3
EXHIBIT 10.5
Lease Agreement
between
CNL Health Care Partners, LP
and
BG Orland Park, LLC
LEASE AGREEMENT
DATED AS OF APRIL 20, 2000
BY AND BETWEEN
CNL HEALTH CARE PARTNERS, LP,
a Delaware limited partnership,
AS LANDLORD,
AND
BG ORLAND PARK, LLC,
AS TENANT
TABLE OF CONTENTS
ARTICLE 1.........................................................................................................1
ARTICLE 2.........................................................................................................4
2.1 Leased Property............................................................................................4
2.2 Condition of Leased Property...............................................................................4
2.3 Fixed Term.................................................................................................4
2.4 Extended Term..............................................................................................4
ARTICLE 3.........................................................................................................4
3.1 Rent.......................................................................................................4
3.2 Late Payment of Rent, Etc..................................................................................4
3.3 Net Lease..................................................................................................4
3.4 Security for Tenant's Performance..........................................................................4
ARTICLE 4.........................................................................................................4
4.1 Permitted Use..............................................................................................4
4.2 Compliance with Legal/Insurance Requirements, Etc..........................................................4
4.3 Environmental Matters......................................................................................4
ARTICLE 5.........................................................................................................4
5.1 Maintenance and Repair.....................................................................................4
5.2 Tenant's Personal Property.................................................................................4
5.3 Yield Up...................................................................................................4
ARTICLE 6.........................................................................................................4
6.1 Improvements to the Leased Property........................................................................4
6.2 Salvage....................................................................................................4
6.3 Equipment Leases...........................................................................................4
ARTICLE 7.........................................................................................................4
ARTICLE 8.........................................................................................................4
ARTICLE 9.........................................................................................................4
9.1 General Insurance Requirements.............................................................................4
9.2 Waiver of Subrogation......................................................................................4
9.3 General Provisions.........................................................................................4
9.4 Blanket Policy.............................................................................................4
9.5 Indemnification of Landlord................................................................................4
ARTICLE 10........................................................................................................4
10.1 Insurance Proceeds........................................................................................4
10.2 Damage or Destruction.....................................................................................4
10.3 Damage Near End of Term...................................................................................4
10.4 Tenant's Property.........................................................................................4
10.5 Restoration of Tenant's Property..........................................................................4
10.6 No Abatement of Rent......................................................................................4
10.7 Waiver....................................................................................................4
ARTICLE 11........................................................................................................4
11.1 Total Condemnation, Etc...................................................................................4
11.2 Partial Condemnation......................................................................................4
11.3 Disbursement of Award.....................................................................................4
11.4 Abatement of Rent.........................................................................................4
11.5 Temporary Condemnation....................................................................................4
11.6 Allocation of Award.......................................................................................4
ARTICLE 12........................................................................................................4
12.1 Events of Default.........................................................................................4
12.2 Remedies..................................................................................................4
12.3 Waiver of Jury Trial......................................................................................4
12.4 Application of Funds......................................................................................4
12.5 Landlord's Right to Cure Tenant's Default.................................................................4
12.6 Security Deposit..........................................................................................4
12.7 Good Faith Dispute........................................................................................4
ARTICLE 13........................................................................................................4
ARTICLE 14........................................................................................................4
14.1 Landlord Notice Obligation................................................................................4
14.2 Landlord's Default........................................................................................4
14.3 Special Remedies for Landlord Funding Default.............................................................4
14.4 Special Remedy under Section 10.1 and 11.3................................................................4
ARTICLE 15........................................................................................................4
15.1 Transfer of Leased Property...............................................................................4
15.2 Conditions of Transfer....................................................................................4
15.3 Transfer of Interest in Landlord..........................................................................4
ARTICLE 16........................................................................................................4
16.1 Subletting and Assignment.................................................................................4
16.2 Required Sublease Provisions..............................................................................4
16.3 Permitted Sublease and Assignment.........................................................................4
16.4 Sublease Limitation.......................................................................................4
ARTICLE 17........................................................................................................4
17.1 Estoppel Certificates.....................................................................................4
17.2 Financial Statements......................................................................................4
17.3 General Operations........................................................................................4
ARTICLE 18........................................................................................................4
ARTICLE 19........................................................................................................4
19.1 Negotiation...............................................................................................4
19.2 Arbitration...............................................................................................4
ARTICLE 20........................................................................................................4
20.1 Landlord May Grant Liens..................................................................................4
20.2 Subordination of Lease....................................................................................4
20.3 Notices...................................................................................................4
ARTICLE 21........................................................................................................4
21.1 Conduct of Business.......................................................................................4
21.2 Maintenance of Accounts and Records.......................................................................4
21.3 Certain Debt Prohibited...................................................................................4
21.4 Special Purpose Entity Requirements.......................................................................4
21.5 Distributions, Payments to Affiliated Persons, Etc........................................................4
21.6 Compliance with Operating Agreement.......................................................................4
ARTICLE 22........................................................................................................4
22.1 Limitation on Payment of Rent.............................................................................4
22.2 No Waiver.................................................................................................4
22.3 Remedies Cumulative.......................................................................................4
22.4 Severability..............................................................................................4
22.5 Acceptance of Surrender...................................................................................4
22.6 No Merger of Title........................................................................................4
22.7 Conveyance by Landlord....................................................................................4
22.8 Quiet Enjoyment...........................................................................................4
22.9 Memorandum of Lease.......................................................................................4
22.10 Notices..................................................................................................4
22.11 Construction; Nonrecourse................................................................................4
22.12 Counterparts; Headings...................................................................................4
22.13 Applicable Law, Etc......................................................................................4
22.14 Right to Make Agreement..................................................................................4
22.15 Disclosure of Information................................................................................4
22.16 Trademarks, Trade Names and Service Marks................................................................4
22.17 Competing Facilities.....................................................................................4
EXHIBITS
A - Minimum Rent
B - The Land
C - Property Expenses
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this 20th day of April,
2000, by and between CNL HEALTH CARE PARTNERS, LP, a Delaware limited
partnership, as landlord ("Landlord"), and BG ORLAND PARK, LLC, a Delaware
limited liability company, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord has acquired fee simple title to the Leased Property
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article 1) which is improved by a 120 bed
assisted living and dementia facility; and
WHEREAS, Landlord desires to lease the Leased Property to Tenant and
Tenant desires to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
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 shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Accounting Period" shall mean each four (4) week accounting period of
Tenant, except that an Accounting Period may, from time to time, include five
(5) weeks in order to conform Tenant's accounting system to Tenant's Fiscal
Year. 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 certain 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. In the event that the Commencement
Date is not the first day of Tenant's four (4) week accounting periods, the
first Accounting Period under this Lease shall consist of the first four (4)
week accounting period of Tenant commencing after the Commencement Date and the
period from the Commencement Date until the commencement of such first four (4)
week accounting period.
"Accounting Year" shall mean each period of thirteen (13) Accounting
Periods of which the first Accounting Period shall commence on the first day of
the first full Accounting Period and ending upon the expiration of twelve (12)
Accounting Periods after such first Accounting Period. Each successor Accounting
Period shall be each period of thirteen (13) Accounting Periods thereafter.
"Additional Charges" shall have the meaning given such term in Section
3.1.3.
"Affiliated Person" shall mean, with respect to any Person, (a) in the
case of any such Person which is a partnership, any partner in such partnership,
(b) in the case of any such Person which is a limited liability company, any
member of such company, (c) 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 (a) and (b), (d) 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 (a), (b) and (c), and (e) any
other Person who is a member of the Immediate Family of such Person or of any
Person referred to in the preceding clauses (a) through (d); provided, however,
that, notwithstanding the foregoing, in no event shall Host Marriott Corporation
or Sodexho Marriott Services, Inc., or any of their Affiliated Persons, be
deemed an Affiliated Person as to Tenant or the Guarantor.
"Agreement" shall mean this Lease Agreement, including all Exhibits
hereto, as it and they may be amended from time to time as herein provided.
"Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health
(except those requirements which, by definition, are solely the responsibility
of employers) or the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil ▇▇▇▇▇), 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 ▇▇▇▇▇), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
"Applicable Percentage" shall mean, with respect to any Accounting
Period, or portion thereof, (i) one percent (1%) with respect to the period
beginning on the Commencement Date and ending on the last day of the fourth
(4th) full Accounting Year, (ii) two percent (2%), with respect to the fifth
(5th) through eighth (8th) full Accounting Years, (iii) three percent (3%) with
respect to the ninth (9th) through twentieth (20th) full Accounting Years, and
(iv) with respect to each Accounting Year thereafter, three and one-half percent
(3.5%).
"Award" shall mean all compensation, sums or other value awarded, paid
or received by virtue of a total or partial Condemnation of the Leased Property
(after deduction of all reasonable legal fees and other reasonable costs and
expenses, including, without limitation, expert witness fees, incurred by
Landlord, in connection with obtaining any such award).
"Base Facility Revenues" shall mean, when used with reference to any
Lease Year, Total Facility Revenues for the Base Year and, when used with
reference to the first, second or third Fiscal Quarters of any Fiscal Year, 3/13
of Total Facility Revenues for the Base Year and, when used with reference to
the fourth Fiscal Quarter of any Fiscal Year, 4/13 of Total Facility Revenues
for the Base Year.
"Base Year" shall mean the first period of four (4) consecutive Fiscal
Quarters in which the Facility achieves an average (on a daily basis) occupancy
of at least ninety-three percent (93%) of the beds in the Facility. For purposes
hereof, a bed shall be deemed occupied for an entire month if Tenant receives
payment of an occupancy fee for such entire month notwithstanding the fact that
such bed was not occupied for the entire period during such month.
"Business Day" shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State of Florida or the State of
Maryland are authorized by law or executive action to close.
"Capital Expenditure" shall mean any expenditure with respect to the
Leased Property treated as capital in nature in accordance with GAAP.
"Case Goods" shall mean furniture and furnishings used in the Facility
including, without limitation: chairs, beds, chests, headboards, decks, lamps,
tables, television sets, mirrors, pictures, wall decorations and similar items.
"Cash Available for Lease Payments" shall mean the remainder of (i)
Total Facility Revenues during the applicable calculation period less (ii)
Property Expenses for the same calculation period.
"CHCLP" shall mean CNL Health Care Partners, LP, a Delaware limited
partnership.
"CHCLP and CHCP Guaranty" shall mean the guaranty agreement, dated as
of the date hereof, made by CHCLP and CHCP for the benefit of Tenant, as may be
amended from time to time.
"CHCP" shall mean CNL Health Care Properties, Inc., a Maryland
corporation.
"Claim" shall have the meaning given such term in Article 8.
"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.
"Competitor" shall mean a Person that owns or has an equity interest in
an assisted living facility brand, tradename, system or chain (a "Brand") which
is comprised of at least ten (10) assisted living facilities; provided that such
Person shall not be deemed a Competitor if it holds its interest in a Brand
merely as a mere passive investor that has no control or influence over the
business decisions of the Brand at issue, such as a mere limited partner in a
partnership, a mere shareholder in a corporation or a mere payee of royalties
based on a prior sale transaction. A mere passive investor that is represented
by a Mere Director on the board of directors of a Competitor shall not be deemed
to have control or influence over the business decisions of that Competitor.
"Condemnation" shall mean (a) the exercise of any governmental power
with respect to the Leased Property, whether by legal proceedings or otherwise,
by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer of
the Leased Property by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting the
Leased Property, whether or not the same shall have actually been commenced.
"Condemnor" shall mean any public or quasi-public authority, or Person
having the power of Condemnation.
"Controlling Interest" shall mean (a) as to a corporation shall mean
the right to exercise, directly or indirectly, more than fifty percent (50%) of
the voting rights attributable to the shares of the Entity (through ownership of
such shares or by contract), and (b) as to an Entity not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the Entity.
"Corporate Transfer" shall have the meaning given such term in Section
16.1.
"Date of Taking" shall mean the date the Condemnor has the right to
possession of the Leased Property, or any portion thereof, in connection with a
Condemnation.
"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) the Interest Rate and (ii) the
per annum rate for ten (10) year U.S. Treasury Obligations as published in The
Wall Street Journal (or successor publication) plus three hundred (300) basis
points.
"Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, if Tenant is a
corporation, or any cash distributions in respect of any partnership or
membership interests in Tenant, if Tenant is a partnership or limited liability
company, (b) any purchase, redemption retirement or other acquisition of any
shares of any class of capital stock of Tenant, if Tenant is a corporation, or
any purchase, redemption, retirement or other acquisition of any partnership or
membership interests in Tenant, if Tenant is a partnership or limited liability
company, (c) any other distribution on or in respect of any shares of any class
of capital stock of Tenant, if Tenant is a corporation, or any other
distribution in respect of any partnership or membership interests in Tenant, if
Tenant is a partnership or a limited liability company, or (d) any return of
capital to shareholders of Tenant, if Tenant is a corporation, or any return of
capital to partners or members in Tenant, if Tenant is a partnership or limited
liability company.
"Encumbrance" shall have the meaning given such term in Section 20.1.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, limited liability 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.
"Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
"Environmental Obligation" shall have the meaning given such term in
Section 4.3.1.
"Event of Default" shall have the meaning given such term in Section
12.1.
"Excess Facility Revenues" shall mean, with respect to any Lease Year
or Fiscal Quarter, or portion thereof, as applicable, the amount of Total
Facility Revenues for such period, in excess of Base Facility Revenues for the
equivalent period.
"Extended Terms" shall have the meaning given such term in Section 2.4.
"Facility" shall mean the assisted living and dementia facility being
operated on the Leased Property.
"Facility Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 20.
"Facility Mortgagee" shall mean the holder of any Facility Mortgage.
"FAS" shall mean all items included within "Property and Equipment"
under the Uniform System of Accounts, including, but not limited to, linen,
china, glassware, tableware, uniforms and similar items, whether used in
connection with public space or guest rooms.
"Fiscal Quarter" shall mean, with respect to the first, second and
third quarter of any Fiscal Year, Accounting Periods one (1) through three (3),
four (4) through six (6) and seven (7) through nine (9), respectively, of such
Fiscal Year and, with respect to the fourth quarter of any Fiscal Year,
Accounting Periods ten (10) through thirteen (13) of such Fiscal Year.
"Fiscal Year" shall mean each fiscal year of Tenant, each such fiscal
year to consist of thirteen Accounting Periods. If Tenant shall, for a bona fide
business reason, change its Fiscal Year during the Term, appropriate
adjustments, if any, shall be made with respect to the timing of certain
accounting and reporting requirements of this Agreement; provided, however,
that, in no event shall any such change or adjustment increase or reduce any
monetary obligation under this Agreement.
"Fixed Term" shall have the meaning given such term in Section 2.3.
"FF&E" means furniture, furnishings, fixtures, Soft Goods, Case Goods,
vehicles and equipment (including, but not limited to, telephone sysems,
facsimile machines, communications and computer systems hardware) but shall not
include FAS or any Software.
"Fixtures" shall have the meaning given such term in Section 2.1(d).
"Force Majeure Event" means any act of God, act of war, civil
disturbance, governmental action (including the revocation or refusal to grant
licenses or permits, where such revocation or refusal is not due to the fault of
the party whose performance is to be excused for reasons of Force Majeure),
strikes, lockouts, fire, unavoidable casualties or any other causes beyond the
reasonable control of either party.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Government Agencies" shall mean any court, agency, authority, board
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or the Facility operated thereon.
"Guarantor" shall mean Marriott International, Inc., a Delaware
corporation, its successors and assigns.
"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.
"Impositions" shall mean collectively, all taxes (including, without
limitation, all taxes imposed under the laws of the State, as such laws may be
amended from time to time, and all ad valorem, sales and use, single business,
gross receipts, transaction privilege, rent or similar taxes as the same relate
to or are imposed upon Landlord, Tenant or the business conducted upon the
Leased Property), assessments (including, without limitation, all assessments
for public improvements or benefit, whether or not commenced or completed prior
to the date hereof), water, sewer or other rents and charges, excises, tax
levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or the business
conducted thereon by Tenant (including all interest and penalties thereon due to
any failure in payment by Tenant), which at any time prior to, during or in
respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon (a) Landlord's interest in the Leased Property, (b) the Leased
Property or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Leased Property
or the leasing or use of the Leased Property or any part thereof by Tenant;
provided, however, that nothing contained herein shall be construed to require
Tenant to pay (i) any tax based on net income, net worth or capital imposed on
Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer fee or other
tax imposed with respect to the sale, exchange or other disposition by Landlord
of the Leased Property or the proceeds thereof, (iv) any single business, gross
receipts tax (from any source other than the rent received by Landlord from
Tenant), or similar taxes as the same relate to or are imposed upon Landlord,
except to the extent that any tax, assessment, tax levy or charge that would
otherwise be an Imposition under this definition which is in effect at any time
during the Term hereof is totally or partially repealed, and a tax, assessment,
tax levy or charge set forth in clause (i) or (ii) preceding is levied, assessed
or imposed expressly in lieu thereof, (v) any interest or penalties imposed on
Landlord as a result of the failure of Landlord to file any return or report
timely and in the form prescribed by law or to pay any tax or imposition, except
to the extent such failure is a result of a breach by Tenant of its obligations
pursuant to Section 3.1.3, (vi) any Impositions imposed on Landlord that are a
result of Landlord not being considered a "United States person" as defined in
Section 7701(a)(30) of the Code, (vii) any Impositions that are enacted or
adopted by their express terms as a substitute for any tax that would not have
been payable by Tenant pursuant to the terms of this Agreement or (viii) any
Impositions imposed as a result of a breach of covenant or representation by
Landlord in any agreement entered into by Landlord governing Landlord's conduct
or operation or as a result of the negligence or willful misconduct of Landlord.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.
"Index" shall mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers, All-Cities, All Items (November 1996 = 100), as published by
the Bureau of Labor Statistics or, in the event publication thereof ceases, by
reference to whatever index then published by the United States Department of
Labor at that time is most nearly comparable as a measure of general changes in
price levels for urban areas, as reasonably determined by Landlord and Tenant.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and regulations and any other requirements of the National
Board of Fire Underwriters (or any other body exercising similar functions)
binding upon Landlord, Tenant or the Leased Property.
"Interest Rate" shall mean ten percent (10%) per annum.
"Inventories" shall mean "Inventories" as defined by GAAP such as
provisions in storerooms, refrigerators, pantries and kitchens; medical
supplies; other merchandise intended for sale; fuel; mechanical supplies;
stationery; and other expensed supplies and similar items.
"Land" shall have the meaning given such term in Section 2.1(a).
"Landlord" shall have the meaning given such term in the preambles to
this Agreement and shall include its permitted successors and assigns.
"Landlord Default" shall have the meaning given such term in Section
14.2.
"Landlord Liens" shall mean liens on or against the Leased Property or
any payment of Rent (a) which result from any act of, or any claim against,
Landlord or any owner (other than Tenant) of a direct or indirect interest in
the Leased Property, or which result from any violation by Landlord of any terms
of this Agreement or the Purchase Agreement, or (b) which result from liens in
favor of any taxing authority by reason of any tax owed by Landlord or any fee
owner of a direct or indirect interest in the Leased Property; provided,
however, that "Landlord Lien" shall not include any lien resulting from any tax
for which Tenant is obligated to pay or indemnify Landlord against until such
time as Tenant shall have already paid to or on behalf of Landlord the tax or
the required indemnity with respect to the same.
"Landlord Rent" shall mean Minimum Rent and Percentage Rent
collectively.
"Lease Year" shall mean any Fiscal Year during the Term and any partial
Fiscal Year at the beginning or end of the Term.
"Leased Improvements" shall have the meaning given such term in Section
2.1(b).
"Leased Intangible Property" shall mean all Intangible Property (as
defined therein) acquired by Landlord with respect to the Leased Property
pursuant to the Purchase Agreement.
"Leased Personal Property" shall have the meaning given such term in
Section 2.1(e).
"Leased Property" shall have the meaning given such term in Section
2.1.
"Legal 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, and (b) all covenants,
agreements, declarations, restrictions and encumbrances contained in any
instruments at any time in force affecting the Leased Property as of the date
hereof, or to which Tenant has consented or 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 or any Affiliated Person of
Landlord's status as a real estate investment trust.
"Lien" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, or any transfer of
property or assets for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors.
"Limited Rent Guaranty" shall mean the limited rent guaranty agreement,
dated as of the date hereof, made by the Guarantor in favor of Landlord, as may
be amended from time to time.
"Major Capital Expenditures shall have the meaning given such term in
Section 5.1.3(a).
"Marriott Companies" shall mean Marriott International, Inc., a
Delaware corporation ("Marriott") and (i) any Subsidiary or Affiliated Person of
Marriott, (ii) a partnership in which Marriott, or any Subsidiary or Affiliated
Person of Marriott, is a general partner, and (iii) any limited liability
company in which Marriott or a any Subsidiary or Affiliated Person of Marriott
is a managing member.
"Marriott Retirement Community System" shall mean at any particular
time the entire system or group of Brighton Gardens retirement communities then
owned and/or operated or managed by Operator (or one or more of its Affiliated
Persons), under the "Marriott" name.
"Membership Interest Pledge Agreement" shall mean the Membership
Interest Pledge Agreement, of even date herewith, made by Marriott Senior Living
Services, Inc. in favor of Landlord, as may be amended from time to time.
"Mere Director" shall mean a Person who holds the office of director of
a corporation and who, as such director, has the right to vote not more than
twelve and one-half percent (12.5%) of the total voting rights on the board of
directors of such corporation, and who represents or acts on behalf of a mere
passive investor which neither (i) owns more than three percent (3%) of the
total voting rights attributable to all shares or ownership interests of a
Competitor, nor (ii) otherwise has the power to direct or cause the direction of
the management or policies of a Competitor.
"Minimum Rent" shall mean, with respect to each Accounting Period, the
sum set forth on Exhibit A, subject to adjustment pursuant to the terms of this
Agreement.
"Notice" shall mean a notice given in accordance with Section 22.10.
"Operating Agreement" shall mean the Operating Agreement, dated as of
the date hereof, between Tenant and Marriott Senior Living Services, Inc., a
Delaware corporation, with respect to the Facility, as amended and replaced from
time to time, subject to Landlord's consent if and to the extent Landlord's
consent is required pursuant to Section 21.6.
"Operator" shall mean the person designated by and acting as Operator
pursuant to the Operating Agreement.
"Overdue Rate" shall mean, on any date, a per annum rate of interest
equal to the lesser of (i) twelve percent (12%) or (ii) the maximum rate then
permitted under applicable law.
"Owner Agreement" shall mean the Owner Agreement pertaining to the
Leased Property, dated as of the date hereof, among Landlord, the Operator and
Tenant, as may be amended from time to time.
"Parent" shall mean, with respect to any Person, any Person which
directly, or indirectly through one or more Subsidiaries or Affiliated Persons,
(i) owns fifty-one percent (51%) or more of the voting or beneficial interest
in, or (ii) otherwise has the right or power (whether by contract, through
ownership of securities or otherwise) to control, such Person.
"Percentage Rent" shall have the meaning given such term in Section
3.1.2(a).
"Permitted Encumbrances" shall mean all rights, restrictions, and
easements of record set forth on Schedule B to the applicable owner's or
leasehold title insurance policy issued to Landlord effective on or about the
date hereof, plus any other such encumbrances as may have been consented to in
writing by Landlord from time to time.
"Permitted Use" shall mean any use of the Leased Property permitted
pursuant to Section 4.1.1(a) or (b).
"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.
"Product Standard(s)" shall have the meaning given such term in Section
5.1.2(c).
"Property Expenses" is defined in Exhibit C attached hereto.
"Proprietary Information" shall mean (a) all computer software and
accompanying documentation (including all future upgrades, enhancements,
additions, substitutions and modifications thereof), other than that which is
commercially available, which are used by Tenant in connection with the property
management system, and all future electronic systems developed by Tenant or any
Affiliated Person of Tenant for use in the Facility, (b) all manuals, brochures
and directives used by Tenant at the Facility regarding the procedures and
techniques to be used in operating the Facility, (c) customer lists, and (d)
employee records which must remain confidential either under Legal Requirements
or under reasonable corporate policies of Tenant or any Affiliated Person as to
Tenant.
"Purchase Agreement" shall mean the Purchase and Sale Agreement, dated
as of March ___, 2000, by and between Landlord as purchaser, and Marriott Senior
Living Services, Inc., as seller, as may be amended from time to time.
"Rent" shall mean, collectively, the Minimum Rent, Percentage Rent and
Additional Charges.
"Request Notice" shall have the meaning given such term in Section
16.1.
"Reserve" shall have the meaning given such term in Section 5.1.2(a).
"Reserve Estimate" shall have the meaning given such term in Section
5.1.2(c).
"Response Notice" shall mean the meaning given such term in Section
16.1.
"SEC" shall mean the Securities and Exchange Commission.
"Security Deposit" shall have the meaning ascribed to it in Section
3.4.
"Soft Goods" shall mean all fabric, textile and flexible plastic
products (not including items which are classified as "Fixed Asset Supplies"
under the Uniform System of Accounts) which are used in furnishing the Facility,
including, without limitation: carpeting, drapes, bedspreads, wall and floor
coverings, mats, shower curtains and similar items.
"Software" means all computer software and accompanying documentation
(including all future upgrades, enhancements, additions, substitutions and
modifications thereof), other than computer software which is commercially
available, which are used by Operator in connection with its operations at the
Facility.
"State" shall mean the State of Illinois.
"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 fifty-one percent (51%) or more of the voting or
beneficial interest or (b) which such Person otherwise has the right or power to
control (whether by contract, through ownership of securities or otherwise); it
being understood and agreed that, as of the date hereof, (x) neither Host
Marriott Corporation or Sodexho Marriott Services Corporation is a Subsidiary of
the Guarantor and (y) the Guarantor is not a Subsidiary of Host Marriott
Corporation or Sodexho Marriott Services, Inc.
"Successor Landlord" shall have the meaning given such term in Section
20.2.
"System Standards" shall mean from time to time both the operational
standards (for example, staffing levels, resident care and health care policies
and procedures, and accounting and financial reporting policies and procedures)
and the physical standards (for example, quality of FF&E, frequency of FF&E
replacement) that are then generally and consistently (but not necessarily,
absolutely or without exception) applied at or to retirement communities in the
Marriott Retirement Community System which are of comparable type, size, age and
market orientation as the Facility.
"Tenant" shall have the meaning given such term in the preamble to this
Agreement and shall include its permitted successors and assigns.
"Tenant's Personal Property" shall mean all motor vehicles,
Inventories, FAS and any other tangible personal property of Tenant, if any,
acquired by Tenant at its election and with its own funds on and after the date
hereof and located at the Leased Property or used in Tenant's business at the
Leased Property and all modifications, replacements, alterations and additions
to such personal property installed at the expense of Tenant, other than any
items included within the definition of Proprietary Information.
"Term" shall mean, collectively, the Fixed Term and the Extended Terms,
to the extent properly exercised pursuant to the provisions of Section 2.4,
unless sooner terminated pursuant to the provisions of this Agreement.
"Total Facility Revenues" shall mean, for the applicable period of
time, all gross revenues and receipts of every kind derived by Tenant or any
Affiliate of Tenant from operating or causing the operation of the Leased
Property and 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 monthly occupancy fees, entrance
fees, health care fees and ancillary services fees received pursuant to various
agreements with residents of the Facility; rental of space of every kind;
license, lease and concession fees and rentals (not including gross receipts
received directly by licensees, lessees and concessionaires); income from
vending machines and video machines; food and beverage sales; wholesale and
retail sales of merchandise (other than proceeds from the sale of furnishings,
fixture and equipment no longer necessary to the operation of the Facility,
which shall be deposited in the Reserve); service charges, to the extent not
distributed to the employees at the Facility as gratuities; and proceeds from
business interruption or other loss of income insurance (but only to the extent
that it reimburses Landlord or Tenant for lost income and not for additional or
other expenses), all determined in accordance with GAAP; provided, however, that
Total Facility Revenues shall not include the following: gratuities to Facility
employees; federal, state or municipal excise, sales, occupancy, use or similar
taxes collected directly from occupants, guests or invitees or included as part
of the sales price of any goods or services; insurance proceeds (other than as
aforesaid); Award proceeds (other than for a temporary Condemnation); 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; interest which accrues on amounts deposited in the Reserve; any cash
refunds, rebates or discounts to residents of the Facility, or cash discounts
and credits of a similar nature given, paid or returned in the course of
obtaining Total Facility Revenues or components thereof; security deposits until
such time as the same are applied to current fees and other charges due and
payable; awards of damages, settlement proceeds and other payments received by
Landlord in respect of any litigation or administrative proceeding other than
any litigation or proceeding to collect fees due for services or goods provided
from the Facility; any "Shortfall Payment" made by Operator to Tenant or
Landlord pursuant to Section 4.03B of the Operating Agreement; and payments
under any policy of title insurance.
"Uniform System of Accounts" shall mean Uniform System of Accounts for
the Lodging Industry, Ninth Revised Edition, 1996, as published by the Hotel
Association of New York City.
"Unsuitable for Its Permitted Use" shall mean a state or condition of
the Facility such that (a) following any damage or destruction involving the
Facility, the Facility cannot be operated in the reasonable judgment of 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 immediately before such damage or destruction, and as otherwise required
by Section 10.2.4, within nine (9) months following such damage or destruction
or such shorter period of time as to which business interruption insurance is
available to cover Rent and other costs related to the Leased Property following
such damage or destruction, or (b) as the result of a partial taking by
Condemnation, the Facility cannot be operated, in the reasonable judgment of
Tenant on a commercially and economically practicable basis for its Permitted
Use in light of then existing circumstances.
"Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1......Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following
(collectively, the "Leased Property"):
(a) the land that is more particularly described in Exhibit B,
attached hereto and made a part hereof (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, the Facility, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines
(on-site and off-site), parking areas and roadways appurtenant to such
buildings and structures presently situated upon the Land
(collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances
relating to the Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into
the Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment,
all of which, to the maximum extent permitted by law, are hereby deemed
by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, but
specifically excluding all items included within the category of
Tenant's Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures located on or in the
Leased Improvements, and all modifications, replacements, alterations
and additions to such property, except items, if any, included within
the category of Fixtures, but specifically excluding all items included
within the category of Tenant's Personal Property (collectively, the
"Leased Personal Property"); and
(f) all of the Leased Intangible Property.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Leased Property, all applicable
Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust permitted by the terms of this Agreement, and such other matters which
would be disclosed by an inspection of the Leased Property and the record title
thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS
INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO,
EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND TENANT WAIVES ANY CLAIM OR ACTION
AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. EXCEPT AS
EXPRESSLY SET FORTH HEREIN, LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
To the maximum extent permitted by law, however, Landlord hereby assigns to
Tenant all of Landlord's rights to proceed against any predecessor in title,
contractors and materialmen for breaches of warranties or representations or for
latent defects in the Leased Property. Landlord shall fully cooperate with
Tenant in the prosecution of any such claims, in Landlord's or Tenant's name,
all at Tenant's sole cost and expense. Tenant shall indemnify, defend, and hold
harmless Landlord from and against any loss, cost, damage or liability
(including reasonable attorneys' fees) incurred by Landlord in connection with
such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire on the last day of the
Accounting Period in which occurs the fifteenth (15th) anniversary of the
Commencement Date.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing, the Term of this Agreement shall be automatically
extended for four (4) renewal terms of five (5) years each (each such five year
renewal term being herein referred to as an "Extended Term"), unless Tenant
shall give Landlord Notice, in Tenant's sole and absolute discretion, not later
than two (2) years prior to the scheduled expiration of the then Fixed Term (in
the case of the first Extended Term) or the then existing Extended Term (in the
case of any Extended Term after the first Extended Term), that Tenant elects not
so to extend the Term of this Agreement (and time shall be of the essence with
respect to the giving of such Notice) in which case the Term of this Lease will
expire at the end of the then current Term. Each Extended Term shall commence on
the day succeeding the expiration of the Fixed Term or the preceding Extended
Term, as the case may be. All of the terms, covenants and provisions of this
Agreement shall apply to each such Extended Term, except that (a) Tenant shall
have no right to extend the Term beyond the expiration of the fourth (4th)
Extended Term, (b) the Minimum Rent payable during such Extended Term shall
equal one hundred two percent (102%) of the sum of (i) the Minimum Rent payable
by Tenant for the Accounting Period immediately preceding the commencement of
such Extended Term and (ii) one thirteenth (1/13th) of the Percentage Rent
payable by Tenant for the last Fiscal Year ending prior to the commencement of
such Extended Term, and (c) the Base Year for purposes of computing Percentage
Rent payable during such Extended Term shall mean the first Fiscal Year ending
after the commencement of such Extended Term. If Tenant shall give Notice that
it elects not to extend the Term, this Agreement shall automatically terminate
at the end of the Term then in effect and Tenant shall have no further option to
extend the Term of this Agreement. Otherwise, the extension of this Agreement
shall be automatically effected without the execution of any additional
documents; it being understood and agreed, however, that Tenant and Landlord
shall execute such documents and agreements as either party shall reasonably
require to evidence the same.
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), Minimum Rent and Percentage Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion.
3.1.1 Minimum Rent.
(a) Payment of Minimum Rent. Minimum Rent shall be
paid in advance on the first Business Day of each Accounting Period;
provided, however, that the first payment of Minimum Rent shall be
payable on the Commencement Date (and, if applicable, such payment
shall be prorated as provided in the following sentence of this
paragraph Section 3.1.1(a)). Minimum Rent for any partial Accounting
Period shall be prorated on a per diem basis.
(b) Adjustments of Minimum Rent Following
Disbursements Under Sections 5.1.4(b), 10.2 or 11.2. Effective on the
date of each disbursement to pay for the cost of any repairs,
maintenance, renovations or replacements pursuant to Sections 5.1.4(b),
10.2 or 11.2, the Minimum Rent shall be increased by an amount equal to
the quotient obtained by dividing (i) a per annum amount equal to the
Disbursement Rate, determined as of the date of Tenant's Notice to
Landlord identifying the amount of and requirement for the applicable
funds, times the amount so disbursed, by (ii) thirteen (13). If any
such disbursement is made during any Accounting Period on a day other
than the first day of an Accounting Period, Tenant shall pay to
Landlord on the first day of the immediately following Accounting
Period (in addition to the amount of Minimum Rent payable with respect
to such Accounting Period, as adjusted pursuant to this paragraph (b))
the amount by which Minimum Rent for the preceding Accounting Period,
as adjusted for such disbursement on a per diem basis, exceeded the
amount of Minimum Rent actually paid by Tenant for such preceding
Accounting Period.
3.1.2 Percentage Rent.
(a) Amount. For each Fiscal Year or portion thereof
commencing with the first full Accounting Period following the Base
Year, Tenant shall pay percentage rent ("Percentage Rent") with respect
to such Fiscal Year (or portion thereof), in an amount equal to seven
percent (7%) of Excess Facility Revenues for such Fiscal Year (or
portion thereof).
(b) Quarterly Installments. Installments of
Percentage Rent for each Fiscal Year or portion thereof shall be
calculated and paid each Fiscal Quarter in arrears. Payment of each
such installment shall be made within thirty (30) days after the end of
each Fiscal Quarter and shall be accompanied by a statement setting
forth the calculation of Percentage Rent due and payable for such
Fiscal Quarter, together with a statement by the controller of the
Facility that, to the best of his or her knowledge and belief, and
subject to year-end audit and adjustment, such statement of Percentage
Rent is true and correct in all material respects. Installments due
with respect to each Fiscal Quarter shall be equal to the Percentage
Rent for all Fiscal Quarters elapsed during the applicable Fiscal Year
less amounts previously paid with respect thereto by Tenant. If the
Percentage Rent for such elapsed Fiscal Quarters as shown on the last
quarterly statement is less than the amount previously paid with
respect thereto by Tenant, Tenant shall be entitled to offset the
amount of such difference against Rent next coming due under this
Agreement, such offset to be applied together with interest at the
Disbursement Rate accruing from the date of payment by Tenant until the
date the offset is applied.
(c) Reconciliation of Percentage Rent. In addition,
on or before March 31 of each year, commencing March 31 following the
Base Year, Tenant shall deliver to Landlord a statement setting forth
the Total Facility Revenues for such preceding Fiscal Year, together
with an audit of Total Facility Revenues for the preceding Fiscal Year,
conducted by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, or another so-called "Big Five" firm
of independent certified public accountants proposed by Tenant and
approved by Landlord (which approval shall not be unreasonably withheld
or delayed). Landlord shall reimburse Tenant for the reasonable cost of
such audit.
If the annual Percentage Rent for such preceding Fiscal Year as shown
in the annual statement exceeds the amount previously paid with respect
thereto by Tenant, Tenant shall pay such excess to Landlord at such
time as the annual statement is delivered, together with interest at
the Disbursement Rate, which interest shall accrue from the Accrual
Date (as hereinafter defined) until the date that such certificate is
required to be delivered (or, if sooner, the date Tenant pays such
excess to Landlord) and, thereafter, such interest shall accrue at the
Overdue Rate, until the amount of such difference shall be paid or
otherwise discharged. In the case of any underpayment of Percentage
Rent by Tenant arising out of incorrect reporting on any statement of
Percentage Rent, the Accrual Date therefor shall be the payment due
date for the respective installment of Percentage Rent with respect to
which the underpayment occurred. In the case of any underpayment of
Percentage Rent arising out of variation in Total Facility Revenues
from Fiscal Quarter to Fiscal Quarter, the Accrual Date shall be the
payment due date for the final installment of Percentage Rent for such
preceding Fiscal Year. If the annual Percentage Rent for such preceding
Fiscal Year as shown in the annual statement is less than the amount
previously paid with respect thereto by Tenant, Tenant shall be
entitled to offset the amount of such difference against Rent next
coming due under this Agreement, such payment or credit to be made
together with interest at the Disbursement Rate, which interest shall
accrue from the date of payment of Tenant until the date such offset is
applied. If such offset cannot be made because the Term has expired
prior to application in full thereof, Landlord shall pay the unapplied
balance of such offset to Tenant, together with interest at the
Disbursement Rate, which interest shall accrue from the date of payment
by Tenant until the date of payment by Landlord.
(d) Confirmation of Percentage Rent. Tenant shall
utilize, or cause to be utilized, an accounting system for the Leased
Property in accordance with its usual and customary practices and in
accordance with GAAP, which will accurately record all Total Facility
Revenues and Tenant shall retain, for at least three (3) years after
the expiration of each Lease Year, reasonably adequate records
conforming to such accounting system showing all Total Facility
Revenues for such Fiscal Year. Landlord, at its own expense except as
provided hereinbelow, shall have the right, exercisable by Notice to
Tenant given within one hundred eighty (180) days after receipt of the
applicable annual statement, by its accountants or representatives to
commence within such 180-day period an audit of the information set
forth in such annual statement referred to in subparagraph (c) above
and, in connection with such audit, to examine Tenant's books and
records with respect thereto (including supporting data and sales and
excise tax returns); provided, however, that if Landlord has credible
evidence that Tenant has intentionally misrepresented Total Facility
Revenues on any such annual statement, the said 180-day period shall
commence to run on the date Landlord obtained such credible evidence
that Tenant has intentionally misrepresented Total Facility Revenues on
any such annual statement. If Landlord does not commence an audit
within such one hundred eighty (180) day period, such annual statement
shall be deemed conclusively to be accepted by Landlord as correct and
Landlord shall have no further right to challenge the same. Landlord
shall use commercially reasonable efforts to complete any such audit as
soon as practicable. If any such audit discloses a deficiency in the
payment of Percentage Rent, and either Tenant agrees with the result of
such audit or the matter is otherwise determined, Tenant shall
forthwith pay to Landlord the amount of the deficiency, as finally
agreed or determined, together with interest at the Disbursement Rate,
from the date such payment should have been made to the date of payment
thereof. If such deficiency, as agreed upon or compromised as
aforesaid, is more than three percent (3%) of the Total Facility
Revenues reported by Tenant for such Fiscal Year and, as a result,
Landlord did not receive at least ninety-five percent (95%) of the
Percentage Rent payable with respect to such Fiscal Year, Tenant shall
pay the reasonable cost of such audit and examination. If any such
audit discloses that Tenant paid more Percentage Rent for any Fiscal
Year than was due hereunder, and either Landlord agrees with the result
of such audit or the matter is otherwise determined Tenant shall be
entitled to a credit equal to the amount of such overpayment against
Rent next coming due in the amount of such difference, as finally
agreed or determined, together with interest at the Disbursement Rate,
which interest shall accrue from the time of payment by Tenant until
the date such credit is applied or paid, as the case may be. If such a
credit cannot be made because the Term has expired before the credit
can be applied in full Landlord shall pay the unapplied balance of such
credit to Tenant, together with interest at the Disbursement Rate,
which interest shall accrue from the date of payment by Tenant until
the date of payment from Landlord.
3.1.3 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 the
following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to
permitted contests, Tenant shall pay, or cause to be paid, all
Impositions before any fine, penalty, interest or cost (other than any
opportunity cost as a result of a failure to take advantage of any
discount for early payment) may be added for non-payment, such payments
to be made directly to the taxing authorities where feasible, and shall
promptly, upon request, furnish to Landlord copies of official receipts
or other reasonably satisfactory proof evidencing such payments. If any
such Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added thereto.
Landlord, at its expense, shall, to the extent required or permitted by
Applicable Law, prepare and file all tax returns and pay all taxes due
in respect of Landlord's net income, gross receipts (from any source
other than the Rent received by Landlord from Tenant), sales and use,
single business, ad valorem, franchise taxes and taxes on its capital
stock, and Tenant, at its expense, shall, to the extent required or
permitted by Applicable Laws, prepare and file all other tax returns
and reports in respect of any Imposition as may be required by
Government Agencies. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall
be paid over to or retained by Tenant. Landlord and Tenant shall, upon
request of the other, provide such data as is maintained by the party
to whom the request is made with respect to the Leased Property as may
be necessary to prepare any required returns and reports. In the event
Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file all personal property tax returns
in such jurisdictions where it may legally so file. Each party shall,
to the extent it possesses the same, provide the other, upon request,
with cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is legally
required to file personal property tax returns for property covered by
this Agreement and/or gross receipts tax returns for Rent received by
Landlord from Tenant, Landlord shall file the same with reasonable
cooperation from Tenant. Landlord shall provide Tenant with copies of
assessment notices in sufficient time for Tenant to prepare a protest
which Landlord shall file, at Tenant's written request. All Impositions
assessed against such personal property shall be (irrespective of
whether Landlord or Tenant shall file the relevant return) paid by
Tenant not later than the last date on which the same may be made
without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge;
provided, however, that Landlord's failure to give any such notice
shall in no way diminish Tenant's obligation hereunder to pay such
Impositions (except that Landlord shall be responsible for any interest
or penalties incurred as a result of Landlord's failure promptly to
forward the same).
(b) Utility Charges. Tenant shall pay or cause to be
paid all charges for electricity, power, gas, oil, water and other
utilities used in connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to
be paid all premiums for the insurance coverage required to be
maintained pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be
paid all other amounts, liabilities and obligations arising in
connection with the Leased Property except those obligations expressly
assumed by Landlord pursuant to the provisions of this Agreement or
expressly stated not to be an obligation of Tenant pursuant to this
Agreement. Without limitation, Tenant shall pay or cause to be paid all
amounts, liabilities and obligations arising in connection with the
Contracts, as defined in the Purchase Agreement.
(e) Reimbursement for Additional Charges. If Tenant
pays or causes to be paid property taxes or similar or other Additional
Charges attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement, Tenant may, within
a reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement.
3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
Percentage Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, within five (5) days after
Landlord's written demand therefor, as Additional Charges, a late charge (to the
extent permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due and Landlord shall
pay when due, or cause the applicable Facility Mortgagee to pay when due, such
Additional Charges to the Entity to which they are due. If any payment due from
Landlord to Tenant shall not be paid within ten (10) days after its due date,
Landlord shall pay to Tenant, on demand, a late charge (to the extent permitted
by law) computed at the Overdue Rate on the amount of such installment from the
due date of such installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional
Charges when due, except as expressly provided in Section 3.1.3(a) with respect
to permitted contests pursuant to Article 8, Tenant shall promptly pay (unless
payment thereof is in good faith being contested and enforcement thereof is
stayed) and discharge, as Additional Charges, every fine, penalty, interest and
cost which may be added for non-payment or late payment of such items. Landlord
shall have all legal, equitable and contractual rights, powers and remedies
provided either in this Agreement or by statute or otherwise in the case of
non-payment of the Additional Charges as in the case of non-payment of the
Minimum Rent and Percentage Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments or
amounts of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including, without limitation,
those provisions for adjustment, refunding or abatement of such Rent and for the
funding of Landlord's obligations pursuant to Sections 5.1.4 and 14.3. This
Agreement is a net lease and, except to the extent otherwise expressly specified
in this Agreement, it is agreed and intended that Rent payable hereunder by
Tenant shall be paid without notice, demand, counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction
and that Tenant's obligation to pay all such amounts, throughout the Term and
all applicable Extended Terms is absolute and unconditional and except to the
extent otherwise expressly specified in this Agreement, the respective
obligations and liabilities of Tenant and Landlord hereunder shall in no way be
released, discharged or otherwise affected for any reason, including without
limitation: (a) any defect in the condition, merchantability, design, quality or
fitness for use of the Leased Property or any part thereof, or the failure of
the Leased Property to comply with all Applicable Laws, including any inability
to occupy or use the Leased Property by reason of such noncompliance; (b) any
damage to, removal, abandonment, salvage, loss, condemnation, theft, scrapping
or destruction of or any requisition or taking of the Leased Property or any
part thereof, or any environmental conditions on the Leased Property or any
property in the vicinity of the Leased Property; (c) any restriction, prevention
or curtailment of or interference with any use of the Leased Property or any
part thereof including eviction; (d) any defect in title to or rights to the
Leased Property or any lien on such title or rights to the Leased Property; (e)
any change, waiver, extension, indulgence or other action or omission or breach
in respect of any obligation or liability of or by any Person; (f) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceedings relating to Tenant or any other Person, or
any action taken with respect to this Agreement by any trustee or receiver of
Tenant or any other Person, or by any court, in any such proceeding; (g) any
right or claim that Tenant has or might have against any Person, including
without limitation Landlord (other than a monetary default) or any vendor,
manufacturer, contractor of or for the Leased Property; (h) any failure on the
part of Landlord or any other Person to perform or comply with any of the terms
of this Agreement, or of any other agreement; (i) any invalidity,
unenforceability, rejection or disaffirmance of this Agreement by operation of
law or otherwise against or by Tenant or any provision hereof; (j) the
impossibility of performance by Tenant or Landlord, or both; (k) any action by
any court, administrative agency or other Government Agencies; (l) any
interference, interruption or cessation in the use, possession or quiet
enjoyment of the Leased Property or otherwise; or (m) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, whether foreseeable
or unforeseeable, and whether or not Tenant shall have notice or knowledge of
any of the foregoing; provided, however, that the foregoing shall not apply or
be construed to restrict Tenant's rights in the event of any act or omission by
Landlord constituting negligence or willful misconduct. Except as specifically
set forth in this Agreement, this Agreement shall be noncancellable 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.
3.4 Security for Tenant's Performance.
(a) Simultaneously with the execution of this Agreement,
Tenant shall deposit with Landlord the sum of Five Hundred Fifty-Three
Thousand Nine Hundred Fifty-Six Dollars ($553,956) (the "Security
Deposit"). Landlord may commingle the Security Deposit with other funds
of Landlord. All interest, if any, earned on the Security Deposit shall
be the sole property of Landlord and shall not be part of the Security
Deposit.
(b) 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 by Tenant 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 the amount of the 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. It is understood and agreed that the Security
Deposit is not to be considered as prepaid rent, nor shall damages be
limited to the amount of the Security Deposit. Upon the expiration or
sooner termination of this Agreement, any unapplied balance of the
Security Deposit shall be paid by wire transfer to Tenant.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Permitted Use.
(a) Tenant shall, at all times during the Term and at
any other time that Tenant shall be in possession of the Leased
Property, continuously use and operate the Leased Property as an
assisted living facility, which may include a dementia facility and any
uses incidental thereto. Subject to Section 16.3, Tenant shall not use
the Leased Property or any portion thereof for any other use without
the prior written consent of Landlord. 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 (except as expressly provided in Section
5.1.4(b)), 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.
(b) Notwithstanding the foregoing, in the event that,
in the reasonable determination of Tenant, it shall no longer be
economically practical to operate the Leased Property as an assisted
living facility, Tenant shall give Landlord Notice thereof, which
Notice shall set forth in reasonable detail the reasons therefor.
Thereafter, Landlord and Tenant shall negotiate in good faith to agree
on an alternative use for the Leased Property, appropriate adjustments
to the Percentage Rent, the Reserve and other related matters;
provided, however, in no such event shall the Minimum Rent be reduced
or abated. Upon agreement by Landlord and Tenant on an alternative use,
Landlord shall use commercially reasonable efforts, at Tenant's cost
and expense, to obtain any approvals or waivers needed pursuant to
Legal Requirements. In the event that operating the Leased Property for
such alternative use shall be outside of Tenant's expertise as
reasonably determined by Tenant, Tenant may engage a third-party
Manager, reasonably acceptable to Landlord, for such purpose.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise commercially reasonable efforts to obtain and maintain
all approvals necessary to use and operate, for its Permitted Use, the Leased
Property and the Facility located thereon under applicable law. Landlord shall
cooperate with Tenant in this regard, including executing all applications and
consents required to be signed by Landlord in order for Tenant to obtain and
maintain such approvals.
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) may reasonably allow a claim or claims for adverse usage or
adverse possession by the public, as such, or of implied dedication of the
Leased Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
provisions of Article 8, Tenant, at its sole expense, shall (i) comply with
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the Leased Property, and (ii)
comply with all appropriate licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property, if
any, then being made and which are material to the operation of the Leased
Property as an assisted living facility, and for the proper operation and
maintenance of the Leased Property or any part thereof.
4.3 Environmental Matters.
4.3.1 Restriction on Use, Etc. If, at any time prior to the
termination of this Agreement, Hazardous Substances (other than those maintained
in accordance with Applicable Laws) are discovered on the Leased Property,
subject to Tenant's right to contest the same in accordance with Article 8,
Tenant shall take all actions and incur any and all expenses, as may be
reasonably necessary and as may be required by any Government Agency, (i) to
clean up and remove from and about the Leased Property all Hazardous Substances
thereon, (ii) to contain and prevent any further release or threat of release of
Hazardous Substances on or about the Leased Property and (iii) to use good faith
efforts to eliminate any further release or threat of release of Hazardous
Substances on or about the Leased Property. Tenant shall promptly: (a) upon
receipt of notice or knowledge, notify Landlord in writing of any material
change in the nature or extent of Hazardous Substances at the Leased Property,
(b) transmit to Landlord a copy of any Community Right to Know report which is
required to be filed by Tenant with respect to the Leased Property pursuant to
▇▇▇▇ Title III or any other Applicable Law, (c) transmit to Landlord copies of
any citations, orders, notices or other governmental communications received by
Tenant or its agents or representatives with respect thereto (collectively,
"Environmental Notice"), which Environmental Notice requires a written response
or any action to be taken and/or if such Environmental Notice gives notice of
and/or presents a material risk of any material violation of any Applicable Law
and/or presents a material risk of any material cost, expense, loss or damage
(an "Environmental Obligation"), (d) observe and comply with all Applicable Laws
relating to the use, maintenance and disposal of Hazardous Substances and all
orders or directives from any official, court or agency of competent
jurisdiction relating to the use or maintenance or requiring the removal,
treatment, containment or other disposition thereof, and (e) pay or otherwise
dispose of any fine, charge or Imposition related thereto, unless Tenant shall
contest the same in good faith and by appropriate proceedings and the right to
use and the value of the Leased Property is not materially and adversely
affected thereby.
Tenant's liability and obligations pursuant to the terms of this Section 4.3.1
are subject to the provisions of Sections 5.1.3 and 5.1.4 and Landlord's
compliance with its funding obligations under Section 5.1.4.
4.3.2 Indemnification. Tenant and Landlord shall each protect,
indemnify and hold harmless the other, its trustees, directors, officers,
agents, employees and beneficiaries, and any of their respective successors or
assigns with respect to this Agreement (collectively, the "Indemnitees" and,
individually, an "Indemnitee") for, from and against any and all debts, liens,
claims, causes of action, administrative orders or notices, costs, fines,
penalties or expenses (including, without limitation, reasonable attorney's fees
and expenses) imposed upon, incurred by or asserted against any Indemnitee
resulting from, either directly or indirectly, the presence during the Term in,
upon or under the soil or ground water of the Leased Property or any properties
surrounding the Leased Property of any Hazardous Substances in violation of any
Applicable Law or otherwise, provided that any of the foregoing arises by reason
of the gross negligence or willful misconduct of the indemnifying party, except
to the extent the same arise from the gross negligence or willful misconduct of
the other party or any other Indemnitee. This duty includes, but is not limited
to, costs associated with personal injury or property damage claims as a result
of the presence prior to the expiration or sooner termination of the Term and
the surrender of the Leased Property to Landlord in accordance with the terms of
this Agreement of Hazardous Substances in, upon or under the soil or ground
water of the Leased Property in violation of any Applicable Law. Upon Notice
from the indemnified party and any other of the Indemnitees, the indemnifying
party shall undertake the defense, at its sole cost and expense, of any
indemnification duties set forth herein, in which event, the indemnifying party
shall not be liable for payment of any duplicative attorneys' fees incurred by
the other party or any Indemnitee.
4.3.3 Survival. As to conditions which exist prior to the
expiration or sooner termination of this Agreement, the provisions of this
Section 4.3 shall survive the expiration or sooner termination of this Agreement
for a period of one (1) year after such expiration or termination.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost and expense
(except as expressly provided in Sections 5.1.2 and 5.1.3(b)), keep the
Leased Property and all private roadways, sidewalks and curbs located
thereon in good order and repair, reasonable wear and tear excepted,
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. All repairs shall be made in a
good, workmanlike manner, consistent with the System Standards and
industry standards for like assisted living 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's obligations under this Section 5.1.1(a) shall be limited
in the event of any casualty or Condemnation as set forth in Sections
10.2 and 11.2 and Tenant's obligations with respect to Hazardous
Substances are as set forth in Section 4.3.
5.1.2 Reserve.
(a) Tenant shall establish, or cause Operator to
establish, an interest bearing reserve account (the "Reserve") in a
bank designated by Landlord and reasonably approved by Tenant. All
interest earned on the Reserve shall be added to and remain a part of
the Reserve. Except as set forth in Section 5.1.2(e), Tenant shall be
the only party entitled to withdraw funds from the Reserve. The purpose
of the Reserve is to cover the cost of:
(i) Replacements, renewals and additions
to the Facility's FF&E;
(ii) Repairs, renovations, renewals,
additions, alterations, improvements or replacements and
maintenance to the Leased Property, all of which are routine
or non-major and which are normally capitalized under GAAP,
such as exterior and interior repainting, resurfacing
building walls, floors, roofs and parking areas, and
replacing folding walls and the like; and
(iii) At Tenant's option, lease payments for
communications equipment and one maintenance or shuttle
vehicle used in connection with the operation of the
Facility.
(b) Commencing with the Commencement Date and
continuing throughout the Term, Tenant shall transfer (as of the end of
each Accounting Period of the Term) into the Reserve an amount equal to
the Applicable Percentage of Total Facility Revenues for such
Accounting Period; provided, however, that for each of the Accounting
Years during the period commencing on the Commencement Date and ending
on the last day of the fourth (4th) full Accounting Year, the amount
transferred by Tenant into the Reserve shall not be less than Thirty
Thousand Dollars ($30,000) for each such Accounting Year. At the time
Tenant provides Landlord the documentation described in Section
3.1.2(c), 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.
(c) On or before December 1 of each Lease 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. Tenant shall
in good faith consider suggestions and comments to the Reserve Estimate
made by Landlord within thirty (30) days after delivery of the Reserve
Estimate to Landlord. All expenditures from the Reserve for the items
described in Section 5.1.2(a) shall be (as to both the amount of each
such expenditure and the timing thereof) (i) required, in Tenant's
reasonable judgment, to keep the Leased Property in a first-class,
competitive, efficient and economical operating condition or to keep
the Leased Property in a condition consistent with the standards set
forth in this Agreement or the Operating Agreement; or (ii) required by
reason of any Legal Requirement imposed by any Government Agency or
otherwise required (as determined by Tenant in its reasonable judgment)
for the continued safe and orderly operation of the Leased Property,
(subsections (i) and (ii) each individually, a "Product Standard" and,
collectively, the "Product Standards").
(d) Tenant shall from time to time make expenditures
from the Reserve as it deems necessary in accordance with Section
5.1.2(a) and (c). Tenant shall provide to Landlord, within forty (40)
Business Days after the end of each Accounting Period, a statement
setting forth Reserve expenditures made to date during the Fiscal Year.
Expenditures from the Reserve shall not be subject to Landlord's
approval.
(e) All funds in the Reserve, all interest earned
thereon and all property purchased with funds from the Reserve shall be
and remain the property of Landlord. Following expiration or earlier
termination of this Agreement and payment in full on all contracts
entered into prior to such expiration or termination for work to be
done or furniture, furnishings, fixtures and equipment to be supplied
in accordance with this Section 5.1.2 out of the Reserve, control over
the Reserve shall be transferred from Tenant to Landlord.
(f) It is understood and agreed that the Reserve
pursuant to this Agreement shall be maintained and used solely in
connection with the Leased Property.
(g) If Landlord wishes to grant a security interest
in or create another encumbrance on the Reserve, 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 subject to the rights of Tenant
with respect to the Reserve as set forth herein. The form and substance
of such provision shall be subject to Tenant's prior written approval,
which approval shall not be unreasonably withheld, delayed or
conditioned.
5.1.3 Major Capital Expenditures.
(a) On or before December 1 of each Lease Year,
Tenant shall deliver to Landlord, for Landlord's approval, an estimate
(the "Building Estimate") of the expenses necessary for repairs,
alterations, improvements, renewals, replacements and additions, all of
which are non-routine or major, to the Leased Improvements which are
not covered under Section 5.1.2(a) and 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 ("Major Capital Expenditures"). Major Capital Expenditures
shall also include all costs associated with any removal or remediation
of Hazardous Substances (except those treated as Tenant's sole cost and
expense under Section 5.1.4(b)), regardless of whether such costs are
normally capitalized under GAAP. Landlord shall not withhold its
approval to such Major Capital Expenditures as are required, in
Tenant's reasonable judgment, for the Leased Property to comply with
the Product Standards or for costs associated with the removal or
remediation of Hazardous Substances. If Tenant does not receive Notice
of Landlord's disapproval of the Building Estimate within twenty (20)
Business Days after delivery of the Building Estimate to Landlord, then
Landlord shall be deemed to have approved the Building Estimate. In the
event Landlord disapproves the Building Estimate, Landlord's Notice
shall identify disputed items on a line item basis. Items not
identified as disputed in such Landlord's Notice shall be deemed
approved.
(b) In the event Major Capital Expenditures are
required as a result of the receipt by Tenant of an order from a
Government Agency or other circumstances described in subsection (ii)
of Section 5.1.2(c) (including costs associated with the removal or
remediation of Hazardous Substances), Tenant shall be authorized to
take appropriate remedial action without first receiving Landlord's
approval (i) due to an emergency threatening the Leased Property, its
guests, invitees or employees, or (ii) if the continuation of a given
condition will subject Tenant or Landlord to civil or criminal
liability. Major Capital Expenditures made pursuant to this Section
5.1.3(b) shall be deemed approved by Landlord.
(c) The cost of all approved, deemed approved or
non-approvable Major Capital Expenditures shall be borne by Landlord in
accordance with the provisions of Section 5.1.4(b).
(d) In the event Landlord timely disapproves any
Building Estimate or any item within any Building Estimate, then,
following the negotiation period specified in Section 19.1, Tenant may
submit the matter for resolution by arbitrators in accordance with the
provisions of Section 19.2, and the arbitrators shall determine whether
or not Tenant acted reasonably in determining that the disputed item or
items are needed for the Leased Property to comply with the Product
Standards or for the costs associated with the removal or remediation
of Hazardous Substances.
5.1.4 Landlord's Funding Obligations.
(a) Landlord shall not, under any circumstances, be
required to build or rebuild any improvement on the Leased Property, or
to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether
ordinary or extraordinary, structural or nonstructural, foreseen or
unforeseen, to maintain the Leased Property in any way, or, except as
provided in Section 5.1.4(b), to make any expenditure whatsoever with
respect thereto. Except as otherwise expressly provided in this
Agreement, Tenant hereby waives, to the maximum extent permitted by
law, the right to make repairs at the expense of Landlord pursuant to
any law in effect on the date hereof or hereafter enacted. Landlord
shall have the right to give, record and post, as appropriate, notices
of nonresponsibility under any mechanic's lien laws now or hereafter
existing.
(b) 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 approved, deemed approved or non-approvable Major Capital
Expenditures (other than costs related to Hazardous Substances under
Section 4.3 resulting from Tenant's gross negligence or willful
misconduct, which costs shall be Tenant's sole cost and expense),
Tenant may, at its election, give Landlord Notice thereof, which Notice
shall set forth, in reasonable detail, the nature of the required or
permitted action and the estimated cost thereof. Landlord shall, within
ten (10) Business Days after such Notice, or such later dates as Tenant
may direct by reasonable prior Notice, disburse such required funds to
Tenant (or, if Tenant shall so elect, directly to the Operator or any
other Person performing the required work) and, upon such disbursement,
the Minimum Rent shall be adjusted as provided in Section 3.1.1(b);
provided, however, that if the disbursement of funds relates to the
Hazardous Substances under Section 4.3 resulting from Landlord's gross
negligence or willful misconduct, there shall be no adjustment to the
Minimum Rent. If Landlord disputes its obligation to disburse such
funds, it shall give Tenant Notice of such dispute within such ten
(10)-Business Day period, and failure to give Tenant Notice of such
dispute shall be deemed a waiver of any right to dispute Landlord's
obligation to disburse such funds. In the event that any dispute shall
arise with respect to Landlord's obligation to disburse any funds
pursuant to this Section 5.1.4(b), then, following the negotiation
period specified in Section 19.1, either party may submit such dispute
for resolution by arbitrators in accordance with the provisions of
Section 19.2, and the arbitrators shall determine whether or not Tenant
acted reasonably in requesting such additional funds in order to
maintain the Leased Property in accordance with the Product Standards
or to cover costs associated with removal or remediation of Hazardous
Substances. To the extent reasonably possible, Landlord shall identify
disputed items on a line item basis. In no event shall Landlord be
entitled to dispute the request for funds for any expenditure which was
approved or deemed approved pursuant to the provisions of Section
5.1.3(a) and (b).
5.1.5 Nonresponsibility of Landlord, Etc. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished by Tenant or for any
other purpose during the term of this Agreement. Nothing contained in this
Agreement shall be deemed or construed in any way as constituting the consent or
request of Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialmen for the performance of any
labor or the furnishing of any materials for any alteration, addition,
improvement or repair to the Leased Property or any part thereof or as giving
Tenant any right, power or authority to contract for or permit the rendering of
any services or the furnishing of any materials that would give rise to the
filing of any lien against the Leased Property or any part thereof nor to
subject Landlord's estate in the Leased Property or any part thereof to
liability under any Mechanic's Lien Law of the State in any way, it being
expressly understood Landlord's estate shall not be subject to any such
liability.
5.1.6 Limitation on Tenant's Obligations. Tenant's
obligations under Section 5.1 shall be limited in the event of any casualty or
Condemnation as set forth in Sections 10.2 and 11.2 and Tenant's obligations
with respect to Hazardous Substances are as set forth in Section 4.3.
5.2 Tenant's Personal Property. At the expiration or sooner termination
of the Term, Landlord may, in its sole and absolute discretion, elect either (i)
to give Tenant Notice that Tenant shall be required, within ten (10) Business
Days after such expiration or termination, to remove all FAS and Inventories
from the Leased Property or (ii) to purchase from Tenant at a purchase price
equal to Tenant's book value all such FAS and Inventories other than those that
Landlord does not have the right to use under Section 22.16. Failure of Landlord
to make such election shall be deemed an election to proceed in accordance with
clause (ii) preceding.
5.3 Yield Up. Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate and surrender the Leased Property, to Landlord in
substantially the same condition in which the Leased Property was in on the
Commencement Date, except as repaired, replaced, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Agreement,
reasonable wear and tear and Condemnation (and casualty damage, in the event
that this Agreement is terminated following a casualty in accordance with
Article 10) excepted, together with the FAS and Inventories then existing but
excluding any FAS and Inventories with Proprietary Marks (as defined in the
Operating Agreement) acquired by Tenant or the Operator.
In addition, as of the expiration or earlier termination of
this Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith, commercially reasonable efforts to transfer to and cooperate with
Landlord or Landlord's nominee in connection with the processing of all
applications for licenses, operating permits and other governmental
authorizations and all contracts entered into by Tenant, including contracts
with governmental or quasi-governmental Entities which may be necessary for the
use and operation of the Facility as then operated, but excluding (i) all
insurance contracts and multi-property contracts not limited in scope to the
Collective Leased Properties, the Leases for which are being terminated
simultaneously,(ii) all contracts and leases with Affiliated Persons, (iii)
utility deposits and (iv) telephone numbers. Landlord shall indemnify and hold
Tenant harmless for all claims, costs and expenses (including reasonable
attorneys' fees) arising from acts or omissions by Landlord under such contracts
subsequent to the date of transfer thereof to Landlord; and Tenant shall
indemnify and hold Landlord harmless for all claims, costs and expenses
(including reasonable attorney's fees) arising from acts or omission by Tenant
under such contracts prior to the date of transfer thereof to Landlord.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Tenant shall not finance the
cost of any construction by the granting of a lien on or security interest in
the Leased Property, or Tenant's interest therein, without the prior written
consent of Landlord, which consent may be withheld by Landlord in Landlord's
sole discretion. Any such improvements shall, upon the expiration or sooner
termination of this Agreement, remain or pass to and become the property of
Landlord, free and clear of all encumbrances other than Permitted Encumbrances.
6.2 Salvage. Other than Tenant's Personal Property, all materials which
are scrapped or removed in connection with the making of repairs, alterations,
improvements, renewals, replacements and additions pursuant to Article 5 shall
be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.
6.3 Equipment Leases. Landlord shall enter into such leases of
equipment and personal property as Tenant may reasonably request from time to
time, provided that the form and substance thereof shall be reasonably
satisfactory to Landlord. Tenant shall prepare and deliver to Landlord all such
lease documents for which Landlord's execution is necessary and Landlord shall
promptly, upon approval thereof, execute and deliver such documents to Tenant.
Tenant shall, throughout the Term, be responsible for performing all of
Landlord's obligations under all such documents and agreements, including
without limitation, all Contracts, as defined in the Purchase Agreement.
ARTICLE 7
LIENS
Subject to Article 8, Tenant shall not, directly or indirectly, create
or allow to remain and shall promptly discharge, at its expense, any lien,
attachment, title retention agreement or claim upon the Leased Property or
Tenant's leasehold interest therein or any attachment, levy, claim or
encumbrance in respect of the Rent, other than (a) Permitted Encumbrances, (b)
restrictions, liens and other encumbrances which are consented to in writing by
Landlord, (c) liens for those taxes of Landlord which Tenant is not required to
pay hereunder, (d) subleases permitted by Article 16, (e) liens for Impositions
or for sums resulting from noncompliance with Legal Requirements so long as (i)
the same are not yet due and payable, or (ii) are being contested in accordance
with Article 8, (f) liens of mechanics, laborers, materialmen, suppliers or
vendors incurred in the ordinary course of business that are not yet due and
payable (but will be paid in full by Tenant) or are for sums that are being
contested in accordance with Article 8, (g) any Facility Mortgages or other
liens which are the responsibility of Landlord pursuant to the provisions of
Article 20 and (h) Landlord Liens.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay any
Claims required hereunder to be paid by Tenant as finally determined, (b) such
contest shall not cause Landlord or Tenant to be in default under any mortgage,
deed of trust or other agreement encumbering the Leased Property or any part
thereof (Landlord agreeing that any such mortgage, deed of trust or other
agreement shall permit Tenant to exercise the rights granted pursuant to this
Article 8) or any interest therein or result in a lien attaching to the Leased
Property, unless such lien is fully bonded or is otherwise secured to the
reasonable satisfaction of Landlord, (c) no part of the Leased Property nor any
Rent therefrom shall be in any immediate danger of sale, forfeiture, attachment
or loss, and (d) Tenant hereby indemnifies and holds harmless Landlord from and
against any cost, claim, damage, penalty or reasonable expense, including
reasonable attorneys' fees, incurred by Landlord in connection therewith or as a
result thereof. Landlord agrees to join in any such proceedings if required
legally to prosecute such contest, provided that Landlord shall not thereby be
subjected to any liability therefor (including, without limitation, for the
payment of any costs or expenses in connection therewith) unless Tenant agrees
to assume and indemnify Landlord with respect to the same. Tenant shall be
entitled to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord to the extent that
Landlord has been reimbursed by Tenant. If Tenant shall fail (x) to pay or cause
to be paid any Claims when finally determined, (y) to provide reasonable
security therefor, or (z) to prosecute or cause to be prosecuted any such
contest diligently and in good faith, Landlord may, upon Notice to Tenant, pay
such charges, together with interest and penalties due with respect thereto, and
Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.
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 risks and in the amounts as follows:
(a) "All-risk" property insurance (and to the extent
applicable, Builder's Risk Insurance) on the Improvements and all items
of business personal property, including but not limited to signs,
awnings, canopies, gazebos, fences and retaining walls, and all FAS,
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 Improvements (excluding
excavation and foundation costs), business personal property and FAS,
without a co-insurance provision, and shall include an Agreed Value
endorsement and a Law and Ordinance endorsement;
(b) Ordinance or Law Coverage with limits of not less than
the Improvements for Coverage A (Loss to the undamaged portion of the
building), limits not less than $500,000 for Coverage B (Demolition
Cost Coverage), and limits not less than $500,000 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 Landlord Rent for the benefit of Landlord, as its
interest may appear, and at least twelve (12) months of Cash Available
for Lease Payments less Landlord Rent for the benefit of Tenant;
(d) Occurrence form comprehensive general liability
insurance, including bodily injury and property damage, liquor
liability, fire legal liability, contractual liability and independent
contractor's hazard and completed operations coverage in an amount not
less than $1,000,000 per occurrence/$2,000,000 aggregate;
(e) Umbrella coverage which shall be on a following form for
the General Liability, Automobile Liability, Employers' Liability, and
Liquor Liability, with limits of not less than $50,000,000 per
occurrence/aggregate;
(f) 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);
(g) 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 per
accident/disease;
(h) To the extent applicable, 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 per occurrence;
(i) To the extent applicable, garage keepers legal liability
insurance covering both comprehensive and collision-type losses with a
limit of liability in an amount not less than $1,000,000 per
occurrence; and
(j) Such additional insurance as may be reasonably required,
from time to time, by Landlord (including, without limitation,
insurance requirements in the Operating Agreement, any mortgage,
security agreement or other financing permitted hereunder and then
affecting the Leased Property, as well as any ground lease or easement
agreement) or any Facility Mortgagee, provided the same is customarily
carried by a majority of comparable high quality assisted living
facilities in the area.
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 individual Facility's allocated
chargeback/deductible for general liability insurance and workmen's compensation
insurance shall not exceed $100,000 unless such greater amount is agreeable to
both Landlord and Tenant. The individual Facility's property insurance
deductible shall not exceed $ 250,000 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; provided, however, that the
aforesaid figure of $250,000 shall be reduced to $25,000 if and during any
period of time that neither the Tenant nor the Operator is the Guarantor or any
successor Guarantor under the Limited Rent Guaranty dated as of the same date as
this Lease executed by Guarantor in favor of Landlord nor any Affiliated Person
as to Guarantor or any such successor Guarantor. 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 Sections 9.1(a) through (d) shall name Landlord,
CNL Health Care Properties, Inc., CNL Health Care Corp. and any Facility
Mortgagee 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,
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, original copies of said policies
shall be made available for Landlord's review at Tenant's corporate headquarters
during normal business hours. All such policies shall provide Landlord (and any
Facility Mortgagee 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 Facility
Mortgagee at the times required, Landlord shall have the right, but not the
obligation, subject to the provisions of Section 12.5, to acquire such insurance
and pay the premiums therefor, which amounts shall be payable to Landlord, upon
demand, as Additional Charges, 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 or any Affiliated Person as to
Tenant.
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 during the Term 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 during the Term or any
litigation, proceeding or claim by governmental entities to which Landlord is
made a party or participant 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. Tenant, at its expense, shall defend any such
claim, action or proceeding asserted or instituted against Landlord covered
under this indemnity (and shall not be responsible for any duplicative
attorneys' fees incurred by Landlord) or may compromise or otherwise dispose of
the same. 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 termination of this Agreement for a period of
three (3) years.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any property policy of
insurance required by Article 9 (other than the proceeds of any business
interruption insurance, which shall be payable directly to Landlord and Tenant
as their interests may appear) shall be paid directly to Landlord, any Facility
Mortgagee, and Tenant, who shall all be required to deposit such proceeds with
an escrow agent reasonably satisfactory to them pursuant to a mutually agreed
upon form of escrow agreement (subject to the provisions of Section 10.2) and
all loss adjustments with respect to property losses payable to Tenant shall
require the prior written consent of Landlord; provided, however, that all such
proceeds less than or equal to (i) Five Hundred Thousand Dollars ($500,000)
(which amount shall be adjusted upward annually based on changes in the Index)
if the Leased Property is insured under Marriott International, Inc.'s insurance
program, or (ii) Two Hundred Fifty Thousand Dollars ($250,000) (which amount
shall be adjusted upward annually based on changes in the Index) if the Leased
Property is insured other than under Marriott International, Inc.'s insurance
program, shall be paid directly to Tenant and such losses may be adjusted
without Landlord's consent. If Tenant is required to reconstruct or repair the
Leased Property as provided herein, such proceeds shall be paid out by such
escrow agent from time to time for the reasonable costs of reconstruction or
repair of the Leased Property necessitated by such damage or destruction,
subject to and in accordance with the provisions of Section 10.2.4. Any
unexpended deductible amount and excess proceeds of insurance remaining after
the completion of the restoration shall be retained by Tenant or, if escrowed,
paid to Tenant. In the event that the provisions of Section 10.2.1 are
applicable, the insurance proceeds shall be retained by the party entitled
thereto pursuant to Section 10.2.1. All salvage resulting from any risk covered
by insurance shall belong to Landlord, provided any rights to the same have been
waived by the insurer.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. If, during
the Term, the Leased Property shall be totally or partially destroyed and the
Facility located thereon is thereby rendered Unsuitable for Its Permitted Use,
Tenant may, by the giving of Notice thereof to Landlord, terminate this
Agreement, whereupon, this Agreement shall terminate and Landlord shall be
entitled to retain the insurance proceeds payable on account of such damage.
10.2.2 Partial Damage or Destruction. If, during the Term,
the Leased Property shall be partially destroyed but the Facility is not
rendered Unsuitable for Its Permitted Use, Tenant shall, subject to Section
10.2.3, promptly restore the Facility as provided in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the Leased Property exceeds the sum of the deductible
and the amount of insurance proceeds received by Landlord and Tenant pursuant to
Article 9(a), (c), (d) or, if applicable, (e), Tenant shall give Landlord Notice
thereof which notice shall set forth in reasonable detail the nature of such
deficiency and whether Tenant shall pay and assume the amount of such deficiency
(Tenant having no obligation to do so, except that, if Tenant shall elect to
make such funds available, the same shall become an irrevocable obligation of
Tenant pursuant to this Agreement). In the event Tenant shall elect not to pay
and assume the amount of such deficiency, Landlord shall have the right (but not
the obligation), exercisable at Landlord's sole election by Notice to Tenant,
given within sixty (60) days after Tenant's notice of the deficiency, to elect
to make available for application to the cost of repair or restoration the
amount of such deficiency; provided, however, in such event, upon any
disbursement by Landlord thereof, the Minimum Rent shall be adjusted as provided
in Section 3.1.1(b). In the event that neither Landlord nor Tenant shall elect
to make such deficiency available for restoration, either Landlord or Tenant may
terminate this Agreement by Notice to the other, whereupon, this Agreement shall
terminate as provided in Section 10.2.1. It is expressly understood and agreed,
however, that, notwithstanding anything in this Agreement to the contrary,
Tenant shall be strictly liable and solely responsible for the amount of any
deductible.
10.2.4 Repairs. In the event Tenant is required to restore
the Leased Property pursuant to Section 10.2, Tenant shall commence promptly and
continue diligently to perform the repair and restoration of the Leased Property
(hereinafter called the "Work"), so as to restore the Leased Property in
compliance with all Legal Requirements and so that the Leased Property shall be,
to the extent practicable, substantially equivalent in value and general utility
to its general utility and value immediately prior to such damage or
destruction. Subject to the terms hereof, the escrow agent shall be required to
advance the insurance proceeds and any additional amounts payable by Landlord
pursuant to Section 10.2.3 to Tenant regularly during the repair and restoration
period so as to permit payment for the cost of any such restoration and repair.
Any such advances shall be made not more than monthly within ten (10) Business
Days after Tenant submits to Landlord 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). Landlord may, at its option, require, prior
to advancement of said insurance proceeds and other amounts by the escrow agent,
(i) approval of plans and specifications by an architect satisfactory to
Landlord (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 authorities and other regulatory bodies whose
approval is required, (vi) deposit by Tenant of the applicable deductible amount
with the escrow agent, and (vii) such other terms as a Facility Mortgagee or
lender of Landlord may reasonably require. Tenant's obligation to restore the
Leased Property pursuant to this Article 10 shall be subject to the release of
available insurance proceeds by the applicable Facility Mortgagee to the escrow
agent or directly to Tenant and, in the event such proceeds are insufficient,
Landlord electing to make such deficiency available therefor (and placement of
such deficiency with the escrow agent).
10.3 Damage Near End of Term. Notwithstanding any provisions of Section
10.1 or 10.2 to the contrary, if damage to or destruction of the Leased Property
occurs during the last twenty-four (24) months of the then Term (including any
exercised Extended Term) and if such damage or destruction cannot reasonably be
expected to be fully repaired and restored prior to the date that is twelve (12)
months prior to the end of such Term (including any exercised Extended Term),
the provisions of Section 10.2.1 shall apply as if the Leased Property had been
totally or partially destroyed and the Facility rendered Unsuitable for its
Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid solely to
Tenant and, to the extent necessary to repair or replace Tenant's Personal
Property in accordance with Section 10.5, Tenant shall hold such proceeds in
trust to pay the cost of repairing or replacing damaged Tenant's Personal
Property.
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 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 damage involving the Leased Property
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any cause of damage or destruction
to the Leased Property and, to the maximum extent permitted by law, no local or
State statute, laws, rules, regulation or ordinance in effect during the Term
which provide for such a contingency shall have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of the Leased
Property shall be taken by Condemnation or (ii) a Condemnation of less than the
whole of the Leased Property renders the Leased Property Unsuitable for Its
Permitted Use, this Agreement shall terminate and Tenant and Landlord shall seek
the Award for their interests in the Leased Property as provided in Section
11.6.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that the Leased Property is not rendered
Unsuitable for Its Permitted Use, Tenant shall, to the extent of the Award and
any additional amounts disbursed by Landlord as hereinafter provided, commence
promptly and continue diligently to restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation, in full compliance with all Legal
Requirements, subject to the provisions of this Section 11.2. If the cost of the
repair or restoration of the Leased Property exceeds the amount of the Award,
Tenant shall give Landlord Notice thereof which notice shall set forth in
reasonable detail the nature of such deficiency and whether Tenant shall pay and
assume the amount of such deficiency (Tenant having no obligation to do so,
except that if Tenant shall elect to make such funds available, the same shall
become an irrevocable obligation of Tenant pursuant to this Agreement). In the
event Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant given within sixty (60) days after
Tenant's Notice of the deficiency, to elect to make available for application to
the cost of repair or restoration the amount of such deficiency; provided,
however, in such event, following any disbursement by Landlord thereof and upon
completion of such repairs, the Minimum Rent shall be adjusted as provided in
Section 3.1.1(b). In the event that neither Landlord nor Tenant shall elect to
make such deficiency available for restoration, either Landlord or Tenant may
terminate this Agreement and the entire Award shall be retained by Landlord.
11.3 Disbursement of Award. Subject to the terms hereof, Landlord,
Tenant and any Facility Mortgagee shall transfer any part of the Award received
by them, respectively, together with severance and other damages awarded for the
taken Leased Improvements and any deficiency Landlord or Tenant has agreed to
pay, to an escrow agent reasonably satisfactory to all parties pursuant to an
escrow agreement that is reasonably satisfactory to all parties, for the purpose
of funding the cost of the repair or restoration. Landlord may require, at its
option, prior to advancement of such Award and other amounts to the escrow
agent, (i) approval of plans and specifications by an architect satisfactory to
Landlord (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, and (v)
evidence of approval by all governmental authorities and other regulatory bodies
whose approval is required. Obligations under this Section 11.3 to disburse the
Award and such other amounts shall be subject to (x) the collection thereof and
(y) the release of such Award by the applicable Facility Mortgagee. Tenant's
obligation to restore the Leased Property shall be subject to the availability
of the Award to fund the cost of such repair or restoration upon its compliance
with this Section 11.3.
11.4 Abatement of Rent. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property. The provisions
of this Article 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 a contingency shall have any application
in such case.
11.5 Temporary Condemnation. In the event of any temporary Condemnation
of the Leased Property or Tenant's interest therein, this Agreement shall
continue in full force and effect and Tenant shall continue to pay, in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe all of the other terms and conditions of
this Agreement on the part of the Tenant to be performed and observed. The
entire amount of any Award made for such temporary Condemnation allocable to the
Term, whether paid by way of damages, rent or otherwise, shall be paid to
Tenant. Tenant shall, promptly upon the termination of any such period of
temporary Condemnation, at its sole cost and expense, restore the Leased
Property to the condition that existed immediately prior to such Condemnation,
in full compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
Section 11.5, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twelve (12) months.
11.6 Allocation of Award. Except as provided in Section 11.5 and the
second sentence of this Section 11.6, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property, or
Tenant's removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of Minimum Rent
or Percentage Rent within three (3) Business Days after Notice thereof,
or fail to make payment of any other Rent or any other sum (including,
but not limited to, funding of the Reserve), payable hereunder when due
and such failure shall continue for a period of ten (10) days after
Notice thereof; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for three (3)
Business Days after Notice thereof; or
(c) subject to Article 8 relating to permitted contests,
should Tenant default in the due observance or performance of any of
the terms, covenants or agreements contained herein to be performed or
observed by it (other than as specified in clauses (a) and (b) above)
and such default shall continue for a period of thirty (30) days after
Notice thereof from Landlord to Tenant; provided, however, that if such
default is susceptible of cure but such cure cannot be accomplished
with due diligence within such period of time and if, in addition,
Tenant commences to cure or cause to be cured such default within
fifteen (15) days after Notice thereof from Landlord and thereafter
prosecutes the curing of such default with all due diligence, such
period of time shall be extended to such period of time (not to exceed
one hundred eighty (180) days) as may be necessary to cure such default
with all due diligence; or
(d) should Tenant generally not be paying its debts as they
become due or should Tenant make a general assignment for the benefit
of creditors; or
(e) should any petition be filed by or against Tenant under
the Federal bankruptcy laws, or should any other proceeding be
instituted by or against Tenant seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or
for any substantial part of the property of Tenant and such proceeding
is not dismissed within ninety (90) days after institution thereof, or
should Tenant take any action to authorize any of the actions set forth
above in this paragraph; or
(f) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(g) should an event of default occur and be continuing under
any mortgage or deed of trust which is secured by Tenant's leasehold
interest hereunder or should the mortgagee under any such mortgage
accelerate the indebtedness secured thereby or commence a foreclosure
action in connection with said mortgage and such default shall continue
for a period of thirty (30) days after notice thereof from Landlord to
Tenant; provided, however, that if such default is susceptible of cure
but such cure cannot be accomplished with due diligence within such
period of time and if, in addition, Tenant commences to cure or cause
to be cured such default within fifteen (15) days after Notice thereof
from Landlord and thereafter prosecutes the curing of such default with
all due diligence, such period of time shall be extended to such period
of time as may be necessary to cure such default with all due
diligence; or
(h) unless Tenant shall be contesting such lien or attachment in good
faith in accordance with Article 8, should the estate or interest of
Tenant in the Leased Property or any part thereof be levied upon or
attached in any proceeding and the same shall not be vacated,
discharged or fully bonded or otherwise secured to the reasonable
satisfaction of Landlord within the later of (x) one hundred and twenty
(120) days after such attachment or levy, unless the amount in dispute
is less than $500,000 (as adjusted each year by increases in the
Index), in which case Tenant shall give notice to Landlord of the
dispute but Tenant may defend in any suitable way, and (y) thirty (30)
days after receipt by Tenant of Notice thereof from Landlord; it being
understood and agreed that Tenant may commence a contest of such matter
pursuant to Article 8 above following such Notice from Landlord; then,
and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement by giving Notice thereof
to Tenant and upon the expiration of the time fixed in such Notice but
in any event not less than seventy-five (75) days, this Agreement shall
terminate and all rights of Tenant under this Agreement shall cease.
Landlord shall have and may exercise all rights and remedies available
at law and in equity to Landlord as a result of Tenant's breach of this
Agreement.
Landlord hereby agrees and consents to any cure of any Default or Event
of Default tendered or performed by the Guarantor (whether prior to or
after expiration of any guaranty provided by Guarantor) within the same
cure period afforded to Tenant herein.
12.2 Remedies. None of (a) the termination of this Agreement pursuant
to Section 12.1, (b) the repossession of the Leased Property or any portion
thereof, (c) the failure of Landlord to re-let the Leased Property or any
portion thereof, nor (d) the re-letting of all or any portion of the Leased
Property, shall relieve Tenant of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or re-letting. In the
event of any such termination, repossession or re-letting, Tenant shall
forthwith pay to Landlord all Rent due and payable with respect to the Leased
Property through and including the date of such termination, repossession or
re-letting. Thereafter, Tenant, until the end of what would have been the Term
of this Agreement (assuming no extension beyond the then-current Term) in the
absence of such termination, repossession or re-letting, and whether or not the
Leased Property or any portion thereof shall have been re-let, shall be liable
to Landlord for, and shall pay to Landlord, as current damages, the Rent and
other charges which would be payable hereunder for the remainder of the Term had
such termination, repossession or re-letting not occurred, less the net
proceeds, if any, of any re-letting of the Leased Property, after deducting all
reasonable expenses in connection with such re-letting, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorneys' fees, advertising, expenses of employees, alteration costs and
expenses of preparation for such re-letting (such expenses being hereinafter
referred to as the "Re-letting Expenses"). Tenant shall pay such current damages
to Landlord monthly on the days on which the Minimum Rent would have been
payable hereunder if this Agreement had not been so terminated with respect to
such of the Leased Property.
At any time after such termination, repossession or
re-letting, in addition to Landlord's right to receive any Rent owing and due up
to and including the date of termination, repossession or re-letting under the
preceding paragraph, Tenant shall pay to Landlord, at Landlord's election, as
liquidated final damages incurred beyond the date of such termination,
repossession or re-letting and in lieu of Landlord's right to receive any
further damages due to the such termination, repossession or re-letting, the
Re-letting Expenses incurred to date (and not theretofore paid by Tenant) and an
amount equal to the present value (discounted at the Interest Rate) of the
excess, if any, of the Rent and other charges which would be payable hereunder
from the date of such termination, repossession or re-letting (assuming that,
for the purposes of this paragraph, annual payments by Tenant on account of
Impositions and Percentage Rent would be the same as payments required for the
immediately preceding thirteen Accounting Periods, or if less than thirteen
Accounting Periods have expired since the Commencement Date, the payments
required for such lesser period projected to an annual amount) for what would be
the then unexpired Term of this Agreement (assuming no extension beyond the
then-current Term) if the same remained in effect, over the fair market rental
for the same period; provided, however, that Tenant shall be entitled to a
credit from Landlord in the amount of any unapplied balance of the Security
Deposit applied by Landlord to its damages under this Agreement, whereupon
Landlord shall have no further obligation to pay the portion of the Security
Deposit so credited to Tenant. Nothing contained in this Agreement shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above.
In case of any Event of Default, re-entry, expiration or
dispossession by summary proceedings or otherwise, Landlord may (a) re-let the
Leased Property or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord's option, be equal to, less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant concessions or free rent to the extent that Landlord
considers advisable and necessary to re-let the same, and (b) may make such
reasonable alterations, repairs and decorations in the Leased Property or any
portion thereof as Landlord, in its sole and absolute discretion, considers
advisable and necessary for the purpose of re-letting the Leased Property; and
the making of such alterations, repairs and decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Subject to
the last sentence of this paragraph, Landlord shall in no event be liable in any
way whatsoever for any failure to re-let all or any portion of the Leased
Property, or, in the event that the Leased Property is re-let, for failure to
collect the rent under such re-letting. To the maximum extent permitted by law,
Tenant hereby expressly waives any and all rights of redemption granted under
any present or future laws in the event of Tenant being evicted or dispossessed,
or in the event of Landlord obtaining possession of the Leased Property, by
reason of the occurrence and continuation of an Event of Default hereunder.
Landlord covenants and agrees, in the event of any such termination,
repossession or re-letting as a result of an Event of Default, to use reasonable
efforts to mitigate its damages.
12.3 Waiver of Jury Trial. Landlord and Tenant hereby waive, to the
maximum extent permitted by Applicable Laws, trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other or in respect of any matter whatsoever arising out of or in any way
connected with this Agreement, the relationship of Landlord and Tenant
hereunder, Tenant's occupancy of the Leased Property, and/or any claim for
injury or damage.
12.4 Application of Funds. Any payments received by Landlord under any
of the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or releasing any Event of Default,
may (but shall not be obligated to), at any time thereafter, make such payment
or perform such act for the account and at the expense of Tenant, and may, to
the maximum extent permitted by law, enter upon the Leased Property or any
portion thereof for such purpose and take all such action thereon as, in
Landlord's sole and absolute discretion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Security Deposit. Notwithstanding any term or provision to the
contrary herein, in the event that this Agreement is terminated pursuant to
Section 12.1 or 12.2, Landlord shall be entitled to credit any unapplied balance
of the Security Deposit (in accordance with Section 3.4(b)) to any claims or
damages to which Landlord is entitled and to the extent that any portion of the
Security Deposit remains after such credit, Landlord shall promptly refund such
portion of the Security Deposit to Tenant. Upon any expiration or other
termination of this Agreement, Landlord shall promptly refund any remaining
portion (that is, after crediting any unapplied balance of the Security Deposit
(in accordance with Section 3.4(b)), to any claims or damages to which Landlord
is entitled) of the Security Deposit to Tenant.
12.7 Good Faith Dispute. If Tenant shall in good faith dispute the
occurrence of any Default and Tenant, before the expiration of the applicable
cure period, shall give Notice thereof to Landlord, setting forth, in reasonable
detail, the basis therefor and, provided Tenant shall escrow disputed amounts,
if any, pursuant to an escrow arrangement reasonably acceptable to Landlord and
Tenant, no Event of Default shall be deemed to have occurred; provided, however,
that in the event of any eventual adverse determination, Tenant shall pay to
Landlord interest on any disputed funds at the Disbursement Rate, from the date
demand for such funds was made by Landlord until the date of final adverse
determination and, thereafter, at the Overdue Rate until paid.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to one and one-half (1.50) times the Rent and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord all
damages (direct or indirect) sustained by reason of any such holding over.
Otherwise, such holding over shall be on the terms and conditions set forth in
this Agreement, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Agreement.
ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
14.1 Landlord Notice Obligation. Landlord shall give prompt Notice to
Tenant and the Manager of any materially adverse matters affecting the Leased
Property of which Landlord receives written notice or actual, conscious, present
knowledge and, to the extent Tenant otherwise has no notice or actual knowledge
thereof, Landlord shall be liable for any liabilities, costs, damages or claims
(including reasonable attorneys' fees) arising from the failure to deliver such
Notice to Tenant. Subject to Article 20, Landlord shall not enter into or amend
any agreement directly affecting the operation of Leased Property without
Tenant's prior written consent. As used in this Agreement, "Landlord's
knowledge" or words of similar import shall mean the actual (and not
constructive or imputed), conscious, present knowledge, without independent
investigation or inquiry of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. or any subsequent officer
or employee of Landlord, or any Affiliated Person as to Landlord, having direct
oversight responsibility for the transactions contemplated in this Agreement.
14.2 Landlord's Default. Subject to Landlord's right to dispute its
obligation in accordance with Section 5.1.4(b), if (i) Landlord shall default in
the performance or observance of any of its covenants or obligations set forth
in this Agreement, or (ii) CHCLP and/or CHCP shall default in its obligations
under the CHCLP and CHCP Guaranty and any such default shall continue for a
period of ten (10) days after Notice thereof with respect to monetary defaults,
and thirty (30) days after Notice thereof with respect to non-monetary defaults,
from Tenant to Landlord and any applicable Facility Mortgagee, or such
additional period as may be reasonably required to correct the same, Tenant may
declare the occurrence of a "Landlord Default" by giving Notice of such
declaration to Landlord and to such Facility Mortgagee. Thereafter, Tenant may
(but shall have no obligation to) cure the same and, subject to the provisions
of the following paragraph, invoice Landlord for costs and expenses (including
reasonable attorneys' fees and court costs) incurred by Tenant in curing the
same, together with interest thereon from the date Landlord receives Tenant's
invoice, at the Overdue Rate. Except as otherwise expressly provided herein to
the contrary, Tenant shall have no right to terminate this Agreement for any
default by Landlord hereunder and no right, for any such default, to offset or
counterclaim against any Rent or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of
any Landlord Default and Landlord, before the expiration of the applicable cure
period, shall give Notice thereof to Tenant, setting forth, in reasonable
detail, the basis therefor, no Landlord Default shall be deemed to have occurred
and Landlord shall have no obligation with respect thereto until final adverse
determination thereof; provided, however, that in the event of any such adverse
determination, Landlord shall pay to Tenant interest on any disputed funds at
the Disbursement Rate, from the date demand for such funds was made by Tenant
until the date of final adverse determination and, thereafter, at the Overdue
Rate until paid. Notwithstanding the foregoing, the provisions of Section 14.3
shall control in the event of a default under Section 5.1.4(b).
14.3 Special Remedies for Landlord Funding Default. In the event of any
Landlord Default arising under Section 5.1.4(b), Tenant shall have the right, in
Tenant's sole discretion, in addition to all other remedies of Tenant hereunder,
to exercise any one or more of the following remedies:
(a) Tenant may fund the deficient amounts and offset the
aggregate amount thereof plus interest thereon from the date of funding
at the Disbursement Rate against any Rent payable by Tenant subsequent
to the date of advance pursuant to this Agreement until recouped;
(b) Tenant may, notwithstanding the provisions of Article
16, assign this Agreement or sublease all (but not less than all) of
the Leased Property to a Person who is not an Affiliated Person as to
Tenant; or
(c) Tenant may terminate this Agreement whereupon, (i) the
Limited Rent Guaranty shall terminate and (ii) Landlord shall refund to
Tenant any unapplied balance of the Security Deposit.
14.4 Special Remedy under Section 10.1 and 11.3. If Landlord or any
Facility Mortgagee shall fail to deposit insurance proceeds with an escrow agent
as required by Section 10.1 or if Landlord shall fail to deposit any Award or
any deficiency as required by Section 11.3 with an escrow agent as required by
Section 11.3, Tenant shall be entitled, in addition to all other remedies of
Tenant hereunder, to the remedies listed in Sections 14.3(a) through (d),
without the requirement of arbitration as described in Section 5.1.4(b).
ARTICLE 15
TRANSFERS BY LANDLORD
15.1 Transfer of Leased Property. Except for liens, encumbrances or
title retention agreements which are governed by Article 20, and except for
normal and customary easements reasonably required for the development and use
of the Leased Property for assisted living facility purposes and uses incidental
thereto, Landlord shall not, without the prior written consent of Tenant, which
consent may be given or withheld by Tenant in Tenant's sole and absolute
discretion, sell, assign, transfer, convey or otherwise dispose of (a
"Transfer") the Leased Property, or any portion thereof or interest therein,
directly or indirectly (other than an interest, directly or indirectly, in
Landlord which is governed by Section 15.3), to any Person which, in Tenant's
reasonable judgment: (i) is not a Person in which CHCP owns and holds, directly
or indirectly, a Controlling Interest and does not have sufficient financial
resources to fulfill Landlord's obligations hereunder; (ii) is known in the
community as being of bad moral character and/or is in control of or controlled
by Persons who have been convicted of felonies in any state or federal court;
(iii) itself is, or any of its Affiliated Persons is, a Competitor; or (iv)
fails expressly to assume, in writing, the obligations of Landlord under this
Agreement. For purposes of this Section 15.1, a Person shall not be deemed to be
a Competitor solely by virtue of (x) the ownership of assisted living
facilities, either directly or indirectly through Subsidiaries, Affiliated
Persons and Entities, or (y) holding a mortgage or mortgages secured by one or
more assisted living facilities. Otherwise, subject to the provisions of Section
15.2, Landlord may Transfer the Leased Property, or any portion thereof or
interest therein, to any Person without the consent of, but upon not less than
sixty (60) days prior Notice to, Tenant. Within five (5) days following any
request by Tenant, Landlord shall provide Tenant such information concerning the
proposed transferee's financial condition, affiliations, ownership, business
interests, and operations as may be reasonably necessary or appropriate in order
for Tenant to determine if such proposed Transfer is consistent with the above
provisions.
Notwithstanding anything to the contrary herein contained,
in the event of a transfer of Tenant's interest in this Agreement to any Entity
in which the Guarantor does not have a Controlling Interest, and if at any time
thereafter Landlord is, for any reason, not satisfied with the performance under
this Agreement by such transferee of Tenant, then Landlord may, upon not less
than sixty (60) days prior Notice to Tenant, elect to Transfer the Leased
Property, and the restriction set forth in subclause (iii) in clause (a) of
Section 15.1 (that is, a Transfer to any Person which, in Tenant's reasonable
judgment, itself is, or any of its Affiliated Persons is, a Competitor) shall
not apply to any such Transfer of the Leased Property; it being understood and
agreed, however, that nothing herein shall prejudice or preclude the Guarantor
from exercising any of its rights or remedies under Section 4 of the Owner
Agreement as a result of, or with respect to, any such Transfer of the Leased
Property.
15.2 Conditions of Transfer. Any Transfer of the Leased Property
permitted by Section 15.1 shall be subject to the prior or simultaneous
satisfaction of the following conditions:
(a) Landlord shall transfer its rights hereunder to the
Security Deposit to the successor landlord and the Security Deposit
with respect to the Leased Property shall continue to be held by the
successor landlord in accordance with the terms and conditions set
forth in Section 3.5;
(b) Any transferee of Landlord pursuant to this Article 15
shall expressly assume, in writing reasonably satisfactory to Tenant,
the obligations of Landlord under this Agreement, and the Owner
Agreement and, upon such assumption and so long as such transferee is
not an Affiliated Person of Landlord or CHCP, then Landlord shall be
released from all liabilities and obligations of the landlord hereunder
accruing after the date of the transfer, assignment and assumption;
(c) Any overpayments of Rent (to the extent determinable)
held by Landlord shall be refunded to Tenant prior to such Transfer;
(d) If the transferee is an Affiliated Person of Landlord or
CHCP, then Landlord and CHCP shall expressly guarantee in writing
reasonably satisfactory to Tenant, or confirm in writing reasonably
satisfactory to Tenant their continuing guarantee of, the obligations
of such transferee under this Agreement and the Owner Agreement; and
(e) Any amounts owed by Landlord to Tenant shall be paid in
full.
15.3 Transfer of Interest in Landlord. For purposes of this Article 15,
any sale, assignment, transfer or other disposition, for value or otherwise,
voluntary or involuntary, by merger, operation of law or otherwise, in a single
transaction or a series of transactions, of any interest in Landlord or any
Person having an interest in Landlord, directly or indirectly, shall be and
constitute a Transfer of the Leased Property; provided, however, that if the
proposed transferee is not, in Tenant's reasonable judgment, (i) known in the
community as being of bad moral character or in which any Person who has been
convicted of a felony in any state or federal court holds a Controlling
Interest, or (ii) itself a Competitor, and none of its Affiliated Persons is a
Competitor, then, so long as the interest to be transferred to such transferee
is less than a Controlling Interest, and so long as immediately following such
transfer CHCP, directly or indirectly, continues to own and hold a Controlling
Interest in Landlord, the other restrictions set forth in Section 15.1 shall not
apply to such transfer; and provided further, however, that the provisions of
Section 15.1 shall not apply to any transfer of interests in CHCP, directly or
indirectly, or in any Entity that has an interest in CHCP, directly or
indirectly, so long as CHCP is a publicly traded company (whether or not such
interests are traded on a public stock exchange), if and so long as such
transfer does not result, directly or indirectly, in a Competitor owning a
Controlling Interest in CHCP, nor shall the provisions of Section 15.1 apply to
any transfer of interests in Landlord, directly or indirectly (or in any Entity
that has an interest in Landlord, directly or indirectly), to any Person which
is not an Affiliated Person of Landlord or CHCP, if and so long as such transfer
does not result in or entail, directly or indirectly, either concurrent with the
transfer or subsequent thereto, CHCP or a wholly-owned Subsidiary of CHCP no
longer continuing to possess the sole power, as the sole general partner of
Landlord, to direct or cause the direction of the management and policies of
Landlord, whether such cessation of power occurs by contract, by conversion of
the general partner interest of CHCP or its wholly-owned Subsidiary in Landlord
to a limited partner interest, by conversion of Landlord to a corporation or
other Entity, or otherwise. Landlord shall deliver to Tenant at least sixty (60)
days prior Notice of any transfer of interests herein contemplated, other than
transfers of limited partner interests in Landlord (specifically excluding any
general partner interests in Landlord), and other than transfers of interests in
any publicly traded company (whether or not such interests are traded on a
public stock exchange).
Notwithstanding anything to the contrary herein contained, a
voluntary sale, assignment, transfer or other disposition, for value, by merger,
operation of law or otherwise, in a single transaction or a related series of
transactions, of all or substantially all of the interests in Landlord or CHCP,
or all or substantially all of the assets of Landlord or CHCP (in either event,
a "Sale of the Entity"), shall not be deemed a Transfer of the Leased Property;
it being understood and agreed, however, that nothing herein shall prejudice or
preclude the Guarantor from exercising any of its rights or remedies under
Section 4 of the Owner Agreement, as a result of, or with respect to, any such
Sale of the Entity. For purposes hereof, "substantially all of the interests in
Landlord" shall mean all of the general partner interests and not less than
ninety percent (90%) of the limited partner interests in Landlord;
"substantially all of the interests in CHCP" shall mean not less than ninety
percent (90%) of the outstanding capital stock of CHCP; and "substantially all
of the assets of Landlord or CHCP" shall mean not less than ninety percent (90%)
of the respective total assets owned by Landlord or CHCP, respectively.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment.
(a) Except as provided in Section 16.3 and in this Section
16.1, Tenant shall not, without Landlord's prior written consent,
assign, mortgage, pledge, hypothecate, encumber or otherwise transfer
this Agreement or sublease (which term shall be deemed to include the
granting of concessions, licenses and the like), all or any part of the
Leased Property or suffer or permit this Agreement or the leasehold
estate created hereby or any other rights arising under this Agreement
to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or
by operation of law, or permit the use or operation of the Leased
Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting; provided, however,
that Tenant may, without Landlord's consent, sell, transfer, assign or
convey its interest in this Agreement to a direct or indirect
Subsidiary of the Guarantor, which Subsidiary of the Guarantor shall
expressly assume the obligations of Tenant under this Agreement, and
the transferor Tenant shall thereupon be released from all liabilities
and obligations of Tenant accruing hereunder after the date of such
transfer by the transferor Tenant if either (i) the Membership Interest
Pledge Agreement has been terminated by reason of a transfer of the
Leased Property by Landlord which terminates the Membership Interest
Pledge Agreement or (ii) the owner of all of the direct ownership
interests in such Subsidiary of the Guarantor executes and delivers a
new Pledge Agreement to Landlord, in form which meets with Landlord's
reasonable satisfaction, that pledges all of the ownership interests of
such Subsidiary to Landlord upon substantive terms identical to the
Membership Interest Pledge Agreement. For purposes of this Section
16.1, an assignment of this Agreement shall be deemed to include the
following (for purposes of this Section 16.1, a "Corporate Transfer"):
any direct or indirect transfer of any interest in Tenant such that
Tenant shall cease to be a direct or indirect Subsidiary of the
Guarantor or any transaction pursuant to which Tenant is merged or
consolidated with another Entity which is not the Guarantor or a
Subsidiary of the Guarantor or pursuant to which all or substantially
all of Tenant's assets are transferred to any other Entity, as if such
change in control or transaction were an assignment of this Agreement
but shall not include any involuntary liens or attachments contested by
Tenant in good faith in accordance with Article 8.
(b) Notwithstanding the foregoing, Landlord's consent shall
not be required for a Corporate Transfer or a sale, transfer,
assignment or other conveyance of Tenant's interest in this Agreement
if, after giving effect to such Corporate Transfer, Tenant, or all or
substantially all of Tenant's assets, would be owned or controlled by a
Person who would, in connection therewith, acquire all or substantially
all of the assisted living facility business of the Guarantor and its
direct and indirect Subsidiaries.
(c) Notwithstanding the foregoing, Landlord's consent shall
not be required for a Corporate Transfer or a sale, transfer,
assignment or other conveyance of Tenant's interest in this Agreement
that occurs following the third (3rd) anniversary of the Commencement
Date so long as (i) the Leased Property will be operated by Guarantor
or a wholly-owned Subsidiary of Guarantor pursuant to an Operating
Agreement, the term of which shall coincide with the term of this
Agreement, including extensions; (ii) the party to whom such transfer
is made is not, in Landlord's reasonable judgment, known in the
community as being of bad moral character and/or is not in control of
or controlled by persons who have been convicted of felonies in any
state or federal court; (iii) following such transfer, the new Tenant
satisfies the requirements set forth in Section 21.4; and (iv) the
transferee of this Lease shall assume the obligations of Tenant under
this Lease accruing after the effective date of such transfer either by
an express written agreement or by operation of law. Upon a transfer
described in this Section 16.1(c), and so long as the transferee is not
an Affiliated Person of Tenant or Guarantor, the transferor Tenant and
all of its Affiliated Persons shall be released from all liabilities
and obligations of Tenant accruing hereunder after the date of such
transfer. Tenant shall deliver notice of any such proposed transfer to
Landlord at least thirty (30) days prior to any such transfer and
shall, within five (5) days following any request by Landlord, provide
Landlord such information as may be reasonably necessary or appropriate
in order for Landlord to determine if such proposed transfer is
consistent with the above provisions. Notwithstanding the foregoing,
this Section 16.1(c) shall not apply to any transfer that meets the
requirements of Section 16.1(b).
(d) If this Agreement is assigned or if the Leased Property
or any part thereof are sublet (or occupied by anybody other than
Tenant) Landlord may collect the rents from such assignee, subtenant or
occupant, as the case may be, and apply the net amount collected to the
Rent herein reserved, but no such collection shall be deemed a waiver
of the provisions set forth in the first paragraph of this Section
16.1, the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or a release of Tenant from
the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
(e) Except as set forth in Section 16.1(c), no subletting or
assignment shall in any way impair the continuing primary liability of
Tenant hereunder (unless Landlord and Tenant expressly otherwise agree
that Tenant shall be released from all obligations hereunder), and no
consent to any subletting or assignment in a particular instance shall
be deemed to be a waiver of the prohibition set forth in this Section
16.1. No assignment, subletting or occupancy shall affect any Permitted
Use. Any subletting, assignment or other transfer of Tenant's interest
under this Agreement in contravention of this Section 16.1 shall be
voidable at Landlord's option. Any assignee of this Lease shall assume
the obligations of Tenant under this Lease accruing after the effective
date of such assignment either by an express written agreement or by
operation of law.
(f) Following a transfer described in Section 16.1(c) above
by the original Tenant under this Agreement, when giving notice to the
transferee Tenant (the "New Tenant") with respect to any default under
the provisions of this Agreement, Landlord will also deliver a copy of
such notice to the original Tenant (the "Transferor"), and the
Transferor or the Operator will have the same period of time after the
giving of such notice in which to remedy or cure the default as is
given to the New Tenant under this Agreement; it being understood and
agreed that the Transferor and the Operator will have no duty or
obligation to remedy or cure such default. Further, any Subsidiary or
Affiliated Person of the Guarantor, including without limitation, the
Transferor if it is then a Subsidiary or Affiliated Person of the
Guarantor (in either case, a "Qualified Transferee"), may become the
Tenant under this Agreement, by an assignment from the New Tenant. If
prior to such assignment from the New Tenant, Landlord elects to
terminate this Agreement by virtue of such default, Landlord shall
deliver to the Transferor and the Manager written notice of Landlord's
election to so terminate this Agreement which notice shall be delivered
at least ten (10) Business Days prior to the effective date of such
termination or exercise. Within such ten (10)-Business Day period, a
Qualified Transferee may elect by written notice to Landlord to
immediately enter into a new lease of the Leased Property for a term of
thirty (30) days, at the Rent (payable on a prorated basis for said
30-day period in advance upon the full execution and delivery of the
new lease), and otherwise upon the covenants, terms and provisions
herein contained. Prior to the expiration of the said 30-day term of
the new lease, the Qualified Transferee may elect by written notice to
Landlord, accompanied by payment to Landlord of all amounts due
Landlord under this Agreement, to extend the term of the new lease for
the remainder of the Term which would have existed but for such
termination, at the Rent and upon the covenants, terms and provisions
herein contained. It is expressly understood and agreed that the rights
and privileges under this Section 16.1(f) shall not accrue to any
Tenant, except as to a Qualified Transferee which becomes the Tenant
under this Agreement.
16.2 Required Sublease Provisions. Any sublease of all or any portion
of the Leased Property entered into on or after the date hereof shall provide
(a) that it is subject and subordinate to this Agreement and to the matters to
which this Agreement is or shall be subject or subordinate; (b) that in the
event of termination of this Agreement or reentry or dispossession of Tenant by
Landlord under this Agreement, Landlord may, at its option, terminate such
sublease or take over all of the right, title and interest of Tenant, as
sublessor under such sublease, and, except as provided below, such subtenant
shall, at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission
of Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous prepayment of more than one (1) Accounting
Period, (iv) be bound by any covenant of Tenant to undertake or complete any
construction work on the Leased Property or any portion thereof, (v) be required
to account for any security deposit of the subtenant other than any security
deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person occupying any portion of the Leased
Property; and (c), in the event that such subtenant receives a written Notice
from Landlord or any Facility Mortgagee stating that an Event of Default has
occurred and is continuing, such subtenant shall thereafter be obligated to pay
all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct. All rentals received from such subtenant by
Landlord or the Facility Mortgagee, as the case may be, shall be credited
against the amounts owing by Tenant under this Agreement and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. An original
counterpart of each such sublease duly executed by Tenant and such subtenant
shall be delivered promptly to Landlord and Tenant shall remain liable for the
payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder. The provisions of
this Section 16.2 shall not be deemed a waiver of the provisions set forth in
Section 16.1(a). No subtenant that is an Affiliated Person of Tenant shall be
required to attorn to Landlord as set forth above in this Section 16.2.
16.3 Permitted Sublease and Assignment. Notwithstanding the foregoing,
but subject to the provisions of Section 16.4 and any other express conditions
or limitations set forth herein, Tenant may, without Landlord's consent,
sublease space at the Leased Property so long as such subleases do not demise,
in the aggregate, in excess of six hundred (600) square feet of area. Any
sublease of space to any Affiliated Person of Tenant or Guarantor shall be on
commercially reasonable terms; provided, however, that any sublease of space to
or for use by Guarantor or any Affiliated Person of Guarantor for marketing
activities shall not be required to be on commercially reasonable terms.
16.4 Sublease Limitation. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of such sublessee,
or (b) any other formula such that any portion of such sublease rental would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) Business Days prior Notice by either party, the party
receiving such Notice shall furnish to the other a certificate certifying that
this Agreement is unmodified and in full force and effect (or that this
Agreement is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, that to its knowledge
no Default or an Event of Default by the other party has occurred and is
continuing or, if a Default or an Event of Default shall exist, specifying in
reasonable detail the nature thereof, and the steps being taken to remedy the
same, and such additional information as the requesting party may reasonably
request. If such additional information reasonably requires more than ten (10)
Business Days to provide, the party furnishing such information shall be
entitled to such additional period to respond to such request as may be
reasonably required under the circumstances. Any such certificate furnished
pursuant to this Section 17.1 may be relied upon by the requesting party, its
lenders and any prospective purchaser or mortgagee of the Leased Property or the
leasehold estate created hereby.
17.2 Financial Statements. Within thirty (30) days after the end of
each Accounting Period, Tenant shall furnish to Landlord an unaudited operating
statement for the Facility, including until the first Accounting Period
commencing after the occurrence of the Base Year, occupancy percentages. In
addition, Tenant shall provide Landlord with information relating to Tenant and
its operation of the Leased Property that (a) may be required in order for
Landlord to prepare financial statements in accordance with GAAP or to comply
with applicable securities laws and regulations and the SEC's interpretation
thereof and (b) is of the type that the Guarantor and its Affiliated Persons
customarily prepare for other assisted living facility owners; provided,
however, that (i) Tenant reserves the right, in good faith, to challenge and
require Landlord to use commercially reasonable efforts to challenge any
assertion by the SEC, any other applicable regulatory authority, or Landlord's
independent public accountants that applicable law, regulations or GAAP require
the provision or publication of Proprietary Information, (ii) Landlord shall
not, without Tenant's consent (which consent shall not be unreasonably withheld,
delayed or conditioned), acquiesce to any such challenged assertion until
Landlord has exhausted all reasonable available avenues of administrative
review, and (iii) Landlord shall consult with Tenant in pursuing any such
challenge and will allow Tenant to participate therein if and to the extent that
Tenant so elects. Landlord acknowledges that the foregoing does not constitute
an agreement by Tenant either to join in any Landlord filing with or appearance
before the SEC or any other regulatory authority or to take or consent to any
other action which would cause Tenant to be liable to any third party for any
statement or information other than those statements incorporated by reference
pursuant to clause (a) above. Any and all costs and expenses incurred by Tenant,
including without limitation reasonable attorneys fees and expenses, in
connection with providing information to Landlord in connection with any
challenge to an SEC assertion (including Tenant's consultation or participation
with Landlord in respect of same) shall be reimbursed to Tenant by Landlord
within ten (10) days following written demand by Tenant. If Landlord fails to so
reimburse Tenant within said 10-day period Tenant shall be entitled to offset
against Rent thereafter coming due any such unreimbursed sums, together with
interest thereon at the Disbursement Rate from the date of such demand to the
date actually paid or offset.
Subject to any Facility Mortgagee entering into such
confidentiality agreement with Tenant as Tenant may reasonably require, Landlord
may at any time, and from time to time, provide any Facility Mortgagee with
copies of any of the foregoing statements.
In addition, Landlord shall have the right, from time to
time at Landlord's sole cost and expense, upon reasonable Notice, during
Tenant's customary business hours, to cause Tenant's books and records with
respect to the Leased Property to be audited by auditors selected by Landlord at
the place where such books and records are customarily kept, provided that,
prior to conducting such audit, Landlord shall enter into a confidentiality
agreement with Tenant, such agreement to be in form and substance reasonably
satisfactory to Landlord, Tenant and the Guarantor. The cost of any audit shall
be borne by Landlord.
17.3 General Operations. Tenant shall furnish to Landlord, not less
than seventy-five (75) days after the commencement of any Fiscal Year, proposed
annual budgets in a form consistent with the then standards for the same brand
of assisted living 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 then current Fiscal Year.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property at reasonable times of the day upon not less than
twenty-four (24) hours' Notice, and to make such repairs as Landlord is
permitted or required to make pursuant to the terms of this Agreement, provided
that any inspection or repair by Landlord or its representatives will not
unreasonably interfere with Tenant's use and operation of the Leased Property
and further provided that in the event of an emergency, as determined by
Landlord in its reasonable discretion, prior Notice shall not be necessary.
ARTICLE 19
ALTERNATIVE DISPUTE RESOLUTION
19.1 Negotiation. Any and all disputes or disagreements arising out of
or relating to Landlord's disapproval of any Building Estimate or any item
within any Building Estimate pursuant to Section 5.1.3 above, or Landlord's
obligations to disburse funds pursuant to Section 5.1.4(b), shall be resolved
through negotiations or, at the election of either party, if the dispute is not
so resolved within 30 days after Notice from either party commencing such
negotiations, through binding arbitration conducted in accordance with Section
19.2.
19.2 Arbitration.
(a) The party electing arbitration pursuant to Section 19.1
as a result of a dispute described in Section 5.1.3(d) or Section
5.1.4(b) shall give Notice to that effect to the other party and shall
in such Notice appoint an individual as arbitrator on its behalf.
Within 15 days after such Notice, the other party, by Notice to the
initiating party, shall appoint a second individual as arbitrator on
its behalf. The arbitrators thus appointed shall appoint a third
individual, and such three arbitrators shall as promptly as possible
determine such dispute; provided, however, that:
(i) if the second arbitrator shall not have been
appointed as aforesaid, the first arbitrator shall proceed
to determine such dispute; and
(ii) if the two (2) arbitrators appointed by the
parties shall be unable to agree, within 15 days after the
appointment of the second arbitrator, upon the appointment
of a third arbitrator, they shall give written Notice to the
parties of such failure to agree, and, if the parties fail
to agree upon the selection of a third arbitrator within 15
days after the arbitrators appointed by the parties give
Notice as aforesaid, then either of the parties upon Notice
to the other party may request such appointment by the then
Chief Judge of the United States District Court for the
District within the State in which the Leased Property is
located, or in such Judge's absence, refusal, failure or
inability to act, may apply for a court appointment of such
third arbitrator.
(b) Each arbitrator shall be a fit and impartial nationally
recognized consulting firm with at least ten years' experience in
consulting with owners, operators, lenders, and/or franchisors in the
operation of assisted living properties operated under nationally
recognized name brands.
(c) The arbitration shall be conducted within the State in
which the Leased Property is located and, to the extent consistent with
this Section 19.2, in accordance with the rules of the American
Arbitration Association. The arbitrators shall render their decision in
accordance with Section 5.1.3(d) or Section 5.1.4(b), as applicable,
upon the concurrence of at least two of their number, within 30 days
after the appointment of the third arbitrator (or, if only one
arbitrator, pursuant to 19.2(a)(i), then by such arbitrator within 45
days of his or her appointment). Such decision and award shall be in
writing and shall be final, binding and enforceable against the parties
and shall be non-appealable, and counterpart copies thereof shall be
delivered to each of the parties. In rendering such decision and award,
the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Agreement. Judgment may be had on the decision and
award of the arbitrator(s) so rendered in any court of competent
jurisdiction.
(d) Each party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such party, and the
fees and expenses of the third arbitrator (or the one arbitrator, if
only one arbitrator is appointed pursuant to Section 19.2(a)(i)) and
all other expenses of the arbitration (other than the fees and
disbursements of attorneys or witnesses for each party) shall be borne
by the parties equally.
ARTICLE 20
FACILITY MORTGAGES
20.1 Landlord May Grant Liens.
(a) Without the consent of Tenant but subject to the
provisions of Section 20.1(b), Landlord may, subject to the terms and
conditions set forth in this Section 20.1, from time to time, directly
or indirectly, create or otherwise cause to exist any lien, encumbrance
or title retention agreement ("Encumbrance") upon the Leased Property,
or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing, provided that any
such Encumbrance shall not secure a maximum principal amount in excess
of the greater of seventy five percent (75%) of the fair market value
of Landlord's interest in the Leased Property, or seventy five percent
(75%) of the Purchase Price (as defined in the Purchase Agreement) for
the Leased Property pursuant to the Purchase Agreement. Any such
Encumbrance shall provide (subject to Section 20.2) that it is subject
to the rights of Tenant under this Agreement. Landlord shall not cross
collateralize the Leased Property with any other property. Landlord
agrees not to enter into any Encumbrance that would allow the Facility
Mortgagee to apply any insurance proceeds or Award to the debt secured
by the Encumbrance but may enter into an Encumbrance that allows the
Facility Mortgagee to hold and disburse insurance proceeds or any Award
to be used, pursuant to the terms of this Agreement, to repair, rebuild
or restore the Leased Property according to usual and customary
procedures (which procedures shall be subject to Tenant's reasonable
approval) for disbursement of construction loan proceeds. For purposes
hereof, the fair market value of Landlord's interest in the Leased
Property shall be based only on the valuation of the rental or other
income owing to Landlord pursuant to the terms of this Agreement,
assuming this Agreement will remain in place in perpetuity regardless
of the expiration date thereof. Tenant may dispute the determination of
the fair market value of Landlord's interest in the Leased Property, in
which case the fair market value of Landlord's interest in the Leased
Property shall be determined by mutual agreement between two (2)
appraisers, each with at least ten (10) years of professional
experience as an appraiser of comparable assisted living facilities,
one appointed by Landlord and the other appointed by Tenant promptly
following Tenant's notice of dispute. If the two (2) appraisers so
appointed are unable to agree upon such fair market value within
forty-five (45) days after their appointment, then they shall promptly
appoint a third appraiser with like qualifications who shall complete
his appraisal within thirty (30) days after appointment, and the
decision of the third appraiser shall be final and binding on Landlord
and Tenant. The fees and expenses of each of the first two (2)
appraisers shall be paid by the party appointing the appraiser, and the
fees and expenses of the third appraiser, if appointed, shall be shared
equally by Landlord and Tenant.
(b) Prior to creating or otherwise causing to exist any
Encumbrance on the Leased Property, Landlord shall give Notice to
Tenant of its proposal with regard to an Encumbrance including
reasonably adequate information for Tenant to determine whether the
loan to value limitations set forth in Section 20.1(a) will be
satisfied.
20.2 Subordination of Lease. Subject to Section 20.1 and this Section
20.2, upon Notice from Landlord, Tenant shall execute and deliver an agreement,
in form and substance reasonably satisfactory to Landlord and Tenant,
subordinating this Agreement to any Encumbrance permitted pursuant to Section
20.1; provided, however, that such subordination shall be on the express
condition that the terms of this Agreement shall be recognized by the mortgagee
or holder of the deed of trust and any purchaser of the Leased Property at any
foreclosure sale (a "Successful Purchaser") and that such mortgagee, holder or
Successful Purchaser shall honor and be bound by this Agreement and that,
notwithstanding any default by Landlord under such Encumbrance or any
foreclosure thereof, Tenant's possession of the Leased Property and rights and
obligations under this Agreement shall not be affected thereby and this
Agreement shall not be terminated other than in accordance with its terms. The
foregoing agreements shall be binding on any purchaser of the Leased Property at
foreclosure. Any mortgage or deed of trust to which this Agreement is, at the
time referred to, subject and subordinate, is herein called "Superior Mortgage"
and the holder, trustee or beneficiary of a Superior Mortgage is herein called
"Superior Mortgagee". Tenant shall have no obligations under any Superior
Mortgage other than those expressly set forth in this Section 20.2. If any
Superior Mortgagee or the nominee or designee of any Superior Mortgagee or any
Successful Purchaser, shall succeed to the rights of Landlord under this
Agreement (any such person, "Successor Landlord"), whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise, such
Successor Landlord shall recognize Tenant's rights under this Agreement as
herein provided and Tenant shall attorn to and recognize the Successor Landlord
as Tenant's landlord under this Agreement and Tenant shall promptly execute and
deliver any instrument that such Successor Landlord may reasonably request to
evidence such attornment (provided that such instrument does not alter the terms
of this Agreement), whereupon, this Agreement shall continue in full force and
effect as a direct lease between the Successor Landlord and Tenant upon all of
the terms, conditions and covenants as are set forth in this Agreement, except
that the Successor Landlord (unless formerly the landlord under this Agreement
or its nominee or designee) shall not be (a) liable in any way to Tenant for any
act or omission, neglect or default on the part of any prior Landlord under this
Agreement, (b) responsible for any monies owing by or on deposit with any prior
Landlord to the credit of Tenant (except to the extent actually paid or
delivered to the Successor Landlord), (c) bound by any modification of this
Agreement subsequent to such Superior Mortgage, or by any previous prepayment of
Minimum Rent or Percentage Rent for more than one (1) month in advance of the
date due hereunder, which was not approved in writing by the Superior Mortgagee
thereto, (d) liable to Tenant beyond the Successor Landlord's interest in the
Leased Property and the rents, income, receipts, revenues, issues and profits
issuing from the Leased Property, or (e) required to remove any Person occupying
the Leased Property or any part thereof, except if such person claims by,
through or under the Successor Landlord; provided, however, that any offset
rights of Tenant pursuant to Section 14.3(a) that, prior thereto, accrued in
Tenant's favor shall continue and Tenant shall be entitled to offset the
remaining balance of such deficient amounts plus interest therein from the date
of funding at the Disbursement Rate against Rent payable by Tenant to such
Successor Landlord. Tenant agrees at any time and from time to time to execute a
suitable instrument in confirmation of Tenant's agreement to attorn, as
aforesaid and Landlord agrees to provide Tenant with an instrument of
nondisturbance and attornment from each such Superior Mortgagee in form and
substance reasonably satisfactory to Tenant. Notwithstanding the foregoing,
Landlord, any Successor Landlord and/or Superior Mortgagee shall be liable to
pay to Tenant any portions of insurance proceeds or Awards received by the
Landlord, Successor Landlord and/or Superior Mortgagee, respectively, and
required to be paid to Tenant or otherwise applied to the cost of repair,
restoration or rebuilding of the Leased Property pursuant to the terms of this
Agreement, and, as a condition to any mortgage, lien or lease in respect of the
Leased Property, and the subordination of this Agreement thereto, the mortgagee,
lienholder or lessor, as applicable, shall expressly agree, for the benefit of
Tenant, to make such payments, which agreement shall be embodied in an
instrument in form reasonably satisfactory to Tenant.
20.3 Notices. Subsequent to the receipt by Tenant of Notice from
Landlord as to the identity of any Facility Mortgagee which complies with
Section 20.1 (which Notice shall be accompanied by a copy of the applicable
mortgage or lease), no notice from Tenant to Landlord as to the Leased Property
shall be effective unless and until a copy of the same is given to such Facility
Mortgagee at the address set forth in the above described Notice, and the curing
of any of Landlord's defaults by such Facility Mortgagee shall be treated as
performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Leased Property and activities incidental
thereto 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 existence and its
rights and licenses necessary to conduct such business.
21.2 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account of Tenant in which full, true and correct entries
will be made of dealings and transactions in relation to the business and
affairs of Tenant and the Facility in accordance with GAAP. Provided Landlord
shall give to Tenant at least ten (10) Business Days written notice of
Landlord's desire to audit such accounts and records, Landlord, at its expense,
shall have the right to audit such accounts and records during normal business
hours. Not more than one (1) such audit shall be conducted within any twelve
(12) month period. Landlord shall keep in confidence all information which it
might gain or gather from the examination or audit of Tenant's accounts and
records, unless required to disclose such information pursuant to Applicable
Laws.
21.3 Certain Debt Prohibited. Tenant shall not incur any
Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord under this Agreement
or to Operator under the Operating Agreement;
(b) Indebtedness of Tenant in respect of loans, the proceeds
of which are used to pay amounts owed under this Agreement or the
Operating Agreement, and which are by their terms expressly subordinate
to the payment and performance of Tenant's obligations under this
Agreement;
(c) Indebtedness of Tenant for Impositions, to the extent
that payment thereof shall not at the time be required to be made in
accordance with the provisions of Article 8;
(d) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period
and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by
insurance payable to Tenant, or (iii) which are for an amount not in
excess of $750,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal
period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article
8, and in respect of which execution thereof shall have been stayed
pending such appeal or review;
(e) unsecured borrowings of Tenant from its Affiliated
Persons which are by their terms expressly subordinate to the payment
and performance of Tenant's obligations under this Agreement; or
(f) Indebtedness for purchase money financing and other
indebtedness incurred in the ordinary course of Tenant's business,
including the leasing of personal property;
21.4 Special Purpose Entity Requirements. Following any transfer
described in Section 16.1(c) and continuing for so long as Tenant is not an
Affiliated Person of Guarantor, Tenant shall comply with the following:
(a) Tenant will be a special purpose entity, either a
corporation, a limited partnership, or a limited liability company
whose purpose will be limited to leasing and operating the Leased
Property.
(b) Tenant's organizational documents shall limit the
ability to incur any Indebtedness except as permitted by Section 21.3.
(c) Tenant's organizational documents will provide that the
favorable vote of an independent director shall be required for the
following matters: (i) filing, or consenting to the filing of, a
bankruptcy or insolvency petition or otherwise instituting insolvency
proceedings; (ii) dissolution, liquidation, consolidation, merger or
sale of all or substantially all of its controlling assets (unless such
entity is merged or consolidated with, acquired by, or its assets are
sold to, Guarantor or an Affiliated Person of Guarantor); (iii)
engaging in any unrelated business activities; and (iv) amending its
organizational documents in a way that would change any of the
requirements provided herein.
(d) Tenant shall observe and maintain its business and
affairs separate and independent of the business and affairs of any
Affiliated Person of Tenant, including without limitation: (i)
maintaining books and records separate from any Affiliated Person of
Tenant; (ii) maintaining its accounts separate from any Affiliated
Person of Tenant; (iii) not co-mingling its assets with those of any
Affiliated Person of Tenant; (iv) conducting its own business in its
own name; (v) not guaranteeing, or becoming obliged for, debts for any
other Person or holding out its credit as being available to satisfy
the obligations of any other Person (except to the extent of
indemnities and other obligations, if any, arising under any Operating
Agreement or credit arrangements for the Leased Property or arising in
the ordinary course of its business); and (vi) using separate
stationery, invoices and checks.
21.5 Distributions, Payments to Affiliated Persons, Etc. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distributions if,
at the time of such proposed action, or immediately after giving effect thereto,
any Event of Default with respect to the payment of Rent shall have occurred and
be continuing; provided, however, that Tenant may resume making such
Distributions if (i) Landlord shall not commence, within ninety (90) days after
Notice by Landlord to Tenant of the occurrence of any such Event of Default, to
enforce its rights and remedies arising on account of such Event of Default with
respect to the payment of Rent, and diligently pursue enforcement of such rights
and remedies thereafter, and (ii) no other Event of Default (i.e., an Event of
Default arising from a cause other than the non-payment of Rent) has occurred as
to which Landlord has commenced enforcing and is continuously and diligently
pursuing the enforcement of its rights and remedies arising on account of any
such Event of Default.
21.6 Compliance with Operating Agreement. Tenant shall substantially
comply with all material terms and provisions of the Operating Agreement (or any
replacement thereof) to be complied with by Tenant, subject to Tenant's right to
pursue all available remedies, at law and in equity, with respect to any alleged
default by Tenant in the performance of its duties and obligations under the
Operating Agreement, or otherwise contest, in good faith and with due diligence,
any such alleged default by Tenant; provided, however, that in the event of any
casualty or condemnation or other event or circumstances, Tenant shall not be
obligated to expend its own funds in excess of such amounts that Tenant would be
obligated pursuant to the Lease to expend under such event or circumstances.
Unless required by Applicable Laws, Tenant shall not enter into any
modifications or amendments of the Operating Agreement, nor, except as otherwise
expressly set forth in this Agreement or the Owner Agreement, terminate the same
prior to the expiration thereof, without Landlord's prior written consent; nor
shall Tenant enter into any replacement of the Operating Agreement without
Landlord's prior written consent. To the extent required by this Section 21.6,
Landlord's consent shall not be unreasonably withheld or conditioned so long as
any such modification, amendment, termination or replacement of the Operating
Agreement does not materially and adversely affect the duties and obligations of
the parties thereunder. Notwithstanding the foregoing, in the event that the
Operating Agreement is terminated by reason of a default by the Operator
thereunder, Landlord shall not unreasonably withhold or condition its consent to
the selection by Tenant of another Operator with experience in the assisted
living facility business and the execution of a new Operating Agreement in form
and substance satisfactory to Tenant and such new Operator. To the extent Tenant
receives any notices, budgets, reports or other documents or materials from the
Operator that the Operator is required to provide to Tenant pursuant to the
Operating Agreement, Tenant will promptly forward a copy of the same to Landlord
if the Operator has not sent the same to Landlord.
ARTICLE 22
MISCELLANEOUS
22.1 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.
22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by 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 or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.
22.4 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.
22.5 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.
22.6 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.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms of this Agreement (specifically
including Article 15) other than as security for a debt, and the grantee or
transferee of such of the Leased Property shall expressly assume all obligations
of Landlord hereunder arising or accruing from and after the date of such
conveyance or transfer, Landlord or such successor owner, as the case may be,
shall thereupon be released from all future liabilities and obligations of
Landlord under this Agreement with respect to such of the Leased Property
arising or accruing from and after the date of such conveyance or other transfer
and all such future liabilities and obligations shall thereupon be binding upon
the new owner.
22.8 Quiet Enjoyment. Provided that no Event of Default shall have
occurred and be continuing, Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate the Facility and (d) liens that have
been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant the right to cancel or terminate this Agreement or ▇▇▇▇▇, reduce or
make a deduction from or offset against the Rent or any other sum payable under
this Agreement, or to fail to perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the State in which reference to this Agreement,
and all options contained herein, shall be made. The parties shall share equally
all costs and expenses of recording such memorandum; provided, however, that in
no event shall the non-requesting party's share of such recording costs and
expenses exceed $25,000.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under
this Agreement shall be deemed adequately given if in writing and the
same shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with return receipt requested (if
by mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
CNL Health Care Partners, LP
CNL Center at City Commons
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ or Chief Operating Officer
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Lowndes Drosdick ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
if to Tenant to:
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇. 52-924.04
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Treasury
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Marriott International, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇. 52/923.24
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Law Department
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
(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.
22.11 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. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated except by an instrument in writing signed by
all the parties thereto. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Each term or provision of this Agreement to be
performed by Tenant shall be construed as an independent covenant and condition.
Time is of the essence with respect to the exercise of any rights of Tenant or
Landlord under this Agreement. Except as otherwise set forth in this Agreement,
any obligations arising prior to the expiration or sooner termination of this
Agreement of Tenant (including without limitation, any monetary, repair and
indemnification obligations) and Landlord shall survive the expiration or sooner
termination of this Agreement; provided, however, that each party shall be
required to give the other Notice of any such surviving and unsatisfied
obligations within one year after the expiration or sooner termination of this
Agreement. Except as otherwise expressly provided with respect to the Security
Deposit, nothing contained in this Agreement shall be construed to create or
impose any liabilities or obligations and no such liabilities or obligations
shall be imposed on any of the shareholders, beneficial owners, direct or
indirect, officers, directors, trustees, employees or agents of Landlord or
Tenant for the payment or performance of the obligations or liabilities of
Landlord or Tenant hereunder. Further, in the event Landlord shall be in default
under this Agreement, and if as a consequence of such default, Tenant shall
recover a money judgment against Landlord, such judgment shall be satisfied only
out of the proceeds of sale received upon execution of such judgment against the
right, title and interest of Landlord in the Leased Property; provided, however,
that nothing herein shall be construed or operate to affect or diminish in any
way whatsoever the liability of CHCLP and/or CHCP under the CHCLP and CHCP
Guaranty for such deficiency and/or the full performance of Landlord's
obligations under this Agreement.
22.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
22.13 Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
applicable to contracts between residents of the State which are to be performed
entirely within the State, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or jurisdiction
of organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any
action to enforce, arising out of, or relating in any way to, any of the
provisions of this Agreement may be brought and prosecuted in such court or
courts located in the State as is provided by law; and the parties consent to
the jurisdiction of said court or courts located in the State and to service of
process by registered mail, return receipt requested, or by any other manner
provided by law.
22.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
22.15 Disclosure of Information.
(a) Any Proprietary Information obtained by Landlord with
respect to Tenant pursuant to the provisions of this Agreement shall be
treated as confidential, except that such information may be used,
subject to confidentiality safeguards mutually acceptable to Landlord
and Tenant, in any litigation between the parties and except further
that, subject to the terms of Section 22.16, Landlord may disclose such
information to its prospective lenders, provided that Landlord shall
direct and obtain the agreement of such lenders to maintain such
information as confidential.
(b) The parties hereto agree that the matters set forth in
this Agreement and any revenue, expense, net profit, fee rates and
occupancy information provided by Tenant or any of its Affiliated
Persons are strictly confidential and each party will make every effort
to ensure that the information is not disclosed to any Person that is
not an Affiliated Person as to any party (including the press) without
the prior written consent of the other party, except as may be required
by law and as may be reasonably necessary to obtain licenses, permits
and other public approvals necessary for the refurbishment or operation
of the Facility, or, subject to the restrictions of Section 22.15(c)
relative to the contents of any Prospectus, in connection with a
Landlord financing, a sale of the Facility, or a sale of a controlling
interest in Landlord, Tenant or the Guarantor.
(c) No reference to Tenant or any of its Affiliated Persons
will be made in any prospectus, private placement memorandum, offering
circular or offering documentation related thereto (collectively, the
"Prospectus"), issued by Landlord or any of its Affiliated Persons,
which is designed to interest potential investors in the Facility,
unless Tenant has previously received a copy of all such references. No
Prospectus shall include fee rate and occupancy data or revenue,
expense or net profit information pertaining to the Facility.
Regardless of whether Tenant so receives a copy of the Prospectus,
neither Tenant nor its Affiliated Persons will be deemed a sponsor of
the offering described in the Prospectus, nor will it have any
responsibility for the Prospectus, and the Prospectus will so state.
Unless Tenant agrees in advance, the Prospectus will not include any
trademark, symbols, logos or designs of Tenant or any of its Affiliated
Persons. Landlord shall indemnify, defend and hold Tenant harmless from
and against all loss, costs, liability and damage (including reasonable
attorneys' fees and expenses, and all cost of litigation) arising out
of any Prospectus or the offering described therein; and this
obligation of Landlord shall survive termination of this Agreement.
(d) The obligations of Tenant and Landlord contained in this
Section 22.15 shall survive the expiration or earlier termination of
this Agreement and shall supersede any previous agreement or letter
between the parties regarding the substance of this Section 22.15.
22.16 Trademarks, Trade Names and Service Marks.
(a) The names "Marriott" and "Brighton Gardens" (each of the
foregoing names, together with any combination thereof, collectively,
the "Trade Names") when used alone or in connection with another word
or words, and the Marriott and Brighton Gardens trademarks, service
marks, other trade names, symbols, logos and designs shall in all
events remain the exclusive property of Guarantor or its Affiliated
Persons, and nothing contained in this Agreement shall confer on
Landlord the right to use any of the Trade Names, or the Marriott or
Brighton Gardens trademarks, service marks, other trade names, symbols,
logos or designs other than in strict accordance with the terms of this
Agreement. Upon termination of this Agreement, any use of or right to
use any of the Trade Names, or any of the Marriott or Brighton Gardens
trademarks, service marks, other trade names, symbols, logos or designs
by Landlord shall be governed by the Operating Agreement and/or Owner
Agreement, upon termination of this Agreement, and, if the Operating
Agreement or a replacement Operating Agreement will not remain in
effect, Landlord shall promptly remove from the Facility any signs or
similar items which contain any of the Trade Names, trademarks, service
marks, other trade names, symbols, logos or designs. If Landlord has
not removed such signs or similar items within ten (10) Business Days
after termination of this Agreement, Tenant shall have the right to do
so at Landlord's expense. Included under the terms of this section are
all trademarks, service marks, trade names, symbols, logos or designs
used in conjunction with the Facility, whether or not the marks contain
the "Marriott" name or the "Brighton Gardens" name. The right to use
such trademarks, service marks, trade names, symbols, logos or designs
belongs exclusively to Tenant and its Affiliated Persons, and the use
thereof inures to the benefit of Tenant and its Affiliated Persons
whether or not the same are registered and regardless of the source of
the same. The provisions of this Section 22.16(a) shall survive
termination of this Agreement.
(b) Any computer software (including upgrades and
replacements) at the Facility owned by Tenant or any of its Affiliated
Persons, or the licensor of any of them is proprietary to Tenant or any
of its Affiliated Persons, or the licensor of any of them and shall in
all events remain the exclusive property of Tenant or any of its
Affiliated Persons or the licensor of any of them, as the case may be,
and nothing contained in this Agreement shall confer on Landlord the
right to use any of such software. Tenant shall have the right to
remove from the Facility without compensation to Landlord any computer
software (including upgrades and replacements), including, without
limitation, the system software, owned by Tenant or any of its
Affiliated Persons or the licensor of any of them. Further, upon
termination of this Agreement, Tenant shall be entitled to remove from
the Facility without compensation to Landlord any computer equipment
utilized as part of a centralized reservation system or owned by a
party other than the Landlord.
22.17 Competing Facilities. Neither this Agreement nor anything implied by the
relationship between Landlord and Tenant shall prohibit any of the Marriott
Companies from constructing, operating, promoting, and/or authorizing others to
construct, operate, or promote one or more assisted living facilities or any
other business operations of any type, at any location, including a location
proximate to the Land. Landlord acknowledges, accepts and agrees further that
the Marriott Companies retain the right, from time to time, to construct or
operate, or both, or promote or acquire, or authorize or otherwise license
others to construct or operate, or both, or promote or acquire any assisted
living facilities or other business operations of any type whatsoever,
including, but not by way of limitation, those listed above, at any location
including one or more sites which may be adjacent, adjoining or proximate to the
Land, which business operations may be in direct competition with the Leased
Improvements and that any such exercise may adversely affect the operation of
the Leased Improvements.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
CNL HEALTH CARE PARTNERS, LP,
a Delaware limited partnership
By: CNL Health Care GP Corp.,
a Delaware corporation,
general partner
By: _____________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President
TENANT:
BG ORLAND PARK, LLC,
a Delaware limited liability company
By: Marriott Senior Living Services, Inc.,
its sole Member
By: _____________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Agent
EXHIBIT A
Minimum Rent
DURING THE PERIOD FROM THE COMMENCEMENT DATE TO THE LAST DAY OF THE ACCOUNTING
PERIOD IN WHICH THE THRESHOLD ACHIEVEMENT DATE OCCURS, THE MINIMUM RENT FOR EACH
ACCOUNTING PERIOD SHALL BE ONE HUNDRED THREE THOUSAND EIGHT HUNDRED SIXTY-SIX
DOLLARS AND SEVENTY-FIVE CENTS ($103,866.75).
DURING THE PERIOD FROM THE FIRST DAY OF THE FIRST ACCOUNTING PERIOD FOLLOWING
THE THRESHOLD ACHIEVEMENT DATE AND CONTINUING THEREAFTER, THE MINIMUM RENT FOR
EACH ACCOUNTING PERIOD SHALL BE ONE HUNDRED SIX THOUSAND FIVE HUNDRED THIRTY
DOLLARS ($106,530).
FOR PURPOSES HEREOF, THE THRESHOLD ACHIEVEMENT DATE SHALL MEAN THE LAST DAY OF
THE SECOND FULL ACCOUNTING YEAR.
EXHIBIT B
The Land
LOT 1 IN MARRIOTT'S BRIGHTON GARDENS OF ORLAND PARK, A SUBDIVISION OF PART OF
THE NORTHWEST 1/4 OF THE NORTHWEST 1/4 OF SECTION 22, TOWNSHIP 36 NORTH, RANGE
12, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED
JULY 22, 1998 AS DOCUMENT 98638801, IN ▇▇▇▇ COUNTY, ILLINOIS.
C - 2
EXHIBIT C
PROPERTY EXPENSES
"Property Expenses" shall mean any or all, as the context requires,
of the following:
1. All costs of operating the Facility incurred in accordance
with this Agreement, including, without limitation, all salaries, wages, fringe
benefits, payroll taxes and other costs related to the Facility's employees,
Employee Claims (as defined in the Operating Agreement except to the extent
specifically set forth to the contrary in Section 14.01 of the Operating
Agreement), all departmental expenses, administrative and general expenses, the
cost of advertising and business promotion for the Facility, heat, light, power,
electricity, gas, telephone, cable and other utilities, and routine repairs,
maintenance and minor alterations that are not the type of expenditures payable
out of the Reserve;
2. The cost of Inventories and FAS consumed in the
operation of the Facility;
3. A reasonable reserve for uncollectible accounts
receivable as determined by the Operator under the Operating Agreement;
4. All reasonable costs and fees of audit, legal, technical
and other independent professionals or other third parties who are retained by
Tenant or are retained by Operator to perform services required or permitted
under the Operating Agreement;
5. The reasonable cost and expense of technical consultants
and operational experts who are employees of Operator or one of its Affiliates,
and who perform specialized services in connection with non-routine Facility
work; provided, however, that the costs and expenses so incurred shall only be
Property Expenses to the extent such costs and expenses are reasonable and
competitively priced, as compared to similar work done by outside consultants or
experts;
6. Costs and expenses for preparation of Medicare and
Medicaid cost reports and billing
submissions;
7. The Base Fee payable under the Operating Agreement;
8. The Central Administrative Services Fee payable
under the Operating Agreement;
9. Insurance costs and expenses as provided in
Article 12;
10. All Additional Charges;
11. Payments into the Reserve pursuant to Section 5.1.2;
12. Such other non-capital costs and expenses incurred by
Tenant or Operator as are specifically provided for elsewhere in this Agreement
or are otherwise reasonably necessary for the proper and efficient operation of
the Facility in accordance with the System Standards; all as determined in
accordance with GAAP;
13. Lease payments for any lease of shuttle vans or
communications equipment; and
14. All other payments required to be paid by Tenant
pursuant to this Agreement.
15. All other amounts treated as "Operating
Expenses" under the provisions of the Operating Agreement.
It is understood that the term "Property Expenses" shall not
include: (i) debt service payments pursuant to any Encumbrance or any other
loans or borrowings of Landlord; nor (ii) except as set forth above, payments
pursuant to equipment leases or other forms of financing obtained for the
furniture, fixtures and equipment located in or connected with the Facility
(such payments shall be paid out of the Reserve in accordance with Section
5.1.2), nor (iii) rental payments pursuant to any ground lease, nor (iv) any
other payments which are designated as Landlord's responsibility under any of
the provisions of this Agreement, all of which shall be paid by Landlord from
its own funds, and not from Total Facility Revenues nor from the Reserve. Unless
otherwise specifically set forth in this Agreement, all the costs and expenses
of the Facility shall be Operating Expenses.