EXHIBIT 10.51
Lease Agreement between
CNL Retirement MA2 Arkansas, LP and
Eight Pack Management Corp. dated December 20, 2002, relating to
the ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
LEASE AGREEMENT
by and between
CNL RETIREMENT MA2 ARKANSAS, LP
a Delaware limited partnership,
(as "Landlord"),
and
EIGHT PACK MANAGEMENT CORP., a Delaware corporation,
(as "Tenant")
for
The Pleasant Hills
Senior Living Community
at Little Rock, Arkansas
DATED AS OF DECEMBER 20, 2002
TABLE OF CONTENTS
I. DEFINITIONS...................................................................................................1
II. LEASED PROPERTY AND TERM....................................................................................13
Section 2.1 Leased Property..................................................................13
Section 2.2 Condition of Leased Property.....................................................13
Section 2.3 Fixed Term.......................................................................14
Section 2.4 Extended Term....................................................................14
III. RENT.......................................................................................................15
Section 3.1 Rent.............................................................................15
Section 3.2 Late Payment of Rent, Etc........................................................18
Section 3.3 Net Lease........................................................................18
IV. USE OF THE LEASED PROPERTY..................................................................................19
Section 4.1 Permitted Use....................................................................19
Section 4.2 Necessary Approvals..............................................................20
Section 4.3 Lawful Use, Etc..................................................................20
Section 4.4 Compliance with Legal/Insurance Requirements, Etc................................20
Section 4.5 Environmental Matters............................................................20
Section 4.6 Title Encumbrances...............................................................22
V. MAINTENANCE AND REPAIRS......................................................................................23
Section 5.1 Maintenance and Repair...........................................................23
Section 5.2 Tenant's Personal Property.......................................................28
Section 5.3 Yield Up.........................................................................28
VI. IMPROVEMENTS, ETC...........................................................................................29
Section 6.1 Improvements to the Leased Property..............................................29
Section 6.2 Salvage..........................................................................29
Section 6.3 Equipment Leases.................................................................29
VII. LIENS......................................................................................................30
VIII. PERMITTED CONTESTS........................................................................................30
IX. INSURANCE...................................................................................................31
Section 9.1 General Insurance Requirements...................................................31
Section 9.2 General Insurance Provisions.....................................................33
Section 9.3 Costs and Expenses...............................................................34
Section 9.4 Indemnification of Landlord......................................................34
Section 9.5 Indemnification of Tenant........................................................35
Section 9.6 Limitation on Liability..........................................................35
X. CASUALTY.....................................................................................................35
Section 10.1 Damage and Repair................................................................35
Section 10.2 Tenant's Property................................................................37
Section 10.3 Restoration of Tenant's Property.................................................37
Section 10.4 No Abatement of Rent.............................................................37
Section 10.5 Waiver...........................................................................37
XI. CONDEMNATION................................................................................................37
Section 11.1 Total Condemnation, Etc..........................................................37
Section 11.2 Partial Condemnation.............................................................38
Section 11.3 Disbursement of Award............................................................38
Section 11.4 Abatement of Rent................................................................38
XII. DEFAULTS AND REMEDIES......................................................................................38
Section 12.1 Events of Default................................................................38
Section 12.2 Remedies.........................................................................40
Section 12.3 Waiver of Jury Trial.............................................................42
Section 12.4 Application of Funds.............................................................42
Section 12.5 Landlord's Right to Cure Tenant's Default........................................42
Section 12.6 Good Faith Dispute...............................................................42
XIII. HOLDING OVER..............................................................................................43
XIV. LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT............................................................43
Section 14.1 Landlord Notice Obligation.......................................................43
Section 14.2 Landlord's Default...............................................................43
XV. TRANSFERS OR TERMINATION BY LANDLORD OR TENANT..............................................................44
Section 15.1 Transfer by Landlord of Leased Property..........................................44
Section 15.2 Termination of Agreement by Landlord.............................................44
XVI. SUBLETTING AND ASSIGNMENT..................................................................................45
Section 16.1 Subletting and Assignment........................................................45
Section 16.2 Required Sublease Provisions.....................................................46
Section 16.3 Permitted Sublease and Assignment................................................47
Section 16.4 Sublease Limitation..............................................................47
XVII. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS............................................................47
Section 17.1 Estoppel Certificates............................................................47
Section 17.2 Financial Statements.............................................................48
Section 17.3 General Operations...............................................................48
XVIII. LANDLORD'S RIGHT TO INSPECT..............................................................................48
XIX. FACILITY MORTGAGES.........................................................................................49
Section 19.1 Landlord May ▇▇▇▇▇ ▇▇▇▇..........................................................49
Section 19.2 Subordination of Lease...........................................................49
Section 19.3 Notices..........................................................................49
XX. ADDITIONAL COVENANTS OF TENANT..............................................................................49
Section 20.1 Conduct of Business..............................................................49
Section 20.2 Maintenance of Accounts and Records..............................................50
Section 20.3 Distributions, Payments to Affiliates, Etc.......................................50
Section 20.4 Compliance with Operating Agreement..............................................51
XXI. MISCELLANEOUS..............................................................................................52
Section 21.1 Limitation on Payment of Rent....................................................52
Section 21.2 No Waiver........................................................................52
Section 21.3 Remedies Cumulative..............................................................52
Section 21.4 Severability.....................................................................53
Section 21.5 Acceptance of Surrender..........................................................53
Section 21.6 No Merger of Title...............................................................53
Section 21.7 Conveyance by Landlord...........................................................53
Section 21.8 Quiet Enjoyment..................................................................53
Section 21.9 Memorandum of Lease..............................................................54
Section 21.10 Notices..........................................................................54
Section 21.11 Construction; Non-recourse.......................................................56
Section 21.12 Counterparts; Headings...........................................................56
Section 21.13 Applicable Law, Etc..............................................................56
Section 21.14 Right to Make Agreement..........................................................57
Section 21.15 Disclosure of Information........................................................57
Section 21.16 Competing Facilities.............................................................58
EXHIBITS
A- Minimum Rent
B- Other Leases
C- The Land
D- Property Expenses
E- Existing Title Encumbrances
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this _____ day of December,
2002, by and between CNL RETIREMENT MA2 ARKANSAS, LP, a Delaware limited
partnership, as landlord ("Landlord"), and EIGHT PACK MANAGEMENT CORP., a
Delaware corporation, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord has acquired fee simple title to the Leased Property
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article I) which is improved as an
assisted living 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:
I. DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article I shall have the meanings assigned to them in this Article and include
the plural as well as the singular, (ii) all accounting terms not otherwise
defined herein shall have the meanings assigned to them in accordance with GAAP,
(iii) all references in this Agreement to designated "Articles," "Sections" and
other subdivisions are to the designated Articles, Sections and other
subdivisions of this Agreement, and (iv) the words "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision.
"Accounting Period" shall mean each four (4) week accounting period of
Operator, except that an Accounting Period may, from time to time, include five
(5) weeks in order to conform Operator's accounting system to Operator's Fiscal
Year. If Operator 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 Additional 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 Operator's four (4) week accounting periods, the
first Accounting Period under this Lease shall consist of the first four (4)
week accounting period of Operator 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.
"Additional Rent" shall mean that amount, if any, by which (A) the
product of (i) fourteen percent (14%), multiplied by (ii) the sum of Landlord's
Computation Basis and Landlord's Additional Investment, exceeds (B) Minimum Rent
for each Fiscal Quarter.
"Affiliate(s)" means any individual or entity directly or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with a party. The term "control," as used in the immediately preceding
sentence, means, with respect to a corporation, the right to the exercise,
directly or indirectly, of more than fifty percent (50%) of the voting rights
attributable to the shares of the controlled corporation, and, with respect to
an entity that is not a corporation, the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of the
controlled entity.
"Agreement" shall mean this Lease Agreement, including all Exhibits
hereto, as it and they may be amended from time to time as herein provided.
"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 first (1st)
full Accounting Year, (ii) two percent (2%), with respect to the second (2nd)
through fifth (5th) full Accounting Years, (iii) three percent (3%) with respect
to the sixth (6th) through seventeenth (17th) 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 or Tenant in connection with obtaining any such award).
"Business Day(s)" means Monday through Friday except for New Year's
Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day.
"Calculation Period" shall mean each successive period of thirteen (13)
consecutive Accounting Periods commencing with the first Accounting Period
following the Commencement Date.
"Capital Expenditure" shall mean expenditures necessary for major
repairs, alterations, improvements, renewals and replacements to the structure
or exterior facade of the Facility, or to the mechanical, electrical, heating,
ventilating, air conditioning, plumbing, or vertical transportation elements of
the Facility, or required under Section 4.4, 4.5 or Article VIII to the extent
not payable as an Operating Expense under the Operating Agreement and any other
repair and maintenance expenditures which are not 802 Expenditures under the
Operating Agreement.
"Case Goods" shall mean furniture and furnishings used in the Facility,
including, without limitation: chairs, beds, chests, headboards, desks, lamps,
tables, television sets, mirrors, pictures, wall decorations and similar items.
"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.
"CNLRP" shall mean CNL Retirement Partners, LP, a Delaware limited
partnership.
"Claim" shall have the meaning given such term in Article VIII.
"Code" shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as amended
from time to time.
"Collective Leased Properties" shall mean, collectively, the Leased
Property and every other Leased Property (as defined therein) under the Other
Leases, but shall in any event exclude any Leased Property with respect to which
the applicable Other Lease has been terminated pursuant to its terms.
"Commencement Date" shall mean the date of this Agreement.
"Competitor" shall mean a Person that owns or has an equity interest in
an assisted living facility and/or senior living facility brand, trade name,
system or chain (a "Brand") which comprises at least ten (10) assisted living
facilities and/or senior living facilities; provided that such Person shall not
be deemed a Competitor if it holds its interest in a Brand merely as a mere
passive investor that has no control or influence over the business decisions of
the Brand at issue, such as a mere limited partner in a partnership, a mere
shareholder in a corporation or a mere payee of royalties based on a prior sale
transaction. A mere passive investor that is represented by a Mere Director on
the board of directors of a Competitor shall not be deemed to have control or
influence over the business decisions of that Competitor.
"Condemnation" shall mean (a) the exercise of any governmental power
with respect to the Leased Property, whether by legal proceedings or otherwise,
by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer of
the Leased Property by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting the
Leased Property, whether or not the same shall have actually been commenced.
"Condemnor" shall mean any public or quasi-public authority, or Person
having the power of Condemnation.
"Controlling Interest" shall mean with respect to a corporation, the
right to the exercise, directly or indirectly, of more than fifty percent (50%)
of the voting rights attributable to the shares of the controlled corporation,
and, with respect to an entity that is not a corporation, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of the controlled entity.
"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
Prime Rate plus one percentage point (1%).
"Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, if Tenant is a
corporation, or any cash distributions in respect of any partnership or
membership interests in Tenant, if Tenant is a partnership or limited liability
company, (b) any purchase, redemption, retirement or other acquisition of any
shares of any class of capital stock of Tenant, if Tenant is a corporation, or
any purchase, redemption, retirement or other acquisition of any partnership or
membership interests in Tenant, if Tenant is a partnership or limited liability
company, (c) any other distribution on or in respect of any shares of any class
of capital stock of Tenant, if Tenant is a corporation, or any other
distribution in respect of any partnership or membership interests in Tenant, if
Tenant is a partnership or a limited liability company, or (d) any return of
capital to shareholders of Tenant, if Tenant is a corporation, or any return of
capital to partners or members in Tenant, if Tenant is a partnership or limited
liability company.
"Emergency Requirements" shall mean any of the following events or
circumstances: (i) an emergency threatening the Retirement Community, or the
life or property of its residents, invitees or employees; (ii) a Legal
Requirement; (iii) a condition, the continuation of which is likely to subject
Landlord or the Tenant, or the Operator during the term of the Operating
Agreement, to civil or criminal liability; or (iv) a Force Majeure event that
prevents Tenant, or Operator while the Operating Agreement is in effect, from
managing or operating the Retirement Community pursuant to industry standards
and/or the standards set forth in the Operating Agreement, if applicable.
"Encumbrance" shall have the meaning given such term in Section 19.1.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, limited liability partnership, stock company or
association, joint venture, company, trust, bank, trust company, land trust,
business trust, cooperative, any government or agency or political subdivision
thereof or any other entity.
"Environment" shall mean soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"Environmental Law(s)" shall mean: (i) the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., as
now or hereafter amended and the Resource Conservation and Recovery Act of 1976,
as now or hereafter amended; (ii) the regulations promulgated thereunder, from
time to time; and (iii) all federal, state and local laws, rules and regulations
(now or hereafter in effect) dealing with the use, generation, treatment,
management, storage, disposal or abatement of Hazardous Substances or protection
of human health or the environment.
"Environmental Notice" shall have the meaning given such term in
Section 4.5.1.
"Environmental Obligation" shall have the meaning given such term in
Section 4.5.1.
"Event of Default" shall have the meaning given such term in Section
12.1.
"Existing Title Encumbrances" shall mean as of the Commencement Date,
the Title Encumbrances as identified on Exhibit "E" attached hereto and by this
reference incorporated herein.
"Extended Terms" shall have the meaning given such term in Section 2.4.
"Facility" shall mean the assisted living facility being operated on
the Leased Property.
"Facility Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article XIX.
"Facility Mortgagee" shall mean the holder of any Facility Mortgage.
"FAS" shall mean items included within "Property and Equipment" under
GAAP, including, but not limited to, linen, china, glassware, silver, uniforms,
and similar items, whether used in connection with public space or in resident
rooms.
"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 Operator, each such fiscal
year to consist of thirteen Accounting Periods. If Operator 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 systems,
facsimile machines, communications and computer systems hardware) but shall not
include FAS or any Software.
"Fixtures" shall have the meaning given such term in Section 2.1(d).
"Force Majeure" means acts of God, acts of war, civil disturbance,
governmental action (including the revocation or refusal to grant licenses or
permits, where such revocation or refusal is not due to the fault of the party
whose performance is to be excused for reasons of Force Majeure), strikes,
lockouts, fire, unavoidable casualties or any other causes beyond the reasonable
control of either party.
"Future Title Encumbrances" shall have the meaning given such term in
Section 4.6.2.
"GAAP" means Generally Accepted Accounting Principles as adopted by the
American Institute of Certified Public Accountants.
"GDP Deflator" shall mean the "Gross Domestic Product Implicit Price
Deflator" issued from time to time by the United States Bureau of Economic
Analysis of the Department of Commerce, or if the aforesaid GDP Deflator is not
at such time so prepared and published, any comparable index selected by Tenant
and reasonably satisfactory to Operator, if the Operating Agreement is in effect
and to Landlord, (a "Substitute Index") then prepared and published by an agency
of the Government of the United States, appropriately adjusted for changes in
the manner in which such index is prepared and/or year upon which such index is
based. Except as otherwise expressly stated herein, whenever a number or amount
is required to be "adjusted by the GDP Deflator," or similar terminology, such
adjustment shall be equal to the percentage increase or decrease in the GDP
Deflator which is issued for the month in which such adjustment is to be made
(or, if the GDP Deflator for such month is not yet publicly available, the GDP
Deflator for the most recent month for which the GDP Deflator is publicly
available) as compared to the GDP Deflator which was issued for the month in
which the Commencement Date occurred.
"Government Agencies" shall mean any court, agency, authority, board
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or the Retirement Community operated
thereon.
"Hazardous Substances" shall mean and include, biocontaminants, such as
mold, and any substance or material containing one or more of any of the
following: "hazardous material," "hazardous waste," "hazardous substance,"
"regulated substance," "petroleum," "pollutant," "contaminant," or "asbestos" as
such terms are defined in any applicable Environmental Law in such
concentration(s) or amount(s) as may impose clean-up, removal, monitoring or
other responsibility under the Environmental Laws, as the same may be amended
from time to time, or which may present a significant risk of harm to residents,
invitees or employees of the Retirement Community.
"Impositions" means all real estate and personal property taxes,
levies, assessments and similar charges including, without limitation, the
following: all water, sewer or similar fees, rents, rates, charges, excises or
levies; vault license fees or rentals; License fees; inspection fees and other
authorization fees and other governmental charges of any kind or nature
whatsoever, whether general or special, ordinary or extraordinary, foreseen or
unforeseen, or hereinafter levied or assessed of every character (including all
interest and penalties thereon), which at any time during or in respect of the
Term of this Agreement may be assessed, levied, confirmed or imposed on
Landlord, Tenant or Operator with respect to the Retirement Community or the
operation thereof, or otherwise in respect of or be a lien upon the Retirement
Community (including, without limitation on any of the FF&E, Inventories or FAS
now or hereafter located therein). Impositions shall not include any franchise,
corporate, estate, inheritance, succession, capital levy or transfer tax imposed
on Landlord or Tenant, or any income tax imposed on any income of Landlord or
Tenant (including the Rent payable pursuant to this Agreement and any
distributions to Landlord pursuant to Section 9.01 of the Operating Agreement),
all of which shall be paid solely by Landlord or Tenant as the recipient of such
income, not from Total Facility Revenues nor from the FF&E Reserve.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and regulations and any other requirements of the National
Board of Fire Underwriters (or any other body exercising similar functions)
binding upon Landlord, Tenant or the Leased Property.
"Interest Rate" shall mean ten percent (10%) per annum.
"Inventories" means "Inventories" as defined by GAAP such as, but not
limited to, provisions in storerooms, refrigerators, pantries and kitchens;
medical supplies; other merchandise intended for sale; fuel; mechanical
supplies; stationery; and other expensed supplies and similar items.
"Land" shall have the meaning given such term in Section 2.1(a).
"Landlord" shall have the meaning given such term in the preambles to
this Agreement and shall include its permitted successors and assigns.
"Landlord Default" shall have the meaning given such term in Section
14.2.
"Landlord Liens" shall mean liens on or against the Leased Property or
any payment of Rent (a) which result from any act of, or any claim against,
Landlord or any owner (other than Tenant) of a direct or indirect interest in
the Leased Property, or which result from any violation by Landlord of any terms
of this Agreement or the Purchase Agreement, or (b) which result from liens in
favor of any taxing authority by reason of any tax owed by Landlord or any fee
owner of a direct or indirect interest in the Leased Property; provided,
however, that "Landlord Lien" shall not include any lien resulting from any tax
for which Tenant is obligated to pay or indemnify Landlord against until such
time as Tenant shall have already paid to or on behalf of Landlord the tax or
the required indemnity with respect to the same.
"Landlord's Additional Investment" shall mean the cost of any repairs,
maintenance, renovations or replacements pursuant to (x) Sections 5.1.3(b),
Section 5.1.5(b)(ii), Section 5.1.5(b)(iii) or Section 11.2, or funded by
Landlord from Landlord's own funds in accordance with Section 8.03 of the
Operating Agreement, if the Operating Agreement is in effect, and not paid out
of Total Facility Revenues, from the Reserve or from insurance proceeds and (y)
the cost of any repairs or replacements funded by Landlord from Landlord's own
funds pursuant to Section 10.1.1 by reason of insufficient insurance proceeds.
"Landlord's Computation Basis" is Ten Million Seven Hundred Forty-Five
Thousand Three Hundred Seven and No/100 Dollars ($10,745,307.00), plus,
twenty-nine and 17/100 percent (29.17%) of Third Party Costs incurred subsequent
to Closing with respect to all of the properties that are the subject of the
Purchase Agreement.
"Lease Rate" shall have the meaning given such term in Exhibit "A-1".
"Lease Year" shall mean any Fiscal Year during the Term and any partial
Fiscal Year at the beginning or end of the Term.
"Leased Improvements" shall have the meaning given such term in Section
2.1(b).
"Leased Intangible Property" shall mean all Intangible Property (as
defined in the Purchase and Sale Agreement) acquired by Landlord with respect to
the Leased Property pursuant to the Purchase Agreement.
"Leased Personal Property" shall have the meaning given such term in
Section 2.1(e).
"Leased Property" shall have the meaning given such term in Section
2.1.
"Legal Requirement(s)" means any federal, state or local law, code,
rule, ordinance, regulation or order of any governmental authority or agency
having jurisdiction over the business or operation of the Retirement Community
or the matters which are the subject of this Agreement, including, without
limitation, any resident care or health care, building, zoning or use laws,
ordinances, regulations or orders, environmental protection laws and fire
department rules.
"License(s)" means any license, permit, decree, act, order,
authorization or other approval (including Medicare/Medicaid certification to
the extent applicable) or instrument which is necessary in order to operate the
Facility in accordance with Legal Requirements or if the Operating Agreement is
in effect, otherwise in accordance with the Operating Agreement.
"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.
"Litigation" means: (i) any cause of action commenced in a federal,
state or local court; or (ii) any claim brought before an administrative agency
or body (for example, without limitation, employment discrimination claims)
relating to the Retirement Community and/or the ownership and/or operation
thereof.
"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-1", subject to adjustment pursuant to the terms of
this Agreement.
"Minor Casualty" shall mean any fire or other casualty which results in
damage to the Facility and/or its contents, to the extent that the total cost
(in Landlord's reasonable judgment) of repairing and/or replacing of the damaged
portion of the Facility to the same condition as existed previously does not
exceed the dollar amount of Two Million Dollars ($2,000,000), said dollar amount
to be adjusted by the GDP Deflator.
"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 Operator, with respect to the Retirement
Community, as amended and/or replaced from time to time, subject to Landlord's
consent if and to the extent Landlord's consent is required pursuant to Section
20.4.1.
"Operator" shall mean Marriott Senior Living Services, Inc., a Delaware
corporation, or an Affiliate of Operator designated by and acting as Operator
pursuant to the Operating Agreement, and any successor operator approved by
Landlord in its sole discretion, or appointed pursuant to Section 20.4.1.
"Operator Facility System" shall mean at any particular time that
independent facility known as Pleasant Hill and the entire system or group of
Brighton Gardens and/or Maple Ridge retirement communities then owned and/or
operated and/or managed by Operator (or one or more of its Affiliates).
"Other Leases" shall mean, collectively, the Lease Agreements between
Landlord, or an Affiliate of Landlord, and Tenant with respect to the properties
described on Exhibit B, but excluding any Lease Agreements terminated pursuant
to their terms or by mutual agreement of the parties.
"Overdue Rate" shall mean, on any date, a per annum rate of interest
equal to the lesser of (i) twelve percent (12%) or (ii) the maximum rate then
permitted under applicable law.
"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 Affiliates, (i) owns
fifty-one percent (51%) or more of the voting or beneficial interest in, or (ii)
otherwise has the right or power (whether by contract, through ownership of
securities or otherwise) to control, such Person.
"Permitted Use" shall mean any use of the Leased Property permitted
pursuant to Section 4.1.
"Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Pooling Agreement" shall mean the Pooling Agreement, dated as of the
date hereof, made by Operator, Tenant, Landlord and Affiliates of Landlord with
respect to the Collective Leased Properties, as may be amended from time to
time.
"Prime Rate" means the "prime rate" as published in the "Money Rates"
section of The Wall Street Journal; however, if such rate is, at any time during
the Term, no longer so published, the term "Prime Rate" means the average of the
prime interest rates which are announced, from time to time, by the three (3)
largest banks (by assets) headquartered in the United States which publish a
"prime rate."
"Property Expenses" is defined in Exhibit D attached hereto.
"Proprietary Information" shall mean (a) all computer software and
accompanying documentation (including all future upgrades, enhancements,
additions, substitutions and modifications thereof), other than that which is
commercially available to the retail customer, which are used by Tenant or
Operator (as long as the Operating Agreement is in effect) in connection with
the property management system and all future electronic systems developed by
Operator or any Affiliate of Operator for use in the Retirement Community, (b)
all manuals, brochures and directives used by Tenant or Operator at the
Retirement Community regarding the procedures and techniques to be used in
operating the Retirement Community, (c) customer lists, and (d) employee records
which must remain confidential either under Legal Requirements or under
reasonable corporate policies of Operator or any Affiliate of Operator.
"Purchase Agreement" shall mean the Purchase and Sale Agreement, dated
as of December ___, 2002, by and between CNL Retirement MA2, LP, as purchaser,
CNL Retirement Partners, LP, its successors and assigns, as Orland Park Owner,
Marriott Senior Living Services, Inc. and MSLS-Mapleridge, Inc., as sellers,
Marriott International, Inc., as MI, and Eight Pack Management Corp., as tenant,
as may be amended from time to time.
"Related Person" shall mean any entity in which Landlord, or any direct
or indirect partner of Landlord, has a direct or indirect interest, and any
individual or Entity whose ownership of the lease of Property would cause such
Leased Property to be a "related party tenant", with respect to the Landlord or
any direct or indirect partner of the Landlord, within the meaning of Section
865(d)(2)(B) of the Code.
"Rent" shall mean, collectively, the Minimum Rent, Additional Rent and
Additional Charges.
"Reserve" shall have the meaning given such term in Section 5.1.2(a).
"Reserve Estimate" shall have the meaning given such term in Section
5.1.2(d).
"Retirement Community" shall mean the Leased Property and all FF&E, FAS
and Inventories installed therein.
"SEC" shall mean the Securities and Exchange Commission.
"Soft Goods" shall mean all fabric, textile and flexible plastic
products (not including items which are classified as "Fixed Asset Supplies"
under GAAP) which are used in furnishing the Facility, including, without
limitation: carpeting, drapes, bedspreads, wall and floor coverings, mats,
shower curtains and similar items.
"Software" means all computer software and accompanying documentation
(including all future upgrades, enhancements, additions, substitutions and
modifications thereof), other than computer software which is commercially
available to the retail customer, which are used by Operator in connection with
its operations at the Facility.
"State" shall mean the State in which the Leased Property is located.
"Subsidiary" shall mean, with respect to any Person, any Entity in
which such Person directly, or indirectly through one or more Subsidiaries or
Affiliates, (a) owns fifty-one percent (51%) or more of the voting or beneficial
interest or (b) which such Person otherwise has the right or power to control
(whether by contract, through ownership of securities or otherwise).
"Tenant" shall have the meaning given such term in the preamble to this
Agreement and shall include its permitted successors and assigns.
"Tenant'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 and excluding
any and all motor vehicles, Inventories, FAS and any other tangible personal
property purchased by Operator pursuant to the Operating Agreement if the
Operating Agreement is in effect.
"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.
"Termination Fee" shall have the meaning given such term in Section
15.2.
"Third Party Costs" shall mean Third-Party Costs paid by the purchaser
pursuant to Section 9.2 of the Purchase Agreement.
"Title Encumbrance" means any covenant, easement, condition,
restriction or agreement affecting title to the Retirement Community but not
including any mortgage.
"Total Casualty" shall mean any fire or other casualty which results in
damage to the Facility and its contents to the extent that the total cost of
repairing and/or replacing the damaged portion of the Facility to the same
condition as existed previously would be thirty percent (30%) or more of the
then total replacement cost of the Facility.
"Total Facility Revenues" shall mean, for each Accounting Period, all
revenues and receipts of every kind derived from operating the Retirement
Community and all departments and parts thereof, including, but not limited to:
income (from both cash and credit transactions) from monthly occupancy fees,
health care fees and ancillary services fees received pursuant to various
agreements with residents of the Retirement Community; income from food and
beverage, and catering sales; income from telephone charges; income from vending
machines; and proceeds, if any, from business interruption or other loss of
income insurance, all determined in accordance with GAAP; provided, however,
that Total Facility Revenues shall not include: (i) gratuities to employees at
the Retirement Community; (ii) federal, state or municipal excise, sales or use
taxes or similar taxes imposed at the point of sale and collected directly from
residents or guests of the Retirement Community or included as part of the sales
price of any goods or services; (iii) proceeds from the sale of FF&E; (iv)
interest received or accrued with respect to the monies in any operating or
reserve accounts of the Retirement Community; (v) any cash refunds, rebates or
discounts to residents of the Retirement Community, or cash discounts and
credits of a similar nature, given, paid or returned in the course of obtaining
Total Facility Revenues or components thereof; (vi) proceeds from any sale of
the Retirement Community, or any other capital transaction; (vii) proceeds of
any financing transaction affecting the Retirement Community; (viii) security
deposits until such time as the same are applied to current fees and other
charges due and payable; (ix) awards of damages, settlement proceeds and other
payments received by Tenant in respect of any Litigation other than Litigation
to collect fees due for services rendered from the Retirement Community; (x)
proceeds of any condemnation; (xi) proceeds of any casualty insurance, other
than loss of rents or business interruption insurance; (xii) any Shortfall
Payment made by Operator to Tenant pursuant to Section 4.03.B of the Operating
Agreement; and (xiii) payments under any policy of title insurance.
II. LEASED PROPERTY AND TERM
Section 2.1 Leased Property
Upon and subject to the terms and conditions hereinafter set forth,
Landlord leases to Tenant and Tenant leases from Landlord all of Landlord's
right, title and interest in and to all of the following (collectively, the
"Leased Property"):
(a) the land that is more particularly described in
Exhibit C, attached hereto and made a part hereof (the "Land");
(b) all buildings, structures and other improvements of
every kind including, but not limited to, the Retirement Community, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site
and off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances relating to
the Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into the
Leased Improvements, including, without limitation, all furnaces, boilers,
heaters, electrical equipment, heating, plumbing, lighting, ventilating,
refrigerating, incineration, air and water pollution control, waste disposal,
air-cooling and air-conditioning systems and apparatus, sprinkler systems and
fire and theft protection equipment, all of which, to the maximum extent
permitted by law, are hereby deemed by the parties hereto to constitute real
estate, together with all replacements, modifications, alterations and additions
thereto, but specifically excluding all items included within the category of
Tenant's Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings,
moveable walls or partitions, computers or trade fixtures located on or in the
Leased Improvements, and all modifications, replacements, alterations and
additions to such property, except items, if any, included within the category
of Fixtures, but specifically excluding all items included within the category
of Tenant's Personal Property (collectively, the "Leased Personal Property");
and
(f) all of the Leased Intangible Property.
Section 2.2 Condition of Leased Property
Tenant acknowledges receipt and delivery of possession of the Leased
Property and Tenant accepts the Leased Property in its "as is" condition,
subject to the rights of parties in possession, the existing state of title,
including all covenants, conditions, restrictions, reservations, mineral leases,
easements and other matters of record or that are visible or apparent on the
Leased Property, all applicable Legal Requirements, the lien of any financing
instruments, mortgages and deeds of trust permitted by the terms of this
Agreement, and such other matters which would be disclosed by an inspection of
the Leased Property and the record title thereto or by an accurate survey
thereof. TENANT REPRESENTS THAT IT HAS INSPECTED THE LEASED PROPERTY AND ALL OF
THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IS NOT
RELYING ON ANY REPRESENTATION OR WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR
EMPLOYEES WITH RESPECT THERETO, EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND TENANT
WAIVES ANY CLAIM OR ACTION AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE
LEASED PROPERTY. EXCEPT AS EXPRESSLY SET FORTH HEREIN, LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. To the maximum extent permitted by law,
however, Landlord hereby assigns to Tenant all of Landlord's rights to proceed
against any predecessor in title, contractors and materialmen for breaches of
warranties or representations or for latent defects in the Leased Property.
Landlord shall fully cooperate with Tenant in the prosecution of any such
claims, in Landlord's or Tenant's name, all at Tenant's sole cost and expense.
Section 2.3 Fixed Term
The initial term of this Agreement (the "Fixed Term") shall commence on
the Commencement Date and shall expire on the fifteenth (15th) anniversary of
the Commencement Date.
Section 2.4 Extended Term
Tenant shall have (a) one (1) renewal option for a first renewal term
of ten (10) years (the "First Extended Term"), which Tenant may exercise at
Tenant's option upon at least twenty-four (24) months Notice for all, and not
less than all, of the Collective Leased Properties, and (b) a second renewal
option (conditional on exercise of the first renewal option) for an additional
nine (9) years and twelve (12) Accounting Periods (the "Second Extended Term")
which Tenant may exercise at Tenant's option upon at least twenty-four (24)
months Notice for all, and not less than all, of the Collective Leased
Properties. The First Extended Term and the Second Extended Term, if exercised
are collectively referred to as the "Extended Terms."
Unless Tenant gives Landlord written Notice of Tenant's decision not to
exercise an Extended Term on or before the date which is twenty-four (24) months
prior to the date of the expiration of the Fixed Term or the First Extended Term
(as the case may be), Tenant shall be deemed to have exercised the First
Extended Term or the Second Extended Term, as applicable, subject to the
conditions set forth in the first paragraph of Section 2.4 above.
Each Extended Term shall commence on the day succeeding the expiration
of the Fixed Term or the preceding Extended Term, as the case may be. All of the
terms, covenants and provisions of this Agreement shall apply to each such
Extended Term, except that Tenant shall have no right to extend the Term beyond
the expiration of the Second Extended Term. Otherwise, the extension of this
Agreement shall be effected without the execution of any additional documents;
it being understood and agreed, however, that Tenant and Landlord shall execute
such documents and agreements as either party shall reasonably require to
evidence the same.
III. RENT
Section 3.1 Rent
Tenant shall pay, in lawful money of the United States of America which
shall be legal tender for the payment of public and private debts, without
offset, abatement, demand or deduction (unless otherwise expressly provided in
this Agreement), Minimum Rent and Additional Rent to Landlord and Additional
Charges to the party to whom such Additional Charges are payable, during the
Term. All payments to Landlord shall be made by wire transfer of immediately
available federal funds or by other means acceptable to Landlord in its sole
discretion.
3.1.1 Minimum Rent.
(a) Payment of Minimum Rent. Minimum Rent shall be paid in
arrears on or before the twenty-second (22nd) day of the subsequent Accounting
Period for which such Minimum Rent is due and payable.
(b) Adjustments of Minimum Rent Following Disbursements
Under Sections 5.1.3(b) and 5.1.5(b) (Landlord's Funding Obligations), 10.1.1
(Insufficient Insurance Proceeds) or 11.2 (Partial Condemnation). Effective on
the date of each disbursement by Landlord of a Landlord's Additional Investment,
the Minimum Rent shall be increased by an amount equal to the quotient obtained
by dividing (i) a per annum amount equal to the Lease Rate multiplied by such
Landlord's Additional Investment determined as of the date of Tenant's Notice to
Landlord identifying the amount of and requirement for the applicable funds, by
(ii) thirteen (13). If any such disbursement is made during any Accounting
Period on a day other than the twentieth (20th) day of an Accounting Period,
Tenant shall pay to Landlord on the twentieth (20th) 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 Additional Rent.
(a) Payment of Additional Rent. For each Fiscal Year
Lessee shall pay Additional Rent.
(b) Installments. Installments of Additional Rent for each
Fiscal Year or portion thereof shall be calculated and paid each Accounting
Period in arrears. Payment of each such installment shall be made within
twenty-two (22) days after the end of each Accounting Period. Installments of
Additional Rent due with respect to each Accounting Period shall be equal to the
Additional Rent due for all Accounting Periods elapsed during the applicable
Fiscal Year less amounts previously paid with respect thereto by Tenant. If the
Additional Rent due and payable for such elapsed Accounting Periods, as shown on
the statement for the last Accounting Period, is less than the amount previously
paid with respect thereto by Tenant, Tenant shall be entitled to offset the
amount of such difference against Rent next coming due under this Agreement,
such offset to be applied together with interest at the Disbursement Rate
accruing from the date of payment by Tenant until the date the offset is
applied. If the Additional Rent for such elapsed Accounting Periods, as shown on
the statement for the last Accounting Period, is more than the amount previously
paid with respect thereto by Tenant, Tenant shall pay to Landlord the amount of
such difference, together with Rent next coming due under this Agreement,
together with interest on the amount of such difference at the Disbursement Rate
accruing from the due date of such payment to the date such payment is received
by Landlord.
3.1.3 Additional Charges.
In addition to the Minimum Rent and Additional Rent payable hereunder,
Tenant shall pay to the appropriate parties and discharge as and when due and
payable the following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article VIII relating to
permitted contests, Tenant shall pay, or cause to be paid, all Impositions
before any fine, penalty, interest or cost (other than any opportunity cost as a
result of a failure to take advantage of any discount for early payment) may be
added for non-payment, such payments to be made directly to the taxing
authorities where feasible, and shall promptly, upon request, furnish to
Landlord copies of official receipts or other reasonably satisfactory proof
evidencing such payments. If any such Imposition may, at the option of the
taxpayer, lawfully be paid in installments (whether or not interest shall accrue
on the unpaid balance of such Imposition), Tenant may exercise the option to pay
the same (and any accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the Term as
the same become due and before any fine, penalty, premium, further interest or
cost may be added thereto. Landlord, at its expense, shall, to the extent
required or permitted by Applicable Law, prepare and file all tax returns and
pay all taxes due in respect of Landlord's net income, gross receipts, sales and
use, single business, ad valorem, franchise taxes and taxes on its capital
stock, and Tenant, at its expense, shall, to the extent required or permitted by
Applicable Laws, prepare and file all other tax returns and reports in respect
of any Imposition as may be required by Government Agencies. If any refund shall
be due from any taxing authority in respect of any Imposition paid by Tenant,
the same shall be paid over to or retained by Tenant. Landlord and Tenant shall,
upon request of the other, provide such data as is maintained by the party to
whom the request is made with respect to the Leased Property as may be necessary
to prepare any required returns and reports. In the event Government Agencies
classify any property covered by this Agreement as personal property, Tenant
shall file all personal property tax returns in such jurisdictions where it may
legally so file. Each party shall, to the extent it possesses the same, provide
the other, upon request, with cost and depreciation records necessary for filing
returns for any property so classified as personal property. Where Landlord is
legally required to file personal property tax returns for property covered by
this Agreement and/or gross receipts tax returns for Rent received by Landlord
from Tenant, Landlord shall file the same with reasonable cooperation from
Tenant. Landlord shall provide Tenant with copies of assessment notices in
sufficient time for Tenant to prepare a protest which Landlord shall file, at
Tenant's written request. All Impositions assessed against such personal
property shall be (irrespective of whether Landlord or Tenant shall file the
relevant return) paid by Tenant not later than the last date on which the same
may be made without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge; provided,
however, that Landlord's failure to give any such Notice shall in no way
diminish Tenant's obligation hereunder to pay such Impositions (except that
Landlord shall be responsible for any interest or penalties incurred as a result
of Landlord's failure promptly to forward the same).
(b) Utility Charges. Tenant shall pay or cause to be paid
all charges for electricity, power, gas, oil, water and other utilities used in
connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to be
paid all premiums for the insurance coverage required to be maintained pursuant
to Article IX.
(d) Other Charges. Tenant shall pay or cause to be paid
all other amounts, liabilities and obligations arising in connection with the
Leased Property except those obligations expressly assumed by Landlord pursuant
to the provisions of this Agreement or expressly stated not to be an obligation
of Tenant pursuant to this Agreement. Without limitation, Tenant shall pay or
cause to be paid all amounts, liabilities and obligations arising in connection
with the Contracts, as defined in the Purchase Agreement, to the extent that
they are Operating Expenses Under the Operating Agreement.
(e) Reimbursement for Additional Charges. If Tenant pays
or causes to be paid property taxes or similar or other Additional Charges
attributable to periods after the end of the Term, whether upon expiration or
sooner termination of this Agreement, Tenant may, within a reasonable time after
the end of the Term, provide Notice to Landlord of its estimate of such amounts.
Landlord shall promptly reimburse Tenant for all payments of such taxes and
other similar Additional Charges. If any Additional Charges have not been
reimbursed to Tenant as of the fifth (5th) day after the Landlord receives
Tenant's Notice therefor, Landlord shall pay to Tenant such reimbursement with
interest at the Overdue Rate from fifth (5th) day after Tenant's Notice therefor
to the date of payment thereof.
Section 3.2 Late Payment of Rent, Etc.
If any installment of Minimum Rent, Additional Rent or Additional
Charges (but only as to those Additional Charges which are payable directly to
Landlord) shall not be paid within ten (10) days after its due date, Tenant
shall pay Landlord, within five (5) days after Landlord's written demand
therefor, as Additional Charges, a late charge (to the extent permitted by law)
computed at the Overdue Rate on the amount of such installment, from the due
date of such installment to the date of payment thereof. To the extent that
Tenant pays any Additional Charges directly to Landlord or any Facility
Mortgagee pursuant to any requirement of this Agreement, Tenant shall be
relieved of its obligation to pay such Additional Charges to the Entity to which
they would otherwise be due and Landlord shall pay when due, or cause the
applicable Facility Mortgagee to pay when due, such Additional Charges to the
Entity to which they are due. If any payment due from Landlord to Tenant shall
not be paid within ten (10) days after its due date, Landlord shall pay to
Tenant, on demand, a late charge (to the extent permitted by law) computed at
the Overdue Rate on the amount of such installment from the due date of such
installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional Charges
when due, except as expressly provided in Section 3.1.3(a) with respect to
permitted contests pursuant to Article VIII, Tenant shall promptly pay (unless
payment thereof is in good faith being contested and enforcement thereof is
stayed) and discharge, as Additional Charges, every fine, penalty, interest and
cost which may be added for non-payment or late payment of such items. Landlord
shall have all legal, equitable and contractual rights, powers and remedies
provided either in this Agreement or by statute or otherwise in the case of
non-payment of the Additional Charges as in the case of non-payment of the
Minimum Rent and Additional Rent.
Notwithstanding the foregoing, subject to Tenant's obligations under
Section 20.4.3 hereunder, no late charges or interest shall be payable by Tenant
with respect to any amounts referred to in this Section 3.2 to the extent that
such delay in payment is attributable to any delay in payment of any amounts
required to be paid by Operator pursuant to the Operating Agreement.
Section 3.3 Net Lease
The Rent shall be absolutely net to Landlord so that this Agreement
shall yield to Landlord the full amount of the installments or amounts of the
Rent throughout the Term, subject to any other provisions of this Agreement
which expressly provide otherwise, including, without limitation, those
provisions for adjustment, refunding or abatement of such Rent and for the
funding of Landlord's obligations pursuant to Sections 5.1.5. This Agreement is
a net lease and, except to the extent otherwise expressly specified in this
Agreement, it is agreed and intended that Rent payable hereunder by Tenant shall
be paid without notice, demand, counterclaim, setoff, deduction or defense and
without abatement, suspension, deferment, diminution or reduction and that
Tenant's obligation to pay all such amounts, throughout the Term and all
applicable Extended Terms is absolute and unconditional and except to the extent
otherwise expressly specified in this Agreement, the respective obligations and
liabilities of Tenant and Landlord hereunder shall in no way be released,
discharged or otherwise affected for any reason, including without limitation:
(a) any defect in the condition, merchantability, design, quality or fitness for
use of the Leased Property or any part thereof, or the failure of the Leased
Property to comply with all Applicable Laws, including any inability to occupy
or use the Leased Property by reason of such noncompliance; (b) any damage to,
removal, abandonment, salvage, loss, condemnation, theft, scrapping or
destruction of or any requisition or taking of the Leased Property or any part
thereof, or any environmental conditions on the Leased Property or any property
in the vicinity of the Leased Property; (c) any restriction, prevention or
curtailment of or interference with any use of the Leased Property or any part
thereof including eviction; (d) any defect in title to or rights to the Leased
Property or any lien on such title or rights to the Leased Property; (e) any
change, waiver, extension, indulgence or other action or omission or breach in
respect of any obligation or liability of or by any Person; (f) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to Tenant or any other Person, or any action
taken with respect to this Agreement by any trustee or receiver of Tenant or any
other Person, or by any court, in any such proceeding; (g) any right or claim
that Tenant has or might have against any Person, including without limitation
Landlord (other than a monetary default) or any vendor, manufacturer, contractor
of or for the Leased Property; (h) any failure on the part of Landlord or any
other Person to perform or comply with any of the terms of this Agreement, or of
any other agreement; (i) any invalidity, unenforceability, rejection or
disaffirmance of this Agreement by operation of law or otherwise against or by
Tenant or any provision hereof; (j) the impossibility of performance by Tenant
or Landlord, or both; (k) any action by any court, administrative agency or
other Government Agencies; (l) any interference, interruption or cessation in
the use, possession or quiet enjoyment of the Leased Property or otherwise; or
(m) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether foreseeable or unforeseeable, and whether or not Tenant shall
have notice or knowledge of any of the foregoing; provided, however, that the
foregoing shall not apply or be construed to restrict Tenant's rights in the
event of any act or omission by Landlord constituting negligence or willful
misconduct. 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.
IV. USE OF THE LEASED PROPERTY
Section 4.1 Permitted Use.
Tenant shall, at all times during the Term and at any other time that
Tenant shall be in possession of the Leased Property, continuously use and
operate the Leased Property as an assisted living 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. Tenant shall, at its sole cost (except as expressly
provided in Section 5.1.5(b)), comply with all Insurance Requirements. Subject
to Article X (Casualty) and Article XI (Condemnation), 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.
Section 4.2 Necessary Approvals.
Tenant, or Operator at the direction of 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 and Operator, as applicable, in this regard,
including executing all applications and consents required to be signed by
Landlord in order for Tenant and Operator, as applicable, to obtain and maintain
such approvals.
Section 4.3 Lawful Use, Etc.
If the Operating Agreement is in effect, Tenant shall comply with the
terms of the Operating Agreement in connection with the use of the Retirement
Community and the obligations to prohibit waste and/or unlawful nuisances set
forth therein, if any. If the Operating Agreement is not in effect, Tenant shall
not commit or suffer to be committed any waste on the Leased Property, or in the
Facility, nor shall Tenant cause or permit any unlawful nuisance thereon or
therein. Tenant shall not suffer nor permit the Leased Property, or any portion
thereof, to be used in such a manner as (i) might reasonably impair Landlord's
title thereto or to any portion thereof, or (ii) may reasonably allow a claim or
claims for adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Property or any portion thereof.
Section 4.4 Compliance with Legal/Insurance Requirements, Etc.
Subject to the provisions of Article VIII, Article X and Article XI,
Tenant, at its sole expense, shall (or shall cause Operator, if applicable, to)
(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.
Section 4.5 Environmental Matters.
4.5.1 Restriction on Use, Etc.
If, at any time prior to the termination of this Agreement, Hazardous
Substances (other than those maintained in accordance with Environmental Laws)
are discovered on the Leased Property, subject to Tenant's right to contest the
same in accordance with Article VIII, Tenant shall take all actions and incur
any and all expenses, as may be reasonably necessary and as may be required by
any Government Agency, (i) to clean up and remove from and about the Leased
Property all Hazardous Substances thereon, (ii) to contain and prevent any
further release or threat of release of Hazardous Substances on or about the
Leased Property and (iii) to use good faith efforts to eliminate any further
release or threat of release of Hazardous Substances on or about the Leased
Property. Tenant shall promptly: (a) upon receipt of Notice or knowledge, notify
Landlord in writing of any material change in the nature or extent of Hazardous
Substances at the Leased Property, (b) transmit to Landlord a copy of any
Community Right to Know report which is required to be filed by Tenant with
respect to the Leased Property pursuant to ▇▇▇▇ Title III or any other
Environmental Law, (c) transmit to Landlord copies of any citations, orders,
notices or other governmental communications received by Tenant or its agents or
representatives with respect thereto (collectively, "Environmental Notice"),
which Environmental Notice requires a written response or any action to be taken
and/or if such Environmental Notice gives notice of and/or presents a material
risk of any material violation of any Environmental Law and/or presents a
material risk of any material cost, expense, loss or damage (an "Environmental
Obligation"), (d) observe and comply with all Environmental Laws relating to the
use, maintenance and disposal of Hazardous Substances and all orders or
directives from any official, court or agency of competent jurisdiction relating
to the use or maintenance or requiring the removal, treatment, containment or
other disposition thereof, and (e) pay or otherwise dispose of any fine, charge
or Imposition related thereto, unless Tenant shall contest the same in good
faith and by appropriate proceedings and the right to use and the value of the
Leased Property is not materially and adversely affected thereby.
Tenant's liability and obligations pursuant to the terms of this
Section 4.5.1 are subject to the provisions of Sections 5.1.3 and 5.1.5 and
Landlord's compliance with its funding obligations under Section 5.1.5.
4.5.2 Indemnification.
Tenant and Landlord shall each protect, indemnify and hold harmless the
other, its trustees, directors, officers, agents, employees and beneficiaries,
and any of their respective successors or assigns with respect to this Agreement
(collectively, the "Indemnitees" and, individually, an "Indemnitee") for, from
and against any and all debts, liens, claims, causes of action, administrative
orders or notices, costs, fines, penalties or expenses (including, without
limitation, reasonable attorney's fees and expenses) imposed upon, incurred by
or asserted against any Indemnitee resulting from, either directly or
indirectly, the presence during the Term in, upon or under the soil or ground
water of the Leased Property or any properties surrounding the Leased Property
of any Hazardous Substances in violation of any Applicable Law or otherwise
(collectively, the "Environmental Claims"), provided that any of the foregoing
arises by reason of the gross negligence or willful misconduct of the
indemnifying party, except to the extent the same arise from the gross
negligence or willful misconduct of the other party or any other Indemnitee.
This duty includes, but is not limited to, costs associated with personal injury
or property damage claims as a result of Environmental Claims prior to the
expiration or sooner termination of the Term and the surrender of the Leased
Property to Landlord in accordance with the terms of this Agreement free of
Hazardous Substances in, upon or under the soil or ground water of the Leased
Property in violation of an 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.
4.5.3 Survival.
As to conditions which exist prior to the expiration or sooner
termination of this Agreement, the provisions of this Section 4.5 shall survive
the expiration or sooner termination of this Agreement for a period of one (1)
year after such expiration or termination.
Section 4.6 Title Encumbrances.
4.6.1 Existing Title Encumbrances.
Tenant hereby acknowledges and consents to all Existing Title
Encumbrances. All costs, expenses and charges which are imposed on the
Retirement Community under the Existing Title Encumbrances shall be a Property
Expense.
4.6.2 Future Title Encumbrances.
Title Encumbrances which are entered into, or become encumbrances on
the Retirement Community and/or the Leased Property, after the Commencement Date
shall be referred to in this Agreement as "Future Title Encumbrances." Landlord
agrees that it will give Tenant and Operator, if applicable, Notice of its
intention to execute any Future Title Encumbrances, such Notice to be reasonably
in advance of the execution thereof. Landlord covenants that, during the Term of
this Agreement, there will not be any Future Title Encumbrances materially
affecting the Leased Property or the Retirement Community, unless the Tenant and
the Operator, if applicable, have given prior written consent thereto, which
consent shall not be unreasonably withheld by Tenant and/or Operator, if
applicable, if such Future Title Encumbrance: (i) would not impose any material
financial obligations on the Retirement Community; (ii) would not prohibit or
limit Tenant and/or the Operator, if applicable, from operating the Retirement
Community, including dining and other facilities customarily a part of or
related to a similar retirement community, in accordance with the industry
standards and the standards set forth in the Operating Agreement during the term
of the Operating Agreement; (iii) would not allow the Facility's facilities (for
example, parking spaces) to be used by persons other than residents, invitees or
employees of the Facility; and (iv) would not adversely affect the value or
future use of the Retirement Community.
4.6.3 Financial Obligations.
All financial obligations imposed on Tenant and/or on Operator during
the term of the Operating Agreement and/or on the Retirement Community pursuant
to any Future Title Encumbrances shall be paid by Landlord from its own funds,
and not as a Property Expense or from the Reserve, unless Tenant, and Operator
during the term of the Operating Agreement, have given their prior written
consent in accordance with the terms of Section 4.6.2 to the payment of such
obligations as Property Expenses.
V. MAINTENANCE AND REPAIRS
Section 5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
Tenant shall, or shall direct Operator to, at Tenant's sole cost and
expense (except as expressly provided in Sections 5.1.2 and 5.1.3(b) and
5.1.5(b)), keep, or direct Operator to keep, the Leased Property in good order
and repair, reasonable wear and tear excepted, and shall, or shall direct
Operator to, promptly make all necessary and appropriate routine and preventive
maintenance, repairs and minor alterations, as Tenant and/or Operator, from time
to time deems necessary for such purposes. The phrase "routine maintenance,
repairs and minor alterations" as used in this Section 5.1.1 shall include only
those which are normally expensed under GAAP. For purposes of this Section 5.1.1
and except as provided in Section 5.1.2, the cost of routine maintenance,
repairs and minor alterations shall be borne by Tenant and funded by the
operations of the Leased Property (and not taken out of the Reserve). All
repairs shall be made in a good, workmanlike manner, consistent with industry
standards for like 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 shall provide
prompt written notification to Landlord of any material adverse change to the
Leased Property, such as material changes to any environmental condition,
including without limitation, the presence of biocontaminants, such as mold
(and, if applicable, promptly notify the applicable insurance carriers and
submit all claim information related thereto pursuant to Section 10.1). Tenant
also shall promptly undertake appropriate assessment, remedial and preventative
action sufficient to meet any guidelines or regulations adopted by applicable
authoritative bodies or regulatory agencies in connection with a determination
of any material adverse change, and, in any event with respect to mold
contamination, and subject to and in accordance with Section 10.1, Tenant shall
undertake (a) removal of the mold, (b) abatement of the underlying cause of mold
(including water intrusion), and (c) repair of any leaks and associated water
damage at or to the Leased Property.
Tenant's obligations under this Section 5.1.1 shall be limited in the
event of any casualty or Condemnation as set forth in Articles X and XI and
Tenant's obligations with respect to Hazardous Substances are as set forth in
Section 4.5.
5.1.2 Reserve.
(a) Tenant, or Operator at Tenant's direction, shall
establish an interest bearing reserve account (the "Reserve") in CNLBank or such
other bank designated by Tenant, or Operator at the direction of Tenant, and
reasonably approved by Landlord. All interest earned on the Reserve shall be
added to and remain a part of the Reserve. Except as set forth in Section
5.1.2(e), Tenant, or Operator if so required by the Operating Agreement or
designated by Tenant, shall be the only party entitled to withdraw funds from
the Reserve. The purpose of the Reserve is to cover the cost of:
(i) Replacements and renewals to the Facility's FF&E;
and
(ii) Certain routine repairs and maintenance to the
Facility building (which are normally capitalized under GAAP) such as exterior
and interior repainting, resurfacing building walls, floors, roofs and parking
areas, and replacing folding walls and the like, but which are not Capital
Expenditures.
(b) Commencing with the Commencement Date and continuing
throughout the Term, Tenant shall transfer, or shall direct Operator to transfer
(as of the end of each Accounting Period of the Term), into the Reserve an
amount equal to the Applicable Percentage of Total Facility Revenues for such
Accounting Period.
(c) Tenant, or Operator at the direction of Tenant, shall
(endeavoring in good faith to comply with the applicable Reserve Estimate,
unless there has been a change in circumstance from time to time) make such
expenditures for the replacements, renewals, repairs, and maintenance described
in this Section 5.1.2, as Tenant, or Operator if the Operating Agreement is in
effect, deems necessary, up to the balance in the Reserve in order to maintain
the Retirement Community consistent with (i) industry standards if the Operating
Agreement is not in effect or (ii) the standards required by the Operating
Agreement if the Operating Agreement is in effect, and in conformity with Legal
Requirements. No expenditures will be made in excess of said balance without the
approval of Landlord. In addition, Tenant, or Operator at the direction of
Tenant, shall not, without Landlord's approval, make any expenditures from the
Reserve that, in the aggregate, exceed the total aggregate amount of
expenditures set forth in the then-applicable Reserve Estimate; provided,
however, that Tenant, or Operator at the direction of Tenant, shall be
authorized to take appropriate remedial action (including making any necessary
expenditures from the Reserve above the total aggregate amount set forth in the
then-applicable Reserve Estimate), without receiving Landlord's prior approval,
to remedy or respond to any of the Emergency Requirements (provided further that
Tenant, or Operator at the direction of Tenant, shall notify Landlord of any
such remedial action that requires more than a de minimus expenditure of funds
from the Reserve). At the end of each Fiscal Year, any amounts remaining in the
Reserve shall be carried forward to the next Fiscal Year. Proceeds from the sale
of FF&E no longer necessary to the operation of the Retirement Community shall
be deposited in the Reserve, as shall any interest which accrues on amounts
placed in the Reserve. Neither: (x) proceeds from the disposition of FF&E; nor
(y) interest which accrues on amounts held in the Reserve, shall result in any
reduction in the required Reserve payments or be included in Total Facility
Revenues. Upon a sale of the Retirement Community, funds in the Reserve will not
be affected, and all dispositions of such funds (both before and after such Sale
of the Retirement Community) will continue to be made exclusively pursuant to
the provisions of this Agreement or the Operating Agreement if applicable.
Tenant, or Operator at the direction of Tenant, is authorized to lease (rather
than purchase) shuttle vans, postal machines, photocopiers and other office
equipment. If Tenant, or Operator at the direction of Tenant, enters into a
lease described in the preceding sentence, Tenant, or Operator at the direction
of Tenant, shall give Landlord Notice of such lease either prior to or promptly
after entering into such lease. Lease payments with respect to such leases shall
be paid from the Reserve.
(d) Tenant, or Operator at the direction of 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. Tenant or Operator, as applicable, will endeavor to follow the
applicable FF&E Estimate, but shall be entitled to depart therefrom, in its
reasonable discretion, provided that: (A) such departures from the applicable
FF&E Estimate result from circumstances which could not reasonably have been
foreseen at the time of the submission of such FF&E Estimate; and (B) such
departures from the applicable FF&E Estimate result from circumstances which
require prompt repair and/or replacement or are necessary to comply with Legal
Requirements; and (C) Tenant or Operator, as applicable, has submitted to
Landlord a revised FF&E Estimate setting forth and explaining such departures.
(e) Tenant, or Operator at the direction of 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, or Operator at Tenant's
direction, shall provide to Landlord, within twenty (20) days after the end of
each Accounting Period, a statement setting forth Reserve expenditures made to
date during the Fiscal Year. Expenditures from the Reserve shall not be subject
to Landlord's approval.
(f) All funds in the Reserve, all interest earned thereon
and all property purchased with funds from the Reserve shall be and remain the
property of Landlord and any such property purchased with funds from the Reserve
shall be part of the Leased Property and leased by Landlord to Tenant pursuant
to this Agreement. Following expiration or earlier termination of this Agreement
and payment in full on all contracts entered into prior to such expiration or
termination for work to be done or furniture, furnishings, fixtures and
equipment to be supplied in accordance with this Section 5.1.2 out of the
Reserve, Tenant's rights hereunder or under the Operating Agreement relating to
the Reserve shall be transferred from Tenant to Landlord, subject to the
provisions of the Operating Agreement if applicable.
(g) It is understood and agreed that during the term of
the Pooling Agreement, the Reserve pursuant to this Agreement shall (i) also
serve as the reserve, and be pooled with the Reserves, under the Other Leases in
accordance with the provisions of the Pooling Agreement, and (ii) include
amounts transferred to the Reserve under this Agreement and the Other Leases.
(h) If Landlord wishes to grant a security interest in or
create another encumbrance on the rights of Landlord with respect to the
Reserve, the instrument granting such security interest or creating such other
encumbrance shall expressly provide that such security interest or encumbrance
is subject to the rights of Tenant with respect to the Reserve as set forth
herein and the rights of the Operator pursuant to the Operating Agreement during
the term of the Operating Agreement. The form and substance of such provision
shall be subject to obtaining Tenant's prior written approval, which approval
shall not be unreasonably withheld, delayed or conditioned.
5.1.3 Capital Expenditures.
(a) Tenant shall deliver, or shall cause Operator to
deliver, to Landlord, for Landlord's approval, an annual estimate (the "Building
Estimate"), that Tenant shall prepare, or cause the Operator to prepare during
the term of the Operating Agreement, of the reasonably foreseeable Capital
Expenditures. Landlord's consent shall not be required with respect to Capital
Expenditures ("Required Capital Expenditures") (i) which are required by reason
of any Legal Requirement, or (ii) required under Operator's then current
life-safety standards, if applicable, (provided that, in order for any such
life-safety standards to be "required" within the meaning of this Section 5.1.3,
such standards must be part of the standards of the Operator of the Retirement
Community), or (iii) otherwise required for the continued safety of residents or
employees or prevention of material damage to property, including the removal of
Hazardous Substances, together with all contaminated soils and containers, and
to contain and prevent any further release or threat of release of Hazardous
Substances on or about the Leased Premises, in compliance with all Environmental
Laws, or (iv) required to obtain or maintain a material License, or (v) required
to be paid by Tenant pursuant to Section 8.03(E) of the Operating Agreement. If
Tenant (or Operator, if applicable) does not receive Notice of Landlord's
disapproval of the Building Estimate or any item therein, within thirty (30)
days after delivery of the Building Estimate to Landlord, then Landlord shall be
deemed to have approved the Building Estimate or such items, as applicable. In
the event Landlord disapproves the Building Estimate, Landlord's Notice shall
identify disputed items on a line item basis. Items not identified as disputed
in such Landlord's Notice shall be deemed approved by Landlord.
(b) In the event of (x) an emergency threatening the
Retirement Community, its residents, invitees or employees, or (y) the receipt
by Tenant or Operator, if applicable, of a governmental order or other Legal
Requirement regarding any Required Capital Expenditures, Tenant or Operator,
acting on Tenant's behalf, shall give Notice thereof to Landlord within five (5)
Business Days thereafter or sooner if circumstances reasonably warrant. Tenant,
or Operator acting on Tenant's behalf, shall then be authorized (but not
obligated) to take appropriate remedial action without receiving Landlord's
prior consent as follows: (i) in an emergency threatening the Retirement
Community, its residents, invitees or employees; or (ii) if the continuation of
the given condition could (in Tenant's or Operator's reasonable judgment) either
(a) subject Operator, Landlord and/or Tenant to either criminal or more than de
minimis civil liability, or (b) result in the suspension or revocation of a
material License and Tenant has either failed to remedy the situation or has
failed to take appropriate legal action to stay the effectiveness of any
applicable Legal Requirement. Tenant (and Operator, during the term of the
Operating Agreement) shall cooperate with Landlord in the pursuit of any such
action and shall have the right to participate therein. Landlord shall reimburse
Tenant and/or Operator, as applicable, for any costs incurred by Tenant and/or
Operator, as applicable, in connection with any such remedial action within
thirty (30) days after Landlord's receipt of Notice from Tenant and/or Operator,
as applicable, of the amount of such costs. Capital Expenditures made pursuant
to this Section 5.1.3(b) shall be deemed approved by Landlord.
(c) The cost of all approved, deemed approved or
non-approvable Capital Expenditures shall be borne by Landlord in accordance
with the provisions of Section 5.1.5(b) and shall increase the Minimum Rent as
set forth in Section 3.1.1.
5.1.4 Landlord Approval Rights During the Last Two Years of the
Term.
Except for expenditures required to remedy or respond to a Legal
Requirement or an Emergency Requirement, no expenditures, including expenditures
to be paid out of the Reserve, in excess of the Reserve shall be: (a) made by
Tenant, if the Operating Agreement is not in effect, without Landlord's prior
consent (i) during the last Fiscal Year of the Fixed Term, if Tenant elects,
pursuant to the provisions of Section 2.4 hereunder, not to extend the Term of
this Agreement beyond such Fixed Term, (ii) during the last Fiscal Year of the
first (1st) Extended Term of this Agreement if Tenant elects, pursuant to the
provisions of Section 2.4 hereunder, not to extend the Term beyond such first
(1st) Extended Term, and (iii) during the last two (2) Fiscal Years of the
second (2nd) Extended Term of this Agreement; or (b) made by Operator if the
Operating Agreement is in effect without Landlord's prior consent (i) during the
last Fiscal Year of the Initial Term (as such term is defined in the Operating
Agreement) of the Operating Agreement if Operator elects pursuant to the
provisions of Section 4.01 of the Operating Agreement, not to extend the term of
the Operating Agreement beyond such Initial Term, (ii) during the last Fiscal
Year of the first (1st) Extended Term (as such term is defined in the Operating
Agreement) of the Operating Agreement if Operator elects, pursuant to the
provisions of Section 4.01 of the Operating Agreement, not to extend the term of
the Operating Agreement beyond such first (1st) Extended Term, and (iii) during
the last two (2) Fiscal Years of the second (2nd) Extended Term (as such term is
defined in the Operating Agreement) of the Operating Agreement.
5.1.5 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 5.1.5(b), to make any
expenditure whatsoever with respect thereto. Except as otherwise expressly
provided in this Agreement, Tenant for itself and any Person claiming by,
through or under Tenant, including Operator, hereby waives, to the maximum
extent permitted by law, the right to make repairs at the expense of Landlord
pursuant to any law in effect on the date hereof or hereafter enacted. Landlord
shall have the right to give, record and post, as appropriate, notices of
non-responsibility under any mechanic's lien laws now or hereafter existing.
(b) If, at any time, (i) funds in the Reserve shall be
insufficient or are reasonably projected by Tenant or Operator, acting on behalf
of Tenant, to be insufficient for necessary and permitted expenditures thereof,
or (ii) funding is necessary for approved, deemed approved or non-approvable
Capital Expenditures (other than costs related to Hazardous Substances under
Section 4.5 resulting from Tenant's gross negligence or willful misconduct (or
that of any Person claiming by, through or under Tenant, including Operator, if
applicable), which costs shall be Tenant's sole cost and expense; but
specifically including the costs associated with the assessment, remedial and
preventative actions taken in connection with biocontaminants as contemplated by
Section 5.1.1 above) or (iii) funding is necessary pursuant to Section 4.5.1(d)
and/or 4.5.1(e), then Tenant or Operator, as applicable, 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 or Operator, as applicable, may direct, 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 4.5 resulting from Landlord's gross negligence or willful
misconduct, there shall be no adjustment to the Minimum Rent. If Landlord
disputes its obligation to disburse such funds, it shall give Operator and
Tenant Notice of such dispute within such ten (10) Business Day period, and
failure to give Operator and Tenant Notice of such dispute shall be deemed a
waiver of any right to dispute Landlord's obligation to disburse such funds. To
the extent reasonably possible, Landlord shall identify disputed items on a line
item basis. In no event shall Landlord be entitled to dispute the request for
funds for any expenditure which was approved or deemed approved pursuant to the
provisions of Section 5.1.3(a) and (b).
5.1.6 Non-responsibility of Landlord, Etc.
All materialmen, contractors, artisans, mechanics and laborers and
other persons contracting with Tenant with respect to the Leased Property, or
any part thereof, are hereby charged with notice that liens on the Leased
Property or on Landlord's interest therein are expressly prohibited and that
they must look solely to Tenant to secure payment for any work done or material
furnished by Tenant or for any other purpose during the term of this Agreement.
Nothing contained in this Agreement shall be deemed or construed in any way as
constituting the consent or request of Landlord, express or implied, by
inference or otherwise, to any contractor, subcontractor, laborer or materialmen
for the performance of any labor or the furnishing of any materials for any
alteration, addition, improvement or repair to the Leased Property or any part
thereof or as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of any lien against the Leased Property or any
part thereof nor to subject Landlord's estate in the Leased Property or any part
thereof to liability under any Mechanic's Lien Law of the State in any way, it
being expressly understood Landlord's estate shall not be subject to any such
liability.
5.1.7 Limitation on Tenant's Obligations.
Tenant's obligations under Section 5.1 shall be limited in the event of
any casualty or Condemnation as set forth in Articles X and XI and Tenant's
obligations with respect to Hazardous Substances are as set forth in Section
4.5.
Section 5.2 Tenant's Personal Property.
At the expiration or sooner termination of the Term, Landlord may, in
its sole and absolute discretion, elect either (i) to 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 deliver and transfer to Landlord all FAS and Inventories located at the
Leased Property, in which event Landlord shall acquire such FAS and Inventories.
Failure of Landlord to make such election shall be deemed an election to proceed
in accordance with clause (ii) preceding.
Section 5.3 Yield Up.
Upon the expiration or sooner termination of this Agreement, Tenant
shall vacate and surrender the Leased Property to Landlord in substantially the
same condition in which the Leased Property was in on the Commencement Date,
except as repaired, replaced, rebuilt, restored, altered or added to as
permitted or required by the provisions of this Agreement, reasonable wear and
tear and Condemnation (and casualty damage, in the event that this Agreement is
terminated following a casualty in accordance with Article X) excepted.
In addition, as of the expiration or earlier termination of this
Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith, commercially reasonable efforts to transfer to and cooperate with
Landlord or Landlord's nominee in connection with the processing of all
applications for licenses, operating permits and other governmental
authorizations and all contracts entered into by Tenant, including contracts
with governmental or quasi-governmental Entities which may be necessary for the
use and operation of the Retirement Community as then operated, but excluding
(i) all insurance contracts and multi-property contracts not limited in scope to
the Collective Leased Properties, the Lease Agreements for which are being
terminated simultaneously, (ii) all contracts and leases with Affiliates, (iii)
utility deposits and (iv) telephone numbers. Landlord shall indemnify and hold
Tenant harmless for all claims, costs and expenses (including reasonable
attorneys' fees and paralegals' fees) arising from acts or omissions by Landlord
under such contracts subsequent to the date of transfer thereof to Landlord; and
Tenant shall indemnify and hold Landlord harmless for all claims, costs and
expenses (including reasonable attorney's fees and paralegals' fees) arising
from acts or omission by Tenant under such contracts prior to the date of
transfer thereof to Landlord.
VI. IMPROVEMENTS, ETC.
Section 6.1 Improvements to the Leased Property.
Tenant shall not finance the cost of any construction by the granting
of a lien on or security interest in the Leased Property, or Tenant's interest
therein, without the prior written consent of Landlord, which consent may be
withheld by Landlord in Landlord's sole discretion. Any such improvements shall,
upon the expiration or sooner termination of this Agreement, remain or pass to
and become the property of Landlord, free and clear of all encumbrances other
than Title Encumbrances.
Section 6.2 Salvage.
Other than Tenant's Personal Property, all materials which are scrapped
or removed in connection with the making of repairs, alterations, improvements,
renewals, replacements and additions pursuant to Article V shall be disposed of
by Tenant and the net proceeds thereof, if any, shall be deposited in the
Reserve.
Section 6.3 Equipment Leases.
Landlord shall enter into such leases of equipment and personal
property as Tenant, or Operator at the direction of Tenant, may reasonably
request from time to time, provided that the form and substance thereof shall be
reasonably satisfactory to Landlord. Tenant, or Operator at the direction of
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, or Operator at
the direction of Tenant shall, throughout the Term, be responsible for
performing all of Landlord's obligations under all such documents and
agreements, including without limitation, all Contracts, as defined in the
Purchase Agreement.
VII. LIENS
Subject to Article VIII, Tenant shall not, directly or indirectly,
create or allow to remain and shall promptly discharge, at its expense, any
lien, attachment, title retention agreement or claim upon the Leased Property or
Tenant's leasehold interest therein or any attachment, levy, claim or
encumbrance in respect of the Rent, other than (a) Existing Title Encumbrances
(b) Future Title Encumbrances if approved by Tenant and Operator (during the
term of the Operating Agreement) in accordance with the provisions of Section
4.6.2, (c) restrictions, liens and other encumbrances which are consented to in
writing by Landlord, (d) liens for those taxes of Landlord which Tenant is not
required to pay hereunder, (e) subleases permitted by Article XVI, (f) liens for
Impositions or for sums resulting from noncompliance with Legal Requirements so
long as (A) the same are not yet due and payable, or (B) are being contested in
accordance with Article VIII, (g) liens of mechanics, laborers, materialmen,
suppliers or vendors incurred in the ordinary course of business that are not
yet due and payable (but will be paid in full by Tenant) or are for sums that
are being contested in accordance with Article VIII, (h) any Facility Mortgages
or other liens which are the responsibility of Landlord pursuant to the
provisions of Article XIX, and (i) Landlord Liens.
VIII. PERMITTED CONTESTS
Tenant, or Operator while the Operating Agreement is in effect, shall
have the right to contest the amount or validity of any Imposition, Legal
Requirement, Insurance Requirement, Environmental Obligation, lien (excluding
any Landlord Liens), attachment, levy, encumbrance, charge or claim
(collectively, "Claims") as to the Leased Property, by appropriate legal
proceedings, conducted in good faith and with due diligence, provided that (a)
the foregoing shall in no way be construed as relieving, modifying or extending
Tenant's obligation to pay any Claims required hereunder to be paid by Tenant as
finally determined, (b) such contest shall not cause Landlord or Tenant to be in
default under any mortgage, deed of trust or other agreement encumbering the
Leased Property or any part thereof (Landlord agreeing that any such mortgage,
deed of trust or other agreement shall permit Tenant to exercise the rights
granted pursuant to this Article VIII) or any interest therein or result in a
lien attaching to the Leased Property, unless such lien is fully bonded or is
otherwise secured to the reasonable satisfaction of Landlord, and (c) no part of
the Leased Property nor any Rent therefrom shall be in any immediate danger of
sale, forfeiture, attachment or loss, and (d) Tenant hereby indemnifies and
holds harmless Landlord from and against any cost, claim, damage, penalty or
reasonable expense, including reasonable attorneys' fees and paralegals' fees,
incurred by Landlord in connection therewith or as a result thereof (except to
the extent that such cost, claim, damage, penalty or reasonable expense,
including reasonable attorneys' fees and paralegals' fees, incurred by Landlord
results from the exercise by Operator of its rights to contest such Claims under
the Operating Agreement, if applicable). Landlord agrees to join in any such
proceedings if required legally to prosecute such contest, provided that
Landlord shall not thereby be subjected to any liability therefor (including,
without limitation, for the payment of any costs or expenses in connection
therewith) unless Tenant agrees to assume and indemnify Landlord with respect to
the same. Tenant shall be entitled to any refund of any Claims and such charges
and penalties or interest thereon which have been paid by Tenant or paid by
Landlord to the extent that Landlord has been reimbursed by Tenant. If Tenant
shall fail (x) to pay or cause to be paid any Claims when finally determined,
(y) to provide reasonable security therefor, or (z) to prosecute or cause to be
prosecuted any such contest diligently and in good faith, Landlord may, upon
Notice to Tenant, pay such charges, together with interest and penalties due
with respect thereto, and Tenant shall reimburse Landlord therefor, upon demand,
as Additional Charges.
IX. INSURANCE
Section 9.1 General Insurance Requirements.
Tenant shall, at all times during the Term and at any other time Tenant
shall be in possession of the Leased Property, at Tenant's sole cost and
expense, keep or cause Operator to keep with respect to each of the Leased
Property and all property located therein or thereon, insured against the risks
and in the amounts as follows:
(a) Property insurance, including boiler and machinery
coverage, on the Retirement Community building(s) and contents including, but
not limited to coverage for signs, awnings, canopies, gazebos, fences and
retaining walls against loss or damage by fire, lightning, windstorm, sprinkler
leakage, water damage, vandalism, malicious mischief and other hazards generally
included under extended coverage and all other risks as commonly covered by an
"all-risk of physical loss" policy of insurance, in an amount not less than the
full replacement cost (less excavation and foundation costs) of the Retirement
Community buildings and contents and law and ordinance coverage in an amount
equal to ten percent (10%) of the replacement value or One Million Dollars
($1,000,000) whichever is greater;
(b) Business interruption insurance including extra
expense covering at least one (1) year loss of profits, necessary continuing
expenses, and if applicable, Rent, for interruptions at the Retirement Community
caused by any occurrence covered by the insurance referred to in Section 9.1(a)
above, and 9.1(c) and 9.1(d) below to the extent available at commercially
reasonable terms;
(c) Flood insurance, if the Retirement Community is
located in whole or in part within an area identified as having a special flood
hazard under the National Flood Insurance Program in commercially reasonable
amounts;
(d) If the Retirement Community is located in an
"earthquake prone zone" as reasonably determined by Landlord and Tenant (or
Operator during the term of the Operating Agreement), Tenant, or during the term
of the Operating Agreement, Operator, on Tenant's behalf, shall maintain
coverage for loss or damage caused by earthquake, but only to the extent that
the same is available on commercially reasonable terms (for example, Tenant or
Operator on Tenant's behalf, shall not be required to carry earthquake insurance
if coverage is completely unavailable or if the cost is unreasonable) and Tenant
and Operator, if applicable, shall provide Landlord with prompt Notice of
unavailability or material restriction of earthquake coverage. Tenant, or
Operator on Tenant's behalf, may provide such earthquake insurance through a
blanket insurance program with limits adequate to protect the regional aggregate
probable maximum loss for all properties in the applicable region in which the
Retirement Community is located under the blanket program and Tenant, or
Operator on Tenant's behalf, shall provide written Notice to Landlord if actual
losses meet or exceed such limits. In the event that Landlord and Tenant or
Operator, if the Operating Agreement is in effect, shall fail to agree if the
Retirement Community is located in an "earthquake prone zone" the issue shall be
promptly referred to EQE International, Inc. for its determination, which shall
be binding on Tenant, Landlord and Operator. Tenant, Landlord and Operator, as
applicable, agree that if EQE International, Inc. is not available or willing to
make such determination, Landlord and Tenant or Operator, if the Operating
Agreement is in effect, shall select another recognized earthquake analysis
company to make such termination;
(e) Such other property insurance as is customarily
maintained by Operator at similar retirement communities;
(f) Such additional insurance as may be reasonably
required from time to time, by (A) Existing Title Encumbrances in effect on the
date hereof and any Future Title Encumbrances, approved in writing by Tenant, or
Operator on Tenant's behalf, or (B) a Facility Mortgagee approved or permitted
pursuant to Article XIX hereof and approved in writing by Operator if the
Operating Agreement is in effect provided the same is customarily carried by a
majority of comparable high quality retirement communities in the area;
(g) Commercial general liability insurance against claims
for bodily injury, death or property damage, fire, legal liability, and if
applicable liquor liability occurring on, in or in conjunction with the
operations of the Retirement Community, and automobile liability insurance on
owned, non-owned and hired vehicles operated in conjunction with the Retirement
Community, with limits of not less than One Million Dollars ($1,000,000.00) per
occurrence and Two Million Dollars ($2,000,000.00) per location aggregate;
(h) Umbrella/Excess liability against claims for damages
covered under the commercial general liability, automobile liability, if
applicable liquor liability and employer's liability with limits of not less
than $50,000,000 per occurrence;
(i) Workers' compensation coverage as may be required
under applicable laws covering all of Operator's employees at the Retirement
Community, and employer's liability insurance of not less than One Million
Dollars ($1,000,000.00) per accident/disease;
(j) Fidelity bond coverage in an amount not less than Two
Million Dollars ($2,000,000.00) covering Operator at the Retirement Community;
(k) Employment practices liability insurance covering all
of Operator's employees at the Retirement Community, to the extent available at
commercially reasonable rates and terms, in an amount not less than One Million
Dollars ($1,000,000);
(l) To the extent applicable, garage keepers legal
liability covering both comprehensive and collision-type losses with a limit of
liability of not less than One Million Dollars ($1,000,000.00) per occurrence;
(m) Professional liability insurance with limits of not
less than $2,000,000 per occurrence and a $5,000,000 aggregate to cover the
professional medical care providers employed by the Operator at the Retirement
Community. If the professional liability insurance is written on a claims-made
basis, and if the existing primary policies are canceled and non-renewed or
canceled and rewritten, an Extended Period of Discovery coverage shall be
purchased for the existing policy for not less than one (1) year (in the event
the insurance coverage required by this subparagraph is no longer available at
commercially reasonable terms, the parties hereto agree to negotiate in good
faith to modify or replace the existing required insurance coverage).
(n) Such other insurance in amounts as Operator, or
Landlord if the Operating Agreement is not in effect, in its reasonable
judgment, deems advisable for protection against claims, liabilities and losses
arising out of or connected with the operation of the Retirement Community.
Section 9.2 General Insurance Provisions
(a) All insurance described in Section 9.1 may be obtained
through blanket insurance programs, provided that such blanket programs
substantially fulfill the requirements specified herein. The blanket insurance
programs may include deductibles or risk retention levels; however, the
Retirement Community's responsibility for such deductibles or risk retention
levels shall be limited to the Insurance Retention as defined in Section 9.3(c).
The Retirement Community's allocated Insurance Retention for general liability
insurance and workers' compensation insurance shall not exceed One Hundred
Thousand Dollars ($100,000) unless such greater amount is agreeable to both
Landlord and Tenant. The Retirement Community's property insurance deductible
shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) unless such
greater amount is agreeable to both Landlord and Tenant, or if a higher
deductible for high hazard risks (i.e., earthquake, wind or flood) is mandated
by the insurance carrier.
(b) All insurance described in Section 9.1 shall be
carried in the name of Tenant or Operator if the Operating Agreement is in
effect. The insurance required under Section 9.1 (excluding coverages 9.1.i, j,
and k) shall include Landlord and Tenant and any Facility Mortgagees specified
by Landlord, in writing, as additional insureds, mortgagee or loss payee as
their interest may appear, as applicable. Any property losses covered by
insurance obtained pursuant to Section 9.1 shall be payable to the respective
parties as their interests may appear. Any Facility Mortgage on the Retirement
Community shall contain provisions to the effect that proceeds of the Section
9.1(a), (c) and (d) insurance shall be available for repair and restoration of
the Retirement Community. With respect to the Retirement Community, all
insurance policies pursuant to Section 9.1 shall provide that the coverage shall
be primary and any insurance carried by any additional insured shall be excess
and non-contributory.
(c) Tenant or Operator if the Operating Agreement is in
effect, upon request, shall deliver to Landlord certificates of insurance
evidencing the insurance coverages required under Section 9.1 and any renewals
thereof. All such certificates of insurance shall, to the extent obtainable,
state that the insurance shall not be canceled or materially reduced without at
least thirty (30) days' prior written notice to the certificate holder.
Excluding workers' compensation and earthquake coverage, all insurance policies
pursuant to this Article IX, shall be issued by insurance carrier having an AM
Best rating of at least A-, VII and all excess insurance policies above
Twenty-Five Million Dollars ($25,000,000) shall be issued by insurance carriers
having an AM Best rating of at least B+, VII. All such insurance shall be
evaluated by Tenant or Operator if the Operating Agreement is in effect from
time to time to ensure that the limits and coverages are adequate.
(d) The parties agree that the insurance coverages and
deductibles maintained by Tenant or Operator if the Operating Agreement is in
effect pursuant to this Article IX shall be adjusted throughout the Term in
accordance with Tenant's or Operator's standard insurance policies, as
applicable which shall be consistent with industry standards for similar
facilities.
Section 9.3 Costs and Expenses
(a) With respect to Section 9.1, all insurance premiums,
costs and other expenses, including any Insurance Retention (as defined below),
shall be treated as an Imposition payable by Tenant as Additional Charges. All
charges under the blanket programs shall be allocated to the Retirement
Community and other similar participating retirement communities on a reasonable
basis. Any losses and associated costs and expenses, that are uninsured shall be
treated as a cost of insurance and shall also be treated as an Imposition.
(b) Upon termination of the Operating Agreement while this
Agreement is in effect, a reserve in an amount determined by Operator based on
loss projections, shall be established from Total Facility Revenues to cover the
amount of any Insurance Retention and all other costs and expenses that will
eventually have to be paid by either Tenant or Operator, as applicable, with
respect to pending or contingent claims, including those that arise after the
termination of this Agreement for causes arising during the Term. If Total
Facility Revenues are insufficient to meet the requirements of such reserve,
Landlord shall deliver to Operator within ten (10) days after receipt of Tenant
or Operator's written request thereof, the sums necessary to establish such
reserve; and if Landlord fails to timely deliver such sums to Operator, Operator
shall have the right (without affecting Operator's other remedies under the
Operating Agreement) to withdraw the amount of such expenses from the operating
accounts of the Retirement Community, the FF&E Reserve, the Working Capital
funds or any other funds of Tenant or Landlord, as applicable, held by or under
the control of Operator.
(c) "Insurance Retention" shall mean the insurance policy
deductible; however, for any insurance obtained through the blanket insurance
programs, "Insurance Retention" shall mean the Retirement Community's per
occurrence limit for any loss or reserve as established for the Retirement
Community, which limit shall be the same as is applied to other similar
retirement communities participating in the blanket insurance programs, or such
higher amount if mandated by the insurer for high hazard risks such as
earthquake, flood and wind.
Section 9.4 Indemnification of Landlord
Tenant shall indemnify and hold harmless Landlord (and any officer,
director, employee, advisor, partner or shareholder of Landlord) in respect of,
and, at Landlord's request, shall defend any action, cause of action, suit,
debt, cost, expense (including without limitation reasonable attorneys' fees),
claim or demand whatsoever brought or asserted by any third person whomsoever,
at law or in equity, arising by reason of: (i) liabilities stemming from general
corporate matters of Tenant or its Affiliates, to the extent the same are not
directly and primarily related to the Retirement Community; (ii) infringement
and other claims relating to the Tenant's use of the proprietary marks of
Landlord; (iii) if Tenant fails to maintain, if the Operating Agreement is not
in effect, or if the Operating Agreement is in effect, fails to use commercially
reasonable efforts to cause Operator to maintain, insurance coverage that it is
required to maintain pursuant to this Agreement, the excess of the amount of any
liability or loss that would have been covered over the amount of any applicable
deductible; and (iv) the bad faith or willful misconduct of Tenant or its
Affiliates, or any of their employees, servants or agents or other persons for
whom they are responsible, result in a claim for bodily injury, death or
property damage occurring on, in or in conjunction with the business of the
Retirement Community, to the extent that such claim exceeds the insurance
proceeds (including Insurance Retention) which are available to pay such claim.
Section 9.5 Indemnification of Tenant
If the Operating Agreement is in effect, Landlord will defend,
indemnify and hold Tenant harmless from and against any claims, losses,
expenses, costs, suits, actions, proceedings, damages, demands or liabilities
(including, without limitation, engineers' and attorneys' fees and expenses, and
costs of litigation) that are asserted against or sustained or incurred by
Tenant pursuant to Section 19.19.B of the Operating Agreement and arising under
or in connection with (i) Landlord's breach hereunder, or (ii) the Tenant's
performance or failure to perform any acts in good faith reliance on the written
instruction of the Expert or Landlord to the extent that such claim exceeds the
insurance proceeds (including Insurance Retentions) which are available to pay
such claim; provided, however, that any such action or claim shall not have
arisen by reason of any matter for which Tenant is responsible for providing
indemnification to Landlord pursuant to Section 9.4 hereof.
Section 9.6 Limitation on Liability
To the maximum extent permitted by applicable law, and except to
Landlord in its capacity as guarantor, no shareholder, director, officer or
employee of any party to this Agreement shall have any personal liability with
respect to the liabilities or obligations of such party hereunder. Furthermore,
Landlord and Tenant agree that if Landlord is in default hereunder, the
liability of Landlord shall be absolutely limited to the Purchase Price.
X. CASUALTY
Section 10.1 Damage and Repair.
If, during the Term, the Retirement Community is damaged by a Minor
Casualty, Tenant, or Operator if the Operating Agreement is in effect, shall
with all reasonable diligence (i) proceed to process the claim with the
applicable insurance carriers, including settling such claim, and to make the
necessary arrangements with appropriate contractors and suppliers to repair
and/or replace the damaged portion of the Facility and (ii) perform Operator's
obligations with respect to such Minor Casualty pursuant to Section 15.01 of the
Operating Agreement.
If, during the Term, the Facility suffers a Total Casualty, this
Agreement shall be terminable at the option of either party upon ninety (90)
days' written notice to the other party. Such notice must be sent within thirty
(30) days after the date of the Total Casualty.
If, during the Term, the Facility is damaged by fire, casualty or other
cause to a greater extent than a Minor Casualty, but not to the extent of a
Total Casualty, or if the Facility suffers a Total Casualty but neither party
elects to terminate under Section 10.1, Landlord shall, at its cost and expense
and with all reasonable diligence, repair and/or replace the damaged portion of
the Facility to the same condition as existed previously. Tenant shall have the
right to discontinue operating the Facility to the extent it deems necessary to
comply with applicable Legal Requirements or as necessary for the safe and
orderly operation of the Facility. To the extent available, casualty insurance
proceeds shall be applied to such repairs and/or replacements. If Landlord fails
to so promptly commence and complete the repair and/or replacement of the
Facility so that it shall be substantially the same as it was prior to such
damage or destruction, such failure shall be a Landlord Default by Landlord. The
parties agree that Landlord's obligations to repair and/or replace pursuant to
the provisions of this Section 10.1 shall be limited to the extent of available
casualty insurance proceeds (plus the amount of any applicable deductibles). The
parties further agree that if Landlord is obligated to utilize such available
casualty insurance proceeds to repay any obligations pursuant to any mortgage,
then Landlord shall be entitled to an equitable extension of time (in which
Landlord has to fulfill its obligations pursuant to the provisions of this
Section 10.1) sufficient to allow Landlord to obtain the necessary funding to
replace such spent casualty insurance proceeds and to make the repairs and/or
replacements required hereunder. The parties further agree that Landlord's
obligations to repair and/or replace pursuant to the provisions of this Section
10.1 shall be subject to Landlord's ability to obtain such entitlements and/or
other governmental approvals as may be necessary to undertake such repair and/or
replacement; provided that Landlord shall undertake good faith efforts to obtain
such entitlements and/or approvals.
10.1.1 Insufficient Insurance Proceeds.
If the cost of the repair or restoration of the Leased Property exceeds
the sum of the deductible and the amount of casualty insurance proceeds received
by Landlord pursuant to Section 9.1 (other than Section 9.1(b)), Landlord shall
give Tenant and Operator, if applicable, Notice thereof, within sixty (60) days
after notice of such deficiency, which Notice shall set forth in reasonable
detail the nature of such deficiency and whether Landlord shall pay and assume
the amount of such deficiency (Landlord having no obligation to do so, except
that, if Landlord shall elect to make such funds available, the same shall
become an irrevocable obligation of Landlord pursuant to this Agreement). If
Landlord elects to make such deficiency available for restoration, the Minimum
Rent shall be adjusted by the amount of the same as provided in Section
3.1.1(b). In the event that Landlord does not elect to make such deficiency
available for restoration, either Landlord or Tenant may terminate this
Agreement by Notice to the other, whereupon, this Agreement shall terminate as
provided in Section 10.1. It is expressly understood and agreed, however, that,
notwithstanding anything in this Agreement to the contrary, Landlord shall be
solely responsible for the amount of any deductible.
Section 10.2 Tenant's Property.
All insurance proceeds payable by reason of any loss of or damage to
any of Tenant's Personal Property shall be paid solely to Landlord and, to the
extent necessary to repair or replace Tenant's Personal Property in accordance
with Section 10.3, Landlord shall hold such proceeds in trust to pay the cost of
repairing or replacing damaged Tenant's Personal Property. If after paying the
costs associated with replacing and repairing Tenant's Personal Property in
accordance with Section 10.3 any insurance proceeds remain, Landlord shall pay
such remaining proceeds to Tenant.
Section 10.3 Restoration of Tenant's Property.
If Landlord is required to restore the Leased Property as hereinabove
provided, Landlord shall either (i) restore all alterations and improvements
made by Tenant and Tenant's Personal Property, or (ii) replace such alterations
and improvements and Tenant's Personal Property with improvements or items of
the same or better quality and utility in the operation of the Leased Property.
Section 10.4 No Abatement of Rent.
Subject to the provisions set forth in Section 10.1 and 10.1.1, this
Agreement shall remain in full force and effect and Tenant's obligation to make
all payments of Rent and to pay all other charges as and when required under
this Agreement shall remain unabated during the Term notwithstanding any damage
involving the Leased Property (provided that Landlord shall credit against such
payments any amounts paid to Landlord as a consequence of such damage under any
business interruption insurance obtained by Tenant hereunder). The provisions of
this Article X shall be considered an express agreement governing any cause of
damage or destruction to the Leased Property and, to the maximum extent
permitted by Applicable Laws, no Applicable Laws in effect during the Term which
provide for such a contingency shall have any application in such case.
Section 10.5 Waiver.
Tenant hereby waives, to the maximum extent permitted by Applicable
Laws, any statutory rights of termination which may arise by reason of any
damage or destruction of the Leased Property.
XI. CONDEMNATION
Section 11.1 Total Condemnation, Etc.
In the event all or substantially all of the Facility shall be taken in
any Condemnation or in the event a portion of the Facility shall be so taken,
but the result is that it is unreasonable to continue to operate the Facility in
accordance with the standards required by this Agreement, this Agreement shall
terminate effective as of the date of such taking or similar proceeding.
Landlord and Tenant shall each have the right to initiate such proceedings as
they deem advisable to recover any Award to which they may be entitled.
Section 11.2 Partial Condemnation.
In the event a portion of the Facility shall be taken by Condemnation
or the entire Facility is affected but on a temporary basis, and the result is
not to make it unreasonable to continue to operate the Facility, this Agreement
shall not terminate. However, so much of any Award for any such partial taking
or condemnation as shall be necessary to render the Facility equivalent to its
condition prior to such event shall be used by Tenant, or Operator if the
Operating Agreement is in effect, for such purpose; and Tenant shall have the
right to discontinue operating the Facility or portion of the Facility to the
extent it deems necessary for the safe and orderly operation of the Facility.
Section 11.3 Disbursement of Award.
In the event of any proceeding described in Section 11.1 or 11.2, the
Landlord shall receive any Award subject to the provisions of Section 15.02 of
the Operating Agreement. For this purpose, any Award received by any mortgagee
shall be deemed to be an Award received by Landlord.
Section 11.4 Abatement of Rent.
Other than as specifically provided in this Agreement, this Agreement
shall remain in full force and effect and Tenant's obligation to make all
payments of Rent and to pay all other charges as and when required under this
Agreement shall remain unabated during the Term notwithstanding any Condemnation
involving the Leased Property. The provisions of this Article XI shall be
considered an express agreement governing any Condemnation involving the Leased
Property and, to the maximum extent permitted by law, no Applicable Laws in
effect during the Term which provide for such a contingency shall have any
application in such case.
XII. DEFAULTS AND REMEDIES
Section 12.1 Events of Default.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of Minimum Rent
or Additional Rent within three (3) Business Days after Notice thereof from
Landlord to Tenant, or fail to make payment of any other Rent or any other sum
(including, but not limited to, funding of the Reserve), payable hereunder when
due and such failure shall continue for a period of ten (10) days after Notice
thereof from Landlord to Tenant; or
(b) should Tenant fail to maintain the insurance coverage
required under Article IX and such failure shall continue for three (3) Business
Days after Notice thereof; or
(c) subject to Article VIII relating to permitted
contests, should Tenant default in the due observance or performance of any of
the terms, covenants or agreements contained herein to be performed or observed
by it (other than as specified in clauses (a) and (b) above) and such default
shall continue for a period of thirty (30) days after Notice thereof from
Landlord to Tenant; provided, however, that if such default is susceptible of
cure but such cure cannot be accomplished with commercially reasonable efforts
within such period of time and if, in addition, Tenant commences to cure or
cause to be cured such default within thirty (30) days after Notice thereof from
Landlord and thereafter prosecutes the curing of such default with commercially
reasonable efforts, such period of time shall be extended to such period of time
(not to exceed one hundred eighty (180) days) as may be necessary to cure such
default with commercially reasonable efforts; or
(d) should Tenant generally not be paying its debts as
they become due or should Tenant make a general assignment for the benefit of
creditors; or
(e) should any petition be filed by or against Tenant
under the Federal bankruptcy laws, or should any other proceeding be instituted
by or against Tenant seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, reorganization, arrangement, adjustment or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for Tenant or for any substantial part of the property of Tenant and such
proceeding is not dismissed within ninety (90) days after institution thereof,
or should Tenant take any action to authorize any of the actions set forth above
in this paragraph; or
(f) should Tenant cause or institute any proceeding for
its dissolution or termination; or
(g) should an event of default occur and be continuing
under any mortgage or deed of trust which is secured by Tenant's leasehold
interest hereunder or should the mortgagee under any such mortgage accelerate
the indebtedness secured thereby or commence a foreclosure action in connection
with said mortgage and such default shall continue for a period of thirty (30)
days after Notice thereof from Landlord to Tenant; provided, however, that if
such default is susceptible of cure but such cure cannot be accomplished with
due diligence within such period of time and if, in addition, Tenant commences
to cure or cause to be cured such default within fifteen (15) days after Notice
thereof from Landlord and thereafter prosecutes the curing of such default with
all due diligence, such period of time shall be extended to such period of time
as may be necessary to cure such default with all due diligence; or
(h) unless Tenant shall be contesting such lien or
attachment in good faith in accordance with Article VIII, should the estate or
interest of Tenant in the Leased Property or any part thereof be levied upon or
attached in any proceeding and the same shall not be vacated, discharged or
fully bonded or otherwise secured to the reasonable satisfaction of Landlord
within the later of (x) one hundred and twenty (120) days after such attachment
or levy, unless the amount in dispute is less than $500,000 (as adjusted each
year by increases in the GDP Deflator), in which case Tenant shall give Notice
to Landlord of the dispute but Tenant may defend in any suitable way, and (y)
thirty (30) days after receipt by Tenant of Notice thereof from Landlord; it
being understood and agreed that Tenant may commence a contest of such matter
pursuant to Article VIII above following such Notice from Landlord; or
(i) should Tenant, its successors and assigns, cause an
"Event of Default" as defined in each of the Other Leases with respect to any of
the Other Leases; or
(j) should Tenant be in default under the Operating
Agreement or Owner Agreement beyond any applicable cure period.
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, including, without limitation, the right
of re-entry upon the Leased Property upon and at any time after the occurrence
of an Event of Default.
Notwithstanding the foregoing provisions of this Section 12.1, Landlord
and Tenant agree that (i) if, and to the extent that, the Tenant's default under
this Agreement or the Operating Agreement is caused by a default of the Landlord
(or one of its Affiliates) pursuant to the provisions of this Agreement, the
Owner Agreement or the surviving provisions of the Purchase Contract, then such
default under this Agreement or the Operating Agreement shall not be considered
a Default hereunder, and (ii) if, and to the extent that, the Tenant's default
under this Agreement is caused by a default of the Operator under the Operating
Agreement, the Owner Agreement or the Pooling Agreement, then such default shall
not be considered a default hereunder, but Tenant agrees to exercise such rights
and remedies of Tenant under the Operating Agreement as Landlord may reasonably
request provided that all reasonable costs and expenses thereof are paid by
Landlord.
During the term of the Operating Agreement, Landlord hereby agrees not
to take any action or inaction that would cause Tenant to be in default under
the terms of the Operating Agreement.
During the term of the Operating Agreement, Landlord hereby agrees and
consents to any cure of any Default or Event of Default tendered or performed by
Operator or any Affiliate of Operator within the same cure period afforded to
Tenant herein.
Section 12.2 Remedies.
None of (a) the termination of this Agreement pursuant to Section 12.1,
(b) the repossession of the Leased Property or any portion thereof, (c) the
failure of Landlord to re-let the Leased Property or any portion thereof, nor
(d) the re-letting of all or any portion of the Leased Property, shall relieve
Tenant of its liability and obligations hereunder, all of which shall survive
any such termination, repossession or re-letting. In the event of any such
termination, repossession or re-letting, Tenant shall forthwith pay to Landlord
all Rent due and payable with respect to the Leased Property through and
including the date of such termination, repossession or re-letting. Thereafter,
Tenant, until the end of what would have been the Term of this Agreement
(assuming no extension beyond the then-current Term) in the absence of such
termination, repossession or re-letting, and whether or not the Leased Property
or any portion thereof shall have been re-let, shall be liable to Landlord for,
and shall pay to Landlord, as current damages, the Rent and other charges which
would be payable hereunder for the remainder of the Term had such termination,
repossession or re-letting not occurred, less the net proceeds, if any, of any
re-letting of the Leased Property or any other operation of the Leased Property
by Landlord (if Landlord repossesses the Leased Property), after deducting all
reasonable expenses in connection with such re-letting or operation, as
applicable, including, without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alteration costs and expenses of preparation for such re-letting
(such expenses being hereinafter referred to as the "Re-letting Expenses").
Tenant shall pay such current damages to Landlord monthly on the days on which
the Minimum Rent would have been payable hereunder if this Agreement had not
been so terminated with respect to such of the Leased Property.
At any time after such termination, repossession or re-letting, in
addition to Landlord's right to receive any Rent owing and due up to and
including the date of termination, repossession or re-letting under the
preceding paragraph, Tenant shall pay to Landlord, at Landlord's election, as
liquidated final damages incurred beyond the date of such termination,
repossession or re-letting and in lieu of Landlord's right to receive any
further damages due to the such termination, repossession or re-letting, the
Re-letting Expenses incurred to date (and not theretofore paid by Tenant or
deducted by Landlord as set forth herein) and an amount equal to the present
value (discounted at the Interest Rate) of the excess, if any, of the Rent and
other charges which would be payable hereunder from the date of such
termination, repossession or re-letting (assuming that, for the purposes of this
paragraph, annual payments by Tenant on account of Impositions and Additional
Rent would be the same as payments required for the immediately preceding
thirteen Accounting Periods, or if less than thirteen Accounting Periods have
expired since the Commencement Date, the payments required for such lesser
period projected to an annual amount) for what would be the then unexpired Term
of this Agreement (assuming no extension beyond the then-current Term) if the
same remained in effect, over the fair market rental for the same period, but
excluding any period after the date of such termination, repossession or
re-letting for which amounts have become payable by Tenant under the first
paragraph of this Section 12.2. Nothing contained in this Agreement shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above. Notwithstanding the foregoing, Landlord shall use commercially
reasonable efforts to mitigate its damages which may be incurred in connection
with this Article XII.
In case of any Event of Default, re-entry, expiration or dispossession
by summary proceedings or otherwise, Landlord may (a) re-let the Leased Property
or any part or parts thereof, either in the name of Landlord or otherwise, for a
term or terms which may at Landlord's option, be equal to, less than or exceed
the period which would otherwise have constituted the balance of the Term and
may grant concessions or free rent to the extent that Landlord considers
advisable and necessary to re-let the same, and (b) may make such reasonable
alterations, repairs and decorations in the Leased Property or any portion
thereof as Landlord, in its sole and absolute discretion, considers advisable
and necessary for the purpose of re-letting the Leased Property; and the making
of such alterations, repairs and decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid. Subject to the last
sentence of this paragraph, Landlord shall in no event be liable in any way
whatsoever for any failure to re-let all or any portion of the Leased Property,
or, in the event that the Leased Property is re-let, for failure to collect the
rent under such re-letting. To the maximum extent permitted by law, Tenant
hereby expressly waives any and all rights of redemption granted under any
present or future laws in the event of Tenant being evicted or dispossessed, or
in the event of Landlord obtaining possession of the Leased Property, by reason
of the occurrence and continuation of an Event of Default hereunder. Landlord
covenants and agrees, in the event of any such termination, repossession or
re-letting as a result of an Event of Default, to use reasonable efforts to
mitigate its damages.
Section 12.3 Waiver of Jury Trial.
Landlord and Tenant hereby waive, to the maximum extent permitted by
Applicable Laws, trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other or in respect of any matter
whatsoever arising out of or in any way connected with this Agreement, the
relationship of Landlord and Tenant hereunder, Tenant's occupancy of the Leased
Property, and/or any claim for injury or damage.
Section 12.4 Application of Funds.
Any payments received by Landlord under any of the provisions of this
Agreement during the existence or continuance of any Event of Default (and any
payment made to Landlord rather than Tenant due to the existence of any Event of
Default) shall be applied to Tenant's current and past due obligations under
this Agreement in such order as Landlord may determine or as may be prescribed
by the laws of the State.
Section 12.5 Landlord's Right to Cure Tenant's Default.
If an Event of Default shall have occurred and be continuing, Landlord,
after Notice to Tenant (which Notice shall not be required if Landlord shall
reasonably determine immediate action is necessary to protect person or
property), without waiving or releasing any obligation of Tenant and without
waiving or releasing any Event of Default, may (but shall not be obligated to),
at any time thereafter, make such payment or perform such act for the account
and at the expense of Tenant, and may, to the maximum extent permitted by law,
enter upon the Leased Property or any portion thereof for such purpose and take
all such action thereon as, in Landlord's sole and absolute discretion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and paralegals' fees) incurred by Landlord in
connection therewith, together with interest thereon (to the extent permitted by
Applicable Laws) at the Overdue Rate from the date such sums are paid by
Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
Section 12.6 Good Faith Dispute.
If Tenant shall in good faith dispute the occurrence of any Default and
Tenant, before the expiration of the applicable cure period, shall give Notice
thereof to Landlord, setting forth, in reasonable detail, the basis therefor
and, provided Tenant shall escrow disputed amounts, if any, pursuant to an
escrow arrangement reasonably acceptable to Landlord and Tenant, no Event of
Default shall be deemed to have occurred; provided, however, that in the event
of any eventual adverse determination, Tenant shall pay to Landlord interest on
any disputed funds at the Disbursement Rate, from the date demand for such funds
was made by Landlord until the date of final adverse determination and,
thereafter, at the Overdue Rate until paid.
XIII. HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to one and one-half (1.50) times the Rent and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord all
damages (direct or indirect) sustained by reason of any such holding over.
Otherwise, such holding over shall be on the terms and conditions set forth in
this Agreement, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Agreement.
XIV. LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
Section 14.1 Landlord Notice Obligation.
Landlord shall give prompt Notice to Tenant and Operator of any
materially adverse matters affecting the Leased Property of which Landlord
receives written Notice or actual, conscious, present knowledge and, to the
extent Tenant otherwise has no notice or actual knowledge thereof. Landlord
shall be liable for any liabilities, costs, damages or claims (including
reasonable attorney fees) arising from failure to deliver such Notice to Tenant.
Subject to Article XIX, Landlord shall not enter into or amend any agreement
directly affecting the operation of Leased Property without Tenant's prior
written consent which consent shall not be unreasonably withheld, conditioned or
delayed. As used in this Agreement, "Landlord's knowledge" or words of similar
import shall mean the actual (and not constructive or imputed), conscious,
present knowledge, without independent investigation or inquiry of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, ▇▇. or ▇▇▇▇ ▇▇▇▇ or any subsequent officer or employee of Landlord, or
any Affiliate as to Landlord, having direct oversight responsibility for the
transactions contemplated in this Agreement.
Section 14.2 Landlord's Default.
Subject to Landlord's right to dispute its obligation in accordance
with Section 5.1.5(b), if Landlord shall default in the performance or
observance of any of its covenants or obligations set forth in this Agreement,
and any such default shall continue for a period of ten (10) days after Notice
thereof with respect to monetary defaults, and thirty (30) days after Notice
thereof with respect to non-monetary defaults, from Tenant to Landlord and,
subject to Section 19.3, any applicable Facility Mortgagee, or such additional
period as may be reasonably required to correct such non-monetary defaults,
Tenant may declare the occurrence of a "Landlord Default" under this Agreement
by giving Notice of such declaration to Landlord and to such Facility Mortgagee.
Thereafter, Tenant may (but shall have no obligation to) cure the same and,
subject to the provisions of the following paragraph, invoice Landlord for costs
and expenses (including reasonable attorneys' fees, paralegals' fees and court
costs) incurred by Tenant in curing the same. If any such costs and expenses
have not been reimbursed to Tenant as of the fifth (5th) day after the Landlord
receives Tenant's Notice therefor, Landlord shall pay to Tenant, a late charge
computed at the Overdue Rate on the amount of such reimbursement from the
expiration of the applicable cure period to the date of payment thereof. Except
as otherwise expressly provided herein to the contrary, Tenant shall have no
right to terminate this Agreement for any default by Landlord hereunder or under
the Other Leases and no right, for any such default, to offset or counterclaim
against any Rent or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of any Landlord
Default and Landlord, before the expiration of the applicable cure period, shall
give Notice thereof to Tenant, setting forth, in reasonable detail, the basis
therefor, no Landlord Default shall be deemed to have occurred and Landlord
shall have no obligation with respect thereto until final adverse determination
thereof; provided, however, that in the event of any such adverse determination,
Landlord shall pay to Tenant interest on any disputed funds at the Disbursement
Rate, from the date demand for such funds was made by Tenant until the date of
final adverse determination and, thereafter, at the Overdue Rate until paid.
During the term of the Operating Agreement, Landlord shall indemnify
and hold Tenant harmless against all claims, costs and expenses (including
reasonable attorneys' fees and paralegals' fees) arising from a Landlord Default
under the terms and conditions of this Agreement which shall cause an Event of
Default under Section 16.01 of the Operating Agreement or a breach by Landlord
of its obligations under the Owner Agreement or the Pooling Agreement. The
provisions of this Section 14.2 shall survive the termination, expiration or
cancellation of this Agreement for a period of five (5) years.
XV. TRANSFERS OR TERMINATION BY LANDLORD OR TENANT
Section 15.1 Transfer by Landlord of Leased Property.
Landlord may, in its sole and absolute discretion, sell, assign,
transfer, convey or otherwise dispose of (a "Transfer") its interest in the
Leased Property, or any portion thereof or interest therein, directly or
indirectly, to any Person without the consent of Tenant.
Section 15.2 Termination of Agreement by Landlord.
Notwithstanding anything to the contrary herein contained, Landlord
may, in its sole and absolute discretion, terminate this Agreement upon prior
Notice to Tenant effective as of the date designated in such Notice in the event
of (i) any Transfer by Landlord to any Person of its interest in the Leased
Property, or any portion thereof or interest therein, directly or indirectly, or
transfer by the partners of Landlord of their partnership interests in Landlord,
provided that such Person is an individual or Entity which is not a Related
Person, (ii) the placement or refinancing of any mortgage, deed of trust or
other security agreement on all or any part of Landlord's interest in the Leased
Property, (iii) any determination by Landlord or Operator that Tenant is not
complying with the provisions of the Operating Agreement after written notice to
Tenant and the expiration of the applicable grace period or (iv) any change in
the requirements or provisions of Section 865(d) of the Code, including
interpretations thereof, as determined in the discretion of REIT counsel to the
Landlord, which would permit the Landlord to render those services to residents
of the Leased Property which are necessary to operate the Leased Property as an
assisted living facility, directly or indirectly, including through a Related
Person, without causing income derived from such facility to be treated as other
than "rents from real property" for purposes of Section 865(d) of the Code.
Termination of this Agreement pursuant to this Section 15.2 shall not relieve
either party of its obligations under this Lease that have accrued as of the
effective date of such termination, appropriately prorated on a daily basis.
If Landlord terminates this Agreement, pursuant to sections (i), (ii)
or (iv) of the foregoing paragraph, the Landlord shall provide the Tenant with
at least three hundred sixty-five (365) days prior written notice (the
"Termination Notice"), provided however, that if the Landlord chooses to
terminate this Lease Agreement pursuant to section (i), (ii) or (iv) of the
foregoing paragraph, on any day which is prior to the three hundred sixty-fifth
(365th) day from which Landlord provided Tenant with the Termination Notice (the
"One Year Notice Date"), Landlord shall pay to Tenant an amount equal to
three-quarters (3/4) of one percent (1%) of Total Facility Revenues (the
"Termination Fee") for the period of time from the date immediately following
the effective date of the termination of this Agreement to the One Year Notice
Date. For example, if the Landlord provides the Tenant with a Termination Notice
which provides that the effective date of the termination of this Agreement will
be in a number of days equal to four (4) Accounting Periods from the date of
said Termination Notice, then the Landlord will pay to the Tenant the
Termination Fee for a number of days equal to nine (9) Accounting Periods. The
Termination Fee shall be payable to the Tenant from the Landlord on the
twenty-fifth (25th) day of each applicable Accounting Period(s). If the
Termination Fee begins to accrue on any day other than the first (1st) day of an
Accounting Period, the Termination Fee for such partial Accounting Period shall
be prorated on a per diem basis.
If this Lease Agreement is terminated for any reason, in consideration
for the Termination Notice and/or the Termination Fee, Tenant shall cooperate
with Landlord to facilitate the issuance or transfer of Licenses to the Landlord
or such other Entity which is approved by the Landlord.
XVI. SUBLETTING AND ASSIGNMENT
Section 16.1 Subletting and Assignment.
(a) Except as provided in Sections 16.2, Tenant shall not,
without Landlord's prior written consent (which may be given or withheld by
Landlord in its sole discretion), assign, mortgage, pledge, hypothecate,
encumber or otherwise transfer this Agreement or sublease (which term shall be
deemed to include the granting of concessions, licenses and the like), all or
any part of the Leased Property or suffer or permit this Agreement or the
leasehold estate created hereby or any other rights arising under this Agreement
to be assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in
whole or in part, whether voluntarily, involuntarily or by operation of law, or
permit the use or operation of the Leased Property by anyone other than Tenant,
or the Leased Property to be offered or advertised for assignment or subletting.
For purposes of this Section 16.1, an assignment of this Agreement shall be
deemed to include any direct or indirect transfer of any interest in Tenant such
that Tenant shall cease to be directly or indirectly owned by DSTS Holding, Inc.
or any transaction pursuant to which Tenant is merged or consolidated with
another Entity which is not owned by DSTS Holding, Inc. or pursuant to which all
or substantially all of Tenant's assets are transferred to any other Entity, as
if such change in control or transaction were an assignment of this Agreement.
(b) If this Agreement is assigned or if the Leased
Property or any part thereof is sublet (or occupied by anybody other than
Tenant) in violation of this Agreement, Landlord may collect the rents from such
assignee, subtenant or occupant, as the case may be, and apply the net amount
collected to the Rent herein reserved, but no such collection shall be deemed a
waiver of the provisions set forth in the first paragraph of this Section 16.1,
the acceptance by Landlord of such assignee, subtenant or occupant, as the case
may be, as a tenant, or a release of Tenant from the future performance by
Tenant of its covenants, agreements or obligations contained in this Agreement.
(c) No subletting or assignment shall in any way impair
the continuing primary liability of Tenant hereunder (unless Landlord and Tenant
expressly otherwise agree that Tenant shall be released from all obligations
hereunder), and no consent to any subletting or assignment in a particular
instance shall be deemed to be a waiver of the prohibition set forth in this
Section 16.1. No assignment, subletting or occupancy shall affect any Permitted
Use. Any subletting, assignment or other transfer of Tenant's interest under
this Agreement in contravention of this Section 16.1 shall be voidable at
Landlord's option.
Section 16.2 Required Sublease Provisions.
Any sublease of all or any portion of the Leased Property entered into
on or after the date hereof in accordance with and subject to the provisions of
Section 16.3 shall provide (a) that it is subject and subordinate to this
Agreement and to the matters to which this Agreement is or shall be subject or
subordinate; (b) that in the event of termination of this Agreement or reentry
or dispossession of Tenant by Landlord under this Agreement, Landlord may, at
its option, terminate such sublease or take over all of the right, title and
interest of Tenant, as sublessor under such sublease, and, except as provided
below, such subtenant shall, at Landlord's option, attorn to Landlord pursuant
to the then executory provisions of such sublease, except that neither Landlord
nor any Facility Mortgagee, as holder of a mortgage or as Landlord under this
Agreement, if such mortgagee succeeds to that position, shall (i) be liable for
any act or omission of Tenant under such sublease, (ii) be subject to any
credit, counterclaim, offset or defense which theretofore accrued to such
subtenant against Tenant, (iii) be bound by any previous prepayment of more than
one (1) Accounting Period, (iv) be bound by any covenant of Tenant to undertake
or complete any construction work on the Leased Property or any portion thereof,
(v) be required to account for any security deposit of the subtenant other than
any security deposit actually delivered to Landlord by Tenant, (vi) be bound by
any obligation to make any payment to such subtenant or grant any credits,
except for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person occupying any portion of the Leased
Property; and (c), in the event that such subtenant receives a written Notice
from Landlord or any Facility Mortgagee stating that an Event of Default has
occurred and is continuing, such subtenant shall thereafter be obligated to pay
all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct. All rentals received from such subtenant by
Landlord or the Facility Mortgagee, as the case may be, shall be credited
against the amounts owing by Tenant under this Agreement and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. An original
counterpart of each such sublease duly executed by Tenant and such subtenant
shall be delivered promptly to Landlord and Tenant shall remain liable for the
payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder. The provisions of
this Section 16.2 shall not be deemed a waiver of the provisions set forth in
Section 16.1(a). Notwithstanding anything to the contrary in this Section 16.2,
the Transition Period Sublease to be entered into by and between the Tenant and
the Operator of even date herewith is hereby approved by the Landlord and shall
not be required to comply with the provisions of this Section 16.2.
Section 16.3 Permitted Sublease and Assignment.
Notwithstanding the foregoing, but subject to the provisions of Section
16.4 and any other express conditions or limitations set forth herein, Tenant
may, without Landlord's consent, sublease space at the Leased Property so long
as (i) such sublease will not cause an event of default under the Operating
Agreement, if applicable, and such sublease has been approved by the Operator,
if applicable, and (ii) such subleases do not demise, in the aggregate, in
excess of six hundred (600) square feet of area.
Section 16.4 Sublease Limitation.
For so long as Landlord or any Affiliate as to Landlord shall seek to
qualify as a real estate investment trust, anything contained in this Agreement
to the contrary notwithstanding, Tenant shall not sublet the Leased Property on
any basis such that the rental to be paid by any sublessee thereunder would be
based, in whole or in part, on either (a) the income or profits derived by the
business activities of such sublessee, or (b) any other formula such that any
portion of such sublease rental would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the Code, or any similar or
successor provision thereto.
XVII. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
Section 17.1 Estoppel Certificates.
At any time and from time to time, upon not less than ten (10) Business
Days prior Notice by either party, the party receiving such Notice shall furnish
to the other a certificate certifying that this Agreement is unmodified and in
full force and effect (or that this Agreement is in full force and effect as
modified and setting forth the modifications), the date to which the Rent has
been paid, that to its knowledge no Default or an Event of Default by the other
party has occurred and is continuing or, if a Default or an Event of Default
shall exist, specifying in reasonable detail the nature thereof, and the steps
being taken to remedy the same, and such additional information as the
requesting party may reasonably request. If such additional information
reasonably requires more than ten (10) Business Days to provide, the party
furnishing such information shall be entitled to such additional period to
respond to such request as may be reasonably required under the circumstances.
Any such certificate furnished pursuant to this Section 17.1 may be relied upon
by the requesting party, its lenders and any prospective purchaser or mortgagee
of the Leased Property or the leasehold estate created hereby.
Section 17.2 Financial Statements.
Tenant shall prepare and deliver to Landlord, or shall cause Operator
to prepare and deliver to Landlord during the term of the Operating Agreement, a
copy of any and all Interim Reports or Annual Financial Reports (as such terms
are defined in the Operating Agreement) prepared by Tenant or prepared by
Operator, if applicable, in accordance with the terms of the Operating
Agreement. During the term of the Operating Agreement, Tenant shall use
commercially reasonable efforts to enforce the Operator's obligations under the
Operating Agreement to prepare any and all Interim Reports and Annual Financial
Reports. Tenant shall deliver, or shall cause Operator to deliver, the reports
referenced in this Section 17.2 within seventy-five (75) days after the close of
each Accounting Period.
Subject to any Facility Mortgagee entering into such confidentiality
agreement with Tenant and Operator, if applicable, as Tenant and Operator 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.
Section 17.3 General Operations.
Tenant shall deliver to Landlord, or shall cause Operator to deliver to
Landlord during the term of the Operating Agreement, a copy of any and all
Annual Operating Projections (as such term is defined in the Operating
Agreement) prepared by the Tenant or the Operator, if applicable. During the
term of the Operating Agreement, Tenant shall use commercially reasonable
efforts to enforce Operator's obligations to prepare the Annual Operating
Projections referenced in this Section 17.3. In addition, at Landlord's request,
Tenant, and Operator, at Tenant's direction, shall meet with Landlord on a
quarterly basis to discuss the Annual Operating Projection, Reserve Estimate,
the Building Estimate and any other items related to the operation of the
Retirement Community, which Landlord wishes to discuss. The Annual Operating
Projection shall be delivered to Landlord by Tenant, or Operator at the
direction of Tenant, within three (3) days of when the Annual Operating
Projection is due to Tenant from Operator each Fiscal Year.
XVIII. LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property at reasonable times of the day upon not less than
twenty-four (24) hours' Notice to Tenant and Operator, provided that any
inspection by Landlord or its representatives will not unreasonably interfere
with Tenant's or Operator's use and operation of the Leased Property and further
provided that in the event of an emergency, as determined by Landlord in its
reasonable discretion, prior Notice shall not be necessary.
XIX. FACILITY MORTGAGES
Section 19.1 Landlord May ▇▇▇▇▇ ▇▇▇▇.
Upon Notice from Landlord to Tenant and with the Operator's consent, to
the extent required by the Operating Agreement, Landlord may from time to time,
directly or indirectly, create or otherwise cause to exist any lien, encumbrance
or title retention agreement ("Encumbrance") upon the Leased Property, or any
portion thereof or interest therein, whether to secure any borrowing or other
means of financing or refinancing. Any Encumbrance upon the Leased Property
shall be non-recourse to the Tenant. The aggregate principal balance of all
Encumbrances upon the Leased Property shall be no greater than seventy-five
percent (75%) of the fair market value of the Retirement Community without the
prior written consent of Tenant. For the purposes hereof, the fair market value
of the Retirement Community shall mean the dollar amount resulting by
multiplying the excess of Total Facility Revenues over Property Expenses during
the thirteen (13) full Accounting Periods immediately preceding the Accounting
Period in which the calculation is made by ten (10).
Section 19.2 Subordination of Lease.
Upon Notice from Landlord, Tenant shall execute and deliver an
agreement, in form and substance reasonably satisfactory to Landlord,
subordinating this Agreement to any Encumbrance permitted pursuant to Section
19.1 and Tenant shall join in and execute any loan documents approved by
Landlord and the Facility Mortgagee that are for the purpose of granting to the
Facility Mortgagee a security interest in the interest of Tenant under this
Lease and in any and all other assets relating to the Leased Property,
including, without limitation, the Operating Agreement, Case Goods, Inventories,
subleases, license and permits but excluding Tenant's Personal Property provided
that the same shall not impose any liability on Tenant beyond Tenant's interest
under this Lease and the aforesaid assets.
Section 19.3 Notices.
Subsequent to the receipt by Tenant of Notice from Landlord as to the
identity of any Facility Mortgagee (which Notice shall be accompanied by a copy
of the applicable Encumbrance and the address of such Facility Mortgagee), no
Notice from Tenant to Landlord as to any default by Landlord under this
Agreement shall be effective unless and until a copy of the same is given to
such Facility Mortgagee at the address set forth in the above described Notice,
and the curing of any of Landlord's defaults by such Facility Mortgagee shall be
treated as performance by Landlord.
XX. ADDITIONAL COVENANTS OF TENANT
Section 20.1 Conduct of Business.
Tenant shall not, without the prior consent of Landlord, engage in any
business other than the leasing and operation of the Collective Leased
Properties 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.
Section 20.2 Maintenance of Accounts and Records.
Tenant shall keep and during the term of the Operating Agreement shall
cause Operator to keep true records and books of account of Tenant and Operator,
respectively, in which full, true and correct entries will be made of dealings
and transactions in relation to the business and affairs of Tenant, Operator and
the Retirement Community. Landlord may at reasonable intervals during Tenant's
or Operator's normal business hours examine, copy (including copying any such
records contained in software other than records relating to current or former
residents of the Retirement Community), and audit such records. The parties
shall, within thirty (30) Business Days after the receipt of the Annual
Financial Report, make any adjustments, by cash payment, needed because of the
final figures set forth in the Annual Financial Report, or send a Notice of
disputed items or matters in appropriate detail. Final adjustments, if any, will
be made at the time any disputed items or matters are resolved by the parties.
If Landlord desires, at its own expense, to audit, examine and/or review, the
Annual Financial Report and supporting records and/or certain procedures at the
Retirement Community, as may be agreed upon by Landlord, Tenant and Operator,
with respect to internal financial controls, accounting policies and accounting
procedures, or other procedures at the Retirement Community, Landlord shall
notify Tenant and Operator in writing within sixty (60) days after receipt of
such statement of its intention to audit and/or review such procedures and begin
such audit and/or review no sooner than thirty (30) days and no later than sixty
(60) days after Tenant and Operator's receipt of such Notice. Landlord shall
complete such audit and/or review within ninety (90) days after commencement
thereof. If Landlord does not make such an audit and/or review, then such Annual
Financial Report and procedures shall be deemed to be conclusively accepted by
Landlord as being correct, and Landlord shall have no right thereafter, except
in the event of fraud by Tenant and/or Operator during the term of the Operating
Agreement, to question or examine the same. If such review by Landlord
determines that the procedures specified above are not in compliance with the
terms of this Agreement, Landlord will provide Tenant and/or Operator, as
applicable, with written notice of such deficiency and Tenant and/or Operator,
as applicable shall remedy such deficiency. If any audit by Landlord discloses
an overpayment of any amounts to Tenant and/or Operator, as applicable, Tenant
and/or Operator, as applicable, shall promptly pay Landlord such amounts found
to be due, plus interest thereon at the Disbursement Rate from the date such
amounts should originally have been paid. If, however, the audit discloses that
Tenant and/or Operator has not received any amounts due it, Landlord shall pay
to Tenant and/or Operator, as applicable, such amounts, plus interest thereon at
the Disbursement Rate from the date such amounts should originally have been
paid. Landlord shall keep in confidence all information which it might gain or
gather from the examination or audit of Tenant's and Operator's accounts and
records, unless required to disclose such information pursuant to Applicable
Laws. In addition, such auditors shall sign a confidentiality agreement
reasonably acceptable to Tenant and Operator.
Section 20.3 Distributions, Payments to Affiliates, 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.
Section 20.4 Compliance with Operating Agreement.
20.4.1 Material Terms of the 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. Tenant shall
not enter into any modifications or amendments of Sections 2.03, 2.04, 2.05,
2.09, 3.01, 4.01, 4.02, 4.03, 5.01, 5.02, 6.02, 7.01, 7.02, 8.01, 8.02, 8.03,
8.05, 8.06, 9.01, 9.02, 9.03, 9.05, 11.02, 11.03, 12.01, 12.02, 12.03, 12.04,
13.01, 14.01, 15.01, 15.02, 15.03, 16.01, 16.02, 16.03, 17.01, 18.01, 18.02,
19.03, 19.09, 19.11, 19.12, 19.16, and 19.19 of the Operating Agreement, nor
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 20.4.1, 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. Additionally, Landlord and Tenant acknowledge and agree that in the
event that Operating Agreement is terminated for any reason whatsoever and a
replacement Operating Agreement is not entered into, this Agreement shall be
amended to provide for certain additional terms, conditions and obligations
which relate to and provide for the operation of the Retirement Community. Such
additional terms and conditions shall be mutually agreed to by the Landlord and
the Tenant.
20.4.2 Communication with the Operator.
Landlord and Tenant acknowledge and agree that the Landlord is hereby
authorized to communicate directly with the Operator in connection with the
operation of the Retirement Community and in connection with certain terms and
provisions set forth in the Operating Agreement, provided that Landlord shall
not take any action that would solely by reason of such action cause Tenant to
be in default under the Operating Agreement, the Pooling Agreement or the Owner
Agreement. Landlord acknowledges that it will accept the performance, by
Operator on behalf of Tenant, of all of the covenants, conditions and
obligations of Tenant contained in this Agreement.
20.4.3 Enforcement of the Operating Agreement.
The Tenant hereby agrees to use commercially reasonable efforts to
pursue and enforce any and all rights available to Tenant under the terms of the
Operating Agreement.
XXI. MISCELLANEOUS
Section 21.1 Limitation on Payment of Rent.
All agreements between Landlord and Tenant herein are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of Rent, or otherwise, shall the Rent or any other amounts payable
to Landlord under this Agreement exceed the maximum permissible under Applicable
Laws, the benefit of which may be asserted by Tenant as a defense, and if, from
any circumstance whatsoever, fulfillment of any provision of this Agreement, at
the time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by Applicable Laws, or if from any
circumstances Landlord should ever receive as fulfillment of such provision such
an excessive amount, then, ipso facto, the amount which would be excessive shall
be applied to the reduction of the installment(s) of Minimum Rent next due and
not to the payment of such excessive amount. This provision shall control every
other provision of this Agreement and any other agreements between Landlord and
Tenant.
Section 21.2 No Waiver.
No failure by Landlord or Tenant to insist upon the strict performance
of any term hereof or to exercise any right, power or remedy consequent upon a
breach thereof, and no acceptance of full or partial payment of Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of any such term. To the maximum extent permitted by law, no waiver of any
breach shall affect or alter this Agreement, which shall continue in full force
and effect with respect to any other then existing or subsequent breach.
Section 21.3 Remedies Cumulative.
To the maximum extent permitted by law, each legal, equitable or
contractual right, power and remedy of Landlord or Tenant, now or hereafter
provided either in this Agreement or by Applicable Laws or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Landlord or Tenant
(as applicable) of any one or more of such rights, powers and remedies shall not
preclude the simultaneous or subsequent exercise by Landlord or Tenant of any or
all of such other rights, powers and remedies.
Section 21.4 Severability.
Any clause, sentence, paragraph, section or provision of this Agreement
held by a court of competent jurisdiction to be invalid, illegal or ineffective
shall not impair, invalidate or nullify the remainder of this Agreement, but
rather the effect thereof shall be confined to the clause, sentence, paragraph,
section or provision so held to be invalid, illegal or ineffective, and this
Agreement shall be construed as if such invalid, illegal or ineffective
provisions had never been contained therein.
Section 21.5 Acceptance of Surrender.
No surrender to Landlord of this Agreement or of the Leased Property or
any part thereof, or of any interest therein, shall be valid or effective unless
agreed to and accepted in writing by Landlord and no act by Landlord or any
representative or agent of Landlord, other than such a written acceptance by
Landlord, shall constitute an acceptance of any such surrender.
Section 21.6 No Merger of Title.
It is expressly acknowledged and agreed that it is the intent of the
parties that there shall be no merger of this Agreement or of the leasehold
estate created hereby by reason of the fact that the same Person may acquire,
own or hold, directly or indirectly this Agreement or the leasehold estate
created hereby and the fee estate or ground landlord's interest in the Leased
Property.
Section 21.7 Conveyance by Landlord.
If Landlord or any successor owner of all or any portion of the Leased
Property shall convey all or any portion of the Leased Property in accordance
with the terms of this Agreement (specifically including Article XV) other than
as security for a debt, and the grantee or transferee of such of the Leased
Property shall expressly assume all obligations of Landlord hereunder arising or
accruing from and after the date of such conveyance or transfer, Landlord or
such successor owner, as the case may be, shall thereupon be released from all
future liabilities and obligations of Landlord under this Agreement with respect
to such of the Leased Property arising or accruing from and after the date of
such conveyance or other transfer and all such future liabilities and
obligations shall thereupon be binding upon the new owner.
Section 21.8 Quiet Enjoyment.
Landlord covenants that, so long as Tenant is not in Default under this
Agreement, Tenant shall quietly hold, occupy, enjoy and manage the Retirement
Community throughout the Term hereof free from hindrance, ejection or
molestation by Landlord or any other party claiming under, through or by right
of Landlord. Landlord agrees to pay and discharge any payments and charges and,
at its expense, to prosecute all appropriate actions, judicial or otherwise,
necessary to assure such free and quiet occupation. Additionally, Landlord
covenants that the Title Encumbrances shall not materially and adversely affect
the Tenant's use and occupancy of the Retirement Community under the terms of
this Agreement.
Section 21.9 Memorandum of Lease.
Tenant shall not record this Agreement without obtaining the prior
written consent of Landlord. Tenant shall promptly, upon the request of
Landlord, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the State in which reference is made to this
Agreement and to such provisions herein that Landlord may desire to include in
such memorandum. All costs and expenses of recording such memorandum shall be
payable by the party that records such memorandum.
Section 21.10 Notices.
(a) Notices, statements and other communications to be
given under the terms of this Agreement shall be in writing and delivered by
hand against receipt or sent by certified or registered mail or Express Mail
service, postage prepaid, return receipt requested or by nationally utilized
overnight delivery service, addressed to the parties as follows:
(b) All such Notices shall be addressed as follows,
if to Landlord to:
CNL Retirement MA2 Arkansas, LP
c/o CNL Retirement Corp.
CNL Center at City Commons
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chief Operating Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax : (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Lowndes Drosdick ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Marriott Senior Living Services, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
Arent Fox ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Tenant to:
Eight Pack Management Corp.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & Lardner
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Marriott Senior Living Services, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
Arent Fox ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, PLLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as is from time to time designated by the
party receiving the Notice. Any such Notice that is mailed in accordance
herewith shall be deemed received when delivery is received or refused, as the
case may be.
Section 21.11 Construction; Non-recourse.
Anything contained in this Agreement to the contrary notwithstanding,
all claims against, and liabilities of, Tenant or Landlord arising prior to any
date of termination or expiration of this Agreement with respect to the Leased
Property shall survive such termination or expiration. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated except
by an instrument in writing signed by all the parties thereto. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns. Each
term or provision of this Agreement to be performed by Tenant shall be construed
as an independent covenant and condition. Time is of the essence with respect to
the exercise of any rights of Tenant or Landlord under this Agreement. Except as
otherwise set forth in this Agreement, any obligations arising prior to the
expiration or sooner termination of this Agreement of Tenant (including without
limitation, any monetary, repair and indemnification obligations) and Landlord
shall survive the expiration or sooner termination of this Agreement; provided,
however, that each party shall be required to give the other Notice of any such
surviving and unsatisfied obligations within one year after the expiration or
sooner termination of this Agreement. Nothing contained in this Agreement shall
be construed to create or impose any liabilities or obligations and no such
liabilities or obligations shall be imposed on any of the shareholders,
beneficial owners, direct or indirect, officers, directors, trustees, employees
or agents of Landlord or Tenant for the payment or performance of the
obligations or liabilities of Landlord or Tenant hereunder. Further, in the
event Landlord shall be in default under this Agreement, and if as a consequence
of such default, Tenant shall recover a money judgment against Landlord, such
judgment shall be satisfied only out of the proceeds of sale received upon
execution of such judgment against the right, title and interest of Landlord in
the Leased Property and the Collective Leased Properties.
Section 21.12 Counterparts; Headings.
This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but which, when taken together, shall
constitute but one instrument and shall become effective as of the date hereof
when copies hereof, which, when taken together, bear the signatures of each of
the parties hereto shall have been signed. Headings in this Agreement are for
purposes of reference only and shall not limit or affect the meaning of the
provisions hereof.
Section 21.13 Applicable Law, Etc.
This Agreement shall be interpreted, construed, applied and enforced in
accordance with the laws of the State applicable to contracts between residents
of the State which are to be performed entirely within the State, regardless of
(i) where this Agreement is executed or delivered; or (ii) where any payment or
other performance required by this Agreement is made or required to be made; or
(iii) where any breach of any provision of this Agreement occurs, or any cause
of action otherwise accrues; or (iv) where any action or other proceeding is
instituted or pending; or (v) the nationality, citizenship, domicile, principal
place of business, or jurisdiction of organization or domestication of any
party; or (vi) whether the laws of the forum jurisdiction otherwise would apply
the laws of a jurisdiction other than the State; or (vii) any combination of the
foregoing.
To the maximum extent permitted by Applicable Laws, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State as is provided by Applicable Laws; and the parties consent to the
jurisdiction of said court or courts located in the State and to service of
process by registered mail, return receipt requested, or by any other manner
provided by Applicable Laws.
Section 21.14 Right to Make Agreement.
Each party warrants, with respect to itself, that neither the execution
of this Agreement, nor the consummation of any transaction contemplated hereby,
shall violate any provision of any Applicable Laws, or any judgment, writ,
injunction, order or decree of any court or governmental authority having
jurisdiction over it; nor result in or constitute a breach or default under any
indenture, contract, other commitment or restriction to which it is a party or
by which it is bound; nor require any consent, vote or approval which has not
been given or taken, or at the time of the transaction involved shall not have
been given or taken. Each party covenants that it has and will continue to have
throughout the term of this Agreement and any extensions thereof, the full right
to enter into this Agreement and perform its obligations hereunder.
Section 21.15 Disclosure of Information.
(a) Any Proprietary Information obtained by Landlord with
respect to Tenant pursuant to the provisions of this Agreement shall be treated
as confidential, except that such information may be used, subject to
confidentiality safeguards mutually acceptable to Landlord and Tenant, in any
litigation between the parties and except further that, subject to the terms of
Section 22.16, Landlord may disclose such information to its prospective
lenders, provided that Landlord shall direct and obtain the agreement of such
lenders to maintain such information as confidential.
(b) The parties hereto agree that the matters set forth in
this Agreement and any revenue, expense, net profit, fee rates and occupancy
information provided by Tenant or any of the Affiliates of Tenant are strictly
confidential and each party will make every effort to ensure that the
information is not disclosed to any Person that is not an Affiliate as to any
party (including the press) other than the Operator, or any Affiliate of
Operator, without the prior written consent of the other party, except as may be
required by Applicable Laws and as may be reasonably necessary to obtain
licenses, permits and other public approvals necessary for the refurbishment or
operation of the Retirement Community, or, subject to the restrictions of
Section 22.15(c) relative to the contents of any Prospectus, in connection with
a Landlord financing, a sale of the Retirement Community, or a sale of a
controlling interest in Landlord.
(c) No reference to Tenant, or any of Tenant's Affiliates
will be made in any prospectus, private placement memorandum, offering circular
or offering documentation related thereto (collectively, the "Prospectus"),
issued by Landlord or any of its Affiliates, which is designed to interest
potential investors in the Retirement Community, unless Tenant has previously
received a copy of all such references and has approved in writing the use of
such references. No Prospectus shall include fee rate and occupancy data or
revenue, expense or net profit information pertaining to the Retirement
Community. Regardless of whether Tenant so receives a copy of the Prospectus or
has approved any references to Tenant or any of Tenant's Affiliates in the
Prospectus, neither Tenant nor Tenant's Affiliates will be deemed a sponsor of
the offering described in the Prospectus, nor will they have any responsibility
for the Prospectus, and the Prospectus will so state. Unless Tenant agrees in
advance, the Prospectus will not include any trademark, symbols, logos or
designs of Tenant, or any of Tenant's Affiliates. Landlord shall indemnify,
defend and hold Tenant and Tenant's Affiliates harmless from and against all
loss, costs, liability and damage (including reasonable attorneys' fees and
expenses, and all costs of litigation) arising out of any Prospectus or the
offering described therein; and this obligation of Landlord shall survive the
termination of this Agreement.
(d) The obligations of Tenant and Landlord contained in
this Section 22.15 shall survive the expiration or earlier termination of this
Agreement.
Section 21.16 Competing Facilities.
Neither this Agreement nor anything implied by the relationship between
Landlord and Tenant shall prohibit Tenant, from constructing, operating,
promoting, and/or authorizing others to construct, operate, or promote one or
more assisted living facilities or any other business operations of any type, at
any location, including a location proximate to the Land. Landlord acknowledges,
accepts and agrees further that Tenant and Tenant's Affiliates retain the right,
from time to time, to construct or operate, or both, or promote or acquire, or
authorize or otherwise license others to construct or operate, or both, or
promote or acquire any assisted living facilities or other business operations
of any type whatsoever, including, but not by way of limitation, those listed
above, at any location including one or more sites which may be adjacent,
adjoining or proximate to the Land, which business operations may be in direct
competition with the Leased Improvements and that any such exercise may
adversely affect the operation of the Leased Improvements.
[SIGNATURES BEGIN ON THE NEXT PAGE.]
IN WITNESS WHEREOF, the parties have executed this Lease Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
CNL RETIREMENT MA2 ARKANSAS, LP, a Delaware
limited partnership
By: CNL Retirement MA2 GP Holding, LLC,
a Delaware limited liability company,
Its sole general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President
TENANT:
EIGHT PACK MANAGEMENT CORP.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
EXHIBIT "A"
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Initial Term Minimum Rent
The amount of Minimum Rent due during the Term shall be calculated as
follows: From the Commencement Date of this Agreement until the last day of the
Term, total Minimum Rent for each Fiscal Year will be an annual amount equal to
the sum of the product of (i) Landlord's Computation Basis plus Landlord's
Additional Investment, multiplied by (ii) a rate equal to the following (the
"Lease Rate"):
For Accounting Year 1 - 10.25%;
Commencing with the 2nd Accounting Year, and on the first day of each
Accounting Year thereafter during the Initial Term, Lease Rate shall
increase by three percent (3%) over the Lease Rate for the immediately
preceding Accounting Year. Accordingly, the Lease Rate used to
calculate Minimum Rent owing from the 2nd Accounting Year through the
end of the Initial Term of this Agreement shall be as follows:
For Accounting Year 2 - 10.56%;
For Accounting Year 3 - 10.87%
For Accounting Year 4 - 11.20%;
For Accounting Year 5 - 11.53%;
For Accounting Year 6 - 11.88%;
For Accounting Year 7 - 12.24%;
For Accounting Year 8 - 12.61%;
For Accounting Year 9 - 12.98%;
For Accounting Year 10 - 13.37%;
For Accounting Year 11 - 13.78%;
For Accounting Year 12 - 14.19%;
For Accounting Year 13 - 14.61%;
For Accounting Year 14 - 15.05%;
For Accounting Year 15 - 15.50%.
During any Extension Term, the Lease Rate for each Accounting Year also
shall increase by three percent (3%) over the Lease Rate for the immediately
preceding Accounting Year. Any adjustment to the Minimum Rent pursuant hereto
shall be memorialized in an amendment to this Agreement fully executed by
Landlord and Tenant. If the Minimum Rent is to be adjusted because Landlord has
expended funds for an item which qualifies as Landlord's Additional Investment,
such adjustment shall be effective on the date Landlord actually expends the
funds; provided, however, that Tenant shall not be required to account for such
adjustment until the date Landlord and Tenant fully execute the amendment to
this Agreement.
EXHIBIT "B"
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Properties Number of Resident Rooms
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1. Brighton Gardens by ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇
▇. Brighton Gardens by ▇▇▇▇▇▇▇▇ - ▇▇▇▇▇, ▇▇ ▇▇▇
▇. MapleRidge by Marriott - Hemet, CA 84
4. MapleRidge by Marriott - Willoughby, OH 84
5. MapleRidge by Marriott - Plymouth, MA 84
6. Brighton Gardens by Marriott - Orland Park, IL 120
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Total 612
EXHIBIT "C"
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The Land
EXHIBIT "D"
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PROPERTY EXPENSES
"Property Expenses" shall mean any or all, as the context requires, of
the following:
1. All costs of operating the Retirement Community incurred in
accordance with the Operating Agreement, including, without limitation, all
salaries, wages, fringe benefits, payroll taxes and other costs related to the
Retirement Community'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, computer services/support, the cost of advertising, marketing
and business promotion for the Retirement Community, heat, light, power,
electricity, gas, telephone, cable and other utilities, and routine repairs,
maintenance and minor alterations treated as Property Expenses under Section
5.1.1 of this Agreement;
2. The cost of Inventories and FAS consumed in the operation of
the Retirement Community;
3. A reasonable reserve for uncollectible accounts receivable 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
Operator to perform services required or permitted hereunder; provided Tenant,
or Operator at the direction of Tenant will notify Landlord at least thirty (30)
days in advance of any proposed expenditure under this paragraph 4 which is in
excess of Twenty-Five Thousand Dollars ($25,000.00) in any Fiscal Year (to be
adjusted by the GDP Deflator) and which was not specifically identified in the
Annual Operating Projection; and Operator shall consider in good faith any
comments which Landlord may have with respect to such proposed expenditure; and
provided, further, that if such expenditure involves immediately-needed repair
work to the Retirement Community or if immediate action is otherwise required,
the above-described requirement regarding thirty (30) days prior Notice shall be
modified to require whatever notice period is reasonable under the
circumstances;
5. The reasonable cost and expense of technical consultants and
operational experts who are employees of Operator or an Affiliate of Operator,
and who perform specialized services in connection with Retirement Community
work; provided, however, that the costs and expenses so incurred shall only be
Property Expenses to the extent such costs and expenses are reasonable and
competitively priced, as compared to similar work done by outside consultants or
experts; and provided, further, that Operator will notify Tenant and Landlord at
least thirty (30) days in advance of any proposed expenditure under this
paragraph 5 which is in excess of Twenty-Five Thousand Dollars ($25,000.00) in
any Fiscal Year (to be adjusted by GDP Deflator) and which is not specifically
identified in the Annual Operating Projection, and Operator shall consider in
good faith any comments which Landlord and Tenant may have with respect to such
proposed expenditure; and provided, further, that if such expenditure involves
immediately-needed repair work to the Retirement Community or if immediate
action is otherwise required, the above-described requirement regarding thirty
(30) days prior Notice shall be modified to require whatever notice period is
reasonable under the circumstances;
6. Costs and expenses for preparation of Medicare and Medicaid
cost reports and billing submissions, if applicable;
7. The Base Management Fee payable under the Operating Agreement;
8. Insurance costs and expenses as provided in Article 12 of the
Operating Agreement;
9. All Additional Charges;
10. Payments into the Reserve pursuant to Section 5.1.2;
11. Such other non-capital costs and expenses incurred by Operator
as are specifically provided for elsewhere in the Operating Agreement or are
otherwise reasonably necessary for the proper and efficient operation of the
Retirement Community; all as determined in accordance with GAAP;
12. Lease payments for any equipment leases to the extent set forth
in Section 8.02.D of the Operating Agreement; and
13. 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 Retirement Community
(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 or as the Tenant's responsibility as "Owner"
under the Operating Agreement, all of which shall be paid by Landlord from its
own funds, and not from Total Facility Revenues nor from the Reserve. Unless
otherwise specifically set forth in this Agreement, all the costs and expenses
of the Retirement Community shall be Property Expenses.
EXHIBIT "E"
EXISTING TITLE ENCUMBRANCES