1
EXHIBIT 10.38
Lease Agreement
by and between
CLEVELAND RETIREMENT PROPERTIES, LLC,
a New York limited liability company
as "Landlord"
and
ARC WESTLAKE VILLAGE, INC.,
a Tennessee corporation
as "Tenant"
Dated December 18, 2000
2
TABLE OF CONTENTS
1. TERM............................................................................. 2
1.1 TERM. ........................................................ 2
1.2 RENEWAL TERMS.................................................. 2
2. RENT............................................................................. 2
2.1 INITIAL TERM MINIMUM RENT...................................... 3
2.2 RENEWAL TERM MINIMUM RENT...................................... 4
2.3 ADDITIONAL RENT................................................ 8
2.4 PRORATION FOR PARTIAL PERIODS.................................. 9
2.5 ABSOLUTE NET LEASE............................................. 9
2.6 Special Lump Sum Payment; Termination Payment ................. 10
3. TAXES, ASSESSMENTS AND OTHER CHARGES............................................. 11
3.1 PAYMENT OF IMPOSITIONS......................................... 11
3.2 DEFINITION OF IMPOSITIONS...................................... 12
3.3 PRORATION...................................................... 13
3.4 RIGHT TO PROTEST............................................... 13
3.5 TAX BILLS...................................................... 13
3.6 OTHER CHARGES.................................................. 13
4. INSURANCE........................................................................ 14
4.1 GENERAL INSURANCE REQUIREMENTS................................. 14
4.2 PROPERTY INSURANCE............................................. 15
4.3 PUBLIC LIABILITY............................................... 16
4.4 BUSINESS INTERRUPTION INSURANCE................................ 17
4.5 BUILDER'S RISK INSURANCE....................................... 17
4.6 REPLACEMENT VALUE.............................................. 18
4.7 PERMITTED MORTGAGE LENDER'S INSURANCE REQUIREMENTS............. 18
4.8 PERMITTED MORTGAGE LENDER'S TAX AND INSURANCE ESCROWS.......... 19
5. USE, MAINTENANCE AND ALTERATION OF THE PREMISES.................................. 19
5.1 TENANT'S MAINTENANCE OBLIGATIONS............................... 19
5.2 REGULATORY COMPLIANCE.......................................... 20
5.3 PERMITTED USE.................................................. 21
5.4 NO LIENS....................................................... 21
5.5 ALTERATIONS BY TENANT.......................................... 21
5.6 CAPITAL EXPENDITURES ACCOUNT................................... 22
6. CONDITION AND TITLE OF PREMISES; RIGHT OF FIRST REFUSAL.......................... 25
6.1 CONDITION AND TITLE OF PREMISES................................ 25
i
3
6.2 RIGHT OF FIRST REFUSAL TO PURCHASE PREMISES.................... 26
6.3 TENANT'S TRANSFER RIGHTS SUBJECT TO BERKSHIRE LOAN DOCUMENTS... 31
7. LANDLORD AND TENANT PERSONAL PROPERTY............................................ 31
7.1 TENANT PERSONAL PROPERTY....................................... 31
7.2 REQUIREMENTS FOR TENANT PERSONAL PROPERTY...................... 31
7.3 COMPLIANCE WITH LAWS........................................... 33
7.4 RESIDENT TENANT LEASES......................................... 33
7.5 TRANSFER OF LICENSE, ETC....................................... 34
8. REPRESENTATIONS AND WARRANTIES................................................... 35
8.1 MUTUAL REPRESENTATIONS AND WARRANTIES.......................... 35
8.2 MUTUAL COVENANTS............................................... 35
8.3 NEGATIVE COVENANTS OF LANDLORD................................. 37
9. FINANCIAL, MANAGEMENT AND REGULATORY REPORTS..................................... 38
9.1 ANNUAL FINANCIAL STATEMENT..................................... 38
9.2 REGULATORY REPORTS............................................. 38
10. EVENTS OF DEFAULT AND LANDLORD'S REMEDIES........................................ 39
10.1 EVENTS OF DEFAULT.............................................. 39
10.2 REMEDIES....................................................... 41
10.3 RECEIVERSHIP................................................... 43
10.4 REMEDIES CUMULATIVE: NO WAIVER................................. 43
10.5 PERFORMANCE OF TENANT'S OBLIGATIONS BY LANDLORD................ 44
10.6 LATE PAYMENT CHARGE............................................ 45
11. DAMAGE BY FIRE OR OTHER CASUALTY................................................. 46
11.1 NOTICE OF CASUALTY............................................. 46
11.2 SUBSTANTIAL DESTRUCTION........................................ 47
11.3 PARTIAL DESTRUCTION............................................ 47
11.4 RESTORATION.................................................... 48
11.5 INSUFFICIENT PROCEEDS.......................................... 49
11.6 NOT TRUST FUNDS................................................ 49
11.7 LANDLORD'S INSPECTION.......................................... 49
11.8 LANDLORD'S COSTS............................................... 50
11.9 NO RENT ABATEMENT.............................................. 50
11.10 SURPLUS PROCEEDS............................................... 50
11.11 END OF TERM.................................................... 50
12. CONDEMNATION..................................................................... 51
12.1 TOTAL TAKING................................................... 51
ii
4
12.2 PARTIAL TAKING................................................. 51
12.3 CONDEMNATION PROCEEDS NOT TRUST FUNDS.......................... 52
13. PROVISIONS ON TERMINATION OF TERM................................................ 52
13.1 SURRENDER OF POSSESSION........................................ 52
13.2 REMOVAL OF PERSONAL PROPERTY................................... 52
13.3 TITLE TO PERSONAL PROPERTY NOT REMOVED......................... 53
13.4 MANAGEMENT OF PREMISES......................................... 53
13.5 CORRECTION OF DEFICIENCIES..................................... 53
14. NOTICES AND DEMANDS.............................................................. 54
15. RIGHT OF ENTRY: EXAMINATION OF RECORDS........................................... 55
16. QUIET ENJOYMENT.................................................................. 55
17. APPLICABLE LAW................................................................... 55
18. HAZARDOUS MATERIALS.............................................................. 55
18.1 HAZARDOUS MATERIAL COVENANTS................................... 55
18.2 TENANT NOTICES TO LANDLORD..................................... 56
18.3 PARTICIPATION IN HAZARDOUS MATERIALS CLAIMS.................... 56
18.4 ENVIRONMENTAL ACTIVITIES....................................... 57
18.5 HAZARDOUS MATERIALS INDEMNITY.................................. 57
18.6 HAZARDOUS MATERIALS............................................ 58
18.7 HAZARDOUS MATERIALS CLAIMS .................................... 58
18.8 HAZARDOUS MATERIALS LAWS....................................... 58
19. ASSIGNMENT AND SUBLETTING........................................................ 59
19.1 PROHIBITION ON ASSIGNMENT AND SUBLETTING....................... 59
19.2 REQUESTS FOR LANDLORD'S CONSENT TO ASSIGNMENT, SUBLEASE OR
MANAGEMENT AGREEMENT .......................................... 60
19.3 ASSIGNMENT BY LANDLORD......................................... 61
19.4 ORDINARY COURSE SUBLEASES NOT REQUIRE CONSENT.................. 61
19.5 SUCCESSOR...................................................... 61
20. INDEMNIFICATION.................................................................. 61
20.1 TENANT'S INDEMNIFICATION....................................... 61
20.2 LIMITATION OF LANDLORD'S LIABILITY............................. 63
21. HOLDING OVER..................................................................... 64
21.1 SURRENDER...................................................... 64
iii
5
22. ESTOPPEL CERTIFICATES............................................................ 64
23. CONVEYANCE BY LANDLORD........................................................... 65
24. WAIVER OF JURY TRIAL............................................................. 65
25. ATTORNEYS' FEES.................................................................. 65
26. SEVERABILITY..................................................................... 66
27. COUNTERPARTS..................................................................... 66
28. BINDING EFFECT................................................................... 66
29. WAIVER AND SUBROGATION........................................................... 66
30. MEMORANDUM OF LEASE.............................................................. 67
31. INCORPORATION OF RECITALS AND ATTACHMENTS........................................ 66
32. TITLES AND HEADINGS.............................................................. 67
33. NATURE OF RELATIONSHIP; USURY SAVINGS CLAUSE..................................... 67
34. JOINT AND SEVERAL................................................................ 67
35. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS............................ 67
36. INTERPRETATION................................................................... 67
37. ASSIGNMENT OF APPROVAL AND CONSENT RIGHTS........................................ 67
38. SUBORDINATION, NON-DISTURBANCE, AND ATTORNMENT................................... 68
39. ENTIRE AGREEMENT................................................................. 68
iv
6
EXHIBITS
EXHIBIT A - LEGAL DESCRIPTION OF PREMISES
EXHIBIT A-1 - PERMITTED EXCEPTIONS
EXHIBIT B - LANDLORD PERSONAL PROPERTY
EXHIBIT C - APPRAISAL PROCESS
EXHIBIT D - ILLUSTRATION OF LEASE RENEWAL FACTOR
EXHIBIT E - LANDLORD'S SINGLE PURPOSE ENTITY COVENANTS
v
7
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into as of the 18th
day of December, 2000 by and between CLEVELAND RETIREMENT PROPERTIES, LLC, a New
York limited liability company ("Landlord") having an address of c/o ▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and ARC WESTLAKE VILLAGE,
INC., a Tennessee corporation ("Tenant"), having an address of American
Retirement Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
WITNESSETH:
WHEREAS, Landlord has purchased from a subsidiary of American
Retirement Corporation, a Tennessee corporation ("ARC"), certain real property,
all improvements thereon (the "Improvements") and all appurtenances thereto,
comprising a continuing care retirement community known as "Westlake Village",
located in Westlake, Ohio and more specifically described in Exhibit "A"
attached hereto, together with the furniture, machinery, equipment, appliances,
fixtures, supplies and other personal property used in connection therewith as
more specifically described on Exhibit "B" attached hereto ("LANDLORD PERSONAL
PROPERTY"). The foregoing real and personal property owned by Landlord as
described in this Recital shall be collectively referred to in this Lease as the
"PREMISES";
WHEREAS, Landlord desires to lease the Premises to Tenant, and Tenant
desires to lease the Premises from Landlord.
1
8
NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein, Landlord hereby leases and lets unto Tenant the
Premises for the term and upon the conditions and provisions hereinafter set
forth.
1. TERM.
1.1 TERM. The term of this Lease shall commence on December
18, 2000 (the "COMMENCEMENT DATE") and shall end on December 31, 2007 (the
"INITIAL TERM") unless extended pursuant to Section 1.2 or earlier terminated in
accordance with the provisions hereof. The Initial Term and all Renewal Terms
are referred to collectively as the "TERM". (Each 12 month period commencing on
the same day and month of the first day of the Initial Term shall be referred to
herein as a "LEASE YEAR".)
1.2 RENEWAL TERMS. The Term may be extended for two (2)
separate renewal terms (each a "RENEWAL TERM"), the first such Renewal Term
being for a term of thirteen (13) years, and the second such Renewal Term being
for a term of ten (10) years, upon the satisfaction of all of the following
terms and conditions:
1.2.1 At least twelve (12) months prior to the end of
the then current Term, Tenant shall have given Landlord written notice
that Tenant desires to exercise its right to extend the then current
Term for the succeeding Renewal Term.
1.2.2 This Lease shall be in full force and effect
and Tenant shall not then be in material default of its obligations
beyond any applicable periods of grace and/or notice and cure.
1.2.3 All other provisions of this Lease shall remain
in full force and effect and shall continuously apply throughout the
Renewal Term(s).
2
9
2. RENT. During the Initial Term and all Renewal Terms, minimum
rent ("MINIMUM RENT") shall be paid by Tenant to Landlord at the address set
forth in Section 14 of this Lease (except as otherwise provided in Section 2.1
below), without abatement, deduction or set-off, as follows:
2.1 INITIAL TERM MINIMUM RENT. During the Initial Term, the
Minimum Rent (the "Initial Term Minimum Rent") shall be paid to Landlord by
Tenant monthly in advance on the first business day of each month (except for
the payment made on the date hereof for the period of December 18, 2000 through
December 31, 2000), and shall be calculated as follows:
2.1.1 On the date hereof, Tenant has delivered to
Landlord Minimum Rent in the amount of $81,755.26 representing prorated
Minimum Rent for the month of December, 2000.
2.1.2 No Minimum Rent shall be due for January, 2001.
2.1.3 February, 2001 through June, 2001 - $133,818.88
per month.
2.1.4 July, 2001 through June, 2002 - $191,004.59 per
month.
2.1.5 July, 2002 through June, 2003- $192,148.30 per
month.
2.1.6 July, 2003 through June, 2004 - $193,292.01 per
month.
2.1.7 July, 2004 through June, 2005 - $194,435.73 per
month.
2.1.8 July, 2005 through June, 2006 - $195,579.44 per
month.
2.1.9 July, 2006 through June, 2007 - $196,723.16 per
month.
2.1.10 July, 2007 through end of Initial Term -
$197,866.87 per month.
3
10
Notwithstanding anything to the contrary herein, any payment of
principal and/or interest by Tenant to any Permitted Mortgage Lender as the same
may become due and payable under the respective Permitted Mortgage Loan shall be
deemed to be a credit in Tenant's favor against any Rent due hereunder.
The term "PERMITTED MORTGAGE LOAN" shall mean any loan to Landlord from
a Permitted Mortgage Lender that is secured by a valid mortgage lien on the
Premises; provided that (i) the terms and conditions of such loan, and all of
the documents relating to such loan, shall be commercially reasonable and
customary, (ii) Tenant shall have consented to such documents and their terms
and conditions in advance of such loan (which consent shall not be unreasonably
withheld), (iii) the amount of such loan shall not, when aggregated with the
outstanding principal amount of any other Permitted Mortgage Loans then in
effect, exceed eighty percent (80%) of the Fair Market Value (as defined on
Exhibit "C" attached hereto) of the Premises at the time that such loan is first
made, and (iv) such loan is permitted by, and will not constitute a default
under, any other Permitted Mortgage Loan. The Berkshire Loan (as hereinafter
defined) shall be considered to be a Permitted Mortgage Loan, and all parties
hereto agree that the terms and conditions of the Berkshire Loan, and all of the
documents evidencing or securing the Berkshire Loan existing as of the
commencement date of this Lease are "commercially reasonable and customary."
"PERMITTED MORTGAGE LENDER" shall mean any commercial lending institution that
generally engages in the business of making real estate loans, but shall not
include any competitor of ARC. The Berkshire Lender (as hereinafter defined)
shall be considered to be a Permitted Mortgage Lender. As used herein,
"BERKSHIRE LOAN" refers to that certain $19,500,000 loan from Berkshire Mortgage
Finance Limited Partnership, a
4
11
Massachusetts limited partnership together with its successors and assigns (the
"BERKSHIRE LENDER") to Landlord, as evidenced by that certain Multifamily Note
dated of even date herewith and payable to Berkshire Lender (the "BERKSHIRE
NOTE").
2.2 RENEWAL TERM MINIMUM RENT. The Minimum Rent for each
Renewal Term shall be expressed as an annual amount but shall be payable in
advance in equal monthly installments on the first business day of each calendar
month. Such annual Minimum Rent shall be equal to the lesser of (a) the Twenty
Percent Renewal Amount as defined and determined under Section 2.2.1, or (b) the
Invested Capital Renewal Amount as defined and determined under Section 2.2.2.
2.2.1 The "Twenty Percent Renewal Amount" means an
amount equal to an increase of twenty percent (20%) over the annual
Minimum Rent for the Lease Year immediately preceding the expiration of
the then expiring Term, subject, in certain circumstances, to the
adjustments described in Sections 2.2.1.1 and 2.2.1.2 below.
2.2.1.1 For purposes of calculating the
Twenty Percent Renewal Amount for the first Renewal Term, if
there is a positive Rate Differential (as hereinafter
defined), annual Minimum Rent for the Lease Year immediately
preceding the expiration of the Initial Term shall be deemed
to be increased by an amount equal to the Interest Rate
Adjustment Amount (as hereinafter defined). As used herein,
the term "INTEREST RATE ADJUSTMENT AMOUNT" shall mean an
amount equal to the Rate Differential multiplied by the lesser
of (i) the outstanding principal balance of the Berkshire Loan
or the Permitted Mortgage Loan on the day preceding the
expiration of the then expiring Term, or
5
12
(ii)( $17,857,765.79. As used herein, the term "RATE
DIFFERENTIAL" shall mean the difference (if positive) between
the Seven Year Note Rate (as hereinafter defined) at the
expiration of the then expiring Term, less 5.24% (i.e., the
Seven Year Note Rate as of the date hereof); provided,
however, that the Rate Differential shall not under any
circumstance exceed 1.54% for purposes of the calculation
under this Section 2.2.1.1. As used herein, the term "SEVEN
YEAR NOTE RATE" means the yield on seven year notes issued by
the United States Treasury, as reasonably determined by
Landlord and Tenant.
2.2.1.2 In the event that the Twenty Percent
Renewal Amount was actually the determinative amount in
establishing the Minimum Rent for the first Renewal Term
(i.e., the Twenty Percent Renewal Amount was less than the
Invested Capital Renewal Amount at the expiration of the
Initial Term), then, for purposes of calculating the Twenty
Percent Renewal Amount in connection with the establishment of
the annual Minimum Rent for the second Renewal Term, annual
Minimum Rent for the Lease Year immediately preceding the
expiration of the expiring first Renewal Term shall be deemed
to be increased by an amount equal to the Interest Rate
Adjustment Amount. Notwithstanding the foregoing, for purposes
of the calculations under this Section 2.2.1.2 the Rate
Differential shall not exceed, and shall be limited to, the
difference between 1.54%, less the Rate Differential
calculated under Section 2.2.1.1 in connection with the
determination of the annual Minimum Rent for the first Renewal
Term (regardless of whether the Twenty Percent Renewal Amount
was determinative).
6
13
2.2.2 The "Invested Capital Renewal Amount"
shall equal ten percent (10%) of Landlord's Adjusted
Investment Amount. As used herein, "LANDLORD'S ADJUSTED
INVESTMENT AMOUNT" means $26,362,849.65, as increased, if
applicable, by the Lease Renewal Factor. The LEASE RENEWAL
FACTOR shall be determined as follows:
2.2.2.1 As promptly as practicable after the
end of the Initial Term of this Lease (or the immediately
preceding Renewal Term, as appropriate), Landlord shall
compute the increase, if any, in the cost of living since the
first day of the first Lease Year of the expiring term based
upon the Consumer Price Index--United States (1982 = 100), All
Urban Consumers (the "CPI"), published by the Bureau of Labor
Statistics of the United States Department of Labor.
2.2.2.2 The CPI number for the month immediately
preceding the first month of the first Lease Year of the
expiring term shall be the "BASE CPI", and the corresponding
CPI number for the last month of the expiring term in question
shall be the "CURRENT CPI."
2.2.2.3 The "CPI INCREASE" shall equal (Current
CPI/Base CPI) -1.
2.2.2.4 The CPI Increase shall be divided by two (2)
to determine the "LEASE RATE ESCALATOR."
2.2.2.5 The Lease Renewal Factor shall equal the
Lease Rate Escalator plus 1. Exhibit "D" hereto sets for a
hypothetical, illustrative calculation of the Lease Renewal
Factor.
2.2.2.6 Landlord shall, within a reasonable time
after obtaining the appropriate data necessary for computing
such increase, give Tenant notice of any
7
14
increase so determined, and Landlord's computation thereof
shall be conclusive and binding (but shall not preclude any
adjustment that may be required in the event of a published
amendment of the CPI figures upon which the computation was
based) unless Tenant shall, within 60 days after the giving of
such notice, notify Landlord of any claimed error therein.
2.2.2.7 The Minimum Rent for each Renewal Term, as so
determined, shall be due and payable to Landlord in equal
monthly installments commencing with the first month of the
Renewal Term in question (any retroactive payments then due
being payable within five days after giving of such notice),
and in the event of any subsequent redetermination of such
amount the adjustment thus indicated shall be made promptly
between Landlord and Tenant.
2.2.2.8 If publication of the CPI shall be
discontinued, the parties shall thereafter accept comparable
statistics on the cost of living for the City of Westlake,
Ohio, as they shall be computed and published by an agency of
the United States or by a responsible financial periodical of
recognized authority then to be selected by the parties. In
the event of (1) use of comparable statistics in place of the
CPI as above mentioned, or (2) publication of the CPI figure
at other than monthly intervals, there shall be made in the
method of computation herein provided such revisions as the
circumstances may require to carry out the intent of this
Section.
2.2.3 MINIMUM RENT NOT TO DECREASE. Except as set forth in
Section 2.2.4, in no event shall the Minimum Rent calculated for any
Renewal Term decrease.
8
15
Notwithstanding anything to the contrary herein, subject to Section
2.2.4, in the event the Minimum Rent as so calculated in this Section
2.2 shall result in a decrease in the amount of Minimum Rent to be paid
as compared to the immediately previous expiring term, then the Minimum
Rent for the new Renewal Term shall be equal to the amount paid in the
immediately previous expiring term.
2.3 ADDITIONAL RENT. In addition to Minimum Rent, Tenant shall
pay as additional rent hereunder all other amounts, liabilities,
obligations and Impositions (as hereinafter defined) which Tenant
assumes or agrees to pay under this Lease and any fine, penalty,
interest, charge and cost which may be added for nonpayment or late
payment of such items (collectively the "Additional Rent"). The Minimum
Rent and Additional Rent are referred to herein as "RENT". Landlord
shall have all legal, equitable and contractual rights, powers and
remedies provided either in this Lease or by statute or otherwise in
the case of nonpayment of the Rent.
2.4 PRORATION FOR PARTIAL PERIODS. The Rent for any month
during the Term that begins or ends on other than the first or last
calendar day of such month shall be prorated based on actual days
elapsed.
2.5 ABSOLUTE NET LEASE.
2.5.1 GENERALLY. All rent payments shall be
absolutely net to the Landlord free of taxes (other than federal or
state income, franchise and excise taxes calculated on the net income
of Landlord), assessments, utility charges, operating expenses,
refurnishings, insurance premiums or any other charge or expense in
connection with the Premises. All expenses and charges, whether for
upkeep,
9
16
maintenance, repair, refurnishing, refurbishing, restoration,
replacement, insurance premiums, real estate or other property taxes,
utilities, and other operating or other charges of a like nature or
otherwise, shall be paid by Tenant. This provision is not in derogation
of the specific provisions of this Lease, but in expansion thereof and
as an indication of the general intention of the parties hereto.
2.5.2 SALES TAX. Tenant hereby agrees to pay any and
all sales or use taxes (and any interest or penalties related thereto)
at any time assessed by the State of Ohio (the "STATE") against Tenant,
with respect to (i) Tenant's operation of business on the Premises, and
(ii) this Lease, including any lease of personal property at any time
entered into by and between Landlord and Tenant.
2.6 SPECIAL LUMP SUM PAYMENT; TERMINATION PAYMENT. In the
event that Tenant does not exercise its first renewal option, and so long as
Landlord is not in material default hereunder, Tenant shall pay to Landlord a
single lump sum payment (the "SPECIAL PAYMENT") on the last day of the Initial
Term in the amount of $1,222,720.00.
Tenant shall also pay to Landlord a lump sum payment in an amount equal
to $133,818.88 (the "TERMINATION PAYMENT") on the last day of the Initial Term
unless Tenant exercises its first renewal option. If Tenant exercises its first
renewal option, Tenant shall pay the Termination Payment to Landlord on the last
day of the first Renewal Term unless Tenant exercises its second renewal option.
If Tenant exercises its second renewal option, Tenant shall not be obligated to
pay the Termination Payment to Landlord.
2.7 NO TERMINATION, ABATEMENT, ETC. Except as otherwise specifically
provided in this Lease, Tenant shall remain bound by this Lease in accordance
with its terms.
10
17
Tenant shall not, without the consent of Landlord, modify, surrender or
terminate the Lease, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent. Except as expressly
provided in this Lease, the obligations of Landlord and Tenant shall not be
affected by reason of (i) any damage to, or destruction of, the Premises or any
part thereof from whatever cause or any Taking (as hereinafter defined) of the
Premises or any part thereof; or (ii) the lawful or unlawful prohibition of, or
restriction upon, Tenant's use of the Premises, or any part thereof, the
interference with such use by any person, corporation, partnership or other
entity, or by reason of eviction by paramount title. Except as otherwise
specifically provided in this Lease, Tenant hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law to modify, surrender or terminate this Lease or quit or
surrender the Premises or any portion thereof.
30 TAXES, ASSESSMENTS AND OTHER CHARGES:
3.1 PAYMENT OF IMPOSITIONS. Tenant shall pay, as Additional
Rent, all Impositions that may be levied or become a lien on the Premises or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Premises, before any fine, penalty, interest, or cost
is incurred; provided, however, Tenant may contest any Imposition in accordance
with Section 3.4. Tenant shall deliver to Landlord [i] not more than 5 days
after the due date of each Imposition, copies of the invoice for such Imposition
and the check delivered for payment thereof; and [ii] not more than 30 days
after the due date of each Imposition, a copy of the original receipt evidencing
such payment or other proof of payment satisfactory to Landlord. Tenant's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Premises or any part
11
18
thereof. Tenant, at its expense, shall prepare and file all tax returns and
reports in respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing authority
if an Event of Default has occurred and is continuing. Landlord and Tenant
shall, upon request of the other, provide such data as is maintained by the
party to whom the request is made with respect to the Premises as may be
necessary to prepare any required returns and reports. In the event governmental
authorities classify any property covered by this Lease as personal property,
Tenant shall file all personal property tax returns in such jurisdictions where
it may legally so file. Landlord, to the extent it possesses the same, and
Tenant, to the extent is possesses the same, will provide the other party, upon
request, with cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is legally required
to file personal property tax returns, Tenant will be provided with copies of
assessment notices indicating a value in excess of the reported value in
sufficient time for Tenant to file a protest. Tenant shall reimburse Landlord
for all personal property taxes paid by Landlord within 30 days after receipt of
▇▇▇▇▇▇▇▇ accompanied by copies of a ▇▇▇▇ therefor and payments thereof which
identify the personal property with respect to which such payments are made.
Impositions imposed in respect to the tax-fiscal period during which the Term
terminates shall be adjusted and prorated between Landlord and Tenant, whether
or not such Imposition is imposed before or after such termination, and Tenant's
obligation to pay its prorated share thereof shall survive such termination.
12
19
3.2 DEFINITION OF IMPOSITIONS. "Impositions" means,
collectively, [i] taxes, all real estate and personal property ad valorem, sales
and use, business or occupation, single business, gross receipts, transaction
privilege, rent or similar taxes; [ii] assessments (including without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed with the Term); [iii] ground rents, water, sewer or other rents and
charges, excises, tax levies, and fees (including without limitation, license,
permit, inspection, authorization and similar fees); [iv] all taxes imposed on
Tenant's operations of the Premises, including without limitation, employee
withholding taxes, income taxes and intangible taxes; [v] all taxes imposed by
the State or any governmental entity in the State with respect to the conveyance
of the Premises by Landlord to Tenant or Tenant's designee, including without
limitation, conveyance taxes and capital gains taxes; and [vi] all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Premises or any part thereof and/or the Rent (including all interest and
penalties thereon due to any failure in payment by Tenant), which at any time
prior to, during or in respect of the Term hereof may be assessed or imposed on
or in respect of or be in a lien upon [a] Landlord or Landlord's interest in the
Premises or any part thereof; [b] the Premises or any part thereof or any rent
therefrom or any estate, right, title or interest therein; or [c] any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Premises or the leasing or use of the Premises or any part
thereof. Notwithstanding anything herein to the contrary, Tenant shall not,
however, be required to pay any tax based on, or calculated with reference to,
Landlord's income or revenues by any governmental entity.
13
20
3.3 PRORATION. At the end of the Term all impositions shall be
prorated unless Tenant or its assignee has exercised the right of first refusal
pursuant to the terms of Section 6.2 hereof.
3.4 RIGHT TO PROTEST. Landlord and/or Tenant shall have the
right, but not the obligation, to protest the amount or payment of any
Impositions; provided that in the event of any protest by Tenant, Landlord shall
not incur any expense because of any such protest, Tenant shall diligently and
continuously prosecute any such protest and notwithstanding such protest Tenant
shall pay any tax, assessment or other charge before the imposition of any
penalty.
3.5 TAX BILLS. Landlord shall promptly forward to Tenant
copies of all tax bills and payment receipts relating to the Impositions
received by Landlord.
3.6 OTHER CHARGES. Tenant agrees to pay and discharge,
punctually as and when the same shall become due and payable without penalty,
all electricity, gas, garbage collection, cable television, telephone, water,
sewer, and other utilities costs and all other charges, obligations or deposits
assessed against the Premises during the Term.
40 INSURANCE.
4.1 GENERAL INSURANCE REQUIREMENTS. All insurance provided for
in this Lease shall be maintained under valid and enforceable policies issued by
insurers of recognized responsibility, approved to do business in the State
having a general policyholders rating of not less than "A" and a financial
rating of not less than "X" in the then most current Best's Insurance Report.
Any and all policies of insurance required under this Lease shall name the
Landlord and any Permitted Mortgage Lender as an additional named insured and
shall be on an "occurrence" or "claims made" basis (at Tenant's election);
provided, however, the proceeds of any business
14
21
interruption policy shall be payable to Tenant without relieving Tenant in any
way of its obligation to pay Rent under this Lease. In addition, Landlord shall
be shown as the loss payable beneficiary under the casualty insurance policy
maintained by Tenant pursuant to Section 4.2. All policies of insurance required
herein may be in the form of "blanket" or "umbrella" type policies which shall
name the Landlord and Tenant as their interests may appear and allocate to the
Premises the full amount of insurance required hereunder. Certificates from the
insurers evidencing the existence of all policies of insurance required by this
Lease and showing the interest of the Landlord shall be filed with the Landlord
prior to the commencement of the Term and shall provide that the subject policy
may not be canceled except upon not less than ten (10) days prior written notice
to Landlord. Certificates from the insurers evidencing the existence of any
renewal policies shall be deposited with Landlord upon renewal of the applicable
policies. Any claims under any policies of insurance described in this Lease
shall be adjudicated by and at the expense of the Tenant or of its insurance
carrier, but shall be subject to joint control of Tenant and Landlord.
4.2 PROPERTY INSURANCE. At Tenant's expense, Tenant shall
maintain in full force and effect a property insurance policy or policies
insuring the Premises against the following:
4.2.1 Loss or damage commonly covered by a "Special Form"
policy (also known as an "All Risk Policy") insuring against physical
loss or damage to the Premises, including but not limited to, risk of
loss from fire and other hazards, collapse, transit coverage,
vandalism, malicious mischief, and any other risk as is normally
covered under such a policy. The policy shall be in the amount of the
Full Replacement Value (as
15
22
hereinafter defined) of the Premises and shall contain a deductible
amount reasonably acceptable to Landlord and any Permitted Mortgage
Lender (as hereinafter defined) in light of all applicable
circumstances (including general industry conditions), but in no event
shall Landlord require such deductible amount to be less than the
deductible amount in effect immediately prior to the Commencement Date.
Landlord shall be named as an additional insured. The policy shall
include a stipulated value endorsement or agreed amount endorsement and
endorsements for contingent liability for operations of building laws,
demolition costs, and increased cost of construction.
4.2.2 If applicable, loss or damage by explosion of steam
boilers, pressure vessels, or similar apparatus, now or hereafter
installed on the Premises, in commercially reasonable amounts
acceptable to Landlord.
4.2.3 Consequential loss of rents and income coverage insuring
against all "Special Form" risk of physical loss or damage with limits
and deductible amounts acceptable to Landlord covering risk of loss
during the first 9 months of reconstruction, and containing an
endorsement for extended period of indemnity of at least 6 months, and
shall be written with a stipulated amount of coverage if available at a
reasonable premium.
4.2.4 If the Premises is located, in whole or in part, in a
federally designated 100-year flood plain area, flood insurance for all
Improvements of every nature whatsoever now or hereafter situated on
the Premises in an amount equal to the lesser of (i) the Full
Replacement Value of the Improvements; or (ii) the maximum amount of
16
23
insurance available for the Improvements under all federal and private
flood insurance programs.
4.2.5 Loss or damage caused by the breakage of plate glass in
commercially reasonable amounts acceptable to Landlord.
4.2.6 Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper
currency, depositor's forgery, and loss of property of patients
accepted by Tenant for safekeeping, in commercially reasonable amounts
acceptable to the Landlord.
4.3 PUBLIC LIABILITY. At Tenant's expense, Tenant shall
maintain liability insurance against the following:
4.3.1 Claims for personal injury or property damage commonly
covered by comprehensive general liability insurance with endorsements
for incidental malpractice, contractual, personal injury, owner's
protective liability, voluntary medical payments, products and
completed operations, broad form property damage, and extended bodily
injury, with commercially reasonable amounts for bodily injury,
property damage, and voluntary medical payments acceptable to Landlord,
but with a combined single limit of not more than $5,000,000.00 per
occurrence; provided, however, this amount shall be adjusted at the
commencement of each Renewal Term according to reasonable and customary
practices for similar businesses in similar locales.
4.3.2 Claims for personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all
owned and non-owned automobiles, with commercially reasonable amounts
for bodily injury, property damage,
17
24
and or automobile medical payments acceptable to Landlord, but with a
combined single limit of not less than $3,000,000.00 per occurrence.
4.3.3 Claims for personal injury commonly covered by medical
malpractice insurance in commercially reasonable amounts acceptable to
Landlord.
4.3.4 Claims commonly covered by worker's compensation
insurance for all persons employed by Tenant on the Premises. Such
worker's compensation insurance shall be in accordance with the
requirements of all applicable local, state, and federal law.
4.4 BUSINESS INTERRUPTION INSURANCE. Tenant shall
maintain, at its expense, business interruption and extra expense insurance
insuring a period of not less than three (3) months.
4.5 BUILDER'S RISK INSURANCE. In connection with any
construction, Tenant shall maintain in full force and effect a builder's
completed value risk policy ("Builder's Risk Policy") of insurance in a
nonreporting form insuring against all "Special Form" risk of physical loss or
damage to the Improvements, including but not limited to, risk of loss from fire
and other hazards, collapse, transit coverage, vandalism, malicious mischief,
theft, earthquake (if Premises is in earthquake zone 1 or 2) and sinkholes (if
usually recommended in the area of the Premises). The Builder's Risk Policy
shall include endorsements providing coverage for building materials and
supplies and temporary premises. The Builder's Risk Policy shall be in the
amount of the Full Replacement Value of the improvements on the Premises and
shall contain a deductible amount acceptable to Landlord. Landlord shall be
named as additional insured. The Builder's Risk Policy shall include an
endorsement permitting initial occupancy.
18
25
4.6 REPLACEMENT VALUE. The term "FULL REPLACEMENT VALUE" means
the actual replacement cost thereof from time to time including increased cost
of construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Premises is insured for its full replacement value. If
Tenant makes any alterations to the Premises, Landlord may have such full
replacement value redetermined at any time after such alterations are made,
regardless of when the full replacement value was last determined.
4.7 PERMITTED MORTGAGE LENDER'S INSURANCE REQUIREMENTS.
Notwithstanding anything to the contrary in this Lease, Tenant's obligations
with respect to insurance as described in this Section 4 shall at all times be
subject to any Permitted Mortgage Lender's insurance requirements as described
in any of the documents evidencing a Permitted Mortgage Loan (the "PERMITTED
MORTGAGE LOAN INSURANCE REQUIREMENTS"). Should the Permitted Mortgage Loan
Insurance Requirements exceed the insurance requirements set forth in this Lease
in any way, including without limitation, scope of coverage and coverage
amounts, Tenant shall comply with terms of the Permitted Mortgage Loan Insurance
Requirements to the extent that such requirements exceed Tenant's obligations in
this Section 4. Absent acquiescence, waiver or amendment by any Permitted
Mortgage Lender, failure of Tenant to so comply with the Permitted Mortgage Loan
Insurance Requirements shall be an Event of Default under this Lease, and shall
entitle Landlord to all of the remedies set forth in Section 10 of this Lease.
19
26
4.8 PERMITTED MORTGAGE LENDER'S TAX AND INSURANCE ESCROWS.
Notwithstanding anything in this Lease to the contrary, in addition to all of
Tenant's obligations with respect to taxes and insurance, as set forth in
Sections 3 and 4 of this Lease, Tenant agrees to comply with any tax and/or
insurance escrows required by any Permitted Mortgage Lender under any Permitted
Mortgage Loans. Landlord and Tenant agree that Tenant's compliance with the tax
and/or insurance escrows requirements of each Permitted Mortgage Loan shall, to
the extent of any payment actually made into any Permitted Mortgage Loan escrow
account, satisfy Tenant's requirements (a) with respect to the payment of
Impositions, (b) relating to taxes, and associated with obtaining insurance
under this Lease.
50 USE, MAINTENANCE AND ALTERATION OF THE PREMISES.
5.1 TENANT'S MAINTENANCE OBLIGATIONS.
5.1.1 Except as provided in Sections 11 and 12,
Tenant will keep and maintain the Premises in good appearance, repair
and condition and maintain proper housekeeping. Tenant shall make or
cause to be made all repairs, interior and exterior, structural and
nonstructural, ordinary and extraordinary, foreseen and unforeseen,
necessary to keep the Premises in good and lawful order and condition.
Tenant covenants and agrees that during the Term (i) it shall use, keep
and operate the Premises in a careful, safe and proper manner; (ii) not
commit or suffer waste thereon; (iii) not use or occupy the Premises
for any unlawful purposes; (iv) not use or occupy the Premises or
permit the same to be used or occupied, for any purpose or business
deemed extrahazardous on account of fire or otherwise; (v) keep the
Premises in such repair and condition as may be required by the local
Board of Health, or other city, state or federal
20
27
authorities, free of all cost to Landlord; (vi) not permit any acts to
be done which will cause the cancellation, invalidation, or suspension
of any insurance policy; and (vii) permit Landlord and its agents to
enter upon the Premises at all reasonable times upon reasonable notice
to examine the condition thereof.
5.1.2 As part of Tenant's obligations under this
Section 5.1, Tenant shall be responsible to maintain, repair and replace all
Landlord Personal Property and all Tenant Personal Property (as defined in
Section 7.1 below) in good and operable condition, consistent with prudent
industry practice as applicable to the Retirement Care Facility (as defined in
Section 5.2 below).
5.2 REGULATORY COMPLIANCE.
5.2.1 Tenant and the Premises shall comply in all
material respects with all federal, state and local licensing and other
laws and regulations applicable to the continuing care retirement
community on the Premises (the "RETIREMENT CARE FACILITY") as well as
with the certification requirements of Medicare and Medicaid (or any
successor program) as currently exist or as are obtained by Tenant at a
later date, as well as with the healthcare compliance covenants set
forth on Exhibit "F" attached hereto. Further, Tenant shall not commit
any act or omission that would in any way violate any certificate of
occupancy affecting the Premises. Tenant shall deliver to Landlord
complete copies of any material surveys, examinations, certification
and licensure inspections, compliance certificates, and other similar
reports issued to Tenant by any governmental agency within 10 days
after Tenant's receipt of each item.
21
28
5.2.2 During the Term, all inspection fees, costs and
charges associated with a change of any licensure or certification
shall be borne solely by Tenant. Tenant shall at its sole cost make any
additions or alterations to the Premises necessitated by, or imposed in
connection with, a change of ownership inspection survey for the
transfer of operation of the Premises from Tenant or Tenant's assignee
or subtenant to Landlord or Landlord's designee at the expiration or
earlier termination of the Term in accordance herewith.
5.3 PERMITTED USE. Tenant shall continuously use and occupy
the Premises during the Term solely as a Retirement Care Facility or other
senior housing, independent living, assisted living, skilled and intermediate
nursing, subacute care, Alzheimer's care, and related uses, and no other use
without Landlord's prior written consent.
5.4 NO LIENS. Tenant shall have no authority to permit or
create a lien against the Premises, and Tenant shall post notices or file such
documents as may be required to protect Landlord's interest in the Premises
against liens. Tenant hereby agrees to defend, indemnify, and hold Landlord
harmless from and against any mechanic's liens against the Premises by reason of
work, labor, services or materials supplied or claimed to have been supplied on
or to the Premises through or under Tenant. Tenant shall remove, bond-off, or
otherwise obtain the release of any mechanic's lien filed against the Premises
within 10 days after the filing thereof. Tenant shall pay all expenses in
connection therewith, including without limitation, damages, interest, court
costs and reasonable attorneys' fees.
5.5 ALTERATIONS BY TENANT. Tenant shall have the right of
altering, improving, replacing, modifying or expanding the facilities, equipment
or appliances in the
22
29
Premises from time to time as it may determine is desirable for the continuing
and proper use and maintenance of the Premises under this Lease; provided,
however, that any alterations, improvements, replacements, expansions or
modifications to the Premises in excess of Five Hundred Thousand Dollars
($500,000) in any rolling twelve (12) month period shall require the prior
written consent of the Landlord, which shall not be unreasonably withheld,
conditioned, or delayed; provided, however, no such alterations, improvements,
replacements, modifications or expansions shall result in a material diminution
of value of the Premises or shall materially adversely affect the use and
operation of the Premises upon completion. Any amounts funded by Tenant as
necessitated by damage to the Premises by casualty or condemnation or in the
nature of routine or ordinary course capital expenditures shall not be included
in the foregoing calculation. The cost of all alterations, improvements,
replacements, modifications, expansions or other purchases, covered by this
Section 5.5 shall be borne solely and exclusively by Tenant and shall
immediately become a part of the Premises and the property of the Landlord
subject to the terms and conditions of this Lease. All work done in connection
therewith shall be done in a good and workmanlike manner and in compliance with
all existing codes and regulations pertaining to the Premises and shall comply
with the requirements of insurance policies required under this Lease. In the
event any items of the Premises have become inadequate, obsolete or worn out or
require replacement (by direction of any regulatory body or otherwise), Tenant
shall remove such items and exchange or replace the same at Tenant's sole cost
and the same shall become part of the Premises and property of the Landlord.
5.6 CAPITAL EXPENDITURES ACCOUNT. At the commencement of the
Initial Term, Landlord shall deposit in an interest bearing account maintained
by Tenant (the "CAPITAL
23
30
EXPENDITURE ACCOUNT") the amount of $265,687.00 for the purpose of funding
repairs, replacements and capital improvements to be made on the Premises from
time to time. The Capital Expenditure Account shall be with Genesee Regional
Bank, a New York State Chartered Commercial Bank ("GENESEE") for so long as, in
the exercise of Tenant's reasonable discretion from time to time, Genesee has
sufficient financial strength and stability to reasonably guaranty that funds
deposited with it will not be subject to risk of loss. If at any time Tenant
deems, in Tenant's reasonable discretion, that Genesee does not have sufficient
financial strength and stability to reasonably guaranty that funds deposited
with it will not be subject to risk of loss, Tenant shall have the right to move
all or any portion of such funds to another financial institution or
institutions selected jointly by Landlord and Tenant and to make subsequent
Capital Expenditure Deposits (as hereinafter defined) thereto. Subject to
Section 5.6.1 below, within sixty (60) days of the first day of the second Lease
Year of the Initial Term, and sixty (60) days of the first day of each Lease
Year thereafter, Tenant shall make additional deposits (the "Capital Expenditure
Deposits") in the Capital Expenditure Account in an amount equal to 3% of
Tenant's annual revenue generated from Tenant's ordinary course business
operations at the Premises. Tenant may withdraw monies deposited in the Capital
Expenditure Account for the purpose of making repairs, replacements and capital
improvements on the Premises to be applied as follows: first, as required to
comply with the provisions of this Lease and, second, as Tenant deems necessary
or desirable. All such repairs, replacements and capital improvements funded by
the Capital Expenditure Account shall be deemed to be a part of the Premises.
5.6.1 If Tenant's capital expenditures at the Premises in any
Lease Year shall exceed the Capital Expenditure Deposit for said Lease
Year (the "CAPITAL EXPENDITURE
24
31
DIFFERENCE"), Tenant shall fund the remaining cost of such Capital
Expenditure Difference. Tenant shall receive a corresponding credit
against future Capital Expenditure Deposits for the subsequent Lease
Year (or Lease Years, if necessary to ensure that Tenant receives full
credit for any Capital Expenditure Difference).
5.6.2 Any interest that accrues on the funds in the Capital
Expenditure Deposit while in the Capital Expenditure Account shall at
all times remain the property of Tenant, and Tenant shall have the
right to withdraw any interest earned from time to time.
5.6.3 At the expiration of the Term, any funds remaining in
the Capital Expenditure Account shall become the property of Landlord,
other than the interest thereon, which shall remain Tenant's property.
5.6.4 Notwithstanding anything to the contrary herein, in the
event that any Permitted Mortgage Loan requires similar capital
expenditure deposits, any amounts so deposited by Tenant shall be a
credit to Tenant against the Capital Expenditure Account requirements
set forth herein. In no event shall Tenant be required to make any
duplicate payments to the Capital Expenditure Account and/or any
accounts for capital expenditures pursuant to any Permitted Mortgage
Loan.
5.7 ASSIGNMENT OF DISBURSEMENTS. Landlord hereby assigns to Tenant all
of Landlord's right to any disbursements (collectively, the "DISBURSEMENT
ASSIGNMENT") under (a) that certain Completion/Repair and Security Agreement, of
even date with the Berkshire Note, by and between Landlord and Berkshire Lender,
and executed in conjunction with the Berkshire Loan, and (b) that certain
Replacement Reserve and Security Agreement, of even date
25
32
with the Berkshire Note, by and between Landlord and Berkshire Lender, executed
in conjunction with the Berkshire Loan. Tenant shall be entitled to direct
disbursement from Berkshire Lender pursuant to the terms and conditions of each
of said Completion/Repair and Security Agreement and said Replacement Reserve
and Security Agreement. Tenant hereby assumes and agrees to perform all
obligations of Landlord under the Completion/Repair and Security Agreement and
the Replacement Reserve and Security Agreement. This Disbursement Assignment
shall terminate concurrently with the expiration or sooner termination of this
Lease; provided, however such termination shall not effect Tenant's right to
such disbursement from Berkshire Lender for any reimbursable expenses (according
to the terms and conditions of said Completion/Repair and Security Agreement and
said Replacement Reserve and Security Agreement) incurred by Tenant during the
Term of this Lease.
60 CONDITION AND TITLE OF PREMISES; RIGHT OF FIRST REFUSAL..
6.1 CONDITION AND TITLE OF PREMISES. Tenant's affiliate, a
subsidiary of ARC, previously owned the Premises, and Tenant has thoroughly
investigated the Premises, has selected the Premises to its own specifications,
and has concluded that no improvements or modifications to the Premises are
required in order to operate the Premises for its intended use. Tenant accepts
the Premises for use as A Retirement Care Facility under this Lease on an "AS
IS, WHERE IS, WITH ALL FAULTS" basis and will assume all responsibility and cost
for the correction of any observed or unobserved deficiencies or violations. In
making its decision to enter into this Lease, Tenant has not relied on any
representations or warranties, express or implied, of any kind from Landlord.
Notwithstanding any other provision of this Lease to the contrary, Tenant
accepts the Premises in their present condition, AS IS, WHERE IS, WITH
26
33
ALL FAULTS, and without any representations or warranties whatsoever, express or
implied, including, without limitation, any express or implied representations
or warranties as to the fitness, use, suitability, or condition of the Premises.
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE PREMISES OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT. Tenant hereby represents and warrants to
Landlord that Tenant is thoroughly familiar with the Premises and the condition
thereof, that Tenant is relying on Tenant's own personal knowledge of the
condition of the Premises, that neither Landlord nor any person or entity acting
or allegedly acting for or on behalf of Landlord or any other person or entity
having or claiming any interest in the Premises has made any representations,
warranties, agreements, statements, or expressions of opinions in any way or
manner whatsoever related to, connected with, or concerning the Premises, the
condition of the Premises, or any other fact or circumstance whatsoever on which
Tenant is relying, and, to the maximum extent not prohibited by applicable law,
Tenant hereby releases and discharges Landlord and all other persons and
entities having or claiming any interest in the Premises from all liability,
damages, costs, and expenses of every kind and nature whatsoever in any way or
manner arising out of, connected with, related to, or emanating from the
condition of the Premises at any time prior to or during the Term of this Lease.
Tenant has examined the condition of title to the Premises prior to the
execution and delivery of this Lease and has found the same to be satisfactory,
including without limitation, all of the encumbrances
27
34
and other exceptions to title set forth more fully on Exhibit "A-1" (the
"PERMITTED EXCEPTIONS").
6.2 RIGHT OF FIRST REFUSAL TO PURCHASE PREMISES.
6.2.1 Tenant shall have the right of first refusal to
purchase (a) the Premises at any time during the Term, and/or (b)
Landlord's equity securities or equity interests at any time during the
Term in which E. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ directly or indirectly controls
Landlord ("LANDLORD'S EQUITY SECURITIES"), upon the terms and
conditions set forth in this Section 6.2.; provided, however, Tenant
shall not have the right to exercise its rights under this Section 6.2.
if any Event of Default has occurred and is continuing as of any of the
following dates: (i) the date on which Landlord delivers an Offering
Notice to Tenant pursuant to Section 6.2.2(i), or (ii) the date of
Tenant's delivery of an Exercise Notice pursuant to Section 6.2.2(ii),
or (iii) or at the closing date established to consummate the purchase
of the Premises or equity securities, as applicable, pursuant to
Section 6.2.2(iii).
6.2.2 Subject to Section 6.2.1 above, if during the
Term Landlord or any owner of Landlord's Equity Securities receives a
bona fide offer to purchase the Premises, or any portion thereof, or
all or any portion of Landlord's Equity Securities (the "OFFERED
PROPERTY"), from any person or entity, Landlord and Tenant shall take
the following steps prior to Landlord's acceptance of such offer:
(1) Landlord shall give written notice to Tenant of
its intention to accept such offer, which notice shall set forth the
price, terms and conditions contained in
28
35
the offer to purchase the Offered Property which Landlord intends to
accept ("OFFERING NOTICE");
(2) Within thirty (30) days after receipt of an
Offering Notice, Tenant shall either (A) deliver to Landlord written
notice that Tenant does not desire to purchase the Offered Property on
the terms set forth in the Offering Notice, or (B) deliver to Landlord
written notice of Tenant's desire to exercise its right to purchase the
Offered Property on the terms set forth in the Offering Notice pursuant
to this Section 6.2 ("EXERCISE NOTICE");
(3) If Tenant delivers an Exercise Notice within such
thirty (30) day period, and if the Offered Property consists of all or
any portion of the Premises, Landlord as seller and Tenant as buyer
shall immediately open an escrow to consummate such purchase at a
national title company selected by Landlord in its reasonable
discretion on the following terms: (A) the form of such instructions to
be then signed by Landlord and Tenant shall be such title company's
standard sale escrow instructions and, notwithstanding anything set
forth in the Offering Notice to the contrary, shall not provide for any
representations or warranties by Landlord as seller or for any due
diligence or other contingencies in favor of Tenant as buyer, (B) the
purchase price shall be payable in cash by Tenant or on such other
terms as are set forth in the Offering Notice with escrow to close on
or before the date set forth in the Offering Notice, (C) transaction
costs shall be paid as set forth in the Offering Notice, (D) at close,
Landlord shall deliver title to the Offered Property subject only to
those title exceptions shown on
29
36
Exhibit "A-1" (the Permitted Exceptions) attached hereto, (E) the sale
escrow instructions shall provide for an ▇▇▇▇▇▇▇ money deposit in the
amount set forth in the Offering Notice and shall provide that such
deposit may be retained by Landlord as liquidated damages in the event
of any breach by Tenant of the terms of the escrow instructions
(provided, however, such liquidated damages shall relate only to
Landlord's damages by reason of a breach of the escrow instructions and
shall in no way liquidate or limit Landlord's or Tenant's damages by
reason of a breach of this Lease), and (F) the escrow instructions
shall otherwise be in form and substance reasonably satisfactory to
Landlord. If Tenant fails to close the escrow for any reason other than
a breach by Landlord, then Landlord may elect to pursue all remedies
available to Landlord against Tenant under the escrow instructions or
under applicable law.
(4) If Tenant delivers an Exercise Notice within such thirty
(30) day period, and if the Offered Property consists of all or any
portion of Landlord's Equity Securities, Landlord as seller and Tenant
as buyer shall consummate the sale of landlord's Equity Securities
according to the terms and conditions of the Offering Notice within
sixty (60) days of Landlord's receipt of the Exercise Notice and
Landlord shall cause its members (partners or shareholders) to sell,
transfer and assign to Tenant or its designee all such membership
(partnership or shareholder) interests, equity securities and other
ownership interest in the Landlord, all of which shall be free and
clear of all liens and encumbrances whatsoever, and Tenant or its
designee shall pay to said members (partners or shareholders) the
purchase price set forth in the Offering Notice (prorated among said
parties in accordance with their respective ownership interests), and
(c) the parties hereto
30
37
(and all members, partners or shareholders of Landlord) shall execute
all securities purchase agreements, assignments and other documents
that are reasonably necessary to consummate said transaction, which
documents shall contain (x) indemnifications of such members (partners
or shareholders) by Tenant for matters occurring after the closing, and
(y) other representations and warranties that are reasonably and
customary for a transactions of such size and nature. By entering into
this Lease, Landlord represents and warrants that each owner of its
equity securities (whether now or in the future) as agreed, or will
agree, to be bound by the provisions of this Section 6.2.2.
(5) If within the thirty (30) day period following
Landlord's delivery of an Offering Notice, Tenant either delivers to
Landlord the notice set forth in Section 6.2.2 (ii)(A) or falls to
deliver either of the notices set forth in Section 6.2.2(ii), then for
a period of six (6) months following the expiration of such fifteen
(15) day period Landlord shall be free to sell the Offered Property on
the terms set forth in the Offering Notice or on any other revised
terms deemed appropriate by Landlord in its sole discretion; provided,
however, if such other revised terms include a price that is below the
price set forth in the Offering Notice, then prior to completing any
sale on such revised terms Landlord shall notify Tenant of such revised
offering terms. During the fifteen (15) business day period after
receipt by Tenant of such notice, Tenant shall have the right (to be
exercised if at all by Tenant's execution of escrow instructions and
deposit of ▇▇▇▇▇▇▇ money under Section 6.2.2 (iii) within such fifteen
(15) business day period) to require that Landlord sell the Offered
Property to Tenant on such revised offering terms. If Tenant fails to
timely exercise its right as required by the preceding
31
38
proviso, Landlord shall be free to sell the Offered Property to a third
party on the revised offering terms.
(6) If at the end of the six (6) month period
described in Section 6.2.1(iv), Landlord has not sold the Offered
Property, then Landlord shall again be required to comply with the
provisions of this Section 6.2 if Landlord desires to accept a third
party offer to purchase the Offered Property.
(7) If an escrow is opened pursuant to Section
6.2.2(iii) and such escrow fails to close by reason of Tenant's
default, in addition to all of the other rights and remedies of
Landlord with respect to such breach, Landlord shall thereafter be free
to sell the Premises or any portion thereof to any Person on any terms
whatsoever without being required to comply with this Section 6.2.
(8) If Landlord has hypothecated its interest in the
Premises, this Section 6.2 shall not apply to any judicial or
non-judicial sale of the Premises in connection with any foreclosure
action or proceeding by the lender.
6.3 TENANT'S TRANSFER RIGHTS SUBJECT TO BERKSHIRE LOAN
DOCUMENTS. Notwithstanding anything in this Lease to the contrary, Tenant's
right of first refusal, as set forth more fully in this Section 6, shall be
subject to compliance with any applicable provisions of any document or
agreement evidencing or relating to the Berkshire Loan (collectively, the
"BERKSHIRE LOAN DOCUMENTS"), which shall control over any inconsistent provision
in this Section 6.
70 LANDLORD AND TENANT PERSONAL PROPERTY.
32
39
7.1 TENANT PERSONAL PROPERTY. Tenant shall install, place, and
use on the Premises such fixtures, furniture, equipment, inventory and other
personal property in addition to Landlord Personal Property as may be required
or as Tenant may, from time to time, deem necessary or useful to operate the
Premises for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the
Premises which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "TENANT PERSONAL PROPERTY."
7.2 REQUIREMENTS FOR TENANT PERSONAL PROPERTY. Tenant shall
comply with all of the following requirements in connection with Tenant Personal
Property:
7.2.1 Tenant shall, at Tenant's sole cost and
expense, maintain, repair, and replace Tenant Personal Property.
7.2.2 Tenant shall, at Tenant's sole cost and
expense, keep Tenant Personal Property insured against loss or damage
by fire, vandalism and malicious mischief, sprinkler leakage,
earthquake, and other physical loss perils commonly covered by fire and
extended coverage, boiler and machinery, and difference in conditions
insurance in an amount not less than 90% of the then full replacement
cost thereof. Tenant shall use the proceeds from any such policy for
the repair and replacement of Tenant Personal Property. The insurance
shall meet the requirements of Section 4.1.
7.2.3 Tenant shall pay all taxes applicable to
Tenant Personal Property.
7.2.4 Unless an Event of Default or any event which,
with the giving of notice or lapse of time, or both, would constitute
an Event of Default has occurred, Tenant may remove Tenant Personal
Property from the Premises from time to time
33
40
provided that [i] the items removed are not required to operate the
Premises for the permitted use hereunder (unless such items are being
replaced by Tenant); and [ii] Tenant repairs any damage to the Premises
resulting from the removal of Tenant Personal Property.
7.2.5 Upon the expiration of the Term, Landlord shall
have the option to purchase the Tenant Personal Property for an amount
equal to its depreciated value determined in accordance with GAAP (as
hereinafter defined). If Landlord desires to exercise its option to
purchase, Landlord shall notify Tenant at least ninety (90) days prior
to the expiration of the Term. Landlord's option to purchase the Tenant
Personal Property shall not include such property as bears the
tradenames, trademarks or patents of ARC, Tenant, or any affiliate,
successor or assign thereof or any rights in and to such tradenames,
trademarks or patents (the "EXCLUDED PROPERTY"). If Landlord elects not
to exercise Landlord's option to purchase Tenant Personal Property,
Tenant shall remove Tenant Personal Property upon the termination or
expiration of this Lease and shall repair any damage to the Premises
resulting from the removal of the Tenant Personal Property. If Tenant
fails to remove Tenant Personal Property within 30 days after request
by Landlord, then Tenant shall be deemed to have abandoned the Tenant
Personal Property, the Tenant Personal Property shall become the
property of Landlord, and Landlord may remove, store and dispose of
Tenant Personal Property. In such event, Tenant shall have no claim or
right against Landlord for such property or the value thereof
regardless of the disposition thereof by Landlord. Tenant shall pay
Landlord, upon demand, all expenses incurred by Landlord in removing,
storing, and disposing of
34
41
Tenant Personal Property and repairing any damage caused by such
removal. Tenant's obligations hereunder shall survive the termination
or expiration of this Lease.
7.3 COMPLIANCE WITH LAWS. Tenant shall comply with all legal
requirements applicable to the Premises and keep all government authorizations
in full force and effect. Tenant shall pay when due all taxes and governmental
charges of every kind and nature that are assessed or imposed upon the Premises
or Tenant's operation of the Premises at any time during the term of the Lease,
including, without limitation, all income, franchise, capital stock, property,
sales and use, business, intangible, employee withholding, and all taxes and
charges relating to Tenant's business and operations. Tenant shall be solely
responsible for compliance with all Legal Requirements, including the ADA, and
Landlord shall have no responsibility for such compliance.
7.4 RESIDENT TENANT LEASES. During the Term, the lessor under
all subleases with residents or patients of the Retirement Care Facility (the
"RESIDENT TENANT LEASES") shall be Landlord. Tenant agrees to assign, or cause
to be assigned, to Landlord all Resident Tenant Leases existing as of the
Commencement Date. Throughout the Term, Tenant assumes and agrees to perform all
of Landlord's obligations under the Resident Tenant Leases. Except to the extent
actually caused by Landlord, Tenant agrees to keep and hold Landlord harmless of
and from any loss, cost, damage, liability or expense arising under the Resident
Tenant Leases during the Term, however arising. Landlord hereby grants Tenant a
power of attorney to (a) enter into commercially reasonable Resident Tenant
Leases on standard lease forms in the ordinary course of business on behalf of
Landlord, (b) collect all rents and other sums due under any Resident Tenant
Leases, and (c) perform all other activities required of lessor under the
35
42
Resident Tenant Leases or otherwise necessary in such capacity. This power of
attorney is coupled with an interest, and shall only terminate upon the
expiration or earlier termination of this Lease or upon any Event of Default by
Tenant beyond any applicable notice, grace or cure periods. So long as this
Lease remains in effect, and no Event of Default shall have occurred and be
continuing beyond all applicable periods of grace and/or notice and cure,
Landlord shall take no action as lessor under the Resident Tenant Leases.
7.4.1. If Tenant or its affiliate purchases the Property
pursuant to either Section 6.2 or 6.3 of this Lease, Landlord shall
assign all then existing Resident Tenant Leases to the purchaser
simultaneous with transfer of the Property.
7.5 TRANSFER OF LICENSE, ETC.. If this Lease is terminated due
to expiration of the Term, pursuant to an Event of Default or for any reason
other than Tenant's purchase of the Premises, or if Tenant vacates the Premises
without termination of this Lease, Tenant shall:
7.5.1 Execute, deliver and file all documents and statements
reasonably requested by Landlord to effect the transfer of all licenses
and government authorizations related to the Retirement Care Facility
to Landlord or an entity designated by Landlord, subject to any
required approval of governmental regulatory authorities, and Tenant
shall provide to Landlord all information and records required by
Landlord in connection with the transfer of the license and government
authorizations.
7.5.2 Use commercial best efforts to cooperate with and
facilitate transfer of the business and operations of the Retirement
Care Facility to Landlord or its designee, without unreasonable
disruption in operations.
80 REPRESENTATIONS AND WARRANTIES.
36
43
8.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Landlord and
Tenant do hereby each for itself represent and warrant to each other as follows:
8.1.1 DUE AUTHORIZATION AND EXECUTION. This Lease and
all agreements, instruments and documents executed or to be executed in
connection herewith by either Landlord or Tenant were duly authorized
and shall be binding upon the party that executed and delivered the
same.
8.1.2 DUE ORGANIZATION. Landlord and Tenant are duly
organized, validly existing and in good standing under the laws of the
State of their respective formations and are duly authorized and
qualified to do all things required of the applicable party under this
Lease within the State of Ohio.
8.1.3 NO BREACH OF OTHER AGREEMENTS. Neither this
Lease nor any agreement, document or instrument executed or to be
executed in connection herewith, violates the terms of any other
agreement to which either Landlord or Tenant is a party where such
violation would have a material adverse effect.
8.2 MUTUAL COVENANTS. Landlord and Tenant do hereby each
for itself make the following covenants:
8.2.1 NO DEFAULT UNDER PERMITTED MORTGAGE LOAN. For
so long as this Lease is in effect and any Permitted Mortgage Loan is
outstanding, Tenant shall comply with the terms and conditions of the
outstanding Permitted Mortgage Loan Documents; provided, however,
Tenant shall not be required to take any action or otherwise cause
compliance with or be deemed responsible for performance of such
Permitted Mortgage Loan Documents as to any affirmative or negative
obligation of
37
44
Landlord that does not relate to management or operation of the
Premises, including, without limitation, accuracy and delivery of
Landlord's financial statements, and the maintenance by Landlord of its
good standing in any states required by such Permitted Mortgage Loan
Documents. For so long as this Lease is in effect and any Permitted
Mortgage Loan is outstanding, Landlord covenants and agrees to comply,
or cause compliance, with the Permitted Mortgage Loan Documents with
respect each affirmative or negative obligation of Landlord that does
not relate solely to management or operation of the Premises,
including, without limitation, accuracy and delivery of Landlord's
financial statements, and the maintenance by Landlord of its good
standing in any states required by such Permitted Mortgage Loan
Documents.
8.2.2 NO AMENDMENT OF PERMITTED LOAN DOCUMENTS.
Neither Landlord nor Tenant shall amend, alter, extend, renew or
otherwise modify any document or agreement evidencing or relating to
any Permitted Mortgage Loan without the prior written consent of the
other party hereto, which may be denied by said party in its reasonable
discretion. Any amendment of the Permitted Loan Documents without
reasonable Tenant's consent shall not be binding on Tenant.
8.2.3 NO AMENDMENT OF LEASE WITHOUT MORTGAGE LENDER'S
CONSENT. So long as the Berkshire Loan remains in effect, neither
Landlord nor Tenant shall amend, modify, terminate or hypothecate this
Lease without Berkshire Lender's prior written consent.
8.3 NEGATIVE COVENANTS OF LANDLORD. Landlord hereby
makes the following covenants:
38
45
8.3.1 INCURRENCE OF INDEBTEDNESS. Landlord hereby
agrees that it will not incur any indebtedness or obligation whatsoever
with respect to the Premises, except a Permitted Mortgage Loan.
8.3.2 NO REMOVAL. During the Term, Landlord shall not
take or remove any assets or items or personal property associated
with, or comprising a portion of, the Premises, or associated or
related to, the Premises without first obtaining the prior written
consent of Tenant, which may be denied in Tenant's sole discretion.
8.3.3 NO OWNER ACTIONS. For so long as this Lease
remains in effect, and Tenant shall not then be in material default of
its obligations beyond any applicable periods of grace and/or notice
and cure, Landlord shall take no action with respect to the business or
operation of the Premises without Tenant's prior written consent, which
may be denied by Tenant in its sole discretion.
8.3.4 NO OTHER ACTIVITIES; SINGLE PURPOSE ENTITY
REQUIREMENTS. Landlord hereby agrees that it will not engage in any
business activity other than those activities relating to the ownership
of the Premises and performance of its obligations hereunder, and shall
comply with the single purpose entity covenants and requirements set
forth on Exhibit "E" attached hereto.
39
46
9. FINANCIAL, MANAGEMENT AND REGULATORY REPORTS.
9.1 ANNUAL FINANCIAL STATEMENT. Within one hundred twenty
(120) days of the fiscal year end of Tenant, Tenant shall deliver to Landlord
the annual financial statement of Tenant, with respect to Tenant's business
operations on the Premises, prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP"), and audited by a certified
public accounting firm reasonably acceptable to Landlord. Within forty-five (45)
days after each fiscal quarter ends, Tenant shall deliver to Landlord unaudited
financial statements of Tenant, with respect to Tenant's business operations on
the Premises, prepared in accordance with GAAP. Notwithstanding any of the other
terms of this Section 9.1, if Tenant be subject to any reporting requirements of
the Securities and Exchange Commission (the "SEC") during the Term, Tenant shall
concurrently deliver to Landlord such reports as are delivered to the SEC
pursuant to applicable security laws.
9.2 REGULATORY REPORTS. In addition, Tenant shall within ten
(10) business days of receipt thereof deliver to Landlord all federal, state and
local licensing and reimbursement certification surveys, inspection and other
reports received by Tenant as to the Premises or any portion thereof and the
operation of business thereon, including, without limitation, state department
of health licensing surveys, Medicare and Medicaid (and successor programs)
certification surveys (if applicable) and life safety code reports. Within ten
(10) business days of receipt thereof, Tenant shall give Landlord written notice
of any violation of any federal, state or local licensing or reimbursement
certification statute or regulation including without limitation Medicare and
Medicaid or successor programs (if applicable to the Premises or any portion
thereof), any suspension, termination or restriction placed upon Tenant or the
40
47
Premises or any portion thereof, the operation of business thereon or the
ability to admit residents, or any violation of any other permit, approval or
certification in connection with the Premises or any portion thereof or its
business, by any federal, state or local authority including without limitation
Medicare and Medicaid or successor programs if applicable to the Premises or any
portion thereof.
10. EVENTS OF DEFAULT AND LANDLORD'S REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following
shall constitute an event of default on the part of Tenant hereunder ("EVENT OF
DEFAULT"):
10.1.1 The failure to pay within ten (10) calendar
days of (i) the date when due any Minimum Rent or Additional Rent, or
(ii) the date when delinquent of any taxes or assessments required of
Tenant under this Lease; provided, however, such ten (10) day cure
periods shall not apply to late payments of P&I Rent so long as the
Berkshire Loan is outstanding.
10.1.2 A material breach by the seller thereunder of
any of the material representations, warranties or covenants in favor
of Landlord as set forth in that certain Purchase Agreement of even
date herewith, by and between Landlord, as purchaser, and a subsidiary
of ARC, as seller (the "PURCHASE AGREEMENT");
10.1.3 The appointment of a receiver, trustee, or
liquidator for Tenant, or any of the property of Tenant, if within ten
(10) business days of such appointment Tenant does not inform Landlord
in writing that Tenant intends to cause such appointment to be
discharged or Tenant does not thereafter diligently prosecute such
discharge to completion within sixty (60) days after the date of such
appointment;
41
48
10.1.4 The filing by Tenant of a voluntary petition
under any federal bankruptcy law or under the law of any state to be
adjudicated as bankrupt or for any arrangement or other debtor's
relief, or in the alternative, if any such petition is involuntarily
filed against Tenant by any other party and Tenant does not within ten
(10) business days of any such filing inform Landlord in writing of the
intent by Tenant to cause such petition to be dismissed, if Tenant does
not thereafter diligently prosecute such dismissal, or if such filing
is not dismissed within ninety (90) days after filing thereof;
10.1.5 The failure to make any monetary payment
required by Tenant under this Lease not covered in Section 10.1.1 or
the failure to perform or comply in any material respect with any other
term or provision of this Lease not requiring the payment of money,
including, without limitation, the failure to comply with the
provisions hereof pertaining to the use, operation and maintenance of
the Premises (or any portion thereof) or the breach of any
representation or warranty of Tenant in this Lease; provided, however,
if the default described in this Section 10.1.5 is curable it shall be
deemed cured, if: (i) within ten (10) business days of Tenant's receipt
of a notice of default from Landlord, Tenant gives Landlord notice of
its intent to cure such default; and (ii) Tenant cures such default
within thirty (30) days after such notice to Landlord, unless such
default cannot with due diligence be cured within a period of thirty
(30) days because of the nature of the default or delays beyond the
control of Tenant, in which case such default shall not constitute an
Event of Default if Tenant uses its best efforts to cure such
42
49
default by promptly commencing and diligently pursuing such cure to the
completion thereof.
10.1.6 Tenant abandons or vacates the Premises or any
material part thereof or ceases to do business or ceases to exist for
any reason for any one or more days.
10.1.7 All notice and cure periods provided herein
shall run concurrently with any notice or cure periods provided by
applicable law.
10.1.8 Notwithstanding anything to the contrary in
this Section 10.1., any act or omission of Tenant that causes an Event
of Default under the Berkshire Loan Documents (as defined in the
Berkshire Loan Documents) shall constitute an Event of Default
hereunder.
10.2 REMEDIES. Upon the occurrence of an Event of Default
and during the pendency thereof, Landlord may exercise all rights and remedies
under this Lease and the laws of the State available to a lessor of real and
personal property in the event of a default by its lessee. Without limiting the
foregoing, Landlord shall have the right to do any of the following:
10.2.1 re-enter and take possession of the Premises
without terminating the Lease, and lease the Premises for the account
of Tenant, holding Tenant liable for all costs of the Landlord in
reletting the Premises and for the difference in the amount received by
such reletting and the amounts payable by Tenant under the Lease.
10.2.2 terminate this Lease, exclude Tenant from
possession of the Premises and lease the Premises to others, holding
Tenant liable for the difference in the amounts received from such
reletting and the amounts payable by Tenant under the Lease.
43
50
10.2.3 re-enter the Premises and have, repossess and
enjoy the Premises as if the Lease had not been made, and in such
event, Tenant and its successors and assigns shall remain liable for
any contingent or unliquidated obligations or sums owing at the time of
such repossession.
10.2.4 have access to an inspect, examine and make
copies of the books and records and any and all accounts, data an
income tax and other returns of Tenant insofar as they pertain to the
Premises.
10.2.5 accelerate all of the unpaid Rent hereunder so
that the aggregate Rent for the unexpired term of this Lease becomes
immediately due and payable.
10.2.6 take whatever action at law or in equity as
may appear necessary or desirable to collect the Rent and other amounts
payable under the Lease then due and thereafter to become due, or to
enforce performance and observance of any obligations, agreements or
covenants of Tenant under this Lease.
10.2.7 Before or after repossession of the Premises
pursuant to Section 10.2.2, and whether or not this Lease has been
terminated, Landlord shall have the right (but shall be under no
obligation except to the extent required by applicable law) to relet
any portion of the Premises to such tenant or tenants, for such term or
terms (which may be greater or less than the remaining balance of the
Term), for such rent, or such conditions (which may include concessions
or free rent) and for such uses, as Landlord, in its absolute
discretion, may determine, and Landlord may collect and receive any
rents payable by reason of such reletting. Tenant agrees to pay
Landlord, immediately upon demand, all reasonable expenses incurred by
Landlord in obtaining possession and in
44
51
reletting any of the Premises, including fees, commissions and costs of
attorneys, architects, agents and brokers;
10.3 RECEIVERSHIP. Tenant acknowledges that one of the rights
and remedies available to Landlord under applicable law is to secure a
court-appointed receiver to take possession of the Premises or any portion
thereof, to collect the rents, issues, profits and income of the Premises or any
portion thereof, and to manage the operation of the Premises or any portion
thereof. Tenant further acknowledges that the revocation, suspension or material
limitation of the certification of the Premises or any portion thereof for
provider status under Medicare or Medicaid (or successor programs) as currently
exist or as are obtained by Tenant at a later date and/or the revocation,
suspension or material limitation of the license of the Premises or any portion
thereof as A Retirement Care Facility under the laws of the State of Ohio will
materially and irreparably impair the value of Landlord's investment in the
Premises. Therefore, in the event of any such revocation, suspension or material
limitation, and in addition to any other right or remedy of Landlord under this
Lease, Tenant hereby consents to the appointment of such a receiver to enter
upon and take possession of the Premises or any portion thereof, to manage the
operation of the Premises or any portion thereof, to collect and disburse all
rents, issues, profits and income generated thereby and to preserve or replace
to the extent possible the licenses and provider certifications of the Premises
required for the operation of the Retirement Care Facility or to otherwise
substitute the licensee or provider thereof. The receiver shall be entitled to a
reasonable fee for its services as a receiver. All such fees and other expenses
of the receivership estate shall be added to the monthly rent due to Landlord
under this Lease. Tenant
45
52
hereby irrevocably stipulates to the appointment of a receiver under such
circumstances and for such purposes and agrees not to contest such appointment.
10.4 REMEDIES CUMULATIVE: NO WAIVER. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of any other
right or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity. No failure of Landlord to insist at any time upon
the strict performance of any provision of this Lease or to exercise any option,
right, power or remedy contained in this Lease shall be construed as a waiver,
modification or relinquishment thereof as to any similar or different breach
(future or otherwise) by Tenant. A receipt by Landlord of any rent or other sum
due hereunder (including any late charge) with knowledge of the breach of any
provision contained in this Lease shall not be deemed a waiver of such breach,
and no waiver by Landlord of any provision of this Lease shall be deemed to have
been made unless expressed in a writing signed by Landlord.
10.5 PERFORMANCE OF TENANT'S OBLIGATIONS BY LANDLORD.
Notwithstanding anything to the contrary, if Tenant at any time after applicable
notice and cure periods shall fail to make any payment or perform any act on its
part required to be made or performed under this Lease, then Landlord may,
without waiving or releasing Tenant from any obligations or default of Tenant
hereunder, make any such payment or perform any such act for the account and at
the expense of Tenant, and may enter upon the Premises for the purpose of taking
all such action thereon as may be reasonably necessary therefor. No such entry
shall be deemed an eviction of Tenant. All reasonable sums so paid by Landlord
and all necessary and incidental costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred in
46
53
connection with the performance of any such act by Landlord, together with
interest at the rate of the Prime Rate as reported daily by the Wall Street
Journal plus 2% (or if said interest rate is violative of any applicable statute
or law, then the maximum interest rate allowable) from the date of the making of
such payment or the incurring of such costs and expenses by Landlord, shall be
payable by Tenant to Landlord on demand.
10.6 LATE PAYMENT CHARGE. Tenant acknowledges that any default
in the payment of any installment of Rent payable hereunder will result in loss
and additional expense to Landlord in servicing any indebtedness of Landlord
secured by the Premises, handling such delinquent payments, and meeting its
other financial obligations, and because such loss and additional expense is
extremely difficult and impractical to ascertain, Tenant agrees that in the
event any Rent payable to Landlord hereunder is not paid within 10 days after
the due date, Tenant shall pay a late charge of 5% of the amount of the overdue
payment as a reasonable estimate of such loss and expenses, unless applicable
law requires a lesser charge, in which event the maximum rate permitted by such
law may be charged by Landlord; provided that nothing herein shall extend the
time for payment of Rent or the period for curing any default or constitute a
waiver of such default, or limit Landlord's remedies in the event of any such
default. Tenant further agrees to pay to Landlord interest on any P & I Rent not
paid on the first day of each month at an annual rate of 7.31% calculated on the
basis of a 360-day year to the extent permitted by applicable law until such P &
I Rent installment is paid in full.
10.7 PERMITTED MORTGAGE LENDER'S RIGHT TO CURE.
Notwithstanding any provision in the Lease to the contrary, no default in the
performance of any of Landlord's obligations under the Lease that is of such a
nature as to give Tenant a right to terminate the
47
54
Lease or to reduce the rent payable under the Lease or to any credit, reduction
or offset against future rents shall entitle Tenant to exercise any such right,
power or remedy unless and until notice of such default is given to Landlord and
any Permitted Mortgage Lender and unless and until fifteen (15) days shall have
elapsed following delivery of such notice by Tenant, during which period any
Permitted Mortgage Lender shall have the right, but not the obligation, to
remedy or cure such default; provided, however, that if such default cannot be
cured within fifteen (15) days, then any Permitted Mortgage Lender shall have
such longer period of time as may be reasonably necessary to cure such default
so long as such Permitted Mortgage Lender pursues the cure of same with due
diligence.
11. DAMAGE BY FIRE OR OTHER CASUALTY.
11.1 NOTICE OF CASUALTY. If the Premises shall be destroyed,
in whole or in part, or damaged by fire, flood, windstorm or other casualty (a
"CASUALTY"), Tenant shall give written notice thereof to the Landlord within one
business day after the occurrence of the Casualty. Within 15 days after the
occurrence of the Casually or as soon thereafter as such information is
reasonably available to Tenant, Tenant shall provide the following information
to Landlord: [i] the date of the Casualty; [ii] the nature of the Casualty;
[iii] a description of the damage or destruction caused by the Casualty
including the type of Premises damaged and the area of the Improvements damaged;
[iv] a preliminary estimate of the cost to repair, rebuild, restore or replace
the Premises; [v] a preliminary estimate of the schedule to complete the repair,
rebuilding, restoration or replacement of the Premises; [vi] a description of
the anticipated property insurance claim including the name of the insurer, the
insurance coverage limits, the deductible amount, the expected settlement
amount, and the expected settlement date; and [vii] a
48
55
description of the business interruption claim including the name of the
insurer, the insurance coverage limits, the deductible amount, the expected
settlement amount, and the expected settlement date. Within five days after
request from Landlord, Tenant will provide Landlord with copies of all
correspondence to the insurer and any other information reasonably requested by
Landlord.
11.2 SUBSTANTIAL DESTRUCTION.
11.2.1 If the Improvements are substantially
destroyed at any time other than during the final 18 months of the
Initial Term or any Renewal Term, Tenant shall promptly rebuild and
restore the Premises in accordance with Section 9.4 and Landlord shall
make the insurance proceeds available to Tenant for such restoration.
The term "substantially destroyed" means any casualty resulting in the
loss of use of 50% or more of the licensed beds at the Retirement Care
Facility.
11.2.2 If the Improvements are substantially
destroyed during the final 18 months of the Initial Term or any Renewal
Term, Landlord may elect to terminate the Lease at Landlord's option,
and Landlord shall retain the insurance proceeds, except that Landlord
shall not be entitled to so terminate this Lease nor to retain the
insurance proceeds if Tenant (within 15 days after the applicable
casualty) exercises its right to extend the term hereof for any
remaining Renewal Term (if any). If Landlord elects to terminate,
Landlord shall give notice ("TERMINATION NOTICE") to Tenant of its
election to terminate this Lease within 30 days after receipt of
Tenant's notice of the damage. If this
49
56
Lease is so terminated pursuant to the foregoing (and if Tenant has not
renewed this Lease, as described above) this Lease shall terminate on
the 15th day after delivery of the Termination Notice. If this Lease is
so terminated, Tenant shall be liable to Landlord for all Rent and all
other obligations accrued under this Lease through the effective date
of termination.
11.3 PARTIAL DESTRUCTION. If the Premises is not substantially
destroyed, then Tenant shall comply with the provisions of Section 11.4 and
Landlord shall make the insurance proceeds available to Tenant for such
restoration.
11.4 RESTORATION. Tenant shall promptly repair, rebuild, or
restore the Premises, at Tenant's expense, so as to make the Premises at least
equal in value to the Premises existing immediately prior to such occurrence and
as nearly similar to it in character as is practicable and reasonable. Before
beginning such repairs or rebuilding , or letting any contracts in connection
with such repairs or rebuilding, Tenant will submit for Landlord's approval,
which approval Landlord will not unreasonably withhold or delay, plans and
specifications. Promptly after receiving Landlord's approval of the plans and
specifications and receiving the proceeds of insurance, Tenant will begin such
repairs or rebuilding and will prosecute the repairs and rebuilding to
completion with diligence, subject, however, to strikes, lockouts, acts of God,
embargoes, governmental restrictions, and other all causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses, after deduction of any costs of collection,
including attorneys' fees. Payments will be made against properly certified
50
57
vouchers of a competent architect in charge of the work and approved by
Landlord. Prior to commencing the repairing or rebuilding, Tenant shall deliver
to Landlord for Landlord's approval a schedule setting forth the estimated
monthly draws for such work. Landlord will contribute to such payments out of
the insurance proceeds an amount equal to the proportion that the total net
amount received by Landlord from insurers bears to the total estimated cost of
the rebuilding or repairing, multiplied by the payment by Tenant on account of
such work. Landlord may, however, withhold 10% from each payment until the work
is completed and proof has been furnished to Landlord that no lien or liability
has attached or will attach to the Premises or to Landlord in connection with
such repairing or rebuilding. Upon the completion of rebuilding and the
furnishing of such proof, the balance of the net proceeds of such insurance
payable to Tenant on account of such repairing or rebuilding will be paid to
Tenant. Tenant will obtain and deliver to Landlord a temporary or final
certificate of occupancy before the Premises is reoccupied for any purpose.
Tenant shall complete such repairs or rebuilding free and clear of mechanic's or
other liens, and in accordance with the building codes and all applicable laws,
ordinances, regulations, or orders of any state, municipal, or other public
authority affecting the repairs or rebuilding, and also in accordance with all
requirement s of the insurance rating organization, or similar body. Any
remaining proceeds of insurance after such restoration will be disbursed to
Tenant.
11.5 INSUFFICIENT PROCEEDS. If the proceeds of any insurance
settlement are not sufficient to pay the costs of Tenant's repair, rebuilding or
restoration under Section 11.4 in full, Tenant shall deposit with Landlord at
Landlord's option, and within 10 days of Landlord's request, an amount
sufficient in Landlord's reasonable judgment to complete such repair,
51
58
rebuilding or restoration. Tenant shall not, by reason of the deposit or
payment, be entitled to any reimbursement from Landlord or diminution in or
postponement of the payment of the Rent.
11.6 NOT TRUST FUNDS. Notwithstanding anything herein or at
law or equity to the contrary, none of the insurance proceeds paid to Landlord
as herein provided shall be deemed trust funds, and Landlord shall be entitled
to dispose of such proceeds as provided in this Article 11. Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment or value,
of the Premises from any casualty whatsoever, whether or not insurable or
insured against.
11.7 LANDLORD'S INSPECTION. During the progress of such
repairs or rebuilding, Landlord and its architects and engineers may, from time
to time, inspect the Premises and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
al reasonable times. If, during such repairs or rebuilding are not being done in
accordance with the approved plans and specifications, Landlord will give prompt
notice in writing to Tenant, specifying in detail the particular deficiency,
omission, or other respect in which Landlord claims such repairs or rebuilding
do not accord with the approved plans and specification. Upon the receipt of any
such notice, Tenant will cause corrections to be made to any deficiencies,
omissions, or such other respect. Tenant's obligations to supply insurance,
according to Article 4, will be applicable to any repairs or rebuilding under
this section.
11.8 LANDLORD'S COSTS. Tenant shall, within 30 days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses, and
fees of any architect or engineer
52
59
employed by Landlord to review any plans and specifications and to supervise and
approve any construction, or for any services rendered by such architect or
engineer to Landlord as contemplated by any of the provisions of this Lease, or
for any services performed by Landlord's attorneys in connection therewith.
11.9 NO RENT ABATEMENT. Rent will not ▇▇▇▇▇ pending the
repairs or rebuilding of the Premises.
11.10 SURPLUS PROCEEDS. If there remains any surplus of
insurance proceeds after the completion of the repair or reconstruction of the
Premises, such surplus shall belong to and be paid to Tenant.
11.11 END OF TERM. Notwithstanding any other provision of this
Section 11, if the Premises are more than 30% destroyed (measured by square
footage) by casualty during the last nine (9) months of the Initial Term or any
Renewal Term, Tenant may terminate this Lease by written notice to Landlord
delivered within thirty (30) days after the date of such casualty, in which
event Landlord shall retain all insurance proceeds.
12. CONDEMNATION.
12.1 TOTAL TAKING. If, by exercise of the right of eminent
domain or by conveyance made in response to the threat of the exercise of such
right ("Taking"), the entire Premises is taken, or so much of the Premises is
taken that the Premises cannot be used by Tenant for the purposes for which it
was used immediately before the Taking, then this Lease will end on the earlier
of the vesting of title to the Premises in the condemning authority or the
taking of possession of the Premises by the condemning authority. All damages
awarded for such Taking under the power of eminent domain shall be the property
of the Landlord, whether
53
60
such damages shall be awarded as compensation for diminution in value of the
leasehold or the fee of the Premises; provided, however, Tenant shall be
entitled to any damages awarded for Tenant's relocation expenses.
12.2 PARTIAL TAKING. If, after a Taking, so much of the
Premises remains that the Premises can be used for substantially the same
purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
the Premises in the condemning authority or the taking of possession of the
Premises by the condemning authority; [ii] at its cost, Tenant shall restore so
much of the Premises as remains to a sound architectural unit substantially
suitable for the purposes for which it was used immediately before the Taking,
using good workmanship and new materials; [iii] upon completion of the
restoration, Landlord will pay Tenant the lesser of the net award made to
Landlord on the account of the Taking (after deducting from the total award,
attorneys', appraisers', and other fees and costs incurred in connection with
the obtaining of the award and amounts paid to the holders of mortgages secured
by the Premises), or Tenant's actual out-of-pocket costs of restoring the
Premises; and [iv] Landlord shall be entitled to the balance of the net award.
The restoration shall be completed in accordance with Section 11.4 and with such
other provisions deemed to apply to condemnation instead of casualty.
12.3 CONDEMNATION PROCEEDS NOT TRUST FUNDS. Notwithstanding
anything in this Lease or at law or equity to the contrary, none of the
condemnation award paid to Landlord shall be deemed trust funds, and Landlord
shall be entitled to dispose of such proceeds as provided in this Article 12.
Tenant expressly assumes all risk of loss, including a decrease in the use,
enjoyment, or value, of the Premises from any Condemnation.
54
61
13. PROVISIONS ON TERMINATION OF TERM.
13.1 SURRENDER OF POSSESSION. Tenant shall, on or before the
last day of the Term, or upon earlier termination of this Lease (unless Tenant
has purchased the Premises pursuant to Section 6.3), surrender to Landlord the
Premises (including all resident charts and records along with appropriate
resident consents) in good condition and repair, excepting only (i) any damage
caused by condemnation pursuant to Section 12.1 above, or (ii) any damage caused
by fire or other casualty resulting in the termination of the Lease pursuant to
Section 11.4 above.
13.2 REMOVAL OF PERSONAL PROPERTY. Subject to Section 7.2.5.
above, if Tenant is not then in default hereunder Tenant shall have the right in
connection with the surrender of the Premises to remove from the Premises all
Tenant Personal Property but not the Landlord Personal Property (including the
Landlord Personal Property replaced by Tenant or required by the State or any
other governmental entity to operate the Premises for the purpose set forth in
Section 5.3 above). Any such removal shall be done in a workmanlike manner
leaving the Premises in good and presentable condition and appearance, including
repair of any damage caused by such removal. At the end of the Term or upon the
earlier termination of this Lease, (unless Tenant has purchased the Premises
pursuant to Section 6.2), Tenant shall return the Premises to Landlord with the
Landlord Personal Property (or replacements thereof) in the same condition and
utility as was delivered to Tenant at the commencement of the Term, reasonable
and normal wear and tear excepted.
13.3 TITLE TO PERSONAL PROPERTY NOT REMOVED. Title to any of
Tenant Personal Property which is not removed by Tenant upon the expiration of
the Term shall, at
55
62
Landlord's election, vest in Landlord; provided, however, that Landlord may
remove and dispose at Tenant's expense of any or all of such Tenant Personal
Property which is not so removed by Tenant without obligation or accounting to
the Tenant.
13.4 MANAGEMENT OF PREMISES. Upon the expiration or earlier
termination of the Term (unless Tenant has purchased the Premises pursuant to
Section 6.2), Landlord or its designee, upon written notice to Tenant, may elect
to assume the responsibilities and obligations for the management and operation
of the Premises and Tenant agrees to cooperate fully with Landlord or its
designee to accomplish the transfer of such management and operation without
interrupting the operation of the Premises. Tenant shall not commit any act or
be remiss in the undertaking of any act that would jeopardize any licensure or
certification of the facility, and Tenant shall comply with all requests for an
orderly transfer of the Retirement Care Facility license, Medicare and Medicaid
(or any successor program) certifications and possession at the time of any such
surrender. Upon the expiration or earlier termination of the Term, Tenant shall
promptly deliver copies of all of Tenant's books and records relating to the
Premises and its operations to Landlord.
13.5 CORRECTION OF DEFICIENCIES. Upon termination or
cancellation of this Lease, Tenant shall indemnify Landlord for any loss,
damage, cost or expense incurred by Landlord to correct all deficiencies of a
physical nature identified by the Ohio Department of Human Services, local
health, fire and safety agencies or any other government agency or Medicare or
Medicaid (or any successor program) providers in the course of the change of
ownership inspection and audit.
56
63
14. NOTICES AND DEMANDS. All notices and demands, certificates,
requests, consents, approvals, and other similar instruments under this Lease
shall be in writing and shall be deemed to have been properly given upon actual
receipt thereof or within three (3) business days of being placed in the United
States certified or registered mail, return receipt requested, postage prepaid
(a) if to Tenant, addressed to ARC Westlake Village, Inc., c/o American
Retirement Corporation, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: Chief Executive Officer, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇ with a copy to
Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: T. ▇▇▇▇▇▇ ▇▇▇▇▇, Esq., Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as Tenant from time to time may have designated by
written notice to Landlord and Mortgage Lender, (b) if to Landlord, addressed to
CLEVELAND RETIREMENT PROPERTIES, LLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ Attn: ▇▇▇ ▇▇▇▇, Fax No. ▇▇▇-▇▇▇-▇▇▇▇ with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, or at such
address as Landlord may from time to time have designated by written notice to
Mortgage Lender and Tenant, and (c) if to Mortgage Lender, addressed to
BERKSHIRE MORTGAGE FINANCE LIMITED PARTNERSHIP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇, or at such address as
Mortgage Lender may from time to time have designated by written notice to
Tenant Landlord. Refusal to accept delivery shall be deemed delivery. If Tenant
is not an individual, notice may be made to any senior officer, general partner
or principal thereof.
15. RIGHT OF ENTRY: EXAMINATION OF RECORDS. Landlord and its
representative may enter the Premises at any reasonable time after reasonable
notice to Tenant for the purpose of
57
64
inspecting the Premises for any reason including, without limitation,
examination of records and/or Tenant's default under this Lease, or to exhibit
the Premises for sale, lease or mortgage financing, or posting notices of
default, or non-responsibility under any mechanic's or materialman's lien law or
to otherwise inspect the Premises for compliance with the terms of this Lease.
Any such entry shall not unreasonably interfere with residents, resident care,
or any other of Tenant's operations.
16. QUIET ENJOYMENT. So long as there is no Event of Default which is
existing and continuing by Tenant, Landlord covenants and agrees that Tenant
shall peaceably and quietly have, hold and enjoy the Premises for the Term, free
of any claim or other action of Landlord, or anyone claiming by through or under
Landlord, not caused or created by Tenant (excepting, however, intrusion of
Tenant's quiet enjoyment occasioned by condemnation or destruction of the
property as referred to in Section 11 and 12 hereof).
17. APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the internal laws of the State of Ohio without regard to the
conflict of laws rules of such State.
18. HAZARDOUS MATERIALS.
18.1 HAZARDOUS MATERIAL COVENANTS. Tenant's use of the
Premises shall comply in all material respects with all Hazardous Materials
Laws. In the event any Environmental Activities occur or are suspected to have
occurred in violation in any material respect of any Hazardous Materials Laws or
if Tenant has received any Hazardous Materials Claim against the Premises,
Tenant shall promptly obtain all permits and approvals necessary to remedy any
such actual or suspected problem through the removal of Hazardous Materials or
58
65
otherwise, and upon Landlord's approval of the remediation plan, remedy any such
problem to the satisfaction of Landlord, in accordance with all Hazardous
Materials Laws and good business practices.
18.2 TENANT NOTICES TO LANDLORD. Tenant shall immediately
advise Landlord in writing of:
18.2.1 any Environmental Activities in violation of
any Hazardous Materials Laws,
18.2.2 any Hazardous Materials Claims against Tenant
or the Premises,
18.2.3 any remedial action taken by Tenant in
response to any Hazardous Materials Claims or any Hazardous Materials
on, under or about the Premises in violation of any Hazardous Materials
Laws,
18.2.4 Tenant's discovery of any occurrence or
condition on or in the vicinity of the Premises that materially
increase the risk that the Premises will be exposed to Hazardous
Materials,
18.2.5 all communications to or from Tenant, any
governmental authority or any other person relating to Hazardous
Materials Laws or Hazardous Materials Claims with respect to the
Premises, including copies thereof.
18.3 PARTICIPATION IN HAZARDOUS MATERIALS CLAIMS. Landlord
shall have the right, at Tenant's sole cost and expense and with counsel chosen
by Landlord, to join and participate in, as a party if it so elects, any legal
proceedings or actions initiated in connection with any Hazardous Materials
Claims.
59
66
18.4 ENVIRONMENTAL ACTIVITIES shall mean the use, generation,
transportation, handling, discharge, production, treatment, storage, release or
disposal of any Hazardous Materials at any time to or from the Premises or
located on or present on or under the Premises. Nothing contained in the
foregoing or elsewhere in this Section 18 is intended to, nor shall it, limit
the liability of Tenant, if any, to Landlord with respect to any representation
or warranty given by Tenant to Landlord with respect to Hazardous Materials or
environmental matters generally as set forth in the Purchase Agreement.
18.5 HAZARDOUS MATERIALS INDEMNITY. Tenant agree to indemnify
and hold Landlord and its officers, directors, members, agents, employees,
affiliates and representatives harmless from and against any and all claims,
demands, damages, losses, liens, liabilities, penalties, fines, lawsuits,
actions, orders, judgments, investigations, regulatory proceedings and other
proceedings, and all costs and expenses (including but not limited to attorney's
and consultant's fees and expenses), incurred in connection therewith, arising
directly or indirectly from or out of, or in any way connected with (a) the
presence or alleged presence of any Hazardous Materials or underground storage
tanks in, on or under the Premises occurring before or during the Term of this
Lease; (b) any cleanup, removal and/or remedial proceeding, investigation, order
or other action undertaken or required pursuant to any Hazardous Materials Law
for violations or alleged violations accruing before or during the Term of this
Lease, (c) any violation or alleged violation of any Hazardous Materials Law
relating to the Premises, attributable to events occurring before or during the
Term of this Lease; (d) any inaccuracy of the certifications, representations
and warranties contained herein; or (e) any Hazardous Materials Claims asserted
against Landlord.
60
67
18.6 HAZARDOUS MATERIALS shall mean (i) any petroleum products
and/or by-products (including any fraction thereof), flammable substances,
explosives, radioactive materials, hazardous or toxic wastes, substances or
materials, known carcinogens or any other materials, contaminants or pollutants
which pose a hazard to the Premises or to persons on or about the Premises or
cause the Premises to be in violation of any Hazardous Materials Laws; (ii)
asbestos in any form which is friable; (iii) urea formaldehyde in foam
insulation or any other form; (iv) transformers or other equipment which contain
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million or any other more restrictive standard then
prevailing; (v) medical wastes and biohazards; (vi) radon gas; and (vii) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority or may or could pose a hazard to the
health and safety of the occupants of the Premises or the owners and/or
occupants of property adjacent to or surrounding the Premises.
18.7 HAZARDOUS MATERIALS CLAIMS shall mean any and all
enforcement, clean-up, removal or other governmental or regulatory actions or
orders threatened, instituted or completed pursuant to any Hazardous Material
Laws, together with all claims made or threatened by any third party against the
Premises, Landlord or Tenant relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials.
18.8 HAZARDOUS MATERIALS LAWS shall mean any laws, ordinances,
regulations, rules, orders, guidelines or policies relating to the environment,
health and safety, Environmental Activities, Hazardous Materials, air and water
quality, waste disposal and other environmental
61
68
matters, if the failure to comply with the same does or would have a material
adverse effect on the Premises or the operation thereof.
19. ASSIGNMENT AND SUBLETTING.
19.1 PROHIBITION ON ASSIGNMENT AND SUBLETTING. Tenant
acknowledges that Landlord has entered into this Lease in reliance on the
personal services and business expertise of Tenant. Tenant may not assign,
sublet, mortgage, hypothecate, pledge, or transfer any interest in this Lease,
or in the Premises, in whole or in part, without the prior written consent of
Landlord, which Landlord may not unreasonably withhold, condition or delay.
Notwithstanding the foregoing, Tenant may without Landlord's consent assign this
Lease or sublet the Premises or any portion thereof to a Successor (as such term
is defined below), to a wholly-owned, direct or indirect, subsidiary of Tenant
("Subsidiary"), or ARC provided that such Successor or Subsidiary fully assumes
the obligations of Tenant and ARC is not released from its guaranty of this
Lease. The following transactions will be deemed an assignment or sublease
requiring Landlord's prior written consent: [i] an assignment by operation of
law; [ii] an imposition (whether or not consensual) of a lien, mortgage, or
encumbrance upon Tenant's interest in the Lease; and [iii] an arrangement
(including, but not limited to, management agreements, concessions, licenses,
and easements) which allows the use or occupancy or operation of all or part of
the Premises by anyone other than Tenant. Landlord's consent to any assignment
or sublease will not release Tenant from its payment and performance obligations
under this Lease, but rather Tenant, and Tenant's assignee or sublessee will be
jointly and severally liable for such payment and performance. An assignment or
sublease without the prior written consent of
62
69
Landlord will be void at the Landlord's option. Landlord's consent to one
assignment or sublease will not waive the requirement of its consent to any
subsequent assignment or sublease.
19.2 REQUESTS FOR LANDLORD'S CONSENT TO ASSIGNMENT, SUBLEASE
OR MANAGEMENT AGREEMENT. If Tenant requests Landlord's consent to a specific
assignment, sublease, or management agreement, Tenant shall give Landlord [i]
the name and address of the proposed assignee, subtenant or manager; [ii] a copy
of the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Premises;
and [iv] banking, financial, and other credit information, and references about
the proposed assignee, subtenant or manager reasonably sufficient to enable
Landlord to determine the financial responsibility and character of the proposed
assignee, subtenant or manager. Any assignment, sublease or management agreement
shall contain provisions to the effect that [a] such assignment, sublease or
management agreement is subject and subordinate to all of the terms and
provisions of this Lease and to the rights of Landlord; [b] such assignment,
sublease or management agreement may not be modified without the prior written
consent of Landlord not to be unreasonably withheld or delayed; [c] if this
Lease shall terminate before the expiration of such assignment, sublease or
management agreement, the assignee, subtenant or manager hereunder will, at
Landlord's option, attorn to Landlord and waive any right the assignee,
subtenant or manager may have to terminate the assignment, sublease or
management agreement or surrender possession thereunder as a result of the
termination of this Lease; and [d] if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or
63
70
payments under the assignment, sublease or management agreement directly to
Landlord until such default has been cured.
19.3 ASSIGNMENT BY LANDLORD. Landlord may not transfer,
assign, mortgage, collaterally assign, or otherwise, directly or indirectly,
dispose of Landlord's interest in this Lease or the Premises to a competitor of
Tenant or ARC for so long as Tenant, ARC, or an affiliate of Tenant and/or ARC
is tenant hereunder.
19.4 ORDINARY COURSE SUBLEASES NOT REQUIRE CONSENT.
Notwithstanding anything to the contrary contained in Section 19, (i) a lease of
a unit or bed to a resident of the Premises, (ii) a sublease of any space in the
Premises to an entity that provides services to such residents, and (iii) a
sublease of any space for uses ancillary to the Retirement Care Facility, so
long as each is made in the ordinary course of Tenant's business shall not be
deemed to be an assignment of the Lease, and shall not require Landlord's
consent.
19.5 SUCCESSOR. As used herein, a "SUCCESSOR" is any entity
which succeeds to materially all of the assets, operations and business of
Tenant by merger or reorganization and which is controlled by the same person or
persons as control Tenant prior to such merger or reorganization.
20. INDEMNIFICATION.
20.1 TENANT'S INDEMNIFICATION. Tenant hereby indemnifies and
agrees to hold harmless Landlord, any successors or assigns of Landlord, and
Landlord's and such successor's and assign's directors, officers, employees and
agents from and against any and all demands, claims, causes of action, fines,
penalties, damages (including consequential damages), losses,
64
71
liabilities (including strict liability), judgments, and expenses (including,
without limitation, reasonable attorneys' fees, and court costs incurred in
connection with or arising from [i] the use or occupancy of the Premises by
Tenant or any persons claiming under Tenant; [ii] any activity, work, or thing
done, or permitted or suffered by Tenant in or about the Premises; [iii] any
acts, omissions, or negligence of Tenant or any person claiming under Tenant, or
the contractors, agents, employees, invitees, or visitors of Tenant or any such
person; [iv] any breach, violation, or nonperformance by Tenant or any person
claiming under Tenant or the employees, agents, contractors, invitees, or
visitors of Tenant or of any such person, of any term, covenant, or provision of
this Lease or any law, ordinance, or governmental requirement of any kind
including, without limitation, any failure to comply with any applicable
requirements under the ADA; [v] any injury or damage to the person, property or
business of Tenant, its employees, agents, contractors, invitees, visitors, or
any other person entering upon the Premises; and [vi] any construction,
alterations, changes or demolition of the Premises performed by or contracted
for Tenant or its employees, agents or contractors, excluding, however, any
claims and damages arising from Landlord's negligence or willful misconduct. If
any action or proceeding is brought against Landlord, its employees, or agents
by reason of any such claim, Tenant, upon notice from Landlord, will defend the
claim at Tenant's expense with counsel reasonably satisfactory to Landlord. All
amounts payable to Landlord under this section shall be payable on written
demand and any such amounts which are not paid within 20 days after demand
therefor by Landlord shall bear interest at the maximum permitted interest rate
under applicable law. In case any action, suit or proceeding is brought against
Tenant by reason of any such occurrence, Tenant shall use its best efforts to
defend such action, suit or proceeding. Notwithstanding
65
72
anything in this Lease to the contrary, Tenant shall not indemnify or hold
Landlord harmless, nor successors or assigns of Landlord, nor Landlord's and
such successor's and assign's directors, officers, employees and agents from and
against any and all demands, claims, causes of action, fines, penalties, damages
(including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys' fees, and court costs) resulting from a breach of or default under
this Lease, or negligence or misconduct on the part of Landlord, the successors
and assigns of Landlord, and Landlord's and such successor's and assign's
directors, officers, employees and agents.
20.1.1 NOTICE OF CLAIM. Landlord shall notify Tenant in
writing of any claim or action brought against Landlord in which
indemnity may be sought against Tenant pursuant to this section. Such
notice shall be given in sufficient time to allow Tenant to defend or
participate in such claim or action, but the failure to give such
notice in sufficient time shall not constitute a defense hereunder nor
in any way impair the obligations of Tenant under this section unless
the failure to give such notice precludes Tenant's defense of any such
action.
20.1.2 SURVIVAL OF COVENANTS. The covenants of Tenant
contained in this section shall remain in full force and effect after
the termination of this Agreement until the expiration of the period
stated in the applicable statute of limitations during which a claim or
cause of action may be brought and payment in full or the satisfaction
of such claim or cause of action and of all expenses and charges
incurred by Landlord relating to the enforcement of the provisions
herein specified.
66
73
20.1.3 REIMBURSEMENT OF EXPENSES. Unless prohibited
by law, Tenant hereby agrees to pay to Landlord all of the reasonable
fees, charges and reasonable out-of-pocket expenses related to the
Retirement Care Facility and requested hereby, or incurred by Landlord
in enforcing the provisions of this Agreement.
20.2 LIMITATION OF LANDLORD'S LIABILITY. Landlord, its agents,
and employees, will not be liable for any loss, injury, death, or damage
(including consequential damages) to persons, property, or Tenant's business
occasioned by theft, act of God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition, order of governmental body or
authority, fire, explosion, falling objects, stream, water, rain or snow, leak
or flow of water (including water from the elevator system), rain or snow from
the Premises or into the Premises or from the roof, street, subsurface or from
any other place or by dampness or from the breakage, leakage, obstruction, or
other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Premises, or from construction,
repair, or alteration of the Premises or from any acts or omissions of any other
occupant or visitor of the Premises, or from any other cause beyond Landlord's
control.
21. HOLDING OVER. Should Tenant, with or without the express or implied
consent of Landlord, continue to hold and occupy the Premises after the
expiration of the Term, such holding over beyond the Term and the acceptance or
collection of Rent by the Landlord shall operate and be construed as creating a
tenancy from month-to-month and not for any other term whatsoever. Said
month-to-month tenancy may be terminated by Landlord by giving Tenant 10 days'
written notice, and at any time thereafter Landlord may re-enter and take
possession of the Premises.
67
74
21.1 SURRENDER. Except for [i] alterations made in accordance
with the terms of this Lease; [ii] normal and reasonable wear and tear (subject
to the obligation of Tenant to maintain the Premises in good order and repair
during the Term); and [iii] damage and destruction not required to be repaired
by Tenant, Tenant shall surrender and deliver up the Premises at the expiration
or termination of the Term in as good order and condition as of the Commencement
Date.
22. ESTOPPEL CERTIFICATES. Tenant shall, at any time upon not less than
fifteen (15) days prior written request by Landlord, execute, acknowledge and
deliver to Landlord or its designee a statement in writing, executed by an
officer or general partner of Tenant, certifying that this Lease is unmodified
and in full force and effect (or, if there have been any modifications, that
this Lease is in full force and effect as modified, and setting forth such
modifications), the dates to which Minimum Rent, Additional Rent and additional
charges hereunder have been paid, certifying that no default by either Landlord
or Tenant exists hereunder or specifying each such default and as to other
matters as Landlord may reasonably request.
23. CONVEYANCE BY LANDLORD. If Landlord or any successor owner of the
Premises shall convey the Premises in accordance with the terms hereof, Landlord
or such successor owner shall thereupon be released from all future liabilities
and obligations of Landlord under this Lease arising or accruing from and after
the date of such conveyance or other transfer as to the Premises and all such
future liabilities and obligations shall thereupon be binding upon the new
owner.
68
75
24. WAIVER OF JURY TRIAL. Landlord and Tenant hereby waive any rights
to trial by jury in any action, proceedings or counterclaim brought by either of
the parties against the other in connection with any matter whatsoever arising
out of or in any way connected with this Lease, including, without limitation,
the relationship of Landlord and Tenant, Tenant's use and occupancy of the
Premises, or any claim of injury or damage relating to the foregoing or the
enforcement of any remedy hereunder.
25. ATTORNEYS' FEES. If Landlord or Tenant brings any action to
interpret or enforce this Lease, or for damages for any alleged breach hereof,
the prevailing party in any such action shall be entitled to reasonable
attorneys' fees and costs as awarded by the court in addition to all other
recovery, damages and costs.
26. SEVERABILITY. In the event any part or provision of the Lease shall
be determined to be invalid or enforceable, the remaining portion of this Lease
shall nevertheless continue in full force and effect.
27. COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.
28. BINDING EFFECT. Subject to the provisions of Section 19 above, this
Lease shall be binding upon and inure to the benefit of Landlord and Tenant and
their respective heirs, personal representatives, successors in interest and
assigns.
29. WAIVER AND SUBROGATION. Landlord and Tenant hereby waive to each
other all rights of subrogation which any insurance carrier, or either of them,
may have as to the Landlord
69
76
or Tenant by reason of any provision in any policy of insurance issued to
Landlord or Tenant, provided such waiver does not thereby invalidate the policy
of insurance.
30. MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon the
request of either, enter into a short form memorandum of the Lease, in form
suitable for recording under the laws of the State of Ohio in which reference to
this Lease shall be made. The party requesting such recordation shall pay all
costs and expenses of preparing and recording such memorandum of this Lease.
31. INCORPORATION OF RECITALS AND ATTACHMENTS. The recitals and
exhibits, schedules, addenda and other attachments to this Lease are hereby
incorporated into this Lease and made a part hereof.
32. TITLES AND HEADINGS. The titles and headings of sections of this
Lease are intended for convenience only and shall not in any way affect the
meaning or construction of any provision of this Lease.
33. NATURE OF RELATIONSHIP; USURY SAVINGS CLAUSE. The parties intend
that their relationship shall be that of lessor and lessee only. Nothing
contained in this Lease shall be deemed or construed to constitute an extension
of credit by Landlord to Tenant, nor shall this Lease be deemed to be a
partnership or venture agreement between Landlord and Tenant. Notwithstanding
the foregoing, in the event any payment made to Landlord hereunder is deemed to
violate any applicable laws regarding usury, the portion of any payment deemed
to be usurious shall be held by Landlord to pay the future obligations of Tenant
as such obligations arise and, in the event Tenant discharges and performs all
obligations hereunder, such funds will
70
77
be reimbursed to Tenant upon the expiration of the Term. No interest shall be
paid on any such funds held by Landlord.
34. JOINT AND SEVERAL. If more than one person or entity is the Tenant
hereunder, the liability and obligations of such persons or entities under this
Lease shall be joint and several.
35. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
obligations, representations, warranties and covenants of Tenant under this
Lease shall survive the expiration or earlier termination of the Term.
36. INTERPRETATION. Both Landlord and Tenant have been represented by
counsel and this Lease has been freely and fairly negotiated. Consequently, all
provisions of this Lease shall be interpreted according to their fair meaning
and shall not be strictly construed against any party.
37. ASSIGNMENT OF APPROVAL AND CONSENT RIGHTS. Intentionally omitted.
38. SUBORDINATION, NON-DISTURBANCE, AND ATTORNMENT. Upon written notice
by Landlord to Tenant, this Lease shall be and become subject and subordinate to
any and all mortgages or deeds of trust now existing, or that hereafter may
secure Permitted Mortgage Loans, on the Premises, for the full amount of all
advances made or to be made thereunder and without regard to the time or
character of such advances, together with interest thereon, and subject to all
the terms and provisions thereof. Notwithstanding the foregoing provisions with
respect to subordination, such provisions shall not be effective unless the
owner or holder of any such mortgage or deed of trust shall execute with Tenant
a non-disturbance and attornment agreement under which said owner or holder
shall agree to accept the attornment of Tenant and not disturb Tenant's right of
possession hereunder upon foreclosure of any such mortgage or
71
78
deed of trust, if Tenant is not in default. Tenant hereby agrees to attorn to
any person, firm or corporation purchasing or otherwise acquiring the Premises
at any sale or other proceeding or pursuant to the exercise of any other rights,
power or remedies under such mortgages or deeds of trust, as if such person,
firm or corporation had been named as Landlord herein. Upon request of Landlord,
Tenant agrees to execute and deliver an instrument suitable for recording
subordinating Tenant's interest in the Premises to any such Permitted Mortgage
Loan, subject to the provisions of this Section 38.
39. ENTIRE AGREEMENT. The entire understanding between the parties with
respect to the transactions contemplated herein is set out in this Lease. This
Lease supersedes and voids all prior proposals, letters and agreements, oral or
written, with respect to the subject matter hereof. No modification or
alteration of this Lease shall be effective unless evidenced by an instrument in
writing and signed by all parties.
[Signatures on following page(s).]
Executed as of the date indicated above.
TENANT:
ARC WESTLAKE VILLAGE, INC.
a Tennessee corporation
By:
--------------------------------
Title:
-----------------------------
72
79
LANDLORD:
CLEVELAND RETIREMENT PROPERTIES, LLC,
a New York limited liability company
By:
------------------------------
Title:
----------------------------
80
EXHIBIT "A"
LEGAL DESCRIPTION OF PREMISES
81
EXHIBIT "A-1"
PERMITTED EXCEPTIONS
82
EXHIBIT "B"
Landlord Personal Property
All furniture, furnishings, equipment, tools, machinery, fixtures,
appliances and all other intangible and tangible personal property conveyed to
Landlord pursuant to the Purchase Agreement.
83
EXHIBIT "C"
Appraisal Process
If Landlord and Tenant are unable to agree upon the Fair Market Value
of the Premises within any relevant period provided in this Lease, each shall
within ten (10) days after written demand by the other select one MAI Appraiser
to participate in the determination of Fair Market Value. For all purposes under
this Lease, the Fair Market Value of the Premises shall be based on the Fair
Market Value of the Premises unencumbered by this Lease. Within ten (10) days of
such selection, the MAI Appraisers so selected by Landlord and Tenant shall
select a third MAI Appraiser. The three (3) selected MAI Appraisers shall each
determine the Fair Market Value of the Premises within thirty (30) days of the
selection of the third appraiser. To the extent consistent with sound appraisal
practices as then existing at the time of any such appraisal, and if requested
by Landlord, such appraisal, shall be made on a basis consistent with the basis
on which the Premises was appraised at the time of its acquisition by Landlord.
Each of Tenant and Landlord shall pay the fees and expenses of any MAI Appraiser
which such party appoints pursuant to this Exhibit plus 50% of the cost of the
third appraiser.
In the event either Landlord or Tenant fails to select a MAI Appraiser
within the time period set forth in the foregoing paragraph, the MAI Appraiser
selected by the other party shall alone determine the Fair Market Value of the
Premises in accordance with the provisions of this Exhibit and the Fair Market
Value so determined shall be binding upon Landlord and Tenant.
In the event the MAI Appraisers selected by Landlord and Tenant are
unable to agree upon a third MAI Appraiser within the time period set forth in
the first paragraph of this Exhibit, either Landlord or Tenant shall have the
right to apply at their mutual expense to the presiding judge of the court of
original trial jurisdiction in the county in which the Premises is located to
name the third MAI Appraiser.
Within five (5) days after completion of the third MAI Appraiser's
appraisal, all three MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the Fair Market Value of the Premises. If
a majority are unable to determine the Fair Market Value at such meeting, the
three appraisals shall be added together and their total divided by three. The
resulting quotient shall be the Fair Market Value of the Premises. If, however,
either or both of the low appraisal or the high appraisal are more than ten
percent (10%) lower or higher than the middle appraisal, any such lower or
higher appraisal shall be disregarded. If only one appraisal is disregarded, the
remaining two appraisals shall be added together and their total divided by two,
and the resulting quotient shall be such Fair Market Value. If both the lower
appraisal and higher appraisal are disregarded as provided herein, the middle
appraisal shall be such Fair Market Value. In any event, the result of the
foregoing appraisal process shall be final and binding.
Landlord, Tenant will exercise their respective best efforts to
expedite the appraisal process and will cooperate fully and with all deliberate
speed with each other and with all
84
appraisers in order to allow the determination of Fair Market Value to be
finally completed. Notwithstanding anything else in this Exhibit, if any
appraiser appointed hereunder fails to complete his or her report within 60 days
of his or her appointment, the Fair Market Value of the Premises will be
determined by reference to the other report or reports completed within such
period.
"MAI APPRAISER" shall mean an appraiser licensed or otherwise qualified
to do business in the State and who has substantial experience in performing
appraisals of facilities similar to the Premises and is certified as a member of
the American Institute of Real Estate Appraisers or certified as a SRPA by the
Society of Real Estate Appraisers, or, if such organizations no longer exist or
certify appraisers, such successor organization or such other organization as is
approved by Landlord.
85
EXHIBIT "D"
LEASE RENEWAL FACTOR
For purposes of Section 2.2.2, the lease renewal factor shall be
determined as follows:
Assume:
Base CPI = 240.0
Current CPI = 300.0
CPI Increase = ((300.0/240.0)-1) = 0.25
Lease Rate Escalator = 0.25/2 = .125
Lease Renewal Factor = .125 + 1 = 1.125
86
EXHIBIT "E"
LANDLORD'S SINGLE PURPOSE ENTITY REQUIREMENTS
A. Without limiting any other provision of this Lease, the following
requirements are applicable to Landlord:
1. Landlord's purpose should be limited to owning the Premises.
2. Landlord shall be prohibited from engaging in any dissolution,
liquidation, consolidation, merger, or asset sale, except as expressly permitted
by this Lease.
3. The consent of all of the members of the Landlord shall be
required in order to voluntarily:
(a) file a bankruptcy or insolvency petition or otherwise
institute insolvency proceedings;
(b) dissolve, liquidate, consolidate, merge, or sell all
or substantially all of the assets of the Landlord;
(c) engage in any other business activity; and
(d) amend Landlord's Operating Agreement or Articles of
Organization.
4. Landlord agrees:
(a) to maintain books and records and bank accounts
separate from any other person or entity;
(b) not to commingle assets or funds with those of any
other person or entity;
(c) to conduct its own business in its own name;
(d) to maintain its assets in such a manner that it is
not costly or difficult to segregate, identify or
ascertain such assets;
(e) to prepare separate tax returns and financial
statements, or if part of a consolidated group, to be
shown as a separate member of such group;
(f) to pay its own liabilities out of its own funds;
(g) to observe all limited liability company formalities;
87
(h) to transact all business with affiliates on an
arm's-length basis and pursuant to enforceable
agreements;
(i) to pay the salaries of its own employees;
(j) not to guarantee or become obligated for the debts of
any other person or entity or hold out its credit as
being available to satisfy the obligations of others
or pay the debts or obligations of any other person
or entity;
(k) to allocate and charge fairly and reasonably any
common employee or overhead shared with affiliates;
(l) to use separate stationary, invoices, and checks;
(m) not to pledge its assets for the benefit of any other
person or entity.
(n) to hold itself out to creditors and the public as a
legal entity separate and distinct from any other
person or entity.
B. The above requirements are applicable so long as the Landlord is a limited
liability company. If the entity structure of Landlord is different, Tenant
shall formulate requirements that are specific to Landlord's actual entity
structure, but similar in concept to the requirements set forth above.
88
EXHIBIT "F"
TENANT'S HEALTHCARE COMPLIANCE COVENANTS
I. Tenant hereby makes the following representations, warranties and covenants
as of the date hereof and throughout the term of the Lease, which
representations, warranties and covenants are in addition to those found within
the body of the Lease:
(a) Tenant is using and operating the Premises as a Retirement
Care Facility (as modified from time to time with Landlord and any
Permitted Mortgage Lender's consent, which consent shall not be
unreasonably withheld, the "LICENSED USE"). The Retirement Care
Facility has the number of beds/units set forth in the Berkshire Loan
Documents. Tenant will comply in all material respects, with all
applicable federal, state and local laws, regulations, quality and
safety standards, accreditation standards and requirements of the
applicable state department of health (each a "DOH") and all other
applicable federal, state or local governmental authorities including
those relating to the quality and adequacy of medical care,
distribution of pharmaceuticals, rate setting, equipment, personnel,
operating policies, additions to facilities and services and fee
splitting. The Retirement Care Facility and any other assisted and/or
independent senior housing and/or skilled nursing facilities which is
owned, leased or operated by Tenant (a "FACILITY") shall be operated
at all times in compliance in all material respects with such laws and
requirements. Nothing in this subsection (a) or anywhere else in this
Exhibit "F" to the contrary, Landlord acknowledges that pursuant to
the Lease, Tenant is responsible for all of the covenants set forth in
this Exhibit "F" (other than those pertaining to Landlord's own acts),
and that performance of such covenants by ARC as guarantor (the
"GUARANTOR") shall constitute performance by Tenant thereof.
(b) All governmental licenses, permits, regulatory agreements
or other approvals or agreements necessary or desirable for the
Licensed Use of the Retirement Care Facility are held by Tenant,
Guarantor or an affiliate of Tenant ("AFFILIATE") in the name of
Lessee, Guarantor or Affiliate as required under applicable law and
are in full force and effect, including a valid certificate of need
("CON") or similar certificate, license, or approval issued by the DOH
for the requisite number of beds and units in the Retirement Care
Facility, and a provider agreement or other required documentation of
approved provider status for each provider payment or reimbursement
program effecting the Retirement Care Facility, if applicable. All
required permits, certificates, licenses and
89
governmental approvals necessary for operation of the Retirement Care
Facility for the Licensed Use are listed on Schedule hereto
(collectively, the "LICENSES"). So long as the Lease remains in effect,
Tenant and Guarantor shall operate the Project or cause the Project to
be operated in a manner such that the Licenses shall remain in full
force and effect.
(c) The Licenses for the Retirement Care Facility,
including without limitation, if applicable, the CON:
(i) May not be, and have not been, and will not
be transferred to any location other than the Premises;
(ii) Are not now and will not be pledged as
collateral security for any other loan or indebtedness; and
(iii) Are held free and will remain free from
restrictions or known conflicts which would materially impair the use
or operation of the Retirement Care Facility for the Licensed Use, and
shall not be provisional, probationary or restricted in any way.
II. None of Affiliate, Guarantor or Lessee shall:
(i) Rescind, withdraw, revoke, amend, modify, supplement, or
otherwise alter the nature, tenor or scope of the Licenses for the Retirement
Care Facility;
(ii) Amend or otherwise change the Retirement Care Facility's
authorized units/beds capacity and/or the number of units/beds approved by the
DOH;
(iii) Replace or transfer all or any part of the Retirement
Care Facility's units/beds to another site or location; or
(iv) Voluntarily transfer or encourage the transfer of any
resident of the Retirement Care Facility to any other Facility, unless such
transfer is at the request of the resident or is for reasons relating to the
health, required level of medical care or safety of the resident to be
transferred.
(e) If and when Tenant, Affiliate or Guarantor participates in any
Medicare or Medicaid or other third party payor program with respect to the
Retirement Care Facility, the Retirement Care Facility will remain in compliance
with all requirements for participation in Medicare and Medicaid, including the
Medicare and Medicaid Patient Protection Act of 1987, and other
90
federal or state third party payor programs. The Retirement Care Facility is and
will remain in conformance in all material respects with all insurance,
reimbursement and cost reporting requirements, and if applicable, has a current
provider agreement which is in full force and effect under Medicare and
Medicaid.
(f) There is no, and during the term of the Lease shall be no,
threatened, existing or pending revocation, suspension, termination, probation,
restriction, limitation, or nonrenewal affecting Tenant, Guarantor, Affiliate or
the Retirement Care Facility or any participation or provider agreement with any
third-party payor, including Medicare, Medicaid, Blue Cross and/or Blue Shield,
other and any other private commercial insurance managed care and employee
assistance program (such programs, the "THIRD-PARTY PAYOR PROGRAMS") to which
Tenant, Guarantor or Affiliate may presently be subject with respect to the
Retirement Care Facility or any other Facility, or at any time hereafter is
subject. All Medicaid, Medicare, and private insurance cost reports and
financial reports submitted by Tenant, Affiliate or Guarantor, if any, are and
will be materially accurate and complete and have not been and will not be
misleading in any material respects. No cost reports for the Retirement Care
Facility remain open or unsettled. Nothing in this subsection (f) shall be
interpreted as requiring Tenant, Affiliate or Guarantor to participate in
Medicare, Medicaid or any other federal or state health care programs; such
participation shall be solely at the option of Tenant or Guarantor.
(g) None of Tenant, Affiliate or Guarantor or the Retirement Care
Facility is or will be the subject of any proceeding by any governmental agency,
and no notice of any violation has been or will be issued by a governmental
agency that would, directly or indirectly, or with the passage of time:
(i) Have a material adverse impact on Tenant's or Guarantor's
ability to accept and/or retain patients or operate the Retirement Care Facility
for the Licensed Use or result in the imposition of a fine, a sanction, a lower
rate certification or a lower reimbursement rate for services rendered to
eligible patients;
(ii) Modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of any of the Licenses;
or
(iii) If applicable, affect Tenant's or Guarantor's continued
participation in the Medicaid or Medicare programs or any other of the
Third-Party Payor Programs, or any successor programs thereto, at current rate
certifications.
91
(h) The Retirement Care Facility and the use thereof complies and will
continue to comply in all material respects with all applicable local, state and
federal building codes, fire codes, health care, senior housing and other
regulatory requirements (the "PHYSICAL PLANT STANDARDS").
(i) The Retirement Care Facility has not received a "Level A" (or
equivalent) violation, and no statement of charges or deficiencies has been made
or penalty enforcement action has been undertaken against the Retirement Care
Facility, Tenant or Guarantor or against any officer, director, partner, member,
stockholder or affiliate of Tenant or Guarantor by any governmental agency
during the last three calendar years, and there have been no violations over the
past three years which have threatened the Retirement Care Facility's, Tenant's,
Affiliate's or Guarantor's certification for participation in Medicare or
Medicaid, or the other Third-Party Payor Programs.
(j) There are no current, pending or outstanding Medicaid, Medicare,
or other Third-Party Payor Programs reimbursement audits or appeals pending at
the Retirement Care Facility, and there are no years that are subject to audit.
(k) There are no current or pending Medicaid, Medicare, or other
Third-Party Payor Programs recoupment efforts at the Retirement Care Facility.
Tenant, Affiliate and Guarantor are not participants in any federal program
whereby any governmental agency may have the right to recover funds by reason of
the advance of federal funds, including those authorized under the ▇▇▇▇-▇▇▇▇▇▇
Act (42 U.S.C. 291, et seq.).
(l) Tenant will pledge its receivables as collateral security for any
other loan or indebtedness.
(m) All patient or resident records at the Retirement Care Facility,
including patient or resident trust fund accounts, are true and correct in all
material respects, and will remain true and correct in all material respects.
(n) Tenant and Guarantor shall not, nor shall the Retirement Care
Facility, other than in the normal course of business, change the terms of any
of the Third-Party Payor Programs now or hereinafter in effect or their normal
billing payment or reimbursement policies and procedures with respect thereto
(including the amount and timing of finance charges, fees and write-offs).
(o) Tenant and Guarantor shall at all times comply with all obligations
under the contracts and leases with residents of the Retirement
92
Care Facility, and shall not commit or permit any default thereunder. Tenant
hereby indemnifies and holds harmless Landlord and agrees to defend Landlord
from and against (collectively, the "INDEMNIFIED CLAIMS") any (i) claims,
proceedings or causes of action brought by any resident of the Retirement Care
Facility, and (ii) loss, damage, cost or expense, including attorney's fees,
incurred or suffered by Landlord as a result of any (x) breach by Tenant or
Guarantor of any contract or lease with a resident of the Retirement Care
Facility or (y) violation of any license or any federal, state or local law
governing the Retirement Care Facility or the use, operation or maintenance
thereof for the Licensed Use.
