Exhibit 10.3

PRIMROSE RETIREMENT COMMUNITY OF ZANESVILLE

ZANESVILLE, OH

LEASE AGREEMENT

DATED AS OF DECEMBER 19, 2012

BY AND BETWEEN

CHT ZANESVILLE OH SENIOR LIVING, LLC,

A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD,

AND

TSMM MANAGEMENT, LLC,

A SOUTH DAKOTA LIMITED LIABILITY COMPANY,

AS TENANT

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TABLE OF CONTENTS

 

         Page  

ARTICLE 1 DEFINITIONS

     1   

ARTICLE 2 LEASED PROPERTY AND TERM

     14   

2.1

 

Leased Property

     14   

2.2

 

Assignment of Permits

     15   

2.3

 

Assignment of Operating Contracts

     15   

2.4

 

Condition of Leased Property

     15   

2.5

 

Initial Term

     16   

2.6

 

Extended Terms

     16   

2.7

 

Yield Up

     16   

2.8

 

Grant of Easements, Etc. by Landlord

     16   

ARTICLE 3 RENT

     17   

3.1

 

Rent

     17   

3.2

 

Minimum Rent

     17   

3.3

 

Percentage Rent

     18   

3.4

 

Additional Charges

     19   

3.5

 

Landlord Advances

     20   

3.6

 

Late Payment of Rent

     20   

3.7

 

Net Lease

     21   

3.8

 

No Abatement of Rent

     22   

3.9

 

Security Agreement

     22   

ARTICLE 4 USE OF THE LEASED PROPERTY

     22   

4.1

 

Permitted Use

     22   

4.2

 

Environmental Matters

     23   

4.3

 

Continuous Operations

     25   

4.4

 

Compliance With Restrictions, Etc.

     25   

4.5

 

Standard of Operation

     25   

4.6

 

Standards, Not Control

     26   

4.7

 

Survival

     26   

ARTICLE 5 MAINTENANCE AND REPAIRS

     27   

5.1

 

Tenant’s Obligations

     27   

5.2

 

Reserve

     27   

5.3

 

Landlord Funding

     30   

ARTICLE 6 IMPROVEMENTS, ETC.

     31   

6.1

 

Prohibition

     31   

6.2

 

Permitted Renovations

     31   

6.3

 

Conditions to Reserve Expenditures and Permitted Renovations

     32   

6.4

 

Salvage

     33   

6.5

 

Project Budget Overruns

     33   

 

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ARTICLE 7 LANDLORD’S INTEREST NOT SUBJECT TO LIENS

     34   

7.1

 

Liens, Generally

     34   

7.2

 

Construction or Mechanics Liens

     34   

7.3

 

Contest of Liens

     35   

7.4

 

Notices of Commencement of Construction

     35   

ARTICLE 8 TAXES AND ASSESSMENTS

     36   

8.1

 

Obligation to Pay Taxes and Assessments

     36   

8.2

 

Tenant’s Right to Contest Taxes

     37   

8.3

 

Tax and Insurance Escrow Account

     37   

ARTICLE 9 INSURANCE

     38   

9.1

 

General Insurance Requirements

     38   

9.2

 

Waiver of Subrogation

     40   

9.3

 

General Provisions

     40   

9.4

 

Indemnification of Landlord

     41   

ARTICLE 10 CASUALTY

     41   

10.1

 

Restoration and Repair

     41   

10.2

 

Escrow and Disbursement of Insurance Proceeds

     42   

10.3

 

No Abatement of Rent

     43   

10.4

 

Business Interruption Insurance

     43   

10.5

 

Restoration of Tenant’s Property

     43   

10.6

 

Waiver

     43   

10.7

 

Rights of Mortgagee

     43   

ARTICLE 11 CONDEMNATION

     44   

11.1

 

Total Condemnation, Etc.

     44   

11.2

 

Partial Condemnation

     44   

11.3

 

Disbursement of Award

     44   

11.4

 

No Abatement of Rent

     45   

ARTICLE 12 DEFAULTS AND REMEDIES

     45   

12.1

 

Tenant Events of Default

     45   

12.2

 

Landlord Remedies Upon An Event of Default by Tenant

     47   

12.3

 

Landlord Event of Default; Tenant Remedies

     50   

12.4

 

Application of Funds

     51   

12.5

 

Landlord’s Right to Cure Tenant’s Default

     51   

12.6

 

Landlord’s Security Interest and Lien

     51   

12.7

 

Collateral Assignment

     52   

ARTICLE 13 HOLDING OVER

     52   

ARTICLE 14 LIABILITY OF LANDLORD; INDEMNIFICATION

     53   

14.1

 

Liability of Landlord

     53   

14.2

 

Indemnification of Landlord

     53   

14.3

 

Notice of Claim or Suit

     54   

14.4

 

Limitation on Liability of Landlord

     54   

ARTICLE 15 REIT AND UBTI REQUIREMENTS

     54   

15.1

 

Limitations on Rents Attributable to Personal Property

     55   

15.2

 

Basis for Sublease Rent Restricted

     55   

15.3

 

Landlord Affiliate Subleases Restricted

     55   

 

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15.4

 

Landlord Interests in Tenant Restricted

     56   

15.5

 

Landlord Services

     56   

15.6

 

Certain Subtenants Prohibited

     56   

15.7

 

Future Amendment

     56   

ARTICLE 16 SUBLETTING AND ASSIGNMENT

     56   

16.1

 

Transfers Prohibited Without Consent

     56   

16.2

 

Indirect Transfer Prohibited Without Consent

     56   

16.3

 

Intentionally Omitted

     57   

16.4

 

Landlord Transfers

     57   

ARTICLE 17 ESTOPPEL CERTIFICATES, FINANCIAL STATEMENTS AND OPERATING STATEMENTS

     57   

17.1

 

Estoppel Certificates

     57   

17.2

 

Monthly Financial Statements

     57   

17.3

 

Annual Financial Statements

     58   

17.4

 

Records

     59   

17.5

 

General Operations Budget

     59   

17.6

 

Quarterly Meetings

     59   

17.7

 

Tenant Financial Statements

     59   

17.8

 

Monthly Statements of Operations

     60   

17.9

 

Audit Rights

     60   

ARTICLE 18 LANDLORD’S RIGHT TO INSPECT

     60   

ARTICLE 19 FACILITY MORTGAGES

     60   

19.1

 

Subordination

     60   

19.2

 

Attornment

     62   

19.3

 

Rights of Mortgagees and Assignees

     62   

ARTICLE 20 ADDITIONAL COVENANTS OF TENANT

     62   

20.1

 

Conduct of Business

     62   

20.2

 

Additional Covenants of Tenant

     62   

20.3

 

Notice to Landlord of Severe Incident and/or Significant Property Damage

     64   

20.4

 

Leasehold Financing Prohibited

     64   

ARTICLE 21 MISCELLANEOUS

     65   

21.1

 

Limitation on Payment of Rent

     65   

21.2

 

No Waiver

     65   

21.3

 

Remedies Cumulative

     65   

21.4

 

Severability

     65   

21.5

 

Acceptance of Surrender

     65   

21.6

 

No Merger of Title

     66   

21.7

 

Tenant’s Representations

     66   

21.8

 

Quiet Enjoyment

     67   

21.9

 

Recordation of Memorandum of Lease

     67   

21.10

 

Notices

     67   

21.11

 

Construction; Nonrecourse

     69   

21.12

 

Counterparts; Headings

     69   

21.13

 

Applicable Law

     69   

 

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21.14

 

Right to Make Agreement

     69   

21.15

 

Brokerage

     70   

21.16

 

No Partnership or Joint Venture

     70   

21.17

 

Entire Agreement

     70   

21.18

 

Costs and Attorneys’ Fees

     70   

21.19

 

Approval of Landlord

     70   

21.20

 

Successors and Assigns

     70   

21.21

 

Waiver of Jury Trial

     71   

21.22

 

Treatment of Lease

     71   

21.23

 

Transfer of Permits and Operating Contracts

     71   

21.24

 

Confidential Information

     72   

21.25

 

Tenant’s Personal Property

     72   

21.26

 

No Third Party Beneficiaries

     73   

21.27

 

Guaranty Net Worth Requirement

     73   

21.28

 

Non-Compete

     74   

21.29

 

Community Fees

     74   

TABLE OF EXHIBITS

 

EXHIBIT A    -    The Land EXHIBIT B    -    Minimum Rent EXHIBIT C    -   
Estoppel Certificate EXHIBIT D    -    Memorandum of Lease EXHIBIT E    -   
Operating Contracts EXHIBIT F    -    Permitted Encumbrances EXHIBIT G    -   
Initial Landlord P&E EXHIBIT H    -    Tenant’s Personal Property EXHIBIT I    -
   Agreements With Affiliates SCHEDULE 1 -    Affiliated Leases SCHEDULE 12.6 -
   Tenant Personal Property Exclusions SCHEDULE 16.2 -    Tenant Organizational
Chart

 

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LEASE AGREEMENT

This LEASE AGREEMENT (this “Lease”) is entered into as of December 19, 2012 (the
“Effective Date”) by and between CHT ZANESVILLE OH SENIOR LIVING, LLC, a
Delaware limited liability company as landlord (“Landlord”), and TSMM
MANAGEMENT, LLC, a South Dakota limited liability company, as tenant (“Tenant”).

W I T N E S S E T H :

WHEREAS, CHT PARTNERS, LP (“CNL”), entered into that certain Asset Purchase
Agreement with Lima Retirement, L.L.C., Zanesville Retirement, L.L.C., Decatur
Retirement, L.L.C., Council Bluffs Retirement, L.L.C. and Primrose Cottages,
L.L.C., collectively, as sellers, dated as of December 19, 2011 (as may be
amended, the “Purchase Agreement”), with respect to the purchase of certain real
and personal property described therein; and

WHEREAS, CNL assigned to Landlord, an Affiliate of CNL, all of its rights, title
and interest in and to the Purchase Agreement with respect to the Leased
Property (these and other capitalized terms used and not otherwise defined
herein having the meanings ascribed to such terms in Article 1), and Landlord
has assumed all of CNL’s obligations thereunder; and

WHEREAS, pursuant to the Purchase Agreement, Landlord has acquired the Leased
Property as of the Effective Date; and

WHEREAS, Landlord desires to lease to Tenant all of Landlord’s interests in the
Leased Property, and Tenant desires to lease from Landlord all of Landlord’s
interests in the Leased Property, all subject to and conditioned upon the terms
and conditions herein set forth.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the mutual receipt and legal sufficiency
of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

ARTICLE 1

DEFINITIONS

For all purposes of this Lease, except as otherwise expressly provided or unless
the context otherwise requires, (i) the terms defined in this Article and used
in this Lease shall have the meanings assigned to them in this Article and
include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein shall have the meanings assigned to them in accordance
with GAAP, (iii) all references in this Lease to designated “Articles,”
“Sections” and other subdivisions are to the designated Articles, Sections and
other subdivisions of this Lease, and (iv) the words “herein,” “hereof,”
“hereunder” and other words of similar import refer to this Lease as a whole and
not to any particular Article, Section or other subdivision.

“Accessibility Laws” shall mean all applicable laws, statutes, regulations,
rules, ordinances, codes, licenses, permits and orders, from time to time in
existence, of all courts of competent jurisdiction and Government Agencies, and
all applicable judicial and administrative

 

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and regulatory decrees, judgments and orders, including common law rulings and
determinations, relating to accessibility for the disabled or handicapped,
including, but not limited to, any applicable provisions of The Architectural
Barriers Act of 1968, The Rehabilitation Act of 1973, The Fair Housing Act of
1988, The Americans With Disabilities Act, the accessibility code(s), if any, of
the State in which the Leased Property is located, and all regulations and
guidelines promulgated under any all of the foregoing, as the same may be
amended from time to time.

“Accounting Period” shall mean each calendar month beginning on the first day of
the month and ending on the last day of such month. Notwithstanding the
foregoing, if the Effective Date is other than the first day of a calendar
month, then the first (1st) Accounting Period under this Lease shall begin on
the Effective Date and end on the last day of the first full calendar month
thereafter.

“Accounting Year” shall mean each period of 365 consecutive calendar days (366
consecutive calendar days during any leap year) elapsing from and after the
Effective Date forward.

“ACM” shall have the meaning given such term in Section 4.2.

“Additional Charges” shall have the meaning given such term in Section 3.4.

“Adjusted Lease Basis” shall mean the sum of Landlord’s Original Investment and
Landlord’s Additional Investment from time to time.

“Adjustment Date” shall have the meaning given such term in Section 5.2.2.

“Affiliate” shall mean, with respect to any Person, (i) any Person directly or
indirectly Controlling, Controlled by or under common Control with any such
Person, (ii) in the case of any such Person which is a partnership, any partner
in such partnership, (iii) in the case of any such Person which is a limited
liability company, any member of such company, (iv) in the case of any such
Person which is a corporation, any officer, director or stockholder of such
corporation, (v) any other Person which is a Parent, a Subsidiary, or a
Subsidiary of a Parent with respect to such Person or to one or more of the
Persons referred to in the preceding clauses (i) through (iv), (vi) any other
Person who is an officer, director, trustee or employee of, or partner in, such
Person or any Person referred to in the preceding clauses (i) through (v) and
(vii) any other Person who is a member of, or trustee of any trust for the
benefit of, the Immediate Family of such Person or of any Person referred to in
the preceding clauses (i) through (vi); provided, however, a Person shall not be
deemed to be an Affiliate solely by virtue of the ownership of shares of stock
registered under the Securities Act of 1934, as amended, unless such Person, as
holder of such stock, is required to file a Schedule 13-D, pursuant to
Section 13(d) of such Act and Rule 13-d-1 promulgated thereunder.

“Affiliated Leases(s)” shall mean, individually or collectively as the context
requires, the leases set forth on Schedule 1 attached hereto.

 

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“Applicable Laws” shall mean all applicable laws, statutes, regulations, rules,
ordinances, codes, licenses, permits and orders, from time to time in existence,
of all courts of competent jurisdiction and Government Agencies, all Legal
Requirements and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations
of any kind, including without limitation, those relating to (i) damage to, or
the protection of, real or personal property, (ii) human health and safety
(except those requirements which, by definition, are solely the responsibility
of employers), (iii) the Environment, including, without limitation, all valid
and lawful requirements of courts and other Government Agencies pertaining to
reporting, licensing, permitting, investigation, remediation and removal of
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or emissions, discharges, releases or
threatened releases of Hazardous Substances, chemical substances, pesticides,
petroleum or petroleum products, pollutants, contaminants or hazardous or toxic
substances, materials or wastes whether solid, liquid or gaseous in nature, into
the Environment, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances,
underground improvements (including, without limitation, treatment or storage
tanks, or water, gas or oil wells), or pollutants, contaminants or hazardous or
toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, (iv) Accessibility Laws, (v) securities, including, without limitation,
the marketing thereof, (vi) senior living facility licensure or
(vii) participation in Medicare or Medicaid programs.

“Approved Reserve Budget” shall have the meaning given such term in
Section 5.2.3.

“Business” means the operation of the Facility and other activities related
thereto.

“Business Day” shall mean any day other than Saturday, Sunday, or any other day
on which federal banking institutions are authorized by law or executive action
to close.

“Certificate of Deposit” shall have the meaning given such term in
Section 21.29(a).

“Certificate of Deposit Issuer” shall have the meaning given such term in
Section 21.29(a).

“Claim” shall have the meaning given such term in Section 14.3.

“Code” shall mean the Internal Revenue Code of 1986 and, to the extent
applicable, the Treasury Regulations promulgated thereunder, each as amended
from time to time.

“Community Fee Agreement” shall have the meaning given such term in
Section 21.29(a).

“Condemnation” shall mean (a) the exercise of any governmental power with
respect to the Leased Property or any interest therein, whether by legal
proceedings or otherwise, by a Condemnor under its power of condemnation, (b) a
voluntary sale or transfer of the Leased Property, or any portion thereof, by
Landlord to any Condemnor, either under threat of condemnation or while legal
proceedings for condemnation are pending, or (c) a taking or voluntary
conveyance of all or part of the Leased Property, or any interest therein, or
right

 

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accruing thereto or use thereof, as the result or in settlement of any
condemnation or other eminent domain proceeding affecting the Leased Property,
whether or not the same shall have actually been commenced.

“Condemnor” shall mean any public or quasi public authority, or Person having
the power of Condemnation.

“Confidential Information” shall have the meaning given such term in
Section 21.24.

“Control” (including the correlative meanings of the terms “Controlling”,
“Controlled by”, and “under common control with”) as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of such Person whether
through the ownership of voting securities, by contract or otherwise.

“CNL” shall have the meaning given such term in the Recitals.

“Compete” shall have the meaning given such term in Section 21.28.

“Covered Person” shall have the meaning given such term in Section 21.28.

“Default” shall mean any event or condition existing which with the giving of
notice and/or lapse of time would ripen into an Event of Default.

“Effective Date” shall have the meaning given such term in the introductory
paragraph of this Lease.

“Emergency” shall have the meaning given such term in Section 5.2.3.

“Entity” shall mean any corporation, general or limited partnership, limited
liability company, limited liability partnership, stock company or association,
joint venture, association, company, trust, bank, trust company, land trust,
business trust, cooperative, any government or agency or political subdivision
thereof or any other association or entity.

“Environment” shall mean soil, surface waters, ground waters, land, streams,
sediments, surface or subsurface strata and ambient air.

“EP” means an independent, qualified, licensed and insured environmental
professional.

“Event of Default” shall have the meaning given such term in Section 12.1.

“Extended Term” shall have the meaning given such term in Section 2.6.

“Extension Option(s)” shall have the meaning given such term in Section 2.6.

“Facility Mortgage” shall have the meaning given such term in Section 19.1.

 

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“Facility” means the senior living facility known as “Primrose Retirement
Community of Zanesville” located on the Land.

“First Anniversary” shall have the meaning given such term in Section 5.2.2.

“Fiscal Quarter” shall mean the first, second, third and fourth three-month
period (each consisting of three (3) Accounting Periods) during each Fiscal
Year.

“Fiscal Year” shall mean each fiscal year of Tenant, each such fiscal year to
consist of twelve (12) consecutive Accounting Periods, beginning on January 1
and ending on December 31. Notwithstanding the foregoing, the first (1st) Fiscal
Year under this Lease shall begin on the Effective Date and end on December 31,
2013. If Tenant shall, for a bona fide business reason, change its Fiscal Year
during the Term, appropriate adjustments, if any, shall be made with respect to
the timing of certain accounting and reporting requirements of this Lease;
provided, however, that in no event shall any such change or adjustment increase
or reduce any monetary obligation under this Lease.

“Force Majeure Event” means any circumstance which is not within the reasonable
control of either party hereto, caused by any of the following: strikes;
lockouts; acts of God; civil commotion; fire or any other casualty; governmental
action; or other similar cause or circumstance which is not within the
reasonable control of either party hereto. Neither lack of financing nor general
economic and/or market conditions or factors is a Force Majeure Event.

“GAAP” shall mean generally accepted accounting principles consistently applied.

“Government Agencies” shall mean any legislative body, court, agency, authority,
board (including, without limitation, health and long term care, environmental
protection, planning and zoning), bureau, commission, department, office or
instrumentality of any nature whatsoever of any governmental or
quasi-governmental unit of the United States or the State or any county or any
political subdivision of any of the foregoing, whether now or hereafter in
existence, having jurisdiction over Tenant or the Leased Property or any portion
thereof, or the Business operated thereon.

“Gross Revenues” shall mean, for a given period or interval, all gross revenues
and receipts of every kind derived by or for the benefit of Tenant or its
Affiliates from operating or causing the operation of the Leased Property and
all parts thereof, including, but not limited to: gross revenues from both cash
and credit transactions (after reasonable deductions for bad debts and discounts
for prompt or cash payments and refunds) from rental or subleasing of every
kind; entrance fees, fees for health care and personal care services, license,
lease and concession fees and rentals, off premises catering, if any, and
parking (not including gross receipts of licensees, lessees and
concessionaires); gross revenues from vending machines; health club membership
fees; food and beverage sales; wholesale and retail sales of merchandise (other
than proceeds from the sale of furnishings, fixtures and equipment no longer
necessary to the operation of the Facility, which shall be deposited in the
Reserve) and service charges, to the extent not distributed to employees at the
Facility as gratuities, interest income except as specifically provided below,
community fees, and deposits forfeited, all as determined in accordance with
GAAP on an accrual basis; provided, however, that Gross Revenues shall not
include the

 

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following: gratuities to Facility employees; federal, state or municipal excise,
sales, occupancy, use or similar taxes collected directly from residents or
included as part of the sales price of any goods or services; insurance proceeds
(except for business interruption insurance proceeds); any proceeds from any
sale of the Leased Property or from the refinancing of any debt encumbering the
Leased Property; proceeds from the disposition of furnishings, fixture and
equipment no longer necessary for the operation of the Facility; and interest
which accrues on amounts deposited in the Reserve.

“Guarantor” or “Guarantors” shall mean, individually or collectively (as
appropriate), James L. Thares, Brian J. Morgan, William J. Schaefbauer II and
Mark W. McNeary.

“Guaranty” shall mean that certain Guaranty Agreement, dated as of the Effective
Date, executed by Guarantors in favor of Landlord with respect to Tenant’s
obligations under this Lease, as the same may be amended.

“Guaranty Net Worth Requirement” shall have the meaning given such term in
Section 21.27.

“Hazardous Substances” shall mean any substance:

(a) the presence of which requires or may hereafter require notification,
investigation or remediation under any federal, state or local statute,
regulation, rule, ordinance, order, action or policy; or

(b) which is or becomes defined as a “hazardous waste”, “hazardous material” or
“hazardous substance” or “pollutant” or “contaminant” under any present or
future federal, state or local statute, regulation, rule or ordinance or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. et seq.) and
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and
the regulations promulgated thereunder; or

(c) which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, any state of the United States, or any
political subdivision thereof; or

(d) the presence of which on the Leased Property causes or materially threatens
to cause an unlawful nuisance upon the Leased Property or to adjacent properties
or poses or materially threatens to pose a hazard to the Leased Property or to
the health or safety of persons on or about the Leased Property, including
without limitation molds/microbial organisms which affect health, indoor air
quality and/or structural integrity; or

(e) without limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons or volatile organic compounds; or

 

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(f) without limitation, which contains polychlorinated biphenyls (PCBs) or
asbestos or urea formaldehyde foam insulation; or

(g) without limitation, which contains or emits radioactive particles, waves or
material; or

(h) without limitation, which constitutes materials which are now or may
hereafter be subject to regulation pursuant to the Material Waste Tracking Act
of 1988, or any Applicable Laws promulgated by any Government Agencies.

“HUD Materials” shall have the meaning given such term in Section 4.2.

“Immediate Family” shall mean, with respect to any individual, such individual’s
spouse, parents, brothers, sisters, children (natural or adopted), stepchildren,
grandchildren, grandparents, parents in law, brothers-in-law, sisters-in-law,
nephews and nieces.

“Improvement Project” shall have the meaning given such term in Section 5.3.1.

“Incident” shall have the meaning given such term in Section 20.3.

“Indebtedness” shall mean all obligations, contingent or otherwise, which in
accordance with GAAP should be reflected on the obligor’s balance sheet as
liabilities.

“Index” shall mean the Consumer Price Index: All Urban Consumers, (1982-84=100),
All Items, U.S. City Average (CPI-U), as published by the United States
Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or
otherwise revised during the Term, such other government index or computation
with which it is replaced shall be used. If the Index is discontinued with no
successor Index, another similar index with an appropriate conversion factor
shall be substituted. If the Index is changed so that a base year other than
1982-84 is used, the Index shall be converted in accordance with the conversion
factor published by the Bureau of Labor Statistics.

“Index Escalation Amount” shall have the meaning given such term in
Section 5.2.2.

“Information Technology and Software” shall mean all information technology
systems and equipment and software necessary to or used in connection with the
operation of the Business.

“Initial Landlord P&E” shall mean and refer to all P&E of any kind or
description which are owned by Landlord and located on the Land as of the
Effective Date, including, without limitation, those items enumerated on Exhibit
G attached hereto and made a part hereof, but specifically excluding items of
Tenant’s Personal Property.

“Initial Term” shall have the meaning given such term in Section 2.5.

“Insurance Requirements” shall mean all terms of any insurance policy,
certificate or endorsement required by this Lease and all requirements of the
issuer of any such policy and all orders, rules and regulations and any other
requirements of the National Board of Fire Underwriters (or any other body
exercising similar functions) binding upon Landlord, Tenant or any of the Leased
Property.

 

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“Interest Rate” shall mean an annual rate of interest equal to, as of the date
of determination, the per annum rate for ten (10) year U.S. Treasury Obligations
as published in the Wall Street Journal, plus two hundred (200) basis points.

“Inventory” shall mean all inventory, as such term is customarily used and
defined in its most broad and inclusive sense, including, but not limited to,
all inventory of merchandise, food, beverages, medical supplies and other
consumables held by Tenant for sale to or for consumption by residents or
employees at the Facility or in connection with the Business, and operating
supplies, cleaning supplies, building and maintenance supplies and spare parts.

“Land” shall have the meaning given such term in Section 2.1(a).

“Landlord” shall have the meaning given such term in the preambles to this Lease
and shall include its successors and assigns.

“Landlord’s Acquisition Costs” shall mean the sum of all costs incurred by
Landlord with third parties, at arm’s length, in connection with the acquisition
of the Leased Property pursuant to the Purchase Agreement and lease of same to
Tenant, including, without limitation, all due diligence costs (including,
without limitation, costs of any environmental reports or studies, property
condition reports and surveys), attorneys’ fees, accountants’/auditors’ fees,
consultants’ fees, closing costs, transfer, sales or similar taxes, transfer and
related costs, recording fees, title premiums and any other title related
charges or fees, and prorations paid to Seller and/or Tenant in connection with
Landlord’s acquisition of the Leased Property and which were reasonably incurred
with respect to the acquisition of same and the lease of same to Tenant;
provided, however, that said sum shall not exceed the cap set forth in the
Purchase Agreement with respect to same unless first approved in writing by
Tenant.

“Landlord’s Additional Investment” shall mean the sum of all costs of any
repairs, maintenance, renovations or replacements pursuant to Article 5, Article
6 or Article 10 hereof and other expenditures made by Landlord in connection
with the Leased Property which are not paid out of the Reserve.

“Landlord’s Original Investment” shall mean that amount which equals the sum of
(i) the purchase price of the Leased Property as set forth in the Purchase
Agreement, plus (ii) Landlord’s Acquisition Costs.

“LBP” shall have the meaning given such term in Section 4.2.

“Lease” shall mean this Lease Agreement, including all Exhibits and Schedules
hereto, as it and they may be amended or restated from time to time as herein
provided.

“Lease Year” shall mean any Fiscal Year during the Term and any partial Fiscal
Year at the beginning or end of the Term.

“Leased Improvements” shall have the meaning given such term in Section 2.1(b).

 

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“Leased Intangible Property” shall mean all transferable or assignable
(a) governmental permits, including licenses and authorizations, required for
the construction, ownership and operation of the Leased Improvements, including
without limitation, certificates of authority, certificates of occupancy,
building permits, signage permits, site use approvals, zoning certificates,
environmental and land use permits and any and all necessary approvals from
state or local authorities and other approvals granted by any public body or by
any private party pursuant to a recorded instrument relating to the Leased
Improvements or the Land; (b) telephone exchange numbers identified with the
Leased Property, if any, and customer files, guest lists, credit records,
labels, promotional literature (but only to the extent not included in Tenant’s
Personal Property), security codes, all records and sales and other customer
data, and any unexpired guaranties or warranties, relating to the Leased
Property and/or the operation of the Business; and (c) certificates, licenses,
warranties and guarantees and contracts, other than such permits, operating
permits, certificates, licenses and approvals which are to be held by, or
transferred to, Tenant in accordance with the terms of the Purchase Agreement or
otherwise in order to permit Tenant to operate such Leased Improvements properly
and in accordance with the terms of this Lease. The term “Leased Intangible
Property” shall specifically exclude items of Tenant’s Personal Property.

“Leased Property” shall have the meaning given such term in Section 2.1.

“Legal Requirements” shall mean all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions affecting the Leased Property or the maintenance,
construction, alteration or operation thereof, whether now or hereafter enacted
or in existence, including, without limitation, (a) all permits, licenses,
authorizations, certificates and regulations necessary or required for the
operation of the Leased Property for its Permitted Use, (b) all covenants,
agreements, declarations, restrictions and encumbrances contained in any
instruments at any time in force affecting the Leased Property or to which
Tenant has consented or which are required to be granted pursuant to Applicable
Laws, including those which may (i) require material repairs, modifications or
alterations in or to the Leased Property or (ii) in any way materially and
adversely affect the use and enjoyment thereof, but excluding any requirements
arising as a result of Landlord’s status as a real estate investment trust, and
(c) Applicable Laws.

“Lien” shall mean any mortgage, security interest, pledge, collateral
assignment, or other encumbrance, lien or charge of any kind, including but not
limited to construction, mechanics’ and materialmen’s liens, or any transfer of
property or assets for the payment of Indebtedness or performance of any other
obligation in priority to payment of the obligor’s general creditors.

“Major Alterations” shall have the meaning given such term in Section 6.2.2.

“Materiality Threshold Period” shall have the meaning given such term in
Section 17.7.

“Minimum Rent” shall mean annual rent as set forth in Section 3.2, subject to
prorations and adjustments as set forth in Section 3.2.

“Minor Alterations” shall have the meaning given such term in Section 6.2.1.

 

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“Mortgagee” shall mean the holder of any Facility Mortgage.

“Notice” shall mean a notice given in accordance with Section 21.10.

“Notice of Commencement” shall have the meaning given such term in Section 7.4.

“O&M Plan” shall have the meaning given such term in Section 4.2.

“Official Records” shall mean the Recorder’s Office of Muskingom County, Ohio.

“Officer’s Certificate” shall have the meaning given such term in Section 17.2.

“Operating Contracts” shall mean the various service agreements, equipment
leases, purchase contracts and special event contracts, software licenses and
information technology contracts, and other contracts utilized in the operation
of the Business, all as more particularly set forth on Exhibit E attached hereto
and made a part hereof.

“Operating Expenses” means all those ordinary and necessary expenses incurred in
the operation of the Business in accordance with this Lease, including all costs
and expenses associated with the employees (including salaries, wages, bonuses
and other compensation of all employees and their benefits, including life,
medical and disability insurance and retirement benefits), the costs associated
with permits and licenses, the cost of maintenance and utilities, administrative
expenses, the costs of advertising, marketing and business promotion, any and
all taxes, assessments, charges, levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees) and other
impositions and charges of every kind and nature whatsoever, extraordinary as
well as ordinary, foreseen or unforeseen, and each and every installment thereof
which shall or may during or with respect to the Term accrue and be charged,
laid, levied, assessed, or imposed upon, or arise in connection with, the use,
occupancy, operation or possession of the Leased Property or the Business
conducted thereon, all premiums and other charges to obtain the insurance
policies required pursuant to the terms hereof, all capital expenditures to the
extent deductible in accordance with GAAP. The term “Operating Expenses” shall
expressly exclude (i) any debt service for any Facility Mortgage or other
financing obtained by Landlord in connection with the Leased Property, and
(ii) any federal, state and local income taxes, other taxes on income or net
worth, franchise taxes, margin taxes, capital, estate, succession, inheritance,
value added or transfer taxes of Landlord or similar taxes or charges or
substitutes therefor.

“Overdue Rate” shall mean, on any date, a per annum rate of interest equal to
the lesser of (a) twelve percent (12%), or (b) the maximum rate then permitted
under Applicable Laws.

“P&E” shall mean all items of personal property, as defined under the Model
Uniform Commercial Code, including, but not limited to: (a) all equipment,
machinery, fixtures, and other items of property, now or hereafter located on or
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air cooling and air conditioning
systems and apparatus, sprinkler systems and fire and theft protection equipment
and irrigation equipment, together with

 

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all replacements, modifications, alterations and additions thereto, all of which
to the extent not otherwise constituting real property under Applicable Law;
(b) all furniture, furnishings, movable walls or partitions, computers or trade
fixtures or other personal property of any kind or description used or useful in
the Business on or in the Leased Improvements, and located on or in the Leased
Improvements, and all modifications, replacements, alterations and additions to
such personal property; (c) “Property and Equipment,” “P&E,” and “FF&E” (as such
terms are customarily used and defined in the most broad and inclusive sense);
(d) all range balls and range ball retrieval systems, including, without
limitation, any vehicle or apparatus used in connection therewith; (e) all
linen, china, glassware, tableware, uniforms and similar items, whether used in
connection with public space or tenant rooms; (f) all replacements of or
additions to items set forth in clause (a) through (e) above; and (g) the
Initial Landlord P&E. The term “P&E” shall specifically exclude items of
Tenant’s Personal Property.

“P&E Replacements” shall mean all items of P&E purchased with funds from the
Reserve established under Article 5 of this Lease or with insurance proceeds
payable with respect to P&E or P&E Replacements (specifically excluding all
insurance proceeds payable with respect to items of Tenant’s Personal Property)
and all other items of P&E added and used at the Leased Property during the Term
of this Lease (specifically excluding items of Tenant’s Personal Property),
together with all leasehold improvements made by Tenant during the Term of this
Lease to the extent not constituting real property affixed to the Land, whether
purchased from the Reserve or with other funds of Tenant, all subject to
disposal and further replacement at the end of their useful lives.

“Parent” shall mean, with respect to any Person, any Person which directly, or
indirectly through one or more Subsidiaries or Affiliates, (i) owns more than
fifty percent (50%) of the voting or beneficial interest in, or (ii) otherwise
has the right or power (whether by contract, through ownership of securities or
otherwise) to Control, such Person.

“Percentage Rent Threshold” shall mean, for the 7th Lease Year, $15,000,000, and
increase annually by an amount equal to the increase, if any, in the Index
during the preceding 12-month period, as determined calculating a fraction, the
numerator of which shall be (a) the Index most recently published immediately
prior to the particular Lease Year in question, minus (b) the Index most
recently published immediately prior to the immediately preceding Lease Year,
and the denominator of which shall be the Index most recently published
immediately prior to the immediately preceding Lease Year. Mathematically, the
Index increase calculation may be expressed as (current Index – last year Index)
÷ last year Index.

“Permits” means all licenses, permits and certificates used or useful in
connection with the ownership, operation, use or occupancy of the Facility, the
Leased Property or the Business, including, without limitation, liquor licenses,
business licenses, state and local health and environmental department licenses,
any other licenses required in connection with the operation of the Leased
Property for the Permitted Use, food service licenses, licenses to conduct
business and all such other permits, licenses and rights, obtained from any
governmental, quasi governmental or private person or entity whatsoever.

“Permitted Encumbrances” shall mean (a) all rights, restrictions, and easements
of record set forth on Exhibit F attached hereto and made a part hereof, (b) to
the extent not

 

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referenced on Exhibit F, any mortgage and other documents of record relating to
a Facility Mortgage, and (c) any other such encumbrances as may have been
consented to in writing by Landlord from time to time in accordance with the
terms of Section 2.8 hereof.

“Permitted Renovations” shall have the meaning given that term in Section 6.2.

“Permitted Use” shall have the meaning given such term in Section 4.1.1.

“Person” shall mean any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.

“Pledged Collateral” shall have the meaning given such term in Section 21.29(b).

“Purchase Agreement” shall have the meaning given such term in the Recitals.

“Reimbursable Deposit” shall have the meaning given such term in
Section 21.29(a).

“REIT” shall have the meaning given such term in Article 15.

“REIT Personal Property Limitation” shall have the meaning given such term in
Section 15.1.

“Release” shall have the meaning given such term in Section 4.2.

“Rent” shall mean, collectively, Minimum Rent, Percentage Rent and Additional
Charges.

“Rental Buydown Deposit” shall have the meaning given such term in
Section 21.29(a).

“Rental Buydown Program” shall have the meaning given such term in
Section 21.29(a).

“Reserve” shall have the meaning given such term in Section 5.2.

“Reserve Budget” shall have the meaning given such term in Section 5.2.3.

“Reserve Expenditures” shall have the meaning given such term in Section 5.2.

“Reserve Payment” shall have the meaning given such term in Section 5.2.2.

“SEC” shall mean the Securities and Exchange Commission.

“Security Deposit” shall have the meaning given such term in Section 21.27.

“Security Interest” shall have the meaning given such term in Section 21.29(b).

“Seller” shall have the meaning given such term in the Recitals.

“Severe Incident” shall have the meaning given such term in Section 20.3.1.

 

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“Significant Property Damage” shall have the meaning given such term in
Section 20.3.2.

“Site Development” shall have the meaning given such term in Section 4.2.

“State” shall mean the State in which the Land is located.

“Subsidiary” shall mean, with respect to any Person, any Entity in which such
Person directly, or indirectly through one or more Subsidiaries or Affiliates,
(a) owns more than fifty percent (50%) of the voting or beneficial interest or
(b) which such Person otherwise has the right or power to Control (whether by
contract, through ownership of securities or otherwise).

“Tax and Insurance Account” shall have the meaning given such term in
Section 8.3.

“Tax and Insurance Escrow Amount” shall have the meaning given such term in
Section 8.3.

“Tenant” shall be the entity identified in the preamble to this Lease and shall
include its successors and assigns expressly permitted hereunder.

“Tenant’s Personal Property” shall mean any specific items of P&E listed in
Exhibit H attached hereto and made a part hereof, or which hereafter are
acquired by Tenant or an Affiliate with its own funds after the Effective Date
or replacements for such items and located at the Leased Property (but not
including any property purchased with funds from the Reserve established under
Article 5), or items of intangible property owned by Tenant or an Affiliate in
connection with the Business, including, without limitation, Information
Technology and Software.

“Term” shall mean, collectively, the Initial Term and the Extended Terms, unless
sooner terminated pursuant to the provisions of this Lease.

“Unexpended Reserve Funds” shall have the meaning given such term in
Section 5.2.8.

“Unforeseen Reserve Expenditures” shall have the meaning given such term in
Section 5.2.5.

“Unfunded Reserve Expenditures” shall have the meaning given such term in
Section 5.2.6.

“Unsuitable for Its Permitted Use” shall mean a state or condition of the Leased
Property such that following any damage, taking, Condemnation or destruction
involving the Leased Property, (a) the Leased Property cannot be operated in the
reasonable judgment of Landlord after consultation with Tenant on a commercially
practicable basis for its Permitted Use and (b) it cannot reasonably be expected
to be restored to substantially the same condition as existed before such damage
or destruction and as is otherwise required by Article 10 within (i) twelve
(12) months following such damage or destruction, or (ii) twelve (12) months
following such damage or destruction in the event that Tenant has extended the
term of the business interruption insurance to pay at least twelve (12) months
Rent for the benefit of Landlord or provides other reasonably acceptable
security for any uninsured portion of the twelve (12) months Rent.

 

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ARTICLE 2

LEASED PROPERTY AND TERM

2.1 Leased Property. Upon and subject to the terms and conditions hereinafter
set forth, Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord all of Landlord’s right, title and interest in and to all of the
following (collectively, the “Leased Property”), and grants to Tenant the right
to use and occupy the Leased Property for the purposes, and subject to the
limitations, set forth in this Lease:

(a) all that certain tract, piece and parcel of land, as more particularly
described in Exhibit A attached hereto and made a part hereof (the “Land”);

(b) all buildings, structures, fixtures and other improvements of every kind,
including, without limitation, all roofs, plumbing systems, electric systems and
HVAC systems, roadways, pavilions, alleyways, parking areas and facilities,
landscaping, sidewalks, curbs, connecting tunnels, utility pipes, irrigation
systems, conduits and lines (on site and off site), appurtenant to or presently
situated upon the Land (collectively, the “Leased Improvements”);

(c) all easements, hereditaments, appurtenances and all other rights, privileges
and entitlements, if any, relating to the Land and the Leased Improvements;

(d) all Initial Landlord P&E, all P&E Replacements and all Inventory;

(e) all moveable machinery, equipment, furniture, furnishings, computers or
trade fixtures (including all vehicles, together with all supplies related
thereto), owned by Landlord and located on or in the Leased Improvements, and
all modifications, replacements, alterations and additions to such property,
including without limitation, to the extent assignable by Landlord, any
operating leases of any such Initial Landlord P&E, P&E Replacements or other
machinery, equipment, furniture, furnishings, computers or trade fixtures, but
specifically excluding all items included within the category of Tenant’s
Personal Property;

(f) all of the Leased Intangible Property;

(g) all maintenance, service and supply contracts, equipment leases, space
leases (including without limitation, leases of storage spaces by any
non-commercial tenant and all other similar agreements affecting any of the
Leased Property and/or the operation of the Business to the extent that such
contracts are transferable, including, without limitation, the Permits and
Operating Contracts, together with all prepayments and deposits held thereunder
(it being agreed that Landlord shall, as of the Effective Date, make such
prepayments and deposits actually available to Tenant for use in the operation
of the Business);

 

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(h) all plans and specifications, blue prints, architectural plans, engineering
diagrams and similar items specifically related to any of the Land or the Leased
Improvements; and

(i) all other property and interests in property conveyed or assigned to
Landlord pursuant to the Purchase Agreement.

2.2 Assignment of Permits. Landlord and Tenant shall cooperate and take
commercially reasonable efforts to cause all Permits related to the operation
(but not ownership) of the Leased Property, which are not currently held in the
name of Tenant, to be assigned to Tenant effective as of the Effective Date or
as soon thereafter as reasonably possible. Landlord shall pay all costs and
expenses in connection with the transfer of the Permits, the out-of-pocket
amounts of which incurred with third parties at arm’s length shall be included
in Landlord’s Additional Investment. Landlord shall, at no additional cost to
Landlord (other than de minimis costs), cooperate in a commercially reasonable
manner with Tenant in connection with obtaining any Permits that are
non-transferable. Tenant shall be responsible for the processing of all requests
and/or applications for such Permits.

2.3 Assignment of Operating Contracts. Landlord and Tenant shall cooperate and
take commercially reasonable efforts to cause all of the Operating Contracts,
under which Tenant is not already a party, to be assigned to Tenant as of the
Effective Date or as soon thereafter as reasonably possible.

2.4 Condition of Leased Property. TENANT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
EXPRESSLY MADE BY LANDLORD IN THIS LEASE, LANDLORD IS NOT MAKING AND
SPECIFICALLY DISCLAIMS ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, THE BUSINESS
OR ANY OF THE OTHER ITEMS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OR
REPRESENTATIONS AS TO MATTERS OF TITLE, ZONING, TAX CONSEQUENCES, PHYSICAL OR
ENVIRONMENTAL CONDITIONS INCLUDING WEATHER-RELATED CONDITIONS, AVAILABILITY OF
ACCESS, INGRESS OR EGRESS, OPERATING HISTORY OR PROJECTIONS, VALUATION,
GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS, THE VALUE, CONDITION,
MERCHANTABILITY, MARKETABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE. TENANT AGREES THAT TENANT HAS NOT RELIED UPON AND
WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR
WARRANTY OF LANDLORD OR ANY AGENT OF LANDLORD OR OTHER THIRD PARTY, INCLUDING
ANY REAL ESTATE BROKER OR AGENT, EXCEPT AS EXPRESSLY MADE BY LANDLORD IN THIS
LEASE. EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE, TENANT HAS CONDUCTED, OR HAS
HAD THE OPPORTUNITY TO CONDUCT, ITS OWN INSPECTIONS AND INVESTIGATIONS OF THE
LEASED PROPERTY AND THE BUSINESS AND ASSUMES ALL RISK IN CONNECTION THEREWITH,
AND TENANT HEREBY ACKNOWLEDGES AND AGREES THAT LANDLORD IS LEASING TO TENANT AND
TENANT HEREBY ACCEPTS ALL OF THE LEASED PROPERTY, THE BUSINESS AND ANY OTHER
ITEMS LEASED HEREBY “AS IS WHERE IS,” WITH ALL FAULTS, AND THERE ARE NO ORAL

 

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AGREEMENTS, WARRANTIES OR REPRESENTATIONS COLLATERAL TO OR AFFECTING THE LEASED
PROPERTY BY LANDLORD, ANY AGENT OF LANDLORD OR ANY THIRD PARTY. THE TERMS AND
CONDITIONS OF THIS SECTION SHALL EXPRESSLY SURVIVE THE TERMINATION OF THIS
LEASE.

2.5 Initial Term. The initial term of this Lease (the “Initial Term”) shall
commence on the Effective Date and shall terminate and expire at 11:59 p.m. on
December 19, 2022.

2.6 Extended Terms. Tenant shall have and is hereby granted two (2) options
(each, an “Extension Option”) to extend the Term of this Lease (each, an
“Extended Term”) for an additional five (5) years each, upon the terms,
covenants, conditions and rental as set forth herein; provided no continuing
Event of Default then exists hereunder or under any Affiliated Lease at the
commencement of the respective Extended Term. Tenant may exercise each such
Extension Option successively by giving written notice to Landlord not less than
six (6) months nor more than twelve (12) months prior to the respective
expiration of the Initial Term of this Lease, or of the then applicable Extended
Term. Should Tenant fail to give Landlord such timely written notice during the
required period, the then current Term of this Lease and all rights of renewal
shall automatically expire as of the then scheduled expiration date of the Term
of this Lease.

2.7 Yield Up. Tenant shall, on or before the last day of the Term or upon the
sooner termination thereof, peaceably and quietly surrender and deliver to
Landlord the Leased Property, including, without limitation, all Leased
Improvements and P&E and all additions thereto and replacements thereof made
from time to time during the Term, together with and including, without
limitation, the P&E Replacements, in good order, condition and repair,
reasonable wear and tear excepted, and free and clear of all Liens and
encumbrances (other than Permitted Encumbrances, Liens or encumbrances in favor
of or granted by Landlord, and any other encumbrances expressly permitted under
the terms of this Lease), and Tenant shall fully cooperate with Landlord in
transferring, to the extent transferable under Applicable Laws and without
consideration or fee, any of the Permits, which Landlord determines, in its sole
and absolute discretion, would be necessary or appropriate to continue to
operate the Leased Property for its Permitted Use. Tenant acknowledges that both
the Initial Landlord P&E described on Exhibit G attached hereto and consumable
items of Inventory located at the Leased Property as of the Commencement Date
may be completely consumed and/or otherwise disposed of in the course of
operation of the Leased Property during the Term of this Lease. Tenant agrees
that, at the expiration or earlier termination of this Lease, Tenant shall fully
restore the Initial Landlord P&E, inclusive with and after consideration of all
P&E Replacements which will become the property of Landlord, to at least the
approximate types and amounts (with reasonably equivalent value) as shown on
Exhibit G, and shall fully restore an adequate supply of Inventory consistent
with the full stocking levels at the applicable time of the Fiscal Year to be
maintained by Tenant pursuant to this Lease. At the expiration or earlier
termination of this Lease, Tenant shall (i) retain all accounts receivable from
its operation of the Property and Business subject to and net of the amount of
such receivables due to Landlord or to the Reserve pursuant to the terms hereof,
and (ii) remain liable for the payment of accounts payable which have accrued as
of such time.

2.8 Grant of Easements, Etc. by Landlord. Landlord may, from time to time, at
the reasonable request of any third party, or as requested or required by any
Government Agencies,

 

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at Landlord’s cost and expense: (i) grant easements and other rights in the
nature of easements; (ii) release existing easements or other rights in the
nature of easements which are for the benefit of the Leased Property;
(iii) dedicate or transfer unimproved portions of the Leased Property for road,
highway or other public purposes; (iv) execute petitions to have the Leased
Property annexed to any municipal corporation or utility district; (v) execute
amendments to any covenants and restrictions affecting the Leased Property; and
(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
interest in the Leased Property), provided that any instrument requested may not
materially impair or diminish Tenant’s use of the Leased Property or adversely
affect in any material respect the operation, value or financial viability of
the Business, or otherwise materially increase Tenant’s obligations or decrease
its rights under this Lease.

ARTICLE 3

RENT

3.1 Rent. Tenant shall pay, in lawful money of the United States of America
which shall be legal tender for the payment of public and private debts, without
offset, abatement, demand or deduction (unless otherwise expressly provided in
this Lease), Rent, together with all applicable sales, use or excise tax thereon
now or hereafter applied to rental receipts by the State, (but expressly
excluding all federal, state and local income taxes, other taxes on income or
net worth, franchise taxes, margin taxes, capital, estate, succession,
inheritance, value added or transfer taxes of Landlord or similar taxes or
charges or substitutes therefor), to Landlord during the Term at the address to
which Notices to Landlord are to be given or to such other party or to such
other address as Landlord may designate from time to time by written notice to
Tenant. All payments to Landlord shall be made by wire transfer of immediately
available federal funds or by other means acceptable to Landlord in its sole
discretion and all such payments shall, upon receipt by Landlord, be and remain
the sole and absolute property of Landlord. If Landlord shall at any time accept
any such Rent or other sums after the same shall become due and payable, or any
partial payment of Rent, such acceptance shall not excuse a delay upon
subsequent occasions, or constitute or be construed as a waiver of any of
Landlord’s rights hereunder.

3.2 Minimum Rent. Tenant shall pay annual base minimum rent (“Minimum Rent”),
together with all applicable sales, use or excise tax thereon now or hereafter
applied to rental receipts by the State (but expressly excluding all federal,
state and local income taxes, other taxes on income or net worth, franchise
taxes, margin taxes, capital, estate, succession, inheritance, value added or
transfer taxes of Landlord or similar taxes or charges or substitutes therefor),
to Landlord in equal monthly installments in advance, on the first
(1st) Business Day of each Accounting Period; provided, however, that the first
payment of Minimum Rent shall be payable on the Effective Date. Further, if
applicable, the first payment of Minimum Rent and the last payment of Minimum
Rent shall be prorated on a per diem basis; provided, however, that for purposes
of Minimum Rent, any prorated payment for any partial Accounting Period prior to
the first full Accounting Period shall be prorated based upon the installment of
Minimum Rent payable for the first full Accounting Period, and any prorated Rent
at the end of the Term shall be prorated based upon the installment of Minimum
Rent payable for the last full Accounting Period. Notwithstanding the foregoing,
the parties acknowledge that all sales tax on personal property has been prepaid
for the Initial Term as of the Effective Date.

 

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3.2.1 Calculation of Initial Term Minimum Rent. Subject to proration as set
forth above, Tenant shall pay Minimum Rent during each Accounting Year of the
Initial Term of this Lease in amounts calculated in accordance with the formula
set forth on Exhibit B attached hereto and made a part hereof.

3.2.2 Calculation of Extended Term Minimum Rent. Subject to proration as set
forth above, Tenant shall pay Minimum Rent during each Accounting Year of each
Extended Term of this Lease in amounts calculated in accordance with the formula
set forth on Exhibit B attached hereto and made a part hereof.

3.3 Percentage Rent.

3.3.1 Commencing with the seventh (7th) Lease Year, Tenant shall also pay
percentage rent (“Percentage Rent”) in an amount equal to twenty percent
(20%) of the amount by which Gross Revenues for the Property and the properties
subject to the Affiliated Leases, in the aggregate, exceed the applicable
Percentage Rent Threshold. Percentage Rent shall be due and payable on the first
day of each calendar quarter for the prior calendar quarter and shall be
prorated as necessary. Further, Percentage Rent shall be “trued up” at the end
of each Lease Year.

3.3.2 Tenant shall deliver to Landlord a certificate from an officer of Tenant
or Manager with each Percentage Rent payment setting forth the calculation of
the Percentage Rent payment for the most recently completed calendar quarter of
each Lease Year during the Term and Percentage Rent year to date through such
recently completed calendar quarter. Percentage Rent shall be subject to
confirmation and adjustment, if applicable, as set forth in Section 3.3.3.

The obligation to pay Percentage Rent shall survive the expiration or earlier
termination of the Term, and a final reconciliation, taking into account, among
other relevant adjustments, any adjustments which are accrued after such
expiration or termination date but which related to Rent accrued prior to such
termination date, shall be made not later than thirty (30) days after such
expiration or termination date.

3.3.3 Confirmation of Percentage Rent. Tenant shall utilize, or cause to be
utilized, an accounting system for the Leased Property in accordance with its
usual and customary practices, and in accordance with GAAP, that will accurately
record all data necessary to compute Percentage Rent, and Tenant shall retain,
for at least five (5) years after the expiration of each Lease Year, reasonably
adequate records conforming to such accounting system showing all data necessary
to conduct Landlord’s audit and to compute Percentage Rent for the applicable
Lease Year. Landlord shall have the right, for a period of two (2) years
following each Lease Year, from time to time, by its accountants or
representatives, to audit such information in connection with Landlord’s audit,
and to examine all Tenant’s records (including supporting data and sales and
excise tax returns) reasonably required to complete Landlord’s audit and to
verify Percentage Rent, subject to any prohibitions or limitations on disclosure
of any such data under Legal Requirements. If any Landlord’s audit discloses a
deficiency in the payment of Percentage

 

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Rent, and either Tenant agrees with the results of Landlord’s audit or the
matter is otherwise determined or compromised, Tenant shall forthwith pay to
Landlord the amount of the deficiency, as finally agreed or determined, together
with interest at the Interest Rate from the date when said payment should have
been made to the date of payment thereof. If any Landlord’s audit discloses a
deficiency in the determination or reporting of Gross Revenues, which, as
finally agreed or determined, exceeds three percent (3%), Tenant shall pay the
costs of the portion of Landlord’s audit allocable to the determination of such
Gross Revenues. Any proprietary information obtained by Landlord pursuant to the
provisions of this Section shall be treated as confidential, except that such
information may be used, subject to appropriate confidentiality safeguards, in
any litigation or arbitration between the parties and except further that
Landlord may disclose such information to prospective lenders, investors and
underwriters and to any other persons to whom disclosure is necessary to comply
with applicable laws, regulations and government requirements. The obligations
of Tenant contained in this Section shall survive the expiration or earlier
termination of this Agreement. Any dispute as to the existence or amount of any
deficiency in the payment of Percentage Rent as disclosed by Landlord’s audit
shall, if not otherwise settled by the parties, be submitted to arbitration

3.4 Additional Charges. In addition to the Minimum Rent and Percentage Rent
payable hereunder, Tenant shall pay to the appropriate parties and discharge as
and when due and payable hereunder the following (collectively the “Additional
Charges”):

3.4.1 Taxes and Assessments. Tenant shall pay or cause to be paid all taxes and
assessments required to be paid pursuant to Article 8.

3.4.2 Utility Charges. Tenant shall be liable for and shall promptly pay
directly to the utility company all deposits, charges and fees (together with
any applicable taxes or assessments thereon) when due for water, gas,
electricity, air conditioning, heat, septic, sewer, refuse collection, telephone
and any other utility charges, impact fees, or similar items in connection with
the use or occupancy of the Leased Property. Landlord shall not be responsible
or liable in any way whatsoever for the quality, quantity, impairment,
interruption, stoppage, or other interference with any utility service,
including, without limitation, water, air conditioning, heat, gas, electric
current for light and power, telephone, or any other utility service provided to
or serving the Leased Property. No interruption, termination or cessation of
utility services shall relieve Tenant of its duties and obligations pursuant to
this Lease, including, without limitation, its obligation to pay all Rent as and
when the same shall be due hereunder.

3.4.3 Insurance Premiums. Tenant shall pay or cause to be paid all premiums for
the insurance coverage required to be maintained pursuant to Article 9.

3.4.4 Licenses and Permits. Except as otherwise provided in this Lease, Tenant
shall pay or cause to be paid all fees, dues and charges of any kind which are
necessary in order to acquire and keep in effect and good standing all Permits
required for operation of the Leased Property in accordance with the terms of
Article 4. Tenant shall maintain, in Tenant’s name (to the extent permitted
under Applicable Laws), those Permits related to the operation of the Leased
Property. Notwithstanding the foregoing, in the event of the expiration or
earlier termination of this Lease, Tenant shall assign, transfer or otherwise
convey all Permits maintained in Tenant’s name to Landlord or Landlord’s
designee, to the extent not prohibited by Applicable Laws.

 

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3.4.5 Sales Tax. Each Fiscal Quarter, Tenant shall reimburse Landlord for the
amount of any applicable sales, use, excise or similar or other tax paid by
Landlord on any Rent and any payments to the Reserve, whether the same be now or
hereafter levied, imposed or assessed by the State or any Governmental Agencies,
but specifically excluding any federal, state or local income taxes, franchise
taxes, margin taxes, taxes on net worth, capital, estate, succession,
inheritance, value added or transfer taxes of Landlord or similar tax or charge
or substitutes therefor and any other taxes imposed on Landlord’s income. Each
Fiscal Quarter, Landlord shall provide Tenant with information regarding the
calculation and payment of such tax, and Tenant shall reimburse Landlord for
such amounts within five (5) Business Days of Landlord’s delivery of such
information.

3.4.6 Other Charges. Tenant shall pay or cause to be paid all other amounts,
liabilities and obligations arising in connection with the Leased Property,
including, without limitation, Operating Expenses and any other costs and
expenses specifically identified as “Additional Charges” pursuant to this Lease,
except those obligations expressly stated not to be an obligation of Tenant
pursuant to this Lease.

3.4.7 Penalties and Interest. Tenant shall pay or cause to be paid every fine,
penalty, interest and cost, that Tenant is responsible for, which may be added
for non-payment or late payment of the items referenced in this Section 3.4.7.
Tenant shall prepare and file at its expense, to the extent required or
permitted by Applicable Laws, all tax returns and other reports in respect of
any Additional Charge as may be required by Governmental Agencies.
Notwithstanding the foregoing provisions of this Section 3.4, with respect to
any Additional Charge accruing prior to the Effective Date and payable on or
after the Effective Date for which Landlord has received a credit from the
Seller at Closing, Landlord shall either pay such credited amount when due to
the applicable parties or deliver such credited amount to Tenant in which event
Tenant shall pay such credited amount to the applicable parties when due.

3.5 Landlord Advances. Except as specifically provided otherwise in this Lease,
and subject to Tenant’s right to contest taxes affecting the Leased Property
pursuant to, and in accordance with, Section 8.2 hereof, if Tenant does not pay
or discharge all Additional Charges, and provide proof of payment if requested
by Landlord prior to delinquency, Landlord shall have the right but not the
obligation to pay such Additional Charges on behalf of Tenant. If Landlord shall
make any such expenditure for which Tenant is responsible or liable under this
Lease, or if Tenant shall become obligated to Landlord under this Lease for any
other sum besides Minimum Rent as hereinabove provided, the amount thereof shall
be deemed to constitute an “Additional Charge” and shall be due and payable by
Tenant to Landlord, together with interest at the Overdue Rate and all
applicable sales or other taxes thereon, if any, simultaneously with the next
succeeding monthly installment of Minimum Rent or at such other time as may be
expressly provided in this Lease for the payment of the same.

3.6 Late Payment of Rent. If Tenant fails to make any payment of Rent on or
before the seventh (7th) Business Day after the same becomes due, Tenant shall
pay to Landlord an administrative late charge of three percent (3%) of the
amount of such payment. In addition, such past due payment shall bear interest
at the Overdue Rate from the date first due until paid. Such late charge and
interest shall constitute an Additional Charge and shall be due and payable with
the next installment of Rent due hereunder.

 

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3.7 Net Lease. Landlord and Tenant acknowledge and agree that both parties
intend that this Lease shall be and constitute what is generally referred to in
the real estate industry as a “triple net” or “absolute net” lease, such that,
except as otherwise expressly set forth herein, Tenant shall be obligated
hereunder to pay all costs and expenses incurred with respect to, and associated
with, the Leased Property and all personal property thereon and therein and the
business operated thereon and therein, including, without limitation, all rent
and other charges due and payable under any ground lease or sublease encumbering
the Land, all taxes and assessments, utility charges, insurance costs,
maintenance costs and routine and customary repair, replacement and restoration
expenses (all as more particularly herein provided), together with any and all
other assessments, charges, costs and expenses of any kind or nature whatsoever
related to, or associated with, the Leased Property, the use, occupation or
operation thereof, and the Business operated thereon and therein, other than
Landlord’s financing costs and expenses and related debt service; provided,
however, that Landlord shall nonetheless be obligated to pay Landlord’s federal,
state and local income taxes, other taxes on income or net worth, franchise
taxes, margin taxes, capital, estate, succession, inheritance, value added or
transfer taxes of Landlord or similar taxes or charges or substitutes therefor
with respect to the Rent and other amounts received by Landlord under this
Lease. Except as expressly provided in this Lease, Landlord shall bear no cost
or expense of any type or nature with respect to, or associated with, the Leased
Property, or the use, occupation or operation thereof. Except to the extent
otherwise expressly provided in this Lease, it is agreed and intended that Rent
payable hereunder by Tenant shall be paid without notice, demand, counterclaim,
set off, deduction or defense and without abatement, suspension, deferment,
diminution or reduction and that Tenant’s obligation to pay Rent throughout the
Term and any applicable Extended Term is absolute and unconditional and the
respective obligations and liabilities of Tenant and Landlord hereunder shall in
no way be released, discharged or otherwise affected for any reason, including
without limitation: (a) any defect in the condition, merchantability, design,
quality or fitness for use of the Leased Property or any part thereof, or the
failure of the Leased Property to comply with Applicable Laws, including any
inability to occupy or use the Leased Property by reason of such non compliance;
(b) any damage to, removal, abandonment, salvage, loss, theft, scrapping or
destruction of or any requisition of the Leased Property or any part thereof, or
any environmental condition on the Leased Property or any property in the
vicinity of the Leased Property; (c) any restriction, prevention or curtailment
of or interference with any use of the Leased Property or any part thereof,
including eviction; (d) any defect in title to or rights to the Leased Property
or any Lien on such title or rights to the Leased Property; (e) any change,
waiver, extension, indulgence or other action or omission or breach in respect
of any obligation or liability of or by any Person; (f) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to Tenant or any other Person or any action
taken with respect to this Lease by any trustee or receiver of Tenant or any
other Person or by any court, in any such proceedings; (g) any right or claim
that Tenant has or might have against any Person, including, without limitation,
Landlord or any vendor, manufacturer or contractor of or for the Leased Property
(other than a claim resulting from any willful misconduct or gross negligence of
Landlord); (h) subject to Section 12.7 hereof, any failure on the part of
Landlord or any other Person to perform or comply with any of the terms of this
Lease, or of any other agreement; (i) any invalidity, unenforceability,
rejection or disaffirmance of this Lease by operation of law or otherwise
against or by Tenant or any provision hereof; (j) the impossibility of
performance by Tenant or Landlord, or both; (k) any action by any court,
administrative agency or other

 

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Government Agencies; (l) any interference, interruption or cessation in the use,
possession or quiet enjoyment of the Leased Property or otherwise; or (m) any
other occurrence whatsoever whether similar or dissimilar to the foregoing,
whether foreseeable or unforeseeable, and whether or not Tenant shall have
notice or knowledge of any of the foregoing. Except as specifically set forth in
this Lease, this Lease shall be non cancelable by Tenant for any reason
whatsoever and, except as expressly provided in this Lease Tenant, to the extent
now or hereafter permitted by Applicable Laws, waives all rights now or
hereafter conferred by statute or otherwise to quit, terminate or surrender this
Lease or to any diminution, abatement or reduction of Rent payable hereunder.
Except as specifically set forth in this Lease, under no circumstances or
conditions shall Landlord be expected or required to make any payment of any
kind hereunder or have any obligations with respect to the use, possession,
control, maintenance, alteration, rebuilding, replacing, repair, restoration or
operation of all or any part of the Leased Property, so long as the Leased
Property or any part thereof is subject to this Lease, and Tenant expressly
waives the right to perform any such action at the expense of Landlord pursuant
to any law.

3.8 No Abatement of Rent. Except as otherwise specifically set forth in this
Lease, no abatement, diminution or reduction (a) of Rent, charges or other
compensation, or (b) of Tenant’s other obligations hereunder shall be allowed to
Tenant or any Person claiming under Tenant, under any circumstances or for any
reason whatsoever and to the maximum extent permitted by Applicable Laws, Tenant
hereby waives the application of any local or state statutes, land rules,
regulations or ordinance providing to the contrary.

3.9 Security Agreement. Tenant hereby grants to Landlord a security interest in
the Reserve as security for Tenant’s obligations to Landlord hereunder and
agrees that, in addition to all other rights and remedies available to Landlord,
Landlord shall have all rights of a secured party under applicable law with
respect to such proceeds. Tenant agrees to execute and deliver all such
instruments as may be required by Landlord to evidence and/or perfect these
security interests. At Landlord’s expense, Landlord may file at the state and
county Uniform Commercial Code filing offices any financing statement or other
instrument needed to evidence and/or perfect these security interests.

ARTICLE 4

USE OF THE LEASED PROPERTY

4.1 Permitted Use.

4.1.1 Permitted Use. Tenant covenants and agrees that it shall, throughout the
Term of this Lease, except during the continuation of a Force Majeure Event,
continuously use and occupy the Leased Property solely for operation of the
Business, and for such other uses as may be necessary or incidental to such use,
and for no other purpose without interruption (the foregoing being referred to
as the “Permitted Use”). Subject to Section 16.5 hereof, without the prior
written consent of Landlord, no Affiliate of Tenant may be a subtenant or
concessionaire in the Leased Property. No use shall be made or permitted to be
made of the Leased Property which will cause the cancellation of any insurance
policy covering the Leased Property or any part thereof, nor shall Tenant sell
or otherwise provide or permit to be kept, used or sold in or about the Leased
Property any article which may be prohibited by law or by the standard form of

 

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fire insurance policies, or any other insurance policies required to be carried
hereunder, or fire underwriter’s regulations. Tenant shall, at its sole cost,
comply with all Insurance Requirements. Tenant shall not take or omit to take
any action, the taking or omission of which materially impairs the value or the
usefulness of the Leased Property or any part thereof for its Permitted Use.

4.1.2 Necessary Approvals. Tenant shall at all times during the Term of this
Lease and in accordance with the terms of this Lease maintain, in good standing,
all Permits and approvals necessary to use and operate, for its Permitted Use,
the Leased Property and the Business operated thereon under Applicable Laws, and
shall provide to Landlord, upon Landlord’s request, a copy of any documents or
information pertaining to said Permits and approvals. Landlord shall, at no cost
or liability to Landlord, reasonably cooperate with Tenant in this regard.

4.1.3 Lawful Use, Etc. Tenant shall not use or suffer or permit the use of the
Leased Property or Tenant’s Personal Property, if any, for any unlawful purpose.
Tenant shall not commit or suffer to be committed any waste on the Leased
Property nor shall Tenant cause or permit any unlawful nuisance thereon or
therein. Tenant shall not suffer nor permit the Leased Property, or any portion
thereof, to be used in such a manner as (i) would reasonably be expected to
impair Landlord’s title thereto or to any portion thereof, (ii) would reasonably
be expected to allow a claim or claims for adverse usage or adverse possession
by the public, as such, or of implied dedication of the Leased Property or any
portion thereof, or (iii) are likely to result in a material, negative change in
its quality or condition.

4.1.4 Compliance with Legal Requirements. Tenant shall at all times, at its sole
cost and expense, keep, maintain and operate the Leased Property in compliance
with all Legal Requirements; provided that the cost or expense of any
improvement, alteration, repair or addition required under any Legal Requirement
or necessary for compliance with any Applicable Law shall be paid for using
funds from the Reserve and otherwise in accordance with Article 5 hereof. Tenant
agrees to give Landlord Notice of any notices, orders or other communications
relating to Legal Requirements affecting the Leased Property which is or are
enacted, passed, promulgated, made, issued or adopted, a copy of which is served
upon, or received by, Tenant, or a copy of which is posted on or fastened or
attached to the Leased Property, within five (5) Business Days after service,
receipt, posting, fastening or attaching. At the same time, Tenant will inform
Landlord as to the work or steps which Tenant proposes to do or take in order to
comply therewith. Tenant shall manage the use of all Hazardous Substances stored
at, or used in connection with, the Leased Property and Business in accordance
with all applicable Environmental Laws.

4.2 Environmental Matters.

4.2.1 Except in accordance with Applicable Laws, Tenant shall at all times
during the Term keep the Leased Property free of Hazardous Substances. Neither
Tenant nor any of its employees, agents, invitees, licensees, contractors,
guests, or subtenants (if permitted) shall use, generate, manufacture, refine,
treat, process, produce, store, deposit, handle, transport, Release (as defined
below), or dispose of Hazardous Substances in, on, at, under, from or about the
Leased Property or the Environment thereof, in violation of any Applicable
Law(s). Tenant

 

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shall give Landlord prompt Notice of any claim received by Tenant from any
person, entity, or applicable Governmental Agencies that a Release or disposal
of Hazardous Substances has occurred or otherwise been identified on the Leased
Property or the Environment thereof, and shall strictly comply with and correct,
at Tenant’s sole cost and expense, any and all violations of Applicable Law(s)
to the written satisfaction of the applicable Governmental Agencies and
Landlord. Upon request of Landlord, Tenant shall provide Landlord with a copy of
any and all written correspondence between any such applicable Governmental
Agency and Tenant. Under this Section 4.2, the term “Release” shall mean any
potential or actual presence in, on, at, under, from, or the spilling, leaking,
migrating, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing into the Environment of any Hazardous
Substance(s). Tenant shall not knowingly or intentionally discharge or permit to
be discharged into any septic facility or sanitary sewer system serving the
Leased Property any Hazardous Substance(s), toxic or hazardous sewage or waste
other than that which is permitted by Applicable Laws or which is normal
domestic waste water for the type of business contemplated by this Lease to be
conducted by Tenant on, in, at or from the Leased Property. Any Hazardous
Substance(s) toxic or hazardous sewage or waste which is produced or generated
in connection with the use or operation of the Leased Property shall be handled
and disposed of as required by and in strict compliance with all Applicable
Law(s), or shall be pre treated to the level of domestic wastewater, as
specified by Applicable Law(s), prior to discharge into any septic facility or
sanitary sewer system serving the Leased Property.

4.2.2 Tenant acknowledges and understands that Landlord has or shall be
conducting surveys of all Leased Property improvements for asbestos/asbestos
containing materials (“ACM”) and suspect lead based paint (“LBP”) (collectively,
“HUD Materials”), including preparation of an ACM survey and LBP survey prepared
by an EP in accordance with any and all guidelines and/or regulations
promulgated by the applicable Governmental Authorities associated with HUD
Materials and all Applicable Laws. If Landlord determines, in its sole
discretion, that HUD Materials are present based on any such ACM and/or LBP
survey reports, Tenant covenants and warrants to Landlord that (a) Tenant shall,
within fifteen (15) Business Days from the date of Tenant’s receipt of the ACM
and/or LBP survey reports, prepare and implement (including all required
employee training), at Tenant’s sole cost and expense and using an EP
pre-approved by and otherwise reasonably acceptable to Landlord, an operations
and maintenance plan (“O&M Plan”) to properly manage any and all the HUD
Materials at the Leased Property in accordance with any and all guidelines
promulgated by the applicable Governmental Authorities associated with HUD
Materials and all Applicable Laws, and (b) if any development, construction,
renovation or any other work to be conducted on the Leased Property
(collectively, “Site Development”) is reasonably likely to or actually disturbs,
damages, or otherwise adversely affects any HUD Materials on the Leased
Property, Tenant shall adhere to the guidelines and/or regulations promulgated
by the applicable Governmental Authorities and Applicable Laws in connection
with Tenant’s timely, lawful and proper abatement, management and removal of the
HUD Materials prior to any such Site Development. Any and all abatement,
management and removal of HUD Materials from the Leased Property shall be
undertaken at Tenant’s sole cost, charge and expense, which cost, charge and
expense may be paid from the Reserve pursuant to Article 5 hereof. Tenant shall
further be liable for any cost, charge, expense or other damages which Landlord
incurs as a result of the failure of Tenant to timely comply with its
obligations, if any, under this Section 4.2.2. If Tenant fails to complete

 

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and/or fully implement the O&M Plan, then Landlord shall have the right, but not
the obligation, to undertake, complete and/or implement the O&M Plan, or any
portion thereof, and all costs and expenses incurred by Landlord in connection
therewith shall be added to the Adjusted Lease Basis. The O&M Plan obligation
shall terminate when all HUD Materials have been properly abated at and disposed
of from the Leased Property.

4.3 Continuous Operations. Tenant shall continuously operate the Leased Property
in the manner required hereunder, shall maintain sufficient skilled staff and
employees, and shall maintain adequate levels and quality of P&E, to operate the
Leased Property as herein required at its sole cost and expense throughout the
entire Term of this Lease. Tenant shall not enter into any management agreement
with respect to the Leased Property unless such management agreement is approved
in writing by Landlord, at Landlord’s sole and absolute discretion, and any such
management agreement shall be expressly subordinate to the interests of Landlord
and the holder of any Facility Mortgage, and the payment of any management fees
thereunder shall be expressly subordinate to payment of Rent under this Lease.

4.4 Compliance With Restrictions, Etc. Tenant, at its sole cost and expense,
shall comply in all respects with all Permitted Encumbrances affecting the
Leased Property and Tenant shall comply with and perform all of the obligations
set forth under the same to the extent that the same are applicable to the
Leased Property or to the extent that the same would, if not complied with or
performed, impair or prevent the continued use, occupancy and operation of the
Leased Property for the purposes set forth in this Lease; provided, however, the
foregoing shall not require Tenant to perform any of Landlord’s obligations
under any Permitted Encumbrance relating to a Facility Mortgage or any other
financing incurred by Landlord. Further, in addition to Tenant’s payment
obligations under this Lease, Tenant shall pay all sums charged, levied or
assessed under any Permitted Encumbrances (other than any encumbrances relating
to a Facility Mortgage or any other financing incurred by Landlord) promptly as
the same become due and shall, upon receipt of written request by Landlord,
promptly furnish Landlord evidence of payment thereof.

4.5 Standard of Operation. Throughout the Term of this Lease, Tenant shall
continuously operate (except during a Force Majeure Event) the Business and the
Leased Property in full compliance with the terms hereof in a manner consistent
with the level of operation maintained as of the Effective Date, as may be
improved from time to time, including, without limitation, the following:

(a) to operate the Leased Property and the Business in a prudent manner and in
compliance with Applicable Laws, Accessibility Laws, Legal Requirements and
regulations relating thereto, and maintain all Permits and any other agreements
necessary for the use and operation of the Business;

(b) to maintain sufficient P&E and Inventory of types and quantities for the
Business to enable Tenant adequately to operate the Business;

(c) to keep all Leased Improvements and P&E located on the Land or used or
useful in connection with the Business in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needed and proper repairs, renewals, replacements, additions and improvements
thereto to keep the same in good operating condition;

 

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(d) to maintain sufficient working capital to operate the Leased Property as
herein required (working capital shall mean assets which are reasonably
necessary and used for the day to day operation of the Leased Property,
including, without limitation, (i) amounts sufficient for the maintenance of
change and petty cash funds, amounts deposited in operating bank accounts,
receivables, prepaid expenses, and (ii) funds required to (A) maintain
Inventory, (B) pay all Operating Expenses as they become due, less accounts
payable and accrued current liabilities, and (C) maintain the Leased Property in
good repair, working order and condition);

(e) to keep, maintain, operate, and use the Leased Property and Business in
compliance with the terms hereof, and at the level of operation conducted at the
Facility as of the Effective Date;

(f) to recruit, train and employ appropriate personnel, and, if applicable,
retain management services from an Affiliate or other qualified operator or
service provider, approved by Landlord, for same; provided that to the extent an
Affiliate is engaged to provide services upon the Leased Property, such
Affiliate shall be compensated at the prevailing market rates for the area in
which the Facility is located; and further provided that Tenant shall not enter
into any agreement with an Affiliate or otherwise which purports to obligate
Landlord or which survives the expiration or earlier termination of this Lease
without the prior written approval of Landlord. The Agreements with the
Affiliates referenced in Exhibit I attached hereto and made a part hereof are
deemed approved by Landlord; and

(g) to provide prompt written notice to Landlord of material or extraordinary
developments, lawsuits, violation of any Legal Requirements and fines relating
to the use and operation of the Leased Property or the Business.

4.6 Standards, Not Control. Landlord and Tenant stipulate and agree that the
means, pricing, policies, and methods used and actions taken to operate the
Business are within the sole control and election of Tenant, and are not
specified by or under the control of Landlord. Accordingly, Landlord shall have
no responsibility for any action taken by Tenant in order to manage or operate
the Business.

4.7 Survival. As to conditions and uses of Tenant existing or occurring prior to
the expiration or sooner termination of this Lease, the provisions of this
Article 4 shall survive the expiration or sooner termination of this Lease.

 

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ARTICLE 5

MAINTENANCE AND REPAIRS

5.1 Tenant’s Obligations.

5.1.1 Tenant shall, at its sole cost and expense, keep the Leased Property in
good working order and repair, and shall promptly make all necessary and
appropriate repairs and replacements thereto of every kind and nature reasonably
required for the standard of operation for the Business as set forth herein,
whether interior or exterior, structural or nonstructural, foreseen or
unforeseen or arising by reason of a condition existing prior to the
commencement of the Term and whether or not necessitated by siltation, wear,
tear, acts of God, obsolescence or defects, latent or otherwise, and shall use
all reasonable precautions to prevent damage or injury. All repairs shall be
made in a good, workmanlike manner, consistent with the standards generally
employed by owners and operators of senior living facilities comparable to the
Facility, as may be improved from time to time, in accordance with all
applicable federal, state and local statutes, ordinances, by laws, codes, rules
and regulations relating to any such work.

5.1.2 Tenant shall also, at its sole cost and expense, put, keep, replace and
maintain Tenant’s Personal Property in good repair and in good, safe and
substantial order, howsoever the necessity or desirability for repairs may
occur, and whether or not necessitated by wear, tear, obsolescence or defects.
Tenant may at any time and from time to time remove and dispose of any of
Tenant’s Personal Property which is either (i) obsolete or unfit for use or
which is no longer useful in the operation of the Business or (ii) not
reasonably required for the operation of the Business as required herein.

5.1.3 In addition to the foregoing, Tenant shall, at its sole cost and expense,
comply with and perform any maintenance obligations and/or requirements set
forth in any and all applicable agreements or permits concerning storm water
control or drainage procedures and any agreements or permits applicable to any
rights in or to navigable waters associated with or related to the Leased
Property or the operation thereof.

5.2 Reserve

5.2.1 Landlord shall establish an interest bearing reserve account (the
“Reserve”) in a bank designated by Landlord. All interest earned on the funds in
the Reserve shall be added to and remain a part of the Reserve. Both Tenant and
Landlord shall be signatories on the Reserve, such that any withdrawals, whether
by check, wire or otherwise, shall require approval of both Tenant and Landlord
(such approval not to be unreasonably withheld, conditioned or delayed),
provided, however, in the event Tenant has committed an uncured Event of
Default, only Landlord’s signature and approval shall be required to withdraw
funds from the Reserve. Such account shall be established in Landlord’s name and
control for the purposes set forth in this Lease. The purpose of the Reserve is
to cover the cost of the following, to the extent carried out in accordance with
this Lease (collectively, “Reserve Expenditures”):

(a) replacements (including P&E Replacements) and renewals and additions to the
P&E located at the Land or used in connection with the Business (other than food
and beverages located at any restaurant operated in connection with the
Business); and

(b) repairs, alterations (including any Permitted Renovations contemplated by
Section 6.2 hereof, subject to the provisions of Section 6.2.2 hereof),
improvements, renewals, replacements and additions, whether routine, non routine
or major, to the

 

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Leased Improvements, including without limitation, those required in order to
cause the Leased Property to comply with Applicable Laws and those which are
normally capitalized under GAAP such as maintenance, renovations, repairs,
alterations, improvements, renewals, replacements and additions to (i) any
structures, including bearing walls, foundations, exterior facades, interior
walls, roofs and ceilings, any mechanical, electrical, heating, ventilating, air
conditioning, plumbing and vertical transportation elements of the Leased
Improvements, and all other related improvements and facilities; and
(ii) signage, storm drain system, parking lot and related facilities and all
other related improvements and facilities, which expenditures Tenant reasonably
believes should be made for the Leased Property for the following Fiscal Year in
order to maintain the Leased Property in a commercially reasonable condition
consistent with the standard of operation for the Business required herein.

(c) In accordance with the terms of Section 4.2.2 hereof, any abatement,
management, cleanup, removal or remediation work with respect to any Hazardous
Substances, including, without limitation any HUD Materials.

5.2.2 On or before the tenth (10th) Business Day following the end of each
Accounting Period during the Term hereof, Tenant shall transfer into the Reserve
an amount equal to one twelfth (1/12) of the Reserve Payment. The term “Reserve
Payment” shall mean Three Hundred and No/100 Dollars ($300.00) per unit per
annum during the period commencing on the Effective Date and ending on the day
immediately preceding the first day of the month which is twelve (12) months
after the Effective Date (the “First Anniversary”), and, thereafter, on each
anniversary of the Effective Date other than the First Anniversary (each, an
“Adjustment Date”), by any increase in the Index during the preceding 12-month
period, as determined calculating a fraction, the numerator of which shall be
(a) the Index most recently published immediately prior to the particular Lease
Year in question, minus (b) the Index most recently published immediately prior
to the immediately preceding Lease Year, and the denominator of which shall be
the Index most recently published immediately prior to the immediately preceding
Lease Year; provided, however, in no event shall any such annual increase exceed
two and one-half percent (2.5%) per annum. Mathematically, the Index increase
calculation may be expressed as (current Index – last year Index) last year
Index. Notwithstanding anything to the contrary in this Section 5.2.2, in the
event that an amount different than the Reserve Payment set forth above is set
forth in a Reserve Budget, or a greater amount is required by the lender holding
the first Mortgage on the Facility, then the Reserve Payment shall be such
different or greater amount, as the case may be.

5.2.3 On or before December 1 of each Fiscal Year (and within sixty (60) days of
the Effective Date for the first Fiscal Year), Tenant shall prepare an estimate
(the “Reserve Budget”) of Reserve Expenditures anticipated during the ensuing
Fiscal Year, and shall submit such Reserve Budget to Landlord for its review.
Such Reserve Budget shall reflect by category the projected budget for Reserve
Expenditures for the Leased Property and assumptions on the basis of which such
categories were prepared in narrative form if necessary, including separate
budget items for all projected expenditures for replacements, substitutions and
additions to Tenant’s Personal Property. Tenant shall provide to Landlord
reasonable additional detail, information and assumptions used in the
preparation of the Reserve Budget as requested by

 

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Landlord, and shall also submit to Landlord with the Reserve Budget good faith
longer range projections of planned Reserve Expenditures for an additional three
(3) Fiscal Years. Tenant shall review the Reserve Budget with Landlord, and
subject to Landlord’s approval, Tenant shall implement such Reserve Budget for
the successive Fiscal Year (during which it shall, if approved by Landlord, be
referred to as the “Approved Reserve Budget”). In addition, Landlord shall have
the right to reasonably disapprove any expenditures to be made pursuant to the
Reserve Budget which are not in compliance with Applicable Laws. Further,
Landlord’s approval of any expenditure pursuant to the Reserve Budget shall not
be, or be deemed to be, an assumption by Landlord of any liability in connection
with the expenditures made. Pending resolution of any dispute, the specific
disputed item of the Reserve Budget shall be suspended and replaced for the
Fiscal Year in question by an amount equal to the lesser of (a) that proposed by
Tenant for such Fiscal Year, or (b) such budget item for the Fiscal Year prior
thereto. Subject to the terms of this Section 5.2.3, Tenant shall not deviate
from the Approved Reserve Budget without the prior approval of Landlord, except
in the case of an emergency where immediate action is necessary to prevent
imminent danger to person or property (an “Emergency”). In such circumstances,
Tenant shall use good faith efforts to obtain the approval of Landlord if
practicable and if such efforts would not pose a risk to the condition of the
Leased Property or harm to any person, and in any event provide notice to
Landlord as promptly as possible of such expenditure, the amount of and the
reason for the same.

5.2.4 Tenant shall, consistent with the Approved Reserve Budget, from time to
time make Reserve Expenditures from the Reserve as it reasonably deems necessary
in accordance with Section 5.2 and Section 5.2.3. Tenant shall provide to
Landlord, within thirty (30) days after the end of each Accounting Period, an
itemized statement setting forth Reserve Expenditures made to date during the
Fiscal Year, including appropriate supporting documentation such as receipts,
invoices or other relevant information required to support and account for such
Reserve Expenditures.

5.2.5 In the event Reserve Expenditures not otherwise provided for in the
Approved Reserve Budget are required (a) as a result of Legal Requirements, a
Force Majeure Event and/or are otherwise required for the continued safe and
orderly operation of the Leased Property, (b) due to an Emergency threatening
the Leased Property, its guests, invitees or employees, or (c) because the
continuation of a given condition will subject Tenant or Landlord to civil or
criminal liability (“Unforeseen Reserve Expenditures”), Tenant shall give
Landlord Notice thereof, which Notice shall set forth in reasonable detail the
nature of the Unforeseen Reserve Expenditures and the estimated cost thereof,
and Landlord agrees that it shall not unreasonably withhold, condition or delay
its approval of such Unforeseen Reserve Expenditures.

5.2.6 In the event funds in the Reserve shall be insufficient, or are reasonably
projected by Tenant to be insufficient for necessary and permitted Reserve
Expenditures, including, without limitation, Unforeseen Reserve Expenditures as
set forth under Section 5.2.5 hereof (collectively, “Unfunded Reserve
Expenditures”), Tenant shall give Landlord Notice thereof, which Notice shall
set forth in reasonable detail the nature of the Unfunded Reserve Expenditures
and the estimated cost thereof, and Landlord, in Landlord’s sole and absolute
discretion, shall approve and fund the amount necessary to pay for such Unfunded
Reserve Expenditures and the amounts so funded shall constitute part of
Landlord’s Additional Investment.

 

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5.2.7 All interest earned on the Reserve shall be added to and become a part
thereof, and all P&E Replacements purchased with funds from the Reserve shall be
and remain the property of Landlord and shall be treated as Leased Property
pursuant to Section 2.1(e). All funds in the Reserve shall be the property of
Landlord throughout the Term and upon expiration or earlier termination of this
Lease, subject to Section 5.2.8 below and Tenant’s rights to use the same in
accordance with this Article 5.

5.2.8 It is understood and agreed that, during the Term, the Reserve shall be
maintained and used solely in connection with the Leased Property. At the end of
each Accounting Period, any amounts remaining in the Reserve shall be carried
forward to the next Accounting Period, but Tenant shall not receive a credit for
such remaining amounts against the Reserve Payment to be deposited by Tenant in
such next Accounting Period. If this Lease is terminated or for any reason
expires prior to the end of any applicable Term, all funds remaining in the
Reserve (“Unexpended Reserve Funds”) shall be retained by Landlord as the sole
and exclusive property of Landlord; if this Lease expires by its own terms, the
Unexpended Reserve Funds, less an amount to cover the costs of any deferred
maintenance, shall be paid to the Tenant and the sole and exclusive property of
Tenant.

5.2.9 If Landlord wishes to grant a security interest in or create another
encumbrance on its interest in the Reserve in connection with a Facility
Mortgage, including all or any part of the existing or future funds therein, or
any general intangible in connection therewith, the instrument granting such
security interest or creating such other encumbrance shall expressly provide
that such security interest or encumbrance is prior in right to the rights of
Tenant with respect to the Reserve as set forth herein.

5.3 Landlord Funding. If Landlord provides Landlord’s Additional Investment to
fund the costs of construction, renovation and/or refurbishment, as applicable,
with respect to the Leased Property (an “Improvement Project”), Landlord and
Tenant acknowledge and agree that (a) all amounts funded by Landlord in
connection with such Improvement Project shall be deemed and treated as
Landlord’s Additional Investment and shall be added to and become part of the
Adjusted Lease Basis, (b) all amounts disbursed by Landlord in connection with
such Improvement Project shall be used by Tenant solely in connection with the
Permitted Renovations to the Leased Property approved in writing by Landlord in
connection with such Improvement Project, (c) the terms, conditions, rights and
obligations of Tenant and Landlord, as applicable, set forth in this Section 5.3
shall be complied with in all respects by Tenant and Landlord, as applicable,
with respect to such Improvement Project, and (d) all improvements and personal
property acquired in connection with such Improvement Project shall be the
property of Landlord and shall be part of the Leased Property hereunder.

 

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ARTICLE 6

IMPROVEMENTS, ETC.

6.1 Prohibition. Except for Minor Alterations as hereinafter expressly provided
in Section 6.2, no portion of the Leased Property shall be demolished, removed
or altered by Tenant in any manner whatsoever without the prior written consent
and approval of Landlord. Tenant shall be entitled and obligated to undertake
all alterations to the Leased Property required by any Legal Requirements and,
in such event, Tenant shall comply with the provisions of Section 6.2 below.

6.2 Permitted Renovations. The activities permitted pursuant to Section 6.2.1
and Section 6.2.2 below shall collectively constitute “Permitted Renovations”.

6.2.1 Minor Alterations. Landlord acknowledges that certain minor alterations
and renovations to the Leased Improvements may be undertaken by Tenant from time
to time (“Minor Alterations”). Landlord hereby agrees that Tenant shall be
entitled to perform such Minor Alterations on or about the Leased Improvements
without the prior approval of Landlord; provided, however, that the cost of each
Minor Alteration shall not exceed One Hundred Thousand and No/100 Dollars
($100,000.00), and the same shall not weaken or impair the structural strength
of any buildings or other structural improvements which constitute part of the
Leased Improvements, or alter their design or appearance (including, but not
limited to, a reduction in the number of units), materially impair the use of
any of the service facilities located on the Leased Property, or fundamentally
affect in any detrimental manner the character or suitability of, the Leased
Improvements for the Permitted Use above, or materially lessen or impair the
value thereof. If Tenant elects to perform any Minor Alterations, the cost
thereof shall be borne by Tenant and accounted for in accordance with GAAP
unless the cost of such Minor Alteration constitutes an approved Reserve
Expenditure, an Unforeseen Reserve Expenditure which has been approved by
Landlord pursuant to Section 5.2.5 or an Unfunded Reserve Expenditure which has
been approved by Landlord pursuant to Section 5.2.6.

6.2.2 Additions, Expansions and Structural Alterations. All alterations,
additions, expansions and renovations to the Leased Improvements which do not
qualify as Minor Alterations shall constitute “Major Alterations.” Except as
expressly permitted in Section 6.1 and Section 6.2.1 above, nothing in this
Article 6 or elsewhere in this Lease shall be deemed to authorize Tenant to
perform any Major Alterations; it being understood that Tenant may do so only
with the prior written consent and approval of Landlord, which consent and
approval may be withheld by Landlord in its sole and absolute discretion, and
may be conditioned upon the payment by Tenant to Landlord of all reasonable
costs incurred by Landlord in evaluating the same, providing additional
insurance and such other conditions as Landlord may impose. If Tenant elects to
perform any Major Alterations, the cost thereof shall be borne by Tenant unless
the Major Alteration constitutes an Improvement Project which has been approved
by Landlord pursuant to Section 5.3.1, an approved Reserve Expenditure or an
Unforeseen Reserve Expenditure which has been approved by Landlord pursuant to
Section 5.2.5 or an Unfunded Reserve Expenditure which has been approved by
Landlord pursuant to Section 5.2.6 or involves the use of insurance proceeds to
repair, replace or reconstruct following any damage or destruction.

 

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6.3 Conditions to Reserve Expenditures and Permitted Renovations. In connection
with any Reserve Expenditures Permitted Renovations pursuant to the Approved
Reserve Budget, Tenant shall satisfy the following conditions:

(a) Except in the case of Minor Alterations, before the commencement of any
Permitted Renovations, plans and specifications therefor or a detailed
itemization thereof prepared by a licensed architect reasonably approved by
Landlord or other design professional appropriate under the circumstances
reasonably approved by Landlord shall be furnished to Landlord for its review
and approval, which approval shall not be unreasonably withheld, conditioned or
delayed. Such approval shall not constitute Landlord’s agreement that such plans
and specifications are in compliance with Applicable Laws or an assumption by
Landlord of any liability in connection with the Permitted Renovations
contemplated thereby. In the case of Minor Alterations, to the extent
applicable, Tenant shall furnish to Landlord a complete set of plans and
specifications therefore or a detailed itemization thereof for its records.

(b) To the extent required by any Legal Requirements and Applicable Laws, before
the commencement of any such work, Tenant shall obtain the approval thereof by
all Governmental Agencies having or claiming jurisdiction of or over the Leased
Property, and with any public utility companies having an interest therein. In
connection with any such work Tenant shall comply with all Legal Requirements
and Applicable Laws, of all other Governmental Agencies having or claiming
jurisdiction of or over the Leased Property and of all their respective
departments, bureaus and offices, and with the requirements, if any, of such
public utilities, of the insurance underwriting board or insurance inspection
bureau having or claiming jurisdiction, or any other body exercising similar
functions, and of all insurance companies then writing policies covering the
Leased Property or any part thereof.

(c) Tenant represents and warrants to Landlord that all such work will be
performed in a good and workmanlike manner and in accordance with the plans and
specifications required under this Section 6.3 therefor, the terms, provisions
and conditions of this Lease and all governmental requirements.

(d) Landlord, at its sole cost and expenses and upon not less than
twenty-four (24) hours Notice to Tenant, shall have the right to inspect any
such work at all times during normal working hours using such inspector(s) as it
may deem necessary so long as such inspections do not unreasonably interfere
with Tenant’s work (but Landlord shall not thereby assume any responsibility for
the proper performance of such work in accordance with the terms of this Lease,
nor any liability arising from the improper performance thereof).

(e) All work comprising a part of the Permitted Renovations or other work
pursuant to which Reserve Expenditures are used, shall, subject to Section 7.1
hereof, be performed free of any Liens on Landlord’s fee simple and/or leasehold
interest, or Tenant’s leasehold interest, in the Leased Property.

 

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(f) To the extent required by any Legal Requirements or Applicable Laws, upon
substantial completion of any Permitted Renovations or other work pursuant to
which Reserve Expenditures are used, Tenant shall procure a certificate of
occupancy, certificate of completion or other final approvals, if applicable,
from the appropriate Governmental Agencies and provide copies of same to
Landlord

(g) Tenant shall, and hereby agrees to, indemnify, save, pay, insure and hold
Landlord and its Affiliated Parties harmless from and against and reimburse
Landlord for any and all loss, damage, cost, liability, fee and expense
(including, without limitation, reasonable attorney’s fees based upon service
rendered at hourly rates) incurred by or asserted against Landlord which is
occasioned by or results, directly or indirectly, from any such work conducted
upon the Leased Property; whether or not the same is caused by, or is the fault
of Tenant or any agent, employee, manager, contractor, subcontractor, laborer,
supplier, materialmen or any other third party; provided, however, Tenant shall
not be obligated to indemnify Landlord from any loss as aforesaid caused by
Landlord’s gross negligence or willful misconduct.

6.4 Salvage. Other than Tenant’s Personal Property, all materials which are
scrapped or removed in connection with maintenance and repair performed pursuant
to Article 5 and the making of Permitted Renovations pursuant to this Article 6
shall be disposed of by Tenant and the net proceeds thereof, if any, shall be
deposited in the Reserve.

6.5 Project Budget Overruns. Other than as specifically set forth herein,
Landlord shall not be responsible for the cost of any Improvement Projects or
Permitted Renovations contemplated or permitted hereby. Landlord shall have the
right to review and approve a budget for any Improvement Projects or Permitted
Renovations which Landlord agrees to fund. With respect to any Improvement
Project or Permitted Renovation which Landlord agrees to fund, all such amounts
shall be added to and become a part of the Adjusted Lease Basis, as more
particularly described in Section 5.3 hereof. In the event Landlord agrees to
fund any Improvement Project or Permitted Renovation, Landlord agrees that it
will fund up to ten percent (10%) in excess of the original approved budget, but
shall have no responsibility to fund any costs which, in the aggregate, exceed
one hundred and ten percent (110%) of the approved budgeted amount for such
Improvement Project or Permitted Renovation. To the extent that Tenant requests
that Landlord fund and Landlord agrees to fund such amounts in excess of one
hundred and ten percent (110%) of the approved budgeted amount for any
Improvement Project or Permitted Renovation, one hundred fifty percent (150%) of
such excess amounts funded by Landlord shall be added to and become a part of
Adjusted Lease Basis. Notwithstanding the foregoing, even in the event Tenant
does not request Landlord to fund such excess, Tenant shall remain obligated to
diligently complete any such Improvement Project or Permitted Renovation in a
timely and workmanlike manner, consistent with all Landlord approved plans and
specifications and in conformance with all Applicable Laws. Tenant acknowledges
that any expenditure in excess of one hundred and ten percent (110%) of the
approved budgeted amount for such Improvement Project or Permitted Renovation,
and any other expenditure for Improvement Projects or Permitted Renovations, may
be subject to Landlord obtaining the approval of such expenditure by the board
of directors of the Parent of Landlord.

 

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ARTICLE 7

LANDLORD’S INTEREST NOT SUBJECT TO LIENS

7.1 Liens, Generally. Tenant shall not, directly or indirectly, create or cause
to be imposed, claimed or filed upon the Leased Property, or any of Tenant’s
assets, properties or income or any portion thereof related to the Leased
Property or upon the interest of Landlord therein, any Lien of any nature
whatsoever, except upon Landlord’s prior written consent which consent may be
withheld in Landlord’s sole and absolute discretion. If, because of any act or
omission of Tenant, any such Lien shall be imposed, claimed or filed by any
party whosoever or whatsoever, Tenant shall, at its sole cost and expense, cause
the same to be promptly (and in no event later than thirty (30) days following
receipt of notice of such Lien) fully paid and satisfied or otherwise promptly
discharged of record (by bonding or otherwise) and Tenant shall indemnify, save,
pay, insure and hold Landlord harmless from and against any and all costs,
liabilities, suits, penalties, claims and demands whatsoever, and from and
against any and all reasonable attorney’s fees, at both trial and all appellate
levels, resulting or on account thereof and therefrom. In the event that Tenant
shall fail to comply with the foregoing provisions of this Section 7.1, Landlord
shall have the option, but not the obligation, of paying, satisfying or
otherwise discharging (by bonding or otherwise) such Lien and Tenant agrees to
reimburse Landlord, upon demand and as an Additional Charge, for all sums so
paid and for all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon, until paid.

7.2 Construction or Mechanics Liens. Landlord’s interest in the Leased Property
shall not be subjected to Liens of any nature by reason of Tenant’s
construction, alteration, renovation, repair, restoration, replacement or
reconstruction of any improvements on or in the Leased Property, or by reason of
any other act or omission of Tenant (or of any person claiming by, through or
under Tenant) including, but not limited to, construction, mechanics’ and
materialmen’s liens. All persons dealing with Tenant are hereby placed on notice
that such persons shall not look to Landlord or to Landlord’s credit or assets
(including Landlord’s interest in the Leased Property) for payment or
satisfaction of any obligations incurred in connection with the construction,
alteration, renovation, repair, restoration, replacement or reconstruction
thereof by or on behalf of Tenant. Tenant has no power, right or authority to
subject Landlord’s interest in the Leased Property to any construction,
mechanic’s or materialmen’s lien or claim of lien. If a Lien, a claim of lien or
an order for the payment of money shall be imposed against the Leased Property
on account of work performed, or alleged to have been performed, for or on
behalf of Tenant, Tenant shall, within thirty (30) days after written notice of
the imposition of such Lien, claim or order, cause the Leased Property to be
released therefrom by the payment of the obligation secured thereby or by
furnishing a bond or by any other method prescribed or permitted by Applicable
Laws. If a Lien is released, Tenant shall thereupon furnish Landlord with a
written instrument of release which has been recorded or filed in the
appropriate office of land records of the County in which the Leased Property is
located, and otherwise sufficient to establish the release as a matter of
record. Before commencing any work relating to alterations, additions, or
improvements affecting the Leased Property (other than Minor Alterations),
Tenant shall notify Landlord in writing of the expected date of commencement
thereof. Landlord shall then have the right at any time and from time to time to
post and maintain on the Land and Leased Improvements such notices as Landlord
reasonably deems necessary to protect the

 

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Leased Property and Landlord from mechanics’ liens, materialmen’s liens, or any
other Liens. In any event, Tenant shall pay when due all claims for labor or
materials furnished to or for Tenant at or for use in the Land and Leased
Improvements. Tenant shall not permit any mechanics’ or materialmen’s liens to
be levied against the Leased Property for any labor or material furnished to
Tenant or claimed to have been furnished to Tenant or to Tenant’s agents or
contractors in connection with work of any character performed or claimed to
have been performed on the Land or the Leased Improvements by or at the
direction of Tenant, and shall immediately cause the release of any such Liens
as provided hereinabove.

7.3 Contest of Liens. Tenant may, at its option, contest the validity of any
Lien or claim of lien if Tenant shall have first posted an appropriate and
sufficient bond in favor of the claimant or paid the appropriate sum into court,
if permitted by and in strict compliance with Applicable Laws, and thereby
obtained the release of the Leased Property from such Lien. If judgment is
obtained by the claimant under any Lien, Tenant shall pay the same immediately
after such judgment shall have become final and the time for appeal therefrom
has expired without appeal having been taken. Tenant shall, at its sole cost and
expense, using counsel reasonably approved by Landlord, diligently defend the
interests of Tenant and Landlord in any and all such suits; provided, however,
that Landlord may, nonetheless, at its election and expense, engage its own
counsel and assert its own defenses, in which event Tenant shall cooperate with
Landlord and make available to Landlord all information and data which Landlord
deems necessary or desirable for such defense.

7.4 Notices of Commencement of Construction. Notwithstanding anything to the
contrary contained in Ohio Revised Code Section 1311.01 et seq. or in this
Lease, Tenant shall not be deemed to be a partner, joint venturer or agent of
Landlord. Tenant agrees that it shall not enter into any contract for
improvements to the Leased Property unless the following language is included in
such contract:

“Notwithstanding anything herein contained to the contrary, the contractor
acknowledges that (insert name of Tenant) holds only a leasehold interest in the
property which is the subject of this contract. (Name of Tenant) is not the
agent of the owner of the property, and no lien resulting from work performed
under this contract shall attach to the interest of such owner.”

Tenant shall not permit any work to be commenced until such time as Tenant has
provided Landlord with a fully executed copy of the construction contract
evidencing incorporation of the aforesaid language. In addition, prior to the
performing of any labor or work or the furnishing of any material for an
improvement to the Leased Property, Tenant shall: (i) post the following notice
in a conspicuous place on the Leased Property, and shall assure that such notice
is maintained throughout the entire course of construction:

NOTICE TO CONTRACTORS, SUBCONTRACTORS,

MATERIALMEN AND LABORERS

Notice is hereby given that work on (description of job) is being performed for
(name of Tenant). (Name of Tenant) is not the

 

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agent of the owner of this property, and any lien rights shall be limited to the
leasehold estate of (name of Tenant) and shall in no event attach to the
interest of the owner.

and (ii) comply with all requirements of Section 1311.04 of the Ohio Revised
Code relative to recording and posting of a “Notice of Commencement”. Tenant
shall also provide Landlord with a copy of the recorded “Notice of
Commencement”, within thirty (30) days of the recording of same, or fails to
record said “Notice of Commencement” within ten (10) days of the performance of
any labor or work or the furnishing of any materials, then, in addition to any
other remedies that may be available to Landlord, including the termination of
this Lease by Landlord, Tenant shall pay to Landlord, in addition to all other
amounts payable hereunder $500 for each day subsequent to Tenant’s failure to
record said “Notice of Commencement” as required pursuant to Section 1311.04 of
the Ohio Revised Code.

ARTICLE 8

TAXES AND ASSESSMENTS

8.1 Obligation to Pay Taxes and Assessments. Throughout the entire Term, Tenant
shall bear, pay and discharge as Additional Charges and not later than the last
day on which payment may be made without penalty or interest, any and all taxes,
assessments, charges, levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees) and other impositions and
charges of every kind and nature whatsoever, extraordinary as well as ordinary,
foreseen or unforeseen, and each and every installment thereof which shall or
may during or with respect to the Term hereof accrue and/or be charged, laid,
levied, assessed, or imposed upon, or arise in connection with, the use,
occupancy, operation or possession of the Leased Property or any part thereof or
the Business conducted thereon, including, without limitation, ad valorem real
and personal property taxes, all taxes charged, laid, levied, assessed or
imposed in lieu of or in addition to any of the foregoing by virtue of all
present or future laws, ordinances, requirements, orders, directions, rules or
regulations of Governmental Agencies, and all assessments and charges imposed
pursuant to the Permitted Encumbrances (other than those relating to a Facility
Mortgage or other financing of Landlord) or other documents of record affecting
title to the Leased Property, with the understanding that any such Additional
Charge that relates to any period prior to the expiration of the Term or the
earlier termination of this Lease which does not become due and payable until
after such expiration or termination shall be the responsibility of Tenant.
Tenant shall prepare and timely file all applicable returns required with
respect to such taxes, assessments, impositions or charges, including, without
limitation, all personal property tax returns required in connection with the
Leased Property. Upon Landlord’s request, Tenant shall promptly furnish to
Landlord satisfactory evidence of the payment of all such taxes, assessments,
impositions or charges and copies of any such returns filed. Notwithstanding the
foregoing, Tenant shall not be responsible for Additional Charges due and
payable after the expiration of the Term to the extent that the same relate and
apply interests and benefits accruing to Landlord after the Term. Tenant shall
have no right to approve any Facility Mortgage or other documents relating to
indebtedness of Landlord and Tenant shall have no responsibility to pay any tax,
charge or imposition levied with respect to any Facility Mortgage.

 

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8.2 Tenant’s Right to Contest Taxes. Notwithstanding the foregoing, Tenant shall
have the right, after prior written notice to Landlord, to contest at its own
expense the amount and validity of any taxes affecting the Leased Property by
appropriate proceedings under Applicable Laws conducted in good faith and with
due diligence and to postpone or defer payment thereof, provided and so long as:

(a) Such proceedings shall operate to suspend the collection of such taxes with
respect to the Leased Property;

(b) Neither the Leased Property nor any part thereof would be in immediate
danger of being forfeited or lost by reason of such proceedings, postponement or
deferment; and

(c) Tenant shall have furnished Landlord with security for payment of the
contested taxes which is satisfactory to Landlord, and, in the event that the
preconditions set forth in (a) and (b) above are no longer met, Landlord shall
have the right to draw upon such security to pay and discharge the taxes in
question and any Liens against the Leased Property arising thereunder.

8.3 Tax and Insurance Escrow Account. During the existence of any Event of
Default hereunder, or upon request of a Mortgagee, Landlord shall have the
right, by written notice to Tenant effective as of the date of such notice, to
require Tenant to pay or cause to be paid into a separate account (the “Tax and
Insurance Account”) to be established by Tenant with a lending institution or
other third party escrow agent designated by Landlord (which Tax and Insurance
Account shall not be removed from such lending institution or other third party
escrow agent without the express prior approval of Landlord), and which Landlord
may draw upon, a reserve amount sufficient to discharge the obligations of
Tenant under Section 8.1 and Article 9 hereof (other than worker’s compensation
insurance premiums) with respect to real estate taxes and insurance premiums for
the applicable Fiscal Year as and when they become due (such amounts, the “Tax
and Insurance Escrow Amount”). During each month commencing with the first full
calendar month following the receipt of said notice from Landlord, Tenant shall
deposit into the Tax and Insurance Account one twelfth of the Tax and Insurance
Escrow Amount so that as each installment of insurance premiums and real estate
taxes becomes due and payable, there are sufficient funds in the Tax and
Insurance Account to pay the same. If the amount of such insurance premiums and
real estate taxes has not been definitively ascertained by Tenant at the time
when any such monthly deposit is to be paid, Landlord shall require payment of
the Tax and Insurance Escrow Amount based upon the amount of premiums and real
estate taxes paid for the preceding year, subject to adjustment as and when the
amount of such premiums and real estate taxes are ascertained by Tenant. The Tax
and Insurance Escrow Amount in the Tax and Insurance Account shall be and
constitute additional security for the performance of Tenant’s obligations
hereunder and shall be subject to Landlord’s security interest therein and
shall, if there are sufficient funds in escrow, be used to pay taxes and
insurance premiums when due. Landlord and Tenant shall execute such
documentation as may be necessary to create and maintain Landlord’s security
interest in the Tax and Insurance Account.

 

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ARTICLE 9

INSURANCE

9.1 General Insurance Requirements. At Landlord’s request, Tenant shall, at all
times during the Term and at any other time Tenant shall be in possession of the
Leased Property, keep the Leased Property and all property located therein or
thereon, insured against the following risks in the following amounts:

(a) Property insurance, (and to the extent applicable, Builder’s Risk Insurance)
including coverage for loss from fire, windstorm, hail, sprinkler leakage,
vandalism and malicious mischief, water damage, and other risks including
extended coverage written on an “All Risk” or Special Form on the Leased
Improvements (excluding foundations) and contents including coverage for signs,
awnings, canopies, gazebos, fences and retaining walls in an amount equal to the
full (100%) replacement value thereof without a co-insurance penalty (Agreed
Value endorsement).

(b) Flood Insurance, if the Facility is located in whole or in part within an
area identified as having a special flood hazard by the National Flood Insurance
Program, with a $500,000 limit per commercial building, a $1,000,000 additional
limit and a deductible acceptable to Landlord and such deductible is
commercially reasonable and maintained by owners of properties similar in type,
location and quality. In the event that the deductible is deemed commercially
unreasonable, any higher deductible must be acceptable to Landlord, which
approval will not be unreasonably withheld.

(c) Earthquake Insurance, if the Facility is located in whole or in part within
an Earthquake zone, with limits and deductibles acceptable to the Landlord and
in accordance with that which is customarily carried by owners of properties
similar in type, location and quality as the Leased Improvements.

(d) Business Income including “extra expense” insurance to be written on an “All
Risk” or Special Form (and Earthquake and Flood forms if such insurance for
those risks is required, it being understood earthquake and flood business
income and extra expense are included in the earthquake and flood sub-limits)
covering at least twelve (12) months’ loss of profits and continuing expenses
and must include coverage for an extended period of indemnity equal to or
exceeding one hundred eighty (180) days.

(e) Boiler & Machinery, providing insurance against loss from accidental damage
to, or from the explosion of, boilers, air conditioning systems, including
refrigeration and heating apparatus, pressure vessels and pressure pipes and
other similar apparatus in an amount equal to the full replacement value of such
items with deductibles acceptable to Landlord; including business interruption
insurance against loss from these damages in an amount acceptable to Landlord.
Coverage can be included in the Property policy with same terms & conditions as
item (a) above.

(f) Ordinance or Law Coverage with limits of not less than the full value of all
the Improvements for Coverage A (Loss to the undamaged portion of the building),
limits of not less than $1,000,000 for Coverage B (Demolition Cost Coverage),
and limits not less than $1,000,000 for Coverage C (Increased Cost of
Construction Coverage).

 

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(g) All insurance policies, except earthquake and flood, procured under clause
(a) above shall provide terrorism coverage, to the extent available through the
commercial insurance market or by Federal Act at rates, terms and conditions
acceptable to Landlord. If Landlord requires terrorism insurance to be procured
by Tenant under clause (a) above, Landlord shall authorize Tenant to procure
such coverage and Tenant shall provide Landlord said rates, terms and conditions
of the terrorism insurance upon binding coverage for the Facility.

(h) Commercial general liability which insures against claims for bodily injury,
personal & advertising injury and property damage (including loss of use
resulting therefrom) arising out of the use, occupancy or maintenance of the
Leased Property with limits not less than $1,000,000 per occurrence and
$2,000,000 aggregate. Any general liability aggregate will apply on a per
location basis. This coverage must be written on ISO CG0001 or its equivalent.
This coverage must include contractual liability, products/completed operations
liability (unless otherwise agreed by lender), and broad form property damage
and must contain an exception to any pollution exclusion which insures damage or
injury arising out of heat, smoke, or fumes from a hostile fire. Such insurance
must be written on an occurrence basis. Liability insurance maintained by Tenant
will be primary coverage naming the mortgagee as an additional insured, without
right of contribution by any similar insurance that may be maintained by
Landlord. Coverage for sexual/physical abuse or molestation should be included.

(i) Commercial automobile liability, insurance insuring against bodily injury
and property damage claims arising out of Tenant’s ownership, maintenance or use
of any owned, non-owned or rented/hired vehicle. A minimum of $1,000,000
combined single limit will apply.

(j) Crime insurance in an amount acceptable to Landlord and Tenant; provided
that maintenance of the deductible shall be commercially reasonable and shall be
maintained by owners of properties similar in type, location and quality as the
Facility.

(k) Workers’ Compensation and Employers Liability. Workers’ Compensation
insurance shall be in the form and amount required by State Statute. The
Employers Liability minimum limits required are $1,000,000 Each Accident;
$1,000,000 Disease-Policy Limit; and $1,000,000 Disease-Each Employee.

(l) Employment Practices Liability Insurance with limits in an amount acceptable
to Landlord, and includes coverage for a third party.

(m) Professional Liability coverage for claims arising as a result of alleged
negligence, dishonesty, errors or omissions while performing or rendering
professional services with limits of not less than $1,000,000 per occurrence and
$2,000,000 per aggregate.

 

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(n) Umbrella/Excess liability with limits of not less than $10,000,000 per
occurrence/aggregate with terms at least as broad as the underlying commercial
general liability; automobile liability, and employer’s liability.

(o) Mortgagee Provisions, (if applicable) which must match standard clause of
ISO forms of Lender’s Loss Payable clause as further described in section D of
ISO form CP 12 18 (06 07); a copy of which must be included with the certificate
of insurance.

(p) Such additional insurance or increased insurance limits as may be reasonably
required, from time to time, by Landlord (including, without limitation, any
mortgage, security agreement or other financing permitted hereunder and then
affecting the Leased Property, as well as any declaration, ground lease or
easement agreement affecting the Leased Property), or any Mortgagee, provided
the same is customarily carried by a majority of comparable facilities in the
area.

9.2 Waiver of Subrogation. Landlord and Tenant agree that with respect to any
property loss which is covered by insurance then being carried by Landlord or
Tenant, respectively, the party carrying such insurance and suffering said loss
releases the other of and from any and all claims with respect to such loss, and
they further agree that their respective insurance companies shall have no right
of subrogation against the other on account thereof.

9.3 General Provisions. The property insurance deductible shall not exceed Fifty
Thousand and No/100 Dollars ($50,000.00), unless such greater amount is
agreeable to both Landlord and Tenant, or if a higher deductible for high hazard
risks (i.e., wind or flood) is mandated by the insurance carrier. All insurance
policies pursuant to this Article 9 shall be issued by insurance carriers having
a general policy holder’s rating of no less than A-X in Best’s latest rating
guide (if and when Mortgagee no longer requires such rating, the rating required
by this Section shall be no less than A:VII in Best’s latest rating guide), and
shall contain clauses or endorsements to the effect that (a) Landlord shall not
be liable for any insurance premiums thereon or subject to any assessments
thereunder, and (b) the coverages provided thereby will be primary and any
insurance carried by any additional insured shall be excess and non-contributory
to the extent of the indemnification obligation pursuant to Section 9.4 below.
All such policies described in Section 9.1 shall name Landlord, CNL Healthcare
Trust, Inc., a Maryland corporation, or its designated Subsidiaries and
Affiliates, and any Mortgagee whose name and address has been provided to Tenant
as additional insureds, Mortgagee’s, lenders loss payees, or mortgagees, as
their interests may appear and to the extent of their indemnity. All loss
adjustments shall be payable as provided in Article 10. Tenant shall deliver
certificates of liability (Acord 25) and Evidence of Commercial Property
Insurance (Acord 28) thereof to Landlord and Mortgagee prior to their effective
date (and, with respect to any renewal policy, no less than thirty (30) days
prior to the expiration of the existing policy), which certificates shall state
the nature and level of coverage reported thereby, as well as the amount of the
applicable deductible. Upon Landlord’s request, duplicate original copies of all
insurance policies to be obtained by Tenant shall be provided to Landlord by
Tenant. All such policies must provide Landlord (and any Mortgagee whose name
and address has been provided to Tenant if required by the same) thirty
(30) days prior written notice of any material change or cancellation of such
policy.

 

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In the event Tenant shall fail to effect such insurance as herein required, to
pay the premiums therefor or to deliver such certificates to Landlord or any
Mortgagee at the times required, Landlord shall have the right, but not the
obligation, subject to the provisions of Section 12.4, to acquire such insurance
and pay the premiums therefor, which amounts shall be payable to Landlord, upon
demand, as an Additional Charge, together with interest accrued thereon at the
Overdue Rate from the date such payment is made until (but excluding) the date
repaid.

9.4 Indemnification of Landlord. Except as expressly provided herein, Tenant
shall protect, indemnify, pay, save, insure, defend and hold harmless Landlord
for, from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and reasonable expenses (including, without limitation,
reasonable attorneys’ fees), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Landlord by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property of third parties
occurring on or about the Leased Property or adjoining sidewalks or rights of
way under Tenant’s control during the Term, and (b) any use, misuse, condition,
management, maintenance or repair by Tenant or anyone claiming under Tenant of
the Leased Property or Tenant’s Personal Property during the Term, or any
litigation, proceeding or claim by Governmental Agencies relating to such use,
misuse, condition, management, maintenance, or repair thereof to which Landlord
is made a party; provided, however, that Tenant’s obligations hereunder shall
not apply to any liability, obligation, claim, damage, penalty, cause of action,
cost or expense arising from any gross negligence or willful misconduct of
Landlord, its employees, agents, contractors or invitees. Any such claim, action
or proceeding asserted or instituted against Landlord covered under this
indemnity shall be defended by counsel selected by Tenant and reasonably
acceptable to Landlord, at Tenant’s sole cost and expense. The obligations of
Tenant under this Section 9.4 shall survive the expiration or any early
termination of this Lease.

ARTICLE 10

CASUALTY

10.1 Restoration and Repair. If during the Term the Leased Property shall be
totally or partially destroyed and thereby rendered Unsuitable for Its Permitted
Use, Tenant shall give Landlord prompt Notice thereof. Either Landlord or Tenant
may, by the giving of Notice thereof to the other party within sixty (60) days
after such casualty occurs, terminate this Lease, whereupon Landlord shall be
entitled to retain the insurance proceeds payable on account of such damage and
Tenant shall pay to Landlord the amount of any deductible. If this Lease is not
terminated, Tenant shall be obligated to promptly proceed with the complete
restoration and repair of the Leased Property first using available proceeds
from any insurance policy then in place naming Tenant as an insured party, plus
the amount of any deductible thereunder. In the event that the total amount of
such available insurance proceeds and any deductible to be paid by Tenant
thereunder are insufficient to pay all necessary repair and restoration costs
and expenses, Landlord shall fund any additional costs or expenses to repair and
restore the same, and any and all amounts so funded by Landlord shall be deemed
and treated as Landlord’s Additional Investment hereunder and, accordingly, the
Adjusted Lease Basis shall increase by an amount equal to the amount funded by
Landlord contemporaneously with the funding thereof by

 

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Landlord. Tenant further expressly acknowledges, understands and agrees that in
the event that this Lease is terminated as aforesaid, Landlord may settle any
insurance claims and Tenant shall, upon request of Landlord, reasonably
cooperate in any such settlement. If during the Term, the Leased Property shall
be destroyed or damaged in whole or in part by fire, windstorm or any other
cause whatsoever, but the Leased Property either (i) is not rendered Unsuitable
for Its Permitted Use or (ii) is rendered Unsuitable for Its Permitted Use but
neither Landlord nor Tenant terminate this Lease in the manner provided above,
then, Tenant shall give Landlord immediate Notice thereof and Tenant shall,
subject to the provisions of Section 10.2 below, repair, reconstruct and replace
the Leased Property, or the portion thereof so destroyed or damaged, at least to
the extent of the value and character thereof existing immediately prior to such
occurrence and in compliance with all Legal Requirements, including any
alterations to the Leased Property required to be made by any Governmental
Agencies due to any changes in code or building regulations (which Tenant
acknowledges may increase the replacement value of the Leased Property which
Tenant will then be required to insure, due to any changes in code or building
regulations). All such restoration work shall be started as promptly as
practicable by Tenant following Tenant’s receipt of insurance proceeds and, if
applicable, any additional funds Landlord is obligated to fund pursuant to this
Section 10.1, and thereafter diligently completed by Tenant. Tenant shall,
however, immediately take such action as is necessary to assure that the Leased
Property (or any portion thereof), does not constitute a nuisance or otherwise
present or constitute a health or safety hazard. Notwithstanding anything herein
to the contrary, if damage to or destruction of the Leased Property occurs
during the last twenty-four (24) months of the Term and such damage or
destruction cannot reasonably be expected to be fully repaired or restored prior
to the date that is twelve (12) months prior to the end of such Term, Tenant
shall have no obligation to repair or restore such damage or destruction.

10.2 Escrow and Disbursement of Insurance Proceeds. If this Lease is not
otherwise terminated pursuant to Section 10.1, then in the event of a casualty
resulting in a loss to the Leased Improvements and/or the P&E in an amount
greater than One Hundred Thousand and No/100 Dollars ($100,000.00) (as
determined by an architect or engineer selected by Landlord), the proceeds of
all insurance policies maintained by Tenant shall be deposited in Landlord’s
name in an escrow account at a bank or other financial institution designated by
Landlord, and shall be used by Tenant for the repair, reconstruction or
restoration of the Leased Property in accordance with the requirements of this
Article 10. Tenant shall, at the time of establishment of such escrow account
and from time to time thereafter until said work shall have been completed and
paid for, furnish Landlord with adequate evidence acceptable to Landlord that at
all times the undisbursed portion of the escrowed insurance proceeds, together
with any funds made available by Tenant, is sufficient to pay for the repair,
reconstruction or restoration in its entirety. Landlord may, at its option,
require, prior to advancement of said escrowed insurance proceeds (i) approval
of plans and specifications by an architect or other design professional
appropriate under the circumstances and approved by Landlord and Tenant (which
approval shall not be unreasonably withheld, conditioned or delayed),
(ii) general contractors’ estimates, (iii) architect’s certificates,
(iv) unconditional lien waivers of general contractors, if available,
(v) evidence of approval by all Governmental Agencies and other regulatory
bodies whose approval is required, and (vi) such other terms as a Mortgagee or
lender of Landlord may reasonably require. The escrowed insurance proceeds shall
be disbursed by Landlord, not more than bi-weekly, upon (y) certification of the
architect or engineer selected by Landlord and having

 

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supervision of the work that such amounts are the amounts paid or payable for
the repair, reconstruction or restoration, and (z) submittal by Tenant of a
written requisition and substantiation therefor on AIA Forms G702 and G703 (or
on such other form or forms as may be reasonably acceptable to Landlord). Tenant
shall obtain, and make available to Landlord, receipted bills and, upon
completion of said work, full and final waivers of lien. In the event of a
casualty resulting in a loss payment for the Leased Property in an amount equal
to or less than the amount stated above, the proceeds shall be paid to Tenant,
and shall be applied towards repair, reconstruction and restoration. Any and all
loss adjustments with respect to losses payable hereunder shall require the
prior written consent of Landlord, which consent may be withheld in Landlord’s
sole and absolute discretion. All salvage resulting from any risk covered by
insurance shall belong to Tenant, provided any rights to the same have been
waived by the insurer. In addition, notwithstanding anything in this Lease to
the contrary, Tenant shall be strictly liable and solely responsible for the
amount of any deductible and shall pay for all repairs, reconstruction or
alterations up to the full amount of such deductible (and provide evidence of
such payment to Landlord by documentation reasonably acceptable to Landlord)
before any insurance proceeds are used for repairs, reconstruction or
alterations.

10.3 No Abatement of Rent. Unless terminated in accordance with the provisions
of Section 10.1 above, this Lease shall remain in full force and effect and
Tenant’s obligation to make all payments of Rent and to pay all Additional
Charges as and when required under this Lease shall remain unabated during the
Term notwithstanding any casualty to the Leased Property. The provisions of this
Article 10 shall be considered an express agreement governing any event of
casualty involving the Leased Property and, to the maximum extent permitted by
law, Tenant hereby waives the application of any local or state statute, law,
rule, regulation or ordinance in effect during the Term which provides for such
abatement.

10.4 Business Interruption Insurance. All insurance proceeds payable by reason
of any loss of or damage to any of Tenant’s Personal Property and the business
interruption insurance maintained for the benefit of Tenant shall be paid to
Tenant; provided, however, no such payments shall diminish or reduce the
insurance payments otherwise payable to or for the benefit of Landlord
hereunder.

10.5 Restoration of Tenant’s Property. If Tenant is required to restore the
Leased Property as hereinabove provided, Tenant shall either (i) restore all
alterations and improvements made by Tenant and Tenant’s Personal Property, or
(ii) replace such alterations and improvements and Tenant’s Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.

10.6 Waiver. Tenant hereby waives to the maximum extent permitted by law, any
statutory or common law rights of termination which may arise by reason of any
damage or destruction of the Leased Property and agrees that its rights shall be
limited to those set forth in Section 10.1.

10.7 Rights of Mortgagee. Notwithstanding any provision herein to the contrary,
so long as a Facility Mortgage is in existence, all insurance proceeds with
respect to the Leased Property to be paid and disbursed to Landlord pursuant to
the terms of this Lease shall be paid and disbursed in accordance with the loan
documents executed in connection with such Facility Mortgage, provided that such
Mortgagee agrees in writing with Landlord and Tenant to disburse such proceeds
in accordance with this Lease.

 

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ARTICLE 11

CONDEMNATION

11.1 Total Condemnation, Etc. If the whole of the Leased Property shall be taken
or Condemned for any public or quasi public use or purpose, by right of eminent
domain or by purchase in lieu thereof, or if a substantial portion of the Leased
Property shall be so taken or condemned such that the portion or portions
remaining is or are not sufficient and suitable for the continued operation
thereof as required herein, so as to effectively render the Leased Property
Unsuitable for its Permitted Use, then this Lease and the Term hereby granted
shall cease and terminate (without prejudice to Landlord’s and Tenant’s
respective rights to an award under Section 11.3 below) as of the date on which
the Condemnor takes possession and all Rent shall be paid by Tenant to Landlord
up to that date or refunded by Landlord to Tenant if Rent has previously been
paid by Tenant beyond that date.

11.2 Partial Condemnation. If a portion of the Leased Property shall be subject
to any Condemnation, and the portion or portions remaining can be adapted and
used for the conduct of the Business in accordance with the terms of this Lease,
such that the Leased Property is not effectively rendered Unsuitable for its
Permitted Use, then Tenant shall, utilizing, as reasonably necessary,
Condemnation proceeds paid to Landlord from the Condemnor, promptly restore the
remaining portion or portions thereof to a condition comparable to their
condition at the time of such Condemnation, less the portion or portions lost by
the taking, and this Lease shall continue in full force and effect with no
reduction or abatement of Rent.

11.3 Disbursement of Award. The entire Condemnation award for the Leased
Property or the portion or portions thereof so taken shall be apportioned
between Landlord and Tenant as follows: (a) if this Lease terminates due to a
Condemnation, Landlord shall be entitled to the entire award; provided, however,
that any portion of the award expressly made for the taking of Tenant’s
leasehold interest in the Leased Property, loss of business during the remainder
of the Term, and the taking of Tenant’s Personal Property shall be the sole
property of and payable to Tenant, and (b) if this Lease does not terminate due
to such Condemnation, Tenant shall be entitled to the award to the extent
required for restoration of the Leased Property, and Landlord shall be entitled
to the balance of the award not applied to restoration. In any Condemnation
proceedings, Landlord and Tenant shall each seek its own award in conformity
herewith, at its own expense. If this Lease does not terminate due to a
Condemnation, Tenant shall, with due diligence, restore the remaining portion or
portions of the Leased Property in the manner hereinabove provided. In such
event, the proceeds of the award to be applied to restoration shall be deposited
with a bank or financial institution designated by Landlord as if such award
were insurance proceeds, and the amount so deposited will thereafter be treated
in the same manner as insurance proceeds are to be treated under Section 10.2 of
this Lease until the restoration has been completed and Tenant has been
reimbursed for all the costs and expenses thereof. If the award is insufficient
to pay for the restoration, Landlord shall be responsible for the remaining cost
and expense of such restoration. All proceeds in excess of those required for
restoration shall be disbursed to Landlord upon completion of such restoration.

 

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11.4 No Abatement of Rent. This Lease shall remain in full force and effect and
Tenant’s obligation to make all payments of Rent and to pay all other charges as
and when required under this Lease shall remain unabated during the Term
notwithstanding any Condemnation involving the Leased Property. Notwithstanding
the foregoing, in the event that 10% or more of occupied residential units are
rendered uninhabitable as a result of post-condemnation restoration, then so
long as Tenant is diligently pursuing such restoration, then rent shall abate on
a pro-rata basis from the date of taking to the completion of restoration.

The provisions of this Article 11 shall be considered an express agreement
governing any Condemnation involving the Leased Property and, to the maximum
extent permitted by Applicable Laws, no local or State statute, law, rule,
regulation or ordinance in effect during the Term which provides for such
abatement shall have any application in such case.

ARTICLE 12

DEFAULTS AND REMEDIES

12.1 Tenant Events of Default. Each of the following events shall be an Event of
Default hereunder by Tenant and shall constitute a breach of this Lease:

(a) If Tenant shall fail to (i) pay, when due, any Minimum Rent due hereunder
and such failure in each such event shall continue for a period of seven
(7) Business Days after such amounts become due.

(b) If Tenant shall fail to (i) pay, when due, any Additional Charge due
hereunder; or (ii) make any required contribution to the Reserve pursuant to
Section 5.2 of this Lease, and such failure in each such event shall continue
for a period of five (5) Business Days after receipt of written Notice thereof
from Landlord.

(c) If any assignment, transfer or sublease of or concerning any of the Leased
Property, specifically excluding the P&E, shall be made or deemed to be made
that is in violation of the provisions of this Lease.

(d) If any lien or encumbrance of the Leased Property or if any assignment,
transfer, sublease, lien or encumbrance of the P&E shall be made or deemed to be
made that is in violation of the provisions of this Lease and such violation or
failure shall continue for a period of ninety (90) days after written notice
thereof from Landlord.

(e) If Tenant shall cease the actual and continuous operation of the Business
contemplated by this Lease to be conducted by Tenant upon the Leased Property
(and such cessation is not the result of casualty, Condemnation or a Permitted
Renovation and accompanying restoration or is not otherwise permitted by
Landlord or is not the result of Applicable Laws or during an Emergency or other
Force Majeure Event); or if Tenant shall vacate, desert or abandon the Leased
Property; or if the Leased Property shall become empty and unoccupied; or if any
of the Leased Property or Leased Improvements are used or are permitted to be
used for any purpose, or for the conduct of any activity, other than the
Permitted Use.

 

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(f) If, at any time during the Term of this Lease, Tenant shall file in any
court, pursuant to any statute of either the United States or of any State, a
petition in bankruptcy or insolvency, or for reorganization or arrangement, or
for the appointment of a receiver or trustee of all or any portion of Tenant’s
property, including, without limitation, the leasehold interest in the Leased
Property, or if Tenant shall make an assignment for the benefit of its creditors
or petitions for or enters into an arrangement with its creditors.

(g) If, at any time during the Term of this Lease, there shall be filed against
Tenant in any court pursuant to any statute of the United States or of any
State, a petition in bankruptcy or insolvency, or for reorganization, or for the
appointment of a receiver or trustee of all or a portion of Tenant’s property,
including, without limitation, the leasehold interest in the Leased Property,
and any such proceeding against Tenant shall not be dismissed within ninety
(90) days following the commencement thereof.

(h) If Tenant’s leasehold interest in the Leased Property or any property
therein (including, without limitation, any material portion of Tenant’s
Personal Property) shall be seized under any levy, execution, attachment or
other process of court where the same shall not be vacated or stayed on appeal
or otherwise within ninety (90) days thereafter, or if Tenant’s leasehold
interest in the Leased Property is sold by judicial sale and such sale is not
vacated, set aside or stayed on appeal or otherwise within ninety (90) days
thereafter.

(i) If any of the Permits material to the operation of the Business or the use
of the Land for its Permitted Use are at any time suspended and the suspension
is not stayed pending appeal within sixty (60) days of the date of the notice of
the suspension of any Permits material to the operation of the Business or the
use of the Land for its Permitted Use, or voluntarily terminated without the
prior written consent of Landlord, which consent may be withheld in Landlord’s
sole opinion and discretion.

(j) If any governmental agency or regulatory authority places a ban on
admissions to the Facility and such ban is not lifted and admissions again
permitted within ninety (90) calendar days.

(k) If Tenant fails to give notice to Landlord not later than ten (10) Business
Days after Tenant’s receipt of any fine notice from any Government Agency
relating to a violation of Applicable Law at the Land or relating to the
Business, which violation, if not cured, could cause a cessation of operations
of the Business or a substantial portion thereof.

(l) If Tenant fails during the Term of this Lease to cure or abate any violation
of Applicable Law occurring during the Term that is claimed by any Governmental
Agency of any law, order, ordinance, rule, regulation or Applicable Laws
pertaining to the operation of the Business or the use of the Land for its
Permitted Use, and within the later of (i) the time permitted by such authority
for such cure or abatement, or (ii) thirty (30) days after written notice
thereof from Landlord.

 

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(m) If Tenant violates or fails to comply with or perform any other term,
provision, covenant, agreement or condition to be performed or observed by
Tenant under this Lease which is not otherwise identified in this Section 12.1,
and such violation or failure shall continue for a period of thirty (30) days
after receipt of written notice thereof from Landlord; provided, however, if
such violation or failure is incapable of cure by Tenant within such thirty
(30) days after Tenant’s diligent and continuous efforts to cure the same, it
shall not constitute an Event of Default provided Tenant commences the cure
within thirty (30) days and diligently thereafter completes the cure of same
within a commercially reasonable period of time after such written notice.

(n) If Tenant encumbers the Leased Property or its interests under this Lease
with leasehold financing in violation hereof.

(o) If there shall be a default by any Guarantor under the Guaranty and such
default is not cured within any applicable cure period.

(p) If there shall be a default by Tenant under any Affiliated Lease and such
default is not cured within any applicable cure period

12.2 Landlord Remedies Upon An Event of Default by Tenant. If any of the Events
of Default hereinabove specified shall occur, Landlord, at any time thereafter,
shall have and may exercise any of the following rights and remedies:

(a) Landlord may, pursuant to written notice thereof to Tenant, immediately
terminate this Lease and, peaceably or pursuant to appropriate legal
proceedings, reenter, retake and resume possession of the Leased Property for
Landlord’s own account without liability for trespass (Tenant hereby waiving any
right to notice or hearing prior to such taking of possession by Landlord) and,
for Tenant’s breach of and default under this Lease, recover immediately from
Tenant any and all sums and damages due or in existence at the time of such
termination, including, without limitation, (i) all Rent and other sums,
charges, payments, costs and expenses agreed and/or required to be paid by
Tenant to Landlord hereunder prior to such termination, (ii) all reasonable
costs and expenses of Landlord in connection with the recovery of possession of
the Leased Property, including reasonable attorney’s fees and court costs, and
(iii) all reasonable costs and expenses of Landlord in connection with any
reletting or attempted reletting of the Leased Property or any part or parts
thereof, including, without limitation, brokerage fees, advertising costs,
reasonable attorney’s fees and the cost of any alterations or repairs or tenant
improvements which may be reasonably required to so relet the Leased Property,
or any part or parts thereof.

(b) Landlord may, pursuant to any prior notice required by law, and without
terminating this Lease, peaceably or pursuant to appropriate legal proceedings,
reenter, retake and resume possession of the Leased Property for the account of
Tenant, make such alterations of and repairs and improvements to the Leased
Property as may be reasonably necessary in order to relet the same or any part
or parts thereof and, directly or through a qualified management or operating
company which may include an Affiliate of Landlord, operate and manage the
Leased Property, and relet or attempt to relet the

 

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Leased Property or any part or parts thereof for such term or terms (which may
be for a term or terms extending beyond the Term of this Lease), at such rents
and upon such other terms and provisions as Landlord, in its sole discretion,
may deem advisable. If Landlord takes possession and control of the Leased
Property and operates the same, Tenant shall, for so long as Landlord is
actively operating the Leased Property, have no obligation to operate the Leased
Property but agrees that Landlord, any contract manager or operator, or any new
tenant or sublessee may, to the extent permitted by Applicable Laws, operate the
Business under Tenant’s Permits, including, unless prohibited by Applicable
Laws, its liquor license, if any, until same are issued in the name of Landlord
or the new manager/operator or tenant or sublessee, as applicable. In addition,
Tenant will reasonably cooperate with Landlord in transferring, to the extent
transferable, any of Tenant’s Permits which Landlord determines would be
necessary or appropriate to continue to operate the Leased Property for its
Permitted Use. If Landlord relets or attempts to relet the Leased Property, or
obtains a contract manager or operator for the Leased Property, Landlord shall
at its sole discretion determine the terms and provisions of any new lease or
sublease, or management or operating agreement, and whether or not a particular
proposed manager or operator, or new tenant or sublessee, is acceptable to
Landlord. Upon any such reletting, or the operation of the Leased Property by a
contract manager or operator, all rents or incomes received by Landlord from
such reletting or otherwise from the operation of the Leased Property shall be
applied, (i) first, to the payment of all costs and expenses of recovering
possession of the Leased Property, (ii) second, to the payment of any costs and
expenses of such reletting and or operation, including brokerage fees,
advertising costs, reasonable attorney’s fees, a reasonable management fee (if
considered necessary by good business practices), and the cost of any
alterations and repairs reasonably required for such reletting or operation of
the Leased Property, (iii) third, to the payment of any indebtedness, other than
Rent, due hereunder from Tenant to Landlord, (iv) fourth, to the payment of all
Rent and other sums due and unpaid hereunder, and (v) fifth, the residue, if
any, shall be held by Landlord and applied in payment of future Rent as the same
may become due and payable hereunder. If the rents received from such reletting
or net income from the operation of the Leased Property during any period shall
be less than the Rents and Additional Charges required to be paid during that
period by Tenant hereunder, Tenant shall promptly pay any such deficiency to
Landlord and failing the prompt payment thereof by Tenant to Landlord, Landlord
shall immediately be entitled to institute legal proceedings for the recovery
and collection of the same. Such deficiency shall be calculated and paid at the
time each payment of Minimum Rent or any other sum shall otherwise become due
under this Lease, or, at the option of Landlord, at the end of the Term of this
Lease. Landlord shall, in addition, be immediately entitled to sue for and
otherwise recover from Tenant any other damages occasioned by or resulting from
any abandonment of the Leased Property or other breach of or default under this
Lease other than a default in the payment of Rent. No such reentry, retaking or
resumption of possession of the Leased Property by Landlord for the account of
Tenant shall be construed as an election on the part of Landlord to terminate
this Lease unless a written notice of such intention shall be given to Tenant or
unless the termination of this Lease be decreed by a court of competent
jurisdiction. Notwithstanding any such re entry and reletting or attempted
reletting of the Leased Property or any part or parts thereof for the account of
Tenant without

 

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termination, Landlord may at any time thereafter, upon written notice to Tenant,
elect to terminate this Lease or pursue any other remedy available to Landlord
for Tenant’s previous breach of or default under this Lease.

(c) Landlord may, without reentering, retaking or resuming possession of the
Leased Property, sue for all Rent and all other sums, charges, payments, costs
and expenses due from Tenant to Landlord hereunder (discounted to present value)
either: (i) as they become due under this Lease, taking into account that
Tenant’s right and option to pay the Rent hereunder on a monthly basis in any
particular Fiscal Year is conditioned upon the absence of a Default on Tenant’s
part in the performance of its obligations under this Lease, or (ii) at
Landlord’s option, accelerate the maturity and due date of the whole or any part
of the Rent for the entire then remaining unexpired balance of the Term of this
Lease, as well as all other sums, charges, payments, costs and expenses required
to be paid by Tenant to Landlord hereunder, including, without limitation,
damages for breach or default of Tenant’s obligations hereunder in existence at
the time of such acceleration, such that all sums due and payable under this
Lease shall, following such acceleration, be treated as being and, in fact, be
due and payable in advance as of the date of such acceleration. Landlord may
then proceed to recover and collect all such unpaid Rent and other sums so sued
for from Tenant by distress, levy, execution or otherwise. Regardless of which
of the foregoing alternative remedies is chosen by Landlord under this
subparagraph (c), Landlord shall not be required, except as may be required by
Applicable Law, to relet the Leased Property nor exercise any other right
granted to Landlord pursuant to this Lease, nor, except as may be required by
Applicable Laws, shall Landlord be under any obligation to minimize or mitigate
Landlord’s damages or Tenant’s loss as a result of Tenant’s breach of or default
under this Lease. Notwithstanding the foregoing, following such time as Landlord
may obtain possession of the Leased Property, Landlord or its successor Landlord
at the time of any Lease termination, shall continue to make the Leased Property
available for lease, on an “as is” basis, and shall turn over the net proceeds
thereof to Tenant to the extent actually received by Landlord in respect of any
time period for which Landlord shall have received the full amount of Rent
payable with respect thereto (albeit perhaps on a basis reasonably discounted
for the time value of money or present value basis).

(d) Landlord may, in addition to any other remedies provided herein, to the
extent permitted by Applicable Laws, enter upon the Leased Property or any
portion thereof and take possession of (i) any and all of Tenant’s Personal
Property, if any, (ii) Tenant’s books and records necessary to operate the
Leased Property, and (iii) the Reserve, without liability for trespass or
conversion (Tenant hereby waiving any right to notice or hearing prior to such
taking of possession by Landlord) and sell the same by public or private sale,
after giving Tenant reasonable notice of the time and place of any public or
private sale, at which sale Landlord or its assigns may purchase all or any
portion of Tenant’s Personal Property, if any, unless otherwise prevented by
law. Unless otherwise provided by law and without intending to exclude any other
manner of giving Tenant reasonable notice, the requirement of reasonable notice
shall be met if such notice is given at least ten (10) days before the date of
sale. The proceeds from any such disposition, less all expenses incurred in
connection with the taking of possession, holding and selling of such Property
(including reasonable attorneys’ fees based upon services rendered at hourly
rates) shall be credited against Rent which is due hereunder.

 

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(e) Tenant acknowledges that one of the rights and remedies available to
Landlord under Applicable Law is to apply to a court of competent jurisdiction
for the appointment of a receiver to collect the rents, issues, profits and
income of the Leased Property and to manage the operation of the Leased
Property. Therefore, in addition to any other right or remedy of Landlord under
this Lease, Landlord may petition any appropriate court for appointment of a
receiver to manage the operation of the Leased Property (or any portion
thereof), to collect and disburse all rents, issues, profits and income
generated thereby. The receiver shall be entitled to a reasonable fee for his
services as receiver. All such fees and other expenses of the receivership
estate shall be payable as Additional Charges under this Lease. To the extent
permitted by Applicable Law, Tenant hereby irrevocably stipulates to the
appointment of a receiver under such circumstances and for such purposes and
agrees not to contest such appointment.

(f) In addition to the remedies hereinabove specified and enumerated, Landlord
shall have and may exercise the right to invoke any other remedies allowed at
law or in equity as if the remedies of reentry, unlawful detainer proceedings
and other remedies were not herein provided. Accordingly, the mention in this
Lease of any particular remedy shall not preclude Landlord from having or
exercising any other remedy at law or in equity. Nothing herein contained shall
be construed as precluding Landlord from having or exercising such lawful
remedies as may be and become necessary in order to preserve Landlord’s right or
the interest of Landlord in the Leased Property and in this Lease, even before
the expiration of any notice periods provided for in this Lease, if under the
particular circumstances then existing the allowance of such notice periods will
prejudice or will endanger the rights and estate of Landlord in this Lease and
in the Leased Property. In addition, any provision of this Lease to the contrary
notwithstanding, no provision of this Lease shall delay or otherwise limit
Landlord’s right to seek injunctive relief or Tenant’s obligation to comply with
any such injunctive relief.

12.3 Landlord Event of Default; Tenant Remedies. It shall be an Event of Default
by Landlord hereunder and a breach of this Lease if Landlord shall fail to
perform any obligation of Landlord expressly contemplated in this Lease, and
such failure shall continue for a period of forty-five (45) days after written
Notice thereof from Tenant; provided, however, if such failure is incapable of
cure by Landlord within such forty-five (45) days after Landlord’s diligent and
continuous efforts to cure the same, Landlord shall have up to an additional
period of sixty (60) days for a total of one hundred five (105) days to cure the
same. Tenant shall have, as its sole and exclusive remedy for any such Event of
Default by Landlord hereunder, the right to either (i) bring and pursue an
action for specific performance against Landlord with respect to such Event of
Default, in which event, Tenant shall specifically waive any right to pursue a
claim for damages, or (ii) bring and pursue an action for actual damages.
ANYTHING HEREIN CONTAINED, AND ANYTHING AT LAW OR IN EQUITY, TO THE CONTRARY
NOTWITHSTANDING, TENANT HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES, IN ANY
ACTION OR PROCEEDING AGAINST LANDLORD ARISING UNDER OR WITH RESPECT TO THIS
LEASE, ANY RIGHT,

 

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POWER OR PRIVILEGE TENANT MAY HAVE TO TERMINATE THIS LEASE OR TO CLAIM OR
RECEIVE ANY PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL OR OTHER SPECIAL
DAMAGES (INCLUDING LOST PROFITS AND ANY CLAIMS FOR LOSS OF FUTURE REVENUES FROM
LOSS OF USE OF THE LEASED PROPERTY), AND TENANT ACKNOWLEDGES AND AGREES THAT THE
REMEDIES HEREIN PROVIDED WILL IN ALL CIRCUMSTANCES BE ADEQUATE. Landlord and
Tenant acknowledge and agree that to the extent the provisions of this
Section 12.3 conflict with any Applicable Laws, the terms and provisions of this
Section 12.3 shall control.

12.4 Application of Funds. Any payments received by Landlord under any of the
provisions of this Lease during the existence or continuance of any Event of
Default (and any payment made to Landlord rather than Tenant due to the
existence of any Event of Default) shall be applied to Tenant’s current and past
due obligations under this Lease in such order as Landlord may determine or as
may be prescribed by the laws of the State in which the Leased Property is
located.

12.5 Landlord’s Right to Cure Tenant’s Default. If an Event of Default shall
occur and be continuing beyond any applicable cure period, Landlord may, but
shall have no obligation to, perform the same for the account and at the expense
of Tenant. If, at any time and by reason of such Event of Default, Landlord is
compelled to pay, or elects to pay, any sum of money or do any act which will
require the payment of any sum of money, or is compelled to incur any expense in
the enforcement of its rights hereunder or otherwise, such sum or sums, together
with interest thereon at the Overdue Rate, shall be deemed an Additional Charge
hereunder and shall be repaid to Landlord by Tenant promptly when billed
therefor, and Landlord shall have all the same rights and remedies in respect
thereof as Landlord has in respect of the rents herein reserved.

12.6 Landlord’s Security Interest and Lien.

12.6.1 Landlord shall have, and Tenant hereby grants, a security interest in
(a) Tenant’s Personal Property (specifically excluding any proprietary software
or proprietary operating systems of Tenant and items listed on Schedule 12.6
attached hereto) or the equity of Tenant therein located at the Leased Property
and (b) Tenant’s books and records related solely to and necessary to operate
the Leased Property. This security interest is granted for the purpose of
securing the payment of Rent, Additional Charges, assessments, penalties and
damages herein covenanted to be paid by Tenant. Upon an Event of Default
hereunder, Landlord shall have all remedies available under the Uniform
Commercial Code enacted in the State, including, without limitation, the right
to take possession of the above-mentioned property and dispose of it by sale in
a commercially reasonable manner. Tenant hereby authorizes Landlord to file such
financing statements as Landlord deems necessary and appropriate in such
jurisdictions as Landlord deems necessary and appropriate for the purpose of
serving notice to third parties of the security interest herein granted.

12.6.2 Landlord shall have at all times during the Term of this Lease, a valid
lien for all Rent, Additional Charges and other sums of money becoming due
hereunder from Tenant, upon all goods, wares, merchandise, Inventory, furniture,
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personal property and effects of Tenant situated in or upon the Leased Property,
including Tenant’s Personal Property (specifically excluding any proprietary
software or proprietary operating systems of Tenant and items listed on
Schedule 12.6 attached hereto) and any interest of Tenant in P&E Replacements,
and such property shall not be removed therefrom except in accordance with the
terms of this Lease without the approval and consent of Landlord until all
arrearages in Rent, Additional Charges or other sums of money then due to
Landlord hereunder shall first have been paid and discharged in full.
Alternatively, the lien hereby granted may be foreclosed in the manner and form
provided by law for foreclosure of security interests or in any other manner and
form provided by law. The statutory lien for Rent, if any, is not hereby waived
and the express contractual lien herein granted is in addition thereto and
supplementary thereto. Tenant agrees to execute and deliver to Landlord from
time to time during the Term of this Lease such financing statements as Landlord
deems necessary and appropriate in such jurisdictions as Landlord deems
necessary and appropriate in order to perfect Landlord’s lien provided herein or
granted or created by state law. Tenant further agrees that during an Event of
Default, Tenant shall not make any distributions to its shareholders, partners,
members or other owners and any such distributions shall be considered and
deemed to be fraudulent (within the meaning of the United States Commercial
Code) and preferential and subordinate to Landlord’s claim for Rent and other
sums hereunder.

12.7 Collateral Assignment. As additional security for Tenant’s performance of
its obligations hereunder, Tenant hereby collaterally assigns to Landlord, to
the extent assignable, all of Tenant’s right, title and interest in Permits,
Operating Contracts, and other agreements and documents held by Tenant (but
expressly excluding documents and other materials which are legally privileged
or which pertain to the ownership, corporate structure or corporate governance
of Tenant) and necessary and used to operate the Leased Property for its
Permitted Use. Such collateral assignment shall become an outright assignment
and shall be effective upon the expiration or sooner termination of this Lease
by Landlord as a result of an Event of Default by Tenant without the need to
execute any additional instruments evidencing such assignment. Tenant agrees and
acknowledges that any third party may rely upon a written statement by Landlord
as to an Event of Default by Tenant and the termination of this Lease.
Notwithstanding the foregoing, Tenant agrees to execute and deliver to Landlord,
upon the termination of this Lease by Landlord as a result of Event of Default
by Tenant, such instruments evidencing the assignment contemplated hereby as may
be required by Landlord in its sole and absolute discretion.

ARTICLE 13

HOLDING OVER

If Tenant or any other Person or party claiming by, through or under Tenant
shall remain in possession of the Leased Property or any part thereof following
the expiration of the Term or earlier termination of this Lease without an
agreement in writing between Landlord and Tenant with respect thereto, such
Person or party remaining in possession shall be deemed to be a tenant at
sufferance, and during any such holdover, the Rent payable under this Lease by
such tenant at sufferance shall be equal to two hundred percent (200%) of the
rate or rates in effect immediately prior to the expiration of the Term or
earlier termination of this Lease. In no event, however, shall such holding over
be deemed or construed to be or constitute a renewal or extension of this Lease.

 

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ARTICLE 14

LIABILITY OF LANDLORD; INDEMNIFICATION

14.1 Liability of Landlord. Landlord and its Affiliates shall not be liable to
Tenant, its employees, agents, invitees, licensees, customers or clients for any
damage, injury, loss, compensation or claim, including, but not limited to,
claims for the interruption of or loss to Tenant’s business, based on, arising
out of or resulting from any cause whatsoever (other than Landlord’s gross
negligence or willful misconduct), including, but not limited to: (a) repairs to
any portion of the Leased Property; (b) interruption in Tenant’s use of the
Leased Property; (c) any accident or damage resulting from the use or operation
(by Landlord, Tenant or any other person or persons) of any equipment within the
Leased Property, including without limitation, heating, cooling, electrical or
plumbing equipment or apparatus; (d) the termination of this Lease by reason of
the Condemnation or destruction of the Leased Property in accordance with the
provisions of this Lease; (e) any fire, robbery, theft, mysterious disappearance
or other casualty; (f) the actions of any other person or persons, other than
Landlord or an Affiliate of Landlord; (g) any leakage or seepage in or from any
part or portion of the Leased Property, whether from water, rain or other
precipitation that may leak into, or flow from, any part of the Leased Property,
or from drains, pipes or plumbing fixtures in the Leased Improvements; (h) any
condition relating to the Environment, except as otherwise provided for herein;
and (i) the existence of any Hazardous Substance located at, on or in the Land,
except as otherwise provided for herein. Any goods, property or personal effects
stored or placed by Tenant or its employees in or about the Leased Property
including Tenant’s Personal Property, shall be at the sole risk of Tenant.

14.2 Indemnification of Landlord. Tenant shall defend, indemnify, pay, save and
hold Landlord harmless from and against any and all liabilities, obligations,
losses, damages, injunctions, suits, actions, fines, penalties, claims, demands,
costs and expenses of every kind or nature, including reasonable attorneys’ fees
and court costs, incurred by Landlord, arising directly or indirectly from:
(a) any failure by Tenant to perform any of the terms, provisions, covenants or
conditions of this Lease, on Tenant’s part to be performed including but not
limited to the payment of any fee, cost or expense which Tenant is obligated to
pay and discharge hereunder, (b) any accident, injury or damage which shall
happen at, in or upon the Leased Property; (c) any matter or thing growing out
of the condition, occupation, maintenance, alteration, repair, use or operation
by any person of the Leased Property, or any part thereof, or the operation of
the Business contemplated by this Lease to be conducted thereon, thereat,
therein, or therefrom arising during the Term; (d) any failure of Tenant to
comply with the Legal Requirements as provided for or required under this Lease;
(e) the presence of any Hazardous Substance or contamination of the Leased
Property or the ground water thereof, arising during the Term, whether caused by
Tenant or an Affiliate of Tenant, their employees, agents, invitees, customers,
licensees or contractors; (f) any discharge of toxic or hazardous sewage or
waste materials from the Leased Property into any septic facility or sanitary
sewer system serving the Leased Property arising on or after the date Tenant
takes possession of the Leased Property,

 

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whether by Tenant or Tenant Affiliate, their employees, agents, invitees,
customers, licensees or contractors; or (g) any other act or omission of Tenant
or Tenant Affiliate, or any of their employees, agents, invitees, customers,
licensees or contractors. Notwithstanding anything set forth above in this
Section 14.2, Tenant shall not be liable for or be obligated to defend,
indemnify, pay, save and hold Landlord harmless from and against any
liabilities, obligations, losses, damages, injunctions, suits, actions, fines,
penalties, claims, demands, costs or expenses of any kind or nature, including
reasonable attorneys’ fees and court costs, resulting from Landlord’s gross
negligence or willful misconduct. Tenant’s indemnity obligations under this
Article and elsewhere in this Lease shall survive expiration, assignment or
earlier termination of this Lease.

14.3 Notice of Claim or Suit. Tenant shall promptly notify Landlord of any
claim, action, proceeding or suit instituted or threatened against Tenant or
Landlord of which Tenant receives notice or of which Tenant acquires knowledge
(a “Claim”). In the event Landlord is made a party to any action for damages or
other relief against which Tenant has indemnified Landlord, as aforesaid, Tenant
shall at its own expense using counsel reasonably approved by Landlord,
diligently defend Landlord, and pay all costs in such litigation; provided,
however, that Landlord shall have the option, at its sole cost and expense, to
engage its own counsel in connection with its own defense or settlement of said
litigation, in which event Tenant shall cooperate with Landlord and make
available to Landlord all information and data which Landlord deems necessary or
desirable for such defense. In the event Landlord is required to secure its own
counsel due to a conflict in the interests of Tenant and Landlord in any action
for damages or other relief against which Tenant has indemnified Landlord,
Tenant shall pay all of Landlord’s reasonable costs in such litigation.
Notwithstanding anything to the contrary contained herein, Tenant shall not be
required to pay costs incurred by Landlord in engaging separate counsel to
defend Landlord pursuant to this Section 14.3, unless Landlord is required to
secure its own counsel as a result of a conflict of interest between Landlord
and Tenant in any action for damages or other relief against which Tenant has
indemnified Landlord. Tenant is required to approve a settlement agreement for
any such claim or suit as requested by Landlord and which is consistent with
applicable insurance company requirements, unless Tenant posts a bond or other
security acceptable to Landlord for any potentially uninsured liability amounts.
Notwithstanding any provision herein to the contrary, on or before the end of
each Fiscal Quarter, Tenant shall provide Landlord with a status report with
respect to all Claims, which status report shall include a summary as to the
status of each Claim.

14.4 Limitation on Liability of Landlord. In the event Tenant is awarded a money
judgment against Landlord, Tenant’s sole recourse for satisfaction of such
judgment shall be limited to execution against Landlord’s interest in the Leased
Property. In no event shall any partner, member, officer, director, stockholder
or shareholder of Landlord or any partner thereof or Affiliate or Subsidiary
thereof, be personally liable for the obligations of Landlord hereunder.

ARTICLE 15

REIT AND UBTI REQUIREMENTS

Tenant understands that, in order for Landlord to qualify as a real estate
investment trust (a “REIT”) under the Code, the following requirements must be
satisfied. The parties intend

 

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that amounts to be paid by Tenant hereunder and received or accrued, directly or
indirectly, by Landlord with respect to the Leased Property (including any rents
attributable to personal property that is leased with respect thereto) will
qualify as “rents from real property” (within the meaning of Code Section 856(d)
and Section 512(b)(3)), and that neither party will take, or permit to take, any
action that would cause any amount received by Landlord under this Lease to fail
to qualify as such under the Code. Consistent with this intent, the parties
agree that:

15.1 Limitations on Rents Attributable to Personal Property. “Rents attributable
to any personal property” leased to the Tenant cannot exceed fifteen percent
(15%) of the total rent received or accrued by Landlord under this Lease for the
Fiscal Year of Landlord. In addition, Landlord’s customary practice is to limit
“rents attributable to any personal property” to twelve and one-half percent
(12.5%) of the total rent received or accrued by Landlord pursuant to any lease
agreement. Consistent therewith, the average of the fair market values of the
personal property (within the meaning set forth in Section 1.512(b) 1(c)(3)(ii)
of the applicable Treasury Regulations) that is leased to Tenant with respect to
the Leased Property at the beginning and end of a Fiscal Year cannot exceed
twelve and one-half percent (12.5%) of the average of the aggregate fair market
values of the real and personal property comprising such Leased Property that is
leased to Tenant under such lease at the beginning and end of such Fiscal Year
(the “REIT Personal Property Limitation”). If Landlord reasonably anticipates
that the REIT Personal Property Limitation will be exceeded with respect to the
Leased Property for any Fiscal Year, Landlord may, at Landlord’s sole option and
absolute discretion (i) notify Tenant, and Landlord and Tenant shall negotiate
in good faith the purchase by Tenant of items of personal property anticipated
by Landlord to be in excess of the REIT Personal Property Limitation, provided,
in such event, Tenant’s responsibility to purchase such personal property would
be offset by Landlord in some mutually agreeable manner, which would not result
in Landlord earning income which would constitute “unrelated business taxable
income” within the meaning of Section 512 of the Code, if Landlord was a
“qualified trust” within the meaning of Section 856(h)(3)(E) of the Code; or
(ii) restructure the ownership of Landlord and/or Landlord’s ownership of the
personal property and lease, or cause an Affiliate to lease to Tenant, pursuant
to a separate lease agreement, such personal property, and Tenant agrees that it
shall cooperate with Landlord in good faith in connection with such
restructuring and shall execute any separate or amended lease agreements,
provided the same do not materially affect Tenant’s rights and obligations under
this Lease.

15.2 Basis for Sublease Rent Restricted. Tenant cannot sublet the property that
is leased to it by Landlord, or enter into any similar arrangement, on any basis
such that the rental or other amounts paid by the sublessee thereunder would be
based, in whole or in part, on either (a) the net income or profits derived by
the business activities of the sublessee or (b) any other formula such that any
portion of the rent paid by Tenant to Landlord would fail to qualify as “rents
from real property” within the meaning of Section 856(d) and Section 512(b)(3)
of the Code and regulations promulgated thereunder.

15.3 Landlord Affiliate Subleases Restricted. Anything to the contrary in this
Lease notwithstanding, Tenant shall not sublease the Leased Property to, or
enter into any similar arrangement with, any person in which Landlord owns,
directly or indirectly, a ten percent (10%) or more interest, with the meaning
of Section 856(d)(2)(B) of the Code, and any such action shall

 

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be deemed void ab initio. Anything to the contrary in this Lease
notwithstanding, Tenant shall not sublease the Leased Property to, or enter into
any similar arrangement with, any Person that Landlord would be deemed to
control within the meaning of Section 512(b)(13) of the Code.

15.4 Landlord Interests in Tenant Restricted. Anything to the contrary in this
Lease notwithstanding, neither party shall take, or permit to take, any action
that would cause Landlord to own, directly or indirectly, a ten percent (10%) or
greater interest in Tenant within the meaning of Section 856(d)(2)(B) of the
Code, and any similar or successor provision thereto, and any such action shall
be deemed void ab initio. In addition, anything to the contrary in this Lease
notwithstanding, Tenant shall not take or permit to take, any action that would
cause Landlord to own, directly or indirectly, such interest in Tenant such that
amounts received from Tenant would represent amounts received from a controlled
entity within the meaning of Section 512(b)(13) of the Code.

15.5 Landlord Services. Any services provided by, or on behalf of, Landlord will
not prevent any amounts received or accrued from qualifying as “rents from real
property” (within the meaning of Section 856(d)(2) or Section 512(b)(3) of the
Code.

15.6 Certain Subtenants Prohibited. Anything to the contrary in this Lease
notwithstanding, Tenant shall not sublease the Leased Property to, or enter into
any similar arrangement with, any Person that would be described in
Section 514(c)(9)(B)(iii) or (iv) of the Code.

15.7 Future Amendment. Tenant hereby agrees to amend this Article 15 from time
to time as Landlord deems necessary or desirable in order to effectuate the
intent hereof, so long as any such amendment does not materially alter the
economic terms of this Lease.

ARTICLE 16

SUBLETTING AND ASSIGNMENT

16.1 Transfers Prohibited Without Consent. Tenant shall not, other than to
Primrose Retirement Communities, LLC, without the prior written consent of
Landlord in each instance, which consent may be withheld in Landlord’s sole
opinion and discretion, sell, assign, sublease, license, concession or otherwise
transfer this Lease, or Tenant’s interest in the Leased Property together with
all interests of Tenant in all property of any nature located and used at the
Leased Property (including without limitation Tenant’s Personal Property), in
whole or in part, or any rights or interest which Tenant may have under this
Lease, or sublet, license or concession any part of the Leased Property, or
grant or permit any Lien or encumbrance on or security interest in Tenant’s
interest in this Lease, except as set forth in this Article 16. Any sale,
assignment, sublease, license, concession or transfer of this Lease without the
prior written consent of Landlord shall be voidable at Landlord’s option.

16.2 Indirect Transfer Prohibited Without Consent. Schedule 16.2 attached hereto
sets forth the current ownership and Control of Tenant. A (a) sale, assignment,
pledge, transfer, exchange or other disposition of the stock, partnership
interests, membership interests or other equitable interests in Tenant or any
Person Controlling Tenant, which results in a change or

 

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transfer of Control or a change or transfer of management of Tenant, or
(b) merger, consolidation or other combination of Tenant with another entity
which results in a change or transfer of management or Control of Tenant, shall
be deemed an assignment hereunder and shall be subject to Section 16.1 hereof.
For purposes hereof, change or transfer of management or Control or effective
Control, shall mean a transfer of fifty percent (50%) or more of the economic
benefit of, or Control of, any such entity. Notwithstanding the foregoing, any
Affiliate of Tenant may transfer his, her or its stock, partnership interests,
membership interests or other equitable interests in Tenant without first
obtaining the prior written consent of Landlord if such transfer or other
disposition (i) is the result of the death of such Affiliate, (ii) involves a
transfer to (A) the Immediate Family of such Affiliate, or (B) a trust of which
such Affiliate is the grantor and such Affiliate, or his or her spouse, is the
trustee for the benefit of such spouse or Immediate Family of such spouse, or
(C) an Entity or Entities in which such Affiliate, spouse or Immediate Family
member shall retain Control; provided, however, that the prior written consent
of Landlord, in its sole and absolute discretion, shall be obtained for any
transfer(s) of a Controlling interest in the management of Tenant.

16.3 Intentionally Omitted.

16.4 Landlord Transfers. Landlord may, in its sole and absolute discretion,
sell, assign, convey or otherwise transfer its interest in this Lease or the
Leased Property, or any portion thereof, or any interest therein, directly or
indirectly, to any Person, without the consent of Tenant. Tenant shall attorn to
any such transferee and continue to be bound by this Lease in the event of any
such transfer, provided, however, that Tenant shall continue to pay Rent and
other Additional Charges to Landlord and performance all other obligations under
this Lease in favor of Landlord until Tenant receives written notice of any such
assignment of this Lease by Landlord and a copy of such transferee’s assumption
of all obligations of Landlord under the terms of this Lease.

ARTICLE 17

ESTOPPEL CERTIFICATES, FINANCIAL STATEMENTS AND OPERATING STATEMENTS

17.1 Estoppel Certificates. Tenant and Landlord shall from time to time, within
fifteen (15) days after receipt of a written request therefor and without
charge, give an Estoppel Certificate in the form (or substantially the form) of
Exhibit C attached hereto and containing such other matters as may be reasonably
requested to any Person specified by such requesting party.

17.2 Monthly Financial Statements. Throughout the Term of this Lease, Tenant
shall prepare and deliver to Landlord: (i) within twenty (20) calendar days
after the end of each Accounting Period, an income (or profit and loss)
statement, an operating balance sheet and a cash flow statement for the Facility
showing the results of the operation of the Leased Property, including an
occupancy report and census data for the immediately preceding Accounting Period
and for the Fiscal Quarter and Fiscal Year to date, an accounts receivable
member’s aging report; (ii) within twenty (20) calendar days after the end of
each Accounting Period, an income (or profit and loss) statement and operating
balance sheet showing the results of the operation of each of Tenant and
Tenant’s Parent (which may be presented on a consolidated basis) for the

 

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immediately preceding Fiscal Quarter and for the Fiscal Year to date; and
(iii) within twenty (20) days after the end of each Accounting Period, a
reconciliation of the Reserve for the immediately preceding Accounting Period.
This information shall be provided to Landlord under a complete financial
statement for the Business which shall be delivered electronically within the
designated time periods in the form customarily provided in the industry and
approved in advance by Landlord. The aforesaid financial statements shall be
accompanied by an Officer’s Certificate which, for purposes hereof shall mean a
Certificate of the Chief Executive Officer or the Chief Financial Officer of
Tenant (or of Tenant’s general partner) (an “Officer’s Certificate”) in which
such Officer shall certify to the best of such Officer’s knowledge (a) that such
statements have been properly prepared in accordance with GAAP and are true,
correct and complete in all material respects and fairly present the
consolidated financial condition of Tenant at and as of the dates thereof and
the results of its operations for the period covered thereby, and (b) that no
Event of Default has occurred and is continuing hereunder.

17.3 Annual Financial Statements. Tenant shall deliver to Landlord within
seventy-five (75) days after the end of each Fiscal Year, a profit and loss
statement, balance sheet and statement of cash flow certified by an independent
certified public accountant who is actively engaged in the practice of his
profession and who is acceptable to Landlord in Landlord’s reasonable discretion
or, as provided for below, by the Chief Financial Officer of Tenant (which
statement shall also be certified by an officer, partner or member in Tenant)
showing results from the operation of the Leased Property during such Fiscal
Year, including without limitation, an accounting of the calculation of amounts
paid into the Reserve and reasons for material variations from the approved
budget for such year. The aforesaid financial statements shall be accompanied by
an Officer’s Certificate which, for purposes hereof shall mean a Certificate of
the Chief Executive Officer or the Chief Financial Officer of Tenant (which
Certificate shall also be certified by another officer of Tenant or Tenant’s
general partner, managing member or manager, as applicable) in which such
Officer shall certify to the best of such Officer’s knowledge (a) that such
statements have been properly prepared in accordance with GAAP and are true,
correct and complete in all material respects and fairly present the
consolidated financial condition of Tenant at and as of the dates thereof and
the results of its operations for the period covered thereby, and (b) that no
Event of Default has occurred and is continuing hereunder. Tenant shall also
deliver to Landlord at any time and from time to time, upon not less than twenty
(20) days notice from Landlord, any financial statements or other financial
reporting information required to be filed by Landlord with the SEC or any other
governmental authority or required pursuant to any order issued by any
Governmental Agencies or arbitrator in any litigation to which Landlord is a
party for purposes of compliance therewith. Notwithstanding the foregoing, in
the event that Tenant’s financial records are not otherwise being reviewed or
audited by an independent certified public accountant then Landlord will accept
financial statements certified true and correct by the Chief Financial Officer
of Tenant (or of Tenant’s general partner). In connection with Landlord’s
responsibility to maintain effective internal controls over financial reporting
and the requirements for complying with the Sarbanes-Oxley Act of 2002, Tenant
hereby agrees to provide reasonable access to the Leased Property, including the
Leased Property’s books and records, and reasonable assistance necessary to
Landlord that will allow Landlord to conduct activities necessary to satisfy
such responsibilities, including, but not limited to, the activities stipulated
by the Public Company Accounting Oversight Board in its release 2004-1, or other
similarly promulgated guidance by other

 

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regulatory agencies. Landlord agrees to provide Tenant with appropriate notice
regarding the conduct of activities anticipated in this provision. Tenant agrees
to provide, at Landlord’s request, evidence of Tenant’s documented policies, if
any, regarding “whistle-blower” procedures and regarding the reporting of fraud
or misstatements involving financial reporting.

17.4 Records. Tenant shall keep and maintain at all times in accordance with
GAAP (separate and apart from its other books, records and accounts) complete
and accurate up to date books and records adequate to reflect clearly and
correctly the results of operations of the Leased Property. Such books and
records shall be kept and maintained at the Leased Property or Tenant’s
principal office at c/o Primrose Retirement Community, LLC, 815 N. 2nd Street,
Aberdeen, South Dakota 57402. Landlord or its representatives shall have, at all
reasonable times during normal business hours, reasonable access, on reasonable
advance Notice, to examine and copy the books and records pertaining to the
Leased Property.

17.5 General Operations Budget. In addition to the Reserve Budget, Tenant shall
furnish to Landlord, on or before November 1 of each Fiscal Year proposed annual
budgets and business plan in a form satisfactory to Landlord and consistent with
the then standards for senior living facilities comparable to the Facility
setting forth the strategic plans of the Business, which specific departmental
support plans and projected income and costs and expenses projected to be
incurred by Tenant in managing, leasing, maintaining and operating the Business
during the following Fiscal Year.

17.6 Quarterly Meetings. At Landlord’s request, Tenant shall make Tenant’s
property management team and the executive officers of Tenant (or of Tenant’s
general partner or managing member, if applicable) available to meet with
Landlord once during each Fiscal Quarter to discuss the Reserve Budget, the
annual budgets and any other items related to the operation of the Business,
which Landlord wishes to discuss. Such meetings shall be conducted via
teleconference or at a location mutually agreeable to Landlord and Tenant and
each of Landlord and Tenant shall be solely responsible for their respective
expenses in connection with such meetings. Tenant agrees to give good faith
consideration to any suggestions or requests that Landlord may have.

17.7 Tenant Financial Statements. For so long as Landlord is an Affiliate of CNL
Healthcare Trust, Inc., or its successors, Landlord shall have the right, at
Landlord’s sole discretion and expense, to require Tenant to prepare and deliver
to Landlord, within sixty (60) days after the end of each Fiscal Year during
which a Materiality Threshold Period (as hereinafter defined) occurs, a balance
sheet, income statement, statement of owner’s equity, cash flows and footnotes
with respect to Tenant audited and certified by an independent certified public
accountant who is actively engaged in the practice of his profession and who is
acceptable to Landlord. The foregoing financial statements and reports shall be
certified to Landlord by such independent certified public accountant that such
statements have been properly prepared in accordance with GAAP and are true,
correct, and complete in all material respects and fairly present the
consolidated financial condition of Tenant at and as of the dates thereof and
the results of all of its operations for the period covered thereby. For the
purposes hereof, the term “Materiality Threshold Period” shall mean any period
of time during the Term during which Tenant, either itself or together with its
Affiliates, leases, operates or manages properties owned by Landlord or its
Affiliates that, in the aggregate, comprise more than twenty percent (20%) of
the total assets of CNL Healthcare Trust, Inc. or its successors, as reasonably
determined by Landlord.

 

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17.8 Monthly Statements of Operations. Throughout the Term of this Lease, Tenant
shall prepare and deliver to Landlord: within twenty (20) calendar days after
the end of each Accounting Period, a report of Facility operations, to include,
at a minimum: (a) census for the preceding month showing available units and
resident days as well as actual units and resident days for the preceding month;
(b) copies of any communications from regulatory agencies having authority over
the Facility; and (c) notice of how much of the Facility is devoted to Medicaid
or Medicare, if any.

17.9 Audit Rights. Landlord shall have the right, at its sole cost and expense,
to perform an audit on any of the foregoing reports provided by Tenant, and
Tenant agrees to reasonably cooperate with any such audit.

ARTICLE 18

LANDLORD’S RIGHT TO INSPECT

Landlord, Mortgagee and their agents shall have the right, upon providing at
least 24 hours advance notice to Tenant, to enter upon the Leased Property or
any portion thereof at any reasonable time to inspect the same, including but
not limited to, the operation, sanitation, safety, maintenance and use of the
same, or any portions of the same and to assure itself that Tenant is in full
compliance with its obligations under this Lease (but Landlord and Mortgagee
shall not thereby assume any responsibility for the performance of any of
Tenant’s obligations hereunder, nor any liability arising from the improper
performance thereof). In making any such inspections, neither Landlord nor
Mortgagee shall unduly interrupt or interfere with the conduct of Tenant’s
Business.

ARTICLE 19

FACILITY MORTGAGES

19.1 Subordination. This Lease, Tenant’s interest hereunder and Tenant’s
leasehold interest in and to the Leased Property are hereby agreed by Tenant to
be and are hereby made junior, inferior, subordinate and subject in right,
title, interest, lien, encumbrance, priority and all other respects to any
mortgage or mortgages and security interests now or hereafter in force and
effect upon or encumbering Landlord’s interest in the Leased Property, or any
portion thereof, and to all collateral assignments by Landlord to any third
party or parties of any of Landlord’s rights under this Lease or the rents,
issues and profits thereof or therefrom as security for any liability or
indebtedness, direct, indirect or contingent, of Landlord to such third party or
parties, and to all future modifications, extensions, renewals, consolidations
and replacements of, and all amendments and supplements to any such mortgage,
mortgages or assignments, and upon recording of any such mortgage, mortgages or
assignments, the same shall be deemed to be prior in dignity, lien and
encumbrance to this Lease, Tenant’s interest hereunder and Tenant’s leasehold
interest in and to the Leased Property irrespective of the dates of execution,
delivery or recordation of any such mortgage, mortgages or assignments (such
mortgages, mortgages,

 

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security interests, assignments, modifications, extensions, renewals,
amendments, supplements and replacement being a “Facility Mortgage”). Tenant
shall reasonably cooperate with Landlord and any Mortgagee or potential
Mortgagee in connection with a Facility Mortgage, including, but not limited to,
consenting to non-material and reasonable amendments to this Lease as may be
requested by such Mortgagee, provided that such amendments do not materially
alter the economic terms of this Lease or the use and operation of any of the
Leased Property or materially increase Tenant’s obligations or decrease its
rights hereunder. Any and all costs, fees and expenses incurred by Landlord in
connection with any Facility Mortgage shall not be included as part of
Landlord’s Additional Investment. The foregoing subordination provisions of this
Section shall be automatic and self operative without the necessity of the
execution of any further instrument or agreement of subordination on the part of
Tenant, so long as the Facility Mortgage recognizes the existence of this Lease
and acknowledges and evidences Mortgagee’s reasonably satisfactory agreement
that, so long as no Event of Default by Tenant has occurred and is continuing
under this Lease (after the expiration of the applicable notice and curative
periods contained herein), (i) Mortgagee, its successors and assigns (or any
other purchaser at any foreclosure sale pursuant to the Facility Mortgage or any
other security instrument in connection therewith) shall not disturb Tenant’s
right of possession to the Leased Property and all other rights of Tenant
hereunder in the event that Mortgagee, its successors and assigns (or any other
purchaser at any foreclosure sale pursuant to the Facility Mortgage or any other
security instrument in connection therewith) acquires title to all or any part
of the Leased Property pursuant to the exercise of any remedy provided for in
the Facility Mortgage or any other related security instrument or acceptance of
title to the Leased Property in lieu of any such foreclosure, and (ii) Tenant
shall not be named as a party defendant to any action to foreclose the liens and
security interests of the Facility Mortgage or any other related security
instrument, except to the extent required by Applicable Law. Tenant acknowledges
and agrees that notwithstanding the foregoing automatic subordination, if
Landlord or Mortgagee shall request that Tenant execute and deliver any further
instrument or agreement of subordination of this Lease or Tenant’s interest
hereunder or Tenant’s leasehold interest in the Leased Property to any such
Facility Mortgage, in confirmation or furtherance of or in addition to the
foregoing subordination provisions of this Section, Tenant shall promptly
execute and deliver the same to the requesting party so long as the same is
reasonably acceptable to Tenant, is consistent with the terms and provisions of
this Lease and does not materially increase Tenant’s obligations or decrease its
rights hereunder. Tenant agrees that it will, from time to time, execute such
documentation as may be reasonably requested by Landlord and any Mortgagee
(a) to assist Landlord and such Mortgagee in establishing or perfecting any
security interest in Landlord’s interest in the Reserve and any funds therein;
and (b) to facilitate or allow Landlord to encumber the Leased Property or any
portion thereof as herein contemplated. If, within thirty (30) calendar days
following Tenant’s receipt of a written request by Landlord, Tenant shall fail
or refuse or shall have not executed any such further instrument or agreement of
subordination, which satisfies the criteria set forth in this Section 19.1,
Tenant shall be in breach and default of its obligation to do so and of this
Lease and Landlord shall be entitled thereupon to exercise any and all remedies
available to Landlord pursuant to this Lease or otherwise provided by law. To
the extent Tenant is required to incur any additional out of pocket costs, fees
and expenses in connection with the review and negotiation of any agreements or
confirmations required from Tenant under the terms of this Section 19.1,
Landlord shall promptly reimburse Tenant for all such reasonable costs, fees and
expenses.

 

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19.2 Attornment. Tenant shall and hereby agrees to attorn, and be bound under
all of the terms, provisions, covenants and conditions of this Lease, to any
successor of the interest of Landlord under this Lease for the balance of the
Term of this Lease remaining at the time of the succession of such interest to
such successor. In particular, in the event that any proceedings are brought for
the foreclosure of any Facility Mortgage, Tenant shall attorn to the purchaser
at any such foreclosure sale and recognize such purchaser as Landlord under this
Lease. Tenant agrees that neither the purchaser at any such foreclosure sale nor
the foreclosing Mortgagee or holder of any such Facility Mortgage shall have any
liability for any act or omission of Landlord, be subject to any offsets or
defenses which Tenant may have as claims against Landlord, or be bound by any
advance rents which may have been paid by Tenant to Landlord for more than the
current period in which such rents come due.

19.3 Rights of Mortgagees and Assignees. Any Mortgagee shall have the right to
unilateral enjoyment, exercise or control over the rights, remedies, powers and
interests of Landlord hereunder, or otherwise arising under Applicable Law, as
assigned or granted to such Mortgagee by Landlord or as provided in any Facility
Mortgage. At the time of giving any notice of default to Landlord, Tenant shall
mail or deliver to any Mortgagee of whom Tenant has notice, a copy of any such
notice. No notice of default or termination of this Lease by Tenant shall be
effective until each Mortgagee shall have been furnished a copy of such notice
by Tenant. In the event Landlord fails to cure any default by it under this
Lease, the Mortgagee shall have, at its option, a period of thirty (30) days
after expiration of any cure period of Landlord within which to remedy such
default of Landlord or to cause such default to be remedied. In the event that
the Mortgagee elects to cure any such default by Landlord, then Tenant shall
accept such performance on the part of such Mortgagee as though the same had
been performed by Landlord, and for such purpose Tenant hereby authorizes any
Mortgagee to enter upon the Leased Property, to the extent necessary to exercise
any of Landlord’s rights, powers and duties under this Lease. If, in the event
of any default by Landlord which is reasonably capable of being cured by a
Mortgagee, the Mortgagee promptly commences and diligently pursues to cure the
default, then Tenant will not terminate this Lease or cease to perform any of
its obligations under this Lease so long as the Mortgagee is, with due
diligence, engaged in the curing of such default.

ARTICLE 20

ADDITIONAL COVENANTS OF TENANT

20.1 Conduct of Business. Tenant shall not engage in any business on the Leased
Property other than for the Permitted Use, and any activities incidental
thereto, and shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect and in good standing its corporate,
limited partnership, limited liability company or other entity status and
existence and its rights and Permits reasonably necessary to conduct the
Business.

20.2 Additional Covenants of Tenant. In addition to the other covenants and
representations of Tenant herein and in this Lease, Tenant hereby covenants,
acknowledges and agrees that Tenant shall:

(a) Not guaranty any obligation of any Person.

 

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(b) Pay or cause to be paid all lawful claims for labor and rents with respect
to the Leased Property.

(c) Pay or cause to be paid all trade payables with respect to the Leased
Property.

(d) Not declare, order, pay or make, directly or indirectly, any Distribution or
any payments to any partners or Affiliates as to Tenant (including payments in
the ordinary course of business and payments pursuant to any management
agreements with any such Affiliate, but expressly excluding payments to any
partners or Affiliates of Tenant for reimbursement of operating expenses
incurred by such partners or Affiliates in connection with the operation and
management of the Leased Property pursuant to any management agreement with such
partners or Affiliates), or set apart any sum of property therefor, or agree to
do so, if, at the time of such proposed action or immediately after giving
effect thereto, any Event of Default shall exist.

(e) Except as otherwise permitted by this Lease, not sell, lease (as lessor or
sublessor), transfer or otherwise dispose of or abandon, all or any material
portion of its assets or business to any Person, or sell, lease, transfer or
otherwise dispose of or abandon any of the P&E or Tenant’s Personal Property;
provided, however, Tenant may dispose of portions of the P&E or Tenant’s
Personal Property which have become inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary, provided substitute equipment or fixtures having
equal or greater value and utility have been provided.

(f) Provide and maintain throughout the Term, all Tenant’s Personal Property and
P&E Replacements as shall be necessary in order to operate the Leased Property
in compliance with applicable Legal Requirements, Insurance Requirements and
otherwise in accordance with customary practice in the industry for the
Permitted Use. If, from and after the Effective Date, Tenant acquires an
interest in any items of tangible personal property (other than motor vehicles)
on, or in connection with the Leased Property which belong to anyone other than
Tenant, Tenant shall require the agreement permitting such use to provide that
Landlord or its designee may assume Tenant’s rights and obligations under such
agreement upon the termination of this Lease and any assumption of management or
operation of the Leased Property by Landlord or its designee.

(g) Not, except as approved in writing by Landlord, either directly or
indirectly, for itself, or through, or on behalf of, or in connection with any
Person, divert or attempt to divert any business or customer of the Leased
Property to any competitor, by direct or indirect inducement or otherwise, or do
or perform, directly or indirectly, any other act injurious or prejudicial to
the good will associated with Landlord or the Leased Property.

(h) Except for liabilities incurred in the ordinary course of business, not
create, incur, assume or guarantee, or permit to exist or become or remain
liable directly or indirectly upon, any Indebtedness except the Indebtedness of
Tenant to Landlord (or, if unsecured and expressly subject to the terms of this
Lease and Landlord’s interest

 

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hereunder, and payable solely out of excess cash flow after payment of all Rent
hereunder, to Tenant’s shareholders, partners or members, as applicable). Tenant
further agrees that the obligee in respect of any such Indebtedness shall agree
in writing, in form and substance satisfactory to Landlord, that (w) the payment
of such Indebtedness shall be expressly subordinate in all respects to all of
Tenant’s obligations under this Lease, (x) no remedies may be exercised by the
obligee with respect to enforcement or collection of such Indebtedness until
such time as this Lease shall be terminated and all of Tenant’s obligations
hereunder shall have been discharged in full; (y) such Indebtedness shall not be
assigned by the obligee to any other party; and (z) the obligee shall not
initiate or join in any bankruptcy proceedings against Tenant. As used in this
Section 20.2(h) (and notwithstanding any other definition of Indebtedness
herein), Indebtedness shall mean all obligations, contingent or otherwise, to
pay or repay monies irrespective of whether, in accordance with GAAP, such
obligations should be reflected on the obligor’s balance sheet as debt.

20.3 Notice to Landlord of Severe Incident and/or Significant Property Damage.
In the event of a Severe Incident (defined in Section 20.3.1 below) or
Significant Property Damage (defined in Section 20.3.2 below) (in each case, an
“Incident”), Tenant shall notify Landlord within twenty-four (24) hours of
learning of the occurrence of any such Incident via email at notice@cnl.com.
Such email notification shall include, at a minimum, (i) the names and contact
information of the parties involved in the Incident, to the extent known at that
time, (ii) a brief description of the Incident, and (iii) all measures that
Tenant (or any other Person(s), to the knowledge of Tenant) is currently
undertaking, or plans to undertake to the extent known, to resolve the Incident
and to prevent, in connection with a Severe Incident and/or Significant Property
Damage, any further harm to person or damage to property as result of such
Incident.

20.3.1 Severe Incident. The defined term “Severe Incident” shall mean any
material or significant accident, incident, claim, cause of action, loss of or
damage to the Leased Property, Tenant’s Personal Property or any other property
of third parties, or injury to or death of a person occurring on or about the
Leased Property or adjoining sidewalks or rights of way under Tenant’s control
during the Term, including, but not limited to, the following: (i) a fatality,
(ii) claim of abuse, assault or molestation, (iii) personal injury resulting in
the amputation of a limb, brain injury, burns over fifty percent (50%) or more
of a person’s body, hearing or sight loss, internal injury resulting in impaired
organ function, spinal cord injury resulting in any degree of paralysis, or
substantial disfigurement, or (iv) a mass casualty event, such as a ride or
other attraction incident, wildfire or building fire, earthquake, and pier
collapse.

20.3.2 Significant Property Damage. The defined term “Significant Property
Damage” shall mean any incident resulting in significant damage to the Leased
Property including, but not limited to the following: fires, floods, avalanches,
earthquakes, catastrophic structure failure, roof collapse, or any Force Majeure
Event caused by either man or nature.

20.4 Leasehold Financing Prohibited. Tenant shall be prohibited from encumbering
any or all of the Leased Property, or any or all of its interests under this
Lease, with leasehold financing without the prior written consent of Landlord,
which consent may be withheld in Landlord’s sole and absolute discretion.

 

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ARTICLE 21

MISCELLANEOUS

21.1 Limitation on Payment of Rent. All agreements between Landlord and Tenant
herein are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of Rent or otherwise, shall the
Rent or any other amounts payable to Landlord under this Lease exceed the
maximum permissible under Applicable Laws, the benefit of which may be asserted
by Tenant as a defense, and if, from any circumstance whatsoever, fulfillment of
any provision of this Lease, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed by law, or if
from any circumstances Landlord should ever receive as fulfillment of such
provision such an excessive amount, then, ipso facto, the amount which would be
excessive shall be applied to the reduction of the installment(s) of Minimum
Rent next due and not to the payment of such excessive amount. This provision
shall control every other provision of this Lease and any other agreements
between Landlord and Tenant.

21.2 No Waiver. No release, discharge or waiver of any provision hereof shall be
enforceable against or binding upon Landlord or Tenant unless in writing and
executed by Landlord or Tenant, as the case may be. Neither the failure of
Landlord or Tenant to insist upon a strict performance of any of the terms,
provisions, covenants, agreements and conditions hereof, nor the acceptance of
any Rent by Landlord with knowledge of a breach of this Lease by Tenant in the
performance of its obligations hereunder, or the following of any practice or
custom at variance with the terms hereof, shall be deemed or constitute a waiver
of any rights or remedies that Landlord or Tenant may have or a waiver of any
subsequent breach or default in any of such terms, provisions, covenants,
agreements and conditions or the waiver of the right to demand exact compliance
with the terms hereof.

21.3 Remedies Cumulative. To the maximum extent permitted by law, each legal,
equitable or contractual right, power and remedy of Landlord, now or hereafter
provided either in this Lease or by statute or otherwise, shall be cumulative
and concurrent and shall be in addition to every other right, power and remedy
and the exercise or beginning of the exercise by Landlord of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Landlord of any or all of such other rights, powers and
remedies.

21.4 Severability. Any clause, sentence, paragraph, section or provision of this
Lease held by a court of competent jurisdiction to be invalid, illegal or
ineffective shall not impair, invalidate or nullify the remainder of this Lease,
but rather the effect thereof shall be confined to the clause, sentence,
paragraph, section or provision so held to be invalid, illegal or ineffective,
and this Lease shall be construed as if such invalid, illegal or ineffective
provisions had never been contained therein.

21.5 Acceptance of Surrender. No surrender to Landlord of this Lease or of the
Leased Property or any part thereof, or of any interest therein, shall be valid
or effective unless agreed to and accepted in writing by Landlord and no act by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, shall constitute an acceptance of any such surrender.

 

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21.6 No Merger of Title. It is expressly acknowledged and agreed that it is the
intent of the parties that there shall be no merger of this Lease or of the
leasehold estate created hereby by reason of the fact that the same Person may
acquire, own or hold, directly or indirectly, this Lease or the leasehold estate
created hereby and the fee estate or ground landlord’s interest in the Leased
Property.

21.7 Tenant’s Representations. In addition to any other representation or
warranty set forth herein and as an inducement to Landlord to enter into this
Lease, Tenant hereby represents and warrants to Landlord as follows:

(a) Tenant is a [limited liability company] which is duly organized and validly
existing and in good standing under the laws of the state of its formation.
Tenant has all requisite power and authority under the laws of the state of its
formation and its articles of organization and agreement of limited partnership
or other charter documents to enter into and perform its obligations under this
Lease and to consummate the transactions contemplated hereby. Tenant is duly
registered or authorized, as applicable, to transact business in any
jurisdiction in which the nature of the business conducted by it requires such
qualification.

(b) Tenant has taken all necessary action to authorize the execution, delivery
and performance of this Lease, and upon the execution and delivery of any
document to be delivered by Tenant, prior to the date hereof, such document
shall constitute the valid and binding obligation and agreement of Tenant,
enforceable against Tenant in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general application affecting the rights and
remedies of creditors and except to the extent that the availability of
equitable relief may be subject to the discretion of the court before which any
proceeding may be brought.

(c) There are no judgments presently outstanding and unsatisfied against Tenant
or any of its properties, and neither Tenant nor any of its properties are
involved in any material litigation at law or in equity or any proceeding before
any court, or by or before any governmental or administrative agency, which
litigation or proceeding could materially adversely affect Tenant, and no such
material litigation or proceeding is, to the knowledge of Tenant, threatened
against Tenant and no investigation looking toward such a proceeding has begun
or is contemplated.

(d) To the knowledge of Tenant, neither this Lease nor any other document,
certificate or statement furnished to Landlord by or on behalf of Tenant in
connection with the transaction contemplated herein contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. There
is no fact or condition which materially and adversely affects the business,
operations, affairs, properties or condition of Tenant which has not been set
forth in this Lease or in other documents, certificates or statements furnished
to Landlord in connection with the transaction contemplated hereby.

 

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(e) All employees of Tenant or any Affiliate, if any, are solely employees of
Tenant or such Affiliate and not Landlord. Neither Tenant nor any Affiliate of
Tenant is Landlord’s agent for any purpose in regard to Tenant’s or any
Affiliate of Tenant’s employees or otherwise. Further, Tenant expressly
acknowledges and agrees that Landlord does not exercise any direction or control
over the employment policies or employment decisions of Tenant or any Affiliate
of Tenant.

(f) Tenant has not (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made,
(ii) established or maintained any unrecorded fund or asset for any purpose or
made any false or artificial entries on its books or (iii) made any payments to
any person with the intention or understanding that any part of such payment was
to be used for any purpose other than that described in the documents supporting
the payment. Tenant shall not take any such actions during the Term of this
Lease.

21.8 Quiet Enjoyment. Landlord covenants and agrees that so long as Tenant shall
timely pay all rents due to Landlord from Tenant hereunder and keep, observe and
perform all covenants, promises and agreements on Tenant’s part to be kept,
observed and performed hereunder, Tenant shall and may peacefully and quietly
have, hold and occupy the Leased Property free of any interference from Landlord
or any Person claiming by, through or under Landlord of any of its Affiliates;
subject, however, and nevertheless to the terms, provisions and conditions of
this Lease, the Permitted Encumbrances and documents affecting title to the
Leased Property approved by Tenant.

21.9 Recordation of Memorandum of Lease. At either party’s option, a short form
memorandum of this Lease, in the form of Exhibit D attached hereto and made a
part hereof, shall be recorded or filed among the Official Records. Tenant shall
pay the transfer and all recording costs associated therewith. In the event of a
discrepancy between the provisions of this Lease and such short form memorandum
thereof, the provisions of this Lease shall prevail.

21.10 Notices. Any and all notices, demands, consents, approvals, offers,
elections and other communications required or permitted under this Lease (each,
a “Notice”) shall be deemed adequately given if in writing and the same shall be
delivered either in hand, by telecopier with written acknowledgment of receipt,
or by mail or Federal Express or another nationally-recognized overnight
carrier, addressed to the recipient of the notice, with all freight charges
prepaid (if by Federal Express or similar carrier).

(a) Any notice, demand or request which shall be served upon any of the parties
in the manner aforesaid shall be deemed sufficiently given (i) upon being hand
delivered in person, (ii) transmitted by facsimile transmission provided a copy
is sent as provided in the following clause (iii) or the following Business Day,
(iii) upon being deposited with Federal Express or another nationally-recognized
overnight carrier; provided, however, the time period in which any response to
such notice, demand or request must be given shall commence on the date of
actual delivery of the notice, demand or request to the address to which it is
sent (rather than delivery to the specific

 

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addressee). Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given as provided below shall
be deemed delivery of the notice, demand or request sent. The addresses given
above may be changed by any party by ten (10) days prior notice to all other
parties given in the manner provided herein.

(b) All such notices shall be addressed,

 

if to Landlord to:   

CHT Zanesville OH Senior Living

c/o CNL Healthcare Trust, Inc.

450 S. Orange Avenue

Orlando, Florida 32801

Attention: Holly S. Greer, Esq., Senior Vice

President and General Counsel

Fax:     (407) 540-2544

Phone: (407) 540-7500

Emails: holly.greer@cnl.com

with a copy to:   

Lowndes, Drosdick, Doster, Kantor and Reed, P.A.

215 North Eola Drive

Orlando, Florida 32801

Attention: William T. Dymond, Jr., Esq.

Fax:     (407) 843-4600

Phone: (407) 843-4444

Email: william.dymond@lowndes-law.com

if to Tenant to:   

TSMM Management, LLC

c/o Primrose Retirement Communities, LLC

815 N. 2nd Street

PO Box 1359

Aberdeen, South Dakota 57402-1359

Attention: Brian Morgan

Fax:     (605) 725-8732

Phone: (605) 226-3300 Ext. 28

Email: bmorgan@primroseretirement.com

With a copy to:   

Mark McNeary

Primrose Retirement Communities, LLC

815 N. 2nd Street

PO Box 1359

Aberdeen, South Dakota 57402-1359

Fax:      (605) 725-8745

Phone:  (605) 226-3300 Ext. 34

Email:   mmcneary@primroseretirement.com

(c) By notice given as herein provided, the parties hereto and their respective
successors and assigns shall have the right from time to time and at any time
during the term of this Lease to change their respective addresses effective
upon receipt by the other parties of such notice and each shall have the right
to specify as its address any other address within the United States of America.

 

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21.11 Construction; Nonrecourse. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Tenant or
Landlord arising prior to any date of termination or expiration of this Lease
with respect to the Leased Property shall survive such termination or
expiration. Each term or provision of this Lease to be performed by Tenant shall
be construed as an independent covenant and condition. Time is of the essence
with respect to the performance of all obligations under this Lease, including,
without limitation, obligations for the payment of money. Except as otherwise
set forth in this Lease, any obligations arising prior to the expiration or
sooner termination of this Lease of Tenant (including without limitation, any
monetary, repair and indemnification obligations) and Landlord shall survive the
expiration or sooner termination of this Lease. In addition, solely with respect
to Landlord, nothing contained in this Lease shall be construed to create or
impose any liabilities or obligations and no such liabilities or obligations
shall be imposed on any of the shareholders, beneficial owners, direct or
indirect, officers, directors, trustees, employees or agents of Landlord or
Tenant for the payment or performance of the obligations or liabilities of
Landlord hereunder. The parties have participated jointly in the negotiation and
drafting of this Lease. In the event an ambiguity or question of intent or
interpretation arises, this Lease shall be construed as if drafted jointly by
the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Lease.

21.12 Counterparts; Headings. This Lease may be executed in two or more
counterparts, each of which shall constitute an original, but which, when taken
together, shall constitute but one instrument and shall become effective as of
the date hereof when copies hereof, which, when taken together, bear the
signatures of each of the parties hereto shall have been signed. Captions and
headings in this Lease are for purposes of reference only and shall in no way
define, limit or describe the scope or intent of, or otherwise affect, the
provisions of this Lease.

21.13 Applicable Law. This Lease shall be governed by, and construed in
accordance with, the laws of the State in which the Leased Property is located.

21.14 Right to Make Agreement. Each party warrants, with respect to itself, that
neither the execution and delivery of this Lease, nor the compliance with the
terms and provisions hereof, shall violate any provision of any law, or any
judgment, writ, injunction, order or decree of any court or Governmental
Authority; nor result in or constitute a breach or default under or the creation
of any lien, charge or encumbrance upon any of its property or assets under, any
indenture, mortgage, deed of trust, contract, other commitment or restriction to
which it is a party or by which it is bound; nor require any consent, vote or
approval which has not been given or taken, or at the time of the transaction
involved shall not have been given or taken. Each party covenants that it has
and will continue to have throughout the term of this Lease and any extensions
thereof, the full right to enter into this Lease and perform its obligations
hereunder.

 

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21.15 Brokerage. Landlord and Tenant hereby represent and warrant to each other
that they have not engaged, employed or utilized the services of any business or
real estate brokers, salesmen, agents or finders in the initiation, negotiation
or consummation of the business and real estate transaction reflected in this
Lease. On the basis of such representation and warranty, each party shall and
hereby agrees to indemnify, pay and save and hold the other party harmless from
and against the payment of any commissions or fees to or claims for commissions
or fees by any real estate or business broker, salesman, agent or finder
resulting from or arising out of any actions taken or agreements made by them
with respect to the business and real estate transaction reflected in this
Lease.

21.16 No Partnership or Joint Venture. Landlord shall not, by virtue of this
Lease, in any way or for any purpose, be deemed to be a partner of Tenant in the
conduct of Tenant’s business upon, within or from the Leased Property or
otherwise, or a joint venture partner or a member of a joint enterprise with
Tenant.

21.17 Entire Agreement. This Lease contains the entire agreement between the
parties and, except as otherwise provided herein, can only be changed, modified,
amended or terminated by an instrument in writing executed by the parties. It is
mutually acknowledged and agreed by Landlord and Tenant that there are no verbal
agreements, representations, warranties or other understandings affecting the
same; and that Tenant hereby waives, as a material part of the consideration
hereof, all claims against Landlord for rescission, damages or any other form of
relief by reason of any alleged covenant, warranty, representation, agreement or
understanding not contained in this Lease.

21.18 Costs and Attorneys’ Fees. In addition to Landlord’s rights under Sections
12.2 and 14.2, if either party shall bring an action to recover any sum due
hereunder, or for any breach hereunder, and shall obtain a judgment or decree in
its favor, the court may award to such prevailing party its reasonable costs and
reasonable attorney’s fees, specifically including reasonable attorney’s fees
incurred in connection with any appeals (whether or not taxable as such by law).
Landlord shall also be entitled to recover its reasonable attorney’s fees and
costs incurred in any bankruptcy action filed by or against Tenant, including,
without limitation, those incurred in seeking relief from the automatic stay, in
dealing with the assumption or rejection of this Lease, in any adversary
proceeding, and in the preparation and filing of any proof of claim.

21.19 Approval of Landlord. Whenever Tenant is required under this Lease to do
anything to meet the satisfaction or judgment of Landlord, the reasonable
satisfaction or judgment of Landlord shall be deemed sufficient. The foregoing
provision of this Section shall not apply in any instance where the provisions
of this Lease expressly state that the provisions of this Section do not apply
or where the provisions of this Lease expressly state that such consent,
approval or satisfaction are subject to the sole and absolute discretion or
judgment of Landlord, and in each such instance Landlord’s approval or consent
may be unreasonably withheld or unreasonable satisfaction or judgment may be
exercised by Landlord.

21.20 Successors and Assigns. The agreements, terms, provisions, covenants and
conditions contained in this Lease shall be binding upon and inure to the
benefit of Landlord and Tenant and, to the extent permitted herein, their
respective successors and assigns.

 

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21.21 Waiver of Jury Trial. TENANT AND LANDLORD HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAWS, THE
RIGHT EITHER OF THEM OR THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS OR
ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION PROCEEDINGS OR
COUNTERCLAIM, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, THE RELATIONSHIP
OF LANDLORD AND TENANT HEREUNDER, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION
IS A MATERIAL INDUCEMENT TO TENANT’S ENTERING INTO THIS LEASE AND LANDLORD’S
ACCEPTING THIS LEASE.

21.22 Treatment of Lease. Landlord and Tenant each acknowledge and agree that:
(i) this Lease is a “true lease” and not a financing lease, capital lease,
mortgage, equitable mortgage, deed of trust, trust agreement, security agreement
or other financing or trust arrangement, and the economic realities of this
Lease are those of a true lease; (ii) the business relationship created by this
Lease and any other related documents is solely that of a long term commercial
lease between Landlord and Tenant, the Lease has been entered into by both
parties in reliance upon the economic and legal bargains contained herein, and
none of the agreements contained herein is intended, nor shall the same be
deemed or construed to create a partnership between Landlord and Tenant, to make
them joint venturers, to make Tenant an agent, legal representative, partner, or
subsidiary of Landlord, nor to make Landlord in any way responsible for the
debts, obligations or losses of Tenant; (iii) except as required by Applicable
Law, (x) each party will treat this Lease as a true lease for tax purposes and
an operating lease under GAAP, and for federal income tax purposes, (y) each
party shall report this Lease as a true lease with Landlord as the owner of the
Leased Property and Tenant as the tenant of the Leased Property; (iv) each party
will not, nor will it permit any Affiliate to, at any time, take any action or
fail to take any action with respect to the preparation or filing of any
statement or disclosure to any governmental authority, including, without
limitation, any income tax return (or amended return), to the extent that such
action or such failure to take action would be inconsistent with the intention
of the parties expressed in this Section 21.22; (v) the Minimum Rent is the fair
market value for the use of the Leased Property and was agreed to by Landlord
and Tenant on that basis, and the execution and delivery of, and the performance
by Tenant of its obligations under this Lease do not constitute a sale, transfer
or conveyance of the Leased Property by Landlord to Tenant; (vi) each of
Landlord and Tenant waives any claim or defense based upon the characterization
of this Lease as anything other than a true lease, and each party stipulates and
agrees that it will not challenge the validity, enforceability or
characterization of this Lease as a true lease, nor will it assert or take or
omit to take any action inconsistent with the agreements and understandings of
this Section 21.22.

21.23 Transfer of Permits and Operating Contracts. Upon the expiration or sooner
termination of this Lease, Tenant shall use commercially reasonable efforts to
transfer and assign to Landlord or its designee or assist Landlord or its
designee in obtaining transfer or assignment of all (a) Permits and Operating
Contracts, including, without limitation, any trade names and intellectual
property (except for trade names, trade secrets, proprietary matters, and other

 

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intellectual property and/or proprietary software included within the Tenant
Personal Property), and (b) to the extent owned by or held in the name of
Tenant, (i) governmental permits, including licenses and authorizations,
required for the construction, ownership and operation of the Leased
Improvements, including without limitation, certificates of authority,
certificates of occupancy, building permits, signage permits, site use
approvals, zoning certificates, environmental and land use permits, and any and
all necessary approvals from state or local authorities and other approvals
granted by any public body or by any private party pursuant to a recorded
instrument relating to such Leased Improvements or the Land; (ii) development
rights, telephone exchange numbers identified with the Leased Property, if any;
and (iii) certificates, licenses, warranties and guarantees and contracts. If
requested by Landlord and to the extent permitted by law and any licensor,
Tenant shall provide a collateral assignment or similar pledge of such licenses
and other intangible rights upon Landlord’s request and as further security for
their respective obligations hereunder plus Permits and Operating Contracts, all
of which shall be assumed by Landlord or its designee. Unless termination of
this Lease is as a result of an Event of Default by Tenant, Landlord shall bear
the costs of any fees associated with the transfer of any of the foregoing.

21.24 Confidential Information. Each Party shall treat as strictly confidential
any and all information concerning the other Party and its operations including,
without limitation, information concerning the business operations, financial
models and operating systems of the other Party (collectively, “Confidential
Information”), and shall not divulge, disclose, publish or otherwise communicate
any such Confidential Information to any person or entity for any reason;
provided, however, Tenant shall be permitted to (i) deliver a copy of this Lease
to a prospective purchaser with the consent of the Landlord, which consent shall
not be unreasonably withheld; provided, however, that, with respect to any
request made in connection with disclosure to a prospective acquirer of Tenant’s
interest in this Lease (or a Controlling interest in Tenant), it shall not be
unreasonable for Landlord to withhold its consent if, in Landlord’s reasonable
opinion, such party lacks the character or the quality and relevant experience
necessary to satisfy the obligations of Tenant hereunder, and (ii) provided
further that Tenant obtain a standard non-disclosure agreement from the party to
whom such information is to be disclosed (in form, and substance reasonably
satisfactory to Landlord), notwithstanding the foregoing, Tenant may disclose
the general economic terms of its operations (including, without limitation, the
economic terms contained in this Lease Agreement) to prospective acquirers of
substantially all of Tenant’s assets or the interests of and/or in Tenant,
lenders and investors. As used herein, the term Confidential Information shall
not include information that (i) is generally available to the public other than
as a result of an improper disclosure by a Party or its Affiliates or
representatives, or was available to the public on a non-confidential basis
prior to its disclosure by Landlord or Tenant, as applicable, or (ii) must be
disclosed as a matter of law, including such public disclosure obligations as
are required by the SEC or in response to a subpoena or other legal process. The
provisions of this Section 21.24 shall survive any termination of this Lease.

21.25 Tenant’s Personal Property. Upon the expiration or sooner termination of
the Term of this Lease, Landlord may, in its sole and absolute discretion, elect
either (i) to give Tenant Notice that Tenant shall be required, within sixty
(60) Business Days after such expiration or termination, to remove all of
Tenant’s Personal Property from the Leased Property

 

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or (ii) to give Tenant Notice that Landlord shall purchase Tenant’s Personal
Property within sixty (60) Business Days after such expiration or termination.
In the event that Landlord exercises its option under the foregoing clause
(ii) of this Section 21.25, the purchase price for all items of Tenant’s
Personal Property shall be the lesser of the fair market value or Tenant’s book
value of such Tenant’s Personal Property (free of, and net of, all Liens and
other encumbrances, monetary or otherwise).

21.26 No Third Party Beneficiaries. Nothing herein is intended or shall be
construed to confer upon or give to any person other than Landlord and Tenant,
any rights or remedies under or by reason of this Lease.

21.27 Guaranty Net Worth Requirement. Tenant acknowledges that Landlord has
accepted the Guaranty in lieu of a security deposit under this Lease and that
the financial strength of the Guarantors and the validity of the Guaranty is an
important consideration to Landlord. Accordingly, if at any time the combined
net worth of the Guarantors fails to equal or exceed the then-applicable annual
amount of Minimum Rent due under this Lease for the current Lease Year (the
“Guaranty Net Worth Requirement”), it shall be an Event of Default hereunder.
Upon a failure of the Guaranty Net Worth Requirement, Tenant shall have sixty
(60) days to cure the Event of Default by either (a) providing Landlord with an
additional Guarantor or Guarantors with net worth sufficient to allow the
consolidated net worth of the Guarantors to equal the Guaranty Net Worth
Requirement or (b) posting a security deposit with Landlord in an amount equal
to three (3) months of Rent (the “Security Deposit”). The Security Deposit shall
be held by Landlord as security for the full and faithful performance by Tenant
of all of the terms and obligations set forth in this Lease and for the full and
faithful performance by Tenant of all of the terms and obligations set forth in
each Affiliated Lease. If an Event of Default shall occur and be continuing
under this Lease or any Affiliated Lease, then in addition to and not exclusive
of any other remedies available under this Lease, Landlord may use, apply or
retain all or any portion of the Security Deposit for the payment of any Rent,
the funding of Additional Charges or other charges in Default, or for the
payment of any sum to which Landlord may become obligated by reason of such
Event of Default. If Landlord so uses or applies all or any portion of the
Security Deposit, Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to the full amount of the Security Deposit. Landlord shall not
be required to keep the Security Deposit separate from its general accounts and
may commingle the Security Deposit with other funds of Landlord. If Tenant
performs all of its obligations hereunder and Tenant performs all of its
obligations under the Affiliated Leases, at the expiration of the Term, and
after Tenant has vacated each Affiliated Leased Property, the Security Deposit,
or so much thereof as has not been applied or used by Landlord as provided in
this Lease or the Affiliated Leases, shall be returned to Tenant within sixty
(60) days, without payment of interest or other increment for its use, and the
documents evidencing the Security Deposit shall be terminated. No trust
relationship is created herein between Landlord and Tenant with respect to the
Security Deposit. Tenant acknowledges that the Security Deposit constitutes
security for the faithful observance and performance by Tenant of all the terms,
covenants and conditions of this Lease to be observed and performed and for the
full and faithful performance by Tenant of all of the terms, covenants and
obligations set forth in each Affiliated Lease. If any Event of Default shall
occur and be continuing under this Lease or any Affiliated Lease, Landlord may,
at its option and without prejudice to any other remedy

 

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which Landlord may have on account thereof, appropriate and apply the amount of
the Security Deposit in accordance with the terms set forth herein and as may be
necessary to compensate Landlord toward the payment of the Rent or other sums
due Landlord under this Lease or under any Affiliated Lease as a result of such
breach by Tenant. It is understood and agreed that the Security Deposit is not
to be considered as prepaid rent, nor shall damages hereunder be limited to the
amount of the Security Deposit. Tenant hereby grants to Landlord a security
interest in the Security Deposit as security for Tenant’s obligations to
Landlord hereunder and agrees to execute and deliver all such instruments as may
be required by Landlord to evidence and perfect these security interests.

21.28 Non-Compete. Tenant agrees that during the term of this Lease and for a
period of five years following the expiration of this Lease, Tenant shall not
engage, and shall not cause or permit any of its Subsidiaries or any of its
Affiliates to (each, a “Covered Person”) to engage directly or indirectly, in
any capacity, in any activities that Compete with the business of developing,
owning, operating, leasing or managing a Senior Living Facility within fifteen
(15) miles of the Facility. For purposes of this provision, “Compete” means
(i) to, directly or indirectly, conduct, facilitate, participate or engage in,
or bid for or otherwise pursue a business, whether as a principal, sole
proprietor, partner, stockholder, or agent of, or consultant to or manager for,
any Person or in any other capacity, or (ii) to, directly or indirectly, have
any ownership interest in any Person or business which conducts, facilitates,
participates or engages in, or bids for or otherwise pursues a business, whether
as a principal, sole proprietor, partner, stockholder, or agent of, or
consultant to or manager for, any Person or in any other capacity.
Notwithstanding the foregoing, this Section 21.28 shall not apply to or in any
way prohibit or restrict any existing ownership interests or operations of a
Covered Person as of the Effective Date of this Lease. The parties recognize and
acknowledge that a breach of this Section 21.28 by Tenant or any of its
Affiliates will cause irreparable and material loss and damage to Landlord and
hereby consent to the granting by any court of competent jurisdiction of an
injunction or other equitable relief, without the necessity of posting a bond,
cash or otherwise, and without the necessity of actual monetary loss being
proved or Landlord’s establishing the inadequacy of any remedy at law, and order
that the breach or threatened breach of such provisions may be effectively
restrained.

21.29 Community Fees. To the extent Tenant or the property manager charge or
collect any “Community Fee”, “Entrance Fee” or similar fee from residents which
is obligated to be repaid, in whole or in part, Tenant agrees that it is solely
responsible for such repayment and hereby agrees to indemnify, save, pay, insure
and hold Landlord and its Affiliated Parties harmless from and against and
reimburse Landlord for any and all loss, damage, cost, liability, fee and
expense (including, without limitation, reasonable attorney’s fees based upon
service rendered at hourly rates) incurred by or asserted against Landlord which
is occasioned by or results, directly or indirectly, from such Community Fees,
Entrance Fees or other fees charged by Tenant or the Property Manager. Further,
upon an Event of Default under or termination of this Lease, Tenant agrees to
assign to Landlord any assets securing or backing the repayment obligation. This
provision shall expressly survive termination of the Lease.

(a) In addition to, and not in limitation of, the foregoing provisions, Landlord
and Tenant acknowledge that Tenant is or may be a party to one or more Community
Fee

 

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Senior Living Townhome Agreements with residents of Facility villas (each, a
“Community Fee Agreement”), pursuant to which Tenant makes available to certain
residents the option to pay Tenant the sum of One Hundred Thousand and No/100
Dollars ($100,000.00) (the “Rental Buydown Deposit”) in exchange for reduced
monthly rent under the resident’s occupancy agreement or lease (“Rental Buydown
Program”). As of the Effective Date, no units of the Facility participate in the
Rental Buydown Program. Tenant shall not permit and shall cause the property
manager not to permit more than six units in the Facility to participate in the
Rental Buydown Program at any one time. $75,000.00 of each Rental Buydown
Deposit is reimbursable to the applicable resident when such resident vacates
the Facility (“Reimbursable Deposit”). All Reimbursable Deposits, whether now or
in the future existing, shall be deposited in Great Western Bank or other
financial institution approved by Landlord and in writing (“Certificate of
Deposit Issuer”) in the form of automatically renewing certificates of deposit
issued in favor of Tenant or, if requested by Landlord or Mortgagee, Landlord
(each, a “Certificate of Deposit”). If requested by Landlord or Mortgagee, the
original Certificates of Deposit shall be deposited with and held by such
requesting party.

(b) Tenant hereby grants to Landlord, its successor and assigns (including but
not limited to Mortgagee and its successors and assigns), a security interest
(the “Security Interest”) in all of Tenant’s right, title and interest in, to
and under all Certificates of Deposit representing Reimbursable Deposits,
whether now or in the future existing, and all renewals, replacements and
proceeds thereof (collectively, the “Pledged Collateral”). Upon the occurrence
of an Event of Default under the Lease Agreement, including but not limited to
any violation or failure of Tenant to comply with any provision of this
Amendment, or upon the expiration or termination of the Lease Agreement for any
reason, Landlord or Mortgagee may in its sole and absolute discretion demand
immediate payment of the Certificates of Deposit to it and, whether or not
Landlord makes such demand, Tenant shall, upon notice from Landlord or Mortgagee
to Tenant or to the Certificate of Deposit Issuer, immediately lose all of its
rights to receive proceeds of any Certificate of Deposit. Upon receipt, Landlord
or Mortgagee shall hold the Certificates of Deposit to pay amounts to residents
at such times as any Reimbursable Deposits may become due and payable, and for
no other purpose. Tenant hereby grants to Landlord and Mortgagee a power of
attorney to demand from the Certificate of Deposit Issuer and collect the
amounts under the Certificates of Deposit as provided in this paragraph, which
power of attorney is irrevocable, unconditional and coupled with an interest.
Landlord or Mortgagee may give notice to Certificate of Deposit Issuer
instructing Certificate of Deposit Issuer and Certificate of Deposit Issuer is
hereby authorized and agrees to pay the Pledged Collateral to Landlord or
Mortgagee immediately upon demand without any obligation or right to inquire
further as to the occurrence or continuance of a default or an Event of Default
under or the expiration or termination of the Lease Agreement or any Facility
Mortgage, and the Certificate of Deposit Issuer shall be released from any and
all liability to Tenant with respect to the Pledged Collateral to the extent the
same is paid to Landlord or Mortgagee.

(c) Within one hundred twenty (120) days after the end of each calendar year,
Tenant shall submit to Landlord and, if requested by Landlord or Mortgagee, to

 

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Mortgagee, a statement certified true and correct by Tenant setting forth the
names of residents who have at any time during the preceding calendar year
participated in the Rental Buydown Program, the amount of Rental Buydown Deposit
deposited with Tenant, the financial institution in which the Reimbursable
Deposit is held, and the Certificate of Deposit amount and account number.

(d) Upon entering into the Rental Buydown Program with any existing or potential
resident, Tenant shall provide to Landlord and, if requested by Landlord or
Mortgagee, the following: (i) the name of the resident, (ii) the amount of each
of the Rental Buydown Deposit and Reimbursable Deposit, (iii) a copy of the
residency agreement with such resident setting forth the Rental Buydown Program,
and (iv) a copy of the Certificate of Deposit representing such resident’s
Reimbursable Deposit, or if requested by Landlord or Mortgagee, the original
Certificate of Deposit.

(e) The insufficiency of any Certificate of Deposit shall not abrogate Tenant’s
obligation to return all Reimbursable Deposits as and when due in accordance
with the Community Fee Agreements and all applicable laws.

(f) Tenant shall cause the Certificate of Deposit Issuer to execute the
acknowledgement to this amendment and any further instruments requested by
Landlord or Mortgagee in connection with the pledge of the Pledged Collateral.
Notwithstanding anything to the contrary in the Lease Agreement, Landlord and
Tenant agree that Mortgagee is an intended third party beneficiary of the
security interest granted hereunder and the provisions of this Section 21.29,
and that Mortgagee shall have such rights and remedies hereunder as are
available to Landlord.

(g) Tenant represents and warrants that Tenant is the owner of the Certificates
of Deposit outstanding as of the Amendment Effective Date, and (i) there are no
prior liens or encumbrances on any of the Pledged Collateral except liens and
encumbrances granted to Landlord or Mortgagee; (ii) Tenant has not heretofore
sold or assigned, collaterally or otherwise, the Pledged Collateral other than
to Landlord or Mortgagee, (iii) there are no restrictions upon the pledging of
the Pledged Collateral except restrictions that have been waived or consented
to, (iv) Tenant has full right and authority to pledge the Pledged Collateral in
accordance with the terms of this Amendment, (v) there is no restriction on the
transfer of any of the Pledged Collateral except restrictions that arise under
agreements between Landlord and Tenant or Mortgagee and Tenant, and (vi) there
are no financing statements covering any Pledged Collateral on file in any
public office, except financing statements naming Landlord or Mortgagee as
secured party

[SIGNATURES APPEAR ON FOLLOWING PAGES]

 

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IN WITNESS WHEREOF, the parties have executed this Lease Agreement as a sealed
instrument as of the date above first written.

 

LANDLORD: CHT ZANESVILLE OH SENIOR LIVING, LLC, a Delaware limited liability
company By:  

/s/ Holly Greer

  Holly Greer, Senior Vice President

 

STATE OF FLORIDA       ) COUNTY OF ORANGE       )

On December 18, 2012, before me, Tracey Bracco, personally appeared Holly Greer
as Senior Vice President of CHT ZANESVILLE OH SENIOR LIVING, LLC, a Delaware
limited liability company, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

 

   

/s/    Tracey B. Bracco        

  (SEAL)  

Notary Public, State of Florida

 

Printed Name: Tracey B. Bracco

Commission No.: DD0924924

Commission Expires: 9/25/2013

 

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TENANT: TSMM MANAGEMENT, LLC, a South Dakota limited liability company By:  

/s/ James L. Thares

Name:   James L. Thares Title:   Managing Member/President

 

STATE OF FLORIDA       ) COUNTY OF ORANGE       )

On December 19, 2012, before me, James L. Thares, personally appeared as
Managing Member/President of TSMM MANAGEMENT, LLC, a South Dakota limited
liability company, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

 

   

/s/    Tracey B. Bracco        

  (SEAL)  

Notary Public, State of Florida

 

Printed Name: Tracey B. Bracco

Commission No.: DD0924924

Commission Expires: 9/25/2013

 

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EXHIBIT A

THE LAND

[Intentionally Omitted]

EXHIBIT B

MINIMUM RENT

[Intentionally Omitted]

EXHIBIT C

ESTOPPEL CERTIFICATE

[Intentionally Omitted]

EXHIBIT D

MEMORANDUM OF LEASE

[Intentionally Omitted]

EXHIBIT E

OPERATING CONTRACTS

[Intentionally Omitted]

EXHIBIT F

PERMITTED ENCUMBRANCES

[Intentionally Omitted]

EXHIBIT G

INITIAL LANDLORD P&E

[Intentionally Omitted]

--------------------------------------------------------------------------------

EXHIBIT H

TENANT’S PERSONAL PROPERTY

[Intentionally Omitted]

EXHIBIT I

AGREEMENTS WITH AFFILIATED PERSONS

[Intentionally Omitted]

SCHEDULE 1

AFFILIATED LEASES

[Intentionally Omitted]

SCHEDULE 12.6

TENANT PERSONAL PROPERTY EXCLUSIONS

[Intentionally Omitted]

SCHEDULE 16.2

TENANT ORGANIZATIONAL CHART

[Intentionally Omitted]