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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: December 31, 1996
(Date of earliest event reported)
ALTERNATIVE LIVING SERVICES, INC.
(Exact name of registrant as specified in its charter)
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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 December 31, 1996, Alternative Living Services, Inc. (the "Company" or the
"Registrant") completed $45 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 twelve of the Company's assisted
living residences having an aggregate capacity of 479 residents, all of which
residences were previously owned by the Company. The sale resulted in a deferred
gain of approximately $5.8 million, which will be recognized over the initial
twelve year lease terms. After repayment of mortgage indebtedness on the twelve
residences, the net proceeds to the Company of approximately $17.6 million (net
of lease deposits and closing costs) are available to fund future development
and construction and for general corporate purposes.
Pursuant to the sale/leaseback transaction, the Company is leasing these twelve
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 twelve assisted living
residences consists of base rent, which the Company expects will equal an annual
aggregate of approximately $4.3 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 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
(1) Not applicable.
(b) Pro Forma Financial Information.
(1) Alternative Living Services, Inc. Pro Forma
Condensed Consolidated Balance Sheet
(unaudited) at September 30, 1996.
(2) Alternative Living Services, Inc. Pro Forma
Condensed Consolidated Statement of
Operations (unaudited) For the Year Ended
December 31, 1995 and for the Nine Months
Ended September 30, 1996.
(3) Notes to Pro Forma Condensed Consolidated
Financial Statements (unaudited).
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It is impracticable to provide the pro forma financial
information required by Item 7(b) at this time. Such pro forma
financial information will be filed by amendment on Form 8-K/A
as soon as practicable, but in any event, not later than March
17, 1997.
(c) Exhibits.
99.1 Facility Lease dated as of December 30,
1996, 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 December 30, 1996, 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 December 30, 1996, by and
among ALS Leasing, Inc., the Company and
Meditrust Acquisition Corporation III
99.6 Press release relating to the sale/leaseback
transaction.
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: January 14, 1997
ALTERNATIVE LIVING SERVICES, INC.
(Registrant)
By: /s/ Thomas E. Komula
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Thomas E. Komula, Senior Vice President,
Treasurer and Chief Financial Officer
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EXHIBIT INDEX
99.1 Form of Facility Lease*
99.2 Schedule of Facility Leases which are substantially
in the Form of 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 December 30, 1996, 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 December 30, 1996,
by and among ALS Leasing, Inc., the Company and Meditrust Acquisition
Corporation III
99.6 Press release relating to the sale/leaseback transaction.
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*Confidential portions omitted and filed separately with the Commission.
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EXHIBIT 99.1
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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.
(A Delaware Corporation)
as
Lessee
Dated As Of December 30, 1996
For Premises Located At
Northampton Manor
65 Newtown Richboro Road
Richboro, Bucks County, PA 18954
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TABLE OF CONTENTS
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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 19
ARTICLE 3 RENT 20
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures 20
3.1.1 Base Rent 20
3.1.2 Additional Rent 20
3.2 Calculation and Payment of Additional Rent; Annual Reconciliation 20
3.2.1 Estimates and Payments 20
3.2.2 Annual Statement 21
3.2.3 Deficits 21
3.2.4 Overpayments 21
3.2.5 Final Determination 21
3.2.6 Best Efforts To Maximize 21
3.3 Confirmation and Audit of Additional Rent 22
3.3.1 Maintain Accounting Systems 22
3.3.2 Audit By Lessor 22
3.3.3 Deficiencies and Overpayment 22
3.3.4 Survival 23
3.4 Additional Charges 23
3.5 Leasing Commitment Fee 23
3.6 Net Lease 23
3.7 No Lessee Termination or Offset 24
3.7.1 No Termination 24
3.7.2 Waiver 24
3.7.3 Independent Covenants 24
3.8 Abatement of Rent Limited 24
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS 25
4.1 Payment of Impositions 25
4.1.1 Lessee To Pay 25
4.1.2 Installment Elections 25
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4.1.3 Returns and Reports 25
4.1.4 Refunds 26
4.1.5 Protest 26
4.2 Notice of Impositions 26
4.3 Adjustment of Impositions 26
4.4 Utility Charges 26
4.5 Insurance Premiums 27
4.6 Deposits 27
4.6.1 Lessor's Option 27
4.6.2 Use of Deposits 28
4.6.3 Deficits 28
4.6.4 Other Properties 29
4.6.5 Transfers 29
4.6.6 Security 29
4.6.7 Return 29
4.6.8 Receipts 29
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL
PROPERTY; INSTALLATION, REMOVAL AND REPLACEMENT
OF PERSONAL PROPERTY 30
5.1 Ownership of the Leased Property 30
5.2 Personal Property; Removal and Replacement of Personal Property 30
5.2.1 Lessee To Equip Facility 30
5.2.2 Sufficient Personal Property 30
5.2.3 Removal and Replacement; Lessor's Option to Purchase 30
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS 31
6.1 Security for the Lessee's Obligations; Permitted Prior Security
Interests 31
6.1.1 Security 31
6.1.2 Purchase-Money Security Interests aLeasesipment 32
6.2 Cash Collateral 33
6.2.1 Cash Collateral. 33
6.2.2 Application of Cash Collateral. 33
6.2.3 Replenishment of Cash Collateral. 33
6.3 Guaranty 33
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS 34
7.1 Condition of the Leased Property 34
7.2 Use of the Leased Property; Compliance; Management 35
7.2.1 Obligation to Operate 35
7.2.2 Permitted Uses 35
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7.2.3 Compliance With Insurance Requirements 35
7.2.4 No Waste 35
7.2.5 No Impairment 35
7.2.6 No Liens 35
7.3 Compliance with Legal Requirements 36
7.4 Management Agreements 36
ARTICLE 8 REPAIRS; RESTRICTIONS 37
8.1 Maintenance and Repair 37
8.1.1 Lessee's Responsibility 37
8.1.2 No Lessor Obligation 38
8.1.3 Lessee May Not Obligate Lessor 38
8.1.4 Lessee's Obligation to Perform Upgrade Renovations 39
8.2 Encroachments; Title Restrictions 40
ARTICLE 9 MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS 40
9.1 Lessor's Approval 40
9.2 General Provisions as to Capital Additions and Certain Material
Structural Work 41
9.2.1 No Liens 41
9.2.2 Lessee's Proposal Regarding Capital Additions and
Material Structural Work 41
9.2.3 Lessor's Options Regarding Capital Additions and
Material Structural Work 41
9.2.4 Lessor May Elect to Finance Capital Additions or
Material Structural Work 42
9.2.5 Legal Requirements; Quality of Work 42
9.3 Capital Additions and Material Structural Work Financed by Lessor 42
9.3.1 Lessee's Financing Request 42
9.3.2 Lessor's General Requirements 42
9.3.3 Payment of Costs 44
9.4 General Limitations 44
9.5 Non-Capital Additions 45
9.6 Permitted Work 45
ARTICLE 10 WARRANTIES AND REPRESENTATIONS 46
10.1 Representations and Warranties 46
10.1.1 Existence; Power; Qualification 46
10.1.2 Valid and Binding 46
10.1.3 Single Purpose 46
10.1.4 No Violation 46
10.1.5 Consents and Approvals 47
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10.1.6 No Liens or Insolvency Proceedings 47
10.1.7 No Burdensome Agreements 47
10.1.8 Commercial Acts 47
10.1.9 Adequate Capital, Not Insolvent 47
10.1.10 Not Delinquent 48
10.1.11 No Affiliate Debt 48
10.1.12 Taxes Current 48
10.1.13 Financials Complete and Accurate 48
10.1.14 Pending Actions, Notices and Reports 49
10.1.15 Compliance with Legal and Other Requirements 50
10.1.16 No Action By Governmental Authority 50
10.1.17 Property Matters 50
10.1.18 Third Party Payor Agreements 52
10.1.19 Rate Limitations 52
10.1.20 Free Care 52
10.1.21 No Proposed Changes 53
10.1.22 ERISA 53
10.1.23 No Broker 53
10.1.24 No Improper Payments 53
10.1.25 Nothing Omitted 54
10.1.26 No Margin Security 54
10.1.27 No Default 54
10.1.28 Principal Place of Business 54
10.1.29 Labor Matters 54
10.1.30 Intellectual Property 55
10.1.31 Management Agreements 55
10.1.32 Fiscal Year 55
10.1.33Rates 55
10.2 Continuing Effect of Representations and Warranties 55
ARTICLE 11 FINANCIAL AND OTHER COVENANTS 56
11.1 Status Certificates 56
11.2 Financial Statements; Reports; Notice and Information 56
11.2.1 Obligation To Furnish 56
11.2.2 Responsible Officer 60
11.2.3 No Material Omission 60
11.2.4 Confidentiality 60
11.3 Financial Covenants 61
11.3.1 Rent Coverage Ratio 61
11.3.2 [Intentionally Omitted] 61
11.3.3 [Intentionally Omitted] 61
11.3.4 [Intentionally Omitted] 61
11.3.5 Current Ratio - Guarantor 61
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11.3.6 [Intentionally Omitted]. 62
11.3.7 Tangible Net Worth - Guarantor 62
11.3.8 No Indebtedness. 62
11.3.9 No Guaranties 62
11.4 Affirmative Covenants 62
11.4.1 Maintenance of Existence 62
11.4.2 Materials 63
11.4.3 Compliance With Legal Requirements And Applicable
Agreements 63
11.4.4 Books And Records 63
11.4.5 Participation in Third Party Payor Programs 63
11.4.6 Conduct of its Business 63
11.4.7 Address 64
11.4.8 Subordination of Affiliate Transactions 64
11.4.9 Inspection 64
11.4.10 Additional Property 64
11.4.11 Acceptable Licensed Operator 65
11.4.12 [Intentionally Omitted]. 65
11.5 Additional Negative Covenants 65
11.5.1 Restrictions Relating to Lessee 65
11.5.2 No Liens 66
11.5.3 Limits on Affiliate Transactions 67
11.5.4 Non-Competition 67
11.5.5 No Default 68
11.5.6 Restrictions Relating to the Guarantor 68
11.5.7 [Intentionally Omitted] 69
11.5.8 ERISA 69
11.5.9 Forgiveness of Indebtedness 69
11.5.10 Value of Assets 69
11.5.11 Changes in Fiscal Year and Accounting Procedures. 69
11.5.12 [Intentionally Omitted] 69
ARTICLE 12 INSURANCE AND INDEMNITY 70
12.1 General Insurance Requirements 70
12.1.1 Types and Amounts of Insurance 70
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 73
12.1.7 Irrevocable Power of Attorney 74
12.1.8 Blanket Policies. 74
12.1.9 No Separate Insurance 74
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12.1.10 Assignment of Unearned Premiums 74
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 76
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 77
13.1.3 Disbursement of Insurance Proceeds 78
13.2 Disposition of Insurance Proceeds 82
13.2.1 Proceeds To Be Released to Pay For Work 82
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 84
13.5 No Abatement of Rent 84
13.6 Termination of Certain Rights 84
13.7 Waiver 84
13.8 Application of Rent Loss and/or Business Interruption Insurance 84
13.9 Obligation To Account 85
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 87
ARTICLE 15 PERMITTED CONTESTS 88
15.1 Lessee's Right to Contest 88
15.2 Lessor's Cooperation 88
15.3 Lessee's Indemnity 89
ARTICLE 16 DEFAULT 89
16.1 Events of Default 89
16.2 Remedies 94
16.3 Damages 95
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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 97
16.9 Right of Forbearance 98
16.10 Cumulative Remedies 98
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
ARTICLE 18 RIGHT OF FIRST REFUSAL TO PURCHASE THE LEASED
PROPERTY 100
18.1 Right of First Refusal to Purchase the Leased Property 100
ARTICLE 19 SUBLETTING AND ASSIGNMENT 101
19.1 Subletting and Assignment 101
19.2 Permitted Subleases 101
19.3 Attornment 101
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 102
20.4 Subordination and Non-Disturbance 102
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 106
24.1 Broker's Fee Indemnification 106
24.2 No Joint Venture or Partnership 107
24.3 Amendments, Waivers and Modifications 107
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24.4 Captions and Heading 108
24.5 Time is of the Essence 108
24.6 Counterparts 108
24.7 Entire Agreement 108
24.8 WAIVER OF JURY TRIAL 108
24.9 Successors and Assigns 108
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 115
EXHIBIT C LIST OF SHAREHOLDERS 116
EXHIBIT D NATIONAL ACCOUNTS AND LOCAL DISCOUNTS 117
EXHIBIT E OPEN COST REPORTS 118
EXHIBIT F RATE LIMITATIONS 119
EXHIBIT G FREE CARE REQUIREMENTS 120
EXHIBIT H CURRENT RATES 121
EXHIBIT I RENT COVERAGE RATIO CALCULATION 122
EXHIBIT J [INTENTIONALLY OMITTED] 123
EXHIBIT K RELATED PARTY OBLIGATIONS 124
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FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 30th day of December,
1996 and 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. ("Lessee"), a Delaware corporation,
having its principal office at 450 N. Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005, Attn: Mr. William F. Lasky.
ARTICLE
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").
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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 December 31, 1996 (the "Commencement Date") and
end on December 31, 2008 (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 December 31, 2023. 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 Related Leases in accordance with the provisions of the Agreement
Regarding Related Lease Transactions and the provisions of Section 1.3 of each
of the Related Leases.
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ARTICLE
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: (A) The Current Manager, (B) the Lessee,
or (C) any Sublessee or Manager of the Facility (pursuant to a Sublease or
Management Agreement approved by the Lessor) that is wholly-owned by Alternative
Living Services, Inc. and is, during the Term, 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; provided, however, that the Current Manager
shall not continue to manage the Facility for more than six (6) months after the
Commencement Date and shall not be deemed an Acceptable Licensed Operator beyond
such six-month term.
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.
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 3.2.
ADDITIONAL LAND: As defined in Section 9.3.
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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, "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 by and among the Lessee, the Guarantor, and
various Affiliates of the Lessor.
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS: That certain Agreement
Regarding Related Lease Transactions of even date by and among the Lessee, the
Lessor and any Related Party that is a party to any Related Lease. The Lessor
and the Lessee anticipated that the Agreement Regarding Related Lease
Transactions will be amended from time to time in connection with future
transactions in order to include Affiliates of the Lessor and the Lessee as
parties thereto.
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.
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
Sections 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
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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.
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.
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.
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.
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CONDEMNOR: Any public or quasi-public authority, or private corporation
or individual, 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.
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), 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.
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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.
CURRENT MANAGEMENT AGREEMENT: That certain Management Agreement of even
date herewith by and between the Lessee and the Current Manager.
CURRENT MANAGER: CCCI/Northampton Limited Partnership, a Pennsylvania
limited partnership.
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.
DOCUMENTS: As defined in the UCC.
ENCUMBRANCE: As defined in Section 20.3.
ENVIRONMENTAL INDEMNITY AGREEMENT: The Environmental Indemnity
Agreement of even date herewith by and among the Lessee, the Guarantor and the
Lessor.
ENVIRONMENTAL LAWS: As defined in the Environmental Indemnity
Agreement.
ERISA: The Employment Retirement Income Security Act of 1974, as
amended.
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 one hundred two (102) unit, fully licensed (to the extent
licensing is required by the State) assisted living facility (known for
regulatory purposes in the State as a personal care
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<PAGE> 18
home) known as Northampton Manor and located in Richboro, Bucks County,
Pennsylvania, on the Land (together with related parking and other amenities).
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.
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FISCAL QUARTER: Each of the three (3) month periods commencing on
January 1st, April 1st, July 1st and October 1st.
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
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(V) deposits refundable to residents of the Facility.
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.
GUARANTOR: Alternative Living Services, Inc. and its successors and
assigns.
GUARANTY: The Guaranty of even date executed by Guarantor in favor of
the Lessor, relating to the Lease Obligations.
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 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
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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.
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.
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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 Agreement
Regarding Related Lease Transactions, the Permits Assignment, the Financing
Statements, the Affiliated Party Subordination Agreement, the Environmental
Indemnity Agreement, the other Facility Lease Agreements of even date herewith
by and between the Lessor and the Lessee, the Certification Regarding Entity
Ownership of even date herewith from the Guarantor to the Lessor 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.
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: ONE HUNDRED EIGHT THOUSAND THREE
HUNDRED SIXTY-ONE AND NO/100 DOLLARS ($108,361.00).
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 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,
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<PAGE> 23
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: 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.
MAXIMUM RENT ADJUSTMENT: As defined in Section 3.1.2.
MEDICAID: The medical assistance program established by Title XIX of
the Social Security Act (42 USC Section. Section. 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 Section. Section
1395 et seq.) and any statute succeeding thereto.
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<PAGE> 24
MEDITRUST: As defined in Article 23.
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: TEN MILLION EIGHT HUNDRED THIRTY-SIX
THOUSAND ONE HUNDRED FIFTEEN AND NO/100 DOLLARS ($10,836,115.00).
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 under Insurance Requirements, and 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 and (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.
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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 granted by the Lessee to the Lessor.
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: As defined in Section 13.1.2.
PLEDGE AGREEMENT: The Stock Pledge Agreement of even date by and
between the Guarantor, the Lessee and the Lessor.
PRIMARY INTENDED USE: The use of the Facility as an assisted living
facility (known for regulatory purposes in the State as a personal care home)
with one hundred two (102) licensed assisted living units 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.
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<PAGE> 26
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: All leases for the facilities listed in Exhibits A and
B to the Agreement Regarding Related Lease Transactions, as amended from time to
time.
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.
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 on EXHIBIT K.
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.
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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.
RENT SHORTFALL: As defined in Section 3.1.
RENT SURPLUS: As defined in Section 3.1.
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.
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.
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.
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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.
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.
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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" (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
RENT
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.
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3.1.1 BASE RENT: The Lessee shall pay to the Lessor a base
rent (the "Base Rent") per annum that is equal to * , subject to
adjustment as provided herein, payable in advance in equal, consecutive
monthly installments due on the first day of each calendar month,
commencing on January 1, 1997, provided that from the date hereof
through December 31, 1996 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 (i) the then current Base Rent or (ii) 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")
in an amount equal to * percent (*%) of Excess Gross Revenues for each
calendar year during the Term. Additional Rent shall accrue commencing
on January 1, 1998, and shall be payable during the Term, quarterly in
arrears, commencing on April 20, 1998 ("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 the
Additional Rent for any calendar year exceed * percent (*%) of the
total of Base Rent and Additional Rent paid for the immediately
preceding calendar year.
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.
- --------
*Confidential portions omitted and filed separately with the Commission
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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.
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 for the purpose
of maximizing earnings.
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
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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 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
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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 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 the full amount of the installments
of Base Rent, the Additional Rent and the payments of Additional Charges
throughout the Term.
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
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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 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.
For the purposes of this Section 3.6, 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.
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ARTICLE
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 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
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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.
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
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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 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
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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 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.
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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.
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
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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 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
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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
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;
(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
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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 granted by the Lessee in full compliance with the
provisions of this Section 6.1.2 are referred to as "Permitted Prior
Security Interests".
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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
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,
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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 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 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
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cause, permit or suffer any Lien to exist with respect to the Leased
Property other than as set forth in Section 11.5.2.
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 things,
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
opportunity to cure such default. The Lessee shall
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furnish to the Lessor, within three (3) days after receipt thereof, or after the
mailing or service thereof by the Lessee, as the case may be, a copy of each
notice of default which the Lessee shall give to, or receive 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.
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
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
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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 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
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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 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
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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 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.
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ARTICLE
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.
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
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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.
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 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:
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(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;
(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
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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
(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
resolutions 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.
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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 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
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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
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. 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 operation of the Leased Property for
the Primary Intended Use and the Other Permitted Uses 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.
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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.
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.
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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 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
(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
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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.
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
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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 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) 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.
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 Lessee is
or will become the licensed operator of the Facility, the Lessee has
obtained 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.
(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
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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 in good operating 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 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;
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(G) All utilities necessary for the use and operation of the
Facility are 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 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) Since the initial construction of the Facility, 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.
THIRD PARTY PAYOR AGREEMENTS.
(A) The Lessee or the Facility is 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.
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(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 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.
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
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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.
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
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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.
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, and the Current Management Agreement
shall terminate not later than six (6) months after the Commencement
Date. The Current Manager is a wholly owned Subsidiary of the
Guarantor.
10.1.32 FISCAL YEAR. The fiscal year of each of the Lessee
and the Guarantor is the Fiscal Year.
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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
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 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
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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 11.4.11.
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 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-
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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 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
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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 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 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
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($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 and;
(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.
(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
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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 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
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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 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. 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).
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
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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
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.
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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
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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) 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
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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
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
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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.
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 *
(*) 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.
- -------------------------------
*Confidential portions omitted and filed separately with the Commission.
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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
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].
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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.
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.
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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
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;
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(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 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;
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(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
cancelled or materially modified except upon thirty (30) days'
prior written notice to the Lessor and any Fee Mortgagee;
(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 cancelled 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
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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.
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
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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 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
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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 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
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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 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 3.6).
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
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($50,000.00) or in any structural damage to the Leased Property,
regardless of the extent of 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 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
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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;
(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
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(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;
(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;
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(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 cancelled 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 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
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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.
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.
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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.
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.
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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 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
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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 3.6, 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 3.6.
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 shall be
diminished by the amount of the Award, if any, received by the Lessor which is
in excess of the Meditrust Investment.
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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.
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.
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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 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
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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;
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;
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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". 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 an "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, liquidation, dissolution or termination
of existence of any member of the Leasing Group (except in the case of
a merger or consolidation with the Guarantor (which shall be a
"Permitted Merger"); 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
(A) 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 (B) if Alternative Living Services, Inc. is not the
surviving corporation which results from such Permitted Merger, the new
surviving corporation will affirm its obligations under the Guaranty in
a manner reasonably satisfactory to the Lessor.
(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
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
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(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;
(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
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(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 any other circumstances under which any member
of the Leasing Group is required to cease 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;
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(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 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. 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
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 reduce the Lessee's
obligations under this Lease or the other Lease Documents, unless otherwise
expressly agreed to in a written document signed by an authorized officer or
agent of the Lessor.
(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
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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 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,
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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.
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
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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.
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.
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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) 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,
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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.
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.
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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 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.
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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.
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
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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
cancelled 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 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.
102
<PAGE> 113
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.
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
103
<PAGE> 114
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:
<TABLE>
<S> <C>
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
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
</TABLE>
104
<PAGE> 115
<TABLE>
<S> <C>
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
</TABLE>
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 MEDITRUST LIABILITY
The Declaration of Trust establishing the sole shareholder of the
Lessor, Meditrust, a Massachusetts business trust ("Meditrust"), dated August
6, 1985 (the "Declaration"), as amended, a copy of which is duly filed in the
office of the Secretary of State of the Commonwealth of Massachusetts, provides
that the name "Meditrust" refers to the trustees under the Declaration
collectively as trustees, but not individually or personally; and that no
trustee, officer, shareholder, employee or agent of Meditrust or any of its
Subsidiaries shall be held to any personal liability, jointly, or severally,
for any obligation of, or claim against Meditrust or any of its Subsidiaries.
All Persons dealing with Meditrust or the Lessor, in any way, shall look only
to the assets of Meditrust or the Lessor, as applicable, for the payment of any
sum or the performance of any obligation. Furthermore, in no event shall
Meditrust or 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 Meditrust is not a party to this
Lease and 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.
105
<PAGE> 116
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.
106
<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 respect 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 paragraph in particular and (D) makes the
waivers set forth herein knowingly, voluntarily and intentionally.
107
<PAGE> 118
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.
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
108
<PAGE> 119
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 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)
109
<PAGE> 120
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]
110
<PAGE> 121
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
<TABLE>
<S> <C>
WITNESSES: LESSEE:
- --------- ------
ALS LEASING, INC., a Delaware
corporation
By:
- --------------------------- ---------------------------
Name: Name:
Title:
- ---------------------------
Name:
WITNESSES: LESSOR:
- --------- ------
MEDITRUST ACQUISITION
CORPORATION III, a Delaware
corporation
By:
- --------------------------- ---------------------------
Name: Name:
Title:
- ---------------------------
Name:
</TABLE>
111
<PAGE> 122
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
ALL THAT CERTAIN tract of land SITUATE in the Township of Northampton, County
of Bucks, Commonwealth of Pennsylvania, consisting of the merger of three
parcels of land (TMP's 31-23-1; 31-23-2-1 and 31-24-221), all shown on a
Property Merging Plan prepared by Andersen Engineering Associates, Inc.,
Perkasie, Pennsylvania (formerly Newtown, PA), dated March 15, 1991, last
revised March 6, 1992, bounded and described, as follows, to wit:
BEGINNING at a concrete monument located along the northerly side of
Newtown-Richboro Road, SR 332 (variable width, 50 feet wide as measured from
the centerline in this location), said concrete monument being a corner of
lands now or late of Efim Kalikhman (TMP 31-24-219);
THENCE along Newtown-Richboro Road, the following three courses and distances:
(1) South 72 degrees 20 minutes 55 seconds West, 51.66 feet to a concrete
monument;
(2) South 77 degrees 20 minutes 55 seconds West, 198.34 feet to a concrete
monument;
(3) South 77 degrees 23 minutes 55 seconds West, 306.88 feet to a concrete
monument, a corner of lands now or late of Villages of Northampton (TMP
31-10-102);
THENCE along lands of Villages of Northampton, the following two courses and
distances:
(1) North 13 degrees 12 minutes 18 seconds West, 183.72 feet to a concrete
monument;
(2) North 01 degrees 54 minutes 05 seconds West, 562.75 feet to a concrete
monument, said concrete monument located in line of lands now or late of Jack
and Anna Holzinger (TMP 31-13-48);
THENCE along lands now or late of Holzinger, lands now or late of William and
Mary Blesi (TMP 31-13-49), lands now or late of Robert and Doris Cramer (TMP
31-13-50), lands now or late of Paul and June Wetzel (TMP 31-13-51), lands now
or late of Addisville Dutch Reformed Church (TMP 31-13-52), lands now or late
of Robert and Elaine McGery (TMP 31-13-53), along the southerly terminus of
Center Street (50 feet wide), lands now or late of Robert E. and Kathleen
Keppol (TMP 31-24-9), lands now or late of Scott and Tracie Conrad (TMP
31-24-10) and partially along lands now or late of David and Carol Hensel (TMP
31-24-11), North 86 degrees 05 minutes 55 seconds, East 909.21 feet to a
concrete monument, a corner of lands now or late of Jack and Pamela Meyers (TMP
31-24-199);
THENCE along lands of Meyers, South 03 degrees 54 minutes 05 seconds East,
213.77 feet to a concrete monument located along the northerly side of Sunset
Drive (50 feet wide);
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<PAGE> 123
THENCE along Sunset Drive, by a curve to the left, with a radius of 175 feet,
the arc distance of 156.35 feet to a concrete monument, a corner of lands now
or late of Svetlana Shtekher (TMP 31-24-220);
THENCE along lands of Shtekher, North 82 degrees 27 minutes 48 seconds West,
220.65 feet to a concrete monument;
THENCE continuing along lands of Shtekher and along lands of the aforementioned
Kalikhman (TMP 31-24-219), South 01 degrees 57 minutes 11 seconds East 393.00
feet to a concrete monument located along the northerly side of Newtown-
Richboro Road, the place of beginning.
Excepting a 30 foot wide sanitary sewer easement and a 20 foot wide utility
easement, as shown on the aforementioned property merging plan.
BEING COUNTY TAX PARCEL NUMBER - 32-23-1
Also including Rights of Ingress and Egress as set forth in an Access/Easement
Agreement dated 5/11/1994 and recorded in Land Record Book 924 page 1095.
113
<PAGE> 124
EXHIBIT B
PERMITTED ENCUMBRANCES
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 on December 31, 1996.
114
<PAGE> 125
EXHIBIT C
LIST OF SHAREHOLDERS
1. Alternative Living Services, Inc. - sole shareholder of the Lessee
115
<PAGE> 126
EXHIBIT D
NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
None
116
<PAGE> 127
EXHIBIT E
OPEN COST REPORTS
None
117
<PAGE> 128
EXHIBIT F
RATE LIMITATIONS
None
118
<PAGE> 129
EXHIBIT G
FREE CARE REQUIREMENTS
None
119
<PAGE> 130
EXHIBIT H
CURRENT RATES
120
<PAGE> 131
EXHIBIT I
RENT COVERAGE RATIO CALCULATION
See Exhibit D to Agreement Regarding Related Lease Transactions.
121
<PAGE> 132
EXHIBIT J
[INTENTIONALLY OMITTED]
122
<PAGE> 133
EXHIBIT K
RELATED PARTY OBLIGATIONS
All obligations evidenced by the "ALS/Meditrust Transaction Documents"
as defined in the Agreement Regarding Related Lease Transactions of even date
herewith between the Lessee and the Lessor.
123
<PAGE> 134
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.
124
<PAGE> 1
EXHIBIT 99.2
<PAGE> 2
EXHIBIT 99.2
SCHEDULE OF FACILITY LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 99.1
<TABLE>
<CAPTION>
ORIGINAL
LEASING MEDITRUST
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT
------------- -------- -------------- ----------
<S> <C> <C> <C>
WovenHearts of Onalaska Onalaska, $ 12,899.00 $ 1,289,931.00
LaCrosse County,
Wisconsin
WovenHearts of Sussex Sussex, $ 9,608.00 $ 960,824.00
Waukesha County,
Wisconsin
WovenHearts of Brown Deer Brown Deer, $ 7,073.00 $ 707,266.00
Milwaukee County,
Wisconsin
Clare Bridge of Montgomery North Wales, $ 46,670.00 $ 4,967,033.00
Montgomery County,
Pennsylvania
Clare Bridge of Lower Makefield Yardley, $ 49,989.00 $ 4,998,920.00
Bucks County,
Pennsylvania
Clare Bridge of Fort Myers Fort Myers, $ 37,655.00 $ 3,765,481.00
Lee County,
Florida
Northampton Manor Richboro, $108,361.00 $10,836,115.00
Bucks County,
Pennsylvania
</TABLE>
<TABLE>
<CAPTION>
NO. OF UNITS
BASE RENT IN FACILITY
--------- -----------
<C> <C>
* 19
* 19
* 15
* 38
* 36
* 32
* 120
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ORIGINAL
LEASING MEDITRUST
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT
------------- -------- -------------- ----------
<S> <C> <C> <C>
Clare Bridge of Tampa Tampa, $ 37,655.00 $ 3,765,481.00
Hillsborough County,
Florida
Hamilton House of Farmington Hills, $ 34,209.00 $ 3,420,850.00
Farmington Hills I Oakland County,
Michigan
Hamilton House of Farmington Hills, $ 37,510.00 $ 3,750,992.00
Farmington Hills II Oakland County,
Michigan
Hamilton House of Ann Arbor Ann Arbor $ 30,783.00 $ 3,078,288.00
Washtenaw County,
Michigan
Hamilton House of Utica Utica, $ 33,546.00 $ 3,354,614.00
Macomb County,
Michigan
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<TABLE>
<CAPTION>
NO. OF UNITS
BASE RENT IN FACILITY
--------- -----------
<C> <C>
* 32
* 28
* 28
* 28
* 28
</TABLE>
127
<PAGE> 1
EXHIBIT 99.3
<PAGE> 2
EXECUTION COPY
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"), relating to the various facilities
listed in Exhibits A and B 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"), pursuant to various Facility Lease Agreements of even
date herewith by and between the Lessor and the Lessee (hereinafter referred
to, collectively, as the "Leases"), 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 defined in the Leases).
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 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 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, court costs
<PAGE> 3
and 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 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 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:
(A) extend credit, make loans and afford other financial
accommodations to the Lessee 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 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
2
<PAGE> 4
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 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
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 ownership of the Lessee, any other
member of the Leasing Group or any of the Related Parties, by reason of any
disability of the Lessee, any other member of the Leasing Group, any Related
Party 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 or any of the Related Parties in respect of any of the Obligations. If
for any reason now or hereafter the Lessee, any other member of the Leasing
Group or any of the Related Parties 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 or any Related Party 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 or any of the Related Parties 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 anyone acting or purporting to act on its 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 and that the Lessee has not been
formed or availed of to evade or circumvent the applicable usury laws of any
state or states concerned
3
<PAGE> 5
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:
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;
4
<PAGE> 6
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:
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;
7.7. FILING OF TAX RETURNS.
5
<PAGE> 7
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 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
6
<PAGE> 8
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.
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 and, 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
7
<PAGE> 9
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 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 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 Guarantor 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:
<TABLE>
<S> <C>
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
</TABLE>
8
<PAGE> 10
<TABLE>
<S> <C>
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
</TABLE>
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.
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.
9
<PAGE> 11
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty
as an instrument under seal as of the 30th day of December, 1996.
WITNESS: GUARANTOR:
ALTERNATIVE LIVING SERVICES, INC.
By:
- ------------------------------ ------------------------------------
Name: Thomas E. Komula,
Senior Vice President
10
<PAGE> 1
EXHIBIT 99.4
<PAGE> 2
Doc. #DS2.240549.4
ALS Non-Construction
12/30/96
AFFILIATED PARTY SUBORDINATION AGREEMENT
THIS AGREEMENT is made as of the 30th day of December, 1996 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
(collectively, the "Manager"); and (IV) 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) and (iv) 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 of even date herewith (collectively, the "Leases")
relating to those properties listed in EXHIBIT A 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,
each of which properties is more particularly described in the respective Lease
for such property (collectively, the "Leased Property").
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 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
<PAGE> 3
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.
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
2
<PAGE> 4
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.
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
<PAGE> 5
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
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
4
<PAGE> 6
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.
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
5
<PAGE> 7
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. 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:
<TABLE>
<S> <C>
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
IF TO THE LESSEE: ALS Leasing, Inc.
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C>
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
</TABLE>
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 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
7
<PAGE> 9
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-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.
8
<PAGE> 10
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the day and year first above written.
<TABLE>
<S> <C>
WITNESS: AFFILIATED PARTIES:
- ------- ------------------
ALS LEASING, INC.
By:
- --------------------------- --------------------------------
Name: Thomas E. Komula, Vice President
WITNESS: ALTERNATIVE LIVING SERVICES, INC.
- -------
By:
- --------------------------- --------------------------------
Name: Thomas E. Komula, Senior Vice -
President
WITNESS: LESSOR:
- ------- ------
</TABLE>
9
<PAGE> 11
<TABLE>
<S> <C>
MEDITRUST ACQUISITION
CORPORATION III
BY:
- -------------------------- ---------------------------------
Name: Name:
Title:
</TABLE>
10
<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:
<TABLE>
<S> <C>
WITNESSES: MANAGER:
- --------- -------
WOVENCARE SYSTEMS, INC.
By:
- --------------------------- ---------------------------------
Name: Thomas E. Komula, Vice President
CLARE BRIDGE OF MONTGOMERY, A
PENNSYLVANIA GENERAL PARTNERSHIP
BY: ALTERNATIVE LIVING SERVICES,
INC., A DELAWARE CORPORATION,
AS GENERAL PARTNER
By:
- ---------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
BY: ALS-EAST, INC., A DELAWARE
CORPORATION, AS GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Vice
President
CLARE BRIDGE OF LOWER MAKEFIELD, A
PENNSYLVANIA GENERAL PARTNERSHIP
BY: ALTERNATIVE LIVING SERVICES,
INC., A DELAWARE CORPORATION,
AS GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
</TABLE>
11
<PAGE> 13
<TABLE>
<S> <C>
BY: ALS-EAST, INC., A DELAWARE
CORPORATION, AS GENERAL PARTNER
By:
- --------------------------- --------------------------
Name: Thomas E. Komula, Vice
President
CCCI / NORTHAMPTON LIMITED
PARTNERSHIP, A PENNSYLVANIA LIMITED
PARTNERSHIP
BY: ALTERNATIVE LIVING SERVICES,
INC., A DELAWARE CORPORATION,
AS GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
BY: ALS-EAST, INC., A DELAWARE
CORPORATION, AS GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Vice
President
HAMILTON HOUSE LIMITED PARTNERSHIP,
A MICHIGAN LIMITED PARTNERSHIP
BY: ALTERNATIVE LIVING
SERVICES-MIDWEST, INC., A
MICHIGAN CORPORATION, AS
GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Vice
President
</TABLE>
12
<PAGE> 14
<TABLE>
<S> <C>
BY: ALTERNATIVE LIVING SERVICES,
INC., A DELAWARE CORPORATION,
AS LIMITED PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
TWELVE/DRAKE LIMITED PARTNERSHIP, A
MICHIGAN LIMITED PARTNERSHIP
BY: ALTERNATIVE LIVING
SERVICES-MIDWEST, INC., A
MICHIGAN CORPORATION, AS
GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Vice
President
BY: ALTERNATIVE LIVING SERVICES,
INC., A DELAWARE CORPORATION,
AS LIMITED PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
EISENHOWER/STATE LIMITED
PARTNERSHIP, A MICHIGAN LIMITED
PARTNERSHIP
BY: ALTERNATIVE LIVING
SERVICES-MIDWEST, INC., A
MICHIGAN CORPORATION, AS
GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Vice
President
BY: ALTERNATIVE LIVING SERVICES,
INC., A DELAWARE CORPORATION,
AS LIMITED PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
</TABLE>
13
<PAGE> 15
<TABLE>
<S> <C>
NORTH SCHOENHERR LIMITED
PARTNERSHIP, A MICHIGAN LIMITED
PARTNERSHIP
BY: ALTERNATIVE LIVING
SERVICES-MIDWEST, INC., A
MICHIGAN CORPORATION, AS
GENERAL PARTNER
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Vice
President
BY: ALTERNATIVE LIVING SERVICES,
INC., A DELAWARE CORPORATION,
AS LIMITED PARTNER
By:
- --------------------------- --------------------------
Name: Thomas E. Komula, Senior Vice
President
ALS/WOVENHEARTS SUSSEX, LLC
BY: ALTERNATIVE LIVING SERVICES,
INC., AS A MEMBER OF THE
COMPANY
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
HEARTLAND RETIREMENT
SERVICES-ONALASKA ASSOCIATES, LLC
BY: HEARTLAND RETIREMENT SERVICES,
INC., AS A MEMBER OF THE
COMPANY
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Vice
President
</TABLE>
14
<PAGE> 16
<TABLE>
<S> <C>
ALS/WOVENHEARTS BROWN DEER, LLC
BY: ALTERNATIVE LIVING SERVICES,
INC., AS A MEMBER OF THE
COMPANY
By:
- --------------------------- ---------------------------
Name: Thomas E. Komula, Senior Vice
President
</TABLE>
15
<PAGE> 1
EXHIBIT 99.5
<PAGE> 2
EXECUTION COPY
AGREEMENT REGARDING RELATED LEASE TRANSACTIONS
MEDITRUST ACQUISITION CORPORATION III
THIS AGREEMENT is made as of the 30th day of December, 1996 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; (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;
(D) 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;
(E) the joining of Affiliates of ALS and of Meditrust in the
agreements reflected herein upon the occurrence of future
transactions; and
(F) the other matters as are hereinafter set forth;
<PAGE> 3
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 or a
Group Two Acquisition Facility, as the context permits.
(B) ACQUISITION FACILITY LEASE: A Group One Acquisition Facility
Lease or a Group Two 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) or the
Group Two 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, 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 first becoming subject to Meditrust/ALS Transaction Documents which,
pursuant to the applicable Meditrust/ALS Transaction Documents, have Original
Meditrust Investments which in the aggregate total approximately FIFTY MILLION
DOLLARS ($50,000,000) as described on EXHIBIT A attached hereto, as the same
may be amended or modified from time to time.
2
<PAGE> 4
(J) GROUP ONE ACQUISITION FACILITY LEASES: The Acquisition
Facility Leases now or hereafter entered into in connection with the Group One
Acquisition Facilities, as the same 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 the same 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, other than the Group One Acquisition Facilities, becoming subject
to Meditrust/ALS Transaction Documents which, pursuant to the applicable
Meditrust/ALS Transaction Documents, have Original Meditrust Investments which
in the aggregate total approximately FIFTY MILLION DOLLARS ($50,000,000) as
described on EXHIBIT B attached hereto, as the same may be amended or modified
from time to time.
(N) GROUP TWO ACQUISITION FACILITY LEASES: The Acquisition
Facility Leases to be entered into in the future in connection with the Group
Two Acquisition Facilities, as the same may be modified and amended from time
to time.
(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) MEDITRUST PARTIES: Meditrust and its Affiliates.
(R) MEDITRUST/ALS FACILITIES: The facilities described on EXHIBIT
C attached hereto, as the same may be amended or modified from time to time.
(S) 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 the Meditrust/ALS Facilities, as the same may be amended or
modified from time to time.
(T) 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).
(U) PERSON: Any individual, corporation, general partnership,
limited partnership, joint venture, limited liability company, stock company or
association, company, bank, trust, trust
3
<PAGE> 5
company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
(V) RENT COVERAGE RATIO: As defined in the applicable Acquisition
Facility Lease.
(W) 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 a 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 a 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.
4. 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 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.
5. 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.
6. 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
4
<PAGE> 6
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 and (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.
Within ninety (90) days after the end of each Fiscal Year, the Lessee shall
furnish to the Lessor an express written calculation showing the 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 D.
7. 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 Acquisition Group, the Acquisition Facilities
constituting such Acquisition Group 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 Acquisition Group 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 an
Acquisition Group 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 Acquisition Group. 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 7.
8. 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 and/or Meditrust/ALS Transaction Documents, as the case
may be, and as Group One Acquisition Facilities, Group Two 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.
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
so
5
<PAGE> 7
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:
<TABLE>
<S> <C>
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.
</TABLE>
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.
10. 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.
6
<PAGE> 8
11. 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]
7
<PAGE> 9
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:
- -------------------------- ---------------------------------
Name: Thomas E. Komula, Vice President
- --------------------------
Name:
****
WITNESSES: MEDITRUST:
MEDITRUST ACQUISITION CORPORATION III
By:
- -------------------------- ---------------------------------
Name: Name:
Title:
- --------------------------
Name:
8
<PAGE> 10
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 December 30, 1996.
WITNESS: ALTERNATIVE LIVING SERVICE, INC.
By:
- -------------------------- ----------------------------------
Name: Thomas E. Komula, Senior Vice
President
- --------------------------
Name:
9
<PAGE> 11
EXHIBIT A
GROUP ONE ACQUISITION FACILITIES
<TABLE>
<S> <C>
1. WovenHearts of Brown Deer
4015 W. Woodale Avenue
Brown Deer, Milwaukee County, WI 53209
2. WovenHearts of Sussex
W240 N6351 Maple Avenue
Sussex, Waukesha County, WI 53089
3. Clare Bridge of Fort Myers
13565 American Colony Boulevard
Fort Myers, Lee County, FL 33912
4. Clare Bridge of Tampa
1513 W. Fletcher Avenue
Tampa, Hillsborough County, FL 33612-3315
5. Hamilton House of Farmington Hills I
27950 Drake Road
Farmington Hills, Oakland County, MI 48331
6. Hamilton House of Farmington Hills II
27900 Drake Road
Farmington Hills, Oakland County, MI 48331
7. Hamilton House of Ann Arbor
750 W. Eisenhower Parkway
Ann Arbor, Washtenaw County, MI 48103
8. Hamilton House of Utica
45959 North Pointe Boulevard
Utica, Macomb County, MI 48315
9. WovenHearts of Onalaska
949 10th Avenue North
Onalaska, La Crosse County, WI 54650
</TABLE>
10
<PAGE> 12
<TABLE>
<S> <C>
10. Northampton Manor
65 Newtown Richboro Road
Richboro, Bucks County, PA 18954
11. Clare Bridge of Lower Makefield
600 Township Line Road
Yardley, Bucks County, PA 19067
12. Clare Bridge of Montgomery
1089 Horsham Road
North Wales, Montgomery County, PA 19454
</TABLE>
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
11
<PAGE> 13
EXHIBIT B
GROUP TWO ACQUISITION FACILITIES
NONE AT PRESENT
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
12
<PAGE> 14
EXHIBIT C
MEDITRUST/ALS FACILITIES
1. Group One Acquisition Facilities
2. Group Two Acquisition Facilities
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
13
<PAGE> 15
EXHIBIT D
RENT COVERAGE RATIO CALCULATION
[TO BE SUPPLEMENTED BY AMENDMENTS TO THIS AGREEMENT]
14
<PAGE> 1
EXHIBIT 99.6
<PAGE> 2
ALTERNATIVE
LIVING SERVICES NEWS
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE:
FOR FURTHER INFORMATION CONTACT:
GARY KASTEL, DIRECTOR OF CORPORATE COMMUNICATIONS
(414) 789-9565
ALTERNATIVE LIVING SERVICES COMPLETES $45 MILLION FINANCING TRANSACTION
PURSUANT TO $250 MILLION LETTER OF INTENT
(Brookfield, WI -- January 2, 1997) Alternative Living Services, Inc.
(AMEX:ALI), one of the nation's largest and most experienced operators of
assisted living residences, has completed a $45 million sale-leaseback
financing arrangement with Meditrust (NYSE:MT), a healthcare real estate
investment trust (REIT), the Company announced today. This represents the
first transaction consummated pursuant to a $250 million letter of intent with
Meditrust for construction and acquisition financing.
The $45 million transaction was completed on 12 residences located in four
states. Of the $45 million in proceeds from this transaction, $25 million will
be used to retire debt on those residences with the remaining funds available
for future development and construction of new residences. The 12 residences
have an aggregate capacity of 479 residents and include four residences for the
frail elderly and eight for individuals with Alzheimer's disease and other
dementias.
"This closing pursuant to the $250 million letter of intent is consistent with
our plans to implement an aggressive growth strategy over the next 24 months,"
William F. Lasky, President and Chief Executive Officer stated. "We will
continue to use sale-leaseback, mortgage debt and joint venture partner
financing as we construct purposeful-built residences to serve the needs of the
growing population of frail elderly and individuals with Alzheimer's disease
and other dementias, "he said. According to Lasky, Alternative Living Services
opened 21 new residences in 1996 bringing the Company's total residences
operating at the end of the year to 77 with an aggregate capacity of 3,202
residents.
Alternative Living Services offers four types of home-like residential models
including the Clare Bridge residence for individuals with Alzheimer's disease
and other dementias, the Wynwood residence for the frail elderly, the
WovenHearts residence to serve the frail elderly in smaller, outlying
communities and the Crossings residence, an apartment style residence. ALS
currently operates 77 residences in 11 states including Wisconsin, Michigan,
Minnesota, Florida, Pennsylvania, Oregon, Colorado, California, Washington,
Idaho and North Carolina. The Company has 54 residences under construction
and development in many of its existing markets as well as in New York, New
Jersey and Arizona.
- --------------------------------------------------------------------------------
450 N. SUNNYSLOPE ROAD, SUITE 300
*BROOKFIELD, WI 53005*(414) 789-9565*FAX (414) 789-9592
- --------------------------------------------------------------------------------
