenant as follows: (a) if this Agreement terminates due to a taking or
condemnation, Landlord shall be entitled to the entire award; provided, however,
that any portion of the award expressly made for the taking of Tenant's
leasehold interest in the Leased Property, loss of business during the remainder
of the Term, and the taking of Tenant's Personal Property shall be the sole
property of and payable to Tenant, and (b) if this Agreement does not terminate
due to such taking or condemnation, Tenant shall be entitled to the award to the
extent required for restoration of the Leased Property, and Landlord shall be
entitled to the balance of the award not applied to restoration. In any
condemnation proceedings, Landlord and Tenant shall each seek its own award in
conformity herewith, at its own expense. If this Agreement does not terminate
due to a taking or condemnation, Tenant shall, with due diligence, restore the
remaining portion or portions of the Leased Property in the manner hereinabove
provided. In such event, the proceeds of the award to be applied to restoration
shall be deposited with a bank or financial institution designated by Landlord
as if such award were insurance proceeds, and the amount so deposited will
thereafter be treated in the same manner as insurance proceeds are to be treated
under Section 10.2 of this Agreement until the restoration has been completed
and Tenant has been reimbursed for all the costs and expenses thereof. If the
award is insufficient to pay for the restoration, Tenant shall be responsible
for the remaining cost and expense of such restoration.
11.4 No Abatement of Rent. This Agreement shall remain in full force
and effect and Tenant's obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any Condemnation involving the Leased Property.
The provisions of this Article 11 shall be considered an express agreement
governing any Condemnation involving the Leased Property and, to the maximum
extent permitted by law, no local or State statute, law, rule, regulation or
ordinance in effect during the Term which provides for such abatement shall have
any application in such case.
11.5 Disputes. If Landlord and Tenant cannot agree in respect of any
matters to be determined under this Article, a determination shall be requested
of the court having jurisdiction over the taking or condemnation; provided,
however, that if said court will not accept such matters for determination,
either party may have the matters determined by a court otherwise having
jurisdiction over the parties.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. Each of the following events shall be an Event
of Default hereunder by Tenant and shall constitute a breach of this Agreement:
(a) If Tenant shall fail to (i) pay, when due, any Rent or
any Additional Charge due hereunder; (ii) fully fund and maintain
the Tenant Shortfall Reserve as required by Section 3.10.1; (iii)
fully fund and maintain the Security Deposit as required by
Section 3.11; or (iv) fully fund and maintain the Reserve and fund
all Reserve Expenditures as required by Section 5.2, and such
failure in each such event shall continue for a period of five (5)
days after such amounts become due and payable.
(b) If Tenant shall violate or fail to comply with or perform
any other term, provision, covenant, agreement or condition to be
performed or observed by Tenant under this Agreement which is not
otherwise identified in this Section 12.1, and such violation or
failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord; provided, however, if such
violation or failure is incapable of cure by Tenant within such
thirty (30) days after Tenant's diligent and continuous efforts to
cure the same, Tenant shall have an additional period of sixty
(60) days to cure the same.
(c) If any assignment, transfer, sublease or encumbrance
shall be made or deemed to be made that is in violation of the
provisions of this Agreement.
(d) If Tenant shall cease the actual and continuous operation
of the business contemplated by this Agreement to be conducted by
Tenant upon the Leased Property (and such cessation is not the
result of casualty, condemnation or renovation and accompanying
restoration or is not otherwise permitted by Landlord or is not
the result of a legal requirement or during an emergency); or if
Tenant shall vacate, desert or abandon the Leased Property; or if
the Leased Property shall become empty and unoccupied; or if the
Leased Property or Leased Improvements are used or are permitted
to be used for any purpose, or for the conduct of any activity,
other than the Permitted Use.
(e) If, at any time during the Term of this Agreement, Tenant
or Guarantor shall file in any court, pursuant to any statute of
either the United States or of any State, a petition in bankruptcy
or insolvency, or for reorganization or arrangement, or for the
appointment of a receiver or trustee of all or any portion of
Tenant's or Guarantor's property, including, without limitation,
the leasehold interest in the Leased Property, or if Tenant or
Guarantor shall make an assignment for the benefit of its
creditors or petitions for or enters into an arrangement with its
creditors.
(f) If, at any time during the Term of this Agreement, there
shall be filed against Tenant or Guarantor in any court pursuant
to any statute of the United States or of any State, a petition in
bankruptcy or insolvency, or for reorganization, or for the
appointment of a receiver or trustee of all or a portion of
Tenant's or Guarantor's property, including, without limitation,
the leasehold interest in the Leased Property, and any such
proceeding against Tenant or Guarantor shall not be dismissed
within sixty (60) days following the commencement thereof.
(g) If Tenant's leasehold interest in the Leased Property or
any property therein (including without limitation Tenant's
Personal Property and the P&E Replacements) shall be seized under
any levy, execution, attachment or other process of court where
the same shall not be vacated or stayed on appeal or otherwise
within thirty (30) days thereafter, or if Tenant's leasehold
interest in the Leased Property is sold by judicial sale and such
sale is not vacated, set aside or stayed on appeal or otherwise
within thirty (30) days thereafter.
(h) If any of the Facility's Permits material to the
Facility's operation for its Permitted Use are at any time
suspended and the suspension is not stayed pending appeal within
five (5) days, or voluntarily terminated without the prior written
consent of Landlord.
(i) If any Governmental Agencies having jurisdiction over the
operation of the Facility removes ten percent (10%) or more of the
total number of patients or residents located in the Facility at
the time of such removal.
(j) If Tenant voluntarily transfers ten (10) or more patients
or residents located in the Facility in any one (1) year period
(except as necessitated by a casualty), provided that any such
transfer to a different type of care facility as a result of such
patient's or resident's special needs that cannot be met at the
Facility shall not be deemed a voluntary transfer.
(k) If Tenant fails to give notice to Landlord not later than
ten (10) days after Tenant's receipt of any fine notice from any
Government Agency relating to a Major Violation at the Facility.
(l) If Tenant fails to notify Landlord within twenty-four
(24) hours after receipt of any notice from any Governmental
Agency terminating or suspending or reflecting a material risk of
an imminent termination or suspension, of any material Permit
relating to the Facility.
(m) If Tenant fails during the Term of this Lease to cure or
xxxxx any Major Violation occurring during the Term that is
claimed by any Governmental Agency of any law, order, ordinance,
rule or regulation pertaining to the operation of the Facility,
and within the time permitted by such authority for such cure or
abatement.
(n) The failure of Tenant to correct, within the time
deadlines set by any Governmental Agency, any deficiency which
would result in the following actions by such agency with respect
to the Facility:
(i) a termination of any Reimbursement Contract or any
Permit material to the operation of the Facility; or
(ii) the issuance of a stop placement order or ban on
new admissions generally.
(o) If a final unappealable determination is made by
applicable state authorities of the revocation or limitation of
any Permit required for the lawful operation of the Leased
Property in accordance with its Permitted Use or there occurs the
loss or material limitation of any Permit under any other
circumstances under which Tenant is required to cease its
operation of the Leased Property in accordance with its Permitted
Use at the time of such loss or limitation.
(p) If Tenant or the Facility should be assessed fines or
penalties by any state health or licensing agency having
jurisdiction over such Persons or the Facility in excess of
$25,000.00 in any Fiscal Year.
(q) If Tenant or Guarantor or an Affiliated Person of Tenant
or Guarantor shall default under any other ARC-Related Lease
(whether now in effect or entered into in the future) and shall
fail to cure such default in the time period provided for in that
lease.
(r) If Guarantor shall default under the Guaranty and any
such default shall remain uncured through any applicable notice
and cure period thereunder.
12.2 Remedies on Default. If any of the Events of Default hereinabove
specified shall occur, Landlord, at any time thereafter, shall have and may
exercise any of the following rights and remedies:
(a) Landlord may, pursuant to written notice thereof to
Tenant, immediately terminate this Agreement and, peaceably or
pursuant to appropriate legal proceedings, re-enter, retake and
resume possession of the Leased Property for Landlord's own
account without liability for trespass (Tenant hereby waiving any
right to notice or hearing prior to such taking of possession by
Landlord) and, for Tenant's breach of and default under this
Agreement, recover immediately from Tenant any and all sums and
damages due or in existence at the time of such termination,
including, without limitation, (i) all Rent and other sums,
charges, payments, costs and expenses agreed and/or required to be
paid by Tenant to Landlord hereunder prior to such termination,
(ii) all costs and expenses of Landlord in connection with the
recovery of possession of the Leased Property, including
reasonable attorney's fees based upon services rendered at hourly
rates and court costs, and (iii) all costs and expenses of
Landlord in connection with any reletting or attempted reletting
of the Leased Property or any part or parts thereof, including,
without limitation, brokerage fees, advertising costs, reasonable
attorney's fees based upon service rendered at hourly rates and
the cost of any alterations or repairs or tenant improvements
which may be reasonably required to so relet the Leased Property,
or any part or parts thereof.
(b) Landlord may, pursuant to any prior notice required by
law, and without terminating this Agreement, peaceably or pursuant
to appropriate legal proceedings, re-enter, retake and resume
possession of the Leased Property for the account of Tenant, make
such alterations of and repairs and improvements to the Leased
Property as may be reasonably necessary in order to relet the same
or any part or parts thereof and, directly or through a qualified
management or operating company which may include an Affiliated
Person of Landlord, operate and manage the Leased Property, and
relet or attempt to relet the Leased Property or any part or parts
thereof for such term or terms (which may be for a term or terms
extending beyond the Term of this Agreement), at such rents and
upon such other terms and provisions as Landlord, in its sole
discretion, may deem advisable. If Landlord takes possession and
control of the Leased Property and operates the same, Tenant
shall, for so long as Landlord is actively operating the Leased
Property, have no obligation to operate the Leased Property but
agrees that Landlord, any contract manager or operator, or any new
tenant or sublessee may, to the extent permitted by law, operate
the Facility under Tenant's Permits, including its Medicaid and
Medicare provider agreements, if any, until same are issued in the
name of the Landlord or the new manager/operator or tenant or
sublessee, as applicable. If Landlord relets or attempts to relet
the Leased Property, or obtains a contract manager or operator for
the Leased Property, Landlord shall at its sole discretion
determine the terms and provisions of any new lease or sublease,
or management or operating agreement, and whether or not a
particular proposed manager or operator, or new tenant or
sublessee, is acceptable to Landlord. Upon any such reletting, or
the operation of the Leased Property by a contract manager or
operator, all rents or incomes received by the Landlord from such
reletting or otherwise from the operation of the Leased Property
shall be applied, (i) first, to the payment of all costs and
expenses of recovering possession of the Leased Property, (ii)
second, to the payment of any costs and expenses of such reletting
and or operation, including brokerage fees, advertising costs,
reasonable attorney's fees based upon service rendered at hourly
rates, a management fee of between five percent (5%) and ten
percent (10%) of the gross revenues generated, and the cost of any
alterations and repairs reasonably required for such reletting or
operation of the Leased Property; (iii) third, to the payment of
any indebtedness, other than Rent, due hereunder from Tenant to
the Landlord, (iv) fourth, to the payment of all Rent and other
sums due and unpaid hereunder, and (v) fifth, the residue, if any,
shall be held by the Landlord and applied in payment of future
Rent as the same may become due and payable hereunder. If the
rents received from such reletting or net income from the
operation of the Leased Property during any period shall be less
than the Rents and Additional Charges required to be paid during
that period by the Tenant hereunder, Tenant shall promptly pay any
such deficiency to the Landlord and failing the prompt payment
thereof by Tenant to Landlord, Landlord shall immediately be
entitled to institute legal proceedings for the recovery and
collection of the same. Such deficiency shall be calculated and
paid at the time each payment of Minimum Rent, Percentage Rent or
any other sum shall otherwise become due under this Agreement, or,
at the option of Landlord, at the end of the Term of this
Agreement. Landlord shall, in addition, be immediately entitled to
xxx for and otherwise recover from Tenant any other damages
occasioned by or resulting from any abandonment of the Leased
Property or other breach of or default under this Agreement other
than a default in the payment of Rent. No such re-entry, retaking
or resumption of possession of the Leased Property by the Landlord
for the account of Tenant shall be construed as an election on the
part of Landlord to terminate this Agreement unless a written
notice of such intention shall be given to the Tenant or unless
the termination of this Agreement be decreed by a court of
competent jurisdiction. Notwithstanding any such re-entry and
reletting or attempted reletting of the Leased Property or any
part or parts thereof for the account of Tenant without
termination, Landlord may at any time thereafter, upon written
notice to Tenant, elect to terminate this Agreement or pursue any
other remedy available to Landlord for Tenant's previous breach of
or default under this Agreement.
(c) Landlord may, without re-entering, retaking or resuming
possession of the Leased Property, xxx for all Rent and all other
sums, charges, payments, costs and expenses due from Tenant to
Landlord hereunder (discounted to present value) either: (i) as
they become due under this Agreement, taking into account that
Tenant's right and option to pay the Rent hereunder on a monthly
basis in any particular Fiscal Year is conditioned upon the
absence of a Default on Tenant's part in the performance of its
obligations under this Agreement, or (ii) at Landlord's option,
accelerate the maturity and due date of the whole or any part of
the Rent for the entire then-remaining unexpired balance of the
Term of this Agreement, as well as all other sums, charges,
payments, costs and expenses required to be paid by Tenant to
Landlord hereunder, including, without limitation, damages for
breach or default of Tenant's obligations hereunder in existence
at the time of such acceleration, such that all sums due and
payable under this Agreement shall, following such acceleration,
be treated as being and, in fact, be due and payable in advance as
of the date of such acceleration. Landlord may then proceed to
recover and collect all such unpaid Rent and other sums so sued
for from Tenant by distress, levy, execution or otherwise.
Regardless of which of the foregoing alternative remedies is
chosen by Landlord under this subparagraph (c), Landlord shall not
be required to relet the Leased Property nor exercise any other
right granted to Landlord pursuant to this Agreement, nor, except
as may be required by Applicable Laws, shall Landlord be under any
obligation to minimize or mitigate Landlord's damages or Tenant's
loss as a result of Tenant's breach of or default under this
Agreement. Notwithstanding the foregoing, following such time as
Landlord may obtain possession of the Leased Property, Landlord or
its successor Landlord at the time of any Lease termination, shall
continue to make the Leased Property available for lease, on an
"as is" basis, and shall turn over the net proceeds thereof to
Tenant to the extent actually received by Landlord in respect of
any time period for which Landlord shall have received the full
amount of Rent payable with respect thereto (albeit perhaps on a
basis reasonably discounted for the time value of money or
present-value basis).
(d) Landlord may, in addition to any other remedies provided
herein, enter upon the Leased Property or any portion thereof and
take possession of (i) any and all of Tenant's Personal Property,
if any, (ii) Tenant's books and records necessary to operate the
Leased Property, and (iii) all the bank accounts concerning, or
established for, the Leased Property, without liability for
trespass or conversion (Tenant hereby waiving any right to notice
or hearing prior to such taking of possession by Landlord) and
sell the same by public or private sale, after giving Tenant
reasonable notice of the time and place of any public or private
sale, at which sale Landlord or its assigns may purchase all or
any portion of Tenant's Personal Property, if any, unless
otherwise prevented by law. Unless otherwise provided by law and
without intending to exclude any other manner of giving Tenant
reasonable notice, the requirement of reasonable notice shall be
met if such notice is given at least ten (10) days before the date
of sale. The proceeds from any such disposition, less all expenses
incurred in connection with the taking of possession, holding and
selling of such Property (including reasonable attorneys' fees
based upon services rendered at hourly rates) shall be credited
against Rent which is due hereunder.
(e) Tenant acknowledges that one of the rights and remedies
available to Landlord under Applicable Law is to apply to a court
of competent jurisdiction for the appointment of a receiver to
collect the rents, issues, profits and income of the Leased
Property and to manage the operation of the Leased Property.
Tenant hereby further acknowledges that the revocation, suspension
or material limitation of the certification of the Leased Property
for provider status under Medicare or Medicaid (or successor
programs) and/or the revocation, suspension or material limitation
of the license of the Leased Property as a assisted living and
dementia care facility under the laws of the State will materially
and irreparably impair the value of Landlord's investment in the
Leased Property. Therefore, in any of such events, and in addition
to any other right or remedy of Landlord under this Agreement,
Landlord may petition any appropriate court for appointment of a
receiver to manage the operation of the Leased Property (or any
portion thereof as to which Tenant has suffered the revocation,
suspension or material limitation of any license), to collect and
disburse all rents, issues, profits and income generated thereby
and to preserve or replace to the extent possible the operating
license and provider certification of the Leased Property or to
otherwise substitute the licensee or provider thereof. The
receiver shall be entitled to a reasonable fee for his services as
receiver. All such fees and other expenses of the receivership
estate shall be payable as Additional Charges under this
Agreement. Tenant hereby irrevocably stipulates to the appointment
of a receiver under such circumstances and for such purposes and
agrees not to contest such appointment.
(f) In addition to the remedies hereinabove specified and
enumerated, Landlord shall have and may exercise the right to
invoke any other remedies allowed at law or in equity as if the
remedies of re-entry, unlawful detainer proceedings and other
remedies were not herein provided. Accordingly, the mention in
this Agreement of any particular remedy shall not preclude
Landlord from having or exercising any other remedy at law or in
equity. Nothing herein contained shall be construed as precluding
the Landlord from having or exercising such lawful remedies as may
be and become necessary in order to preserve the Landlord's right
or the interest of the Landlord in the Leased Property and in this
Agreement, even before the expiration of any notice periods
provided for in this Agreement, if under the particular
circumstances then existing the allowance of such notice periods
will prejudice or will endanger the rights and estate of the
Landlord in this Agreement and in the Leased Property. In
addition, any provision of this Agreement to the contrary
notwithstanding, no provision of this Agreement shall delay or
otherwise limit Landlord's right to seek injunctive relief or
Tenant's obligation to comply with any such injunctive relief.
12.3 Application of Funds. Any payments received by Landlord under any
of the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State.
12.4 Landlord's Right to Cure Tenant's Default. If Tenant shall default
in the performance of any term, provisions, covenant or condition on its part to
be performed hereunder, Landlord may, but shall have no obligation to perform
the same for the account and at the expense of Tenant. If, at any time and by
reason of such default, Landlord is compelled to pay, or elects to pay, any sum
of money or do any act which will require the payment of any sum of money, or is
compelled to incur any expense in the enforcement of its rights hereunder or
otherwise, such sum or sums, together with interest thereon at the Overdue Rate
shall be deemed Additional Rent hereunder and shall be repaid to Landlord by
Tenant promptly when billed therefor, and Landlord shall have all the same
rights and remedies in respect thereof as Landlord has in respect of the rents
herein reserved.
12.5 Landlord's Lien. Landlord shall have at all times during the Term
of this Agreement, a valid lien for all rents and other sums of money becoming
due hereunder from Tenant, upon all goods, accounts, wares, merchandise,
inventory, furniture, fixtures, equipment, vehicles and other personal property
and effects of Tenant situated in or upon the Leased Property, including
Tenant's Personal Property and any interest of Tenant in P&E Replacements, but
specifically excluding the trade names "ARC," "American Retirement Corporation,"
Homewood Residence, or any derivation or replacement thereof or addition thereto
applied by Affiliated Persons of Guarantor to other facilities, and such
property shall not be removed therefrom except in accordance with the terms of
this Agreement without the approval and consent of Landlord until all arrearages
in Rent as well as any and all other sums of money then due to Landlord
hereunder shall first have been paid and discharged in full. Alternatively, the
lien hereby granted may be foreclosed in the manner and form provided by law for
foreclosure of security interests or in any other manner and form provided by
law. The statutory lien for Rent, if any, is not hereby waived and the express
contractual lien herein granted is in addition thereto and supplementary
thereto. Tenant agrees to execute and deliver to Landlord from time to time
during the Term of this Agreement such Financing Statements as may be required
by Landlord in order to perfect the Landlord's lien provided herein or granted
or created by state law. Tenant further agrees that during an Event of Default,
Tenant shall not make any distributions to its shareholders, partners, members
or other owners and any such distributions shall be considered and deemed to be
fraudulent and preferential and subordinate to Landlord's claim for Rent and
other sums hereunder.
ARTICLE 13
HOLDING OVER
If Tenant or any other person or party shall remain in possession of
the Leased Property or any part thereof following the expiration of the Term or
earlier termination of this Agreement without an agreement in writing between
Landlord and Tenant with respect thereto, the person or party remaining in
possession shall be deemed to be a tenant at sufferance, and during any such
holdover, the Rent payable under this Agreement by such tenant at sufferance
shall be double the rate or rates in effect immediately prior to the expiration
of the Term or earlier termination of this Agreement. In no event, however,
shall such holding over be deemed or construed to be or constitute a renewal or
extension of this Agreement.
ARTICLE 14
LIABILITY OF LANDLORD; INDEMNIFICATION
14.1 Liability of Landlord. Landlord and its affiliates shall not be
liable to Tenant, its employees, agents, invitees, licensees, customers,
clients, residents and their respective family members or guests for any damage,
injury, loss, compensation or claim, including, but not limited to, claims for
the interruption of or loss to Tenant's business, based on, arising out of or
resulting from any cause whatsoever (other than Landlord's gross negligence or
willful misconduct), including, but not limited to: (a) repairs to any portion
of the Leased Property; (b) interruption in Tenant's use of the Leased Property;
(c) any accident or damage resulting from the use or operation (by Landlord,
Tenant or any other person or persons) of any equipment within the Leased
Property, including without limitation, heating, cooling, electrical or plumbing
equipment or apparatus; (d) the termination of this Agreement by reason of the
condemnation or destruction of the Leased Property in accordance with the
provisions of this Agreement; (e) any fire, robbery, theft, mysterious
disappearance or other casualty; (f) the actions of any other person or persons;
and (g) any leakage or seepage in or from any part or portion of the Leased
Property, whether from water, rain or other precipitation that may leak into, or
flow from, any part of the Leased Property, or from drains, pipes or plumbing
fixtures in the Leased Improvements. Any goods, property or personal effects
stored or placed by the Tenant or its employees in or about the Leased Property
including Tenant's Personal Property, shall be at the sole risk of the Tenant.
14.2 Indemnification of Landlord. Tenant shall defend, indemnify and
save and hold Landlord harmless from and against any and all liabilities,
obligations, losses, damages, injunctions, suits, actions, fines, penalties,
claims, demands, costs and expenses of every kind or nature, including
reasonable attorneys' fees and court costs, incurred by Landlord, arising
directly or indirectly from or out of: (a) any failure by Tenant to perform any
of the terms, provisions, covenants or conditions of this Agreement, on Tenant's
part to be performed including but not limited to the payment of any fee, cost
or expense which Tenant is obligated to pay and discharge hereunder, (b) any
accident, injury or damage which shall happen at, in or upon the Leased
Property, however occurring; (c) any matter or thing growing out of the
condition, occupation, maintenance, alteration, repair, use or operation by any
person of the Leased Property, or any part thereof, or the operation of the
business contemplated by this Agreement to be conducted thereon, thereat,
therein, or therefrom; (d) any failure of Tenant to comply with the Legal
Requirements; (e) any contamination of the Leased Property, or the groundwaters
thereof, arising on or after the date Tenant takes possession of the Leased
Property and occasioned by the use, transportation, storage, spillage or
discharge thereon, therein or therefrom of any toxic or hazardous chemicals,
compounds, materials or substances, whether by Tenant or by any agent or invitee
of Tenant; (f) any discharge of toxic or hazardous sewage or waste materials
from the Leased Property into any septic facility or sanitary sewer system
serving the Leased Property arising on or after the date Tenant takes possession
of the Leased Property, whether by Tenant or by any agent of Tenant; (g) any
fines, penalties, or refunds due and payable to Medicare or Medicaid arising out
of the operation of the Leased Property by Tenant; or (h) any other act or
omission of Tenant, its employees, agents, invitees, customers, licensees or
contractors, provided, however, Tenant shall not be liable for or be obligated
to indemnify Landlord from and against any damages resulting from Landlord's
gross negligence or willful misconduct.
THE INDEMNIFICATION OF LANDLORD HEREUNDER IS INTENDED TO AND SHALL
EXPRESSLY INCLUDE INDEMNIFICATION AGAINST LANDLORD'S OWN NEGLIGENCE,
UNLESS SPECIFICALLY OTHERWISE PROVIDED.
Tenant's indemnity obligations under this Article and elsewhere in this
Agreement arising prior to the termination or permitted assignment of this
Agreement shall survive any such termination or assignment.
14.3 Notice of Claim or Suit. Tenant shall promptly notify Landlord of
any claim, action, proceeding or suit instituted or threatened against Tenant or
Landlord of which Tenant receives notice or of which Tenant acquires knowledge.
In the event Landlord is made a party to any action for damages or other relief
against which Tenant has indemnified Landlord, as aforesaid, Tenant shall at its
own expense using counsel reasonably approved by Landlord, diligently defend
Landlord, pay all costs in such litigation or, at Landlord's option and expense,
Landlord may nonetheless engage its own counsel in connection with its own
defense or settlement of said litigation in which event Tenant shall cooperate
with Landlord and make available to Landlord all information and data which
Landlord deems necessary or desirable for such defense. In the event Landlord is
required to secure its own counsel due to a conflict in the interests of Tenant
and Landlord in any action for damages or other relief against which Tenant has
indemnified Landlord, Tenant shall pay all of Landlord's costs in such
litigation. Tenant is required to approve a settlement agreement for any such
claim or suit as requested by Landlord and which is consistent with applicable
insurance company requirements, unless Tenant posts a bond or other security
acceptable to Landlord for any potentially uninsured liability amounts.
14.4 Limitation on Liability of Landlord. In the event Tenant is
awarded a money judgment against Landlord, Tenant's sole recourse for
satisfaction of such judgment shall be limited to execution against the
Landlord's interest in the Leased Property. In no event shall any partner,
member, officer, director, stockholder or shareholder of Landlord or any partner
thereof or Affiliated Person or Subsidiary thereof, be personally liable for the
obligations of Landlord hereunder.
ARTICLE 15
REIT AND UBTI REQUIREMENTS
Tenant understands that, in order for Landlord to qualify as a real
estate investment trust (a "REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"), the following requirements must be satisfied. The parties
intend that amounts to be paid by Tenant hereunder and received or accrued,
directly or indirectly, by Landlord with respect to the Leased Property
(including any rents attributable to personal property that is leased with
respect thereto) will qualify as "rents from real property" (within the meaning
of Code Section 856(d) and Section 512(b)(3)), and that neither party will take,
or permit to take, any action that would cause any amount received by the
Landlord under this Agreement to fail to qualify as such under the Code.
Consistent with this intent, the parties agree that:
15.1 Limitations on Rents Attributable to Personal Property. "Rents
attributable to any personal property" leased to the Tenant cannot exceed
fifteen percent (15%) of the total rent received or accrued by Landlord under
this Agreement for the Fiscal Year of the Landlord. Consistent therewith, the
average of the fair market values of the personal property (within the meaning
set forth in Section 1.512(b)-1(c)(3)(ii) of the applicable Treasury
Regulations) that is leased to Tenant with respect to the Leased Property at the
beginning and end of a Fiscal Year cannot exceed fifteen percent (15%) of the
average of the aggregate fair market values of the real and personal property
comprising such Leased Property that is leased to Tenant under such lease at the
beginning and end of such Fiscal Year (the "REIT Personal Property Limitation").
If Landlord reasonably anticipates that the REIT Personal Property Limitation
will be exceeded with respect to the Leased Property for any Fiscal Year,
Landlord shall notify Tenant, and Landlord and Tenant shall negotiate in good
faith the purchase by Tenant of items of personal property anticipated by
Landlord to be in excess of the Personal Property Limitation. Provided, however,
that Tenant's responsibility to purchase such personal property will be offset
by Landlord in some mutually agreeable manner, which would not result in the
Landlord earning income which would constitute "unrelated business taxable
income" within the meaning of Section 512 of the Code, if the Landlord was a
"qualified trust" within the meaning of Section 856(h)(3)(E) of the Code.
15.2 Basis for Sublease Rent Restricted. Tenant cannot sublet the
property that is leased to it by Landlord, or enter into any similar
arrangement, on any basis such that the rental or other amounts paid by the
sublessee thereunder would be based, in whole or in part, on either (a) the net
income or profits derived by the business activities of the sublessee or (b) any
other formula such that any portion of the rent paid by Tenant to Landlord would
fail to qualify as "rent from real property" within the meaning of Section
856(d) and Section 512(b)(3) of the Code and regulations promulgated thereunder.
15.3 Landlord Affiliate Subleases Restricted. Anything to the contrary
in this Agreement notwithstanding, Tenant shall not sublease the Leased Property
to, or enter into any similar arrangement with, any person in which Landlord
owns, directly or indirectly, a ten percent (10%) or more interest, with the
meaning of Section 856(d)(2)(B) of the Code, and any such action shall be deemed
void ab initio. Anything to the contrary in this Agreement notwithstanding,
Tenant shall not sublease the Leased Property to, or enter into any similar
arrangement with, any Person that Landlord would be deemed to control within the
meaning of Section 512 (b)(13) of the Code.
15.4 Landlord Interests in Tenant Restricted. Anything to the contrary
in this Agreement notwithstanding, neither party shall take, or permit to take,
any action that would cause Landlord to own, directly or indirectly, a ten
percent (10%) or greater interest in the Tenant within the meaning of Section
856(d)(2)(B) of the Code, and any similar or successor provision thereto, and
any such action shall be deemed void ab initio. In addition, anything to the
contrary in this Agreement notwithstanding, Tenant shall not take or permit to
take, any action that would cause Landlord to own, directly or indirectly, such
interest in Tenant such that amounts received from Tenant would represent
amounts received from a controlled entity within the meaning of Section
512(b)(13) of the Code.
15.5 Rents from Personal Property Restricted. Rents attributable to
personal property within the meaning of Treasury Regulation Section
1.512(b)-1(c)(3)(ii) that is leased to Tenant with respect to the Leased
Property will not exceed 10 percent (10%) of the total Rents per year (the "UBTI
Personal Property Limitation"). If Landlord reasonably anticipates that the UBTI
Personal Property Limitation will be exceeded with respect to the Leased
Property for any Fiscal Year, Landlord shall notify Tenant, and Landlord and
Tenant shall negotiate in good faith the purchase by Tenant of items of personal
property anticipated by Landlord to be in excess of the UBTI Personal Property
Limitation; provided, However, that Tenant's responsibility to purchase such
personal property will be offset by Landlord in some mutually agreeable manner
which will not result in the Landlord earning income which would constitute
"unrelated business taxable income" within the meaning of Section 512 of the
Code if the Landlord was a "qualified trust" within the meaning of Section
856(h)(3)(E) of the Code.
15.6 Landlord Services. Any services provided by, or on behalf of,
Landlord will not prevent any amounts received or accrued from qualifying as
"Rents from real property" (within the meaning of Section 856(d)(2) or Section
512(b)(3) of the Code).
15.7 Certain Subtenants Prohibited. Anything to the contrary in this
Agreement notwithstanding, Tenant shall not sublease the Leased Property to, or
enter into any similar arrangement with, any Person that would be described in
Section 514(c)(9)(B)(iii) or (iv) of the Code.
15.8 Future Amendment. Tenant hereby agrees to amend this Article 15
from time to time as Landlord deems necessary or desirable in order to
effectuate the intent hereof.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Transfers Prohibited Without Consent. Tenant shall not, without
the prior written consent of Landlord in each instance, which may be withheld in
Landlord's sole opinion and discretion, sell, assign or otherwise transfer this
Agreement, or Tenant's interest in the Leased Property together with all
interests of Tenant in all property of any nature located and used at the Leased
Property (including without limitation Tenant's Personal Property and the P&E
Replacements), in whole or in part, or any rights or interest which Tenant may
have under this Agreement, or sublet any part of the Leased Property, or grant
or permit any lien or encumbrance on or security interest in Tenant's interest
in this Agreement; notwithstanding the foregoing, Tenant shall be permitted to
grant sublease, rental or other occupancy rights in the Facility to individual
residents in connection with the operation of the Leased Property in accordance
with the Permitted Use. Notwithstanding the foregoing, Tenant may sell, assign
or otherwise transfer this Agreement, or Tenant's interest in the Leased
Property, in whole but not in part, without the consent of Landlord, to an
Affiliated Person or to Guarantor provided (i) Tenant gives Landlord prior
written notice of such sale or assignment, (ii) Tenant shall remain liable under
this Agreement for the remaining Term, and (iii) such assignee or purchaser
shall continue to operate the Leased Premises as a first class assisted living
and dementia care facility consistent with other assisted living and dementia
care facilities being operated by Tenant and its Affiliated Persons.
Landlord shall not, without the prior written consent of Tenant in each
instance, which may be withheld in Tenant's sole opinion and discretion, sell,
assign or otherwise transfer this Agreement, or Landlord's interest in the
Leased Property, in whole or in part, or any rights or interest which Landlord
may have under this Agreement, either directly or indirectly in the form of a
Facility Mortgage as contemplated under Article 19 hereof, to a direct
competitor of Tenant or Guarantor. In the event that a direct competitor of
Tenant or Guarantor becomes a Mortgagee of the Leased Property the subordination
provisions of Section 19.1 shall not apply.
16.2 Indirect Transfer Prohibited Without Consent. A sale, assignment,
pledge, transfer, exchange or other disposition of (a) the stock of Tenant or
any general partner interest in Tenant or (b) any interest of a member or
members of Tenant which results in a change or transfer of management or control
of Tenant, or a merger, consolidation or other combination of Tenant with
another entity which results in a change or transfer of management or control of
Tenant, shall be deemed an assignment hereunder and shall be subject to Section
16.1 hereof. For purposes hereof, exchange or transfer of management or control
or effective control, shall mean a transfer of 50% or more of the economic
benefit of, or Control of, any such entity.
16.3 Adequate Assurances. Without limiting any of the foregoing
provisions of this Article, if, pursuant to the U.S. Bankruptcy Code, as the
same may be amended from time to time, Tenant is permitted to assign or
otherwise transfer its rights and obligations under this Agreement in disregard
of the restrictions contained in this Article, the assignee shall be deemed to
agree to provide adequate assurance to Landlord (a) that any Percentage Rent
shall not decline substantially after the date of such assignment, (b) of the
continued use of the Leased Property solely in accordance with the Permitted Use
thereof, (c) of the continuous operation of the business in the Leased Property
in strict accordance with the requirements of Article 4 hereof, and (d) of such
other matters as Landlord may reasonably require at the time of such assumption
or assignment. Without limiting the generality of the foregoing, adequate
assurance shall include the requirement that any such assignee shall have a net
worth (exclusive of good will) of not less than the aggregate of the Rent due
and payable for the previous Fiscal Year and is or can be licensed to operate
the Facility by the appropriate Governmental Agencies. Such assignee shall
expressly assume this Agreement by an agreement in recordable form, an original
counterpart of which shall be delivered to Landlord prior to an assignment of
the Agreement.
Any approval of such successor Tenant shall not affect or alter
Landlord's approval rights of each manager of the Leased Property.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. Tenant shall from time to time, within
fifteen (15) days after request by Landlord and without charge, give a Tenant
Estoppel Certificate in the form (or substantially the form) attached hereto as
Exhibit "D" and containing such other matters as may be reasonably requested by
Landlord to any person, firm or corporation specified by Landlord.
17.2 Monthly Financial Statements. Throughout the Term of this
Agreement, Tenant shall prepare and deliver to Landlord at or prior to the end
of each month during the Term hereof, an income (or profit and loss) statement
and operating balance sheet showing the results of the operation of the Leased
Property for the immediately preceding month and for the Fiscal Year to date.
This information shall be provided to Landlord under a complete financial
statement for the Facility which shall be delivered prior to the end of the next
following month, in the form customarily provided in the industry and approved
in advance by the Landlord, and which shall: (a) be taken from the books and
records maintained by Tenant, Guarantor and any manager in the form specified
herein; (b) follow a consistent form as approved in advance in writing by
Landlord; and (c) indicate variances from budgeted results for each line item
against the Tenant's budget for the Leased Property for such Fiscal Year. The
aforesaid financial statements shall be accompanied by an Officer's Certificate
which, for purposes hereof shall mean a Certificate of the Chief Financial
Officer of Tenant (or of Tenant's general partner or managing member, if
applicable) and of Guarantor's Chief Financial Officer, in which such Officer
shall certify (a) that such statements have been properly prepared in accordance
with GAAP and are true, correct and complete in all material respects and fairly
present the consolidated financial condition of the Tenant at and as of the
dates thereof and the results of its operations for the period covered thereby,
and (b) that no Event of Default has occurred and is continuing hereunder.
17.3 Annual Financial Statements. Tenant shall deliver to Landlord
within ninety (90) days after the end of each Fiscal Year, a profit and loss
statement, balance sheet and statement of cash flow certified by an independent
certified public accountant who is actively engaged in the practice of his
profession and who is acceptable to Landlord (which statement shall also be
certified by an officer, partner or member in Tenant) together with copies of
all reports and communications furnished to Guarantor, Tenant's other Affiliated
Persons or any manager of the Leased Property, showing results from the
operation of the Leased Property during such Fiscal Year, and reasons for
material variations from the approved budget for such year. Tenant shall also
deliver to Landlord at Landlord's expense at any time and from time to time,
upon not less than twenty (20) days notice from Landlord, any financial
statements or other financial reporting information required to be filed by
Landlord with the SEC or any other governmental authority or required pursuant
to any order issued by any Governmental Agencies or arbitrator in any litigation
to which Landlord is a party for purposes of compliance therewith. The financial
statements required herein are in addition to the statements required under
Section 3.3.2 hereof. Notwithstanding the foregoing, in the event that Tenant's
financial records are not otherwise being reviewed or audited by an independent
certified public accountant then the Landlord will accept financial statements
certified true and correct by the Chief Financial Officer of Tenant (or of
Tenant's general partner or managing member, if applicable) and by the
Guarantor's Chief Financial Officer.
17.4 Records. Tenant shall keep and maintain at all times in accordance
with GAAP (separate and apart from its other books, records and accounts)
complete and accurate up-to-date books and records adequate to reflect clearly
and correctly the results of operations of the Leased Property, on an accrual
basis, including but not limited to, each calculation of Percentage Rent. Such
books and records shall be kept and maintained at the Leased Property or
Tenant's principal office in Nashville, Tennessee. Landlord or its
representatives shall have, at all reasonable times during normal business
hours, reasonable access, on reasonable advance notice, to examine and copy the
books and records pertaining to the Leased Property and the Tenant Shortfall
Reserve. Such books and records shall be available for at least four (4) years
after the applicable quarterly calculation of Percentage Rent for Landlord's
inspection, copying, review and audit at Landlord's expense during reasonable
business hours and upon reasonable notice for the purpose of verifying the
accuracy of Tenant's calculation of Percentage Rent.
17.5 General Operations Budget. In addition to the Reserve Estimate,
Tenant shall furnish to Landlord, on or before December 1 of each Fiscal Year
proposed annual budgets in a form satisfactory to Landlord and consistent with
the then standards for the same brand of assisted living and dementia care
facilities as the Facility setting forth projected income and costs and expenses
projected to be incurred by Tenant in managing, leasing, maintaining and
operating the Facility during the following Fiscal Year.
17.6 Quarterly Meetings. At Landlord's request, Tenant shall make the
Tenant's property management team and the executive officers of Tenant (or of
Tenant's general partner or managing member, if applicable) available to meet
with Landlord on a quarterly basis to discuss the Reserve Estimate, the annual
budgets and any other items related to the operation of the Facility, which
Landlord wishes to discuss. Tenant agrees to give good faith consideration to
any suggestions or requests that Landlord may have.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Landlord, Mortgagee and their agents shall have the right to enter upon
the Leased Property or any portion thereof at any reasonable time to inspect the
same, including but not limited to, the operation, sanitation, safety,
maintenance and use of the same, or any portions of the same and to assure
itself that Tenant is in full compliance with its obligations under this
Agreement (but Landlord and Mortgagee shall not thereby assume any
responsibility for the performance of any of Tenant's obligations hereunder, nor
any liability arising from the improper performance thereof). In making any such
inspections, neither Landlord nor Mortgagee shall unduly interrupt or interfere
with the conduct of Tenant's business.
ARTICLE 19
FACILITY MORTGAGES
19.1 Subordination. This Agreement, Tenant's interest hereunder and
Tenant's leasehold interest in and to the Leased Property are hereby agreed by
Tenant to be and are hereby made junior, inferior, subordinate and subject in
right, title, interest, lien, encumbrance, priority and all other respects to
any mortgage or mortgages and security interests now or hereafter in force and
effect upon or encumbering Landlord's interest in the Leased Property, or any
portion thereof, and to all collateral assignments by Landlord to any third
party or parties of any of Landlord's rights under this Agreement or the rents,
issues and profits thereof or therefrom as security for any liability or
indebtedness, direct, indirect or contingent, of Landlord to such third party or
parties, and to all future modifications, extensions, renewals, consolidations
and replacements of, and all amendments and supplements to any such mortgage,
mortgages or assignments, and upon recording of any such mortgage, mortgages or
assignments, the same shall be deemed to be prior in dignity, lien and
encumbrance to this Agreement, Tenant's interest hereunder and Tenant's
leasehold interest in and to the Leased Property irrespective of the dates of
execution, delivery or recordation of any such mortgage, mortgages or
assignments (such mortgages, mortgages, security interests, assignments,
modifications, extensions, renewals, amendments, supplements and replacement
being a "Facility Mortgage"). The subordination of this Lease shall be upon the
express condition that the validity of this Lease shall be recognized by the
Mortgagee, and that, notwithstanding any default by the mortgagor, with respect
to such mortgage, Tenant's possession and right of use under this Lease in and
to the Leased Property (including rights to have insurance and condemnation
proceeds made available for proper reconstruction of the Leased Property) shall
not be disturbed by such Mortgagee unless and until Tenant shall breach any of
the provisions hereof and this Lease or Tenant's right to possession hereunder
shall have been terminated or shall be terminable in accordance with the
provisions of this Lease. The foregoing subordination and non-disturbance
provisions of this Section shall be automatic and self-operative without the
necessity of the execution of any further instrument or agreement of
subordination on the part of Tenant. Tenant acknowledges and agrees that
notwithstanding the foregoing automatic subordination, if Landlord or Mortgagee
shall request that Tenant execute and deliver any further instrument or
agreement of subordination of this Agreement or Tenant's interest hereunder or
Tenant's leasehold interest in the Leased Property to any such Facility
Mortgage, in confirmation or furtherance of or in addition to the foregoing
subordination provisions of this Section, Tenant shall promptly execute and
deliver the same to the requesting party (provided that such instrument or
agreement also reflects the non-disturbance provisions set forth above).
Further, Tenant agrees that it will, from time to time, execute such
documentation as may be requested by Landlord and any Mortgagee (a) to assist
Landlord and such Mortgagee in establishing or perfecting any security interest
in Landlord's interest in the Reserve and the funds therein; and (b) to
facilitate or allow Landlord to encumber the Leased Property as herein
contemplated. If, within thirty (30) days following Tenant's receipt of a
written request by Landlord or the holder or proposed holder of any such
Facility Mortgage, Tenant shall fail or refuse or shall have not executed any
such further instrument or agreement of subordination, for whatever reason,
Tenant shall be in breach and default of its obligation to do so and of this
Agreement and Landlord shall be entitled thereupon to exercise any and all
remedies available to Landlord pursuant to this Agreement or otherwise provided
by law.
19.2 Attornment. Tenant shall and hereby agrees to attorn, and be bound
under all of the terms, provisions, covenants and conditions of this Agreement,
to any successor of the interest of Landlord under this Agreement for the
balance of the Term of this Agreement remaining at the time of the succession of
such interest to such successor. In particular, in the event that any
proceedings are brought for the foreclosure of any Facility Mortgage, Tenant
shall attorn to the purchaser at any such foreclosure sale and recognize such
purchaser as Landlord under this Agreement. Tenant agrees that neither the
purchaser at any such foreclosure sale nor the foreclosing Mortgagee or holder
of any such Facility Mortgage shall have any liability for any act or omission
of Landlord, be subject to any offsets or defenses which Tenant may have as
claims against Landlord, or be bound by any advance rents which may have been
paid by Tenant to Landlord for more than the current period in which such rents
come due.
19.3 Rights of Mortgagees and Assignees. Provided Landlord has given
Tenant notice thereof, any Mortgagee shall have the right to unilateral
enjoyment, exercise or control over the rights, remedies, powers and interests
of Landlord hereunder, or otherwise arising under Applicable Law, as assigned or
granted to such Mortgagee by Landlord or as provided in any Facility Mortgage.
At the time of giving any notice of default to Landlord, Tenant shall mail or
deliver to any Mortgagee of whom Tenant has notice, a copy of any such notice.
No notice of default or termination of this Agreement by Tenant shall be
effective until each Mortgagee shall have been furnished a copy of such notice
by Tenant. In the event Landlord fails to cure any default by it under this
Agreement, the Mortgagee shall have, at its option, a period of thirty (30) days
after expiration of any cure period of Landlord within which to remedy such
default of Landlord or to cause such default to be remedied. In the event that
the Mortgagee elects to cure any such default by Landlord, then Tenant shall
accept such performance on the part of such Mortgagee as though the same had
been performed by Landlord, and for such purpose Tenant hereby authorizes any
Mortgagee to enter upon the Leased Property to the extent necessary to exercise
any of Landlord's rights, powers and duties under this Agreement. If, in the
event of any default by Landlord which is reasonably capable of being cured by a
Mortgagee, the Mortgagee promptly commences and diligently pursues to cure the
default, then Tenant will not terminate this Agreement or cease to perform any
of its obligations under this Agreement so long as the Mortgagee is, with due
diligence, engaged in the curing of such default.
ARTICLE 20
ADDITIONAL COVENANTS OF TENANT
20.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Leased Property for the Permitted Use and
activities incidental thereto, including without limitation the delivery of
services to the Facility residents under the Service Licenses or otherwise, and
shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect and in good standing its corporate, limited partnership,
limited liability company or other entity status and existence and its rights
and licenses necessary to conduct such business. Promptly upon receipt of same,
Tenant shall provide Landlord with copies of all licenses, licensure and
certification surveys and related plans of correction, and notices of corrective
action required, of loss of licensure or certification of the Facility, or of
any limits imposed upon admissions to the Facility.
20.2 Additional Covenants of Tenant. In addition to the other covenants
and representations of Tenant herein and in this Agreement, Tenant hereby
covenants, acknowledges and agrees that Tenant shall:
(a) Not guaranty any obligation of any Person other than the
tenant under any ARC-Related Lease;
(b) Pay or cause to be paid all lawful claims for labor and
rents with respect to the Leased Property;
(c) Pay or cause to be paid all trade payables;
(d) Not declare, order, pay or make, directly or indirectly,
any Distribution or any payments to any members or Affiliated
Persons as to Tenant (including payments in the ordinary course of
business and payments pursuant to any management agreements with
any such Affiliate), or set apart any sum of property therefor, or
agree to do so, if, at the time of such proposed action or
immediately after giving effect thereto, any Event of Default
shall exist;
(e) Except as otherwise permitted by this Agreement, not
sell, lease (as lessor or sublessor), transfer or otherwise
dispose of or abandon, all or any material portion of its assets
or business to any Person, or sell, lease, transfer or otherwise
dispose of or abandon any of Tenant's Personal Property, provided,
however, Tenant may dispose of portions of Tenant's Personal
Property which have become inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary, provided substitute
equipment or fixtures having equal or greater value and utility
have been provided.
(f) Provide and maintain throughout the Term, all Tenant's
Personal Property and P&E Replacements as shall be necessary in
order to operate the Leased Property in compliance with applicable
legal requirements and insurance requirements and otherwise in
accordance with customarily practice in the industry for the
Permitted Use. If, from and after the Commencement Date, Tenant
acquires an interest in any items of tangible personal property
(other than motor vehicles) on, or in connection with the Leased
Property which belong to anyone other than Tenant, Tenant shall
require the agreement permitting such use to provide that Landlord
or its designee may assume Tenant's rights and obligations under
such agreement upon the termination of this Agreement and any
assumption of management or operation of the Leased Property by
Landlord or its designee.
(g) Deliver to Landlord within thirty (30) days after receipt
of or after modification thereof, copies of all licenses
authorizing Tenant to operate the Leased Property for its
Permitted Use.
(h) Undertake a risk management analysis and report regarding
the operation of the Facility annually for compliance with all
Applicable Laws governing the ongoing use and operation of the
Facility for the Permitted Use and provide Landlord with a copy of
the report and any other results of the analysis.
(i) Give prompt notice to Landlord of any litigation or any
administrative proceeding involving Tenant, Landlord or the Leased
Property of which Tenant has notice or actual knowledge and which
involves a potential uninsured liability equal to or greater than
$100,000.00 or which, in Tenant's reasonable opinion, may
otherwise result in any material adverse change in the business,
operations, property, prospects, results of operation or
conditions, financial or otherwise, of Tenant or the Facility.
(j) Not, except as approved in writing by Landlord, either
directly or indirectly, for itself, or through, or on behalf of,
or in connection with any Person, divert or attempt to divert any
business or customer of the Leased Property to any competitor, by
direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to
the good will associated with the Landlord or the Leased Property.
(k) Except for liabilities incurred in the ordinary course of
business, not create, incur, assume or guarantee, or permit to
exist or become or remain liable directly or indirectly upon, any
Indebtedness except Indebtedness of Tenant to Landlord (or, if
unsecured and expressly subject to the terms of this Agreement and
Landlord's interest hereunder, and payable solely out of excess
cash flow after payment of all Rent hereunder, to Tenant's
shareholders, partners or members, as applicable). Tenant further
agrees that the obligee in respect of any such Indebtedness shall
agree in writing, in form and substance satisfactory to Landlord
that (w) the payment of such Indebtedness shall be expressly
subordinated in all respects to all of Tenant's obligations under
this Agreement, (x) no remedies may be exercised by the obligee
with respect to enforcement or collection of such Indebtedness
until such time as this Agreement shall be terminated and all of
Tenant's obligations hereunder shall have been discharged in full;
(y) such Indebtedness shall not be assigned by the obligee to any
other party; and (z) the obligee shall not initiate or join in any
bankruptcy proceedings against Tenant. As used in this Section
20.2(k) (and notwithstanding any other definition of Indebtedness
herein), Indebtedness shall mean all obligations, contingent or
otherwise, to pay or repay monies irrespective of whether, in
accordance with GAAP, such obligations should be reflected on the
obligor's balance sheet as debt.
20.3 Tenant a Single Purpose Entity. Tenant represents, agrees and
warrants that Tenant is, and throughout the Term will remain, a Single Purpose
Entity as described and contemplated on Exhibit "F" hereof. Notwithstanding the
foregoing, the Landlord agrees that the requirements for an Independent Director
or Independent Member thereunder shall not apply so long as Tenant is an
Affiliated Person of Guarantor.
20.4 Intentionally Omitted.
ARTICLE 21
MISCELLANEOUS
21.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under Applicable Laws, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
21.2 No Waiver. No release, discharge or waiver of any provision hereof
shall be enforceable against or binding upon Landlord or Tenant unless in
writing and executed by Landlord or Tenant, as the case may be. Neither the
failure of Landlord or Tenant to insist upon a strict performance of any of the
terms, provisions, covenants, agreements and conditions hereof, nor the
acceptance of any Rent by Landlord with knowledge of a breach of this Agreement
by Tenant in the performance of its obligations hereunder, or the following of
any practice or custom at variance with the terms hereof, shall be deemed or
constitute a waiver of any rights or remedies that Landlord or Tenant may have
or a waiver of any subsequent breach or default in any of such terms,
provisions, covenants, agreements and conditions or the waiver of the right to
demand exact compliance with the terms hereof.
21.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord, now or
hereafter provided either in this Agreement or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Landlord of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord of any or all of such other rights, powers
and remedies.
21.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be confined to
the clause, sentence, paragraph, section or provision so held to be invalid,
illegal or ineffective, and this Agreement shall be construed as if such
invalid, illegal or ineffective provisions had never been contained therein.
21.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
21.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
21.7 Tenant's Representations. In addition to any other representation
or warranty set forth herein and as an inducement to Landlord to enter into this
Agreement, Tenant hereby represents and warrants to Landlord as follows:
(a) Tenant is a Tennessee limited liability company which is
duly organized and validly existing and in good standing under the
laws of the State of its formation. Tenant has all requisite power
and authority under the laws of the State of its formation and the
laws of the State of Tennessee and its partnership or operating
agreement, articles of incorporation, by-laws, or other charter
documents to enter into and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
Tenant is duly authorized to transact business in any jurisdiction
in which the nature of the business conducted by it requires such
qualification.
(b) Tenant has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and upon
the execution and delivery of any document to be delivered by
Tenant, prior to the date hereof, such document shall constitute
the valid and binding obligation and agreement of Tenant,
enforceable against Tenant in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application
affecting the rights and remedies of creditors and except to the
extent that the availability of equitable relief may be subject to
the discretion of the court before which any proceeding may be
brought.
(c) There are no judgments presently outstanding and
unsatisfied against Tenant or any of its properties, and neither
Tenant nor any of its properties are involved in any material
litigation at law or in equity or any proceeding before any court,
or by or before any governmental or administrative agency, which
litigation or proceeding could materially adversely affect Tenant,
and no such material litigation or proceeding is, to the knowledge
of Tenant, threatened against Tenant and no investigation looking
toward such a proceeding has begun or is contemplated.
(d) To the knowledge of Tenant, neither this Agreement nor
any other document, certificate or statement furnished to Landlord
by or on behalf of Tenant in connection with the transaction
contemplated herein contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading. To the
knowledge of Tenant there is no fact or condition which materially
and adversely affects the business, operations, affairs,
properties or condition of Tenant which has not been set forth in
this Agreement or in other documents, certificates or statements
furnished to Landlord in connection with the transaction
contemplated hereby.
(e) Tenant hereby represents to Landlord that, in the
reasonable opinion of Tenant, the Leased Property and the Leased
Improvements therein are adequately furnished and contain adequate
P&E and Inventories consistent with the amount of P&E and
Inventories which is customarily maintained in assisted living and
dementia care facilities of the type and character of the Leased
Property as otherwise required to operate the Leased Property in a
manner contemplated by this Agreement and in compliance with all
legal requirements.
(f) Tenant acknowledges that Tenant's failure or repeated
delays in making prompt payment in accordance with the terms of
any agreement, leases, invoices or statements for purchase or
lease of P&E, Inventories or other goods or services will be
detrimental to the reputation of Landlord and Tenant.
(g) All employees of Tenant are solely employees of Tenant
and not Landlord. Tenant is not Landlord's agent for any purpose
in regard to Tenant's employees or otherwise. Further, Tenant
expressly acknowledges and agrees that Landlord does not exercise
any direction or control over the employment policies or
employment decisions of Tenant.
(h) Tenant has not (i) made any contributions, payments or
gifts to or for the private use of any governmental official,
employee or agent where either the payment or the purpose of such
contribution, payment or gift is illegal under the laws of the
United States or the jurisdiction in which made, (ii) established
or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on its books, (iii) given or
received any payments or other forms of remuneration in connection
with the referral of patients which would violate the
Medicare/Medicaid Anti-kickback Law, Section 1128(b) of the Social
Security Act, 42 U.S.C. Section 1320a-7b(b), the federal physician
self-referral law, 42 U.S.C. Section 1395 nn, or any analogous
state statute or (iv) made any payments to any person with the
intention or understanding that any part of such payment was to be
used for any purpose other than that described in the documents
supporting the payment. Tenant shall not take any such actions
during the Term of this Agreement.
(i) Tenant has not knowingly filed or failed to correct any
claims for payment or cost reports with Medicare or Medicaid that
are not true and correct in all material respects and, to Tenant's
knowledge, no refunds or overpayments from either Medicare or
Medicaid are due and owing.
(j) Tenant's equity is directly and (if applicable)
indirectly owned as shown on Exhibit "G". Tenant shall promptly
provide to Landlord, upon the occurrence thereof but in any event
not more than fifteen (15) days following a written request
therefor, written notice of any change in the executive officers,
directors, shareholders, partners, and/or members of Tenant, as
applicable to Tenant's formation and structure, and of any change
in the respective interests in Tenant held by each of such
Persons.
21.8 Quiet Enjoyment. Landlord covenants and agrees that so long as
Tenant shall timely pay all rents due to Landlord from Tenant hereunder and
keep, observe and perform all covenants, promises and agreements on Tenant's
part to be kept, observed and performed hereunder, Tenant shall and may
peacefully and quietly have, hold and occupy the Leased Property free of any
interference from Landlord or any Person claiming by, through or under Landlord;
subject, however, and nevertheless to the terms, provisions and conditions of
this Agreement, the Permitted Encumbrances, any other documents affecting record
title to or the use and occupancy of the Leased Property immediately prior to
the conveyance thereof to Landlord on or about the date hereof, and documents
affecting title to the Leased Property approved by Tenant. Landlord shall not,
without the prior written approval of Tenant, enter into or record any document
which purports to or which by its terms will materially and adversely affect the
Tenant, Tenant's use and enjoyment of the Leased Property or Tenant's rights
under this Agreement (such approval not to be unreasonably withheld, delayed or
conditioned provided that the same is appropriate and reasonably necessary in
connection with the normal and ordinary course of ownership and use of the
Facility).
21.9 Recordation of Memorandum of Lease. At either party's option, a
short form memorandum of this Agreement, in the form attached hereto as Exhibit
"E" shall be recorded or filed among the appropriate land records of the County
in which the Leased Property is located, and Tenant shall pay the transfer and
all recording costs associated therewith. In the event of a discrepancy between
the provisions of this Agreement and such short form memorandum thereof, the
provisions of this Agreement shall prevail.
21.10 Notices. Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under this
Agreement shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or similar expedited commercial carrier, addressed
to the recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
CNL Retirement - AM/Tennessee LP
CNL Center at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Chief Operating Officer
Telecopier No. (000) 000-0000
with a copy to:
Lowndes, Drosdick, Doster, Xxxxxx and Xxxx, P.A.
000 Xxxxx Xxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Telecopier No. (000) 000-0000
if to Tenant to:
Homewood at Brookmont Terrace, LLC
000 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Mr. Xxxxxx Xxxxx, Chief Financial Officer
with a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: T. Xxxxxx Xxxxx, Esquire
Phone: (000) 000-0000
Fax (000) 000-0000
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
21.11 Construction; Nonrecourse. Anything contained in this Agreement
to the contrary notwithstanding, all claims against, and liabilities of, Tenant
or Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. Each term or provision of this Agreement to be performed by Tenant
shall be construed as an independent covenant and condition. Time is of the
essence with respect to the performance by Tenant of its obligations under this
Agreement, including, without limitation, obligations for the payment of money.
Except as otherwise set forth in this Agreement, any obligations arising prior
to the expiration or sooner termination of this Agreement of Tenant (including
without limitation, any monetary, repair and indemnification obligations) and
Landlord shall survive the expiration or sooner termination of this Agreement.
In addition, solely with respect to Landlord, nothing contained in this
Agreement shall be construed to create or impose any liabilities or obligations
and no such liabilities or obligations shall be imposed on any of the
shareholders, beneficial owners, direct or indirect, officers, directors,
trustees, employees or agents of Landlord or Tenant for the payment or
performance of the obligations or liabilities of Landlord hereunder. The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
21.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Captions and
headings in this Agreement are for purposes of reference only and shall in no
way define, limit or describe the scope or intent of, or otherwise affect, the
provisions of this Agreement.
21.13 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State in which the Leased Property
is located.
21.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution and delivery of this Agreement, nor the
compliance with the terms and provisions hereof, shall violate any provision of
any law, or any judgment, writ, injunction, order or decree of any court or
Governmental Authority; nor result in or constitute a breach or default under or
the creation of any lien, charge or encumbrance upon any of its property or
assets under, any indenture, mortgage, deed of trust, contract, other commitment
or restriction to which it is a party or by which it is bound; nor require any
consent, vote or approval which has not been given or taken, or at the time of
the transaction involved shall not have been given or taken. Each party
covenants that it has and will continue to have throughout the term of this
Agreement and any extensions thereof, the full right to enter into this
Agreement and perform its obligations hereunder.
21.15 Brokerage. Landlord and Tenant hereby represent and warrant to
each other that they have not engaged, employed or utilized the services of any
business or real estate brokers, salesmen, agents or finders in the initiation,
negotiation or consummation of the business and real estate transaction
reflected in this Agreement. On the basis of such representation and warranty,
each party shall and hereby agrees to indemnify and save and hold the other
party harmless from and against the payment of any commissions or fees to or
claims for commissions or fees by any real estate or business broker, salesman,
agent or finder resulting from or arising out of any actions taken or agreements
made by them with respect to the business and real estate transaction reflected
in this Agreement.
21.16 No Partnership or Joint Venture. Landlord shall not, by virtue of
this Agreement, in any way or for any purpose, be deemed to be a partner of
Tenant in the conduct of Tenant's business upon, within or from the Leased
Property or otherwise, or a joint venturer or a member of a joint enterprise
with Tenant.
21.17 Entire Agreement. This Agreement contains the entire agreement
between the parties and, except as otherwise provided herein, can only be
changed, modified, amended or terminated by an instrument in writing executed by
the parties. It is mutually acknowledged and agreed by Landlord and Tenant that
there are no verbal agreements, representations, warranties or other
understandings affecting the same; and that Tenant hereby waives, as a material
part of the consideration hereof, all claims against Landlord for rescission,
damages or any other form of relief by reason of any alleged covenant, warranty,
representation, agreement or understanding not contained in this Agreement.
21.18 Costs and Attorneys' Fees. In addition to Landlord's rights under
Sections 12.2 and 14.2, if either party shall bring an action to recover any sum
due hereunder, or for any breach hereunder, and shall obtain a judgment or
decree in its favor, the court may award to such prevailing party its reasonable
costs and reasonable attorney's fees based upon service rendered at hourly
rates, specifically including reasonable attorney's fees incurred in connection
with any appeals (whether or not taxable as such by law). Landlord shall also be
entitled to recover its reasonable attorney's fees based upon service rendered
at hourly rates and costs incurred in any bankruptcy action filed by or against
Tenant, including, without limitation, those incurred in seeking relief from the
automatic stay, in dealing with the assumption or rejection of this Agreement,
in any adversary proceeding, and in the preparation and filing of any proof of
claim.
21.19 Approval of Landlord. Whenever Tenant is required under this
Agreement to do anything to meet the satisfaction or judgement of Landlord, the
reasonable satisfaction or judgement of Landlord shall be deemed sufficient. The
foregoing provision of this Section shall not apply in any instance where the
provisions of this Agreement expressly state that the provisions of this Section
do not apply or where the provisions of this Agreement expressly state that such
consent, approval or satisfaction are subject to the sole and absolute
discretion or judgement of Landlord, and in each such instance Landlord's
approval or consent may be unreasonably withheld or unreasonable satisfaction or
judgement may be exercised by Landlord.
21.20 Successors and Assigns. The agreements, terms, provisions,
covenants and conditions contained in this Agreement shall be binding upon and
inure to the benefit of Landlord and Tenant and, to the extent permitted herein,
their respective successors and assigns.
21.21 Waiver of Jury Trial. TENANT AND LANDLORD HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAWS, THE RIGHT EITHER OF THEM OR THEIR HEIRS, PERSONAL
REPRESENTATIVES, SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY LITIGATION PROCEEDINGS OR COUNTERCLAIM, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, THE RELATIONSHIP OF LANDLORD AND TENANT HEREUNDER, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LANDLORD'S
ACCEPTING THIS AGREEMENT.
21.22 Treatment of Lease. Landlord and Tenant each agree to treat this
Agreement as a true lease for tax purposes and as an operating lease for
generally accepted accounting principles.
21.23 Transfer of Licenses. Upon the expiration or sooner termination
of this Agreement, Tenant shall use its best efforts to transfer and assign to
Landlord or its designee or assist Landlord or its designee in obtaining
transfer or assignment of all Leased Intangible Property, including without
limitation and together with any contracts, licenses (including without
limitation all licenses identified as part of the Initial Tenant Personal
Property and any replacements thereof and additions thereto), permits,
development rights, trade names (except for trade names as included within the
Initial Tenant Personal Property), telephone exchange numbers identified with
the Leased Property, approvals and certificates and all other intangible rights,
benefits and privileges of any kind or character with respect to the Leased
Property, useful or required for the then operation of the Leased Property
(except for proprietary software as included within the Initial Tenant Personal
Property). If requested by Landlord and to the extent permitted by law the
Tenant shall provide a collateral assignment of such licenses and other
intangible rights as further security for Tenant's obligations hereunder.
21.24 Tenant's Personal Property. Upon the expiration or sooner
termination of the Term of this Agreement, Landlord may, in its sole and
absolute discretion, elect to either (i) give Tenant Notice that Tenant shall be
required, within ten (10) Business Days after such expiration or termination, to
remove all of Tenant's Personal Property from the Leased Property, or (ii) pay
Tenant's book value of such Tenant's Personal Property (not including, however,
trade names and proprietary software listed as part of the Initial Tenant
Personal Property, which shall remain the sole property of Tenant). Failure of
Landlord to make such election shall be deemed an election to proceed in
accordance with clause (ii) preceding.
21.25 Landlord's Representations. Landlord hereby represents and
warrants to Tenant as follows:
(a) Landlord is a limited partnership duly organized and
validly existing and in good standing under the laws of the State
of Delaware. Landlord has all requisite power and authority under
the laws of the State of Delaware and its charter documents to
enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby.
(b) Landlord has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and upon
the execution and delivery hereof, this Agreement shall constitute
the valid and binding agreement of Landlord.
21.26 Guaranty of Lease. The Landlord has entered into this Lease in
reliance upon the Guaranty of Lease by the Guarantor in favor of Landlord dated
of even date herewith (the "Guaranty"), pursuant to which the Guarantor has
unconditionally guaranteed all of the obligations of the Tenant under this
Lease, including without limitation the covenants of Tenant in Sections 4.4 and
Section 4.6 hereof , and all of the additional covenants of Tenant in Article 20
hereof.
21.27 Guaranty of ARC-Related Leases. The obligations of each tenant
under each ARC-Related Lease (whether now in effect or entered into in the
future) also shall be and are hereby unconditionally guaranteed by Tenant.
Tenant agrees that its guaranty of the ARC-Related Leases hereunder shall be a
material inducement for the execution of each ARC-Related Lease, is and shall be
a guaranty of payment and performance and not of collection solely, and shall be
effective in accordance with the terms and conditions of the Guaranty, which are
incorporated herein by this reference. Notwithstanding the foregoing, and the
automatic and unconditional guaranty of all ARC-Related Leases hereunder, Tenant
shall upon request of the Landlord or its Affiliated Persons promptly execute
and deliver a separate Unconditional Guaranty of Payment and Performance with
respect to each ARC-Related Lease.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
LANDLORD:
CNL RETIREMENT - AM/TENNESSEE LP, a
Delaware limited partnership
By: CNL Retirement - GP/Tennessee Corp., a
Delaware corporation, its general partner
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Printed name: Xxxxxxx X. Xxxx
--------------------
Title: Senior Vice President
(CORPORATE SEAL)
TENANT:
HOMEWOOD AT BROOKMONT TERRACE, LLC,
a Tennessee limited liability company
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------
Printed name: Xxxxxx X. Xxxxx
-----------------------------
Title: EVP - Finance, CFO, Secretary and Treasurer
-------------------------------------------
NOTICE: This agreement contains
waivers and indemnities by the Tenant
of the Landlord's own negligence.
Exhibit "A"
The Land
Being a tract of land lying in Nashville, Davidson County, Tennessee, and being
more particularly described as follows:
Beginning at an iron rod set at the southerly intersection of the northerly
right-of-way line of the Memphis-Bristol Highway, Highway 70 South, width
varies, and the easterly right-of-way line of Brookmont Terrace, width 50 feet;
Thence, with the easterly right-of-way line of Brookmont Terrace along a curve
to the right, with an arc length of 97.65 feet, the central angle of which is
28(0) 37' 14" the radius of which is 195.49 feet, the chord of which is North
32(0) 53' 21" East, 96.64 feet to an iron rod set;
Thence, North 47(0)11' 58" East, 151.58 feet to an iron rod set;
Thence, along a curve to the left, with an arc length of 197.73 feet, the
central angle of which is 21(0) 05' 35", the radius of which is 537.09 feet, the
chord of which is North 36(0) 39' 10" East, 196.61 feet to an iron rod set;
Thence, along a curve to the right, with an arc length of 94.69 feet, the
central angle of which is 06(0) 46' 49", the radius of which is 800.15 feet, the
chord of which is North 29(0) 40' 56" East, 94.64 feet to an iron rod set;
Thence, North 33(0)04' 21" East, 400.16 feet to an iron rod set;
Thence, along a curve to the right, with an arc length of 233.81 feet, the
central angle of which is 30(0) 59' 59", the radius of which is 432.14 feet, the
chord of which is North 48(0) 34' 21" East, 230.97 feet to an iron rod set;
Thence, North 63(0)58' 17" East, 454.24 feet to an iron rod set;
Thence, North 74(0) 48' 49" East, 340.27 feet to an iron rod set at the
northerly intersection of the easterly right-of-way of Brookmont Terrace and the
northerly right-of-way line of the Memphis-Bristol Highway, Highway 70 South;
Thence, leaving the easterly right-of-way line of Brookmont Terrace with the
northerly right-of-way line of the Xxxxxxx-Xxxxxxx Xxxxxxx, Xxxxxxx 00 Xxxxx,
Xxxxx 36(0) 50' 35" West, 269.39 feet to an iron rod set;
Thence, South 37(0)01' 16" West, 309.94 feet to an iron rod set;
Thence, along a curve to the right, with an arc length of 663.98 feet, the
central angle of which is 10(0) 57' 37", the radius of which is 3470.99 feet,
the chord of which is South 49(0) 40' 59" West, 662.96 feet to an iron rod set;
Thence, South 34(0)50' 13" East, 30.00 feet to an iron rod set;
Thence, along a curve to the right, with an arc length of 583.91 feet, the
central angle of which is 09(0) 33' 22", the radius of which is 3500.99 feet,
the chord of which is South 59(0) 56' 28" West, 583.24 feet to an iron rod set;
Thence, North 85(0) 59' 09" West, 115.00 feet to the point of beginning,
containing 479,930 square feet (11.018 acres more or less).
Exhibit "B"
Initial Term Minimum Rent
The amount of Minimum Rent due during the Initial Term 1 as follows:
For Accounting Year 1 $ 918,179.63
Commencing with the 2nd Accounting Year, and on the first day of each Accounting
Year thereafter during the Initial Term, Minimum Rent shall increase by two
percent (2%) over the Minimum Rent owing in the immediately preceding Accounting
Year. Accordingly, the Minimum Rent owing from the 2nd Accounting Year through
the end of the Initial Term of this Agreement shall be as follows:
For Accounting Year 2 $ 936,543.22
For Accounting Year 3 $ 955,274.08
For Accounting Year 4 $ 974,379.56
For Accounting Year 5 $ 993,867.15
For Accounting Year 6 $ 1,013,744.50
For Accounting Year 7 $ 1,034,019.39
For Accounting Year 8 $ 1,054,699.78
For Accounting Year 9 $ 1,075,793.77
For Accounting Year 10 $ 1,097,309.65
For Accounting Year 11 $ 1,119,255.84
For Accounting Year 12 $ 1,141,640.96
For Accounting Year 13 $ 1,164,473.78
For Accounting Year 14 $ 1,187,763.25
For Accounting Year 15 $ 1,211,518.52
------------------
1 Absent and assuming no increase in respect of any Earn Out Payment under the
Earn Out Agreement with American Retirement Corporation
Exhibit "C"
Appraisal Process
If Landlord and Tenant are unable to agree upon the fair market value
of the Leased Property within any relevant period provided in this Agreement,
each shall within ten (10) days after written demand by the other select one MAI
Appraiser to participate in the determination of fair market value. Within ten
(10) days of such selection, the MAI Appraisers so selected by Landlord and
Tenant shall select a third MAI Appraiser. The three (3) selected MAI Appraisers
shall each determine the fair market value of the Leased Property within thirty
(30) days of the selection of the third appraiser. To the extent consistent with
sound appraisal practices as then existing at the time of any such appraisal,
and if requested by Landlord, such appraisal, shall be made on a basis
consistent with the basis on which the Leased Property was appraised at the time
of its acquisition by Landlord. Tenant shall pay the fees and expenses of any
MAI Appraisers retained pursuant to this Exhibit.
In the event either Landlord or Tenant fails to select a MAI Appraiser
within the time period set forth in the foregoing paragraph, the MAI Appraiser
selected by the other party shall alone determine the fair market value of the
Leased Property in accordance with the provisions of this Exhibit and the fair
market value so determined shall be binding upon Landlord and Tenant.
In the event the MAI Appraisers selected by Landlord and Tenant are
unable to agree upon a third MAI Appraiser within the time period set forth in
the first paragraph of this Exhibit, either Landlord or Tenant shall have the
right to apply at Tenant's expense to the presiding judge of the court of
original trial jurisdiction in the county in which the Leased Property is
located to name the third MAI Appraiser.
Within five (5) days after completion of the third MAI Appraiser's
appraisal, all three MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the fair market value of the Leased
Property. If a majority 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 Leased
Property. If, however, either or both of the low appraisal or the high appraisal
are more than ten percent (10%) lower or higher than the middle appraisal, any
such lower or higher appraisal shall be disregarded. If only one appraisal is
disregarded, the remaining two appraisals shall be added together and their
total divided by two, and the resulting quotient shall be such fair market
value. If both the lower appraisal and the higher appraisal are disregarded as
provided herein, the middle appraisal shall be such fair market value. In any
event, the result of the foregoing appraisal process shall be final and binding.
"MAI Appraiser" shall mean an appraiser licensed or otherwise qualified
to do business in the State and who has substantial experience in performing
appraisals of facilities similar to the Leased Property and is certified as a
member of the American Institute of Real Estate Appraisers or certified as a
SRPA by the Society of Real Estate Appraisers, or, if such organizations no
longer exist or certify appraisers, such successor organization or such other
organization as is approved by Landlord.
Exhibit "D"
Tenant Estoppel Certificate
THIS TENANT'S ESTOPPEL CERTIFICATE ("Certificate") is given this __day
of ___, 20___ by HOMEWOOD AT BROOKMONT TERRACE, LLC, a Tennessee limited
liability company, whose address is 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxx 00000, as Tenant ("Tenant") in favor of _________________________, a
__________, with principal office and place of business at
___________________________("Beneficiary").
RECITALS:
A. Pursuant to the terms and conditions of that certain Lease Agreement
("Lease") dated October ___, 2002, CNL Retirement - AM/Tennessee LP, a Delaware
limited partnership ("Landlord") leased to Tenant certain real property in
Davidson County, Tennessee ("Leased Property"), which Leased Property are more
particularly described in the Lease.
B. Pursuant to the terms and conditions of the Lease, the Beneficiary has
requested that the Tenant execute and deliver this Certificate with respect to
the Lease.
NOW, THEREFORE, in consideration of the above Leased Property, the
Tenant hereby makes the following statements for the benefit of the Assignee:
1. The copy of the Lease attached hereto and made a part hereof as
Exhibit "A" is a true, correct and complete copy of the Lease, which Lease is in
full force and effect as of the date hereof, and has not been modified or
amended.
2. The Lease sets forth the entire agreement between the Landlord and
the Tenant relating to the leasing of the Leased Property, and there are no
other agreements, written or oral, relating to the leasing of the Leased
Property.
3. There exists no uncured or outstanding defaults or events of default
under the Lease, or events which, with the passage of time, and the giving of
notice, or both, would be a default or event of default under the Lease.
4. No notice of termination has been given by Landlord or Tenant with
respect to the Lease.
5. All payments due the Landlord under the Lease through and including
the date hereof have been made, including the monthly installment of Minimum
Rent (as defined in the Lease) for the period of ______________to
________________in the amount of $______________.
6. As of the date hereof, the annual Minimum Rent under the Lease is
$__________.
7. Percentage Rent (as defined in the Lease) has been paid through and
including the Fiscal Year ending __________.
8. There are no disputes between the Landlord and the Tenant with
respect to any rental due under the Lease or with respect to any provision of
the Lease.
9. Notwithstanding any provisions of the Lease to the contrary, the
Tenant hereby consents to the collateral assignment of the Lease by the Landlord
to the Beneficiary, and agrees that no terms and conditions of the Lease shall
be altered, amended or changed as a result of such assignment.
10. The Tenant hereby agrees that from and after the date hereof copies
of all notices which Tenant is required to deliver to the Landlord under the
Lease with respect to defaults, events of default or failure to perform by the
Landlord under the Lease, shall be delivered to Beneficiary at the following
address:
11. The Tenant represents and warrants that (a) all improvements
constructed on the Leased Property have been approved and accepted by Tenant,
(b) all utility sources and utility companies which service the Leased Property
have been approved and accepted by Tenant and utility service is available to
the Leased Property, (c) Tenant is in occupancy of the Leased Property pursuant
to the Lease, and (d) Tenant has no offsets, counterclaims or defenses with
respect to its obligations under the Lease.
12. The Tenant understands and acknowledges that Beneficiary is relying
upon the representations set forth in this Certificate, and may rely thereon in
connection with the [collateral] assignment of the Lease to Beneficiary.
IN TESTIMONY WHEREOF, witness the signature of the Tenant as of the day
and year first set forth above.
HOMEWOOD AT BROOKMONT TERRACE, LLC, a Tennessee limited liability company
By:
---------------------------------------------------------
Name:
----------------------------------------------
Title:
------------------------------------------------------
STATE OF _______
COUNTY OF _______
The foregoing instrument was acknowledged before me this ___ day of
_____, 20___ by _________________, as _________________of HOMEWOOD AT BROOKMONT
TERRACE, LLC, a Tennessee limited liability company, on behalf of the limited
liability company. He/she is personally known to me or has produced ________as
identification.
(NOTARY SEAL).....
Notary Public
Printed Name:______________________________
Notary Public, State of
-----------------------------
Commission #:
----------------------------------------
My commission expires:
-------------------------------
THIS INSTRUMENT WAS PREPARED BY
AND SHOULD BE RETURNED TO:
Xxxxxx X. Xxxxxxx, Esquire
Lowndes, Drosdick, Doster, Xxxxxx & Xxxx, P.A.
000 Xxxxx Xxxx Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxx, XX 00000-0000
(000) 000-0000
Memorandum of Lease
THIS MEMORANDUM OF LEASE, entered into as of this ____ day of October,
2002, by and between CNL RETIREMENT - AM/TENNESSEE LP, a Delaware limited
partnership, whose address is 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000,
as Landlord, and HOMEWOOD AT BROOKMONT TERRACE, LLC, a Tennessee limited
liability company, whose address is 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxx 00000, as Tenant.
W I T N E S E T H:
-----------------
THAT, Landlord and Tenant have heretofore entered into a certain Lease
Agreement dated October ___, 2002 (the "Lease") covering certain Leased Property
consisting of, among other things, certain real property located in Davidson
County, Tennessee, more particularly described on Exhibit "A" attached hereto
upon which there is constructed and located certain improvements (together the
"Leased Property"), and
WHEREAS, it is the desire of both Landlord and Tenant to memorialize
the Lease and set forth certain pertinent data with respect thereto,
NOW THEREFORE, with respect to the Lease, Landlord and Tenant hereby
acknowledge and agree as follows:
1. Demise. The Leased Property have been and are hereby demised, let
and leased by Landlord to Tenant, and taken and accepted by Tenant from
Landlord, all pursuant to and in accordance with the Lease.
2. Term. The initial Term of the Lease is from October ___, 2002, until
October 31, 2017. Tenant has the right, privilege and option to renew and extend
the initial Term of the Lease for up to two (2) additional periods of five (5)
years each, subject to the provisions and conditions of the Lease.
3. Possession. Landlord has delivered possession of the Leased Property
to Tenant and Tenant has accepted delivery and taken possession of the Leased
Property from Landlord in the "as is" condition of the Leased Property on the
Commencement Date.
4. Liens on Landlord's Interest Prohibited. By the terms of the Lease,
Landlord's interest in the Leased Property may not be subjected to liens of any
nature by reason of Tenant's construction, alteration, repair, restoration,
replacement or reconstruction of any improvements on or in the Leased Property,
including those arising in connection with or as an incident to the renovation
of the improvements located on the Leased Property, or by reason of any other
act or omission of Tenant (or of any person claiming by, through or under
Tenant) including, but not limited to, construction, mechanics' and
materialmen's liens. Accordingly, all persons dealing with Tenant are hereby
placed on notice that such persons shall not look to Landlord or to Landlord's
credit or assets (including Landlord's interest in the Leased Property) for
payment or satisfaction of any obligations incurred in connection with the
construction, alteration, repair, restoration, renovation, replacement or
reconstruction thereof by or on behalf of Tenant. Tenant has no power, right or
authority to subject Landlord's interest in the Leased Property to any
construction, mechanic's or materialmen's lien or claim of lien.
5. Subordination and Attornment. The Lease specifically provides that
the Lease and Tenant's leasehold interest in and to the Leased Property are
junior, inferior, subordinate and subject in all respects to any mortgage or
mortgages now or hereafter in force and effect upon or encumbering the Leased
Property or any portion thereof, and that Tenant shall, and has agreed to,
attorn to any successor of the interest of Landlord under the Lease, including
the purchaser at any foreclosure sale occasioned by the foreclosure of any such
mortgage or mortgages, for the balance of the Term of the Lease remaining at the
time of the succession of such interest to such successor. Such subordination
shall be upon the express condition that the validity of this Lease shall be
recognized by the mortgagee, and that, notwithstanding any default by the
mortgagor, with respect to such mortgage, Tenant's possession and right of use
under this Lease in and to the Premises (including rights to have insurance and
condemnation proceeds made available for proper reconstruction of the Premises)
shall not be disturbed by such mortgagee unless and until Tenant shall breach
any of the provisions hereof and this Lease or Tenant's right to possession
hereunder shall have been terminated in accordance with the provisions of this
Lease.
6. Inconsistent Provisions. The provisions of this Memorandum
constitute only a general description of the content of the Lease with respect
to matters set forth herein. Accordingly, third parties are advised that the
provisions of the Lease itself shall be controlling with respect to all matters
set forth herein. In the event of any discrepancy between the provisions of the
Lease and this Memorandum, the provisions of the Lease shall take precedence and
prevail over the provisions of this Memorandum.
7. Termination of Lease. All rights of Tenant shall terminate upon the
expiration or earlier termination of the Lease, which may be evidenced by a
written notice of such expiration or termination recorded or filed by Landlord
among the appropriate land records of the County in which the Leased Property is
located.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
IN WITNESS WHEREOF, Landlord and Tenant have caused this Memorandum of
Lease to be duly executed on or as of the day and year first above written.
Signed, sealed and delivered
in the presence of:
CNL RETIREMENT - AM/TENNESSEE LP, a Delaware limited
partnership
By: CNL Retirement - GP/Tennessee Corp., a Delaware corporation, general partner
By:
Name:
Its:
(CORPORATE SEAL)
"LANDLORD"
STATE OF _______________
COUNTY OF _____________
The foregoing instrument was acknowledged before me this _____ day of
October, 2002 by ____________________, as _________ of CNL Retirement -
GP/Tennessee Corp., a Delaware corporation, as general partner of CNL RETIREMENT
- AM/TENNESSEE LP, a Delaware limited partnership, on behalf of the limited
partnership. He/she is personally known to me or has produced
_______________________ as identification.
(NOTARY SEAL)
Printed Name:
------------------------------------
Notary Public, State of
--------------------------
Commission #:
-------------------------------------
My commission expires:
----------------------------
HOMEWOOD AT BROOKMONT TERRACE, LLC, a Tennessee limited
liability company
By:
----------------------
Name:
--------------------
Its:
---------------------
"TENANT"
STATE OF __________
COUNTY OF __________
The foregoing instrument was acknowledged before me this _____ day of
October, 2002, by ___________________, as ______________ of HOMEWOOD AT
BROOKMONT TERRACE, LLC, a Tennessee limited liability company, on behalf of the
limited liability company. He/she is personally known to me or has produced
_______________________ as identification.
Printed Name:______________________________
Notary Public, State of
-----------------------------
Commission #:
----------------------------------------
My commission expires:
-------------------------------
Exhibit "F"
Single Purpose Entity Requirements
Tenant or its assignee shall throughout the Term hereof do all things
necessary to continue to be and remain a Single Purpose Entity (including
without limitation, if Tenant is a partnership, insuring that each General
Partner of Tenant, continues as a Single Purpose Entity and shall not amend its
Articles of Organization or Operating Agreement (or if Tenant is a corporation,
Tenant shall not amend its Articles of Incorporation or Bylaws, or if Tenant is
a partnership, Tenant shall prevent any general partner from amending such
general partner's Articles of Organization or Bylaws or other formation
documents). For purposes hereof, Single Purpose Entity shall mean a Person,
other than an individual, which (a) is formed, organized or reorganized solely
for the purpose of holding, directly, the leasehold interest in the Leased
Property, (b) does not engage in any business unrelated to the Leased Property
and the operation and management thereof, (c) has not and will not have any
assets other than those related to its interest in the Leased Property and has
not and will not have any indebtedness other than incurred in the ordinary
course of business and paid pursuant to the terms of financing applicable to
such trade payables and indebtedness expressly authorized in Section 20.2(f) of
the Agreement, (d) maintains its own separate books and records and its own
accounts, in each case which are separate and apart from the books and records
of any other Person, (e) holds itself out as being a Person separate and apart
from any other Person, (f) does not and will not commingle its funds or assets
with those of any other Person, (g) conducts its own business in its own name,
(h) maintains separate financial statements, (i) pays its own liabilities out of
its own funds, (j) observes all limited liability company formalities,
partnership formalities or corporate formalities, as applicable, (k) maintains
an arm's-length relationship with its Affiliated Persons, (l) pays the salaries
of its own employees and maintains a sufficient number of employees in light of
its contemplated business operation, (m) does not guarantee or otherwise
obligate itself with respect to the debts of any other Person or hold out its
credit as being available to satisfy the obligations of any other Person except
as required or expressly authorized under the Agreement, (n) does not acquire
obligations or securities of its partners, members or shareholders, (o)
allocates fairly and reasonably shared expenses, including without limitation,
any overhead for shared office space, (if any), (p) uses separate stationary,
invoices and checks, (q) except as required or expressly authorized under the
Agreement, does not and will not pledge its assets for the benefit of any Person
other than Landlord or make any loans or advances to any other Person, (r) does
and will correct any known misunderstanding regarding its separate identity, (s)
maintains adequate capital in light of its contemplated business operations, and
(t) has and will have an Operating Agreement, partnership agreement, certificate
of incorporation or other organization document which complies with the
standards and requirements for a Single Purpose Entity set by Rating Agencies
(as hereinafter defined) as of the date hereof applicable to a limited liability
company, partnership or corporation, as applicable. In addition, if such Person
is a limited liability company, (i) the managing member shall be a corporation
or limited liability company (or if a partnership, shall have as its sole
general partner a corporation or limited liability company) that is a Single
Purpose Entity whose organization documents shall comply with the standards and
requirements for a Single Purpose Entity set by the Rating Agencies as of the
date hereof applicable to such managing members, (ii) its Articles of
Organization, Certificate of Formation and/or Operating Agreement, as
applicable, shall provide that such entity will dissolve only upon the
bankruptcy of the managing member, (iii) if such Person has more than one
managing member, at least one member shall be a corporation or limited liability
company that qualifies as a Single Purpose Entity and the Organization Documents
shall provide that such Person shall continue (and not dissolve) for so long as
a solvent managing member exists (iv) such corporate member or limited liability
company shall conform to the requirements hereof for Persons that are
corporations or limited liability company and (v) such Person shall have at
least one Independent Member. In addition, if such Person is a partnership, (a)
all general partners of such Person shall be Single Purpose Entities whose
organizational documents shall comply with the standards and requirements for a
Single Purpose Entity set by the Rating Agencies as of the date hereof
applicable to such general partners, (b) if such Person has more than one
general partner, then the organization documents shall provide that such Person
shall continue (and not dissolve) for so long as a solvent general partner
exists. In addition, if such Person is a corporation, then at all times, (i)
such Person shall have at least one Independent Director, and (ii) Board of
Directors of such Person may not take any action relating to such Person's
bankruptcy, dissolution or status as a Single Purpose Entity without the
unanimous affirmative vote of 100% of the members of the Board of Directors
unless all of the directors, including the Independent Director shall have
participated in such vote. In addition, such Person which is formed or organized
solely for the purpose of holding, directly, the leasehold interest in the
Leased Property (i) without the unanimous consent of all of the partners,
directors or members, as applicable, has not and will not with respect to itself
or any other single purpose entity that owns an interest in the Leased Property
in which it has a direct or indirect legal or beneficial interest (a) seek or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or other similar official for itself for all or any
portion of its properties, or (b) take any action which might cause it to become
insolvent, (ii) has held and will hold its assets in its own name, (iii) has and
will maintain its financial statements, accounting records and other entity
documents separate and apart form any other Person, and (iv) has not and will
not identify its partners, members or shareholders or any of its affiliates of
any of them as a division or part of it. For purposes hereof, "Rating Agencies"
shall mean any three of the following: Standards & Poor's Rating Services, a
division of the XxXxxx-Xxxx Companies, Inc., Duff and Xxxxxx Credit Rating Co.,
Xxxxx'x Investors Services, Inc. and Fitch Investors Services, L.P. or if any
such corporation shall for any reason no longer perform the functions of a
securities rating agency, any other nationally recognized statistical rating
agency designated by Landlord. In addition, for purposes hereof, "Independent
Director" or "Independent Member" shall mean an individual appointed by CT
Corporation System, AMACAR Group, L.L.C., CSC Special Services or similar
corporate service or an individual reasonably satisfactory to Landlord, who in
any case shall not have been at the time of such individual's appointment, and
may not have been at any time during the preceding two years (i) a shareholder
of, or an officer or employee of, or a member or manager of Tenant or any of its
respective shareholders, subsidiaries or Affiliated Persons, (ii) a customer of,
or supplier to Tenant or any member, manager or general partner or any of its
respective shareholders, subsidiaries or Affiliated Persons, (iii) a Person or
other entity controlling any such shareholder, supplier, customer, member or
manager, or (iv) a member of the immediate family of any such shareholder,
officer, employee, supplier, customer, member or manager or of any other
director of Tenant or any general partner thereof.
In addition to the foregoing, and consistent with the Single Purpose
Entity requirements hereof, Tenant covenants and agrees that throughout the Term
hereof, Tenant shall not voluntarily file or consent to the filing of a petition
for bankruptcy, insolvency, reorganization, assignment for the benefit of
creditors or similar proceedings under any federal or state bankruptcy,
insolvency, reorganization or other similar law or otherwise seek any relief
under any laws relating to the relief of debts or the protection of debtors
generally, without the unanimous consent of its manager(s), which shall at all
times include the affirmative consent of the Independent Director, and if Tenant
is a partnership without the unanimous consent of its general partners
(including the unanimous consent of the directors of the corporate general
partners or shareholders as the case may be which shall at all times include the
consent of the Independent Director).
Exhibit "G"
Tenant Equity Ownership
Homewood at Brookmont Terrace, LLC is owned 51% by American Retirement
Corporation and 49% by ARC Brookmont Terrace, Inc.
ARC Brookmont Terrace, Inc. is a wholly-owned subsidiary of American
Retirement Corporation.
Exhibit "H"
Property Expenses
The term "Property Expenses" shall mean for the requisite period the
sum of the following items:
1. the cost of sales, including without limitation, compensation,
fringe benefits, payroll taxes and other costs relating to employees of Tenant
(the foregoing costs shall not include salaries and other employee costs of
executive personnel of Tenant who do not work at the Leased Property on a
regular basis; except that the foregoing costs shall include the allocable
portion of the salary and other employee costs of any general manager or other
supervisory personnel (not including regional vice presidents or regional sales
people) assigned to a "cluster" of assisted living and dementia care facilities
which includes the Leased Property);
2. departmental expenses incurred at departments within the Leased
Property; administrative and general expenses; the cost of marketing incurred by
the Leased Property; advertising and business promotion incurred by the Leased
Property; heat, light, and power; and computer line charges;
3. the cost of Inventories and P&E consumed in the operation of the
Leased Property;
4. a reasonable reserve for uncollectible accounts receivable as
determined by the Tenant;
5. all costs and fees of independent professionals or other third
parties who are retained by Tenant to perform services required or permitted
hereunder;
6. all costs and fees of technical consultants and operational experts
who are retained or employed by Tenant for specialized services (including,
without limitation, quality assurance inspectors) and the cost of attendance by
employees of the Leased Property at training and manpower development programs
sponsored by Tenant;
7. Additional Charges as referenced in Section 3.4 of the Agreement;
8. payments made into the Reserve pursuant to Section 5.2 of the
Agreement;
9. management fees paid to any approved manager and such other costs
and expenses incurred by an approved manager as are specifically provided for
under any approved management agreement or are otherwise reasonably necessary
for the proper and efficient operating of the Leased Property;
10. the term "Property Expenses" shall not include (a) debt service
payments pursuant to any Facility Mortgage, (b) payments pursuant to equipment
leases or other forms of financing obtained for the Tenant's Personal Property,
(c) rental payments pursuant to any ground lease of the Land, (d) any
indebtedness of Tenant, or (e) any employee claim which is not covered by
insurance and where the basis of such employee claim is conduct by Tenant or its
manager which is (i) a substantial violation of the standards of responsible
labor relations as generally practiced by prudent owners or operators of similar
retirement community operations in the state in which the Facility is situated,
and (ii) not the isolated act of individual employees, but rather is a direct
result of corporate policies of Tenant or any manager. Neither revenues from the
Facility, nor any disbursement from the Reserve or the Tenant Shortfall Reserve,
shall be used by Tenant to pay the amounts not constituting Property Expenses
under clauses 10 (b), (c), (d) or (e) above.
Notwithstanding the foregoing definition of "Property Expenses," the
financial and other informational reports and statements to be provided pursuant
to the Lease may be provided by Tenant consistent with Tenant's standard
information reporting practices, provided that any omitted or varying item under
such practices is identified and separately scheduled as adjustments if
necessary to determine any financial or economic amount relevant to the Lease or
if otherwise requested in writing by Landlord.
Exhibit "I"
Initial Landlord P&E
Exhibit "J"
Initial Tenant Personal Property
(a) The right to use the tradename "ARC," "American Retirement
Corporation," "Homewood Residence," "Brookmont Terrace," and
any variations thereof;
(b) Assisted living and dementia care licenses, and any liquor
licenses;
(c) Any vans, cars or other motor vehicles; and
(d) Any proprietary software of Tenant and its Affiliated Persons
not including, however, information and data relating to the
Leased Property and the ownership, operation and occupancy
thereof, which information and data shall remain available to
Landlord at all times during and be transferred to Landlord
immediately upon the expiration or any early termination of
the Lease Term.
Exhibit "K"
Fallback Shortfall Assumption
Average Occupancy Projected (Monthly) Shortfalls Projected (Annual) Shortfalls 1.25 X Total Proj. Shortfalls
------------------ ------------------------------------ ----------------------------------- ------------------------------------
71% $77,540 $383,922 $479,902
75% $65,254 $306,382 $382,977
78% $56,410 $241,128 $301,410
81% $41,756 $184,718 $230,898
84% $31,056 $104,833 $131,042
88% $20,163 $ 49,986 $ 62,483
90% $12,902 $ 29,823 $ 37,279
92% $ 5,640 $ 7,649 $ 9,561
93% $ 2,009 $ 2,009 $ 2,511
94% $ 0.00 $ 0.00 $ 0.00
