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EXHIBIT 10.4.1
MASTER LEASE AGREEMENT
BY
VENTAS REALTY, LIMITED PARTNERSHIP,
AS LANDLORD
AND
THOSE ENTITIES IDENTIFIED ON SCHEDULE 1 ATTACHED HERETO,
AS TENANT
DATED AS OF JANUARY 28, 2004
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TABLE OF CONTENTS
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1. LEASED PROPERTY; TERM; JOINT AND SEVERAL LIABILITY;
LIMITATION ON RIGHTS.............. 1
1.1. LEASED
PROPERTY..............................................................
1
1.2.
TERM.........................................................................
2
1.3. JOINT AND SEVERAL LIABILITY; LIMITATION ON
RIGHTS............................ 2
1.4. EXERCISE OF RENEWAL
OPTIONS.................................................. 3
2.
DEFINITIONS...........................................................................
3
3.
RENT..................................................................................
4
3.1. FIXED
RENT...................................................................
4
3.2. ADDITIONAL
RENT..............................................................
5
3.3. ESCROW
DEPOSITS..............................................................
7
3.4. SECURITY
DEPOSIT.............................................................
9
3.5. DEFERRED MAINTENANCE
DEPOSIT................................................. 11
3.6. NET
LEASE....................................................................
12
3.7. LEASE
GUARANTY...............................................................
13
4.
IMPOSITIONS...........................................................................
13
4.1. PAYMENT OF
IMPOSITIONS.......................................................
13
4.2. NOTICE OF
IMPOSITIONS........................................................
13
4.3. ADJUSTMENT OF
IMPOSITIONS....................................................
14
5. NO AFFECT OR IMPAIRMENT,
ETC..........................................................
14
6. PREMISES; TENANT'S PERSONAL
PROPERTY.................................................. 14
6.1. OWNERSHIP OF THE
PREMISES.................................................... 14
6.2. TENANT'S PERSONAL
PROPERTY................................................... 14
6.3. LANDLORD'S PERSONAL
PROPERTY................................................. 15
7. CONDITION AND USE OF EACH LEASED
PROPERTY............................................. 15
7.1. CONDITION OF EACH LEASED
PROPERTY............................................ 15
7.2. USE OF EACH LEASED
PROPERTY.................................................. 15
7.3. AUTHORIZATION
COLLATERAL.....................................................
16
7.4. GRANTING OF EASEMENTS,
ETC................................................... 16
8. NEGATIVE AND AFFIRMATIVE COVENANTS OF
TENANT.......................................... 17
8.1. NEGATIVE
COVENANTS...........................................................
17
8.2. AFFIRMATIVE
COVENANTS........................................................
19
8.3. AUTHORIZATION
NON-COMPLIANCE.................................................
22
8.4. NO CHANGE IN PRIMARY INTENDED USE OR OTHER CHANGES
WITHOUT
LANDLORD
CONSENT.............................................................
22
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8.5. PROPERTY
MANAGER.............................................................
22
9. MAINTENANCE OF
FACILITIES.............................................................
22
9.1. MAINTENANCE AND
REPAIR.......................................................
22
9.2.
ENCROACHMENTS................................................................
24
10. TENANT'S REPRESENTATIONS AND
WARRANTIES............................................... 24
10.1. ORGANIZATION AND GOOD
STANDING............................................... 25
10.2. POWER AND
AUTHORITY..........................................................
25
10.3.
ENFORCEABILITY...............................................................
25
10.4.
CONSENTS.....................................................................
25
10.5. NO
VIOLATION.................................................................
25
10.6. INTENTIONALLY
OMITTED........................................................
25
10.7. ADVERSE
MATTERS..............................................................
25
10.8.
CERTIFICATION................................................................
25
10.9. NO RECOUPMENTS
EFFORTS.......................................................
26
10.10. PRIMARY INTENDED
USE......................................................... 26
10.11. COMPLIANCE WITH
LAWS.........................................................
26
10.12. OWNERSHIP OF
AUTHORIZATIONS..................................................
26
10.13. NO
LITIGATION................................................................
26
10.14. NO MEDICARE, MEDICAID,
ETC................................................... 27
11.
ALTERATIONS...........................................................................
27
11.1.
ALTERATIONS..................................................................
27
11.2. CONSTRUCTION REQUIREMENTS FOR ALL
ALTERATIONS................................ 27
11.3. CAPITAL EXPENDITURES
ACCOUNTS................................................ 29
12.
LIENS.................................................................................
30
13. PERMITTED
CONTESTS....................................................................
31
14.
INSURANCE.............................................................................
31
14.1. GENERAL INSURANCE
REQUIREMENTS............................................... 31
14.2. POLICIES;
CERTIFICATES.......................................................
35
14.3. BLANKET
POLICIES.............................................................
35
14.4. ADDITIONAL
INSURED...........................................................
36
14.5. POLICY
REQUIREMENTS..........................................................
36
14.6. EVIDENCE OF
COMPLIANCE.......................................................
37
14.7. FORECLOSURE;
TRANSFER........................................................
37
14.8. INSURANCE
COMPANY............................................................
37
14.9. STATE LAW
COMPLIANCE.........................................................
37
15. DAMAGE AND
DESTRUCTION................................................................
37
15.1. NOTICE OF
CASUALTY...........................................................
37
15.2. TENANT'S TERMINATION
RIGHT................................................... 38
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15.3. LANDLORD'S TERMINATION
RIGHT................................................. 38
15.4. INTENTIONALLY
OMITTED........................................................
39
15.5.
RESTORATION..................................................................
39
15.6. DISBURSEMENT OF INSURANCE
PROCEEDS........................................... 40
15.7. INSUFFICIENT PROCEEDS/RISK OF
LOSS........................................... 41
15.8. EXCESS
PROCEEDS..............................................................
41
15.9. LANDLORD'S
INSPECTION........................................................
41
16.
CONDEMNATION..........................................................................
41
16.1. PARTIES' RIGHTS AND
OBLIGATIONS.............................................. 41
16.2. TOTAL
TAKING.................................................................
41
16.3. PARTIAL
TAKING...............................................................
41
16.4.
RESTORATION..................................................................
42
16.5. TEMPORARY
TAKING.............................................................
42
16.6. INTENTIONALLY
OMITTED........................................................
42
17.
DEFAULT...............................................................................
42
17.1. EVENTS OF
DEFAULT............................................................
42
17.2. REMEDY
ELECTION..............................................................
45
17.3. CERTAIN
REMEDIES.............................................................
45
17.4.
DAMAGES......................................................................
45
17.5.
WAIVER.......................................................................
47
17.6. APPLICATION OF
FUNDS.........................................................
47
17.7. NATURE OF
REMEDIES...........................................................
47
17.8. NO MEDIATION OR
ARBITRATION..................................................
47
17.9. DELETION OF
PROPERTIES.......................................................
47
18. LANDLORD'S RIGHT TO CURE TENANT'S
DEFAULT............................................. 48
19. HOLDING
OVER..........................................................................
48
20.
SUBORDINATION.........................................................................
49
20.1.
SUBORDINATION................................................................
49
20.2.
ATTORNMENT...................................................................
49
20.3. MORTGAGEE CURE
RIGHTS........................................................
50
20.4.
MODIFICATIONS................................................................
50
21. PROPERTY
COLLATERAL...................................................................
50
21.1. LANDLORD'S SECURITY
INTEREST................................................. 50
22. INTENTIONALLY
OMITTED.................................................................
51
23.
INDEMNIFICATION.......................................................................
51
24. ASSIGNMENT;
SUBLEASE..................................................................
52
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24.1.
PROHIBITION..................................................................
52
24.2. PERMITTED
TRANSFERS..........................................................
53
24.3 PERMITTED ASSIGNMENTS AND
SUBLEASES.......................................... 53
25. FINANCIAL STATEMENTS AND
REPORTING....................................................
53
25.1. MAINTENANCE OF BOOKS AND
RECORDS............................................. 54
25.2. ANNUAL FINANCIAL
STATEMENTS.................................................. 54
25.3. QUARTERLY
INFORMATION........................................................
54
25.4. CERTIFICATIONS OF
COMPLIANCE................................................. 55
25.5. REPORTS OF MATERIAL ADVERSE EVENTS AND MONTHLY FINANCE
REPORTS............... 55
25.6. REPORT OF COMPLIANCE WITH
AUTHORIZATIONS..................................... 56
25.7.
AUTHORIZATIONS...............................................................
56
25.8. QUARTERLY DEFICIENCY
REPORTS................................................. 56
25.9. INTENTIONALLY
OMITTED........................................................
56
25.10. NOTICES FROM GOVERNMENTAL
AUTHORITIES........................................ 56
25.11. ANNUAL
BUDGETS...............................................................
56
25.12. FINANCIAL STATEMENTS OF
GUARANTOR............................................ 57
25.13. ESTOPPEL
CERTIFICATION.......................................................
57
25.14. SUPPLEMENTAL
INFORMATION.....................................................
57
25.15. MONTHLY CASH
FLOW............................................................
57
25.16. QUARTERLY MEETINGS; FACILITY LEVEL MEETINGS AND
REVIEWS...................... 58
25.17.
FORMAT.......................................................................
58
25.18. ALLOCATION OF CERTAIN
EXPENSES............................................... 58
25.19. CAPITAL EXPENDITURE
REPORT................................................... 58
25.20. SIMILAR
REPORTS..............................................................
59
26. LANDLORD'S RIGHT TO
INSPECT...........................................................
59
27. NO
WAIVER.............................................................................
59
28. SINGLE
LEASE..........................................................................
59
29. ACCEPTANCE OF
SURRENDER...............................................................
60
30. NO MERGER OF
TITLE....................................................................
60
31. CONVEYANCE BY
LANDLORD................................................................
60
32. QUIET
ENJOYMENT.......................................................................
61
33.
NOTICES...............................................................................
61
34. GENERAL REIT
PROVISIONS...............................................................
62
35. LANDLORD'S OPTION TO PURCHASE THE TENANT'S PERSONAL
PROPERTY.......................... 62
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36. COMPLIANCE WITH ENVIRONMENTAL
LAWS.................................................... 63
36.1. HAZARDOUS
SUBSTANCES.........................................................
63
36.2. REMEDIATION;
NOTIFICATION....................................................
63
36.3.
INDEMNITY....................................................................
64
36.4. ENVIRONMENTAL
INSPECTION.....................................................
64
36.5.
REMOVAL......................................................................
65
37. OPERATIONAL
TRANSFER..................................................................
65
38.
NON-RECOURSE..........................................................................
65
39. COMBINATION OF
LEASES.................................................................
65
39.1. SECTION 39
LEASE.............................................................
66
39.2. ADDITIONAL
PROPERTIES........................................................
66
39.3. COMBINATION
LEASE............................................................
67
39.4. SECTION 39
DATE..............................................................
67
39.5. ADDITIONAL
ACTIONS...........................................................
67
40. NEW
LEASE.............................................................................
68
40.1. NEW LEASE
TERMS..............................................................
68
40.2. AMENDMENTS TO THIS
LEASE..................................................... 69
40.3. EFFECTIVE
DATE...............................................................
69
40.4. OTHER
UNDERTAKINGS...........................................................
69
41. RESTRICTIVE
COVENANT..................................................................
70
42.
MISCELLANEOUS.........................................................................
70
42.1.
SURVIVAL.....................................................................
70
42.2. NON-BUSINESS DAY
PAYMENTS.................................................... 70
42.3.
HEADINGS.....................................................................
70
42.4. INTEGRATION;
MODIFICATION....................................................
70
42.5. SEVERABILITY; MAXIMUM
RATE................................................... 70
42.6. GOVERNING LAW;
VENUE.........................................................
70
42.7. WAIVERS;
FORBEARANCE.........................................................
71
42.8. BINDING
CHARACTER............................................................
71
42.9.
COUNTERPARTS.................................................................
71
43.
APPRAISALS............................................................................
71
43.1.
APPRAISALS...................................................................
71
43.2. APPOINTMENT OF
APPRAISERS....................................................
71
43.3. QUALIFICATIONS OF
APPRAISERS................................................. 72
43.4. BINDING
NATURE...............................................................
72
43.5.
COSTS........................................................................
72
44. TENANT'S OPTION TO PURCHASE THE LEASED
PROPERTY....................................... 72
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45. ADDITION OF OTHER LEASES AND OTHER PROPERTIES TO THIS
LEASE........................... 73
46. RIGHT OF FIRST
OFFER..................................................................
73
47. ASSIGNMENT OF
CONTRACTS...............................................................
74
48. LOCAL LAW
PROVISIONS..................................................................
75
48.1. NEW
MEXICO...................................................................
75
48.1.1. LIMITATION ON
INDEMNIFICATIONS...................................... 75
48.1.2. NOTICE OF
LIENS..................................................... 75
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LIST OF SCHEDULES AND EXHIBITS
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Schedule 1 - Tenant, Facility, Primary Intended Use, IL Units,
AL Units, Total
Units
Schedule 2 - Initial Allocated Rent and Initial Minimum Option
Price
Schedule 3.1.1 - Wire Instructions
Schedule 3.5 - Capital Repair Items
Schedule 7.3 - Authorization Collateral
Schedule 8.2.7 - Noncompliance with Certain Legal and Insurance
Requirements
Exhibit A - Leased Property Addresses
Exhibit A-1 through A-4 - Legal Descriptions
Exhibit B - Definitions
Exhibit C - Estoppel Certificates
Exhibit D - Restrictive Covenant
Exhibit E - Option to Purchase
Exhibit F - Property Management Contracts
Exhibit G - Other Leased Properties
Exhibit H - List of Grand Court Properties
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MASTER LEASE AGREEMENT
This MASTER LEASE AGREEMENT (this agreement, as it may be
amended,
renewed, supplemented, extended or replaced by the parties
hereto from time to
time, this "LEASE") is made and entered into as of January 28,
2004 (the
"COMMENCEMENT DATE"), between VENTAS REALTY, LIMITED
PARTNERSHIP, a Delaware
limited partnership (together with its successors and assigns,
"LANDLORD"), and
each of the entities identified on SCHEDULE 1 attached hereto,
as the same may
be modified from time to time pursuant to SECTIONS 17.9, 39, 40
or 45 hereof of
this Lease (together with their permitted successors and
assigns, individually
and collectively, "TENANT").
RECITALS:
WHEREAS, Landlord owns the real property described by the
common
addresses set forth on EXHIBIT "A" attached hereto and legally
described in
EXHIBIT "A-1" through "A-4" attached hereto; and
WHEREAS, Landlord desires to lease the Premises (as
hereinafter
defined) to Tenant, and Tenant desires to lease the Premises
from Landlord; and
WHEREAS, Landlord acquired each Leased Property pursuant to
certain
Purchase and Sale Agreements between Landlord and the sellers
thereunder, dated
as of the date hereof (the "P&S AGREEMENTS"); and
WHEREAS, Tenant's obligations under this Lease are
guaranteed
pursuant to that certain Guaranty Agreement (the "LEASE
GUARANTY") dated as of
the date hereof by Brookdale Living Communities, Inc., a
Delaware corporation
(together with its successors and assigns as therein provided,
the "GUARANTOR").
NOW, THEREFORE, Landlord and Tenant hereby agree upon the
leasing
and demising of the Premises by Landlord to Tenant, upon the
terms and
conditions of this Lease.
1. LEASED PROPERTY; TERM; JOINT AND SEVERAL LIABILITY;
LIMITATION ON
RIGHTS.
1.1. LEASED PROPERTY. Effective as of the Commencement Date,
upon
and subject to SECTION 1.3 below and to the other terms and
conditions
hereinafter set forth, Landlord hereby leases to Tenant, and
Tenant hereby
leases from Landlord, all of the following:
1.1.1. LAND. The parcels of land more particularly described
in EXHIBITS "A-1" through "A-4" attached hereto, together with
all easements and
interests appurtenant thereto (collectively, the "LAND"; each
parcel of Land
described in such EXHIBITS "A-1" through "A-4", as amended from
time to time,
together with such appurtenances with respect to such parcel,
being referred to
herein as a "LEASED LAND").
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1.1.2. LEASED IMPROVEMENTS. All buildings, structures,
Fixtures (as hereinafter defined) and other improvements of
every kind,
including, but not limited to, alleyways, sidewalks, utility
pipes, conduits and
lines, parking areas and roadways appurtenant to such buildings
and structures
situated upon the Land as of the date hereof and Alterations
hereafter made upon
the Land (collectively, the "LEASED IMPROVEMENTS");
1.1.3. INTANGIBLE PROPERTY. The interest, if any, of
Landlord
in and to any of the following intangible property owned by
Landlord in
connection with the Land and the Leased Improvements
(collectively, the
"INTANGIBLES"): (i) the identity or business of the Facilities
as a going
concern, including, without limitation, any names or trade names
by which the
Facilities or any part thereof may be known, and all
registrations for such
names, if any; (ii) to the extent assignable or transferable,
the interest, if
any, of Landlord in and to each and every guaranty and warranty
concerning the
Leased Improvements, including, without limitation, any roofing,
air
conditioning, heating, elevator and other guaranty or warranty
relating to the
construction, maintenance or repair of the Leased Improvements
or any portion
thereof; and (iii) the interest, if any, of Landlord in and to
all
Authorizations to the extent the same can be assigned or
transferred in
accordance with applicable law; and
1.1.4. LANDLORD'S PERSONAL PROPERTY. All personal property
owned by Landlord and located at the Premises, including all
repairs thereto and
replacements thereof ("LANDLORD'S PERSONAL PROPERTY").
SUBJECT, HOWEVER, to the Permitted Encumbrances (as
hereinafter
defined).
1.2. TERM. Landlord hereby leases the Premises to Tenant for
an
initial term (the "INITIAL TERM") of fifteen (15) years
commencing as of the
Commencement Date and expiring at midnight on the last day in
the calendar month
in which the fifteenth (15th) anniversary of the Commencement
Date occurs(the
"INITIAL EXPIRATION DATE"). Subject to the terms of SECTION 1.4
below, Tenant
shall have two (2) options (each a "RENEWAL OPTION") to extend
the Initial Term
of this Lease for ten (10) years each (collectively, the
"EXTENDED TERMS" and,
each, individually, an "EXTENDED TERM"). The Initial Term,
together with any
Extended Term timely and properly exercised by Tenant hereunder
are herein
collectively referred to as the "TERM"; the Initial Expiration
Date as extended
by any such Renewal Option is herein referred to as the
"EXPIRATION DATE".
1.3. JOINT AND SEVERAL LIABILITY; LIMITATION ON RIGHTS.
Notwithstanding anything contained herein to the contrary, each
Tenant shall be
jointly and severally liable for the payment and performance of
all obligations
and liabilities of Tenant hereunder, including, without
limitation, the
obligations and liabilities of each other Tenant hereunder,
including, without
limitation, each such other Tenant's obligation to pay Rent
hereunder; provided,
however, that, without limitation of the joint and several
nature of the
obligations of each Tenant hereunder, the possessory and
leasehold rights that
are created by this Lease shall be limited and confined in the
case of each
Tenant to the applicable Facility(ies) identified as being
leased to such Tenant
on SCHEDULE 1 attached hereto.
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1.4. EXERCISE OF RENEWAL OPTIONS.
1.4.1. Tenant may exercise a Renewal Option with respect to
all, but not less than all, of the Premises by providing written
notice to
Landlord of each such renewal (a "RENEWAL NOTICE") at least one
(1) year but not
more than eighteen (18) months prior to the expiration of the
Initial Term or
the first Extended Term, as applicable, on the express
conditions that, (x) each
tenant under the Other Leases simultaneously exercises the
renewal option under
each of the Other Leases, and (y) at the time Tenant gives a
Renewal Notice as
set forth above and at the commencement of the applicable
Extended Term (i) the
Tenants are the tenants originally named herein (except with
respect to any
Permitted Transfers or Deleted Properties) and an Affiliate of
Tenant is the
tenant under all of the Other Leases, (ii) Tenant or a Permitted
Transferee
actually occupies all of the Leased Property then demised under
this Lease and
an Affiliate of Tenant actually occupies all of the Other Leased
Property then
demised under the Other Leases, subject in each case, to the
rights of the
Occupants of the Leased Properties and the Other Leased
Properties and (iii) no
Event of Default exists under this Lease or the Other Leases or
would exist but
for the passage of time or the giving of notice, or both. During
each Extended
Term, all of the terms and conditions of this Lease shall
continue in full force
and effect, except that the Fixed Rent for the initial Lease
Year of any
Extended Term shall be the greater of: (a) then current Fixed
Rent in effect at
the expiration of the Initial Term or the first Extended Term,
as applicable,
increased and adjusted upwards pursuant to the formula contained
in SECTION
3.1.2 hereof; or (b) Fair Market Rental. The Fixed Rent payable
by Tenant to
Landlord for any subsequent Lease Year during an Extended Term
shall escalate
pursuant to, and in accordance with, SECTION 3.1.2 hereof. The
Fixed Rent shall
not be reduced by reason of any costs or expenses saved by
Landlord by reason of
Landlord's not having to find a new tenant for such Leased
Property (including,
without limitation, brokerage commissions, costs of
improvements, rent
concessions or lost rental income during any vacancy period).
Within ninety (90)
days after receipt by Landlord from Tenant of a Renewal Notice,
the Fair Market
Rental of each Leased Property shall be determined pursuant to
the appraisal
procedure described in SECTION 43 below.
1.4.2. The determination of Fixed Rent does not reduce the
Tenant's obligation to pay Additional Rent as set forth in the
Lease, and Tenant
shall continue to pay such Additional Rent, including
escalations as set forth
in the Lease during any Extension Term.
1.4.3. If Tenant does not give the Renewal Notice within the
period set forth in SECTION 1.4.1 above, Tenant's right to
extend the Lease Term
shall automatically terminate. Time is of the essence as to the
giving of any
Renewal Notice.
1.4.4. Landlord shall have no obligation to refurbish or
otherwise improve the Leased Property for any Extension Term.
The Premises shall
be tendered on the commencement date of any Extension Term in
"as-is" condition.
2. DEFINITIONS. For all purposes of this Lease, except as
otherwise
expressly provided or unless the context otherwise requires, (i)
all accounting
terms not otherwise defined herein have the meanings assigned to
them in
accordance with GAAP, (ii) all references in this
3
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Lease to designated "Sections", "Subsections" and other
subdivisions are to the
designated Sections, Subsections and other subdivisions of this
Lease, (iii) the
words "herein", "hereof" and "hereunder" and other words of
similar import refer
to this Lease as a whole and not to any particular Section,
Subsection or other
subdivision, and (iv) the terms defined in EXHIBIT "B" attached
hereto have the
meanings assigned to them in such exhibit and include the plural
as well as the
singular.
3. RENT.
3.1. FIXED RENT.
3.1.1. RENTAL PAYMENTS. Tenant shall pay to Landlord, in
advance and without demand, on or prior to the first (1st) day
of each calendar
month during the Term, in lawful money of the United States of
America, by wire
transfer and pursuant to the wiring instructions attached hereto
as SCHEDULE
3.1.1, or at such place or to such Person(s) as Landlord from
time to time may
designate in writing, the Fixed Rent (and Additional Rent in
those instances
described in SECTION 3.3 below) payable in respect of such
month. Landlord may,
by written notice to Tenant at any time and from time to time,
elect to require
that Rent (or portions thereof designated by Landlord) owing
hereunder be paid
to a lock box. Fixed Rent (and Additional Rent in those
instances described in
SECTION 3.3 below) shall be paid in equal, consecutive monthly
installments;
provided, however, that the first payment of Fixed Rent (and the
aforesaid
Additional Rent) shall be payable on the date hereof, and
prorated for the
period from and including the date hereof through January 31,
2004, and the last
monthly payment of Fixed Rent (and the aforesaid Additional
Rent) shall be
prorated as to any partial month.
3.1.2. RENTAL AMOUNTS. Fixed Rent for the First Lease Year
shall be Three Million Two Hundred Seventy Thousand Three
Hundred Twenty-Two and
No/100 Dollars per annum ($3,270,322.00), payable in equal
monthly installments
of Two Hundred Seventy-Two Thousand Five Hundred Twenty-Six and
83/100 Dollars
($272,526.83). Each Tenant's allocable share of Fixed Rent shall
be equal to the
initial amount with respect to such Tenant set forth on SCHEDULE
2 attached
hereto (the "ALLOCATED RENT"). Commencing on the first day of
the second (2nd)
Lease Year of the Initial Term, and on the first day of each
Lease Year
thereafter during the Term, the Fixed Rent (and, with respect to
each Leased
Property. the Allocated Rent) for such Lease Year shall be an
amount equal to
the sum of (i) the Prior Period Fixed Rent (and, with respect to
each Leased
Property, the Prior Period Allocated Rent) applicable to such
Lease Year, plus
(ii) an amount equal to the product of (a) the Prior Period
Fixed Rent (and,
with respect to each Leased Property, the Prior Period Allocated
Rent)
applicable to such Lease Year and (b) the greater of (x) one and
one half
percent (1.5%) or (y) seventy five percent (75%) of the actual
CPI Increase,
expressed as a percentage, for such Lease Year for which such
calculation is
being performed.
3.1.3. FIXED RENT DETERMINATIONS. Promptly after the
publication of the Cost of Living Index for the tenth (10th)
month during any
Lease Year, Landlord shall calculate the CPI Increase and the
Fixed Rent for the
next Lease Year and submit its determination of Fixed Rent for
the next Lease
Year for Tenant's approval, which determination
4
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shall be deemed approved, absent written notice from Tenant
setting forth with
reasonable specificity and detail any manifest errors in such
determination by
Landlord within five (5) days after its submission to Tenant.
The determination
of Fixed Rent by Landlord shall be deemed correct and approved
by Tenant absent
manifest error in its determination on the part of Landlord. In
the event
Landlord and Tenant are unable to determine Fixed Rent for any
Lease Year on or
prior to the commencement of such Lease Year, Tenant shall pay
Fixed Rent for
such Lease Year assuming a one and one-half percent (1.5%)
increase over the
Prior Period Fixed Rent applicable to such Lease Year until the
correct Fixed
Rent is determined for such Lease Year. If the Fixed Rent
ultimately determined
for any such Lease Year exceeds the assumed amount, Tenant shall
pay any
deficiency with the first installment of Fixed Rent owing after
such
determination is made. If the Fixed Rent ultimately determined
for any such
Lease Year is less than the assumed amount, any excess amounts
paid by Tenant on
account of the Fixed Rent for such Lease Year shall be credited
against the next
installment of Fixed Rent due and owing hereunder. At either
party's written
request, following the determination of Fixed Rent for a
particular Lease Year,
both parties shall, not later than five (5) Business Days after
the
non-requesting party's receipt of such request, execute and
enter into a written
instrument memorializing the amount of such Fixed Rent provided,
however, the
failure to enter such written instrument shall not relieve
Tenant of its
obligation to pay Fixed Rent as determined hereunder.
3.2. ADDITIONAL RENT. In addition to Fixed Rent, Tenant shall
pay
and discharge as and when due and payable the following
(collectively
"ADDITIONAL RENT") (any reasonable costs or expenses paid or
incurred by
Landlord on behalf of Tenant that constitute Additional Rent
shall be reimbursed
by Tenant to Landlord within ten (10) days after the
presentation by Landlord to
Tenant of invoices therefor):
3.2.1. IMPOSITIONS. Tenant shall pay all Impositions prior
to
delinquency, levied or accruing for any period during the Term
regardless of
when due and payable, and in any event before any fine, penalty,
interest or
cost may be added for non-payment, such payments to be made
directly to the
taxing authorities where feasible. Impositions accruing in
respect of any
periods prior to or after the Term shall be prorated between
Landlord and
Tenant. Tenant shall, promptly upon request, furnish to Landlord
copies of
official receipts or other satisfactory evidence of 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 same (and any accrued
interest on the
unpaid balance of such Imposition) in installments (provided no
such
installments shall extend beyond the Term) and, in such event,
shall pay such
installments during the Term before any fine, penalty, premium,
further interest
or cost may be added thereto.
3.2.2. UTILITY CHARGES. Tenant shall pay any and all charges
for electricity, power, gas, oil, water, sanitary and storm
sewer, refuse
collection, medical waste disposal and other utilities used or
consumed in
connection with each Leased Property during the Term. In the
event Landlord is
billed directly by any utility company for any utilities or
services supplied to
Tenant during the Term, Landlord shall send Tenant the bill and
Tenant shall pay
the
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same before it is due, provided that Landlord has sent the bill
to Tenant at
least ten (10) days prior to the due date. Tenant agrees that,
in the event
Landlord has not sent the bill ten (10) days prior to the due
date, Tenant shall
use best efforts to pay the bill before it is due, and in any
event will pay
said bill within ten (10) days of receipt of said bill from
Landlord.. Landlord
shall have no obligation or liability with respect to any
interruption or
failure in the supply of any such utilities.
3.2.3. INSURANCE PREMIUMS. Tenant shall pay all premiums for
the insurance coverage required to be maintained pursuant to
SECTION 14 hereof,
and obtain reimbursement for such premiums from the Insurance
Escrow in
accordance with SECTION 3.3.2.
3.2.4. OTHER CHARGES. Tenant shall pay all other amounts,
liabilities, obligations, costs and expenses paid or incurred
with respect to
the ownership (not including any debt service payments on any
Landlord
financing), repair, replacement, restoration, maintenance and
operation of the
Premises.
3.2.5. LATE PAYMENT OF RENT. If any installment of Fixed
Rent
or Additional Rent (but only as to those Additional Rent
payments that are
payable directly to Landlord or Landlord's agent or assignee)
shall not be paid
by the fifth (5th) day following its due date, Tenant shall pay
to Landlord for
such overdue installment, on demand, interest 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 Rent when due, Tenant shall in addition promptly pay
and discharge,
as Additional Rent, every fine, penalty, interest and cost that
may be added for
non-payment or late payment of such items.
3.2.6. CONSENT EXPENSES. Tenant shall pay, as Additional
Rent,
on behalf of Landlord, or reimburse Landlord for, any and all
actual
out-of-pocket costs or expenses paid or incurred by Landlord
relating to any
request made by Tenant of Landlord or relating to expenses
incurred in
connection with a default by Tenant, including, without
limitation, reasonable
attorneys' fees, in connection with any of the following
activities undertaken
by or on behalf of Landlord under this Lease: (i) the review,
execution,
negotiation or delivery of any consent, waiver, estoppel,
subordination
agreement or approval requested of Landlord by Tenant hereunder,
including,
without limitation, any request for consent to Alterations, any
so-called
"landlord's waiver"; (ii) the review by Landlord or Landlord's
Representatives
of any Plans and Specifications or Restoration Plans and
Specifications; (iii)
the review by Landlord or Landlord's Representatives of any
request by Tenant
for any other approval or consent hereunder, or any waiver of
any obligation of
Tenant hereunder; (iv) the negotiation by Landlord or Landlord's
Representatives
of the terms of instruments requested by Landlord of Tenant in
connection with
any Facility Mortgage; (v) any assistance provided by Landlord
in connection
with a permitted contest pursuant to SECTION 13; (vi) any other
negotiation,
request or other activity comparable to any of the foregoing
(collectively, such
expenses, "CONSENT EXPENSES"). Tenant shall reimburse Landlord
for (or pay on
behalf of Landlord) any Consent Expenses within ten (10) days
after the
presentation by Landlord to Tenant of invoices therefor.
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3.3. ESCROW DEPOSITS.
3.3.1. ESCROW RELATIVE TO IMPOSITIONS. Tenant shall, on the
date the first payment of Fixed Rent is due hereunder (the
"ESCROW COMMENCEMENT
DATE"), and on the first day of each of the next eleven calendar
months
thereafter, pay to and deposit with Landlord a sum equal to one
twelfth (1/12th)
of the Impositions to be levied, charged, filed, assessed or
imposed upon or
against the Premises during such twelve (12) month period (it
being agreed that
such payments and deposits only need to be made for such first
twelve (12)
months commencing on the Escrow Commencement Date). The amounts
so deposited
shall be held as provided herein to secure Tenant's obligations
to pay
Impositions pursuant to SECTION 3.2.1 (the "IMPOSITION ESCROW").
If the amount
of the Impositions to be levied, charged, filed, assessed or
imposed, during the
twelve (12) months following the Escrow Commencement Date cannot
be determined
as of the Escrow Commencement Date, such amount for the purpose
of computing the
deposit to be made by Tenant into the Imposition Escrow shall be
estimated by
Landlord with an appropriate adjustment to be promptly made
between Landlord and
Tenant as soon as such amount becomes determinable. Landlord
may, at its option,
from time to time require that any particular monthly deposit be
greater than
one-twelfth (1/12th) of the estimated Impositions payable during
the twelve (12)
months after the Escrow Commencement Date, if such additional
deposit would be
required to provide a sufficient amount in the Imposition Escrow
to secure
payment of such Impositions not later than the due date thereof.
The actual or
estimated amounts of Impositions in the Imposition Escrow shall
be adjusted
annually so that the amount held in the Impositions Escrow is
equal to the
Impositions estimated to be paid by Tenant during such year. In
the event of any
deficiency, Landlord shall notify Tenant thereof and Tenant
shall promptly
deliver to Landlord the amount of such deficiency within ten
(10) days of
Landlord's written request therefor. The Impositions Escrow
shall be held by
Landlord for the Term of the Lease and be used by Landlord
pursuant to SECTION
3.3.4 and returned to Tenant pursuant to SECTION 3.3.6.
3.3.2. ESCROW RELATIVE TO INSURANCE. Tenant shall, on the
Escrow Commencement Date, and on the first day of each calendar
month thereafter
during the Term, pay to and deposit with Landlord a sum equal to
(i) one twelfth
(1/12th) of the premiums for the insurance policies required
pursuant to SECTION
14 hereof that are payable during the twelve (12) months after
the Escrow
Commencement Date (or any subsequent twelve (12) month
period)(the "INSURANCE
ESCROW"). If the amount of the insurance premiums to be paid,
during the twelve
(12) months following the Escrow Commencement Date (or for any
subsequent twelve
(12) month period hereunder) cannot be determined as of the
Escrow Commencement
Date (or the commencement of any subsequent twelve (12) month
period), such
amount for the purpose of computing the deposit to be made by
Tenant hereunder
shall be estimated by Landlord with an appropriate adjustment to
be promptly
made between Landlord and Tenant as soon as such amount becomes
determinable.
Tenant shall deliver to Landlord copies of all notices, demands,
claims, bills
and receipts in relation to the insurance premiums promptly upon
receipt thereof
by Tenant. The actual or estimated amounts of insurance premiums
in the
Insurance Escrow Account shall be adjusted annually.
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3.3.3. LANDLORD'S DEPOSIT. The escrow deposits made by
Tenant
pursuant to this SECTION 3.3 shall be deposited by Landlord in a
segregated
interest-bearing account (which account may include amounts held
by Landlord
pursuant to this Lease or Other Landlords pursuant to the Other
Leases) (the
"ESCROW ACCOUNT") of Landlord or with any Facility Mortgagee, in
the sole
discretion of Landlord. Landlord shall not be liable to Tenant
or any other
Person for any consequent loss of principal or interest on funds
held in the
Escrow Account other than as a result of a bankruptcy or the
willful misconduct
of Landlord or Other Landlords or other action by or on account
of any creditor
of Landlord or Other Landlords. Furthermore, neither Landlord or
Other Landlords
nor any Facility Mortgagee shall bear responsibility for the
financial condition
of, nor any act or omission by, any Lending Institution at which
the Escrow
Account is located. The interest from such deposits shall be
retained in the
Escrow Account to be applied in accordance with the terms of
this SECTION 3.3.
3.3.4. USE OF DEPOSITS. Tenant shall pay any and all
Impositions and insurance premiums when due, regardless of
whether or not the
funds then held in the Escrow Account are sufficient to
reimburse Tenant
therefor (it being understood that Tenant will not be reimbursed
for
Impositions). The sums deposited by Tenant under this SECTION
3.3 shall be held
by Landlord or any Facility Mortgagee, and, with respect to
insurance premiums,
provided that no Event of Default exists hereunder, shall be
used to reimburse
Tenant for insurance premiums, paid by Tenant, upon delivery by
Tenant to
Landlord or such Facility Mortgagee, as applicable, of
documentation evidencing
the payment of such insurance premiums, which reimbursement
shall be provided
within ten (10) days after the presentation of such evidence. If
Tenant fails to
pay any Impositions or insurance premiums when due and owing
hereunder to the
applicable taxing authority or insurance carrier, Landlord or
any Facility
Mortgagee may, but shall not be obligated to, pay such
Impositions or insurance
premiums from any funds in the Escrow Account and Tenant shall
promptly repay in
full (but in any event within five (5) Business Days of such
payment by Landlord
or any Facility Mortgagee) such amount so paid by Landlord or
Facility
Mortgagee. Upon the occurrence of any Event of Default, Landlord
may apply any
funds held in the Escrow Account to cure such Event of Default
or on account any
damages suffered or incurred by Landlord in connection
therewith.
3.3.5. DEFICITS. Landlord shall have no liability whatsoever
to Tenant if any deposits held by Landlord under this SECTION
3.3 are not
sufficient to reimburse Tenant for any insurance premium paid by
Tenant.
Landlord may change its estimate of any Imposition or insurance
premium for any
period on the basis of a change in an assessment or tax rate or
of a prior
miscalculation or for any other good faith reason. In such
event, Tenant shall
deposit with Landlord the amount in excess of the sums
previously deposited with
Landlord for the applicable period within ten (10) days after
Landlord's request
therefor.
3.3.6. TRANSFERS; REFUND. In connection with any assignment
of
the Landlord's interest under this Lease, the assigning Landlord
or any
predecessor shall have the right to transfer all amounts
deposited pursuant to
the provisions of this SECTION 3.3 and still in its possession
to such assignee
and, upon such transfer, the assigning Landlord or any such
predecessor, as the
case may be, transferring the deposits shall thereupon be
completely released
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from all liability with respect to such deposits so transferred,
and Tenant
shall look solely to said assignee in reference thereto. As of
the Expiration
Date, any sums held by Landlord under this SECTION 3.3
(inclusive of interest
accrued thereon) shall be returned to Tenant, only as and when
the conditions of
the second to last sentence of SECTION 3.4.4 for the return of
the Security
Deposit have been met and provided that any and all Impositions
or insurance
premiums due and owing hereunder have been paid in full.
3.4. SECURITY DEPOSIT.
3.4.1. CASH SECURITY DEPOSIT; APPLICATION. Unless Tenant has
made the LC Election, Tenant shall pay to Landlord upon the
delivery of this
Lease an amount equal to one (1) month of Fixed Rent (subject to
increase as
described in SECTION 3.4.4 below, the "SECURITY AMOUNT") as
security (the
"SECURITY DEPOSIT") for the full and faithful performance by
Tenant of each and
every term, provision, covenant and condition of this Lease.
Upon the occurrence
of an Event of Default and during the continuation thereof,
Landlord may, but
shall not be required to, use, apply or retain the whole or any
part of the
Security Deposit (whether by drawing upon the Letter of Credit
or applying the
cash Security Deposit held by it) for the payment of any Rent in
default or for
any other sum that Landlord may expend or be required to expend
by reason of
such Event of Default, including any damages or deficiency in
the reletting of
the Premises, whether such damages or deficiency accrue before
or after summary
proceedings or other re-entry by Landlord. Tenant shall be
entitled to any
interest on the Security Deposit and Landlord shall hold the
Security Deposit in
a segregated account (which account may include amounts held by
Landlord
pursuant to this Lease and amounts held by the Other Landlords
pursuant to the
Other Leases). Provided no Event of Default exists, interest
earned thereon
shall be distributed to Tenant on the last day of each Lease
Year during the
Term. In case of a sale or transfer of the Premises by Landlord,
or any
cessation of Landlord's interest therein, whether in whole or in
part, Landlord
shall pay over any unapplied part of the Security Deposit (or,
in the case of
any such partial transfer or cessation, such portion as Landlord
allocates to
such part of the Premises, in its reasonable discretion) or
transfer the Letter
of Credit if the LC Election has been made, with any fees
incident to such
transfer being paid by Tenant (which transfer, in the case of
any such partial
transfer or cessation, shall require Tenant to cause the Letter
Credit to be
reissued as separate Letters of Credit satisfying the
requirements of SECTION
3.4.2 as to the remaining Leased Properties) to the successor
owner of the
Premises, and from and after such payment, Landlord shall be
relieved of all
liability with respect thereto. The provisions of the preceding
sentence shall
apply to every subsequent sale or transfer of the Premises or
any part thereof.
3.4.2. LC ELECTION. At any time, and from time to time,
Tenant
may elect (such election, a "LC ELECTION"), in its sole
discretion and by
written notice to Landlord, to post the Security Deposit in the
form of an
irrevocable, standby Letter of Credit with a face value of the
full Security
Amount (the "LETTER OF CREDIT"). Within ten (10) days after
notice of an LC
Election, Tenant shall deliver to Landlord a Letter of Credit
satisfying the
requirements of this SECTION 3.4.2 in the place and stead of the
cash Security
Deposit, whereupon Landlord shall return any unapplied portion
of a cash
Security Deposit then held by Landlord. The Letter of
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Credit shall: (a) be in form and substance reasonably acceptable
to Landlord;
(b) name Landlord as its sole beneficiary; (c) expressly allow
Landlord to draw
upon it at any time, or from time to time, in whole or in part,
by delivering to
the issuer, at an office of the issuer located in New York, New
York,
Louisville, Kentucky or Chicago, Illinois, the original letter
of credit
together with a written notice that Landlord is entitled to draw
thereon
pursuant to the terms of this Lease; (d) be issued by an
FDIC-insured Lending
Institution that is reasonably satisfactory to Landlord, but
shall in all events
have a credit rating of "AA" (or the equivalent) or higher from
one of the
Rating Agencies; and (e) be expressly unconditional, irrevocable
and fully
transferable subject to such reasonable and customary fees and
conditions
specified in the approved Letter of Credit as the issuer may
impose. The Letter
of Credit (and any renewals or replacements thereof) shall be
for a term of not
less than one (1) year. Tenant agrees that it shall from time to
time, as
necessary, (i) renew or replace the original and any subsequent
Letter of Credit
not less than thirty (30) days prior to its stated expiration
date so that it
will remain in full force and effect until the later of thirty
(30) days after
the last day of the Term or the date on which Tenant's
obligations under this
Lease are satisfied in full or (ii) deliver a cash Security
Deposit in the
Security Amount not less than thirty (30) days prior to the
stated expiration
date of such Letter of Credit. If Tenant fails to furnish such
renewal or
replacement at least 30 days prior to the stated expiration date
of the Letter
of Credit or the issuer fails to maintain an "AA" or higher
rating and Letter of
Credit is not replaced within ten (10) days of Landlord's
notice, Landlord, or
its successor, may immediately draw upon such Letter of Credit
and, hold the
proceeds thereof as a cash Security Deposit pursuant to the
terms of this Lease.
Any renewal of or replacement for the original or any subsequent
Letter of
Credit shall be in an amount not less than the Security Amount
and shall
otherwise meet the requirements for the original Letter of
Credit as set forth
above.
3.4.3. RELEASE/RESTORATION OF SECURITY DEPOSIT.
3.4.3.1 RELEASE. Provided no Event of Default exists under this
Lease or
the Other Leases, or would exist but for the passage of time or
the giving of
notice, or both, upon written request of Tenant, if the
Portfolio Coverage Ratio
is 1:40:1.00 or greater for twelve (12) consecutive months after
the
Commencement Date, the Security Deposit or Letter of Credit, as
applicable,
shall be returned to Tenant within fifteen (15) days of Tenant's
request,
provided Tenant has provided Landlord with the necessary backup
documentation
supporting the calculation of the Portfolio Coverage Ratio.
Prior to any return
of the Security Deposit or Letter of Credit based upon a
calculation of the
Portfolio Coverage Ratio, the Landlord may, based upon
Landlord's reasonable
belief that such calculation is incorrect, delay such return
until such time as
it has conducted an audit of such calculation to be conducted at
its sole cost
and expense by an auditor of its choice. In the event Landlord
elects to have an
audit performed, Landlord shall provide Tenant written notice
within the
foregoing 15-day period informing Tenant that such audit is
being conducted (the
"AUDIT NOTICE"). Such audit must be completed within thirty (30)
days of the
date of the Audit Notice. If Landlord's audit reveals a
discrepancy such that
the Portfolio Coverage Ratio as determined by Landlord's audit
is less than
1.40:1.00, then Tenant shall reimburse Landlord for the cost of
such audit, and
the Security Deposit or Letter of Credit, as applicable, shall
not be released.
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3.4.3.2 RESTORATION. In the event the Security Deposit or Letter
of Credit
has been returned to Tenant and thereafter the Portfolio
Coverage Ratio
subsequently falls below 1:25:1.00, Tenant shall be required to
restore the
Security Deposit or post the Letter of Credit in the amount that
would have been
required pursuant to SECTION 3.4.4 as if the Security Deposit or
Letter of
Credit had never been released.
3.4.3.3 SUBSEQUENT RELEASE/RESTORATION. After the restoration of
the
Security Deposit or Letter of Credit in accordance with SECTION
3.4.3.2, then,
provided no Event of Default exists under this Lease or the
Other Leases, or
would exist but for the passage of time or the giving of notice,
or both, upon
written request of Tenant, if the Portfolio Coverage Ratio once
again is
1:40:1.00 or greater, then the release and restoration
provisions of SECTION
3.4.3.1 and SECTION 3.4.3.2 shall apply. In the event the
Security Deposit or
Letter of Credit, as applicable, has been returned and restored
five (5) times
over the course of the Term of the Lease, then Tenant shall have
no further
right to a release of the Security Deposit pursuant to this
SECTION 3.4.3.
3.4.4. INCREASE OR DECREASE; REPLACEMENT OF SECURITY
DEPOSIT.
Tenant, within fifteen (15) days after any increase in Fixed
Rent hereunder,
shall deposit with Landlord cash in, or increase the face amount
of the Letter
of Credit by, the amount necessary to ensure that the Security
Deposit hereunder
continues to be equal to one (1) month's annual Fixed Rent based
upon the
increased Fixed Rent from time to time due hereunder. In the
event the Security
Deposit (or any portion thereof) is applied (or drawn upon from
time to time in
full or partial amounts in the case of the Letter of Credit and
any renewals or
replacements thereof) by Landlord on account of any Event(s) of
Default by
Tenant hereunder or as otherwise expressly provided in this
SECTION 3.4, Tenant
shall replenish said Security Deposit in full, within fifteen
(15) days after
demand therefor, by paying to Landlord the amount so applied or,
in the case of
the Letter of Credit, restoring the Letter of Credit to its full
amount.
Tenant's failure to timely replenish and restore the Security
Deposit as
aforesaid shall be an Event of Default. If: (a) no Event of
Default has occurred
and is continuing hereunder and (b) Tenant has fully performed
and satisfied all
of its obligations under the Lease (including, without
limitation and as
applicable, its obligations relative to any Operational
Transfer(s)), then the
Security Deposit, or the remaining unapplied portion thereof,
shall be paid or
returned to Tenant within thirty five (35) days after the
expiration or
termination of this Lease and the surrender of the Premises to
Landlord in the
condition required hereunder; provided, however, that Landlord
may retain an
amount, as it shall reasonably determine, to secure the payment
of any Rent, the
amount of which Landlord is then unable to determine finally
(and Landlord shall
return any such retained amount to Tenant promptly following the
final
determination of such Rent amount and the full payment to
Landlord of such
Rent). The Security Deposit shall not be deemed an advance
payment of Rent or a
measure of Landlord's damages for any default hereunder by
Tenant, nor shall it
be a bar or defense to any action that Landlord may at any time
commence against
Tenant.
3.5. DEFERRED MAINTENANCE DEPOSIT. Landlord has deposited the
amount
set forth in SCHEDULE 3.5 (the "DEFERRED MAINTENANCE DEPOSIT" )
as a reserve for
the completion of those capital repair items set forth on
SCHEDULE 3.5 (the
"CAPITAL REPAIR ITEMS"). Tenant shall
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be entitled to any interest on the Deferred Maintenance Deposit
and Landlord
shall hold the Deferred Maintenance Deposit in a segregated
account (which
account may include amounts held by Landlord pursuant to this
Lease and amounts
held by the Other Landlords pursuant to the Other Leases). The
Deferred
Maintenance Deposit is specifically allocated among the Capital
Repair Items
(each such allocation, an "ALLOWANCE AMOUNT") as such
allocations are more fully
set forth on SCHEDULE 3.5. Tenant shall act diligently and in
good faith to
cure, repair, or replace, as applicable, the Capital Repair
Items. Landlord
shall reimburse Tenant for the cost incurred by the Tenant to
cure, repair or
replace any Capital Repair Item from the Deferred Maintenance
Deposit up to an
amount not to exceed the applicable Allowance Amount for any
Capital Repair Item
or the amount of the Deferred Maintenance Deposit for all
Capital Repair Items.
Landlord shall provide such reimbursement to Tenant upon receipt
of Tenant's
written request therefor, only at such time as the Capital
Repair Item has been
completed to Landlord's reasonable satisfaction and Tenant has
presented
satisfactory evidence (in the form of final lien waivers from
all contractors
and subcontractors) that any portion of the cost of such Capital
Repair Item
required to be paid by Tenant hereunder has been paid in full.
Tenant may not
make a reimbursement request in an amount less than One Hundred
Thousand and
No/100 Dollars ($100,000) until such time that the Deferred
Maintenance Deposit
Amount is less than Hundred Thousand and No/100 Dollars
($100,000). Any cure,
repair or replacement of a Capital Repair Item at the Facility
shall be
performed by the Tenant subject to, and in accordance with, the
terms of SECTION
11.2 of this Lease applicable to such activities. If the cost
incurred by Tenant
to complete a Capital Repair Item exceeds the applicable
Allocated Amount, such
excess cost shall be paid by Tenant without contribution from
Landlord. Any
Capital Repair Item shall be repaired, cured, or replaced in a
good, workmanlike
and lien free fashion. If any part of the Deferred Maintenance
Deposit has not
been applied by Landlord towards the cost of Capital Repair
Items after the
completion of all Capital Repair Items in accordance with the
requirements of
this SECTION 3.5, Landlord shall promptly pay such amounts to
Tenant within ten
(10) days following Tenant's written request therefor. If Tenant
has not
repaired, cured or replaced the Capital Repair Items within
twelve (12) months
after Commencement Date, Landlord shall have the right to
repair, maintain,
replace or cure such Capital Repair Items on behalf of Tenant
and at Tenant's
sole cost. Any costs so incurred by Landlord shall first be
deducted from the
Deferred Maintenance Deposit. If the cost incurred by Landlord
to perform any
such Capital Repair Items exceeds the remaining Deferred
Maintenance Deposit,
Tenant shall promptly, and in any event within ten (10) days,
reimburse Landlord
for such excess costs. Delinquent amounts owing from Tenant to
Landlord pursuant
to this SECTION 3.5 shall bear interest at the Overdue Rate.
3.6. NET LEASE. The Rent shall be paid absolutely net to
Landlord,
free of all Impositions, utility charges, operating expenses,
insurance premiums
or any other charges or expenses in connection with the
Premises, without any
rights of deduction, set-off or abatement, so that this Lease
shall yield to
Landlord the full amount of the installments of Fixed Rent,
throughout the Term.
This Lease is intended to be and shall be construed as an
absolutely net lease
pursuant to which Landlord shall not, under any circumstances or
conditions,
whether presently existing or hereafter arising, and whether
foreseen or
unforeseen by the parties, be
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required to make any payment or expenditure of any kind
whatsoever or be under
any other obligation or liability whatsoever, except as
expressly set forth
herein.
3.7. LEASE GUARANTY. On the date hereof, Tenant shall cause to
be
delivered to Landlord the Lease Guaranty made by Guarantor
guaranteeing all of
Tenant's obligations under this Lease.
4. IMPOSITIONS.
4.1. PAYMENT OF IMPOSITIONS. Subject to SECTION 13 relating
to
permitted contests, Tenant shall pay all Impositions as set
forth in SECTION
3.2.1 accruing for any tax period occurring during the Term,
irrespective of
whether the Impositions for such tax period are due and payable
during or after
the Term. Tenant's obligation to pay such Impositions shall be
deemed absolutely
fixed upon the date such Impositions become a lien upon the
Leased Property or
any part thereof. If any refund shall be due from any taxing
authority in
respect of any Imposition paid by Tenant during the Term, the
same shall be paid
over to or retained by Tenant but only if no Event of Default
shall have
occurred hereunder and be continuing. If an Event of Default
shall exist
hereunder, such refund shall be paid over to and retained by
Landlord until such
Event of Default has been cured or corrected, if at all, unless
such refund has
been applied by Landlord in connection with SECTION 17.4. If
Tenant nevertheless
receives such refund, Tenant shall, upon receipt, immediately
pay such refund
over to Landlord in full. Any such funds retained by Landlord
due to an Event of
Default shall be applied to Tenant's obligations under this
Lease as Landlord
shall determine in its sole discretion. In the event any
Governmental Authority
classifies any property covered by this Lease as personal
property, Tenant shall
file any personal property tax returns that are required with
respect thereto.
Subject to the terms of SECTION 13, Tenant may, upon notice to
Landlord, at
Tenant's option and at Tenant's sole cost and expense, protest,
appeal, or
institute tax contests to effect a reduction of real estate or
personal property
assessments and Landlord, at Tenant's expense as aforesaid,
shall cooperate with
Tenant in such protest, appeal, or other action to the extent
required by law
and reasonably requested by Tenant.
4.2. NOTICE OF IMPOSITIONS. Landlord or Landlord's designee
shall
use reasonable efforts to give prompt notice to Tenant of all
Impositions
payable by Tenant hereunder of which Landlord at any time has
knowledge (which
notice shall be deemed properly given if given pursuant to
SECTION 33 hereof and
may be concurrently delivered by an e-mail notification to
Tenant at
stany@brookdaleliving.com and sbeck@brookdaleliving.com or such
other e-mail
address as provided to Landlord by notice pursuant to SECTION
33), provided,
however, that any failure by Landlord to provide such notice to
Tenant shall in
no way relieve Tenant of its obligation to timely pay the
Impositions; provided
that Tenant has received notice of such Impositions prior to the
date on which
any Imposition is due. Tenant shall deliver to Landlord, on or
before the due
date of each Imposition, copies of the invoice for such
Imposition, the check
delivered for payment thereof and an original receipt evidencing
such payment or
other proof of payment satisfactory to Landlord.
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4.3. ADJUSTMENT OF IMPOSITIONS. Any Imposition imposed in
respect of
the tax-fiscal period during which the Term terminates or
expires shall be
adjusted and prorated between Landlord and Tenant, whether or
not such
Imposition is imposed before or after such termination or
expiration, and
Tenant's obligation to pay its prorated share thereof shall
survive such
termination or expiration.
5. NO AFFECT OR IMPAIRMENT, ETC. The respective obligations of
Landlord
and Tenant shall not be affected or impaired by reason of (a)
any damage to, or
destruction of, any Leased Property or any portion thereof, from
whatever cause,
or any Condemnation of any Leased Property or any portion
thereof (except as
otherwise expressly and specifically provided in SECTION 15 or
SECTION 16), (b)
the interruption or discontinuation of any service or utility
servicing any
Leased Property, (c) the lawful or unlawful prohibition of, or
restriction upon,
Tenant's use of any Leased Property, or any portion thereof, due
to the
interference with such use by any Person or eviction by
paramount title, (d) any
claim that Tenant has or might have against Landlord on account
of any breach of
warranty or default by Landlord under this Lease or any other
agreement by which
Landlord is bound, (e) any bankruptcy, insolvency,
reorganization, composition,
readjustment, liquidation, dissolution, winding up or other
proceedings
affecting Landlord or any assignee or transferee of Landlord,
(f) the
revocation, suspension or non-renewal of any license, permit,
approval or other
Authorization, or (g) for any other cause whether similar or
dissimilar to any
of the foregoing other than a discharge of Tenant from any such
obligations as a
matter of law. Tenant hereby specifically waives all rights,
arising from any
occurrence whatsoever, which may now or hereafter be conferred
upon it by law
(i) to modify, surrender or terminate this Lease or quit or
surrender any Leased
Property or any portion thereof, or (ii) that would entitle
Tenant to any
abatement, reduction, suspension or deferment of the Rent or
other sums payable
by Tenant hereunder. The obligations of Landlord and Tenant
hereunder shall be
separate and independent covenants and agreements and the Rent
and all other
sums payable by Tenant hereunder shall continue to be payable in
all events
unless otherwise expressly provided herein.
6. PREMISES; TENANT'S PERSONAL PROPERTY.
6.1. OWNERSHIP OF THE PREMISES. Tenant acknowledges that the
Premises are the property of Landlord and that Tenant has only
the right to the
possession and use of the Premises upon and subject to the terms
and conditions
of this Lease.
6.2. TENANT'S PERSONAL PROPERTY. Tenant may (and shall as
provided
herein below), at its sole expense, install, affix or assemble
or place on any
parcels of the Land or in any of the Leased Improvements, any
items of Tenant's
Personal Property and Tenant shall, subject to the terms of
SECTION 21.1.1 and
the conditions set forth below, and except for any Tenant's
Personal Property
that is purchased by Landlord pursuant to SECTION 35, remove the
same upon the
expiration or any prior termination of the Term as it relates to
any Leased
Property(ies) upon which the same are located. Tenant shall
provide and maintain
during the entire Term all such Tenant's Personal Property and
Landlord's
Personal Property as shall be necessary to maintain the
Authorizations in effect
and to operate each Facility in compliance with all licensure
and
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certification requirements, and all applicable Legal
Requirements and Insurance
Requirements and otherwise in accordance with customary practice
in the industry
for the Primary Intended Use of each Leased Property. All of
Tenant's Personal
Property not removed on or prior to the expiration or earlier
termination of
this Lease shall be considered abandoned by Tenant and may be
appropriated,
sold, destroyed or otherwise disposed of by Landlord without
first giving notice
thereof to Tenant and without any payment to Tenant and without
any obligation
to account therefor or otherwise dispose of the same in
accordance with
applicable law.
6.3. LANDLORD'S PERSONAL PROPERTY. Tenant may, from time to
time, at
Tenant's sole discretion, without notice to or approval of
Landlord, sell or
dispose of any item of Landlord's Personal Property; provided,
unless such item
is functionally obsolete, Tenant shall promptly replace such
item with an item
of similar quality, use and functionality.
7. CONDITION AND USE OF EACH LEASED PROPERTY.
7.1. CONDITION OF EACH LEASED PROPERTY. Tenant acknowledges
receipt
and delivery of possession of each Leased Property. Tenant is
leasing each
Leased Property "AS IS" "WHERE IS" and Tenant waives any claim
or action against
Landlord in respect of the condition of each Leased Property.
LANDLORD MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
ANY LEASED
PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS, DESIGN
OR CONDITION FOR
ANY PARTICULAR USE OR PURPOSE OR THE QUALITY OF THE MATERIAL OR
WORKMANSHIP
THEREIN, LATENT OR PATENT, OR OTHERWISE, IT BEING AGREED THAT
ALL SUCH RISKS ARE
TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT EACH LEASED
PROPERTY HAS BEEN
INSPECTED BY TENANT AND THAT TENANT HAS FOUND EACH LEASED
PROPERTY TO BE IN GOOD
ORDER AND REPAIR AND SATISFACTORY FOR ITS PURPOSES
HEREUNDER.
7.2. USE OF EACH LEASED PROPERTY.
7.2.1. PRIMARY INTENDED USE. During the entire Term, Tenant
shall use each Facility (including, without limitation, the
Leased Improvements
thereon) solely for its Primary Intended Use (and shall not
change, or consent
to or acquiesce in the change of, such Primary Intended Use) and
shall operate
each Facility (or cause Property Manager to operate each
Facility) in a
professional manner consistent with a high quality senior
independent living
facility and/or assisted living facility, as applicable, with
services provided
as appropriate in the relevant marketplace. No use shall be made
or permitted to
be made of any Leased Property, and no acts shall be done, that
would cause the
cancellation of any insurance policy covering such Leased
Property or any part
thereof, nor shall Tenant sell or otherwise provide to Occupants
therein
(including any tenants under the Service Leases), or permit to
be kept, used or
sold in or about such Leased Property, any article that may be
prohibited by any
Legal Requirements or by the standard form of fire insurance
policies, or any
other insurance policies required to be carried hereunder, or
fire underwriters'
regulations.
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<PAGE>
7.2.2. AUTHORIZATIONS APPURTENANT. The Authorizations for
any
Facility shall, to the maximum extent permitted by law, relate
and apply
exclusively to such Facility, and Tenant acknowledges and agrees
that, subject
to all applicable Legal Requirements, the Authorizations are
appurtenant to the
Facilities to which they apply, both during and following the
termination or
expiration of the Term. In jurisdictions where the
Authorizations are issued to
a Tenant or the Property Manager, as the Facility operator,
Tenant agrees that
to the extent permitted in accordance with applicable law (i)
such
Authorizations shall nevertheless remain the property of
Landlord and be held by
Tenant or such Property Manager, in trust for the benefit of
Landlord pursuant
to a revocable, temporary license that may be revoked by
Landlord at any time,
and (ii) in connection with an Operational Transfer or as
otherwise required by
Landlord, Tenant shall cooperate with Landlord, in accordance
with SECTION 37
hereof, to turn over all of Tenant's rights in connection with
such
Authorizations to Landlord or Successor Operator, as applicable.
This SECTION
7.2.2 shall survive the expiration or earlier termination of
this Lease.
7.3. AUTHORIZATION COLLATERAL. To the fullest extent permitted
by
applicable law, Tenant hereby grants to Landlord a first
priority security
interest in, and lien upon, all Authorizations issued to, leased
or licensed to,
or held by, Tenant, including, but not limited to, Tenant's
interest in and
rights under all licenses, with respect to the Facilities
(collectively, the
"AUTHORIZATION COLLATERAL") to secure the performance of all of
Tenant's
obligations under this Lease, including, but not limited to, its
obligation to
engage in, assist with and facilitate any Operational Transfer.
Tenant
represents and warrants to Landlord that attached hereto on
SCHEDULE 7.3 is a
detailed list and description of all of the Authorization
Collateral.
Notwithstanding anything contained herein to the contrary,
Tenant shall not
(under any circumstances) grant any lien upon, security interest
in and to or
otherwise pledge, encumber, hypothecate, transfer or assign, in
whole or in
part, the Authorization Collateral to any Person, irrespective
of the priority
of such security interest, pledge or hypothecation. The security
interest and
lien granted by this SECTION 7.3 shall be in addition to any
lien of Landlord
that may now or at any time hereafter be provided by law. The
provisions of
SECTION 21.1.1.1 below shall be applicable to the security
interest and lien
referenced in this SECTION 7.3.
7.4. GRANTING OF EASEMENTS, ETC. Landlord may, from time to
time,
with respect to any Leased Property and, unless required by law
(in which case
no Tenant consent shall be required) and upon the prior written
consent of
Tenant, which consent shall not be unreasonably withheld (and
which consent
shall be deemed given if not expressly denied by Tenant, in
writing, within ten
(10) Business Days of Tenant's receipt of such request
accompanied by the
relevant documents): (i) grant easements, covenants and
restrictions, and other
rights in the nature of easements, covenants and restrictions,
(ii) release
existing easements, covenants and restrictions, or other rights
in the nature of
easements, covenants or restrictions, that are for the benefit
of such Leased
Property, (iii) dedicate or transfer unimproved portions of such
Leased Property
for road, highway or other public purposes, (iv) execute
petitions to have such
Leased Property annexed to any municipal corporation or utility
district, (v)
execute amendments to any easements, covenants and restrictions
affecting such
Leased Property and
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(vi) execute and deliver to any Person any instrument
appropriate to confirm or
effect such grants, releases, dedications and transfers (to the
extent of its
interests in such Leased Property).
8. NEGATIVE AND AFFIRMATIVE COVENANTS OF TENANT.
8.1. NEGATIVE COVENANTS. Tenant covenants and agrees with
Landlord
that:
8.1.1. LIENS; WASTE. No Tenant shall create, incur, assume
or
suffer to exist any lien, charge, encumbrance, easement or
restriction on any
portion of any of the Premises. No Tenant shall commit or suffer
to be committed
any waste on any Leased Property, nor shall any Tenant cause or
permit any
nuisance thereon. Tenant shall not take or omit to take any
action, the taking
or omission of which may materially impair the value or the
usefulness of any
Leased Property or any part thereof for its Primary Intended
Use.
8.1.2. ISSUANCE OF EQUITY INTERESTS. No Tenant shall issue
or
allow to be created any stocks, shares, partnership or
membership interests or
other ownership interests in any Tenant, other than the stocks,
shares,
partnership or membership interests and other ownership
interests that are
outstanding on the date hereof or any security or other
instrument that is
outstanding on the date hereof and by its terms is convertible
into or
exchangeable for stock, shares, partnership or membership
interests or other
ownership interests in any Tenant, without Landlord's prior
written consent,
which consent shall not be unreasonably withheld or delayed.
8.1.3. CHANGE IN BUSINESS OR ORGANIZATIONAL STATUS. No
Tenant
shall make any material change in the scope or nature of its
business or
operations, or undertake or participate in activities other than
in continuance
of its present business. No Tenant shall amend, modify or alter
its Tenant Org
Docs in any material respect without Landlord's prior written
consent, which
consent shall not be unreasonably withheld or delayed or allow
itself to be
dissolved, voluntarily or involuntarily.
8.1.4. AFFILIATE TRANSACTIONS AND PAYMENTS. No Tenant shall
enter into, or be a party to, any transaction with an Affiliate
of any Tenant or
any of the partners, members or shareholders of any Tenant
except in the
ordinary course of business and on terms that are fully
disclosed to Landlord in
advance and are no less favorable to any Tenant or such
Affiliate than would be
obtained in a comparable arm's-length transaction with an
unrelated third party.
After the occurrence of an Event of Default and until such Event
of Default is
cured, no Tenant shall make any payments or distributions
(including, without
limitation, salaries, bonuses, fees, principal, interest,
dividends, liquidating
distributions, management fees, cash flow distributions or lease
payments) to
any Guarantor or any Affiliate of any Tenant or any Guarantor,
or any
shareholder, member, partner or other equity interest holder of
any Tenant, any
Guarantor or any Affiliate of any Tenant or any Guarantor.
Landlord acknowledges
that Tenants have entered into the Property Management Contracts
with Property
Manager, and that transactions between Property Manager and
Tenants pursuant to
the Property Management Contracts shall not be deemed a
violation of this
SECTION 8.1.4.
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8.1.5. ZONING. No Tenant shall initiate or consent to any
zoning reclassification of any portion of any of the Leased or
seek any variance
under any existing zoning ordinance or use (or permit the use
of) any portion of
any of the Leased Properties in any manner that could result in
such use
becoming a non-conforming use under any zoning ordinance or any
other applicable
land use law, rule or regulation.
8.1.6. ASSETS; INVESTING. No Tenant shall purchase or own
any
property other than property necessary for, or incidental to,
the operation of
the applicable Facility(ies) for its/their Primary Intended
Use(s). No Tenant
shall purchase or otherwise acquire, hold, or invest in
securities (whether
capital stock or instruments evidencing indebtedness) of any
Person. No Tenant
shall make loans or advances to any Person, except for cash
balances temporarily
invested in short-term or money market securities.
8.1.7. CONTRACTS. No Tenant shall execute or modify any
material contracts or agreements with respect to any Facility
except for
contracts and modifications approved by Landlord (which approval
shall not be
unreasonably withheld). Contracts made in the ordinary course of
business and in
an amount less than either (i) $100,000 or (ii) if terminable
without penalty
upon thirty (30) days' notice, $250,000, shall not be considered
"material" for
purposes of this SECTION 8.1.7.
8.1.8. NO JOINT ASSESSMENT. No Tenant shall suffer, permit
or
initiate the joint assessment of any Leased Property (i) with
any other real
property constituting a tax lot separate from such Leased
Property, or (ii) with
any portion of such Leased Property that may be deemed to
constitute personal
property, or any other procedure whereby the lien of any taxes
that may be
levied against any such personal property shall be assessed or
levied or charged
to such Leased Property.
8.1.9. ERISA. No Tenant shall engage in any transaction that
would cause any obligation, or action taken or to be taken,
hereunder (or the
exercise by Landlord of any of its rights under this Lease) to
be a non-exempt
(under a statutory or administrative class exemption) prohibited
transaction
under ERISA. Each Tenant shall deliver to Landlord such
certifications or other
evidence from time to time throughout the Term, as requested by
Landlord in its
sole discretion, that (A) such Tenant is not and does not
maintain an "employee
benefit plan", as defined in Section 3(3) of ERISA, that is
subject to Title I
of ERISA, or a "governmental plan" within the meaning of Section
3(3) of ERISA;
(B) such Tenant is not subject to state statutes regulating
investments and
fiduciary obligations with respect to governmental plans; and
(C) one or more of
the following circumstances is true: (i) equity interests in
such Tenant are
publicly offered securities, within the meaning of 29 C.F.R.
Section
2510.3-101(b)(2); (ii) less than twenty-five percent (25%) of
each outstanding
class of equity interests in such Tenant are held by "benefit
plan investors"
within the meaning of 29 C.F.R. Section 2510.3-101(f)(2); or
(iii) such Tenant
qualifies as an "operating company" or a "real estate operating
company" within
the meaning of 29 C.F.R. Section 2510.3-101(c) or (e).
8.1.10. DEBT CANCELLATION; OTHER INDEBTEDNESS; GUARANTIES.
No
Tenant shall cancel or otherwise forgive or release any material
claim or
material debt owed to
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any Tenant by any Person, except for adequate consideration and
in the ordinary
course of such Tenant's business. No Tenant shall create, incur,
assume, or
permit to exist any indebtedness other than (i) trade debt
incurred in the
ordinary course of Tenant's business (which shall not include
so-called
"accounts receivable" financing). No Tenant shall create, incur,
assume, or
permit to exist any guarantee of any loan or other indebtedness
except for the
endorsement of negotiable instruments for collection in the
ordinary course of
business.
8.1.11. USE-SPECIFIC NEGATIVE COVENANTS. No Tenant shall:
8.1.11.1. Transfer any Authorizations to any location
other than the Facility operated by such Tenant or as otherwise
required by the
terms of this Lease nor pledge any Authorizations as collateral
security for any
loan or indebtedness except as required by the terms of this
Lease.
8.1.11.2. Rescind, withdraw, revoke, amend,
supplement, or otherwise alter the nature, tenor or scope of any
Authorization
for any Facility.
8.1.11.3. Amend or otherwise change, by consent,
acquiescence or otherwise, the number of Units at any Facility
(in excess of two
percent (2%) of the number of such Units at any such Facility as
of the
Commencement Date) or the type and/or licensed capacity at such
Facility (by
more than two percent (2%) of the type and/or licensed capacity
at any such
Facility as of the Commencement Date), in each case as the same
exist on the
Commencement Date, or apply for approval of any of the foregoing
amendments or
changes, without Landlord's prior consent which consent shall
not be
unreasonably withheld or delayed.
8.1.11.4. Replace or transfer all or any part of any
Facility's Units to another location or apply for approval of
any such
replacement or transfer.
8.1.11.5. Enter into any Occupant Agreements with
Occupants, tenants under the Service Agreements or any other
Persons that
deviate in any material respect from the standard form
customarily used by any
Tenant at the applicable Facility other than in the ordinary
course of Tenant's
business, without Landlord's prior written consent, which
consent is not to be
unreasonably withheld, conditioned, or delayed.
8.1.11.6. Assign or transfer any of its interest in any
Authorization or assign, pledge, hypothecate, transfer or
remove, or permit any
other Person to assign, transfer, pledge, hypothecate or remove,
any records
pertaining to any Facility, including, without limitation,
(except for removal
of such Occupant records as directed by the Occupants owning
such records).
8.2. AFFIRMATIVE COVENANTS. Tenant covenants and agrees as
follows:
8.2.1. PERFORM OBLIGATIONS. Tenant shall perform or cause to
be performed, as and when due, all of its obligations under this
Lease, the
Other Leases, the Authorizations, any Permitted Encumbrances,
any Insurance
Requirements and any Legal
19
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Requirements. Prior to the date hereof, Tenant has taken all
necessary action to
obtain all Authorizations required for the operation of each of
the Facilities
for its Primary Intended Use and shall take all necessary action
to maintain
such Authorizations during the Term.
8.2.2. PROCEEDINGS TO ENJOIN OR PREVENT CONSTRUCTION. If any
proceedings are filed seeking to enjoin or otherwise prevent or
declare invalid
or unlawful Tenant's construction, occupancy, maintenance, or
operation of any
Facility or any portion thereof for its Primary Intended Use,
Tenant shall cause
such proceedings to be vigorously contested in good faith, and
shall, without
limiting the generality of the foregoing, use all reasonable
commercial efforts
to bring about a favorable and speedy disposition of all such
proceedings and
any other proceedings.
8.2.3. DOCUMENTS AND INFORMATION.
8.2.3.1. FURNISH INFORMATION. Tenant shall (i) promptly
supply Landlord with such information concerning its financial
condition,
licensing, affairs and property as Landlord may reasonably
request from time to
time hereafter and in the format reasonably designated by
Landlord and, without
limitation of the foregoing, promptly, and in any event within
ten (10) days,
after a request from Landlord, Tenant shall provide to Landlord
such additional
information regarding Tenant, Tenant's financial condition or
the Facilities as
Landlord, or any existing or proposed creditor of Landlord or
Ventas, Inc.
(including, without limitation, any existing or proposed
Facility Mortgagee), or
any auditor or underwriter of Landlord or Ventas, Inc., may
reasonably require
from time to time; and (ii) promptly notify Landlord in writing
of any condition
or event that constitutes a breach of any term, condition,
warranty,
representation, or provision of this Lease, any other document
related to this
Lease, any Other Lease, the Guaranty, or any Property Management
Contract, and
of any Material Adverse Effect relative to the financial
condition of any
Tenant, any Other Tenant, any Guarantor, or any Property
Manager. Tenant shall
notify Landlord, in writing and within five (5) Business Days,
following receipt
by Tenant of written notice by its insurance carrier,
reinsurance provider,
accountants, actuary, or any Governmental Authority, of any
actual, pending,
threatened or contemplated increase in its reserves for expenses
relating to
malpractice or professional liability claims or any material
increase in the
premium costs for malpractice or professional liability
insurance (any of the
foregoing, a "RESERVE EVENT").
8.2.4. FURTHER ASSURANCES. Tenant shall, upon request of
Landlord from time to time, execute, deliver, and furnish such
documents as may
be reasonably necessary or appropriate to consummate fully the
transactions
contemplated under this Lease.
8.2.5. MATERIAL COMMUNICATIONS. Tenant shall transmit to
Landlord, within five (5) Business Days after receipt thereof,
any material
written communication affecting one or more Facilities, any
Tenant, or any
Property Manager, this Lease, the Legal Requirements, the
Insurance
Requirements, the Authorizations, and Tenant shall promptly
respond to inquiries
by Landlord with respect to such information. Tenant shall
notify Landlord in
writing promptly after any Tenant obtains knowledge of any
potential,
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threatened or existing litigation or proceeding against, or
investigation of,
any Tenant, any Other Tenant, any Property Manager or any
Facility that may have
a Material Adverse Effect.
8.2.6. OPERATOR REPORTS. Tenant shall provide Landlord with
accurate and complete copies of any and all of the census
information concerning
the number of Units occupied by Occupants, all cost reports,
surveys, survey
deficiency reports, monthly financial statements and other
reports, materials
and information concerning any Tenant, the Facilities and each
Tenant's business
operations and compliance with material laws, ordinances, rules,
regulations,
and Authorizations that are submitted by Tenant to any
Governmental Authorities
for any of the Facilities (the "OPERATOR REPORTS") promptly, and
in any event,
within five (5) Business Days, after the submission thereof to
such Governmental
Authorities. All Operator Reports shall be accurate in all
material respects as
of the date of such Operator Reports.
8.2.7. COMPLIANCE WITH LAWS. Except for those matters
disclosed on SCHEDULE 8.2.7. hereof, Tenant shall at its own
cost and expense
comply with all Insurance Requirements and all Legal
Requirements (including,
without limitation, any and all zoning requirements) (and
Landlord shall have no
responsibility for such compliance with Insurance Requirements
and Legal
Requirements), and keep all Authorizations in full force and
effect.
8.2.8. PORTFOLIO COVERAGE RATIO. Tenant shall maintain, as
of
the end of each fiscal quarter commencing with the fiscal
quarter ending on June
30, 2004, a Portfolio Coverage Ratio of not less than 1.10 to
1.00. For periods
prior to the Commencement Date, in order to determine the
Portfolio Coverage
Ratio, the actual (not annualized) Cash Flow for the Portfolio
for such periods
shall be used and the Fixed Rent for the Portfolio shall be
assumed to be the
Fixed Rent for the first Lease Year prorated over the applicable
period and
shall not include actual debt service payments for such periods.
It shall be an
Event of Default under this Lease if Tenant shall fail to
maintain as of the end
of each fiscal quarter a Portfolio Coverage Ratio of not less
than 1.10 to 1.00,
provided, however, that it shall not be an Event of Default
hereunder, if (i)
the Portfolio Coverage Ratio is greater than or equal to 1.00 to
1.00, and (ii)
within fifteen (15) days following the date on which Tenant was
required to
deliver its computation of the Portfolio Coverage Ratio for such
fiscal quarter,
Tenant deposits with Landlord cash or a Letter of Credit in an
amount that, had
such amount been added to the Cash Flow for such 12-month
period, the Portfolio
Coverage Ratio for such period would have been equal to 1.10 to
1.00 (the
"DIFFERENCE"). The Difference will be held by Landlord as an
addition to the
Security Deposit and applied, held and returned by Landlord in
accordance with
the provisions of SECTION 3.4. Notwithstanding the foregoing,
Tenant shall have
the ability to cure a breach of the Portfolio Coverage Ratio by
depositing the
Difference no more than five (5) times during the Term of this
Lease.
8.2.9. PERMITTED ENCUMBRANCES. Tenant shall, at its own
cost,
fully observe, perform and comply with all Permitted
Encumbrances as the same
apply to or bind Landlord or any Leased Property and, at
Tenant's cost and
expense, Landlord shall reasonably
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cooperate (including at Landlord's option, the taking of any
action to comply if
Tenant is not legally able to do so in its capacity as Tenant
provided that this
shall not limit Tenant's obligations regarding the use or
operation of the
Property) with Tenant to the extent Landlord's cooperation is
necessary to
enable Tenant to so perform. No Tenant shall cause, or permit
its respective
Tenant Parties to cause, whether by act or omission, any breach
of, default
under or termination of any Permitted Encumbrance applicable to
or binding upon
Landlord or any Leased Property.
8.3. AUTHORIZATION NON-COMPLIANCE. In the event that Tenant
shall
receive a written complaint or notice from a Governmental
Authority alleging,
asserting or suggesting that Tenant is not in compliance with
any Legal
Requirement, license, permit, approval or other Authorization,
Tenant shall,
within five (5) Business Days, send notice to Landlord,
whereupon Tenant,
subject to its right to contest the same pursuant to SECTION 13,
shall remedy
any condition causing such complaint, notice or non-compliance
promptly, and in
any case within any cure period allowed therefor by the
applicable Governmental
Authority, in the case of such non-compliance.
8.4. NO CHANGE IN PRIMARY INTENDED USE OR OTHER CHANGES
WITHOUT
LANDLORD CONSENT. Tenant shall not, without Landlord's prior
written consent,
change the Primary Intended Use for any Facility or make any
other change at any
Facility or enter into any agreement that would make any
Facility or Tenant a
party to, or subject to (i) Medicare, Medicaid or any other
Third Party Payor
Program, (ii) any Provider Agreement or Facility Provider
Agreement, (iii)
require any Facility, Tenant or any Property Manager to maintain
professional
liability insurance, or (iv) require a CON to operate any
Facility. If Landlord
gives its consent to any such changes, Tenant agrees that it
shall enter into an
amendment to this Lease in form and substance acceptable to
Landlord, which
amendment shall contain, without limitation, all
representations, warranties and
covenants required by Landlord in connection with any such
change.
8.5. PROPERTY MANAGER.
8.5.1. MANAGEMENT OF LEASED PROPERTY. Tenant shall cause the
Property Manager to manage the Leased Properties in accordance
with the terms of
SECTION 7.2.1 hereof. Tenant shall not remove or replace the
Property Manager
(which, with respect to a Property Manager which is an Affiliate
of Guarantor,
shall be deemed to occur upon a change of control of the
Property Manager) or
modify or waive any material terms of the Property Management
Contract except in
accordance with SECTION 24.2. Upon replacement of the Property
Manager, Tenant
shall, and shall cause the new manager of the Property to,
execute a Manager's
Consent and Subordination of Property Management Contract in
form and substance
reasonably acceptable to Landlord and such substitute Property
Manager. Any fee
relating to the management or operation of the Premises is and
shall at all
times remain subordinate to the payments of Rent.
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8.5.2. Termination of Property Manager. In the event the Lease
is
terminated for any reason, the Property Management Contract
shall automatically
be terminated.
9. MAINTENANCE OF FACILITIES.
9.1. MAINTENANCE AND REPAIR.
9.1.1. FACILITY REPAIR. Tenant, at its sole expense, shall
keep each Leased Property (and Tenant's Personal Property) in
good and safe
order and repair, except for ordinary wear and tear and damage
by Casualty and
Condemnation (whether or not the need for such repairs occurs as
a result of
Tenant's use, any prior use, the elements or the age of such
Leased Property,
Tenant's Personal Property, or any portion thereof). Without
limitation of the
foregoing, Tenant shall promptly make all necessary and
appropriate repairs and
replacements (capital and otherwise) to each Facility, of every
kind and nature,
whether interior or exterior, structural or non-structural,
ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a
condition
existing prior to the commencement of the Term (concealed or
otherwise),
including, but not limited to, any roof repairs or replacements
or parking lot
repairs or replacements, such that each Leased Property is
maintained in good
repair, appearance and condition, for use for its Primary
Intended Use, except
for ordinary wear and tear and damage by Casualty or
Condemnation. Tenant shall
have in place service and maintenance contracts with duly
licensed contractors
or repair services providing for regular maintenance and repair
of any and all
major systems serving each Leased Property, including, but not
limited to, the
HVAC systems, life safety systems, plumbing systems and elevator
and conveyor
systems. Landlord may from time to time as to any one or more
Leased Properties,
and at Tenant's sole expense (but, provided no Event of Default
exists, no more
than once every three (3) years at Tenant's expense), cause an
engineer
designated by Landlord, in its reasonable discretion, to inspect
one or more
Leased Properties and issue a report (a "LEASED PROPERTY
CONDITION REPORT") with
respect to the condition of any such Leased Properties. Tenant
shall, at its own
expense, make any and all repairs or replacements recommended by
such Leased
Property Condition Report, to the extent required to maintain
the applicable
Leased Property in as good repair and appearance as at the date
of this Lease,
except for ordinary wear and tear and damage by Casualty or
Condemnation. All
repairs shall be made in a good and workmanlike manner and in
accordance with
all Legal Requirements relating to such work. Landlord shall not
under any
circumstances be required to repair, replace, build or rebuild
any improvements
on any Leased Property, or to make any repairs, replacements,
alterations,
restorations or renewals of any nature or description to any
Leased Property,
whether ordinary or extraordinary, structural or non-structural,
foreseen or
unforeseen, or to make any expenditure whatsoever with respect
thereto, or to
maintain any Leased Property in any way. Tenant hereby waives,
to the extent
permitted by law, the right to make repairs at the expense of
Landlord pursuant
to any law currently in effect or hereafter enacted.
9.1.2. NOTICE OF NON-RESPONSIBILITY. Except as expressly set
forth in this Lease, nothing contained in this Lease and no
action or inaction
by Landlord shall be construed as: (i) constituting the consent
or request of
Landlord, express or implied, to any
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contractor, subcontractor, laborer, materialman or vendor to, or
for the
performance of, any labor or services or the furnishing of any
materials or
other property for the construction, alteration, addition,
repair or demolition
of or to any Leased Property or any part thereof; or (ii) giving
Tenant any
right, power or permission to contract for or permit the
performance of any
labor or services or the furnishing of any materials or other
property in such
fashion as would permit the making of any claim against Landlord
in respect
thereof or to make any agreement that might create, or in any
way be the basis
for, any right, title, interest, lien, claim or other
encumbrance upon the
estate of Landlord in any Leased Property, or any portion
thereof. Landlord may
post, at Tenant's sole cost, such notices of non-responsibility
upon, or of
record against, any Leased Property to prevent the lien of any
contractor,
subcontractor, laborer, materialmen or vendor providing work,
services or
supplies to Tenant from attaching against the Premises to the
extent permitted
by law. Tenant agrees to promptly execute and record any such
notice of
non-responsibility at Tenant's sole cost.
9.1.3. VACATION AND SURRENDER. Tenant shall, upon the
expiration or sooner termination of the Term as to any Leased
Property, vacate
and surrender the applicable Leased Property to Landlord in the
condition
consistent with the requirements of SECTION 9.1.1, except as
repaired, rebuilt,
restored, altered or added to as permitted or required by the
provisions of this
Lease and except for normal wear and tear and damage from
Casualty or
Condemnation. Any Leased Property (other than Landlord's
Personal Property)
shall be returned to Landlord in a broom clean condition, free
and clear of
Tenant's Personal Property (subject to the terms of SECTION
21.1.1 and except
for Tenant's Personal Property that Landlord elects to acquire
pursuant to
SECTION 35 hereof) but including any and all Alterations, which
shall be and
remain the property of Landlord as part of such Leased Property
(except for
Alterations that Landlord requests, in writing, that Tenant
remove, which
Alterations shall be promptly and completely removed by Tenant).
Tenant shall
repair, at Tenant's sole cost, any damage to a Leased Property
resulting from
Tenant's vacation from or surrender of such Leased Property
and/or the removal
of any Alterations or Tenant's Personal Property therefrom,
whether effected by
Tenant or Landlord.
9.2. ENCROACHMENTS. If any of the Leased Improvements on any
Leased
Property shall, at any time, encroach upon any property, street
or right-of-way
adjacent to such Leased Property and such encroachment is caused
or permitted to
occur by Tenant, then, promptly upon the request of Landlord,
Tenant shall, at
its expense, subject to its right to contest the existence of
any encroachment
and, in such case, in the event of any adverse final
determination, either (i)
obtain valid waivers or settlements of all claims, liabilities
and damages
resulting from each such encroachment, whether the same shall
affect Landlord or
Tenant, or (ii) make such changes in the Leased Improvements,
and take such
other actions, as Tenant, in the good faith exercise of its
judgment deems
reasonably practicable, to remove such encroachment, including,
if necessary,
the alteration of any of the Leased Improvements, and in any
event take all such
actions as may be necessary in order to be able to continue the
operation of the
Leased Improvements for the Primary Intended Use substantially
in the manner and
to the extent the Leased Improvements were operated prior to the
assertion of
such encroachment. Any such alteration shall be made in
conformity with the
applicable requirements of SECTION 11. Tenant's
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obligations under this SECTION 9.2 shall be in addition to and
shall in no way
discharge or diminish any obligation of any insurer under any
policy of title or
other insurance.
10. TENANT'S REPRESENTATIONS AND WARRANTIES. Tenant hereby makes
the
following representations and warranties, as of the date hereof,
to Landlord and
acknowledges that Landlord is granting the Lease in reliance
upon such
representations and warranties. Tenant's representations and
warranties shall
survive the expiration or termination of this Lease and, except
to the extent
otherwise specifically limited, shall continue in full force and
effect, and
remain true and correct, until Tenant's obligations hereunder
have been
performed in full.
10.1. ORGANIZATION AND GOOD STANDING. Each Tenant is duly
organized,
validly existing and in good standing under the laws of the
State of its
organization. Each Tenant is qualified to do business in and is
in good standing
under the laws of the State in which the Facility leased by such
Tenant is
located. Each Tenant has delivered true and complete copies of
the documents,
certificates and agreements pursuant to which such Tenant is
organized to do
business (the "TENANT ORG DOCS").
10.2. POWER AND AUTHORITY. Each Tenant has the power and
authority
to execute, deliver and perform this Lease and to make itself
jointly and
severally liable for the obligations of each other Tenant. Each
Tenant has taken
all requisite action necessary to authorize the execution,
delivery and
performance of such Tenant's obligations under this Lease.
10.3. ENFORCEABILITY. This Lease constitutes a legal, valid,
and
binding obligation of each Tenant enforceable in accordance with
its terms
subject to applicable bankruptcy, insolvency and similar laws
affecting rights
of creditors generally and general principles of equity.
10.4. CONSENTS. The execution, delivery and performance of
this
Lease will not require any consent, approval, authorization,
order, or
declaration of, or any filing or registration with, any court,
any Governmental
Authority, or any other Person.
10.5. NO VIOLATION. The execution, delivery and performance of
this
Lease (i) do not and will not conflict with, and do not and will
not result in a
breach of, any Tenant Org Docs; and (ii) do not and will not
violate any order,
writ, injunction, decree, statute, rule or regulation applicable
to any Tenant
or any of the Facilities.
10.6. INTENTIONALLY OMITTED.
10.7. ADVERSE MATTERS. No Tenant nor any of their respective
representatives, officers, directors, members, contractors,
subcontractors,
agents or employees have engaged in any activities that are
prohibited under
criminal law, or are cause for civil penalties. There is no, and
there shall
continue to be no, threatened, existing or pending revocation,
suspension,
termination, probation, restriction, investigation, limitation
or non-renewal
affecting any Tenant or any Facility with regard to the
applicable
Authorizations to which any Tenant or Facility presently is
subject.
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10.8. CERTIFICATION. Each Tenant has obtained any and all
Authorizations necessary or advisable to operate its
Facility(ies) for its
Primary Intended Use and to be, and to continue to be, validly
licensed to
operate its applicable Facility for the number and type of Units
in accordance
with all applicable governmental rules and regulations and the
requirements of
all applicable Governmental Authorities.
10.9. NO RECOUPMENTS EFFORTS. Tenant is not a participant in
any
federal program whereby any Governmental Authority may have the
right to recover
funds by reason of the advance of federal funds.
10.10. PRIMARY INTENDED USE. Each Facility is being operated for
its
Primary Intended Use and contains the number of Units described
on SCHEDULE 1
attached hereto.
10.11. COMPLIANCE WITH LAWS. Each Tenant is in substantial
compliance with all applicable federal, state and local laws,
regulations and
guidelines, quality and safety standards, accepted professional
standards and
principles that apply to professionals providing services to
assisted living
facilities and/or senior independent living facilities, as
applicable,
accreditation standards, and requirements of the applicable
state or other
governmental licensing agency(ies) and all other Governmental
Authorities,
including, without limitation, those requirements relating to
the physical
structure and environment of each Leased Property, licensing,
quality and
adequacy of medical care, if applicable, distribution of
pharmaceuticals, if
applicable, rate setting, equipment, personnel, operating
policies, additions to
facilities and services and fee splitting. No Tenant has
committed any act which
may give any Governmental Authority the right to cause Tenant to
lose any
applicable Authorizations.
10.12. OWNERSHIP OF AUTHORIZATIONS. The Authorizations: (i) are
not,
and have not been, transferred to any location other than the
Facility to which
such Authorizations relate; (ii) are not, and have not been,
pledged as
collateral security for any loan or indebtedness other than
pursuant to the
terms of this Lease; (iii) are held free from restrictions or
conflicts that
would materially impair the use or operation of each Facility
for its Primary
Intended Use; and (iv) are not provisional, probationary or
restricted in any
way.
10.13. NO LITIGATION. No action, suit or proceeding, or
investigation, judicial, administrative or otherwise (including,
without
limitation, any reorganization, bankruptcy, insolvency or
similar proceeding)
currently is pending or, to the best of Tenant's (including due
inquiry of the
Property Manager) knowledge, threatened or contemplated against
or affecting
Tenant, Property Manager, or the Premises that has not been
disclosed by Tenant
in writing to Landlord and which, if adversely determined, could
reasonably be
expected to have a Material Adverse Effect.
10.14. NO MEDICARE, MEDICAID, ETC. No Facility, and no
Tenant,
Property Manager, or officer, director, member, manager member
or employee of
Tenant or Property Manager with respect to any Facility (i)
participates in
Medicare, Medicaid or any other Third Party Payor Program (ii)
is a party to any
Provider Agreements or Facility Provider Agreements, (iii) is
required by law to
maintain professional liability insurance, or (iv)is required by
law to
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have a CON to operate any Facility. Without limitation of
SECTION 8.4, in the
event that this representation becomes untrue for any reason
with respect to any
Facility or any Tenant, Property Manager, or officer, director,
member, manager
or other employee of Tenant or Property Manager with respect to
any Facility,
Tenant agrees that it shall promptly take all necessary actions
to ensure that
it is in compliance with all Legal Requirements, and Tenant
agrees that it shall
enter into an amendment to this Lease in form and substance
reasonably
acceptable to Landlord, which amendment shall contain, without
limitation, all
representations, warranties and covenants required by Landlord
in connection
with any such compliance.
11. ALTERATIONS.
11.1. ALTERATIONS. Tenant shall not (x) make any Capital
Alterations
on or to any Leased Property, (y) enlarge or reduce the size of
any Facility
and/or (z) make any Capital Alterations or other Alterations
that would tie in
or connect with any improvements on property adjacent to the
Land, without
Landlord's prior consent, which consent shall not be
unreasonably withheld.
Tenant may, without Landlord's consent, make any alterations,
additions, or
improvements (collectively, with the alterations described in
items (x), (y) and
(z) of the preceding sentence, "ALTERATIONS") to any Leased
Property if such
Alterations are not of the type described in clause (x), (y) or
(z) above, so
long as in each case: (i) the same do not (A) decrease the value
of the Leased
Property, (B) affect the exterior appearance of the Leased
Property other than
purely cosmetic changes, or (C) affect the structural components
of the Leased
Property or the main electrical, mechanical, plumbing, elevator
or ventilating
and air conditioning systems for any Facility, (ii) the same are
consistent in
terms of style, quality and workmanship to the original Leased
Property and
Fixtures, (iii) the same are constructed and performed in
accordance with the
provisions of SECTION 11.2 below and (iv) the cost thereof does
not exceed, in
the aggregate $250,000, for any consecutive twelve (12) month
period with
respect to any single Facility. Except for those limited
Alterations that
expressly do not require Landlord's consent pursuant to the
preceding sentence,
all Alterations shall be subject to Landlord's prior written
consent, which
consent shall not be unreasonably withheld. To the extent
Landlord's prior
written consent shall be required in connection with any
Alterations, Landlord
may impose such reasonable conditions thereon in connection with
its approval
thereof as Landlord deems appropriate. Notwithstanding the
foregoing, Landlord
agrees that painting, landscaping, and replacement of floor,
wall and window
coverings shall be deemed Alterations that do not require
Landlord's consent,
regardless of the cost thereof, so long as the same meet the
requirements of
clauses (ii) and (iii) above.
11.2. CONSTRUCTION REQUIREMENTS FOR ALL ALTERATIONS. Whether or
not
Landlord's consent is required, for all Alterations of any
Leased Property, the
following shall apply and shall be in addition to and not in
lieu of any other
requirements that Landlord may impose on Tenant in connection
with the making of
any Alterations:
11.2.1. PLANS AND SPECIFICATIONS. Prior to commencing any
Alterations, Tenant shall have submitted to Landlord a written
proposal
describing in reasonable
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detail such proposed Alteration and shall provide to Landlord
for Landlord's
reasonable approval such plans and specifications, permits,
licenses,
construction budgets and other information (collectively, the
"PLANS AND
SPECIFICATIONS") as Landlord shall request, showing in
reasonable detail the
scope and nature of the proposed Alteration provided, however,
that if Landlord
has not responded to Tenant's written request within thirty (30)
days of the
receipt by Landlord of the Plans and Specifications, Landlord's
approval shall
be deemed to have been given.
11.2.2. PERMITS. Such construction shall not commence until
Tenant shall have procured and paid for all municipal and other
governmental
permits and authorizations required therefor (as well as any
permits or
approvals required in connection with any Permitted
Encumbrance), and Landlord
shall join in the application for such permits or authorizations
whenever such
action is necessary; provided, however, that (i) any such
joinder shall be at no
liability, cost or expense to Landlord; and (ii) any Plans and
Specifications
required to be filed in connection with any such application
that require the
approval of Landlord shall have been so approved by
Landlord.
11.2.3. NO IMPAIRMENT. Such construction shall not, and
prior
to commencement of such construction Tenant's licensed architect
or engineer
shall certify to Landlord that such construction shall not,
impair the
structural integrity of any component of the applicable Facility
or overburden
or impair the operating efficiency of the electrical, water,
plumbing, HVAC or
other building systems of any such Facility .
11.2.4. COMPLIANCE CERTIFICATION. Prior to commencing any
Alterations, Tenant's licensed architect or engineer shall
certify to Landlord
that the Plans and Specifications conform to and comply with all
Insurance
Requirements and all applicable building, subdivision and zoning
codes, laws,
ordinances, regulations and other Legal Requirements.
11.2.5. PARKING. During and following completion of such
construction, the parking that is located on the Land adjoining
the applicable
Facility shall remain adequate for the operation of such
Facility for its
Primary Intended Use and in no event shall such parking be less
than is required
by any applicable Legal Requirements or was located on the Land
adjoining such
Facility prior to such construction.
11.2.6. MATERIALS; QUALITY. All work done in connection with
such construction shall be done promptly and in a good and
workmanlike manner
using materials of good quality and in conformity with all Legal
Requirements.
11.2.7. AS-BUILTS. Promptly following the completion of the
construction of any Capital Alterations, Tenant shall deliver to
Landlord: (i)
"as built" drawings of any Capital Alterations included therein,
certified as
accurate by the licensed architect or engineer selected by
Tenant to supervise
such work; and (ii) a certificate from Tenant's licensed
architect or engineer
certifying to Landlord that such Capital Alterations have been
completed in
compliance with the Plans and Specifications and all applicable
Legal
Requirements.
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11.2.8. CERTIFICATE OF OCCUPANCY. If, by reason of the
construction of any Alteration, a new or revised certificate of
occupancy for
any component of the applicable Facility is required, Tenant
shall obtain such
certificate in compliance with all applicable Legal Requirements
and furnish a
copy of the same to Landlord promptly upon receipt thereof.
11.2.9. LIEN WAIVERS. Upon completion of any Alteration,
Tenant shall promptly deliver to Landlord final lien waivers
from each and every
general contractor and subcontractor that provided goods or
services in
connection with such Alteration indicating that such contractor
or subcontractor
has been paid in full for such goods or services, together with
such other
evidence as Landlord may reasonably require to satisfy Landlord
that no liens
have been created in connection with such Alteration.
11.3. CAPITAL EXPENDITURES ACCOUNTS.
11.3.1. CAPITAL EXPENDITURE REQUIREMENT. Tenant agrees that
it
shall spend annually an amount for each Leased Property equal to
the product of
(x) $350 (the "PER UNIT ALLOCATION"); and (y) the aggregate
number of Units in
such Leased Property, on Permitted Repairs (as hereafter
defined)(the "ANNUAL
CAPITAL EXPENDITURE SPENDING REQUIREMENT"). Commencing on the
first day of the
second (2nd) Lease Year of the Initial Term, and on the first
day of each Lease
Year thereafter during the Term, the Per Unit Allocation for
such Lease Year
shall be an amount equal to the sum of (i) the Per Unit
Allocation in effect for
the prior Lease Year, plus (ii) the product of (a) the Per Unit
Allocation in
effect for the prior Lease Year, and (b) the greater of (x) one
and one-half
percent (1.5%) or (y) seventy five percent (75%) of the actual
CPI Increase,
expressed as a percentage, for such Lease Year for which such
calculation is
being performed. In the event that Landlord determines that
either (a) Tenant's
Annual Capital Expenditure Budget does not allocate sufficient
funds to fully
satisfy the Annual Capital Expenditure Spending Requirement, or
(b) Tenant has
failed to fully satisfy the Annual Capital Expenditure Spending
Requirement ,
then Landlord shall have the right to reserve sufficient funds
to satisfy
Tenant's Annual Capital Expenditure Spending Requirement as
follows: Commencing
on the first (1st) day of the first full month following
Landlord's
determination in the previous sentence, and on the first (1st)
day of each month
to occur thereafter during the Term, Tenant shall deposit (the
"CAPITAL
EXPENDITURE DEPOSITS") in an interest-bearing account entitled
"capital
expenditure account" (the "CAPITAL EXPENDITURE ACCOUNT") under
the sole dominion
and control of Landlord (or any Facility Mortgagee) an amount
for each Leased
Property equal to one-twelfth (1/12) of the difference between
the Annual
Capital Expenditure Spending Requirement and the actual amount
budgeted and/or
spent, as applicable, by Tenant in the applicable year. The
Capital Expenditure
Account shall be maintained with a Lending Institution
reasonably satisfactory
to Landlord or with any Facility Mortgagee. Tenant hereby grants
to Landlord a
first priority security interest in the Capital Expenditure
Account pursuant to
the Uniform Commercial Code (the "UCC") of the State whose laws
govern the
perfection of such security interest, and the provisions of
SECTION 21.1.1.1
below shall be applicable to such security interest. The Capital
Expenditure
Spending Requirement shall only be satisfied by spending money
on, and/or the
Capital Expenditure Account shall only be used for, Permitted
Repairs.
"PERMITTED REPAIRS" shall mean repairs,
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replacements and capital and non-capital improvements to be made
with respect to
any Leased Property from time to time (including, without
limitation, cosmetic
repairs to the Leased Properties and repairs and replacements
made with respect
to any of Landlord's Personal Property), but in no event shall
the Permitted
Repairs includes repairs or additions to, or replacement of, any
of Tenant's
Personal Property. All such Permitted Repairs shall be deemed to
be a part of
the Premises and shall be performed subject to the terms of
SECTIONS 11.1 and
11.2 hereof. On the express condition that no Event of Default
then exists
hereunder, Tenant may request, by written notice to Landlord
(but not more than
once per month), that Landlord disburse monies deposited in the
Capital
Expenditures Account for the purpose of making Permitted Repairs
on any Leased
Property and Landlord shall disburse monies on account of such
Permitted Repairs
promptly after the presentation of invoices therefor provided
that: (i) such
Permitted Repairs have been completed in a good, workmanlike and
lien-free
fashion and in compliance with all Legal Requirements and the
terms of SECTION
11.2 applicable to any Alterations; and (ii) Tenant has paid for
any Capital
Expenditure Difference. If Tenant's capital expenditures at the
Premises in any
Lease Year shall exceed the Capital Expenditure Deposits for
such Lease Year
(such excess, the "CAPITAL EXPENDITURE DIFFERENCE"), Tenant
shall pay the amount
of such Capital Expenditure Difference towards the cost of such
repairs,
replacements and capital expenditures, before seeking funds from
the Capital
Expenditure Account. Any interest that accrues on the funds in
the Capital
Expenditure Account shall at all times remain in the Capital
Expenditure
Account. At the expiration of the Term, any funds remaining in
the Capital
Expenditure Account shall become the property of Landlord.
11.3.2. ANNUAL CAPITAL EXPENDITURE BUDGET. Within ninety
(90)
days prior to the commencement of each calendar year, Tenant
shall deliver to
Landlord, at Tenant's expense, a budget (the "ANNUAL CAPITAL
EXPENDITURE
BUDGET") setting forth Tenant's reasonable estimate of the
repairs, replacements
and capital improvements to the Premises that Tenant anticipates
will be
necessary in such calendar year to comply with the maintenance,
repair and
replacement obligations contained in SECTION 9 hereof and
maintain the Leased
Properties in the condition required under SECTION 9. The Annual
Capital
Expenditure Budget shall be subject to Landlord's approval
(which approval shall
not be unreasonably withheld) for purposes of determining and
confirming that
the repairs, replacements and capital improvements are
sufficient to satisfy
Tenant's obligations pursuant to SECTION 9 hereof; provided,
however, that the
grant by Landlord of its approval to any Annual Capital
Expenditure Budget shall
not be deemed a consent, acknowledgement or agreement on
Landlord's part that
such repairs, replacements or capital improvements are
sufficient to satisfy
Tenant's obligations pursuant to SECTION 9 hereunder.
12. LIENS. Subject to the provisions of SECTION 13 below
governing a
permitted contest by Tenant, Tenant will not, directly or
indirectly, create or
allow to remain, and will promptly discharge at its expense, any
lien,
encumbrance, attachment, title retention agreement or claim upon
any Leased
Property or any attachment, levy, claim or encumbrance in
respect of the Rent,
not including, however, (a) liens for those taxes of Landlord
that Tenant is not
required to pay hereunder, (b) liens for Impositions or for sums
resulting from
noncompliance with Legal Requirements, so long as (1) the same
are not yet
payable or (2) such liens are in the process of
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being contested as permitted by SECTION 13, (c) liens of
mechanics, laborers,
materialmen, suppliers or vendors for sums either disputed in
good faith or not
yet due, provided that (1) such lien and such reserve or other
appropriate
provisions as shall be required by law or generally accepted
accounting
principles shall have been made therefor and (2) any such liens
are in the
process of being contested as permitted by SECTION 13, and (d)
any liens that
are expressly the responsibility of Landlord hereunder.
Notwithstanding the
foregoing, Tenant shall bond over any lien affecting the
applicable Leased
Property if Landlord shall request or if any applicable Facility
Mortgagee shall
so require.
13. PERMITTED CONTESTS. Tenant, on its own or on Landlord's
behalf (or in
Landlord's name), but at Tenant's expense, may contest, by
appropriate legal
proceedings, conducted in good faith and with due diligence, the
amount,
validity or application, in whole or in part, of any Imposition
or any lien,
attachment, levy, encumbrance, charge or claim not otherwise
permitted by
SECTION 12, provided that (a) in the case of an unpaid
Imposition, lien,
attachment, levy, encumbrance, charge, or claim, the
commencement and
continuation of such proceedings shall suspend the collection
thereof from
Landlord and from the applicable Leased Property, (b) neither
the applicable
Leased Property nor any Fixed Rent therefrom nor any part
thereof or interest
therein would be reasonably likely to be in danger of being
sold, forfeited,
attached or lost, (c) Tenant shall indemnify and hold harmless
Landlord and the
Landlord Indemnified Parties from and against any Losses
incurred by Landlord or
the Landlord Indemnified Parties in connection with any such
contest or as a
result thereof, (d) Tenant shall give such security as may be
reasonably
required by Landlord to insure ultimate payment of, or
compliance with, the same
and to prevent any sale or forfeiture of the affected Leased
Property or the
Rent by reason of such non-payment or non-compliance; provided,
however, the
provisions of this SECTION 13 shall not be construed to permit
Tenant to contest
the payment of Fixed Rent or any other sums payable by Tenant to
Landlord
hereunder, (e) in the case of the contest of an Insurance
Requirement, the
coverage required by SECTION 14 shall be maintained, and (f) if
such contest is
resolved against Landlord or Tenant, Tenant shall, as Additional
Rent due
hereunder, pay to the appropriate payee the amount required to
be paid, together
with all interest and penalties accrued thereon, within twenty
(20) days after
such determination (or within such shorter period as may be
required by the
terms of such determination), and comply, within any cure period
allowed
therefor by the applicable agency or authority (or if no such
cure period shall
be allowed or specified by the applicable agency or authority,
promptly and
diligently following the effective date of such determination);
provided,
however, that this clause (f) is not intended, and shall not be
construed, to
afford Tenant any cure or grace period beyond the effective date
of any final
unappealable determination. Landlord, at Tenant's expense, shall
execute and
deliver to Tenant such authorizations and other documents as may
reasonably be
required in any such contest, and, if reasonably requested by
Tenant or if
Landlord so desires, shall join as a party therein. The terms of
this SECTION 13
shall survive the expiration or sooner termination of this
Lease.
14. INSURANCE.
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14.1. GENERAL INSURANCE REQUIREMENTS. Tenant shall obtain
and
maintain, or cause to be maintained, insurance for Tenant and
the Leased
Properties providing at least the following coverages:
14.1.1. Coverage for loss or damage by fire, lightning, wind
and such other perils as are included in a standard "all risk"
or "special
causes of loss" endorsement and against loss or damage by other
risks and
hazards covered by a standard property insurance policy
including, without
limitation, riot, civil commotion, vandalism, malicious
mischief, burglary and
theft on the Leased Improvements and of the Tenant's Personal
Property at each
Leased Property, (A) in an amount equal to one hundred percent
(100%) of the
Full Replacement Cost, as determined by Landlord from time to
time, of such
Leased Property without reduction for physical depreciation
provided, however,
that if a change in any zoning law increases the Replacement
Cost of any
facility by $5,000,000 or more, Tenant is not required to
maintain insurance for
the amount above the $5,000,000 or more increase; (B) containing
a "Replacement
Cost" endorsement; (C) containing an agreed amount endorsement
with respect to
the Leased Improvements and Tenant's Personal Property at the
Leased Properties
waiving all co-insurance provisions; (D) providing for no
deductible in excess
of One Hundred Thousand and No/100 Dollars ($100,000.00) for all
such insurance
coverage (with the exception of flood, wind, earthquake, and any
other
catastrophic-related coverages that are not customarily included
in standard
property insurance policies); and (E) containing (a) "Ordinance
or Law Coverage"
(if any of the Leased Improvements or the use of any Leased
Property shall at
any time constitute legal non-conforming structures or uses
which
non-conformance shall be presumed unless and until Tenant proves
to Landlord's
reasonable satisfaction, that such uses are conforming)
"Operation of Building
Laws," or "Enforcement" endorsement and (b) "demolition"
insurance (in an amount
of at least $5,000,000 and (c) "increased cost of construction"
endorsement
(equal to at least $5,000,000). In addition, each Tenant shall
obtain: (y) if
any portion of the Leased Improvements at any Leased Property is
currently or at
any time in the future located in a federally designated
"special flood hazard
area" (i.e. Zones A and V), flood hazard insurance in an amount
equal to the
lesser of (1) the Full Replacement Cost of such portion of such
Leased
Improvements together with business interruption coverage or (2)
the maximum
amount of such insurance available under the National Flood
Insurance Act of
1968, the Flood Disaster Protection Act of 1973 or the National
Flood Insurance
Reform Act of 1994, as each may be amended; and (z) if the
Leased Property is in
a high probability earthquake area (i.e. Zone 1 and 2), and a
Probable Maximum
Loss ("PML") study reveals that the PML is greater than 10% of
the replacement
cost (as determined by Landlord), then earthquake insurance must
be maintained
in an amount equal to the PML percentage of the replacement cost
with a
deductible not to exceed 5% of the values at risk, earthquake
insurance in
amounts and in form and substance satisfactory to Landlord in
the event that any
Leased Property is located in an area with a high degree of
seismic activity
(i.e. Zone 1 or Zone 2), provided that the insurance pursuant to
clauses (y) and
(z) hereof shall be on terms consistent with the comprehensive
all risk
insurance policy required under this SECTION 14.1.1. With
respect to flood
hazard insurance, Tenant must provide evidence that the Leased
Property not
covered by flood insurance is not located in an area designated
by the Federal
Emergency Management Agency as an area having special flood
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hazards (i.e. Zone A and V). Tenant must promptly notify
Landlord if Tenant has
knowledge that any Leased Property is in a flood zone.
14.1.2. Commercial general liability insurance against
claims
for personal injury, bodily injury, death or damage to the
Leased Properties
occurring upon, in or about each Leased Property, such insurance
(A) which may
be on a "claims-made" form with a combined limit, excluding any
excess coverage,
of not less than One Million and No/100 Dollars ($1,000,000.00)
per claim with a
minimum Three Million and No/100 Dollars ($3,000,000.00) per
location aggregate
and a minimum Five Million and No/100 Dollars ($5,000,000.00)
general aggregate
with respect to any Leased Property located in Florida or Texas
and with respect
to Leased Properties located in any other state, not less than
Two Million and
No/100 Dollars ($2,000,000) per claim with a minimum Five
Million and No/100
Dollars ($5,000,000.00) general aggregate; (B) to continue at
not less than the
aforesaid limit until required to be changed by Landlord by
reason of changed
economic conditions making such protection inadequate; (C) to
cover at least the
following: (1) premises and operations; (2) products and
completed operations on
an "if any" basis; (3) independent contractors; (4) blanket
contractual
liability for all legal contracts; (5) contractual liability
covering
indemnities, if any, given by Tenant contained in the Facility
Mortgage, if any,
applicable to the Leased Property, to the extent the same is
available; (6)
broad form property damage; (7) personal injury (including death
resulting
therefrom); (8) healthcare professional liability and (9) a
liquor liability
endorsement if alcoholic beverages are sold at any Leased
Property; and (D)
providing for a deductible or self insured retention of not in
excess of One
Hundred Thousand and No/100 Dollars ($100,000.00) for any Leased
Property
located in Florida or Texas and not in excess of Two Million and
No/100 Dollars
($2,000,000) for any Leased Property located in any other state
without
Landlord's prior written consent.
14.1.3. Business interruption insurance and/or loss of
rental
income insurance (A) with loss payable to Landlord (provided
that, so long as no
Event of Default has occurred and Landlord determines in its
reasonable
discretion that the proceeds generated from the remaining term
of such insurance
will be sufficient to carry the applicable Leased Property
through
reconstruction and stabilization, Landlord shall return to
Tenant any amounts of
such business interruption insurance proceeds in excess of rent
allocable to the
Leased Property for which such proceeds are applicable for the
applicable
period); (B) covering all risks required to be covered by the
insurance provided
for in SECTION 14.1.1 above and SECTION 14.1.11 below; (C) in an
amount
sufficient to avoid any co-insurance penalty and to provide
proceeds that will
cover a period of not less than eighteen (18) months from the
date of casualty
or loss; (D) containing an extended period of indemnity
endorsement that
provides that after the physical loss to the applicable Leased
Property has been
repaired, the continued loss of income will be insured until
such income returns
to the same level it was prior to the loss, or the expiration
twelve (12) months
from the date of the repair, whichever first occurs, and
notwithstanding that
the policy may expire prior to the end of such period. The
amount of business
interruption coverage shall be an annual aggregate amount equal
to the projected
gross revenue from the Leased Properties (less non-recurring
expenses), assuming
the aggregate occupancy at the Facilities equals ninety-five
percent (95%). The
amount of business interruption coverage shall be adjusted
annually by
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Landlord to reflect the projected gross revenue during the
succeeding eighteen
(18) month period. The perils covered by this insurance shall be
the same as
those required to be covered on the Leased Property, including
flood, terrorism
and earthquake, if necessary.
14.1.4. At all times during which Alterations or structural
construction or repairs are being made with respect to any of
the Leased
Improvements, and only if the Leased Properties' coverage form
does not
otherwise apply, (A) owner's contingent or protective liability
insurance
covering claims not covered by or under the terms or provisions
of the above
mentioned commercial general liability insurance policy; and (B)
the insurance
provided for in SECTION 14.1.1 above written in a so-called
builder's risk
completed value form (1) on a non-reporting basis, (2) against
all risks insured
against pursuant to SECTION 14.1.1 above, (3) including
permission to occupy the
Leased Properties, and (4) with an agreed amount endorsement
waiving
co-insurance provisions.
14.1.5. Workers' compensation, subject to the statutory
limits
of the State in which the applicable Leased Property is located,
and employer's
liability insurance with a limit of at least One Hundred
Thousand and No/100
Dollars ($100,000.00) per accident and per disease, per
employee, and Five
Hundred Thousand and No/100 Dollars ($500,000.00) aggregate in
respect of any
work or operations on or about any Leased Property, or in
connection with any
Leased Property or its operation (if applicable).
14.1.6. Broad form boiler and machinery insurance (without
exclusion for explosion) covering all boilers or other pressure
vessels,
machinery, and equipment located in, on or about any Leased
Property (including
"system breakdown coverage") in an amount equal to or greater
than the repair
and full replacement cost of such equipment and insurance
against loss of
occupancy or use arising from any breakdown of such equipment on
a so-called
"accident basis" and in such amounts as are generally required
by institutional
lenders for properties comparable to the Leased Properties.
14.1.7. Umbrella liability insurance in addition to primary
coverage under SECTION 14.1.2 in an amount not less than Twenty
Million and
No/100 Dollars ($20,000,000) per occurrence for motor vehicle
liability and
employer's liability on terms that cover all claims typically
covered by an
excess liability policy.
14.1.8. Motor vehicle liability coverage for all owned and
non-owned vehicles, including rented and leased vehicles
containing minimum
limits per occurrence of One Million and No/100 Dollars
($1,000,000.00).
14.1.9. If alcoholic beverages are sold at any Leased
Property, so-called "dramshop" insurance or other liability
insurance required
in connection with the sale of alcoholic beverages.
14.1.10. Insurance against employee dishonesty in an amount
not less than six (6) months of gross revenue from the Leased
Properties and
with a deductible not greater than Twenty-five Thousand and
No/100 Dollars
($25,000.00).
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14.1.11. If the insurance required under SECTION 14.1.1
above
excludes coverage for acts of terrorism, Tenant shall provide
terrorism
insurance coverage in an amount equal to Full Replacement Cost
of the Leased
Properties unless such terrorism insurance coverage is (i)
waived by Landlord,
(ii) unable to be procured from any carrier of such insurance,
or (iii) not
available at commercially reasonable rates and not being carried
by owners or
operators of similarly situated properties.
14.1.12. Such other reasonable insurance and in such
reasonable amounts as Landlord, from time to time may reasonably
request against
such other insurable hazards or casualties that at the time are
commonly insured
against for property similar to the Leased Properties located in
or around the
region in which the Leased Properties are located including,
without limitation,
wind, sinkhole, mine subsidence and environmental insurance, due
regard being
given to the height and type of the applicable Leased Property,
construction,
location, use and occupancy.
14.1.13. In the event that any insurance in amounts,
covering
risks and/or with deductibles required under SECTION 14.1.2 AND
SECTION 14.1.12
is not available at commercially reasonable rates in the
insurance market for
properties similar to the Leased Properties and is not
maintained by owners or
operators of similarly situated properties, Tenant may maintain
insurance under
SECTION 14.1.2 AND SECTION 14.1.12 in amounts, covering such
risks and subject
to deductibles reasonably acceptable to Landlord and any
Facility Mortgagee.
14.2. POLICIES; CERTIFICATES. All insurance provided for in
SECTION
14.1 above shall be obtained under valid and enforceable
policies (the
"POLICIES") and, to the extent not specified above, shall be
subject to the
approval of Landlord as to deductibles, loss payees and
insureds. Not less than
ten (10) days prior to the expiration dates of the Policies
theretofore
furnished to Landlord, Accord 25S certificates for all liability
insurance
policies and Accord 28 certificates for all property insurance
policies
evidencing the Policies accompanied by evidence satisfactory to
Landlord of
payment of the premiums then due thereunder (the "INSURANCE
PREMIUMS"), shall be
delivered by Tenant to Landlord. The Cancellation Clause
disclaimer (...
endeavor to ... but failure to mail such notice shall impose no
obligation or
liability of any kind upon the company, its agents or
representatives) must be
deleted from the Accord 25S. Tenant shall deliver original
Policies to Landlord
within ninety (90) days of the date hereof and thereafter upon
request. All
Policies must have a term of not less than one (1) year. All
Insurance Premiums
on all policies may not be financed, but, rather, must be paid
annually in
advance unless otherwise approved by Landlord. In the event
insurance
certificates are issued which do not meet all of the
requirements set forth
above, but are otherwise in a form satisfactory to Landlord,
then the Tenant's
insurance agent will be required to execute the previously
provided Certificate
of Insurance Agent certifying that policies have been issued and
are in full
force and effect which satisfy all of Landlord's requirements
(including 30 days
notice to Landlord prior to cancellation) notwithstanding that
such requirements
could not be evidenced on the insurance certificates.
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14.3. BLANKET POLICIES. Any blanket Policy shall
specifically
allocate to each Leased Property the amount of coverage from
time to time
required hereunder and shall otherwise provide the same
protection as would a
separate Policy insuring only such Leased Property in compliance
with the
provisions of SECTION 14.1. Landlord reserves the right to
review from time to
time the claims history and reserves held with respect to any
such blanket
Policy.
14.4. ADDITIONAL INSURED. All Policies provided for or
contemplated
by SECTION 14.1 above, except for the Policy referenced in
SECTION 14.1.5, shall
name each applicable Tenant as the insured and Landlord and any
Facility
Mortgagee and its/their successors and/or assigns as the
additional insureds, as
its/their interests may appear, and in the case of property
damage, business
interruption, terrorism, if any, boiler and machinery, flood and
earthquake
insurance, each shall name Landlord as loss-payee and contain a
so-called New
York standard non-contributing mortgagee clause in favor of any
Facility
Mortgagee, as applicable, providing that the loss thereunder
shall be payable to
Landlord or such Facility Mortgagee, as applicable.
14.5. POLICY REQUIREMENTS. All Policies of insurance provided
for in
SECTION 14.1 shall contain clauses or endorsements to the effect
that:
(i) no act or negligence of Tenant or any Tenant Party, or
failure
to comply with the provisions of any Policy, which might
otherwise result
in a forfeiture of the insurance or any part thereof, shall in
any way
affect the validity or enforceability of the insurance insofar
as Landlord
or any Facility Mortgagee is concerned;
(ii) the Policy shall not be materially changed (other than
to
increase the coverage provided thereby) or canceled without at
least
thirty (30) days' written notice to Landlord, any Facility
Mortgagee and
any other party named therein as an additional insured;
(iii) neither Landlord nor any Facility Mortgagee shall be
liable
for any Insurance Premiums thereon or subject to any
assessments
thereunder; and
(iv) to the extent available at commercially reasonable rates,
a
waiver of subrogation rights as to Landlord and any Facility
Mortgagee.
(v) The "all risk" property insurance, Boiler and Machinery
Insurance, Flood Insurance, if any, and Builder's Risk Insurance
Policies
shall also contain: (i) a standard "non-contributory
mortgagee"
endorsement or its equivalent relating, inter alia, to recovery
by
Landlord notwithstanding the negligent or willful acts or
omission of
Tenant, and (ii) an endorsement providing for deductibles per
loss of an
amount not more than that which its customarily maintained by
prudent
owners of similar properties in the general vicinity of the
Property, but
in no event in excess of $100,000 (with the exception of flood,
wind,
earthquake, and any other catastrophic-related coverages that
are not
customarily included in standard property insurance
policies).
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(vi) Coverage that is provided under a blanket insurance policy
must
be satisfactory to Landlord and must detail the allocated
coverage
amounts, deductibles, property
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