Homewood, Jefferson County, Alabama
LEASE AGREEMENT
DATED AS OF AUGUST 25, 2003
BY AND BETWEEN
CNL RETIREMENT DSL1 ALABAMA, LP,
a Delaware limited partnership,
AS LANDLORD,
AND
ALABAMA SOMERBY, LLC,
a Delaware limited liability company
AS TENANT
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS......................................................................................................1
ARTICLE 2 LEASED PROPERTY AND TERM........................................................................................12
2.1 Leased Property.................................................................................................12
2.2 Condition of Leased Property....................................................................................13
2.3 Initial Term....................................................................................................13
2.4 Extended Term...................................................................................................13
2.5 Yield Up........................................................................................................14
ARTICLE 3 RENT............................................................................................................14
3.1 Rent............................................................................................................14
3.2 Minimum Rent....................................................................................................14
3.3 Percentage Rent.................................................................................................16
3.4 Additional Charges..............................................................................................17
3.5 Landlord Advances...............................................................................................18
3.6 Late Payment of Rent............................................................................................18
3.7 Net Lease.......................................................................................................18
3.8 No Abatement of Rent............................................................................................20
3.9 Intentionally Omitted...........................................................................................20
3.10 Intentionally Omitted...........................................................................................20
3.11 Intentionally Omitted...........................................................................................20
3.12 Security Agreement..............................................................................................20
ARTICLE 4 USE OF THE LEASED PROPERTY; CONFLICTING BUSINESS................................................................20
4.1 Permitted Use...................................................................................................20
4.2 Environmental Matters...........................................................................................21
4.3 Conflicting Businesses Prohibited...............................................................................22
4.4 Continuous Operations...........................................................................................22
4.5 Compliance With Restrictions, Etc...............................................................................23
4.6 Standard of Operation...........................................................................................23
4.7 Resident Agreements and Service Licenses........................................................................25
4.8 Standards, Not Control..........................................................................................25
4.9 Survival........................................................................................................25
ARTICLE 5 MAINTENANCE AND REPAIRS.........................................................................................25
5.1 Tenant's Obligations............................................................................................25
5.2 Reserve.........................................................................................................26
ARTICLE 6 IMPROVEMENTS, ETC...............................................................................................28
6.1 Prohibition.....................................................................................................28
6.2 Permitted Renovations...........................................................................................29
6.3 Conditions to Reserve Expenditures, Permitted Renovations and Major Alterations.................................29
6.4 Salvage.........................................................................................................30
ARTICLE 7 LANDLORD'S INTEREST NOT SUBJECT TO LIENS........................................................................30
7.1 Liens, Generally................................................................................................30
7.2 Construction or Mechanics Liens.................................................................................31
7.3 Contest of Liens................................................................................................31
7.4 Notices of Commencement of Construction.........................................................................32
ARTICLE 8 TAXES AND ASSESSMENTS...........................................................................................32
8.1 Obligation to Pay Taxes and Assessments.........................................................................32
8.2 Tenant's Right to Contest Taxes.................................................................................33
8.3 Tax and Insurance Escrow Account................................................................................33
ARTICLE 9 INSURANCE.......................................................................................................34
9.1 General Insurance Requirements..................................................................................34
9.2 Waiver of Subrogation...........................................................................................36
9.3 General Provisions..............................................................................................36
9.4 Blanket Policy..................................................................................................36
9.5 Indemnification of Landlord.....................................................................................37
ARTICLE 10 CASUALTY.......................................................................................................37
10.1 Restoration and Repair..........................................................................................37
10.2 Escrow and Disbursement of Insurance Proceeds...................................................................38
10.3 No Abatement of Rent............................................................................................39
10.4 Tenant's Property and Business Interruption Insurance...........................................................39
10.5 Restoration of Tenant's Property................................................................................39
10.6 Waiver..........................................................................................................40
ARTICLE 11 CONDEMNATION...................................................................................................40
11.1 Total Condemnation, Etc.........................................................................................40
11.2 Partial Condemnation............................................................................................40
11.3 Disbursement of Award...........................................................................................40
11.4 No Abatement of Rent............................................................................................41
11.5 Disputes........................................................................................................41
11.6 Restoration of Leased Property..................................................................................41
ARTICLE 12 DEFAULTS AND REMEDIES..........................................................................................42
12.1 Events of Default...............................................................................................42
12.2 Daniel Cure Rights..............................................................................................44
12.3 Remedies on Default.............................................................................................45
12.4 Application of Funds............................................................................................49
12.5 Landlord's Right to Cure Tenant's Default.......................................................................49
12.6 Landlord's Lien.................................................................................................49
ARTICLE 13 HOLDING OVER...................................................................................................50
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ARTICLE 14 LIABILITY OF LANDLORD; INDEMNIFICATION.........................................................................50
14.1 Liability of Landlord...........................................................................................50
14.2 Indemnification of Landlord.....................................................................................50
14.3 Notice of Claim or Suit.........................................................................................51
14.4 Limitation on Liability of Landlord.............................................................................51
ARTICLE 15 REIT AND UBTI REQUIREMENTS.....................................................................................52
15.1 Limitations on Rents Attributable to Personal Property..........................................................52
ARTICLE 16 SUBLETTING AND ASSIGNMENT......................................................................................53
16.1 Transfers Prohibited Without Consent............................................................................53
16.2 Indirect Transfer Prohibited Without Consent....................................................................54
16.3 Adequate Assurances.............................................................................................54
ARTICLE 17 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.................................................................55
17.1 Estoppel Certificates...........................................................................................55
17.2 Monthly Financial Statements....................................................................................55
17.3 Annual Financial Statements.....................................................................................55
17.4 Records.........................................................................................................56
17.5 General Operations Budget.......................................................................................56
17.6 Quarterly Meetings..............................................................................................56
ARTICLE 18 LANDLORD'S RIGHT TO INSPECT....................................................................................56
ARTICLE 19 FACILITY MORTGAGES.............................................................................................56
19.1 Subordination...................................................................................................56
19.2 Attornment......................................................................................................57
19.3 Rights of Mortgagees and Assignees..............................................................................58
19.4 CMC Mortgage Loan...............................................................................................58
ARTICLE 20 ADDITIONAL COVENANTS OF TENANT.................................................................................60
20.1 Conduct of Business.............................................................................................60
20.2 Additional Covenants of Tenant..................................................................................60
20.3 Tenant a Special Purpose Entity.................................................................................62
20.4 Performance by Manager..........................................................................................62
ARTICLE 21 MISCELLANEOUS..................................................................................................63
21.1 Limitation on Payment of Rent...................................................................................63
21.2 No Waiver.......................................................................................................63
21.3 Remedies Cumulative.............................................................................................63
21.4 Severability....................................................................................................63
21.5 Acceptance of Surrender.........................................................................................63
21.6 No Merger of Title..............................................................................................64
21.7 Tenant's Representations........................................................................................64
21.8 Quiet Enjoyment.................................................................................................66
21.9 Recordation of Memorandum of Lease..............................................................................66
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21.10 Notices........................................................................................................66
21.11 Construction; Nonrecourse......................................................................................68
21.12 Counterparts; Headings.........................................................................................68
21.13 Applicable Law.................................................................................................69
21.14 Right to Make Agreement........................................................................................69
21.15 Brokerage......................................................................................................69
21.16 No Partnership or Joint Venture................................................................................69
21.17 Entire Agreement...............................................................................................69
21.18 Costs and Attorneys' Fees......................................................................................69
21.19 Approval of Landlord...........................................................................................70
21.20 Successors and Assigns.........................................................................................70
21.21 Waiver of Jury Trial...........................................................................................70
21.22 Treatment of Lease.............................................................................................70
21.23 Transfer of Licenses...........................................................................................70
21.24 Tenant's Personal Property.....................................................................................71
21.25 Landlord's Representations.....................................................................................71
21.26 Guaranty of Lease..............................................................................................71
21.27 Guaranty of Related Lease......................................................................................71
21.28 Third Party Beneficiaries......................................................................................71
EXHIBITS
Exhibit "A" - The Land
Exhibit "B" - Minimum Rent
Exhibit "C" - Appraisal Process
Exhibit "D" - Tenant Estoppel Certificate
Exhibit "E" - Memorandum of Lease
Exhibit "F" - Special Purpose Entity Requirements
Exhibit "G" - Tenant Equity Ownership
Exhibit "H"- Property Expenses
Exhibit "I" - Initial Landlord P&E
Exhibit "J" - Initial Tenant Personal Property
Exhibit "K" - Landlord's Single Purpose Entity Requirements
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LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT is entered into as of August 25, 2003, by and between
CNL RETIREMENT DSL1 ALABAMA, LP, a Delaware limited partnership, as landlord
("Landlord"), and ALABAMA SOMERBY, LLC, a Delaware limited liability company, as
tenant ("Tenant").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Landlord has heretofore acquired fee simple title to the Land and
the Facility (these and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in Article 1); and
WHEREAS, Landlord wishes to lease the Leased Property to Tenant and Tenant
wishes to lease the Leased Property from Landlord, all subject to and upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows: ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, (i) the terms defined in this Article
and used in this Agreement shall have the meanings assigned to them in this
Article and include the plural as well as the singular, (ii) all accounting
terms not otherwise defined herein shall have the meanings assigned to them in
accordance with GAAP, (iii) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Agreement, and (iv) the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular Article, Section or other subdivision.
"Accessibility Laws" shall mean all applicable laws, statutes, regulations,
rules, ordinances, codes, licenses, permits and orders, from time to time in
existence, of all courts of competent jurisdiction and Government Agencies, and
all applicable judicial and administrative and regulatory decrees, judgments and
orders, including common law rulings and determinations, relating to
accessibility for the disabled or handicapped, including, but not limited to,
any applicable provisions of The Architectural Barriers Act of 1968, The
Rehabilitation Act of 1973, The Fair Housing Act of 1988, The Americans With
Disabilities Act, the accessibility code(s), if any, of the State in which the
Leased Property is located, and all regulations and guidelines promulgated under
any all of the foregoing, as the same may be amended from time to time.
"Accounting Period" shall mean each calendar month accounting period of
Tenant. If Tenant shall, for a bona fide business reason, change its accounting
period during the Term, appropriate adjustments, if any, shall be made with
respect to the timing of applicable accounting and reporting
requirements of this Agreement; provided, however, that in no event shall any
such change or adjustment alter the amount or frequency of payment of Minimum
Rent within any Fiscal Year, or alter the frequency of payment of Percentage
Rent, if any, to less than four (4) times within any Fiscal Year, or otherwise
increase or reduce any monetary obligation under this Agreement.
"Accounting Year" shall mean each period of twelve (12) consecutive
Accounting Periods during the Term of this Agreement; the first Accounting Year
shall commence with the first full Accounting Period after the Commencement Date
of this Agreement.
"Additional Charges" shall have the meaning given such term in Section 3.4.
"Additional Rent" shall have the meaning given such term in Section 3.5.
"Affiliated Person" shall mean, with respect to any Person, (i) any Person
directly or indirectly Controlling, Controlled by or under common Control with
any such Person, (ii) in the case of any such Person which is a partnership, any
partner in such partnership, (iii) in the case of any such Person which is a
limited liability company, any member of such company, (iv) in the case of any
such Person which is a corporation, any officer, director or stockholder of such
corporation, (v) any other Person which is a Parent, a Subsidiary, or a
Subsidiary of a Parent with respect to such Person or to one or more of the
Persons referred to in the preceding clauses (i) through (iv), (vi) any other
Person who is an officer, director, trustee or employee of, or partner in, such
Person or any Person referred to in the preceding clauses (i) through (v) and
(vii) any other Person who is a member of, or trustee of any trust for the
benefit of, the Immediate Family of such Person or of any Person referred to in
the preceding clauses (i) through (vi). Provided, however, a Person shall not be
deemed to be an Affiliated Person solely by virtue of the ownership of shares of
stock registered under the Securities Act of 1934, as amended, unless such
Person, as holder of such stock, is required to file a Schedule 13 D, pursuant
to Section 13(d) of such Act and Rule 13 d-1 promulgated thereunder.
"Agreement" shall mean this Lease Agreement, including all Exhibits hereto,
as it and they may be amended or restated from time to time as herein provided.
"Annual Operations Statement" shall have the meaning given such term in
Section 3.3.2.
"Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations of any
kind, including without limitation, those relating to (i) damage to, or the
protection of real or personal property, (ii) human health and safety (except
those requirements which, by definition, are solely the responsibility of
employers), (iii) the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
2
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, (iv) Accessibility Laws, (v) dementia care/assisted facility licensure
or (vi) participation in Medicare or Medicaid programs.
"Applicable Reserve Percentage" shall mean (i) with respect to the period
beginning on the later to occur of the Opening Date or the Commencement Date and
ending on the last day of the thirty-sixth (36th) full Accounting Period next
following, two percent (2%) of Total Facility Revenue; and (ii) with respect to
each Accounting Period thereafter, two and one half percent (2.5%) of Total
Facility Revenue.
"Approved Reserve Estimate" shall have the meaning given such term in
Section 5.2.3.
"Business Day" shall mean any day other than Saturday, Sunday, or any other
day on which banking institutions in the State are authorized by law or
executive action to close.
"Calculation Period" shall mean each successive period of four (4)
consecutive Fiscal Quarters commencing with the first Fiscal Quarter following
the acquisition by Landlord of the Leased Property.
"Cash Available for Lease Payments" shall mean for any Calculation Period
the remainder of (i) Total Facility Revenue for the Leased Property during such
Calculation Period, less (ii) Property Expenses for the Leased Property for the
same Calculation Period.
"CNL Retirement" shall mean CNL Retirement Properties, Inc., a Maryland
corporation.
"Code" shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as amended
from time to time.
"Commencement Date" shall mean the date of this Agreement.
"Condemnation" shall mean (a) the exercise of any governmental power with
respect to the Leased Property, whether by legal proceedings or otherwise, by a
Condemnor of its power of condemnation, (b) a voluntary sale or transfer of the
Leased Property by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting the
Leased Property, whether or not the same shall have actually been commenced.
"Condemnor" shall mean any public or quasi-public authority, or Person
having the power of Condemnation.
"Conflicting Business" shall have the meaning given such term in Section
4.3.
"Control" (including the correlative meanings of the terms "Controlling",
"Controlled by", and "under common Control with") as used with respect to any
Person, shall mean the possession, directly
3
or indirectly, of the power to direct or cause the direction of the management
policies of such Person whether through the ownership of voting securities, by
contract or otherwise.
"CRC" shall mean CNL Retirement Corp., a Florida corporation.
"Daniel" shall mean Daniel Senior Living, L.L.C., an Alabama limited
liability company.
"Daniel Note" shall mean that certain promissory note of even date herewith
by Tenant payable to Daniel.
"Debt Constant" shall mean the annual interest and principal payments of
the loan obtained by or on behalf of Landlord (but not by Tenant) to finance any
restoration or repair of the Leased Property pursuant to Sections 10.2 or 11.6
hereof, divided by the initial principal balance of such loan.
"Default" shall mean any event or condition existing which with the giving
of notice and/or lapse of time would ripen into an Event of Default.
"Disbursement Rate" shall mean an annual rate of interest equal to the
greater of, as of the date of determination, (i) ten percent (10%) and (ii) the
per annum rate for ten (10) year U.S. Treasury Obligations as published in The
Wall Street Journal plus three hundred fifty (350) basis points.
"Distribution" shall mean (a) any declaration or payment of any dividend on
or in respect of any shares of any class of capital stock of Tenant, if Tenant
is a corporation, or any cash distributions in respect of any partnership
interests or membership interests in Tenant, if Tenant is a partnership or a
limited liability company, (b) any purchase, redemption, retirement or other
acquisition of any shares of any class of capital stock of Tenant, if Tenant is
a corporation, or any purchase, redemption, retirement or other acquisition of
any partnership or membership interests in Tenant, if Tenant is a partnership or
a limited liability company, (c) any other distribution on or in respect of any
shares of any class of capital stock of Tenant, if Tenant is a corporation, or
any other distribution in respect of any partnership interests or membership
interests in Tenant, if Tenant is a partnership or a limited liability company,
or (d) any return of capital to shareholders of Tenant, if Tenant is a
corporation, or any return of capital to partners of Tenant, if Tenant is a
partnership or a limited liability company.
"Earn Out Agreement" shall mean that certain Earn Out Agreement of even
date herewith, by and naming Daniel, Guarantor, Tenant and Landlord.
"Earn Out Rent" shall mean all rent payable by Tenant pursuant to an
amendment to this Lease required by Section 4(b) of the Earn Out Agreement.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, cooperative, any government or agency or political subdivision thereof or
any other entity.
"Environment" shall mean soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
4
"Event of Default" shall have the meaning given such term in Section 12.1.
"Extended Terms" shall have the meaning given such term in Section 2.4.
"Facility" shall mean the assisted living, independent living and dementia
care facility located and operated on the Land.
"Facility Mortgage" shall mean any encumbrance placed upon the Leased
Property as referenced in Article 19.
"Fiscal Quarter" shall mean the first, second, third and fourth three-month
period (each consisting of three Accounting Periods) during each Fiscal Year.
"Fiscal Year" shall mean Tenant's Fiscal Year which as of the Commencement
Date begins on January 1 and ends on December 31 in each calendar year. Any
partial Fiscal Year between the Commencement Date and the commencement of the
first full Fiscal Year (except with respect to the calculation and payment of
Minimum Rent as referenced in Section 3.1 of this Agreement), shall constitute a
separate Fiscal Year. A partial Fiscal Year between the end of the last full
Fiscal Year and the termination of this Agreement shall also constitute a
separate Fiscal Year. If Tenant's Fiscal Year is changed in the future,
appropriate adjustments to this Agreement's reporting and accounting procedures
shall be made; provided, however, that no such change or adjustment shall alter
the Term of this Agreement or in any way reduce other payments due hereunder.
Each full Fiscal Year shall consist of twelve Accounting Periods.
"Force Majeure Event" means any circumstance which is not in the reasonable
control of either party hereto, caused by any of the following: strikes,
lockouts; acts of God; civil commotion; fire or any other casualty; governmental
action; or other similar cause or circumstance which is not in the reasonable
control of either party hereto. Neither lack of financing nor general economic
and/or market factors is a Force Majeure Event.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Guarantor" shall mean American Retirement Corporation, a Tennessee
corporation.
"Government Agencies" shall mean any legislative body, court, agency,
authority, board (including, without limitation, health and long term care,
environmental protection, planning and zoning), bureau, commission, department,
office or instrumentality of any nature whatsoever of any governmental or
quasi-governmental unit of the United States or the State or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Tenant or the Leased Property or any portion
thereof or the assisted living and independent living and dementia care facility
operated thereon.
"Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require notification,
investigation or remediation under any federal, state or local
statute, regulation, rule, ordinance, order, action or policy; or
5
(b) which is or becomes defined as a "hazardous waste", "hazardous
material" or "hazardous substance" or "pollutant" or "contaminant"
under any present or future federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. et seq.) and the Resource Conservation and
Recovery Act (42 U.S.C. Section 6901 et seq.) and the regulations
promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or
becomes regulated by any governmental authority, agency, department,
commission, board, agency or instrumentality of the United States, any
state of the United States, or any political subdivision thereof; or
(d) the presence of which on the Leased Property causes or materially
threatens to cause an unlawful nuisance upon the Leased Property or to
adjacent properties or poses or materially threatens to pose a hazard
to the Leased Property or to the health or safety of persons on or
about the Leased Property; or
(e) without limitation, which contains gasoline, diesel fuel or other
petroleum hydrocarbons or volatile organic compounds; or (f) without
limitation, which contains polychlorinated biphenyls (PCBs) or
asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive particles,
waves or material; or
(h) without limitation, constitutes materials which are now or may
hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, parents, brothers, sisters, children (natural or adopted),
stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law,
sisters-in-law, nephews and nieces.
"Indebtedness" shall mean all obligations, contingent or otherwise, which
in accordance with GAAP should be reflected on the obligor's balance sheet as
liabilities.
"Initial Landlord P&E" shall mean and refer to all P&E of any kind or
description which are located on or in the Leased Improvements as of the
Commencement Date, including without limitation those items enumerated on
Exhibit "I" attached hereto and made a part hereof, but specifically excluding
any specific items of Tenant's Personal Property identified on Exhibit "J"
attached hereto and made a part hereof.
"Initial Term" shall have the meaning given such term in Section 2.3.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and regulations
6
and any other requirements of the National Board of Fire Underwriters (or any
other body exercising similar functions) binding upon Landlord, Tenant or the
Leased Property.
"Inventories" shall mean all inventories, as such term is customarily used
and defined in its most broad and inclusive sense including, but not limited to,
all inventories of food, beverages and other consumables held by Tenant for sale
or use at or from the Leased Property or the Facility, and soap, cleaning
supplies, paper supplies, operating supplies, china, glassware, silver, linen,
uniforms, building and maintenance supplies, spare parts and attic stock,
medical supplies, drugs and all other such goods, wares and merchandise held by
Tenant for sale to or for consumption by residents or patients of the Leased
Property or the Facility and all such other goods returned to or repossessed by
Tenant.
"Land" shall have the meaning given such term in Section 2.1(a).
"Landlord" shall have the meaning given such term in the preambles to this
Agreement and shall include its successors and assigns.
"Landlord's Adjusted Investment Amount" shall mean the sum of (a)
Landlord's Original Investment plus (b) the portion of the First Earn Out
Payment (as defined in the Earn Out Agreement) (if applicable) and the portion
of the Final Earn Out Payment (as defined in the Earn Out Agreement) (if
applicable) payable pursuant to the Earn Out Agreement to the extent the same
are allocated to the Leased Property pursuant to the Earn Out Agreement;
provided, however, that, for purpose of calculating Minimum Rent with respect to
the second Extended Term, if the Minimum Rent for the first Extended Term was
calculated based upon the fair market value of the Leased Property as of the
commencement of the first Extended Term pursuant to clause (b) of Section 3.2.2,
then "Landlord's Adjustment Investment Amount" shall mean the fair market value
of the Leased Property that was used to so determine Minimum Rent for the first
Extended Term.
"Landlord's Debt" shall mean $35,350,000.00.
"Landlord's Equity" shall mean $16,924,041.00.
"Landlord's Equity Rate" shall mean .124 x (1.025%)^(the number of days
elapsed since the inception of the Leases/365).
"Landlord's Original Investment" shall mean the sum of Landlord's Debt plus
Landlord's Equity, which represents, for purposes of this Lease, Landlord's
total acquisition and transactional costs incurred in acquiring the Leased
Property.
"Lease" shall mean this Lease Agreement, including all Exhibits hereto, as
it and they may be amended or restated from time to time as herein provided.
"Lease Rate" shall have the meaning set forth on Exhibit "B".
"Lease Year" shall mean any Accounting Year during the Term and any partial
Accounting Year at the beginning or end of the Term.
7
"Leased Improvements" shall have the meaning given such term in Section
2.1(b).
"Leased Intangible Property" shall mean all transferable or assignable (a)
governmental permits, including licenses and authorizations, required for the
construction, ownership and operation of the Leased Improvements, including
without limitation, certificates of need, certificates of authority,
certificates of occupancy, building permits, signage permits, site use
approvals, zoning certificates, environmental and land use permits and any and
all necessary approvals from state or local authorities and other approvals
granted by any public body or by any private party pursuant to a recorded
instrument relating to such Leased Improvements or the Land; (b) development
rights, trade names, telephone exchange numbers identified with the Leased
Property, if any (specifically excluding, however, any specific items of
Tenant's Personal Property identified on Exhibit "J" hereto); and (c)
certificates, licenses, warranties and guarantees and contracts other than such
permits, operating permits, certificates, licenses and approvals which are to
held by, or transferred to, the Tenant in order to permit the Tenant to operate
such Leased Improvements properly and in accordance with the terms of this
Agreement.
"Leased Property" shall have the meaning given such term in Section 2.1.
"Legal Requirements" shall mean all federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Property or the
maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate the Leased Property for its Permitted Use, (b) all covenants,
agreements, declarations, restrictions and encumbrances contained in any
instruments at any time in force affecting the Leased Property or to which
Tenant has consented or which are required to be granted pursuant to Applicable
Laws, including those which may (i) require material repairs, modifications or
alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment thereof, but excluding any requirements
arising as a result of Landlord's status as a real estate investment trust, and
(c) Applicable Laws.
"Lien" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, or any transfer of
property or assets for the payment of Indebtedness or performance of any other
obligation in priority to payment of the obligor's general creditors.
"Major Alterations" shall have the meaning given such term in Section
6.2.2.
"Major Violation" shall mean any violation of Applicable Laws relating to
the use, operation or maintenance of the Facility or to the care of residents
which presents an imminent danger to the residents or guests of the Facility or
a substantial probability that death or serious harm would result therefrom.
"Management Agreement" shall mean that certain Agreement for Management
Services dated of even date herewith by and between Tenant and Manager, pursuant
to which Manager shall operate the Leased Property on behalf of Tenant.
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"Manager" shall mean ARC Management, LLC, a Tennessee limited liability
company.
"Minimum Rent" shall mean annual rent as set forth in Section 3.2, subject
to prorations and adjustments as set forth in Section 3.2.
"Minimum Rent Coverage" shall mean the quotient, expressed as a ratio, of
(i) the total Cash Available for Lease Payments during the Calculation Period
divided by the (ii) total Minimum Rent and Earn Out Rent paid under this
Agreement for the Leased Property during such Calculation Period.
"Minor Alterations" shall have the meaning given such term in Section
6.2.1.
"Mortgagee" shall mean the holder of any Facility Mortgage.
"Notice" shall mean a notice given in accordance with Section 21.10.
"Opening Date" shall mean the date on which the Facility first opened for
business to the general public.
"Overdue Rate" shall mean, on any date, a per annum rate of interest equal
to the lesser of (i) fifteen percent (15%) or (ii) the maximum rate then
permitted under applicable law.
"P&E" shall mean all items of personal property, as defined under the Model
Uniform Commercial Code, including, but not limited to: (a) all equipment,
machinery, fixtures, and other items of property, now or hereafter permanently
affixed to or incorporated into the Leased Improvements, including, without
limitation, all furnaces, boilers, heaters, electrical equipment, heating,
plumbing, lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment, all of
which, to the maximum extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements, modifications,
alterations and additions thereto; (b) all furniture, furnishings, movable walls
or partitions, moveable machinery, moveable equipment, computers or trade
fixtures or other personal property of any kind or description used or useful in
Tenant's business on or in the Leased Improvements, and located on or in the
Leased Improvements, and all modifications, replacements, alterations and
additions to such personal property; (c) all linen, china, glassware, tableware,
uniforms and similar items, whether used in connection with public space or
tenant rooms; and (d) "Property and Equipment," "P&E," and "FF&E" (as such terms
are customarily used and defined in the most broad and inclusive sense), as well
as all other items included within the category of Inventory; and including,
without limitation, the Initial Landlord P&E, but not including, however, any
item of Tenant's Personal Property identified in Exhibit "J" hereto.
"P&E Replacements" shall mean all items purchased or leased with funds from
the Reserve established under Article 5 of this Lease and all other items of P&E
added and used at the Leased Property during the Term of this Lease, together
with all leasehold improvements made by Tenant during the Term of this Lease to
the extent not constituting real property affixed to the Land, whether purchased
or leased from the Reserve or with other funds of Tenant, all subject to
disposal and further replacement at the end of their useful lives.
9
"Parent" shall mean, with respect to any Person, any Person which directly,
or indirectly through one or more Subsidiaries or Affiliated Persons, (i) owns
more than fifty percent (50%) of the voting or beneficial interest in, or (ii)
otherwise has the right or power (whether by contract, through ownership of
securities or otherwise) to control, such Person.
"Percentage Rent" shall have the meaning given such term in Section 3.3.
"Permitted Equipment Financings" shall have the meaning as given that term
in Section 20.2.
"Permits" means all licenses, permits and certificates used or useful in
connection with the ownership, operation, use or occupancy of the Leased
Property or the Facility, including, without limitation, business licenses,
state and local health and environmental department licenses, any other licenses
required in connection with the operation of the Facility for assisted living,
independent living and dementia care purposes, food service licenses, licenses
to conduct business, certificates of need and all such other permits, licenses
and rights, obtained from any governmental, quasi-governmental or private person
or entity whatsoever.
"Permitted Encumbrances" shall mean all rights, restrictions, and easements
of record set forth on Schedule B to the applicable owner's title insurance
policy issued to Landlord for the Land, plus any other such encumbrances as may
have been consented to in writing by Landlord from time to time.
"Permitted Renovations" shall have the meaning given that term in Section
6.2.
"Permitted Use" shall mean any use of the Leased Property permitted
pursuant to Section 4.1.1.
"Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Property Expenses" shall mean those expenses more particularly described
on Exhibit "H" attached hereto.
"Proscribed Area" shall have the meaning given such term in Section 4.3.
"Reimbursement Contracts" means all third party reimbursement contracts for
the Facility which are now or hereafter in effect with respect to residents or
patients qualifying for coverage under the same, including private insurance
agreements, Medicare and Medicaid and any successor program or other similar
reimbursement program and/or private insurance agreements.
"Related Lease" shall mean that certain Lease Agreement by and between
Landlord and Tenant with respect to certain real property located in Madison
County, Alabama of even date herewith.
"Rent" shall mean, collectively, Minimum Rent, Percentage Rent, Earn Out
Rent (if any) and Additional Rent.
"Reserve" shall have the meaning given such term in Section 5.2.
"Reserve Estimate" shall have the meaning given such term in Section 5.2.
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"Reserve Expenditures" shall have the meaning given such term in Section
5.2.
"SEC" shall mean the Securities and Exchange Commission.
"Special Purpose Entity" shall have the meaning given such term in Exhibit
"F" attached hereto.
"Somerby Properties" shall mean the Leased Property (as defined herein) and
the Leased Property (as defined in the Related Lease).
"State" shall mean the State in which the Facility is located.
"Subsidiary" shall mean, with respect to any Person, any Entity in which
such Person directly, or indirectly through one or more Subsidiaries or
Affiliated Persons, (a) owns more than fifty percent (50%) of the voting or
beneficial interest or (b) which such Person otherwise has the right or power to
control (whether by contract, through ownership of securities or otherwise).
"Tax and Insurance Account" shall have the meaning given such term in
Section 8.3.
"Tax and Insurance Escrow Amount" shall have the meaning given such term in
Section 8.3.
"Tenant" shall be the entity identified in the preamble to this Agreement
and shall include its successors and assigns expressly permitted hereunder.
"Tenant's Personal Property" shall mean any specific items of P&E listed in
Exhibit "J" to this Lease, or replacements for such items or items within any
specific categories of P&E listed in Exhibit "J" to this Lease which hereafter
are acquired by Tenant with its own funds after the Commencement Date and
located at the Leased Property (but not including any property purchased with
funds from the Reserve established under Section 5.2).
"Term" shall mean, collectively, the Initial Term and the Extended Terms,
unless sooner terminated pursuant to the provisions of this Agreement.
"Total Facility Revenue" shall mean, for a given period or interval, all
gross revenues and receipts of every kind derived by or for the benefit of
Tenant or its Affiliated Persons from operating or causing the operation of the
Leased Property and all parts thereof, including, but not limited to: income
from both cash and credit transactions (after reasonable deductions for bad
debts and discounts for prompt or cash payments and refunds) from rental or
subleasing of every kind; entrance fees, fees for health care and personal care
services, license, lease and concession fees and rentals, off premises catering,
if any, and parking (not including gross receipts of licensees, lessees and
concessionaires); income from vending machines; health club membership fees;
food and beverage sales; wholesale and retail sales of merchandise (other than
proceeds from the sale of furnishings, fixtures and equipment no longer
necessary to the operation of the Facility, which shall be deposited in the
Reserve) and service charges, to the extent not distributed to employees at the
Facility as gratuities, interest income except as specifically provided below,
community fees, and deposits forfeited, all as determined in accordance with
GAAP on an accrual basis; provided, however, that Total Facility Revenue shall
not include the following: gratuities to Facility employees; federal, state or
municipal excise, sales, occupancy, use or
11
similar taxes collected directly from residents or included as part of the sales
price of any goods or services; insurance proceeds (except for business
interruption insurance proceeds); any proceeds from any sale of the Leased
Property or from the refinancing of any debt encumbering the Leased Property;
proceeds from the disposition of furnishings, fixture and equipment no longer
necessary for the operation of the Facility; and interest which accrues on
amounts deposited in the Reserve.
"Unsuitable for Its Permitted Use" shall mean a state or condition of the
Leased Property such that following any damage or destruction involving the
Leased Property, the Leased Property cannot be operated in the reasonable
judgment of Landlord (after conferring with Tenant) on a commercially
practicable basis for its Permitted Use and it cannot reasonably be expected to
be restored to substantially the same condition as existed before such damage or
destruction and as is otherwise required by Article 12 within (i) twelve (12)
months following such damage or destruction, or (ii) twenty-four (24) months
following such damage or destruction in the event that Tenant has extended the
term of the business income insurance to pay at least twenty-four (24) months
Rent for the benefit of Landlord or provides other reasonably acceptable
security for any uninsured portion of the twenty-four (24) months Rent.
ARTICLE 2
LEASED PROPERTY AND TERM
------------------------
2.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord all of Landlord's right, title and interest in and to all of the
following (collectively, the "Leased Property"):
(a) all that certain tract, piece and parcel of land, as more particularly
described in Exhibit "A", attached hereto and made a part hereof (the
"Land");
(b) the Facility, all buildings, structures and other improvements of
every kind, including without limitation all roofs, plumbing systems,
electric systems and HVAC systems, roadways, alleyways, parking areas,
sidewalks, curbs, connecting tunnels, utility pipes, conduits and
lines (on-site and off-site) appurtenant to or presently situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land and the
Leased Improvements;
(d) all P&E and Inventory;
(e) [Intentionally Omitted.]
(f) all of the Leased Intangible Property;
(g) any and all subleases of space in the Leased Improvements to
subtenants thereof; and
12
(h) All other property and interests in property conveyed or assigned to
Landlord pursuant to the Purchase and Sale Contract governing the sale
and conveyance of the Leased Property from Daniel Senior Living,
L.L.C., an Alabama limited liability company, to Landlord dated as of
July 11, 2003 (the "Purchase Agreement").
2.2 Condition of Leased Property. Tenant acknowledges and agrees that the
Leased Property is and shall be leased by Landlord to Tenant and from Landlord
by Tenant in its present "as is" condition, subject to the existing state of
title and all applicable legal or governmental requirements, and Landlord makes
absolutely no representations or warranties whatsoever with respect to the
Leased Property or the condition thereof. Tenant acknowledges that Landlord has
not investigated and does not warrant or represent to Tenant that the Leased
Property is fit for the purposes intended by Tenant or for any other purpose or
purposes whatsoever, and Tenant acknowledges that the Leased Property is to be
leased to Tenant in its existing condition, i.e., "as-is", and "where-is",
without any representation or warranty as to habitability or fitness for any
particular purpose, on and as of the Commencement Date. Tenant represents and
acknowledges that all permits, licenses and approvals required by any
governmental or quasi-governmental, body, department, commission, board, bureau,
instrumentality or officer, or otherwise appropriate with respect to the
construction, operation, leasing, maintenance or use of the Leased Property or
any part thereof, have been issued, are past all appeals periods and are valid
and in full force and effect and that no provision, condition or limitation of
any of the same has been breached or violated. Tenant acknowledges that Tenant
shall be solely responsible for any and all actions, repairs, permits, approvals
and costs required for the rehabilitation, renovation, use, occupancy and
operation of the Leased Property in accordance with applicable governmental
requirements, foreseen or unforeseen, including, without limitation, all
governmental charges and fees, if any, which may be due or payable to applicable
authorities. Tenant agrees that, by leasing the Leased Property, Tenant warrants
and represents that Tenant has examined and approved all things concerning the
Leased Property which Tenant deems material to Tenant's leasing and use of the
Leased Property. Tenant further acknowledges and agrees that (a) neither
Landlord nor any agent of Landlord has made any representation or warranty,
express or implied, concerning the Leased Property or which have induced Tenant
to execute this Agreement and (b) any other representations and warranties are
expressly disclaimed by Landlord.
2.3 Initial Term. The initial term of this Agreement (the "Initial Term")
shall commence on the Commencement Date and shall terminate and expire at 11:59
p.m. on the last calendar day of the month on which the fifteenth (15th) annual
anniversary of the Commencement Date shall occur.
2.4 Extended Term. Tenant shall have and is hereby granted two (2)
option(s) to extend this Agreement for an additional ten (10) years each
(individually an "Extended Term"), upon the same terms, covenants, conditions
and rental as set forth herein; provided there exists no continuing Event of
Default hereunder, or Default which Tenant has had an opportunity but failed to
cure as provided hereunder, during any applicable cure hereunder at the
commencement of the respective Extended Term. Tenant may exercise each such ten
(10) year option successively by giving written notice to Landlord not less than
twelve (12) months nor more than eighteen (18) months prior to the respective
expiration of the Initial Term of this Agreement or of the then applicable
Extended Term. Should Tenant fail to give Landlord such timely written notice
during the required period, all remaining rights of renewal shall automatically
expire.
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2.5 Yield Up. Tenant shall, on or before the last day of the Term or upon
the sooner termination thereof, peaceably and quietly surrender and deliver to
Landlord the Leased Property, including, without limitation, all Leased
Improvements and P&E and all additions thereto and replacements thereof made
from time to time during the Term, together with and including without
limitation the P&E Replacements, in good order, condition and repair, reasonable
wear and tear excepted, and free and clear of all liens and encumbrances (other
than Permitted Encumbrances, liens or encumbrances in favor of or granted by
Landlord, and any other encumbrances expressly permitted under the terms of this
Agreement). Tenant acknowledges that both the Initial Landlord P&E described on
Exhibit "I" attached hereto and consumable items of Inventory located at the
Leased Property as of the Commencement Date may be completely consumed and/or
otherwise disposed of in the course of operation of the Leased Property during
the Term of this Agreement. Tenant agrees that, at the expiration or earlier
termination of this Agreement, Tenant shall fully restore the Initial Landlord
P&E, inclusive with and after consideration of all P&E Replacements which will
become the property of Landlord, to at least the approximate types and amounts
(with reasonably equivalent value) as shown on Exhibit "I", and shall fully
restore an adequate supply of Inventory consistent with the full stocking levels
to be maintained by Tenant pursuant to Section 4.6 of this Lease.
ARTICLE 3
RENT
----
3.1 Rent. Tenant shall pay, in lawful money of the United States of America
which shall be legal tender for the payment of public and private debts, without
offset, abatement, demand or deduction (unless otherwise expressly provided in
this Agreement), Rent to Landlord during the Term at the address to which
notices to Landlord are to be given or to such other party or to such other
address as Landlord may designate from time to time by written notice to Tenant.
All payments to Landlord shall be made by wire transfer of immediately available
federal funds or by other means acceptable to Landlord in its sole discretion
and all such payments shall, upon receipt by Landlord, be and remain the sole
and absolute property of Landlord. If Landlord shall at any time accept any such
Rent or other sums after the same shall become due and payable, or any partial
payment of Rent, such acceptance shall not excuse a delay upon subsequent
occasions, or constitute or be construed as a waiver of any of Landlord's rights
hereunder.
3.2 Minimum Rent. Tenant shall pay annual base minimum rent ("Minimum
Rent") to Landlord in equal installments (each of which shall be equal to one
twelfth (1/12th of the applicable annual Minimum Rent amount calculated pursuant
to Sections 3.2.1 and 3.2.2 below) in advance, on the first (1st) Business Day
of each Accounting Period; provided, however, that the first payment of Minimum
Rent shall be payable on the Commencement Date. Further, if applicable, the
first payment of Minimum Rent and the last payment of Minimum Rent shall be
prorated on a per diem basis provided, however, that for purposes of Minimum
Rent, any prorated payment for any partial Accounting Period prior to the first
full Accounting Period shall be prorated based upon the installment of Minimum
Rent payable for the first full Accounting Period, and any prorated Rent at the
end of the Term shall be prorated based upon the installment of Minimum Rent
payable for the last full Accounting Period.
14
If, during the period commencing on the Commencement Date and ending on the
last day of the sixth (6th) full Accounting Period immediately following the
Commencement Date, Cash Available for Lease Payments is insufficient to meet
payments due by Tenant pursuant to Section 3.9 or Section 5.2 hereof and the
Minimum Rent and Percentage Rent payments due for any of the aforementioned
Accounting Periods, Tenant may defer payment of up to FORTY-TWO THOUSAND THREE
HUNDRED THIRTY-SIX AND 00/100 ($42,336.00) Dollars of the Minimum Rent payment
due for such Accounting Period until such time as Cash Available for Lease
Payments exceeds the Minimum Rent and Percentage Rent due (in which event the
deferred rental amount shall be paid to the extent the Cash Available for Lease
Payments exceeds said Minimum Rent and Percentage Rent due (and the payments due
by Tenant under Section 3.9 or Section 5.2 hereof) until the deferred rental
amount has been paid in full.
3.2.1Calculation of Initial Term Minimum Rent. Subject to proration as set
forth above, Tenant shall pay Minimum Rent during each Accounting Year
of the Initial Term of this Agreement in the amounts set forth on
Exhibit "B" attached hereto and made a part hereof.
3.2.2Calculation of Extended Term Minimum Rent. Subject to proration as set
forth above, Tenant shall pay Minimum Rent under this Agreement during
the each Accounting Year of each Extended Term in an amount equal to
the product of (i) the then-current Lease Rate, multiplied by (ii) the
greater of:
(a) Landlord's Adjusted Investment Amount; or
(b) the fair market value of the Leased Property on the date of
Tenant's Notice of exercise with respect to the applicable
Extended Term pursuant to Section 2.4 (it being understood and
agreed that said fair market value calculation shall only be made
at the beginning of the first Accounting Year of each Extended
Term and not at the beginning of any succeeding Accounting Year
during such Extended Term).
In no event shall Earn Out Rent be payable during the Extended Terms.
If within ten (10) days of the date of Tenant's Notice of exercise pursuant
to Section 2.4, Landlord and Tenant are unable to agree on the fair market value
of the Premises for purposes of this calculation, such fair market value shall
be established by the appraisal process described on Exhibit "C" attached
hereto. Landlord and Tenant acknowledge and agree that this Section is designed
to establish a fair market Minimum Rent for the Leased Property during each
applicable Extended Term. In the event that the Minimum Rent for the applicable
Extended Term is not finally determined by such appraisal process prior to the
commencement of the Extended Term, then in such event until such amount is
finally determined the Tenant shall pay to Landlord as "Interim Rent" for the
Extended Term an amount equal to one hundred ten percent (110%) of the
established Minimum Rent as of the end of the Accounting Year immediately
preceding the Extended Term until such appraisal process and any dispute
relating thereto is finally resolved. In such an event, the amount of any
differential between the Interim Rent and Minimum Rent established shall, if
resulting in an underpayment, be paid by Tenant to Landlord within fifteen (15)
days, or if resulting in an overpayment be credited by Landlord against the next
installment(s) of Rent coming due hereunder.
15
3.3 Percentage Rent. From the first (1st) through and including the ninth
(9th) Accounting Years hereof, in addition to and not in lieu of Minimum Rent,
Tenant shall pay percentage rent ("Percentage Rent") to Landlord for each such
Accounting Year, during such 9 Accounting Years. Installments of Percentage Rent
shall be due and payable in arrears within thirty (30) days after the end of
each Fiscal Quarter during such 9 Account Years, based upon Total Facility
Revenue for such Fiscal Quarter. Along with each Percentage Rent payment Tenant
shall submit to Landlord an unaudited (but certified by a duly authorized
officer of Tenant or Tenant's general partner or managing member, if applicable)
statement showing a detailed breakdown of the calculation of Percentage Rent for
that Fiscal Quarter and Fiscal Year-to-date on a cumulative basis. Percentage
Rent for any partial Fiscal Quarter in the final Fiscal Year for which
Percentage Rent is due, shall be prorated proportionately. Tenant's obligation
to pay Percentage Rent for the Fiscal Quarter which includes the date of
termination of this Agreement shall survive the termination hereof. In no event
shall Percentage Rent be due with respect to any period after the expiration of
the 9th Accounting Year.
3.3.1Calculation of Percentage Rent. Subject to proration as set forth
above, Tenant shall pay Percentage Rent in respect of each Fiscal Year
in which Percentage of Rent is due under this Agreement equal to (i)
one quarter of one percent (0.25%) of Total Facility Revenues during
the first Accounting Year; (ii) one half of one percent (0.50%) of
Total Facility Revenues during the second Accounting Year; (iii) three
quarters of one percent (0.75%) of Total Facility Revenues during the
third (3rd) though sixth (6th) Accounting Years; and (iv) one percent
(1.0%) of Total Facility Revenues during the seventh (7th) though
ninth (9th) Accounting Years. Notwithstanding the foregoing, revenues
from therapy services shall not be included in Total Facility Revenues
for purposes of calculating Percentage Rent.
3.3.2Annual Reconciliation of Percentage Rent. Tenant shall, no later than
ninety (90) days following the end of each Fiscal Year during the Term
hereof furnish to Landlord for such Fiscal Year a complete statement
(the "Annual Operations Statement") certified true and correct by the
Chief Financial Officer of Tenant, or of Tenant's general partner or
managing member, if applicable, and the Chief Financial Officer of the
Guarantor, setting forth, with respect to such Fiscal Year in
reasonable detail the Total Facility Revenue derived by or for the
benefit of Tenant in respect of such Fiscal Year. If the Annual
Operations Statement for any Fiscal Year indicates that the aggregate
of the installment payments theretofore made with respect to such
Fiscal Year pursuant to Section 3.3.1 exceeds the Percentage Rent due
for such Fiscal Year, Landlord shall credit such overpayment against
the next installment or installments of Minimum Rent falling due (or
will pay the amount of such overpayment to Tenant if this Agreement
shall have terminated other than by reason of Tenant's default or if
Landlord so elects to do so). If, on the other hand, the Annual
Operations Statement indicates that the aggregate of the installment
payments theretofore made with respect to such Fiscal Year is less
than the Percentage Rent due for such Fiscal Year then Tenant shall
pay the balance or excess, as the case may be, together with interest
thereon determined as set forth below in this paragraph, to Landlord
concurrently with the submission of the Annual Operations Statement.
Interest shall accrue on payments pursuant to this paragraph at the
Disbursement Rate from the date when first due and payable until the
date when the adjusted amount is fully paid in the manner as set forth
above, except to the extent of de minimus adjustments of not more than
ten percent (10%) of the amount initially paid resulting from the
calculation method used or unintentional errors which could not
reasonably have been avoided by reasonable care and diligence.
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3.3.3Landlord Audit of Annual Operations Statement. Notwithstanding the
foregoing, Landlord at its own expense, except as provided
hereinbelow, shall have the right, exercisable by Notice to Tenant
given within 270 days after receipt of the applicable Annual
Operations Statement, by its accountants or representatives, to
commence within such 270 day period an audit of the information set
forth in such Annual Operations Statement and, in connection with such
audit, to examine all of Tenant's books and records with respect
thereto (including supporting data and sales and excise tax returns);
provided, however, if Landlord reasonably believes Tenant has
intentionally misrepresented Total Facility Revenue on any such Annual
Operations Statement, the said 270 day period shall commence to run on
the date Landlord obtains credible evidence that Tenant has
intentionally misrepresented Total Facility Revenue on any such Annual
Operations Statement. If Landlord does not commence an audit with such
270 day period, such Annual Operations Statement shall be deemed to be
accepted by Landlord as correct. Landlord shall use commercially
reasonable efforts to complete any such audit as soon as practicable.
If such audit discloses a deficiency in the payment of Percentage
Rent, Tenant shall forthwith pay to Landlord the amount of the
deficiency, together with interest at the Disbursement Rate from the
date such payment should have been made to the date of payment
therefore. If such deficiency is more than three percent (3%) of the
Total Facility Revenue reported by Tenant for such Fiscal Year, Tenant
shall also pay the costs of such audit and examination.
3.4 Additional Charges. In addition to the Rent payable hereunder, Tenant
shall pay to the appropriate parties and discharge as and when due and payable
hereunder the following (collectively the "Additional Charges"):
3.4.1Taxes and Assessments. Tenant shall pay or cause to be paid all taxes
and assessments required to be paid pursuant to Article 8.
3.4.2Utility Charges. Tenant shall be liable for and shall promptly pay
directly to the utility company all deposits, charges and fees
(together with any applicable taxes or assessments thereon) when due
for water, gas, electricity, air conditioning, heat, septic, sewer,
refuse collection, telephone and any other utility charges, impact
fees, or similar items in connection with the use or occupancy of the
Leased Property. Landlord shall not be responsible or liable in any
way whatsoever for the quality, quantity, impairment, interruption,
stoppage, or other interference with any utility service, including,
without limitation, water, air conditioning, heat, gas, electric
current for light and power, telephone, or any other utility service
provided to or serving the Leased Property. No interruption,
termination or cessation of utility services shall relieve Tenant of
its duties and obligations pursuant to this Agreement, including,
without limitation, its obligation to pay all Rent as and when the
same shall be due hereunder.
3.4.3Insurance Premiums. Tenant shall pay or cause to be paid all premiums
for the insurance coverage required to be maintained pursuant to
Article 9.
3.4.4Licenses and Permits. Tenant shall pay or cause to be paid all fees,
dues and charges of any kind which are necessary in order to acquire
and keep in effect and good standing all licenses and permits required
for operation of the Leased Property in accordance with the terms of
Article 4.
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3.4.5Sales Tax. Simultaneously with each payment of Rent and Additional
Charges hereunder, Tenant shall pay to Landlord the amount of any
applicable sales, use, excise or similar or other tax on any such Rent
and Additional Charges, whether the same be levied, imposed or
assessed by the State in which the Leased Property is located or any
Governmental Agencies, but specifically excluding any income (or
similar) taxes imposed on Landlord's net income. Landlord shall, upon
written request by Tenant, provide to Tenant on an annual basis such
reasonable information in Landlord's possession or control as shall be
necessary to enable Tenant to pay such tax.
3.4.6Other Charges. Tenant shall pay or cause to be paid all other
amounts, liabilities and obligations arising in connection with the
Leased Property except those obligations expressly stated not to be an
obligation of Tenant pursuant to this Agreement.
3.4.7Penalties and Interest. Tenant shall pay or cause to be paid every
fine, penalty, interest and cost which may be added for non-payment or
late payment of the items referenced in this Section 3.4.
Tenant shall prepare and file at its expense, to the extent required or
permitted by Applicable Laws, all tax returns and other reports in respect of
any Additional Charge as may be required by Governmental Agencies.
3.5 Landlord Advances. Except as specifically provided otherwise in this
Agreement, if Tenant does not pay or discharge all Additional Charges, and
provide proof of payment if requested by Landlord, at least fifteen (15) days
prior to delinquency, Landlord shall have the right but not the obligation to
pay such Additional Charges on behalf of Tenant. If Landlord shall make any such
expenditure for which Tenant is responsible or liable under this Agreement, or
if Tenant shall become obligated to Landlord under this Agreement for any other
sum besides Minimum Rent or Percentage Rent as hereinabove provided, the amount
thereof shall be deemed to constitute "Additional Rent" and shall be due and
payable by Tenant to Landlord, together with interest at the Overdue Rate and
all applicable sales or other taxes thereon, if any, simultaneously with the
next succeeding monthly installment of Minimum Rent or at such other time as may
be expressly provided in this Agreement for the payment of the same.
3.6 Late Payment of Rent. If Tenant fails to make any payment of Rent on or
before the fifth (5th) business day after the date such payment is due and
payable, Tenant shall pay to Landlord an administrative late charge of five
percent (5%) of the amount of such payment. In addition, such past due payment
shall bear interest at the Overdue Rate from the date first due until paid. Such
late charge and interest shall constitute Additional Rent and shall be due and
payable with the next installment of Rent due hereunder.
3.7 Net Lease. Landlord and Tenant acknowledge and agree that both parties
intend that this Agreement shall be and constitute what is generally referred to
in the real estate industry as a "triple net" or "absolute net" lease, such that
Tenant shall be obligated hereunder to pay all costs and expenses incurred with
respect to, and associated with, the Leased Property and all personal property
thereon and therein and the business operated thereon and therein, including,
without limitation, all taxes and assessments, utility charges, insurance costs,
maintenance costs and repair, replacement and restoration expenses (all as more
particularly herein provided), together with any and all other
18
assessments, charges, costs and expenses of any kind or nature whatsoever
related to, or associated with, the Leased Property and the business operated
thereon and therein, other than Landlord's financing costs and expenses and
related debt service; provided, however, that Landlord shall nonetheless be
obligated to pay Landlord's personal income taxes (and similar taxes) with
respect to the Rent and other amounts received by Landlord under this Agreement.
Except as expressly hereinabove provided, Landlord shall bear no cost or expense
of any type or nature with respect to, or associated with, the Leased Property.
Except to the extent otherwise expressly provided in this Agreement, it is
agreed and intended that Rent payable hereunder by Tenant shall be paid without
notice, demand, counterclaim, set-off, deduction or defense and without
abatement, suspension, deferment, diminution or reduction and that Tenant's
obligation to pay Rent throughout the Term and any applicable Extended Term is
absolute and unconditional and the respective obligations and liabilities of
Tenant and Landlord hereunder shall in no way be released, discharged or
otherwise affected for any reason, including without limitation: (a) any defect
in the condition, merchantability, design, quality or fitness for use of the
Leased Property or any part thereof, or the failure of the Leased Property to
comply with Applicable Laws, including any inability to occupy or use the Leased
Property by reason of such non-compliance; (b) any damage to, removal,
abandonment, salvage, loss, condemnation, theft, scrapping or destruction of or
any requisition or taking of the Leased Property or any part thereof, or any
environmental condition on the Leased Property or any property in the vicinity
of the Leased Property; (c) any restriction, prevention or curtailment of or
interference with any use of the Leased Property or any part thereof, including
eviction; (d) any defect in title to or rights to the Leased Property or any
lien on such title or rights to the Leased Property; (e) any change, waiver,
extension, indulgence or other action or omission or breach in respect of any
obligation or liability of or by any Person; (f) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceedings relating to Tenant or any other Person or any action taken with
respect to this Agreement by any trustee or receiver of Tenant or any other
Person or by any court, in any such proceedings; (g) any right or claim that
Tenant has or might have against any Person, including, without limitation,
Landlord or any vendor, manufacturer or contractor of or for the Leased Property
(other than a claim resulting from any willful misconduct or gross negligence of
Landlord); (h) any failure on the part of Landlord or any other Person to
perform or comply with any of the terms of this Agreement, or of any other
agreement; (i) any invalidity, unenforceability, rejection or disaffirmance of
this Agreement by operation of law or otherwise against or by Tenant or any
provision hereof; (j) the impossibility of performance by Tenant or Landlord, or
both; (k) any action by any court, administrative agency or other Government
Agencies; (l) any interference, interruption or cessation in the use, possession
or quiet enjoyment of the Leased Property or otherwise; or (m) any other
occurrence whatsoever whether similar or dissimilar to the foregoing, whether
foreseeable or unforeseeable, and whether or not Tenant shall have notice or
knowledge of any of the foregoing. Except as specifically set forth in this
Agreement, this Agreement shall be non-cancellable by Tenant for any reason
whatsoever and, except as expressly provided in this Agreement Tenant, to the
extent now or hereafter permitted by Applicable Laws, waives all rights now or
hereafter conferred by statute or otherwise to quit, terminate or surrender this
Agreement or to any diminution, abatement or reduction of Rent payable
hereunder. Except as specifically set forth in this Agreement, under no
circumstances or conditions shall Landlord be expected or required to make any
payment of any kind hereunder or have any obligations with respect to the use,
possession, control, maintenance, alteration, rebuilding, replacing, repair,
restoration or operation of all or any part of the Leased Property, so long
19
as the Leased Property or any part thereof is subject to this Agreement, and
Tenant expressly waives the right to perform any such action at the expense of
Landlord pursuant to any law.
3.8 No Abatement of Rent. No abatement, diminution or reduction (a) of
Rent, charges or other compensation, or (b) of Tenant's other obligations
hereunder shall be allowed to Tenant or any person claiming under Tenant, under
any circumstances or for any reason whatsoever and to the maximum extent
permitted by law, Tenant hereby waives the application of any local or state
statutes, land rules, regulations or ordinance providing to the contrary.
3.9 Intentionally Omitted.
3.10 Intentionally Omitted.
3.11 Intentionally Omitted.
3.12 Security Agreement. Tenant hereby grants to Landlord a security
interest in the Reserve as set forth below, as security for all obligations of
the Guarantor and as further security for Tenant's obligations to Landlord
hereunder, and agrees to execute and deliver all such instruments as may be
required by Landlord to evidence and perfect these security interests.
ARTICLE 4
USE OF THE LEASED PROPERTY; CONFLICTING BUSINESS
------------------------------------------------
4.1 Permitted Use.
4.1.1Permitted Use. Tenant covenants and agrees that it shall, throughout
the Term of this Agreement, continuously use and occupy the Leased
Property solely and exclusively as a first class licensed (if licenses
are available) assisted living, independent living and dementia care
facility (and, at Tenant's election, in Tenant's sole and absolute
discretion, a skilled nursing facility), and for such other uses as
may be necessary or incidental to such use (such as services provided
directly to residents by Tenant or under Service Licenses, as such
term is defined below), with appropriate amenities for the same and
for no other purpose without interruption except for minimum necessary
interruptions in respect to portions of the Leased Property for
periods provided herein for repairs, renovations, replacements and
rebuilding all of which shall be carried out pursuant to, and in
accordance with the applicable provisions of this Agreement (the
foregoing being referred to as the "Permitted Use"). Without the prior
written consent of the Landlord, no Affiliated Person of Tenant may be
a subtenant or concessionaire in the Leased Property, provided however
that Landlord hereby consents and agrees that a qualified and
fully-insured Affiliated Person of Tenant may provide therapy and
therapy-related services at the Facility for customary and appropriate
charges. No use shall be made or permitted to be made of the Leased
Property and no acts shall be done thereon which will cause the
cancellation of any insurance policy covering the Leased Property or
any part thereof (unless another adequate policy is available), nor
shall Tenant sell or otherwise provide or permit to be kept, used or
sold in or about the Leased Property any article which may be
prohibited by law or by the standard form of fire insurance policies,
or any other insurance policies required to be carried hereunder, or
fire underwriter's regulations. Tenant shall, at its sole cost, comply
with all Insurance
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Requirements. Tenant shall not take or omit to take any action, the
taking or omission of which materially impairs the value or the
usefulness of the Leased Property or any part thereof for its
Permitted Use, or causes the Leased Premises to no longer be
considered a first class facility.
4.1.2Necessary Approvals. Tenant shall maintain in good standing all
Permits and approvals necessary to use and operate, for its Permitted
Use, the Leased Property and the Facility located thereon under
Applicable Law and shall provide to Landlord a copy of Tenant's
federal, state and Medicare survey regarding the Facility, and such
other information or documents pertaining to said approvals. Landlord
shall at no cost or liability to Landlord cooperate with Tenant in
this regard, limited to executing all applications and consents
required to be signed by Landlord in order for Tenant to obtain and
maintain such approvals.
4.1.3Lawful Use, Etc. Tenant shall not use or suffer or permit the use of
the Leased Property or Tenant's Personal Property, if any, for any
unlawful purpose. Tenant shall not commit or suffer to be committed
any waste on the Leased Property, or in the Facility, nor shall Tenant
cause or permit any unlawful nuisance thereon or therein. Tenant shall
not suffer nor permit the Leased Property, or any portion thereof, to
be used in such a manner as (i) might reasonably impair Landlord's
title thereto or to any portion thereof, or (ii) might reasonably
allow a claim or claims for adverse usage or adverse possession by the
public, as such, or of implied dedication of the Leased Property or
any portion thereof.
4.1.4Compliance with Legal Requirements. Tenant shall at all times at its
sole cost and expense, keep and maintain the Leased Property in
compliance with all Legal Requirements. Tenant agrees to give Landlord
Notice of any notices, orders or other communications relating to
Legal Requirements affecting the Leased Property which is or are
enacted, passed, promulgated, made, issued or adopted, a copy of which
is served upon, or received by, Tenant, or a copy of which is posted
on or fastened or attached to the Leased Property, within ten (10)
Business Days after service, receipt, posting, fastening or attaching.
At the same time, the Tenant will inform Landlord as to the work or
steps which Tenant proposes to do or take in order to comply
therewith.
4.2 Environmental Matters. Except as permitted by Applicable Law, Tenant
shall at all times during the Term keep the Leased Property free of Hazardous
Substances. Neither Tenant nor any of its employees, agents, invitees,
licensees, contractors, guests, or subtenants (if permitted) shall use,
generate, manufacture, refine, treat, process, produce, store, deposit, handle,
transport, release, or dispose of Hazardous Substances in, on or about the
Leased Property or the groundwater thereof, in violation of any federal, state
or municipal law, decision, statute, rule, ordinance or regulation currently in
existence or hereafter enacted or rendered. Tenant shall give Landlord prompt
Notice of any claim received by Tenant from any person, entity, or Governmental
Agencies that a release or disposal of Hazardous Substances has occurred on the
Leased Property or the groundwater thereof.
Tenant shall not discharge or permit to be discharged into any septic
facility or sanitary sewer system serving the Leased Property any toxic or
hazardous sewage or waste other than that which is permitted by Applicable Law
or which is normal domestic waste water for the type of business contemplated by
this Agreement to be conducted by Tenant on, in or from the Leased Property. Any
toxic or hazardous sewage or waste which is produced or generated in connection
with the use or operation of the Leased Property shall be handled and disposed
of as required by and in compliance
21
with all Applicable Laws or shall be pre-treated to the level of domestic
wastewater prior to discharge into any septic facility or sanitary sewer system
serving the Leased Property.
4.3 Conflicting Businesses Prohibited. Landlord and Tenant hereby recognize
and acknowledge (a) that the Minimum Rent payable by Tenant to Landlord under
this Agreement have been established at the levels specified in this Agreement
upon the premise and with the expectation that the Minimum Rent may determine
the market value of the Leased Property and constitute a material consideration
for Landlord's willingness to execute this Agreement and thereby lease and
demise the Leased Property to Tenant, and (b) that the operation, management,
franchising or ownership by Tenant or an Affiliated Person of Tenant of another
Facility of the Permitted Use as specified in Section 4.1.1 above (such other
Facility being referred to herein as a "Conflicting Business") within a ten (10)
mile radius of the Leased Property (the "Proscribed Area") will tend to result
in a decrease in the amount of Total Facility Revenue which would otherwise
reasonably be expected to be made upon, within and from the Leased Property and
thereby result in a reduction of the market value of the Leased Property and a
reduction in the Rent which would otherwise be received by Landlord pursuant to
this Agreement in the absence of the operation of a Conflicting Business by
Tenant or any such Affiliated Person of Tenant within the Proscribed Area. An
Affiliated Person's development, operation or ownership of a senior living
community consisting of single family patio or garden homes shall not constitute
a Conflicting Business under this Section 4.3 Accordingly, Tenant on behalf of
itself and such Affiliated Persons, agrees that during the Term of this
Agreement neither Tenant, nor any Affiliated Person of Tenant shall open,
develop, operate, manage, franchise, own, lease or have any other interest in a
Conflicting Business within the Proscribed Area. In the event of a breach of
this covenant, Landlord shall have the right to terminate this Agreement and
pursue any other remedy at law available to Landlord, including injunctive
relief. Further, Tenant agrees that Tenant's sole business shall be to lease,
and Tenant shall not incur any expenses or liability related to any business or
activity other than leasing and operating, the Somerby Properties and other
premises owned or hereinafter owned by Landlord or its Affiliated Persons
pursuant to terms acceptable to Landlord and Tenant. Landlord will not
unreasonably withhold its consent to a waiver of this Conflicting Business
restriction for any Conflicting Business which is approximately five (5) or more
miles away so long as Landlord is provided with evidence reasonably acceptable
to it that the proposed Conflicting Business is not likely to draw from the
demographic base otherwise available to support full occupancy of the Facility
and/or a revenue protection agreement acceptable to Landlord with respect to
adverse affects on Facility occupancy or residents tied to the Facility's
identified demographic base served at the Conflicting Business.
4.4 Continuous Operations. Except for cessation which is the result of
casualty, condemnation (including cessation for renovations as a result of such
casualty or condemnation), a legal requirement or an emergency, Tenant shall
continuously operate the Leased Property and maintain sufficient skilled staff
and employees, either directly or through a qualified manager approved by
Landlord, and shall maintain adequate levels and quality of Tenant's Personal
Property, to operate the Leased Property as a first class assisted living,
independent living and dementia care facility (and, if Tenant elects to operate
a skilled nursing component within the facility pursuant to Section 4.1.1 above,
skilled nursing facility) as herein required at its sole cost and expense
throughout the entire Term of this Agreement.
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4.5 Compliance With Restrictions, Etc. Tenant, at its expense, shall comply
with all restrictive covenants and other title exceptions affecting the Leased
Property as of the date of this Lease and comply with and perform all of the
obligations set forth in the same to the extent that (i) the same are applicable
to the Leased Property, (ii) the same would, if not complied with or performed,
impair or prevent the continued use, occupancy and operation of the Leased
Property for the purposes set forth in this Agreement and (iii) Landlord has
affirmative obligations in connection with the common areas or other property as
set forth in that certain Somerby at University Park Declaration of Covenants,
Conditions and Restrictions recorded in Book 9706, Page 2423, and amended in
Book 9815, Page 8213, in the public records of Jefferson County, Alabama
("Declaration"). Further, in addition to Tenant's payment obligations under this
Agreement, Tenant shall collect and/or pay all sums charged, levied or assessed
or required to be charged, levied or assessed by Landlord under any restrictive
covenants, declaration, reciprocal easement agreement or other title exceptions,
equipment leases, leases and all other agreements affecting the Leased Property,
including the Declaration, as of the date of this Lease promptly as the same
become due and shall promptly furnish Landlord evidence of payment thereof.
4.6 Standard of Operation. Throughout the Term of this Agreement, Tenant
shall continuously operate the Leased Property in full compliance with the terms
hereof in a manner consistent with the level of operation of a national, first
class assisted living, independent living and dementia care facility (and, if
Tenant elects to operate a skilled nursing component within the facility
pursuant to Section 4.1.1 above, skilled nursing facility) , including without
limitation, the following:
(a) to maintain the standard of care for the residents/patients of the
Facility at all times at a level necessary to ensure quality care for
the residents/patients of the Facility in accordance with customary
and prudent industry standards;
(b) to operate the Facility in a prudent manner and in compliance with
applicable laws and regulations relating thereto and cause all
Permits, Reimbursement Contracts and any other agreements necessary
for the use and operation of the Facility or as may be necessary for
participation in applicable reimbursement programs to remain in good
standing;
(c) to maintain sufficient P&E and Inventories, and Tenant Personal
Property, of types and quantities at the Facility to enable Tenant
adequately to perform operations of the Facility; and
(d) to keep all Leased Improvements and P&E located on or used or useful
in connection with the Facility in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time
make all needed and proper repairs, renewals, replacements, additions
and improvements thereto to keep the same in good operating condition.
(e) to maintain sufficient working capital to operate the Leased Premises
as a first class facility (working capital shall mean assets which are
reasonably necessary and used for the day to day operation of the
Leased Premises, including, without limitation, amounts sufficient for
the maintenance of change and petty cash funds, amounts
23
deposited in operating bank accounts, receivables, prepaid expenses,
and funds required to maintain Inventories and pay all operating
expenses as they become due, less accounts payable and accrued current
liabilities).
(f) to operate and use the Leased Premises to a standard consistent with
national chain first class assisted living, independent living and
dementia care facilities (and, if Tenant elects to operate a skilled
nursing component within the facility pursuant to Section 4.1.1 above,
skilled nursing facilities) at least equal to or better in quality
than assisted living, independent living and dementia care facilities
(and, if Tenant elects to operate a skilled nursing component within
the facility pursuant to Section 4.1.1 above, skilled nursing
facilities) operated by Guarantor and its Affiliated Persons at the
Commencement Date, and to operate the Facility only under the
Guarantor's name, trademarks, logos and service marks, with all
required licenses and permits for such operation, if any.
(g) To follow and conform to all of the same operating, employment,
marketing, insurance, risk management and management standards and
practices employed at first class assisted living, independent living
and dementia care facilities (and, if Tenant elects to operate a
skilled nursing component within the facility pursuant to Section
4.1.1 above, skilled nursing facilities) operated by Guarantor and its
Affiliated Persons.
(h) Recruit, train and employ appropriate personnel, or retain management
services from Guarantor or other qualified operator or
service-provider approved by Landlord for same.
(i) Provide prompt written notice to Guarantor and to Landlord of material
or extraordinary developments, lawsuits, violation of any Legal
Requirements and fines relating to the use and operation of the
Facility.
Throughout the term of the Lease, Tenant shall continuously operate the
Leased Property as a national, first-class assisted living, independent living
and dementia care facility (and, if Tenant elects to operate a skilled nursing
component within the facility pursuant to Section 4.1.1 above, skilled nursing
facility) in the manner set forth above, and to a standard consistent with
national chain, first-class assisted living, independent living and dementia
care facilities (and, if Tenant elects to operate a skilled nursing component
within the facility pursuant to Section 4.1.1 above, skilled nursing facilities)
at least equal to or better in quality than assisted living, independent living
and dementia care facilities (and, if Tenant elects to operate a skilled nursing
component within the facility pursuant to Section 4.1.1 above, skilled nursing
facilities) operated currently by Guarantor under Guarantor's name, trademarks,
logos and service marks. Tenant shall endeavor and use its best efforts to
maximize Total Facility Revenue for the Leased Property. Tenant shall further
provide, or cause to be provided, all group services, facilities and benefits
generally available to a national chain, first-class assisted living,
independent living and dementia care facilities (and, if Tenant elects to
operate a skilled nursing component within the facility pursuant to Section
4.1.1 above, skilled nursing facilities) of a similar type operated elsewhere by
Guarantor or any successor to Guarantor (or by other national operators of first
class assisted living, independent living and dementia care facilities (and, if
Tenant elects to
24
operate a skilled nursing component within the facility pursuant to Section
4.1.1 above, skilled nursing facilities).
4.7 Resident Agreements and Service Licenses. Tenant shall comply in all
material respects with the terms and provisions of each agreement and
undertaking entered into with or provided to the residents of the Facility
("Resident Agreements"), including without limitation to fulfill or cause to be
fulfilled all undertakings and representations regarding the use, condition and
operation of the Facility and services to provided the residents and the
standards and services of and benefits to be provided by the Guarantor and its
Affiliated Persons. In addition, Tenant shall comply in all material respects
with the terms and conditions of any contract or license entered into with
respect to the provision of services to the residents at the Facility ("Service
Licenses").
4.8 Standards, Not Control. Landlord and Tenant stipulate and agree that
Tenant is obligated to undertake such actions as are reasonably necessary to
properly achieve the highest standard of operation for the Facility as set forth
herein, and that although Landlord shall have the right to undertake all
enforcement rights as provided herein in the event that the required standard of
operation is not maintained by Tenant, the means and methods used and actions
taken to operate the Facility are within the sole control and election of
Tenant, and are not specified by or under the control of Landlord. Accordingly,
Landlord shall have no responsibility for any action taken by Tenant in order to
manage or operate the Facility.
4.9 Survival. As to conditions and uses of Tenant existing or occurring
prior to the expiration or sooner termination of this Agreement, the provisions
of this Section 4 shall survive the expiration or sooner termination of this
Agreement to extent of any ongoing effects on Landlord or its successors with
respect to the Facility (specifically including the prohibitions relating to
conflicting businesses under Section 4.3.
ARTICLE 5
MAINTENANCE AND REPAIRS
-----------------------
5.1 Tenant's Obligations. Tenant shall, at its sole cost and expense, keep
the Leased Property in good order and repair, and shall promptly make all
necessary and appropriate repairs and replacements thereto of every kind and
nature, whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a condition
existing prior to the commencement of the Term and whether or not necessitated
by wear, tear, obsolescence or defects, latent or otherwise, and shall use all
reasonable precautions to prevent damage or injury. All repairs shall be made in
a good, workmanlike manner, consistent with the industry standards for like
assisted living, independent living and dementia care facilities (and, if Tenant
elects to operate a skilled nursing component within the facility pursuant to
Section 4.1.1 above, skilled nursing facilities) in like locales, in accordance
with all applicable federal, state and local statutes, ordinances, by-laws,
codes, rules and regulations relating to any such work. Tenant shall provide
prompt written notification to Landlord of any material adverse change to the
Leased Property, such as material changes to any environmental condition,
including, without limitation, the presence of biocontaminants, such as mold and
shall promptly undertake appropriate assessment, remedial and preventative
actions sufficient to meet any guidelines or regulations adopted by applicable
authoritative bodies or regulatory agencies in
25
connection with a determination of any material adverse change, and, in any
event with respect to mold contamination, Tenant shall undertake (a) removal of
the mold, (b) abatement of the underlying cause of mold (including water
intrusion), and (c) repair of any leaks and associated water damage at the
Leased Property. In addition, Tenant shall also, at its sole cost and expense,
put, keep, replace and maintain Tenant's Personal Property in good repair and in
good, safe and substantial order, howsoever the necessity or desirability for
repairs may occur, and whether or not necessitated by wear, tear, obsolescence
or defects. Tenant may at any time and from time to time remove and dispose of
any of Tenant's Personal Property which has become obsolete or unfit for use or
which is no longer useful in the operation of the Facility's business conducted
by Tenant on the Leased Property; provided, however, that Tenant's Personal
Property so disposed of shall be promptly replaced with other Tenant's Personal
Property not necessarily of the same character, but of at least equal usefulness
and quality as, and having a value at least equal to the value of, those
disposed of, and in any event in accordance with and in compliance with the
standards required by and the provisions of this Agreement. Tenant shall further
at all times maintain the Leased Property, including the grounds and
landscaping, in an aesthetically pleasing manner.
5.2 Reserve.
5.2.1Tenant shall establish an interest bearing reserve account (the
"Reserve") in a bank designated by Tenant and approved by Landlord.
All interest earned on the Reserve shall be added to and remain a part
of the Reserve. Both Tenant and Landlord shall be signatories on the
Reserve, provided only one signature shall be required to withdraw
funds and Landlord agrees that so long as Tenant is not in default
hereunder, Landlord shall not be required to sign on any checks and
Landlord shall not withdraw any funds from such account. Upon the
occurrence and continuation of any Default or Event of Default
hereunder the Tenant signatory party shall no longer be an authorized
signatory on the Reserve account. Such account shall be established in
Landlord's name and control for the benefit of Tenant and shall not
include or contemplate "overdraft protection" and Tenant shall not
request or attempt to draw or draft any funds which are not actually
on deposit in such account. The purpose of the Reserve is to cover the
cost of the following, to the extent carried out in accordance with
this Agreement (collectively, "Reserve Expenditures"):
(a) Replacements (including P&E Replacements), renewals and additions to
the P&E at the Facility;
(b) repairs, alterations, improvements, renewals, replacements and
additions, whether routine, non-routine or major, to the Leased
Improvements, including without limitation those which are normally
capitalized under GAAP such as repairs, alterations, improvements,
renewals, replacements and additions to the structure, the exterior
facade, the mechanical, electrical, heating, ventilating, air
conditioning, plumbing and vertical transportation elements of the
Leased Improvements, which expenditures Tenant believes should be made
for the Leased Property for the following Fiscal Year; and
(c) payments due by Tenant in respect of the Permitted Equipment
Financings.
26
5.2.2 Commencing with the Commencement Date and continuing throughout the Term,
Tenant shall on the last day of each Accounting Period during the Term, transfer
into the Reserve an amount equal to the Applicable Reserve Percentage of Total
Facility Revenues for such Accounting Period (based upon estimates of Total
Facility Revenue if necessary, to be adjusted as soon as Tenant has had an
opportunity to confirm actual Total Facility Revenue). At the time Tenant
provides Landlord the documentation described in Section 3.3, Tenant shall also
deliver to Landlord a statement setting forth the total amount of deposits made
to and expenditures from the Reserve for the preceding Fiscal Year.
5.2.3On or before November 1 of each Fiscal Year, Tenant shall prepare an
estimate (the "Reserve Estimate") of Reserve Expenditures anticipated
during the ensuing Fiscal Year and shall submit such Reserve Estimate
to Landlord for its review. Such Reserve Estimate shall reflect by
line item the projected budget for Reserve Expenditures for the Leased
Property and assumptions on the basis of which such line items were
prepared in narrative form if necessary, including separate budget
items for all projected expenditures for replacements, substitutions
and additions to Tenant's Personal Property. Tenant shall provide to
Landlord reasonable additional detail, information and assumptions
used in the preparation of the Reserve Estimate as requested by
Landlord and shall also submit to Landlord with the Reserve Estimate
good faith longer-range projections of planned Reserve Expenditures
for an additional three (3) Fiscal Years. Tenant shall review the
Reserve Estimate with Landlord, and subject to Landlord's approval,
Tenant shall implement such Reserve Estimate for the successive Fiscal
Year (during which it shall, if approved by Landlord, be referred to
as the "Approved Reserve Estimate"). In addition, Landlord shall have
the right to disapprove any expenditures to be made pursuant to the
Reserve Estimate which are not in compliance with Applicable Laws.
Further, Landlord's approval of any expenditure pursuant to the
Reserve Estimate shall not be, or be deemed to be, an assumption by
Landlord of any liability in connection with the expenditures made.
Pending resolution of any dispute, the specific disputed item of the
Reserve Estimate shall be suspended and replaced for the Fiscal Year
in question by an amount equal to the lesser of (a) that proposed by
Tenant for such Fiscal Year or (b) such budget item for the Fiscal
Year prior thereto. Tenant shall not make any expenditures from the
Reserve, nor shall Tenant deviate from the Approved Reserve Estimate
without the prior approval of Landlord, except in the case of
emergency where immediate action is necessary to prevent imminent
danger to person or property.
5.2.4Tenant shall, consistent with the Approved Reserve Estimate, from
time to time make Reserve Expenditures from the Reserve as it
reasonably deems necessary in accordance with Section 5.2.1 and
Section 5.2.3. Tenant shall provide to Landlord, within thirty (30)
days after the end of each Fiscal Quarter, an itemized statement
setting forth Reserve Expenditures made to date during the Fiscal
Year.
5.2.5In the event Reserve Expenditures not set forth in the Approved
Reserve Estimate are required (i) as a result of Legal Requirements or
are otherwise required for the continued safe and orderly operation of
the Leased Property, (ii) due to an emergency threatening the Leased
Property, its residents, patients, guests, invitees or employees, or
(iii) because the continuation of a given condition will subject
Tenant or Landlord to civil or criminal liability, Landlord agrees
that it will not unreasonably withhold its approval of such
expenditures.
27
5.2.6All interest earned on the Reserve shall be added to and become a
part thereof, and all property purchased with funds from the Reserve
shall be and remain the property of Tenant until the end of the Term
of the Lease or earlier expiration or termination of this Agreement
(subject to Landlord's lien rights hereunder), at which time all P&E
at the Leased Property, including without limitation all P&E
Replacements or other items purchased with funds from the Reserve (but
not including Tenant's Personal Property except as specifically
provided herein) shall be and become the sole property of Landlord.
All funds in the Reserve shall be and remain the property of Tenant
throughout the Lease Term, subject to the control rights and liens and
security interests of Landlord, but following expiration or earlier
termination of this Agreement and payment in full on all contracts
entered into prior to such expiration or termination for work to be
done or furniture, furnishings, fixtures and equipment to be supplied
in accordance with this Section 5.2 out of the Reserve, ownership of
the Reserve shall be transferred from Tenant to Landlord except
(provided Tenant is not in Default at the time of termination) to the
extent of the amount, if any, by which Tenant's cumulative cash
expenditures on P&E used solely at the Leased Property (not including
any of Tenant's Personal Property which is not used at the Leased
Property throughout the useful life thereof), less all amounts
received upon any disposition thereof, exceeds the cumulative amount
deposited by Tenant into the Reserve. It is understood and agreed that
the Reserve pursuant to this Agreement shall be maintained and used
solely in connection with the Leased Property.
5.2.7If Landlord wishes to grant a security interest in or create another
encumbrance on its interest in the Reserve in connection with a
Facility Mortgage, all or any part of the existing or future funds
therein, or any general intangible in connection therewith, the
instrument granting such security interest or creating such other
encumbrance shall expressly provide that such security interest or
encumbrance is prior in right to the rights of Tenant with respect to
the Reserve as set forth herein, provided that the same is subject to
a Tenant non-disturbance agreement as provided herein and the
Mortgagee thereunder agrees to be responsible to Tenant and to
properly disburse all amounts of the Reserve received by it for use
and disposition as provided herein.
5.2.8If, at any time, funds in the Reserve shall be insufficient or are
reasonably projected by Tenant to be insufficient for necessary and
permitted expenditures thereof or funding is necessary for Reserve
Expenditures, Tenant shall give Landlord Notice thereof, which Notice
shall set forth, in reasonable detail, the nature of the required or
permitted action and the estimated cost thereof, and Tenant shall
thereafter fund such additional Reserve Expenditures.
ARTICLE 6
IMPROVEMENTS, ETC.
------------------
6.1 Prohibition. Except for work funded by Reserve Expenditures and Minor
Alterations as hereinafter expressly provided in Section 6.2, and except as
required to protect the life and safety of all Facility Residents in the case of
an emergency, no portion of the Leased Property shall be demolished, removed or
altered by Tenant in any manner whatsoever without the prior written consent and
approval of Landlord. Notwithstanding the foregoing, however, Tenant shall be
entitled and obligated to undertake all alterations to the Leased Property
required by any Legal Requirements and, in such event, Tenant shall comply with
the provisions of Section 6.2 below.
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6.2 Permitted Renovations. The activities permitted pursuant to Section
6.2.1 and Section 6.2.2 below shall collectively constitute "Permitted
Renovations".
6.2.1Minor Alterations. Landlord acknowledges that certain minor,
alterations and renovations may be undertaken by Tenant from time to
time ("Minor Alterations"). Landlord hereby agrees that Tenant shall
be entitled to perform such Minor Alterations on or about the Leased
Improvements; provided, however, that the cost of any such Minor
Alteration shall not exceed $75,000.00 and the same shall not weaken
or impair the structural strength of the Leased Improvements, or alter
their exterior design or appearance, materially impair the use of any
of the service facilities located in, or fundamentally affect the
character or suitability of, the Leased Improvements for the Permitted
Use specified in Section 4.1.1 above or materially lessen or impair
their value.
6.2.2Additions, Expansions and Structural Alterations. Except as expressly
permitted in Section 6.1 and Section 6.2.1 above, nothing in this
Article 6 or elsewhere in this Agreement shall be deemed to authorize
Tenant to construct and erect any additions to or expansions of the
Leased Improvements, or perform any alterations of a structural nature
whatsoever (collectively referred to herein as the "Major
Alterations"); it being understood that Tenant may do so only with the
prior written consent and approval of Landlord, which consent and
approval may be withheld by Landlord in its sole and absolute
discretion and may be conditioned upon the payment by Tenant to
Landlord of all reasonable costs incurred by Landlord in evaluating
the same.
6.3 Conditions to Reserve Expenditures, Permitted Renovations and Major
Alterations. In connection with any Reserve Expenditures, Permitted Renovations
or Major Alterations of the Leased Property the following conditions shall be
met, to wit:
(a) Before the commencement of any such work, plans and specifications
therefor or a detailed itemization thereof prepared by a licensed
architect approved by Landlord or other design professional
appropriate under the circumstances approved by Landlord and Tenant
shall be furnished to Landlord for its review and approval. Such
approval shall not constitute Landlord's agreement that the plans and
specification are in compliance with Applicable Laws or an assumption
by Landlord of any liability in connection with the renovation work
contemplated thereby.
(b) Before the commencement of any such work Tenant shall obtain the
approval thereof by all Governmental Agencies having or claiming
jurisdiction of or over the Leased Property, and with any public
utility companies having an interest therein. In connection with any
such work Tenant shall comply with all Legal Requirements and
Applicable Laws, of all other Governmental Agencies having or claiming
jurisdiction of or over the Leased Property and of all their
respective departments, bureaus and offices, and with the requirements
and regulations, if any, of such public utilities, of the insurance
underwriting board or insurance inspection bureau having or claiming
jurisdiction, or any other body exercising similar functions, and of
all insurance companies then writing policies covering the Leased
Property or any part thereof.
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(c) Tenant represents and warrants to Landlord that all such work will be
performed in a good and workmanlike manner and in accordance with the
plans and specifications therefor approved by Landlord, the terms,
provisions and conditions of this Agreement and all governmental
requirements.
(d) Landlord shall have the right, at Tenant's expense, to inspect any
such work at all times during normal working hours using such
inspector(s) as it may deem necessary so long as such inspections do
not unreasonably interfere with Tenant's work (but Landlord shall not
thereby assume any responsibility for the proper performance of the
work in accordance with the terms of this Agreement, nor any liability
arising from the improper performance thereof).
(e) All such work shall be performed free of any liens on Landlord's fee
simple interest on or Tenant's leasehold interest in the Leased
Property.
(f) Upon substantial completion of any such work, Tenant shall procure a
certificate of occupancy or other final approvals, if applicable, from
the appropriate Governmental Agencies and provide copies of same to
Landlord.
(g) Tenant shall, and hereby agrees to, indemnify and save and hold
Landlord and its Affiliated Parties harmless from and against and
reimburse Landlord for any and all loss, damage, cost, liability, fee
and expense (including, without limitation, reasonable attorney's fees
based upon service rendered at hourly rates) incurred by or asserted
against Landlord which is occasioned by or results, directly or
indirectly, from any such work conducted upon the Leased Property;
whether or not the same is caused by, or is the fault of Tenant or any
agent, employee, manager, contractor, subcontractor, laborer,
supplier, materialman or any other third party; but Tenant shall not
be obligated to indemnify Landlord from any loss as aforesaid caused
by Landlord's gross negligence or willful misconduct.
6.4 Salvage. Other than Tenant's Personal Property, all materials which are
scrapped or removed in connection with maintenance and repair performed pursuant
to Article 5 and the making of Permitted Renovations pursuant to Article 6 shall
be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.
ARTICLE 7
LANDLORD'S INTEREST NOT SUBJECT TO LIENS
----------------------------------------
7.1 Liens, Generally. Tenant shall not, directly or indirectly, create or
cause to be imposed, claimed or filed upon the Leased Property, or Tenant's
assets, properties or income or any portion thereof, or upon the interest of
Landlord therein, any Lien of any nature whatsoever (except that any property
acquired by Tenant with proceeds of the Permitted Equipment Financing may be
pledged to secure such Permitted Equipment Financing). If, because of any act or
omission of Tenant, any such Lien shall be imposed, claimed or filed by any
party whomsoever or whatsoever, Tenant shall, at its sole cost and expense,
cause the same to be promptly (and in no event later than thirty (30) days
30
following receipt of notice of such Lien) fully paid and satisfied or otherwise
promptly discharged of record (by bonding or otherwise) and Tenant shall
indemnify and save and hold Landlord harmless from and against any and all
costs, liabilities, suits, penalties, claims and demands whatsoever, and from
and against any and all reasonable attorney's fees, at both trial and all
appellate levels, resulting or on account thereof and therefrom. In the event
that Tenant shall fail to comply with the foregoing provisions of this Section
7, Landlord shall have the option, but not the obligation, of paying, satisfying
or otherwise discharging (by bonding or otherwise) such Lien and Tenant agrees
to reimburse Landlord, upon demand and as Additional Rent, for all sums so paid
and for all costs and expenses incurred by Landlord in connection therewith,
together with interest thereon, until paid.
7.2 Construction or Mechanics Liens. Landlord's interest in the Leased
Property shall not be subjected to Liens of any nature by reason of Tenant's
construction, alteration, renovation, repair, restoration, replacement or
reconstruction of any improvements on or in the Leased Property, or by reason of
any other act or omission of Tenant (or of any person claiming by, through or
under Tenant) including, but not limited to, construction, mechanics' and
materialmen's liens. All persons dealing with Tenant are hereby placed on notice
that such persons shall not look to Landlord or to Landlord's credit or assets
(including Landlord's interest in the Leased Property) for payment or
satisfaction of any obligations incurred in connection with the construction,
alteration, renovation, repair, restoration, replacement or reconstruction
thereof by or on behalf of Tenant. Tenant has no power, right or authority to
subject Landlord's interest in the Leased Property to any construction,
mechanic's or materialmen's lien or claim of lien. If a Lien, a claim of lien or
an order for the payment of money shall be imposed against the Leased Property
on account of work performed, or alleged to have been performed, for or on
behalf of Tenant, Tenant shall, within thirty (30) days after written notice of
the imposition of such Lien, claim or order, cause the Leased Property to be
released therefrom by the payment of the obligation secured thereby or by
furnishing a bond or by any other method prescribed or permitted by law. If a
Lien is released, Tenant shall thereupon furnish Landlord with a written
instrument of release which has been recorded or filed in the appropriate office
of land records of the County in which the Leased Property is located, and
otherwise sufficient to establish the release as a matter of record. Before
commencing any work relating to alterations, additions, or improvements
affecting the Leased Property, Tenant shall notify Landlord in writing of the
expected date of commencement thereof. Landlord shall then have the right at any
time and from time to time to post and maintain on the Land and Improvements
such notices as Landlord reasonably deems necessary to protect the Leased
Property and Landlord from mechanics' liens, materialmen's liens, or any other
liens. In any event, subject to Section 7.3 below, Tenant shall pay when due all
claims for labor or materials furnished to or for Tenant at or for use in the
Land and Improvements. Subject to Section 7.3 below, Tenant shall not permit any
mechanics' or materialmen's liens to be levied against the Leased Property for
any labor or material furnished to Tenant or claimed to have been furnished to
Tenant or to Tenant's agents or contractors in connection with work of any
character performed or claimed to have been performed on the Land or the
Improvements by or at the direction of Tenant, and shall immediately cause the
release of any such liens as provided hereinabove.
7.3 Contest of Liens. Tenant may, at its option, contest the validity of
any Lien or claim of lien if Tenant shall have first posted an appropriate and
sufficient bond in favor of the claimant or paid the appropriate sum into court,
if permitted by and in strict compliance with Applicable Laws, and thereby
obtained the release of the Leased Property from such Lien. If judgment is
obtained by the claimant under any Lien, Tenant shall pay the same immediately
after such judgment shall have
31
become final and the time for appeal therefrom has expired without appeal having
been taken. Tenant shall, at its own expense, using counsel reasonably approved
by Landlord, diligently defend the interests of Tenant and Landlord in any and
all such suits; provided, however, that Landlord may, nonetheless, at its
election and expense, engage its own counsel and assert its own defenses, in
which event Tenant shall cooperate with Landlord and make available to Landlord
all information and data which Landlord deems necessary or desirable for such
defense.
7.4 Notices of Commencement of Construction. If required by the laws of the
State in which the Leased Property is located, prior to commencement by Tenant
of any work on the Leased Property which shall have been previously permitted by
Landlord as provided in this Agreement, Tenant shall record or file a notice of
the commencement of such work or similar notice required by Applicable Law (the
"Notice of Commencement") in the land records of the County in which the Leased
Property is located, identifying Tenant as the party for whom such work is being
performed, stating such other matters as may be required by law and requiring
the service of copies of all notices, Liens or claims of lien upon Landlord. Any
such Notice of Commencement shall clearly reflect that the interest of Tenant in
the Leased Property is that of a leasehold estate and shall also clearly reflect
that the interest of Landlord as the fee simple owner of the Leased Property
shall not be subject to construction, mechanics or materialmen's liens on
account of the work which is the subject of such Notice of Commencement. A copy
of any such Notice of Commencement shall be furnished to and approved by
Landlord and its attorneys prior to the recording or filing thereof, as
aforesaid.
ARTICLE 8
TAXES AND ASSESSMENTS
---------------------
8.1 Obligation to Pay Taxes and Assessments. Throughout the entire Term,
Tenant shall bear, pay and discharge as Additional Charges and not later than
the last day on which payment may be made without penalty or interest, any and
all taxes, assessments, charges, levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees) and other
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen or unforeseen, and each and every installment thereof
which shall or may during or with respect to the Term hereof be charged, laid,
levied, assessed, or imposed upon, or arise in connection with, the use,
occupancy, operation or possession of the Leased Property or any part thereof or
the business conducted thereon, including, without limitation, ad valorem real
and personal property taxes, all taxes charged, laid, levied, assessed or
imposed in lieu of or in addition to any of the foregoing by virtue of all
present or future laws, ordinances, requirements, orders, directions, rules or
regulations of Governmental Agencies, and all assessments and charges imposed
pursuant to the Permitted Encumbrances or other documents of record affecting
title to the Leased Property (provided however that such documents have been
approved by Tenant, which approval shall not unreasonably be withheld, delayed
or conditioned provided that the same are appropriate and reasonably necessary
in connection with the normal and ordinary course of ownership and use of the
Facility), whether or not such Additional Charges become due and payable during
or after the Term. Notwithstanding the foregoing, Tenant shall not be
responsible for Additional Charges due and payable after the expiration of the
Term to the extent that the same relate and apply to interests and benefits
accruing to Landlord after the Lease Term. Upon payment, Tenant shall promptly
furnish to Landlord satisfactory evidence
32
of the payment of all such taxes, assessments, impositions or charges. Tenant
shall have no right to approve, nor shall Tenant be obligated for any amounts
due by virtue of, any Facility Mortgage or other documents relating to
indebtedness of Landlord.
8.2 Tenant's Right to Contest Taxes. Notwithstanding the foregoing, Tenant
shall have the right, after prior written notice to Landlord, to contest at its
own expense the amount and validity of any taxes affecting the Leased Property
by appropriate proceedings under Applicable Law conducted in good faith and with
due diligence and to postpone or defer payment thereof, provided and so long as:
(a) Such proceedings shall operate to suspend the collection of such taxes
with respect to the Leased Property;
(b) Neither the Leased Property nor any part thereof would be in immediate
danger of being forfeited or lost by reason of such proceedings,
postponement or deferment; and
(c) Tenant shall have furnished Landlord with security for payment of the
contested taxes which is satisfactory to Landlord, and, in the event
that the preconditions set forth in (a) and (b) above are no longer
met, Landlord shall have the right to draw upon such security to pay
and discharge the taxes in question and any liens against the Leased
Property arising thereunder.
8.3 Tax and Insurance Escrow Account. In the event any of the Events of
Default specified in Section 12.1 hereunder shall occur, or upon request of
Landlord's lender, Landlord shall have the right, by written notice to Tenant
effective as of the date of such notice, to require Tenant to pay or cause to be
paid into a separate account (the "Tax and Insurance Account") to be established
by Tenant with a lending institution designated by Landlord (which Tax and
Insurance Account shall not be removed from such lending institution without the
express prior approval of Landlord), and which Landlord may draw upon, a reserve
amount sufficient to discharge the obligations of Tenant under Section 8.1 and
Article 9 hereof (other than worker's compensation insurance premiums) with
respect to real estate taxes and insurance premiums for the applicable Fiscal
Year as and when they become due (such amounts, the "Tax and Insurance Escrow
Amount"). During each month commencing with the first full calendar month
following the receipt of said notice from Landlord, Tenant shall deposit into
the Tax and Insurance Account one twelfth of the Tax and Insurance Escrow Amount
so that as each installment of insurance premiums and real estate taxes becomes
due and payable, there are sufficient funds in the Tax and Insurance Account to
pay the same. If the amount of such insurance premiums and real estate taxes has
not been definitively ascertained by Tenant at the time when any such monthly
deposit is to be paid, Landlord shall require payment of the Tax and Insurance
Escrow Amount based upon the amount of premiums and real estate taxes paid for
the preceding year, subject to adjustment as and when the amount of such
premiums and real estate taxes are ascertained by Tenant. The Tax and Insurance
Escrow Amount in the Tax and Insurance Account shall be and constitute
additional security for the performance of Tenant's obligations hereunder and
shall be subject to Landlord's security interest therein and shall, if there are
sufficient funds in escrow, be used to pay taxes and insurance premiums when
due. Landlord and Tenant shall execute such documentation as may be necessary to
create and maintain Landlord's security interest in the Tax and Insurance
Account.
33
ARTICLE 9
INSURANCE
---------
9.1 General Insurance Requirements. Tenant shall, at all times during the
Term and at any other time Tenant shall be in possession of the Leased Property,
keep the Leased Property and all property located therein or thereon, insured
against the following risks in the following amounts:
(a) "All-risk" property insurance (and to the extent applicable, Builder's
Risk Insurance) on the Leased Improvements and all items of business
personal property, including but not limited to signs, awnings,
canopies, gazebos, fences and retaining walls, and all P&E, including
without limitation, insurance against loss or damage from the perils
under "All Risk" (Special) form, including but not limited to the
following: fire, windstorm, sprinkler leakage, vandalism and malicious
mischief, water damage, explosion of steam boilers, pressure vessels
and other similar apparatus, and other hazards generally included
under extended coverage, all in an amount equal to one hundred percent
(100%) of the replacement value of the Leased Improvements (excluding
excavation and foundation costs), business personal property and P&E,
without a co-insurance provision, and shall include an Agreed Value
endorsement;
(b) Ordinance or Law Coverage with limits of not less than the Leased
Improvements for Coverage A (Loss to the undamaged portion of the
building), limits not less than $500,000.00 for Coverage B (Demolition
Cost Coverage), and limits not less than $500,000.00 for Coverage C
(Increased Cost of Construction Coverage);
(c) Business income insurance to be written on "Special Form" (and on
"Earthquake" and "Flood" forms if such insurance for those risks is
required) including "Extra Expense", without a provision for
co-insurance, including an amount sufficient to pay at least twelve
(12) months of Rent for the benefit of Landlord, as its interest may
appear, and at least twelve (12) months of "Net Operating Income" less
Rent for the benefit of Tenant;
(d) Occurrence form commercial general liability insurance, including
bodily injury and property damage, liquor liability (if applicable),
fire legal liability, contractual liability and independent
contractor's hazard and completed operations coverage in an amount not
less than $1,000,000.00 per occurrence and $2,000,000.00 per location,
aggregate;
(e) Umbrella liability coverage which shall be on a following form for the
General Liability, Automobile Liability, Employers' Liability,
Malpractice and Liquor Liability (if applicable), with limits in a
minimum amount of not less than $15,000,000.00 per
occurrence/aggregate;
(f) Malpractice insurance/professional liability insurance
in an amount not less than $5,000,000.00 for each person and each occurrence to
cover the professional medical care providers working on the Leased Property;
(g) Flood insurance (if the Leased Property is located in whole or in part
within an area identified as an area having special flood hazards
under the National Flood Insurance Program) for the
34
full (100%) replacement value of the improvements and all items of
business personal property or any greater amount as may be required by
the National Flood Insurance Program;
(h) Worker's compensation coverage for all persons employed by Tenant on
the Leased Property with statutory limits, and Employers' Liability
insurance in an amount of at least $1,000,000.00 per accident/disease;
(i) Business auto liability insurance, including owned, non-owned and
hired vehicles for combined single limit of bodily injury and property
damage of not less than $1,000,000.00 per occurrence;
(j) Intentionally Omitted;
(k) "Earthquake" insurance, if the Leased Property is currently, or at any
time in the future, located within a major earthquake disaster area,
in amount, and in such form and substance and with such limits and
deductibles as are satisfactory to Landlord; and
(l) Crime insurance covering employee theft in an amount not less than
$1,500,000.
(m) Such additional insurance or increased insurance limits as may be
reasonably required, from time to time, by Landlord (including,
without limitation, any mortgage, security agreement or other
financing permitted hereunder and then affecting the Leased Property,
as well as any declaration, ground lease or easement agreement
affecting the Leased Property), or any Mortgagee, provided the same is
customarily carried by a majority of comparable assisted living,
independent living facilities (and, if Tenant elects to operate a
skilled nursing or dementia care component within the facility
pursuant to Section 4.1.1 above, skilled nursing or dementia care
facility) in the area.
Without limiting the generality of the foregoing Section 9.1(m), the required
commercial liability insurance and umbrella liability coverage limits and
deductible amounts pertaining thereto as set forth in this Article 9 shall in no
event provide less coverage (lower limits or higher deductibles) than the
"Comparable Insurance Coverage" carried on any of the other assisted living,
independent living and dementia care facilities (and, if Tenant elects to
operate a skilled nursing component within the facility pursuant to Section
4.1.1 above, skilled nursing facilities) leased or owned by Tenant and Guarantor
and their Affiliated Persons, and the insurance coverage for the Leased Property
shall immediately be increased by Tenant to equal any greater or increased
"Comparable Insurance Coverage" carried or obtained for such other facilities.
For purposes of the foregoing, "Comparable Insurance Coverage" shall mean
insurance coverage levels adjusted for relevant variations in risk and
insurability characteristics between the insured facilities being compared,
including without limitation consideration of variations in insurance coverages
carried by Guarantor and its Affiliated Persons between different insurance
markets (states or other jurisdictional subdivisions) where insured risks or
insurance pricing or availability varies materially. Tenant shall use all
reasonable efforts to obtain increased umbrella liability coverage of not less
than $100,000,000 per occurrence/aggregate, and decreased liability insurance
deductibles, at such time as the same can be obtained at commercially reasonable
or economically feasible rates for the Lease Property. Until such increased
coverages are obtained the Tenant shall provide to Landlord a thorough annual
update and review of the overall liability insurance coverage program and
strategy for Tenant and Guarantor and their Affiliated
35
Persons, which shall include an analysis of market rates for the current and
desired liability insurance coverages. In addition, Tenant shall have the right
to provide commercial general liability insurance coverage on a "claims made"
basis, so long as the general liability insurance coverages otherwise required
hereunder are maintained or continued in existence at all times throughout the
Lease Term for all periods that Tenant or its Affiliates have had any ownership
or use of the Leased Property, and evidence thereof has been provided to
Landlord.
9.2 Waiver of Subrogation. Landlord and Tenant agree that with respect to
any property loss which is covered by insurance then being carried by Landlord
or Tenant, respectively, the party carrying such insurance and suffering said
loss releases the other of and from any and all claims with respect to such
loss; and they further agree that their respective insurance companies shall
have no right of subrogation against the other on account thereof.
9.3 General Provisions. The Facility's allocated chargeback/deductible for
general liability insurance shall not exceed $1,000,000 for assisted living and
$1,000,000 for memory impaired, to the extent commercially available, and
$250,000.00 for workmen's compensation insurance, to the extent commercially
available, unless any greater amounts are agreeable to both Landlord and Tenant.
The Facility's property insurance deductible shall not exceed $25,000.00 unless
such greater amount is agreeable to both Landlord and Tenant, or if a higher
deductible for high hazard risks (i.e., wind or flood) is mandated by the
insurance carrier. All insurance policies pursuant to this Article 9 shall be
issued by insurance carriers having a general policy holder's rating of no less
than A-/VII in Best's latest rating guide, and shall contain clauses or
endorsements to the effect that (a) Landlord shall not be liable for any
insurance premiums thereon or subject to any assessments thereunder, and (b) the
coverages provided thereby will be primary and any insurance carried by any
additional insured shall be excess and non-contributory to the extent of the
indemnification obligation pursuant to Section 9.5 below. All such policies
described in Section 9.1 shall name Landlord, CRC and CNL Retirement and any
Mortgagee whose name and address has been provided to Tenant as additional
insureds, loss payees, or mortgagees, as their interests may appear and to the
extent of their indemnity. All loss adjustments shall be payable as provided in
Article 10. Tenant shall deliver certificates thereof to Landlord prior to their
effective date (and, with respect to any renewal policy, no less than thirty
(30) days prior to the expiration of the existing policy), which certificates
shall state the nature and level of coverage reported thereby, as well as the
amount of the applicable deductible. Upon Landlord's request, duplicate original
copies of all insurance policies to be obtained by Tenant shall be provided to
Landlord by Tenant. All such policies shall provide Landlord (and any Mortgagee
whose name and address has been provided to Tenant if required by the same)
thirty (30) days prior written notice of any material change or cancellation of
such policy.
In the event Tenant shall fail to effect such insurance as herein required,
to pay the premiums therefor or to deliver such certificates to Landlord or any
Mortgagee at the times required, Landlord shall have the right, but not the
obligation, subject to the provisions of Section 12.5, to acquire such insurance
and pay the premiums therefor, which amounts shall be payable to Landlord, upon
demand, as Additional Rent, together with interest accrued thereon at the
Overdue Rate from the date such payment is made until (but excluding) the date
repaid.
9.4 Blanket Policy. Notwithstanding anything to the contrary contained in
this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a
36
so-called blanket policy or policies of insurance carried and maintained by
Tenant, so long as such policies otherwise meet all requirements under this
Article 9.
9.5 Indemnification of Landlord. Except as expressly provided herein,
Tenant shall protect, indemnify and hold harmless Landlord for, from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon or
incurred by or asserted against Landlord by reason of: (a) any accident, injury
to or death of persons or loss of or damage to property of third parties
occurring on or about the Leased Property or adjoining sidewalks or rights of
way under Tenant's control, and (b) any use, misuse, condition, management,
maintenance or repair by Tenant or anyone claiming under Tenant of the Leased
Property or Tenant's Personal Property or any litigation, proceeding or claim by
Governmental Agencies relating to such use, misuse, condition, management,
maintenance, or repair thereof to which Landlord is made a party; provided,
however, that Tenant's obligations hereunder shall not apply to any liability,
obligation, claim, damage, penalty, cause of action, cost or expense arising
from any gross negligence or willful misconduct of Landlord, its employees,
agents, contractors or invitees. Any such claim, action or proceeding asserted
or instituted against Landlord covered under this indemnity shall be defended by
counsel selected by Tenant and reasonably acceptable to Landlord, at Tenant's
expense. Notwithstanding the foregoing, indemnification with respect to
Hazardous Substances is governed by Section 4.3. The obligations of Tenant under
this Section 9.5 shall survive the expiration or any early termination of this
Agreement.
ARTICLE 10
CASUALTY
--------
10.1 Restoration and Repair. If during the Term the Leased Property shall
be totally or partially destroyed and thereby rendered Unsuitable for Its
Permitted Use, Tenant shall give Landlord prompt Notice thereof. Neither
Landlord nor Tenant shall have the right to terminate this Lease with respect to
any such casualty occurring prior to the expiration of the first thirty-six (36)
Accounting Periods of the Initial Term. With respect to any such casualty that
renders the Leased Property Unsuitable for Its Permitted Use after such
thirty-sixth (36th) Accounting Period, either Landlord or Tenant may, by the
giving of Notice thereof to the other party within sixty (60) days after such
casualty occurs, terminate this Agreement, whereupon Landlord shall be entitled
to retain the insurance proceeds payable on account of such damage and Tenant
shall pay to Landlord the amount of any deductible. Tenant further expressly
acknowledges, understands and agrees that in the event that the Agreement is
terminated as aforesaid, Landlord may settle any insurance claims and Tenant
shall, upon request of Landlord, cooperate in any such settlement. If during the
Term, the Leased Property shall be destroyed or damaged in whole or in part by
fire, windstorm or any other cause whatsoever, but the Leased Property either
(i) is not rendered Unsuitable for Its Permitted Use or (ii) is rendered
Unsuitable for Its Permitted Use but neither Landlord nor Tenant terminate (or
are entitled to terminate) this Agreement in the manner provided above, then,
Tenant shall give Landlord immediate Notice thereof and Tenant shall, subject to
the provisions of Section 10.2 below, repair, reconstruct and replace the Leased
Property, or the portion thereof so destroyed or damaged, at least to the extent
of the value and character thereof existing immediately prior to such occurrence
and in compliance with all Legal Requirements, including any alterations to the
Leased Property required to be made by any
37
Governmental Agencies due to any changes in code or building regulations (which
Tenant acknowledges may increase the replacement value of the Leased Property
which Tenant will then be required to insure, due to any changes in code or
building regulations). All such restoration work shall be started as promptly as
practicable and diligently completed at Tenant's sole cost and expense (using
available insurance proceeds). Tenant shall, however, immediately take such
action as is necessary to assure that the Leased Property (or any portion
thereof), does not constitute a nuisance or otherwise present or constitute a
health or safety hazard. Notwithstanding the foregoing the Tenant shall have the
right to elect not to repair any material casualty damage (estimated to cost
greater than $250,000 to repair) occurring within twelve (12) months prior to
the scheduled expiration of the then-current Term, provided and on the condition
that: (i) Tenant promptly pays to Landlord the full amount of all deductibles
applying to the insured loss, as well as of all uninsured amounts thereof, and
Landlord or its Mortgagee also receive and retain all insurance proceeds; (ii)
Tenant has provided adequate assurance that applicable business interruption
insurance will continue to be available through the end of the then-current Term
to cover all resulting loss of income or else adequate security therefor as
requested by Landlord; and (iii) Tenant, at Tenant's sole cost and expense,
properly secures and protects and preserves any damaged portion of the Facility
in such a fashion as to insure the safety of all Facility Residents, guest,
invitees and others (to the extent that such persons are reasonably expected to
continue to occupy or come upon the relevant portions of the Leased Property),
and the value of the affected improvements.
10.2 Escrow and Disbursement of Insurance Proceeds. If this Agreement is
not otherwise terminated pursuant to Section 10.1, then in the event of a
casualty resulting in a loss to the Leased Improvements and/or P&E in an amount
greater than FiftY Thousand and No/100 Dollars ($50,000.00) (as determined by an
architect or engineer selected by Landlord), the proceeds of all insurance
policies maintained by Tenant shall be deposited in Landlord's name in an escrow
account at a bank or other financial institution designated by Landlord, and
shall be used by Tenant for the repair, reconstruction or restoration of the
Leased Property to its original condition. Tenant shall, at the time of
establishment of such escrow account and from time to time thereafter until said
work shall have been completed and paid for, furnish Landlord with adequate
evidence acceptable to Landlord that at all times the undisbursed portion of the
escrowed insurance proceeds, together with any funds made available by Tenant,
is sufficient to pay for the repair, reconstruction or restoration in its
entirety. Landlord may, at its option, require, prior to advancement of said
escrowed insurance proceeds (i) approval of plans and specifications by an
architect or other design professional appropriate under the circumstances and
approved by Landlord and Tenant (which approval shall not be unreasonably
withheld or delayed), (ii) general contractors' estimates, (iii) architect's
certificates, (iv) unconditional lien waivers of general contractors, if
available, (v) evidence of approval by all Governmental Agencies and other
regulatory bodies whose approval is required, and (vi) such other terms as a
Mortgagee or lender of Landlord may reasonably require. The escrowed insurance
proceeds shall be disbursed by Landlord, not more than monthly, upon (i)
certification of the architect or engineer selected by Landlord and having
supervision of the work that such amounts are the amounts paid or payable for
the repair, reconstruction or restoration and (ii) submittal by Tenant of a
written requisition and substantiation therefor on AIA Forms G702 and G703 (or
on such other form or forms as may be reasonably acceptable to Landlord). Tenant
shall obtain, and make available to Landlord, receipted bills and, upon
completion of said work, full and final waivers of lien. In the event of a
casualty resulting in a loss payment for the Leased Improvements in an amount
equal to or less than the amount
38
stated above, the proceeds shall be paid to Tenant, and shall be applied towards
repair, reconstruction and restoration. Any and all loss adjustments with
respect to losses payable hereunder shall require the prior written consent of
Landlord. All salvage resulting from any risk covered by insurance shall belong
to Tenant, provided any rights to the same have been waived by the insurer. In
addition, notwithstanding anything in this Agreement to the contrary, Tenant
shall be strictly liable and solely responsible for the amount of any deductible
and shall pay for all repairs, reconstruction or alterations up to the full
amount of such deductible (and provide evidence of such payment to Landlord by
documentation reasonably acceptable to Landlord) before any insurance proceeds
are used for repairs, reconstruction or alterations. In the event that
Landlord's lender requires that any insurance proceeds be applied to reduce the
principal amount of any loan secured by the Leased Property, then Landlord shall
use its best efforts to fund the repair or reconstruction of the Leased Property
through customary, commercially reasonable, fixed-rate debt financing (which
shall, in all events, be at a rate that is less than the Landlord's Equity
Rate). In the event that Landlord is unable to fully fund the repair or
reconstruction of the Leased Property through customary, commercially
reasonable, fixed-rate debt financing, Landlord shall fund with equity that
portion of such cost which it cannot fund through customary, commercially
reasonable, fixed-rate debt financing. In such event the Landlord's Debt shall
be reduced by an amount equal to the insurance proceeds applied to reduce the
principal amount of the loan secured by the Leased Property and Minimum Rent
shall be reduced accordingly. In addition, Minimum Rent shall be increased by an
amount equal to the cost of restoration or repair of the Leased Property that is
funded by Landlord (through debt or equity) x (Debt Constant x (debt
proceeds/the cost of restoration or repair of the Leased Property that is funded
by Landlord (through debt or equity))) + the cost of restoration or repair of
the Leased Property that is funded by Landlord (through debt or equity) x
(Landlord Equity Rate x (equity proceeds/the cost of restoration or repair of
the Leased Property that is funded by Landlord (through debt or equity))). At
the time of any such funding, Landlord and Tenant shall execute an amendment to
this Lease to confirm the above-described adjustment to Minimum Rent.
10.3 No Abatement of Rent. Unless terminated in accordance with the
provisions of Section 10.1 above, this Agreement shall remain in full force and
effect and Tenant's obligation to make all payments of Rent and to pay all
Additional Charges as and when required under this Agreement shall remain
unabated during the Term notwithstanding any casualty to the Leased Property
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any event of casualty involving the
Leased Property and, to the maximum extent permitted by law, Tenant hereby
waives the application of any local or state statute, law, rule, regulation or
ordinance in effect during the Term which provides for such abatement.
10.4 Tenant's Property and Business Interruption Insurance. All insurance
proceeds payable by reason of any loss of or damage to any of Tenant's Personal
Property and the business interruption insurance maintained for the benefit of
Tenant shall be paid to Tenant; provided, however, no such payments shall
diminish or reduce the insurance payments otherwise payable to or for the
benefit of Landlord hereunder.
10.5 Restoration of Tenant's Property. If Tenant is required to restore the
Leased Property as hereinabove provided, Tenant shall either (i) restore all
alterations and improvements made by Tenant
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and Tenant's Personal Property, or (ii) replace such alterations and
improvements and Tenant's Personal Property with improvements or items of the
same or better quality and utility in the operation of the Leased Property.
10.6 Waiver. Tenant hereby waives any statutory rights of termination which
may arise by reason of any damage or destruction of the Leased Property and
agrees that its rights shall be limited to those set forth in Section 10.1.
ARTICLE 11
CONDEMNATION
------------
11.1 Total Condemnation, Etc. If the whole of the Leased Property shall be
taken or condemned for any public or quasi-public use or purpose, by right of
eminent domain or by purchase in lieu thereof, or if a substantial portion of
the Leased Property shall be so taken or condemned that the portion or portions
remaining is or are not sufficient and suitable, in the mutual reasonable
judgment of Landlord and Tenant, for the continued operation thereof as required
herein, so as to effectively render the Leased Property Unsuitable for its
Intended Use, then this Agreement and the Term hereby granted shall cease and
terminate (without prejudice to Landlord's and Tenant's respective rights to an
award under Section 11.3 below), as of the date on which the Condemnor takes
possession and all Rent shall be paid by Tenant to Landlord up to that date or
refunded by Landlord to Tenant if Rent has previously been paid by Tenant beyond
that date.
11.2 Partial Condemnation. If a portion of the Leased Property is taken,
and the portion or portions remaining can, in the mutual reasonable judgment of
Landlord and Tenant, be adapted and used for the conduct of Tenant's business
operation in accordance with the terms of this Agreement, such that the Leased
Property is not effectively rendered Unsuitable for its Intended Use, then the
Tenant shall, utilizing condemnation proceeds paid to Landlord from the
Condemnor, promptly restore the remaining portion or portions thereof to a
condition comparable to their condition at the time of such taking or
condemnation, less the portion or portions lost by the taking, and this
Agreement shall continue in full force and effect except that the Rent payable
hereunder shall, if necessary, be equitably adjusted to take into account the
proportionate reduction in the number of licensed beds or living units located
on the Leased Property as a result of the taking.
11.3 Disbursement of Award. The entire award for the Leased Property or the
portion or portions thereof so taken shall be apportioned between Landlord and
Tenant as follows: (a) if this Agreement terminates due to a taking or
condemnation, Landlord shall be entitled to the entire award; provided, however,
that any portion of the award expressly made for the taking of Tenant's
leasehold interest in the Leased Property, loss of business during the remainder
of the Term, and the taking of Tenant's Personal Property shall be the sole
property of and payable to Tenant, and (b) if this Agreement does not terminate
due to such taking or condemnation, Tenant shall be entitled to the award to the
extent required for restoration of the Leased Property, and Landlord shall be
entitled to the balance of the award not applied to restoration. In any
condemnation proceedings, Landlord and Tenant shall each seek its own award in
conformity herewith, at its own expense. If this Agreement does not terminate
due to a taking or condemnation, Tenant shall, with due diligence, restore the
remaining portion or portions of the Leased Property in the manner hereinabove
provided. In such
40
event, the proceeds of the award to be applied to restoration shall be deposited
with a bank or financial institution designated by Landlord as if such award
were insurance proceeds, and the amount so deposited will thereafter be treated
in the same manner as insurance proceeds are to be treated under Section 10.2 of
this Agreement until the restoration has been completed and Tenant has been
reimbursed for all the costs and expenses thereof. If the award is insufficient
to pay for the restoration, Tenant shall be responsible for the remaining cost
and expense of such restoration.
11.4 No Abatement of Rent. This Agreement shall remain in full force and
effect and Tenant's obligation to make all payments of Rent and to pay all other
charges as and when required under this Agreement shall remain unabated during
the Term notwithstanding any Condemnation involving the Leased Property. The
provisions of this Article 11 shall be considered an express agreement governing
any Condemnation involving the Leased Property and, to the maximum extent
permitted by law, no local or State statute, law, rule, regulation or ordinance
in effect during the Term which provides for such abatement shall have any
application in such case.
11.5 Disputes. If Landlord and Tenant cannot agree in respect of any
matters to be determined under this Article, a determination shall be requested
of the court having jurisdiction over the taking or condemnation; provided,
however, that if said court will not accept such matters for determination,
either party may have the matters determined by a court otherwise having
jurisdiction over the parties.
11.6 Restoration of Leased Property.
(a) In the event that Landlord's lender requires that any condemnation
proceeds be applied to reduce the principal amount of any loan secured
by the Leased Property, then Landlord shall use its best efforts to
fund the repair or reconstruction of the Leased Property (to the
extent such repair or reconstruction is required or permitted pursuant
to this Lease and to the extent such repair and reconstruction is not
funded through condemnation proceeds) through customary, commercially
reasonable, fixed-rate debt financing (which shall, in all events, be
at a rate that is less than the Landlord's Equity Rate). In the event
that Landlord is unable to fully fund the repair or reconstruction of
the Leased Property through customary, commercially reasonable,
fixed-rate debt financing, Landlord shall fund with equity that
portion of such cost which it cannot fund through customary,
commercially reasonable, fixed-rate debt financing.
(b) In the event Landlord's lender requires that any condemnation proceeds
be applied to reduce the principal amount of any loan, regardless of
whether any repairs or reconstruction are funded by Landlord pursuant
to Section 11.6(a) above, the Landlord's Debt shall be reduced by an
amount equal to the condemnation proceeds applied to reduce the
principal amount of the loan secured by the Leased Property and
Minimum Rent shall be reduced accordingly. In addition, in the event
Landlord funds (through debt financing or equity) any repairs or
reconstruction pursuant to Section 11.6(a) above, Minimum Rent shall
be increased by an amount equal to the cost of restoration or repair
of the Leased Property that is funded by
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Landlord (through debt financing or equity) x (Debt Constant x (debt
proceeds/the cost of restoration or repair of the Leased Property that
is funded by Landlord (through debt financing or equity))) + the cost
of restoration or repair of the Leased Property that is funded by
Landlord (through debt financing or equity) x (Landlord Equity Rate x
(equity proceeds/the cost of restoration or repair of the Leased
Property that is funded by Landlord (through debt financing or
equity))). Landlord and Tenant shall, at such time, execute an
amendment to this Lease to confirm the above-described adjustment to
Minimum Rent.
ARTICLE 12
DEFAULTS AND REMEDIES
---------------------
12.1 Events of Default. Each of the following events shall be an Event of
Default hereunder by Tenant and shall constitute a breach of this Agreement:
(a) If Tenant shall fail to (i) pay, when due, any Rent or any Additional
Charge due hereunder; or (ii) fully fund and maintain the Reserve and
fund all Reserve Expenditures as required by Section 5.2, and such
failure in each such event shall continue for a period of five (5)
days after such amounts become due and payable.
(b) If Tenant shall violate or fail to comply with or perform any other
term, provision, covenant, agreement or condition to be performed or
observed by Tenant under this Agreement which is not otherwise
identified in this Section 12.1, and such violation or failure shall
continue for a period of thirty (30) days after written notice thereof
from Landlord; provided, however, if such violation or failure is
incapable of cure by Tenant within such thirty (30) days after
Tenant's diligent and continuous efforts to cure the same, Tenant
shall have an additional period of sixty (60) days to cure the same.
(c) If any assignment, transfer, sublease or encumbrance shall be made or
deemed to be made that is in violation of the provisions of this
Agreement.
(d) If Tenant shall cease the actual and continuous operation of the
business contemplated by this Agreement to be conducted by Tenant upon
the Leased Property (and such cessation is not the result of casualty,
condemnation or renovation and accompanying restoration or is not
otherwise permitted by Landlord or is not the result of a legal
requirement or during an emergency); or if Tenant shall vacate, desert
or abandon the Leased Property; or if the Leased Property shall become
empty and unoccupied; or if the Leased Property or Leased Improvements
are used or are permitted to be used for any purpose, or for the
conduct of any activity, other than the Permitted Use.
(e) If, at any time during the Term of this Agreement, Tenant or Guarantor
shall file in any court, pursuant to any statute of either the United
States or of any State, a petition in bankruptcy or insolvency, or for
reorganization or arrangement, or for the appointment of a receiver or
trustee of all or any portion of Tenant's or Guarantor's property,
including, without limitation, the leasehold interest in the Leased
Property, or if Tenant or Guarantor shall make an assignment for the
benefit of its creditors or petitions for or enters into an
arrangement with its creditors.
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(f) If, at any time during the Term of this Agreement, there shall be
filed against Tenant or Guarantor in any court pursuant to any statute
of the United States or of any State, a petition in bankruptcy or
insolvency, or for reorganization, or for the appointment of a
receiver or trustee of all or a portion of Tenant's or Guarantor's
property, including, without limitation, the leasehold interest in the
Leased Property, and any such proceeding against Tenant or Guarantor
shall not be dismissed within sixty (60) days following the
commencement thereof.
(g) If Tenant's leasehold interest in the Leased Property or any property
therein (including without limitation Tenant's Personal Property and
the P&E Replacements) shall be seized under any levy, execution,
attachment or other process of court where the same shall not be
vacated or stayed on appeal or otherwise within thirty (30) days
thereafter, or if Tenant's leasehold interest in the Leased Property
is sold by judicial sale and such sale is not vacated, set aside or
stayed on appeal or otherwise within thirty (30) days thereafter.
(h) If any of the Facility's Permits material to the Facility's operation
for its Permitted Use are at any time suspended and the suspension is
not stayed pending appeal within five (5) days, or voluntarily
terminated without the prior written consent of Landlord.
(i) If any Governmental Agencies having jurisdiction over the operation of
the Facility removes (unless such removal results from the occurrence
of a casualty) ten percent (10%) or more of the total number of
patients or residents located in the Facility at the time of such
removal.
(j) If Tenant voluntarily transfers ten (10) or more patients or residents
located in the Facility other than the Facility under the Related
Lease in any one (1) year period (except as necessitated by a
casualty), provided that any such transfer to a different type of care
facility as a result of such patient's or resident's special needs
that cannot be met at the Facility shall not be deemed a voluntary
transfer.
(k) If Tenant fails to give notice to Landlord not later than ten (10)
days after Tenant's receipt of any fine notice from any Government
Agency relating to a Major Violation at the Facility.
(l) If Tenant fails to notify Landlord within twenty-four (24) hours after
receipt of any notice from any Governmental Agency terminating or
suspending or reflecting a material risk of an imminent termination or
suspension, of any material Permit relating to the Facility.
(m) If Tenant fails during the Term of this Lease to cure or abate any
Major Violation occurring during the Term that is claimed by any
Governmental Agency of any law, order, ordinance, rule or regulation
pertaining to the operation of the Facility, and within the time
permitted by such authority for such cure or abatement.
(n) The failure of Tenant to correct, within the time deadlines set by any
Governmental Agency, any deficiency which would result in the
following actions by such agency with respect to the Facility:
43
(i) a termination of any Reimbursement Contract or any Permit
material to the operation of the Facility; or (ii) the issuance
of a stop placement order or ban on new admissions generally.
(o) If a final unappealable determination is made by applicable state
authorities of the revocation or limitation of any Permit
required for the lawful operation of the Leased Property in
accordance with its Permitted Use or there occurs the loss or
material limitation of any Permit under any other circumstances
under which Tenant is required to cease its operation of the
Leased Property in accordance with its Permitted Use at the time
of such loss or limitation.
(p) If Tenant or the Facility should be assessed fines or penalties by any
state health or licensing agency having jurisdiction over such Persons
or the Facility in excess of $250,000.00 in any Fiscal Year.
(q) If Tenant or Guarantor or an Affiliated Person of Tenant or Guarantor
shall default under the Related Lease (whether now in effect or
entered into in the future) and shall fail to cure such default in the
time period provided for in that lease.
(r) If Guarantor shall default under the Guaranty and any such default
shall remain uncured through any applicable notice and cure period
thereunder.
(s) If Tenant shall default under the Management Agreement and any such
default shall remain uncured through any applicable notice and cure
period thereunder.
12.2 Daniel Cure Rights. Notwithstanding the foregoing, for so long as
Tenant owes any obligation to Daniel under the Daniel Note, upon the occurrence
of any Event of Default, Landlord shall not be entitled to terminate this Lease
or exercise any other remedies under this Lease (x) until the expiration of ten
(10) days after written notice thereof has been delivered by Landlord to Daniel
with respect to defaults which can be cured by the payment of money or until the
expiration of thirty (30) days after written notice thereof has been delivered
by Landlord to Daniel with respect to defaults which cannot be cured by the
payment of money , or (y) thereafter, if Daniel, within such ten (10) day or
thirty (30) period, shall cure such Event of Default and shall assume the
obligations of Tenant under this Lease. With respect to any Event of Default
under clauses (e) (as it relates to Guarantor), (f) (as it relates to
Guarantor), (r) or (s) above, Daniel shall be deemed to have cured such Event of
Default if Daniel shall procure a replacement guarantor or manager that is
acceptable to Landlord in Landlord's reasonable discretion. In the event a
substitute guarantor is procured by Daniel and approved by Landlord, Landlord
shall release Guarantor from all obligations under the Guaranty effective as of
the date of the substitute guaranty. With respect to any Event of Default under
clauses (i), (j), (k), (l) or (p) above, Daniel shall be deemed to have cured
such Event of Default if Daniel shall have, in Landlord's reasonable opinion,
adequately addressed the underlying cause of such Events of Default so as to
prevent the reoccurrence of the same. In the event that Daniel proposes a
substitute guarantor or manager to cure an Event of Default hereunder, Landlord
shall not unreasonably delay its approval or disapproval of such guarantor or
manager. In such event, Landlord agrees that (i) Daniel (or a Daniel
44
Affiliate) is and will be, a reasonable and acceptable temporary substitute
manager under the Management Agreement until such time as CNL has approved, in
its reasonable discretion, a replacement manager, and (ii) Daniel is, and will
be, a reasonable and acceptable replacement or substitute guarantor under the
Lease. At anytime that Daniel (or a Daniel Affiliate) becomes the temporary
manager, it shall operate the Leased Property, and be entitled to compensation
in accordance with the terms of the Management Agreement as if it were the named
manager thereunder.
(a) The parties acknowledge that if Daniel becomes the Guarantor under the
Lease, it shall be entitled upon ten (10) days written notice, to
remove the manager under the Management Agreement. Such removal,
notwithstanding any provision herein to the contrary, will not result
in an Event of Default hereunder; provided that Daniel (or a Daniel
Affiliate) acts as a temporary substitute manager pursuant to the
foregoing pending CNL's reasonable approval of a replacement manager
as set forth in (c) below.
(b) In the event that Daniel (or a Daniel Affiliate) acts as the Manager
under the terms of the Management Agreement after the expiration of
the Earn Out Agreement, then, all sums payable under the Daniel Note
thereafter shall be paid into escrow until the date that is four (4)
months following the date on which Daniel (or a Daniel Affiliate) (i)
resigns as Manager, (ii) is removed as Manager in accordance with the
applicable provisions of the Management Agreement; or (iii) is
replaced by a replacement manager reasonably satisfactory to CNL ,
whichever is earlier. Such escrow shall be paid into an
interest-bearing account with an escrow agent and on terms reasonably
satisfactory to CNL and Daniel. Upon the expiration of such four (4)
month period, any undisputed portion of such escrowed amount shall be
paid to Daniel upon demand. If the parties are unable, after good
faith efforts, to resolve any dispute with respect to any such amount
remaining in escrow, then such dispute shall be presented for
arbitration in accordance with the arbitration provisions agreed upon
in the Earn Out Agreement, which terms are, for the purposes of this
Section 12.2 only, incorporated herein by reference.
(c) At any period during which Daniel (or a Daniel Affiliate) is acting as
temporary manager under the Management Agreement, Daniel shall, within
thirty (30) days following Landlord's written demand, propose to the
Landlord, for Landlord's consideration, at least two proposed
replacement managers. Daniel may, in such proposal, state its
preferred choice of manager. In the event that Landlord does not,
acting in its reasonable discretion, approve such preferred
replacement manager or, if the preferred manager is not approved, the
other proposed replacement manager or managers, Daniel shall, within
thirty (30) days following receipt of written notice of disapproval,
provide to Landlord another proposed manager, and such proposal and
notice process shall continue until such time as the Landlord, acting
in its reasonable discretion, has approved a permanent replacement
manager on terms reasonably satisfactory to Daniel and CNL. For
purposes of this paragraph, all proposed replacement managers shall be
nationally recognized and have experience operating first class
facilities of this size and with independent living, assisted living,
skilled nursing and dementia care components, as applicable.
12.3 Remedies on Default. If any of the Events of Default hereinabove
specified shall occur, Landlord, at any time thereafter, shall have and may
exercise any of the following rights and remedies:
45
(a) Landlord may, pursuant to written notice thereof to Tenant,
immediately terminate this Agreement and, peaceably or pursuant to
appropriate legal proceedings, re-enter, retake and resume possession
of the Leased Property for Landlord's own account without liability
for trespass (Tenant hereby waiving any right to notice or hearing
prior to such taking of possession by Landlord) and, for Tenant's
breach of and default under this Agreement, recover immediately from
Tenant any and all sums and damages due or in existence at the time of
such termination, including, without limitation, (i) all Rent and
other sums, charges, payments, costs and expenses agreed and/or
required to be paid by Tenant to Landlord hereunder prior to such
termination, (ii) all costs and expenses of Landlord in connection
with the recovery of possession of the Leased Property, including
reasonable attorney's fees based upon services rendered at hourly
rates and court costs, and (iii) all costs and expenses of Landlord in
connection with any reletting or attempted reletting of the Leased
Property or any part or parts thereof, including, without limitation,
brokerage fees, advertising costs, reasonable attorney's fees based
upon service rendered at hourly rates and the cost of any alterations
or repairs or tenant improvements which may be reasonably required to
so relet the Leased Property, or any part or parts thereof.
(b) Landlord may, pursuant to any prior notice required by law, and
without terminating this Agreement, peaceably or pursuant to
appropriate legal proceedings, re-enter, retake and resume possession
of the Leased Property for the account of Tenant, make such
alterations of and repairs and improvements to the Leased Property as
may be reasonably necessary in order to relet the same or any part or
parts thereof and, directly or through a qualified management or
operating company which may include an Affiliated Person of Landlord,
operate and manage the Leased Property, and relet or attempt to relet
the Leased Property or any part or parts thereof for such term or
terms (which may be for a term or terms extending beyond the Term of
this Agreement), at such rents and upon such other terms and
provisions as Landlord, in its sole discretion, may deem advisable. If
Landlord takes possession and control of the Leased Property and
operates the same, Tenant shall, for so long as Landlord is actively
operating the Leased Property, have no obligation to operate the
Leased Property but agrees that Landlord, any contract manager or
operator, or any new tenant or sublessee may, to the extent permitted
by law, operate the Facility under Tenant's Permits, including its
Medicaid and Medicare provider agreements, if any, until same are
issued in the name of the Landlord or the new manager/operator or
tenant or sublessee, as applicable. If Landlord relets or attempts to
relet the Leased Property, or obtains a contract manager or operator
for the Leased Property, Landlord shall at its sole discretion
determine the terms and provisions of any new lease or sublease, or
management or operating agreement, and whether or not a particular
proposed manager or operator, or new tenant or sublessee, is
acceptable to Landlord. Upon any such reletting, or the operation of
the Leased Property by a contract manager or operator, all rents or
incomes received by the Landlord from such reletting or otherwise from
the operation of the Leased Property shall be applied, (i) first, to
the payment of all costs and expenses of recovering possession of the
Leased Property, (ii) second, to the payment of any costs and expenses
of such reletting and or operation, including brokerage fees,
advertising costs, reasonable attorney's fees based upon service
rendered at hourly rates, a management fee of between five percent
(5%) and ten percent (10%) of the gross revenues generated, and the
cost of any alterations and repairs reasonably required for such
reletting or operation of the Leased Property; (iii) third, to
46
the payment of any indebtedness, other than Rent, due hereunder from
Tenant to the Landlord, (iv) fourth, to the payment of all Rent and
other sums due and unpaid hereunder, and (v) fifth, the residue, if
any, shall be held by the Landlord and applied in payment of future
Rent as the same may become due and payable hereunder. If the rents
received from such reletting or net income from the operation of the
Leased Property during any period shall be less than the Rents and
Additional Charges required to be paid during that period by the
Tenant hereunder, Tenant shall promptly pay any such deficiency to the
Landlord and failing the prompt payment thereof by Tenant to Landlord,
Landlord shall immediately be entitled to institute legal proceedings
for the recovery and collection of the same. Such deficiency shall be
calculated and paid at the time each payment of Minimum Rent,
Percentage Rent or any other sum shall otherwise become due under this
Agreement, or, at the option of Landlord, at the end of the Term of
this Agreement. Landlord shall, in addition, be immediately entitled
to sue for and otherwise recover from Tenant any other damages
occasioned by or resulting from any abandonment of the Leased Property
or other breach of or default under this Agreement other than a
default in the payment of Rent. No such re-entry, retaking or
resumption of possession of the Leased Property by the Landlord for
the account of Tenant shall be construed as an election on the part of
Landlord to terminate this Agreement unless a written notice of such
intention shall be given to the Tenant or unless the termination of
this Agreement be decreed by a court of competent jurisdiction.
Notwithstanding any such re-entry and reletting or attempted reletting
of the Leased Property or any part or parts thereof for the account of
Tenant without termination, Landlord may at any time thereafter, upon
written notice to Tenant, elect to terminate this Agreement or pursue
any other remedy available to Landlord for Tenant's previous breach of
or default under this Agreement.
(c) Landlord may, without re-entering, retaking or resuming possession of
the Leased Property, sue for all Rent and all other sums, charges,
payments, costs and expenses due from Tenant to Landlord hereunder
(discounted to present value) either: (i) as they become due under
this Agreement, taking into account that Tenant's right and option to
pay the Rent hereunder on a monthly basis in any particular Fiscal
Year is conditioned upon the absence of a Default on Tenant's part in
the performance of its obligations under this Agreement, or (ii) at
Landlord's option, accelerate the maturity and due date of the whole
or any part of the Rent for the entire then-remaining unexpired
balance of the Term of this Agreement, as well as all other sums,
charges, payments, costs and expenses required to be paid by Tenant to
Landlord hereunder, including, without limitation, damages for breach
or default of Tenant's obligations hereunder in existence at the time
of such acceleration, such that all sums due and payable under this
Agreement shall, following such acceleration, be treated as being and,
in fact, be due and payable in advance as of the date of such
acceleration. Landlord may then proceed to recover and collect all
such unpaid Rent and other sums so sued for from Tenant by distress,
levy, execution or otherwise. Regardless of which of the foregoing
alternative remedies is chosen by Landlord under this subparagraph
(c), Landlord shall not be required to relet the Leased Property nor
exercise any other right granted to Landlord pursuant to this
Agreement, nor, except as may be required by Applicable Laws, shall
Landlord be under any obligation to minimize or mitigate Landlord's
damages or Tenant's loss as a result of Tenant's breach of or default
under this Agreement. Notwithstanding the foregoing, following such
time as Landlord may obtain possession of the Leased Property,
Landlord or its successor Landlord at the time
47
of any Lease termination, shall continue to make the Leased Property
available for lease, on an "as is" basis, and shall turn over the net
proceeds thereof to Tenant to the extent actually received by Landlord
in respect of any time period for which Landlord shall have received
the full amount of Rent payable with respect thereto (albeit perhaps
on a basis reasonably discounted for the time value of money or
present-value basis).
(d) Landlord may, in addition to any other remedies provided herein, enter
upon the Leased Property or any portion thereof and take possession of
(i) any and all of Tenant's Personal Property, if any, (ii) Tenant's
books and records necessary to operate the Leased Property, and (iii)
all the bank accounts concerning, or established for, the Leased
Property, without liability for trespass or conversion (Tenant hereby
waiving any right to notice or hearing prior to such taking of
possession by Landlord) and sell the same by public or private sale,
after giving Tenant reasonable notice of the time and place of any
public or private sale, at which sale Landlord or its assigns may
purchase all or any portion of Tenant's Personal Property, if any,
unless otherwise prevented by law. Unless otherwise provided by law
and without intending to exclude any other manner of giving Tenant
reasonable notice, the requirement of reasonable notice shall be met
if such notice is given at least ten (10) days before the date of
sale. The proceeds from any such disposition, less all expenses
incurred in connection with the taking of possession, holding and
selling of such Property (including reasonable attorneys' fees based
upon services rendered at hourly rates) shall be credited against Rent
which is due hereunder.
(e) Tenant acknowledges that one of the rights and remedies available to
Landlord under Applicable Law is to apply to a court of competent
jurisdiction for the appointment of a receiver to collect the rents,
issues, profits and income of the Leased Property and to manage the
operation of the Leased Property. Tenant hereby further acknowledges
that the revocation, suspension or material limitation of the
certification of the Leased Property for provider status under
Medicare or Medicaid (or successor programs) and/or the revocation,
suspension or material limitation of the license of the Leased
Property as an assisted living, independent living and dementia care
facility (and, if Tenant elects to operate a skilled nursing component
within the facility pursuant to Section 4.1.1 above, a skilled nursing
facility) under the laws of the State will materially and irreparably
impair the value of Landlord's investment in the Leased Property.
Therefore, in any of such events, and in addition to any other right
or remedy of Landlord under this Agreement, Landlord may petition any
appropriate court for appointment of a receiver to manage the
operation of the Leased Property (or any portion thereof as to which
Tenant has suffered the revocation, suspension or material limitation
of any license), to collect and disburse all rents, issues, profits
and income generated thereby and to preserve or replace to the extent
possible the operating license and provider certification of the
Leased Property or to otherwise substitute the licensee or provider
thereof. The receiver shall be entitled to a reasonable fee for his
services as receiver. All such fees and other expenses of the
receivership estate shall be payable as Additional Charges under this
Agreement. Tenant hereby irrevocably stipulates to the appointment of
a receiver under such circumstances and for such purposes and agrees
not to contest such appointment.
(f) In addition to the remedies hereinabove specified and enumerated,
Landlord shall have and may exercise the right to invoke any other
remedies allowed at law or in equity
48
as if the remedies of re-entry, unlawful detainer proceedings and
other remedies were not herein provided. Accordingly, the mention in
this Agreement of any particular remedy shall not preclude Landlord
from having or exercising any other remedy at law or in equity.
Nothing herein contained shall be construed as precluding the Landlord
from having or exercising such lawful remedies as may be and become
necessary in order to preserve the Landlord's right or the interest of
the Landlord in the Leased Property and in this Agreement, even before
the expiration of any notice periods provided for in this Agreement,
if under the particular circumstances then existing the allowance of
such notice periods will prejudice or will endanger the rights and
estate of the Landlord in this Agreement and in the Leased Property.
In addition, any provision of this Agreement to the contrary
notwithstanding, no provision of this Agreement shall delay or
otherwise limit Landlord's right to seek injunctive relief or Tenant's
obligation to comply with any such injunctive relief.
12.4 Application of Funds. Any payments received by Landlord under any of
the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default. If Tenant shall default in
the performance of any term, provisions, covenant or condition on its part to be
performed hereunder, Landlord may, but shall have no obligation to perform the
same for the account and at the expense of Tenant. If, at any time and by reason
of such default, Landlord is compelled to pay, or elects to pay, any sum of
money or do any act which will require the payment of any sum of money, or is
compelled to incur any expense in the enforcement of its rights hereunder or
otherwise, such sum or sums, together with interest thereon at the Overdue Rate
shall be deemed Additional Rent hereunder and shall be repaid to Landlord by
Tenant promptly when billed therefor, and Landlord shall have all the same
rights and remedies in respect thereof as Landlord has in respect of the rents
herein reserved.
12.6 Landlord's Lien. Landlord shall have at all times during the Term of
this Agreement, a valid lien for all rents and other sums of money becoming due
hereunder from Tenant, upon all goods, accounts, wares, merchandise, inventory,
furniture, fixtures, equipment, vehicles and other personal property and effects
of Tenant situated in or upon the Leased Property, including Tenant's Personal
Property and any interest of Tenant in P&E Replacements, but specifically
excluding the trade names "Somerby", or any derivation or replacement thereof or
addition thereto applied by Affiliated Persons of Guarantor to other facilities,
and such property shall not be removed therefrom except in accordance with the
terms of this Agreement without the approval and consent of Landlord until all
arrearages in Rent as well as any and all other sums of money then due to
Landlord hereunder shall first have been paid and discharged in full.
Alternatively, the lien hereby granted may be foreclosed in the manner and form
provided by law for foreclosure of security interests or in any other manner and
form provided by law. The statutory lien for Rent, if any, is not hereby waived
and the express contractual lien herein granted is in addition thereto and
supplementary thereto. Tenant agrees to execute and deliver to Landlord from
time to time during the Term of this Agreement such Financing Statements as may
be required by Landlord in order to perfect the Landlord's lien provided herein
or granted or created by state law. Tenant further agrees that during an Event
of Default, Tenant shall not make any distributions to its shareholders,
partners, members or other owners and any such distributions shall be
49
considered and deemed to be fraudulent and preferential and subordinate to
Landlord's claim for Rent and other sums hereunder.
ARTICLE 13
HOLDING OVER
------------
If Tenant or any other person or party shall remain in possession of the
Leased Property or any part thereof following the expiration of the Term or
earlier termination of this Agreement without an agreement in writing between
Landlord and Tenant with respect thereto, the person or party remaining in
possession shall be deemed to be a tenant at sufferance, and during any such
holdover, the Rent payable under this Agreement by such tenant at sufferance
shall be double the rate or rates in effect immediately prior to the expiration
of the Term or earlier termination of this Agreement. In no event, however,
shall such holding over be deemed or construed to be or constitute a renewal or
extension of this Agreement.
ARTICLE 14
LIABILITY OF LANDLORD; INDEMNIFICATION
--------------------------------------
14.1 Liability of Landlord. Landlord and its affiliates shall not be liable
to Tenant, its employees, agents, invitees, licensees, customers, clients,
residents and their respective family members or guests for any damage, injury,
loss, compensation or claim, including, but not limited to, claims for the
interruption of or loss to Tenant's business, based on, arising out of or
resulting from any cause whatsoever (other than Landlord's gross negligence or
willful misconduct), including, but not limited to: (a) repairs to any portion
of the Leased Property; (b) interruption in Tenant's use of the Leased Property;
(c) any accident or damage resulting from the use or operation (by Landlord,
Tenant or any other person or persons) of any equipment within the Leased
Property, including without limitation, heating, cooling, electrical or plumbing
equipment or apparatus; (d) the termination of this Agreement by reason of the
condemnation or destruction of the Leased Property in accordance with the
provisions of this Agreement; (e) any fire, robbery, theft, mysterious
disappearance or other casualty; (f) the actions of any other person or persons;
and (g) any leakage or seepage in or from any part or portion of the Leased
Property, whether from water, rain or other precipitation that may leak into, or
flow from, any part of the Leased Property, or from drains, pipes or plumbing
fixtures in the Leased Improvements. Any goods, property or personal effects
stored or placed by the Tenant or its employees in or about the Leased Property
including Tenant's Personal Property, shall be at the sole risk of the Tenant.
14.2 Indemnification of Landlord. Tenant shall defend, indemnify and save
and hold Landlord harmless from and against any and all liabilities,
obligations, losses, damages, injunctions, suits, actions, fines, penalties,
claims, demands, costs and expenses of every kind or nature, including
reasonable attorneys' fees and court costs, incurred by Landlord, arising
directly or indirectly from or out of: (a) any failure by Tenant to perform any
of the terms, provisions, covenants or conditions of this Agreement, on Tenant's
part to be performed including but not limited to the payment of any fee, cost
or expense which Tenant is obligated to pay and discharge hereunder, (b) any
accident, injury or
50
damage which shall happen at, in or upon the Leased Property, however occurring;
(c) any matter or thing growing out of the condition, occupation, maintenance,
alteration, repair, use or operation by any person of the Leased Property, or
any part thereof, or the operation of the business contemplated by this
Agreement to be conducted thereon, thereat, therein, or therefrom; (d) any
failure of Tenant to comply with the Legal Requirements; (e) any contamination
of the Leased Property, or the groundwaters thereof, arising on or after the
date Tenant takes possession of the Leased Property and occasioned by the use,
transportation, storage, spillage or discharge thereon, therein or therefrom of
any toxic or hazardous chemicals, compounds, materials or substances, whether by
Tenant or by any agent or invitee of Tenant; (f) any discharge of toxic or
hazardous sewage or waste materials from the Leased Property into any septic
facility or sanitary sewer system serving the Leased Property arising on or
after the date Tenant takes possession of the Leased Property, whether by Tenant
or by any agent of Tenant; (g) any fines, penalties, or refunds due and payable
to Medicare or Medicaid arising out of the operation of the Leased Property by
Tenant; or (h) any other act or omission of Tenant, its employees, agents,
invitees, customers, licensees or contractors, provided, however, Tenant shall
not be liable for or be obligated to indemnify Landlord from and against any
damages resulting from Landlord's gross negligence or willful misconduct.
THE INDEMNIFICATION OF LANDLORD HEREUNDER IS INTENDED TO AND SHALL
EXPRESSLY INCLUDE INDEMNIFICATION AGAINST LANDLORD'S OWN NEGLIGENCE, UNLESS
SPECIFICALLY OTHERWISE PROVIDED.
Tenant's indemnity obligations under this Article and elsewhere in this
Agreement arising prior to the termination or permitted assignment of this
Agreement shall survive any such termination or assignment.
14.3 Notice of Claim or Suit. Tenant shall promptly notify Landlord of any
claim, action, proceeding or suit instituted or threatened against Tenant or
Landlord of which Tenant receives notice or of which Tenant acquires knowledge.
In the event Landlord is made a party to any action for damages or other relief
against which Tenant has indemnified Landlord, as aforesaid, Tenant shall at its
own expense using counsel reasonably approved by Landlord, diligently defend
Landlord, pay all costs in such litigation or, at Landlord's option and expense,
Landlord may nonetheless engage its own counsel in connection with its own
defense or settlement of said litigation in which event Tenant shall cooperate
with Landlord and make available to Landlord all information and data which
Landlord deems necessary or desirable for such defense. In the event Landlord is
required to secure its own counsel due to a conflict in the interests of Tenant
and Landlord in any action for damages or other relief against which Tenant has
indemnified Landlord, Tenant shall pay all of Landlord's costs in such
litigation. Tenant is required to approve a settlement agreement for any such
claim or suit as requested by Landlord and which is consistent with applicable
insurance company requirements, unless Tenant posts a bond or other security
acceptable to Landlord for any potentially uninsured liability amounts.
14.4 Limitation on Liability of Landlord. In the event Tenant is awarded a
money judgment against Landlord, Tenant's sole recourse for satisfaction of such
judgment shall be limited to execution against the Landlord's interest in the
Leased Property. In no event shall any partner, member, officer, director,
stockholder or shareholder of Landlord or any partner thereof or Affiliated
Person or Subsidiary thereof, be personally liable for the obligations of
Landlord hereunder.
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ARTICLE 15
REIT AND UBTI REQUIREMENTS
--------------------------
Tenant understands that, in order for Landlord to qualify as a real estate
investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), the following requirements must be satisfied. The parties intend
that amounts to be paid by Tenant hereunder and received or accrued, directly or
indirectly, by Landlord with respect to the Leased Property (including any rents
attributable to personal property that is leased with respect thereto) will
qualify as "rents from real property" (within the meaning of Code Section 856(d)
and Section 512(b)(3)), and that neither party will take, or permit to take, any
action that would cause any amount received by the Landlord under this Agreement
to fail to qualify as such under the Code. Consistent with this intent, the
parties agree that:
15.1 Limitations on Rents Attributable to Personal Property. "Rents
attributable to any personal property" leased to the Tenant cannot exceed
fifteen percent (15%) of the total rent received or accrued by Landlord under
this Agreement for the Fiscal Year of the Landlord. Consistent therewith, the
average of the fair market values of the personal property (within the meaning
set forth in Section 1.512(b)-1(c)(3)(ii) of the applicable Treasury
Regulations) that is leased to Tenant with respect to the Leased Property at the
beginning and end of a Fiscal Year cannot exceed fifteen percent (15%) of the
average of the aggregate fair market values of the real and personal property
comprising such Leased Property that is leased to Tenant under such lease at the
beginning and end of such Fiscal Year (the "REIT Personal Property Limitation").
If Landlord reasonably anticipates that the REIT Personal Property Limitation
will be exceeded with respect to the Leased Property for any Fiscal Year,
Landlord shall notify Tenant, and Landlord and Tenant shall negotiate in good
faith the purchase by Tenant of items of personal property anticipated by
Landlord to be in excess of the Personal Property Limitation. Provided, however,
that Tenant's responsibility to purchase such personal property will be offset
by Landlord in some mutually agreeable manner, which would not result in the
Landlord earning income which would constitute "unrelated business taxable
income" within the meaning of Section 512 of the Code, if the Landlord was a
"qualified trust" within the meaning of Section 856(h)(3)(E) of the Code.
15.2 Basis for Sublease Rent Restricted. Tenant cannot sublet the property
that is leased to it by Landlord, or enter into any similar arrangement, on any
basis such that the rental or other amounts paid by the sublessee thereunder
would be based, in whole or in part, on either (a) the net income or profits
derived by the business activities of the sublessee or (b) any other formula
such that any portion of the rent paid by Tenant to Landlord would fail to
qualify as "rent from real property" within the meaning of Section 856(d) and
Section 512(b)(3) of the Code and regulations promulgated thereunder.
15.3 Landlord Affiliate Subleases Restricted. Anything to the contrary in
this Agreement notwithstanding, Tenant shall not sublease the Leased Property
to, or enter into any similar arrangement with, any person in which Landlord
owns, directly or indirectly, a ten percent (10%) or more interest, with the
meaning of Section 856(d)(2)(B) of the Code, and any such action shall be deemed
void ab initio. Anything to the contrary in this Agreement notwithstanding,
Tenant shall not sublease the Leased Property to, or enter into any similar
arrangement with, any Person that Landlord would be deemed to control within the
meaning of Section 512 (b)(13) of the Code.
52
15.4 Landlord Interests in Tenant Restricted. Anything to the contrary in
this Agreement notwithstanding, neither party shall take, or permit to take, any
action that would cause Landlord to own, directly or indirectly, a ten percent
(10%) or greater interest in the Tenant within the meaning of Section
856(d)(2)(B) of the Code, and any similar or successor provision thereto, and
any such action shall be deemed void ab initio. In addition, anything to the
contrary in this Agreement notwithstanding, Tenant shall not take or permit to
take, any action that would cause Landlord to own, directly or indirectly, such
interest in Tenant such that amounts received from Tenant would represent
amounts received from a controlled entity within the meaning of Section
512(b)(13) of the Code.
15.5 Rents from Personal Property Restricted. Rents attributable to
personal property within the meaning of Treasury Regulation Section
1.512(b)-1(c)(3)(ii) that is leased to Tenant with respect to the Leased
Property will not exceed 10 percent (10%) of the total Rents per year (the "UBTI
Personal Property Limitation"). If Landlord reasonably anticipates that the UBTI
Personal Property Limitation will be exceeded with respect to the Leased
Property for any Fiscal Year, Landlord shall notify Tenant, and Landlord and
Tenant shall negotiate in good faith the purchase by Tenant of items of personal
property anticipated by Landlord to be in excess of the UBTI Personal Property
Limitation; provided, However, that Tenant's responsibility to purchase such
personal property will be offset by Landlord in some mutually agreeable manner
which will not result in the Landlord earning income which would constitute
"unrelated business taxable income" within the meaning of Section 512 of the
Code if the Landlord was a "qualified trust" within the meaning of Section
856(h)(3)(E) of the Code.
15.6 Landlord Services. Any services provided by, or on behalf of, Landlord
will not prevent any amounts received or accrued from qualifying as "Rents from
real property" (within the meaning of Section 856(d)(2) or Section 512(b)(3) of
the Code).
15.7 Certain Subtenants Prohibited. Anything to the contrary in this
Agreement notwithstanding, Tenant shall not sublease the Leased Property to, or
enter into any similar arrangement with, any Person that would be described in
Section 514(c)(9)(B)(iii) or (iv) of the Code.
15.8 Future Amendment. Tenant hereby agrees to amend this Article 15 from
time to time as Landlord deems necessary or desirable in order to effectuate the
intent hereof.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
-------------------------
16.1 Transfers Prohibited Without Consent. Tenant shall not, without the
prior written consent of Landlord in each instance, which may be withheld in
Landlord's sole opinion and discretion, sell, assign or otherwise transfer this
Agreement, or Tenant's interest in the Leased Property together with all
interests of Tenant in all property of any nature located and used at the Leased
Property (including without limitation Tenant's Personal Property and the P&E
Replacements), in whole or in part, or any rights or interest which Tenant may
have under this Agreement, or sublet any part of the Leased Property, or grant
or permit any lien or encumbrance on or security interest in Tenant's interest
in this Agreement; notwithstanding the foregoing, Tenant shall be permitted to
grant sublease, rental or other occupancy rights in the Facility to individual
residents in connection with the operation of the Leased Property in accordance
with the Permitted Use. Notwithstanding the foregoing, Tenant may
53
sell, assign or otherwise transfer this Agreement, or Tenant's interest in the
Leased Property, in whole but not in part, without the consent of Landlord, to
an Affiliated Person of Guarantor, or to Daniel (but only for so long as Tenant
owes any obligation to Daniel under the Daniel Note), provided (i) Tenant gives
Landlord prior written notice of such sale or assignment, (ii) Tenant shall
remain liable under this Agreement for the remaining Term, and (iii) such
assignee or purchaser shall continue to operate the Leased Premises as a first
class assisted living, independent living and dementia care facility (and, if
Tenant elects to operate a skilled nursing component within the facility
pursuant to Section 4.1.1 above, a skilled nursing facility) consistent with
other assisted living, independent living and dementia care facilities (and, if
Tenant elects to operate a skilled nursing component within the facility
pursuant to Section 4.1.1 above, skilled nursing facilities) being operated by
Tenant and its Affiliated Persons.
Landlord shall not, without the prior written consent of Tenant in each
instance, which may be withheld in Tenant's sole opinion and discretion, sell,
assign or otherwise transfer this Agreement, or Landlord's interest in the
Leased Property, in whole or in part, or any rights or interest which Landlord
may have under this Agreement, either directly or indirectly in the form of a
Facility Mortgage as contemplated under Article 19 hereof, to a direct
competitor of Tenant or Guarantor. In the event that a direct competitor of
Tenant or Guarantor becomes a Mortgagee of the Leased Property the subordination
provisions of Section 19.1 shall not apply.
16.2 Indirect Transfer Prohibited Without Consent. A sale, assignment,
pledge, transfer, exchange or other disposition of (a) the stock of Tenant or
any general partner interest in Tenant or (b) any interest of a member or
members of Tenant which results in a change or transfer of management or control
of Tenant, or a merger, consolidation or other combination of Tenant with
another entity which results in a change or transfer of management or control of
Tenant, shall be deemed an assignment hereunder and shall be subject to the
terms of Section 16.1 hereof. For purposes hereof, exchange or transfer of
management or control or effective control, shall mean a transfer of 50% or more
of the economic benefit of, or Control of, any such entity.
16.3 Adequate Assurances. Without limiting any of the foregoing provisions
of this Article, if, pursuant to the U.S. Bankruptcy Code, as the same may be
amended from time to time, Tenant is permitted to assign or otherwise transfer
its rights and obligations under this Agreement in disregard of the restrictions
contained in this Article, the assignee shall be deemed to agree to provide
adequate assurance to Landlord (a) that any Percentage Rent shall not decline
substantially after the date of such assignment, (b) of the continued use of the
Leased Property solely in accordance with the Permitted Use thereof, (c) of the
continuous operation of the business in the Leased Property in strict accordance
with the requirements of Article 4 hereof, and (d) of such other matters as
Landlord may reasonably require at the time of such assumption or assignment.
Without limiting the generality of the foregoing, adequate assurance shall
include the requirement that any such assignee shall have a net worth (exclusive
of good will) of not less than the aggregate of the Rent due and payable for the
previous Fiscal Year and is or can be licensed to operate the Facility by the
appropriate Governmental Agencies. Such assignee shall expressly assume this
Agreement by an agreement in recordable form, an original counterpart of which
shall be delivered to Landlord prior to an assignment of the Agreement.
Any approval of such successor Tenant shall not affect or alter Landlord's
approval rights of each manager of the Leased Property.
54
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
----------------------------------------------
17.1 Estoppel Certificates. Tenant shall from time to time, within fifteen
(15) days after request by Landlord and without charge, give a Tenant Estoppel
Certificate in the form (or substantially the form) attached hereto as Exhibit
"D" and containing such other matters as may be reasonably requested by Landlord
to any person, firm or corporation specified by Landlord.
17.2 Monthly Financial Statements. Throughout the Term of this Agreement,
Tenant shall prepare and deliver to Landlord at or prior to the end of each
month during the Term hereof, an income (or profit and loss) statement and
operating balance sheet showing the results of the operation of the Leased
Property for the immediately preceding month and for the Fiscal Year to date.
This information shall be provided to Landlord under a complete financial
statement for the Facility which shall be delivered prior to the end of the next
following month, in the form customarily provided in the industry and approved
in advance by the Landlord, and which shall: (a) be taken from the books and
records maintained by Tenant, Guarantor and any manager in the form specified
herein; (b) follow a consistent form as approved in advance in writing by
Landlord; and (c) indicate variances from budgeted results for each line item
against the Tenant's budget for the Leased Property for such Fiscal Year. The
aforesaid financial statements shall be accompanied by an Officer's Certificate
which, for purposes hereof shall mean a Certificate of the Chief Financial
Officer of Tenant (or of Tenant's general partner or managing member, if
applicable) and of Guarantor's Chief Financial Officer, in which such Officer
shall certify (a) that such statements have been properly prepared in accordance
with GAAP and are true, correct and complete in all material respects and fairly
present the consolidated financial condition of the Tenant at and as of the
dates thereof and the results of its operations for the period covered thereby,
and (b) that no Event of Default has occurred and is continuing hereunder.
17.3 Annual Financial Statements. Tenant shall deliver to Landlord within
ninety (90) days after the end of each Fiscal Year, a profit and loss statement,
balance sheet and statement of cash flow certified by an independent certified
public accountant who is actively engaged in the practice of his profession and
who is acceptable to Landlord (which statement shall also be certified by an
officer, partner or member in Tenant) together with copies of all reports and
communications furnished to Guarantor, Tenant's other Affiliated Persons or any
manager of the Leased Property, showing results from the operation of the Leased
Property during such Fiscal Year, and reasons for material variations from the
approved budget for such year. Tenant shall also deliver to Landlord at
Landlord's expense at any time and from time to time, upon not less than twenty
(20) days notice from Landlord, any financial statements or other financial
reporting information required to be filed by Landlord with the SEC or any other
governmental authority or required pursuant to any order issued by any
Governmental Agencies or arbitrator in any litigation to which Landlord is a
party for purposes of compliance therewith. The financial statements required
herein are in addition to the statements required under Section 3.3.2 hereof.
Notwithstanding the foregoing, in the event that Tenant's financial records are
not otherwise being reviewed or audited by an independent certified public
accountant then the Landlord will accept financial statements certified true and
correct by the Chief Financial Officer of Tenant (or of Tenant's general partner
or managing member, if applicable) and by the Guarantor's Chief Financial
Officer.
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17.4 Records. Tenant shall keep and maintain at all times in accordance
with GAAP (separate and apart from its other books, records and accounts)
complete and accurate up-to-date books and records adequate to reflect clearly
and correctly the results of operations of the Leased Property, on an accrual
basis. Such books and records shall be kept and maintained at the Leased
Property or Tenant's principal office in Brentwood, Tennessee. Landlord or its
representatives shall have, at all reasonable times during normal business
hours, reasonable access, on reasonable advance notice, to examine and copy the
books and records pertaining to the Leased Property. Such books and records
shall be available for at least four (4) years after the end of each Lease Year
for Landlord's inspection, copying, review and audit at Landlord's expense
during reasonable business hours and upon reasonable notice.
17.5 General Operations Budget. In addition to the Reserve Estimate, Tenant
shall furnish to Landlord, on or before November 1 of each Fiscal Year proposed
annual budgets in a form satisfactory to Landlord and consistent with the then
standards for the same brand of assisted living, independent living and dementia
care facilities (and, if Tenant elects to operate a skilled nursing component
within the facility pursuant to Section 4.1.1 above, a skilled nursing
facilities) as the Facility setting forth projected income and costs and
expenses projected to be incurred by Tenant in managing, leasing, maintaining
and operating the Facility during the following Fiscal Year.
17.6 Quarterly Meetings. At Landlord's request, Tenant shall make the
Tenant's property management team and the executive officers of Tenant (or of
Tenant's general partner or managing member, if applicable) available to meet
with Landlord on a quarterly basis to discuss the Reserve Estimate, the annual
budgets and any other items related to the operation of the Facility, which
Landlord wishes to discuss. Tenant agrees to give good faith consideration to
any suggestions or requests that Landlord may have.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
---------------------------
Landlord, Mortgagee and their agents shall have the right to enter upon the
Leased Property or any portion thereof at any reasonable time to inspect the
same, including but not limited to, the operation, sanitation, safety,
maintenance and use of the same, or any portions of the same and to assure
itself that Tenant is in full compliance with its obligations under this
Agreement (but Landlord and Mortgagee shall not thereby assume any
responsibility for the performance of any of Tenant's obligations hereunder, nor
any liability arising from the improper performance thereof). In making any such
inspections, neither Landlord nor Mortgagee shall unduly interrupt or interfere
with the conduct of Tenant's business.
ARTICLE 19
FACILITY MORTGAGES
------------------
19.1 Subordination. This Agreement, Tenant's interest hereunder and
Tenant's leasehold interest in and to the Leased Property are hereby agreed by
Tenant to be and are hereby made junior,
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inferior, subordinate and subject in right, title, interest, lien, encumbrance,
priority and all other respects to any mortgage or mortgages and security
interests now or hereafter in force and effect upon or encumbering Landlord's
interest in the Leased Property, or any portion thereof, and to all collateral
assignments by Landlord to any third party or parties of any of Landlord's
rights under this Agreement or the rents, issues and profits thereof or
therefrom as security for any liability or indebtedness, direct, indirect or
contingent, of Landlord to such third party or parties, and to all future
modifications, extensions, renewals, consolidations and replacements of, and all
amendments and supplements to any such mortgage, mortgages or assignments, and
upon recording of any such mortgage, mortgages or assignments, the same shall be
deemed to be prior in dignity, lien and encumbrance to this Agreement, Tenant's
interest hereunder and Tenant's leasehold interest in and to the Leased Property
irrespective of the dates of execution, delivery or recordation of any such
mortgage, mortgages or assignments (such mortgages, mortgages, security
interests, assignments, modifications, extensions, renewals, amendments,
supplements and replacement being a "Facility Mortgage"). The subordination of
this Lease shall be upon the express condition that the validity of this Lease
shall be recognized by the Mortgagee, and that, notwithstanding any default by
the mortgagor, with respect to such mortgage, Tenant's possession and right of
use under this Lease in and to the Leased Property (including rights to have
insurance and condemnation proceeds made available for proper reconstruction of
the Leased Property) shall not be disturbed by such Mortgagee unless and until
Tenant shall breach any of the provisions hereof and this Lease or Tenant's
right to possession hereunder shall have been terminated or shall be terminable
in accordance with the provisions of this Lease. The foregoing subordination and
non-disturbance provisions of this Section shall be automatic and self-operative
without the necessity of the execution of any further instrument or agreement of
subordination on the part of Tenant. Tenant acknowledges and agrees that
notwithstanding the foregoing automatic subordination, if Landlord or Mortgagee
shall request that Tenant execute and deliver any further instrument or
agreement of subordination of this Agreement or Tenant's interest hereunder or
Tenant's leasehold interest in the Leased Property to any such Facility
Mortgage, in confirmation or furtherance of or in addition to the foregoing
subordination provisions of this Section, Tenant shall promptly execute and
deliver the same to the requesting party (provided that such instrument or
agreement also reflects the non-disturbance provisions set forth above).
Further, Tenant agrees that it will, from time to time, execute such
documentation as may be requested by Landlord and any Mortgagee (a) to assist
Landlord and such Mortgagee in establishing or perfecting any security interest
in Landlord's interest in the Reserve and the funds therein; and (b) to
facilitate or allow Landlord to encumber the Leased Property as herein
contemplated. If, within thirty (30) days following Tenant's receipt of a
written request by Landlord or the holder or proposed holder of any such
Facility Mortgage, Tenant shall fail or refuse or shall have not executed any
such further instrument or agreement of subordination, for whatever reason,
Tenant shall be in breach and default of its obligation to do so and of this
Agreement and Landlord shall be entitled thereupon to exercise any and all
remedies available to Landlord pursuant to this Agreement or otherwise provided
by law.
19.2 Attornment. Tenant shall and hereby agrees to attorn, and be bound
under all of the terms, provisions, covenants and conditions of this Agreement,
to any successor of the interest of Landlord under this Agreement for the
balance of the Term of this Agreement remaining at the time of the succession of
such interest to such successor. In particular, in the event that any
proceedings are brought for the foreclosure of any Facility Mortgage, Tenant
shall attorn to the purchaser at any such foreclosure sale and recognize such
purchaser as Landlord under this Agreement. Tenant agrees that
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neither the purchaser at any such foreclosure sale nor the foreclosing Mortgagee
or holder of any such Facility Mortgage shall have any liability for any act or
omission of Landlord, be subject to any offsets or defenses which Tenant may
have as claims against Landlord, or be bound by any advance rents which may have
been paid by Tenant to Landlord for more than the current period in which such
rents come due.
19.3 Rights of Mortgagees and Assignees. Provided Landlord has given Tenant
notice thereof, any Mortgagee shall have the right to unilateral enjoyment,
exercise or control over the rights, remedies, powers and interests of Landlord
hereunder, or otherwise arising under Applicable Law, as assigned or granted to
such Mortgagee by Landlord or as provided in any Facility Mortgage. At the time
of giving any notice of default to Landlord, Tenant shall mail or deliver to any
Mortgagee of whom Tenant has notice, a copy of any such notice. No notice of
default or termination of this Agreement by Tenant shall be effective until each
Mortgagee shall have been furnished a copy of such notice by Tenant. In the
event Landlord fails to cure any default by it under this Agreement, the
Mortgagee shall have, at its option, a period of thirty (30) days after
expiration of any cure period of Landlord within which to remedy such default of
Landlord or to cause such default to be remedied. In the event that the
Mortgagee elects to cure any such default by Landlord, then Tenant shall accept
such performance on the part of such Mortgagee as though the same had been
performed by Landlord, and for such purpose Tenant hereby authorizes any
Mortgagee to enter upon the Leased Property to the extent necessary to exercise
any of Landlord's rights, powers and duties under this Agreement. If, in the
event of any default by Landlord which is reasonably capable of being cured by a
Mortgagee, the Mortgagee promptly commences and diligently pursues to cure the
default, then Tenant will not terminate this Agreement or cease to perform any
of its obligations under this Agreement so long as the Mortgagee is, with due
diligence, engaged in the curing of such default.
19.4 CMC Mortgage Loan.
(a) Pursuant to that certain Multifamily Mortgage, Assignment of Rents and
Security Agreement (the "Mortgage") between Landlord and Collateral
Mortgage Capital, LLC, a Delaware limited liability company ("CMC")
and related documents dated on or about the date hereof (the "Loan
Documents"), CMC has agreed to accept the performance by Tenant of
Landlord's obligations under the Loan Documents, as if such
obligations were performed by Landlord thereunder and has required
Tenant execute certain related collateral assignment documents. Tenant
acknowledges and agrees that, with respect only to the below-listed
provisions of the Loan Documents relating to the operation,
maintenance and other requirements of the Leased Property, including
providing financial and other reports relating to the Leased Property
(but excluding the indebtedness obligations owed by Landlord
thereunder and any Borrower Personal Default (as defined below),
Tenant will perform such obligations and otherwise comply with such
provisions of the Loan Documents and will not take, or fail to take,
any act related thereto that would result in an event of default under
such provisions of the Loan Documents. The failure of Tenant to comply
with such Loan Documents obligations hereinafter set forth which
results in an Event of Default (as defined in the Loan Documents)
shall be an Event of Default hereunder.
(b) Tenant shall execute and fully comply with the obligations of Tenant
under the following Loan Documents to which it is a party: (i) that
certain Collateral Assignment of Management Agreement, (ii) Collateral
Assignment of Licenses, Certificates and Permits, (iii) Collateral
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Assignment of Service Contracts, (iv) Subordination Agreement (Master
Lease), (v) the Replacement Reserve Agreement:, and (vi) for purposes
of the grant to CMC of a security interest in Tenant's Personal
Property and this Lease only, the Multifamily Mortgage, Assignment of
Rents and Security Agreement (the "Mortgage") each dated on or about
the date hereof.
(c) In order to comply with 19(a) above,, Tenant agrees to fully perform
the actions and requirements of Landlord, as borrower under the
following provisions of the Loan Documents (except to the extent any
such Sections do not relate to the maintenance or operation of the
Leased Property, which operation, maintenance and related reporting
obligations are herein referred to as "Premises Obligation(s)"):
The following provisions of the Mortgage (all as modified by Exhibit B to
the Mortgage, as applicable):
Section 3, Assignment of Rents; Appointment of Receiver; Lender in
Possession (to the extent such provisions relate to Tenant's actions or Tenant's
interests in the Leased Property);
Section 4, Assignment of Leases; Leases Affecting the Mortgaged Property
(to the extent such provisions relate to Tenant's actions or Tenant's interests
in the Property);
Section 7, Deposits for Taxes, Insurance and Other Charges;
Section 8, Collateral Assignments;
Section 10, Compliance with Laws;
Section 11, Use of Property;
Section 12, Protection of Lender's Security; Instrument Secures Future
Advances (excluding, however, to the extent this Section applies to a Borrower
Personal Default);
Section 13, Inspection;
Section 14, Books and Records; Financial Reporting (except to the extent
such provisions require financial statements or other information relating to
the Landlord, as borrower);
Section 15, Taxes; Operating Expenses;
Section 17, Preservation Management and Maintenance of the Mortgaged
Property;
Section 18, Environmental Hazards;
Section 19, Property and Liability Insurance;
Section 20, Condemnation;
Section 27, Further Assurances;
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Exhibit B
Section 1., 47 (excluding (f)(3) to the extent such Event of Default arises
from a Borrower Personal Default);
(d) Furthermore, to the extent that the above-referenced provisions of the
Loan Documents allow or require that Tenant (or Landlord) undertake an
action related to the Leased Property in addition to, or different
from the provisions of this Lease, such provisions of the Loan
Documents shall control but only to the extent required to be in
compliance with the Loan Documents and in such an event, Tenant's
compliance therewith shall not be deemed to be a default or Event of
Default hereunder. Landlord shall not instruct Tenant to take any
action that conflicts with the requirements of the Loan Documents or
any instruction from Lender related thereto. Notwithstanding the
foregoing, Tenant shall have no obligation to cure any Borrower
Personal Defaults nor shall any Event of Default arising from a
Borrower Personal Default be an Event of Default hereunder. Each of
Landlord and Tenant each agree to provide concurrent copies to the
other party of any notice sent to Lender under the Loan Documents in
the same manner as delivery of Notice required under this Lease. For
purpose of this Section 19.4 the term "Borrower Personal Default"
shall mean an Event of Default under the Loan Documents which arises
from any obligation of Landlord, as borrower under the Loan Documents
which is not a Premises Obligation.
ARTICLE 20
ADDITIONAL COVENANTS OF TENANT
------------------------------
20.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Somerby Properties for the uses permitted
by this Lease and the Related Lease, as applicable, and activities incidental
thereto, including without limitation the delivery of services to the Facility
residents under the Service Licenses or otherwise, and shall do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
and in good standing its corporate, limited partnership, limited liability
company or other entity status and existence and its rights and licenses
necessary to conduct such business. Promptly upon receipt of same, Tenant shall
provide Landlord with copies of all licenses, licensure and certification
surveys and related plans of correction, and notices of corrective action
required, of loss of licensure or certification of the Facility, or of any
limits imposed upon admissions to the Facility.
20.2 Additional Covenants of Tenant. In addition to the other covenants and
representations of Tenant herein and in this Agreement, Tenant hereby covenants,
acknowledges and agrees that Tenant shall:
(a) Not guaranty any obligation of any Person;
(b) Pay or cause to be paid all lawful claims for labor and rents with
respect to the Leased Property;
(c) Pay or cause to be paid all trade payables;
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(d) Not declare, order, pay or make, directly or indirectly, any
Distribution or any payments to any members or Affiliated Persons as
to Tenant (including payments in the ordinary course of business and
payments pursuant to any management agreements with any such
Affiliate), or set apart any sum of property therefor, or agree to do
so, if, at the time of such proposed action or immediately after
giving effect thereto, any Event of Default shall exist;
(e) Except as otherwise permitted by this Agreement, not sell, lease (as
lessor or sublessor), transfer or otherwise dispose of or abandon, all
or any material portion of its assets or business to any Person, or
sell, lease, transfer or otherwise dispose of or abandon any of
Tenant's Personal Property, provided, however, Tenant may dispose of
portions of Tenant's Personal Property which have become inadequate,
obsolete, worn-out, unsuitable, undesirable or unnecessary, provided
substitute equipment or fixtures having equal or greater value and
utility have been provided.
(f) Provide and maintain throughout the Term, all Tenant's Personal
Property and P&E Replacements as shall be necessary in order to
operate the Leased Property in compliance with applicable legal
requirements and insurance requirements and otherwise in accordance
with customarily practice in the industry for the Permitted Use. If,
from and after the Commencement Date, Tenant acquires an interest in
any items of tangible personal property (other than motor vehicles)
on, or in connection with the Leased Property which belong to anyone
other than Tenant, Tenant shall require the agreement permitting such
use to provide that Landlord or its designee may assume Tenant's
rights and obligations under such agreement upon the termination of
this Agreement and any assumption of management or operation of the
Leased Property by Landlord or its designee.
(g) Deliver to Landlord within thirty (30) days after receipt of or after
modification thereof, copies of all licenses authorizing Tenant to
operate the Leased Property for its Permitted Use.
(h) Undertake a risk management analysis and report regarding the
operation of the Facility annually for compliance with all Applicable
Laws governing the ongoing use and operation of the Facility for the
Permitted Use and provide Landlord with a copy of the report and any
other results of the analysis.
(i) Give prompt notice to Landlord of any litigation or any administrative
proceeding involving Tenant, Landlord or the Leased Property of which
Tenant has notice or actual knowledge and which involves a potential
uninsured liability equal to or greater than $100,000.00 or which, in
Tenant's reasonable opinion, may otherwise result in any material
adverse change in the business, operations, property, prospects,
results of operation or conditions, financial or otherwise, of Tenant
or the Facility.
(j) Not, except as approved in writing by Landlord, either directly or
indirectly, for itself, or through, or on behalf of, or in connection
with any Person, divert or attempt to divert any business or customer
of the Leased Property to any competitor,
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by direct or indirect inducement or otherwise, or do or perform,
directly or indirectly, any other act injurious or prejudicial to the
good will associated with the Landlord or the Leased Property.
(k) Except for (i) liabilities incurred in the ordinary course of
business, (ii) purchase money financing or lease financing of any
Tenant's Personal Property or P&E Replacements which shall not exceed
$250,000 at any given time (collectively, the "Permitted Equipment
Financings"), and (iii) liabilities and obligations to Daniel pursuant
to the Daniel Note (which Tenant hereby covenants and agrees not to
amend without Landlord's consent, which consent may be withheld in
Landlord's sole and absolute discretion), not create, incur, assume or
guarantee, or permit to exist or become or remain liable directly or
indirectly upon, any Indebtedness except Indebtedness of Tenant to
Landlord (or, if unsecured and expressly subject to the terms of this
Agreement and Landlord's interest hereunder, and payable solely out of
excess cash flow after payment of all Rent hereunder, to Tenant's
shareholders, partners or members, as applicable). Tenant further
agrees that the obligee in respect of any such Indebtedness (excluding
the Daniel Note and Permitted Equipment Financings) shall agree in
writing, in form and substance satisfactory to Landlord that (w) the
payment of such Indebtedness shall be expressly subordinated in all
respects to all of Tenant's obligations under this Agreement, (x) no
remedies may be exercised by the obligee with respect to enforcement
or collection of such Indebtedness until such time as this Agreement
shall be terminated and all of Tenant's obligations hereunder shall
have been discharged in full; (y) such Indebtedness shall not be
assigned by the obligee to any other party; and (z) the obligee shall
not initiate or join in any bankruptcy proceedings against Tenant. As
used in this Section 20.2(k) (and notwithstanding any other definition
of Indebtedness herein), Indebtedness shall mean all obligations,
contingent or otherwise, to pay or repay monies irrespective of
whether, in accordance with GAAP, such obligations should be reflected
on the obligor's balance sheet as debt.
(l) Perform all of Tenant's duties and obligations under the Management
Agreement.
(m) Provide Landlord with copies of all notices, reports and other
documents which Tenant receives or delivers in connection with the
Management Agreement.
(n) Not to alter its limited liability operating agreement without
Landlord's consent, which consent may be withheld by Landlord in its
sole and absolute discretion.
20.3 Tenant a Special Purpose Entity. Tenant represents, agrees and
warrants that Tenant is, and throughout the Term will remain, a Special Purpose
Entity as described and contemplated on Exhibit "F" hereof.
20.4 Performance by Manager. Landlord understands and acknowledges that (a)
Manager is required to provide certain services and perform certain tasks
pursuant to the terms of the Management Agreement, and (b) to the extent Manager
performs any obligation of the Tenant hereunder, Landlord shall accept such
performance by Manager to the same extent as if such obligation had been
performed
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by Tenant; provided, however, that neither Landlord's acceptance of Manager's
performance, nor anything else herein shall be deemed or construed to relieve
Tenant of any of its obligations hereunder.
ARTICLE 21
MISCELLANEOUS
-------------
21.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under Applicable Laws, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
21.2 No Waiver. No release, discharge or waiver of any provision hereof
shall be enforceable against or binding upon Landlord or Tenant unless in
writing and executed by Landlord or Tenant, as the case may be. Neither the
failure of Landlord or Tenant to insist upon a strict performance of any of the
terms, provisions, covenants, agreements and conditions hereof, nor the
acceptance of any Rent by Landlord with knowledge of a breach of this Agreement
by Tenant in the performance of its obligations hereunder, or the following of
any practice or custom at variance with the terms hereof, shall be deemed or
constitute a waiver of any rights or remedies that Landlord or Tenant may have
or a waiver of any subsequent breach or default in any of such terms,
provisions, covenants, agreements and conditions or the waiver of the right to
demand exact compliance with the terms hereof.
21.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord, now or
hereafter provided either in this Agreement or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other right, power
and remedy and the exercise or beginning of the exercise by Landlord of any one
or more of such rights, powers and remedies shall not preclude the simultaneous
or subsequent exercise by Landlord of any or all of such other rights, powers
and remedies.
21.4 Severability. Any clause, sentence, paragraph, section or provision of
this Agreement held by a court of competent jurisdiction to be invalid, illegal
or ineffective shall not impair, invalidate or nullify the remainder of this
Agreement, but rather the effect thereof shall be confined to the clause,
sentence, paragraph, section or provision so held to be invalid, illegal or
ineffective, and this Agreement shall be construed as if such invalid, illegal
or ineffective provisions had never been contained therein.
21.5 Acceptance of Surrender. No surrender to Landlord of this Agreement or
of the Leased Property or any part thereof, or of any interest therein, shall be
valid or effective unless agreed to and
63
accepted in writing by Landlord and no act by Landlord or any representative or
agent of Landlord, other than such a written acceptance by Landlord, shall
constitute an acceptance of any such surrender.
21.6 No Merger of Title. It is expressly acknowledged and agreed that it is
the intent of the parties that there shall be no merger of this Agreement or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
21.7 Tenant's Representations. In addition to any other representation or
warranty set forth herein and as an inducement to Landlord to enter into this
Agreement, Tenant hereby represents and warrants to Landlord as follows:
(a) Tenant is a Delaware limited liability company which is duly organized
and validly existing and in good standing under the laws of the State
of its formation. Tenant has all requisite power and authority under
the laws of the State of its formation and the laws of the State of
Alabama and its partnership or operating agreement, articles of
incorporation, by-laws, or other charter documents to enter into and
perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. Tenant is duly authorized to
transact business in any jurisdiction in which the nature of the
business conducted by it requires such qualification.
(b) Tenant has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, and upon the execution and
delivery of any document to be delivered by Tenant, prior to the date
hereof, such document shall constitute the valid and binding
obligation and agreement of Tenant, enforceable against Tenant in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application affecting the rights and remedies
of creditors and except to the extent that the availability of
equitable relief may be subject to the discretion of the court before
which any proceeding may be brought.
(c) There are no judgments presently outstanding and unsatisfied against
Tenant or any of its properties, and neither Tenant nor any of its
properties are involved in any material litigation (other than
litigation disclosed in the Purchase Agreement) at law or in equity or
any proceeding before any court, or by or before any governmental or
administrative agency, which litigation or proceeding could materially
adversely affect Tenant, and no such material litigation or proceeding
is, to the knowledge of Tenant, threatened against Tenant and no
investigation looking toward such a proceeding has begun or is
contemplated.
(d) To the knowledge of Tenant, neither this Agreement nor any other
document, certificate or statement furnished to Landlord by or on
behalf of Tenant in connection with the transaction contemplated
herein contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
contained herein or therein not misleading. To the knowledge of Tenant
there is no fact or condition which materially and adversely affects
the business, operations, affairs, properties or condition of Tenant
which has
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not been set forth in this Agreement or in other documents,
certificates or statements furnished to Landlord in connection with
the transaction contemplated hereby.
(e) Tenant hereby represents to Landlord that, in the reasonable opinion
of Tenant, the Leased Property and the Leased Improvements therein are
adequately furnished and contain adequate P&E and Inventories
consistent with the amount of P&E and Inventories which is customarily
maintained in assisted living, independent living and dementia care
facilities (and, if Tenant elects to operate a skilled nursing
component within the facility pursuant to Section 4.1.1 above, skilled
nursing facilities) of the type and character of the Leased Property
as otherwise required to operate the Leased Property in a manner
contemplated by this Agreement and in compliance with all legal
requirements.
(f) Tenant acknowledges that Tenant's failure or repeated delays in making
prompt payment in accordance with the terms of any agreement, leases,
invoices or statements for purchase or lease of P&E, Inventories or
other goods or services will be detrimental to the reputation of
Landlord and Tenant.
(g) All employees of Tenant are solely employees of Tenant and not
Landlord. Tenant is not Landlord's agent for any purpose in regard to
Tenant's employees or otherwise. Further, Tenant expressly
acknowledges and agrees that Landlord does not exercise any direction
or control over the employment policies or employment decisions of
Tenant.
(h) Tenant has not (i) made any contributions, payments or gifts to or for
the private use of any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or
gift is illegal under the laws of the United States or the
jurisdiction in which made, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false or
artificial entries on its books, (iii) given or received any payments
or other forms of remuneration in connection with the referral of
patients which would violate the Medicare/Medicaid Anti-kickback Law,
Section 1128(b) of the Social Security Act, 42 U.S.C. Section
1320a-7b(b), the federal physician self-referral law, 42 U.S.C.
Section 1395 nn, or any analogous state statute or (iv) made any
payments to any person with the intention or understanding that any
part of such payment was to be used for any purpose other than that
described in the documents supporting the payment. Tenant shall not
take any such actions during the Term of this Agreement.
(i) Tenant has not knowingly filed or failed to correct any claims for
payment or cost reports with Medicare or Medicaid that are not true
and correct in all material respects and, to Tenant's knowledge, no
refunds or overpayments from either Medicare or Medicaid are due and
owing.
(j) Tenant's equity is directly and (if applicable) indirectly owned as
shown on Exhibit "G". Tenant shall promptly provide to Landlord, upon
the occurrence thereof but in any event not more than fifteen (15)
days following a written request therefor, written notice of any
change in the executive officers, directors, shareholders, partners,
and/or members of Tenant, as applicable to Tenant's formation and
structure, and of any change in the respective interests in Tenant
held by each of such Persons.
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21.8 Quiet Enjoyment. Landlord covenants and agrees that so long as Tenant
shall timely pay all rents due to Landlord from Tenant hereunder and keep,
observe and perform all covenants, promises and agreements on Tenant's part to
be kept, observed and performed hereunder, Tenant shall and may peacefully and
quietly have, hold and occupy the Leased Property free of any interference from
Landlord or any Person claiming by, through or under Landlord; subject, however,
and nevertheless to the terms, provisions and conditions of this Agreement, the
Permitted Encumbrances, any other documents affecting record title to or the use
and occupancy of the Leased Property immediately prior to the conveyance thereof
to Landlord on or about the date hereof, and documents affecting title to the
Leased Property approved by Tenant. Landlord shall not, without the prior
written approval of Tenant, enter into or record any document which purports to
or which by its terms will materially and adversely affect the Tenant, Tenant's
use and enjoyment of the Leased Property or Tenant's rights under this Agreement
(such approval not to be unreasonably withheld, delayed or conditioned provided
that the same is appropriate and reasonably necessary in connection with the
normal and ordinary course of ownership and use of the Facility).
21.9 Recordation of Memorandum of Lease. At either party's option, a short
form memorandum of this Agreement, in the form attached hereto as Exhibit "E"
shall be recorded or filed among the appropriate land records of the County in
which the Leased Property is located, and Tenant shall pay the transfer and all
recording costs associated therewith. In the event of a discrepancy between the
provisions of this Agreement and such short form memorandum thereof, the
provisions of this Agreement shall prevail.
21.10 Notices.
(a) Any and all notices, demands, consents, approvals, offers, elections
and other communications required or permitted under this Agreement
shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of
receipt, or by mail or Federal Express or similar expedited commercial
carrier, addressed to the recipient of the notice, postpaid and
registered or certified with return receipt requested (if by mail), or
with all freight charges prepaid (if by Federal Express or similar
carrier).
(b) All notices required or permitted to be sent hereunder shall be deemed
to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in
all other cases, upon the date of receipt or refusal, except that
whenever under this Agreement a notice is either received on a day
which is not a Business Day or is required to be delivered on or
before a specific day which is not a Business Day, the day of receipt
or required delivery shall automatically be extended to the next
Business Day.
(c) All such notices shall be addressed,
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if to Landlord to:
CNL Retirement DSL1 Alabama, LP
c/o CNL Retirement Corp.
CNL Center at City Commons
450 South Orange Avenue
Orlando, FL 32801-3336
Attn: Chief Operating Officer
Phone: (407) 835-3201
Fax : (407) 835-3232
with a copy to:
Lowndes Drosdick Doster Kantor and Reed, P.A.
215 North Eola Drive
P.O. Box 2809 Orlando, FL 32802-2809 Attn: Daniel F. McIntosh,
Esq. Phone: (407) 843-4600 Fax: (407) 843-4444
if to Tenant to:
Alabama Somerby, LLC
111 Westwood Place, Suite 200
Brentwood, Tennessee 37027
Attn: Mr. Todd Kaestner
Phone: (615) 221-2250
Fax: (615) 221-2269
with a copy to:
Daniel Senior Living, L.L.C.
3595 Grandview Parkway, Suite 200
Birmingham, Alabama 35243
Attn: John Gorecki
Phone: (205) 443-4777
Fax: (205) 443-4615
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with a copy to:
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
420 North 20th Street, Suite 1600
Birmingham, AL 35243
Attn: Denise Killebrew, Esq.
Phone: (205) 250-8320
Fax: (205) 322-8007
with a copy to:
Bass, Berry & Sims PLC
315 Deaderick Street, Suit 2700
Nashville, Tennessee 37238
Attn: T. Andrew Smith, Esq.
Phone: (615) 742-6200
Fax: (615) 742-2766
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of
such notice and each shall have the right to specify as its address
any other address within the United States of America.
21.11 Construction; Nonrecourse. Anything contained in this Agreement to
the contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. Each term or provision of this Agreement to be performed by Tenant
shall be construed as an independent covenant and condition. Time is of the
essence with respect to the performance by Tenant of its obligations under this
Agreement, including, without limitation, obligations for the payment of money.
Except as otherwise set forth in this Agreement, any obligations arising prior
to the expiration or sooner termination of this Agreement of Tenant (including
without limitation, any monetary, repair and indemnification obligations) and
Landlord shall survive the expiration or sooner termination of this Agreement.
In addition, solely with respect to Landlord, nothing contained in this
Agreement shall be construed to create or impose any liabilities or obligations
and no such liabilities or obligations shall be imposed on any of the
shareholders, beneficial owners, direct or indirect, officers, directors,
trustees, employees or agents of Landlord or Tenant for the payment or
performance of the obligations or liabilities of Landlord hereunder. The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
21.12 Counterparts; Headings. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but which, when taken
together, shall constitute but one instrument and shall become effective as of
the date hereof when copies hereof, which, when taken
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together, bear the signatures of each of the parties hereto shall have been
signed. Captions and headings in this Agreement are for purposes of reference
only and shall in no way define, limit or describe the scope or intent of, or
otherwise affect, the provisions of this Agreement.
21.13 Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State in which the Leased Property is located.
21.14 Right to Make Agreement. Each party warrants, with respect to itself,
that neither the execution and delivery of this Agreement, nor the compliance
with the terms and provisions hereof, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or Governmental
Authority; nor result in or constitute a breach or default under or the creation
of any lien, charge or encumbrance upon any of its property or assets under, any
indenture, mortgage, deed of trust, contract, other commitment or restriction to
which it is a party or by which it is bound; nor require any consent, vote or
approval which has not been given or taken, or at the time of the transaction
involved shall not have been given or taken. Each party covenants that it has
and will continue to have throughout the term of this Agreement and any
extensions thereof, the full right to enter into this Agreement and perform its
obligations hereunder.
21.15 Brokerage. Landlord and Tenant hereby represent and warrant to each
other that they have not engaged, employed or utilized the services of any
business or real estate brokers, salesmen, agents or finders in the initiation,
negotiation or consummation of the business and real estate transaction
reflected in this Agreement. On the basis of such representation and warranty,
each party shall and hereby agrees to indemnify and save and hold the other
party harmless from and against the payment of any commissions or fees to or
claims for commissions or fees by any real estate or business broker, salesman,
agent or finder resulting from or arising out of any actions taken or agreements
made by them with respect to the business and real estate transaction reflected
in this Agreement.
21.16 No Partnership or Joint Venture. Landlord shall not, by virtue of
this Agreement, in any way or for any purpose, be deemed to be a partner of
Tenant in the conduct of Tenant's business upon, within or from the Leased
Property or otherwise, or a joint venturer or a member of a joint enterprise
with Tenant.
21.17 Entire Agreement. This Agreement contains the entire agreement
between the parties and, except as otherwise provided herein, can only be
changed, modified, amended or terminated by an instrument in writing executed by
the parties. It is mutually acknowledged and agreed by Landlord and Tenant that
there are no verbal agreements, representations, warranties or other
understandings affecting the same; and that Tenant hereby waives, as a material
part of the consideration hereof, all claims against Landlord for rescission,
damages or any other form of relief by reason of any alleged covenant, warranty,
representation, agreement or understanding not contained in this Agreement.
21.18 Costs and Attorneys' Fees. In addition to Landlord's rights under
Sections 12.3 and 14.2, if either party shall bring an action to recover any sum
due hereunder, or for any breach hereunder, and shall obtain a judgment or
decree in its favor, the court may award to such prevailing party its reasonable
costs and reasonable attorney's fees based upon service rendered at hourly
rates, specifically including reasonable attorney's fees incurred in connection
with any appeals (whether or not taxable as such by law). Landlord shall also be
entitled to recover its reasonable attorney's fees
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based upon service rendered at hourly rates and costs incurred in any bankruptcy
action filed by or against Tenant, including, without limitation, those incurred
in seeking relief from the automatic stay, in dealing with the assumption or
rejection of this Agreement, in any adversary proceeding, and in the preparation
and filing of any proof of claim.
21.19 Approval of Landlord. Whenever Tenant is required under this
Agreement to do anything to meet the satisfaction or judgment of Landlord, the
reasonable satisfaction or judgment of Landlord shall be deemed sufficient. The
foregoing provision of this Section shall not apply in any instance where the
provisions of this Agreement expressly state that the provisions of this Section
do not apply or where the provisions of this Agreement expressly state that such
consent, approval or satisfaction are subject to the sole and absolute
discretion or judgment of Landlord, and in each such instance Landlord's
approval or consent may be unreasonably withheld or unreasonable satisfaction or
judgment may be exercised by Landlord.
21.20 Successors and Assigns. The agreements, terms, provisions, covenants
and conditions contained in this Agreement shall be binding upon and inure to
the benefit of Landlord and Tenant and, to the extent permitted herein, their
respective successors and assigns.
21.21 Waiver of Jury Trial. TENANT AND LANDLORD HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAWS, THE RIGHT EITHER OF THEM OR THEIR HEIRS, PERSONAL
REPRESENTATIVES, SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY LITIGATION PROCEEDINGS OR COUNTERCLAIM, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, THE RELATIONSHIP OF LANDLORD AND TENANT HEREUNDER, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LANDLORD'S
ACCEPTING THIS AGREEMENT.
21.22 Treatment of Lease. Landlord and Tenant each agree to treat this
Agreement as a true lease for tax purposes and as an operating lease for
generally accepted accounting principles.
21.23 Transfer of Licenses. Upon the expiration or sooner termination of
this Agreement, Tenant shall use its best efforts to transfer and assign to
Landlord or its designee or assist Landlord or its designee in obtaining
transfer or assignment of all Leased Intangible Property, including without
limitation and together with any contracts, licenses (including without
limitation all licenses identified as part of the Initial Tenant Personal
Property and any replacements thereof and additions thereto), permits,
development rights, trade names (except for trade names as included within the
Initial Tenant Personal Property), telephone exchange numbers identified with
the Leased Property, approvals and certificates and all other intangible rights,
benefits and privileges of any kind or character with respect to the Leased
Property, useful or required for the then operation of the Leased Property
(except for proprietary software as included within the Initial Tenant Personal
Property). If requested by Landlord and to the extent permitted by law the
Tenant shall provide a collateral assignment of such licenses and other
intangible rights as further security for Tenant's obligations hereunder.
70
21.24 Tenant's Personal Property. Upon the expiration or sooner termination
of the Term of this Agreement, Landlord may, in its sole and absolute
discretion, elect to either (i) give Tenant Notice that Tenant shall be
required, within ten (10) Business Days after such expiration or termination, to
remove all of Tenant's Personal Property from the Leased Property, or (ii) pay
Tenant's book value of such Tenant's Personal Property (not including, however,
trade names and proprietary software listed as part of the Initial Tenant
Personal Property, which shall remain the sole property of Tenant). Failure of
Landlord to make such election shall be deemed an election to proceed in
accordance with clause (ii) preceding.
21.25 Landlord's Representations. Landlord hereby represents and warrants
to Tenant as follows:
(a) Landlord is a limited partnership duly organized and validly existing
and in good standing under the laws of the State of Delaware. Landlord
has all requisite power and authority under the laws of the State of
Delaware and its charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
(b) Landlord has taken all necessary action to authorize the execution,
delivery and performance of this Agreement, and upon the execution and
delivery hereof, this Agreement shall constitute the valid and binding
agreement of Landlord.
(c) Landlord represents, agrees and warrants that Landlord is, and
throughout the Term will remain, a Single Purpose Entity as described
and contemplated on Exhibit "L" hereof.
21.26 Guaranty of Lease. The Landlord has entered into this Lease in
reliance upon the Guaranty of Lease by the Guarantor in favor of Landlord dated
of even date herewith (the "Guaranty"), pursuant to which the Guarantor has
unconditionally guaranteed all of the obligations of the Tenant under this
Lease, including without limitation the covenants of Tenant in Sections 4.4 and
Section 4.6 hereof , and all of the additional covenants of Tenant in Article 20
hereof.
21.27 Guaranty of Related Lease. The obligations of each tenant under the
Related Lease also shall be and are hereby unconditionally guaranteed by Tenant.
Tenant agrees that its guaranty of the Related Lease hereunder shall be a
material inducement for the execution of the Related Lease, is and shall be a
guaranty of payment and performance and not of collection solely, and shall be
effective in accordance with the terms and conditions of the Guaranty, which are
incorporated herein by this reference. Notwithstanding the foregoing, and the
automatic and unconditional guaranty of the Related Lease hereunder, Tenant
shall upon request of the Landlord or its Affiliated Persons promptly execute
and deliver a separate Unconditional Guaranty of Payment and Performance with
respect to the Related Lease.
21.28 Third Party Beneficiaries. It is the intention of the parties to this
Agreement that no third party shall have the benefit of or any rights under any
of the provisions hereof; provided, however, that Daniel shall be a third-party
beneficiary of the provisions of Section 12.2 hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date above first written.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
72
LANDLORD:
CNL RETIREMENT DSL1 ALABAMA, LP,
a Delaware limited liability company
By: CNL Retirement DSL1 GP Holding,
LLC, a Delaware limited liability
company, its sole general partner
By: ____________________
Marcel Verbaas
Senior Vice-President
Date: ____________________
TENANT:
ALABAMA SOMERBY, LLC, a Delaware
limited liability company
By: ARC Somerby Holdings, Inc., a Tennessee
corporation, as managing member
By:_______________________________
Name:____________________________
Title:_____________________________
Date:_____________________________
NOTICE: This agreement contains
waivers and indemnities by the
Tenant of the Landlord's own
negligence.
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The undersigned hereby joins in the execution of this Agreement for the
purposes of unconditionally guaranteeing the obligations of CNL RETIREMENT DSL1
ALABAMA, LP under Sections 10.2 and 11.6 hereof, but no other obligations of CNL
RETIREMENT DSL1 ALABAMA, LP.
GUARANTOR:
CNL RETIREMENT PROPERTIES
INC., a Florida corporation
By:
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Phillip M. Anderson, Jr.
Executive Vice President
Date:
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