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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -------------------------------------------------------------------------------
FORM 8-K
- -------------------------------------------------------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: November 21, 1997
(Date of earliest event reported)
ALTERNATIVE LIVING SERVICES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 1-11999 39-1771281
(State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification No.)
incorporation or organization)
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450 N. SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WISCONSIN 53005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(414) 789-9565
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
On November 21, 1997, Alternative Living Services, Inc. (the "Company" or the
"Registrant") completed $62 million in sale/leaseback financing with a
subsidiary of Meditrust, a healthcare real estate investment trust (REIT). The
financing involved the sale and leaseback of 24 of the Company's assisted
living/dementia residences having an aggregate capacity of 775 residents, all of
which residences were previously owned by the Company (including residences
owned by majority owned, joint venture entities). The sale resulted in a
deferred gain of approximately $4.8 million, which will be recognized over the
initial twelve year lease terms. Of the $62 million in total proceeds,
approximately $14 million was withheld in escrow to fund additional construction
costs on six residences not substantially completed as of the date of this
transaction. After repayment of approximately $41 million of bridge loan
financing outstanding as of the date of the transaction, proceeds of $5 million
(net of lease deposits and closing costs) are available to fund future
development.
Pursuant to the sale/leaseback transaction, the Company is leasing these 24
residences from Meditrust pursuant to long-term operating leases. Each of such
leases has a term of twelve years with an option to extend the lease for three
additional periods of five years each. Rent for the 24 assisted living/dementia
residences consists of base rent, which the Company expects will equal an annual
aggregate of approximately $5.7 million, plus additional rent, the calculation
of which is based on the revenue of each respective property. Such additional
rent shall be payable commencing during the second year of the lease term.
The foregoing descriptions are qualified in their entirety by reference to the
full text of the agreements which are filed herewith and incorporated herein by
reference.
Item 5. Other Information
Pursuant to the Current Report on Form 8-K dated September 23, 1997, as
amended by a Form 8-K/A filed on November 6, 1997, the Registrant reported on
the consummation of its merger (the "Sterling Merger") with Sterling House
Corporation ("Sterling") on October 23, 1997. Reference is made to this Current
Report, as amended, for further information regarding the Sterling Merger.
Significant expenses are expected to be incurred in connection with the
consolidation and integration of ALS and Sterling as a result of the Sterling
Merger. Such activities may include restructuring regional and corporate
functions, consolidating information systems, integrating operations, and other
personnel costs. In addition, under the pooling-of-interests accounting method,
direct transaction costs are expensed in the period in which the transaction is
consummated. Such costs include investment banking, legal, accounting, printing,
solicitation and filing fees, and similar expenses. The Registrant anticipates
recording a charge to earnings in the quarter ended December 31, 1997 related to
the Sterling Merger in an aggregate range of $9 million to $11 million. A
portion of these charges to earnings will be identified as non-recurring merger
charges on the Registrant's financial statements for such quarter.
Any statements contained herein which are not historical facts are
forward-looking statements that involve risks and uncertainties. The Registrant
cautions the reader that forward
2
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looking statements, such as estimated changes related to the Sterling Merger,
may differ materially as a result of risks facing the Registrant.
Item 7. Financial Statements, Pro Forma
a) Financial Statements of Business Acquired.
i) Not applicable.
b) Pro Forma Financial Information.
i) Alternative Living Services, Inc., Unaudited Pro Forma
Condensed Consolidated Balance Sheet at September 30, 1997;
ii) Alternative Living Services, Inc., Unaudited Pro Forma
Condensed Combined Statement of Operations for the nine months
ended September 30, 1997;
iii) Alternative Living Services, Inc., Unaudited Pro Forma
Condensed Combined Statement of Operations for the year Ended
December 31, 1996;
iv) Unaudited Pro Forma Notes to Consolidated Financial
Statements.
c) Exhibits:
99.1 Form of Facility Lease dated as of November 21, 1997, between
Meditrust Acquisition Corporation III and ALS Leasing, Inc. ("Form
of Facility Lease").
99.2 Schedule of Additional Facility Leases which are substantially
similar to the Form of Facility Lease attached as Exhibit 99.1.
99.3 Guaranty by Alternative Living Services, Inc. to Meditrust
Acquisition Corporation III.
99.4 Affiliated Party Subordination Agreement dated November 21, 1997, by
and among ALS Leasing, Inc., the Company, the parties listed on
Schedule A thereto, all other Affiliates as defined therein and
Meditrust Acquisition Corporation III.
99.5 Agreement Regarding Related Lease Transactions dated November 21,
1997, by and among ALS Leasing, Inc., the Company and Meditrust
Acquisition Corporation III.
3
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Pro Forma
ALS Adjustments ALS
Historical (A) Pro Forma
--------------- ----------------- ---------------
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ASSETS
Current Assets:
Cash and cash equivalents.................................. $ 19,566 $ 9,243 $ 28,809
Resident receivables, net.................................. 5,562 -- 5,562
Other current assets....................................... 26,407 -- 26,407
---------- ---------- --------------
Total current assets................................... 51,535 9,243 60,778
---------- ---------- --------------
Property, plant and equipment, net............................. 288,677 (36,866) 251,811
Long-term investments.......................................... 4,436 -- 4,436
Investment in and advances to unconsolidated affiliates........ 2,168 -- 2,168
Other assets................................................... 19,771 1,285 21,056
---------- ---------- --------------
Total assets........................................... $ 366,587 $ (26,338) $ 340,249
========== ========== ==============
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term debt..................... $ 916 $ -- $ 916
Short-term notes payable................................... 26,046 (6,000) 20,046
Accounts payable........................................... 15,016 -- 15,016
Accrued expenses........................................... 17,788 (170) 17,618
---------- ---------- --------------
Total current liabilities.............................. 59,766 (6,170) 53,596
---------- ---------- --------------
Long-term Debt, less current installments...................... 195,478 (25,000) 170,478
Other long-term liabilities.................................... -- -- --
Deferred gain on sale.......................................... 7,466 4,832 12,298
Minority interest.............................................. 12,614 -- 12,614
Stockholders' equity:
Common stock and paid in capital........................... 104,444 -- 104,444
Accumulated deficit........................................ (13,181) -- (13,181)
---------- ---------- --------------
Total stockholders' equity............................. 91,263 -- 91,263
---------- ---------- --------------
Total liabilities and equity........................... 366,587 (26,338) $ 340,249
========== ========== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
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ALTERNATIVE LIVING SERVICES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Meditrust The Company
The Sale/Leaseback Pro Forma
Company (A) As Adjusted
--------- --------------- -----------
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Statement of Operations Data:
Operating revenues $ 89,104 -- $ 89,104
Operating Expenses:
Residence operations 56,153 -- 56,153
Lease expense 18,088 1,288 19,376
General & administrative 11,480 -- 11,480
Depreciation & amortization 6,828 (584) 6,244
Non-recurring charge -- -- --
-------- ------- --------
Total operating expenses 92,549 704 93,253
-------- ------- --------
Operating loss (3,445) (704) (4,149)
-------- ------- --------
Other income (expense):
Interest expense (net) (2,236) 916 (1,320)
Equity in losses of
unconsolidated affiliates (195) -- (195)
Minority interest in losses of
consolidated subsidiaries 6,022 -- 6,022
Other, net (67) -- (67)
-------- ------- --------
Total other income
(expense) net 3,524 916 4,440
-------- ------- --------
Loss before income taxes 79 212 291
-------- ------- --------
Provision for income taxes -- -- --
-------- ------- --------
Net income from continuing operations 79 212 291
======== ======= ========
Net income/(loss) per share $ 0.00 $ 0.02
======== ========
Weighted average shares
outstanding 18,989 18,989
======== ========
</TABLE>
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ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Meditrust The Company
The Sale/Leaseback Pro Forma
Company (A) As Adjusted
--------- --------------- -----------
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Statement of Operations Data:
Operating revenues $ 55,637 -- $ 55,637
Operating Expenses:
Residence operations 35,977 -- 35,977
Lease expense 9,035 382 9,417
General & administrative 11,143 -- 11,143
Depreciation & amortization 4,223 (192) 4,031
Non-recurring charge 976 -- 976
-------- ------- --------
Total operating expenses 61,354 190 61,544
-------- ------- --------
Operating loss (5,717) (190) (5,907)
Other income (expense):
Interest expense (net) (3,231) 209 (3,022)
Equity in losses of
unconsolidated affiliates (52) -- (52)
Minority interest in losses of
consolidated subsidiaries 76 -- 76
Other, net (31) -- (31)
-------- ------- --------
Total other income
(expense) net (3,238) 209 (3,029)
-------- ------- --------
Loss before income taxes (8,955) 19 (8,936)
-------- ------- --------
Provision for income taxes (159) -- (159)
-------- ------- --------
Net income/(loss) from
continuing operations $ (8,796) $ 19 $ (8,777)
======== ======= ========
Net income/(loss) per share $ (0.57) $ (0.57)
======== ========
Weighted average shares
outstanding 15,429 15,429
======== ========
</TABLE>
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ALTERNATIVE LIVING SERVICES, INC.
UNAUDITED PRO FORMA NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(A) To record effects of the November 21, 1997 sale/leaseback of 24
residences, the pro forma adjustments of expenses and net income/(loss)
were made for the number of months each residence was in operation based
on the date each facility originally opened or was acquired by the
Company. Of these residences, 17 were in operation as of September 30,
1997. The name of these residences and the month and year each such
residence was opened or acquired are: WovenHearts Sun Prairie, May, 1994;
WovenHearts Manitowoc, December, 1995; WovenHearts Neenah, April, 1996;
WovenHearts Oshkosh, August 1996; WovenHearts Mankato, October, 1996;
WovenHearts Medford, December, 1996; WovenHearts Wisconsin Rapids,
December, 1996; WovenHearts Wausau, December, 1996; WovenHearts Plover,
December , 1996; WovenHearts Owatonna, December, 1996; WovenHearts Winona,
January, 1997; WovenHearts Eau Claire, February, 1997; WovenHearts
Middleton, April, 1997; WovenHearts Faribault, April, 1997; WovenHearts
Sauk Rapids, April, 1997; WovenHearts Willmar, April 1997; Clare Bridge of
Greensboro, September, 1997. As of September 30, 1997, 7 additional
residences; Wynwood Lansing; Wynwood of Greensboro, Wynwood and Clare
Bridge Charlotte; Clare Bridge Jacksonville; Clare Bridge Charleston; and
Clare Bridge Columbia were not in operation and are only reflected in the
pro forma balance sheet for construction expenditures through September
30, 1997. The Meditrust sale/leaseback impact is:
For the nine months ended September 30, 1997:
(i) an increase in lease expense of $1,288,000 resulting from lease
payments due to Meditrust, (ii) a decrease in depreciation expense of
$584,000 due to the sale of $36.9 million of property, plant, and
equipment, including $267,000 amortization of $4.8 million of deferred
gain, (iii) a decrease of $427,000 of interest expense related to
long-term debt paid off with sale/leaseback proceeds, and (iv) interest
income of $489,000 on the $20.8 million net proceeds at an assumed 5%
interest return.
For the year ended December 31, 1996:
(i) an increase in lease expense of $382,000 resulting from lease
payments due to Meditrust, (ii) a decrease in depreciation expense of
$192,000 due to the sale of $9.5 million of property, plant, and
equipment, including $82,000 amortization of $2.3 million of deferred
gain, and (iii) interest income of $209,000 on the $12.1 million net
proceeds at an assumed 5% interest return.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: December 2, 1997
ALTERNATIVE LIVING SERVICES, INC.
(Registrant)
By: /s/ Thomas E. Komula
---------------------
Thomas E. Komula, Senior Vice President, Treasurer
and Chief Financial Officer
8
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EXHIBIT INDEX
99.1 Form of Facility Lease dated as of November 21, 1997, between
Meditrust Acquisition Corporation III and ALS Leasing, Inc. ("Form
of Facility Lease").
99.2 Schedule of Additional Facility Leases which are substantially
similar to the Form of Facility Lease attached as Exhibit 99.1.
99.3 Guaranty by Alternative Living Services, Inc. to Meditrust
Acquisition Corporation III.
99.4 Affiliated Party Subordination Agreement dated November 21, 1997, by
and among ALS Leasing, Inc., the Company, the parties listed on
Schedule A thereto, all other Affiliates as defined therein and
Meditrust Acquisition Corporation III.
99.5 Agreement Regarding Related Lease Transactions dated November 21,
1997, by and among ALS Leasing, Inc., the Company and Meditrust
Acquisition Corporation III.
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EXHIBIT 99.1
F A C I L I T Y L E A S E A G R E E M E N T
MEDITRUST ACQUISITION CORPORATION III
(A Delaware Corporation)
as
Lessor
AND
ALS LEASING, INC.
[NC: , IN NORTH CAROLINA D/B/A ALS LEASING (DELAWARE), INC.]
(A Delaware Corporation)
as
Lessee
Dated As Of November 21, 1997
For Premises Located At
[FACILITY NAME AND ADDRESS]
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TABLE OF CONTENTS
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Page No.
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ARTICLE 1
LEASED PROPERTY; TERM; EXTENSIONS........................................................................1
1.1 Leased Property...............................................................................1
1.2 Term..........................................................................................2
1.3 Extended Terms................................................................................2
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION....................................................................3
2.1 Definitions...................................................................................3
2.2 Rules of Construction........................................................................21
ARTICLE 3
RENT....................................................................................................21
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures..............................21
3.1.2 Additional Rent..............................................................22
3.2 Calculation and Payment of Additional Rent; Annual Reconciliation............................22
3.2.1 Estimates and Payments.......................................................22
3.2.2 Annual Statement.............................................................23
3.2.3 Deficits.....................................................................23
3.2.4 Overpayments.................................................................23
3.2.5 Final Determination..........................................................23
3.2.6 Best Efforts To Maximize.....................................................23
3.3 Confirmation and Audit of Additional Rent....................................................24
3.3.1 Maintain Accounting Systems..................................................24
3.3.2 Audit By Lessor..............................................................24
3.3.3 Deficiencies and Overpayment.................................................24
3.3.4 Survival.....................................................................24
3.4 Additional Charges...........................................................................25
3.5 Leasing Commitment Fee.......................................................................25
3.6 Net Lease....................................................................................25
3.7 No Lessee Termination or Offset..............................................................25
3.7.1 No Termination...............................................................25
3.7.2 Waiver.......................................................................26
3.7.3 Independent Covenants........................................................26
3.8 Abatement of Rent Limited....................................................................26
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ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS.......................................................27
4.1 Payment of Impositions.......................................................................27
4.1.1 Lessee To Pay................................................................27
4.1.2 Installment Elections........................................................27
4.1.3 Returns and Reports..........................................................27
4.1.4 Refunds......................................................................28
4.1.5 Protest......................................................................28
4.2 Notice of Impositions........................................................................28
4.3 Adjustment of Impositions....................................................................28
4.4 Utility Charges..............................................................................28
4.5 Insurance Premiums...........................................................................28
4.6 Deposits.....................................................................................29
4.6.1 Lessor's Option..............................................................29
4.6.2 Use of Deposits..............................................................29
4.6.3 Deficits.....................................................................30
4.6.4 Other Properties.............................................................30
4.6.5 Transfers....................................................................30
4.6.6 Security.....................................................................31
4.6.7 Return.......................................................................31
4.6.8 Receipts.....................................................................31
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY.......................................................................................31
5.1 Ownership of the Leased Property.............................................................31
5.2 Personal Property; Removal and Replacement of Personal Property..............................32
5.2.1 Lessee To Equip Facility.....................................................32
5.2.2 Sufficient Personal Property.................................................32
5.2.3 Removal and Replacement; Lessor's Option to Purchase.........................32
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS..........................................................................33
6.1 Security for the Lessee's Obligations; Permitted Prior Security Interests....................33
6.1.1 Security.....................................................................33
6.1.2 Purchase-Money Security Interests and Equipment Leases.......................34
6.2 Cash Collateral..............................................................................34
6.2.1 Cash Collateral..............................................................34
6.2.2 Application of Cash Collateral...............................................35
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6.2.3 Replenishment of Cash Collateral.............................................35
6.3 Guaranty.....................................................................................35
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY; MANAGEMENT AGREEMENTS.............................................35
7.1 Condition of the Leased Property.............................................................35
7.2 Use of the Leased Property; Compliance; Management...........................................36
7.2.1 Obligation to Operate........................................................36
7.2.2 Permitted Uses...............................................................36
7.2.3 Compliance With Insurance Requirements.......................................36
7.2.4 No Waste.....................................................................36
7.2.5 No Impairment................................................................37
7.2.6 No Liens.....................................................................37
7.3 Compliance with Legal Requirements...........................................................37
7.4 Management Agreements........................................................................37
ARTICLE 8
REPAIRS; RESTRICTIONS...................................................................................38
8.1 Maintenance and Repair.......................................................................38
8.1.1 Lessee's Responsibility......................................................38
8.1.2 No Lessor Obligation.........................................................39
8.1.3 Lessee May Not Obligate Lessor...............................................40
8.1.4 Lessee's Obligation to Perform Upgrade Renovations...........................40
8.2 Encroachments; Title Restrictions............................................................41
ARTICLE 9
MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS..........................................................42
9.2 General Provisions as to Capital Additions and Certain Material Structural
Work.........................................................................................42
9.2.1 No Liens.....................................................................42
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work..............................................................42
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work..............................................................42
9.2.4 Lessor May Elect to Finance Capital Additions or Material
Structural Work..............................................................43
9.2.5 Legal Requirements; Quality of Work..........................................43
9.3 Capital Additions and Material Structural Work Financed by Lessor............................43
9.3.1 Lessee's Financing Request...................................................43
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9.3.2 Lessor's General Requirements................................................43
9.3.3 Payment of Costs.............................................................45
9.4 General Limitations..........................................................................45
9.5 Non-Capital Additions........................................................................46
9.6 Permitted Work...............................................................................46
ARTICLE 10
WARRANTIES AND REPRESENTATIONS..........................................................................47
10.1 Representations and Warranties...............................................................47
10.1.1 Existence; Power; Qualification..............................................47
10.1.2 Valid and Binding............................................................47
10.1.3 Single Purpose...............................................................47
10.1.4 No Violation.................................................................47
10.1.5 Consents and Approvals.......................................................48
10.1.6 No Liens or Insolvency Proceedings...........................................48
10.1.7 No Burdensome Agreements.....................................................48
10.1.8 Commercial Acts..............................................................49
10.1.9 Adequate Capital, Not Insolvent..............................................49
10.1.10 Not Delinquent...............................................................49
10.1.11 No Affiliate Debt............................................................49
10.1.12 Taxes Current................................................................49
10.1.13 Financials Complete and Accurate.............................................50
10.1.14 Pending Actions, Notices and Reports.........................................50
10.1.15 Compliance with Legal and Other Requirements.................................51
10.1.16 No Action By Governmental Authority..........................................51
10.1.17 Property Matters.............................................................51
10.1.18 Third Party Payor Agreements.................................................53
10.1.19 Rate Limitations.............................................................53
10.1.20 Free Care....................................................................54
10.1.21 No Proposed Changes..........................................................54
10.1.22 ERISA........................................................................54
10.1.23 No Broker....................................................................54
10.1.24 No Improper Payments.........................................................54
10.1.25 Nothing Omitted..............................................................55
10.1.26 No Margin Security...........................................................55
10.1.27 No Default...................................................................55
10.1.28 Principal Place of Business..................................................55
10.1.29 Labor Matters................................................................55
10.1.30 Intellectual Property........................................................56
10.1.31 Management Agreements........................................................56
10.1.32 Fiscal Year..................................................................56
10.1.33 Rates........................................................................56
10.2 Continuing Effect of Representations and Warranties..........................................56
</TABLE>
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<CAPTION>
ARTICLE 11
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FINANCIAL AND OTHER COVENANTS...........................................................................57
11.1 Status Certificates..........................................................................57
11.2 Financial Statements; Reports; Notice and Information........................................57
11.2.1 Obligation To Furnish........................................................57
11.2.2 Responsible Officer..........................................................61
11.2.3 No Material Omission.........................................................61
11.2.4 Confidentiality..............................................................61
11.3 Financial Covenants..........................................................................62
11.3.1 Rent Coverage Ratio..........................................................62
11.3.2 [Intentionally Omitted]......................................................62
11.3.3 [Intentionally Omitted]......................................................62
11.3.4 [Intentionally Omitted]......................................................62
11.3.5 Current Ratio - Guarantor....................................................62
11.3.6 Net Worth of Guarantor After a Permitted Transaction or
Permitted Merger.............................................................63
11.3.7 Tangible Net Worth - Guarantor...............................................63
11.3.8 No Indebtedness..............................................................63
11.3.9 No Guaranties................................................................63
11.4 Affirmative Covenants........................................................................63
11.4.1 Maintenance of Existence.....................................................63
11.4.2 Materials....................................................................64
11.4.3 Compliance With Legal Requirements And Applicable
Agreements...................................................................64
11.4.4 Books And Records............................................................64
11.4.5 Participation in Third Party Payor Programs..................................64
11.4.6 Conduct of its Business......................................................64
11.4.7 Address......................................................................65
11.4.8 Subordination of Affiliate Transactions......................................65
11.4.9 Inspection...................................................................65
11.4.10 Additional Property..........................................................65
11.4.11 Acceptable Licensed Operator.................................................66
11.4.12 [Intentionally Omitted]......................................................66
11.5 Additional Negative Covenants................................................................66
11.5.1 Restrictions Relating to Lessee..............................................66
11.5.2 No Liens.....................................................................67
11.5.3 Limits on Affiliate Transactions.............................................68
11.5.4 Non-Competition..............................................................68
11.5.5 No Default...................................................................69
11.5.6 Restrictions Relating to the Guarantor.......................................69
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11.5.7 [Intentionally Omitted]......................................................69
11.5.8 ERISA........................................................................70
11.5.9 Forgiveness of Indebtedness..................................................70
11.5.10 Value of Assets..............................................................70
11.5.11 Changes in Fiscal Year and Accounting Procedures.............................70
11.5.12 [Intentionally Omitted]......................................................70
ARTICLE 12
INSURANCE AND INDEMNITY.................................................................................70
12.1 General Insurance Requirements...............................................................70
12.1.1 Types and Amounts of Insurance...............................................71
12.1.2 Insurance Company Requirements...............................................72
12.1.3 Policy Requirements..........................................................72
12.1.4 Notices; Certificates and Policies...........................................73
12.1.5 Lessor's Right to Place Insurance............................................73
12.1.6 Payment of Proceeds..........................................................74
12.1.7 Irrevocable Power of Attorney................................................74
12.1.8 Blanket Policies.............................................................74
12.1.9 No Separate Insurance........................................................75
12.1.10 Assignment of Unearned Premiums..............................................75
12.2 Indemnity....................................................................................75
12.2.1 Indemnification..............................................................75
12.2.2 Indemnified Parties..........................................................76
12.2.3 Defense of Actions by the Lessee.............................................76
12.2.4 Limitation on Lessor Liability...............................................76
12.2.5 Risk of Loss.................................................................77
ARTICLE 13
FIRE AND CASUALTY.......................................................................................77
13.1 Restoration Following Fire or Other Casualty.................................................77
13.1.1 Following Fire or Casualty...................................................77
13.1.2 Procedures...................................................................78
13.1.3 Disbursement of Insurance Proceeds...........................................79
13.2 Disposition of Insurance Proceeds............................................................83
13.2.1 Proceeds To Be Released to Pay For Work......................................83
13.2.2 Proceeds Not To Be Released..................................................83
13.2.3 Lessee Responsible for Short-Fall............................................84
13.3 Tangible Personal Property...................................................................84
13.4 Restoration of Certain Improvements and the Tangible Personal Property.......................85
13.5 No Abatement of Rent.........................................................................85
13.6 Termination of Certain Rights................................................................85
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13.7 Waiver.......................................................................................85
13.8 Application of Rent Loss and/or Business Interruption Insurance..............................85
13.9 Obligation To Account........................................................................86
ARTICLE 14
CONDEMNATION............................................................................................86
14.1 Parties' Rights and Obligations..............................................................86
14.2 Total Taking.................................................................................86
14.3 Partial or Temporary Taking..................................................................86
14.4 Restoration..................................................................................87
14.5 Award Distribution...........................................................................87
14.6 Control of Proceedings.......................................................................88
ARTICLE 15
PERMITTED CONTESTS......................................................................................88
15.1 Lessee's Right to Contest....................................................................88
15.2 Lessor's Cooperation.........................................................................89
15.3 Lessee's Indemnity...........................................................................89
ARTICLE 16
DEFAULT.................................................................................................89
16.1 Events of Default............................................................................89
16.2 Remedies.....................................................................................94
16.3 Damages......................................................................................96
16.4 Lessee Waivers...............................................................................96
16.5 Application of Funds.........................................................................97
16.6 Intentionally Omitted........................................................................97
16.7 Lessor's Right to Cure.......................................................................97
16.8 No Waiver By Lessor..........................................................................98
16.9 Right of Forbearance.........................................................................98
16.10 Cumulative Remedies..........................................................................99
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER.....................................................99
17.1 Surrender....................................................................................99
17.2 Transfer of Permits and Contracts............................................................99
17.3 No Acceptance of Surrender..................................................................100
17.4 Holding Over................................................................................100
</TABLE>
vii
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<TABLE>
<S> <C>
ARTICLE 18
RIGHT OF FIRST REFUSAL TO PURCHASE THE LEASED PROPERTY.................................................101
18.1 Right of First Refusal to Purchase the Leased Property......................................101
ARTICLE 19
SUBLETTING AND ASSIGNMENT..............................................................................102
19.1 Subletting and Assignment...................................................................102
19.2 Permitted Subleases.........................................................................102
19.3 Attornment..................................................................................102
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR............................................................102
20.1 No Merger of Title..........................................................................102
20.2 Transfers By Lessor.........................................................................102
20.3 Lessor May Grant Liens......................................................................103
20.4 Subordination and Non-Disturbance...........................................................103
ARTICLE 21
LESSOR OBLIGATIONS.....................................................................................104
21.1 Quiet Enjoyment.............................................................................104
21.2 Memorandum of Lease.........................................................................104
21.3 Default by Lessor...........................................................................104
ARTICLE 22
NOTICES................................................................................................105
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY......................................................................106
ARTICLE 24
MISCELLANEOUS PROVISIONS...............................................................................107
24.1 Broker's Fee Indemnification................................................................107
24.2 No Joint Venture or Partnership.............................................................107
24.3 Amendments, Waivers and Modifications.......................................................107
24.4 Captions and Heading........................................................................108
24.5 Time is of the Essence......................................................................108
</TABLE>
viii
<PAGE> 10
<TABLE>
<S> <C> <C>
24.6 Counterparts................................................................................108
24.7 Entire Agreement............................................................................108
24.8 WAIVER OF JURY TRIAL........................................................................108
24.9 Successors and Assigns......................................................................109
24.10 No Third Party Beneficiaries................................................................109
24.11 Governing Law...............................................................................109
24.12 General.....................................................................................109
24.13 Intention of Parties........................................................................110
24.14 Appraisal...................................................................................110
24.14.1 Designation of Appraisers...................................................110
24.14.2 Appraisal Process...........................................................110
24.14.3 Specific Enforcement and Costs..............................................111
EXHIBIT A - LEGAL DESCRIPTION OF THE LAND.......................................................................113
EXHIBIT B - PERMITTED ENCUMBRANCES..............................................................................114
EXHIBIT C - LIST OF SHAREHOLDERS................................................................................115
EXHIBIT D - NATIONAL ACCOUNTS AND LOCAL DISCOUNTS...............................................................116
EXHIBIT E - OPEN COST REPORTS...................................................................................117
EXHIBIT F - RATE LIMITATIONS....................................................................................118
EXHIBIT G - FREE CARE REQUIREMENTS..............................................................................119
EXHIBIT H - CURRENT RATES.......................................................................................120
EXHIBIT I - RENT COVERAGE RATIO CALCULATION.....................................................................121
EXHIBIT J - [INTENTIONALLY OMITTED].............................................................................122
</TABLE>
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<PAGE> 11
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 21st day of
November, 1997, is between MEDITRUST ACQUISITION CORPORATION III ("Lessor"), a
Delaware corporation having its principal office at 197 First Avenue, Needham
Heights, Massachusetts 02194, and ALS LEASING, INC. [NC ONLY: , IN NORTH
CAROLINA D/B/A ALS LEASING (DELAWARE), INC.] ("Lessee"), a Delaware
corporation, having its principal office at 450 N. Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005, Attn: Mr. William F. Lasky.
ARTICLE 1
LEASED PROPERTY; TERM; EXTENSIONS
1.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(A) the real property described in EXHIBIT A attached hereto (the
"Land");
(B) all buildings, structures, Fixtures (as hereinafter defined) and
other improvements of every kind including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines, and
parking areas and roadways appurtenant to such buildings and structures
presently or hereafter situated upon the Land (collectively, the "Leased
Improvements");
(C) all easements, rights and appurtenances of every nature and
description now or hereafter relating to or benefitting any or all of the
Land and the Leased Improvements; and
(D) all equipment, machinery, building fixtures, and other items of
property (whether realty, personalty or mixed), including all components
thereof, now or hereafter located in, on or used in connection with, and
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 built-in oxygen and vacuum systems, all of
which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically
excluding all items included within the category of Tangible Personal
Property (as hereinafter defined) which are not permanently affixed to or
incorporated in the Leased Property (collectively, the "Fixtures").
<PAGE> 12
The Leased Property is leased in its present condition, AS IS,
without representation or warranty of any kind, express or implied, by the
Lessor and subject to: (I) the rights of parties in possession; (II) the
existing state of title including all covenants, conditions, Liens (as
hereinafter defined) and other matters of record (including, without limitation,
the matters set forth in EXHIBIT B); (III) all applicable laws; and (IV) all
matters, whether or not of a similar nature, which would be disclosed by an
inspection of the Leased Property or by an accurate survey thereof.
1.2 TERM. The term of this Lease shall consist of: the "Initial
Term", which shall commence on November __, 1997 (the "Commencement Date") and
end on November __, 2007 (the "Expiration Date"); provided, however, that this
Lease may be sooner terminated as hereinafter provided. In addition, the Lessee
shall have the option(s) to extend the Term (as hereinafter defined) as provided
for in Section 1.3.
1.3 EXTENDED TERMS. Provided that this Lease has not been previously
terminated, and as long as there exists no Lease Default (as hereinafter
defined) at the time of exercise and on the last day of the Initial Term or the
then current Extended Term (as hereinafter defined), as the case may be, the
Lessee is hereby granted the option to extend the Initial Term of this Lease for
three (3) additional periods (collectively, the "Extended Terms") as follows:
three (3) successive five (5) year periods for a maximum Term, if all such
options are exercised, which ends on November __, 2022. The Lessee's extension
options shall be exercised by the Lessee by giving written notice to the Lessor
of the Lessee's exercise of each such extension at least one hundred eighty
(180) days, but not more than three hundred sixty (360) days, prior to the
termination of the Initial Term or the then current Extended Term, as the case
may be. The Lessee shall have no right to rescind any such notice once given.
The Lessee may not exercise its option for more than one Extended Term at a
time. During each effective Extended Term, all of the terms and conditions of
this Lease shall continue in full force and effect, except that the Base Rent
(as hereinafter defined) for each such Extended Term shall be adjusted as set
forth in Section 3.1.1.
Notwithstanding anything to the contrary set forth herein, the
Lessee's rights to exercise the options granted in this Section 1.3 are subject
to the further condition that concurrently with the exercise of any extension
option hereunder, the Lessee shall have exercised its option to extend the terms
of all of the Group One Acquisition Facility Leases (as defined in the Agreement
Regarding Related Lease Transactions) in accordance with the provisions of the
Agreement Regarding Related Lease Transactions and the provisions of Section 1.3
of each of the Group One Acquisition Leases.
2
<PAGE> 13
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 DEFINITIONS. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (I) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (II) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
ACCEPTABLE LICENSED OPERATOR: Any of (A) the Current Manager, (B)
the Lessee, (C) the Guarantor, (D) any Manager of the Facility (pursuant to a
Management Agreement approved by the Lessor) that is wholly-owned by Alternative
Living Services, Inc. and, during the Term, is engaged in no business or venture
other than the ownership and/or operation of any health care facility owned or
financed by any Meditrust Entity, or (E) any Sublessee of the Facility (pursuant
to a Sublease approved by the Lessor) that is wholly-owned or is controlled by
Alternative Living Services, Inc. and, during the Term, is engaged in no
business or venture other than the ownership and/or operation of any health care
facility owned or financed by any Meditrust Entity.
ACCOUNTS: As defined in the UCC.
ACCREDITATION BODY: All Persons having jurisdiction over the
accreditation, certification, evaluation or operation of the Facility. The
Lessor understands that neither the Lessee nor any Sublessee nor the Facility is
currently under the jurisdiction, or is otherwise subject to the rules, of any
Accreditation Body and that, accordingly, the provisions of this Lease relating
in any way to an Accreditation Body are presently inapplicable to this
transaction; however, in the event that at any time during the Term, any of the
Lessee, any Sublessee or the Facility falls under the jurisdiction of, or
otherwise becomes subject to the rules of, any Accreditation Body, then all such
provisions of this Lease and the other Lease Documents relating to an
Accreditation Body shall apply with full force and effect.
[FL ONLY: ADDENDUM TO LEASE: THE ADDENDUM ATTACHED TO THIS LEASE,
DATED OF EVEN DATE HEREWITH BY AND BETWEEN THE LESSOR AND THE LESSEE.]
ADDITIONAL RENT: As defined in Section 3.1.2.
ADDITIONAL RENT COMMENCEMENT DATE: As defined in Section 3.1.2.
ADDITIONAL CHARGES: As defined in Section 3.4.
ADDITIONAL LAND: As defined in Section 9.3.
3
<PAGE> 14
AFFILIATE: With respect to any Person (I) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (II) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more of the outstanding capital stock, shares
or equity interests of such Person, or (III) any officer, director, employee,
general partner or trustee of such Person, or any other Person controlling,
controlled by, or under common control with, such Person (excluding trustees and
Persons serving in a fiduciary or similar capacity who are not otherwise an
Affiliate of such Person). For the purposes of this definition and the
definition of Acceptable Licensed Operator, "control" (including the correlative
meanings of the terms "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 and policies of
such Person, through the ownership of voting securities, partnership interests
or other equity interests.
AFFILIATED PARTY SUBORDINATION AGREEMENT: That certain Affiliated
Party Subordination Agreement of even date herewith by and among the Lessee, the
Guarantor, and various Affiliates of the Lessor, as may be amended from time to
time.
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS: That certain
Agreement Regarding Related Lease Transactions of even date herewith by and
among the Lessee, the Lessor and any Related Party that is a party to any
Related Lease, as may be amended from time to time. The Lessor and the Lessee
anticipate that the Agreement Regarding Related Lease Transactions will be
amended from time to time in order, among other things, to (A) include
Affiliates of each of the Lessor and the Lessee as parties thereto in
connection with future transactions, (B) amend EXHIBITS A and B to the
Environmental Indemnity Agreement amending the list of environmental site
assessment reports and the list of state and local environmental laws,
respectively, in connection with the inclusion of additional facilities, (C)
amend SCHEDULES A and B to the Affiliated Party Subordination Agreement to
include additional parties as the "Manager" and the "Sublessee" thereto in
connection with the inclusion of additional facilities, and (D) include
additional facilities within the scope of such related transactions and
acknowledge and agree that for all purposes under this Lease such amendments
shall be deemed to be included in this definition.
ANNUAL FACILITY UPGRADE EXPENDITURE: The aggregate amount spent on
Upgrade Renovations during any Lease Year.
APPURTENANT AGREEMENTS: Collectively, all instruments, documents and
other agreements that now or hereafter create any utility, access or other
rights or appurtenances benefiting or relating to the Leased Property.
[ARCHITECT'S ASSIGNMENT: THAT CERTAIN ARCHITECT'S CONSENT OF EVEN
DATE HEREWITH, WHEREBY THE ARCHITECT CONSENTS TO THE LESSEE'S (OR ITS
AFFILIATE'S, AS THE CASE MAY BE) COLLATERAL ASSIGNMENT OF THE ARCHITECT'S
CONTRACT.]
4
<PAGE> 15
[ARCHITECT'S CONTRACT: THAT CERTAIN ARCHITECT'S CONTRACT ENTERED
INTO BY AND BETWEEN THE ARCHITECT AND THE LESSEE (OR ITS AFFILIATE, AS THE CASE
MAY BE) FOR ARCHITECTURAL SERVICES RESPECTING THE FACILITY.]
AWARD: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
BANKRUPTCY CODE: Subsection 365(h) of the United States Bankruptcy
Code, 11 U.S.C. ss.365(h), as the same may hereafter be amended and including
any successor provision thereto.
BASE RENT: As defined in Section 3.1.1 and adjusted pursuant to
Section 3.1.1.
BUSINESS DAY: Any day which is not a Saturday or Sunday or a public
holiday under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which the Lessor's depository bank is
located.
CAPITAL ADDITIONS: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property in order to provide a functionally new
facility that is needed or used to provide services not previously offered, and
any expansion, construction, renovation or conversion or in order to (I)
increase the unit capacity of a Facility, (II) change the purpose for which such
units are utilized and/or (III) change the utilization of any material portion
of any of the Leased Improvements. [THE TERM "CAPITAL ADDITIONS" SHALL EXPRESSLY
EXCLUDE THE RENOVATIONS.]
CAPITAL ADDITION COST: The cost of any Capital Addition made by the
Lessee whether paid for by the Lessee or the Lessor. Such cost shall include all
costs and expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, the Lessor.
CASH COLLATERAL: As defined in Section 6.2.1.
CASH FLOW: The Consolidated Net Income (or Consolidated Net Loss),
arising solely from the operation of the Leased Property, before federal and
state income taxes for any period plus (I) the amount of the provision for
depreciation and amortization actually deducted on the books of the applicable
Person for the purposes of computing such Consolidated Net Income (or
Consolidated Net Loss) for the period involved, plus (II) Rent and interest on
all other payments with respect to all Indebtedness and/or other obligations
(including, without limitation, management fees) which are fully subordinated to
the Lease Obligations pursuant to the Affiliated Party Subordination Agreement.
5
<PAGE> 16
CASUALTY: As defined in Section 13.1.1.
CHATTEL PAPER: As defined in the UCC.
CODE: The Internal Revenue Code of 1986, as amended.
COLLATERAL: All of the property in which security interests are
granted to the Lessor and the other Meditrust Entities pursuant to the Lease
Documents and the Related Party Agreements to secure the Lease Obligations,
including, without limitation, the Cash Collateral and the Receivables.
COMMENCEMENT DATE: As defined in Section 1.2.
COMPETITIVE ACTIVITY: As defined in Section 11.5.4.
[COMPLETION DEADLINE: As defined in the Renovation Escrow
Agreement.]
CONDEMNATION: With respect to the Leased Property or any interest
therein or right accruing thereto or use thereof (I) the exercise by a
Condemnor, whether by legal proceedings or otherwise, resulting in a Taking or
(II) a voluntary sale or transfer by the Lessor to any Condemnor, either under
threat of Condemnation or Taking or while legal proceedings for a Taking are
pending.
CONDEMNOR: Any public or quasi-public authority, or private
corporation or Person, having the power of condemnation.
CONSOLIDATED AND CONSOLIDATING: When used with reference to any term
otherwise defined herein, means such term as applied to the consolidated and
consolidating accounts of the relevant Person and its Subsidiaries consolidated
in accordance with GAAP.
CONSOLIDATED FINANCIALS: For any fiscal year or other accounting
period for any Person and its consolidated Subsidiaries, statements of earnings
and retained earnings and of changes in financial position for such period and
for the period from the beginning of the respective fiscal year to the end of
such period and the related balance sheet as at the end of such period, together
with the notes thereto, all in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared in accordance with GAAP.
[CONSTRUCTION ASSIGNMENT: THAT CERTAIN CONTRACTOR'S CONSENT OF EVEN
DATE HEREWITH WHEREBY THE CONTRACTOR CONSENTS TO THE LESSEE'S (OR ITS
AFFILIATE'S, AS THE CASE MAY BE) COLLATERAL ASSIGNMENT OF THE CONSTRUCTION
CONTRACT.]
[CONSTRUCTION CONTRACT: THAT CERTAIN CONSTRUCTION CONTRACT ENTERED
INTO BY AND BETWEEN THE CONTRACTOR AND THE LESSEE (OR ITS AFFILIATE, AS THE CASE
MAY BE) RESPECTING THE CONSTRUCTION OF THE FACILITY.]
6
<PAGE> 17
CONSULTANTS: Collectively, the architects, engineers, inspectors,
surveyors and other consultants that are engaged from time to time by the Lessor
to perform services for the Lessor in connection with this Lease.
CONSUMER PRICE ADJUSTMENT FACTOR: A fraction, the numerator of which
is the Consumer Price Index in effect as of first day of the Lease Year for
which the Annual Facility Upgrade Expenditure increase is being calculated and
the denominator of which is the Consumer Price Index in effect as of the
Commencement Date.
CONSUMER PRICE INDEX: The Consumer Price Index for Urban Wage
Earners and Clerical Workers, All Items-U.S. Cities Average (1982-84=100),
published by the Bureau of Labor Statistics, U.S. Department of Labor; provided,
that, if the compilation of the Consumer Price Index in its present form and
calculated on its present basis is discontinued or transferred to any other
Governmental Authority, then, the index most similar to the Consumer Price Index
published by the Bureau of Labor Statistics shall be used. If there is no such
similar index, a substitute index which is then generally recognized as being
similar to the Consumer Price Index shall be used, with such substitute index to
be reasonably selected by the Lessor and reasonably approved by the Lessee.
CONTRACTS: All agreements (including, without limitation, Provider
Agreements and Resident Agreements [MN ONLY: EXCLUDE "AND RESIDENT
AGREEMENTS"]), contracts, (including without limitation, construction contracts,
subcontracts, and architects' contracts,) contract rights, warranties and
representations, franchises, and records and books of account benefiting,
relating to or affecting the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession, or
operation thereof, or the operation of any programs or services in conjunction
with the Leased Property and all renewals, replacement and substitutions
therefor, now or hereafter issued by or entered into with any Governmental
Authority, Accreditation Body or Third Party Payor or maintained or used by any
member of the Leasing Group or entered into by any member of the Leasing Group
with any third Person. [MN ONLY: NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS LEASE, IN NO EVENT SHALL THE TERM "CONTRACTS" INCLUDE ANY RESIDENT
AGREEMENTS OR ANY LEASES, SUBLEASES OR OTHER AGREEMENTS OR CONTRACTS WHICH
GENERATE ANY INCOME OR PROFITS FROM THE LEASED PROPERTY.]
[CONVERSION DATE: THE EARLIER TO OCCUR OF (I) THE COMPLETION
DEADLINE, (II) THE COMPLETION OF THE RENOVATIONS IN ACCORDANCE WITH THE PLANS
AND SPECIFICATIONS AND THE RENOVATION ESCROW AGREEMENT AND THE ISSUANCE BY THE
APPROPRIATE GOVERNMENTAL AUTHORITIES OF A CERTIFICATE OF OCCUPANCY (OR ITS
EQUIVALENT) WITH RESPECT TO THE FACILITY OR (III) THE DATE THAT THE FIRST
RESIDENT IS ADMITTED TO THE FACILITY.]
CURRENT ASSETS: All assets of any Person which would, in accordance
with GAAP, be classified as current assets of a Person.
CURRENT LIABILITIES: All liabilities of any Person which would, in
accordance with GAAP, be classified as current liabilities of a Person.
7
<PAGE> 18
CURRENT MANAGEMENT AGREEMENT: That certain Management and Operations
Agreement of even date herewith by and between the Lessee and the Current
Manager.
CURRENT MANAGER: Alternative Living Services, Inc.
DATE OF TAKING: The date the Condemnor has the right to possession
of the property being condemned.
DECLARATION: As defined in Article 23.
DEPOSIT PLEDGE AGREEMENT: The pledge and security agreement so
captioned and dated as of even date herewith between the Lessee and the Lessor,
as may be amended from time to time.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section 20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT: The Amended and Restated
Environmental Indemnity Agreement of even date herewith by and among the Lessee,
the Guarantor and the Lessor, as may be amended from time to time.
ENVIRONMENTAL LAWS: As defined in the Environmental Indemnity
Agreement.
ERISA: The Employment Retirement Income Security Act of 1974, as
amended.
[ESCROWED FUNDS: As defined in the Renovation Escrow Agreement.]
EVENT OF DEFAULT: As defined in Section 16.1.
EXCESS GROSS REVENUES: Gross Revenues for a calendar year less the
Gross Revenues for the immediately preceding calendar year.
EXCLUDED FACILITIES: As defined in Section 11.5.4.
EXPIRATION DATE: As defined in Section 1.2.
EXTENDED TERMS: As defined in Section 1.3.
FACILITY: The _______________ unit, _______________ bed, fully
licensed (to the extent licensing is required by the State) [ASSISTED LIVING AND
ALZHEIMER'S DEMENTIA CARE FACILITY] (known for regulatory purposes in the State
as a [PERSONAL CARE HOME]) known as _______________ and located in
_______________,_______________ County,_______________, on the Land (together
with related parking and other amenities).
8
<PAGE> 19
FAILURE TO OPERATE: As defined in Section 16.1.
FAILURE TO PERFORM: As defined in Section 16.1.
FAIR MARKET ADDED VALUE: The Fair Market Value of the Leased
Property (including all Capital Additions) minus the Fair Market Value of the
Leased Property determined as if no
Capital Additions paid for by the Lessee had been constructed.
FAIR MARKET VALUE OF THE CAPITAL ADDITION: The amount by which the
Fair Market Value of the Leased Property upon the completion of a particular
Capital Addition exceeds the Fair Market Value of the Leased Property just prior
to the construction of the particular Capital Addition.
FAIR MARKET VALUE OF THE LEASED PROPERTY: The fair market value of
the Leased Property, including all Capital Additions, and including the Land and
all other portions of the Leased Property, and (A) assuming the same is
unencumbered by this Lease, (B) determined in accordance with the appraisal
procedures set forth in Section 24.14 or in such other manner as shall be
mutually acceptable to the Lessor and the Lessee and (C) not taking into account
any reduction in value resulting from any Lien to which the Leased Property is
subject and which Lien the Lessee or the Lessor is otherwise required to remove
at or prior to closing of the transaction. However, the positive or negative
effect on the value of the Leased Property attributable to the interest rate,
amortization schedule, maturity date, prepayment provisions and other terms and
conditions of any Lien on the Leased Property which is not so required or agreed
to be removed shall be taken into account in determining the Fair Market Value
of the Leased Property. The Fair Market Value of the Leased Property shall be
determined as the overall value based on due consideration of the "income"
approach, the "comparable sales" approach and the "replacement cost" approach.
FAIR MARKET VALUE OF THE MATERIAL STRUCTURAL WORK: The amount by
which the Fair Market Value of the Leased Property upon the completion of any
particular Material Structural Work exceeds the Fair Market Value of the Leased
Property just prior to the construction of the applicable Material Structural
Work.
FEE MORTGAGE: As defined in Section 20.3.
FEE MORTGAGEE: As defined in Section 20.3.
FINANCING PARTY: Any Person who is or may be participating with the
Lessor in any way in connection with the financing of any Capital Addition.
FINANCING STATEMENTS: Uniform Commercial Code financing statements
evidencing the security interests granted to the Lessor in connection with the
Lease Documents.
FISCAL QUARTER: Each of the three (3) month periods commencing on
January 1st, April 1st, July 1st and October 1st.
9
<PAGE> 20
FISCAL YEAR: The twelve (12) month period from January 1st to
December 31st.
FIXTURES: As defined in Section 1.1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
GENERAL INTANGIBLES: As defined in the UCC.
GOVERNMENTAL AUTHORITIES: Collectively, all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures, and
offices of any nature whatsoever of any government, quasi-government unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise and whether now or hereinafter in existence.
GROSS REVENUES: Collectively, all revenues generated by reason of
the operation of the Leased Property (including any Capital Additions), whether
or not directly or indirectly received or to be received by the Lessee,
including, without limitation, all resident revenues received or receivable for
the use of, or otherwise by reason of, all rooms, units and other facilities
provided, meals served, services performed, space or facilities subleased or
goods sold on or from the Leased Property and further including, without
limitation, except as otherwise specifically provided below, any consideration
received under any subletting, licensing, or other arrangements with any Person
relating to the possession or use of the Leased Property and all revenues from
all ancillary services provided at or relating to the Leased Property; provided,
however, that Gross Revenues shall not include non-operating revenues such as
interest income or gain from the sale of assets not sold in the ordinary course
of business; and provided, further, that there shall be excluded or deducted (as
the case may be) from such revenues:
(I) contractual allowances (relating to any period during the Term
of this Lease and thereafter until the Rent hereunder is paid in full) for
billings not paid by or received from the appropriate Governmental Agencies or
Third Party Payors,
(II) allowances according to GAAP for uncollectible accounts,
(III) all proper resident billing credits and adjustments according
to GAAP relating to health care accounting,
(IV) federal, state or local sales, use, gross receipts and excise
taxes and any tax based upon or measured by said Gross Revenues which is added
to or made a part of the amount billed to the resident or other recipient of
such services or goods, whether included in the billing or stated separately,
and
(V) deposits refundable to residents of the Facility.
10
<PAGE> 21
To the extent that the Leased Property is subleased or occupied by
an Affiliate of the Lessee, Gross Revenues calculated for all purposes of this
Lease (including, without limitation, the determination of the Additional Rent
payable under this Lease) shall include the Gross Revenues of such Sublessee
with respect to the premises demised under the applicable Sublease (i.e., the
Gross Revenues generated from the operations conducted on such subleased portion
of the Leased Property) and the rent received or receivable from such Sublessee
pursuant to such Subleases shall be excluded from Gross Revenues for all such
purposes. As to any Sublease between the Lessee and a non- Affiliate of the
Lessee, only the rental actually received by the Lessee from such non-Affiliate
shall be included in Gross Revenues.
GROUP ONE ACQUISITION TRANSACTION DOCUMENTS: As defined in the
Agreement Regarding Related Lease Transactions.
GROUP TWO ACQUISITION TRANSACTION DOCUMENTS: As defined in the
Agreement Regarding Related Lease Transactions.
GROUP THREE ACQUISITION TRANSACTION DOCUMENTS: As defined in the
Agreement Regarding Related Lease Transactions.
GUARANTOR: Alternative Living Services, Inc. and its successors and
assigns.
GUARANTY: The Guaranty of even date herewith executed by Guarantor
in favor of the Lessor, relating to the Lease Obligations, as may be amended
from time to time.
HAZARDOUS SUBSTANCES: As defined in the Environmental Indemnity
Agreement.
IMPOSITIONS: Collectively, all taxes (including, without limitation,
all capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), assessments (including, without limitation, all assessments for
public improvements or benefits, whether or not commenced or completed prior to
the date hereof and whether or not to be completed within the Term), ground
rents, water and sewer rents, water charges or other rents and charges, excises,
tax levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), transfer taxes and recordation taxes imposed as
a result of the conveyance of the Land to the Lessor (and/or the conveyance of
the Leased Property to the Lessee pursuant to the terms of this Lease), this
Lease or any extensions hereof, and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of either or both of the Leased
Property and the Rent (including all interest and penalties thereon due to any
failure in payment by the Lessee), which at any time prior to, during or in
respect of the Term hereof and thereafter until the Leased Property is
surrendered to the Lessor as required by the terms of this Lease, may be
assessed or imposed on or in respect of or be a Lien upon (A) the Lessor or the
Lessor's interest in the Leased Property, (B) the Leased Property or any rent
therefrom or any estate, right, title or interest therein, or (C) any occupancy,
operation, use or possession of, sales from, or activity
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conducted on, or in connection with, the Leased Property or the leasing or use
of the Leased Property. Notwithstanding the foregoing, nothing contained in this
Lease shall be construed to require the Lessee to pay (1) any tax based on net
income (whether denominated as a franchise or capital stock or other tax)
imposed on the Lessor or any other Person, except the Lessee or its successors,
(2) any net revenue tax of the Lessor or any other Person, except the Lessee and
its successors, (3) any tax imposed with respect to the sale, exchange or other
disposition by the Lessor of the Leased Property or the proceeds thereof, (4)
any tax imposed with respect to any Fee Mortgage or any Fee Mortgagee, (5)
except as expressly provided elsewhere in this Lease, any principal or interest
on any Encumbrance on the Leased Property, or (6) any portion of assessments
which are assessed during the Term of this Lease and amortized over a period
which extends beyond the Term of this Lease provided the Lessee (and not the
Lessor) shall be responsible for that portion of the amortized assessment due
and owing during the Term and any and all finance charges and/or penalties which
accrue as a result of amortizing any such assessments, including, without
limitation, any finance charges and/or penalties (other than penalties which
accrue as a result of late payment after the expiration of the Term of this
Lease) which accrue after the expiration of the Term of this Lease; provided,
however, the provisos set forth in clauses (1) and (2) of this sentence shall
not be applicable to the extent that any tax, assessment, tax levy or charge
which the Lessee is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof. In
computing the amount of any franchise tax or capital stock tax which may be or
become an Imposition, the amount payable by the Lessee shall be equitably
apportioned based upon all properties owned by the Lessor that are located
within the particular jurisdiction subject to any such tax.
INDEBTEDNESS: The total of all obligations of a Person, whether
current or long-term, which in accordance with GAAP, would be included as
liabilities upon such Person's balance sheet at the date as of which
Indebtedness is to be determined.
INDEMNIFIED PARTIES: As defined in Section 12.2.2.
INDEX: The rate of interest of actively traded marketable United
States Treasury Securities bearing a fixed rate of interest adjusted for a
constant maturity of ten (10) years as calculated by the Federal Reserve Board.
INITIAL TERM: As defined in Section 1.2.
INSTRUMENTS: As defined in the UCC.
INSURANCE REQUIREMENTS: All terms of any insurance policy required
by this Lease, all requirements of the issuer of any such policy with respect to
the Leased Property and the activities conducted thereon and the requirements of
any insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
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JCAHO: The Joint Commission on Accreditation of Health Care
Organizations.
LAND: As defined in Article 1.
LEASE: As defined in the preamble of this Lease.
LEASE DEFAULT: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace and/or cure periods under
this Lease and/or any of the other Lease Documents.
LEASE DOCUMENTS: Collectively, this Lease, the Guaranty, the
Security Agreement, the Deposit Pledge Agreement, the Pledge Agreement[, THE
RENOVATION ESCROW AGREEMENT], the Agreement Regarding Related Lease
Transactions, [THE CONSTRUCTION ASSIGNMENT, THE ARCHITECT'S ASSIGNMENT,] the
Permits Assignment, the Financing Statements, the Affiliated Party Subordination
Agreement, the Environmental Indemnity Agreement, the other Facility Lease
Agreements referred to in the Agreement Regarding Related Transactions, and any
and all other instruments, documents, certificates or agreements now or
hereafter (I) executed or furnished by any member of the Leasing Group in
connection with the transactions evidenced by this Lease and/or any of the
foregoing documents and/or (II) evidencing or securing any of the Lessee's
obligations relating to the Leased Property[, INCLUDING, WITHOUT LIMITATION, THE
LESSEE'S OBLIGATIONS HEREUNDER AND/OR UNDER THE RENOVATION ESCROW AGREEMENT].
LEASE OBLIGATIONS: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than the Lessor's
obligations) under this Lease and the other Lease Documents.
LEASE YEAR: A twelve-month period ending on December 31 of each
year; provided, that the first Lease Year shall begin on the Commencement Date
and shall end on December 31, 1997.
LEASED IMPROVEMENTS: As defined in Article 1.
LEASED PROPERTY: As defined in Article 1.
LEASING COMMITMENT FEE: ____________________ AND __/100 DOLLARS
($_______________). [MMI: PLEASE PROVIDE.]
LEASING GROUP: Collectively, the Lessee, the Guarantor, any
Sublessee which is an Affiliate of the Lessee or the Guarantor and any Manager
which is an Affiliate of the Lessee or
the Guarantor.
LEGAL REQUIREMENTS: Collectively, all statutes, ordinances, by-laws,
codes, rules, regulations, restrictions, orders, judgments, decrees and
injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision, and other land use and assisted living licensing
statutes, ordinances, by-laws, codes, rules and regulations), whether now or
hereafter
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enacted, promulgated or issued by any Governmental Authority, Accreditation
Body or Third Party Payor affecting any member of the Leasing Group and
relating to the Leased Property or the ownership, construction, development,
maintenance, management, repair, use, occupancy, possession or operation
thereof or the operation of any programs or services in connection with the
Leased Property, including, without limitation, any of the foregoing which may
(I) require repairs, modifications or alterations in or to the Leased Property,
(II) in any way affect (adversely or otherwise) the use and enjoyment of the
Leased Property or (III) require the assessment, monitoring, clean-up,
containment, removal, remediation or other treatment of any Hazardous
Substances on, under or from the Leased Property. Without limiting the
foregoing, the term Legal Requirements includes all Environmental Laws and
shall also include all Permits and Contracts issued or entered into by any
Governmental Authority, any Accreditation Body and/or any Third Party Payor and
all Permitted Encumbrances, but shall exclude any non-binding or non-mandatory
rules or guidelines promulgated by an Accreditation Body or Third Party Payor.
LESSEE: As defined in the preamble of this Lease and its successors
and assigns.
LESSEE'S ELECTION NOTICE: As defined in Section 14.3.
LESSOR: As defined in the preamble of this Lease and its successors
and assigns.
LIEN: With respect to any real or personal property, any mortgage, deed
of trust, easement, restriction, lien, pledge, collateral assignment,
hypothecation, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment or other encumbrance of any kind in
respect of such property, whether or not choate, vested or perfected.
LIMITED PARTIES: As defined in Section 11.5.4; provided, however, in no
event shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate of any member of the Leasing Group.
MANAGED CARE PLANS: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
MANAGEMENT AGREEMENT: Any agreement, whether written or oral, between
the Lessee or any Sublessee and any other Person pursuant to which the Lessee or
such Sublessee provides any payment, fee or other consideration to any other
Person to operate or manage the Facility.
MANAGER: Any Person who has entered into a Management Agreement with
the Lessee or any Sublessee.
MATERIAL STRUCTURAL WORK: [EXCLUDING RENOVATIONS,] any (I) structural
alteration, (II) structural repair or (III) structural renovation to the Leased
Property that would require (A) the design and/or involvement of a structural
engineer and/or architect and/or (B) the issuance of a Permit.
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MEDICAID: The medical assistance program established by Title XIX of
the Social Security Act (42 USC ss.ss.1396 et seq.) and any statute succeeding
thereto.
MEDICARE: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.ss.1395 et
seq.) and any statute succeeding thereto.
MEDITRUST: As defined in Article 23.
MEDITRUST/ALS TRANSACTION DOCUMENTS: As defined in the Agreement
Regarding Related Lease Transactions, including Meditrust/ALS Transaction
Documents which are by implication added to, or deleted from, such definition as
EXHIBITS A, B, C OR D to the Agreement Regarding Related Lease Transactions are
amended or modified from time to time in order to reflect the addition of
facilities or the removal of one or more facilities.
MEDITRUST ENTITIES: Collectively, Meditrust, the Lessor and any other
Affiliate of the Lessor which may now or hereafter be a party to any Related
Party Agreement.
MEDITRUST INVESTMENT: The sum of (I) the Original Meditrust
Investment plus (II) the aggregate amount of all Subsequent Investments.
MONTHLY DEPOSIT DATE: As defined in Section 4.6.1.
NET INCOME (OR NET LOSS): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
OBLIGATIONS: Collectively, the Lease Obligations and the Related
Party Obligations.
OFFER: As defined in Section 18.1.
OFFERED PROPERTY: As defined in Section 18.1.
OFFICER'S CERTIFICATE: A certificate of the Lessee signed on behalf of
the Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of the Lessee, or another officer authorized to so
sign by the Board of Directors or By-Laws of the Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any of the Persons holding the foregoing offices.
ORIGINAL MEDITRUST INVESTMENT: ____________________ AND __/100 DOLLARS
($---------------).
OTHER PERMITTED USES: To the extent the Lessee elects, in its sole
discretion, to engage in same and then only if permitted under Legal
Requirements and
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so long as the same do not detract in any material manner from the Primary
Intended Use, (I) medical or dental offices or clinics, (II) medical or dental
laboratories, (III) day care center, (IV) hospitals, (V) pharmacy, (VI) medical
services and physical therapy, (VII) florists and card shops which do not have
a separate entrance, (VIII) ancillary parking, (IX) beauty salons, and (X)
other similar ancillary uses currently being conducted at the Facility.
OVERDUE RATE: On any date, a rate of interest per annum equal to the
greater of: (I) a variable rate of interest per annum equal to one hundred
twenty percent (120%) of the Prime Rate, or (II) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by the Lessor.
PBGC: Pension Benefit Guaranty Corporation.
PERMITS: Collectively, all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, agreements, contracts, contract rights,
franchises, interim licenses, permits and other authorizations of every nature
whatsoever required by, or issued under, applicable Legal Requirements
benefiting, relating or affecting the Leased Property or the construction,
development, maintenance, management, use or operation thereof, or the operation
of any programs or services in conjunction with the Leased Property and all
renewals, replacements and substitutions therefor, now or hereafter required or
issued by any Governmental Authority, Accreditation Body or Third Party Payor to
any member of the Leasing Group, or maintained or used by any member of the
Leasing Group, or entered into by any member of the Leasing Group with any third
Person.
PERMITS ASSIGNMENT: The Collateral Assignment of Permits, Licenses and
Contracts of even date herewith granted by the Lessee to the Lessor, as may be
amended from time to time.
PERMITTED ENCUMBRANCES: As defined in Section 10.1.17.
PERMITTED PRIOR SECURITY INTERESTS: As defined in Section 6.1.2.
PERSON: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
PLANS AND SPECIFICATIONS: [WITH RESPECT TO THE RENOVATIONS, AS
DEFINED IN THE RENOVATION ESCROW AGREEMENT AND, WITH RESPECT TO WORK REQUIRED
AS A RESULT OF A CASUALTY,] as defined in Section 13.1.2.
PLEDGE AGREEMENT: The Amended and Restated Stock Pledge Agreement of
even date herewith by and among the Guarantor, the Lessee and the Lessor, as may
be amended from time to time.
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PRIMARY INTENDED USE: The use of the Facility as an [ASSISTED LIVING
AND ALZHEIMER'S DEMENTIA CARE] facility (known for regulatory purposes in the
State as a personal care home) with __________ licensed [ASSISTED LIVING UNITS
AND/OR ALZHEIMER'S DEMENTIA CARE] units and __________ beds and such ancillary
uses as are permitted by law and may be necessary in connection therewith or
incidental thereto.
PRIME RATE: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by the Lessor.
PRINCIPAL PLACE OF BUSINESS: As defined in Section 10.1.28.
PROCEEDS: As defined in the UCC.
PROVIDER AGREEMENTS: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of the
Lessee or any Sublessee in connection with the operation of the Facility
relating to any right of payment or other claim arising out of or in connection
with the Lessee's or such Sublessee's participation in any Third Party Payor
Program.
PURCHASER: As defined in Section 11.5.4.
RECEIVABLES: Collectively, all (I) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (II) rights to payment for
goods sold or leased or services rendered by the Lessee or any other party in
connection with the operation of the Facility, whether now in existence or
arising from time to time hereafter and whether or not yet earned by
performance, including, without limitation, obligations evidenced by an account,
note, contract, security agreement, chattel paper, or other evidence of
indebtedness.
REFERENCE BANK: Fleet Bank of Connecticut, N.A.
RELATED LEASES: Collectively, those Facility Leases relating to each of
the facilities listed on EXHIBITS A, B AND C of the Agreement Regarding Related
Lease Transactions, as such exhibits may be amended or modified from time to
time in order to reflect the addition of facilities or the removal of one or
more facilities.
RELATED PARTIES: Collectively, each Person that may now or hereafter
be a party to any Related Party Agreement other than the Meditrust Entities.
RELATED PARTY AGREEMENT: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation, including,
without limitation, the Related Leases and any agreements listed in Schedule 2.6
of the Security Agreement.
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RELATED PARTY DEFAULT: The occurrence of a default or breach of
condition continuing beyond the expiration of any applicable notice and grace
and cure periods, if any, under the terms of any Related Party Agreement.
RELATED PARTY OBLIGATIONS: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, the Lessor or any of the other Meditrust Entities by the Lessee or
any other member of the Leasing Group or any of their respective Affiliates;
whether such indebtedness, covenants, liabilities, obligations, agreements
and/or undertakings are direct or indirect, absolute or contingent, liquidated
or unliquidated, due or to become due, joint, several or joint and several,
primary or secondary, now existing or hereafter arising, including, without
limitation, the obligations set forth under the Meditrust/ALS Transaction
Documents.
[RENOVATION ESCROW AGREEMENT: That certain Renovation Escrow
Agreement of even date herewith by and between the Lessor and the Lessee.]
[RENOVATIONS: As defined in the Renovation Escrow Agreement.]
RENT: Collectively, the Base Rent, the Additional Rent, the
Additional Charges and all other sums payable under this Lease and the other
Lease Documents.
RENT ADJUSTMENT DATE: The first day of each Extended Term.
RENT ADJUSTMENT RATE: Three hundred thirty (330) basis points over
the Index.
RENT COVERAGE RATIO: The ratio of (I) Cash Flow for each applicable
period to (II) the total of all Rent paid or payable during such period or
accrued for such period.
RENT INSURANCE PROCEEDS: As defined in Section 13.8.
RESIDENT AGREEMENTS: Collectively, all Subleases now or hereafter
executed or entered into by or on behalf of any Person allowing such Person to
reside at the Facility.
RETAINAGE: As defined in Section 13.1.3.
RIGHT OF FIRST REFUSAL: As defined in Section 18.1.
SECURITY AGREEMENT: The Security Agreement as of even date herewith
between the Lessee and the Lessor, as may be amended from time to time.
STATE: The state or commonwealth in which the Leased Property is
located.
STATED AMOUNT: An amount equal to three (3) months Base Rent during
the first Lease Year.
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SUBLEASE: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements, rentals of other facilities
of the Leased Property and all other occupancy agreements of every kind and
nature (including all Resident Agreements), whether oral or in writing, now in
existence or subsequently entered into by the Lessee, encumbering or affecting
the Leased Property.
SUBLESSEE: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but excluding any resident of the Facility
under any Resident Agreement.
SUBSEQUENT INVESTMENTS: The aggregate amount of all sums expended
and liabilities incurred by the Lessor in connection with Capital Additions.
SUBSIDIARY OR SUBSIDIARIES: With respect to any Person, any
corporation or other entity of which such Person, directly, or indirectly,
through another entity or otherwise, owns, or has the right to control or direct
the voting of, fifty percent (50%) or more of the outstanding capital stock or
other ownership interest having general voting power (under ordinary
circumstances).
TAKING: A taking or voluntary conveyance during the Term of the
Leased Property, or any interest therein or right accruing thereto, or use
thereof, as the result of, or in settlement of, any Condemnation or other
eminent domain proceeding affecting the Leased Property.
TANGIBLE NET WORTH: An amount determined in accordance with GAAP
equal to the total assets of any Person, excluding the total intangible assets
of such Person, minus the total liabilities of such Person. Total intangible
assets shall be deemed to include, but shall not be limited to, the excess of
cost over book value of acquired businesses accounted for by the purchase
method, formulae, trademarks, trade names, patents, patent rights and deferred
expenses (including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
TANGIBLE PERSONAL PROPERTY: All vehicles, machinery, equipment,
furniture, furnishings, movable walls or partitions, computers or trade
fixtures, goods, inventory, supplies, and other personal property owned or
leased (pursuant to equipment leases) by the Lessee and used in connection with
the operation of the Leased Property.
TERM: Collectively, the Initial Term and each Extended Term which
has become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
THIRD PARTY PAYOR PROGRAMS: Collectively, all third party payor
programs in which the Lessee or any Sublessee presently or in the future may
participate, including without limitation, Medicare, Medicaid, Blue Cross and/or
Blue Shield, Managed Care Plans, other private insurance plans and employee
assistance programs.
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THIRD PARTY PAYORS: Collectively, Medicare, Medicaid, Blue Cross
and/or Blue Shield, private insurers and any other Person which presently or in
the future maintains Third Party Payor Programs.
UCC: The Uniform Commercial Code as in effect from time to time in
the State.
UNAVOIDABLE DELAYS: Delays due to strikes, lockouts, inability to
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto.
UNITED STATES TREASURY SECURITIES: The uninsured treasury securities
issued by the United States Federal Reserve Bank.
UNSUITABLE FOR ITS PRIMARY INTENDED USE: As used anywhere in this
Lease, the term "Unsuitable For Its Primary Intended Use" shall mean that, by
reason of Casualty, or a partial or temporary Taking by Condemnation, as jointly
determined by the Lessor and the Lessee in good faith, the Facility cannot be
operated on a commercially practicable basis for the Primary Intended Use,
taking into account, among other relevant factors, the number of usable units
affected by such Casualty or partial or temporary Taking.
UPGRADE RENOVATIONS: As defined in Section 8.1.4.
WORK: As defined in Section 13.1.1.
WORK CERTIFICATES: As defined in Section 13.1.3.
2.2 RULES OF CONSTRUCTION. The following rules of construction shall
apply to the Lease and each of the other Lease Documents: (A) references to
"herein", "hereof" and "hereunder" shall be deemed to refer to this Lease or the
other applicable Lease Document, and shall not be limited to the particular text
or section or subsection in which such words appear; (B) the use of any gender
shall include all genders and the singular number shall include the plural and
vice versa as the context may require; (C) references to the Lessor's attorneys
shall be deemed to include, without limitation, special counsel and local
counsel for the Lessor; (D) reference to attorneys' fees and expenses shall be
deemed to include only actual attorneys' fees reasonably incurred and only
actual costs reasonably incurred for administrative, paralegal and other support
staff; (E) references to Leased Property shall be deemed to include references
to all of the Leased Property and references to any portion thereof; (F)
references to the Lease Obligations shall be deemed to include references to all
of the Lease Obligations and references to any portion thereof; (G) references
to the Obligations shall be deemed to include references to all of the
Obligations and references to any portion thereof; (H) the term "including",
when following any general statement, will not be construed to limit such
statement to the specific items or matters as provided immediately following the
term "including"
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(whether or not non- limiting language such as "without limitation" or "but not
limited to" or words of similar import are also used), but rather will be deemed
to refer to all of the items or matters that could reasonably fall within the
broadest scope of the general statement; (I) any requirement that financial
statements be Consolidated in form shall apply only to such financial statements
as relate to a period during any portion of which the relevant Person has one or
more Subsidiaries; (J) all accounting terms not specifically defined in the
Lease Documents shall be construed in accordance with GAAP; and (K) all exhibits
annexed to any of the Lease Documents as referenced therein shall be deemed
incorporated in such Lease Document by such annexation and/or reference.
ARTICLE 3
RENT
3.1 RENT FOR LAND, LEASED IMPROVEMENTS, RELATED RIGHTS AND FIXTURES.
The Lessee will pay to the Lessor, in lawful money of the United States of
America, at the Lessor's address set forth herein or at such other place or to
such other Person as the Lessor from time to time may designate in writing not
less than five (5) Business Days in advance, rent for the Leased Property, as
follows.
3.1.1 BASE RENT: The Lessee shall pay to the Lessor, commencing
on __________ __, 1997, a base rent (the "Base Rent") equal to (I)
____________________ AND __/100 DOLLARS ($_______________) per annum,
payable in advance in equal, consecutive monthly installments, provided
that from the date hereof through November 30, 1997 the Lessee shall
pay to the Lessor a prorated portion of the Base Rent; and provided
further that on each Rent Adjustment Date, the Base Rent shall be
adjusted to equal the greater of (X) the then current Base Rent or (Y)
an amount equal to the Meditrust Investment multiplied by the Rent
Adjustment Rate then in effect on such Rent Adjustment Date.
3.1.2 ADDITIONAL RENT. In addition to the Base Rent, the Lessee
shall pay to the Lessor additional rent (the "Additional Rent") which
shall equal, in each calendar year during the Term, the sum of (a) the
Additional Rent payable with respect to the immediately preceding
calendar year plus (b) twelve percent (12%) of Excess Gross Revenues
for the then current calendar year. Additional Rent shall accrue
commencing on December 1, 1998, and shall be payable during the Term,
quarterly in arrears, commencing on April 20, 1999 ("Additional Rent
Commencement Date") and there shall be an annual reconciliation as
provided in Section 3.2 below. Notwithstanding the foregoing, in no
event shall any increase to the Additional Rent for any calendar year
exceed two and one-half percent (2.5%) of the total of Base Rent and
Additional Rent payable with respect to the immediately preceding
calendar year.
Additional Rent payable hereunder for any fractional calendar year
shall be prorated so that such Additional Rent shall equal the product
of (x) the Additional Rent payable with respect
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to the immediately preceding calendar year plus an amount equal to twelve
percent (12%) of the annualized Excess Gross Revenues for the applicable
fractional calendar year multiplied by (y) a fraction (the "Proration
Factor"), the numerator of which is the number of days in the applicable
fractional calendar year and the denominator of which is 365; provided,
however, that, in no event shall the Additional Rent payable during (a)
the calendar year in which the Additional Rent Commencement Date occurs
exceed the product of two and one-half percent (2.5%) of the total of Base
Rent payable with respect to the immediately preceding calendar year
multiplied by the applicable Proration Factor and (b) any other fractional
calendar year increase by more than the product of two and one-half
percent (2.5%) of the total of Base Rent and Additional Rent payable with
respect to the immediately preceding calendar year multiplied by the
applicable Proration Factor.
3.2 CALCULATION AND PAYMENT OF ADDITIONAL RENT; ANNUAL RECONCILIATION.
3.2.1 ESTIMATES AND PAYMENTS. Commencing on January 1, 1998,
Additional Rent to be paid during each calendar year during the Term shall
be paid quarterly in arrears (in equal installments on the 20th day of
April, July, October and January) based on the actual increase in Gross
Revenues over the comparable fiscal quarter for the immediately preceding
calendar year, to be adjusted at the end of each such year based on the
actual Excess Gross Revenues calculated for that calendar year. Additional
Rent due for any portion of any calendar year shall be prorated
accordingly.
3.2.2 ANNUAL STATEMENT. In addition, on or before the first day of
April of each year following any calendar year for which Additional Rent
is payable hereunder, the Lessee shall deliver to the Lessor an Officer's
Certificate, reasonably acceptable to the Lessor and certified by the
chief financial officer of the Lessee, setting forth the Gross Revenues
for the immediately preceding calendar year.
3.2.3 DEFICITS. If the Additional Rent, as finally determined for any
calendar year (or portion thereof), exceeds the sum of the quarterly
payments of Additional Rent previously paid by the Lessee with respect to
said calendar year, within thirty (30) days after such determination is
required to be made hereunder, the Lessee shall pay such deficit to the
Lessor and, if the deficit exceeds five percent (5%) of the Additional
Rent which was previously paid to the Lessor with respect to said calendar
year, then the Lessee shall also pay the Lessor interest on such deficit
at the Overdue Rate from the applicable quarterly date that such payment
should have originally been made by the Lessee to the date that the Lessor
receives such payment.
3.2.4 OVERPAYMENTS. If the Additional Rent, as finally determined for
any calendar year (or portion thereof), is less than the amount previously
paid with respect thereto by the Lessee, and if no Lease Default exists,
the Lessee shall notify the Lessor either (A) to pay to the Lessee an
amount equal to such difference or (B) to grant the Lessee a credit
against Additional Rent next coming due in the amount of such difference.
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3.2.5 FINAL DETERMINATION. The obligation to pay Additional Rent
shall survive the expiration or earlier termination of the Term (as to
Additional Rent payments that are due and payable with respect to periods
prior to the expiration or earlier termination of the Term and during any
periods that the Lessee remains in possession of the Leased Property), and
a final reconciliation, taking into account, among other relevant
adjustments, any contractual allowances which related to Gross Revenues
that accrued prior to the date of such expiration or earlier termination,
but which have been determined to be not payable. The Lessee's good faith
best estimate of the amount of any unresolved contractual allowances shall
be made not later than two (2) years after said expiration or termination
date. Within sixty (60) days after the expiration or earlier termination
of the Term, the Lessee shall advise the Lessor of the Lessee's best
estimate of the approximate amount of such adjustments, which estimate
shall not be binding on the Lessee or have any legal effect whatsoever.
3.2.6 BEST EFFORTS TO MAXIMIZE. The Lessee further covenants that
the operation of the Facility shall be conducted in a manner consistent
with the prevailing standards and practices recognized in the assisted
living industry as those customarily utilized by first class business
operations. Subject to any applicable Legal Requirements, the members of
the Leasing Group shall use their best efforts to maximize the Facility's
Gross Revenues.
3.3 CONFIRMATION AND AUDIT OF ADDITIONAL RENT.
3.3.1 MAINTAIN ACCOUNTING SYSTEMS. The Lessee shall utilize, or
cause to be utilized, an accounting system for the Leased Property in
accordance with usual and customary practices in the assisted living
industry and in accordance with GAAP which will accurately record all
Gross Revenues. The Lessee shall retain, for at least three (3) years
after the expiration of each calendar year (and in any event until the
final reconciliation described in Section 3.2 above has been made),
adequate records conforming to such accounting system showing all Gross
Revenues for such calendar year.
3.3.2 AUDIT BY LESSOR. The Lessor, at its own expense except as
provided hereinbelow, shall have the right from time to time to have its
accountants or representatives audit the information set forth in the
Officer's Certificate referred to in Section 3.2 and in connection with
such audits, to examine the Lessee's records with respect thereto
(including supporting data, income tax and sales tax returns), subject to
any prohibitions or limitations on disclosure of any such data under
applicable law or regulations, including without limitation, any duly
enacted "Patients' Bill of Rights" or similar legislation, including such
limitations as may be necessary to preserve the confidentiality of any
Facility-patient relationship and any physician-patient privilege.
3.3.3 DEFICIENCIES AND OVERPAYMENTS. If any such audit discloses a
deficiency in the reporting of Gross Revenues and either the Lessee
agrees with the result of such audit or the matter is compromised, the
Lessee shall forthwith pay to the Lessor the amount of the deficiency in
Additional Rent which would have been payable by it had such deficiency in
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reporting Gross Revenues not occurred, as finally agreed or determined,
together with interest on the Additional Rent which should have been
payable by it, calculated at the Overdue Rate, from the date when said
payment should have been made by the Lessee to the date that the Lessor
receives such payment. Notwithstanding anything to the contrary herein,
with respect to any audit that is commenced more than two (2) years after
the date Gross Revenues for any calendar year are reported by the Lessee
to the Lessor, the deficiency, if any, with respect to Additional Rent
shall bear interest as permitted herein only from the date such
determination of deficiency is made, unless such deficiency is the result
of gross negligence or willful misconduct on the part of the Lessee (or
any Affiliate thereof). If any audit conducted for the Lessor pursuant to
the provisions hereof discloses that (A) the Gross Revenues actually
received by the Lessee for any calendar year exceed those reported by the
Lessee by more than five percent (5%), the Lessee shall pay the reasonable
cost of such audit and examination or (B) the Lessee has overpaid
Additional Rent, and if no Lease Default exists, the Lessor shall so
notify the Lessee and the Lessee shall direct the Lessor either (I) to
refund the overpayment to the Lessee or (II) grant a credit against
Additional Rent next coming due in the amount of such difference.
3.3.4 SURVIVAL. The obligations of the Lessor and the Lessee
contained in this Section shall survive the expiration or earlier
termination of this Lease.
3.4 ADDITIONAL CHARGES. Subject to the rights to contest as set forth in
Article 15, in addition to the Base Rent and the Additional Rent, (A) the Lessee
will also pay and discharge as and when due and payable all Impositions, all
amounts, liabilities and obligations under the Appurtenant Agreements due from
or payable by the owner of the Leased Property, all amounts, liabilities and
obligations under the Permitted Encumbrances due from or payable by the owner of
the Leased Property and all other amounts, liabilities and obligations which the
Lessee assumes or agrees to pay under this Lease, and (B) in the event of any
failure on the part of the Lessee to pay any of those items referred to in
clause (a) above, the Lessee will also promptly pay and discharge every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items (the items referred to in clauses (a) and (b) above being referred to
herein collectively as the "Additional Charges"), and the Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided in this
Lease, by statute or otherwise, in the case of non-payment of the Additional
Charges, as well as the Base Rent and the Additional Rent. To the extent that
the Lessee pays any Additional Charges to the Lessor pursuant to any requirement
of this Lease, the Lessee shall be relieved of its obligation to pay such
Additional Charges to any other Person to which such Additional Charges would
otherwise be due, and the Lessor shall be obligated to pay such Additional
Charges to any Person to whom such Additional Charges are due promptly and prior
to any additional costs or expenses being incurred.
3.5 LEASING COMMITMENT FEE: The Lessee shall pay to the Lessor the Leasing
Commitment Fee simultaneously with the execution of this Lease; provided,
however, that, at the Lessor's option, the Leasing Commitment Fee shall be held
in an escrow account established with a Person designated by the Lessor pursuant
to an escrow arrangement satisfactory to the Lessor, with interest thereon
benefiting the Lessor. If the Lessor exercises its option to require that the
Leasing Commitment Fee be held in such an escrow account (A) the Leasing
Commitment Fee shall be
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disbursed from said escrow account only upon the joint instructions of the
Lessee and the Lessor (which instructions from the Lessee shall be immediately
given upon the request of the Lessor) and in no event shall the Leasing
Commitment Fee be disbursed therefrom, in whole or in part, unless and until so
requested by the Lessor and (B) the Lessor shall bear the risk of loss of or
misappropriation of the Leasing Commitment Fee by such escrow agent.
3.6 NET LEASE. The Rent shall be paid absolutely net to the Lessor, so
that this Lease shall yield to the Lessor throughout the Term the full amount of
the installments of Base Rent, the Additional Rent and the payments of
Additional Charges.
3.7 NO LESSEE TERMINATION OR OFFSET.
3.7.1 NO TERMINATION. Except as may be otherwise specifically
and expressly provided in Article 13 or Article 14 of this Lease, the
Lessee, to the extent not prohibited by applicable law, shall remain
bound by this Lease in accordance with its terms and shall neither take
any action without the consent of the Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent,
nor shall the respective obligations of the Lessor and the Lessee be
otherwise affected by reason of (A) any Casualty or any Taking of the
Leased Property, (B) the lawful or unlawful prohibition of, or
restriction upon, the Lessee's use of the Leased Property or the
interference with such use by any Person (other than the Lessor, except
to the extent permitted hereunder) or by reason of eviction by
paramount title; (C) any claim that the Lessee has or might have
against the Lessor, (D) any default or breach of any warranty by the
Lessor or any of the other Meditrust Entities under this Lease, any
other Lease Document or any Related Party Agreement, (E) any
bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting the
Lessor or any assignee or transferee of the Lessor or (F) any other
cause whether similar or dissimilar to any of the foregoing, other than
a discharge of the Lessee from any of the Lease Obligations as a matter
of law.
3.7.2 WAIVER. The Lessee, to the fullest extent not prohibited
by applicable law, hereby specifically waives all rights, arising from
any occurrence whatsoever, which may now or hereafter be conferred upon
it by law to (A) modify, surrender or terminate this Lease or quit or
surrender the Leased Property or (B) entitle the Lessee to any
abatement, reduction, suspension or deferment of the Rent or other sums
payable by the Lessee hereunder, except as otherwise specifically and
expressly provided in this Lease.
3.7.3 INDEPENDENT COVENANTS. The obligations of the Lessor and
the Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by the Lessee
hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated pursuant to the express
provisions of this Lease or (except in those instances where the
obligation to pay expressly survives the
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termination of this Lease) by termination of this Lease other than by
reason of an Event of Default.
3.8 ABATEMENT OF RENT LIMITED. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3 or in the
event of a Casualty described in Section 13.1.1, the Base Rent shall be abated
as follows: (A) in the case of such a partial Taking, the Meditrust Investment
shall be reduced for the purposes of calculating Base Rent pursuant to Section
3.1 by subtracting therefrom, as applicable, the net amount of the Award
received by the Lessor; (B) in the case of such a temporary Taking, by reducing
the Base Rent for the period of such a temporary Taking, by the net amount of
the Award received by the Lessor; and (C) in the event of a Casualty which is
not the result of the gross negligence or willful misconduct of any member of
the Leasing Group and which the Lessee is proceeding to restore in accordance
with the provisions of this Lease, by reducing the Base Rent, during the period
the Lessee is unable to use the Leased Property for the Primary Intended Use by
the net amount of rent loss and/or business interruption insurance received by
the Lessor. [MN ONLY: TENANT HEREBY WAIVES THE PROVISIONS OF MINNESOTA SECTION
504.05.]
For the purposes of this Section 3.8, the "net amount of the Award
received by the Lessor" shall mean the Award paid to the Lessor on account of
such Taking, minus all costs and expenses incurred by the Lessor in connection
therewith, and minus any amounts paid to or for the account of the Lessee to
reimburse for the costs and expenses of reconstructing the Facility following
such Taking in order to create a viable and functional Facility under all of the
circumstances.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 PAYMENT OF IMPOSITIONS.
4.1.1 LESSEE TO PAY. Subject to the provisions of Section 4.1.2
and Article 15, the Lessee will pay or cause to be paid all Impositions
before any fine, penalty, interest or cost may be added for
non-payment, such payments to be made directly to the taxing authority
where feasible, and the Lessee, upon request by the Lessor, will
promptly furnish the Lessor copies of official receipts or other
satisfactory proof evidencing payment not later than the last day on
which the same may be paid without penalty or interest. The Lessor
shall promptly forward to the Lessee for payment any and all bills or
invoices it receives with respect to Impositions.
4.1.2 INSTALLMENT ELECTIONS. If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the unpaid balance of such Imposition),
the Lessee may exercise the option to pay the same (and any
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accrued interest on the unpaid balance of such Imposition) in
installments and, in such event, shall pay such installments during the
Term hereof (subject to the Lessee's right to contest pursuant to the
provisions of Section 4.1.5 below) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be
added thereto.
4.1.3 RETURNS AND REPORTS. The Lessor, at its expense, shall,
to the extent permitted by applicable law, prepare and file all tax
returns and reports as may be required by Governmental Authorities in
respect of the Lessor's net income, gross receipts, franchise taxes and
taxes on its capital stock, and the Lessee, at its expense, shall, to
the extent permitted by applicable laws and regulations, prepare and
file all other tax returns and reports in respect of any Imposition as
may be required by Governmental Authorities. The Lessor and the Lessee
shall, upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and
reports. In the event that any Governmental Authority classifies any
property covered by this Lease as personal property, the Lessee shall
file all personal property tax returns in such jurisdictions where it
may legally so file. The Lessor, to the extent it possesses the same,
and the Lessee, to the extent it possesses the same, will provide the
other party, upon request, with cost and depreciation records necessary
for filing returns for any portion of Leased Property so classified as
personal property. Where the Lessor is legally required to file
personal property tax returns, if the Lessee notifies the Lessor of the
obligation to do so in each year at least thirty (30) days prior to the
date any protest must be filed, the Lessee will be provided with copies
of assessment notices so as to enable the Lessee to file a protest.
4.1.4 REFUNDS. If no Lease Default shall have occurred and be
continuing, any refund due from any taxing authority in respect of any
Imposition paid by the Lessee shall be paid over to or retained by the
Lessee. If a Lease Default shall have occurred and be continuing, at
the Lessor's option, such funds shall be paid over to the Lessor and/or
retained by the Lessor and applied toward the Obligations in accordance
with the Lease Documents and/or the Related Party Agreements.
4.1.5 PROTEST. Upon giving notice to the Lessor, at the
Lessee's option and sole cost and expense, and subject to compliance
with the provisions of Article 15, the Lessee may contest, protest,
appeal, or institute such other proceedings as the Lessee may deem
appropriate to effect a reduction of any Imposition and the Lessor, at
the Lessee's cost and expense as aforesaid, shall fully cooperate in a
reasonable manner with the Lessee in connection with such protest,
appeal or other action.
4.2 NOTICE OF IMPOSITIONS. The Lessor shall give prompt notice to the
Lessee of all Impositions payable by the Lessee hereunder of which the Lessor at
any time has knowledge, but the Lessor's failure to give any such notice shall
in no way diminish the Lessee's obligations hereunder to pay such Impositions.
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4.3 ADJUSTMENT OF IMPOSITIONS. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between the Lessor and the Lessee, whether or not
such Impositions are imposed before or after such expiration or termination, and
the Lessee's obligation to pay and the Lessor's obligation to refund their
respective prorated share thereof shall survive such expiration or termination.
4.4 UTILITY CHARGES. The Lessee will pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone and other utilities
used in the Leased Property during the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease. If the
Lessee is required to pay a deposit to any of the utility providers serving the
Leased Property, any and all such deposits shall become the property of the
Lessee at the expiration of the Term (as opposed to an earlier termination of
this Lease) if and when the Lessee surrenders the Leased Property in the manner
required by this Lease.
4.5 INSURANCE PREMIUMS. The Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until the Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and the Lessee, at the Lessor's request, shall furnish the
Lessor with evidence satisfactory to the Lessor that all such premiums have been
so paid prior to the commencement of the Term and thereafter at least thirty
(30) days prior to the due date of each premium which thereafter becomes due.
Notwithstanding the foregoing, the Lessee may pay such insurance premiums to the
insurer in monthly installments so long as the applicable insurer is
contractually obligated to give the Lessor not less than a sixty (60) days
notice of non-payment and so long as no Lease Default has occurred and is
continuing. In the event of the failure of the Lessee either to comply with the
insurance requirements in Article 12,
or to pay the premiums for such insurance, or to deliver such policies or
certificates thereof to the Lessor at the times required hereunder, the Lessor
shall be entitled, but shall have no obligation, to effect such insurance and
pay the premiums therefor, which premiums shall be a demand obligation of the
Lessee to the Lessor.
4.6 DEPOSITS.
4.6.1 LESSOR'S OPTION. At the option of the Lessor, which may be
exercised at any time after an Event of Default occurs, the Lessee
shall, upon written request of the Lessor, on the first day on the
calendar month immediately following such request, and on the first day
of each calendar month thereafter during the Term (each of which dates
is referred to as a "Monthly Deposit Date"), pay to and deposit with
the Lessor a sum equal to one-twelfth (1/12th) of the Impositions to be
levied, charged, filed, assessed or imposed upon or against the Leased
Property within one (1) year after said Monthly Deposit Date and a sum
equal to one-twelfth (1/12th) of the premiums for the insurance
policies required pursuant to Article 12 which are payable within one
(1) year after said Monthly Deposit Date. If the amount of the
Impositions to be levied, charged, assessed or imposed or insurance
premiums to be paid within the ensuing one (1) year period shall not be
fixed upon any Monthly Deposit Date, such amount for the purpose of
computing the deposit to be made by the Lessee hereunder
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shall be reasonably estimated by the Lessor with an appropriate
adjustment to be promptly made between the Lessor and the Lessee as
soon as such amount becomes determinable. In addition, the Lessor may,
at its option, from time to time require that any particular deposit be
greater than one-twelfth (1/12th) of the estimated amount payable
within one (1) year after said Monthly Deposit Date, if such additional
deposit is reasonably required in order to provide to the Lessor a
sufficient fund from which to make payment of all Impositions on or
before the next due date of any installment thereof, or to make payment
of any required insurance premiums not later than the due date thereof.
4.6.2 USE OF DEPOSITS. The sums deposited by the Lessee under
this Section 4.6 shall be held by the Lessor and shall be applied by
the Lessor in payment of the Impositions or insurance premiums, as the
case may be, on or before the due date thereafter and prior to any
penalty, interest, late fee or other similar charge being imposed to
the extent of available funds deposited by the Lessee under this
Section 4.6. Any such deposits may be commingled with other assets of
the Lessor, and shall be deposited by the Lessor at such bank as the
Lessor may, from time to time select, and the Lessor shall not be
liable to the Lessee or any other Person (A) based on the Lessor's (or
such bank's) choice of investment vehicles, (B) for any consequent loss
of principal or interest or (C) for any unavailability of funds based
on such choice of investment; provided, however, that notwithstanding
the foregoing, the Lessor shall only invest any such deposit in any of
the investment vehicles described on EXHIBIT A of the Deposit Pledge
Agreement. Furthermore, the Lessor shall bear no responsibility for the
financial condition of, nor any act or omission by, the Lessor's
depository bank. The income from such investment or interest on such
deposit shall be paid to the Lessee on a semi-annual basis as long as
no Lease Default has occurred and is then continuing, and as long as no
fact or circumstance exists which, with the giving of notice and/or the
passage of time, would constitute a Lease Default. The Lessee shall
give not less than ten (10) days prior written notice to the Lessor in
each instance when an Imposition or insurance premium is due,
specifying the Imposition or premium to be paid and the amount thereof,
the place of payment, and the last day on which the same may be paid in
order to comply with the requirements of this Lease. If the Lessor, in
violation of its obligations under this Lease, does not pay any
Imposition or insurance premium when due, for which a sufficient
deposit exists, the Lessee shall not be in default hereunder by virtue
of the failure of the Lessor to pay such Imposition or such insurance
premium and the Lessor shall pay any interest or fine assessed by
virtue of the Lessor's failure to pay such Imposition or insurance
premium.
4.6.3 DEFICITS. If for any reason any deposit held by the
Lessor under this Section 4.6 shall not be sufficient to pay an
Imposition or insurance premium within the time specified therefor in
this Lease, then, within ten (10) days after demand by the Lessor, the
Lessee shall deposit an additional amount with the Lessor, increasing
the deposit held by the Lessor so that the Lessor holds sufficient
funds to pay such Imposition or premium in full (or in installments as
otherwise provided for herein), together with any penalty or interest
due thereon. The Lessor may change its estimate of any Imposition or
insurance premium for any
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period on the basis of a change in an assessment or tax rate or on the
basis of a prior miscalculation; in which event, within ten (10) days
after demand by the Lessor, the Lessee shall deposit with the Lessor
the amount in excess of the sums previously deposited with the Lessor
for the applicable period which would theretofore have been payable
under the revised estimate.
4.6.4 OTHER PROPERTIES. If any Imposition shall be levied,
charged, filed, assessed, or imposed upon or against the Leased
Property, and if such Imposition shall also be a levy, charge,
assessment, or imposition upon or for any other real or personal
property that does not constitute a part of the Leased Property, then
the computation of the amounts to be deposited under this Section 4.6
shall be based upon the entire amount of such Imposition and the Lessee
shall not have the right to apportion any deposit with respect to such
Imposition. However, the Lessor will reasonably cooperate with the
Lessee (but at no cost or expense to the Lessor) to change the manner
of assessment for such Imposition so that such Imposition will
thereafter relate only to the Leased Property.
4.6.5 TRANSFERS. In connection with any assignment of the
Lessor's interest under this Lease, the original Lessor named herein
and each successor in interest shall be obligated to transfer all
amounts deposited pursuant to the provisions of this Section 4.6 then
in its possession to such assignee (as the subsequent holder of the
Lessor's interest in this Lease), who shall be obligated to assume the
Lessor's obligations with respect to all such deposited amounts, and
upon such transfer, the original Lessor named herein or the applicable
successor in interest transferring the deposits shall thereupon be
completely released from all liability with respect to such deposits so
transferred and the Lessee shall look solely to said assignee, as the
subsequent holder of the Lessor's interest under this Lease, in
reference thereto. The original Lessor named herein or the applicable
successor in interest transferring the deposits shall provide written
notice to the Lessee of such transfer. The original Lessor named herein
or the applicable successor in interest shall not be released from
liability with respect to the deposits so transferred unless the next
successor in interest assumes liability for such deposits.
4.6.6 SECURITY. All amounts deposited with the Lessor pursuant
to the provisions of this Section 4.6 shall be held by the Lessor as
additional security for the payment and performance of the Obligations
and, upon the occurrence of any Lease Default, the Lessor may, in its
sole and absolute discretion, apply said amounts towards payment or
performance of such Obligations.
4.6.7 RETURN. Upon the expiration or earlier termination of
this Lease, provided, that, all of the Lease Obligations have been
fully paid and performed, any sums then held by the Lessor under this
Section 4.6 shall be refunded to the Lessee; unless a Related Party
Default has occurred, in which event such sums may be applied towards
the Obligations in accordance with the Related Party Agreements.
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4.6.8 RECEIPTS. The Lessee shall immediately deliver to the
Lessor copies of all notices of non-payment of any insurance premiums
and/or Impositions and, upon the Lessor's request, shall deliver to the
Lessor copies of all other notices, demands, claims, bills and receipts
in relation to the Impositions and insurance premiums immediately upon
receipt thereof by the Lessee.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY
5.1 OWNERSHIP OF THE LEASED PROPERTY. The Lessee acknowledges that the
Leased Property is the property of the Lessor and that the Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease.
5.2 PERSONAL PROPERTY; REMOVAL AND REPLACEMENT OF PERSONAL
PROPERTY.
5.2.1 LESSEE TO EQUIP FACILITY. The Lessee, at its sole cost
and expense, shall install, affix or assemble or place on the Leased
Property, sufficient items of Tangible Personal Property to enable the
Leased Property to be operated in accordance with the requirements of
this Lease for the Primary Intended Use and the Other Permitted Uses,
and such Tangible Personal Property and replacements thereof, shall be
at all times the property of the Lessee.
5.2.2 SUFFICIENT PERSONAL PROPERTY. The Lessee shall maintain,
during the entire Term, the Tangible Personal Property in good order
and repair and shall provide at its expense all necessary replacements
thereof, as may be necessary in order to operate the Leased Property in
compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the
industry for the Primary Intended Use and the Other Permitted Uses,
unless the failure to comply with the same will not have any adverse
effect on either the Leased Property or the Lessee. In addition, the
Lessee shall (A) furnish all necessary replacements of obsolete items
of the Tangible Personal Property during the Term, unless the Lessee
provides the Lessor with an explanation (reasonably acceptable to the
Lessor) as to why such Tangible Personal Property is no longer required
in connection with the operation of the Leased Property and (B) if
requested by the Lessor, deliver to the Lessor, a detailed inventory of
all such Tangible Personal Property.
5.2.3 REMOVAL AND REPLACEMENT; LESSOR'S OPTION TO PURCHASE. The
Lessee shall not remove from the Leased Property any one or more items
of Tangible Personal Property (whether now owned or hereafter
acquired), the fair market value of which exceeds
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TWENTY-FIVE THOUSAND AND NO/100 DOLLARS ($25,000.00), individually or ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) collectively, except if such
Tangible Personal Property is simultaneously suitably replaced or the Lessee
provides the Lessor with an explanation (reasonably satisfactory to the Lessor)
as to why such Tangible Personal Property is no longer required in connection
with the operation of the Leased Property. At its sole cost and expense, the
Lessee shall restore the Leased Property to the condition required by Article
8, including repair of all damage to the Leased Property caused by the removal
of the Tangible Personal Property, whether effected by the Lessee or the
Lessor. Upon the expiration or earlier termination of this Lease, the Lessor
shall have the option, which may be exercised prior to or within the relevant
Decision Period (defined below), of (A) acquiring the Tangible Personal
Property (pursuant to a bill of sale and assignments of any equipment leases,
all in such forms as are reasonably satisfactory to the Lessor) upon payment of
its fair market value or (B) requiring the Lessee to remove the Tangible
Personal Property. For purposes of the preceding sentence, the "Decision
Period" shall mean (1) the last day of the Term with respect to the expiration
thereof in accordance with the provisions of this Lease, (2) the fifth (5th)
Business Day after the date of any earlier termination of this Lease based on
either Casualty or Condemnation or (3) the thirtieth (30th) day after the date
of any earlier termination of this Lease based on any Event of Default. If the
Lessor exercises its option to purchase the Tangible Personal Property, the
price to be paid by the Lessor shall be (I) reduced by the amount of all
payments due on any equipment leases or any other Permitted Prior Security
Interests assumed by the Lessor and (II) applied to the Lease Obligations
before any payment to the Lessee. If the Lessor requires the removal of the
Tangible Personal Property, then all of the Tangible Personal Property that is
not removed by the Lessee within ten (10) days following such request shall be
considered abandoned by the Lessee and may be appropriated, sold, destroyed or
otherwise disposed of by the Lessor without first giving notice thereof to the
Lessee, without any payment to the Lessee and without any obligation to account
therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 SECURITY FOR THE LESSEE'S OBLIGATIONS; PERMITTED PRIOR SECURITY
INTERESTS.
6.1.1 SECURITY. In order to secure the payment and performance of
all of the Obligations, the Lessee agrees to provide or cause there to be
provided, among other things, the following security:
(a) a first lien and exclusive security interest in the
Tangible Personal Property, Receivables and certain other Collateral as
more particularly provided for in the Security Agreement;
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(b) the Cash Collateral described in Section 6.2;
(c) a first lien and exclusive pledge of all of the capital
stock of the Lessee all as more particularly set forth in the Pledge
Agreement(s). If any Person other than the Lessee or the Guarantor
shall ever operate the Facility, a pledge of all capital stock of, or
partnership or other ownership interests, in such Person shall also be
provided pursuant to a pledge and security agreement substantially
similar to the Pledge Agreements;
(d) a first lien and exclusive pledge and assignment of, and
security interest in, all Permits and Contracts, as more particularly
provided for in the Permits Assignment, to the extent permitted by law
or the terms thereof; and
(e) in the event that at any time during the Term, the Lessee
holds the fee title to or a leasehold interest in any real property and/or
personal property which is used as an integral part of the operation of the
Leased Property (but is not subject to this Lease), the Lessee shall (I)
provide the Lessor with prior notice of such acquisition and (II) shall take
such actions and enter into such agreements as the Lessor shall reasonably
request in order to grant the Lessor a first priority mortgage or other
security interest in such real property and personal property, subject only to
the Permitted Encumbrances and other Liens reasonably acceptable to the Lessor.
6.1.2 PURCHASE-MONEY SECURITY INTERESTS AND EQUIPMENT LEASES.
Notwithstanding any other provision hereof regarding the creation of Liens, but
subject to Section 11.3.8, the Lessee may (A) grant priority purchase money
security interests in items of Tangible Personal Property and (B) lease Tangible
Personal Property from equipment lessors, as long as in each instance where the
aggregate amount of such purchase money security interests and equipment leases
will exceed TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00): (I) all of
the terms, conditions and provisions of the purchase money security agreements
or equipment leases evidencing the financing arrangement are reasonably
acceptable to the Lessor; (II) promptly after the execution thereof, the Lessee
provides to the Lessor true and complete copies, as executed, of all such
purchase money security agreements and equipment leases (and all amendments
thereto); (III) no such purchase money security interest or equipment lease
shall be cross-defaulted or cross-collateralized with any other obligation
other than a purchase money security interest or equipment lease entered into by
the Lessee involving Tangible Personal Property and the same secured party or
equipment lessor, as applicable; (IV) the secured party or equipment lessors
enter into an intercreditor agreement with, and satisfactory to, the Lessor,
pursuant to which, without limiting the foregoing: (X) the Lessor shall be
afforded the option of curing defaults and the option of succeeding to the
rights of the Lessee; (Y) the Lessor's security interest in Tangible Personal
Property shall be subordinated to the security interest granted to such secured
party; and (Z) the secured party or equipment lessor is not a member of the
Leasing Group or an Affiliate of any member of the Leasing Group. Security
interests
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granted by the Lessee in full compliance with the provisions of this
Section 6.1.2 are referred to as "Permitted Prior Security Interests".
6.2 CASH COLLATERAL.
6.2.1 CASH COLLATERAL. In order to further secure the Lessee's
performance of the Obligations, on the Commencement Date, pursuant to the terms
of the Deposit Pledge Agreement, the Lessee shall provide and pledge to the
Lessor a credit enhancement for the benefit of the Lessor in the form of cash or
other specified investments approved by the Lessor in the Lessor's name in the
total of the Stated Amount (the "Cash Collateral"). The Cash Collateral shall
serve as additional security for the Obligations and may be drawn upon by the
Lessor upon any Lease Default. The Lessee shall maintain the Cash Collateral in
the full Stated Amount throughout the Term, subject to the provisions of the
Agreement Regarding Related Lease Transactions. The Cash Collateral shall be in
form and substance and, if the Lessor elects a form of Cash Collateral other
than actual cash, from a bank continually acceptable to the Lessor in the
Lessor's reasonable discretion and shall be pledged to the Lessor pursuant to
the Deposit Pledge Agreement.
6.2.2 APPLICATION OF CASH COLLATERAL. Upon the occurrence of
any Lease Default, the Lessor shall be entitled, at its option, to use all or
any portion of the Cash Collateral, including interest thereon, then held by it
to pay any amount otherwise payable by the Lessee or the Guarantor under any of
the Lease Documents, in accordance with the terms of this Lease or the other
Lease Documents.
6.2.3 REPLENISHMENT OF CASH COLLATERAL. If the Lessor expends
any of the Cash Collateral to pay any amount payable by the Lessee, or otherwise
applies the same to or towards the Obligations, the Lessee shall, upon demand of
the Lessor, immediately augment the Cash Collateral so as to increase the amount
held by the Lessor to the full Stated Amount.
6.3 GUARANTY. All of the Lease Obligations shall be
unconditionally and irrevocably guaranteed by the Guarantor pursuant to the
Guaranty.
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ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 CONDITION OF THE LEASED PROPERTY. The Lessee acknowledges that the
Guarantor has caused the Leased Property to be sold to the Lessor and that the
Lessee and the Lessor have concurrently entered into this Lease. The Lessee
acknowledges receipt and delivery of possession of the Leased Property and that
the Lessee has examined and otherwise has acquired knowledge of the condition of
the Leased Property prior to the execution and delivery of this Lease and has
found the same to be in good order and repair and satisfactory for its purposes
hereunder. The Lessee is leasing the Leased Property "AS-IS" in its present
condition. The Lessee waives any claim or action against the Lessor in respect
of the condition of the Leased Property. THE LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, EITHER
AS TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS DESIGN OR CONDITION OR
OTHERWISE, OR AS TO DEFECTS IN THE QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, LATENT OR PATENT; IT BEING AGREED THAT ALL RISKS RELATING TO THE
DESIGN, CONDITION AND/OR USE OF THE LEASED PROPERTY ARE TO BE BORNE BY THE
LESSEE. THE LESSEE HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF THE
LEASED PROPERTY, THE SUITABILITY OF THE LEASED PROPERTY FOR THE LESSEE'S
PURPOSES, AND THE COMPLIANCE OR NON-COMPLIANCE OF THE LEASED PROPERTY WITH ALL
APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL LAWS
AND ZONING OR LAND USE LAWS.
Upon the request of the Lessor following a Lease Default or if the
Lessor has a reasonable basis to believe any of the following circumstances
exist, at any time and from time to time during the Term, the Lessee shall
engage one (1) or more independent professional consultants, engineers and
inspectors, qualified to do business in the State and acceptable to the Lessor
to perform any environmental and/or structural investigations and/or other
inspections of the Leased Property and the Facility as the Lessor may reasonably
request in order to detect (A) any structural deficiencies in the Leased
Improvements or the utilities servicing and/or located on the Leased Property or
(B) the presence of any condition that (I) in the Lessor's reasonable judgment
is likely to be harmful or present a health hazard to the residents and other
occupants of the Leased Property or (II) constitutes a breach or violation of
any of the Lease Documents. In the event that the Lessor reasonably determines
that the results of such testing or inspections are unsatisfactory, within
thirty (30) days of notice from the Lessor (except as otherwise provided in the
Environmental Indemnity Agreement), the Lessee shall commence such appropriate
remedial actions as may be required under this Lease and reasonably requested by
the Lessor to correct such unsatisfactory conditions and, thereafter, shall
diligently and continuously prosecute such remedial actions to completion within
the time limits prescribed in this Lease or the other Lease Documents. Any
report produced by any aforementioned consultant, engineer or inspector in
connection with an environmental and/or
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structural investigation and/or other investigation of the Leased Property shall
be addressed to and provided to both the Lessor and the Lessee.
7.2 USE OF THE LEASED PROPERTY; COMPLIANCE; MANAGEMENT.
7.2.1 OBLIGATION TO OPERATE. The [FOLLOWING THE COMPLETION OF
THE RENOVATIONS,] [FL ONLY: FOLLOWING ISSUANCE OF APPROPRIATE
LICENSURE, THE] Lessee or any other Acceptable Licensed Operator shall
continuously operate the Leased Property in accordance with the Primary
Intended Use and the Other Permitted Uses and maintain its
qualifications for licensure and accreditation as required by all
applicable Legal Requirements and Insurance Requirements.
7.2.2 PERMITTED USES. During the entire Term, the Lessee shall
use the Leased Property, or permit the Leased Property to be used, only
for the Primary Intended Use and the Other Permitted Uses. The Lessee
shall not use the Leased Property or permit the Leased Property to be
used for any other use without the prior written consent of the Lessor,
which consent may be withheld in the Lessor's sole and absolute
discretion.
7.2.3 COMPLIANCE WITH INSURANCE REQUIREMENTS. No use shall be
made or permitted to be made of the Leased Property and no acts shall
be done which will cause the cancellation of any insurance policy
covering the Leased Property, nor shall the Lessee, any Manager or any
other Person sell or otherwise provide to any residents, other
occupants or invitees therein, or permit to be kept, used or sold in or
about the Leased Property, any article which may be prohibited by any
Legal Requirement or by any of the Insurance Requirements. Furthermore,
the Lessee shall, at its sole cost and expense, take whatever other
actions that may be necessary to comply with and to insure that the
Leased Property complies with all Insurance Requirements.
7.2.4 NO WASTE. The Lessee shall not commit or suffer to be
committed any waste on, in or under the Leased Property, nor shall the
Lessee cause or permit any nuisance thereon.
7.2.5 NO IMPAIRMENT. The Lessee shall neither suffer nor
permit the Leased Property to be used in such a manner as (A) might
reasonably tend to impair the Lessor's title thereto or (B) may
reasonably make possible a claim or claims of adverse usage or adverse
possession by the public or of implied dedication of the Leased
Property.
7.2.6 NO LIENS. Except as permitted pursuant to Section 6.1.2,
the Lessee shall not permit or suffer any Lien to exist on the
Tangible Personal Property and shall in no event cause, permit or
suffer any Lien to exist with respect to the Leased Property other
than as set forth in Section 11.5.2.
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7.3 COMPLIANCE WITH LEGAL REQUIREMENTS. The Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that the
Lessee and any other Acceptable Licensed Operator, at their sole cost and
expense, shall promptly (A) comply with, and shall cause every other member of
the Leasing Group to comply with, all Legal Requirements relating to the use,
operation, maintenance, repair and restoration of the Leased Property, whether
or not compliance therewith shall require structural change in any of the Leased
Property or interfere with the use and enjoyment of the Leased Property and (B)
procure, maintain and comply with (in all material respects), and shall cause
every other member of the Leasing Group to procure, maintain and comply with (in
all material respects), all Contracts and Permits necessary or desirable in
order to operate the Leased Property for the Primary Intended Use and/or Other
Permitted Uses, and for compliance with all of the terms and conditions of this
Lease. Unless a Lease Default has occurred or any event has occurred which, with
the passage of time and/or the giving of notice would constitute a Lease
Default, the Lessee may, upon prior written notice to the Lessor, contest any
Legal Requirement to the extent permitted by, and in accordance with, Article
15.
7.4 MANAGEMENT AGREEMENTS. From and after the Commencement Date, the
Lessee shall not enter into any Management Agreement without the prior written
approval of the Lessor, in each instance, which approval shall not be
unreasonably withheld. The Lessee shall not, without the prior written approval
of the Lessor, in each instance, which approval shall not be unreasonably
withheld, agree to or allow (A) any change in any Manager or any change in the
ownership or control of any Manager except as otherwise permitted by the
provisions of Sections 16.1(h)(vi) and 16.1(i), (B) the termination of any
Management Agreement (other than in connection with the exercise by the Lessee
of any of its remedies under the Management Agreement as a result of any default
by the Manager thereunder), (C) any assignment by any Manager of its interest
under any Management Agreement or (D) any material amendment of any Management
Agreement. In addition, the Lessee shall, at its sole cost and expense, promptly
and fully perform or cause to be performed every covenant, condition, promise
and obligation of the licensed operator of the Leased Property under any
Management Agreement. Notwithstanding the foregoing, in the event that the
Lessee enters into any Management Agreement with an Affiliate of the Lessee, the
Lessor shall consent to the execution and delivery of such Management Agreement,
provided, that, concurrently with the execution and delivery of such Management
Agreement, the Affiliated Party Subordination Agreement and the Environmental
Indemnity Agreement are amended so as to add as a party thereto the applicable
Affiliate of the Lessee that is to be the Manager (so that, among other thngs,
the payments to be made under such Management Agreement are fully subordinated
to the Lease Obligations).
Each Management Agreement shall provide that the Lessor shall be
provided notice of any defaults thereunder and, at the Lessor's option, an
oppportunity to cure such default. The Lessee shall furnish to the Lessor,
within three (3) days after receipt thereof, or after the mailing or serive
thereof by the Lessee, as the case may be, a copy of each notice of defualt
which the Lessee shall give to, or recieve from any Person, based upon the
occurrence, or alleged occurrence, of any default in the performance of any
covenant, condition, promise or obligation under any Management Agreement.
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Whenever and as often as the Lessee shall fail to perform, promptly and
fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under and
pursuant to any Management Agreement, the Lessor, or a lawfully appointed
receiver of the Leased Property, may, at their respective options (and without
any obligation to do so), after five (5) days' prior notice to the Lessee
(except in the case of an emergency) enter upon the Leased Property and perform,
or cause to be performed, such work, labor, services, acts or things, and take
such other steps and do such other acts as they may deem advisable, to cure such
defaulted covenant, condition, promise or obligation, and any amount so paid or
advanced by the Lessor or such receiver and all costs and expenses reasonably
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses and court costs), shall be a demand obligation of the Lessee to the
Lessor or such receiver, and, the Lessor shall have the same rights and remedies
for failure to pay such costs on demand as for the Lessee's failure to pay any
other sums due hereunder.
ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 MAINTENANCE AND REPAIR.
8.1.1 LESSEE'S RESPONSIBILITY. The Lessee, at its sole cost and
expense, shall keep the Leased Property and all private roadways,
sidewalks and curbs appurtenant thereto which are under the Lessee's
control in good order and repair (whether or not the need for such
repairs occurs as a result of the Lessee's use, any prior use, the
elements or the age of the Leased Property or such private roadways,
sidewalks and curbs or any other cause whatsoever). Subject to Articles
9, 13 and 14, the Lessee shall promptly, with the exercise of all
reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations,
alterations and modifications thereof of every kind and nature, whether
interior or exterior, structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen or arising by reason of a
condition (concealed or otherwise) existing prior to the commencement
of, or during, the Term and thereafter until the Lessee surrenders the
Leased Property in the manner required by this Lease. The Lessor
understands that the Facility will incur reasonable, normal wear and
tear during the Term of this Lease and agrees that the Lessee shall not
be obligated to repair or replace every incidence of reasonable and
normal wear and tear. However, nothing herein shall relieve the Lessee
of its obligation to maintain the Leased Property and all private
roadways, sidewalks and curbs appurtenant thereto which are under the
Lessee's control in good order and repair. And further, in no event
shall such wear and tear present any condition which may be harmful to
residents or other occupants of the Leased Property or which prevents
the Leased Property from being operated for the Primary Intended Use in
accordance with the provisions of this Lease. In addition, the Lessee,
at its sole cost and expense, shall make all repairs, modifications,
replacements, renovations and alterations of the Leased Property (and
such
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private roadways, sidewalks and curbs) that are necessary to comply
with all applicable Legal Requirements and Insurance Requirements so
that the Leased Property can be legally operated for the Primary
Intended Use and the Other Permitted Uses. All repairs, replacements,
renovations, alterations, and modifications required by the terms of
this Section 8.1 shall be (A) performed in a good and workmanlike
manner in compliance with all Legal Requirements, Insurance
Requirements and the requirements of Article 9 hereof, using new
materials well suited for their intended purpose and (B) consistent
with the operation of the Leased Property in a first class manner. The
Lessee will not take or omit to take any action the taking or omission
of which might materially impair the value or the usefulness of the
Leased Property for the Primary Intended Use and the Other Permitted
Uses. To the extent that any of the repairs, replacements, renovations,
alterations or modifications required by the terms of this Section 8.1
constitute Material Structural Work, the Lessee shall obtain the
Lessor's prior written approval (which approval shall not be
unreasonably withheld) of the specific repairs, replacements,
renovations, alterations and modifications to be performed by or on
behalf of the Lessee in connection with such Material Structural Work,
and shall perform the same in accordance with the provisions of this
Lease upon receipt of such approval. Notwithstanding the foregoing, in
the event of a bona fide emergency during which the Lessee is unable to
contact the appropriate representatives of the Lessor, the Lessee may
commence such Material Structural Work as may be necessary in order to
address such emergency without the Lessor's prior approval, provided,
however, that the Lessee shall immediately thereafter advise the Lessor
of such emergency and the nature and scope of the Material Structural
Work commenced and shall obtain the Lessor's approval of the remaining
Material Structural Work to be completed.
8.1.2 NO LESSOR OBLIGATION. The Lessor shall not, under any
circumstances (except to the extent of any damage caused thereto as a
result of the gross negligence or wilful misconduct of the Lessor or
the Lessor's employees, agents or contractors), be required to build or
rebuild any improvements on the Leased Property (or any private
roadways, sidewalks or curbs appurtenant thereto), or to make any
repairs, replacements, renovations, alterations, restorations,
modifications, or renewals of any nature or description to the Leased
Property (or any private roadways, sidewalks or curbs appurtenant
thereto), whether ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen, or to make any expenditure
whatsoever with respect thereto in connection with this Lease, or to
maintain the Leased Property (or any private roadways, sidewalks or
curbs appurtenant thereto) in any way.
8.1.3 LESSEE MAY NOT OBLIGATE LESSOR. Nothing contained herein
nor any action or inaction by the Lessor shall be construed as (A)
constituting the consent or request of the Lessor, express or implied,
to any contractor, subcontractor, laborer, materialman or vendor to or
for the performance of any labor or services for any construction,
alteration, addition, repair or demolition of or to the Leased Property
or (B) giving the Lessee any right, power or permission to contract for
or permit the performance of any labor or services or the furnishing of
any materials or other property in such fashion as would permit the
making of
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any claim against the Lessor for the payment thereof or to make any
agreement that may create, or in any way be the basis for, any right,
title or interest in, or Lien or claim against, the estate of the
Lessor in the Leased Property. Without limiting the generality of the
foregoing, the right, title and interest of the Lessor in and to the
Leased Property shall not be subject to liens or encumbrances for the
performance of any labor or services or the furnishing of any materials
or other property furnished to the Leased Property at or by the request
of the Lessee or any other Person other than the Lessor. The Lessee
shall notify any contractor, subcontractor, laborer, materialman or
vendor providing any labor, services or materials to the Leased
Property of this provision.
8.1.4 LESSEE'S OBLIGATION TO PERFORM UPGRADE RENOVATIONS.
Without limiting the Lessee's obligations to maintain the Leased
Property under this Lease, within thirty (30) days after the end of
each Lease Year commencing with the end of the fourth (4th) Lease Year,
the Lessee shall provide the Lessor with evidence reasonably
satisfactory to the Lessor that the Lessee has in each and every
consecutive thirty-six (36) month period commencing with such fourth
(4th) Lease Year spent an average annual amount on Upgrade Renovations
(collectively, the "Annual Facility Upgrade Expenditure") equal to
$200.00 per living unit within the Facility (as such per living unit
amount shall be adjusted annually at the beginning of each Lease Year
(commencing with the second (2nd) Lease Year) by an amount equal to the
product of (i) $200.00 multiplied by (ii) the Consumer Price Adjustment
Factor). The term "Upgrade Renovations" is defined to mean upgrades or
improvements to the Leased Property which have the effect of
maintaining or improving the competitive position of the Leased
Property in its marketplace; and Upgrade Expenditures shall not include
normal janitorial, cleaning and maintenance activities. Non-exclusive
examples of Upgrade Renovations include new or replacement wallpaper,
tiles, window coverings, lighting fixtures, painting, upgraded
landscaping, carpeting, architectural adornments, common areas
amenities and the like. It is expressly understood that capital
improvements or repairs (such as but not limited to repairs or
replacements to the structural elements of the walls, parking area, or
the roof or to the electrical, plumbing, HVAC or other mechanical or
structural systems in the Leased Property) shall not be considered
Upgrade Renovations. In the event that during a given Lease Year
Upgrade Renovations are not necessary (which necessity shall be
determined in the Lessee's reasonable discretion) and/or the full
amount of the respective Annual Facility Upgrade Expenditure is not
made for the Facility for whatever reason, the Lessee shall be required
to show evidence that a reserve fund has been established with the
balance of the unexpended Annual Facility Upgrade Expenditure to be
used solely for Upgrade Renovations in future Lease Years or as
otherwise requested by the Lessor. If the Lessee fails in each and
every consecutive thirty-six (36) month period (commencing with the end
of the fourth (4th) Lease Year) to make Upgrade Renovations in an
average annual amount equal to the Annual Facility Upgrade Expenditure
or to establish a reserve fund as aforesaid, the Lessee shall promptly
on demand from the Lessor (but in no event within more than five (5)
days) pay to the Lessor the applicable shortfall in the Annual Facility
Upgrade Expenditure over any aforementioned thirty-six (36) month
period, as applicable; and the
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Lessor may retain such funds as additional rent hereunder or, in its
sole discretion, provide such funds to the Lessee to perform Upgrade
Renovations.
8.2 ENCROACHMENTS; TITLE RESTRICTIONS. If any of the Leased
Improvements shall, at any time, encroach upon any property, street or
right-of-way adjacent to the Leased Property, or shall violate the agreements or
conditions contained in any lawful restrictive covenant or other Lien now or
hereafter affecting the Leased Property, or shall impair the rights of others
under any easement, right-of-way or other Lien to which the Leased Property is
now or hereafter subject, then promptly upon the request of the Lessor, the
Lessee shall, at its sole cost and expense, subject to the Lessee's right to
contest the existence of any encroachment, violation or impairment as set forth
in Article 15, (A) obtain valid and effective waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment, violation
or impairment or (B) make such alterations to the Leased Improvements, and take
such other actions, as the Lessee in the good faith exercise of its judgment
deems reasonably practicable, to remove such encroachment, or to end such
violation or impairment, including, if necessary, the alteration of any of the
Leased Improvements. Notwithstanding the foregoing, the Lessee shall, in any
event, take all such actions as may be reasonably necessary in order to be able
to continue the operation of the Leased Improvements for the Primary Intended
Use and the Other Permitted Uses substantially in the manner and to the extent
that the Leased Improvements were operated prior to the assertion of such
encroachment, violation or impairment and nothing contained herein shall limit
the Lessee's obligations to operate the Leased Property in accordance with its
Primary Intended Use. Any such alteration made pursuant to the terms of this
Section 8.2 shall be completed in conformity with the applicable requirements of
Section 8.1 and Article 9. The Lessee's obligations under this Section 8.2 shall
be in addition to and shall in no way discharge or diminish any obligation of
any insurer under any policy of title or other insurance.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 LESSOR'S APPROVAL. Without the prior written consent of the Lessor,
which consent may be withheld by the Lessor, in its sole and absolute
discretion, the Lessee shall make no Capital Addition or Material Structural
Work to the Leased Property (including, without limitation, any change in the
size or unit capacity of the Facility), except as may be otherwise expressly
required pursuant to Article 8.
9.2 GENERAL PROVISIONS AS TO CAPITAL ADDITIONS AND CERTAIN MATERIAL
STRUCTURAL WORK. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which the Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in the Lessor's written approval.
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9.2.1 NO LIENS. Subject to Article 15 of this Lease, the
Lessee shall not be permitted to create, nor suffer to exist, any Lien
on the Leased Property in connection with any Capital Addition or
Material Structural Work. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT
AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED
OR TO BE FURNISHED TO THE LESSEE OR TO ANYONE HOLDING ANY PART OF THE
LEASED PROPERTY, AND THAT NO MECHANICS' LIENS, CONSTRUCTION LIENS OR
OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO
OR AFFECT THE INTEREST OF THE LESSOR IN AND TO THE LEASED PROPERTY.
9.2.2 LESSEE'S PROPOSAL REGARDING CAPITAL ADDITIONS AND
MATERIAL STRUCTURAL WORK. If the Lessee desires to undertake any
Capital Addition or Material Structural Work, the Lessee shall submit
to the Lessor in writing a proposal setting forth in reasonable detail
any proposed Capital Addition or Material Structural Work and shall
provide to the Lessor copies of, or information regarding, the
applicable plans and specifications, Permits, Contracts and any other
materials concerning the proposed Capital Addition or Material
Structural Work, as the case may be, as the Lessor may reasonably
request. Without limiting the generality of the foregoing, each such
proposal pertaining to any Capital Addition shall indicate the
approximate projected cost of constructing such Capital Addition and
the use or uses to which it will be put.
9.2.3 LESSOR'S OPTIONS REGARDING CAPITAL ADDITIONS AND
MATERIAL STRUCTURAL WORK. The Lessor shall have the options of (A)
denying permission for the construction of the applicable Capital
Addition or Material Structural Work, (B) offering to finance the
construction of the Capital Addition or Material Structural Work
pursuant to Section 9.3, (C) allowing the Lessee to pay for or
separately finance the construction of the Capital Addition or Material
Structural Work, subject to compliance with the terms and conditions of
Section 9.2.1, Section 9.4, Section 13.1, all Legal Requirements and
all other requirements of this Lease and to such other terms and
conditions as the Lessor may in its discretion impose or (D) any
combination of the foregoing. Unless the Lessor notifies the Lessee in
writing of a contrary election within thirty (30) days of the Lessee's
request, the Lessor shall be deemed to have denied the request for the
Capital Addition or Material Structural Work.
9.2.4 LESSOR MAY ELECT TO FINANCE CAPITAL ADDITIONS OR
MATERIAL STRUCTURAL WORK. If the Lessor elects to offer financing for
the proposed Capital Addition or Material Structural Work, the
provisions of Section 9.3 shall apply.
9.2.5 LEGAL REQUIREMENTS; QUALITY OF WORK. All Capital
Additions and/or Material Structural Work shall be performed in full
compliance with all applicable Legal Requirements and shall be
performed in a good and workmanlike manner.
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9.3 CAPITAL ADDITIONS AND MATERIAL STRUCTURAL WORK FINANCED BY LESSOR.
9.3.1 LESSEE'S FINANCING REQUEST. The Lessee may request that
the Lessor provide or arrange financing for a Capital Addition or
Material Structural Work by providing to the Lessor such information
about the Capital Addition or Material Structural Work as the Lessor
may reasonably request, including, without limitation, all information
referred to in Section 9.2 above. The Lessee understands, however, that
the Lessor shall be under no obligation to agree to such request.
Nevertheless, the Lessor shall notify the Lessee, within forty-five
(45) days of receipt of such information, as to whether the Lessor will
finance the proposed Capital Addition or Material Structural Work and,
if so, the terms and conditions upon which it would do so, including
the terms of any amendment to this Lease (including, without
limitation, an increase in the Base Rent based on the Lessor's then
existing terms and prevailing conditions to compensate the Lessor for
the additional funds advanced by it). The Lessee may withdraw its
request by notice to the Lessor at any time before such time as the
Lessee accepts the Lessor's terms and conditions. All advances of funds
for any such financing shall be made in accordance with the Lessor's
then standard construction loan requirements and procedures, which may
include, without limitation, the requirements and procedures applicable
to Work under Section 13.1.
9.3.2 LESSOR'S GENERAL REQUIREMENTS. If the Lessor agrees to
finance the proposed Capital Addition or Material Structural Work and
the Lessee accepts the Lessor's proposal therefor, in addition to all
other items which the Lessor or any applicable Financing Party may
reasonably require, the Lessee shall provide to the Lessor the
following:
(A) prior to any advance of funds, (I) any
information, opinions, certificates, Permits or documents
reasonably requested by the Lessor or any applicable Financing
Party which are necessary to confirm that the Lessee will be
able to use the Capital Addition upon the completion thereof or
the applicable portion of the Facility upon the completion of
the Material Structural Work in accordance with the Primary
Intended Use and/or the Other Permitted Uses and (II) evidence
satisfactory to the Lessor and any applicable Financing Party
that all Permits required for the construction and use of the
Capital Addition or the applicable portion of the Facility have
been obtained, are in full force and effect and are not subject
to appeal, except only for those Permits which cannot in the
normal course be obtained prior to commencement or completion
of the construction; provided, that the Lessor and any
applicable Financing Party are furnished with reasonable
evidence that the same will be available in the normal course
of business without unusual condition;
(B) prior to any advance of funds, an Officer's
Certificate and, if requested, a certificate from the Lessee's
architect, setting forth in reasonable detail the projected (or
actual, if available) Capital Addition Cost or the cost of the
Material Structural Work;
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(C) bills of sale, instruments of transfer and other
documents required by the Lessor so as to vest title to the
Capital Addition or the applicable Material Structural Work in
the Lessor free and clear of all Liens, and amendments to this
Lease and any recorded notice or memorandum thereof, duly
executed and acknowledged, in form and substance reasonably
satisfactory to the Lessor, providing for any changes required
by the Lessor including, without limitation, changes in the
Base Rent and the legal description of the Land;
(D) upon payment therefor, a deed conveying to the
Lessor title to any land acquired for the purpose of
constructing the Capital Addition or the applicable Material
Structural Work ("Additional Land") free and clear of any Liens
except those approved by the Lessor;
(E) upon completion of the Capital Addition or the
Material Structural Work, a final as-built survey thereof
reasonably satisfactory to the Lessor, if required by the
Lessor;
(F) during and following the advance of funds and the
completion of the Capital Addition or the Material Structural
Work, endorsements to any outstanding policy of title insurance
covering the Leased Property satisfactory in form and substance
to the Lessor and any Financing Party (I) updating the same
without any additional exception except as may be reasonably
permitted by the Lessor, (II) if applicable, including the
Additional Land in the premises covered by such title insurance
policy and (III) increasing the coverage thereof by an amount
equal to any amount paid by the Lessor for the Additional Land
plus the Fair Market Value of the Capital Addition or the Fair
Market Value of the Material Structural Work (except to the
extent covered by the owner's policy of title insurance
referred to in subparagraph (g) below);
(G) simultaneous with the initial advance of funds,
if appropriate, (I) an owner's policy of title insurance
insuring fee simple title to any Additional Land conveyed to
the Lessor pursuant to subparagraph (d) free and clear of all
Liens except those approved by the Lessor and (II) a lender's
policy of title insurance reasonably satisfactory in form and
substance to any applicable Financing Party;
(H) following the completion of the Capital Addition
or the Material Structural Work, if reasonably deemed
necessary by the Lessor, an appraisal of the Leased Property
by an M.A.I. appraiser acceptable to the Lessor, which states
that the Fair Market Value of the Leased Property upon
completion of the Capital Addition or the Material Structural
Work exceeds the Fair Market Value of the Leased Property
prior to the commencement of the construction of such Capital
Addition or Material Structural Work by an amount not less
than one hundred percent (100%) of the Capital Addition Cost
or the cost of the Material Structural Work; and
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(I) during or following the advancement of funds,
prints of architectural and engineering drawings relating to
the Capital Addition or the Material Structural Work and such
other materials, including, without limitation, endorsements to
the title insurance policies (insuring the Lessor and any
applicable Financing Party with respect to the Leased Property)
contemplated by subsection (f) above, opinions of counsel,
appraisals, surveys, certified copies of duly adopted resolu
tions of the board of directors of the Lessee authorizing the
execution and delivery of the lease amendment and any other
documents and instruments as may be reasonably required by the
Lessor and any applicable Financing Party.
9.3.3 PAYMENT OF COSTS. By virtue of making a request to
finance a Capital Addition or any Material Structural Work, whether or
not such financing is actually consummated, the Lessee shall be deemed
to have agreed to pay, upon demand, all costs and expenses reasonably
incurred by the Lessor and any Person participating with the Lessor in
any way in the financing of the Capital Addition or Material Structural
Work, including, but not limited to (A) fees and expenses of their
respective attorneys, (B) all photocopying expenses, if any, (C) the
amount of any filing, registration and recording taxes and fees, (D)
documentary stamp taxes and intangible taxes and (E) title insurance
charges and appraisal fees.
9.4 GENERAL LIMITATIONS. Without in any way limiting the Lessor's
options with respect to proposed Capital Additions or Material Structural Work,
(A) no Capital Addition or Material Structural Work shall be completed that
could, upon completion, significantly alter the character or purpose or detract
from the value or operating efficiency of the Leased Property, or significantly
impair the revenue-producing capability of the Leased Property, or adversely
affect the ability of the Lessee to comply with the terms of this Lease, (B) no
Capital Addition or Material Structural Work shall be completed which would tie
in or connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the Leased Property (and not part of the
Land covered by this Lease) including, without limitation, tie-ins of buildings
or other structures or utilities, unless the Lessee shall have obtained the
prior written approval of the Lessor, which approval may be withheld in the
Lessor's sole and absolute discretion and (C) all proposed Capital Additions and
Material Structural Work shall be architecturally integrated and consistent with
the Leased Property.
9.5 NON-CAPITAL ADDITIONS. The Lessee shall have the obligation and
right to make repairs, replacements and alterations which are not Capital
Additions as required by the other Sections of this Lease, but in so doing, the
Lessee shall always comply with and satisfy the conditions of Sections 9.2.1,
9.2.5 and 9.4, mutatis, mutandis. The Lessee shall have the right, from time to
time, to make additions, modifications or improvements to the Leased Property
which do not constitute Capital Additions or Material Structural Work as it may
deem to be desirable or necessary for its uses and purposes, subject to the same
limits and conditions imposed under Sections 9.2.1, 9.2.5 and 9.4. The cost of
any such repair, replacement, alteration, addition, modification or improvement
shall be paid by the Lessee and the results thereof shall be included under the
terms
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of this Lease and become a part of the Leased Property, without payment therefor
by the Lessor at any time. Notwithstanding the foregoing, all such additions,
modifications and improvements which affect the structure of any of the Leased
Improvements, or which involve the expenditure of more than FIFTY THOUSAND AND
NO/100 DOLLARS ($50,000.00) in any consecutive twelve (12) month period, shall
be undertaken only upon compliance with the provisions of Section 13.1, all
Legal Requirements and all other applicable requirements of this Lease;
provided, however, that in the event of a bona fide emergency during which the
Lessee is unable to contact the appropriate representatives of the Lessor, the
Lessee may commence such additions, modifications and improvements as may be
necessary in order to address such emergency without the Lessor's prior
approval, as long as the Lessee immediately thereafter advises the Lessor of
such emergency and the nature and scope of the additions, modifications and
improvements performed and obtains the Lessor's approval of the remaining work
to be completed.
9.6 PERMITTED WORK. Notwithstanding Section 9.1 above, the Lessee shall
have the right to perform Permitted Work (as defined below) without the Lessor's
prior approval or consent as long as the Lessee gives to the Lessor prior notice
that the Lessee is undertaking such Permitted Work and provides the Lessor with
reasonably detailed plans and specifications describing the work to be done.
"Permitted Work" shall mean work to the Leased Improvements which will not
affect any of the structural elements of the Leased Improvements and which, in
the aggregate, costs less than FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00)
during any consecutive twelve (12) month period. Any work to the Facility,
regardless of cost, which (A) will affect any structural element of any of the
Leased Improvements and (B) is not otherwise subject to an approval of the
Lessor pursuant to any other provision of this Lease, shall still require the
prior written consent of the Lessor, which consent may be withheld by the Lessor
in its sole and absolute discretion.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 REPRESENTATIONS AND WARRANTIES. The Lessee hereby represents and
warrants to, and covenants and agrees with, the Lessor that:
10.1.1 EXISTENCE; POWER; QUALIFICATION. The Lessee is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. The Lessee has all requisite
corporate power to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted and is duly
qualified to transact business and is in good standing in each
jurisdiction where such qualification is necessary or desirable in
order to carry out its business as presently conducted and as proposed
to be conducted. As of the date of this Lease, the Lessee does not have
any Subsidiaries and the Lessee is not a member of any partnership or
joint venture (except for each of the limited partnerships which have
been created with the Lessor's approval to be the sublessees of the
facilities known as Clare Bridge of Fort Myers, Florida and Clare
Bridge of Tampa, Florida,
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and Clare Bridge of Jacksonville, Florida, respectively). Attached
hereto as EXHIBIT C is a true and correct list of all of the
shareholders of the Lessee and their respective ownership interests in
the Lessee.
10.1.2 VALID AND BINDING. The Lessee is duly authorized to make
and enter into all of the Lease Documents to which the Lessee is a
party and to carry out the transactions contemplated therein. All of
the Lease Documents to which the Lessee is a party have been duly
executed and delivered by the Lessee, and each is a legal, valid and
binding obligation of the Lessee, enforceable in accordance with its
terms.
10.1.3 SINGLE PURPOSE. The Lessee is, and during the entire
time that this Lease remains in force and effect the Lessee and any
other Acceptable Licensed Operator (other than the Guarantor or Current
Manager, if other than the Guarantor) shall be, engaged in no business,
trade or activity other than the [CONSTRUCTION OF THE RENOVATIONS IN
ACCORDANCE WITH THE TERMS OF THE RENOVATION ESCROW AGREEMENTS OF EVEN
DATE BY AND BETWEEN THE LESSOR AND THE LESSEE, THE] operation of the
Leased Property for the Primary Intended Use and the Other Permitted
Uses, [AND/OR THE DEVELOPMENT, OWNERSHIP] and/or the lease and
operation of other assisted living facilities and/or Alzheimer's
dementia care facilities where the Lessor or some other Meditrust
Entity is the owner, lessor or holder of a first priority fee mortgage
on such other facility.
10.1.4 NO VIOLATION. The execution, delivery and performance
of the Lease Documents and the consummation of the transactions thereby
contemplated shall not result in any breach of, or constitute a default
under, or result in the acceleration of, or constitute an event which,
with the giving of notice or the passage of time, or both, could result
in default or acceleration of any obligation of any member of the
Leasing Group under any of the Permits or Contracts or any other
contract, mortgage, lien, lease, agreement, instrument, franchise,
arbitration award, judgment, decree, bank loan or credit agreement,
trust indenture or other instrument to which any member of the Leasing
Group is a party or by which any member of the Leasing Group or the
Leased Property may be bound or affected and do not violate or
contravene any Legal Requirement.
10.1.5 CONSENTS AND APPROVALS. Except as already obtained or
filed, or except as otherwise expressly contemplated in any of the
Lease Documents, as the case may be, no consent or approval or other
authorization of, or exemption by, or declaration or filing with, any
Person and no waiver of any right by any Person is required to
authorize or permit, or is otherwise required as a condition of the
execution and delivery of any of the Lease Documents by any member of
the Leasing Group and the performance of such member's obligations
thereunder or as a condition to the validity (assuming the due
authorization, execution and delivery by the Lessor of the Lease
Documents to which it is a party) and the first priority of any Liens
granted under the Lease Documents, except the filing of the Financing
Statements.
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10.1.6 NO LIENS OR INSOLVENCY PROCEEDINGS. Each member of the
Leasing Group is financially solvent and there are no actions, suits,
investigations or proceedings including, without limitation,
outstanding federal or state tax liens, garnishments or insolvency or
bankruptcy proceedings, pending or, to the best of the Lessee's
knowledge and belief, threatened:
(A) against or affecting any member of the Leasing
Group, which if adversely resolved to such member of the
Leasing Group, would materially adversely affect the ability
of any of the foregoing to perform their respective
obligations under the Lease Documents;
(B) against or affecting the Leased Property or the
ownership, construction, development, maintenance, management,
repair, use, occupancy, possession or operation thereof; or
(C) which may involve or affect the validity,
priority or enforceability of any of the Lease Documents, at
law or in equity, or before or by any arbitrator or
Governmental Authority.
10.1.7 NO BURDENSOME AGREEMENTS. No member of the Leasing
Group is a party to any agreement the terms of which now have, or, as
far as can be reasonably foreseen, may have, a material adverse affect
on its respective financial condition or business or [ON THE
DEVELOPMENT OR] operation of the Leased Property for its Primary
Intended Use or any Other Permitted Use.
10.1.8 COMMERCIAL ACTS. The Lessee's performance of and
compliance with the obligations and conditions set forth herein and in
the other Lease Documents will constitute commercial acts done and
performed for commercial purposes.
10.1.9 ADEQUATE CAPITAL, NOT INSOLVENT. After giving effect to
the consummation of the transactions contemplated by the Lease
Documents, each of the Lessee and the Guarantor, taken as a whole:
(A) will be able to pay its debts as they become due;
(B) will have sufficient funds and capital to carry
on its business as now conducted or as contemplated to be
conducted (in accordance with the terms of the Lease
Documents);
(C) will own property having a value both at fair
valuation and at present fair saleable value greater than the
amount required to pay its debts as they become due; and
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(D) will not be rendered insolvent as determined by
applicable law.
10.1.10 NOT DELINQUENT. No member of the Leasing Group is
delinquent or claimed to be delinquent under any obligation for the
payment of borrowed money in excess of ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00).
10.1.11 NO AFFILIATE DEBT. The Lessee has not created,
incurred, guaranteed, endorsed, assumed or suffered to exist any
liability (whether direct or contingent) for borrowed money from the
Guarantor (or any of its Affiliates) or any Affiliate of the Lessee
that is not fully subordinated to the Lease Obligations pursuant to the
Affiliated Party Subordination Agreement.
10.1.12 TAXES CURRENT. Each member of the Leasing Group (A)
has filed all federal, state and local tax returns which are required
to be filed and as to which extensions are not currently in effect and
(B) has paid all taxes, assessments, impositions, fees and other
governmental charges (including interest and penalties) (I) which have
become due pursuant to such returns or pursuant to any assessment or
notice of tax claim or deficiency received by each such member of the
Leasing Group and (II) for which non-payment could result in assessment
of a penalty against (1) such member of the Leasing Group other than
the Guarantor in excess of ONE THOUSAND AND NO/100 DOLLARS ($1,000.00)
or (2) the Guarantor in excess of FIVE THOUSAND AND NO/100 DOLLARS
($5,000.00). No tax liability has been asserted by the Internal Revenue
Service against any member of the Leasing Group or any other federal,
state or local taxing authority for taxes, assessments, impositions,
fees or other governmental charges (including interest or penalties
thereon) in excess of those already paid.
10.1.13 FINANCIALS COMPLETE AND ACCURATE. The financial
statements of each member of the Leasing Group given to the Lessor in
connection with the execution and delivery of the Lease Documents were
true, complete and accurate, in all material respects, and fairly
presented the financial condition of each such member of the Leasing
Group as of the date thereof and for the periods covered thereby,
having been prepared in accordance with GAAP and such financial
statements disclosed all material liabilities. There has been no
material adverse change since such date with respect to the Tangible
Net Worth of any member of the Leasing Group or with respect to any
other matters contained in such financial statements, nor have any
additional material liabilities, including, without limitation,
contingent liabilities, of any member of the Leasing Group arisen or
been incurred or asserted since such date. The projections heretofore
delivered to the Lessor continue to be reasonable (with respect to the
material assumptions upon which such projections are based) and the
Lessee reasonably anticipates the results projected therein will be
achieved, there having been (A) no material adverse change in the
business, assets or condition, financial or otherwise of any member of
the Leasing Group or the Leased Property and (B) no material depletion
of the cash or decrease in working capital of any member of the Leasing
Group.
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10.1.14 PENDING ACTIONS, NOTICES AND REPORTS.
(A) There is no action or investigation pending or, to the
best knowledge and belief of the Lessee, threatened, anticipated or
contemplated (nor, to the knowledge of the Lessee, is there any
reasonable basis therefor) against or affecting the Leased Property or
any member of the Leasing Group (or any Affiliate thereof) before any
Governmental Authority, Accreditation Body or Third Party Payor which
could prevent or hinder the consummation of the transactions
contemplated hereby or call into question the validity of any of the
Lease Documents or any action taken or to be taken in connection with
the transactions contemplated thereunder or which in any single case or
in the aggregate might result in any material adverse change in the
business, prospects, condition, affairs or operations of the Lessee or
the Guarantor or the Leased Property (including, without limitation,
any action to revoke, withdraw or suspend any Permit necessary or
desirable for the operation of the Leased Property in accordance with
its Primary Intended Use and any action to transfer or relocate any
such Permit to a location other than the Leased Property) or any
material impairment of the right or ability of the Lessee or the
Guarantor to carry on its operations as presently conducted or proposed
to be conducted or which may materially adversely impact reimbursement
to the Lessee for services rendered to beneficiaries of Third Party
Payor Programs.
(B) Neither the Facility nor any member of the Leasing Group
has received any notice of any claim, requirement or demand of any
Governmental Authority, Accreditation Body, Third Party Payor or any
insurance body having or claiming any licensing, certifying,
supervising, evaluating or accrediting authority over the Leased
Property to rework or redesign the Leased Property, its professional
staff or its professional services, procedures or practices in any
material respect or to provide additional furniture, fixtures,
equipment or inventory or to otherwise take action so as to make the
Leased Property conform to or comply with any Legal Requirement;
(C) The most recent utilization reviews, if any, relating to
the Leased Property by all applicable Third Party Payors, Accreditation
Bodies and Governmental Authorities and reviews or scrutiny by any
managed care or utilization review companies have not had a material
adverse impact on the utilization of units or programs at the Leased
Property. No claims or assertions have been made in any utilization
review that any of the practices or procedures used at the Leased
Property are improper or inappropriate other than such claims or
assertions which singly and in the aggregate will not have a material
adverse impact on the Leased Property; and
(D) If applicable, the Lessee has delivered or caused to be
delivered to the Lessor true and correct copies of all licenses,
inspection surveys and accreditation reviews relating to the Leased
Property, issued by any Governmental Authority or Accreditation Body
during the most recent licensing period, together with all plans of
correction relating thereto.
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10.1.15 COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS.
(A) The Lessee and the Leased Property and the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession and operation thereof comply with all applicable
Legal Requirements and there is no claim of any violation thereof known
to the Lessee which could have a material adverse effect on the Leased
Property or the Lessee. Without limiting the foregoing, the Acceptable
Licensed Operator is or will become the licensed operator of the
Facility, the Acceptable Licensed Operator has or will obtain all
Permits that are necessary to operate the Leased Property in accordance
with its Primary Intended Use and the Other Permitted Uses, if any, and
all such Permits are in full force and effect to the extent issued
prior to the date hereof.
(B) Except as previously delivered to the Lessor pursuant to
Section 10.1.14(d) hereof, there are no outstanding notices of
deficiencies, notices of proposed action or orders of any kind relating
to the Leased Property issued by any Governmental Authority requiring
conformity to any of the Legal Requirements and which could have a
material adverse effect on the Leased Property or the Lessee.
10.1.16 NO ACTION BY GOVERNMENTAL AUTHORITY. There is no
action pending or, to the best knowledge and belief of the Lessee,
recommended, by any Governmental Authority or Accreditation Body to
revoke, repeal, cancel, modify, withdraw or suspend any Permit or
Contract or to take any other action of any other type which could have
a material adverse effect on the Leased Property.
10.1.17 PROPERTY MATTERS.
(A) The Leased Property is free and clear of agreements,
covenants and Liens, except those agreements, covenants and Liens to
which this Lease is expressly subject, whether presently existing, as
are listed on EXHIBIT B or were listed on the UCC lien search results
delivered to the Lessor at or prior to the execution and delivery of
this Lease (and were not required to be terminated as a condition of
the execution and delivery of this Lease), or which may hereafter be
created in accordance with the terms hereof (collectively referred to
herein as the "Permitted Encumbrances"); and the Lessee shall warrant
and defend the Lessor's title to the Leased Property against any and
all claims and demands of every kind and nature whatsoever, subject to
the Permitted Exceptions;
(B) There is no Condemnation or similar proceeding pending
with respect to or affecting the Leased Property, and the Lessee is not
aware, to the best of the Lessee's knowledge and belief, that any such
proceeding is contemplated;
(C) No part of the Collateral or the Leased Property has been
damaged by any fire or other casualty. The Leased Improvements,
Fixtures and Tangible Personal Property are [AND, UPON COMPLETION OF
THE CONSTRUCTION OF THE RENOVATIONS, WILL BE] in good operating
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condition and repair, ordinary wear and tear excepted, free from known
defects in construction or design;
(D) All buildings, facilities and other improvements
necessary, both legally and practically, for the proper and efficient
operation of the Facility are [AND, UPON COMPLETION OF THE CONSTRUCTION
OF THE RENOVATIONS, WILL BE] located upon the Leased Property and all
real property and personal property currently utilized by the Lessee is
included within the definition of the Leased Property or the
Collateral;
(E) The Leased Property abuts on and has direct vehicular
access to a public road or access to a public road via permanent,
irrevocable, appurtenant easements;
(F) The Leased Property constitutes a separate parcel for real
estate tax purposes and no portion of any real property that does not
constitute a portion of the Leased Property is part of the same tax
parcel as any part of the Leased Property;
(G) All utilities necessary for the use and operation of the
Facility are [AND, UPON COMPLETION OF THE CONSTRUCTION OF THE
RENOVATIONS, WILL BE] available to the lot lines of the Leased
Property:
(I) in sufficient supply and capacity;
(II) through validly created and existing easements
of record appurtenant to or encumbering the Leased Property
(which easements shall not impede or restrict the
[CONSTRUCTION OF THE RENOVATIONS OR THE] operation of the
Facility); and
(III) without need for any Permits and/or Contracts
to be issued by or entered into with any Governmental
Authority, except as already obtained or executed, as the case
may be, or as otherwise shown to the satisfaction of the
Lessor to be readily obtainable; and
(H) Except as may be shown on the survey of the Leased
Property that has been reviewed and approved by the Lessor, the Lessee
has made no structural alterations or improvements to any of the Leased
Improvements that changed the foot-print of any of the Leased
Improvements, added an additional story to any of the Leased
Improvements, decreased the amount of parking available on the Leased
Property or otherwise involved any alteration which would be regulated
by applicable zoning requirements.
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10.1.18 THIRD PARTY PAYOR AGREEMENTS.
(A) The Lessee, the Acceptable Licensed Operator (as
applicable) or the Facility is [, OR WILL BE AFTER COMPLETION OF THE
RENOVATIONS] fully qualified as a provider of services under and
participates in all Third Party Payor Programs and referral programs as
is necessary for the prudent operation of the Facility in the Lessee's
good faith exercise of commercially reasonable business judgment.
(B) Attached hereto as EXHIBIT D is a list of national
accounts and local discount agreements, which constitute all of the
agreements between the Lessee or the Facility, on the one hand, and
Third Party Payors on the other hand, pursuant to which the Lessee or
the Facility agrees to provide services based on a discount factor from
the rates regularly charged for services rendered by the Lessee or the
Facility.
(C) No member of the Leasing Group, nor the Facility has any
rate appeal currently pending before any Governmental Authority or any
administrator of any Third Party Payor Program or any other referral
source other than such appeals which, if determined adversely to any
member of the Leasing Group or the Facility would not have a materially
adverse effect, either singly or in the aggregate, on the financial
condition of any member of the Leasing Group or the Facility.
(D) All cost reports and financial reports submitted to any
Third Party Payor with respect to the Facility by any member of the
Leasing Group have been materially accurate and complete and have not
been misleading in any material respect. As a result of any audits by
any Third Party Payor, there are no related recoupment claims made or
contests pending or threatened other than such recoupment claims or
contests which, if determined adversely to any member of the Leasing
Group or the Facility, would not have a materially adverse effect,
either singly or in the aggregate, on the financial condition of any
member of the Leasing Group or the Facility. As of the date hereof, no
cost reports for the Facility remain open or unsettled other than those
listed on EXHIBIT E.
10.1.19 RATE LIMITATIONS. Except as disclosed on EXHIBIT F,
the State currently imposes no restrictions or limitations on rates
which may be charged to private pay residents receiving services at the
Facility.
10.1.20 FREE CARE. Except as disclosed on EXHIBIT G, there are
no Contracts, Permits or Legal Requirements which require that [,
EITHER CONCURRENTLY OR UPON COMPLETION OF CONSTRUCTION OF THE
RENOVATIONS,] a percentage of units or slots in any program at the
Facility be reserved for Medicaid or Medicare eligible patients or that
the Facility provide a certain amount of welfare, free or charity care
or discounted or government assisted resident care.
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10.1.21 NO PROPOSED CHANGES. The Lessee has no actual
knowledge of any Legal Requirements which have been enacted,
promulgated or issued within the eighteen (18) months preceding the
date of this Lease or any proposed Legal Requirements currently pending
in the State which may materially adversely affect rates at the
Facility (or any program operated in conjunction with the Facility) or
the imposition of Medicaid, Medicare, charity, free care, welfare or
other discounted or government assisted residents at the Facility or
require that the Lessee or the Facility obtain a certificate of need,
Section 1122 approval or the equivalent, which the Lessee or the
Facility does not currently possess.
10.1.22 ERISA. No employee pension benefit plan maintained by
any member of the Leasing Group has any accumulated funding deficiency
within the meaning of the ERISA, nor does any member of the Leasing
Group have any material liability to the PBGC established under ERISA
(or any successor thereto) in connection with any employee pension
benefit plan (or other class of benefit which the PBGC has elected to
insure), and there have been no "reportable events" (not waived) or
"prohibited transactions" with respect to any such plan, as those terms
are defined in Section 4043 of ERISA and Section 4975 of the Internal
Revenue Code of 1986, as now or hereafter amended, respectively.
10.1.23 NO BROKER. No member of the Leasing Group nor any of
their respective Affiliates has dealt with any broker or agent in
connection with the transactions contemplated by the Lease Documents.
The Lessor hereby represents and warrants to the Lessee that no
Meditrust Entity has dealt with any broker or agent in connection with
the transactions contemplated by the Lease Documents.
10.1.24 NO IMPROPER PAYMENTS. No member of the Leasing Group
nor, to the best knowledge of the Lessee, any of their respective
Affiliates (other than individuals who are not acting on behalf of any
such non-individual Affiliates) has:
(A) made any contributions, payments or gifts of its funds or
property to or for the private use of any government official,
employee, agent or other Person where either the payment or the purpose
of such contribution, payment or gifts is illegal under the laws of the
United States, any state thereof or any other jurisdiction (foreign or
domestic);
(B) established or maintained any unrecorded fund or asset for
any purpose or has made any false or artificial entries on any of its
books or records for any reason;
(C) made any payments to any Person with the intention or
understanding that any part of such payment was to be used for any
other purpose other than that described in the documents supporting the
payment; or
(D) made any contribution, or has reimbursed any political
gift or contribution made by any other Person, to candidates for public
office, whether federal, state or local, where such contribution would
be in violation of applicable law.
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10.1.25 NOTHING OMITTED.
(A) Neither this Lease, nor any of the other Lease Documents,
nor any certificate, agreement, statement or other document, including,
without limitation, any financial statements concerning the financial
condition of any member of the Leasing Group, furnished to or to be
furnished to the Lessor or its attorneys in connection with the
transactions contemplated by the Lease Documents, contains or will
contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary in order to prevent all statements
contained herein and therein from being misleading.
(B) There is no fact within the special knowledge of the
Lessee which has not been disclosed herein or in writing to the Lessor
that materially adversely affects, or in the future, insofar as the
Lessee can reasonably foresee, may materially adversely affect the
business, properties, assets or condition, financial or otherwise, of
any member of the Leasing Group or the Leased Property.
10.1.26 NO MARGIN SECURITY. The Lessee is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds
of the Meditrust Investment will be used to purchase or carry any
margin security or to extend credit to others for the purpose of
purchasing or carrying any margin security or in any other manner which
would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System. The Lessee is not an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
10.1.27 NO DEFAULT. No event or state of facts which
constitutes, or which, with notice or lapse of time, or both, could
constitute, a Lease Default has occurred and is continuing.
10.1.28 PRINCIPAL PLACE OF BUSINESS. The principal place of
business and chief executive office of the Lessee is located at 450 N.
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 (the "Principal
Place of Business").
10.1.29 LABOR MATTERS. There are no proceedings now pending,
nor, to the best of the Lessee's knowledge, threatened with respect to
the operation of the Facility before the National Labor Relations
Board, State Commission on Human Rights and Opportunities, State
Department of Labor, U.S. Department of Labor or any other Governmental
Authority having jurisdiction of employee rights with respect to
hiring, tenure and conditions of employment, and no member of the
Leasing Group has experienced any material controversy with any
Facility administrator or other employee of similar stature or with any
labor organization.
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10.1.30 INTELLECTUAL PROPERTY. The Lessee is duly licensed or
authorized to use all (if any) copyrights, rights of reproduction,
trademarks, trade-names, trademark applications, service marks, patent
applications, patents and patent license rights, (all whether
registered or unregistered, U.S. or foreign), inventions, franchises,
discoveries, ideas, research, engineering, methods, practices,
processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how and trade secrets which are used
in or necessary for the operation of the Facility in accordance with
its Primary Intended Use, without conflict with or infringement of any,
and subject to no restriction, lien, encumbrance, right, title or
interest in others.
10.1.31 MANAGEMENT AGREEMENTS. There is no Management
Agreement in force and effect as of the date hereof other than the
Current Management Agreement.
10.1.32 FISCAL YEAR. The fiscal year of each of the Lessee and
the Guarantor is the Fiscal Year.
10.1.33 RATES. The Lessee or the Facility, as the case may be,
currently charge those rates for private pay residents set forth on EXHIBIT H,
all of which rates are legal, valid and enforceable rates.
10.2 CONTINUING EFFECT OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term. Notwithstanding the
provisions of the foregoing sentence but without derogation from any other terms
and provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied on
the part of the Lessee, the representations and warranties contained in Sections
10.1.6, 10.1.7, 10.1.10, 10.1.14, 10.1.15, 10.1.17(b), 10.1.17(c), 10.1.18(b),
10.1.18(c), 10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.25(b), 10.1.28, 10.1.29, in
the second sentence of Section 10.1.12, in the second and third sentences of
Section 10.1.13, and in the second and third sentences of Section 10.1.18(d)
shall not constitute continuing representations and warranties throughout the
Term.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 STATUS CERTIFICATES. At any time, and from time to time, upon
request from the Lessor, the Lessee shall furnish to the Lessor, within ten (10)
Business Days' after receipt of such request, an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modifications) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section shall be addressed to any
prospective purchaser or mortgagee of the Leased Property as the Lessor
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may request and may be relied upon by the Lessor and any such prospective
purchaser or mortgagee of the Leased Property.
11.2 FINANCIAL STATEMENTS; REPORTS; NOTICE AND INFORMATION.
11.2.1 OBLIGATION TO FURNISH. The Lessee will furnish and
shall cause to be furnished to the Lessor the following statements,
information and other materials:
(A) ANNUAL STATEMENTS. Within ninety (90) days after
the end of each of their respective fiscal years, (I) a copy
of the Consolidated Financials for each of (X) the Lessee, (Y)
the Guarantor and (Z) any other Acceptable Licensed Operator
for the preceding fiscal year, certified and audited (only
with respect to the Guarantor) by, and with the unqualified
opinion of, independent certified public accountants from a
nationally recognized public accounting firm (it being hereby
acknowledged that KPMG Peat Marwick is acceptable for this
purpose) and certified as true and correct by the Lessee, the
Guarantor or the applicable Acceptable Licensed Operator, as
the case may be (and, without limiting anything else contained
herein, the Consolidated Financials for the Lessee and for any
other Acceptable Licensed Operator shall include a detailed
income statement for Leased Property as of the last day of
such fiscal year and an unaudited statement of earnings from
the Leased Property for such fiscal year showing, among other
things, all rents and other income therefrom and all expenses
paid or incurred in connection with the operation of the
Leased Property); (II) separate statements, certified as true
and correct by the Lessee, the Guarantor and any other
Acceptable Licensed Operator, stating whether, to the best of
the signer's knowledge and belief after making due inquiry,
the Lessee, the Guarantor or such Acceptable Licensed
Operator, as the case may be, is in default in the performance
or observance of any of the terms of this Lease or any of the
other Lease Documents and, if so, specifying all such
defaults, the nature thereof and the steps being taken to
immediately remedy the same; (III) a copy of all letters from
the independent certified accountants engaged to perform the
annual audits referred to above, directed to the management of
the Lessee, the Guarantor or any other Acceptable Licensed
Operator, as the case may be, regarding the existence of any
reportable conditions or material weaknesses and (IV) a
statement certified as true and correct by the Lessee setting
forth any and all Subleases (excluding Resident Agreements) as
of the last day of such fiscal year, the respective areas
demised thereunder, the names of the Sublessees thereunder,
the respective expiration dates of such Subleases, the
respective rentals provided for therein, and such other
information pertaining to such Subleases as may be reasonably
requested by the Lessor and (V) evidence satisfactory to the
Lessor that the Lessee has fulfilled its obligation to make
the Annual Facility Upgrade Expenditure in accordance with the
provisions of Section 8.1.4. Notwithstanding any provisions of
this Section 11.2.1(a) to the contrary, the Lessee may provide
the Lessor with Consolidated Financials covering each of the
Lessee, the Guarantor and any other Acceptable Licensed
Operator in accordance with the aforementioned
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provisions; provided, however, the Lessee shall provide the
Lessor with a separate detailed balance sheet and an unaudited
statement of earnings for the Leased Property.
(B) MONTHLY STATEMENTS OF LESSEE. Within thirty (30)
days after the end of each calendar month during the pendency
of this Lease, (I) an unaudited, detailed month and year to
date income and expense statement for the Leased Property
which shall include a comparison to corresponding budget
figures, occupancy statistics (including the actual number of
residents, the number of units available and total patient
days for such month) and resident mix breakdowns (for each
resident day during such month classifying residents by the
type of care required and source of payment) and (II) an
express written calculation showing the compliance or
non-compliance, as the case may be, with the specific
financial covenants set forth in Section 11.3 for the
applicable period, including, with respect to the calculation
of the Lessee's Rent Coverage Ratio, a schedule substantially
in the form attached hereto as EXHIBIT I (which calculation
with respect to the Lessee's Rent Coverage Ratio shall be
provided only within thirty (30) days after the end of each
Fiscal Year).
(C) [INTENTIONALLY OMITTED].
(D) QUARTERLY STATEMENTS OF THE GUARANTOR. Within
forty-five (45) days after the end of each Fiscal Quarter
ending March 31, June 30 and September 30 respectively, all
10Q reports required to be filed with the Securities and
Exchange Commission for the Guarantor, certified as true and
correct by the Guarantor.
(E) PERMITS AND CONTRACTS. Promptly after the
issuance or the execution thereof, as the case may be, true
and complete copies of (I) all Permits which constitute
operating licenses for the Facility issued by any Governmental
Authority having jurisdiction over assisted living matters and
(II) Contracts (involving payments in the aggregate in excess
of $100,000 per annum), including, without limitation, all
Provider Agreements.
(F) CONTRACT NOTICES. Promptly after the receipt
thereof, true and complete copies of any notices, consents,
terminations or statements of any kind or nature relating to
any of the Contracts (involving payments in the aggregate in
excess of $100,000 per annum) other than those issued in the
ordinary course of business.
(G) PERMIT OR CONTRACT DEFAULTS. Promptly after the
receipt thereof, true and complete copies of all surveys,
follow-up surveys, licensing surveys, complaint surveys,
examinations, compliance certificates, inspection reports,
statements (other than those statements that are issued in the
ordinary course of business), terminations and notices of any
kind (other than those notices that are furnished in the
ordinary course of business) issued or provided to the Lessee
or any other Acceptable Licensed
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Operator by any Governmental Authority, Accreditation Body or
any Third Party Payor, including, without limitation, any
notices pertaining to any delinquency in, or proposed revision
of, the Lessee's or any Acceptable Licensed Operator's
obligations under the terms and conditions of any Permits or
Contracts now or hereafter issued by or entered into with any
Governmental Authority, Accreditation Body or Third Party
Payor and the response(s) thereto made by or on behalf of the
Lessee or any Acceptable Licensed Operator.
(H) OFFICIAL REPORTS. Upon completion or filing
thereof, complete copies of all applications (other than those
that are furnished in the ordinary course of business),
notices (other than those that are furnished in the ordinary
course of business), statements, annual reports, cost reports
and other reports or filings of any kind (other than those
that are furnished in the ordinary course of business)
provided by the Lessee or any other Acceptable Licensed
Operator to any Governmental Authority, Accreditation Body or
any Third Party Payor with respect to the Leased Property.
(I) OTHER INFORMATION. With reasonable promptness,
such other information as the Lessor may from time to time
reasonably request respecting (I) the financial condition and
affairs of each member of the Leasing Group and the Leased
Property and (II) the licensing and operation of the Leased
Property; including, without limitation, audited financial
statements, certificates and consents from accountants and all
other financial and licensing/operational information as may
be required or requested by any Governmental Authority.
(J) DEFAULT CONDITIONS. As soon as possible, and in
any event within five (5) Business Days after the occurrence
of any Lease Default, or any event or circumstance which, with
the giving of notice or the passage of time, or both, could
constitute a Lease Default, a written statement of the Lessee
setting forth the details of such Lease Default, event or
circumstance and the action which the Lessee proposes to take
with respect thereto.
(K) OFFICIAL ACTIONS. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before
any Governmental Authority or Accreditation Body which could
have a material adverse effect on (I) any member of the
Leasing Group to perform any of its obligations under any of
the Lease Documents or (II) the Leased Property.
(L) AUDIT REPORTS. Promptly after receipt, a copy of
all audits or reports submitted to any member of the Leasing
Group by any independent public accountant in connection with
any annual, special or interim audits of the books of any such
member of the Leasing Group and, if requested by the Lessor,
any letter of comments
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directed by such accountant to the management of any such
member of the Leasing Group.
(M) ADVERSE DEVELOPMENTS. Promptly after the Lessee
acquires knowledge thereof, written notice of:
(I) the potential termination of any
Permit or Provider Agreement
necessary for the [CONSTRUCTION OF
THE RENOVATIONS AND/OR] operation
of the Leased Property;
(II) any loss, damage or destruction to
or of the Leased Property in excess
of FIFTY THOUSAND AND NO/100
DOLLARS ($50,000.00) occurring
within any twelve (12) month period
(regardless of whether the same is
covered by insurance);
(III) any material controversy involving
the Lessee or any other Acceptable
Licensed Operator;
(IV) any controversy that calls into
question the eligibility of the
Lessee, any other Acceptable
Licensed Operator or the Facility
for the participation in any
Medicaid, Medicare or other Third
Party Payor Program;
(V) any refusal of reimbursement by any
Third Party Payor which, singularly
or together with all other such
refusals by any Third Party Payors,
could have a material adverse
effect on the financial condition
of the Lessee or any other
Acceptable Licensed Operator; and
(VI) any fact within the special
knowledge of any member of the
Leasing Group, or any other
development in the business or
affairs of any member of the
Leasing Group, which may be
materially adverse to the business,
properties, assets or condition,
financial or otherwise, of any
member of the Leasing Group or the
Leased Property.
(N) INTENTIONALLY OMITTED.
(O) RESPONSES TO INSPECTION REPORTS. Within thirty
(30) days after receipt of an inspection report relating to
the Leased Property from the Lessor, a written response
describing in detail prepared plans to address concerns raised
by the inspection report.
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(P) PUBLIC INFORMATION. Upon the completion or
filing, mailing or other delivery thereof, complete copies of
all financial statements, reports, notices and proxy
statements, if any, sent by any member of the Leasing Group
(which is a publicly held corporation) to its shareholders and
of all reports, if any, filed by any member of the Leasing
Group (which is a publicly held corporation) with any
securities exchange or with the Securities Exchange
Commission.
(Q) ANNUAL BUDGETS. At least thirty (30) days prior
to the end of each Fiscal Year, the Lessee, any Sublessee
and/or any Manager shall submit to the Lessor a preliminary
annual financial budget for the Facility for the next Fiscal
Year, a preliminary capital expenditures budget for the
Facility for the next Fiscal Year and a report detailing the
capital expenditures made in the then current Fiscal Year and
on or before the end of the first month of each Fiscal Year,
the Lessee, any Sublessee and/or any Manager shall submit to
the Lessor revised finalized versions of such budgets and
report.
11.2.2 RESPONSIBLE OFFICER. Any certificate, instrument,
notice, or other document to be provided to the Lessor hereunder by any
member of the Leasing Group shall be signed by an executive officer of
such member (in the event that any of the foregoing is not an
individual), having a position of Vice President or higher and with
respect to financial matters, any such certificate, instrument, notice
or other document shall be signed by the chief financial officer of
such member.
11.2.3 NO MATERIAL OMISSION. No certificate, instrument,
notice or other document, including without limitation, any financial
statements furnished or to be furnished to the Lessor pursuant to the
terms hereof or of any of the other Lease Documents shall contain any
untrue statement of a material fact or shall omit to state any material
fact necessary in order to prevent all statements contained therein
from being misleading.
11.2.4 CONFIDENTIALITY. The Lessor shall not disclose any
information received pursuant to the provisions of the Lease Documents
to any competitor of the Lessee and shall afford any such information
the same degree of confidentiality that the Lessor affords similar
information proprietary to the Lessor; provided, however, that the
Lessor does not in any way warrant or represent that such information
received from any member of the Leasing Group shall remain confidential
(and shall not be liable in any way for any subsequent disclosure of
such information by any Person that the Lessor has provided such
information in accordance with the terms hereof, including, without
limitation, a disclosure by such Person to any competitor of the
Lessee) and provided, further, that the Lessor shall have the
unconditional right to (A) disclose any such information as the Lessor
deems necessary or appropriate in connection with any sale, transfer,
conveyance, participation or assignment of the Leased Property or any
of the Lease Documents or any interest therein and (B) use such
information in any litigation or arbitration proceeding between the
Lessor and any member of the Leasing Group. Without limiting the
foregoing, the Lessor may also utilize
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any information furnished to it hereunder as and to the extent (I)
counsel to the Lessor determines that such utilization is necessary
pursuant to 15 U.S.C. 77a-77aa or 15 U.S.C. 78a-78jj and the rules and
regulations promulgated thereunder, (II) the Lessor is required or
requested by any Governmental Authority to disclose any such
information and/or (III) the Lessor is requested to disclose any such
information by any of the Meditrust Entities' lenders or potential
lenders. The Lessor shall not be liable in any way for any subsequent
disclosure of such information by any Person to whom the Lessor
provided such information in accordance with the terms hereof.
Nevertheless, in connection with any such disclosure, the Lessor shall
inform the recipient of any such information of the confidential nature
thereof. The Lessor shall observe any prohibitions or limitations on
the disclosure of any such information under applicable confidentiality
law or regulations, to the extent that the same are applicable to such
information, including, without limitation, any duly enacted "Patients'
Bill of Rights" or similar legislation, including such limitations as
may be necessary to preserve the confidentiality of the
facility-patient relationship and the physician-patient privilege.
11.3 FINANCIAL COVENANTS. The Lessee covenants and agrees that,
throughout the Term and as long as the Lessee is in possession of the Leased
Property:
11.3.1 RENT COVERAGE RATIO. The Lessee shall comply with the
provisions of the Agreement Regarding Related Lease Transactions
pertaining to Rent Coverage Ratio.
11.3.2 [INTENTIONALLY OMITTED].
11.3.3 [INTENTIONALLY OMITTED].
11.3.4 [INTENTIONALLY OMITTED].
11.3.5 CURRENT RATIO - GUARANTOR. The Guarantor shall achieve,
as of December 31, 1997, a ratio of Consolidated Current Assets to
Consolidated Current Liabilities equal to or greater than 0.5 to 1 and,
as of December 31 of each year thereafter during the Term, a ratio of
Consolidated Current Assets to Consolidated Current Liabilities equal
to or greater than 1.0 to 1; provided however that if a Permitted
Transaction (as defined in Section 16.1(h)(vi)) occurs, or if increased
ratios are triggered by a Permitted Merger pursuant to Section 16.1(i),
then such ratios shall increase to 1.0 to 1.0 and 1.2 to 1.0,
respectively.
11.3.6 NET WORTH OF GUARANTOR AFTER A PERMITTED TRANSACTION OR
PERMITTED MERGER. From and after the occurrence of a Permitted
Transaction or if triggered by a Permitted Merger pursuant to Section
16.1(i), the Guarantor shall maintain a "Net Worth" (determined in
accordance with GAAP) of not less than FIFTY-FIVE MILLION DOLLARS
($55,000,000.00).
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11.3.7 TANGIBLE NET WORTH - GUARANTOR. The Guarantor shall
maintain, at all times, a Tangible Net Worth of not less than FORTY
MILLION AND NO/100 DOLLARS ($40,000,000.00).
11.3.8 NO INDEBTEDNESS. The Lessee shall not create, incur,
assume or suffer to exist any liability for borrowed money except (I)
Indebtedness to the Lessor under the Lease Documents and, (II)
Impositions allowed pursuant to the provisions of the Lease, (III)
unsecured normal trade debt incurred upon customary terms in the
ordinary course of business, (IV) Indebtedness created in connection
with any financing of any Capital Addition, provided, that each such
financing has been approved by the Lessor in accordance with the terms
of Article 9 hereof, (V) Indebtedness to any Affiliate, provided, that,
such Indebtedness is fully subordinated to the Lease Obligations
pursuant to the Affiliated Party Subordination Agreement, (VI) other
Indebtedness of the Lessee in the aggregate amount not to exceed TWO
HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00) incurred, for the
exclusive use of the Leased Property, on account of purchase money
indebtedness or finance lease arrangements, each of which shall not
exceed the fair market value of the assets or property acquired or
leased and shall not extend to any assets or property other than those
purchased or leased and (VII) purchase money security interests in
equipment and equipment leases which comply with the provisions of
Section 6.1.2.
11.3.9 NO GUARANTIES. The Lessee shall not assume, guarantee,
endorse, contingently agree to purchase or otherwise become directly or
contingently liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise to invest in any debtor or
otherwise to assure any creditor against loss) in connection with any
Indebtedness of any other Person, except by the endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
11.4 AFFIRMATIVE COVENANTS. The Lessee covenants and agrees that
throughout the Term and any periods thereafter that the Lessee remains in
possession of the Leased Property:
11.4.1 MAINTENANCE OF EXISTENCE. If the Lessee is a
corporation, trust or partnership, during the entire time that this
Lease remains in full force and effect, the Lessee shall keep in effect
its existence and rights as a corporation, trust or partnership under
the laws of the state of its incorporation or formation and its right
to own property and transact business in the State.
11.4.2 MATERIALS. Except as provided in Section 6.1.2, the
Lessee shall not suffer the use in connection with any renovations or
other construction relating to the Leased Property of any materials,
fixtures or equipment intended to become part of the Leased Property
which are purchased upon lease or conditional bill of sale or to which
the Lessee does not have absolute and unencumbered title, and the
Lessee covenants to cause to be paid punctually all sums becoming due
for labor, materials, fixtures or equipment used or
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purchased in connection with any such renovations or construction,
subject to the Lessee's right to contest to the extent provided for in
Article 15.
11.4.3 COMPLIANCE WITH LEGAL REQUIREMENTS AND APPLICABLE
AGREEMENTS. The Lessee and the Leased Property and all uses thereof
shall comply with (I) all Legal Requirements, (II) all Permits and
Contracts, (III) all Insurance Requirements, (IV) the Lease Documents,
(V) the Permitted Encumbrances and (VI) the Appurtenant Agreements.
11.4.4 BOOKS AND RECORDS. The Lessee shall cause to be kept
and maintained, and shall permit the Lessor and its representatives to
inspect at all reasonable times, accurate books of accounts in which
complete entries will be made in accordance with GAAP reflecting all
financial transactions of the Lessee (showing, at a minimum, all income
and expenses of the Leased Property as a discernable component of such
books of account).
11.4.5 PARTICIPATION IN THIRD PARTY PAYOR PROGRAMS. The Lessee
and any other Acceptable Licensed Operator shall participate in all
Third Party Payor Programs (which would be participated in by a prudent
operator in the good faith exercise of commercially reasonable business
judgment), in accordance with all requirements thereof (including,
without limitation, all applicable Provider Agreements), and shall
remain eligible to participate in such Third Party Payor Programs, all
as shall be necessary for the prudent operation of the Facility in the
good faith exercise of commercially reasonable business judgment.
11.4.6 CONDUCT OF ITS BUSINESS. The Lessee will maintain, and
cause any Sublessee and any Manager to maintain, experienced and
competent professional management with respect to its business and with
respect to the Leased Property. The Lessor agrees that management by
the executive officers listed on EXHIBIT J attached hereto is
satisfactory for the purposes of this provision. The Lessee, any
Sublessee and any Manager shall conduct, in the ordinary course, the
operation of the Facility, and the Lessee and any other Acceptable
Licensed Operator (other than the Guarantor, if applicable) shall not
enter into any other business or venture during the Term or such time
as the Lessee or any other Acceptable Licensed Operator is in
possession of the Leased Property, other than the development,
ownership and/or operation of any other health care facility owned or
financed by any Meditrust Entity.
11.4.7 ADDRESS. The Lessee shall provide the Lessor thirty
(30) days' prior written notice of any change of its Principal Place of
Business from its current Principal Place of Business. The Lessee shall
maintain the Collateral, including without limitation, all books and
records relating to its business, solely at its Principal Place of
Business and at the Leased Property. The Lessee shall not remove the
Collateral, including, without limitation, any books or records
relating to the Lessee's business from either the Leased Property or
the Lessee's Principal Place of Business.
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11.4.8 SUBORDINATION OF AFFILIATE TRANSACTIONS. Without
limiting the provisions of any other Section of this Lease or the
Affiliated Party Subordination Agreement, any payments to be made by
the Lessee to (A) any member of the Leasing Group (or any Affiliate of
any member of the Leasing Group) or (B) any Affiliate of the Lessee, in
connection with any transaction between the Lessee and such Person,
including, without limitation, the purchase, sale or exchange of any
property, the rendering of any service to or with any such Person
(including, without limitation, all allocations of any so-called
corporate or central office costs, expenses and charges of any kind or
nature) or the making of any loan or other extension of credit or the
making of any equity investment, shall be subordinate to the complete
payment and performance of the Lease Obligations; provided, however,
that all such subordinated payments may be paid at any time unless: (X)
after giving effect to such payment, the Lessee shall be unable to
comply with any of its obligations under any of the Lease Documents or
(Y) a Lease Default has occurred and is continuing and has not been
expressly waived in writing by the Lessor or an event or state of facts
exists, which, with the giving of notice or the passage of time, or
both, would constitute a Lease Default.
11.4.9 INSPECTION. At reasonable times and upon reasonable
notice, the Lessee shall permit (and shall cause any other Acceptable
Licensed Operator to permit) the Lessor and its authorized
representatives (including, without limitation, the Consultants) to
inspect the Leased Property as provided in Section 7.1 above.
11.4.10 ADDITIONAL PROPERTY. In the event that at any time
during the Term, the Lessee holds the fee title to or a leasehold
interest in (A) any personal property which was purchased or financed
by a Meditrust Entity or which replaces any personal property purchased
or financed by a Meditrust Entity or which is a Fixture or (B) any real
property and such real or personal property is used as an integral part
of the operation of the Leased Property (but is not subject to this
Lease), the Lessee shall (I) provide the Lessor with prior notice of
such acquisition and (II) shall take such actions and enter into such
agreements as the Lessor shall reasonably request in order to grant the
Lessor a first priority mortgage or other security interest in such
real property and personal property, subject only to the Permitted
Encumbrances and other Liens reasonably acceptable to the Lessor.
11.4.11 ACCEPTABLE LICENSED OPERATOR. In the event that the
Lessee proposes that any other Acceptable Licensed Operator become the
licensed operator of the Facility, the Lessee shall so advise the
Lessor and, subject to the Lessor's review and approval of any
applicable Sublease or Management Agreement (pursuant to which the
proposed Acceptable Licensed Operator shall operate the Facility), the
Lessor shall consent to such operation of the Facility by the proposed
Acceptable Licensed Operator, as long as, prior to or contemporaneously
with the commencement of the operation of the Facility by such proposed
Acceptable Licensed Operator and without limiting any other terms and
conditions of the Lease Documents, the Lessor receives (A) such
evidence as the Lessor may request evidencing that the proposed
Acceptable Licensed Operator has received all Permits necessary for the
operation of the Facility in accordance with its Primary Intended Use,
(B)
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such documents executed by the proposed Acceptable Licensed Operator as
the Lessor may request to maintain and protect the Lessor's security
for the Lease Obligations (including, without limitation, documents in
form and substance substantially similar to the Permits Assignment and
Security Agreement), (C) a copy of the proposed Acceptable Licensed
Operator's articles of incorporation as certified by the Secretary of
State of the state of its incorporation, (D) a certificate of the
Secretary of State of the state of incorporation of the proposed
Acceptable Licensed Operator to the effect that the proposed Acceptable
Licensed Operator is in legal existence and good standing on the
records of such Secretary of State as of the date of such Certificate,
(E) a copy of the by-laws of the proposed Acceptable Licensed Operator
as certified by the Secretary of the proposed Acceptable Licensed
Operator, (F) resolutions certified by the Secretary of the proposed
Acceptable Licensed Operator evidencing the execution and delivery of
the documents required under this Section 11.4.11 by the Lessor and (G)
if requested by the Lessor, a due authorization and enforceability
opinion, addressed to the Lessor, in form and substance reasonably
acceptable to the Lessor, rendered by counsel to the Lessee and the
proposed Acceptable Licensed Operator, opining as to the due
authorization, execution, delivery and enforceability of the documents
required under this Section 11.4.11 by the Lessor.
11.4.12 [INTENTIONALLY OMITTED].
11.5 ADDITIONAL NEGATIVE COVENANTS. The Lessee covenants and agrees
that, throughout the Term and such time as the Lessee remains in possession of
the Leased Property:
11.5.1 RESTRICTIONS RELATING TO LESSEE. Except as may
otherwise be expressly provided in any of the other Lease Documents,
the Lessee shall not, without the prior written consent of the Lessor,
in each instance, which consent may be withheld in the sole and
absolute discretion of the Lessor:
(A) convey, assign, hypothecate, transfer, dispose of
or encumber, or permit the conveyance, assignment, transfer,
hypothecation, disposal or encumbrance of all or any part of
any legal or beneficial interest in this Lease, its other
assets or the Leased Property; provided, however, that this
restriction shall not apply to (I) the Permitted Encumbrances
that may be created after the date hereof pursuant to the
Lease Documents; (II) Liens created in accordance with the
applicable provisions of Section 6.1.2 against Tangible
Personal Property securing Indebtedness permitted under
Section 11.3.8(vi) relating to equipment leasing or financing
for the exclusive use of the Leased Property; (III) the sale,
conveyance, assignment, hypothecation, lease or other transfer
of any material asset or assets (whether now owned or
hereafter acquired), the fair market value of which equals or
is less than TWENTY-FIVE THOUSAND AND NO/100 DOLLARS
($25,000.00), individually, or ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00) collectively; (IV) without limitation as
to amount, the disposition in the ordinary course of business
of any obsolete, worn out or defective fixtures, furnishings
or equipment used in the
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operation of the Leased Property provided that the same are
replaced with fixtures, furnishings or equipment of equal or
greater utility or value or the Lessee provides the Lessor
with an explanation (reasonably satisfactory to the Lessor) as
to why such fixtures, furnishings or equipment is no longer
required in connection with the operation of the Leased
Property; (V) without limitation as to amount, any sale of
inventory by the Lessee in the ordinary course of business;
(VI) agreements entered into with utility companies creating
easements in favor of such companies as are required to
service the Facility, provided, however, the term of any such
agreement shall not extend beyond the Term and shall be in
form reasonably acceptable to the Lessor; and (VII) subject to
the terms of the Pledge Agreement and the Affiliated Party
Subordination Agreement, distributions to the shareholders of
the Lessee;
(B) permit the use of the Facility for any purpose
other than the Primary Intended Use and the Other Permitted
Uses;
(C) subject to the terms of Section 11.4.11, permit
any Person other than the Lessee to be the Licensed Operator
of the Facility; or
(D) liquidate, dissolve or merge or consolidate with
any other Person.
11.5.2 NO LIENS. The Lessee will not directly or indirectly
create or allow to remain and will promptly discharge at its expense
any Lien, title retention agreement or claim upon or against the Leased
Property (including the Lessee's interest therein) or the Lessee's
interest in this Lease or any of the other Lease Documents, or in
respect of the Rent, excluding (A) this Lease and any permitted
Subleases, (B) the Permitted Encumbrances, (C) Liens which are
consented to in writing by the Lessor, (D) Liens for those taxes of the
Lessor which the Lessee is not required to pay hereunder, (E) Liens of
mechanics, laborers, materialmen, suppliers or vendors for sums either
not yet due or being contested in strict compliance with the terms and
conditions of Article 15, (F) any Liens which are the responsibility of
the Lessor pursuant to the provisions of Article 20, (G) Liens for
Impositions which are either not yet due and payable or which are in
the process of being contested in strict compliance with the terms and
conditions of Article 15 and (H) involuntary Liens caused by the
actions or omissions of the Lessor.
11.5.3 LIMITS ON AFFILIATE TRANSACTIONS. The Lessee shall not
enter into any transaction with any Affiliate, including, without
limitation, the purchase, sale or exchange of any property, the
rendering of any service to or with any Affiliate and the making of any
loan or other extension of credit, except in the ordinary course of,
and pursuant to the reasonable requirements of, the Lessee's business
and upon fair and reasonable terms no less favorable to the Lessee than
would be obtained in a comparable arms'-length transaction with any
Person that is not an Affiliate.
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11.5.4 NON-COMPETITION. The Lessee acknowledges that upon and
after any termination of this Lease, any competition by any member of
the Leasing Group with any subsequent owner or subsequent lessee of the
Leased Property (the "Purchaser") would cause irreparable harm to the
Lessor and any such Purchaser. To induce the Lessor to enter into this
Lease, the Lessee agrees that, from and after the end of the seventh
(7th) Lease Year and thereafter until the later of (A) the expiration
of this Lease or (B) the fifth (5th) anniversary of the termination of
this Lease on account of a Lease Default, without the prior written
consent of the Lessor (which consent shall not be unreasonably withheld
or delayed), no member of the Leasing Group nor any Subsidiary of any
member of the Leasing Group (collectively, the "Limited Parties") shall
be involved in any capacity in or lend any of their names to or engage
in any capacity in any assisted living facility (or other facility
operated for any use included within the definition of the Primary
Intended Use), center, unit or program (or in any Person engaged in any
such activity or any related activity competitive therewith), excluding
however any of the facilities described on Schedule 11.5 attached
hereto (collectively, the "Excluded Facilities"), whether such
competitive activity (the "Competitive Activity") shall be as an
officer, director, owner, employee, agent, advisor, independent
contractor, developer, lender, sponsor, venture capitalist,
administrator, manager, investor, partner, joint venturer, consultant
or other participant in any capacity whatsoever with respect to an
assisted living facility (or other facility operated for any use
included within the definition of Primary Intended Use), center, unit
or program located within a seven (7) mile radius of the Leased
Property.
The Lessee hereby acknowledges and agrees that none of the
time span, scope or area covered by the foregoing restrictive covenants
is or are unreasonable and that it is the specific intent of the Lessee
that each and all of the restrictive covenants set forth hereinabove
shall be valid and enforceable as specifically set forth herein. The
Lessee further agrees that these restrictions are special, unique,
extraordinary and reasonably necessary for the protection of the Lessor
and any Purchaser and that the violation of any such covenant by any of
the Limited Parties would cause irreparable damage to the Lessor and
any Purchaser for which a legal remedy alone would not be sufficient to
fully protect such parties.
Therefore, in addition to and without limiting any other
remedies available at law or hereunder, in the event that any of the
Limited Parties breaches any of the restrictive covenants hereunder or
shall threaten breach of any of such covenants, then the Lessor and any
Purchaser shall be entitled to obtain equitable remedies, including
specific performance and injunctive relief, to prevent or otherwise
restrain a breach of this Section 11.5.4 (without the necessity of
posting a bond) and, unless the Lessee prevails, to recover any and all
costs and expenses (including, without limitation, attorneys' fees and
expenses and court costs) reasonably incurred in enforcing the
provisions of this Section 11.5.4. The existence of any claim or cause
of action of any of the Limited Parties or any member of the Leasing
Group against the Lessor or any Purchaser, whether predicated on this
Lease or otherwise, shall not constitute a defense to the enforcement
by the Lessor or any Purchaser of the foregoing
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restrictive covenants and the Limited Parties shall not defend on the
basis that there is an adequate remedy at law.
Without limiting any other provision of this Lease, the
parties hereto acknowledge that the foregoing restrictive covenants are
severable and separate. If at any time any of the foregoing restrictive
covenants shall be deemed invalid or unenforceable by a court having
jurisdiction over this Lease, by reason of being vague or unreasonable
as to duration, or geographic scope or scope of activities restricted,
or for any other reason, such covenants shall be considered divisible
as to such portion and such covenants shall be immediately amended and
reformed to include only such covenants as are deemed reasonable and
enforceable by the court having jurisdiction over this Lease to the
full duration, geographic scope and scope of restrictive activities
deemed reasonable and thus enforceable by said court; and the parties
agree that such covenants as so amended and reformed, shall be valid
and binding as through the invalid or unenforceable portion has not
been included therein.
The provisions of this Section 11.5.4 shall survive the
termination of the Lease and any satisfaction of the Lease Obligations
in connection therewith or subsequent thereto. The parties hereto
acknowledge and agree that any Purchaser may enforce the provisions of
this Section 11.5.4 as a third party beneficiary.
11.5.5 NO DEFAULT. The Lessee shall not commit any default or
breach under any of the Lease Documents.
11.5.6 RESTRICTIONS RELATING TO THE GUARANTOR. If, at any time
during the Term, the Tangible Net Worth of the Guarantor is less than
FORTY MILLION AND NO/100 ($40,000,000.00), the Guarantor shall not,
without the prior written consent of the Lessor, in each instance,
which consent may be withheld in the sole and absolute discretion of
the Lessor, convey, assign, donate, sell, mortgage or pledge any real
or personal property or take any other action which would have a
materially adverse effect upon the Tangible Net Worth or general
financial condition of the Guarantor.
11.5.7 [INTENTIONALLY OMITTED].
11.5.8 ERISA. The Lessee shall not establish or permit any
Sublessee to establish any new pension or defined benefit plan or
modify any such existing plan for employees subject to ERISA, which
plan provides any benefits based on past service without the advance
consent of the Lessor to the amount of the aggregate past service
liability thereby created, which consent shall not be unreasonably
withheld.
11.5.9 FORGIVENESS OF INDEBTEDNESS. The Lessee will not waive,
or permit any Sublessee or Manager which is an Affiliate of the Lessee
or the Guarantor to waive any debt or claim, except in the ordinary
course of its business.
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11.5.10 VALUE OF ASSETS. Except as disclosed in the financial
statements provided to the Lessor as of the date hereof, the Lessee
will not write up (by creating an appraisal surplus or otherwise) the
value of any assets of the Lessee above their cost to the Lessee, less
the depreciation regularly allowable thereon, unless the same is
allowed to be done by GAAP in the normal course of business.
11.5.11 CHANGES IN FISCAL YEAR AND ACCOUNTING PROCEDURES. The
Lessee may (A) change its fiscal year or capital structure or (B)
change, alter, amend or modify, but only in accordance with GAAP, any
of its current accounting procedures related to the method of revenue
recognition, billing procedures or determinations of doubtful accounts
or bad debt expenses or (C) permit any of its Subsidiaries to change
its fiscal year provided that (I) the Lessee shall have notified the
Lessor of any such change not less than thirty (30) days prior to the
proposed effective date of such change and shall have promptly
furnished to the Lessor all such financial information as the Lessor
may have reasonably requested in order to determine the impact of such
change on the Lessee's financial statements, (II) no such change shall
be permitted if its effect would be to enable the Lessee to satisfy any
covenant contained in this Lease which, absent such change, would not
have been satisfied and (III) the Lessee shall have entered into any
amendment to this Lease which the Lessor shall have reasonably
requested in order to maintain the intended effect of the covenants
contained in this Lease.
11.5.12 [INTENTIONALLY OMITTED]
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 GENERAL INSURANCE REQUIREMENTS. During the Term of this Lease and
thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the Lessee shall at its sole cost and expense keep the
Leased Property and the Tangible Personal Property located thereon and the
business operations conducted on the Leased Property insured as set forth below.
12.1.1 TYPES AND AMOUNTS OF INSURANCE. The Lessee's insurance
shall include the following:
(A) property loss and physical damage insurance on an
all-risk basis (with only such exceptions as the Lessor may in
its reasonable discretion approve) covering the Leased Property
(exclusive of Land) for its full replacement cost, which cost
shall be reset once a year at the Lessor's option, with an
agreed-amount endorsement and a deductible not in excess of
FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00). Such insurance
shall include, without limitation, the following
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coverages: (I) increased cost of construction, (II) cost of
demolition, (III) the value of the undamaged portion of the
Facility and (IV) contingent liability from the operation of
building laws, less exclusions provided in the normal "All
Risk" insurance policy. During any period of construction,
such insurance shall be on a builder's-risk, completed value,
non-reporting form with permission to occupy;
(B) flood insurance (if the Leased Property or any
portion thereof is situated in an area which is considered a
flood risk area by the U.S. Department of Housing and Urban
Development or any other Governmental Authority that may in
the future have jurisdiction over flood risk analysis) in
limits acceptable to the Lessor;
(C) boiler and machinery insurance (including related
electrical apparatus and components) under a standard
comprehensive form, providing coverage against loss or damage
caused by explosion of steam boilers, pressure vessels or
similar vessels, now or hereafter installed on the Leased
Property, in limits acceptable to the Lessor;
(D) earthquake insurance (if deemed necessary by the
Lessor) in limits and with deductibles acceptable to the
Lessor;
(E) business interruption and/or rent loss insurance
in an amount equal to the annual Base Rent and Additional Rent
due hereunder plus the aggregate sum of the Impositions
relating to the Leased Property due and payable during one
year;
(F) comprehensive general public liability insurance
including coverages commonly found in the Broad Form
Commercial Liability Endorsements with amounts not less than
FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00) per occurrence
with respect to bodily injury and death and THREE MILLION AND
NO/100 DOLLARS ($3,000,000.00) for property damage and with
all limits based solely upon occurrences at the Leased
Property without any other impairment;
(G) professional liability insurance in an amount not
less than TEN MILLION AND NO/100 DOLLARS ($10,000,000.00) for
each medical incident;
(H) physical damage insurance on an all-risk basis
(with only such exceptions as the Lessor in its reasonable
discretion shall approve) covering the Tangible Personal
Property for the full replacement cost thereof and with a
deductible not in excess of one percent (1%) of the full
replacement cost thereof;
(I) Workers' Compensation and Employers' Liability
Insurance providing protection against all claims arising out
of injuries to all employees of the Lessee or of any Sublessee
(employed on the Leased Property or any portion thereof) in
amounts equal for Workers' Compensation, to the statutory
benefits payable to
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employees in the State and for Employers' Liability, to limits
of not less than ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00) for injury by accident, ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($100,000.00) per employee for disease and FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00) disease
policy limit;
(J) subsidence insurance (if deemed necessary by the
Lessor) in limits acceptable to the Lessor; and
(K) such other insurance as the Lessor from time to
time may reasonably require and also, as may from time to time
be required by applicable Legal Requirements and/or by any Fee
Mortgagee (other than a Meditrust Entity); provided, however,
that the cost of any additional insurance required by any Fee
Mortgagee shall be borne by the Lessor.
12.1.2 INSURANCE COMPANY REQUIREMENTS. All such insurance
required by this Lease or the other Lease Documents shall be issued and
underwritten by insurance companies licensed to do insurance business
by, and in good standing under the laws of, the State and which
companies have and maintain a rating of A- or better by A.M. Best Co.
12.1.3 POLICY REQUIREMENTS. Every policy of insurance from
time to time required under this Lease or any of the other Lease
Documents (other than worker's compensation) shall name the Lessor as
owner, loss payee, secured party (to the extent applicable) and an
additional named insured as its interests may appear. To the extent
appropriate, the same policies may be used to insure the Lessee's
various interests in the Leased Property and to provide liability
coverage to the Lessee as long as combining the interests of the Lessor
and the Lessee in a single policy in no way impairs or diminishes the
Lessor's rights in such policies. If an insurance policy covers
properties other than the Leased Property, then the Lessor shall be so
named with respect only to the Leased Property. Each such policy, where
applicable or appropriate, shall:
(A) include an agreed amount endorsement and loss
payee, additional named insured and secured party
endorsements, in forms acceptable to the Lessor in its sole
and absolute discretion;
(B) include mortgagee, secured party, loss payable
and additional named insured endorsements reasonably
acceptable to each Fee Mortgagee; provided, however, that the
cost of any additional insurance required by any Fee Mortgagee
shall be borne by the Lessor.
(C) provide that the coverages may not be canceled or
materially modified except upon thirty (30) days' prior
written notice to the Lessor and any Fee Mortgagee;
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(D) be payable to the Lessor and any Fee Mortgagee
notwithstanding any defense or claim that the insurer may have
to the payment of the same against any other Person holding
any other interest in the Leased Property;
(E) be endorsed with standard noncontributory clauses
in favor of and in form reasonably acceptable to the Lessor
and any Fee Mortgagee; provided, however, that the cost of any
additional insurance required by any Fee Mortgagee shall be
borne by the Lessor.
(F) expressly waive any right of subrogation on the
part of the insurer against the Lessor, any Fee Mortgagee or
the Leasing Group; and
(G) otherwise be in such forms as shall be reasonably
acceptable to the Lessor.
12.1.4 NOTICES; CERTIFICATES AND POLICIES. The Lessee shall
promptly provide to the Lessor copies of any and all notices (including
notice of non-renewal), claims and demands which the Lessee receives
from insurers of the Leased Property. At least ten (10) days prior to
the expiration of any insurance policy required hereunder, the Lessee
shall deliver to the Lessor certificates and evidence of insurance
relating to all renewals and replacements thereof, together with
evidence, satisfactory to the Lessor, of payment of the premiums
thereon. The Lessee shall deliver to the Lessor original counterparts
or copies certified by the insurance company to be true and complete
copies, of all insurance policies required hereunder not later than the
earlier to occur of (A) ninety (90) days after the effective date of
each such policy and (B) ten (10) days after receipt thereof by the
Lessee.
12.1.5 LESSOR'S RIGHT TO PLACE INSURANCE. If the Lessee shall
fail to obtain any insurance policy required hereunder by the Lessor,
or shall fail to deliver the certificate and evidence of insurance
relating to any such policy to the Lessor, or if any insurance policy
required hereunder (or any part thereof) shall expire or be canceled or
become void or voidable by reason of any breach of any condition
thereof, or if the Lessor determines that such insurance coverage is
unsatisfactory by reason of the failure or impairment of the capital of
any insurance company which wrote any such policy, upon demand by the
Lessor, the Lessee shall promptly obtain new or additional insurance
coverage on the Leased Property, or for those risks required to be
insured by the provisions hereof, satisfactory to the Lessor, and, at
its option, if the Lessee fails to obtain any insurance coverage
required under this Lease or after demand by the Lessor, the Lessor may
obtain such insurance and pay the premium or premiums therefor; in
which event, any amount so paid or advanced by the Lessor and all costs
and expenses incurred in connection therewith (including, without
limitation, attorneys' fees and expenses and court costs), shall be a
demand obligation of the Lessee to the Lessor, payable as an Additional
Charge.
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12.1.6 PAYMENT OF PROCEEDS. All insurance policies required
hereunder (except for general public liability, professional liability
and workers' compensation and employers liability insurance) shall
provide that, in the event of loss, injury or damage, all proceeds
shall be paid to the Lessor alone (rather than jointly to the Lessee
and the Lessor). The Lessor is hereby authorized to adjust and
compromise any such loss with the consent of the Lessee or, following
any Lease Default, if not cured, without the consent of the Lessee, and
to collect and receive such proceeds in the name of the Lessor and the
Lessee, and the Lessee appoints the Lessor (or any agent designated by
the Lessor) as the Lessee's attorney-in-fact with full power of
substitution, to endorse the Lessee's name upon any check in payment
thereof. Subject to the provisions of Article 13, such insurance
proceeds shall be applied first toward reimbursement of all costs and
expenses reasonably incurred by the Lessor in collecting said insurance
proceeds, then toward payment of the Lease Obligations or any portion
thereof, then due and payable, in such order as the Lessor determines,
and then in whole or in part toward restoration, repair or
reconstruction of the Leased Property for which such insurance proceeds
shall have been paid.
12.1.7 IRREVOCABLE POWER OF ATTORNEY. The power of attorney
conferred on the Lessor pursuant to the provisions of this Section
12.1, being coupled with an interest, shall be irrevocable for as long
as this Lease is in effect or any Lease Obligations are outstanding,
shall not be affected by any disability or incapacity which the Lessee
may suffer and shall survive the same. Such power of attorney is
provided solely to protect the interests of the Lessor and shall not
impose any duty on the Lessor to exercise any such power, and neither
the Lessor nor such attorney-in-fact shall be liable for any act,
omission, error in judgment or mistake of law, except as the same may
result from its gross negligence or wilful misconduct.
12.1.8 BLANKET POLICIES. Notwithstanding anything to the
contrary contained herein, the Lessee's obligations to carry the
insurance provided for herein may be brought within the coverage of a
so-called blanket policy or policies of insurance carried and
maintained by the Lessee and its Affiliates; provided, however, that
the coverage afforded to the Lessor shall not be reduced or diminished
or otherwise be different from that which would exist under a separate
policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided, further that the
requirements of this Section 12.1 are otherwise satisfied.
12.1.9 NO SEPARATE INSURANCE. The Lessee shall not, on the
Lessee's own initiative or pursuant to the request or requirement of
any other Person, take out separate insurance concurrent in form or
contributing in the event of loss with the insurance required hereunder
to be furnished by the Lessee, or increase the amounts of any then
existing insurance by securing an additional policy or additional
policies, unless (A) all parties having an insurable interest in the
subject matter of the insurance, including the Lessor, are included
therein as additional insureds and (B) losses are payable under said
insurance in the same manner as losses are required to be payable under
this Lease. The Lessee shall immediately
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notify the Lessor of the taking out of any such separate insurance or
of the increasing of any of the amounts of the then existing insurance
by securing an additional insurance policy or policies.
12.1.10 ASSIGNMENT OF UNEARNED PREMIUMS. The Lessee hereby
assigns to the Lessor all rights of the Lessee in and to any unearned
premiums on any insurance policy required hereunder to be furnished by
the Lessee which may become payable or are refundable after the
occurrence of an Event of Default hereunder. In the event that this
Lease is terminated for any reason (other than the purchase of the
Leased Property by the Lessee), the insurance policies required to be
maintained hereunder, including all right, title and interest of the
Lessee thereunder, shall become the absolute property of the Lessor.
In the event that this Lease is terminated for any reason
(other than the purchase of the Leased Property by the Lessee), the
insurance policies required to be maintained hereunder, excluding
Workers' Compensation and Employers Liability Insurance, shall continue
to be maintained for a period of fifteen (15) days following such
termination; provided, however, that the Lessee shall not be obligated
to maintain commercial general liability and professional liability
insurance for such fifteen (15) day period to the extent that any such
insurance is unavailable from the then current insurer as a result of
any such termination. The provisions of this Section 12.1.10 shall
survive any termination of this Lease.
12.2 INDEMNITY.
12.2.1 INDEMNIFICATION. Except with respect to the gross
negligence or wilful misconduct of the Lessor or any of the other
Indemnified Parties, as to which no indemnity is provided, the Lessee
hereby agrees to defend with counsel acceptable to the Lessor,
indemnify and hold harmless the Lessor and each of the other
Indemnified Parties from and against all damages, losses, claims,
liabilities, obligations, penalties, causes of action, costs and
expenses (including, without limitation, attorneys' fees, court costs
and other expenses of litigation) suffered by, or claimed or asserted
against, the Lessor or any of the other Indemnified Parties, directly
or indirectly, based on, arising out of or resulting from (A) the use
and occupancy of the Leased Property or any business conducted therein,
(B) any act, fault, omission to act or misconduct by (I) any member of
the Leasing Group, (II) any Affiliate of the Lessee or (III) any
employee, agent, licensee, business invitee, guest, customer,
contractor or sublessee of any of the foregoing parties, relating to,
directly or indirectly, the Leased Property, (C) any accident, injury
or damage whatsoever caused to any Person, including, without
limitation, any claim of malpractice, or to the property of any Person
in or about the Leased Property or outside of the Leased Property where
such accident, injury or damage results or is claimed to have resulted
from any act, fault, omission to act or misconduct by any member of the
Leasing Group or any Affiliate of the Lessee or any employee, agent,
licensee, contractor or sublessee of any of the foregoing parties, (D)
any Lease Default, (E) any claim brought or threatened against any of
the Indemnified Parties by
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any member of the Leasing Group (unless such member of the Leasing
Group prevails in such claim against one of the Indemnified Parties) or
by any other Person on account of (I) the Lessor's relationship with
any member of the Leasing Group pertaining in any way to the Leased
Property and/or the transaction evidenced by the Lease Documents and/or
(II) the Lessor's negotiation of, entering into and/or performing any
of its obligations and/or exercising any of its right and remedies
under any of the Lease Documents, (F) any attempt by any member of the
Leasing Group or any Affiliate of the Lessee to transfer or relocate
any of the Permits to any location other than the Leased Property
and/or (G) the enforcement of this indemnity. Any amounts which become
payable by the Lessee under this Section 12.2.1 shall be a demand
obligation of the Lessee to the Lessor, payable as an Additional
Charge. The indemnity provided for in this Section 12.2.1 shall survive
any termination of this Lease.
12.2.2 INDEMNIFIED PARTIES. As used in this Lease the term
"Indemnified Parties" shall mean the Meditrust Entities, any Fee
Mortgagee which is an Affiliate of Meditrust and their respective
successors, assigns, employees, servants, agents, attorneys, officers,
directors, shareholders, partners and owners.
12.2.3 DEFENSE OF ACTIONS BY THE LESSEE. The Lessee's
obligation to defend, set forth in Section 12.2.1 above, may be
satisfied by the defense of such actions by counsel retained by any
insurance carrier having an obligation to defend any such action
provided the counsel is acceptable to the Lessor in its reasonable
discretion. Further, if the insurance carrier having the obligation to
defend such action makes available insurance proceeds for the payment
of defense rather than retaining its own defense counsel, then such
insurance proceeds shall be made available to the Lessee to defray the
costs of such defense.
12.2.4 LIMITATION ON LESSOR LIABILITY. Neither the Lessor nor
any Affiliate of the Lessor shall be liable to any member of the
Leasing Group or any Affiliate of any member of the Leasing Group, or
to any other Person whatsoever for any damage, injury, loss,
compensation, or claim (including, but not limited to, any claim for
the interruption of or loss to any business conducted on the Leased
Property) based on, arising out of or resulting from any cause
whatsoever, including, but not limited to, the following: (A) repairs
to the Leased Property, (B) interruption in use of the Leased Property;
(C) any accident or damage resulting from the use or operation of the
Leased Property or any business conducted thereon; (D) the termination
of this Lease by reason of Casualty or Condemnation, (E) any fire,
theft or other casualty or crime, (F) the actions, omissions or
misconduct of any other Person, (G) damage to any property, or (H) any
damage from the flow or leaking of water, rain or snow. All Tangible
Personal Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of the Lessee and the Lessor
shall not in any manner be held responsible therefor. Notwithstanding
the foregoing, the Lessor shall not be released from liability for any
injury, loss, damage or liability suffered directly by the Lessee to
the extent caused directly by the gross negligence or willful
misconduct of the Lessor, any Affiliate of the Lessor or any of their
respective successors, assigns, employees, servants, agents, attorneys,
officers, directors, shareholders, partners or owners on or about the
Leased
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Property or in regards to the Lease; provided, however, that in no
event shall the Lessor, any Affiliate of the Lessor or any of their
respective successors, assigns, employees, servants, agents, attorneys,
officers, directors, shareholders, partners or owners have any
liability based on any loss with respect to or interruption in the
operation of any business at the Leased Property or for any indirect or
consequential damages.
12.2.5 RISK OF LOSS. During the Term of this Lease, the risk of
loss or of decrease in the enjoyment and beneficial use of the Leased
Property in consequence of any damage or destruction thereof by fire,
the elements, casualties, thefts, riots, wars or otherwise, or in
consequence of foreclosures, levies or executions of Liens (other than
those created by the Lessor in accordance with the provisions of
Article 20) is assumed by the Lessee and, in the absence of the gross
negligence or willful misconduct as set forth in Section 12.2.4, the
Lessor shall in no event be answerable or accountable therefor (except
for the obligation to account for insurance proceeds and Awards to the
extent provided for in Articles 13 and 14) nor shall any of the events
mentioned in this Section entitle the Lessee to any abatement of Rent
(except for an abatement, if any, as specifically provided for in
Section 3.8).
ARTICLE 13
FIRE AND CASUALTY
13.1 RESTORATION FOLLOWING FIRE OR OTHER CASUALTY.
13.1.1 FOLLOWING FIRE OR CASUALTY. In the event of any damage
or destruction to the Leased Property by reason of fire or other hazard
or casualty (a "Casualty"), the Lessee shall give immediate written
notice thereof to the Lessor and, subject to the terms of this Article
13, the Lessee shall proceed with reasonable diligence, in full
compliance with all applicable Legal Requirements, to perform such
repairs, replacement and reconstruction work (referred to herein as the
"Work") to restore the Leased Property to the condition it was in
immediately prior to such damage or destruction and to a condition
adequate to operate the Facility for the Primary Intended Use and the
Other Permitted Uses and in compliance with Legal Requirements. All
Work shall be performed and completed in accordance with all Legal
Requirements and the other requirements of this Lease within one
hundred eighty (180) days following the occurrence of the damage or
destruction plus a reasonable time to compensate for Unavoidable Delays
(including for the purposes of this Section, delays in obtaining
Permits and in adjusting insurance losses), but in no event beyond
two-hundred and seventy (270) days following the occurrence of the
Casualty.
13.1.2 PROCEDURES. In the event that any Casualty results in
non-structural damage to the Leased Property in excess of FIFTY
THOUSAND AND NO/100 DOLLARS ($50,000.00) or in any structural damage to
the Leased Property, regardless of the extent of
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such structural damage, prior to commencing the Work, the Lessee shall
comply with the following requirements:
(A) The Lessee shall furnish to the Lessor complete
plans and specifications for the Work (collectively, the "Plans
and Specifications"), for the Lessor's approval, in each
instance, which approval shall not be unreasonably withheld or
delayed. The Plans and Specifications shall bear the signed
approval thereof by an architect, licensed to do business in
the State, reasonably satisfactory to the Lessor and shall be
accompanied by a written estimate from the architect, bearing
the architect's seal, of the entire cost of completing the
Work, and to the extent feasible, the Plans and Specifications
shall provide for Work of such nature, quality and extent,
that, upon the completion thereof, the Leased Property shall be
at least equal in value and general utility to its value and
general utility prior to the Casualty and shall be adequate to
operate the Leased Property for the Primary Intended Use and
the Other Permitted Uses;
(B) The Lessee shall furnish to the Lessor certified
or photostatic copies of all Permits and Contracts required by
all applicable Legal Requirements in connection with the
commencement and conduct of the Work;
(C) The Lessee shall furnish to the Lessor a cash
deposit or a payment and performance bond sufficient to pay for
completion of and payment for the Work in an amount not less
than the architect's estimate of the entire cost of completing
the Work, less the amount of property insurance proceeds, if
any, then held by the Lessor and which the Lessor shall be
required to apply toward restoration of the Leased Property as
provided in Section 13.2;
(D) The Lessee shall furnish to the Lessor such
insurance with respect to the Work (in addition to the
insurance required under Section 12.1 hereof) in such amounts
and in such forms as is reasonably required by the Lessee; and
(E) The Lessee shall not commence any of the Work
until the Lessee shall have complied with the requirements set
forth in clauses (a) through (d) immediately above, as
applicable, and, thereafter, the Lessee shall perform the Work
diligently, in a good and workmanlike fashion and in good faith
in accordance with (I) the Plans and Specifications referred to
in clause (a) immediately above, (II) the Permits and Contracts
referred to in clause (b) immediately above and (III) all
applicable Legal Requirements and other requirements of this
Lease; provided, however, that in the event of a bona fide
emergency during which the Lessee is unable to contact the
appropriate representatives of the Lessor, the Lessee may
commence such Work as may be necessary in order to address such
emergency without the Lessor's prior approval, as long as the
Lessee immediately thereafter advises the Lessor of such
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emergency and the nature and scope of the Work performed and
obtains the Lessor's approval of the remaining Work to be
completed.
13.1.3 DISBURSEMENT OF INSURANCE PROCEEDS. If, as provided in
Section 13.2, the Lessor is required to apply any property insurance
proceeds toward repair or restoration of the Leased Property, then as
long as the Work is being diligently performed by the Lessee in
accordance with the terms and conditions of this Lease, the Lessor
shall disburse such insurance proceeds from time to time during the
course of the Work in accordance with and subject to satisfaction of
the following provisions and conditions. The Lessor shall not be
required to make disbursements more often than at thirty (30) day
intervals. The Lessee shall submit a written request for each
disbursement at least ten (10) Business Days in advance and shall
comply with the following requirements in connection with each
disbursement:
(A) Prior to the commencement of any Work, the Lessee
shall have received the Lessor's written approval of the Plans
and Specifications (which approval shall not be unreasonably
withheld or delayed) and the Work shall be supervised by an
experienced construction manager with the consultation of an
architect or engineer qualified and licensed to do business in
the State.
(B) Each request for payment shall be accompanied by
(X) a certificate of the architect or engineer, bearing the
architect's or engineer's seal, and (Y) a certificate of the
general contractor, qualified and licensed to do business in
the State, that is performing the Work (collectively, the "Work
Certificates"), each dated not more than ten (10) days prior to
the application for withdrawal of funds, and each stating:
(I) that all of the Work performed as of the
date of the certificates has been completed
in compliance with the approved Plans and
Specifications, applicable Contracts and all
applicable Legal Requirements;
(II) that the sum then requested to be withdrawn
has been paid by the Lessee or is justly due
to contractors, subcontractors, materialmen,
engineers, architects or other Persons,
whose names and addresses shall be stated
therein, who have rendered or furnished
certain services or materials for the Work,
and the certificate shall also include a
brief description of such services and
materials and the principal subdivisions or
categories thereof and the respective
amounts so paid or due to each of said
Persons in respect thereof and stating the
progress of the Work up to the date of said
certificate;
(III) that the sum then requested to be withdrawn,
plus all sums previously withdrawn, does not
exceed the cost of the Work insofar as
actually accomplished up to the date of such
certificate;
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(IV) that the remainder of the funds held by the
Lessor will be sufficient to pay for the
full completion of the Work in accordance
with the Plans and Specifications;
(V) that no part of the cost of the services and
materials described in the applicable Work
Certificate has been or is being made the
basis of the withdrawal of any funds in any
previous or then pending application; and
(VI) that, except for the amounts, if any,
specified in the applicable Work Certificate
to be due for services and materials, there
is no outstanding indebtedness known, after
due inquiry, which is then due and payable
for work, labor, services or materials in
connection with the Work which, if unpaid,
might become the basis of a vendor's,
mechanic's, laborer's or materialman's
statutory or other similar Lien upon the
Leased Property.
(C) The Lessee shall deliver to the Lessor
satisfactory evidence that the Leased Property and all
materials and all property described in the Work Certificates
are free and clear of Liens, except (I) Liens, if any,
securing indebtedness due to Persons (whose names and
addresses and the several amounts due them shall be stated
therein) specified in an applicable Work Certificate, which
Liens shall be discharged upon disbursement of the funds then
being requested, (II) any Fee Mortgage and (III) the Permitted
Encumbrances. The Lessor shall accept as satisfactory evidence
of the foregoing lien waivers in customary form from the
general contractor and all subcontractors performing the Work,
together with an endorsement of its title insurance policy
(relating to the Leased Property) in form acceptable to the
Lessor, dated as of the date of the making of the then current
disbursement, confirming the foregoing.
(D) If the Work involves alteration or restoration of
the exterior of any Leased Improvement that changes the
footprint of any Leased Improvement, the Lessee shall deliver
to the Lessor, upon the request of the Lessor, an "as-built"
survey of the Leased Property dated as of a date within ten
(10) days prior to the making of the first and final advances
(or revised to a date within ten (10) days prior to each such
advance) showing no encroachments other than such
encroachments, if any, by the Leased Improvements upon or over
the Permitted Encumbrances as are in existence as of the date
hereof.
(E) The Lessee shall deliver to the Lessor (I) an
opinion of counsel or licensed architect or engineer
(satisfactory to the Lessor both as to counsel, architect or
engineer and as to the form of opinion) prior to the first
advance opining that all necessary Permits for the repair,
replacement and/or restoration of the Leased
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Property have been obtained and that the Leased Property, if
repaired, replaced or rebuilt in accordance, in all material
respects, with the approved Plans and Specifications and such
Permits, shall comply with all applicable Legal Requirements
and (II) an architect's certificate (satisfactory to the
Lessor both as to the architect and as to the form of the
certificate) prior to the final advance, certifying that the
Leased Property was repaired, replaced or rebuilt in
accordance, in all material respects, with the approved Plans
and Specifications and complies with all applicable Legal
Requirements, including, without limitation, all Permits
referenced in the foregoing clause (i).
(F) There shall be no Lease Default or any state of
facts or circumstance existing which, with the giving of
notice and/or the passage of time, would constitute any Lease
Default.
The Lessor, at its option, may waive any of the foregoing requirements
in whole or in part in any instance. Upon compliance by the Lessee with
the foregoing requirements (except for such requirements, if any, as
the Lessor may have expressly elected to waive), and to the extent of
(X) the insurance proceeds, if any, which the Lessor may be required to
apply to restoration of the Leased Property pursuant to the provisions
of this Lease and (Y) all other cash deposits made by the Lessee, the
Lessor shall make available for payment to the Persons named in the
Work Certificate the respective amounts stated in said certificate(s)
to be due, subject to a retention of ten percent (10%) as to all hard
costs of the Work (the "Retainage"). It is understood that the
Retainage is intended to provide a contingency fund to assure the
Lessor that the Work shall be fully completed in accordance with the
Plans and Specifications and the requirements of the Lessor. Upon
the full and final completion of all of the Work in accordance with the
provisions hereof, the Retainage shall be made available for payment to
those Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making any
further advance, in addition to the requirements set forth above, the
Lessee shall promptly deliver to the Lessor:
(I) written certificates of the architect or engineer,
bearing the architect's or engineer's seal, and the
general contractor, certifying that the Work has been
fully completed in a good and workmanlike manner in
material compliance with the Plans and Specifications
and all Legal Requirements;
(II) an endorsement of its title insurance policy
(relating to the Leased Property) in form reasonably
acceptable to the Lessor insuring the Leased Property
against all mechanic's and materialman's liens
accompanied by the final lien waivers from the
general contractor and all subcontractors;
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(III) a certificate by the Lessee in form and substance
reasonably satisfactory to the Lessor, listing all
costs and expenses in connection with the completion
of the Work and the amount paid by the Lessee with
respect to the Work; and
(IV) a temporary certificate of occupancy (if obtainable)
and all other applicable Permits and Contracts (that
have not previously been delivered to the Lessor)
issued by or entered into with any Governmental
Authority with respect to the Leased Property and the
Primary Intended Use and the Other Permitted Uses and
by the appropriate Board of Fire Underwriters or
other similar bodies acting in and for the locality
in which the Leased Property is situated; provided,
that within thirty (30) days prior to the expiration
of any temporary certificate of occupancy, the Lessee
shall obtain and deliver to the Lessor a permanent
certificate of occupancy for the Leased Property.
Upon completion of the Work and delivery of the documents
required pursuant to the provisions of this Section 13.1, the Lessor
shall pay the Retainage to the Lessee or to those Persons entitled
thereto and if there shall be insurance proceeds or cash deposits,
other than the Retainage, held by the Lessor in excess of the amounts
disbursed pursuant to the foregoing provisions, then provided that no
Lease Default has occurred and is continuing, nor any state of facts or
circumstances which, with the giving of notice and/or the passage of
time would constitute a Lease Default, the Lessor shall pay over such
proceeds or cash deposits to the Lessee.
No inspections or any approvals of the Work during or after
construction shall constitute a warranty or representation by the
Lessor, or any of its agents or Consultants, as to the technical
sufficiency, adequacy or safety of any structure or any of its
component parts, including, without limitation, any fixtures, equipment
or furnishings, or as to the subsoil conditions or any other physical
condition or feature pertaining to the Leased Property. All acts
described in this paragraph, including any failure to act, relating to
the Lessor are performed solely for the benefit of the Lessor to assure
the payment and performance of the Lease Obligations and are not for
the benefit of the Lessee or the benefit of any other Person.
13.2 DISPOSITION OF INSURANCE PROCEEDS.
13.2.1 PROCEEDS TO BE RELEASED TO PAY FOR WORK. In the event of
any Casualty, except as provided for in Section 13.2.2, the Lessor
shall release proceeds of property insurance held by it to pay for the
Work in accordance with the provisions and procedures set forth in this
Article 13, only if:
(A) all of the terms, conditions and provisions of
Sections 13.1 and 13.2.1 are satisfied;
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(B) there does not then exist any Lease Default or
any state of facts or circumstance which, with the giving of
notice and/or the passage of time, would constitute such a
Lease Default;
(C) The Lessee demonstrates to the Lessor's
satisfaction that the Lessee has the financial ability to
satisfy the Lease Obligations during such repair or
restoration; and
(D) no Sublease (excluding Resident Agreements)
material to the operation of the Facility immediately prior to
such damage or taking shall have been canceled or terminated,
nor contain any still exercisable right to cancel or
terminate, due to such Casualty if and to the extent that the
income from such Sublease is necessary in order to avoid the
violation of any of the financial covenants set forth in this
Lease or otherwise to avoid the creation of an Event of
Default.
13.2.2 PROCEEDS NOT TO BE RELEASED. If, as the result of any
Casualty, the Leased Property is damaged to the extent it is rendered
Unsuitable For Its Primary Intended Use and if either: (A) the Lessee,
after exercise of diligent efforts, cannot within a reasonable time
(not in excess of ninety (90) days) obtain all necessary Permits in
order to be able to perform all required Work and to again operate the
Facility for its Primary Intended Use and the Other Permitted Uses
within two hundred and seventy (270) days from the occurrence of the
damage or destruction in substantially the manner as immediately prior
to such damage or destruction or (B) such Casualty occurs during the
last twenty-four (24) months of the Term and would reasonably require
more than nine (9) months to obtain all Permits and complete the Work,
then the Lessee may either (I) acquire the Leased Property from the
Lessor for a purchase price equal to the greater of (X) the Meditrust
Investment or (Y) the Fair Market Value of the Leased Property minus
the Fair Market Added Value, with the Fair Market Value and the Fair
Market Added Value to be determined as of the day immediately prior to
such Casualty and prior to any other Casualty which has not been fully
repaired, restored or replaced, in which event, the Lessee shall be
entitled upon payment of the full purchase price to receive all
property insurance proceeds (less any costs and expenses incurred by
the Lessor in collecting the same), or (II) terminate this Lease, in
which event (subject to the provisions of the last sentence of this
Section 13.2.2) the Lessor shall be entitled to receive and retain the
insurance proceeds; provided, however, that the Lessee shall only have
such right of termination effective upon payment to the Lessor of all
Rent and other sums due under this Lease and the other Lease Documents
through the date of termination plus an amount, which when added to the
sum of (1) the Fair Market Value of the Leased Property as affected by
all unrepaired or unrestored damage due to any Casualty (and giving due
regard for delays, costs and expenses incident to completing all repair
or restoration required to fully repair or restore the same) plus (2)
the amount of insurance proceeds actually received by the Lessor (net
of costs and expenses incurred by the Lessor in collecting the same)
equals (3) the greater of the Meditrust Investment or the Fair Market
Value of the Leased Property minus the Fair Market Added Value, with
the Fair Market
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Value and the Fair Market Added Value to be determined as of the day
immediately prior to such Casualty and prior to any other Casualty
which has not been fully repaired. Any acquisition of the Leased
Property pursuant to the terms of this Section 13.2.2 shall be
consummated in accordance with the terms and conditions of this Lease
and normal and customary practices of the State and at a time
satisfactory to the Lessor. If such termination becomes effective, the
Lessor shall assign to the Lessee any outstanding insurance claims.
13.2.3 LESSEE RESPONSIBLE FOR SHORT-FALL. If the cost of the
Work exceeds the amount of proceeds received by the Lessor from the
property insurance required under Article 12 (net of costs and expenses
incurred by the Lessor in collecting the same), the Lessee shall be
obligated to contribute any excess amount needed to repair or restore
the Leased Property and pay for the Work. Such amount shall be paid by
the Lessee to the Lessor together with any other property insurance
proceeds for application to the cost of the Work.
13.3 TANGIBLE PERSONAL PROPERTY. All insurance proceeds payable by
reason of any loss of or damage to any of the Tangible Personal Property shall
be paid to the Lessor as secured party, subject to the rights of the holders of
any Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or the
passage of time could constitute a Lease Default, has occurred and is
continuing, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the Lessee for the cost of repairing or replacing the damaged Tangible
Personal Property, subject to the terms and conditions set forth in the other
provisions of this Article 13, mutatis mutandis.
13.4 RESTORATION OF CERTAIN IMPROVEMENTS AND THE TANGIBLE PERSONAL
PROPERTY. If the Lessee is required or elects to restore the Facility, the
Lessee shall either (A) restore (I) all alterations and improvements to the
Leased Property made by the Lessee and (II) the Tangible Personal Property or
(B) replace such alterations and improvements and the Tangible Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 NO ABATEMENT OF RENT. The obligation to pay Rent shall not abate
as a result of any Casualty. However, any insurance proceeds received by the
Lessor on account of rent loss insurance carried by the Lessee shall be credited
against Rent and any other amounts due hereunder or owed during the period of
restoration on account of such Casualty as provided in Section 13.8(b) below
provided no fact or circumstance exists which constitutes, or with notice, or
passage of time, or both, would constitute a Lease Default.
13.6 TERMINATION OF CERTAIN RIGHTS. Any termination of this Lease
pursuant to this Article 13 shall cause any right of the Lessee to extend the
Term of this Lease, any right of first refusal granted to the Lessee herein and
any right of the Lessee to purchase the Leased Property contained in this Lease
to be terminated and to be without further force or effect.
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13.7 WAIVER. The Lessee hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction to the Leased
Property due to any Casualty which the Lessee is obligated to restore or may
restore under any of the provisions of this Lease.
13.8 APPLICATION OF RENT LOSS AND/OR BUSINESS INTERRUPTION INSURANCE.
All proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to the Lessor and dealt with as
follows:
(A) if the Work has been promptly and diligently commenced by
the Lessee and is in the process of being completed in accordance with
this Lease and no fact or condition exists which constitutes, or which
with the giving of notice and/or the passage of time would constitute,
a Lease Default, the Lessor shall each month pay to the Lessee out of
the Rent Insurance Proceeds a sum equal to that amount, if any, of the
Rent Insurance Proceeds paid by the insurer which is allocable to the
rental loss and/or business interruption for the preceding month minus
an amount equal to the sum of the Rent due hereunder for such month
plus any Impositions relating to the Leased Property then due and
payable;
(B) if the Work has not been promptly and diligently commenced
by the Lessee or is not in the process of being completed in accordance
with this Lease, the Rent Insurance Proceeds shall be applied to any
Rent then due, and, to the extent sufficient therefor, an amount equal
to Base Rent, Additional Rent, Impositions and insurance premiums
payable for the next twelve (12) months, as reasonably projected by the
Lessor, shall be held by the Lessor as security for the Lease
Obligations and applied to the payment of Rent as it becomes due;
(C) if such Rent Insurance Proceeds received by the Lessor (net
of costs and expenses incurred by the Lessor in collecting the same)
exceed the amounts required under clauses (a) and (b) above, the excess
shall be paid to the Lessee, provided no fact or circumstance exists
which constitutes, or with notice, or passage of time, or both, would
constitute, a Lease Default; and
(D) if the Casualty causing such business interruption of the
Lessee is the result of the gross negligence or willful misconduct of
the Lessor or any of Lessor's employees, agents or contractors, then
the proceeds of business interruption insurance (as distinguished from
proceeds of rent loss insurance) shall be paid over to the Lessee
provided no fact or circumstance exists which constitutes, or with
notice, or passage of time, or both, would constitute, a Lease Default.
Notwithstanding the foregoing, the Lessor may at its option use or release the
Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists, the
Lessor may apply all such insurance proceeds towards the Lease Obligations or
hold such proceeds as security therefor.
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13.9 OBLIGATION TO ACCOUNT. Within fifteen (15) Business Days of the
Lessee's written request, which may not be made not more than once in any three
(3) month period, the Lessor shall provide the Lessee with a written accounting
of the application of all insurance proceeds received by the Lessor.
ARTICLE 14
CONDEMNATION
14.1 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
14.2 TOTAL TAKING. If there is a permanent Taking of all or
substantially all of the Leased Property, this Lease shall terminate on the Date
of Taking.
14.3 PARTIAL OR TEMPORARY TAKING. If there is a Permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the Leased Property, this Lease shall remain in effect so long as the
Leased Property is not thereby rendered permanently Unsuitable For Its Primary
Intended Use or temporarily Unsuitable For Its Primary Intended Use for a period
not likely to, or which does not, exceed two hundred and seventy (270) days. If,
however, the Leased Property is thereby so rendered permanently or temporarily
Unsuitable For Its Primary Intended Use: (A) the Lessee shall have the right to
restore the Leased Property, at its own expense, (subject to the right under
certain circumstances as provided for in Section 14.5 to receive the net
proceeds of an Award for reimbursement) to the extent possible, to substantially
the same condition as existed immediately before the partial or temporary Taking
or (B) the Lessee shall have the right to acquire the Leased Property from the
Lessor (I) upon payment of all Rent due through the date that the purchase price
is paid, for a purchase price equal to the greater of (X) the Meditrust
Investment or (Y) the Fair Market Value of the Leased Property minus the Fair
Market Added Value, with the Fair Market Value of the Leased Property and the
Fair Market Added Value to be determined as of the day immediately prior to such
partial or temporary Taking and (II) in accordance with the terms and conditions
set forth in Section 24.14; in which event, this Lease shall terminate upon
payment of such purchase price and the consummation of such acquisition.
Notwithstanding the foregoing, (1) if the Taking occurs at a time when there is
less than two (2) years remaining on the Term of this Lease and the Lessee has
elected to restore the Leased Property under clause (a) above, then, unless the
Lessee extends the Term pursuant to the provisions hereof, the Lessor may
overrule the Lessee's election and terminate this Lease as of the date when the
Lessee is required to surrender possession of the portion of the Leased Property
so taken and (2) if the Taking occurs at a time when there are two (2) years or
more remaining on the Term and the Lessee elects to acquire the Leased Property
under clause (b) above, then the Lessor may overrule the Lessee's election and
compel the Lessee to keep the Lease in full force and effect and to restore the
Leased Property as provided in clause (a) above, but only if the Leased Property
may be operated
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for at least eighty percent (80%) of the licensed unit capacity of the Facility
if operated in accordance with its Primary Intended Use. The Lessee shall
exercise its election under this Section 14.3 by giving the Lessor notice
thereof ("Lessee's Election Notice") within sixty (60) days after the Lessee
receives notice of the Taking. The Lessor shall exercise its option to overrule
the Lessee's election under this Section 14.3 by giving the Lessee notice of the
Lessor's exercise of its rights under Section 14.3 within thirty (30) days after
the Lessor receives the Lessee's Election Notice. If, as the result of any such
partial or temporary Taking, this Lease is not terminated as provided above, the
Lessee shall be entitled to an abatement of Rent, but only to the extent, if
any, provided for in Section 3.8, effective as of the date upon which the Leased
Property is rendered Unsuitable For Its Primary Intended Use.
14.4 RESTORATION. If there is a partial or temporary Taking of the
Leased Property and this Lease remains in full force and effect pursuant to
Section 14.3, the Lessee shall accomplish all necessary restoration and the
Lessor shall release the net proceeds of such Award to reimburse the Lessee for
the actual reasonable costs and expenses thereof, subject to all of the
conditions and provisions set forth in Article 13 as though the Taking was a
Casualty and the Award was insurance proceeds. If the cost of the restoration
exceeds the amount of the Award (net of costs and expenses incurred in obtaining
the Award), the Lessee shall be obligated to contribute any excess amount needed
to restore the Facility or pay for such costs and expenses. To the extent that
the cost of restoration is less than the amount of the Award (net of cost and
expenses incurred in obtaining the Award), the remainder of the Award shall be
retained by the Lessor and Rent shall be abated as set forth in Section 3.8.
14.5 AWARD DISTRIBUTION. In the event the Lessee completes the purchase
of the Leased Property, as described in Section 14.3, the entire Award shall,
upon payment of the purchase price and all Rent and other sums due under this
Lease and the other Lease Documents, belong to the Lessee and the Lessor agrees
to assign to the Lessee all of the Lessor's rights thereto. In any other event,
the entire Award shall belong to and be paid to the Lessor. However, if the
Lessor has recovered the entire Meditrust Investment from such Award then the
Lessee shall be entitled to prosecute a claim against the Condemnor for the
value of the Lessee's leasehold estate under this Lease (although in no event
shall the Lessee be entitled to seek or recover any portion of the leasehold
value from the Lessor).
14.6 CONTROL OF PROCEEDINGS. Subject to the rights of any Fee
Mortgagee, unless and until the Lessee completes the purchase of the Leased
Property as provided in Section 14.3, all proceedings involving any Taking and
the prosecution of claims arising out of any Taking against the Condemnor shall
be conducted, prosecuted and settled by the Lessor; provided, however, that the
Lessor shall keep the Lessee apprised of the progress of all such proceedings
and shall solicit the Lessee's advice with respect thereto and shall give due
consideration to any such advice. In addition, the Lessee shall reimburse the
Lessor (as an Additional Charge) for all costs and expenses, including
reasonable attorneys' fees, appraisal fees, fees of expert witnesses and costs
of litigation or dispute resolution, in relation to any Taking, whether or not
this Lease is terminated; provided, however, if this Lease is terminated as a
result of a Taking, the Lessee's obligation to so reimburse the Lessor
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shall be diminished by the amount of the Award, if any, received by the Lessor
which is in excess of the Meditrust Investment.
ARTICLE 15
PERMITTED CONTESTS
15.1 LESSEE'S RIGHT TO CONTEST. To the extent of the express references
made to this Article 15 in other Sections of this Lease, the Lessee, any
Sublessee or any Manager on their own or on the Lessor's behalf (or in the
Lessor's name), but at their sole cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental Authority
related to the operation of the Leased Property for its Primary Intended Use
and/or any of the Other Permitted Uses or any Lien or claim relating to the
Leased Property not otherwise permitted by this Lease; provided, that (A) prior
written notice of such contest is given to the Lessor, (B) in the case of an
unpaid Imposition, Lien or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from the Lessor and/or
compliance by any applicable member of the Leasing Group with the contested
Legal Requirement or other matter may be legally delayed pending the prosecution
of any such proceeding without the occurrence or creation of any Lien, charge or
liability of any kind against the Leased Property, (C) neither the Leased
Property nor any rent therefrom would be in any immediate danger of being sold,
forfeited, attached or lost as a result of such proceeding, (D) in the case of a
Legal Requirement, neither the Lessor nor any member of the Leasing Group would
be in any immediate danger of civil or criminal liability for failure to comply
therewith pending the outcome of such proceedings, (E) in the event that any
such contest shall involve a sum of money or potential loss in excess of TEN
THOUSAND AND NO/100 DOLLARS ($10,000.00), the Lessee shall deliver to the Lessor
an Officer's Certificate and opinion of counsel, if the Lessor deems the
delivery of an opinion to be appropriate, certifying or opining, as the case may
be, as to the validity of the statements set forth to the effect set forth in
clauses (b), (c) and (d), to the extent applicable, (F) the Lessee shall give
such cash security (or letter of credit in form and substance acceptable to the
Lender) as may be demanded in good faith by the Lessor to insure ultimate
payment of any fine, penalty, interest or cost and to prevent any sale or
forfeiture of the affected portion of the Leased Property by reason of such
non-payment or non-compliance, (G) if such contest is finally resolved against
the Lessor or any member of the Leasing Group, the Lessee shall promptly pay, as
Additional Charges due hereunder, the amount required to be paid, together with
all interest and penalties accrued thereon and/or comply (and cause any
Sublessee and any Manager to comply) with the applicable Legal Requirement, and
(H) no state of facts or circumstance exists which constitutes, or with the
passage of time and/or the giving of notice, could constitute a Lease Default;
provided, however, the provisions of this Article 15 shall not be construed to
permit the Lessee to contest the payment of Rent or any other sums payable by
the Lessee to the Lessor under any of the Lease Documents.
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15.2 LESSOR'S COOPERATION. The Lessor, at the Lessee's sole cost and
expense, shall execute and deliver to the Lessee such authorizations and other
documents as may reasonably be required in any such contest, so long as the same
does not expose the Lessor to any civil or criminal liability, and, if
reasonably requested by the Lessee or if the Lessor so desires, the Lessor shall
join as a party therein.
15.3 LESSEE'S INDEMNITY. The Lessee, as more particularly provided for
in Section 12.2, shall indemnify, defend (with counsel acceptable to the Lessor)
and save the Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon the Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
16.1 EVENTS OF DEFAULT. Each of the following shall constitute an
"Event of Default" hereunder and shall entitle the Lessor to exercise its
remedies hereunder and under any of the other Lease Documents:
(A) any failure of the Lessee to pay any amount due hereunder
or under any of the other Lease Documents within ten (10) days
following the date when such payment was due;
(B) any failure in the observance or performance of any other
covenant, term, condition or warranty provided in this Lease or any of
the other Lease Documents, other than the payment of any monetary
obligation and other than as specified in subsections (c) through (w)
below (a "Failure to Perform"), continuing for thirty (30) days after
the giving of notice by the Lessor to the Lessee specifying the nature
of the Failure to Perform; except as to matters not susceptible to cure
within thirty (30) days, provided that with respect to such matters,
(I) the Lessee commences the cure thereof within thirty (30) days after
the giving of such notice by the Lessor to the Lessee, (II) the Lessee
continuously prosecutes such cure to completion, (III) such cure is
completed within one hundred eighty (180) days after the giving of such
notice by the Lessor to the Lessee, and (IV) such Failure to Perform
does not materially impair the value of, or the Lessor's rights with
respect to, the Leased Property or otherwise materially impair the
Collateral or the Lessor's security interest therein;
(C) the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and grace
periods, if any, under any of the other Lease Documents;
(D) if any representation, warranty or statement contained
herein or in any of the other Lease Documents proves to be untrue in
any material respect as of the date when made
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or at any time during the Term if such representation or warranty is a
continuing representation or warranty pursuant to Section 10.2 and the
breach of any such representation or warranty is not cured by the
Lessee after notice from the Lessor in the same time periods specified
for a cure under Section 16.1(b) above;
(E) if any member of the Leasing Group shall (I) voluntarily be
adjudicated a bankrupt or insolvent, (II) seek or consent to the
appointment of a receiver or trustee for itself or for the Leased
Property, (III) file a petition seeking relief under the bankruptcy or
other similar laws of the United States, any state or any jurisdiction,
(IV) make a general assignment for the benefit of creditors, (V) make
or offer a composition of its debts with its creditors or (VI) be
unable to pay its debts as such debts mature;
(F) if any court shall enter an order, judgment or decree
appointing, without the consent of any member of the Leasing Group, a
receiver or trustee for such member or for any of its property and such
order, judgment or decree shall remain in force, undischarged or
unstayed, sixty (60) days after it is entered;
(G) if a petition is filed against any member of the Leasing
Group which seeks relief under the bankruptcy or other similar laws of
the United States, any state or any other jurisdiction, and such
petition is not dismissed within sixty (60) days after it is filed;
(H) in the event that, without the prior written consent of the
Lessor, in each instance, which consent may be withheld by the Lessor
in its sole and absolute discretion, and except as permitted in
subsection (h)(vi) or subsection (i) below:
I. there shall be a change in the Person or Persons
presently in control of any member of the Leasing
Group (other than changes in stock ownership of the
Guarantor or changes in the officers or directors of
either the Lessee or the Guarantor) (whether by
operation of law or otherwise);
II. any member of the Leasing Group (other than changes
in the stock ownership of the Guarantor), all or any
portion of the interest of any partner or member of
any member of the Leasing Group shall be, on any one
or more occasions, directly or indirectly, sold,
assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise), if such
member of the Leasing Group shall be a partnership,
joint venture, syndicate or other group;
III. any of the shares of the issued and outstanding
capital stock of any member of the Leasing Group
(other than changes of stock ownership of the
Guarantor) shall be, on any one or more occasions,
directly or indirectly, sold, assigned, hypothecated
or otherwise transferred (whether by operation of law
or otherwise), if such member of the Leasing Group
shall be a corporation;
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IV. all or any portion of the beneficial interest in any
member of the Leasing Group shall be, directly or
indirectly, sold or otherwise transferred (whether by
operation of law or otherwise), if such member of the
Leasing Group shall be a trust;
V. except as otherwise expressly permitted in accordance
with the provisions of Section 11.4.11, if any Person
other than the Lessee is the licensed operator of the
Facility; or
VI. more than fifty percent (50%), in the aggregate, of
the shares of the issued and outstanding capital
stock of the Guarantor are held by a single Person or
two (2) or more Affiliates (collectively, an
"Acquiror"), except in a Permitted Transaction
(defined below). If immediately after the date on
which the Acquiror acquire(s) more than fifty percent
(50%) of such stock, the "Net Worth" (defined as an
amount determined in accordance with GAAP) of the
Guarantor is equal to or greater than FIFTY-FIVE
MILLION DOLLARS ($55,000,000.00), then such
acquisition shall be deemed to be a "Permitted
Transaction." However, in the event that a Permitted
Transaction occurs, then the higher ratios specified
in Section 11.3.5 and the Net Worth covenant
specified in Section 11.3.6 shall both become
operative and effective;
(I) the death, incapacity, merger, liquidation, dissolution or
termination of existence of any member of the Leasing Group (except (A)
in the case of a merger or consolidation of some other Person with the
Guarantor, which shall be a "Permitted Merger" or (B) in the case of a
Permitted Transaction); provided however, if the Persons who were the
shareholders of the Guarantor immediately prior to the Permitted Merger
hold in the aggregate less than 50% of the outstanding voting stock of
the surviving corporation which results from the Permitted Merger, then
(I) the higher ratios specified in Section 11.3.5 and the Net Worth
covenant specified in Section 11.3.6 shall both become operative and
effective, and (II) if Alternative Living Services, Inc. is not the
surviving corporation which results from such Permitted Merger, the new
surviving corporation will affirm in writing its obligations under the
Guaranty;
(J) except as otherwise permitted pursuant to Article 15 or
Section 19.2 hereof, if, without the prior written consent of the
Lessor, in each instance, which consent may be withheld by the Lessor
in its sole and absolute discretion, the Lessee's or any Sublessee's
interest in the Leased Property shall be, directly or indirectly,
mortgaged, encumbered (by any voluntary or involuntary Lien other than
the Permitted Encumbrances), subleased, sold, assigned, hypothecated or
otherwise transferred (whether by operation of law or otherwise);
(K) the occurrence of a default or breach of condition
continuing beyond the expiration of the applicable notice and grace
periods, if any, in connection with the payment or performance of any
other material obligation of the Lessee or any Sublessee, whether or
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not the applicable creditor or obligee elects to declare the
obligations of the Lessee or the applicable Sublessee under the
applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee, if such creditor's or
obligee's rights and remedies may involve or result in (I) the taking
of possession of the Leased Property or (II) the assertion of any other
right or remedy that, in the Lessor's reasonable opinion, may impair
the Lessee's ability punctually to perform all of its obligations under
this Lease and the other Lease Documents, may impair such Sublessee's
ability punctually to perform all of its obligations under its Sublease
or may materially impair the Lessor's security for the Lease
Obligations; provided, however, that in any event, the election by the
applicable creditor or obligee to declare the obligations of the Lessee
under the applicable agreement due and payable or to exercise any other
right or remedy available to such creditor or obligee shall be an Event
of Default hereunder only if such obligations, individually or in the
aggregate, are in excess of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($500,000.00);
(L) the occurrence of a Related Party Default;
(M) the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and grace
periods, if any, under any credit agreement, loan agreement or other
agreement establishing a major line of credit (or any documents
executed in connection with such lines of credit) on behalf of any
member of the Leasing Group whether or not the applicable creditor has
elected to declare the indebtedness due and payable under such line of
credit or to exercise any other right or remedy available to it. For
the purposes of this provision, a major line of credit shall, with
respect to any member of the Leasing Group other than the Guarantor,
mean and include any line of credit established in an amount equal to
or greater than ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) and,
with respect to the Guarantor mean and include any line of credit
established in an amount equal to or greater than FIVE MILLION AND
NO/100 DOLLARS ($5,000,000.00);
(N) except as a result of Casualty or a partial or complete
Condemnation, if the Lessee or any Sublessee ceases operation of the
Facility for a period in excess of thirty (30) days, except that if it
is not possible to resume operation of the Facility within thirty (30)
days then the Lessee shall have up to ninety (90) days to reopen the
Facility subject to the terms of subparts (i) and (ii) of Section
16.1(b) above (a "Failure to Operate");
(O) if one or more judgments against the Lessee or any other
Acceptable Licensed Operator or attachments against the Lessee's
interest or any other Acceptable Licensed Operator's interest in the
Leased Property, which in the aggregate exceed ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($100,000.00) or which may materially and adversely
interfere with the operation of the Facility, remain unpaid, unstayed
on appeal, undischarged, unbonded or undismissed for a period of thirty
(30) days;
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(P) if any malpractice award or judgment exceeding any
applicable professional liability insurance coverage by more than FIVE
HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000) shall be rendered
against any member of the Leasing Group and either (I) enforcement
proceedings shall have been commenced by any creditor upon such award
or judgment or (II) such award or judgment shall continue unsatisfied
and in effect for a period of ten (10) consecutive days without an
insurance company satisfactory to the Lessor (in its sole and absolute
discretion) having agreed to fund such award or judgment in a manner
satisfactory to the Lessor (in its sole and absolute discretion) and in
either case such award or judgment shall, in the reasonable opinion of
the Lessor, have a material adverse effect on the ability of any member
of the Leasing Group to operate the Facility;
(Q) any failure to comply with the Legal Requirements
applicable to any Third Party Payor Program in which the Lessee or the
Applicable Licensed Operator elects to participate, continuing for
thirty (30) days after the giving of notice by the Lessor to the Lessee
specifying the nature of any such failure (except as to matters not
susceptible to cure within thirty (30) days, provided that with respect
to such matters, (I) the Lessee commences the cure thereof within
thirty (30) days after the giving of such notice by the Lessor to the
Lessee, (II) the Lessee continuously prosecutes such cure to
completion, (III) such cure is completed within one hundred eighty
(180) days after the giving of such notice by the Lessor to the Lessee,
and (IV) such failure to comply does not materially impair the value
of, or the Lessor's rights with respect to, the Leased Property or
otherwise materially impair the Collateral or the Lessor's security
interest therein), unless the Lessee elects to no longer participate in
any such Third Party Payor Program and sends written notice of such
election to the Lessor;
(R) any failure to comply with the Legal Requirements
applicable to any Accreditation Body under whose jurisdiction the
Lessee or any other Acceptable Licensed Operator elects to subject
itself, continuing for thirty (30) days after the giving of notice by
the Lessor to the Lessee specifying the nature of any such failure
(except as to matters not susceptible to cure within thirty (30) days,
provided that with respect to such matters, (I) the Lessee commences
the cure thereof within thirty (30) days after the giving of such
notice by the Lessor to the Lessee, (II) the Lessee continuously
prosecutes such cure to completion, (III) such cure is completed within
one hundred eighty (180) days after the giving of such notice by the
Lessor to the Lessee, and (IV) such failure to comply does not
materially impair the value of, or the Lessor's rights with respect to,
the Leased Property or otherwise materially impair the Collateral or
the Lessor's security interest therein), unless the Lessee elects to no
longer be subject to the jurisdiction of any such Accreditation Body
and sends written notice of such election to the Lessor;
(S) if any member of the Leasing Group receives notice of a
final unappealable determination by applicable Governmental Authorities
of the revocation of any Permit required for the lawful construction or
operation of the Facility in accordance with the Primary Intended Use
or the loss of, or the failure to obtain and/or renew, any Permit under
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any other circumstances under which any member of the Leasing Group is
required to cease [(I) THE CONSTRUCTION OF THE RENOVATIONS IN EXCESS OF
TEN (10) DAYS OR (II)] the operation of the Facility in accordance with
the Primary Intended Use; and
(T) any failure to maintain the insurance required pursuant to
Section 12 of this Lease in force and effect at all times until the
Lease Obligations are fully paid and performed;
(U) the appointment of a temporary manager (or operator) for
the Leased Property by any Governmental Authority;
(V) the entry of an order by a court with jurisdiction over
the Leased Property to close the Facility; or
(W) the entry of an order to transfer one or more residents
from the Facility as a result of an allegation of abuse or neglect or
to take any action to eliminate an emergency situation then existing at
the Facility where such order would have a material adverse effect in
the Lessor's reasonable judgment on the continued operation of the
Facility (it being understood, however, that if there are more than
three (3) such orders at any time during the term of this Lease, then,
ipso facto, the Lessor shall be entitled to deem there to be a material
adverse effect on the operation of the Facility) .
16.2 REMEDIES.
(A) If any Lease Default shall have occurred, the Lessor may at its
option terminate this Lease by giving the Lessee not less than ten (10) days'
notice of such termination, or exercise any one or more of its rights and
remedies under this Lease or any of the other Lease Documents, or as available
at law or in equity. In the event of such termination and upon the expiration of
the time fixed in such notice, the Term shall terminate (but only if the Lessor
shall have specifically elected by a written notice to so terminate the Lease)
and all rights of the Lessee under this Lease shall cease as though that date
was the date originally set as the Expiration Date. Notwithstanding the
foregoing, in the event of the Lessee's failure to pay Rent, if such Rent
remains unpaid beyond ten (10) days from the due date thereof, the Lessor shall
not be obligated to give ten (10) days notice of such termination or exercise of
any of its other rights and remedies under this Lease, or the other Lease
Documents, or otherwise available at law or in equity, and the Lessor shall be
at liberty to pursue any one or more of such rights or remedies without further
notice. No termination of this Lease or taking of possession of the Leased
Property by or on behalf of the Lessor, and no other act done by or on behalf of
the Lessor, shall constitute an acceptance of surrender of the Leased Property
by the Lessee or release or reduce the Lessee's obligations under this Lease or
the other Lease Documents (which shall expressly survive any such termination,
repossession or other act), unless otherwise expressly agreed to in a written
document signed by an authorized officer or agent of the Lessor.
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(B) To the extent permitted under applicable law, the Lessee shall pay
as Additional Charges all costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of the Lessor
as a result of any Lease Default.
(C) If any Lease Default shall have occurred, whether or not this Lease
has been terminated pursuant to Paragraph (a) of this Section, the Lessee shall,
to the extent permitted under applicable law, if required by the Lessor so to
do, upon not less than ten (10) days' prior notice from the Lessor, immediately
surrender to the Lessor the Leased Property pursuant to the provisions of
Paragraph (a) of this Section and quit the same, and the Lessor may enter upon
and repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove the Lessee and all other Persons and any
and all of the Tangible Personal Property from the Leased Property, subject to
the rights of any residents or patients of the Facility and any Sublessees who
are not Affiliates of any member of the Leasing Group and to any requirements of
applicable law, or the Lessor may claim ownership of the Tangible Personal
Property as set forth in Section 5.2.3 hereof or the Lessor may exercise its
rights as secured party under the Security Agreement. The Lessor shall use
reasonable, good faith efforts to relet the Leased Property or otherwise
mitigate damages suffered by the Lessor as a result of the Lessee's breach of
this Lease.
(D) In addition to all of the rights and remedies of the Lessor set
forth in this Lease and the other Lease Documents, if the Lessee shall fail to
pay any rental or other charge due hereunder (whether denominated as Base Rent,
Additional Rent, Additional Charges or otherwise) within ten (10) days after
same shall have become due and payable, then and in such event the Lessee shall
also pay to the Lessor (I) a late payment service charge (in order to partially
defray the Lessor's administrative and other overhead expenses) equal to two
hundred-fifty ($250) dollars and (II) to the extent permitted by applicable law,
interest on such unpaid sum at the Overdue Rate; it being understood, however,
that nothing herein shall be deemed to extend the due date for payment of any
sums required to be paid by the Lessee hereunder or to relieve the Lessee of its
obligation to pay such sums at the time or times required by this Lease.
16.3 DAMAGES. None of (A) the termination of this Lease pursuant to
Section 16.2, (B) the eviction of the Lessee or the repossession of the Leased
Property, (C) the failure or inability of the Lessor, notwithstanding reasonable
good faith efforts, to relet the Leased Property, (D) the reletting of the
Leased Property or (E) the failure of the Lessor to collect or receive any
rentals due upon any such reletting, shall relieve the Lessee of its liability
and obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In any such event, the Lessee shall forthwith pay to
the Lessor all Rent due and payable with respect to the Leased Property to and
including the date of such termination, repossession or eviction. Thereafter,
the Lessee shall forthwith pay to the Lessor, at the Lessor's option, either:
(I) the sum of: (X) all Rent that is due and unpaid at later to
occur of termination, repossession or eviction, together with
interest thereon at the Overdue Rate to the date of payment,
plus (Y) the worth (calculated in the manner stated below) of
the amount by which the unpaid Rent for the balance of the
Term after the later to occur of the
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termination, repossession or eviction exceeds the fair market
rental value of the Leased Property for the balance of the
Term, plus (Z) any other amount necessary to compensate the
Lessor for all damage proximately caused by the Lessee's
failure to perform the Lease Obligations or which in the
ordinary course would be likely to result therefrom; or
(II) each payment of Rent as the same would have become due and
payable if the Lessee's right of possession or other rights
under this Lease had not been terminated, or if the Lessee had
not been evicted, or if the Leased Property had not been
repossessed which Rent, to the extent permitted by law, shall
bear interest at the Overdue Rate from the date when due until
the date paid, and the Lessor may enforce, by action or
otherwise, any other term or covenant of this Lease. There
shall be credited against the Lessee's obligation under this
Clause (ii) amounts actually collected by the Lessor from
another tenant to whom the Leased Property may have actually
been leased or, if the Lessor is operating the Leased Property
for its own account, the actual Cash Flow of the Leased
Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
16.4 LESSEE WAIVERS. If this Lease is terminated pursuant to Section
16.2, the Lessee waives, to the extent not prohibited by applicable law, (A) any
right of redemption, re-entry or repossession, (B) any right to a trial by jury
in the event of summary proceedings to enforce the remedies set forth in this
Article 16, and (C) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
In the event the Lessor elects to regain possession of the Leased
Property by a forcible detainer proceeding, the Lessee hereby specifically
waives any statutory notice which may be required prior to any such proceeding,
and agrees that the Lessor's execution of this Lease is, in part, consideration
for this waiver. Except as otherwise set forth herein, the Lessee further waives
any demand for Rent, notice of termination and any notice to quit required
pursuant to statutes of the State or otherwise and agrees that the Lessor's
execution of this Lease is, in part, consideration for these waivers.
All claims for damages by reason of re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. The Lessee agrees
that any re-entry by the Lessor may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as the Lessor may elect, and the Lessor shall not be liable
in trespass or otherwise.
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The Lessee shall not interpose any counterclaim of any kind in any
action or proceeding commenced by the Lessor to recover possession of the Leased
Property.
16.5 APPLICATION OF FUNDS. Any payments otherwise payable to the Lessee
which are received by the Lessor under any of the provisions of this Lease
during the existence or continuance of any Lease Default shall be applied to the
Lease Obligations in the order which the Lessor may reasonably determine or as
may be required by the laws of the State.
16.6 INTENTIONALLY OMITTED.
16.7 LESSOR'S RIGHT TO CURE. If the Lessee shall fail to make any
payment, or to perform any act required to be made or performed under this Lease
and to cure the same within the relevant time periods provided in Section 16.1,
the Lessor, after five (5) Business Days' prior notice to the Lessee (except in
an emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Lessee, and may, to the extent permitted by law, enter upon the Leased Property
for such purpose and take all such action thereon as, in the Lessor's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of the Lessee. All sums so paid by the Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by the Lessee to the Lessor on demand as an Additional Charge. The
obligations of the Lessee and rights of the Lessor contained in this Article
shall survive the expiration or earlier termination of this Lease.
16.8 NO WAIVER BY LESSOR. The Lessor shall not by any act, delay,
omission or otherwise (including, without limitation, the exercise of any right
or remedy hereunder) be deemed to have waived any of its right or remedies
hereunder or under any of the other Lease Documents unless such waiver is in
writing and signed by the Lessor, and then, only to the extent specifically set
forth therein. No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations) shall be construed as a waiver of any
other term, condition, covenant, representation or warranty of any of the Lease
Documents, nor shall such a waiver in any one instance or circumstances be
construed as a waiver of the same term, condition, covenant, representation or
warranty in any subsequent instance or circumstance. No such failure, delay or
waiver shall be construed as creating a requirement that the Lessor must
thereafter, as a result of such failure, delay or waiver, give notice to the
Lessee, any guarantor of the Lease Obligations, or any other Person that the
Lessor does not intend to, or may not, give a further waiver or to refrain from
insisting upon the strict performance of the terms, conditions, covenants,
representations and warranties set forth in the Lease Documents before the
Lessor can exercise any of its rights or remedies under any of the Lease
Documents or before any Lease Default can occur, or as establishing a course of
dealing for interpreting the conduct of and agreements between the Lessor and
the Lessee, any guarantor of the Lease Obligations or any other Person.
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The acceptance by the Lessor of any payment that is less than payment
in full of all amounts then due under any of the Lease Documents at the time of
the making of such payment shall not: (A) constitute a waiver of the right to
exercise any of the Lessor's remedies at that time or at any subsequent time,
(B) constitute an accord and satisfaction or (C) nullify any prior exercise of
any remedy, without the express written consent of the Lessor. Any failure by
the Lessor to take any action under this Lease or any of the other Lease
Documents by reason of a default hereunder or thereunder, any acceptance of a
past due installment, or any indulgence granted from time to time shall not be
construed (I) as a novation of this Lease or any of the other Lease Documents,
(II) as a waiver of any right of the Lessor thereafter to insist upon strict
compliance with the terms of this Lease or any of the other Lease Documents or
(III) to prevent the exercise of any right of acceleration or any other right
granted hereunder or under applicable law; and to the maximum extent not
prohibited by applicable law, the Lessor hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
16.9 RIGHT OF FORBEARANCE. Whether or not for consideration paid or
payable to the Lessor and, except as may be otherwise specifically agreed to by
the Lessor in writing, no forbearance on the part of the Lessor, no extension of
the time for the payment of the whole or any part of the Obligations, and no
other indulgence given by the Lessor to the Lessee or any other Person, shall
operate to release or in any manner affect the original liability of the Lessee
or such other Persons, or to limit, prejudice or impair any right of the Lessor,
including, without limitation, the right to realize upon any collateral, or any
part thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension, forbearance or indulgence being hereby
waived by the Lessee and all those claiming by, through or under the Lessee.
16.10 CUMULATIVE REMEDIES. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to the Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by the Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and remedies of the
Lessor under each of the Lease Documents shall be separate and cumulative and
may be exercised concurrently or successively in the Lessor's sole and absolute
discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 SURRENDER. The Lessee shall, upon the expiration or prior
termination of the Term (unless the Lessee has concurrently purchased the Leased
Property in accordance with the terms hereof), vacate and surrender the Leased
Property to the Lessor in good repair and condition, in compliance with all
Legal Requirements, all Insurance Requirements, and in compliance with the
provisions of Article 8, except for: (A) ordinary wear and tear (subject to the
obligation of the Lessee to maintain the Leased Property in good order and
repair during the entire Term of the Lease), (B)
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damage caused by the gross negligence or willful acts of the Lessor, any
Affiliate of the Lessor and any of their respective successors, assigns,
employees, servants, agents, attorneys, officers, directors, shareholders,
partners or owners, and (C) any damage or destruction resulting from a Casualty
or Taking that the Lessee is not required by the terms of this Lease to repair
or restore.
17.2 TRANSFER OF PERMITS AND CONTRACTS. In connection with the
expiration or any earlier termination of this Lease (unless the Lessee has
concurrently purchased the Leased Property in accordance with the terms hereof),
upon any request made from time to time by the Lessor, the Lessee shall (at no
out-of-pocket costs to the Lessee in connection with the expiration or
termination of this Lease for reasons other than a Lease Default) (A) promptly
and diligently use its best efforts to (I) transfer and assign all Permits and
Contracts necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Use to the Lessor or its designee and/or
(II) arrange for the transfer or assignment of such Permits and Contracts to the
Lessor or its designee, all to the extent the same may be transferred or
assigned under applicable law and the terms thereof, and (B) cooperate in every
respect (and to the fullest extent possible) and assist the Lessor or its
designee in obtaining such Permits and Contracts (whether by transfer,
assignment or otherwise). Such efforts and cooperation on the part of the Lessee
shall include, without limitation, the execution, delivery and filing with
appropriate Governmental Authorities and Third Party Payors of any applications,
petitions, statements, notices, requests, assignments and other documents or
instruments requested by the Lessor. Furthermore, the Lessee shall not take any
action or refrain from taking any action which would defer, delay or jeopardize
the process of the Lessor or its designee obtaining said Permits and Contracts
(whether by transfer, assignment or otherwise). Without limiting the foregoing,
the Lessee shall not seek to transfer or relocate any of said Permits or
Contracts to any location other than the Leased Property. The provisions of this
Section 17.2 shall survive the expiration or earlier termination of this Lease.
The Lessee hereby appoints the Lessor as its attorney-in- fact, with
full power of substitution to take such actions, in the event that the Lessee
fails to comply with any request made by the Lessor hereunder, as the Lessor (in
its sole absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on the Lessor by
the provisions of this Section 17.2, being coupled with an interest, shall be
irrevocable until the Obligations are fully paid and performed and shall not be
affected by any disability or incapacity which the Lessee may suffer and shall
survive the same. Such power of attorney is provided solely to protect the
interests of the Lessor and shall not impose any duty on the Lessor to exercise
any such power and neither the Lessor nor such attorney-in-fact shall be liable
for any act, omission, error in judgment or mistake of law, except as the same
may result from its gross negligence or willful misconduct.
17.3 NO ACCEPTANCE OF SURRENDER. Except at the expiration of the Term
in the ordinary course, no surrender to the Lessor of this Lease or of the
Leased Property or any interest therein shall be valid or effective unless
agreed to and accepted in writing by the Lessor and no act by the Lessor or any
representative or agent of the Lessor, other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
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17.4 HOLDING OVER. If, for any reason, the Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time the Lessee shall pay as rental each month, one and one-half
times the aggregate of (I) one-twelfth of the aggregate Base Rent and Additional
Rent payable at the time of such expiration or earlier termination of the Term;
(II) all Additional Charges accruing during the month and (III) all other sums,
if any, payable by the Lessee pursuant to the provisions of this Lease with
respect to the Leased Property. During such period of tenancy, the Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue its occupancy and use
of the Leased Property. Nothing contained herein shall constitute the consent,
express or implied, of the Lessor to the holding over of the Lessee after the
expiration or earlier termination of this Lease.
ARTICLE 18
RIGHT OF FIRST REFUSAL TO
PURCHASE THE LEASED PROPERTY
18.1 RIGHT OF FIRST REFUSAL TO PURCHASE THE LEASED PROPERTY. At any
time during the Term, as long as there exists no Lease Default at the time of
exercise and the Closing Date (as hereinafter defined), and this Lease is then
in full force and effect and there exists no event or state of facts which
constitutes, or with the passage of time and/or the giving of notice would
constitute, a Lease Default, the Lessee shall have a "Right of First Refusal"
subject to the following terms and conditions: (A) if the Lessor receives a bona
fide written offer to purchase the Leased Property from a Person which is not a
member of the Leasing Group or an Affiliate of any member of the Leasing Group
(the "Offer"), acceptable to the Lessor in the Lessor's sole and absolute
discretion and the Lessor elects, in the Lessor's sole and absolute discretion,
to sell the Leased Property in accordance with the Offer, the Lessee shall have
thirty (30) days following delivery of the notice of the Offer to the Lessee to
elect to purchase the Leased Property and any and all other property subject to
the Offer (collectively, the "Offered Property") on the same terms and
conditions as specified therein; (B) unless the Lessor receives notice from the
Lessee within such thirty (30) day period setting forth the Lessee's election to
so purchase the Offered Property and unless thereafter the Lessee completes the
acquisition of the Offered Property exactly as provided for, and by the date
specified (the "Closing Date"), in the Offer, the Lessor shall be at liberty,
and shall have the absolute and unconditional right, to sell the Leased Property
to any Person within the next twelve (12) months on the same terms and
conditions set forth in the Offer or on any other terms and conditions more
favorable to the Lessor and (C) any such sale consummated in accordance with the
provisions of the foregoing clause (b) shall extinguish all rights granted to
the Lessee under this Section 18.1. If the Lessor does not sell the Leased
Property within the next twelve (12) months as aforesaid, the Lessee's Right of
First Refusal to purchase the Leased Property in accordance with the provisions
of this Section 18.1 shall remain in full force and effect. The Lessee's Right
of First Refusal shall not apply to and shall survive: (A) any sale or transfer
of the Leased Property to any Affiliate of the
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Lessor or of Meditrust; (B) any sale or transfer of the Leased Property
occasioned by the exercise of any rights or remedies of any Fee Mortgagee or (C)
a deed or transfer in lieu of foreclosure to any Fee Mortgagee or any Affiliate
thereof. The Lessee's Right of First Refusal shall in all events terminate upon
the expiration or any earlier termination of this Lease.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 SUBLETTING AND ASSIGNMENT. Except as specifically set forth in
Section 19.2 below, the Lessee may not, without the prior written consent of the
Lessor, which consent may be withheld in the Lessor's sole and absolute
discretion, assign or pledge all or any portion of its interest in this Lease or
any of the other Lease Documents (whether by operation of law or otherwise) or
sublet all or any part of the Leased Property. For purposes of this Section
19.1, the term "assign" shall be deemed to include, but not be limited to, any
one or more sales, pledges, hypothecations or other transfers (including,
without limitation, any transfer by operation of law) of any of the capital
stock of or partnership interest in the Lessee or sales, pledges, hypothecations
or other transfers (including, without limitation, any transfer by operation of
law) of the capital or the assets of the Lessee. Any such assignment, pledge,
sale, hypothecation or other transfer made without the Lessor's consent shall be
void and of no force and effect.
19.2 PERMITTED SUBLEASES. Notwithstanding the foregoing, the Lessee
shall have the right to enter into Resident Agreements without the prior consent
of the Lessor.
19.3 ATTORNMENT. The Lessee shall insert in each Sublease approved by
the Lessor or permitted under Section 19.2, provisions to the effect that (A)
such Sublease is subject and subordinate to all of the terms and provisions of
this Lease and to the rights of the Lessor hereunder, (B) in the event this
Lease shall terminate before the expiration of such Sublease, the Sublessee
thereunder will, at the Lessor's option, attorn to the Lessor and waive any
right the Sublessee may have to terminate the Sublease or to surrender
possession thereunder, as a result of the termination of this Lease and (C) in
the event the Sublessee receives a written notice from the Lessor stating that
the Lessee is in default under this Lease, the Sublessee shall thereafter be
obligated to pay all rentals accruing under said Sublease directly to the Lessor
or as the Lessor may direct. All rentals received from the Sublessee by the
Lessor shall be credited against the amounts owing by the Lessee under this
Lease.
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ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 NO MERGER OF TITLE. There shall be no merger of this Lease or of
the leasehold estate created hereby with the fee estate in the Leased Property
by reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (A) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (B) the fee estate in the Leased
Property.
20.2 TRANSFERS BY LESSOR. If the original Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of the Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of the Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 LESSOR MAY GRANT LIENS. Without the consent of the Lessee, but
subject to the terms and conditions set forth below in this Section 20.3, the
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement upon the Leased
Property or any interest therein ("Encumbrance"), whether to secure any
borrowing or other means of financing or refinancing, provided that the Lessee
shall have no obligation to make payments under such Encumbrances. The Lessee
shall subordinate this Lease to the lien of any such Encumbrance, on the
condition that the beneficiary or holder of such Encumbrance executes a
non-disturbance agreement in conformity with the provisions of Section 20.4. To
the extent that any such Encumbrance consists of a mortgage or deed of trust on
the Lessor's interest in the Leased Property the same shall be referred to
herein as a "Fee Mortgage" and the holder thereof shall be referred to herein as
a "Fee Mortgagee".
20.4 SUBORDINATION AND NON-DISTURBANCE. Concurrently with the execution
and delivery of any Fee Mortgage entered into after the date hereof, provided
that the Lessee executes and delivers an agreement of the type described in the
following paragraph, the Lessor shall obtain and deliver to the Lessee an
agreement by the holder of such Fee Mortgage, pursuant to which, (A) the
applicable Fee Mortgagee consents to this Lease and (B) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (I) the Lessee shall not be disturbed in peaceful enjoyment
of the Leased Property nor shall this Lease be terminated or canceled at any
time, except in the event that the Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein, (II) the
Lessee's rights under this Lease shall not be diminished or adversely effected
in any way provided no Event of Default exists hereunder, (III) all insurance
proceeds received in
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connection with any loss, injury or damage relating to the Leased Property shall
be paid to the Lessor in accordance with the provisions of this Lease and the
Fee Mortgagee shall have no rights with respect to any such proceeds unless the
Lessee elects to terminate this Lease pursuant to the provisions of Section
13.2.2, (IV) the Lessee's Right of First Refusal to purchase the Leased Property
shall remain in force and effect pursuant to the terms hereof and (V) in the
event that the Lessee elects to exercise the Right of First Refusal to purchase
the Leased Property and performs all of its obligations hereunder in connection
with any such election, the holder of the Fee Mortgage shall release its Fee
Mortgage upon payment by the Lessee of the purchase price required hereunder,
provided, that (1) such purchase price is paid to the holder of the Fee
Mortgage, in the event that the Indebtedness secured by the applicable Fee
Mortgage is equal to or greater than the purchase price or (2) in the event that
the purchase price is greater than the Indebtedness secured by the Fee Mortgage,
a portion of the purchase price equal to the Indebtedness secured by the Fee
Mortgage is paid to the Fee Mortgagee and the remainder of the purchase price is
paid to the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee shall
(A) subordinate this Lease and all of the Lessee's rights and estate hereunder
to the Fee Mortgage held by such Fee Mortgagee, (B) agree that the Lessee will
attorn to and recognize such Fee Mortgagee or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such Fee Mortgage as the
Lessor under this Lease for the balance of the Term then remaining and (C) enter
into a new lease with the Fee Mortgagee or the purchaser at any such sale on the
same terms and conditions of this Lease for the balance of the Term then
remaining. To effect the intent and purpose of the immediately preceding
sentence, the Lessee agrees to execute and deliver such instruments in
recordable from as are reasonably requested by the Lessor or the applicable Fee
Mortgagee; provided, however, that such Fee Mortgagee simultaneously executes,
delivers and records a written agreement of the type described in the preceding
paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 QUIET ENJOYMENT. As long as the Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations thereunder, the Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property throughout the Term, free of
any claim or other action by the Lessor or anyone claiming by, through or under
the Lessor, but subject to the Permitted Encumbrances and such Liens as may
hereafter be consented to by the Lessee. No failure by the Lessor to comply with
the foregoing covenant shall give the Lessee any right to cancel or terminate
this Lease, or to fail to pay any other sum payable under this Lease, or to fail
to perform any other obligation of the Lessee hereunder. Notwithstanding the
foregoing, the Lessee shall have the right by separate and independent action to
pursue any claim it may have against the Lessor as a result of a breach by the
Lessor of the covenant of quiet enjoyment contained in this Article 21.
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21.2 MEMORANDUM OF LEASE. The Lessor and the Lessee shall, promptly
upon the request of either, enter into a short form memorandum of this Lease, in
form suitable for recording under the laws of the State, in which reference to
this Lease and all options contained herein shall be made. The Lessee shall pay
all recording costs and taxes associated therewith.
21.3 DEFAULT BY LESSOR. The Lessor shall be in default of its
obligations under this Lease only if the Lessor shall fail to observe or perform
any term, covenant or condition of this Lease on its part to be performed and
such failure shall continue for a period of thirty (30) days after notice
thereof from the Lessee (or such shorter time as may be necessary in order to
protect the health or welfare of any residents of the Facility or to insure the
continuing compliance of the Facility with the applicable Legal Requirements),
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if the
Lessor, within said thirty (30) day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which the Lessor shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay.
ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder or
under any of the other Lease Documents shall be in writing and shall be deemed
duly given if personally delivered, sent by certified mail, return receipt
requested, or sent by a nationally recognized commercial overnight delivery
service with provision for a receipt, postage or delivery charges prepaid, and
shall be deemed given when so personally delivered or postmarked or placed in
the possession of such mail or delivery service and addressed as follows:
If to the Lessee: ALS Leasing, Inc.
c/o Alternative Living Services, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
With a copy to: Miriam J. Dent, Esq.
[The Lessee's counsel] Rogers & Hardin
229 Peachtree Street, N.E.,
2700 International Tower
Atlanta, Georgia 30303
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If to the Guarantor: Alternative Living Services, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
With a copy to: Miriam J. Dent, Esq.
[Guarantor's Counsel] Rogers & Hardin
229 Peachtree Street, N.E.,
2700 International Tower
Atlanta, Georgia 30303
If to the Lessor: Meditrust of Acquisition Corporation III
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and Frank Giso III, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
or such other address as the Lessor, the Lessee or the Guarantor shall
hereinafter from time to time designate by a written notice to the others given
in such manner. Any notice given to the Lessee or the Guarantor by the Lessor at
any time shall not imply that such notice or any further or similar notice was
or is required.
ARTICLE 23
LIMITATION OF LIABILITY
All Persons dealing with the Lessor, in any way, shall look only to the
assets of the Lessor for the payment of any sum or the performance of any
obligation. Furthermore, in no event shall the Lessor ever be liable to the
Lessee or any other Person for any indirect or consequential damages incurred by
the Lessee or such other Person resulting from any cause whatsoever.
Notwithstanding the foregoing, the Lessee hereby acknowledges and agrees that
the Lessee shall look only to the assets of the Lessor for the payment of any
sum or performance of any obligation due by or from the Lessor pursuant to the
terms and provisions of the Lease Documents.
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ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 BROKER'S FEE INDEMNIFICATION. Each of the Lessor and the Lessee
hereby represents and warrants to the other that it has not dealt with any
broker or any other similar agent in connection with any of the transactions
contemplated by the Lease Documents. Each of the Lessor and the Lessee shall and
hereby agrees to indemnify, defend (with counsel acceptable to the other) and
hold the other harmless from and against any and all claims for premiums or
other charges, finder's fees, taxes, brokerage fees or commissions and other
similar compensation and all other costs and expenses, including, without
limitation, reasonable attorneys' fees, due in connection with or otherwise
incurred as a result of the indemnifying party's breach of the representation
and warranty set forth in the preceding sentence. Notwithstanding the foregoing,
each of the Lessor and the Lessee shall have the option of conducting its own
defense against any such claims with counsel of its own choice, but at the
expense of the other, as aforesaid. This indemnification shall include all
attorneys' fees and expenses and court costs reasonably incurred by the Lessor
in connection with the defense against any such claims and the enforcement of
this indemnification agreement and shall survive the termination of this Lease.
24.2 NO JOINT VENTURE OR PARTNERSHIP. Neither anything contained in any
of the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between the Lessor and the
Lessee. The Lessee is not the agent or representative of the Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, the Lessor liable to any Person for goods delivered to the
Lessee, services performed with respect to the Leased Property at the direction
of the Lessee or for debts or claims accruing against the Lessee.
24.3 AMENDMENTS, WAIVERS AND MODIFICATIONS. Except as otherwise
expressly provided for herein or in any other Lease Document, none of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by (A) all parties to this Lease or the other
applicable Lease Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination and (B) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Lease and the other
Lease Documents shall extend and be applicable to all renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management Agreements, the
Related Party Agreements, the Permits and/or the Contracts. References herein
and in the other Lease Documents to any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the Permits and/or the Contracts shall
be deemed to include any renewals, replacements, amendments, extensions,
substitutions, revisions, consolidations or modifications thereof.
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<PAGE> 117
Notwithstanding the foregoing, any reference contained in any of the
Lease Documents, whether express or implied, to any renewal, replacement,
amendment, extension, substitution, revisions, consolidation or modification of
any of the Lease Documents or any Management Agreement, Related Party Agreement,
Permit and/or the Contract is not intended to constitute an agreement or consent
by the Lessor to any such renewal, replacement, amendment, substitution,
revision, consolidation or modification; but, rather as a reference only to
those instances where the Lessor may give, agree or consent to any such renewal,
replacement, amendment, extension, substitution, revision, consolidation or
modification as the same may be required pursuant to the terms, covenants and
conditions of any of the Lease Documents.
24.4 CAPTIONS AND HEADINGS. The captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 TIME IS OF THE ESSENCE. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which taken together shall constitute an original and all
of which shall constitute one and the same instrument.
24.7 ENTIRE AGREEMENT. This Lease and the other Lease Documents set
forth the entire agreement of the parties with respect to the Facility and the
other Leased Property and shall, with respect to the Facility and the other
Leased Property, supersede in all respects the letter of intent dated July 22,
1996 (and all prior iterations thereof) from Meditrust to the Guarantor;
provided, however, said letter of intent is not superseded with respect to the
subject matter not contemplated by the Lease Documents.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, THE LESSOR AND THE LESSEE HEREBY MUTUALLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR
HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. The
Lessee hereby certifies that neither the Lessor nor any of the Lessor's
representatives, agents or counsel has represented expressly or otherwise that
the Lessor would not, in the event of any such suit, action or proceeding seek
to enforce this waiver to the right of trial by jury and acknowledges that the
Lessor has been induced by this waiver (among other things) to enter into the
transactions evidenced by this Lease and the other Lease Documents and further
acknowledges that the Lessee (A) has read the provisions of this Lease, and in
particular, the paragraph containing this waiver, (B) has consulted legal
counsel, (C) understands the rights that it is granting in this Lease and the
rights that it waiving in this
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paragraph in particular and (D) makes the waivers set forth herein knowingly,
voluntarily and intentionally.
24.9 SUCCESSORS AND ASSIGNS. This Lease and the other Lease Documents
shall be binding and inure to the benefit of (A) upon the Lessee and the
Lessee's legal representatives and permitted successors and assigns and (B) the
Lessor and any other Person who may now or hereafter hold the interest of the
Lessor under this Lease and their respective successors and assigns.
Notwithstanding the foregoing, except as may be permitted pursuant to Article
19, the Lessee shall not assign any of its rights or obligations hereunder or
under any of the other Lease Documents without the prior written consent of the
Lessor, in each instance, which consent may be withheld in the Lessor's sole and
absolute discretion.
24.10 NO THIRD PARTY BENEFICIARIES. This Lease and the other Lease
Documents are solely for the benefit of the Lessor, its successors, assigns and
participants (if any), the Meditrust Entities, the Indemnified Parties, the
Lessee, the Guarantor, the other members of the Leasing Group and their
respective permitted successors and assigns, and, except as otherwise expressly
set forth in any of the Lease Documents, nothing contained therein shall confer
upon any Person other than such parties any right to insist upon or to enforce
the performance or observance of any of the obligations contained therein. All
conditions to the obligations of the Lessor to advance or make available
proceeds of insurance or Awards, or to release any deposits held for Impositions
or insurance premiums are imposed solely and exclusively for the benefit of the
Lessor, its successors and assigns. No other Person shall have standing to
require satisfaction of such conditions in accordance with their terms, and no
other Person shall, under any circumstances, be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by the
Lessor at any time, if, in the Lessor's sole and absolute discretion, the Lessor
deems it advisable or desirable to do so.
24.11 GOVERNING LAW. This Lease shall be construed and the rights and
obligations of the Lessor and the Lessee shall be determined in accordance with
the laws of the State.
The Lessee hereby consents to personal jurisdiction in the courts of
the State and the United States District Court for the District in which the
Leased Property is situated as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of or with respect to any of the
Lease Documents, the negotiation and/or consummation of the transactions
evidenced by the Lease Documents, the Lessor's relationship of any member of the
Leasing Group in connection with the transactions evidenced by the Lease
Documents and/or the performance of any obligation or the exercise of any remedy
under any of the Lease Documents and expressly waives any and all objections the
Lessee may have as to venue in any of such courts.
24.12 GENERAL. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
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<PAGE> 119
If any provision of this Lease or any of the other Lease Documents or
any application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
If any late charges provided for in any provision of this Lease or any
of the other Lease Documents are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
The Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
24.13 INTENTION OF PARTIES. The Lessor and the Lessee acknowledge and
agree that this Lease is intended to be a lease of the Leased Property and is in
no way intended to be a mortgage encumbering the Leased Property.
24.14 APPRAISAL.
24.14.1 DESIGNATION OF APPRAISERS. In the event that it becomes
necessary to determine the Fair Market Value of the Leased Property for
any purpose of this Lease, the party required or permitted to give
notice of such required determination shall include in the notice the
name of a Person selected to act as appraiser on its behalf. Within ten
(10) days after receipt of any such notice, the Lessor (or the Lessee,
as the case may be) shall by notice to the Lessee (or the Lessor, as
the case may be) appoint a second Person as appraiser on its behalf.
24.14.2 APPRAISAL PROCESS. The appraisers thus appointed, each
of whom must be a member of the American Institute of Real Estate
Appraisers (or any successor organization thereto), shall, within
forty-five (45) days after the date of the notice appointing the first
appraiser, proceed to appraise the Leased Property to determine the
Fair Market Value of the Leased Property as of the relevant date
(giving effect to the impact, if any, of inflation from the date of
their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall
have been so appointed but only one such appraiser shall have made such
determination within fifty (50) days after the making of the Lessee's
or the Lessor's request, then the determination of such appraiser shall
be final and binding upon the parties. If two appraisers shall have
been appointed and shall have made their determinations within the
respective requisite periods set forth above and if the difference
between the amounts so determined shall not exceed ten per cent (10%)
of the
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<PAGE> 120
lesser of such amounts, then the Fair Market Value of the Leased
Property shall be an amount equal to fifty percent (50%) of the sum of
the amounts so determined. If the difference between the amounts so
determined shall exceed ten percent (10%) of the lesser of such
amounts, then such two appraisers shall have twenty (20) days to
appoint a third appraiser, but if such appraisers fail to do so, then
either party may request the American Arbitration Association or any
successor organization thereto to appoint an appraiser within twenty
(20) days of such request, and both parties shall be bound by any
appointment so made within such twenty (20) day period. If no such
appraiser shall have been appointed within such twenty (20) days or
within ninety (90) days of the original request for a determination of
Fair Market Value of the Leased Property, whichever is earlier, either
the Lessor or the Lessee may apply to any court having jurisdiction to
have such appointment made by such court. Any appraiser appointed by
the original appraisers, by the American Arbitration Association or by
such court shall be instructed to determine the Fair Market Value of
the Leased Property within thirty (30) days after appointment of such
Appraiser. The determination of the appraiser which differs most in
terms of dollar amount from the determinations of the other two
appraisers shall be excluded, and fifty percent (50%) of the sum of the
remaining two determinations shall be final and binding upon the Lessor
and the Lessee as the Fair Market Value of the Leased Property.
24.14.3 SPECIFIC ENFORCEMENT AND COSTS. This provision for
determination by appraisal shall be specifically enforceable to the
extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law. The Lessor and the
Lessee shall each pay the fees and expenses of the appraiser appointed
by it and each shall pay one-half of the fees and expenses of the third
appraiser and one-half of all other cost and expenses incurred in
connection with each appraisal.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 121
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
WITNESSES: LESSEE:
ALS LEASING, INC., a Delaware
corporation [NC ONLY: , IN NORTH
CAROLINA D/B/A ALS LEASING (DELAWARE),
INC.]
By:
- -------------------------- -----------------------------------
Name: David M. Boitano, Vice President
- --------------------------
Name:
WITNESSES: LESSOR:
MEDITRUST ACQUISITION
CORPORATION III, a Delaware
corporation
By:
- -------------------------- -----------------------------------
Name: Name:
Title:
- --------------------------
Name:
- --------------------------
Name:
111
<PAGE> 122
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
112
<PAGE> 123
EXHIBIT B
PERMITTED ENCUMBRANCES
1. All matters pertaining to the Leased Property and enumerated on
Schedule B (Part I and Part II) of the Lessor's Owner's Title Insurance
Policy issued by Lawyers Title Insurance Corporation and effective as
of the date hereof.
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<PAGE> 124
EXHIBIT C
LIST OF SHAREHOLDERS
1. Alternative Living Services, Inc. - sole shareholder of the Lessee
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<PAGE> 125
EXHIBIT D
NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
None
115
<PAGE> 126
EXHIBIT E
OPEN COST REPORTS
None
116
<PAGE> 127
EXHIBIT F
RATE LIMITATIONS
None
117
<PAGE> 128
EXHIBIT G
FREE CARE REQUIREMENTS
None
118
<PAGE> 129
EXHIBIT H
CURRENT RATES
119
<PAGE> 130
EXHIBIT I
RENT COVERAGE RATIO CALCULATION
See Exhibit D to Agreement Regarding Related Lease Transactions.
120
<PAGE> 131
EXHIBIT J
[INTENTIONALLY OMITTED]
121
<PAGE> 132
SCHEDULE 11.5
1. Any assisted living facility (or other facility operated for any use
included within the definition of the Primary Intended Use), center, unit or
program (or any such activity or any related activity competitive therewith)
which is in whole or in part, owned, operated, leased, managed or under
construction by Lessee, Guarantor or any Affiliate thereof or which Lessee,
Guarantor or any Affiliate thereof has a right to acquire within a two (2) year
period, which is either in existence or under construction as of the end of the
seventh (7th) Lease Year.
122
<PAGE> 1
EXHIBIT 99.2
SCHEDULE OF RESIDENCE LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 99.1
<TABLE>
<CAPTION>
LEASING ORIGINAL NO. OF
COMMITMENT MEDITRUST BASE UNITS
FACILITY NAME LOCATION FEE INVESTMENT RENT IN FACILITY
---------------------------- -------------- ------------- -------------- ------- ---------------
<S> <C> <C> <C> <C> <C>
1. The Evergreens/Evergreens Plover, WI $10,909 $2,233,924 $204,181 37
South/WovenHearts
2. The Oaks/WovenHearts Wisconsin Rapids, WI $ 6,364 $1,303,123 $119,105 19
3. The Pines/Pines North/ Wausau, WI $ 8,182 $1,675,443 $153,135 40
WovenHearts
4. StoneCroft Manor/WovenHearts Medford, WI $ 4,545 $ 930,802 $ 85,075 19
5. WovenHearts of Faribault Faribault, MN $ 4,474 $1,185,390 $108,345 20
6. WovenHearts of Mankato Mankato, MN $ 4,847 $1,284,173 $117,373 20
7. WovenHearts of Owatonna Owatonna, MN $ 4,847 $1,284,173 $117,373 20
8. WovenHearts of Sauk Rapids Sauk Rapids, MN $ 3,728 $ 987,825 $ 90,287 20
9. WovenHearts of Winona Winona, MN $ 4,847 $1,284,173 $117,373 20
10. WovenHearts of Eau Claire Eau Claire, WI $ 4,847 $1,284,173 $117,373 20
11. WovenHearts of Manitowoc Manitowoc, WI $ 4,101 $1,086,608 $ 99,316 20
12. WovenHearts of Neenah Neenah, WI $ 5,219 $1,382,955 $126,402 20
13. WovenHearts of Oshkosh Oshkosh, WI $ 4,101 $1,086,608 $ 99,316 20
14. WovenHearts of Sun Prairie Sun Prairie, WI $ 4,474 $1,185,390 $108,345 20
15. WovenHearts of Willmar Willmar, MN $ 4,474 $1,185,390 $108,345 20
16. WovenHearts of Middleton Middleton, WI $ 5,592 $1,481,738 $135,431 20
17. Clare Bridge of Charleston Charleston, SC $15,381 $4,075,366 $372,488 38
18. Clare Bridge of Charlotte Charlotte, NC $19,516 $5,170,973 $472,627 52
19. Clare Bridge of Columbia Columbia, SC $14,321 $3,794,584 $346,825 38
20. Clare Bridge of Jacksonville Jacksonville, FL $14,070 $3,728,171 $340,755 38
21. Clare Bridge of Greensboro Greensboro, NC $14,559 $3,857,509 $352,576 38
22. Wynwood of Charlotte Charlotte, NC $26,492 $7,019,381 $641,571 72
23. Wynwood of Greensboro Greensboro, NC $26,031 $6,897,281 $639,411 72
24. Wynwood of Lansing Lansing, MI $26,248 $6,954,771 $635,666 72
</TABLE>
9
<PAGE> 1
EXHIBIT 99.3
EXECUTION COPY
DS2-304489.3
GUARANTY
TO: MEDITRUST ACQUISITION CORPORATION III
1. Guaranty of Payment and Performance of Obligations. For value
received and hereby acknowledged and as an inducement to MEDITRUST ACQUISITION
CORPORATION III, a Delaware corporation, having its principal office at 197
First Avenue, Needham Heights, Massachusetts 02194 (hereinafter referred to as
the "Lessor") to: (A) enter into that certain lease transaction with ALS
LEASING, INC., a Delaware corporation, having its principal place of business at
450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 (hereinafter
referred to as the "Lessee"), pursuant to various Facility Lease Agreements by
and between the Lessor and the Lessee (hereinafter referred to, collectively, as
the "Leases"), relating to the various facilities listed in Exhibits A, B and C
to the Agreement Regarding Related Lease Transactions ("Agreement Regarding
Related Lease Transactions") by and between Lessor and Lessee of even date
herewith (hereinafter referred to, collectively, as the "Facilities") as each
such Exhibit may be amended or modified from time to time in order to reflect
the addition of new facilities or the removal of one or more facilities, and (B)
enter into or accept the other Lease Documents (as defined in the Leases) and
make future loans, advances and extensions of credit to, for the account of or
on behalf of the Lessee, the undersigned, ALTERNATIVE LIVING SERVICES, INC., a
Delaware corporation, having its principal place of business at 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 (the "Guarantor"), being
the sole shareholder of the Lessee and, as such, deriving a substantial benefit
from the consummation of the transaction evidenced by the Lease Documents,
hereby unconditionally guarantees to the Lessor the full payment and performance
of the Lease Obligations (as hereinafter defined) and the full payment and
performance of all obligations under any and all Subleases (as defined in the
Leases) irrespective of whether or not the Lessee is in default of any Lease
Obligations or whether or not any of the Leases are terminated. For the purposes
of this Guaranty, the term "Lease Obligations" shall mean the Lease Obligations
as defined in the Leases and all payment and performance obligations due and
owing under any and all Subleases.
This Guaranty is an absolute, unconditional and continuing guaranty of
the full and punctual payment and performance of the Lease Obligations and not
merely of their collectibility and is in no way conditioned upon any requirement
that the Lessor first collect or attempt to collect the Lease Obligations or any
portion thereof from the Lessee or from any endorser, surety or other guarantor
of any of the same or resort to any security or other means of obtaining payment
of any of the Lease Obligations that the Lessor, from any Sublessee now has or
may acquire after the date hereof, or upon any other contingency whatsoever.
Upon any Lease Default (as defined in the Leases), the Lease Obligations and all
liabilities and obligations of the Guarantor to the Lessor, hereunder or
otherwise, shall, at the option of the Lessor, become immediately due and
payable to the Lessor
<PAGE> 2
without further demand or notice of any nature, all of which are expressly
waived by the Guarantor. Payments by the Guarantor hereunder may be required by
the Lessor on any number of occasions. This Guaranty shall continue in full
force and effect until the complete payment and performance of all of the Lease
Obligations.
All payments hereunder received by the Lessor shall be applied by the
Lessor, without any marshalling of assets, towards the payment and/or
performance of the Lease Obligations and any other indebtedness of the Guarantor
hereunder in such order as the Lessor, in its sole and absolute discretion, may
determine.
2. DEFINED TERMS. Capitalized terms used herein and not otherwise
specifically defined herein shall have the same meanings ascribed to such terms
in the Leases.
3. THE GUARANTOR'S FURTHER AGREEMENTS TO PAY. The Guarantor further
agrees, as the principal obligor and not as a guarantor, to pay to the Lessor
forthwith upon demand, in funds immediately available to the Lessor, all costs
and expenses, including without limitation, attorneys' fees and expenses and
court costs, reasonably incurred or expended by the Lessor in connection with
the collection or enforcement of the Lease Obligations and the enforcement of
all of the other obligations hereunder. Any amounts owed to the Lessor under
this Section 3 shall be a demand obligation and, if not paid within ten (10)
days after demand, shall thereafter, to the extent then permitted by law, bear
interest at the Overdue Rate until the date of payment. The provisions of this
Section 3 shall survive the expiration or earlier termination of the Leases.
4. LIABILITY OF THE GUARANTOR. This Guaranty is unlimited and the
Guarantor shall be jointly and severally liable with every endorser, surety or
other guarantor of any or all of the Lease Obligations and the continuation of
this Guaranty shall not be affected by the termination, discontinuance, release
or modification of any agreement from (A) any such endorser, surety or guarantor
and/or (B) any other endorser, surety or guarantor of any of the other
Obligations. Nothing contained herein or otherwise shall require the Lessor to
make demand upon or join the Lessee, any Sublessee or any such endorser, surety
or guarantor or other party in any suit brought upon this Guaranty; and the
Guarantor hereby waives any right to require marshalling or exhaustion of any
remedy against any collateral, other property, or any other Person primarily or
secondarily liable.
5. THE LESSOR'S FREEDOM TO DEAL WITH THE LESSEE AND OTHER PARTIES. The
Lessor shall be at liberty, without giving notice to or obtaining the assent of
the Guarantor and without relieving the Guarantor of any liability hereunder, to
deal with the Lessee, any Sublessee and with each other Person who now is or
after the date hereof becomes liable in any manner for any of the Obligations in
such manner as the Lessor, in its sole and absolute discretion, deems fit. The
Lessor and the other Meditrust Entities have full authority (in their sole and
absolute discretion) to do any or all of the following things, none of which
shall discharge or affect the Guarantor's liability hereunder:
2
<PAGE> 3
(a) extend credit, make loans and afford other financial accommodations
to the Lessee, any Sublessee and/or any of the Related Parties at such times, in
such amounts and on such terms as the Lessor may approve;
(b) modify, amend, vary the terms and grant extensions or renewals of
any present or future Obligations or any instrument relating to or securing the
same, and, without limitation, this Guaranty shall survive the expiration or
earlier termination of the Leases;
(c) grant time, waivers and other indulgences in respect of any of the
Obligations;
(d) vary, exchange, release or discharge, wholly or partially, or
delay, fail to, or abstain from perfecting and enforcing any security or
guaranty or other means of obtaining payment of any of the Obligations which the
Lessor or any of the other Meditrust Entities now has or acquires after the date
hereof;
(e) take or omit to take any of the actions referred to in any
instrument evidencing, securing or relating to any of the Obligations or any
actions under this Guaranty, except nothing herein shall relieve the Lessor of
any obligation to give notice and/or a period to cure (if any) to the Lessee as
provided in the Leases;
(f) fail, omit or delay to enforce, assert or exercise any right, power
or remedy conferred on the Lessor or any of the other Meditrust Entities in this
Guaranty or in any other instrument evidencing, securing or relating to any of
the Obligations or take or refrain from taking any other action, except nothing
herein shall relieve the Lessor of any obligation to give notice and/or a period
to cure (if any) to the Lessee as provided in the Leases;
(g) accept partial payments from the Lessee, any other member of the
Leasing Group, any of the Related Parties or any other Person;
(h) release or discharge, wholly or partially, the Lessee, any other
member of the Leasing Group, any of the Related Parties, any Sublessee and/or
any other Person now or hereafter primarily or secondarily liable for the
Obligations (or any portion thereof) or accept additional collateral for the
payment of any Obligations;
(i) compromise or make any settlement or other arrangement with the
Lessee, any other member of the Leasing Group, any of the Related Parties, any
Sublessee or any other Person referred to in clause (h) above; and
(j) consent to and participate in the proceeds of any assignment,
trust or mortgage for the benefit of creditors.
6. UNENFORCEABILITY OF OBLIGATIONS; INVALIDITY OF SECURITY OR OTHER
GUARANTIES. The obligations of the Guarantor hereunder shall not be affected by
any change in the beneficial
3
<PAGE> 4
ownership of the Lessee, any other member of the Leasing Group, any of the
Related Parties or any Sublessee, by reason of any disability of the Lessee, any
other member of the Leasing Group, any Related Party, any Sublessee or by any
other circumstance (other than the complete payment and performance of the Lease
Obligations) which might constitute a defense available to, or a discharge of,
the Lessee, any other member of the Leasing Group, any of the Related Parties or
any Sublessee in respect of any of the Obligations. If for any reason now or
hereafter the Lessee, any other member of the Leasing Group, any of the Related
Parties or any Sublessee has no legal existence or is under no legal obligation
to discharge any of the Obligations undertaken or purported to be undertaken by
it or on its behalf, or if any of the moneys included in the Obligations have
become irrecoverable from the Lessee, any other member of the Leasing Group, any
Related Party or any Sublessee by operation of law or for any other reason, this
Guaranty shall nevertheless be binding on the Guarantor and the Guarantor shall
remain unconditionally liable for the complete payment and performance of the
Lease Obligations. This Guaranty shall be in addition to any other guaranty or
other security for the Obligations, and it shall not be prejudiced or rendered
unenforceable by the invalidity of any such other guaranty or security. This
Guaranty shall continue to be effective or be reinstated, as the case may be,
if, at any time, any payment of the Obligations is rescinded or must otherwise
be returned by the Lessor or any of the other Meditrust Entities, upon the
insolvency, bankruptcy or reorganization of the Lessee, any other member of the
Leasing Group, any of the Related Parties or any Sublessee or otherwise, all as
though such payment had not been made. The Guarantor covenants to cause the
Lessee to maintain and preserve the enforceability of any instruments now or
hereafter executed in favor of the Lessor, and to take no action of any kind
which might be the basis for a claim that the Guarantor has any defense
hereunder other than the complete payment and performance of the Lease
Obligations.
It shall not be necessary for the Lessor to inquire into the power of
the Lessee or any Sublessee or anyone acting or purporting to act on any such
party's behalf, and any Lease Obligation made or created in reliance upon the
professed exercise of such powers shall be guarantied hereunder. The Guarantor
represents that the Lessee is the bona fide tenant of the Leased Property, that
any Sublessee is or shall be a bona fide subtenant of the Leased Property and
that neither the Lessee nor any Sublessee has been formed or availed of to evade
or circumvent the applicable usury laws of any state or states concerned
therewith, and the Guarantor hereby indemnifies the Lessor and agrees to save it
harmless against any damages or expenses suffered by the Lessor should this
representation or any other representation contained herein prove untrue in any
material respect. The aforesaid indemnification agreement shall include, without
limitation, attorneys' fees and expenses and court costs reasonably incurred by
the Lessor in connection with the enforcement of said indemnification.
The indemnity provisions of this Section 6 shall survive the complete
payment and performance of the Obligations and the expiration or earlier
termination of the Leases.
7. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR. In order to induce
the Lessor to enter into or accept the Leases and the other Lease Documents, the
Guarantor hereby warrants and represents to, and covenants and agrees with, the
Lessor that:
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7.1. FORMATION AND AUTHORITY OF THE GUARANTOR AND ITS GENERAL PARTNER.
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. The Guarantor has all requisite
corporate power to own and operate its properties and to carry on its business
as now conducted and as proposed to be conducted and is duly qualified to do
business and is in good standing in each jurisdiction where such qualification
is necessary or desirable in order to carry out its business as now conducted
and as proposed to be conducted;
7.2. THE LESSEE AS SUBSIDIARY.
The Lessee is a wholly-owned Subsidiary of the Guarantor.
7.3. NO VIOLATIONS.
The execution, delivery and performance of this Guaranty and the other
Lease Documents and the consummation of the transactions thereby contemplated
shall not result in any breach of, or constitute a default under, or result in
the acceleration of, or constitute an event which, with notice or passage of
time could result in default or acceleration of any obligation of the Guarantor
or any other contract, mortgage, lien, lease, agreement, instrument, franchise,
arbitration award, judgment, decree, bank loan or credit agreement, trust
indenture or other instrument to which the Guarantor is a party or by which the
Guarantor may be bound or affected and do not violate or contravene any Legal
Requirement;
7.4. NO CONSENT OR APPROVAL.
Except as already obtained or filed, as the case may be, no consent or
approval or other authorization of, or exemption by, or declaration or filing
with, any Person and no waiver of any right by any Person is required to
authorize or permit, or is otherwise required as a condition to the Guarantor's
execution and delivery of this Guaranty or any of the other Lease Documents to
which it is a party and the performance of its obligations thereunder, or as a
condition to the validity (assuming the due authorization, execution and
delivery by the Lessor of the Leases and the other Lease Documents to which it
is a party) or enforceability of any of the same and/or the first priority of
any Liens granted thereunder;
7.5. FINANCIAL CONDITION.
(a) The Guarantor is financially solvent and there are no actions,
suits, investigations or proceedings including, without limitation, outstanding
federal or state tax liens, garnishments or insolvency and bankruptcy
proceedings, pending or, to the best of the Guarantor's knowledge and belief,
threatened:
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i. against or affecting the Guarantor which, if adversely
resolved against the Guarantor would materially adversely affect the
ability of the Guarantor to perform its obligations under this Guaranty
or any of the Lease Documents to which it is a party;
ii. against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession or operation thereof; or
iii. which may involve or affect the validity, priority or
enforceability of this Guaranty, the Leases or any of the other Lease
Documents, at law or in equity, or before or by any arbitrator or
Governmental Authority;
(b) After giving effect to the consummation of the transaction
contemplated by the Leases and the other Lease Documents, the Guarantor:
i. will be able to pay its debts as they become due;
ii. will have sufficient funds and capital to carry on its
business as now conducted or as contemplated to be conducted (in
accordance with the terms of the Lease Documents);
iii. will own property having a value both at fair valuation and
at present fair saleable value greater than the amount required to pay
its debts as they become due; and
iv. will not be rendered insolvent as determined by applicable
law;
(c) The Guarantor is not a party to any agreement, the terms of which
now have or, based upon current circumstances, as far as can be reasonably
foreseen, may have a material adverse effect on its financial condition or
business or on the operation of the Facilities;
(d) The Guarantor is not delinquent or claimed to be delinquent
under any material obligation for the payment of borrowed money;
7.6. COMMERCIAL ACTS.
The Guarantor's performance of and compliance with the obligations and
conditions set forth herein and the other Lease Documents to which it is a party
will constitute commercial acts done and performed for commercial purposes;
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7.7. FILING OF TAX RETURNS.
The Guarantor has filed all federal, state and local tax returns which
are required to be filed as to which extensions are not currently in effect and
has paid all taxes, assessments, impositions, fees and other governmental
charges (including interest and penalties) which have become due pursuant to
such returns or pursuant to any assessment or notice of tax claim or deficiency
received by the Guarantor. No tax liability has been asserted by the Internal
Revenue Service against the Guarantor or any other federal, state or local
taxing authority for taxes, assessments, impositions, fees or other governmental
charges (including interest or penalties thereon) in excess of those already
paid;
7.8. ACCURACY OF FINANCIAL STATEMENTS AND OTHER INFORMATION.
The financial statements of the Guarantor given to the Lessor in
connection with the consummation of the transaction contemplated by the Lease
Documents were true, complete and accurate and fairly presented the financial
condition of the Guarantor as of the date thereof and for the periods covered
thereby, having been prepared in accordance with GAAP and such financial
statements disclosed all material liabilities of the Guarantor as required by
GAAP. There has been no material adverse change since such date with respect to
the Tangible Net Worth or liquidity of the Guarantor or with respect to any
other matters referred to or contained therein and no additional material
liabilities, including, without limitation, contingent liabilities of the
Guarantor have arisen or been incurred since such date. The projections
heretofore delivered to the Lessor continue to be reasonable (with respect to
the material assumptions upon which such projections are based) and the
Guarantor reasonably anticipates the results projected therein will be achieved,
there having been (A) no material adverse change in the business, assets or
condition, financial or otherwise of the Guarantor or (B) no material depletion
of the Guarantor's cash or decrease in working capital except in the ordinary
course of business;
7.9. REPRESENTATIONS AND WARRANTIES IN LEASE DOCUMENTS.
All of the representations and warranties made in any of the Lease
Documents with respect to the Guarantor are true and correct; and
7.10. TERMS, CONDITIONS, COVENANTS AND AGREEMENTS CONTAINED IN LEASE
DOCUMENTS.
The Guarantor shall be bound by all terms, conditions, covenants and
agreements contained in any of the Lease Documents with respect to the
Guarantor.
8. CONTINUING REPRESENTATIONS AND WARRANTIES: All representations
and warranties contained in this Guaranty shall constitute continuing
representations and warranties which shall remain true, correct and complete as
long as this Guaranty is in force and effect. Notwithstanding the provisions of
the foregoing sentence but without derogation from any other terms and
provisions of this Guaranty, including, without limitation, those terms and
provisions containing covenants to
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be performed or conditions to be satisfied on the part of the Guarantor, the
representations and warranties contained in Sections 7.5(a), 7.5(c), 7.5(d), in
the second sentence of Section 7.7 and in the second and third sentences of
Section 7.8 hereof shall not constitute continuing representations and
warranties hereunder.
9. NO CONTEST WITH THE LESSOR. No set-off, counterclaim, reduction
or diminution of any obligation, or any claim or defense of any kind or nature
which the Guarantor has or may have against the Lessee, any other member of the
Leasing Group, any of the Related Parties or the Lessor shall be available
hereunder to the Guarantor. The Guarantor shall not assert and hereby waives any
right whatsoever that the Guarantor may have at law or in equity, including,
without limitation, any right of subrogation or to seek contribution,
indemnification or any other form of reimbursement from the Lessee, any other
endorser, surety or guarantor of any of the Obligations or any other Person now
or hereafter primarily or secondarily liable for any of the Obligations. The
Guarantor shall not, in any proceedings under the Bankruptcy Code or insolvency
proceedings of any nature, prove in competition with the Lessor in respect of
any payment hereunder or be entitled to have the benefit of any counterclaim or
proof of claim or dividend or payment by or on behalf of the Lessee, any other
member of the Leasing Group or any of the Related Parties or the benefit of any
other security for any Obligation which, now or hereafter, the Guarantor may
hold in competition with the Lessor.
10. SET-OFF. In addition to any rights now or hereafter granted under
any agreement or applicable law and not by way of limitation of any such rights,
upon the occurrence of any Lease Default, including, without limitation, any
default by the Guarantor hereunder, the Lessor and the other Meditrust Entities
are hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to the Guarantor or to any other
Person, all of which are hereby expressly waived, to set off and to appropriate
and apply any and all deposits and any other indebtedness at any time held by or
owing to the Lessor (or any of the other Meditrust Entities) to or for the
credit or the account of the Guarantor against and on account of the obligations
and liabilities of the Guarantor to the Lessor or any of the other Meditrust
Entities under this Guaranty or otherwise, irrespective of whether or not the
Lessor or any of the other Meditrust Entities shall have made any demand
hereunder or under any Related Party Agreement and although said obligations,
liabilities or claims, or any of them, may then be contingent or unmatured and
without regard to the availability or adequacy of other collateral. The
Guarantor also grants to the Lessor (and the other Meditrust Entities) a
security interest in all of the Guarantor's deposits, securities and other
property at any time and from time to time, in the possession of the Lessor (or
any of the other Meditrust Entities) and, upon the occurrence of any Lease
Default, the Lessor and the other Meditrust Entities may exercise all rights and
remedies of a secured party under the Massachusetts Uniform Commercial Code. The
Lessor and the other Meditrust Entities shall have no duty to take steps to
preserve rights against prior parties as to such securities or other property.
The Guarantor hereby agrees that all collateral now or hereafter
granted as security for any indebtedness of the Guarantor to the Lessor and/or
the other Meditrust Entities shall be deemed to be additional collateral
securing the Obligations.
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11. WAIVERS. The Guarantor waives presentment for payment, demand,
protest, notice of nonpayment, notice of dishonor, protest of any dishonor,
suretyship defenses, notice of protest and protest of the Lease Documents,
including, without limiting the generality of the foregoing, any and all rights
the Guarantor may have under N.C. Gen. Stat. Section 26-7 et seq., and all other
notices in connection with (a) the delivery or the acceptance of the Lease
Documents and any reliance thereon and/or (b) the performance, default (except
notice of default as specifically elsewhere required under any of the Lease
Documents) or enforcement of any obligation under the Lease Documents, and
agrees that its liability shall be unconditional without regard to the liability
of any other party and shall not be in any manner affected by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by
the Lessor; and the Guarantor consents to any and all extensions of time,
renewals, waivers or modifications that may be granted or consented to by the
Lessor with respect to the payment or performance of any obligations under the
Lease Documents and to the release of the Collateral (or any part thereof), with
or without substitution, and agrees that additional makers, endorsers,
guarantors or sureties may become parties to the Lease Documents without notice
to the Guarantor or affecting the liability of the Guarantor hereunder or under
any of the other Lease Documents to which the Guarantor is a party.
12. INDEMNIFICATION. Except with respect to the gross negligence or
wilful misconduct of the Lessor or any of the other Indemnified Parties, as to
which no indemnity is provided, the Guarantor hereby agrees to defend with
counsel acceptable to the Lessor, indemnify and hold harmless the Lessor and
each of the other Indemnified Parties from and against all damages, losses,
claims, liabilities, obligations, penalties, causes of action, costs and
expenses (including, without limitation, attorneys' fees, court costs and other
expenses of litigation) suffered by, or claimed or asserted against, the Lessor
or any of the other Indemnified Parties, directly or indirectly, based on,
arising out of or resulting from (a) the use and occupancy of the Leased
Property or any business conducted therein, (b) any act, fault, omission to act
or misconduct by (i) any member of the Leasing Group, (ii) any Affiliate of the
Lessee, (iii) any Sublessee, or (iv) any employee, agent, licensee, business
invitee, guest, customer, contractor or sublessee of any of the foregoing
parties, relating to, directly or indirectly, the Leased Property, (c) any
accident, injury or damage whatsoever caused to any Person, including, without
limitation, any claim of malpractice, or to the property of any Person in or
about the Leased Property or outside of the Leased Property where such accident,
injury or damage results or is claimed to have resulted from any act, fault,
omission to act or misconduct by any member of the Leasing Group or any
Affiliate of the Lessee or any employee, agent, licensee, contractor or
sublessee of any of the foregoing parties, (d) any Lease Default, (e) any claim
brought or threatened against any of the Indemnified Parties by any member of
the Leasing Group (unless such member of the Leasing Group prevails in such
claim against one of the Indemnified Parties) or by any other Person on account
of (i) the Lessor's relationship with any member of the Leasing Group pertaining
in any way to the Leased Property and/or the transaction evidenced by the Lease
Documents and/or (ii) the Lessor's negotiation of, entering into and/or
performing any of its obligations and/or exercising any of its right and
remedies under any of the Lease Documents, (f) any attempt by any member of the
Leasing Group, any Affiliate of the Lessee or any other Sublessee to transfer or
relocate any of the Permits to any location other than the Leased Property
and/or (g) the enforcement of this indemnity. Any amounts which become payable
by the Guarantor
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under this Section 12 shall be a demand obligation of the Guarantor to the
Lessor. The indemnity provided for in this Section 12 shall survive any
termination of this Guaranty.
13. NOTICES. Any notice, request, demand, statement or consent made
hereunder shall be in writing and shall be deemed duly given if personally
delivered, sent by certified mail, return receipt requested, or sent by a
nationally recognized commercial overnight delivery service with provisions for
a receipt, postage or delivery charges prepaid, and shall be deemed given when
postmarked or placed in the possession of such mail or delivery service and
addressed as follows:
IF TO THE GUARANTOR: Alternative Living Services, Inc.
450 North Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attn: William F. Lasky, President
WITH A COPY TO: Miriam J. Dent, Esq.
Rogers & Hardin
229 Peachtree Street, N.E., 2700 International Tower
Atlanta, Georgia 30303
IF TO THE LESSOR: Meditrust Acquisition Corporation III
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
WITH COPIES TO: Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
Frank Giso, III, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
or at such other place as any of the parties hereto may from time to time
hereafter designate to the others in writing. Any notice given to the Guarantor
by the Lessor at any time shall not imply that such notice or any further or
similar notice was or is required.
14. GOVERNING LAW. This Guaranty shall be construed, and the rights
and obligations of the Lessor and the Guarantor shall be determined, in
accordance with the laws of the Commonwealth of Massachusetts.
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The Guarantor hereby consents to personal jurisdiction in the courts of
the Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of or with respect to any of the
Lease Documents, the negotiation and/or consummation of the transactions
evidenced by the Lease Documents, the Lessor's relationship of any member of the
Leasing Group in connection with the transactions evidenced by the Lease
Documents and/or the performance of any obligation or the exercise of any remedy
under any of the Lease Documents and expressly waives any and all objections the
Guarantor may have as to venue in any of such courts.
15. GENERAL PROVISIONS; RULES OF CONSTRUCTION. The provisions set
forth in Article 23 and Sections 2.2, 11.5.4, 16.8 through 16.10, inclusive,
17.2, 24.2 through 24.10, inclusive, and 24.12 of the Leases are hereby
incorporated herein by reference, mutatis, mutandis and shall be applicable to
this Guaranty as if set forth in full herein.
THE UNDERSIGNED HEREBY WAIVES AND RELINQUISHES ANY STATUTORY APPRAISAL RIGHTS
WHICH MEANS THE HIGH BID AT A JUDICIAL FORECLOSURE SALE WILL BE APPLIED TO THE
DEBT REGARDLESS OF ANY APPRAISED VALUE OF THE LEASED PROPERTY.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as an
instrument under seal as of the 21st day of November, 1997.
WITNESS: GUARANTOR:
ALTERNATIVE LIVING SERVICES, INC.
By: /s/
- -------------------- ---------------------------------
David M. Boitano, its Vice President
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EXHIBIT-99.4
EXECUTION COPY
DS2-304557.3
0494313-0053
AFFILIATED PARTY SUBORDINATION AGREEMENT
THIS AGREEMENT is made as of the 21st day of November, 1997 by and
among (i) ALS LEASING, INC., a Delaware corporation, having its principal place
of business at 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
(the "Lessee"), (ii) ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation,
having its principal place of business at 450 North Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005 (the "Guarantor"); (iii) the parties listed on
SCHEDULE A attached hereto and made a part hereof, as amended from time to time
by amendments to Exhibit H of the Agreement Regarding Related Lease Transactions
(as hereinafter defined) to reflect the addition of new parties to this
Agreement (collectively, the "Manager"); (iv) the parties listed on SCHEDULE B
attached hereto and made a part hereof, as amended from time to time by
amendments to Exhibit I of the Agreement Regarding Related Lease Transactions to
reflect the addition of new parties to this Agreement (collectively, the
"Sublessee"); and (v) all other Affiliates (as such term is defined in the
"Lease" as hereinafter defined) of the Lessee and/or the Guarantor which
hereafter enter into Interaffiliate Agreements (as hereinafter defined) with the
Lessee (all of the parties referred to in the foregoing clauses (i), (ii),
(iii), (iv) and (v) are hereinafter collectively referred to as the "Affiliated
Parties") and (v) MEDITRUST ACQUISITION CORPORATION III, a Delaware corporation,
having a principal address at 197 First Avenue, Needham Heights, Massachusetts
02194 (the "Lessor").
1. BACKGROUND
1.1 LEASE. The Lessor and the Lessee have entered into various Facility
Lease Agreements (collectively, the "Leases") relating to those facilities
(collectively, the "Leased Property") listed in Exhibits A, B and C to the
Agreement Regarding Related Lease Transactions (the "Agreement Regarding Related
Lease Transactions") by and between the Lessor and the Lessee of even date
herewith, as each such Exhibit may be modified or amended from time to time in
order to reflect the addition of new facilities or the removal of one or more
facilities.
1.2 CAPITALIZED TERMS. All capitalized terms used herein and not
expressly defined herein shall have the same meanings ascribed to such terms in
the Leases.
1.3 INTERAFFILIATE AGREEMENTS. The Affiliated Parties have entered into
or may enter into agreements of any kind or nature, whether written or oral
(including, without limitation, management agreements, financing arrangements
and shareholder agreements) with the Lessee (such agreements are hereinafter
collectively referred to as the "Interaffiliate Agreements").
1.4 AFFILIATED PARTY DEBT. All fees, indebtedness, interests,
liabilities, and obligations of the Lessee to any of the Affiliated Parties,
whether now existing or hereafter arising, under the
<PAGE> 2
Interaffiliate Agreements are hereinafter referred to collectively as the
"Affiliated Party Debt". Without limiting the foregoing, the term "Affiliated
Party Debt" shall be deemed to include (i) all dividends, distributions and
other payments of any kind or nature hereafter made or paid by the Lessee to any
of its partners or shareholders except for payroll expenses made in the ordinary
course of business, (ii) any payment hereafter made by the Lessee in connection
with any loan from or to any of the Affiliated Parties and (iii) any equity
investment hereafter made by the Lessee in any Affiliate or Subsidiary.
1.5 CONSIDERATION. In order to induce the Lessor to enter into the
Leases and to enter into or accept the other Lease Documents, and to enable the
Affiliated Parties to derive substantial benefits from the consummation of the
transactions set forth in the Leases and the other Lease Documents, the
Affiliated Parties agree to the terms and provisions of this Agreement.
2. SUBORDINATION
2.1. SUBORDINATION OF AFFILIATED PARTY DEBT. The payment of any and
all of the Affiliated Party Debt is hereby expressly subordinated and made
junior to the payment and performance of all of the Obligations to the extent
and in the manner set forth herein.
2.2. PAYMENTS AND RECEIPTS. Until the Lease Obligations shall have
been completely paid and performed, the Lessee shall not make, and the
Affiliated Parties shall not receive, accept or retain any direct or indirect
payment or reduction (whether by way of loan, setoff, declaration of any
dividend, distribution of cash or property or otherwise) in respect to the
principal of, or premium or interest on, the Affiliated Party Debt, if, on the
date such payment would (but for the terms hereof) be payable to and received by
any of the Affiliated Parties pursuant to any of the Interaffiliate Agreements
(each of which such dates shall be hereinafter referred to as a "Affiliated
Party Debt Payment Date"):
(i) after giving effect to such payment, the Lessee shall be
unable to comply with any of the Lease Obligations;
(ii) a default or breach of condition continuing beyond all
applicable notice and/or grace periods under any of the Lease Documents
(hereinafter referred to as a "Lease Default") shall have occurred, shall be
continuing and shall not have been specifically waived in writing by the Lessor,
whether or not the Lessor has exercised any right or remedy under the Lease
Documents with respect thereto or if such a Lease Default shall not be
continuing on any Affiliated Party Debt Payment Date, but the Lessor (pursuant
to any of the Lease Documents) shall have commenced to exercise any right and
remedy under the Lease Documents with respect thereto and such exercise shall
not have been specifically rescinded in writing by the Lessor; or
(iii) an event which with the giving of notice or the passage
of time or both shall constitute a Lease Default shall have occurred, shall be
continuing and shall not have been specifically waived in writing by the Lessor.
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2.3 BANKRUPTCY AND INSOLVENCY. In the event of any voluntary or
involuntary insolvency, bankruptcy, receivership, custodianship, readjustment of
debt, arrangement, composition, assignment for the benefit of creditors or other
similar proceeding relative to the Lessee or any of the Lessee's property, then
and in any such event:
(i) all of the Obligations shall first be paid in full before
any payment or distribution of any character, whether in cash, securities,
obligations or other property, shall be made in respect to the Affiliated Party
Debt;
(ii) any payment or distribution of any character, which would
otherwise (but for the terms hereof) be payable or deliverable in respect of the
Affiliated Party Debt (including, without limitation, any payment or
distribution of any other indebtedness of the Lessee being subordinated to the
Affiliated Party Debt), shall be paid or delivered directly to the Lessor until
all of the Obligations shall have been paid in full, and the Affiliated Parties
or any other holders of the Affiliated Party Debt irrevocably authorize, empower
and direct all receivers, custodians, trustees, liquidators, conservators, and
others having authority with respect to the Leased Property to effect all such
payments and deliveries;
(iii) upon the written request of the Lessor, the Affiliated
Parties shall prove, enforce and endeavor to obtain payment of the aggregate
outstanding amount of all unpaid Affiliated Party Debt payments due and payable,
or thereafter becoming due and payable from the Lessee to the Affiliated
Parties, and shall turn over to the Lessor in precisely the form received, any
payment of any kind or character on account of such Affiliated Party Debt for
application to the payment of the Obligations. In the event that the Affiliated
Parties shall fail to take any such action requested by the Lessor, the Lessor
as attorney-in-fact for the Affiliated Parties, with full power of substitution,
may take such action on behalf of the Affiliated Parties, but for the use and
benefit of the Lessor. This power of attorney, being coupled with an interest,
shall be irrevocable until all of the Lease Obligations are fully paid and
performed and shall not be affected by any disability or incapacity which any of
the Affiliated Parties may suffer and shall survive the same. The power of
attorney conferred on the Lessor by the foregoing provisions is provided solely
to protect the interests of the Lessor and shall not impose any duty on the
Lessor to exercise any such power, and neither the Lessor nor such
attorney-in-fact shall be liable for any act, omission, error in judgment or
mistake of law, except as the same may result from its gross negligence or
wilful misconduct; and
(iv) the Affiliated Parties or any other holder of the
Affiliated Party Debt shall execute and deliver to the Lessor all such further
instruments confirming the authorization referred to in the foregoing clauses
(ii) and (iii), and any powers of attorney specifically confirming the rights of
the Lessor arising hereunder, and all such proofs of claim, assignments of claim
and other instruments and shall take all such other actions as may be requested
by the Lessor in order to enable the Lessor to enforce any and all claims upon
or in respect of such Affiliated Party Debt and to collect and give any and all
payments or distributions which may be payable or deliverable at any time upon
or with respect to such Affiliated Party Debt.
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2.4. APPLICATION OF PAYMENTS. If, notwithstanding the provisions of
this Agreement, any payment or distribution of any character (whether in cash,
securities or other property) or any security shall be received by any of the
Affiliated Parties in contravention of the terms of this Agreement, and before
all of the Obligations shall have been paid and performed in full, such payment,
distribution or security shall be held in trust for the benefit of and shall be
paid over or delivered and transferred to, the Lessor for application to the
payment of all of the Lease Obligations remaining unpaid, until all of the Lease
Obligations shall have been paid in full.
2.5 OBLIGATIONS OF THE LESSEE TO AFFILIATED PARTIES. Except to the
extent provided in this Agreement that the Affiliated Party Debt may not be
payable, be paid or be retained, nothing contained herein shall impair, as
between the Lessee and the Affiliated Parties, the obligations of the Lessee,
which are absolute and unconditional, to pay to the Affiliated Parties the
Affiliated Party Debt, as and when the same shall become due and payable in
accordance with the terms thereof (and retain the same), or prevent the
Affiliated Parties, upon default with respect to the Affiliated Party Debt, from
exercising all rights, powers, and remedies otherwise provided therein or by
applicable law, all subject to the rights of the Lessor hereunder.
3. CONTINUED EFFECTIVENESS OF THIS AGREEMENT.
3.1. CHANGES IN LEASE DOCUMENTS, ETC. The terms and provisions of this
Agreement, the subordination effected hereby, the rights of the Lessor, and the
obligations of the Affiliated Parties arising hereunder shall not be affected,
modified or impaired in any manner or to any extent by:
(i) any renewal, replacement, amendment, extension,
substitution, revision, consolidation, modification or termination of any of the
Lease Documents and/or any of the Related Party Agreements;
(ii) the validity or enforceability of any such documents
referred to in clause (i) above;
(iii) the release, sale, exchange or surrender, in whole or in
part, of Collateral;
(iv) any exercise or nonexercise of any right, power or remedy
in respect of the Obligations; or
(v) any waiver, consent, release, indulgency, extension,
renewal, modification, delay or other action, inaction or omission in respect of
the Obligations, now existing or hereafter arising, all whether or not the
Affiliated Parties shall have had notice or knowledge of any of the foregoing
and whether or not they shall have consented thereto.
3.2. TRANSFEREES. In the event of any sale, assignment, disposition
or other transfer of the Affiliated Party Debt, the Affiliated Parties shall
cause the transferee thereof to execute and deliver to the Lessor an agreement
(substantially identical with this Agreement) providing for the continued
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subordination of the Affiliated Party Debt to the Obligations as provided herein
and for the continued effectiveness of all of the rights of the Lessor arising
under this Agreement; provided, however, that notwithstanding the delivery of
such an agreement, the Lessor shall not be deemed to have waived its right to
consent to any assignment, transfer, amendment or alteration of the
Interaffiliate Agreements pursuant to the terms of the Lease Documents.
4. INTERAFFILIATE AGREEMENTS.
4.1. TERMINATION OF INTERAFFILIATE AGREEMENTS. Notwithstanding anything
to the contrary contained in the Interaffiliate Agreements, the Affiliated
Parties hereby agree that after the occurrence of any Lease Default, the Lessor
may terminate all or any one or more of the Interaffiliate Agreements, upon
written notice to the Affiliated Parties, in the event that:
(i) the Lessor elects to take possession (directly or
through a nominee) of the Leased Property by reason of the exercise of the
rights and remedies granted to the Lessor under any of the Lease Documents; or
(ii) the Lessor elects to terminate any of the Leases
pursuant to the terms of any of the Lease Documents.
In the event of a termination of any one or more of the Interaffiliate
Agreements pursuant to the provisions hereof, neither the Lessor nor any such
nominee shall have any liabilities or obligations whatsoever with respect to the
Affiliated Party Debt or any portion thereof (whether past due or which would
have become due and payable if such Interaffiliate Agreements had not been
terminated) or any other duties, covenants, agreements or obligations of the
Lessee under any of the Interaffiliate Agreements.
4.2 CHANGES IN INTERAFFILIATE AGREEMENTS, ETC. Each of the Affiliated
Parties agrees that it shall not transfer or assign any Interaffiliate Agreement
or any interest therein, directly or indirectly, or consent to the transfer or
assignment of any Interaffiliate Agreement or any such interest by any party
thereto, without the prior written consent of the Lessor, in each instance,
which consent shall not be unreasonably withheld; provided, however, that the
Lessor's consent shall not be required for any transfer or assignment of any
Interaffiliate Agreement to another Affiliate of the Lessee as long as such
other Affiliate has executed this Agreement or executes and delivers to the
Lessor an agreement substantially identical to this Agreement.
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<PAGE> 6
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Lessee and the other Affiliated Parties each represent and warrant
to, and covenant and agree with the Lessor, that: (i) each Affiliate of the
Lessee that is a party to any Interaffiliate Agreement in effect as of the date
hereof is a party to this Agreement; (ii) a true and correct copy of each
written Interaffiliate Agreement entered into after the date hereof shall be
provided to the Lessor within ten (10) days after its execution and in the event
that any party to any Interaffiliate Agreement (whether written or oral) entered
into after the date hereof is not a party to this Agreement as of the date
hereof, the Affiliated Parties agree to cause such party to agree to be bound by
the terms of this Agreement, pursuant to an instrument in form and substance
acceptable to the Lessor, as fully and effectively as if such party constituted
one of the Affiliated Parties specifically named herein as of the date hereof;
and (iii) no written Interaffiliate Agreement shall be amended except by written
instrument and a true and correct copy of each instrument which is hereafter
entered into amending any Interaffiliate Agreement shall be provided to the
Lessor within ten (10) days after its execution.
6. LEASE DOCUMENTS.
Each of the Affiliated Parties acknowledges that it has received copies
of the Lease Documents and hereby agrees to be bound by and to fully comply with
the terms and conditions contained therein, as the same may be applicable to the
Affiliated Parties (either directly or as a result of the Affiliated Parties'
duties, obligations, covenants and agreements under the Interaffiliate
Agreements).
7. INDEMNIFICATION.
The Affiliated Parties shall and hereby jointly and severally agree to
indemnify and hold the Lessor harmless from and against all obligations,
liabilities, losses, costs, claims, expenses, fines, penalties and damages
(including, without limitation, attorneys' fees and expenses and court costs)
which the Lessor may reasonably incur (i) by reason of this Agreement and (ii)
in connection with the Interaffiliate Agreements (including, without limitation,
all claims and demands which may be asserted against the Lessor by reason of any
alleged obligation or undertaking on its part to perform or discharge any of the
terms, covenants or agreements contained in the Interaffiliate Agreements) (the
matters described in the foregoing clauses (i) and (ii) are collectively
referred to herein as the "Indemnified Losses"). Notwithstanding anything to the
contrary contained herein, the Indemnified Losses shall not include any
obligations, liabilities, losses, costs, claims, expenses, fines, penalties or
damages arising solely as a result of the Lessor's gross negligence or willful
misconduct.
The Affiliated Parties shall defend the Lessor against any claim or
litigation involving the Lessor for the same, with counsel approved by the
Lessor, and should the Lessor incur any such obligation, liability, loss, cost,
expense, fine, penalty or damage, then the Affiliated Parties shall reimburse
the Lessor for such amounts upon demand, and upon the failure of the Affiliated
Parties so to do, the Lessor, at its option, may declare the Lease Obligations
immediately due and payable.
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<PAGE> 7
Notwithstanding anything to the contrary contained herein, the Lessor shall have
the option of conducting its own defense with counsel of its own choice, but at
the expense of the Affiliated Parties.
The foregoing indemnification agreement shall also include all costs
reasonably incurred by the Lessor in connection with the enforcement of said
indemnification agreement. Any amounts owed to the Lessor under this Section
shall be a demand obligation and to the extent permitted under applicable law,
shall be added to the Lease Obligations and, if not paid within ten (10) days
after demand, shall thereafter, to the extent permitted by applicable law, bear
interest at the Overdue Rate until the date of payment.
The provisions of this Section shall survive the complete payment and
performance of the Obligations and the expiration or earlier termination of all
of the Leases.
8. CONFLICT.
In the event of any conflict between any term, covenant or condition of
this Agreement and any term, covenant or condition of the Interaffiliate
Agreements, or any documents executed in connection therewith or the
indebtedness evidenced thereby, the provisions of this Agreement shall control
and govern.
9. NOTICE.
Any notice, request, demand, statement or consent made hereunder shall
be in writing and shall be deemed duly given if personally delivered, sent by
certified mail, return receipt requested, or sent by a nationally recognized
commercial overnight delivery service with provisions for a receipt, postage or
delivery charges prepaid, and shall be deemed given when postmarked or placed in
the possession of such mail or delivery service and addressed as follows:
IF TO THE AFFILIATED c/o Alternative Living Services, Inc.
PARTIES: 450 North Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attn: William F. Lasky, President
WITH A COPY TO: Miriam J. Dent, Esq.
Rogers & Hardin
229 Peachtree Street, N.E., 2700 International Tower
Atlanta, Georgia 30303
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<PAGE> 8
IF TO THE LESSEE: ALS Leasing, Inc.
c/o Alternative Living Services, Inc.
450 North Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attn: William F. Lasky, President
WITH A COPY TO: Miriam J. Dent, Esq.
Rogers & Hardin
229 Peachtree Street, N.E., 2700 International Tower
Atlanta, Georgia 30303
IF TO THE LESSOR: Meditrust Acquisition Corporation III
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
WITH COPIES TO: Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
Frank Giso, III, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
or at such other place as any of the parties hereto may from time to time
hereafter designate to the others in writing. Any notice given to any of the
Affiliated Parties by the Lessor at any time shall not imply that such notice or
any further or similar notice was or is required.
10. PRIORITY.
This Agreement is intended to establish relative rights and priorities
between the Lessor and the Affiliated Parties.
11. GOVERNING LAW.
This Agreement shall in all respects be governed, construed, applied
and enforced in accordance with the laws of the Commonwealth of Massachusetts.
To the maximum extent permitted by applicable law, the Affiliated
Parties hereby submit to the jurisdiction of the courts of the Commonwealth of
Massachusetts and the United States District
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<PAGE> 9
Court for the District of Massachusetts, as well as to the jurisdiction of all
courts from which an appeal may be taken from the aforesaid courts, for the
purpose of any suit, action or other proceeding arising out of, or with respect
to any of the Lease Documents, the negotiation and/or consummation of the
transactions evidenced by the Lease Documents, the Lessor's relationship with
any member of the Leasing Group in connection with the transactions evidenced by
the Lease Documents and/or the performance of any obligation or the exercise of
any remedy under any of the Lease Documents and expressly waive any and all
objections they may have as to venue in any of such courts.
12. TERM.
This Agreement shall remain in full force and effect so long as the
Lease Obligations remain undischarged or unsatisfied in any respect. The
Affiliated Parties agree that an affidavit, certificate, letter or statement of
any officer, agent or attorney of the Lessor indicating that any part of the
Lease Obligations remains outstanding shall be deemed prima facie evidence of
the validity, effectiveness and continuing force of this Agreement and any
Person may and is hereby authorized to rely thereon. Upon the complete payment
and performance of the Lease Obligations, this Agreement shall be deemed
terminated without further action and shall thereupon be of no further force or
effect.
13. FURTHER ASSURANCES.
At any time and from time to time, upon request by the Lessor, the
Affiliated Parties shall promptly make, execute and deliver, or cause to be
made, executed and delivered, to the Lessor and, where appropriate, cause to be
recorded and/or filed (and from time to time thereafter to be re-recorded and/or
refiled) at such time and in such offices and places as shall be deemed
desirable by the Lessor (in its reasonable discretion), any and all such other
and further amendments, assignments, instruments of further assurance,
certificates and other documents as the Lessor may, in its sole and absolute
discretion, deem desirable to (A) enable the Lessor to convey the Leased
Property, (B) assign any of the Leases and/or any of the other Lease Documents
or any portion of the Lessor's interest in any or all of the same, (C) enable
the Lessor to enter into participation agreements with respect to all or any
portion of the Obligations or (D) effectuate, complete or perfect, or to
continue and preserve the rights and remedies of the Lessor and/or the
obligations of any of the Affiliated Parties under this Agreement and/or any of
the other Lease Documents, including, without limitation, any document requested
in order to preserve the security interests created under the Lease Documents as
first priority security interests in the Collateral; provided, however, that no
such additional document or other instrument requested by the Lessor hereunder
shall increase the Obligations (except as to the costs and expenses reasonably
incurred by the Lessor in connection with the items referred to in the foregoing
clause (D)), require any of the Affiliated Parties to incur any additional cost
or be unduly burdensome to any of the Affiliated Parties. Any failure by the
Affiliated Parties to comply with any request pursuant to this Section within
twenty (20) days after such request is made by the Lessor, shall be an Event of
Default hereunder and upon such Event of Default, the Lessor may make, execute,
record, file, re-record and/or refile any and all such amendments, assignments,
instruments, certificates, and documents for and in the name of the Affiliated
Parties and the Affiliated Parties each hereby appoint the Lessor as their
attorney-in-
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<PAGE> 10
fact, with full power of substitution, to take such actions (on their behalf and
in their name) as the Lessor, in its sole and absolute discretion, may deem
necessary or desirable to effectuate the intent of this Section. This power of
attorney, being coupled with an interest, shall be irrevocable until all of the
Obligations are fully paid and performed and shall not be affected by any
disability or incapacity which any of the Affiliated Parties may suffer and
shall survive the same. The power of attorney conferred on the Lessor pursuant
to the provisions of this Section is provided solely to protect the interests of
the Lessor and shall not impose any duty on the Lessor to exercise any such
power, and neither the Lessor nor such attorney-in-fact shall be liable for any
act, omission, error in judgment or mistake of law, except as the same may
result from its gross negligence or willful misconduct.
14. SUCCESSORS AND ASSIGNS; JOINT AND SEVERAL LIABILITY.
The terms and provisions of this Agreement shall be binding on and
inure to the benefit of (I) the Affiliated Parties and their respective heirs,
executors, administrators, legal representatives, successors and assigns and any
Affiliates of the Lessee, now or hereafter existing, and (II) the Lessor, any
other Person who may now or hereafter hold any interest in the Leases or any of
the other Lease Documents and their respective successors, assigns and
participants; provided, however, that, without limiting any of the other
provisions of any of the other Lease Documents, in the event that more than
fifty percent (50%) of the legal or beneficial interest in an Affiliated Party
shall have been sold to a purchaser which is not an Affiliated Party or an
Affiliate of an Affiliated Party and such Affiliated Party shall no longer be
controlled by an Affiliated Party or an Affiliate of an Affiliated Party, then
the obligation of the Lessee and such Affiliate hereunder with respect to
Affiliated Party Debt shall cease with respect to Affiliated Party Debt first
incurred by such Affiliated Party following such sale. Notwithstanding the
foregoing, except as specifically permitted under this Agreement, the Affiliated
Parties shall not, individually or together, assign or otherwise transfer this
Agreement or any of their respective rights or obligations hereunder without the
express written consent of the Lessor, in each instance, which consent may be
withheld in the Lessor's sole and absolute discretion. All of the obligations of
the Affiliated Parties hereunder shall be joint and several.
15. GENERAL PROVISIONS; RULES OF CONSTRUCTION.
The provisions set forth in Article 23 and Sections 2.2, 16.8 through
16.10, inclusive, 24.2 through 24.10, inclusive, and 24.12 of the Leases are
hereby incorporated herein by reference, mutatis, mutandis, and shall be
applicable to this Agreement as if set forth in full herein.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the day and year first above written.
WITNESS: AFFILIATED PARTIES:
ALS LEASING, INC.
By: /s/
- ------------------------------- -------------------------------
Name: Name: David M. Boitano
Title: Vice President
WITNESS: ALTERNATIVE LIVING SERVICES, INC.
By: /s/
- ------------------------------- -------------------------------
Name: Name: David M. Boitano
Title: Vice President
WITNESS: LESSOR:
MEDITRUST ACQUISITION
CORPORATION III
By: /s/
- ------------------------------- -------------------------------
Name: Name: Michael S. Benjamin
Title: Senior Vice President
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<PAGE> 12
SCHEDULE A
LIST OF MANAGERS
The following parties are collectively defined as the "Manager" and
hereby join in this Agreement and consent to the provisions hereof:
1. Alternative Living Services, Inc., a Delaware corporation.
[TO BE SUPPLEMENTED FROM TIME TO TIME BY AMENDMENTS TO EXHIBIT H OF THE
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS TO REFLECT THE ADDITION OF NEW
PARTIES TO THIS AGREEMENT]
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<PAGE> 13
SCHEDULE B
LIST OF SUBLESSEES
The following parties are collectively defined as the "Sublessee" and
hereby join in this Agreement and consent to the provisions hereof:
WITNESS: SUBLESSEE:
ALS-JACKSONVILLE LIMITED
PARTNERSHIP, A FLORIDA LIMITED PARTNERSHIP
BY: ALS LEASING, INC., A DELAWARE CORPORATION,
ITS GENERAL PARTNER
By: /s/
- ----------------------- ----------------------------------------
Name: Name: David M. Boitano
Title: Vice President
CLARE BRIDGE OF CHARLOTTE, LLC, A
NORTH CAROLINA LIMITED LIABILITY COMPANY
BY: ALTERNATIVE LIVING SERVICES, INC., A
DELAWARE CORPORATION, ITS MEMBER
By: /s/
- ----------------------- ----------------------------------------
Name: Name: David M. Boitano
Title: Vice President
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<PAGE> 14
WYNWOOD OF CHARLOTTE, LLC, A NORTH
CAROLINA LIMITED LIABILITY COMPANY
BY: ALTERNATIVE LIVING SERVICES, INC., A
DELAWARE CORPORATION, ITS MEMBER
By: /s/
- ----------------------- ----------------------------------------
Name: Name: David M. Boitano
Title: Vice President
CLARE BRIDGE OF GREENSBORO, LLC, A
NORTH CAROLINA LIMITED LIABILITY COMPANY
BY: ALTERNATIVE LIVING SERVICES, INC., A
DELAWARE CORPORATION, ITS MEMBER
By: /s/
- ----------------------- ----------------------------------------
Name: Name: David M. Boitano
Title: Vice President
WYNWOOD OF GREENSBORO, LLC, A NORTH
CAROLINA LIMITED LIABILITY COMPANY
BY: ALTERNATIVE LIVING SERVICES, INC., A
DELAWARE CORPORATION, ITS MEMBER
By: /s/
- ----------------------- ----------------------------------------
Name: Name: David M. Boitano
Title: Vice President
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<PAGE> 15
CLARE BRIDGE OF CHARLESTON, LLC, A
SOUTH CAROLINA LIMITED LIABILITY COMPANY
BY: ALTERNATIVE LIVING SERVICES, INC., A
DELAWARE CORPORATION, ITS MEMBER
By: /s/
- ----------------------- ----------------------------------------
Name: Name: David M. Boitano
Title: Vice President
CLARE BRIDGE OF COLUMBIA, LLC, A
SOUTH CAROLINA LIMITED LIABILITY COMPANY
BY: ALTERNATIVE LIVING SERVICES, INC., A
DELAWARE CORPORATION, ITS MEMBER
By: /s/
- ----------------------- ----------------------------------------
Name: Name: David M. Boitano
Title: Vice President
[TO BE SUPPLEMENTED FROM TIME TO TIME BY AMENDMENTS TO EXHIBIT I OF THE
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS TO REFLECT THE ADDITION OF NEW
PARTIES TO THIS AGREEMENT]
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<PAGE> 1
EXHIBIT 99.5
AGREEMENT REGARDING
RELATED LEASE TRANSACTIONS
MEDITRUST ACQUISITION CORPORATION III/ALS LEASING, INC.
($150,000,000 MEDITRUST INVESTMENT)
THIS AGREEMENT is made as of the 21st day of November, 1997 by and
among (I) ALS LEASING, INC., a Delaware corporation, having its principal place
of business at 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
("Lessee"); (II) ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation,
having its principal place of business at 450 North Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005 ("ALS"); and (III) MEDITRUST ACQUISITION CORPORATION
III, a Delaware corporation, having its principal place of business at c/o
Meditrust Mortgage Investments, Inc., 197 First Avenue, Needham Heights,
Massachusetts 02194 ("Meditrust").
W I T N E S S E T H:
WHEREAS, ALS is in the business of operating assisted living
facilities;
WHEREAS, Meditrust is in the business of providing for the acquisition,
development and operation of such facilities;
WHEREAS, in connection with transactions between ALS and Meditrust
which have been consummated concurrently with the effectiveness of this
Agreement and also in connection with transactions between ALS or its Affiliates
(hereinafter defined) and Meditrust or its Affiliates which are contemplated to
occur in the future, ALS, for itself and its Affiliates, and Meditrust, for
itself and its Affiliates, desire to establish certain arrangements to govern
the relationship of present and future transactions between them, including,
without limitation, the following, all as more particularly set forth in the
operative provisions of this Agreement:
(A) the requirement that particular rights available to ALS with
respect to different facilities be exercised simultaneously
with each other;
(B) the cross-defaulting of all transactions between ALS and its
Affiliates and Meditrust and its Affiliates;
(C) the reduction of cash collateral held by Meditrust in the
event certain transactions with ALS and its Affiliates satisfy
specified financial tests;
<PAGE> 2
(D) the cross collateralization of any security given to any of
the Meditrust Parties (hereinafter defined) by any of the ALS
Parties (hereinafter defined) for performance of Lessee's
obligations under the respective Acquisition Facility Leases
(hereinafter defined);
(E) the combination of the results of certain financial tests with
respect to the performance of various facilities for purposes
of ascertaining their compliance with Meditrust's or its
Affiliates' expectations of financial performance;
(F) the joining of Affiliates of ALS and of Meditrust in the
agreements reflected herein upon the occurrence of future
transactions; and
(G) the other matters as are hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto act and agree
as follows:
1. DEFINITIONS. All capitalized terms used herein not expressly defined herein
shall have the same meanings ascribed to such terms in the Acquisition Facility
Leases. For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the following terms shall
have the following meanings and shall include the plural and the singular:
(A) ACQUISITION FACILITY: A Group One Acquisition Facility, a Group Two
Acquisition Facility or a Group Three Acquisition Facility, as the context
permits.
(B) ACQUISITION FACILITY LEASE: A Group One Acquisition Facility Lease,
a Group Two Acquisition Facility Lease or a Group Three Acquisition Facility
Lease, as the context permits.
(C) ACQUISITION GROUP: The ALS Parties which are parties to the Group
One Acquisition Transaction Documents (other than this Agreement), the Group Two
Acquisition Transaction Documents (other than this Agreement) or the Group Three
Acquisition Transaction Documents (other than this Agreement), as the case may
be.
(D) AFFILIATE: With respect to any Person (I) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (II) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more of the outstanding capital stock, shares
or equity interests of such Person or (III) any officer, director, employee,
general partner or trustee of such Person, or any other Person controlling,
controlled by, or under common control with, such Person (excluding trustees and
Persons serving in a fiduciary or similar capacity who are not otherwise an
Affiliate of such Person), whether now or hereafter existing. For the purposes
of this definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession,
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<PAGE> 3
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, through the ownership of voting
securities, partnership interests or other equity interests.
(E) AGGREGATE MEDITRUST INVESTMENTS: The sum total of the Meditrust
Investments (as such term is defined in the applicable Acquisition Facility
Leases).
(F) AGGREGATE NET FAIR MARKET VALUE: The sum of the Fair Market Value
of the Leased Property minus the Fair Market Added Value (as such terms are
defined in the applicable Acquisition Facility Leases) under all of the
applicable Acquisition Facility Leases.
(G) ALS PARTIES: ALS, the Lessee and any other of ALS' Affiliates.
(H) FISCAL QUARTER: As defined in the applicable Acquisition Facility
Lease.
(I) GROUP ONE ACQUISITION FACILITIES: Those Acquisition Facilities
having an Original Meditrust Investment in the aggregate total of approximately
FIFTY MILLION DOLLARS ($50,000,000), as listed on EXHIBIT A attached hereto, as
such Exhibit may be amended or modified from time to time in order to reflect
the addition of new facilities or the removal of one or more facilities.
(J) GROUP ONE ACQUISITION FACILITY LEASES: The Acquisition Facility
Leases in effect from time to time in connection with the Group One Acquisition
Facilities, as any such Lease may be modified and amended from time to time.
(K) GROUP ONE ACQUISITION GROUP: The ALS Parties which are parties to
the Group One Acquisition Transaction Documents (other than this Agreement).
(L) GROUP ONE ACQUISITION TRANSACTION DOCUMENTS: The documents now or
hereafter entered into by and between ALS Parties and Meditrust Parties in
connection with the Group One Acquisition Facilities, as any such document may
be modified and amended from time to time, including, without limitation, the
Group One Acquisition Facility Leases and the "Lease Documents" referenced
therein.
(M) GROUP TWO ACQUISITION FACILITIES: Those Acquisition Facilities,
having an Original Meditrust Investment in the aggregate total of approximately
FIFTY MILLION DOLLARS ($50,000,000), as listed on EXHIBIT B attached hereto, as
such Exhibit may be amended or modified from time to time in order to reflect
the addition of new facilities or the removal of one or more facilities.
(N) GROUP TWO ACQUISITION FACILITY LEASES: The Acquisition Facility
Leases entered into now or in the future in connection with the Group Two
Acquisition Facilities, as any such Lease may be modified and amended from time
to time.
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<PAGE> 4
(O) GROUP TWO ACQUISITION GROUP: The ALS Parties which are parties to
the Group Two Acquisition Transaction Documents (other than this Agreement).
(P) GROUP TWO ACQUISITION TRANSACTION DOCUMENTS: The documents
hereafter entered into by and between ALS Parties and Meditrust Parties in
connection with the Group Two Acquisition Facilities, as the same may be
modified and amended from time to time, including, without limitation, the Group
Two Acquisition Facility Leases and the "Lease Documents" referenced therein.
(Q) GROUP THREE ACQUISITION FACILITIES: Those Acquisition Facilities
having an Original Meditrust Investment in the aggregate total of approximately
FIFTY MILLION DOLLARS ($50,000,000), as listed on EXHIBIT C attached hereto, as
such Exhibit may be amended or modified from time to time in order to reflect
the addition of new facilities or the removal of one or more facilities.
(R) GROUP THREE ACQUISITION FACILITY LEASES: The Acquisition Facility
Leases in effect from time to time in connection with the Group Three
Acquisition Facilities, as any such Lease may be modified and amended from time
to time.
(S) GROUP THREE ACQUISITION GROUP: The ALS parties which are parties to
the Group Three Acquisition Transaction Documents (other than this Agreement).
(T) GROUP THREE ACQUISITION TRANSACTION DOCUMENTS: The documents now or
hereafter entered into by and between ALS Parties and Meditrust Parties in
connection with the Group Three Acquisition Facilities, as any such document may
be modified and amended from time to time, including, without limitation, the
Group Three Acquisition Facility Leases and the "Lease Documents" referenced
therein.
(U) MEDITRUST PARTIES: Meditrust and its Affiliates.
(V) MEDITRUST/ALS FACILITIES: The facilities listed on EXHIBIT D
attached hereto, as the same may be amended or modified from time to time in
order to reflect the addition of new facilities or the removal of one or more
facilities.
(W) MEDITRUST/ALS TRANSACTION DOCUMENTS: The documents now or hereafter
entered into by and between ALS Parties and Meditrust Parties in connection with
any transaction now or hereafter consummated between such parties regarding any
of the Meditrust/ALS Facilities, as any such Document may be amended or modified
from time to time, including, without limitation, the Group One Acquisition
Transaction Documents, the Group Two Acquisition Transaction Documents, and the
Group Three Acquisition Transaction Documents.
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<PAGE> 5
(X) ORIGINAL MEDITRUST INVESTMENT: The Meditrust Investment paid by a
Meditrust Party pursuant to an Acquisition Facility Lease at the time of Closing
(as such term is defined in the applicable Acquisition Facility Lease).
(Y) PERSON: Any individual, corporation, general partnership, limited
partnership, joint venture, limited liability company, stock company or
association, company, bank, trust, trust company, land trust, business trust,
unincorporated organization, unincorporated association, Governmental Authority
or other entity of any kind or nature.
(Z) RENT COVERAGE RATIO: As defined in the applicable Acquisition
Facility Lease.
(AA) TERM: As defined in the applicable Acquisition Facility Lease.
2. PROVISIONS OF AGREEMENT PARAMOUNT. In the event and to the extent
any provision of a Meditrust/ALS Transaction Document is inconsistent or in
conflict with a provision of this Agreement, the provision of this Agreement
shall be considered paramount.
3. EXTENSION OPTION RIGHTS. No member of the Group One Acquisition
Group shall exercise the extension option right provided in Section 1.3 of any
Group One Acquisition Facility Lease, unless each and every other member of the
Group One Acquisition Group shall have the right to exercise, and shall have in
fact duly exercised, the same right under each Group One Acquisition Facility
Lease. No member of the Group Two Acquisition Group shall exercise the extension
option right provided in Section 1.3 of any Group Two Acquisition Facility
Lease, unless each and every other member of the Group Two Acquisition Group
shall have the right to exercise, and shall have in fact duly exercised, the
same right under each Group Two Acquisition Facility Lease. No member of the
Group Three Acquisition Group shall exercise the extension option right provided
in Section 1.3 of any Group Three Acquisition Facility Lease, unless each and
every other member of the Group Three Acquisition Group shall have the right to
exercise, and shall have in fact duly exercised, the same right under each Group
Three Acquisition Facility Lease.
4. [INTENTIONALLY OMITTED]
5. LEASE MODIFICATION AND AMENDMENT. None of the terms or provisions of
any Group One Acquisition Facility Lease or of any of the "Lease Documents"
referenced therein shall be modified or amended unless each and every other
Group One Acquisition Facility Lease and/or each and every other corresponding
"Lease Document" referenced therein, as applicable, shall be modified or amended
in a similar manner except to the extent any such modification or amendment
pertains only to the real estate comprising a part of the Group One Acquisition
Facility in which case a modification or amendment of every other such Group One
Acquisition Facility Lease shall not be required. None of the terms or
provisions of any Group Two Acquisition Facility Lease or of any of the "Lease
Documents" referenced therein shall be modified or amended, unless each and
every other Group Two Acquisition Facility Lease and/or each and every other
corresponding "Lease Document" referenced therein, as applicable, shall be
modified or amended in a similar manner
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<PAGE> 6
except to the extent any such modification or amendment pertains only to the
real estate comprising a part of the Group Two Acquisition Facility in which
case a modification or amendment of every other such Group Two Acquisition
Facility Lease shall not be required. None of the terms or provisions of any
Group Three Acquisition Facility Lease or of any of the "Lease Documents"
referenced therein shall be modified or amended unless each and every other
Group Three Acquisition Facility Lease and/or each and every other corresponding
"Lease Document" referenced therein, as applicable, shall be modified or amended
in a similar manner except to the extent any such modification or amendment
pertains only to the real estate comprising a part of the Group Three
Acquisition Facility in which case a modification or amendment of every other
such Group Three Acquisition Facility Lease shall not be required.
6. CROSS-DEFAULT. The ALS Parties covenant and agree that an Event of
Default (as defined in each applicable Meditrust/ALS Transaction Document) on
the part of an ALS Party under any Meditrust/ALS Transaction Document which
remains uncured beyond applicable grace periods contained in such Meditrust/ALS
Transaction Document shall be deemed an Event of Default under all other
Meditrust/ALS Transaction Documents without the benefit of any notice or grace
periods contained in such other Meditrust/ALS Transaction Documents and without
regard to whether such other Meditrust/ALS Transaction Documents relate to the
same Meditrust/ALS Facility and each Meditrust Party shall have the benefit of
any and all of the rights and remedies granted by any of the Meditrust/ALS
Transaction Documents in the event of a default thereunder in connection with
such an Event of Default.
7. CROSS-COLLATERALIZATION. Each of the ALS Parties covenants and
agrees that any and all security or collateral granted by any of the ALS Parties
to any of the Meditrust Parties as security for performance of the Lessee's
obligations under any of the respective Meditrust/ALS Transaction Documents
shall constitute security and collateral for the performance of the Lessee's
obligations under each and every one of the Meditrust/ALS Transaction Documents
whether or not the particular security instrument granting such security or
collateral specifically states as much. Accordingly, upon the occurrence of any
Event of Default, the Meditrust Parties shall have recourse to all such
collateral and security for application as the Meditrust Parties see fit to the
respective Lessee obligations under the various Meditrust/ALS Transaction
Documents. Notwithstanding anything to the contrary in this Agreement, there
shall be no cross-collateralization with any Minnesota security, collateral,
indebtedness and obligations with any other security, collateral, indebtedness
and/or obligations.
8. RENT COVERAGE RATIO. The ALS Parties covenant and agree that,
throughout the Term and as long as the Lessee is in possession of any
Acquisition Facility in a particular Acquisition Group, (a) the Group One
Acquisition Facilities shall achieve an aggregate Rent Coverage Ratio equal to
or greater than 1.2 to 1 for each Fiscal Year, (b) the Group Two Acquisition
Facilities shall achieve an aggregate Rent Coverage Ratio equal to or greater
than 1.2 to 1 for each Fiscal Year, and (c) the Group Three Acquisition
Facilities shall achieve an aggregate Rent Coverage Ratio equal to or greater
than 1.2 to 1 for each Fiscal Year. Within ninety (90) days after the end of
each Fiscal Year, the Lessee shall furnish to the Lessor an express written
calculation showing the
6
<PAGE> 7
compliance or non-compliance, as the case may be, with the aforementioned Rent
Coverage Ratio in substantially the same form as the schedule attached as
EXHIBIT E. For the purposes of this Section 8 only, the term "Group One
Acquisition Facilities" shall include a given Group One Acquisition Facility as
soon as the second anniversary date of the opening of such Facility has been
reached.
9. CASH COLLATERAL REDUCTION. If, after the third (3rd) anniversary of
the Commencement Date of the first Acquisition Facility Lease to go into effect
in a particular Group of Acquisition Facilities (i.e., Group One Acquisition
Facilities, Group Two Acquisition Facilities, etc.), the Acquisition Facilities
constituting such Group of Acquisition Facilities achieve an aggregate Rent
Coverage Ratio of not less than 1.3 to 1 for four (4) consecutive Fiscal
Quarters, and provided that no Event of Default, or fact or circumstance which
with the passage of time or giving of notice or both would constitute an Event
of Default, exists hereunder or under any of the Meditrust/ALS Transaction
Documents, the Cash Collateral (as defined in the applicable Acquisition
Facility Leases) under each such Acquisition Facility Lease in such Group of
Acquisition Facilities shall be returned by the applicable Meditrust Party to
the applicable ALS Party. Notwithstanding the foregoing, if at any time and from
time to time during the Terms of the applicable Acquisition Facility Leases and
after the return of the Cash Collateral (pursuant to the conditions set forth in
the preceding sentence), the aggregate Rent Coverage Ratio of the Facilities
constituting a Group of Acquisition Facilities shall be less than 1.3 to 1 for
any one (1) Fiscal Quarter, the applicable ALS Party shall deliver to the
applicable Meditrust Party, within thirty (30) days after the expiration of such
Fiscal Quarter, cash in an amount which equals the Stated Amount to be held by
the applicable Meditrust Party as Cash Collateral under the applicable
Acquisition Facility Leases in the applicable Group of Acquisition Facilities.
Upon the replenishment of the Cash Collateral in the Stated Amount as described
in the preceding sentence, and notwithstanding any subsequent achievement of an
aggregate Rent Coverage Ratio of not less than 1.3 to 1 for four (4) consecutive
Fiscal Quarters, the Cash Collateral shall not be subject to further return. The
applicable ALS Party shall pay all costs and expenses incurred by the applicable
Meditrust Parties in connection with any return and/or replenishment in the
amount of the Cash Collateral, pursuant to the terms of this Section 9.
10. AMENDMENTS. The ALS Parties and the Meditrust Parties anticipate
that some or all of them will engage in financing or lease transactions in the
future ("Future Related Transactions"). The ALS Parties and the Meditrust
Parties acknowledge and agree that the parties to the Future Related
Transactions are to become parties to this Agreement and the documents and
facilities which relate to the Future Related Transactions shall be treated as
Group One Acquisition Transaction Documents, Group Two Acquisition Transaction
Documents, Group Three Acquisition Transaction Documents and/or Meditrust/ALS
Transaction Documents, as the case may be, and as Group One Acquisition
Facilities, Group Two Acquisition Facilities, Group Three Acquisition Facilities
and/or Meditrust/ALS Facilities, as the case may be. From time to time upon the
occurrence of a Future Related Transaction, the ALS Parties and the Meditrust
Parties agree that they shall enter into amendments of this Agreement and the
exhibits hereto which will reflect the foregoing.
7
<PAGE> 8
11. NOTICE. Any notice, request, demand, statement or consent made
hereunder shall be in writing and shall be deemed duly given if personally
delivered, sent by certified mail, return receipt requested, or sent by a
nationally recognized commercial overnight delivery service with provisions for
a receipt, postage or delivery charges prepaid, and shall be deemed given when
so personally delivered, three (3) business days following the date postmarked
or the next business day when placed in the possession of such mail delivery
service and addressed as follows:
If to the
ALS Parties: c/o Alternative Living Services, Inc.
450 North Sunnyslope Road, Suite 300
Brookfield, WI 53005
Attn: William F. Lasky, President
With a copy to: Rogers & Hardin
Peachtree Center
229 Peachtree Street, N.E., 2700 International Tower
Atlanta, GA 30303
Attn: Miriam J. Dent, Esq.
If to the
Meditrust Parties: c/o Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Mortgage Investments Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Attn: Frank Giso III, Esq.
or such other address as the ALS Parties or the Meditrust Parties shall
hereinafter from time to time designate by a written notice to the others given
in such manner. Any notice given to any of the ALS Parties by any of the
Meditrust Parties at any time shall not imply that such notice or any further or
similar notice was or is required.
8
<PAGE> 9
12. GOVERNING LAW. This Agreement shall in all respects be construed
and interpreted in accordance with and governed by the laws of the Commonwealth
of Massachusetts.
Each of the parties constituting the ALS Parties hereby consents to
personal jurisdiction in the courts of the Commonwealth of Massachusetts and the
United States District Court for the District of Massachusetts as well as to the
jurisdiction of all courts from which an appeal may be taken from the aforesaid
courts, for the purpose of any suit, action or other proceeding arising out of
or with respect to this Agreement or any of the other Meditrust/ALS Transaction
Documents and expressly waives any and all objections such party may have as to
venue in any of such courts.
13. GENERAL PROVISIONS. The provisions set forth in Article 23 and
Sections 2.2, 16.8, 16.9, 16.10, 24.3 through 24.10, inclusive, and 24.12 of the
respective Acquisition Facility Leases are hereby incorporated herein by
reference, mutatis, mutandis and shall be applicable to this Agreement as if set
forth herein in full.
The ALS Parties waive all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance and waives all notices of the existence, creation, or
incurring of new or additional obligations, except as to all of the foregoing as
expressly provided for herein or in the Meditrust/ALS Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the day and year above written.
WITNESSES: LESSEE:
ALS LEASING, INC.
By: /s/
- ------------------------------- -------------------------------------
Name: David M. Boitano, its Vice President
- -------------------------------
Name:
WITNESSES: MEDITRUST:
MEDITRUST ACQUISITION CORPORATION III
By: /s/
- ----------------------- ----------------------------------------
Name: Name: Michael S. Benjamin
Title: Senior Vice President
- -------------------------------
Name:
10
<PAGE> 11
JOINDER AND CONSENT
Alternative Living Services, Inc., being a guarantor of the various
obligations of ALS Leasing, Inc. under guaranties delivered to the Meditrust
Parties in connection with the Meditrust/ALS Transaction Documents, hereby (A)
joins in this Agreement and consents to the provisions hereof, (B) except as
required in the Lease Documents, waives protest, notice of nonpayment, notice of
dishonor, protest of any dishonor, suretyship defenses, notice of protest and
protest of this Agreement and all other notices in connection with (I) the
delivery or the acceptance of this Agreement and any amendment hereto and any
reliance thereon and/or (II) the performance, default or enforcement of any
obligation under this Agreement, (C) waives notice of, or any right to consent
to, any modification or amendment of this Agreement and (D) agrees that this
joinder and consent shall be deemed to be a joinder and consent to this
Agreement as the same may be modified and amended from time to time.
EXECUTED under seal as of November 21, 1997.
WITNESS: ALTERNATIVE LIVING SERVICES, INC.
By: /s/ David M. Boitano
- ------------------------------- ------------------------------------
Name: David M. Boitano, its Vice President
- -------------------------------
Name:
11
<PAGE> 12
EXHIBIT A
GROUP ONE ACQUISITION FACILITIES
1. WovenHearts of Faribault
935 Spring Road
Faribault, Rice County, MN 55021
2. WovenHearts of Mankato
100 Teton Lane
Mankato, Blue Earth County, MN 56001
3. WovenHearts of Owatonna
334 Cedardale Drive, S.E.
Owatonna, Steele County, MN 55060
4. WovenHearts of Sauk Rapids
1325 Summit Avenue
Sauk Rapids, Benton County, MN 56379
5. WovenHearts of Willmar
1501 19th Avenue, S.W.
Willmar, Kandiyohi County, MN 56201
6. WovenHearts of Winona
835 East Belleview Street
Winona, Winona County, MN 55987
7. WovenHearts of Eau Claire
659 West Hamilton Avenue
Eau Claire, Eau Claire County, WI 54701
8. WovenHearts of Manitowoc
5005 Vista Road
Manitowoc, Manitowoc County, WI 54220
9. WovenHearts of Middleton
6916 Century Lane
Middleton, Dane County, WI 53562
10. WovenHearts of Neenah
2330 Bruce Street
Neenah, Winnebago County, WI 54956
11. WovenHearts of Oshkosh
190 Lake Pointe Drive
Oshkosh, Winnebago County, WI 54901
12
<PAGE> 13
12. WovenHearts of Sun Prairie
650 Broadway Drive
Sun Prairie, Dane County, WI 53590
13. Clare Bridge of Jacksonville
10050 St. Augustine Road
Jacksonville, Duval County, FL 32257
14. Wynwood of Lansing
5346 Marsh Road
Haslett, Ingham County, MI 48840
15. Clare Bridge of Charlotte
11240 Ballantyne Trace Court
Charlotte, Mecklenburg County, NC 28277
16. Wynwood of Charlotte
11230 Ballantyne Trace Court
Charlotte, Mecklenburg County, NC 28277
17. Clare Bridge of Greensboro
3898 North Elm Street
Greensboro, Guilford County, NC 27455
18. Wynwood of Greensboro
3896 North Elm Street
Greensboro, Guilford County, NC 27455
19. Clare Bridge of Charleston
1010 Anna Knapp Blvd.
Mt. Pleasant, Charleston County, SC 29464
20. Clare Bridge of Columbia
990 Columbia Avenue
Irmo, Lexington & Richland Counties, SC 29063
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
13
<PAGE> 14
EXHIBIT B
GROUP TWO ACQUISITION FACILITIES
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
14
<PAGE> 15
EXHIBIT C
GROUP THREE ACQUISITION FACILITIES
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
15
<PAGE> 16
EXHIBIT D
MEDITRUST/ALS FACILITIES
KANSAS
1. Sterling House of Wichita, Wichita, Kansas
2. Sterling House of Derby, Derby, Kansas
3. Sterling House of Wellington, Wellington, Kansas
4. Sterling House of Hays, Hays, Kansas
5. Sterling House of Abilene II, Abilene, Kansas
OKLAHOMA
6. Sterling House of Bethany, Bethany, Oklahoma
7. Sterling House of Bartlesville II, Bartlesville, Oklahoma
FLORIDA
8. Sterling House of Tequesta, Tequesta, Florida
9. Sterling House of West Melbourne, West Melbourne, Florida
10. Sterling House of Stuart, Stuart, Florida
11. Sterling House of Vero Beach, Vero Beach, Florida
12. Sterling House of Leesburg, Leesburg, Florida
13. Sterling House of Port Orange, Port Orange, Florida
14. Sterling House of Ocala, Ocala, Florida
15. Sterling House of Deland, Deland, Florida
16. Sterling House of Ormond Beach, Ormond Beach, Florida
17. Sterling House of West Melbourne II, West Melbourne, Florida
18. Clare Bridge of Fort Myers, Fort Myers, Florida
19. Clare Bridge of Tampa, Tampa, Florida
20. Clare Bridge of Jacksonville, Jacksonville, Florida
TEXAS
21. Sterling House of Temple, Temple, Texas
22. Sterling House of Carrollton, Carrollton, Texas
23. Sterling House of Kerrville, Kerrville, Texas
24. Sterling House of San Antonio-Whitby Road, San Antonio, Texas
25. Sterling House of New Braunfels, New Braunfels, Texas
26. Sterling House of Lancaster, Lancaster, Texas
OHIO
27. Sterling House of Bowling Green, Bowling Green, Ohio
16
<PAGE> 17
WISCONSIN
28. WovenHearts of Brown Deer, Brown Deer, Wisconsin
29. WovenHearts of Sussex, Sussex, Wisconsin
30. WovenHearts of Onalaska, Onalaska, Wisconsin
31. WovenHearts of Menomonie, Menomonie, Wisconsin
32. WovenHearts of New Richmond, New Richmond, Wisconsin
33. WovenHearts of Wisconsin Rapids, Wisconsin Rapids, Wisconsin
34. WovenHearts of Plymouth, Plymouth, Wisconsin
35. The Evergreens, Plover, Wisconsin
36. The Evergreens South, Plover, Wisconsin
37. StoneCroft Manor, Medford, Wisconsin
38. The Pines, Wausau, Wisconsin
39. The Pines North, Wausau, Wisconsin
40. The Oaks, Wisconsin Rapids, Wisconsin
41. WovenHearts of Eau Claire, Eau Claire, Wisconsin
42. WovenHearts of Manitowoc, Manitowoc, Wisconsin
43. WovenHearts of Middleton, Middleton, Wisconsin
44. WovenHearts of Neenah, Neenah, Wisconsin
45. WovenHearts of Oshkosh, Oshkosh, Wisconsin
46. WovenHearts of Sun Prairie, Sun Prairie, Wisconsin
MICHIGAN
47. Hamilton House of Farmington Hills I, Farmington Hills, Michigan
48. Hamilton House of Farmington Hills II, Farmington Hills, Michigan
49. Hamilton House of Ann Arbor, Ann Arbor, Michigan
50. Hamilton House of Utica, Utica, Michigan
51. Wynwood of Lansing, Lansing, Michigan
PENNSYLVANIA
52. Northampton Manor, Richboro, Pennsylvania
53. Clare Bridge of Lower Makefield, Yardley, Pennsylvania
54. Clare Bridge of Montgomery and Wynwood of Montgomery, North Wales,
Pennsylvania
NEW YORK
55. Liberty Commons, Manlius, New York
MINNESOTA
56. WovenHearts of Faribault, Faribault, Minnesota
57. WovenHearts of Mankato, Mankato, Minnesota
58. WovenHearts of Owatonna, Owatonna, Minnesota
59. WovenHearts of Sauk Rapids, Sauk Rapids, Minnesota
60. WovenHearts of Willmar, Willmar, Minnesota
17
<PAGE> 18
61. WovenHearts of Winona, Winona, Minnesota
NORTH CAROLINA
62. Clare Bridge of Charlotte, Charlotte, North Carolina
63. Wynwood of Charlotte, Charlotte, North Carolina
64. Clare Bridge of Greensboro, Greensboro, North Carolina
65. Wynwood of Greensboro, Greensboro, North Carolina
SOUTH CAROLINA
66. Clare Bridge of Charleston, Mt. Pleasant, South Carolina
67. Clare Bridge of Columbia, Irmo, South Carolina
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
18
<PAGE> 19
EXHIBIT E
RENT COVERAGE RATIO CALCULATION
19
<PAGE> 20
EXHIBIT F
EXHIBIT A
TO
THE ENVIRONMENTAL INDEMNITY AGREEMENT
Environmental Site Assessment Reports
1. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates Inc. respecting the property known as
WovenHearts of Faribault and located at 935 Spring Road, Faribault,
Minnesota (Project No. 5E-9709006).
2. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Mankato and located at 100 Teton Lane, Mankato,
Minnesota (Project No. 5E-9709007).
3. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Owatonna and located at 334 Cedardale Drive, Owatonna,
Minnesota (Project No. 5E-9709009).
4. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Sauk Rapids and located at 1325 North Summit Avenue,
Sauk Rapids, Minnesota (Project No. 1E-9709058).
5. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Willmar and located at 1501 19th Avenue Southwest,
Willmar, Minnesota (Project No. 1E-9709063).
6. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Winona located at 835 East Bellview Street, Winona,
Minnesota (Project No. 5E-9709010).
7. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Eau Claire and located at 733 West Hamilton Avenue, Eau
Claire, Wisconsin (Project No. 1E-9709059).
8. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Manitowoc and located at 5005 Vista Road, Manitowoc,
Wisconsin (Project No. 1E-9709060).
20
<PAGE> 21
9. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Middleton and located at 6916 Century Avenue, Middleton,
Wisconsin (Project No. 5E-9709008).
10. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Neenah and located at 2330 Bruce Street, Neenah,
Wisconsin (Project No. 1E-9709061).
11. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Oshkosh and located at 190 Lake Pointe Drive, Oshkosh,
Wisconsin (Project No. 1E-9709062).
12. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
WovenHearts of Sun Prairie and located at 650 Broadway Drive, Sun
Prairie, Wisconsin (Project No. 5E-9709011).
13. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
Clare Bridge of Jacksonville and located at 10050 Old St. Augustine
Road, Jacksonville, Florida (Project No. 3E-9709018).
14. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
Wynwood of Lansing and located at 5346 Marsh Road, Lansing (Haslett),
Michigan (Project No. 3E-9709064).
15. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the properties known
as Clare Bridge of Charlotte and Wynwood of Charlotte and located,
respectively, at 11240 and 11230 Ballantyne Trace Court, Charlotte,
North Carolina (Project No. 3E-9709016).
16. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the properties known
as Clare Bridge of Greensboro and Wynwood of Greensboro and located,
respectively, at 3898 and 3896 North Elm Street, Greensboro, North
Carolina (Project No. 3E-9709019).
17. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
Clare Bridge of Charleston and located at 1010 Anna Knapp Boulevard,
Mount Pleasant, South Carolina (Project No. 3E-9709015).
18. Phase I Environmental Site Assessment dated November 11, 1997 prepared
by Giles Engineering Associates, Inc. respecting the property known as
Clare Bridge of Columbia and located at 990 Columbia Avenue, Irmo,
South Carolina (Project No. 3E- 9709017).
21
<PAGE> 22
[TO BE AMENDED FROM TIME TO TIME AS ADDITIONAL ASSISTED LIVING FACILITIES ARE
ADDED TO EXHIBITS A, B OR C OF THE AGREEMENT REGARDING RELATED LEASE
TRANSACTIONS]
22
<PAGE> 23
EXHIBIT G
EXHIBIT B
TO
THE ENVIRONMENTAL INDEMNITY AGREEMENT
1. With respect to the Leased Property located in Florida, Chapters 376
and 403, Florida Statutes.
2. With respect to the Leased Property located in Michigan, the Michigan
Hazardous Waste Management Act, Act. No. 64 of the Michigan Public Acts
of 1979, as amended (MCLA 299.501, et seq.) and the Michigan Natural
Resources and Environmental Protection Act (MCLA 324.20101, et seq.),
as amended.
3. With respect to the Leased Property located in Minnesota, Minnesota
Statutes Section 115B.01-115B.24 and Minnesota Statutes Chapter 115C.
4. With respect to the Leased Property located in North Carolina, the Oil
Pollution and Hazardous Substances Control Act, N.C. Gen. Stat.
ss.143-215.75 et seq. and the Inactive Hazardous Sites Response Act,
N.C. Gen. Stat. ss.130A-310 et seq.
5. With respect to the Leased Property located in South Carolina, Title 48
and Title 44 of the South Carolina Code of Laws (1976) as amended.
6. With respect to the Leased Property located in Wisconsin, Chapter 144,
Wisconsin Statutes (1993-94).
[TO BE AMENDED FROM TIME TO TIME AS ADDITIONAL ASSISTED LIVING FACILITIES ARE
ADDED TO EXHIBITS A, B, OR C OF THE AGREEMENT REGARDING RELATED LEASE
TRANSACTIONS]
23
<PAGE> 24
EXHIBIT H
SCHEDULE A
TO
THE AFFILIATED PARTY SUBORDINATION AGREEMENT
LIST OF MANAGERS
[TO BE SUPPLEMENTED FROM TIME TO TIME TO REFLECT THE ADDITION OF NEW PARTIES TO
THE AFFILIATED PARTY SUBORDINATION AGREEMENT]
24
<PAGE> 25
EXHIBIT I
SCHEDULE B
TO
THE AFFILIATED PARTY SUBORDINATION AGREEMENT
LIST OF SUBLESSEES
[TO BE SUPPLEMENTED FROM TIME TO TIME TO REFLECT THE ADDITION OF NEW PARTIES TO
THE AFFILIATED PARTY SUBORDINATION AGREEMENT]
25
