EXHIBIT 10.26.1
MASTER
LEASE
Between
NATIONWIDE
HEALTH PROPERTIES, INC.,
a Maryland corporation,
as "Landlord"
AND
SUMMERVILLE
AT CAMELOT PLACE LLC,
a Delaware limited liability company,
SUMMERVILLE
AT HILLEN VALE LLC,
a Delaware limited liability company,
and
SUMMERVILLE
AT LAKEVIEW LLC,
a Delaware limited liability company,
collectively, as "Tenant"
Dated: October 2, 2006
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TABLE OF CONTENTS
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Page
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1.
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Term
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2
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2.
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Rent
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2
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2.1
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Initial
Term Rent
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2
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2.2
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Renewal
Term Rent
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3
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2.3
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Payment
Terms
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3
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2.4
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Absolute
Net Lease
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4
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3.
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Late
Charges
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4
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4.
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Security
Deposit
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4
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5.
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Taxes
and Other Charges
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5
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5.1
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Protests
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6
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5.2
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Impound
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6
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6.
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Insurance
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8
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7.
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Use,
Regulatory Compliance and Preservation of
Business
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8
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7.1
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Permitted
Use; Qualified Care
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8
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7.2
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Regulatory
Compliance
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9
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7.3
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Preservation
of Business
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9
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8.
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Acceptance,
Maintenance, Upgrade, Alteration and
Environmental
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9
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8.1
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Acceptance
“AS IS”; No Liens
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9
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8.2
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Tenant’s
Maintenance Obligations
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10
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8.3
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Upgrade
Expenditures
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10
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8.4
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Alterations
by Tenant
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11
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8.5
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Hazardous
Materials
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11
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8.6
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Capital
Improvements funded by Landlord
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12
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9.
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Tenant
Property and Security Interest
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13
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9.1
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Tenant
Property
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13
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9.2
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Landlord’s
Security Interest and Financing Statements
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13
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10.
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Financial,
Management and Regulatory Reports
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14
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11.
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Representations
and Warranties
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14
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12.
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Events
of Default
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14
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13.
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Remedies
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16
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13.1
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General
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16
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TABLE OF CONTENTS
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Page
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13.2
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Receivership
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16
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13.3
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Remedies
Cumulative; No Waiver
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17
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13.4
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Performance
of Tenant’s Obligations
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17
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14.
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Provisions on Termination
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17
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14.1
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Surrender
of Possession
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17
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14.2
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Removal
of Tenant Personal Property
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18
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14.3
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Management
of Premises
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18
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14.4
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Holding
Over
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18
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14.5
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Survival
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18
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15.
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Certain Landlord Rights
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19
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15.1
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Entry
and Examination of Records
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19
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15.2
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Grant
Liens
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19
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15.3
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Estoppel
Certificates
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19
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15.4
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Conveyance
Release
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19
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16.
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Assignment and
Subletting
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20
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17.
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Damage by Fire or Other Casualty
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21
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18.
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Condemnation
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21
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19.
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Indemnification
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22
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20.
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Disputes
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22
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21.
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Notices
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22
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22.
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Miscellaneous
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23
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23.
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Option to Purchase
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24
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24.
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Memorandum of Lease
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24
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25.
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1031 Exchange
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25
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LANDLORD PERSONAL PROPERTY
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FINANCIAL, MANAGEMENT AND REGULATORY REPORTS
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IDENTITY OF LANDLORD AND TENANT ENTITIES
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FACILITY INFORMATION: BUSINESS, UNITS, ETC.
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CALCULATION OF NHP’S WEIGHTED AVERAGE COST OF
CAPITAL
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MASTER LEASE
This
"Master Lease" is entered into as of October
2, 2006, between NATIONWIDE HEALTH PROPERTIES,
INC., a Maryland corporation
("Landlord"), and SUMMERVILLE AT
CAMELOT PLACE LLC, a Delaware limited liability
company, SUMMERVILLE AT HILLEN VALE LLC, a
Delaware limited liability company, and SUMMERVILLE AT
LAKEVIEW LLC, a Delaware limited liability company
(collectively, "Tenant"), for the respective
real properties and improvements thereon (each a
"Facility" and collectively, the
"Facilities") as set forth on Schedule 1 and
as legally described on Exhibit
A and the "Landlord Personal
Property" associated therewith as described in
Exhibit
B (collectively, the
"Premises"), each used as a licensed
healthcare facility of the type described on Schedule
2 (individually as so utilized, and collectively,
the "Business"). Pursuant to its concurrent
Amended and Restated Guaranty of Lease,
Summerville Senior Living, Inc., a Delaware corporation
("Guarantor") has guaranteed Tenant's
obligations hereunder. In consideration of the mutual
covenants, conditions and agreements set forth herein,
Landlord hereby leases the Premises to Tenant for the Term
upon the terms and conditions provided below. Certain
capitalized terms used in this Master Lease are defined on
Exhibit
E.
RECOGNITION OF MASTER LEASE;
IRREVOCABLE WAIVER OF CERTAIN RIGHTS
Tenant
and Landlord each acknowledge and agree that this Master Lease
constitutes a single, indivisible lease of the entire
Premises, and the Premises constitute a single economic unit.
The Minimum Rent, Additional Rent, other amounts payable
hereunder and all other provisions contained herein have been
negotiated and agreed upon based on the intent to lease the
entirety of the Premises as a single and inseparable
transaction, and such Minimum Rent, Additional Rent, other
amounts and other provisions would have been materially
different had the parties intended to enter into separate
leases or a divisible lease. Any Event of Default under this
Master Lease shall constitute an Event of Default as to the
entire Premises.
Each of the entities comprising Tenant and Guarantor, in order to
induce Landlord to enter into this Master Lease, to
the extent permitted by law:
A. Agrees,
acknowledges and is forever estopped from asserting to the
contrary that the statements set forth in the first sentence
of this Section are true, correct and complete;
B. Agrees,
acknowledges and is forever estopped from asserting to the
contrary that this Master Lease is a new and de novo lease,
separate and distinct from any other lease between any of the
entities comprising Tenant and any of the entities comprising
Landlord that may have existed prior to the date
hereof;
C. Agrees,
acknowledges and is forever estopped
from asserting to the contrary that this Master Lease is a
single lease pursuant to which the collective Premises are
demised as a whole to Tenant;
D. Agrees,
acknowledges and is forever estopped from asserting to the
contrary that if, notwithstanding the provisions of this
Section, this Master Lease were to be determined or found to
be in any proceeding, action or arbitration under state or
federal bankruptcy, insolvency, debtor-relief or other
applicable laws to constitute multiple leases demising
multiple properties, such multiple leases could not, by the
debtor, trustee, or any other party, be selectively or
individually assumed, rejected or assigned;
E. Forever
knowingly waives and relinquishes any and all rights under or
benefits of
the
provisions of the Federal Bankruptcy Code Section 365 (11
U.S.C. § 365), or any successor or replacement thereof or
any analogous state law, to selectively or individually
assume, reject or assign the multiple leases comprising this
Master Lease following a determination or finding in the
nature of that described in the foregoing Section
D.
1.
Term. The "Term" of this Master
Lease is the Initial Term plus all Renewal Terms, and a
"Lease Year" is the twelve (12) month
period commencing on October 1 of each year of the Term; provided,
however that the first Lease Year shall commence on October 2, 2006
and end on September 30, 2007. The "Initial Term"
commences on October 2, 2006 (the "Effective
Date") and ends on September 30, 2016, and may be extended
for two (2) separate "Renewal Terms" of ten
(10) years each if: (a) at least twelve (12), but not
more than fifteen (15) months prior to the end of
the then current Term, Tenant delivers to Landlord a
"Renewal Notice" that it desires to exercise its
right to extend this Master Lease for one (1) Renewal Term; (b)
there is no Event of Default on the date Landlord receives the
Renewal Notice (the "Exercise
Date") or on the last day of the then current
Term; and (c) the Minimum Rent for the Renewal Term is determined
pursuant to Section 2.2 within ninety (90) days
after the Exercise Date.
2.
Rent. During the Term, Tenant shall pay Landlord
"Rent" consisting of "Minimum
Rent" plus "Additional Rent"
determined as provided in this Section 2; provided, the Rent
for any Lease Year shall not be less than one hundred
percent (100%) of the Rent for the previous Lease Year.
The Rent for any month that begins or ends on other than the first
or last day of a calendar month shall be prorated based on actual
days elapsed.
2.1
Initial Term Rent.
(a)
During
the Initial Term, the annual "Minimum
Rent" shall be an amount equal to the sum of (I)
Landlord's Camelot Investment multiplied by eight and
sixty one- hundredths
percent (8.60%), and (II) Landlord's
Lakeview/HillenVale Investment multiplied by
eight and
seventy one-hundredths percent (8.70%) (the
"Lease
Rate"), payable in advance in twelve (12) equal
monthly installments. Commencing with the second (2nd) Lease Year
and continuing thereafter during the Term (excluding the first
Lease Year of any Renewal Term), Tenant agrees to pay "Additional
Rent" to Landlord monthly in advance together with
the payment of Minimum Rent. Such Additional Rent (which shall be
expressed as an annual amount but shall be payable in equal monthly
installments) shall be equal to the sum of (i) the Additional Rent
for the immediately preceding Lease Year and (ii) the product of
(A) the Minimum Rent and Additional Rent due for the immediately
preceding Lease Year and (B) the lesser of (x) three percent (3.0%)
or (y) a percentage equal to five (5) times the percentage increase
(the "CPI
Increase") in the United States Department of
Labor, Bureau of Labor Statistics Consumer Price Index for All
Urban Wage Earners and Clerical Workers, United States Average,
Subgroup "All Items" (1982 –1984 = 100) (the "CPI"). In no
event shall the CPI Increase be a negative number. The applicable
CPI Increase shall be calculated annually for each Lease Year by
comparing the CPI in effect on the first calendar day of the Lease
Year for which Additional Rent is being calculated to the first
calendar day of the immediately preceding Lease Year.
(b) As
used herein, (i) "Landlord's
Camelot Investment" means Landlord's
investment in the Facility located at 49-A Leisure Lane,
Medina, Ohio (the "Camelot
Facility") in the amount of Ten Million Six
Hundred Sixty-Five Thousand Dollars ($10,665,000),
plus any amounts advanced by Landlord pursuant to
Section 8.6 with respect to the Camelot Facility,
plus any other amount that, in accordance with any
other term or provision of this Master Lease, is to be added
to Landlord's Camelot Investment, and minus any
amount that, in accordance with any term or provision of this
Master Lease, is to be subtracted from Landlord's Camelot
Investment; and (ii) "Landlord's
Lakeview/HillenVale Investment" means
Landlord's investment in (A) the Facility located at 4000
Lakeview Crossing, Groveport, Ohio (the "Lakeview
Facility"), and (B) the Facility located at
1615 Yauger Road, Mt. Vernon, Ohio (the "HillenVale
Facility"), in the aggregate amount of
Twenty-Two Million Two Hundred Eighty Thousand Dollars
($22,280,000),
plus any amounts advanced by Landlord pursuant to
Section 8.6 with respect to the Lakeview Facility
and/or HillenVale Facility, plus any other amount
that, in accordance with any other term or provision of this
Master Lease, is to be added to Landlord's Lakeview/HillenVale
Investment, and minus any amount that, in accordance
with any term or provision of this Master Lease, is to be
subtracted from Landlord's Lakeview/HillenVale
Investment.
(c) Concurrently
with any increase or decrease in Landlord's Camelot Investment
and/or Landlord's Lakeview/HillenVale Investment during the
Term as described in Section 2.1(b), the Rent then due
and payable for the balance of the applicable Lease Year and
Term shall be recalculated and reset based on the adjusted
amount of Landlord's Camelot Investment and/or Landlord's
Lakeview/HillenVale Investment, as the case may
be.
2.2
Renewal Term Rent. To establish a fair
market Minimum Rent for the Premises during the Renewal Terms, the
Minimum Rent for each Renewal Term shall be reset and expressed as
an annual amount equal to the greater of (a) the product of (i) the
total Minimum Rent and Additional Rent due for the last Lease Year
of the Initial Term or the preceding Renewal Term, as the case may
be, and (ii) one hundred three percent (103%); or
(b) the product of (x) the "Fair Market Value" of
the Premises on the Exercise Date as established pursuant to
Exhibit C, and (y) a percentage equal to two hundred
(200) basis points over NHP's Weighted Average Cost of
Capital as of the Exercise Date. As used herein,
"NHP's Weighted Average Cost of
Capital" as of any date of determination shall be
determined and calculated in accordance with Schedule 1
attached hereto. Commencing with the second (2' 1 ) Lease
Year of a Renewal Term, "Additional Rent" shall be
calculated and payable on a monthly basis together with Minimum
Rent as provided in Section 2.1.
Notwithstanding the
foregoing, in no event shall the Minimum Rent due for the
first Lease Year of any Renewal Term be less than one hundred three
percent (103%) nor greater than one hundred ten percent (110%) of
the total Minimum Rent and Additional Rent due for the Lease Year
immediately preceding the applicable Renewal Term.
2.3
Payment Terms. All Rent and other payments
to Landlord shall be paid by wire
transfer or ACH (Automated Clearing House) only.
Minimum Rent and Additional Rent shall be paid in advance in equal
monthly installments on or before the first (1st) business day of
each calendar month.
2.4
Absolute Net Lease. All Rent payments shall
be absolutely net to Landlord, free of any and all Taxes, Other
Charges, and operating or other expenses of any kind whatsoever,
all of which shall be paid by Tenant. Tenant shall continue to
perform its obligations under this Master Lease even if Tenant
claims that it has been damaged by Landlord. Thus, Tenant shall at
all times remain obligated under this Master Lease without any
right of setoff, counterclaim, abatement, deduction, reduction
or defense of any kind. Tenant's sole right to recover damages
against Landlord under this Master Lease shall be to prove such
damages in a separate action.
3.
Late Charges. The late payment of Rent or
other amounts due will cause Landlord to lose the use of such money
and incur administrative and other expenses not contemplated under
this Master Lease. While the exact amount of the foregoing is
extremely difficult to ascertain, the parties agree that as a
reasonable estimate of fair compensation to Landlord, if any Rent
or other amount is not paid within (a) five (5) days after
the due date for such payment, then Tenant shall thereafter pay to
Landlord on demand a late charge equal to
five percent (5%) of such delinquent amounts, and
(b) ten (10) days after the due date for such payment,
such unpaid amount shall accrue interest from such
date at the "Agreed Rate" of three percent
(3%) plus the Lease Rate.
4.
Security Deposit: Guaranty.
(a)
Pursuant to the parties' concurrent Letter of Credit
Agreement, Tenant shall deposit with Landlord and
maintain during the Term one (1) or more letters of credit in
an undrawn face amount equal to Four Hundred Three Thousand
Eight Hundred Twenty-Five Dollars ($403,825) as a
"Security Deposit" against the faithful
performance by Tenant of its obligations under this Master
Lease.
(b) Notwithstanding
the foregoing, (i) at the end of the first Lease Year the
amount of the Security Deposit shall be increased by the
amount of $325,960 if the Lakeview/HillenVale
Rent Coverage Ratio is less than 1.01 to 1; and (ii)
at the end of the second Lease Year the amount of the Security
Deposit shall be increased by the amount of
$162,980 if the Lakeview/HillenVale Rent
Coverage Ratio is less than 1.26 to 1. As used herein,
"Lakeview/HillenVale Rent Coverage Ratio"
means, as of the date of determination, the ratio of (i) the
EBITDARM (as hereinafter defined) for the Lakeview Facility
and HillenVale Facility for the immediately preceding two
calendar quarters (a "Measuring Period"),
minus (A) an assumed management fee equal to five
percent (5%) of the Gross Revenues (as
hereinafter defined) generated during such Measuring Period
from the Lakeview Facility and HillenVale Facility, and (B)
one-half of the applicable annual CapEx Amount (as defined in
Section 8.3 below) for the Lakeview Facility and HillenVale
Facility at the commencement of the Measuring Period,
multiplied by the aggregate number of assisted living
units at the Lakeview Facility and HillenVale Facility, to
(ii) the total amount of the Minimum Rent and Additional Rent
due with respect to the Lakeview Facility and HillenVale
Facility for the Measuring Period pursuant to the terms of
this Master Lease
(c)
In the event that at any time following January 31, 2011 the
Camelot Rent Coverage Ratio is less than 1.20 to 1, Tenant
shall from time to time make deposits, which may be in the
form of cash or supplemental letters of credit meeting the
requirements of the Letter of Credit Agreement (the
"Supplemental Deposits"), to Landlord
pursuant to Section 4(d) until such time as the total amount
of the Security Deposit is increased as a result of such
Supplemental Deposits by the amount of One Hundred Fifty-One
Thousand Four Hundred Thirty-Five Dollars
($151,435); provided, however, Tenant's
obligation to make such Supplemental Deposits shall not apply
with respect to any Measuring Period (as hereinafter defined)
for which the Camelot Rent Coverage Ratio equals or exceeds
1.20 to 1. As used herein, "Camelot Rent Coverage
Ratio" means, as of the date of determination, the
ratio of (i) the EBITDARM for the Camelot Facility for the
Measuring Period, minus (A) an assumed management fee
equal to five percent (5%) of the Gross
Revenues (as hereinafter defined) generated during
such Measuring Period from the Camelot Facility, and (B)
one-half of the applicable annual CapEx Amount (as defined in
Section 8.3 below) for the Camelot Facility at the
commencement of the Measuring Period, multiplied by
the aggregate number of assisted living units at the Camelot
Facility, to (ii) the total amount of the Minimum Rent and
Additional Rent due with respect to the Camelot Facility for
the Measuring Period pursuant to the terms of this Master
Lease. As used herein, "EBITDARM" means, for
any Measuring Period, the net income (or loss) of Tenant for
such Measuring Period to the extent derived from the operation
of the applicable Facility or Facilities, adjusted to add
thereto any amounts deducted in determining such net income
(or loss) for (v) interest expense, (w) income tax expense,
(x) depreciation and amortization expense, (y) rental expense,
and (z) management fee expense, in each case determined in
conformity with generally accepted accounting principles,
consistently applied.
(d) The
Supplemental Deposits to be made by Tenant in accordance with
Section 4(c) above shall be due on the thirtieth (30
th ) day
of each calendar month (or last day of the month, in the case
of February) following the Measuring Period in which the
actual Camelot Rent Coverage Ratio fails to equal or exceed
1.20 to 1. The Supplemental Deposits shall be equal to five
percent (5%) of the Gross Revenues from the Camelot Facility
for the calendar month immediately preceding the date on which
each Supplemental Deposit is due or such lesser amount as is
required to fulfill the requirements of Section 4(c) above. As
used herein, "Gross Revenues" means all of the revenues of the
applicable Facility or Facilities other than the proceeds of
the sale of any of the applicable Facility's or Facilities'
equipment which has become worn out or obsolete, all insurance
awards and condemnation proceeds, sales, use and occupancy or
other taxes on receipts required to be accounted for by Tenant
to governmental authorities and non-recurring revenues as
reasonably approved by Landlord.
5 .
Taxes and Other Charges. At the
commencement and end of the Term, all Taxes and Other Charges shall
be prorated. Landlord shall promptly forward to Tenant copies of
all bills and payment receipts for Taxes or Other Charges received
by it. Tenant shall pay and discharge (including the filing of all
required returns), prior to delinquency or imposition of any fine,
penalty, interest or other cost ("Penalty"), (a)
"Taxes", consisting of any property (real and personal)
and other taxes and assessments levied or assessed with respect to
this Master Lease, any portion of the Premises or Landlord, with
respect to the Premises [including, without limitation, any state
or county occupation tax, transaction privilege, franchise taxes,
business privilege, rental tax or other excise taxes, and other
assessments levied or assessed against the Premises, Tenant's
interest therein or Landlord (with respect to this Master Lease
and/or the Premises, but excluding any local, state or federal
income tax based upon the net income of Landlord and any transfer
tax or stamps for its transfer of any interest in any portion of
the Premises to any Person other than Tenant or any of its
Affiliates or other similar taxes attributable to Landlord, all of
which shall be paid by Landlord)], and (b) "Other
Charges", consisting of any utilities and other costs and
expenses of the Business or any portion of the Premises and all
other charges, obligations or deposits assessed against any portion
of the Premises during the Term with respect to the use or
operation of the Premises. Tenant may pay the foregoing in
permitted installments (whether or not interest accrues on the
unpaid balance) when due and before any Penalty. Within thirty
(30) days of its receipt of Landlord's written notice of
payment, Tenant shall pay Landlord an amount equal to any Taxes or
Penalty that Landlord at any time is assessed or otherwise becomes
responsible and for which Tenant is liable under this Master Lease,
whether arising from the sole liability of Landlord or the joint
liability of the parties.
5.1
Protests.
Each party has the right, but not the obligation, in good faith to
protest or contest (a "Protest") in whole or
in part (a)
the amount or payment of any Taxes or Other Charges and
(b) the
existence, amount or validity of any Lien (as defined in Section
8.1) by appropriate proceedings sufficient to prevent its
collection or other realization and the sale, forfeiture or loss of
any portion of the Premises or Rent to satisfy it (so long as it
provides Landlord with reasonable security (including, without
limitation a bond) to assure the foregoing). Tenant shall
diligently prosecute any such Protest at its sole cost and expense
and pay such Taxes, Other Charges or Lien before the imposition of
any Penalty. Landlord will cooperate fully in any Protest that
involves an amount assessed against it.
5.2
Im ound. Tenant shall include with each Minimum
Rent payment a deposit
of one-twelfth (1/12 t
) of the amount required to discharge the annual
amount of real property Taxes secured by a Lien encumbering any
portion of the Premises as and when they become due. The deposits
shall not bear interest nor be held by Landlord in trust or as an
agent of Tenant, but rather shall be applied to the payment of the
related obligations. Provided that the impound deposits are then
sufficient for payment of the applicable obligations, (a) the amounts held by
Landlord shall be applied by Landlord directly to the payment of
the related obligations in a timely fashion and prior to the
imposition of any Penalty, and (b) if any Penalty
results from Landlord's failure to timely make any such payment,
such Penalty shall be borne by Landlord. If at any time within
thirty (30) days prior to the due date the deposits shall
be insufficient for the payment of the obligation in full, Tenant
shall within ten (10) days after demand deposit the
deficiency with Landlord. If deposits are in excess of the actual
obligation, the required monthly deposits for the ensuing Lease
Year shall be reduced proportionately and any such excess at the
end of the final Lease Year shall be refunded to Tenant within
thirty calendar (30) days. Tenant shall forward to
Landlord or its designee all Tax bills, bond and assessment
statements as soon as they are received. If Landlord transfers this
Master Lease, it shall transfer all such deposits to the
transferee, and Landlord shall thereafter have no liability of any
kind with respect thereto.
6.
Insurance.
6.1
Requirements. All insurance provided for in
this Master Lease shall (i) be maintained under valid and
enforceable policies issued by insurers licensed and approved to do
business in the state(s) where the Premises are located and having
general policyholders and financial ratings of not less than "A-"
and "X", respectively, in the then current Best's Insurance Report,
(ii) name Landlord as an additional insured and, for the casualty
policy referenced in Section 6.1, as the owner and loss
payable beneficiary, (iii) be on an "occurrence" basis (except as
otherwise contemplated herein), (iv) cover all of Tenant's
operations at the applicable Facility or portion of the Premises,
(v) provide that the policy may not be canceled except upon not
less than thirty (30) days prior written notice to
Landlord and (vi) be primary and provide that any insurance with
respect to any portion of the Premises maintained by Landlord is
excess and noncontributing with Tenant's insurance. The parties
hereby waive as to each other all rights of subrogation which any
insurance carrier, or either of them, may have by reason of any
provision in any policy issued to them, provided such waiver does
not thereby invalidate such policy. Original policies or reasonably
satisfactory insurer certificates evidencing the existence of the
insurance required by this Master Lease and showing the interest of
Landlord shall be provided to it prior to the commencement of the
Term or, for a renewal policy, not less than ten (10) days
prior to the expiration date of the policy being renewed. If
Landlord is provided with a certificate, it may demand that Tenant
provide a complete copy of the related policy within ten (10)
days. During the Term, Tenant shall maintain the following
insurance and any claims thereunder shall be adjudicated by and at
the expense of it or its insurance carrier:
(a)
Fire and Extended Coverage with respect to each
Facility against loss or damage from all causes under standard "all
risk" property insurance coverage with an agreed amount endorsement
(such that the insurance carrier has accepted the amount of
coverage and has agreed that there will be no co-insurance
penalty), without exclusion for fire, lightning, windstorm,
explosion, smoke damage, vehicle damage, sprinkler leakage, flood,
vandalism, earthquake, malicious mischief or any other risks
normally covered under an extended coverage endorsement, in amounts
that are not less than the actual replacement value of such
Facility and all Tenant Personal Property associated therewith
(including the cost of compliance with changes in zoning and
building codes and other laws and regulations, demolition and
debris removal and increased cost of construction);
(b)
Commercial General Public Liability Coverage with
respect to each Facility (including products liability and broad
form coverage) against claims for bodily injury, death or property
damage occurring on, in or about the Premises, affording the
parties protection of not less than One Million Dollars
($1,000,000) for bodily injury or death to any one
person, not less than Three Million Dollars
($3,000,000) for any one accident, and not less
than One Million Dollars ($1,000,000) for property
damage;
(c)
Professional Liability Coverage with respect to
each Facility for damages for injury, death, loss of service or
otherwise on account of professional services rendered or which
should have been rendered, in a minimum amount of One Million
Dollars ($1,000,000) per claim and Three Million
Dollars ($3,000,000) in the
aggregate;
(d)
Worker's Compensation Coverage with respect to
each Facility for injuries sustained by Tenant's employees in the
course of their employment and otherwise consistent with all
applicable legal requirements;
(e)
Boiler and Pressure Vessel Coverage with respect
to each Facility on any fixtures or equipment which are capable of
bursting or exploding, in an amount not less than Five Million
Dollars ($5,000,000) for resulting damage to
property, bodily injury or death and with an endorsement for boiler
business interruption insurance;
(f)
Business Interruption and Extra Expense Coverage
with respect to each Facility for loss of rental value for a period
not less than one (1) year; and
(g)
Deductibles/Self-Insured Retentions for the above
policies shall not be greater than Fifty Thousand Dollars
($50,000), and Landlord shall have the right at
any time to require a lower such amount or set higher policy
limits, to the extent commercially available and reasonable and
customary for similar properties.
6.2
Additional Requirements. If at the end of
the Initial Term or any Renewal Term or upon Tenant's exercise of
its option to purchase pursuant to Section 23, Tenant is not
in compliance with the requirements of Section
6.1 and any general liability insurance maintained by Tenant
provides for coverage on a "claims-made" basis, Landlord may in its
sole and absolute discretion require Tenant to purchase an
"Extended Reporting Provision Option" (i.e., tail coverage) for
such general liability policy for two (2) years.
6.3
Payments to Landlord. During any Lease Year
or portion thereof in which Tenant is not in compliance with the
provisions of Section 6.1, Tenant shall pay Landlord, within
ten (10) days of Landlord's demand therefor, for the
estimated costs of the premiums of the general liability insurance
policy maintained by Landlord, or contributions to self-insurance
in lieu thereof, in connection with the Premises for the applicable
period during which Tenant is not in compliance, which amount shall
not exceed in any Lease Year the sum of six cents ($.06)
multiplied by the total square footage of the Facilities
located on the Premises (as adjusted at the end of each Lease Year
for increases since the Effective Date in the CPI). Tenant shall
have no right to receive any proceeds or other benefits from any
such insurance. For purposes of this Section 6.3, Tenant
shall not be in compliance with Section 6.1 at any such time
that any insurance required hereunder is provided to Tenant by or
through a "captive" insurance company.
7.
Use, Regulatory Compliance and Preservation of
Business.
7.1
Permitted Use; Qualified Care. Tenant shall
continuously use and
occupy
each Facility during the Term (other than during a period of
repair or reconstruction following damage or destruction
thereto or as a result of condemnation) as a licensed facility
engaged in the respective Business described on Schedule
2 with not less than the applicable number of units shown
on Schedule 2, and for ancillary services relating
thereto, but for no other purpose. Tenant shall not allow the
average occupancy for any Facility for any trailing three
(3) month period to be less than fifty
percent (50%). Tenant shall provide care, treatment
and services to all customers of the Business in a manner
consistent with all applicable laws.
7.2
Regulatory Compliance
. Tenant and the
Premises shall comply in all material respects with all licensing
and other laws and all CC&R's and other use or maintenance
requirements applicable to the Business conducted thereon and, to
the extent applicable, all Medicare, Medicaid and other third-party
payor certification requirements, including timely filing properly
completed cost and other required reports, timely paying all
expenses shown thereon, and ensuring that the Premises continue to
be fully certified for participation in Medicare and Medicaid
throughout the Term and when they are returned to Landlord, all
without any suspension, revocation, decertification or other
material limitation. Further, Tenant shall not commit any act or
omission that would in any way violate any certificate of occupancy
affecting any Facility, result in closure of the Business conducted
at any Facility or result in the sale or transfer of all or any
portion of any related certificate of need, bed rights or other
similar certificate or license. All inspection fees, costs and
charges associated with a change of such licensure or certification
shall be borne solely by Tenant.
7.3
Preservation of Business. Tenant
acknowledges that a fair return to Landlord on and protection of
its investment in the Premises is dependent, in part, on Tenant's
dedication to the Business and the concentration on each Facility
of similar businesses of Tenant and its Affiliates in the
geographical area of such Facility. Tenant further acknowledges
that the diversion of residents or patient care activities from any
Facility to other facilities owned or operated by Tenant or its
Affiliates at any time during the Term will have a material adverse
affect on the value and utility of such Facility. Therefore, Tenant
agrees that during the Term and for a period of one (1)
year thereafter, neither Tenant nor any of its Affiliates
shall, without the prior written consent of Landlord: (i) operate,
own, participate in or otherwise receive revenues from any other
business providing services similar to those of the Business of any
Facility within the geographical radius of such Facility as set
forth on Schedule 2, (ii) except as is necessary to
provide residents or patients with an alternative level of care,
recommend or solicit the removal or transfer of any resident or
patient from any Facility to any other nursing, health care, senior
housing or retirement housing facility or divert actual or
potential residents, patients or care activities of the Business
conducted at any Facility to any other facilities owned or operated
by Tenant or its Affiliates or from which they receive any type of
referral fees or other compensation for transfers, or (iii) employ
for other businesses any management or supervisory personnel
working on a daily basis at any Facility. Notwithstanding the
foregoing, unless this Master Lease terminates as a result of an
Event of Default by Tenant, the foregoing prohibition against
employment shall not apply to unsolicited personnel who approach
Tenant or its Affiliate directly and request employment by Tenant
or such Affiliate. For purposes of this Section 7.3, an
"Affiliate" shall not be deemed or construed to include Apollo Real
Estate Investment Fund III, L.P., Apollo Real Estate Investment
Fund IV, L.P. or any other Affiliates of such entities that are not
affiliated with Summerville Senior Living, Inc.
8.
Acceptance, Maintenance, Upgrade, Alteration and
Environmental.
8.1
Acceptance "AS IS"; No Liens. Tenant
acknowledges that it is presently engaged in operations like the
Business in the state(s) where the Premises are located and has
expertise in this industry and, in deciding to enter into this
Master Lease, has not relied on any representations or warranties,
express or implied, of any kind from Landlord. Tenant has examined
the condition of title to and thoroughly investigated the Premises,
has selected the Premises to its own specifications, has concluded
that no improvements or modifications to them are required in order
to conduct the Business, and accepts them on an "AS
IS" basis and assumes all responsibility and cost
for the correction of any observed or unobserved deficiencies or
violations. It is expressly understood and agreed that any
inspection by or on behalf of the Landlord of the
business conducted at the Premises or of the Premises is for
Landlord's sole and exclusive benefit and is not
directly or indirectly for the benefit of, nor should be
relied in any manner upon by, Tenant, its residents or any
other third party. Notwithstanding its right to Protest
set forth in Section 5.1, Tenant shall not cause or permit
any lien, levy or attachment to be placed or assessed against any
portion of the Premises or the operation thereof (a
"Lien") for any reason.
8.2
Tenant's Maintenance Obligations. Tenant
shall (a) keep and maintain
the
Premises in good appearance, repair and condition and maintain
proper housekeeping, (b) promptly make all repairs (interior
and exterior, structural and nonstructural, ordinary and
extraordinary, foreseen and unforeseen) necessary to keep each
Facility in good and lawful order and condition and in
substantial compliance with all applicable requirements and
laws relating to the Business, including if applicable
certification for participation in Medicare and Medicaid, and
(c) keep and maintain all Landlord and Tenant Personal
Property in good condition, ordinary wear and tear excepted,
and repair and replace such property consistent with prudent
industry practice.
8.3
Upgrade Expenditures. Tenant shall include
with each Minimum Rent
payment,
starting with the first ( f t
) full month of the Term, a deposit for each Facility
to be added to a reserve (the "CapEx
Reserve") equal to one-twelfth (1/12 th ) of
the Applicable Annual Reserve for such Facility (as adjusted
at the end of each Lease Year for increases since the
Effective Date in the CPI, the "CapEx
Amount"), multiplied by (ii) the aggregate
number of assisted living care units at such Facility (the
"Upgrade Minimum"), minus (c) the
Upgrade Overage (as hereinafter defined). As used herein, the
"Applicable Annual Reserve"
means:
|
Age
of Facility (Years)
|
Applicable
Annual Reserve
|
| |
|
|
Zero
through Three
|
$
200.00
|
|
Four
through Seven
|
$
300.00
|
|
Eight
or more Years
|
$
450.00
|
Landlord
shall not be deemed to hold the same in trust or as an agent
for Tenant. Tenant acknowledges that the impounding of such
funds in the CapEx Reserve shall constitute a true escrow, and
that Tenant has no, and hereby waives any, interest in or
right or title to any funds escrowed pursuant to this
Section 8.3, whether legal, equitable, beneficial or
otherwise. From time to time, but not more often than once in
any calendar month and provided that no Event of Default is
then continuing, Landlord will pay to Tenant amounts from the
CapEx Reserve to reimburse Tenant for Upgrade Expenditures
made by Tenant during the prior rolling twenty-four
(24) month period during the Term (or
portio
