EXHIBIT 10.1
Lease Agreement
by and between
COUNTRYSIDE ALF, LLC,
a New York limited liability company
as "Landlord"
and
ARCLP - CHARLOTTE, LLC
a Tennessee limited liability company
as "Tenant"
Dated December 31, 2001
LEASE AGREEMENT
THIS LEASE AGREEMENT ("LEASE") is made and entered into as of the 31st
day of December, 2001 by and between COUNTRYSIDE ALF, LLC, a New York limited
liability company ("LANDLORD") having an address of ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and ARCLP-CHARLOTTE, LLC, a Tennessee limited
liability company ("TENANT"), having an address of c/o American Retirement
Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, Landlord has purchased from Tenant, a subsidiary of American
Retirement Corporation, a Tennessee corporation ("ARC"), certain real property,
all improvements thereon (the "IMPROVEMENTS") and all appurtenances thereto,
comprising a continuing care retirement community known as "Carriage Club of
Charlotte", located in Charlotte, North Carolina and more specifically described
in Exhibit "A" attached hereto, together with the furniture, machinery,
equipment, appliances, fixtures, supplies and other personal property used in
connection therewith as more specifically described on Exhibit "B" attached
hereto ("LANDLORD PERSONAL Property"). The foregoing real and personal property
owned by Landlord as described in this Recital shall be collectively referred to
in this Lease as the "PREMISES";
WHEREAS, Landlord desires to lease the Premises to Tenant, and Tenant
desires to lease the Premises from Landlord.
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NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein, Landlord hereby leases and lets unto Tenant the
Premises for the term and upon the conditions and provisions hereinafter set
forth.
1. TERM.
1.1 TERM. The term of this Lease shall commence at 12:01 a.m. on
December 31, 2001 (the "COMMENCEMENT Date") and shall end at 11:59 p.m.
on December 31, 2016 (the "INITIAL TERM") unless extended pursuant to
Section 1.2 or earlier terminated in accordance with the provisions
hereof. The Initial Term and all Renewal Terms are referred to
collectively as the "TERM". (Each 12 month period commencing on January
1st of each calendar year during the Term shall be referred to herein as
a "LEASE YEAR".)
1.2 RENEWAL TERMS. The Initial Term may be extended for two (2)
separate renewal terms (each a "RENEWAL Term") of five (5) years each,
upon the satisfaction of all of the following terms and conditions:
1.2.1 At least three hundred sixty (360) days prior to
the end of the then current Term, Tenant shall have given
Landlord written notice that Tenant desires to exercise its
right to extend the then current Term for the succeeding Renewal
Term.
1.2.2 This Lease shall be in full force and effect and
Tenant shall not then be in material default of its obligations
beyond any applicable periods of grace and/or notice and cure.
1.2.3 All other provisions of this Lease shall remain in
full force and effect and shall continuously apply throughout
the Renewal Term(s).
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2. RENT. During the Initial Term and all Renewal Terms, minimum rent
("MINIMUM RENT") shall be paid by Tenant to Landlord at the address set forth in
Section 14 of this Lease (except as otherwise provided in Section 2.1 below),
without abatement, deduction or set-off, as follows:
2.1 MINIMUM RENT. During the Initial Term and all Renewal Terms
Minimum Rent shall be paid to Landlord by Tenant monthly in advance on
the first business day of each month (except for the payment made upon
the execution hereof as provided in Section 2.1.1 below), and shall be
calculated as follows:
2.1.1 Upon the execution hereof, Tenant has delivered to
Landlord Minimum Rent in the amount of $_______________,
representing prorated Minimum Rent for December 31, 2001.
2.1.2 Except as provided in Section 2.1.1, the Minimum
Rent for each month from January, 2002 through July, 2008 (the
scheduled maturity of the ▇▇▇▇▇▇ Loan), inclusive, shall be the
sum of $236,374.11 (the monthly Permitted Loan Debt Service to
▇▇▇▇▇▇), plus an amount equal to the Landlord Investment
Component.
2.1.3 For the month of August, 2008 and for each month
during the Term thereafter, the Minimum Rent shall be the sum of
the Theoretical Debt Service plus an amount equal to the
Landlord Investment Component. The Minimum Rent shall be
calculated every month and shall be adjusted to reflect any
change in the interest rate of any Permitted Mortgage Loan.
Exhibit "D-1" attached hereto demonstrates the calculation of
Minimum Rent as set forth in this Section 2.1.3.
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2.1.4 As used herein:
"▇▇▇▇▇▇" shall mean ▇▇▇▇▇▇ Financial, Inc., a
Delaware corporation, together with its successors and
assigns.
"▇▇▇▇▇▇ LOAN" shall mean that certain loan from
▇▇▇▇▇▇ to Tenant, in the original principal amount of
$36,000,000, evidenced by that certain Fixed Rate
Program Promissory Note Secured by Mortgage dated July
9, 1998 in said principal amount, payable to ▇▇▇▇▇▇, and
any modifications, renewals or extensions thereof, as
assumed by Landlord pursuant to that certain Assumption
Agreement and Amendment to Loan Documents of even date
herewith. The parties hereto agree that the terms and
conditions of the ▇▇▇▇▇▇ Loan as of the commencement
date of this Lease are commercially reasonable and
customary.
"INDEX" means the Consumer Price Index - All
Urban Consumers, U.S. City Average (All Items)
(1982=100), as published by the Department of the Bureau
of Labor Statistics, United States Department of Labor.
In the event the Index ceases to be published there
shall be made in the method of computation of Minimum
Rent herein provided such revisions as the circumstances
may require to carry out the intent of this Section 2.1.
"LANDLORD INVESTMENT COMPONENT" shall mean, for
any month, Landlord's Adjusted Investment Amount as
determined for the year in which such month occurs,
multiplied by ten percent (10%) and divided by twelve
(12).
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"LANDLORD'S ADJUSTED INVESTMENT AMOUNT" shall
mean, (a) during the first calendar year of the Term
(i.e., January, 2002 through December, 2002), the sum of
$10,567,851.72 (the sum of the purchase price for the
Premises paid by Landlord plus Landlord's closing
expenses minus the principal balance of ▇▇▇▇▇▇ Loan as
of the closing) and (b) for each subsequent calendar
year of the Term, the Landlord's Adjusted Investment
Amount as in effect during the immediately preceding
calendar year, multiplied by a fraction, the numerator
of which shall be the Index number as in effect on
(i.e., as published immediately prior to) January 1 of
such subsequent calendar year and the denominator of
which shall be the Index number as in effect on (i.e.,
as published immediately prior to) January 1 of the
immediately preceding calendar year. In addition,
Landlord's Adjusted Investment Amount shall be adjusted
as provided in Section 4.10 hereof.
"PERMITTED LOAN DEBT SERVICE" shall mean, for
any month, the regularly scheduled installments of
principal and/or interest and any other payments
required under any Permitted Mortgage Loan first due and
payable during such month.
"PERMITTED MORTGAGE LENDER" shall mean ▇▇▇▇▇▇
and any other commercial lending institution that
generally engages in the business of making real estate
loans, but shall not include any competitor of ARC.
"PERMITTED MORTGAGE LOAN" shall mean any loan to
Landlord from a Permitted Mortgage Lender that is
secured by a valid mortgage or
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deed of trust lien on the Premises; provided that (i)
the terms and conditions of such loan, and all
instruments, documents and agreements evidencing or
relating to such loan (collectively, "PERMITTED MORTGAGE
LOAN DOCUMENTS"), shall be commercially reasonable and
customary, (ii) Tenant shall have consented in writing
to such Permitted Mortgage Loan Documents and their
terms and conditions in advance of the making of such
loan (which consent shall not be unreasonably withheld,
conditioned or delayed), (iii) the amount of such loan
shall not, when aggregated with the outstanding
principal amount of any other Permitted Mortgage Loans
then in effect, exceed eighty-five percent (85%) of the
Fair Market Value (as defined in attached Exhibit "C")
of the Premises at the time that such loan is first
made, and (iv) such loan is permitted by, and will not
constitute a default under, any other Permitted Mortgage
Loan.
"PREVAILING INTEREST RATE" shall mean the per
annum interest rate in effect with respect to any
Permitted Mortgage Loan.
"THEORETICAL PRINCIPAL" shall mean (i) as of
July 1, 2008, the sum of $31,400,131, and (ii) for each
month of the Term thereafter, the theoretical principal
balance of a loan in such amount amortized in equal
consecutive monthly installments of principal and
interest over the Theoretical Loan Term at the rate of
6.87% per annum, compounded monthly. Exhibit "D-2"
attached hereto demonstrates the amortization of
Theoretical Principal.
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"THEORETICAL DEBT SERVICE" shall mean, as of any
date of determination, the theoretical amount that would
be necessary to amortize fully a loan in the principal
amount of the Theoretical Principal in equal consecutive
monthly installments of principal and interest over the
Theoretical Loan Term, in each case at the Prevailing
Interest Rate in effect on such date.
"THEORETICAL LOAN TERM" shall mean, as of any
date of determination, 300 months less the number of
full months of the Term that have elapsed prior to the
month in which the date of determination occurs.
2.1.5 When so agreed by the parties, and in any event if
Landlord has defaulted in the making of payments in respect of
any Permitted Mortgage Loan or Tenant reasonably believes any
such default is likely, Tenant may pay the portion of the
Minimum Rent attributable to Permitted Loan Debt Service
directly to the Permitted Mortgage Lender(s) entitled thereto.
2.2 ADDITIONAL RENT. In addition to Minimum Rent, Tenant shall
pay as additional rent hereunder all other amounts, liabilities,
obligations and Impositions (as hereinafter defined) which Tenant
assumes or agrees to pay under this Lease and any fine, penalty,
interest, charge and cost which may be added for nonpayment or late
payment of such items (collectively the "ADDITIONAL RENT"). The Minimum
Rent and Additional Rent are referred to herein as "RENT". Landlord
shall have all legal, equitable and contractual rights, powers and
remedies provided either in this Lease or by statute or otherwise in the
case of nonpayment of the Rent.
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2.3 PAYMENT ON TERMINATION. In the event the Tenant shall fail
to exercise any option to renew this Lease, or this Lease otherwise
terminates for any reason prior to December 31, 2026, Tenant shall pay
to Landlord upon termination an amount (the "SPECIAL LUMP SUM PAYMENT")
calculated as follows:
(a) If the termination is effective as of a date prior
to July 1, 2008, the Special Lump Sum Payment shall be in an
amount equal to the difference between (i) the principal balance
of the ▇▇▇▇▇▇ Loan as of the date of termination and (ii) the
principal balance, as of the date of termination, of a
theoretical loan in the initial principal amount of $34,779,918
as of December 31, 2001, amortized in equal consecutive monthly
installments of principal and interest over a period of 300
months at the rate of 6.87% per annum, compounded monthly.
(b) If the termination is effective as of July 1, 2008,
the Special Lump Sum Payment shall be in the amount of $914,098.
(c) If the termination is effective as of a date
subsequent to July 1, 2008, the Special Lump Sum Payment shall
be in an amount equal to the principal balance, as of the date
of termination, of a theoretical loan in the initial principal
amount of $914,098 as of July 1, 2008, amortized in equal
consecutive monthly installments of principal and interest over
a period of 222 months at the rate of 6.87% per annum,
compounded monthly.
2.4 PRORATION FOR PARTIAL PERIODS. Except as otherwise provided
herein, the Rent for any month during the Term that begins or ends on
other than the first or last calendar day of such month shall be
prorated based on actual days elapsed.
2.5 ABSOLUTE NET LEASE. All rent payments shall be absolutely
net to the Landlord free of all Impositions (as defined below), utility
charges, operating expenses, refurnishings, insurance premiums or any
other charge or expense in connection with the Premises. All expenses
and charges, whether for upkeep, maintenance, repair, refurnishing,
refurbishing, restoration, replacement, insurance premiums, real estate
or other property taxes, utilities, and other operating or other charges
of a like nature or otherwise, shall be paid by
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Tenant. This provision is not in derogation of the specific provisions
of this Lease, but in expansion thereof and as an indication of the
general intention of the parties hereto.
2.6 NO TERMINATION, ABATEMENT, ETC. Except as otherwise
specifically provided in this Lease, Tenant shall remain bound by this
Lease in accordance with its terms. Tenant shall not, without the
consent of Landlord, modify, surrender or terminate the Lease, nor seek
nor be entitled to any abatement, deduction, deferment or reduction of
Rent, or set-off against the Rent. Except as expressly provided in this
Lease, the obligations of Landlord and Tenant shall not be affected by
reason of (i) any damage to, or destruction of, the Premises or any part
thereof from whatever cause or any Taking (as hereinafter defined) of
the Premises or any part thereof; or (ii) the lawful or unlawful
prohibition of, or restriction upon, Tenant's use of the Premises, or
any part thereof, the interference with such use by any person,
corporation, partnership or other entity, or by reason of eviction by
paramount title. Except as otherwise specifically provided in this
Lease, Tenant hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it
by law to modify, surrender or terminate this Lease or quit or surrender
the Premises or any portion thereof.
3. TAXES, ASSESSMENTS AND OTHER CHARGES.
3.1 PAYMENT OF IMPOSITIONS. Tenant shall pay, as Additional
Rent, all Impositions that may be levied or become a lien on the
Premises or any part thereof at any time (whether prior to or during the
Term), without regard to prior ownership of said Premises, before any
fine, penalty, interest, or cost is incurred; provided, however, Tenant
may contest any Imposition in accordance with Section 3.4. Tenant shall
deliver to Landlord [i] not more than five (5) days after the due date
of each Imposition, copies of the invoice for such Imposition and the
check delivered for payment thereof; and [ii] not more than 30 days
after the due date of each
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Imposition, a copy of the original receipt evidencing such payment or
other proof of payment satisfactory to Landlord. Tenant's obligation to
pay such Impositions shall be deemed absolutely fixed upon the date such
Impositions become a lien upon the Premises or any part thereof. Tenant,
at its expense, shall prepare and file all tax returns and reports in
respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing
authority if an Event of Default has occurred and is continuing.
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 Premises as may be necessary to prepare any required returns and
reports. In the event any governmental authority having jurisdiction
classifies any property covered by this Lease as personal property,
Tenant shall file any required personal property tax returns in each
jurisdiction in which the same must be filed. Landlord, to the extent it
possesses the same, and Tenant, to the extent it possesses the same,
will provide the other party, upon request, with cost and depreciation
records necessary for filing returns for any property so classified as
personal property. In the event Landlord is legally required to file
personal property tax returns, Tenant will be provided with copies of
assessment notices indicating a value in excess of the reported value in
sufficient time for Tenant to file a protest. Tenant shall reimburse
Landlord for all personal property taxes paid by Landlord within thirty
(30) days after receipt of ▇▇▇▇▇▇▇▇ accompanied by copies of a ▇▇▇▇
therefor and payments thereof which identify the personal property with
respect to which such payments are made.
3.2 DEFINITION OF IMPOSITIONS. "IMPOSITIONS" means,
collectively, [i] all real estate and personal property ad valorem,
sales and use, business or occupation, single business,
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gross receipts, transaction privilege, rent or similar taxes assessed
against or with respect to the Premises, this Lease, the Rent payable
hereunder or Tenant's business operation at the Premises; [ii]
assessments (including without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed with the Term); [iii]
ground rents, water, sewer or other rents and charges, excises, tax
levies, and fees (including without limitation, license, permit,
inspection, authorization and similar fees); [iv] all taxes imposed on
Tenant's operations of the Premises, including without limitation,
employee withholding taxes, income taxes and intangible taxes; [v] all
taxes imposed by the State of North Carolina (the "STATE") or any
governmental entity in the State with respect to the conveyance of the
Premises by Landlord to Tenant or Tenant's designee, including without
limitation, conveyance taxes and capital gains taxes; and [vi] all other
governmental charges, in each case whether general or special, ordinary
or extraordinary, or foreseen or unforeseen, of every character in
respect of the Premises or any part thereof and/or the Rent (including
all interest and penalties thereon due to any failure in payment by
Tenant), which at any time prior to, during or in respect of the Term
hereof may be assessed or imposed on or in respect of or be in a lien
upon [a] Landlord or Landlord's interest in the Premises or any part
thereof; [b] the Premises or any part thereof or any rent therefrom or
any estate, right, title or interest therein; or [c] any occupancy,
operation, use or possession of, or sales from, or activity conducted
on, or in connection with the Premises or the leasing or use of the
Premises or any part thereof. Notwithstanding anything herein to the
contrary, "Impositions" shall not include, and Tenant shall not be
required to pay, any tax based on, or calculated with reference to,
Landlord's income or revenues by any governmental entity.
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3.3 PRORATION. Impositions imposed in respect of the tax-fiscal
period during which the Term terminates shall be adjusted and prorated
between Landlord and Tenant, regardless of whether such Imposition is
imposed before or after such termination, and Tenant's obligation to pay
its prorated share thereof shall survive such termination.
Notwithstanding the foregoing to the contrary, (a) if Tenant or its
assignee exercises the right of first refusal pursuant to the terms of
Section 6.2 hereof, Impositions shall not be prorated and shall remain
the obligation of Tenant after termination of this Lease, and (b) if
this Lease is terminated because of the occurrence of an Event of
Default, Impositions imposed in respect of the portion of the tax-fiscal
period during which the Term terminates that are attributable to the
period prior to termination shall remain the obligation of Tenant, shall
not be prorated and shall be considered an element of the damages
recoverable by the Landlord because of the occurrence of such Event of
Default.
3.4 RIGHT TO PROTEST. Landlord and/or Tenant shall have the
right, but not the obligation, to protest the amount or payment of any
Impositions; provided that in the event of any protest by Tenant,
Landlord shall not incur any expense because of any such protest, Tenant
shall diligently and continuously prosecute any such protest and
notwithstanding such protest Tenant shall pay any such Imposition before
the imposition of any penalty.
3.5 TAX BILLS. Landlord shall promptly forward to Tenant copies
of all tax bills and payment receipts relating to the Impositions
received by Landlord.
3.6 OTHER CHARGES. Tenant agrees to pay and discharge,
punctually as and when the same shall become due and payable without
penalty, all electricity, gas, garbage collection, cable television,
telephone, water, sewer, and other utilities costs and all other
charges, obligations or deposits assessed against the Premises during
the Term.
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4. INSURANCE.
4.1 GENERAL INSURANCE REQUIREMENTS. All insurance provided for
in this Lease shall be maintained under valid and enforceable policies
issued by insurers of recognized responsibility, approved to do business
in the State having a general policyholders rating of not less than "A"
and a financial rating of not less than "X" in the then most current
Best's Insurance Report. Any and all policies of liability insurance
required under this Lease shall name the Landlord and any Permitted
Mortgage Lender (as defined hereinafter) as an additional named insured
and shall be on an "occurrence" or "claims made" basis (at Tenant's
election); provided, however, the proceeds of any business interruption
policy shall be payable to Tenant without relieving Tenant in any way of
its obligation to pay Rent under this Lease. In addition, Landlord shall
be shown as the loss payable beneficiary under the casualty insurance
policy maintained by Tenant pursuant to Section 4.2. All policies of
insurance required herein may be in the form of "blanket" or "umbrella"
type policies which shall name the Landlord and Tenant as their
interests may appear and allocate to the Premises the full amount of
insurance required hereunder. All policies of insurance required herein
shall have deductibles and/or self-insured retention limits, as
applicable, in such amounts as are reasonably available to Tenant and as
are then customary for businesses engaged in activities similar to the
Retirement Care Facility (as defined in Section 5.2 below) in similar
locales. Certificates from the insurers evidencing the existence of all
policies of insurance required by this Lease and showing the interest of
the Landlord shall be filed with the Landlord prior to the commencement
of the Term and shall provide that the subject policy may not be
canceled except upon not less than ten (10) days' prior written notice
to Landlord. Certificates from the insurers evidencing the existence of
any renewal policies shall be deposited with Landlord upon renewal of
the applicable policies. Any
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claims under any policies of property insurance described in this Lease
shall be adjudicated by and at the expense of the Tenant or of its
insurance carrier, and if (and to the extent that) either Landlord or
Tenant participates in such adjudication then the parties shall
cooperate fully with each other in such participation.
4.2 PROPERTY INSURANCE. At Tenant's expense, Tenant shall
maintain in full force and effect a property insurance policy or
policies insuring the Premises against the following:
4.2.1 Loss or damage commonly covered by a "Special
Form" policy (also known as an "All Risk Policy") insuring
against physical loss or damage to the Premises, including but
not limited to, risk of loss from fire and other hazards,
collapse, transit coverage, vandalism, malicious mischief, and
any other risk as is normally covered under such a policy. The
policy shall be in the amount of the Full Replacement Value (as
hereinafter defined) of the Premises and shall contain a
deductible amount reasonably acceptable to Landlord and any
Permitted Mortgage Lender (as hereinafter defined) in light of
all applicable circumstances (including general industry
conditions), but in no event shall Landlord require such
deductible amount to be less than the deductible amount in
effect immediately prior to the Commencement Date. Landlord
shall be named as an additional insured. The policy shall
include a stipulated value endorsement or agreed amount
endorsement and endorsements for contingent liability for
operations of building laws, demolition costs, and increased
cost of construction.
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4.2.2 If applicable, loss or damage by explosion of
steam boilers, pressure vessels, or similar apparatus, now or
hereafter installed on the Premises, in commercially reasonable
amounts acceptable to Landlord.
4.2.3 Consequential loss of rents and income coverage
insuring against all "Special Form" risk of physical loss or
damage with limits and deductible amounts acceptable to Landlord
covering risk of loss during the first 9 months of
reconstruction, and containing an endorsement for extended
period of indemnity of at least 6 months, and shall be written
with a stipulated amount of coverage if available at a
reasonable premium.
4.2.4 If the Premises is located, in whole or in part,
in a federally designated 100-year flood plain area, flood
insurance for all Improvements of every nature whatsoever now or
hereafter situated on the Premises in an amount equal to the
lesser of (i) the Full Replacement Value (as defined in Section
4.6) of the Improvements; or (ii) the maximum amount of
insurance available for the Improvements under all federal and
private flood insurance programs.
4.2.5 Loss or damage caused by the breakage of plate
glass in commercially reasonable amounts acceptable to Landlord.
4.2.6 Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or
paper currency, depositor's forgery, and loss of property of
patients accepted by Tenant for safekeeping, in commercially
reasonable amounts acceptable to the Landlord.
4.3 PUBLIC LIABILITY. At Tenant's expense, Tenant shall maintain
liability insurance against the following:
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4.3.1 Claims for personal injury or property damage
commonly covered by commercial general liability insurance, with
endorsements for contractual, personal injury, products and
completed operations, broad form property damage and extended
bodily injury, in commercially reasonable amounts for bodily
injury and property damage acceptable to Landlord, but with a
combined single limit of not more than $5,000,000.00 per
occurrence; provided, however, this amount shall be adjusted at
the commencement of each Renewal Term according to reasonable
and customary practices for similar businesses in similar
locales.
4.3.2 Claims for personal injury and property damage
commonly covered by comprehensive automobile liability
insurance, covering all owned and non-owned automobiles, with
commercially reasonable amounts for bodily injury, property
damage, and or automobile medical payments acceptable to
Landlord, but with a combined single limit of not less than
$3,000,000.00 per occurrence.
4.3.3 Claims for personal injury commonly covered by
medical malpractice insurance in commercially reasonable amounts
acceptable to Landlord.
4.3.4 Claims commonly covered by worker's compensation
insurance for all persons employed by Tenant on the Premises.
Such worker's compensation insurance shall be in accordance with
the requirements of all applicable local, state, and federal
law.
4.4 BUSINESS INTERRUPTION INSURANCE. Tenant shall maintain, at
its expense, business interruption and extra expense insurance insuring
a period of not less than three (3) months.
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4.5 BUILDER'S RISK INSURANCE. In connection with any
construction, Tenant shall maintain in full force and effect a builder's
completed value risk policy ("BUILDER'S RISK POLICY") of insurance in a
nonreporting form insuring against all "Special Form" risk of physical
loss or damage to the Improvements, including but not limited to, risk
of loss from fire and other hazards, collapse, transit coverage,
vandalism, malicious mischief, theft, earthquake (if the Premises are in
earthquake zone 1 or 2) and sinkholes (if usually recommended in the
area of the Premises). The Builder's Risk Policy shall include
endorsements providing coverage for building materials and supplies and
temporary premises. The Builder's Risk Policy shall be in the amount of
the Full Replacement Value of the improvements on the Premises and shall
contain a deductible amount acceptable to Landlord. Landlord shall be
named as additional insured. The Builder's Risk Policy shall include an
endorsement permitting initial occupancy.
4.6 REPLACEMENT VALUE. The term "FULL REPLACEMENT VALUE" means
the actual replacement cost thereof from time to time including
increased cost of construction endorsement, with no reductions or
deductions. Tenant shall, in connection with each annual policy renewal,
deliver to Landlord a redetermination of the full replacement value by
the insurer or an endorsement indicating that the Premises is insured
for its full replacement value. If Tenant makes any alterations to the
Premises, Landlord may have such full replacement value redetermined at
any time after such alterations are made, regardless of when the full
replacement value was last determined.
4.7 PERMITTED MORTGAGE LENDER'S INSURANCE REQUIREMENTS.
Notwithstanding anything to the contrary in this Lease, Tenant's
obligations with respect to insurance as described in this Section 4
shall at all times be subject to any Permitted Mortgage Lender's
insurance requirements as described in any of the documents evidencing a
Permitted
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Mortgage Loan (the "PERMITTED MORTGAGE LOAN INSURANCE REQUIREMENTS").
Should the Permitted Mortgage Loan Insurance Requirements exceed the
insurance requirements set forth in this Lease in any way, including
without limitation, scope of coverage and coverage amounts, Tenant shall
comply with terms of the Permitted Mortgage Loan Insurance Requirements
to the extent that such requirements exceed Tenant's obligations in this
Section 4. Absent acquiescence, waiver or amendment by any Permitted
Mortgage Lender, failure of Tenant to so comply with the Permitted
Mortgage Loan Insurance Requirements shall be an Event of Default under
this Lease, and shall entitle Landlord to all of the remedies set forth
in Section 10.2 of this Lease.
4.8 PERMITTED MORTGAGE LENDER'S TAX AND INSURANCE ESCROWS.
Notwithstanding anything in this Lease to the contrary, in addition to
all of Tenant's obligations with respect to taxes and insurance, as set
forth in Sections 3 and 4 of this Lease, Tenant agrees to comply with
any tax and/or insurance escrows required by any Permitted Mortgage
Lender under any Permitted Mortgage Loan. Landlord and Tenant agree that
Tenant's compliance with the tax and/or insurance escrows requirements
of each Permitted Mortgage Loan shall, to the extent of any payment
actually made into any Permitted Mortgage Loan escrow account, satisfy
Tenant's requirements (a) with respect to the payment of Impositions,
(b) relating to taxes, and, (c) associated with obtaining insurance
under this Lease.
4.9 INTENTIONALLY OMITTED.
4.10 COST OF REFINANCING. Any reasonable costs of refinancing
the ▇▇▇▇▇▇ Loan that are charged by the Permitted Mortgage Lender making
such refinancing shall, at the sole option of Tenant, (a) be paid to
such Permitted Mortgage Lender by Tenant, or (b) be paid to such
Permitted Mortgage Lender by Landlord; provided, however, if Tenant
elects to have
18
Landlord pay such refinancing costs then Landlord's Adjusted Investment
Amount shall be increased by an amount equal to such payment on the
effective date of such refinancing and the Minimum Rent thereafter shall
be adjusted accordingly.
5. USE, MAINTENANCE AND ALTERATION OF THE PREMISES.
5.1 TENANT'S MAINTENANCE OBLIGATIONS.
5.1.1 Except as provided in Sections 11 and 12, Tenant
will keep and maintain the Premises in good appearance, repair
and condition and maintain proper housekeeping. Tenant shall
make or cause to be made all repairs, interior and exterior,
structural and nonstructural, ordinary and extraordinary,
foreseen and unforeseen, necessary to keep and maintain the
overall condition and repair of the Premises substantially the
same as at the Commencement Date and in compliance with
applicable law and otherwise generally in accord with standards
historically used for determining the Retirement Care Facility's
(as defined in Section 5.2 below) quality. Tenant covenants and
agrees that during the Term (i) it shall use, keep and operate
the Premises in a careful, safe and proper manner; (ii) not
commit or suffer waste thereon; (iii) not use or occupy the
Premises for any unlawful purposes; (iv) not use or occupy the
Premises or permit the same to be used or occupied, for any
purpose or business deemed extrahazardous on account of fire or
otherwise; (v) keep the Premises in such repair and condition as
may be required by the local Board of Health or other city,
state or federal authorities, free of all cost to Landlord; (vi)
not permit any acts to be done which will cause the
cancellation, invalidation, or suspension of any insurance
policy;
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and (vii) permit Landlord and its agents to enter upon the
Premises at all reasonable times upon reasonable notice to
examine the condition thereof.
5.1.2 As part of Tenant's obligations under this Section
5.1, Tenant shall be responsible to maintain, repair and replace
all Landlord Personal Property and all Tenant Personal Property
(as defined in Section 7.1 below) as necessary to maintain the
same in good and operable condition consistent with the standard
set forth in Section 5.1.1 and prudent industry practice as
applicable to the Retirement Care Facility (as defined in
Section 5.2 below).
5.2 REGULATORY COMPLIANCE.
5.2.1 Tenant and the Premises shall comply in all
material respects with (i) all federal, state and local
licensing and other laws and regulations applicable to the
continuing care retirement community on the Premises (the
"RETIREMENT CARE FACILITY"), (ii) the certification requirements
of Medicare and Medicaid (or any successor program) as currently
exist or as are obtained by Tenant at a later date, and (iii)
the healthcare compliance covenants set forth on Exhibit "G"
attached hereto. Further, Tenant shall not commit any act or
omission that would in any way violate any certificate of
occupancy affecting the Premises. Tenant shall deliver to
Landlord complete copies of any material surveys, examinations,
certification and licensure inspections, compliance
certificates, and other similar reports issued to Tenant by any
governmental agency within 10 days after Tenant's receipt of
each item.
5.2.2 During the Term, all inspection fees, costs and
charges associated with a change of any licensure or
certification shall be borne solely by Tenant.
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Tenant shall at its sole cost make any additions or alterations
to the Premises necessitated by, or imposed in connection with,
a change of ownership inspection survey for the transfer of
operation of the Premises from Tenant or Tenant's assignee or
subtenant to Landlord or Landlord's designee at the expiration
or earlier termination of the Term in accordance herewith.
5.3 PERMITTED USE. Tenant shall continuously use and occupy the
Premises during the Term solely as a Retirement Care Facility or other
senior housing, independent living, assisted living, skilled and
intermediate nursing, subacute care, Alzheimer's care, and related uses,
and no other use without Landlord's prior written consent.
5.4 NO LIENS. Tenant shall have no authority to permit or create
a lien against the Premises, and Tenant shall post notices or file such
documents as may be required to protect Landlord's interest in the
Premises against liens. Tenant hereby agrees to defend, indemnify, and
hold Landlord harmless from and against any mechanic's liens against the
Premises by reason of work, labor, services or materials supplied or
claimed to have been supplied on or to the Premises through or under
Tenant. Tenant shall remove, bond-off, or otherwise obtain the release
of any mechanic's lien filed against the Premises within 10 days after
the filing thereof. Tenant shall pay all expenses in connection
therewith, including without limitation, damages, interest, court costs
and reasonable attorneys' fees.
5.5 ALTERATIONS BY TENANT. Tenant shall have the right of
altering, improving, replacing, modifying or expanding the facilities,
equipment or appliances in the Premises from time to time as it may
determine is desirable for the continuing and proper use and maintenance
of the Premises under this Lease; provided, however, that any
alterations, improvements, replacements, expansions or modifications to
the Premises in excess of Five
21
Hundred Thousand Dollars ($500,000) in any rolling twelve (12) month
period shall require the prior written consent of the Landlord, which
shall not be unreasonably withheld, conditioned, or delayed; provided,
however, no such alterations, improvements, replacements, modifications
or expansions shall result in a material diminution of value of the
Premises or shall materially adversely affect the use and operation of
the Premises upon completion. Any amounts funded by Tenant as
necessitated by damage to the Premises by casualty or condemnation or in
the nature of routine or ordinary course capital expenditures shall not
be included in the foregoing calculation. The cost of all alterations,
improvements, replacements, modifications, expansions or other
purchases, covered by this Section 5.5 shall be borne solely and
exclusively by Tenant and shall immediately become a part of the
Premises and the property of the Landlord subject to the terms and
conditions of this Lease. All work done in connection therewith shall be
done in a good and workmanlike manner and in compliance with all
existing codes and regulations pertaining to the Premises and shall
comply with the requirements of insurance policies required under this
Lease. In the event any items of the Premises have become inadequate,
obsolete or worn out or require replacement (by direction of any
regulatory body or otherwise), Tenant shall remove such items and
exchange or replace the same at Tenant's sole cost and the same shall
become part of the Premises and property of the Landlord.
5.6 CAPITAL EXPENDITURES ACCOUNT.
5.6.1 Commencing on the fifteenth (15th) day of the
second full month of the Initial Term and every fifteenth (15th)
day of each month during the Term thereafter, Tenant shall
deposit (the "CAPITAL EXPENDITURE DEPOSITS") in an
interest-bearing account (the "CAPITAL EXPENDITURE ACCOUNT") an
amount equal to three percent (3%) of the gross revenues
generated from Tenant's ordinary
22
course of business operations at the Premises during the
previous month; provided, however, that calculation of the
Capital Expenditure Deposits shall not include any revenues
attributable to therapy services or home health agency services.
Except to the extent otherwise required by any Permitted
Mortgage Lender, the Capital Expenditure Account shall be
maintained with Genesee Regional Bank, a New York State
Chartered Commercial Bank ("GENESEE") for so long as, in the
exercise of Tenant's reasonable discretion from time to time,
Genesee has sufficient financial strength and stability to
assure reasonably that funds deposited with it will not be
subject to risk of loss. The Capital Expenditure Account shall
be used for funding repairs, replacements and capital
improvements to be made on the Premises from time to time.
Tenant may withdraw monies deposited in the Capital Expenditure
Account for the purpose of making repairs, replacements and
capital improvements on the Premises, to be applied as follows:
first, as required to comply with the provisions of this Lease
relating to repairs, replacements and capital improvements to be
made on the Premises, and second, as Tenant deems necessary or
desirable. All such repairs, replacements and capital
improvements funded by the Capital Expenditure Account shall be
deemed to be a part of the Premises.
5.6.2 If Tenant's capital expenditures at the Premises
in any Lease Year shall exceed the Capital Expenditure Deposit
for said Lease Year (the "CAPITAL EXPENDITURE DIFFERENCE"),
Tenant shall fund the remaining cost of such Capital Expenditure
Difference. Tenant shall receive a corresponding credit against
23
future Capital Expenditure Deposits for subsequent months until
Tenant receives full credit for any Capital Expenditure
Difference.
5.6.3 Any interest that accrues on the funds in the
Capital Expenditure Account shall at all times remain the
property of Tenant, and Tenant shall have the right to withdraw
any interest earned from time to time.
5.6.4 At the expiration of the Term, any funds remaining
in the Capital Expenditure Account shall become the property of
Landlord, other than the interest thereon, which shall remain
Tenant's property.
5.6.5 Notwithstanding anything to the contrary herein,
in the event that any Permitted Mortgage Loan requires similar
capital expenditure deposits, any amounts so deposited by Tenant
shall be a credit to Tenant against the Capital Expenditure
Account requirements set forth herein. In no event shall Tenant
be required to make any duplicate payments to the Capital
Expenditure Account and/or any accounts for capital expenditures
pursuant to any Permitted Mortgage Loan.
5.7 ANNUAL CAPITAL EXPENDITURE BUDGET. Within ninety (90) days
after the commencement of each calendar year, Tenant shall deliver to
Landlord, at Tenant's expense, a budget (the "ANNUAL CAPITAL EXPENDITURE
BUDGET") setting forth Tenant's reasonable estimate of the capital
repairs, replacements and improvements to the Premises that Tenant
anticipates will be required to be made in such calendar year pursuant
to the terms of this Lease; provided, however, that failure by Tenant to
make, or to cause to be made, in any year, any capital repairs,
replacements or improvements included in the Annual Capital Expenditure
Budget for such year shall not, in and of itself, be a default or Event
of Default under this Lease.
24
5.8 INITIAL CAPITAL EXPENDITURE REQUIREMENTS. At Tenant's sole
expense, Tenant shall make the repairs and refurbishments set forth on
Exhibit "E" attached hereto and incorporated herein (the "INITIAL R&R").
The Initial R&R shall be completed on or before June 30, 2002. If the
Initial R&R are not completed on or before June 30, 2002, Landlord shall
either (a) cause completion of the Initial R&R, or (b) direct Tenant
and/or ARC to complete the Initial R&R, and Landlord may offset any
reasonable costs and expenses actually incurred by Landlord in
completing the Initial R&R against principal and interest due under that
certain 2002 Promissory Note and, to the extent the 2002 Promissory Note
is insufficient for such offset, that certain 2003 Promissory Note (as
defined in the Purchase Agreement) by delivery of written notice to
Tenant sufficiently evidencing the costs and expenses to be offset.
5.9 INITIAL ENGINEERING REPORT; REMEDIAL ACTION. Within ninety
(90) days after the Commencement Date (or within such reasonably longer
period as may be required, so long as Tenant pursues the same with
reasonable diligence) Tenant shall provide to Landlord, at Tenant's
expense, a report (the "INITIAL ENGINEERING REPORT") to be prepared by
professional engineering firm selected by Landlord and reasonably
acceptable to Tenant. In the event that the Initial Engineering Report
advises any material repairs or replacements to be made to or of the
Premises, Tenant will make such repairs or replacements with reasonable
diligence. If Tenant does not complete such repairs and replacements on
or before June 30, 2002, or within such reasonable time thereafter as
may be required (provided Tenant is proceeding with reasonable diligence
to complete such repairs and replacements), Landlord may either (a)
cause completion of the same, or (b) direct Tenant and/or ARC to
complete the same, and Landlord may offset any reasonable costs and
expenses actually incurred by Landlord in completing the same against
principal and interest due under the 2002 Promissory Note and, to the
extent the 2002
25
Promissory Note is insufficient for such offset, the 2003 Promissory
Note, by delivery of written notice to Tenant sufficiently evidencing
the costs and expenses to be offset.
6. CONDITION AND TITLE OF PREMISES; RIGHT OF FIRST REFUSAL.
6.1 CONDITION AND TITLE OF PREMISES. Tenant previously owned the
Premises, and Tenant has thoroughly investigated the Premises, has
selected the Premises to its own specifications, and has concluded that
no improvements or modifications to the Premises are required in order
to operate the Premises for its intended use. Tenant accepts the
Premises for use as a Retirement Care Facility under this Lease on an
"AS IS, WHERE IS, WITH ALL FAULTS" basis and will assume all
responsibility and cost for the correction of any observed or unobserved
deficiencies or violations. In making its decision to enter into this
Lease, Tenant has not relied on any representations or warranties,
express or implied, of any kind from Landlord. Notwithstanding any other
provision of this Lease to the contrary, Tenant accepts the Premises in
their present condition, AS IS, WHERE IS, WITH ALL FAULTS, and without
any representations or warranties whatsoever, express or implied,
including, without limitation, any express or implied representations or
warranties as to the fitness, use, suitability, or condition of the
Premises. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE PREMISES OR ANY PART THEREOF, EITHER AS TO
ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, OR AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE
BORNE BY TENANT. Tenant hereby represents and warrants to Landlord that
Tenant is thoroughly familiar with the Premises and the condition
thereof, that Tenant is relying on Tenant's own personal knowledge of
the condition of the Premises, that
26
neither Landlord nor any person or entity acting or allegedly acting for
or on behalf of Landlord or any other person or entity having or
claiming any interest in the Premises has made any representations,
warranties, agreements, statements, or expressions of opinions in any
way or manner whatsoever related to, connected with, or concerning the
Premises, the condition of the Premises, or any other fact or
circumstance whatsoever on which Tenant is relying, and, to the maximum
extent not prohibited by applicable law, Tenant hereby releases and
discharges Landlord and all other persons and entities having or
claiming any interest in the Premises from all liability, damages,
costs, and expenses of every kind and nature whatsoever in any way or
manner arising out of, connected with, related to, or emanating from the
condition of the Premises at any time prior to or during the Term of
this Lease. Tenant has examined the condition of title to the Premises
prior to the execution and delivery of this Lease and has found the same
to be satisfactory, including without limitation, all of the
encumbrances and other exceptions to title set forth more fully on
Exhibit "A-1" (the "PERMITTED EXCEPTIONS").
6.2 RIGHT OF FIRST REFUSAL TO PURCHASE PREMISES.
6.2.1 Subject to and upon the terms and conditions set
forth in this Section 6.2, Tenant shall have the right of first
refusal to purchase (a) the Premises at any time during the
Term, and/or (b) any equity securities or equity interests of
Landlord ("LANDLORD'S EQUITY SECURITIES"); provided, however,
Tenant shall not have the right to exercise its rights under
this Section 6.2 if any Event of Default has occurred and is
continuing as of any of the following dates: (i) the date on
which Landlord delivers an Offering Notice to Tenant pursuant to
Section 6.2.2(i), or (ii) the date of Tenant's delivery of an
Exercise Notice pursuant to Section 6.2.2(ii), or (iii) the
closing date established to consummate
27
the purchase of the Premises or equity securities, as
applicable, pursuant to Section 6.2.2(iii). Notwithstanding the
foregoing, the right of first refusal to purchase Landlord's
Equity Securities as set forth in this Section 6.2 shall not
apply to:
(a) any transfer by bequest or devise;
(b) any transfer to, or to a trust for the benefit of,
one or more of E. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and/or the spouse, children
and grandchildren of E. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇ FAMILY"),
provided that the Tenant shall have the right to approve the
identity of the trustee of any such trust that is not either E.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or an institutional trustee (such approval not
to be unreasonably withheld or delayed); or
(c) any transfer following which E. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and/or the trustee of a trust described in the preceding clause
(b) will continue to have the power and authority to manage,
direct, regulate and govern Landlord, directly or indirectly.
6.2.2 Subject to Section 6.2.1 above, if during the Term
Landlord or any owner of Landlord's Equity Securities receives a
bona fide offer ("OFFER") to purchase the Premises, or any
portion thereof, or all or any portion of Landlord's Equity
Securities (the "OFFERED PROPERTY"), from any person or entity,
Landlord and Tenant shall take the following steps prior to
Landlord's acceptance of such offer:
(i) Landlord shall give written notice to Tenant of its
intention to accept such Offer ("OFFERING NOTICE"), which notice
shall set forth the price, terms and conditions contained in the
Offer that Landlord intends to accept;
(ii) Within thirty (30) days after receipt of an
Offering Notice, Tenant shall either (A) deliver to Landlord
written notice that Tenant does not desire to purchase the
Offered Property on the terms set forth in the Offering Notice,
or (B)
28
deliver to Landlord written notice of Tenant's desire to
exercise its right to purchase the Offered Property on the terms
set forth in the Offering Notice pursuant to this Section 6.2
("EXERCISE NOTICE");
(iii) If Tenant delivers an Exercise Notice within such
thirty (30) day period, and if the Offered Property consists of
all or any portion of the Premises, Landlord as seller and
Tenant as buyer shall immediately open an escrow to consummate
such purchase at a national title company selected by Landlord
in its reasonable discretion on the following terms: (A) the
form of such instructions to be then signed by Landlord and
Tenant shall be such title company's standard sale escrow
instructions and, notwithstanding anything set forth in the
Offering Notice to the contrary, shall not provide for any
representations or warranties by Landlord as seller or for any
due diligence in favor of Tenant as buyer, (B) the purchase
price shall be payable in cash by Tenant or on such other terms
as are set forth in the Offering Notice with escrow to close on
or before the date set forth in the Offering Notice, (C)
transaction costs shall be paid as set forth in the Offering
Notice, (D) at close, Landlord shall deliver title to the
Offered Property subject only to those title exceptions
permitted by the terms of the Offer, (E) the sale escrow
instructions shall provide for an ▇▇▇▇▇▇▇ money deposit in the
amount set forth in the Offering Notice and shall further
provide, to the extent so provided by the terms of the Offer,
that such deposit may be retained by Landlord as liquidated
damages in the event of any breach by Tenant of the terms of the
escrow instructions (provided, however, such liquidated damages
shall relate only to Landlord's damages by reason of a breach of
the escrow instructions and shall
29
in no way liquidate or limit Landlord's or Tenant's damages by
reason of a breach of this Lease), and (F) the escrow
instructions shall otherwise be in form and substance reasonably
satisfactory to Landlord. If Tenant fails to close the escrow
for any reason other than a breach by Landlord, then Landlord
may elect to pursue all remedies available to Landlord against
Tenant under the escrow instructions or under applicable law,
and the provisions of this Section 6 shall be of no further
force or effect.
(iv) If Tenant delivers an Exercise Notice within such
thirty (30) day period, and if the Offered Property consists of
all or any portion of Landlord's Equity Securities, Landlord as
seller and Tenant as buyer shall consummate the sale of
Landlord's Equity Securities according to the terms and
conditions of the Offering Notice within sixty (60) days of
Landlord's receipt of the Exercise Notice and (a) Landlord shall
cause its members (partners or shareholders) to sell, transfer
and assign to Tenant or its designee all such membership
(partnership or shareholder) interests, equity securities and
other ownership interest in the Landlord, all of which shall be
free and clear of all liens and encumbrances whatsoever, (b)
Tenant or its designee shall pay to said members (partners or
shareholders) the purchase price set forth in the Offering
Notice (prorated among said parties in accordance with their
respective ownership interests), and (c) the parties hereto (and
all members, partners or shareholders of Landlord) shall execute
all securities purchase agreements, assignments and other
documents that are reasonably necessary to consummate said
transaction, which documents shall contain (x) indemnifications
of such members (partners or shareholders) by
30
Tenant for matters occurring after the closing, and (y) other
representations and warranties that are reasonably and customary
for a transactions of such size and nature. By entering into
this Lease, Landlord represents and warrants that each owner of
its equity securities (whether now or in the future) has agreed,
or will agree, to be bound by the provisions of this Section
6.2.2.
(v) If within the thirty (30) day period following
Landlord's delivery of an Offering Notice, Tenant either
delivers to Landlord the notice set forth in Section
6.2.2(ii)(A) or fails to deliver either of the notices set forth
in Section 6.2.2(ii), then for a period of six (6) months
following the expiration of such fifteen (15) day period
Landlord shall be free to sell the Offered Property on the terms
set forth in the Offering Notice or on any other revised terms
deemed appropriate by Landlord in its sole discretion; provided,
however, if such other revised terms include a price that is
below the price set forth in the Offering Notice, then prior to
completing any sale on such revised terms Landlord shall notify
Tenant of such revised offering terms. During the fifteen (15)
business day period after receipt by Tenant of such notice,
Tenant shall have the right (to be exercised if at all by
Tenant's execution of escrow instructions and deposit of ▇▇▇▇▇▇▇
money under Section 6.2.2(iii) or by delivery of a notice of
intent to purchase under Section 6.2.2(iv), as applicable,
within such fifteen (15) business day period) to require that
Landlord sell the Offered Property to Tenant on such revised
offering terms. If Tenant fails to timely exercise its right as
required by the preceding proviso, Landlord shall be free to
sell the Offered Property to a third party on the revised
offering terms.
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(vi) If at the end of the six (6) month period described
in Section 6.2.1(iv), Landlord has not sold the Offered
Property, then Landlord shall again be required to comply with
the provisions of this Section 6.2 if Landlord desires to accept
a third party offer to purchase the Offered Property.
(vii) If an escrow is opened pursuant to Section
6.2.2(iii) and such escrow fails to close by reason of Tenant's
default, in addition to all of the other rights and remedies of
Landlord with respect to such breach, Landlord shall thereafter
be free to sell the Premises or any portion thereof to any
Person on any terms whatsoever without being required to comply
with this Section 6.2.
6.2.3 If Landlord has hypothecated its interest in the
Premises, this Section 6.2 shall not apply to any judicial or
non-judicial sale of the Premises in connection with any
foreclosure action or proceeding by the lender.
6.3 FIRST REFUSAL RIGHTS SUBJECT TO PERMITTED MORTGAGE LOAN
DOCUMENTS. Notwithstanding anything in this Lease to the contrary,
Tenant's right of first refusal, as set forth more fully in this Section
6, shall be subject to compliance with any applicable provisions of any
outstanding Permitted Mortgage Loan Documents if and to the same extent
that the terms of the corresponding Offer are so subject.
7. LANDLORD AND TENANT PERSONAL PROPERTY.
7.1 TENANT PERSONAL PROPERTY. Tenant shall install, place, and
use on the Premises such fixtures, furniture, equipment, inventory and
other personal property in addition to Landlord Personal Property as may
be required or as Tenant may, from time to time, deem necessary or
useful to operate the Premises for its permitted purposes. All fixtures,
furniture, equipment, inventory, and other personal property installed,
placed, or used on the Premises
32
which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "TENANT PERSONAL PROPERTY."
7.2 REQUIREMENTS FOR TENANT PERSONAL PROPERTY. Tenant shall
comply with all of the following requirements in connection with Tenant
Personal Property:
7.2.1 Tenant shall, at Tenant's sole cost and expense,
maintain, repair, and replace Tenant Personal Property.
7.2.2 Tenant shall, at Tenant's sole cost and expense,
keep Tenant Personal Property insured against loss or damage by
fire, vandalism and malicious mischief, sprinkler leakage,
earthquake, and other physical loss perils commonly covered by
fire and extended coverage and boiler and machinery insurance,
in an amount not less than 90% of the then full replacement cost
thereof. Tenant shall use the proceeds from any such policy for
the repair and replacement of Tenant Personal Property. The
insurance shall meet the requirements of Section 4.1 to the
extent applicable.
7.2.3 Tenant shall pay all taxes applicable to Tenant
Personal Property.
7.2.4 Unless an Event of Default or any event which,
with the giving of notice or lapse of time, or both, would
constitute an Event of Default has occurred and is continuing
beyond all applicable periods of grace and/or notice and cure,
Tenant may remove Tenant Personal Property from the Premises
from time to time provided that [i] the items removed are not
required to operate the Premises for the permitted use hereunder
(unless such items are being replaced by Tenant); and [ii]
Tenant repairs any damage to the Premises resulting from the
removal of Tenant Personal Property.
33
7.2.5 Upon the expiration of the Term, Landlord shall
have the option to purchase the Tenant Personal Property for an
amount equal to its depreciated value determined in accordance
with GAAP (as hereinafter defined). If Landlord desires to
exercise its option to purchase, Landlord shall notify Tenant at
least ninety (90) days prior to the expiration of the Term.
Landlord's option to purchase the Tenant Personal Property shall
not include such property as bears the tradenames, trademarks or
patents of ARC, Tenant, or any affiliate, successor or assign
thereof or any rights in and to such tradenames, trademarks or
patents (the "EXCLUDED PROPERTY"). The purchase price to be paid
by Landlord may be paid, at Landlord's election and upon notice
to Tenant, by offsetting all or any portion of the purchase
price against any unsatisfied obligations of Tenant under this
Lease. If Landlord elects not to exercise Landlord's option to
purchase Tenant Personal Property, Tenant shall remove Tenant
Personal Property upon the termination or expiration of this
Lease and shall repair any damage to the Premises resulting from
the removal of the Tenant Personal Property. If Tenant fails to
remove Tenant Personal Property within 30 days after request by
Landlord, then Tenant shall be deemed to have abandoned the
Tenant Personal Property, the Tenant Personal Property shall
become the property of Landlord, and Landlord may remove, store
and dispose of Tenant Personal Property. In such event, Tenant
shall have no claim or right against Landlord for such property
or the value thereof regardless of the disposition thereof by
Landlord. Tenant shall pay Landlord, upon demand, all expenses
incurred by Landlord in removing, storing, and disposing of
Tenant Personal Property and repairing any damage
34
caused by such removal. Tenant's obligations hereunder shall
survive the termination or expiration of this Lease.
7.2.6 In the event this Lease is terminated by reason of
an Event of Default, any Tenant Personal Property remaining at
the Premises shall, at Landlord's option, be deemed abandoned
and shall be and remain property of Landlord. Notwithstanding
the foregoing to the contrary, in no event shall Tenant be
deemed to have abandoned any Excluded Property, which shall
remain the sole property of Tenant, ARC or any affiliates,
successors, or assigns thereof, as the case may be.
7.3 COMPLIANCE WITH LAWS. Tenant shall comply with all legal
requirements applicable to the Premises and operation of the Retirement
Care Facility and shall keep all government authorizations in full force
and effect. Tenant shall pay when due all taxes and governmental charges
of every kind and nature that are assessed or imposed upon Tenant's
operation of the Premises at any time during the term of the Lease,
including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and
other taxes and charges relating to Tenant's business and operations.
Tenant shall be solely responsible for compliance with all Legal
Requirements, including the Americans with Disabilities Act, and
Landlord shall have no responsibility for such compliance.
7.4 RESIDENT TENANT LEASES. During the Term, the lessor under
all subleases with residents or patients of the Retirement Care Facility
(the "RESIDENT TENANT LEASES") shall be Landlord. Tenant agrees to
assign, or cause to be assigned, to Landlord all Resident Tenant Leases
existing as of the Commencement Date. Throughout the Term, Tenant
assumes and agrees to perform all of Landlord's obligations under the
Resident Tenant Leases. Except to the
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extent actually caused by Landlord, Tenant agrees to keep and hold
Landlord harmless of and from any loss, cost, damage, liability or
expense arising under the Resident Tenant Leases during the Term,
however arising. Landlord hereby grants Tenant a power of attorney to
(a) enter into commercially reasonable Resident Tenant Leases on
standard lease forms in the ordinary course of business on behalf of
Landlord, (b) collect and receive all rents and other sums due under any
Resident Tenant Leases, and (c) perform all other activities required of
lessor under the Resident Tenant Leases or otherwise necessary in such
capacity. This power of attorney is coupled with an interest, and shall
only terminate upon the expiration or earlier termination of this Lease
or upon any Event of Default by Tenant beyond any applicable notice,
grace or cure periods. So long as this Lease remains in effect, and no
Event of Default shall have occurred and be continuing beyond all
applicable periods of grace and/or notice and cure, Landlord shall take
no action as lessor under the Resident Tenant Leases and Tenant shall be
entitled to all rents and other sums due under any Resident Tenant
Leases.
7.4.1 If Tenant or its affiliate purchases the Property
pursuant to Section 6.2 of this Lease, Landlord shall assign all
then existing Resident Tenant Leases to the purchaser
simultaneous with transfer of the Property.
7.5 TRANSFER OF LICENSE, ETC. If this Lease is terminated due to
expiration of the Term, pursuant to an Event of Default or for any
reason other than Tenant's purchase of the Premises, or if Tenant
vacates the Premises without termination of this Lease, Tenant shall, at
Landlord's request:
7.5.1 Execute, deliver and file all documents and
statements reasonably requested by Landlord to effect the
transfer of all licenses and government authorizations related
to the Retirement Care Facility to Landlord or an entity
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designated by Landlord, subject to any required approval of
governmental regulatory authorities, and Tenant shall provide to
Landlord all information and records required by Landlord in
connection with the transfer of the license and government
authorizations.
7.5.2 Use commercial best efforts to cooperate with and
facilitate transfer of the business and operations of the
Retirement Care Facility to Landlord or its designee, without
unreasonable disruption in operations.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS.
8.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Landlord and Tenant
do hereby each for itself represent and warrant to each other as
follows:
8.1.1 DUE AUTHORIZATION AND EXECUTION. This Lease and all
agreements, instruments and documents executed or to be executed in
connection herewith by either Landlord or Tenant were duly authorized
and shall be binding upon the party that executed and delivered the
same.
8.1.2 DUE ORGANIZATION. Landlord and Tenant are duly organized,
validly existing and in good standing under the laws of the State of
their respective formations and are duly authorized and qualified to do
all things required of the applicable party under this Lease within the
State of North Carolina.
8.1.3 NO BREACH OF OTHER AGREEMENTS. Neither this Lease nor any
agreement, document or instrument executed or to be executed in
connection herewith, violates the terms of any other agreement to which
either Landlord or Tenant is a party where such violation would have a
material adverse effect.
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8.2 MUTUAL COVENANTS. Landlord and Tenant do hereby each for
itself make the following covenants:
8.2.1 NO DEFAULT UNDER PERMITTED MORTGAGE LOAN. For so
long as this Lease is in effect and any Permitted Mortgage Loan
is outstanding, Tenant shall comply with the terms and
conditions of the Permitted Mortgage Loan Documents; provided,
however, Tenant shall not be required to take any action or
otherwise cause compliance with or be deemed responsible for
performance of such Permitted Mortgage Loan Documents as to any
affirmative or negative obligation of Landlord that does not
relate to management or operation of the Premises, including,
without limitation, accuracy and delivery of Landlord's
financial statements, and the maintenance by Landlord of its
good standing in any states required by such Permitted Mortgage
Loan Documents. For so long as this Lease is in effect and any
Permitted Mortgage Loan is outstanding, Landlord covenants and
agrees to comply, or cause compliance, with the Permitted
Mortgage Loan Documents with respect each affirmative or
negative obligation of Landlord that does not relate solely to
management or operation of the Premises, including, without
limitation, accuracy and delivery of Landlord's financial
statements, and the maintenance by Landlord of its good standing
in any states required by such Permitted Mortgage Loan
Documents.
8.2.2 NO AMENDMENT OF PERMITTED MORTGAGE LOAN DOCUMENTS.
Neither Landlord nor Tenant shall amend, alter, extend, renew or
otherwise modify any Permitted Mortgage Loan Document without
the prior written consent of the other party hereto, which
consent shall not be unreasonably withheld,
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conditioned or delayed. Any amendment of the Permitted Mortgage
Loan Documents without Tenant's reasonable consent shall not be
binding on Tenant.
8.3 NEGATIVE COVENANTS OF LANDLORD. Landlord hereby makes the
following covenants:
8.3.1 INCURRENCE OF INDEBTEDNESS. Landlord hereby agrees
that it will not incur any indebtedness or obligation whatsoever
with respect to the Premises, except a Permitted Mortgage Loan.
8.3.2 NO REMOVAL. During the Term, Landlord shall not
take or remove any assets or items or personal property
comprising a portion of, associated with or related to the
Premises without first obtaining the prior written consent of
Tenant, which may be denied in Tenant's sole discretion.
8.3.3 NO OWNER ACTIONS. For so long as this Lease
remains in effect, and Tenant shall not then be in material
default of its obligations beyond any applicable periods of
grace and/or notice and cure, Landlord shall take no action with
respect to the business or operation of the Premises without
Tenant's prior written consent, which may be denied by Tenant in
its sole discretion.
8.3.4 NO OTHER ACTIVITIES; SINGLE PURPOSE ENTITY
REQUIREMENTS. Landlord hereby agrees that it will not engage in
any business activity other than those activities relating to
the ownership of the Premises and performance of its obligations
hereunder, and shall comply with the single purpose entity
covenants and requirements set forth on Exhibit "F-1" attached
hereto.
8.4 NEGATIVE COVENANTS OF TENANT. Tenant hereby agrees that it
will not engage in any business activity other than the operation of the
Retirement Care Facility as
39
contemplated in this Lease, and shall comply with the single purpose
entity covenants and requirements set forth on Exhibit "F-2" attached
hereto. Notwithstanding anything to the contrary foregoing, Tenant shall
be permitted to ▇▇▇▇▇ ▇▇▇▇▇▇ Lender a security interest in Tenant's
rights to payment under the 2002 Promissory Note and the 2003 Promissory
Note pursuant to the terms and conditions of that certain Collateral
Assignment of Loan Documents and Estoppel Agreement dated as of January
25, 2002, by and between Landlord, Tenant and ▇▇▇▇▇▇ Lender.
9. FINANCIAL, REGULATORY AND ENGINEER'S REPORTS.
9.1 ANNUAL FINANCIAL STATEMENT. Within one hundred twenty (120)
days of the fiscal year end of Tenant, Tenant shall deliver to Landlord
the annual financial statement of Tenant, with respect to Tenant's
business operations on the Premises, prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP"),
and, if requested by Landlord not less than thirty (30) nor more than
sixty (60) days prior to the end of the fiscal year of Tenant, audited
by a certified public accounting firm reasonably acceptable to Landlord.
Within forty-five (45) days after each fiscal quarter ends, Tenant shall
deliver to Landlord unaudited financial statements of Tenant, with
respect to Tenant's business operations on the Premises, prepared in
accordance with GAAP. Notwithstanding any of the other terms of this
Section 9.1, if Tenant is subject to any reporting requirements of the
Securities and Exchange Commission (the "SEC") during the Term, Tenant
shall concurrently deliver to Landlord such reports as are delivered to
the SEC pursuant to applicable securities laws.
9.2 REGULATORY REPORTS. Tenant shall within ten (10) business
days of receipt thereof deliver to Landlord all federal, state and local
licensing and reimbursement certification surveys, inspection and other
reports received by Tenant as to the Premises or any
40
portion thereof and the operation of business thereon, including,
without limitation, state department of health licensing surveys,
Medicare and Medicaid (and successor programs) certification surveys (if
applicable) and life safety code reports. Within ten (10) business days
of receipt thereof, Tenant shall give Landlord a copy of any written
notice of any violation of any federal, state or local licensing or
reimbursement certification statute or regulation including without
limitation Medicare and Medicaid or successor programs (if applicable to
the Premises or any portion thereof), any suspension, termination or
restriction placed upon Tenant or the Premises or any portion thereof,
the operation of business thereon or the ability to admit residents, or
any violation of any other permit, approval or certification in
connection with the Premises or any portion thereof or its business, by
any federal, state or local authority including without limitation
Medicare and Medicaid or successor programs if applicable to the
Premises or any portion thereof.
9.3 ENGINEER'S REPORT. Within ninety (90) days after the end of
the fifth (5th) Lease Year, the tenth (10th) Lease Year, and, if Tenant
exercises its option to renew as set forth in Section 1.2) the fifteenth
(15th) Lease Year, Tenant shall provide to Landlord, at Tenant's
expense, a report (the "ENGINEER'S REPORT") to be prepared by
professional engineering firm selected by Landlord and reasonably
acceptable to Tenant. The Engineer's Report shall (a) assess the general
condition of the Improvements, (b) be reasonably sufficient to assist
Landlord and Tenant in prioritizing repairs and refurbishments to be
funded by the Capital Expenditure Account and as otherwise required to
be made under this Lease, and (c) provide generalized cost estimates for
major repair and refurbishment projects. If the Engineer's Report
discloses any repairs that Tenant is required to make pursuant to
Section 5.1.1 of this Lease, Tenant shall make such repairs in
accordance with Section 5.1.1 of the Lease.
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10. EVENTS OF DEFAULT AND LANDLORD'S REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an event of default on the part of Tenant hereunder
("EVENT OF DEFAULT"), and all notice and cure periods provided below
shall run concurrently with any notice or cure periods provided by
applicable law:
10.1.1 The failure to pay within five (5) calendar days
of (i) the date when due, any Minimum Rent or Additional Rent,
or (ii) the date when delinquent, any Impositions required to be
paid by Tenant under this Lease.
10.1.2 A material breach by the seller thereunder of any
of the representations, warranties or covenants in favor of
Landlord as set forth in that certain Purchase and Sale
Agreement of even date herewith, by and between Landlord, as
purchaser, and Tenant, as seller, relating to the Premises (the
"PURCHASE AGREEMENT");
10.1.3 The appointment of a receiver, trustee, or
liquidator for Tenant, or any of the property of Tenant, if
within ten (10) business days of such appointment Tenant does
not inform Landlord in writing that Tenant intends to cause such
appointment to be discharged or Tenant does not thereafter
diligently prosecute such discharge to completion within sixty
(60) days after the date of such appointment;
10.1.4 The filing by Tenant of a voluntary petition
under any federal bankruptcy law or under the law of any state
to be adjudicated as bankrupt or for any arrangement or other
debtor's relief, or in the alternative, if any such petition is
involuntarily filed against Tenant by any other party and Tenant
does not within
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ten (10) business days of any such filing inform Landlord in
writing of the intent by Tenant to cause such petition to be
dismissed, if Tenant does not thereafter diligently prosecute
such dismissal, or if such filing is not dismissed within ninety
(90) days after filing thereof;
10.1.5 The failure to make any monetary payment required
by Tenant under this Lease not covered in Section 10.1.1 or the
failure to perform or comply in any material respect with any
other term or provision of this Lease not requiring the payment
of money, including, without limitation, the failure to comply
with the provisions hereof pertaining to the use, operation and
maintenance of the Premises (or any portion thereof) or the
breach of any representation or warranty of Tenant in this
Lease; provided, however, if the default described in this
Section 10.1.5 is curable it shall be deemed cured, if Tenant
cures such default within thirty (30) days after notice from
Landlord, unless such default cannot with due diligence be cured
within a period of thirty (30) days because of the nature of the
default or delays beyond the control of Tenant, in which case
such default shall not constitute an Event of Default if Tenant
uses its best efforts to cure such default by promptly
commencing and diligently pursuing such cure to the completion
thereof.
10.1.6 Tenant abandons or vacates the Premises or any
material part thereof or ceases to do business or ceases to
exist for any reason for any one or more days.
10.1.7 Notwithstanding anything to the contrary in this
Section 10.1, any act or omission of Tenant that causes an Event
of Default under and as defined in
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the Permitted Mortgage Loan Documents evidencing the ▇▇▇▇▇▇ Loan
shall constitute an Event of Default hereunder.
10.2 REMEDIES. Upon the occurrence of an Event of Default and
during the pendency thereof, Landlord may exercise all rights and
remedies under this Lease and the laws of the State available to a
lessor of real and personal property in the event of a default by its
lessee. Without limiting the foregoing, Landlord shall have the right to
do any of the following:
10.2.1 re-enter and take possession of the Premises
without terminating the Lease, and lease the Premises for the
account of Tenant, holding Tenant liable for all costs of the
Landlord in reletting the Premises and for the difference in the
amount received by such reletting and the amounts payable by
Tenant under the Lease.
10.2.2 terminate this Lease, exclude Tenant from
possession of the Premises and lease the Premises to others,
holding Tenant liable for the difference in the amounts received
from such reletting and the amounts payable by Tenant under the
Lease.
10.2.3 re-enter the Premises and have, repossess and
enjoy the Premises as if the Lease had not been made, and in
such event, Tenant and its successors and assigns shall remain
liable for any contingent or unliquidated obligations or sums
owing at the time of such repossession.
10.2.4 have access to and inspect, examine and make
copies of the books and records and any and all accounts, data
and income tax and other returns of Tenant insofar as they
pertain to the Premises.
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10.2.5 to the extent consistent with and permitted by
applicable law, accelerate all of the unpaid Rent hereunder so
that the aggregate Rent for the unexpired term of this Lease
becomes immediately due and payable.
10.2.6 take whatever action at law or in equity as may
appear necessary or desirable to collect the Rent and other
amounts payable under this Lease then due and thereafter to
become due (subject to any applicable limitations on the damages
collectible by a landlord provided by applicable law), or to
enforce performance and observance of any obligations,
agreements or covenants of Tenant under this Lease.
10.2.7 setoff against the 2002 Promissory Note
(according to the terms set forth therein), the 2003 Promissory
Note (according to the terms set forth therein), and any
obligation of Landlord to Tenant under this Lease any Rent due
and owing Landlord pursuant to this Lease.
10.2.8 Before or after repossession of the Premises
pursuant to Section 10.2.1, and whether or not this Lease has
been terminated, Landlord shall have the right (but shall be
under no obligation except to the extent required by applicable
law) to relet any portion of the Premises to such tenant or
tenants, for such term or terms (which may be greater or less
than the remaining balance of the Term), for such rent, or such
conditions (which may include concessions or free rent) and for
such uses, as Landlord, in its absolute discretion, may
determine, and Landlord may collect and receive any rents
payable by reason of such reletting. Tenant agrees to pay
Landlord, immediately upon demand, all reasonable expenses
45
incurred by Landlord in obtaining possession and in reletting
any of the Premises, including fees, commissions and costs of
attorneys, architects, agents and brokers.
10.3 RECEIVERSHIP. Tenant acknowledges that one of the rights
and remedies available to Landlord under applicable law is to secure a
court-appointed receiver to take possession of the Premises or any
portion thereof, to collect the rents, issues, profits and income of the
Premises or any portion thereof, and to manage the operation of the
Premises or any portion thereof. Tenant further acknowledges that the
revocation, suspension or material limitation of the certification of
the Premises or any portion thereof for provider status under Medicare
or Medicaid (or successor programs) as they currently exist or as are
obtained by Tenant at a later date (if applicable to the Premises or any
portion thereof) and/or the revocation, suspension or material
limitation of the license of the Premises or any portion thereof as a
Retirement Care Facility under the laws of the State will materially and
irreparably impair the value of Landlord's investment in the Premises.
Therefore, in the event of any such revocation, suspension or material
limitation, and in addition to any other right or remedy of Landlord
under this Lease, Tenant hereby consents to the appointment of such a
receiver to enter upon and take possession of the Premises or any
portion thereof, to manage the operation of the Premises or any portion
thereof, to collect and disburse all rents, issues, profits and income
generated thereby and to preserve or replace to the extent possible the
licenses and provider certifications of the Premises required for the
operation of the Retirement Care Facility or to otherwise substitute the
licensee or provider thereof. The receiver shall be entitled to a
reasonable fee for its services as a receiver. All such fees and other
expenses of the receivership estate shall be added to the monthly rent
due to Landlord under this Lease. Tenant hereby irrevocably stipulates
to the
46
appointment of a receiver under such circumstances and for such purposes
and agrees not to contest such appointment.
10.4 REMEDIES CUMULATIVE; NO WAIVER. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of
any other right or remedy, and each and every right and remedy shall be
cumulative and in addition to any other right or remedy given hereunder
or now or hereafter existing at law or in equity. No failure of Landlord
to insist at any time upon the strict performance of any provision of
this Lease or to exercise any option, right, power or remedy contained
in this Lease shall be construed as a waiver, modification or
relinquishment thereof as to any similar or different breach (future or
otherwise) by Tenant. A receipt by Landlord of any rent or other sum due
hereunder (including any late charge) with knowledge of the breach of
any provision contained in this Lease shall not be deemed a waiver of
such breach, and no waiver by Landlord of any provision of this Lease
shall be deemed to have been made unless expressed in a writing signed
by Landlord.
10.5 PERFORMANCE OF TENANT'S OBLIGATIONS BY LANDLORD.
Notwithstanding anything herein to the contrary, if Tenant at any time
after applicable notice and cure periods shall fail to make any payment
or perform any act on its part required to be made or performed under
this Lease, then Landlord may, without waiving or releasing Tenant from
any obligations or default of Tenant hereunder, make any such payment or
perform any such act for the account and at the expense of Tenant, and
may enter upon the Premises for the purpose of taking all such action
thereon as may be reasonably necessary therefor. No such entry shall be
deemed an eviction of Tenant. All reasonable sums so paid by Landlord
and all necessary and incidental costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred in
connection with the performance of any such act by Landlord, together
with interest
47
at the rate of the Prime Rate as reported daily by the Wall Street
Journal plus 2% (or if said interest rate is violative of any applicable
statute or law, then the maximum interest rate allowable) from the date
of the making of such payment or the incurring of such costs and
expenses by Landlord, shall be payable by Tenant to Landlord on demand.
10.6 LATE PAYMENT CHARGE. Tenant acknowledges that any default
in the payment of any installment of Rent payable hereunder will result
in loss and additional expense to Landlord in servicing any indebtedness
of Landlord secured by the Premises, handling such delinquent payments,
and meeting its other financial obligations, and because such loss and
additional expense is extremely difficult and impractical to ascertain,
Tenant agrees that in the event any Rent payable to Landlord hereunder
is not paid within five (5) days after the due date, Tenant shall pay a
late charge of 5% of the amount of the overdue payment as a reasonable
estimate of such loss and expenses, unless applicable law requires a
lesser charge, in which event the maximum rate permitted by such law may
be charged by Landlord; provided that nothing herein shall extend the
time for payment of Rent or the period for curing any default or
constitute a waiver of such default, or limit Landlord's remedies in the
event of any such default.
10.7 PERMITTED MORTGAGE LENDER'S RIGHT TO CURE. Notwithstanding
any provision in this Lease to the contrary, no default in the
performance of any of Landlord's obligations under the Lease that is of
such a nature as to give Tenant a right to terminate the Lease or to
reduce the rent payable under the Lease or to any credit, reduction or
offset against future rents shall entitle Tenant to exercise any such
right, power or remedy unless and until notice of such default is given
to Landlord and any Permitted Mortgage Lender and unless and until
fifteen (15) days shall have elapsed following delivery of such notice
by Tenant, during which period any Permitted Mortgage Lender shall have
the right, but not the obligation, to
48
remedy or cure such default; provided, however, that if such default
cannot be cured within fifteen (15) days, then any Permitted Mortgage
Lender shall have such longer period of time as may be reasonably
necessary to cure such default so long as such Permitted Mortgage Lender
pursues the cure of same with due diligence.
11. DAMAGE BY FIRE OR OTHER CASUALTY.
11.1 NOTICE OF CASUALTY. If the Premises shall be destroyed, in
whole or in part, or damaged by fire, flood, windstorm or other casualty
(a "CASUALTY"), Tenant shall give written notice thereof to the Landlord
within one business day after the occurrence of the Casualty. Within 15
days after the occurrence of the Casualty or as soon thereafter as such
information is reasonably available to Tenant, Tenant shall provide the
following information to Landlord: [i] the date of the Casualty; [ii]
the nature of the Casualty; [iii] a description of the damage or
destruction caused by the Casualty including the type of Premises
damaged and the area of the Improvements damaged; [iv] a preliminary
estimate of the cost to repair, rebuild, restore or replace the
Premises; [v] a preliminary estimate of the schedule to complete the
repair, rebuilding, restoration or replacement of the Premises; [vi] a
description of the anticipated property insurance claim including the
name of the insurer, the insurance coverage limits, the deductible
amount, the expected settlement amount, and the expected settlement
date; and [vii] a description of the business interruption claim
including the name of the insurer, the insurance coverage limits, the
deductible amount, the expected settlement amount, and the expected
settlement date. Within five days after request from Landlord, Tenant
will provide Landlord with copies of all correspondence to the insurer
and any other information reasonably requested by Landlord.
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11.2 SUBSTANTIAL DESTRUCTION.
11.2.1 If the Improvements are substantially destroyed
at any time other than during the final 18 months of the Initial
Term or any Renewal Term, Tenant shall promptly rebuild and
restore the Premises in accordance with Section 11.4 and
Landlord shall make the insurance proceeds available to Tenant
for such restoration. The term "SUBSTANTIALLY DESTROYED" means
any casualty resulting in the loss of use of 50% or more of the
licensed beds at the Retirement Care Facility.
11.2.2 If the Improvements are substantially destroyed
during the final 18 months of the Initial Term or any Renewal
Term, Landlord may elect to terminate the Lease at Landlord's
option, and Landlord shall retain the insurance proceeds, except
that Landlord shall not be entitled to so terminate this Lease
nor to retain the insurance proceeds if Tenant (within 15 days
after the applicable casualty) exercises its right to extend the
term hereof for any remaining Renewal Term (if any). If Landlord
elects to terminate, Landlord shall give notice ("TERMINATION
NOTICE") to Tenant of its election to terminate this Lease
within 30 days after receipt of Tenant's notice of the damage.
If this Lease is so terminated pursuant to the foregoing (and if
Tenant has not renewed this Lease, as described above) this
Lease shall terminate and Rent shall be apportioned as of the
later of the date of termination, the date Tenant surrenders
possession of the Premises or the latest date through which
insurance described in Section 4.2.3 fully compensates for loss
of rent. If this Lease is so terminated, Tenant shall be liable
to Landlord for all Rent and all other obligations accrued under
this Lease through the effective date of termination.
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11.3 PARTIAL DESTRUCTION. If the Premises are not substantially
destroyed, then Tenant shall comply with the provisions of Section 11.4
and Landlord shall make the insurance proceeds available to Tenant for
such restoration.
11.4 RESTORATION. Tenant shall promptly repair, rebuild, or
restore the Premises, at Tenant's expense, so as to make the Premises at
least equal in value to the Premises existing immediately prior to such
occurrence and as nearly similar to it in character as is practicable
and reasonable. Before beginning such repairs or rebuilding, or letting
any contracts in connection with such repairs or rebuilding, Tenant will
submit for Landlord's approval, which approval Landlord will not
unreasonably withhold or delay, plans and specifications. Promptly after
receiving Landlord's approval of the plans and specifications and
receiving the proceeds of insurance, Tenant will begin such repairs or
rebuilding and will prosecute the repairs and rebuilding to completion
with diligence, subject, however, to strikes, lockouts, acts of God,
embargoes, governmental restrictions, and other all causes beyond
Tenant's reasonable control. Landlord will make available to Tenant the
net proceeds of any fire or other casualty insurance paid to Landlord
for such repair or rebuilding as the same progresses, after deduction of
any costs of collection, including attorneys' fees. Payments will be
made against properly certified vouchers of a competent architect in
charge of the work and approved by Landlord. Prior to commencing the
repairing or rebuilding, Tenant shall deliver to Landlord for Landlord's
approval a schedule setting forth the estimated monthly draws for such
work. Landlord will contribute to such payments out of the insurance
proceeds an amount equal to the proportion that the total net amount
received by Landlord from insurers bears to the total estimated cost of
the rebuilding or repairing, multiplied by the payment by Tenant on
account of such work. Landlord may, however, withhold 10% from each
payment until the work is completed and proof has been
51
furnished to Landlord that no lien or liability has attached or will
attach to the Premises or to Landlord in connection with such repairing
or rebuilding. Upon the completion of rebuilding and the furnishing of
such proof, the balance of the net proceeds of such insurance payable to
Tenant on account of such repairing or rebuilding will be paid to
Tenant. Tenant will obtain and deliver to Landlord a temporary or final
certificate of occupancy before the Premises is reoccupied for any
purpose. Tenant shall complete such repairs or rebuilding free and clear
of mechanic's or other liens, and in accordance with the building codes
and all applicable laws, ordinances, regulations, or orders of any
state, municipal, or other public authority affecting the repairs or
rebuilding, and also in accordance with all requirements of the
insurance rating organization, or similar body. Subject to Tenant's
compliance with this Section 11, any remaining proceeds of insurance
after such restoration will be disbursed to Tenant.
11.5 INSUFFICIENT PROCEEDS. So long as Landlord makes available
to Tenant the net proceeds of any insurance as provided in Section 11.4
for the repair, rebuilding and restoration of the Premises, Tenant shall
repair, rebuild or restore that Premises as provided in Section 11.4
regardless of the existence or sufficiency of any such insurance
proceeds. If the proceeds of any insurance settlement are not sufficient
to pay the costs of Tenant's repair, rebuilding or restoration under
Section 11.4 in full, Tenant shall deposit with Landlord at Landlord's
option, and within 10 days of Landlord's request, an amount sufficient
in Landlord's reasonable judgment to complete such repair, rebuilding or
restoration. Tenant shall not, by reason of the deposit or payment, be
entitled to any reimbursement from Landlord or diminution in or
postponement of the payment of the Rent.
11.6 NOT TRUST FUNDS. Notwithstanding anything herein or at law
or equity to the contrary, none of the insurance proceeds paid to
Landlord as herein provided shall be deemed
52
trust funds, and Landlord shall be entitled to dispose of such proceeds
as provided in this Section 11. Tenant expressly assumes all risk of
loss, including a decrease in the use, enjoyment or value, of the
Premises from any casualty whatsoever, whether or not insurable or
insured against.
11.7 LANDLORD'S INSPECTION. During the progress of such repairs
or rebuilding, Landlord and its architects and engineers may, from time
to time, inspect the Premises and will be furnished, if required by
them, with copies of all plans, shop drawings, and specifications
relating to such repairs or rebuilding. Tenant will keep all plans, shop
drawings, and specifications at the Premises, and Landlord and its
architects and engineers may examine them at al reasonable times. If,
during such repairs or rebuilding are not being done in accordance with
the approved plans and specifications, Landlord will give prompt notice
in writing to Tenant, specifying in detail the particular deficiency,
omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and specification. Upon
the receipt of any such notice, Tenant will cause corrections to be made
to any deficiencies, omissions, or such other respect. Tenant's
obligations to supply insurance, according to Section 4, will be
applicable to any repairs or rebuilding under this section.
11.8 LANDLORD'S COSTS. Tenant shall, within 30 days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses,
and fees of any architect or engineer employed by Landlord to review any
plans and specifications and to supervise and approve any construction,
or for any services rendered by such architect or engineer to Landlord
as contemplated by any of the provisions of this Lease, or for any
services performed by Landlord's attorneys in connection therewith.
11.9 NO RENT ABATEMENT. Rent will not ▇▇▇▇▇ pending the repairs
or rebuilding of the Premises.
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11.10 SURPLUS PROCEEDS. Subject to Tenant's compliance with this
Section 11, if there remains any surplus of insurance proceeds after the
completion of the repair or reconstruction of the Premises, such surplus
shall belong to and be paid to Tenant.
11.11 END OF TERM. Notwithstanding any other provision of this
Section 11, if the Premises are more than 30% destroyed (measured by
square footage) by casualty during the last nine (9) months of the
Initial Term or any Renewal Term, Tenant may terminate this Lease by
written notice to Landlord delivered within thirty (30) days after the
date of such casualty, in which event (a) this Lease shall be terminated
as of the later of the date Tenant surrenders possession of the Premises
or the latest date through which insurance described in Section 4.2.3
fully compensates for loss of rent, and (b) Landlord shall retain all
insurance proceeds.
12. CONDEMNATION.
12.1 TOTAL TAKING. If, by exercise of the right of eminent
domain or by conveyance made in response to the threat of the exercise
of such right ("TAKING"), the entire Premises is taken, or so much of
the Premises is taken that the Premises cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this
Lease will end on the earlier of the vesting of title to the Premises in
the condemning authority or the taking of possession of the Premises by
the condemning authority. All damages awarded for such Taking under the
power of eminent domain shall be the property of the Landlord, whether
such damages shall be awarded as compensation for diminution in value of
the leasehold or the fee of the Premises; provided, however, Tenant
shall be entitled to any damages awarded for Tenant's relocation
expenses.
12.2 PARTIAL TAKING. If, after a Taking, so much of the Premises
remains that the Premises can be used for substantially the same
purposes for which it was used immediately
54
before the Taking, then [i] this Lease will end as to the part taken on
the earlier of the vesting of title to the Premises in the condemning
authority or the taking of possession of the Premises by the condemning
authority; [ii] at its cost, Tenant shall restore so much of the
Premises as remains to a sound architectural unit substantially suitable
for the purposes for which it was used immediately before the Taking,
using good workmanship and new materials; [iii] upon completion of the
restoration, Landlord will pay Tenant the lesser of the net award made
to Landlord on the account of the Taking (after deducting from the total
award, attorneys', appraisers', and other fees and costs incurred in
connection with the obtaining of the award and amounts paid to the
holders of mortgages secured by the Premises), or Tenant's actual
out-of-pocket costs of restoring the Premises; and [iv] Landlord shall
be entitled to the balance of the net award. The restoration shall be
completed in accordance with Section 11.4 and with such other provisions
deemed to apply to condemnation instead of casualty.
12.3 CONDEMNATION PROCEEDS NOT TRUST FUNDS. Notwithstanding
anything in this Lease or at law or equity to the contrary, none of the
condemnation award paid to Landlord shall be deemed trust funds, and
Landlord shall be entitled to dispose of such proceeds as provided in
this Section 12. Tenant expressly assumes all risk of loss, including a
decrease in the use, enjoyment, or value, of the Premises from any
Condemnation.
13. PROVISIONS ON TERMINATION OF TERM.
13.1 SURRENDER OF POSSESSION. Tenant shall, on or before the
last day of the Term, or upon earlier termination of this Lease (unless
Tenant has purchased the Premises pursuant to Section 6.2), surrender to
Landlord the Premises (including all resident charts and records along
with appropriate resident consents) in the condition in which the
Premises are required to be maintained pursuant to Section 5 hereof
except for (a) alterations made in
55
accordance with the terms of this Lease; (b) normal and reasonable wear
and tear (subject to the obligation of Tenant to maintain the Premises
during the Term as elsewhere provided herein); and (c) damage or
destruction not required to be repaired by Tenant, whether caused by
Casualty, Taking or otherwise.
13.2 REMOVAL OF PERSONAL PROPERTY. Subject to Section 7.2.5
above, if Tenant is not then in default hereunder Tenant shall have the
right in connection with the surrender of the Premises to remove from
the Premises all Tenant Personal Property but not the Landlord Personal
Property (including the Landlord Personal Property replaced by Tenant or
required by the State or any other governmental entity to operate the
Premises for the purpose set forth in Section 5.3 above). Any such
removal shall be done in a workmanlike manner leaving the Premises in
good and presentable condition and appearance, including repair of any
damage caused by such removal. At the end of the Term or upon the
earlier termination of this Lease, (unless Tenant has purchased the
Premises pursuant to Section 6.2), Tenant shall return the Premises to
Landlord with the Landlord Personal Property (or replacements thereof)
in the condition in which the Premises and such Landlord Personal
Property are required to be maintained pursuant to Section 5 hereof.
13.3 TITLE TO PERSONAL PROPERTY NOT REMOVED. Title to any of
Tenant Personal Property which is not removed by Tenant upon the
expiration of the Term shall, at Landlord's election, vest in Landlord;
provided, however, that Landlord at Tenant's expense may remove and
dispose of any or all of such Tenant Personal Property which is not so
removed by Tenant without obligation or accounting to the Tenant.
13.4 MANAGEMENT OF PREMISES. Upon the expiration or earlier
termination of the Term (unless Tenant has purchased the Premises
pursuant to Section 6.2), Landlord or its
56
designee, upon written notice to Tenant, may elect to assume the
responsibilities and obligations for the management and operation of the
Premises and Tenant agrees to cooperate fully with Landlord or its
designee to accomplish the transfer of such management and operation
without interrupting the operation of the Premises. Tenant shall not
commit any act or be remiss in the undertaking of any act that would
jeopardize any licensure or certification of the facility, and Tenant
shall comply with all requests for an orderly transfer of the Retirement
Care Facility license, Medicare and Medicaid (or any successor program)
certifications and possession at the time of any such surrender. Upon
the expiration or earlier termination of the Term, Tenant shall promptly
deliver copies of all of Tenant's books and records relating to the
Premises and its operations to Landlord.
13.5 CORRECTION OF DEFICIENCIES. Upon termination or
cancellation of this Lease, Tenant shall indemnify Landlord for any
loss, damage, cost or expense incurred by Landlord to correct all
deficiencies of a physical nature identified by the North Carolina
Department of Human Services, local health, fire and safety agencies or
any other government agency or Medicare or Medicaid (or any successor
program) providers in the course of the change of ownership inspection
and audit.
14. NOTICES AND DEMANDS. All notices and demands, certificates,
requests, consents, approvals, and other similar instruments under this Lease
shall be in writing and shall be deemed to have been properly given upon actual
receipt thereof or within three (3) business days of being placed in the United
States certified or registered mail, return receipt requested, postage prepaid
(a) if to Tenant, addressed to ARCLP-Charlotte, LLC, c/o American Retirement
Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
Chief Executive Officer, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Bass, ▇▇▇▇▇ &
▇▇▇▇ PLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: T. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.,
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇, or at such other address as Tenant from time to time may
have designated by written notice to Landlord, and (b) if to Landlord, addressed
to Countryside ALF, LLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇
▇▇▇▇, Fax No. ▇▇▇-▇▇▇-▇▇▇▇ with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, or at such address as Landlord
may from time to time have designated by written notice to Tenant. Refusal to
accept delivery shall be deemed delivery. If Tenant is not an individual, notice
may be made to any senior officer, general partner or principal thereof.
15. RIGHT OF ENTRY; EXAMINATION OF RECORDS. Landlord and its
representative may enter the Premises at any reasonable time after reasonable
notice to Tenant for the purpose of inspecting the Premises for any reason
including, without limitation, examination of records and/or Tenant's default
under this Lease, or to exhibit the Premises for sale, lease or mortgage
financing, or posting notices of default, or non-responsibility under any
mechanic's or materialman's lien law or to otherwise inspect the Premises for
compliance with the terms of this Lease. Any such entry shall not unreasonably
interfere with residents, resident care, or any other of Tenant's operations.
16. QUIET ENJOYMENT. So long as there is no Event of Default which is
existing and continuing by Tenant, Landlord covenants and agrees that Tenant
shall peaceably and quietly have, hold and enjoy the Premises for the Term, free
of any claim or other action of Landlord, or anyone claiming by through or under
Landlord, not caused or created by Tenant (excepting, however, intrusion of
Tenant's quiet enjoyment occasioned by condemnation or destruction of the
property as referred to in Sections 11 and 12 hereof).
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17. APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the internal laws of the State of North Carolina without regard
to the conflict of laws rules of such State.
18. HAZARDOUS MATERIALS.
18.1 HAZARDOUS MATERIAL COVENANTS. Tenant's use of the Premises
shall comply in all material respects with all Hazardous Materials Laws.
In the event any Environmental Activities occur or are suspected to have
occurred in violation in any material respect of any Hazardous Materials
Laws or if Tenant has received any Hazardous Materials Claim against the
Premises, Tenant shall promptly obtain all permits and approvals
necessary to remedy any such actual or suspected problem through the
removal of Hazardous Materials or otherwise, and upon Landlord's
approval of the remediation plan, remedy any such problem to the
satisfaction of Landlord, in accordance with all Hazardous Materials
Laws and good business practices.
18.2 TENANT NOTICES TO LANDLORD. Tenant shall immediately advise
Landlord in writing of:
18.2.1 any Environmental Activities in violation of any
Hazardous Materials Laws,
18.2.2 any Hazardous Materials Claims against Tenant or
the Premises,
18.2.3 any remedial action taken by Tenant in response
to any Hazardous Materials Claims or any Hazardous Materials on,
under or about the Premises in violation of any Hazardous
Materials Laws,
18.2.4 Tenant's discovery of any occurrence or condition
on or in the vicinity of the Premises that materially increase
the risk that the Premises will be
59
exposed to Hazardous Materials in violation of any Hazardous
Materials Laws, and
18.2.5 all communications to or from Tenant, any
governmental authority or any other person relating to Hazardous
Materials Laws or Hazardous Materials Claims with respect to the
Premises, including copies thereof.
18.3 PARTICIPATION IN HAZARDOUS MATERIALS CLAIMS. Landlord shall
have the right, at Tenant's sole cost and expense and with counsel
chosen by Landlord, to join and participate in, as a party if it so
elects, any legal proceedings or actions initiated in connection with
any Hazardous Materials Claims.
18.4 ENVIRONMENTAL ACTIVITIES. Shall mean the use, generation,
transportation, handling, discharge, production, treatment, storage,
release or disposal of any Hazardous Materials at any time to or from
the Premises or located on or present on or under the Premises. Nothing
contained in the foregoing or elsewhere in this Section 18 is intended
to, nor shall it, limit the liability of Tenant, if any, to Landlord
with respect to any representation or warranty given by Tenant to
Landlord with respect to Hazardous Materials or environmental matters
generally as set forth in the Purchase Agreement.
18.5 HAZARDOUS MATERIALS INDEMNITY. Tenant agrees to indemnify
and hold Landlord and its officers, directors, members, agents,
employees, affiliates and representatives harmless from and against any
and all claims, demands, damages, losses, liens, liabilities, penalties,
fines, lawsuits, actions, orders, judgments, investigations, regulatory
proceedings and other proceedings, and all costs and expenses (including
but not limited to attorney's and consultant's fees and expenses),
incurred in connection therewith, arising directly or indirectly from or
out of, or in any way connected with (a) the presence or alleged
presence of any
60
Hazardous Materials or underground storage tanks in, on or under the
Premises occurring before or during the Term of this Lease; (b) any
cleanup, removal and/or remedial proceeding, investigation, order or
other action undertaken or required pursuant to any Hazardous Materials
Laws for violations or alleged violations accruing before or during the
Term of this Lease, (c) any violation or alleged violation of any
Hazardous Materials Laws relating to the Premises, attributable to
events occurring before or during the Term of this Lease; (d) any
inaccuracy of the certifications, representations and warranties
contained herein; or (e) any Hazardous Materials Claims asserted against
Landlord.
18.6 HAZARDOUS MATERIALS. "HAZARDOUS MATERIALS" shall mean (i)
any petroleum products and/or by-products (including any fraction
thereof), flammable substances, explosives, radioactive materials,
hazardous or toxic wastes, substances or materials, known carcinogens or
any other materials, contaminants or pollutants which pose a hazard to
the Premises or to persons on or about the Premises or cause the
Premises to be in violation of any Hazardous Materials Laws; (ii)
asbestos in any form which is friable; (iii) urea formaldehyde in foam
insulation or any other form; (iv) transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls
in excess of fifty (50) parts per million or any other more restrictive
standard then prevailing; (v) medical wastes and biohazards; (vi) radon
gas; and (vii) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any governmental authority
or may or could pose a hazard to the health and safety of the occupants
of the Premises or the owners and/or occupants of property adjacent to
or surrounding the Premises.
18.7 HAZARDOUS MATERIALS CLAIMS. "HAZARDOUS MATERIALS CLAIMS"
shall mean any and all enforcement, clean-up, removal or other
governmental or regulatory actions or
61
orders threatened, instituted or completed pursuant to any Hazardous
Material Laws, together with all claims made or threatened by any third
party against the Premises, Landlord or Tenant relating to damage,
contribution, cost recovery compensation, loss or injury resulting from
violation of any Hazardous Materials Laws.
18.8 HAZARDOUS MATERIALS LAWS. "HAZARDOUS MATERIALS LAWS" shall
mean any laws, ordinances, regulations, rules, orders, guidelines or
policies relating to the environment, health and safety, Environmental
Activities, Hazardous Materials, air and water quality, waste disposal
and other environmental matters, if the failure to comply with the same
does or would have a material adverse effect on the Premises or the
operation thereof.
18.9 PHASE I INSPECTION AND REPORT; REMEDIAL ACTION. Within
thirty (30) days after the Commencement Date (or within such reasonably
longer period as may be required, so long as Tenant pursues the same
with reasonable diligence), Tenant will provide to Lender a so-called
"Phase I" environmental inspection report regarding the Premises
prepared by an environmental inspector selected by Tenant and reasonably
approved by Landlord. In the event that such report reasonably
recommends that a so-called "Phase II" environmental inspection report
be completed to indemnify Landlord from any material potential Hazardous
Materials Claims or violations of Hazardous Materials Laws, within
thirty (30) days after the completion of the so-called "Phase I"
environmental inspection report (or within such reasonably longer period
as may be required, so long as Tenant pursues the same with reasonable
diligence), Tenant will provided to Lender such Phase II environmental
inspection report prepared by an environmental inspector selected by
Tenant and reasonably acceptable by Landlord. If either or both of such
reports disclose any material noncompliances with Hazardous Materials
Laws, Tenant will remedy same with reasonable diligence. If Tenant's
remedial action is not completed
62
on or before June 30, 2002, or within such reasonable time thereafter as
may be required (provided Tenant is proceeding with reasonable diligence
to correct and remedy such noncompliance), Landlord may either (a) cause
completion of the same, or (b) direct Tenant and/or ARC to complete the
same, and Landlord may offset any reasonable costs and expenses actually
incurred by Landlord in completing the same against principal and
interest due under the 2002 Promissory Note and, to the extent the 2002
Promissory Note is insufficient for such offset, the 2003 Promissory
Note, by delivery of written notice to Tenant sufficiently evidencing
the costs and expenses to be offset.
19. ASSIGNMENT AND SUBLETTING.
19.1 PROHIBITION ON ASSIGNMENT AND SUBLETTING. Tenant
acknowledges that Landlord has entered into this Lease in reliance on
the personal services and business expertise of Tenant. Tenant may not
assign, sublet, mortgage, hypothecate, pledge, or transfer any interest
in this Lease, or in the Premises, in whole or in part, without the
prior written consent of Landlord, which Landlord may not unreasonably
withhold, condition or delay. Tenant acknowledges that, without limiting
the foregoing, Landlord may withhold its consent to any such assignment,
sublease, mortgage, hypothecation, pledge or transfer if the experience,
reputation or creditworthiness of the proposed assignee, sublessee,
mortgagee or transferee is not reasonably satisfactory to Landlord. The
following transactions will be deemed an assignment or sublease
requiring Landlord's prior written consent: [i] an assignment by
operation of law; [ii] an imposition (whether or not consensual) of a
lien, mortgage, or encumbrance upon Tenant's interest in the Lease; and
[iii] an arrangement (including, but not limited to, management
agreements, concessions, licenses, and easements) which allows the use
or occupancy or operation of all or part of the Premises by anyone other
than Tenant. Landlord's consent to any
63
assignment or sublease will not release Tenant from its payment and
performance obligations under this Lease, but rather Tenant and Tenant's
assignee or sublessee will be jointly and severally liable for such
payment and performance. An assignment or sublease without the prior
written consent of Landlord will be void at the Landlord's option.
Landlord's consent to one assignment or sublease will not waive the
requirement of its consent to any subsequent assignment or sublease.
19.2 ASSIGNMENT AND SUBLETTING WITHOUT LANDLORD'S CONSENT.
Notwithstanding the provisions of Section 19.1, Tenant may without
Landlord's consent, assign this Lease or sublet the Premises or any
portion thereof to a Successor (as such term is defined below) or to a
wholly-owned, direct or indirect, subsidiary of ARC or Tenant
("SUBSIDIARY"), provided that in each case such Successor or Subsidiary
fully assumes the obligations of Tenant and ARC is not released from its
guaranty of this Lease.
19.3 REQUESTS FOR LANDLORD'S CONSENT TO ASSIGNMENT, SUBLEASE OR
MANAGEMENT AGREEMENT. If Tenant requests Landlord's consent to a
specific assignment, sublease, or management agreement, Tenant shall
give Landlord [i] the name and address of the proposed assignee,
subtenant or manager; [ii] a copy of the proposed assignment, sublease
or management agreement; [iii] reasonably satisfactory information about
the nature, business and business history of the proposed assignee,
subtenant, or manager and its proposed use of the Premises; and [iv]
banking, financial, and other credit information, and references about
the proposed assignee, subtenant or manager reasonably sufficient to
enable Landlord to determine the financial responsibility and character
of the proposed assignee, subtenant or manager. Any assignment, sublease
or management agreement shall contain provisions to the effect that [a]
such assignment, sublease or management agreement is subject and
subordinate to all of the
64
terms and provisions of this Lease and to the rights of Landlord; [b]
such assignment, sublease or management agreement may not be modified
without the prior written consent of Landlord not to be unreasonably
withheld, conditioned or delayed; [c] if this Lease shall terminate
before the expiration of such assignment, sublease or management
agreement, the assignee, subtenant or manager hereunder will, at
Landlord's option, attorn to Landlord and waive any right the assignee,
subtenant or manager may have to terminate the assignment, sublease or
management agreement or surrender possession thereunder as a result of
the termination of this Lease; and [d] if the assignee, subtenant or
manager receives a written notice from Landlord stating that Tenant is
in default under this Lease, the assignee, subtenant or manager shall
thereafter pay all rentals or payments under the assignment, sublease or
management agreement directly to Landlord until such default has been
cured.
19.4 TRANSFER OR ASSIGNMENT BY LANDLORD. Landlord may not
transfer, assign, mortgage, collaterally assign, or otherwise, directly
or indirectly, dispose of Landlord's interest in this Lease or the
Premises to a competitor of Tenant or ARC for so long as Tenant, ARC, or
an affiliate of Tenant and/or ARC is tenant hereunder. The foregoing
limitation shall not be applicable if an Event of Default has occurred
and is continuing beyond the expiration of any applicable grace and/or
cure periods and Landlord is proceeding to take action to exercise its
remedies pursuant to Section 10.2.1 or 10.2.2.
19.5 ORDINARY COURSE SUBLEASES NOT TO REQUIRE CONSENT.
Notwithstanding anything to the contrary contained in Section 19, (i) a
lease of a unit or bed to a resident of the Premises, (ii) a sublease of
any space in the Premises to an entity that provides services to such
residents, and (iii) a sublease of any space for uses ancillary to the
Retirement Care Facility, so long as each is made in the ordinary course
of Tenant's business, shall not be deemed to be an
65
assignment of this Lease, or an unpermitted subletting hereunder, and
shall not require Landlord's consent.
19.6 SUCCESSOR. As used herein, a "SUCCESSOR" is any entity,
which succeeds to materially, all of the assets, operations and business
of Tenant by merger or reorganization and which is controlled by the
same person or persons as control Tenant prior to such merger or
reorganization.
20. INDEMNIFICATION.
20.1 TENANT'S INDEMNIFICATION. Tenant hereby indemnifies and
agrees to hold harmless Landlord, any successors or assigns of Landlord,
and Landlord's and such successor's and assign's directors, officers,
employees and agents from and against any and all demands, claims,
causes of action, fines, penalties, damages (including consequential
damages), losses, liabilities (including strict liability), judgments,
and expenses (including, without limitation, reasonable attorneys' fees
and court costs), incurred in connection with or arising from [i] the
use or occupancy of the Premises by Tenant or any persons claiming under
Tenant, [ii] any activity, work, or thing done, or permitted or suffered
by Tenant in or about the Premises, [iii] any acts, omissions, or
negligence of Tenant or any person claiming under Tenant, or the
contractors, agents, employees, invitees, or visitors of Tenant or any
such person, [iv] any breach, violation, or nonperformance by Tenant or
any person claiming under Tenant or the employees, agents, contractors,
invitees, or visitors of Tenant or of any such person, of any term,
covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind including, without limitation, any
failure to comply with any applicable requirements under the Americans
with Disabilities Act, [v] any injury or damage to the person, property
or business of Tenant, its employees, agents, contractors, invitees,
visitors, or any other person entering upon
66
the Premises, and [vi] any construction, alterations, changes or
demolition of the Premises performed by or contracted for Tenant or its
employees, agents or contractors. If any action or proceeding is brought
against Landlord, its employees, or agents by reason of any such claim,
Tenant, upon notice from Landlord, will defend the claim at Tenant's
expense with counsel reasonably satisfactory to Landlord. All amounts
payable to Landlord under this section shall be payable on written
demand and any such amounts which are not paid within 20 days after
demand therefor by Landlord shall bear interest at the maximum permitted
interest rate under applicable law. In case any action, suit or
proceeding is brought against Tenant by reason of any such occurrence,
Tenant shall use its best efforts to defend such action, suit or
proceeding. Notwithstanding anything in this Lease to the contrary,
Tenant shall not indemnify or hold Landlord harmless, nor successors or
assigns of Landlord, nor Landlord's and such successor's and assign's
directors, officers, employees and agents, from and against any and all
demands, claims, causes of action, fines, penalties, damages (including
consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation,
reasonable attorneys' fees, and court costs) to the extent resulting
from a breach of or default under this Lease, or negligence or
misconduct on the part of Landlord, the successors and assigns of
Landlord, and Landlord's and such successor's and assign's directors,
officers, employees and agents.
20.2 NOTICE OF CLAIM. Landlord shall notify Tenant in writing of
any claim or action brought against Landlord in which indemnity may be
sought against Tenant pursuant to this section. Such notice shall be
given in sufficient time to allow Tenant to defend or participate in
such claim or action, but the failure to give such notice in sufficient
time shall not constitute a
67
defense hereunder nor in any way impair the obligations of Tenant under
this section unless the failure to give such notice precludes Tenant's
defense of any such action.
20.3 SURVIVAL OF COVENANTS. The covenants of Tenant contained in
this section shall remain in full force and effect after the termination
of this Agreement until the expiration of the period stated in the
applicable statute of limitations during which a claim or cause of
action may be brought and payment in full or the satisfaction of such
claim or cause of action and of all expenses and charges incurred by
Landlord relating to the enforcement of the provisions herein specified.
20.4 REIMBURSEMENT OF EXPENSES. Unless prohibited by law, Tenant
hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Retirement Care
Facility, or incurred by Landlord in enforcing the provisions of this
Agreement.
20.5 LIMITATION OF LANDLORD'S LIABILITY. Landlord, its agents,
and employees, will not be liable for any loss, injury, death, or damage
(including consequential damages) to persons, property, or Tenant's
business occasioned by theft, act of God, public enemy, injunction,
riot, strike, insurrection, war, court order, requisition, order of
governmental body or authority, fire, explosion, falling objects,
stream, water, rain or snow, leak or flow of water (including water from
the elevator system), rain or snow from the Premises or into the
Premises or from the roof, street, subsurface or from any other place or
by dampness or from the breakage, leakage, obstruction, or other defects
of the pipes, sprinklers, wires, appliances, plumbing, air conditioning,
or lighting fixtures of the Premises, or from construction, repair, or
alteration of the Premises or from any acts or omissions of any other
occupant or visitor of the Premises, or from any other cause beyond
Landlord's control.
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21. HOLDING OVER. Should Tenant, with or without the express or implied
consent of Landlord, continue to hold and occupy the Premises after the
expiration of the Term, such holding over beyond the Term and the acceptance or
collection of Rent by the Landlord shall operate and be construed as creating a
tenancy from month-to-month and not for any other term whatsoever. Said
month-to-month tenancy may be terminated by Landlord by giving Tenant 10 days'
written notice, and at any time thereafter Landlord may re-enter and take
possession of the Premises.
22. ESTOPPEL CERTIFICATES. Tenant shall, at any time upon not less than
fifteen (15) days' prior written request by Landlord, execute, acknowledge and
deliver to Landlord or its designee a statement in writing, executed by an
officer or general partner of Tenant, certifying that this Lease is unmodified
and in full force and effect (or, if there have been any modifications, that
this Lease is in full force and effect as modified, and setting forth such
modifications), the dates to which Minimum Rent, Additional Rent and additional
charges hereunder have been paid, certifying that to Tenant's knowledge, no
default by either Landlord or Tenant exists hereunder or specifying each such
default and as to other matters as Landlord may reasonably request.
23. CONVEYANCE BY LANDLORD. If Landlord or any successor owner of the
Premises shall convey the Premises in accordance with the terms hereof, Landlord
or such successor owner shall thereupon be released from all future liabilities
and obligations of Landlord under this Lease arising or accruing from and after
the date of such conveyance or other transfer as to the Premises and all such
future liabilities and obligations shall thereupon be binding upon the new
owner.
69
24. WAIVER OF JURY TRIAL. Landlord and Tenant hereby waive any rights to
trial by jury in any action, proceedings or counterclaim brought by either of
the parties against the other in connection with any matter whatsoever arising
out of or in any way connected with this Lease, including, without limitation,
the relationship of Landlord and Tenant, Tenant's use and occupancy of the
Premises, or any claim of injury or damage relating to the foregoing or the
enforcement of any remedy hereunder.
25. ATTORNEYS' FEES. If Landlord or Tenant brings any action to
interpret or enforce this Lease, or for damages for any alleged breach hereof,
the prevailing party in any such action shall be entitled to reasonable
attorneys' fees and costs as awarded by the court in addition to all other
recovery, damages and costs.
26. SEVERABILITY. In the event any part or provision of the Lease shall
be determined to be invalid or enforceable, the remaining portion of this Lease
shall nevertheless continue in full force and effect.
27. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.
28. BINDING EFFECT. Subject to the provisions of Section 19 above, this
Lease shall be binding upon and inure to the benefit of Landlord and Tenant and
their respective heirs, personal representatives, successors in interest and
assigns.
29. WAIVER AND SUBROGATION. Landlord and Tenant hereby waive to each
other all rights of subrogation which any insurance carrier, or either of them,
may have as to the Landlord or Tenant by reason of any provision in any policy
of insurance issued to Landlord or Tenant, provided such waiver does not thereby
invalidate the policy of insurance.
70
30. MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon the
request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease shall be made. The party requesting such recordation shall pay all costs
and expenses of preparing and recording such memorandum of this Lease.
31. INCORPORATION OF RECITALS AND ATTACHMENTS. The recitals and
exhibits, schedules, addenda and other attachments to this Lease are hereby
incorporated into this Lease and made a part hereof.
32. TITLES AND HEADINGS. The titles and headings of sections of this
Lease are intended for convenience only and shall not in any way affect the
meaning or construction of any provision of this Lease.
33. NATURE OF RELATIONSHIP; USURY SAVINGS CLAUSE. The parties intend
that their relationship shall be that of lessor and lessee only. Nothing
contained in this Lease shall be deemed or construed to constitute an extension
of credit by Landlord to Tenant, nor shall this Lease be deemed to be a
partnership or venture agreement between Landlord and Tenant. Notwithstanding
the foregoing, in the event any payment made to Landlord hereunder is deemed to
violate any applicable laws regarding usury, the portion of any payment deemed
to be usurious shall be held by Landlord to pay the future obligations of Tenant
as such obligations arise and, in the event Tenant discharges and performs all
obligations hereunder, such funds will be reimbursed to Tenant upon the
expiration of the Term. No interest shall be paid on any such funds held by
Landlord.
34. JOINT AND SEVERAL. If more than one person or entity is the Tenant
hereunder, the liability and obligations of such persons or entities under this
Lease shall be joint and several.
71
35. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
obligations, representations, warranties and covenants of Tenant under this
Lease shall survive the expiration or earlier termination of the Term.
36. INTERPRETATION. Both Landlord and Tenant have been represented by
counsel and this Lease has been freely and fairly negotiated. Consequently, all
provisions of this Lease shall be interpreted according to their fair meaning
and shall not be strictly construed against any party.
37. [INTENTIONALLY OMITTED.]
38. SUBORDINATION, NON-DISTURBANCE, AND ATTORNMENT. Upon written notice
by Landlord to Tenant, this Lease shall be and become subject and subordinate to
any and all mortgages or deeds of trust now existing, or that hereafter may
secure Permitted Mortgage Loans, on the Premises, for the full amount of all
advances made or to be made thereunder and without regard to the time or
character of such advances, together with interest thereon, and subject to all
the terms and provisions thereof. Notwithstanding the foregoing provisions with
respect to subordination, such provisions shall not be effective unless the
owner or holder of any such mortgage or deed of trust shall execute with Tenant
a non-disturbance and attornment agreement under which said owner or holder
shall agree to accept the attornment of Tenant and not disturb Tenant's right of
possession hereunder upon foreclosure of any such mortgage or deed of trust, if
Tenant is not in default. Tenant hereby agrees to attorn to any person, firm or
corporation purchasing or otherwise acquiring the Premises at any sale or other
proceeding or pursuant to the exercise of any other rights, power or remedies
under such mortgages or deeds of trust, as if such person, firm or corporation
had been named as Landlord herein. Upon request of Landlord, Tenant agrees to
execute and deliver an instrument suitable for recording
72
subordinating Tenant's interest in the Premises to any such Permitted Mortgage
Loan, subject to the provisions of this Section 38.
39. ENTIRE AGREEMENT. The entire understanding between the parties with
respect to the transactions contemplated herein is set out in this Lease. This
Lease supersedes and voids all prior proposals, letters and agreements, oral or
written, with respect to the subject matter hereof. No modification or
alteration of this Lease shall be effective unless evidenced by an instrument in
writing and signed by all parties.
40. OPERATING LEASE. The parties hereto intend that this Lease be
treated as an operating lease for tax and accounting purposes.
41. LANDLORD'S LIEN. To secure the payment of all Rent due and to become
due hereunder, and the faithful performance of all other covenants of this Lease
required by Tenant to be performed, Tenant hereby gives to Landlord a lien on,
and security interest in and to, all Tenant Personal Property (except any part
of such property as may be Excluded Property), and all proceeds therefrom. Upon
the occurrence of an Event of Default, Landlord may, in addition to any other
remedies provided herein, enter upon the Premises and take possession of any and
all such Tenant Personal Property and sell the same at public or private sale
all in accordance with the Uniform Commercial Code as enacted in the State (the
"UCC"). Tenant hereby authorizes Landlord to file any UCC financing statements
necessary to perfect the security interest of Landlord in such Personal Property
under the provisions of the UCC.
[Signatures on following page(s).]
73
[SIGNATURE PAGE TO LEASE AGREEMENT Doc #2246890]
IN WITNESS WHEREOF, the parties hereto have executed this Lease
Agreement of have caused this Lease Agreement to be duly executed on or as of
the day and date first above written.
TENANT:
Witness: ARCLP-CHARLOTTE, LLC
a Tennessee limited liability company
--------------------------- By: ARC Charlotte, Inc., managing member
By:
-------------------------------------
--------------------------- Title:
----------------------------------
LANDLORD:
Witness:
COUNTRYSIDE ALF, LLC
a New York limited liability company
---------------------------
By:
-------------------------------------
--------------------------- Title:
----------------------------------
74
STATE OF __________________
COUNTY OF ________________
BEFORE ME, a notary public in and for said County, personally appeared
E. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Member of Countryside ALF, LLC, a limited liability company,
who having been duly sworn, acknowledged that he did execute the foregoing
instrument, and that the same is his free act and deed personally and as such
Member.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal at office, this _______ day of January, 2002.
------------------------------------
(Print Name)
Notary Public
My Commission Expires:
---------------------------
STATE OF TENNESSEE
COUNTY OF DAVIDSON
BEFORE ME, a notary public, personally appeared __________________,
______________ OF ARC Charlotte, Inc., a corporation that is managing member of
ARCLP - Charlotte, LLC, a Tennessee limited liability company, who having been
duly sworn, acknowledged that he did execute the foregoing instrument, and that
the same is his free act and deed personally and as such officer.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal at office, this _________ day of January, 2002.
------------------------------------
(Print Name)
Notary Public
My Commission Expires:
---------------------------
EXHIBIT "A"
LEGAL DESCRIPTION OF PREMISES
EXHIBIT "A-1"
PERMITTED EXCEPTIONS
EXHIBIT "B"
Landlord Personal Property
All furniture, furnishings, equipment, tools, machinery, fixtures,
appliances and all other intangible and tangible personal property conveyed to
Landlord pursuant to the Purchase Agreement.
EXHIBIT "C"
Fair Market Value
"FAIR MARKET VALUE" shall mean the value of the Premises as agreed upon
by Landlord and Tenant; provided, however, if Landlord and Tenant are unable to
agree upon the value of the Premises within fifteen (15) days after the need to
establish Fair Market Value arises pursuant to the terms of this Lease, then
each shall within ten (10) days after written demand by either party select one
MAI Appraiser each to participate in the determination of Fair Market Value. For
all purposes under this Lease, the Fair Market Value of the Premises shall be
based on the Fair Market Value of the Premises unencumbered by this Lease. The
two appraisers shall appraise the Premises within twenty (20) days of the
written demand required above and shall certify each such appraisal to both
Landlord and Tenant. If the two appraisals do not differ by more than ten
percent (10%) the average of the two appraisals shall be used as the Fair Market
Value. If the two appraisals do differ by more than ten percent (10%), then the
two appraisers shall elect a third MAI Appraiser. The third MAI Appraiser shall
appraise the Premises within thirty (30) days of the selection of the third
appraiser. The appraisal of the third MAI Appraiser shall be the Fair Market
Value unless such amount is either greater than or less than both of the two
previous appraisals, in which event the Fair Market Value shall be the amount of
whichever of the two previous appraisals is closet to the amount of the third
appraisal. To the extent consistent with sound appraisal practices as then
existing at the time of any such appraisal, and if requested by Landlord, such
appraisal, shall be made on a basis consistent with the basis on which the
Premises was appraised at the time of its acquisition by Landlord. Each of
Tenant and Landlord shall pay the fees and expenses of any MAI Appraiser, which
such party appoints pursuant to this Exhibit plus 50% of the cost of the third
appraiser.
In the event either Landlord or Tenant fails to select a MAI Appraiser
within the time period set forth in the foregoing paragraph, and such failure is
not corrected within five (5) days of notice of such failure to the defaulting
party, the MAI Appraiser selected by the other party (the "SOLE APPRAISER")
shall alone determine the Fair Market Value of the Premises in accordance with
the provisions of this Exhibit and the Fair Market Value so determined shall be
binding upon Landlord and Tenant.
In the event the MAI Appraisers selected by Landlord and Tenant are
unable to agree upon a third MAI Appraiser within the time period set forth in
the first paragraph of this Exhibit, either Landlord or Tenant shall have the
right to apply at their mutual expense to the presiding judge of the court of
original trial jurisdiction in the county in which the Premises is located to
name the third MAI Appraiser.
Landlord, Tenant will exercise their respective best efforts to
expedite the appraisal process and will cooperate fully and with all deliberate
speed with each other and with all appraisers in order to allow the
determination of Fair Market Value to be finally completed.
"MAI APPRAISER" shall mean an appraiser (i) licensed or otherwise
qualified to do business in the State, (ii) who has substantial experience in
performing appraisals of facilities similar to the Premises, (iii) who is
certified as a member of the American Institute of Real
Estate Appraisers or certified as a SRPA by the Society of Real Estate
Appraisers, or, if such organizations no longer exist or certify appraisers,
such successor organization or such other organization as is approved by
Landlord and Tenant, and (iv) who does not have an interest, direct or indirect,
in the Premises, Landlord or Tenant, and who will not otherwise derive a benefit
from the calculation of the Fair Market Value.
EXHIBIT "D-1"
EXAMPLES OF CALCULATION OF MINIMUM RENT AS SET FORTH IN THIS SECTION 2.1.3.
EXAMPLE 1
This example assumes that the debt to be refinanced in July of 2008
($31,400,131) is refinanced over 300 months rather than 222 months.
Amortization Principal Rate Payment
Theoretical Debt Service portion of Minimum Rent 222 months 31,400,131 6.87% 250,225
Actual debt service 300 months 31,400,131 6.87% 219,332
EXAMPLE 2
This example assumes that the debt to be refinanced in July, 2008 ($31,400,131)
is refinanced over 300 months rather than 222 months and at 8% rather than
6.87%.
Amortization Principal Rate Payment
Theoretical Debt Service portion of Minimum Rent 222 months 31,400,131 8.00% 271,425
Actual debt service 300 months 31,400,131 8.00% 242,351
EXAMPLE 3
This example assumes that the debt to be refinanced in July, 2008 ($31,400,131)
is refinanced over 300 months rather than 222 months and the amount financed is
increased from $31,400,131 to $34,400,131.
Amortization Principal Rate Payment
Theoretical Debt Service portion of Minimum Rent 222 months 31,400,131 6.87% 250,225
Actual debt service 300 months 34,400,131 6.87% 240,288
EXAMPLE 4
This example assumes that the debt to be refinanced in July, 2008 ($31,400,131)
is refinanced over 300 months rather than 222 months, with a change of interest
rate to 8% and a change in amount from $31,400,131 to $34,400,131.
Amortization Principal Rate Payment
Theoretical Debt Service portion of Minimum Rent 222 months 31,400,131 8.00% 271,425
Actual debt service 300 months 34,400,131 8.00% 265,505
EXHIBIT "D-2"
AMORTIZATION OF THEORETICAL PRINCIPAL
31,400,131 Principal Amount
222 Amortization
0.0687 Rate
250,225 Payment Amount
Ending Prin Principal Interest
1st of Month
1 Aug-08 31,329,672 70,459 179,766
2 Sep-08 31,258,809 70,863 179,362
3 Oct-08 31,187,541 71,268 178,957
4 Nov-08 31,115,864 71,676 178,549
5 Dec-08 31,043,778 72,087 178,138
6 Jan-09 30,971,278 72,499 177,726
7 Feb-09 30,898,364 72,914 177,311
8 Mar-09 30,825,032 73,332 176,893
9 Apr-09 30,751,280 73,752 176,473
10 May-09 30,677,106 74,174 176,051
11 Jun-09 30,602,508 74,599 175,626
12 Jul-09 30,527,482 75,026 175,199
13 Aug-09 30,452,027 75,455 174,770
14 Sep-09 30,376,140 75,887 174,338
15 Oct-09 30,299,818 76,322 173,903
16 Nov-09 30,223,059 76,759 173,466
17 Dec-09 30,145,861 77,198 173,027
18 Jan-10 30,068,221 77,640 172,585
19 Feb-10 29,990,137 78,084 172,141
20 Mar-10 29,911,606 78,531 171,694
21 Apr-10 29,832,624 78,981 171,244
22 May-10 29,753,191 79,433 170,792
23 Jun-10 29,673,303 79,888 170,337
24 Jul-10 29,592,958 80,345 169,880
25 Aug-10 29,512,152 80,805 169,420
26 Sep-10 29,430,885 81,268 168,957
27 Oct-10 29,349,151 81,733 168,492
28 Nov-10 29,266,950 82,201 168,024
29 Dec-10 29,184,278 82,672 167,553
30 Jan-11 29,101,133 83,145 167,080
31 Feb-11 29,017,512 83,621 166,604
32 Mar-11 28,933,413 84,100 166,125
33 Apr-11 28,848,831 84,581 165,644
34 May-11 28,763,766 85,065 165,160
35 Jun-11 28,678,213 85,552 164,673
36 Jul-11 28,592,171 86,042 164,183
37 Aug-11 28,505,636 86,535 163,690
38 Sep-11 28,418,606 87,030 163,195
39 Oct-11 28,331,078 87,529 162,697
40 Nov-11 28,243,048 88,030 162,195
41 Dec-11 28,154,514 88,534 161,691
42 Jan-12 28,065,474 89,040 161,185
43 Feb-12 27,975,924 89,550 160,675
44 Mar-12 27,885,861 90,063 160,162
45 Apr-12 27,795,282 90,578 159,647
46 May-12 27,704,185 91,097 159,128
47 Jun-12 27,612,567 91,619 158,606
48 Jul-12 27,520,424 92,143 158,082
49 Aug-12 27,427,753 92,671 157,554
50 Sep-12 27,334,552 93,201 157,024
51 Oct-12 27,240,817 93,735 156,490
52 Nov-12 27,146,546 94,271 155,954
53 Dec-12 27,051,735 94,811 155,414
54 Jan-13 26,956,381 95,354 154,871
55 Feb-13 26,860,481 95,900 154,325
56 Mar-13 26,764,033 96,449 153,776
57 Apr-13 26,667,032 97,001 153,224
58 May-13 26,569,475 97,556 152,669
59 Jun-13 26,471,361 98,115 152,110
60 Jul-13 26,372,684 98,676 151,549
61 Aug-13 26,273,443 99,241 150,984
62 Sep-13 26,173,633 99,810 150,415
63 Oct-13 26,073,252 100,381 149,844
64 Nov-13 25,972,297 100,956 149,269
65 Dec-13 25,870,763 101,534 148,691
66 Jan-14 25,768,648 102,115 148,110
67 Feb-14 25,665,948 102,700 147,526
68 Mar-14 25,562,661 103,287 146,938
69 Apr-14 25,458,782 103,879 146,346
70 May-14 25,354,309 104,473 145,752
71 Jun-14 25,249,237 105,072 145,153
72 Jul-14 25,143,564 105,673 144,552
73 Aug-14 25,037,286 106,278 143,947
74 Sep-14 24,930,399 106,887 143,338
75 Oct-14 24,822,901 107,498 142,727
76 Nov-14 24,714,787 108,114 142,111
77 Dec-14 24,606,054 108,733 141,492
78 Jan-15 24,496,699 109,355 140,870
79 Feb-15 24,386,717 109,981 140,244
80 Mar-15 24,276,106 110,611 139,614
81 Apr-15 24,164,862 111,244 138,981
82 May-15 24,052,981 111,881 138,344
83 Jun-15 23,940,459 112,522 137,703
84 Jul-15 23,827,293 113,166 137,059
85 Aug-15 23,713,479 113,814 136,411
86 Sep-15 23,599,014 114,465 135,760
87 Oct-15 23,483,893 115,121 135,104
88 Nov-15 23,368,113 115,780 134,445
89 Dec-15 23,251,671 116,443 133,782
90 Jan-16 23,134,562 117,109 133,116
91 Feb-16 23,016,782 117,780 132,445
92 Mar-16 22,898,328 118,454 131,771
93 Apr-16 22,779,196 119,132 131,093
94 May-16 22,659,382 119,814 130,411
95 Jun-16 22,538,882 120,500 129,725
96 Jul-16 22,417,692 121,190 129,035
97 Aug-16 22,295,808 121,884 128,341
98 Sep-16 22,173,227 122,582 127,644
99 Oct-16 22,049,943 123,283 126,942
100 Nov-16 21,925,954 123,989 126,236
101 Dec-16 21,801,255 124,699 125,526
102 Jan-17 21,675,842 125,413 124,812
103 Feb-17 21,549,712 126,131 124,094
104 Mar-17 21,422,859 126,853 123,372
105 Apr-17 21,295,280 127,579 122,646
106 May-17 21,166,970 128,310 121,915
107 Jun-17 21,037,926 129,044 121,181
108 Jul-17 20,908,143 129,783 120,442
109 Aug-17 20,777,617 130,526 119,699
110 Sep-17 20,646,344 131,273 118,952
111 Oct-17 20,514,319 132,025 118,200
112 Nov-17 20,381,539 132,781 117,444
113 Dec-17 20,247,998 133,541 116,684
114 Jan-18 20,113,693 134,305 115,920
115 Feb-18 19,978,619 135,074 115,151
116 Mar-18 19,842,771 135,847 114,378
117 Apr-18 19,706,146 136,625 113,600
118 May-18 19,568,739 137,407 112,818
119 Jun-18 19,430,545 138,194 112,031
120 Jul-18 19,291,559 138,985 111,240
121 Aug-18 19,151,779 139,781 110,444
122 Sep-18 19,011,198 140,581 109,644
123 Oct-18 18,869,812 141,386 108,839
124 Nov-18 18,727,616 142,195 108,030
125 Dec-18 18,584,607 143,009 107,216
126 Jan-19 18,440,779 143,828 106,397
127 Feb-19 18,296,127 144,652 105,573
128 Mar-19 18,150,647 145,480 104,745
129 Apr-19 18,004,335 146,313 103,912
130 May-19 17,857,185 147,150 103,075
131 Jun-19 17,709,192 147,993 102,232
132 Jul-19 17,560,352 148,840 101,385
133 Aug-19 17,410,660 149,692 100,533
134 Sep-19 17,260,111 150,549 99,676
135 Oct-19 17,108,700 151,411 98,814
136 Nov-19 16,956,422 152,278 97,947
137 Dec-19 16,803,273 153,150 97,076
138 Jan-20 16,649,247 154,026 96,199
139 Feb-20 16,494,339 154,908 95,317
140 Mar-20 16,338,544 155,795 94,430
141 Apr-20 16,181,857 156,687 93,538
142 May-20 16,024,273 157,584 92,641
143 Jun-20 15,865,787 158,486 91,739
144 Jul-20 15,706,393 159,393 90,832
145 Aug-20 15,546,088 160,306 89,919
146 Sep-20 15,384,864 161,224 89,001
147 Oct-20 15,222,717 162,147 88,078
148 Nov-20 15,059,642 163,075 87,150
149 Dec-20 14,895,634 164,009 86,216
150 Jan-21 14,730,686 164,948 85,278
151 Feb-21 14,564,794 165,892 84,333
152 Mar-21 14,397,953 166,842 83,383
153 Apr-21 14,230,156 167,797 82,428
154 May-21 14,061,399 168,757 81,468
155 Jun-21 13,891,675 169,724 80,502
156 Jul-21 13,720,980 170,695 79,530
157 Aug-21 13,549,307 171,672 78,553
158 Sep-21 13,376,652 172,655 77,570
159 Oct-21 13,203,009 173,644 76,581
160 Nov-21 13,028,371 174,638 75,587
161 Dec-21 12,852,733 175,638 74,587
162 Jan-22 12,676,090 176,643 73,582
163 Feb-22 12,498,436 177,654 72,571
164 Mar-22 12,319,764 178,671 71,554
165 Apr-22 12,140,070 179,694 70,531
166 May-22 11,959,347 180,723 69,502
167 Jun-22 11,777,589 181,758 68,467
168 Jul-22 11,594,790 182,798 67,427
169 Aug-22 11,410,946 183,845 66,380
170 Sep-22 11,226,048 184,897 65,328
171 Oct-22 11,040,092 185,956 64,269
172 Nov-22 10,853,072 187,020 63,205
173 Dec-22 10,664,981 188,091 62,134
174 Jan-23 10,475,813 189,168 61,057
175 Feb-23 10,285,562 190,251 59,974
176 Mar-23 10,094,222 191,340 58,885
177 Apr-23 9,901,786 192,436 57,789
178 May-23 9,708,249 193,537 56,688
179 Jun-23 9,513,603 194,645 55,580
180 Jul-23 9,317,844 195,760 54,465
181 Aug-23 9,120,963 196,880 53,345
182 Sep-23 8,922,956 198,008 52,218
183 Oct-23 8,723,815 199,141 51,084
184 Nov-23 8,523,533 200,281 49,944
185 Dec-23 8,322,106 201,428 48,797
186 Jan-24 8,119,525 202,581 47,644
187 Feb-24 7,915,784 203,741 46,484
188 Mar-24 7,710,877 204,907 45,318
189 Apr-24 7,504,797 206,080 44,145
190 May-24 7,297,536 207,260 42,965
191 Jun-24 7,089,090 208,447 41,778
192 Jul-24 6,879,450 209,640 40,585
193 Aug-24 6,668,610 210,840 39,385
194 Sep-24 6,456,562 212,047 38,178
195 Oct-24 6,243,301 213,261 36,964
196 Nov-24 6,028,819 214,482 35,743
197 Dec-24 5,813,109 215,710 34,515
198 Jan-25 5,596,164 216,945 33,280
199 Feb-25 5,377,977 218,187 32,038
200 Mar-25 5,158,541 219,436 30,789
201 Apr-25 4,937,849 220,692 29,533
202 May-25 4,715,893 221,956 28,269
203 Jun-25 4,492,666 223,227 26,998
204 Jul-25 4,268,162 224,505 25,721
205 Aug-25 4,042,372 225,790 24,435
206 Sep-25 3,815,290 227,082 23,143
207 Oct-25 3,586,907 228,382 21,843
208 Nov-25 3,357,217 229,690 20,535
209 Dec-25 3,126,212 231,005 19,220
210 Jan-26 2,893,885 232,327 17,898
211 Feb-26 2,660,227 233,658 16,567
212 Mar-26 2,425,232 234,995 15,230
213 Apr-26 2,188,891 236,341 13,884
214 May-26 1,951,198 237,694 12,531
215 Jun-26 1,712,143 239,054 11,171
216 Jul-26 1,471,720 240,423 9,802
217 Aug-26 1,229,921 241,799 8,426
218 Sep-26 986,737 243,184 7,041
219 Oct-26 742,161 244,576 5,649
▇▇▇ ▇▇▇-▇▇ 496,185 245,976 4,249
221 Dec-26 248,801 247,384 2,841
222 Jan-27 248,801 1,424
EXHIBIT "E"
INITIAL CAPITAL EXPENDITURE REQUIREMENTS
Repair Budget
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1 Repair of Wood Exterior/Doors 100,000
2 Repaint Exterior of Buildings 250,000
3 Replacement of Window Glass 25,000
4 Roofing Work 50,000
5 Asphalt parking lot 45,000
6 Pool Deck 5,000
7 Carbon Monoxide Detectors 7,500
8 Elevator Hold Opens 15,000
9 Plumbing Repairs 80,000
10 Former Executive Director's Residence Repairs 20,000
11 Signage 3,500
12 Flooring 35,000
13 Lighting 30,000
14 Kitchen Improvements 30,000
15 Awning 7,500
16 AL Entrance Walkway Cover 15,000
17 Bridge Connector 40,000
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758,500
1. REPAIR OF WOOD EXTERIOR/DOORS - The exterior siding and wood trim of the
building are in need of repairs. There has been an ongoing program of
periodic repairs to some areas of the buildings. It is now time to
perform more in depth repairs that would include wood filling, caulking,
and replacement. A majority of the repairs are at the ground level where
moisture is abundant and also located around column bases and wall trim
that may not have readily visible damage. This allowance would also
include the replacement of several pairs of heavily worn wood exterior
doors. Wood doors at building 3, Clubhouse dining level and pool level
will need to be replaced. Some garage door replacement and repairs are
covered in this allowance. A trial replacement has been completed in the
dining room area where the wood doors were successfully replaced with
metal storefront type units. This has been well received and is very low
maintenance.
PRIORITY: A BUDGET: 100,000
2. REPAINT EXTERIOR OF BUILDINGS - The buildings have not been completely
painted since 1994. There have been partial areas repainted when repairs
were made, but not a complete paint job. We recommend that the entire
exteriors of the buildings be repainted. This would include the EIFS
(stucco), wood siding and trim, wood stairs and railings. Typically a
paint job should last 7 years, so we are at the last of the effective
life of the last application. The painting should be performed after the
necessary exterior wood repairs are made. This new coating will protect
the exterior materials and extend the life of them as well. Refer to the
photos as examples of the faded paint/stain and staining
throughout the property. The projected cost for this work is an in house
estimate based on prior painting jobs. The scope of this work is made up
of mostly the original buildings (IL and SC), but will include the metal
railings on the AL building and the fiberglass site lighting poles in
the parking lot as well.
PRIORITY: A BUDGET: 250,000
3. REPLACEMENT OF WINDOW GLASS - There are several windows throughout the
community that are fogged. The seal on the insulation glass has leaked
and now there is condensate and staining inside the window units causing
an opaque appearance. This is occurring in the public areas as well as
the resident apartments. There has been an ongoing annual program to
change out some of these windows. We are recommending that we try to
address all of the remaining units at one time.
PRIORITY: A BUDGET: 25,000
4. ROOFING - There has been an ongoing annual replacement of some of the
flat roof areas of the campus buildings. We have identified that the
remaining roofing (rubber membrane, two well areas per building) are due
for replacement. Currently there are no known leaks, but the product is
past the effective life of 10 years and is showing signs of wear. Rather
than total replacement, we are recommending a new product that is
applied as a coating to the flat roof sections that will reduce the cost
from 130,000 to 50,000. This includes the clubhouse building. Although
the singled roof area of the buildings is stained, they still have
remaining life and there are no known leaks to date.
PRIORITY: A BUDGET: 50,000
5. ASPHALT PARKING LOT - The asphalt on the campus is original to
construction, although some patches and repairs have been made. The
entire surface was seal coated four years ago. We are recommending
re-striping of the faded lines and spaces with some limited crack
filling and repairs. An allowance has been established to cover patching
and repairs of trouble spots as well as seal coating areas. There are
some buckled pavers that need to be reset in the courtyard of building
1.
PRIORITY: A BUDGET: 45,000
6. POOL DECK - The cool deck of the pool surround is flaking in some areas.
We suggest patching these areas rather than total replacement. We
suggest a repair allowance of 5,000.
PRIORITY: A BUDGET: 5,000
7. CARBON MONOXIDE DETECTORS - The county Health Department will require
our community to comply with the new ordinance to have carbon monoxide
detectors in all of our resident apartments by 1-1-02. The detectors
must be placed in areas where there are gas appliances (hot water
heaters) and/or automobiles (garages). This can be a simple plug in type
model with battery back up. The cost is approx. $25 each and can be
installed with in house labor.
PRIORITY: A BUDGET: 7,500
8. ELEVATOR HOLD OPEN DEVICES - There are 13 elevators on campus. 10 have
the old fashion rubber bumper devices, but all will be required to have
the motion sensor devise installed per the new elevator code. This
sensor will keep the door from closing on slow residents as they
enter/exit the elevator cabs.
PRIORITY: A BUDGET: 15,000
9. PLUMBING REPAIRS - There are on going upgrades to the plumbing lines in
the resident apartments. This has been a source of many leaks. The
original pvc tube type plumbing lines are failing. We are in the process
of replacing these lines in buildings 6 and 7 that were funded with
emergency cap ex funding of 38,000. We estimate an additional 80,000 to
complete all of the replacements in buildings 1 through 5.
PRIORITY: A BUDGET: 80,000
10. FORMER ED RESIDENCE - The house located on the property is currently
being used as a meeting area, arts/crafts shop and offices. This
structure is in need of many exterior repairs. The gutters need to be
replaced, wood soffit areas and fascia boards are rotted, missing and
need replacement. The exterior wood siding needs scraping, sanding and a
new coat of paint. The main focus of these repairs will be directed to
the exterior of the structure.
PRIORITY: A BUDGET: 20,000
11. SIGNAGE - The main directional sign at the entrance to the community is
cracked and badly weathered. Also since we have added ME (alzhm.) to the
campus and relocated Home Health off site, we need to revise this sign
and a second directional sign.
PRIORITY: A BUDGET: 3,500
12. FLOORING - The carpeting in the entry, living, and dining room was
replaced 3 years ago. There is an extreme amount of high traffic in the
dining and entryway. Another challenge we have is the failing gypcrete
concrete topping that lies beneath the carpeted areas. The cement type
material is original to the building and is deteriorating and crumbling.
This causes dips, bumps, and wrinkles in the carpet that becomes trip
hazards. This is occurring throughout the buildings but is the worst at
the lobby/entrance area. The time to replace the gypcrete topping is
when the carpet is to be replaced. It is our recommendation to replace
gypcrete and carpeting in the entry lobby immediately. We can either
keep carpeting in the lobby entrance or go to a vinyl type product that
simulates wood for easier maintenance and slip resistance. There is some
effective life remaining in the carpeting in the living and dining room.
One option is to leave this product in place for a couple more years and
place a tile insert in the high traffic/stained areas at the bar in the
living room and the salad bar/buffet line in the dining room and the
serving area for the main dining area.
PRIORITY: A BUDGET: 35,000
13. LIGHTING - The current lighting fixtures in the hallways/corridors are
insufficient and cause the areas to be dark. We recommend that first we
replace the existing sconces with a different design/style that will
throw off more light. Then if additional lighting is required, we could
add fluorescent ceiling mount fixtures, but this will require more
electrical work and drywall repairs. There have also been discussions to
change out the dining room fixtures as well. Several of the lighting
fixtures throughout the facility are discontinued and parts are no
longer available. Several are beyond repair. We recommend an allowance
of 30,000 to address this issue.
PRIORITY: A BUDGET: 30,000
14. KITCHEN IMPROVEMENTS - At one time we were considering a major kitchen
renovation and redesign. Our thoughts have changed as to the operation
and extreme costs of this design, but there are several issues that will
still need to be addressed in the kitchen area. Currently, the AC system
in the kitchen is inadequate. Pricing has been taken on adding a
separate cooling unit to serve the main kitchen area. This would be a
7.5-ton unit costing approx. 12,500. There are also leaks in the kitchen
floor at the dishwashing area and the 3-compartment sink that have
damaged the ceiling of the auditorium below. The ceiling tiles in the
kitchen need to be replaced with a washable tile. These repairs will
need to be made and we have targeted 17,500 as a budget.
PRIORITY: A BUDGET: 30,000
15. AWNINGS - The awning at the living/dining room deck of the clubhouse is
in poor condition, we recommend replacing it with a more durable
material, like a plastic coated fabric rather than standard canvas. Also
the awning frame at the SC/IL connector has been damaged and should be
repaired.
PRIORITY: A BUDGET: 7,500
16. AL WALKWAY/ENTRANCE COVER - The original entrance roof structure has an
open design with metal decorative metal tubing that has been difficult
to maintain. The pipes rust and streak the paint giving a poor
appearance at our main entrance to the AL facility. We recommend
enclosing this soffit area with vinyl material (low maintenance) and use
lapped vinyl siding on the ends to create a matching appearance to the
remainder of the building. This is similar to what has already been done
on the AL patio beneath this area.
PRIORITY: A BUDGET: 15,000
17. BRIDGE CONNECTOR - The bridge connector is used by the residents in the
villas and other apartment buildings located across the lake from the
main campus. This is their primary walking path to the main campus. In
the past we have had several roof leaks that now have been repaired, but
we have interior damage to repair now. There are expansion joints that
are cracked in the ceiling that need drywall repair as well as water
spots that need repainting. There is wallpaper damage (original
wallpaper) and flooring damage.
We suggest that we replace the faded and peeling wallpaper with a
painted surface that will be more durable in this situation and replace
the original carpet with new product.
PRIORITY: A BUDGET: 40,000
EXHIBIT "F-1"
LANDLORD'S SINGLE PURPOSE ENTITY REQUIREMENTS
A. Without limiting any other provision of this Lease, the following
requirements are applicable to Landlord:
1. Landlord's purpose shall be limited to owning the Premises.
2. Landlord shall be prohibited from engaging in any dissolution,
liquidation, consolidation, merger, or asset sale, except as expressly permitted
by this Lease.
3. Subject to the provisions of this Lease, the consent of all of the
members of the Landlord shall be required in order to voluntarily:
(a) file a bankruptcy or insolvency petition or otherwise
institute insolvency proceedings;
(b) dissolve, liquidate, consolidate, merge, or sell all or
substantially all of the assets of the Landlord; and
(c) amend Landlord's Operating Agreement or Articles of
Organization.
4. Landlord agrees:
(a) to maintain books and records and bank accounts separate
from any other person or entity;
(b) not to commingle assets or funds with those of any other
person or entity;
(c) to conduct its own business in its own name;
(d) to maintain its assets in such a manner that it is not
costly or difficult to segregate, identify or ascertain such assets;
(e) to prepare separate tax returns and financial statements, or
if part of a consolidated group, to be shown as a separate member of
such group;
(f) to pay its own liabilities out of its own funds;
(g) to observe all limited liability company formalities;
(h) to transact all business with affiliates on an arm's-length
basis and pursuant to enforceable agreements;
(i) to pay the salaries of its own employees;
(j) not to guarantee or become obligated for the debts of any
other person or entity or hold out its credit as being available to
satisfy the obligations of others or pay the debts or obligations of any
other person or entity;
(k) to allocate and charge fairly and reasonably any common
employee or overhead shared with affiliates;
(l) to use separate stationery, invoices, and checks;
(m) not to pledge its assets for the benefit of any other person
or entity.
(n) to hold itself out to creditors and the public as a legal
entity separate and distinct from any other person or entity.
B. The above requirements are applicable so long as the Landlord is a
limited liability company. If the entity structure of Landlord is different,
Tenant shall formulate requirements that are specific to Landlord's actual
entity structure, but similar in concept to the requirements set forth above.
EXHIBIT "F-2"
TENANTS'S SINGLE PURPOSE ENTITY REQUIREMENTS
A. Without limiting any other provision of this Lease, the following
requirements are applicable to Tenant:
1. Tenant's purpose shall be limited to operating the Premises pursuant
to the terms and conditions of this Lease.
2. Tenant shall be prohibited from engaging in any dissolution,
liquidation, consolidation, merger, or asset sale, except as expressly permitted
by this Lease.
3. Subject to the provisions of this Lease, the consent of all of the
members of the Tenant shall be required in order to voluntarily:
(a) file a bankruptcy or insolvency petition or otherwise
institute insolvency proceedings;
(b) dissolve, liquidate, consolidate, merge, or sell all or
substantially all of the assets of the Tenant; and
(c) amend Tenant's Operating Agreement or Articles of
Organization.
4. Except as otherwise permitted by the terms of this Lease, Tenant
agrees:
(a) to maintain books and records and bank accounts separate
from any other person or entity;
(b) not to commingle assets or funds with those of any other
person or entity;
(c) to conduct its own business in its own name;
(d) to maintain its assets in such a manner that it is not
costly or difficult to segregate, identify or ascertain such assets;
(e) to prepare separate tax returns and financial statements, or
if part of a consolidated group, to be shown as a separate member of
such group;
(f) to pay its own liabilities out of its own funds;
(g) to observe all limited liability company formalities;
(h) to transact all business with affiliates on an arm's-length
basis and pursuant to enforceable agreements;
(i) to pay the salaries of its own employees;
(j) not to guarantee or become obligated for the debts of any
other person or entity or hold out its credit as being available to
satisfy the obligations of others or pay the debts or obligations of any
other person or entity;
(k) to allocate and charge fairly and reasonably any common
employee or overhead shared with affiliates;
(l) to use separate stationery, invoices, and checks;
(m) not to pledge its assets for the benefit of any other person
or entity.
(n) to hold itself out to creditors and the public as a legal
entity separate and distinct from any other person or entity.
B. The above requirements are applicable so long as the Tenant is a limited
liability company. If the entity structure of Tenant is different, Landlord
shall formulate requirements that are specific to Tenant's actual entity
structure, but similar in concept to the requirements set forth above.
EXHIBIT "G"
TENANT'S HEALTHCARE COMPLIANCE COVENANTS
Tenant hereby makes the following representations, warranties and
covenants as of the date hereof and throughout the term of the Lease, which
representations, warranties and covenants are in addition to those found within
the body of the Lease:
1. Tenant is using and operating the Premises as a Retirement Care
Facility (as modified from time to time with Landlord's and any Permitted
Mortgage Lender's consent, which consent shall not be unreasonably withheld,
conditioned or delayed, the "LICENSED USE"). Tenant will comply in all material
respects, with all applicable federal, state and local laws, regulations,
quality and safety standards, accreditation standards and requirements of the
applicable state department of health (each a "DOH") and all other applicable
federal, state or local governmental authorities including those relating to the
quality and adequacy of medical care, distribution of pharmaceuticals, rate
setting, equipment, personnel, operating policies, additions to facilities and
services and fee splitting. The Retirement Care Facility and any other assisted
and/or independent senior housing and/or skilled nursing facilities which is
owned, leased or operated by Tenant (a "FACILITY") shall be operated at all
times in compliance in all material respects with such laws and requirements.
Nothing in this subsection (a) or anywhere else in this Exhibit "F" to the
contrary, Landlord acknowledges that pursuant to the Lease, Tenant is
responsible for all of the covenants set forth in this Exhibit "F" (other than
those pertaining to Landlord's own acts), and that performance of such covenants
by ARC as guarantor (the "GUARANTOR") shall constitute performance by Tenant
thereof.
2. All governmental licenses, permits, regulatory agreements or other
approvals or agreements necessary or desirable for the Licensed Use of the
Retirement Care Facility are held by Tenant, Guarantor or an affiliate of Tenant
("AFFILIATE") in the name of Lessee, Guarantor or Affiliate as required under
applicable law and are in full force and effect, including a valid certificate
of need ("CON") or similar certificate, license, or approval issued by the DOH
for the requisite number of beds and units in the Retirement Care Facility, and
a provider agreement or other required documentation of approved provider status
for each provider payment or reimbursement program effecting the Retirement Care
Facility, if applicable. All required permits, certificates, licenses and
governmental approvals necessary for operation of the Retirement Care Facility
for the Licensed Use are listed on Schedule hereto (collectively, the
"LICENSES"). So long as the Lease remains in effect, Tenant and Guarantor shall
operate the Project or cause the Project to be operated in a manner such that
the Licenses shall remain in full force and effect.
3. The Licenses for the Retirement Care Facility, including without
limitation, if applicable, the CON:
(a) May not be, and have not been, and will not be transferred
to any location other than the Premises;
(b) Are not now and will not be pledged as collateral security
for any other loan or indebtedness; and
(c) Are held free and will remain free from restrictions or
known conflicts which would materially impair the use or operation of
the Retirement Care Facility for the Licensed Use, and shall not be
provisional, probationary or restricted in any way.
4. None of Lessee, Guarantor or Affiliate shall:
(a) Rescind, withdraw, revoke, amend, modify, supplement, or
otherwise alter the nature, tenor or scope of the Licenses for the
Retirement Care Facility;
(b) Amend or otherwise change the Retirement Care Facility's
authorized units/beds capacity and/or the number of units/beds approved
by the DOH;
(c) Replace or transfer all or any part of the Retirement Care
Facility's units/beds to another site or location; or
(d) Voluntarily transfer or encourage the transfer of any
resident of the Retirement Care Facility to any other Facility, unless
such transfer is at the request of the resident or is for reasons
relating to the health, required level of medical care or safety of the
resident to be transferred.
5. If and when Tenant, Affiliate or Guarantor participates in any
Medicare or Medicaid or other third party payor program with respect to the
Retirement Care Facility, the Retirement Care Facility will remain in compliance
with all requirements for participation in Medicare and Medicaid, including the
Medicare and Medicaid Patient Protection Act of 1987, and other federal or state
third party payor programs. The Retirement Care Facility is and will remain in
conformance in all material respects with all insurance, reimbursement and cost
reporting requirements, and if applicable, has a current provider agreement,
which is in full force and effect under Medicare and Medicaid.
6. There is no, and during the term of the Lease shall be no,
threatened, existing or pending revocation, suspension, termination, probation,
restriction, limitation, or nonrenewal affecting Tenant, Guarantor, Affiliate or
the Retirement Care Facility or any participation or provider agreement with any
third-party payor, including Medicare, Medicaid, Blue Cross and/or Blue Shield,
other and any other private commercial insurance managed care and employee
assistance program (such programs, the "THIRD-PARTY PAYOR PROGRAMS") to which
Tenant, Guarantor or Affiliate may presently be subject with respect to the
Retirement Care Facility or any other Facility, or at any time hereafter is
subject. All Medicaid, Medicare, and private insurance cost reports and
financial reports submitted by Tenant, Affiliate or Guarantor, if any, are and
will be materially accurate and complete and have not been and will not be
misleading in any material respects. No cost reports for the Retirement Care
Facility remain open or unsettled. Nothing in this subsection (f) shall be
interpreted as requiring Tenant, Affiliate or Guarantor to participate in
Medicare, Medicaid or any other federal or state health care programs; such
participation shall be solely at the option of Tenant or Guarantor.
7. None of Tenant, Affiliate or Guarantor or the Retirement Care
Facility is or will be the subject of any proceeding by any governmental agency,
and no notice of any violation has been or will be issued by a governmental
agency that would, directly or indirectly, or with the passage of time:
(a) Have a material adverse impact on Tenant's or Guarantor's
ability to accept and/or retain patients or operate the Retirement Care
Facility for the Licensed Use or result in the imposition of a fine, a
sanction, a lower rate certification or a lower reimbursement rate for
services rendered to eligible patients;
(b) Modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of any of the
Licenses; or
(c) If applicable, affect Tenant's or Guarantor's continued
participation in the Medicaid or Medicare programs or any other of the
Third-Party Payor Programs, or any successor programs thereto, at
current rate certifications.
8. The Retirement Care Facility and the use thereof complies and will
continue to comply in all material respects with all applicable local, state and
federal building codes, fire codes, health care, senior housing and other
regulatory requirements (the "PHYSICAL PLANT STANDARDS").
9. The Retirement Care Facility has not received a "Level A" (or
equivalent) violation, and no statement of charges or deficiencies has been made
or penalty enforcement action has been undertaken against the Retirement Care
Facility, Tenant or Guarantor or against any officer, director, partner, member,
stockholder or affiliate of Tenant or Guarantor by any governmental agency
during the last three calendar years, and there have been no violations over the
past three years which have threatened the Retirement Care Facility's, Tenant's,
Affiliate's or Guarantor's certification for participation in Medicare or
Medicaid, or the other Third-Party Payor Programs.
10. There are no current, pending or outstanding Medicaid, Medicare, or
other Third-Party Payor Programs reimbursement audits or appeals pending at the
Retirement Care Facility, and there are no years that are subject to audit.
11. There are no current or pending Medicaid, Medicare, or other
Third-Party Payor Programs recoupment efforts at the Retirement Care Facility.
Tenant, Affiliate and Guarantor are not participants in any federal program
whereby any governmental agency may have the right to recover funds by reason of
the advance of federal funds, including those authorized under the ▇▇▇▇-▇▇▇▇▇▇
Act (42 U.S.C. 291, et seq.).
12. Tenant will pledge its receivables as collateral security for any
other loan or indebtedness.
13. All patient or resident records at the Retirement Care Facility,
including patient or resident trust fund accounts, are true and correct in all
material respects, and will remain true and
correct in all material respects.
14. Tenant and Guarantor shall not, nor shall the Retirement Care
Facility, other than in the normal course of business, change the terms of any
of the Third-Party Payor Programs now or hereinafter in effect or their normal
billing payment or reimbursement policies and procedures with respect thereto
(including the amount and timing of finance charges, fees and write-offs).
15. Tenant and Guarantor shall at all times comply with all obligations
under the contracts and leases with residents of the Retirement Care Facility,
and shall not commit or permit any default thereunder. Tenant hereby indemnifies
and holds harmless Landlord and agrees to defend Landlord from and against
(collectively, the "INDEMNIFIED CLAIMS") any (i) claims, proceedings or causes
of action brought by any resident of the Retirement Care Facility, and (ii)
loss, damage, cost or expense, including attorney's fees, incurred or suffered
by Landlord as a result of any (x) breach by Tenant or Guarantor of any contract
or lease with a resident of the Retirement Care Facility or (y) violation of any
license or any federal, state or local law governing the Retirement Care
Facility or the use, operation or maintenance thereof for the Licensed Use.