FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number
333-47411
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CNL Health Care Properties, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 59-3491443
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(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
450 South Orange Avenue
Orlando, Florida 32801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number
(including area code) (407) 650-1000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
699,907 shares of common stock, $.01 par value, outstanding as of May 1, 2000.
<PAGE>
CONTENTS
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Part I Page
<S><C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Stockholders' Equity 3
Condensed Consolidated Statements of Cash Flows 4-5
Notes to Condensed Consolidated Financial Statements 6-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13-17
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 17
Part II
Other Information 18-19
</TABLE>
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CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------------- -------------
<S><C>
ASSETS
Cash $5,812,893 $4,744,222
Other assets 423,602 344,338
--------------- --------------
$6,236,495 $5,088,560
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Due to related parties $1,938,627 $1,775,256
Accounts payable and accrued expenses 28,100 21,167
--------------- --------------
Total liabilities 1,966,727 1,796,423
--------------- --------------
Commitment (Note 8)
Stockholders' equity:
Preferred stock, without par value.
Authorized and unissued 3,000,000 shares
Excess shares, $.01 par value per share.
Authorized and unissued 103,000,000 shares
Common stock, $.01 par value per share.
Authorized 100,000,000 shares, issued and
outstanding 658,615 and 540,028 shares, respectively 6,586 5,400
Capital in excess of par value 4,410,747 3,365,531
Accumulated deficit (147,565 ) (78,794 )
--------------- --------------
Total stockholders' equity 4,269,768 3,292,137
--------------- --------------
$6,236,495 $5,088,560
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Quarter
Ended March 31,
2000 1999
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<S><C>
Revenues:
Interest income $72,962 $ --
------------ ------------
Expenses:
General operating and administrative 98,140 --
------------ ------------
Net Loss $ (25,178 ) $ --
============ ============
Net Loss Per Share of Common Stock
(Basic and Diluted) $ (0.04 ) $ --
============ ============
Weighted Average Number of Shares of
Common Stock Outstanding 601,758 --
============ ============
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
Quarter Ended March 31, 2000 and Year Ended December 31, 1999
<TABLE>
<CAPTION>
Common stock
------------------------------- Capital in
Number Par excess of Accumulated
of Shares value par value deficit Total
-------------- ------------ ------------- ----------------- -------------
<S><C>
Balance at December 31, 1998 20,000 $ 200 $ 199,800 $ -- $ 200,000
Subscriptions received for common
stock through public offering
and distribution reinvestment plan 543,528 5,435 5,429,848 -- 5,435,283
Subscriptions held in escrow (23,500 ) (235 ) (234,765 ) -- (235,000 )
Stock issuance costs -- -- (2,029,352 ) -- (2,029,352 )
Net loss -- -- -- (28,390 ) (28,390 )
Distributions declared and paid
($.125 per share) -- -- -- (50,404 ) (50,404 )
--------------- ------------- -------------- --------------- --------------
Balance at December 31, 1999 540,028 5,400 3,365,531 (78,794 ) 3,292,137
Subscriptions received for common
stock through public offering and
distribution reinvestment plan 133,387 1,334 1,332,553 -- 1,333,887
Subscriptions held in escrow (14,800 ) (148 ) (147,852 ) -- (148,000 )
Stock issuance costs -- -- (139,485 ) -- (139,485 )
Net loss -- -- -- (25,178 ) (25,178 )
Distributions declared and paid
($.075 per share) -- -- -- (43,593 ) (43,593 )
--------------- ------------- -------------- --------------- --------------
Balance at March 31, 2000 658,615 $ 6,586 $4,410,747 $ (147,565 ) $ 4,269,768
=============== ============= ============== =============== ==============
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarter Ended
March 31,
2000 1999
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<S><C>
Increase (Decrease) in Cash and Cash Equivalents:
Net Cash Provided by Operating Activities $ 10,409 $ --
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Financing Activities:
Subscriptions received from stockholders 1,185,887 --
Distributions to stockholders (43,593 ) --
Payment of stock issuance costs (84,032 ) --
--------------- ----------------
Net cash provided by financing activities 1,058,262 --
--------------- ----------------
Net Increase in Cash and Cash
Equivalents 1,068,671 --
Cash and Cash Equivalents at Beginning
of Quarter 4,744,222 92
--------------- ----------------
Cash and Cash Equivalents at End of
Quarter $ 5,812,893 $ 92
=============== ================
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Quarter Ended
March 31,
2000 1999
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<S><C>
Reconciliation of Net Loss to Net Cash Provided
by Operating Activities:
Net loss $ (25,178 ) $ --
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Changes in operating assets and liabilities:
Other assets (2,671 ) --
Accounts payable and
other accrued expenses 5,607 --
Due to related parties 32,651 --
=============== ================
Net cash provided by operating
activities $ 10,409 $ --
=============== ================
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Amounts paid by related parties
on behalf of the Company and
its subsidiaries:
Acquisition costs $ 22,283 $ 10,057
Deferred offering costs -- 118,784
Stock issuance costs 18,641 --
=============== ================
$ 40,924 $ 128,841
=============== ================
Costs incurred by the Company and unpaid at quarter end:
Acquisition costs $ 54,310 $ --
Deferred offering costs -- 9,799
Stock issuance costs 36,812 --
--------------- ----------------
$ 91,122 $ 9,799
=============== ================
</TABLE>
See accompanying notes to condensed consolidated
financial statements.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Quarters Ended March 31, 2000 and 1999
1. Organization and Nature of Business:
CNL Health Care Properties, Inc. was organized pursuant to the laws of the
state of Maryland on December 22, 1997. CNL Health Care GP Corp. and CNL
Health Care LP Corp. are wholly owned subsidiaries of CNL Health Care
Properties, Inc., each of which were organized pursuant to the laws of the
state of Delaware in December 1999. CNL Health Care Partners, LP is a
Delaware limited partnership formed in December 1999. CNL Health Care GP
Corp. and CNL Health Care LP Corp. are the general and limited partners,
respectively, of CNL Health Care Partners, LP. The term "Company" includes,
unless the context otherwise requires, CNL Health Care Properties, Inc.,
CNL Health Care Partners, LP, CNL Health Care GP Corp. and CNL Health Care
LP Corp.
The Company intends to use the proceeds from its public offering (the
"Offering"), after deducting offering expenses, primarily to acquire real
estate properties (the "Properties") related to health care and seniors'
housing facilities (the "Health Care Facilities") located across the United
States. The Health Care Facilities may include congregate living, assisted
living and skilled nursing facilities, continuing care retirement
communities and life care communities, and medical office buildings and
walk-in clinics. The Company may provide mortgage financing (the "Mortgage
Loans") to operators of Health Care Facilities in the aggregate principal
amount of approximately 5 to 10 percent of the Company's total assets. The
Company also may offer furniture, fixture and equipment financing ("Secured
Equipment Leases") to operators of Health Care Facilities. Secured
Equipment Leases will be funded from the proceeds of a loan in an amount up
to ten percent of the Company's total assets.
The Company was a development stage enterprise from December 22, 1997
through July 13, 1999. Since operations had not begun, activities through
July 13, 1999 were devoted to organization of the Company.
2. Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. The condensed consolidated financial
statements reflect all adjustments, consisting of normal recurring
adjustments, which are, in the opinion of the management, necessary to a
fair statement of the results for the interim periods presented. Operating
results for the quarter ended March 31, 2000 may not be indicative of the
results that may be expected for the year ending December 31, 2000. Amounts
included in the financial statements as of December 31, 1999 have been
derived from audited financial statements as of that date.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 2000 and 1999
2. Basis of Presentation - Continued:
These unaudited financial statements should be read in conjunction with the
financial statements and notes thereto included in the Form 10-K of CNL
Health Care Properties, Inc. for the year ended December 31, 1999.
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company, CNL Health Care Properties, Inc., and
its wholly owned subsidiaries, CNL Health Care GP Corp. and CNL Health Care
LP Corp., as well as the accounts of CNL Health Care Partners, LP. All
significant intercompany balances and transactions have been eliminated.
3. Public Offering:
The Company has a currently effective registration statement on Form S-11
with the Securities Exchange Commission. A maximum of 15,500,000 shares
($155,000,000) may be sold, including 500,000 shares ($5,000,000) which are
available only to stockholders who elect to participate in the Company's
reinvestment plan. The Company has adopted a reinvestment plan pursuant to
which stockholders may elect to have the full amount of their cash
distributions from the Company reinvested in additional shares of common
stock of the Company. In addition, the Company has registered 600,000
shares issuable upon the exercise of warrants granted to the managing
dealer of the Offering. As of March 31, 2000, the Company had received
subscription proceeds of $6,769,154 (676,915 shares), including $23,190
(2,319 shares) through the distribution reinvestment plan and $383,000
(38,300 shares) from Pennsylvania investors which will be held in escrow
until the Company receives aggregate subscriptions of at least $7,775,000.
4. Other Assets:
Other assets as of March 31, 2000 and December 31, 1999 were $423,602 and
$344,338, respectively, which consisted of acquisition fees and
miscellaneous acquisition expenses which will be allocated to future
Properties and miscellaneous prepaid expenses.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 2000 and 1999
5. Stock Issuance Costs:
The Company has incurred certain expenses of its Offering, including
commissions, marketing support and due diligence expense reimbursement
fees, filing fees, legal, accounting, printing and escrow fees, which have
been deducted from the gross proceeds of the Offering. Preliminary costs
incurred prior to raising capital were advanced by an affiliate of the
Company, CNL Health Care Corp. (the "Advisor") and its affiliates. The
Advisor has agreed to pay all offering expenses (excluding commissions and
marketing support and due diligence expense reimbursement fees) which
exceed three percent of the gross offering proceeds received from the sale
of shares of the Company in connection with the Offering.
During the quarters ended March 31, 2000 and 1999, the Company incurred
$139,485 and $128,583, respectively, in stock issuance costs, including
$94,869 and $17,180, respectively, in commissions and marketing support and
due diligence expense reimbursement fees (see Note 7). These amounts have
been charged to stockholders' equity subject to the three percent cap
described above.
6. Distributions:
For the quarter ended March 31, 2000, 100 percent of the distributions paid
to stockholders were considered ordinary income for federal income tax
purposes. No amounts distributed to the stockholders for the quarter ended
March 31, 2000 are required to be or have been treated by the Company as a
return of capital for purposes of calculating the stockholders' return on
their invested capital. The characterization for tax purposes of
distributions declared for the quarter ended March 31, 2000 may not be
indicative of the results that may be expected for the year ending December
31, 2000.
7. Related Party Arrangements:
Certain affiliates of the Company receive fees and compensation in
connection with the offering, and the acquisition, management and sale of
the assets of the Company.
CNL Securities Corp. is entitled to receive commissions amounting to 7.5%
of the total amount raised from the sale of shares for services in
connection with the Offering, a substantial portion of which has been or
will be paid as commissions to other broker-dealers. During the quarter
ended March 31, 2000, the Company incurred $88,940 of such fees. A
substantial portion of these amounts was or will be paid by CNL Securities
Corp. as commissions to other broker-dealers.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 2000 and 1999
7. Related Party Arrangements - Continued:
In addition, CNL Securities Corp. is entitled to receive a marketing
support and due diligence expense reimbursement fee equal to 0.5% of the
total amount raised from the sale of shares, all or a portion of which may
be reallowed to other broker-dealers. During the quarter ended March 31,
2000, the Company incurred $5,929 of such fees, the majority of which was
reallowed to other broker-dealers and from which all bona fide due
diligence expenses were or will be paid.
In addition, the Company has agreed to issue and sell soliciting dealer
warrants ("Soliciting Dealer Warrants") to CNL Securities Corp. The price
for each warrant is $0.0008 and one warrant is issued for every 25 shares
sold by the managing dealer except where prohibited by federal or state
securities laws. All or a portion of the Soliciting Dealer Warrants may be
reallowed to soliciting dealers with prior written approval from, and in
the sole discretion of, the managing dealer, except where prohibited by
either federal or state securities laws. The holder of a Soliciting Dealer
Warrant will be entitled to purchase one share of common stock from the
Company at a price of $12.00 during the five-year period commencing with
the date the offering begins. No Soliciting Dealer Warrant, however, will
be exercisable until one year from the date of issuance. During the quarter
ended March 31, 2000, the Company issued approximately 19,400 Soliciting
Dealer Warrants. As of March 31, 2000, CNL Securities Corp. was entitled to
receive approximately 5,000 additional Soliciting Dealer Warrants for
shares sold during the quarter then ended.
The Advisor is entitled to receive acquisition fees for services in
identifying Properties and structuring the terms of leases of the
Properties and Mortgage Loans equal to 4.5% of gross proceeds of the
Offering, loan proceeds from permanent financing and amounts outstanding on
the line of credit, if any, at the time of listing of the shares on a
national securities exchange or over-the-counter market, but excluding that
portion of the permanent financing used to finance Secured Equipment
Leases. During the quarter ended March 31, 2000, the Company incurred
$53,364 of such fees. These fees are included in other assets at March 31,
2000.
The Company incurs operating expenses which, in general, are those expenses
relating to administration of the Company on an ongoing basis. Pursuant to
the advisory agreement, the Advisor is required to reimburse the Company
the amount by which the total operating expenses paid or incurred by the
Company exceed in any four consecutive fiscal quarters (the "Expense
Year"), the greater of two percent of average invested assets or 25 percent
of net income (the "Expense Cap"). Due to the fact that the Company
commenced operations in July 1999, the Advisor will be required to
reimburse the Company any amounts in excess of the Expense Cap commencing
with the Expense Year ending June 30, 2000.
<PAGE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 2000 and 1999
7. Related Party Arrangements - Continued:
The Advisor and its affiliates provide various administrative services to
the Company, including services related to accounting; financial, tax and
regulatory compliance reporting; stockholder distributions and reporting;
due diligence and marketing; and investor relations (including
administrative services in connection with the Offering), on a day-to-day
basis.
The expenses incurred for these services were classified as follows for the
quarters ended March 31:
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S><C>
Deferred offering costs $ -- $ 70,291
Stock issuance costs 27,103 --
Other assets 945 --
General operating and administrative expenses 54,321 --
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$ 82,369 $ 70,291
============== ==============
Amounts due to related parties consisted of the following at:
March 31, December 31,
2000 1999
-------------- --------------
Due to the Advisor:
Expenditures incurred for organizational and offering
expenses on behalf of the Company $ 1,479,354 $ 1,432,291
Accounting and administrative services 35,729 6,739
Acquisition fees and expenses 412,820 336,226
-------------- --------------
1,927,903 1,775,256
-------------- --------------
Due to CNL Securities Corp.:
Commissions 10,054 --
Marketing support and due diligence
expense reimbursement fee 670 --
-------------- --------------
10,724 --
-------------- --------------
$ 1,938,627 $ 1,775,256
============== ==============
</TABLE>
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 2000 and 1999
8. Commitment:
In March 2000, the Company entered into an initial commitment to acquire a
private-pay assisted living community for $13,848,900. The Property is a
Brighton Gardens(R) by Marriot(R) in Orland Park, Illinois (see note 9).
9. Subsequent Events:
During the period April 1 through May 1, 2000, the Company received
subscription proceeds for an additional 41,292 shares ($412,916) of common
stock. As of May 1, 2000, the Company had received total subscription
proceeds of $7,182,070, including $383,000 from Pennsylvania investors
whose funds will be held in escrow until aggregate subscription proceeds
total at least $7,775,000.
On April 1, April 20 and May 1, 2000, the Company declared distributions
of $0.025, $0.012 and $0.058, respectively, per share of common stock.
These distributions are payable in June 2000.
On April 20, 2000, the Company entered into a revolving line of credit and
security agreement with a bank to be used by the Company to acquire and
construct health care Properties. The line of credit provides that the
Company may receive advances of up to $25,000,000 until April 19, 2005,
with an annual review to be performed by the bank to indicate that there
has been no substantial deterioration, in the bank's reasonable discretion,
of the credit quality. Interest expense on each advance shall be payable
monthly, with all unpaid interest and principal due no later than five
years from the date of the advance. Generally, advances under the line of
credit will bear interest at either (i) a rate per annum equal to London
Interbank Offered Rate (LIBOR) plus the difference between LIBOR and the
bank's base rate at the time of the advance or (ii) a rate equal to the
bank's base rate, whichever the Company selects at the time advances are
made. The interest rate will be adjusted daily in accordance with
fluctuations with the bank's rate or the LIBOR rate, as applicable.
Notwithstanding the above, the interest rate on the first $9.7 million
drawn will be 8.75%. In addition, a fee of .5 percent per advance will be
due and payable to the bank on funds as advanced. Each advance made under
the line of credit will be collateralized by the assignment of rents and
leases. In addition, the line of credit provides that the Company will not
be able to further encumber the applicable Property during the term of the
advance without the bank's consent. The Company will be required, at each
closing, to pay all costs, fees and expenses arising in connection with the
line of credit. The Company must also pay the bank's attorneys fees,
subject to a maximum cap, incurred in connection with the line of credit
and each advance.
CNL HEALTH CARE PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Quarters Ended March 31, 2000 and 1999
9. Subsequent Events - Continued:
On April 20, 2000, the Company used offering proceeds of $5,748,000 and
obtained an advance under the line of credit of $8,100,000 to acquire a
Property for a total cost of $13,848,900. In connection with the line of
credit, the Company incurred an origination fee, legal fees and closing
costs of $55,917. In connection with the purchase of the Property, the
Company, as lessor, entered into a long-term lease, triple-net agreement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements generally are characterized by
the use of terms such as "believe", "expect" and "may". Although the Company
believes that the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, the Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include the following: changes in
general economic conditions, changes in real estate conditions, availability of
proceeds from the Company's offering, the ability of the Company to obtain
permanent financing on satisfactory terms, the ability of the Company to
continue to locate suitable tenants for its properties and borrowers for its
mortgage loans and secured equipment leases, and the ability of tenants and
borrowers to make payments under their respective leases, mortgage loans or
secured equipment leases. Given these uncertainties, readers are cautioned not
to place undue reliance on such statements. The Company undertakes no obligation
to update these forward-looking statements to reflect any future events or
circumstances.
Introduction
CNL Health Care Properties, Inc. is a Maryland corporation that was
organized December 22, 1997. CNL Health Care GP Corp. and CNL Health Care LP
Corp. are wholly owned subsidiaries of CNL Health Care Properties, Inc.,
organized in Delaware in December 1999. CNL Health Care Partners, LP is a
Delaware limited partnership formed in December 1999. CNL Health Care GP Corp.
and CNL Health Care LP Corp. are the general and limited partners, respectively,
of CNL Health Care Partners, LP. Assets acquired are expected to be held by CNL
Health Care Partners, LP and, as a result, owned by CNL Health Care Properties,
Inc. through the partnership. The term "Company" includes CNL Health Care
Properties, Inc. and its subsidiaries, CNL Health Care GP Corp., CNL Health Care
LP Corp. and CNL Health Care Partners, LP.
The Company was formed to acquire real estate properties (the
"Properties") related to health care and seniors' housing facilities (the
"Health Care Facilities") located across the United States. The Health Care
Facilities may include congregate living, assisted living and skilled nursing
facilities, continuing care retirement communities and life care communities,
and medical office buildings and walk-in clinics. The Properties will be leased
on a long-term, "triple-net" basis. The Company may also provide mortgage
financing (the "Mortgage Loans") to operators of Health Care Facilities in the
aggregate principal amount of approximately five to ten percent of the Company's
total assets. The Company also may offer furniture, fixture and equipment
financing ("Secured Equipment Leases") to operators of Health Care Facilities.
The aggregate principal amount of Secured Equipment Leases is not expected to
exceed ten percent of the Company's total assets.
<PAGE>
Introduction - Continued
The Company's primary investment objectives are to preserve, protect,
and enhance the Company's assets while (i) making distributions commencing in
the initial year of Company operations; (ii) obtaining fixed income through the
receipt of base rent, and increasing the Company's income (and distributions)
and providing protection against inflation through automatic fixed increases in
base rent or increases in the base rent based on increases in consumer price
indices, over the terms of the leases, and obtaining fixed income through the
receipt of payments from Mortgage Loans and Secured Equipment Leases; (iii)
qualifying and remaining qualified as a REIT for federal income tax purposes;
and (iv) providing stockholders of the Company with liquidity of their
investment within five to ten years after commencement of the offering, either
in whole or in part, through (a) listing of the shares on a national securities
exchange or over-the-counter market ("Listing"), or (b) the commencement of the
orderly sale of the Company's assets, and distribution of the proceeds thereof
(outside the ordinary course of business and consistent with its objective of
qualifying as a REIT).
Liquidity and Capital Resources
Pursuant to a registration statement on Form S-11 under the Securities
Act of 1933 effective September 18, 1998, the Company registered for sale an
aggregate of $155,000,000 of shares of common stock (the "Shares") (15,500,000
shares at $10 per Share), with 500,000 of such shares available only to
stockholders who elect to participate in the Company's reinvestment plan. In
accordance with the Company's prospectus, the Company has elected to extend the
offering of Shares to a date no later than September 18, 2000. The Board of
Directors may determine to engage in future offerings of common stock, up to the
number of unissued authorized shares of common stock.
The managing dealer of the offering of shares of the Company is CNL
Securities Corp., an affiliate of the Company.
As of July 13, 1999, the Company had received aggregate subscription
proceeds of $2,751,052 (275,105 Shares), which exceeded the minimum offering
amount of $2,500,000, and $2,526,052 of the funds were released from escrow. The
remaining subscription proceeds of $225,000 (representing funds received from
Pennsylvania investors) will be held in escrow until the Company receives
aggregate subscriptions of at least $7,775,000.
As of March 31, 2000, the Company had received aggregate subscription
proceeds of $6,769,154 (676,915 Shares), including $23,190 (2,319 Shares)
through its distribution reinvestment plan and approximately $383,000 (38,300
Shares) from Pennsylvania investors. As of March 31, 2000, the Company had
approximately $5,364,000 available to invest in Properties and Mortgage Loans
following the deduction of selling commissions, marketing support and due
diligence expense reimbursement fees, organization and offering expenses of
approximately three percent, and acquisition fees.
<PAGE>
Liquidity and Capital Resources - Continued
The Company expects to use net offering proceeds from the sale of
Shares to purchase Properties and to invest in Mortgage Loans. In addition, the
Company intends to borrow money to acquire assets and to pay certain related
fees. The Company intends to encumber assets in connection with such borrowing.
The Company has obtained a revolving $25,000,000 initial line of credit and may
obtain one or more additional revolving lines of credit that, combined with the
initial line of credit, will be in an aggregate amount up to $45,000,000 (the
"Lines of Credit"). The Company also plans to obtain permanent financing. The
Lines of Credit may be repaid with offering proceeds, working capital or
permanent financing. The aggregate amount of any permanent financing shall not
exceed 30% of the Company's total assets and the maximum amount the Company may
borrow is 300% of the Company's net assets.
Until Properties are acquired, or Mortgage Loans are entered into, net
offering proceeds are held in short-term, highly liquid investments which
management believes to have appropriate safety of principal. This investment
strategy provides high liquidity in order to facilitate the Company's use of
these funds to acquire Properties at such time as Properties suitable for
acquisition are located or to fund Mortgage Loans. At March 31, 2000, the
Company had $5,812,893 invested in such short-term investments as compared to
$4,744,222 at December 31, 1999. The increase in the amount invested in
short-term investments reflects subscription proceeds received from the sale of
Shares during the quarter ended March 31, 2000. These funds will be used
primarily to purchase Properties, to make Mortgage Loans, to pay organizational
and offering expenses and acquisition expenses, to pay distributions to
stockholders, to meet other Company expenses and, in management's discretion, to
create cash reserves.
During the quarters ended March 31, 2000 and 1999, affiliates incurred
on behalf of the Company $18,641 and $118,784, respectively, for certain
organizational and offering expenses and $22,283 and $10,057, respectively, for
certain acquisition expenses. In addition, during the quarter ended March 31,
2000, affiliates incurred on behalf of the Company $40,821 for certain operating
expenses. As of March 31, 2000 and 1999, the Company owed affiliates $1,938,627
and $911,689, respectively, for such amounts and unpaid fees and administrative
expenses (including accounting; financial, tax, and regulatory compliance and
reporting, due diligence and marketing; and investor relations). The Advisor of
the Company has agreed to pay all organizational and offering expenses
(excluding selling commissions and marketing support and due diligence expense
reimbursement fees) in excess of three percent of the gross offering proceeds.
Since the commencement of the Offering through March 31, 2000,
approximately $510,892 has been incurred by the Company in selling commissions,
marketing support and due diligence reimbursement fees to related parties,
$457,230 of which was reallowed to other broker-dealer firms. In addition, since
the commencement of the Offering through March 31, 2000, the Company has
reimbursed affiliates approximately $135,339 for certain organizational and
offering expenses incurred on behalf of the Company and administrative services
related to the Offering.
<PAGE>
Liquidity and Capital Resources - Continued
During the quarter ended March 31, 2000, the Company generated cash
from operations of $10,409. Based on current and anticipated cash from
operations, the Company declared and paid distributions to its stockholders of
$43,593 during quarter ended March 31, 2000. On April 1 and April 20, 2000, the
Company declared distributions of $0.025 and $0.012, respectively, per share of
common stock, to stockholders of record on April 1 and April 20, 2000,
respectively. The Company has also declared a distribution of $0.058 per share
of common stock to stockholders of record on May 1, 2000. These distributions
are payable in June 2000.
For the quarter ended March 31, 2000, 100 percent of the distributions
received by stockholders were considered to be ordinary income for federal
income tax purposes. No amounts distributed or to be distributed to the
stockholders as of May 1, 2000 were required to be or have been treated by the
Company as a return of capital for purposes of calculating the stockholders'
return on their invested capital.
Due to anticipated low operating expenses, rental income expected to be
obtained from Properties after they are acquired, the fact that permanent
financing has not been obtained and that the Company has not entered into
Mortgage Loans or Secured Equipment Leases, management does not believe that
working capital reserves will be necessary at this time. Management has the
right to cause the Company to maintain reserves if, in their discretion, they
determine such reserves are required to meet the Company's working capital
needs.
On April 20, 2000, the Company entered into a revolving line of credit
and security agreement with a bank to be used by the Company to acquire and
construct health care Properties. The line of credit provides that the Company
may receive advances of up to $25,000,000 until April 19, 2005, with an annual
review to be performed by the bank to indicate that there has been no
substantial deterioration, in the bank's reasonable discretion, of the credit
quality. Interest expense on each advance shall be payable monthly, with all
unpaid interest and principal due no later than five years from the date of the
advance. Generally, advances under the line of credit will bear interest at
either (i) a rate per annum equal to London Interbank Offered Rate (LIBOR) plus
the difference between LIBOR and the bank's base rate at the time of the advance
or (ii) a rate equal to the bank's base rate, whichever the Company selects at
the time advances are made. The interest rate will be adjusted daily in
accordance with fluctuations with the bank's rate or the LIBOR rate, as
applicable. Notwithstanding the above, the interest rate on the first $9.7
million drawn will be 8.75%. In addition, a fee of .5 percent per advance will
be due and payable to the bank on funds as advanced. Each advance made under the
line of credit will be collateralized by the assignment of rents and leases. In
addition, the line of credit provides that the Company will not be able to
further encumber the applicable Property during the term of the advance without
the bank's consent. The Company will be required, at each closing, to pay all
costs, fees and expenses arising in connection with the line of credit. The
Company must also pay the bank's attorneys fees, subject to a maximum cap,
incurred in connection with the line of credit and each advance.
<PAGE>
Liquidity and Capital Resources - Continued
On April 20, 2000, the Company used offering proceeds of $5,748,000 and
obtained an advance under the line of credit of $8,100,000 to acquire a
private-pay assisted living community for a total cost of $13,848,900. The
Property is a Brighton Gardens by Marriot in Orland Park, Illinois.
In connection with the line of credit, the Company incurred an origination fee,
legal fees and closing costs of $55,917. In connection with the purchase of the
Property, the Company, as lessor, entered into a long-term, triple-net lease
agreement.
Results of Operations
No operations commenced until the Company received the minimum offering
proceeds of $2,500,000 on July 14, 1999. The Company did not acquire any
Properties or enter into any Mortgage Loans during the quarter ended March 31,
2000.
During the quarter ended March 31, 2000, the Company earned $72,962 in
interest income from investments in money market accounts. Interest income is
expected to increase as the Company invests subscription proceeds received in
the future in highly liquid investments pending investment in Properties and
Mortgage Loans. However, as net offering proceeds are invested in Properties and
used to make Mortgage Loans, the percentage of the Company's total revenues from
interest income from investments in money market accounts or other short term,
highly liquid investments is expected to decrease.
Operating expenses were $98,140 for the quarter ended March 31, 2000.
Operating expenses represent only a portion of operating expenses which the
Company is expected to incur during a quarter in which the Company owns
Properties. The dollar amount of operating expenses is expected to increase as
the Company acquires Properties and invests in Mortgage Loans. However, general
and administrative expenses as a percentage of total revenues is expected to
decrease as the Company acquires Properties and invests in Mortgage Loans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is subject to interest rate risk through outstanding
balances on its variable rate line of credit. The Company may mitigate this risk
by paying down its line of credit from offering proceeds should interest rates
rise substantially.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Inapplicable.
Item 2. Changes in Securities and Use of Proceeds.
(d) The information required by this item is set forth in
Part I. Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations and
is hereby incorporated by reference.
Item 3. Defaults upon Senior Securities. Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
Item 5. Other Information. Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.1 CNL Health Care Properties, Inc. Amended and
Restated Articles of Incorporation (Included
as Exhibit 3.1 to the Registrant's 1998
Report on Form 10-K filed with the
Securities and Exchange Commission
on March 5, 1999 and incorporated
herein by reference.)
3.2 CNL Health Care Properties, Inc. Bylaws
(Included as Exhibit 3.2 to the Registrant's
1998 Report on Form 10-K filed with the
Securities and Exchange Commission on March
5, 1999 and incorporated herein by
reference.)
4.1 Reinvestment Plan (Included as Exhibit 4.4
to Registration Statement No. 333-47411
on Form S-11 and incorporated herein
by reference.)
10.1 Advisory Agreement, dated as of September
15, 1998, between CNL Health Care
Properties, Inc. and CNL Health Care Corp.
(Included as Exhibit 10.1 to the Registrants
1998 Report on Form 10-K filed with the
Securities and Exchange Commission on March
5, 1999 and incorporated herein by
reference.)
<PAGE>
10.2 Indemnification Agreement between CNL
Health Care Properties, Inc. and Thomas J.
Hutchison III dated February 29, 2000.
Each of the following director and/or
officer has signed a substantially similar
agreement as follows: James M. Seneff, Jr.,
Robert A. Bourne, David W. Dunbar, Timothy
S. Smick, Edward A. Moses, Jeanne A. Wall
and Lynn E. Rose dated September 15, 1998
and Phillip M. Anderson, Jr. dated
February 19, 1999 (Filed herewith.)
10.3 Agreement of Limited Partnership of CNL
Health Care Partners, LP (included as
Exhibit 10.10 to Registration Statement No.
333-47411 on Form S-11 and incorporated
herein by reference.)
10.4 Purchase and Sale Agreement between CNL
Health Care Partners, LP and Marriot Senior
Living Services, Inc., relating to the
Brighton Gardens by Marriot -
Orland Park, Illinois (Filed herewith.)
10.5 Lease Agreement between CNL Health Care
Partners, LP and BG Orland Park, LLC dated
April 20, 2000, relating to the Brighton
Gardens by Marriot - Orland
Park, Illinois (Filed herewith.)
10.6 Revolving Line of Credit Agreement with CNL
Health Care Properties, Inc., CNL Health
Care Partners, LP and Colonial Bank, dated
April 20, 2000 (Filed herewith.)
27. Financial Data Schedule (Filed herewith.)
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATED this 1st day of May, 2000.
CNL HEALTH CARE PROPERTIES, INC.
By: /s/ James M. Seneff, Jr.
JAMES M. SENEFF, JR.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert A. Bourne
ROBERT A. BOURNE
Director and President
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBITS
<PAGE>
EXHIBIT INDEX
Exhibit Number
3.1 CNL Health Care Properties, Inc. Amended and Restated Articles of
Incorporation (Included as Exhibit 3.1 to the Registrant's 1998
Report on Form 10-K filed with the Securities and Exchange
Commission on March 5, 1999 and incorporated herein by reference.)
3.2 CNL Health Care Properties, Inc. Bylaws (Included as Exhibit 3.2 to the
Registrant's 1998 Report on Form 10-K filed with the Securities and
Exchange Commission on March 5, 1999 and incorporated herein by
reference.)
4.1 Reinvestment Plan (Included as Exhibit 4.4 to Registration Statement
No. 333-47411 on Form S-11 and incorporated herein by reference.)
10.1 Advisory Agreement, dated as of September 15, 1998, between CNL Health
Care Properties, Inc. and CNL Health Care Corp. (Included as Exhibit
10.1 to the Registrants 1998 Report on Form 10-K filed with the
Securities and Exchange Commission on March 5, 1999 and incorporated
herein by reference.)
10.2 Indemnification Agreement between CNL Health Care Properties, Inc.
and Thomas J. Hutchison III dated February 29, 2000. Each of the
following director and/or officer has signed a substantially
similar agreement as follows: James M. Seneff, Jr., Robert A. Bourne,
David W. Dunbar, Timothy S. Smick, Edward A. Moses, Jeanne A. Wall
and Lynn E. Rose dated September 15, 1998 and Phillip M. Anderson, Jr.
dated February 19, 1999 (Filed herewith.)
10.3 Agreement of Limited Partnership of CNL Health Care Partners, LP
(included as Exhibit 10.10 to Registration Statement No.
333-47411 on Form S-11 and incorporated herein by reference.)
10.4 Purchase and Sale Agreement between CNL Health Care Partners, LP and
Marriot Senior Living Services, Inc., relating to the Brighton
Gardens by Marriot - Orland Park, Illinois (Filed
herewith.)
10.5 Lease Agreement between CNL Health Care Partners, LP and BG Orland
Park, LLC dated April 20, 2000, relating to the Brighton Gardens
by Marriot - Orland Park, Illinois (Filed herewith.)
10.6 Revolving Line of Credit Agreement with CNL Health Care Properties,
Inc., CNL Health Care Partners, LP and Colonial Bank,
dated April 20, 2000 (Filed herewith.)
27. Financial Date Schedule (Filed herewith.)
EXHIBIT 10.2
Indemnification Agreement
between
CNL Health Care Properties, Inc.
and
Thomas J. Hutchison III
<PAGE>
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made and entered into
as of the 21st day of February, 2000, by and among CNL Health Care Properties,
Inc., a Maryland corporation (the "Company") and Thomas J.
Hutchison III, a director and/or officer of the Company (the "Indemnitee").
W I T N E S S E T H:
WHEREAS, the interpretation of ambiguous statutes, regulations,
articles of incorporation and bylaws regarding indemnification of directors and
officers may be too uncertain to provide such directors and officers with
adequate notice of the legal, financial and other risks to which they may be
exposed by virtue of their service as such; and
WHEREAS, damages sought against directors and officers in shareholder
or similar litigation by class action plaintiffs may be substantial, and the
costs of defending such actions and of judgments in favor of plaintiffs or of
settlement therewith may be prohibitive for individual directors and officers,
without regard to the merits of a particular action and without regard to the
culpability of, or the receipt of improper personal benefit by, any named
director or officer to the detriment of the corporation; and
WHEREAS, the issues in controversy in such litigation usually relate to
the knowledge, motives and intent of the director or officer, who may be the
only person with firsthand knowledge of essential facts or exculpating
circumstances who is qualified to testify in his defense regarding matters of
such a subjective nature, and the long period of time which may elapse before
final disposition of such litigation may impose undue hardship and burden on a
director or officer or his estate in launching and maintaining a proper and
adequate defense of himself or his estate against claims for damages; and
WHEREAS, the Company is organized under the Maryland General
Corporation Law (the "MGCL") and Section 2-418 of the MGCL empowers corporations
to indemnify and advance expenses of litigation to a person serving as a
director, officer, employee or agent of a corporation and to persons serving at
the request of the corporation, while a director of a corporation, as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan, and further provides that the indemnification and
advancement of expenses set forth in said section, subject to certain
limitations are not "exclusive of any other rights, by indemnification or
otherwise, to which a director may be entitled under the charter, the bylaws, a
resolution of stockholders or directors, an agreement or otherwise, both as to
action in an official capacity and as to action in another capacity while
holding such office"; and
WHEREAS, the Articles of Incorporation of the Company, as they may be
amended or amended and restated from time to time (the "Articles of
Incorporation"), provide that the Company shall indemnify and hold harmless
directors, advisors, or affiliates, as such terms are defined in the Articles of
Incorporation; and
<PAGE>
WHEREAS, the Board of Directors of the Company (the "Board") has
concluded that it is reasonable and prudent for the Company contractually to
obligate itself to indemnify in a reasonable and adequate manner the Indemnitee
and to assume for itself maximum liability for expenses and damages in
connection with claims lodged against him for his decisions and actions as a
director and/or officer of the Company; and
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which is acknowledged
by each of the parties hereto, the parties agree as follows:
I
DEFINITIONS
For purposes of this Agreement, the following terms shall have
the meanings set forth below:
A. "Board" shall mean the Board of Directors of the Company.
B. "Change in Control" shall mean a change in the ownership or power to
direct the Voting Securities of the Company or the acquisition by a person not
affiliated with the Company of the ability to direct the management of the
Company.
C. "Corporate Status" shall mean the status of a person who is or was a
director or officer of the Company, or a member of any committee of the Board,
and the status of a person who, while a director or officer of the Company, is
or was serving at the request of the Company as a director, officer, partner
(including service as a general partner of any limited partnership), trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, other incorporated or unincorporated entity or enterprise
or employee benefit plan.
D. "Disinterested Director" shall mean a director of the Company who
neither is nor was a party to the Proceeding in respect of which indemnification
is being sought by the Indemnitee.
E. "Expenses" shall mean without limitation expenses of Proceedings
including all attorneys' fees, retainers, court costs, transcript costs, fees of
experts, investigation fees and expenses, accounting and witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating or being or preparing to be a witness in a
Proceeding.
F. "Good Faith Act or Omission" shall mean an act or omission of the
Indemnitee reasonably believed by the Indemnitee to be in or not opposed to the
best interests of the Company and other than (i) one involving negligence or
misconduct, or, if the Indemnitee is an independent director, one involving
gross negligence or willful misconduct; (ii) one that was material to the loss
or liability and that was committed in bad faith or that was the result of
active
<PAGE>
or deliberate dishonesty; (iii) one from which the Indemnitee actually received
an improper personal benefit in money, property or services; or (iv) in the case
of a criminal Proceeding, one as to which the Indemnitee had cause to believe
his conduct was unlawful.
G. "Liabilities" shall mean liabilities of any type whatsoever,
including, without limitation, any judgments, fines, excise taxes and penalties
under the Employee Retirement Income Security Act of 1974, as amended, penalties
and amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection with or in respect of such judgments,
fines, penalties or amounts paid in settlement) in connection with the
investigation, defense, settlement or appeal of any Proceeding or any claim,
issue or matter therein.
H. "Proceeding" shall mean any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other actual, threatened or completed proceeding
whether civil, criminal, administrative or investigative, or any appeal
therefrom.
I. "Voting Securities" shall mean any securities of the
Company that are entitled to vote generally in the election of directors.
II
TERMINATION OF AGREEMENT
This Agreement shall continue until, and terminate upon the later to
occur of (i) the death of the Indemnitee; or (ii) the final termination of all
Proceedings (including possible Proceedings) in respect of which the Indemnitee
is granted rights of indemnification or advancement of Expenses hereunder and of
any proceeding commenced by the Indemnitee regarding the interpretation or
enforcement of this Agreement.
III
SERVICE BY INDEMNITEE, NOTICE OF
PROCEEDINGS, DEFENSE OF CLAIMS
A. Notice of Proceedings. The Indemnitee agrees to notify the Company
promptly in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder, but the Indemnitee's omission to so notify the Company shall
not relieve the Company from any liability which it may have to the Indemnitee
under this Agreement.
B. Defense of Claims. The Company will be entitled to participate, at
its own expense, in any Proceeding of which it has notice. The Company jointly
with any other indemnifying party similarly notified of any Proceeding will be
entitled to assume the defense of the Indemnitee therein, with counsel
reasonably satisfactory to the Indemnitee; provided, however, that the Company
shall not be entitled to assume the defense of the Indemnitee in any Proceeding
if there has been a Change in Control or if the Indemnitee has reasonably
concluded that there may be a conflict of interest between the Company and the
Indemnitee with respect to such Proceeding. The Company will not be liable to
the Indemnitee under this Agreement for any Expenses incurred by the Indemnitee
in connection with the defense of any Proceeding, other than reasonable costs of
investigation or as otherwise provided below, after notice from the Company to
the Indemnitee of its election to assume the defense of the Indemnitee therein.
The Indemnitee shall have the right to employ his own counsel in any such
Proceeding, but the fees and expenses of such counsel incurred after notice from
the Company of its assumption of the defense thereof shall be at the expense of
the Indemnitee unless (i) the employment of counsel by the Indemnitee has been
authorized by the Company; (ii) the Indemnitee shall have reasonably concluded
that counsel employed by the Company may not adequately represent the Indemnitee
and shall have so informed the Company; or (iii) the Company shall not in fact
have employed counsel to assume the defense of the Indemnitee in such Proceeding
or such counsel shall not, in fact, have assumed such defense or such counsel
shall not be acting, in connection therewith, with reasonable diligence; and in
each such case the fees and expenses of the Indemnitee's counsel shall be
advanced by the Company in accordance with this Agreement.
C. Settlement of Claims. The Company shall not settle any Proceeding in
any manner which would impose any liability, penalty or limitation on the
Indemnitee without the written consent of the Indemnitee; provided, however,
that the Indemnitee will not unreasonably withhold or delay consent to any
proposed settlement. The Company shall not be liable to indemnify the Indemnitee
under this Agreement or otherwise for any amounts paid in settlement of any
Proceeding effected by the Indemnitee without the Company's written consent,
which consent shall not be unreasonably withheld or delayed.
IV
INDEMNIFICATION
A. In General. Upon the terms and subject to the conditions set forth
in this Agreement, the Company shall hold harmless and indemnify the Indemnitee
against any and all Liabilities actually incurred by or for him in connection
with any Proceeding (whether the Indemnitee is or becomes a party, a witness or
otherwise is a participant in any role) to the fullest extent required or
permitted by the Articles of Incorporation and by applicable law in effect on
the date hereof and to such greater extent as applicable law may hereafter from
time to time permit. For all matters for which the Indemnitee is entitled to
indemnification under this Article IV, the Indemnitee shall be entitled to
advancement of Expenses in accordance with Article V hereof.
B. Proceeding Other Than a Proceeding by or in the Right of the
Company. If the Indemnitee was or is a party or is threatened to be made a party
to any Proceeding (whether the Indemnitee is or becomes a party, a witness or
otherwise is a participant in any role) (other than a Proceeding by or in the
right of the Company) by reason of his Corporate Status, or by reason of alleged
action or inaction by him in any such capacity, the Company shall, subject to
the limitations set forth in Section IV.F. below, hold harmless and indemnify
him against any and all Expenses and Liabilities actually and reasonably
incurred by or for the Indemnitee in connection with the Proceeding if the
act(s) or omission(s) of the Indemnitee giving rise thereto were Good Faith
Act(s) or Omission(s).
<PAGE>
C. Proceedings by or in the Right of the Company. If the Indemnitee was
or is a party or is threatened to be made a party to any Proceeding (whether the
Indemnitee is or becomes a party, a witness or otherwise is a participant in any
role) by or in the right of the Company to procure a judgment in its favor by
reason of his Corporate Status, or by reason of any action or inaction by him in
any such capacity, the Company shall, subject to the limitations set forth in
Section IV.F. below, hold harmless and indemnify him against any and all
Expenses actually incurred by or for him in connection with the investigation,
defense, settlement or appeal of such Proceeding if the act(s) or omission(s) of
the Indemnitee giving rise to the Proceeding were Good Faith Act(s) or
Omission(s); except that no indemnification under this Section IV.C. shall be
made in respect of any claim, issue or matter as to which the Indemnitee shall
have been finally adjudged to be liable to the Company, unless a court of
appropriate jurisdiction (including, but not limited to, the court in which such
Proceeding was brought) shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
regardless of whether the Indemnitee's act(s) or omission(s) were found to be a
Good Faith Act(s) or Omission(s), the Indemnitee is fairly and reasonably
entitled to indemnification for such Expenses which such court shall deem
proper.
D. Indemnification of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee is, by reason of the Indemnitee's Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, the Indemnitee shall
be indemnified by the Company to the maximum extent consistent with applicable
law, against all Expenses and Liabilities actually incurred by or for him in
connection therewith. If the Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one or more but
less than all claims, issues or matters in such Proceeding, the Company shall
hold harmless and indemnify the Indemnitee to the maximum extent consistent with
applicable law, against all Expenses and Liabilities actually and reasonably
incurred by or for him in connection with each successfully resolved claim,
issue or matter in such Proceeding. Resolution of a claim, issue or matter by
dismissal, with or without prejudice, except as provided in subsection F hereof,
shall be deemed a successful result as to such claim, issue or matter, so long
as there has been no finding (either adjudicated or pursuant to Article VI
hereof) that the act(s) or omission(s) of the Indemnitee giving rise thereto
were not a Good Faith Act(s) or Omission(s).
E. Indemnification for Expenses of Witness. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee, by reason of the
Indemnitee's Corporate Status, has prepared to serve or has served as a witness
in any Proceeding, or has participated in discovery proceedings or other trial
preparation, the Indemnitee shall be held harmless and indemnified against all
Expenses actually and reasonably incurred by or for him in connection therewith.
F. Specific Limitations on Indemnification. In addition to the other
limitations set forth in this Article IV, and notwithstanding anything in this
Agreement to the contrary, the Company shall not be obligated under this
Agreement to make any payment to the Indemnitee for indemnification with respect
to any Proceeding:
<PAGE>
1. To the extent that payment is actually made to the
Indemnitee under any insurance policy or is made on behalf of the
Indemnitee by or on behalf of the Company otherwise than pursuant to
this Agreement.
2. If a court in such Proceeding has entered a judgment or
other adjudication which is final and has become nonappealable and
establishes that a claim of the Indemnitee for such indemnification
arose from: (i) a breach by the Indemnitee of the Indemnitee's duty of
loyalty to the Company or its shareholders; (ii) acts or omissions of
the Indemnitee that are not Good Faith Acts or Omissions or which are
the result of active and deliberate dishonesty; (iii) acts or omissions
of the Indemnitee which the Indemnitee had reasonable cause to believe
were unlawful; or (iv) a transaction in which the Indemnitee actually
received an improper personal benefit in money, property or services.
3. If there has been no Change in Control, for Liabilities in
connection with Proceedings settled without the consent of the Company
which consent, however, shall not be unreasonably withheld.
4. For any loss or liability arising from an alleged violation
of federal or state securities laws unless one or more of the following
conditions are met: (i) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to
the Indemnitee, (ii) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the Indemnitee;
or (iii) a court of competent jurisdiction approves a settlement of the
claims against the Indemnitee and finds that indemnification of the
settlement and the related costs should be made, and the court
considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the published
position of any state securities regulatory authority in which
securities of the Company were offered or sold as to indemnification
for violations of securities laws.
V
ADVANCEMENT OF EXPENSES
Notwithstanding any provision to the contrary in Article VI hereof, the
Company shall advance to the Indemnitee all Expenses which, by reason of the
Indemnitee's Corporate Status, were incurred by or for him in connection with
any Proceeding for which the Indemnitee is entitled to indemnification pursuant
to Article IV hereof, in advance of the final disposition of such Proceeding,
provided that all of the following are satisfied: (i) the Indemnitee was made a
party to the proceeding by reason of his service as a director or officer of the
Company, (ii) the Indemnitee provides the Company with written affirmation of
his good faith belief that he has met the standard of conduct necessary for
indemnification by the Company pursuant to Article IV hereof, (iii) the
Indemnitee provides the Company with a written agreement (the "Undertaking") to
repay the amount paid or reimbursed by the Company, together with the applicable
legal rate of interest thereon, if it is ultimately determined that the
Indemnitee did not comply with the requisite standard of conduct, and (iv) the
legal proceeding was initiated by a third party who is not a stockholder of the
Company or, if by a stockholder of the Company acting in his or her capacity as
such, a court of competent jurisdiction approves such advancement. The
Indemnitee shall be required to execute and submit the Undertaking to repay
Expenses advanced in the form of Exhibit A attached hereto or in such form as
may be required under applicable law as in effect at the time of execution
thereof. The Undertaking shall reasonably evidence the Expenses incurred by or
for the Indemnitee and shall contain the written affirmation by the Indemnitee,
described above, of his good faith belief that the standard of conduct necessary
for indemnification has been met. The Company shall advance such expenses within
five (5) business days after the receipt by the Company of the Undertaking. The
Indemnitee hereby agrees to repay any Expenses advanced hereunder if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
against such Expenses. Any advances and the undertaking to repay pursuant to
this Article V shall be unsecured.
VI
PROCEDURE FOR PAYMENT OF LIABILITIES;
DETERMINATION OF RIGHT TO INDEMNIFICATION
A. Procedure for Payment. To obtain indemnification for Liabilities
under this Agreement, the Indemnitee shall submit to the Company a written
request for payment, including with such request such documentation as is
reasonably available to the Indemnitee and reasonably necessary to determine
whether, and to what extent, the Indemnitee is entitled to indemnification and
payment hereunder. The Secretary of the Company, or such other person as shall
be designated by the Board of Directors, promptly upon receipt of a request for
indemnification shall advise the Board of Directors, in writing, of such
request. Any indemnification payment due hereunder shall be paid by the Company
no later than five (5) business days following the determination, pursuant to
this Article VI, that such indemnification payment is proper hereunder.
B. No Determination Necessary when the Indemnitee was Successful. To
the extent the Indemnitee has been successful, on the merits or otherwise, in
defense of any Proceeding referred to in Sections IV.B. or IV.C. above or in the
defense of any claim, issue or matter described therein, the Company shall
indemnify the Indemnitee against Expenses actually and reasonably incurred by or
for him in connection with the investigation, defense or appeal of such
Proceeding.
C. Determination of Good Faith Act or Omission. In the event that
Section VI.B. is inapplicable, the Company also shall hold harmless and
indemnify the Indemnitee unless the Company shall prove by clear and convincing
evidence to a forum listed in Section VI.D. below that the act(s) or omission(s)
of the Indemnitee giving rise to the Proceeding were not Good Faith Act(s) or
Omission(s).
D. Forum for Determination. The Indemnitee shall be entitled to select
from among the following the forums, in which the validity of the Company's
claim under Section VI.C., above, that the Indemnitee is not entitled to
indemnification will be heard:
1. A quorum of the Board consisting of Disinterested
Directors;
2. The shareholders of the Company;
<PAGE>
3. Legal counsel selected by the Indemnitee, subject
to the approval of the Board, which approval shall
not be unreasonably delayed or denied, which
counsel shall make such determination in a written
opinion; or
4. A panel of three arbitrators, one of whom is
selected by the Company, another of whom is selected
by the Indemnitee and the last of whom is selected
jointly by the first two arbitrators so selected.
As soon as practicable, and in no event later than thirty (30) days after
written notice of the Indemnitee's choice of forum pursuant to this Section
VI.D., the Company shall, at its own expense, submit to the selected forum in
such manner as the Indemnitee or the Indemnitee's counsel may reasonably
request, its claim that the Indemnitee is not entitled to indemnification, and
the Company shall act in the utmost good faith to assure the Indemnitee a
complete opportunity to defend against such claim. The fees and expenses of the
selected forum in connection with making the determination contemplated
hereunder shall be paid by the Company. If the Company shall fail to submit the
matter to the selected forum within thirty (30) days after the Indemnitee's
written notice or if the forum so empowered to make the determination shall have
failed to make the requested determination within thirty (30) days after the
matter has been submitted to it by the Company, the requisite determination that
the Indemnitee has the right to indemnification shall be deemed to have been
made.
E. Right to Appeal. Notwithstanding a determination by any forum listed
in Section VI.D. above that the Indemnitee is not entitled to indemnification
with respect to a specific Proceeding, the Indemnitee shall have the right to
apply to the court in which that Proceeding is or was pending, or to any other
court of competent jurisdiction, for the purpose of enforcing the Indemnitee's
right to indemnification pursuant to this Agreement. Such enforcement action
shall consider the Indemnitee's entitlement to indemnification de novo, and the
Indemnitee shall not be prejudiced by reason of a prior determination that the
Indemnitee is not entitled to indemnification. The Company shall be precluded
from asserting that the procedures and presumptions of this Agreement are not
valid, binding and enforceable. The Company further agrees to stipulate in any
such judicial proceeding that the Company is bound by all the provisions of this
Agreement and is precluded from making any assertion to the contrary.
F. Right to Seek Judicial Determination. Notwithstanding any other
provision of this Agreement to the contrary, at any time after sixty (60) days
after a request for indemnification has been made to the Company (or upon
earlier receipt of written notice that a request for indemnification has been
rejected) and before the third (3rd) anniversary of the making of such
indemnification request, the Indemnitee may petition a court of competent
jurisdiction, whether or not the court has jurisdiction over, or is the forum in
which is pending, the Proceeding, to determine whether the Indemnitee is
entitled to indemnification hereunder, and such court thereupon shall have the
exclusive authority to make such determination, unless and until such court
dismisses or otherwise terminates the Indemnitee's action without having made
such determination. The court, as petitioned, shall make an independent
determination of whether the Indemnitee is entitled to indemnification
hereunder, without regard to any prior determination in any other forum as
provided hereby.
<PAGE>
G. Expenses under this Agreement. Notwithstanding any other provision
in this Agreement to the contrary, the Company shall indemnify the Indemnitee
against all Expenses incurred by the Indemnitee in connection with any hearing
or proceeding under this Section VI involving the Indemnitee and against all
Expenses incurred by the Indemnitee in connection with any other action between
the Company and the Indemnitee involving the interpretation or enforcement of
the rights of the Indemnitee under this Agreement, even if it is finally
determined that the Indemnitee is not entitled to indemnification in whole or in
part hereunder.
VII
PRESUMPTIONS AND EFFECT
OF CERTAIN PROCEEDINGS
A. Burden of Proof. In making a determination with respect to
entitlement to indemnification hereunder, the person, persons, entity or
entities making such determination shall presume that the Indemnitee is entitled
to indemnification under this Agreement and the Company shall have the burden of
proof to overcome that presumption.
B. Effect of Other Proceedings. The termination of any Proceeding or of
any claim, issue or matter therein, by judgment, order or settlement shall not
create a presumption that the act(s) or omission(s) giving rise to the
Proceeding were not Good Faith Act(s) or Omission(s). The termination of any
Proceeding by conviction, or upon a plea of nolo contendere, or its equivalent,
or an entry of an order of probation prior to judgment, shall create a
rebuttable presumption that the act(s) or omission(s) of the Indemnitee giving
rise to the Proceeding were not Good Faith Act(s) or Omission(s).
C. Reliance as Safe Harbor. For purposes of any determination of
whether any act or omission of the Indemnitee was a Good Faith Act or Omission,
each act of the Indemnitee shall be deemed to be a Good Faith Act or Omission if
the Indemnitee's action is based on the records or books of accounts of the
Company, including financial statements, or on information supplied to the
Indemnitee by the officers of the Company in the course of their duties, or on
the advice of legal counsel for the Company or on information or records given
or reports made to the Company by an independent certified public accountant or
by an appraiser or other expert selected with reasonable care by the Company.
The provisions of this Section VII.C. shall not be deemed to be exclusive or to
limit in any way the other circumstances in which the Indemnitee may be deemed
to have met the applicable standard of conduct set forth in this Agreement or
under applicable law.
D. Actions of Others. The knowledge and/or actions, or failure to act,
of any director, officer, agent or employee of the Company shall not be imputed
to the Indemnitee for purposes of determining the right to indemnification under
this Agreement.
<PAGE>
VIII
INSURANCE
In the event that the Company maintains officers' and directors' or
similar liability insurance to protect itself and any director or officer of the
Company against any expense, liability or loss, such insurance shall cover the
Indemnitee to at least the same degree as each other director and/or officer of
the Company.
IX
OBLIGATIONS OF THE COMPANY
UPON A CHANGE IN CONTROL
In the event of a Change in Control, upon written request of the
Indemnitee the Company shall establish a trust for the benefit of the Indemnitee
hereunder (a "Trust") and from time to time, upon written request from the
Indemnitee, shall fund the Trust in an amount sufficient to satisfy all amounts
actually paid hereunder as indemnification for Liabilities or Expenses
(including those paid in advance) or which the Indemnitee reasonably determines
and demonstrates, from time to time, may be payable by the Company hereunder.
The amount or amounts to be deposited in the Trust shall be determined by legal
counsel selected by the Indemnitee and approved by the Company, which approval
shall not be unreasonably withheld. The terms of the Trust shall provide that
(i) the Trust shall not be dissolved or the principal thereof invaded without
the written consent of the Indemnitee; (ii) the trustee of the Trust (the
"Trustee") shall be selected by the Indemnitee; (iii) the Trustee shall make
advances to the Indemnitee for Expenses within ten (10) business days following
receipt of a written request therefor (and the Indemnitee hereby agrees to
reimburse the Trust under the circumstances under which the Indemnitee would be
required to reimburse the Company under Article V hereof; (iv) the Company shall
continue to fund the Trust from time to time in accordance with its funding
obligations hereunder; (v) the Trustee promptly shall pay to the Indemnitee all
amounts as to which indemnification is due under this Agreement; (vi) unless the
Indemnitee agrees otherwise in writing, the Trust for the Indemnitee shall be
kept separate from any other trust established for any other person to whom
indemnification might be due by the Company; and (vii) all unexpended funds in
the Trust shall revert to the Company upon final, nonappealable determination by
a court of competent jurisdiction that the Indemnitee has been indemnified to
the full extent required under this Agreement.
X
NON-EXCLUSIVITY,
SUBROGATION AND MISCELLANEOUS
A. Non-Exclusivity. The rights of the Indemnitee hereunder shall not be
deemed exclusive of any other rights to which the Indemnitee may at any time be
entitled under any provision of law, the Articles of Incorporation, the Bylaws
of the Company, as the same may be in effect from time to time, any agreement, a
vote of shareholders of the Company or a resolution of directors of the Company
or otherwise, and to the extent that during the term of this Agreement the
rights of the then-existing directors and officers of the Company are more
favorable to such directors or officers than the rights currently provided to
the Indemnitee under this Agreement, the Indemnitee shall be entitled to the
full benefits of such more favorable rights. No amendment, alteration,
rescission or replacement of this Agreement or any provision hereof which would
in any way limit the benefits and protections afforded to an Indemnitee hereby
shall be effective as to such Indemnitee with respect to any action or inaction
by such Indemnitee in the Indemnitee's Corporate Status prior to such amendment,
alteration, rescission or replacement.
B. Subrogation. In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all documents required and take
all action necessary to secure such rights, including execution of such
documents as are necessary to enable the Company to bring suit to enforce such
rights.
C. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i) if
delivered by hand, by courier or by telegram and receipted for by the party to
whom said notice or other communication shall have been directed at the time
indicated on such receipt; (ii) if by facsimile at the time shown on the
confirmation of such facsimile transmission; or (iii) if by U.S. certified or
registered mail, with postage prepaid, on the third business day after the date
on which it is so mailed:
If to the Indemnitee, as shown with the Indemnitee's signature below.
If to the Company to:
CNL Health Care Properties, Inc.
450 South Orange Avenue
Orlando, FL 32801
Attention: President
Facsimile No. (407)423-2894
or to such other address as may have been furnished to the Indemnitee by the
Company or to the Company by the Indemnitee, as the case may be.
D. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the substantive laws
of the State of Maryland, without application of the conflict of laws principles
thereof.
E. Binding Effect. Except as otherwise provided in this Agreement, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their heirs, executors, administrators, successors, legal representatives
and permitted assigns. The Company shall require any successor or assignee
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of its respective assets or business, by written
agreement in form and substance reasonably satisfactory to the Indemnitee,
expressly to assume and agree to be bound by and to perform this Agreement in
the same manner and to the same extent as the Company would be required to
perform absent such succession or assignment.
F. Waiver. No termination, cancellation, modification, amendment,
deletion, addition or other change in this Agreement, or any provision hereof,
or waiver of any right or remedy herein, shall be effective for any purpose
unless specifically set forth in a writing signed by the party or parties to be
bound thereby. The waiver of any right or remedy with respect to any occurrence
on one occasion shall not be deemed a waiver of such right or remedy with
respect to such occurrence on any other occasion.
G. Entire Agreement. This Agreement, constitutes the entire agreement
and understanding among the parties hereto in reference to the subject matter
hereof; provided, however, that the parties acknowledge and agree that the
Amended and Restated Articles of Incorporation of the Company contain provisions
on the subject matter hereof and that this Agreement is not intended to, and
does not, limit the rights or obligations of the parties hereto pursuant to such
instruments.
H. Titles. The titles to the articles and sections of this
Agreement are inserted for convenience of reference only and should not be
deemed a part hereof or affect the construction or interpretation of any
provisions hereof.
I. Invalidity of Provisions. Every provision of this
Agreement is severable, and the invalidity or unenforceability of any term
or provision shall not effect the validity or enforceability of the remainder
of this Agreement.
J. Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
K. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one agreement binding on all the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CNL HEALTH CARE PROPERTIES, INC.
By:
Name: Robert A. Bourne
________________________, as INDEMNITEE
Name: Thomas J. Hutchison III
Title: Executive Vice President
Address: 450 South Orange Avenue
Orlando, Florida 32801
Facsimile No.: (407) 423-2984
<PAGE>
EXHIBIT A
FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED
The Board of Directors of CNL Health Care
Properties, Inc.
Re: Undertaking to Repay Expenses Advanced
Ladies and Gentlemen:
This undertaking is being provided pursuant to that certain
Indemnification Agreement dated the ____ day of September, 1998, by and among
CNL Health Care Properties, Inc. and the undersigned Indemnitee (the
"Indemnification Agreement"), pursuant to which I am entitled to advancement of
expenses in connection with [Description of Proceeding] (the "Proceeding").
Terms used herein and not otherwise defined shall have the meanings specified in
the Indemnification Agreement.
I am subject to the Proceeding by reason of my Corporate Status or by
reason of alleged actions or omissions by me in such capacity. During the period
of time to which the Proceeding relates I was _____________________ [name of
office(s) held] of CNL Health Care Properties, Inc. Pursuant to Section IV of
the Indemnification Agreement, the Company is obligated to reimburse me for
Expenses that are actually and reasonably incurred by or for me in connection
with the Proceeding, provided that I execute and submit to the Company an
Undertaking in which I (i) undertake to repay any Expenses paid by the Company
on my behalf, together with the applicable legal rate of interest thereon, if it
shall be ultimately determined that I am not entitled to be indemnified thereby
against such Expenses; (ii) affirm my good faith belief that I have met the
standard of conduct necessary for indemnification; and (iii) reasonably evidence
the Expenses incurred by or for me.
[Description of expenses incurred by or for Indemnitee]
This letter shall constitute my undertaking to repay to the Company any
Expenses paid by it on my behalf, together with the applicable legal rate of
interest thereon, in connection with the Proceeding if it is ultimately
determined that I am not entitled to be indemnified with respect to such
Expenses as set forth above. I hereby affirm my good faith belief that I have
met the standard of conduct necessary for indemnification and that I am entitled
to such indemnification.
----------------------------------
Signature
----------------------------------
Print Name
----------------------------------
Date
ii
EXHIBIT 10.4
Purchase and Sale Agreement
between
CNL Health Care Partners, LP
and
Marriot Senior Living Services, Inc.
<PAGE>
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
MARRIOTT INTERNATIONAL, INC.
as MI,
and
MARRIOTT SENIOR LIVING SERVICES, INC.
as Seller,
and
CNL HEALTH CARE PARTNERS, L.P.
as Purchaser
---------------------------
Dated: March 23, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION 1. DEFINITIONS...........................................................................................1
<S><C>
SECTION 2. PURCHASE-SALE; DILIGENCE..............................................................................3
2.1 Purchase-Sale............................................................................................3
2.2 Diligence Inspections....................................................................................3
2.3 Title Matters............................................................................................3
2.4 Survey...................................................................................................3
2.5 Environmental Report.....................................................................................3
2.6 Immaterial Taking........................................................................................3
SECTION 3. PURCHASE AND SALE.....................................................................................3
3.1 Closing....................................................................................................3
3.2 Purchase Price.............................................................................................3
3.3 Competitor.................................................................................................3
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.........................................................3
4.1 Closing Documents..........................................................................................3
4.2 Condition of the Property..................................................................................3
4.3 Title Policies.............................................................................................3
4.4 Opinions of Counsel........................................................................................3
4.5 FF&E Schedule..............................................................................................3
4.6 Other......................................................................................................3
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE............................................................3
5.1 Purchase Price.............................................................................................3
5.2 Closing Documents..........................................................................................3
5.3 Opinions of Counsel........................................................................................3
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER..............................................................3
6.1 Status and Authority of the Seller.........................................................................3
6.2 Status and Authority of MI.................................................................................3
6.3 Status and Authority of Tenant.............................................................................3
6.4 Employees..................................................................................................3
6.5 Existing Agreements........................................................................................3
6.6 Tax Returns................................................................................................3
6.7 Action of MI and Seller....................................................................................3
6.8 No Violations of Agreements................................................................................3
6.9 Litigation.................................................................................................3
6.10 Not A Foreign Person......................................................................................3
6.11 Construction Contracts; Mechanics' Liens..................................................................3
6.12 Permits, Licenses.........................................................................................3
6.13 Hazardous Substances......................................................................................3
6.14 Insurance.................................................................................................3
6.15 Financial Information.....................................................................................3
6.16 Contracts.................................................................................................3
6.17 Title to FF&E.............................................................................................3
6.18 FF&E......................................................................................................3
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................................................3
7.1 Status and Authority of the Purchaser......................................................................3
7.2 Status and Authority of the Guarantors.....................................................................3
7.3 Action of the Purchaser....................................................................................3
7.4 No Violations of Agreements................................................................................3
7.5 Litigation.................................................................................................3
SECTION 8. COVENANTS OF THE SELLER...............................................................................3
8.1 Compliance with Laws.......................................................................................3
8.2 Correction of Defects......................................................................................3
8.3 Insurance..................................................................................................3
8.4 Material Defects in Structural Systems.....................................................................3
SECTION 9. APPORTIONMENTS........................................................................................3
9.1 Apportionments.............................................................................................3
9.2 Closing Costs..............................................................................................3
SECTION 10. DEFAULT..............................................................................................3
10.1 Default by the Seller.....................................................................................3
10.2 Default by the Purchaser..................................................................................3
10.3 Purchaser's Deposit.......................................................................................3
SECTION 11. MISCELLANEOUS........................................................................................3
11.1 Agreement to Indemnify....................................................................................3
11.2 Brokerage Commissions.....................................................................................3
11.3 Publicity.................................................................................................3
11.4 Notices...................................................................................................3
11.5 Waivers, Etc..............................................................................................3
11.6 Assignment; Successors and Assigns........................................................................3
11.7 Severability..............................................................................................3
11.8 Counterparts, Etc.........................................................................................3
11.9 Governing Law.............................................................................................3
11.10 Performance on Business Days.............................................................................3
11.11 Attorneys' Fees..........................................................................................3
11.12 Relationship.............................................................................................3
11.13 Section and Other Headings...............................................................................3
11.14 Disclosure...............................................................................................3
</TABLE>
Schedule A - Purchase Price
Schedule B - Guaranty
Schedule C - Lease Agreement
Schedule D - Limited Rent Guaranty
Schedule E - Membership Interest Pledge Agreement
Schedule F - Form of Owner Agreement
Schedule G - Permitted Encumbrances
Schedule H - Plans & Specifications
Schedule I - Legal Description of the Real Property
Schedule J - Owner's Policy Commitment
Schedule K - Leasehold Policy Commitment
Schedule L - Survey
Schedule M - Form of Architect's Certificate
Schedule M-1 - Form of Marriott's Architect Certificate
Schedule N - Form of Engineer's Certificate
Schedule N-1 - Form of Marriott's Engineer Certificate
Schedule O - Operating Agreement
Schedule P - Escrow Agreement
Schedule Q - Environmental Report
Schedule R - FF&E Schedule
<PAGE>
3
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT is made as of the 23rd day of March,
2000, by and between MARRIOTT SENIOR LIVING SERVICES, Inc., a Delaware
corporation, as seller, and CNL HEALTH CARE PARTNERS, L.P., a Delaware limited
partnership, as purchaser, and joined in by MARRIOTT INTERNATIONAL, INC., a
Delaware corporation.
W I T N E S S E T H :
WHEREAS, the Seller (this and other capitalized terms used and not
otherwise defined herein having the meanings ascribed to such terms in Section
1) is, the owner of the Property; and
WHEREAS, Purchaser desires to purchase the Property and thereby acquire
all of the Seller's right, title and interest in and to the Property upon the
terms and conditions hereinafter set forth; and
WHEREAS, the Seller desires to sell to the Purchaser the Property and
thereby convey all right, title and interest in the Property, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, the Seller and the Purchaser
hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used in this Agreement and not defined elsewhere
herein shall have the meanings set forth below, in the Section of this Agreement
referred to below, or in such other document or agreement referred to below:
"Act of Bankruptcy" shall mean if a party hereto or any general partner
thereof or Tenant shall (a) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or all of or a substantial part of its property; (b) admit in writing its
inability to pay its debts as they become due; (c) make a general assignment for
the benefit of its creditors; (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect); (e) be adjudicated a bankrupt or insolvent; (f) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts;
(g) fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case or proceeding
under the Federal Bankruptcy Code (as now or hereafter in effect); or (h) take
any corporate or partnership action for the purpose of effecting any of the
foregoing; or if the proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner thereof or
Tenant, in any court of competent jurisdiction seeking (1) the liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
debts, of such party or general partner or Tenant; (2) the appointment of a
receiver, custodian, trustee or liquidator for such party or general partner or
Tenant or all or any substantial part of its assets; or (3) other similar relief
under any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereinafter in
effect), judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstated and in effect, for a period of sixty (60)
consecutive days.
"Agreement" shall mean this Purchase and Sale Agreement, together with
Schedules A through Q hereto, as it and they may be amended from time to time as
herein provided.
"Architect" shall mean Shayman, Salk, Sussholz & Company.
"As-Built' Drawings" shall mean the final "as-built" plans and
specifications for the Improvements which are to be furnished by the Seller to
Purchaser pursuant to Section 4.1 of this Agreement.
"Assets" shall mean all of the FF&E, the Contracts and the Intangible
Property, collectively, now owned or hereafter (but prior to the Closing Date)
acquired by Seller in connection with or relating to the Property other than any
Excluded Assets.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which banking institutions in the State of Maryland are authorized
by law or executive action to close.
"CHCP" shall mean CNL Health Care Property, Inc., a Maryland
corporation.
"CHCLP" shall mean CNL Health Care Partners, L.P., a Delaware limited
partnership.
"Closing" shall have the meaning given such term in Section 3.1.
"Closing Date" shall have the meaning given such term in Section 3.1.
"Competitor" shall mean a Person that owns or has an equity interest in
an assisted living facility brand, tradename, system or chain (a "Brand") which
is comprised of at least ten assisted living facilities; provided that such
Person shall not be deemed a Competitor if it holds its interest in a Brand
merely as a mere passive investor that has no control or influence over the
business decisions of the Brand at issue, such as a mere limited partner in a
partnership, a mere shareholder in a corporation or a mere payee of royalties
based on a prior sale transaction. A mere passive investor that is represented
by a Mere Director on the board of directors of a Competitor shall not be deemed
to have control or influence over the business decisions of that Competitor.
"Contracts" shall mean, with respect to the Property, any equipment
leases relating to the Property and disclosed to Purchaser on or before Closing
and which are to survive the Closing and to which the Seller is a party.
"Controlling Interest" shall mean (a) as to a corporation, the right to
exercise, directly or indirectly, more than fifty percent (50%) of the voting
rights attributable to the shares of the Entity (through ownership of such
shares or by contract), and (b) as to an Entity not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the Entity.
"Deposit" shall have the meaning given such term in Section 10.3.
"Engineer" shall mean Manhard Consulting Ltd.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, partnership, stock company or association, joint
venture, association, company, trust, bank, trust company, land trust, business
trust, cooperative, any government or agency or political subdivision thereof or
any other entity.
"Excluded Assets" shall mean (i) any right, title or interest in any
name containing any of the names "Marriott" and "Brighton Gardens" and other
marks used, or that may in the future be used, by MI or its affiliates,
including the Seller of such Property (and Seller and MI shall have the right to
remove any such name or mark appearing on any signage or other property pursuant
to the terms of the Operating Agreement), (ii) all property owned by the Seller
or any of its affiliates, not normally located at the Property and used, but not
exclusively, in connection with the operation of the Property, (iii) all items,
tangible or intangible, consisting of Proprietary Information, (iv) computer
software, (v) FAS, (vi) any Inventories located at the Property, (vii) working
capital, including without limitation, cash, bank accounts and accounts
receivable owned or held by Seller or any of its affiliates, (viii) all books,
ledger sheets, files and records, (ix) all contracts pertaining to the operation
of the Property other than the Contracts, and (x) any software, manuals,
brochures or directives used by the Seller or any of its affiliates, in the
operation of the Property.
"FAS" shall have the meaning given such term in the Lease.
"FF&E" shall mean all appliances, machinery, devices, fixtures,
appurtenances, equipment, furniture, furnishings and articles of tangible
personal property of every kind and nature whatsoever owned by the Seller or any
of its affiliates, and located in or at, or used in connection with the
ownership, operation or maintenance of such Property, other than motor vehicles.
"FF&E Schedule" shall have the meaning given such term in Section 4.5.
"Operating Agreement" shall mean the Operating Agreement to be entered
into at or prior to the Closing of the purchase and sale of the Property between
Tenant, as Owner, and Seller, as Operator, substantially in the form attached
hereto at Schedule O.
"Guarantor" shall mean CHCP and CHCLP, jointly and severally.
"Guaranty of Landlord's Obligations" shall mean the Guaranty in the
form of Schedule B hereto to be entered into by Guarantor for the benefit of
Tenant, in respect of the Lease and guarantying the landlord's obligations under
the Lease.
"Immaterial Taking" shall have the meaning given such term in Section
2.6.
"Improvements" shall mean all buildings, fixtures, walls, fences,
landscaping and other structures and improvements situated on, affixed or
appurtenant to the Real Property, including, but not limited to, all pavement,
access ways, curb cuts, parking, kitchen and support facilities, meeting and
conference rooms, swimming pool facilities, recreational amenities, office
facilities, drainage system and facilities, air ventilation and filtering
systems and facilities and utility facilities and connections for sanitary
sewer, potable water, irrigation, electricity, telephone, cable television and
natural gas, if applicable, to the extent the same form a part of the Property
and all appurtenances thereto acquired by Purchaser in connection with
Purchaser's acquisition of the Property pursuant to the terms of this Agreement.
"Intangible Property" shall mean, with respect to any Property, all
transferable or assignable (a) governmental permits, including licenses and
authorizations, required for the construction, ownership and operation of the
Improvements, including without limitation certificates of occupancy, building
permits, signage permits, liquor licenses, site use approvals, zoning
certificates, environmental and land use permits and any and all necessary
approvals from state or local authorities (hereinafter defined as "Permits") and
other approvals granted by any public body or by any private party pursuant to a
recorded instrument relating to the Property and (b) certificates, licenses,
warranties and guarantees and the Contracts held by Seller, other than (x) the
Excluded Assets and (y) such permits, operating permits, certificates, licenses
and approvals which are to be held by, or transferred to, the Tenant in order to
permit the Tenant to operate such Property properly in accordance with the terms
of the Lease.
"Inventories" shall have the meaning given such term in the Lease.
"Lease" shall mean the Lease Agreement in the form of Schedule C
attached hereto to be entered into by Tenant and Purchaser.
"Limited Rent Guaranty" shall mean the Limited Rent Guaranty in the
form of Schedule D hereto to be entered into by MI in respect of the Lease.
"Membership Interest Pledge" shall mean the Membership Interest Pledge
Agreement in the form of Schedule E hereto to be entered into by MI, or its
affiliates, owning all of the outstanding membership interests in Tenant, as
pledgor, and the Purchaser of such Property, as pledgee, as further security for
the performance of Tenant's obligations under the Lease for such Property.
"Mere Director" shall mean a Person who holds the office of director of
a corporation and who, as such director, has the right to vote not more than
twelve and one-half percent (12.5%) of the total voting rights on the board of
directors of such corporation, and who represents or acts on behalf of a mere
passive investor which neither (i) owns more than three percent (3%) of the
total voting rights attributable to all shares or ownership interests of a
Competitor, nor (ii) otherwise has the power to direct or cause the direction of
the management or policies of a Competitor.
"MI" shall mean Marriott International, Inc., a Delaware corporation,
its successor or successors by merger or operation of law, and assignee or
assignees to whom it has transferred all or substantially all of its assisted
living facility assets and/or businesses and which assumes in writing Marriott
International, Inc.'s obligations under this Agreement.
"Owner Agreement" shall mean the Owner Agreement in substantially the
form of Schedule F hereto to be entered into by MI, Tenant and CHCLP in respect
of the Lease.
"Permitted Encumbrances" shall mean: (a) any and all matters affecting
title to the Property as shown on Schedule G hereto; (b) liens for taxes,
assessments and governmental charges with respect to the Property not yet due
and payable or due and payable but not yet delinquent; (c) applicable zoning
regulations and ordinances and other governmental laws, ordinances and
regulations; (d) such other nonmonetary encumbrances which were granted by
Seller in order to facilitate, in Seller's reasonable discretion, the
construction and operation of the Improvements; (e) any utility, drainage or
other easements which are customary in connection with (or which reasonably
serve) the Improvements; (f) the Lease; (g) such other nonmonetary encumbrances
with respect to the Property which are not objected to by the Purchaser in
accordance with Section 2.3; and (h) such matters as are disclosed by the
Existing Survey.
"Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Plans and Specifications" shall mean those certain plans and
specifications which have been approved by Purchaser and which are identified on
Schedule H.
"Property" shall mean the Real Property and Improvements, together with
the Assets relating to the Property.
"Proprietary Information" shall have the meaning given such term in
the Lease.
"Purchase Price" shall mean the amount set forth on Schedule A hereto.
"Purchaser" shall mean CHCLP and its permitted successors and assigns.
"Real Property" shall mean the real property described in Schedule I to
this Agreement, together with all easements, rights of way, privileges, licenses
and appurtenances which the Seller may now own or hereafter acquire with respect
thereto, less any portion or portions thereof taken by way of an Immaterial
Taking.
"Reserve" shall have the meaning given such term in the Lease.
"Seller" shall mean Marriott Senior Living Services, Inc.
"Tenant" shall mean a limited liability company, wholly-owned, directly
or indirectly, by MI.
"Title Commitments" shall have the meaning given such term in Section
2.3.
"Title Company" shall mean First American Title Insurance Company or
such other title insurance company as shall have been approved by the Purchaser
and the Seller.
SECTION 2. PURCHASE-SALE; DILIGENCE.
2.1 Purchase-Sale. In consideration of the mutual covenants herein
contained, the Purchaser hereby agrees to purchase the Property from the Seller
and the Seller hereby agrees to sell the Property to the Purchaser for the
Purchase Price, subject to and in accordance with the terms and conditions of
this Agreement.
2.2 Diligence Inspections. Purchaser has approved (or is deemed to have
approved for purposes of this Agreement) the Property in its "as is, where is"
condition as of the date hereof. The Seller shall permit the Purchaser and its
representatives to inspect the Improvements at such reasonable times as the
Purchaser or its representatives may request by reasonable prior notice to the
Seller. During any such inspection, the Purchaser and its representatives shall
minimize any resulting interference with the operation of the Property. To the
extent that, in connection with such investigations, the Purchaser, its agents,
representatives or contractors, damages or disturbs the Property, the Purchaser
shall return the same to substantially the same condition which existed
immediately prior to such damage or disturbance. The Purchaser shall indemnify,
defend and hold harmless the Seller from and against any and all expense, loss
or damage (including, without limitation, reasonable attorneys' fees) which the
Seller may incur as a result of any act or omission of the Purchaser or its
representatives, agents or contractors in connection with any such inspections,
other than any expense, loss or damage arising from any act or omission of the
Seller. The foregoing indemnification agreement shall survive the termination of
this Agreement and the Closing hereunder.
2.3 Title Matters. Purchaser has approved (or is hereby deemed to have
approved) the state of title to the Property and all exceptions thereto
reflected in the written commitments for the issuance of (a) a title insurance
policy for the Property, a copy of which commitment is attached hereto as
Schedule J (the "Commitment"), and (b) a Leasehold Owner's Title Insurance
Policy for the Property naming Tenant as the insured, a copy of which commitment
is attached hereto as Schedule K (the "Leasehold Policy Commitment") (the
Commitment and Leasehold Policy Commitment herein, collectively, the "Title
Commitments"). Purchaser has approved the Commitment and the form of policy
provided for therein. MI has approved the Leasehold Policy Commitment and the
form of the leasehold policy provided for therein on behalf of the Tenant.
In the event that Seller decides to encumber a Property with an
additional document, instrument or other matter, Seller shall give Purchaser
notice thereof together with a copy of the document, instrument or other matter
to be placed of record against the Property ("Additional Exception"). Within
five (5) Business Days after receipt of a notice of any Additional Exception
with respect to any Property, the Purchaser shall give the Seller notice of its
approval or disapproval thereof. Purchaser shall not withhold its approval of
any such Additional Exception which would be a Permitted Encumbrance specified
in clauses (a) through (g), inclusive, of the definition of Permitted
Encumbrance in Section 1, and shall not unreasonably withhold, delay or
condition its approval of any other Additional Exception. If Purchaser fails to
respond within said five (5) Business Day period, Purchaser shall be deemed to
have approved such Additional Exception. If Purchaser unreasonably disapproves
of any Additional Exception, Seller shall be excused from performing any term or
condition (or any portion or aspect of a term or condition) of this Agreement
which Seller is unable or unwilling to perform as a result of its inability to
enter into and/or record such Additional Exception.
In the event that an encumbrance is placed on any Property (other than
a monetary encumbrance, which Seller shall pay, provided such encumbrance does
not exceed $250,000) as a result of judicial action taken by a local, state, or
Federal governmental entity with respect to violation of any state or Federal
environmental laws not caused by, authorized or acquiesced to by Seller, the
Purchaser's sole remedy shall be (A) to terminate this Agreement, in which event
this Agreement shall terminate and be of no further force or effect and Seller
shall reimburse to Purchaser the Purchaser's expenses incurred in respect of the
Property, not to exceed $5,000 (and direct Escrow Agent to refund to Purchaser
the Deposit as provided in Section 10.3) or (B) to consummate the transactions
contemplated hereby, notwithstanding such encumbrance, without any abatement or
reduction in the Purchase Price for the Property on account thereof.
2.4 Survey. Purchaser has approved the survey ("Existing Survey") for
the Property and all matters shown thereon (other than the billboard on the
southwest corner of the Property), which survey is identified on Schedule L
attached hereto.
2.5 Environmental Report. Purchaser has approved and accepts the
environmental condition of the Property as existing on the date hereof and as
reflected in the environmental report or reports in respect of the Property
identified in Schedule Q hereto.
2.6 Immaterial Taking. If prior to the Closing of the purchase of the
Property, such Property is the subject of a condemnation which does not, in
Seller's reasonable opinion, affect any material part of the Improvements and
does not materially adversely affect access to the Improvements or compliance
with applicable zoning or building requirements, including parking (an
"Immaterial Taking"), Seller will provide written notice of such Immaterial
Taking to Purchaser and this Agreement will remain in full force and effect in
respect of the purchase and sale of such Property, but with an abatement of the
Purchase Price for such Property equal to the amount of the award paid to Seller
on account of such taking, less the amount of Seller's costs and expenses,
including reasonable attorneys' fees and expenses, in establishing and
collecting such award.
SECTION 3. PURCHASE AND SALE.
3.1 Closing. (a) The purchase and sale of the Property shall be
consummated at a closing (the "Closing") in escrow with the Title Company at the
offices of Seller at 10400 Fernwood Road, Bethesda, Maryland, or at such other
location as the Seller and the Purchaser may agree, at 10:00 a.m. local time on
the date (the "Closing Date") that is three (3) Business Days after Purchaser
receives written notice that the condition set forth in Section 4.1(x) has been
fulfilled but not earlier than April 4, 2000 and not later than April 14, 2000.
3.2 Purchase Price. At the Closing, the Purchase Price for the Property
shall be payable by wire transfer of immediately available funds on the Closing
Date to an account or accounts to be designated by the Seller prior to the
Closing, subject to any adjustments and apportionments made pursuant to Section
9.1 of this Agreement.
3.3 Competitor. In the event that any sale, assignment, transfer or
other disposition, for value or otherwise, voluntary or involuntary, by merger,
operation of law or otherwise, in a single transaction or a series of
transactions, of any interest in Purchaser or any Person having an interest in
Purchaser, directly or indirectly, results, directly or indirectly, in a
Competitor owning a Controlling Interest in Purchaser, Seller shall have the
right, but not the obligation, to terminate this Agreement (and such termination
shall not constitute a default under any of the related transactions or
documents contemplated thereby, including this Agreement), and, solely with
respect to this Section 3.3, Purchaser shall be entitled to direct Escrow Agent
to refund to Purchaser the entire Deposit.
SECTION 4. CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE.
The obligation of the Purchaser to acquire the Property on the Closing
Date shall be subject to the satisfaction or waiver of the following conditions
precedent on and as of the Closing Date:
4.1 Closing Documents. The Seller shall have delivered to the Purchaser
with respect to the applicable Property:
(a) A special warranty deed, duly executed by the Seller, conveying to
Purchaser good and marketable title to the Property, free from all liens,
encumbrances, security interests, options and adverse claims of any kind or
character, subject to the Permitted Encumbrances and except as otherwise
specifically permitted hereunder;
(b) A Warranty Bill of Sale, an Assignment of Contracts, an Assignment
of Intangible Property and an Assignment of Construction-Related Contracts, each
duly executed by Seller (or MI, as applicable), transferring and assigning to
Purchaser all rights, title and interest of Seller (and MI, as applicable) in
the Assets, together with, to the extent the same are in the Seller's or MI's
(or their agent's) possession, original (or copies certified by Seller as true
and correct), fully executed copies of all agreements constituting any of the
same;
(c) The Lease for the Property duly executed by Tenant;
(d) The Limited Rent Guaranty duly executed by MI;
(e) The Membership Interest Pledge duly executed by Seller;
(f) A copy of the fully executed Operating Agreement with respect to
the Property ;
(g) The Owner Agreement duly executed by MI;
(h) A copy of the final certificate of occupancy for the Property;
(i) An architect's certificate in respect of the Improvements to the
Property in the form attached hereto as Schedule M, or as otherwise provided in
Section 4.2(c) below;
(j) An engineer's certificate in respect of the Improvements to the
Property in the form attached hereto as Schedule N, or as otherwise provided in
Section 4.2(c) below;
(k) Certified copies of applicable resolutions and certificates of
incumbency with respect to the Seller, Tenant, MI, and such other persons as the
Purchaser may reasonably require;
(l) A certificate of a duly authorized officer of MI and Seller
confirming the continued truth and accuracy of the representations and
warranties of the Seller in this Agreement (subject to such changes as Seller
has given notice of to Purchaser pursuant to Section 6 and subject to Section
4.2(b));
(m) A copy of the certificate of substantial completion substantially
in the form of AIA G704, if any, and a copy of the final "punch list" of
incomplete work, if any, required upon substantial completion of the
Improvements;
(n) The "As-Built" Drawings;
(o) The Permits (or copies thereof certified by Seller as true
and correct);
(p) The Contracts (or copies thereof certified by Seller as true
and correct);
(q) Copies of any and all warranties and guarantees pertaining to the
Improvements, specifically including the manufacturers roof membrane warranty
issued with respect to the buildings comprising the Improvements;
(r) Insurance certificates to be provided by Tenant pursuant to
the Lease;
(s) The FF&E Schedule;
(t) An Owner's affidavit in the usual and customary form of the Title
Company for the purpose of satisfying any request for the same in the applicable
Title Commitment;
(u) A settlement statement;
(v) Joint written notification from Seller and Purchaser to Escrow
Agent pursuant to the Escrow Agreement (hereinafter defined) authorizing the
release to Seller of the Deposit for application to the Purchase Price for such
Property;
(w) A certificate duly executed by Seller as required by the Illinois
Responsible Party Transfer Act;
(x) Evidence of the approval by the Illinois Health Facilities Planning
Board of a Certificate of Exemption from Change of Ownership relating to the
transfer of ownership of the Property from Seller to Purchaser; and
(y) An "as-built" survey prepared by Manhard Consulting, Ltd. dated as
of March 2000 which does not disclose any matter not referred to in clauses (a),
(c), (d), (e) or (g) of the definition of Permitted Encumbrances and that would
become an additional exception in the title policies issued pursuant to the
Title Commitments and not set forth in the Title Commitments.
(z) Such other documents, certificates and other instruments as may be
reasonably required to consummate the transaction contemplated hereby.
4.2 Condition of the Property
(a) No action shall be pending or threatened for the condemnation or
taking by power of eminent domain of all or any material portion of the
Property;
(b) All material licenses, permits and other authorizations necessary
for the current use, occupancy and operation of the Property shall be in full
force and effect; however, in the event that Seller fails to obtain any such
licenses, permits or other authorizations and discloses same to Purchaser,
Purchaser may, but shall not be required to, waive Seller's compliance with
Section 6.12 of this Agreement and proceed with Closing; and
(c) The Purchaser shall have received an architect's certificate in the
form of Schedule M executed by the Architect and an engineer's certificate in
the form of Schedule N, executed by the Engineer in respect of the applicable
Property; provided, however, that in the event that Seller is not able to
deliver to Purchaser either or both of the foregoing certificates executed by
the Architect and/or Engineer, as applicable, Purchaser shall accept in lieu
thereof, a certificate executed by Seller in substantially the form attached
hereto as Schedule M-1 and/or Schedule N-1, as applicable.
4.3 Title Policies. The Title Company shall be prepared, subject only
to payment of the applicable premium and delivery of all conveyance documents,
to issue the title policies pursuant to the Title Commitments, in accordance
with Section 2.3.
4.4 Opinions of Counsel. The Purchaser shall have received a written
opinion from counsel to the Seller and MI (which may be its in-house counsel),
in form and substance reasonably satisfactory to the Purchaser and its counsel,
regarding the organization, good standing and/or authority of the Seller and MI,
the Tenant, and the guarantor under the Limited Rent Guaranty and the
enforceability of this Agreement, the Lease, the Limited Rent Guaranty, the
Owner Agreement and the Membership Interest Pledge and such other matters with
respect to the transactions contemplated by this Agreement as the Purchaser may
reasonably require.
4.5 FF&E Schedule. Attached hereto as Schedule R is a schedule (the
"FF&E Schedule") of all FF&E at the Property owned by Seller and which FF&E is
intended to be part of the Assets to be owned by Purchaser upon and following
such Closing. Upon reasonable prior notice to Seller, Purchaser shall be
entitled to inspect the FF&E at the Property prior to Closing in order to
confirm and verify the FF&E Schedule.
4.6 Other.
(a) The representations and warranties of the Seller and MI set forth
in Section 6 hereof (as the same may have been changed by notice from Seller as
provided therein) shall be true, correct and complete in all material respects
on and as of the Closing Date;
(b) No Act of Bankruptcy on the part of the Seller, MI or Tenant shall
have occurred and remain outstanding as of the Closing Date;
(c) The Seller shall be the sole owner of good and marketable title to
the applicable Property free and clear of all liens, encumbrances, restrictions,
conditions and agreements (other than the Permitted Encumbrances and this
Agreement);
(d) There shall be no unsatisfied state or federal tax liens against or
affecting the applicable Seller, or any tax audit of the Seller in process,
which could result in a lien against the Property; and
(e) There shall be no outstanding, unsettled claim against the Seller
arising under any insurance policies in respect of the Seller or the Property
which could result in a lien against the Property.
SECTION 5. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE.
The obligation of the Seller to convey and transfer to the Purchaser
the Property on the applicable Closing Date is subject to the satisfaction or
waiver of the following conditions precedent on and as of such Closing Date:
5.1 Purchase Price. The Purchaser shall deliver to the Seller the
Purchase Price of the Property as provided in Section 3.2.
5.2 Closing Documents. The Purchaser shall have delivered to
the Seller:
(a) Duly executed and acknowledged counterparts of the documents
described in Subsections 4.1(b), (c), (d), (e), (g), (u) and (v);
(b) The Guaranty of Landlord's Obligations duly executed by the
Guarantor;
(c) A certificate of a duly authorized officer of the Purchaser
confirming the continued truth and accuracy of the representations and
warranties of the Purchaser in this Agreement;
(d) Certified copies of applicable resolutions and certificates of
incumbency with respect to the Purchaser, the Guarantor, and such other persons
as the Seller or the Tenant may reasonably require; and
(e) Such other documents, certificates and other instruments as may be
reasonably required to consummate the transaction contemplated hereby.
5.3 Opinions of Counsel. The Seller shall have received a written
opinion from (a) Lowndes, Drosdick, Doster, Kantor & Reed, P.A., counsel to the
Purchaser (or other counsel reasonably acceptable to Seller, MI and its
counsel), in form and substance reasonably satisfactory to Seller and its
counsel, regarding the good standing and authority of the Purchaser and the
Guarantor, and (b) counsel reasonably acceptable to Seller, MI, and its counsel
regarding the enforceability of this Agreement, the Lease, the Owner Agreement,
the Guaranty of Landlord's Obligations and such other matters with respect to
the transactions contemplated by this Agreement as MI, Seller or Tenant may
reasonably require.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce the Purchaser to enter into this Agreement, the Seller and
MI, represent and warrant to the Purchaser as follows:
6.1 Status and Authority of the Seller. The Seller is, or will be at or
before Closing, a corporation duly organized, validly existing and in corporate
good standing under the laws of its state of incorporation, and has all
requisite power and authority under the laws of such state and its respective
charter documents to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. Seller is duly qualified
to transact business and is in good standing in the state in which the Property
is located.
6.2 Status and Authority of MI. MI is a corporation duly organized,
validly existing and in corporate good standing under the laws of its state of
incorporation, and has all requisite power and authority under the laws of such
state and its respective charter documents to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. MI has duly qualified to transact business and is in good standing in
the state in which the Property is located.
6.3 Status and Authority of Tenant. Tenant is, or will be at Closing, a
limited liability company, duly organized, validly existing and in good standing
under the laws of the State of Delaware and duly qualified to do business and in
good standing under the laws of the state in which the Property is located.
6.4 Employees The Seller shall be responsible for payment of all wages
and salaries payable to, and all vacation pay, pension and welfare benefits and
other fringe benefits accrued with respect to all individuals employed by the
Seller at the Property relating to the period prior to the Closing and Tenant
shall be responsible for payment of all wages, salaries and benefits relating to
the period commencing on and from and after the Closing. At no time hereunder,
upon Closing or under the Lease, shall any of the employees at the Property
including employees of any manager thereof, be or be deemed to be the employees
of Purchaser, and upon and after Closing, be or be deemed to be transferred to
Purchaser. If required, the Seller will comply with the notice and other
requirements under the Worker Adjustment Retraining and Notification Act ("WARN
Act"), the Consolidated Omnibus Budget Reconciliation Act ("COBRA") or any
similar state or local legislation with respect to such employee matters, and
such obligation shall survive Closing, notwithstanding anything to the contrary
in the WARN Act. Because Purchaser at no time will be or be deemed to be the
employer of employees at the Property, it is expressly understood and agreed
that Purchaser is not and shall not be responsible or liable, directly or
indirectly, for payment of any benefits, severance liability, compensation, pay
or other obligations, of whatever nature, due or alleged to be due to any
employee at the Property including employees of any manager thereof, or of the
Seller attributable to any time period up to, upon and after Closing. Similarly,
there shall be no union agreements, pension plans, health plans, benefit plans,
deferred compensation plans, bonus plans or vacation plans or similar agreements
for or concerning such employees which shall be binding upon Purchaser.
6.5 Existing Agreements. There are no (or will not be at the Closing)
service contracts, maintenance agreements, leasing commissions or brokerage
agreements, repair contracts, property management contracts, contracts for the
purchase or delivery of labor, services, materials or goods, supplies or
equipment, leases, licensees or occupancy agreements, or similar agreements
entered into by or on behalf of any Seller which will be obligations of
Purchaser after the Closing, other than (i) the Permitted Encumbrances, (ii) the
documents to be assigned to the Purchaser pursuant to the terms hereof, (iii)
the Contracts, (iv) the Lease, (v) the Owner Agreement, and (vi) any other
document or instrument given or entered into in connection with Closing.
6.6 Tax Returns. All tax returns for privilege, gross receipts, excise,
sales and use, personal property and franchise taxes required by law to be filed
by the Seller prior to the date of the Closing will be prepared and duly filed,
prior to the Closing (or after Closing with respect to pre-Closing matters) and
all taxes, if any, shown on such returns or otherwise determined to be due,
together with any interest or penalties thereon, will be paid by Seller prior to
Closing, or allowance made therefor at Closing.
6.7 Action of MI and Seller. MI and Seller have taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by MI or the
Seller on or prior to each Closing Date, such document shall constitute the
valid and binding obligation and agreement of MI and/or Seller, as applicable,
enforceable against MI and/or Seller, as applicable, as the case may be, in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application affecting the rights and remedies of creditors and general
principles of equity.
6.8 No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by the Seller and/or MI, nor compliance with the
terms and provisions hereof, will result in any breach of the terms, conditions
or provisions of, or conflict with or constitute a default under, or result in
the creation of any lien, charge or encumbrance upon the Property pursuant to
the terms of any indenture, mortgage, deed of trust, note, evidence of
indebtedness or any other agreement or instrument by which the Seller and/or MI,
as the case may be, is bound.
6.9 Litigation. Neither Seller nor MI has received written notice of
and, to the Seller's and MI's knowledge, no investigation, action or proceeding
is pending or, to the Seller's and MI's knowledge, threatened, and the Seller
has not received written notice of and, to the Seller's and MI's knowledge, no
investigation looking toward such an action or proceeding has begun, which (a)
questions the validity of this Agreement or any action taken or to be taken
pursuant hereto, or (b) may result in or subject the Property to a material
liability which is not covered by insurance, whether or not Purchaser is
indemnified by Seller and/or MI with respect to the same, or (c) involves
condemnation or eminent domain proceedings against any material part of the
Property.
6.10 Not A Foreign Person. The Seller is not a "foreign person" within
the meaning of Section 1445 of the United States Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
6.11 Construction Contracts; Mechanics' Liens. At the Closing, there
will be no outstanding contracts made by the Seller for the construction or
repair of any Improvements relating to the Property which have not been fully
paid for or provision for the payment of which has not been made by Seller and
Seller shall discharge and have released of record or bonded all mechanics' or
materialmen's liens, if any, arising from any labor or materials furnished to
such Property prior to the Closing to the extent any such lien is not insured
over by the Title Company or bonded over pursuant to applicable law.
6.12 Permits, Licenses. As of the Closing, there will be in effect all
material licenses (including liquor licenses, if required), permits and other
authorizations necessary for the then current use, occupancy and operation of
the Property, unless failure to obtain any such licenses, permits and other
authorizations is disclosed to Purchaser, and Purchaser waives compliance
herewith in accordance with Section 4.2(b) of this Agreement.
6.13 Hazardous Substances. Except as otherwise disclosed to Purchaser,
including without limitation any matters described in the Environmental Reports,
to the Seller's and MI's knowledge, the Seller, since the date that Seller
acquired title to the Property, has not stored or disposed of (or engaged in the
business of storing or disposing of, or authorized the storage or disposal of)
nor has released nor caused nor authorized the release of any hazardous waste,
contaminants, oil, radioactive or other material on the Property, or any portion
thereof, the removal of which is required or the maintenance of which is
prohibited or penalized by any applicable Federal, state or local statutes,
laws, ordinances, rules or regulations, and which has not as of the Closing Date
been removed from the Property in accordance with such applicable statutes,
laws, ordinances, rules or regulations.
6.14 Insurance. The Seller has received no written notice from any
insurance carrier of defects or inadequacies in the Property which, if
uncorrected, would result in a termination of insurance coverage or a material
increase in the premiums charged therefor.
6.15 Financial Information. Financial information, including, without
limitation, all books and records and financial statements relating to the
Property, which have been provided to Purchaser are true, correct and complete
in all material respects.
6.16 Contracts. Seller has performed all of its obligations under each
Contract to which the Seller is a party or is subject and no fact or
circumstance has occurred, which by itself or with the passage of time or the
giving of notice or both would constitute a default under any such Contract.
Further, to Seller's knowledge, all other parties to such Contracts have
performed all of their obligations thereunder in all material respects and are
not in default thereunder.
6.17 Title to FF&E. The Seller has good and marketable title to the
FF&E described on the FF&E Schedule.
6.18 FF&E. The FF&E Schedule accurately describes in all material
respects the FF&E owned by the Seller and located at the Property.
The representations and warranties made in this Agreement by Seller
and, if applicable, MI, in Section 6.1 through Section 6.10, inclusive, are made
as of the date hereof and shall be deemed remade by the Seller and, if
applicable, MI, as of the Closing Date for the Property the Seller, with the
same force and effect as if made on, and as of, such date; and the
representations and warranties made in this Agreement by Seller and, if
applicable, MI, in Section 6.11 through Section 6.19, inclusive, shall be made
as of the Closing Date, provided, however, that, the Seller shall have the
right, from time to time prior to the Closing Date to modify the representations
and warranties made in Section 6.8 (No Violation of Agreements), Section 6.9
(Litigation) and Section 6.14 (Insurance) as a result of changes in applicable
conditions beyond the control of Seller, by notice to the Purchaser and, in such
event, the representations and warranties shall be deemed modified to the extent
required by such changes, and (a) if Seller and MI agree to indemnify Purchaser
against any loss that may be suffered by Purchaser as a result of such changes,
then Purchaser will be required to close hereunder without any abatement of the
Purchase Price or changes in any other condition, and (b) if Seller and MI elect
not to so indemnify Purchaser, Purchaser shall have the option to either accept
the change and close, or reject the change, in which case Purchaser's obligation
to purchase the Property shall terminate. All representations and warranties
made in this Agreement by the Seller and MI shall survive the Closing for a
period of one year. Any action, suit or proceeding with respect to the truth,
accuracy or completeness of any such representation or warranty shall be
commenced, if at all, on or before the date which is twelve (12) months after
the date of the Closing and, if not commenced on or before such date, thereafter
shall be void and of no force or effect.
Prior to the Closing contemplated by this Agreement, Purchaser will
have had the opportunity to investigate independently all physical aspects of
the Property, and to make all such independent inspections and/or investigations
of the Property that Purchaser deems necessary or desirable including, without
limitation, review of the building permits, certificates of occupancy,
environmental audits and assessments, toxic reports, surveys, investigation of
land use and development rights, development restrictions and conditions that
are or may be imposed by governmental agencies, agreements with associations or
other private parties affecting or concerning the Property, the condition of
title, soils and geological reports, engineering and structural certificates,
tests and third-party reports (if any), governmental agreements and approvals
and architectural plans and site plans. Purchaser represents and warrants that,
in entering into this Agreement, Purchaser has not relied on any representation,
warranty, promise or statement, express or implied, of Seller or MI, or anyone
acting for or on behalf of Seller or MI, other than as expressly set forth in
this Agreement; AND THAT, AS A MATERIAL INDUCEMENT TO THE EXECUTION AND DELIVERY
OF THIS AGREEMENT BY SELLER AND MI, PURCHASER ACKNOWLEDGES THAT THE PROPERTY
WILL, UPON THE ACQUISITION BY PURCHASER OF the PROPERTY, BE IN ITS "AS IS"
CONDITION AND IN ITS "AS IS" STATE OF REPAIR, WITH ALL FAULTS SUBJECT ONLY,
HOWEVER, TO THE EXPRESS COVENANTS, REPRESENTATIONS AND WARRANTIES MADE BY THE
SELLER AND MI FOR THE BENEFIT OF PURCHASER EXPRESSLY SET FORTH IN THIS
AGREEMENT.
Except as otherwise expressly provided in this Agreement or any
documents executed and delivered by Seller or MI to the Purchaser at the
Closing, the Seller and MI disclaim the making of any representations or
warranties, express or implied, regarding the Property or matters affecting the
same, whether made by the Seller or MI, on the Seller's behalf or on MI's
behalf, or otherwise, including, without limitation, the physical condition of
the Property, title to, the boundaries or other survey matters of, the Real
Property, pest control matters, soil conditions, the presence, existence or
absence of hazardous wastes, toxic substances or other environmental matters,
compliance with building, health, safety, land use and zoning laws, regulations
and orders, structural and other engineering characteristics, traffic patterns,
market data, economic conditions or projections, and any other information
pertaining to the Property or the market and physical environments in which they
are located. The Purchaser acknowledges that the Purchaser has entered into this
Agreement with the intention of making and relying upon its own investigation or
that of third parties with respect to the physical, environmental, economic and
legal condition of each Property, except as expressly provided in Section 6.8,
Section 6.9, Section 6.11, Section 6.12, Section 6.13, Section 6.15 and Section
6.17. The Purchaser further acknowledges that it has not received from or on
behalf of the Seller or MI, any accounting, feasibility, marketing, economic,
tax, legal, architectural, engineering, property management or other advice with
respect to this transaction and is relying solely upon the advice of third party
accounting, tax, legal, architectural, engineering, property management and
other advisors.
As used in this Agreement, the phrases "to Seller's knowledge," "to
MI's knowledge" and "to Seller's and MI's knowledge" or words of similar import
shall mean the actual (and not constructive or imputed) knowledge, without
independent investigation or inquiry, of Kevin E. Montano (and any subsequent
officer of Marriott Senior Living Services, Inc. having direct oversight
responsibility for the transactions contemplated hereby), or Timothy J. Grisius
(and any subsequent finance officer of MI having direct oversight responsibility
for the transactions contemplated hereby), or of an employee of Seller or MI, or
any Affiliated Person as to either, assigned to work at the Property in
connection with construction of the Improvements and/or in connection with the
installment of the FF&E on a full-time basis, if any.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
To induce the Seller to enter into this Agreement, the Purchaser and,
if Purchaser is other than CHCLP, CHCLP represents and warrants to the Seller as
follows:
7.1 Status and Authority of the Purchaser. The Purchaser is duly
organized and validly existing under the laws of the jurisdiction in which it
was formed, and has all requisite power and authority under the laws of such
state and under its charter documents to enter into and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
Purchaser is, or will be by the Closing Date, duly qualified and in good
standing in each of the states in which the Property is located.
7.2 Status and Authority of the Guarantors. CHCLP is a limited
partnership duly organized and validly existing under the laws of the State of
Delaware. CHCP is a corporation duly organized and validly existing under the
laws of the State of Maryland. CHCP and CHCLP each has all requisite power and
authority under the laws of the state under whose laws it has organized or
incorporated and under their respective charter documents to enter into and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. CHCLP is, or will be by the Closing Date, duly qualified
and in good standing in each of the states in which the Property is located.
7.3 Action of the Purchaser. The Purchaser has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and upon the execution and delivery of any document to be delivered by the
Purchaser on or prior to each Closing Date, such document shall constitute the
valid and binding obligation and agreement of the Purchaser, enforceable against
the Purchaser in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application affecting the rights and remedies of creditors and general
principles of equity.
7.4 No Violations of Agreements. Neither the execution, delivery or
performance of this Agreement by the Purchaser, nor compliance with the terms
and provisions hereof, will result in any breach of the terms, conditions or
provisions of, or conflict with or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Purchaser pursuant to the terms of any indenture, mortgage, deed of trust, note,
evidence of indebtedness or any other agreement or instrument by which the
Purchaser is bound.
7.5 Litigation. Purchaser has received no written notice of and, to
Purchaser's knowledge, no investigation, action or proceeding is pending and, to
Purchaser's knowledge, no action or proceeding is threatened and Purchaser has
received no notice of, and to Purchaser's knowledge, no investigation looking
toward such an action or proceeding has begun, which questions the validity of
this Agreement or any action taken or to be taken pursuant hereto.
The representations and warranties made in this Agreement by the
Purchaser are made as of the date hereof and shall be deemed remade by the
Purchaser as of the Closing Date with the same force and effect as if made on,
and as of, such date. All representations and warranties made in this Agreement
by the Purchaser shall survive the Closing for a period of one year. Any action,
suit or proceeding with respect to the truth, accuracy or completeness of any
such representation or warranty shall be commenced and served, if at all, on or
before the date which is twelve (12) months after the date of the Closing and,
if not commenced on or before such date, thereafter shall be void and of no
force or effect.
As used in this Agreement, the phrase "to Purchaser's knowledge" or
words of similar import shall mean the actual (and not constructive or imputed)
knowledge, without independent investigation or inquiry, of Phillip M. Anderson.
SECTION 8. COVENANTS OF THE SELLER.
The Seller and MI hereby covenant with the Purchaser as follows:
8.1 Compliance with Laws. From the date of this Agreement to the
Closing Date, Seller shall use commercially reasonable efforts to comply in all
material respects with (i) all laws, regulations and other requirements
affecting the Property, from time to time applicable, of every governmental body
having jurisdiction of the Property or the use or occupancy of any Improvements
located thereon and (ii) all terms, covenants and conditions of instruments of
record affecting the Property.
8.2 Correction of Defects. Seller shall correct, at Seller's or MI's
cost, all defects in the Improvements that are discovered and disclosed by or to
the Seller within one year following the acceptance of the Improvements by the
Seller from the general contractor for such Improvements. At Closing, Seller and
MI shall, at Purchaser's request, certify the outside date of such one-year
warranty period to Purchaser. The Purchaser agrees to cooperate with the Seller,
MI and/or the Tenant in enforcing any applicable warranties or guaranties with
respect to such defects. Seller and/or Tenant shall have the exclusive right and
obligation to pursue the aforementioned rights and remedies; however, in the
event that Seller and/or Tenant fails to exercise such rights and remedies,
after ten (10) days from notice by Purchaser to Seller of such failure to
exercise such rights and remedies, Purchaser shall then have the right to pursue
the same. The provisions of this Section 8.2 shall survive any Closing under
this Agreement.
8.3 Insurance. The Seller shall, at no expense to the Seller,
reasonably cooperate with Purchaser in connection with Purchaser's obtaining any
insurance which may be required to be maintained by Purchaser under the terms of
the Lease for the Property following the Closing.
8.4 Material Defects in Structural Systems. If, to Seller's or MI's
knowledge, a material construction defect or a material design defect in the
structural system of the Improvements exists at any time prior to Closing,
Seller or MI shall disclose the same to Purchaser, provided that neither Seller
nor MI shall have any obligation to correct such disclosed defects if the cost
to correct such defects exceeds $250,000. If such cost exceeds $250,000 and
Seller and MI elect not to correct, then Purchaser's sole remedy shall be to
terminate this Agreement, in which event this Agreement shall terminate and be
of no further force or effect and Seller shall reimburse to Purchaser the
Purchaser's expenses incurred in respect of the Property, not to exceed $5,000
(and direct Escrow Agent to refund to Purchaser the Deposit as provided in
Section 10.3).
SECTION 9. APPORTIONMENTS.
9.1 Apportionments. Representatives of the Purchaser, Tenant and the
Seller shall make and perform any and all of the adjustments and apportionments
which are appropriate and usual for a transaction of this nature, taking into
account the applicable provisions of the Lease and this Agreement. The
adjustments hereunder shall be calculated or paid in an amount based upon a fair
and reasonable estimated accounting performed and agreed to by representatives
of the Seller and the Purchaser at the applicable Closing. Subsequent final
adjustments and payments shall be made in cash or other immediately available
funds as soon as practicable after the Closing Date, and in any event within
ninety (90) days after the Closing Date, based upon an agreed accounting
performed by representatives of the Seller, Tenant and the Purchaser. In the
event the parties have not agreed with respect to the adjustments required to be
made pursuant to this Section 9.1 within such ninety-day period, upon
application by either party, a certified public accountant reasonably acceptable
to the Purchaser and the Seller shall determine any such adjustments which have
not theretofore been agreed to between the Seller and the Purchaser. The charges
of such accountant shall be borne fifty percent (50%) by the Seller and fifty
percent (50%) by the Purchaser. Seller shall pay the entire amount of the
calendar year 1999 real estate taxes after the bill for such real estate taxes
is received after the Closing Date and prior to the date such real estate taxes
become delinquent. Seller shall pay (on or before the due date) that portion of
the calendar year 2000 real estate taxes allocable (on a daily basis) to the
period commencing on January 1, 2000 and ending on the Closing Date and Tenant
shall, pursuant to the Lease, pay (on or before the due date) that portion of
the calendar year 2000 real estate taxes allocable (on a daily basis) to the
period commencing on the day after the Closing Date and ending on December 31,
2000.
9.2 Closing Costs.
(a) In the event that Closing is consummated hereunder, Seller shall
pay all Third-Party Costs (hereinafter defined) and Transfer Taxes (hereinafter
defined) to the extent that the aggregate amount of all Third-Party Costs and
Transfer Taxes does not exceed Sixty Eight Thousand Nine Hundred Dollars
($68,900) and Purchaser shall pay any Third-Party Costs and Transfer Taxes in
excess of Sixty Eight Thousand Nine Hundred Dollars ($68,900). As used herein,
the term "Third-Party Costs" include but shall not be limited to (i) the
Environmental Reports; (ii) the Existing Survey; (iii) premiums for the title
insurance policies to be provided at the Closing pursuant to Section 2.3 and
Section 4.3(a); (iv) any closing or escrow charges or other expenses payable to
the Title Company conducting the Closing; (v) the third party MAI property
appraisal of the Property obtained by Purchaser; (vi) the third party market
assessment report obtained by Purchaser; (vii) the third party architectural and
engineering inspection report of the Property obtained by Purchaser; and (viii)
the third party audited Special Purpose Financial Statement for the Property
obtained by Purchaser. All Third-Party Costs shall be advanced by Purchaser
prior to Closing and in the event that Closing is not consummated hereunder,
Purchaser shall pay the entire amount of the Third-Party Costs; provided,
however, that in the event that this Agreement is terminated by Purchaser
pursuant to Section 2.3 or Section 8.4, Seller shall pay (or reimburse Purchaser
for) such Third-Party Costs in an amount not exceeding Five Thousand Dollars
($5,000).
(b) As used herein, the term "Transfer Taxes" shall mean any transfer,
sales, use, recordation or other similar taxes, impositions or expenses incurred
in connection with the Closing of the transactions contemplated hereby and/or
the recordation or filing of any documents or instruments in connection
therewith or the sale, transfer or conveyance of the Property from Seller to
Purchaser or the lease of the Property from Purchaser to Tenant; provided
Transfer Taxes shall not include, and Seller shall be solely responsible for any
taxes due in respect of its income, net worth or capital, if any, and any
privilege, sales and occupancy taxes, due or owing to any governmental entity in
connection with the operation of the Property for any period of time prior to
Closing, and Purchaser or Tenant, as applicable, shall be solely responsible for
all such taxes for any period from and after Closing, and provided further that
any income tax arising as a result of the sale and transfer of the Property by
Seller to Purchaser shall be the sole responsibility of Seller and any income
tax arising as a result of the lease of the Property from Purchaser to Tenant
shall be the sole responsibility of Tenant or Purchaser, as applicable.
(c) Except as expressly provided in this Section 9, Seller and
Purchaser shall each pay their own separate costs and expenses incurred in
connection with the transactions contemplated hereby, including the fees and
expenses of counsel in connection with the preparation and negotiation of this
Agreement, the Lease and all other documents and instruments in connection
therewith and in consummating any and all of the transactions contemplated
hereby and thereby.
(d) The obligations of the parties under this Section 9 shall survive
the Closings.
SECTION 10. DEFAULT.
10.1 Default by the Seller. If the Seller or MI shall have made any
representation or warranty herein which shall be untrue in any material respect
when made or updated as herein provided, or if the Seller or MI shall fail to
perform any of the material covenants and agreements contained herein and such
condition or failure continues for a period of ten (10) days (or such additional
period as may be reasonably required to effectuate a cure of the same) after
notice thereof from the Purchaser, the Purchaser may terminate this Agreement
and Seller shall reimburse to Purchaser the Purchaser's expenses incurred in
respect of the Property, not to exceed $30,000 (and direct Escrow Agent to
refund to Purchaser the Deposit as provided in Section 10.3), and/or the
Purchaser may pursue any and all remedies available to it at law or in equity,
including, but not limited to, a suit for specific performance or other
equitable relief; provided, however, that in such event (x) neither Seller nor
MI shall be liable for (and Purchaser hereby agrees that it will not commence or
prosecute any action for) consequential or punitive or exemplary damages and (y)
the aggregate liability of the Seller or MI under this Agreement shall not
exceed an amount equal to One Hundred Thousand Dollars ($100,000) plus the
reasonable attorneys' fees and expenses incurred by Purchaser in enforcing the
Agreement against Seller and/or MI in respect of Seller's or MI's default. It is
understood and agreed that for purposes of this Section 10.1, if a default
results from a false representation or warranty, such default shall be deemed
cured if the events, conditions, acts or omissions giving rise to the falsehood
are cured within the applicable cure period even though, as a technical matter,
such representation or warranty was false as of the date actually made.
10.2 DEFAULT BY THE PURCHASER. IF THE PURCHASER SHALL HAVE MADE ANY
REPRESENTATION OR WARRANTY HEREIN WHICH SHALL BE UNTRUE OR MISLEADING IN ANY
MATERIAL RESPECT OR IF THE PURCHASER SHALL FAIL TO PERFORM ANY OF THE COVENANTS
AND AGREEMENTS CONTAINED HEREIN AND SUCH CONDITION OR FAILURE SHALL CONTINUE FOR
A PERIOD OF TEN (10) DAYS (OR SUCH ADDITIONAL PERIOD AS MAY BE REASONABLY
REQUIRED TO EFFECTUATE A CURE OF THE SAME; PROVIDED THAT NO SUCH EXTENSION OF
TIME SHALL APPLY TO PURCHASER'S FAILURE TO PAY THE PURCHASE PRICE AT CLOSING OR
OTHERWISE OPERATE TO EXTEND THE CLOSING DATE) AFTER NOTICE THEREOF FROM THE
SELLER, THE SELLER MAY, AS ITS SOLE AND EXCLUSIVE REMEDY, AT LAW, OR IN EQUITY,
TERMINATE THIS AGREEMENT, WHEREUPON, THE PURCHASER SHALL PAY TO THE SELLER, AS
LIQUIDATED DAMAGES AND NOT AS A PENALTY, THE SUM OF ONE HUNDRED THOUSAND DOLLARS
($100,000) (the "LIQUIDATED DAMAGES AMOUNT") PLUS THE REASONABLE ATTORNEYS' FEES
AND EXPENSES INCURRED BY SELLER IN ENFORCING THE AGREEMENT AGAINST PURCHASER IN
RESPECT OF PURCHASER'S DEFAULT.
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ---------------------------------------------------------
PURCHASER'S INITIALS SELLER'S INITIALS
<S><C>
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
- ----------------------------- -------------------------------------
CNL HEALTHCARE MARRIOTT SENIOR LIVING
PARTNERS, LP SERVICES, INC.
--------------------------------------------------------
MARRIOTT INTERNATIONAL, INC.
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
It is understood and agreed that for purposes of this Section 10.2, if
a default results from a false representation or warranty, such default shall be
deemed cured if the events, conditions, acts or omissions giving rise to the
falsehood are cured within the applicable cure period even though, as a
technical matter, such representation or warranty was false as of the date
actually made.
10.3 Purchaser's Deposit. In order to secure Purchaser's performance
hereunder, including, without limitation, its obligation to pay liquidated
damages as provided in Section 10.2, Purchaser has heretofore provided, or will
provide immediately upon the execution and delivery of this Agreement, a cash
deposit in the amount of the Liquidated Damages Amount (said deposit is herein
referred to as the "Deposit") to the Escrow Agent. The Escrow Agent shall hold
and disburse the Deposit pursuant to the terms of the Escrow Agreement entered
into among Seller, Purchaser and Escrow Agent of even date herewith, a true copy
of which is attached hereto as Schedule P (the "Escrow Agreement").
If Purchaser defaults on its obligations hereunder such that Seller
becomes entitled to the Liquidated Damages Amount as provided in Section 10.2,
Seller shall be immediately entitled to the entire Deposit as such liquidated
damages. If Purchaser elects to terminate this Agreement pursuant to Sections
2.3 or 8.4, or if Seller elects to terminate this Agreement pursuant to the
provisions of Section 3.3, Purchaser shall be entitled to the prompt return of
the Deposit and the parties shall so direct the Escrow Agent to pay the Deposit
to Purchaser and thereupon shall have no further obligations hereunder in
respect of the Property except any obligations which expressly survive a
termination of this Agreement. In the event Seller becomes entitled to the
Deposit hereunder, the Escrow Agent shall promptly disburse the Deposit to
Seller in the manner provided for in the Escrow Agreement.
The Deposit shall be held by Escrow Agent in an interest-bearing
account and Escrow Agent shall be authorized to deliver the interest accrued
thereon from time to time to Purchaser. In the event that Closing is consummated
hereunder, the Deposit shall be returned to Purchaser promptly following the
occurrence of the Closing.
SECTION 11. MISCELLANEOUS.
11.1 Agreement to Indemnify.
(a) Subject to any express provisions of this Agreement to the
contrary, from and after the Closing, (i) the Seller and MI shall indemnify,
defend and hold harmless the Purchaser from and against any and all obligations,
claims, losses, damages, liabilities, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and disbursements)
arising out of (v) any termination of employment of employees at the Property
prior to or upon the Closing resulting from the termination of employment of
such employees by Seller or its operator and/or the failure of Tenant to hire
such employees (including, without limitation, severance pay, wrongful discharge
claims, and claims and/or fines under federal, state or local statutes or
regulations, including without limitation the Worker Adjustment and Retraining
Notification Act), (w) the employment of such individuals prior to the Closing
Date, including, without limitation, employment-related claims; COBRA-related
claims; disability claims; vacation; sick leave; wages; salaries; payments due
(or allocable) to any medical, pension, and health and welfare plans, and any
other employee benefit plan established for the employees at the Property; and
employee-related tax obligations such as, but not limited to, social security
and unemployment taxes accrued as of the Closing Date, (x) events, acts, or
omissions of the Seller that occurred in connection with its ownership or
operation of the Property prior to the Closing Date or obligations accruing
prior to the Closing Date under any Contract of Seller (except to the extent of
any adjustment made in respect of such Contract at Closing), (y) any material
breach of a representation or warranty made by Seller and MI under Section 6 (as
such representations and warranties may be modified pursuant to said Section 6
and subject to the one-year limitation period set forth therein), or (z) any
claim against Purchaser for damage to property of others or injury to or death
of any person or any debts or obligations of or against Seller and arising out
of any event occurring on or about or in connection with the Property or any
portion thereof, at any time or times prior to the Closing Date, and (ii) the
Purchaser and, if Purchaser is not CHCLP, CHCLP shall indemnify, defend and hold
harmless the Seller from and against any and all obligations, claims, losses,
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' and accountants' fees and disbursements) arising out of (x) events,
acts, or omissions of the Purchaser that occur in connection with its ownership
or operation of the Property from and after the Closing Date or obligations
accruing from and after the Closing Date under any Contract (except to the
extent of any adjustment made in respect of such Contract at Closing), (y) any
material breach of a representation or warranty made by Purchaser and, if
Purchaser is not CHCLP, CHCLP under Section 7 (and subject to the one year
limitation period set forth therein), or (z) any claim against Seller for damage
to property of others or injury to or death of any person or any claims for any
debts or obligations of or against Seller and arising out of any event occurring
on or about or in connection with the Property or any portion thereof, at any
time or times from and after the Closing Date. The provisions of this Section
11.1 shall not apply to any liabilities or obligations with respect to hazardous
substances, the liabilities of the parties with respect thereto being governed
by the representation and warranty of Seller set forth in Section 6.13.
(b) Whenever it is provided in this Agreement that an obligation will
continue after Closing as an obligation of Purchaser or be assumed by Purchaser
after the Closing, the Purchaser and, if Purchaser is not CHCLP, CHCLP shall be
deemed to have also agreed to indemnify and hold harmless the Seller and MI and
their respective successors and assigns from and against all claims, losses,
damages, liabilities, costs, and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) arising from any
failure of the Purchaser to perform the obligation so continued or assumed after
the Closing (but not with respect to any act or omission which occurred prior to
Closing).
(c) Whenever either party shall learn through the filing of a claim or
the commencement of a proceeding or otherwise of the existence of any liability
for which the other party is or may be responsible under this Agreement, the
party learning of such liability shall notify the other party promptly and
furnish such copies of documents (and make originals thereof available) and such
other information as such party may have that may be used or useful in the
defense of such claims and shall afford said other party full opportunity to
defend the same in the name of such party and shall generally cooperate with
said other party in the defense of any such claim.
(d) The provisions of this Section 11.1 shall survive the Closing
hereunder and the termination of this Agreement. All representations and
warranties made in this Agreement shall survive the Closing for a period of one
year. Any action, suit or proceeding with respect to the truth, accuracy or
completeness of any such representation or warranty shall be commenced, if at
all, on or before the date which is twelve (12) months after the date of the
Closing and served promptly (but in no event later than sixty (60) days after
commencement) and, if not commenced on or before such date and so served,
thereafter shall be void and of no force or effect.
11.2 Brokerage Commissions. Each of the parties hereto represents to
the other party that it dealt with no broker, finder or like agent in connection
with this Agreement or the transactions contemplated hereby, and that it
reasonably believes that there is no basis for any other person or entity to
claim a commission or other compensation for bringing about this Agreement or
the transactions contemplated hereby. The Seller shall indemnify and hold
harmless the Purchaser and its successors and assigns from and against any loss,
liability or expense, including, reasonable attorneys' fees, arising out of any
claim or claims for commissions or other compensation for bringing about this
Agreement or the transactions contemplated hereby made by any broker, finder or
like agent, if such claim or claims are based in whole or in part on dealings
with the Seller. The Purchaser shall indemnify and hold harmless the Seller and
its successors and assigns from and against any loss, liability or expense,
including, reasonable attorneys' fees, arising out of any claim or claims for
commissions or other compensation for bringing about this Agreement or the
transactions contemplated hereby made by any broker, finder or like agent, if
such claim or claims are based in whole or in part on dealings with the
Purchaser. Nothing contained in this section shall be deemed to create any
rights in any third party. The provisions of this Section 11.2 shall survive the
Closing hereunder and any termination of this Agreement.
11.3 Publicity. The parties agree that no party shall, with respect to
this Agreement and the transactions contemplated hereby, contact or conduct
negotiations with public officials, make any public pronouncements, issue press
releases or otherwise furnish information regarding this Agreement or the
transactions contemplated hereby to any third party without the consent of the
other party, which consent shall not be unreasonably withheld, conditioned or
delayed, except as may be required by law or as may be reasonably necessary, on
a confidential basis, to inform any rating agencies, potential sources of
financing, financial analysts, or to entities involved with a sale of a
controlling interest in the Seller, the Purchaser or any of their affiliates or
to receive legal, accounting and/or tax advice; provided, however, that, if such
information is required to be disclosed by law, the party so disclosing the
information will use reasonable efforts to give notice to the other party as
soon as such party learns that it must make such disclosure.
11.4 Notices.
(a) Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this Agreement
shall be deemed adequately given if in writing and the same shall be delivered
either in hand, by telecopier with written acknowledgment of receipt, or by mail
or Federal Express or similar expedited commercial carrier, addressed to the
recipient of the notice, postpaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid (if by
Federal Express or similar carrier).
(b) All notices required or permitted to be sent hereunder shall be
deemed to have been given for all purposes of this Agreement upon the date of
acknowledged receipt, in the case of a notice by telecopier, and, in all other
cases, upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business Day or is
required to be delivered on or before a specific day which is not a Business
Day, the day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to the Seller to:
Marriott International, Inc
10400 Fernwood Road, Dept. 52/924.94
Bethesda, Maryland 20817
Attn: Treasury
Telecopier No. (301) 380-5067
with a copy to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/923.24
Bethesda, Maryland 20817
Attn: Kevin E. Montano, Esquire
Law Department
Telecopier No. (301) 380-6727
and
Arent Fox Kintner Plotkin & Kahn, PLLC
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attn: Joseph M. Fries, Esq.
Telecopier No. (202) 857-6395
If to the Purchaser, to:
CNL Health Care Partners, LP
CNL Center at City Commons
450 South Orange Avenue
Orlando, Florida 32801-3336
Attn: Mr. Phillip M. Anderson or Chief Operating Officer
Telecopier No. (407) 835-3232
with a copy to:
Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
215 North Eola Drive
Post Office Box 2809
Orlando, Florida 32802
Attn: David G. Williford, Esq.
Telecopier No. (407) 843-4444
If to MI:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/924.04
Bethesda, Maryland 20817
Attn: Treasury
Telecopier No. (301) 380-5067
with a copy to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/923.24
Bethesda, Maryland 20817
Attn: Kevin E. Montano, Esquire
Law Department
Telecopier No. (301) 380-6727
and
Arent Fox Kintner Plotkin & Kahn, PLLC
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attn: Joseph M. Fries, Esq.
Telecopier No. (202) 857-6395
(d) By notice given as herein provided, the parties hereto and their
respective successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
effective upon receipt by the other parties of such notice and each shall have
the right to specify as its address any other address within the United States
of America.
11.5 Waivers, Etc. Any waiver of any term or condition of this
Agreement, or of the breach of any covenant, representation or warranty
contained herein, in any one instance, shall not operate as or be deemed to be
or construed as a further or continuing waiver of any other breach of such term,
condition, covenant, representation or warranty or any other term, condition,
covenant, representation or warranty, nor shall any failure at any time or times
to enforce or require performance of any provision hereof operate as a waiver of
or affect in any manner such party's right at a later time to enforce or require
performance of such provision or any other provision hereof. This Agreement may
not be amended, nor shall any waiver, change, modification, consent or discharge
be effected, except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification,
consent or discharge is sought.
11.6 Assignment; Successors and Assigns. This Agreement and all rights
and obligations hereunder shall not be assignable by any party without the
written consent of the other party, except that the Purchaser may assign this
Agreement to any entity wholly owned, directly or indirectly, by CHCLP provided,
however, that, in the event this Agreement shall be assigned to any entity
wholly owned, directly or indirectly, by CHCLP, CHCLP shall remain fully and
primarily liable for the obligations of the "Purchaser" hereunder. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement is
not intended and shall not be construed to create any rights in or to be
enforceable in any part by any other persons.
11.7 Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
11.8 Counterparts, Etc. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof and shall supersede and take the place of any other
instruments purporting to be an agreement of the parties hereto relating to the
subject matter hereof. This Agreement may not be amended or modified in any
respect other than by the written agreement of all of the parties hereto.
11.9 Governing Law. This Agreement shall be interpreted,
construed, applied and enforced in
accordance with the laws of the State of Maryland.
To the maximum extent permitted by applicable law, any action to
enforce, arising out of, or relating in any way to, any of the provisions of
this Agreement may be brought and prosecuted in such court or courts located in
the State of Maryland as is provided by law; and the parties consent to the
jurisdiction of said court or courts located in the State of Maryland and to
service of process by registered mail, return receipt requested, or by any other
manner provided by law.
11.10 Performance on Business Days. In the event the date on which
performance or payment of any obligation of a party required hereunder is other
than a Business Day, the time for payment or performance shall automatically be
extended to the first Business Day following such date.
11.11 Attorneys' Fees. If any lawsuit or arbitration or other legal
proceeding arises in connection with the interpretation or enforcement of this
Agreement, the prevailing party therein shall be entitled to receive from the
other party the prevailing party's costs and expenses, including reasonable
attorneys' fees, incurred in connection therewith, in preparation therefor and
on appeal therefrom, which amounts shall be included in any judgment therein.
11.12 Relationship. Nothing herein contained shall be deemed or
construed by the parties hereto, nor by any third party, as creating the
relationship of principal and agent or of partnership or joint venture between
the parties hereto, it being understood and agreed that no provision contained
herein, nor any acts of the parties hereto shall be deemed to create the
relationship between the parties hereto other than the relationship of seller
and purchaser.
11.13 Section and Other Headings. The headings contained in
this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement
11.14 Disclosure. From and after Closing and at the written request of
Purchaser, Seller shall provide such financial statements in respect of the
Seller's operations relating to the Property from the date of Seller's
commencement of business to the date of the Closing to the extent such financial
statements are required by applicable securities laws and regulations and the
SEC's interpretation thereof; provided, however, that (i) Seller reserves the
right, in good faith, to challenge, and require Purchaser to use commercially
reasonable efforts to challenge, any assertion by the SEC, any other applicable
regulatory authority, or Purchaser's independent public accountants that
applicable law or regulations require the provision of such financial
statements, (ii) Purchaser shall not, without Seller's consent (which consent
shall not be unreasonably withheld, delayed or conditioned), acquiesce to any
such challenged assertion until Purchaser has exhausted all reasonable available
avenues of administrative review, and (iii) Purchaser shall consult with Seller
in pursuing any such challenge and will allow Seller to participate therein if
and to the extent that Seller so elects. Any and all costs and expenses incurred
by Seller, including without limitation reasonable attorneys fees and expenses,
in connection with providing such financial statements to Purchaser or in
connection with any challenge to an SEC assertion (including Seller's
consultation or participation with Purchaser in respect of same) shall be
reimbursed to Seller by Purchaser within ten (10) days following written demand
by Seller.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument as of the date first above written.
SELLER:
MARRIOTT SENIOR LIVING SERVICES, INC.
By:
Timothy J. Grisius
Agent
PURCHASER:
CNL HEALTH CARE PARTNERS, L.P.
By: CNL Health Care GP Corp.,
a Delaware corporation
its general partner
By:
Phillip M. Anderson
Executive Vice President
MI:
MARRIOTT INTERNATIONAL, INC.
By:
Timothy J. Grisius
Agent
<PAGE>
The undersigned, CNL Health Care Properties, Inc., joins herein for the purpose
of evidencing its agreement to enter into and deliver the Guaranty of Landlord's
Obligations pursuant to the terms of the foregoing Agreement.
CNL HEALTH CARE PROPERTIES, INC.
By: ___________________________
Phillip M. Anderson
Executive Vice President
and Chief Operating Officer
<PAGE>
The undersigned, First American Title Insurance Company, joins herein
for the purpose of evidencing its agreement to enter into and deliver the Escrow
Agreement, attached hereto at Schedule P.
FIRST AMERICAN TITLE
INSURANCE COMPANY
By: _________________
Brian A. Lobuts
Vice President
<PAGE>
Schedule A
Purchase Price
Thirteen Million Eight Hundred Forty-Eight Thousand Nine Hundred
Dollars ($13,848,900)
<PAGE>
Schedule B
Guaranty
<PAGE>
Schedule C
Lease Agreement
<PAGE>
Schedule D
Limited Rent Guaranty
<PAGE>
Schedule E
Membership Interest Pledge Agreement
<PAGE>
Schedule F
Form of Owner Agreement
<PAGE>
Schedule G
Permitted Encumbrances
<PAGE>
Schedule H
Plans and Specifications
<PAGE>
Schedule I
Legal Description of the Property
<PAGE>
Schedule J
Owner's Policy Commitment
<PAGE>
Schedule K
Leasehold Policy Commitment
<PAGE>
Schedule L
Survey
<PAGE>
M-2
Schedule M
Form of Architect's Certificate
ARCHITECT'S CERTIFICATE
__________________, 2000
CNL Health Care Partners, LP
400 East South Street, Suite 500
Orlando, Florida 32801
Ladies/Gentlemen:
We are the architects for _________________ in connection with the
construction of the project known as ___________________ located at
______________________________ County, _____________ (hereinafter referred to as
the "Project"). In this capacity, we hereby certify to you as follows:
1. We are duly licensed architects under the laws of the State of
Illinois.
2. The undersigned has prepared or is familiar with the plans for the
Project described as follows:
Job No. 9715
Drawing Nos. ___________________________________
Dated: August 29, 1997
and related specifications, addendum and change orders
(the "Plans and Specifications").
3. Based on our limited (12) site visits and observations of the
Project and to the best of our information, professional
knowledge and belief, the Project has been substantially
completed in accordance with the Plans and Specifications.
4. The Plans and Specifications have been prepared in accordance
with (i) applicable local building and zoning codes and state
building codes, and (ii) all restrictive covenants of record
applicable to the Project, in effect at the time of design or
known to us during construction. The elevation of all slabs
for the project and the height of the improvements, as set
forth in the Plans and Specifications, meet the applicable
requirements of building permits for the same. The Plans and
Specifications have been designed in accordance with the
recommendations contained in applicable soils reports,
compaction studies or soil borings tests.
5. The Project has been designed such that, if properly operated,
it will not result in the direct or indirect emission into the
atmosphere of any substance (other than motor vehicle
exhausts, steam, water vapor and the emissions from natural
gas or electric comfort heating, ventilation and air
conditioning systems).
6. The Project has been designed such that, if properly operated,
it will not result in the direct or indirect discharge of
pollutants into the waters of the State in which the Project
is located (other than contributions to the sanitary sewer
system serving the Project, provided, however, the foregoing
is in compliance with all applicable governmental regulations
and no further consents or approvals are required therefor).
7. The Project is substantially free of architectural barriers
and is otherwise in substantial compliance with the
requirements of applicable federal, state and local laws,
statutes and ordinances relating to accessibility by persons
with disabilities, including, without limitation, the
Americans With Disabilities Act and the respective regulations
promulgated thereunder. Notwithstanding the foregoing,
Marriott and the architect have differing opinions on the
interpretation and application of ADA Law. We followed
Marriott's direction in those items. The project was designed,
to the best of our knowledge, to comply with the Illinois
Accessibility Code, April 24, 1997 Edition.
8. We have been informed that the real property upon which the
Project is located is currently zoned ___________ under
applicable zoning ordinances of ______________. We have
examined all applicable materials relative to the types of
restrictions and requirements which relate to such zoning
classifications. The Project complies in all respects with
such zoning classification.
9. This letter and certificate shall be binding upon the
undersigned and its successors and assigns, and shall inure to
the benefit of the addressees and their respective successors
and assigns.
--------------------------------
By: ____________________________
<PAGE>
Schedule M-1
Form of Marriott's Architect Certificate
To: CNL Health Care Properties, Inc., as purchaser (together with
its successors and assigns "CNL"
From: Marriott International Design and Construction Services, Inc.
Date:
Re:
As an inducement to CNL to acquire the above referenced property, we do hereby
certify to CNL that Marriott International Design and Construction Services,
Inc., has received an Architect's Certificate (a copy of which is attached
hereto as Exhibit A) from the architect of record for the above referenced
property, which certifies that the plans and specifications [prepared by the
architect/reviewed by the architect] for construction of the above referenced
property comply with all applicable requirements of all governmental authorities
having jurisdiction over the improvements located on the above referenced
property, including without limitation, all applicable zoning laws, ordinances,
rules, regulations and restrictions (but excluding any such ordinances, rules,
regulations and restrictions relating to environmental matters) and that, to the
best of the architect's knowledge, the above referenced property was built in
substantial compliance with said plans, specifications and drawings. In
addition, I hereby certify that to the best of my knowledge, the above
referenced property was built in substantial compliance with the plans,
specifications, and drawings.
Marriott International Design and Construction Services, Inc.
By: ____________________________
Project Director
<PAGE>
N-2
Schedule N
Form of Engineer's Certificate
CIVIL ENGINEER'S CERTIFICATE
March 21, 2000
CNL Health Care Partners, LP
400 East South Street, Suite 500
Orlando, Florida 32801
Ladies/Gentlemen:
We are the civil engineers for Marriott International, Inc. in
connection with the construction of a the project known as Brighton Gardens
located at Orland Park, Illinois (hereinafter referred to as the "Project"). In
this capacity, we hereby state to the best of our knowledge and belief to you as
follows:
1. We are duly licensed civil engineers under the laws of the State of
Illinois.
2. There are no civil engineering permits or approvals of any
governmental authority or public agency required for the
Project which have not been obtained, issued or granted and
which do not, as of the date of the engineering construction
plans consisting of five (5) sheets prepared by our office
under Job No. 1247 dated April 18, 1997; latest revision June
24, 1998.
3. All sewage and other waste waters from the Project are
disposed of by a connection to the Orland Park sanitary sewer
system.
4. The construction of the Project does not involve the dredging
of materials from or the filling of materials in the waters of
the State of Illinois or the United States. Potable water has
not been appropriated from any natural surface or subsurface
source, but rather has been and will be supplied by Orland
Park.
5. All stormwater drainage at the Project is retained on-site or
discharged into existing public rights-of-way or stormwater
drainage easements maintained by Marriott International, Inc.
6. Our office did not perform construction observation or
management services, and therefore cannot state whether the
project was constructed in accordance with the approved
engineering and whether all permits, etc., are still in force
and effect.
7. This letter and certificate shall be binding upon the
undersigned and its successors and assigns, and shall inure to
the benefit of the addressees and their respective successors
and assigns.
----------------------------------
By: ______________________________
<PAGE>
Schedule N-1
Form of Marriott's Engineer Certificate
To: CNL Health Care Properties, Inc., as purchaser (together with
its successors and assigns ("CNL")
From: Marriott International Design and Construction Services, Inc.
Date:
Re:
As an inducement to CNL to acquire the above referenced property, we do hereby
certify to CNL that an engineer duly registered under the laws and applicable
regulations of the State of [insert name] prepared the plans and specifications
for construction of the above referenced property. And to the best of my
knowledge those plans and specifications comply with all applicable requirements
of all governmental authorities having jurisdiction over the improvements
located on the above referenced property, including without limitation, all
applicable zoning laws, ordinances, rules, regulations and restrictions (but
excluding any such ordinances, rules, regulations and restrictions relating to
environmental matters). In addition, we hereby certify that to the best of our
knowledge, the above referenced property was built in substantial compliance
with the plans, specifications, and drawings.
Marriott International Design and Construction Services, Inc.
By: ______________________
Project Director
<PAGE>
Schedule O
Operating Agreement
<PAGE>
Schedule P
Escrow Agreement
<PAGE>
Schedule Q
Environmental Report
<PAGE>
Schedule R
FF&E SCHEDULE
3
EXHIBIT 10.5
Lease Agreement
between
CNL Health Care Partners, LP
and
BG Orland Park, LLC
<PAGE>
LEASE AGREEMENT
DATED AS OF APRIL 20, 2000
BY AND BETWEEN
CNL HEALTH CARE PARTNERS, LP,
a Delaware limited partnership,
AS LANDLORD,
AND
BG ORLAND PARK, LLC,
AS TENANT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1.........................................................................................................1
<S><C>
ARTICLE 2.........................................................................................................4
2.1 Leased Property............................................................................................4
2.2 Condition of Leased Property...............................................................................4
2.3 Fixed Term.................................................................................................4
2.4 Extended Term..............................................................................................4
ARTICLE 3.........................................................................................................4
3.1 Rent.......................................................................................................4
3.2 Late Payment of Rent, Etc..................................................................................4
3.3 Net Lease..................................................................................................4
3.4 Security for Tenant's Performance..........................................................................4
ARTICLE 4.........................................................................................................4
4.1 Permitted Use..............................................................................................4
4.2 Compliance with Legal/Insurance Requirements, Etc..........................................................4
4.3 Environmental Matters......................................................................................4
ARTICLE 5.........................................................................................................4
5.1 Maintenance and Repair.....................................................................................4
5.2 Tenant's Personal Property.................................................................................4
5.3 Yield Up...................................................................................................4
ARTICLE 6.........................................................................................................4
6.1 Improvements to the Leased Property........................................................................4
6.2 Salvage....................................................................................................4
6.3 Equipment Leases...........................................................................................4
ARTICLE 7.........................................................................................................4
ARTICLE 8.........................................................................................................4
ARTICLE 9.........................................................................................................4
9.1 General Insurance Requirements.............................................................................4
9.2 Waiver of Subrogation......................................................................................4
9.3 General Provisions.........................................................................................4
9.4 Blanket Policy.............................................................................................4
9.5 Indemnification of Landlord................................................................................4
ARTICLE 10........................................................................................................4
10.1 Insurance Proceeds........................................................................................4
10.2 Damage or Destruction.....................................................................................4
10.3 Damage Near End of Term...................................................................................4
10.4 Tenant's Property.........................................................................................4
10.5 Restoration of Tenant's Property..........................................................................4
10.6 No Abatement of Rent......................................................................................4
10.7 Waiver....................................................................................................4
ARTICLE 11........................................................................................................4
11.1 Total Condemnation, Etc...................................................................................4
11.2 Partial Condemnation......................................................................................4
11.3 Disbursement of Award.....................................................................................4
11.4 Abatement of Rent.........................................................................................4
11.5 Temporary Condemnation....................................................................................4
11.6 Allocation of Award.......................................................................................4
ARTICLE 12........................................................................................................4
12.1 Events of Default.........................................................................................4
12.2 Remedies..................................................................................................4
12.3 Waiver of Jury Trial......................................................................................4
12.4 Application of Funds......................................................................................4
12.5 Landlord's Right to Cure Tenant's Default.................................................................4
12.6 Security Deposit..........................................................................................4
12.7 Good Faith Dispute........................................................................................4
ARTICLE 13........................................................................................................4
ARTICLE 14........................................................................................................4
14.1 Landlord Notice Obligation................................................................................4
14.2 Landlord's Default........................................................................................4
14.3 Special Remedies for Landlord Funding Default.............................................................4
14.4 Special Remedy under Section 10.1 and 11.3................................................................4
ARTICLE 15........................................................................................................4
15.1 Transfer of Leased Property...............................................................................4
15.2 Conditions of Transfer....................................................................................4
15.3 Transfer of Interest in Landlord..........................................................................4
ARTICLE 16........................................................................................................4
16.1 Subletting and Assignment.................................................................................4
16.2 Required Sublease Provisions..............................................................................4
16.3 Permitted Sublease and Assignment.........................................................................4
16.4 Sublease Limitation.......................................................................................4
ARTICLE 17........................................................................................................4
17.1 Estoppel Certificates.....................................................................................4
17.2 Financial Statements......................................................................................4
17.3 General Operations........................................................................................4
ARTICLE 18........................................................................................................4
ARTICLE 19........................................................................................................4
19.1 Negotiation...............................................................................................4
19.2 Arbitration...............................................................................................4
ARTICLE 20........................................................................................................4
20.1 Landlord May Grant Liens..................................................................................4
20.2 Subordination of Lease....................................................................................4
20.3 Notices...................................................................................................4
ARTICLE 21........................................................................................................4
21.1 Conduct of Business.......................................................................................4
21.2 Maintenance of Accounts and Records.......................................................................4
21.3 Certain Debt Prohibited...................................................................................4
21.4 Special Purpose Entity Requirements.......................................................................4
21.5 Distributions, Payments to Affiliated Persons, Etc........................................................4
21.6 Compliance with Operating Agreement.......................................................................4
ARTICLE 22........................................................................................................4
22.1 Limitation on Payment of Rent.............................................................................4
22.2 No Waiver.................................................................................................4
22.3 Remedies Cumulative.......................................................................................4
22.4 Severability..............................................................................................4
22.5 Acceptance of Surrender...................................................................................4
22.6 No Merger of Title........................................................................................4
22.7 Conveyance by Landlord....................................................................................4
22.8 Quiet Enjoyment...........................................................................................4
22.9 Memorandum of Lease.......................................................................................4
22.10 Notices..................................................................................................4
22.11 Construction; Nonrecourse................................................................................4
22.12 Counterparts; Headings...................................................................................4
22.13 Applicable Law, Etc......................................................................................4
22.14 Right to Make Agreement..................................................................................4
22.15 Disclosure of Information................................................................................4
22.16 Trademarks, Trade Names and Service Marks................................................................4
22.17 Competing Facilities.....................................................................................4
</TABLE>
<PAGE>
EXHIBITS
A - Minimum Rent
B - The Land
C - Property Expenses
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is entered into as of this 20th day of April,
2000, by and between CNL HEALTH CARE PARTNERS, LP, a Delaware limited
partnership, as landlord ("Landlord"), and BG ORLAND PARK, LLC, a Delaware
limited liability company, as tenant ("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord has acquired fee simple title to the Leased Property
(this and other capitalized terms used and not otherwise defined herein having
the meanings ascribed to such terms in Article 1) which is improved by a 120 bed
assisted living and dementia facility; and
WHEREAS, Landlord desires to lease the Leased Property to Tenant and
Tenant desires to lease the Leased Property from Landlord, all subject to and
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the mutual receipt and
legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, (i) the terms defined in this
Article shall have the meanings assigned to them in this Article and include the
plural as well as the singular, (ii) all accounting terms not otherwise defined
herein shall have the meanings assigned to them in accordance with GAAP, (iii)
all references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement, and (iv) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Accounting Period" shall mean each four (4) week accounting period of
Tenant, except that an Accounting Period may, from time to time, include five
(5) weeks in order to conform Tenant's accounting system to Tenant's Fiscal
Year. If Tenant shall, for a bona fide business reason, change its Accounting
Period during the Term, appropriate adjustments, if any, shall be made with
respect to the timing of certain accounting and reporting requirements of this
Agreement; provided, however, that, in no event shall any such change or
adjustment alter the amount or frequency of payment of Minimum Rent within any
Fiscal Year, or alter the frequency of payment of Percentage Rent to less than
four (4) times within any Fiscal Year, or otherwise increase or reduce any
monetary obligation under this Agreement. In the event that the Commencement
Date is not the first day of Tenant's four (4) week accounting periods, the
first Accounting Period under this Lease shall consist of the first four (4)
week accounting period of Tenant commencing after the Commencement Date and the
period from the Commencement Date until the commencement of such first four (4)
week accounting period.
"Accounting Year" shall mean each period of thirteen (13) Accounting
Periods of which the first Accounting Period shall commence on the first day of
the first full Accounting Period and ending upon the expiration of twelve (12)
Accounting Periods after such first Accounting Period. Each successor Accounting
Period shall be each period of thirteen (13) Accounting Periods thereafter.
"Additional Charges" shall have the meaning given such term in Section
3.1.3.
"Affiliated Person" shall mean, with respect to any Person, (a) in the
case of any such Person which is a partnership, any partner in such partnership,
(b) in the case of any such Person which is a limited liability company, any
member of such company, (c) any other Person which is a Parent, a Subsidiary, or
a Subsidiary of a Parent with respect to such Person or to one or more of the
Persons referred to in the preceding clauses (a) and (b), (d) any other Person
who is an officer, director, trustee or employee of, or partner in, such Person
or any Person referred to in the preceding clauses (a), (b) and (c), and (e) any
other Person who is a member of the Immediate Family of such Person or of any
Person referred to in the preceding clauses (a) through (d); provided, however,
that, notwithstanding the foregoing, in no event shall Host Marriott Corporation
or Sodexho Marriott Services, Inc., or any of their Affiliated Persons, be
deemed an Affiliated Person as to Tenant or the Guarantor.
"Agreement" shall mean this Lease Agreement, including all Exhibits
hereto, as it and they may be amended from time to time as herein provided.
"Applicable Laws" shall mean all applicable laws, statutes,
regulations, rules, ordinances, codes, licenses, permits and orders, from time
to time in existence, of all courts of competent jurisdiction and Government
Agencies, and all applicable judicial and administrative and regulatory decrees,
judgments and orders, including common law rulings and determinations, relating
to injury to, or the protection of, real or personal property or human health
(except those requirements which, by definition, are solely the responsibility
of employers) or the Environment, including, without limitation, all valid and
lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature.
"Applicable Percentage" shall mean, with respect to any Accounting
Period, or portion thereof, (i) one percent (1%) with respect to the period
beginning on the Commencement Date and ending on the last day of the fourth
(4th) full Accounting Year, (ii) two percent (2%), with respect to the fifth
(5th) through eighth (8th) full Accounting Years, (iii) three percent (3%) with
respect to the ninth (9th) through twentieth (20th) full Accounting Years, and
(iv) with respect to each Accounting Year thereafter, three and one-half percent
(3.5%).
"Award" shall mean all compensation, sums or other value awarded, paid
or received by virtue of a total or partial Condemnation of the Leased Property
(after deduction of all reasonable legal fees and other reasonable costs and
expenses, including, without limitation, expert witness fees, incurred by
Landlord, in connection with obtaining any such award).
"Base Facility Revenues" shall mean, when used with reference to any
Lease Year, Total Facility Revenues for the Base Year and, when used with
reference to the first, second or third Fiscal Quarters of any Fiscal Year, 3/13
of Total Facility Revenues for the Base Year and, when used with reference to
the fourth Fiscal Quarter of any Fiscal Year, 4/13 of Total Facility Revenues
for the Base Year.
"Base Year" shall mean the first period of four (4) consecutive Fiscal
Quarters in which the Facility achieves an average (on a daily basis) occupancy
of at least ninety-three percent (93%) of the beds in the Facility. For purposes
hereof, a bed shall be deemed occupied for an entire month if Tenant receives
payment of an occupancy fee for such entire month notwithstanding the fact that
such bed was not occupied for the entire period during such month.
"Business Day" shall mean any day other than Saturday, Sunday, or any
other day on which banking institutions in the State of Florida or the State of
Maryland are authorized by law or executive action to close.
"Capital Expenditure" shall mean any expenditure with respect to the
Leased Property treated as capital in nature in accordance with GAAP.
"Case Goods" shall mean furniture and furnishings used in the Facility
including, without limitation: chairs, beds, chests, headboards, decks, lamps,
tables, television sets, mirrors, pictures, wall decorations and similar items.
"Cash Available for Lease Payments" shall mean the remainder of (i)
Total Facility Revenues during the applicable calculation period less (ii)
Property Expenses for the same calculation period.
"CHCLP" shall mean CNL Health Care Partners, LP, a Delaware limited
partnership.
"CHCLP and CHCP Guaranty" shall mean the guaranty agreement, dated as
of the date hereof, made by CHCLP and CHCP for the benefit of Tenant, as may be
amended from time to time.
"CHCP" shall mean CNL Health Care Properties, Inc., a Maryland
corporation.
"Claim" shall have the meaning given such term in Article 8.
"Code" shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as amended
from time to time.
"Commencement Date" shall mean the date of this Agreement.
"Competitor" shall mean a Person that owns or has an equity interest in
an assisted living facility brand, tradename, system or chain (a "Brand") which
is comprised of at least ten (10) assisted living facilities; provided that such
Person shall not be deemed a Competitor if it holds its interest in a Brand
merely as a mere passive investor that has no control or influence over the
business decisions of the Brand at issue, such as a mere limited partner in a
partnership, a mere shareholder in a corporation or a mere payee of royalties
based on a prior sale transaction. A mere passive investor that is represented
by a Mere Director on the board of directors of a Competitor shall not be deemed
to have control or influence over the business decisions of that Competitor.
"Condemnation" shall mean (a) the exercise of any governmental power
with respect to the Leased Property, whether by legal proceedings or otherwise,
by a Condemnor of its power of condemnation, (b) a voluntary sale or transfer of
the Leased Property by Landlord to any Condemnor, either under threat of
condemnation or while legal proceedings for condemnation are pending, or (c) a
taking or voluntary conveyance of all or part of the Leased Property, or any
interest therein, or right accruing thereto or use thereof, as the result or in
settlement of any Condemnation or other eminent domain proceeding affecting the
Leased Property, whether or not the same shall have actually been commenced.
"Condemnor" shall mean any public or quasi-public authority, or Person
having the power of Condemnation.
"Controlling Interest" shall mean (a) as to a corporation shall mean
the right to exercise, directly or indirectly, more than fifty percent (50%) of
the voting rights attributable to the shares of the Entity (through ownership of
such shares or by contract), and (b) as to an Entity not a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the Entity.
"Corporate Transfer" shall have the meaning given such term in Section
16.1.
"Date of Taking" shall mean the date the Condemnor has the right to
possession of the Leased Property, or any portion thereof, in connection with a
Condemnation.
"Default" shall mean any event or condition existing which with the
giving of notice and/or lapse of time would ripen into an Event of Default.
"Disbursement Rate" shall mean an annual rate of interest equal to the
greater of, as of the date of determination, (i) the Interest Rate and (ii) the
per annum rate for ten (10) year U.S. Treasury Obligations as published in The
Wall Street Journal (or successor publication) plus three hundred (300) basis
points.
"Distribution" shall mean (a) any declaration or payment of any
dividend (except dividends payable in common stock of Tenant) on or in respect
of any shares of any class of capital stock of Tenant, if Tenant is a
corporation, or any cash distributions in respect of any partnership or
membership interests in Tenant, if Tenant is a partnership or limited liability
company, (b) any purchase, redemption retirement or other acquisition of any
shares of any class of capital stock of Tenant, if Tenant is a corporation, or
any purchase, redemption, retirement or other acquisition of any partnership or
membership interests in Tenant, if Tenant is a partnership or limited liability
company, (c) any other distribution on or in respect of any shares of any class
of capital stock of Tenant, if Tenant is a corporation, or any other
distribution in respect of any partnership or membership interests in Tenant, if
Tenant is a partnership or a limited liability company, or (d) any return of
capital to shareholders of Tenant, if Tenant is a corporation, or any return of
capital to partners or members in Tenant, if Tenant is a partnership or limited
liability company.
"Encumbrance" shall have the meaning given such term in Section 20.1.
"Entity" shall mean any corporation, general or limited partnership,
limited liability company, limited liability partnership, stock company or
association, joint venture, association, company, trust, bank, trust company,
land trust, business trust, cooperative, any government or agency or political
subdivision thereof or any other entity.
"Environment" shall mean soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"Environmental Notice" shall have the meaning given such term in
Section 4.3.1.
"Environmental Obligation" shall have the meaning given such term in
Section 4.3.1.
"Event of Default" shall have the meaning given such term in Section
12.1.
"Excess Facility Revenues" shall mean, with respect to any Lease Year
or Fiscal Quarter, or portion thereof, as applicable, the amount of Total
Facility Revenues for such period, in excess of Base Facility Revenues for the
equivalent period.
"Extended Terms" shall have the meaning given such term in Section 2.4.
"Facility" shall mean the assisted living and dementia facility being
operated on the Leased Property.
"Facility Mortgage" shall mean any Encumbrance placed upon the Leased
Property in accordance with Article 20.
"Facility Mortgagee" shall mean the holder of any Facility Mortgage.
"FAS" shall mean all items included within "Property and Equipment"
under the Uniform System of Accounts, including, but not limited to, linen,
china, glassware, tableware, uniforms and similar items, whether used in
connection with public space or guest rooms.
"Fiscal Quarter" shall mean, with respect to the first, second and
third quarter of any Fiscal Year, Accounting Periods one (1) through three (3),
four (4) through six (6) and seven (7) through nine (9), respectively, of such
Fiscal Year and, with respect to the fourth quarter of any Fiscal Year,
Accounting Periods ten (10) through thirteen (13) of such Fiscal Year.
"Fiscal Year" shall mean each fiscal year of Tenant, each such fiscal
year to consist of thirteen Accounting Periods. If Tenant shall, for a bona fide
business reason, change its Fiscal Year during the Term, appropriate
adjustments, if any, shall be made with respect to the timing of certain
accounting and reporting requirements of this Agreement; provided, however,
that, in no event shall any such change or adjustment increase or reduce any
monetary obligation under this Agreement.
"Fixed Term" shall have the meaning given such term in Section 2.3.
"FF&E" means furniture, furnishings, fixtures, Soft Goods, Case Goods,
vehicles and equipment (including, but not limited to, telephone sysems,
facsimile machines, communications and computer systems hardware) but shall not
include FAS or any Software.
"Fixtures" shall have the meaning given such term in Section 2.1(d).
"Force Majeure Event" means any act of God, act of war, civil
disturbance, governmental action (including the revocation or refusal to grant
licenses or permits, where such revocation or refusal is not due to the fault of
the party whose performance is to be excused for reasons of Force Majeure),
strikes, lockouts, fire, unavoidable casualties or any other causes beyond the
reasonable control of either party.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Government Agencies" shall mean any court, agency, authority, board
(including, without limitation, environmental protection, planning and zoning),
bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States
or the State or any county or any political subdivision of any of the foregoing,
whether now or hereafter in existence, having jurisdiction over Tenant or the
Leased Property or any portion thereof or the Facility operated thereon.
"Guarantor" shall mean Marriott International, Inc., a Delaware
corporation, its successors and assigns.
"Hazardous Substances" shall mean any substance:
(a) the presence of which requires or may hereafter require
notification, investigation or remediation under any federal, state or
local statute, regulation, rule, ordinance, order, action or policy; or
(b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "pollutant" or
"contaminant" under any present or future federal, state or local
statute, regulation, rule or ordinance or amendments thereto including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. et seq.) and the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and the
regulations promulgated thereunder; or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, any state of the United States, or any political subdivision
thereof; or
(d) the presence of which on the Leased Property causes or
materially threatens to cause an unlawful nuisance upon the Leased
Property or to adjacent properties or poses or materially threatens to
pose a hazard to the Leased Property or to the health or safety of
persons on or about the Leased Property; or
(e) without limitation, which contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds; or
(f) without limitation, which contains polychlorinated
biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(g) without limitation, which contains or emits radioactive
particles, waves or material; or
(h) without limitation, constitutes materials which are now or
may hereafter be subject to regulation pursuant to the Material Waste
Tracking Act of 1988, or any Applicable Laws promulgated by any
Government Agencies.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, parents, brothers, sisters, children (natural or adopted),
stepchildren, grandchildren, grandparents, parents-in-law, brothers-in-law,
sisters-in-law, nephews and nieces.
"Impositions" shall mean collectively, all taxes (including, without
limitation, all taxes imposed under the laws of the State, as such laws may be
amended from time to time, and all ad valorem, sales and use, single business,
gross receipts, transaction privilege, rent or similar taxes as the same relate
to or are imposed upon Landlord, Tenant or the business conducted upon the
Leased Property), assessments (including, without limitation, all assessments
for public improvements or benefit, whether or not commenced or completed prior
to the date hereof), water, sewer or other rents and charges, excises, tax
levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or the business
conducted thereon by Tenant (including all interest and penalties thereon due to
any failure in payment by Tenant), which at any time prior to, during or in
respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon (a) Landlord's interest in the Leased Property, (b) the Leased
Property or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (c) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Leased Property
or the leasing or use of the Leased Property or any part thereof by Tenant;
provided, however, that nothing contained herein shall be construed to require
Tenant to pay (i) any tax based on net income, net worth or capital imposed on
Landlord, (ii) any net revenue tax of Landlord, (iii) any transfer fee or other
tax imposed with respect to the sale, exchange or other disposition by Landlord
of the Leased Property or the proceeds thereof, (iv) any single business, gross
receipts tax (from any source other than the rent received by Landlord from
Tenant), or similar taxes as the same relate to or are imposed upon Landlord,
except to the extent that any tax, assessment, tax levy or charge that would
otherwise be an Imposition under this definition which is in effect at any time
during the Term hereof is totally or partially repealed, and a tax, assessment,
tax levy or charge set forth in clause (i) or (ii) preceding is levied, assessed
or imposed expressly in lieu thereof, (v) any interest or penalties imposed on
Landlord as a result of the failure of Landlord to file any return or report
timely and in the form prescribed by law or to pay any tax or imposition, except
to the extent such failure is a result of a breach by Tenant of its obligations
pursuant to Section 3.1.3, (vi) any Impositions imposed on Landlord that are a
result of Landlord not being considered a "United States person" as defined in
Section 7701(a)(30) of the Code, (vii) any Impositions that are enacted or
adopted by their express terms as a substitute for any tax that would not have
been payable by Tenant pursuant to the terms of this Agreement or (viii) any
Impositions imposed as a result of a breach of covenant or representation by
Landlord in any agreement entered into by Landlord governing Landlord's conduct
or operation or as a result of the negligence or willful misconduct of Landlord.
"Indebtedness" shall mean all obligations, contingent or otherwise,
which in accordance with GAAP should be reflected on the obligor's balance sheet
as liabilities.
"Index" shall mean the Consumer Price Index for Urban Wage Earners and
Clerical Workers, All-Cities, All Items (November 1996 = 100), as published by
the Bureau of Labor Statistics or, in the event publication thereof ceases, by
reference to whatever index then published by the United States Department of
Labor at that time is most nearly comparable as a measure of general changes in
price levels for urban areas, as reasonably determined by Landlord and Tenant.
"Insurance Requirements" shall mean all terms of any insurance policy
required by this Agreement and all requirements of the issuer of any such policy
and all orders, rules and regulations and any other requirements of the National
Board of Fire Underwriters (or any other body exercising similar functions)
binding upon Landlord, Tenant or the Leased Property.
"Interest Rate" shall mean ten percent (10%) per annum.
"Inventories" shall mean "Inventories" as defined by GAAP such as
provisions in storerooms, refrigerators, pantries and kitchens; medical
supplies; other merchandise intended for sale; fuel; mechanical supplies;
stationery; and other expensed supplies and similar items.
"Land" shall have the meaning given such term in Section 2.1(a).
"Landlord" shall have the meaning given such term in the preambles to
this Agreement and shall include its permitted successors and assigns.
"Landlord Default" shall have the meaning given such term in Section
14.2.
"Landlord Liens" shall mean liens on or against the Leased Property or
any payment of Rent (a) which result from any act of, or any claim against,
Landlord or any owner (other than Tenant) of a direct or indirect interest in
the Leased Property, or which result from any violation by Landlord of any terms
of this Agreement or the Purchase Agreement, or (b) which result from liens in
favor of any taxing authority by reason of any tax owed by Landlord or any fee
owner of a direct or indirect interest in the Leased Property; provided,
however, that "Landlord Lien" shall not include any lien resulting from any tax
for which Tenant is obligated to pay or indemnify Landlord against until such
time as Tenant shall have already paid to or on behalf of Landlord the tax or
the required indemnity with respect to the same.
"Landlord Rent" shall mean Minimum Rent and Percentage Rent
collectively.
"Lease Year" shall mean any Fiscal Year during the Term and any partial
Fiscal Year at the beginning or end of the Term.
"Leased Improvements" shall have the meaning given such term in Section
2.1(b).
"Leased Intangible Property" shall mean all Intangible Property (as
defined therein) acquired by Landlord with respect to the Leased Property
pursuant to the Purchase Agreement.
"Leased Personal Property" shall have the meaning given such term in
Section 2.1(e).
"Leased Property" shall have the meaning given such term in Section
2.1.
"Legal Requirements" shall mean all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Leased Property or the
maintenance, construction, alteration or operation thereof, whether now or
hereafter enacted or in existence, including, without limitation, (a) all
permits, licenses, authorizations, certificates and regulations necessary to
operate the Leased Property for its Permitted Use, and (b) all covenants,
agreements, declarations, restrictions and encumbrances contained in any
instruments at any time in force affecting the Leased Property as of the date
hereof, or to which Tenant has consented or required to be granted pursuant to
Applicable Laws, including those which may (i) require material repairs,
modifications or alterations in or to the Leased Property or (ii) in any way
materially and adversely affect the use and enjoyment thereof, but excluding any
requirements arising as a result of Landlord's or any Affiliated Person of
Landlord's status as a real estate investment trust.
"Lien" shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, or any transfer of
property or assets for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors.
"Limited Rent Guaranty" shall mean the limited rent guaranty agreement,
dated as of the date hereof, made by the Guarantor in favor of Landlord, as may
be amended from time to time.
"Major Capital Expenditures shall have the meaning given such term in
Section 5.1.3(a).
"Marriott Companies" shall mean Marriott International, Inc., a
Delaware corporation ("Marriott") and (i) any Subsidiary or Affiliated Person of
Marriott, (ii) a partnership in which Marriott, or any Subsidiary or Affiliated
Person of Marriott, is a general partner, and (iii) any limited liability
company in which Marriott or a any Subsidiary or Affiliated Person of Marriott
is a managing member.
"Marriott Retirement Community System" shall mean at any particular
time the entire system or group of Brighton Gardens retirement communities then
owned and/or operated or managed by Operator (or one or more of its Affiliated
Persons), under the "Marriott" name.
"Membership Interest Pledge Agreement" shall mean the Membership
Interest Pledge Agreement, of even date herewith, made by Marriott Senior Living
Services, Inc. in favor of Landlord, as may be amended from time to time.
"Mere Director" shall mean a Person who holds the office of director of
a corporation and who, as such director, has the right to vote not more than
twelve and one-half percent (12.5%) of the total voting rights on the board of
directors of such corporation, and who represents or acts on behalf of a mere
passive investor which neither (i) owns more than three percent (3%) of the
total voting rights attributable to all shares or ownership interests of a
Competitor, nor (ii) otherwise has the power to direct or cause the direction of
the management or policies of a Competitor.
"Minimum Rent" shall mean, with respect to each Accounting Period, the
sum set forth on Exhibit A, subject to adjustment pursuant to the terms of this
Agreement.
"Notice" shall mean a notice given in accordance with Section 22.10.
"Operating Agreement" shall mean the Operating Agreement, dated as of
the date hereof, between Tenant and Marriott Senior Living Services, Inc., a
Delaware corporation, with respect to the Facility, as amended and replaced from
time to time, subject to Landlord's consent if and to the extent Landlord's
consent is required pursuant to Section 21.6.
"Operator" shall mean the person designated by and acting as Operator
pursuant to the Operating Agreement.
"Overdue Rate" shall mean, on any date, a per annum rate of interest
equal to the lesser of (i) twelve percent (12%) or (ii) the maximum rate then
permitted under applicable law.
"Owner Agreement" shall mean the Owner Agreement pertaining to the
Leased Property, dated as of the date hereof, among Landlord, the Operator and
Tenant, as may be amended from time to time.
"Parent" shall mean, with respect to any Person, any Person which
directly, or indirectly through one or more Subsidiaries or Affiliated Persons,
(i) owns fifty-one percent (51%) or more of the voting or beneficial interest
in, or (ii) otherwise has the right or power (whether by contract, through
ownership of securities or otherwise) to control, such Person.
"Percentage Rent" shall have the meaning given such term in Section
3.1.2(a).
"Permitted Encumbrances" shall mean all rights, restrictions, and
easements of record set forth on Schedule B to the applicable owner's or
leasehold title insurance policy issued to Landlord effective on or about the
date hereof, plus any other such encumbrances as may have been consented to in
writing by Landlord from time to time.
"Permitted Use" shall mean any use of the Leased Property permitted
pursuant to Section 4.1.1(a) or (b).
"Person" shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"Product Standard(s)" shall have the meaning given such term in Section
5.1.2(c).
"Property Expenses" is defined in Exhibit C attached hereto.
"Proprietary Information" shall mean (a) all computer software and
accompanying documentation (including all future upgrades, enhancements,
additions, substitutions and modifications thereof), other than that which is
commercially available, which are used by Tenant in connection with the property
management system, and all future electronic systems developed by Tenant or any
Affiliated Person of Tenant for use in the Facility, (b) all manuals, brochures
and directives used by Tenant at the Facility regarding the procedures and
techniques to be used in operating the Facility, (c) customer lists, and (d)
employee records which must remain confidential either under Legal Requirements
or under reasonable corporate policies of Tenant or any Affiliated Person as to
Tenant.
"Purchase Agreement" shall mean the Purchase and Sale Agreement, dated
as of March ___, 2000, by and between Landlord as purchaser, and Marriott Senior
Living Services, Inc., as seller, as may be amended from time to time.
"Rent" shall mean, collectively, the Minimum Rent, Percentage Rent and
Additional Charges.
"Request Notice" shall have the meaning given such term in Section
16.1.
"Reserve" shall have the meaning given such term in Section 5.1.2(a).
"Reserve Estimate" shall have the meaning given such term in Section
5.1.2(c).
"Response Notice" shall mean the meaning given such term in Section
16.1.
"SEC" shall mean the Securities and Exchange Commission.
"Security Deposit" shall have the meaning ascribed to it in Section
3.4.
"Soft Goods" shall mean all fabric, textile and flexible plastic
products (not including items which are classified as "Fixed Asset Supplies"
under the Uniform System of Accounts) which are used in furnishing the Facility,
including, without limitation: carpeting, drapes, bedspreads, wall and floor
coverings, mats, shower curtains and similar items.
"Software" means all computer software and accompanying documentation
(including all future upgrades, enhancements, additions, substitutions and
modifications thereof), other than computer software which is commercially
available, which are used by Operator in connection with its operations at the
Facility.
"State" shall mean the State of Illinois.
"Subsidiary" shall mean, with respect to any Person, any Entity in
which such Person directly, or indirectly through one or more Subsidiaries or
Affiliated Persons, (a) owns fifty-one percent (51%) or more of the voting or
beneficial interest or (b) which such Person otherwise has the right or power to
control (whether by contract, through ownership of securities or otherwise); it
being understood and agreed that, as of the date hereof, (x) neither Host
Marriott Corporation or Sodexho Marriott Services Corporation is a Subsidiary of
the Guarantor and (y) the Guarantor is not a Subsidiary of Host Marriott
Corporation or Sodexho Marriott Services, Inc.
"Successor Landlord" shall have the meaning given such term in Section
20.2.
"System Standards" shall mean from time to time both the operational
standards (for example, staffing levels, resident care and health care policies
and procedures, and accounting and financial reporting policies and procedures)
and the physical standards (for example, quality of FF&E, frequency of FF&E
replacement) that are then generally and consistently (but not necessarily,
absolutely or without exception) applied at or to retirement communities in the
Marriott Retirement Community System which are of comparable type, size, age and
market orientation as the Facility.
"Tenant" shall have the meaning given such term in the preamble to this
Agreement and shall include its permitted successors and assigns.
"Tenant's Personal Property" shall mean all motor vehicles,
Inventories, FAS and any other tangible personal property of Tenant, if any,
acquired by Tenant at its election and with its own funds on and after the date
hereof and located at the Leased Property or used in Tenant's business at the
Leased Property and all modifications, replacements, alterations and additions
to such personal property installed at the expense of Tenant, other than any
items included within the definition of Proprietary Information.
"Term" shall mean, collectively, the Fixed Term and the Extended Terms,
to the extent properly exercised pursuant to the provisions of Section 2.4,
unless sooner terminated pursuant to the provisions of this Agreement.
"Total Facility Revenues" shall mean, for the applicable period of
time, all gross revenues and receipts of every kind derived by Tenant or any
Affiliate of Tenant from operating or causing the operation of the Leased
Property and parts thereof, including, but not limited to: income from both cash
and credit transactions (after reasonable deductions for bad debts and discounts
for prompt or cash payments and refunds) from monthly occupancy fees, entrance
fees, health care fees and ancillary services fees received pursuant to various
agreements with residents of the Facility; rental of space of every kind;
license, lease and concession fees and rentals (not including gross receipts
received directly by licensees, lessees and concessionaires); income from
vending machines and video machines; food and beverage sales; wholesale and
retail sales of merchandise (other than proceeds from the sale of furnishings,
fixture and equipment no longer necessary to the operation of the Facility,
which shall be deposited in the Reserve); service charges, to the extent not
distributed to the employees at the Facility as gratuities; and proceeds from
business interruption or other loss of income insurance (but only to the extent
that it reimburses Landlord or Tenant for lost income and not for additional or
other expenses), all determined in accordance with GAAP; provided, however, that
Total Facility Revenues shall not include the following: gratuities to Facility
employees; federal, state or municipal excise, sales, occupancy, use or similar
taxes collected directly from occupants, guests or invitees or included as part
of the sales price of any goods or services; insurance proceeds (other than as
aforesaid); Award proceeds (other than for a temporary Condemnation); any
proceeds from any sale of the Leased Property or from the refinancing of any
debt encumbering the Leased Property; proceeds from the disposition of
furnishings, fixture and equipment no longer necessary for the operation of the
Facility; interest which accrues on amounts deposited in the Reserve; any cash
refunds, rebates or discounts to residents of the Facility, or cash discounts
and credits of a similar nature given, paid or returned in the course of
obtaining Total Facility Revenues or components thereof; security deposits until
such time as the same are applied to current fees and other charges due and
payable; awards of damages, settlement proceeds and other payments received by
Landlord in respect of any litigation or administrative proceeding other than
any litigation or proceeding to collect fees due for services or goods provided
from the Facility; any "Shortfall Payment" made by Operator to Tenant or
Landlord pursuant to Section 4.03B of the Operating Agreement; and payments
under any policy of title insurance.
"Uniform System of Accounts" shall mean Uniform System of Accounts for
the Lodging Industry, Ninth Revised Edition, 1996, as published by the Hotel
Association of New York City.
"Unsuitable for Its Permitted Use" shall mean a state or condition of
the Facility such that (a) following any damage or destruction involving the
Facility, the Facility cannot be operated in the reasonable judgment of Tenant
on a commercially practicable basis for its Permitted Use and it cannot
reasonably be expected to be restored to substantially the same condition as
existed immediately before such damage or destruction, and as otherwise required
by Section 10.2.4, within nine (9) months following such damage or destruction
or such shorter period of time as to which business interruption insurance is
available to cover Rent and other costs related to the Leased Property following
such damage or destruction, or (b) as the result of a partial taking by
Condemnation, the Facility cannot be operated, in the reasonable judgment of
Tenant on a commercially and economically practicable basis for its Permitted
Use in light of then existing circumstances.
"Work" shall have the meaning given such term in Section 10.2.4.
ARTICLE 2
LEASED PROPERTY AND TERM
2.1......Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Landlord leases to Tenant and Tenant leases from Landlord
all of Landlord's right, title and interest in and to all of the following
(collectively, the "Leased Property"):
(a) the land that is more particularly described in Exhibit B,
attached hereto and made a part hereof (the "Land");
(b) all buildings, structures and other improvements of every
kind including, but not limited to, the Facility, alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines
(on-site and off-site), parking areas and roadways appurtenant to such
buildings and structures presently situated upon the Land
(collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances
relating to the Land and the Leased Improvements;
(d) all equipment, machinery, fixtures, and other items of
property, now or hereafter permanently affixed to or incorporated into
the Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment,
all of which, to the maximum extent permitted by law, are hereby deemed
by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, but
specifically excluding all items included within the category of
Tenant's Personal Property (collectively, the "Fixtures");
(e) all machinery, equipment, furniture, furnishings, moveable
walls or partitions, computers or trade fixtures located on or in the
Leased Improvements, and all modifications, replacements, alterations
and additions to such property, except items, if any, included within
the category of Fixtures, but specifically excluding all items included
within the category of Tenant's Personal Property (collectively, the
"Leased Personal Property"); and
(f) all of the Leased Intangible Property.
2.2 Condition of Leased Property. Tenant acknowledges receipt and
delivery of possession of the Leased Property and Tenant accepts the Leased
Property in its "as is" condition, subject to the rights of parties in
possession, the existing state of title, including all covenants, conditions,
restrictions, reservations, mineral leases, easements and other matters of
record or that are visible or apparent on the Leased Property, all applicable
Legal Requirements, the lien of any financing instruments, mortgages and deeds
of trust permitted by the terms of this Agreement, and such other matters which
would be disclosed by an inspection of the Leased Property and the record title
thereto or by an accurate survey thereof. TENANT REPRESENTS THAT IT HAS
INSPECTED THE LEASED PROPERTY AND ALL OF THE FOREGOING AND HAS FOUND THE
CONDITION THEREOF SATISFACTORY AND IS NOT RELYING ON ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR LANDLORD'S AGENTS OR EMPLOYEES WITH RESPECT THERETO,
EXCEPT AS EXPRESSLY SET FORTH HEREIN, AND TENANT WAIVES ANY CLAIM OR ACTION
AGAINST LANDLORD IN RESPECT OF THE CONDITION OF THE LEASED PROPERTY. EXCEPT AS
EXPRESSLY SET FORTH HEREIN, LANDLORD MAKES NO WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
To the maximum extent permitted by law, however, Landlord hereby assigns to
Tenant all of Landlord's rights to proceed against any predecessor in title,
contractors and materialmen for breaches of warranties or representations or for
latent defects in the Leased Property. Landlord shall fully cooperate with
Tenant in the prosecution of any such claims, in Landlord's or Tenant's name,
all at Tenant's sole cost and expense. Tenant shall indemnify, defend, and hold
harmless Landlord from and against any loss, cost, damage or liability
(including reasonable attorneys' fees) incurred by Landlord in connection with
such cooperation.
2.3 Fixed Term. The initial term of this Agreement (the "Fixed Term")
shall commence on the Commencement Date and shall expire on the last day of the
Accounting Period in which occurs the fifteenth (15th) anniversary of the
Commencement Date.
2.4 Extended Term. Provided that no Event of Default shall have
occurred and be continuing, the Term of this Agreement shall be automatically
extended for four (4) renewal terms of five (5) years each (each such five year
renewal term being herein referred to as an "Extended Term"), unless Tenant
shall give Landlord Notice, in Tenant's sole and absolute discretion, not later
than two (2) years prior to the scheduled expiration of the then Fixed Term (in
the case of the first Extended Term) or the then existing Extended Term (in the
case of any Extended Term after the first Extended Term), that Tenant elects not
so to extend the Term of this Agreement (and time shall be of the essence with
respect to the giving of such Notice) in which case the Term of this Lease will
expire at the end of the then current Term. Each Extended Term shall commence on
the day succeeding the expiration of the Fixed Term or the preceding Extended
Term, as the case may be. All of the terms, covenants and provisions of this
Agreement shall apply to each such Extended Term, except that (a) Tenant shall
have no right to extend the Term beyond the expiration of the fourth (4th)
Extended Term, (b) the Minimum Rent payable during such Extended Term shall
equal one hundred two percent (102%) of the sum of (i) the Minimum Rent payable
by Tenant for the Accounting Period immediately preceding the commencement of
such Extended Term and (ii) one thirteenth (1/13th) of the Percentage Rent
payable by Tenant for the last Fiscal Year ending prior to the commencement of
such Extended Term, and (c) the Base Year for purposes of computing Percentage
Rent payable during such Extended Term shall mean the first Fiscal Year ending
after the commencement of such Extended Term. If Tenant shall give Notice that
it elects not to extend the Term, this Agreement shall automatically terminate
at the end of the Term then in effect and Tenant shall have no further option to
extend the Term of this Agreement. Otherwise, the extension of this Agreement
shall be automatically effected without the execution of any additional
documents; it being understood and agreed, however, that Tenant and Landlord
shall execute such documents and agreements as either party shall reasonably
require to evidence the same.
ARTICLE 3
RENT
3.1 Rent. Tenant shall pay, in lawful money of the United States of
America which shall be legal tender for the payment of public and private debts,
without offset, abatement, demand or deduction (unless otherwise expressly
provided in this Agreement), Minimum Rent and Percentage Rent to Landlord and
Additional Charges to the party to whom such Additional Charges are payable,
during the Term. All payments to Landlord shall be made by wire transfer of
immediately available federal funds or by other means acceptable to Landlord in
its sole discretion.
3.1.1 Minimum Rent.
(a) Payment of Minimum Rent. Minimum Rent shall be
paid in advance on the first Business Day of each Accounting Period;
provided, however, that the first payment of Minimum Rent shall be
payable on the Commencement Date (and, if applicable, such payment
shall be prorated as provided in the following sentence of this
paragraph Section 3.1.1(a)). Minimum Rent for any partial Accounting
Period shall be prorated on a per diem basis.
(b) Adjustments of Minimum Rent Following
Disbursements Under Sections 5.1.4(b), 10.2 or 11.2. Effective on the
date of each disbursement to pay for the cost of any repairs,
maintenance, renovations or replacements pursuant to Sections 5.1.4(b),
10.2 or 11.2, the Minimum Rent shall be increased by an amount equal to
the quotient obtained by dividing (i) a per annum amount equal to the
Disbursement Rate, determined as of the date of Tenant's Notice to
Landlord identifying the amount of and requirement for the applicable
funds, times the amount so disbursed, by (ii) thirteen (13). If any
such disbursement is made during any Accounting Period on a day other
than the first day of an Accounting Period, Tenant shall pay to
Landlord on the first day of the immediately following Accounting
Period (in addition to the amount of Minimum Rent payable with respect
to such Accounting Period, as adjusted pursuant to this paragraph (b))
the amount by which Minimum Rent for the preceding Accounting Period,
as adjusted for such disbursement on a per diem basis, exceeded the
amount of Minimum Rent actually paid by Tenant for such preceding
Accounting Period.
3.1.2 Percentage Rent.
(a) Amount. For each Fiscal Year or portion thereof
commencing with the first full Accounting Period following the Base
Year, Tenant shall pay percentage rent ("Percentage Rent") with respect
to such Fiscal Year (or portion thereof), in an amount equal to seven
percent (7%) of Excess Facility Revenues for such Fiscal Year (or
portion thereof).
(b) Quarterly Installments. Installments of
Percentage Rent for each Fiscal Year or portion thereof shall be
calculated and paid each Fiscal Quarter in arrears. Payment of each
such installment shall be made within thirty (30) days after the end of
each Fiscal Quarter and shall be accompanied by a statement setting
forth the calculation of Percentage Rent due and payable for such
Fiscal Quarter, together with a statement by the controller of the
Facility that, to the best of his or her knowledge and belief, and
subject to year-end audit and adjustment, such statement of Percentage
Rent is true and correct in all material respects. Installments due
with respect to each Fiscal Quarter shall be equal to the Percentage
Rent for all Fiscal Quarters elapsed during the applicable Fiscal Year
less amounts previously paid with respect thereto by Tenant. If the
Percentage Rent for such elapsed Fiscal Quarters as shown on the last
quarterly statement is less than the amount previously paid with
respect thereto by Tenant, Tenant shall be entitled to offset the
amount of such difference against Rent next coming due under this
Agreement, such offset to be applied together with interest at the
Disbursement Rate accruing from the date of payment by Tenant until the
date the offset is applied.
(c) Reconciliation of Percentage Rent. In addition,
on or before March 31 of each year, commencing March 31 following the
Base Year, Tenant shall deliver to Landlord a statement setting forth
the Total Facility Revenues for such preceding Fiscal Year, together
with an audit of Total Facility Revenues for the preceding Fiscal Year,
conducted by Arthur Andersen LLP, or another so-called "Big Five" firm
of independent certified public accountants proposed by Tenant and
approved by Landlord (which approval shall not be unreasonably withheld
or delayed). Landlord shall reimburse Tenant for the reasonable cost of
such audit.
If the annual Percentage Rent for such preceding Fiscal Year as shown
in the annual statement exceeds the amount previously paid with respect
thereto by Tenant, Tenant shall pay such excess to Landlord at such
time as the annual statement is delivered, together with interest at
the Disbursement Rate, which interest shall accrue from the Accrual
Date (as hereinafter defined) until the date that such certificate is
required to be delivered (or, if sooner, the date Tenant pays such
excess to Landlord) and, thereafter, such interest shall accrue at the
Overdue Rate, until the amount of such difference shall be paid or
otherwise discharged. In the case of any underpayment of Percentage
Rent by Tenant arising out of incorrect reporting on any statement of
Percentage Rent, the Accrual Date therefor shall be the payment due
date for the respective installment of Percentage Rent with respect to
which the underpayment occurred. In the case of any underpayment of
Percentage Rent arising out of variation in Total Facility Revenues
from Fiscal Quarter to Fiscal Quarter, the Accrual Date shall be the
payment due date for the final installment of Percentage Rent for such
preceding Fiscal Year. If the annual Percentage Rent for such preceding
Fiscal Year as shown in the annual statement is less than the amount
previously paid with respect thereto by Tenant, Tenant shall be
entitled to offset the amount of such difference against Rent next
coming due under this Agreement, such payment or credit to be made
together with interest at the Disbursement Rate, which interest shall
accrue from the date of payment of Tenant until the date such offset is
applied. If such offset cannot be made because the Term has expired
prior to application in full thereof, Landlord shall pay the unapplied
balance of such offset to Tenant, together with interest at the
Disbursement Rate, which interest shall accrue from the date of payment
by Tenant until the date of payment by Landlord.
(d) Confirmation of Percentage Rent. Tenant shall
utilize, or cause to be utilized, an accounting system for the Leased
Property in accordance with its usual and customary practices and in
accordance with GAAP, which will accurately record all Total Facility
Revenues and Tenant shall retain, for at least three (3) years after
the expiration of each Lease Year, reasonably adequate records
conforming to such accounting system showing all Total Facility
Revenues for such Fiscal Year. Landlord, at its own expense except as
provided hereinbelow, shall have the right, exercisable by Notice to
Tenant given within one hundred eighty (180) days after receipt of the
applicable annual statement, by its accountants or representatives to
commence within such 180-day period an audit of the information set
forth in such annual statement referred to in subparagraph (c) above
and, in connection with such audit, to examine Tenant's books and
records with respect thereto (including supporting data and sales and
excise tax returns); provided, however, that if Landlord has credible
evidence that Tenant has intentionally misrepresented Total Facility
Revenues on any such annual statement, the said 180-day period shall
commence to run on the date Landlord obtained such credible evidence
that Tenant has intentionally misrepresented Total Facility Revenues on
any such annual statement. If Landlord does not commence an audit
within such one hundred eighty (180) day period, such annual statement
shall be deemed conclusively to be accepted by Landlord as correct and
Landlord shall have no further right to challenge the same. Landlord
shall use commercially reasonable efforts to complete any such audit as
soon as practicable. If any such audit discloses a deficiency in the
payment of Percentage Rent, and either Tenant agrees with the result of
such audit or the matter is otherwise determined, Tenant shall
forthwith pay to Landlord the amount of the deficiency, as finally
agreed or determined, together with interest at the Disbursement Rate,
from the date such payment should have been made to the date of payment
thereof. If such deficiency, as agreed upon or compromised as
aforesaid, is more than three percent (3%) of the Total Facility
Revenues reported by Tenant for such Fiscal Year and, as a result,
Landlord did not receive at least ninety-five percent (95%) of the
Percentage Rent payable with respect to such Fiscal Year, Tenant shall
pay the reasonable cost of such audit and examination. If any such
audit discloses that Tenant paid more Percentage Rent for any Fiscal
Year than was due hereunder, and either Landlord agrees with the result
of such audit or the matter is otherwise determined Tenant shall be
entitled to a credit equal to the amount of such overpayment against
Rent next coming due in the amount of such difference, as finally
agreed or determined, together with interest at the Disbursement Rate,
which interest shall accrue from the time of payment by Tenant until
the date such credit is applied or paid, as the case may be. If such a
credit cannot be made because the Term has expired before the credit
can be applied in full Landlord shall pay the unapplied balance of such
credit to Tenant, together with interest at the Disbursement Rate,
which interest shall accrue from the date of payment by Tenant until
the date of payment from Landlord.
3.1.3 Additional Charges. In addition to the Minimum Rent and
Percentage Rent payable hereunder, Tenant shall pay to the appropriate
parties and discharge as and when due and payable the
following (collectively, "Additional Charges"):
(a) Impositions. Subject to Article 8 relating to
permitted contests, Tenant shall pay, or cause to be paid, all
Impositions before any fine, penalty, interest or cost (other than any
opportunity cost as a result of a failure to take advantage of any
discount for early payment) may be added for non-payment, such payments
to be made directly to the taxing authorities where feasible, and shall
promptly, upon request, furnish to Landlord copies of official receipts
or other reasonably satisfactory proof evidencing such payments. If any
such Imposition may, at the option of the taxpayer, lawfully be paid in
installments (whether or not interest shall accrue on the unpaid
balance of such Imposition), Tenant may exercise the option to pay the
same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such
installments during the Term as the same become due and before any
fine, penalty, premium, further interest or cost may be added thereto.
Landlord, at its expense, shall, to the extent required or permitted by
Applicable Law, prepare and file all tax returns and pay all taxes due
in respect of Landlord's net income, gross receipts (from any source
other than the Rent received by Landlord from Tenant), sales and use,
single business, ad valorem, franchise taxes and taxes on its capital
stock, and Tenant, at its expense, shall, to the extent required or
permitted by Applicable Laws, prepare and file all other tax returns
and reports in respect of any Imposition as may be required by
Government Agencies. If any refund shall be due from any taxing
authority in respect of any Imposition paid by Tenant, the same shall
be paid over to or retained by Tenant. Landlord and Tenant shall, upon
request of the other, provide such data as is maintained by the party
to whom the request is made with respect to the Leased Property as may
be necessary to prepare any required returns and reports. In the event
Government Agencies classify any property covered by this Agreement as
personal property, Tenant shall file all personal property tax returns
in such jurisdictions where it may legally so file. Each party shall,
to the extent it possesses the same, provide the other, upon request,
with cost and depreciation records necessary for filing returns for any
property so classified as personal property. Where Landlord is legally
required to file personal property tax returns for property covered by
this Agreement and/or gross receipts tax returns for Rent received by
Landlord from Tenant, Landlord shall file the same with reasonable
cooperation from Tenant. Landlord shall provide Tenant with copies of
assessment notices in sufficient time for Tenant to prepare a protest
which Landlord shall file, at Tenant's written request. All Impositions
assessed against such personal property shall be (irrespective of
whether Landlord or Tenant shall file the relevant return) paid by
Tenant not later than the last date on which the same may be made
without interest or penalty.
Landlord shall give prompt Notice to Tenant of all Impositions payable
by Tenant hereunder of which Landlord at any time has knowledge;
provided, however, that Landlord's failure to give any such notice
shall in no way diminish Tenant's obligation hereunder to pay such
Impositions (except that Landlord shall be responsible for any interest
or penalties incurred as a result of Landlord's failure promptly to
forward the same).
(b) Utility Charges. Tenant shall pay or cause to be
paid all charges for electricity, power, gas, oil, water and other
utilities used in connection with the Leased Property.
(c) Insurance Premiums. Tenant shall pay or cause to
be paid all premiums for the insurance coverage required to be
maintained pursuant to Article 9.
(d) Other Charges. Tenant shall pay or cause to be
paid all other amounts, liabilities and obligations arising in
connection with the Leased Property except those obligations expressly
assumed by Landlord pursuant to the provisions of this Agreement or
expressly stated not to be an obligation of Tenant pursuant to this
Agreement. Without limitation, Tenant shall pay or cause to be paid all
amounts, liabilities and obligations arising in connection with the
Contracts, as defined in the Purchase Agreement.
(e) Reimbursement for Additional Charges. If Tenant
pays or causes to be paid property taxes or similar or other Additional
Charges attributable to periods after the end of the Term, whether upon
expiration or sooner termination of this Agreement, Tenant may, within
a reasonable time after the end of the Term, provide Notice to Landlord
of its estimate of such amounts. Landlord shall promptly reimburse
Tenant for all payments of such taxes and other similar Additional
Charges that are attributable to any period after the Term of this
Agreement.
3.2 Late Payment of Rent, Etc. If any installment of Minimum Rent,
Percentage Rent or Additional Charges (but only as to those Additional Charges
which are payable directly to Landlord) shall not be paid within ten (10) days
after its due date, Tenant shall pay Landlord, within five (5) days after
Landlord's written demand therefor, as Additional Charges, a late charge (to the
extent permitted by law) computed at the Overdue Rate on the amount of such
installment, from the due date of such installment to the date of payment
thereof. To the extent that Tenant pays any Additional Charges directly to
Landlord or any Facility Mortgagee pursuant to any requirement of this
Agreement, Tenant shall be relieved of its obligation to pay such Additional
Charges to the Entity to which they would otherwise be due and Landlord shall
pay when due, or cause the applicable Facility Mortgagee to pay when due, such
Additional Charges to the Entity to which they are due. If any payment due from
Landlord to Tenant shall not be paid within ten (10) days after its due date,
Landlord shall pay to Tenant, on demand, a late charge (to the extent permitted
by law) computed at the Overdue Rate on the amount of such installment from the
due date of such installment to the date of payment thereof.
In the event of any failure by Tenant to pay any Additional
Charges when due, except as expressly provided in Section 3.1.3(a) with respect
to permitted contests pursuant to Article 8, Tenant shall promptly pay (unless
payment thereof is in good faith being contested and enforcement thereof is
stayed) and discharge, as Additional Charges, every fine, penalty, interest and
cost which may be added for non-payment or late payment of such items. Landlord
shall have all legal, equitable and contractual rights, powers and remedies
provided either in this Agreement or by statute or otherwise in the case of
non-payment of the Additional Charges as in the case of non-payment of the
Minimum Rent and Percentage Rent.
3.3 Net Lease. The Rent shall be absolutely net to Landlord so that
this Agreement shall yield to Landlord the full amount of the installments or
amounts of the Rent throughout the Term, subject to any other provisions of this
Agreement which expressly provide otherwise, including, without limitation,
those provisions for adjustment, refunding or abatement of such Rent and for the
funding of Landlord's obligations pursuant to Sections 5.1.4 and 14.3. This
Agreement is a net lease and, except to the extent otherwise expressly specified
in this Agreement, it is agreed and intended that Rent payable hereunder by
Tenant shall be paid without notice, demand, counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction
and that Tenant's obligation to pay all such amounts, throughout the Term and
all applicable Extended Terms is absolute and unconditional and except to the
extent otherwise expressly specified in this Agreement, the respective
obligations and liabilities of Tenant and Landlord hereunder shall in no way be
released, discharged or otherwise affected for any reason, including without
limitation: (a) any defect in the condition, merchantability, design, quality or
fitness for use of the Leased Property or any part thereof, or the failure of
the Leased Property to comply with all Applicable Laws, including any inability
to occupy or use the Leased Property by reason of such noncompliance; (b) any
damage to, removal, abandonment, salvage, loss, condemnation, theft, scrapping
or destruction of or any requisition or taking of the Leased Property or any
part thereof, or any environmental conditions on the Leased Property or any
property in the vicinity of the Leased Property; (c) any restriction, prevention
or curtailment of or interference with any use of the Leased Property or any
part thereof including eviction; (d) any defect in title to or rights to the
Leased Property or any lien on such title or rights to the Leased Property; (e)
any change, waiver, extension, indulgence or other action or omission or breach
in respect of any obligation or liability of or by any Person; (f) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceedings relating to Tenant or any other Person, or
any action taken with respect to this Agreement by any trustee or receiver of
Tenant or any other Person, or by any court, in any such proceeding; (g) any
right or claim that Tenant has or might have against any Person, including
without limitation Landlord (other than a monetary default) or any vendor,
manufacturer, contractor of or for the Leased Property; (h) any failure on the
part of Landlord or any other Person to perform or comply with any of the terms
of this Agreement, or of any other agreement; (i) any invalidity,
unenforceability, rejection or disaffirmance of this Agreement by operation of
law or otherwise against or by Tenant or any provision hereof; (j) the
impossibility of performance by Tenant or Landlord, or both; (k) any action by
any court, administrative agency or other Government Agencies; (l) any
interference, interruption or cessation in the use, possession or quiet
enjoyment of the Leased Property or otherwise; or (m) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, whether foreseeable
or unforeseeable, and whether or not Tenant shall have notice or knowledge of
any of the foregoing; provided, however, that the foregoing shall not apply or
be construed to restrict Tenant's rights in the event of any act or omission by
Landlord constituting negligence or willful misconduct. Except as specifically
set forth in this Agreement, this Agreement shall be noncancellable by Tenant
for any reason whatsoever and, except as expressly provided in this Agreement,
Tenant, to the extent now or hereafter permitted by Applicable Laws, waives all
rights now or hereafter conferred by statute or otherwise to quit, terminate or
surrender this Agreement or to any diminution, abatement or reduction of Rent
payable hereunder. Except as specifically set forth in this Agreement, under no
circumstances or conditions shall Landlord be expected or required to make any
payment of any kind hereunder or have any obligations with respect to the use,
possession, control, maintenance, alteration, rebuilding, replacing, repair,
restoration or operation of all or any part of the Leased Property, so long as
the Leased Property or any part thereof is subject to this Agreement, and Tenant
expressly waives the right to perform any such action at the expense of Landlord
pursuant to any law.
3.4 Security for Tenant's Performance.
(a) Simultaneously with the execution of this Agreement,
Tenant shall deposit with Landlord the sum of Five Hundred Fifty-Three
Thousand Nine Hundred Fifty-Six Dollars ($553,956) (the "Security
Deposit"). Landlord may commingle the Security Deposit with other funds
of Landlord. All interest, if any, earned on the Security Deposit shall
be the sole property of Landlord and shall not be part of the Security
Deposit.
(b) Tenant acknowledges that the Security Deposit constitutes
security for the faithful observance and performance by Tenant of all
the terms, covenants and conditions of this Agreement by Tenant to be
observed and performed. If any Event of Default shall occur and be
continuing under this Agreement, Landlord may, at its option and
without prejudice to any other remedy which Landlord may have on
account thereof, appropriate and apply the amount of the Security
Deposit as may be necessary to compensate Landlord toward the payment
of the Rent or other sums due Landlord under this Agreement as a result
of such breach by Tenant. It is understood and agreed that the Security
Deposit is not to be considered as prepaid rent, nor shall damages be
limited to the amount of the Security Deposit. Upon the expiration or
sooner termination of this Agreement, any unapplied balance of the
Security Deposit shall be paid by wire transfer to Tenant.
ARTICLE 4
USE OF THE LEASED PROPERTY
4.1 Permitted Use.
4.1.1 Permitted Use.
(a) Tenant shall, at all times during the Term and at
any other time that Tenant shall be in possession of the Leased
Property, continuously use and operate the Leased Property as an
assisted living facility, which may include a dementia facility and any
uses incidental thereto. Subject to Section 16.3, Tenant shall not use
the Leased Property or any portion thereof for any other use without
the prior written consent of Landlord. No use shall be made or
permitted to be made of the Leased Property and no acts shall be done
thereon which will cause the cancellation of any insurance policy
covering the Leased Property or any part thereof (unless another
adequate policy is available), nor shall Tenant sell or otherwise
provide or permit to be kept, used or sold in or about the Leased
Property any article which may be prohibited by law or by the standard
form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriter's regulations.
Tenant shall, at its sole cost (except as expressly provided in Section
5.1.4(b)), comply with all Insurance Requirements. Tenant shall not
take or omit to take any action, the taking or omission of which
materially impairs the value or the usefulness of the Leased Property
or any part thereof for its Permitted Use.
(b) Notwithstanding the foregoing, in the event that,
in the reasonable determination of Tenant, it shall no longer be
economically practical to operate the Leased Property as an assisted
living facility, Tenant shall give Landlord Notice thereof, which
Notice shall set forth in reasonable detail the reasons therefor.
Thereafter, Landlord and Tenant shall negotiate in good faith to agree
on an alternative use for the Leased Property, appropriate adjustments
to the Percentage Rent, the Reserve and other related matters;
provided, however, in no such event shall the Minimum Rent be reduced
or abated. Upon agreement by Landlord and Tenant on an alternative use,
Landlord shall use commercially reasonable efforts, at Tenant's cost
and expense, to obtain any approvals or waivers needed pursuant to
Legal Requirements. In the event that operating the Leased Property for
such alternative use shall be outside of Tenant's expertise as
reasonably determined by Tenant, Tenant may engage a third-party
Manager, reasonably acceptable to Landlord, for such purpose.
4.1.2 Necessary Approvals. Tenant shall proceed with all due
diligence and exercise commercially reasonable efforts to obtain and maintain
all approvals necessary to use and operate, for its Permitted Use, the Leased
Property and the Facility located thereon under applicable law. Landlord shall
cooperate with Tenant in this regard, including executing all applications and
consents required to be signed by Landlord in order for Tenant to obtain and
maintain such approvals.
4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or
permit the use of the Leased Property or Tenant's Personal Property, if any, for
any unlawful purpose. Tenant shall not commit or suffer to be committed any
waste on the Leased Property, or in the Facility, nor shall Tenant cause or
permit any unlawful nuisance thereon or therein. Tenant shall not suffer nor
permit the Leased Property, or any portion thereof, to be used in such a manner
as (i) might reasonably impair Landlord's title thereto or to any portion
thereof, or (ii) may reasonably allow a claim or claims for adverse usage or
adverse possession by the public, as such, or of implied dedication of the
Leased Property or any portion thereof.
4.2 Compliance with Legal/Insurance Requirements, Etc. Subject to the
provisions of Article 8, Tenant, at its sole expense, shall (i) comply with
Legal Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair, alteration and restoration of the Leased Property, and (ii)
comply with all appropriate licenses, and other authorizations and agreements
required for any use of the Leased Property and Tenant's Personal Property, if
any, then being made and which are material to the operation of the Leased
Property as an assisted living facility, and for the proper operation and
maintenance of the Leased Property or any part thereof.
4.3 Environmental Matters.
4.3.1 Restriction on Use, Etc. If, at any time prior to the
termination of this Agreement, Hazardous Substances (other than those maintained
in accordance with Applicable Laws) are discovered on the Leased Property,
subject to Tenant's right to contest the same in accordance with Article 8,
Tenant shall take all actions and incur any and all expenses, as may be
reasonably necessary and as may be required by any Government Agency, (i) to
clean up and remove from and about the Leased Property all Hazardous Substances
thereon, (ii) to contain and prevent any further release or threat of release of
Hazardous Substances on or about the Leased Property and (iii) to use good faith
efforts to eliminate any further release or threat of release of Hazardous
Substances on or about the Leased Property. Tenant shall promptly: (a) upon
receipt of notice or knowledge, notify Landlord in writing of any material
change in the nature or extent of Hazardous Substances at the Leased Property,
(b) transmit to Landlord a copy of any Community Right to Know report which is
required to be filed by Tenant with respect to the Leased Property pursuant to
SARA Title III or any other Applicable Law, (c) transmit to Landlord copies of
any citations, orders, notices or other governmental communications received by
Tenant or its agents or representatives with respect thereto (collectively,
"Environmental Notice"), which Environmental Notice requires a written response
or any action to be taken and/or if such Environmental Notice gives notice of
and/or presents a material risk of any material violation of any Applicable Law
and/or presents a material risk of any material cost, expense, loss or damage
(an "Environmental Obligation"), (d) observe and comply with all Applicable Laws
relating to the use, maintenance and disposal of Hazardous Substances and all
orders or directives from any official, court or agency of competent
jurisdiction relating to the use or maintenance or requiring the removal,
treatment, containment or other disposition thereof, and (e) pay or otherwise
dispose of any fine, charge or Imposition related thereto, unless Tenant shall
contest the same in good faith and by appropriate proceedings and the right to
use and the value of the Leased Property is not materially and adversely
affected thereby.
Tenant's liability and obligations pursuant to the terms of this Section 4.3.1
are subject to the provisions of Sections 5.1.3 and 5.1.4 and Landlord's
compliance with its funding obligations under Section 5.1.4.
4.3.2 Indemnification. Tenant and Landlord shall each protect,
indemnify and hold harmless the other, its trustees, directors, officers,
agents, employees and beneficiaries, and any of their respective successors or
assigns with respect to this Agreement (collectively, the "Indemnitees" and,
individually, an "Indemnitee") for, from and against any and all debts, liens,
claims, causes of action, administrative orders or notices, costs, fines,
penalties or expenses (including, without limitation, reasonable attorney's fees
and expenses) imposed upon, incurred by or asserted against any Indemnitee
resulting from, either directly or indirectly, the presence during the Term in,
upon or under the soil or ground water of the Leased Property or any properties
surrounding the Leased Property of any Hazardous Substances in violation of any
Applicable Law or otherwise, provided that any of the foregoing arises by reason
of the gross negligence or willful misconduct of the indemnifying party, except
to the extent the same arise from the gross negligence or willful misconduct of
the other party or any other Indemnitee. This duty includes, but is not limited
to, costs associated with personal injury or property damage claims as a result
of the presence prior to the expiration or sooner termination of the Term and
the surrender of the Leased Property to Landlord in accordance with the terms of
this Agreement of Hazardous Substances in, upon or under the soil or ground
water of the Leased Property in violation of any Applicable Law. Upon Notice
from the indemnified party and any other of the Indemnitees, the indemnifying
party shall undertake the defense, at its sole cost and expense, of any
indemnification duties set forth herein, in which event, the indemnifying party
shall not be liable for payment of any duplicative attorneys' fees incurred by
the other party or any Indemnitee.
4.3.3 Survival. As to conditions which exist prior to the
expiration or sooner termination of this Agreement, the provisions of this
Section 4.3 shall survive the expiration or sooner termination of this Agreement
for a period of one (1) year after such expiration or termination.
ARTICLE 5
MAINTENANCE AND REPAIRS
5.1 Maintenance and Repair.
5.1.1 Tenant's Obligations.
(a) Tenant shall, at its sole cost and expense
(except as expressly provided in Sections 5.1.2 and 5.1.3(b)), keep the
Leased Property and all private roadways, sidewalks and curbs located
thereon in good order and repair, reasonable wear and tear excepted,
and shall promptly make all necessary and appropriate repairs and
replacements thereto of every kind and nature, whether interior or
exterior, structural or nonstructural, ordinary or extraordinary,
foreseen or unforeseen or arising by reason of a condition existing
prior to the commencement of the Term. All repairs shall be made in a
good, workmanlike manner, consistent with the System Standards and
industry standards for like assisted living facilities in like locales,
in accordance with all applicable federal, state and local statutes,
ordinances, by-laws, codes, rules and regulations relating to any such
work. Tenant's obligations under this Section 5.1.1(a) shall be limited
in the event of any casualty or Condemnation as set forth in Sections
10.2 and 11.2 and Tenant's obligations with respect to Hazardous
Substances are as set forth in Section 4.3.
5.1.2 Reserve.
(a) Tenant shall establish, or cause Operator to
establish, an interest bearing reserve account (the "Reserve") in a
bank designated by Landlord and reasonably approved by Tenant. All
interest earned on the Reserve shall be added to and remain a part of
the Reserve. Except as set forth in Section 5.1.2(e), Tenant shall be
the only party entitled to withdraw funds from the Reserve. The purpose
of the Reserve is to cover the cost of:
(i) Replacements, renewals and additions
to the Facility's FF&E;
(ii) Repairs, renovations, renewals,
additions, alterations, improvements or replacements and
maintenance to the Leased Property, all of which are routine
or non-major and which are normally capitalized under GAAP,
such as exterior and interior repainting, resurfacing
building walls, floors, roofs and parking areas, and
replacing folding walls and the like; and
(iii) At Tenant's option, lease payments for
communications equipment and one maintenance or shuttle
vehicle used in connection with the operation of the
Facility.
(b) Commencing with the Commencement Date and
continuing throughout the Term, Tenant shall transfer (as of the end of
each Accounting Period of the Term) into the Reserve an amount equal to
the Applicable Percentage of Total Facility Revenues for such
Accounting Period; provided, however, that for each of the Accounting
Years during the period commencing on the Commencement Date and ending
on the last day of the fourth (4th) full Accounting Year, the amount
transferred by Tenant into the Reserve shall not be less than Thirty
Thousand Dollars ($30,000) for each such Accounting Year. At the time
Tenant provides Landlord the documentation described in Section
3.1.2(c), Tenant shall also deliver to Landlord a statement setting
forth the total amount of deposits made to and expenditures from the
Reserve for the preceding Fiscal Year.
(c) On or before December 1 of each Lease Year,
Tenant shall prepare an estimate (the "Reserve Estimate") of Reserve
expenditures anticipated during the ensuing Fiscal Year and shall
submit such Reserve Estimate to Landlord for its review. Tenant shall
in good faith consider suggestions and comments to the Reserve Estimate
made by Landlord within thirty (30) days after delivery of the Reserve
Estimate to Landlord. All expenditures from the Reserve for the items
described in Section 5.1.2(a) shall be (as to both the amount of each
such expenditure and the timing thereof) (i) required, in Tenant's
reasonable judgment, to keep the Leased Property in a first-class,
competitive, efficient and economical operating condition or to keep
the Leased Property in a condition consistent with the standards set
forth in this Agreement or the Operating Agreement; or (ii) required by
reason of any Legal Requirement imposed by any Government Agency or
otherwise required (as determined by Tenant in its reasonable judgment)
for the continued safe and orderly operation of the Leased Property,
(subsections (i) and (ii) each individually, a "Product Standard" and,
collectively, the "Product Standards").
(d) Tenant shall from time to time make expenditures
from the Reserve as it deems necessary in accordance with Section
5.1.2(a) and (c). Tenant shall provide to Landlord, within forty (40)
Business Days after the end of each Accounting Period, a statement
setting forth Reserve expenditures made to date during the Fiscal Year.
Expenditures from the Reserve shall not be subject to Landlord's
approval.
(e) All funds in the Reserve, all interest earned
thereon and all property purchased with funds from the Reserve shall be
and remain the property of Landlord. Following expiration or earlier
termination of this Agreement and payment in full on all contracts
entered into prior to such expiration or termination for work to be
done or furniture, furnishings, fixtures and equipment to be supplied
in accordance with this Section 5.1.2 out of the Reserve, control over
the Reserve shall be transferred from Tenant to Landlord.
(f) It is understood and agreed that the Reserve
pursuant to this Agreement shall be maintained and used solely in
connection with the Leased Property.
(g) If Landlord wishes to grant a security interest
in or create another encumbrance on the Reserve, all or any part of the
existing or future funds therein, or any general intangible in
connection therewith, the instrument granting such security interest or
creating such other encumbrance shall expressly provide that such
security interest or encumbrance is subject to the rights of Tenant
with respect to the Reserve as set forth herein. The form and substance
of such provision shall be subject to Tenant's prior written approval,
which approval shall not be unreasonably withheld, delayed or
conditioned.
5.1.3 Major Capital Expenditures.
(a) On or before December 1 of each Lease Year,
Tenant shall deliver to Landlord, for Landlord's approval, an estimate
(the "Building Estimate") of the expenses necessary for repairs,
alterations, improvements, renewals, replacements and additions, all of
which are non-routine or major, to the Leased Improvements which are
not covered under Section 5.1.2(a) and which are normally capitalized
under GAAP such as repairs, alterations, improvements, renewals,
replacements and additions to the structure, the exterior facade, the
mechanical, electrical, heating, ventilating, air conditioning,
plumbing and vertical transportation elements of the Leased
Improvements ("Major Capital Expenditures"). Major Capital Expenditures
shall also include all costs associated with any removal or remediation
of Hazardous Substances (except those treated as Tenant's sole cost and
expense under Section 5.1.4(b)), regardless of whether such costs are
normally capitalized under GAAP. Landlord shall not withhold its
approval to such Major Capital Expenditures as are required, in
Tenant's reasonable judgment, for the Leased Property to comply with
the Product Standards or for costs associated with the removal or
remediation of Hazardous Substances. If Tenant does not receive Notice
of Landlord's disapproval of the Building Estimate within twenty (20)
Business Days after delivery of the Building Estimate to Landlord, then
Landlord shall be deemed to have approved the Building Estimate. In the
event Landlord disapproves the Building Estimate, Landlord's Notice
shall identify disputed items on a line item basis. Items not
identified as disputed in such Landlord's Notice shall be deemed
approved.
(b) In the event Major Capital Expenditures are
required as a result of the receipt by Tenant of an order from a
Government Agency or other circumstances described in subsection (ii)
of Section 5.1.2(c) (including costs associated with the removal or
remediation of Hazardous Substances), Tenant shall be authorized to
take appropriate remedial action without first receiving Landlord's
approval (i) due to an emergency threatening the Leased Property, its
guests, invitees or employees, or (ii) if the continuation of a given
condition will subject Tenant or Landlord to civil or criminal
liability. Major Capital Expenditures made pursuant to this Section
5.1.3(b) shall be deemed approved by Landlord.
(c) The cost of all approved, deemed approved or
non-approvable Major Capital Expenditures shall be borne by Landlord in
accordance with the provisions of Section 5.1.4(b).
(d) In the event Landlord timely disapproves any
Building Estimate or any item within any Building Estimate, then,
following the negotiation period specified in Section 19.1, Tenant may
submit the matter for resolution by arbitrators in accordance with the
provisions of Section 19.2, and the arbitrators shall determine whether
or not Tenant acted reasonably in determining that the disputed item or
items are needed for the Leased Property to comply with the Product
Standards or for the costs associated with the removal or remediation
of Hazardous Substances.
5.1.4 Landlord's Funding Obligations.
(a) Landlord shall not, under any circumstances, be
required to build or rebuild any improvement on the Leased Property, or
to make any repairs, replacements, alterations, restorations or
renewals of any nature or description to the Leased Property, whether
ordinary or extraordinary, structural or nonstructural, foreseen or
unforeseen, to maintain the Leased Property in any way, or, except as
provided in Section 5.1.4(b), to make any expenditure whatsoever with
respect thereto. Except as otherwise expressly provided in this
Agreement, Tenant hereby waives, to the maximum extent permitted by
law, the right to make repairs at the expense of Landlord pursuant to
any law in effect on the date hereof or hereafter enacted. Landlord
shall have the right to give, record and post, as appropriate, notices
of nonresponsibility under any mechanic's lien laws now or hereafter
existing.
(b) If, at any time, funds in the Reserve shall be
insufficient or are reasonably projected by Tenant to be insufficient
for necessary and permitted expenditures thereof or funding is
necessary for approved, deemed approved or non-approvable Major Capital
Expenditures (other than costs related to Hazardous Substances under
Section 4.3 resulting from Tenant's gross negligence or willful
misconduct, which costs shall be Tenant's sole cost and expense),
Tenant may, at its election, give Landlord Notice thereof, which Notice
shall set forth, in reasonable detail, the nature of the required or
permitted action and the estimated cost thereof. Landlord shall, within
ten (10) Business Days after such Notice, or such later dates as Tenant
may direct by reasonable prior Notice, disburse such required funds to
Tenant (or, if Tenant shall so elect, directly to the Operator or any
other Person performing the required work) and, upon such disbursement,
the Minimum Rent shall be adjusted as provided in Section 3.1.1(b);
provided, however, that if the disbursement of funds relates to the
Hazardous Substances under Section 4.3 resulting from Landlord's gross
negligence or willful misconduct, there shall be no adjustment to the
Minimum Rent. If Landlord disputes its obligation to disburse such
funds, it shall give Tenant Notice of such dispute within such ten
(10)-Business Day period, and failure to give Tenant Notice of such
dispute shall be deemed a waiver of any right to dispute Landlord's
obligation to disburse such funds. In the event that any dispute shall
arise with respect to Landlord's obligation to disburse any funds
pursuant to this Section 5.1.4(b), then, following the negotiation
period specified in Section 19.1, either party may submit such dispute
for resolution by arbitrators in accordance with the provisions of
Section 19.2, and the arbitrators shall determine whether or not Tenant
acted reasonably in requesting such additional funds in order to
maintain the Leased Property in accordance with the Product Standards
or to cover costs associated with removal or remediation of Hazardous
Substances. To the extent reasonably possible, Landlord shall identify
disputed items on a line item basis. In no event shall Landlord be
entitled to dispute the request for funds for any expenditure which was
approved or deemed approved pursuant to the provisions of Section
5.1.3(a) and (b).
5.1.5 Nonresponsibility of Landlord, Etc. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
Tenant with respect to the Leased Property, or any part thereof, are hereby
charged with notice that liens on the Leased Property or on Landlord's interest
therein are expressly prohibited and that they must look solely to Tenant to
secure payment for any work done or material furnished by Tenant or for any
other purpose during the term of this Agreement. Nothing contained in this
Agreement shall be deemed or construed in any way as constituting the consent or
request of Landlord, express or implied, by inference or otherwise, to any
contractor, subcontractor, laborer or materialmen for the performance of any
labor or the furnishing of any materials for any alteration, addition,
improvement or repair to the Leased Property or any part thereof or as giving
Tenant any right, power or authority to contract for or permit the rendering of
any services or the furnishing of any materials that would give rise to the
filing of any lien against the Leased Property or any part thereof nor to
subject Landlord's estate in the Leased Property or any part thereof to
liability under any Mechanic's Lien Law of the State in any way, it being
expressly understood Landlord's estate shall not be subject to any such
liability.
5.1.6 Limitation on Tenant's Obligations. Tenant's
obligations under Section 5.1 shall be limited in the event of any casualty or
Condemnation as set forth in Sections 10.2 and 11.2 and Tenant's obligations
with respect to Hazardous Substances are as set forth in Section 4.3.
5.2 Tenant's Personal Property. At the expiration or sooner termination
of the Term, Landlord may, in its sole and absolute discretion, elect either (i)
to give Tenant Notice that Tenant shall be required, within ten (10) Business
Days after such expiration or termination, to remove all FAS and Inventories
from the Leased Property or (ii) to purchase from Tenant at a purchase price
equal to Tenant's book value all such FAS and Inventories other than those that
Landlord does not have the right to use under Section 22.16. Failure of Landlord
to make such election shall be deemed an election to proceed in accordance with
clause (ii) preceding.
5.3 Yield Up. Upon the expiration or sooner termination of this
Agreement, Tenant shall vacate and surrender the Leased Property, to Landlord in
substantially the same condition in which the Leased Property was in on the
Commencement Date, except as repaired, replaced, rebuilt, restored, altered or
added to as permitted or required by the provisions of this Agreement,
reasonable wear and tear and Condemnation (and casualty damage, in the event
that this Agreement is terminated following a casualty in accordance with
Article 10) excepted, together with the FAS and Inventories then existing but
excluding any FAS and Inventories with Proprietary Marks (as defined in the
Operating Agreement) acquired by Tenant or the Operator.
In addition, as of the expiration or earlier termination of
this Agreement, Tenant shall, at Landlord's sole cost and expense, use its good
faith, commercially reasonable efforts to transfer to and cooperate with
Landlord or Landlord's nominee in connection with the processing of all
applications for licenses, operating permits and other governmental
authorizations and all contracts entered into by Tenant, including contracts
with governmental or quasi-governmental Entities which may be necessary for the
use and operation of the Facility as then operated, but excluding (i) all
insurance contracts and multi-property contracts not limited in scope to the
Collective Leased Properties, the Leases for which are being terminated
simultaneously,(ii) all contracts and leases with Affiliated Persons, (iii)
utility deposits and (iv) telephone numbers. Landlord shall indemnify and hold
Tenant harmless for all claims, costs and expenses (including reasonable
attorneys' fees) arising from acts or omissions by Landlord under such contracts
subsequent to the date of transfer thereof to Landlord; and Tenant shall
indemnify and hold Landlord harmless for all claims, costs and expenses
(including reasonable attorney's fees) arising from acts or omission by Tenant
under such contracts prior to the date of transfer thereof to Landlord.
ARTICLE 6
IMPROVEMENTS, ETC.
6.1 Improvements to the Leased Property. Tenant shall not finance the
cost of any construction by the granting of a lien on or security interest in
the Leased Property, or Tenant's interest therein, without the prior written
consent of Landlord, which consent may be withheld by Landlord in Landlord's
sole discretion. Any such improvements shall, upon the expiration or sooner
termination of this Agreement, remain or pass to and become the property of
Landlord, free and clear of all encumbrances other than Permitted Encumbrances.
6.2 Salvage. Other than Tenant's Personal Property, all materials which
are scrapped or removed in connection with the making of repairs, alterations,
improvements, renewals, replacements and additions pursuant to Article 5 shall
be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.
6.3 Equipment Leases. Landlord shall enter into such leases of
equipment and personal property as Tenant may reasonably request from time to
time, provided that the form and substance thereof shall be reasonably
satisfactory to Landlord. Tenant shall prepare and deliver to Landlord all such
lease documents for which Landlord's execution is necessary and Landlord shall
promptly, upon approval thereof, execute and deliver such documents to Tenant.
Tenant shall, throughout the Term, be responsible for performing all of
Landlord's obligations under all such documents and agreements, including
without limitation, all Contracts, as defined in the Purchase Agreement.
ARTICLE 7
LIENS
Subject to Article 8, Tenant shall not, directly or indirectly, create
or allow to remain and shall promptly discharge, at its expense, any lien,
attachment, title retention agreement or claim upon the Leased Property or
Tenant's leasehold interest therein or any attachment, levy, claim or
encumbrance in respect of the Rent, other than (a) Permitted Encumbrances, (b)
restrictions, liens and other encumbrances which are consented to in writing by
Landlord, (c) liens for those taxes of Landlord which Tenant is not required to
pay hereunder, (d) subleases permitted by Article 16, (e) liens for Impositions
or for sums resulting from noncompliance with Legal Requirements so long as (i)
the same are not yet due and payable, or (ii) are being contested in accordance
with Article 8, (f) liens of mechanics, laborers, materialmen, suppliers or
vendors incurred in the ordinary course of business that are not yet due and
payable (but will be paid in full by Tenant) or are for sums that are being
contested in accordance with Article 8, (g) any Facility Mortgages or other
liens which are the responsibility of Landlord pursuant to the provisions of
Article 20 and (h) Landlord Liens.
ARTICLE 8
PERMITTED CONTESTS
Tenant shall have the right to contest the amount or validity of any
Imposition, Legal Requirement, Insurance Requirement, Environmental Obligation,
lien, attachment, levy, encumbrance, charge or claim (collectively, "Claims") as
to the Leased Property, by appropriate legal proceedings, conducted in good
faith and with due diligence, provided that (a) the foregoing shall in no way be
construed as relieving, modifying or extending Tenant's obligation to pay any
Claims required hereunder to be paid by Tenant as finally determined, (b) such
contest shall not cause Landlord or Tenant to be in default under any mortgage,
deed of trust or other agreement encumbering the Leased Property or any part
thereof (Landlord agreeing that any such mortgage, deed of trust or other
agreement shall permit Tenant to exercise the rights granted pursuant to this
Article 8) or any interest therein or result in a lien attaching to the Leased
Property, unless such lien is fully bonded or is otherwise secured to the
reasonable satisfaction of Landlord, (c) no part of the Leased Property nor any
Rent therefrom shall be in any immediate danger of sale, forfeiture, attachment
or loss, and (d) Tenant hereby indemnifies and holds harmless Landlord from and
against any cost, claim, damage, penalty or reasonable expense, including
reasonable attorneys' fees, incurred by Landlord in connection therewith or as a
result thereof. Landlord agrees to join in any such proceedings if required
legally to prosecute such contest, provided that Landlord shall not thereby be
subjected to any liability therefor (including, without limitation, for the
payment of any costs or expenses in connection therewith) unless Tenant agrees
to assume and indemnify Landlord with respect to the same. Tenant shall be
entitled to any refund of any Claims and such charges and penalties or interest
thereon which have been paid by Tenant or paid by Landlord to the extent that
Landlord has been reimbursed by Tenant. If Tenant shall fail (x) to pay or cause
to be paid any Claims when finally determined, (y) to provide reasonable
security therefor, or (z) to prosecute or cause to be prosecuted any such
contest diligently and in good faith, Landlord may, upon Notice to Tenant, pay
such charges, together with interest and penalties due with respect thereto, and
Tenant shall reimburse Landlord therefor, upon demand, as Additional Charges.
ARTICLE 9
INSURANCE
9.1 General Insurance Requirements. Tenant shall, at all times during
the Term and at any other time Tenant shall be in possession of the Leased
Property, keep the Leased Property and all property located therein or thereon,
insured against the risks and in the amounts as follows:
(a) "All-risk" property insurance (and to the extent
applicable, Builder's Risk Insurance) on the Improvements and all items
of business personal property, including but not limited to signs,
awnings, canopies, gazebos, fences and retaining walls, and all FAS,
including without limitation, insurance against loss or damage from the
perils under "All Risk" (Special) form, including but not limited to
the following: fire, windstorm, sprinkler leakage, vandalism and
malicious mischief, water damage, explosion of steam boilers, pressure
vessels and other similar apparatus, and other hazards generally
included under extended coverage, all in an amount equal to one hundred
percent (100%) of the replacement value of the Improvements (excluding
excavation and foundation costs), business personal property and FAS,
without a co-insurance provision, and shall include an Agreed Value
endorsement and a Law and Ordinance endorsement;
(b) Ordinance or Law Coverage with limits of not less than
the Improvements for Coverage A (Loss to the undamaged portion of the
building), limits not less than $500,000 for Coverage B (Demolition
Cost Coverage), and limits not less than $500,000 for Coverage C
(Increased Cost of Construction Coverage);
(c) Business income insurance to be written on Special Form
(and on Earthquake and Flood forms if such insurance for those risks is
required) including Extra Expense, without a provision for
co-insurance, including an amount sufficient to pay at least twelve
(12) months of Landlord Rent for the benefit of Landlord, as its
interest may appear, and at least twelve (12) months of Cash Available
for Lease Payments less Landlord Rent for the benefit of Tenant;
(d) Occurrence form comprehensive general liability
insurance, including bodily injury and property damage, liquor
liability, fire legal liability, contractual liability and independent
contractor's hazard and completed operations coverage in an amount not
less than $1,000,000 per occurrence/$2,000,000 aggregate;
(e) Umbrella coverage which shall be on a following form for
the General Liability, Automobile Liability, Employers' Liability, and
Liquor Liability, with limits of not less than $50,000,000 per
occurrence/aggregate;
(f) Flood insurance (if the Leased Property is located in
whole or in part within an area identified as an area having special
flood hazards under the National Flood Insurance Program);
(g) Worker's compensation coverage for all persons employed
by Tenant on the Leased Property with statutory limits, and Employers'
Liability insurance in an amount of at least $1,000,000 per
accident/disease;
(h) To the extent applicable, business auto liability
insurance, including owned, non-owned and hired vehicles for combined
single limit of bodily injury and property damage of not less than
$1,000,000 per occurrence;
(i) To the extent applicable, garage keepers legal liability
insurance covering both comprehensive and collision-type losses with a
limit of liability in an amount not less than $1,000,000 per
occurrence; and
(j) Such additional insurance as may be reasonably required,
from time to time, by Landlord (including, without limitation,
insurance requirements in the Operating Agreement, any mortgage,
security agreement or other financing permitted hereunder and then
affecting the Leased Property, as well as any ground lease or easement
agreement) or any Facility Mortgagee, provided the same is customarily
carried by a majority of comparable high quality assisted living
facilities in the area.
9.2 Waiver of Subrogation. Landlord and Tenant agree that with respect
to any property loss which is covered by insurance then being carried by
Landlord or Tenant, respectively, the party carrying such insurance and
suffering said loss releases the other of and from any and all claims with
respect to such loss; and they further agree that their respective insurance
companies shall have no right of subrogation against the other on account
thereof.
9.3 General Provisions. The individual Facility's allocated
chargeback/deductible for general liability insurance and workmen's compensation
insurance shall not exceed $100,000 unless such greater amount is agreeable to
both Landlord and Tenant. The individual Facility's property insurance
deductible shall not exceed $ 250,000 unless such greater amount is agreeable to
both Landlord and Tenant, or if a higher deductible for high hazard risks (i.e.,
wind or flood) is mandated by the insurance carrier; provided, however, that the
aforesaid figure of $250,000 shall be reduced to $25,000 if and during any
period of time that neither the Tenant nor the Operator is the Guarantor or any
successor Guarantor under the Limited Rent Guaranty dated as of the same date as
this Lease executed by Guarantor in favor of Landlord nor any Affiliated Person
as to Guarantor or any such successor Guarantor. All insurance policies pursuant
to this Article 9 shall be issued by insurance carriers having a general policy
holder's rating of no less than A-/VII in Best's latest rating guide, and shall
contain clauses or endorsements to the effect that (a) Landlord shall not be
liable for any insurance premiums thereon or subject to any assessments
thereunder, and (b) the coverages provided thereby will be primary and any
insurance carried by any additional insured shall be excess and non-contributory
to the extent of the indemnification obligation pursuant to Section 9.5 below.
All such policies described in Sections 9.1(a) through (d) shall name Landlord,
CNL Health Care Properties, Inc., CNL Health Care Corp. and any Facility
Mortgagee as additional insureds, loss payees, or mortgagees, as their interests
may appear and to the extent of their indemnity. All loss adjustments shall be
payable as provided in Article 10. Tenant shall deliver certificates thereof to
Landlord prior to their effective date (and, with respect to any renewal policy,
prior to the expiration of the existing policy), which certificates shall state
the nature and level of coverage reported thereby, as well as the amount of the
applicable deductible. Upon Landlord's request, original copies of said policies
shall be made available for Landlord's review at Tenant's corporate headquarters
during normal business hours. All such policies shall provide Landlord (and any
Facility Mortgagee if required by the same) thirty (30) days prior written
notice of any material change or cancellation of such policy. In the event
Tenant shall fail to effect such insurance as herein required, to pay the
premiums therefor or to deliver such certificates to Landlord or any Facility
Mortgagee at the times required, Landlord shall have the right, but not the
obligation, subject to the provisions of Section 12.5, to acquire such insurance
and pay the premiums therefor, which amounts shall be payable to Landlord, upon
demand, as Additional Charges, together with interest accrued thereon at the
Overdue Rate from the date such payment is made until (but excluding) the date
repaid.
9.4 Blanket Policy. Notwithstanding anything to the contrary contained
in this Article 9, Tenant's obligation to maintain the insurance herein required
may be brought within the coverage of a so-called blanket policy or policies of
insurance carried and maintained by Tenant or any Affiliated Person as to
Tenant.
9.5 Indemnification of Landlord. Except as expressly provided herein,
Tenant shall protect, indemnify and hold harmless Landlord for, from and against
all liabilities, obligations, claims, damages, penalties, causes of action,
costs and reasonable expenses (including, without limitation, reasonable
attorneys' fees), to the maximum extent permitted by law, imposed upon or
incurred by or asserted against Landlord by reason of: (a) any accident, injury
to or death of persons or loss of or damage to property of third parties
occurring during the Term on or about the Leased Property or adjoining sidewalks
or rights of way under Tenant's control, and (b) any use, misuse, condition,
management, maintenance or repair by Tenant or anyone claiming under Tenant of
the Leased Property or Tenant's Personal Property during the Term or any
litigation, proceeding or claim by governmental entities to which Landlord is
made a party or participant relating to such use, misuse, condition, management,
maintenance, or repair thereof to which Landlord is made a party; provided,
however, that Tenant's obligations hereunder shall not apply to any liability,
obligation, claim, damage, penalty, cause of action, cost or expense arising
from any gross negligence or willful misconduct of Landlord, its employees,
agents, contractors or invitees. Tenant, at its expense, shall defend any such
claim, action or proceeding asserted or instituted against Landlord covered
under this indemnity (and shall not be responsible for any duplicative
attorneys' fees incurred by Landlord) or may compromise or otherwise dispose of
the same. Notwithstanding the foregoing, indemnification with respect to
Hazardous Substances is governed by Section 4.3. The obligations of Tenant under
this Section 9.5 shall survive the termination of this Agreement for a period of
three (3) years.
ARTICLE 10
CASUALTY
10.1 Insurance Proceeds. Except as provided in the last clause of this
sentence, all proceeds payable by reason of any loss or damage to the Leased
Property, or any portion thereof, and insured under any property policy of
insurance required by Article 9 (other than the proceeds of any business
interruption insurance, which shall be payable directly to Landlord and Tenant
as their interests may appear) shall be paid directly to Landlord, any Facility
Mortgagee, and Tenant, who shall all be required to deposit such proceeds with
an escrow agent reasonably satisfactory to them pursuant to a mutually agreed
upon form of escrow agreement (subject to the provisions of Section 10.2) and
all loss adjustments with respect to property losses payable to Tenant shall
require the prior written consent of Landlord; provided, however, that all such
proceeds less than or equal to (i) Five Hundred Thousand Dollars ($500,000)
(which amount shall be adjusted upward annually based on changes in the Index)
if the Leased Property is insured under Marriott International, Inc.'s insurance
program, or (ii) Two Hundred Fifty Thousand Dollars ($250,000) (which amount
shall be adjusted upward annually based on changes in the Index) if the Leased
Property is insured other than under Marriott International, Inc.'s insurance
program, shall be paid directly to Tenant and such losses may be adjusted
without Landlord's consent. If Tenant is required to reconstruct or repair the
Leased Property as provided herein, such proceeds shall be paid out by such
escrow agent from time to time for the reasonable costs of reconstruction or
repair of the Leased Property necessitated by such damage or destruction,
subject to and in accordance with the provisions of Section 10.2.4. Any
unexpended deductible amount and excess proceeds of insurance remaining after
the completion of the restoration shall be retained by Tenant or, if escrowed,
paid to Tenant. In the event that the provisions of Section 10.2.1 are
applicable, the insurance proceeds shall be retained by the party entitled
thereto pursuant to Section 10.2.1. All salvage resulting from any risk covered
by insurance shall belong to Landlord, provided any rights to the same have been
waived by the insurer.
10.2 Damage or Destruction.
10.2.1 Damage or Destruction of Leased Property. If, during
the Term, the Leased Property shall be totally or partially destroyed and the
Facility located thereon is thereby rendered Unsuitable for Its Permitted Use,
Tenant may, by the giving of Notice thereof to Landlord, terminate this
Agreement, whereupon, this Agreement shall terminate and Landlord shall be
entitled to retain the insurance proceeds payable on account of such damage.
10.2.2 Partial Damage or Destruction. If, during the Term,
the Leased Property shall be partially destroyed but the Facility is not
rendered Unsuitable for Its Permitted Use, Tenant shall, subject to Section
10.2.3, promptly restore the Facility as provided in Section 10.2.4.
10.2.3 Insufficient Insurance Proceeds. If the cost of the
repair or restoration of the Leased Property exceeds the sum of the deductible
and the amount of insurance proceeds received by Landlord and Tenant pursuant to
Article 9(a), (c), (d) or, if applicable, (e), Tenant shall give Landlord Notice
thereof which notice shall set forth in reasonable detail the nature of such
deficiency and whether Tenant shall pay and assume the amount of such deficiency
(Tenant having no obligation to do so, except that, if Tenant shall elect to
make such funds available, the same shall become an irrevocable obligation of
Tenant pursuant to this Agreement). In the event Tenant shall elect not to pay
and assume the amount of such deficiency, Landlord shall have the right (but not
the obligation), exercisable at Landlord's sole election by Notice to Tenant,
given within sixty (60) days after Tenant's notice of the deficiency, to elect
to make available for application to the cost of repair or restoration the
amount of such deficiency; provided, however, in such event, upon any
disbursement by Landlord thereof, the Minimum Rent shall be adjusted as provided
in Section 3.1.1(b). In the event that neither Landlord nor Tenant shall elect
to make such deficiency available for restoration, either Landlord or Tenant may
terminate this Agreement by Notice to the other, whereupon, this Agreement shall
terminate as provided in Section 10.2.1. It is expressly understood and agreed,
however, that, notwithstanding anything in this Agreement to the contrary,
Tenant shall be strictly liable and solely responsible for the amount of any
deductible.
10.2.4 Repairs. In the event Tenant is required to restore
the Leased Property pursuant to Section 10.2, Tenant shall commence promptly and
continue diligently to perform the repair and restoration of the Leased Property
(hereinafter called the "Work"), so as to restore the Leased Property in
compliance with all Legal Requirements and so that the Leased Property shall be,
to the extent practicable, substantially equivalent in value and general utility
to its general utility and value immediately prior to such damage or
destruction. Subject to the terms hereof, the escrow agent shall be required to
advance the insurance proceeds and any additional amounts payable by Landlord
pursuant to Section 10.2.3 to Tenant regularly during the repair and restoration
period so as to permit payment for the cost of any such restoration and repair.
Any such advances shall be made not more than monthly within ten (10) Business
Days after Tenant submits to Landlord a written requisition and substantiation
therefor on AIA Forms G702 and G703 (or on such other form or forms as may be
reasonably acceptable to Landlord). Landlord may, at its option, require, prior
to advancement of said insurance proceeds and other amounts by the escrow agent,
(i) approval of plans and specifications by an architect satisfactory to
Landlord (which approval shall not be unreasonably withheld or delayed), (ii)
general contractors' estimates, (iii) architect's certificates, (iv)
unconditional lien waivers of general contractors, if available, (v) evidence of
approval by all governmental authorities and other regulatory bodies whose
approval is required, (vi) deposit by Tenant of the applicable deductible amount
with the escrow agent, and (vii) such other terms as a Facility Mortgagee or
lender of Landlord may reasonably require. Tenant's obligation to restore the
Leased Property pursuant to this Article 10 shall be subject to the release of
available insurance proceeds by the applicable Facility Mortgagee to the escrow
agent or directly to Tenant and, in the event such proceeds are insufficient,
Landlord electing to make such deficiency available therefor (and placement of
such deficiency with the escrow agent).
10.3 Damage Near End of Term. Notwithstanding any provisions of Section
10.1 or 10.2 to the contrary, if damage to or destruction of the Leased Property
occurs during the last twenty-four (24) months of the then Term (including any
exercised Extended Term) and if such damage or destruction cannot reasonably be
expected to be fully repaired and restored prior to the date that is twelve (12)
months prior to the end of such Term (including any exercised Extended Term),
the provisions of Section 10.2.1 shall apply as if the Leased Property had been
totally or partially destroyed and the Facility rendered Unsuitable for its
Permitted Use.
10.4 Tenant's Property. All insurance proceeds payable by reason of any
loss of or damage to any of Tenant's Personal Property shall be paid solely to
Tenant and, to the extent necessary to repair or replace Tenant's Personal
Property in accordance with Section 10.5, Tenant shall hold such proceeds in
trust to pay the cost of repairing or replacing damaged Tenant's Personal
Property.
10.5 Restoration of Tenant's Property. If Tenant is required to restore
the Leased Property as hereinabove provided, Tenant shall either (i) restore all
alterations and improvements made by Tenant and Tenant's Personal Property, or
(ii) replace such alterations and improvements and Tenant's Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
10.6 No Abatement of Rent. This Agreement shall remain in full force
and effect and Tenant's obligation to make all payments of Rent and to pay all
other charges as and when required under this Agreement shall remain unabated
during the Term notwithstanding any damage involving the Leased Property
(provided that Landlord shall credit against such payments any amounts paid to
Landlord as a consequence of such damage under any business interruption
insurance obtained by Tenant hereunder). The provisions of this Article 10 shall
be considered an express agreement governing any cause of damage or destruction
to the Leased Property and, to the maximum extent permitted by law, no local or
State statute, laws, rules, regulation or ordinance in effect during the Term
which provide for such a contingency shall have any application in such case.
10.7 Waiver. Tenant hereby waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property.
ARTICLE 11
CONDEMNATION
11.1 Total Condemnation, Etc. If either (i) the whole of the Leased
Property shall be taken by Condemnation or (ii) a Condemnation of less than the
whole of the Leased Property renders the Leased Property Unsuitable for Its
Permitted Use, this Agreement shall terminate and Tenant and Landlord shall seek
the Award for their interests in the Leased Property as provided in Section
11.6.
11.2 Partial Condemnation. In the event of a Condemnation of less than
the whole of the Leased Property such that the Leased Property is not rendered
Unsuitable for Its Permitted Use, Tenant shall, to the extent of the Award and
any additional amounts disbursed by Landlord as hereinafter provided, commence
promptly and continue diligently to restore the untaken portion of the Leased
Improvements so that such Leased Improvements shall constitute a complete
architectural unit of the same general character and condition (as nearly as may
be possible under the circumstances) as the Leased Improvements existing
immediately prior to such Condemnation, in full compliance with all Legal
Requirements, subject to the provisions of this Section 11.2. If the cost of the
repair or restoration of the Leased Property exceeds the amount of the Award,
Tenant shall give Landlord Notice thereof which notice shall set forth in
reasonable detail the nature of such deficiency and whether Tenant shall pay and
assume the amount of such deficiency (Tenant having no obligation to do so,
except that if Tenant shall elect to make such funds available, the same shall
become an irrevocable obligation of Tenant pursuant to this Agreement). In the
event Tenant shall elect not to pay and assume the amount of such deficiency,
Landlord shall have the right (but not the obligation), exercisable at
Landlord's sole election by Notice to Tenant given within sixty (60) days after
Tenant's Notice of the deficiency, to elect to make available for application to
the cost of repair or restoration the amount of such deficiency; provided,
however, in such event, following any disbursement by Landlord thereof and upon
completion of such repairs, the Minimum Rent shall be adjusted as provided in
Section 3.1.1(b). In the event that neither Landlord nor Tenant shall elect to
make such deficiency available for restoration, either Landlord or Tenant may
terminate this Agreement and the entire Award shall be retained by Landlord.
11.3 Disbursement of Award. Subject to the terms hereof, Landlord,
Tenant and any Facility Mortgagee shall transfer any part of the Award received
by them, respectively, together with severance and other damages awarded for the
taken Leased Improvements and any deficiency Landlord or Tenant has agreed to
pay, to an escrow agent reasonably satisfactory to all parties pursuant to an
escrow agreement that is reasonably satisfactory to all parties, for the purpose
of funding the cost of the repair or restoration. Landlord may require, at its
option, prior to advancement of such Award and other amounts to the escrow
agent, (i) approval of plans and specifications by an architect satisfactory to
Landlord (which approval shall not be unreasonably withheld or delayed), (ii)
general contractors' estimates, (iii) architect's certificates, (iv)
unconditional lien waivers of general contractors, if available, and (v)
evidence of approval by all governmental authorities and other regulatory bodies
whose approval is required. Obligations under this Section 11.3 to disburse the
Award and such other amounts shall be subject to (x) the collection thereof and
(y) the release of such Award by the applicable Facility Mortgagee. Tenant's
obligation to restore the Leased Property shall be subject to the availability
of the Award to fund the cost of such repair or restoration upon its compliance
with this Section 11.3.
11.4 Abatement of Rent. Other than as specifically provided in this
Agreement, this Agreement shall remain in full force and effect and Tenant's
obligation to make all payments of Rent and to pay all other charges as and when
required under this Agreement shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property. The provisions
of this Article 11 shall be considered an express agreement governing any
Condemnation involving the Leased Property and, to the maximum extent permitted
by law, no local or State statute, law, rule, regulation or ordinance in effect
during the Term which provides for such a contingency shall have any application
in such case.
11.5 Temporary Condemnation. In the event of any temporary Condemnation
of the Leased Property or Tenant's interest therein, this Agreement shall
continue in full force and effect and Tenant shall continue to pay, in the
manner and on the terms herein specified, the full amount of the Rent. Tenant
shall continue to perform and observe all of the other terms and conditions of
this Agreement on the part of the Tenant to be performed and observed. The
entire amount of any Award made for such temporary Condemnation allocable to the
Term, whether paid by way of damages, rent or otherwise, shall be paid to
Tenant. Tenant shall, promptly upon the termination of any such period of
temporary Condemnation, at its sole cost and expense, restore the Leased
Property to the condition that existed immediately prior to such Condemnation,
in full compliance with all Legal Requirements, unless such period of temporary
Condemnation shall extend beyond the expiration of the Term, in which event
Tenant shall not be required to make such restoration. For purposes of this
Section 11.5, a Condemnation shall be deemed to be temporary if the period of
such Condemnation is not expected to, and does not, exceed twelve (12) months.
11.6 Allocation of Award. Except as provided in Section 11.5 and the
second sentence of this Section 11.6, the total Award shall be solely the
property of and payable to Landlord. Any portion of the Award made for the
taking of Tenant's leasehold interest in the Leased Property, loss of business
during the remainder of the Term, the taking of Tenant's Personal Property, or
Tenant's removal and relocation expenses shall be the sole property of and
payable to Tenant (subject to the provisions of Section 11.2). In any
Condemnation proceedings, Landlord and Tenant shall each seek its own Award in
conformity herewith, at its own expense.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) should Tenant fail to make any payment of Minimum Rent
or Percentage Rent within three (3) Business Days after Notice thereof,
or fail to make payment of any other Rent or any other sum (including,
but not limited to, funding of the Reserve), payable hereunder when due
and such failure shall continue for a period of ten (10) days after
Notice thereof; or
(b) should Tenant fail to maintain the insurance coverages
required under Article 9 and such failure shall continue for three (3)
Business Days after Notice thereof; or
(c) subject to Article 8 relating to permitted contests,
should Tenant default in the due observance or performance of any of
the terms, covenants or agreements contained herein to be performed or
observed by it (other than as specified in clauses (a) and (b) above)
and such default shall continue for a period of thirty (30) days after
Notice thereof from Landlord to Tenant; provided, however, that if such
default is susceptible of cure but such cure cannot be accomplished
with due diligence within such period of time and if, in addition,
Tenant commences to cure or cause to be cured such default within
fifteen (15) days after Notice thereof from Landlord and thereafter
prosecutes the curing of such default with all due diligence, such
period of time shall be extended to such period of time (not to exceed
one hundred eighty (180) days) as may be necessary to cure such default
with all due diligence; or
(d) should Tenant generally not be paying its debts as they
become due or should Tenant make a general assignment for the benefit
of creditors; or
(e) should any petition be filed by or against Tenant under
the Federal bankruptcy laws, or should any other proceeding be
instituted by or against Tenant seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or
for any substantial part of the property of Tenant and such proceeding
is not dismissed within ninety (90) days after institution thereof, or
should Tenant take any action to authorize any of the actions set forth
above in this paragraph; or
(f) should Tenant cause or institute any proceeding for its
dissolution or termination; or
(g) should an event of default occur and be continuing under
any mortgage or deed of trust which is secured by Tenant's leasehold
interest hereunder or should the mortgagee under any such mortgage
accelerate the indebtedness secured thereby or commence a foreclosure
action in connection with said mortgage and such default shall continue
for a period of thirty (30) days after notice thereof from Landlord to
Tenant; provided, however, that if such default is susceptible of cure
but such cure cannot be accomplished with due diligence within such
period of time and if, in addition, Tenant commences to cure or cause
to be cured such default within fifteen (15) days after Notice thereof
from Landlord and thereafter prosecutes the curing of such default with
all due diligence, such period of time shall be extended to such period
of time as may be necessary to cure such default with all due
diligence; or
(h) unless Tenant shall be contesting such lien or attachment in good
faith in accordance with Article 8, should the estate or interest of
Tenant in the Leased Property or any part thereof be levied upon or
attached in any proceeding and the same shall not be vacated,
discharged or fully bonded or otherwise secured to the reasonable
satisfaction of Landlord within the later of (x) one hundred and twenty
(120) days after such attachment or levy, unless the amount in dispute
is less than $500,000 (as adjusted each year by increases in the
Index), in which case Tenant shall give notice to Landlord of the
dispute but Tenant may defend in any suitable way, and (y) thirty (30)
days after receipt by Tenant of Notice thereof from Landlord; it being
understood and agreed that Tenant may commence a contest of such matter
pursuant to Article 8 above following such Notice from Landlord; then,
and in any such event, Landlord, in addition to all other remedies
available to it, may terminate this Agreement by giving Notice thereof
to Tenant and upon the expiration of the time fixed in such Notice but
in any event not less than seventy-five (75) days, this Agreement shall
terminate and all rights of Tenant under this Agreement shall cease.
Landlord shall have and may exercise all rights and remedies available
at law and in equity to Landlord as a result of Tenant's breach of this
Agreement.
Landlord hereby agrees and consents to any cure of any Default or Event
of Default tendered or performed by the Guarantor (whether prior to or
after expiration of any guaranty provided by Guarantor) within the same
cure period afforded to Tenant herein.
12.2 Remedies. None of (a) the termination of this Agreement pursuant
to Section 12.1, (b) the repossession of the Leased Property or any portion
thereof, (c) the failure of Landlord to re-let the Leased Property or any
portion thereof, nor (d) the re-letting of all or any portion of the Leased
Property, shall relieve Tenant of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or re-letting. In the
event of any such termination, repossession or re-letting, Tenant shall
forthwith pay to Landlord all Rent due and payable with respect to the Leased
Property through and including the date of such termination, repossession or
re-letting. Thereafter, Tenant, until the end of what would have been the Term
of this Agreement (assuming no extension beyond the then-current Term) in the
absence of such termination, repossession or re-letting, and whether or not the
Leased Property or any portion thereof shall have been re-let, shall be liable
to Landlord for, and shall pay to Landlord, as current damages, the Rent and
other charges which would be payable hereunder for the remainder of the Term had
such termination, repossession or re-letting not occurred, less the net
proceeds, if any, of any re-letting of the Leased Property, after deducting all
reasonable expenses in connection with such re-letting, including, without
limitation, all repossession costs, brokerage commissions, legal expenses,
attorneys' fees, advertising, expenses of employees, alteration costs and
expenses of preparation for such re-letting (such expenses being hereinafter
referred to as the "Re-letting Expenses"). Tenant shall pay such current damages
to Landlord monthly on the days on which the Minimum Rent would have been
payable hereunder if this Agreement had not been so terminated with respect to
such of the Leased Property.
At any time after such termination, repossession or
re-letting, in addition to Landlord's right to receive any Rent owing and due up
to and including the date of termination, repossession or re-letting under the
preceding paragraph, Tenant shall pay to Landlord, at Landlord's election, as
liquidated final damages incurred beyond the date of such termination,
repossession or re-letting and in lieu of Landlord's right to receive any
further damages due to the such termination, repossession or re-letting, the
Re-letting Expenses incurred to date (and not theretofore paid by Tenant) and an
amount equal to the present value (discounted at the Interest Rate) of the
excess, if any, of the Rent and other charges which would be payable hereunder
from the date of such termination, repossession or re-letting (assuming that,
for the purposes of this paragraph, annual payments by Tenant on account of
Impositions and Percentage Rent would be the same as payments required for the
immediately preceding thirteen Accounting Periods, or if less than thirteen
Accounting Periods have expired since the Commencement Date, the payments
required for such lesser period projected to an annual amount) for what would be
the then unexpired Term of this Agreement (assuming no extension beyond the
then-current Term) if the same remained in effect, over the fair market rental
for the same period; provided, however, that Tenant shall be entitled to a
credit from Landlord in the amount of any unapplied balance of the Security
Deposit applied by Landlord to its damages under this Agreement, whereupon
Landlord shall have no further obligation to pay the portion of the Security
Deposit so credited to Tenant. Nothing contained in this Agreement shall,
however, limit or prejudice the right of Landlord to prove and obtain in
proceedings for bankruptcy or insolvency an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater than, equal to, or less than the amount of the loss or damages referred
to above.
In case of any Event of Default, re-entry, expiration or
dispossession by summary proceedings or otherwise, Landlord may (a) re-let the
Leased Property or any part or parts thereof, either in the name of Landlord or
otherwise, for a term or terms which may at Landlord's option, be equal to, less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant concessions or free rent to the extent that Landlord
considers advisable and necessary to re-let the same, and (b) may make such
reasonable alterations, repairs and decorations in the Leased Property or any
portion thereof as Landlord, in its sole and absolute discretion, considers
advisable and necessary for the purpose of re-letting the Leased Property; and
the making of such alterations, repairs and decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Subject to
the last sentence of this paragraph, Landlord shall in no event be liable in any
way whatsoever for any failure to re-let all or any portion of the Leased
Property, or, in the event that the Leased Property is re-let, for failure to
collect the rent under such re-letting. To the maximum extent permitted by law,
Tenant hereby expressly waives any and all rights of redemption granted under
any present or future laws in the event of Tenant being evicted or dispossessed,
or in the event of Landlord obtaining possession of the Leased Property, by
reason of the occurrence and continuation of an Event of Default hereunder.
Landlord covenants and agrees, in the event of any such termination,
repossession or re-letting as a result of an Event of Default, to use reasonable
efforts to mitigate its damages.
12.3 Waiver of Jury Trial. Landlord and Tenant hereby waive, to the
maximum extent permitted by Applicable Laws, trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other or in respect of any matter whatsoever arising out of or in any way
connected with this Agreement, the relationship of Landlord and Tenant
hereunder, Tenant's occupancy of the Leased Property, and/or any claim for
injury or damage.
12.4 Application of Funds. Any payments received by Landlord under any
of the provisions of this Agreement during the existence or continuance of any
Event of Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant's current and past
due obligations under this Agreement in such order as Landlord may determine or
as may be prescribed by the laws of the State.
12.5 Landlord's Right to Cure Tenant's Default. If an Event of Default
shall have occurred and be continuing, Landlord, after Notice to Tenant (which
Notice shall not be required if Landlord shall reasonably determine immediate
action is necessary to protect person or property), without waiving or releasing
any obligation of Tenant and without waiving or releasing any Event of Default,
may (but shall not be obligated to), at any time thereafter, make such payment
or perform such act for the account and at the expense of Tenant, and may, to
the maximum extent permitted by law, enter upon the Leased Property or any
portion thereof for such purpose and take all such action thereon as, in
Landlord's sole and absolute discretion, may be necessary or appropriate
therefor. No such entry shall be deemed an eviction of Tenant. All reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by Landlord in connection therewith, together with interest thereon (to
the extent permitted by law) at the Overdue Rate from the date such sums are
paid by Landlord until repaid, shall be paid by Tenant to Landlord, on demand.
12.6 Security Deposit. Notwithstanding any term or provision to the
contrary herein, in the event that this Agreement is terminated pursuant to
Section 12.1 or 12.2, Landlord shall be entitled to credit any unapplied balance
of the Security Deposit (in accordance with Section 3.4(b)) to any claims or
damages to which Landlord is entitled and to the extent that any portion of the
Security Deposit remains after such credit, Landlord shall promptly refund such
portion of the Security Deposit to Tenant. Upon any expiration or other
termination of this Agreement, Landlord shall promptly refund any remaining
portion (that is, after crediting any unapplied balance of the Security Deposit
(in accordance with Section 3.4(b)), to any claims or damages to which Landlord
is entitled) of the Security Deposit to Tenant.
12.7 Good Faith Dispute. If Tenant shall in good faith dispute the
occurrence of any Default and Tenant, before the expiration of the applicable
cure period, shall give Notice thereof to Landlord, setting forth, in reasonable
detail, the basis therefor and, provided Tenant shall escrow disputed amounts,
if any, pursuant to an escrow arrangement reasonably acceptable to Landlord and
Tenant, no Event of Default shall be deemed to have occurred; provided, however,
that in the event of any eventual adverse determination, Tenant shall pay to
Landlord interest on any disputed funds at the Disbursement Rate, from the date
demand for such funds was made by Landlord until the date of final adverse
determination and, thereafter, at the Overdue Rate until paid.
ARTICLE 13
HOLDING OVER
Any holding over by Tenant after the expiration or sooner termination
of this Agreement shall be treated as a daily tenancy at sufferance at a rate
equal to one and one-half (1.50) times the Rent and other charges herein
provided (prorated on a daily basis). Tenant shall also pay to Landlord all
damages (direct or indirect) sustained by reason of any such holding over.
Otherwise, such holding over shall be on the terms and conditions set forth in
this Agreement, to the extent applicable. Nothing contained herein shall
constitute the consent, express or implied, of Landlord to the holding over of
Tenant after the expiration or earlier termination of this Agreement.
ARTICLE 14
LANDLORD'S NOTICE OBLIGATIONS; LANDLORD DEFAULT
14.1 Landlord Notice Obligation. Landlord shall give prompt Notice to
Tenant and the Manager of any materially adverse matters affecting the Leased
Property of which Landlord receives written notice or actual, conscious, present
knowledge and, to the extent Tenant otherwise has no notice or actual knowledge
thereof, Landlord shall be liable for any liabilities, costs, damages or claims
(including reasonable attorneys' fees) arising from the failure to deliver such
Notice to Tenant. Subject to Article 20, Landlord shall not enter into or amend
any agreement directly affecting the operation of Leased Property without
Tenant's prior written consent. As used in this Agreement, "Landlord's
knowledge" or words of similar import shall mean the actual (and not
constructive or imputed), conscious, present knowledge, without independent
investigation or inquiry of Phillip M. Anderson, Jr. or any subsequent officer
or employee of Landlord, or any Affiliated Person as to Landlord, having direct
oversight responsibility for the transactions contemplated in this Agreement.
14.2 Landlord's Default. Subject to Landlord's right to dispute its
obligation in accordance with Section 5.1.4(b), if (i) Landlord shall default in
the performance or observance of any of its covenants or obligations set forth
in this Agreement, or (ii) CHCLP and/or CHCP shall default in its obligations
under the CHCLP and CHCP Guaranty and any such default shall continue for a
period of ten (10) days after Notice thereof with respect to monetary defaults,
and thirty (30) days after Notice thereof with respect to non-monetary defaults,
from Tenant to Landlord and any applicable Facility Mortgagee, or such
additional period as may be reasonably required to correct the same, Tenant may
declare the occurrence of a "Landlord Default" by giving Notice of such
declaration to Landlord and to such Facility Mortgagee. Thereafter, Tenant may
(but shall have no obligation to) cure the same and, subject to the provisions
of the following paragraph, invoice Landlord for costs and expenses (including
reasonable attorneys' fees and court costs) incurred by Tenant in curing the
same, together with interest thereon from the date Landlord receives Tenant's
invoice, at the Overdue Rate. Except as otherwise expressly provided herein to
the contrary, Tenant shall have no right to terminate this Agreement for any
default by Landlord hereunder and no right, for any such default, to offset or
counterclaim against any Rent or other charges due hereunder.
If Landlord shall in good faith dispute the occurrence of
any Landlord Default and Landlord, before the expiration of the applicable cure
period, shall give Notice thereof to Tenant, setting forth, in reasonable
detail, the basis therefor, no Landlord Default shall be deemed to have occurred
and Landlord shall have no obligation with respect thereto until final adverse
determination thereof; provided, however, that in the event of any such adverse
determination, Landlord shall pay to Tenant interest on any disputed funds at
the Disbursement Rate, from the date demand for such funds was made by Tenant
until the date of final adverse determination and, thereafter, at the Overdue
Rate until paid. Notwithstanding the foregoing, the provisions of Section 14.3
shall control in the event of a default under Section 5.1.4(b).
14.3 Special Remedies for Landlord Funding Default. In the event of any
Landlord Default arising under Section 5.1.4(b), Tenant shall have the right, in
Tenant's sole discretion, in addition to all other remedies of Tenant hereunder,
to exercise any one or more of the following remedies:
(a) Tenant may fund the deficient amounts and offset the
aggregate amount thereof plus interest thereon from the date of funding
at the Disbursement Rate against any Rent payable by Tenant subsequent
to the date of advance pursuant to this Agreement until recouped;
(b) Tenant may, notwithstanding the provisions of Article
16, assign this Agreement or sublease all (but not less than all) of
the Leased Property to a Person who is not an Affiliated Person as to
Tenant; or
(c) Tenant may terminate this Agreement whereupon, (i) the
Limited Rent Guaranty shall terminate and (ii) Landlord shall refund to
Tenant any unapplied balance of the Security Deposit.
14.4 Special Remedy under Section 10.1 and 11.3. If Landlord or any
Facility Mortgagee shall fail to deposit insurance proceeds with an escrow agent
as required by Section 10.1 or if Landlord shall fail to deposit any Award or
any deficiency as required by Section 11.3 with an escrow agent as required by
Section 11.3, Tenant shall be entitled, in addition to all other remedies of
Tenant hereunder, to the remedies listed in Sections 14.3(a) through (d),
without the requirement of arbitration as described in Section 5.1.4(b).
ARTICLE 15
TRANSFERS BY LANDLORD
15.1 Transfer of Leased Property. Except for liens, encumbrances or
title retention agreements which are governed by Article 20, and except for
normal and customary easements reasonably required for the development and use
of the Leased Property for assisted living facility purposes and uses incidental
thereto, Landlord shall not, without the prior written consent of Tenant, which
consent may be given or withheld by Tenant in Tenant's sole and absolute
discretion, sell, assign, transfer, convey or otherwise dispose of (a
"Transfer") the Leased Property, or any portion thereof or interest therein,
directly or indirectly (other than an interest, directly or indirectly, in
Landlord which is governed by Section 15.3), to any Person which, in Tenant's
reasonable judgment: (i) is not a Person in which CHCP owns and holds, directly
or indirectly, a Controlling Interest and does not have sufficient financial
resources to fulfill Landlord's obligations hereunder; (ii) is known in the
community as being of bad moral character and/or is in control of or controlled
by Persons who have been convicted of felonies in any state or federal court;
(iii) itself is, or any of its Affiliated Persons is, a Competitor; or (iv)
fails expressly to assume, in writing, the obligations of Landlord under this
Agreement. For purposes of this Section 15.1, a Person shall not be deemed to be
a Competitor solely by virtue of (x) the ownership of assisted living
facilities, either directly or indirectly through Subsidiaries, Affiliated
Persons and Entities, or (y) holding a mortgage or mortgages secured by one or
more assisted living facilities. Otherwise, subject to the provisions of Section
15.2, Landlord may Transfer the Leased Property, or any portion thereof or
interest therein, to any Person without the consent of, but upon not less than
sixty (60) days prior Notice to, Tenant. Within five (5) days following any
request by Tenant, Landlord shall provide Tenant such information concerning the
proposed transferee's financial condition, affiliations, ownership, business
interests, and operations as may be reasonably necessary or appropriate in order
for Tenant to determine if such proposed Transfer is consistent with the above
provisions.
Notwithstanding anything to the contrary herein contained,
in the event of a transfer of Tenant's interest in this Agreement to any Entity
in which the Guarantor does not have a Controlling Interest, and if at any time
thereafter Landlord is, for any reason, not satisfied with the performance under
this Agreement by such transferee of Tenant, then Landlord may, upon not less
than sixty (60) days prior Notice to Tenant, elect to Transfer the Leased
Property, and the restriction set forth in subclause (iii) in clause (a) of
Section 15.1 (that is, a Transfer to any Person which, in Tenant's reasonable
judgment, itself is, or any of its Affiliated Persons is, a Competitor) shall
not apply to any such Transfer of the Leased Property; it being understood and
agreed, however, that nothing herein shall prejudice or preclude the Guarantor
from exercising any of its rights or remedies under Section 4 of the Owner
Agreement as a result of, or with respect to, any such Transfer of the Leased
Property.
15.2 Conditions of Transfer. Any Transfer of the Leased Property
permitted by Section 15.1 shall be subject to the prior or simultaneous
satisfaction of the following conditions:
(a) Landlord shall transfer its rights hereunder to the
Security Deposit to the successor landlord and the Security Deposit
with respect to the Leased Property shall continue to be held by the
successor landlord in accordance with the terms and conditions set
forth in Section 3.5;
(b) Any transferee of Landlord pursuant to this Article 15
shall expressly assume, in writing reasonably satisfactory to Tenant,
the obligations of Landlord under this Agreement, and the Owner
Agreement and, upon such assumption and so long as such transferee is
not an Affiliated Person of Landlord or CHCP, then Landlord shall be
released from all liabilities and obligations of the landlord hereunder
accruing after the date of the transfer, assignment and assumption;
(c) Any overpayments of Rent (to the extent determinable)
held by Landlord shall be refunded to Tenant prior to such Transfer;
(d) If the transferee is an Affiliated Person of Landlord or
CHCP, then Landlord and CHCP shall expressly guarantee in writing
reasonably satisfactory to Tenant, or confirm in writing reasonably
satisfactory to Tenant their continuing guarantee of, the obligations
of such transferee under this Agreement and the Owner Agreement; and
(e) Any amounts owed by Landlord to Tenant shall be paid in
full.
15.3 Transfer of Interest in Landlord. For purposes of this Article 15,
any sale, assignment, transfer or other disposition, for value or otherwise,
voluntary or involuntary, by merger, operation of law or otherwise, in a single
transaction or a series of transactions, of any interest in Landlord or any
Person having an interest in Landlord, directly or indirectly, shall be and
constitute a Transfer of the Leased Property; provided, however, that if the
proposed transferee is not, in Tenant's reasonable judgment, (i) known in the
community as being of bad moral character or in which any Person who has been
convicted of a felony in any state or federal court holds a Controlling
Interest, or (ii) itself a Competitor, and none of its Affiliated Persons is a
Competitor, then, so long as the interest to be transferred to such transferee
is less than a Controlling Interest, and so long as immediately following such
transfer CHCP, directly or indirectly, continues to own and hold a Controlling
Interest in Landlord, the other restrictions set forth in Section 15.1 shall not
apply to such transfer; and provided further, however, that the provisions of
Section 15.1 shall not apply to any transfer of interests in CHCP, directly or
indirectly, or in any Entity that has an interest in CHCP, directly or
indirectly, so long as CHCP is a publicly traded company (whether or not such
interests are traded on a public stock exchange), if and so long as such
transfer does not result, directly or indirectly, in a Competitor owning a
Controlling Interest in CHCP, nor shall the provisions of Section 15.1 apply to
any transfer of interests in Landlord, directly or indirectly (or in any Entity
that has an interest in Landlord, directly or indirectly), to any Person which
is not an Affiliated Person of Landlord or CHCP, if and so long as such transfer
does not result in or entail, directly or indirectly, either concurrent with the
transfer or subsequent thereto, CHCP or a wholly-owned Subsidiary of CHCP no
longer continuing to possess the sole power, as the sole general partner of
Landlord, to direct or cause the direction of the management and policies of
Landlord, whether such cessation of power occurs by contract, by conversion of
the general partner interest of CHCP or its wholly-owned Subsidiary in Landlord
to a limited partner interest, by conversion of Landlord to a corporation or
other Entity, or otherwise. Landlord shall deliver to Tenant at least sixty (60)
days prior Notice of any transfer of interests herein contemplated, other than
transfers of limited partner interests in Landlord (specifically excluding any
general partner interests in Landlord), and other than transfers of interests in
any publicly traded company (whether or not such interests are traded on a
public stock exchange).
Notwithstanding anything to the contrary herein contained, a
voluntary sale, assignment, transfer or other disposition, for value, by merger,
operation of law or otherwise, in a single transaction or a related series of
transactions, of all or substantially all of the interests in Landlord or CHCP,
or all or substantially all of the assets of Landlord or CHCP (in either event,
a "Sale of the Entity"), shall not be deemed a Transfer of the Leased Property;
it being understood and agreed, however, that nothing herein shall prejudice or
preclude the Guarantor from exercising any of its rights or remedies under
Section 4 of the Owner Agreement, as a result of, or with respect to, any such
Sale of the Entity. For purposes hereof, "substantially all of the interests in
Landlord" shall mean all of the general partner interests and not less than
ninety percent (90%) of the limited partner interests in Landlord;
"substantially all of the interests in CHCP" shall mean not less than ninety
percent (90%) of the outstanding capital stock of CHCP; and "substantially all
of the assets of Landlord or CHCP" shall mean not less than ninety percent (90%)
of the respective total assets owned by Landlord or CHCP, respectively.
ARTICLE 16
SUBLETTING AND ASSIGNMENT
16.1 Subletting and Assignment.
(a) Except as provided in Section 16.3 and in this Section
16.1, Tenant shall not, without Landlord's prior written consent,
assign, mortgage, pledge, hypothecate, encumber or otherwise transfer
this Agreement or sublease (which term shall be deemed to include the
granting of concessions, licenses and the like), all or any part of the
Leased Property or suffer or permit this Agreement or the leasehold
estate created hereby or any other rights arising under this Agreement
to be assigned, transferred, mortgaged, pledged, hypothecated or
encumbered, in whole or in part, whether voluntarily, involuntarily or
by operation of law, or permit the use or operation of the Leased
Property by anyone other than Tenant, or the Leased Property to be
offered or advertised for assignment or subletting; provided, however,
that Tenant may, without Landlord's consent, sell, transfer, assign or
convey its interest in this Agreement to a direct or indirect
Subsidiary of the Guarantor, which Subsidiary of the Guarantor shall
expressly assume the obligations of Tenant under this Agreement, and
the transferor Tenant shall thereupon be released from all liabilities
and obligations of Tenant accruing hereunder after the date of such
transfer by the transferor Tenant if either (i) the Membership Interest
Pledge Agreement has been terminated by reason of a transfer of the
Leased Property by Landlord which terminates the Membership Interest
Pledge Agreement or (ii) the owner of all of the direct ownership
interests in such Subsidiary of the Guarantor executes and delivers a
new Pledge Agreement to Landlord, in form which meets with Landlord's
reasonable satisfaction, that pledges all of the ownership interests of
such Subsidiary to Landlord upon substantive terms identical to the
Membership Interest Pledge Agreement. For purposes of this Section
16.1, an assignment of this Agreement shall be deemed to include the
following (for purposes of this Section 16.1, a "Corporate Transfer"):
any direct or indirect transfer of any interest in Tenant such that
Tenant shall cease to be a direct or indirect Subsidiary of the
Guarantor or any transaction pursuant to which Tenant is merged or
consolidated with another Entity which is not the Guarantor or a
Subsidiary of the Guarantor or pursuant to which all or substantially
all of Tenant's assets are transferred to any other Entity, as if such
change in control or transaction were an assignment of this Agreement
but shall not include any involuntary liens or attachments contested by
Tenant in good faith in accordance with Article 8.
(b) Notwithstanding the foregoing, Landlord's consent shall
not be required for a Corporate Transfer or a sale, transfer,
assignment or other conveyance of Tenant's interest in this Agreement
if, after giving effect to such Corporate Transfer, Tenant, or all or
substantially all of Tenant's assets, would be owned or controlled by a
Person who would, in connection therewith, acquire all or substantially
all of the assisted living facility business of the Guarantor and its
direct and indirect Subsidiaries.
(c) Notwithstanding the foregoing, Landlord's consent shall
not be required for a Corporate Transfer or a sale, transfer,
assignment or other conveyance of Tenant's interest in this Agreement
that occurs following the third (3rd) anniversary of the Commencement
Date so long as (i) the Leased Property will be operated by Guarantor
or a wholly-owned Subsidiary of Guarantor pursuant to an Operating
Agreement, the term of which shall coincide with the term of this
Agreement, including extensions; (ii) the party to whom such transfer
is made is not, in Landlord's reasonable judgment, known in the
community as being of bad moral character and/or is not in control of
or controlled by persons who have been convicted of felonies in any
state or federal court; (iii) following such transfer, the new Tenant
satisfies the requirements set forth in Section 21.4; and (iv) the
transferee of this Lease shall assume the obligations of Tenant under
this Lease accruing after the effective date of such transfer either by
an express written agreement or by operation of law. Upon a transfer
described in this Section 16.1(c), and so long as the transferee is not
an Affiliated Person of Tenant or Guarantor, the transferor Tenant and
all of its Affiliated Persons shall be released from all liabilities
and obligations of Tenant accruing hereunder after the date of such
transfer. Tenant shall deliver notice of any such proposed transfer to
Landlord at least thirty (30) days prior to any such transfer and
shall, within five (5) days following any request by Landlord, provide
Landlord such information as may be reasonably necessary or appropriate
in order for Landlord to determine if such proposed transfer is
consistent with the above provisions. Notwithstanding the foregoing,
this Section 16.1(c) shall not apply to any transfer that meets the
requirements of Section 16.1(b).
(d) If this Agreement is assigned or if the Leased Property
or any part thereof are sublet (or occupied by anybody other than
Tenant) Landlord may collect the rents from such assignee, subtenant or
occupant, as the case may be, and apply the net amount collected to the
Rent herein reserved, but no such collection shall be deemed a waiver
of the provisions set forth in the first paragraph of this Section
16.1, the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or a release of Tenant from
the future performance by Tenant of its covenants, agreements or
obligations contained in this Agreement.
(e) Except as set forth in Section 16.1(c), no subletting or
assignment shall in any way impair the continuing primary liability of
Tenant hereunder (unless Landlord and Tenant expressly otherwise agree
that Tenant shall be released from all obligations hereunder), and no
consent to any subletting or assignment in a particular instance shall
be deemed to be a waiver of the prohibition set forth in this Section
16.1. No assignment, subletting or occupancy shall affect any Permitted
Use. Any subletting, assignment or other transfer of Tenant's interest
under this Agreement in contravention of this Section 16.1 shall be
voidable at Landlord's option. Any assignee of this Lease shall assume
the obligations of Tenant under this Lease accruing after the effective
date of such assignment either by an express written agreement or by
operation of law.
(f) Following a transfer described in Section 16.1(c) above
by the original Tenant under this Agreement, when giving notice to the
transferee Tenant (the "New Tenant") with respect to any default under
the provisions of this Agreement, Landlord will also deliver a copy of
such notice to the original Tenant (the "Transferor"), and the
Transferor or the Operator will have the same period of time after the
giving of such notice in which to remedy or cure the default as is
given to the New Tenant under this Agreement; it being understood and
agreed that the Transferor and the Operator will have no duty or
obligation to remedy or cure such default. Further, any Subsidiary or
Affiliated Person of the Guarantor, including without limitation, the
Transferor if it is then a Subsidiary or Affiliated Person of the
Guarantor (in either case, a "Qualified Transferee"), may become the
Tenant under this Agreement, by an assignment from the New Tenant. If
prior to such assignment from the New Tenant, Landlord elects to
terminate this Agreement by virtue of such default, Landlord shall
deliver to the Transferor and the Manager written notice of Landlord's
election to so terminate this Agreement which notice shall be delivered
at least ten (10) Business Days prior to the effective date of such
termination or exercise. Within such ten (10)-Business Day period, a
Qualified Transferee may elect by written notice to Landlord to
immediately enter into a new lease of the Leased Property for a term of
thirty (30) days, at the Rent (payable on a prorated basis for said
30-day period in advance upon the full execution and delivery of the
new lease), and otherwise upon the covenants, terms and provisions
herein contained. Prior to the expiration of the said 30-day term of
the new lease, the Qualified Transferee may elect by written notice to
Landlord, accompanied by payment to Landlord of all amounts due
Landlord under this Agreement, to extend the term of the new lease for
the remainder of the Term which would have existed but for such
termination, at the Rent and upon the covenants, terms and provisions
herein contained. It is expressly understood and agreed that the rights
and privileges under this Section 16.1(f) shall not accrue to any
Tenant, except as to a Qualified Transferee which becomes the Tenant
under this Agreement.
16.2 Required Sublease Provisions. Any sublease of all or any portion
of the Leased Property entered into on or after the date hereof shall provide
(a) that it is subject and subordinate to this Agreement and to the matters to
which this Agreement is or shall be subject or subordinate; (b) that in the
event of termination of this Agreement or reentry or dispossession of Tenant by
Landlord under this Agreement, Landlord may, at its option, terminate such
sublease or take over all of the right, title and interest of Tenant, as
sublessor under such sublease, and, except as provided below, such subtenant
shall, at Landlord's option, attorn to Landlord pursuant to the then executory
provisions of such sublease, except that neither Landlord nor any Facility
Mortgagee, as holder of a mortgage or as Landlord under this Agreement, if such
mortgagee succeeds to that position, shall (i) be liable for any act or omission
of Tenant under such sublease, (ii) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant,
(iii) be bound by any previous prepayment of more than one (1) Accounting
Period, (iv) be bound by any covenant of Tenant to undertake or complete any
construction work on the Leased Property or any portion thereof, (v) be required
to account for any security deposit of the subtenant other than any security
deposit actually delivered to Landlord by Tenant, (vi) be bound by any
obligation to make any payment to such subtenant or grant any credits, except
for services, repairs, maintenance and restoration provided for under the
sublease that are performed after the date of such attornment, (vii) be
responsible for any monies owing by Tenant to the credit of such subtenant, or
(viii) be required to remove any Person occupying any portion of the Leased
Property; and (c), in the event that such subtenant receives a written Notice
from Landlord or any Facility Mortgagee stating that an Event of Default has
occurred and is continuing, such subtenant shall thereafter be obligated to pay
all rentals accruing under such sublease directly to the party giving such
Notice or as such party may direct. All rentals received from such subtenant by
Landlord or the Facility Mortgagee, as the case may be, shall be credited
against the amounts owing by Tenant under this Agreement and such sublease shall
provide that the subtenant thereunder shall, at the request of Landlord, execute
a suitable instrument in confirmation of such agreement to attorn. An original
counterpart of each such sublease duly executed by Tenant and such subtenant
shall be delivered promptly to Landlord and Tenant shall remain liable for the
payment of the Rent and for the performance and observance of all of the
covenants and conditions to be performed by Tenant hereunder. The provisions of
this Section 16.2 shall not be deemed a waiver of the provisions set forth in
Section 16.1(a). No subtenant that is an Affiliated Person of Tenant shall be
required to attorn to Landlord as set forth above in this Section 16.2.
16.3 Permitted Sublease and Assignment. Notwithstanding the foregoing,
but subject to the provisions of Section 16.4 and any other express conditions
or limitations set forth herein, Tenant may, without Landlord's consent,
sublease space at the Leased Property so long as such subleases do not demise,
in the aggregate, in excess of six hundred (600) square feet of area. Any
sublease of space to any Affiliated Person of Tenant or Guarantor shall be on
commercially reasonable terms; provided, however, that any sublease of space to
or for use by Guarantor or any Affiliated Person of Guarantor for marketing
activities shall not be required to be on commercially reasonable terms.
16.4 Sublease Limitation. For so long as Landlord or any Affiliated
Person as to Landlord shall seek to qualify as a real estate investment trust,
anything contained in this Agreement to the contrary notwithstanding, Tenant
shall not sublet the Leased Property on any basis such that the rental to be
paid by any sublessee thereunder would be based, in whole or in part, on either
(a) the income or profits derived by the business activities of such sublessee,
or (b) any other formula such that any portion of such sublease rental would
fail to qualify as "rents from real property" within the meaning of Section
856(d) of the Code, or any similar or successor provision thereto.
ARTICLE 17
ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
17.1 Estoppel Certificates. At any time and from time to time, upon not
less than ten (10) Business Days prior Notice by either party, the party
receiving such Notice shall furnish to the other a certificate certifying that
this Agreement is unmodified and in full force and effect (or that this
Agreement is in full force and effect as modified and setting forth the
modifications), the date to which the Rent has been paid, that to its knowledge
no Default or an Event of Default by the other party has occurred and is
continuing or, if a Default or an Event of Default shall exist, specifying in
reasonable detail the nature thereof, and the steps being taken to remedy the
same, and such additional information as the requesting party may reasonably
request. If such additional information reasonably requires more than ten (10)
Business Days to provide, the party furnishing such information shall be
entitled to such additional period to respond to such request as may be
reasonably required under the circumstances. Any such certificate furnished
pursuant to this Section 17.1 may be relied upon by the requesting party, its
lenders and any prospective purchaser or mortgagee of the Leased Property or the
leasehold estate created hereby.
17.2 Financial Statements. Within thirty (30) days after the end of
each Accounting Period, Tenant shall furnish to Landlord an unaudited operating
statement for the Facility, including until the first Accounting Period
commencing after the occurrence of the Base Year, occupancy percentages. In
addition, Tenant shall provide Landlord with information relating to Tenant and
its operation of the Leased Property that (a) may be required in order for
Landlord to prepare financial statements in accordance with GAAP or to comply
with applicable securities laws and regulations and the SEC's interpretation
thereof and (b) is of the type that the Guarantor and its Affiliated Persons
customarily prepare for other assisted living facility owners; provided,
however, that (i) Tenant reserves the right, in good faith, to challenge and
require Landlord to use commercially reasonable efforts to challenge any
assertion by the SEC, any other applicable regulatory authority, or Landlord's
independent public accountants that applicable law, regulations or GAAP require
the provision or publication of Proprietary Information, (ii) Landlord shall
not, without Tenant's consent (which consent shall not be unreasonably withheld,
delayed or conditioned), acquiesce to any such challenged assertion until
Landlord has exhausted all reasonable available avenues of administrative
review, and (iii) Landlord shall consult with Tenant in pursuing any such
challenge and will allow Tenant to participate therein if and to the extent that
Tenant so elects. Landlord acknowledges that the foregoing does not constitute
an agreement by Tenant either to join in any Landlord filing with or appearance
before the SEC or any other regulatory authority or to take or consent to any
other action which would cause Tenant to be liable to any third party for any
statement or information other than those statements incorporated by reference
pursuant to clause (a) above. Any and all costs and expenses incurred by Tenant,
including without limitation reasonable attorneys fees and expenses, in
connection with providing information to Landlord in connection with any
challenge to an SEC assertion (including Tenant's consultation or participation
with Landlord in respect of same) shall be reimbursed to Tenant by Landlord
within ten (10) days following written demand by Tenant. If Landlord fails to so
reimburse Tenant within said 10-day period Tenant shall be entitled to offset
against Rent thereafter coming due any such unreimbursed sums, together with
interest thereon at the Disbursement Rate from the date of such demand to the
date actually paid or offset.
Subject to any Facility Mortgagee entering into such
confidentiality agreement with Tenant as Tenant may reasonably require, Landlord
may at any time, and from time to time, provide any Facility Mortgagee with
copies of any of the foregoing statements.
In addition, Landlord shall have the right, from time to
time at Landlord's sole cost and expense, upon reasonable Notice, during
Tenant's customary business hours, to cause Tenant's books and records with
respect to the Leased Property to be audited by auditors selected by Landlord at
the place where such books and records are customarily kept, provided that,
prior to conducting such audit, Landlord shall enter into a confidentiality
agreement with Tenant, such agreement to be in form and substance reasonably
satisfactory to Landlord, Tenant and the Guarantor. The cost of any audit shall
be borne by Landlord.
17.3 General Operations. Tenant shall furnish to Landlord, not less
than seventy-five (75) days after the commencement of any Fiscal Year, proposed
annual budgets in a form consistent with the then standards for the same brand
of assisted living facilities as the Facility setting forth projected income and
costs and expenses projected to be incurred by Tenant in managing, leasing,
maintaining and operating the Facility during the then current Fiscal Year.
ARTICLE 18
LANDLORD'S RIGHT TO INSPECT
Tenant shall permit Landlord and its authorized representatives to
inspect the Leased Property at reasonable times of the day upon not less than
twenty-four (24) hours' Notice, and to make such repairs as Landlord is
permitted or required to make pursuant to the terms of this Agreement, provided
that any inspection or repair by Landlord or its representatives will not
unreasonably interfere with Tenant's use and operation of the Leased Property
and further provided that in the event of an emergency, as determined by
Landlord in its reasonable discretion, prior Notice shall not be necessary.
ARTICLE 19
ALTERNATIVE DISPUTE RESOLUTION
19.1 Negotiation. Any and all disputes or disagreements arising out of
or relating to Landlord's disapproval of any Building Estimate or any item
within any Building Estimate pursuant to Section 5.1.3 above, or Landlord's
obligations to disburse funds pursuant to Section 5.1.4(b), shall be resolved
through negotiations or, at the election of either party, if the dispute is not
so resolved within 30 days after Notice from either party commencing such
negotiations, through binding arbitration conducted in accordance with Section
19.2.
19.2 Arbitration.
(a) The party electing arbitration pursuant to Section 19.1
as a result of a dispute described in Section 5.1.3(d) or Section
5.1.4(b) shall give Notice to that effect to the other party and shall
in such Notice appoint an individual as arbitrator on its behalf.
Within 15 days after such Notice, the other party, by Notice to the
initiating party, shall appoint a second individual as arbitrator on
its behalf. The arbitrators thus appointed shall appoint a third
individual, and such three arbitrators shall as promptly as possible
determine such dispute; provided, however, that:
(i) if the second arbitrator shall not have been
appointed as aforesaid, the first arbitrator shall proceed
to determine such dispute; and
(ii) if the two (2) arbitrators appointed by the
parties shall be unable to agree, within 15 days after the
appointment of the second arbitrator, upon the appointment
of a third arbitrator, they shall give written Notice to the
parties of such failure to agree, and, if the parties fail
to agree upon the selection of a third arbitrator within 15
days after the arbitrators appointed by the parties give
Notice as aforesaid, then either of the parties upon Notice
to the other party may request such appointment by the then
Chief Judge of the United States District Court for the
District within the State in which the Leased Property is
located, or in such Judge's absence, refusal, failure or
inability to act, may apply for a court appointment of such
third arbitrator.
(b) Each arbitrator shall be a fit and impartial nationally
recognized consulting firm with at least ten years' experience in
consulting with owners, operators, lenders, and/or franchisors in the
operation of assisted living properties operated under nationally
recognized name brands.
(c) The arbitration shall be conducted within the State in
which the Leased Property is located and, to the extent consistent with
this Section 19.2, in accordance with the rules of the American
Arbitration Association. The arbitrators shall render their decision in
accordance with Section 5.1.3(d) or Section 5.1.4(b), as applicable,
upon the concurrence of at least two of their number, within 30 days
after the appointment of the third arbitrator (or, if only one
arbitrator, pursuant to 19.2(a)(i), then by such arbitrator within 45
days of his or her appointment). Such decision and award shall be in
writing and shall be final, binding and enforceable against the parties
and shall be non-appealable, and counterpart copies thereof shall be
delivered to each of the parties. In rendering such decision and award,
the arbitrators shall not add to, subtract from or otherwise modify the
provisions of this Agreement. Judgment may be had on the decision and
award of the arbitrator(s) so rendered in any court of competent
jurisdiction.
(d) Each party shall pay the fees and expenses of the one of
the two original arbitrators appointed by or for such party, and the
fees and expenses of the third arbitrator (or the one arbitrator, if
only one arbitrator is appointed pursuant to Section 19.2(a)(i)) and
all other expenses of the arbitration (other than the fees and
disbursements of attorneys or witnesses for each party) shall be borne
by the parties equally.
ARTICLE 20
FACILITY MORTGAGES
20.1 Landlord May Grant Liens.
(a) Without the consent of Tenant but subject to the
provisions of Section 20.1(b), Landlord may, subject to the terms and
conditions set forth in this Section 20.1, from time to time, directly
or indirectly, create or otherwise cause to exist any lien, encumbrance
or title retention agreement ("Encumbrance") upon the Leased Property,
or any portion thereof or interest therein, whether to secure any
borrowing or other means of financing or refinancing, provided that any
such Encumbrance shall not secure a maximum principal amount in excess
of the greater of seventy five percent (75%) of the fair market value
of Landlord's interest in the Leased Property, or seventy five percent
(75%) of the Purchase Price (as defined in the Purchase Agreement) for
the Leased Property pursuant to the Purchase Agreement. Any such
Encumbrance shall provide (subject to Section 20.2) that it is subject
to the rights of Tenant under this Agreement. Landlord shall not cross
collateralize the Leased Property with any other property. Landlord
agrees not to enter into any Encumbrance that would allow the Facility
Mortgagee to apply any insurance proceeds or Award to the debt secured
by the Encumbrance but may enter into an Encumbrance that allows the
Facility Mortgagee to hold and disburse insurance proceeds or any Award
to be used, pursuant to the terms of this Agreement, to repair, rebuild
or restore the Leased Property according to usual and customary
procedures (which procedures shall be subject to Tenant's reasonable
approval) for disbursement of construction loan proceeds. For purposes
hereof, the fair market value of Landlord's interest in the Leased
Property shall be based only on the valuation of the rental or other
income owing to Landlord pursuant to the terms of this Agreement,
assuming this Agreement will remain in place in perpetuity regardless
of the expiration date thereof. Tenant may dispute the determination of
the fair market value of Landlord's interest in the Leased Property, in
which case the fair market value of Landlord's interest in the Leased
Property shall be determined by mutual agreement between two (2)
appraisers, each with at least ten (10) years of professional
experience as an appraiser of comparable assisted living facilities,
one appointed by Landlord and the other appointed by Tenant promptly
following Tenant's notice of dispute. If the two (2) appraisers so
appointed are unable to agree upon such fair market value within
forty-five (45) days after their appointment, then they shall promptly
appoint a third appraiser with like qualifications who shall complete
his appraisal within thirty (30) days after appointment, and the
decision of the third appraiser shall be final and binding on Landlord
and Tenant. The fees and expenses of each of the first two (2)
appraisers shall be paid by the party appointing the appraiser, and the
fees and expenses of the third appraiser, if appointed, shall be shared
equally by Landlord and Tenant.
(b) Prior to creating or otherwise causing to exist any
Encumbrance on the Leased Property, Landlord shall give Notice to
Tenant of its proposal with regard to an Encumbrance including
reasonably adequate information for Tenant to determine whether the
loan to value limitations set forth in Section 20.1(a) will be
satisfied.
20.2 Subordination of Lease. Subject to Section 20.1 and this Section
20.2, upon Notice from Landlord, Tenant shall execute and deliver an agreement,
in form and substance reasonably satisfactory to Landlord and Tenant,
subordinating this Agreement to any Encumbrance permitted pursuant to Section
20.1; provided, however, that such subordination shall be on the express
condition that the terms of this Agreement shall be recognized by the mortgagee
or holder of the deed of trust and any purchaser of the Leased Property at any
foreclosure sale (a "Successful Purchaser") and that such mortgagee, holder or
Successful Purchaser shall honor and be bound by this Agreement and that,
notwithstanding any default by Landlord under such Encumbrance or any
foreclosure thereof, Tenant's possession of the Leased Property and rights and
obligations under this Agreement shall not be affected thereby and this
Agreement shall not be terminated other than in accordance with its terms. The
foregoing agreements shall be binding on any purchaser of the Leased Property at
foreclosure. Any mortgage or deed of trust to which this Agreement is, at the
time referred to, subject and subordinate, is herein called "Superior Mortgage"
and the holder, trustee or beneficiary of a Superior Mortgage is herein called
"Superior Mortgagee". Tenant shall have no obligations under any Superior
Mortgage other than those expressly set forth in this Section 20.2. If any
Superior Mortgagee or the nominee or designee of any Superior Mortgagee or any
Successful Purchaser, shall succeed to the rights of Landlord under this
Agreement (any such person, "Successor Landlord"), whether through possession or
foreclosure action or delivery of a new lease or deed, or otherwise, such
Successor Landlord shall recognize Tenant's rights under this Agreement as
herein provided and Tenant shall attorn to and recognize the Successor Landlord
as Tenant's landlord under this Agreement and Tenant shall promptly execute and
deliver any instrument that such Successor Landlord may reasonably request to
evidence such attornment (provided that such instrument does not alter the terms
of this Agreement), whereupon, this Agreement shall continue in full force and
effect as a direct lease between the Successor Landlord and Tenant upon all of
the terms, conditions and covenants as are set forth in this Agreement, except
that the Successor Landlord (unless formerly the landlord under this Agreement
or its nominee or designee) shall not be (a) liable in any way to Tenant for any
act or omission, neglect or default on the part of any prior Landlord under this
Agreement, (b) responsible for any monies owing by or on deposit with any prior
Landlord to the credit of Tenant (except to the extent actually paid or
delivered to the Successor Landlord), (c) bound by any modification of this
Agreement subsequent to such Superior Mortgage, or by any previous prepayment of
Minimum Rent or Percentage Rent for more than one (1) month in advance of the
date due hereunder, which was not approved in writing by the Superior Mortgagee
thereto, (d) liable to Tenant beyond the Successor Landlord's interest in the
Leased Property and the rents, income, receipts, revenues, issues and profits
issuing from the Leased Property, or (e) required to remove any Person occupying
the Leased Property or any part thereof, except if such person claims by,
through or under the Successor Landlord; provided, however, that any offset
rights of Tenant pursuant to Section 14.3(a) that, prior thereto, accrued in
Tenant's favor shall continue and Tenant shall be entitled to offset the
remaining balance of such deficient amounts plus interest therein from the date
of funding at the Disbursement Rate against Rent payable by Tenant to such
Successor Landlord. Tenant agrees at any time and from time to time to execute a
suitable instrument in confirmation of Tenant's agreement to attorn, as
aforesaid and Landlord agrees to provide Tenant with an instrument of
nondisturbance and attornment from each such Superior Mortgagee in form and
substance reasonably satisfactory to Tenant. Notwithstanding the foregoing,
Landlord, any Successor Landlord and/or Superior Mortgagee shall be liable to
pay to Tenant any portions of insurance proceeds or Awards received by the
Landlord, Successor Landlord and/or Superior Mortgagee, respectively, and
required to be paid to Tenant or otherwise applied to the cost of repair,
restoration or rebuilding of the Leased Property pursuant to the terms of this
Agreement, and, as a condition to any mortgage, lien or lease in respect of the
Leased Property, and the subordination of this Agreement thereto, the mortgagee,
lienholder or lessor, as applicable, shall expressly agree, for the benefit of
Tenant, to make such payments, which agreement shall be embodied in an
instrument in form reasonably satisfactory to Tenant.
20.3 Notices. Subsequent to the receipt by Tenant of Notice from
Landlord as to the identity of any Facility Mortgagee which complies with
Section 20.1 (which Notice shall be accompanied by a copy of the applicable
mortgage or lease), no notice from Tenant to Landlord as to the Leased Property
shall be effective unless and until a copy of the same is given to such Facility
Mortgagee at the address set forth in the above described Notice, and the curing
of any of Landlord's defaults by such Facility Mortgagee shall be treated as
performance by Landlord.
ARTICLE 21
ADDITIONAL COVENANTS OF TENANT
21.1 Conduct of Business. Tenant shall not engage in any business other
than the leasing and operation of the Leased Property and activities incidental
thereto and shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect and in good standing its existence and its
rights and licenses necessary to conduct such business.
21.2 Maintenance of Accounts and Records. Tenant shall keep true
records and books of account of Tenant in which full, true and correct entries
will be made of dealings and transactions in relation to the business and
affairs of Tenant and the Facility in accordance with GAAP. Provided Landlord
shall give to Tenant at least ten (10) Business Days written notice of
Landlord's desire to audit such accounts and records, Landlord, at its expense,
shall have the right to audit such accounts and records during normal business
hours. Not more than one (1) such audit shall be conducted within any twelve
(12) month period. Landlord shall keep in confidence all information which it
might gain or gather from the examination or audit of Tenant's accounts and
records, unless required to disclose such information pursuant to Applicable
Laws.
21.3 Certain Debt Prohibited. Tenant shall not incur any
Indebtedness except the following:
(a) Indebtedness of Tenant to Landlord under this Agreement
or to Operator under the Operating Agreement;
(b) Indebtedness of Tenant in respect of loans, the proceeds
of which are used to pay amounts owed under this Agreement or the
Operating Agreement, and which are by their terms expressly subordinate
to the payment and performance of Tenant's obligations under this
Agreement;
(c) Indebtedness of Tenant for Impositions, to the extent
that payment thereof shall not at the time be required to be made in
accordance with the provisions of Article 8;
(d) Indebtedness of Tenant in respect of judgments or awards
(i) which have been in force for less than the applicable appeal period
and in respect of which execution thereof shall have been stayed
pending such appeal or review, or (ii) which are fully covered by
insurance payable to Tenant, or (iii) which are for an amount not in
excess of $750,000 in the aggregate at any one time outstanding and (x)
which have been in force for not longer than the applicable appeal
period, so long as execution is not levied thereunder or (y) in respect
of which an appeal or proceedings for review shall at the time be
prosecuted in good faith in accordance with the provisions of Article
8, and in respect of which execution thereof shall have been stayed
pending such appeal or review;
(e) unsecured borrowings of Tenant from its Affiliated
Persons which are by their terms expressly subordinate to the payment
and performance of Tenant's obligations under this Agreement; or
(f) Indebtedness for purchase money financing and other
indebtedness incurred in the ordinary course of Tenant's business,
including the leasing of personal property;
21.4 Special Purpose Entity Requirements. Following any transfer
described in Section 16.1(c) and continuing for so long as Tenant is not an
Affiliated Person of Guarantor, Tenant shall comply with the following:
(a) Tenant will be a special purpose entity, either a
corporation, a limited partnership, or a limited liability company
whose purpose will be limited to leasing and operating the Leased
Property.
(b) Tenant's organizational documents shall limit the
ability to incur any Indebtedness except as permitted by Section 21.3.
(c) Tenant's organizational documents will provide that the
favorable vote of an independent director shall be required for the
following matters: (i) filing, or consenting to the filing of, a
bankruptcy or insolvency petition or otherwise instituting insolvency
proceedings; (ii) dissolution, liquidation, consolidation, merger or
sale of all or substantially all of its controlling assets (unless such
entity is merged or consolidated with, acquired by, or its assets are
sold to, Guarantor or an Affiliated Person of Guarantor); (iii)
engaging in any unrelated business activities; and (iv) amending its
organizational documents in a way that would change any of the
requirements provided herein.
(d) Tenant shall observe and maintain its business and
affairs separate and independent of the business and affairs of any
Affiliated Person of Tenant, including without limitation: (i)
maintaining books and records separate from any Affiliated Person of
Tenant; (ii) maintaining its accounts separate from any Affiliated
Person of Tenant; (iii) not co-mingling its assets with those of any
Affiliated Person of Tenant; (iv) conducting its own business in its
own name; (v) not guaranteeing, or becoming obliged for, debts for any
other Person or holding out its credit as being available to satisfy
the obligations of any other Person (except to the extent of
indemnities and other obligations, if any, arising under any Operating
Agreement or credit arrangements for the Leased Property or arising in
the ordinary course of its business); and (vi) using separate
stationery, invoices and checks.
21.5 Distributions, Payments to Affiliated Persons, Etc. Tenant shall
not declare, order, pay or make, directly or indirectly, any Distributions if,
at the time of such proposed action, or immediately after giving effect thereto,
any Event of Default with respect to the payment of Rent shall have occurred and
be continuing; provided, however, that Tenant may resume making such
Distributions if (i) Landlord shall not commence, within ninety (90) days after
Notice by Landlord to Tenant of the occurrence of any such Event of Default, to
enforce its rights and remedies arising on account of such Event of Default with
respect to the payment of Rent, and diligently pursue enforcement of such rights
and remedies thereafter, and (ii) no other Event of Default (i.e., an Event of
Default arising from a cause other than the non-payment of Rent) has occurred as
to which Landlord has commenced enforcing and is continuously and diligently
pursuing the enforcement of its rights and remedies arising on account of any
such Event of Default.
21.6 Compliance with Operating Agreement. Tenant shall substantially
comply with all material terms and provisions of the Operating Agreement (or any
replacement thereof) to be complied with by Tenant, subject to Tenant's right to
pursue all available remedies, at law and in equity, with respect to any alleged
default by Tenant in the performance of its duties and obligations under the
Operating Agreement, or otherwise contest, in good faith and with due diligence,
any such alleged default by Tenant; provided, however, that in the event of any
casualty or condemnation or other event or circumstances, Tenant shall not be
obligated to expend its own funds in excess of such amounts that Tenant would be
obligated pursuant to the Lease to expend under such event or circumstances.
Unless required by Applicable Laws, Tenant shall not enter into any
modifications or amendments of the Operating Agreement, nor, except as otherwise
expressly set forth in this Agreement or the Owner Agreement, terminate the same
prior to the expiration thereof, without Landlord's prior written consent; nor
shall Tenant enter into any replacement of the Operating Agreement without
Landlord's prior written consent. To the extent required by this Section 21.6,
Landlord's consent shall not be unreasonably withheld or conditioned so long as
any such modification, amendment, termination or replacement of the Operating
Agreement does not materially and adversely affect the duties and obligations of
the parties thereunder. Notwithstanding the foregoing, in the event that the
Operating Agreement is terminated by reason of a default by the Operator
thereunder, Landlord shall not unreasonably withhold or condition its consent to
the selection by Tenant of another Operator with experience in the assisted
living facility business and the execution of a new Operating Agreement in form
and substance satisfactory to Tenant and such new Operator. To the extent Tenant
receives any notices, budgets, reports or other documents or materials from the
Operator that the Operator is required to provide to Tenant pursuant to the
Operating Agreement, Tenant will promptly forward a copy of the same to Landlord
if the Operator has not sent the same to Landlord.
ARTICLE 22
MISCELLANEOUS
22.1 Limitation on Payment of Rent. All agreements between Landlord and
Tenant herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent, or otherwise, shall the
Rent or any other amounts payable to Landlord under this Agreement exceed the
maximum permissible under Applicable Laws, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Agreement, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law, or
if from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Agreement and any other agreements
between Landlord and Tenant.
22.2 No Waiver. No failure by Landlord or Tenant to insist upon the
strict performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof, and no acceptance of full or partial payment
of Rent during the continuance of any such breach, shall constitute a waiver of
any such breach or of any such term. To the maximum extent permitted by law, no
waiver of any breach shall affect or alter this Agreement, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
22.3 Remedies Cumulative. To the maximum extent permitted by law, each
legal, equitable or contractual right, power and remedy of Landlord or Tenant,
now or hereafter provided either in this Agreement or by statute or otherwise,
shall be cumulative and concurrent and shall be in addition to every other
right, power and remedy and the exercise or beginning of the exercise by
Landlord or Tenant (as applicable) of any one or more of such rights, powers and
remedies shall not preclude the simultaneous or subsequent exercise by Landlord
of any or all of such other rights, powers and remedies.
22.4 Severability. Any clause, sentence, paragraph, section or
provision of this Agreement held by a court of competent jurisdiction to be
invalid, illegal or ineffective shall not impair, invalidate or nullify the
remainder of this Agreement, but rather the effect thereof shall be confined to
the clause, sentence, paragraph, section or provision so held to be invalid,
illegal or ineffective, and this Agreement shall be construed as if such
invalid, illegal or ineffective provisions had never been contained therein.
22.5 Acceptance of Surrender. No surrender to Landlord of this
Agreement or of the Leased Property or any part thereof, or of any interest
therein, shall be valid or effective unless agreed to and accepted in writing by
Landlord and no act by Landlord or any representative or agent of Landlord,
other than such a written acceptance by Landlord, shall constitute an acceptance
of any such surrender.
22.6 No Merger of Title. It is expressly acknowledged and agreed that
it is the intent of the parties that there shall be no merger of this Agreement
or of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly this Agreement or the
leasehold estate created hereby and the fee estate or ground landlord's interest
in the Leased Property.
22.7 Conveyance by Landlord. If Landlord or any successor owner of all
or any portion of the Leased Property shall convey all or any portion of the
Leased Property in accordance with the terms of this Agreement (specifically
including Article 15) other than as security for a debt, and the grantee or
transferee of such of the Leased Property shall expressly assume all obligations
of Landlord hereunder arising or accruing from and after the date of such
conveyance or transfer, Landlord or such successor owner, as the case may be,
shall thereupon be released from all future liabilities and obligations of
Landlord under this Agreement with respect to such of the Leased Property
arising or accruing from and after the date of such conveyance or other transfer
and all such future liabilities and obligations shall thereupon be binding upon
the new owner.
22.8 Quiet Enjoyment. Provided that no Event of Default shall have
occurred and be continuing, Tenant shall peaceably and quietly have, hold and
enjoy the Leased Property for the Term, free of hindrance or molestation by
Landlord or anyone claiming by, through or under Landlord, but subject to (a)
any Encumbrance permitted under Article 20 or otherwise permitted to be created
by Landlord hereunder, (b) all Permitted Encumbrances, (c) liens as to
obligations of Landlord that are either not yet due or which are being contested
in good faith and by proper proceedings, provided the same do not materially
interfere with Tenant's ability to operate the Facility and (d) liens that have
been consented to in writing by Tenant. Except as otherwise provided in this
Agreement, no failure by Landlord to comply with the foregoing covenant shall
give Tenant the right to cancel or terminate this Agreement or abate, reduce or
make a deduction from or offset against the Rent or any other sum payable under
this Agreement, or to fail to perform any other obligation of Tenant hereunder.
22.9 Memorandum of Lease. Neither Landlord nor Tenant shall record this
Agreement. However, Landlord and Tenant shall promptly, upon the request of the
other, enter into a short form memorandum of this Agreement, in form suitable
for recording under the laws of the State in which reference to this Agreement,
and all options contained herein, shall be made. The parties shall share equally
all costs and expenses of recording such memorandum; provided, however, that in
no event shall the non-requesting party's share of such recording costs and
expenses exceed $25,000.
22.10 Notices.
(a) Any and all notices, demands, consents, approvals,
offers, elections and other communications required or permitted under
this Agreement shall be deemed adequately given if in writing and the
same shall be delivered either in hand, by telecopier with written
acknowledgment of receipt, or by mail or Federal Express or similar
expedited commercial carrier, addressed to the recipient of the notice,
postpaid and registered or certified with return receipt requested (if
by mail), or with all freight charges prepaid (if by Federal Express or
similar carrier).
(b) All notices required or permitted to be sent hereunder
shall be deemed to have been given for all purposes of this Agreement
upon the date of acknowledged receipt, in the case of a notice by
telecopier, and, in all other cases, upon the date of receipt or
refusal, except that whenever under this Agreement a notice is either
received on a day which is not a Business Day or is required to be
delivered on or before a specific day which is not a Business Day, the
day of receipt or required delivery shall automatically be extended to
the next Business Day.
(c) All such notices shall be addressed,
if to Landlord to:
CNL Health Care Partners, LP
CNL Center at City Commons
450 South Orange Avenue
Orlando, FL 32801-3336
Attn: Mr. Phillip M. Anderson or Chief Operating Officer
Telecopier No. (407) 835-3232
with a copy to:
Lowndes Drosdick Doster Kantor and Reed, P.A.
215 North Eola Drive
P.O. Box 2809
Orlando, FL 32809
Attn: David G. Williford, Esq.
Telecopier No. (407) 843-4444
if to Tenant to:
c/o Marriott International, Inc.
10400 Fernwood Road, Dept. 52-924.04
Bethesda, Maryland 20817
Attn: Treasury
Telecopier No. (301) 380-5067
with a copy to:
Marriott International, Inc.
10400 Fernwood Road, Dept. 52/923.24
Bethesda, Maryland 20817
Attn: Kevin E. Montano, Esquire
Law Department
Telecopier No. (301) 380-6727
(d) By notice given as herein provided, the parties hereto
and their respective successors and assigns shall have the right from
time to time and at any time during the term of this Agreement to
change their respective addresses effective upon receipt by the other
parties of such notice and each shall have the right to specify as its
address any other address within the United States of America.
22.11 Construction; Nonrecourse. Anything contained in this Agreement
to the contrary notwithstanding, all claims against, and liabilities of, Tenant
or Landlord arising prior to any date of termination or expiration of this
Agreement with respect to the Leased Property shall survive such termination or
expiration. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated except by an instrument in writing signed by
all the parties thereto. All the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Each term or provision of this Agreement to be
performed by Tenant shall be construed as an independent covenant and condition.
Time is of the essence with respect to the exercise of any rights of Tenant or
Landlord under this Agreement. Except as otherwise set forth in this Agreement,
any obligations arising prior to the expiration or sooner termination of this
Agreement of Tenant (including without limitation, any monetary, repair and
indemnification obligations) and Landlord shall survive the expiration or sooner
termination of this Agreement; provided, however, that each party shall be
required to give the other Notice of any such surviving and unsatisfied
obligations within one year after the expiration or sooner termination of this
Agreement. Except as otherwise expressly provided with respect to the Security
Deposit, nothing contained in this Agreement shall be construed to create or
impose any liabilities or obligations and no such liabilities or obligations
shall be imposed on any of the shareholders, beneficial owners, direct or
indirect, officers, directors, trustees, employees or agents of Landlord or
Tenant for the payment or performance of the obligations or liabilities of
Landlord or Tenant hereunder. Further, in the event Landlord shall be in default
under this Agreement, and if as a consequence of such default, Tenant shall
recover a money judgment against Landlord, such judgment shall be satisfied only
out of the proceeds of sale received upon execution of such judgment against the
right, title and interest of Landlord in the Leased Property; provided, however,
that nothing herein shall be construed or operate to affect or diminish in any
way whatsoever the liability of CHCLP and/or CHCP under the CHCLP and CHCP
Guaranty for such deficiency and/or the full performance of Landlord's
obligations under this Agreement.
22.12 Counterparts; Headings. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but which, when
taken together, shall constitute but one instrument and shall become effective
as of the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Headings in
this Agreement are for purposes of reference only and shall not limit or affect
the meaning of the provisions hereof.
22.13 Applicable Law, Etc. This Agreement shall be interpreted,
construed, applied and enforced in accordance with the laws of the State
applicable to contracts between residents of the State which are to be performed
entirely within the State, regardless of (i) where this Agreement is executed or
delivered; or (ii) where any payment or other performance required by this
Agreement is made or required to be made; or (iii) where any breach of any
provision of this Agreement occurs, or any cause of action otherwise accrues; or
(iv) where any action or other proceeding is instituted or pending; or (v) the
nationality, citizenship, domicile, principal place of business, or jurisdiction
of organization or domestication of any party; or (vi) whether the laws of the
forum jurisdiction otherwise would apply the laws of a jurisdiction other than
the State; or (vii) any combination of the foregoing.
To the maximum extent permitted by applicable law, any
action to enforce, arising out of, or relating in any way to, any of the
provisions of this Agreement may be brought and prosecuted in such court or
courts located in the State as is provided by law; and the parties consent to
the jurisdiction of said court or courts located in the State and to service of
process by registered mail, return receipt requested, or by any other manner
provided by law.
22.14 Right to Make Agreement. Each party warrants, with respect to
itself, that neither the execution of this Agreement, nor the consummation of
any transaction contemplated hereby, shall violate any provision of any law, or
any judgment, writ, injunction, order or decree of any court or governmental
authority having jurisdiction over it; nor result in or constitute a breach or
default under any indenture, contract, other commitment or restriction to which
it is a party or by which it is bound; nor require any consent, vote or approval
which has not been given or taken, or at the time of the transaction involved
shall not have been given or taken. Each party covenants that it has and will
continue to have throughout the term of this Agreement and any extensions
thereof, the full right to enter into this Agreement and perform its obligations
hereunder.
22.15 Disclosure of Information.
(a) Any Proprietary Information obtained by Landlord with
respect to Tenant pursuant to the provisions of this Agreement shall be
treated as confidential, except that such information may be used,
subject to confidentiality safeguards mutually acceptable to Landlord
and Tenant, in any litigation between the parties and except further
that, subject to the terms of Section 22.16, Landlord may disclose such
information to its prospective lenders, provided that Landlord shall
direct and obtain the agreement of such lenders to maintain such
information as confidential.
(b) The parties hereto agree that the matters set forth in
this Agreement and any revenue, expense, net profit, fee rates and
occupancy information provided by Tenant or any of its Affiliated
Persons are strictly confidential and each party will make every effort
to ensure that the information is not disclosed to any Person that is
not an Affiliated Person as to any party (including the press) without
the prior written consent of the other party, except as may be required
by law and as may be reasonably necessary to obtain licenses, permits
and other public approvals necessary for the refurbishment or operation
of the Facility, or, subject to the restrictions of Section 22.15(c)
relative to the contents of any Prospectus, in connection with a
Landlord financing, a sale of the Facility, or a sale of a controlling
interest in Landlord, Tenant or the Guarantor.
(c) No reference to Tenant or any of its Affiliated Persons
will be made in any prospectus, private placement memorandum, offering
circular or offering documentation related thereto (collectively, the
"Prospectus"), issued by Landlord or any of its Affiliated Persons,
which is designed to interest potential investors in the Facility,
unless Tenant has previously received a copy of all such references. No
Prospectus shall include fee rate and occupancy data or revenue,
expense or net profit information pertaining to the Facility.
Regardless of whether Tenant so receives a copy of the Prospectus,
neither Tenant nor its Affiliated Persons will be deemed a sponsor of
the offering described in the Prospectus, nor will it have any
responsibility for the Prospectus, and the Prospectus will so state.
Unless Tenant agrees in advance, the Prospectus will not include any
trademark, symbols, logos or designs of Tenant or any of its Affiliated
Persons. Landlord shall indemnify, defend and hold Tenant harmless from
and against all loss, costs, liability and damage (including reasonable
attorneys' fees and expenses, and all cost of litigation) arising out
of any Prospectus or the offering described therein; and this
obligation of Landlord shall survive termination of this Agreement.
(d) The obligations of Tenant and Landlord contained in this
Section 22.15 shall survive the expiration or earlier termination of
this Agreement and shall supersede any previous agreement or letter
between the parties regarding the substance of this Section 22.15.
22.16 Trademarks, Trade Names and Service Marks.
(a) The names "Marriott" and "Brighton Gardens" (each of the
foregoing names, together with any combination thereof, collectively,
the "Trade Names") when used alone or in connection with another word
or words, and the Marriott and Brighton Gardens trademarks, service
marks, other trade names, symbols, logos and designs shall in all
events remain the exclusive property of Guarantor or its Affiliated
Persons, and nothing contained in this Agreement shall confer on
Landlord the right to use any of the Trade Names, or the Marriott or
Brighton Gardens trademarks, service marks, other trade names, symbols,
logos or designs other than in strict accordance with the terms of this
Agreement. Upon termination of this Agreement, any use of or right to
use any of the Trade Names, or any of the Marriott or Brighton Gardens
trademarks, service marks, other trade names, symbols, logos or designs
by Landlord shall be governed by the Operating Agreement and/or Owner
Agreement, upon termination of this Agreement, and, if the Operating
Agreement or a replacement Operating Agreement will not remain in
effect, Landlord shall promptly remove from the Facility any signs or
similar items which contain any of the Trade Names, trademarks, service
marks, other trade names, symbols, logos or designs. If Landlord has
not removed such signs or similar items within ten (10) Business Days
after termination of this Agreement, Tenant shall have the right to do
so at Landlord's expense. Included under the terms of this section are
all trademarks, service marks, trade names, symbols, logos or designs
used in conjunction with the Facility, whether or not the marks contain
the "Marriott" name or the "Brighton Gardens" name. The right to use
such trademarks, service marks, trade names, symbols, logos or designs
belongs exclusively to Tenant and its Affiliated Persons, and the use
thereof inures to the benefit of Tenant and its Affiliated Persons
whether or not the same are registered and regardless of the source of
the same. The provisions of this Section 22.16(a) shall survive
termination of this Agreement.
(b) Any computer software (including upgrades and
replacements) at the Facility owned by Tenant or any of its Affiliated
Persons, or the licensor of any of them is proprietary to Tenant or any
of its Affiliated Persons, or the licensor of any of them and shall in
all events remain the exclusive property of Tenant or any of its
Affiliated Persons or the licensor of any of them, as the case may be,
and nothing contained in this Agreement shall confer on Landlord the
right to use any of such software. Tenant shall have the right to
remove from the Facility without compensation to Landlord any computer
software (including upgrades and replacements), including, without
limitation, the system software, owned by Tenant or any of its
Affiliated Persons or the licensor of any of them. Further, upon
termination of this Agreement, Tenant shall be entitled to remove from
the Facility without compensation to Landlord any computer equipment
utilized as part of a centralized reservation system or owned by a
party other than the Landlord.
22.17 Competing Facilities. Neither this Agreement nor anything implied by the
relationship between Landlord and Tenant shall prohibit any of the Marriott
Companies from constructing, operating, promoting, and/or authorizing others to
construct, operate, or promote one or more assisted living facilities or any
other business operations of any type, at any location, including a location
proximate to the Land. Landlord acknowledges, accepts and agrees further that
the Marriott Companies retain the right, from time to time, to construct or
operate, or both, or promote or acquire, or authorize or otherwise license
others to construct or operate, or both, or promote or acquire any assisted
living facilities or other business operations of any type whatsoever,
including, but not by way of limitation, those listed above, at any location
including one or more sites which may be adjacent, adjoining or proximate to the
Land, which business operations may be in direct competition with the Leased
Improvements and that any such exercise may adversely affect the operation of
the Leased Improvements.
IN WITNESS WHEREOF, the parties have executed this Agreement as a
sealed instrument as of the date above first written.
LANDLORD:
CNL HEALTH CARE PARTNERS, LP,
a Delaware limited partnership
By: CNL Health Care GP Corp.,
a Delaware corporation,
general partner
By: _____________________________
Phillip M. Anderson
Executive Vice President
TENANT:
BG ORLAND PARK, LLC,
a Delaware limited liability company
By: Marriott Senior Living Services, Inc.,
its sole Member
By: _____________________________
Timothy J. Grisius
Agent
<PAGE>
EXHIBIT A
Minimum Rent
DURING THE PERIOD FROM THE COMMENCEMENT DATE TO THE LAST DAY OF THE ACCOUNTING
PERIOD IN WHICH THE THRESHOLD ACHIEVEMENT DATE OCCURS, THE MINIMUM RENT FOR EACH
ACCOUNTING PERIOD SHALL BE ONE HUNDRED THREE THOUSAND EIGHT HUNDRED SIXTY-SIX
DOLLARS AND SEVENTY-FIVE CENTS ($103,866.75).
DURING THE PERIOD FROM THE FIRST DAY OF THE FIRST ACCOUNTING PERIOD FOLLOWING
THE THRESHOLD ACHIEVEMENT DATE AND CONTINUING THEREAFTER, THE MINIMUM RENT FOR
EACH ACCOUNTING PERIOD SHALL BE ONE HUNDRED SIX THOUSAND FIVE HUNDRED THIRTY
DOLLARS ($106,530).
FOR PURPOSES HEREOF, THE THRESHOLD ACHIEVEMENT DATE SHALL MEAN THE LAST DAY OF
THE SECOND FULL ACCOUNTING YEAR.
<PAGE>
EXHIBIT B
The Land
LOT 1 IN MARRIOTT'S BRIGHTON GARDENS OF ORLAND PARK, A SUBDIVISION OF PART OF
THE NORTHWEST 1/4 OF THE NORTHWEST 1/4 OF SECTION 22, TOWNSHIP 36 NORTH, RANGE
12, EAST OF THE THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF RECORDED
JULY 22, 1998 AS DOCUMENT 98638801, IN COOK COUNTY, ILLINOIS.
<PAGE>
C - 2
EXHIBIT C
PROPERTY EXPENSES
"Property Expenses" shall mean any or all, as the context requires,
of the following:
1. All costs of operating the Facility incurred in accordance
with this Agreement, including, without limitation, all salaries, wages, fringe
benefits, payroll taxes and other costs related to the Facility's employees,
Employee Claims (as defined in the Operating Agreement except to the extent
specifically set forth to the contrary in Section 14.01 of the Operating
Agreement), all departmental expenses, administrative and general expenses, the
cost of advertising and business promotion for the Facility, heat, light, power,
electricity, gas, telephone, cable and other utilities, and routine repairs,
maintenance and minor alterations that are not the type of expenditures payable
out of the Reserve;
2. The cost of Inventories and FAS consumed in the
operation of the Facility;
3. A reasonable reserve for uncollectible accounts
receivable as determined by the Operator under the Operating Agreement;
4. All reasonable costs and fees of audit, legal, technical
and other independent professionals or other third parties who are retained by
Tenant or are retained by Operator to perform services required or permitted
under the Operating Agreement;
5. The reasonable cost and expense of technical consultants
and operational experts who are employees of Operator or one of its Affiliates,
and who perform specialized services in connection with non-routine Facility
work; provided, however, that the costs and expenses so incurred shall only be
Property Expenses to the extent such costs and expenses are reasonable and
competitively priced, as compared to similar work done by outside consultants or
experts;
6. Costs and expenses for preparation of Medicare and
Medicaid cost reports and billing
submissions;
7. The Base Fee payable under the Operating Agreement;
8. The Central Administrative Services Fee payable
under the Operating Agreement;
9. Insurance costs and expenses as provided in
Article 12;
10. All Additional Charges;
11. Payments into the Reserve pursuant to Section 5.1.2;
12. Such other non-capital costs and expenses incurred by
Tenant or Operator as are specifically provided for elsewhere in this Agreement
or are otherwise reasonably necessary for the proper and efficient operation of
the Facility in accordance with the System Standards; all as determined in
accordance with GAAP;
13. Lease payments for any lease of shuttle vans or
communications equipment; and
14. All other payments required to be paid by Tenant
pursuant to this Agreement.
15. All other amounts treated as "Operating
Expenses" under the provisions of the Operating Agreement.
It is understood that the term "Property Expenses" shall not
include: (i) debt service payments pursuant to any Encumbrance or any other
loans or borrowings of Landlord; nor (ii) except as set forth above, payments
pursuant to equipment leases or other forms of financing obtained for the
furniture, fixtures and equipment located in or connected with the Facility
(such payments shall be paid out of the Reserve in accordance with Section
5.1.2), nor (iii) rental payments pursuant to any ground lease, nor (iv) any
other payments which are designated as Landlord's responsibility under any of
the provisions of this Agreement, all of which shall be paid by Landlord from
its own funds, and not from Total Facility Revenues nor from the Reserve. Unless
otherwise specifically set forth in this Agreement, all the costs and expenses
of the Facility shall be Operating Expenses.
14
EXHIBIT 10.6
Revolving Line of Credit Agreement
with
CNL Health Care Properties, Inc., CNL Health Care Partners, LP
and
Colonial Bank
<PAGE>
MASTER REVOLVING
LINE OF CREDIT
LOAN AGREEMENT
THIS MASTER REVOLVING LINE OF CREDIT LOAN AGREEMENT, dated April 20,
2000 (the "Master Loan Agreement"), is made by and between CNL HEALTH CARE
PROPERTIES, INC., a Maryland corporation and CNL HEALTH CARE PARTNERS, LP, a
Delaware limited partnership (collectively "Borrower"), with its offices at 450
S. Orange Avenue, Orlando, Florida 32801-3336, and COLONIAL BANK, a state
chartered bank organized and existing under the laws of the State of Alabama,
with its offices located at 201 East Pine Street, Suite 701, Orlando, Florida,
32801 ("Bank").
RECITALS
A. Borrower has applied to Bank for a $25,000,000.00 credit facility
to provide financing for various loans of differing amounts (hereinafter
individually referred to as a "Loan" or collectively as the "Loans"), to be
advanced by Bank pursuant to the terms hereof.
B. Borrower will use the proceeds of the Loans to acquire assisted
living facilities, independent congregate care living facilities and medical
office buildings including skilled nursing beds as part of a larger community
and related improvements or amenities ("SLFs"), which shall be leased to
acceptable credit tenants, as herein provided.
C. Borrower and Bank wish to enter into this Master Loan Agreement to
provide a format to be effective, to the extent possible, with respect to such
Loans as Bank has presently agreed to make or may, in the future, agree to make.
D. From time to time Borrower and Bank shall enter into a Funding
Agreement/Loan Summary for each Loan which shall set forth certain specific loan
information (the "Loan Summaries" or, individually, a "Loan Summary") pertaining
to individual Loans that may be approved by Bank as provided herein and agreed
upon between the parties, the terms of which shall be incorporated herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Borrower and Bank hereby agree as
follows:
ARTICLE I
Definitions
1.1 For the purposes hereof, for each Loan:
a. "Architect" or "Supervising Architect" means the architect, who will serve as
Borrower's architect, as identified in the Loan Summary. Borrower shall retain
an architect who will perform various services in connection with SLFs on behalf
of Borrower under an Architect's Contract (as hereinafter defined) with
Borrower. Bank's Consultant and Borrower's supervising architect shall not be
the same person or firm;
b. "Assisted Living Facility" means any Land, building and related structure
designed for assisted living of residents with all related Improvements,
amenities, utilities, parking areas and other facilities associated therewith
that is managed, maintained and operated by an entity with substantial senior
living facility ownership and management experience.
c. "Closing Date" means the date upon which a Loan is closed pursuant to the
terms hereof;
d. "Commitment" means Bank's commitment letter (and all amendments thereto) to
Borrower, if any, as described in the Loan Summary, the terms and conditions of
which are incorporated herein by reference, but in the event of any conflict or
discrepancy between the terms of this Master Loan Agreement and the Commitment,
the terms of this Master Loan Agreement shall control;
e. "Consultant" means the architectural or engineering firm which Bank shall
designate to perform various services on behalf of Bank. The services to be
performed by Bank's Consultant include inspections of the SLFs and all
utilities, services, systems or facilities used in conjunction therewith;
f. "Default" means a violation of any term, covenant, or condition hereunder or
a Default as defined under any of the Loan Documents which remains uncured after
the expiration of any applicable grace period or required notice, if any,
provided in the Loan Documents;
g. "Default Condition" means the occurrence or existence of an event or
condition which, upon the giving of notice or the passage of time, or both,
would constitute a Default;
h. "Financing Statements" means the UCC financing statements filed in order to
perfect Bank's lien on certain leases, contract rights, personal property and
fixtures as more particularly described therein;
i. "Governmental Authorities" means any local, state, or federal governmental
agency, regulatory body or office, or any quasi-govern mental office (including
health and environmental), or any officer or official of any such agency,
office, or body whose consent or approval is required as a prerequisite to the
commencement of the construction of the Improvements, or to the operation and
occupancy of the Improvements or the SLF, or to the performance of any act or
obligation or the observance of any agreement, provision or condition of
whatsoever nature herein contained;
j. "Improvements" means all improvements on the Land (as defined hereinbelow),
including without limitation the improvements described in the Loan Summary;
k. "Land" means all the real property upon which an SLF is located, including,
without limitation, all improvements and amenities associated therewith, and
shall include all easements, licenses, permits, approvals, drainage rights,
impact fee or use credits and all other hereditaments, right, title and interest
associated and used in conjunction with the SLF;
l. "Loan Documents" means this Master Loan Agreement, the Note, the Assignment
of Leases and Rents, the Agreement Not to Encumber, and the Financing
Statements, and any other document or writing executed in connection therewith
or in furtherance thereof;
m. "Note" means a promissory note dated as of the Closing Date executed by
Borrower in favor of Bank evidencing a particular Loan for a particular SLF, as
well as any promissory note or notes issued by Borrower in substitution,
replacement, extension, future advance, amendment, assumption or renewal of the
Note or any such promissory note or notes;
n. "Operator" means the manager of an SLF under an operating agreement.
o. "Operating Agreement" means an agreement between a tenant under a Primary
Lease and a licensed management company experienced in the management of SLFs to
the reasonable satisfaction of Bank.
p. "Permitted Encumbrances" means those liens, encumbrances, easement and other
matters specified in the Agreement Not to Encumber as "Permitted Encumbrances";
q. "Plans" means plans and specifications for the Improvements prepared by the
Architect and identified by Bank, and including such amendments thereto as may
from time to time be made by Borrower and approved by Bank.
r. "Primary Lease" means a valid, binding executed and existing lease for the
use of a SLF which is for an initial term of more than three (3) years and is
entered into between Borrower and either (i) a tenant who is an experienced SLF
manager which is deemed to be creditworthy by the Bank or (ii) a tenant who
retains an experienced Operator pursuant to an Operating Agreement and such
other terms as are acceptable to Bank and Bank counsel.
s. "Title Policy" means the owner's title policy meeting the requirements of
this Master Loan Agreement.
ARTICLE II
Line of Credit Guidance Facility
2.1 Loan Facility. Upon the execution of this Master Loan Agreement, and subject
to the terms hereof, the Bank has agreed to provide a credit facility to the
Borrower in an amount up to a maximum of $25,000,000.00 (the "Master Facility").
Borrower hereby acknowledges and agrees that the execution of this Master Loan
Agreement does not obligate Bank to make a future Loan for any specific future
SLF or any other loans, and that any future request by Borrower for an
additional Loan for a new SLF shall be made or denied by Bank in the exercise of
its sole discretion. Such decision may not be based on any specific financial
performance or other criteria of Borrower, or an SLF, or by prior actions,
agreements or loans by Bank to Borrower. Bank shall retain full and complete
discretion to review and approve or disapprove future loan requests under this
Master Loan Agreement as and when such requests are made by Borrower. Bank shall
make any decisions on future requests for a Loan for a future SLF, if any, based
solely upon its own underwriting and other decision making processes. Borrower's
proper compliance with the Loan Documents (including, without limitation, this
Master Loan Agreement) will not be determinative of whether any future Loans or
other loan requests are approved or granted. Bank and Borrower acknowledge and
agree that the structure of this Master Loan Agreement has been prepared in such
a way as to set out the terms of any future Loans and to structure the Loan
Documents to provide a format that may reduce or minimize costs in the event
future Loans are made by Bank to Borrower and Borrower acknowledges it has fully
consulted with its legal counsel in connection therewith, and has satisfied
itself as to the structure and format of the Loan Documents delivered and
reviewed by Borrower as of the date of this Master Loan Agreement in that
regard.
2.2 Term of Master Facility. The Master Facility shall be for a term of five (5)
years from the date of this Master Loan Agreement, subject to termination by
Bank within ninety (90) days of each anniversary date of this Master Loan
Agreement, in the event the Bank determines there has been a material
deterioration in the Loan or value of the collateral, as determined in Bank's
reasonable discretion, and such termination shall be effective upon written
notice to Borrower within such ninety (90) day period, whereupon the Master
Facility shall expire and terminate on the date so specified in the notice,
provided any outstanding Loan would mature on the maturity date as provided that
in the respective Note evidencing such Loan, and would remain unaffected by such
termination.
2.3 Terms of Future Loans. Upon the approval of any request by Borrower of a new
Loan for a new SLF, such Loan shall be made in accordance with the terms and
provisions of this Master Loan Agreement and the following terms:
a. Interest Rate: The outstanding principal balance shall bear interest at a
variable rate per annum equal to either (i) the Base Rate, or (ii) the LIBOR
Rate plus the number of basis points necessary as of the Closing Date for the
interest rate under a Note to equal the Base Rate as of the Closing Date, for
Loans on SLFs, as selected by Borrower at the time of making each loan (the
"Interest Rate"). The Interest Rate shall be adjusted daily in accordance with
fluctuations in the Base Rate or the LIBOR Rate, as applicable. "Base Rate"
shall mean the fluctuating rate of interest per annum established by Colonial
Bank as its base lending rate in effect from time to time whether or not such
rate shall be otherwise published. Such Base Rate is established by Colonial
Bank as an index or base rate and may or may not at any time be the best or
lowest rate of interest offered by Bank. The "LIBOR Rate" means a rate per annum
for U.S. dollar deposits for a 90 day maturity as reported on page 3750 (under
the caption "USD" of the Telerate Services, Incorporated, screen or such other
display as may replace such page) as of 11:00 a.m., London time, two London
Business Days before the relevant Interest Period begins (or if not so reported,
a then as determined by Lender from another recognized source or interbank
quotation). LIBOR shall be rounded to the next higher 1/1000 of one percent.
"London Business Day" means any business day on which commercial banks are open
for international business (including dealings in dollar deposits) in London.
Notwithstanding the foregoing, the Note in the amount of Nine Million Seven
Hundred Thousand and 00/100 Dollars ($9,700,000.00) representing the initial
advance hereunder shall bear interest at 8.75% fixed per annum for two (2) years
in accordance with the terms of the Note. Lender shall have no obligation to
offer any fixed or variable rate to Borrower for any other advance hereunder
other than as set forth above.
b. Term: Sixty (60) months from the Closing Date of the Loan for a specific SLF.
c. Loan Commitment Fee: Borrower shall pay to Bank a loan commitment fee equal
to one-half of one percent (1/2%) of the actual disbursements under each Loan,
as provided herein. Borrower may borrow, repay and re-borrow under the Loan and
during the first two (2) years after the date of this Agreement, Borrower shall
pay the one-half of one percent (1/2%) fee only on the amounts initially
disbursed under each Note (but not on any amounts re-borrowed under
<PAGE>
each Note) and in no event will Borrower be obligated to pay the commitment fee
on more than $25,000,000.00 disbursed under the Loan. Beginning on the second
anniversary of the date of this Agreement the one-half of one percent (1/2%) fee
shall be due on all disbursements thereafter.
2.4 Notes. The funds loaned under the Master Facility will be evidenced by
various Notes indicating the principal amount of each Loan made pursuant to the
line of credit; provided, however, that the amount actually due from Borrower to
Bank from time to time will be evidenced by the Bank's records (provided such
amounts are prepared and posted properly without arithmetic or mathematical
errors), and may increase and decrease from time to time, or be completely
repaid and again reborrowed, but in no event shall the total amount due exceed
$25,000,000.00.
2.5 Release by Borrower. Borrower waives and releases any claims, now or in the
future, known or unknown, that it may have to require or compel Bank to provide
future Loans other than as may be separately agreed by Borrower and Bank
pursuant to a subsequent commitment letter or other written agreement between
the parties, specifying the terms and conditions of such fundings. Any such
commitment or agreement shall be satisfactory to Bank, in its sole discretion.
In connection therewith, Borrower will execute such additional loan
documentation as Bank shall require including, without limitation, amendments
and modifications to the Loan Documents, together with the Loan Summary, which
will evidence and set forth the particular terms, conditions, restrictions,
agreements and covenants that pertain to the future Loans, as required by Bank.
Borrower acknowledges and agrees that the terms and conditions in any future
Loan Summary and related loan documentation shall be determined independently
from the terms of the Loan Documents and of any prior Loan Summary, if any, and
Borrower shall not rely upon the form and content of the terms of the Loan
Documents and of any prior Loan Summary as being determinative of what may be
included in a future Loan Summary.
2.6 Revolving Feature.The funds loaned under the Master Facility will be
evidenced by the various Notes; provided, however, that the amount actually due
from Borrower to Bank from time to time will be evidenced by Bank's records and
may increase and decrease form time to time or be completely repaid and again
reborrowed.
2.7 Disbursements Under Loans. The parties acknowledge and agree that the Bank
can make one or more disbursements of any Loan at the request of Borrower,
provided, however, the aggregate amount of such disbursements shall not exceed
the principal amount of the Note. Except to the extent previously satisfied in
the reasonable discretion of Bank, each disbursement of the Loan must satisfy
the conditions precedent set forth in Article IV of the Master Revolving Line of
Credit Loan Agreement and such other provisions of the Loan Documents as may
apply.
ARTICLE III
The Loans
As to each Loan made by Bank to Borrower:
3.1 Loan Terms. Subject to the terms and conditions of this Master Loan
Agreement, Bank will lend, and Borrower will borrow, such sums as Bank and
Borrower shall agree upon, as specified in the Loan Summary which borrowing
shall be evidenced by the Note. All of the terms, definitions, conditions, and
covenants of the Note, the Assignment of Leases and Rents, the Agreement Not to
Encumber, and any other documents executed in connection therewith or pursuant
thereto are expressly made a part of this Master Loan Agreement by reference in
the same manner and with the same effect as if set forth herein at length and
shall have the meaning set forth in such instrument(s) unless otherwise defined
herein.
3.2 Interest.The outstanding principal balance of the Loan shall bear interest
based on a 360 (actual) day year at the interest rate specified in the Note, and
principal and interest shall be due and payable in accordance with the terms of
the Note.
3.3 Disbursements. Bank agrees that it will, from time to time, and so long as
there shall exist no Default Condition or Default, disburse Loan proceeds to
Borrower pursuant to the Loan Documents. The conditions set forth in this
Article III hereof must be satisfied and the conditions set forth in Article IV
hereof must be satisfied before Bank will make the disbursement for each Loan
hereunder.
3.4 Draw Requests. At least three (3) days prior to each Loan disbursement by
Bank, Borrower must submit to Bank a Request for Disbursement on a form
acceptable to Bank, which shall include:
a. Request for Disbursement. A completed Request for Disbursement signed by
Borrower in a format acceptable and certified to Bank, setting forth the amount
of Loan proceeds desired, together with such certifications and additional
information as Bank may require.
b. Owner's Affidavit. A notarized affidavit from Borrower shall be submitted
which certifies that Owner is or shall upon application of the Disbursement
immediately become fee simple title holder to the SLF.
c. Equity Compliance. Copies of paid invoices or other acceptable documentation
indicating Borrower's investment of Borrower's own funds in the SLF for those
items and in the amounts indicated on the certified Cost Breakdown, attached as
an exhibit to the Funding Agreement/Loan Summary.
3.5 Disbursement Amounts. Following receipt of a Request for Disbursement and
receipt and review of the report of the Consultant, Bank shall determine the
amount of the disbursement it will make in accordance with the Bank's
underwriting policies adopted from time to time by the Bank.
3.6 Equity Requirements. If Bank determines that costs of acquisition of a SLF
exceed the amount specified on the Loan Summary, which includes certain
specified amounts of "up front" equity and deferred equity to be paid by
Borrower, or if Bank at any time determines in its reasonable discretion that
the Loan proceeds plus the amount of all equity investments made are not
sufficient to meet the Bank's underwriting policies, and to pay all other sums
due, then Bank shall, upon written Notice to Borrower, have the option of
requiring Borrower to deposit with Bank additional funds from some other source
(or submit evidence to Bank of equity investments previously made) in amounts
sufficient to cover the anticipated or resulting deficit before Bank will
disburse any additional Loan proceeds.
ARTICLE IV
Conditions Precedent to Disbursement of Each Loan
Bank shall not be obligated to make the Loan disbursement with respect
to each Loan until all of the following conditions precedent have been satisfied
as to such Loan by proper evidence, execution, and/or delivery to Bank of the
following items, all in form and substance reasonably satisfactory to Bank and
Bank's counsel:
4.1 Note. The original Note, properly executed, shall have been
delivered to Bank.
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4.2 Assignment of Leases and Rents, Security Agreement and Agreement Not to
Encumber. The Assignment of Leases and Rents, covering the SLF, which with the
Security Agreement shall be a validly perfected first priority lien, and with
the Agreement Not to Encumber shall have been delivered to Bank, and which shall
contain, among other provisions, the following provisions:
a. That upon any sale, conveyance, assignment or transfer of all or any
part of the SLF or any interest therein, Bank may, at Bank's option,
declare the Loan to be immediately due and payable without notice or
demand. Bank may, in Bank's sole discretion decide not to exercise
said option, in which event Bank's forbearance may be predicated on
such terms and conditions as Bank may, in Bank's sole discretion
require, including, but not limited to, Bank's approval of the
transferee's creditworthiness and management ability, the execution
and delivery to Bank by the transferee, prior to the sale, transfer,
assignment or conveyance, of a written assumption agreement containing
such terms as Bank may require, including, but not limited to, a
payment of a part of the principal amount of the Note, an increase in
the rate of interest payable on the Note, the payment of an assumption
fee, a modification of the term of the Note, and such other terms or
conditions as Bank may require, or Bank may make any such adjustments
in the terms of the Loan without requiring an assumption by such
transferee;
b. That Borrower shall not, without the prior written consent of Bank,
mortgage, pledge, hypothecate or otherwise encumber (other than by a
lease or leases of the property which shall be in compliance with the
terms hereof) all or any portion of the SLF, even if such pledge or
mortgage is subordinate to Bank's lien position, and any violation of
this prohibition shall give Bank the right immediately to accelerate
the maturity of the Loan without notice or demand;
c. That Borrower shall provide evidence that all ad valorem or other
applicable taxes and insurance premiums have been paid when due.
d. That all income, profits, rents, insurance proceeds or other incomes
from leases or any other source relating to the SLF are assigned to
the benefit of the Bank including but not limited to the Primary
Lease, all as more particularly set forth in the Assignment of Leases
and Rents.
e. Any and all Leases assigned to the Bank or tenant estoppel letters
pursuant hereto shall be required to contain a provision which
requires the tenant to give written notice to Bank of any and all
defaults of landlord and provides the Bank opportunity to cure the
same, such provision to be in a form and substance deemed adequate by
Bank and Bank's counsel.
f. That the Assignment of Leases and Rents and Security Agreement shall
be cross-defaulted with respect to any other indebtedness or
obligations from Borrower to Bank under the Loan.
4.3 Assignment of FF&E Account. An Assignment of FF&E Account (or provisions in
the Security Agreement), properly executed by Borrower and delivered to the
Bank.
4.4 Indemnity. A Hazardous Substance Certificate and Indemnification Agreement,
properly executed by Borrower, shall have been delivered to Bank.
4.5 Financing Statements. The Financing Statements on forms approved for filing
in the appropriate state and local filing offices shall have been properly
executed.
4.6 Title Policy.The Title Policy (or a satisfactory commitment or binder
therefore), as to each SLF from First American Title Insurance Company or such
other company or companies acceptable to Bank (the "Title Company"), and on such
form, approved by Bank issued by the Title Company to the Borrower in the amount
equal to or greater than the amount of the Loan insuring that the Borrower is
the fee simple owner of the SLF subject only to the Permitted Encumbrances.
4.7 Title Exceptions. Copies of all documents creating exceptions
to the Title Policy.
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4.8 Survey. Three (3) copies of a recent survey of the Land (the "Survey")
prepared by a registered land surveyor acceptable to Bank and certified to Bank,
the Title Company, and Borrower. Such survey shall show: (a) all boundaries of
the Land with courses and distances indicated including chord bearings and arc
and chord distances for all curves, (b) dimensions and locations of all existing
improvements and of all easements, private drives, roadways, encroachments,
utility and transmission lines, governmental regulation and jurisdictional
lines, building set back lines established by zoning regulations or private
covenants and restrictions, whether recorded or unrecorded, (c) the distances
to, and names of the nearest intersecting streets, (d) a narrative metes and
bounds legal description of the boundary of the Land, (e) the area of the Land
and the SLF and any Improvements thereon, (f) a certification as to the
applicable flood zone(s) for the Land; and if the subject property contains more
than one Flood Zone Designation, the boundary line(s) between the Flood Zone
Designated Areas, (g) a statement as to access to or from the SLF, (h) the date
of the survey and the surveyor's registration number and seal, (i) other facts
in any way affecting the Land, j) a certification that the survey was made in
accordance with the requirements for an ALTA land survey and in accordance with
applicable state law, and (k) such other details as the Bank may request.
4.9 Flood Hazards. Evidence as to whether or not the Land is located within an
area identified as having "special flood hazards" as such term is used in the
Federal Flood Disaster Protection Act of 1973. Such evidence can be the
certification that is required in connection with the survey required herein.
4.10 Flood Hazard Insurance. If all or any part of the Improvements is to be
located in an area having "special flood hazard", a flood insurance policy
naming Bank as a loss payee must be submitted to Bank.
Satisfactory evidence of premium payments must be provided.
4.11 Liability Insurance. Evidence of premium payments of Liability Insurance
meeting the requirements set forth in the Lease shall be provided to the Bank in
accordance with the terms set forth herein and in the Security Agreement. All
Liability Insurance shall be evidenced by policies complying with the terms of
the Lease. Each such policy is hereinafter referred as an "Insurance Policy".
The liability Insurance Policy shall list Bank as an additional insured.
Borrower agrees to cause the Land to be insured by property casualty insurance
in an amount not less than the appraised value of the Improvements. Borrower
agrees to notify Bank in the event that it receives any notice of termination of
the property casualty Insurance Policy. At such time as Bank may obtain a
mortgage on the Land, pursuant to the terms of the Loan Documents, Borrower
shall within five (5) days after notice from Bank cause Bank to be added as an
additional insured and mortgagee loss payee to the property casualty Insurance
Policy. During the time that Bank does not hold a mortgage encumbering the Land,
Borrower agrees not to exercise any of its rights to direct the application of
any proceeds under the property casualty Insurance Policy without the prior
written consent of the Bank. In the event that Borrower fails to comply with any
of the terms hereof, Bank may in addition to any other remedies it may have,
procure the requisite insurance at the cost and expense of Borrower and the same
shall be immediately due and payable within ten (10) days after notice from Bank
to Borrower. Failure of Borrower to timely pay such invoice shall be a default
under the Loan Documents. Copies of duly executed certificates of insurance for
all Insurance Policies shall be delivered to the Bank no more than ten (10) days
after the effective date of the Lease and upon the annual anniversary date
thereof and thereafter as may be reasonably requested by the Bank.
4.12 Property Insurance. Evidence of Property Insurance covering damages to each
SLF and all personal property and Improvements associated therewith and meeting
the requirements as set forth in the Security Agreement shall be provided to
Bank in accordance with the same terms as set forth in the requirements for
Casualty Insurance in Section 4.11 above.
4.13 Borrower's Organizational Documents And Resolutions. (i) A certified copy
from the appropriate governmental body of organizational documents of Borrower,
certifying that Borrower is duly organized, validly existing, and in good
standing under the state of its existence, (ii) evidence that Borrower has the
authority under such documents and laws to enter into the Loan as contemplated
by the Loan Documents, and (iii) if applicable, evidence that Borrower has made
all appropriate filings, including without limitation, qualification to do
business in the state where the Land is located, the state of its organization
or domicile, and Florida, necessary to enter into the Loan and execute the Loan
Documents. Additionally, Borrower shall provide (i) certified resolutions or
other corporate documents of Borrower evidencing that Borrower has taken all
requisite corporate action, and received all corporate approvals necessary to
enter into the Loan and execute the Loan Documents, and (ii) such other
documents or writings as Bank may reasonably request.
4.14 Fictitious Name Certificate. If Borrower utilizes or intends to utilize a
fictitious name, a copy of the Fictitious Name Certificate of the Borrower
issued by the Florida Secretary of State and any other jurisdiction in which
such filing is necessary.
4.15 Attorney's Opinion. The written opinions of counsel to Borrower (with
respect to the laws of Florida and the state where the Land is located, if
different), addressed to Bank, acceptable to Bank and Bank's counsel, as to
those matters required by Bank. The attorneys opinion, with respect to the
enforceability of remedies provided in the Loan Documents and related instrument
may be made subject to or as affected by, applicable bankruptcy, moratorium,
reorganization, insolvency or similar laws from time to time in effect affecting
the rights of creditors generally. As to matters of fact, such opinions may be
qualified to the extent of the knowledge of such counsel based upon due inquiry
and reasonable investigation.
4.16 Compliance with Laws and Matters of Record. Satisfactory documentary
evidence that the Land with Improvements, and the intended uses of the Land, are
in compliance with all applicable laws, regulations and ordinances and private
covenants, easements, and conditions of record. Such evidence is subject to
approval by Bank and Bank's counsel and may include letters, licenses, permits,
certificates and other correspondence from the appropriate Governmental
Authorities, opinions of Borrower's counsel or other counsel, and opinions or
certifications from the Architect, or the Engineer. The laws, regulations and
ordinances with which compliance should be evidenced include without limitation
the following: health and environmental protection laws, laws related to or
regulating water management districts, hazardous materials and substances and
storm water drainage, erosion control ordinances, tree and landscaping
ordinances, building codes, land use requirements, threshold building consultant
requirements, the development of regional impact Statutes, doing business and/or
licensing laws and zoning laws (the evidence submitted as to zoning should
include the zoning designation made for the Land, the permitted uses of the Land
under such zoning designation and zoning requirements as to parking, lot size,
ingress, egress and building setbacks).
4.17 Taxes. Evidence that each SLF is, or will be, separately assessed for tax
purposes and information as to tax parcel identification numbers, tax rates,
estimated tax values and the identities, of- the taxing authorities.
4.18 Utilities. Evidence of the availability and suitability of the water,
sewer, telephone, electrical, natural gas, and other utilities needed to
properly service the SLF in its intended use.
4.19 Plans and Specifications. With respect to SLFs, evidence of the Plans which
include architectural, structural, mechanical, plumbing, electrical and site
development (including storm drainage, utility lines, erosion control and
landscaping).
4.20 Permits. A copy certified by Borrower of evidence of all applicable permits
including, without limitation, the building permit and all permits pursuant
thereto, land use permits, dredge and stormwater discharge permits (federal and
state), and any other permits required for use and occupation of the SLF.
4.21 Engineers Report. Copies of the report signed by Borrower's Engineer
detailing the results of the engineers inspection of the SLF, certified to the
Borrower and Bank.
4.22 Soil Tests. Evidence of a prior report as to soil borings made on the Land
by a soil testing firm satisfactory to Bank or certification in the Engineers
Report as to such soil borings. The report and/or certification shall include
the conclusions and findings of the soil testing firm as to the suitability of
the soil for adequately supporting the improvements.
4.23 Environmental Assessment.
a. An environmental assessment of the Land and Improvements performed at
Borrower's expense by a licensed engineer or other environmental consultant
satisfactory to Bank stating whether:
(i) the Land is located within any area designated as a hazardous
substance site by any of the Governmental
Authorities;
(ii) hazardous or toxic wastes or other materials or substances,
regulated, controlled, or prohibited by any federal, state or
local environmental laws, including but not limited to
asbestos, are located on the Land or Improvements; and
(iii) the Land has been cited or investigated in the past for any
violation of any such laws, regulations, or ordinances.
b. Receipt of any acceptable environmental audit is a condition precedent to
Bank's obligation under the Commitment and hereunder. If the environmental
assessment shall reveal any condition unacceptable to Bank, Bank may elect to be
relieved of any obligation under the Commitment after providing written notice
to Borrower. If Bank does not elect to terminate the Commitment, Borrower shall
obtain a Phase II audit or conduct other additional testing, at its sole cost
and expense, and Borrower shall promptly conduct such additional audits and
testing and/or complete such remedial action. Bank may require Borrower to
provide evidence that all necessary actions have been taken to remove any
hazardous substance contamination and/or to restore the site to a condition
acceptable to Bank and state and federal governmental agencies.
c. Bank shall use best efforts to keep and maintain matters set forth in the
Environmental Assessment confidential by and among the Bank's employees, agents,
representatives and assigns; excepting, however, when required by operation of
Law to report any matters contained therein to any governmental agency.
4.24 Leases. Copies of the then existing lease between the tenant for the SLF
(the "Tenant") and Borrower (the "Tenant Lease"), certified by Borrower and the
respective Tenant to be accurate, complete, unaltered, and binding.
4.25 Taxpayer Identification Number. Borrower's federal taxpayer identification
number.
4.26 Borrower's Affidavit. An affidavit of Borrower regarding the absence of any
other parties in possession of the SLF, other than the tenant under the Primary
Lease and the residents of the SLF (but merely in their capacity as residents)
and such other matters as may be requested by Bank;.
4.27 Fee. Subject to the terms of Paragraph 2.3(c) hereof, a fee equal to
one-half of one percent (1/2%) of the actual disbursements under each Loan shall
be due and payable by Borrower to the Bank at closing or subsequent
disbursement.
4.28 Notice. To the extent Property is located in Florida, a copy of a recorded
notice stating that all leases affecting the SLF, or any portion thereof,
prohibit the attachment of Tenant related liens.
4.29 Appraisal. A signed copy of an appraisal by an MAI certified appraiser
approved by Bank reflecting the value of the SLF to be not less than the amount
specified in the Loan Summary.
4.30 Comprehensive Plan. Documentary evidence, satisfactory to Bank and its
counsel, that use and operation of the SLF are consistent with concurrency
requirements and other applicable provisions of the local comprehensive plan,
local land development regulations, and any other similar requirements
("Comprehensive Plan"). Such evidence may include a certificate from Borrower's
Architect, on a form satisfactory to Bank, certifying to Bank that the use and
operation of the SLF are consistent with the Comprehensive Plan.
4.31 Facilities for Handicapped. Bank shall have received and approved evidence,
satisfactory to Bank, that the Improvements comply with all legal requirements
regarding access and facilities for handicapped or disabled persons, including,
without limitation, and to the extent applicable, Part V of the Florida Building
Construction Standards Act entitled "Accessibility by Handicapped Persons"
Chapter 553, Fla Stat. (or similar law in other jurisdictions, if applicable);
the Federal Architectural Barriers Act of 1988 (42 U.S.C. 4151, et. seq.), the
Fair Housing Amendment Act of 1988 (42 U.S.C. 3601, et. seq.), The Americans
With Disabilities Act of 1990 (42 U.S.C. 12101 et. seq.), and The Rehabilitation
Act of 1973 (29 U.S.C. 794)
4.32 Reports and Analysis. Such reports and analysis as reasonably requested by
the Bank to establish the financial feasibility of the development, use and
operation of the SLF as contemplated by the Loan.
4.33 No Defaults. No Default Condition or Default shall exist under the Loan
Documents.
4.34 Request. Bank shall have received Borrower's Request for Disbursement.
4.35 Tenant Estoppel Certificates and Subordination Agreements. Any tenant
occupying the SLF, or any portion thereof, or which will occupy the SLF, or any
portion thereof, shall execute and deliver to Bank a tenant estoppel certificate
and, if requested by Bank, subordination agreement in a form satisfactory to
Bank. In such event, the tenant shall also agree to provide the Bank notice and
opportunity to cure any and all defaults of landlord prior to tenant seeking any
remedy. The tenant estoppel certificate shall certify, among other things, the
date the tenant accepted occupancy of the leased premises (if applicable), the
absence of any lease defaults by landlord, the date the tenant commenced rent
payments (if applicable), the lease's material terms, and such other matters as
may be requested by Bank. The subordination agreement shall provide, among other
things, that the tenant's right, title and interest under the lease is
subordinate to the lien of Bank's Assignment of Leases and Rents, Security
Agreement and Assignment of FF&E Account.
4.36 Miscellaneous. All other Loan Documents or items that are customarily
provided in loan transactions of this type required by Bank and all other loan
documents or items set forth in the Commitment.
ARTICLE V
Borrower's Covenants and Agreements As To Each Loan
5.1 Payment and Performance. Borrower will pay when due all sums owing to Bank
under all of the Note(s), this Master Loan Agreement, the Assignment of Rents
and the other Loan Documents, and perform all obligations as outlined or
referenced therein.
5.2 Organization; Powers. CNL Health Care Properties, Inc. has been duly formed
and is validly existing as a corporation under the laws of the State of Maryland
and CNL Health Care Partners, L.P. has been duly formed and is validly existing
as a limited partnership under the laws of the State of Delaware and each has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement and other Loan Documents and to carry on its
business as now conducted and as proposed to be conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a material adverse effect.
5.3 Authorization; Enforceability. The Loan is within the Borrower's powers and
has been duly authorized by all necessary action. The Security Agreement and the
other Loan Documents have been duly executed and delivered by the Borrower and
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent, conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
5.4 Further Assurances. Borrower will promptly do any act and execute any
additional documents reasonably required by Bank to secure the Loan, to confirm
or perfect the lien of the Assignment of Leases and Rents or any other Loan
Documents or to comply with the Commitment, including, but not limited to,
additional financing statements or continuation statements, new or replacement
notes and/or Loan Documents and agreements supplementing, extending or otherwise
modifying the Loan Documents and certificates as to the amount of the
indebtedness evidenced by the Note from time to time.
5.5 Inspection. Borrower will permit Bank and its authorized agents to enter
upon the SLF during normal working hours and as often as Bank desires, for the
purpose of inspecting the SLF or the Improvements. Failure of Bank or its
authorized agents to discover deficiencies in the Improvements shall not make
Bank or its agent liable to Borrower or to any other person on account of such
failure, nor shall any prior failure constitute a waiver of Bank's rights.
Borrower specifically acknowledges that all inspections undertaken by Bank or
its agent shall be for the sole benefit of Bank and not for Borrower, or any
third party. The costs of all inspections shall be at Borrowers expense;
provided, however, that as long as there is no Default, such cost shall not
exceed $500.00 for each Loan. Notwithstanding anything herein to the contrary,
Bank agrees that its rights to inspect the Land and Improvements are subject to
the tenant's right under the Primary Lease. Borrower hereby assigns to Bank and
Bank's inspector for its benefit any and all rights of entry and inspection that
Borrower has under the Primary Lease.
5.6 Fees and Expenses. Whether or not the Loan is made, or all Loan proceeds
disbursed hereunder, Borrower agrees to pay all expenses incurred by Bank, or by
Borrower in order to meet Bank's requirements, in connection with the Loan,
including without limitation, commitment and renewal fees or deposits to bank,
fees for appraisal, reappraisal survey, recording, title insurance, builder's
risk and other insurance premiums, property taxes, intangible taxes, documentary
stamp taxes, the design architects and Architect's fees, the Engineer's fees,
the Consultant's fees, and such reasonable legal fees and costs incurred by Bank
in connection with the making of the Loan, the enforcement of bank's rights
under the Loan Documents, or in connection with litigation or threatened
litigation by a third party which arises because Bank made this Loan, Any such
amounts paid by Bank shall constitute part of the debt which is secured by the
Loan Documents, and shall be due and payable upon demand.
5.7 Use of Loan Funds. Borrower shall use all Loan proceeds initially disbursed
to Borrower under any Note solely in payment of costs incurred in connection
with acquiring the applicable SLF, in accordance with the applicable Loan
Summary. Initially disbursements of Loan funds under any Note with regard to one
SLF project shall not be utilized for any other project under this Master Loan
Agreement; provided, however, that if the initial Loan Funds under any Note are
paid down and subsequently re-borrowed under such Note, then such re-borrowed
proceeds may be used for the acquisition of another SLF under this Master Loan
Agreement.
5.8 Insurance. Borrower covenants to maintain or caused to be maintained
insurance as required herein and in the Security Agreement.
5.9 Taxes and Insurance. Upon the request of Bank, Borrower shall submit to Bank
such receipts and other statements which shall evidence, to the satisfaction of
Bank, that all taxes, assessments and insurance premiums have been paid in full.
5.10 Availability of Utilities. All utility services necessary for the
Improvements and the operation thereof for their intended purposes are presently
available through presently existing public or unencumbered private easements or
rights-of-ways in accordance with validly executed and enforceable utility
service agreements between Borrower and the provider of each of such services
(the "Utility Service Agreements") at the boundaries of the Land, including but
not limited to, water, storms and sanitary sewer, gas, electric and telephone
facilities, and all such utilities are non-interruptible.
5.11 Additional Construction. Except for construction by tenant permited in the
Primary Lease, Borrower shall not construct or permit the construction of any
improvements on the Land other than those Improvements approved in writing by
Bank.
5.12 Financial Statements. Borrower shall submit annual audit reports and
semi-annual unaudited company prepared financial statements to the Bank. Such
statements shall include, at a minimum: a balance sheet; an income and expense
statement; a statement showing contingent liabilities; detailed cash flow
statements for each project or entity in which Borrower has an interest and on
which Bank has advanced funds under a Loan; and any supporting schedules or
documentation which Bank may require. Detailed cash flow statements shall
include, as applicable: the project name; location; percentage of Borrower's
ownership interest; leasing status; net operating income; current loan balance;
debt service; source of any operating deficit; amount and beneficiary of any
cash distributions; and the amount of cash invested in or received from that
enterprise. In addition detailed cash flow projects for the next fiscal year
(twelve month period) for each SLF or entity shall be submitted. Each unaudited
statement must contain a certification to Bank of the statement's accuracy and
completeness signed by the highest ranking financial officer of the Borrower.
Annual statements of business entities (including corporation and partnership)
shall be audited and bear the unqualified opinion of an acceptable certified
public accountant. The annual statements shall be submitted no later than April
30th of each year of the Loan term.
Interim statements shall be submitted within 30 days of Bank's request.
5.13 Appraisals. In addition to the appraisals required by Bank prior to closing
of the Loan, updated appraisals shall be prepared at Borrower's expense when
requested by Bank or when required in connection with any extension options in
the Note. Such appraisals shall be prepared in accordance with written
instructions from Bank and by a professional appraiser selected and engaged by
Bank. Borrower shall cooperate fully with the appraisal process and shall allow
the appraiser reasonable access to the SLF and its tenants. Bank agrees that it
shall not require appraisals more frequently than annually unless Borrower is in
default or unless required of Bank by any banking agency or regulation.
5.14 Hazardous Substances. Concurrently with the execution hereof, Borrower
warrants and represents to Bank that, to the best of Borrowers knowledge, the
SLF and all real property, now or previously owned by Borrower during the period
of Borrowers ownership, and are not now being used in violation of any federal,
state or local environmental law, ordinance or regulation; that no proceedings
have been commenced, or notices(s) received, concerning any alleged violation of
any such environmental law, ordinance or regulation. Borrower covenants that it
shall not permit any such materials to be brought onto the SLF or any other real
property owned by Borrower, or if so brought or found located thereon, shall be
immediately removed with proper disposal, and all required environmental cleanup
procedures shall be diligently undertaken pursuant to all applicable laws,
ordinances and regulations. Borrower herein indemnifies and holds Bank harmless
against any loss, claim or costs incurred by Bank in connection with the
warranties granted herein. Borrowers obligations hereunder shall survive any
proceeding to enforce Bank's rights under the Loan Documents.
If the Bank has reasonable belief of the existence of an environmental
problem or if required by any banking regulation, but no more frequently than
once each calendar year, the Bank may in its reasonable discretion, at its
election, obtain one or more environmental assessments of the Land prepared by a
geohydrologist, an independent engineer, or other qualified consultant or expert
approved by Bank evaluating or confirming (i) whether any Hazardous Substances
are present in the soil or water at the Land and (ii) whether the use and
operation of the Land complies with all applicable Environmental Laws relating
to air quality, environmental control, release of oil, hazardous materials,
hazardous wastes and hazardous substances, and any and all other applicable
environmental laws. Environmental assessments may include detailed visual
inspection as to the Land including, without limitation, any and all storage
areas, storage tanks, drains, dry wells, and leasing areas and the taking of
soil samples, surface water samples, and ground water samples, as well as such
other investigations or analyses as are necessary or appropriate for a complete
determination of the compliance of the Land and the use and operation thereof
with all applicable Environmental Laws. Such environmental assessment shall be
the sole cost and expense of Borrower.
In the event that it is determined that additional tests and/or
remediation are necessary as a result of the aforesaid assessments, or in the
event such additional testing or remediation is recommended by the aforesaid
assessments, Borrower agrees to immediately perform the tests or undertake the
remediation as recommended. In the event contamination or other environmental
problem is found on the Land and Borrower does not promptly undertake the
remediation as recommended, Borrower shall be in default hereunder.
Bank shall use best efforts to keep and maintain matters set forth in
any hazardous substances notices and/or environmental assessments confidential
by and among the Bank's employees, agents, representatives and assigns;
excepting, however, when required by operation of law to report any such matters
contained therein to any governmental agency.
5.15 Leases Affecting SLF. Borrower shall not, without the express prior written
consent of Bank, enter into any lease affecting the SLF or any part thereof
(including the Primary Lease), or amend, modify, extend, terminate or cancel,
accept the surrender of any portion of the SLF which is the subject of a lease
(except by expiration of such lease in accordance with its terms), subordinate,
accelerate the payment of rent as to, or change the terms of any renewal option
of any lease now existing or hereafter created, or permit or suffer an
assignment or sublease thereof, except as set out herein. Any lease or any
modification, extension, or renewal of any lease, affecting or relating to all
or any portion of a SLF shall be subject to Bank's prior written approval.
Copies of all leases or modifications, renewals, or extensions thereto, approved
by the Bank shall be certified as accurate and complete by Borrower and Tenant
and delivered to the Bank within fifteen (15) days of execution.
5.16 Assignment of Contracts. As additional security for the Loan and for the
performance by Borrower of all of its obligations hereunder Borrower hereby
collaterally assigns to Bank all of Borrower's interest in any and all
contracts, agreements, permits, licenses, approvals, or other documents or
writing relating to the leasing, management or operation of the Improvements.
This assignment shall not, however, be deemed to impose upon Bank any of
Borrowers obligations under any such contract. Borrower will fulfill the
obligations of Borrower under all contracts, enforce the performance thereof and
give immediate notice to Bank of any material default by the other party to such
contract. Further, Borrower, will not, without the prior written consent of Bank
(i) materially modify, or amend the terms of any material contract, or (ii)
waive or release the performance of any-material obligation to be performed by
the other party to any such contract.
5.17 Subordinate Financing. Borrower shall not permit there to exist nor shall
Borrower obtain any subordinate financing of the SLF, or any part thereof, or
any other property granted as security for the Loan.
5.18 Transfer of Property or Borrower. Borrower shall not permit any change in
its ownership, or the ownership of its general partners, the nature and
operation of its business or the nature and character of Borrower or the SLF,
nor shall Borrower sell, assign, transfer, hypothecate or dispose of all or any
portion of the SLF except as permitted hereby, without the prior written consent
of Bank, which consent shall be withheld or granted in Bank's sole and absolute
discretion. Notwithstanding the foregoing, the sale or disposition of shares or
units of Borrower sold or transferred pursuant to a registration made with the
Securities and Exchange Commission pursuant to the Securities and Exchange Act
of 1934 shall be deemed a permissible transaction.
5.19 Americans With Disabilities Act. Borrower covenants and agrees that, during
the term of the Loan, the SLF will be in full compliance with the Americans With
Disabilities Act ("ADA" of July 26, 1990, 42 U.S.C Section 12191, et. seq.) as
amended from time to time, and the regulations promulgated pursuant thereto.
Borrower shall be solely responsible for all ADA compliance costs including
without limitation, reasonable attorneys fees and litigation costs, which
responsibility shall survive the repayment of the Loan and foreclosure of the
SLF.
ARTICLE VI
Borrower's Representations and Warranties As to Each Loan
6.1 Representations and Warranties. Borrower hereby represents and warrants to
Bank that:
a. Representations and Warranties in Loan Documents. All of the representations
and warranties contained in the Assignment of Leases and Rents, the Agreement
Not to Encumber and the other Loan Documents are true and correct and are
incorporated herein by reference as if set out in full.
b. Other Financing. Borrower has not (i) received any other financing for the
acquisition of the SLF existing as of the date of the Loan for such SLF, or (ii)
received any other financing of Improvements, equipment or other facilities used
in conjunction with each SLF.
c. Governmental Requirements and Other Requirements, To Borrowers knowledge,
after due inquiry, the use and operation of the SLF does and shall comply with
all covenants, conditions and restrictions affecting the Land or any portion
thereof; and do and shall comply with all Governmental Requirements.
d. Use of the SLF. To Borrower's knowledge there is no (i) plan, study or effort
by any Governmental Authority or any nongovernmental person or agency which may
adversely affect the current or planned use of the SLF, or (ii) any intended or
proposed Governmental Requirement (including, but not limited to, zoning
changes) which may adversely affect the current or planned use of the SLF.
e. Moratorium. Other than applicable government regulations for new SLFs with
respect to which Borrower is in compliance, there is no moratorium or like
governmental order or restriction now in effect with respect to the operation of
the SLF and, to the best of Borrower's knowledge, no moratorium or similar
ordinance or restriction is now contemplated.
f. Permits. To Borrower's knowledge, after due inquiry, prior to the closing on
each Loan, all permits, approvals and consents of Governmental Authorities and
public and private utilities having jurisdiction necessary in connection with
such SLF shall have been issued and be in good standing.
g. Condition of SLF. To Borrower's knowledge, after due inquiry, at time of
closing of each Loan, (i) no defect or condition of the SLF Improvements, Land
or the soil, ground water or geology of or under the Land and (ii) no other
agreement, arrangement, understanding or conditions whatsoever, exists which
will delay or impair the use, or the operation of SLF for its intended purpose.
h. Surveys. The Survey, and all plot plans and other documents heretofore
furnished by Borrower to Bank with respect to Land and Improvements are accurate
and complete as of their respective dates. To Borrower's knowledge, after due
inquiry (which inquiry will consist of review of the Survey and an inspection of
the Land) there are no encroachments onto the Land and no Improvements on the
Land encroach onto any adjoining property.
i. Sale of Securities. Borrower has not instituted, caused to be instituted or
been a party to and, to the best of Borrower's knowledge, there has not been any
public offering with respect to the Land and Improvements, or either, within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934
("Securities Laws") unless the same comply with all Laws, Including but not
limited to the Securities laws, and Borrower promptly and timely provides a copy
of all materials filed with any Governmental Authority in conjunction therewith.
j. Reliance on Representations. Borrower acknowledges that Bank has relied upon
the Borrowers representations and is not charged with any knowledge contrary
thereto that may be received by an examination of the public records wherein the
Land is located or that may have been received by any officer, director, agent,
employee of shareholder of Bank.
ARTICLE VII
Events of Default
7.1 Default. The occurrence of any one or more of the following events (time
being of the essence as to this Master Loan Agreement and all of its provisions)
with respect to one or more Loans constitutes a "Default" by Borrower under this
Master Loan Agreement, and at the option of Bank, under the other Loan Documents
for the respective Loan or any other Loan:
a.Scheduled Payment. Borrower's failure to make any payment required under
any of the Note(s) when due.
b. Monetary Default. Borrower's failure to make any other payment required by
this Master Loan-Agreement or the other Loan Documents, within ten (10) days of
the due date, which payment is not received by Bank within fifteen (15) days of
receipt of written notice of such failure from Bank.
c. Other. Borrower's failure to perform any other obligation imposed upon
Borrower by this Master Loan Agreement or any other Loan Document within the
time period specified, or as may be specified by Bank, if in the reasonable
opinion of Bank such Default is curable, should such failure not be cured by
Borrower within thirty (30) days of receipt of written notice from the Bank,
except when a shorter or longer period is specifically provided in any provision
of the Loan Documents. This provision shall not be construed to provide Borrower
with any grace period in complying with any obligations imposed on Borrower by
the terms of the Loan Documents.
d. Representation. Any representation or warranty of Borrower contained in this
Master Loan Agreement or in any certificate delivered pursuant hereto, or in any
other instrument or statement furnished in connection herewith, proves to be
incorrect or misleading in any adverse respect as of the time when the same
shall have been made, including, without limitation, any and all financial
statements, operating statements, and schedules attached thereto, furnished by
Borrower to Bank or pursuant to any provision of this Master Loan Agreement,
provided such representation or warranty is made accurate by Borrower within
thirty (30) days of receipt of written notice from Bank.
e. Bankruptcy.Borrower or any general partner of Borrower or any affiliate (i)
files a voluntary petition in bankruptcy or a petition or answer seeking or
acquiescing in any reorganization or for an arrangement, composition,
readjustment, liquidation, dissolution, or similar relief for itself pursuant to
the United States Bankruptcy Code or any similar law or regulation, federal or
state, relating to any relief for debtors, now or hereafter in effect; or (ii)
makes an assignment for the benefit of creditors or admits in writing its
inability to pay or fails to pay its debts as they become due; or (iii) suspends
payment of its obligations or take any action in furtherance of the foregoing;
or (iv) consents to or acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator or other similar official of Borrower, a
general partner of Borrower, for all or any part of the SLF or other assets of
such party, or either; or (v) has filed against it an involuntary petition,
arrangement, composition, readjustment, liquidation dissolution, or an answer
proposing an adjudication of it as a bankruptcy or insolvent, or is subject to
reorganization pursuant to the United States Bankruptcy Code, an action seeking
to appoint a trustee, receiver, custodian, or conservator or liquidator, or any
similar law, federal or state, now or hereinafter in effect, and such action is
approved by any court of competent jurisdiction and the order approving the same
shall not be vacated or stayed within sixty (60) days from entry; or (vi)
consents to the filing of any such petition or answer, or shall fail to deny the
material allegations of the same in a timely manner.
f. Judgments. (1) A final judgment other than a final judgment in connection
with any condemnation, and including any judgment or other final determination
of any contest permitted by the Assignment of Rent, is entered against Borrower,
any Guarantor, or any general partner of Borrower, that (i) adversely affects
the value, use or operation of any SLF, or any portion thereof, in Bank's sole
judgment, or (ii) materially adversely affects, or may materially adversely
affect, the validity, enforceability or priority of the lien or security
interest created by the Loan Document in Bank's sole judgment, or both; or (2)
execution or other final process issues thereon with respect to any SLF, or any
portion thereof, and (3) Borrower or any general partner of Borrower, does not
discharge the same or provide for its discharge in accordance with its terms, or
procure a stay of execution thereon, in any event within thirty (30) days from
entry, or Borrower shall not, within such period or such longer period during
which execution on such judgment shall have been entered, and cause its
execution to be stayed during such appeal, or if on appeal such order, decree or
process shall be affirmed and Borrower shall not discharge such judgment
provided for its discharge in accordance with its terms within sixty (60) days
after the entry of such order or decree or affirmance, or if any stay of
execution on appeal is released or otherwise discharged.
g. Liens. Any federal, state or local tax lien or any claim of lien for labor or
materials in an amount in excess of $100,000.00 or any other lien or
encumbrances of any nature whatsoever is recorded against Borrower or any SLF,
or any part thereof, and is not removed by payment or transferred to substitute
security in the manner provided by law, within thirty (30) days after it is
recorded in accordance with applicable law, or is not contested by Borrower in
the manner permitted by loan Documents.
h. Leases. Borrower's default in the performance of its obligations as lessor
under any lease of all or any portion of the SLF, including the Primary Lease,
which default could result, in Bank's sole judgment, in the termination of said
lease provided such default is not cured by Borrower within thirty (30) days
after receipt of written notice from Bank.
i. Other Notes or Mortgages. Borrower's default in the performance or payment of
Borrowers obligations under any other note or under any mortgage encumbering all
or any part of the SLF, if the other mortgage is permitted by the Bank, whether
such other note or mortgage is held by Bank or by any other party, provided such
default is not cured by Borrower within thirty (30) days after receipt of
written notice from the Bank.
j. Borrower Default Under Loan Documents. Borrower's default in the payment or
performance of any of Borrowers obligations under any of the Loan Documents
pertaining to any Loan, including this Master Loan Agreement and any amendments,
riders or Loan Summaries attached hereto, provided such default is not cured by
Borrower within thirty (30) days of receipt of written notice from Bank,
excepting, however, if this thirty (30) day period should conflict with any
other notice and opportunity to cure provision contained in the Loan Documents.
k. Borrower's Continued Existence. Borrower shall cease to exist or to be
qualified to do or transact business in the state in which the SLF is located or
shall be dissolved or shall be a party to a merger or consolidation, or shall
sell all or substantially all of its assets without providing thirty (30) days
written notice to the Bank in the event of any voluntary dissolution, mergers or
consolidations or after thirty (30) days written notice from Bank in the event
of involuntary merger, dissolution or consolidation.
l. Stock in Borrower/Change in Partners. If any legal or beneficial interest,
including, but not limited to, shares of stock of Borrower are issued, sold
transferred, conveyed, assigned, mortgaged, pledged, or otherwise disposed of so
as to result in change of control of Borrower, whether voluntarily or by
operation of law, other than a sale by CNL Health Care Partners, LP of limited
partnership interests in itself and whether with or without consideration, or
any agreement for any of the foregoing is entered into; or, of any general
partnership interest or other equity interest in Borrower is sold, transferred,
assigned, conveyed, mortgaged, pledged, or otherwise disposed of, whether
voluntarily or by operation of law, and whether with or without consideration,
or any agreement for any of the foregoing is entered into, or any general
partner of Borrower withdraws from the partnership; unless otherwise permitted
or approved by the Bank.
m. Transfer of Property or Ownership. Any sale, conveyance, transfer,
assignment, or other disposition of all or any part of any SLF.
n. False Statement. Any statement or representation of Borrower contained in the
loan application or any financial statements or other materials furnished to
Bank or any other lender prior or subsequent to the making of the Loan secured
hereby are discovered to have been false or incorrect or incomplete, which
statement or representation is not made accurate within thirty (30) days of
receipt of written notice from Bank.
o. Default Under Indemnity. Borrower shall default under any obligation imposed
by any indemnity whether contained within any of the Loan Documents, (including,
without limitation, the Hazardous Substance Certificate and Indemnification
Agreement), or otherwise, which default is not cured by Borrower within thirty
(30) days of receipt of written notice from Bank.
p. Cross Default. Any default by Borrower under any other documents or
instruments evidencing any other loans by Bank to Borrower (or any one if more
than one Borrower) or in any mortgages or other collateral documents securing
such loans, which default is not cured by Borrower within thirty (30) days of
receipt of written notice from Bank.
q. Non-Compliance with the Plans and Specifications. Failure of any of the
Improvements to comply with the requirements of any Governmental authority
unless Borrower, after thirty (30) days notice, undertakes and diligently
pursues the correction of such failure.
r. Non-Payment of Debts. Borrower is generally not paying its debts as such
debts become due, provided such debts are not paid and evidence of such payment
provided to Bank within thirty (30) days of receipt of written notice from Bank.
s. Securities Laws Violation. The assertion of any violation by Borrower of the
1933 Securities Act, 1934 Securities Act or the Blue Sky Laws by any
Governmental-Authorities or the institution of any securities litigation not
dismissed within sixty (60) days of the commencement of same.
t. Miscellaneous. If at any time Bank shall determine that there has been a
material adverse change in the financial condition or prospect of Borrower,
provided such change is not cured by Borrower to Bank's reasonable satisfaction
within sixty (60) days of receipt of written notice from Bank.
u. Cure. To the extent the Borrower needs additional time to cure any
non-monetary default and Borrower is diligently pursuing said cure, Borrower
shall have reasonable time to complete said cure.
ARTICLE VIII
Bank's Rights and Remedies
The following rights and remedies are available to Bank as to all
Loans then outstanding and any SLFs pertaining thereto:
8.1 Acceleration. Upon the occurrence of a Default, the entire unpaid principal
balance of the Note in Default and all accrued but unpaid interest thereon and
any costs or expenses then due to Bank and any and all other obligations of
Borrower to Bank, shall, at the option of Bank and without notice to Borrower,
become immediately due and payable and, Bank shall have no further obligation to
make any advance, disbursement or Loan under this Master Loan Agreement.
8.2 Remedies. Upon the occurrence of a Default, Bank may avail itself of any and
all rights and remedies available at law or in equity or as provided under this
Master Loan Agreement or any of the other Loan Documents.
8.3 Action to Protect Bank's Interest and Granting Mortgage. From and after the
occurrence of a Default, the Bank shall be entitled to pursue any and all
remedies provided in the Loan Documents to protect the Bank's interest. In
addition to all remedies of Bank provided in this Agreement and in the Loan
Documents, upon a Default Borrower shall, within twenty (20) days of receiving
notice, execute a Mortgage securing the Note in Default with a first lien upon
the respective SLF. Such Mortgage shall be upon terms as set forth in Exhibit
"A" attached hereto. In the event Borrower fails or refuses to execute any of
said Mortgages, Borrower does hereby irrevocably appoint and grant to the Bank
power of attorney for Borrower to act for Borrower in regard to the Bank's
request including the right to execute any and all such Mortgages and documents
relating thereto, to record the same upon the public records and to do all
things necessary to create a first mortgage lien upon each respective SLF.
Borrower shall be responsible for all cost and expenses related to such
Mortgages including but not limited to recording, documentary, or other taxes,
and a mortgage title insurance policy insuring Bank's mortgage.
8.4 Special Remedy. In the event the Primary Lease shall be terminated for any
reason whatsoever, in addition to all other remedies available to Bank under the
Loan Documents, Borrower shall, within twenty (20) days of receiving notice from
Bank, execute a Mortgage securing the Note with respect to such SLF for which
the Primary Lease has terminated unless Borrower has provided the Lender a new
Primary Lease upon substantially similar terms as exist at the time of making
the Loan for such SLF and meeting the requirements of this Master Loan Agreement
(hereinafter a "Qualified Lease"), in the reasonable judgment of Bank. Such
Mortgage shall be upon terms as set forth in Exhibit "A" attached hereto. In the
event Borrower fails or refuses to execute said Mortgage(s), Borrower does
hereby irrevocably appoint and grant to the Bank power of attorney for Borrower
to act for Borrower in regard to the Bank's request including the right to
execute any such Mortgage(s) and documents relating thereto, to record the same
upon the public records and to do all things necessary to create a first
mortgage lien upon said SLF(s). Borrower shall be responsible for all cost and
expenses related to such Mortgage(s) including but not limited to recording,
documentary, or other taxes, and a mortgage title insurance policy insuring
Bank's mortgage. Bank agrees to release the lien created by any Mortgage made
pursuant to this Section 8.4 if Borrower is not in Default and Borrower has or
subsequently obtains a Qualified Lease.
8.5 Remedies Cumulative; Nonwaiver. All remedies of Bank provided for herein or
in the other Loan Documents for any Loan are cumulative and shall be in addition
to any and all other rights and remedies provided for or available under the
other Loan Documents, at law or in equity. The exercise of any right or remedy
by Bank hereunder shall not in any way constitute a cure or waiver of a Default
Condition or a Default hereunder or under the Loan Documents, or All remedies of
Bank provided for herein or in the other Loan Documents for any Loan are
cumulative and shall be in addition to any and all other rights and remedies
provided for or available under the other Loan Documents, at law or in equity.
The exercise of any right or remedy by Bank hereunder shall not in any way
constitute a cure or waiver of a Default Condition or a Default hereunder or
under the Loan Documents, or
8.6 Remedies Cumulative; Nonwaiver. All remedies of Bank provided for herein or
in the other Loan Documents for any Loan are cumulative and shall be in addition
to any and all other rights and remedies provided for or available under the
other Loan Documents, at law or in equity. The exercise of any right or remedy
by Bank hereunder shall not in any way constitute a cure or waiver of a Default
Condition or a Default hereunder or under the Loan Documents, or invalidate an
act done pursuant to any notice of the occurrence of a Default Condition or a
Default hereunder or under the Loan Documents, or invalidate any act done
pursuant to any notice of the occurrence of a Default Condition or Default, or
prejudice Bank in the exercise of said rights, Bank realizes all amounts owed to
it under the Loan Documents.
8.7 No Liability of Bank. Whether or not Bank elects to employ any or all
remedies available to it in the event of an occurrence of a Default Condition or
Default, Bank shall not be liable for the construction of or failure to
construct or complete or protect the Improvements or for payment of any expense
incurred in connection with the exercise or any remedy available to Bank or for
the construction or Completion of the Improvements or for the performance or
nonperformance of any other obligation of Borrower.
8.8 Security Interest. It is understood and agreed that Bank shall have and
enjoy and is hereby granted a lien on, and a security interest in, all real and
personal property and fixtures described in the Security Agreement and
Assignment of Leases and Rents, and including without limitation, any and all
materials of Borrower (stored on-site or off-site) reserves, deferred payments,
deposits or advance payments for materials (stored on-site or off-site)
undisbursed Loan proceeds, insurance refunds, impound accounts, refunds for
overpayment of any kind, and such lien and security interest shall constitute
additional security for the debt of Borrower under the Loan Documents (including
but not limited to the FF&E Account), and Bank shall have and possess any and
all rights and remedies of a secured party provided by law with respect to
enforcement of and recovery on its security interest on such items and amounts.
In the event of a conflict between this paragraph and any security interest
granted pursuant to the Assignment of Leases and Rents, the terms and provisions
contained in the Assignment of Leases and Rents shall control.
ARTICLE IX
General Conditions
The following conditions shall be applicable throughout the term of
this Master Loan Agreement:
9.1 Loan Summary. For any Loan made pursuant to this Master Loan Agreement to be
effective, Borrower must complete and execute the Loan Summary pertaining
thereto and the same must be accepted by Bank in its sole discretion and
executed by the Bank, and Borrower must comply with all the applicable terms and
conditions hereof including, without limitation, the execution and delivery of
the Loan Documents which pertain to the Loan.
9.2 Waivers. No waiver of any Default Condition or Default or breach by Borrower
hereunder shall be implied from any delay or omissions by Bank to take action on
account of such Default Condition or Default, and no express waiver shall affect
any Default Condition or Default other than the Default specified in the waiver
and it shall be operative only for the time and to the extent therein stated.
Waivers or any covenants, terms or conditions contained herein must be in
writing and shall not be construed as a waiver of any subsequent breach of the
same covenant, term or condition. The consent or approval by Bank to or of any
act by Borrower requiring further consent or approval shall not be deemed to
waive or render unnecessary the consent or approval to or of any subsequent or
similar act. No single or partial exercise of any right or remedy of Bank
hereunder shall preclude any further exercise thereof or the exercise of any
other or different right or remedy.
9.3 Benefit. This Master Loan Agreement is made and entered into for the sole
protection and benefit of Bank and Borrower, their successors and assigns, and
no other person or persons have any right to action hereon or rights to the Loan
all proceeds at any time, nor shall Bank owe any duty whatsoever to any claimant
for labor or services performed or material furnished in connection with the
SLF, or to apply any undisbursed portion of the Loan to the payment of any such
claim, or to exercise any right or power of Bank hereunder or arising from any
Default Condition or Default by Borrower.
9.4 Assignment. The terms hereof shall be binding upon and inure to the benefit
of the heirs, successors, assigns, and personal representatives of the parties
hereto; provided, however, that Borrower shall not assign this Master Loan
Agreement or any of its rights, interests, duties or obligations hereunder or
any Loan proceeds or other moneys to be advanced hereunder in whole or in part
without the prior written consent of Bank and that any such assignment (whether
voluntary or by operation of law) without said consent shall be void. It is
expressly recognized and agreed that Bank may assign this Master Loan Agreement,
the Agreement Not to Encumber, the Assignment of Leases and Rents and any other
Loan Documents in whole or in part, to any other person, firm, or legal entity
provided that all of the provisions hereof shall continue in full force and
effect and, in the event of such assignment, Bank shall thereafter be relieved
of all liability under the Loan Documents arising from and after the date of
such assignment and any Loan disbursements made by any assignee shall be deemed
made in pursuant and not in modification hereof and shall be secured by the
Assignment of Leases and Rents and any other Loan Documents.
9.5 Amendments. This Master Loan Agreement shall not be amended except by a
written instrument signed by all parties hereto.
9.6 Terms. Whenever the context and construction so require, all words used in
the singular number herein shall be deemed to have been used in the plural, and
vice versa, and the masculine gender shall include the feminine and neuter and
the neuter shall include the masculine and feminine.
9.7 Post-Closing Environmental Assessments. In addition to the environmental
report required to be furnished to Bank as a condition precedent to closing,
Bank may, but no more frequently than annually, at Bank's sole option, and at
the Borrower's expense, require an environmental assessment or updated
assessment conforming to Bank's Guidance Document, from a reputable
environmental consultant satisfactory to Bank as to whether the SLF, or any
portion thereof, has been or is presently being used for the handling, storage,
transportation or disposal of hazardous or toxic materials. If such report
indicates such past, or present use, handling, storage, transportation or
disposal of hazardous or toxic materials, such shall be deemed to constitute a
default by the Borrower under the Loan Documents.
9.8 Cross Default/Cross Collateral. A default hereunder or under any of the
documents evidencing or securing a Loan shall constitute an event of default
under any other Loan of Borrower to Bank. Any default under any document
evidencing or securing such other indebtedness shall constitute a default
hereunder.
9.9 Anti-Coercion Notice. The insurance laws of the State of Florida provide
that Bank may not require Borrower to take insurance through any particular
insurance agent or company to insure the Land or Improvements. Borrower, subject
to the rules adopted by the Florida Insurance Commissions, has the right to have
insurance placed with an insurance agent or company of Borrower's choice,
provided the company meets Bank's requirements. Bank has the right to designate
reasonable financial requirements as to the company and the adequacy of the
insurance coverage. Borrower shall also execute any documents required by
similar laws of any other state which may be applicable.
9.10 Entire Agreement. This Master Loan Agreement, when accepted, shall
constitute the entire agreement between Borrower and Bank, and it may not be
altered or amended unless agreed to in writing by Bank and Borrower.
9.11 Indemnification. Borrower shall indemnify and hold Bank and its directors,
officers, agent, employees, and attorneys harmless from all liability, loss
expense or damage of any kind or nature, including, without limitation, any
suits, proceedings, claims, demands, or damages (including attorney's fees and
costs paid or incurred in connection therewith at both trial and appellate
levels), incurred or arising by reason of:
a. This Master Loan Agreement or the making of a Loan (except for liability,
loss, expense, or damage arising from the willful misconduct of Bank);
b. Any claim or action for the payment of any brokerage commissions or fees
which may be claimed to be payable in connection with this Master Loan
Agreement; and
c. The past, present or future handling, storage, transportation, or disposal
of hazardous substances upon the SLF, or any portion thereof.
These indemnifications shall survive the full payment and performance
of the obligations of the Borrower under the Loan Documents.
9.12 Choice of Law. The Loans, and all documents executed in connection
therewith shall be governed by and construed in accordance with Florida law
except with respect to the enforcement of the Assignment of Leases and Rents,
the Security Agreement, the Financing Statements and the Agreement Not To
Encumber, which shall be governed by the laws of the State where the SLF is
located, and Borrower shall execute such instruments necessary in connection
therewith.
9.13 Controlling Agreement. The parties intend to conform strictly to the
applicable usury laws. All agreements between Bank and Borrower (or any other
party liable with respect to any indebtedness under the Loan Documents) are
hereby limited by the provision of this paragraph which shall override and
control all such agreements, whether now existing or hereafter arising and
whether written or oral. In no way, nor in any event or contingency (including
but not limited to prepayment default, demand for payment or acceleration of the
maturity of any obligation), shall the interest contracted for, charged or
received under this Master Loan Agreement or otherwise exceed the maximum amount
permissible under applicable law. If, from any possible construction of any
document interest would otherwise be payable to bank in excess of the maximum
lawful amount any such construction shall be subject to the provisions of this
paragraph and such document shall be automatically reformed and the interest
payable to Bank shall be automatically reduced to the maximum amount permitted
under applicable law, without the necessity of execution of any amendment or new
document. If Bank shall ever receive anything of value which is characterized as
interest under applicable law and which would apart from this provisions be in
excess of the maximum lawful amount, an amount equal to the amount which would
have been excessive interest shall be applied to the reduction of the principal
amount owing in the inverse order of its maturity and to the payment of
interest, or refunded to Borrower if and to the extent such amount which would
have been excessive exceeds unpaid principal. The right to accelerate maturity
of any indebtedness does not include the right to accelerate any interest which
has not otherwise accrued on the date of such acceleration, and Bank does not
intend to charge or receive any unearned interest in the event of acceleration.
All interest paid or agreed to be paid to Bank shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
stated term (including any renewal or extension) of such indebtedness so that
the amount of interest on account of such indebtedness does not exceed the
maximum permitted by applicable law.
9.14 NOTICE TO ALL BORROWERS AND OTHER OBLIGORS, FINAL AGREEMENT. The following
notice is incorporated in this Master Loan Agreement; and such of the Loan
Documents as Bank may specify and shall contain such notice in solid capital
letters;
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9.15 Savings Clause. Invalidation of any one or more of the provisions of this
Master Loan Agreement shall in no way affect any of the other provisions hereof,
which shall remain in full force and effect.
9.16 Execution in Counterparts. This Master Loan Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same instrument, and in making proof
of this Master Loan Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
9.17 Captions. The captions herein are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of this
Master Loan Agreement nor the intent of any provisions hereof.
9.18 Notices. Each notice, request, demand, director or other communication
provided for hereunder shall be in writing and mailed (by registered or
certified mail, return receipt requested), delivered by hand, or sent by
facsimile (with receipt confirmed by facsimile) to Borrower or Bank at the
addresses indicated herein. Notices and other communications mailed shall be
deemed given three (3) days after being mailed; those sent by facsimile shall be
deemed given when sent, and those delivered by hand or reputable overnight
courier shall be deemed given when delivered. To the greatest extent permitted
under applicable law, Borrower waives all notice and demand in connection with
or relating to this Agreement. Borrower agrees that in any instance in which
reasonable advance notice to Borrower is required by law, such requirement shall
be satisfied if notice is given (deemed given) at least five (5) days in
advance.
9.19 No Commitment. Nothing in this Master Loan Agreement shall be construed or
deemed to be a commitment by Bank to make any future Loan or Loans to Borrower
other than as may be set forth in any Commitment Letter or other agreements as
Borrower and Bank may agree upon.
9.20 WAIVER OF JURY TRIAL. BY ACCEPTANCE HEREOF, BORROWER AGREES THAT NEITHER
BORROWER, NOR ANY ASSIGNEE, SUCCESSOR, HEIR OR LEGAL REPRESENTATIVE OF BORROWER
ALL OF WHOM ARE HEREINAFTER REFERRED TO AS THE PARTIES SHALL SEEK A JURY TRIAL
IN ANY LAWSUIT, PROCEEDINGS, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE
BASED UPON OR ARISING OUT OF THIS MASTER LOAN AGREEMENT OR ANY INSTRUMENT
EVIDENCING, SECURING, OR RELATING TO THE INDEBTEDNESS AND OTHER OBLIGATIONS
EVIDENCE HEREBY, ANY RELATED AGREEMENT OR INSTRUMENT, ANY OTHER COLLATERAL FOR
THE INDEBTEDNESS EVIDENCE HEREBY OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR
AMONG THE PARTIES, OR ANY OF THEM. NONE OF THE PARTIES WILL SEEK TO CONSOLIDATE
ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION HAVE BEEN
FULLY NEGOTIATED BY THE PARTIES WITH BANK, AND THESE PROVISIONS SHALL BE SUBJECT
TO NO EXCEPTIONS. BANK HAS IN NO WAY AGREED WITH OR REPRESENTED TO ANY OF THE
PARTIES THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
9.21 Joint and Several. If there is more than one entity executing as Borrower
under this Master Loan Agreement, each and every entity executing this Master
Loan Agreement on behalf of Borrower shall be joint and severally liable for all
debts and obligations and this Master Loan Agreement.
IN WITNESS WHEREOF, Borrower and Bank have executed this Master Loan
Agreement as of the above written date by their duly authorized respective
officers.
WITNESSES: BORROWER:
CNL HEALTH CARE
PROPERTIES, INC., a Maryland
corporation
Print Name:
By:
Name:
Print Name: Title:
CNL HEALTH CARE
PARTNERS, LP, a Delaware
Limited partnership
By: CNL Health Care GP Corp.,
a Delaware corporation, general
partner
Print Name:
By:
Name:
Print Name: Title:
ORL1 #545474 v6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet of CNL Health Care Properties, Inc. at March 31, 2000, and its
statement of income for the three months then ended and is qualified in its
entirely by reference to the Form 10Q of CNL Health Care Properties, Inc. for
the three months ended March 31, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-1-2000
<PERIOD-END> Mar-31-2000
<CASH> 5,812,893
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,236,495
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 0
0
0
<COMMON> 6,586
<OTHER-SE> 4,263,182
<TOTAL-LIABILITY-AND-EQUITY> 6,236,495
<SALES> 0
<TOTAL-REVENUES> 72,962
<CGS> 0
<TOTAL-COSTS> 98,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (25,178)
<INCOME-TAX> 0
<INCOME-CONTINUING> (25,178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,178)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
<FN>
<F1>Due to the nature of its industry, CNL Health Care Properties, Inc. has an
unclassified balance sheet; therefore, no value are shown above for current
assets and liabilities.
</FN>
</TABLE>
