<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-11999
ALTERRA HEALTHCARE CORPORATION
DELAWARE 39-1771281
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 N. SUNNYSLOPE ROAD, SUITE 300
BROOKFIELD, WI
53005
(Address of principal executive offices)
(Zip Code)
(414) 641-5100
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
AS OF AUGUST 10, 1999, THERE WERE 22,084,888 SHARES OF THE REGISTRANT'S
COMMON STOCK, PAR VALUE $0.01, OUTSTANDING.
(Number of shares outstanding of each class of the issuer's classes of common
stock, as of the latest practical date.)
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ALTERRA HEALTHCARE CORPORATION
INDEX
Part I. Financial Information
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 1999 and
December 31, 1998......................................................................... 1
Condensed Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1999 and 1998....................................................... 2
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998.............................................................. 3
Notes to Condensed Consolidated Financial Statements...................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................... 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................ 12
Part II. Other Information
Item 4. Submissions of Matters to a Vote of Security Holders...................................... 12
Item 6. Exhibits and Reports on Form 8-K.......................................................... 13
</TABLE>
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- ----------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 57,930 $ 49,934
Accounts receivable.............................................. 7,244 4,045
Pre-opening costs, net of amortization........................... -- 7,856
Note receivable.................................................. 15,585 10,986
Other current assets............................................. 25,578 18,031
--------------- -----------------
Total current assets......................................... 106,337 90,852
--------------- -----------------
Property and equipment, net........................................ 726,561 640,211
Long-term investments.............................................. 8,217 4,504
Goodwill, net...................................................... 5,172 5,243
Other assets....................................................... 46,794 37,000
--------------- -----------------
Total assets................................................. $893,081 $777,810
=============== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations.................... $ 11,293 $ 4,376
Short-term notes payable......................................... 8,363 8,363
Accounts payable - Trade......................................... 5,871 6,854
Accounts payable - Construction.................................. 8,103 21,812
Accrued expenses................................................. 20,956 15,723
Deferred rent and refundable deposits............................ 6,762 5,419
--------------- -----------------
Total current liabilities.................................... 61,348 62,547
--------------- -----------------
Long-term obligations, less current installments................... 406,273 286,984
Convertible debt................................................... 228,600 228,600
Deferred gain on sale and other.................................... 10,175 18,347
Minority interest.................................................. 2,126 4,220
Stockholders' equity:
Common stock..................................................... 222 219
Additional paid-in capital....................................... 179,042 177,864
Retained earnings (accumulated deficit).......................... 5,295 (971)
--------------- -----------------
Total stockholders' equity..................................... 184,559 177,112
--------------- -----------------
Total liabilities and stockholders' equity................... $893,081 $777,810
=============== =================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ------------------------------
1999 1998 1999 1998
----------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Resident service fees........................................ $ 84,344 $ 54,635 $161,466 $100,286
Other........................................................ 7,576 564 13,345 1,397
----------- ------------ ------------- -------------
Operating revenue.......................................... 91,920 55,199 174,811 101,683
Operating expenses:
Residence operations......................................... 52,497 34,127 99,596 63,571
Lease expense................................................ 15,971 10,062 30,430 19,051
General and administrative................................... 9,246 5,183 18,864 9,985
Depreciation and amortization................................ 4,525 4,249 8,550 7,646
----------- ------------ ------------- -------------
Total operating expenses................................... 82,239 53,621 157,440 100,253
----------- ------------ ------------- -------------
Operating income........................................... 9,681 1,578 17,371 1,430
----------- ------------ ------------- -------------
Other income (expense):
Interest expense, net........................................ (7,611) (1,812) (14,075) (2,541)
Lease income................................................. 4,937 -- 9,826 --
Other, net................................................... (34) (70) (34) (97)
Equity in (losses) of unconsolidated affiliates.............. (152) (10) (70) (22)
Minority interest in losses of consolidated subsidiaries.... 983 5,189 3,278 9,688
----------- ------------ ------------- -------------
Total other (expense) income net........................... (1,877) 3,297 (1,075) 7,028
----------- ------------ ------------- -------------
Income before income taxes and the cumulative effect of a
change in accounting principle................................. 7,804 4,875 16,296 8,458
Income taxes..................................................... 2,966 -- 6,193 --
----------- ------------ ------------- -------------
Income after taxes....................................... 4,838 4,875 10,103 8,458
----------- ------------ ------------- -------------
Cumulative effect of a change in accounting principle, net of
tax benefit of $2,409 (see Note 4) ........................... --- --- (3,837) --
----------- ------------ ------------- -------------
Net income....................................................... $4,838 $ 4,875 $6,266 $ 8,458
=========== ============ ============= =============
Income per common share before change in accounting principle:
Basic........................................................ $0.22 $ 0.22 $0.46 $0.39
=========== ============ ============= =============
Diluted...................................................... $0.22 $ 0.22 $0.45 $0.38
=========== ============ ============= =============
Net income per common share:
Basic........................................................ $0.22 $0.22 $0.28 $0.39
=========== ============ ============= =============
Diluted...................................................... $0.22 $0.22 $0.28 $0.38
=========== ============ ============= =============
Weighted average common shares outstanding:
Basic........................................................ 22,085 21,912 22,080 21,840
=========== ============ ============= =============
Diluted...................................................... 22,345 22,413 22,442 22,367
=========== ============ ============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
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ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................................... $ 6,266 $ 8,458
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization....................................................... 8,550 7,646
Deferred income taxes............................................................... (501) ---
Equity in net loss from investments in unconsolidated affiliates.................... 70 22
Minority interest in losses of consolidated subsidiaries............................ (3,278) (9,688)
Tax effect of stock options exercised............................................... 537 ---
Increase in net resident receivables................................................ (3,498) (856)
Decrease (increase) in pre-opening costs............................................ 7,856 (7,927)
(Increase) decrease in other current assets......................................... (4,840) 115
(Decrease) increase in accounts payable............................................. (993) 2,725
Increase in accrued expenses........................................................ 6,767 1,522
Decrease in accrued merger costs.................................................... (267) (3,861)
Changes in other assets and liabilities, net........................................ 1,603 (1,885)
------------- -------------
Net cash provided by (used in) operating activities................................... 18,272 (3,729)
------------- -------------
Cash flows from investing activities:
Payments for property, equipment and project development costs...................... (140,470) (162,145)
Increase in notes receivable........................................................ (4,599) ---
Acquisitions of facilities, net of cash............................................ (15,206) (8,477)
Changes in investments in and advances to unconsolidated affiliates................. (675) (16,159)
Purchase of joint venture interests................................................. (34,461) (8,057)
Decrease in short-term investments................................................... --- 65,000
Increase in long-term investments................................................... (3,713) ---
------------- -------------
Net cash used in investing activities................................................. (199,124) (129,838)
------------- -------------
Cash flows from financing activities:
Repayments of short-term borrowings................................................. --- (14,587)
Repayments of long-term obligations................................................. (45,649) (32,103)
Proceeds from issuance of debt...................................................... 169,282 72,561
Proceeds from issuance of convertible debt.......................................... --- 18,750
Payments for financing costs........................................................ (5,104) (2,651)
Proceeds from sale/leaseback transactions........................................... 64,391 49,160
Issuance of common stock and other capital contributions............................ 746 9,768
Contributions by minority partners and minority stockholders........................ 5,182 8,678
------------- -------------
Net cash provided by financing activities............................................. 188,848 109,576
------------- -------------
Net increase (decrease) in cash and cash equivalents.................................. 7,996 (23,991)
------------- -------------
Cash and cash equivalents:
Beginning of period................................................................. 49,934 79,838
------------- -------------
End of period....................................................................... $ 57,930 $ 55,847
============= =============
Supplemental disclosure of cash flow information:
Cash paid for interest, including amounts capitalized............................... $ 18,384 $ 10,391
============= =============
Cash paid during period for income taxes............................................ $ 4,386 $ 1,256
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
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ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The condensed consolidated balance sheets as of June 30, 1999 and
December 31, 1998, the condensed consolidated statements of operations for the
three and six months ended June 30, 1999 and 1998 and the condensed consolidated
statements of cash flows for the six months ended June 30, 1999 and 1998
contained herein include the accounts of Alterra Healthcare Corporation (the
"Company") and its affiliates which are under the common financial control of
the Company. All significant intercompany accounts have been eliminated in
consolidation. In the opinion of management, all adjustments (consisting only of
normal recurring items) necessary for a fair presentation of such condensed
consolidated financial statements have been included. The results of operations
for the six months ended June 30, 1999 are not necessarily indicative of the
results to be expected for the full fiscal year.
The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. The accompanying condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, for the year ended December 31, 1998.
(2) ACQUISITIONS
On April 21, 1999, the Company acquired three assisted living
residences from HCR Manor Care, Inc. as part of the strategic alliance formed
with HCR Manor Care, Inc. on December 31, 1998, having an aggregate capacity of
231 residents. This acquisition, which has been accounted for as a purchase, had
a purchase price of $14.4 million, all of which was paid in cash.
On May 12, 1999, the Company acquired an assisted living residence
having an aggregate capacity of 48 residents in Kenosha, Wisconsin. This
acquisition, which has been accounted for as a purchase, had a purchase price of
$4.3 million, $800,000 of which was paid in cash and the remainder was debt and
liabilities assumed by the Company.
(3) FINANCING
The Company obtained $24.3 million in new construction financing during
the second quarter of 1999. The terms for these financings are all three years,
currently bear floating interest rates ranging from 6.9% to 7.0% and are secured
by 20 residences.
The Company obtained $55.8 million in sale/leaseback financing from
real estate investment trusts ("REITs") during the second quarter of 1999. The
initial lease term for these arrangements are 14 years, and the weighted average
effective lease rate is 9.8%. Any gain or loss arising from the sale of
residences to the REITs has been deferred and will be amortized into income in
proportion to rental expense over the initial term of the lease.
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(4) CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
In the first quarter of 1999, the Company adopted the Statement of
Position No. 98-5, "Reporting on the Costs of Start-up Activities." This
Statement provides guidance on the financial reporting of start-up activities
and organization costs. It requires costs of start-up activities and
organization costs to be expensed when incurred. The Company's prior practice
was to capitalize such costs and amortize them over a one year period after
residence opening in the case of start-up costs and five years in the case of
organizational costs. This Statement is required to be adopted for fiscal years
beginning after December 15, 1998 and accordingly, was adopted by the Company
effective January 1, 1999. The cumulative effect of the accounting change
reflected in the condensed consolidated statement of operations for the six
months ended June 30, 1999 was $3.8 million, net of tax.
(5) NET INCOME PER COMMON SHARE
The following table summarizes the computation of basic and diluted net
income per share amounts presented in the accompanying consolidated statements
of operations (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ------------------------------
1999 1998 1999 1998
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted income per share before cumulative
effect of a change in accounting principle ...................... $ 4,838 $ 4,875 $ 10,103 $ 8,458
Cumulative effect of a change in accounting principle .............. -- -- (3,837) --
------- ------- ---------- ----------
Numerator for basic and diluted net income per share ............... $ 4,838 $ 4,875 $ 6,266 $ 8,458
======= ======= ========== ==========
Denominator:
Denominator for basic net income per common
share-weighted average shares ................................... 22,085 21,912 22,080 21,840
Effect of dilutive securities:
Employee stock options ........................................ 260 501 362 527
------- ------- ---------- ----------
Denominator for diluted net income per common share-weighted average
shares plus assumed conversions .................................. 22,345 22,413 22,442 22,367
======= ======= ========== ==========
Basic income per common share before cumulative effect
of a change in accounting principle ............................. $ 0.22 $ 0.22 $ 0.46 $ 0.39
Cumulative effect of a change in accounting principle .............. -- -- (0.17) --
------- ------- ---------- ----------
Basic net income per common share(1) ............................... $ 0.22 $ 0.22 $ 0.28 $ 0.39
======= ======= ========== ==========
Diluted income per common share before cumulative effect
of a change in accounting principle ............................. $ 0.22 $ 0.22 $ 0.45 $ 0.38
Cumulative effect of a change in accounting principle .............. -- -- (0.17) --
------- ------- ---------- ----------
Diluted net income per common share ............................... $ 0.22 $ 0.22 $ 0.28 $ 0.38
======= ======= ========== ==========
</TABLE>
(1) Six month period ended June 30, 1999 does not total due to rounding.
Shares issuable upon the conversion of convertible subordinated notes
have been excluded from the computation because the effect of their inclusion
would be anti-dilutive.
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(6) SUBSEQUENT EVENT
On July 20, 1999, the Company completed and funded a $140 million
acquisition and financing transaction related to its refinancing of three
already acquired properties and the acquisition of an additional 17 properties
from HCR Manor Care, Inc.. This closing related to the previously announced
agreement to acquire 28 residences from HCR Manor Care, Inc. for a total of
approximately $200 million. The 17 residences were financed (and the three
residences acquired from HCR Manor Care, Inc. in April 1999 were refinanced),
under a synthetic lease arrangement with an initial effective lease rate of
9.7%. The Company expects the remaining eight residences to close in the third
quarter as final financing, regulatory, and construction due diligence are
completed and requisite approvals are received.
(7) RECLASSIFICATIONS
Certain reclassifications have been made in the 1998 financial
statements to conform with the 1999 financial statement presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OVERVIEW
OVERVIEW
The Company's continued growth has had a significant impact on its
results of operations and accounts for most of the changes in results between
the first six months of 1999 and 1998. As of June 30, 1999 and 1998, the Company
operated or managed 389 and 291 residences with aggregate capacities of 16,900
and 12,300 residents, respectively. The Company is also constructing or
developing approximately 133 residences with aggregate capacity of 5,500 as of
June 30, 1999. For the six months ended June 30, 1999, the Company generated
operating revenue of $174.8 million, and realized operating income of $17.4
million, and net income of $10.1 million prior to the cumulative effect of a
change in accounting.
Since 1993, the Company has grown as a result of its development and
acquisition activities, which have focused on purposeful built, free-standing
assisted living residences. The Company intends to continue its development
strategy and, at June 30, 1999, was constructing 77 residences and developing an
additional 56 residences.
On December 31, 1998, the Company entered into a strategic alliance
with HCR Manor Care, Inc.. The alliance includes four principal arrangements:
- - The Company agreed to acquire from HCR Manor Care, Inc. 28
Alzheimer's/dementia care and assisted living residences with a capacity
for approximately 2,400 residents located in 12 states for $200 million in
cash. The Company completed the acquisition of three of these residences in
April 1999, an additional 17 residences in July 1999 and expects to
complete the acquisition of the remaining eight in the third quarter of
1999.
- - HCR Manor Care, Inc. and the Company agreed to establish and capitalize a
joint venture to develop $500 million of Alterra-branded
Alzheimer's/dementia care and assisted living residences in HCR's core
markets over the next three to five years. The Company began joint
development under this arrangement in the second quarter of 1999 and will
continue joint development activities over a three to five year period.
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- - HCR Manor Care, Inc. has the right to license from the Company the use of
Alterra's Clare Bridge(R) service mark, to share various best practices,
and to engage in joint marketing activities relating to HCR's remaining
Alzheimer's/dementia care residences. The Company and HCR Manor Care, Inc.
executed definitive agreements with respect to this arrangement in April
1999.
- - HCR Manor Care, Inc. and the Company have agreed to form a new company to
provide a variety of ancillary services to the Company's resident
population, including rehabilitation therapy and hospice care. The Company
and HCR Manor Care, Inc. executed definitive agreements with respect to
this arrangement in April 1999.
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998
Residence Service Fees. Residence service fees for the three months
ended June 30, 1999 were $84.3 million representing an increase of $29.7
million, or 54%, from the $54.6 million for the comparable 1998 period.
Substantially all of this increase resulted from the addition of newly
constructed residences and other residences acquired by the Company. The Company
operated 389 and 291 residences at June 30, 1999 and 1998, respectively.
Other Revenues. Other revenues for the three months ended June 30, 1999
were $7.6 million, an increase of $7.0 million over the $564,000 of other
revenue for the three months ended June 30, 1998. The increase is attributable
to management fees on a greater number of residences which were either managed
for third parties, including residences in transition from the HCR Manor Care,
Inc. alliance or for entities in which the Company held a minority ownership
position in the 1999 period versus the 1998 period. As of June 30, 1999, the
Company had 67 such residences compared to 43 such residences as of June 30,
1998.
Residence Operating Expenses. Residence operating expenses for the
three months ended June 30, 1999 increased to $52.5 million from $34.1 million
in the three-month period ended June 30, 1998 due to the increased number of
residences operated during the 1999 period. Operating expenses as a percentage
of residence service fees for the three months ended June 30, 1999 and 1998 were
62.2% and 62.5%, respectively.
Lease Expense. Lease expense for the three months ended June 30, 1999
was $16.0 million, compared to $10.1 million in the comparable period in 1998.
Such increase was primarily attributable to the utilization of additional
sale/leaseback financing totaling $199 million during the twelve-month period
ended June 30, 1999.
General and Administrative Expense. For the three months ended June 30,
1999, general and administrative expenses were $9.2 million, compared to $5.2
million for the comparable 1998 period, representing an increase as a percentage
of operating revenue to 10.1% in the 1999 period from 9.4% in the 1998 period.
The increase as a percentage of operating revenues is a result of additional
expenses incurred in transitioning newly managed residences from the joint
venture development arrangement with HCR Manor Care, as well as residences
acquired or to be acquired from HCR Manor Care, Inc. The increase in expenses
from 1998 was primarily attributable to salaries, related payroll taxes and
employee benefits for additional corporate personnel retained to support the
Company's actual and anticipated growth.
Depreciation and Amortization. Depreciation and amortization for the
three months ended June 30, 1999 was $4.5 million, representing an increase of
$276,000, or 6.5%, from the $4.2 million of depreciation and amortization for
the comparable 1998 period. This increase resulted primarily from depreciation
of fixed assets on the larger number of new residences that were owned by the
Company during the three months ended June 30, 1999, versus the comparable
period in 1998. This increase was
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offset by the elimination of amortization on pre-opening costs which are now
expensed when they are incurred.
Interest Expense, Net. Interest expense, net of interest income, was
$7.6 million for the three months ended June 30, 1999, compared to $1.8 million
for the comparable period in 1998. Gross interest expense (before interest
capitalization and interest income) for the 1999 period was $11.2 million
compared to $7.1 million for the 1998 period, an increase of $4.1 million. This
increase is primarily attributable to an increase in the amount of debt
financing used in the 1999 period as compared to the 1998 period. The Company
capitalized $2.6 million of interest expense in the 1999 period compared to $3.8
million in the comparable 1998 period. This decrease is due primarily to a
decrease in assets under construction financed using general corporate funds in
1999 compared to 1998. Interest income for the 1999 period was $1.0 million as
compared to $1.5 million for the 1998 period. This decrease was primarily due to
a reduction in average cash and investment balances from 1998 to 1999. The large
1998 balance was due to proceeds from the Company's concurrent offering of
common stock and 5.25% convertible subordinated debentures in December 1997.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries for the three months ended June
30, 1999 was $1.0 million, representing a decrease of $4.2 million from $5.2
million for the comparable 1998 period. The decrease was primarily attributable
to the decrease in the number of residences in various stages of lease-up that
were owned by the Company in consolidated joint venture arrangements during the
1999 period. During the second quarter of 1999, the Company had an average of 13
residences held in these consolidated joint venture arrangements compared to an
average of 54 residences held in similar joint venture arrangements during the
comparable 1998 period.
Income Taxes. For the three months ended June 30, 1999, the Company
recorded a current income tax provision of $2.5 million and recognized a
$500,000 deferred tax liability resulting in a current income tax expense of
$3.0 million. No income tax provision was recorded for the same period in 1998
due to the utilization of net operating loss carryforwards.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998
Residence Service Fees. Residence service fees for the six months ended
June 30, 1999 were $161.4 million representing an increase of $61.2 million, or
61%, from the $100.3 million for the comparable 1998 period. Substantially all
of this increase resulted from the addition of newly constructed residences and
other residences acquired by the Company. The Company operated 389 and 291
residences at June 30, 1999 and 1998, respectively.
Other Revenues. Other revenues for the six months ended June 30, 1999
were $13.3 million, an increase of $11.9 million over the $1.4 million of other
revenue for the six months ended June 30, 1998. The increase is attributable to
management fees on a greater number of residences which were either managed for
third parties, including residences in transition from the HCR Manor Care, Inc.
alliance or for entities in which the Company held a minority ownership position
in the 1999 period versus the 1998 period. As of June 30, 1999, the Company had
67 such residences compared to 43 such residences as of June 30, 1998. The
increase in other revenue was also impacted by $2.2 million of development fees
recognized in the first six months of 1999 in connection with development
activities conducted by the Company on behalf of third parties.
Residence Operating Expenses. Residence operating expenses for the six
months ended June 30, 1999 increased to $99.6 million from $63.6 million in the
six month period ended June 30, 1998 due to the increased number of residences
operated during the 1999 period. Operating expenses as a percentage of operating
revenue for the six months ended June 30, 1999 and 1998 were 61.7% and 63.4%,
respectively.
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<PAGE> 11
Lease Expense. Lease expense for the six months ended June 30, 1999 was
$30.4 million, compared to $19.1 million in the comparable period in 1998. Such
increase was primarily attributable to the utilization of additional
sale/leaseback financing totaling $199 million during the twelve-month period
ended June 30, 1999.
General and Administrative Expense. For the six months ended June 30,
1999, general and administrative expenses before costs related to the $1.8
million write-off of existing signage and other expenses associated with the
name change from Alternative Living Services, Inc.. to Alterra Healthcare
Corporation were $17.1 million, compared to $10.0 million for the comparable
1998 period, representing 10% of operating revenue, consistent with the 1998
period. The increase in expenses was primarily attributable to salaries, related
payroll taxes and employee benefits for additional corporate personnel retained
to support the Company's actual and anticipated growth.
Depreciation and Amortization. Depreciation and amortization for the
six months ended June 30, 1999 was $8.6 million, representing an increase of
$900,000, or 11.8%, from the $7.6 million of depreciation and amortization for
the comparable 1998 period. This increase resulted primarily from depreciation
of fixed assets on the larger number of new residences that were owned by the
Company during the six months ended June 30, 1999, versus the comparable period
in 1998. This increase was offset by the elimination of amortization on
pre-opening costs which are now expensed when they are incurred.
Interest Expense, Net. Interest expense, net of interest income, was
$14.1 million for the six months ended June 30, 1999, compared to $2.5 million
for the comparable period in 1998. Gross interest expense (before interest
capitalization and interest income) for the 1999 period was $21.0 million
compared to $12.7 million for the 1998 period, an increase of $8.3 million. This
increase is primarily attributable to an increase in the amount of debt
financing used in the 1999 period as compared to the 1998 period. The Company
capitalized $5.2 million of interest expense in the 1999 period compared to $6.9
million in the comparable 1998 period. This decrease is due to a decrease in
assets under construction financed using general corporate funds in the 1999
period compared to the 1998 period. Interest income for the 1999 period was $1.8
million as compared to $3.3 million for the 1998 period. This increase was
primarily due to the investment in the 1998 period of the proceeds received from
the December 1997 concurrent convertible debt and equity offering.
Minority Interest in Losses of Consolidated Subsidiaries. Minority
interest in losses of consolidated subsidiaries for the six months ended June
30, 1999 was $3.3 million, representing a decrease of $6.4 million from $9.7
million for the comparable period in 1998. The decrease was primarily
attributable to the decrease in the number of residences in various stages of
lease-up that are owned by the Company in consolidated joint venture
arrangements during the 1999 period. During the first half of 1999, the Company
had an average of 24 residences held in consolidated joint venture relationships
compared to an average of 46 residences in consolidated joint venture
relationships during the first half of 1998.
Income Taxes. For the six months ended June 30, 1999, the Company
recorded a current income tax provision of $5.3 million and recognized a
$900,000 deferred tax liability resulting in a current income tax expense of
$6.6 million before the effect of a cumulative change in accounting. No income
tax provision was recorded for the same period in 1998 due to the utilization of
net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1999 cash flow from operations was
$18.3 million versus an operating cash flow deficit of $3.7 million for six
months ended June 30, 1998.
9
<PAGE> 12
During the six months ended June 30, 1999, the Company closed on
approximately $169.3 million of new debt financing which included approximately
$55.0 million of debt used to refinance properties having prior debt balances of
$45.1 million. Additional financing was provided through $64.4 million of
sale/leaseback financing and $5.2 million of minority partner contributions.
This new financing along with approximately $8.0 million in available
cash and investments and cash from operations was used during the six month
period ending June 30, 1999 to fund $140.5 million in construction and
development activity, $34.5 million in joint venture buy-outs, $15.2 million in
acquisition activity, and $4.6 million of construction bridge financing under
third party development arrangements.
At June 30, 1999, the Company had working capital of $45.0 million
compared to working capital of $90.5 million at June 30, 1998. The decrease was
due to the utilization of $77 million in cash and investments generated by the
December 1997 equity and convertible debt offerings to fund additional
construction and development activities during 1998 and 1999.
To achieve its growth objectives, the Company will need to obtain
sufficient financing to fund its development, construction and acquisition
activities. The Company has plans to develop or acquire approximately $500
million of residences (inclusive of the $200 million of residences acquired or
to be acquired from HCR Manor Care, Inc.) for the 12-month period ending June
30, 2000. Historically, the Company has financed its development program and
acquisitions through a combination of various forms of real estate financing
(mortgage and sale/leaseback financing), capital contributions from joint
venture partners and the sale of its securities. The Company has executed
non-binding letters of intent with various healthcare REITs with approximately
$66.6 million of remaining capacity at June 30, 1999. The Company also had
available $252.6 million of remaining financing capacity from conventional
lenders, as of June 30, 1999, which financing is accessible by the Company upon
satisfying the respective lender's property underwriting requirements. On July
20, 1999, the Company completed a $140 million synthetic lease transaction
related to 20 residences acquired from HCR Manor Care, Inc. The Company expects
to acquire an additional eight residences from HCR Manor Care, Inc. in the third
quarter of 1999 using a similar financing arrangement. In addition to financing
construction and development costs, the Company may require capital resources to
meet its obligations under joint venture arrangements. The Company believes that
its cash on hand, financing under these commitments, other debt and equity
financing that the Company expects to be able to access and equity contributions
from its joint venture development partners will be sufficient to fund its
growth strategy for the next 12 months.
A lack of funds may require the Company to delay or eliminate all or
some of its development projects and acquisition plans. In addition, the Company
may require additional financing to enable it to acquire additional residences,
to respond to changing economic conditions, to expand the Company's development
program or to account for changes in assumptions related to its development
program. There can be no assurance that any newly constructed residences will
achieve a stabilized occupancy level and attain a resident mix that meet the
Company's expectations or generate sufficient positive cash flow to cover
operating and financing costs associated with such residences. There can be no
assurance that the Company will be successful in securing additional financing
or that adequate funding will be available and, if available, will be on terms
that are acceptable to the Company.
The Company is obligated under certain of its joint venture
arrangements to purchase the equity interests of its joint venture partners at
fair market value upon the election of such partners. Within the next twelve
months, the Company will become subject to such contingent purchase obligations
with respect to equity interests held by joint venture partners, exercisable at
their election, related to certain of the Company's residences. At such times,
or earlier, as such contingent purchase obligations are exercisable, the Company
may also elect to exercise its rights to purchase such interests. Based on a
number of assumptions, including assumptions as to the number of residences to
be developed with joint venture partners, the timing of such development, the
time at which such options may be exercised and the fair market value of such
residences at the date such options are exercised, the Company estimates
10
<PAGE> 13
that it may require approximately $50 million to $55 million to satisfy these
purchase obligations during the 12 month period ended June 30, 2000.
IMPACT OF INFLATION
To date, inflation has not had a significant impact on the Company. Inflation
could, however, affect the Company's results of operations due to the Company's
dependence on its senior resident population who rely on liquid assets and
relatively fixed incomes to pay for the Company's services. As a result, the
Company may not be able to increase residence service fees to account fully for
increased operating expenses. In structuring its fees, the Company attempts to
anticipate inflation levels, but there can be no assurance that the Company will
be able to anticipate fully or otherwise respond to any future inflationary
pressures. In addition, given the significant amount of construction and
development activity which the Company anticipates, inflationary pressures could
affect the Company's cost of new product deployment and financing. There can be
no assurances that financing will be available on terms acceptable to the
Company.
YEAR 2000 ISSUE
As a result of certain computer programs being written using two digits
rather than four to define the applicable year, computer systems that have date
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000 (the so-called "Year 2000 Issue"). This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in normal business activities.
The Company has evaluated its computer systems to determine what
modification (if any) are necessary to make such systems compatible with the
year 2000 requirements. Because many of the Company's computer systems have been
put into service within the last several years, or are currently being replaced
with year 2000 compliant systems, the Company does not expect any such
modifications to have a material adverse effect on the Company's consolidated
financial position or results of operations. However, given the complex nature
of computer systems used in the Company's operations, there can be no assurance
that all the Company's computer systems will be year 2000 compliant or that all
the year 2000 Issue will not have a material adverse affect on the Company.
Similarly, there can be no assurance that the computer systems of other
companies on which the Company's systems rely will be timely modified, or that a
failure to modify such systems by another company, or modifications that are
incompatible with the Company's systems, would not have a material adverse
effect on the Company.
FORWARD-LOOKING STATEMENTS
The statements in this quarterly report relating to matters that are
not historical facts are forward-looking statements based on management's belief
and assumptions using currently available information. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it cannot give any assurances that these expectations will prove to
be correct. Such statements involve a number of risks and uncertainties,
including, but not limited to, substantial debt and operating lease payment
obligations, operating losses associated with new residences, the ability to
manage rapid growth and business diversification, the need for additional
financing, development and construction risks, risks associated with
acquisitions, competition, governmental regulation and other risks and
uncertainties detailed in the reports filed by the Company with the Securities
and Exchange Commission. Should one or more of these risks materialize (or the
consequences of such a development worsen), or should the underlying assumptions
prove incorrect, actual results could differ materially from those forecasted or
expected. The Company assumes no duty to publicly update such statements.
11
<PAGE> 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices. Changes in these factors cause
fluctuations in the Company's earnings and cash flows.
The Company performed a sensitivity analysis which presents the
hypothetical change in fair value of those financial instruments held by the
Company at June 30, 1999 which are sensitive to changes in interest rates.
Market risk is estimated as the potential change in fair value resulting from an
immediate hypothetical one percentage point parallel shift in the yield curve.
The fair value of the debt included in the analysis is $160.7 million. Although
not expected, a one percentage point change in the interest rates would have
caused the Company's annual interest expense to change by approximately $1.6
million. Accordingly, a significant increase in LIBOR based interest rates could
have a material adverse effect on the Company's earnings.
Although a majority of the debt and lease payment obligations of the
Company as of or during the three months ended, June 30, 1999 are not subject to
floating interest rates, indebtedness that the Company may incur in the future
may bear interest at a floating rate. Debt and annual operating lease payment
obligations will continue to increase as the Company pursues its growth
strategy.
The Company does not presently use financial derivative instruments to
manage its interest costs. The Company does not use foreign currency exchange
rate forward contracts or commodity contracts and does not have foreign currency
exposure as of June 30, 1999.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on May 19,
1999, and the following matters were voted on at that meeting:
Action was taken to amend and restate article one of the Company's
restated certificate of incorporation to change the Company's name. The results
were as follows: For, 17,324,015; Against, 11,938; and Abstentions, 240,471.
Action was taken to elect a board of eight directors of the Company.
The results were as follows:
<TABLE>
<CAPTION>
AUTHORITY
DIRECTOR FOR WITHHELD
- ------------------------------- ---------------- ------------------
<S> <C> <C>
Richard W. Boehlke 17,529,181 47,243
Tim Buchanan 17,529,021 47,403
Gene E. Burleson 17,529,181 47,243
Robert Haveman 17,529,181 47,243
William F. Lasky 17,529,181 47,243
William G. Petty, Jr. 17,529,181 47,243
Jerry L. Tubergen 17,529,181 47,243
Steven Vick 17,529,131 47,293
</TABLE>
The proposal to elect directors and to amend the Company's restated
Certificate of Incorporation were set forth and described in the Notice of
Annual Meeting and Proxy Statement of the Company dated
12
<PAGE> 15
April 15, 1999, filed with the Commission pursuant to Rule 14b-3 under the
Securities Exchange Act of 1934, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Schedule of Bank United Mortgage, Assignment and Security
Agreements ("Mortgage") which are substantially similar to
the Form of Mortgage attached as Exhibit 10.53 to the
Company's 10-K for the period ending December 31, 1998
10.2 Subordination, Representation and Guaranty Agreement between
the Company, Greenwich Capital Financial Products, Inc., and
Third Party Investors I, L.L.C. dated as of June 30, 1999
10.3 Purchase Agreement and Agreement to Complete Construction dated
as of June 14, 1999, by and between Omega Healthcare
Investors, Inc. and Sterling House Corporation, ALS-Clare
Bridge, Inc., and the Company
10.4 Master Lease dated as of June 14, 1999, by and between Omega
Healthcare Investors, Inc. as Lessor and AHC Properties, Inc.
as Lessee
10.5 Kansas Master Lease dated as of June 14, 1999, by and between
Omega (Kansas), Inc. as Lessor and AHC Properties, Inc. as
Lessee
10.6 Lease Guaranty dated as of June 14, 1999, by Alterra
Healthcare Corporation in favor of Omega Healthcare Investors,
Inc. and Omega (Kansas), Inc.
10.7 Form of Lease Agreement by and between the Company and Health
Care REIT, Inc. dated as of January 22, 1996
10.8 Schedule of Health Care REIT, Inc. Leases which are
substantially similar to the Form of Lease attached as Exhibit
10.7
10.9 Form of Lease Agreement by and between Sterling House
Corporation and Heath Care REIT, Inc. dated as of September
1995
10.10 Schedule of Health Care REIT, Inc. Leases which are
substantially similar to the Form of Lease attached as Exhibit
10.9
10.11 Form of Lease Agreement by and between the Company and Health
Care REIT, Inc. dated as of December 1998
10.12 Schedule of Health Care REIT, Inc. Leases which are
substantially similar to the Form of Lease attached as Exhibit
10.11
10.13 Form of Lease Agreement by and between the Company and Health
Care REIT, Inc. dated as of March 1999
10.14 Schedule of Health Care REIT, Inc. Leases which are
substantially similar to the Form of Lease attached as Exhibit
10.13
11.1 Statement Regarding Computation of Net Income (Loss) Per Share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K: The Registrant has filed no reports with
the Securities and Exchange Commission on Form 8-K during the
quarter ended June 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin, on the 13th day of August, 1999.
ALTERRA HEALTHCARE CORP., INC.
Date: August 13, 1999 By: /s/ Thomas E. Komula
--------------------------------
Thomas E. Komula
Senior Vice President, Treasurer,
Chief Financial
Officer and Secretary
(Principal Financial Officer)
13
<PAGE> 1
EXHIBIT 10.1
SCHEDULE OF BANK UNITED MORTGAGES
WHICH ARE SUBSTANTIALLY IN THE FORM OF MORTGAGE
ATTACHED AS EXHIBIT 10.53 TO THE COMPANY'S FORM
10-K FOR THE PERIOD ENDING 12/31/98
<TABLE>
<CAPTION>
DATE OF
MORTGAGOR FACILITY NAME LOCATION MORTGAGE AMOUNT MORTGAGE
- --------- ------------- -------- --------------- --------
<S> <C> <C> <C> <C>
ALS Holdings, Inc. Alterra Clare Bridge of Southern 101 Bruce Wood Road $3,244,249 June 4, 1999
Pines Southern Pines, NC 28387-5144
ALS Holdings, Inc. Alterra Clare Bridge Cottage of 160 Elephant Rd. $2,026,006 June 4, 1999
Dublin Borough Dublin, PA 18917-2202
ALS Holdings, Inc. Alterra Clare Bridge Cottage of Vero 420 4th Ct. $2,325,000 June 11, 1999
Beach Vero Beach, FL 32962-1812
ALS Holdings, Inc. Alterra Sterling House of Vero Beach 410 4th Ct. $3,150,000 June 11, 1999
Vero Beach, FL 32962-1812
ALS Holdings, Inc. Alterra Clare Bridge Cottage of 710 South Lake Street $2,813,522 June 30, 1999
Leesburg Leesburg, FL 34748-7316
ALS Holdings, Inc. Alterra Clare Bridge Cottage of 1605 North Morrison Road $2,707,813 June 30, 1999
Muncie Muncie, IN 47304-5329
ALS Holdings, Inc. Alterra Sterling House of Muncie 1601 North Morrison Road $3,000,000 June 30, 1999
Muncie, IN 47304-5329
ALS Holdings, Inc. Alterra Clare Bridge Cottage of 467 Sterling Drive $2,700,000 June 30, 1999
Florence Florence, SC 29505
ALS Holdings, Inc. Alterra Sterling House of Florence 3006 Hoffmeyer Road $2,700,000 June 30, 1999
Florence, SC 29501-7551
ALS Holdings, Inc. Alterra Sterling House of Carrollton 1029 Seminole Trail $3,150,000 June 30, 1999
Carrollton, TX 75007-6275
</TABLE>
<PAGE> 1
EXHIBIT 10.2
SUBORDINATION, REPRESENTATION AND GUARANTY AGREEMENT
NOTICE: THIS SUBORDINATION, REPRESENTATION AND GUARANTY AGREEMENT RESULTS IN
YOUR INTEREST IN THE PROPERTY DESCRIBED HEREIN BECOMING SUBJECT TO AND OF LOWER
PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.
This SUBORDINATION, REPRESENTATION AND GUARANTY AGREEMENT (this
"Agreement") made as of June 30, 1999, by and between GREENWICH CAPITAL
FINANCIAL PRODUCTS, INC., a Delaware corporation, having an office at 600
Steamboat Road, Greenwich, Connecticut 06830 (together with its successors and
assigns, hereinafter referred to as the "Senior Lender") and ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation, having an office at 450 North Sunnyslope
Road, Suite 300, Brookfield, Wisconsin 53005 (together with its permitted
successors and assigns, hereinafter referred to as the "Subordinate Lender").
Senior Lender and Subordinate Lender may each be referred to herein individually
as a "Lender Party" and collectively as the "Lender Parties." In addition, THIRD
PARTY INVESTORS I, L.L.C., a Delaware limited liability company ("Borrower") is
a party hereto for purposes of consenting to the agreement of the Lender Parties
and for the additional purposes expressly stated herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
"AFFILIATE" means in relation to any Person, any other Person: (i)
directly or indirectly controlling, controlled by, or under common control with,
the first Person; (ii) directly or indirectly owning or holding 10 percent or
more of any equity interest in the first Person; or (iii) 10 percent or more of
whose voting stock or other equity interest is directly or indirectly owned or
held by the first Person. For purposes of this definition, "CONTROL" (including
with correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
including by formal or informal arrangement or affiliation with others. Further,
the Affiliates of any Person which is an entity shall include all natural
persons who are officers, agents, directors, members, partners, and employees
the entity Person, and the natural persons who are their Affiliates. In all
cases, the Affiliates of any natural person shall include (i) the siblings of
such person, (ii) the then-current and former spouses of such person, (iii)
persons who share or then have shared a residence with such person, and (iv) the
ancestors and descendants of such person and of the others mentioned in this
sentence, and (v) other natural persons who, by reason of familial, economic,
social or other relationship, would reasonably be expected to favor the first
person or to act as requested by the first person. Where expressions such as
"[name of party] or any Affiliate" are used, the same shall refer to the named
party and any Affiliate of the named party.
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<PAGE> 2
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code.
"BANKRUPTCY PROCEEDING" shall mean any case or other proceeding,
whether voluntary or involuntary, for insolvency, liquidation, reorganization,
dissolution, bankruptcy or other similar proceeding pursuant to the Bankruptcy
Code or other applicable federal or state law.
"CASH COLLATERAL" is defined in Section 3.5.
"ENFORCEMENT ACTION" shall mean any of (i) the exercise of any right or
remedy in response to or in anticipation of any breach, default, or failure of
performance, (ii) any act to enforce any right to payment or performance or
other right against Borrower, any Pledgor, or any guarantor, (iii) any act to
enforce any right pertaining to any Security, or (iv) any act to request, cause,
or encourage payment or performance by Borrower or any Pledgor or guarantor.
Without limitation, the following are Enforcement Actions: (a) declaring any
breach or default, (b) acceleration of all or any part of any indebtedness of
Borrower, (c) any Foreclosure, or the initiation or prosecution thereof, (d) the
seeking, petitioning for or obtaining of a receiver or similar remedy or relief,
(e) the petitioning, seeking or obtaining of relief from automatic stay, (f) the
requesting or seeking, by motion or otherwise, or obtaining of adequate
protection under the Bankruptcy Code, (g) the assessment or collection of
default interest or late charges, (h) the seeking, petitioning for or taking
possession or control (whether directly or through a receiver or other Person)
of any Security, (i) any lawsuit, arbitration, or similar proceeding, or (j) the
exercise of any lien or rights of set-off or recoupment.
"DEVELOPMENT AGREEMENTS" means the documents and instruments designated
as such on SCHEDULE XX, as the same may be modified or amended (whether such
modification or amendment occurs in violation of this Agreement or with the
consent of Senior Lender).
"FORECLOSURE" means any sale or other disposition of any real or
personal property pursuant to any lien or security interest therein or pledge
thereof.
"GUARANTOR PLEDGE AGREEMENT" means the Guarantor Pledge Agreement of
even date herewith executed by Subordinate Lender.
"MANAGEMENT AGREEMENTS" means the documents and instruments designated
as such on SCHEDULE XX, as the same may be modified or amended (whether such
modification or amendment occurs in violation of this Agreement or with the
consent of Senior Lender).
"OTHER GUARANTOR" is defined in Section 6.2.
"PERSON" means any person or entity.
"PLEDGORS" means any Persons who have granted security interests in or
pledges of membership interests in Borrower in favor of either or both of Senior
Lender or Subordinate Lender.
"PROPERTIES" means the real property improvements encumbered by the
Mortgages (as defined in the Senior Loan Agreement.
"SATISFACTION OF THE SENIOR OBLIGATIONS" shall be deemed to occur only
when all of the Senior Obligations are fully, finally, and irrevocably repaid
and discharged.
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<PAGE> 3
"SECURITY" means all real and personal property of every kind which is
now or hereafter encumbered by any lien, security interest or pledge as security
for any of the Senior Obligations or the Subordinate Obligations. In addition,
"Security" includes the Pledged Collateral (as defined in the Guarantor Pledge
Agreement).
"SENIOR DOCUMENTS" means (i) the Senior Loan Agreement and the Loan
Documents (as defined in the Senior Loan Agreement), and any modifications and
amendments of the same, and (ii) any documents hereafter executed by Borrower,
any Pledgor, or others and accepted by Senior Lender for purposes of evidencing
or securing any of the obligations to Senior Lender evidenced or secured by the
documents and instruments referred to in clause (i) of this definition. Without
limitation, "Senior Documents" includes the Senior Security Documents.
"SENIOR ENTITY PLEDGES" means the pledges of interests in Borrower
executed in favor of Senior Lender by Pledgors.
"SENIOR LOAN AGREEMENT" means that certain Loan and Security Agreement
dated as of June 30, 1999, by and between Borrower and Senior Lender, as the
same may be modified or amended.
"SENIOR OBLIGATIONS" means all obligations of Borrower evidenced by or
arising under the Senior Documents.
"SENIOR RIGHTS AND INTERESTS" means (i) the Senior Obligations, (ii)
the Senior Documents, and (iii) all rights and interests of Senior Lender now or
hereafter evidenced by or arising under the Senior Documents, including without
limitation all such rights and interests in any present or future Security.
"SENIOR SECURITY DOCUMENTS" means all documents and instruments given
by Borrower, Pledgors, or others and accepted by Senior Lender for the purpose
of securing any of the Senior Obligations, including without limitation the
Mortgages (as defined in the Senior Loan Agreement) and the Senior Entity
Pledges.
"SPECIFIED BANKRUPTCY PROCEEDING" shall mean any Bankruptcy Proceeding
(i) in which, whether through substantive consolidation or otherwise, one or
more of the debtors is Borrower, or any Pledgor, or any constituent, successor
or assign of any of the foregoing, or (ii) in which the property of the estate
includes (or is claimed to include) any Security or any of the Subordinate
Rights and Interests.
"SUBORDINATE OBLIGATIONS" means all obligations of Borrower, any
Pledgor, or any Affiliate of Borrower or any Pledgor evidenced by or arising
under any of the Subordinate Documents.
"SUBORDINATE PROPERTY RIGHTS" is defined in Section 4.1.
"SUBORDINATE PROPERTY RIGHTS DOCUMENTS" means the documents and
instruments designated as such on SCHEDULE XX, as the same may be modified or
amended (whether such modification or amendment occurs in violation of this
Agreement or with the consent of Senior Lender).
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<PAGE> 4
"SUBORDINATE RIGHTS AND INTERESTS" means any and all right, title, and
interest that Subordinate Lender or any of its Affiliates may now have or
hereafter acquire in (i) any obligation whatsoever of Borrower or any of its
Affiliates, or (ii) any document or instrument evidencing or securing any such
obligation, or (iii) any Security for the any such obligation or for any of the
Senior Obligations, or (iv) any property of any kind in which any of Borrower or
any Pledgor or any of the Affiliates of Borrower or any Pledgor now has or
hereafter acquires any interest. Without limitation, "Subordinate Rights and
Interests" includes the Subordinate Documents and all rights of Subordinate
Lender or any of its Affiliates thereunder, including without limitation the
Subordinate Obligations and the Subordinate Property Rights.
"SUBORDINATE LOAN AND SECURITY DOCUMENTS" means the documents and
instruments designated as such on SCHEDULE XX, as the same may be modified or
amended (whether such modification or amendment occurs in violation of this
Agreement or with the consent of Senior Lender).
"SUBORDINATE SECURITY DOCUMENTS" means the documents and instruments
designated as such on SCHEDULE XX, as the same may be modified or amended
(whether such modification or amendment occurs in violation of this Agreement or
with the consent of Senior Lender).
"SUBORDINATE DOCUMENTS" means the Subordinate Loan and Security
Documents, the Management Agreements, the Development Agreements, and the
Subordinate Property Rights Agreements, as any of the same may be modified or
amended (whether such modification or amendment occurs in violation of this
Agreement or with the consent of Senior Lender).
ARTICLE II
SUBORDINATION; RELATED MATTERS
SECTION II.1 GENERAL SUBORDINATION. The Subordinate Rights and
Interests are hereby, and shall be and shall continue to be, absolutely and
unconditionally subject and subordinate in all respects and for all purposes,
including without limitation in the priority of lien and in the right of
payment, to the Senior Rights and Interests. Without limitation, all of the
terms, covenants and conditions of the Subordinate Documents are hereby, and
shall be and shall continue to be, absolutely and unconditionally subordinate in
all respects to all of the terms, covenants and conditions of the Senior
Documents. The provisions of this Agreement shall apply, notwithstanding the
availability of other collateral to Senior Lender, and notwithstanding the
actual date and time of execution, delivery, recordation, filing or perfection
of the Senior Security Documents or the Subordinate Security Documents.
SECTION II.2 FORBEARANCE OF COLLECTION; STANDSTILL.
(1) Until Satisfaction of the Senior Obligations, Subordinate
Lender shall not directly or indirectly request, sue for, receive or direct any
payment, consideration, or recovery whatsoever (i) from or on behalf of
Borrower, or (ii) from any Security or the proceeds thereof, or (iii) on account
of any of the Subordinate Obligations. If any payment, consideration, or
recovery occurs in violation of the foregoing sentence, then Subordinate Lender
shall hold the same in trust for the benefit of Senior Lender, and the amount of
such payment, consideration or recovery shall
-4-
<PAGE> 5
become an obligation payable by Subordinate Lender on demand to Senior Lender,
with interest accruing from the date of such demand at the default rate of
interest under the Senior Loan Agreement.
(2) Further, until Satisfaction of the Senior Obligations,
Subordinate Lender shall not directly or indirectly (i) take any Enforcement
Action pertaining to any of the Subordinate Obligations or to Borrower, any
Pledgor, guarantor, or Security, or (ii) accept or permit the purchase,
repurchase, acquisition or redemption of all or any part of the Subordinate
Obligations, (iii) exercise any right of subrogation, regardless of any payment
made hereunder, or (iv) make any claim in or otherwise contest or interfere in
any way with any Enforcement Action by Senior Lender. The foregoing prohibition
against Subordinate Lender's taking any Enforcement Action shall not prohibit
Subordinate Lender from curing defaults by Borrower under the Senior
Obligations, to the extent Borrower has a right to do so under the Senior
Documents. Notwithstanding anything to the contrary herein, nothing herein,
including the foregoing rights to cure afforded to Subordinate Lender, shall
operate to prohibit, preclude or prevent Senior Lender from commencing any
Enforcement Action which it is entitled to commence under the Senior Documents
at any time.
SECTION II.3 EFFECTS OF FORECLOSURE.
(1) In the event of any Foreclosure of any Security pursuant
to any of the Senior Security Documents, all proceeds of such Foreclosure shall
be applied to the Senior Obligations, including the expenses of Senior Lender in
connection with such Foreclosure, until all such obligations are paid in full,
and only if there are proceeds of such Foreclosure remaining after payment in
full of the Senior Obligations, then may such remaining proceeds be available to
Subordinate Lender and other creditors in accordance with applicable law. Upon
any Foreclosure pursuant to any of the Senior Security Documents, all right,
title and interest of Subordinate Lender in and to the subject Security shall be
extinguished. Any Foreclosure pursuant to any of the Subordinate Security
Documents (whether in violation of the terms of this Agreement or with the
consent of Senior Lender) shall have no effect whatsoever on the Senior Rights
and Interests, and without limitation of the foregoing the applicable Security
shall remain subject to the lien of the Senior Security Documents.
(2) Subject to and without limitation of the foregoing,
Subordinate Lender acknowledges and agrees that if Foreclosure occurs under any
of the Senior Entity Pledges, (i) no obligation or consequence in the nature of
a transfer or assumption fee or acceleration under the Subordinate Documents
shall occur, (ii) such Foreclosure shall not violate any restrictions on
transfer contained in, or in any way constitute a default under, the Subordinate
Documents, and (iii) neither Senior Lender nor any of Senior Lender's successors
or assigns, nor any of their respective officers, directors, principals,
partners, members or shareholders shall be or become liable for all or any
portion of the Subordinate Obligations.
SECTION II.4 ACQUISITION OF SECURITY OR INTERESTS THEREIN. If
Subordinate Lender shall acquire by indemnification, subrogation or otherwise,
any lien, estate, right or other interest in any Security (whether in violation
of this Agreement or with the consent of Senior Lender), such lien, estate,
right or other interest shall be subordinate to the Senior Rights and Interests
as provided herein, and Subordinate Lender hereby waives any and all rights it
may acquire by subrogation or otherwise to the lien of such Senior Security
Documents or any portion thereof.
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SECTION II.5 NOTICES TO SENIOR LENDER. By the same manner and means and
at the same time as Subordinate Lender gives notice under the Subordinate
Documents, Subordinate Lender shall give to Senior Lender copies of all notices
of default under any of the Subordinate Documents, and also copies of all other
notices required to be delivered to Borrower, Pledgors, or others under any of
the Subordinate Documents. Any such notice referred to in the preceding sentence
shall not be deemed effective until such notice has been received by Senior
Lender. This provision shall not be deemed to authorize or validate any notice
or action prohibited elsewhere herein.
SECTION II.6 MODIFICATION OF SENIOR RIGHTS AND INTERESTS. Subordinate
Lender hereby expressly consents to and authorizes, at the option of Senior
Lender, the waiver, postponement, extension, other indulgence, reduction,
amendment or modification of any of the Senior Rights and Interests, including
without limitation any provision of the Senior Documents. Subordinate Lender
agrees that Subordinate Lender's obligations under this Agreement (including the
subordination and corresponding obligations provided for herein) shall continue
and shall apply with respect to the Senior Rights and Interests as the same are
modified, amended, or affected by any such waiver, postponement, extension,
indulgence, reduction, amendment or modification. However, if without the
consent of Subordinate Lender any amendment of the Senior Documents is executed
and delivered after the date hereof, and if such amendment provides for an
advance of additional principal that is not contemplated in the Senior Documents
as in effect as of the date hereof (other than additional principal for
protection of the Security, for performance of Borrower's or any Pledgor's
obligations contracted for as of the date hereof, or for reimbursement of Senior
Lender's costs and expenses), or such amendment provides for an increase in the
rate or rates of interest in amounts or under conditions not contemplated in the
Senior Documents as in effect as of the date hereof, then the subordination and
other obligations of Subordinate Lender hereunder shall not apply to the
increment of the Senior Obligations comprised of such additional principal and
interest, but shall continue to apply to the Senior Obligations less such
increment of additional principal and interest.
SECTION II.7 WAIVER OF MARSHALING. Subordinate Lender hereby waives any
right to require marshalling of any Security, to determine or object to the
order of Foreclosure of any Security, to require or object to the separate or
combined Foreclosure of any Security, to require Senior Lender to exhaust its
remedies against any portion of the Security or other property, rights or
claims, or any combination of any portion of the Security or other property,
rights or claims or any other collateral, or to require Senior Lender to proceed
against any portion of the Security or other property, rights or claims or
combinations thereof. In the event of any Foreclosure, Subordinate Lender hereby
expressly consents to and authorizes, at the option of Senior Lender, the sale
either separately or together, of all or any portion of the Security or other
property, rights or claims. Subordinate Lender hereby agrees that all payments
received by Senior Lender may be applied, reversed, and reapplied, in whole or
in part, to any of the Senior Obligations, as Senior Lender in Senior Lender's
sole discretion, deems appropriate. Subordinate Lender assents to any
substitution, exchange or release of Security which may at any time secure the
Senior Obligations and to the addition or release of any other party or person
primarily or secondarily liable therefor.
SECTION II.8 ESTOPPEL CERTIFICATES. After request by either Lender
Party from time to time (but not more often than quarterly), the other Lender
Party shall within ten days furnish the requesting Lender Party with a
statement, duly executed on behalf of the providing Lender Party,
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setting forth in reasonable detail the amounts of Subordinate Obligations or
Senior Obligations (as applicable) then outstanding, broken down to show
separate obligations to the extent thereof, the unpaid principal balances, all
accrued and unpaid interest and any other sums due and owing thereunder, the
rate of interest, and whether there exist any defaults known to the providing
party.
SECTION II.9 NOTICE OF FORECLOSURE. Senior Lender will provide
Subordinate Lender with written notice of any Foreclosure not later than the
tenth day following commencement of such Foreclosure, and in any event not later
than the tenth day prior to the sale or disposition in such Foreclosure. If such
notice is provided late but prior to the tenth day before the sale or
disposition, the sole remedy that Subordinate Lender shall have by reason of
such lateness shall be to deliver to Senior Lender written notice of objection
to such late notice within seven days of receipt of the same, whereupon the date
of the sale or other disposition shall be continued for not less than the amount
of time constituting the difference between the amount of notice that was given
to Subordinate Lender and the amount that is required under this provision.
SECTION II.10 NO FURTHER SUBORDINATION. Subordinate Lender shall not
grant or consent to any further or additional subordination of all or any part
of the Subordinate Rights and Interests in favor of any person or entity other
than Senior Lender without the prior written consent of Senior Lender, which
consent may be withheld at Senior Lender's sole and absolute discretion.
SECTION II.11 WAIVER OF CONTEST RIGHTS. Subordinate Lender shall not
contest in any manner or forum, including, without limitation, in any Bankruptcy
Proceeding (i) any amount now or hereafter owed under or secured by the Senior
Documents, (ii) any payment or application of Security or the proceeds thereof
made on account of any portion of the Senior Obligations, or (iii) the validity,
legality enforceability, priority or perfection of any of the Senior
Obligations.
ARTICLE III
CERTAIN BANKRUPTCY ISSUES
SECTION III.1 RELATIONSHIP TO GUARANTY. Pursuant to Article VI hereof,
Subordinate Lender has agreed to pay in full all of the Senior Obligations
immediately upon the initiation of any Bankruptcy Proceeding in which Borrower,
any Pledgor, or any successor or assign of any of them is a debtor or in which
any of the Security is or is claimed to be property of the estate. None of the
provisions of this Agreement (including those set forth below in this Article)
which are operative if the Senior Obligations remain outstanding after
initiation of a Specified Bankruptcy Proceeding shall be deemed to diminish or
excuse any obligation of Subordinate Lender to pay and perform strictly in
accordance with the terms of said Article VI.
SECTION III.2 SUBORDINATION CONTINUES; INTEREST ACCRUAL IN BANKRUPTCY.
In any Specified Bankruptcy Proceeding, (i) this Agreement shall continue in
full force and effect; and (ii) the subordination of the Subordinate Rights and
Interests to the Senior Rights and Interests effected herein shall continue
notwithstanding that all or any portion of the Senior Obligations or any claim
for any of such Senior Obligations may be subordinated, avoided or disallowed,
in whole or in part, under the Bankruptcy Code or other applicable federal or
state law, and notwithstanding any election on the part of Senior Lender to have
its claim treated as a fully secured claim under Section 1111(b) of the
Bankruptcy Code; and (iii) all claims of Subordinate Lender with respect to any
Cash Collateral hereby are, and shall be and shall continue to be subordinate in
lien and right
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of payment to the claims of Senior Lender in such Cash Collateral; and (iv) the
Senior Obligations shall include all interest (including, without limitation,
all late fees, charges, defaults and prepayment premiums) accrued on such Senior
Obligations in accordance with and at the rates specified in the Senior
Documents, both for periods before and for periods after the commencement of any
of such proceeding, and all other amounts included in the Senior Obligations,
even if the claim for such interest (including, without limitation, all late
fees, charges, default interest and prepayment premiums) is not allowed or
allowable pursuant to Bankruptcy Code or other applicable law.
SECTION III.3 PROHIBITED ACTIONS. Subordinate Lender shall not
initiate, join in, acquiesce in, or file any petition or take any other action
which would result in (or in the judgment of Senior Lender, pose unreasonable
risk of) any Specified Bankruptcy Proceeding.
SECTION III.4 RECEIPT OF PAYMENTS. Without limitation of any Section
2.2 or any other provision of this Agreement, in any Specified Bankruptcy
Proceeding, if any payment of principal or interest or other payment, including
payments for purposes of providing adequate protection under the Bankruptcy
Code, shall be received by or payable at the direction of or for the benefit of
Subordinate Lender, such payment or distribution shall be held by Subordinate
Lender in trust for the benefit of Senior Lender and, upon demand, shall be paid
over to Senior Lender. Subordinate Lender hereby irrevocably authorizes and
empowers Senior Lender to demand, sue for, collect and receive each such payment
or distribution and give acquittance therefore and to file claims and take such
other actions or proceedings in the name of Subordinate Lender as Senior Lender
deems necessary or advisable for the enforcement of this Agreement.
SECTION III.5 COOPERATION IN SPECIFIED BANKRUPTCY PROCEEDINGS. The
provisions of this Section shall apply in all Specified Bankruptcy Proceedings.
(1) Senior Lender shall have the exclusive right to enforce
the Senior Rights and Interests, including without limitation the Senior
Obligations.
(2) Senior Lender may, in its own name or in the name of
Subordinate Lender, enforce claims, by proof of claim or otherwise, comprising
the Subordinate Rights and Interests and exercise any voting rights, including,
without limitation, the voting of claims comprising the Subordinate Obligations
to accept or reject any plan of liquidation, reorganization or arrangement and
generally take any action in connection with any creditor's meeting or
proceeding which Subordinate Lender might otherwise take, all of which rights
are hereby irrevocably and absolutely assigned by Subordinate Lender to Senior
Lender and all of which Subordinate Lender expressly covenants to refrain from
exercising.
(3) In lieu of or in addition to the foregoing paragraph, at
the election of Senior Lender, upon the request of Senior Lender, Subordinate
Lender shall exercise any and all of its rights in any Specified Bankruptcy
Proceeding at the direction of Senior Lender. Without limitation, at the request
and direction of Senior Lender, (i) Subordinate Lender will support and not
object to or do anything to impede any request or motion by Senior Lender for
relief from the automatic stay, for adequate protection or for an order
establishing that proceeds, product, offspring, rents and profits of the
Security for the Senior Obligations constitute cash collateral under Section 363
of the Bankruptcy Code ("CASH COLLATERAL"); and (ii) if Senior Lender consents
to any use of the Cash Collateral, Subordinate Lender shall also consent, and if
Senior Lender objects to any such use,
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Subordinate Lender shall also object; and (iii) Subordinate Lender will vote for
and otherwise support and not object to or do anything to impede any plan of
reorganization designated for such support by Senior Lender; and (iv)
Subordinate Lender will oppose and vote against and shall not in any way support
any plan of reorganization designated for such opposition by Senior Lender; (v)
Subordinate Lender shall file a proof of claim in respect of the Subordinate
Rights and Interests and shall send to Senior Lender a copy thereof together
with evidence of the filing with the appropriate court or other authority, in
each case by the tenth business day before the last day for filing of proofs of
claim, or if Senior Lender reasonably believes that the proof of claim so filed
is more than or less than the proper amount thereof, then Senior Lender may file
such proof of claim, or corrected proof of claim, on behalf of Subordinate
Lender; and (vi) if objection is made to the allowance of any claim of
Subordinate Lender, Senior Lender shall have the right to intervene and fully
participate in such proceedings and if such rights are denied and Subordinate
Lender fails to defend such claim, then Senior Lender may defend such claim in
the name of Subordinate Lender.
SECTION III.6 SET-ASIDE. To the extent any payment under any of the
Senior Obligations is declared to be fraudulent or preferential, set aside or
required to be paid to the trustee, receiver or other similar party under any
bankruptcy, insolvency, receivership or similar law, then if such payment is
recovered by, or paid over to, such trustee, receiver or other similar party,
the Senior Obligations or part thereof originally intended to be satisfied shall
be deemed to be reinstated and outstanding as if such payment had not occurred.
ARTICLE IV
SPECIFICATION AND LIMITATION
OF SUBORDINATE RIGHTS AND INTERESTS
SECTION IV.1 SPECIFICATION OF SUBORDINATE RIGHTS AND INTERESTS.
Subordinate Lender represents, warrants, covenants and agrees as follows:
(1) SUBORDINATE LOANS AND FINANCING. Set forth on SCHEDULE XX
attached hereto under the heading "Summary of Subordinate Financing" is a true
and accurate summary of the terms (including funded principal amount, unfunded
principal amount, rates of interest, payment requirements, maturity date, and
other material terms) of all arrangements and agreements between Borrower and
Subordinate Lender pertaining to any and all loans and other financing now
provided or contracted to be provided by Subordinate Lender to Borrower. All of
such loans and financings are evidenced and (as applicable) secured by the
Subordinate Loan and Security Documents. Except for the rights and obligations
of Subordinate Lender as so summarized and evidenced by the Subordinate Loan and
Security Documents as in effect as of the Date hereof, neither Subordinate
Lender nor any Affiliate has or (until Satisfaction of the Senior Obligations)
shall have any right, title, or interest in or to any obligation of Borrower or
any Affiliate for any loan or financing of any kind, and neither Subordinate
Lender nor any Affiliate has or shall have any commitment or contract to provide
any such loan or financing.
(2) SUBORDINATE LOAN AND SECURITY DOCUMENTS. Set forth on
SCHEDULE XX and labeled as "Subordinate Loan and Security Documents" is a true
and complete itemization setting forth by title, date, and parties all documents
and instruments (including all modifications and amendments thereto) evidencing
or securing any and all loans and other financing now provided or contracted to
be provided by Subordinate Lender to Borrower. Subordinate Lender has provided
to Senior Lender and its counsel true and complete copies of all Subordinate
Loan and Security
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Documents (including all schedules and exhibits thereto). Any and all of the
Subordinate Loan and Security Documents which create any lien or security
interest whatsoever are also clearly identified on such SCHEDULE XX as
"Subordinate Security Documents." Neither Subordinate Lender nor any Affiliate
of Subordinate Lender has or (until Satisfaction of the Senior Obligations)
shall have any lien or security interest of any kind in any property whatsoever
securing any obligation of Borrower or any Affiliate of Borrower, except for
security interests in the membership interests in Borrower presently granted to
Subordinate Lender pursuant to the Subordinate Security Documents as in effect
as of the Date hereof.
(3) MANAGEMENT AGREEMENTS. Set forth on SCHEDULE XX and
labeled as "Management Agreements" is a true and complete itemization setting
forth by title, date, parties, and Property, all documents and instruments
(including all modifications and amendments thereto) evidencing any and all
rights and obligations of Subordinate Lender to lease or occupy any of the
Properties, or to manage or operate any of the Properties or any business
therein or thereon (other than pursuant to the Development Agreements as in
effect as of the Date hereof). Subordinate Lender has provided to Senior Lender
and its counsel true and complete copies of all Management Agreements (including
all schedules and exhibits thereto). Neither Subordinate Lender nor any
Affiliate of Subordinate Lender has or (until Satisfaction of the Senior
Obligations) shall have any rights or obligations to lease or occupy any of the
Properties, or to manage or operate any of the Properties or any business
therein or thereon, except for the rights and obligations of Subordinate Lender
under the Management Agreements and Development Agreements as in effect as of
the Date hereof.
(4) DEVELOPMENT AGREEMENTS. Set forth on SCHEDULE XX and
labeled as "Development Agreements" is a true and complete itemization setting
forth by title, date, parties, and Property, all documents and instruments
(including all modifications and amendments thereto) evidencing any and all
rights and obligations of Subordinate Lender to develop or cause to occur any
construction or other improvement of or on any of the Properties. Subordinate
Lender has provided to Senior Lender and its counsel true and complete copies of
all Development Agreements (including all schedules and exhibits thereto).
Neither Subordinate Lender nor any Affiliate of Subordinate Lender has or (until
Satisfaction of the Senior Obligations) shall have any rights or obligations to
develop or cause to occur any construction or other improvement of or on any of
the Properties, except for the rights and obligations of Subordinate Lender
under the Development Agreements as in effect as of the Date hereof.
(5) PROPERTY RIGHTS. Set forth on SCHEDULE XX attached hereto
under the heading "Summary of Subordinate Property Rights" is a true and
accurate summary of the terms of all rights of first refusal, rights of first
offer, options to purchase, covenants and restrictions, or rights to acquire any
other interest now existing or contracted to exist in the future in favor of
Subordinate Lender pertaining in any way to any of the Properties (the
"SUBORDINATE PROPERTY RIGHTS"). Set forth on SCHEDULE XX and labeled as
"Subordinate Property Rights Documents" is a true and complete itemization
setting forth by title, date, parties, and Property all documents and
instruments (including all modifications and amendments thereto) granting or
evidencing the Subordinate Property Rights. Subordinate Lender has provided to
Senior Lender and its counsel true and complete copies of all Subordinate
Property Rights Documents (including all schedules and exhibits thereto).
Neither Subordinate Lender nor any Affiliate of Subordinate Lender has or (until
Satisfaction of the Senior Obligations) shall have any rights of first refusal,
rights of first offer,
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options to purchase, covenants or restrictions, or rights to acquire any
interest pertaining in any way to any of the Properties, except for the
Subordinate Property Rights in favor of Subordinate Lender pursuant to the
Subordinate Property Rights Documents as in effect as of the Date hereof.
(6) NO OTHER SUBORDINATE RIGHTS AND INTERESTS. The Subordinate
Rights and Interests consist only of the documents and instruments expressly
identified on SCHEDULE XX as in effect as of the Date hereof, and the rights and
interests expressly stated therein to be created or evidenced thereby. The
Subordinate Documents set forth the entire agreement between Borrower and
Subordinate Lender, and between Pledgors and Subordinate Lender. Except for the
Subordinate Documents, there are no contracts or agreements by and between
Subordinate Lender or any of its Affiliates and Borrower or any of its
Affiliates, or by and between Subordinate Lender or any of its Affiliates and
any Pledgor or any Affiliate of any Pledgor.
(7) NO RECORDATION OF SUBORDINATE RIGHTS AND INTERESTS.
Subordinate Lender represents, warrants and agrees that none of the Subordinate
Rights and Interests (and no document or instrument giving public notice
thereof) is recorded or filed with any county recorder, county clerk, county
registrar, secretary of state, or other office or place where filing or
recording of records occurs for purposes of giving public notice or establishing
priorities among interests; and no such filing or recordation shall occur until
Satisfaction of the Senior Obligations.
(8) NO MODIFICATION OR AMENDMENT OF SUBORDINATE RIGHTS AND
INTERESTS. Until Satisfaction of the Senior Obligations, (i) no modification or
amendment of any of the Subordinate Obligations or Subordinate Documents shall
occur, (ii) no further documents or agreements shall be executed by and between
Subordinate Lender or any of its Affiliates and Borrower or any of its
Affiliates, or between Subordinate Lender or any of its Affiliates and any of
Pledgors or any of their Affiliates. Except only for the Subordinate Rights and
Interests as evidenced by the Subordinate Documents as in effect as of the Date
hereof, neither Subordinate Lender nor any of its Affiliates has or (until
Satisfaction of the Senior Obligations) shall have any rights whatsoever in or
to any obligation, property, or interest whatsoever of Borrower, any Pledgor, or
any Affiliate of Borrower or any Pledgor.
SECTION IV.2 AFFILIATE DIRECTOR INTERESTS QUALIFICATION. The
representations, warranties, and covenants set forth in this Agreement are
qualified by the fact that three directors of Subordinate Lender presently have
and may continue to have indirect interests in members of Borrower.
SECTION IV.3 TRANSFER OF SUBORDINATE RIGHTS AND INTERESTS. Subordinate
Lender represents and warrants that Subordinate Lender is the sole owner of the
Subordinate Rights and Interests, unencumbered by the interest of any person or
entity whatsoever, and none of Subordinate Lender's rights in any of the
Subordinate Rights and Interests has been pledged, mortgaged, sold, assigned, or
otherwise transferred to any person or entity. Without the prior written consent
of Senior Lender, which consent may be withheld in the sole and absolute
discretion of Senior Lender, Subordinate Lender shall not pledge, mortgage,
sell, assign, or otherwise transfer all or any portion of the Subordinate Rights
and Interests.
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ARTICLE V
ADDITIONAL REPRESENTATIONS,
WARRANTIES, AND COVENANTS
SECTION V.1 Loan Agreement Representations and Covenants. Subordinate
Lender hereby makes all representations, warranties, and covenants of Borrower
contained in Articles IV and V of the Senior Loan Agreement, except that to the
extent that the knowledge of Borrower is referred to therein, the same shall
mean the knowledge of Subordinate Lender for purposes of this Agreement.
SECTION V.2 Subordinate Lender further covenants and agrees as follows:
(1) Subordinate Lender shall continue to fund the loans for
the construction of the improvements on the Properties as contemplated in the
Subordinate Loan and Security Documents.
(2) Subordinate Lender shall from time to time, upon request
by Senior Lender, deliver to Senior Lender such financial statements as Senior
Lender may reasonably require.
ARTICLE VI
GUARANTY
SECTION VI.1 GUARANTY. Subordinate Lender hereby absolutely,
unconditionally and irrevocably guarantees to Senior Lender the full and prompt
payment when due, whether at maturity or earlier, by reason of acceleration or
otherwise, and at all times thereafter, and the full and prompt performance when
due, of the following: (a) payment and performance of all of the Senior
Obligations, including all obligations of Borrower under the Senior Documents,
(b) completion of the improvements on the Properties as and when and in
accordance with the budgets and time schedules contemplated in the Development
Agreements. Further, without limitation of the foregoing, Subordinate Lender
shall pay in full all of the Senior Obligations immediately upon the initiation
of any Bankruptcy Proceeding in which Borrower, any Pledgor, or any successor or
assign of any of them is a debtor or in which any of the Security is or is
claimed to be property of the estate, irrespective of whether or not the Senior
Obligations are then due and payable by their terms. Subordinate Lender's
obligations under this Article constitute an unconditional guaranty of payment
and performance and not merely a guaranty of collection.
SECTION VI.2 UNCONDITIONAL OBLIGATIONS. The obligations of Subordinate
Lender under this Article shall be performed without demand by Senior Lender and
shall be unconditional irrespective of the genuineness, validity, regularity or
enforceability of any or all of the Senior Documents, and without regard to any
other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or a guarantor. Subordinate Lender shall be liable even if
Borrower had no liability at the time of execution of the Senior Loan Agreement
or any other Senior Document, or ceases to be liable. Subordinate Lender hereby
agrees that Subordinate Lenders liability may be larger in amount and more
burdensome than that of Borrower. Subordinate Lender's obligations under this
Article shall be performed regardless of Senior Lender's performance or
nonperformance of its obligations, and regardless of Borrower's performance or
nonperformance of any obligations, including without limitation any obligations
in connection with the Subordinate Obligations. Subordinate Lender hereby waives
the benefit of all principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Article and agrees that
Subordinate Lender's obligations shall not be affected by any circumstances,
whether or not referred to in this Article, which might otherwise constitute a
legal or equitable discharge of a surety or a
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guarantor. Subordinate Lender hereby waives the benefits of any right of
discharge under any and all statutes or other laws relating to guarantors or
sureties and any other rights of sureties and guarantors thereunder. Without
limiting the generality of the foregoing, Subordinate Lender hereby waives, to
the fullest extent permitted by law, diligence in collecting the Senior
Obligations, presentment, demand for payment, protest, all notices with respect
to the Senior Documents or this Agreement which may be required by statute, rule
of law or otherwise to preserve Senior Lender's rights against Subordinate
Lender under this Article, including, but not limited to, notice of acceptance,
notice of any amendment of the Senior Documents, notice of the occurrence of any
default, notice of intent to accelerate, notice of acceleration, notice of
dishonor, notice of foreclosure, notice of protest, and notice of the incurring
by Borrower of any obligation or indebtedness. Subordinate Lender also waives,
to the fullest extent permitted by law, all rights to require Senior Lender to
(a) proceed against Borrower or any other guarantor (including any of Pledgors)
of Borrower's payment or performance with respect to the Senior Obligations (an
"OTHER GUARANTOR"), (b) if Borrower or any Other Guarantor is a partnership,
proceed against any general partner of Borrower or the Other Guarantor, (c)
proceed against or exhaust any collateral held by Senior Lender to secure the
repayment of the Senior Obligations, or (d) pursue any other remedy it may now
or hereafter have against Borrower or any Person or any Security.
SECTION VI.3 CERTAIN WAIVERS. Subordinate Lender understands that the
exercise by Senior Lender of certain rights and remedies contained in the Senior
Documents (such as a nonjudicial foreclosure sale) may affect or eliminate
Subordinate Lender's right of subrogation against Borrower, and that Subordinate
Lender may therefore incur a partially or totally nonreimbursable liability
under this Article. Nevertheless, Subordinate Lender hereby authorizes and
empowers Senior Lender to exercise, in its sole and absolute discretion, any
right or remedy, or any combination thereof, which may then be available, since
it is the intent and purpose of Subordinate Lender that the obligations under
this Article shall be absolute, independent and unconditional under any and all
circumstances. Subordinate Lender expressly waives any defense (which defense,
if Subordinate Lender had not given this waiver, Subordinate Lender might
otherwise have) to a judgment against Subordinate Lender by reason of a judicial
or nonjudicial foreclosure. Without limiting the generality of the foregoing,
Subordinate Lender hereby expressly waives any and all benefits under any
applicable law which, if Subordinate Lender had not given this waiver, (i) would
otherwise limit Subordinate Lender's liability after a foreclosure sale to the
difference between the obligations of Subordinate Lender under this Article and
the fair market value of the property or interests sold at such nonjudicial
foreclosure sale, (ii) would otherwise limit Senior Lender's right to recover a
deficiency judgment after a foreclosure sale, and (iii) would otherwise require
Senior Lender to exhaust all of its security before a personal judgment could be
obtained for a deficiency. Notwithstanding any Foreclosure pursuant to any of
the Senior Security Documents, Subordinate Lender shall remain bound under this
Agreement. Subordinate Lender waives all rights and defenses that Subordinate
Lender may have because Borrower's obligations are secured by real property.
Without limitation:
(1) Senior Lender may collect from Subordinate Lender without
Foreclosure of any real or personal property collateral pledged by Borrower or
others; and
(2) If Senior Lender forecloses on any real property
collateral pledged by Borrower or others: (i) The amount of the debt may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price;
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and (ii) Senior Lender may collect from Subordinate Lender even if Senior
Lender, by foreclosing on the real property collateral, has destroyed any right
Subordinate Lender may have to collect from Borrower.
This is an unconditional and irrevocable waiver of any rights and defenses that
Subordinate Lender may have because Borrower's obligations are secured by real
property.
SECTION VI.4 WAIVER IN CONNECTION WITH ELECTION OF REMEDIES.
Subordinate Lender also waives any right or defense based upon an election of
remedies by Senior Lender, even though such election (e.g., nonjudicial
foreclosure with respect to any collateral held by Senior Lender to secure
repayment of the Senior Obligations) destroys or otherwise impairs the
subrogation rights of Subordinate Lender or the right of Subordinate Lender
(after payment of the obligations guaranteed by Subordinate Lender under this
Article) to proceed against Borrower for reimbursement, or both.
SECTION VI.5 WAIVER OF REIMBURSEMENT. Subordinate Lender shall have no
right of, and hereby waives any claim for, subrogation, reimbursement,
indemnification, and contribution against Borrower and against any member or
other constituent of Borrower, and against any other person or any collateral or
security for the Senior Obligations, until the Satisfaction of the Senior
Obligations, and Senior Lender has released, transferred or disposed of all of
its right, title and interest in such collateral or security, and there has
expired the maximum possible period thereafter during which any payment made by
Borrower or others to Senior Lender with respect to the Senior Obligations could
be deemed a preference under the United States Bankruptcy Code.
SECTION VI.6 MODIFICATION OF SENIOR OBLIGATIONS. At any time, from time
to time, and any number of times, without notice to Subordinate Lender, (a) the
time for payment of the principal of or interest on the Senior Obligations may
be extended or the Senior Obligations may be renewed in whole or in part; (b)
the time for Borrower's performance of or compliance with any covenant or
agreement contained in the Senior Documents, whether presently existing or
hereinafter entered into, may be extended or such performance or compliance may
be waived; (c) the maturity of the Senior Obligations may be accelerated as
provided in the Senior Documents; (d) the Senior Documents may be modified or
amended by Senior Lender and Borrower in any respect, including, but not limited
to, an increase in the principal amount and the rates of interest; and (e) any
security for the Senior Obligations may be modified, exchanged, surrendered or
otherwise dealt with or additional security may be pledged or mortgaged for the
Senior Obligations. Subordinate Lender shall continue to be fully liable under
this Article, notwithstanding any of the foregoing. However, if without the
consent of Subordinate Lender any amendment of the Senior Documents is executed
and delivered after the date hereof, and if such amendment provides for an
advance of additional principal that is not contemplated in the Senior Documents
as in effect as of the date hereof (other than additional principal for
protection of the Security, for performance of Borrower's or any Pledgor's
obligations contracted for as of the date hereof, or for reimbursement of Senior
Lender's costs and expenses), or such amendment provides for an increase in the
rate or rates of interest in amounts or under conditions not contemplated in the
Senior Documents as in effect as of the date hereof, then the guaranty and other
obligations of Subordinate Lender hereunder shall not apply to the increment of
the Senior Obligations comprised of such additional principal and interest, but
shall continue to apply to the Senior Obligations less such increment of
additional principal and interest.
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<PAGE> 15
SECTION VI.7 SENIOR LENDER RIGHTS. Senior Lender, in its sole and
absolute discretion, may (a) bring suit against Subordinate Lender, or any one
or more of the persons constituting Subordinate Lender, and any Other Guarantor,
jointly and severally, or against any one or more of them; (b) compromise or
settle with any one or more of the persons constituting Subordinate Lender for
such consideration as Senior Lender may deem proper; (c) release one or more of
the persons constituting Subordinate Lender, or any Other Guarantor, from
liability; and (d) otherwise deal with Subordinate Lender and any Other
Guarantor, or any one or more of them, in any manner, and no such action shall
impair the rights of Senior Lender to collect from Subordinate Lender any amount
guaranteed by Subordinate Lender under this Article. Nothing contained in this
paragraph shall in any way affect or impair the rights or obligations of
Subordinate Lender with respect to any Other Guarantor.
SECTION VI.8 LIABILITY UNDER GUARANTY. Any indebtedness of Borrower
held by Subordinate Lender, including without limitation the Subordinate
Obligations, which is collected, enforced and received by Subordinate Lender, as
trustee for Senior Lender in accordance with this Agreement, shall not reduce or
affect in any manner the liability of Subordinate Lender under the other
provisions of this Article.
SECTION VI.9 REFUND OF SUMS TO BORROWER. If any payment by Borrower is
held to constitute a preference under any applicable bankruptcy, insolvency, or
similar laws, or if for any other reason Senior Lender is required to refund any
sums to Borrower, such refund shall not constitute a release of any liability of
Subordinate Lender under this Article. It is the intention of Senior Lender and
Subordinate Lender that Subordinate Lender's obligations under this Article
shall not be discharged except by Subordinate Lender's performance of such
obligations and then only to the extent of such performance.
SECTION VI.10 ACKNOWLEDGMENT OF FULL DISBURSEMENT. Subordinate Lender
acknowledges that the full amount of $30,000,000 has been disbursed under the
Senior Loan Agreement for the benefit of Borrower, and is unconditionally
guaranteed hereunder, notwithstanding that much or all of such money has not
been paid directly to Borrower.
ARTICLE VII
MISCELLANEOUS
SECTION VII.1 PROVISIONS CUMULATIVE. The rights of Senior Lender
hereunder shall be cumulative. Without limitation of the foregoing, where herein
Subordinate Lender provides multiple waivers covering the same matters, Senior
Lender shall have the benefit of the most expansive reading of such waivers.
Further, nothing in the provisions pertaining subordination shall detract from
the obligations of Subordinate Lender pursuant to its guaranty of the Senior
Obligations hereunder.
SECTION VII.2 COOPERATION. Subordinate Lender irrevocably authorizes
and directs Senior Lender and its successors and assigns and any trustee in
bankruptcy, receiver or assignee for the benefit of creditors of the Borrower,
whether in a voluntary or involuntary liquidation, dissolution or
reorganization, on Subordinate Lender's behalf to take such action as may be
necessary or
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<PAGE> 16
appropriate to effectuate the subordination provisions and other rights granted
to Senior Lender in this Agreement.
SECTION VII.3 SPECIFIC PERFORMANCE; NO WAIVER OF REMEDIES. Each party
hereto acknowledges that to the extent that no adequate remedy at law exists for
breach of its obligations under this Agreement, in the event either party fails
to comply with its obligations hereunder, the other party shall have the right
to obtain specific performance of the obligations of such defaulting party,
injunctive relief or such other equitable relief as may be available. No failure
or delay on the part of any party hereto in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such rights, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder.
SECTION VII.4 NOTICE. Unless otherwise specifically provided herein,
any notice or other communication required or permitted to be given shall be in
writing and addressed to the respective party as set forth below. Notices shall
be effective when actually delivered by any commercially reasonable means,
provided that if such delivery occurs on any day other than a Business Day or
after the close of business on any Business Day, the same shall be effective on
the next Business Day. Further, notices sent by certified or registered mail,
return receipt requested, or by nationally recognized express courier service,
shall be effective on the earlier of (i) actual delivery or (ii) refusal to
accept delivery or on failure of delivery because the recipient address is not
open to receive deliveries between 9:00 am and 5:00 pm on any Business Day.
Notices sent by telecopy or other electronic means shall be effective only if
also sent by nationally recognized express courier service for delivery on the
next Business Day. As used herein, "Business Day" means any day excluding (i)
Saturday, (ii) Sunday, (iii) any day which is a legal holiday under the laws of
the State of New York, and (iv) any day on which banking institutions located in
such state are generally not open for the conduct of regular business.
Notices shall be addressed as follows:
If to Subordinate Lender:
Alterra Healthcare Corporation
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attn: Mr. William F. Lasky
Facsimile: (414) 789-6677
With copies to:
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303-16001
Attn: Alan C. Leet, Esq.
Facsimile: (404) 525-2224
-16-
<PAGE> 17
If to Senior Lender:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Attn: Mr. Kent Daiber
Facsimile: (203) 618-2052
With copies to:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Attn: Mr. Steven Palmer
Facsimile: (203) 618-2052
and
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Attn: M. Scott Cooper, Esq.
(213) 896-6600
Any party may change the address at which it is to receive notices to another
address in the United States at which business is conducted (and not a
post-office box or other similar receptacle), by giving notice of such change of
address in accordance with the foregoing. This provision shall not invalidate or
impose additional requirements for the delivery or effectiveness of any notice
(i) given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Senior Lender's interest in the Senior Obligations, then the new
lenders may give notice to the parties in accordance with this Section,
specifying the addresses at which the new lenders shall receive notice, and they
shall be entitled to notice at such address in accordance with this Section.
Notwithstanding the foregoing, any notice hereunder given in accordance with the
notice provisions of the Senior Loan Agreement shall be effective.
Subordinate Lender agrees to the provisions of the Senior Loan Agreement
pertaining to its receiving or not receiving copies of notices to Borrower.
Without limitation, Subordinate Lender agrees that notwithstanding any provision
of the Senior Loan Agreement that provides for notice in certain instances to
Subordinate Lender and/or its counsel, such notice is given as a courtesy only
and not as a matter of obligation, and the failure to give such notice in any
instance shall not (i) have any effect on the validity or effectiveness of any
such notice, (ii) result in any liability or obligation on the part of Senior
Lender or its Affiliates, (iii) give rise to any claims, offsets or defenses by
Subordinate Lender whatsoever, including without limitation under this Agreement
or under the Guarantor Pledge Agreement or (iv) be of any other consequence
whatsoever.
SECTION VII.5 CONFLICTS, INVALIDITY OF PROVISIONS. In the event of any
conflict between the provisions of this Agreement and the provisions of any of
the Subordinate Documents, the provisions of this Agreement shall prevail. In
case any one or more of the provisions contained in
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<PAGE> 18
this Agreement, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein, and any other application thereof, shall
not in any way be affected or impaired thereby.
SECTION VII.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
SECTION VII.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION VII.8 SUCCESSORS AND ASSIGNS; BORROWER OBLIGATIONS. The
provisions of this Agreement define the relative rights of (i) Senior Lender and
(ii) Subordinate Lender, and are solely for their benefit and the benefit of
their respective successors and permitted assigns as holders of any of the
Senior Obligations and the Subordinate Obligations. This Agreement shall bind
and inure to the benefit of Senior Lender and Subordinate Lender and their
respective successors, permitted transferees and assigns. No other Persons shall
have any rights under this Agreement. As between Borrower on the one hand and
either of the Lender Parties on the other, nothing contained in this Agreement
is intended to or shall modify, limit or excuse any of the obligations of the
Borrower under any of the Senior Documents or Subordinate Documents.
SECTION VII.9 FINANCIAL CONDITION OF BORROWER. Subordinate Lender
hereby assumes responsibility for keeping itself informed of the financial
condition of Borrower, any and all endorsers and any and all guarantors of the
Senior Obligations and of all other circumstances bearing upon the risk of
nonpayment of the Senior Obligations and the Subordinate Obligations that
diligent inquiry would reveal, and Subordinate Lender hereby agrees that Senior
Lender shall have no duty to advise Subordinate Lender of information known to
Senior Lender regarding such condition or any such circumstances. In the event
Senior Lender, in Senior Lender's sole discretion, undertakes, at any time or
from time to time, to provide any such information to Subordinate Lender, Senior
Lender shall be under no obligation (i) to provide any such information to
Subordinate Lender on any subsequent occasion or (ii) to undertake any
investigation not a part of Senior Lender's regular business routine and shall
be under no obligation to disclose any information which, pursuant to accepted
or reasonable commercial finance practices, Senior Lender wishes to maintain
confidential.
SECTION VII.10 SENIOR LENDER APPROVAL. Wherever in this Agreement
Senior Lender's prior consent or approval shall be required, such consent or
approval may, unless otherwise expressly provided herein to the contrary, be
withheld in Senior Lender's sole and absolute discretion.
SECTION VII.11 FINAL AGREEMENT; MODIFICATIONS. This Agreement, the
Guarantor Pledge Agreement, and the other Senior Documents represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements. There are no unwritten oral
agreements between the parties. All prior or contemporaneous agreements,
understandings, representations, and statements, oral or written, are
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<PAGE> 19
merged into this Agreement, the Guarantor Pledge Agreement, and the other Senior
Documents. Subordinate Lender acknowledges that it has received copies of the
Senior Documents. Neither this Agreement nor any of its provisions may be
waived, modified, amended, discharged, supplemented or terminated except by an
agreement in writing signed by the party against which the enforcement of the
waiver, modification, amendment, discharge, supplement or termination is sought,
and then only to the extent set forth in that agreement.
SECTION VII.12 WAIVER OF TRIAL BY JURY. SUBORDINATE LENDER AND SENIOR
LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE
ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP BETWEEN THE PARTIES AS
SUBORDINATE LENDER AND SENIOR LENDER THAT IS TRIABLE OF RIGHT BY A JURY AND (B)
WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT
ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE
BENEFIT OF COMPETENT LEGAL COUNSEL.
SECTION VII.13 REASONABLENESS. Subordinate Lender represents, warrants
and acknowledges that (i) it is a sophisticated lender, familiar with
transactions of this kind, and (ii) it has entered into this Agreement after
lengthy negotiations in which it has been represented by legal counsel of its
choice. Subordinate Lender also acknowledges and agrees that the rights of
Senior Lender under this Agreement are reasonable and appropriate, taking into
consideration all of the facts and circumstances including without limitation
the amount of the Senior Obligations, the nature of the Security, and the risks
incurred by Senior Lender.
SECTION VII.14 ATTORNEYS' FEES. If any action or proceeding is brought
to determine or enforce any of the rights or obligations of any party hereunder,
then the prevailing party shall be entitled to receive its reasonable fees,
costs and expenses (including attorneys' fees and fees of other professionals
retained by either party), incurred in any such action from the non-prevailing
party, such amounts payable on demand. If any amount owing hereunder is not paid
when due, then the same shall bear interest at the default rate under the Senior
Loan Agreement.
[DOCUMENT CONTINUES]
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SECTION VII.15 MISCELLANEOUS. The titles of the Sections and Articles
of this Agreement are for convenience only and shall not be used to limit or
interpret any provision of this Agreement. No failure of consideration, failure
of performance, or other defense or matter arising between Subordinate Lender
and Borrower shall be asserted against Senior Lender.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Senior Lender: GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
a Delaware corporation
By: /s/ KENT E. DAIBER
----------------------
Kent E. Daiber
Subordinate Lender: ALTERRA HEALTHCARE CORPORATION,
a Delaware corporation
By: /s/ JOHN PETERSON
------------------------
Name: John Peterson
Title: Vice President
The undersigned Borrower hereby approves of, and agrees and consents
to, the terms and conditions of this Subordination, Representation and Guaranty
Agreement and agrees not to make any payments on account of the Subordinate
Obligations until Satisfaction of the Senior Obligations.
BORROWER:
THIRD PARTY INVESTORS, L.L.C.,
a Delaware limited liability company
By: Twin Oaks Capital, LLC,
a Delaware limited liability company
By: /s/ RONALD G. KENNY
------------------------------
Ronald G. Kenny, President
ATTACHMENTS:
Schedule XX Subordinate Rights and Interests
Notarial Jurat
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<PAGE> 1
EXHIBIT 10.3
PURCHASE AGREEMENT
AND AGREEMENT TO COMPLETE CONSTRUCTION
OMEGA HEALTHCARE INVESTORS, INC.
OMEGA (KANSAS), INC.
AND
STERLING HOUSE CORPORATION
ALS-CLARE BRIDGE, INC.
ALTERRA HEALTHCARE CORPORATION
Alterra Sterling House of Bloomington
Alterra Sterling House of Jeffersonville
Alterra Clare Bridge Cottage of Jeffersonville
Alterra Sterling House of Kokomo
Alterra Clare Bridge of Wichita
Alterra Clare Bridge Cottage of New Philadelphia
Alterra Clare Bridge Cottage of SW Oklahoma City
Alterra Clare Bridge Cottage of Goodlettesville I
Alterra Clare Bridge of Silverdale
Alterra Sterling House of Briargate
Dated as of June 14, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
ARTICLE II PURCHASE AND SALE......................................................................................9
2.01. Agreement to Sell and Buy.......................................................................9
2.02. No Assumption of Liabilities...................................................................10
2.03. "As Is" Purchase...............................................................................10
ARTICLE III PURCHASE PRICE.......................................................................................10
3.01. Payment........................................................................................10
3.02. First Payment of Additional Purchase Price.....................................................10
3.03. Subsequent Payment of Additional Purchase Price................................................10
3.04. Limitation on Additional Purchase Price........................................................11
3.05. Termination of Obligation to Pay Additional Purchase Price.....................................11
ARTICLE IV CLOSING...............................................................................................11
ARTICLE V........................................................................................................11
5.01. Transfer Taxes.................................................................................11
5.02. Sales Taxes....................................................................................11
5.03. Title Insurance................................................................................11
5.04. Survey/ UCC Search Reports.....................................................................12
5.05. Environmental Reports/Remediation..............................................................12
5.06. Attorneys' Fees................................................................................12
5.07. Recording Costs................................................................................12
5.08. Releases.......................................................................................12
5.09. Transaction Fee................................................................................12
5.10. Other Items....................................................................................12
ARTICLE VI POSSESSION............................................................................................12
ARTICLE VII SELLERS' AND ALTERRA'S REPRESENTATIONS AND WARRANTIES................................................13
7.01. Status of Seller and Alterra...................................................................13
7.02. Validity and Conflicts.........................................................................13
7.03. Authority......................................................................................13
7.04. Financial Statements...........................................................................13
7.05. Absence of Adverse Change......................................................................14
7.06. The Licenses...................................................................................14
7.07. Compliance with Law............................................................................15
7.08. Residents......................................................................................15
7.09. Books and Records..............................................................................16
7.10. Taxes and Tax .................................................................................16
</TABLE>
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<TABLE>
<S> <C>
7.11. Environmental Issues...........................................................................16
7.12. Necessary Action...............................................................................16
7.13. Litigation.....................................................................................17
7.14. Sensitive Payments.............................................................................17
7.15. Title..........................................................................................17
7.16. The Facilities.................................................................................17
7.17. Inventories....................................................................................18
7.18. The Facility Agreements........................................................................18
7.19. Resident Roster................................................................................18
7.20. Disclosure.....................................................................................18
7.21. Insurance......................................................................................19
7.22. Plans and Specifications.......................................................................19
7.23. Authorizations and Permits.....................................................................19
7.24. Total Construction Costs.......................................................................19
ARTICLE VIII PURCHASER REPRESENTATIONS AND WARRANTIES............................................................19
8.01. Status of Purchaser............................................................................19
8.02. Validity and Conflicts.........................................................................20
8.03. Authority......................................................................................20
8.04. Necessary Action...............................................................................20
ARTICLE IX BROKER; INVESTMENT BANKER.............................................................................20
ARTICLE X SELLERS AND ALTERRA COVENANTS..........................................................................21
10.01. Closing Date...................................................................................21
10.02. Post Closing....................................................................................21
ARTICLE XI PURCHASER COVENANTS...................................................................................22
11.01. Closing Date....................................................................................22
11.02. Post Closing....................................................................................22
ARTICLE XII MUTUAL COVENANTS.....................................................................................22
12.01. General Covenants...............................................................................22
12.02. Public Announcements............................................................................23
ARTICLE XIII COMPLETION ESCROW; DISBURSEMENT.....................................................................23
13.01. Completion Escrow..............................................................................23
13.02. Construction and Development of the Construction Facilities....................................23
13.02.01. Commencement and Completion of Construction..................................23
13.02.02. Purchaser's Architect........................................................24
13.02.03. Plans and Specifications.....................................................24
13.02.04. Character of Construction....................................................24
13.02.05. Construction Contract and Architectural/Engineering Agreement................25
</TABLE>
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<TABLE>
<S> <C>
13.02.06. Records and Reports..........................................................25
13.02.07. Access.......................................................................26
13.02.08. Damage by Fire or Other Casualty.............................................26
13.02.09. Payment of Costs.............................................................26
13.03. Disbursements from Completion Escrow...........................................................27
13.04. Limitation on Disbursements....................................................................28
13.05. Sufficiency of Completion Holdback.............................................................28
13.06. Payments to Contractor, Subcontractors and Suppliers...........................................29
13.07. Purchaser's Right to Cure......................................................................29
13.08. Application of Advances........................................................................29
13.09. Construction or Other Liens....................................................................29
13.10. Conditions to Final Payment....................................................................29
ARTICLE XIV GUARANTY OF COMPLETION; FORCE MAJEURE................................................................30
14.01 Guaranty of Completion.........................................................................30
14.02 Force Majeure..................................................................................30
ARTICLE XV INDEMNIFICATION.......................................................................................31
15.01. Sellers' and Alterra's Indemnification..........................................................31
15.02. Procedure.......................................................................................32
ARTICLE XVI MISCELLANEOUS........................................................................................32
16.01. Notices.........................................................................................32
16.02. Assignment......................................................................................33
16.03. Sole Agreement..................................................................................33
16.04. Captions........................................................................................33
16.05. Severability....................................................................................33
16.06. Counterparts....................................................................................33
16.07. Knowledge Defined...............................................................................33
16.08. Third Party Beneficiary.........................................................................34
16.09. Attorneys' Fees.................................................................................34
16.10. Construction....................................................................................34
16.11. Survival........................................................................................34
16.12. Governing Law...................................................................................34
16.13. Arbitration of Disputes Following Closing.......................................................35
16.14 Joint and Several...............................................................................35
</TABLE>
iii
<PAGE> 5
PURCHASE AGREEMENT
AND AGREEMENT TO COMPLETE CONSTRUCTION
THIS PURCHASE AGREEMENT (the "Agreement") is executed and delivered as
of this 14th day of June, 1999 (the "Effective Date") by and between STERLING
HOUSE CORPORATION, a Kansas corporation ("Sterling"), ALS CLARE BRIDGE, INC., a
Delaware corporation ("ALS-Clare"), (Sterling and ALS-Clare are each referred to
herein as a "Seller" and, collectively, as "Sellers"), ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation ("Alterra"), OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation ("Omega"), and OMEGA (KANSAS), INC., a Kansas
corporation ("Omega-Kansas").
The circumstances underlying the execution and delivery of this
Agreement are as follows:
A. Capitalized terms used but not otherwise defined herein have the
respective meanings given them in Article I below.
B. Sellers are the owner of Sellers' Assets. Sellers desire to sell,
and Purchaser desires to acquire, Sellers' Assets on the terms and conditions
set forth in this Agreement.
C. Upon Closing, Purchaser desires to lease to Lessee, and Alterra
desires to cause Lessee to lease from Purchaser, the Sellers' Assets on the
terms and conditions of the Master Leases.
D. Certain of the Facilities being transferred pursuant to this
Agreement are under construction. With respect to such Facilities, the parties
desire Sellers complete the construction after Closing and, to assure
completion, deposit the Completion Holdback into the Completion Escrow.
E. As a material inducement for Purchaser to purchase the Sellers'
Assets pursuant to this Agreement, Purchaser desires that Alterra, and Alterra
desires to, guarantee completion of construction of the Facilities.
NOW, THEREFORE, Sellers, Alterra and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the respective meanings given them
below:
"Actual Cash Flow" means at any given time the actual Cash Flow for the
Facilities determined on a trailing three (3) month basis.
<PAGE> 6
"Additional Cash Flow" means, at any given time, the Annualized Actual
Cash Flow less the Expected Cash Flow.
"Additional Purchase Price" means the amount, if any, to be paid by
Purchaser to Sellers as additional purchase price in excess of the Closing
Payment and determined pursuant to, and paid according to, Article III.
"Affiliate" means any Person which, directly or indirectly, Controls or
is Controlled by or is under common Control with another Person.
"Annualized Actual Cash Flow" means the Actual Cash Flow annualized.
"Capital Expenditure Amount" means $100,250 times the increase, if any,
in the CPI during the period commencing on the Commencement Date and ending on
the date with respect to which the calculation of Additional Purchase Price is
to be made.
"Cash Flow" shall have the meaning assigned to it in the Master Leases.
"Charter Documents" means the articles of incorporation, certificate of
formation, operating agreement, bylaws, resolutions, minutes and other documents
that govern the organization of a Seller, Alterra or Purchaser, as the case may
be.
"Claim" means a claim for indemnification pursuant to Section 15.01 of
this Agreement.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Date" means the Effective Date.
"Closing Payment" means the lesser of (i) THIRTY-FOUR MILLION
EIGHTY-FIVE THOUSAND DOLLARS ($34,085,000) and (ii) the amount determined
pursuant to the Supplemental Letter.
"Completed Facilities" means the Facilities identified on Schedule 1(a)
as being open and operating.
"Completion Date" means the date identified on Schedule 1(a) as the
date which is Sellers' best faith estimate of the date each Facility will be
open and operating.
"Completion Escrow" means the escrow account with Escrow Agent into
which the Completion Holdback will be deposited pursuant to clause (i) of
Article III.
2
<PAGE> 7
"Completion Holdback" means the amount determined pursuant to the terms
of the Supplemental Letter which will be deposited into the Completion Escrow.
"Construction Budgets" means the detailed budget for the construction
of the Construction Facilities attached as Schedule 1(b), which sets forth
Sellers' best faith estimate of the Project Costs on an itemized basis and
designates each item by amount, whether such item constitutes an item of Hard
Costs or Soft Costs and the amount of proceeds, if any, of the Completion
Holdback allocable to each item of Hard Costs and Soft Costs.
"Construction Facilities" means the Facilities identified on Schedule
1(a) as being under construction and for which a Construction Budget has been
attached as Schedule 1(b).
"Construction Insurance" means the following insurance policies
covering the Construction Facilities: (i) hazard or builder's risk insurance
with an extended coverage endorsement acceptable to the Purchaser in an amount
equal to the full replacement cost of the Construction Facilities, and (ii)
comprehensive public liability insurance insuring against bodily injury and
property damage, and which shall contain an endorsement in favor of Purchaser or
name Purchaser as first loss payee, as the case may be, and shall require
written notification to Purchaser not less than thirty (30) days before
cancellation or expiration and shall not permit amendment or modification
without Purchaser's prior written consent. The Construction Insurance may be
consolidated in one insurance policy at Sellers' option. The builder's risk
policy must be written on an all-risk basis and on a completed-value form
(non-reporting basis) for the full replacement cost of the Improvements. Upon
Purchaser's request, Sellers shall deliver to Purchaser a certificate of
insurance addressed to Purchaser evidencing worker's compensation and public
liability insurance of the construction manager or general contractor, as the
case may be, for the Construction Facilities.
"Consumables" means the food and other consumable inventories located
at the Facilities on the Closing Date.
"Consumer Price Index or CPI" means the United States Department of
Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban
Consumers (1982=84=100), U.S. City Average, All Items, or, if that index is not
available at the time in question, the index designated by such Department as
the successor to such index, and if there is no index so designated, an index
for an area in the United States that most closely corresponds to the entire
United States, published by such Department, or if none, by any other
instrumentality of the United States.
"Contractor's Overhead" means costs incurred by Sellers and set forth
on the Construction Budgets for contractor's overhead and profit.
"Control" (and its corollaries "Controlled by" and "under common
Control with") means possession, directly or indirectly, of the power to direct
or cause the direction of the management
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and policies of a Person, through the ownership of voting securities,
partnership interests or other equity interests.
"Controversy" means a controversy between a Seller or Alterra and
Purchaser that (a) arises following the Closing Date, (b) relates to this
Agreement, any other agreement between a Seller or Alterra and Purchaser, any
instrument or document delivered pursuant to or in connection with this
Agreement or the transactions contemplated by this Agreement and (c) a Seller or
Alterra and Purchaser are unable to settle between themselves.
"Developer's Fees" means the fees and commissions, including
Developer's Overhead, payable to Sellers, Alterra or any Affiliate of Alterra
for services rendered in connection with the development, construction
management or leasing of the Construction Facilities, as set forth on the
Construction Budget.
"Developer's Overhead" means costs incurred by Sellers and set forth on
the Construction Budget for developer's overhead and profit.
"Facilities" means, collectively, the Completed Facilities and the
Construction Facilities.
"Facilities Licenses" means all material licenses, permits and
authorizations necessary for the lawful operation of the Facilities as the
Completed Facilities currently are operated and as the Construction Facilities
will be operated upon completion, including all licenses, permits and
authorizations necessary to (a) lawfully operate all beds contained or to be
contained in the Facilities as assisted living home beds; and (b) provide
licensed assisted living services.
"Financial Statements" means the financial statements for Alterra and
the Facilities requested by Purchaser and relating to the operations of the
Facilities and of Alterra for the fiscal years 1996, 1997 and 1998 and for
fiscal year 1999 to date.
"Effective Date" means the date set forth in the Preamble of this
Agreement.
"Environmental Laws" means any and all applicable local, state and
federal governmental laws, rules, regulations, ordinances, administrative orders
and requirements relating to environmental and/or occupational health and safety
matters.
"Escrow Agent" means the Title Company or such other person as agreed
to the by the parties to this Agreement.
"Expected Cash Flow" means the sum of (A) the Capital Expenditure
Amount plus (B) the quotient of (i) the Purchase Price Paid to Date divided by
(ii) the Purchase Price Multiplier.
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"Event of Force Majeure" is any event or condition, not existing as of
the Closing Date, not reasonably foreseeable as of such date and not reasonably
within the control of Sellers and Alterra, that prevents in whole or in material
part the performance by Sellers and Alterra of their obligations under Articles
XIII and Section 14.01 or that renders the performance of such obligations so
difficult as to make such performance commercially unreasonable. Without
limiting the foregoing, Events of Force Majeure shall include acts of state,
riots, war, prolonged shortage of energy supplies, epidemics, fire, flood,
hurricane, typhoon, earthquake, or explosion.
"Facilities" means the Real Property and Personal Property constituting
the assisted living facilities identified on attached Schedule 1(a).
"GAAP" means generally accepted accounting principles.
"Hard Costs" means costs paid to construct and complete the
Construction Facilities, including without limitation, demolition costs, site
preparation costs, contractor's fees, and costs of labor and material paid or
necessarily incurred by Sellers in connection with the construction of the
Construction Facilities, but excluding Developer's Fees, Developer's Overhead
and Contractor's Overhead, and the contingency reserve, if any, set forth on the
Construction Budget.
"Hazardous Substances" means any materials, substances or wastes deemed
to be hazardous or toxic under any applicable Environmental Laws.
"Indemnified Person" means a person entitled to indemnification
pursuant to Article XV of this Agreement.
"Indemnitor" means a person or persons responsible for indemnifying an
Indemnified Person pursuant to Article XV of this Agreement.
"Indiana Facility" means the Alterra Sterling House of Bloomington.
"Intangible Property" means to the extent transferable under applicable
law, all consents, authorizations, variances or waivers, licenses, permits and
approvals given or issued by any governmental or quasi-governmental agency,
department, board, commission, bureau or other entity or instrumentality having
jurisdiction over the Facilities, but excluding the Facility Licenses.
"Kansas Facility" means the Facility identified on Schedule 1(a) as
being located in State of Kansas.
"Lessee" means AHC Properties, Inc., a Delaware corporation.
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"MAI Appraisal" means an appraisal, in form and substance satisfactory
to Purchaser, prepared by an appraiser who is a Member of the Appraisal
Institute and is experienced in appraising properties of the same nature, and in
the same geographical vicinity, as the Facility being appraised.
"Management Agreements" means the management agreements pursuant to
which the Alterra has agreed to manage the Facilities and Sublessees have agreed
to pay to Alterra fees therefor.
"Master Leases" means (i) a Master Lease, in form and substance
satisfactory to Purchaser and Alterra, executed and delivered by Purchaser and
Lessee concurrently with the Closing, pursuant to which Purchaser leases to
Lessee, and Lessee leases from Purchaser, all of the Facilities other than the
Kansas Facility and (ii) a Master Lease, in form and substance satisfactory to
Purchaser and Alterra, executed and delivered by Omega-Kansas and Lessee
concurrently with the Closing, pursuant to which Omega-Kansas leases to Lessee,
and Lessee leases from Omega-Kansas, the Kansas Facility.
"Omega Capitalization Rate" means the average yield to Purchaser on
leases, entered into during the one hundred twenty (120) days preceding the date
of the payment of such portion of Additional Purchase Price, of assisted living
and/or dementia care facilities to lessees whose creditworthiness, alone or, as
to any such lease or leases which are guaranteed, in combination with that of
the guarantor or guarantors thereof, is similar to the creditworthiness of
Lessee and Alterra on June 14, 1999.
"Omega Rent Multiplier" means (A) one (1) divided by (B) (i) the Omega
Capitalization Rate divided by (ii) the following amount during the following
periods:
On or Before
------------
December 31, 2001 1.2
December 31, 2002 1.25
December 31, 2003 1.28
June 30, 2004 1.31
"Permitted Encumbrances" means the matters set forth on attached
Schedule 1(d).
"Person" means any natural person, trust, partnership, corporation,
joint venture, limited liability company or other legal entity.
"Personal Property" means all equipment, furniture, fixtures, inventory
(including linens, dietary supplies and housekeeping supplies, but specifically
excluding food and other consumable inventories) and other tangible personal
property owned (but not leased) by a Seller and located on the Real Property and
Facilities, but excluding (a) cash, cash equivalents or accounts receivable
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relating to the period prior to the Closing Date, (b) proprietary brochures,
computers and computer software and any vehicles, and (c) those items of
personal property identified on attached Schedule 1(g).
"Portfolio Stabilization Appraisal" means the MAI Appraisal conducted
with respect to the Facilities after the Portfolio Stabilization Date.
"Portfolio Stabilization Appraisal Date" means the date on which the
Portfolio Stabilization Appraisal is delivered to Purchaser.
"Portfolio Stabilization" shall have the meaning assigned to it in the
Master Leases.
"Portfolio Stabilization Date" means the date on which Portfolio
Stabilization occurs.
"Project Costs" means all Hard Costs, Soft Costs, Developer's Fees,
Contractor's Overhead and other costs and fees associated with the construction
of the Construction Facilities.
"Property Documents" means all Resident Agreements; environmental
reports; structural reports and geological reports; governmental licenses,
permits and approvals; service and maintenance contracts; existing surveys of
the Real Property, including any as-built surveys for the improvements; wetland
reports; soils reports; architectural drawings, plans and specifications; and
engineering tests and reports.
"Purchase Price" means the sum of (i) the Closing Payment plus (ii) the
Additional Purchase Price.
"Purchase Price Paid to Date" means at any given time the sum of (i)
the Closing Payment plus (ii) the amount of Additional Purchase Price previously
paid.
"Purchase Price Multiplier" means the lesser of (A) Omega Rent
Multiplier and (B) following number on or before the following dates:
On or Before Purchase Price Multiplier
------------ -------------------------
December 31, 1999 8.032
December 31, 2000 7.933
December 31, 2001 7.739
December 31, 2002 7.249
December 31, 2003 6.906
June 30, 2004 6.583
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"Purchaser" means Omega with respect to all Facilities other than the
Kansas Facility and Omega-Kansas with respect to the Kansas Facility.
"Real Property" means the real property described on attached Schedule
1(h), together with (a) any buildings and other improvements located thereon or
to be located thereon upon completion of the Construction Facilities; (b) all
rights of Sellers, if any, in and to all air, mineral and riparian rights and
all tenements, hereditaments, privileges and appurtenances belonging or in any
way appertaining thereto; (c) any land lying in the bed of any street, road or
avenue adjoining the real property described on attached Schedule 1(h) to the
center line thereof, but only to the extent of Sellers' interest, if any,
therein; and (d) all easements, whether or not recorded, strips and
rights-of-way abutting, adjacent to, contiguous with or adjoining the real
property described on attached Schedule 1(h), but only to the extent of Sellers'
interest, if any, therein.
"Resident Agreements" means the admission agreements entered into by
Alterra with the current residents of the Facilities.
"Sellers' Assets" means the Real Property, the Facilities, the Personal
Property and the Intangible Property.
"Soft Costs" means the Transaction Fee; premiums for title, casualty
and other insurance required by Purchaser under this Agreement or the Master
Leases; the cost of recording and filing the Transaction Documents and any tax
levied upon such filing; real estate taxes and other assessments that Sellers or
Alterra are obligated to pay; fees and disbursements of the Purchaser's
attorneys, architects and engineers, appraisers, environmental engineers and
surveyors; architectural design and monitoring fees; permit fees; marketing
expenses; leasing and sales commissions; property management fees; and interest
(including any reserve for interest set forth on the Construction Budgets), fees
and miscellaneous transaction closing costs and charges payable by Sellers to
Purchaser as they become due and payable.
"Survey Requirements" means a survey that (a) is certified to
Purchaser, Sellers, Alterra and the Title Company; (b) is prepared in accordance
with the minimum standard detail requirements and classifications for ALTA/ASCM
land title surveys, as adopted in 1992 by ALTA/ASCM, including Table A
responsibilities and specifications 1-4, 6-11 and 13; and (c) otherwise is in
form satisfactory to Purchaser.
"Subleases" means the Subleases identified on Schedule 1(i).
"Sublessees" means the sublessees under the Subleases.
"Supplemental Letter" means the letter from Omega to Alterra dated as
of June 14, 1999, which supplements the Transaction Documents.
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"Title Commitments" means title insurance commitments, issued by the
Title Company, dated after the date of this Agreement and committing the Title
Company to insure Purchaser's fee simple title to the Facilities, without the
so-called "standard exceptions", in the amount of the Purchase Price, together
with legible copies of all recorded documents referred to therein.
"Title Company" means Chicago Title Insurance Company.
"Title Insurance Policies" means the title insurance policies, issued
pursuant to the Title Commitments by the Title Company concurrently with the
Closing, that insures Purchaser's fee simple title to the Facilities, without
the so-called "standard exceptions", and subject only to the Permitted
Encumbrances. The Title Insurance Policies shall include the following
endorsements, to the extent available under the law of the state in which the
Facilities is located: (a) for the Completed Facilities, Form 3.1 completed
zoning endorsement and for the Construction Facilities, Form 3.0 zoning
endorsement; (b) comprehensive endorsement; (c) access endorsement; (d) survey
endorsement; (e) separate tax parcel endorsement; (e) contiguity endorsement (if
the Real Property on which the Facility is located consists of more than one
parcel); and (f) such other endorsements as Purchaser reasonably may require.
"Transaction Documents" means the following documents: the Master
Leases; the Purchase Agreement; the Supplemental Letter, any and all warranty
deeds, bills of sale, security agreements, guaranties, pledge agreements,
subordination agreements, collateral assignment of contracts, continued
performance agreements, such other documents as may evidence or secure the
transactions contemplated by this Agreement and the Master Leases, and any and
all amendments, modifications, extensions and renewals of any of the foregoing
documents.
"Transaction Fee" means the ONE HUNDRED SEVENTY-EIGHT THOUSAND NINE
HUNDRED THIRTY-TWO DOLLAR ($178,932) fee to be paid to Purchaser to induce
Purchaser to enter into the transactions provided for in this Agreement.
"UCC Search Report" means UCC search reports in the name of Sellers and
the Facilities conducted at the state and county level in the state in which the
Facilities are located and, if different, in the state in which a Seller is
organized and in the state in which a Seller's chief executive office is
located.
ARTICLE II
PURCHASE AND SALE
2.01. Agreement to Sell and Buy. On the terms and subject to the
conditions set forth herein, Sellers agree to sell to Purchaser, and Purchaser
agrees to acquire from Sellers, Sellers' Assets.
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2.02. No Assumption of Liabilities. Except as specifically set forth in
this Agreement, Purchaser is not acquiring or assuming any liabilities
whatsoever, including, without limitation, those of Sellers with respect to
Sellers' Assets.
2.03. "As Is" Purchase. Purchaser is acquiring Sellers' Assets without
any express or implied warranties other than those specifically set forth in
this Agreement.
ARTICLE III
PURCHASE PRICE
3.01. Payment. The Purchase Price shall be payable as follows:
(i) Closing Payment in cash or other immediately available funds
at the Closing (subject to the adjustments set forth in this
Agreement); provided that Sellers deposit the Completion
Holdback into the Completion Escrow pursuant Article XIII; and
(ii) The Additional Purchase Price in cash or other immediately
available funds in accordance with this Article III.
Sellers and Purchaser agree that, for purposes of this Agreement, no portion of
the Purchase Price shall be allocated to the Personal Property or the Intangible
Property.
3.02. First Payment of Additional Purchase Price. If Portfolio
Stabilization occurs on or before June 30, 2004, then on the first day of the
first month following the Portfolio Stabilization Date, Purchaser shall pay to
Sellers the amount, if any, of Additional Purchase Price equal to the lesser of:
(i) ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000);
(ii) (A) ninety-five percent (95%) of the Portfolio Stabilization
Appraisal less (B) the Closing Payment; and
(iii) The Additional Cash Flow times the Purchase Price Multiplier.
3.03. Subsequent Payment of Additional Purchase Price. If Portfolio
Stabilization has occurred on or before June 30, 2002, then, on each of the
first and second anniversary dates of Portfolio Stabilization, if the aggregate
amount of Additional Purchase Price previously paid by Purchaser to Sellers
pursuant to this Article III as determined on such anniversary date is less than
the lesser of the amounts in Section 3.02(i) and 3.02(ii), then, on the first
day of the first month following such anniversary date, Purchaser shall pay to
Sellers, subject to Section 3.04, the amount,
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if any, of Additional Purchase Price equal to the Additional Cash Flow times the
Purchase Price Multiplier.
3.04. Limitation on Additional Purchase Price. Notwithstanding anything
in this Agreement or any of the Transaction Documents to the contrary, the
aggregate amount of Additional Purchase Price required to be paid by Purchaser
to Sellers pursuant to this Article III shall not exceed the lesser of:
(i) ONE MILLION SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000); and
(ii) (A) ninety-five percent (95%) of the Portfolio Stabilization
Appraisal less (B) the Closing Payment.
3.05. Termination of Obligation to Pay Additional Purchase Price.
Notwithstanding anything in this Agreement or any of the Transaction Documents
to the contrary, Purchaser shall have no obligation to pay any Additional
Purchase Price (i) if Portfolio Stabilization has not occurred on or before June
30, 2004, (ii) after the second anniversary of Portfolio Stabilization if it
occurs prior to June 30, 2002, or (iii) after the occurrence of a default or an
Event of Default under this Agreement, the Master Leases or any of the other
Transaction Documents.
ARTICLE IV
CLOSING
The purchase and sale of Sellers' Assets shall occur on the Closing
Date at the offices of counsel to the Purchaser, or at such other place as is
agreed upon by the parties.
ARTICLE V
COSTS AND PRORATIONS
The costs of the transaction and the expenses related to the ownership
and operation of the Sellers' Assets shall be allocated between Sellers and
Purchaser as follows:
5.01. Transfer Taxes. Sellers shall pay all state and county transfer
or excise taxes due on the transfer to Purchaser of title to the Real Property
and the Facilities and all assessments and taxes related to the recording of the
deed.
5.02. Sales Taxes. Sellers shall pay any sales tax due on the transfer
to Purchaser of title to the Personal Property.
5.03. Title Insurance. Sellers shall pay the cost of the Title
Commitments and the premiums for the Title Insurance Policies.
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5.04. Survey/ UCC Search Reports. Sellers shall pay the cost of the
Surveys and the UCC Search Reports for the Facilities.
5.05. Environmental Reports/Remediation. Sellers shall pay for the cost
of the Phase I environmental assessments for the Facilities, or, at the option
of Purchaser, for any existing Phase I environmental assessments to be certified
to Purchaser for reliance by Purchaser thereon.
5.06. Attorneys' Fees. Sellers shall pay its attorneys' fees and the
attorneys' fees of Purchaser.
5.07. Recording Costs. Sellers shall pay all recording fees related to
the recording of the deeds.
5.08. Releases. Sellers shall pay the cost of obtaining and recording
any releases necessary to deliver title to Sellers' Assets in accordance with
the terms of this Agreement.
5.09. Transaction Fee. At the Closing, Sellers shall pay to Purchaser
the Transaction Fee.
5.10. Other Items. Neither Purchaser nor Omega-Kansas has any duty to
operate the Facilities from and after the Closing Date, such operations to be
accomplished solely by Lessee, as lessee under the Master Leases, or by Alterra
pursuant to the Management Agreement. Accordingly, Sellers, Lessee and Alterra
shall be responsible for (a) all revenues and expenses attributable to the
Facilities, whether attributable to the period before or after the Closing; (b)
real and personal property taxes, assessments and similar charges that are
levied against the Facilities, whether attributable to the period before or
after the Closing Date; (c) all utilities provided to the Facilities, whether
before or after the Closing Date; and (d) any amounts that have been prepaid, or
that remain to be paid, under any of the Admissions Agreements or any other
contracts affecting Sellers' Assets.
ARTICLE VI
POSSESSION
At Closing, Purchaser shall be entitled to possession of Sellers'
Assets, subject only to (a) the rights of the residents of the Facilities, (b)
any possessory rights granted to any person under the Permitted Encumbrances,
(c) such possessory rights of Sellers and Alterra required to allow them to
fullfill their obligations under Articles XIII and XIV with respect to
completing construction of the Construction Facilities, (d) the rights of Lessee
under the Master Leases, and (e) the rights of the Sublessees under the
Subleases.
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ARTICLE VII
SELLERS' AND ALTERRA'S REPRESENTATIONS AND WARRANTIES
Sellers and Alterra, jointly and severally, represent and warrant to
Purchaser, as of the Closing Date, that:
7.01. Status of Seller and Alterra. Sterling is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas and is duly qualified to do business as a foreign corporation in each
state in which a Facility owned by it is located. ALS-Clare is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to do business as a foreign corporation
in each state in which a Facility owned by it is located. Alterra is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to do business as a foreign
corporation in each state in which a Facility is located.
7.02. Validity and Conflicts. This Agreement is, and all documents to
be executed by Sellers or Alterra pursuant to this Agreement will be, their
valid and binding obligations, enforceable against them in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The execution of this Agreement and the
consummation of the transactions contemplated in this Agreement in accordance
with its terms have been approved by all necessary action of Sellers and Alterra
under their respective Charter Documents and do not and will not result in a
breach of the terms and conditions of, nor constitute a default under or
violation of, each Seller's Charter Documents, Alterra's Charter Documents or
any law, regulation, court order, mortgage, note, bond, indenture, agreement,
license or other instrument or obligation to which a Seller or Alterra is now a
party or by which any of Sellers' Assets may be bound or affected.
7.03. Authority. Sellers and Alterra each have full power and authority
to execute and to deliver this Agreement and all related documents and to carry
out the transactions contemplated herein and therein. Each Seller has full power
and authority (a) to own and operate the Facilities owned by it as the same
currently are owned and operated and (b) to conduct its business as the same
currently is being conducted.
7.04. Financial Statements. Sellers and Alterra have delivered to
Purchaser true and correct copies of the Financial Statements. Except as
otherwise noted in the Financial Statements or on attached Schedule 7.04, the
Financial Statements have been prepared in accordance with GAAP, consistently
applied, and fairly represent the financial condition, and accurately set forth
in all material respects, as and to the extent required by GAAP, the results of
the operations, of Alterra and the Facilities for the periods covered thereby,
subject to customary year end adjustments; provided,
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however, that the Financial Statements which solely pertain to the Facilities
have not been prepared in accordance with GAAP, but rather on an accounting
basis consistent with those of Alterra. Alterra has delivered to Purchaser any
financial statements prepared by Alterra subsequent to the date of the Financial
Statements delivered by it to Purchaser, and such financial statements represent
fairly the financial condition, and set forth accurately in all material
respects the results of the operations, of Alterra and the Facilities for the
periods covered thereby.
7.05. Absence of Adverse Change. Since the date of the Financial
Statements delivered by Alterra to Purchaser, there has not been any material
adverse change in the financial condition, business, assets, liabilities,
results of operations or prospects of Alterra, Sellers or the Facilities
(individually or in the aggregate), whether in the ordinary course of business
or otherwise.
7.06. The Licenses. (a) Alterra has all Facilities Licenses applicable
to the Completed Facilities. Attached as Schedule 7.06(a) are true and correct
copies of the licenses issued most recently by the applicable health care
authorities with respect to the operation of the Completed Facilities. To the
best knowledge of Sellers and Alterra, it has not received written or verbal
notice (i) that any action or proceeding has been initiated or is proposed to be
initiated by the appropriate state or federal agency having jurisdiction
thereof, to revoke, withdraw or suspend any of the Facilities Licenses
applicable to the Completed Facilities or (ii) of any judicial or administrative
agency judgment or decision not to renew any of the Facilities Licenses
applicable to the Completed Facilities or (iii) of any licensure or
certification action of any other type applicable to the Completed Facilities.
(b) Alterra has applied for all Facilities Licenses applicable to the
Construction Facilities. Attached as Schedule 7.06(b) are true and correct
copies of the license applications filed with the applicable health care
authorities with respect to the operation of the Construction Facilities. To
Sellers' knowledge, upon completion of construction of the Construction
Facilities, no basis in law or fact will exist for the applicable health care
authorities to deny or delay the issuance of the Facilities Licenses for the
Construction Facilities.
(c) The Completed Facilities are not operated as Medicare or Medicaid
providers, there are no plans to operate the Completed Facilties as Medicare or
Medicaid providers, and the Completed Facilities receive substantially all of
their operating revenue from private pay residents. The Construction Facilities
will not be operated as Medicare or Medicaid providers and will receive
substantially all of their operating revenue from private pay residents.
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7.07. Compliance with Law.
(a) Schedule 7.07(a) sets forth the most recent licensure or
certification surveys for the Facilities. A copy of each such licensure
or certification survey has been delivered to Purchaser. To the best
knowledge of Sellers and Alterra, the Facilities and their current
operation and use comply with all applicable municipal, county, state
and federal laws, regulations, ordinances and orders and with all
applicable municipal health and building laws and regulations
(including, without limitation, the building and life safety codes),
except to the extent that the failure to comply therewith would not
have a material adverse effect on the business, property, condition
(financial or otherwise) or operation thereof;
(b) To the best knowledge of Sellers and Alterra, no
governmental authority having jurisdiction over the Facilities has
issued any citations with respect to any deficiencies or other matters
that fail to conform to any applicable statute, regulation, ordinance
or bylaw and that have not been corrected as of the date hereof or that
shall not have been corrected on or prior to the Closing, except to the
extent that either (i) a waiver has been issued by the appropriate
authority, in which case a copy of such waiver is included in Schedule
7.07(b), or (ii) the deficiency or non-conformity will not have a
material and adverse effect on the financial condition or results of
the operations of such Facility; and
(c) To the best knowledge of Sellers and Alterra, none of
Sellers or Alterra has received written or oral notice from any
licensing or certifying agency supervising or having authority over the
Facilities, requiring them to be reworked or redesigned or additional
furniture, fixtures, equipment or inventory to be provided at the
Facilities so as to conform to or comply with any existing and
applicable law, code or standard, except where the requirement either
(i) has been fully satisfied prior to the Closing Date, (ii) will, as
of the Closing Date, be in the process of being satisfied in the
ordinary course of Sellers' business pursuant to the terms of a plan of
correction or other documentation submitted to and approved by the
appropriate authority, (iii) will, as of the Closing Date, be the
subject of a valid written waiver issued by the applicable licensing or
certifying agency or (iv) is included in the Construction Budget for
such Facility if such requirement pertains to a Construction Facility.
7.08. Residents. Except for notice provisions that are required by law
or that are contained in the Admissions Agreements provided to Purchaser by
Sellers with respect to the Facilities, there are no agreements with residents
of the Facilities that are not terminable by Sellers at will and that require
the owner of the Facilities to provide the care routinely provided at the
Facilities for the duration of the resident's stay at the Facilities for no
consideration.
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7.09. Books and Records. All of the books and records of the
Facilities, including resident records, resident trust fund records and records
concerning all resident prepaid accounts, are true and correct in all material
respects.
7.10. Taxes and Tax Returns. All tax returns, reports and filings of
any kind or nature that a Seller or Alterra is required to file, prior to the
Effective Date of this Agreement, with respect to or affecting the Facilities
have been properly completed and timely filed, or extensions for the filing
thereof have been timely secured, with all such filings being in material
compliance with all applicable requirements and all taxes due with respect to a
Seller or Alterra have been timely paid.
7.11. Environmental Issues. To the best knowledge of Sellers and
Alterra, they have not released into the environment or discharged, placed or
disposed of any Hazardous Substances or caused the same to be so released into
the environment or discharged, placed or disposed of at, on or under the
Facilities, except (a) to the extent the same will not have a material and
adverse affect on the condition, financial or otherwise, of the Facilities
(whether the Facilities are considered individually or in the aggregate) and (b)
in accordance, and in compliance, with any and all applicable Environmental
Laws. To the best knowledge of Sellers and Alterra, (a) no Hazardous Substances
are located on or at the Facilities or have been released into the environment
or discharged, placed or disposed of in, on or under the Facilities, except to
the extent permitted by applicable Environmental Laws, (b) no underground
storage tanks are or have been located at the Facilities except for those that
have been closed, or currently are being maintained, in accordance with
applicable Environmental Laws, (c) the Facilities are not located on property
that has been used as a dump for waste material and (d) the Facilities comply
with, and at all times during the period of their operation by a Seller have
complied with, all Environmental Laws in all material respects. To the best
knowledge of Sellers and Alterra, neither Seller has received from any
governmental authority or third party written notice or a written complaint
alleging the failure of the Facilities to comply with, or the potential
liability of a Seller as a result of the noncompliance of the Facilities with,
any Environmental Laws or, if a Seller has received such a written notice or
written complaint from any governmental authority or third party, the alleged
noncompliance of the Facilities and/or liability of a Seller with respect
thereto has been resolved as of the Closing Date. Sellers and Alterra have made
available to Purchaser all written assessments that have been prepared by or on
behalf of a Seller or Alterra and that are in a Seller's or Alterra's possession
or under a Seller's or Alterra's reasonable control with respect to the
hazardous waste conditions at the Facilities.
7.12. Necessary Action. Each Seller and Alterra have duly and properly
taken or obtained or caused to be taken or obtained all action necessary for
Sellers and Alterra (a) to enter into and to deliver this Agreement and any and
all documents and agreements executed by a Seller or Alterra in connection
herewith and (b) to carry out the terms of this Agreement and the transaction
contemplated by it. No other action by or on behalf of a Seller or Alterra is or
will be necessary to authorize the execution, delivery and performance of this
Agreement and any documents and agreements executed or to be executed by a
Seller or Alterra in connection herewith or to authorize
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the transactions contemplated by this Agreement. No consent of any third party
is or will be necessary in connection with the execution, delivery and
performance of this Agreement and any documents and agreements executed or to be
executed by a Seller or Alterra in connection herewith or in connection with the
consummation of the transactions contemplated by this Agreement.
7.13. Litigation. Except as set forth in Schedule 7.13, to the best
knowledge of Sellers and Alterra, neither Sellers nor Alterra have received
notice of any litigation, administrative investigation or other proceeding that
is pending or threatened with respect to or affecting a Facility, except where
the amount claimed is less than $25,000 in any single action or $50,000 in the
aggregate. Neither Sellers nor Alterra is a party to, nor are Sellers, Alterra
or the Facilities bound by, any orders, judgments, injunctions, decrees or
settlement agreements under which it or they may have continuing obligations as
of the date hereof or as of the Closing Date and that are likely to materially
restrict or affect the present or presently contemplated business operations of
the Facilities. To the best knowledge of Sellers and Alterra, the right or
ability of Sellers and Alterra to consummate the transaction contemplated herein
has not been challenged by any governmental agency or any other person.
7.14. Sensitive Payments. To the best knowledge of Sellers and Alterra,
neither Sellers nor Alterra have (a) made any contributions, payments or gifts
to or for the private use of any governmental official, employee or agent where
either the payment or the purpose of such contribution, payment or gift is
illegal under the laws of the United States or the jurisdiction in which made,
(b) established or maintained any unrecorded fund or asset for any purpose or
made any false or artificial entries on its books, (c) given or received any
payments or other forms of remuneration in connection with the referral of
patients that would violate the Medicare/Medicaid Anti-kickback Law, Section
1128(b) of the Social Security Act, 42 USC Section 1320a-7b(b), or any analogous
state statute, or (d) made any payments to any person with the intention or
understanding that any part of such payment was being made for any purpose other
than that described in the documents supporting the payment.
7.15. Title. Seller have good title to the Facilities, free and clear
of all liens, charges and encumbrances other than the Permitted Encumbrances and
any other items reflected in the Title Commitment, Survey and UCC Search Report.
Sellers have good title to the remainder of Sellers' Assets, free and clear of
all liens, charges and encumbrances.
7.16. The Facilities. The Completed Facilities are duly licensed to
operate the number of beds set forth on Schedule 1(a). Alterra has applied for
all licenses necessary under applicable law to operate the number of beds set
forth on Schedule 1(a) with respect to the Construction Facilities (other than
the Indiana Facility) as assisted living facilities. The Personal Property
relating to the Completed Facilities is all of the property necessary for the
lawful operation of the Completed Facilities at their current occupancy levels.
Upon completion of construction, the Personal Property relating to the
Construction Facilities will be all of the property necessary for the lawful
operation
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of the Completed Facilities at their contemplated occupancy levels. To the best
knowledge of Sellers and Alterra, there is no action pending or recommended by
the appropriate state or federal agencies having jurisdiction thereof that, if
decided adversely to Sellers or Alterra, would have a material and adverse
effect on a Facility, its operations or business. To the best knowledge of
Sellers and Alterra, the building and improvements constituting the Facilities
have been constructed in compliance with the requirements of all laws at the
time of construction and all ordinances, rules, regulations and restrictions of
record applicable thereto, and all bills for labor and materials in connection
with the construction thereof have been paid in full or reserves have been
established to pay them. Except as disclosed in Schedule 7.16, Sellers and
Alterra have no knowledge of any latent or patent material defect or deficiency
with regard to the structures, roofs, soils, furniture, fixtures or equipment of
the Facilities that would materially impair the use or value of the Facilities,
and the structures, roofs, soils, furniture, fixtures and equipment of the
Facilities are in good working order and condition. Sellers and Alterra have no
knowledge of any latent or patent material defect or deficiency with regard to
the plumbing, mechanical, electrical or other systems of the Facilities that
would materially impair the use or value of the Facilities, and the plumbing,
mechanical, electrical and other systems of the Facilities are in good working
order and condition.
7.17. Inventories. At Closing, the Completed Facilities shall have an
inventory of perishable and non-perishable food, central supplies, linens,
housekeeping supplies, kitchen supplies and nursing supplies sufficient in
condition and quantity as may be required under all applicable laws and, to the
extent there exist no applicable laws that specifically identify the condition
and/or required quantity for any such supplies or inventory, then such inventory
and supplies shall be in such condition and quantity as customarily are
maintained by Sellers.
7.18. The Facility Agreements. All Admissions Agreement utilized, or to
be utilized, by Sellers, Alterra and Lessee at the Facilities shall conform with
all requirements of applicable law and shall be on a form approved by the
applicable state agency.
7.19. Resident Roster. Attached as Schedule 7.19 is a true and complete
resident roster that identifies each of the residents of the Completed
Facilities, the daily rate paid by each of the residents, and, with respect to
the private pay residents, the date through which each of them has paid.
7.20. Disclosure. No representation or warranty by or on behalf of
Sellers or Alterra contained in this Agreement, and no statement contained in
any certificate, list, exhibit or other instrument furnished or to be furnished
to Purchaser pursuant hereto, contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material facts that are
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading.
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7.21. Insurance. Sellers have maintained insurance policies that insure
the Facilities and the other Sellers' Assets continuously since Sellers'
acquisition thereof. Such insurance policies are written on an occurrence basis,
against physical damage, general liability, professional liability and worker's
compensation. Attached as Schedule 7.21 are descriptions of each such policy and
certificates of insurance evidencing such coverage.
7.22. Plans and Specifications. Sellers have delivered to Purchaser
accurate and complete copies of the Plans and Specifications and all other
contract documents requested by Purchaser, including all modifications thereof.
The Plans and Specifications and construction pursuant thereto and the use of
the Facilities contemplated thereby comply and will comply with all applicable
governmental laws and regulations and requirements, zoning and subdivision
ordinances, and standards and regulations of all governmental bodies exercising
jurisdiction over the Facilities, including health care licensing, environmental
protection, energy, equal employment regulations and appropriate supervising
boards of fire underwriters and similar agencies. Sellers and Alterra agree to
provide to Purchaser a certification of Sellers' architect to such effect as
well as the approvals of any governmental body or agency exercising jurisdiction
of the Facilities.
7.23. Authorizations and Permits. Sellers have obtained all required
permits, licenses, approvals and authorizations, including those required by the
Federal Environmental Protection Agency and any state or local authority charged
with the enforcement of regulations of such agency, and fully complied with all
building, safety, zoning and other requirements of any state, municipal or other
governmental authority pertaining to the construction of the improvements
capable of being complied with at the date hereof, and will obtain all such
permits, licenses, approvals and authorizations and will comply with all such
building, safety, zoning and other requirements hereafter.
7.24. Total Construction Costs. Sellers represents that the
Construction Budgets sets forth their best faith estimate of the total Project
Costs in connection with the development of the Construction Facilities. Prior
to the Closing Date, Sellers will have paid a sufficient amount of such costs so
that the remaining Project Costs will not exceed the Completion Holdback.
ARTICLE VIII
PURCHASER REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants to Sellers and Alterra, as of the
Closing Date, that:
8.01. Status of Purchaser. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and, to the extent required by applicable law, is authorized to transact
business in each state in which the Facilities are located.
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8.02. Validity and Conflicts. This Agreement is, and all documents to
be executed by Purchaser pursuant hereto will be, the valid and binding
obligations of Purchaser, enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
The execution of this Agreement and the consummation of the transactions
contemplated herein have been approved by the Board of Directors of Purchaser
and do not and will not result in a breach of the terms and conditions of, nor
constitute a default under or violation of, the Charter Documents of Purchaser
or any law, regulation, court order, mortgage, note, bond, indenture, agreement,
license or other instrument or obligation to which Purchaser is now a party or
by which its assets may be bound or affected.
8.03. Authority. Purchaser has full corporate power and authority to
execute and to deliver this Agreement and all related documents and to carry out
the transactions contemplated herein and therein.
8.04. Necessary Action. Purchaser has duly and properly taken or
obtained or caused to be taken or obtained, or prior to Closing will have duly
and properly taken or obtained or caused to be taken or obtained, all action
necessary for Purchaser (a) to enter into and deliver this Agreement and any and
all documents and agreements executed and to be executed by Purchaser in
connection herewith and (b) to carry out the terms of this Agreement and the
transactions contemplated by it. No consent of any third party is or will be
necessary, and no other action by or on behalf of Purchaser is or will be
necessary, to authorize the execution, delivery and performance of this
Agreement and any documents and agreements executed and to be executed by
Purchaser in connection herewith or to authorize the consummation of the
transactions contemplated herein.
ARTICLE IX
BROKER; INVESTMENT BANKER
Each party represents, covenants and warrants to the other that it has
employed no broker, finder or investment banker in connection with the
transaction contemplated in this Agreement. Each party agrees to pay any
commission, finder's fee or investment banker's fee that may be due on account
of the transaction contemplated in this Agreement to any broker, finder or
investment banker employed by it, and to indemnify the other party hereto
against any claim for any commission, finder's fee or investment banker's fee
made by any broker, finder or investment banker allegedly employed by it and
from and against any and all costs and expenses incurred in connection
therewith, including, but not limited to, reasonable attorneys' fees and costs.
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ARTICLE X
SELLERS AND ALTERRA COVENANTS
10.01. Closing Date. On the Closing Date, Sellers will pay the closing
costs that Sellers are obligated to pay pursuant to this Agreement and Sellers
and Alterra will deliver, or cause to be delivered, to Purchaser such documents
or instruments as reasonably may be necessary to consummate the transactions
contemplated by this Agreement.
10.02. Post Closing. Sellers and Alterra covenant and agree that, after
the Closing Date, they will:
(a) At no cost to Sellers or Alterra, reasonably cooperate
with Purchaser if Purchaser is required to include audited financial
statements with respect to the Facilities in its filings with the
Securities and Exchange Commission;
(b) Take such actions and properly execute and deliver to
Purchaser such further instruments of assignment, conveyance and
transfer as, in the reasonable opinion of counsel for Purchaser and
Seller, reasonably may be necessary to assure, complete and evidence
the transfer and conveyance of Sellers' Assets as contemplated by this
Agreement;
(c) File the annual cost reports for the Facilities currently
within the periods required by Medicare, Medicaid and any other third
party payor and provide any additional documentation to support the
amounts claimed under such cost reports within such time periods;
(d) Furnish to Purchaser on or before July 31, 1999, with
respect to those Construction Facilities for which a certificate of
occupancy has not been issued by such date, the written agreements of
the construction manager or general contractor(s), as the case may be,
and the architect and/or engineer, each in form and substance
acceptable to Purchaser, that such construction manager, general
contractor, architect and/or engineer will, at the request of Purchaser
and upon payment of amounts payable under the contract, continue
performance of the contract notwithstanding any default of Sellers
under such contract and, with respect to the agreement to be executed
by the architect and/or engineer, that Purchaser will have the
unrestricted use of the Plans and Specifications without additional
charge;
(e) Within 90 days of Portfolio Stabilization, deliver to
Purchaser the Portfolio Stabilization Appraisal;
(f) Furnish to Purchaser on or before July 31, 1999, a final
"as built" survey of each Completed Facility prepared and certified in
accordance with the Survey Requirements;
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(g) Furnish to Purchaser within 45 days of the Completion Date
of each Construction Facility, a final "as built" survey prepared in
accordance with the Survey Requirements;
(h) Prior to the completion of construction of the
Construction Facilities, maintain (or cause Lessee to maintain) the
Construction Insurance on Construction Facilities; and
(i) Furnish to Purchaser on or before June 30, 1999, the form
of Resident Agreement for the Completed Facilities; and
(j) Furnish to Purchaser within 45 days of the Completion Date
of each Construction Facility, the form of Resident Agreement for the
Completed Facilities; and
(k) Furnish to Purchaser with 60 days of the date of this
Agreement a copy of the Indiana Facility License.
ARTICLE XI
PURCHASER COVENANTS
11.01. Closing Date. On the Closing Date, Purchaser will pay the
closing costs for which Purchaser is responsible under this Agreement and
deliver or cause to be delivered the Purchase Price pursuant to Article III, as
adjusted in accordance with this Agreement, and such documents or instruments as
reasonably may be necessary to consummate the transactions contemplated by this
Agreement.
11.02. Post Closing. After the Closing Date, Purchaser will take such
actions and properly execute and deliver such further instruments as Sellers and
Alterra reasonably may request to assure, complete and evidence the transaction
provided for in this Agreement.
ARTICLE XII
MUTUAL COVENANTS
12.01. General Covenants. Following the execution of this Agreement,
each of Sellers, Alterra and Purchaser agree:
(a) To cooperate fully with each other in preparing, filing,
prosecuting and taking any other actions that are or may be reasonable
and necessary to obtain the consent of any governmental instrumentality
or any third party to accomplish the transactions contemplated by this
Agreement;
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(b) To deliver such other instruments of title, certificates,
consents, endorsements, assignments, assumptions and other documents or
instruments as reasonably may be necessary to carry out and/or to
comply with the terms of this Agreement and the transactions
contemplated by it;
(c) To confer on a regular basis with the other, report on
material operational matters and promptly advise the other orally and
in writing of any change or event that would have a material adverse
effect on the consummation of the transactions contemplated by this
Agreement or that would constitute a material breach of any of the
representations, warranties or covenants of such party contained in
this Agreement; and
(d) To provide the other (or its counsel) promptly with copies
of all other filings made by such party with any state or federal
governmental entity in connection with this Agreement or the
transactions contemplated hereby.
12.02. Public Announcements. Sellers, Alterra and Purchaser shall
consult with the other regarding, and shall use reasonable best efforts to agree
upon, the form and content of any press release, public announcement or
statement with respect to this Agreement or the transactions contemplated by it.
ARTICLE XIII
COMPLETION ESCROW; DISBURSEMENT
13.01. Completion Escrow. Sellers agree, subject to and in accordance
with the terms and provisions of this Agreement, to deposit at Closing the
Completion Holdback with Escrow Agent in the Completion Escrow. The Construction
Holdback will be disbursed as construction is completed in accordance with
Section 13.03 below.
13.02. Construction and Development of the Construction Facilities.
13.02.01. Commencement and Completion of Construction. Sellers
have commenced substantial on-site development of the Construction Facilities as
of the Closing Date and, subject to a temporary suspension of performance
pursuant to Section 14.02, will continue diligently to complete the Construction
Facilities on or before the Completion Date and will supply such moneys and
perform such duties as may be necessary in connection therewith. The
Construction Facilities will be complete for purposes of this paragraph 13.02.01
only at such time as (i) all improvements to the Construction Facilities called
for in the Plans and Specifications have been installed or completed in a manner
satisfactory to Purchaser and (ii) the local public authority has issued a final
certificate of occupancy for the Construction Facilities subject only to such
conditions as may be acceptable to Purchaser.
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13.02.02. Purchaser's Architect. Purchaser may retain the
services of architects and engineers, including architects and engineers
employed by Purchaser (the "Purchaser's Architect"), to act as Purchaser's agent
in reviewing the Plans and Specifications and the progress of construction and
in making such certifications and performing such other tasks and duties as
Purchaser deems appropriate. Sellers will pay all fees, costs and expenses of
the Purchaser's Architect within ten (10) days after demand by Purchaser;
provided, however, that Sellers will not be obligated to pay for Purchaser's
Architect more than $5,000 per Construction Facility or $40,000 in the
aggregate.
13.02.03. Plans and Specifications. Purchaser acknowledges its
approval of the Plans and Specifications. Except as provided below, Sellers will
not make, or cause or permit to be made, any change to the Plans and
Specifications unless a request for the change has been submitted in writing to
Purchaser and approved in writing by the construction manager or general
contractor, as the case may be, any tenants whose approval is required,
Purchaser and such other parties as Purchaser may require. Purchaser's approval
may be subject to such terms and conditions as Purchaser reasonably may
prescribe. Under no circumstances will any failure by Purchaser to respond to a
request for approval of a change in the Plans and Specifications be deemed to
constitute approval of the request. Sellers will deliver promptly to Purchaser
copies of all bulletins, addenda, change orders and modifications to the Plans
and Specifications.
Purchaser has the right at all times to require strict
compliance with the original Plans and Specifications, but Sellers may effect
changes in the Plans and Specifications from time to time, without first
obtaining Purchaser's approval, if (i) the changes do not impair the structural
integrity, design concept or architectural appearance of the Construction
Facilities or change the useable area of the Construction Facilities in any way,
(ii) the changes will not result in a default in any other obligation to any
other party or authority and (iii) the changes will not result in a net increase
or decrease in the total Project Costs of FIVE THOUSAND DOLLARS ($5,000) Dollars
or more in the case of any one change or FIFTY THOUSAND DOLLARS ($50,000)
Dollars or more in the aggregate for all changes. Notwithstanding the foregoing,
to the extent that the cost to complete the Construction Facilities exceeds the
Completion Holdback (whether or not as a result of any such changes in the
Plans), Sellers will be responsible for payment of the excess.
13.02.04. Character of Construction. All construction will be
in accordance with the Plans and Specifications, of sound materials, in good and
workmanlike manner, free and clear of all liens, claims and encumbrances (other
than the liens and security interests securing the obligations of the Lessee
under the Master Leases), and in compliance with all laws, ordinances,
regulations and restrictions affecting the Construction Facilities and all
requirements of all governmental authorities having jurisdiction over the
Construction Facilities and of the appropriate board of fire underwriters or
other similar body, if any, and any applicable health care authority related to
the Facility Licenses. Sellers will furnish Purchaser with evidence of such
compliance as Purchaser requires from time to time.
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13.02.05. Construction Contract and Architectural/Engineering
Agreement. (i) A list of the construction manager(s) or general contractor(s),
as the case may be, and the architect and/or engineer, and the contracts under
which each is retained in connection with the Construction Facilities is
attached as Schedule 13.02.05. Any change to the construction manager(s) or
general contractor(s), as the case may be, and the architect and/or engineer in
connection with the Construction Facilities must be approved by Purchaser in
writing. Upon request of Purchaser, Sellers will promptly furnish to Purchaser
executed copies of the construction management agreement or general contract(s)
between Sellers and the construction manager or general contractor(s) covering
all work to be done in connection with the Construction Facilities and executed
copies of all subcontracts between the construction manager or general
contractor(s) and all of their subcontractors and suppliers. Upon request of
Purchaser, Sellers will promptly furnish to Purchaser any amendments or
modifications (including change orders) to any of the foregoing. Sellers will
not modify or amend or permit to be modified or amended (including by way of
change order) any construction management agreement, construction contract or
construction subcontract without Purchaser's prior written approval; provided,
however, that Purchaser's prior approval need not be obtained with respect to
any change order that results from a change in the Plans and Specifications with
respect to which Purchaser's consent is not required pursuant to Section
13.02.03 above. Upon request of Purchaser, Sellers will also furnish to
Purchaser an executed copy of the architectural and/or engineering agreement
between Sellers and the architect and/or engineer with respect to the
Construction Facilities.
(ii) Sellers will perform their obligations under the
contracts described in subparagraph (i) above, and will use reasonable best
efforts to cause each other party to such contracts to perform its obligations
under such contracts.
(iii) Sellers will enforce or cause to be enforced the prompt
performance of the contracts described in subparagraph (i) above and will allow
Purchaser to take advantage of all rights and benefits of such contracts. In
addition, upon completion of construction, Sellers will assign to Lessee under
the Master Leases all warranties given to Sellers under the contracts described
in subparagraph (i) above.
13.02.06. Records and Reports. Sellers and Alterra will keep
accurate and complete books and records relating to the construction of the
Construction Facilities, and Purchaser will have access thereto during usual
business hours upon 24 hours advance notice. Sellers and Alterra will furnish or
cause to be furnished to Purchaser from time to time, promptly upon request, (i)
copies and lists of all paid and unpaid bills for labor and materials with
respect to the Construction Facilities, (ii) Construction Budgets and revisions
thereof showing the estimated cost of the Construction Facilities and the source
of the funds required at any given time to complete and pay for the same, (iii)
receipted bills or other evidence of payment with respect to the cost of the
Construction Facilities, and (iv) such reports as to other matters relating to
the Construction
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Facilities as Purchaser may request. This paragraph will supplement any similar
provision in the Master Leases between Purchaser and Omega-Kansas and Lessee.
13.02.07. Access. Notwithstanding anything to the contrary
contained in the Master Leases, Alterra will, and will cause Lessee to, permit
Purchaser's representatives to have access to the Construction Facilities at all
reasonable times and to conduct such investigations and inspections thereof as
Purchaser shall determine necessary, including without limitation in connection
with inspecting the Construction Facilities and all work done, labor performed
and materials furnished in connection with the construction thereof. Alterra
will, and will cause Lessee to, cooperate and cause the construction manager or
general contractor, as the case may be, to cooperate with Purchaser and its
representatives and agents during such inspections. Notwithstanding the
foregoing, Alterra will, and will cause Lessee to, be responsible for making
inspections as to the Construction Facilities during the course of construction
and will determine to their own satisfaction that the work done or materials
supplied by the contractors and subcontractors has been properly supplied or
done in accordance with applicable contracts. All inspections that may be
performed by Purchaser and its agents will be exclusively for the benefit of
Purchaser and will impose no obligation whatever upon Purchaser for the benefit
of any person. Sellers and Alterra will, and will cause Lessee to, hold
Purchaser harmless from, and Purchaser will have no liability or obligation of
any kind to Seller, Alterra, Lessee or creditors of any of them in connection
with, any defective, improper or inadequate workmanship or materials brought in
or related to the Construction Facilities, or any construction lien arising as a
result of such workmanship or materials. No inspection by Purchaser will create
any obligation on Purchaser or relieve Sellers, Alterra or Lessee of any
obligation.
13.02.08. Damage by Fire or Other Casualty. If any of the
Construction Facilities is partially or totally damaged or destroyed by fire or
other casualty or taken under the power of eminent domain, proceeds of such
event will be applied as provided in the Master Leases.
13.02.09. Payment of Costs. Sellers or Alterra will pay when
due all obligations incurred by Sellers, Alterra or Lessee for the Construction
Facilities, including any cost for restoration incurred pursuant to paragraph
13.02.08 above.
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13.03. Disbursements from Completion Escrow. Upon satisfaction of the
conditions set forth in subparagraphs (a) through (c) below, the Escrow Agent
may disburse from time to time (but no more frequently than once per month) to
Sellers proceeds of the Completion Holdback, subject to the limitations set
forth in Section 13.04 below:
(a) The Escrow Agent has received:
(1) a request for disbursement, in the form of
AIA (the "Request"), executed by an
executive officer of Alterra and setting
forth, among other things, the portion of
the Completion Holdback that Sellers then
are requesting be disbursed, the amount that
Sellers in good faith believe to be the cost
to complete construction (after disbursement
of the portion of the Completion Holdback
then being requested), a detailed breakdown
of the costs and expenses incurred in the
construction of the Construction Facilities
to the date of Request, a detailed cost
breakdown of the percentage of completion of
the construction of the Construction
Facilities (including both Hard Costs and
Soft Costs) to the date of the Request, the
amounts then due and unpaid with respect to
such construction, such other information or
documentation as may be required by the
Escrow Agent and the date upon which the
disbursement is desired, provided that the
date of the payment must not be less than
seven (7) Business Days after the date upon
which the Escrow Agent receives the Request
and the other items set forth in clauses
(ii) through (vi) below;
(2) A certification from Sellers, Alterra and
Lessees that, as of the date of the Request,
no Event of Default exists under this
Agreement or any of the Transaction
Documents, all representations and
warranties set forth in this Agreement and
all of the other Transaction Documents are
accurate and complete, and there are no
actions, suits or proceedings pending, or to
the knowledge of the person making the
certification, threatened or involving (or
that could involve) Sellers, Alterra or
Lessee or all or any part of the Facilities
and that could impair the Facilities or the
ability of Sellers, Alterra or Lessee to
perform under this Agreement or any of the
other Transaction Documents;
(3) Certificates of Sellers' architect and/or
engineer, Purchaser's Architect, if any, and
Sellers, certified to Purchaser, the Escrow
Agent and Sellers and certifying that (a)
the Request is correct and,
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to the best of its knowledge, all work on
the Construction Facilities up to the date
thereof has been done in substantial
compliance with the Plans and Specifications
therefor; (b) to the date thereof, there has
been no material deviation from the budgeted
cost of the Construction Facilities or
construction progress schedule, except as
authorized by Sellers and approved by
Purchaser; and (c) the undisbursed portion
of the Completion Holdback will be
sufficient to meet all known costs to
complete the work covered by the Plans and
Specifications, after giving effect to all
amounts previously disbursed, plus the
amount then requested; and
(4) Evidence that Sellers have delivered the
items described in (i)-(iii) above to
Purchaser;
(2) Upon the request of Purchaser, the Escrow Agent is
prepared, without condition, to issue to Purchaser a
date-down endorsement, dated as of the date of the
disbursement, insuring Purchaser's title to the
Construction Facilities subject to no other
exceptions than are set forth on the Title Policies
delivered to Purchaser at closing; and
(3) The Escrow Agent has not received from Purchaser,
within five (5) Business Days after receipt of the
items described in subparagraph (a) above, written
notice from Purchaser disputing the matters set forth
in Sellers' submission pursuant to subparagraph (a)
above.
13.04. Limitation on Disbursements. In no event will the Escrow Agent
pay amounts in excess of the amounts actually paid out by Sellers for services
or materials incorporated into the Construction Facilities.
13.05. Sufficiency of Completion Holdback. Purchaser shall be entitled
to instruct the Escrow Agent not to make a disbursement or instruct the Escrow
Agent to make a disbursement in an amount less than the amount requested) if
Purchaser is not satisfied in its sole discretion that following the requested
disbursement the unpaid proceeds of the Completion Holdback budgeted for the
construction of the Construction Facilities will be at least equal to the sum of
(a) the estimated Soft Costs to complete the Construction Facilities in
accordance with the Plans and Specifications (including all costs in connection
with changes in the Plans and Specifications) and (b) 110% of the estimated Hard
Costs to complete the Construction Facilities in accordance with the Plans and
Specifications (including all costs incurred in connection with changes in the
Plans and Specifications). If at any time it appears to Purchaser that the
unpaid balance of the Completion Holdback is less than the amount required by
this Section, Purchaser may give written notice to Sellers specifying the amount
of the deficiency and Sellers immediately will deposit with Escrow
28
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Agent the amount of the deficiency, which will be expended first in the same
manner as Completion Holdback before any further payment of the Completion
Holdback will be made by Purchaser. Purchaser may determine the cost of
construction of the Construction Facilities and Sellers will be obligated to pay
any sums so determined in excess of the Completion Holdback prior to any payment
under this Agreement.
13.06. Payments to Contractor, Subcontractors and Suppliers. In order
to induce the Escrow Agent to insure Purchaser's title to the Construction
Facilities without exception for the construction or mechanics' liens, the
Escrow Agent may make payments directly to any contractor, subcontractor or
supplier furnishing labor or materials to the Construction Facilities.
13.07. Purchaser's Right to Cure. If Sellers or Alterra fail to perform
any of Sellers' or Alterra's undertakings set forth in this Agreement or in any
other Transaction Document, Purchaser may, but will not be required to, perform
the same, and Sellers and Alterra, jointly and severally, will reimburse
Purchaser any amounts expended by Purchaser in so doing. In addition to the
foregoing, Purchaser may make require the Escrow Agent to pay the Completion
Holdback to Purchaser in payment of rent and other charges due under the Master
Leases without regard to whether such payments have been approved by Sellers.
13.08. Application of Advances. Sellers will apply each payment of
Completion Holdback against amounts due and payable for construction of the
Construction Facilities or obligations in connection therewith. Nothing
contained in this Agreement will impose upon Purchaser any obligation to see to
the proper application of the advances by Sellers or any other party.
13.09. Construction or Other Liens. In the event any construction or
other lien or encumbrance is filed or attached against the Construction
Facilities or any part thereof without the prior written consent of Purchaser,
Purchaser may, at its option and without regard to the priority of such
construction or other lien or encumbrance, and without regard to any defenses
that Sellers may have with respect to the lien or encumbrance, pay the same, and
Sellers and Alterra, jointly and severally, will reimburse all amounts expended
by Purchaser for such purpose within ten (10) days of written notice thereof.
13.10. Conditions to Final Payment. Purchaser shall be entitled to
instruct the Escrow Agent to withhold the final payment of the Completion
Holdback from the Completion Escrow unless and until all of the following
conditions have been fulfilled to Purchaser's satisfaction:
(1) All conditions for all previous disbursements have
been, and, as of the date of the final disbursement
continue to be, fulfilled.
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<PAGE> 34
(2) Purchaser and Escrow Agent have received, at least
seven (7) Business Days prior to the final payment,
the following items, all of which Sellers and Alterra
agree to obtain and submit to Purchaser at Sellers'
sole expense:
(1) A final "as built" survey prepared and
certified in accordance with the Survey
Requirements;
(2) Certificates of Sellers' architect and/or
engineer, Purchaser's Architect, if any, and
Sellers certified to both Purchaser and
Sellers and certifying that (a) to the best
of its knowledge, the Construction
Facilities are complete in accordance with
the Plans and Specifications therefor; (b)
to the date thereof, there has been no
material deviation from the budgeted cost of
the Construction Facilities or construction
progress schedule, except as authorized by
Sellers and approved by Purchaser; and (c)
the amount of the final payment will be
sufficient to meet all known costs to
complete the work covered by the Plans and
Specifications;
(3) A final, unconditional certificate of
occupancy for the Construction Facilities.
ARTICLE XIV
GUARANTY OF COMPLETION; FORCE MAJEURE
14.01 Guaranty of Completion. Subject to a temporary suspension of
performance pursuant to Section 14.02, but regardless of whether the cost
thereof exceeds the amount of the Completion Holdback, Sellers and Alterra will
diligently and continuously carry out or cause to be carried out the
construction of the Construction Facilities so as to insure the completion of
construction of the Construction Facilities, the opening of the Construction
Facilities and the acquisition of all Facilities Licenses for the Construction
Facilities, all by the applicable Completion Date. Regardless of whether the
cost thereof exceeds the amount of the Completion Holdback, Sellers and Alterra
will be responsible for payment of all costs of completing, opening and
licensing the Construction Facilities, including the payment of all costs in
excess of the Construction Budgets. Sellers and Alterra promptly will correct
any structural defects in the Construction Facilities or any departure from the
Plans and Specifications not previously approved by Purchaser. The approval or
absence of disapproval by Purchaser of any payment of Completion Holdback from
the Completion Escrow shall not constitute a waiver of Purchaser's right to
require compliance with this Article XIV.
14.02 Force Majeure. Upon the occurrence and during the continuance of
an Event of Force Majeure and the giving of written notice thereof to Purchaser,
Sellers and Alterra shall be
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<PAGE> 35
temporarily released without any liability on their part from the performance of
their obligations under Article XIII and Section 14.01, except for the
obligation to pay any amounts due and owing thereunder, but only to the extent
and only for the period that their performance of each such obligation is
prevented by the Event of Force Majeure. Such notice shall include a description
of the nature of the Event of Force Majeure, and its cause and possible
consequences. Sellers and Alterra shall promptly notify Purchaser of the
termination of such event. Upon the request of Purchaser, Sellers and Alterra
shall provide confirmation of the existence of the circumstances constituting an
Event of Force Majeure. Such evidence may consist of a statement of an
appropriate governmental department or agency where available, or a statement
describing in detail the facts claimed to constitute an Event of Force Majeure.
During the period that the performance by Sellers and Alterra has been suspended
by reason of an Event of Force Majeure, Purchaser may likewise suspend the
performance of all or part of its obligations under this Agreement to the extent
that such suspension is commercially reasonable and, notwithstanding anything in
this Agreement to the contrary, Escrow Agent shall make no disbursements from
the Construction Account.
ARTICLE XV
INDEMNIFICATION
15.01. Sellers' and Alterra's Indemnification. Subject to the
limitations contained herein and in Section 15.02, Sellers and Alterra, jointly
and severally (together, the "Indemnitors"), shall indemnify and hold Purchaser,
and its successors and assigns, and their employees, officers, and directors
(each an "Indemnified Party", and together, the "Indemnified Parties"), harmless
from and against any and all damages, losses, liabilities, costs, actions,
suits, proceedings, demands, assessments, and judgements, including, but not
limited to, reasonable attorney's fees and reasonable costs and expenses of
litigation, arising out of or in any manner related to any of the following
(unless arising solely out of the gross negligence or intentional misconduct of
an Indemnified Party):
(a) Except as otherwise provided in this Agreement, any and
all obligations relating to the ownership of Sellers' Assets and the
operation of the Facilities that exist immediately prior to the Closing
Date;
(b) Any misrepresentation of a material fact, breach of
warranty or nonfulfillment of any agreement on the part of Sellers or
Alterra under this Agreement or from any misrepresentations in any
certificate furnished or to be furnished to Purchaser hereunder;
(c) Any failure by Sellers or Alterra in connection with the
transaction contemplated herein to comply with the requirements of any
laws or regulations relating to bulk sales or transfers; and
(d) Any sums due by Sellers or Alterra for Medicare and
Medicaid adjustments arising from the operation of Facilities conveyed
pursuant to this Agreement.
31
<PAGE> 36
For purposes of Section 15.01(a), an obligation shall be deemed to "exist"
immediately prior to the Closing Date if it relates to events that occurred
prior to the Closing Date even if it is not asserted until after the Closing
Date.
15.02. Procedure. If an Indemnified Party asserts that the Indemnitors
are subject to a Claim for indemnification pursuant to Section 15.01, the
Indemnified Party promptly shall notify the Indemnitors in writing of the Claim
and shall describe in the notice the Claim in sufficient detail in order to
permit the Indemnitors to evaluate the nature and cause of the Claim. If the
asserted Claim arises or is in connection with a claim, suit or demand filed by
a third party, the Indemnitors shall be entitled to defend against the Claim
with counsel reasonably satisfactory to the Indemnified Party. The Indemnified
Party may continue to employ counsel of its own, but such costs shall be borne
by the Indemnified Party as long as the Indemnitor continues to so defend. If
the Indemnitors fail to respond or does not admit responsibility for
indemnification, the Indemnified Party may take such necessary steps to defend
itself and any reasonable costs associated therewith may be included as part of
the asserted Claim for indemnification. For all Claims that are not Claims
arising from a third party, the Indemnitors shall notify the Indemnified Party
as to its assertion of whether the Claim is covered by this Article, including
specific reasons for non-coverage, within 30 days of receipt of written notice
from the Indemnified Party describing the Claim in reasonable detail.
ARTICLE XVI
MISCELLANEOUS
16.01. Notices. Any notice, request or other communication to be given
by any party hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, by overnight delivery, hand delivery or
facsimile transmission to the following address:
To Sellers or Alterra: Alterra Healthcare Corporation
450 N. Sunnyslope Road
Brookfield, Wisconsin 53005
Attn: Mark W. Ohlendorf
Telephone No.: (414) 641-5100
Facsimile No.: (414) 789-6677
With copy to Rogers & Hardin
(which shall not 2700 International Tower
constitute notice): 229 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attn: Miriam Dent
Telephone No.: (404) 522-4700
Facsimile No.: (404) 525-224
32
<PAGE> 37
To Purchaser: Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Attn: F. Scott Kellman and Susan
Allene Kovach
Telephone No.: 734/887-0200
Facsimile No.: 734/887-0201
With copy to Dykema Gossett PLLC
(which shall not 1577 North Woodward Avenue, Suite 300
constitute notice): Bloomfield Hills, Michigan 48304
Attn: Fred J. Fechheimer
Telephone No.: (248) 203-0743
Facsimile No.: (248) 203-0763
Notices shall be deemed given three (3) business days after deposit in
the mail as provided herein or upon actual receipt if sent by overnight
delivery, facsimile transmission or hand delivery.
16.02. Assignment. No party may assign, directly or indirectly, its
rights or obligations hereunder without the prior written consent of the other
parties.
16.03. Sole Agreement. This Agreement may not be amended or modified in
any respect whatsoever except by an instrument in writing signed by the parties
hereto. This Agreement, the disclosure schedules for each of the parties and the
documents executed and delivered pursuant hereto constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior negotiations, discussions, writings and agreements between
them.
16.04. Captions. The captions of this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
16.05. Severability. Should any one or more of the provisions of this
Agreement be determined to be invalid, unlawful or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired thereby.
16.06. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
16.07. Knowledge Defined. To the extent that any of the representations
and warranties contained in this Agreement is limited by the phrases "to the
knowledge of" or "to Sellers' knowledge" or "to the best knowledge of Sellers
and Alterra" or "Purchaser has no knowledge of"
33
<PAGE> 38
or "Seller has no knowledge of" or words or phrases of similar import, the same
shall mean to the actual knowledge of any of the corporate officers or directors
of the party or its subsidiaries making said representation or warranty, except
that any representation or warranty made by Sellers with respect to the
Facilities or any of Sellers' Assets also shall mean the actual knowledge of the
Administrator and Director of Nursing of the Facilities. To the extent that any
of the representations and warranties contained in this Agreement refers to
verbal notice to a party, such notice shall be deemed to have been received if
delivered to any officer of such party or to an officer of one of its
subsidiaries.
16.08. Third Party Beneficiary. Nothing in this Agreement is intended
to or shall not be construed to confer upon or create in any person (other than
the parties hereto) any rights or remedies under or by reason of this Agreement,
including without limitation, any right to enforce this Agreement.
16.09. Attorneys' Fees. In the event of a dispute between the parties
hereto with respect to the interpretation or enforcement of the terms hereof,
the prevailing party in any action resulting therefrom shall be entitled to
collect from the other its reasonable costs and attorneys' fees, including its
costs and fees on appeal.
16.10. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state or local
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean "including without limitation."
16.11. Survival. The representations, warranties, covenants or
conditions set forth herein shall survive the Closing.
16.12. Governing Law. THIS AGREEMENT AND THE TRANSACTION DOCUMENTS
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MICHIGAN. SELLERS AND ALTERRA CONSENT TO IN PERSONAM JURISDICTION BEFORE THE
STATE AND FEDERAL COURTS OF THE STATE OF MICHIGAN AND THE STATES IN WHICH THE
FACILITIES ARE LOCATED, AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT
MAY BE HEARD, AT PURCHASER'S OPTION, IN THE STATE AND FEDERAL COURTS LOCATED IN
THE STATE OF MICHIGAN OR THE STATES IN WHICH THE FACILITIES ARE LOCATED. SELLERS
AND ALTERRA AGREE THAT SERVICE OF PROCESS MAY BE EFFECTED UPON SELLERS AND
ALTERRA UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OF MICHIGAN OR
THE
34
<PAGE> 39
STATES IN WHICH THE FACILITIES ARE LOCATED AND IRREVOCABLY WAIVES ANY OBJECTION
TO VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE OF MICHIGAN OR THE STATES
IN WHICH THE FACILITIES ARE LOCATED.
16.13. Arbitration of Disputes Following Closing. If a Controversy
shall arise, the Controversy shall be determined by arbitration, which shall be
conducted in accordance with the rules and procedures of the American
Arbitration Association by three (3) arbitrators selected in accordance with its
procedures. The decision of the arbitrators shall be final and binding and shall
be enforceable in any court of competent jurisdiction. The decision of the
arbitrators shall set forth in writing the basis for the decision, and in
rendering such decision, the arbitrators shall not add to, subtract from or
otherwise modify the provisions of this Agreement and any other agreements,
documents and instruments executed pursuant to or in connection with this
Agreement. The expense of the arbitration shall be divided equally between
Alterra and Purchaser unless otherwise specified in award. The prevailing party,
as determined by the arbitrators, shall be entitled to recover its costs and
expenses, including attorney fees. The arbitration shall be conducted in
Detroit, Michigan. In any such arbitration, the parties shall be entitled to
conduct discovery in the same manner as permitted under Federal Rules of Civil
Procedure 27 through 37. No provision in this Section 16.13 shall limit the
right of any party to this Agreement to obtain provisional or ancillary remedies
from a court of competent jurisdiction before, after or during the pendency of
any arbitration. The exercise of such a remedy does not waive the right of any
party to arbitration. The Section shall not apply to any controversy that may
arise between the parties prior to the Closing.
16.14 Joint and Several. The liability of Sellers and Alterra under
this Agreement shall be joint and several.
Signatures on following pages.
35
<PAGE> 40
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the
day and year first set forth therein.
OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation
June ____, 1999 By: /s/ Susan A. Kovach
-----------------------------------
Susan A. Kovach
Vice President and General Counsel
OMEGA (KANSAS), INC.,
a Maryland corporation
June ____, 1999 By: /s/ Susan A. Kovach
-----------------------------------
Susan A. Kovach
Vice President and General Counsel
ALTERRA HEALTHCARE CORPORATION,
a Delaware corporation
June ____, 1999 By: /s/ Mark W. Ohlendorf
-----------------------------------
Mark W. Ohlendorf
Senior Vice President
STERLING HOUSE CORPORATION,
a Kansas corporation
June ____, 1999 By: /s/ Mark W. Ohlendorf
-----------------------------------
Mark W. Ohlendorf
Senior Vice President
ALS-CLARE BRIDGE, INC.,
a Delaware corporation
June ____, 1999 By: /s/ Mark W. Ohlendorf
-----------------------------------
Mark W. Ohlendorf
Senior Vice President
<PAGE> 41
STATE OF MICHIGAN )
) ss:
COUNTY OF WASHTENAW )
The foregoing instrument was acknowledged before me on June ____, 1999,
by Susan A. Kovach who is the Vice President and General Counsel of Omega
Healthcare Investors, Inc., a Maryland corporation, and Omega (Kansas), Inc., a
Kansas corporation, on behalf of the corporations, who acknowledged the same to
be her free act and deed and the free act and deed of the corporations.
Notary Public, _______ County, Michigan
My commission expires:
STATE OF WISCONSIN )
) ss:
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on June ____, 1999,
by Mark W. Ohlendorf who is a Senior Vice President of Alterra Healthcare
Corporation, a Delaware corporation, Sterling House Corporation, a Kansas
corporation, and ALS-Clare Bridge, Inc., a Delaware corporation, on behalf of
the corporations, who acknowledged the same to be his free act and deed and the
free act and deed of the corporation.
Notary Public, _______ County, Wisconsin
My commission expires:
<PAGE> 1
EXHIBIT 10.4
MASTER LEASE
SINGLE LESSEE
MULTIPLE FACILITIES
OMEGA HEALTHCARE INVESTORS, INC.
AND
AHC PROPERTIES, INC.
DATED: JUNE 14TH, 1999
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ..................................................................................................... 1
ARTICLE I..................................................................................................... 1
1.1 Lease....................................................................................... 1
1.2 Term........................................................................................ 2
1.3 Option to Renew............................................................................. 2
ARTICLE II.................................................................................................... 2
2.1 Definitions................................................................................. 2
ARTICLE III................................................................................................... 22
3.1 Base Rent; Monthly Installments............................................................. 22
3.2 Additional Charges.......................................................................... 22
3.3 Late Charge; Interest....................................................................... 22
3.4 Net Lease................................................................................... 22
3.5 Payments In The Event of a Rent Adjustment.................................................. 23
ARTICLE IV.................................................................................................... 23
4.1 Payment of Impositions...................................................................... 23
4.2 Adjustment of Impositions................................................................... 23
4.3 Utility Charges............................................................................. 24
4.4 Insurance Premiums.......................................................................... 24
ARTICLE V..................................................................................................... 24
5.1 No Termination, Abatement, etc.............................................................. 24
ARTICLE VI.................................................................................................... 25
6.1 Ownership of the Leased Properties.......................................................... 25
6.2 Lessor's Personal Property.................................................................. 25
6.3 Lessee's Personal Property.................................................................. 25
6.4 Grant of Security Interest in Personal Property and Accounts................................ 26
ARTICLE VII................................................................................................... 26
7.1 Condition of the Leased Properties.......................................................... 26
7.2 Use of the Leased Properties................................................................ 26
7.3 Certain Environmental Matters............................................................... 27
ARTICLE VIII.................................................................................................. 31
8.1 Compliance with Legal and Insurance Requirements............................................ 31
8.2 Certain Covenants........................................................................... 31
8.3 Minimum Qualified Capital Expenditures...................................................... 32
</TABLE>
i
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<TABLE>
<S> <C>
8.4 Management Agreements....................................................................... 32
8.5 Other Facilities............................................................................ 33
8.6 No Other Business........................................................................... 33
8.7 Separateness................................................................................ 33
ARTICLE IX.................................................................................................... 33
9.1 Maintenance and Repair...................................................................... 33
9.2 Encroachments, Restrictions, etc............................................................ 35
ARTICLE X..................................................................................................... 35
10.1 Construction of Alterations and Additions to the Leased Properties.......................... 35
ARTICLE XI.................................................................................................... 36
11.1 Liens....................................................................................... 36
ARTICLE XII................................................................................................... 36
12.1 Permitted Contests.......................................................................... 36
12.2 Lessor's Requirement for Deposits........................................................... 37
ARTICLE XIII.................................................................................................. 37
13.1 General Insurance Requirements.............................................................. 37
13.2 Risks to be Insured......................................................................... 38
13.3 Payment of Premiums; Copies of Policies; Certificates....................................... 39
[13.4 INTENTIONALLY OMITTED]...................................................................... ..
13.5 Umbrella Policies........................................................................... 39
13.6 Legal Requirements re: Workers' Compensation Insurance..................................... 39
13.7 No Liability; Waiver of Subrogation......................................................... 39
13.8 Increase in Limits.......................................................................... 39
13.9 Blanket Policy.............................................................................. 40
13.10 No Separate Insurance....................................................................... 40
ARTICLE XIV................................................................................................... 40
14.1 Insurance Proceeds.......................................................................... 40
14.2 Restoration in the Event of Damage or Destruction........................................... 41
14.3 Restoration of Lessee's Property............................................................ 41
14.4 No Abatement of Rent........................................................................ 41
14.5. Waiver...................................................................................... 41
14.6. Disbursement of Insurance Proceeds Equal to or Greater Than The Approval Threshold.......... 41
14.7 Net Proceeds Paid to Facility Mortgagee..................................................... 43
ARTICLE XV.................................................................................................... 43
15.1 Total Taking or Other Taking with Leased Property Rendered Unsuitable for Its
Primary Intended Use ....................................................................... 43
15.2 Allocation of Award......................................................................... 44
</TABLE>
ii
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<TABLE>
<S> <C>
15.3 Partial Taking.............................................................................. 44
15.4 Temporary Taking............................................................................ 44
15.5 Awards Paid to Facility Mortgagee........................................................... 45
ARTICLE XVI................................................................................................... 45
16.1 Lessor's Rights Upon an Event of Default.................................................... 45
16.2 Certain Remedies............................................................................ 46
16.3 Damages..................................................................................... 46
[16.4 INTENTIONALLY OMITTED] ..................................................................... ..
16.5 Waiver...................................................................................... 47
16.6 Application of Funds........................................................................ 47
16.7 Bankruptcy.................................................................................. 47
ARTICLE XVII.................................................................................................. 48
17.1 Lessor's Right to Cure Lessee's Default..................................................... 48
ARTICLE XVIII................................................................................................. 48
18.1 Holding Over................................................................................ 48
18.2 Indemnity................................................................................... 48
ARTICLE XIX................................................................................................... 49
19.1 Subordination............................................................................... 49
19.2 Attornment.................................................................................. 49
19.3 Lessee's Certificate........................................................................ 49
ARTICLE XX.................................................................................................... 50
20.1 Risk of Loss................................................................................ 50
ARTICLE XXI................................................................................................... 50
21.1 Indemnification............................................................................. 50
ARTICLE XXII.................................................................................................. 51
22.1 General Prohibition against Transfers....................................................... 51
22.2 Consent to Certain Transfers................................................................ 51
22.3 Termination of Previously Existing Lease Agreements, etc.................................... 51
22.4 Subordination and Attornment................................................................ 52
22.5 Sublease Limitation......................................................................... 52
ARTICLE XXIII................................................................................................. 52
23.1 Officer's Certificates and Financial Statements............................................. 52
23.2 Public Offering Information................................................................. 54
ARTICLE XXIV.................................................................................................. 54
24.1 Lessor's Right to Inspect................................................................... 54
</TABLE>
iii
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<TABLE>
<S> <C>
ARTICLE XXV................................................................................................... 54
25.1 No Waiver................................................................................... 54
ARTICLE XXVI.................................................................................................. 55
26.1 Remedies Cumulative......................................................................... 55
ARTICLE XXVII................................................................................................. 55
27.1 Acceptance of Surrender..................................................................... 55
ARTICLE XXIII................................................................................................. 55
28.1 No Merger of Title.......................................................................... 55
28.2 No Partnership.............................................................................. 55
ARTICLE XXIX.................................................................................................. 55
29.1 Conveyance by Lessor........................................................................ 55
ARTICLE XXX................................................................................................... 56
30.1 Quiet Enjoyment............................................................................. 56
ARTICLE XXXI.................................................................................................. 56
31.1 Notices..................................................................................... 56
ARTICLE XXXII................................................................................................. 57
32.1 Appraisers.................................................................................. 57
ARTICLE XXXIII................................................................................................ 58
33.1 Breach by Lessor............................................................................ 58
ARTICLE XXXIV................................................................................................. 59
34.1 Lessor's Option to Purchase Lessee's Personal Property...................................... 59
34.2 Transfer of Operational Control of the Facilities........................................... 59
34.4 Intangibles and Personal Property........................................................... 61
ARTICLE XXXV.................................................................................................. 61
35.1 Arbitration................................................................................. 61
ARTICLE XXXVI................................................................................................. 62
36.1 Miscellaneous............................................................................... 62
ARTICLE XXXVII................................................................................................ 63
37.1 Commissions (Lessee)........................................................................ 63
37.2 Commissions (Lessor)........................................................................ 64
ARTICLE XVIII................................................................................................. 64
38.1 Memorandum or Short Form of Lease........................................................... 64
</TABLE>
iv
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<TABLE>
<S> <C>
ARTICLE XXXIX................................................................................................. 64
39.1 Security Deposit............................................................................ 64
39.2 Reduction in Security Deposit............................................................... 65
39.3 Application of Security Deposit............................................................. 65
39.4 Transfer of Security Deposit................................................................ 65
EXHIBIT A; FACILITY TRADE NAMES............................................................................... A-1
EXHIBIT B-___; DESCRIPTION OF LAND............................................................................ B-1
EXHIBIT C; LESSEE'S CERTIFICATE............................................................................... C-1
EXHIBIT D; MINIMUM REPURCHASE PRICES.......................................................................... D-1
EXHIBIT E-____; PERMITTED ENCUMBRANCES........................................................................ E-1
EXHIBIT F; CONSENT AND NON-DISTURBANCE AGREEMENT.............................................................. F-1
EXHIBIT G; MEMORANDUM OR SHORT FORM OF LEASE.................................................................. G-1
</TABLE>
v
<PAGE> 7
MASTER LEASE
THIS MASTER LEASE ("Lease") is executed and delivered as of this 14th
day of June, 1999, and is entered into by OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation ("Lessor"), the address of which is 900 Victors Way, Suite
350, Ann Arbor, Michigan 48108, and AHC PROPERTIES, INC., a Delaware corporation
("Lessee"), the address of which is 450 N. Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005.
RECITALS
The circumstances underlying the execution and delivery of this Lease
are as follows:
A. Capitalized terms used and not otherwise defined herein have the
respective meanings given them in Article II, below.
B. Lessor has purchased the real property described on page B-1 to this
Lease (together with the improvements thereon and the related fixtures and other
tangible and intangible property) from ALS-Clare Bridge, Inc., a Delaware
corporation, and Lessor has purchased all of the other Leased Properties from
Sterling House Corporation, a Kansas corporation.
C. Lessor now wishes to lease the Leased Properties to Lessee, and
Lessee wishes to lease the Leased Properties from Lessor, on the terms and
conditions set forth in this Lease.
NOW THEREFORE Lessor and Lessee agree as follows:
ARTICLE I
1.1 Lease. Upon and subject to the terms and conditions hereinafter set
forth, Lessor leases to Lessee, and Lessee leases from Lessor, the Leased
Properties. Each Facility is leased subject to all covenants, conditions,
restrictions, easements and other matters affecting such Facility, whether or
not of record, including the Permitted Encumbrances and other matters which
would be disclosed by an inspection of the Facility or by an accurate survey
thereof. Lessor represents and warrants to Lessee that, other than this Lease
and as provided in Section 22.2, Lessor has not consented to the creation or
existence of any liens or encumbrances that are not Permitted Exceptions and
that no liens or judgments attached to the Leased Properties or title thereto by
virtue of Lessor's taking title thereto; provided, however, that Lessor
hereafter shall have the right to encumber the Leased Properties with one or
more Facility Mortgage(s).
This Lease constitutes one indivisible lease of the Leased Properties,
and not separate leases governed by similar terms. The Leased Properties
constitute one economic unit, and the Base Rent and all other provisions have
been negotiated and agreed to based on a demise of all of the Leased Properties
as a single, composite, inseparable transaction and would have been
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substantially different had separate leases or a divisible lease been intended.
Except as expressly provided herein for specific, isolated purposes (and then
only to the extent expressly otherwise stated), all provisions of this Lease
apply equally and uniformly to all the Leased Properties as one unit. An Event
of Default with respect to any Leased Property is an Event of Default as to all
of the Leased Properties. The parties intend that the provisions of this Lease
shall at all times be construed, interpreted and applied so as to carry out
their mutual objective to create an indivisible lease of all the Leased
Properties and, in particular but without limitation, that for purposes of any
assumption, rejection or assignment of this Lease under 11 USC Section 365, this
is one indivisible and non-severable lease and executory contract dealing with
one legal and economic unit which must be assumed, rejected or assigned as a
whole with respect to all (and only all) the Leased Properties covered hereby.
1.2 Term. The initial term of this Lease ("Initial Term") shall be
fourteen (14) Lease Years plus the Preliminary Term, if any. The Initial Term
shall commence on the Commencement Date and end on the Expiration Date, subject
to renewal as set forth in Section 1.3, below.
1.3 Option to Renew. Lessee is hereby granted three (3) options to
renew this Lease, each of which options is for a period of ten (10) Lease Years,
for a maximum Term if such options are exercised of forty-four (44) Lease Years
plus the Preliminary Term, if any, on the following terms and conditions: (a) An
option to renew is exercisable only by Notice to Lessor at least three hundred
sixty five (365) days prior to the expiration of the Initial Term (or prior to
the expiration of the preceding Renewal Term, as the case may be); (b) The
absence of any Event of Default both at the time a renewal option is exercised
and at the commencement of a Renewal Term is a condition precedent to any
renewal of the Term; and (c) During a Renewal Term, all of the terms and
conditions of this Lease shall remain in full force and effect.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP as at the time applicable, (iii) all references in this Lease to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease, and (iv) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Lease
as a whole and not to any particular Article, Section or other subdivision.
Additional Charges: All Impositions and other amounts,
liabilities and obligations which Lessee assumes or agrees to pay under this
Lease.
Adjustment Date: January 1, 2000, and each January 1
thereafter during the Term.
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Affiliate: Any Person which, directly or indirectly, Controls
or is Controlled by or is under common Control with another Person.
Annual Site Inspection Fee: A fee of One Thousand Dollars
($1,000.00) for each Facility leased, which shall be paid by Lessee in each
Lease Year throughout the Term, beginning with the second (2nd) Lease Year, in
quarterly installments of Two Hundred and Fifty Dollars ($250.00) each at the
same time as the first (1st), fourth (4th), seventh (7th) and tenth (10th)
monthly installments of Base Rent are due in such Lease Year.
Approval Threshold: Fifty Thousand Dollars ($50,000.00)
Assessment: Any governmental assessment on the Leased
Properties or any part thereof for public or private improvements or benefits,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term.
Assumed Indebtedness: Any indebtedness or other obligations
expressly assumed in writing by Lessor and secured by a mortgage, deed of trust
or other security agreement to which Lessor's title to the Leased Properties is
subject.
Award: All compensation, sums or anything of value awarded,
paid or received in connection with a total or partial Taking.
Base Rent:
(A) During the Initial Term, the Base Rent shall be:
(1) For the first Lease Year, $1,776,411; and
(2) For each Lease Year in the Initial Term after the
first Lease Year, the Base Rent for the immediately preceding
Lease Year (annualized, if the first Lease Year is the
Preliminary Term) increased by fifty percent (50%) of the (a)
the sum of the Gross Revenue Increase, if any, during the
immediately preceding Lease Year and (b) the aggregate
Carryover for all prior Lease Years; provided, however, that
the Base Rent for a Lease Year shall never be less than the
Base Rent for the immediately preceding Lease Year nor (i) in
the case of the Lease Year beginning January 1, 2000, shall
the Base Rent be more than 1.0135% of the annualized Base Rent
for the Preliminary Term, and (ii) in the case of the Lease
Year beginning January 1, 2001, and each Lease Year
thereafter, shall the Base Rent be more than 1.025% of the
Base Rent for the immediately preceding Lease Year.
(3) The Purchase Agreement sets forth the terms and
conditions upon which "Additional Purchase Price" (as defined
in the Purchase Agreement) is to be paid to the sellers
pursuant to the Purchase Agreement. With respect to any
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portion of Additional Purchase Price paid on or before June
14, 2001, the Base Rent for the Lease Year in which such
portion thereof is paid shall be increased by an amount equal
to the product obtained by multiplying (a) the portion of
Additional Purchase Price so paid by (b) the quotient obtained
by dividing the Base Rent for the then current Lease Year by
the aggregate Purchase Price theretofore paid to the sellers
pursuant to the Purchase Agreement. With respect to any
portion of Additional Purchase Price paid on or after June 15,
2001, the Base Rent for the Lease Year in which such portion
thereof is made shall be increased by the greater of (aa) an
amount equal to the product obtained by multiplying (x) the
portion of the Additional Purchase Price so paid by (y) the
Omega Lease Rate for such Lease Year, or (bb) an amount equal
to the product obtained by multiplying (xx) the portion of
Additional Purchase Price so paid by (yy) the quotient
obtained by dividing the Base Rent for the then current Lease
Year by the aggregate Purchase Price theretofore paid to the
sellers pursuant to the Purchase Agreement . Any such increase
in Base Rent shall be effective as of the date upon which the
portion of Additional Purchase Price is paid, and for periods
of less than a full Lease Year such increase shall be prorated
on a daily basis and paid in equal monthly installments (or as
nearly equal as possible) on the first (1st) day of each month
remaining in such Lease Year.
(B) During a Renewal Term, the Base Rent shall be:
(1) For the first Lease Year of the Renewal Term, the
greater of (a) 1.025% of the Base Rent for the immediately
preceding Lease Year or (b) the Fair Market Rent for the
Leased Properties on the first day of such Renewal Term as
agreed upon by Lessor and Lessee, or, if prior to the
commencement of such Renewal Term they are unable to agree, as
determined by an appraisal pursuant to Article XXXII of this
Lease; provided, however, that in no event shall the Base Rent
for the first Lease Year of the Renewal Term ever be less than
the Base Rent for the immediately preceding Lease Year nor
more than 1.15% of the Base Rent for the immediately preceding
Lease Year; and
(2) For each succeeding Lease Year during such
Renewal Term, the Base Rent for the immediately preceding
Lease Year increased by application of the formula set forth
in (A)(2) above.
Break-even Operations: Break-even Operations shall have
occurred when the Facilities first achieve a Cash Flow to Rent Ratio of 1 or
more.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York are authorized, or obligated, by law or executive order, to close.
Capitalization Rate: 9.63.
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Capitalized Leases: Leases that in accordance with GAAP are
required to be capitalized for financial reporting purposes.
Capitalized Lease Obligations: All obligations under
Capitalized Leases the amount of the indebtedness for which shall be the
capitalized amount of such obligations determined in accordance with GAAP.
Carryover: The amount by which the Gross Revenue Increase for
a Lease Year exceeds two and one-half percent (2.5%) of the Base Rent for the
immediately preceding Lease Year or, as to the second Lease Year, the amount by
which the Gross Revenue Increase for the Preliminary Term exceeds one and 35/100
percent (1.35%) of the Base Rent for the Preliminary Term.
Cash Flow: For any period, the sum of (a) Net Income of Lessee
arising solely from the operation of the Facilities for the applicable period,
plus (b) the amounts deducted in computing Lessee's Net Income for the
applicable period for (i) depreciation, (ii) amortization, (iii) Base Rent, (iv)
interest (other than payments in the nature of interest under Capitalized Leases
and interest on any Purchase Money Financing), (v) income taxes (or, if greater,
income tax actually paid during the period) and (vi) management fees, less (c) a
management fee equal to five percent (5%) of Gross Revenues for the applicable
period.
Cash Flow to Rent Ratio: For any fiscal period, Cash Flow
divided by Base Rent.
Clean-Up: The investigation, removal, restoration, remediation
and/or elimination of, or other response to, Contamination, in each case to the
satisfaction of all governmental agencies having jurisdiction, in compliance
with or as may be required by Environmental Laws.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: The date set forth in the introductory
paragraph of this Lease.
Condemnor: Any public or quasi-public authority, or private
corporation or individual, having the power of condemnation. Construction Funds:
The Net Proceeds and such additional funds as may be deposited with Lessor by
Lessee pursuant to Section 14.6 for restoration or repair work pursuant to this
Lease.
Contamination: The presence, Release or threatened Release of
any Hazardous Substance at the Leased Properties in violation of any
Environmental Law, or in a quantity that would give rise to any affirmative
Clean-Up obligations under an Environmental Law, including, but not limited to,
the existence of any injury or potential injury to public health, safety,
natural resources or the environment associated therewith, or any other
environmental condition at, in, about, under or migrating from or to the Leased
Properties.
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Control (and its corollaries "Controlled by" and "under common
Control with"): Possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, through the
ownership of voting securities, partnership interests or other equity interests.
Consumer Price Index or CPI: The United States Department of
Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban
Consumers (1982=84=100), U.S. City Average, All Items, or, if that index is not
available at the time in question, the index designated by such Department as
the successor to such index, and if there is no index so designated, an index
for an area in the United States that most closely corresponds to the entire
United States, published by such Department, or if none, by any other
instrumentality of the United States.
Date of Taking: The date on which the Condemnor has the right
to possession of the Leased Property that is the subject of the Taking or
Partial Taking.
Debt: As of any date, all (a) obligations of a Person, whether
current or long-term, that in accordance with GAAP should be included as
liabilities on such Person's balance sheet; (b) Capitalized Lease Obligations of
such Person; (c) obligations of others for which that Person is liable directly
or indirectly, by way of guaranty (whether by direct guaranty, suretyship,
discount, endorsement, take-or-pay agreement, agreement to purchase or advance
or keep in funds or other agreement having the effect of a guaranty) or
otherwise; (d) liabilities and obligations secured by liens of any assets of
that Person, whether or not those liabilities or obligations are recourse to
that Person; and (e) liabilities of that Person, direct or contingent, with
respect to letters of credit issued for the account of that Person or others or
with respect to bankers acceptances created for that Person.
Encumbrance: Any mortgage, deed of trust, lien, encumbrance or
other matter affecting title to the Leased Properties, or any portion thereof or
interest therein, securing any borrowing or other means of financing or
refinancing.
Environmental Audit: A written certificate, in form and
substance satisfactory to Lessor, from an environmental consulting or
engineering firm acceptable to Lessor, which states that there is no
Contamination on the Leased Properties and that the Leased Properties are
otherwise in strict compliance with Environmental Laws.
Environmental Documents: Each and every (i) document received
by Lessee or any Affiliate from, or submitted by Lessee or any Affiliate to, the
United States Environmental Protection Agency and/or any other federal, state,
county or municipal agency responsible for enforcing or implementing
Environmental Laws with respect to the condition of the Leased Properties, or
Lessee's operations at the Leased Properties; and (ii) review, audit, report, or
other analysis or data pertaining to environmental conditions, including, but
not limited to, the presence or absence of Contamination, at, in, or under or
with respect to the Leased Properties that have been prepared by, for or on
behalf of Lessee.
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Environmental Laws: All federal, state and local laws
(including, without limitation, common law), statutes, codes, ordinances,
regulations, rules, orders, permits or decrees relating to the introduction,
emission, discharge or release of Hazardous Substances into the indoor or
outdoor environment (including without limitation, air, surface water,
groundwater, land or soil) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, transportation or disposal of Hazardous
Substances; or the Clean-Up of Contamination, all as are now or may hereinafter
be in effect.
Event of Default: The occurrence of any of the following:
(a) Lessee fails to pay or cause to be paid the Rent prior to
the expiration of two (2) Business Days after it is due and payable (provided
that such two (2) Business Day grace period shall apply on only two occasions
per Lease Year, after which in any Lease Year there shall be further no grace
period applicable to the failure to pay Rent when due);
(b) Lessee, on a petition in bankruptcy filed against it, is
adjudicated a bankrupt or has an order for relief thereunder entered against it,
or a court of competent jurisdiction enters an order or decree appointing a
receiver of Lessee or any Guarantor or of the whole or substantially all of its
property, or approving a petition filed against Lessee seeking reorganization or
arrangement of Lessee under the federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof, and such
judgment, order or decree is not vacated or set aside or stayed within ninety
(90) days from the date of the entry thereof, subject to the applicable
provisions of the Bankruptcy Code (11 USC Section 101, et seq.)
and to the provisions of Section 16.7, below;
(c) Lessee: (i) admits in writing its inability to pay its
debts generally as they become due, (ii) files a petition in bankruptcy or a
petition to take advantage of any insolvency law, (iii) makes a general
assignment for the benefit of its creditors, (iv) consents to the appointment of
a receiver of itself or of the whole or any substantial part of its property, or
(v) files a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof, subject to the applicable provisions of
the Bankruptcy Code (11 USC Section 101, et seq.) and to the provisions of
Section 16.7, below;
(d) Lessee is liquidated or dissolved, or begins proceedings
toward liquidation or dissolution, or has filed against it a petition or other
proceeding to cause it to be liquidated or dissolved and the proceeding is not
dismissed within thirty (30) days thereafter, or Lessee in any manner permits
the sale or divestiture of substantially all of its assets;
(e) The estate or interest of Lessee in the Leased Properties
or any part thereof is levied upon or attached in any proceeding and the same is
not vacated or discharged within thirty (30) days thereafter (unless Lessee is
in the process of contesting such lien or attachment in good faith in accordance
with Article XII hereof);
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(f) Lessee ceases operation of any Facility for a period in
excess of five (5) Business Days except upon prior Notice to, and with the
express prior written consent of, Lessor (which consent Lessor may withhold in
its absolute discretion), or as the unavoidable consequence of damage or
destruction as a result of a casualty, or a Partial or total Taking;
(g) Any representation or warranty made by a party (other than
Lessor) to the Purchase Agreement, or in the certificates delivered in
connection therewith, proves to be untrue when made in any material respect,
Lessor is materially and adversely affected thereby and Lessee fails within
twenty (20) days after Notice from Lessor thereof to cure such condition by
terminating such adverse effect and making Lessor whole for any damage suffered
therefrom, or, if with due diligence such cure cannot be effected within twenty
(20) days, if Lessee has failed to commence to cure the same within the twenty
(20) days or failed thereafter to proceed promptly and with due diligence to
cure such condition and complete such cure prior to the time that such condition
causes a default in any other lease to which Lessee is subject and prior to the
time that the same results in civil or criminal penalties to Lessor, Lessee, any
Affiliates of either or the Leased Properties;
(h) Lessee (or, if applicable, any sublessee or Manager) has
its license to operate any Facility as a provider of health care services in
accordance with its Primary Intended Use suspended or revoked or an order is
imposed suspending its right to operate or accept residents, which order is not
immediately stayed and promptly cured;
(i) A default occurs under any Guaranty;
(j) A Transfer occurs without the prior written consent of
Lessor;
(k) An Event of Default occurs under the Letter of Credit
Agreement or the Security Agreement;
(l) A default occurs under any other material contract
affecting any Facility or Lessee;
(m) Lessee breaches any of the financial covenants set forth
in Article VIII hereof and the breach is not cured within a period of the
shorter of (i) 30 days after the Notice thereof from Lessor, or (ii) 15 days
following the date of delivery of a certificate pursuant to Section 23.1 (i) or
23.1 (ii);
(n) Lessee or an Affiliate of Lessee defaults beyond any
applicable grace period in the payment of any amount or the performance of any
material act required of Lessee or such Affiliate by the terms of any other
lease or other agreement between Lessee or such Affiliate and Lessor or any
Affiliate of Lessor;
(o) Lessee fails to observe or perform any other term,
covenant or condition of this Lease and the failure is not cured by Lessee
within a period of thirty (30) days after Notice thereof from Lessor, unless the
failure cannot with due diligence be cured within a period
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of thirty (30) days, in which case such failure shall not be deemed an Event of
Default if and for so long as Lessee proceeds promptly and with due diligence to
cure the failure and completes the cure prior to the time that the same causes a
default in any Facility Mortgage or any other lease to which Lessee is subject
and prior to the time that the same results in civil or criminal penalties to
Lessor, Lessee, any Affiliates of either or to the Leased Properties;
(p) Lessee breaches any material representation or warranty
made by it in this Lease.
(q) The issuance or entry against Lessee of any award or
judgment exceeding any applicable insurance coverage by more than TWENTY FIVE
THOUSAND DOLLARS ($25,000.00) 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 Lessor (in its
sole and absolute discretion) having agreed to fund such award or judgment in a
manner satisfactory to Lessor (in its sole and absolute discretion);
(s) The issuance or entry against Guarantor of any award or
judgment exceeding any applicable insurance coverage by more than ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) 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 Lessor (in its
sole and absolute discretion) having agreed to fund such award or judgment in a
manner satisfactory to Lessor (in its sole and absolute discretion);
(t) The termination or suspension of the right of any Facility
to participate in Medicare, Medicaid or a similar program (collectively
"Provider Programs"), or the termination or suspension of the right of any
Facility to admit residents who would be entitled to receive benefits pursuant
to such Provider Programs, if in either case (i) such Facility participated at
any time during the Term in a Provider Program, and (ii) the revenues received
by or payable to such Facility from such Provider Programs equaled or exceeded
10% of such Facility's gross revenues in any Lease Year (annualized for periods
of less than an entire Lease Year);
(u) The final and unappealable revocation by a governmental
authority having jurisdiction of any permit required for the lawful construction
or operation of a 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 Lessee is required to cease the operation of the
Facility in accordance with the Primary Intended Use; or
(v) The occurrence of an Event of Default under the Kansas
Master Lease.
Expiration Date: December 31, 2013.
Facility: A health care facility on the Land, including the
Leased Property associated with such Facility.
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Facility Mortgage: Any mortgage, deed of trust or other
security agreement which with the express, prior, written consent of Lessor is a
lien upon any or all of the Leased Properties, whether such lien secures an
Assumed Indebtedness or another obligation or obligations.
Facility Mortgagee: The secured party to a Facility Mortgage.
Facility Trade Names: The name(s) under which the Facilities
have done business during the Term. The Facility Trade Names in use by the
Facilities on the Commencement Date are set forth on attached EXHIBIT A.
Fair Market Rent: The rent that, at the relevant time, a
Facility would most probably command in the open market, under a lease on
substantially the same terms and conditions as are set forth in this Lease with
a lessee unrelated to Lessor having experience and a reputation in the health
care industry and a credit standing reasonably equivalent to that of Guarantor,
and, if this Lease is guaranteed, with such lease being guaranteed by guarantors
having a net worth at least equal to that of Guarantor as of the date of this
Lease, with evidence of such rent being the rent that is being asked and agreed
to at such time under any leases of facilities comparable to such Facility being
entered into at such time in which the lessees and lease guarantors meet the
qualifications set forth in this sentence. Fair Market Rent shall be determined
in accordance with the appraisal procedure set forth in Article XXXII or in such
other manner as may be mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of a Facility at the
relevant time (i) assuming the same is unencumbered by this Lease, and (ii)
determined in accordance with the appraisal procedure set forth in Article XXXII
or in such other manner as may be mutually acceptable to Lessor and Lessee.
Financial Statement: As to Lessee for any period, a statement
of profit and loss for such period, and for the period from the beginning of the
fiscal year to the end of such period, in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared on a basis of accounting that is consistent
with that of Guarantor, certified to be accurate and complete by the chief
financial officer of Lessee and Guarantor. Guarantor's fiscal year-end Financial
Statement shall be an audited financial report prepared by KMPG, LLP or another
independent international firm of certified public accountants reasonably
satisfactory to Lessor, containing the Guarantor's balance sheet as of the end
of that year, its related profit and loss, a statement of shareholder's equity
for that year, a statement of cash flows for that year, any management letter
prepared by those certified public accountants and such comments and financial
details as are customarily included in reports of like character and the
unqualified opinion of the certified public accountants as to the fairness of
the statements therein.
Fixtures: Collectively, all permanently affixed equipment,
machinery, fixtures, and other items of real and/or personal property (excluding
Lessor's Personal Property), including all components thereof, now and hereafter
located in, on or used in connection with,
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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 (other than individual units), sprinkler
systems and fire and theft protection equipment, built-in oxygen and vacuum
systems, towers and other devices for the transmission of radio, television and
other signals, 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.
Force Majeure: An event or condition beyond the control of a
Person, including without limitation a flood, earthquake, or other Act of God; a
fire or other casualty resulting in a complete or partial destruction of the
Facility in question; a war, revolution, riot, civil insurrection or commotion,
terrorism, or vandalism; unusual governmental action, delay, restriction, or
regulation not reasonably to be expected; a contractor or supplier delay or
failure in performance (not arising from a failure to pay any undisputed amount
due), or a delay in the delivery of essential equipment or materials; bankruptcy
or other insolvency of a contractor, subcontractor, or construction manager (not
an Affiliate of the party claiming Force Majeure); a strike, slowdown, or other
similar labor action; or any other similar event or condition beyond the
reasonable control of the party claiming that Force Majeure is delaying or
preventing such party from timely and fully performing its obligations under
this Lease; provided that in any such event, the party claiming the existence of
Force Majeure shall have given the other party Notice of such claim within
fifteen (15) days after becoming aware thereof, and if the party claiming Force
Majeure shall fail to give such Notice, then the event or condition shall not be
considered Force Majeure for any period preceding the date such Notice shall be
given. No lack of funds shall be construed as Force Majeure.
GAAP: Generally accepted accounting principles, consistently
applied, in effect at the time in question.
Gross Revenues: All revenues received or receivable from or by
reason of the operation of the Facilities, or any other use of the Leased
Properties, including without limitation all resident revenues received or
receivable for the use of or otherwise by reason of all rooms, beds, and other
facilities provided, meals served, services performed, space or facilities
subleased or goods sold on the Leased Properties and, except as provided below,
any consideration received for any sublease, license or other arrangement with
an unrelated third party in possession, or using, any portion of the Leased
Properties, and all revenues received or receivable by Lessee and any Affiliates
of Lessee from the operation of any nursing home, rest home, assisted living
facility, subacute facility, retirement center or similar health care facility
located within a ten (10) mile radius of any of the Leased Properties. Gross
Revenues shall not, however, include:
(i) revenue from professional fees or charges by physicians,
physical therapists, pharmacy services, hairdressers and barbers,
hospice care and manicurists when and to the extent such charges are
paid over to such providers or are accompanied by separate charges for
use of a Facility or any portion thereof,
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(ii) non-operating revenues such as interest income or income
from the sale of assets not sold in the ordinary course of business,
(iii) contractual allowances and reasonable reserves (relating
to any period during the Term) for billings not paid by or received
from the appropriate governmental agencies, third party providers or
other payor,
(iv) all proper resident billing credits and adjustments
according to generally accepted accounting principles relating to
health care accounting, and
(v) federal, state or local sales or excise taxes and any tax
based upon or measured by said 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.
If any of the Leased Properties or any part thereof is subleased, or a
license permitting the use thereof is granted to an Affiliate of Lessee, Gross
Revenues shall include all revenues received or receivable by the sublessee or
licensee from its use of the Leased Properties and any rent or equivalent
payment by the sublessee or licensee received or receivable by Lessee from such
sublease or licensee shall be excluded from Gross Revenues (provided, however,
that in the case of a sublease of space for the placement or erection of
antennae or similar device, the rent or equivalent payment shall be included in
Gross Revenues).
Gross Revenue Increase: For any Lease Year, the increase, if
any, in aggregate Gross Revenues of the Leased Properties for such Lease Year
over aggregate Gross Revenues for the immediately preceding Lease Year;
provided, however, that for purposes of determining Base Rent for the Lease Year
beginning January 1, 2000, Gross Revenue Increase shall mean aggregate Gross
Revenues of the Leased Properties for the Preliminary Term minus aggregate Gross
Revenues of the Leased Properties for the period from and including January 1,
1999 through June 14, 1999.
Guarantor: Alterra Healthcare Corporation, a Delaware
corporation.
Guaranty: The Guaranty of even date herewith executed by the
Guarantor.
Hazardous Substance: Dangerous, toxic or hazardous material,
substance, pollutant, contaminant, chemical, waste (including medical waste),
including petroleum products, asbestos and PCBs defined, listed or described as
such under any Environmental Law.
Impositions: Collectively, all taxes (including, without
limitation, all capital stock and franchise taxes of Lessor and all ad valorem,
sales and use, single business, gross receipts, transaction privilege, rent or
similar taxes to the extent the same are assessed against Lessor on the basis of
its gross or net income from this Lease or the value of the Leased Property or
both), assessments (including Assessments), ground rents, water, sewer or other
rents and
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charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), 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 the Leased Properties
or the businesses conducted thereon by Lessee and/or the Rent (including all
interest and penalties thereon), which at any time prior to, during or in
respect of the Term may be assessed or imposed on or in respect of or be a lien
upon (i) Lessor or Lessor's interest in the Leased Properties, (ii) the Leased
Properties or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (iii) any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Leased
Properties or the leasing or use of the Leased Properties or any part thereof or
(iv) the Rent; notwithstanding the foregoing, Imposition shall not include: (i)
except as provided above, any tax imposed on Lessor's gross or net income
generally and not specifically arising in connection with the Leased Properties
(unless such a tax is levied, assessed or imposed in lieu of a portion or all of
a tax which was included within the definition of "Imposition,") , (ii) any
transfer or other tax imposed with respect to the sale, exchange or other
disposition by Lessor of the Leased Properties or any part thereof or the
proceeds thereof, or (iii) any tax imposed as a result of a Facility Mortgage
placed by Lessor on a Facility.
Initial Term: As defined in Section 1.2 hereof.
Insurance Requirements: All terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
Investigation: Soil and chemical tests or any other
environmental investigations, examinations or analyses.
Judgment Date: The date on which a judgment is entered against
Lessee which establishes, without the possibility of appeal, the amount of
liquidated damages to which Lessor is entitled hereunder.
Kansas Master Lease: The Kansas Master Lease of even date
herewith between Omega (Kansas), Inc., a Kansas corporation, as lessor, and
Lessee, as lessee.
Land: The real property described in EXHIBITS B-1 through B-9
attached hereto.
Lease: As defined in the Preamble.
Lease Year: Each period from and including January 1 through
December 31 during the Term of this Lease, except that if there is a Preliminary
Term, the first Lease Year shall be the period from and including the
Commencement Date through the end of the Preliminary Term. If this Lease is
terminated before the end of any Lease Year, the final Lease Year shall be
January 1 of the year in which the Term expires or the Lease terminates through
the date of termination.
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Leased Improvements: Collectively, all buildings, structures,
Fixtures and other improvements of every kind on the Land including, but not
limited to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits
and lines (on-site and off-site), parking areas and roadways appurtenant to such
buildings and structures.
Leased Property: The portion of the Land on which a Facility
is located, the legal description of which is set forth beneath the Facility's
name on EXHIBITS B-1 through B-9, the Leased Improvements on such portion of the
Land, the Related Rights with respect to such portion of the Land, and Lessor's
Personal Property with respect to such Facility.
Leased Properties: All of the Land, Leased Improvements,
Related Rights and Lessor's Personal Property.
Legal Requirements: All federal, state, county, municipal and
other governmental statutes, laws, rules, orders, waivers, regulations,
ordinances, judgments, decrees and injunctions affecting the Leased Properties
or any portion thereof, Lessee's Personal Property or the construction, use or
alteration thereof, including but not limited to the Americans with Disabilities
Act, whether enacted and in force before, after or on the Commencement Date, and
including any which may (i) require repairs, modifications, alterations or
additions in or to any portion or all of the Facilities, or (ii) in any way
adversely affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto including, but not limited to,
those relating to existing health care licenses, those authorizing the current
number of licensed beds and the level of services delivered from the Leased
Properties, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to Lessee (other than
Facility Mortgages and other encumbrances created by Lessor), in force at any
time during the Term.
Lessee's Certificate: A statement in writing in substantially
the form of EXHIBIT C attached hereto (with such changes thereto as may
reasonably be requested by the person relying on such certificate).
Lessee's Personal Property: Personal Property owned or leased
by Lessee that is not included within the definition of Lessor's Personal
Property but is used by Lessee in the operation of the Facilities, including
Personal Property provided by Lessee in compliance with Section 6.3 hereof.
Lessor's Future Rent Loss: An amount equal to the Rent which
would have been payable by Lessee from and after the Liquidated Damages Payment
Date through the Expiration Date had the Lease not been terminated, plus such
additional amount as may be necessary in order to compensate Lessor for all
other damages proximately caused by Lessee's failure to perform its obligations
under this Lease which in the ordinary course of business would be likely to
result therefrom.
Lessor's Interim Rent Loss: An amount equal to the Rent which
would have been payable by Lessee from the Termination Date through the Judgment
Date had the Lease not been
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terminated (including interest and late charges determined on the basis of the
date or dates on which Lessor's Interim Rent Loss is actually paid by Lessee),
plus such additional amount as may be necessary in order to compensate Lessor
for all other damages proximately caused by Lessee's failure to perform its
obligations under this Lease which in the ordinary course of business would be
likely to result therefrom.
Lessor's Monthly Rent Loss: For any month, an amount equal to
the installment of Rent which would have been due in such month under the Lease
if it had not been terminated, plus, if such amount is not paid on or before the
day of the month on which such installment of Rent would have been due, the
amount of interest and late charges thereon which would also have been due under
the Lease, plus such additional amount as may be necessary in order to
compensate Lessor for all other damages proximately caused by Lessee's failure
to perform its obligations under this Lease which in the ordinary course of
business would be likely to result therefrom.
Lessor's Personal Property: All Personal Property and
intangibles, if any, owned by Lessor and leased to Lessee on the Commencement
Date, and all Personal Property and intangibles required in order to commence
operations of a Facility for the Primary Intended Use (whether in use on the
Commencement Date or thereafter), together with any and all replacements
thereof, and all Personal Property that pursuant to the terms of the Lease
becomes the property of Lessor during the Term; provided, however that Lessor's
Personal Property shall not include Lessee's proprietary brochures, computers,
computer software or any vehicles or other Personal Property that is leased by
Lessee as permitted by this Lease.
Letter of Credit Agreement: An agreement between Lessor and
Lessee providing for a letter of credit to be delivered to Lessor as the
Security Deposit.
Liquidated Damages Payment Date: The date on which Lessee pays
Lessor all of the liquidated damages for which it is liable under Article XVI.
Management Agreement: Any agreement pursuant to which
management of a Facility is delegated to any person not an employee of Lessee or
to any other related or unrelated party. Without limiting this definition, each
of the agreements between a sublessee referred to in Section 22.2 and Guarantor
pursuant to which Guarantor manages a Facility is a Management Agreement.
Manager: The Person to which management of the operation of a
Facility is delegated pursuant to a Management Agreement.
Minimum Repurchase Price: As to each Facility, the amount set
forth opposite its name on attached EXHIBIT D, increased by three percent (3%)
compounded annually each Lease Year (pro rata for any Preliminary Term and
partial Lease Year) from the Commencement Date through the date of repurchase by
Lessee.
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Net Income: For any period, Lessee's net income (or loss) for
such period, determined in accordance with GAAP, provided, however, that
Lessee's Net Income shall not include:
(a) any after-tax gains or losses attributable to
returned surplus assets of any pension-benefit plan;
(b) any extraordinary gains or losses or nonrecurring
gains or losses;
(c) any gains or losses realized upon the sale or other
disposition of property which is not sold or
otherwise disposed of in the ordinary course of
business;
(d) any gains or losses realized upon the sale or other
disposition of any capital stock of any Person;
(e) any gains or losses from the disposal of a
discontinued business;
(f) the cumulative effect on prior years of any change in
an accounting principle;
(g) the income or loss of any Person acquired by Lessee
or an Affiliate in a pooling of interests transaction
for any period prior to the date of such acquisition;
(h) the income or loss from any sale of assets in which
the book value of such assets had been the book value
of any Person acquired in a pooling-of-interests
transaction prior to the date such Person became an
Affiliate of Lessee;
(i) the income of Lessee to the extent the payment of
such income is not permitted, whether on account of
any law, statute, judgment, decree or governmental
order, rule or regulation applicable to such Lessee;
(j) all amounts included in computing such net income (or
loss) in respect of the write-up of any asset or the
write-down of any Debt at less than face value after
the later of the Commencement Date or the date on
which such asset or Debt was first properly included
on Lessee's balance sheet.
(k) the reduction or increase in income tax expense
resulting from an increase or decrease in a deferred
income tax asset due to the anticipation of future
income tax benefits or obligations; or
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(l) the reduction or increase in income tax expense
resulting from an increase or decrease in a deferred
income tax asset or from a decrease or increase in a
deferred income tax liability due to a change in a
statutory tax rate.
Net Proceeds: All proceeds, net of any costs incurred by
Lessor in obtaining such proceeds, payable under any policy of insurance
required by Article XIII of this Lease (including any proceeds with respect to
Lessee's Personal Property that Lessee is required or elects to restore or
replace pursuant to Section 14.3) or paid by a Condemnor for the Taking of any
of all or any portion of a Leased Property.
Net Reletting Proceeds: Proceeds of the reletting of any
portion of the Leased Property received by Lessor, net of Reletting Costs.
Net Worth: At any date, net worth as determined in conformity
with GAAP.
Notice: A notice given in accordance with Article XXXI hereof.
Notice of Termination: A Notice from Lessor that it is
terminating this Lease by reason of an Event of Default.
Officer's Certificate: If for a corporation, a certificate
signed by one or more officers of the corporation authorized to do so by the
bylaws of such corporation or a resolution of the Board of Directors thereof; if
for a partnership, limited liability company or any other kind of entity, a
certificate signed by a Person having the authority to so act on behalf of such
entity.
Omega Lease Rate: The average yield to Lessor on leases,
entered into during the one hundred twenty (120) days preceding the date of the
payment of such portion of Additional Purchase Price, of assisted living and/or
dementia care facilities to lessees whose creditworthiness, alone or, as to any
such lease or leases which are guaranteed, in combination with that of the
guarantor or guarantors thereof, is similar to the creditworthiness of Lessee
and Guarantor on the date of this Lease.
Overdue Rate: On any date, the interest rate that is equal to
five percent (5%) (five hundred (500) basis points) above the Prime Rate, but in
no event greater than the maximum rate then permitted under applicable law.
Partial Taking: A taking of less than the entire fee of a
Leased Property that either (i) does not render the Leased Property Unsuitable
for its Primary Intended Use, or (ii) renders a Leased Property Unsuitable for
its Primary Intended Use, but neither Lessor nor Lessee elects pursuant to
Section 15.1 hereof to terminate this Lease.
Payment Date: Any due date for the payment of the installments
of Base Rent or for the payment of Additional Charges or any other amount
required to be paid by Lessee hereunder.
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Permitted Encumbrances: Encumbrances listed on attached
EXHIBIT E.
Person: Any natural person, trust, partnership, corporation,
joint venture, limited liability company or other legal entity.
Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers (and all associated
software), trade fixtures and other personal property (but excluding consumable
inventory and supplies owned by Lessee) used in connection with the Leased
Properties, together with all replacements and alterations thereof and additions
thereto, except items, if any, included within the definition of Fixtures or
Leased Improvements.
Portfolio Stabilization: Portfolio Stabilization shall have
occurred when the Cash Flow to Rent Ratio required by the first sentence of
Section 8.2.1.2 has first been achieved.
Preliminary Term: If the Commencement Date is not January 1,
the period from and including the Commencement Date through December 31st of the
calendar year in which the Commencement Date occurs.
Present Value: The value of future payments, determined by
discounting each such payment at a rate equal to the yield on the specified date
on securities issued by the United States Treasury (bills, notes and bonds)
maturing on the date closest to December 31 in the year in which such future
payment would have been due.
Primary Intended Use: Assisted living facility and/or dementia
care, together with incidental uses thereof for the care and/or housing of the
elderly, such as (provided the following are individually and in the aggregate
incidental and ancillary to the use of a Facility for assisted living and/or
dementia care) adult day care, physical therapy, hospice care, pharmacy and
related uses.
Prime Rate: On any date, an interest rate equal to the prime
rate published by the Wall Street Journal, but in no event greater than the
maximum rate then permitted under applicable law. If the Wall Street Journal
ceases to be in existence, or for any reason no longer publishes such prime
rate, the Prime Rate shall be the rate announced as its prime rate by Fleet
Bank, and if such bank no longer exists or does not announce a prime rate at
such time, the Prime Rate shall be the rate of interest announced as its prime
rate by a national bank selected by Lessor.
Proceeding: Any action, proposal or investigation by any
agency or entity.
Purchase Agreement: The Purchase Agreement and Agreement to
Complete Construction of even date among Lessor, as purchaser, Sterling House
Corporation and ALS-Clare Bridge, Inc., as sellers, and Guarantor.
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Purchase Money Financing: Any financing provided by a Person
to Lessee in connection with the acquisition of Personal Property used in
connection with the operation of a Facility, whether by way of installment sale
or otherwise.
Qualified Capital Expenditures: Expenditures capitalized on
the books of Lessee for any of the following:
Replacement of furniture, fixtures and equipment, including
refrigerators, ranges, major appliances, bathroom fixtures,
doors (exterior and interior), central air conditioning and
heating systems (including cooling towers, water chilling
units, furnaces, boilers and fuel storage tanks) and major
replacement of siding; major roof replacements, including
major replacements of gutters, downspouts, eaves and soffits;
major repairs and replacements of plumbing and sanitary
systems; overhaul of elevator systems; major repaving,
resurfacing and sealcoating of sidewalks, parking lots and
driveways; repainting of entire building exterior; but
excluding major alterations, renovations, additions, normal
maintenance and repairs.
Regulatory Actions: Any claim, demand, notice, action or
proceeding brought, threatened or initiated by any governmental authority in
connection with any Environmental Law, including, without limitation, civil,
criminal and administrative proceedings, whether or not the remedy sought is
costs, damages, equitable remedies, penalties or expenses.
Related Rights: All easements, rights and appurtenances
relating to the Land and the Leased Improvements.
Release: The intentional or unintentional spilling, leaking,
dumping, pouring, emptying, seeping, disposing, discharging, emitting,
depositing, injecting, leaching, escaping, abandoning, or any other release or
threatened release, however defined, of any Hazardous Substance.
Reletting Costs: Actual expenses incurred by Lessor in
connection with the reletting of the Leased Properties in whole or in part after
an Event of Default, including without limitation attorneys' fees and expenses,
brokerage fees and expenses, marketing expenses and the cost of repairs and
renovations reasonably required for such reletting.
Renewal Term: A period for which the Term is renewed in
accordance with Section 1.3.
Rent: Collectively, Base Rent, Annual Site Inspection Fee and
Additional Charges.
Replacement Cost: The actual replacement cost of a Leased
Property, including an increased cost of construction endorsement, less
exclusions provided in the standard form of fire insurance policy. In all events
Replacement Cost shall be an amount sufficient that neither
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Lessor nor Lessee is deemed to be a co-insurer of the Leased Property in
question. Lessor shall have the right from time to time, but no more frequently
than once in any period of three (3) consecutive Lease Years, to have
Replacement Cost reasonably redetermined by the fire insurance company which is
then carrying the largest amount of fire insurance on the Leased Properties,
which determination shall be final and binding on the parties hereto, and upon
such determination Lessee shall forthwith increase, but not decrease, the amount
of the insurance carried pursuant to Section 13.2.1 to the amount so determined,
subject to the approval of any Facility Mortgagee. Lessee shall pay the fee, if
any, of the insurer making such determination.
SEC: Securities and Exchange Commission.
Security Agreement: The Security Agreement of even date
between Lessor as secured party and Lessee as debtor.
Security Deposit: Two Million Four Hundred Eighty-Five
Thousand Four Hundred and Ninety-Eight Dollars ($2,485,498), to be delivered and
held in accordance with Article XXXIX hereof.
Special Risk Insurance: The insurance coverage required by
Section 13.2.1.
State(s): The State or States in which the Leased Properties
are located.
Taken: Conveyed pursuant to a Taking.
Taking: A taking or voluntary conveyance during the Term of
all or part of a 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 whether or not
the same shall have actually been commenced.
Term: Collectively, the Initial Term plus the Renewal Term or
Renewal Terms, if any.
Termination Date: The tenth (10th) day following the date on
which a Notice of Termination is given.
Third Party Claims: Any claims, actions, demands or
proceedings (other than Regulatory Actions) howsoever based (including without
limitation those based on negligence, trespass, strict liability, nuisance,
toxic tort or detriment to health welfare or property) due to Contamination,
whether or not the remedy sought is costs, damages, penalties or expenses,
brought by any person or entity other than a governmental agency.
Transaction Documents: This Lease, the Kansas Master Lease,
the Purchase Agreement and the letter of credit agreements, security agreements,
pledge agreements, subordination agreements, guaranties and other documents
which evidence, secure or otherwise relate to this Lease, the Kansas Master
Lease and the Purchase Agreement.
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Transfer: The (a) assignment, mortgaging or other encumbering
of all or any part of Lessee's interest in this Lease or in the Leased
Properties, or (b) subletting of the whole or any part of any Leased Property,
or (c) entering into of any Management Agreement or other arrangement under
which any Facility is operated by or licensed to be operated by an entity other
than Guarantor, or (d) merger, consolidation or reorganization of a corporate
Lessee or of any corporate Guarantor or corporate Manager, or the sale,
issuance, or transfer, cumulatively or in one transaction, of any voting stock
by Lessee, any Guarantor or Manager or by Persons who are stockholders of record
of Lessee, any Guarantor or Manager, which (with respect to such merger,
consolidation, reorganization, sale, issuance or transfer, as applicable)
results in a change of Control of Lessee, any Guarantor or Manager, or (e) sale,
issuance or transfer, cumulatively or in one transaction, of any interest, or
the termination of any interest, in Lessee, any Guarantor or Manager if Lessee,
such Guarantor or such Manager is a joint venture, partnership, limited
liability company or other association (other than a corporation), which results
in a change of Control of such joint venture, partnership or other association.
Notwithstanding the foregoing, a change in Control of Lessee or Guarantor or
Manager resulting from (a) a sale, issuance or transfer of any stock in
Guarantor or Manager or (b) a merger, consolidation, reorganization or other
business combination involving Guarantor or Manager shall not constitute a
"Transfer," provided that (i) after the change of Control, the Net Worth of the
Guarantor or such successor entity, on a consolidated basis, is at least equal
to ONE HUNDRED MILLION DOLLARS ($100,000,000.00); (ii) Guarantor or Guarantor's
parent corporation following such transaction is, at the time of or immediately
after such transaction, a publicly held corporation; and (iii) in the event of a
merger, consolidation, reorganization or other business combination involving
Guarantor, the successor entity of Guarantor, if any, executes and delivers to
Lessor a Guaranty, in substantially the form of the Guaranty executed by
Guarantor, pursuant to which the successor entity guarantees to Lessor the
payment and performance by Lessee of its obligations under this Lease.
Transferee: An assignee, subtenant or other occupant of a
Leased Property pursuant to a Transfer.
Unsuitable for Its Primary Intended Use: A state or condition
of a Facility such that by reason of a Partial Taking, the Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use,
taking into account, among other relevant factors, the number of usable beds
permitted by applicable law and regulation in the Facility after the Partial
Taking, the square footage Taken and the estimated revenue impact of such
Partial Taking.
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ARTICLE III
3.1 Base Rent; Monthly Installments. In addition to all other payments
to be made by Lessee under this Lease, Lessee shall pay Lessor the Base Rent in
lawful money of the United States of America which is legal tender for the
payment of public and private debts, in advance, in equal, consecutive monthly
installments. The first installment of Base Rent shall be payable on the
Commencement Date, together with a prorated amount of Base Rent for the period
from the Commencement Date until the last day of the first full calendar month
of the Term. Thereafter, installments of Base Rent shall be payable on the first
(1st) day of each calendar month. Base Rent shall be paid to Lessor, or to such
other Person as Lessor from time to time may designate by Notice to Lessee, by
wire transfer of immediately available federal funds to the bank account
designated in writing by Lessor. If Lessor directs Lessee to pay any Base Rent
or Additional Charges to any Person other than Lessor, Lessee shall send to
Lessor such evidence of such payment as Lessor may require.
3.2 Additional Charges. In addition to the Base Rent, Lessee will also
pay as and when due (a) the Annual Site Inspection Fee and (b) all Additional
Charges.
3.3 Late Charge; Interest If any Rent payable to Lessor is not paid
when due, Lessee shall pay Lessor on demand, as an Additional Charge, (a) a late
charge equal to the greater of (i) five percent (5%) of the amount not paid when
due and (ii) any and all charges, expenses, fees or penalties imposed on Lessor
by a Facility Mortgagee for late payment, plus (b) if such Rent (including the
late charge) is not paid within thirty (30) days of the date due, interest
thereon at the Overdue Rate from such thirtieth (30th) day until such Rent
(including the late charge and interest) is paid in full.
3.4 Net Lease.
3.4.1 The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount of the Rent payable to Lessor
hereunder throughout the Term, subject only to any provisions of the Lease which
expressly provide for adjustment or abatement of Rent or other charges.
3.4.2 If Lessor commences any proceedings for non-payment of
Rent, Lessee will not interpose any counterclaim or cross complaint or similar
pleading of any nature or description (other than an alleged default by Lessor
under Section 30.1) in such proceedings unless Lessee would lose or waive such
claim by the failure to assert it, but Lessee does not waive any rights to
assert such claim in a separate action brought by Lessee. The covenants to pay
Rent are independent covenants, and Lessee shall have no right to hold back,
offset or fail to pay any Rent because of any alleged default by Lessor or for
any other reason whatsoever, other than after the entry of a final judgment of a
court of competent jurisdiction that Lessor has breached Section 30.1.
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3.5 Payments In The Event of a Rent Adjustment. In the event this Lease
provides for adjustment of the Base Rent on any basis that requires a
determination of Base Rent which cannot be made on or before the due date of the
first installment of Base Rent following the Adjustment Date, Lessee shall
continue to pay the Base Rent at the rate previously in effect until Lessor
gives Lessee Notice of its determination of the adjusted Base Rent. Upon such
determination, the Base Rent shall be retroactively adjusted as of the
Adjustment Date. On or before the second (2nd) Payment Date for Base Rent
following receipt by Lessee of Lessor's Notice of the adjustment, Lessee shall
make an additional payment of Base Rent in such amount as will bring the Base
Rent, as adjusted, current on or before such second (2nd) Payment Date, and
thereafter Lessee shall pay the adjusted Base Rent in correspondingly adjusted
monthly installments until the Base Rent is next adjusted as required herein.
This Section 3.5 shall survive the expiration or termination of this Lease with
respect to any adjustment which is not known or fully paid as of the date of
expiration or termination.
ARTICLE IV
4.1 Payment of Impositions. Subject to Article XII relating to
permitted contests, Lessee will pay all Impositions before any fine, penalty,
interest or cost is added for non-payment, and will promptly, upon request,
furnish to Lessor copies of official receipts or other satisfactory proof
evidencing such payments. If at the option of the taxpayer any Imposition may
lawfully be paid in installments, Lessee may pay the same in the required
installments provided it also pays any and all interest due thereon as and when
due.
Lessee shall prepare and file as and when required all tax returns and
reports required by governmental authorities with respect to all Impositions.
Lessor and Lessee shall each, upon request, provide the other with such data,
including without limitation cost and depreciation records, as is maintained by
the party to whom the request is made as is necessary to prepare any required
returns and reports.
Lessee shall be entitled to receive and retain any refund from a taxing
authority in respect of an Imposition paid by Lessee if at the time of the
refund no Event of Default has occurred and is continuing, but if an Event of
Default has occurred and is continuing at the time of the refund, Lessee shall
not be entitled to receive or retain such refund and if and when received by
Lessor such refund shall be applied as provided in Article XVI. Lessor shall pay
over to Lessee, promptly upon receipt, any refund to which Lessee would be
entitled under the preceding sentence that is received by Lessor after the
expiration or earlier termination of this Lease.
4.2 Adjustment of Impositions. Impositions imposed in respect of the
tax-fiscal period during which the Term ends shall be adjusted and prorated
between Lessor and Lessee, whether or not imposed before or after the expiration
of the Term or the earlier termination thereof, and Lessee's obligation to pay
and Lessor's obligation to refund the prorated share thereof shall survive such
expiration or earlier termination.
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4.3 Utility Charges. Lessee will pay or cause to be paid when due all
charges for electricity, power, gas, oil, water and other utilities imposed upon
the Leased Properties or upon Lessor or Lessee with respect to the Leased
Properties.
4.4 Insurance Premiums. Lessee shall pay or cause to be paid when due
all premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term.
ARTICLE V
5.1 No Termination, Abatement, etc. Lessee shall not take any action
without the consent of Lessor to modify, surrender or terminate this Lease, and
shall not seek or be entitled to any abatement, deduction, deferment or
reduction of Rent, or setoff against Rent, other than after the entry of a final
judgment of a court of competent jurisdiction that Lessor has breached Section
30.1. The respective obligations of Lessor and Lessee shall not be affected by
reason of (i) any damage to, or destruction of, the Leased Properties or any
portion thereof from whatever cause or any Taking of the Leased Properties or
any portion thereof, except as expressly set forth herein; (ii) the lawful or
unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Properties, or any portion thereof, or the interference with such use by any
Person or by reason of eviction by paramount title (other than by the holder(s)
of any Facility Mortgage(s) or other encumbrances now or hereafter placed on a
Facility by Lessor and the claimants under liens attaching to a Facility as a
result of Lessor's ownership of an interest therein); (iii) any claim which
Lessee has or might have against Lessor or by reason of any default or breach of
any warranty by Lessor under this Lease or any other agreement between Lessor
and Lessee (other than Section 30.1), or to which Lessor and Lessee are parties,
(iv) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor, or (v) any other cause whether similar or
dissimilar to any of the foregoing other than a discharge of Lessee from any
such obligations as a matter of law. Lessee hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law to (i) modify, surrender or terminate this Lease or
quit or surrender the Leased Properties or any portion thereof, or (ii) entitle
Lessee to any abatement, reduction, suspension or deferment of the Rent or other
sums payable by Lessee hereunder except as otherwise specifically provided in
this Lease.
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ARTICLE VI
6.1 Ownership of the Leased Properties. Lessee acknowledges that the
Leased Properties are the property of Lessor and that Lessee has only the right
to the possession and use of the Leased Properties upon the terms and conditions
of this Lease. Lessee will not (i) file any income tax return or other
associated documents; (ii) file any other document with or submit any document
to any governmental body or authority; (iii) enter into any written contractual
arrangement with any Person; or (iv) release any financial statement of Lessee,
in any case that takes any position other than that throughout the Term Lessor
is the owner of the Leased Properties for federal, state and local income tax
purposes, this Lease is a "true lease" and an "operating lease" and not a
"capital lease".
6.2 Lessor's Personal Property. Lessee shall, during the entire Term,
maintain all of Lessor's Personal Property in good order, condition and repair
as shall be necessary in order to operate the Facilities for the Primary
Intended Use in compliance with all applicable licensure and certification
requirements, all applicable Legal Requirements and Insurance Requirements, and
customary industry practice for the Primary Intended Use. If any of Lessor's
Personal Property requires replacement in order to comply with the foregoing,
Lessee shall replace it with similar property of the same or better quality at
Lessee's sole cost and expense, and when such replacement property is placed in
service with respect to the Leased Property it shall become Lessor's Personal
Property. Lessee shall not permit or suffer Lessor's Personal Property to be
subject to any lien, charge, encumbrance, financing statement, contract of sale,
equipment lessor's interest or the like, except for any purchase money security
interest or equipment lessor's interest expressly approved in advance, in
writing, by Lessor. At the expiration or earlier termination of this Lease, all
of Lessor's Personal Property shall be surrendered to Lessor with the Leased
Properties at or before the time of the surrender of the Leased Property in at
least as good a condition as at the Commencement Date (or, as to replacements,
in at least as good a condition as when placed in service at the Facilities)
except for ordinary wear and tear.
6.3 Lessee's Personal Property. Lessee shall provide and maintain
during the Term such Personal Property, in addition to Lessor's Personal
Property, as shall be necessary and appropriate in order to operate the
Facilities for the Primary Intended Use in compliance with all licensure and
certification requirements, 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. Without the prior written consent
of Lessor, Lessee shall not permit or suffer Lessee's Personal Property to be
subject to any lien, charge, encumbrance, financing statement or contract of
sale or the like other than as permitted by Section 8.2.1.3. Upon the expiration
of the Term or the earlier termination of this Lease, without the payment of any
additional consideration by Lessor, Lessee shall be deemed to have sold,
assigned, transferred and conveyed to Lessor all of Lessee's right, title and
interest in and to any of Lessee's Personal Property that, in Lessor's
reasonable judgment, is integral to the Primary Intended Use of the Facilities
(or if some other use thereof has been approved by Lessor as required herein,
such other use as is then being made by Lessee) and, as provided in Section 34.1
hereof, Lessor shall have the option to purchase any of Lessee's Personal
Property that is not then integral to such use. Without Lessor's prior written
consent, Lessee shall not remove
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Lessee's Personal Property that is in use at the expiration or earlier
termination of the Term from the Leased Properties until such option to purchase
has expired or been waived in writing by Lessor. Any of Lessee's Personal
Property that is not integral to the use of the Facilities being made by Lessee
and is not purchased by Lessor pursuant to Section 34.1 may be removed by Lessee
upon the expiration or earlier termination of this Lease, and, if not removed
within twenty (20) days following the expiration or earlier termination of this
Lease, shall be considered abandoned by Lessee and may be appropriated, sold,
destroyed or otherwise disposed of by Lessor without giving notice thereof to
Lessee and without any payment to Lessee or any obligation to account therefor.
Lessee shall reimburse Lessor for any and all expense incurred by Lessor in
disposing of any of Lessee's Personal Property that Lessee may remove but within
such twenty (20) day period fails to remove, and shall either at its own expense
restore the Leased Properties to the condition required by Section 9.1.5,
including repair of all damage to the Leased Properties caused by the removal of
any of Lessee's Personal Property, or reimburse Lessor for any and all expense
incurred by Lessor for such restoration and repair.
6.4 Grant of Security Interest in Personal Property and Accounts.
Lessee has concurrently granted to Lessor a security interest in all of Lessee's
right, title and interest in the Collateral as defined in the Security
Agreement, which includes, without limitation, Lessee's Personal Property and
the Lessee's Accounts as defined in the Security Agreement.
ARTICLE VII
7.1 Condition of the Leased Properties. Lessee acknowledges that it has
inspected and otherwise has knowledge of the condition of the Leased Properties
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. Lessee is
leasing the Leased Properties "as is" in their condition on the Commencement
Date. Lessee waives any claim or action against Lessor in respect of the
condition of the Leased Properties. LESSOR MAKES NO WARRANTY OR REPRESENTATION
EXPRESS OR IMPLIED, IN RESPECT OF ANY LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE.
Lessee further acknowledges that throughout the Term Lessee is solely
responsible for the condition of the Leased Properties.
7.2 Use of the Leased Properties. Throughout the Term Lessee shall
continuously use the Leased Properties for the Primary Intended Use and uses
incidental thereto. Lessee shall not use the Leased Properties or any portion
thereof for any other use without the prior written consent of Lessor. No use
shall be made or permitted to be made of, or allowed in, the Leased Properties,
and no acts shall be done, which will cause the cancellation of, or be
prohibited by, any insurance policy covering the Leased Properties or any part
thereof, nor shall the Leased Properties or Lessee's Personal Property be used
for any unlawful purpose. Lessee shall not commit or suffer to be committed any
waste on the Leased Properties, or cause or permit any
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nuisance thereon, or suffer or permit the Leased Properties or any portion
thereof, or Lessee's Personal Property, to be used in such a manner as (i) might
reasonably tend to impair Lessor's (or Lessee's, as the case may be) title
thereto or to any portion thereof, or (ii) may reasonably make possible a claim
or claims of adverse usage or adverse possession by the public, as such, or of
implied dedication of the Leased Properties or any portion thereof.
7.3 Certain Environmental Matters.
(a) Prohibition Against Use of Hazardous Substances. Lessee
shall not permit, conduct or allow on the Leased Properties, the
generation, introduction, presence, maintenance, use, receipt,
acceptance, treatment, manufacture, production, installation,
management, storage, disposal or release of any Hazardous Substance
except for those types and quantities of Hazardous Substances necessary
for and ordinarily associated with the conduct of Lessee's business
which are used in full compliance with all Environmental Laws.
(b) Notice of Environmental Claims, Actions or Contaminations.
Lessee shall notify Lessor, in writing, immediately upon learning of
any existing, pending or threatened: (a) investigation, inquiry, claim
or action by any governmental authority in connection with any
Environmental Laws, (b) Third Party Claims, (c) Regulatory Actions,
and/or (id) Contamination of any portion of the Leased Properties.
(c) Costs of Remedial Actions with Respect to Environmental
Matters. If any investigation and/or Clean-Up of any Hazardous
Substance or other environmental condition on, under, about or with
respect to a Leased Property is required by any Environmental Law,
Lessee shall complete, at its own expense, such investigation and/or
Clean-Up or cause any other Person that may be legally responsible
therefor to complete such investigation and/or Clean-Up.
(d) Delivery of Environmental Documents. Lessee shall deliver
to Lessor complete copies of any and all Environmental Documents that
may now be in or at any time hereafter come into the possession of
Lessee.
(e) Environmental Audit. At Lessee's expense, Lessee shall
from time to time, upon and within forty-five (45) days of Lessor's
request therefor, deliver an Environmental Audit to Lessor. All tests
and samplings shall be conducted using generally accepted and
scientifically valid technology and methodologies. Lessee shall give
the engineer or environmental consultant conducting the Environmental
Audit reasonable and complete access to the Leased Properties and to
all records in the possession of Lessee that may indicate the presence
(whether current or past) of a Release or threatened Release of any
Hazardous Substances on, in, under, about and adjacent to any Leased
Property. Lessee shall also provide the engineer or environmental
consultant full access to and the opportunity to interview such persons
as may be employed in connection with the Leased Properties as the
engineer or consultant deems appropriate. However, Lessor shall not be
entitled to request an Environmental Audit from Lessee
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unless Lessor has reasonable cause to believe that a Release affecting
a Facility has occurred or there are fewer than six (6) months
remaining in the Term. If the Environmental Audit discloses the
presence of Contamination or any noncompliance with Environmental Laws,
Lessee shall immediately perform all of Lessee's obligations hereunder
with respect to such Hazardous Substances or noncompliance.
(f) Entry onto Leased Properties for Environmental Matters. If
Lessee fails to provide an Environmental Audit as and when required by
Subparagraph (e) hereof, in addition to Lessor's other remedies Lessee
shall permit Lessor from time to time, by its employees, agents,
contractors or representatives, to enter upon the Leased Properties for
the purpose of conducting such Investigations as Lessor may desire, the
expense of which shall promptly be paid or reimbursed by Lessee as an
Additional Charge. Lessor, and its employees, agents, contractors,
consultants and/or representatives, shall conduct any such
Investigation in a manner which does not unreasonably interfere with
Lessee's use of and operations on the Leased Properties (however,
reasonable temporary interference with such use and operations is
permissible if the investigation cannot otherwise be reasonably and
inexpensively conducted). Other than in an emergency, Lessor shall
provide Lessee with prior notice before entering any of the Leased
Properties to conduct such Investigation, and shall provide copies of
any reports or results to Lessor, and Lessee shall cooperate fully in
such Investigation.
(g) Environmental Matters Upon Termination of the Lease or
Expiration of Term. Upon the expiration or earlier termination of the
Term of this Lease, Lessee shall cause the Leased Properties to be
delivered free of any and all Regulatory Actions and Third Party Claims
and otherwise in compliance with all Environmental Laws with respect
thereto, and in a manner and condition that is reasonably required to
ensure that the then present use, operation, leasing, development,
construction, alteration, refinancing or sale of the Leased Property
shall not be restricted by any environmental condition existing as of
the date of such expiration or earlier termination of the Term.
(h) Compliance with Environmental Laws. Lessee shall (and
shall cause each sublessee referred to in Section 22.2 to) comply with,
and shall cause its agents, servants and employees to comply with, and
shall use reasonable efforts to cause each occupant and user of any of
the Leased Properties, and the agents, servants and employees of such
occupants and users, to comply with each and every Environmental Law
applicable to Lessee, the Leased Properties and each such occupant or
user with respect to the Leased Properties. Specifically, but without
limitation:
(i) Maintenance of Licenses and Permits. Lessee shall
obtain and maintain (and Lessee shall use reasonable efforts
to cause each tenant, occupant and user to obtain and
maintain) all permits, certificates, licenses and other
consents and approvals required by any applicable
Environmental Law from time to time with respect to Lessee,
each and every part of the Leased Properties and/or the
conduct of any business at a Facility or related thereto;
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(ii) Contamination. Lessee shall not cause, suffer or
permit any Contamination;
(iii) Clean-Up. If a Contamination occurs, the Lessee
promptly shall Clean-Up and remove any Hazardous Substance or
cause the Clean-Up and the removal of any Hazardous Substance
and in any such case such Clean-Up and removal of the
Hazardous Substance shall be effected to Lessor's reasonable
satisfaction and in any event in strict compliance with and in
accordance with the provisions of the applicable Environmental
Laws;
(iv) Discharge of Lien. Within twenty (20) days of
the date any lien is imposed against the Leased Properties or
any part thereof under any Environmental Law, Lessee shall
cause such lien to be discharged (by payment, by bond or
otherwise to Lessor's absolute satisfaction);
(v) Notification of Lessor. Within three (3) Business
Days after receipt by Lessee of notice or discovery by Lessee
of any fact or circumstance which might result in a breach or
violation of any covenant or agreement, Lessee shall notify
Lessor in writing of such fact or circumstance; and
(vi) Requests, Orders and Notices. Within three (3)
Business Days after receipt of any request, order or other
notice relating to the Leased Properties under any
Environmental Law, Lessee shall forward a copy thereof to
Lessor.
(i) Environmental Related Remedies. In the event of a breach
by Lessee beyond any applicable notice and/or grace period of its
covenants with respect to environmental matters, Lessor may, in its
sole discretion, do any one or more of the following (the exercise of
one right or remedy hereunder not precluding the simultaneous or
subsequent exercise of any other right or remedy hereunder):
(i) Cause a Clean-Up. Cause the Clean-Up of any
Hazardous Substance or other environmental condition on or
under the Leased Properties, or both, at Lessee's cost and
expense; or
(ii) Payment of Regulatory Damages. Pay on behalf of
Lessee any damages, costs, fines or penalties imposed on
Lessee or Lessor as a result of any Regulatory Actions; or
(iii) Payments to Discharge Liens. On behalf of
Lessee, make any payment or perform any other act or cause any
act to be performed which will prevent a lien in favor of any
federal, state or local governmental authority from attaching
to the Leased Properties or which will cause the discharge of
any lien then attached to the Leased Properties; or
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(iv) Payment of Third Party Damages. Pay, on behalf
of Lessee, any damages, cost, fines or penalties imposed on
Lessee as a result of any Third Party Claims; or
(v) Demand of Payment. Demand that Lessee make
immediate payment of all of the costs of such Clean-Up and/or
exercise of the remedies set forth in this Section 7.3
incurred by Lessor and not theretofore paid by Lessee as of
the date of such demand.
(j) Environmental Indemnification. Lessee shall and does
hereby indemnify, and shall defend and hold harmless Lessor, its
principals, officers, directors, agents and employees from each and
every incurred and potential claim, cause of action, damage, demand,
obligation, fine, laboratory fee, liability, loss, penalty, imposition,
settlement, levy, lien removal, litigation, judgment, proceeding,
disbursement, expense and/or cost (including without limitation the
cost of each and every Clean-Up), however defined and of whatever kind
or nature, known or unknown, foreseeable or unforeseeable, contingent,
incidental, consequential or otherwise (including, but not limited to,
attorneys' fees, consultants' fees, experts' fees and related expenses,
capital, operating and maintenance costs, incurred in connection with
(i) any Investigation or monitoring of site conditions, and (ii) any
Clean-Up required or performed by any federal, state or local
governmental entity or performed by any other entity or person because
of the presence of any Hazardous Substance, Release, threatened Release
or any Contamination on, in, under or about any of the Leased
Properties) which may be asserted against, imposed on, suffered or
incurred by, each and every indemnitee arising out of or in any way
related to, or allegedly arising out of or due to any environmental
matter including, but not limited to, any one or more of the following:
(i) Release Damage or Liability. The presence of
Contamination in, on, at, under, or near a Leased Property or
migrating to a Leased Property from another location;
(ii) Injuries. All injuries to health or safety
(including wrongful death), or to the environment, by reason
of environmental matters relating to the condition of or
activities past or present on, at, in, under a Leased
Property;
(iii) Violations of Law. All violations, and alleged
violations, of any Environmental Law relating to a Leased
Property or any activity on, in, at, under or near a Leased
Property;
(iv) Misrepresentation. All material
misrepresentations relating to environmental matters in any
documents or materials furnished by Lessee to Lessor and/or
its representatives in connection with the Lease;
(v) Event of Default. Each and every Event of Default
relating to environmental matters;
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(vi) Lawsuits. Any and all lawsuits brought or
threatened, settlements reached and governmental orders
relating to any Hazardous Substances at, on, in, under or near
a Leased Property, and all demands of governmental
authorities, based upon or in any way related to any Hazardous
Substances at, on, in, under a Leased Property; and
(vii) Presence of Liens. All liens imposed upon any
of the Leased Properties in favor of any governmental entity
or any person as a result of the presence, disposal, release
or threat of release of Hazardous Substances at, on, in, from,
or under a Leased Property.
(k) Rights Cumulative and Survival. The rights granted Lessor
under this Section are in addition to and not in limitation of any
other rights or remedies available to Lessor hereunder or allowed at
law or in equity or rights of indemnification provided to Lessor in any
agreement pursuant to which Lessor purchased any of the Leased
Property. The payment and indemnification obligations set forth in this
Section 7.3 shall survive the expiration or earlier termination of the
Term of this Lease.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements. In its use,
maintenance, operation and any alteration of the Leased Properties, Lessee, at
its expense, will promptly (i) comply with all Legal Requirements and Insurance
Requirements, whether or not compliance therewith requires structural changes in
any of the Leased Improvements (which structural changes shall be subject to
Lessor's prior written approval, which approval shall not be unreasonably
withheld or delayed) or interferes with or prevents the use and enjoyment of the
Leased Properties, and (ii) procure, maintain and comply with all licenses,
certificates of need, provider agreements and other authorizations required for
the use of the Leased Properties and Lessee's Personal Property then being made,
and for the proper erection, installation, operation and maintenance of the
Leased Properties or any part thereof. The judgment of any court of competent
jurisdiction, or the admission of Lessee in any action or proceeding against
Lessee, whether or not Lessor is a party thereto, that Lessee has violated any
such Legal Requirements or Insurance Requirements shall be conclusive of that
fact as between Lessor and Lessee.
8.2 Certain Covenants.
8.2.1 Certain Financial Covenants.
8.2.1.1 Net Worth. At all times during the Term
Lessee and Guarantor, on a consolidated basis, shall maintain a Net Worth of at
least ONE HUNDRED MILLION DOLLARS ($100,000,000.00).
8.2.1.2 Cash Flow to Rent Ratio. Within twenty-four
(24) months after the Commencement Date, Lessee shall achieve and thereafter
maintain, on a trailing three (3)
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calendar month basis, a Cash Flow to Rent Ratio of not less than 1.2. Not later
than December 31, 2002, Lessee shall achieve and thereafter maintain, on a
trailing three (3) month basis, a Cash Flow to Rent Ratio of not less than 1.25.
Not later than December 31, 2003, and not later than December 31 of each Lease
Year thereafter throughout the Term, Lessee shall achieve and thereafter
maintain, on a trailing three (3) month basis, a Cash Flow to Rent Ratio that is
not less than three (3) basis points higher than the Cash Flow to Rent Ratio
that Lessee was required to achieve by the immediately preceding December 31
(e.g., the Cash Flow to Rent Ratio for the Lease Year ended December 31, 2003
shall be not less than 1.28, the Cash Flow to Rent Ratio for the Lease Year
ended December 31, 2004 shall be not less than 1.31, etc.) In determining
Lessee's compliance with this financial covenant, Lessee's Cash Flow for the
pertinent fiscal period shall be reduced by an amount equal to the Minimum
Qualified Capital Expenditures allocable to such period (prorated on a daily
basis for any fiscal period of less than 365 days).
8.2.1.3 No Other Debt. Lessee shall not, directly or
indirectly, incur or otherwise become liable for any Debt or obligation to pay
money to any Person other than to (i) Lessor pursuant to this Lease , (ii)
lessors of leased equipment used in the operation of the Facilities, and (iii)
Purchase Money Financing; provided that in no event shall the aggregate payments
due with respect to such equipment leases and Purchase Money Financing at any
time during the Term exceed $150,000.
8.2.1.4 Pledge or Encumber Assets. Lessee shall not
pledge or otherwise encumber any of its assets, other than leased equipment used
in the operation of the Facilities.
8.2.1.5 Guarantees Prohibited. Lessee shall not
guarantee any indebtedness of any Person.
8.3 Minimum Qualified Capital Expenditures. During the Lease Year that
begins January 1, 2001, Lessee shall expend at least Two Hundred and Fifty
Dollars ($250.00) per bed for Qualified Capital Expenditures to improve the
Facilities. Thereafter throughout the Term Lessee shall expend such amount each
Lease Year, increased annually in proportion to increases in the CPI. Qualified
Capital Expenditures in any Lease Year in excess of that required by the
previous two sentences of this Section 8.3 shall be credited toward the
Qualified Capital Expenditures required to be made in any ensuing Lease Year(s);
provided, however, that in each Lease Year in any period of three (3) successive
Lease Years (or, during the period beginning January 1, 2000 and ending December
31, 2001, two (2) successive Lease Years) during the Term the Qualified Capital
Expenditures actually made per bed at each Facility shall be not less than the
average of the sum of the Qualified Capital Expenditures required hereby for
such period. At least annually, at the request of Lessor, Lessee shall prepare
capital expenditures budgets and provide copies of same to Lessor.
8.4 Management Agreements. Lessee shall not enter into, amend, modify,
renew, replace or otherwise change the terms of any Management Agreement without
the prior written consent of Lessor as to the identity of the Manager and the
terms of the agreement, which consent Lessor may withhold in its sole
discretion, and in no event without the execution by Lessee, Manager and Lessor
of an agreement, satisfactory to Lessor in form and substance,
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pursuant to which Manager's right to receive its management fee is subordinated
to the obligation of Lessee to pay the Rent to Lessor.
8.5 Other Facilities. During the last three Lease Years in the Term,
neither Lessee nor any Affiliate shall acquire ownership or become an operator
or manager of, or acquire any interest whatever in, any nursing home, rest home,
assisted living facility, subacute facility, retirement center or similar health
care facility located within a five (5) mile radius of any Facility.
8.6 No Other Business. Lessee shall not engage in any business other
than the operation of the Facilities.
8.7 Separateness. Lessee shall:
a. Maintain records and books of account separate from
those of any Affiliate.
b. Not guarantee or become obligated for the debts of
any other entity, including any Affiliate, or hold
out its credit, jointly or severally, as being
available to satisfy the obligations of others.
c. Not pledge its assets, jointly or severally, for the
benefit of any other entity, including any Affiliate.
d. Hold itself out as an entity separate from any
Affiliates.
e. At all times cause its Board of Directors to hold
appropriate meetings (or act by unanimous consent) to
authorize all appropriate corporate actions, and in
authorizing such actions, to observe all formalities.
ARTICLE IX
9.1 Maintenance and Repair.
9.1.1 Lessee, at its expense, will keep the Leased Properties,
and all landscaping, private roadways, sidewalks and curbs appurtenant thereto
which are under Lessee's control and Lessee's Personal Property in good order
and repair, whether or not the need for such repairs arises out of Lessee's use,
any prior use, the elements or the age of the Leased Property or any portion
thereof, or any cause whatsoever except the act or negligence of Lessor, and
with reasonable promptness shall make all necessary and appropriate repairs
thereto of every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the Commencement Date (concealed or
otherwise). Lessee shall at all times maintain, operate and otherwise manage the
Leased Properties on generally observed by Guarantor in the management
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of the other properties that Guarantor or its Affiliates manage. All repairs
shall, to the extent reasonably achievable, be at least equivalent in quality to
the original work or the property to be repaired shall be replaced. 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 Properties or any
parts thereof for the Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to
maintain, build or rebuild any improvements on the Leased Properties (or any
private roadways, sidewalks or curbs appurtenant thereto), or to make any
repairs, replacements, alterations, restorations or renewals of any nature or
description to the Leased Properties, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or upon any adjoining
property, whether to provide lateral or other support or abate a nuisance, or
otherwise, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease. Lessee hereby waives, to the extent permitted by
law, the right to make repairs at the expense of Lessor pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
9.1.3 Nothing contained in this Lease shall be construed as
(i) constituting the consent or request of Lessor, expressed or implied, to any
contractor, subcontractor, laborer, materialmen or vendor to or for the
performance of any labor or services or the furnishing of any materials or other
property for the construction, alteration, addition, repair or demolition of or
to any Leased Property or any part thereof, or (ii) giving 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 Lessor in respect thereof or to
make any agreement that may create, or in any way be the basis for any right,
title, interest, lien, claim or other encumbrance upon the estate of Lessor in
the Leased Properties, or any portion thereof. Lessor shall have the right to
give, record and post, as appropriate, notices of non-responsibility under any
mechanics' and construction lien laws now or hereafter existing.
9.1.4 Lessee shall promptly replace any of the Leased
Improvements or Lessor's Personal Property which become worn out, obsolete or
unusable or unavailable for the purpose for which intended. All replacements
shall have a value and utility at least equal to that of the items replaced and
shall become part of the Leased Properties immediately upon their acquisition by
Lessee. Upon Lessor's request, Lessee shall promptly execute and deliver to
Lessor a bill of sale or other instrument establishing Lessor's lien-free
ownership of such replacements. Lessee shall promptly repair all damage to a
Leased Property incurred in the course of such replacement.
9.1.5 Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Properties to Lessor in the condition
in which they were originally received from Lessor, in good operating condition,
ordinary wear and tear excepted, except as repaired, rebuilt, restored, altered
or added to as permitted or required by the provisions of this Lease.
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9.2 Encroachments, Restrictions, etc. If, at any time, any of the
Leased Improvements are alleged to encroach upon any property, street or right
of way adjacent to a Leased Property, or to violate any restrictive covenant, or
to impair the rights of others under any easement or right of way, Lessee shall
promptly settle such allegations or take such other lawful action as may be
necessary in order to be able to continue the use of a Leased Property for the
Primary Intended Use substantially in the manner and to the extent such Leased
Property was being used at the time of the assertion of such violation,
impairment or encroachment, provided, however, that no such action shall violate
any other provision of this Lease and any alteration of a Leased Property must
be made in conformity with the applicable requirements of Article X. Lessee
shall not have any claim against Lessor or offset against any of Lessee's
obligations under this Lease with respect to any such violation, impairment or
encroachment.
ARTICLE X
10.1 Construction of Alterations and Additions to the Leased
Properties. Lessee shall not (a) make or permit to be made any structural
alterations, improvements or additions of or to the Leased Properties or any
part thereof, or (b) materially alter the plumbing, HVAC or electrical systems
thereon or (c) make any other alterations, improvements or additions the cost of
which exceeds, as to any given Facility (i) Twenty Five Thousand ($25,000.00)
Dollars per alteration, improvement or addition, or (ii) Fifty Thousand
($50,000.00) Dollars in any Lease Year as to any given facility, unless and
until Lessee has (a) caused complete plans and specifications therefor to have
been prepared by a licensed architect and submitted to Lessor at least ninety
(90) Business Days before the planned start of construction thereof, and (b)
obtained Lessor's written approval thereof and the approval of any Facility
Mortgagee. If Lessor requires a deposit, Lessor shall retain and disburse the
amount deposited in the same manner as is provided for insurance proceeds in
Section 14.6. If the deposit is reasonably determined by Lessor at any time to
be insufficient for the completion of the alteration, improvement or addition,
Lessee shall immediately increase the deposit to the amount reasonably required
by Lessor. Lessee shall be responsible for the completion of such improvements
in accordance with the plans and specifications approved by Lessor, and shall
promptly correct any failure with respect thereto.
Alterations and improvements not falling within the categories
described in the first sentence of the preceding paragraph may be made by Lessee
without the prior approval of Lessor.
All alterations, improvements and additions shall be constructed in a
first class, workmanlike manner, in compliance with all Insurance Requirements
and Legal Requirements, be in keeping with the character of the Leased
Properties and the other properties managed by Guarantor or an Affiliate, and be
designed and constructed so that the value of the Leased Properties will not be
diminished or and that the Primary Intended Use of the Leased Properties will
not be changed. All improvements, alterations and additions shall immediately
become a part of the Leased Properties.
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Lessee shall have no claim against Lessor at any time in respect of the
cost or value of any such improvement, alteration or addition. There shall be no
adjustment in the Rent by reason of any such improvement, alteration or
addition. With Lessor's consent, expenditures made by Lessee pursuant to this
Article X may be included as capital expenditures for purposes of inclusion in
the capital expenditures budget for the Facilities and for measuring compliance
with the obligations of Lessee set forth in Section 8.3 of this Lease.
In connection with any alteration which involves the removal,
demolition or disturbance of any asbestos-containing material, Lessee shall
cause to be prepared at its expense a full asbestos assessment applicable to
such alteration, and shall carry out such asbestos monitoring and maintenance
program as shall reasonably be required thereafter in light of the results of
such assessment.
ARTICLE XI
11.1 Liens. Without the consent of Lessor or as expressly permitted
elsewhere herein, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Properties, and
any attachment, levy, claim or encumbrance in respect of the Rent, except for
(i) Permitted Encumbrances, (ii) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums not yet due, and (iii) liens created by , through
or under Lessor or Lessor's title in the Leased Properties.
ARTICLE XII
12.1 Permitted Contests. Lessee, on its own or on Lessor's behalf (or
in Lessor's) name, but at Lessee's sole cost and expense, shall have the right
to contest, by appropriate legal proceedings conducted in good faith and with
due diligence, the amount or validity of any Imposition, Legal Requirement or
Insurance Requirement , provided (a) prior Notice of such contest is given to
Lessor, (b) the Leased Properties would not be in any danger of being sold,
forfeited or attached as a result of such contest, and there is no risk to
Lessor of a loss of or interruption in the payment of, Rent, (c) in the case of
an unpaid Imposition or Claim, collection thereof is suspended during the
pendency of such contest, (d) in the case of a contest of a Legal Requirement,
compliance may legally be delayed pending such contest. Upon request of Lessor,
Lessee shall deposit funds or assure Lessor in some other manner reasonably
satisfactory to Lessor that a contested Imposition or Claim, together with
interest and penalties, if any, thereon, and any and all costs for which Lessee
is responsible will be paid if and when required upon the conclusion of such
contest. Lessee shall defend, indemnify and save harmless Lessor from all costs
or expenses arising out of or in connection with any such contest, including but
not limited to attorneys' fees. If at any time Lessor reasonably determines that
payment of any Imposition or Claim, or compliance with any Legal or Insurance
Requirement being contested by Lessee is necessary in order to prevent loss of
any of the Leased Properties or Rent or civil or criminal penalties or other
damage, upon such prior Notice to Lessee as is reasonable in the circumstances
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Lessor may pay such amount, require Lessee to comply with such Legal or
Insurance Requirement or take such other action as it may deem necessary to
prevent such loss or damage. If reasonably necessary, upon Lessee's written
request Lessor, at Lessee's expense, shall cooperate with Lessee in a permitted
contest, provided Lessee upon demand reimburses Lessor for Lessor's costs
incurred in cooperating with Lessee in such contest.
12.2 Lessor's Requirement for Deposits. Any time after the occurrence
of an Event of Default, Lessor, in its sole discretion, shall be entitled to
require Lessee to deposit with Lessor monthly, at the time of its payments of
Base Rent, a prorata portion of the amounts required to comply with Insurance
Requirements, Impositions and Legal Requirements, and when such obligations
become due, Lessor shall pay them (to the extent of the deposit) upon Notice
from Lessee requesting such payment. In the event that sufficient funds have not
been deposited to cover the amount of the obligations due at least thirty (30)
days in advance of the due date, Lessee shall forthwith deposit the same with
Lessor upon Notice from Lessor. Lessor shall not be obligated to segregate such
deposited funds from its other funds, or to pay Lessee any interest on any
deposit so held by Lessor. Upon an Event of Default, any of the funds remaining
on deposit may be applied under this Lease in any manner and on such priority as
may be determined by Lessor.
ARTICLE XIII
13.1 General Insurance Requirements. Lessee shall keep the Leased
Properties, and all property located in or on the Leased Properties, including
Lessor's Personal Property and Lessee's Personal Property, insured with
insurance meeting the following requirements: (a) all insurance shall be written
by companies authorized to do insurance business in the applicable States and
having a rating classification of not less than A- and a financial size category
of "Class VIII", according to the then most recent issue of Best's Key Rating
Guide; (b) all policies must name Lessor as an additional insured, and name as
an additional insured any Facility Mortgagee by way of a standard form of
mortgagee's loss payable endorsement in use in the applicable States and in
accordance with any such other requirements as may be established by such
Facility Mortgagee, provided, however, that if requested by Lessor and available
on a commercially reasonable basis, all public liability and property damage
insurance shall contain a provision that Lessor, although named as an additional
insured, shall nevertheless be entitled to recovery for loss, damage, or injury
to Lessor, its servants, agents, and employees by reason of the negligence of
Lessee or Lessor; (c) losses must be payable to Lessor or Lessee as provided in
Article XIV, and loss adjustments shall require the written consent of Lessor
and, provided it is not then in default, Lessee, which consent shall not be
unreasonably withheld by either Lessor or Lessee; (d) each insurer must agree
that it will give Lessor and any Facility Mortgagee at least thirty (30) days'
written notice before its policy shall be altered, allowed to expire or
canceled; (e) the amount of any deductible or retention must be approved by
Lessor prior to the issuance of any policy; and (f) the form of all policies
shall be approved by Lessor, whose approval shall not unreasonably be withheld,
and by any Facility Mortgagee.
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13.2 Risks to be Insured. The policies covering the Leased Properties
and Lessee's Personal Property shall insure against the following risks:
13.2.1 Loss or damage by fire, vandalism and malicious
mischief, earthquake, extended coverage perils commonly known as "Special Risk,"
and all physical loss perils normally included in such Special Risk insurance,
including but not limited to sprinkler leakage, in an amount not less than one
hundred percent (100%) of Replacement Cost;
13.2.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus in such amounts as may be required by Lessor from
time to time;
13.2.3 Loss of rental under a rental value insurance policy
covering risk of loss during reconstruction necessitated by the occurrence of
any of the hazards described in Sections 13.2.1 or 13.2.2 (but in no event for a
period less than twelve (12) months) in an amount sufficient to prevent Lessor
and Lessee from becoming a co-insurer;
13.2.4 Claims for personal injury or property damage under a
policy of commercial general public liability insurance with a combined single
limit per occurrence in respect of bodily injury and death and property damage
of One Million Dollars ($1,000,000.00), and an aggregate limitation of not less
than Five Million Dollars ($5,000,000.00), which insurance shall insure Lessee's
contractual liability to Lessor under the indemnity provisions of Article XXI of
this Lease and shall be written on an 'occurrence' and not a 'claims made'
basis;
13.2.5 Claims arising out of malpractice in an amount not less
than One Million Dollars ($1,000,000.00) for each person and for each occurrence
(with umbrella coverage of not less than Five Million Dollars ($5,000,000.00)
and, if written on a "claims-made" basis, Lessee shall also provide continuous
liability coverage for claims arising during the Term either by obtaining an
endorsement providing for an extended reporting period reasonably acceptable to
Lessor in the event such policy is canceled or not renewed for any reason
whatsoever, or by obtaining "tail" insurance coverage converting the policies to
"occurrence" basis policies providing coverage for a period of at least three
(3) years beyond the expiration of the Term;
13.2.6 Flood (with respect to any Leased Property located in
whole or in part within a designated flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in the area;
13.2.7 During such time as Lessee is constructing any
improvements, (i) worker's compensation insurance and employers' liability
insurance covering all persons employed in connection with the improvements in
statutory limits, (ii) a completed operations endorsement to the commercial
general liability and property damage insurance policies referred to above,
(iii) builder's risk insurance, completed value form, covering all physical
loss, in an amount satisfactory to Lessor, and (iv) such other insurance, in
such amounts, as Lessor deems necessary to protect Lessor's interest in the
Leased Properties from any act or omission of Lessee's contractors or
subcontractors, and certificates of insurance evidencing such coverage, in
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form satisfactory to Lessor, shall be presented to Lessor prior to the
commencement of construction of such improvements;
13.2.8 Primary automobile liability insurance with limits of
One Million Dollars ($1,000,000.00) per occurrence each for owned and non-owned
and hired vehicles.
13.3 Payment of Premiums; Copies of Policies; Certificates. Lessee
shall pay when due all of the premiums for the insurance required by this Lease,
and shall deliver to Lessor and to any Facility Mortgagee requesting such
evidence, certificates of insurance in form satisfactory to Lessor and such
Facility Mortgagee. Photocopies of the policies of insurance required by this
Lease and certificates thereof shall be delivered to Lessor not less than thirty
(30) days prior to their effective date (and, with respect to any renewal
policy, not less than twenty (20) days prior to the expiration of the existing
policy), and in the event of the failure of Lessee either to carry the required
insurance or pay the premiums therefor, or to deliver photocopies of policies or
certificates to Lessor as required, Lessor shall be entitled, but shall have no
obligation, to obtain such insurance and pay the premiums therefor when due,
which premiums shall be repayable to Lessor upon written demand therefor as
Additional Charges.
[13.4 INTENTIONALLY OMITTED]
13.5 Umbrella Policies. If Lessee chooses to carry umbrella liability
coverage to obtain the limits of liability required under this Lease, the
umbrella policies must provide coverage in the same manner as the primary
commercial general liability policy and must contain no exclusions in addition
to, or limitations materially different than, those of the primary policy.
13.6 Legal Requirements re: Workers' Compensation Insurance. In
addition to the insurance described above, Lessee shall at all times comply with
all Legal Requirements with respect to worker's compensation insurance coverage.
13.7 No Liability; Waiver of Subrogation. Lessor shall have no
liability to Lessee, and, provided Lessee provides the insurance required of it
by this Lease, Lessee shall have no liability to Lessor (except as provided in
Section 21.1), regardless of the cause, for any loss or expense resulting from
or in connection with any insured matter, and neither party will have any right
or claim against the other for any such loss or expense by way of subrogation.
Each insurance policy carried by either party pursuant to this Lease, including
without limitation, contents, fire and casualty insurance, shall contain an
express waiver of any right of subrogation on the part of the insurer against
the other party. Lessee shall pay any additional costs or charges for obtaining
such waiver.
13.8 Increase in Limits. If from time to time Lessor determines, in the
exercise of its reasonable business judgment, that the limits of the personal
injury or property damage - public liability insurance then being carried are
insufficient, upon Notice from Lessor Lessee shall cause such limits to be
increased to the level specified in such Notice until further increase pursuant
to the provisions of this Section.
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13.9 Blanket Policy. Any insurance required by this Lease may be
provided by so-called blanket policies of insurance carried by Lessee, provided,
however, that the coverage afforded Lessor thereby may not thereby be less than
or materially different from that which would be provided by separate policies
meeting the requirements of this Lease.
13.10 No Separate Insurance.
13.10.1 Lessee shall not on its own initiative or pursuant to
the request or requirement of any third party, take out separate insurance
concurrent in form or contributing in the event of loss with that required by
this Lease, to be furnished by, or which may reasonably be required to be
furnished by, Lessee, or increase the amount of any then existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including in all
cases Lessor and all Facility Mortgagees, are named therein as additional
insureds, and losses are payable thereunder in the same manner as losses are
payable under this Lease.
13.10.2 Nothing herein shall prohibit Lessee, upon Notice to
Lessor, from (i) securing insurance required to be carried hereby with higher
limits of liability than required in this Lease, or (ii) securing insurance
against risks not required to be insured pursuant to this Lease, and as to such
insurance, Lessor and any Facility Mortgagee need not be included therein as
additional insureds, nor must losses thereunder be payable in the same manner as
losses are payable under this Lease, except to the extent required to avoid a
default under a Facility Mortgage or any other encumbrance.
ARTICLE XIV
14.1 Insurance Proceeds. Net Proceeds shall be paid to Lessor and held,
disbursed or retained by Lessor as provided herein.
14.1.1 Proceeds of Special Risk Insurance. If the Net Proceeds
are less than the Approval Threshold, and no Event of Default has
occurred and is continuing, Lessor shall pay the Net Proceeds to Lessee
promptly for Lessee's use in Lessee's completion of the restoration of
the damaged or destroyed Leased Property. If the Net Proceeds equal or
exceed the Approval Threshold, and no Event of Default has occurred and
is continuing, the Net Proceeds shall be made available for restoration
or repair as provided in Section 14.6. Within fifteen (15) days of the
receipt of the Net Proceeds of Special Risk Insurance, Lessor and
Lessee shall agree as to the portion thereof, if any, attributable to
the Lessee's Personal Property that Lessee is not required and does not
elect to restore or replace, and if they cannot agree they shall submit
the matter to arbitration pursuant to Article XXXV hereof, and the
portion of the proceeds of such Special Risk Insurance agreed or
determined by arbitration to be attributable to the Lessee's Personal
Property that Lessee is not required and does not elect to restore or
replace shall be paid to Lessee.
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14.2 Restoration in the Event of Damage or Destruction. If all or any
portion of a Leased Property is damaged by fire or other casualty, Lessee shall
(a) give Lessor Notice of such damage or destruction within five (5) Business
Days of the occurrence thereof, (b) within thirty (30) Business Days of the
occurrence commence the process of restoring such Leased Property and (c)
thereafter diligently proceed to complete such restoration to substantially the
same (or better) condition as such Leased Property was in immediately prior to
the damage or destruction as quickly as is reasonably possible, but in any
event, absent Force Majeure or any delays caused by Lessor's failure to remit
Net Proceeds to Lessee as required herein, within two hundred forty (240) days
of the occurrence. Regardless of the anticipated cost thereof, if the
restoration of a Leased Property requires any modification of structural
elements, prior to commencing such modification Lessee shall obtain Lessor's
written approval of the plans and specifications therefor, which approval may be
withheld in Lessor's sole discretion if such modification materially changes the
usable area or interior or exterior wall configuration of any building that is
part of the Leased Property, or reduces the load bearing capacity of any floor
in any such building, but which approval otherwise shall not be unreasonably
withheld, delayed or conditioned.
14.3 Restoration of Lessee's Property. If Lessee is required to restore
a Leased Property, Lessee shall also concurrently restore any of Lessee's
Personal Property that is integral to the Primary Intended Use of such Leased
Property at the time of the damage or destruction.
14.4 No Abatement of Rent. Absent termination of this Lease as provided
herein, there shall be no abatement of Rent by reason of any damage to or the
partial or total destruction of any Leased Property.
14.5. Waiver. Except as provided elsewhere in this Lease, Lessee hereby
waives any statutory or common law rights of termination which may arise by
reason of any damage to or destruction of a Leased Property.
14.6. Disbursement of Insurance Proceeds Equal to or Greater Than The
Approval Threshold. If Lessee restores or repairs a Leased Property pursuant to
this Article XIV, and if the Net Proceeds equal or exceed the Approval
Threshold, the restoration or repair and disbursement of funds to Lessee shall
be in accordance with the following procedures:
(i) The restoration or repair work shall be done pursuant to
plans and specifications approved by Lessor, which approval may be
withheld in Lessor's sole discretion if such plans and specifications
would result in material changes to the usable area or interior or
exterior wall configuration of any building that is part of the Leased
Property, or would reduce the load bearing capacity of any floor in any
such building, but which approval otherwise shall not be unreasonably
withheld, delayed or conditioned, and a certified construction cost
statement, to be obtained by Lessee from a contractor reasonably
acceptable to Lessor, showing the total cost of the restoration or
repair; to the extent the cost as so certified exceeds the Net
Proceeds, prior to the commencement of the restoration and repair work
(except for such emergency repair work as may be required immediately
following the casualty), Lessee shall provide Lessor with assurance
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of its ability to pay such excess costs as and when required during the
restoration and repair work, such assurance to be in the form of an
unconditional letter of credit delivered to Lessor or a deposit of cash
or the equivalent with Lessor or, at Lessee's request, in escrow with a
title insurance company acceptable to Lessor and Lessee, such deposit
to be disbursed by Lessor or such escrow agent pari passu with the
disbursement of Net Proceeds by Lessor in payment of the costs of
restoration or repair.
(ii) Construction Funds shall be made available to Lessee upon
request, no more frequently than monthly, as the restoration and repair
work progresses, subject to a ten (10%) percent holdback, pursuant to
certificates of an architect selected by Lessee that, in the judgment
of Lessor, reasonably exercised, is highly qualified in the design and
construction of the type of Facility being repaired , which
certificates must be in form and substance reasonably acceptable to
Lessor.
(iii) After the first disbursement to Lessee, sworn statements
and lien waivers in an amount at least equal to the amount of
Construction Funds previously paid to Lessee shall be delivered to
Lessor from all contractors, subcontractors and material suppliers
covering all labor and materials furnished through the date of the
previous disbursement.
(iv) Lessee shall deliver to Lessor such other evidence as
Lessor may reasonably request from time to time during the course of
the restoration and repair, as to the progress of the work, compliance
with the approved plans and specifications, the cost of restoration and
repair and the total amount needed to complete the restoration and
repair, and showing that there are no liens against such Leased
Property arising in connection with the restoration and repair and that
the cost of the restoration and repair at least equals the total amount
of Construction Funds then disbursed to Lessee hereunder.
(v) If the Construction Funds are at any time determined by
Lessor to be inadequate for payment in full of all labor and materials
for the restoration and repair, Lessee shall immediately increase the
amount of the letter of credit delivered to Lessor pursuant to
subsection 14.6 (i) hereof, if any, or pay the amount of the deficiency
to Lessor or the escrow agent appointed pursuant to subsection 14.6 (i)
hereof, to be held and disbursed as Construction Funds pari passu with
the disbursement of any other Construction Funds then held by Lessor
and such escrow agent.
(vi) The Construction Funds may be disbursed by Lessor to
Lessee or to the persons entitled to receive payment thereof from
Lessee, and such disbursement in either case may be made directly or
through a third party escrow agent, such as, but not limited to, a
title insurance company, or its agent, all as Lessor may determine in
its sole discretion. Provided Lessee is not in default hereunder, any
excess Construction Funds shall be paid to Lessee upon completion of
the restoration or repair.
(vii) If Lessee at any time fails to promptly and fully
perform the conditions and covenants set out in subparagraphs (i)
through (vi) above, and the failure is not
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corrected within ten (10) days of written Notice thereof, or if during
the restoration or repair an Event of Default occurs hereunder, Lessor
may, at its option, immediately cease making any further payments to
Lessee (and, if any Construction Funds are being held by an escrow
agent pursuant to subsection 14.6(i) hereof, upon Lessor's direction
such escrow agent shall also cease making any further payments to
Lessee) for the restoration and repair.
(viii) Lessor may reimburse itself out of the Construction
Funds for its reasonable expenses incurred in administering the
Construction Funds and inspecting the restoration and repair work,
including without limitation attorneys' and other professional fees and
escrow fees and expenses.
14.7 Net Proceeds Paid to Facility Mortgagee. In the event of any
conflict between the terms of this Lease and any Facility Mortgage with respect
to the use or manner of disbursement of Net Proceeds , as between Lessor and
Lessee the terms of this Lease shall prevail and Lessor shall make available for
use and disbursement in accordance with this Lease an amount equal to any
portion of the Net Proceeds that pursuant to such Facility Mortgage is applied,
held, and/or disbursed in a manner or for a purpose other than as set forth
herein.
ARTICLE XV
15.1 Total Taking or Other Taking with Leased Property Rendered
Unsuitable for Its Primary Intended Use. If title to the fee of the whole of a
Leased Property is Taken, this Lease shall cease and terminate as to the Leased
Property Taken as of the Date of Taking by the Condemnor and Rent shall be
apportioned as of the Date of Taking, provided, however, that if the Award to
Lessor is less than the Minimum Repurchase Price for such Leased Property at the
time of such Award, it shall be a condition precedent to the termination of this
Lease as to such Leased Property that Lessee pay the amount of the deficiency to
Lessor. If title to the fee of less than the whole of a Leased Property is
Taken, but such Leased Property is thereby rendered Unsuitable for Its Primary
Intended Use, Lessee and Lessor shall each have the option by written Notice to
the other, at any time prior to the taking of possession by, or the date of
vesting of title in, the Condemnor, whichever first occurs, to terminate this
Lease with respect to such Leased Property as of the such taking of possession
or vesting of title, in which event this Lease shall thereupon so cease and
terminate as of the earlier of the date specified in such Notice or the date on
which possession is taken by the Condemnor. If this Lease is so terminated as to
a Leased Property, the Base Rent for the Lease Year in which the Date of Taking
occurs shall be reduced as of the Date of Taking as set forth below, and Lessee
shall be deemed to have elected to purchase such Leased Property for the Minimum
Repurchase Price therefor. Lessee shall complete the purchase within ninety (90)
days of the Date of Taking, and Lessee shall receive credit against such Minimum
Repurchase Price for any portion of the Award received by Lessor. The Base Rent
for the Lease Year in which Lessee purchases the Leased Property as to which
this Lease is terminated shall be reduced by an amount equal to the product
obtained by multiplying (a) the Minimum Repurchase Price for such Leased
Property by (b) the quotient obtained by dividing the Base Rent for the then
current Lease Year by the aggregate Purchase
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Price (including Additional Purchase Price, if any ) theretofore paid to the
sellers pursuant to the Purchase Agreement. Any such reduction in Base Rent
shall be effective as of the day following the date upon which Lessee pays the
Minimum Repurchase Price to Lessor, and for periods of less than a full Lease
Year such decrease shall be prorated on a daily basis and the monthly
installments due during such Lease Year after the date of such payment shall be
reduced accordingly.
15.2 Allocation of Award. The total Award made with respect to all or
any portion of a Leased Property or for loss of Rent, or for loss of business,
shall be solely the property of and payable to Lessor, subject to Lessor's
obligation to disburse to Lessee in accordance with Section 15.2 hereof for the
restoration of such Leased Property such portion of the Award as may be made for
damage to the Leased Property upon a Partial Taking. Nothing contained in this
Lease will be deemed to create any additional interest in Lessee, or entitle
Lessee to any payment based on the value of the unexpired term or so-called
"bonus value" to Lessee of this Lease. Any Award made for the taking of Lessee's
Personal Property that is not integral to the Primary Intended Use of the
Facilities, or for removal and relocation expenses of Lessee in any such
proceedings shall be payable to Lessee. Any Award made for the taking of
Lessee's Personal Property that is integral to the Primary Intended Use of the
Facilities shall payable to Lessor. In any proceedings with respect to an Award,
Lessor and Lessee shall each seek its own Award in conformity herewith, at its
own expense. Notwithstanding the foregoing, Lessee may pursue a claim for loss
of its business, provided that under the laws of the State, such claim will not
diminish the Award to Lessor.
15.3 Partial Taking. In the event of a Partial Taking, Lessee, at its
own cost and expense, shall within sixty (60) days of the taking of possession
by, or the date of vesting of title in, the Condemnor, whichever first occurs ,
commence the restoration of the Leased Premises to a complete architectural unit
of the same general character and condition (as nearly as may be possible under
the circumstances) as existed immediately prior to the Partial Taking, and
complete such restoration with all reasonable dispatch, but in any event, absent
Force Majeure or any delays caused by Lessor's failure to remit Net Proceeds to
Lessee as required herein, within one hundred eighty (180) days of the date on
which such Notice is given. Lessor shall contribute to the cost of restoration
only such portion of the Award as is made therefor. As long as no Event of
Default has occurred and is continuing, regardless of the amount thereof Lessor
shall make such portion of the Award available to Lessee in the manner provided
in Section 14.6 with respect to Net Proceeds in excess of the Approval
Threshold. Notwithstanding anything to the contrary elsewhere herein, if the
Fair Market Rent of the affected Leased Property is reduced by reason of the
Partial Taking, from and after the date on which possession is taken by the
Condemnor the annualized Base Rent shall be reduced by an amount determined by
dividing the portion of the Award made to Lessor expressly for such reduction in
Fair Market Rent by the Capitalization Rate.
15.4 Temporary Taking. If there is a Taking of possession or the use of
all or part of a Leased Property, but the fee of such Leased Property is not
Taken in whole or in part, until such Taking of possession or use continues for
more than six (6) months, all the provisions of this Lease shall remain in full
force and effect and the entire amount of any Award made for such
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Taking shall be paid to Lessee provided there is then no Event of Default. Upon
the termination of any such period of temporary use or occupancy, Lessee at its
sole cost and expense shall restore the affected Leased Property, as nearly as
may be reasonably possible, to the condition existing immediately prior to such
Taking. If any temporary Taking continues for longer than six (6) months, and
fifty percent (50%) or more of the resident capacity of the affected Facility is
thereby rendered Unsuitable for its Primary Intended Use, this Lease shall cease
and terminate as to the affected Leased Property as of the last day of the sixth
(6th) month, but if less than fifty percent (50%) of the resident capacity of
such Facility is thereby rendered Unsuitable for its Primary Intended Use,
Lessee and Lessor shall each have the option by at least sixty (60) day's prior
written Notice to the other, at any time prior to the end of the temporary
taking, to terminate this Lease as to the affected Leased Property on the date
set forth in such Notice, and Lessee shall be entitled to any Award made for the
period of such temporary Taking prior to the date of termination of the Lease.
Rent shall not abate during the period of any temporary Taking.
15.5 Awards Paid to Facility Mortgagee. Notwithstanding anything herein
to the contrary, if pursuant to the terms of any Facility Mortgage the Award is
applied to the indebtedness secured by the Facility Mortgage: (i) if the Award
represents an Award for Partial Taking as described in Section 15.3 above,
Lessor shall make available to Lessee for its restoration of the affected
Facility an amount equal to the portion of the Award that would have been
payable to Lessee by Lessor for such purpose under Section 15.3; or (ii) if the
Award represents an Award for a Total Taking as described in Section 15.1 above,
Lessee shall pay to Lessor an amount equal to the Minimum Repurchase Price minus
a credit for the portion of the Award applied to the Facility Mortgage and any
portion of the Award received by Lessor and not paid over to Lessee, and Lessor
shall transfer its interest in the affected Leased Property to Lessee.
ARTICLE XVI
16.1 Lessor's Rights Upon an Event of Default. If an Event of Default
shall occur Lessor may terminate this Lease by giving Lessee a Notice of
Termination, and in such event, the Term shall end and all rights of Lessee
under this Lease shall cease on the Termination Date. The Notice of Termination
shall be in lieu of and not in addition to any notice required by the laws of
any State as a condition to bringing an action for possession of the Leased
Premises or to recover damages under this Lease. In addition to Lessor's right
to terminate this Lease, Lessor shall have all other rights set forth in this
Lease and all remedies available at law and in equity.
Lessee shall, to the extent permitted by law, pay as
Additional Charges all costs and expenses incurred by or on behalf of Lessor,
including, without limitation, reasonable attorneys' fees and expenses (whether
or not litigation is commenced, and if litigation is commenced, including fees
and expenses incurred in appeals and post-judgment proceedings) as a result of
any default of Lessee hereunder.
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No Event of Default (other than a failure to make payment of
money) shall be deemed to exist if and for so long as Lessee is unable to
prevent such Event of Default because of Force Majeure, provided that upon the
cessation of such Force Majeure, Lessee shall forthwith proceed to remedy the
action or condition giving rise to such Event of Default within the applicable
cure period as extended by such Force Majeure.
16.2 Certain Remedies. If an Event of Default shall occur, whether or
not this Lease has been terminated pursuant to Section 16.1, if required to do
so by Lessor Lessee shall immediately surrender to Lessor the Leased Properties
to Lessor in the condition required by Section 9.1.5 and quit the same, and
Lessor may enter upon and repossess the Leased Properties by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal properties from the Leased Properties, subject
to rights of any residents or patients and to any Legal Requirements. In
addition to all other remedies set forth or referred to in this Article XVI,
Lessor shall have the right to suspend any Management Agreement as to one or
more or all Facilities and to retain a manager of the affected Facility or all
Facilities at the expense of Lessee, such manager to serve for such term and at
such compensation as Lessor reasonably determines is necessary under the
circumstances.
16.3 Damages. Neither (i) the termination of this Lease pursuant to
Section 16.1, (ii) the repossession of the Leased Properties, (iii) the failure
of Lessor to relet the Leased Properties, (iv) the reletting of all or any
portion thereof, nor (v) the failure of Lessor to collect or receive any rentals
due upon such any reletting, shall relieve Lessee of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In the event this Lease is terminated by Lessor,
Lessee shall forthwith pay to Lessor all Rent due and payable with respect to
the Leased Properties to and including the Termination Date, including without
limitation all interest and late charges payable under Section 3.3 hereof with
respect to any late payment of such Rent. Lessee shall also pay to Lessor, as
liquidated damages, at Lessor's option, either:
(A) The sum of:
(i) Lessor's Interim Rent Loss, minus Net Reletting Proceeds
for such period, and minus the portion of Lessor's Interim
Rent Loss, if any, that Lessee prove could reasonably have
been mitigated by Lessor, plus
(ii) the Present Value on the Judgment Date of Lessor's Future
Rent Loss, assuming Gross Revenues were to increase four
percent (4%) per Lease Year and the Cost of Living Index were
to increase four (4) percentage points per Lease Year from the
Judgment Date through the Expiration Date, minus the Present
Value on the Termination Date of the portion of Lessor's
Future Rent Loss that Lessee proves could reasonably be
mitigated by Lessor;
or
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(B) Each month between the Termination Date and the Expiration Date,
Lessor's Monthly Rent Loss, minus the Net Reletting Proceeds for such
month, and minus the portion, if any, of Lessor's Monthly Rent Loss
that Lessee proves could reasonably have been avoided. Any suit brought
to recover liquidated damages payable under this subsection "(B)" shall
not prejudice Lessor's right to collect liquidated damages for
subsequent months in a similar proceeding.
[16.4 INTENTIONALLY OMITTED]
16.5 Waiver. If this Lease is terminated pursuant to Section 16.1,
Lessee waives, to the extent permitted by applicable law, (i) any right of
reentry, repossession or redesignation, (ii) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
XVI, and (iii) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt. Acceptance of Rent at any time
does not prejudice or remove any right of Lessor as to any right or remedy. No
course of conduct shall be held to bar Lessor from literal enforcement of the
terms of this Lease.
16.6 Application of Funds. Any payments received by Lessor under any of
the provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee's obligations in the order which Lessor may
determine or as may be prescribed by law.
16.7 Bankruptcy.
(a) Neither Lessee's interest in this Lease, nor any estate hereby
created in Lessee's interest nor any interest herein or
therein, shall pass to any trustee or receiver or assignee for
the benefit of creditors or otherwise by operation of law,
except as may specifically be provided pursuant to the
Bankruptcy Code (11 USC Section 101 et. seq.), as the same may
be amended from time to time.
(b) Rights and Obligations Under the Bankruptcy Code.
(1) Upon filing of a petition by or against Lessee under
the Bankruptcy Code, Lessee, as debtor and as
debtor-in-possession, and any trustee who may be
appointed with respect to the assets of or estate in
bankruptcy of Lessee, agree to pay monthly in advance
on the first day of each month, as reasonable
compensation for the use and occupancy of the Leased
Premises, an amount equal to all Rent due pursuant to
this Lease.
(2) Included within and in addition to any other
conditions or obligations imposed upon Lessee or its
successor in the event of the assumption and/or
assignment of the Lease in connection with any
bankruptcy proceeding are the following: (i) the cure
of any monetary defaults and reimbursement of
pecuniary loss within not more than thirty (30) days
of assumption and/or assignment; (ii) the deposit of
an additional amount
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equal to not less than three (3) months' Base Rent,
which amount is agreed to be a necessary and
appropriate deposit to secure the future performance
under the Lease of Lessee or its assignee; and (iii)
the continued use of the Leased Premises for the
Primary Intended Use.
ARTICLE XVII
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to make
any payment or perform any act required to be made or performed under this
Lease, and fails to cure the same within any grace or cure period applicable
thereto, upon such Notice as may be expressly required herein (or, if Lessor
reasonably determines that the giving of such Notice would risk loss to the
Leased Properties or cause damage to Lessor, upon such Notice as is practical
under the circumstances), and without waiving or releasing any obligation of
Lessee, Lessor may make such payment or perform such act for the account and at
the expense of Lessee, and may, to the extent permitted by law, enter upon the
Leased Properties for such purpose and take all such action thereon as, in
Lessor's sole opinion, may be necessary or appropriate. No such entry shall be
deemed an eviction of Lessee. All amounts so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) so incurred, together with the late charge and interest provided for
in Section 3.3 thereon, shall be paid by Lessee to Lessor on demand. The
obligations of Lessee and rights of Lessor contained in this Article shall
survive the expiration or earlier termination of this Lease.
ARTICLE XVIII
18.1 Holding Over. If Lessee remains in possession of all or any of the
Leased Properties after the expiration of the Term or earlier termination of
this Lease, such possession shall be as a month-to-month tenant, and throughout
the period of such possession Lessee shall pay as Rent for each month one and
one-half (1.5) times the sum of: (i) one-twelfth (1/12th) of the Base Rent
payable during the Lease Year in which such expiration or termination occurs,
plus (ii) all Additional Charges accruing during the month, plus (iii) any and
all other sums payable by Lessee pursuant to this Lease. During such period of
month-to-month tenancy, 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 applicable law to
month-to-month tenancies, to continue its occupancy and use of the Leased
Properties until the month-to-month tenancy is terminated. Nothing contained
herein shall constitute the consent, express or implied, of Lessor to the
holding over of Lessee after the expiration or earlier termination of this
Lease.
18.2 Indemnity. If Lessee fails to surrender the Leased Properties in a
timely manner and in accordance with the provisions of Section 9.1.5 upon the
expiration or termination of this Lease, in addition to any other liabilities
that Lessee may have to Lessor accruing therefrom, Lessee shall defend,
indemnify and hold Lessor, its principals, officers, directors, agents and
employees harmless from loss or liability resulting from such failure,
including, without limiting
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the generality of the foregoing, loss of rental with respect to any new lease in
which the rental payable thereunder exceeds the Rent paid by Lessee pursuant to
this Lease during Lessee's hold-over and any claims by any proposed new tenant
founded on such failure. The provisions of this Section 18.2 shall survive the
expiration or termination of this Lease.
ARTICLE XIX
19.1 Subordination. Subject to and conditioned upon Lessee's receipt of
a "Non-Disturbance Agreement" complying with the requirements of the next
sentence of this Section 19.1, Lessee shall, upon written request of Lessor, any
Facility Mortgagee, or the beneficiary of any deed of trust of Lessor, enter
into a written agreement subordinating its rights pursuant to this Lease (i) to
the lien of any mortgage, deed of trust or the interest of any lease in which
Lessor is the lessee and to all modifications, extensions, substitutions thereof
(or, at Lessor's option, agree to the subordination to this Lease of the lien of
said mortgage, deed of trust or the interest of any lease in which Lessor is the
lessee), and (ii) to all advances made or hereafter to be made thereunder. In
connection with any such request, Lessor shall provide Lessee with a
Non-Disturbance Agreement providing that if such mortgagee, beneficiary or
lessor , or any other successful bidder at any foreclosure sale, acquires the
Leased Properties by way of foreclosure or deed in lieu of foreclosure, such
mortgagee, beneficiary or lessor will not disturb Lessee's possession under this
Lease and will recognize Lessee's rights hereunder if and for so long as no
Event of Default has occurred and is continuing, and further acknowledging that
the provisions of this Lease relating to Lessee's right to insurance proceeds
and the proceeds of any Taking shall control over any conflicting provisions of
such mortgage, deed of trust or lease.
19.2 Attornment. If any proceedings are brought for foreclosure, or if
the power of sale is exercised under any mortgage or deed of trust made by
Lessor encumbering the Leased Properties, or if a lease in which Lessor is the
lessee is terminated, Lessee shall attorn to the purchaser or lessor under such
lease upon any foreclosure or deed in lieu thereof, sale or lease termination
and recognize the purchaser or lessor as Lessor under this Lease, provided the
purchaser or lessor acquires and accepts the Leased Properties subject to this
Lease.
19.3 Lessee's Certificate. Lessee shall, upon not less than ten (10)
days prior Notice from Lessor, execute, acknowledge and deliver to Lessor
Lessee's Certificate containing then-current facts. It is intended that any
Lessee's Certificate delivered pursuant hereto may be relied upon by Lessor, any
prospective tenant or purchaser of the Leased Properties, any mortgagee or
prospective mortgagee, and by any other party who may reasonably rely on such
statement. Lessee's failure to deliver the Lessee's Certificate within such time
shall constitute an Event of Default, provided that Lessor has given Lessee
Notice of such failure and Lessee has failed to cure it within five (5) days
after such Notice. In addition, if Lessee fails to deliver the Lessee's
Certificate to Lessor within the period set forth in the immediately preceding
sentence of this Section, Lessee hereby authorizes Lessor to execute and deliver
a certificate to the effect (if true) that Lessee represents and warrants that
(i) this Lease is in full force and effect without modification, and (ii) Lessor
is not in breach or default of any of its obligations under this Lease.
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ARTICLE XX
20.1 Risk of Loss. During the Term, the risk of loss or of decrease in
the enjoyment and beneficial use of the Leased Properties in consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through
or under Lessor) is assumed by Lessee, and, in the absence of gross negligence,
willful misconduct or material breach of this Lease by Lessor, Lessor shall in
no event be answerable or accountable therefor nor shall any of the events
mentioned in this Section entitle Lessee to any abatement of Rent.
ARTICLE XXI
21.1 Indemnification. Notwithstanding the existence of any insurance or
self-insurance provided for in Article XIII, and without regard to the policy
limits of any such insurance or self-insurance, Lessee shall protect, indemnify,
save harmless and defend Lessor, its principals, officers, directors and agents
and employees from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses), to the extent permitted by law,
imposed upon or incurred by or asserted against Lessor by reason of: (i) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Properties or adjoining sidewalks, including
without limitation any claims of malpractice, (ii) any use, misuse, non-use,
condition, maintenance or repair by Lessee of the Leased Properties, (iii) the
failure to pay any Impositions, (iv) any failure on the part of Lessee to
perform or comply with any of the terms of this Lease, and (v) the
nonperformance of any contractual obligation, express or implied, assumed or
undertaken by Lessee or any party in privity with Lessee with respect to the
Leased Properties or any business or other activity carried on with respect to
the Leased Properties during the Term or thereafter during any time in which
Lessee or any such other party is in possession of the Leased Properties or
thereafter to the extent that any conduct by Lessee or any such person (or
failure of such conduct thereby if the same should have been undertaken during
such time of possession and leads to such damage or loss) causes such loss or
claim. Any amounts which become payable by Lessee under this Section shall be
paid within ten (10) days after liability therefor on the part of Lessee is
determined by litigation or otherwise, and if not timely paid, shall bear
interest (to the extent permitted by law) at the Overdue Rate from the date of
such determination to the date of payment. Nothing herein shall be construed as
indemnifying Lessor against its own grossly negligent acts or omissions or
willful misconduct.
Lessee's liability under this Article shall survive the expiration or
any earlier termination of this Lease.
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ARTICLE XXII
22.1 General Prohibition against Transfers. Lessee acknowledges that a
significant inducement to Lessor to enter into this Lease with Lessee on the
terms set forth herein is the combination of financial strength, experience,
skill and reputation possessed by the Lessee named herein, the Person or Persons
in Control of Lessee, the Guarantor and the Manager of the Facilities on the
Commencement Date, together with Lessee's assurance that Lessor shall have the
unrestricted right to approve or disapprove any proposed Transfer. Therefore,
there shall be no Transfer except as specifically permitted by this Lease or
consented to in advance by Lessor in writing. Lessee agrees that Lessor shall
have the right to withhold its consent to any proposed Transfer on the basis of
Lessor's judgment as to the effect the proposed Transfer may have on the
Facilities and the future performance of the obligations of the Lessee under
this Lease, whether or not Lessee agrees with such judgment. Any attempted
Transfer which is not specifically permitted by this Lease or consented to by
Lessor in advance in writing shall be null and void and of no force and effect
whatsoever. In the event of a Transfer, Lessor may collect Rent and other
charges from the assignee, subtenant or other occupant or transferee (any and
all of which are herein referred to as a "Transferee") and apply the amounts
collected to the Rent and other charges herein reserved, but no Transfer or
collection of Rent and other charges shall be deemed to be a waiver of Lessor's
rights to enforce Lessee's covenants or an acceptance of the Transferee as
Lessee, or a release of the Lessee named herein from the performance of its
covenants. Notwithstanding any Transfer, Lessee and each Guarantor of this Lease
shall remain fully liable for the performance of all terms, covenants and
provisions of this Lease. Any violation of this Lease by any Transferee shall be
deemed to be a violation of this Lease by Lessee.
22.2 Consent to Certain Transfers. Lessor acknowledges that Lessee, as
sublessor, intends to enter into subleases with the parties identified on
Schedule 22.2 hereto, as sublessees, with respect to the Facilities identified
on such Schedule. Lessor consents to such subleases provided that all such
sublease agreements satisfy all of the requirements set forth in this Lease and
otherwise are satisfactory in form and substance to Lessor. The conditions set
forth in the immediately preceding sentence shall be deemed satisfied as to any
sublease with respect to which Lessor has executed and delivered a Consent and
Non-Disturbance Agreement in substantially the form of EXHIBIT F attached
hereto.
22.3 Termination of Previously Existing Lease Agreements, etc. Lessee
represents and warrants to Lessor that any and all written or oral lease
agreements and arrangements (however evidenced or denominated) existing prior to
the date of this Lease between a seller, identified as such in the Purchase
Agreement, and a party listed in Schedule 22.2 hereto, pursuant to which a party
listed in Schedule 22.2 hereto had any right (whether as owner, lessee or
otherwise) in a Leased Property or any portion thereof (or had any right to
acquire any such right in a Leased Property or any portion thereof), have been
duly terminated and are null and void and of no further force and effect. Lessee
further represents and warrants to Lessor that the only agreements, arrangements
and understandings between Lessee and a party listed in Schedule 22.2 hereto
relating to the Leased Property are set forth in subleases with respect to which
Lessor
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has executed and delivered a Consent and Non-Disturbance Agreement in
substantially the form of EXHIBIT F attached hereto.
22.4 Subordination and Attornment. Lessee shall insert in any sublease
permitted by Lessor provisions to the effect that (i) such sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder, (ii) if this Lease terminates before the expiration
or earlier termination of such sublease, the sublessee thereunder will attorn to
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 (iii) if the sublessee receives a written Notice from Lessor or Lessor's
assignee, if any, stating that Lessee is in default under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under the
sublease directly to the party giving such Notice, or as such party may direct,
which payments shall be credited against the amounts owing by Lessee under this
Lease.
22.5 Sublease Limitation. Anything contained in this Lease to the
contrary notwithstanding, even if a sublease of a Leased Property is permitted,
Lessee shall not sublet such Leased Property on any basis such that the rental
to be paid by the sublessee thereunder would be based, in whole or in part, on
either (i) the income or profits derived by the business activities of the
sublessee, or (ii) any other formula such that any portion of the sublease
rental received by Lessor would fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Code, or any similar or successor
provision thereto. The parties agree that this paragraph shall not be deemed
waived or modified by implication, but may be waived or modified only by an
instrument in writing explicitly referring to this paragraph by number.
ARTICLE XXIII
23.1 Officer's Certificates and Financial Statements. Lessee shall
furnish (and as appropriate cause Guarantor to furnish) to Lessor:
(i) Within ninety (90) days after the end of each of Lessee's
fiscal years: (a) Lessee's Financial Statement; (b) a consolidated
profit and loss statement for the Facilities, which shall be prepared
on the basis of accounting consistent with that of Guarantor; and (c)
an Officer's Certificate stating that Lessee is not in default in the
performance or observance of any of the terms of this Lease, or if
Lessee is in default, specifying all such defaults, the nature thereof,
and the steps being taken to remedy the same;
(ii) Within forty-five (45) days after the end of each of
Guarantor's fiscal quarters, a copy of Guarantor's Report on Form 10-Q
for the preceding fiscal quarter, in the form required to be filed with
the SEC, together with an Officer's Certificate that Lessee is not in
default of any covenant set forth in Section 8 of this Lease, or if
Lessee is in default, specifying all such defaults, the nature thereof,
and the steps being taken to remedy the same;
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(iii) Within ninety (90) days after the end of each of
Guarantor's fiscal years, Guarantor's Financial Statement for such
fiscal year.
(iv) Within thirty (30) days after the end of each month,
monthly financial reports for each Facility with detailed statements of
income and expense (actual and as compared to budget), and detailed
operational statistics regarding occupancy rates for the Facility;
(v) Within fifteen (15) days of filing a copy of each cost
report filed with a governmental agency for any Facility;
(vi) Within ten (10) days after they are required to be filed
with the SEC, copies of any annual or quarterly report and of
information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe)
which Lessee or any Guarantor are required to file with the SEC
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934;
(vii) Within thirty (30) days of Lessee's or Manager's receipt
thereof, copies of surveys performed by the appropriate governmental
agencies for licensing or certification purposes, and any plan of
correction as approved by a State for a Facility;
(viii) Immediate Notice to Lessor of any action, proposal or
investigation by any agency or entity, or complaint to such agency or
entity, known to Lessee, the result of which could be to (i) modify in
a way adverse to Lessee or revoke or suspend or terminate, or fail to
renew or fully continue in effect, any license or certificate or
operating authority pursuant to which Lessee carries on any part of the
Primary Intended Use of the Facilities, or (ii) suspend, terminate,
adversely modify, or fail to renew or fully continue in effect any cost
reimbursement or cost sharing program by any state or federal
governmental agency, including but not limited to Medicaid or Medicare
or any successor or substitute therefor, or seek return of or
reimbursement for any funds previously advanced or paid pursuant to any
such program but only if Lessee participates in such programs), or
(iii) impose any bed hold, limitation on resident admission or similar
restriction on any Leased Property, or (iv) prosecute any party with
respect to the operation of any activity on the Facilities or enjoin
any party or seek any civil penalty in excess of One Thousand Dollars
($1,000.00) in respect thereof;
(ix) As soon as it is prepared in each Lease Year, a capital
and operating budget for the Facilities for that and the following
Lease Year;
(x) With reasonable promptness, such other information
respecting the financial condition and affairs of Lessee, Guarantor and
the Facilities as Lessor may reasonably request from time to time
including, without limitation, any such other information as may be
available to the administration of the Leased Properties; and
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(xi) Upon Lessor's request from time to time, such additional
information and unaudited quarterly financial information concerning
the Leased Properties and Lessee as Lessor may require for its on-going
filings with the Securities and Exchange Commission, under both the
Securities Act of 1933, as amended and the Securities Exchange Act of
1934, as amended, including, but not limited to 10-Q Quarterly Reports,
10-K Annual Reports and registration statements to be filed by Lessor
during the Term of this Lease.
(xii) The worksheets of Lessee and Guarantor (including
worksheets furnished by or on behalf of Lessee or Guarantor to its
accountants in connection with the preparation of the Financial
Statements), but only after the occurrence of an Event of Default and
following written request by Lessor.
23.2 Public Offering Information. Lessee specifically agrees that
Lessor may include financial information and information concerning the
operation of the Facilities that does not violate the confidentiality of the
facility-resident relationship and the physician-resident privilege under
applicable laws, in offering memoranda or prospectuses, or similar publications
in connection with syndications or public offerings of Lessor's securities or
interests, and any other reporting requirements under applicable federal and
state laws, including those of any successor to Lessor. Lessee agrees to provide
such other reasonable information necessary with respect to Lessee and the
Leased Properties to facilitate a public offering or to satisfy SEC or
regulatory disclosure requirements. Upon request of Lessor, Lessee shall notify
Lessor of any necessary corrections to information Lessor proposes to publish
within a reasonable period of time (not to exceed three (3) Business Days) after
being informed thereof by Lessor.
ARTICLE XXIV
24.1 Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives to inspect the Leased Properties and Lessee's books
and records pertaining thereto during normal business hours at any time upon not
less than 24 hours' Notice (except in the case of a bona fide emergency, in
which no advance Notice shall be required).
ARTICLE XXV
25.1 No Waiver. No failure by Lessor to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach hereof, and no acceptance of full or partial payment of
Rent during the continuance of any such breach, shall constitute a waiver of any
such breach or of any such term. No waiver of any breach shall affect or alter
this Lease, which shall continue in full force and effect with respect to any
other then existing or subsequent breach.
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ARTICLE XXVI
26.1 Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor now or hereafter
provided either in this Lease or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Lessor of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or subsequent
exercise by Lessor of any or all of such other rights, powers and remedies.
ARTICLE XXVII
27.1 Acceptance of Surrender. No surrender to Lessor of this Lease or
of the Leased Properties or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Lessor, and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXIII
28.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (i) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate, and (ii) the fee estate in the
Leased Properties.
28.2 No Partnership. Nothing contained in this Lease will be deemed or
construed to create a partnership or joint venture between Lessor and Lessee or
to cause either party to be responsible in any way for the debts or obligations
of the other or any other party, it being the intention of the parties that the
only relationship hereunder is that of Lessor and Lessee.
ARTICLE XXIX
29.1 Conveyance by Lessor. If Lessor or any successor owner of the
Leased Properties conveys the Leased Properties other than as security for a
debt, Lessor or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Lessor under this Lease
arising or accruing from and after the date of such conveyance or other transfer
and all such future liabilities and obligations shall thereupon be binding upon
the new owner.
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ARTICLE XXX
30.1 Quiet Enjoyment. So long as Lessee pays all Rent as it becomes due
and complies with all of the terms of this Lease and performs its obligations
hereunder, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Properties for the Term, free of any claim or other action by Lessor or anyone
claiming by, through or under Lessor, but subject to all other covenants,
conditions, restrictions, easements and other matters consented to by Lessee or
referred to in Section 1.1, whether now or hereafter existing or arising (other
than claims asserted by the holder(s) of any Facility Mortgage(s) or other
encumbrances now or hereafter placed on a Facility by Lessor and liens attaching
to a Facility as a result of Lessor's ownership of an interest therein). Except
as otherwise provided in this Lease, no failure by Lessor to comply with the
foregoing covenant will give Lessee any right to cancel or terminate this Lease
or abate, reduce or make a deduction from or offset against the Rent or any
other sum payable under this Lease, or to fail to perform any other obligation
of Lessee. Lessee shall, however, have the right, by separate and independent
action, to pursue any claim it may have against Lessor as a result of a breach
by Lessor of the covenant of quiet enjoyment contained in this Section.
ARTICLE XXXI
31.1 Notices. Any notice, request or other communication to be given by
any party hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, by overnight deliver, hand delivery or
facsimile transmission to the following address:
TO LESSEE: AHC Properties, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attn: Mark W. Ohlendorf
Telephone No.: 414/641-5100
Facsimile No.: 414/789-6677
With copy to Rogers & Hardin
(which shall not 2700 International Tower
constitute notice): 229 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attn: Miriam Dent
Telephone No.: 404/522-4700
Facsimile No.: 404/525-2224
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TO LESSOR: Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Attn.: F. Scott Kellman and Susan Allene Kovach
Telephone No.: 734/887-0200
Facsimile No.: 734/887-0201
With copy to Dykema Gossett PLLC
(which shall not 1577 North Woodward Ave.
constitute notice): Bloomfield Hills, MI 48304-2820
Attn.: Fred J. Fechheimer, Esq.
Telephone No.: (248) 203-0743
Facsimile No.: (248) 203-0763
or to such other address as either party may hereafter designate. Notice shall
be deemed to have been given on the date of delivery if such delivery is made on
a Business Day, or if not, on the first Business Day after delivery. If delivery
is refused, Notice shall be deemed to have been given on the date delivery was
first attempted. Notice sent by facsimile transmission shall be deemed given
upon confirmation that such Notice was received at the number specified above or
in a Notice to the sender.
ARTICLE XXXII
32.1 Appraisers. If it becomes necessary to determine Fair Market Value
or Fair Market Rent for any purpose under 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 such Notice, the party receiving such Notice shall give
Notice to the other party of its selection of a person to act as appraiser on
its behalf. The appraisers thus appointed, each of whom must be a member of the
Appraisal Institute (or any successor organization thereto) and experienced in
appraising facilities used for purposes similar to the Primary Intended Use of
the Facilities, shall, within forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to appraise the Leased Property or
Leased Properties, as the case may be, to determine the Fair Market Value or
Fair Market Rent thereof as of the relevant date (giving effect to the impact,
if any, of inflation between the date of their decision and the relevant date);
provided, however, that if only one appraiser has been so appointed, or if two
appraisers have been so appointed but only one such appraiser has made such
determination within fifty (50) days after the date of the Notice appointing the
first appraiser, then the determination of such appraiser shall be final and
binding upon the parties. To the extent consistent with sound appraisal practice
at the time of any such appraisal, such appraisal shall be made on a basis
consistent with the basis on which the Leased Property or Leased Properties were
appraised for purposes of determining its Fair Market Value at the time of
Lessor's acquisition thereof. If two appraisers have been appointed and have
made their determinations within the respective requisite periods set forth
above, and if the difference between the amounts so determined does not exceed
ten percent (10%) of the lesser of such
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amounts, then the Fair Market Value or Fair Market Rent 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 exceeds ten percent (10%) of the
lesser of such amounts, then such two appraisers shall within twenty (20) days
appoint a third appraiser. If no such appraiser is appointed within such twenty
(20) days or within ninety (90) days of the date of the Notice appointing the
first appraiser, whichever is earlier, either Lessor or Lessee may apply to any
court having jurisdiction to have such appointment made by such court. Any
appraiser appointed by the original appraisers or by such court shall be
instructed to determine the Fair Market Value or Fair Market Rent within
forty-five (45) 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 the average of
the remaining two determinations shall be final and binding upon Lessor and
Lessee as the Fair Market Value or Fair Market Rent of the Leased Property or
Leased Properties, as the case may be. If the Fair Market Rent is being
determined for more than one year, the Fair Market Rent may include such annual
increases, if any, as the appraisers determine to be in accordance with the
terms of this Lease.
This provision for determining 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, and judgment may be entered upon such
determination in a court of competent jurisdiction. Lessor and 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 costs and expenses incurred in connection with each appraisal.
ARTICLE XXXIII
33.1 Breach by Lessor. Lessor shall not be in breach of this Lease
unless Lessor fails to observe or perform any term, covenant or condition of
this Lease on its part to be performed and such failure continues for a period
of thirty (30) days after written Notice specifying such failure and the
necessary curative action is received by Lessor from Lessee. If the failure
cannot with due diligence be cured within a period of thirty (30) days, the
failure shall not be deemed to continue if Lessor, within said thirty (30) day
period, proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof. The time within which Lessor shall be
obligated to cure any such failure shall also be subject to extension of time
due to Force Majeure.
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ARTICLE XXXIV
34.1 Lessor's Option to Purchase Lessee's Personal Property. At the
expiration or termination of this Lease, Lessor shall have the option on the
terms hereinafter set forth to purchase any of Lessee's Personal Property that
is not deemed to have been sold, assigned, transferred and conveyed to Lessor
pursuant to Section 6.3 hereof, for an amount equal to the then fair market
value thereof, subject to, and with appropriate credits for, any obligations
owing from Lessee to Lessor and for the then outstanding balances owing on all
equipment leases, conditional sale contracts and any other encumbrances to which
such Lessee's Personal Property is subject. Lessor's option shall be exercised
by Notice to Lessee no more than one hundred eighty (180) days, nor less than
ninety (90) days, before the expiration of the Initial Term or, if the Term is
renewed as provided herein, before the expiration of the last Renewal Term,
unless this Lease is terminated prior to its expiration date by reason of an
Event of Default, in which event Lessor's option shall be exercised not more
than ninety (90) days after the date of termination. Lessor's option under this
Section 34.1 shall terminate if not timely exercised. If Lessor exercises its
option, Lessee shall, in exchange for Lessor's payment of the purchase price,
deliver the purchased Lessee's Personal Property to Lessor, together with a bill
of sale and such other documents as Lessor may reasonably request in order to
carry out the purchase, and the purchase shall be closed by such delivery and
such payment on the date set by Lessor in its Notice of exercise.
34.2 Transfer of Operational Control of the Facilities. Lessee shall
cooperate fully in transferring operational control of all of the Facilities
which are then subject to this Lease to Lessor or Lessor's nominee if the Term
expires without renewal or this Lease is terminated upon the occurrence of an
Event of Default or for any other reason, and Lessee shall use reasonable
efforts to cause the business conducted at all such Facilities to continue
without interruption. To that end, pending completion of the transfer of the
operational control of such Facilities to Lessor or its nominee:
(i) Lessee will not terminate the employment of any employees
without just cause, or change any salaries, provided, however, that
without the advance written consent of Lessor Lessee may grant
pre-announced wage increases of which Lessor has knowledge, increases
required by written employment agreements and normal raises to
non-officers at regular review dates; and Lessee will not hire any
additional employees except in good faith in the ordinary course of
business;
(ii) Lessee will provide all necessary information reasonably
requested by Lessor or its nominee for the preparation and filing of
any and all necessary applications or notifications of any federal or
state governmental authority having jurisdiction over a change in the
operational control of the Facilities, and any other information
reasonably required to effect an orderly transfer of the Facilities,
and Lessee will use reasonable efforts to cause all operating health
care licenses to be issued to Lessor or to Lessor's nominee;
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(iii) Lessee shall use reasonable efforts to keep the business
and organization of the Facilities intact and to preserve for Lessor or
its nominee the goodwill of the suppliers, distributors, residents and
others having business relations with Lessee with respect to the
Facilities;
(iv) Lessee shall engage only in transactions or other
activities with respect to the Facilities which are in the ordinary
course of its business and shall perform all maintenance and repairs
reasonably necessary to keep the Facilities in satisfactory operating
condition and repair, and shall maintain the supplies and foodstuffs at
levels which are consistent and in compliance with all health care
regulations, and shall not sell or remove any personal property except
in the ordinary course of business and in accordance with the terms and
conditions of this Lease;
(v) Lessee shall provide Lessor or its nominee, within the
limits of applicable law, with full and complete information regarding
the employees of the Facilities and shall reimburse Lessor or its
nominee for all outstanding accrued employee benefits, including
accrued vacation, sick and holiday pay calculated on a true accrual
basis, including all earned and a prorated portion of all unearned
benefits, for all employees thereafter actually employed by Lessor or
its nominee or assignee;
(vi) Lessee shall use reasonable efforts to obtain the
acknowledgment and the consent of any creditor, lessor or sublessor,
mortgagee, beneficiary of a deed of trust or security agreement
affecting the real and personal properties of Lessee or any other party
whose acknowledgment and/or consent would be required because of a
change in the operational control of the Facilities and transfer of
personal property. The consent must be in form, scope and substance
satisfactory to Lessor or its nominee, including, without limitation,
an acknowledgment in respect to all such contracts, leases, deeds of
trust, mortgage, security agreements, or other agreements that Lessee
and all predecessors or successors-in-interest thereto are not in
default in respect thereto, that no condition known to the consenting
party exists which with the giving of notice or lapse of time would
result in such a default, and, if requested, affirmatively consenting
to the change in the operational control of the Facilities;
(vii) To more fully preserve and protect Lessor's rights under
this Section, Lessee does hereby make, constitute and appoint Lessor
its true and lawful attorney-in-fact, for it and in its name, place and
stead to execute and deliver all such instruments and documents, and to
do all such other acts and things, as Lessor may deem to be necessary
or desirable to protect and preserve the rights granted under this
Section, including, without limitation, the preparation, execution and
filing with the Board of Health (or similar agency) of each State OF
any and all required "Letters of Responsibility" or similar documents.
Lessee hereby grants to Lessor the full power and authority to appoint
one or more substitutes to perform any of the acts that Lessor is
authorized to perform under this Section, with a right to revoke such
appointment of substitution at Lessor's pleasure. The power of attorney
granted pursuant to this Section is coupled with an interest and
therefore is irrevocable. Any person dealing with Lessor
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<PAGE> 67
may rely upon the representation of Lessor relating to any authority
granted by this power of attorney, including the intended scope of the
authority, and may accept the written certificate of Lessor that this
power of attorney is in full force and effect. Photographic or other
facsimile reproductions of this executed Lease may be made and
delivered by Lessor, and may be relied upon by any person to the same
extent as though the copy were an original. Anyone who acts in reliance
upon any representation or certificate of Lessor, or upon a
reproduction of this Lease, shall not be liable for permitting Lessor
to perform any act pursuant to this power of attorney. Notwithstanding
the foregoing, Lessor covenants with Lessee that Lessor shall refrain
from exercising the power of attorney granted hereby except in the case
of an Event of Default hereunder or in the event of a default, which,
in Lessor's reasonable judgment, may lead to the suspension or
revocation of any license of Lessee or of any sublessee.
34.4 Intangibles and Personal Property. Notwithstanding any other
provision of this Lease but subject to Section 6.4 relating to the security
interest in favor of Lessor, Lessor's Personal Property shall not include
goodwill nor shall it include any other intangible personal property that is
severable from Lessor's "interests in real property" within the meaning of
Section 856(d) of the Code, or any similar or successor provision thereto.
ARTICLE XXXV
35.1 Arbitration. Except with respect to the payment of Rent under this
Lease and any proceedings to recover possession of one or more of the Leased
Properties, in case any controversy arises between the parties hereto as to any
of the provisions of this Lease or the performance thereof, and the parties are
unable to settle the controversy by agreement or as otherwise provided herein,
the controversy shall be decided by arbitration. The arbitration shall be
conducted by three arbitrators selected in accordance with the rules and
procedures of the American Arbitration Association. The decision of the
arbitrators shall be final and binding, and judgment may be entered thereon in
any court of competent jurisdiction. The decision shall set forth in writing the
basis for the decision. In rendering the decision and award, the arbitrators
shall not add to, subtract from, or otherwise modify the provisions of this
Lease. The expense of the arbitration shall be divided between Lessor and Lessee
unless otherwise specified in the award. Each party in interest shall pay the
fees and expenses of its own counsel. The arbitration shall be conducted in Ann
Arbor, Michigan. In any arbitration, the parties shall be entitled to conduct
discovery in the same manner as permitted under Federal Rules of Civil Procedure
26 through 37, as amended. No provision in this Article shall limit the right of
any party to this Agreement to obtain provisional or ancillary remedies from a
court of competent jurisdiction before, after, or during the pendency of any
arbitration, and the exercise of such remedies does not constitute a waiver of
the right of either party to arbitration.
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ARTICLE XXXVI
36.1 Miscellaneous.
36.1.1 Survival, Choice of law. Anything contained in this
Lease to the contrary notwithstanding, all claims against, and liabilities of,
Lessee or Lessor arising prior to the date of expiration or termination of this
Lease shall survive such expiration or termination. If any term or provision of
this Lease or any application thereof is held invalid or unenforceable, the
remainder of this Lease and any other application of such term or provisions
shall not be affected thereby. Neither this Lease nor any provision hereof may
be changed, waived, discharged or terminated except by an instrument in writing
and in recordable form signed by Lessor and Lessee. All the terms and provisions
of this Lease shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. The headings in this Lease
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof. This Lease shall be governed by and construed in accordance
with the laws of the state of Michigan, except as to matters which, under
applicable procedural conflicts of laws rules require the application of laws of
another State.
LESSEE CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND
FEDERAL COURTS OF THE STATES OF MICHIGAN AND EACH STATE IN WHICH A FACILITY IS
LOCATED, AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE
STATE AND FEDERAL COURTS LOCATED IN THE STATES OF MICHIGAN OR ANY STATE IN WHICH
A FACILITY IS LOCATED. LESSEE AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED
UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATES OF MICHIGAN OR
ANY STATE IN WHICH A FACILITY IS LOCATED AND IRREVOCABLY WAIVES ANY OBJECTION TO
VENUE IN THE STATE AND FEDERAL COURTS OF THE STATES OF MICHIGAN OR ANY SUCH
STATE.
36.1.2 Limitation on Recovery. Lessee specifically agrees to
look solely to Lessor's interest in the Leased Properties for recovery of any
judgment from Lessor, it being specifically agreed that no constituent
shareholder, officer or director of Lessor shall ever be personally liable for
any such judgment or for the payment of any monetary obligation to Lessee.
Furthermore, Lessor (original or successor) shall never be liable to Lessee for
any indirect or consequential damages suffered by Lessee from whatever cause.
36.1.3 Waivers. Lessee waives any defense by reason of any
disability of Lessee, and waives any other defense based on the termination of
Lessee's (including Lessee's successors) liability from any cause. 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.
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36.1.4 Consents. Whenever the consent or approval of Lessor is
required hereunder, Lessor may in its sole discretion and without reason
withhold that consent or approval unless otherwise specifically provided.
36.1.5 Counterparts. This Lease may be executed in separate
counterparts, each of which shall be considered an original when each party has
executed and delivered to the other one or more copies of this Lease.
36.1.6 Options Personal. The renewal options granted to Lessee
in this Lease are granted solely to Lessee and are not assignable or
transferrable except in connection with a Transfer permitted in Article XXII.
36.1.7 Rights Cumulative. Except as provided herein to the
contrary, the respective rights and remedies of the parties specified in this
Lease shall be cumulative and in addition to any rights and remedies not
specified in this Lease.
36.1.8 Entire Agreement. There are no oral or written
agreements or representations between the parties hereto affecting this Lease
other than the Transaction Documents. This Lease and the Transaction Documents
supersede and cancel any and all previous negotiations, arrangements,
representations, brochures, agreements and understandings, if any, between
Lessor and Lessee.
36.1.9 Amendments in Writing. No provision of this Lease may
be amended except by an agreement in writing signed by Lessor and Lessee.
36.1.10 Severability. If any provision of this Lease or the
application of such provision to any person, entity or circumstance is found
invalid or unenforceable by a court of competent jurisdiction, such
determination shall not affect the other provisions of this Lease and all other
provisions of this Lease shall be deemed valid and enforceable.
36.1.11 Time of the Essence. Time is of the essence of all
provisions of this Lease of which time is an element.
ARTICLE XXXVII
37.1 Commissions (Lessee). Lessee agrees to save, indemnify and hold
Lessor harmless from and against any and all claims, liabilities or obligations
for brokerage commissions, finder's fees or the like in connection with this
Lease or the transactions contemplated hereby asserted by any person on the
basis of any statement or act alleged to have been made or taken by Lessee.
Lessee represents and warrants to Lessor that Lessee is aware of no Person who
would have a meritorious basis for asserting any such claims, liabilities or
obligations.
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37.2 Commissions (Lessor). Lessor agrees to save, indemnify and hold
Lessee harmless from and against any and all claims, liabilities or obligations
for brokerage commissions, finder's fees or the like in connection with this
Lease or the transactions contemplated hereby asserted by any person on the
basis of any statement or act alleged to have been made or taken by Lessor.
Lessor represents and warrants to Lessee that Lessor is aware of no Person who
would have a meritorious basis for asserting any such claims, liabilities or
obligations.
ARTICLE XVIII
38.1 Memorandum or Short Form of Lease. Lessor and Lessee shall,
promptly upon the request of either, enter into a Memorandum or Short Form of
Lease, substantially in the form of attached EXHIBIT G with such modifications
as may be appropriate under the laws and customs of the States and in the
customary form suitable for recording under the laws of each of the States.
Lessee shall pay all costs and expenses of recording such memorandum or short
form of this Lease.
ARTICLE XXXIX
39.1 Security Deposit. Concurrently with Lessee's execution of this
Lease, Lessee shall deliver the Security Deposit to Lessor, which Lessor shall
hold as security for the full and faithful performance by Lessee of each and
every term, provision, covenant and condition of this Lease. Unless otherwise
provided in the Purchase Agreement, Lessee shall satisfy the Security Deposit
obligation by providing a letter of credit which shall be subject to the terms
and conditions of the Letter of Credit Agreement. If at any time the Security
Deposit is in the form of cash, it shall be deposited by Lessor into an account
which shall earn interest. Promptly upon receipt of written request from Lessee
(which may be made not more often than at quarterly intervals), Lessor shall,
provided there then exists no uncured Event of Default and no circumstance
which, with notice or the passage of time, or both, could become an Event of
Default, pay such interest to Lessee. Any interest that Lessee is not entitled
to receive under the preceding sentence shall be added to and become part of the
Security Deposit. The Security Deposit shall not be considered an advance
payment of Rent (or of any other sum payable to Lessee under this Lease) or a
measure of Lessor's damages in case of a default by Lessee. The Security Deposit
shall not be considered a trust fund, and Lessee expressly acknowledges and
agrees that Lessor is not acting as a trustee or in any fiduciary capacity in
controlling or using the Security Deposit. Lessor shall have no obligation to
maintain the Security Deposit separate and apart from Lessor's general and/or
other funds. The Security Deposit, less any portion thereof applied as provided
in the Letter of Credit Agreement or Section 39.3, shall be returned to Lessee
within sixty (60) days following the expiration of the Term.
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39.2 Reduction in Security Deposit.
(a) The Security Deposit shall be reduced to an amount equal
to six (6) months' Base Rent when both of the following conditions have
been satisfied (provided there then exists no Event of Default or fact
or circumstance which, with notice or the passage of time, or both,
would constitute an Event of Default): (i) Break-even Operations shall
have occurred, and (ii) Lessee has acquired all of the outstanding
equity interests in each of the sublessees listed in Schedule 22.2
hereto and the sublease arrangement between Lessee and each such
sublessee with respect to the Leased Property has been terminated.
(b) The Security Deposit shall be further reduced to an amount
equal to three (3) months' Base Rent when both of the following
conditions have been satisfied (provided there then exists no Event of
Default or fact or circumstance which, with notice or the passage of
time, or both, would constitute an Event of Default): (i) Portfolio
Stabilization shall have occurred, and (ii) Lessee has acquired all of
the outstanding equity interests in each of the sublessees listed in
Schedule 22.2 hereto and the sublease arrangement between Lessee and
each such sublessee with respect to the Leased Property has been
terminated.
39.3 Application of Security Deposit. If an Event of Default occurs
under this Lease, Lessor may, but shall not be required to, in addition to and
not in lieu of any other rights and remedies available to Lessor , apply all or
any part of the Security Deposit to the payment of any sum in default, or any
other sum, including but not limited to, any damages or deficiency in reletting
the Leased Properties, which Lessor may expend or incur or be required to expend
or incur by reason of Lessee's default. Whenever, and as often as, Lessor has
applied any portion of the Security Deposit as herein provided, Lessee shall,
within ten (10) days after Notice from Lessor, deliver a new letter of credit
meeting the requirements of the Letter of Credit Agreement to Lessor (or, at
Lessor's option, deposit additional money with Lessor) sufficient to restore the
Security Deposit to the full amount originally provided or paid, and Lessee's
failure to do so shall constitute an Event of Default hereunder without any
further Notice or grace period.
39.4 Transfer of Security Deposit. If Lessor transfers its interest
under this Lease, Lessor shall assign the Security Deposit to the new lessor and
thereafter Lessor shall have no further liability for the return of the Security
Deposit, and Lessee agrees to look solely to the new lessor for the return of
the Security Deposit. The provisions of the preceding sentence shall apply to
every transfer or assignment of Lessor's interest under this Lease. Lessee
agrees that it will not assign or encumber or attempt to assign or encumber the
Security Deposit and that Lessor, its successors and assigns, may return the
Security Deposit to the last Lessee in possession at the last address for Notice
given by such Lessee and that Lessor shall thereafter be relieved of any
liability therefor, regardless of one or more assignments of this Lease or any
such actual or attempted assignment or encumbrances of the Security Deposit.
SIGNATURES ON FOLLOWING PAGE.
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IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation
June _____, 1999 By: /s/ Susan A. Kovach
---------------------------------------
Susan A. Kovach
Vice President and General Counsel
LESSEE:
AHC PROPERTIES, INC.,
a Delaware corporation
June ____, 1999 By: /s/ Mark W. Ohlendorf
----------------------
Mark W. Ohlendorf
Senior Vice President
STATE OF MICHIGAN )
) ss:
COUNTY OF WASHTENAW )
The foregoing instrument was acknowledged before me on June ____, 1999,
by Susan A. Kovach who is the Vice President and General Counsel of Omega
Healthcare Investors, Inc., a Maryland corporation, on behalf of the
corporation, who acknowledged the same to be her free act and deed and the free
act and deed of the corporation.
Notary Public, _______ County, Michigan
My commission expires:
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STATE OF WISCONSIN )
) ss:
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on June ____, 1999,
by Mark W. Ohlendorf who is a Senior Vice President of AHC Properties, Inc., a
Delaware corporation, on behalf of the corporation, who acknowledged the same to
be his free act and deed and the free act and deed of the corporation.
Notary Public, _______ County, Wisconsin
My commission expires:
LIST OF EXHIBITS TO LEASE
EXHIBIT A - Facility Trade Names
EXHIBIT B-1 THROUGH B-9 - Description of Land
EXHIBIT C - Form of Lessee's Certificate
EXHIBIT D - Minimum Repurchase Prices
EXHIBIT E-1 THROUGH E-9 - Permitted Encumbrances
EXHIBIT F - Form of Consent and Non-Disturbance Agreement
EXHIBIT G - Form of Memorandum or Short Form of Lease
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EXHIBIT 10.5
KANSAS MASTER LEASE
SINGLE LESSEE
SINGLE FACILITY
OMEGA (KANSAS), INC.
AND
AHC PROPERTIES, INC.
DATED: JUNE 14TH, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS ....................................................................................................... 1
ARTICLE I....................................................................................................... 1
1.1 Lease......................................................................................... 1
1.2 Term.......................................................................................... 2
1.3 Option to Renew............................................................................... 2
ARTICLE II...................................................................................................... 2
2.1 Definitions................................................................................... 2
ARTICLE III..................................................................................................... 22
3.1 Base Rent; Monthly Installments............................................................... 22
3.2 Additional Charges............................................................................ 22
3.3 Late Charge; Interest......................................................................... 22
3.4 Net Lease..................................................................................... 22
3.5 Payments In The Event of a Rent Adjustment.................................................... 23
ARTICLE IV...................................................................................................... 23
4.1 Payment of Impositions........................................................................ 23
4.2 Adjustment of Impositions..................................................................... 23
4.3 Utility Charges............................................................................... 24
4.4 Insurance Premiums............................................................................ 24
ARTICLE V....................................................................................................... 24
5.1 No Termination, Abatement, etc................................................................ 24
ARTICLE VI...................................................................................................... 24
6.1 Ownership of the Leased Properties............................................................ 24
6.2 Lessor's Personal Property.................................................................... 25
6.3 Lessee's Personal Property.................................................................... 25
6.4 Grant of Security Interest in Personal Property and Accounts.................................. 26
ARTICLE VII..................................................................................................... 26
7.1 Condition of the Leased Properties............................................................ 26
7.2 Use of the Leased Properties.................................................................. 26
7.3 Certain Environmental Matters................................................................. 27
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE VIII.................................................................................................... 31
8.1 Compliance with Legal and Insurance Requirements.............................................. 31
8.2 Certain Covenants............................................................................. 32
8.3 Minimum Qualified Capital Expenditures........................................................ 32
8.4 Management Agreements......................................................................... 33
8.5 Other Facilities.............................................................................. 33
8.6 No Other Business............................................................................. 33
8.7 Separateness.................................................................................. 33
ARTICLE IX...................................................................................................... 34
9.1 Maintenance and Repair........................................................................ 34
9.2 Encroachments, Restrictions, etc.............................................................. 35
ARTICLE X....................................................................................................... 35
10.1 Construction of Alterations and Additions to the Leased Properties............................ 35
ARTICLE XI...................................................................................................... 36
11.1 Liens......................................................................................... 36
ARTICLE XII..................................................................................................... 36
12.1 Permitted Contests............................................................................ 36
12.2 Lessor's Requirement for Deposits............................................................. 37
ARTICLE XIII.................................................................................................... 37
13.1 General Insurance Requirements................................................................ 37
13.2 Risks to be Insured........................................................................... 38
13.3 Payment of Premiums; Copies of Policies; Certificates......................................... 39
[13.4 INTENTIONALLY OMITTED]........................................................................ ..
13.5 Umbrella Policies............................................................................. 39
13.6 Legal Requirements re: Workers' Compensation Insurance....................................... 39
13.7 No Liability; Waiver of Subrogation........................................................... 39
13.8 Increase in Limits............................................................................ 40
13.9 Blanket Policy................................................................................ 40
13.10 No Separate Insurance......................................................................... 40
ARTICLE XIV..................................................................................................... 41
14.1 Insurance Proceeds............................................................................ 41
14.2 Restoration in the Event of Damage or Destruction............................................. 41
14.3 Restoration of Lessee's Property.............................................................. 41
14.4 No Abatement of Rent.......................................................................... 41
14.5. Waiver........................................................................................ 42
14.6. Disbursement of Insurance Proceeds Equal to or Greater Than The Approval Threshold............ 42
</TABLE>
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<TABLE>
<S> <C>
14.7 Net Proceeds Paid to Facility Mortgagee....................................................... 43
ARTICLE XV...................................................................................................... 44
15.1 Total Taking or Other Taking with Leased Property Rendered Unsuitable for Its Primary Intended
Use........................................................................................... 44
15.2 Allocation of Award........................................................................... 44
15.3 Partial Taking................................................................................ 45
15.4 Temporary Taking.............................................................................. 45
15.5 Awards Paid to Facility Mortgagee............................................................. 45
ARTICLE XVI..................................................................................................... 46
16.1 Lessor's Rights Upon an Event of Default...................................................... 6
16.2 Certain Remedies.............................................................................. 46
16.3 Damages....................................................................................... 47
[16.4 INTENTIONALLY OMITTED] ....................................................................... 47
16.5 Waiver........................................................................................ 47
16.6 Application of Funds.......................................................................... 48
16.7 Bankruptcy.................................................................................... 48
ARTICLE XVII.................................................................................................... 48
17.1 Lessor's Right to Cure Lessee's Default....................................................... 48
ARTICLE XVIII................................................................................................... 49
18.1 Holding Over.................................................................................. 49
18.2 Indemnity..................................................................................... 49
ARTICLE XIX..................................................................................................... 49
19.1 Subordination................................................................................. 49
19.2 Attornment.................................................................................... 50
19.3 Lessee's Certificate.......................................................................... 50
ARTICLE XX...................................................................................................... 51
20.1 Risk of Loss.................................................................................. 51
ARTICLE XXI..................................................................................................... 51
21.1 Indemnification............................................................................... 51
ARTICLE XXII.................................................................................................... 51
22.1 General Prohibition against Transfers......................................................... 51
22.2 Consent to Certain Transfers.................................................................. 52
22.3 Termination of Previously Existing Lease Agreements, etc...................................... 52
22.4 Subordination and Attornment.................................................................. 52
22.5 Sublease Limitation........................................................................... 53
</TABLE>
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<TABLE>
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ARTICLE XXIII................................................................................................... 53
23.1 Officer's Certificates and Financial Statements............................................... 53
23.2 Public Offering Information................................................................... 55
ARTICLE XXIV.................................................................................................... 55
24.1 Lessor's Right to Inspect..................................................................... 55
ARTICLE XXV..................................................................................................... 55
25.1 No Waiver..................................................................................... 55
ARTICLE XXVI.................................................................................................... 55
26.1 Remedies Cumulative........................................................................... 55
ARTICLE XXVII................................................................................................... 56
27.1 Acceptance of Surrender....................................................................... 56
ARTICLE XXIII................................................................................................... 56
28.1 No Merger of Title............................................................................ 56
28.2 No Partnership................................................................................ 56
ARTICLE XXIX.................................................................................................... 56
29.1 Conveyance by Lessor.......................................................................... 56
ARTICLE XXX..................................................................................................... 56
30.1 Quiet Enjoyment............................................................................... 56
ARTICLE XXXI.................................................................................................... 57
31.1 Notices....................................................................................... 57
ARTICLE XXXII................................................................................................... 58
32.1 Appraisers.................................................................................... 58
ARTICLE XXXIII.................................................................................................. 59
33.1 Breach by Lessor.............................................................................. 59
ARTICLE XXXIV................................................................................................... 59
34.1 Lessor's Option to Purchase Lessee's Personal Property........................................ 59
34.2 Transfer of Operational Control of the Facilities............................................. 59
34.4 Intangibles and Personal Property............................................................. 61
ARTICLE XXXV.................................................................................................... 62
35.1 Arbitration................................................................................... 62
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XXXVI................................................................................................... 62
36.1 Miscellaneous................................................................................. 62
ARTICLE XXXVII.................................................................................................. 64
37.1 Commissions (Lessee).......................................................................... 64
37.2 Commissions (Lessor).......................................................................... 64
ARTICLE XVIII................................................................................................... 64
38.1 Memorandum or Short Form of Lease............................................................. 64
ARTICLE XXXIX................................................................................................... 64
39.1 Security Deposit.............................................................................. 64
39.2 Reduction in Security Deposit................................................................. 65
39.3 Application of Security Deposit............................................................... 65
39.4 Transfer of Security Deposit.................................................................. 66
EXHIBIT A; FACILITY TRADE NAMES................................................................................. A-1
EXHIBIT B-___; DESCRIPTION OF LAND.............................................................................. B-1
EXHIBIT C; LESSEE'S CERTIFICATE................................................................................. C-1
EXHIBIT D; MINIMUM REPURCHASE PRICES............................................................................ D-1
EXHIBIT E-____; PERMITTED ENCUMBRANCES.......................................................................... E-1
EXHIBIT F; CONSENT AND NON-DISTURBANCE AGREEMENT................................................................ F-1
EXHIBIT G; MEMORANDUM OR SHORT FORM OF LEASE.................................................................... G-1
</TABLE>
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<PAGE> 7
KANSAS MASTER LEASE
THIS KANSAS MASTER LEASE ("Lease") is executed and delivered as of this
14th day of June, 1999, and is entered into by OMEGA (KANSAS), INC., a Kansas
corporation ("Lessor"), the address of which is 900 Victors Way, Suite 350, Ann
Arbor, Michigan 48108, and AHC PROPERTIES, INC., a Delaware corporation
("Lessee"), the address of which is 450 N. Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005.
RECITALS
The circumstances underlying the execution and delivery of this Lease
are as follows:
A. Capitalized terms used and not otherwise defined herein have the
respective meanings given them in Article II, below.
B. Lessor has purchased the real property described on page B to this
Lease (together with the improvements thereon and the related fixtures and other
tangible and intangible property) from Sterling House Corporation, a Kansas
corporation.
C. Lessor now wishes to lease the Leased Properties to Lessee, and
Lessee wishes to lease the Leased Properties from Lessor, on the terms and
conditions set forth in this Lease.
NOW THEREFORE Lessor and Lessee agree as follows:
ARTICLE I
1.1 Lease. Upon and subject to the terms and conditions hereinafter set
forth, Lessor leases to Lessee, and Lessee leases from Lessor, the Leased
Properties. Each Facility is leased subject to all covenants, conditions,
restrictions, easements and other matters affecting such Facility, whether or
not of record, including the Permitted Encumbrances and other matters which
would be disclosed by an inspection of the Facility or by an accurate survey
thereof. Lessor represents and warrants to Lessee that, other than this Lease
and as provided in Section 22.2, Lessor has not consented to the creation or
existence of any liens or encumbrances that are not Permitted Exceptions and
that no liens or judgments attached to the Leased Properties or title thereto by
virtue of Lessor's taking title thereto; provided, however, that Lessor
hereafter shall have the right to encumber the Leased Properties with one or
more Facility Mortgage(s).
This Lease constitutes one indivisible lease of the Leased Properties,
and not separate leases governed by similar terms. The Leased Properties
constitute one economic unit, and the Base Rent and all other provisions have
been negotiated and agreed to based on a demise of all of the Leased Properties
as a single, composite, inseparable transaction and would have been
substantially different had separate leases or a divisible lease been intended.
Except as expressly provided herein for
<PAGE> 8
specific, isolated purposes (and then only to the extent expressly otherwise
stated), all provisions of this Lease apply equally and uniformly to all the
Leased Properties as one unit. An Event of Default with respect to any Leased
Property is an Event of Default as to all of the Leased Properties. The parties
intend that the provisions of this Lease shall at all times be construed,
interpreted and applied so as to carry out their mutual objective to create an
indivisible lease of all the Leased Properties and, in particular but without
limitation, that for purposes of any assumption, rejection or assignment of this
Lease under 11 USC Section 365, this is one indivisible and non-severable lease
and executory contract dealing with one legal and economic unit which must be
assumed, rejected or assigned as a whole with respect to all (and only all) the
Leased Properties covered hereby.
1.2 Term. The initial term of this Lease ("Initial Term") shall be
fourteen (14) Lease Years plus the Preliminary Term, if any. The Initial Term
shall commence on the Commencement Date and end on the Expiration Date, subject
to renewal as set forth in Section 1.3, below.
1.3 Option to Renew. Lessee is hereby granted three (3) options to
renew this Lease, each of which options is for a period of ten (10) Lease Years,
for a maximum Term if such options are exercised of forty-four (44) Lease Years
plus the Preliminary Term, if any, on the following terms and conditions: (a) An
option to renew is exercisable only by Notice to Lessor at least three hundred
sixty five (365) days prior to the expiration of the Initial Term (or prior to
the expiration of the preceding Renewal Term, as the case may be); (b) The
absence of any Event of Default both at the time a renewal option is exercised
and at the commencement of a Renewal Term is a condition precedent to any
renewal of the Term; and (c) During a Renewal Term, all of the terms and
conditions of this Lease shall remain in full force and effect.
ARTICLE II
2.1 Definitions. For all purposes of this Lease, except as otherwise
expressly provided or unless the context otherwise requires, (i) the terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular, (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP as at the time applicable, (iii) all references in this Lease to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease, and (iv) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this Lease
as a whole and not to any particular Article, Section or other subdivision.
Additional Charges: All Impositions and other amounts, liabilities
and obligations which Lessee assumes or agrees to pay under this Lease.
Adjustment Date: January 1, 2000, and each January 1 thereafter
during the Term.
Affiliate: Any Person which, directly or indirectly, Controls or is
Controlled by or is under common Control with another Person.
2
<PAGE> 9
Annual Site Inspection Fee: A fee of One Thousand Dollars
($1,000.00) for each Facility leased, which shall be paid by Lessee in each
Lease Year throughout the Term, beginning with the second (2nd) Lease Year, in
quarterly installments of Two Hundred and Fifty Dollars ($250.00) each at the
same time as the first (1st), fourth (4th), seventh (7th) and tenth (10th)
monthly installments of Base Rent are due in such Lease Year.
Approval Threshold: Fifty Thousand Dollars ($50,000.00)
Assessment: Any governmental assessment on the Leased
Properties or any part thereof for public or private improvements or benefits,
whether or not commenced or completed prior to the date hereof and whether or
not to be completed within the Term.
Assumed Indebtedness: Any indebtedness or other obligations
expressly assumed in writing by Lessor and secured by a mortgage, deed of trust
or other security agreement to which Lessor's title to the Leased Properties is
subject.
Award: All compensation, sums or anything of value awarded,
paid or received in connection with a total or partial Taking.
Base Rent:
(A) During the Initial Term, the Base Rent shall be:
(1) For the first Lease Year, $198,034; and
(2) For each Lease Year in the Initial Term after the
first Lease Year, the Base Rent for the immediately preceding
Lease Year (annualized, if the first Lease Year is the
Preliminary Term) increased by fifty percent (50%) of the (a)
the sum of the Gross Revenue Increase, if any, during the
immediately preceding Lease Year and (b) the aggregate
Carryover for all prior Lease Years; provided, however, that
the Base Rent for a Lease Year shall never be less than the
Base Rent for the immediately preceding Lease Year nor (i) in
the case of the Lease Year beginning January 1, 2000, shall
the Base Rent be more than 1.0135% of the annualized Base Rent
for the Preliminary Term, and (ii) in the case of the Lease
Year beginning January 1, 2001, and each Lease Year
thereafter, shall the Base Rent be more than 1.025% of the
Base Rent for the immediately preceding Lease Year.
(3) The Purchase Agreement sets forth the terms and
conditions upon which "Additional Purchase Price" (as defined
in the Purchase Agreement) is to be paid to the sellers
pursuant to the Purchase Agreement. With respect to any
portion of Additional Purchase Price paid on or before June
14, 2001, the Base Rent for the Lease Year in which such
portion thereof is paid shall be increased by an amount
3
<PAGE> 10
equal to the product obtained by multiplying (a) the portion
of Additional Purchase Price so paid by (b) the quotient
obtained by dividing the Base Rent for the then current Lease
Year by the aggregate Purchase Price theretofore paid to the
sellers pursuant to the Purchase Agreement. With respect to
any portion of Additional Purchase Price paid on or after June
15, 2001, the Base Rent for the Lease Year in which such
portion thereof is made shall be increased by the greater of
(aa) an amount equal to the product obtained by multiplying
(x) the portion of the Additional Purchase Price so paid by
(y) the Omega Lease Rate for such Lease Year, or (bb) an
amount equal to the product obtained by multiplying (xx) the
portion of Additional Purchase Price so paid by (yy) the
quotient obtained by dividing the Base Rent for the then
current Lease Year by the aggregate Purchase Price theretofore
paid to the sellers pursuant to the Purchase Agreement . Any
such increase in Base Rent shall be effective as of the date
upon which the portion of Additional Purchase Price is paid,
and for periods of less than a full Lease Year such increase
shall be prorated on a daily basis and paid in equal monthly
installments (or as nearly equal as possible) on the first
(1st) day of each month remaining in such Lease Year.
(B) During a Renewal Term, the Base Rent shall be:
(1) For the first Lease Year of the Renewal Term, the
greater of (a) 1.025% of the Base Rent for the immediately
preceding Lease Year or (b) the Fair Market Rent for the
Leased Properties on the first day of such Renewal Term as
agreed upon by Lessor and Lessee, or, if prior to the
commencement of such Renewal Term they are unable to agree, as
determined by an appraisal pursuant to Article XXXII of this
Lease; provided, however, that in no event shall the Base Rent
for the first Lease Year of the Renewal Term ever be less than
the Base Rent for the immediately preceding Lease Year nor
more than 1.15% of the Base Rent for the immediately preceding
Lease Year; and
(2) For each succeeding Lease Year during such
Renewal Term, the Base Rent for the immediately preceding
Lease Year increased by application of the formula set forth
in (A)(2) above.
Break-even Operations: Break-even Operations shall have
occurred when the Facilities first achieve a Cash Flow to Rent Ratio of 1 or
more.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York are authorized, or obligated, by law or executive order, to close.
Capitalization Rate: 9.63.
4
<PAGE> 11
Capitalized Leases: Leases that in accordance with GAAP are
required to be capitalized for financial reporting purposes.
Capitalized Lease Obligations: All obligations under
Capitalized Leases the amount of the indebtedness for which shall be the
capitalized amount of such obligations determined in accordance with GAAP.
Carryover: The amount by which the Gross Revenue Increase for
a Lease Year exceeds two and one-half percent (2.5%) of the Base Rent for the
immediately preceding Lease Year or, as to the second Lease Year, the amount by
which the Gross Revenue Increase for the Preliminary Term exceeds one and 35/100
percent (1.35%) of the Base Rent for the Preliminary Term.
Cash Flow: For any period, the sum of (a) Net Income of Lessee
arising solely from the operation of the Facilities for the applicable period,
plus (b) the amounts deducted in computing Lessee's Net Income for the
applicable period for (i) depreciation, (ii) amortization, (iii) Base Rent, (iv)
interest (other than payments in the nature of interest under Capitalized Leases
and interest on any Purchase Money Financing), (v) income taxes (or, if greater,
income tax actually paid during the period) and (vi) management fees, less (c) a
management fee equal to five percent (5%) of Gross Revenues for the applicable
period.
Cash Flow to Rent Ratio: For any fiscal period, Cash Flow
divided by Base Rent.
Clean-Up: The investigation, removal, restoration, remediation
and/or elimination of, or other response to, Contamination, in each case to the
satisfaction of all governmental agencies having jurisdiction, in compliance
with or as may be required by Environmental Laws.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: The date set forth in the introductory
paragraph of this Lease.
Condemnor: Any public or quasi-public authority, or private
corporation or individual, having the power of condemnation.
Construction Funds: The Net Proceeds and such additional funds
as may be deposited with Lessor by Lessee pursuant to Section 14.6 for
restoration or repair work pursuant to this Lease.
Contamination: The presence, Release or threatened Release of
any Hazardous Substance at the Leased Properties in violation of any
Environmental Law, or in a quantity that would give rise to any affirmative
Clean-Up obligations under an Environmental Law, including, but not limited to,
the existence of any injury or potential injury to public health, safety,
natural
5
<PAGE> 12
resources or the environment associated therewith, or any other environmental
condition at, in, about, under or migrating from or to the Leased Properties.
Control (and its corollaries "Controlled by" and "under common
Control with"): Possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, through the
ownership of voting securities, partnership interests or other equity interests.
Consumer Price Index or CPI: The United States Department of
Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban
Consumers (1982=84=100), U.S. City Average, All Items, or, if that index is not
available at the time in question, the index designated by such Department as
the successor to such index, and if there is no index so designated, an index
for an area in the United States that most closely corresponds to the entire
United States, published by such Department, or if none, by any other
instrumentality of the United States.
Date of Taking: The date on which the Condemnor has the right
to possession of the Leased Property that is the subject of the Taking or
Partial Taking.
Debt: As of any date, all (a) obligations of a Person, whether
current or long-term, that in accordance with GAAP should be included as
liabilities on such Person's balance sheet; (b) Capitalized Lease Obligations of
such Person; (c) obligations of others for which that Person is liable directly
or indirectly, by way of guaranty (whether by direct guaranty, suretyship,
discount, endorsement, take-or-pay agreement, agreement to purchase or advance
or keep in funds or other agreement having the effect of a guaranty) or
otherwise; (d) liabilities and obligations secured by liens of any assets of
that Person, whether or not those liabilities or obligations are recourse to
that Person; and (e) liabilities of that Person, direct or contingent, with
respect to letters of credit issued for the account of that Person or others or
with respect to bankers acceptances created for that Person.
Encumbrance: Any mortgage, deed of trust, lien, encumbrance or
other matter affecting title to the Leased Properties, or any portion thereof or
interest therein, securing any borrowing or other means of financing or
refinancing.
Environmental Audit: A written certificate, in form and
substance satisfactory to Lessor, from an environmental consulting or
engineering firm acceptable to Lessor, which states that there is no
Contamination on the Leased Properties and that the Leased Properties are
otherwise in strict compliance with Environmental Laws.
Environmental Documents: Each and every (i) document received
by Lessee or any Affiliate from, or submitted by Lessee or any Affiliate to, the
United States Environmental Protection Agency and/or any other federal, state,
county or municipal agency responsible for enforcing or implementing
Environmental Laws with respect to the condition of the Leased Properties, or
Lessee's operations at the Leased Properties; and (ii) review, audit, report, or
other
6
<PAGE> 13
analysis or data pertaining to environmental conditions, including, but not
limited to, the presence or absence of Contamination, at, in, or under or with
respect to the Leased Properties that have been prepared by, for or on behalf of
Lessee.
Environmental Laws: All federal, state and local laws
(including, without limitation, common law), statutes, codes, ordinances,
regulations, rules, orders, permits or decrees relating to the introduction,
emission, discharge or release of Hazardous Substances into the indoor or
outdoor environment (including without limitation, air, surface water,
groundwater, land or soil) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, transportation or disposal of Hazardous
Substances; or the Clean-Up of Contamination, all as are now or may hereinafter
be in effect.
Event of Default: The occurrence of any of the following:
(a) Lessee fails to pay or cause to be paid the Rent prior to
the expiration of two (2) Business Days after it is due and payable (provided
that such two (2) Business Day grace period shall apply on only two occasions
per Lease Year, after which in any Lease Year there shall be further no grace
period applicable to the failure to pay Rent when due);
(b) Lessee, on a petition in bankruptcy filed against it, is
adjudicated a bankrupt or has an order for relief thereunder entered against it,
or a court of competent jurisdiction enters an order or decree appointing a
receiver of Lessee or any Guarantor or of the whole or substantially all of its
property, or approving a petition filed against Lessee seeking reorganization or
arrangement of Lessee under the federal bankruptcy laws or any other applicable
law or statute of the United States of America or any state thereof, and such
judgment, order or decree is not vacated or set aside or stayed within ninety
(90) days from the date of the entry thereof, subject to the applicable
provisions of the Bankruptcy Code (11 USC Section 101, et seq.) and to the
provisions of Section 16.7, below;
(c) Lessee: (i) admits in writing its inability to pay its
debts generally as they become due, (ii) files a petition in bankruptcy or a
petition to take advantage of any insolvency law, (iii) makes a general
assignment for the benefit of its creditors, (iv) consents to the appointment of
a receiver of itself or of the whole or any substantial part of its property, or
(v) files a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof, subject to the applicable provisions of
the Bankruptcy Code (11 USC Section 101, et seq.)
and to the provisions of Section 16.7, below;
(d) Lessee is liquidated or dissolved, or begins proceedings
toward liquidation or dissolution, or has filed against it a petition or other
proceeding to cause it to be liquidated or dissolved and the proceeding is not
dismissed within thirty (30) days thereafter, or Lessee in any manner permits
the sale or divestiture of substantially all of its assets;
7
<PAGE> 14
(e) The estate or interest of Lessee in the Leased Properties
or any part thereof is levied upon or attached in any proceeding and the same is
not vacated or discharged within thirty (30) days thereafter (unless Lessee is
in the process of contesting such lien or attachment in good faith in accordance
with Article XII hereof);
(f) Lessee ceases operation of any Facility for a period in
excess of five (5) Business Days except upon prior Notice to, and with the
express prior written consent of, Lessor (which consent Lessor may withhold in
its absolute discretion), or as the unavoidable consequence of damage or
destruction as a result of a casualty, or a Partial or total Taking;
(g) Any representation or warranty made by a party (other than
Lessor) to the Purchase Agreement, or in the certificates delivered in
connection therewith, proves to be untrue when made in any material respect,
Lessor is materially and adversely affected thereby and Lessee fails within
twenty (20) days after Notice from Lessor thereof to cure such condition by
terminating such adverse effect and making Lessor whole for any damage suffered
therefrom, or, if with due diligence such cure cannot be effected within twenty
(20) days, if Lessee has failed to commence to cure the same within the twenty
(20) days or failed thereafter to proceed promptly and with due diligence to
cure such condition and complete such cure prior to the time that such condition
causes a default in any other lease to which Lessee is subject and prior to the
time that the same results in civil or criminal penalties to Lessor, Lessee, any
Affiliates of either or the Leased Properties;
(h) Lessee (or, if applicable, any sublessee or Manager) has
its license to operate any Facility as a provider of health care services in
accordance with its Primary Intended Use suspended or revoked or an order is
imposed suspending its right to operate or accept residents, which order is not
immediately stayed and promptly cured;
(i) A default occurs under any Guaranty;
(j) A Transfer occurs without the prior written consent of
Lessor;
(k) An Event of Default occurs under the Letter of Credit
Agreement or the Security Agreement;
(l) A default occurs under any other material contract
affecting any Facility or Lessee;
(m) Lessee breaches any of the financial covenants set forth
in Article VIII hereof and the breach is not cured within a period of the
shorter of (i) 30 days after the Notice thereof from Lessor, or (ii) 15 days
following the date of delivery of a certificate pursuant to Section 23.1 (i) or
23.1 (ii);
(n) Lessee or an Affiliate of Lessee defaults beyond any
applicable grace period in the payment of any amount or the performance of any
material act required of Lessee or such
8
<PAGE> 15
Affiliate by the terms of any other lease or other agreement between Lessee or
such Affiliate and Lessor or any Affiliate of Lessor;
(o) Lessee fails to observe or perform any other term,
covenant or condition of this Lease and the failure is not cured by Lessee
within a period of thirty (30) days after Notice thereof from Lessor, unless the
failure cannot with due diligence be cured within a period of thirty (30) days,
in which case such failure shall not be deemed an Event of Default if and for so
long as Lessee proceeds promptly and with due diligence to cure the failure and
completes the cure prior to the time that the same causes a default in any
Facility Mortgage or any other lease to which Lessee is subject and prior to the
time that the same results in civil or criminal penalties to Lessor, Lessee, any
Affiliates of either or to the Leased Properties;
(p) Lessee breaches any material representation or warranty
made by it in this Lease.
(q) The issuance or entry against Lessee of any award or
judgment exceeding any applicable insurance coverage by more than TWENTY FIVE
THOUSAND DOLLARS ($25,000.00) 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 Lessor (in its
sole and absolute discretion) having agreed to fund such award or judgment in a
manner satisfactory to Lessor (in its sole and absolute discretion);
(s) The issuance or entry against Guarantor of any award or
judgment exceeding any applicable insurance coverage by more than ONE HUNDRED
THOUSAND DOLLARS ($100,000.00) 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 Lessor (in its
sole and absolute discretion) having agreed to fund such award or judgment in a
manner satisfactory to Lessor (in its sole and absolute discretion);
(t) The termination or suspension of the right of any Facility
to participate in Medicare, Medicaid or a similar program (collectively
"Provider Programs"), or the termination or suspension of the right of any
Facility to admit residents who would be entitled to receive benefits pursuant
to such Provider Programs, if in either case (i) such Facility participated at
any time during the Term in a Provider Program, and (ii) the revenues received
by or payable to such Facility from such Provider Programs equaled or exceeded
10% of such Facility's gross revenues in any Lease Year (annualized for periods
of less than an entire Lease Year);
(u) The final and unappealable revocation by a governmental
authority having jurisdiction of any permit required for the lawful construction
or operation of a Facility in accordance with the Primary Intended Use, or the
loss of, or the failure to obtain and/or renew any
9
<PAGE> 16
permit under any other circumstances under which Lessee is required to cease the
operation of the Facility in accordance with the Primary Intended Use; or
(v) The occurrence of an Event of Default under the Master
Lease.
Expiration Date: December 31, 2013.
Facility: A health care facility on the Land, including the
Leased Property associated with such Facility.
Facility Mortgage: Any mortgage, deed of trust or other
security agreement which with the express, prior, written consent of Lessor is a
lien upon any or all of the Leased Properties, whether such lien secures an
Assumed Indebtedness or another obligation or obligations.
Facility Mortgagee: The secured party to a Facility Mortgage.
Facility Trade Names: The name(s) under which the Facilities
have done business during the Term. The Facility Trade Names in use by the
Facilities on the Commencement Date are set forth on attached EXHIBIT A.
Fair Market Rent: The rent that, at the relevant time, a
Facility would most probably command in the open market, under a lease on
substantially the same terms and conditions as are set forth in this Lease with
a lessee unrelated to Lessor having experience and a reputation in the health
care industry and a credit standing reasonably equivalent to that of Guarantor,
and, if this Lease is guaranteed, with such lease being guaranteed by guarantors
having a net worth at least equal to that of Guarantor as of the date of this
Lease, with evidence of such rent being the rent that is being asked and agreed
to at such time under any leases of facilities comparable to such Facility being
entered into at such time in which the lessees and lease guarantors meet the
qualifications set forth in this sentence. Fair Market Rent shall be determined
in accordance with the appraisal procedure set forth in Article XXXII or in such
other manner as may be mutually acceptable to Lessor and Lessee.
Fair Market Value: The fair market value of a Facility at the
relevant time (i) assuming the same is unencumbered by this Lease, and (ii)
determined in accordance with the appraisal procedure set forth in Article XXXII
or in such other manner as may be mutually acceptable to Lessor and Lessee.
Financial Statement: As to Lessee for any period, a statement
of profit and loss for such period, and for the period from the beginning of the
fiscal year to the end of such period, in reasonable detail and setting forth in
comparative form the corresponding figures for the corresponding period in the
preceding fiscal year, and prepared on a basis of accounting that is consistent
with that of Guarantor, certified to be accurate and complete by the chief
financial officer of Lessee and Guarantor. Guarantor's fiscal year-end Financial
Statement shall be an audited financial report prepared by KMPG, LLP or another
independent international firm of certified
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public accountants reasonably satisfactory to Lessor, containing the Guarantor's
balance sheet as of the end of that year, its related profit and loss, a
statement of shareholder's equity for that year, a statement of cash flows for
that year, any management letter prepared by those certified public accountants
and such comments and financial details as are customarily included in reports
of like character and the unqualified opinion of the certified public
accountants as to the fairness of the statements therein.
Fixtures: Collectively, all permanently affixed equipment,
machinery, fixtures, and other items of real and/or personal property (excluding
Lessor's Personal Property), including all components thereof, now and 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 (other than
individual units), sprinkler systems and fire and theft protection equipment,
built-in oxygen and vacuum systems, towers and other devices for the
transmission of radio, television and other signals, 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.
Force Majeure: An event or condition beyond the control of a
Person, including without limitation a flood, earthquake, or other Act of God; a
fire or other casualty resulting in a complete or partial destruction of the
Facility in question; a war, revolution, riot, civil insurrection or commotion,
terrorism, or vandalism; unusual governmental action, delay, restriction, or
regulation not reasonably to be expected; a contractor or supplier delay or
failure in performance (not arising from a failure to pay any undisputed amount
due), or a delay in the delivery of essential equipment or materials; bankruptcy
or other insolvency of a contractor, subcontractor, or construction manager (not
an Affiliate of the party claiming Force Majeure); a strike, slowdown, or other
similar labor action; or any other similar event or condition beyond the
reasonable control of the party claiming that Force Majeure is delaying or
preventing such party from timely and fully performing its obligations under
this Lease; provided that in any such event, the party claiming the existence of
Force Majeure shall have given the other party Notice of such claim within
fifteen (15) days after becoming aware thereof, and if the party claiming Force
Majeure shall fail to give such Notice, then the event or condition shall not be
considered Force Majeure for any period preceding the date such Notice shall be
given. No lack of funds shall be construed as Force Majeure.
GAAP: Generally accepted accounting principles, consistently
applied, in effect at the time in question.
Gross Revenues: All revenues received or receivable from or by
reason of the operation of the Facilities, or any other use of the Leased
Properties, including without limitation all resident revenues received or
receivable for the use of or otherwise by reason of all rooms, beds, and other
facilities provided, meals served, services performed, space or facilities
subleased or goods sold on the Leased Properties and, except as provided below,
any consideration received for any
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sublease, license or other arrangement with an unrelated third party in
possession, or using, any portion of the Leased Properties, and all revenues
received or receivable by Lessee and any Affiliates of Lessee from the operation
of any nursing home, rest home, assisted living facility, subacute facility,
retirement center or similar health care facility located within a ten (10) mile
radius of any of the Leased Properties. Gross Revenues shall not, however,
include:
(i) revenue from professional fees or charges by physicians,
physical therapists, pharmacy services, hairdressers and barbers,
hospice care and manicurists when and to the extent such charges are
paid over to such providers or are accompanied by separate charges for
use of a Facility or any portion thereof,
(ii) non-operating revenues such as interest income or income
from the sale of assets not sold in the ordinary course of business,
(iii) contractual allowances and reasonable reserves (relating
to any period during the Term) for billings not paid by or received
from the appropriate governmental agencies, third party providers or
other payor,
(iv) all proper resident billing credits and adjustments
according to generally accepted accounting principles relating to
health care accounting, and
(v) federal, state or local sales or excise taxes and any tax
based upon or measured by said 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.
If any of the Leased Properties or any part thereof is subleased, or a
license permitting the use thereof is granted to an Affiliate of Lessee, Gross
Revenues shall include all revenues received or receivable by the sublessee or
licensee from its use of the Leased Properties and any rent or equivalent
payment by the sublessee or licensee received or receivable by Lessee from such
sublease or licensee shall be excluded from Gross Revenues (provided, however,
that in the case of a sublease of space for the placement or erection of
antennae or similar device, the rent or equivalent payment shall be included in
Gross Revenues).
Gross Revenue Increase: For any Lease Year, the increase, if
any, in aggregate Gross Revenues of the Leased Properties for such Lease Year
over aggregate Gross Revenues for the immediately preceding Lease Year;
provided, however, that for purposes of determining Base Rent for the Lease Year
beginning January 1, 2000, Gross Revenue Increase shall mean aggregate Gross
Revenues of the Leased Properties for the Preliminary Term minus aggregate Gross
Revenues of the Leased Properties for the period from and including January 1,
1999 through June 14, 1999.
Guarantor: Alterra Healthcare Corporation, a Delaware
corporation.
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Guaranty: The Guaranty of even date herewith executed by the
Guarantor.
Hazardous Substance: Dangerous, toxic or hazardous material,
substance, pollutant, contaminant, chemical, waste (including medical waste),
including petroleum products, asbestos and PCBs defined, listed or described as
such under any Environmental Law.
Impositions: Collectively, all taxes (including, without
limitation, all capital stock and franchise taxes of Lessor and all ad valorem,
sales and use, single business, gross receipts, transaction privilege, rent or
similar taxes to the extent the same are assessed against Lessor on the basis of
its gross or net income from this Lease or the value of the Leased Property or
both), assessments (including Assessments), ground rents, water, sewer or other
rents and charges, excises, tax levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees), 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 the
Leased Properties or the businesses conducted thereon by Lessee and/or the Rent
(including all interest and penalties thereon), which at any time prior to,
during or in respect of the Term may be assessed or imposed on or in respect of
or be a lien upon (i) Lessor or Lessor's interest in the Leased Properties, (ii)
the Leased Properties or any part thereof or any rent therefrom or any estate,
right, title or interest therein, or (iii) any occupancy, operation, use or
possession of, or sales from, or activity conducted on, or in connection with
the Leased Properties or the leasing or use of the Leased Properties or any part
thereof or (iv) the Rent; notwithstanding the foregoing, Imposition shall not
include: (i) except as provided above, any tax imposed on Lessor's gross or net
income generally and not specifically arising in connection with the Leased
Properties (unless such a tax is levied, assessed or imposed in lieu of a
portion or all of a tax which was included within the definition of
"Imposition,") , (ii) any transfer or other tax imposed with respect to the
sale, exchange or other disposition by Lessor of the Leased Properties or any
part thereof or the proceeds thereof, or (iii) any tax imposed as a result of a
Facility Mortgage placed by Lessor on a Facility.
Initial Term: As defined in Section 1.2 hereof.
Insurance Requirements: All terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
Investigation: Soil and chemical tests or any other
environmental investigations, examinations or analyses.
Judgment Date: The date on which a judgment is entered against
Lessee which establishes, without the possibility of appeal, the amount of
liquidated damages to which Lessor is entitled hereunder.
Land: The real property described in EXHIBITS B-1 through B-9
attached hereto.
Lease: As defined in the Preamble.
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Lease Year: Each period from and including January 1 through
December 31 during the Term of this Lease, except that if there is a Preliminary
Term, the first Lease Year shall be the period from and including the
Commencement Date through the end of the Preliminary Term. If this Lease is
terminated before the end of any Lease Year, the final Lease Year shall be
January 1 of the year in which the Term expires or the Lease terminates through
the date of termination.
Leased Improvements: Collectively, all buildings, structures,
Fixtures and other improvements of every kind on the Land including, but not
limited to, alleyways and connecting tunnels, sidewalks, utility pipes, conduits
and lines (on-site and off-site), parking areas and roadways appurtenant to such
buildings and structures.
Leased Property: The portion of the Land on which a Facility
is located, the legal description of which is set forth beneath the Facility's
name on EXHIBITS B-1 through B-9, the Leased Improvements on such portion of the
Land, the Related Rights with respect to such portion of the Land, and Lessor's
Personal Property with respect to such Facility.
Leased Properties: All of the Land, Leased Improvements,
Related Rights and Lessor's Personal Property.
Legal Requirements: All federal, state, county, municipal and
other governmental statutes, laws, rules, orders, waivers, regulations,
ordinances, judgments, decrees and injunctions affecting the Leased Properties
or any portion thereof, Lessee's Personal Property or the construction, use or
alteration thereof, including but not limited to the Americans with Disabilities
Act, whether enacted and in force before, after or on the Commencement Date, and
including any which may (i) require repairs, modifications, alterations or
additions in or to any portion or all of the Facilities, or (ii) in any way
adversely affect the use and enjoyment thereof, and all permits, licenses and
authorizations and regulations relating thereto including, but not limited to,
those relating to existing health care licenses, those authorizing the current
number of licensed beds and the level of services delivered from the Leased
Properties, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to Lessee (other than
Facility Mortgages and other encumbrances created by Lessor), in force at any
time during the Term.
Lessee's Certificate: A statement in writing in substantially
the form of EXHIBIT C attached hereto (with such changes thereto as may
reasonably be requested by the person relying on such certificate).
Lessee's Personal Property: Personal Property owned or leased
by Lessee that is not included within the definition of Lessor's Personal
Property but is used by Lessee in the operation of the Facilities, including
Personal Property provided by Lessee in compliance with Section 6.3 hereof.
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Lessor's Future Rent Loss: An amount equal to the Rent which
would have been payable by Lessee from and after the Liquidated Damages Payment
Date through the Expiration Date had the Lease not been terminated, plus such
additional amount as may be necessary in order to compensate Lessor for all
other damages proximately caused by Lessee's failure to perform its obligations
under this Lease which in the ordinary course of business would be likely to
result therefrom.
Lessor's Interim Rent Loss: An amount equal to the Rent which
would have been payable by Lessee from the Termination Date through the Judgment
Date had the Lease not been terminated (including interest and late charges
determined on the basis of the date or dates on which Lessor's Interim Rent Loss
is actually paid by Lessee), plus such additional amount as may be necessary in
order to compensate Lessor for all other damages proximately caused by Lessee's
failure to perform its obligations under this Lease which in the ordinary course
of business would be likely to result therefrom.
Lessor's Monthly Rent Loss: For any month, an amount equal to
the installment of Rent which would have been due in such month under the Lease
if it had not been terminated, plus, if such amount is not paid on or before the
day of the month on which such installment of Rent would have been due, the
amount of interest and late charges thereon which would also have been due under
the Lease, plus such additional amount as may be necessary in order to
compensate Lessor for all other damages proximately caused by Lessee's failure
to perform its obligations under this Lease which in the ordinary course of
business would be likely to result therefrom.
Lessor's Personal Property: All Personal Property and
intangibles, if any, owned by Lessor and leased to Lessee on the Commencement
Date, and all Personal Property and intangibles required in order to commence
operations of a Facility for the Primary Intended Use (whether in use on the
Commencement Date or thereafter), together with any and all replacements
thereof, and all Personal Property that pursuant to the terms of the Lease
becomes the property of Lessor during the Term; provided, however that Lessor's
Personal Property shall not include Lessee's proprietary brochures, computers,
computer software or any vehicles or other Personal Property that is leased by
Lessee as permitted by this Lease.
Letter of Credit Agreement: An agreement between Lessor and
Lessee providing for a letter of credit to be delivered to Lessor as the
Security Deposit.
Liquidated Damages Payment Date: The date on which Lessee pays
Lessor all of the liquidated damages for which it is liable under Article XVI.
Management Agreement: Any agreement pursuant to which
management of a Facility is delegated to any person not an employee of Lessee or
to any other related or unrelated party. Without limiting this definition, each
of the agreements between a sublessee referred to in Section 22.2 and Guarantor
pursuant to which Guarantor manages a Facility is a Management Agreement.
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Manager: The Person to which management of the operation of a
Facility is delegated pursuant to a Management Agreement.
Master Lease: The Master Lease of even date herewith between
Omega Healthcare Investors, Inc., a Kansas corporation, as lessor, and Lessee,
as lessee.
Minimum Repurchase Price: As to each Facility, the amount set
forth opposite its name on attached EXHIBIT D, increased by three percent (3%)
compounded annually each Lease Year (pro rata for any Preliminary Term and
partial Lease Year) from the Commencement Date through the date of repurchase by
Lessee.
Net Income: For any period, Lessee's net income (or loss) for
such period, determined in accordance with GAAP, provided, however, that
Lessee's Net Income shall not include:
(a) any after-tax gains or losses attributable to
returned surplus assets of any pension-benefit plan;
(b) any extraordinary gains or losses or nonrecurring
gains or losses;
(c) any gains or losses realized upon the sale or other
disposition of property which is not sold or
otherwise disposed of in the ordinary course of
business;
(d) any gains or losses realized upon the sale or other
disposition of any capital stock of any Person;
(e) any gains or losses from the disposal of a
discontinued business;
(f) the cumulative effect on prior years of any change in
an accounting principle;
(g) the income or loss of any Person acquired by Lessee
or an Affiliate in a pooling of interests transaction
for any period prior to the date of such acquisition;
(h) the income or loss from any sale of assets in which
the book value of such assets had been the book value
of any Person acquired in a pooling-of-interests
transaction prior to the date such Person became an
Affiliate of Lessee;
(i) the income of Lessee to the extent the payment of
such income is not permitted, whether on account of
any law, statute, judgment, decree or governmental
order, rule or regulation applicable to such Lessee;
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(j) all amounts included in computing such net income (or
loss) in respect of the write-up of any asset or the
write-down of any Debt at less than face value after
the later of the Commencement Date or the date on
which such asset or Debt was first properly included
on Lessee's balance sheet.
(k) the reduction or increase in income tax expense
resulting from an increase or decrease in a deferred
income tax asset due to the anticipation of future
income tax benefits or obligations; or
(l) the reduction or increase in income tax expense
resulting from an increase or decrease in a deferred
income tax asset or from a decrease or increase in a
deferred income tax liability due to a change in a
statutory tax rate.
Net Proceeds: All proceeds, net of any costs incurred by
Lessor in obtaining such proceeds, payable under any policy of insurance
required by Article XIII of this Lease (including any proceeds with respect to
Lessee's Personal Property that Lessee is required or elects to restore or
replace pursuant to Section 14.3) or paid by a Condemnor for the Taking of any
of all or any portion of a Leased Property.
Net Reletting Proceeds: Proceeds of the reletting of any
portion of the Leased Property received by Lessor, net of Reletting Costs.
Net Worth: At any date, net worth as determined in conformity
with GAAP.
Notice: A notice given in accordance with Article XXXI hereof.
Notice of Termination: A Notice from Lessor that it is
terminating this Lease by reason of an Event of Default.
Officer's Certificate: If for a corporation, a certificate
signed by one or more officers of the corporation authorized to do so by the
bylaws of such corporation or a resolution of the Board of Directors thereof; if
for a partnership, limited liability company or any other kind of entity, a
certificate signed by a Person having the authority to so act on behalf of such
entity.
Omega Lease Rate: The average yield to Lessor on leases,
entered into during the one hundred twenty (120) days preceding the date of the
payment of such portion of Additional Purchase Price, of assisted living and/or
dementia care facilities to lessees whose creditworthiness, alone or, as to any
such lease or leases which are guaranteed, in combination with that of the
guarantor or guarantors thereof, is similar to the creditworthiness of Lessee
and Guarantor on the date of this Lease.
Overdue Rate: On any date, the interest rate that is equal to
five percent (5%) (five hundred (500) basis points) above the Prime Rate, but in
no event greater than the maximum rate then permitted under applicable law.
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Partial Taking: A taking of less than the entire fee of a
Leased Property that either (i) does not render the Leased Property Unsuitable
for its Primary Intended Use, or (ii) renders a Leased Property Unsuitable for
its Primary Intended Use, but neither Lessor nor Lessee elects pursuant to
Section 15.1 hereof to terminate this Lease.
Payment Date: Any due date for the payment of the installments
of Base Rent or for the payment of Additional Charges or any other amount
required to be paid by Lessee hereunder.
Permitted Encumbrances: Encumbrances listed on attached
EXHIBIT E.
Person: Any natural person, trust, partnership, corporation,
joint venture, limited liability company or other legal entity.
Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers (and all associated
software), trade fixtures and other personal property (but excluding consumable
inventory and supplies owned by Lessee) used in connection with the Leased
Properties, together with all replacements and alterations thereof and additions
thereto, except items, if any, included within the definition of Fixtures or
Leased Improvements.
Portfolio Stabilization: Portfolio Stabilization shall have
occurred when the Cash Flow to Rent Ratio required by the first sentence of
Section 8.2.1.2 has first been achieved.
Preliminary Term: If the Commencement Date is not January 1,
the period from and including the Commencement Date through December 31st of the
calendar year in which the Commencement Date occurs.
Present Value: The value of future payments, determined by
discounting each such payment at a rate equal to the yield on the specified date
on securities issued by the United States Treasury (bills, notes and bonds)
maturing on the date closest to December 31 in the year in which such future
payment would have been due.
Primary Intended Use: Assisted living facility and/or dementia
care, together with incidental uses thereof for the care and/or housing of the
elderly, such as (provided the following are individually and in the aggregate
incidental and ancillary to the use of a Facility for assisted living and/or
dementia care) adult day care, physical therapy, hospice care, pharmacy and
related uses.
Prime Rate: On any date, an interest rate equal to the prime
rate published by the Wall Street Journal, but in no event greater than the
maximum rate then permitted under applicable law. If the Wall Street Journal
ceases to be in existence, or for any reason no longer publishes such prime
rate, the Prime Rate shall be the rate announced as its prime rate by Fleet
Bank, and if such bank no longer exists or does not announce a prime rate at
such time, the Prime Rate shall be the rate of interest announced as its prime
rate by a national bank selected by Lessor.
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Proceeding: Any action, proposal or investigation by any
agency or entity.
Purchase Agreement: The Purchase Agreement and Agreement to
Complete Construction of even date among Lessor, as purchaser, Sterling House
Corporation and ALS-Clare Bridge, Inc., as sellers, and Guarantor.
Purchase Money Financing: Any financing provided by a Person
to Lessee in connection with the acquisition of Personal Property used in
connection with the operation of a Facility, whether by way of installment sale
or otherwise.
Qualified Capital Expenditures: Expenditures capitalized on
the books of Lessee for any of the following:
Replacement of furniture, fixtures and equipment, including
refrigerators, ranges, major appliances, bathroom fixtures,
doors (exterior and interior), central air conditioning and
heating systems (including cooling towers, water chilling
units, furnaces, boilers and fuel storage tanks) and major
replacement of siding; major roof replacements, including
major replacements of gutters, downspouts, eaves and soffits;
major repairs and replacements of plumbing and sanitary
systems; overhaul of elevator systems; major repaving,
resurfacing and sealcoating of sidewalks, parking lots and
driveways; repainting of entire building exterior; but
excluding major alterations, renovations, additions, normal
maintenance and repairs.
Regulatory Actions: Any claim, demand, notice, action or
proceeding brought, threatened or initiated by any governmental authority in
connection with any Environmental Law, including, without limitation, civil,
criminal and administrative proceedings, whether or not the remedy sought is
costs, damages, equitable remedies, penalties or expenses.
Related Rights: All easements, rights and appurtenances
relating to the Land and the Leased Improvements.
Release: The intentional or unintentional spilling, leaking,
dumping, pouring, emptying, seeping, disposing, discharging, emitting,
depositing, injecting, leaching, escaping, abandoning, or any other release or
threatened release, however defined, of any Hazardous Substance.
Reletting Costs: Actual expenses incurred by Lessor in
connection with the reletting of the Leased Properties in whole or in part after
an Event of Default, including without limitation attorneys' fees and expenses,
brokerage fees and expenses, marketing expenses and the cost of repairs and
renovations reasonably required for such reletting.
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Renewal Term: A period for which the Term is renewed in
accordance with Section 1.3.
Rent: Collectively, Base Rent, Annual Site Inspection Fee and
Additional Charges.
Replacement Cost: The actual replacement cost of a Leased
Property, including an increased cost of construction endorsement, less
exclusions provided in the standard form of fire insurance policy. In all events
Replacement Cost shall be an amount sufficient that neither Lessor nor Lessee is
deemed to be a co-insurer of the Leased Property in question. Lessor shall have
the right from time to time, but no more frequently than once in any period of
three (3) consecutive Lease Years, to have Replacement Cost reasonably
redetermined by the fire insurance company which is then carrying the largest
amount of fire insurance on the Leased Properties, which determination shall be
final and binding on the parties hereto, and upon such determination Lessee
shall forthwith increase, but not decrease, the amount of the insurance carried
pursuant to Section 13.2.1 to the amount so determined, subject to the approval
of any Facility Mortgagee. Lessee shall pay the fee, if any, of the insurer
making such determination.
SEC: Securities and Exchange Commission.
Security Agreement: The Security Agreement of even date
between Lessor as secured party and Lessee as debtor.
Security Deposit: Two Hundred Seventy-Seven Thousand
Eighty-Two Dollars ($277,082), to be delivered and held in accordance with
Article XXXIX hereof.
Special Risk Insurance: The insurance coverage required by
Section 13.2.1.
State(s): The State or States in which the Leased Properties
are located.
Taken: Conveyed pursuant to a Taking.
Taking: A taking or voluntary conveyance during the Term of
all or part of a 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 whether or not
the same shall have actually been commenced.
Term: Collectively, the Initial Term plus the Renewal Term or
Renewal Terms, if any.
Termination Date: The tenth (10th) day following the date on
which a Notice of Termination is given.
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Third Party Claims: Any claims, actions, demands or
proceedings (other than Regulatory Actions) howsoever based (including without
limitation those based on negligence, trespass, strict liability, nuisance,
toxic tort or detriment to health welfare or property) due to Contamination,
whether or not the remedy sought is costs, damages, penalties or expenses,
brought by any person or entity other than a governmental agency.
Transaction Documents: This Lease, the Master Lease, the
Purchase Agreement and the letter of credit agreements, security agreements,
pledge agreements, subordination agreements, guaranties and other documents
which evidence, secure or otherwise relate to this Lease, the Master Lease and
the Purchase Agreement.
Transfer: The (a) assignment, mortgaging or other encumbering
of all or any part of Lessee's interest in this Lease or in the Leased
Properties, or (b) subletting of the whole or any part of any Leased Property,
or (c) entering into of any Management Agreement or other arrangement under
which any Facility is operated by or licensed to be operated by an entity other
than Guarantor, or (d) merger, consolidation or reorganization of a corporate
Lessee or of any corporate Guarantor or corporate Manager, or the sale,
issuance, or transfer, cumulatively or in one transaction, of any voting stock
by Lessee, any Guarantor or Manager or by Persons who are stockholders of record
of Lessee, any Guarantor or Manager, which (with respect to such merger,
consolidation, reorganization, sale, issuance or transfer, as applicable)
results in a change of Control of Lessee, any Guarantor or Manager, or (e) sale,
issuance or transfer, cumulatively or in one transaction, of any interest, or
the termination of any interest, in Lessee, any Guarantor or Manager if Lessee,
such Guarantor or such Manager is a joint venture, partnership, limited
liability company or other association (other than a corporation), which results
in a change of Control of such joint venture, partnership or other association.
Notwithstanding the foregoing, a change in Control of Lessee or Guarantor or
Manager resulting from (a) a sale, issuance or transfer of any stock in
Guarantor or Manager or (b) a merger, consolidation, reorganization or other
business combination involving Guarantor or Manager shall not constitute a
"Transfer," provided that (i) after the change of Control, the Net Worth of the
Guarantor or such successor entity, on a consolidated basis, is at least equal
to ONE HUNDRED MILLION DOLLARS ($100,000,000.00); (ii) Guarantor or Guarantor's
parent corporation following such transaction is, at the time of or immediately
after such transaction, a publicly held corporation; and (iii) in the event of a
merger, consolidation, reorganization or other business combination involving
Guarantor, the successor entity of Guarantor, if any, executes and delivers to
Lessor a Guaranty, in substantially the form of the Guaranty executed by
Guarantor, pursuant to which the successor entity guarantees to Lessor the
payment and performance by Lessee of its obligations under this Lease.
Transferee: An assignee, subtenant or other occupant of a
Leased Property pursuant to a Transfer.
Unsuitable for Its Primary Intended Use: A state or condition
of a Facility such that by reason of a Partial Taking, the Facility cannot be
operated on a commercially practicable basis for its Primary Intended Use,
taking into account, among other relevant factors, the number of usable
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beds permitted by applicable law and regulation in the Facility after the
Partial Taking, the square footage Taken and the estimated revenue impact of
such Partial Taking.
ARTICLE III
3.1 Base Rent; Monthly Installments. In addition to all other payments
to be made by Lessee under this Lease, Lessee shall pay Lessor the Base Rent in
lawful money of the United States of America which is legal tender for the
payment of public and private debts, in advance, in equal, consecutive monthly
installments. The first installment of Base Rent shall be payable on the
Commencement Date, together with a prorated amount of Base Rent for the period
from the Commencement Date until the last day of the first full calendar month
of the Term. Thereafter, installments of Base Rent shall be payable on the first
(1st) day of each calendar month. Base Rent shall be paid to Lessor, or to such
other Person as Lessor from time to time may designate by Notice to Lessee, by
wire transfer of immediately available federal funds to the bank account
designated in writing by Lessor. If Lessor directs Lessee to pay any Base Rent
or Additional Charges to any Person other than Lessor, Lessee shall send to
Lessor such evidence of such payment as Lessor may require.
3.2 Additional Charges. In addition to the Base Rent, Lessee will also
pay as and when due (a) the Annual Site Inspection Fee and (b) all Additional
Charges.
3.3 Late Charge; Interest If any Rent payable to Lessor is not paid
when due, Lessee shall pay Lessor on demand, as an Additional Charge, (a) a late
charge equal to the greater of (i) five percent (5%) of the amount not paid when
due and (ii) any and all charges, expenses, fees or penalties imposed on Lessor
by a Facility Mortgagee for late payment, plus (b) if such Rent (including the
late charge) is not paid within thirty (30) days of the date due, interest
thereon at the Overdue Rate from such thirtieth (30th) day until such Rent
(including the late charge and interest) is paid in full.
3.4 Net Lease.
3.4.1 The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount of the Rent payable to Lessor
hereunder throughout the Term, subject only to any provisions of the Lease which
expressly provide for adjustment or abatement of Rent or other charges.
3.4.2 If Lessor commences any proceedings for non-payment of
Rent, Lessee will not interpose any counterclaim or cross complaint or similar
pleading of any nature or description (other than an alleged default by Lessor
under Section 30.1) in such proceedings unless Lessee would lose or waive such
claim by the failure to assert it, but Lessee does not waive any rights to
assert such claim in a separate action brought by Lessee. The covenants to pay
Rent are independent covenants, and Lessee shall have no right to hold back,
offset or fail to pay any Rent because of any
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alleged default by Lessor or for any other reason whatsoever, other than after
the entry of a final judgment of a court of competent jurisdiction that Lessor
has breached Section 30.1.
3.5 Payments In The Event of a Rent Adjustment. In the event this Lease
provides for adjustment of the Base Rent on any basis that requires a
determination of Base Rent which cannot be made on or before the due date of the
first installment of Base Rent following the Adjustment Date, Lessee shall
continue to pay the Base Rent at the rate previously in effect until Lessor
gives Lessee Notice of its determination of the adjusted Base Rent. Upon such
determination, the Base Rent shall be retroactively adjusted as of the
Adjustment Date. On or before the second (2nd) Payment Date for Base Rent
following receipt by Lessee of Lessor's Notice of the adjustment, Lessee shall
make an additional payment of Base Rent in such amount as will bring the Base
Rent, as adjusted, current on or before such second (2nd) Payment Date, and
thereafter Lessee shall pay the adjusted Base Rent in correspondingly adjusted
monthly installments until the Base Rent is next adjusted as required herein.
This Section 3.5 shall survive the expiration or termination of this Lease with
respect to any adjustment which is not known or fully paid as of the date of
expiration or termination.
ARTICLE IV
4.1 Payment of Impositions. Subject to Article XII relating to
permitted contests, Lessee will pay all Impositions before any fine, penalty,
interest or cost is added for non-payment, and will promptly, upon request,
furnish to Lessor copies of official receipts or other satisfactory proof
evidencing such payments. If at the option of the taxpayer any Imposition may
lawfully be paid in installments, Lessee may pay the same in the required
installments provided it also pays any and all interest due thereon as and when
due.
Lessee shall prepare and file as and when required all tax returns and
reports required by governmental authorities with respect to all Impositions.
Lessor and Lessee shall each, upon request, provide the other with such data,
including without limitation cost and depreciation records, as is maintained by
the party to whom the request is made as is necessary to prepare any required
returns and reports.
Lessee shall be entitled to receive and retain any refund from a taxing
authority in respect of an Imposition paid by Lessee if at the time of the
refund no Event of Default has occurred and is continuing, but if an Event of
Default has occurred and is continuing at the time of the refund, Lessee shall
not be entitled to receive or retain such refund and if and when received by
Lessor such refund shall be applied as provided in Article XVI. Lessor shall pay
over to Lessee, promptly upon receipt, any refund to which Lessee would be
entitled under the preceding sentence that is received by Lessor after the
expiration or earlier termination of this Lease.
4.2 Adjustment of Impositions. Impositions imposed in respect of the
tax-fiscal period during which the Term ends shall be adjusted and prorated
between Lessor and Lessee, whether or
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not imposed before or after the expiration of the Term or the earlier
termination thereof, and Lessee's obligation to pay and Lessor's obligation to
refund the prorated share thereof shall survive such expiration or earlier
termination.
4.3 Utility Charges. Lessee will pay or cause to be paid when due all
charges for electricity, power, gas, oil, water and other utilities imposed upon
the Leased Properties or upon Lessor or Lessee with respect to the Leased
Properties.
4.4 Insurance Premiums. Lessee shall pay or cause to be paid when due
all premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term.
ARTICLE V
5.1 No Termination, Abatement, etc. Lessee shall not take any action
without the consent of Lessor to modify, surrender or terminate this Lease, and
shall not seek or be entitled to any abatement, deduction, deferment or
reduction of Rent, or setoff against Rent, other than after the entry of a final
judgment of a court of competent jurisdiction that Lessor has breached Section
30.1. The respective obligations of Lessor and Lessee shall not be affected by
reason of (i) any damage to, or destruction of, the Leased Properties or any
portion thereof from whatever cause or any Taking of the Leased Properties or
any portion thereof, except as expressly set forth herein; (ii) the lawful or
unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Properties, or any portion thereof, or the interference with such use by any
Person or by reason of eviction by paramount title (other than by the holder(s)
of any Facility Mortgage(s) or other encumbrances now or hereafter placed on a
Facility by Lessor and the claimants under liens attaching to a Facility as a
result of Lessor's ownership of an interest therein); (iii) any claim which
Lessee has or might have against Lessor or by reason of any default or breach of
any warranty by Lessor under this Lease or any other agreement between Lessor
and Lessee (other than Section 30.1), or to which Lessor and Lessee are parties,
(iv) any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting Lessor or
any assignee or transferee of Lessor, or (v) any other cause whether similar or
dissimilar to any of the foregoing other than a discharge of Lessee from any
such obligations as a matter of law. Lessee hereby specifically waives all
rights, arising from any occurrence whatsoever, which may now or hereafter be
conferred upon it by law to (i) modify, surrender or terminate this Lease or
quit or surrender the Leased Properties or any portion thereof, or (ii) entitle
Lessee to any abatement, reduction, suspension or deferment of the Rent or other
sums payable by Lessee hereunder except as otherwise specifically provided in
this Lease.
ARTICLE VI
6.1 Ownership of the Leased Properties. Lessee acknowledges that the
Leased Properties are the property of Lessor and that Lessee has only the right
to the possession and use of the Leased
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Properties upon the terms and conditions of this Lease. Lessee will not (i) file
any income tax return or other associated documents; (ii) file any other
document with or submit any document to any governmental body or authority;
(iii) enter into any written contractual arrangement with any Person; or (iv)
release any financial statement of Lessee, in any case that takes any position
other than that throughout the Term Lessor is the owner of the Leased Properties
for federal, state and local income tax purposes, this Lease is a "true lease"
and an "operating lease" and not a "capital lease".
6.2 Lessor's Personal Property. Lessee shall, during the entire Term,
maintain all of Lessor's Personal Property in good order, condition and repair
as shall be necessary in order to operate the Facilities for the Primary
Intended Use in compliance with all applicable licensure and certification
requirements, all applicable Legal Requirements and Insurance Requirements, and
customary industry practice for the Primary Intended Use. If any of Lessor's
Personal Property requires replacement in order to comply with the foregoing,
Lessee shall replace it with similar property of the same or better quality at
Lessee's sole cost and expense, and when such replacement property is placed in
service with respect to the Leased Property it shall become Lessor's Personal
Property. Lessee shall not permit or suffer Lessor's Personal Property to be
subject to any lien, charge, encumbrance, financing statement, contract of sale,
equipment lessor's interest or the like, except for any purchase money security
interest or equipment lessor's interest expressly approved in advance, in
writing, by Lessor. At the expiration or earlier termination of this Lease, all
of Lessor's Personal Property shall be surrendered to Lessor with the Leased
Properties at or before the time of the surrender of the Leased Property in at
least as good a condition as at the Commencement Date (or, as to replacements,
in at least as good a condition as when placed in service at the Facilities)
except for ordinary wear and tear.
6.3 Lessee's Personal Property. Lessee shall provide and maintain
during the Term such Personal Property, in addition to Lessor's Personal
Property, as shall be necessary and appropriate in order to operate the
Facilities for the Primary Intended Use in compliance with all licensure and
certification requirements, 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. Without the prior written consent
of Lessor, Lessee shall not permit or suffer Lessee's Personal Property to be
subject to any lien, charge, encumbrance, financing statement or contract of
sale or the like other than as permitted by Section 8.2.1.3. Upon the expiration
of the Term or the earlier termination of this Lease, without the payment of any
additional consideration by Lessor, Lessee shall be deemed to have sold,
assigned, transferred and conveyed to Lessor all of Lessee's right, title and
interest in and to any of Lessee's Personal Property that, in Lessor's
reasonable judgment, is integral to the Primary Intended Use of the Facilities
(or if some other use thereof has been approved by Lessor as required herein,
such other use as is then being made by Lessee) and, as provided in Section 34.1
hereof, Lessor shall have the option to purchase any of Lessee's Personal
Property that is not then integral to such use. Without Lessor's prior written
consent, Lessee shall not remove Lessee's Personal Property that is in use at
the expiration or earlier termination of the Term from the Leased Properties
until such option to purchase has expired or been waived in writing by Lessor.
Any of Lessee's Personal Property that is not integral to the use of the
Facilities being made by Lessee and is not purchased by Lessor pursuant to
Section 34.1 may be removed by Lessee
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upon the expiration or earlier termination of this Lease, and, if not removed
within twenty (20) days following the expiration or earlier termination of this
Lease, shall be considered abandoned by Lessee and may be appropriated, sold,
destroyed or otherwise disposed of by Lessor without giving notice thereof to
Lessee and without any payment to Lessee or any obligation to account therefor.
Lessee shall reimburse Lessor for any and all expense incurred by Lessor in
disposing of any of Lessee's Personal Property that Lessee may remove but within
such twenty (20) day period fails to remove, and shall either at its own expense
restore the Leased Properties to the condition required by Section 9.1.5,
including repair of all damage to the Leased Properties caused by the removal of
any of Lessee's Personal Property, or reimburse Lessor for any and all expense
incurred by Lessor for such restoration and repair.
6.4 Grant of Security Interest in Personal Property and Accounts.
Lessee has concurrently granted to Lessor a security interest in all of Lessee's
right, title and interest in the Collateral as defined in the Security
Agreement, which includes, without limitation, Lessee's Personal Property and
the Lessee's Accounts as defined in the Security Agreement.
ARTICLE VII
7.1 Condition of the Leased Properties. Lessee acknowledges that it has
inspected and otherwise has knowledge of the condition of the Leased Properties
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. Lessee is
leasing the Leased Properties "as is" in their condition on the Commencement
Date. Lessee waives any claim or action against Lessor in respect of the
condition of the Leased Properties. LESSOR MAKES NO WARRANTY OR REPRESENTATION
EXPRESS OR IMPLIED, IN RESPECT OF ANY LEASED PROPERTY OR ANY PART THEREOF,
EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR
PURPOSE OR OTHERWISE AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN,
LATENT OR PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE.
Lessee further acknowledges that throughout the Term Lessee is solely
responsible for the condition of the Leased Properties.
7.2 Use of the Leased Properties. Throughout the Term Lessee shall
continuously use the Leased Properties for the Primary Intended Use and uses
incidental thereto. Lessee shall not use the Leased Properties or any portion
thereof for any other use without the prior written consent of Lessor. No use
shall be made or permitted to be made of, or allowed in, the Leased Properties,
and no acts shall be done, which will cause the cancellation of, or be
prohibited by, any insurance policy covering the Leased Properties or any part
thereof, nor shall the Leased Properties or Lessee's Personal Property be used
for any unlawful purpose. Lessee shall not commit or suffer to be committed any
waste on the Leased Properties, or cause or permit any nuisance thereon, or
suffer or permit the Leased Properties or any portion thereof, or Lessee's
Personal Property, to be used in such a manner as (i) might reasonably tend to
impair Lessor's (or Lessee's, as the case may be) title thereto or to any
portion thereof, or (ii) may reasonably make possible a claim or claims of
adverse
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usage or adverse possession by the public, as such, or of implied dedication of
the Leased Properties or any portion thereof.
7.3 Certain Environmental Matters.
(a) Prohibition Against Use of Hazardous Substances. Lessee
shall not permit, conduct or allow on the Leased Properties, the
generation, introduction, presence, maintenance, use, receipt,
acceptance, treatment, manufacture, production, installation,
management, storage, disposal or release of any Hazardous Substance
except for those types and quantities of Hazardous Substances necessary
for and ordinarily associated with the conduct of Lessee's business
which are used in full compliance with all Environmental Laws.
(b) Notice of Environmental Claims, Actions or Contaminations.
Lessee shall notify Lessor, in writing, immediately upon learning of
any existing, pending or threatened: (a) investigation, inquiry, claim
or action by any governmental authority in connection with any
Environmental Laws, (b) Third Party Claims, (c) Regulatory Actions,
and/or (id) Contamination of any portion of the Leased Properties.
(c) Costs of Remedial Actions with Respect to Environmental
Matters. If any investigation and/or Clean-Up of any Hazardous
Substance or other environmental condition on, under, about or with
respect to a Leased Property is required by any Environmental Law,
Lessee shall complete, at its own expense, such investigation and/or
Clean-Up or cause any other Person that may be legally responsible
therefor to complete such investigation and/or Clean-Up.
(d) Delivery of Environmental Documents. Lessee shall deliver
to Lessor complete copies of any and all Environmental Documents that
may now be in or at any time hereafter come into the possession of
Lessee.
(e) Environmental Audit. At Lessee's expense, Lessee shall
from time to time, upon and within forty-five (45) days of Lessor's
request therefor, deliver an Environmental Audit to Lessor. All tests
and samplings shall be conducted using generally accepted and
scientifically valid technology and methodologies. Lessee shall give
the engineer or environmental consultant conducting the Environmental
Audit reasonable and complete access to the Leased Properties and to
all records in the possession of Lessee that may indicate the presence
(whether current or past) of a Release or threatened Release of any
Hazardous Substances on, in, under, about and adjacent to any Leased
Property. Lessee shall also provide the engineer or environmental
consultant full access to and the opportunity to interview such persons
as may be employed in connection with the Leased Properties as the
engineer or consultant deems appropriate. However, Lessor shall not be
entitled to request an Environmental Audit from Lessee unless Lessor
has reasonable cause to believe that a Release affecting a Facility has
occurred or there are fewer than six (6) months remaining in the Term.
If the Environmental Audit discloses the presence of Contamination or
any
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noncompliance with Environmental Laws, Lessee shall immediately perform
all of Lessee's obligations hereunder with respect to such Hazardous
Substances or noncompliance.
(f) Entry onto Leased Properties for Environmental Matters. If
Lessee fails to provide an Environmental Audit as and when required by
Subparagraph (e) hereof, in addition to Lessor's other remedies Lessee
shall permit Lessor from time to time, by its employees, agents,
contractors or representatives, to enter upon the Leased Properties for
the purpose of conducting such Investigations as Lessor may desire, the
expense of which shall promptly be paid or reimbursed by Lessee as an
Additional Charge. Lessor, and its employees, agents, contractors,
consultants and/or representatives, shall conduct any such
Investigation in a manner which does not unreasonably interfere with
Lessee's use of and operations on the Leased Properties (however,
reasonable temporary interference with such use and operations is
permissible if the investigation cannot otherwise be reasonably and
inexpensively conducted). Other than in an emergency, Lessor shall
provide Lessee with prior notice before entering any of the Leased
Properties to conduct such Investigation, and shall provide copies of
any reports or results to Lessor, and Lessee shall cooperate fully in
such Investigation.
(g) Environmental Matters Upon Termination of the Lease or
Expiration of Term. Upon the expiration or earlier termination of the
Term of this Lease, Lessee shall cause the Leased Properties to be
delivered free of any and all Regulatory Actions and Third Party Claims
and otherwise in compliance with all Environmental Laws with respect
thereto, and in a manner and condition that is reasonably required to
ensure that the then present use, operation, leasing, development,
construction, alteration, refinancing or sale of the Leased Property
shall not be restricted by any environmental condition existing as of
the date of such expiration or earlier termination of the Term.
(h) Compliance with Environmental Laws. Lessee shall (and
shall cause each sublessee referred to in Section 22.2 to) comply with,
and shall cause its agents, servants and employees to comply with, and
shall use reasonable efforts to cause each occupant and user of any of
the Leased Properties, and the agents, servants and employees of such
occupants and users, to comply with each and every Environmental Law
applicable to Lessee, the Leased Properties and each such occupant or
user with respect to the Leased Properties. Specifically, but without
limitation:
(i) Maintenance of Licenses and Permits. Lessee shall
obtain and maintain (and Lessee shall use reasonable efforts
to cause each tenant, occupant and user to obtain and
maintain) all permits, certificates, licenses and other
consents and approvals required by any applicable
Environmental Law from time to time with respect to Lessee,
each and every part of the Leased Properties and/or the
conduct of any business at a Facility or related thereto;
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(ii) Contamination. Lessee shall not cause, suffer or
permit any Contamination;
(iii) Clean-Up. If a Contamination occurs, the Lessee
promptly shall Clean-Up and remove any Hazardous Substance or
cause the Clean-Up and the removal of any Hazardous Substance
and in any such case such Clean-Up and removal of the
Hazardous Substance shall be effected to Lessor's reasonable
satisfaction and in any event in strict compliance with and in
accordance with the provisions of the applicable Environmental
Laws;
(iv) Discharge of Lien. Within twenty (20) days of
the date any lien is imposed against the Leased Properties or
any part thereof under any Environmental Law, Lessee shall
cause such lien to be discharged (by payment, by bond or
otherwise to Lessor's absolute satisfaction);
(v) Notification of Lessor. Within three (3) Business
Days after receipt by Lessee of notice or discovery by Lessee
of any fact or circumstance which might result in a breach or
violation of any covenant or agreement, Lessee shall notify
Lessor in writing of such fact or circumstance; and
(vi) Requests, Orders and Notices. Within three (3)
Business Days after receipt of any request, order or other
notice relating to the Leased Properties under any
Environmental Law, Lessee shall forward a copy thereof to
Lessor.
(i) Environmental Related Remedies. In the event of a breach
by Lessee beyond any applicable notice and/or grace period of its
covenants with respect to environmental matters, Lessor may, in its
sole discretion, do any one or more of the following (the exercise of
one right or remedy hereunder not precluding the simultaneous or
subsequent exercise of any other right or remedy hereunder):
(i) Cause a Clean-Up. Cause the Clean-Up of any
Hazardous Substance or other environmental condition on or
under the Leased Properties, or both, at Lessee's cost and
expense; or
(ii) Payment of Regulatory Damages. Pay on behalf of
Lessee any damages, costs, fines or penalties imposed on
Lessee or Lessor as a result of any Regulatory Actions; or
(iii) Payments to Discharge Liens. On behalf of
Lessee, make any payment or perform any other act or cause any
act to be performed which will prevent a lien in favor of any
federal, state or local governmental authority from attaching
to the Leased Properties or which will cause the discharge of
any lien then attached to the Leased Properties; or
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(iv) Payment of Third Party Damages. Pay, on behalf
of Lessee, any damages, cost, fines or penalties imposed on
Lessee as a result of any Third Party Claims; or
(v) Demand of Payment. Demand that Lessee make
immediate payment of all of the costs of such Clean-Up and/or
exercise of the remedies set forth in this Section 7.3
incurred by Lessor and not theretofore paid by Lessee as of
the date of such demand.
(j) Environmental Indemnification. Lessee shall and does
hereby indemnify, and shall defend and hold harmless Lessor, its
principals, officers, directors, agents and employees from each and
every incurred and potential claim, cause of action, damage, demand,
obligation, fine, laboratory fee, liability, loss, penalty, imposition,
settlement, levy, lien removal, litigation, judgment, proceeding,
disbursement, expense and/or cost (including without limitation the
cost of each and every Clean-Up), however defined and of whatever kind
or nature, known or unknown, foreseeable or unforeseeable, contingent,
incidental, consequential or otherwise (including, but not limited to,
attorneys' fees, consultants' fees, experts' fees and related expenses,
capital, operating and maintenance costs, incurred in connection with
(i) any Investigation or monitoring of site conditions, and (ii) any
Clean-Up required or performed by any federal, state or local
governmental entity or performed by any other entity or person because
of the presence of any Hazardous Substance, Release, threatened Release
or any Contamination on, in, under or about any of the Leased
Properties) which may be asserted against, imposed on, suffered or
incurred by, each and every indemnitee arising out of or in any way
related to, or allegedly arising out of or due to any environmental
matter including, but not limited to, any one or more of the following:
(i) Release Damage or Liability. The presence of
Contamination in, on, at, under, or near a Leased Property or
migrating to a Leased Property from another location;
(ii) Injuries. All injuries to health or safety
(including wrongful death), or to the environment, by reason
of environmental matters relating to the condition of or
activities past or present on, at, in, under a Leased
Property;
(iii) Violations of Law. All violations, and alleged
violations, of any Environmental Law relating to a Leased
Property or any activity on, in, at, under or near a Leased
Property;
(iv) Misrepresentation. All material
misrepresentations relating to environmental matters in any
documents or materials furnished by Lessee to Lessor and/or
its representatives in connection with the Lease;
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(v) Event of Default. Each and every Event of Default
relating to environmental matters;
(vi) Lawsuits. Any and all lawsuits brought or
threatened, settlements reached and governmental orders
relating to any Hazardous Substances at, on, in, under or near
a Leased Property, and all demands of governmental
authorities, based upon or in any way related to any Hazardous
Substances at, on, in, under a Leased Property; and
(vii) Presence of Liens. All liens imposed upon any
of the Leased Properties in favor of any governmental entity
or any person as a result of the presence, disposal, release
or threat of release of Hazardous Substances at, on, in, from,
or under a Leased Property.
(k) Rights Cumulative and Survival. The rights granted Lessor
under this Section are in addition to and not in limitation of any
other rights or remedies available to Lessor hereunder or allowed at
law or in equity or rights of indemnification provided to Lessor in any
agreement pursuant to which Lessor purchased any of the Leased
Property. The payment and indemnification obligations set forth in this
Section 7.3 shall survive the expiration or earlier termination of the
Term of this Lease.
ARTICLE VIII
8.1 Compliance with Legal and Insurance Requirements. In its use,
maintenance, operation and any alteration of the Leased Properties, Lessee, at
its expense, will promptly (i) comply with all Legal Requirements and Insurance
Requirements, whether or not compliance therewith requires structural changes in
any of the Leased Improvements (which structural changes shall be subject to
Lessor's prior written approval, which approval shall not be unreasonably
withheld or delayed) or interferes with or prevents the use and enjoyment of the
Leased Properties, and (ii) procure, maintain and comply with all licenses,
certificates of need, provider agreements and other authorizations required for
the use of the Leased Properties and Lessee's Personal Property then being made,
and for the proper erection, installation, operation and maintenance of the
Leased Properties or any part thereof. The judgment of any court of competent
jurisdiction, or the admission of Lessee in any action or proceeding against
Lessee, whether or not Lessor is a party thereto, that Lessee has violated any
such Legal Requirements or Insurance Requirements shall be conclusive of that
fact as between Lessor and Lessee.
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8.2 Certain Covenants.
8.2.1 Certain Financial Covenants.
8.2.1.1 Net Worth. At all times during the Term
Lessee and Guarantor, on a consolidated basis, shall maintain a Net Worth of at
least ONE HUNDRED MILLION DOLLARS ($100,000,000.00).
8.2.1.2 Cash Flow to Rent Ratio. Within twenty-four
(24) months after the Commencement Date, Lessee shall achieve and thereafter
maintain, on a trailing three (3) calendar month basis, a Cash Flow to Rent
Ratio of not less than 1.2. Not later than December 31, 2002, Lessee shall
achieve and thereafter maintain, on a trailing three (3) month basis, a Cash
Flow to Rent Ratio of not less than 1.25. Not later than December 31, 2003, and
not later than December 31 of each Lease Year thereafter throughout the Term,
Lessee shall achieve and thereafter maintain, on a trailing three (3) month
basis, a Cash Flow to Rent Ratio that is not less than three (3) basis points
higher than the Cash Flow to Rent Ratio that Lessee was required to achieve by
the immediately preceding December 31 (e.g., the Cash Flow to Rent Ratio for the
Lease Year ended December 31, 2003 shall be not less than 1.28, the Cash Flow to
Rent Ratio for the Lease Year ended December 31, 2004 shall be not less than
1.31, etc.) In determining Lessee's compliance with this financial covenant,
Lessee's Cash Flow for the pertinent fiscal period shall be reduced by an amount
equal to the Minimum Qualified Capital Expenditures allocable to such period
(prorated on a daily basis for any fiscal period of less than 365 days).
8.2.1.3 No Other Debt. Lessee shall not, directly or
indirectly, incur or otherwise become liable for any Debt or obligation to pay
money to any Person other than to (i) Lessor pursuant to this Lease , (ii)
lessors of leased equipment used in the operation of the Facilities, and (iii)
Purchase Money Financing; provided that in no event shall the aggregate payments
due with respect to such equipment leases and Purchase Money Financing at any
time during the Term exceed $150,000.
8.2.1.4 Pledge or Encumber Assets. Lessee shall not
pledge or otherwise encumber any of its assets, other than leased equipment used
in the operation of the Facilities.
8.2.1.5 Guarantees Prohibited. Lessee shall not
guarantee any indebtedness of any Person.
8.3 Minimum Qualified Capital Expenditures. During the Lease Year that
begins January 1, 2001, Lessee shall expend at least Two Hundred and Fifty
Dollars ($250.00) per bed for Qualified Capital Expenditures to improve the
Facilities. Thereafter throughout the Term Lessee shall expend such amount each
Lease Year, increased annually in proportion to increases in the CPI. Qualified
Capital Expenditures in any Lease Year in excess of that required by the
previous two sentences of this Section 8.3 shall be credited toward the
Qualified Capital Expenditures required to be made in any ensuing Lease Year(s);
provided, however, that in each Lease Year in any period
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of three (3) successive Lease Years (or, during the period beginning January 1,
2000 and ending December 31, 2001, two (2) successive Lease Years) during the
Term the Qualified Capital Expenditures actually made per bed at each Facility
shall be not less than the average of the sum of the Qualified Capital
Expenditures required hereby for such period. At least annually, at the request
of Lessor, Lessee shall prepare capital expenditures budgets and provide copies
of same to Lessor.
8.4 Management Agreements. Lessee shall not enter into, amend, modify,
renew, replace or otherwise change the terms of any Management Agreement without
the prior written consent of Lessor as to the identity of the Manager and the
terms of the agreement, which consent Lessor may withhold in its sole
discretion, and in no event without the execution by Lessee, Manager and Lessor
of an agreement, satisfactory to Lessor in form and substance, pursuant to which
Manager's right to receive its management fee is subordinated to the obligation
of Lessee to pay the Rent to Lessor.
8.5 Other Facilities. During the last three Lease Years in the Term,
neither Lessee nor any Affiliate shall acquire ownership or become an operator
or manager of, or acquire any interest whatever in, any nursing home, rest home,
assisted living facility, subacute facility, retirement center or similar health
care facility located within a five (5) mile radius of any Facility.
8.6 No Other Business. Lessee shall not engage in any business other
than the operation of the Facilities.
8.7 Separateness. Lessee shall:
a. Maintain records and books of account separate from
those of any Affiliate.
b. Not guarantee or become obligated for the debts of
any other entity, including any Affiliate, or hold
out its credit, jointly or severally, as being
available to satisfy the obligations of others.
c. Not pledge its assets, jointly or severally, for the
benefit of any other entity, including any Affiliate.
d. Hold itself out as an entity separate from any
Affiliates.
e. At all times cause its Board of Directors to hold
appropriate meetings (or act by unanimous consent) to
authorize all appropriate corporate actions, and in
authorizing such actions, to observe all formalities.
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ARTICLE IX
9.1 Maintenance and Repair.
9.1.1 Lessee, at its expense, will keep the Leased Properties,
and all landscaping, private roadways, sidewalks and curbs appurtenant thereto
which are under Lessee's control and Lessee's Personal Property in good order
and repair, whether or not the need for such repairs arises out of Lessee's use,
any prior use, the elements or the age of the Leased Property or any portion
thereof, or any cause whatsoever except the act or negligence of Lessor, and
with reasonable promptness shall make all necessary and appropriate repairs
thereto of every kind and nature, whether interior or exterior, structural or
non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the Commencement Date (concealed or
otherwise). Lessee shall at all times maintain, operate and otherwise manage the
Leased Properties on generally observed by Guarantor in the management of the
other properties that Guarantor or its Affiliates manage. All repairs shall, to
the extent reasonably achievable, be at least equivalent in quality to the
original work or the property to be repaired shall be replaced. 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 Properties or any parts thereof
for the Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to
maintain, build or rebuild any improvements on the Leased Properties (or any
private roadways, sidewalks or curbs appurtenant thereto), or to make any
repairs, replacements, alterations, restorations or renewals of any nature or
description to the Leased Properties, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or upon any adjoining
property, whether to provide lateral or other support or abate a nuisance, or
otherwise, or to make any expenditure whatsoever with respect thereto, in
connection with this Lease. Lessee hereby waives, to the extent permitted by
law, the right to make repairs at the expense of Lessor pursuant to any law in
effect at the time of the execution of this Lease or hereafter enacted.
9.1.3 Nothing contained in this Lease shall be construed as
(i) constituting the consent or request of Lessor, expressed or implied, to any
contractor, subcontractor, laborer, materialmen or vendor to or for the
performance of any labor or services or the furnishing of any materials or other
property for the construction, alteration, addition, repair or demolition of or
to any Leased Property or any part thereof, or (ii) giving 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 Lessor in respect thereof or to
make any agreement that may create, or in any way be the basis for any right,
title, interest, lien, claim or other encumbrance upon the estate of Lessor in
the Leased Properties, or any portion thereof. Lessor shall have the right to
give, record and post, as appropriate, notices of non-responsibility under any
mechanics' and construction lien laws now or hereafter existing.
9.1.4 Lessee shall promptly replace any of the Leased
Improvements or Lessor's Personal Property which become worn out, obsolete or
unusable or unavailable for the purpose for
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which intended. All replacements shall have a value and utility at least equal
to that of the items replaced and shall become part of the Leased Properties
immediately upon their acquisition by Lessee. Upon Lessor's request, Lessee
shall promptly execute and deliver to Lessor a bill of sale or other instrument
establishing Lessor's lien-free ownership of such replacements. Lessee shall
promptly repair all damage to a Leased Property incurred in the course of such
replacement.
9.1.5 Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Properties to Lessor in the condition
in which they were originally received from Lessor, in good operating condition,
ordinary wear and tear excepted, except as repaired, rebuilt, restored, altered
or added to as permitted or required by the provisions of this Lease.
9.2 Encroachments, Restrictions, etc. If, at any time, any of the
Leased Improvements are alleged to encroach upon any property, street or right
of way adjacent to a Leased Property, or to violate any restrictive covenant, or
to impair the rights of others under any easement or right of way, Lessee shall
promptly settle such allegations or take such other lawful action as may be
necessary in order to be able to continue the use of a Leased Property for the
Primary Intended Use substantially in the manner and to the extent such Leased
Property was being used at the time of the assertion of such violation,
impairment or encroachment, provided, however, that no such action shall violate
any other provision of this Lease and any alteration of a Leased Property must
be made in conformity with the applicable requirements of Article X. Lessee
shall not have any claim against Lessor or offset against any of Lessee's
obligations under this Lease with respect to any such violation, impairment or
encroachment.
ARTICLE X
10.1 Construction of Alterations and Additions to the Leased
Properties. Lessee shall not (a) make or permit to be made any structural
alterations, improvements or additions of or to the Leased Properties or any
part thereof, or (b) materially alter the plumbing, HVAC or electrical systems
thereon or (c) make any other alterations, improvements or additions the cost of
which exceeds, as to any given Facility (i) Twenty Five Thousand ($25,000.00)
Dollars per alteration, improvement or addition, or (ii) Fifty Thousand
($50,000.00) Dollars in any Lease Year as to any given facility, unless and
until Lessee has (a) caused complete plans and specifications therefor to have
been prepared by a licensed architect and submitted to Lessor at least ninety
(90) Business Days before the planned start of construction thereof, and (b)
obtained Lessor's written approval thereof and the approval of any Facility
Mortgagee. If Lessor requires a deposit, Lessor shall retain and disburse the
amount deposited in the same manner as is provided for insurance proceeds in
Section 14.6. If the deposit is reasonably determined by Lessor at any time to
be insufficient for the completion of the alteration, improvement or addition,
Lessee shall immediately increase the deposit to the amount reasonably required
by Lessor. Lessee shall be responsible for the completion of such improvements
in accordance with the plans and specifications approved by Lessor, and shall
promptly correct any failure with respect thereto.
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Alterations and improvements not falling within the categories
described in the first sentence of the preceding paragraph may be made by Lessee
without the prior approval of Lessor.
All alterations, improvements and additions shall be constructed in a
first class, workmanlike manner, in compliance with all Insurance Requirements
and Legal Requirements, be in keeping with the character of the Leased
Properties and the other properties managed by Guarantor or an Affiliate, and be
designed and constructed so that the value of the Leased Properties will not be
diminished or and that the Primary Intended Use of the Leased Properties will
not be changed. All improvements, alterations and additions shall immediately
become a part of the Leased Properties.
Lessee shall have no claim against Lessor at any time in respect of the
cost or value of any such improvement, alteration or addition. There shall be no
adjustment in the Rent by reason of any such improvement, alteration or
addition. With Lessor's consent, expenditures made by Lessee pursuant to this
Article X may be included as capital expenditures for purposes of inclusion in
the capital expenditures budget for the Facilities and for measuring compliance
with the obligations of Lessee set forth in Section 8.3 of this Lease.
In connection with any alteration which involves the removal,
demolition or disturbance of any asbestos-containing material, Lessee shall
cause to be prepared at its expense a full asbestos assessment applicable to
such alteration, and shall carry out such asbestos monitoring and maintenance
program as shall reasonably be required thereafter in light of the results of
such assessment.
ARTICLE XI
11.1 Liens. Without the consent of Lessor or as expressly permitted
elsewhere herein, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Properties, and
any attachment, levy, claim or encumbrance in respect of the Rent, except for
(i) Permitted Encumbrances, (ii) liens of mechanics, laborers, materialmen,
suppliers or vendors for sums not yet due, and (iii) liens created by , through
or under Lessor or Lessor's title in the Leased Properties.
ARTICLE XII
12.1 Permitted Contests. Lessee, on its own or on Lessor's behalf (or
in Lessor's) name, but at Lessee's sole cost and expense, shall have the right
to contest, by appropriate legal proceedings conducted in good faith and with
due diligence, the amount or validity of any Imposition, Legal Requirement or
Insurance Requirement , provided (a) prior Notice of such contest is given to
Lessor, (b) the Leased Properties would not be in any danger of being sold,
forfeited or attached as a result of such contest, and there is no risk to
Lessor of a loss of or interruption in the
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payment of, Rent, (c) in the case of an unpaid Imposition or Claim, collection
thereof is suspended during the pendency of such contest, (d) in the case of a
contest of a Legal Requirement, compliance may legally be delayed pending such
contest. Upon request of Lessor, Lessee shall deposit funds or assure Lessor in
some other manner reasonably satisfactory to Lessor that a contested Imposition
or Claim, together with interest and penalties, if any, thereon, and any and all
costs for which Lessee is responsible will be paid if and when required upon the
conclusion of such contest. Lessee shall defend, indemnify and save harmless
Lessor from all costs or expenses arising out of or in connection with any such
contest, including but not limited to attorneys' fees. If at any time Lessor
reasonably determines that payment of any Imposition or Claim, or compliance
with any Legal or Insurance Requirement being contested by Lessee is necessary
in order to prevent loss of any of the Leased Properties or Rent or civil or
criminal penalties or other damage, upon such prior Notice to Lessee as is
reasonable in the circumstances Lessor may pay such amount, require Lessee to
comply with such Legal or Insurance Requirement or take such other action as it
may deem necessary to prevent such loss or damage. If reasonably necessary, upon
Lessee's written request Lessor, at Lessee's expense, shall cooperate with
Lessee in a permitted contest, provided Lessee upon demand reimburses Lessor for
Lessor's costs incurred in cooperating with Lessee in such contest.
12.2 Lessor's Requirement for Deposits. Any time after the occurrence
of an Event of Default, Lessor, in its sole discretion, shall be entitled to
require Lessee to deposit with Lessor monthly, at the time of its payments of
Base Rent, a prorata portion of the amounts required to comply with Insurance
Requirements, Impositions and Legal Requirements, and when such obligations
become due, Lessor shall pay them (to the extent of the deposit) upon Notice
from Lessee requesting such payment. In the event that sufficient funds have not
been deposited to cover the amount of the obligations due at least thirty (30)
days in advance of the due date, Lessee shall forthwith deposit the same with
Lessor upon Notice from Lessor. Lessor shall not be obligated to segregate such
deposited funds from its other funds, or to pay Lessee any interest on any
deposit so held by Lessor. Upon an Event of Default, any of the funds remaining
on deposit may be applied under this Lease in any manner and on such priority as
may be determined by Lessor.
ARTICLE XIII
13.1 General Insurance Requirements. Lessee shall keep the Leased
Properties, and all property located in or on the Leased Properties, including
Lessor's Personal Property and Lessee's Personal Property, insured with
insurance meeting the following requirements: (a) all insurance shall be written
by companies authorized to do insurance business in the applicable States and
having a rating classification of not less than A- and a financial size category
of "Class VIII", according to the then most recent issue of Best's Key Rating
Guide; (b) all policies must name Lessor as an additional insured, and name as
an additional insured any Facility Mortgagee by way of a standard form of
mortgagee's loss payable endorsement in use in the applicable States and in
accordance with any such other requirements as may be established by such
Facility Mortgagee, provided, however, that if requested by Lessor and available
on a commercially reasonable basis, all public liability and property damage
insurance shall contain a provision that Lessor, although named as an additional
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insured, shall nevertheless be entitled to recovery for loss, damage, or injury
to Lessor, its servants, agents, and employees by reason of the negligence of
Lessee or Lessor; (c) losses must be payable to Lessor or Lessee as provided in
Article XIV, and loss adjustments shall require the written consent of Lessor
and, provided it is not then in default, Lessee, which consent shall not be
unreasonably withheld by either Lessor or Lessee; (d) each insurer must agree
that it will give Lessor and any Facility Mortgagee at least thirty (30) days'
written notice before its policy shall be altered, allowed to expire or
canceled; (e) the amount of any deductible or retention must be approved by
Lessor prior to the issuance of any policy; and (f) the form of all policies
shall be approved by Lessor, whose approval shall not unreasonably be withheld,
and by any Facility Mortgagee.
13.2 Risks to be Insured. The policies covering the Leased Properties
and Lessee's Personal Property shall insure against the following risks:
13.2.1 Loss or damage by fire, vandalism and malicious
mischief, earthquake, extended coverage perils commonly known as "Special Risk,"
and all physical loss perils normally included in such Special Risk insurance,
including but not limited to sprinkler leakage, in an amount not less than one
hundred percent (100%) of Replacement Cost;
13.2.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus in such amounts as may be required by Lessor from
time to time;
13.2.3 Loss of rental under a rental value insurance policy
covering risk of loss during reconstruction necessitated by the occurrence of
any of the hazards described in Sections 13.2.1 or 13.2.2 (but in no event for a
period less than twelve (12) months) in an amount sufficient to prevent Lessor
and Lessee from becoming a co-insurer;
13.2.4 Claims for personal injury or property damage under a
policy of commercial general public liability insurance with a combined single
limit per occurrence in respect of bodily injury and death and property damage
of One Million Dollars ($1,000,000.00), and an aggregate limitation of not less
than Five Million Dollars ($5,000,000.00), which insurance shall insure Lessee's
contractual liability to Lessor under the indemnity provisions of Article XXI of
this Lease and shall be written on an 'occurrence' and not a 'claims made'
basis;
13.2.5 Claims arising out of malpractice in an amount not less
than One Million Dollars ($1,000,000.00) for each person and for each occurrence
(with umbrella coverage of not less than Five Million Dollars ($5,000,000.00)
and, if written on a "claims-made" basis, Lessee shall also provide continuous
liability coverage for claims arising during the Term either by obtaining an
endorsement providing for an extended reporting period reasonably acceptable to
Lessor in the event such policy is canceled or not renewed for any reason
whatsoever, or by obtaining "tail" insurance coverage converting the policies to
"occurrence" basis policies providing coverage for a period of at least three
(3) years beyond the expiration of the Term;
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13.2.6 Flood (with respect to any Leased Property located in
whole or in part within a designated flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in the area;
13.2.7 During such time as Lessee is constructing any
improvements, (i) worker's compensation insurance and employers' liability
insurance covering all persons employed in connection with the improvements in
statutory limits, (ii) a completed operations endorsement to the commercial
general liability and property damage insurance policies referred to above,
(iii) builder's risk insurance, completed value form, covering all physical
loss, in an amount satisfactory to Lessor, and (iv) such other insurance, in
such amounts, as Lessor deems necessary to protect Lessor's interest in the
Leased Properties from any act or omission of Lessee's contractors or
subcontractors, and certificates of insurance evidencing such coverage, in form
satisfactory to Lessor, shall be presented to Lessor prior to the commencement
of construction of such improvements;
13.2.8 Primary automobile liability insurance with limits of
One Million Dollars ($1,000,000.00) per occurrence each for owned and non-owned
and hired vehicles.
13.3 Payment of Premiums; Copies of Policies; Certificates. Lessee
shall pay when due all of the premiums for the insurance required by this Lease,
and shall deliver to Lessor and to any Facility Mortgagee requesting such
evidence, certificates of insurance in form satisfactory to Lessor and such
Facility Mortgagee. Photocopies of the policies of insurance required by this
Lease and certificates thereof shall be delivered to Lessor not less than thirty
(30) days prior to their effective date (and, with respect to any renewal
policy, not less than twenty (20) days prior to the expiration of the existing
policy), and in the event of the failure of Lessee either to carry the required
insurance or pay the premiums therefor, or to deliver photocopies of policies or
certificates to Lessor as required, Lessor shall be entitled, but shall have no
obligation, to obtain such insurance and pay the premiums therefor when due,
which premiums shall be repayable to Lessor upon written demand therefor as
Additional Charges.
[13.4 INTENTIONALLY OMITTED]
13.5 Umbrella Policies. If Lessee chooses to carry umbrella liability
coverage to obtain the limits of liability required under this Lease, the
umbrella policies must provide coverage in the same manner as the primary
commercial general liability policy and must contain no exclusions in addition
to, or limitations materially different than, those of the primary policy.
13.6 Legal Requirements re: Workers' Compensation Insurance. In
addition to the insurance described above, Lessee shall at all times comply with
all Legal Requirements with respect to worker's compensation insurance coverage.
13.7 No Liability; Waiver of Subrogation. Lessor shall have no
liability to Lessee, and, provided Lessee provides the insurance required of it
by this Lease, Lessee shall have no liability
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to Lessor (except as provided in Section 21.1), regardless of the cause, for any
loss or expense resulting from or in connection with any insured matter, and
neither party will have any right or claim against the other for any such loss
or expense by way of subrogation. Each insurance policy carried by either party
pursuant to this Lease, including without limitation, contents, fire and
casualty insurance, shall contain an express waiver of any right of subrogation
on the part of the insurer against the other party. Lessee shall pay any
additional costs or charges for obtaining such waiver.
13.8 Increase in Limits. If from time to time Lessor determines, in the
exercise of its reasonable business judgment, that the limits of the personal
injury or property damage - public liability insurance then being carried are
insufficient, upon Notice from Lessor Lessee shall cause such limits to be
increased to the level specified in such Notice until further increase pursuant
to the provisions of this Section.
13.9 Blanket Policy. Any insurance required by this Lease may be
provided by so-called blanket policies of insurance carried by Lessee, provided,
however, that the coverage afforded Lessor thereby may not thereby be less than
or materially different from that which would be provided by separate policies
meeting the requirements of this Lease.
13.10 No Separate Insurance.
13.10.1 Lessee shall not on its own initiative or pursuant to
the request or requirement of any third party, take out separate insurance
concurrent in form or contributing in the event of loss with that required by
this Lease, to be furnished by, or which may reasonably be required to be
furnished by, Lessee, or increase the amount of any then existing insurance by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including in all
cases Lessor and all Facility Mortgagees, are named therein as additional
insureds, and losses are payable thereunder in the same manner as losses are
payable under this Lease.
13.10.2 Nothing herein shall prohibit Lessee, upon Notice to
Lessor, from (i) securing insurance required to be carried hereby with higher
limits of liability than required in this Lease, or (ii) securing insurance
against risks not required to be insured pursuant to this Lease, and as to such
insurance, Lessor and any Facility Mortgagee need not be included therein as
additional insureds, nor must losses thereunder be payable in the same manner as
losses are payable under this Lease, except to the extent required to avoid a
default under a Facility Mortgage or any other encumbrance.
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ARTICLE XIV
14.1 Insurance Proceeds. Net Proceeds shall be paid to Lessor and held,
disbursed or retained by Lessor as provided herein.
14.1.1 Proceeds of Special Risk Insurance. If the Net Proceeds
are less than the Approval Threshold, and no Event of Default has
occurred and is continuing, Lessor shall pay the Net Proceeds to Lessee
promptly for Lessee's use in Lessee's completion of the restoration of
the damaged or destroyed Leased Property. If the Net Proceeds equal or
exceed the Approval Threshold, and no Event of Default has occurred and
is continuing, the Net Proceeds shall be made available for restoration
or repair as provided in Section 14.6. Within fifteen (15) days of the
receipt of the Net Proceeds of Special Risk Insurance, Lessor and
Lessee shall agree as to the portion thereof, if any, attributable to
the Lessee's Personal Property that Lessee is not required and does not
elect to restore or replace, and if they cannot agree they shall submit
the matter to arbitration pursuant to Article XXXV hereof, and the
portion of the proceeds of such Special Risk Insurance agreed or
determined by arbitration to be attributable to the Lessee's Personal
Property that Lessee is not required and does not elect to restore or
replace shall be paid to Lessee.
14.2 Restoration in the Event of Damage or Destruction. If all or any
portion of a Leased Property is damaged by fire or other casualty, Lessee shall
(a) give Lessor Notice of such damage or destruction within five (5) Business
Days of the occurrence thereof, (b) within thirty (30) Business Days of the
occurrence commence the process of restoring such Leased Property and (c)
thereafter diligently proceed to complete such restoration to substantially the
same (or better) condition as such Leased Property was in immediately prior to
the damage or destruction as quickly as is reasonably possible, but in any
event, absent Force Majeure or any delays caused by Lessor's failure to remit
Net Proceeds to Lessee as required herein, within two hundred forty (240) days
of the occurrence. Regardless of the anticipated cost thereof, if the
restoration of a Leased Property requires any modification of structural
elements, prior to commencing such modification Lessee shall obtain Lessor's
written approval of the plans and specifications therefor, which approval may be
withheld in Lessor's sole discretion if such modification materially changes the
usable area or interior or exterior wall configuration of any building that is
part of the Leased Property, or reduces the load bearing capacity of any floor
in any such building, but which approval otherwise shall not be unreasonably
withheld, delayed or conditioned.
14.3 Restoration of Lessee's Property. If Lessee is required to restore
a Leased Property, Lessee shall also concurrently restore any of Lessee's
Personal Property that is integral to the Primary Intended Use of such Leased
Property at the time of the damage or destruction.
14.4 No Abatement of Rent. Absent termination of this Lease as provided
herein, there shall be no abatement of Rent by reason of any damage to or the
partial or total destruction of any Leased Property.
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14.5. Waiver. Except as provided elsewhere in this Lease, Lessee hereby
waives any statutory or common law rights of termination which may arise by
reason of any damage to or destruction of a Leased Property.
14.6. Disbursement of Insurance Proceeds Equal to or Greater Than The
Approval Threshold. If Lessee restores or repairs a Leased Property pursuant to
this Article XIV, and if the Net Proceeds equal or exceed the Approval
Threshold, the restoration or repair and disbursement of funds to Lessee shall
be in accordance with the following procedures:
(i) The restoration or repair work shall be done pursuant to
plans and specifications approved by Lessor, which approval may be
withheld in Lessor's sole discretion if such plans and specifications
would result in material changes to the usable area or interior or
exterior wall configuration of any building that is part of the Leased
Property, or would reduce the load bearing capacity of any floor in any
such building, but which approval otherwise shall not be unreasonably
withheld, delayed or conditioned, and a certified construction cost
statement, to be obtained by Lessee from a contractor reasonably
acceptable to Lessor, showing the total cost of the restoration or
repair; to the extent the cost as so certified exceeds the Net
Proceeds, prior to the commencement of the restoration and repair work
(except for such emergency repair work as may be required immediately
following the casualty), Lessee shall provide Lessor with assurance of
its ability to pay such excess costs as and when required during the
restoration and repair work, such assurance to be in the form of an
unconditional letter of credit delivered to Lessor or a deposit of cash
or the equivalent with Lessor or, at Lessee's request, in escrow with a
title insurance company acceptable to Lessor and Lessee, such deposit
to be disbursed by Lessor or such escrow agent pari passu with the
disbursement of Net Proceeds by Lessor in payment of the costs of
restoration or repair.
(ii) Construction Funds shall be made available to Lessee upon
request, no more frequently than monthly, as the restoration and repair
work progresses, subject to a ten (10%) percent holdback, pursuant to
certificates of an architect selected by Lessee that, in the judgment
of Lessor, reasonably exercised, is highly qualified in the design and
construction of the type of Facility being repaired , which
certificates must be in form and substance reasonably acceptable to
Lessor.
(iii) After the first disbursement to Lessee, sworn statements
and lien waivers in an amount at least equal to the amount of
Construction Funds previously paid to Lessee shall be delivered to
Lessor from all contractors, subcontractors and material suppliers
covering all labor and materials furnished through the date of the
previous disbursement.
(iv) Lessee shall deliver to Lessor such other evidence as
Lessor may reasonably request from time to time during the course of
the restoration and repair, as to the progress of the work, compliance
with the approved plans and specifications, the cost of restoration and
repair and the total amount needed to complete the restoration and
repair, and showing
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that there are no liens against such Leased Property arising in
connection with the restoration and repair and that the cost of the
restoration and repair at least equals the total amount of Construction
Funds then disbursed to Lessee hereunder.
(v) If the Construction Funds are at any time determined by
Lessor to be inadequate for payment in full of all labor and materials
for the restoration and repair, Lessee shall immediately increase the
amount of the letter of credit delivered to Lessor pursuant to
subsection 14.6 (i) hereof, if any, or pay the amount of the deficiency
to Lessor or the escrow agent appointed pursuant to subsection 14.6 (i)
hereof, to be held and disbursed as Construction Funds pari passu with
the disbursement of any other Construction Funds then held by Lessor
and such escrow agent.
(vi) The Construction Funds may be disbursed by Lessor to
Lessee or to the persons entitled to receive payment thereof from
Lessee, and such disbursement in either case may be made directly or
through a third party escrow agent, such as, but not limited to, a
title insurance company, or its agent, all as Lessor may determine in
its sole discretion. Provided Lessee is not in default hereunder, any
excess Construction Funds shall be paid to Lessee upon completion of
the restoration or repair.
(vii) If Lessee at any time fails to promptly and fully
perform the conditions and covenants set out in subparagraphs (i)
through (vi) above, and the failure is not corrected within ten (10)
days of written Notice thereof, or if during the restoration or repair
an Event of Default occurs hereunder, Lessor may, at its option,
immediately cease making any further payments to Lessee (and, if any
Construction Funds are being held by an escrow agent pursuant to
subsection 14.6(i) hereof, upon Lessor's direction such escrow agent
shall also cease making any further payments to Lessee) for the
restoration and repair.
(viii) Lessor may reimburse itself out of the Construction
Funds for its reasonable expenses incurred in administering the
Construction Funds and inspecting the restoration and repair work,
including without limitation attorneys' and other professional fees and
escrow fees and expenses.
14.7 Net Proceeds Paid to Facility Mortgagee. In the event of any
conflict between the terms of this Lease and any Facility Mortgage with respect
to the use or manner of disbursement of Net Proceeds , as between Lessor and
Lessee the terms of this Lease shall prevail and Lessor shall make available for
use and disbursement in accordance with this Lease an amount equal to any
portion of the Net Proceeds that pursuant to such Facility Mortgage is applied,
held, and/or disbursed in a manner or for a purpose other than as set forth
herein.
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ARTICLE XV
15.1 Total Taking or Other Taking with Leased Property Rendered
Unsuitable for Its Primary Intended Use. If title to the fee of the whole of a
Leased Property is Taken, this Lease shall cease and terminate as to the Leased
Property Taken as of the Date of Taking by the Condemnor and Rent shall be
apportioned as of the Date of Taking, provided, however, that if the Award to
Lessor is less than the Minimum Repurchase Price for such Leased Property at the
time of such Award, it shall be a condition precedent to the termination of this
Lease as to such Leased Property that Lessee pay the amount of the deficiency to
Lessor. If title to the fee of less than the whole of a Leased Property is
Taken, but such Leased Property is thereby rendered Unsuitable for Its Primary
Intended Use, Lessee and Lessor shall each have the option by written Notice to
the other, at any time prior to the taking of possession by, or the date of
vesting of title in, the Condemnor, whichever first occurs, to terminate this
Lease with respect to such Leased Property as of the such taking of possession
or vesting of title, in which event this Lease shall thereupon so cease and
terminate as of the earlier of the date specified in such Notice or the date on
which possession is taken by the Condemnor. If this Lease is so terminated as to
a Leased Property, the Base Rent for the Lease Year in which the Date of Taking
occurs shall be reduced as of the Date of Taking as set forth below, and Lessee
shall be deemed to have elected to purchase such Leased Property for the Minimum
Repurchase Price therefor. Lessee shall complete the purchase within ninety (90)
days of the Date of Taking, and Lessee shall receive credit against such Minimum
Repurchase Price for any portion of the Award received by Lessor. The Base Rent
for the Lease Year in which Lessee purchases the Leased Property as to which
this Lease is terminated shall be reduced by an amount equal to the product
obtained by multiplying (a) the Minimum Repurchase Price for such Leased
Property by (b) the quotient obtained by dividing the Base Rent for the then
current Lease Year by the aggregate Purchase Price (including Additional
Purchase Price, if any ) theretofore paid to the sellers pursuant to the
Purchase Agreement. Any such reduction in Base Rent shall be effective as of the
day following the date upon which Lessee pays the Minimum Repurchase Price to
Lessor, and for periods of less than a full Lease Year such decrease shall be
prorated on a daily basis and the monthly installments due during such Lease
Year after the date of such payment shall be reduced accordingly.
15.2 Allocation of Award. The total Award made with respect to all or
any portion of a Leased Property or for loss of Rent, or for loss of business,
shall be solely the property of and payable to Lessor, subject to Lessor's
obligation to disburse to Lessee in accordance with Section 15.2 hereof for the
restoration of such Leased Property such portion of the Award as may be made for
damage to the Leased Property upon a Partial Taking. Nothing contained in this
Lease will be deemed to create any additional interest in Lessee, or entitle
Lessee to any payment based on the value of the unexpired term or so-called
"bonus value" to Lessee of this Lease. Any Award made for the taking of Lessee's
Personal Property that is not integral to the Primary Intended Use of the
Facilities, or for removal and relocation expenses of Lessee in any such
proceedings shall be payable to Lessee. Any Award made for the taking of
Lessee's Personal Property that is integral to the Primary Intended Use of the
Facilities shall payable to Lessor. In any proceedings with respect to an Award,
Lessor and Lessee shall each seek its own Award in conformity herewith, at its
own
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expense. Notwithstanding the foregoing, Lessee may pursue a claim for loss of
its business, provided that under the laws of the State, such claim will not
diminish the Award to Lessor.
15.3 Partial Taking. In the event of a Partial Taking, Lessee, at its
own cost and expense, shall within sixty (60) days of the taking of possession
by, or the date of vesting of title in, the Condemnor, whichever first occurs ,
commence the restoration of the Leased Premises to a complete architectural unit
of the same general character and condition (as nearly as may be possible under
the circumstances) as existed immediately prior to the Partial Taking, and
complete such restoration with all reasonable dispatch, but in any event, absent
Force Majeure or any delays caused by Lessor's failure to remit Net Proceeds to
Lessee as required herein, within one hundred eighty (180) days of the date on
which such Notice is given. Lessor shall contribute to the cost of restoration
only such portion of the Award as is made therefor. As long as no Event of
Default has occurred and is continuing, regardless of the amount thereof Lessor
shall make such portion of the Award available to Lessee in the manner provided
in Section 14.6 with respect to Net Proceeds in excess of the Approval
Threshold. Notwithstanding anything to the contrary elsewhere herein, if the
Fair Market Rent of the affected Leased Property is reduced by reason of the
Partial Taking, from and after the date on which possession is taken by the
Condemnor the annualized Base Rent shall be reduced by an amount determined by
dividing the portion of the Award made to Lessor expressly for such reduction in
Fair Market Rent by the Capitalization Rate.
15.4 Temporary Taking. If there is a Taking of possession or the use of
all or part of a Leased Property, but the fee of such Leased Property is not
Taken in whole or in part, until such Taking of possession or use continues for
more than six (6) months, all the provisions of this Lease shall remain in full
force and effect and the entire amount of any Award made for such Taking shall
be paid to Lessee provided there is then no Event of Default. Upon the
termination of any such period of temporary use or occupancy, Lessee at its sole
cost and expense shall restore the affected Leased Property, as nearly as may be
reasonably possible, to the condition existing immediately prior to such Taking.
If any temporary Taking continues for longer than six (6) months, and fifty
percent (50%) or more of the resident capacity of the affected Facility is
thereby rendered Unsuitable for its Primary Intended Use, this Lease shall cease
and terminate as to the affected Leased Property as of the last day of the sixth
(6th) month, but if less than fifty percent (50%) of the resident capacity of
such Facility is thereby rendered Unsuitable for its Primary Intended Use,
Lessee and Lessor shall each have the option by at least sixty (60) day's prior
written Notice to the other, at any time prior to the end of the temporary
taking, to terminate this Lease as to the affected Leased Property on the date
set forth in such Notice, and Lessee shall be entitled to any Award made for the
period of such temporary Taking prior to the date of termination of the Lease.
Rent shall not abate during the period of any temporary Taking.
15.5 Awards Paid to Facility Mortgagee. Notwithstanding anything herein
to the contrary, if pursuant to the terms of any Facility Mortgage the Award is
applied to the indebtedness secured by the Facility Mortgage: (i) if the Award
represents an Award for Partial Taking as described in Section 15.3 above,
Lessor shall make available to Lessee for its restoration of the affected
Facility an amount equal to the portion of the Award that would have been
payable to Lessee by Lessor for
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such purpose under Section 15.3; or (ii) if the Award represents an Award for a
Total Taking as described in Section 15.1 above, Lessee shall pay to Lessor an
amount equal to the Minimum Repurchase Price minus a credit for the portion of
the Award applied to the Facility Mortgage and any portion of the Award received
by Lessor and not paid over to Lessee, and Lessor shall transfer its interest in
the affected Leased Property to Lessee.
ARTICLE XVI
16.1 Lessor's Rights Upon an Event of Default. If an Event of Default
shall occur Lessor may terminate this Lease by giving Lessee a Notice of
Termination, and in such event, the Term shall end and all rights of Lessee
under this Lease shall cease on the Termination Date. The Notice of Termination
shall be in lieu of and not in addition to any notice required by the laws of
any State as a condition to bringing an action for possession of the Leased
Premises or to recover damages under this Lease. In addition to Lessor's right
to terminate this Lease, Lessor shall have all other rights set forth in this
Lease and all remedies available at law and in equity.
Lessee shall, to the extent permitted by law, pay as
Additional Charges all costs and expenses incurred by or on behalf of Lessor,
including, without limitation, reasonable attorneys' fees and expenses (whether
or not litigation is commenced, and if litigation is commenced, including fees
and expenses incurred in appeals and post-judgment proceedings) as a result of
any default of Lessee hereunder.
No Event of Default (other than a failure to make payment of
money) shall be deemed to exist if and for so long as Lessee is unable to
prevent such Event of Default because of Force Majeure, provided that upon the
cessation of such Force Majeure, Lessee shall forthwith proceed to remedy the
action or condition giving rise to such Event of Default within the applicable
cure period as extended by such Force Majeure.
16.2 Certain Remedies. If an Event of Default shall occur, whether or
not this Lease has been terminated pursuant to Section 16.1, if required to do
so by Lessor Lessee shall immediately surrender to Lessor the Leased Properties
to Lessor in the condition required by Section 9.1.5 and quit the same, and
Lessor may enter upon and repossess the Leased Properties by reasonable force,
summary proceedings, ejectment or otherwise, and may remove Lessee and all other
persons and any and all personal properties from the Leased Properties, subject
to rights of any residents or patients and to any Legal Requirements. In
addition to all other remedies set forth or referred to in this Article XVI,
Lessor shall have the right to suspend any Management Agreement as to one or
more or all Facilities and to retain a manager of the affected Facility or all
Facilities at the expense of Lessee, such manager to serve for such term and at
such compensation as Lessor reasonably determines is necessary under the
circumstances.
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16.3 Damages. Neither (i) the termination of this Lease pursuant to
Section 16.1, (ii) the repossession of the Leased Properties, (iii) the failure
of Lessor to relet the Leased Properties, (iv) the reletting of all or any
portion thereof, nor (v) the failure of Lessor to collect or receive any rentals
due upon such any reletting, shall relieve Lessee of its liability and
obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In the event this Lease is terminated by Lessor,
Lessee shall forthwith pay to Lessor all Rent due and payable with respect to
the Leased Properties to and including the Termination Date, including without
limitation all interest and late charges payable under Section 3.3 hereof with
respect to any late payment of such Rent. Lessee shall also pay to Lessor, as
liquidated damages, at Lessor's option, either:
(A) The sum of:
(i) Lessor's Interim Rent Loss, minus Net Reletting Proceeds
for such period, and minus the portion of Lessor's Interim
Rent Loss, if any, that Lessee prove could reasonably have
been mitigated by Lessor, plus
(ii) the Present Value on the Judgment Date of Lessor's Future
Rent Loss, assuming Gross Revenues were to increase four
percent (4%) per Lease Year and the Cost of Living Index were
to increase four (4) percentage points per Lease Year from the
Judgment Date through the Expiration Date, minus the Present
Value on the Termination Date of the portion of Lessor's
Future Rent Loss that Lessee proves could reasonably be
mitigated by Lessor;
or
(B) Each month between the Termination Date and the Expiration Date,
Lessor's Monthly Rent Loss, minus the Net Reletting Proceeds for such
month, and minus the portion, if any, of Lessor's Monthly Rent Loss
that Lessee proves could reasonably have been avoided. Any suit brought
to recover liquidated damages payable under this subsection "(B)" shall
not prejudice Lessor's right to collect liquidated damages for
subsequent months in a similar proceeding.
[16.4 INTENTIONALLY OMITTED]
16.5 Waiver. If this Lease is terminated pursuant to Section 16.1,
Lessee waives, to the extent permitted by applicable law, (i) any right of
reentry, repossession or redesignation, (ii) any right to a trial by jury in the
event of summary proceedings to enforce the remedies set forth in this Article
XVI, and (iii) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt. Acceptance of Rent at any time
does not prejudice or remove any right of Lessor as to any right or remedy. No
course of conduct shall be held to bar Lessor from literal enforcement of the
terms of this Lease.
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16.6 Application of Funds. Any payments received by Lessor under any of
the provisions of this Lease during the existence or continuance of any Event of
Default shall be applied to Lessee's obligations in the order which Lessor may
determine or as may be prescribed by law.
16.7 Bankruptcy.
(a) Neither Lessee's interest in this Lease, nor any estate hereby
created in Lessee's interest nor any interest herein or
therein, shall pass to any trustee or receiver or assignee for
the benefit of creditors or otherwise by operation of law,
except as may specifically be provided pursuant to the
Bankruptcy Code (11 USC Section 101 et. seq.), as the same may
be amended from time to time.
(b) Rights and Obligations Under the Bankruptcy Code.
(1) Upon filing of a petition by or against Lessee under
the Bankruptcy Code, Lessee, as debtor and as
debtor-in-possession, and any trustee who may be
appointed with respect to the assets of or estate in
bankruptcy of Lessee, agree to pay monthly in advance
on the first day of each month, as reasonable
compensation for the use and occupancy of the Leased
Premises, an amount equal to all Rent due pursuant to
this Lease.
(2) Included within and in addition to any other
conditions or obligations imposed upon Lessee or its
successor in the event of the assumption and/or
assignment of the Lease in connection with any
bankruptcy proceeding are the following: (i) the cure
of any monetary defaults and reimbursement of
pecuniary loss within not more than thirty (30) days
of assumption and/or assignment; (ii) the deposit of
an additional amount equal to not less than three (3)
months' Base Rent, which amount is agreed to be a
necessary and appropriate deposit to secure the
future performance under the Lease of Lessee or its
assignee; and (iii) the continued use of the Leased
Premises for the Primary Intended Use.
ARTICLE XVII
17.1 Lessor's Right to Cure Lessee's Default. If Lessee fails to make
any payment or perform any act required to be made or performed under this
Lease, and fails to cure the same within any grace or cure period applicable
thereto, upon such Notice as may be expressly required herein (or, if Lessor
reasonably determines that the giving of such Notice would risk loss to the
Leased Properties or cause damage to Lessor, upon such Notice as is practical
under the circumstances), and without waiving or releasing any obligation of
Lessee, Lessor may make such payment or perform such act for the account and at
the expense of Lessee, and may, to the extent permitted by law, enter upon the
Leased Properties for such purpose and take all such action thereon as, in
Lessor's sole
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opinion, may be necessary or appropriate. No such entry shall be deemed an
eviction of Lessee. All amounts so paid by Lessor and all costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) so
incurred, together with the late charge and interest provided for in Section 3.3
thereon, shall be paid by Lessee to Lessor on demand. The obligations of Lessee
and rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Lease.
ARTICLE XVIII
18.1 Holding Over. If Lessee remains in possession of all or any of the
Leased Properties after the expiration of the Term or earlier termination of
this Lease, such possession shall be as a month-to-month tenant, and throughout
the period of such possession Lessee shall pay as Rent for each month one and
one-half (1.5) times the sum of: (i) one-twelfth (1/12th) of the Base Rent
payable during the Lease Year in which such expiration or termination occurs,
plus (ii) all Additional Charges accruing during the month, plus (iii) any and
all other sums payable by Lessee pursuant to this Lease. During such period of
month-to-month tenancy, 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 applicable law to
month-to-month tenancies, to continue its occupancy and use of the Leased
Properties until the month-to-month tenancy is terminated. Nothing contained
herein shall constitute the consent, express or implied, of Lessor to the
holding over of Lessee after the expiration or earlier termination of this
Lease.
18.2 Indemnity. If Lessee fails to surrender the Leased Properties in a
timely manner and in accordance with the provisions of Section 9.1.5 upon the
expiration or termination of this Lease, in addition to any other liabilities
that Lessee may have to Lessor accruing therefrom, Lessee shall defend,
indemnify and hold Lessor, its principals, officers, directors, agents and
employees harmless from loss or liability resulting from such failure,
including, without limiting the generality of the foregoing, loss of rental with
respect to any new lease in which the rental payable thereunder exceeds the Rent
paid by Lessee pursuant to this Lease during Lessee's hold-over and any claims
by any proposed new tenant founded on such failure. The provisions of this
Section 18.2 shall survive the expiration or termination of this Lease.
ARTICLE XIX
19.1 Subordination. Subject to and conditioned upon Lessee's receipt of
a "Non-Disturbance Agreement" complying with the requirements of the next
sentence of this Section 19.1, Lessee shall, upon written request of Lessor, any
Facility Mortgagee, or the beneficiary of any deed of trust of Lessor, enter
into a written agreement subordinating its rights pursuant to this Lease (i) to
the lien of any mortgage, deed of trust or the interest of any lease in which
Lessor is the lessee and to all modifications, extensions, substitutions thereof
(or, at Lessor's option, agree to the subordination to this Lease of the lien of
said mortgage, deed of trust or the interest of any lease in which Lessor is the
lessee), and (ii) to all advances made or hereafter to be made thereunder. In
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connection with any such request, Lessor shall provide Lessee with a
Non-Disturbance Agreement providing that if such mortgagee, beneficiary or
lessor , or any other successful bidder at any foreclosure sale, acquires the
Leased Properties by way of foreclosure or deed in lieu of foreclosure, such
mortgagee, beneficiary or lessor will not disturb Lessee's possession under this
Lease and will recognize Lessee's rights hereunder if and for so long as no
Event of Default has occurred and is continuing, and further acknowledging that
the provisions of this Lease relating to Lessee's right to insurance proceeds
and the proceeds of any Taking shall control over any conflicting provisions of
such mortgage, deed of trust or lease.
19.2 Attornment. If any proceedings are brought for foreclosure, or if
the power of sale is exercised under any mortgage or deed of trust made by
Lessor encumbering the Leased Properties, or if a lease in which Lessor is the
lessee is terminated, Lessee shall attorn to the purchaser or lessor under such
lease upon any foreclosure or deed in lieu thereof, sale or lease termination
and recognize the purchaser or lessor as Lessor under this Lease, provided the
purchaser or lessor acquires and accepts the Leased Properties subject to this
Lease.
19.3 Lessee's Certificate. Lessee shall, upon not less than ten (10)
days prior Notice from Lessor, execute, acknowledge and deliver to Lessor
Lessee's Certificate containing then-current facts. It is intended that any
Lessee's Certificate delivered pursuant hereto may be relied upon by Lessor, any
prospective tenant or purchaser of the Leased Properties, any mortgagee or
prospective mortgagee, and by any other party who may reasonably rely on such
statement. Lessee's failure to deliver the Lessee's Certificate within such time
shall constitute an Event of Default, provided that Lessor has given Lessee
Notice of such failure and Lessee has failed to cure it within five (5) days
after such Notice. In addition, if Lessee fails to deliver the Lessee's
Certificate to Lessor within the period set forth in the immediately preceding
sentence of this Section, Lessee hereby authorizes Lessor to execute and deliver
a certificate to the effect (if true) that Lessee represents and warrants that
(i) this Lease is in full force and effect without modification, and (ii) Lessor
is not in breach or default of any of its obligations under this Lease.
ARTICLE XX
20.1 Risk of Loss. During the Term, the risk of loss or of decrease in
the enjoyment and beneficial use of the Leased Properties in consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than those caused by Lessor and those claiming from, through
or under Lessor) is assumed by Lessee, and, in the absence of gross negligence,
willful misconduct or material breach of this Lease by Lessor, Lessor shall in
no event be answerable or accountable therefor nor shall any of the events
mentioned in this Section entitle Lessee to any abatement of Rent.
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ARTICLE XXI
21.1 Indemnification. Notwithstanding the existence of any insurance or
self-insurance provided for in Article XIII, and without regard to the policy
limits of any such insurance or self-insurance, Lessee shall protect, indemnify,
save harmless and defend Lessor, its principals, officers, directors and agents
and employees from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses), to the extent permitted by law,
imposed upon or incurred by or asserted against Lessor by reason of: (i) any
accident, injury to or death of persons or loss of or damage to property
occurring on or about the Leased Properties or adjoining sidewalks, including
without limitation any claims of malpractice, (ii) any use, misuse, non-use,
condition, maintenance or repair by Lessee of the Leased Properties, (iii) the
failure to pay any Impositions, (iv) any failure on the part of Lessee to
perform or comply with any of the terms of this Lease, and (v) the
nonperformance of any contractual obligation, express or implied, assumed or
undertaken by Lessee or any party in privity with Lessee with respect to the
Leased Properties or any business or other activity carried on with respect to
the Leased Properties during the Term or thereafter during any time in which
Lessee or any such other party is in possession of the Leased Properties or
thereafter to the extent that any conduct by Lessee or any such person (or
failure of such conduct thereby if the same should have been undertaken during
such time of possession and leads to such damage or loss) causes such loss or
claim. Any amounts which become payable by Lessee under this Section shall be
paid within ten (10) days after liability therefor on the part of Lessee is
determined by litigation or otherwise, and if not timely paid, shall bear
interest (to the extent permitted by law) at the Overdue Rate from the date of
such determination to the date of payment. Nothing herein shall be construed as
indemnifying Lessor against its own grossly negligent acts or omissions or
willful misconduct.
Lessee's liability under this Article shall survive the expiration or
any earlier termination of this Lease.
ARTICLE XXII
22.1 General Prohibition against Transfers. Lessee acknowledges that a
significant inducement to Lessor to enter into this Lease with Lessee on the
terms set forth herein is the combination of financial strength, experience,
skill and reputation possessed by the Lessee named herein, the Person or Persons
in Control of Lessee, the Guarantor and the Manager of the Facilities on the
Commencement Date, together with Lessee's assurance that Lessor shall have the
unrestricted right to approve or disapprove any proposed Transfer. Therefore,
there shall be no Transfer except as specifically permitted by this Lease or
consented to in advance by Lessor in writing. Lessee agrees that Lessor shall
have the right to withhold its consent to any proposed Transfer on the basis of
Lessor's judgment as to the effect the proposed Transfer may have on the
Facilities and the future performance of the obligations of the Lessee under
this Lease, whether or not Lessee agrees with such judgment. Any attempted
Transfer which is not specifically permitted by this Lease or
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consented to by Lessor in advance in writing shall be null and void and of no
force and effect whatsoever. In the event of a Transfer, Lessor may collect Rent
and other charges from the assignee, subtenant or other occupant or transferee
(any and all of which are herein referred to as a "Transferee") and apply the
amounts collected to the Rent and other charges herein reserved, but no Transfer
or collection of Rent and other charges shall be deemed to be a waiver of
Lessor's rights to enforce Lessee's covenants or an acceptance of the Transferee
as Lessee, or a release of the Lessee named herein from the performance of its
covenants. Notwithstanding any Transfer, Lessee and each Guarantor of this Lease
shall remain fully liable for the performance of all terms, covenants and
provisions of this Lease. Any violation of this Lease by any Transferee shall be
deemed to be a violation of this Lease by Lessee.
22.2 Consent to Certain Transfers. Lessor acknowledges that Lessee, as
sublessor, intends to enter into subleases with the parties identified on
Schedule 22.2 hereto, as sublessees, with respect to the Facilities identified
on such Schedule. Lessor consents to such subleases provided that all such
sublease agreements satisfy all of the requirements set forth in this Lease and
otherwise are satisfactory in form and substance to Lessor. The conditions set
forth in the immediately preceding sentence shall be deemed satisfied as to any
sublease with respect to which Lessor has executed and delivered a Consent and
Non-Disturbance Agreement in substantially the form of EXHIBIT F attached
hereto.
22.3 Termination of Previously Existing Lease Agreements, etc. Lessee
represents and warrants to Lessor that any and all written or oral lease
agreements and arrangements (however evidenced or denominated) existing prior to
the date of this Lease between a seller, identified as such in the Purchase
Agreement, and a party listed in Schedule 22.2 hereto, pursuant to which a party
listed in Schedule 22.2 hereto had any right (whether as owner, lessee or
otherwise) in a Leased Property or any portion thereof (or had any right to
acquire any such right in a Leased Property or any portion thereof), have been
duly terminated and are null and void and of no further force and effect. Lessee
further represents and warrants to Lessor that the only agreements, arrangements
and understandings between Lessee and a party listed in Schedule 22.2 hereto
relating to the Leased Property are set forth in subleases with respect to which
Lessor has executed and delivered a Consent and Non-Disturbance Agreement in
substantially the form of EXHIBIT F attached hereto.
22.4 Subordination and Attornment. Lessee shall insert in any sublease
permitted by Lessor provisions to the effect that (i) such sublease is subject
and subordinate to all of the terms and provisions of this Lease and to the
rights of Lessor hereunder, (ii) if this Lease terminates before the expiration
or earlier termination of such sublease, the sublessee thereunder will attorn to
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 (iii) if the sublessee receives a written Notice from Lessor or Lessor's
assignee, if any, stating that Lessee is in default under this Lease, the
sublessee shall thereafter be obligated to pay all rentals accruing under the
sublease directly to the party giving such Notice, or as such party may direct,
which payments shall be credited against the amounts owing by Lessee under this
Lease.
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22.5 Sublease Limitation. Anything contained in this Lease to the
contrary notwithstanding, even if a sublease of a Leased Property is permitted,
Lessee shall not sublet such Leased Property on any basis such that the rental
to be paid by the sublessee thereunder would be based, in whole or in part, on
either (i) the income or profits derived by the business activities of the
sublessee, or (ii) any other formula such that any portion of the sublease
rental received by Lessor would fail to qualify as "rents from real property"
within the meaning of Section 856(d) of the Code, or any similar or successor
provision thereto. The parties agree that this paragraph shall not be deemed
waived or modified by implication, but may be waived or modified only by an
instrument in writing explicitly referring to this paragraph by number.
ARTICLE XXIII
23.1 Officer's Certificates and Financial Statements. Lessee shall
furnish (and as appropriate cause Guarantor to furnish) to Lessor:
(i) Within ninety (90) days after the end of each of Lessee's
fiscal years: (a) Lessee's Financial Statement; (b) a consolidated
profit and loss statement for the Facilities, which shall be prepared
on the basis of accounting consistent with that of Guarantor; and (c)
an Officer's Certificate stating that Lessee is not in default in the
performance or observance of any of the terms of this Lease, or if
Lessee is in default, specifying all such defaults, the nature thereof,
and the steps being taken to remedy the same;
(ii) Within forty-five (45) days after the end of each of
Guarantor's fiscal quarters, a copy of Guarantor's Report on Form 10-Q
for the preceding fiscal quarter, in the form required to be filed with
the SEC, together with an Officer's Certificate that Lessee is not in
default of any covenant set forth in Section 8 of this Lease, or if
Lessee is in default, specifying all such defaults, the nature thereof,
and the steps being taken to remedy the same;
(iii) Within ninety (90) days after the end of each of
Guarantor's fiscal years, Guarantor's Financial Statement for such
fiscal year.
(iv) Within thirty (30) days after the end of each month,
monthly financial reports for each Facility with detailed statements of
income and expense (actual and as compared to budget), and detailed
operational statistics regarding occupancy rates for the Facility;
(v) Within fifteen (15) days of filing a copy of each cost
report filed with a governmental agency for any Facility;
(vi) Within ten (10) days after they are required to be filed
with the SEC, copies of any annual or quarterly report and of
information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe)
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which Lessee or any Guarantor are required to file with the SEC
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934;
(vii) Within thirty (30) days of Lessee's or Manager's receipt
thereof, copies of surveys performed by the appropriate governmental
agencies for licensing or certification purposes, and any plan of
correction as approved by a State for a Facility;
(viii) Immediate Notice to Lessor of any action, proposal or
investigation by any agency or entity, or complaint to such agency or
entity, known to Lessee, the result of which could be to (i) modify in
a way adverse to Lessee or revoke or suspend or terminate, or fail to
renew or fully continue in effect, any license or certificate or
operating authority pursuant to which Lessee carries on any part of the
Primary Intended Use of the Facilities, or (ii) suspend, terminate,
adversely modify, or fail to renew or fully continue in effect any cost
reimbursement or cost sharing program by any state or federal
governmental agency, including but not limited to Medicaid or Medicare
or any successor or substitute therefor, or seek return of or
reimbursement for any funds previously advanced or paid pursuant to any
such program but only if Lessee participates in such programs), or
(iii) impose any bed hold, limitation on resident admission or similar
restriction on any Leased Property, or (iv) prosecute any party with
respect to the operation of any activity on the Facilities or enjoin
any party or seek any civil penalty in excess of One Thousand Dollars
($1,000.00) in respect thereof;
(ix) As soon as it is prepared in each Lease Year, a capital
and operating budget for the Facilities for that and the following
Lease Year;
(x) With reasonable promptness, such other information
respecting the financial condition and affairs of Lessee, Guarantor and
the Facilities as Lessor may reasonably request from time to time
including, without limitation, any such other information as may be
available to the administration of the Leased Properties; and
(xi) Upon Lessor's request from time to time, such additional
information and unaudited quarterly financial information concerning
the Leased Properties and Lessee as Lessor may require for its on-going
filings with the Securities and Exchange Commission, under both the
Securities Act of 1933, as amended and the Securities Exchange Act of
1934, as amended, including, but not limited to 10-Q Quarterly Reports,
10-K Annual Reports and registration statements to be filed by Lessor
during the Term of this Lease.
(xii) The worksheets of Lessee and Guarantor (including
worksheets furnished by or on behalf of Lessee or Guarantor to its
accountants in connection with the preparation of the Financial
Statements), but only after the occurrence of an Event of Default and
following written request by Lessor.
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23.2 Public Offering Information. Lessee specifically agrees that
Lessor may include financial information and information concerning the
operation of the Facilities that does not violate the confidentiality of the
facility-resident relationship and the physician-resident privilege under
applicable laws, in offering memoranda or prospectuses, or similar publications
in connection with syndications or public offerings of Lessor's securities or
interests, and any other reporting requirements under applicable federal and
state laws, including those of any successor to Lessor. Lessee agrees to provide
such other reasonable information necessary with respect to Lessee and the
Leased Properties to facilitate a public offering or to satisfy SEC or
regulatory disclosure requirements. Upon request of Lessor, Lessee shall notify
Lessor of any necessary corrections to information Lessor proposes to publish
within a reasonable period of time (not to exceed three (3) Business Days) after
being informed thereof by Lessor.
ARTICLE XXIV
24.1 Lessor's Right to Inspect. Lessee shall permit Lessor and its
authorized representatives to inspect the Leased Properties and Lessee's books
and records pertaining thereto during normal business hours at any time upon not
less than 24 hours' Notice (except in the case of a bona fide emergency, in
which no advance Notice shall be required).
ARTICLE XXV
25.1 No Waiver. No failure by Lessor to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach hereof, and no acceptance of full or partial payment of
Rent during the continuance of any such breach, shall constitute a waiver of any
such breach or of any such term. No waiver of any breach shall affect or alter
this Lease, which shall continue in full force and effect with respect to any
other then existing or subsequent breach.
ARTICLE XXVI
26.1 Remedies Cumulative. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of Lessor now or hereafter
provided either in this Lease or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power and remedy and
the exercise or beginning of the exercise by Lessor of any one or more of such
rights, powers and remedies shall not preclude the simultaneous or subsequent
exercise by Lessor of any or all of such other rights, powers and remedies.
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ARTICLE XXVII
27.1 Acceptance of Surrender. No surrender to Lessor of this Lease or
of the Leased Properties or any part thereof, or of any interest therein, shall
be valid or effective unless agreed to and accepted in writing by Lessor, and no
act by Lessor or any representative or agent of Lessor, other than such a
written acceptance by Lessor, shall constitute an acceptance of any such
surrender.
ARTICLE XXIII
28.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same person,
firm, corporation or other entity may acquire, own or hold, directly or
indirectly, (i) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate, and (ii) the fee estate in the
Leased Properties.
28.2 No Partnership. Nothing contained in this Lease will be deemed or
construed to create a partnership or joint venture between Lessor and Lessee or
to cause either party to be responsible in any way for the debts or obligations
of the other or any other party, it being the intention of the parties that the
only relationship hereunder is that of Lessor and Lessee.
ARTICLE XXIX
29.1 Conveyance by Lessor. If Lessor or any successor owner of the
Leased Properties conveys the Leased Properties other than as security for a
debt, Lessor or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of Lessor under this Lease
arising or accruing from and after the date of such conveyance or other transfer
and all such future liabilities and obligations shall thereupon be binding upon
the new owner.
ARTICLE XXX
30.1 Quiet Enjoyment. So long as Lessee pays all Rent as it becomes due
and complies with all of the terms of this Lease and performs its obligations
hereunder, Lessee shall peaceably and quietly have, hold and enjoy the Leased
Properties for the Term, free of any claim or other action by Lessor or anyone
claiming by, through or under Lessor, but subject to all other covenants,
conditions, restrictions, easements and other matters consented to by Lessee or
referred to in Section 1.1, whether now or hereafter existing or arising (other
than claims asserted by the holder(s) of any Facility Mortgage(s) or other
encumbrances now or hereafter placed on a Facility by Lessor and liens attaching
to a Facility as a result of Lessor's ownership of an interest therein). Except
as otherwise provided in this Lease, no failure by Lessor to comply with the
foregoing covenant will give Lessee any right to cancel or terminate this Lease
or abate, reduce or make a deduction from or offset against the Rent or any
other sum payable under this Lease, or to fail to perform any other obligation
of Lessee. Lessee shall, however, have the right, by separate and independent
action, to pursue any
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claim it may have against Lessor as a result of a breach by Lessor of the
covenant of quiet enjoyment contained in this Section.
ARTICLE XXXI
31.1 Notices. Any notice, request or other communication to be given by
any party hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid, by overnight deliver, hand delivery or
facsimile transmission to the following address:
TO LESSEE: AHC Properties, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attn: Mark W. Ohlendorf
Telephone No.: 414/641-5100
Facsimile No.: 414/789-6677
With copy to Rogers & Hardin
(which shall not 2700 International Tower
constitute notice): 229 Peachtree Street, N.W.
Atlanta, Georgia 30303
Attn: Miriam Dent
Telephone No.: 404/522-4700
Facsimile No.: 404/525-2224
TO LESSOR: Omega Healthcare Investors, Inc.
900 Victors Way, Suite 350
Ann Arbor, Michigan 48108
Attn.: F. Scott Kellman and
Susan Allene Kovach
Telephone No.: 734/887-0200
Facsimile No.: 734/887-0201
With copy to Dykema Gossett PLLC
(which shall not 1577 North Woodward Ave.
constitute notice): Bloomfield Hills, MI 48304-2820
Attn.: Fred J. Fechheimer, Esq.
Telephone No.: (248) 203-0743
Facsimile No.: (248) 203-0763
or to such other address as either party may hereafter designate. Notice shall
be deemed to have been given on the date of delivery if such delivery is made on
a Business Day, or if not, on the first Business Day after delivery. If delivery
is refused, Notice shall be deemed to have been given on the date delivery was
first attempted. Notice sent by facsimile transmission shall be deemed given
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upon confirmation that such Notice was received at the number specified above or
in a Notice to the sender.
ARTICLE XXXII
32.1 Appraisers. If it becomes necessary to determine Fair Market Value
or Fair Market Rent for any purpose under 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 such Notice, the party receiving such Notice shall give
Notice to the other party of its selection of a person to act as appraiser on
its behalf. The appraisers thus appointed, each of whom must be a member of the
Appraisal Institute (or any successor organization thereto) and experienced in
appraising facilities used for purposes similar to the Primary Intended Use of
the Facilities, shall, within forty-five (45) days after the date of the Notice
appointing the first appraiser, proceed to appraise the Leased Property or
Leased Properties, as the case may be, to determine the Fair Market Value or
Fair Market Rent thereof as of the relevant date (giving effect to the impact,
if any, of inflation between the date of their decision and the relevant date);
provided, however, that if only one appraiser has been so appointed, or if two
appraisers have been so appointed but only one such appraiser has made such
determination within fifty (50) days after the date of the Notice appointing the
first appraiser, then the determination of such appraiser shall be final and
binding upon the parties. To the extent consistent with sound appraisal practice
at the time of any such appraisal, such appraisal shall be made on a basis
consistent with the basis on which the Leased Property or Leased Properties were
appraised for purposes of determining its Fair Market Value at the time of
Lessor's acquisition thereof. If two appraisers have been appointed and have
made their determinations within the respective requisite periods set forth
above, and if the difference between the amounts so determined does not exceed
ten percent (10%) of the lesser of such amounts, then the Fair Market Value or
Fair Market Rent 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
exceeds ten percent (10%) of the lesser of such amounts, then such two
appraisers shall within twenty (20) days appoint a third appraiser. If no such
appraiser is appointed within such twenty (20) days or within ninety (90) days
of the date of the Notice appointing the first appraiser, whichever is earlier,
either Lessor or Lessee may apply to any court having jurisdiction to have such
appointment made by such court. Any appraiser appointed by the original
appraisers or by such court shall be instructed to determine the Fair Market
Value or Fair Market Rent within forty-five (45) 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 the average of the remaining two determinations shall be final and
binding upon Lessor and Lessee as the Fair Market Value or Fair Market Rent of
the Leased Property or Leased Properties, as the case may be. If the Fair Market
Rent is being determined for more than one year, the Fair Market Rent may
include such annual increases, if any, as the appraisers determine to be in
accordance with the terms of this Lease.
This provision for determining by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and
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binding upon the parties except as otherwise provided by applicable law, and
judgment may be entered upon such determination in a court of competent
jurisdiction. Lessor and 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 costs and expenses incurred in
connection with each appraisal.
ARTICLE XXXIII
33.1 Breach by Lessor. Lessor shall not be in breach of this Lease
unless Lessor fails to observe or perform any term, covenant or condition of
this Lease on its part to be performed and such failure continues for a period
of thirty (30) days after written Notice specifying such failure and the
necessary curative action is received by Lessor from Lessee. If the failure
cannot with due diligence be cured within a period of thirty (30) days, the
failure shall not be deemed to continue if Lessor, within said thirty (30) day
period, proceeds promptly and with due diligence to cure the failure and
diligently completes the curing thereof. The time within which Lessor shall be
obligated to cure any such failure shall also be subject to extension of time
due to Force Majeure.
ARTICLE XXXIV
34.1 Lessor's Option to Purchase Lessee's Personal Property. At the
expiration or termination of this Lease, Lessor shall have the option on the
terms hereinafter set forth to purchase any of Lessee's Personal Property that
is not deemed to have been sold, assigned, transferred and conveyed to Lessor
pursuant to Section 6.3 hereof, for an amount equal to the then fair market
value thereof, subject to, and with appropriate credits for, any obligations
owing from Lessee to Lessor and for the then outstanding balances owing on all
equipment leases, conditional sale contracts and any other encumbrances to which
such Lessee's Personal Property is subject. Lessor's option shall be exercised
by Notice to Lessee no more than one hundred eighty (180) days, nor less than
ninety (90) days, before the expiration of the Initial Term or, if the Term is
renewed as provided herein, before the expiration of the last Renewal Term,
unless this Lease is terminated prior to its expiration date by reason of an
Event of Default, in which event Lessor's option shall be exercised not more
than ninety (90) days after the date of termination. Lessor's option under this
Section 34.1 shall terminate if not timely exercised. If Lessor exercises its
option, Lessee shall, in exchange for Lessor's payment of the purchase price,
deliver the purchased Lessee's Personal Property to Lessor, together with a bill
of sale and such other documents as Lessor may reasonably request in order to
carry out the purchase, and the purchase shall be closed by such delivery and
such payment on the date set by Lessor in its Notice of exercise.
34.2 Transfer of Operational Control of the Facilities. Lessee shall
cooperate fully in transferring operational control of all of the Facilities
which are then subject to this Lease to Lessor or Lessor's nominee if the Term
expires without renewal or this Lease is terminated upon the occurrence of an
Event of Default or for any other reason, and Lessee shall use reasonable
efforts
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to cause the business conducted at all such Facilities to continue without
interruption. To that end, pending completion of the transfer of the operational
control of such Facilities to Lessor or its nominee:
(i) Lessee will not terminate the employment of any employees
without just cause, or change any salaries, provided, however, that
without the advance written consent of Lessor Lessee may grant
pre-announced wage increases of which Lessor has knowledge, increases
required by written employment agreements and normal raises to
non-officers at regular review dates; and Lessee will not hire any
additional employees except in good faith in the ordinary course of
business;
(ii) Lessee will provide all necessary information reasonably
requested by Lessor or its nominee for the preparation and filing of
any and all necessary applications or notifications of any federal or
state governmental authority having jurisdiction over a change in the
operational control of the Facilities, and any other information
reasonably required to effect an orderly transfer of the Facilities,
and Lessee will use reasonable efforts to cause all operating health
care licenses to be issued to Lessor or to Lessor's nominee;
(iii) Lessee shall use reasonable efforts to keep the business
and organization of the Facilities intact and to preserve for Lessor or
its nominee the goodwill of the suppliers, distributors, residents and
others having business relations with Lessee with respect to the
Facilities;
(iv) Lessee shall engage only in transactions or other
activities with respect to the Facilities which are in the ordinary
course of its business and shall perform all maintenance and repairs
reasonably necessary to keep the Facilities in satisfactory operating
condition and repair, and shall maintain the supplies and foodstuffs at
levels which are consistent and in compliance with all health care
regulations, and shall not sell or remove any personal property except
in the ordinary course of business and in accordance with the terms and
conditions of this Lease;
(v) Lessee shall provide Lessor or its nominee, within the
limits of applicable law, with full and complete information regarding
the employees of the Facilities and shall reimburse Lessor or its
nominee for all outstanding accrued employee benefits, including
accrued vacation, sick and holiday pay calculated on a true accrual
basis, including all earned and a prorated portion of all unearned
benefits, for all employees thereafter actually employed by Lessor or
its nominee or assignee;
(vi) Lessee shall use reasonable efforts to obtain the
acknowledgment and the consent of any creditor, lessor or sublessor,
mortgagee, beneficiary of a deed of trust or security agreement
affecting the real and personal properties of Lessee or any other party
whose acknowledgment and/or consent would be required because of a
change in the operational control of the Facilities and transfer of
personal property. The consent must be
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in form, scope and substance satisfactory to Lessor or its nominee,
including, without limitation, an acknowledgment in respect to all such
contracts, leases, deeds of trust, mortgage, security agreements, or
other agreements that Lessee and all predecessors or
successors-in-interest thereto are not in default in respect thereto,
that no condition known to the consenting party exists which with the
giving of notice or lapse of time would result in such a default, and,
if requested, affirmatively consenting to the change in the operational
control of the Facilities;
(vii) To more fully preserve and protect Lessor's rights under
this Section, Lessee does hereby make, constitute and appoint Lessor
its true and lawful attorney-in-fact, for it and in its name, place and
stead to execute and deliver all such instruments and documents, and to
do all such other acts and things, as Lessor may deem to be necessary
or desirable to protect and preserve the rights granted under this
Section, including, without limitation, the preparation, execution and
filing with the Board of Health (or similar agency) of each State OF
any and all required "Letters of Responsibility" or similar documents.
Lessee hereby grants to Lessor the full power and authority to appoint
one or more substitutes to perform any of the acts that Lessor is
authorized to perform under this Section, with a right to revoke such
appointment of substitution at Lessor's pleasure. The power of attorney
granted pursuant to this Section is coupled with an interest and
therefore is irrevocable. Any person dealing with Lessor may rely upon
the representation of Lessor relating to any authority granted by this
power of attorney, including the intended scope of the authority, and
may accept the written certificate of Lessor that this power of
attorney is in full force and effect. Photographic or other facsimile
reproductions of this executed Lease may be made and delivered by
Lessor, and may be relied upon by any person to the same extent as
though the copy were an original. Anyone who acts in reliance upon any
representation or certificate of Lessor, or upon a reproduction of this
Lease, shall not be liable for permitting Lessor to perform any act
pursuant to this power of attorney. Notwithstanding the foregoing,
Lessor covenants with Lessee that Lessor shall refrain from exercising
the power of attorney granted hereby except in the case of an Event of
Default hereunder or in the event of a default, which, in Lessor's
reasonable judgment, may lead to the suspension or revocation of any
license of Lessee or of any sublessee.
34.4 Intangibles and Personal Property. Notwithstanding any other
provision of this Lease but subject to Section 6.4 relating to the security
interest in favor of Lessor, Lessor's Personal Property shall not include
goodwill nor shall it include any other intangible personal property that is
severable from Lessor's "interests in real property" within the meaning of
Section 856(d) of the Code, or any similar or successor provision thereto.
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ARTICLE XXXV
35.1 Arbitration. Except with respect to the payment of Rent under this
Lease and any proceedings to recover possession of one or more of the Leased
Properties, in case any controversy arises between the parties hereto as to any
of the provisions of this Lease or the performance thereof, and the parties are
unable to settle the controversy by agreement or as otherwise provided herein,
the controversy shall be decided by arbitration. The arbitration shall be
conducted by three arbitrators selected in accordance with the rules and
procedures of the American Arbitration Association. The decision of the
arbitrators shall be final and binding, and judgment may be entered thereon in
any court of competent jurisdiction. The decision shall set forth in writing the
basis for the decision. In rendering the decision and award, the arbitrators
shall not add to, subtract from, or otherwise modify the provisions of this
Lease. The expense of the arbitration shall be divided between Lessor and Lessee
unless otherwise specified in the award. Each party in interest shall pay the
fees and expenses of its own counsel. The arbitration shall be conducted in Ann
Arbor, Michigan. In any arbitration, the parties shall be entitled to conduct
discovery in the same manner as permitted under Federal Rules of Civil Procedure
26 through 37, as amended. No provision in this Article shall limit the right of
any party to this Agreement to obtain provisional or ancillary remedies from a
court of competent jurisdiction before, after, or during the pendency of any
arbitration, and the exercise of such remedies does not constitute a waiver of
the right of either party to arbitration.
ARTICLE XXXVI
36.1 Miscellaneous.
36.1.1 Survival, Choice of law. Anything contained in this
Lease to the contrary notwithstanding, all claims against, and liabilities of,
Lessee or Lessor arising prior to the date of expiration or termination of this
Lease shall survive such expiration or termination. If any term or provision of
this Lease or any application thereof is held invalid or unenforceable, the
remainder of this Lease and any other application of such term or provisions
shall not be affected thereby. Neither this Lease nor any provision hereof may
be changed, waived, discharged or terminated except by an instrument in writing
and in recordable form signed by Lessor and Lessee. All the terms and provisions
of this Lease shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. The headings in this Lease
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof. This Lease shall be governed by and construed in accordance
with the laws of the state of Michigan, except as to matters which, under
applicable procedural conflicts of laws rules require the application of laws of
another State.
LESSEE CONSENTS TO IN PERSONAM JURISDICTION BEFORE THE STATE AND
FEDERAL COURTS OF THE STATES OF MICHIGAN AND EACH STATE IN WHICH A FACILITY IS
LOCATED, AND AGREES THAT ALL DISPUTES CONCERNING THIS AGREEMENT BE HEARD IN THE
STATE AND FEDERAL COURTS LOCATED IN THE
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STATES OF MICHIGAN OR ANY STATE IN WHICH A FACILITY IS LOCATED. LESSEE AGREES
THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE
UNDER THE LAWS OF THE STATES OF MICHIGAN OR ANY STATE IN WHICH A FACILITY IS
LOCATED AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN THE STATE AND FEDERAL
COURTS OF THE STATES OF MICHIGAN OR ANY SUCH STATE.
36.1.2 Limitation on Recovery. Lessee specifically agrees to
look solely to Lessor's interest in the Leased Properties for recovery of any
judgment from Lessor, it being specifically agreed that no constituent
shareholder, officer or director of Lessor shall ever be personally liable for
any such judgment or for the payment of any monetary obligation to Lessee.
Furthermore, Lessor (original or successor) shall never be liable to Lessee for
any indirect or consequential damages suffered by Lessee from whatever cause.
36.1.3 Waivers. Lessee waives any defense by reason of any
disability of Lessee, and waives any other defense based on the termination of
Lessee's (including Lessee's successors) liability from any cause. 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.
36.1.4 Consents. Whenever the consent or approval of Lessor is
required hereunder, Lessor may in its sole discretion and without reason
withhold that consent or approval unless otherwise specifically provided.
36.1.5 Counterparts. This Lease may be executed in separate
counterparts, each of which shall be considered an original when each party has
executed and delivered to the other one or more copies of this Lease.
36.1.6 Options Personal. The renewal options granted to Lessee
in this Lease are granted solely to Lessee and are not assignable or
transferrable except in connection with a Transfer permitted in Article XXII.
36.1.7 Rights Cumulative. Except as provided herein to the
contrary, the respective rights and remedies of the parties specified in this
Lease shall be cumulative and in addition to any rights and remedies not
specified in this Lease.
36.1.8 Entire Agreement. There are no oral or written
agreements or representations between the parties hereto affecting this Lease
other than the Transaction Documents. This Lease and the Transaction Documents
supersede and cancel any and all previous negotiations, arrangements,
representations, brochures, agreements and understandings, if any, between
Lessor and Lessee.
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36.1.9 Amendments in Writing. No provision of this Lease may
be amended except by an agreement in writing signed by Lessor and Lessee.
36.1.10 Severability. If any provision of this Lease or the
application of such provision to any person, entity or circumstance is found
invalid or unenforceable by a court of competent jurisdiction, such
determination shall not affect the other provisions of this Lease and all other
provisions of this Lease shall be deemed valid and enforceable.
36.1.11 Time of the Essence. Time is of the essence of all
provisions of this Lease of which time is an element.
ARTICLE XXXVII
37.1 Commissions (Lessee). Lessee agrees to save, indemnify and hold
Lessor harmless from and against any and all claims, liabilities or obligations
for brokerage commissions, finder's fees or the like in connection with this
Lease or the transactions contemplated hereby asserted by any person on the
basis of any statement or act alleged to have been made or taken by Lessee.
Lessee represents and warrants to Lessor that Lessee is aware of no Person who
would have a meritorious basis for asserting any such claims, liabilities or
obligations.
37.2 Commissions (Lessor). Lessor agrees to save, indemnify and hold
Lessee harmless from and against any and all claims, liabilities or obligations
for brokerage commissions, finder's fees or the like in connection with this
Lease or the transactions contemplated hereby asserted by any person on the
basis of any statement or act alleged to have been made or taken by Lessor.
Lessor represents and warrants to Lessee that Lessor is aware of no Person who
would have a meritorious basis for asserting any such claims, liabilities or
obligations.
ARTICLE XVIII
38.1 Memorandum or Short Form of Lease. Lessor and Lessee shall,
promptly upon the request of either, enter into a Memorandum or Short Form of
Lease, substantially in the form of attached EXHIBIT G with such modifications
as may be appropriate under the laws and customs of the States and in the
customary form suitable for recording under the laws of each of the States.
Lessee shall pay all costs and expenses of recording such memorandum or short
form of this Lease.
ARTICLE XXXIX
39.1 Security Deposit. Concurrently with Lessee's execution of this
Lease, Lessee shall deliver the Security Deposit to Lessor, which Lessor shall
hold as security for the full and faithful performance by Lessee of each and
every term, provision, covenant and condition of this Lease. Unless otherwise
provided in the Purchase Agreement, Lessee shall satisfy the Security Deposit
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obligation by providing a letter of credit which shall be subject to the terms
and conditions of the Letter of Credit Agreement. If at any time the Security
Deposit is in the form of cash, it shall be deposited by Lessor into an account
which shall earn interest. Promptly upon receipt of written request from Lessee
(which may be made not more often than at quarterly intervals), Lessor shall,
provided there then exists no uncured Event of Default and no circumstance
which, with notice or the passage of time, or both, could become an Event of
Default, pay such interest to Lessee. Any interest that Lessee is not entitled
to receive under the preceding sentence shall be added to and become part of the
Security Deposit. The Security Deposit shall not be considered an advance
payment of Rent (or of any other sum payable to Lessee under this Lease) or a
measure of Lessor's damages in case of a default by Lessee. The Security Deposit
shall not be considered a trust fund, and Lessee expressly acknowledges and
agrees that Lessor is not acting as a trustee or in any fiduciary capacity in
controlling or using the Security Deposit. Lessor shall have no obligation to
maintain the Security Deposit separate and apart from Lessor's general and/or
other funds. The Security Deposit, less any portion thereof applied as provided
in the Letter of Credit Agreement or Section 39.3, shall be returned to Lessee
within sixty (60) days following the expiration of the Term.
39.2 Reduction in Security Deposit.
(a) The Security Deposit shall be reduced to an amount equal
to six (6) months' Base Rent when both of the following conditions have
been satisfied (provided there then exists no Event of Default or fact
or circumstance which, with notice or the passage of time, or both,
would constitute an Event of Default): (i) Break-even Operations shall
have occurred, and (ii) Lessee has acquired all of the outstanding
equity interests in each of the sublessees listed in Schedule 22.2
hereto and the sublease arrangement between Lessee and each such
sublessee with respect to the Leased Property has been terminated.
(b) The Security Deposit shall be further reduced to an amount
equal to three (3) months' Base Rent when both of the following
conditions have been satisfied (provided there then exists no Event of
Default or fact or circumstance which, with notice or the passage of
time, or both, would constitute an Event of Default): (i) Portfolio
Stabilization shall have occurred, and (ii) Lessee has acquired all of
the outstanding equity interests in each of the sublessees listed in
Schedule 22.2 hereto and the sublease arrangement between Lessee and
each such sublessee with respect to the Leased Property has been
terminated.
39.3 Application of Security Deposit. If an Event of Default occurs
under this Lease, Lessor may, but shall not be required to, in addition to and
not in lieu of any other rights and remedies available to Lessor , apply all or
any part of the Security Deposit to the payment of any sum in default, or any
other sum, including but not limited to, any damages or deficiency in reletting
the Leased Properties, which Lessor may expend or incur or be required to expend
or incur by reason of Lessee's default. Whenever, and as often as, Lessor has
applied any portion of the Security Deposit as herein provided, Lessee shall,
within ten (10) days after Notice from Lessor, deliver a new letter of credit
meeting the requirements of the Letter of Credit Agreement to Lessor (or, at
Lessor's option, deposit additional money with Lessor) sufficient to restore the
Security Deposit to
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<PAGE> 72
the full amount originally provided or paid, and Lessee's failure to do so shall
constitute an Event of Default hereunder without any further Notice or grace
period.
39.4 Transfer of Security Deposit. If Lessor transfers its interest
under this Lease, Lessor shall assign the Security Deposit to the new lessor and
thereafter Lessor shall have no further liability for the return of the Security
Deposit, and Lessee agrees to look solely to the new lessor for the return of
the Security Deposit. The provisions of the preceding sentence shall apply to
every transfer or assignment of Lessor's interest under this Lease. Lessee
agrees that it will not assign or encumber or attempt to assign or encumber the
Security Deposit and that Lessor, its successors and assigns, may return the
Security Deposit to the last Lessee in possession at the last address for Notice
given by such Lessee and that Lessor shall thereafter be relieved of any
liability therefor, regardless of one or more assignments of this Lease or any
such actual or attempted assignment or encumbrances of the Security Deposit.
SIGNATURES ON FOLLOWING PAGE.
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<PAGE> 73
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized officers as of the date first above written.
LESSOR:
OMEGA HEALTHCARE INVESTORS,
INC., a Maryland corporation
June , 1999 By: /s/ Susan A. Kovach
----- -------------------------------
Susan A. Kovach
Vice President and General Counsel
LESSEE:
AHC PROPERTIES, INC.,
a Delaware corporation
June , 1999 By: /s/ Mark W. Ohlendorf
----- --------------------------------
Mark W. Ohlendorf
Senior Vice President
STATE OF MICHIGAN )
) ss:
COUNTY OF WASHTENAW )
The foregoing instrument was acknowledged before me on June , 1999,
by Susan A. Kovach who is the Vice President and General Counsel of Omega
Healthcare Investors, Inc., a Maryland corporation, on behalf of the
corporation, who acknowledged the same to be her free act and deed and the free
act and deed of the corporation.
Notary Public, County, Michigan
My commission expires:
--------------------
STATE OF WISCONSIN )
) ss:
COUNTY OF )
67
<PAGE> 74
The foregoing instrument was acknowledged before me on June ____, 1999,
by Mark W. Ohlendorf who is a Senior Vice President of AHC Properties, Inc., a
Delaware corporation, on behalf of the corporation, who acknowledged the same to
be his free act and deed and the free act and deed of the corporation.
Notary Public, _______ County, Wisconsin
My commission expires:___________________
68
<PAGE> 1
EXHIBIT 10.6
LEASE GUARANTY
(Alterra Healthcare Corporation)
This LEASE GUARANTY (the "Guaranty") is given as of June 14, 1999 (the
"Effective Date"), by ALTERRA HEALTHCARE CORPORATION, a Delaware corporation,
whose address is 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin
53005 (the "Guarantor"), in favor of OMEGA HEALTHCARE INVESTORS, INC., a
Maryland corporation ("Omega"), and OMEGA (KANSAS), INC., a Kansas corporation
("Omega-Kansas"), whose addresses are 900 Victors Way, Suite 350, Ann Arbor,
Michigan 48108 (together, the "Lessors"), with reference to the following facts:
RECITALS
A. AHC PROPERTIES, INC., a Delaware corporation (the "Lessee"), has
executed and delivered to Omega a Master Lease dated of even date herewith (the
"Master Lease") pursuant to which Lessee leased from Omega certain assisted
living facilities and to Omega-Kansas a Kansas Master Lease dated of even date
herewith (the "Kansas Master Lease") pursuant to which Lessee leased from
Omega-Kansas an assisted living facility located in Kansas. The Master Lease and
the Kansas Master Lease are collectively referred to herein as the "Master
Leases".
B. The Lessee is the Guarantor's wholly-owned subsidiary, and it is to
the advantage of the Guarantor that Lessors enter into the Master Leases.
C. As a material inducement to Lessors to lease the assisted living
facilities pursuant to the Master Leases to the Lessee, the Guarantor has agreed
to guarantee the payment of all amounts due from, and the performance of all
obligations undertaken by the Lessee pursuant to the Master Leases and any
security agreements, letter of credit agreements, guarantees or other documents
which evidence, secure or otherwise relate to the Master Leases (all such
documents, and any and all amendments, modifications, extensions and renewals
thereof, are hereinafter referred to collectively as the "Transaction
Documents"), all as hereinafter set forth.
WHEREFORE, the parties hereby agree as follows:
1. Defined Terms. All capitalized terms used herein and not defined
herein shall have the meaning for such terms set forth in the Master Leases.
2. Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees to Lessors (i) the payment when due of all Rent and all other sums
payable by the Lessee under the Master Leases and (ii) the faithful and prompt
performance when due of each and every one of the terms, conditions and
covenants to be kept and performed by the Lessee under the Transaction
Documents,
<PAGE> 2
any and all amendments, modifications, extensions and renewals of the
Transaction Documents, including without limitation all indemnification
obligations, insurance obligations, and all obligations to operate, rebuild,
restore or replace any facilities or improvements now or hereafter located on
the Leased Properties covered by the Master Leases. Upon the occurrence of an
Event of Default under the Transaction Documents (whether defined as an "Event
of Default", a "Transaction Event of Default", a "Security Agreement Event of
Default" or otherwise), Guarantor shall forthwith perform or cause to be
performed all provisions of the Transaction Documents to be performed by the
Lessee thereunder, and pay all damages that may result from the non-performance
thereof to the full extent provided under the Transaction Documents
(collectively, the "Obligations"). As to the Obligations, Guarantor's liability
under this Guaranty is without limit.
3. Survival of Obligations. The obligations of Guarantor under this
Guaranty with respect to the Transaction Documents shall survive and continue in
full force and effect for so long as any Obligations remain outstanding
notwithstanding:
(a) any amendment, modification, or extension of any Transaction
Document;
(b) any compromise, release, consent, extension, indulgence or
other action or inaction in respect of any terms of any
Transaction Document or any other guarantor;
(c) any substitution or release, in whole or in part, of any
security for this Guaranty which Lessors may hold at any time;
(d) any exercise or nonexercise by a Lessor of any right, power or
remedy under or in respect of any Transaction Document or any
security held by a Lessor with respect thereto, or any waiver
of any such right, power or remedy;
(e) any bankruptcy, insolvency, reorganization, arrangement,
adjustment, composition, liquidation, or the like of the
Lessee or any other guarantor;
(f) any limitation of the Lessee's liability under any Transaction
Document or any limitation of the Lessee's liability
thereunder which may now or hereafter be imposed by any
statute, regulation or rule of law, or any illegality,
irregularity, invalidity or unenforceability, in whole or in
part, of any Transaction Document or any term thereof;
(g) any sale, lease, or transfer of all or any part of any
interest in any Leased Property or any or all of the assets of
the Lessee to any other person, firm or entity other than to
Lessor;
(h) any extensions of time for performance under the Transaction
Documents;
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<PAGE> 3
(i) the release of the Lessee from performance or observation of
any of the agreements, covenants, terms or conditions
contained in any Transaction Document by operation of law or
otherwise;
(j) the fact that the Lessee may or may not be personally liable,
in whole or in part, under the terms of any Transaction
Document to pay any money judgment;
(k) the failure to give Guarantor any notice of acceptance,
default or otherwise unless specifically required by the
Transaction Document, if any, pursuant to which such notice is
required to be given;
(l) any other guaranty now or hereafter executed by the Guarantor
or anyone else in connection with any Transaction Document;
(m) any rights, powers or privileges Lessor may now or hereafter
have against any other person, entity or collateral; or
(n) any other circumstances, whether or not the Guarantor had
notice or knowledge thereof.
4. Primary Liability. The liability of Guarantor with respect to the
Transaction Documents shall be primary, direct and immediate, and Lessors may
proceed against Guarantor: (i) prior to or in lieu of proceeding against the
Lessee, its assets, any security deposit, or any other guarantor; and (ii) prior
to or in lieu of pursuing any other rights or remedies available to a Lessor.
All rights and remedies afforded to Lessors by reason of this Guaranty or by law
are separate, independent and cumulative, and the exercise of any rights or
remedies shall not in any way limit, restrict or prejudice the exercise of any
other rights or remedies.
In the event of any Event of Default under any Transaction Document
(whether defined as an "Event of Default", a "Transaction Event of Default", a
"Security Agreement Event of Default" or otherwise), a separate action or
actions may be brought and prosecuted against Guarantor whether or not the
Lessee is joined therein or a separate action or actions are brought against the
Lessee. Lessors may maintain successive actions for other defaults. Lessors'
rights hereunder shall not be exhausted by its exercise of any of its rights or
remedies or by any such action or by any number of successive actions until and
unless all indebtedness and obligations the payment and performance of which are
hereby guaranteed have been paid and fully performed.
5. Obligations Not Affected. In such manner, upon such terms and at
such times as Lessor in its sole discretion deems necessary or expedient, and
without notice to Guarantor, Lessors may: (a) amend, alter, compromise,
accelerate, extend or change the time or manner for the payment or the
performance of any Obligation hereby guaranteed; (b) extend, amend or terminate
the Master Leases, or either of them; or (c) release the Lessee by consent to
any assignment (or otherwise) as
3
<PAGE> 4
to all or any portion of the obligations hereby guaranteed. Any exercise or
non-exercise by Lessors of any right hereby given Lessors, dealing by Lessors
with Guarantor or any other guarantor, Lessee or any other person, or change,
impairment, release or suspension of any right or remedy of Lessors against any
person including the Lessee and any other guarantor will not affect any of the
obligations of Guarantor hereunder or give Guarantor any recourse or offset
against Lessors.
6. Waiver. With respect to the Transaction Documents, Guarantor hereby
waives and relinquishes all rights and remedies accorded by applicable law to
guarantors or any other accommodation parties, under any statutory provisions,
common law or any other provision of law, custom or practice, and agrees not to
assert or take advantage of any such rights or remedies including, but not
limited to:
(a) any right to require Lessors to proceed against the Lessee or
any other person or to proceed against or exhaust any security
held by Lessors at any time or to pursue any other remedy in
Lessors' power before proceeding against Guarantor or to
require that Lessors cause a marshaling of the Lessee's assets
or the assets, if any, given as collateral for this Guaranty
or to proceed against the Lessee and/or any collateral,
including collateral, if any, given to secure Guarantor's
obligation under this Guaranty, held by a Lessor at any time
or in any particular order;
(b) any defense that may arise by reason of the incapacity or lack
of authority of any other person or persons;
(c) notice of the existence, creation or incurring of any new or
additional obligation or of any action or non-action on the
part of the Lessee, Lessors, any creditor of the Lessee or
Guarantor or on the part of any other person whomsoever under
this or any other instrument in connection with any obligation
held by a Lessor or in connection with any obligation hereby
guaranteed;
(d) any defense based upon an election of remedies by Lessors
which destroys or otherwise impairs the subrogation rights of
Guarantor or the right of Guarantor to proceed against the
Lessee for reimbursement, or both;
(e) any duty on the part of Lessors to disclose to Guarantor any
facts Lessors may now or hereafter know about the Lessee,
regardless of whether Lessors have reason to believe that any
such facts materially increase the risk beyond that which
Guarantor intends to assume or have reason to believe that
such facts are unknown to Guarantor or have a reasonable
opportunity to communicate such facts to Guarantor, it being
understood and agreed that the Guarantor is fully responsible
for being and keeping informed of the financial condition of
the Lessee and of all circumstances bearing on the risk of
non-payment or non-performance of any obligations hereby
guaranteed;
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<PAGE> 5
(f) any defense arising because of Lessors' election, in any
proceeding instituted under the federal Bankruptcy Code, of
the application of Section 1111 (b)(2) of the federal
Bankruptcy Code;
(g) any defense based on any borrowing or grant of a security
interest under Section 364 of the federal Bankruptcy Code; and
(h) all rights and remedies accorded by applicable law to
guarantors, including without limitation, any extension of
time conferred by any law now or hereafter in effect and any
requirement or notice of acceptance of this Guaranty or any
other notice to which the undersigned may now or hereafter be
entitled to the extent such waiver of notice is permitted by
applicable law.
7. Warranties. With respect to the Transaction Documents, Guarantor
warrants that: (a) this Guaranty is executed at the Lessee's request; and (b)
Guarantor has established adequate means of obtaining from the Lessee on a
continuing basis financial and other information pertaining to the Lessee's
financial condition. Guarantor agrees to keep adequately informed from such
means of any facts, events or circumstances which might in any way affect
Guarantor's risks hereunder, and Guarantor further agrees that Lessor shall have
no obligation to disclose to Guarantor information or material acquired in the
course of Lessor's relationship with Lessee.
8. No-Subrogation. Until all obligations of the Lessee under the
Transaction Documents have been satisfied and discharged in full for one (1)
year, Guarantor shall have no right of subrogation and waives any right to
enforce any remedy which a Lessor now has or may hereafter have against the
Lessee and any benefit of, and any right to participate in, any security now or
hereafter held by Lessors with respect to the Master Leases.
9. Subordination. Upon the occurrence of an Event of Default under any
Transaction Document, which is not cured by the Guarantor, the indebtedness or
obligations of Lessee to Guarantor shall not be paid in whole or in part nor
will Guarantor accept any payment of or on account of any amounts owing, without
the prior written consent of Lessors and at Lessors' request, Guarantor shall
cause the Lessee to pay to Lessors all or any part of the subordinated
indebtedness until the obligations under the Master Leases and the other
Transaction Documents have been paid in full. Any payment by the Lessee in
violation of this Guaranty shall be received by Guarantor in trust for Lessors,
and Guarantor shall cause the same to be paid to Lessors immediately on account
of the amounts owing from the Lessee to Lessors. No such payment will reduce or
affect in any manner the liability of Guarantor under this Guaranty.
10. No Delay. Any payments required to be made by Guarantor hereunder
shall become due on demand in accordance with the terms hereof immediately upon
the happening of an Event of Default under any Transaction Document.
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<PAGE> 6
11. Application of Payments. With respect to the Transaction Documents,
and with or without notice to Guarantor, Lessors, in Lessors' sole discretion
and at any time and from time to time and in such manner and upon such terms as
Lessors deems appropriate, may (a) apply any or all payments or recoveries from
the Lessee or from any other guarantor under any other instrument or realized
from any security, in such manner and order of priority as Lessors may
determine, to any obligation of the Lessee with respect to the Master Leases or
any other Transaction Document and whether or not such obligation is guaranteed
hereby or is otherwise secured or is due at the time of such application, and
(b) refund to the Lessee any payment received by Lessors under the Master
Leases.
12. Guaranty Default.
(a) As used herein, the term Guaranty Default shall mean one or more
of the following events (subject to applicable cure periods):
(i) the failure of Guarantor to pay the amounts required
to be paid hereunder at the times specified herein.
(ii) the failure of Guarantor to observe and perform any
covenants condition or agreement on its part to be
observed or performed, other than as referred to in
Subsection (i) above, for a period of thirty (30)
days after written notice of such failure has been
given to Guarantor by Lessors, unless Lessors agree
in writing to an extension of such time prior to its
expiration;
(iii) the occurrence of a default under any other guaranty
between a Lessor and Guarantor.
(b) Upon the occurrence of a Guaranty Default, Lessors shall have the
right to bring such actions at law or in equity, including appropriate
injunctive relief, as it deems appropriate to compel compliance, payment or
deposit, and among other remedies to recover its attorneys' fees in any
proceeding, including any appeal therefrom and any post-judgement proceedings.
13. Financial Covenants. At all times while any Obligations guaranteed
by Guarantor remain outstanding (the "Term of this Guaranty"), Guarantor shall
comply with the affirmative financial covenants of the Master Leases, as the
same may be amended, modified or restated from time to time during the Term of
this Guaranty.
14. Financial Statements. At the times specified in the Master Leases,
Guarantor shall deliver to Lessors a copy of its Financial Statements, prepared
in the manner required by the Master Leases. Together with the Guarantor's
Financial Statements furnished in accordance with the preceding sentence,
Guarantor shall deliver (a) a Certificate of Guarantor stating that Guarantor is
not in default in the performance or observance of any of the terms of this
Guaranty, or if Guarantor
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<PAGE> 7
is in default, specifying all such defaults, the nature thereof, and the steps
being taken to remedy the same, and (b) a certificate acceptable to Lessors from
a certified public accounting firm approved by Lessors that nothing came to
their attention during the course of their audit of Guarantor's Financial
Statements that would cause them to believe that there was any default under
this Guaranty.
15. Miscellaneous.
(a) No term, condition or provision of this Guaranty may be waived
except by an express written instrument to that effect signed by Lessors. No
waiver of any term, condition or provision of this Guaranty will be deemed a
waiver of any other term, condition or provision, irrespective of similarity, or
constitute a continuing waiver of the same term, condition or provision, unless
otherwise expressly provided.
(b) If any one or more of the terms, conditions or provisions contained
in this Guaranty is found in a final award or judgment rendered by any court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining terms, conditions and
provisions of this Guaranty shall not in any way be affected or impaired
thereby, and this Guaranty shall be interpreted and construed as if the invalid,
illegal, or unenforceable term, condition or provision had never been contained
in this Guaranty.
(c) THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF MICHIGAN, EXCEPT THAT THE LAWS OF THE STATES IN WHICH
THE FACILITIES ARE LOCATED SHALL GOVERN THIS AGREEMENT TO THE EXTENT NECESSARY
(i) TO OBTAIN THE BENEFIT OF THE- RIGHTS AND REMEDIES SET FORTH HEREIN WITH
RESPECT TO THE FACILITIES LOCATED IN EACH SUCH STATE AND (ii) FOR PROCEDURAL
REQUIREMENTS WHICH MUST BE GOVERNED BY THE LAWS OF EACH STATE IN WHICH SUCH
FACILITIES ARE LOCATED. GUARANTOR CONSENTS TO IN PERSONAM JURISDICTION BEFORE
THE STATE OR STATES AND FEDERAL COURTS OF MICHIGAN AND AGREES THAT ALL DISPUTES
CONCERNING THIS GUARANTY BE HEARD IN THE STATE AND FEDERAL COURTS LOCATED IN THE
STATE OR STATES IN WHICH THE FACILITY OR FACILITIES ARE LOCATED OR IN MICHIGAN.
GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY
METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OR STATES IN WHICH THE FACILITY
OR FACILITIES ARE LOCATED OR MICHIGAN AND IRREVOCABLY WAIVES ANY OBJECTION TO
VENUE IN THE STATE AND FEDERAL COURTS OF THE STATE OR STATES IN WHICH THE
FACILITY OR FACILITIES ARE LOCATED AND OF MICHIGAN.
(d) GUARANTOR AND LESSOR HEREBY WAIVE TRIAL BY JURY AND THE RIGHT
THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON,
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<PAGE> 8
UNDER, OUT OF, BY REASON OF OR RELATING IN ANY WAY TO THIS GUARANTY OR THE
INTERPRETATION, BREACH OR ENFORCEMENT THEREOF.
(e) In the event of any suit, action, arbitration or other proceeding
to interpret this Guaranty, or to determine or enforce any right or obligation
created hereby, the prevailing party in the action shall recover such party's
actual costs and expenses reasonably incurred in connection therewith,
including, but not limited to, attorneys' fees and costs of appeal, post
judgment enforcement proceedings (if any) and bankruptcy proceedings (if any).
Any court, arbitrator or panel of arbitrators shall, in entering any judgment or
making any award in any such suit, action, arbitration or other proceeding, in
addition to any and all other relief awarded to such prevailing party, include
in such-judgment or award such party's costs and expenses as provided in this
paragraph.
(f) Guarantor (i) represents that it has been represented and advised
by counsel in connection with the execution of this Guaranty; (ii) acknowledges
receipt of a copy of the Master Leases and the other Transaction Documents; and
(iii) further represents that Guarantor has been advised by counsel with respect
thereto. This Guaranty shall be construed and interpreted in accordance with the
plain meaning of its language, and not for or against Guarantor or Lessor, and
as a whole, giving effect to all of the terms, conditions and provisions hereof.
(g) Except as provided in any other written agreement now or at any
time hereafter in force between Lessors and Guarantor, this Guaranty and the
Transaction Documents shall constitute the entire agreement of Guarantor with
Lessors with respect to the subject matter hereof, and no representation,
understanding, promise or condition concerning the subject matter hereof will be
binding upon Lessors or Guarantor unless expressed herein.
(h) All stipulations, obligations, liabilities and undertakings under
this Guaranty shall be binding upon Guarantor and its respective successors and
assigns and shall inure to the benefit of Lessors and to the benefit of Lessors'
successors and assigns.
(i) Whenever the singular shall be used hereunder, it shall be deemed
to include the plural (and vice-versa) and reference to one gender shall be
construed to include all other genders, including neuter, whenever the context
of this Guaranty so requires. Section captions or headings used in the Guaranty
are for convenience and reference only, and shall not affect the construction
thereof.
Signature on following page.
8
<PAGE> 9
IN WITNESS WHEREOF, the undersigned has executed this Guaranty as of
the date first written above.
GUARANTOR:
ALTERRA HEALTHCARE CORPORATION,
a Delaware corporation
June ____, 1999 By: /s/ Mark W. Ohlendorf
----------------------
Mark W. Ohlendorf
Senior Vice President
STATE OF WISCONSIN )
) ss:
COUNTY OF ________ )
The foregoing instrument was acknowledged before me on June ____, 1999,
by Mark W. Ohlendorf who is the Senior Vice President of Alterra Healthcare
Corporation, a Delaware corporation, on behalf of the corporation, who
acknowledged the same to be his free act and deed and the free act and deed of
the corporation.
________________________________________
Notary Public, _______ County, Wisconsin
My commission expires:__________________
Signature Page to Lease Guaranty
<PAGE> 1
EXHIBIT 10.7
LEASE AGREEMENT
BETWEEN
HEALTH CARE REIT, INC.
AND
ALTERNATIVE LIVING SERVICES, INC.
JANUARY 22, 1996
CLARE BRIDGE OF SARASOTA
SARASOTA, FLORIDA
<PAGE> 2
LEASE AGREEMENT
This Lease Agreement ("Lease" or "Agreement") is made
effective as of the 22nd day of January, 1996 (the "Effective Date") between
HEALTH CARE REIT, INC., a corporation organized under the laws of the State of
Delaware ("Landlord"), having its principal office located at One SeaGate, Suite
1950, P.O. Box 1475, Toledo, Ohio 43603, and ALTERNATIVE LIVING SERVICES, INC.,
a corporation organized under the laws of the State of Delaware ("Tenant"),
having its chief executive office located at 450 N. Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005.
R E C I T A L S
A. As of the date hereof, Landlord acquired the Leased
Property (defined below) from Tenant. Landlord paid the Acquisition Amount
(defined below).
B. Landlord desires to lease the Leased Property to Tenant and
Tenant desires to lease the Leased Property from Landlord upon the terms set
forth in this Lease.
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS
1.1 Leased Property. Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord the following property:
(a) The land described in Exhibit A attached hereto
(the "Land").
(b) All buildings, structures, and other
improvements, including without limitation, sidewalks, alleys, utility pipes,
conduits, and lines, parking areas, and roadways, now or hereafter situated upon
the Land (the "Improvements").
(c) All easements, rights and other appurtenances
relating to the Land and Improvements (the "Appurtenances").
(d) All permanently affixed equipment, machinery,
fixtures, and other items of real and personal property, including all
components thereof, located in, or used in connection with, and permanently
affixed to or incorporated into the 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 Personal Property as defined
below (collectively the "Fixtures").
<PAGE> 3
(e) All machinery, equipment, furniture, furnishings,
movable walls or partitions, computers, trade fixtures, consumable inventory and
supplies, and other personal property used or useful in Tenant's business on the
Leased Property, including without limitation, all items of furniture,
furnishings, equipment, supplies and inventory listed on Exhibit B attached
hereto and the replacements therefor, except items, if any, included within the
definition of Fixtures (collectively the "Personal Property").
SUBJECT, HOWEVER, to all easements, liens, encumbrances,
restrictions, agreements, and other title matters existing as of the date hereof
as listed on Exhibit B attached hereto (the "Permitted Exceptions").
1.2 Term. The initial term ("Initial Term") of this Lease
commences on the Effective Date and expires at 12:00 Midnight Eastern Time on
January 31, 2006 (the "Expiration Date"); provided, however, that Tenant has one
or more options to renew the Lease pursuant to Article 12.
1.3 Definitions. Except as otherwise expressly provided, [i]
the terms defined in this section have the meanings assigned to them in this
section and include the plural as well as the singular; [ii] all accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with generally accepted accounting principles as of the time
applicable; and [iii] the words "herein", "hereof", and "hereunder" and similar
words refer to this Lease as a whole and not to any particular section.
"Acquisition Amount" means $3,650,000.00.
"ADA" means the federal statute entitled Americans with
Disabilities Act, 42 U.S.C.Section 12101, et seq.
"Affiliate" means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Tenant. "Control" (and the correlative meanings of the terms "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such entity.
"Affiliate Facility" means the adult congregate living
facility known as Clare Bridge of Bradenton located in Bradenton, Florida.
"Affiliate Lease" means the lease made between Landlord and
Tenant for the Affiliate Facility, as amended, modified, extended or renewed
from time to time.
"Annual Financial Statements" means the audited balance sheet
and statement of income for the most recent fiscal year and an unaudited
operating statement for the Facility for the most recent fiscal year certified
by the chief financial officer of Tenant to be accurate and to fairly present
the financial condition of the Facility.
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<PAGE> 4
"Base Rent" has the meaning set forth in Section 2.1, as
increased from time to time pursuant to Section 2.2.
"Business Day" means any day other than a Saturday, Sunday, or
national holiday.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended from time to time. The terms
"disposal" and "release" as used in this Agreement shall have the meaning set
forth in CERCLA.
"Closing" means the closing of the purchase of the Leased
Property by Landlord and the lease of the Leased Property to Tenant.
"Commencement Date" means the Effective Date if such date is
the first day of a month, and if it is not, the first day of the first month
following the Effective Date.
"Effective Date" means the date of this Lease.
"Environmental Laws" means all federal, state, and local
ecological, wetlands, and other environmental laws and regulations, as amended
from time to time, including but not limited to [i] CERCLA; [ii] the Resource
Conservation and Recovery Act; [iii] the Hazardous Materials Transportation Act;
[iv] the Clean Air Act; [v] Clean Water Act; [vi] the Toxic Substances Control
Act; and [vii] the Safe Water Drinking Act.
"Event of Default" has the meaning set forth in Section 8.1.
"Expiration Date" has the meaning set forth in Section 1.2.
"Facility" means the adult congregate living facility known as
Clare Bridge of Sarasota and located on the Leased Property.
"Fair Market Value" has the meaning set forth in Section 13.3.
"Financial Statements" means [i] the audited annual balance
sheet and statement of income of Tenant for the years ended December 31, 1993
and December 31, 1994; and [ii] the unaudited quarterly balance sheet and
statement of income of Tenant for the period ended September 30, 1995.
"Government Authorizations" means all permits, licenses,
approvals, consents, and authorizations required to comply with all Legal
Requirements, including but not limited to, [i] zoning permits, variances,
exceptions, special use permits, conditional use permits, and consents; [ii] the
permits, licenses, provider agreements and approvals required for licensure and
operation of an adult congregate living facility certified as a provider under
the federal Medicare and state Medicaid programs; [iii] environmental,
ecological, coastal, wetlands, air, and water permits, licenses, and consents;
[iv] curb cut, subdivision, land use, and planning permits, licenses,
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approvals and consents; [v] building, sign, fire, health, and safety permits,
licenses, approvals, and consents; and [vi] architectural reviews, approvals,
and consents required under restrictive covenants.
"Hazardous Materials" means any substance [i] the presence of
which poses a hazard to the health or safety of persons on or about the Land
including but not limited to asbestos containing materials; [ii] which requires
removal or remediation under any Environmental Law, including without limitation
any substance which is toxic, explosive, flammable, radioactive, or otherwise
hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic including but not limited to any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste", or
"pollutant" as defined in any Environmental Law.
"Impositions" has the meaning set forth in Section 3.2.
"Increaser Rate" means 20 basis points per year.
"Initial Term" has the meaning set forth in Section 1.2.
"Issuer" means a financial institution satisfactory to
Landlord issuing the Letter of Credit and such Issuer's successors and assigns.
Any "Issuer" shall have a Lace Financial Service Rating of "C+" or higher at all
times throughout the Term.
"Lease Advance" means [i] the first Lease Advance by Landlord
in the Acquisition Amount for the acquisition of the Leased Property or [ii] any
other advance of funds by Landlord to Tenant pursuant to the term of this Lease.
"Lease Advance Amount" means the amount of any Lease Advance.
The Acquisition Amount is the first Lease Advance Amount.
"Lease Advance Date" means the date on which Landlord makes a
Lease Advance.
"Lease Amount" is an aggregate concept and means the sum of
the Lease Advance Amounts outstanding at the applicable time.
"Lease Payments" means the sum of the Base Rent payments (as
increased from time to time) for the applicable period.
"Lease Rate" means the annual rate used to determine Base Rent
for each Lease Advance. The Lease Rate is the sum of the applicable Rate Index
plus the applicable Rate Spread, computed using the 365/360 method. The Lease
Rate includes any accrued Increaser Rate. On each Renewal Date, the Lease Rate
will be reset for the Lease Amount based upon the applicable Rate Index plus the
applicable Rate Spread in effect on the Rate Determination Date for such Renewal
Date.
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"Lease Year" means each consecutive period of 365 or 366 days
throughout the Term. The first Lease Year commences on the Commencement Date and
expires on the day before the first anniversary of the Commencement Date.
"Leased Property" means, collectively, the Land, Improvements,
Appurtenances, Fixtures and Personal Property.
"Legal Requirements" means all laws, regulations, rules,
orders, writs, injunctions, decrees, certificates, requirements, agreements,
conditions of participation and standards of any federal, state, county,
municipal or other governmental entity, administrative agency, insurance
underwriting board, architectural control board, private third-party payor,
accreditation organization, or any restrictive covenants applicable to the
development, construction, condition and operation of the Facility by Tenant,
including but not limited to, [i] zoning, building, fire, health, safety, sign,
and subdivision regulations and codes; [ii] certificate of need laws; [iii]
licensure to operate as an adult congregate living facility; [iv] Medicare and
Medicaid certification requirements; [v] the ADA; [vi] any Environmental Laws;
and [vii] requirements, conditions and standards for participation in
third-party payer insurance programs.
"Letter of Credit" means an irrevocable and transferable
Letter of Credit in an amount initially equal to 5% of the Lease Amount (and
subject to increase as provided in Section 15.7 or reduction as provided in
Section 20.6), issued by Issuer in favor of Landlord as security for the Lease
and in form acceptable to Lender, and any amendments thereto or replacements or
substitutions therefor.
"Material Obligation" means [i] any indebtedness secured by a
security interest in or a lien, deed of trust or mortgage on any of the Leased
Property (or any part thereof, including any Personal Property) and any
agreement relating thereto; [ii] any obligation or agreement that is material to
the construction or operation of the Facility or that is material to Tenant's
business or financial condition; [iii] any indebtedness or capital lease of
Tenant that has an outstanding principal balance of at least $50,000.00 and any
agreement relating thereto; [iv] any obligation to or agreement with the Issuer
relating to the Letter of Credit; and [v] any sublease of the Leased Property.
"Option Price" has the meaning set forth in Section 13.2.
"Option to Purchase" has the meaning set forth in Section
13.1.
"Periodic Financial Statements" means [i] unaudited balance
sheet and statement of income of Tenant for the most recent quarter; and [ii]
unaudited operating statement for the Facility for the most recent month.
"Permitted Exceptions" means the exceptions to title set forth
on Exhibit B.
"Permitted Liens" means [i] liens granted to Landlord; [ii]
liens customarily incurred by Tenant in the ordinary course of business for
items not delinquent including mechanic's liens
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and deposits and charges under worker's compensation laws; [iii] liens for taxes
and assessments not yet due and payable; [iv] any lien, charge, or encumbrance
which is being contested in good faith pursuant to this Agreement; [v] the
Permitted Exceptions; and [vi] purchase money financing and capitalized
equipment leases for the acquisition of personal property provided, however,
that Landlord obtains a nondisturbance agreement from the purchase money lender
or equipment lessor in form and substance as may be satisfactory to Landlord if
the original cost of the equipment exceeds $50,000.00.
"Pro Forma Statement" means a financial forecast for the
Facility for the next 5 year period prepared in accordance with the diligence
requirements for forecasts established by the American Institute of Certified
Public Accountants.
"Purchase Notice" has the meaning set forth in Section 13.1.
"Rate Determination Date" means the date on which the value
for the Rate Index is established for computing any Lease Rate. For any Lease
Advances made during the Initial Term, the Rate Determination Date is the Lease
Advance Date. For any Renewal Date, the Rate Determination Date is the last
Business Day of the current Term.
"Rate Index" means the yield quoted in the Wall Street Journal
on the applicable Rate Determination Date for the most actively traded United
States Treasury Notes having the nearest equivalent maturity date to the
Expiration Date or the expiration date for the current Renewal Term, as
applicable. For any Lease Advance other than the first Lease Advance, the yield
shall be computed based upon the remainder of the Initial Term or Renewal Term,
as applicable.
"Rate Spread" means the rate spread from time to time used to
calculate the Lease Rate applicable to any Lease Advance. The Rate Spread is [i]
4.00% for the Initial Term; [ii] for the first Renewal Term, the greater of [a]
the sum of the Lease Rate in effect at the end of the Initial Term plus 20 basis
points, or [b] 6.00% ; [iii] for the second Renewal Term, the greater of [a] the
sum of the Lease Rate in effect at the end of the first Renewal Term plus 20
basis points, or [b] 7.00%; and [iv] for the third Renewal Term, the greater of
[a] the sum of the Lease Rate in effect at the end of the Second Renewal Term
plus 20 basis points, or [b] 8.00%.
"Receivables" means [i] all of Tenant's rights to receive
payment for providing resident care and services at the Facility as set forth in
any accounts, contract rights, and instruments, and [ii] those documents,
chattel paper, inventory proceeds, provider agreements, participation
agreements, ledger sheets, files, records, computer programs, tapes, and
agreements relating to Tenant's rights to receive payment for providing resident
care services at the Facility.
"Renewal Date" means the first day of each Renewal Term.
"Renewal Option" has the meaning set forth in Section 12.1.
"Renewal Rate" means the Lease Rate established for any
Renewal Date and is the sum of the applicable Rate Index and applicable Rate
Spread.
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"Renewal Term" has the meaning set forth in Section 12.1.
"Overdue Rate" has the meaning set forth in Section 8.6.
"State" means the State of Florida.
"Tenant's Obligations" means all payment and performance
obligations of Tenant under this Lease and all documents executed by Tenant in
connection with this Lease.
"Tenant's Organizational Documents" means the Articles of
Incorporation of Tenant certified by the Secretary of State of the state of
organization, as amended to date and the Bylaws of Tenant certified by Tenant,
as amended to date.
"Term" means the Initial Term and each Renewal Term.
ARTICLE 2: RENT
2.1 Base Rent. Tenant shall pay Landlord base rent ("Base
Rent") in advance in consecutive monthly installments payable on the first day
of each month during the Term commencing on the Commencement Date. If the
Effective Date is not the first day of a month, Tenant shall pay Landlord Base
Rent on the Effective Date for the partial month, i.e. for the period commencing
on the Effective Date and ending on the day before the Commencement Date. The
Base Rent for the Initial Term will be computed monthly and will be equal to
1/12th of the sum of the products of each Lease Advance times the Lease Rate for
each Lease Advance. The Base Rent for each Renewal Term will be computed in
accordance with Section 12.2.
2.2 Increase of Lease Rate and Base Rent. Commencing on the
first anniversary of the Commencement Date and on each anniversary thereafter
throughout the Term (including any Renewal Term and Extended Term), the Lease
Rate will increase by the applicable Increaser Rate. On each date that the Lease
Rate is increased, the Base Rent will be increased accordingly and will be equal
to 1/12th of the sum of the products of each Lease Advance times the Lease Rate
(including the applicable Increaser Rate) for each Lease Advance.
2.3 Additional Rent. In addition to Base Rent, Tenant shall
pay all other amounts, liabilities, obligations and Impositions which Tenant
assumes or agrees to pay under this Lease and any fine, penalty, interest,
charge and cost which may be added for nonpayment or late payment of such items
(collectively the "Additional Rent"). The Base Rent and Additional Rent are
hereinafter referred to as "Rent". Landlord shall have all legal, equitable and
contractual rights, powers and remedies provided either in this Lease or by
statute or otherwise in the case of nonpayment of the Rent.
2.4 Place of Payment of Rent. Tenant shall make all payments
of Base Rent and any Additional Rent required to be paid to Landlord at the
Landlord's address set forth in the first paragraph of this Lease or at such
other place as Landlord may designate from time to time. If
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delivery is by overnight mail, the address for Landlord shall be One SeaGate,
Suite 1950, Toledo, Ohio 43604.
2.5 Net Lease. This Lease shall be deemed and construed to be
an "absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
abatement, deduction or set-off.
2.6 No Termination, Abatement, Etc. Except as otherwise
specifically provided in this Lease, Tenant shall remain bound by this Lease in
accordance with its terms. Tenant shall not, without the consent of Landlord,
modify, surrender or terminate the Lease, nor seek nor be entitled to any
abatement, deduction, deferment or reduction of Rent, or set-off against the
Rent. Except as expressly provided in this Lease, the obligations of Landlord
and Tenant shall not be affected by reason of [i] any damage to, or destruction
of, the Leased Property or any part thereof from whatever cause or any Taking
(as hereinafter defined) of the Leased Property or any part thereof; [ii] the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title; [iii] any claim which Tenant has or might have against Landlord
or by reason of any default or breach of any warranty by Landlord under this
Lease or any other agreement between Landlord and Tenant, or to which Landlord
and Tenant are parties; [iv] any bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding up or other
proceeding affecting Landlord or any assignee or transferee of Landlord; or [v]
any other cause, whether similar or dissimilar to any of the foregoing, other
than a discharge of Tenant from any such obligations as a matter of law. If
Landlord's mortgagee at any time notifies Tenant to pay Rent directly to the
mortgagee, Tenant shall be entitled to rely upon such notice. Except as
otherwise specifically provided in this Lease, Tenant hereby specifically waives
all rights, arising from any occurrence whatsoever, which may now or hereafter
be conferred upon it by law [a] to modify, surrender or terminate this Lease or
quit or surrender the Leased Property or any portion thereof; or [b] entitling
Tenant to any abatement, reduction, suspension or deferment of the Rent or other
sums payable by Tenant hereunder. The obligations of Landlord and Tenant
hereunder shall be separate and independent covenants and agreements and the
Rent and all other sums payable by Tenant hereunder shall continue to be payable
in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or by termination of this Lease
other than by reason of an Event of Default.
2.7 Computational Method. Landlord and Tenant acknowledge that
all rates under this Lease will be computed based on the actual number of days
elapsed over a 360-day year (365/360 method).
2.8 Commitment Fee. On the Effective Date, Tenant shall pay a
commitment fee to Landlord in an amount equal to 1/2% of the Acquisition Amount.
ARTICLE 3: IMPOSITIONS AND UTILITIES
3.1 Payment of Impositions. Tenant shall pay, as Additional
Rent, all
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Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with Section 3.7. Tenant shall deliver to Landlord [i] not more than
5 days after the due date of each Imposition, copies of the invoice for such
Imposition and the check delivered for payment thereof; and [ii] not more than
30 days after the due date of each Imposition, a copy of the official receipt
evidencing such payment or other proof of payment satisfactory to Landlord.
Tenant's obligation to pay such Impositions shall be deemed absolutely fixed
upon the date such Impositions become a lien upon the Leased Property or any
part thereof. Tenant, at its expense, shall prepare and file all tax returns and
reports in respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing authority
if an Event of Default has occurred and is continuing. Any refunds retained by
Landlord due to an Event of Default shall be applied as provided in Section 8.8.
Landlord and Tenant 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 governmental authorities classify any property covered by this Lease as
personal property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Landlord, to the extent it possesses
the same, and Tenant, 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 property so classified as personal property. Where
Landlord is legally required to file personal property tax returns, Tenant will
be provided with copies of assessment notices indicating a value in excess of
the reported value in sufficient time for Tenant to file a protest. Tenant may,
upon notice to Landlord, at Tenant's option and at Tenant's sole cost and
expense, protest, appeal, or institute such other proceedings as Tenant may deem
appropriate to effect a reduction of real estate or personal property
assessments and Landlord, at Tenant's expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action. Tenant shall
reimburse Landlord for all personal property taxes paid by Landlord within 30
days after receipt of billings accompanied by copies of a bill therefor and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Landlord
and Tenant, whether or not such Imposition is imposed before or after such
termination, and Tenant's obligation to pay or Landlord's obligation to refund
its prorated share thereof shall survive such termination.
3.2 Definition of Impositions. "Impositions" means,
collectively, [i] taxes (including without limitation, all capital stock and
franchise taxes of Landlord imposed by the State or any governmental entity in
the State due to this lease transaction or Landlord's ownership of the Leased
Property and the income arising therefrom, or due to Landlord being considered
as doing business in the State because of Landlord's ownership of the Leased
Property or lease thereof to Tenant), all real estate and personal property ad
valorem, sales and use, business or occupation, single business, gross receipts,
transaction privilege, rent or similar taxes); [ii] 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 with the Term); [iii] ground rents, water, sewer or other rents and
charges, excises, tax levies, and fees
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(including without limitation, license, permit, inspection, authorization and
similar fees); [iv] all taxes imposed on Tenant's operations of the Leased
Property, including without limitation, employee withholding taxes, income taxes
and intangible taxes; [v] all taxes imposed by the State or any governmental
entity in the State with respect to the conveyance of the Leased Property by
Landlord to Tenant or Tenant's designee, including without limitation,
conveyance taxes and capital gains taxes; and [vi] all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
any part thereof and/or the Rent (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time prior to, during or
in respect of the Term hereof may be assessed or imposed on or in respect of or
be a lien upon [a] Landlord or Landlord's interest in the Leased Property or any
part thereof; [b] the Leased Property or any part thereof or any rent therefrom
or any estate, right, title or interest therein; or [c] any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased Property
or any part thereof. Tenant shall not, however, be required to pay any tax based
on net income (whether denominated as a franchise or capital stock or other tax)
imposed on Landlord by any governmental entity other than as described in clause
[i] above.
3.3 Escrow of Impositions. If an Event of Default occurs and
while it remains uncured, Tenant shall, at Landlord's election, deposit with
Landlord on the first day of each month a sum equal to 1/12th of the Impositions
assessed against the Leased Property for the preceding tax year, which sums
shall be used by Landlord toward prompt payment of such Impositions. Tenant, on
demand, shall pay to Landlord any additional funds necessary to pay and
discharge the obligations of Tenant pursuant to the provisions of this Section.
The receipt by Landlord of the payment of such Impositions by and from Tenant
shall only be as an accommodation to Tenant, the mortgagees, and the taxing
authorities, and shall not be construed as rent or income to Landlord, Landlord
serving, if at all, only as a conduit for delivery purposes.
3.4 Utilities. Tenant shall pay, as Additional Rent, all
taxes, assessments, charges, deposits, and bills for utilities, including
without limitation charges for water, gas, oil, sanitary and storm sewer,
electricity, telephone service, and trash collection, which may be charged
against the occupant of the Improvements during the Term. If an Event of Default
occurs and while it remains uncured, Tenant shall, at Landlord's election,
deposit with Landlord on the first day of each month a sum equal to 1/12th of
the amount of the annual utility expenses for the preceding Lease Year, which
sums shall be used by Landlord to promptly pay such utilities. Tenant shall, on
demand, pay to Landlord any additional amount needed to pay such utilities.
Landlord's receipt of such payments shall only be an accommodation to Tenant and
the utility companies and shall not constitute rent or income to Landlord.
Tenant shall at all times maintain that amount of heat necessary to ensure
against the freezing of water lines. Tenant hereby agrees to indemnify and hold
Landlord harmless from and against any liability or damages to the utility
systems and the Leased Property that may result from Tenant's failure to
maintain sufficient heat in the Improvements unless the failure arises from
Landlord's failure to make prompt payment of utility expenses to the extent that
funds for such expenses have been deposited with Landlord under this section.
3.5 Discontinuance of Utilities. Landlord will not be liable
for damages to
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person or property or for injury to, or interruption of, business for any
discontinuance of utilities nor will such discontinuance in any way be construed
as an eviction of Tenant or cause an abatement of rent or operate to release
Tenant from any of Tenant's obligations under this Lease unless Landlord has
failed to make prompt payment of utility expenses to the extent that funds for
such expenses have been deposited with Landlord under Section 3.4 above.
3.6 Business Expenses. Tenant shall promptly pay all expenses
and costs incurred in connection with the operation of the Facility on the
Leased Property, including without limitation, employee benefits, employee
vacation and sick pay, consulting fees, and expenses for inventory and supplies.
3.7 Permitted Contests. Tenant, on its own or on Landlord's
behalf (or in Landlord's name), but at Tenant's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition or
any Legal Requirement or insurance requirement or any lien, attachment, levy,
encumbrance, charge or claim provided that [i] in the case of an unpaid
Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Leased Property; [ii] neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; [iii] in
the case of a Legal Requirement, Landlord would not be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings; [iv] in the event that any such contest shall
involve a sum of money or potential loss in excess of $50,000.00, Tenant shall
deliver to Landlord and its counsel an opinion of Tenant's counsel to the effect
set forth in clauses [i], [ii] and [iii], to the extent applicable; [v] in the
case of a Legal Requirement and/or an Imposition, lien, encumbrance or charge,
Tenant shall give such reasonable security as may be demanded by Landlord to
insure ultimate payment of the same and to prevent any sale or forfeiture of the
affected Leased Property or the Rent by reason of such nonpayment or
noncompliance; provided, however, the provisions of this Section shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition or
the basis for the assertion of any other claim) or any other sums payable by
Tenant to Landlord hereunder; [vi] in the case of an insurance requirement, the
coverage required by Article 4 shall be maintained; and [vii] if such contest be
finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or insurance requirement. Landlord, at Tenant's expense, shall
execute and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. Tenant hereby
agrees to indemnify and save Landlord harmless from and against any liability,
cost or expense of any kind that may be imposed upon Landlord in connection with
any such contest and any loss resulting therefrom.
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ARTICLE 4: INSURANCE
4.1 Property Insurance. At Tenant's expense, Tenant shall
maintain in full force and effect a property insurance policy or policies
insuring the Leased Property against the following:
(a) Loss or damage commonly covered by a "Special
Form" policy insuring against physical loss or damage to the Improvements and
Personal Property, including but not limited to, risk of loss from fire and
other hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if the Leased Property is in earthquake zone 1 or 2) and sinkholes
(if usually recommended in the area of the Leased Property). The policy shall be
in the amount of the full replacement value (as defined in Section 4.5) of the
Improvements and Personal Property and shall contain a deductible amount
acceptable to Landlord. Landlord shall be named as an additional insured. The
policy shall include a stipulated value endorsement or agreed amount endorsement
and endorsements for contingent liability for operations of building laws,
demolition costs, and increased cost of construction.
(b) If applicable, loss or damage by explosion of
steam boilers, pressure vessels, or similar apparatus, now or hereafter
installed on the Leased Property, in commercially reasonable amounts acceptable
to Landlord.
(c) Consequential loss of rents and income coverage
insuring against all "Special Form" risk of physical loss or damage with limits
and deductible amounts acceptable to Landlord covering risk of loss during the
first 9 months of reconstruction, and containing an endorsement for extended
period of indemnity of at least 6 months, and shall be written with a stipulated
amount of coverage if available at a reasonable premium.
(d) If the Leased Property is located, in whole or in
part, in a federally designated 100-year flood plain area, flood insurance for
the Improvements in an amount equal to the lesser of [i] the full replacement
value of the Improvements; or [ii] the maximum amount of insurance available for
the Improvements under all federal and private flood insurance programs.
(e) Loss or damage caused by the breakage of plate
glass in commercially reasonable amounts acceptable to Landlord.
(f) Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper currency,
depositor's forgery, and loss of property of patients accepted by Tenant for
safekeeping, in commercially reasonable amounts acceptable to the Landlord.
4.2 Liability Insurance. At Tenant's expense, Tenant shall
maintain liability insurance against the following:
(a) Claims for personal injury or property damage
commonly covered by comprehensive general liability insurance with endorsements
for incidental malpractice,
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contractual, personal injury, owner's protective liability, voluntary medical
payments, products and completed operations, broad form property damage, and
extended bodily injury, with commercially reasonable amounts for bodily injury,
property damage, and voluntary medical payments acceptable to Landlord, but with
a combined single limit of not less than $5,000,000.00 per occurrence.
(b) Claims for personal injury and property damage
commonly covered by comprehensive automobile liability insurance, covering all
owned and non-owned automobiles, with commercially reasonable amounts for bodily
injury, property damage, and for automobile medical payments acceptable to
Landlord, but with a combined single limit of not less than $5,000,000.00 per
occurrence.
(c) Claims for personal injury commonly covered by
medical malpractice insurance in commercially reasonable amounts acceptable to
Landlord.
(d) Claims commonly covered by worker's compensation
insurance for all persons employed by Tenant on the Leased Property. Such
worker's compensation insurance shall be in accordance with the requirements of
all applicable local, state, and federal law.
4.3 Builder's Risk Insurance. In connection with any
construction, Tenant shall maintain in full force and effect a builder's
completed value risk policy ("Builder's Risk Policy") of insurance in a
nonreporting form insuring against all "Special Form" risk of physical loss or
damage to the Improvements, including but not limited to, risk of loss from fire
and other hazards, collapse, transit coverage, vandalism, malicious mischief,
theft, earthquake (if Leased Property is in earthquake zone 1 or 2) and
sinkholes (if usually recommended in the area of the Leased Property). The
Builder's Risk Policy shall include endorsements providing coverage for building
materials and supplies and temporary premises. The Builder's Risk Policy shall
be in the amount of the full replacement value of the Improvements and shall
contain a deductible amount acceptable to Landlord. Landlord shall be named as
an additional insured. The Builder's Risk Policy shall include an endorsement
permitting initial occupancy.
4.4 Insurance Requirements. The following provisions shall
apply to all insurance coverages required hereunder:
(a) The form and substance of all policies shall be
subject to the approval of Landlord, which approval will not be unreasonably
withheld.
(b) The carriers of all policies shall have a Best's
Rating of "A" or better and a Best's Financial Category of X or higher and shall
be authorized to do insurance business in the State.
(c) Tenant shall be the "named insured" and Landlord
shall be an "additional insured" on each liability policy. On all property and
casualty policies, Landlord and Tenant shall be joint loss payees.
(d) Tenant shall deliver to Landlord certificates or
policies showing the
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required coverages and endorsements. The policies of insurance shall provide
that the policy may not be cancelled or not renewed, and no material change or
reduction in coverage may be made, without at least 30 days' prior written
notice to Landlord.
(e) The policies shall contain a severability of
interest and/or cross-liability endorsement, provide that the acts or omissions
of Tenant or Landlord will not invalidate the coverage of the other party, and
provide that Landlord shall not be responsible for payment of premiums.
(f) All loss adjustment shall require the written
consent of Landlord and Tenant, as their interests may appear.
(g) At least 30 days prior to the expiration of each
policy, Tenant shall deliver to Landlord a certificate showing renewal of such
policy and payment of the annual premium therefor.
4.5 Replacement Value. The term "full replacement value" means
the actual replacement cost thereof from time to time including increased cost
of construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement value redetermined at any time
after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.
4.6 Blanket Policy. Notwithstanding anything to the contrary
contained in this Section, Tenant may carry the insurance required by this
Article under a blanket policy of insurance, provided that the coverage afforded
Tenant will not be reduced or diminished or otherwise be different from that
which would exist under a separate policy meeting all of the requirements of
this Lease.
4.7 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing
insurance, by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including Landlord and any mortgagees, are included therein as additional
insureds or loss payees, the loss is payable under said insurance in the same
manner as losses are payable under this Lease, and such additional insurance is
not prohibited by the existing policies of insurance. Tenant shall immediately
notify Landlord of the taking out of such separate insurance or the increasing
of any of the amounts of the existing insurance by securing an additional policy
or additional policies.
4.8 Waiver of Subrogation. Each party hereto hereby waives any
and every claim which arises or may arise in its favor and against the other
party hereto during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part of, the Leased Property,
which loss or damage is covered by valid and collectible insurance
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policies, to the extent that such loss or damage is recoverable under such
policies. Said mutual waiver shall be in addition to, and not in limitation or
derogation of, any other waiver or release contained in this Lease with respect
to any loss or damage to property of the parties hereto. Inasmuch as the said
waivers will preclude the assignment of any aforesaid claim by way of
subrogation (or otherwise) to an insurance company (or any other person), each
party hereto agrees immediately to give each insurance company which has issued
to it policies of insurance, written notice of the terms of said mutual waivers,
and to have such insurance policies properly endorsed, if necessary, to prevent
the invalidation of said insurance coverage by reason of said waivers, so long
as such endorsement is available at a reasonable cost.
4.9 Mortgages. The following provisions shall apply if
Landlord now or hereafter places a mortgage on the Leased Property or any part
thereof: [i] Tenant shall obtain a standard form of lender's loss payable clause
insuring the interest of the mortgagee; [ii] Tenant shall deliver evidence of
insurance to such mortgagee; [iii] loss adjustment shall require the consent of
the mortgagee which consent shall not be unreasonably withheld; and [iv] Tenant
shall provide such other information and documents as may be reasonably required
by the mortgagee.
4.10 Escrows. After an Event of Default occurs hereunder and
is continuing, Tenant shall make such periodic payments of insurance premiums in
accordance with Landlord's requirements after receipt of notice thereof from
Landlord.
ARTICLE 5: INDEMNITY
5.1 Tenant's Indemnification. Tenant hereby indemnifies and
agrees to hold harmless Landlord, any successors or assigns of Landlord, and
Landlord's and such successor's and assign's directors, officers, employees and
agents from and against any and all demands, claims, causes of action, fines,
penalties, damages (including consequential damages), losses, liabilities
(including strict liability), judgments, and expenses (including, without
limitation, reasonable attorneys' fees, court costs, and the costs set forth in
Section 8.7) incurred in connection with or arising from: [i] the use or
occupancy of the Leased Property by Tenant or any persons claiming under Tenant;
[ii] any activity, work, or thing done, or permitted or suffered by Tenant in or
about the Leased Property; [iii] any acts, omissions, or negligence of Tenant or
any person claiming under Tenant, or the contractors, agents, employees,
invitees, or visitors of Tenant or any such person; [iv] any breach, violation,
or nonperformance by Tenant or any person claiming under Tenant or the
employees, agents, contractors, invitees, or visitors of Tenant or of any such
person, of any term, covenant, or provision of this Lease or any law, ordinance,
or governmental requirement of any kind including, without limitation, any
failure to comply with any applicable requirements under the ADA; [v] any injury
or damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property; and [vi] any construction, alterations, changes or demolition of the
Facility performed by or contracted for Tenant or its employees, agents or
contractors. Provided, however, that Tenant shall have no indemnity obligation
with respect to matters, liabilities, obligations, claims, damages, penalties,
causes of actions, costs and expenses caused by Landlord's gross negligence or
willful misconduct. If any action or proceeding is brought against Landlord, its
employees, or agents by reason of any such claim, Tenant, upon notice from
Landlord, will defend the claim at Tenant's
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expense with counsel reasonably satisfactory to Landlord. All amounts payable to
Landlord under this section shall be payable on written demand and any such
amounts which are not paid within 10 days after demand therefor by Landlord
shall bear interest at the Overdue Rate. In case any action, suit or proceeding
is brought against Tenant by reason of any such occurrence, Tenant shall use its
best efforts to defend such action, suit or proceeding.
5.1.1 Notice of Claim. Landlord shall notify Tenant in writing
of any claim or action brought against Landlord in which indemnity may be sought
against Tenant pursuant to this section. Such notice shall be given in
sufficient time to allow Tenant to defend or participate in such claim or
action, but the failure to give such notice in sufficient time shall not
constitute a defense hereunder nor in any way impair the obligations of Tenant
under this section unless the failure to give such notice precludes Tenant's
defense of any such action.
5.1.2 Survival of Covenants. The covenants of Tenant contained
in this section shall remain in full force and effect after the termination of
this Agreement until the expiration of the period stated in the applicable
statute of limitations during which a claim or cause of action may be brought
and payment in full or the satisfaction of such claim or cause of action and of
all expenses and charges incurred by Landlord relating to the enforcement of the
provisions herein specified.
5.1.3 Reimbursement of Expenses. Unless prohibited by law,
Tenant hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Agreement.
5.2 Environmental Indemnity; Audits.
5.2.1 Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors to Landlord's interest in this Lease, and
Landlord's and such successors' directors, officers, employees and agents from
and against any losses, claims, damages (including consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including expenses of litigation and
reasonable attorneys' fees) incurred by Landlord or any other indemnitee or
assessed against the Leased Property by virtue of any claim or lien by any
governmental or quasi-governmental unit, body, or agency, or any third party,
for cleanup costs or other costs pursuant to any Environmental Law. Tenant's
indemnity shall survive the termination of this Lease. Provided, however, Tenant
shall have no indemnity obligation with respect to [i] Hazardous Materials first
introduced to the Leased Property subsequent to the date that Tenant's occupancy
of the Leased Property shall have fully terminated; or [ii] Hazardous Materials
introduced to the Leased Property by Landlord, its agent, employees, successors
or assigns. If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of the Leased Premises, in
such form, scope and substance as specified by Landlord, at Tenant's expense.
Tenant shall, within 30 days after receipt of an invoice from Landlord,
reimburse Landlord for all costs and expenses incurred in reviewing any
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environmental audit, including without limitation, reasonable attorneys' fees
and costs.
5.3 Limitation of Landlord's Liability. Landlord, its agents,
and employees, will not be liable for any loss, injury, death, or damage
(including consequential damages) to persons, property, or Tenant's business
occasioned by theft, act of God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition, order of governmental body or
authority, fire, explosion, falling objects, steam, water, rain or snow, leak or
flow of water (including water from the elevator system), rain or snow from the
Leased Property or into the Leased Property or from the roof, street, subsurface
or from any other place, or by dampness or from the breakage, leakage,
obstruction, or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning, or lighting fixtures of the Leased Property, or from
construction, repair, or alteration of the Leased Property or from any acts or
omissions of any other occupant or visitor of the Leased Property, or from any
other cause beyond Landlord's control. The foregoing limitation does not apply
to loss, injury, death or damage caused by Landlord's gross negligence or
willful misconduct.
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES
6.1 Use of Leased Property. Tenant shall use and occupy the
Leased Property exclusively as an adult congregate living facility and for all
lawful and licensed ancillary uses, and for no other purpose without the prior
written consent of the Landlord which consent shall not be unreasonably
withheld. Tenant shall obtain and maintain all approvals, licenses, and consents
needed to use and operate the Leased Property as herein permitted. Tenant shall
deliver to Landlord complete copies of surveys, examinations, certification and
licensure inspections, compliance certificates, and other similar reports issued
to Tenant by any governmental agency within 10 days after Tenant's receipt of
each item.
6.2 Acceptance of Leased Property. Tenant acknowledges that
[i] Tenant and its agents have had an opportunity to inspect the Leased
Property; [ii] Tenant has found the Leased Property fit for Tenant's use; [iii]
Landlord will deliver the Leased Property to Tenant in "as-is" condition; [iv]
Landlord is not obligated to make any improvements or repairs to the Leased
Property; and [v] the roof, walls, foundation, heating, ventilating, air
conditioning, telephone, sewer, electrical, mechanical, elevator, utility,
plumbing, and other portions of the Leased Property are in good working order.
Tenant waives any claim or action against Landlord with respect to the condition
of the Leased Property. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.3 Conditions of Use and Occupancy. Tenant agrees that during
the Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed
extrahazardous on account of fire or otherwise; keep the Leased Property in such
repair and
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condition as may be required by the Board of Health, or other city, state or
federal authorities, free of all cost to Landlord; not permit any acts to be
done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its agents to enter upon the Leased
Property at all reasonable times to examine the condition thereof and
accompanied by a representative of Tenant to the extent such a representative is
available.
ARTICLE 7: REPAIRS AND MECHANICS' LIENS
7.1 Maintenance. Tenant shall maintain, repair, and replace
the Leased Property, including without limitation, all structural and
nonstructural repairs and replacements to the roof, foundations, exterior walls,
parking areas, sidewalks, water, sewer, and gas connections, pipes, and mains.
Tenant shall pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall permit Landlord to
inspect the Leased Property at all reasonable times, and shall implement all
reasonable suggestions of the Landlord as to the maintenance and replacement of
the Leased Property.
7.2 Required Alterations. Tenant shall, at Tenant's sole cost
and expense, make any additions, changes, improvements or alterations to the
Leased Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure or
certification under the Medicare and Medicaid programs (to the extent Tenant is
participating in such programs), whether such changes are required by Tenant's
use, changes in the law, ordinances, or governmental regulations, defects
existing as of the date of this Lease, or any other cause whatever. All such
additions, changes, improvements or alterations shall be deemed to be Permitted
Alterations and shall comply with all laws requiring such alterations and with
the provisions of Section 16.4.
7.3 Mechanic's Liens. Tenant shall have no authority to permit
or create a lien against Landlord's interest in the Leased Property, and Tenant
shall post notices or file such documents, to the extent permitted by law, as
may be required to protect Landlord's interest in the Leased Property against
liens. Tenant hereby agrees to defend, indemnify, and hold Landlord harmless
from and against any mechanic's liens against the Leased Property by reason of
work, labor, services or materials supplied or claimed to have been supplied on
or to the Leased Property. Tenant shall remove, bond-off, or otherwise obtain
the release of any mechanic's lien filed against the Leased Property within 10
days after Tenant receives notice of the filing thereof. Tenant shall pay all
expenses in connection therewith, including without limitation, damages,
interest, court costs and reasonable attorneys' fees.
7.4 Replacements of Fixtures and Personal Property. Tenant
shall not remove Fixtures and Personal Property from the Leased Property except
to replace the Fixtures and Personal Property by other similar items of equal
quality and value. Items being replaced by Tenant may be removed and shall
become the property of Tenant and items replacing the same shall be and remain
the property of Landlord. Tenant shall execute, upon written request from
Landlord, any and all documents necessary to evidence Landlord's ownership of
the Personal
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Property and replacements therefor. Tenant may finance replacements for the
Fixtures and Personal Property by equipment lease or by a security agreement and
financing statement and if the original cost of the equipment exceeds
$50,000.00, Tenant must obtain the following: [i] Landlord's consent to the
terms and conditions of the equipment lease or security agreement; and [ii] a
nondisturbance agreement from the equipment lessor or lender upon terms and
conditions reasonably acceptable to Landlord for, including without limitation,
the following: [a] Landlord shall have the right (but not the obligation) to
assume such security agreement or equipment lease upon the occurrence of an
Event of Default under this Lease; [b] the equipment lessor or lender shall
notify Landlord of any default by Tenant under the equipment lease or security
agreement and give Landlord a reasonable opportunity to cure such default; and
[c] Landlord shall have the right to assign its rights under the equipment
lease, security agreement, or nondisturbance agreement. Tenant shall, within 30
days after receipt of an invoice from Landlord, reimburse Landlord for all costs
and expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.
ARTICLE 8: DEFAULTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of
the following shall be an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of
Rent, or any other monetary obligation payable by Tenant under this Lease
(including the Option Price), within 10 days after such payment is due.
(b) Landlord gives Tenant three or more notices of
non-payment of Rent (after expiration of the 10 day grace period) in any Lease
Year.
(c) Tenant fails to comply with any covenant set
forth in Article 14, Section 15.6, Section 15.7 or Article 20 of this Lease.
(d) Tenant fails to observe and perform any other
covenant, condition or agreement under this Lease to be performed by Tenant and
[i] such failure continues for a period of 30 days after written notice thereof
is given to Tenant by Landlord; or [ii] if, by reason of the nature of such
default, the same cannot be remedied within said 30 days, Tenant fails to
proceed with diligence reasonably satisfactory to Landlord after receipt of the
notice to cure the same or, if Tenant does proceed diligently, Tenant fails to
cure such default within 90 days after receipt of the notice. The foregoing
notice and cure provisions do not apply to any Event of Default otherwise
specifically described in any other subsection of Section 8.1.
(e) Tenant abandons or vacates the Leased Property or
any material part thereof or ceases to do business or ceases to exist for any
reason for any one or more days except as a result of condemnation or casualty.
(f) [i] The filing by Tenant of a petition under 11
U.S.C. or the commencement of a bankruptcy or similar proceeding by Tenant; [ii]
the failure by Tenant within
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60 days to dismiss an involuntary bankruptcy petition or other commencement of a
bankruptcy, reorganization or similar proceeding against Tenant, or to lift or
stay any execution, garnishment or attachment of such consequence as will impair
its ability to carry on its operation at the Leased Property; [iii] the entry of
an order for relief under 11 U.S.C. in respect of Tenant; [iv] any assignment by
Tenant for the benefit of its creditors; [v] the entry by Tenant into an
agreement of composition with its creditors; [vi] the approval by a court of
competent jurisdiction of a petition applicable to Tenant in any proceeding for
its reorganization instituted under the provisions of any state or federal
bankruptcy, insolvency, or similar laws; [vii] appointment by final order,
judgment, or decree of a court of competent jurisdiction of a receiver of a
whole or any substantial part of the properties of Tenant (provided such
receiver shall not have been removed or discharged within 60 days of the date of
his qualification).
(g) [i] Any receiver, administrator, custodian or
other person takes possession or control of any of the Leased Property and
continues in possession for 60 days; [ii] any writ against any of the Leased
Property is not released within 60 days; [iii] any judgment is rendered or
proceedings are instituted against the Leased Property or Tenant which affect
the Leased Property or any part thereof, which is not dismissed for 60 days
(except as otherwise provided in this Section); [iv] all or a substantial part
of the assets of Tenant are attached, seized, subjected to a writ or distress
warrant, or are levied upon, or come into the possession of any receiver,
trustee, custodian, or assignee for the benefit of creditors; [v] Tenant is
enjoined, restrained, or in any way prevented by court order, or any proceeding
is filed or commenced seeking to enjoin, restrain or in any way prevent Tenant
from conducting all or a substantial part of its business or affairs; or [vi]
except as otherwise permitted hereunder, a final notice of lien, levy or
assessment is filed of record with respect to all or any part of the Leased
Property or any property of Tenant located at the Leased Property and is not
dismissed, discharged, or bonded-off within 30 days.
(h) Any representation or warranty made by Tenant in
this Lease or any other document executed in connection with this Lease, any
guaranty of or other security for this Lease, or any report, certificate,
application, financial statement or other instrument furnished by Tenant
pursuant hereto or thereto shall prove to be false, misleading or incorrect in
any material respect as of the date made.
(i) Tenant defaults on any indebtedness or obligation
to Landlord under this Lease or the Affiliate Lease, or Tenant receives notice
of acceleration of payment in connection with any Material Obligation unless
Tenant can demonstrate to Landlord that such acceleration will not cause Tenant
to be in violation of Section 15.7. This provision applies to all such
indebtedness, obligations and agreements as they may be amended, modified,
extended, or renewed from time to time.
(j) The occurrence of any change in Tenant's
leasehold interest in the Leased Property, or any material change in the control
of Tenant, directly or indirectly, at any time prior to Tenant's initial public
offering, without the prior written consent of Landlord.
(k) The license for the Facility or any other
Government Authorization,
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is cancelled, suspended or otherwise invalidated, notice of impending revocation
proceedings is received and Tenant fails to diligently contest such proceeding,
or any reduction occurs in the number of licensed beds or units at the Facility
in excess of 3%.
8.2 Remedies. Landlord may exercise any one or more of the
following remedies upon the occurrence of an Event of Default:
(a) Landlord may re-enter and take possession of the
Leased Property without terminating the Lease, and lease the Leased Property for
the account of Tenant at a commercially reasonable rate, holding Tenant liable
for all costs of the Landlord in reletting the Leased Property and for the
difference in the amount received by such reletting and the amounts payable by
Tenant under the Lease.
(b) Landlord may terminate this Lease, exclude Tenant
from possession of the Leased Property and use efforts to lease the Leased
Property to others at a commercially reasonable rate, holding Tenant liable for
the difference in the amounts received from such reletting and the amounts
payable by Tenant under the Lease.
(c) Landlord may re-enter the Leased Property and
have, repossess and enjoy the Leased Property as if the Lease had not been made,
and in such event, Tenant and its successors and assigns shall remain liable for
any contingent or unliquidated obligations or sums owing at the time of such
repossession.
(d) Landlord may have access to and inspect, examine
and make copies of the books and records and any and all accounts, data and
income tax and other returns of Tenant insofar as they pertain to the Leased
Property.
(e) Landlord may accelerate all of the unpaid Rent
hereunder so that the aggregate Rent for the unexpired term of this Lease
becomes immediately due and payable.
(f) Landlord may take whatever action at law or in
equity as may appear necessary or desirable to collect the Rent and other
amounts payable under the Lease then due and thereafter to become due, or to
enforce performance and observance of any obligations, agreements or covenants
of Tenant under this Lease.
(g) With respect to the Collateral and Landlord's
security interest therein, Landlord may exercise all of its rights as secured
party under Article 9 of the Uniform Commercial Code as adopted in the State.
Landlord may sell the Collateral by public or private sale upon 10 days notice
to Tenant. Tenant agrees that a commercially reasonable manner of disposition of
the Collateral shall include, without limitation and at the option of Landlord,
a sale of the Collateral, in whole or in part, concurrently with the sale of the
Leased Property.
(h) Landlord may obtain control over and collect the
Receivables and apply the proceeds of the collections to satisfaction of
Tenant's Obligations unless prohibited by law. Tenant appoints Landlord or its
designee as attorney for Tenant with powers [i] to receive, to
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indorse, to sign and/or to deliver, in Tenant's name or Landlord's name, any and
all checks, drafts, and other instruments for the payment of money relating to
the Receivables, and to waive demand, presentment, notice of dishonor, protest,
and any other notice with respect to any such instrument; [ii] to sign Tenant's
name on any invoice or bill of lading relating to any Receivable, drafts against
account debtors, assignments and verifications of Receivables, and notices to
account debtors; [iii] to send verifications of Receivables to any account
debtor; and [iv] to do all other acts and things necessary to carry out this
Lease. Landlord shall not be liable for any omissions, commissions, errors of
judgment, or mistakes in fact or law made in the exercise of any such powers
provided Lender's exercise of such powers is commercially reasonable. At
Landlord's option, Tenant shall [i] provide Landlord a full accounting of all
amounts received on account of Receivables with such frequency and in such form
as Landlord may require, either with or without applying all collections on
Receivables in payment of Tenant's Obligations or [ii] deliver to Landlord on
the day of receipt all such collections in the form received and duly indorsed
by Tenant. At Landlord's request, Tenant shall institute any action or enter
into any settlement determined by Landlord to be necessary to obtain recovery or
redress from any account debtor in default of Receivables. Landlord may give
notice of its security interest in the Receivables to any or all account debtors
with instructions to make all payments on Receivables directly to Landlord,
thereby terminating Tenant's authority to collect Receivables. After terminating
Tenant's authority to enforce or collect Receivables, Landlord shall have the
right to take possession of any or all Receivables and records thereof and is
hereby authorized to do so, and only Landlord shall have the right to collect
and enforce the Receivables. Prior to the occurrence of an Event of Default, at
Tenant's cost and expense, but on behalf of Landlord and for Landlord's account,
Tenant shall collect or otherwise enforce all amounts unpaid on Receivables and
hold all such collections in trust for Landlord, but Tenant may commingle such
collections with Tenant's own funds, until Tenant's authority to do so has been
terminated, which may be done only after an Event of Default. Notwithstanding
any other provision hereof, Landlord does not assume any of Tenant's obligations
under any Receivable, and Landlord shall not be responsible in any way for the
performance of any of the terms and conditions thereof by Tenant.
(i) Without waiving any prior or subsequent Event of
Default, Landlord may waive any Event of Default or, with or without waiving any
Event of Default, remedy any default.
(j) Landlord may terminate its obligation to disburse
Lease Advances.
8.3 Right of Set-Off. After an Event of Default occurs
hereunder and is continuing, Landlord may, and is hereby authorized by Tenant
to, at any time and from time to time without advance notice to Tenant (any such
notice being expressly waived by Tenant), set-off and apply any and all sums
held by Landlord, any indebtedness of Landlord to Tenant, and any claims by
Tenant against Landlord, against any obligations of Tenant hereunder and against
any claims by Landlord against Tenant, whether or not such obligations or claims
of Tenant are matured and whether or not Landlord has exercised any other
remedies hereunder. The rights of Landlord under this Section are in addition to
any other rights and remedies Landlord may have against Tenant.
8.4 Performance of Tenant's Covenants. Landlord may perform
any obligation
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of Tenant which Tenant has failed to perform within 10 days after Landlord has
sent a written notice to Tenant informing it of its specific failure. Tenant
shall reimburse Landlord on demand, as Additional Rent, for any expenditures
thus incurred by Landlord and shall pay interest thereon at the Overdue Rate (as
defined in Section 8.6).
8.5 Late Payment Charge. Tenant acknowledges that any default
in the payment of any installment of Rent payable hereunder will result in loss
and additional expense to Landlord in servicing any indebtedness of Landlord
secured by the Leased Property, handling such delinquent payments, and meeting
its other financial obligations, and because such loss and additional expense is
extremely difficult and impractical to ascertain, Tenant agrees that in the
event any Rent payable to Landlord hereunder is not paid within 10 days after
the due date, Tenant shall pay a late charge of 5% of the amount of the overdue
payment as a reasonable estimate of such loss and expenses, unless applicable
law requires a lesser charge, in which event the maximum rate permitted by such
law may be charged by Landlord. The 10 day grace period set forth in this
Section shall not extend the time for payment of Rent or the period for curing
any default or constitute a waiver of such default.
8.6 Interest. In addition to the late payment charge, any
payment not made by Tenant within 10 days after the due date shall thereafter
bear interest at the rate (the "Overdue Rate") of the greater of [i] 18.5% per
annum; or [ii] 2.5% per annum above the Lease Rate then in effect; provided,
however, that at no time will Tenant be required to pay interest at a rate
higher than the maximum legal rate and, provided further, that if a court of
competent jurisdiction determines that any other charges payable under this
Lease are deemed to be interest, the Overdue Rate shall be adjusted to ensure
that the aggregate interest payable under this Lease does not accrue at a rate
in excess of the maximum legal rate. Tenant shall not be required to pay
interest upon any late payment fees assessed pursuant to Section 8.5.
8.7 Litigation; Attorneys' Fees. Within 5 days after Tenant
has knowledge of any litigation or other proceeding that may be instituted
against Tenant that is material to the construction or operation of the Facility
or that is material to Tenant's business or financial condition, against the
Leased Property to secure or recover possession thereof, or that may affect the
title to or the interest of Landlord in the Leased Property, Tenant shall give
written notice thereof to Landlord. Tenant shall pay all reasonable costs and
expenses incurred by Landlord in enforcing or preserving Landlord's rights under
this Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including without limitation, [i] the fees,
expenses, and costs of any litigation, receivership, administrative, bankruptcy,
insolvency or other similar proceeding; [ii] reasonable attorney, paralegal,
consulting and witness fees and disbursements, whether in house counsel or
outside counsel; and [iii] the expenses, including without limitation, lodging,
meals, and transportation, of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency or
other similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. All such costs, charges and fees payable by Tenant shall
be deemed to be Additional Rent under this Lease.
8.8 Escrows and Application of Payments. As security for the
performance of
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its obligations hereunder, Tenant hereby assigns to Landlord all its right,
title, and interest in and to all monies escrowed with Landlord under this Lease
and all deposits with utility companies, taxing authorities and insurance
companies; provided, however, that Landlord shall not exercise its rights
hereunder until an Event of Default has occurred. Any payments received by
Landlord under any provisions of this Lease during the existence or continuance
of an Event of Default shall be applied to Tenant's obligations in the order
which Landlord may determine.
8.9 Remedies Cumulative. The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity. The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.
ARTICLE 9: DAMAGE AND DESTRUCTION
9.1 Notice of Casualty. If the Leased Property shall be
destroyed, in whole or in part, or damaged by fire, flood, windstorm or other
casualty (a "Casualty"), Tenant shall give written notice thereof to the
Landlord within 3 business days after the occurrence of the Casualty. Within 15
days after the occurrence of the Casualty or as soon thereafter as such
information is reasonably available to Tenant, Tenant shall provide the
following information to Landlord: [i] the date of the Casualty; [ii] the nature
of the Casualty; [iii] a description of the damage or destruction caused by the
Casualty including the type of Leased Property damaged and the area of the
Improvements damaged; [iv] a preliminary estimate of the cost to repair,
rebuild, restore or replace the Leased Property; [v] a preliminary estimate of
the schedule to complete the repair, rebuilding, restoration or replacement of
the Leased Property; [vi] a description of the anticipated property insurance
claim including the name of the insurer, the insurance coverage limits, the
deductible amount, the expected settlement amount, and the expected settlement
date; and [vii] a description of the business interruption claim including the
name of the insurer, the insurance coverage limits, the deductible amount, the
expected settlement amount, and the expected settlement date. Within five days
after request from Landlord, Tenant will provide Landlord with copies of all
correspondence to the insurer and any other information reasonably requested by
Landlord.
9.2 Substantial Destruction.
9.2.1 If the Improvements are substantially destroyed at any
time other than during the final 18 months of the Initial Term or any Renewal
Term, Tenant shall promptly rebuild and restore the Leased Property in
accordance with Section 9.4 and Landlord shall make the insurance proceeds
available to Tenant for such restoration. The term "Substantially Destroyed"
means any casualty resulting in the loss of use of 35% or more of the licensed
beds at any one Facility.
9.2.2 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term or any Renewal Term, Landlord may elect
to terminate this Lease or terminate this Lease and all Affiliate Leases, at
Landlord's option, and retain the insurance proceeds unless Tenant exercises its
option to renew as set forth in Section 9.2.3 or exercises its option to
purchase as set forth in Section 9.2.4. If Landlord elects to terminate,
Landlord shall give notice ("Termination Notice") of its election to terminate
this Lease (or this Lease and all Affiliate Leases, if elected by Landlord)
within 30 days after receipt of Tenant's notice of the damage. If Tenant does
not exercise its option
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to renew under Section 9.2.3 or its option to purchase under Section 9.2.4
within 15 days after delivery of the Termination Notice, this Lease (or this
Lease and all Affiliate Leases, if elected by Landlord) shall terminate on the
15th day after delivery of the Termination Notice. If this Lease (or this Lease
and all Affiliate Leases, if elected by Landlord) is so terminated, Tenant shall
be liable to Landlord for all Rent and all other obligations accrued under this
Lease through the effective date of termination and each Affiliate shall be
liable to Landlord for all Rent and all other obligations accrued under its
respective Affiliate Lease through the effective date of termination.
9.2.3 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term or the first or second Renewal Term and
Landlord gives the Termination Notice, Tenant shall have the option to renew
this Lease. Tenant shall give Landlord irrevocable notice of Tenant's election
to renew, and Tenant shall give irrevocable notice of renewal of the Affiliate
Lease, within 15 days after delivery of the Termination Notice. If Tenant elects
to renew, the Renewal Term will be in effect for the balance of the then current
Term plus a 5 year period. The Renewal Term will commence on the third day
following Landlord's receipt of Tenant's and notice of renewal. All other terms
of this Lease for the Renewal Term shall be in accordance with Article 12. The
Leased Property will be restored by Tenant in accordance with the provisions of
this Article 9 regarding partial destruction.
9.2.4 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term or any Renewal Term and Landlord gives
the Termination Notice, Tenant shall have the option to purchase the Leased
Property. Tenant shall give Landlord notice of Tenant's election to purchase,
and if required by Landlord, Tenant shall give notice of its election to
purchase the Affiliate Facility, within 15 days after delivery of the
Termination Notice. If Tenant elects to purchase the Leased Property and the
Affiliate Facility, the Option Price will be determined in accordance with
Section 13.2 and the Fair Market Value will be determined in accordance with
Section 13.3. For purposes of determining the Fair Market Value, the Leased
Property will be valued as if it had been restored to be equal in value to the
Leased Property existing immediately prior to the occurrence of the damage. All
other terms of the option to purchase shall be in accordance with Article 13.
Landlord shall hold the insurance proceeds until the closing of the purchase of
the Leased Property and at closing shall deliver the proceeds to Tenant.
9.3 Partial Destruction. If the Leased Property is not
substantially destroyed, then Tenant shall comply with the provisions of Section
9.4 and Landlord shall make the insurance proceeds available to Tenant for such
restoration.
9.4 Restoration. Tenant shall promptly repair, rebuild, or
restore the Leased Property, at Tenant's expense, so as to make the Leased
Property at least equal in value to the Leased Property existing immediately
prior to such occurrence and as nearly similar to it in character as is
practicable and reasonable. Before beginning such repairs or rebuilding, or
letting any contracts in connection with such repairs or rebuilding, Tenant will
submit for Landlord's approval, which approval Landlord will not unreasonably
withhold or delay, plans and specifications meeting the requirements of Section
16.2 for such repairs or rebuilding. Promptly after receiving Landlord's
approval of the plans and specifications and receiving the proceeds of
insurance, Tenant will begin such repairs or rebuilding and will prosecute the
repairs and rebuilding
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to completion with diligence, subject, however, to strikes, lockouts, acts of
God, embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses, after deduction of any costs of collection,
including reasonable attorneys' fees. Tenant may assume primary responsibility
for collection of the proceeds in consultation with Landlord. Payments will be
made against properly certified vouchers of a competent architect in charge of
the work and approved by Landlord. Prior to commencing the repairing or
rebuilding, Tenant shall deliver to Landlord for Landlord's approval a schedule
setting forth the estimated monthly draws for such work. Landlord will
contribute to such payments out of the insurance proceeds an amount equal to the
proportion that the total net amount received by Landlord from insurers bears to
the total estimated cost of the rebuilding or repairing, multiplied by the
payment by Tenant on account of such work. Landlord may, however, withhold 10%
from each payment until the work is completed and proof has been furnished to
Landlord that no lien or liability has attached or will attach to the Leased
Property or to Landlord in connection with such repairing or rebuilding. Upon
the completion of rebuilding and the furnishing of such proof, the balance of
the net proceeds of such insurance payable to Tenant on account of such
repairing or rebuilding will be paid to Tenant. Tenant will obtain and deliver
to Landlord a temporary or final certificate of occupancy before the Leased
Property is reoccupied for any purpose. Tenant shall complete such repairs or
rebuilding free and clear of mechanic's or other liens, and in accordance with
the building codes and all applicable laws, ordinances, regulations, or orders
of any state, municipal, or other public authority affecting the repairs or
rebuilding, and also in accordance with all requirements of the insurance rating
organization, or similar body. Any remaining proceeds of insurance after such
restoration will be Tenant's property.
9.5 Insufficient Proceeds. If the proceeds of any insurance
settlement are not sufficient to pay the costs of Tenant's repair, rebuilding or
restoration under Section 9.4 in full, Tenant shall deposit with Landlord at
Landlord's option, and within 10 days of Landlord's request, an amount
sufficient in Landlord's reasonable judgment to complete such repair, rebuilding
or restoration. Tenant shall not, by reason of the deposit or payment, be
entitled to any reimbursement from Landlord or diminution in or postponement of
the payment of the Rent.
9.6 Not Trust Funds. Notwithstanding anything herein or at law
or equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9. Tenant expressly assumes
all risk of loss, including a decrease in the use, enjoyment or value, of the
Leased Property from any casualty whatsoever, whether or not insurable or
insured against.
9.7 Landlord's Inspection. During the progress of such repairs
or rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the
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particular deficiency, omission, or other respect in which Landlord claims such
repairs or rebuilding do not accord with the approved plans and specifications.
Upon the receipt of any such notice, Tenant will cause corrections to be made to
any deficiencies, omissions, or such other respect. Tenant's obligations to
supply insurance, according to Article 4, will be applicable to any repairs or
rebuilding under this Section.
9.8 Landlord's Costs. Tenant shall, within 30 days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses, and
fees of any architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith.
9.9 No Rent Abatement. Except to the extent that business
interruption insurance proceeds are received by Landlord, rent will not abate
pending the repairs or rebuilding of the Leased Property.
ARTICLE 10: CONDEMNATION
10.1 Total Taking. If, by exercise of the right of eminent
domain or by conveyance made in response to the threat of the exercise of such
right ("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the property of the Landlord except for damages awarded
to Tenant as compensation for diminution in value of the leasehold of the Leased
Property. If this Lease is terminated with respect to the Facility subject to a
taking as described in this section, Landlord may, at its option, terminate the
Affiliate Lease.
10.1.2 If the entire Lease Property is taken during the final
18 months of the Initial Term or any Renewal Term and Landlord elects to
terminate the Affiliate Lease, Tenant shall have the option to purchase the
Affiliate Facility. Tenant shall give Landlord notice of Tenant's election to
purchase within 15 days after delivery of the notice of Landlord's intent to
terminate. If Tenant elects to purchase the Affiliate Facility, the Option Price
will be determined in accordance with Section 13.2 and the Fair Market Value
will be determined in accordance with Section 13.3. All other terms of the
option to purchase shall be in accordance with Article 13.
10.2 Partial Taking. If, after a Taking, so much of the Leased
Property remains that the Leased Property can be used for substantially the same
purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
the Leased Property in the condemning authority or the taking of possession of
the Leased Property by the condemning authority; [ii] at its cost and to the
extent of the proceeds, Tenant shall restore so much of the Leased Property as
remains to a sound architectural unit
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substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials; [iii] upon
completion of the restoration, Landlord will pay Tenant the lesser of the net
award made to Landlord on the account of the Taking (after deducting from the
total award, attorneys', appraisers', and other reasonable fees and costs
incurred in connection with the obtaining of the award and amounts paid to the
holders of mortgages secured by the Leased Property), or Tenant's actual
out-of-pocket costs of restoring the Leased Property; and [iv] Landlord shall be
entitled to the balance of the net award. The restoration shall be completed in
accordance with Section Section 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions
deemed to apply to condemnation instead of casualty.
10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding
anything in this Lease or at law or equity to the contrary, none of the
condemnation award paid to Landlord shall be deemed trust funds, and Landlord
shall be entitled to dispose of such proceeds as provided in this Article 10.
Tenant expressly assumes all risk of loss, including a decrease in the use,
enjoyment, or value, of the Leased Property from any Condemnation.
ARTICLE 11: TENANT'S PROPERTY
11.1 Tenant's Property. Tenant shall install, place, and use
on the Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Personal Property as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "Tenant's Property".
11.2 Requirements for Tenant's Property. Tenant shall comply
with all of the following requirements in connection with Tenant's Property:
(a) Tenant shall, at Tenant's sole cost and expense,
maintain, repair, and replace Tenant's Property.
(b) Tenant shall, at Tenant's sole cost and expense,
keep Tenant's Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, earthquake, and other physical loss
perils commonly covered by fire and extended coverage, boiler and machinery, and
difference in conditions insurance in an amount not less than 90% of the then
full replacement cost thereof. Tenant shall use the proceeds from any such
policy for the repair and replacement of Tenant's Property. The insurance shall
meet the requirements of Section 4.3.
(c) Tenant shall pay all taxes applicable to Tenant's
Property.
(d) If Tenant's Property is damaged or destroyed by
fire or any other cause, Tenant shall promptly repair or replace Tenant's
Property unless Landlord elects to terminate this Lease pursuant to Section
9.2.2.
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(e) Unless an Event of Default or any event which,
with the giving of notice or lapse of time, or both, would constitute an Event
of Default has occurred, Tenant may remove Tenant's Property from the Leased
Property from time to time provided that [i] the items removed are not required
to operate the Leased Property as a licensed adult congregate living facility
(unless such items are being replaced by Tenant); and [ii] Tenant repairs any
damage to the Leased Property resulting from the removal of Tenant's Property.
(f) Tenant shall not, without the prior written
consent of Landlord or as otherwise provided in this Lease, remove any Tenant's
Property or Leased Property. Tenant shall, at Landlord's option, remove Tenant's
Property upon the termination or expiration of this Lease and shall repair any
damage to the Leased Property resulting from the removal of Tenant's Property.
If Tenant fails to remove Tenant's Property within 30 days after request by
Landlord, then Tenant shall be deemed to have abandoned Tenant's Property,
Tenant's Property shall become the property of Landlord, and Landlord may
remove, store and dispose of Tenant's Property. In such event, Tenant shall have
no claim or right against Landlord for such property or the value thereof
regardless of the disposition thereof by Landlord. Tenant shall pay Landlord,
upon demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such removal.
Tenant's obligations hereunder shall survive the termination or expiration of
this Lease.
(g) Tenant shall perform its obligations under any
equipment lease or security agreement for Tenant's Property. For equipment loans
or leases for equipment having an original cost in excess of $50,000.00, Tenant
shall cause such equipment lessor or lender to enter into a nondisturbance
agreement with Landlord upon terms and conditions acceptable to Landlord,
including without limitation, the following: [i] Landlord shall have the right
(but not the obligation) to assume such equipment lease or security agreement
upon the occurrence of an Event of Default by Tenant hereunder; [ii] such
equipment lessor or lender shall notify Landlord of any default by Tenant under
the equipment lease or security agreement and give Landlord a reasonable
opportunity to cure such default; and [iii] Landlord shall have the right to
assign its interest in the equipment lease or security agreement and
nondisturbance agreement. Tenant shall, within 30 days after receipt of an
invoice from Landlord, reimburse Landlord for all costs and expenses incurred in
reviewing and approving the equipment lease, security agreement and
nondisturbance agreement, including without limitation, reasonable attorneys'
fees and costs.
ARTICLE 12: RENEWAL OPTIONS
12.1 Renewal Options. Tenant has the option to renew ("Renewal
Option") this Lease for 3 consecutive 5 year renewal terms (each a "Renewal
Term"). Tenant can exercise the Renewal Option only upon satisfaction of the
following conditions:
(a) There shall be no uncured Event of Default, or
any event which with the passage of time or giving of notice would constitute an
Event of Default, at the time Tenant exercises its Renewal Option nor on the
date the Renewal Term is to commence.
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(b) Tenant shall give Landlord written notice of
renewal no later than the date which is [i] 90 days prior to the expiration date
of the then current Term; or [ii] 15 days after Landlord's delivery of the
Termination Notice as set forth in Section 9.2.3. Such notice shall be
irrevocable except to the extent that an event occurs which under the provisions
of this Lease would permit Tenant to terminate this Lease and Tenant so elects
to terminate this Lease.
(c) Tenant shall concurrently give irrevocable notice
of renewal for the Affiliate Lease.
12.2 Effect of Renewal. The following terms and conditions
will be applicable if Tenant renews the Lease:
(a) Effective Date. Except as otherwise provided in
Section 9.2.3, the effective date of any Renewal Term will be the first day
after the expiration date of the then current Term. The first day of each
Renewal Term is also referred to as the Renewal Date.
(b) Lease Amount. Effective as of the Renewal Date, a
single Lease Amount will be computed by summing all Lease Advance Amounts
(including the Acquisition Amount).
(c) Lease Rate. Effective as of the Renewal Date, a
single Lease Rate will be computed equal to the Renewal Rate. The Renewal Rate
will be the sum of the Rate Index on the Rate Determination Date plus the
applicable Rate Spread.
(d) Increaser Rate. The Increaser Rate will be 20
basis points per year.
(e) Base Rent. Effective as of the Renewal Date, the
Base Rent will be changed to equal 1/12th of the product of [i] the Lease Amount
on the Renewal Date times [ii] the new Lease Rate equal to the Renewal Rate.
(f) Other Terms and Conditions. Except for the
modifications set forth in this Section 12.2, all other terms and conditions of
the Lease will remain the same for the Renewal Term.
ARTICLE 13: OPTION TO PURCHASE
13.1 Option to Purchase. Landlord hereby grants to Tenant an
option to purchase ("Option to Purchase") all of the Leased Property (but not
any part thereof) in accordance with the terms and conditions of this Article
13. Tenant may exercise its Option to Purchase only by giving an irrevocable
notice of Tenant's election to purchase the Leased Property ("Purchase Notice")
in accordance with the following:
(a) During years 8, 9 and 10 the Initial Term and
during any Renewal Term, Tenant must give a Purchase Notice no earlier than the
date which is 270 days, and no later
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than the date which is 120 days, prior to [i] the end of the Initial Term, or
[ii] the expiration date of the then current Term of this Lease and the
Affiliate Lease.
(b) If the Improvements are substantially destroyed
during the final 18 months of the Initial Term or any Renewal Term, Tenant must
give a Purchase Notice within 15 days after Landlord gives the Termination
Notice pursuant to Section 9.2.4.
Tenant shall have no right to exercise the Option to Purchase other than in
accordance with subparagraph [a] or [b].
13.1.2 In the event that the accounting treatment for this
Lease does not permit Tenant to have a fair market value option to purchase the
Facility, Tenant shall have a right of first refusal to purchase the Facility
(or the Affiliate Facility as applicable). If at any time during the Term,
Landlord shall receive a bona fide offer ("Offer") from a third person for the
purchase of the Leased Property, which Offer Landlord desires to accept,
Landlord shall promptly deliver to Tenant a copy of such Offer. Tenant shall
have the right for a period of 60 days thereafter to elect to purchase the
Leased Property on the same terms and conditions as those set forth in the
Offer. If Tenant elects to purchase the Leased Property, Tenant must give
written notice thereof to Landlord no later than the 60th day after the date
Landlord delivers the Offer to Tenant. If Tenant does not elect to exercise its
right of first refusal as set forth in this section, Landlord shall be free to
sell and convey the Leased Property to the third party purchaser in accordance
with the terms and provisions of the Offer, subject to this Lease. In the event
that Landlord does not consummate the sale of the Leased Property to such
purchaser, Tenant's right of first refusal under this section shall remain
applicable to subsequent bona fide offers from third persons.
13.2 Option Price. The option price ("Option Price") will be
the Fair Market Value of the Leased Property determined pursuant to Section
13.3; provided, however, that the Option Price shall not be less than the Lease
Amount. Notwithstanding any provision in this Lease to the contrary, Tenant
shall have the right to revoke its Purchase Notice within 10 days after the
Option Price has been determined if the Option Price is not acceptable to Tenant
or Tenant may revoke to the extent that an event occurs which under the
provisions of this Lease would permit Tenant to terminate this Lease and Tenant
so elects to terminate this Lease. In addition to the Option Price, Tenant shall
pay all closing costs and expenses in connection with the transfer of the Leased
Property to Tenant including but not limited to the following: [a] real property
conveyance or transfer fees or deed stamps; [b] title search fees, title
insurance commitment fees, and title insurance premiums; [c] survey fees; [d]
environmental assessment fees; [e] recording fees; [f] reasonable attorneys'
fees of Landlord's counsel; [g] fees of any escrow agent; and [h] all amounts,
costs, expenses, charges, Additional Rent and other items payable by Tenant to
Landlord including but not limited to enforcement costs as set forth in Section
8.7.
13.3 Fair Market Value. The fair market value (the "Fair
Market Value") of the Leased Property shall be determined as follows.
13.3.1 The parties shall attempt to determine the Fair Market
Value by mutual agreement within 15 days after giving the Purchase Notice.
However, if the parties do not agree on
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the Fair Market Value within such 15 day period, the following provisions shall
apply.
13.3.2 Landlord and Tenant shall each give the other party
notice of the name of an acceptable appraiser 15 days after giving of the
Purchase Notice. The two appraisers will then select a third appraiser within an
additional 5 days. Each appraiser must demonstrate to the reasonable
satisfaction of both Landlord and Tenant that it has significant experience in
appraising properties similar to the Leased Property. Within 5 days after
designation, each appraiser shall submit a resume to Landlord and Tenant setting
forth such appraiser's qualifications including education and experience with
similar properties. A notice of objections to the qualifications of any
appraiser shall be given within 10 days after receipt of such resume. If a party
fails to timely object to the qualifications of an appraiser, then the appraiser
shall be conclusively deemed satisfactory. If a party gives a timely notice of
objection to the qualifications of an appraiser, then the disqualified appraiser
shall be replaced by an appraiser selected by the qualified appraisers or, if
all appraisers are disqualified, then by an appraiser selected by a commercial
arbitrator acceptable to Landlord and Tenant.
13.3.3 The Fair Market Value shall be determined by the
appraisers within 60 days thereafter as follows. Each of the appraisers shall be
instructed to prepare an appraisal of the Leased Property in accordance with the
following instructions:
The Leased Property is to be valued upon the three
conventional approaches to estimate value known as the Income,
Sales Comparison and Cost Approaches. Once the approaches are
completed, the appraiser correlates the individual approaches
into a final value conclusion.
The three approaches to estimate value are summarized as follows:
INCOME APPROACH: This valuation approach recognizes that the
value of the operating tangible and intangible asset can be
represented by the expected economic viability of the business
giving returns on and of the assets and shall use a management
fee of 7%.
SALES COMPARISON APPROACH: This valuation approach is based
upon the principal of substitution. When a facility is
replaceable in the market, the market approach assumes that
value tends to be set at the price of acquiring an equally
desirable substitute facility. Since healthcare market
conditions change and frequently are subject to regulatory and
financing environments, adjustments need to be considered.
These adjustments also consider the operating differences such
as services and demographics.
COST APPROACH: This valuation approach estimates the value of
the tangible assets only. Value is represented by the market
value of the
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land plus the depreciated reproduction cost of all
improvements and equipment.
In general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangibles and intangible assets,
consider the operating characteristics of the business and have the most
significant influence on attracting potential investors.
The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the Fair
Market Value.
13.3.4 In the event of any condemnation, similar taking or
threat thereof with respect to any part of the Leased Property or any insured or
partially insured casualty loss to any part of the Leased Property after Tenant
has exercised an Option to Purchase, but before settlement, the Fair Market
Value of the Leased Property shall be redetermined as provided in this Section
13.3 to give effect to such condemnation, taking or loss.
13.3.5 Tenant shall pay, or reimburse Landlord for, all costs
and expenses in connection with the appraisals.
13.4 Closing. The purchase of the Leased Property by Tenant
shall close on a date agreed to by Landlord and Tenant which shall be not less
than 60 days after Landlord's receipt of the Purchase Notice and not more than
60 days after the Fair Market Value of the Leased Property has been determined.
At the closing, Tenant shall pay the Option Price and all closing costs in
immediately available funds and Landlord shall convey title to the Leased
Property to Tenant by a transferable and recordable limited warranty deed and
limited warranty bill of sale. The warranties provided for in such documents
shall not be limited by any limitations upon Landlord's liability as provided in
this Lease. Landlord shall also execute those affidavits reasonably required by
the title company for the issuance of an owner's policy of title insurance.
13.5 Failure to Close Option. If Tenant for any reason fails
to purchase the Leased Property after Tenant has given the Purchase Notice, then
Tenant shall pay Landlord all costs and expenses incurred by Landlord as a
result of the failure to close including costs of unwinding swap transactions or
other interest rate protection devices and preparing for the closing. Tenant
shall continue to be obligated as lessee hereunder for the remainder of the Term
(including the Extended Term as set forth in Section 12.3).
13.6 Failure to Exercise Option to Purchase and Renewal
Option. If Tenant for any reason does not exercise its Option to Purchase or
Renewal Option in accordance with the terms and conditions of this Lease before
the expiration of the then current Term, Tenant shall be deemed to have
forfeited its equity contribution and all proprietary and ownership interest in
the Leased Property.
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ARTICLE 14: NEGATIVE COVENANTS
Until Tenant's Obligations shall have been performed in full,
Tenant covenants and agrees that Tenant shall not do any of the following
without the prior written consent of Landlord which consent shall not be
unreasonably withheld:
14.1 No Debt. Tenant shall not create, incur, assume, or
permit to exist any indebtedness related to the Facility other than [i] trade
debt incurred in the ordinary course of Tenant's business; [ii] indebtedness for
Facility working capital purposes in an amount not to exceed $150,000.00; [iii]
indebtedness relating to the Letter of Credit; [iv] indebtedness that is secured
by any Permitted Lien; and [v] unsecured indebtedness that will not cause Tenant
to be in violation of Section 15.7.
14.2 No Liens. Tenant shall not create, incur, or permit to
exist any lien, charge, encumbrance, easement or restriction upon the Leased
Property or any lien upon or pledge of any interest in Tenant related to the
Facility, except for Permitted Liens.
14.3 No Guaranties. Tenant shall not create, incur, assume, or
permit to exist any guarantee of any loan or other indebtedness except for the
endorsement of negotiable instruments for collection in the ordinary course of
business or guarantees that will not cause Tenant to be in violation of Section
15.7.
14.4 No Transfer. Tenant shall not sell, lease, sublease,
mortgage, convey, assign or otherwise transfer any legal or equitable interest
in the Leased Property or any part thereof, except for transfers made in
connection with any Permitted Lien and transfers to an Affiliate.
14.5 No Dissolution. Tenant or Manager shall not dissolve,
liquidate, merge, consolidate or terminate its existence or sell, assign, lease,
or otherwise transfer (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) except for mergers, consolidations or other structural
changes in Tenant that will not cause Tenant to be in violation of Section 15.7.
14.6 No Change in Control. No material change shall occur in
the control of Tenant at any time prior to Tenant's initial public offering.
14.7 No Investments. Tenant shall not purchase or otherwise
acquire, hold, or invest in securities (whether capital stock or instruments
evidencing indebtedness) of or make loans or advances to any person, including,
without limitation, any Affiliate, or any shareholder, member or partner of
Tenant, or any Affiliate, except for cash balances temporarily invested in
short-term or money market securities and investments or loans that will not
cause Tenant to be in violation of Section 15.7.
14.8 Contracts. Tenant shall not execute or modify any
material contracts or agreements with respect to the Facility except for
contracts and modifications approved by Landlord. Contracts made in the ordinary
course of business and in an amount less than $50,000.00
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shall not be considered "material" for purposes of this paragraph.
14.9 Subordination of Payments to Affiliates. After the
occurrence of an Event of Default and until such Event of Default is cured,
Tenant shall not make any payments or distributions (including, without
limitation, salary, bonuses, fees, principal, interest, dividends, liquidating
distributions, management fees, cash flow distributions or lease payments) to
any Affiliate, or any shareholder, member or partner of Tenant or any Affiliate.
14.10 Change of Location or Name. Tenant shall not change any
of the following without giving Landlord at least 60 days' advance written
notice: [i] the location of the principal place of business or chief executive
office of Tenant, or any office where any of Tenant's books and records are
maintained; or [ii] the name under which Tenant conducts any of its business or
operations.
ARTICLE 15: AFFIRMATIVE COVENANTS
15.1 Perform Obligations. Tenant shall perform all of its
obligations under this Lease, the Government Authorizations, the Permitted
Exceptions, and all Legal Requirements. If applicable, Tenant shall take all
necessary action to obtain all Government Authorizations required for the
operation of the Facility as soon as possible after the Effective Date.
15.2 Proceedings to Enjoin or Prevent Construction. If any
proceedings are filed seeking to enjoin or otherwise prevent or declare invalid
or unlawful Tenant's construction, occupancy, maintenance, or operation of the
Facility or any portion thereof, Tenant will cause such proceedings to be
vigorously contested in good faith, and in the event of an adverse ruling or
decision, prosecute all allowable appeals therefrom, and will, without limiting
the generality of the foregoing, resist the entry or seek the stay of any
temporary or permanent injunction that may be entered, and use its best efforts
to bring about a favorable and speedy disposition of all such proceedings and
any other proceedings.
15.3 Documents and Information.
15.3.1 Furnish Documents. Tenant shall periodically during the
term of the Lease deliver to Landlord the Annual Financial Statements, Periodic
Financial Statements and other documents described on Exhibit C within the
specified time periods. With each delivery of Annual Financial Statements and
Periodic Financial Statements to Landlord, Tenant shall also deliver to Landlord
a certificate signed by the Chief Financial Officer of Tenant, an Annual
Facility Financial Report or Quarterly Facility Financial Report, as applicable,
and a Quarterly Facility Accounts Receivable Aging Report all in the form of
Exhibit D. In addition, Tenant shall deliver to Landlord the Annual Facility
Financial Report and a Quarterly Facility Accounts Receivable Aging Report
(based upon internal financial statements) within 90 days after the end of each
fiscal year.
15.3.2 Furnish Information. Tenant shall [i] promptly supply
Landlord with such information concerning its financial condition, affairs and
property, as Landlord may reasonably request from time to time hereafter; [ii]
promptly notify Landlord in writing of any condition or
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event that constitutes a breach or event of default of any term, condition,
warranty, representation, or provisions of this Agreement or any other
agreement, and of any material adverse change in its financial condition; [iii]
maintain a standard and modern system of accounting; [iv] permit Landlord or any
of its agent or representatives to have access to and to examine all of its
books and records regarding the financial condition of the Facility at any time
or times hereafter during business hours and after reasonable written notice;
and [v] permit Landlord to copy and make abstracts from any and all of said
books and records.
15.3.3 Further Assurances and Information. Tenant shall, on
request of Landlord from time to time, execute, deliver, and furnish documents
as may be necessary to fully consummate the transactions contemplated under this
Agreement. Within 15 days after a request from Landlord, Tenant shall provide to
Landlord such additional information regarding Tenant, Tenant's financial
condition or the Facility as Landlord, or any existing or proposed creditor of
Landlord, or any auditor or underwriter of Landlord, may reasonably require from
time to time, including, without limitation, a current Tenant's Certificate and
Schedule of Financial Information in the form of Exhibit D.
15.3.4 Material Communications. Tenant shall transmit to
Landlord, within 5 business days after receipt thereof, any material
communication affecting a Facility, this Lease, the Legal Requirements or the
Government Authorizations, and Tenant will promptly respond to Landlord's
inquiry with respect to such information. Tenant shall promptly notify Landlord
in writing after Tenant has knowledge of any potential, threatened or existing
litigation or proceeding against, or investigation of, Tenant or the Facility
that may affect the right to operate the Facility or Landlord's title to the
Facility or Tenant's interest therein.
15.3.5 Requirements for Financial Statements. Tenant shall
meet the following requirements in connection with the preparation of the
financial statements: [i] all audited financial statements shall be prepared in
accordance with general accepted accounting principles; [ii] all unaudited
financial statements shall be prepared in a manner substantially consistent with
prior audited and unaudited financial statements submitted to Landlord; [iii]
all financial statements shall fairly present the financial condition and
performance for the relevant period in all material respects; [iv] the financial
statements shall include all notes to the financial statements and a complete
schedule of contingent liabilities and transactions with Affiliates; and [v] the
audited financial statements shall contain an unqualified opinion, except to the
extent such opinion references a change in treatment made in accordance with
general accepted accounting principles.
15.4 Compliance With Laws. Tenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and effect.
Tenant shall pay when due all taxes and governmental charges of every kind and
nature that are assessed or imposed upon Tenant at any time during the term of
the Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to Tenant's business and operations. Tenant shall be
solely responsible for compliance with all Legal Requirements, including the
ADA, and Landlord shall have no responsibility for such compliance.
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15.5 Broker's Commission. Tenant and Landlord shall indemnify
each other from claims of brokers arising by the execution hereof or the
consummation of the transactions contemplated hereby and from expenses incurred
by Landlord or Tenant in connection with any such claims (including attorneys'
fees).
15.6 Existence and Change in Control. Tenant shall maintain
its existence throughout the term of this Agreement. Any material change in the
control of Tenant, directly or indirectly prior to Tenant's initial public
offering, shall require Landlord's prior written consent, which consent shall
not be unreasonably withheld.
15.7 Financial Covenants. The defined terms used in this
section are defined in Section 15.7.1. The following financial covenants shall
be met throughout the term of this Lease; provided, however, if Tenant fails to
meet the covenant contained in Section 15.7.2, such failure shall not be an
Event of Default under this Lease provided that Tenant increases the Letter of
Credit by an amount that would effectively reduce the Lease Amount (for
calculation purposes only) to an amount that would permit Tenant to be in
compliance with the covenant. If Tenant increases the Letter of Credit amount,
the increase must remain in place until the Coverage Ratio is satisfied by
Tenant (without adjustment to the Lease Amount) for 2 consecutive quarters. If
Tenant fails to meet the covenant contained in Section 15.7.4, such failure
shall not be an Event of Default under this Lease provided that Tenant increases
the amount of the Letter of Credit by an amount equal to 2.5% of the Lease
Amount. The increase in the Letter of Credit must remain in place until the
current ratio is satisfied by Tenant for 2 consecutive quarters.
15.7.1 Definitions.
(a) "Cash Flow" means the net income of Tenant as
reflected on the income statement of Tenant plus [i] the amount of the provision
for depreciation and amortization; [ii] the amount of the provision for
management fees; plus [iii] the amount of the provision for income taxes; plus
[iv] the amount of the provision for Rent payments and interest and lease
payments, if any; minus [v] an imputed management fee equal to 5% of revenues
(net of contractual allowances); and minus [vi] an imputed replacement reserve
of $300.00 per licensed unit at the Facility, per year.
(b) "Coverage Ratio" is the ratio of [i] Cash Flow
for each applicable period; [ii] to the Rent payments due pursuant to this Lease
and all other debt service of Tenant and lease payments relating to the Leased
Property for the applicable period.
(c) "Net Worth" means an amount equal to the total
consolidated fair market value of the tangible assets of the entity (excluding
good will and other intangible assets) minus the total consolidated liabilities
of such entity.
15.7.2 Coverage Ratio. Tenant shall maintain for each fiscal
quarter a Coverage Ratio with respect to the Facility of not less than 1.25 to
1.00 for the second full year that the Facility is operational and for each year
thereafter. Landlord shall determine the Coverage Ratio based upon the Financial
Statements certified by the chief financial officer of Tenant to be accurate
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and to fairly present the financial condition of the Facility.
15.7.3 Shareholders' Equity. Tenant and its consolidated
subsidiaries shall maintain combined shareholders' equity and subordinated debt
of at least $10,000,000.00.
15.7.4 Current Ratio. Tenant and its consolidated subsidiaries
shall maintain for each fiscal quarter a ratio of current assets to current
liabilities of not less than 1.25 to 1.00 for the second full year that the
Facility is operational and for each year thereafter.
15.7.5 Minimum Cash Requirement. Tenant shall maintain cash
and cash equivalents with at least $500,000.00.
15.7.6 Working Capital. Tenant shall maintain available
working capital for the Facility in the amount not less than $100,000.00. The
available working capital may be included as part of the cash requirement under
Section 15.7.5.
ARTICLE 16: ALTERATIONS, CAPITAL
IMPROVEMENTS, AND SIGNS
16.1 Prohibition on Alterations and Improvements. Except for
Permitted Alterations (as hereinafter defined), Tenant shall not make any
structural or nonstructural changes, alterations, additions and/or improvements
(hereinafter collectively referred to as "Alterations") to the Leased Property.
16.2 Approval of Alterations. If Tenant desires to perform any
Permitted Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Landlord's
failure to respond within 60 days of receipt of the Plans and Specifications
shall be deemed to constitute Landlord's approval. Within 30 days after receipt
of an invoice, Tenant shall reimburse Landlord for all costs and expenses
incurred by Landlord in reviewing and, if required, approving or disapproving
the Plans and Specifications, inspecting the Leased Property, and otherwise
monitoring compliance with the terms of this Article 16. Tenant shall comply
with the requirements of Section 16.4 in making any Permitted Alterations.
16.3 Permitted Alterations. Permitted Alterations means any
one of the following: [i] Alterations approved by Landlord; [ii] Alterations
required under Section 7.2; [iii] Alterations having a total cost of less than
$25,000.00; or [iv] repairs, rebuilding and restoration required or undertaken
pursuant to Section 9.4.
16.4 Requirements for Permitted Alterations. Tenant shall
comply with all of the following requirements in connection with any Permitted
Alterations:
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(a) The Permitted Alterations shall be made in
accordance with the approved Plans and Specifications.
(b) The Permitted Alterations and the installation
thereof shall comply with all applicable legal requirements and insurance
requirements.
(c) The Permitted Alterations shall be done in a good
and workmanlike manner, shall not impair the value or the structural integrity
of the Leased Property, and shall be free and clear of all mechanic's liens.
(d) For any Permitted Alterations having a total cost
of $100,000.00 or more, Tenant shall deliver to Landlord a payment and
performance bond, with a surety acceptable to Landlord, in an amount equal to
the estimated cost of the Permitted Alterations, guaranteeing the completion of
the work free and clear of liens and in accordance with the approved Plans and
Specifications, and naming Landlord and any mortgagee of Landlord as joint
obligees on such bond.
(e) Tenant shall, at Tenant's expense, obtain a
builder's completed value risk policy of insurance insuring against all risks of
physical loss, including collapse and transit coverage, in a nonreporting form,
covering the total value of the work performed, and equipment, supplies, and
materials, and insuring initial occupancy. Landlord and any mortgagee of
Landlord shall be additional insureds of such policy. Landlord shall have the
right to approve the form and substance of such policy.
(f) Tenant shall pay the premiums required to
increase the amount of the insurance coverages required by Article 4 to reflect
the increased value of the Improvements resulting from installation of the
Permitted Alterations, and shall deliver to Landlord a certificate evidencing
the increase in coverage.
(g) Tenant shall, not later than 60 days after
completion of the Permitted Alterations, deliver to Landlord a revised
"as-built" survey of the Leased Property if the Permitted Alterations altered
the Land or "foot-print" of the Improvements and an "as-built" set of Plans and
Specifications for the Permitted Alterations in form and substance satisfactory
to Landlord.
(h) Tenant shall, not later than 30 days after
Landlord sends an invoice, reimburse Landlord for any reasonable costs and
expenses, including attorneys' fees and architects' and engineers' fees,
incurred in connection with reviewing and approving the Permitted Alterations
and ensuring Tenant's compliance with the requirements of this Section. The
daily fee for Landlord's consulting engineer is $750.00.
16.5 Ownership and Removal of Permitted Alterations. The
Permitted Alterations shall become a part of the Leased Property, owned by
Landlord, and leased to Tenant subject to the terms and conditions of this
Lease. Tenant shall not be required or permitted to remove any Permitted
Alterations.
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16.6 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the termination or expiration of this
Lease, Tenant shall, within 30 days after notice from Landlord, remove the signs
and restore the Leased Property to its original condition.
ARTICLE 17: [RESERVED]
ARTICLE 18: ASSIGNMENT AND
SALE OF LEASED PROPERTY
18.1 Prohibition on Assignment and Subletting. Tenant
acknowledges that Landlord has entered into this Lease in reliance on the
personal services and business expertise of Tenant. Tenant may not assign,
sublet, mortgage, hypothecate, pledge, or transfer any interest in this Lease,
or in the Leased Property, in whole or in part, except to an Affiliate of Tenant
without the prior written consent of Landlord, which Landlord may withhold in
its sole and absolute discretion to the extent permitted by law. The following
transactions will be deemed an assignment or sublease requiring Landlord's prior
written consent: [i] an assignment by operation of law; [ii] an imposition
(whether or not consensual) of a lien, mortgage, or encumbrance upon Tenant's
interest in the Lease; [iii] an arrangement (including but not limited to,
management agreements, concessions, licenses, and easements) which allows the
use or occupancy of all or part of the Leased Property by anyone other than
Tenant; and [iv] a material change in control of Tenant prior to Tenant's
initial public offering. Landlord's consent to any assignment or sublease will
not release Tenant (or any guarantor) from its payment and performance
obligations under this Lease, but rather Tenant, any guarantor, and Tenant's
assignee or sublessee will be jointly and severally liable for such payment and
performance. An assignment or sublease without the prior written consent of
Landlord will be void at the Landlord's option. Landlord's consent to one
assignment or sublease will not waive the requirement of its consent to any
subsequent assignment or sublease.
18.2 Requests for Landlord's Consent to Assignment, Sublease
or Management Agreement. If Tenant requests Landlord's consent to a specific
assignment, sublease, or management agreement, Tenant shall give Landlord [i]
the name and address of the proposed assignee, subtenant or manager; [ii] a copy
of the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and [iv] banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that [a] such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord; [b] such assignment,
sublease or management agreement may not be modified without the prior written
consent of Landlord not to be unreasonably withheld or delayed; [c] if this
Lease shall terminate before the expiration of such assignment, sublease or
management agreement, the assignee, subtenant or manager thereunder will, at
Landlord's option, attorn to Landlord and waive any right the assignee,
subtenant or manager may have to terminate the
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assignment, sublease or management agreement or surrender possession thereunder
as a result of the termination of this Lease; and [d] if the assignee, subtenant
or manager receives a written notice from Landlord stating that Tenant is in
default under this Lease, the assignee, subtenant or manager shall thereafter
pay all rentals or payments under the assignment, sublease or management
agreement directly to Landlord until such default has been cured. Tenant hereby
collaterally assigns to Landlord, as security for the performance of its
obligations hereunder, all of Tenant's right, title, and interest in and to any
assignment, sublease or management agreement now or hereafter existing for all
or part of the Leased Property. Tenant shall, at the request of Landlord,
execute such other instruments or documents as Landlord may request to evidence
this collateral assignment. If Landlord, in its sole and absolute discretion,
consents to such assignment, sublease, or management agreement, such consent
shall not be effective until [i] a fully executed copy of the instrument of
assignment, sublease or management agreement has been delivered to Landlord;
[ii] in the case of an assignment, Landlord has received a written instrument in
which the assignee has assumed and agreed to perform all of Tenant's obligations
under the Lease; and [iii] Tenant has paid to Landlord a fee in the amount of
$2,500.00; and [iv] Landlord has received reimbursement from Tenant or the
assignee for all reasonable attorneys' fees and expenses and all other
reasonable out-of-pocket expenses incurred in connection with determining
whether to give its consent, giving its consent and all matters relating to the
assignment.
18.3 Agreements with Residents. Notwithstanding Section 18.1,
Tenant may enter into an occupancy agreement with residents of the Leased
Property without the prior written consent of Landlord provided that [i] the
agreement does not provide for lifecare services; [ii] Tenant may not collect
rent for more than two months in advance; and [iii] all residents of the Leased
Property are accurately shown in Tenant's accounting records.
18.4 Sale of Leased Property. If Landlord or any subsequent
owner of the Leased Property sells the Leased Property, its liability for the
performance of its agreements in this Lease will end on the date of the sale of
the Leased Property, and Tenant will look solely to the purchaser for the
performance of those agreements. For purposes of this Section, any holder of a
mortgage or security agreement which affects the Leased Property at any time,
and any landlord under any lease to which this Lease is subordinate at any time,
will be a subsequent owner of the Leased Property when it succeeds to the
interest of Landlord or any subsequent owner of the Leased Property.
18.5 Assignment by Landlord. Landlord may transfer, assign,
mortgage, collaterally assign, or otherwise dispose of Landlord's interest in
this Lease or the Leased Property.
ARTICLE 19: HOLDOVER AND SURRENDER
19.1 Holding Over. Should Tenant, with or without the express
or implied consent of Landlord, continue to hold and occupy the Leased Property
after the expiration of the Term, such holding over beyond the Term and the
acceptance or collection of Rent by the Landlord shall operate and be construed
as creating a tenancy from month-to-month and not for any other term whatsoever.
Said month-to-month tenancy may be terminated by Landlord by giving Tenant 10
days written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property.
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19.2 Surrender. Except for [i] Permitted Alterations; [ii]
normal and reasonable wear and tear (subject to the obligation of Tenant to
maintain the Leased Property in good order and repair during the Term); and
[iii] damage and destruction not required to be repaired by Tenant, Tenant shall
surrender and deliver up the Leased Property at the expiration or termination of
the Term in as good order and condition as of the Commencement Date.
ARTICLE 20: LETTER OF CREDIT
20.1 Terms of Letter of Credit. As security for the
performance of its obligations hereunder, Tenant shall provide Landlord with the
Letter of Credit at the Closing. Tenant shall maintain the Letter of Credit in
favor of Landlord until Tenant's Obligations are performed in full. The Letter
of Credit shall permit partial draws and shall permit drawing upon presentation
of a draft drawn on the issuer and a certificate signed by Landlord stating that
an Event of Default has occurred under this Lease. The Letter of Credit shall be
for an initial term of one year and shall be automatically renewed annually for
successive terms of at least one year unless Landlord receives notice from the
Issuer, by certified mail, at least 60 days prior to the expiry date then in
effect that the Letter of Credit will not be extended for an additional one-year
period.
20.2 Replacement Letter of Credit. Tenant shall provide a
replacement Letter of Credit which satisfies the requirements of Section 20.1
from an Issuer acceptable to Landlord within 30 days after the occurrence of any
of the following: [i] Landlord's receipt of notice from the Issuer that the
Letter of Credit will not be extended for an additional one-year period; [ii]
Landlord gives notice to Tenant that the Lace Financial Service Rating of the
Issuer is less than a "C+"; or [iii] Landlord gives notice to Tenant of the
admission by Issuer in writing of its inability to pay its debts generally as
they become due, or Issuer's filing of a petition in bankruptcy or petitions to
take advantage of any insolvency act, making an assignment for the benefit of
its creditors, consenting to the appointment of a receiver of itself or of the
whole or any substantial part of its property, or filing a petition or answer
seeking reorganization or arrangement under the federal bankruptcy laws or any
other applicable law or statute of the United States of America or any state
thereof. Tenant's failure to comply with the requirements of this Section shall
be an immediate Event of Default without any notice (other than as provided for
in the section), cure or grace period.
20.3 Draws. Landlord may draw under the Letter of Credit upon
the occurrence of an Event of Default hereunder. Any such draw shall not cure an
Event of Default. Landlord shall have the right, but not the obligation, to
apply all or any portion of the proceeds from the Letter of Credit to pay all or
any portion of [i] all Rent and other charges and expenses payable by Tenant
under this Lease; plus [ii] all expenses and costs incurred by Landlord in
enforcing or preserving Landlord's rights under this Lease or any security for
the Lease, including without limitation, [a] the fees, expenses, and costs of
any litigation, receivership, administrative, bankruptcy, insolvency, or other
similar proceeding; [b] attorney, paralegal, consulting and witness fees and
disbursements; and [c] the expenses, including without limitation, lodging,
meals and transportation of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency,
or similar proceedings and attendance at hearings, depositions, and trials in
connection therewith.
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With respect to any portion of the Letter of Credit proceeds
that is not applied to payment of Tenant's Obligations, Landlord shall have the
option to either [i] deposit the proceeds into an interest-bearing account with
a financial institution chosen by Landlord ("LC Account"); or [ii] require
Tenant to obtain a replacement Letter of Credit satisfactory to Landlord, with
the Letter of Credit proceeds made available to Tenant to secure Tenant's
reimbursement obligation for the Letter of Credit. All interest accruing on the
LC Account shall be paid to Landlord and may, from time to time, be withdrawn
from the LC Account by Landlord. At any time and from time to time until
Tenant's Obligations are performed in full, Landlord may apply all or any
portion of the funds held in the LC Account to payment of all or any portion of
Tenant's Obligations. Within 10 days after any such payment from the LC Account,
Landlord shall give written notice to Tenant describing the amount of such
payment and how it was applied to Tenant's Obligations.
Upon the occurrence of either [i] Landlord's receipt of a
replacement Letter of Credit that satisfies the requirements of Section 20.1 and
is issued by an Issuer acceptable to Landlord; or [ii] the date on which all of
Tenant's Obligations are performed in full, Landlord shall pay the principal
balance of the LC Account (but not any accrued interest) to Tenant.
20.4 Partial Draws. Upon the occurrence of a monetary Event of
Default under this Lease, Landlord may, at its option, make a partial draw on
the Letter of Credit in an amount not to exceed the amount of Tenant's monetary
obligations under this Lease then past due. If Landlord then applies the
proceeds from such partial draw on the Letter of Credit to payment of all or any
portion of Tenant's monetary obligations then past due, Tenant shall, within 10
days after notice from Landlord of such partial draw and payment, cause the
amount of the Letter of Credit to be reinstated to the amount in effect prior to
such partial draw. Tenant's failure to comply with the requirements of this
section shall be an immediate Event of Default under the Loan Documents without
any notice (other than as provided for in this section), cure or grace period.
Landlord's rights under this Section 20.4 are in addition to, and not in
limitation of, Landlord's rights under Section 20.3.
20.5 Substitute Letter of Credit. Tenant may, from time to
time, deliver to Landlord a substitute Letter of Credit meeting the requirements
of this Agreement and issued by an Issuer acceptable to Landlord. Upon
Landlord's approval of the substitute Letter of Credit, Landlord shall release
the previous Letter of Credit to the Tenant.
20.6 Reduction in Letter of Credit Amount. The amount of the
Letter of Credit may be reduced by Tenant from 5% of the Lease Amount to 2.5% of
the Lease Amount after the Coverage Ratio equals or exceeds 1.35 to 1 for 4
consecutive quarters.
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION,
ATTORNMENT AND ESTOPPEL CERTIFICATES
21.1 Quiet Enjoyment. So long as Tenant performs all of its
obligations under this Lease, Tenant's possession of the Leased Property will
not be disturbed by Landlord.
21.2 Subordination. Subject to the terms and conditions of
this section, this
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Lease and Tenant's rights under this Lease are subordinate to any ground lease
or underlying lease, first mortgage, first deed of trust, or other first lien
against the Leased Property, together with any renewal, consolidation,
extension, modification or replacement thereof, which now or at any subsequent
time affects the Leased Property or any interest of Landlord in the Leased
Property, except to the extent that any such instrument expressly provides that
this Lease is superior. The foregoing subordination provision is expressly
conditioned upon any lessor or mortgagee being obligated and bound to recognize
Tenant as the tenant under this Lease, and such lessor or mortgagee shall have
no right to disturb Tenant's possession, use and occupancy of the Leased
Property or Tenant's enjoyment of its rights under this Lease unless and until
an Event of Default occurs hereunder. Any foreclosure action or proceeding by
any mortgagee with respect to the Leased Property shall not affect Tenant's
rights under this Lease and shall not terminate this Lease unless and until an
Event of Default occurs hereunder. The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them. However, Tenant shall execute, acknowledge and deliver to Landlord, at any
time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this Section, to confirm or effect any such
subordination, provided that any such document shall include a non-disturbance
provision as set forth in this section satisfactory to Tenant. Any mortgagee of
the Leased Property shall be deemed to be bound by the non-disturbance provision
set forth in this section. If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord may
execute acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
Section. This power of attorney is coupled with an interest and is irrevocable.
21.3 Attornment. If any holder of any mortgage, indenture,
deed of trust, or other similar instrument described in Section 21.2 succeeds to
Landlord's interest in the Leased Property, Tenant will pay to such holder all
Rent subsequently payable under this Lease. Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease. The successor
in interest will not be bound by [i] any payment of Rent for more than one month
in advance; [ii] any amendment or modification of this Lease thereafter made
without its consent as provided in this Lease provided that Tenant has knowledge
that Landlord's interest has been transferred and that such successor in
interest's consent is required; [iii] any claim against Landlord arising prior
to the date on which the successor succeeded to Landlord's interest; or [iv] any
claim or offset of Rent against the Landlord. Upon request by Landlord or such
successor in interest and without cost to Landlord or such successor in
interest, Tenant will execute, acknowledge and deliver an instrument or
instruments confirming the attornment. If Tenant fails or refuses to execute,
acknowledge, and deliver any such instrument within 20 days after written
demand, then Landlord or such successor in interest will be entitled to execute,
acknowledge, and deliver any document on behalf of Tenant as Tenant's
attorney-in-fact. Tenant hereby constitutes and irrevocably appoints Landlord,
its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document. This power of
attorney is coupled with an interest and is irrevocable.
21.4 Estoppel Certificates. At the request of Landlord or any
mortgagee or
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purchaser of the Leased Property, Tenant shall execute, acknowledge, and deliver
an estoppel certificate, in recordable form, in favor of Landlord or any
mortgagee or purchaser of the Leased Property certifying the following: [i] that
the Lease is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications; [ii] the date to which Rent and other charges have been paid;
[iii] whether Tenant or Landlord is in default or whether there is any fact or
condition which, with notice or lapse of time, or both, would constitute a
default, and specifying any existing default, if any; [iv] that Tenant has
accepted and occupies the Leased Property; [v] that Tenant has no defenses,
set-offs, deductions, credits, or counterclaims against Landlord, if that be the
case, or specifying such that exist; and [vi] such other information as may
reasonably be requested by Landlord or any mortgagee or purchaser. Any purchaser
or mortgagee may rely on this estoppel certificate. If Tenant fails to deliver
the estoppel certificates to Landlord within 10 days after the request of the
Landlord, then Tenant shall be deemed to have certified that [a] the Lease is in
full force and effect and has not been modified, or that the Lease has been
modified as set forth in the certificate delivered to Tenant; [b] Tenant has not
prepaid any Rent or other charges except for the current month; [c] Tenant has
accepted and occupies the Leased Property; [d] to Tenant's knowledge, neither
Tenant nor Landlord is in default nor is there any fact or condition which, with
notice or lapse of time, or both, would constitute a default; and [e] to
Tenant's knowledge, Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord. Tenant hereby irrevocably appoints Landlord as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on Tenant's
behalf any estoppel certificate to which Tenant does not object within the time
period specified in Landlord's transmittal of the certificate to Tenant which
time period cannot be less than 10 days. This power of attorney is coupled with
an interest and is irrevocable.
ARTICLE 22: REPRESENTATIONS AND WARRANTIES
Tenant hereby makes the following representations and
warranties, as of the Effective Date, to Landlord and acknowledges that Landlord
is granting the Lease in reliance upon such representations and warranties.
Tenant's representations and warranties shall survive the Closing and, except to
the extent made as of a specific date, shall continue in full force and effect
until Tenant's Obligations have been performed in full.
22.1 Organization and Good Standing. Tenant is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in and is in good standing
under the laws of the State.
22.2 Power and Authority. Tenant has the power and authority
to execute, deliver and perform this Lease. Tenant has taken all requisite
action necessary to authorize the execution, delivery and performance of
Tenant's obligations under this Lease.
22.3 Enforceability. This Lease constitutes a legal, valid,
and binding obligation of Tenant enforceable in accordance with its terms.
22.4 Government Authorizations. The Facility is in compliance
with all Legal Requirements. Exhibit E attached hereto contains a complete list
of all Government Authorizations
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required for the operation of the Facility as of the Effective Date. All
Government Authorizations are in full force and effect. Tenant holds all
Government Authorizations necessary for the operation of the Facility as an
adult congregate living facility.
22.5 Financial Statements. Tenant has furnished Landlord with
true, correct, and complete copies of the Financial Statements. The Financial
Statements fairly present the financial position of Tenant as of the respective
dates and the results of operations for the periods then ended in conformance
with generally accepted accounting principles applied on a basis consistent with
prior periods. The Financial Statements and other information furnished to
Landlord are true, complete and correct and, as of the Effective Date, no
material adverse change has occurred since the furnishing of such statements and
information. As of the Effective Date, the Financial Statements and other
information do not contain any untrue statement or omission of a material fact
and are not misleading in any material respect. Tenant is solvent, and no
bankruptcy, insolvency, or similar proceeding is pending or contemplated by or,
to the knowledge of Tenant, against Tenant. Notwithstanding anything to the
contrary set forth in this Lease, Landlord hereby acknowledges that Tenant has
advised Landlord that Tenant intends to write off approximately $600,000 in
capitalized pre-opening costs on its 1995 Financial Statements and intends to
net capitalized costs of approximately $1,000,000.00 relating to Tenant's May,
1995 financing transaction against its shareholders' equity account (resulting
in a reduction of paid in capital and elimination of these capitalized costs
from Tenant's assets) even though preliminary financial information and
Financial Statements delivered to Landlord reflected a different treatment for
such costs, and Landlord has agreed that such different treatment is acceptable
to Landlord and not a default hereunder.
22.6 Condition of Facility. To the best of Tenant's knowledge,
all of the mechanical and electrical systems, heating and air-conditioning
systems, plumbing, water and sewer systems, and all other items of mechanical
equipment or appliances are in good working order, condition and repair, are of
sufficient size and capacity to service the Facility as presently operated, and
conform with all applicable ordinances and regulations, and with all building,
zoning, fire, safety, and other codes, laws and orders. The Improvements,
including the roof and foundation, are structurally sound and free from leaks
and other defects.
22.7 Compliance with Laws. To the best of Tenant's knowledge,
there is no violation of, or noncompliance with, [i] any laws, orders, rules or
regulations, ordinances or codes of any kind or nature whatsoever relating to
the Facility or the ownership or operation thereof (including without
limitation, building, fire, health, occupational safety and health, zoning and
land use, planning and environmental laws, orders, rules and regulations); [ii]
any covenants, conditions, restrictions or agreements affecting or relating to
the ownership, use or occupancy of the Facility; or [iii] any order, writ,
regulation or decree relating to any matter referred to in [i] or [ii] above.
22.8 No Litigation. As of the Effective Date and except as
disclosed on Exhibit F, [i] there are no actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against
Tenant or the Facility; [ii] Tenant has not received notice of any threatened
actions, suits, proceedings or investigations against Tenant or the Facility at
law or in equity, or before any governmental board, agency or authority which,
if determined adversely to
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Tenant, would materially and adversely affect the Facility or title to the
Facility (or any part thereof), the right to operate the Facility as presently
operated, or the financial condition of Tenant; [iii] there are no unsatisfied
or outstanding judgments against Tenant or the Facility; [iv] there is no labor
dispute materially and adversely affecting the operation or business conducted
by Tenant or the Facility; and [v] Tenant has not been notified in writing of
any facts or circumstances which might reasonably form the basis for any such
action, suit, or proceeding.
22.9 Consents. The execution, delivery and performance of this
Lease will not require any consent, approval, authorization, order, or
declaration of, or any filing or registration with, any court, any federal,
state, or local governmental or regulatory authority, or any other person or
entity, the absence of which would materially impair the ability of Tenant to
operate the Facility as presently operated except for the post-acquisition
filing for licensure of the Facility.
22.10 No Violation. The execution, delivery and performance of
this Lease [i] do not and will not conflict with, and do not and will not result
in a breach of the Articles of Incorporation or Bylaws of Tenant; [ii] do not
and will not conflict with, and do not and will not result in a breach of, and
do not and will not constitute a default under (or an event which, with or
without notice or lapse of time, or both, would constitute a default under), any
of the terms, conditions or provisions of any agreement or other instrument or
obligation to which Tenant is a party or by which its assets are bound; and
[iii] do not and will not violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Tenant or the Facility.
22.11 Reports and Statements. All reports, statements,
certificates and other data furnished by or on behalf of Tenant to Landlord in
connection with this Lease, and all representations and warranties made herein
or in any certificate or other instrument delivered in connection herewith and
therewith, are true and correct in all material respects and do not omit to
state any material fact or circumstance necessary to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading as of the date of such report, statement, certificate or
other data. The copies of all agreements and instruments submitted to Landlord,
including, without limitation, all agreements relating to management of the
Facility, the Letter of Credit, and Tenant's working capital are true, correct
and complete copies and include all amendments and modifications of such
agreements.
22.12 ERISA. All plans (as defined in Section 4021(a) of the
Employee Retirement Income Security Act of 1974, as amended or supplemented from
time to time ("ERISA")) for which Tenant is an "employer" or a "substantial
employer" (as defined in Section Section 3(5) and 4001(a)(2) of ERISA,
respectively) are in compliance with ERISA and the regulations and published
interpretations thereunder. To the extent Tenant maintains a qualified defined
benefit pension plan: [i] there exists no accumulated funding deficiency; [ii]
no reportable event and no prohibited transaction has occurred; [iii] no lien
has been filed or threatened to be filed by the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA; and [iv]
Tenant has not been deemed to be a substantial employer.
22.13 Chief Executive Office. Tenant maintains its chief
executive office and its books and records at the address set forth in the
introductory paragraph of this agreement. Tenant
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does not conduct any of its business or operations other than at its chief
executive office, at the Facility and the following locations: Palmer Club -
Sarasota, Florida; Clare Bridge of Bradenton - Bradenton, Florida; Hamilton
House - Ann Arbor, Michigan; Hamilton House II - Farmington Hills, Michigan;
Hamilton House - Lansing, Michigan; Stonefield - Madison, Wisconsin; Clare
Bridge - Brookfield, Wisconsin; Wynfield - Madison, Wisconsin; Wynwood -
Brookfield, Wisconsin; Hamilton House - Farmington Hills, Michigan; Northhampton
Manor - Richboro, Pennsylvania; Hamilton House - Utica, Michigan; and
Naperville, Illinois.
22.14 Other Name or Entities. Tenant has not, since the
incorporation of Tenant, [i] changed its name, [ii] used any name other than the
name stated at the beginning of this agreement, or other than names under which
Tenant's facilities do business, such as the name of the Facility, or [iii]
merged or consolidated with, or acquired any of the assets of, any corporation
or other business, other than acquisitions of operating facilities.
22.15 Parties in Possession. Except as disclosed on Exhibit B,
there are no parties in possession of any Leased Property or any portion thereof
as managers, lessees, tenants at sufferance, or trespassers.
22.16 Access. Access to the Land is directly from a dedicated
public right-of-way without any easement. To the knowledge of Tenant, there is
no fact or condition which would result in the termination or reduction of the
current access to and from the Land to such right-of-way.
22.17 Utilities. There are available at the Land gas,
municipal water, and sanitary sewer lines, storm sewers, electrical and
telephone services in operating condition which are adequate for the operation
of the Facility at a reasonable cost. The Land has direct access to utility
lines located in a dedicated public right-of-way without any easement. As of the
Effective Date, there is no pending or, to the knowledge of Tenant, threatened
governmental or third party proceeding which would impair or result in the
termination of such utility availability.
22.18 Condemnation and Assessments. As of the Effective Date,
Tenant has not received notice of, and there are no pending or, to the best of
Tenant's knowledge, threatened, condemnation, assessment or similar proceedings
affecting or relating to the Facility, or any portion thereof, or any utilities,
sewers, roadways or other public improvements serving the Facility.
22.19 Zoning. As of the Effective Date, [i] the use and
operation of the Facility as an adult congregate living facility is a permitted
use under the applicable zoning code; [ii] except as disclosed on Exhibit E
hereto, no special use permits, conditional use permits, variances, or
exceptions have been granted or are needed for such use of the Facility; [iii]
the Land is not located in any special districts such as historical districts or
overlay districts; and [iv] the Facility has been constructed in accordance with
and complies with all applicable zoning laws, including but not limited to,
dimensional, parking, setback, screening, landscaping, sign and curb cut
requirements.
22.20 Pro Forma Statement. Tenant has delivered to Landlord a
true, correct and complete copy of the Pro Forma Statement. Subject to the
matter referenced in Section 22.5, the Pro
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Forma Statement shows Tenant's reasonable expectation of the results of Facility
operations for the next 5 year period.
22.21 Environmental Matters. During the period of Tenant's
ownership of the Leased Property, if any, and based on the environmental audit
provided to Landlord by Tenant, for the period Tenant did not own the Leased
Property, [i] the Leased Property is in compliance with all Environmental Laws;
[ii] there were no releases of Hazardous Materials on, from, or under the Leased
Property, except in compliance with all Environmental Laws; [iii] no Hazardous
Materials have been, are or will be used, generated, stored, or disposed of on
the Leased Property, except in compliance with all Environmental Laws; [iv] no
permit is or has been required to be obtained by Tenant from the Environmental
Protection Agency or any similar agency or department of any state or local
government for the use or maintenance of any Improvements; and [v] no summons,
citation or inquiry has been made by any such environmental unit, body or agency
or a third party demanding any right of recovery for payment or reimbursement
for costs incurred under CERCLA or any other Environmental Laws and the Land is
not subject to the lien of any such agency. "Disposal" and "release" shall have
the meanings set forth in CERCLA. To the best of Tenant's knowledge, all
underground storage tanks located on the Leased Property, if any, have been
removed in accordance with all applicable federal, state and local laws and
regulations and all necessary closure reports have been filed with the
appropriate governmental agencies.
22.22 Leases and Contracts. As of the Effective Date and
except as disclosed on Exhibit G, there are no leases or contracts (including
but not limited to, insurance contracts, maintenance contracts, construction
contracts, employee benefit plans, employment contracts, equipment leases,
security agreements, architect agreements, and management contracts) to which
Tenant is a party relating to any part of the ownership, operation, possession,
construction, management or administration of the Land or the Facility.
22.23 No Default. As of the Effective Date, [i] there is no
existing Event of Default under this Lease; and [ii] no event has occurred
which, with the giving of notice or the passage of time, or both, would
constitute or result in such an Event of Default.
ARTICLE 23: [RESERVED]
ARTICLE 24: SECURITY INTEREST
24.1 Collateral. Tenant hereby grants to Landlord a security
interest in the following described property, whether now owned or hereafter
acquired by Tenant (the "Collateral"), to secure the payment and performance of
Tenant's obligations under this Lease:
(a) All machinery, furniture, equipment, trade
fixtures, appliances, inventory and all other goods (as "equipment," "inventory"
and "goods" are defined for purposes of Article 9 ("Article 9") of the Uniform
Commercial Code as adopted in the State) now or hereafter located in or on or
used or usable in connection with the Land, Improvements, or Fixtures and
replacements, additions, and accessions thereto, including without limitation
those items which are to become fixtures or which are building supplies and
materials to be incorporated into an
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Improvement or Fixture.
(b) All accounts, contract rights, general
intangibles, instruments, documents, and chattel paper [as "accounts", "contract
rights", "general intangibles", "instruments", "documents", and "chattel paper",
are defined for purposes of Article 9] now or hereafter arising in connection
with the business located in or on or used or usable in connection with the
Land, Improvements, or Fixtures, and replacements, additions, and accessions
thereto.
(c) All franchises, permits, licenses, operating
rights, certifications, approvals, consents, authorizations and other general
intangibles regarding the use, occupancy or operation of the Improvements, or
any part thereof, including without limitation, certificates of need, state
health care facility licenses, and Medicare and Medicaid provider agreements, to
the extent permitted by law.
(d) Unless expressly prohibited by the terms thereof,
all contracts, agreements, contract rights and materials relating to the design,
construction or operation of the Improvements, including but not limited to,
plans, specifications, drawings, blueprints, models, mock-ups, brochures,
flyers, advertising and promotional materials and mailing lists.
(e) All ledger sheets, files, records, computer
programs, tapes, other electronic data processing materials, and other
documentation relating to the preceding listed property or otherwise used or
usable in connection with the Land and Improvements.
(f) The products and proceeds of the preceding listed
property, including without limitation cash and non-cash proceeds, proceeds of
proceeds, and insurance proceeds.
24.2 Additional Documents. At the request of Landlord, Tenant
shall execute additional security agreements, financing statements, and such
other documents as may be requested by Landlord to maintain and perfect such
security interest. Tenant hereby irrevocably appoints Landlord, its successors
and assigns, as Tenant's attorney-in-fact to execute, acknowledge, deliver and
file such documents on behalf of Tenant. This power of attorney is coupled with
an interest and is irrevocable.
24.3 Notice of Sale. With respect to any sale or other
disposition of any of the Collateral after the occurrence of an Event of
Default, Landlord and Tenant agree that the giving of 5 days notice by Landlord,
sent by overnight delivery, postage prepaid, to Tenant's notice address
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of such Collateral is to be made,
shall be deemed to be reasonable notice thereof and Tenant waives any other
notice with respect thereto.
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ARTICLE 25: MISCELLANEOUS
25.1 Notices. Landlord and Tenant hereby agree that all
notices, demands, requests, and consents (hereinafter "notices") required to be
given pursuant to the terms of this Lease shall be in writing, shall be
addressed to the addresses set forth in the introductory paragraph of this
Lease, and shall be served by [i] personal delivery; [ii] certified mail, return
receipt requested, postage prepaid; or [iii] nationally recognized overnight
courier. All notices shall be deemed to be given upon the earlier of actual
receipt or 3 days after mailing, or one business day after deposit with the
overnight courier. Any notices meeting the requirements of this Section shall be
effective, regardless of whether or not actually received. Landlord or Tenant
may change its notice address at any time by giving the other party notice of
such change.
25.2 Advertisement of Leased Property. In the event the
parties hereto have not executed a renewal Lease within 120 days prior to the
expiration of this Lease, or Tenant has not exercised its Option to Purchase,
then Landlord or its agent shall have the right to enter the Leased Property at
all reasonable times for the purpose of exhibiting the Leased Property to others
and to place upon the Leased Property for and during the period commencing 120
days prior to the expiration of this Lease, "for sale" or "for rent" notices or
signs.
25.3 Entire Agreement. This Lease contains the entire
agreement between Landlord and Tenant with respect to the subject matter hereof.
No representations, warranties, and agreements have been made by Landlord except
as set forth in this Lease.
25.4 Severability. If any term or provision of this Lease is
held or deemed by Landlord to be invalid or unenforceable, such holding shall
not affect the remainder of this Lease and the same shall remain in full force
and effect, unless such holding substantially deprives Tenant of the use of the
Leased Property or Landlord of the rents herein reserved, in which event this
Lease shall forthwith terminate as if by expiration of the Term.
25.5 Captions and Headings. The captions and headings are
inserted only as a matter of convenience and for reference and in no way define,
limit or describe the scope of this Lease or the intent of any provision hereof.
25.6 Governing Law. This Lease shall be construed under the
laws of the State.
25.7 Memorandum of Lease. Tenant shall not record this Lease.
Tenant may, however, record a memorandum of lease approved by Landlord.
25.8 Waiver. No waiver by Landlord of any condition or
covenant herein contained, or of any breach of any such condition or covenant,
shall be held or taken to be a waiver of any subsequent breach of such covenant
or condition, or to permit or excuse its continuance or any future breach
thereof or of any condition or covenant, nor shall the acceptance of Rent by
Landlord at any time when Tenant is in default in the performance or observance
of any condition or covenant herein be construed as a waiver of such default, or
of Landlord's right to terminate this Lease or exercise any other remedy granted
herein on account of such existing default.
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25.9 Binding Effect. This Lease will be binding upon and inure
to the benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.
25.10 Power of Attorney. Effective upon [i] the occurrence and
during the continuance of an Event of Default or upon, [ii] termination of the
Lease without Tenant exercising its Option to Purchase, Tenant hereby
irrevocably and unconditionally appoints Landlord, or Landlord's authorized
officer, agent, employee or designee, as Tenant's true and lawful
attorney-in-fact, to act for Tenant in Tenant's name, place, and stead, to
execute, deliver and file all applications and any and all other necessary
documents or things to effect the issuance, transfer, reinstatement, renewal
and/or extension of any and all Governmental Authorizations issued to Tenant or
applied for by Tenant in connection with Tenant's operation of the Facility, to
permit any transferee to operate the Facility under the Governmental
Authorizations, and to do any and all other acts incidental to any of the
foregoing. Tenant irrevocably and unconditionally grants to Landlord as its
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant might or could do if personally present or acting, with full power of
substitution, hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable prior to the full performance of
Tenant's Obligations. Except in the case of an emergency, Landlord shall give
Tenant 3 business days prior written notice before acting on behalf of Tenant
pursuant to this power of attorney.
25.11 No Offer. Landlord's submission of this Lease to Tenant
is not an offer to lease the Leased Property, or an agreement by Landlord to
reserve the Leased Property for Tenant. Landlord will not be bound to Tenant
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.
25.12 Modification. This Lease may only be modified by a
writing signed by both Landlord and Tenant. All references to this Lease,
whether in this Lease or in any other document or instrument, shall be deemed to
incorporate all amendments, modifications and renewals of this Lease, made after
the date hereof. If Tenant requests Landlord's consent to any change in
ownership, merger or consolidation of Tenant or Guarantor, any assumption of the
Lease, or any modification of the Lease, Tenant shall provide Landlord all
relevant information and documents sufficient to enable Landlord to evaluate the
request. In connection with any such request, Tenant shall pay to Landlord a fee
in the amount of $2,500.00 and shall pay all of Landlord's reasonable attorney's
fees and expenses and other reasonable out-of-pocket expenses incurred in
connection with Landlord's evaluation of Tenant's request, the preparation of
any documents and amendments, the subsequent amendment of any documents between
Landlord and its collateral pool lenders (if applicable), and all related
matters.
25.13 Lender's Modification. Tenant acknowledges that Landlord
may mortgage the Leased Property or use the Leased Property as collateral for a
collateralized mortgage obligations or Real Estate Mortgage Investment Companies
(REMICS). If any mortgage lender of Landlord desires any modification of this
Lease, Tenant agrees to consider such modification in
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good faith and to execute an amendment of this Lease if Tenant finds such
modification acceptable in Tenant's reasonable discretion provided such
modification does not materially diminish Tenant's rights under the Lease.
25.14 No Merger. The surrender of this Lease by Tenant or the
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant's default will not work a merger,
and will, at Landlord's option, terminate any subleases or operate as an
assignment to Landlord of any subleases. Landlord's option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.
25.15 Laches. No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.
25.16 Limitation on Tenant's Recourse. Tenant's sole recourse
against Landlord, and any successor to the interest of Landlord in the Leased
Property, is to the interest of Landlord, and any such successor, in the Leased
Property. Tenant will not have any right to satisfy any judgment which it may
have against the Landlord, or any such successor, from any other assets of
Landlord, or any such successor. In this Section, the terms "Landlord" and
"successor" include the shareholders, venturers, and partners of "Landlord" and
"successor" and the officers, directors, and employees of the same. The
provisions of this Section are not intended to limit Tenant's right to seek
injunctive relief or specific performance.
25.17 Construction of Lease. This Lease has been prepared by
Landlord and its professional advisors and reviewed by Tenant and its
professional advisors. Landlord, Tenant, and their advisors believe that this
Lease is the product of all their efforts, that it expresses their agreement,
and agree that it shall not be interpreted in favor of either Landlord or Tenant
or against either Landlord or Tenant merely because of their efforts in
preparing it.
25.18 Counterparts. This Lease may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
25.19 Custody of Escrow Funds. Any funds paid to Landlord in
escrow hereunder may be held by Landlord or, at Landlord's election, by a
financial institution, the deposits or accounts of which are insured or
guaranteed by a federal or state agency. The funds shall not be deemed to be
held in trust, may be commingled with the general funds of Landlord or such
other institution, and shall not bear interest.
25.20 Landlord's Status as a REIT. Tenant acknowledges that
Landlord has now and may hereafter elect to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code.
53
<PAGE> 55
25.21 Exhibits. The following exhibits are attached hereto and
incorporated herein:
Exhibit A: Legal Description
Exhibit B: Permitted Exceptions
Exhibit C: Documents to be Delivered
Exhibit D: Certificate and Facility Financial Reports
Exhibit E: Government Authorizations
Exhibit F: Pending Litigation
Exhibit G: List of Leases and Contracts
25.22 Waiver of Jury Trial. Landlord and Tenant waive trial by
jury in any action, proceeding or counterclaim brought by either of them against
the other on all matters arising out of this Lease or the use and occupancy of
the Leased Property (except claims for personal injury or property damage). If
Landlord commences any summary proceeding for nonpayment of Rent, Tenant will
not interpose, and waives the right to interpose, any counterclaim in any such
proceeding.
25.23 Attorney's Fees and Expenses. Tenant shall pay to
Landlord all reasonable costs and expenses incurred by Landlord in administering
this Lease and the security for this Lease, enforcing or preserving Landlord's
rights under this Lease and the security for this Lease, and in all matters of
collection, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including but not limited to, [a] reasonable
attorney's and paralegal's fees and disbursements; [b] the fees and expenses of
any litigation, administrative, bankruptcy, insolvency, receivership and any
other similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and [e]
consulting and witness fees incurred by Landlord in connection with any
litigation or other proceeding. All references in this Lease to attorney's fees
shall include reasonable attorney's fees incurred in connection with appellate
proceedings.
25.24 Survival. The following provisions shall survive
termination of the Lease: Article 9 (Damage & Destruction), Article 10
(Condemnation); Article 16 (Alterations); and Section 25.24 (Survival).
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
54
<PAGE> 56
IN WITNESS WHEREOF, the parties hereto have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
Signed and acknowledged
in the presence of: HEALTH CARE REIT, INC.
Signature By:
-------------------------- ------------------------------
Print Name
------------------------- Title:
---------------------------
Signature
--------------------------
Print Name
-------------------------
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
The foregoing instrument was acknowledged before me this _____
day of _____________, 1996 by ___________________________, the _________________
of Health Care REIT, Inc., a Delaware corporation, on behalf of the corporation.
-------------------------------
Notary Public
My Commission Expires:_____________________ [SEAL]
55
<PAGE> 57
ALTERNATIVE LIVING SERVICES, INC.
Signature By:
-------------------------- ------------------------------
Print Name
------------------------- Title:
---------------------------
Signature
-------------------------- Tax I.D. No:
Print Name ---------------------
-------------------------
STATE OF ________________ )
) SS:
COUNTY OF ________________ )
The foregoing instrument was acknowledged before me this _____
day of ______________________, 1996 by ___________________
___________________________, the _________________ of Alternative Living
Services, Inc., a Delaware corporation, on behalf of the corporation.
-------------------------------
Notary Public
My Commission Expires:_____________________ [SEAL]
THIS INSTRUMENT PREPARED BY:
CYNTHIA L. RERUCHA, ESQ.
SHUMAKER, LOOP & KENDRICK
1000 JACKSON STREET
TOLEDO, OHIO 43624
56
<PAGE> 1
EXHIBIT 10.8
SCHEDULE OF HEALTH CARE REIT LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.7 TO THE COMPANY'S FORM
10-Q FOR THE PERIOD ENDING 6/30/99
<TABLE>
<CAPTION>
LEASING ORIGINAL HEALTH CARE
FACILITY NAME LOCATION COMMITMENT FEE REIT INVESTMENT ANNUAL BASE RENT
- ------------- -------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Alterra Clare Bridge 6101 Pointe West Boulevard $ 355,000 $ 3,550,000 $ 355,000
of Bradenton Bradenton, FL 34209
Clare Bridge of Sarasota 8450 McIntosh Road 365,000 3,650,000 365,000
Sarasota, FL
</TABLE>
<PAGE> 1
EXHIBIT 10.9
LEASE AGREEMENT
BETWEEN
HEALTH CARE REIT, INC.
AND
STERLING HOUSE CORPORATION
SEPTEMBER _____, 1995
STERLING HOUSE OF PONCA CITY
PONCA CITY, OKLAHOMA
<PAGE> 2
LEASE AGREEMENT
This Lease Agreement ("Lease" or "Agreement") is made effective as of
the _____ day of September, 1995 (the "Effective Date") between HEALTH CARE
REIT, INC., a corporation organized under the laws of the State of Delaware
("Landlord"), having its principal office located at One SeaGate, Suite 1950,
P.O. Box 1475, Toledo, Ohio 43603, and STERLING HOUSE CORPORATION, a corporation
organized under the laws of the State of Kansas ("Tenant"), having its chief
executive office located at 453 South Webb Road, Suite 500, Wichita, Kansas
67207.
R E C I T A L S
A. As of the date hereof, Landlord acquired the Leased Property
(defined below) from Sterling Partners, L.L.C., a Kansas limited liability
company ("Seller"), and paid the Acquisition Amount (defined below) to Seller.
Seller is an affiliate of Tenant.
B. Landlord desires to lease the Leased Property to Tenant and Tenant
desires to lease the Leased Property from Landlord upon the terms set forth in
this Lease.
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the following property:
(a) The land described in Exhibit A attached hereto (the
"Land").
(b) All buildings, structures, and other improvements,
including without limitation, sidewalks, alleys, utility pipes, conduits, and
lines, parking areas, and roadways, now or hereafter situated upon the Land (the
"Improvements").
(c) All easements, rights and other appurtenances relating to
the Land and Improvements (the "Appurtenances").
(d) All permanently affixed equipment, machinery, fixtures,
and other items of real and personal property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the 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 Personal Property as defined
below (collectively the "Fixtures").
<PAGE> 3
(e) All machinery, equipment, furniture, furnishings, movable
walls or partitions, computers, trade fixtures, consumable inventory and
supplies, and other personal property purchased by Landlord and used or useful
in Tenant's business on the Leased Property, including without limitation, all
items of furniture, furnishings, equipment, supplies and inventory listed on
Exhibit B attached hereto and the replacements therefor, except items, if any,
included within the definition of Fixtures (collectively the "Personal
Property"). The Land, Improvements, Appurtenances, and Fixtures and Personal
Property are hereinafter referred to as the "Leased Property".
SUBJECT, HOWEVER, to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof as listed on
Exhibit B attached hereto (the "Permitted Exceptions").
1.2 Term. The initial term ("Initial Term") of this Lease commences on
the Effective Date and expires at 12:00 Midnight Eastern Time on September 30,
2006 (the "Expiration Date"); provided, however, that Tenant has options to
renew the Lease pursuant to Article 12.
1.3 Definitions. Except as otherwise expressly provided, [i] the terms
defined in this section have the meanings assigned to them in this section and
include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; and [iii]
the words "herein", "hereof", and "hereunder" and similar words refer to this
Lease as a whole and not to any particular section.
"Acquisition Amount" means $1,650,000.00.
"ADA" means the federal statute entitled Americans with Disabilities
Act, 42 U.S.C. Section 12101, et seq.
"Affiliate" means any person, corporation, partnership, trust, or other
legal entity that, directly or indirectly, controls, or is controlled by, or is
under common control with Tenant. "Control" (and the correlative meanings of
the terms "controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity. "Affiliate" includes, without
limitation, each Related Company and Related Tenant.
"Annual Financial Statements" means [i] for the Tenant, the audited
balance sheet and statement of income for the most recent fiscal year or an
individual facility and consolidated basis and an audited operating statement
for the Facility for the most recent fiscal year; [ii] for each Guarantor, an
annual unaudited financial statement; and [iii] or each Related Company, the
compiled balance sheet and statement of income for the most recent fiscal year.
"Base Rent" has the meaning set forth in Section 2.1, as increased from
time to time pursuant to Section 2.2.
2
<PAGE> 4
"Business Day" means any day other than a Saturday, Sunday, or national
holiday.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time. The terms "disposal"
and "release" as used in this Agreement shall have the meaning set forth in
CERCLA.
"Closing" means the closing of the purchase of the Leased Property by
Landlord and the lease of the Leased Property to Tenant.
"Commencement Date" means the Effective Date if such date is the first
day of a month, and if it is not, the first day of the first month following the
Effective Date.
"Commitment" means the Restated Commitment Letter from Landlord to
Corridor dated as of August 29, 1995, as amended from time to time.
"Contingent Interest Agreement" means the Contingent Interest Agreement
effective as of December 29, 1994 between Landlord and Corridor as the same has
been or may be amended from time to time.
"Corridor" means Corridor Properties, L.L.C., a limited liability
company organized under the laws of the State of Kansas.
"Effective Date" is the date hereof as first set forth above.
"Environmental Laws" means all federal, state, and local ecological,
wetlands, and other environmental laws and regulations, as amended from time to
time, including but not limited to [i] CERCLA; [ii] the Resource Conservation
and Recovery Act; [iii] the Hazardous Materials Transportation Act; [iv] the
Clean Air Act; [v] Clean Water Act; [vi] the Toxic Substances Control Act; and
[vii] the Safe Water Drinking Act.
"Event of Default" has the meaning set forth in Section 8.1.
"Expiration Date" has the meaning set forth in Section 1.2.
"Extended Term" has the meaning set forth in Section 12.3(a).
"Facility" means the assisted living facility known as Sterling House
of Ponca City and located on the Leased Property.
"Financial Statements" means [i] the annual balance sheet and statement
of income of Tenant for the year ended December 31, 1994; [ii] the financial
statement of Timothy Buchanan dated as of August 15, 1995 and of Steven L. Vick
dated as of June 30, 1995; [iii] the unaudited consolidated quarterly balance
sheet and statement of income of Tenant and each Related Company for the period
ended June 30, 1995; and [iv] operating statements for each Facility as of June
30, 1995.
3
<PAGE> 5
"Government Authorizations" means all permits, licenses, approvals,
consents, and authorizations required to comply with all Legal Requirements,
including but not limited to, [i] zoning permits, variances, exceptions, special
use permits, conditional use permits, and consents; [ii] if applicable, the
permits, licenses, provider agreements and approvals required for licensure and
operation of an assisted living facility certified as a provider under the
federal Medicare and state Medicaid programs, [iii] environmental, ecological,
coastal, wetlands, air, and water permits, licenses, and consents; [iv] curb
cut, subdivision, land use, and planning permits, licenses, approvals and
consents; [v] building, sign, fire, health, and safety permits, licenses,
approvals, and consents; and [vi] architectural reviews, approvals, and consents
required under restrictive covenants.
"Guarantor" means Timothy J. Buchanan and Steven L. Vick, individually
and collectively.
"Hazardous Materials" means any substance [i] the presence of which
poses a hazard to the health or safety of persons on or about the Land including
but not limited to asbestos containing materials; [ii] which requires removal or
remediation under any Environmental Law, including without limitation any
substance which is toxic, explosive, flammable, radioactive, or otherwise
hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic including but not limited to any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste", or
"pollutant" as defined in any Environmental Law.
"Impositions" has the meaning set forth in Section 3.2.
"Increaser Rate" means 22.5 basis points per year; provided, however,
that if the IPO Conditions are satisfied, the "Increaser Rate" shall be 20 basis
points per year.
"Initial Term" has the meaning set forth in Section 1.2.
"IPO" means the initial public offering of common stock of Tenant or
any Affiliate of Tenant or any successor of the foregoing resulting from a
"roll-up" of the Tenant and/or one or more of its Affiliates.
"IPO Conditions" means completion of the IPO by December 31, 1995, with
net proceeds to the public company (Tenant or any Affiliate or successor of
Tenant) of at least $17,500,000, issuance to Landlord of shares of the public
company's common stock with a value of $988,000 having the registration and sale
rights described in the Commitment and payment by Tenant to Landlord of the
$500,000 modification fee and payment of all costs and expenses incurred by
Landlord in connection with the modifications.
"Issuer" means one or more financial institutions satisfactory to
Landlord issuing the Letter of Credit and the Equity Letter of Credit (if
applicable) and such Issuer's successors and
4
<PAGE> 6
assigns. Any "Issuer" shall have a Lace Financial Service Rating of "C+" or
higher at all times throughout the Term.
"Lease Advance" means [i] the first Lease Advance by Landlord in the
Acquisition Amount for the acquisition of the Leased Property or [ii] any other
advance of funds by Landlord to Tenant pursuant to the term of this Lease.
"Lease Advance Amount" means the amount of any Lease Advance. The
Acquisition Amount is the first Lease Advance Amount.
"Lease Advance Date" means the date on which Landlord makes a Lease
Advance.
"Lease Amount" is an aggregate concept and means the sum of the Lease
Advance Amounts outstanding at the applicable time.
"Lease Payments" means the sum of the Base Rent payments (as increased
from time to time) for the applicable period.
"Lease Rate" means the annual rate used to determine Base Rent for each
Lease Advance. The Lease Rate is the sum of the applicable Rate Index plus the
applicable Rate Spread, computed using the 365/360 method. The Lease Rate
includes any accrued Increaser Rate. On each Renewal Date, the Lease Rate will
be reset for the Lease Amount based upon the applicable Rate Index plus the
applicable Rate Spread in effect on the Rate Determination Date for such Renewal
Date.
"Lease Year" means each consecutive period of 365 or 366 days
throughout the Term. The first Lease Year commences on the Commencement Date and
expires on the day before the first anniversary of the Commencement Date.
"Legal Requirements" means all laws, regulations, rules, orders, writs,
injunctions, decrees, certificates, requirements, agreements, conditions of
participation and standards of any federal, state, county, municipal or other
governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of each Facility by Tenant, including but
not limited to, [i] zoning, building, fire, health, safety, sign, and
subdivision regulations and codes; [ii] certificate of need laws, if applicable;
[iii] licensure to operate as an assisted living facility; [iv] Medicare and
Medicaid certification requirements, if applicable; [v] the ADA; [vi] any
Environmental Laws; and [vii] requirements, conditions and standards for
participation in third-party payer insurance programs.
"Letter of Credit" means one or more irrevocable and transferable
Letters of Credit in the aggregate amount equal to 2.5% of the Lease Amount
issued by Issuer in favor of Landlord as security for the Lease and in form
acceptable to Lender, and any amendments thereto or replacements or
substitutions therefor.
5
<PAGE> 7
"Material Obligation" means [i] any indebtedness secured by a lien,
deed of trust or mortgage on any of the Leased Property and any agreement
relating thereto; [ii] any obligation or agreement that is material to the
construction or operation of the Facility; [iii] any indebtedness or capital
lease of Tenant that has an outstanding principal balance of at least $100,000
in any one instance or at least $250,000 in the aggregate and any agreement
relating thereto; [iv] any obligation to or agreement with the Issuer relating
to the Letter of Credit; and [v] any sublease of the Leased Property.
"Periodic Financial Statements" means [i] unaudited balance sheet and
statement of income of Tenant and each Related Company for the most recent
quarter; and [ii] unaudited financial statement of each Guarantor as of the date
specified by Lender.
"Permitted Exceptions" means the exceptions to title set forth on
Exhibit B.
"Permitted Liens" means [i] liens granted to Landlord; [ii] liens
customarily incurred by Tenant in the ordinary course of business for items not
delinquent including mechanic's liens and deposits and charges under worker's
compensation laws; [iii] liens for taxes and assessments not yet due and
payable; [iv] any lien, charge, or encumbrance which is being contested in good
faith pursuant to this Agreement; [v] the Permitted Exceptions; and [vi]
purchase money financing and capitalized equipment leases for the acquisition of
personal property provided, however, that Landlord obtains a nondisturbance
agreement from the purchase money lender or equipment lessor in form and
substance as may be satisfactory to Landlord if the original cost of the
equipment exceeds $50,000.00.
"Phase I Lease" means each lease, now or hereafter existing, between
Landlord and Corridor, or any successor or assign of Corridor, relating to the 7
assisted living facilities located in Bartlesville, Oklahoma, Midwest City,
Oklahoma, Stillwater, Oklahoma, Enid, Oklahoma, Oklahoma City, Oklahoma,
Shawnee, Oklahoma and Chickasha, Oklahoma and this Lease, as amended from time
to time.
"Phase I Tenant" means each Tenant under any Phase I Lease.
"Phase II Lease" means each lease, now or hereafter existing, between
Landlord and Tenant or any Affiliate relating to the 9th through 16th assisted
living facilities (or other similar facilities) developed by Tenant or any
Affiliate in association with Landlord, as amended from time to time.
"Phase II Tenant" means each Tenant under any Phase II Lease.
"Phase III Lease" means each Lease, now or hereafter existing, between
Landlord and Tenant or any Affiliate relating to the 17th through 24th assisted
living facilities (or other similar facilities) developed by Tenant or any
Affiliate in association with Landlord, as amended from time to time.
6
<PAGE> 8
"Phase III Tenant" means each Tenant under any Phase III Lease.
"Pro Forma Statement" means a financial forecast for the Facility for
the next 5 year period prepared in accordance with the standards for forecasts
established by the American Institute of Certified Public Accountants.
"Rate Determination Date" means the date on which the value for the
Rate Index is established for computing any Lease Rate. For any Lease Advances
made during the Initial Term, the Rate Determination Date is the Lease Advance
Date. For any Renewal Date, the Rate Determination Date is the last Business Day
of the current Term.
"Rate Index" means the yield quoted in the Wall Street Journal on the
applicable Rate Determination Date for the most actively traded United States
Treasury Notes having the nearest equivalent maturity date to the Expiration
Date or the expiration date for the current Renewal Term, as applicable. For any
Lease Advance other than the first Lease Advance, the yield shall be computed
based upon the remainder of the Initial Term or Renewal Term, as applicable.
"Rate Spread" means the rate spread from time to time used to calculate
the Lease Rate applicable to any Lease Advance. The Rate Spread is [i] 400 basis
points for the Initial Term; [ii] 625 basis points for the first Renewal Term;
[iii] 737.5 basis points for the second Renewal Term; and [iv] 850 basis points
for the third Renewal Term; provided, however, that upon satisfaction of the IPO
Conditions, the Rate Spread for the Initial Term shall be 375 basis points and
the Rate Spread for each Renewal Term shall be computed in accordance with
Section 12.2(c).
"Receivables" means [i] all of Tenant's rights to receive payment for
providing resident care and services as set forth in any accounts, contract
rights, and instruments, and [ii] those documents, chattel paper, inventory
proceeds, provider agreements, participation agreements, ledger sheets, files,
records, computer programs, tapes, and agreements relating to Tenant's rights to
receive payment for providing resident care services.
"Related Company" means Avanti Group, Inc., a Kansas corporation;
Sterling Management Company, Inc., a Kansas corporation; Sterling Holdings,
Inc., a Kansas corporation; Corridor Properties, L.L.C., a Kansas limited
liability company; and Buchanan Homes, Inc., a Kansas corporation, individually
and collectively, and each successor and assign thereof.
"Related Lease" means any Phase I Lease, Phase II Lease or Phase III
Lease.
"Related Tenant" means any Phase I Tenant, Phase II Tenant or Phase III
Tenant.
"Renewal Date" means the date on which the Lease Rate is reset and will
be the first day of each Renewal Term.
"Renewal Option" has the meaning set forth in Section 12.1.
"Renewal Rate" means the Lease Rate established for any Renewal Date
and is the sum of the applicable Rate Index and applicable Rate Spread.
"Renewal Term" has the meaning set forth in Section 12.1.
7
<PAGE> 9
"Overdue Rate" has the meaning set forth in Section 8.6.
"State" means the State of Oklahoma.
"Tenant's Obligations" means all payment and performance obligations of
Tenant under this Lease and all documents executed by Tenant in connection with
this Lease.
"Term" means the Initial Term and each Renewal Term.
ARTICLE 2: RENT
2.1 Base Rent. Tenant shall pay Landlord base rent ("Base Rent") in
advance in consecutive monthly installments payable on the first day of each
month during the Term commencing on the Commencement Date. If the Effective Date
is not the first day of a month, Tenant shall pay Landlord Base Rent on the
Effective Date for the partial month, i.e. for the period commencing on the
Effective Date and ending on the day before the Commencement Date. The Base Rent
for the Initial Term will be computed monthly and will be equal to 1/12th of the
sum of the products of each Lease Advance times the Lease Rate for each Lease
Advance. The Base Rent for each Renewal Term will be computed in accordance
with Section 12.2.
2.2 Increase of Lease Rate and Base Rent. Commencing on the first
anniversary of the Commencement Date and on each anniversary thereafter
throughout the Term (including any Renewal Term and Extended Term), the Lease
Rate will increase by the applicable Increaser Rate. On each date that the Lease
Rate is increased, the Base Rent will be increased accordingly and will be equal
to 1/12th of the sum of the products of each Lease Advance times the Lease Rate
(including the applicable Increaser Rate) for each Lease Advance.
2.3 Additional Rent. In addition to Base Rent, Tenant shall pay all
other amounts, liabilities, obligations and Impositions which Tenant assumes or
agrees to pay under this Lease and any fine, penalty, interest, charge and cost
which may be added for nonpayment or late payment of such items (collectively
the "Additional Rent"). The Base Rent and Additional Rent are hereinafter
referred to as "Rent". Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in this Lease or by statute or
otherwise in the case of nonpayment of the Rent.
2.4 Place of Payment of Rent. Tenant shall make all payments of Rent at
the Landlord's address set forth in the first paragraph of this Lease or at such
other place as Landlord may designate from time to time.
2.5 Net Lease. This Lease shall be deemed and construed to be an
"absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased
8
<PAGE> 10
Property throughout the Term, without abatement, deduction or set-off.
2.6 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant shall remain bound by this Lease in accordance
with its terms. Tenant shall not, without the consent of Landlord, modify,
surrender or terminate the Lease, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent. Except
as expressly provided in this Lease, the obligations of Landlord and Tenant
shall not be affected by reason of [i] any damage to, or destruction of, the
Leased Property or any part thereof from whatever cause or any Taking (as
hereinafter defined) of the Leased Property or any part thereof; [ii] the lawful
or unlawful prohibition of, or restriction upon, Tenant's use of the Leased
Property, or any part thereof, the interference with such use by any person,
corporation, partnership or other entity, or by reason of eviction by paramount
title (subject to the provisions of Article 10); [iii] any claim which Tenant
has or might have against Landlord or by reason of any default or breach of any
warranty by Landlord under this Lease or any other agreement between Landlord
and Tenant, or to which Landlord and Tenant are parties; [iv] any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceeding affecting Landlord or any assignee or transferee
of Landlord; or [v] any other cause, whether similar or dissimilar to any of the
foregoing, other than a discharge of Tenant from any such obligations as a
matter of law. Except as otherwise specifically provided in this Lease, Tenant
hereby specifically waives all rights, arising from any occurrence whatsoever,
which may now or hereafter be conferred upon it by law [a] to modify, surrender
or terminate this Lease or quit or surrender the Leased Property or any portion
thereof; or [b] entitling Tenant to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Tenant hereunder. The obligations
of Landlord and Tenant hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Tenant hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.
2.7 Computational Method. Landlord and Tenant acknowledge that all
rates under this Lease will be computed based on the actual number of days
elapsed over a 360-day year (365/360 method).
2.8 Commitment Fee. On the Effective Date, Tenant shall pay a
commitment fee to Landlord in an amount equal to 1% of the Acquisition Amount.
9
<PAGE> 11
ARTICLE 3: IMPOSITIONS AND UTILITIES
3.1 Payment of Impositions. Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with Section 3.7. Tenant shall deliver to Landlord [i] not more than
5 days after the due date of each Imposition, copies of the invoice for such
Imposition and the check delivered for payment thereof; and [ii] not more than 5
business days after receipt thereof, a copy of the official receipt evidencing
such payment or other proof of payment satisfactory to Landlord. Tenant's
obligation to pay such Impositions shall be deemed absolutely fixed upon the
date such Impositions become a lien upon the Leased Property or any part
thereof. Tenant, at its expense, shall prepare and file all tax returns and
reports in respect of any Imposition as may be required by governmental
authorities. Tenant shall be entitled to any refund due from any taxing
authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing authority
if an Event of Default has occurred and is continuing. Any refunds retained by
Landlord due to an Event of Default shall be applied as provided in Section 8.8.
Landlord and Tenant 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 governmental authorities classify any property covered by this Lease as
personal property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Landlord, to the extent it possesses
the same, and Tenant, 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 property so classified as personal property. Where
Landlord is legally required to file personal property tax returns, Tenant will
be provided with copies of assessment notices indicating a value in excess of
the reported value in sufficient time for Tenant to file a protest. Tenant may,
upon notice to Landlord, at Tenant's option and at Tenant's sole cost and
expense, protest, appeal, or institute such other proceedings as Tenant may deem
appropriate to effect a reduction of real estate or personal property
assessments and Landlord, at Tenant's expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action. Tenant shall
reimburse Landlord for all personal property taxes paid by Landlord within 30
days after receipt of billings accompanied by copies of a bill therefor and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Landlord
and Tenant, whether or not such Imposition is imposed before or after such
termination, and Tenant's obligation to pay its prorated share thereof shall
survive such termination.
3.2 Definition of Impositions. "Impositions" means, collectively, [i]
taxes (including without limitation, all capital stock and franchise taxes of
Landlord imposed by the State or any governmental entity in the State due to
this lease transaction or Landlord's ownership of the Leased Property and the
income arising therefrom, or due to Landlord being considered as doing business
in the State because of Landlord's ownership of the Leased Property or lease
thereof to Tenant), all real estate and personal property ad valorem, sales and
use, business or occupation, single business, gross receipts, transaction
privilege, rent or similar taxes); [ii] assessments
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(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 with the Term); [iii] ground rents, water, sewer
or other rents and charges, excises, tax levies, and fees (including without
limitation, license, permit, inspection, authorization and similar fees); [iv]
all taxes imposed on Tenant's operations of the Leased Property, including
without limitation, employee withholding taxes, income taxes and intangible
taxes; [v] all real property conveyance taxes, transfer fees, deed stamps and
similar charges imposed by the State or any governmental entity in the State
with respect to the conveyance of the Leased Property from Tenant to Landlord
(if applicable) and from Landlord to Tenant; and [vi] all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Leased Property or
any part thereof and/or the Rent (including all interest and penalties thereon
due to any failure in payment by Tenant), which at any time prior to, during or
in respect of the Term hereof may be assessed or imposed on or in respect of or
be a lien upon [a] Landlord or Landlord's interest in the Leased Property or any
part thereof; [b] the Leased Property or any part thereof or any rent therefrom
or any estate, right, title or interest therein; or [c] any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased Property
or any part thereof. Tenant shall not, however, be required to pay any tax based
on net income (whether denominated as a franchise or capital stock or other tax)
imposed on Landlord by any governmental entity other than as described in clause
[i] above.
3.3 Escrow of Impositions. If an Event of Default occurs and while it
remains uncured, Tenant shall, at Landlord's election, deposit with Landlord on
the first day of each month a sum equal to 1/12th of the Impositions assessed
against the Leased Property for the preceding tax year, which sums shall be used
by Landlord toward payment of such Impositions. Tenant, on demand, shall pay to
Landlord any additional funds necessary to pay and discharge the obligations of
Tenant pursuant to the provisions of this Section. The receipt by Landlord of
the payment of such Impositions by and from Tenant shall only be as an
accommodation to Tenant, the mortgagees, and the taxing authorities, and shall
not be construed as rent or income to Landlord, Landlord serving, if at all,
only as a conduit for delivery purposes.
3.4 Utilities. Tenant shall pay, or cause to be paid, as Additional
Rent, all taxes, assessments, charges, deposits, and bills for utilities,
including without limitation charges for water, gas, oil, sanitary and storm
sewer, electricity, telephone service, and trash collection, which may be
charged against the occupant of the Improvements during the Term. If an Event of
Default occurs and while it remains uncured, Tenant shall, at Landlord's
election, deposit with Landlord on the first day of each month a sum equal to
1/12th of the amount of the annual utility expenses for the preceding Lease
Year, which sums shall be used by Landlord to pay such utilities. Tenant shall,
on demand, pay to Landlord any additional amount needed to pay such utilities.
Landlord's receipt of such payments shall only be an accommodation to Tenant and
the utility companies and shall not constitute rent or income to Landlord.
Tenant shall at all times maintain that amount of heat necessary to ensure
against the freezing of water lines. Tenant hereby agrees to indemnify and hold
Landlord harmless from and against any liability or damages to the utility
systems and the Leased Property that may result from Tenant's failure to
maintain sufficient heat in the Improvements.
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3.5 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business for
any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of rent or operate to
release Tenant from any of Tenant's obligations under this Lease.
3.6 Business Expenses. Tenant shall promptly pay all expenses and costs
incurred in connection with the operation of the Facility on the Leased
Property, including without limitation, employee benefits, employee vacation and
sick pay, consulting fees, and expenses for inventory and supplies.
3.7 Permitted Contests. Tenant, on its own or on Landlord's behalf (or
in Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that [i] in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; [ii] neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the case
of a Legal Requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; [iv] in the event that any such contest shall involve a sum of
money or potential loss in excess of $50,000.00, Tenant shall deliver to
Landlord and its counsel an opinion of Tenant's counsel to the effect set forth
in clauses [i], [ii] and [iii], to the extent applicable; [v] in the case of a
Legal Requirement and/or an Imposition, lien, encumbrance or charge, Tenant
shall give such reasonable security as may be demanded by Landlord to insure
ultimate payment of the same and to prevent any sale or forfeiture of the
affected Leased Property or the Rent by reason of such nonpayment or
noncompliance; provided, however, the provisions of this Section shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition or
the basis for the assertion of any other claim) or any other sums payable by
Tenant to Landlord hereunder; [vi] in the case of an insurance requirement, the
coverage required by Article 4 shall be maintained; and [vii] if such contest be
finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or insurance requirement. Landlord, at Tenant's expense, shall
execute and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. Tenant hereby
agrees to indemnify and save Landlord harmless from and against any liability,
cost or expense of any kind that may be imposed upon Landlord in connection with
any such contest and any loss resulting therefrom.
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ARTICLE 4: INSURANCE
4.1 Property Insurance. At Tenant's expense, Tenant shall maintain in
full force and effect a property insurance policy or policies insuring the
Leased Property against the following:
(a) Loss or damage commonly covered by a "Special Form" policy
insuring against physical loss or damage to the Improvements and Personal
Property, including but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if the Leased Property is in earthquake zone 1 or 2) and sinkholes
(if usually recommended in the area of the Leased Property). The policy shall be
in the amount of the full replacement value (as defined in Section 4.5) of the
Improvements and Personal Property and shall contain a deductible amount
acceptable to Landlord. Landlord shall be named as an additional insured. The
policy shall include a stipulated value endorsement or agreed amount endorsement
and endorsements for contingent liability for operations of building laws,
demolition costs, and increased cost of construction.
(b) If applicable, loss or damage by explosion of steam
boilers, pressure vessels, or similar apparatus, now or hereafter installed on
the Leased Property, in commercially reasonable amounts acceptable to Landlord.
(c) Consequential loss of rents and income coverage insuring
against all "Special Form" risk of physical loss or damage with limits and
deductible amounts acceptable to Landlord covering risk of loss during the first
9 months of reconstruction, and containing an endorsement for extended period of
indemnity of at least 6 months, and shall be written with a stipulated amount
coverage if available at a reasonable premium.
(d) If the Leased Property is located, in whole or in part, in
a federally designated 100-year flood plain area, flood insurance for the
Improvements in an amount equal to the lesser of [i] the full replacement value
of the Improvements; or [ii] the maximum amount of insurance available for the
Improvements under all federal and private flood insurance programs.
(e) Loss or damage caused by the breakage of plate glass in
commercially reasonable amounts acceptable to Landlord.
(f) Loss or damage commonly covered by blanket crime insurance
including employee dishonesty, loss of paper currency, depositor's forgery, and
loss of property of patients accepted by Tenant for safekeeping, in commercially
reasonable amounts acceptable to the Landlord.
4.2 Liability Insurance. At Tenant's expense, Tenant shall maintain
liability insurance against the following:
(a) Claims for personal injury or property damage commonly
covered by comprehensive general liability insurance with endorsements for
incidental malpractice,
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contractual, personal injury, owner's protective liability, voluntary medical
payments, products and completed operations, broad form property damage, and
extended bodily injury, with commercially reasonable amounts for bodily injury,
property damage, and voluntary medical payments acceptable to Landlord, but with
a combined single limit of not less than $5,000,000.00 per occurrence.
(b) Claims for personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all owned and
non-owned automobiles, with commercially reasonable amounts for bodily injury,
property damage, and for automobile medical payments acceptable to Landlord, but
with a combined single limit of not less than $5,000,000.00 per occurrence.
(c) Claims for personal injury commonly covered by medical
malpractice insurance in commercially reasonable amounts acceptable to Landlord.
(d) Claims commonly covered by worker's compensation insurance
for all persons employed by Tenant on the Leased Property. Such worker's
compensation insurance shall be in accordance with the requirements of all
applicable local, state, and federal law.
4.3 Builder's Risk Insurance. In connection with any construction,
Tenant shall maintain in full force and effect a builder's completed value risk
policy ("Builder's Risk Policy") of insurance in a nonreporting form insuring
against all "Special Form" risk of physical loss or damage to the Improvements,
including but not limited to, risk of loss from fire and other hazards,
collapse, transit coverage, vandalism, malicious mischief, theft, earthquake (if
Leased Property is in earthquake zone 1 or 2) and sinkholes (if usually
recommended in the area of the Leased Property). The Builder's Risk Policy shall
include endorsements providing coverage for building materials and supplies and
temporary premises. The Builder's Risk Policy shall be in the amount of the full
replacement value of the Improvements and shall contain a deductible amount
acceptable to Landlord. Landlord shall be named as an additional insured. The
Builder's Risk Policy shall include an endorsement permitting initial occupancy.
4.4 Insurance Requirements. The following provisions shall apply to all
insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject to
the approval of Landlord, which approval will not be unreasonably withheld.
(b) The carriers of all policies shall have a Best's Rating of
"A" or better and a Best's Financial Category of IX or higher and shall be
authorized to do insurance business in the State.
(c) Tenant shall be the "named insured" and Landlord shall be
an "additional insured" on each liability policy. On all property and casualty
policies, Landlord and Tenant shall be joint loss payees.
(d) Tenant shall deliver to Landlord certificates or policies
showing the
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required coverages and endorsements. The policies of insurance shall provide
that the policy may not be cancelled or not renewed, and no material change or
reduction in coverage may be made, without at least 30 days' prior written
notice to Landlord.
(e) The policies shall contain a severability of interest
and/or cross-liability endorsement, provide that the acts or omissions of Tenant
or Landlord will not invalidate the coverage of the other party, and provide
that Landlord shall not be responsible for payment of premiums.
(f) All casualty loss adjustment shall require the written
consent of Landlord and Tenant, as their interests may appear.
(g) At least 30 days prior to the expiration of each policy,
Tenant shall deliver to Landlord satisfactory evidence of payment of the annual
renewal premium. No later than the expiration date of each policy, Tenant shall
deliver to Landlord a certificate showing renewal of such policy and payment of
the annual renewal premium.
4.5 Replacement Value. The term "full replacement value" means the
actual replacement cost thereof from time to time including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement value redetermined at any time
after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.
4.6 Blanket Policy. Notwithstanding anything to the contrary contained
in this Section, Tenant may carry the insurance required by this Article under a
blanket policy of insurance, provided that the coverage afforded Tenant will not
be reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all of the requirements of this Lease.
4.7 No Separate Insurance. Tenant shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article, or increase the amounts of any then existing insurance, by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including Landlord
and any mortgagees, are included therein as additional insureds or loss payees,
the loss is payable under said insurance in the same manner as losses are
payable under this Lease, and such additional insurance is not prohibited by the
existing policies of insurance. Tenant shall immediately notify Landlord of the
taking out of such separate insurance or the increasing of any of the amounts of
the existing insurance by securing an additional policy or additional policies.
4.8 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part
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of, the Leased Property, which loss or damage is covered by valid and
collectible insurance policies, to the extent that such loss or damage is
recoverable under such policies. Said mutual waiver shall be in addition to, and
not in limitation or derogation of, any other waiver or release contained in
this Lease with respect to any loss or damage to property of the parties hereto.
Inasmuch as the said waivers will preclude the assignment of any aforesaid claim
by way of subrogation (or otherwise) to an insurance company (or any other
person), each party hereto agrees immediately to give each insurance company
which has issued to it policies of insurance, written notice of the terms of
said mutual waivers, and to have such insurance policies properly endorsed, if
necessary, to prevent the invalidation of said insurance coverage by reason of
said waivers, so long as such endorsement is available at a reasonable cost.
4.9 Mortgages. The following provisions shall apply if
Landlord now or hereafter places a mortgage on the Leased Property or any part
thereof: [i] Tenant shall obtain a standard form of lender's loss payable clause
insuring the interest of the mortgagee; [ii] Tenant shall deliver evidence of
insurance to such mortgagee; [iii] loss adjustment of claims in excess of $5,000
shall require the consent of the mortgagee; and [iv] Tenant shall provide such
other information and documents as may be required by the mortgagee.
4.10 Escrows. After an Event of Default occurs hereunder and
until such Event of Default is cured, Tenant shall make such periodic payments
of insurance premiums in accordance with Landlord's requirements after receipt
of notice thereof from Landlord.
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ARTICLE 5: INDEMNITY
5.1 Tenant's Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors or assigns of Landlord, and Landlord's
and such successor's and assign's directors, officers, employees and agents from
and against any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys' fees, court costs, and the costs set forth in Section 8.7) incurred
in connection with or arising from: [i] the use or occupancy of the Leased
Property by Tenant or any persons claiming under Tenant; [ii] any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; [iii] any acts, omissions, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind including, without limitation, any failure
to comply with any applicable requirements under the ADA; [v] any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property; and [vi] any construction, alterations, changes or demolition of any
Facility performed by or contracted for Tenant or its employees, agents or
contractors. If any action or proceeding is brought against Landlord, its
employees, or agents by reason of any such claim, Tenant, upon notice from
Landlord, will defend the claim at Tenant's expense with counsel reasonably
satisfactory to Landlord. All amounts payable to Landlord under this section
shall be payable on written demand and any such amounts which are not paid
within 10 days after demand therefor by Landlord shall bear interest at the
Overdue Rate. In case any action, suit or proceeding is brought against Tenant
by reason of any such occurrence, Tenant shall use its best efforts to defend
such action, suit or proceeding.
5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of any
claim or action brought against Landlord in which indemnity may be sought
against Tenant pursuant to this section. Such notice shall be given in
sufficient time to allow Tenant to defend or participate in such claim or
action.
5.1.2 Survival of Covenants. The covenants of Tenant contained in this
section shall remain in full force and effect after the termination of this
Agreement until the expiration of the period stated in the applicable statute of
limitations during which a claim or cause of action may be brought and payment
in full or the satisfaction of such claim or cause of action and of all expenses
and charges incurred by Landlord relating to the enforcement of the provisions
herein specified.
5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant
hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Agreement.
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5.2 Environmental Indemnity; Audits.
5.2.1 Indemnification. Tenant hereby indemnifies and agrees to hold
harmless Landlord, any successors to Landlord's interest in this Lease, and
Landlord's and such successors' directors, officers, employees and agents from
and against any losses, claims, damages (including consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including expenses of litigation and
reasonable attorneys' fees) incurred by Landlord or any other indemnitee or
assessed against the Leased Property by virtue of any claim or lien by any
governmental or quasi-governmental unit, body, or agency, or any third party,
for cleanup costs or other costs pursuant to any Environmental Law. Tenant's
indemnity shall survive the termination of this Lease. Provided, however, Tenant
shall have no indemnity obligation with respect to [i] Hazardous Materials first
introduced to the Leased Property subsequent to the date that Tenant's occupancy
of the Leased Property shall have fully terminated; or [ii] Hazardous Materials
introduced to the Leased Property by Landlord, its agent, employees, successors
or assigns. If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of the Leased Premises, in
such form, scope and substance as specified by Landlord, at Tenant's expense.
Tenant shall, within 30 days after receipt of an invoice from Landlord,
reimburse Landlord for all costs and expenses incurred in reviewing any
environmental audit, including without limitation, reasonable attorneys' fees
and costs.
5.3 Limitation of Landlord's Liability. Landlord, its agents, and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy, injunction, riot, strike, insurrection, war,
court order, requisition, order of governmental body or authority, fire,
explosion, falling objects, steam, water, rain or snow, leak or flow of water
(including water from the elevator system), rain or snow from the Leased
Property or into the Leased Property or from the roof, street, subsurface or
from any other place, or by dampness or from the breakage, leakage, obstruction,
or other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, or lighting fixtures of the Leased Property, or from construction,
repair, or alteration of the Leased Property or from any acts or omissions of
any other occupant or visitor of the Leased Property, or from any other cause
beyond Landlord's control.
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES
6.1 Use of Leased Property. Tenant shall use and occupy the Leased
Property exclusively as an assisted living facility and for all lawful and
licensed ancillary uses, and for no other purpose without the prior written
consent of the Landlord. Tenant shall obtain and maintain all approvals,
licenses, and consents needed to use and operate the Leased Property as herein
permitted. Tenant shall deliver to Landlord complete copies of surveys,
examinations, certification and licensure inspections, compliance certificates,
and other similar reports issued to Tenant by any governmental agency within 10
days after Tenant's receipt of each item.
6.2 Acceptance of Leased Property. Tenant acknowledges that [i] Tenant
and its
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agents have had an opportunity to inspect the Leased Property; [ii] Tenant has
found the Leased Property fit for Tenant's use; [iii] Landlord will deliver the
Leased Property to Tenant in "as-is" condition; [iv] Landlord is not obligated
to make any improvements or repairs to the Leased Property; and [v] the roof,
walls, foundation, heating, ventilating, air conditioning, telephone, sewer,
electrical, mechanical, elevator, utility, plumbing, and other portions of the
Leased Property are in good working order. Tenant waives any claim or action
against Landlord with respect to the condition of the Leased Property. LANDLORD
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE
LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL
SUCH RISKS ARE TO BE BORNE BY TENANT.
6.3 Conditions of Use and Occupancy. Tenant agrees that during the Term
it shall use and keep the Leased Property in a careful, safe and proper manner;
not commit or suffer waste thereon; not use or occupy the Leased Property for
any unlawful purposes; not use or occupy the Leased Property or permit the same
to be used or occupied, for any purpose or business deemed extrahazardous on
account of fire or otherwise; keep the Leased Property in such repair and
condition as may be required by the Board of Health, or other city, state or
federal authorities, free of all cost to Landlord; not permit any acts to be
done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its agents to enter upon the Leased
Property at all reasonable times to examine the condition thereof.
ARTICLE 7: REPAIRS AND MECHANICS' LIENS
7.1 Maintenance. Tenant shall maintain, repair, and replace the Leased
Property, including without limitation, all structural and nonstructural repairs
and replacements to the roof, foundations, exterior walls, parking areas,
sidewalks, water, sewer, and gas connections, pipes, and mains. Tenant shall
pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall permit Landlord to
inspect the Leased Property at all reasonable times, and shall implement all
reasonable suggestions of the Landlord as to the maintenance and replacement of
the Leased Property.
7.2 Required Alterations. Tenant shall, at Tenant's sole cost and
expense, make any additions, changes, improvements or alterations to the Leased
Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure or
certification under the Medicare and Medicaid programs (if so certified),
whether such changes are required by Tenant's use, changes in the law,
ordinances, or governmental regulations, defects existing as of the date of this
Lease, or any other cause whatever. All such additions, changes, improvements or
alterations shall be deemed to be Permitted Alterations and shall comply with
all laws requiring such alterations and with the provisions of Section 16.4.
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7.3 Mechanic's Liens. Tenant shall have no authority to permit or
create a lien against Landlord's interest in the Leased Property, and upon
Landlord's request, Tenant shall post notices during construction or file such
documents as may be required to protect Landlord's interest in the Leased
Property against liens. Tenant hereby agrees to defend, indemnify, and hold
Landlord harmless from and against any mechanic's liens against the Leased
Property by reason of work, labor, services or materials supplied or claimed to
have been supplied on or to the Leased Property. Tenant shall remove, bond-off,
or otherwise obtain the release of any mechanic's lien filed against the Leased
Property within 10 days after the filing thereof; provided, however, that Tenant
shall have the right to contest in good faith and with due diligence the
validity of any such lien upon furnishing such security or indemnity as may be
reasonably required by Landlord. Tenant shall pay all Landlord's expenses in
connection therewith, including without limitation, damages, interest, court
costs and reasonable attorneys' fees.
7.4 Replacements of Fixtures and Personal Property. Tenant shall not
remove Fixtures and Personal Property from the Leased Property except to replace
the Fixtures and Personal Property by other similar items of equal quality and
value. Items being replaced by Tenant may be removed and shall become the
property of Tenant and items replacing the same shall be and remain the property
of Landlord. Tenant shall execute, upon written request from Landlord, any and
all documents necessary to evidence Landlord's ownership of the Personal
Property and replacements therefor. Tenant may finance replacements for the
Fixtures and Personal Property by equipment lease or by a security agreement and
financing statement if the equipment lessor or lender has entered into a
nondisturbance agreement with Landlord upon terms and conditions reasonably
acceptable to Landlord, including without limitation, the following: [a]
Landlord shall have the right (but not the obligation) to assume such security
agreement or equipment lease upon the occurrence of an Event of Default under
this Lease; [b] the equipment lessor or lender shall notify Landlord of any
default by Tenant under the equipment lease or security agreement and give
Landlord a reasonable opportunity to cure such default; and [c] Landlord shall
have the right to assign its rights under the equipment lease, security
agreement, or nondisturbance agreement. Tenant shall, within 30 days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.
ARTICLE 8: DEFAULTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following shall be an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of Rent, or
any other monetary obligation payable by Tenant under this Lease (including the
Option Price) within 3 business days after Tenant is given written notice of
such failure, which written notice shall be given, at Landlord's option, at any
time after the expiration of 10 days from the date such payment is due;
provided, however, that if Tenant receives two notices of default during any one
year period, regardless of any subsequent cure of such default, thereafter
Landlord shall not be obligated to give Tenant written notice of any failure to
make any such payments, and it shall be an Event of Default
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if Tenant fails to pay any installment of Rent or any other monetary obligation
payable by Tenant under this Lease within 10 days after such payment is due.
(b) [Deleted]
(c) Borrower or Guarantor (where applicable) fails to comply
with any covenant set forth in Article 14, Section 15.6, Section 15.7 or Article
20 of this Lease.
(d) Tenant fails to observe and perform any other covenant,
condition or agreement under this Lease to be performed by Tenant and [i] such
failure continues for a period of 30 days after written notice thereof is given
to Tenant by Landlord; or [ii] if, by reason of the nature of such default, the
same cannot be remedied within said 30 days, Tenant fails to proceed with
diligence reasonably satisfactory to Landlord after receipt of the notice to
cure the same or, in any event, fails to cure such default within 90 days after
receipt of the notice. The foregoing notice and cure provisions do not apply to
any Event of Default otherwise specifically described in any other subsection
of Section 8.1.
(e) Tenant abandons or vacates the Leased Property or any
material part thereof or ceases to do business for any reason.
(f) [i] The filing by Tenant of a petition under 11 U.S.C. or
the commencement of a bankruptcy or similar proceeding by Tenant; [ii] the
failure by Tenant within 60 days to dismiss an involuntary bankruptcy petition
or other commencement of a bankruptcy, reorganization or similar proceeding
against Tenant, or to lift or stay any execution, garnishment or attachment of
such consequence as will impair its ability to carry on its operation at the
Leased Property; [iii] the entry of an order for relief under 11 U.S.C. in
respect of Tenant; [iv] any assignment by Tenant for the benefit of its
creditors; [v] the entry by Tenant into an agreement of composition with its
creditors; [vi] the approval by a court of competent jurisdiction of a petition
applicable to Tenant in any proceeding for its reorganization instituted under
the provisions of any state or federal bankruptcy, insolvency, or similar laws;
[vii] appointment by final order, judgment, or decree of a court of competent
jurisdiction of a receiver of a whole or any substantial part of the properties
of Tenant (provided such receiver shall not have been removed or discharged
within 60 days of the date of his qualification).
(g) [i] Any receiver, administrator, custodian or other person
takes possession or control of any of the Leased Property and continues in
possession for 60 days; [ii] any writ against any of the Leased Property is not
released within 60 days; [iii] any judgment is rendered or proceedings are
instituted against the Leased Property or Tenant which affect the Leased
Property or any part thereof, which is not dismissed for 60 days (except as
otherwise provided in this Section); [iv] all or a substantial part of the
assets of Tenant or Guarantor are attached, seized, subjected to a writ or
distress warrant, or are levied upon, or come into the possession of any
receiver, trustee, custodian, or assignee for the benefit of creditors; [v]
Tenant or Guarantor is enjoined, restrained, or in any way prevented by court
order (other than ex parte order) from conducting all or a substantial part of
its business or affairs; or [vi] except as otherwise permitted hereunder, a
final notice of lien, levy or assessment is filed of record with respect to all
or
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any part of the Leased Property or any property of Tenant located at the
Leased Property and is not dismissed, discharged, or bonded-off within 30 days
or is not otherwise addressed pursuant to Section 7.3.
(h) Any representation or warranty made by Tenant, Guarantor
or any Related Company in this Lease or any other document executed in
connection with this Lease, any guaranty of or other security for this Lease, or
any report, certificate, application, financial statement or other instrument
furnished by Tenant, Guarantor or any Related Company pursuant hereto or thereto
shall prove to be false, misleading or incorrect in any material respect as of
the date made.
(i) Tenant, any Guarantor, or any Affiliate defaults on any
indebtedness or obligation to Landlord, including, without limitation, any lease
with Landlord, or Tenant defaults on any Material Obligation, and any applicable
grace or cure period with respect to default under such indebtedness or
obligation expires without such default having been cured. This provision
applies to all such indebtedness and obligations as they may be amended,
modified, extended, or renewed from time to time.
(j) The occurrence of any change in Tenant's leasehold
interest in the Leased Property, or any change in the or management of Tenant,
except as permitted under Section 14.6 hereof, without the prior written consent
of Landlord.
(k) Any guarantor of the Lease dies, dissolves, terminates, is
adjudicated incompetent, files a petition in bankruptcy, or is adjudicated
insolvent under 11 U.S.C. or any other insolvency law, or fails to comply with
any covenant or requirement of such guarantor set forth in this Lease or in the
guaranty of such guarantor, and Tenant fails to deliver to Landlord within 60
days or 10 days before the deadline for making any claim against the estate of
the guarantor, whichever is less, (i) a substitute guaranty from a guarantor
that has a net worth at least equal to that of the affected guarantor; that is,
in Landlord's reasonable discretion, at least as creditworthy as the existing
guarantor; and that is otherwise reasonably satisfactory to Landlord; or (ii)
other collateral reasonably satisfactory to Landlord.
(l) The license for the Facility or any other Government
Authorization, is cancelled, suspended or otherwise invalidated, notice of
impending revocation proceedings is received and Tenant fails to diligently
contest such proceeding, or any reduction occurs in the number of licensed units
at the Facility.
8.2 Remedies. Landlord may exercise any one or more of the following
remedies upon the occurrence of an Event of Default:
(a) Landlord may re-enter and take possession of the Leased
Property without terminating the Lease, and lease the Leased Property for the
account of Tenant, holding Tenant liable for all costs of the Landlord in
reletting the Leased Property and for the difference in the amount received by
such reletting and the amounts payable by Tenant under the Lease.
(b) Landlord may terminate this Lease, exclude Tenant from
possession
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of the Leased Property and use efforts to lease the Leased Property to others,
holding Tenant liable for the difference in the amounts received from such
reletting and the amounts payable by Tenant under the Lease.
(c) Landlord may re-enter the Leased Property and have,
repossess and enjoy the Leased Property as if the Lease had not been made, and
in such event, Tenant and its successors and assigns shall remain liable for any
contingent or unliquidated obligations or sums owing at the time of such
repossession.
(d) Landlord may have access to and inspect, examine and make
copies of the books and records and any and all accounts, data and income tax
and other returns of Tenant insofar as they pertain to the Leased Property.
(e) Landlord may accelerate all of the unpaid Rent hereunder
so that the aggregate Rent for the unexpired term of this Lease becomes
immediately due and payable.
(f) Landlord may take whatever action at law or in equity as
may appear necessary or desirable to collect the Rent and other amounts payable
under the Lease then due and thereafter to become due, or to enforce performance
and observance of any obligations, agreements or covenants of Tenant under the
Commitment and this Lease, and may exercise all of Landlord's remedies set forth
in the Commitment and this Lease.
(g) With respect to the Collateral and Landlord's security
interest therein, Landlord may exercise all of its rights as secured party under
Article 9 of the Uniform Commercial Code as adopted in the State. Landlord may
sell the Collateral by public or private sale upon 5 days notice to Tenant.
Tenant agrees that a commercially reasonable manner of disposition of the
Collateral shall include, without limitation and at the option of Landlord, a
sale of the Collateral, in whole or in part, concurrently with the sale of the
Leased Property.
(h) Landlord may obtain control over and collect the
Receivables and apply the proceeds of the collections to satisfaction of
Tenant's Obligations unless prohibited by law. Tenant appoints Landlord or its
designee as attorney for Tenant with powers [i] to receive, to indorse, to sign
and/or to deliver, in Tenant's name or Landlord's name, any and all checks,
drafts, and other instruments for the payment of money relating to the
Receivables, and to waive demand, presentment, notice of dishonor, protest, and
any other notice with respect to any such instrument; [ii] to sign Tenant's name
on any invoice or bill of lading relating to any Receivable, drafts against
account debtors, assignments and verifications of Receivables, and notices to
account debtors; [iii] to send verifications of Receivables to any account
debtor; and [iv] to do all other acts and things necessary to carry out this
Lease. Landlord shall not be liable for any omissions, commissions, errors of
judgment, or mistakes in fact or law made in the exercise of any such powers. At
Landlord's option, Tenant shall [i] provide Landlord a full accounting of all
amounts received on account of Receivables with such frequency and in such form
as Landlord may require, either with or without applying all collections on
Receivables in payment of Tenant's Obligations or [ii] deliver to Landlord on
the day of receipt all such collections in the form received and duly indorsed
by Tenant. At Landlord's request, Tenant shall institute any action or enter
into any settlement
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determined by Landlord to be necessary to obtain recovery or redress from any
account debtor in default of Receivables. Landlord may give notice of its
security interest in the Receivables to any or all account debtors with
instructions to make all payments on Receivables directly to Landlord, thereby
terminating Tenant's authority to collect Receivables. After terminating
Tenant's authority to enforce or collect Receivables, Landlord shall have the
right to take possession of any or all Receivables and records thereof and is
hereby authorized to do so, and only Landlord shall have the right to collect
and enforce the Receivables. Prior to the occurrence of an Event of Default, at
Tenant's cost and expense, but on behalf of Landlord and for Landlord's account,
Tenant shall collect or otherwise enforce all amounts unpaid on Receivables and
hold all such collections in trust for Landlord, but Tenant may commingle such
collections with Tenant' own funds, until Tenant's authority to do so has been
terminated, which may be done only after an Event of Default. Notwithstanding
any other provision hereof, Landlord does not assume any of Tenant's obligations
under any Receivable, and Landlord shall not be responsible in any way for the
performance of any of the terms and conditions thereof by Tenant.
(i) Without waiving any prior or subsequent Event of Default,
Landlord may waive any Event of Default or, with or without waiving any Event of
Default, remedy any default.
(j) Landlord may terminate its obligation to disburse Lease
Advances.
(k) Landlord may enter and take possession of the Land and
Facility without terminating the Lease and complete construction and renovation
of the Improvements (or any part thereof) and perform the obligations of Tenant
under the Lease Documents. Without limiting the Construction Documents
generality of the foregoing and for the purposes aforesaid, Tenant hereby
appoints Landlord its lawful attorney-in-fact with full power to do any of the
following: [i] complete construction, renovation and equipping of the
Improvements in the name of Tenant; [ii] use unadvanced funds remaining under
the Maximum Lease Amount, or funds that may be reserved, escrowed, or set aside
for any purposes hereunder at any time, or to advance funds in excess of the
Maximum Lease Amount, to complete the Improvements; [iii] make changes in the
Plans and Specifications that shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the Plans and
Specifications; [iv] retain or employ new general contractors, subcontractors,
architects, engineers, and inspectors as shall be required for said purposes;
[v] pay, settle, or compromise all existing bills and claims, which may be liens
or security interests, or to avoid such bills and claims becoming liens against
the Facility or security interest against fixtures or equipment, or as may be
necessary or desirable for the completion of the construction and equipping of
the Improvements or for the clearance of title; [vi] execute all applications
and certificates, in the name of Tenant, that may be required by any of the
Construction Documents; [vii] do any and every act that Tenant might do in its
own behalf, to prosecute and defend all actions or proceedings in connection
with the Improvements; and [viii] to execute, deliver and file all applications
and other documents and take any and all actions necessary to transfer the
operations of the Facility to Landlord or Landlord's designee. This power of
attorney is a power coupled with an interest and cannot be revoked.
8.3 Right of Set-Off. Landlord may, and is hereby authorized by Tenant
to, at
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any time and from time to time without advance notice to Tenant (any such notice
being expressly waived by Tenant), set-off and apply any and all sums held by
Landlord, any indebtedness of Landlord to Tenant, and any claims by Tenant
against Landlord, against any obligations of Tenant hereunder and against any
claims by Landlord against Tenant, whether or not such obligations or claims of
Tenant are matured and whether or not Landlord has exercised any other remedies
hereunder. The rights of Landlord under this Section are in addition to any
other rights and remedies Landlord may have against Tenant.
8.4 Performance of Tenant's Covenants. Landlord may perform any
obligation of Tenant which Tenant has failed to perform within 5 days after
Landlord has sent a written notice to Tenant informing it of its specific
failure. Tenant shall reimburse Landlord on demand, as Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the
Overdue Rate (as defined in Section 8.6).
8.5 Late Payment Charge. Tenant acknowledges that any default in the
payment of any installment of Rent payable hereunder will result in loss and
additional expense to Landlord in servicing any indebtedness of Landlord secured
by the Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and additional expense is extremely
difficult and impractical to ascertain, Tenant agrees that in the event any Rent
payable to Landlord hereunder is not paid within 10 days after the due date,
Tenant shall pay a late charge of 5% of the amount of the overdue payment as a
reasonable estimate of such loss and expenses, unless applicable law requires a
lesser charge, in which event the maximum rate permitted by such law may be
charged by Landlord. The 10 day grace period set forth in this Section shall not
extend the time for payment of Rent or the period for curing any default or
constitute a waiver of such default.
8.6 Interest. In addition to the late payment charge, any payment not
made by Tenant within 10 days after the due date shall thereafter bear interest
at the rate (the "Overdue Rate") of the greater of [i] 18.5% per annum; or [ii]
2.5% per annum above the Lease Rate then in effect; provided, however, that at
no time will Tenant be required to pay interest at a rate higher than the
maximum legal rate and, provided further, that if a court of competent
jurisdiction determines that any other charges payable under this Lease are
deemed to be interest, the Overdue Rate shall be adjusted to ensure that the
aggregate interest payable under this Lease does not accrue at a rate in excess
of the maximum legal rate. Tenant shall not be required to pay interest upon any
late payment fees assessed pursuant to Section 8.5.
8.7 Litigation; Attorneys' Fees. Within 5 days after Tenant has
knowledge of any litigation or other proceeding that may be instituted against
Tenant, against the Leased Property to secure or recover possession thereof, or
that may affect the title to or the interest of Landlord in the Leased Property,
Tenant shall give written notice thereof to Landlord. Tenant shall pay all
reasonable costs and expenses incurred by Landlord in enforcing or preserving
Landlord's rights under this Lease, whether or not an Event of Default has
actually occurred or has been declared and thereafter cured, including without
limitation, [i] the fees, expenses, and costs of any litigation, receivership,
administrative, bankruptcy, insolvency or other similar proceeding; [ii]
reasonable attorney, paralegal, consulting and witness fees and disbursements,
whether in house counsel or
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outside counsel; and [iii] the expenses, including without limitation, lodging,
meals, and transportation, of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency or
other similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. All such costs, charges and fees payable by Tenant shall
be deemed to be Additional Rent under this Lease.
8.8 Escrows and Application of Payments. As security for the
performance of its obligations hereunder, Tenant hereby assigns to Landlord all
its right, title, and interest in and to all monies escrowed with Landlord under
this Lease and all deposits with utility companies, taxing authorities and
insurance companies; provided, however, that Landlord shall not exercise its
rights hereunder until an Event of Default has occurred. Any payments received
by Landlord under any provisions of this Lease during the existence or
continuance of an Event of Default shall be applied to Tenant's obligations in
the order which Landlord may determine.
8.9 Remedies Cumulative. The remedies of Landlord herein are cumulative
to and not in lieu of any other remedies available to Landlord at law or in
equity. The use of any one remedy shall not be taken to exclude or waive the
right to use any other remedy.
ARTICLE 9: DAMAGE AND DESTRUCTION
9.1 Notice of Casualty. If the Leased Property shall be destroyed, in
whole or in part, or damaged by fire, flood, windstorm or other casualty (a
"Casualty"), Tenant shall give written notice thereof to the Landlord within one
business day after the occurrence of the Casualty. Within 15 days after the
occurrence of the Casualty or as soon thereafter as such information is
reasonably available to Tenant, Tenant shall provide the following information
to Landlord: [i] the date of the Casualty; [ii] the nature of the Casualty;
[iii] a description of the damage or destruction caused by the Casualty
including the type of Leased Property damaged and the area of the Improvements
damaged; [iv] a preliminary estimate of the cost to repair, rebuild, restore or
replace the Leased Property; [v] a preliminary estimate of the schedule to
complete the repair, rebuilding, restoration or replacement of the Leased
Property; [vi] a description of the anticipated property insurance claim
including the name of the insurer, the insurance coverage limits, the deductible
amount, the expected settlement amount, and the expected settlement date; and
[vii] a description of the business interruption claim including the name of the
insurer, the insurance coverage limits, the deductible amount, the expected
settlement amount, and the expected settlement date. Within 5 days after request
from Landlord, Tenant will provide Landlord with copies of all correspondence to
the insurer and any other information reasonably requested by Landlord.
9.2 Substantial Destruction.
9.2.1 If the Improvements are substantially destroyed at any time other
than during the final 18 months of the Initial Term or any Renewal Term, Tenant
shall promptly rebuild and restore the Leased Property in accordance with
Sections 9.4 through 9.9 and Landlord shall make the insurance proceeds
available to Tenant for such restoration. The term "substantially destroyed"
means any casualty resulting in the loss of use of 50% or more of the licensed
beds or units at any Facility.
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9.2.2 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or any Renewal Term, Tenant shall have the option
to either [i] rebuild the Leased Property in accordance with Sections 9.4
through 9.9; or [ii] terminate this Lease; subject, however, to the following
conditions. In order for Tenant to elect to rebuild the Leased Property, Tenant
must satisfy the following conditions within 60 days after the occurrence of the
damage: [i] Tenant must give irrevocable notice to Landlord of Tenant's election
to rebuild and Tenant's election to either [a] renew this Lease pursuant to
Section 9.2.3 (if the damage occurred during the Initial Term or the first or
second Renewal Term), or [b] exercise its option to purchase the Leased Property
pursuant to Section 9.2.4; and [ii] if Tenant elects to renew this Lease, each
Phase I Tenant must give irrevocable notice to Landlord that such Phase I Tenant
elects to renew its respective Phase I Lease or, if Tenant elects to exercise
its option to purchase, each Phase I Tenant must give irrevocable notice to
Landlord that such Phase I Tenant elects to purchase the Leased Property subject
to its respective Phase I Lease. In order for Tenant to elect to terminate this
Lease, Tenant must give irrevocable notice to Landlord, within 60 days after the
occurrence of the damage, of Tenant's election to terminate this Lease;
provided, however, that Tenant shall pay to Landlord all Rent and all other
obligations accrued under this Lease through the effective date of termination
and, if the amount of insurance proceeds received or to be received by Landlord
is less than the Lease Amount, Tenant shall pay to Landlord the amount by which
the Lease Amount exceeds the amount of insurance proceeds. Termination of this
Lease shall not be effective until all such amounts have been paid by Tenant to
Landlord and the insurance proceeds have been paid to Landlord. If the
Improvements are substantially destroyed during the final 18 months of the third
Renewal Term, Tenant shall have the option to either [i] rebuild the Leased
Property and exercise its option to purchase as set forth above, provided that
each Phase I Tenant elects to purchase its respective Leased Property as set
forth above; or [ii] terminate this Lease as set forth above. The failure of
Tenant to give Landlord notice of Tenant's election within 60 days after the
occurrence of the damage shall constitute an Event of Default under this Lease
and Tenant shall be liable to Landlord for all Rent and other obligations under
this Lease and the amount, if any, by which the Lease Amount exceeds the amount
of insurance proceeds received by Landlord.
9.2.3 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or the first or second Renewal Term and if Tenant
and each Phase I Tenant give irrevocable notice to Landlord of its respective
election to renew, the current Term of each Phase I Lease shall continue until
its expiration date and the 5 year Renewal Term shall commence on the day
following the expiration date. All other terms of each Phase I Lease for the
Renewal Term shall be in accordance with Article 12 of such Phase I Lease. The
Leased Property will be restored by Tenant in accordance with Sections 9.4
through 9.9.
9.2.4 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or any Renewal Term and if Tenant and each Phase I
Tenant give irrevocable notice to Landlord of its respective election to
purchase its respective Leased Property, the Option Price will be determined in
accordance with Section 13.2 and the Fair Market Value will be determined in
accordance with Section 13.3. For purposes of determining the Fair Market Value,
the Leased Property will valued as if it had been restored to be equal in value
to the Leased Property existing immediately prior to the occurrence of the
damage. All other terms of the option to purchase shall
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be in accordance with Article 13 of each Phase I Lease. Landlord shall hold the
insurance proceeds until the closing of the purchase of the Leased Property and
at closing shall deliver the proceeds to Tenant.
9.3 Partial Destruction. If the Leased Property is not substantially
destroyed, then Tenant shall comply with the provisions of Section 9.4 and
Landlord shall make the insurance proceeds available to Tenant for such
restoration.
9.4 Restoration. Tenant shall promptly repair, rebuild, or restore the
Leased Property, at Tenant's expense, so as to make the Leased Property at least
equal in value to the Leased Property existing immediately prior to such
occurrence and as nearly similar to it in character as is practicable and
reasonable. Before beginning such repairs or rebuilding, or letting any
contracts in connection with such repairs or rebuilding, Tenant will submit for
Landlord's approval, which approval Landlord will not unreasonably withhold or
delay, plans and specifications meeting the requirements of Section 16.2 for
such repairs or rebuilding. Promptly after receiving Landlord's approval of the
plans and specifications and receiving the proceeds of insurance, Tenant will
begin such repairs or rebuilding and will prosecute the repairs and rebuilding
to completion with diligence, subject, however, to strikes, lockouts, acts of
God, embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the proceeds of any
fire or other casualty insurance paid to Landlord for such repair or rebuilding
as the same progresses. Tenant shall be responsible for collection of the
insurance proceeds, subject to Landlord's prior reasonable consent to any
settlement, and Tenant shall bear all costs of collection, including attorney's
fees. Payments will be made against properly certified vouchers of a competent
architect in charge of the work and approved by Landlord. Prior to commencing
the repairing or rebuilding, Tenant shall deliver to Landlord for Landlord's
approval a schedule setting forth the estimated monthly draws for such work.
Landlord will contribute to such payments out of the insurance proceeds an
amount equal to the proportion that the total net amount received by Landlord
from insurers bears to the total estimated cost of the rebuilding or repairing,
multiplied by the payment by Tenant on account of such work. Landlord may,
however, withhold 10% from each payment due subcontractors until the work is
completed and proof has been furnished to Landlord that no lien or liability has
attached or will attach to the Leased Property or to Landlord in connection with
such repairing or rebuilding. Upon the completion of rebuilding and the
furnishing of such proof, the balance of the net proceeds of such insurance
payable to Tenant on account of such repairing or rebuilding will be paid to
Tenant. Tenant will obtain and deliver to Landlord a temporary or final
certificate of occupancy before the Leased Property is reoccupied for any
purpose. Tenant shall complete such repairs or rebuilding in accordance with the
building codes and all applicable laws, ordinances, regulations, or orders of
any state, municipal, or other public authority affecting the repairs or
rebuilding, and also in accordance with all requirements of the insurance rating
organization, or similar body. Any remaining proceeds of insurance after such
restoration will be Tenant's property.
9.5 Insufficient Proceeds. If the proceeds of any insurance settlement
are not sufficient to pay the costs of such repair, rebuilding or restoration in
full, Tenant shall deposit with Landlord at Landlord's option, and within 20
days of Landlord's request, an amount sufficient in Landlord's reasonable
judgment to complete such repair, rebuilding or restoration. Tenant shall
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not, by reason of the deposit or payment, be entitled to any reimbursement from
Landlord or diminution in or postponement of the payment of the Rent.
9.6 Not Trust Funds. Notwithstanding anything herein or at law or
equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9. Tenant expressly assumes
all risk of loss, including a decrease in the use, enjoyment or value, of the
Leased Property from any casualty whatsoever, whether or not insurable or
insured against.
9.7 Landlord's Inspection. During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and specifications. Upon the
receipt of any such notice, Tenant will cause corrections to be made to any
deficiencies, omissions, or such other respect. Tenant's obligations to supply
insurance, according to Article 4, will be applicable to any repairs or
rebuilding under this Section.
9.8 Landlord's Costs. Tenant shall, within 30 days after receipt of an
invoice from Landlord, pay the costs, expenses, and fees of any architect or
engineer employed by Landlord to review any plans and specifications and to
supervise and approve any construction, or for any services rendered by such
architect or engineer to Landlord as contemplated by any of the provisions of
this Lease, or for any services performed by Landlord's attorneys in connection
therewith. With respect to any inspections by the architect or engineer employed
by Landlord, Tenant shall pay no more than $500 per day plus out of pocket
expenses for travel, lodging, food and transportation.
9.9 No Rent Abatement. Rent will not abate pending the repairs or
rebuilding of the Leased Property.
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ARTICLE 10: CONDEMNATION
10.1 Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the property of the Landlord, whether such damages shall
be awarded as compensation for diminution in value of the leasehold or the fee
of the Leased Property.
10.2 Partial Taking. If, after a Taking, so much of the Leased Property
remains that the Leased Property can be used for substantially the same purposes
for which it was used immediately before the Taking, then [i] this Lease will
end as to the part taken on the earlier of the vesting of title to the Leased
Property in the condemning authority or the taking of possession of the Leased
Property by the condemning authority; [ii] at its cost, Tenant shall restore so
much of the Leased Property as remains to a sound architectural unit
substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials; [iii] upon
completion of the restoration, Landlord will pay Tenant the lesser of the net
award made to Landlord on the account of the Taking (after deducting from the
total award, attorneys', appraisers', and other fees and costs incurred in
connection with the obtaining of the award and amounts paid to the holders of
mortgages secured by the Leased Property), or Tenant's actual out-of-pocket
costs of restoring the Leased Property; and [iv] Landlord shall be entitled to
the balance of the net award. The restoration shall be completed in accordance
with Sections 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed to apply to
condemnation instead of casualty. casualty.
10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding anything in
this Lease or at law or equity to the contrary, none of the condemnation award
paid to Landlord shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 10. Borrower expressly
assumes all risk of loss, including a decrease in the use, enjoyment, or value,
of the Leased Property from any Condemnation.
ARTICLE 11: TENANT'S PROPERTY
11.1 Tenant's Property. Tenant shall install, place, and use on the
Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Personal Property as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "Tenant's Property".
11.2 Requirements for Tenant's Property. Tenant shall comply with all
of the following requirements in connection with Tenant's Property:
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(a) Tenant shall, at Tenant's sole cost and expense, maintain,
repair, and replace Tenant's Property.
(b) Tenant shall, at Tenant's sole cost and expense, keep
Tenant's Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, earthquake, and other physical loss
perils commonly covered by fire and extended coverage, boiler and machinery, and
difference in conditions insurance in an amount not less than 90% of the then
full replacement cost thereof. Tenant shall use the proceeds from any such
policy for the repair and replacement of Tenant's Property.
(c) Tenant shall pay all taxes applicable to Tenant's
Property.
(d) If Tenant's Property is damaged or destroyed by fire or
any other cause, Tenant shall promptly repair or replace Tenant's Property
unless Landlord elects to terminate this Lease pursuant to Section 9.2.2.
(e) Unless an Event of Default or any event which, with the
giving of notice or lapse of time, or both, would constitute an Event of Default
has occurred, Tenant may remove Tenant's Property from the Leased Property from
time to time provided that [i] the items removed are not required to operate the
Leased Property as a licensed assisted living facility (unless such items are
being replaced by Tenant); and [ii] Tenant repairs any damage to the Leased
Property resulting from the removal of Tenant's Property.
(f) Tenant shall not, without the prior written consent of
Landlord or as otherwise provided in this Lease, remove any Tenant's Property or
Leased Property. Tenant shall, at Landlord's option, remove Tenant's Property
upon the termination or expiration of this Lease and shall repair any damage to
the Leased Property resulting from the removal of Tenant's Property. If Tenant
fails to remove Tenant's Property within 30 days after request by Landlord, then
Tenant shall be deemed to have abandoned Tenant's Property, Tenant's Property
shall become the property of Landlord, and Landlord may remove, store and
dispose of Tenant's Property. In such event, Tenant shall have no claim or right
against Landlord for such property or the value thereof regardless of the
disposition thereof by Landlord. Tenant shall pay Landlord, upon demand, all
expenses incurred by Landlord in removing, storing, and disposing of Tenant's
Property and repairing any damage caused by such removal. Tenant's obligations
hereunder shall survive the termination or expiration of this Lease.
(g) Tenant shall perform its obligations under any equipment
lease or security agreement for Tenant's Property. For equipment loans or leases
for equipment having an original cost in excess of $50,000.00, Tenant shall
cause such equipment lessor or lender to enter into a nondisturbance agreement
with Landlord upon terms and conditions acceptable to Landlord, including
without limitation, the following: [i] Landlord shall have the right (but not
the obligation) to assume such equipment lease or security agreement upon the
occurrence of an Event of Default by Tenant hereunder; [ii] such equipment
lessor or lender shall notify Landlord of any default by Tenant under the
equipment lease or security agreement and give Landlord a reasonable
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opportunity to cure such default; and [iii] Landlord shall have the right to
assign its interest in the equipment lease or security agreement and
nondisturbance agreement. Tenant shall, within 30 days after receipt of an
invoice from Landlord, reimburse Landlord for all costs and expenses incurred in
reviewing and approving the equipment lease, security agreement and
nondisturbance agreement, including without limitation, reasonable attorneys'
fees and costs.
ARTICLE 12: RENEWAL OPTIONS
12.1 Renewal Options. Tenant has the option to renew ("Renewal Option")
this Lease for 3 consecutive 5 year renewal terms (each a "Renewal Term").
Tenant can exercise the Renewal Option only upon satisfaction of the following
conditions:
(a) There shall be no uncured Event of Default, or any event
which with the passage of time or giving of notice would constitute an Event of
Default, at the time Tenant exercises its Renewal Option nor on the date the
Renewal Term is to commence.
(b) Tenant shall give Landlord irrevocable written notice of
renewal ("Renewal Notice") no later than the date which is [i] 90 days prior to
the expiration date of the then current Term; or [ii] if applicable, 15 days
after the occurrence of the substantial destruction of the Improvements as set
forth in Sections 9.2.2 and 9.2.3.
(c) Each Phase I Tenant shall concurrently give irrevocable
notice of renewal for each Phase I Lease.
12.2 Effect of Renewal. The following terms and conditions will be
applicable if Tenant renews the Lease:
(a) Effective Date. The effective date of any Renewal Term
will be the first day after the expiration date of the then current Term. The
first day of each Renewal Term is also referred to as the Renewal Date.
(b) Lease Amount. Effective as of each Renewal Date, a single
Lease Amount will be computed by summing all Lease Advance Amounts (including
the Acquisition Amount).
(c) Lease Rate. Effective as of each Renewal Date, a single
Lease Rate will be computed equal to the Renewal Rate. If the IPO Conditions
were not satisfied, the Renewal Rate will be the sum of the Rate Index on the
Rate Determination Date plus the applicable Rate Spread as set forth in the
definition of "Rate Spread".
If the IPO Conditions have been satisfied, the Renewal Rate
for each Renewal Term shall be the fair market value lease rate for this type of
lease as determined in accordance with the following provisions. The parties
shall attempt to determine the fair market value lease rate by mutual agreement
within 15 days after the date Tenant gives the Renewal Notice. If the parties do
not agree on such lease rate within the 15 day period, the appraisal
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procedure set forth in Section 13.3 shall be used. The appraisers shall be
instructed to appraise the fair market value lease rate as a financing lease
rate for a health care facility of the same type as the Facility and shall take
into account the lease rate then being charged by Landlord to tenants of
comparable creditworthiness for comparable facilities. The appraised rates
submitted by the three appraisers shall be ranked from highest to lowest, the
rate (highest or lowest) which is furthest from the middle rate shall be
discarded, and the remaining two appraised rates shall be averaged to arrive at
the appraised lease rate. The Renewal Rate shall be the appraised lease rate
provided, however, that Landlord shall not be obligated to renew this Lease at a
Renewal Rate less than the lease rate then being charged by Landlord to tenants
of comparable creditworthiness for comparable facilities.
(d) Increaser Rate. The Increaser Rate will be 22.5 basis
points per year; provided, however, that if the IPO Conditions are satisfied,
the Increaser Rate shall be 20 basis points per year.
(e) Base Rent. Effective as of the Renewal Date, the Base Rent
will be changed to equal 1/12th of the product of [i] the Lease Amount on the
Renewal Date times [ii] the new Lease Rate equal to the Renewal Rate.
(f) Other Terms and Conditions. Except for the modifications
set forth in this Section 12.2, all other terms and conditions of the Lease will
remain the same for the Renewal Term.
12.3 Effect of Non-Renewal or Expiration of Lease. The following terms
and conditions will be applicable if Tenant does not renew this Lease or
exercise its Option to Purchase by the expiration date for the then current
Term:
(a) Extension of Current Term. The current Term will be
extended (the "Extended Term") for 180 days; provided, however, that the
Extended Term will expire on such earlier date of the closing of the sale
pursuant to the Option to Purchase.
(b) Lease Payments. During the Extended Term, Tenant shall
continue to make monthly payments of Rent (including Base Rent) based upon the
then existing Lease Rate.
ARTICLE 13: RIGHT OF FIRST REFUSAL
13.1 Right of First Refusal. Tenant shall have the right of first
refusal to purchase the Leased Property during the Term of this Lease. If at any
time during the Term, Landlord shall receive a bona fide offer ("Offer") from a
third person for the purchase of the Leased Property, which Offer Landlord
desires to accept, Landlord shall promptly deliver to Tenant a copy of such
Offer. Tenant shall have the right for a period of 60 days thereafter to elect
to purchase the Leased Property on the same terms and conditions as those set
forth in the Offer. If Tenant elects to purchase the Leased Property, Tenant
must give written notice thereof to Landlord no later than the 60th day after
the date Landlord delivers the Offer to Tenant.
13.2 No Exercise. If Tenant does not elect to exercise its right of
first refusal as
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set forth in Section 13.1, Landlord shall be free to sell and convey the Leased
Property to the third party purchaser in accordance with the terms and
provisions of the Offer. In the event that Landlord does not consummate the sale
of the Leased Property to such purchaser, Tenant's right of first refusal under
this Article 13 shall remain applicable to subsequent bonafide offers from third
persons.
ARTICLE 14: NEGATIVE COVENANTS
Until Tenant's Obligations shall have been performed in full, Tenant
and Guarantor covenant and agree that Tenant (and Guarantor where applicable)
shall not do any of the following without the prior written consent of Landlord:
14.1 No Debt. Tenant shall not create, incur, assume, or permit to
exist any indebtedness relating to the Facility other than [i] trade debt
incurred in the ordinary course of Tenant's business; [ii] indebtedness relating
to the Letter of Credit; [iii] indebtedness that is secured by any Permitted
Lien; [iv] unsecured indebtedness for working capital in an amount not to exceed
$25,000 per facility and $600,000 in the aggregate for the facilities operated
by Tenant or Corridor and financed by Landlord; and [v] unsecured indebtedness
for working capital in any amount for facilities not financed by Landlord.
14.2 No Liens. Tenant shall not create, incur, or permit to exist any
lien, charge, encumbrance, easement or restriction upon the Leased Property or
any lien upon or pledge of any interest in Tenant, except for Permitted Liens.
14.3 No Guaranties. Tenant shall not create, incur, assume, or permit
to exist any guarantee of any loan or other indebtedness except for the
endorsement of negotiable instruments for collection in the ordinary course of
business; provided, however, that the foregoing provision shall not apply if the
IPO Conditions are satisfied.
14.4 No Transfer. Tenant shall not sell, lease, sublease, mortgage,
convey, assign or otherwise transfer any legal or equitable interest in the
Leased Property or any part thereof, except for transfers made in connection
with any Permitted Lien.
14.5 No Dissolution. Tenant shall not dissolve, liquidate, merge,
consolidate or terminate its existence or sell, assign, lease, or otherwise
transfer (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired). No
Related Company shall dissolve, liquidate, merge, consolidate or terminate its
existence or sell, assign, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired), or issue any notes or
securities, if such action would have a material adverse effect on the condition
or performance of Tenant or the Facility. Notwithstanding the foregoing, Tenant
and any Related Company are permitted to enter into a "roll-up" of any such
entities into a single entity in order to facilitate the IPO; provided, however,
that the publicly held company (whether Tenant or any successor or Affiliate)
shall be liable for the payment and performance of all obligations of Tenant
under this Lease.
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14.6 No Change in Management. Neither Timothy J. Buchanan nor Steven L.
Vick shall cease to be an active principal officer and executive manager of
Tenant unless the replacement officers are qualified and experienced in the
management of assisted living facilities or other similar facilities and the
replacements are reasonably acceptable to, and reasonably approved in advance
by, Landlord.
14.7 No Investments. Tenant shall not purchase or otherwise acquire,
hold, or invest in securities (whether capital stock or instruments evidencing
indebtedness) of or make loans or advances to any person, including, without
limitation, any Guarantor, any Affiliate, or any shareholder, member or partner
of Tenant, Guarantor or any Affiliate, except for cash balances temporarily
invested in short-term or money market securities.
14.8 Contracts. Tenant shall not execute or modify any material
contracts or agreements with respect to any Facility except for contracts and
modifications approved by Landlord. Contracts made in the ordinary course of
business or in an amount less than $150,000.00 shall not be considered
"material" for purposes of this paragraph.
14.9 Subordination of Payments to Affiliates. After the occurrence of
an Event of Default and until such Event of Default is cured, Tenant shall not
make any payments or distributions (including, without limitation, salary,
bonuses, fees, principal, interest, dividends, liquidating distributions,
management fees, cash flow distributions or lease payments) to Guarantor, any
Affiliate, or any shareholder, member or partner of Tenant, Guarantor or any
Affiliate.
14.10 Change of Location or Name. Without at least 10 business days
advance written notice to Landlord, Tenant shall not change any of the
following: [i] the location of the principal place of business or chief
executive office of Tenant, or any office where any of Tenant's books and
records are maintained; or [ii] the name under which Tenant conducts any of its
business or operations.
14.11 Limits on Management Fees. Tenant shall not pay management fees
or pay any compensation in the nature of or in lieu of management fees in excess
of 8% of annual revenues. Landlord may, at Tenant's request, and after Tenant
has provided such information as Landlord may require, approve a change in the
management fees payable during any particular fiscal year.
ARTICLE 15: AFFIRMATIVE COVENANTS
15.1 Perform Obligations. Tenant shall perform all of its obligations
under this Lease, the Government Authorizations, the Permitted Exceptions, and
all Legal Requirements.
15.2 Proceedings to Enjoin or Prevent Construction. If any proceedings
are filed seeking to enjoin or otherwise prevent or declare invalid or unlawful
Tenant's construction, occupancy, maintenance, or operation of the Facility or
any portion thereof, Tenant will cause such proceedings to be vigorously
contested in good faith, and in the event of an adverse ruling or decision,
prosecute all allowable appeals therefrom, and will, without limiting the
generality of the
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foregoing, resist the entry or seek the stay of any temporary or permanent
injunction that may be entered, and use its best efforts to bring about a
favorable and speedy disposition of all such proceedings and any other
proceedings.
15.3 Documents and Information.
15.3.1 Furnish Documents. Tenant and the Related Companies shall
periodically during the term of the Lease deliver to Landlord the Annual
Financial Statements, Periodic Financial Statements and other documents
described on Exhibit C within the specified time periods. With each delivery of
Annual Financial Statements and Periodic Financial Statements to Landlord,
Tenant shall also deliver to Landlord a certificate signed by the Chief
Financial Officer of Tenant and an Annual Facility Financial Report or Quarterly
Facility Financial Report, as applicable, all in the form of Exhibit D. In
addition, Tenant shall deliver to Landlord the Annual Facility Financial Report
(based upon internal financial statements) within 60 days after the end of each
fiscal year.
15.3.2 Furnish Information. Tenant shall [i] promptly supply Landlord
with such information concerning its financial condition, affairs and property,
as Landlord may reasonably request from time to time hereafter; [ii] promptly
notify Landlord in writing of any condition or event that constitutes a breach
or event of default of any term, condition, warranty, representation, or
provisions of this Agreement or any other agreement, and of any material adverse
change in its financial condition; [iii] maintain a standard and modern system
of accounting; [iv] permit Landlord or any of its agent or representatives to
have access to and to examine all of its books and records regarding the
financial condition of each Facility at any time or times hereafter during
business hours and after reasonable oral or written notice; and [v] permit
Landlord to copy and make abstracts from any and all of said books and records.
15.3.3 Further Assurances and Information. Tenant shall, on request of
Landlord from time to time, execute, deliver, and furnish documents as may be
necessary to fully consummate the transactions contemplated under this
Agreement. Within 15 days after a request from Landlord, Tenant shall provide to
Landlord such additional information regarding Tenant, Tenant's financial
condition or any Facility as Landlord, or any existing or proposed creditor of
Landlord, or any auditor or underwriter of Landlord, may require from time to
time, including, without limitation, a current Tenant's Certificate and Schedule
of Financial Information in the form of Exhibit D.
15.3.4 Material Communications. Tenant shall transmit to Landlord,
within 5 business days after receipt thereof, any material communication
affecting a Facility, this Lease, the Legal Requirements or the Government
Authorizations, and Tenant will promptly respond to Landlord's inquiry with
respect to such information. Tenant shall promptly notify Landlord in writing
after Tenant has knowledge of any potential, threatened or existing litigation
or proceeding against, or investigation of, Tenant, Guarantor, a Related Company
or any Facility that may affect the right to operate the Facility or Landlord's
title to the Facility or Tenant's interest therein. Without otherwise limiting
the term "material" as used in the preceding sentence, any litigation or
proceeding involving a claim of $50,000 or more or involving a threatened or
alleged violation of an Environmental Law shall be deemed to be material.
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15.3.5 Requirements for Financial Statements. Tenant and the Related
Companies shall meet the following requirements in connection with the
preparation of the financial statements: [i] all audited financial statements
shall be prepared in accordance with general accepted accounting principles
consistently applied; [ii] all unaudited financial statements shall be prepared
in a manner substantially consistent with prior audited and unaudited financial
statements submitted to Landlord; [iii] all financial statements shall fairly
present the financial condition and performance for the relevant period in all
material respects; [iv] the financial statements shall include all notes to the
financial statements and a complete schedule of contingent liabilities and
transactions with Affiliates; and [v] the audited financial statements shall
contain an unqualified opinion.
15.3.6 Confidentiality. Landlord shall use reasonable efforts not to
disclose the information provided by Tenant under this Section 15.3; provided,
however, that Landlord may disclose such information to any person or entity to
whom Landlord is required to make such disclosure; to governmental authorities;
and to any other person or entity having a legitimate business interest in the
Landlord, including, but not limited to, regulators, auditors, accountants,
attorneys, investors, underwriters, rating agencies, bond or surety companies,
and lenders of Landlord (including, but not limited to, collateral pool lenders
and line of credit lenders).
15.4 Compliance With Laws. Tenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and effect.
Tenant shall pay when due all taxes and governmental charges of every kind and
nature that are assessed or imposed upon Tenant at any time during the term of
the Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to Tenant's business and operations. Tenant shall be
solely responsible for compliance with all Legal Requirements, including the
ADA, and Landlord shall have no responsibility for such compliance.
15.5 Broker's Commission. Tenant shall indemnify Landlord from claims
of brokers retained or used by Tenant arising by the execution hereof or the
consummation of the transactions contemplated hereby and from expenses incurred
by Landlord in connection with any such claims (including attorneys' fees).
15.6 Existence and Change in Ownership. Tenant shall maintain its
existence throughout the term of this Agreement. Until the IPO is completed, any
change in the ownership interest of Steven L. Vick, Timothy J. Buchanan or any
Related Company in Tenant, directly or indirectly, other than any change in
ownership relating to the IPO, shall require Landlord's prior written consent.
15.7 Financial Covenants. The defined terms used in this section are
defined in Section 15.7.1. The following financial covenants shall be met
throughout the term of this Lease:
15.7.1 Definitions.
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(a) "Cash Flow" means the net income of Tenant as reflected on
the income statement of Tenant plus [i] the amount of the provision for
depreciation and amortization; [ii] the amount of the provision for management
fees; plus [iii] the amount of the provision for income taxes; plus [iv] the
amount of the provision for Rent payments; minus [v] an imputed management fee
equal to 8% of revenues (net of contractual allowances); and minus [vi] an
imputed replacement reserve of $300.00 per unit at the Facility, per year.
(b) "Coverage Ratio" is the ratio of [i] Cash Flow for each
applicable period; [ii] to the Rent payments due pursuant to this Lease for the
applicable period.
(c) "Net Worth" means an amount equal to the total
consolidated fair market value of the tangible assets of the entity (excluding
good will and other intangible assets) minus the total consolidated liabilities
of such entity.
15.7.2 Coverage Ratio. Tenant shall maintain a Coverage Ratio of not
less than 1.25 to 1.0 for each fiscal quarter during the second full year that
the Facility is operational and for each year thereafter; provided, however,
that after two or more of Tenant's assisted living facilities financed by
Landlord are in their second full year of operation, the Coverage Ratio for any
one or more facilities may be as low as 1.15 to 1.0 if the collective Coverage
Ratio for all such facilities (that are in operation at least one year) is at
least 1.25 to 1.0.
15.7.3 Net Worth. Until the IPO Conditions are satisfied, Guarantor
shall maintain a combined Net Worth of at least $1,200,000.
15.7.4 Working Capital. Until the IPO Conditions are satisfied, Tenant
shall maintain working capital of at least $25,000 for each facility financed by
Landlord.
ARTICLE 16: ALTERATIONS, CAPITAL
IMPROVEMENTS, AND SIGNS
16.1 Prohibition on Alterations and Improvements. Except for Permitted
Alterations (as hereinafter defined), Tenant shall not make any structural or
nonstructural changes, alterations, additions and/or improvements (hereinafter
collectively referred to as "Alterations") to the Leased Property.
16.2 Approval of Alterations. If Tenant desires to perform any
Permitted Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Within 30 days
after receipt of an invoice, Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord in reviewing and, if required, approving or
disapproving the Plans and Specifications, inspecting the Leased Property, and
otherwise
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monitoring compliance with the terms of this Article 16. Tenant shall comply
with the requirements of Section 16.4 in making any Permitted Alterations.
16.3 Permitted Alterations. Permitted Alterations means any one of the
following: [i] Alterations approved by Landlord; [ii] Alterations required under
Section 7.2; [iii] Alterations having a total cost of less than $100,000; or
[iv] repairs, rebuilding and restoration required or undertaken pursuant to
Section 9.4.
16.4 Requirements for Permitted Alterations. Tenant shall comply with
all of the following requirements in connection with any Permitted Alterations:
(a) The Permitted Alterations shall be made in accordance with
the approved Plans and Specifications.
(b) The Permitted Alterations and the installation thereof
shall comply with all applicable legal requirements and insurance requirements.
(c) The Permitted Alterations shall be done in a good and
workmanlike manner, shall not impair the value or the structural integrity of
the Leased Property, and shall be free and clear of all mechanic's liens.
(d) Tenant shall, at Tenant's expense, obtain a builder's
completed value risk policy of insurance insuring against all risks of physical
loss, including collapse and transit coverage, in a nonreporting form, covering
the total value of the work performed, and equipment, supplies, and materials,
and insuring initial occupancy. Landlord and any mortgagee of Landlord shall be
additional insureds of such policy. Landlord shall have the right to approve the
form and substance of such policy.
(e) Tenant shall pay the premiums required to increase the
amount of the insurance coverages required by Article 4 to reflect the increased
value of the Improvements resulting from installation of the Permitted
Alterations, and shall deliver to Landlord a certificate evidencing the increase
in coverage.
(f) Tenant shall, not later than 60 days after completion of
the Permitted Alterations, deliver to Landlord a revised "as-built" survey of
the Leased Property if the Permitted Alterations altered the Land or
"foot-print" of the Improvements and an "as-built" set of Plans and
Specifications for the Permitted Alterations in form and substance satisfactory
to Landlord.
(g) Tenant shall, not later than 30 days after Landlord sends
an invoice, reimburse Landlord for any reasonable costs and expenses, including
attorneys' fees and architects' and engineers' fees, incurred in connection with
reviewing and approving the Permitted Alterations and ensuring Tenant's
compliance with the requirements of this Section. The fee for Landlord's
consulting engineer is $500.00 per day plus out-of-pocket expenses for travel,
lodging, food and transportation.
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16.5 Ownership and Removal of Permitted Alterations. The Permitted
Alterations shall become a part of the Leased Property, owned by Landlord, and
leased to Tenant subject to the terms and conditions of this Lease. Tenant shall
not be required or permitted to remove any Permitted Alterations.
16.6 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the termination or expiration of this
Lease, Tenant shall, within 30 days after notice from Landlord, remove the signs
and restore the Leased Property to its original condition.
ARTICLE 17: IPO AND SECURITY
17.1 Guaranty and Stock Pledge. This Lease is jointly and severally
guaranteed for 10% of the Acquisition Amount by the Guarantors pursuant to an
Unconditional and Continuing Lease Guaranty ("Guaranty") and is secured by
pledges of the Guarantors' interests in Sterling Management Company, Sterling
Holdings, Inc., Sterling House Corporation and Buchanan Construction Company
pursuant to one or more stock pledge agreements ("Stock Pledge"). If the IPO
Conditions are satisfied, Landlord shall terminate the Guaranty and all other
guaranties of Guarantor in favor of Landlord, release the Stock Pledge and all
other stock pledges given to Landlord, return all pledged securities to
Guarantor and terminate the Contingent Interest Agreement.
17.2 Contingent Interest Agreement. In anticipation of the IPO
Conditions being satisfied, Landlord has agreed to postpone issuance of
additional interests in Corridor to Landlord pursuant to the Contingent Interest
Agreement for lease financings closed between August 15, 1995 and December 31,
1995. If the IPO Conditions are not satisfied, Tenant shall transfer its
interest under this Lease and all existing Related Leases to Corridor and
Corridor will amend the Contingent Interest Agreement to provide Landlord its
corresponding interests in Corridor based upon the lease amounts financed by
Landlord through December 31, 1995. The transfer and amendment shall be
completed by March 31, 1996. Tenant's failure to comply with the foregoing
requirement shall constitute an immediate Event of Default under this Lease.
17.3 Expenses. Tenant shall pay all costs and expenses, including,
without limitation, attorney's fees and expenses, incurred by Landlord in
connection with any of the actions and modifications required under this Article
17.
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ARTICLE 18: ASSIGNMENT AND
SALE OF LEASED PROPERTY
18.1 Prohibition on Assignment and Subletting. Tenant acknowledges that
Landlord has entered into this Lease in reliance on the personal services and
business expertise of Tenant. Tenant may not assign, sublet, mortgage,
hypothecate, pledge, or transfer any interest in this Lease, or in the Leased
Property, in whole or in part, without the prior written consent of Landlord,
which Landlord may withhold in its sole and absolute discretion. The following
transactions will be deemed an assignment or sublease requiring Landlord's prior
written consent: [i] an assignment by operation of law; [ii] an imposition
(whether or not consensual) of a lien, mortgage, or encumbrance upon Tenant's
interest in the Lease; [iii] an arrangement (including but not limited to,
management agreements, concessions, licenses, and easements) which allows the
use or occupancy of all or part of the Leased Property by anyone other than
Tenant, Sterling Management Company, Inc. or any other permitted manager; and
[iv] a change of ownership of Tenant except as permitted under Section 15.6.
Landlord's consent to any assignment or sublease will not release Tenant (or any
guarantor) from its payment and performance obligations under this Lease, but
rather Tenant, any guarantor, and Tenant's assignee or sublessee will be jointly
and severally liable for such payment and performance. An assignment or sublease
without the prior written consent of Landlord will be void at the Landlord's
option. Landlord's consent to one assignment or sublease will not waive the
requirement of its consent to any subsequent assignment or sublease.
18.2 Requests for Landlord's Consent to Assignment, Sublease or
Management Agreement. If Tenant requests Landlord's consent to a specific
assignment, sublease, or management agreement, Tenant shall give Landlord [i]
the name and address of the proposed assignee, subtenant or manager; [ii] a copy
of the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and [iv] banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that [a] such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord; [b] such assignment,
sublease or management agreement may not be modified without the prior written
consent of Landlord not to be unreasonably withheld or delayed; [c] if this
Lease shall terminate before the expiration of such assignment, sublease or
management agreement, the assignee, subtenant or manager thereunder will, at
Landlord's option, attorney to Landlord and waive any right the assignee,
subtenant or manager may have to terminate the assignment, sublease or
management agreement or surrender possession thereunder as a result of the
termination of this Lease; and [d] if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or payments under the assignment, sublease or management agreement directly to
Landlord until such default has been cured. Tenant hereby collaterally assigns
to Landlord, as security for the performance of its obligations hereunder, all
of Tenant's right, title, and interest in and to any assignment, sublease or
management agreement now or hereafter existing for all or part of the Leased
Property. Tenant shall, at the request of Landlord,
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execute such other instruments or documents as Landlord may request to evidence
this collateral assignment. If Landlord, in its sole and absolute discretion,
consents to such assignment, sublease, or management agreement, such consent
shall not be effective until [i] a fully executed copy of the instrument of
assignment, sublease or management agreement has been delivered to Landlord;
[ii] in the case of an assignment, Landlord has received a written instrument in
which the assignee has assumed and agreed to perform all of Tenant's obligations
under the Lease; and [iii] Tenant has paid to Landlord a fee in the amount of
$1,500.00; and [iv] Landlord has received reimbursement from Tenant or the
assignee for all reasonable attorneys' fees and expenses and all other
reasonable out-of-pocket expenses incurred in connection with determining
whether to give its consent, giving its consent and all matters relating to the
assignment.
18.3 Agreements with Residents. Notwithstanding Section 18.1, Tenant
may enter into an occupancy agreement with residents of the Leased Property
without the prior written consent of Landlord provided that [i] the agreement
does not provide for lifecare services; [ii] Tenant may not collect rent for
more than one month in advance except that Tenant may collect security deposits
in an amount that does not exceed two months rent; and [iii] all residents of
the Leased Property are accurately shown in Tenant's accounting records.
18.4 Sale of Leased Property. If Landlord or any subsequent owner of
the Leased Property sells the Leased Property, its liability for the performance
of its agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements. Landlord shall remain liable to Tenant for any breach of this
Lease by Landlord that occurs during the period of Landlord's ownership of the
Leased Property. For purposes of this Section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when it succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.
18.5 Assignment by Landlord. Landlord may transfer, assign, mortgage,
collaterally assign, or otherwise dispose of Landlord's interest in this Lease
or the Leased Property.
ARTICLE 19: HOLDOVER AND SURRENDER
19.1 Holding Over. Should Tenant, with or without the express or
implied consent of Landlord, continue to hold and occupy the Leased Property
after the expiration of the Term, such holding over beyond the Term and the
acceptance or collection of Rent by the Landlord shall operate and be construed
as creating a tenancy from month-to-month and not for any other term whatsoever.
Said month-to-month tenancy may be terminated by Landlord by giving Tenant 10
days written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property.
19.2 Surrender. Except for [i] Permitted Alterations; [ii] normal and
reasonable wear and tear (subject to the obligation of Tenant to maintain the
Leased Property in good order and repair during the Term); and [iii] damage and
destruction not required to be repaired by Tenant, Tenant shall surrender and
deliver up the Leased Property at the expiration or termination of the
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Term in as good order and condition as of the Commencement Date.
ARTICLE 20: LETTER OF CREDIT
20.1 Terms of Letter of Credit. As security for the performance of its
obligations hereunder, Tenant shall provide Landlord with the Letter of Credit
at the Closing. Tenant shall maintain the Letter of Credit in favor of Landlord
until Tenant's Obligations are performed in full. The Letter of Credit shall
permit partial draws and shall permit drawing upon presentation of a draft drawn
on the issuer and a certificate signed by Landlord stating that an Event of
Default has occurred under this Lease. The Letter of Credit shall be for an
initial term of one year and shall be automatically renewed annually for
successive terms of at least one year unless Landlord receives notice from the
Issuer, by certified mail, at least 60 days prior to the expiry date then in
effect that the Letter of Credit will not be extended for an additional one-year
period.
20.2 Replacement Letter of Credit. Tenant shall provide a replacement
Letter of Credit which satisfies the requirements of Section 20.1 from an Issuer
acceptable to Landlord within 30 days after the occurrence of any of the
following: [i] Landlord's receipt of notice from the Issuer that the Letter of
Credit will not be extended for an additional one-year period; [ii] Landlord
gives notice to Tenant that the Lace Financial Service Rating of the Issuer is
less than a "C+"; or [iii] Landlord gives notice to Tenant of the admission by
Issuer in writing of its inability to pay its debts generally as they become
due, or Issuer's filing of a petition in bankruptcy or petitions to take
advantage of any insolvency act, making an assignment for the benefit of its
creditors, consenting to the appointment of a receiver of itself or of the whole
or any substantial part of its property, or filing a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state thereof.
Tenant's failure to comply with the requirements of this Section shall be an
immediate Event of Default without any notice (other than as provided for in the
section), cure or grace period.
20.3 Draws. Landlord may draw under the Letter of Credit upon the
occurrence of an Event of Default hereunder. Any such draw shall not cure an
Event of Default. Landlord shall have the right, but not the obligation, to
apply all or any portion of the proceeds from the Letter of Credit to pay all or
any portion of [i] all Rent and other charges and expenses payable by Tenant
under this Lease; plus [ii] all expenses and costs incurred by Landlord in
enforcing or preserving Landlord' rights under this Lease or any security for
the Lease, including without limitation, [a] the fees, expenses, and costs of
any litigation, receivership, administrative, bankruptcy, insolvency, or other
similar proceeding; [b] attorney, paralegal, consulting and witness fees and
disbursements; and [c] the expenses, including without limitation, lodging,
meals and transportation of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency,
or similar proceedings and attendance at hearings, depositions, and trials in
connection therewith.
With respect to any portion of the Letter of Credit proceeds that is
not applied to payment of Tenant's Obligations, Landlord shall have the option
to either [i] deposit the proceeds into an interest-bearing account with a
financial institution chosen by Landlord ("LC Account"); or [ii] require Tenant
to obtain a replacement Letter of Credit satisfactory to Landlord, with the
Letter
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of Credit proceeds made available to Tenant to secure Tenant's reimbursement
obligation for the Letter of Credit. All interest accruing on the LC Account
shall be paid to Landlord and may, from time to time, be withdrawn from the LC
Account by Landlord. At any time and from time to time until Tenant's
Obligations are performed in full, Landlord may apply all or any portion of the
funds held in the LC Account to payment of all or any portion of Tenant's
Obligations. Within 10 days after any such payment from the LC Account, Landlord
shall give written notice to Tenant describing the amount of such payment and
how it was applied to Tenant's Obligations.
Upon the occurrence of either [i] Landlord's receipt of a replacement
Letter of Credit that satisfies the requirements of Section 20.1 and is issued
by an Issuer acceptable to Landlord; or [ii] the date on which all of Tenant's
Obligations are performed in full, Landlord shall pay the principal balance of
the LC Account (including any accrued interest) to Tenant.
20.4 Partial Draws. Upon the occurrence of a monetary Event of Default
under this Lease, Landlord may, at its option, make a partial draw on the Letter
of Credit in an amount not to exceed the amount of Tenant's monetary obligations
under this Lease then past due. If Landlord then applies the proceeds from such
partial draw on the Letter of Credit to payment of all or any portion of
Tenant's monetary obligations then past due, Tenant shall, within 10 days after
notice from Landlord of such partial draw and payment, cause the amount of the
Letter of Credit to be reinstated to the amount in effect prior to such partial
draw. Tenant's failure to comply with the requirements of this section shall be
an immediate Event of Default under the Loan Documents without any notice (other
than as provided for in this section), cure or grace period. Landlord's rights
under this Section 20.4 are in addition to, and not in limitation of, Landlord's
rights under Section 20.3.
20.5 Substitute Letter of Credit. Tenant may, from time to time,
deliver to Landlord a substitute Letter of Credit meeting the requirements of
this Agreement and issued by an Issuer acceptable to Landlord. Upon Landlord's
approval of the substitute Letter of Credit, Landlord shall release the previous
Letter of Credit to the Tenant.
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION,
ATTORNMENT AND ESTOPPEL CERTIFICATES
21.1 Quiet Enjoyment. So long as Tenant performs all of its obligations
under this Lease, Tenant's possession of the Leased Property will not be
disturbed by Landlord.
21.2 Subordination. Subject to the terms and conditions of this
section, this Lease and Tenant's rights under this Lease are subordinate to any
ground lease or underlying lease, first mortgage, first deed of trust, or other
first lien against the Leased Property, together with any renewal,
consolidation, extension, modification or replacement thereof, which now or at
any subsequent time affects the Leased Property or any interest of Landlord in
the Leased Property, except to the extent that any such instrument expressly
provides that this Lease is superior. The foregoing subordination provision is
expressly conditioned upon any lessor or mortgagee being obligated and bound to
recognize Tenant as the tenant under this Lease, and such lessor or mortgagee
shall have no right to disturb Tenant's possession, use and occupancy of the
Leased Property or Tenant's enjoyment of its rights under this Lease unless and
until an Event of Default
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occurs hereunder. Any foreclosure action or proceeding by any mortgagee with
respect to the Leased Property shall not affect Tenant's rights under this Lease
and shall not terminate this Lease unless and until an Event of Default occurs
hereunder. The foregoing provisions will be self-operative, and no further
instrument will be required in order to effect them. However, Tenant shall
execute, acknowledge and deliver to Landlord, at any time and from time to time
upon demand by Landlord, such documents as may be requested by Landlord or any
mortgagee or any holder of any mortgage or other instrument described in this
Section, to confirm or effect any such subordination, provided that any such
document shall include a non-disturbance provision as set forth in this section
satisfactory to Tenant. Any mortgagee of the Leased Property shall be deemed to
be bound by the non-disturbance provision set forth in this section. If Tenant
fails or refuses to execute, acknowledge, and deliver any such document within
20 days after written demand, Landlord may execute acknowledge and deliver any
such document on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby
constitutes and irrevocably appoints Landlord, its successors and assigns, as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on behalf of
Tenant any documents described in this Section. This power of attorney is
coupled with an interest and is irrevocable.
21.3 Attornment. If any holder of any mortgage, indenture, deed of
trust, or other similar instrument described in Section 21.2 succeeds to
Landlord's interest in the Leased Property, Tenant will pay to such holder all
Rent subsequently payable under this Lease. Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease. The successor
in interest will not be bound by [i] any payment of Rent for more than one month
in advance; [ii] any amendment or modification of this Lease thereafter made
without its consent as provided in this Lease; [iii] any claim against Landlord
arising prior to the date on which the successor succeeded to Landlord's
interest; or [iv] any claim or offset of Rent against the Landlord. Upon request
by Landlord or such successor in interest and without cost to Landlord or such
successor in interest, Tenant will execute, acknowledge and deliver an
instrument or instruments confirming the attornment. If Tenant fails or refuses
to execute, acknowledge, and deliver any such instrument within 20 days after
written demand, then Landlord or such successor in interest will be entitled to
execute, acknowledge, and deliver any document on behalf of Tenant as Tenant's
attorney-in-fact. Tenant hereby constitutes and irrevocably appoints Landlord,
its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any such document. This power of
attorney is coupled with an interest and is irrevocable.
21.4 Estoppel Certificates. At the request of Landlord or any mortgagee
or purchaser of the Leased Property, Tenant shall execute, acknowledge, and
deliver an estoppel certificate, in recordable form, in favor of Landlord or any
mortgagee or purchaser of the Leased Property certifying the following: [i] that
the Lease is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications; [ii] the date to which Rent and other charges have been paid;
[iii] whether Tenant or Landlord is in default or whether there is any fact or
condition which, with notice or lapse of time, or both, would constitute a
default, and specifying any existing default, if any; [iv] that Tenant has
accepted and occupies the Leased Property; [v] that Tenant has no defenses,
set-offs, deductions, credits, or counterclaims against Landlord, if that be the
case, or specifying such that exist; and [vi] such other information as may
reasonably be requested by Landlord or any mortgagee or
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purchaser. Any purchaser or mortgagee may rely on this estoppel certificate. If
Tenant fails to deliver the estoppel certificates to Landlord within 10 days
after the request of the Landlord, then Tenant shall be deemed to have certified
that [a] the Lease is in full force and effect and has not been modified, or
that the Lease has been modified as set forth in the certificate delivered to
Tenant; [b] Tenant has not prepaid any Rent or other charges except for the
current month; [c] Tenant has accepted and occupies the Leased Property; [d]
neither Tenant nor Landlord is in default nor is there any fact or condition
which, with notice or lapse of time, or both, would constitute a default; and
[e] Tenant has no defenses, set-offs, deductions, credits, or counterclaims
against Landlord. Tenant hereby irrevocably appoints Landlord as Tenant's
attorney-in-fact to execute, acknowledge, and deliver on Tenant's behalf any
estoppel certificate to which Tenant does not object within 10 days after
Landlord sends the certificate to Tenant. This power of attorney is coupled with
an interest and is irrevocable.
ARTICLE 22: REPRESENTATIONS AND WARRANTIES
Tenant hereby makes the following representations and warranties, as of
the Effective Date, to Landlord and acknowledges that Landlord is granting the
Lease in reliance upon such representations and warranties. Tenant's
representations and warranties shall survive the Closing and, except to the
extent made as of a specific date, shall continue in full force and effect until
Tenant's Obligations have been performed in full.
22.1 Organization and Good Standing. Tenant is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Kansas.
22.2 Power and Authority. Tenant has the power and authority to
execute, deliver and perform this Lease. Tenant has taken all requisite action
necessary to authorize the execution, delivery and performance of Tenant's
obligations under this Lease.
22.3 Enforceability. This Lease constitutes a legal, valid, and binding
obligation of Tenant enforceable in accordance with its terms.
22.4 Government Authorizations. Each Facility is in compliance with all
Legal Requirements. Exhibit E attached hereto contains a complete list of all
Government Authorizations required for the operation of each Facility as of the
Effective Date. All Government Authorizations are in full force and effect.
Tenant holds all Government Authorizations necessary for the Facility's
operation as an assisted living facility.
22.5 Financial Statements. Tenant has furnished Landlord with true,
correct, and complete copies of the Financial Statements. The Financial
Statements fairly present the financial position of Tenant, the Related
Companies and Guarantor as applicable, as of the respective dates and the
results of operations for the periods then ended in conformance with generally
accepted accounting principles applied on a basis consistent with prior periods.
The Financial Statements and other information furnished to Landlord are true,
complete and correct and, as of the Effective Date, no material adverse change
has occurred since the furnishing of such statements and information. As of the
Effective Date, the Financial Statements and other information do not contain
any untrue statement or omission of a material fact and are not misleading in
any material
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respect. Tenant, the Related Companies and Guarantor are solvent, and no
bankruptcy, insolvency, or similar proceeding is pending or contemplated by or,
to the knowledge of Tenant, against Tenant, the Related Companies or Guarantor.
22.6 No Litigation. As of the Effective Date and except as disclosed on
Exhibit F, [i] there are no actions or suits, or any proceedings or
investigations by any governmental agency or regulatory body pending against
Tenant, Guarantor or any Facility; [ii] Tenant has not received notice of any
threatened actions, suits, proceedings or investigations against Tenant,
Guarantor or the Facility at law or in equity, or before any governmental board,
agency or authority which, if determined adversely to Tenant or Guarantor, would
materially and adversely affect the Facility or title to the Facility (or any
part thereof), the right to operate the Facility as presently operated, or the
financial condition of Tenant or Guarantor; [iii] there are no unsatisfied or
outstanding judgments against Tenant, Guarantor or any Facility; [iv] there is
no labor dispute materially and adversely affecting the operation or business
conducted by Tenant, Guarantor, or any Facility; and [v] Tenant does not have
knowledge of any facts or circumstances which might reasonably form the basis
for any such action, suit, or proceeding.
22.7 Consents. The execution, delivery and performance of this Lease
will not require any consent, approval, authorization, order, or declaration of,
or any filing or registration with, any court, any federal, state, or local
governmental or regulatory authority, or any other person or entity, the absence
of which would materially impair the ability of Tenant to operate the Facility
as presently operated.
22.8 No Violation. The execution, delivery and performance of this
Lease [i] do not and will not conflict with, and do not and will not result in a
breach of the Articles of Incorporation or Bylaws of Tenant; [ii] do not and
will not conflict with, and do not and will not result in a breach of, and do
not and will not constitute a default under (or an event which, with or without
notice or lapse of time, or both, would constitute a default under), any of the
terms, conditions or provisions of any agreement or other instrument or
obligation to which Tenant is a party or by which its assets are bound; and
[iii] do not and will not violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Tenant or the Facility.
22.9 Reports and Statements. All reports, statements, certificates and
other data furnished by or on behalf of Tenant, the Related Companies or
Guarantor to Landlord in connection with this Lease, and all representations and
warranties made herein or in any certificate or other instrument delivered in
connection herewith and therewith, are true and correct in all material respects
and do not omit to state any material fact or circumstance necessary to make the
statements contained herein or therein, in light of the circumstances under
which they are made, not misleading as of the date of such report, statement,
certificate or other data. The copies of all agreements and instruments
submitted to Landlord, including, without limitation, all agreements relating to
management of the Facility, the Letter of Credit, and Tenant's working capital
are true, correct and complete copies and include all amendments and
modifications of such agreements.
22.10 ERISA. All plans (as defined in Section 4021(a) of the Employee
Retirement Income Security Act of 1974, as amended or supplemented from time to
time ("ERISA")) for which
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Tenant is an "employer" or a "substantial employer" (as defined in Sections 3(5)
and 4001(a)(2) of ERISA, respectively) are in compliance with ERISA and the
regulations and published interpretations thereunder. To the extent Tenant
maintains a qualified defined benefit pension plan: [i] there exists no
accumulated funding deficiency; [ii] no reportable event and no prohibited
transaction has occurred; [iii] no lien has been filed or threatened to be filed
by the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA; and [iv] Tenant has not been deemed to be a substantial
employer.
22.11 Chief Executive Office. Tenant maintains its chief executive
office and its books and records at the address set forth in the introductory
paragraph of this agreement.
22.12 Other Name or Entities. Except as disclosed herein, none of
Tenant's business is conducted through any corporate subsidiary, unincorporated
association or other entity and Tenant has not, within the six years preceding
the date of this agreement [i] changed its name, [ii] used any name other than
the name stated at the beginning of this agreement, or [iii] merged or
consolidated with, or acquired any of the assets of, any corporation or other
business except for the matters set forth on Exhibit H.
22.13 Parties in Possession. Except as disclosed on Exhibit B, there
are no parties in possession of any Leased Property or any portion thereof as
managers, lessees, tenants at sufferance, or trespassers.
22.14 Access. Access to the Land is directly from a dedicated public
right-of-way without any easement. To the knowledge of Tenant, there is no fact
or condition which would result in the termination or reduction of the current
access to and from the Land to such right-of-way.
22.15 Utilities. There are available at the Land gas, municipal water,
and sanitary sewer lines, storm sewers, electrical and telephone services in
operating condition which are adequate for the operation of each Facility at a
reasonable cost. The Land has direct access to utility lines located in a
dedicated public right-of-way without any easement. As of the Effective Date,
there is no pending or, to the knowledge of Tenant, threatened governmental or
third party proceeding which would impair or result in the termination of such
utility availability.
22.16 Condemnation and Assessments. As of the Effective Date, Tenant
has not received notice of, and there are no pending or, to the best of Tenant's
knowledge, threatened, condemnation, assessment or similar proceedings affecting
or relating to any Facility, or any portion thereof, or any utilities, sewers,
roadways or other public improvements serving the Facility.
22.17 Zoning. As of the Effective Date, [i] the use and operation of
each Facility as a 33-unit assisted living facility is a permitted use under the
applicable zoning code; [ii] except as disclosed on Exhibit E hereto, no special
use permits, conditional use permits, variances, or exceptions have been granted
or are needed for such use of each Facility; [iii] the Land is not located in
any special districts such as historical districts or overlay districts; and
[iv] each Facility
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has been constructed in accordance with and complies with all applicable zoning
laws, including but not limited to, dimensional, parking, setback, screening,
landscaping, sign and curb cut requirements.
22.18 Pro Forma Statement. Tenant has delivered to Landlord a true,
correct and complete copy of the Pro Forma Statement. The Pro Forma Statement
shows Tenant's reasonable expectation of the most likely results of Facility
operations for the 5 year period commencing on the anticipated Effective Date.
22.19 Environmental Matters. During the period of Tenant's ownership of
the Leased Property, if any, and to the best of Tenant's knowledge after
diligent inquiry, for the period Tenant did not own the Leased Property, [i] the
Leased Property is in compliance with all Environmental Laws; [ii] there were no
releases of Hazardous Materials on, from, or under the Leased Property, except
in compliance with all Environmental Laws; [iii] no Hazardous Materials have
been, are or will be used, generated, stored, or disposed of on the Leased
Property, except in compliance with all Environmental Laws; [iv] no permit is or
has been required to be obtained by Tenant from the Environmental Protection
Agency or any similar agency or department of any state or local government for
the use or maintenance of any Improvements; and [v] no summons, citation or
inquiry has been made by any such environmental unit, body or agency or a third
party demanding any right of recovery for payment or reimbursement for costs
incurred under CERCLA or any other Environmental Laws and the Land is not
subject to the lien of any such agency. "Disposal" and "release" shall have the
meanings set forth in CERCLA. To the best of Tenant's knowledge, all underground
storage tanks located on the Leased Property, if any, have been removed in
accordance with all applicable federal, state and local laws and regulations and
all necessary closure reports have been filed with the appropriate governmental
agencies.
22.20 Leases and Contracts. As of the Effective Date and except as
disclosed on Exhibit G, there are no leases or contracts (including but not
limited to, insurance contracts, maintenance contracts, construction contracts,
employee benefit plans, employment contracts, equipment leases, security
agreements, architect agreements, and management contracts) to which Tenant or
Guarantor is a party relating to any part of the ownership, operation,
possession, construction, management or administration of the Land or the
Facility.
22.21 No Default. As of the Effective Date, [i] there is no existing
Event of Default under this Lease; and [ii] no event has occurred which, with
the giving of notice or the passage of time, or both, would constitute or result
in such an Event of Default. Except as disclosed to Landlord in writing, neither
Tenant nor any Affiliate is in default, after expiration of any applicable grace
period, under any financing documents relating to the First 15 Properties or the
MMR Facilities (as each is defined in the Commitment) or under any financing
documents relating to any loan from Landlord to Corridor or any lease from
Landlord to Tenant to Corridor.
22.22 Condition of Facility. To the best of Tenant's knowledge, all of
the mechanical and electrical systems, heating and air-conditioning systems,
plumbing, water and sewer systems, and all other items of mechanical equipment
or appliances are in good working order, condition and repair, are of sufficient
size and capacity to service the Facility as presently
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operated, and conform with all applicable ordinances and regulations, and with
all building, zoning, fire, safety, and other codes, laws and orders. The
Improvements, including the roof and foundation, are structurally sound and free
from leaks and other defects.
22.23 Compliance with Laws. To the best of Tenant's knowledge, there is
no violation of, or noncompliance with, [i] any laws, orders, rules or
regulations, ordinances or codes of any kind or nature whatsoever relating to
the Facility or the ownership or operation thereof (including without
limitation, building, fire, health, occupational safety and health, zoning and
land use, planning and environmental laws, orders, rules and regulations); [ii]
any covenants, conditions, restrictions or agreements affecting or relating to
the ownership, use or occupancy of the Facility; or [iii] any order, writ,
regulation or decree relating to any matter referred to in [i] or [ii] above.
ARTICLE 23: FUTURE PROJECTS
23.1 Obligation for Future Projects. Subject to the requirements, terms
and conditions of the Commitment and this Lease, Landlord has committed to
finance up to 24 assisted living facilities to be developed by Tenant and its
Affiliates ("Tenant Projects"). Landlord's obligation to provide financing for
each Tenant Project is subject to the satisfaction of Landlord's due diligence
requirements and the closing conditions set forth in the Commitment. Tenant and
its Affiliates are obligated to close a total of 24 financings for Tenant
Projects with Landlord.
ARTICLE 24: SECURITY INTEREST
24.1 Collateral. Tenant hereby grants to Landlord a security interest
in the following described property, whether now owned or hereafter acquired by
Tenant (the "Collateral"), to secure the payment and performance of Tenant's
obligations under this Lease:
(a) All machinery, furniture, equipment, trade fixtures,
appliances, inventory and all other goods (as "equipment," "inventory" and
"goods" are defined for purposes of Article 9 ("Article 9") of the Uniform
Commercial Code as adopted in the State) now or hereafter located in or on or
used or usable in connection with the Land, Improvements, or Fixtures and
replacements, additions, and accessions thereto, including without limitation
those items which are to become fixtures or which are building supplies and
materials to be incorporated into an Improvement or Fixture.
(b) All accounts, contract rights, general intangibles,
instruments, documents, and chattel paper [as "accounts", "contract rights",
"general intangibles", "instruments", "documents", and "chattel paper", are
defined for purposes of Article 9] now or hereafter arising in connection with
the business located in or on or used or usable in connection with the Land,
Improvements, or Fixtures, and replacements, additions, and accessions thereto.
(c) All franchises, permits, licenses, operating rights,
certifications, approvals, consents, authorizations and other general
intangibles regarding the use, occupancy or operation of the Improvements, or
any part thereof, including without limitation, certificates of need, state
health care facility licenses, and Medicare and Medicaid provider agreements, to
the
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extent permitted by law.
(d) Unless expressly prohibited by the terms thereof, all
contracts, agreements, contract rights and materials relating to the design,
construction or operation of the Improvements, including but not limited to,
plans, specifications, drawings, blueprints, models, mock-ups, brochures,
flyers, advertising and promotional materials and mailing lists.
(e) All ledger sheets, files, records, computer programs,
tapes, other electronic data processing materials, and other documentation
relating to the preceding listed property or otherwise used or usable in
connection with the Land and Improvements.
(f) The products and proceeds of the preceding listed
property, including without limitation cash and non-cash proceeds, proceeds of
proceeds, and insurance proceeds.
24.2 Additional Documents. At the request of Landlord, Tenant shall
execute additional security agreements, financing statements, and such other
documents as may be requested by Landlord to maintain and perfect such security
interest. Tenant hereby irrevocably appoints Landlord, its successors and
assigns, as Tenant's attorney-in-fact to execute, acknowledge, deliver and file
such documents on behalf of Tenant. This power of attorney is coupled with an
interest and is irrevocable.
24.3 Notice of Sale. With respect to any sale or other disposition of
any of the Collateral after the occurrence of an Event of Default, Landlord and
Tenant agree that the giving of 5 days notice by Landlord, sent by overnight
delivery, postage prepaid, to Borrower's notice address designating the time and
place of any public sale or the time after which any private sale or other
intended disposition of such Collateral is to be made, shall be deemed to be
reasonable notice thereof and Tenant waives any other notice with respect
thereto.
ARTICLE 25: MISCELLANEOUS
25.1 Notices. Landlord and Tenant hereby agree that all notices,
demands, requests, and consents (hereinafter "notices") required to be given
pursuant to the terms of this Lease shall be in writing, shall be addressed to
the addresses set forth in the introductory paragraph of this Lease, and shall
be served by [i] personal delivery; [ii] United States mail, postage prepaid; or
[iii] nationally recognized overnight courier; provided, however, that any
notice of an Event of Default shall be served by (i) personal delivery; (ii)
certified United States mail, postage prepaid, return receipt requested; or
(iii) nationally recognized overnight courier. A copy of any notice given to
Tenant shall be sent to David Crockett, Esq., The Amidon House, 1005 N. Market,
Wichita, Kansas 67214-2971, but the failure to give the notice required by this
sentence shall not affect the validity or effectiveness of the notices to Tenant
hereunder. All notices shall be deemed to be given upon the earlier of actual
receipt or 3 business days after mailing, or one business day after deposit with
the overnight courier. Any notices meeting the requirements of this Section
shall be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
notice of such change.
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25.2 Advertisement of Leased Property. In the event the parties hereto
have not executed a renewal Lease within 120 days prior to the expiration of
this Lease, or Tenant has not exercised its Option to Purchase, then Landlord or
its agent shall have the right to enter the Leased Property at all reasonable
times for the purpose of exhibiting the Leased Property to others and to place
upon the Leased Property for and during the period commencing 120 days prior to
the expiration of this Lease, "for sale" or "for rent" notices or signs.
25.3 Entire Agreement. The Commitment and this Lease constitute the
entire agreement between Landlord and Tenant with respect to the subject matter
hereof. No representations, warranties, and agreements have been made by
Landlord except as set forth in the Commitment and this Lease. If there is any
direct conflict between the terms and provisions of the Commitment and the terms
of this Lease, this Lease shall govern. Tenant hereby reaffirms the Commitment
and all provisions thereof. The Commitment shall survive the execution of this
Lease.
25.4 Severability. If any term or provision of this Lease is held to be
invalid or unenforceable, such holding shall not affect the remainder of this
Lease and the same shall remain in full force and effect, unless such holding
substantially deprives Tenant of the use of the Leased Property or Landlord of
the rents herein reserved, in which event this Lease shall forthwith terminate
as if by expiration of the Term.
25.5 Captions and Headings. The captions and headings are inserted only
as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Lease or the intent of any provision hereof.
25.6 Governing Law. This Lease shall be construed under the laws of the
State.
25.7 Memorandum of Lease. Tenant shall not record this Lease. Tenant
may, however, record a memorandum of lease approved by Landlord.
25.8 Waiver. No waiver by Landlord of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Lease or exercise any other remedy granted herein on account
of such existing default.
25.9 Binding Effect. This Lease will be binding upon and inure to the
benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.
25.10 Power of Attorney. Effective upon the occurrence and during the
continuance of an Event of Default, Tenant hereby irrevocably and
unconditionally appoints Landlord, or Landlord's authorized officer, agent,
employee or designee, as Tenant's true and lawful
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<PAGE> 54
attorney-in-fact, to act for Tenant in Tenant's name, place, and stead, to
execute, deliver and file all applications and any and all other necessary
documents or things to effect the issuance, transfer, reinstatement, renewal
and/or extension of any and all Governmental Authorizations issued to Tenant or
applied for by Tenant in connection with Tenant's operation of each Facility, to
permit any transferee to operate each Facility under the Governmental
Authorizations, and to do any and all other acts incidental to any of the
foregoing. Tenant irrevocably and unconditionally grants to Landlord as its
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant might or could do if personally present or acting, with full power of
substitution, hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable prior to the full performance of
Tenant's Obligations. Except in the case of an emergency, Landlord shall give
Tenant 3 business days prior written notice before acting on behalf of Tenant
pursuant to this power of attorney.
25.11 No Offer. Landlord's submission of this Lease to Tenant is not an
offer to lease the Leased Property, or an agreement by Landlord to reserve the
Leased Property for Tenant. Landlord will not be bound to Tenant until Tenant
has duly executed and delivered duplicate original leases to Landlord, and
Landlord has duly executed and delivered one of these duplicate original leases
to Tenant.
25.12 Modification. This Lease may only be modified by a writing signed
by both Landlord and Tenant except for the automatic extension(s) of the Term
pursuant to Section 1.2. All references to this Lease, whether in this Lease or
in any other document or instrument, shall be deemed to incorporate all
amendments, modifications and renewals of this Lease, made after the date
hereof. If Tenant requests Landlord's consent to any change in ownership, merger
or consolidation of Tenant or Guarantor, any assumption of the Lease, or any
modification of the Lease, Tenant shall provide Landlord all relevant
information and documents sufficient to enable Landlord to evaluate the request.
In connection with any such request, Tenant shall pay to Landlord a fee in the
amount of $1,500.00 and shall pay all of Landlord's reasonable attorney's fees
and expenses and other reasonable out-of-pocket expenses incurred in connection
with Landlord's evaluation of Tenant's request, the preparation of any documents
and amendments, the subsequent amendment of any documents between Landlord and
its collateral pool lenders (if applicable), and all related matters.
25.13 Lender's Modification. Tenant acknowledges that Landlord may
mortgage the Leased Property or use the Leased Property as collateral for a
collateralized mortgage obligations or Real Estate Mortgage Investment Companies
(REMICS). If any mortgage lender of Landlord desires any modification of this
Lease, Tenant agrees to consider such modification in good faith and to execute
an amendment of this Lease if Tenant finds such modification acceptable.
25.14 No Merger. The surrender of this Lease by Tenant or the
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant's default will not work a merger,
and will, at Landlord's option, terminate any subleases or operate as an
assignment to Landlord of any subleases. Landlord's option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.
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<PAGE> 55
25.15 Laches. No delay or omission by either party hereto to exercise
any right or power accruing upon any noncompliance or default by the other party
with respect to any of the terms hereof shall impair any such right or power or
be construed to be a waiver thereof.
25.16 Construction of Lease. This Lease has been prepared by Landlord
and its professional advisors and reviewed by Tenant and its professional
advisors. Landlord, Tenant, and their advisors believe that this Lease is the
product of all their efforts, that it expresses their agreement, and agree that
it shall not be interpreted in favor of either Landlord or Tenant or against
either Landlord or Tenant merely because of their efforts in preparing it.
25.17 Counterparts. This Lease may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
25.18 Lease Guaranty. The payment of Rent and the performance of
Tenant's obligations under this Lease are guaranteed for 10% of the Lease Amount
by Guarantor pursuant to a Lease Guaranty of even date and secured by a stock
pledge made by Guarantor in favor of Landlord pursuant to a Stock Pledge
Agreement of even date, subject to being released pursuant to Section 17.1.
25.19 Custody of Escrow Funds. Any funds paid to Landlord in escrow
hereunder may be held by Landlord or, at Landlord's election, by a financial
institution, the deposits or accounts of which are insured or guaranteed by a
federal or state agency. The funds shall not be deemed to be held in trust, may
be commingled with the general funds of Landlord or such other institution, and
shall not bear interest.
25.20 Landlord's Status as a REIT. Tenant acknowledges that Landlord
has now and may hereafter elect to be taxed as a real estate investment trust
("REIT") under the Internal Revenue Code.
25.21 Exhibits. The following exhibits are attached hereto and
incorporated herein:
Exhibit A: Legal Description
Exhibit B: Permitted Exceptions
Exhibit C: Documents to be Delivered
Exhibit D: Certificate and Facility Financial Report
Exhibit E: Government Authorizations
Exhibit F: Pending Litigation
Exhibit G: List of Leases and Contracts
Exhibit H: Business and Name Changes
25.22 Waiver of Jury Trial. Landlord and Tenant waive trial by jury in
any action, proceeding or counterclaim brought by either of them against the
other on all matters arising out of this Lease or the use and occupancy of the
Leased Property (except claims for personal injury or
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property damage). If Landlord commences any summary proceeding for nonpayment of
Rent, Tenant will not interpose, and waives the right to interpose, any
counterclaim in any such proceeding.
25.23 Attorney's Fees and Expenses. Tenant shall pay to Landlord all
reasonable costs and expenses incurred by Landlord in administering this Lease
and the security for this Lease, enforcing or preserving Landlord's rights under
this Lease and the security for this Lease, and in all matters of collection,
whether or not an Event of Default has actually occurred or has been declared
and thereafter cured, including but not limited to, [a] reasonable attorney's
and paralegal's fees and disbursements; [b] the fees and expenses of any
litigation, administrative, bankruptcy, insolvency, receivership and any other
similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and [e]
consulting and witness fees incurred by Landlord in connection with any
litigation or other proceeding.
25.24 CONSENT TO JURISDICTION. TENANT HEREBY IRREVOCABLY SUBMITS AND
CONSENTS TO THE NON-EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO, SEDGWICK COUNTY, KANSAS OR
KAY COUNTY, OKLAHOMA FOR ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
MATTER ARISING FROM OR RELATED TO [I] THE COMMITMENT; [II] THIS LEASE; OR [III]
ANY DOCUMENT EXECUTED BY TENANT IN CONNECTION WITH THIS LEASE. TENANT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT TENANT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR
PROCEEDING. TENANT AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
TENANT AND ANY GUARANTOR AGREE NOT TO INSTITUTE ANY LEGAL ACTION OR
PROCEEDING AGAINST LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR
PROPERTY OF LANDLORD, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THE
COMMITMENT, THIS LEASE OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE
OR FEDERAL COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO, SEDGWICK COUNTY,
KANSAS OR KAY COUNTY, OKLAHOMA.
TENANT HEREBY CONSENTS TO SERVICE OF PROCESS BY LANDLORD IN ANY MANNER
AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT OR IMPAIR
LANDLORD'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW, OR
LANDLORD'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT OR THE
PROPERTY OF TENANT OR ANY GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
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25.25 Survival. The following provisions shall survive termination of
the Lease: Article 9 (Damage & Destruction), Article 10 (Condemnation); Article
16 (Alterations); and Section 25.28 (Survival).
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
Signed and acknowledged
in the presence of: HEALTH CARE REIT, INC.
Signature ________________________ By:____________________________
Print Name________________________
Title:____________________
Signature ________________________
Print Name________________________
STERLING HOUSE CORPORATION
Signature ________________________ By:____________________________
Print Name________________________
Title:____________________
Signature ________________________
Print Name________________________ Tax I.D. No.:__________________
STATE OF OHIO )
) Section:
COUNTY OF LUCAS )
The foregoing instrument was acknowledged before me this _____ day of
_____________, 19____ by ___________________________, the _________________ of
Health Care REIT, Inc., a Delaware corporation, on behalf of the corporation.
-------------------------------
Notary Public
My Commission Expires:_____________________ [SEAL]
57
<PAGE> 59
STATE OF KANSAS )
) Section:
COUNTY OF SEDGWICK )
The foregoing instrument was acknowledged before me this _____ day of
______________________, 19____ by ___________________
___________________________, the _________________ of Sterling House
Corporation, a Kansas corporation, on behalf of the corporation.
-------------------------------
Notary Public
My Commission Expires:_____________________ [SEAL]
THIS INSTRUMENT PREPARED BY:
Diane V. Davis, Esq.
Shumaker, Loop & Kendrick
1000 Jackson Street
Toledo, Ohio 43624
58
<PAGE> 60
CONSENT AND AGREEMENT OF RELATED COMPANIES
The undersigned Related Companies hereby consent to the foregoing Lease
Agreement and agree to be bound by all provisions therein applicable to the
undersigned, including, without limitation, Sections 14.5, 14.7, 14.9, 15.3,
15.6, Article 17 and Article 23.
Executed and delivered as of the Effective Date.
STERLING MANAGEMENT
AVANTI GROUP, INC. INCORPORATED
By:___________________________ By:____________________________
Title:___________________ Title:____________________
STERLING HOLDINGS, INC.
By:____________________________
Title:____________________
CORRIDOR PROPERTIES, L.L.C.
By: Sterling House Corporation,
Manager
By:_______________________
Title:_______________
BUCHANAN HOMES, INC.
By:____________________________
Title:____________________
59
<PAGE> 1
EXHIBIT 10.10
SCHEDULE OF HEALTH CARE REIT LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.9 TO THE COMPANY'S FORM
10-Q FOR THE PERIOD ENDING 6/30/99
<TABLE>
<CAPTION>
Leasing Original Health Care
Facility Name Location Commitment Fee REIT Investment Annual Base Rent
- ------------- -------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Alterra Sterling House of Findlay 725 Fox Run Road $ 200,000 $ 2,000,000 $ 214,400
Findlay, OH 45840
Alterra Sterling House of Piqua 1744 W. High Street 212,000 2,120,000 202,650
Piqua, OH 45356-5001
Alterra Sterling House of Troy 81 S. Stanfield Road 220,000 2,200,000 229,900
Troy, OH 45373
Alterra Sterling House of 5420 S.E. Adams Blvd. 153,900 1,539,000 141,340
Bartlesville North Bartlesville, OK 74006
Alterra Sterling House of Chickasha 801 Country Club Road 153,900 1,539,000 156,288
Chickasha, OK 73018
Alterra Sterling House of Claremore 1605 N. Hwy. 88 158,250 1,582,500 156,668
Claremore, OK 74017
Alterra Sterling House of Duncan 915 W. Plato Road 145,000 1,450,000 157,470
Duncan, OK 73533
Alterra Sterling House of Edmond 116 W. Danforth 173,900 1,739,000 188,855
Edmond, OK 73003
Alterra Sterling House of Enid 4613 W. Willow Road 153,900 1,539,000 141,340
Enid, OK 73703
Alterra Sterling House of Lawton 6302 S.W. Lee Blvd. 160,000 1,600,000 173,760
Lawton, OK 73505
Alterra Sterling House of Midwest 615 W. BlueRidge Drive 153,900 1,539,000 141,340
City Midwest City, OK 73110
Alterra Sterling House of Muskogee 3211 Chandler Road 158,250 1,582,500 158,883
Muskogee, OK 74403
Alterra Sterling House of Norman 1701 E. Alameda St. 153,900 1,539,000 167,135
Norman, OK 73071
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C> <C>
Alterra Sterling House of Oklahoma 2500 S.W. 89th Street 153,900 1,539,000 156,288
City South Oklahoma City, OK 73159
Alterra Sterling House of Owasso 12807 E. 86th Place North 159,500 1,595,000 159,022
Owasso, OK 74055
Alterra Sterling House of Ponca City 1500 E. Bradley Ave. 165,000 1,650,000 167,640
Ponca City, OK 74604
Alterra Sterling House of Shawnee 3947 Kickapoo 153,900 1,539,000 141,340
Shawnee, OK 74801
Alterra Sterling House of Stillwater 1616 E. McElroy Road 153,900 1,539,000 141,340
Stillwater, OK 74075
Alterra Sterling House of Cedar Hill 602 E. Beltline Road 166,100 1,661,000 171,415
Cedar Hill, TX 75104
Alterra Sterling House of Desoto 747 W. Pleasant Run Road 159,500 1,595,000 160,457
Desoto, TX 75115-3838
Alterra Sterling House of Georgetown 2600 East University Ave. 230,000 2,300,000 239,200
Georgetown, TX 78626
Alterra Sterling House of Palestine 101 Trinity Court 158,250 1,582,500 157,459
Palestine, TX 75801
Alterra Sterling House of Texarkana 4204 Moores Lane 159,500 1,595,000 161,574
Texarkana, TX 75503
Alterra Sterling House of Waxahachie 2250 Brown Street 158,250 1,582,500 157,459
Waxahachie, TX 75165
</TABLE>
<PAGE> 1
EXHIBIT 10.11
LEASE AGREEMENT
BETWEEN
HEALTH CARE REIT, INC.
AND
ALTERNATIVE LIVING SERVICES, INC.
DECEMBER ___, 1998
CLARE BRIDGE OF OKLAHOMA CITY
OKLAHOMA CITY, OKLAHOMA
<PAGE> 2
LEASE AGREEMENT
(OKLAHOMA CITY, OKLAHOMA)
This Lease Agreement ("Lease" or "Agreement") is made effective as of
the ___ day of December, 1998 (the "Effective Date") between HEALTH CARE REIT,
INC., a corporation organized under the laws of the State of Delaware
("Landlord"), having its principal office located at One SeaGate, Suite 1500,
P.O. Box 1475, Toledo, Ohio 43603, and ALTERNATIVE LIVING SERVICES, INC., a
corporation organized under the laws of the State of Delaware ("Tenant"), having
its chief executive office located at 450 N. Sunnyslope Road, Suite 300,
Brookfield, Wisconsin 53005.
R E C I T A L S
A. As of the date hereof, Landlord holds fee simple title to the land
described in Exhibit A attached hereto ("Land").
B. Landlord desires to lease the Leased Property (defined below) to
Tenant and Tenant desires to lease the Leased Property from Landlord upon the
terms set forth in this Lease.
C. Tenant desires to construct a 34 unit/38 bed assisted
living/Alzheimer/dementia facility ("Facility") on the Land. Landlord has agreed
to pay for the development and construction costs of the Facility up to the
maximum amount of $3,200,000.00 subject to the terms and conditions of this
Lease and the Construction Disbursing Agreement between Landlord and Tenant.
D. All amounts paid by Tenant for the acquisition and development costs
of the Leased Property shall be considered Tenant's contribution.
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant hereby
leases from Landlord the following property:
(a) The Land.
(b) All buildings, structures, and other improvements, including
without limitation, sidewalks, alleys, utility pipes, conduits, and lines,
parking areas, and roadways, now or hereafter situated upon the Land (the
"Improvements").
(c) All easements, rights and other appurtenances relating to the
Land and Improvements (the "Appurtenances").
<PAGE> 3
(d) All permanently affixed equipment, machinery, fixtures, and
other items of real and personal property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the 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 Personal Property as defined
below (collectively the "Fixtures").
(e) All machinery, equipment, furniture, furnishings, movable walls
or partitions, computers, trade fixtures, consumable inventory and supplies, and
other personal property used or useful in Tenant's business on the Leased
Property, and the replacements therefor, except items, if any, included within
the definition of Fixtures (collectively the "Personal Property"). The Land,
Improvements, Appurtenances, and Fixtures and Personal Property are hereinafter
referred to as the "Leased Property".
SUBJECT, HOWEVER, to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof as listed on
Exhibit B attached hereto (the "Permitted Exceptions").
All Improvements constructed by Tenant on the Land and all Fixtures
installed by Tenant into the Improvements shall be the property of Landlord and
shall be part of the "Leased Property" hereunder. From time to time upon
Landlord's request, Tenant shall execute and deliver to Landlord such
instruments, certificates and other documents as Landlord may reasonably request
to evidence Landlord's ownership of the Improvements and Fixtures constructed
and installed by Tenant.
1.2 Term. The Construction Term of this Lease commences on the
Effective Date and expires on the Conversion Date. The initial term ("Initial
Term") of this Lease commences on the day after the Conversion Date and expires
at 12:00 Midnight Eastern Time on the thirteenth anniversary of the Term
Commencement Date (the "Expiration Date"); provided, however, that Tenant has an
option to renew the Lease pursuant to Article 12 and, provided further, the
current Term of this Lease shall be deemed automatically extended from time to
time (without any written amendment or other documentation) to be concurrent
with the Term of the Phase IV Lease having the latest expiration date.
1.3 Definitions. Except as otherwise expressly provided, [i] the terms
defined in this section have the meanings assigned to them in this section and
include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; [iii] the
words "herein", "hereof", and "hereunder" and similar words refer to this Lease
as a whole and not to any particular section; and [iv] any capitalized term not
defined in this
2
<PAGE> 4
Agreement which is defined in the Construction Agreement shall have the meaning
set forth in the Construction Agreement.
"Acquisition Amount" means $30,187.50.
"ADA" means the federal statute entitled Americans with Disabilities
Act, 42 U.S.C. Section 12101, et seq.
"Affiliate" means any person, corporation, partnership, trust, or other
legal entity that, directly or indirectly, controls, or is controlled by, or is
under common control with Tenant. "Control" (and the correlative meanings of the
terms "controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity. "Affiliate" includes, without
limitation, each Related Tenant.
"Annual Financial Statements" means the Tenant's unaudited balance
sheet and statement of income for the most recent fiscal year on an individual
facility and consolidated basis and an unaudited operating statement for the
Facility for the most recent fiscal year.
"Base Rent" has the meaning set forth in 2.4, as increased from time to
time pursuant to Section 2.5.
"Business Day" means any day other than a Saturday, Sunday, or national
holiday.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time. The terms "disposal"
and "release" as used in this Agreement shall have the meaning set forth in
CERCLA.
"Closing" means the closing of the purchase of the Leased Property by
Landlord and the lease of the Leased Property to Tenant.
"Commencement Date" means the Effective Date if such date is the first
day of a month, and if it is not, the first day of the first month following the
Effective Date.
"Commitment" means the Commitment Letter from Landlord to Sterling
dated as of April 3, 1996, as amended from time to time.
"Construction Agreement" means the Construction Disbursing Agreement
between Tenant and Landlord dated the date hereof.
"Construction Base Rent" has the meaning set forth in Section 2.1.
"Construction Rate Index" means the Base Rate announced from time to
time by National City Bank (Cleveland) or the successor bank with which Landlord
maintains its primary
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line of credit; the Lease Rate for the Construction Term shall be adjusted to
reflect each change in the Construction Rate Index.
"Construction Term" means the term of this Lease commencing on the
Effective Date and expiring on the Conversion Date.
"Conversion Date" means the date when the Facility is completed and the
final disbursement of the Lease Amount has been made pursuant to Section 3.3 of
the Construction Agreement.
"Effective Date" is the date hereof as first set forth above.
"Environmental Laws" means all federal, state, and local ecological,
wetlands, and other environmental laws and regulations, as amended from time to
time, including but not limited to [i] CERCLA; [ii] the Resource Conservation
and Recovery Act; [iii] the Hazardous Materials Transportation Act; [iv] the
Clean Air Act; [v] Clean Water Act; [vi] the Toxic Substances Control Act; and
[vii] the Safe Water Drinking Act.
"Event of Default" has the meaning set forth in Section 8.1.
"Expiration Date" has the meaning set forth in Section 1.2.
"Extended Term" has the meaning set forth in Section 12.3(a).
"Facility" means the 34 units/38 bed assisted
living/Alzheimers/dementia facility known as Clare Bridge of Oklahoma City and
located on the Leased Property.
"Facility Financial Statement" means the financial statement for the
Facility which shall include the statement of income and expense, occupancy
census data (including payor mix to the extent presently provided by Affiliates)
and a comparison of the actual financial data versus the Facility's internal
budget for the applicable period.
"Fair Market Value" has the meaning set forth in Section 13.3.
"Financial Statements" means [i] the annual, quarterly and year to date
financial statements of Tenant; and [ii] all operating statements for the
Facility, that were submitted to Landlord prior to the Effective Date.
"Government Authorizations" means all permits, licenses, approvals,
consents, and authorizations required to comply with all Legal Requirements,
including but not limited to, [i] zoning permits, variances, exceptions, special
use permits, conditional use permits, and consents; [ii] to the extent
applicable, the permits, licenses, provider agreements and approvals required
for licensure and operation of a residential care home certified as a provider
under the federal Medicare and state Medicaid programs; [iii] environmental,
ecological, coastal, wetlands, air, and water permits, licenses, and consents;
[iv] curb cut, subdivision, land use, and planning permits, licenses, approvals
and consents; [v] building, sign, fire, health, and safety permits,
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licenses, approvals, and consents; and [vi] architectural reviews, approvals,
and consents required under restrictive covenants.
"Hazardous Materials" means any substance [i] the presence of which
poses a hazard to the health or safety of persons on or about the Land including
but not limited to asbestos containing materials; [ii] which requires removal or
remediation under any Environmental Law, including without limitation any
substance which is toxic, explosive, flammable, radioactive, or otherwise
hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic including but not limited to any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste", or
"pollutant" as defined in any Environmental Law.
"Impositions" has the meaning set forth in Section 3.2.
"Initial Rate Index" means the yield to maturity quoted in the Wall
Street Journal on the applicable Rate Determination Date for the most actively
traded United States Treasury Notes having the nearest equivalent maturity date
to the Expiration Date.
"Initial Term" has the meaning set forth in Section 1.2.
"Landlord Affiliate" means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Landlord. "Control" (and the correlative meanings of the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity. "Landlord Affiliate" includes, without limitation, Health Care
REIT, Inc., HCRI Texas Properties, Ltd., HCRI Pennsylvania Properties, Inc.,
HCRI Nevada Properties, Inc., and HCRI Louisiana Properties, L.P.
"Lease Advance" means each advance of funds by Landlord to Tenant
pursuant to the term of this Lease, including the first Lease Advance in the
amount equal to the Acquisition Amount.
"Lease Advance Amount" means the amount of any Lease Advance.
"Lease Advance Date" means the date on which Landlord makes a Lease
Advance.
"Lease Amount" is an aggregate concept and means the sum of the Lease
Advance Amounts outstanding at the applicable time.
"Lease Payments" means the sum of the Base Rent payments (as increased
from time to time) for the applicable period.
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"Lease Rate" means the annual rate used to determine Construction Base
Rent and Base Rent for each Lease Advance. The Lease Rate is the greater of [i]
925 basis points or [ii] the sum of the applicable Rate Index plus the
applicable Rate Spread, computed using the 365/360 method.
"Lease Year" means each consecutive period of 365 or 366 days
throughout the Term, except the Construction Term. The first Lease Year
commences on the Term Commencement Date and expires on the day before the first
anniversary of the Term Commencement Date.
"Legal Requirements" means all laws, regulations, rules, orders, writs,
injunctions, decrees, certificates, requirements, agreements, conditions of
participation and standards of any federal, state, county, municipal or other
governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of each Facility by Tenant, including but
not limited to, [i] zoning, building, fire, health, safety, sign, and
subdivision regulations and codes; [ii] certificate of need laws, if applicable;
[iii] licensure to operate as a residential care home; [iv] Medicare and
Medicaid certification requirements, if applicable, and if Tenant elects to
participate in such programs; [v] the ADA; [vi] any Environmental Laws; and
[vii] requirements, conditions and standards for participation in third-party
payor insurance programs.
"Material Obligation" means [i] any indebtedness secured by a security
interest in or a lien, deed of trust or mortgage on any of the Leased Property
and any agreement relating thereto; [ii] any obligation or agreement that is
material to the operation of the Facility; [iii] any indebtedness or capital
lease of Tenant that has an outstanding principal balance of at least
$1,000,000.00 in any one instance or at least $1,000,000.00 in the aggregate and
any agreement relating thereto; and [iv] any sublease of the Leased Property.
"Maximum Lease Amount" means $3,200,000.00.
"Option Price" has the meaning set forth in Section 13.2.
"Option to Purchase" has the meaning set forth in Section 13.1.
"Overdue Rate" has the meaning set forth in Section 8.6.
"Periodic Financial Statements" means [i] for Tenant, the unaudited
balance sheet and statement of income of Tenant for the most recent quarter; and
[ii] for the Facility, the unaudited Facility Financial Statement for the most
recent month.
"Permitted Exceptions" means the exceptions to title set forth on
Exhibit B.
"Permitted Liens" means [i] liens granted to Landlord; [ii] liens
customarily incurred by Tenant in the ordinary course of business for items not
delinquent including mechanic's liens and deposits and charges under worker's
compensation laws; [iii] liens for
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taxes and assessments not yet due and payable; [iv] any lien, charge, or
encumbrance which is being contested in good faith pursuant to this Agreement;
[v] the Permitted Exceptions; and [vi] purchase money financing and capitalized
equipment leases for the acquisition of personal property provided, however,
that Landlord obtains a nondisturbance agreement from the purchase money lender
or equipment lessor in form and substance as may be satisfactory to Landlord if
the original cost of the equipment exceeds $50,000.00.
"Phase I Lease" means each lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Sterling, or any successor or assign of
Sterling, relating to the 8 assisted living facilities located in Bartlesville,
Oklahoma, Midwest City, Oklahoma, Stillwater, Oklahoma, Enid, Oklahoma, S.W.
Oklahoma City, Oklahoma, Shawnee, Oklahoma, Chickasha, Oklahoma and Ponca City,
Oklahoma, as amended from time to time.
"Phase I Tenant" means each tenant under any Phase I Lease.
"Phase II Lease" means each lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Sterling, or any successor or assign of
Sterling, relating to the 9th through 16th assisted living facilities (or other
similar facilities) developed by Sterling in association with Landlord or any
Landlord Affiliate, as amended from time to time.
"Phase II Tenant" means each tenant under any Phase II Lease.
"Phase III Lease" means each lease now or hereafter existing, between
Landlord or any Landlord Affiliate and Tenant, Sterling or any Affiliate
relating to the 17th through 23rd assisted living facilities (or other similar
facilities) developed by Tenant, Sterling or any Affiliate in association with
Landlord or any Landlord Affiliate, as amended from time to time.
"Phase III Tenant" means each tenant under any Phase III Lease.
"Phase IV Lease" means each lease, including this Lease, now or
hereafter existing, between Landlord or any Landlord Affiliate and Tenant,
Sterling or any Affiliate relating to the 24th through 35th assisted living
facilities (or other similar facilities) developed by Tenant, Sterling or any
Affiliate in association with Landlord or any Landlord Affiliate, as amended
from time to time.
"Phase IV Tenant" means each tenant under any Phase IV Lease.
"Pro Forma Statement" means a financial forecast for the Facility for
the next five year period commencing on the anticipated date when the Facility
commences operations prepared in accordance with the standards for forecasts
established by the American Institute of Certified Public Accountants.
"Purchase Notice" has the meaning set forth in Section 13.1.
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"Rate Determination Date" means the date on which the value for the
Rate Index is established for computing any Lease Rate. For any Lease Advances
made during the Construction Term or the Initial Term, the Rate Determination
Date is the Lease Advance Date.
"Rate Index" means the rate index used from time to time to calculate
the Lease Rate. The Rate Index is [i] the Construction Rate Index during the
Construction Term; and [ii] the Initial Rate Index during the Initial Term.
"Rate Spread" means the rate spread from time to time used to calculate
the Lease Rate applicable to any Lease Advance. The Rate Spread is [i] 200 basis
points for the Construction Term; and [ii] 330 basis points for the Initial
Term.
"Receivables" means [i] all of Tenant's rights to receive payment for
providing resident care and services at the Facility as set forth in any
accounts, contract rights, and instruments, and [ii] those documents, chattel
paper, inventory proceeds, provider agreements, participation agreements, ledger
sheets, files, records, computer programs, tapes, and agreements relating to
Tenant's rights to receive payment for providing resident care services at the
Facility.
"Related Lease" means any Phase I Lease, Phase II Lease, Phase III
Lease, Phase IV Lease or any other lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Tenant, Sterling or any Affiliate.
"Related Tenant" means any Phase I Tenant, Phase II Tenant, Phase III
Tenant, Phase IV Tenant or any other tenant under any Related Lease.
"Renewal Date" means the date on which the Lease Rate is reset and will
be the first day of the Renewal Term.
"Renewal Option" has the meaning set forth in Section 12.1.
"Renewal Rate" means the Lease Rate established the Renewal Date in
accordance with Section 12.2(c).
"Renewal Term" has the meaning set forth in Section 12.1.
"Sterling" means Sterling House Corporation, a corporation organized
under the laws of the State of Kansas.
"State" means the State in which the Facility is located.
"Tenant's Obligations" means all payment and performance obligations of
Tenant under this Lease and all documents executed by Tenant in connection with
this Lease.
"Term" means the Construction Term, Initial Term and the Renewal Term.
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"Term Commencement Date" means the first day of the first month after
the Conversion Date.
ARTICLE 2: RENT
2.1 Construction Base Rent. Tenant shall pay Landlord construction base
rent ("Construction Base Rent") in arrears in consecutive monthly installments
payable on the first day of each month during the Construction Term commencing
on the Commencement Date. The annual Construction Base Rent for the Construction
Term will be equal to the product of the aggregate Lease Amount times the
applicable Lease Rate (adjusted for each change in the Construction Rate Index),
with the Lease Rate charged for each Lease Advance Amount from the date such
amount was disbursed. The Construction Base Rent will be computed monthly based
on the actual number of days elapsed over a 360-day year (365/360 method). The
Construction Base Rent for any partial month shall be prorated.
2.2 Construction Lease Advances. Subject to the terms and upon the
conditions set forth in this Lease and the Construction Agreement, Landlord
shall disburse Lease Advances to Tenant to pay for the development and
construction costs of the Facility up to the Maximum Lease Amount.
2.3 Conversion to Initial Term. Upon the Conversion Date, Tenant shall
pay Landlord [i] all accrued and unpaid Construction Base Rent; [ii] Base Rent
in advance for the balance of the then current month; and [iii] all costs and
expenses incurred by Landlord in connection with the conversion to the Initial
Term.
2.4 Base Rent. Tenant shall pay Landlord base rent ("Base Rent") in
advance in consecutive monthly installments payable on the first day of each
month during the Term commencing on the Commencement Date. If the Effective Date
is not the first day of a month, Tenant shall pay Landlord Base Rent on the
Effective Date for the partial month, i.e., for the period commencing on the
Effective Date and ending on the day before the Commencement Date. The annual
Base Rent for the Initial Term will be equal to the sum of the products of each
Lease Advance times the Lease Rate for each Lease Advance. The Base Rent will be
computed monthly based on the actual number of days elapsed over a 360-day year
(365/360 method). The Base Rent for the Renewal Term will be computed in
accordance with Section 12.2. The Acquisition Amount paid by Landlord to Tenant
is the first Lease Advance under this Lease.
2.5 Increase of Lease Rate and Base Rent. Commencing on the first
anniversary of the Commencement Date and on each anniversary thereafter during
the Term, including any Renewal Term and Extended Term, (each such date shall be
herein defined as "Rent Adjustment Date") the Base Rent shall be increased so as
to equal the lesser of (a) the Maximum Rent Adjustment (defined below), or (b)
an amount determined by multiplying the Base Rent then in effect times a
fraction, the numerator of which shall be the CPI Index on the applicable Rent
Adjustment Date and the denominator of which shall be the CPI Index on the
preceding Rent Adjustment Date (or on the Effective Date in the case of the
first Rent Adjustment Date).
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If, for any Lease Year or any portion thereof, the Base Rent is
adjusted in accordance with clause (b) above, then the difference between the
Base Rent for such Lease Year, and the Base Rent for such Lease Year if adjusted
in accordance with clause (a) above shall be referred to herein as the "Rent
Shortfall." If, for any Lease Year, the Base Rent is adjusted in accordance with
clause (a), then the difference between the Base Rent for such Lease Year and
the Base Rent for such Lease Year if adjusted in accordance with clause (b),
shall be referred to herein as the "Rent Surplus."
Any Rent Surplus for a Lease Year shall be applied first to payment of
the unpaid balance of any Rent Shortfalls for any previous Lease Years.
As used herein, the "Maximum Rent Adjustment" shall be the Base Rent in
any applicable year, which would result solely by multiplying, in each year, on
the Rent Adjustment Date, the Base Rent then in effect (as adjusted pursuant to
this Section 2.2 only) by 1.02.
As used herein, the "CPI Index" shall mean and refer to the Consumer
Price Index for Urban Wage Earners and Clerical Workers, U.S. Cities Average.
All items (1982-84-100) published by the Bureau of Labor Statistics of the U.S.
Department of Labor; provided that if compilation of the CPI Index in its
present form and calculated on its present basis is discontinued or transferred
to any other governmental department or bureau, then the index most nearly the
same as the CPI 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 CPI Index shall be used, such substitute
index to be reasonably selected by Landlord. Until the CPI Index is established,
Tenant shall pay the Base Rent calculated in accordance with clause (a) above,
and once the CPI Index for the Rent Adjustment Date of such Lease Year is
published, the new Base Rent (as increased) shall be effective retroactively as
of the Rent Adjustment Date with the remaining payments to be adjusted ratably.
2.6 Additional Rent. In addition to Construction Base Rent or Base
Rent, Tenant shall pay all other amounts, liabilities, obligations and
Impositions which Tenant assumes or agrees to pay under this Lease and any fine,
penalty, interest, charge and cost which may be added for nonpayment or late
payment of such items (collectively the "Additional Rent"). The Construction
Base Rent, Base Rent and Additional Rent are hereinafter referred to as "Rent".
Landlord shall have all legal, equitable and contractual rights, powers and
remedies provided either in this Lease or by statute or otherwise in the case of
nonpayment of the Rent.
2.7 Place of Payment of Rent. Tenant shall make all payments of Base
Rent and any additional Rent required to be paid to Landlord at the Landlord's
address set forth in the first paragraph of this Lease or at such other place as
Landlord may designate from time to time. If delivery is by overnight mail, the
address for Landlord shall be One SeaGate, Suite 1500, Toledo, Ohio 43604.
2.8 Net Lease. This Lease shall be deemed and construed to be an
"absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
abatement, deduction or set-off.
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2.9 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant shall remain bound by this Lease in accordance
with its terms. Tenant shall not, without the consent of Landlord, modify,
surrender or terminate the Lease, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent. Except
as expressly provided in this Lease, the obligations of Landlord and Tenant
shall not be affected by reason of [i] any damage to, or destruction of, the
Leased Property or any part thereof from whatever cause or any Taking (as
hereinafter defined) of the Leased Property or any part thereof; [ii] the lawful
or unlawful prohibition of, or restriction upon, Tenant's use of the Leased
Property, or any part thereof, the interference with such use by any person,
corporation, partnership or other entity, or by reason of eviction by paramount
title (subject to the provisions of Article 10); [iii] any claim which Tenant
has or might have against Landlord or by reason of any default or breach of any
warranty by Landlord under this Lease or any other agreement between Landlord
and Tenant, or to which Landlord and Tenant are parties; [iv] any bankruptcy,
insolvency, reorganization, composition, readjustment, liquidation, dissolution,
winding up or other proceeding affecting Landlord or any assignee or transferee
of Landlord; or [v] any other cause, whether similar or dissimilar to any of the
foregoing, other than a discharge of Tenant from any such obligations as a
matter of law. Except as otherwise specifically provided in this Lease, Tenant
hereby specifically waives all rights, arising from any occurrence whatsoever,
which may now or hereafter be conferred upon it by law [a] to modify, surrender
or terminate this Lease or quit or surrender the Leased Property or any portion
thereof; or [b] entitling Tenant to any abatement, reduction, suspension or
deferment of the Rent or other sums payable by Tenant hereunder. The obligations
of Landlord and Tenant hereunder shall be separate and independent covenants and
agreements and the Rent and all other sums payable by Tenant hereunder shall
continue to be payable in all events unless the obligations to pay the same
shall be terminated pursuant to the express provisions of this Lease or by
termination of this Lease other than by reason of an Event of Default.
2.10 Computational Method. Landlord and Tenant acknowledge that all
rates under this Lease will be computed based on the actual number of days
elapsed over a 360-day year (365/360 method).
2.11 Commitment Fee. No commitment fee is payable by Tenant to
Landlord for this Lease.
ARTICLE 3: IMPOSITIONS AND UTILITIES
3.1 Payment of Impositions. Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with Section 3.7. Tenant shall deliver to Landlord [i] not more than
five days after the due date of each Imposition, copies of the invoice for such
Imposition and the check delivered for payment thereof; and [ii] not more than
15 business days after the due date of each Imposition, a copy of the official
receipt evidencing such payment or other proof of payment satisfactory to
Landlord. Tenant's obligation to pay such Impositions shall be deemed absolutely
fixed upon the date such Impositions become a lien upon the Leased Property
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or any part thereof. Tenant, at its expense, shall prepare and file all tax
returns and reports in respect of any Imposition as may be required by
governmental authorities. Tenant shall be entitled to any refund due from any
taxing authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing authority
if an Event of Default has occurred and is continuing. Any refunds retained by
Landlord due to an Event of Default shall be applied as provided in Section 8.8.
Landlord and Tenant 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 governmental authorities classify any property covered by this Lease as
personal property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Landlord, to the extent it possesses
the same, and Tenant, 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 property so classified as personal property. Where
Landlord is legally required to file personal property tax returns, Tenant will
be provided with copies of assessment notices indicating a value in excess of
the reported value in sufficient time for Tenant to file a protest. Tenant may,
upon notice to Landlord, at Tenant's option and at Tenant's sole cost and
expense, protest, appeal, or institute such other proceedings as Tenant may deem
appropriate to effect a reduction of real estate or personal property
assessments and Landlord, at Tenant's expense as aforesaid, shall fully
cooperate with Tenant in such protest, appeal, or other action. Tenant shall
reimburse Landlord for all personal property taxes paid by Landlord within 30
days after receipt of billings accompanied by copies of a bill therefor and
payments thereof which identify the personal property with respect to which such
payments are made. Impositions imposed in respect to the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Landlord
and Tenant, whether or not such Imposition is imposed before or after such
termination, and Tenant's obligation to pay or Landlord's obligation to refund
its prorated share thereof shall survive such termination.
3.2 Definition of Impositions. "Impositions" means, collectively, [i]
taxes (including without limitation, all capital stock and franchise taxes of
Landlord imposed by the State or any governmental entity in the State due to
this lease transaction or Landlord's ownership of the Leased Property and the
income arising therefrom, or due to Landlord being considered as doing business
in the State because of Landlord's ownership of the Leased Property or lease
thereof to Tenant), all real estate and personal property ad valorem, sales and
use, business or occupation, single business, gross receipts, transaction
privilege, rent or similar taxes; [ii] 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 with the Term); [iii] ground rents, water, sewer or other rents and
charges, excises, tax levies, and fees (including without limitation, license,
permit, inspection, authorization and similar fees); [iv] all taxes imposed on
Tenant's operations of the Leased Property, including without limitation,
employee withholding taxes, income taxes and intangible taxes; [v] all real
property conveyance taxes, transfer fees, deed stamps and similar charges
imposed by the State or any governmental entity in the State with respect to the
conveyance of the Leased Property from Sterling to Landlord (if applicable) and
from Landlord to Tenant; and [vi] all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to any
failure in payment by
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Tenant), which at any time prior to, during or in respect of the Term hereof may
be assessed or imposed on or in respect of or be a lien upon [a] Landlord or
Landlord's interest in the Leased Property or any part thereof; [b] the Leased
Property or any part thereof or any rent therefrom or any estate, right, title
or interest therein; or [c] any occupancy, operation, use or possession of, or
sales from, or activity conducted on, or in connection with the Leased Property
or the leasing or use of the Leased Property or any part thereof. Tenant shall
not, however, be required to pay any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Landlord by
any governmental entity other than as described in clause [i] above.
3.3 Escrow of Impositions. If an Event of Default occurs and while it
remains uncured, Tenant shall, at Landlord's election, deposit with Landlord on
the first day of each month a sum equal to 1/12th of the Impositions assessed
against the Leased Property for the preceding tax year, which sums shall be used
by Landlord toward prompt payment of such Impositions. Tenant, on demand, shall
pay to Landlord any additional funds necessary to pay and discharge the
obligations of Tenant pursuant to the provisions of this section. The receipt by
Landlord of the payment of such Impositions by and from Tenant shall only be as
an accommodation to Tenant, the mortgagees, and the taxing authorities, and
shall not be construed as rent or income to Landlord, Landlord serving, if at
all, only as a conduit for delivery purposes.
3.4 Utilities. Tenant shall pay, or cause to be paid, as Additional
Rent, all taxes, assessments, charges, deposits, and bills for utilities,
including without limitation charges for water, gas, oil, sanitary and storm
sewer, electricity, telephone service, and trash collection, which may be
charged against the occupant of the Improvements during the Term. If an Event of
Default occurs and while it remains uncured, Tenant shall, at Landlord's
election, deposit with Landlord on the first day of each month a sum equal to
1/12th of the amount of the annual utility expenses for the preceding Lease
Year, which sums shall be used by Landlord to promptly pay such utilities.
Tenant shall, on demand, pay to Landlord any additional amount needed to pay
such utilities. Landlord's receipt of such payments shall only be an
accommodation to Tenant and the utility companies and shall not constitute rent
or income to Landlord. Tenant shall at all times maintain that amount of heat
necessary to ensure against the freezing of water lines. Tenant hereby agrees to
indemnify and hold Landlord harmless from and against any liability or damages
to the utility systems and the Leased Property that may result from Tenant's
failure to maintain sufficient heat in the Improvements unless the failure
arises from Landlord's failure to make prompt payment of utility expenses to the
extent that funds for such expenses have been deposited with Landlord under this
section.
3.5 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business for
any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of rent or operate to
release Tenant from any of Tenant's obligations under this Lease unless Landlord
has failed to make prompt payment of utility expenses to the extent that funds
for such expenses have been deposited with Landlord under Section 3.4 above.
3.6 Business Expenses. Tenant shall promptly pay all expenses and costs
incurred in connection with the operation of the Facility on the Leased
Property, including
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without limitation, employee benefits, employee vacation and sick pay,
consulting fees, and expenses for inventory and supplies.
3.7 Permitted Contests. Tenant, on its own or on Landlord's behalf (or
in Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien, attachment, levy, encumbrance,
charge or claim provided that [i] in the case of an unpaid Imposition, lien,
attachment, levy, encumbrance, charge or claim, the commencement and
continuation of such proceedings shall suspend the collection thereof from
Landlord and from the Leased Property; [ii] neither the Leased Property nor any
Rent therefrom nor any part thereof or interest therein would be in any
immediate danger of being sold, forfeited, attached or lost; [iii] in the case
of a Legal Requirement, Landlord would not be in any immediate danger of civil
or criminal liability for failure to comply therewith pending the outcome of
such proceedings; [iv] in the event that any such contest shall involve a sum of
money or potential loss in excess of $50,000.00, Tenant shall deliver to
Landlord and its counsel an opinion of Tenant's counsel to the effect set forth
in clauses [i], [ii] and [iii], to the extent applicable; [v] in the case of a
Legal Requirement and/or an Imposition, lien, encumbrance or charge, Tenant
shall give such reasonable security as may be demanded by Landlord to insure
ultimate payment of the same and to prevent any sale or forfeiture of the
affected Leased Property or the Rent by reason of such nonpayment or
noncompliance; provided, however, the provisions of this section shall not be
construed to permit Tenant to contest the payment of Rent (except as to contests
concerning the method of computation or the basis of levy of any Imposition or
the basis for the assertion of any other claim) or any other sums payable by
Tenant to Landlord hereunder; [vi] in the case of an insurance requirement, the
coverage required by Article 4 shall be maintained; and [vii] if such contest be
finally resolved against Landlord or Tenant, Tenant shall, as Additional Rent
due hereunder, promptly pay the amount required to be paid, together with all
interest and penalties accrued thereon, or comply with the applicable Legal
Requirement or insurance requirement. Landlord, at Tenant's expense, shall
execute and deliver to Tenant such authorizations and other documents as may be
reasonably required in any such contest, and, if reasonably requested by Tenant
or if Landlord so desires, Landlord shall join as a party therein. Tenant hereby
agrees to indemnify and save Landlord harmless from and against any liability,
cost or expense of any kind that may be imposed upon Landlord in connection with
any such contest and any loss resulting therefrom.
ARTICLE 4: INSURANCE
4.1 Property Insurance. At Tenant's expense, Tenant shall maintain in
full force and effect a property insurance policy or policies insuring the
Leased Property against the following:
(a) Loss or damage commonly covered by a "Special Form" policy
insuring against physical loss or damage to the Improvements and Personal
Property, including but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if the Leased Property is in earthquake zone 1 or 2 per the ISO
rating system,) and sinkholes (if usually recommended in the area of the Leased
Property).
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The policy shall be in the amount of the full replacement value (as defined in
Section 4.5) of the Improvements and Personal Property and shall contain a
deductible amount acceptable to Landlord. Landlord shall be named as an
additional insured. The policy shall include a stipulated value endorsement or
agreed amount endorsement and endorsements for contingent liability for
operations of building laws, demolition costs, and increased cost of
construction.
(b) If applicable, loss or damage by explosion of steam boilers,
pressure vessels, or similar apparatus, now or hereafter installed on the Leased
Property, in commercially reasonable amounts acceptable to Landlord.
(c) Consequential loss of rents and income coverage insuring
against all "Special Form" risk of physical loss or damage with limits and
deductible amounts acceptable to Landlord covering risk of loss during the first
9 months of reconstruction, and containing an endorsement for extended period of
indemnity of at least 6 months, and shall be written with a stipulated amount of
coverage if available at a reasonable premium.
(d) If the Leased Property is located, in whole or in part, in a
federally designated 100-year flood plain area, flood insurance for the
Improvements in an amount equal to the lesser of [i] the full replacement value
of the Improvements; or [ii] the maximum amount of insurance available for the
Improvements under all federal and private flood insurance programs.
(e) Loss or damage caused by the breakage of plate glass in
commercially reasonable amounts acceptable to Landlord.
(f) Loss or damage commonly covered by blanket crime insurance
including employee dishonesty, loss of paper currency, depositor's forgery, and
loss of property of patients accepted by Tenant for safekeeping, in commercially
reasonable amounts acceptable to the Landlord.
4.2 Liability Insurance. At Tenant's expense, Tenant shall maintain
liability insurance against the following:
(a) Claims for personal injury or property damage commonly covered
by comprehensive general liability insurance with endorsements for incidental
malpractice, contractual, personal injury, owner's protective liability,
voluntary medical payments, products and completed operations, broad form
property damage, and extended bodily injury, with commercially reasonable
amounts for bodily injury, property damage, and voluntary medical payments
acceptable to Landlord, but with a combined single limit of not less than
$5,000,000.00 per occurrence.
(b) Claims for personal injury and property damage commonly covered
by comprehensive automobile liability insurance, covering all owned and
non-owned automobiles, with commercially reasonable amounts for bodily injury,
property damage, and for automobile medical payments acceptable to Landlord, but
with a combined single limit of not less than $5,000,000.00 per occurrence.
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(c) Claims for personal injury commonly covered by medical
malpractice insurance in commercially reasonable amounts acceptable to Landlord.
(d) Claims commonly covered by worker's compensation insurance for
all persons employed by Tenant on the Leased Property. Such worker's
compensation insurance shall be in accordance with the requirements of all
applicable local, state, and federal law.
4.3 Builder's Risk Insurance. In connection with any construction,
Tenant shall maintain in full force and effect a builder's completed value risk
policy ("Builder's Risk Policy") of insurance in a nonreporting form insuring
against all "Special Form" risk of physical loss or damage to the Improvements,
including but not limited to, risk of loss from fire and other hazards,
collapse, transit coverage, vandalism, malicious mischief, theft, earthquake (if
Leased Property is in earthquake zone 1 or 2) and sinkholes (if usually
recommended in the area of the Leased Property). The Builder's Risk Policy shall
include endorsements providing coverage for building materials and supplies and
temporary premises. The Builder's Risk Policy shall be in the amount of the full
replacement value of the Improvements and shall contain a deductible amount
acceptable to Landlord. Landlord shall be named as an additional insured. The
Builder's Risk Policy shall include an endorsement permitting initial occupancy.
4.4 Insurance Requirements. The following provisions shall apply to all
insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject to the
approval of Landlord, which approval will not be unreasonably withheld.
(b) The carriers of all policies shall have a Best's Rating of "A"
or better and a Best's Financial Category of IX or higher and shall be
authorized to do insurance business in the State.
(c) Tenant shall be the "named insured" and Landlord shall be an
"additional insured" on each liability policy. On all property and casualty
policies, Landlord and Tenant shall be joint loss payees.
(d) Tenant shall deliver to Landlord certificates or policies
showing the required coverages and endorsements. The policies of insurance shall
provide that the policy may not be cancelled or not renewed, and no material
change or reduction in coverage may be made, without at least 30 days' prior
written notice to Landlord.
(e) The policies shall contain a severability of interest and/or
cross-liability endorsement, provide that the acts or omissions of Tenant or
Landlord will not invalidate the coverage of the other party, and provide that
Landlord shall not be responsible for payment of premiums.
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(f) All casualty loss adjustment shall require the written consent
of Landlord and Tenant, as their interests may appear.
(g) At least 30 days prior to the expiration of each policy, Tenant
shall deliver to Landlord a certificate showing renewal of such policy and
payment of the annual premium therefor and a current Certificate of Compliance
(in the form delivered at the time of Closing) completed and signed by Tenant's
insurance agent.
4.5 Replacement Value. The term "full replacement value" means the
actual replacement cost thereof from time to time including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the Leased
Property, Landlord may have such full replacement value redetermined at any time
after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.
4.6 Blanket Policy. Notwithstanding anything to the contrary contained
in this section, Tenant may carry the insurance required by this Article under a
blanket policy of insurance, provided that the coverage afforded Tenant will not
be reduced or diminished or otherwise be different from that which would exist
under a separate policy meeting all of the requirements of this Lease.
4.7 No Separate Insurance. Tenant shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required in
this Article, or increase the amounts of any then existing insurance, by
securing an additional policy or additional policies, unless all parties having
an insurable interest in the subject matter of the insurance, including Landlord
and any mortgagees, are included therein as additional insureds or loss payees,
the loss is payable under said insurance in the same manner as losses are
payable under this Lease, and such additional insurance is not prohibited by the
existing policies of insurance. Tenant shall immediately notify Landlord of the
taking out of such separate insurance or the increasing of any of the amounts of
the existing insurance by securing an additional policy or additional policies.
4.8 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part of, the Leased Property,
which loss or damage is covered by valid and collectible insurance policies, to
the extent that such loss or damage is recoverable under such policies. Said
mutual waiver shall be in addition to, and not in limitation or derogation of,
any other waiver or release contained in this Lease with respect to any loss or
damage to property of the parties hereto. Inasmuch as the said waivers will
preclude the assignment of any aforesaid claim by way of subrogation (or
otherwise) to an insurance company (or any other person), each party hereto
agrees immediately to give each insurance company which has issued to it
policies of insurance, written notice of the terms of said mutual waivers, and
to have such insurance policies properly
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endorsed, if necessary, to prevent the invalidation of said insurance coverage
by reason of said waivers, so long as such endorsement is available at a
reasonable cost.
4.9 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: [i]
Tenant shall obtain a standard form of lender's loss payable clause insuring the
interest of the mortgagee; [ii] Tenant shall deliver evidence of insurance to
such mortgagee; [iii] loss adjustment of claims in excess of $50,000 shall
require the consent of the mortgagee, which consent shall not be unreasonably
withheld; and [iv] Tenant shall provide such other information and documents as
may be reasonably required by the mortgagee.
4.10 Escrows. After an Event of Default occurs hereunder and until such
Event of Default is cured, Tenant shall make such periodic payments of insurance
premiums in accordance with Landlord's requirements after receipt of notice
thereof from Landlord.
ARTICLE 5: INDEMNITY
5.1 Tenant's Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors or assigns of Landlord, and Landlord's
and such successor's and assign's directors, officers, employees and agents from
and against any and all demands, claims, causes of action, fines, penalties,
damages (including consequential damages), losses, liabilities (including strict
liability), judgments, and expenses (including, without limitation, reasonable
attorneys' fees, court costs, and the costs set forth in Section 8.7) incurred
in connection with or arising from: [i] the use or occupancy of the Leased
Property by Tenant or any persons claiming under Tenant; [ii] any activity,
work, or thing done, or permitted or suffered by Tenant in or about the Leased
Property; [iii] any acts, omissions, or negligence of Tenant or any person
claiming under Tenant, or the contractors, agents, employees, invitees, or
visitors of Tenant or any such person; [iv] any breach, violation, or
nonperformance by Tenant or any person claiming under Tenant or the employees,
agents, contractors, invitees, or visitors of Tenant or of any such person, of
any term, covenant, or provision of this Lease or any law, ordinance, or
governmental requirement of any kind including, without limitation, any failure
to comply with any applicable requirements under the ADA; [v] any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, visitors, or any other person entering upon the Leased
Property; and [vi] any construction, alterations, changes or demolition of the
Facility performed by or contracted for Tenant or its employees, agents or
contractors. Provided, however, that Tenant shall have no indemnity obligation
with respect to matters, liabilities, obligations, claims, damages, penalties,
causes of actions, costs and expenses caused by Landlord's gross negligence or
willful misconduct. If any action or proceeding is brought against Landlord, its
employees, or agents by reason of any such claim, Tenant, upon notice from
Landlord, will defend the claim at Tenant's expense with counsel reasonably
satisfactory to Landlord. All amounts payable to Landlord under this section
shall be payable on written demand and any such amounts which are not paid
within 10 days after demand therefor by Landlord shall bear interest at the
Overdue Rate. In case any action, suit or proceeding is brought against Tenant
by reason of any such occurrence, Tenant shall use its best efforts to defend
such action, suit or proceeding.
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5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of any
claim or action brought against Landlord in which indemnity may be sought
against Tenant pursuant to this section. Such notice shall be given in
sufficient time to allow Tenant to defend or participate in such claim or
action, but the failure to give such notice in sufficient time shall not
constitute a defense hereunder nor in any way impair the obligations of Tenant
under this section unless the failure to give such notice precludes or
materially prejudices Tenant's defense of any such action.
5.1.2 Survival of Covenants. The covenants of Tenant contained in this
section shall remain in full force and effect after the termination of this
Agreement until the expiration of the period stated in the applicable statute of
limitations during which a claim or cause of action may be brought and payment
in full or the satisfaction of such claim or cause of action and of all expenses
and charges incurred by Landlord relating to the enforcement of the provisions
herein specified.
5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant
hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Agreement.
5.2 Environmental Indemnity; Audits.
5.2.1 Indemnification. Tenant hereby indemnifies and agrees to hold
harmless Landlord, any successors to Landlord's interest in this Lease, and
Landlord's and such successors' directors, officers, employees and agents from
and against any losses, claims, damages (including consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including expenses of litigation and
reasonable attorneys' fees) incurred by Landlord or any other indemnitee or
assessed against the Leased Property by virtue of any claim or lien by any
governmental or quasi-governmental unit, body, or agency, or any third party,
for cleanup costs or other costs pursuant to any Environmental Law. Tenant's
indemnity shall survive the termination of this Lease. Provided, however, Tenant
shall have no indemnity obligation with respect to [i] Hazardous Materials first
introduced to the Leased Property subsequent to the date that Tenant's occupancy
of the Leased Property shall have fully terminated; or [ii] Hazardous Materials
introduced to the Leased Property by Landlord, its agent, employees, successors
or assigns. If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of the Leased Premises, in
such form, scope and substance as specified by Landlord, at Tenant's expense.
Tenant shall, within 30 days after receipt of an invoice from Landlord,
reimburse Landlord for all costs and expenses incurred in reviewing any
environmental audit, including without limitation, reasonable attorneys' fees
and costs.
5.3 Limitation of Landlord's Liability. Landlord, its agents, and
employees, will not be liable for any loss, injury, death, or damage (including
consequential damages) to persons, property, or Tenant's business occasioned by
theft, act of God, public enemy,
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injunction, riot, strike, insurrection, war, court order, requisition, order of
governmental body or authority, fire, explosion, falling objects, steam, water,
rain or snow, leak or flow of water (including water from the elevator system),
rain or snow from the Leased Property or into the Leased Property or from the
roof, street, subsurface or from any other place, or by dampness or from the
breakage, leakage, obstruction, or other defects of the pipes, sprinklers,
wires, appliances, plumbing, air conditioning, or lighting fixtures of the
Leased Property, or from construction, repair, or alteration of the Leased
Property or from any acts or omissions of any other occupant or visitor of the
Leased Property, or from any other cause beyond Landlord's control. The
foregoing limitation does not apply to loss, injury, death or damage caused by
Landlord's gross negligence or willful misconduct.
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES
6.1 Use of Leased Property. Tenant shall use and occupy the Leased
Property exclusively as an assisted living/ facility and for all lawful and
licensed ancillary uses, and for no other purpose without the prior written
consent of the Landlord which consent shall not be unreasonably withheld. Tenant
shall obtain and maintain all approvals, licenses, and consents needed to use
and operate the Leased Property as herein permitted. Tenant shall deliver to
Landlord complete copies of surveys, examinations, certification and licensure
inspections, compliance certificates, and other similar reports issued to Tenant
by any governmental agency within 10 days after Tenant's receipt of each item.
6.2 Acceptance of Leased Property. Tenant acknowledges that [i] Tenant
and its agents have had an opportunity to inspect the Leased Property; [ii]
Tenant has found the Leased Property fit for Tenant's use; [iii] Landlord will
deliver the Leased Property to Tenant in "as-is" condition; [iv] Landlord is not
obligated to make any improvements or repairs to the Leased Property; and [v]
the roof, walls, foundation, heating, ventilating, air conditioning, telephone,
sewer, electrical, mechanical, elevator, utility, plumbing, and other portions
of the Leased Property are in good working order. Tenant waives any claim or
action against Landlord with respect to the condition of the Leased Property.
LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF
THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO
QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.3 Conditions of Use and Occupancy. Tenant agrees that during the Term
it shall use and keep the Leased Property in a careful, safe and proper manner;
not commit or suffer waste thereon; not use or occupy the Leased Property for
any unlawful purposes; not use or occupy the Leased Property or permit the same
to be used or occupied, for any purpose or business deemed extra hazardous on
account of fire or otherwise; keep the Leased Property in such repair and
condition as may be required by the Board of Health, or other city, state or
federal authorities, free of all cost to Landlord; not permit any acts to be
done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its
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agents to enter upon the Leased Property at all reasonable times to examine the
condition thereof and accompanied by a representative of Tenant to the extent
such a representative is available.
ARTICLE 7: REPAIRS AND MECHANICS' LIENS
7.1 Maintenance. Tenant shall maintain, repair, and replace the Leased
Property, including without limitation, all structural and nonstructural repairs
and replacements to the roof, foundations, exterior walls, parking areas,
sidewalks, water, sewer, and gas connections, pipes, and mains. Tenant shall
pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall permit Landlord to
inspect the Leased Property at all reasonable times, and shall implement all
reasonable suggestions of the Landlord as to the maintenance and replacement of
the Leased Property.
7.2 Required Alterations. Tenant shall, at Tenant's sole cost and
expense, make any additions, changes, improvements or alterations to the Leased
Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure or
certification under the Medicare and Medicaid programs (if so certified),
whether such changes are required by Tenant's use, changes in the law,
ordinances, or governmental regulations, defects existing as of the date of this
Lease, or any other cause whatever. All such additions, changes, improvements or
alterations shall be deemed to be Permitted Alterations and shall comply with
all laws requiring such alterations and with the provisions of Section 16.4.
7.3 Mechanic's Liens. Tenant shall have no authority to permit or
create a lien against Landlord's interest in the Leased Property, and upon
Landlord's request, Tenant shall post notices during construction or file such
documents as may be required to protect Landlord's interest in the Leased
Property against liens. Tenant hereby agrees to defend, indemnify, and hold
Landlord harmless from and against any mechanic's liens against the Leased
Property by reason of work, labor, services or materials supplied or claimed to
have been supplied on or to the Leased Property. Tenant shall remove, bond-off,
or otherwise obtain the release of any mechanic's lien filed against the Leased
Property within 10 days after Tenant receives notice of the filing thereof;
provided, however, that Tenant shall have the right to contest in good faith and
with due diligence the validity of any such lien upon furnishing such security
or indemnity as may be reasonably required by Landlord. Tenant shall pay all
Landlord's expenses in connection therewith, including without limitation,
damages, interest, court costs and reasonable attorneys' fees.
7.4 Replacements of Fixtures and Personal Property. Tenant shall not
remove Fixtures and Personal Property from the Leased Property except to replace
the Fixtures and Personal Property by other similar items of equal quality and
value. Items being replaced by Tenant may be removed and shall become the
property of Tenant and items replacing the same shall be and remain the property
of Landlord. Tenant shall execute, upon written request from Landlord, any and
all documents necessary to evidence Landlord's ownership of the Personal
Property and replacements therefor. Tenant may finance replacements for the
Fixtures and
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Personal Property by equipment lease or by a security agreement and financing
statement and if the original cost of the equipment exceeds $50,000.00, Tenant
must obtain the following: [i] Landlord's consent to the terms and conditions of
the equipment lease or security agreement; and [ii] a nondisturbance agreement
from the equipment lessor or lender upon terms and conditions reasonably
acceptable to Landlord, including without limitation, the following: [a]
Landlord shall have the right (but not the obligation) to assume such security
agreement or equipment lease upon the occurrence of an Event of Default under
this Lease; [b] the equipment lessor or lender shall notify Landlord of any
default by Tenant under the equipment lease or security agreement and give
Landlord a reasonable opportunity to cure such default; and [c] Landlord shall
have the right to assign its rights under the equipment lease, security
agreement, or nondisturbance agreement. Tenant shall, within 30 days after
receipt of an invoice from Landlord, reimburse Landlord for all costs and
expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.
ARTICLE 8: DEFAULTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the
following shall be an event of default ("Event of Default") hereunder:
(a) Tenant fails to pay in full any installment of Rent, or any
other monetary obligation payable by Tenant under this Lease (including the
Option Price) within three business days after Tenant is given written notice of
such failure, which written notice shall be given, at Landlord's option, at any
time after the expiration of 10 days from the date such payment is due;
provided, however, that if Tenant receives two notices of default during any one
year period, regardless of any subsequent cure of such default, thereafter
Landlord shall not be obligated to give Tenant written notice of any failure to
make any such payments, and it shall be an Event of Default if Tenant fails to
pay any installment of Rent or any other monetary obligation payable by Tenant
under this Lease within 10 days after such payment is due.
(b) [DELETED]
(c) Tenant fails to comply with any covenant set forth in Article
14, Section 15.6 or Section 15.7 of this Lease, to the extent such covenant is
applicable to such entity.
(d) Tenant fails to observe and perform any other covenant,
condition or agreement under this Lease to be performed by Tenant and [i] such
failure continues for a period of 30 days after written notice thereof is given
to Tenant by Landlord; or [ii] if, by reason of the nature of such default, the
same cannot be remedied within said 30 days, Tenant fails to proceed with
diligence reasonably satisfactory to Landlord after receipt of the notice to
cure the same or, in any event, fails to cure such default within 90 days after
receipt of the notice. The foregoing notice and cure provisions do not apply to
any Event of Default otherwise specifically described in any other subsection of
Section 8.1.
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(e) Tenant abandons or vacates the Leased Property or any material
part thereof or ceases to do business or ceases to exist for any reason for any
one or more days except as a result of condemnation or casualty.
(f) [i] The filing by Tenant of a petition under 11 U.S.C. or the
commencement of a bankruptcy or similar proceeding by Tenant; [ii] the failure
by Tenant within 60 days to dismiss an involuntary bankruptcy petition or other
commencement of a bankruptcy, reorganization or similar proceeding against
Tenant or to lift or stay any execution, garnishment or attachment of such
consequence as will impair its ability to carry on its operation at the Leased
Property; [iii] the entry of an order for relief under 11 U.S.C. in respect of
Tenant; [iv] any assignment by Tenant for the benefit of its creditors; [v] the
entry by Tenant into an agreement of composition with its creditors; [vi] the
approval by a court of competent jurisdiction of a petition applicable to Tenant
in any proceeding for its reorganization instituted under the provisions of any
state or federal bankruptcy, insolvency, or similar laws; [vii] appointment by
final order, judgment, or decree of a court of competent jurisdiction of a
receiver of a whole or any substantial part of the properties of Tenant
(provided such receiver shall not have been removed or discharged within 60 days
of the date of his qualification).
(g) [i] Any receiver, administrator, custodian or other person
takes possession or control of any of the Leased Property and continues in
possession for 60 days; [ii] any writ against any of the Leased Property is not
released within 60 days; [iii] any judgment is rendered or proceedings are
instituted against the Leased Property or Tenant which affect the Leased
Property or any part thereof, which is not dismissed for 60 days (except as
otherwise provided in this section); [iv] all or a substantial part of the
assets of Tenant are attached, seized, subjected to a writ or distress warrant,
or are levied upon, or come into the possession of any receiver, trustee,
custodian, or assignee for the benefit of creditors; [v] Tenant is enjoined,
restrained, or in any way prevented by court order (other than ex parte order)
from conducting all or a substantial part of its business or affairs; or [vi]
except as otherwise permitted hereunder, a final notice of lien, levy or
assessment is filed of record with respect to all or any part of the Leased
Property or any property of Tenant located at the Leased Property and is not
dismissed, discharged, or bonded-off within 30 days or is not otherwise
addressed pursuant to Section 7.3.
(h) Any representation or warranty made by Tenant in this Lease or
any other document executed in connection with this Lease, any guaranty of or
other security for this Lease, or any report, certificate, application,
financial statement or other instrument furnished by Tenant pursuant hereto or
thereto shall prove to be false, misleading or incorrect in any material respect
as of the date made.
(i) Tenant or any Affiliate defaults on any indebtedness or
obligation to Landlord or any Landlord Affiliate, including, without limitation,
any lease with Landlord or any Landlord Affiliate, or Tenant, Sterling or any
Affiliate receives notice of acceleration of payment in connection with a
default under any Material Obligation unless Tenant can demonstrate to Landlord
that such acceleration will not cause Tenant to be in violation of Section 15.7,
and any applicable grace or cure period with respect to default under such
indebtedness or obligation expires without such default having been cured. This
provision applies to all such
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indebtedness and obligations as they may be amended, modified, extended, or
renewed from time to time.
(j) Except as otherwise specifically permitted herein, the
assignment, sublease or the occurrence of any other change in Tenant's leasehold
interest in the Leased Property, which shall not include any change in Tenant's
stock ownership.
(k) The license for the Facility or any other Government
Authorization, is cancelled, suspended or otherwise invalidated, notice of
impending revocation proceedings is received and Tenant fails to diligently
contest such proceeding, or any reduction occurs in the number of licensed beds
or units at the Facility in excess of 3%.
(l) The occurrence of an Event of Default (after expiration of any
applicable grace or cure period) under the Construction Agreement.
8.2 Remedies. Landlord may exercise any one or more of the following
remedies upon the occurrence of an Event of Default:
(a) Landlord may re-enter and take possession of the Leased
Property without terminating the Lease, and lease the Leased Property for the
account of Tenant at a commercially reasonable rate, holding Tenant liable for
all costs of the Landlord in reletting the Leased Property and for the
difference in the amount received by such reletting and the amounts payable by
Tenant under the Lease.
(b) Landlord may terminate this Lease, exclude Tenant from
possession of the Leased Property and use efforts to lease the Leased Property
to others at a commercially reasonable rate, holding Tenant liable for the
difference in the amounts received from such reletting and the amounts payable
by Tenant under the Lease.
(c) Landlord may re-enter the Leased Property and have, repossess
and enjoy the Leased Property as if the Lease had not been made, and in such
event, Tenant and its successors and assigns shall remain liable for any
contingent or unliquidated obligations or sums owing at the time of such
repossession.
(d) Landlord may have access to and inspect, examine and make
copies of the books and records and any and all accounts, data and income tax
and other returns of Tenant insofar as they pertain to the Leased Property.
(e) Landlord may accelerate all of the unpaid Rent hereunder so
that the aggregate Rent for the unexpired term of this Lease becomes immediately
due and payable.
(f) Landlord may take whatever action at law or in equity as may
appear necessary or desirable to collect the Rent and other amounts payable
under the Lease then due and thereafter to become due, or to enforce performance
and observance of any obligations, agreements or covenants of Tenant under the
Commitment and this Lease, and may exercise all of Landlord's remedies set forth
in the Commitment and this Lease.
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(g) With respect to the Collateral and Landlord's security interest
therein, Landlord may exercise all of its rights as secured party under Article
9 of the Uniform Commercial Code as adopted in the State. Landlord may sell the
Collateral by public or private sale upon 10 days notice to Tenant. Tenant
agrees that a commercially reasonable manner of disposition of the Collateral
shall include, without limitation and at the option of Landlord, a sale of the
Collateral, in whole or in part, concurrently with the sale of the Leased
Property.
(h) Landlord may obtain control over and collect the Receivables
and apply the proceeds of the collections to satisfaction of Tenant's
Obligations unless prohibited by law. Tenant appoints Landlord or its designee
as attorney for Tenant with powers [i] to receive, to endorse, to sign and/or to
deliver, in Tenant's name or Landlord's name, any and all checks, drafts, and
other instruments for the payment of money relating to the Receivables, and to
waive demand, presentment, notice of dishonor, protest, and any other notice
with respect to any such instrument; [ii] to sign Tenant's name on any invoice
or bill of lading relating to any Receivable, drafts against account debtors,
assignments and verifications of Receivables, and notices to account debtors;
[iii] to send verifications of Receivables to any account debtor; and [iv] to do
all other acts and things necessary to carry out this Lease. Landlord shall not
be liable for any omissions, commissions, errors of judgment, or mistakes in
fact or law made in the exercise of any such powers provided Landlord's exercise
of such power is commercially reasonable. At Landlord's option, Tenant shall [i]
provide Landlord a full accounting of all amounts received on account of
Receivables with such frequency and in such form as Landlord may require, either
with or without applying all collections on Receivables in payment of Tenant's
Obligations or [ii] deliver to Landlord on the day of receipt all such
collections in the form received and duly endorsed by Tenant. At Landlord's
request, Tenant shall institute any action or enter into any settlement
determined by Landlord to be necessary to obtain recovery or redress from any
account debtor in default of Receivables. Landlord may give notice of its
security interest in the Receivables to any or all account debtors with
instructions to make all payments on Receivables directly to Landlord, thereby
terminating Tenant's authority to collect Receivables. After terminating
Tenant's authority to enforce or collect Receivables, Landlord shall have the
right to take possession of any or all Receivables and records thereof and is
hereby authorized to do so, and only Landlord shall have the right to collect
and enforce the Receivables. Prior to the occurrence of an Event of Default, at
Tenant's cost and expense, but on behalf of Landlord and for Landlord's account,
Tenant shall collect or otherwise enforce all amounts unpaid on Receivables and
hold all such collections in trust for Landlord, but Tenant may commingle such
collections with Tenant's own funds, until Tenant's authority to do so has been
terminated, which may be done only after an Event of Default. Notwithstanding
any other provision hereof, Landlord does not assume any of Tenant's obligations
under any Receivable, and Landlord shall not be responsible in any way for the
performance of any of the terms and conditions thereof by Tenant.
(i) Without waiving any prior or subsequent Event of Default,
Landlord may waive any Event of Default or, with or without waiving any Event of
Default, remedy any default.
(j) Landlord may terminate its obligation to disburse Lease
Advances.
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(k) Landlord may enter and take possession of the Land and Facility
without terminating the Lease and complete renovation of the Improvements (or
any part thereof) and perform the obligations of Tenant under this Lease.
Without limiting the generality of the foregoing and for the purposes aforesaid,
Tenant hereby appoints Landlord its lawful attorney-in-fact with full power to
do any of the following: [i] complete renovation and equipping of the
Improvements in the name of Tenant; [ii] use unadvanced funds remaining under
the Maximum Lease Amount, or funds that may be reserved, escrowed, or set aside
for any purposes hereunder at any time, or to advance funds in excess of the
Maximum Lease Amount, to complete the Improvements; [iii] make changes in the
Plans and Specifications that shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the Plans and
Specifications; [iv] retain or employ new general contractors, subcontractors,
architects, engineers, and inspectors as shall be required for said purposes;
[v] pay, settle, or compromise all existing bills and claims, which may be liens
or security interests, or to avoid such bills and claims becoming liens against
the Facility or security interest against fixtures or equipment, or as may be
necessary or desirable for the completion of the construction and equipping of
the Improvements or for the clearance of title; [vi] do any and every act that
Tenant might do in its own behalf, to prosecute and defend all actions or
proceedings in connection with the Improvements; and [vii] to execute, deliver
and file all applications and other documents and take any and all actions
necessary to transfer the operations of the Facility to Landlord or Landlord's
designee. This power of attorney is a power coupled with an interest and cannot
be revoked.
8.3 Right of Set-Off. After an Event of Default occurs hereunder and is
continuing, Landlord may, and is hereby authorized by Tenant to, at any time and
from time to time without advance notice to Tenant (any such notice being
expressly waived by Tenant), set-off and apply any and all sums held by
Landlord, any indebtedness of Landlord to Tenant, and any claims by Tenant
against Landlord, against any obligations of Tenant hereunder and against any
claims by Landlord against Tenant, whether or not such obligations or claims of
Tenant are matured and whether or not Landlord has exercised any other remedies
hereunder. The rights of Landlord under this section are in addition to any
other rights and remedies Landlord may have against Tenant.
8.4 Performance of Tenant's Covenants. Landlord may perform any
obligation of Tenant which Tenant has failed to perform within 10 days after
Landlord has sent a written notice to Tenant informing it of its specific
failure. Tenant shall reimburse Landlord on demand, as Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the
Overdue Rate (as defined in Section 8.6).
8.5 Late Payment Charge. Tenant acknowledges that any default in the
payment of any installment of Rent payable hereunder will result in loss and
additional expense to Landlord in servicing any indebtedness of Landlord secured
by the Leased Property, handling such delinquent payments, and meeting its other
financial obligations, and because such loss and additional expense is extremely
difficult and impractical to ascertain, Tenant agrees that in the event any Rent
payable to Landlord hereunder is not paid within 10 days after the due date,
Tenant shall pay a late charge of 5% of the amount of the overdue payment as a
reasonable
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estimate of such loss and expenses, unless applicable law requires a lesser
charge, in which event the maximum rate permitted by such law may be charged by
Landlord. The 10 day grace period set forth in this section shall not extend the
time for payment of Rent or the period for curing any default or constitute a
waiver of such default.
8.6 Interest. In addition to the late payment charge, any payment not
made by Tenant within 10 days after the due date shall thereafter bear interest
at the rate (the "Overdue Rate") of the greater of [i] 18.5% per annum; or [ii]
2.5% per annum above the Lease Rate then in effect (except that if this Lease is
governed by Texas law, the Overdue Rate shall be 18.0% per annum); provided,
however, that at no time will Tenant be required to pay interest at a rate
higher than the maximum legal rate and, provided further, that if a court of
competent jurisdiction determines that any other charges payable under this
Lease are deemed to be interest, the Overdue Rate shall be adjusted to ensure
that the aggregate interest payable under this Lease does not accrue at a rate
in excess of the maximum legal rate. Tenant shall not be required to pay
interest upon any late payment fees assessed pursuant to Section 8.5.
8.7 Litigation; Attorneys' Fees. Within five days after Tenant has
knowledge of any litigation or other proceeding that may be instituted against
Tenant that is material to the construction or operation of the Facility or that
is material to Tenant's business or financial condition, against the Leased
Property to secure or recover possession thereof, or that may affect the title
to or the interest of Landlord in the Leased Property, Tenant shall give written
notice thereof to Landlord. Tenant shall pay all reasonable costs and expenses
incurred by Landlord in enforcing or preserving Landlord's rights under this
Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including without limitation, [i] the fees,
expenses, and costs of any litigation, receivership, administrative, bankruptcy,
insolvency or other similar proceeding; [ii] reasonable attorney, paralegal,
consulting and witness fees and disbursements, whether in house counsel or
outside counsel; and [iii] the expenses, including without limitation, lodging,
meals, and transportation, of Landlord and its employees, agents, attorneys, and
witnesses in preparing for litigation, administrative, bankruptcy, insolvency or
other similar proceedings and attendance at hearings, depositions, and trials in
connection therewith. All such costs, charges and fees payable by Tenant shall
be deemed to be Additional Rent under this Lease.
8.8 Escrows and Application of Payments. As security for the
performance of its obligations hereunder, Tenant hereby assigns to Landlord all
its right, title, and interest in and to all monies escrowed with Landlord under
this Lease and all deposits with utility companies, taxing authorities and
insurance companies; provided, however, that Landlord shall not exercise its
rights hereunder until an Event of Default has occurred. Any payments received
by Landlord under any provisions of this Lease during the existence or
continuance of an Event of Default shall be applied to Tenant's obligations in
the order which Landlord may determine.
8.9 Remedies Cumulative. The remedies of Landlord herein are cumulative
to and not in lieu of any other remedies available to Landlord at law or in
equity. The use of any one remedy shall not be taken to exclude or waive the
right to use any other remedy.
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ARTICLE 9: DAMAGE AND DESTRUCTION
9.1 Notice of Casualty. If the Leased Property shall be destroyed, in
whole or in part, or damaged by fire, flood, windstorm or other casualty (a
"Casualty"), Tenant shall give written notice thereof to the Landlord within
three business days after the occurrence of the Casualty. Within 15 days after
the occurrence of the Casualty or as soon thereafter as such information is
reasonably available to Tenant, Tenant shall provide the following information
to Landlord: [i] the date of the Casualty; [ii] the nature of the Casualty;
[iii] a description of the damage or destruction caused by the Casualty
including the type of Leased Property damaged and the area of the Improvements
damaged; [iv] a preliminary estimate of the cost to repair, rebuild, restore or
replace the Leased Property; [v] a preliminary estimate of the schedule to
complete the repair, rebuilding, restoration or replacement of the Leased
Property; [vi] a description of the anticipated property insurance claim
including the name of the insurer, the insurance coverage limits, the deductible
amount, the expected settlement amount, and the expected settlement date; and
[vii] a description of the business interruption claim including the name of the
insurer, the insurance coverage limits, the deductible amount, the expected
settlement amount, and the expected settlement date. Within five days after
request from Landlord, Tenant will provide Landlord with copies of all
correspondence to the insurer and any other information reasonably requested by
Landlord.
9.2 Substantial Destruction.
9.2.1 If the Improvements are substantially destroyed at any time other
than during the final 18 months of the Initial Term or any Renewal Term, Tenant
shall promptly rebuild and restore the Leased Property in accordance with
Section 9.4 through Section 9.9 and Landlord shall make the insurance proceeds
available to Tenant for such restoration. The term "substantially destroyed"
means any casualty resulting in the loss of use of 35% or more of the licensed
beds or units at any one Facility.
9.2.2 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or any Renewal Term, Tenant shall have the option
to either [i] rebuild the Leased Property in accordance with Section 9.4 through
Section 9.9; or [ii] terminate this Lease; subject, however, to the following
conditions. In order for Tenant to elect to rebuild the Leased Property, Tenant
must satisfy the following conditions within 60 days after the occurrence of the
damage: [i] Tenant must give irrevocable notice to Landlord of Tenant's election
to rebuild and Tenant's election to either [a] renew this Lease pursuant to
Section 9.2.3 (if the damage occurred during the Initial Term), or [b] exercise
its option to purchase the Leased Property pursuant to Section 9.2.4; and [ii]
if Tenant elects to renew this Lease, each Phase IV Tenant must give irrevocable
notice to Landlord that such Phase IV Tenant elects to renew its respective
Phase IV Lease or, if Tenant elects to exercise its option to purchase, each
Phase IV Tenant must give irrevocable notice to Landlord that such Phase IV
Tenant elects to purchase the Leased Property subject to its respective Phase IV
Lease. In order for Tenant to elect to terminate this Lease, Tenant must give
irrevocable notice to Landlord, within 60 days after the occurrence of the
damage, of Tenant's election to terminate this Lease; provided, however, that
Tenant shall pay to Landlord all Rent and all other obligations accrued under
this Lease through the effective date of termination and, if the amount of
insurance proceeds received or to be received by Landlord is less than the Lease
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Amount, Tenant shall pay to Landlord the amount by which the Lease Amount
exceeds the amount of insurance proceeds. Termination of this Lease shall not be
effective until all such amounts have been paid by Tenant to Landlord and the
insurance proceeds have been paid to Landlord.
The failure of Tenant to give Landlord notice of Tenant's election
within 60 days after the occurrence of the damage shall constitute an election
to terminate and Tenant shall be liable to Landlord for all Rent and other
obligations under this Lease and the amount, if any, by which the Lease Amount
exceeds the amount of insurance proceeds received by Landlord.
9.2.3 If the Improvements are substantially destroyed during the final
18 months of the Initial Term and if Tenant and each Phase IV Tenant give
irrevocable notice to Landlord of its respective election to renew, the current
Term of each Phase IV Lease shall continue until its expiration date and the 11
year Renewal Term shall commence on the day following the expiration date. All
other terms of each Phase IV Lease for the Renewal Term shall be in accordance
with Article 12 of such Phase IV Lease. The Leased Property will be restored by
Tenant in accordance with Section 9.4 through Section 9.9.
9.2.4 If the Improvements are substantially destroyed during the final
18 months of the Initial Term or the Renewal Term and if Tenant and each Phase
IV Tenant gives irrevocable notice to Landlord of its respective election to
purchase its respective Leased Property, the purchase price will be the Option
Price determined in accordance with Section 13.2 and the Fair Market Value will
be determined in accordance with Section 13.3. For purposes of determining the
Fair Market Value, the Leased Property will be valued as if it had been restored
to be equal in value to the Leased Property existing immediately prior to the
occurrence of the damage. All other terms of such purchase shall be in
accordance with Article 13. Landlord shall hold the insurance proceeds until the
closing of the purchase of the Leased Property and at closing shall deliver the
proceeds to Tenant.
9.3 Partial Destruction. If the Leased Property is not substantially
destroyed, then Tenant shall comply with the provisions of Section 9.4 and
Landlord shall make the insurance proceeds available to Tenant for such
restoration.
9.4 Restoration. Tenant shall promptly repair, rebuild, or restore the
Leased Property, at Tenant's expense, so as to make the Leased Property at least
equal in value to the Leased Property existing immediately prior to such
occurrence and as nearly similar to it in character as is practicable and
reasonable. Before beginning such repairs or rebuilding, or letting any
contracts in connection with such repairs or rebuilding, Tenant will submit for
Landlord's approval, which approval Landlord will not unreasonably withhold or
delay, plans and specifications meeting the requirements of Section 16.2 for
such repairs or rebuilding. Promptly after receiving Landlord's approval of the
plans and specifications and receiving the proceeds of insurance, Tenant will
begin such repairs or rebuilding and will prosecute the repairs and rebuilding
to completion with diligence, subject, however, to strikes, lockouts, acts of
God, embargoes, governmental restrictions, and other causes beyond Tenant's
reasonable control. Landlord will make available to Tenant the net proceeds of
any fire or other casualty insurance paid to Landlord for such repair or
rebuilding as the same progresses. Tenant shall be
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responsible for collection of the insurance proceeds, subject to Landlord's
prior reasonable consent to any settlement, and Tenant shall bear all costs of
collection, including attorneys' fees. Payments will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by Landlord. Prior to commencing the repairing or rebuilding, Tenant shall
deliver to Landlord for Landlord's approval a schedule setting forth the
estimated monthly draws for such work. Landlord will contribute to such payments
out of the insurance proceeds an amount equal to the proportion that the total
net amount received by Landlord from insurers bears to the total estimated cost
of the rebuilding or repairing, multiplied by the payment by Tenant on account
of such work. Landlord may, however, withhold 10% from each payment due
subcontractors until the work is completed and proof has been furnished to
Landlord that no lien or liability has attached or will attach to the Leased
Property or to Landlord in connection with such repairing or rebuilding. Upon
the completion of rebuilding and the furnishing of such proof, the balance of
the net proceeds of such insurance payable to Tenant on account of such
repairing or rebuilding will be paid to Tenant. Tenant will obtain and deliver
to Landlord a temporary or final certificate of occupancy before the Leased
Property is reoccupied for any purpose. Tenant shall complete such repairs or
rebuilding in accordance with the building codes and all applicable laws,
ordinances, regulations, or orders of any state, municipal, or other public
authority affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body. Any
remaining proceeds of insurance after such restoration will be Tenant's
property.
9.5 Insufficient Proceeds. If the proceeds of any insurance settlement
are not sufficient to pay the costs of Tenant's repair, rebuilding or
restoration under Section 9.4 in full, Tenant shall deposit with Landlord at
Landlord's option, and within 20 days of Landlord's request, an amount
sufficient in Landlord's reasonable judgment to complete such repair, rebuilding
or restoration. Tenant shall not, by reason of the deposit or payment, be
entitled to any reimbursement from Landlord or diminution in or postponement of
the payment of the Rent.
9.6 Not Trust Funds. Notwithstanding anything herein or at law or
equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9. Tenant expressly assumes
all risk of loss, including a decrease in the use, enjoyment or value, of the
Leased Property from any casualty whatsoever, whether or not insurable or
insured against.
9.7 Landlord's Inspection. During the progress of such repairs or
rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and specifications. Upon the
receipt of any such notice, Tenant will cause corrections to be made to any
deficiencies,
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omissions, or such other respect. Tenant's obligations to supply insurance,
according to Article 4, will be applicable to any repairs or rebuilding under
this section.
9.8 Landlord's Costs. Tenant shall, within 30 days after receipt of an
invoice from Landlord, pay the reasonable costs, expenses, and fees of any
architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith. With respect to any inspections by the
architect or engineer employed by Landlord, Tenant shall pay no more than $500
per day plus out of pocket expenses for travel, lodging, food and
transportation.
9.9 No Rent Abatement. Except to the extent that business interruption
insurance proceeds are received by Landlord, Rent will not abate pending the
repairs or rebuilding of the Leased Property.
ARTICLE 10: CONDEMNATION
10.1 Total Taking. If, by exercise of the right of eminent domain or by
conveyance made in response to the threat of the exercise of such right
("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the property of the Landlord, except for damages awarded
to Tenant as compensation for diminution in value of the leasehold of the Leased
Property provided the award to Landlord is not less than the Lease Amount.
10.2 Partial Taking. If, after a Taking, so much of the Leased Property
remains that the Leased Property can be used for substantially the same purposes
for which it was used immediately before the Taking, then [i] this Lease will
end as to the part taken on the earlier of the vesting of title to the Leased
Property in the condemning authority or the taking of possession of the Leased
Property by the condemning authority; [ii] at its cost, Tenant shall restore so
much of the Leased Property as remains to a sound architectural unit
substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials; [iii] upon
completion of the restoration, Landlord will pay Tenant the lesser of the net
award made to Landlord on the account of the Taking (after deducting from the
total award, attorneys', appraisers', and other reasonable fees and costs
incurred in connection with the obtaining of the award and amounts paid to the
holders of mortgages secured by the Leased Property), or Tenant's actual
out-of-pocket costs of restoring the Leased Property; and [iv] Landlord shall be
entitled to the balance of the net award. The restoration shall be completed in
accordance with Sections 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed
to apply to condemnation instead of casualty.
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10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding anything in
this Lease or at law or equity to the contrary, none of the condemnation award
paid to Landlord shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 10. Tenant expressly
assumes all risk of loss, including a decrease in the use, enjoyment, or value,
of the Leased Property from any Condemnation.
ARTICLE 11: TENANT'S PROPERTY
11.1 Tenant's Property. Tenant shall install, place, and use on the
Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Personal Property as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "Tenant's Property".
11.2 Requirements for Tenant's Property. Tenant shall comply with all
of the following requirements in connection with Tenant's Property:
(a) Tenant shall, at Tenant's sole cost and expense, maintain,
repair, and replace Tenant's Property.
(b) Tenant shall, at Tenant's sole cost and expense, keep Tenant's
Property insured against loss or damage by fire, vandalism and malicious
mischief, sprinkler leakage, earthquake, and other physical loss perils commonly
covered by fire and extended coverage, boiler and machinery, and difference in
conditions insurance in an amount not less than 90% of the then full replacement
cost thereof. Tenant shall use the proceeds from any such policy for the repair
and replacement of Tenant's Property.
(c) Tenant shall pay all taxes applicable to Tenant's Property.
(d) If Tenant's Property is damaged or destroyed by fire or any
other cause, Tenant shall promptly repair or replace Tenant's Property unless
Landlord elects to terminate this Lease pursuant to Section 9.2.2.
(e) Unless an Event of Default or any event which, with the giving
of notice or lapse of time, or both, would constitute an Event of Default has
occurred, Tenant may remove Tenant's Property from the Leased Property from time
to time provided that [i] the items removed are not required to operate the
Leased Property as a licensed assisted living facility (unless such items are
being replaced by Tenant); and [ii] Tenant repairs any damage to the Leased
Property resulting from the removal of Tenant's Property.
(f) Tenant shall not, without the prior written consent of
Landlord or as otherwise provided in this Lease, remove any Tenant's Property or
Leased Property. Tenant shall, at Landlord's option, remove Tenant's Property
upon the termination or expiration of this Lease and shall repair any damage to
the Leased Property resulting from the removal of Tenant's
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Property. If Tenant fails to remove Tenant's Property within 30 days after
request by Landlord, then Tenant shall be deemed to have abandoned Tenant's
Property, Tenant's Property shall become the property of Landlord, and Landlord
may remove, store and dispose of Tenant's Property. In such event, Tenant shall
have no claim or right against Landlord for such property or the value thereof
regardless of the disposition thereof by Landlord. Tenant shall pay Landlord,
upon demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such removal.
Tenant's obligations hereunder shall survive the termination or expiration of
this Lease.
(g) Tenant shall perform its obligations under any equipment lease
or security agreement for Tenant's Property. For equipment loans or leases for
equipment having an original cost in excess of $50,000.00, Tenant shall cause
such equipment lessor or lender to enter into a nondisturbance agreement with
Landlord upon terms and conditions acceptable to Landlord, including without
limitation, the following: [i] Landlord shall have the right (but not the
obligation) to assume such equipment lease or security agreement upon the
occurrence of an Event of Default by Tenant hereunder; [ii] such equipment
lessor or lender shall notify Landlord of any default by Tenant under the
equipment lease or security agreement and give Landlord a reasonable opportunity
to cure such default; and [iii] Landlord shall have the right to assign its
interest in the equipment lease or security agreement and nondisturbance
agreement. Tenant shall, within 30 days after receipt of an invoice from
Landlord, reimburse Landlord for all costs and expenses incurred in reviewing
and approving the equipment lease, security agreement and nondisturbance
agreement, including without limitation, reasonable attorneys' fees and costs.
ARTICLE 12: RENEWAL OPTIONS
12.1 Renewal Options. Tenant has the option to renew ("Renewal Option")
this Lease for two 11-year renewal terms (each a "Renewal Term"). Tenant can
exercise each Renewal Option only upon satisfaction of the following conditions:
(a) There shall be no uncured Event of Default, or any event which
with the passage of time or giving of notice would constitute an Event of
Default, at the time Tenant exercises its Renewal Option nor on the date each
Renewal Term is to commence.
(b) Tenant shall give Landlord irrevocable written notice of
renewal ("Renewal Notice") no later than the date which is [i] 90 days prior to
the expiration date of the Initial Term; or [ii] if applicable, 15 days after
the occurrence of the substantial destruction of the Improvements as set forth
in Sections 9.2.2 and 9.2.3.
(c) Each Phase IV Tenant shall concurrently give irrevocable
notice of renewal for each Phase IV Lease.
12.2 Effect of Renewal. The following terms and conditions will be
applicable if Tenant renews the Lease:
(a) Effective Date. The effective date of the first Renewal Term
will be the first day after the expiration date of the Initial Term. The first
day of each respective
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Renewal Term is also referred to as the Renewal Date. The effective date of the
second Renewal Term will be the first day after the expiration date of the first
Renewal Term.
(b) Lease Amount. Effective as of each Renewal Date, a single
Lease Amount will be computed by summing all Lease Advance Amounts (including
the Acquisition Amount).
(c) Lease Rate. Effective as of each Renewal Date, a single Lease
Rate will be computed equal to the Renewal Rate. The Renewal Rate for each
Renewal Term shall be the fair market value lease rate for this type of lease as
determined in accordance with the following provisions. The parties shall
attempt to determine the fair market value lease rate by mutual agreement within
15 days after the date Tenant gives the Renewal Notice. If the parties do not
agree on such lease rate within the 15 day period, the appraisal procedure set
forth in Section 13.3 shall be used. The appraisers shall be instructed to
appraise the fair market value lease rate as a financing lease rate for a health
care facility of the same type as the Facility. The appraised rates submitted by
the three appraisers shall be ranked from highest to lowest, the rate (highest
or lowest) which is furthest from the middle rate shall be discarded, and the
remaining two appraised rates shall be averaged to arrive at the appraised lease
rate. The Renewal Rate shall be the appraised lease rate provided, however, that
Landlord shall not be obligated to renew this Lease at a Renewal Rate less than
the lease rate then being charged by Landlord to tenants of comparable
creditworthiness for comparable facilities.
(d) [INTENTIONALLY OMITTED]
(e) Base Rent. Effective as of each Renewal Date, the annual Base
Rent will be changed to equal the product of [i] the Lease Amount on the
applicable Renewal Date times [ii] the new Lease Rate equal to the Renewal Rate.
(f) Other Terms and Conditions. Except for the modifications set
forth in this Section 12.2, all other terms and conditions of the Lease will
remain the same for the Renewal Term.
12.3 Effect of Non-Renewal or Expiration of Lease. The following terms
and conditions will be applicable if Tenant does not renew this Lease or
exercise its Option to Purchase by the expiration date for the Initial Term or
the first Renewal Term:
(a) Extension of Current Term. The Initial Term will be extended
(the "Extended Term") for 180 days.
(b) Lease Payments. During the Extended Term, Tenant shall
continue to make monthly payments of Rent (including Base Rent) based upon the
then existing Lease Rate.
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ARTICLE 13: OPTION TO PURCHASE
13.1 Option to Purchase. If Sterling is not Tenant or an Affiliate,
Landlord hereby grants to Tenant an option to purchase ("Option to Purchase")
all of the Leased Property (but not less than all thereof) in accordance with
the terms and conditions of this Article 13. Tenant may exercise its Option to
Purchase only by giving an irrevocable notice of Tenant's election to purchase
the Leased Property ("Purchase Notice") in accordance with the following:
(a) During the Initial Term or the Renewal Term, Tenant and each
Phase IV Tenant must give a Purchase Notice no earlier than the date which is
180 days, and no later than the date which is 90 days, prior to the expiration
date of the then current Term of this Lease and each Phase IV Lease.
(b) In accordance with Sections 9.2.2 and 9.2.4, hereof. Tenant
shall have no right to exercise the Option to Purchase other than in accordance
with subparagraph [a] or [b].
13.1.1 If Sterling is Tenant or an Affiliate, Tenant shall have a right
of first refusal to purchase the Facility. If at any time during the Term,
Landlord shall receive a bona fide offer ("Offer") from a third person for the
purchase of the Leased Property, which Offer Landlord desires to accept,
Landlord shall promptly deliver to Tenant a copy of such Offer. Tenant shall
have the right for a period of 60 days thereafter to elect to purchase the
Leased Property on the same terms and conditions as those set forth in the
Offer. If Tenant elects to purchase the Leased Property, Tenant must give
written notice thereof to Landlord no later than the 60th day after the date
Landlord delivers the Offer to Tenant. If Tenant does not elect to exercise its
right of first refusal as set forth in this section, Landlord shall be free to
sell and convey the Leased Property to the third party purchaser in accordance
with the terms and provisions of the Offer, subject to this Lease. In the event
that Landlord does not consummate the sale of the Leased Property to such
purchaser, Tenant's right of first refusal under this section shall remain
applicable to subsequent bona fide offers from third persons.
13.2 Option Price. The option price ("Option Price") will be the Fair
Market Value of the Leased Property determined pursuant to Section 13.3;
provided, however, that the Option Price shall not be less than the Lease
Amount. Notwithstanding any provision in this Lease to the contrary, Tenant
shall have the right to revoke its Purchase Notice within 10 days after the
Option Price has been determined if the Option Price is not acceptable to Tenant
or Tenant may revoke to the extent that an event occurs which under the
provisions of this Lease would permit Tenant to terminate this Lease and Tenant
so elects to terminate this Lease. In addition to the Option Price, Tenant shall
pay all closing costs and expenses in connection with the transfer of the Leased
Property to Tenant including but not limited to the following: [a] real property
conveyance or transfer fees or deed stamps; [b] title search fees, title
insurance commitment fees, and title insurance premiums; [c] survey fees; [d]
environmental assessment fees; [e] recording fees; [f] reasonable attorneys'
fees of Landlord's counsel; [g] fees of any escrow agent; and [h] all amounts,
costs, expenses, charges, Additional Rent and other items payable by Tenant to
Landlord including but not limited to enforcement costs as set forth in Section
8.7.
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13.3 Fair Market Value. The fair market value (the "Fair Market Value")
of the Leased Property shall be determined as follows.
13.3.1 The parties shall attempt to determine the Fair Market Value by
mutual agreement within 15 days after giving the Purchase Notice. However, if
the parties do not agree on the Fair Market Value within such 15 day period, the
following provisions shall apply.
13.3.2 Landlord and Tenant shall each give the other party notice of
the name of a qualified MIA or SRA appraiser 15 days after giving of the
Purchase Notice. The two appraisers will then select a third appraiser within an
additional five days. Each appraiser must demonstrate to the reasonable
satisfaction of both Landlord and Tenant that it has significant experience in
appraising assisted living and other health care properties substantially
similar to the Leased Property. Within five days after designation, each
appraiser shall submit a resume to Landlord and Tenant setting forth such
appraiser's qualifications including education and experience with similar
properties. A notice of objections to the qualifications of any appraiser shall
be given within 10 days after receipt of such resume. If a party fails to timely
object to the qualifications of an appraiser, then the appraiser shall be
conclusively deemed satisfactory. If a party gives a timely notice of objection
to the qualifications of an appraiser, then the disqualified appraiser shall be
replaced by an appraiser selected by the qualified appraisers or, if all
appraisers are disqualified, then by an appraiser selected by a commercial
arbitrator acceptable to Landlord and Tenant.
13.3.3 The Fair Market Value shall be determined by the appraisers
within 60 days after the appointment of the appraisers as follows. Each of the
appraisers shall be instructed to prepare an appraisal of the Leased Property in
accordance with the following instructions:
The Leased Property is to be valued upon the three conventional
approaches to estimate value known as the Income, Sales Comparison and
Cost Approaches. Once the approaches are completed, the appraiser
correlates the individual approaches into a final value conclusion.
The three approaches to estimate value are summarized as follows:
INCOME APPROACH: This valuation approach recognizes that the value of
the operating tangible and intangible asset can be represented by the
expected economic viability of the business giving returns on and of
the assets and shall use a management fee of 7%.
SALES COMPARISON APPROACH: This valuation approach is based upon the
principle of substitution. When a facility is replaceable in the
market, the market approach assumes that value tends to be set at the
price of acquiring an equally desirable substitute facility. Since
healthcare market conditions change and frequently are
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subject to regulatory and financing environments, adjustments need to
be considered. These adjustments also consider the operating
differences such as services and demographics.
COST APPROACH: This valuation approach estimates the value of the
tangible assets only. Value is represented by the market value of the
land plus the depreciated reproduction cost of all improvements and
equipment.
In general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangibles and intangible assets,
consider the operating characteristics of the business and have the most
significant influence on attracting potential investors.
The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the Fair
Market Value.
13.3.4 In the event of any condemnation, similar taking or threat
thereof with respect to any part of the Leased Property or any insured or
partially insured casualty loss to any part of the Leased Property after Tenant
has exercised an Option to Purchase, but before settlement, the Fair Market
Value of the Leased Property shall be redetermined as provided in this Section
13.3 to give effect to such condemnation, taking or loss.
13.3.5 Tenant shall pay, or reimburse Landlord for, all costs and
expenses in connection with the appraisals.
13.4 Closing. The purchase of the Leased Property by Tenant shall close
on a date agreed to by Landlord and Tenant which shall be not less than 60 days
after Landlord's receipt of the Purchase Notice and not more than 60 days after
the Fair Market Value of the Leased Property has been determined. At the
closing, Tenant shall pay the Option Price and all closing costs in immediately
available funds and Landlord shall convey title to the Leased Property to Tenant
or to Tenant's assignee by a recordable limited warranty deed subject only to
Permitted Exceptions and encumbrances approved in writing by Tenant and limited
warranty bill of sale. The warranties provided for in such documents shall not
be limited by any limitations upon Landlord's liability as provided in this
Lease. Landlord shall also execute those affidavits reasonably required by the
title company for the issuance of an owner's policy of title insurance.
13.5 Failure to Close Option. If Tenant for any reason fails to
purchase the Leased Property after Tenant has given the Purchase Notice, then
Tenant shall pay Landlord all costs and expenses incurred by Landlord as a
result of the failure to close including costs of unwinding swap transactions or
other interest rate protection devices and preparing for the closing. Tenant
shall continue to be obligated as lessee hereunder for the remainder of the Term
(including the Extended Term as set forth in Section 12.3).
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13.6 Failure to Exercise Option to Purchase and Renewal
Option. If Tenant for any reason does not exercise its Option to Purchase or
Renewal Option in accordance with the terms and conditions of this Lease before
the expiration of the then current Term, Tenant shall be deemed to have
forfeited its equity contribution and all proprietary and ownership interest in
the Leased Property.
ARTICLE 14: NEGATIVE COVENANTS
Until Tenant's Obligations shall have been performed in full, Tenant
covenants and agrees that Tenant shall not do any of the following without the
prior written consent of Landlord which consent shall not be unreasonably
withheld:
14.1 No Debt. Tenant shall not create, incur, assume, or permit to
exist any indebtedness related to the Facility other than [i] trade debt
incurred in the ordinary course of Tenant's business; [ii] indebtedness for
Facility working capital purposes in an amount not to exceed $150,000.00; [iii]
indebtedness that is secured by any Permitted Lien; and [iv] unsecured
indebtedness that will not cause Tenant to be in violation of Section 15.7.
14.2 No Liens. Tenant shall not create, incur, or permit to exist any
lien, charge, encumbrance, easement or restriction upon the Leased Property or
any lien upon or pledge of any interest in Tenant related to the Facility,
except for Permitted Liens.
14.3 No Guaranties. Tenant shall not create, incur, assume, or permit
to exist any guarantee of any loan or other indebtedness except for the
endorsement of negotiable instruments for collection in the ordinary course of
business or guaranties that will not cause Tenant to be in violation of Section
15.7.
14.4 No Transfer. Tenant shall not sell, lease, sublease, mortgage,
convey, assign or otherwise transfer any legal or equitable interest in the
Leased Property or any part thereof, except for transfers made in connection
with any Permitted Lien and transfers to an Affiliate.
14.5 No Dissolution. Tenant shall not dissolve, liquidate, merge,
consolidate or terminate its existence or sell, assign, lease, or otherwise
transfer (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) except
for mergers, consolidations or other structural changes in Tenant that will not
cause Tenant to be in violation of Section 15.7.
14.6 [INTENTIONALLY OMITTED]
14.7 No Investments. Tenant shall not purchase or otherwise acquire,
hold, or invest in securities (whether capital stock or instruments evidencing
indebtedness) of or make loans or advances to any person, including, without
limitation, any Affiliate, or any shareholder, member or partner of Tenant, or
any Affiliate, except for cash balances temporarily invested in short-term or
money market securities and except for purchases, acquisitions, advances,
investments or loans that will not cause Tenant to be in violation of Section
15.7.
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14.8 Contracts. Tenant shall not execute or modify any material
contracts or agreements with respect to the Facility except for contracts and
modifications approved by Landlord. Contracts made in the ordinary course of
business and in an amount less than $150,000.00 shall not be considered
"material" for purposes of this paragraph.
14.9 Subordination of Payments to Affiliates. After the occurrence of
an Event of Default and until such Event of Default is cured, Tenant shall not
make any payments or distributions (including, without limitation, salary,
bonuses, fees, principal, interest, dividends, liquidating distributions,
management fees, cash flow distributions or lease payments) to any Affiliate, or
any shareholder, member or partner of Tenant or any Affiliate, except for
ordinary payroll.
14.10 Change of Location or Name. Tenant shall not change any of the
following without giving Landlord at least 60 days' advance written notice: [i]
the location of the principal place of business or chief executive office of
Tenant, or any office where any of Tenant's books and records are maintained; or
[ii] the name under which Tenant conducts any of its business or operations.
ARTICLE 15: AFFIRMATIVE COVENANTS
15.1 Perform Obligations. Tenant shall perform all of its obligations
under this Lease, the Government Authorizations, the Permitted Exceptions, and
all Legal Requirements. Tenant shall take all necessary action to obtain all
Government Authorizations required for the operation of the Facility as soon as
possible after the Effective Date.
15.2 Proceedings to Enjoin or Prevent Construction. If any proceedings
are filed seeking to enjoin or otherwise prevent or declare invalid or unlawful
Tenant's construction, occupancy, maintenance, or operation of the Facility or
any portion thereof, Tenant will cause such proceedings to be vigorously
contested in good faith, and in the event of an adverse ruling or decision,
prosecute all allowable appeals therefrom, and will, without limiting the
generality of the foregoing, resist the entry or seek the stay of any temporary
or permanent injunction that may be entered, and use its best efforts to bring
about a favorable and speedy disposition of all such proceedings and any other
proceedings.
15.3 Documents and Information.
15.3.1 Furnish Documents. Tenant shall periodically during the term of
the Lease deliver to Landlord the Annual Financial Statements, Periodic
Financial Statements and other documents described on Exhibit C within the
specified time periods. With each delivery of Annual Financial Statements and
Periodic Financial Statements to Landlord, Tenant shall also deliver to Landlord
a certificate signed by the Chief Financial Officer of Tenant, an Annual
Facility Financial Report or Quarterly Facility Financial Report, as applicable,
and a Quarterly Facility Accounts Receivable Aging Report all in the form of
Exhibit D. In addition, Tenant shall deliver to Landlord the Annual Facility
Financial Report and a Quarterly Facility Accounts
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Receivable Aging Report (based upon internal financial statements) within 90
days after the end of each fiscal year.
15.3.2 Furnish Information. Tenant shall [i] promptly supply Landlord
with such information concerning its financial condition, affairs and property,
as Landlord may reasonably request from time to time hereafter; [ii] promptly
notify Landlord in writing of any condition or event that constitutes a breach
or event of default of any term, condition, warranty, representation, or
provisions of this Agreement or any other agreement, and of any material adverse
change in its financial condition; [iii] maintain a standard and modern system
of accounting; [iv] permit Landlord or any of its agent or representatives to
have access to and to examine all of its books and records regarding the
financial condition of the Facility at any time or times hereafter during
business hours and after reasonable oral or written notice; and [v] permit
Landlord to copy and make abstracts from any and all of said books and records.
15.3.3 Further Assurances and Information. Tenant shall, on request of
Landlord from time to time, execute, deliver, and furnish documents as may be
necessary to fully consummate the transactions contemplated under this
Agreement. Within 15 days after a request from Landlord, Tenant shall provide to
Landlord such additional information regarding Tenant, Tenant's financial
condition or any Facility as Landlord, or any existing or proposed creditor of
Landlord, or any auditor or underwriter of Landlord, may reasonably require from
time to time, including, without limitation, a current Tenant's Certificate and
Facility Financial Report in the form of Exhibit D.
15.3.4 Material Communications. Tenant shall transmit to Landlord,
within five business days after receipt thereof, any material communication
affecting the Facility, this Lease, the Legal Requirements or the Government
Authorizations, and Tenant will promptly respond to Landlord's inquiry with
respect to such information. Tenant shall promptly notify Landlord in writing
after Tenant has knowledge of any potential, threatened or existing litigation
or proceeding against, or investigation of, Tenant or the Facility that may
affect the right to operate the Facility or Landlord's title to the Facility or
Tenant's interest therein. Without otherwise limiting the term "material" as
used in the preceding sentence, any litigation or proceeding involving a claim
of $50,000 or more or involving a threatened or alleged violation of an
Environmental Law shall be deemed to be material.
15.3.5 Requirements for Financial Statements. Tenant shall meet the
following requirements in connection with the preparation of the financial
statements: [i] all audited financial statements shall be prepared in accordance
with general accepted accounting principles consistently applied; [ii] all
unaudited financial statements shall be prepared in a manner substantially
consistent with prior audited and unaudited financial statements submitted to
Landlord; [iii] all financial statements shall fairly present the financial
condition and performance for the relevant period in all material respects; [iv]
the financial statements shall include all notes to the financial statements and
a complete schedule of contingent liabilities and transactions with Affiliates;
and [v] the audited financial statements shall contain an unqualified opinion,
except to the extent such opinion references a change in treatment made in
accordance with generally accepted accounting principles.
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15.3.6 Confidentiality. Landlord shall use reasonable efforts not to
disclose the information provided by Tenant under this Section 15.3; provided,
however, that Landlord may disclose such information to any person or entity to
whom Landlord is required to make such disclosure; to governmental authorities;
and to any other person or entity having a legitimate business interest in the
Landlord, including, but not limited to, regulators, auditors, accountants,
attorneys, investors, underwriters, rating agencies, bond or surety companies,
and lenders of Landlord (including, but not limited to, collateral pool lenders
and line of credit lenders).
15.4 Compliance With Laws. Tenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and effect.
Tenant shall pay when due all taxes and governmental charges of every kind and
nature that are assessed or imposed upon Tenant at any time during the term of
the Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to Tenant's business and operations. Tenant shall be
solely responsible for compliance with all Legal Requirements, including the
ADA, and Landlord shall have no responsibility for such compliance.
15.5 Broker's Commission. Tenant and Landlord shall indemnify each
other from claims of brokers arising by the execution hereof or the consummation
of the transactions contemplated hereby and from expenses incurred by Landlord
or Tenant in connection with any such claims (including attorneys' fees).
15.6 Existence and Change in Control. Tenant or any entity into which
Tenant is merged shall maintain its existence throughout the term of this
Agreement.
15.7 Financial Covenants. The defined terms used in this section are
defined in Section 15.7.1. The following financial covenants shall be met
throughout the term of this Lease:
15.7.1 Definitions.
(a) "Cash Flow" means the net income of Tenant as reflected on
the income statement of Tenant plus [i] the amount of the provision for
depreciation and amortization; [ii] the amount of the provision for management
fees; plus [iii] the amount of the provision for income taxes; plus [iv] the
amount of the provision for Rent payments and interest and lease payments, if
any; minus [v] an imputed management fee equal to 8% of revenues (net of
contractual allowances); and minus [vi] an imputed replacement reserve of
$300.00 per unit at the Facility, per year.
(b) "Coverage Ratio" is the ratio of [i] Cash Flow for each
applicable period; [ii] to the Rent payments due pursuant to this Lease and all
other debt service of Tenant and lease payments relating to the Leased Property
for the applicable period.
(c) "Net Worth" means an amount equal to the total consolidated
fair market value of the tangible assets of the entity (excluding good will and
other intangible assets) minus the total consolidated liabilities of such
entity.
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15.7.2 Coverage Ratio. Tenant shall maintain a Coverage Ratio of not
less than 1.25 to 1.0 [i] during at least one month of the 8 month period
following the Commencement Date and [ii] for each fiscal year during the second
full year that the Facility is operational and for each year thereafter;
provided, however, that after two or more of Tenant's and Sterling's assisted
living facilities financed by Landlord are in their second full year of
operation, the Coverage Ratio for any one or more facilities may be as low as
1.15 to 1.0 if the collective Coverage Ratio for all such facilities (that are
in operation at least one year) is at least 1.25 to 1.0.
15.7.3 Shareholders' Equity. Tenant and its consolidated subsidiaries
shall maintain combined shareholders' equity and subordinated debt of at least
$10,000,000.00.
15.7.3 Current Ratio. Tenant and its consolidated subsidiaries shall
maintain for each fiscal quarter a ratio of current assets to current
liabilities of not less than 1.25 to 1.00 for the second full year that the
Facility is operational and for each year thereafter.
15.7.4 Minimum Cash Requirement. Tenant shall maintain cash and cash
equivalents of at least $500,000.00.
15.7.6 Working Capital. Tenant shall maintain available working capital
for the Facility in the amount not less than $100,000.00. The available working
capital may be included as part of the cash requirement under Section 15.7.5.
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS
16.1 Prohibition on Alterations and Improvements. Except for Permitted
Alterations (as hereinafter defined), Tenant shall not make any structural or
nonstructural changes, alterations, additions and/or improvements (hereinafter
collectively referred to as "Alterations") to the Leased Property.
16.2 Approval of Alterations. If Tenant desires to perform any
Permitted Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Provided Tenant
has given Landlord written notice at the time of delivery of the Plans and
Specifications of the effect of Landlord's failure to respond, Landlord's
failure to respond within 60 days of receipt of Plans and Specifications shall
be deemed to constitute Landlord's approval. Within 30 days after receipt of an
invoice, Tenant shall reimburse Landlord for all costs and expenses incurred by
Landlord in reviewing and, if required, approving or disapproving the Plans and
Specifications, inspecting the Leased Property, and otherwise monitoring
compliance with the terms of this Article 16. Tenant shall comply with the
requirements of Section 16.4 in making any Permitted Alterations.
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16.3 Permitted Alterations. Permitted Alterations means any one of the
following: [i] Alterations approved by Landlord; [ii] Alterations required under
Section 7.2; [iii] Alterations having a total cost of less than $100,000; or
[iv] repairs, rebuilding and restoration required or undertaken pursuant to
Section 9.4.
16.4 Requirements for Permitted Alterations. Tenant shall comply with
all of the following requirements in connection with any Permitted Alterations:
(a) The Permitted Alterations shall be made in accordance with the
approved Plans and Specifications.
(b) The Permitted Alterations and the installation thereof shall
comply with all applicable legal requirements and insurance requirements.
(c) The Permitted Alterations shall be done in a good and
workmanlike manner, shall not impair the value or the structural integrity of
the Leased Property, and shall be free and clear of all mechanic's liens.
(d) Tenant shall, at Tenant's expense, obtain a builder's
completed value risk policy of insurance insuring against all risks of physical
loss, including collapse and transit coverage, in a nonreporting form, covering
the total value of the work performed, and equipment, supplies, and materials,
and insuring initial occupancy. Landlord and any mortgagee of Landlord shall be
additional insureds of such policy. Landlord shall have the right to approve the
form and substance of such policy.
(e) Tenant shall pay the premiums required to increase the amount
of the insurance coverages required by Article 4 to reflect the increased value
of the Improvements resulting from installation of the Permitted Alterations,
and shall deliver to Landlord a certificate evidencing the increase in coverage.
(f) Tenant shall, not later than 60 days after completion of the
Permitted Alterations, deliver to Landlord a revised "as-built" survey of the
Leased Property if the Permitted Alterations altered the Land or "footprint" of
the Improvements and an "as-built" set of Plans and Specifications for the
Permitted Alterations in form and substance satisfactory to Landlord.
(g) Tenant shall, not later than 30 days after Landlord sends an
invoice, reimburse Landlord for any reasonable costs and expenses, including
attorneys' fees and architects' and engineers' fees, incurred in connection with
reviewing and approving the Permitted Alterations and ensuring Tenant's
compliance with the requirements of this section. The fee for Landlord's
consulting engineer is $500.00 per day plus out-of-pocket expenses for travel,
lodging, food and transportation.
16.5 Ownership and Removal of Permitted Alterations. The Permitted
Alterations shall become a part of the Leased Property, owned by Landlord, and
leased to Tenant
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subject to the terms and conditions of this Lease. Tenant shall not be required
or permitted to remove any Permitted Alterations.
16.6 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the termination or expiration of this
Lease, Tenant shall, within 30 days after notice from Landlord, remove the signs
and restore the Leased Property to its original condition.
ARTICLE 17: [RESERVED]
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY
18.1 Prohibition on Assignment and Subletting. Tenant acknowledges that
Landlord has entered into this Lease in reliance on the personal services and
business expertise of Tenant. Tenant may not assign, mortgage, hypothecate,
pledge, or transfer any interest in this Lease, or in the Leased Property, in
whole or in part, without the prior written consent of Landlord, which Landlord
may withhold in its sole and absolute discretion. The following transactions
will be deemed an assignment or sublease requiring Landlord's prior written
consent: [i] an assignment by operation of law (other than as a result of
mergers, consolidation or other structured changes in Tenant that will not cause
Tenant to be in violation of Section 15.7; [ii] an imposition (whether or not
consensual) of a lien, mortgage, or encumbrance upon Tenant's interest in the
Lease; and [iii] an arrangement (including but not limited to, management
agreements, concessions, licenses, and easements) which allows the use or
occupancy of all or part of the Leased Property by anyone other than Tenant or
any other permitted manager. Landlord's consent to any assignment or sublease
will not release Tenant (or any guarantor) from its payment and performance
obligations under this Lease, but rather Tenant, any guarantor, and Tenant's
assignee or sublessee will be jointly and severally liable for such payment and
performance. An assignment or sublease without the prior written consent of
Landlord will be void at the Landlord's option. Landlord's consent to one
assignment or sublease will not waive the requirement of its consent to any
subsequent assignment or sublease. Subject to the foregoing and Section 18.2,
Landlord shall consent to a sublease of the Facility or a management agreement,
provided the sublessee or manager is an Affiliate and the execution of the
sublease or management agreement does not result in a lapse in licensure.
18.2 Requests for Landlord's Consent to Assignment, Sublease or
Management Agreement. If Tenant requests Landlord's consent to a specific
assignment, sublease, or management agreement, Tenant shall give Landlord [i]
the name and address of the proposed assignee, subtenant or manager; [ii] a copy
of the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and [iv] banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that [a] such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord; [b] such assignment,
sublease or
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management agreement may not be modified without the prior written consent of
Landlord not to be unreasonably withheld or delayed; [c] if this Lease shall
terminate before the expiration of such assignment, sublease or management
agreement, the assignee, subtenant or manager thereunder will, at Landlord's
option, attorn to Landlord and waive any right the assignee, subtenant or
manager may have to terminate the assignment, sublease or management agreement
or surrender possession thereunder as a result of the termination of this Lease;
and [d] if the assignee, subtenant or manager receives a written notice from
Landlord stating that Tenant is in default under this Lease, the assignee,
subtenant or manager shall thereafter pay all rentals or payments under the
assignment, sublease or management agreement directly to Landlord until such
default has been cured. Tenant hereby collaterally assigns to Landlord, as
security for the performance of its obligations hereunder, all of Tenant's
right, title, and interest in and to any assignment, sublease or management
agreement now or hereafter existing for all or part of the Leased Property.
Tenant shall, at the request of Landlord, execute such other instruments or
documents as Landlord may request to evidence this collateral assignment. If
Landlord, in its sole and absolute discretion, consents to such assignment,
sublease, or management agreement, such consent shall not be effective until [i]
a fully executed copy of the instrument of assignment, sublease or management
agreement has been delivered to Landlord; [ii] in the case of an assignment,
Landlord has received a written instrument in which the assignee has assumed and
agreed to perform all of Tenant's obligations under the Lease; and [iii] Tenant
has paid to Landlord a fee in the amount of $1,500.00; and [iv] Landlord has
received reimbursement from Tenant or the assignee for all reasonable attorneys'
fees and expenses and all other reasonable out-of-pocket expenses incurred in
connection with determining whether to give its consent, giving its consent and
all matters relating to the assignment.
18.3 Agreements with Residents. Notwithstanding Section 18.1, Tenant
may enter into an occupancy agreement with residents of the Leased Property
without the prior written consent of Landlord provided that [i] the agreement
does not provide for lifecare services (a single payment to provide services for
the remainder of occupants life); [ii] Tenant may not collect rent for more than
one month in advance except that Tenant may collect security deposits in an
amount that does not exceed two months rent; and [iii] all residents of the
Leased Property are accurately shown in Tenant's accounting records.
18.4 Sale of Leased Property. If Landlord or any subsequent owner of
the Leased Property sells the Leased Property, its liability for the performance
of its agreements in this Lease will end on the date of the sale of the Leased
Property, and Tenant will look solely to the purchaser for the performance of
those agreements. Landlord shall remain liable to Tenant for any breach of this
Lease by Landlord that occurs during the period of Landlord's ownership of the
Leased Property. For purposes of this section, any holder of a mortgage or
security agreement which affects the Leased Property at any time, and any
landlord under any lease to which this Lease is subordinate at any time, will be
a subsequent owner of the Leased Property when it succeeds to the interest of
Landlord or any subsequent owner of the Leased Property.
18.5 Assignment by Landlord. Landlord may transfer, assign, mortgage,
collaterally assign, or otherwise dispose of Landlord's interest in this Lease
or the Leased Property.
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ARTICLE 19: HOLDOVER AND SURRENDER
19.1 Holding Over. Should Tenant, with or without the express or
implied consent of Landlord, continue to hold and occupy the Leased Property
after the expiration of the Term, such holding over beyond the Term and the
acceptance or collection of Rent by the Landlord shall operate and be construed
as creating a tenancy from month-to-month and not for any other term whatsoever.
Said month-to-month tenancy may be terminated by Landlord by giving Tenant 10
days written notice, and at any time thereafter Landlord may re-enter and take
possession of the Leased Property.
19.2 Surrender. Except for [i] Permitted Alterations; [ii] normal and
reasonable wear and tear (subject to the obligation of Tenant to maintain the
Leased Property in good order and repair during the Term); and [iii] damage and
destruction not required to be repaired by Tenant, Tenant shall surrender and
deliver up the Leased Property at the expiration or termination of the Term in
as good order and condition as of the Commencement Date.
ARTICLE 20: RESERVED
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND
ESTOPPEL CERTIFICATES
21.1 Quiet Enjoyment. So long as Tenant performs all of its obligations
under this Lease, Tenant's possession of the Leased Property will not be
disturbed by Landlord.
21.2 Subordination. Subject to the terms and conditions of this
section, this Lease and Tenant's rights under this Lease are subordinate to any
ground lease or underlying lease, first mortgage, first deed of trust, or other
first lien against the Leased Property, together with any renewal,
consolidation, extension, modification or replacement thereof, which now or at
any subsequent time affects the Leased Property or any interest of Landlord in
the Leased Property, except to the extent that any such instrument expressly
provides that this Lease is superior. The foregoing subordination provision is
expressly conditioned upon any lessor or mortgagee being obligated and bound to
recognize Tenant as the tenant under this Lease, and such lessor or mortgagee
shall have no right to disturb Tenant's possession, use and occupancy of the
Leased Property or Tenant's enjoyment of its rights under this Lease unless and
until an Event of Default occurs hereunder. Any foreclosure action or proceeding
by any mortgagee with respect to the Leased Property shall not affect Tenant's
rights under this Lease and shall not terminate this Lease unless and until an
Event of Default occurs hereunder. The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them. However, Tenant shall execute, acknowledge and deliver to Landlord, at any
time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this section, to confirm or effect any such
subordination, provided that any such document shall include a non-disturbance
provision as set forth in this section satisfactory to Tenant. Any mortgagee of
the Leased Property shall be deemed to be bound by the non-disturbance provision
set forth in this section. If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord may
execute acknowledge and deliver any such
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document on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby
constitutes and irrevocably appoints Landlord, its successors and assigns, as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on behalf of
Tenant any documents described in this section. This power of attorney is
coupled with an interest and is irrevocable.
21.3 Attornment. If any holder of any mortgage, indenture, deed of
trust, or other similar instrument described in Section 21.2 succeeds to
Landlord's interest in the Leased Property, Tenant will pay to such holder all
Rent subsequently payable under this Lease. Tenant shall, upon request of anyone
succeeding to the interest of Landlord, automatically become the tenant of, and
attorn to, such successor in interest without changing this Lease. The successor
in interest will not be bound by [i] any payment of Rent for more than one month
in advance; [ii] any amendment or modification of this Lease thereafter made
without its consent as provided in this Lease provided Tenant has knowledge that
Landlord's interest has been transferred and that such successor in interests
consent is required; [iii] any claim against Landlord arising prior to the date
on which the successor succeeded to Landlord's interest; or [iv] any claim or
offset of Rent against the Landlord. Upon request by Landlord or such successor
in interest and without cost to Landlord or such successor in interest, Tenant
will execute, acknowledge and deliver an instrument or instruments confirming
the attornment. If Tenant fails or refuses to execute, acknowledge, and deliver
any such instrument within 20 days after written demand, then Landlord or such
successor in interest will be entitled to execute, acknowledge, and deliver any
document on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby
constitutes and irrevocably appoints Landlord, its successors and assigns, as
Tenant's attorney-in-fact to execute, acknowledge, and deliver on behalf of
Tenant any such document. This power of attorney is coupled with an interest and
is irrevocable.
21.4 Estoppel Certificates. At the request of Landlord or any mortgagee
or purchaser of the Leased Property, Tenant shall execute, acknowledge, and
deliver an estoppel certificate, in recordable form, in favor of Landlord or any
mortgagee or purchaser of the Leased Property certifying the following: [i] that
the Lease is unmodified and in full force and effect, or if there have been
modifications that the same is in full force and effect as modified and stating
the modifications; [ii] the date to which Rent and other charges have been paid;
[iii] whether Tenant or Landlord is in default or whether there is any fact or
condition which, with notice or lapse of time, or both, would constitute a
default, and specifying any existing default, if any; [iv] that Tenant has
accepted and occupies the Leased Property; [v] that Tenant has no defenses,
set-offs, deductions, credits, or counterclaims against Landlord, if that be the
case, or specifying such that exist; and [vi] such other information as may
reasonably be requested by Landlord or any mortgagee or purchaser. Any purchaser
or mortgagee may rely on this estoppel certificate. If Tenant fails to deliver
the estoppel certificates to Landlord within 10 days after the request of the
Landlord, then Tenant shall be deemed to have certified that [a] the Lease is in
full force and effect and has not been modified, or that the Lease has been
modified as set forth in the certificate delivered to Tenant; [b] Tenant has not
prepaid any Rent or other charges except for the current month; [c] Tenant has
accepted and occupies the Leased Property; [d] to Tenant's knowledge, neither
Tenant nor Landlord is in default nor is there any fact or condition which, with
notice or lapse of time, or both, would constitute a default; and [e] to
Tenant's knowledge, Tenant has no defenses, set-offs, deductions, credits, or
counterclaims against Landlord. Tenant hereby irrevocably appoints Landlord as
Tenant's attorney-in-fact to execute, acknowledge, and
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deliver on Tenant's behalf any estoppel certificate to which Tenant does not
object within the time period specified in Landlord's transmittal of the
certificate to Tenant. This power of attorney is coupled with an interest and is
irrevocable.
ARTICLE 22: REPRESENTATIONS AND WARRANTIES
Tenant hereby makes the following representations and warranties, as of
the Effective Date, to Landlord and acknowledges that Landlord is granting the
Lease in reliance upon such representations and warranties. Tenant's
representations and warranties shall survive the Closing and, except to the
extent made as of a specific date, shall continue in full force and effect until
Tenant's Obligations have been performed in full.
22.1 Organization and Good Standing. Tenant is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified to do business in and is in good standing under the
laws of the State.
22.2 Power and Authority. Tenant has the power and authority to
execute, deliver and perform this Lease. Tenant has taken all requisite action
necessary to authorize the execution, delivery and performance of Tenant's
obligations under this Lease.
22.3 Enforceability. This Lease constitutes a legal, valid, and binding
obligation of Tenant enforceable in accordance with its terms.
22.4 Government Authorizations. The Land and Plans and Specifications
conform with all Legal Requirements for the construction and development of the
Facility. Upon completion of the Facility, in accordance with the Plans and
Specifications, the Facility will conform to all Legal Requirements. Except as
otherwise noted on Exhibit E, Tenant holds all Government Authorizations
required to commence construction of the Facility.
22.5 Financial Statements. Tenant has furnished Landlord with true,
correct, and complete copies of the Financial Statements. The Financial
Statements fairly present the financial position of Tenant, as of the respective
dates and the results of operations for the periods then ended in conformance
with generally accepted accounting principles applied on a basis consistent with
prior periods. The Financial Statements and other information furnished to
Landlord are true, complete and correct and, as of the Effective Date, no
material adverse change has occurred since the furnishing of such statements and
information. As of the Effective Date, the Financial Statements and other
information do not contain any untrue statement or omission of a material fact
and are not misleading in any material respect. Tenant is solvent, and no
bankruptcy, insolvency, or similar proceeding is pending or contemplated by or,
to the knowledge of Tenant, against Tenant.
22.6 No Litigation. As of the Effective Date [i] there are no actions
or suits, or any proceedings or investigations by any governmental agency or
regulatory body pending against Tenant or the Facility which, if determined
adversely to Tenant, would materially and adversely affect the Facility, title
thereto, operation thereof or the financial condition of Tenant and Tenant has
not received notice of any threatened actions, suits, proceedings or
investigations
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against Tenant or the Facility at law or in equity, or before any governmental
board, agency or authority, which, if determined adversely to Tenant, would
materially and adversely affect the Facility or title to the Facility (or any
part thereof), the right to operate the Facility as presently operated, or the
financial condition of Tenant; [ii] there are no unsatisfied or outstanding
material or adverse judgments against Tenant or the Facility; [iii] there is no
labor dispute materially and adversely affecting the operation or business
conducted by Tenant at the Facility; and [iv] Tenant has not been notified in
writing of any facts or circumstances which might reasonably form the basis for
any such action, suit, or proceeding.
22.7 Consents. The execution, delivery and performance of this Lease
will not require any consent, approval, authorization, order, or declaration of,
or any filing or registration with, any court, any federal, state, or local
governmental or regulatory authority, or any other person or entity, the absence
of which would materially impair the ability of Tenant to operate the Facility
as presently operated.
22.8 No Violation. The execution, delivery and performance of this
Lease [i] do not and will not conflict with, and do not and will not result in a
breach of the Articles of Incorporation or Bylaws of Tenant; [ii] do not and
will not conflict with, and do not and will not result in a breach of, and do
not and will not constitute a default under (or an event which, with or without
notice or lapse of time, or both, would constitute a default under), any of the
terms, conditions or provisions of any agreement or other instrument or
obligation to which Tenant is a party or by which its assets are bound; and
[iii] do not and will not violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Tenant or the Facility.
22.9 Reports and Statements. All reports, statements, certificates and
other data furnished by or on behalf of Tenant to Landlord in connection with
this Lease, and all representations and warranties made herein or in any
certificate or other instrument delivered in connection herewith and therewith,
are true and correct in all material respects and do not omit to state any
material fact or circumstance necessary to make the statements contained herein
or therein, in light of the circumstances under which they are made, not
misleading as of the date of such report, statement, certificate or other data.
The copies of all agreements and instruments submitted to Landlord, including,
without limitation, all agreements relating to management of the Facility, the
Letter of Credit, and Tenant's working capital are true, correct and complete
copies and include all amendments and modifications of such agreements.
22.10 ERISA. All plans (as defined in Section 4021(a) of the Employee
Retirement Income Security Act of 1974, as amended or supplemented from time to
time ("ERISA")) for which Tenant is an "employer" or a "substantial employer"
(as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively) are in
compliance with ERISA and the regulations and published interpretations
thereunder. To the extent Tenant maintains a qualified defined benefit pension
plan: [i] there exists no accumulated funding deficiency; [ii] no reportable
event and no prohibited transaction has occurred; [iii] no lien has been filed
or threatened to be filed by the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA; and [iv] Tenant has not
been deemed to be a substantial employer.
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22.11 Chief Executive Office. Tenant maintains its chief executive
office and its books and records at the address set forth in the introductory
paragraph of this agreement.
22.12 Other Name or Entities. Tenant has not, since November 1, 1997,
[i] changed its name, [ii] used any name other than the name stated at the
beginning of this agreement, or other than names under which Tenant's facilities
do business, such as the name of the Facility, or [iii] merged or consolidated
with, or acquired any of the assets of, any corporation or other business, other
than acquisitions of operating facilities.
22.13 Parties in Possession. Except as disclosed on Exhibit B, there
are no parties in possession of any Leased Property or any portion thereof as
managers, lessees, tenants at sufferance, or trespassers.
22.14 Access. Access to the Land is directly from a dedicated public
right-of-way without any easement. To the knowledge of Tenant, there is no fact
or condition which would result in the termination or reduction of the current
access to and from the Land to such right-of-way.
22.15 Utilities. There are available at the Land gas, municipal water,
and sanitary sewer lines, storm sewers, electrical and telephone services in
operating condition which are adequate for the operation of the Facility at a
reasonable cost. The Land has direct access to utility lines located in a
dedicated public right-of-way without any easement. As of the Effective Date,
there is no pending or, to the knowledge of Tenant, threatened governmental or
third party proceeding which would impair or result in the termination of such
utility availability.
22.16 Condemnation and Assessments. As of the Effective Date, Tenant
has not received notice of, and there are no pending or, to the best of Tenant's
knowledge, threatened, condemnation, assessment or similar proceedings affecting
or relating to the Facility, or any portion thereof, or any utilities, sewers,
roadways or other public improvements serving the Facility.
22.17 Zoning. As of the Effective Date, [i] the use and operation of
the Facility as a 34 units/38 bed assisted living/Alzheimers/dementia facility
is a permitted use under the applicable zoning code; [ii] except as disclosed on
Exhibit E hereto, no special use permits, conditional use permits, variances, or
exceptions have been granted or are needed for such use of each Facility; and
[iii] the Land is not located in any special districts such as historical
districts or overlay districts.
22.18 Pro Forma Statement. Tenant has delivered to Landlord a true,
correct and complete copy of the Pro Forma Statement. The Pro Forma Statement
shows Tenant's reasonable expectation of the most likely results of Facility
operations for the five year period commencing on the anticipated date when the
Facility commences operations.
22.19 Environmental Matters. During the period of Tenant's ownership of
the Leased Property, if any, and to the best of Tenant's knowledge after
diligent inquiry, for the period Tenant did not own the Leased Property, [i] the
Leased Property is in compliance with all
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Environmental Laws; [ii] there were no releases of Hazardous Materials on, from,
or under the Leased Property, except in compliance with all Environmental Laws;
[iii] no Hazardous Materials have been, are or will be used, generated, stored,
or disposed of on the Leased Property, except in compliance with all
Environmental Laws; [iv] no permit is or has been required to be obtained by
Tenant from the Environmental Protection Agency or any similar agency or
department of any state or local government for the use or maintenance of any
Improvements; and [v] no summons, citation or inquiry has been made by any such
environmental unit, body or agency or a third party demanding any right of
recovery for payment or reimbursement for costs incurred under CERCLA or any
other Environmental Laws and the Land is not subject to the lien of any such
agency. "Disposal" and "release" shall have the meaning set forth in CERCLA.
22.20 Leases and Contracts. As of the Effective Date and except as
disclosed on Exhibit F, there are no leases or contracts (including but not
limited to, insurance contracts, maintenance contracts, construction contracts,
employee benefit plans, employment contracts, equipment leases, security
agreements, architect agreements, and management contracts) to which Tenant is a
party relating to any part of the ownership, operation, possession,
construction, management or administration of the Land or the Facility.
22.21 No Default. As of the Effective Date, [i] there is no existing
Event of Default under this Lease; and [ii] no event has occurred which, with
the giving of notice or the passage of time, or both, would constitute or result
in such an Event of Default. Except as disclosed to Landlord in writing, Tenant
and Sterling are not in default, after expiration of any applicable grace
period, under any Related Lease.
22.22 Tax Status. To the best of Tenant's knowledge, all of the
mechanical and electrical systems, heating and air conditioning systems,
plumbing, water and sewer systems, and all other items of mechanical equipment
or appliances are in good working order, condition and repair, or of sufficient
size and capacity to service the Facility as presently operated, and conform
with all applicable ordinances and regulations, and with all building, zoning,
fire, safety, and other codes, laws and orders. The Improvements, including the
roof and foundation, are structurally sound and free from leaks and other
defects.
ARTICLE 23: FUTURE PROJECTS
23.1 Obligation for Future Projects. Subject to the requirements, terms
and conditions of the Commitment and this Lease, Landlord has committed to
finance additional assisted living facilities to be developed by Tenant,
Sterling or an Affiliate ("Tenant Projects"). Landlord's obligation to provide
financing for each Tenant Project is subject to the satisfaction of Landlord's
due diligence requirements and the closing conditions set forth in the
Commitment.
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ARTICLE 24: SECURITY INTEREST
24.1 Collateral. Tenant hereby grants to Landlord a security interest
in the following described property, whether now owned or hereafter acquired by
Tenant (the "Collateral"), to secure the payment and performance of Tenant's
obligations under this Lease:
(a) All machinery, furniture, equipment, trade fixtures,
appliances, inventory and all other goods (as "equipment," "inventory" and
"goods" are defined for purposes of Article 9 ("Article 9") of the Uniform
Commercial Code as adopted in the State) and any leasehold interest of Tenant in
any of the foregoing (except for any leasehold interest in property owned by
Landlord), now or hereafter located in or on or used or usable in connection
with the Land, Improvements, or Fixtures and replacements, additions, and
accessions thereto, including without limitation those items which are to become
fixtures or which are building supplies and materials to be incorporated into an
Improvement or Fixture.
(b) All accounts, contract rights, general intangibles,
instruments, documents, and chattel paper [as "accounts", "contract rights",
"general intangibles", "instruments", "documents", and "chattel paper", are
defined for purposes of Article 9] now or hereafter arising in connection with
the business located in or on or used or usable in connection with the Land,
Improvements, or Fixtures, and replacements, additions, and accessions thereto.
(c) All franchises, permits, licenses, operating rights,
certifications, approvals, consents, authorizations and other general
intangibles regarding the use, occupancy or operation of the Improvements, or
any part thereof, including without limitation, certificates of need, state
health care facility licenses, and Medicare and Medicaid provider agreements, to
the extent permitted by law.
(d) Unless expressly prohibited by the terms thereof, all
contracts, agreements, contract rights and materials relating to the design,
construction or operation of the Improvements, including but not limited to,
plans, specifications, drawings, blueprints, models, mock-ups, brochures,
flyers, advertising and promotional materials and mailing lists.
(e) All ledger sheets, files, records, computer programs, tapes,
other electronic data processing materials, and other documentation relating to
the preceding listed property or otherwise used or usable in connection with the
Land and Improvements.
(f) The products and proceeds of the preceding listed property,
including without limitation cash and non-cash proceeds, proceeds of proceeds,
and insurance proceeds.
24.2 Additional Documents. At the request of Landlord, Tenant shall
execute additional security agreements, financing statements, and such other
documents as may be requested by Landlord to maintain and perfect such security
interest. Tenant hereby irrevocably appoints Landlord, its successors and
assigns, as Tenant's attorney-in-fact to execute,
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acknowledge, deliver and file such documents on behalf of Tenant. This power of
attorney is coupled with an interest and is irrevocable.
24.3 Notice of Sale. With respect to any sale or other disposition of
any of the Collateral after the occurrence of an Event of Default, Landlord and
Tenant agree that the giving of five days notice by Landlord, sent by overnight
delivery, postage prepaid, to Tenant's notice address designating the time and
place of any public sale or the time after which any private sale or other
intended disposition of such Collateral is to be made, shall be deemed to be
reasonable notice thereof and Tenant waives any other notice with respect
thereto.
ARTICLE 25: MISCELLANEOUS
25.1 Notices. Landlord and Tenant hereby agree that all notices,
demands, requests, and consents (hereinafter "notices") required to be given
pursuant to the terms of this Lease shall be in writing, shall be addressed to
the addresses set forth in the introductory paragraph of this Lease, and shall
be served by [i] personal delivery; [ii] United States mail, postage prepaid; or
[iii] nationally recognized overnight courier; provided, however, that any
notice of an Event of Default shall be served by (I) personal delivery; (ii)
certified United States mail, postage prepaid, return receipt requested; or
(iii) nationally recognized overnight courier. A copy of any notice given to
Tenant shall be sent to Miriam J. Dent, Esq., Rogers & Hardin, 229 Peachtree
Street, N.E., 2700 International Tower, Peachtree Center, Atlanta, Georgia
30303, but the failure to give the notice required by this sentence shall not
affect the validity or effectiveness of the notices to Tenant hereunder. All
notices shall be deemed to be given upon the earlier of actual receipt or three
business days after mailing, or one business day after deposit with the
overnight courier. Any notices meeting the requirements of this section shall be
effective, regardless of whether or not actually received. Landlord or Tenant
may change its notice address at any time by giving the other party notice of
such change.
25.2 Advertisement of Leased Property. In the event the parties hereto
have not executed a renewal Lease within 120 days prior to the expiration of
this Lease, then Landlord or its agent shall have the right to enter the Leased
Property at all reasonable times for the purpose of exhibiting the Leased
Property to others and to place upon the Leased Property for and during the
period commencing 120 days prior to the expiration of this Lease, "for sale" or
"for rent" notices or signs.
25.3 Entire Agreement. The Commitment, this Lease and the Construction
Agreement constitute the entire agreement between Landlord and Tenant with
respect to the subject matter hereof. No representations, warranties, and
agreements have been made by Landlord except as set forth in the Commitment and
this Lease. If there is any direct conflict between the terms and provisions of
the Commitment and the terms of this Lease, this Lease shall govern. Tenant
hereby reaffirms the Commitment and all provisions thereof. The Commitment shall
survive the execution of this Lease.
25.4 Severability. If any term or provision of this Lease is held to be
invalid or unenforceable, such holding shall not affect the remainder of this
Lease and the same shall remain in full force and effect, unless such holding
substantially deprives Tenant of the use of
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the Leased Property or Landlord of the rents herein reserved, in which event
this Lease shall forthwith terminate as if by expiration of the Term.
25.5 Captions and Headings. The captions and headings are inserted only
as a matter of convenience and for reference and in no way define, limit or
describe the scope of this Lease or the intent of any provision hereof.
25.6 Governing Law. This Lease shall be construed under the laws of the
State.
25.7 Memorandum of Lease. Tenant shall not record this Lease. Tenant
may, however, record a memorandum of lease approved by Landlord.
25.8 Waiver. No waiver by Landlord of any condition or covenant herein
contained, or of any breach of any such condition or covenant, shall be held or
taken to be a waiver of any subsequent breach of such covenant or condition, or
to permit or excuse its continuance or any future breach thereof or of any
condition or covenant, nor shall the acceptance of Rent by Landlord at any time
when Tenant is in default in the performance or observance of any condition or
covenant herein be construed as a waiver of such default, or of Landlord's right
to terminate this Lease or exercise any other remedy granted herein on account
of such existing default.
25.9 Binding Effect. This Lease will be binding upon and inure to the
benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.
25.10 Power of Attorney. Effective upon [i] the occurrence and during
the continuance of an Event of Default or upon [ii] termination of the Lease
without Tenant exercising its Option to Purchase, Tenant hereby irrevocably and
unconditionally appoints Landlord, or Landlord's authorized officer, agent,
employee or designee, as Tenant's true and lawful attorney-in-fact, to act for
Tenant in Tenant's name, place, and stead, to execute, deliver and file all
applications and any and all other necessary documents or things to effect the
issuance, transfer, reinstatement, renewal and/or extension of any and all
Governmental Authorizations issued to Tenant or applied for by Tenant in
connection with Tenant's operation of the Facility, to permit any transferee to
operate the Facility under the Governmental Authorizations, and to do any and
all other acts incidental to any of the foregoing. Tenant irrevocably and
unconditionally grants to Landlord as its attorney-in-fact full power and
authority to do and perform every act necessary and proper to be done in the
exercise of any of the foregoing powers as fully as Tenant might or could do if
personally present or acting, with full power of substitution, hereby ratifying
and confirming all that said attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and is
irrevocable prior to the full performance of Tenant's Obligations. Except in the
case of an emergency, Landlord shall give Tenant three business days prior
written notice before acting on behalf of Tenant pursuant to this power of
attorney.
25.11 No Offer. Landlord's submission of this Lease to Tenant is not an
offer to lease the Leased Property, or an agreement by Landlord to reserve the
Leased Property for
54
<PAGE> 56
Tenant. Landlord will not be bound to Tenant until Tenant has duly executed and
delivered duplicate original leases to Landlord, and Landlord has duly executed
and delivered one of these duplicate original leases to Tenant.
25.12 Modification. This Lease may only be modified by a writing signed
by both Landlord and Tenant except for the automatic extension of the Term
pursuant to Section 1.2. All references to this Lease, whether in this Lease or
in any other document or instrument, shall be deemed to incorporate all
amendments, modifications and renewals of this Lease, made after the date
hereof. If Tenant requests Landlord's consent to any change in ownership, merger
or consolidation of Tenant, any assumption of the Lease, or any modification of
the Lease, Tenant shall provide Landlord all relevant information and documents
sufficient to enable Landlord to evaluate the request. In connection with any
such request, Tenant shall pay to Landlord a fee in the amount of $1,500.00 and
shall pay all of Landlord's reasonable attorney's fees and expenses and other
reasonable out-of-pocket expenses incurred in connection with Landlord's
evaluation of Tenant's request, the preparation of any documents and amendments,
the subsequent amendment of any documents between Landlord and its collateral
pool lenders (if applicable), and all related matters.
25.13 Landlord's Modification. Tenant acknowledges that Landlord may
mortgage the Leased Property or use the Leased Property as collateral for a
collateralized mortgage obligations or Real Estate Mortgage Investment Companies
(REMICS). If any mortgage lender of Landlord desires any modification of this
Lease, Tenant agrees to consider such modification in good faith and to execute
an amendment of this Lease if Tenant finds such modification acceptable in
Tenant's reasonable discretion provided such modification does not materially
diminish Tenant's rights under the Lease.
25.14 No Merger. The surrender of this Lease by Tenant or the
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant's default will not work a merger,
and will, at Landlord's option, terminate any subleases or operate as an
assignment to Landlord of any subleases. Landlord's option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.
25.15 Laches. No delay or omission by either party hereto to exercise
any right or power accruing upon any noncompliance or default by the other party
with respect to any of the terms hereof shall impair any such right or power or
be construed to be a waiver thereof.
25.16 Limitation on Tenant's Recourse. Tenant's sole recourse against
Landlord, and any successor to the interest of Landlord in the Leased Property,
is to the interest of Landlord, and any such successor, in the Leased Property.
Tenant will not have any right to satisfy any judgment which it may have against
the Landlord, or any such successor, from any other assets of Landlord, or any
such successor. In this section, the terms "Landlord" and "successor" include
the shareholders, venturers, and partners of "Landlord" and "successor" and the
officers, directors, and employees of the same. The provisions of this section
are not intended to limit Tenant's right to seek injunctive relief or specific
performance.
55
<PAGE> 57
25.17 Construction of Lease. This Lease has been prepared by Landlord
and its professional advisors and reviewed by Tenant and its professional
advisors. Landlord, Tenant, and their advisors believe that this Lease is the
product of all their efforts, that it expresses their agreement, and agree that
it shall not be interpreted in favor of either Landlord or Tenant or against
either Landlord or Tenant merely because of their efforts in preparing it.
25.18 Counterparts. This Lease may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
25.19 Custody of Escrow Funds. Any funds paid to Landlord in escrow
hereunder may be held by Landlord or, at Landlord's election, by a financial
institution, the deposits or accounts of which are insured or guaranteed by a
federal or state agency. The funds shall not be deemed to be held in trust, may
be commingled with the general funds of Landlord or such other institution, and
shall not bear interest.
25.20 Landlord's Status as a REIT. Tenant acknowledges that Landlord
has now and may hereafter elect to be taxed as a real estate investment trust
("REIT") under the Internal Revenue Code.
25.21 Exhibits. The following exhibits are attached hereto and
incorporated herein:
Exhibit A: Legal Description
Exhibit B: Permitted Exceptions
Exhibit C: Documents to be Delivered
Exhibit D: Certificate and Facility Financial Report
Exhibit E: Government Authorizations
Exhibit F: List of Leases and Contracts
25.22 Waiver of Jury Trial. Landlord and Tenant waive trial by jury in
any action, proceeding or counterclaim brought by either of them against the
other on all matters arising out of this Lease or the use and occupancy of the
Leased Property (except claims for personal injury or property damage). If
Landlord commences any summary proceeding for nonpayment of Trent, Tenant will
not interpose, and waives the right to interpose, any counterclaim in any such
proceeding.
25.23 Attorney's Fees and Expenses. Tenant shall pay to Landlord all
reasonable costs and expenses incurred by Landlord in administering this Lease
and the security for this Lease, enforcing or preserving Landlord's rights under
this Lease and the security for this Lease, and in all matters of collection,
whether or not an Event of Default has actually occurred or has been declared
and thereafter cured, including but not limited to, [a] reasonable attorney's
and paralegal's fees and disbursements; [b] the fees and expenses of any
litigation, administrative, bankruptcy, insolvency, receivership and any other
similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
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<PAGE> 58
travel, and attendance at meetings, hearings, depositions, and trials; and [e]
consulting and witness fees incurred by Landlord in connection with any
litigation or other proceeding.
25.24 CONSENT TO JURISDICTION. TENANT HEREBY IRREVOCABLY SUBMITS AND
CONSENTS TO THE NON-EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO FOR ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO [I] THE COMMITMENT;
[II] THIS LEASE; OR [III] ANY DOCUMENT EXECUTED BY TENANT IN CONNECTION WITH
THIS LEASE. TENANT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT TENANT MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY SUCH ACTION OR PROCEEDING. TENANT AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
TENANT AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST LANDLORD
OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF LANDLORD, CONCERNING
ANY MATTER ARISING OUT OF OR RELATING TO THE COMMITMENT, THIS LEASE OR ANY
RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL COURT HAVING
JURISDICTION OVER LUCAS COUNTY, OHIO, WAUKESHA COUNTY, WISCONSIN OR OKLAHOMA
COUNTY, OKLAHOMA.
TENANT HEREBY CONSENTS TO SERVICE OF PROCESS BY LANDLORD IN ANY MANNER
AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT OR IMPAIR
LANDLORD'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW, OR
LANDLORD'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT OR THE
PROPERTY OF TENANT IN THE COURTS OF ANY OTHER JURISDICTION.
25.25 Survival. The following provisions shall survive termination of
the Lease: Article 9 (Damage & Destruction), Article 10 (Condemnation); Article
16 (Alterations); and Section 25.26 (Survival).
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
57
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have executed this Lease or
caused the same to be executed by their respective duly authorized officers as
of the date first set forth above.
Signed and acknowledged
in the presence of HEALTH CARE REIT, INC.
Signature By: /s/ Erin C. Ibele
---------------------------- --------------------------------
Print Name
--------------------------- Title: Vice President, Corporate
Secretary
Signature -------------------------
----------------------------
Print Name
---------------------------
ALTERNATIVE LIVING SERVICES, INC.
Signature By: /s/ Mark Ohlendorf
---------------------------- --------------------------------
Print Name
--------------------------- Title: Senior Vice President
Secretary
Signature -------------------------
----------------------------
Print Name Tax I.D. No.: 39-1771281
---------------------------
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
The foregoing instrument was acknowledged before me this ___ day of
December, 1998 by _________________________, the _________________________ of
Health Care REIT, Inc., a Delaware corporation, on behalf of the corporation.
------------------------------------
Notary Public
My Commission Expires:____________ [SEAL]
58
<PAGE> 60
STATE OF WISCONSIN )
) SS:
COUNTY OF WAUKESHA )
The foregoing instrument was acknowledged before me this ___ day of
December, 1998 by _________________________, the _________________________ of
Alternative Living Services, Inc., a Delaware corporation, on behalf of the
corporation.
------------------------------------
Notary Public
My Commission Expires:____________ [SEAL]
THIS INSTRUMENT PREPARED BY:
OKSANA M. LUDD, ESQ.
SHUMAKER, LOOP & KENDRICK, LLP
1000 JACKSON STREET
TOLEDO, OHIO 43624
59
<PAGE> 1
EXHIBIT 10.12
SCHEDULE OF HEALTH CARE REIT LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.11 TO THE COMPANY'S FORM
10-Q FOR THE PERIOD ENDING 6/30/99
<TABLE>
<CAPTION>
LEASING ORIGINAL HEALTH CARE
FACILITY NAME LOCATION COMMITMENT FEE REIT INVESTMENT ANNUAL BASE RENT
- ------------- -------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Alterra Clare Bridge of Oklahoma 12401 Dorset Drive $ 316,981 $ 3,169,813 $ 301,132
City Oklahoma City, OK 73120
</TABLE>
<PAGE> 1
EXHIBIT 10.13
LEASE AGREEMENT
BETWEEN
HCRI TENNESSEE PROPERTIES, INC.
AND
ALTERNATIVE LIVING SERVICES, INC. d/b/a ALTERRA
MARCH ___, 1999
STERLING HOUSE OF COLUMBIA
COLUMBIA, TENNESSEE
<PAGE> 2
LEASE AGREEMENT
(COLUMBIA, TENNESSEE)
This Lease Agreement ("Lease" or "Agreement") is made effective as of
the ___ day of March, 1999 (the "Effective Date") between HCRI TENNESSEE
PROPERTIES, INC., a corporation organized under the laws of the State of
Delaware ("Landlord"), having its principal office located at One SeaGate,
Suite 1500, P.O. Box 1475, Toledo, Ohio 43603, and ALTERNATIVE LIVING SERVICES,
INC. d/b/a ALTERRA, a corporation organized under the laws of the State of
Delaware ("Tenant"), having its chief executive office located at 450 N.
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005.
R E C I T A L S
A. As of the date hereof, Landlord acquired the Leased Property
(defined below) and paid the Acquisition Amount (defined below) towards the
purchase price for the Leased Property. The amount paid by Tenant for the
acquisition costs of the Leased Property shall be considered Tenant's
contribution.
B. Landlord desires to lease the Leased Property to Tenant and Tenant
desires to lease the Leased Property from Landlord upon the terms set forth in
this Lease.
NOW, THEREFORE, Landlord and Tenant agree as follows:
ARTICLE 1: LEASED PROPERTY, TERM AND DEFINITIONS
1.1 Leased Property. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the following property:
(a) The land described in Exhibit A attached hereto (the "Land").
(b) All buildings, structures, and other improvements, including
without limitation, sidewalks, alleys, utility pipes, conduits, and lines,
parking areas, and roadways, now or hereafter situated upon the Land (the
"Improvements").
(c) All easements, rights and other appurtenances relating to the
Land and Improvements (the "Appurtenances").
(d) All permanently affixed equipment, machinery, fixtures, and
other items of real and personal property, including all components thereof,
located in, or used in connection with, and permanently affixed to or
incorporated into the 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,
<PAGE> 3
together with all replacements, modifications, alterations and additions
thereto but specifically excluding all items included within the category of
Personal Property as defined below (collectively the "Fixtures").
(e) All machinery, equipment, furniture, furnishings, movable
walls or partitions, computers, trade fixtures, consumable inventory and
supplies, and other personal property used or useful in Tenant's business on
the Leased Property, including without limitation, all items of furniture,
furnishings, equipment, supplies and inventory located at the Facility and the
replacements therefor, except items, if any, included within the definition of
Fixtures (collectively the "Personal Property"). The Land, Improvements,
Appurtenances, and Fixtures and Personal Property are hereinafter referred to
as the "Leased Property".
SUBJECT, HOWEVER, to all easements, liens, encumbrances, restrictions,
agreements, and other title matters existing as of the date hereof as listed on
Exhibit B attached hereto (the "Permitted Exceptions").
1.2 Term. The initial term ("Initial Term") of this Lease commences on
the Effective Date and expires at 12:00 Midnight Eastern Time on the fifteenth
anniversary of the Commencement Date (the "Expiration Date"); provided,
however, that Tenant has an option to renew the Lease pursuant to Article 12
and, provided further, the current Term of this Lease shall be deemed
automatically extended from time to time (without any written amendment or
other documentation) to be concurrent with the Term of the Phase IV Lease
having the latest expiration date.
1.3 Definitions. Except as otherwise expressly provided, [i] the terms
defined in this section have the meanings assigned to them in this section and
include the plural as well as the singular; [ii] all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as of the time applicable; and [iii]
the words "herein", "hereof", and "hereunder" and similar words refer to this
Lease as a whole and not to any particular section.
"Acquisition Amount" means $2,635,620.00.
"ADA" means the federal statute entitled Americans with Disabilities
Act, 42 U.S.C. Section 12101, et seq.
"Affiliate" means any person, corporation, partnership, limited
liability company, trust, or other legal entity that, directly or indirectly,
controls, or is controlled by, or is under common control with Tenant.
"Control" (and the correlative meanings of the terms "controlled by" and "under
common control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
entity. "Affiliate" includes, without limitation, each Related Tenant.
"Annual Facility Budget" means Tenant's projection of what the Annual
Facility Financial Statements will be for the next fiscal year.
2
<PAGE> 4
"Annual Financial Statements" means the Tenant's unaudited balance
sheet and statement of income for the most recent fiscal year on an individual
facility and consolidated basis and an unaudited operating statement for the
Facility for the most recent fiscal year.
"Base Rent" has the meaning set forth in Section 2.1, as increased
from time to time pursuant to Section 2.2.
"Business Day" means any day other than a Saturday, Sunday, or
national holiday.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended from time to time. The terms "disposal"
and "release" as used in this Agreement shall have the meaning set forth in
CERCLA.
"Closing" means the closing of the purchase of the Leased Property by
Landlord and the lease of the Leased Property to Tenant.
"Commencement Date" means the Effective Date if such date is the first
day of a month, and if it is not, the first day of the first month following
the Effective Date.
"Commitment" means the Commitment Letter from Landlord to Sterling
dated as of April 3, 1996, as amended May 14, 1997, as further amended pursuant
to the project approval letter dated February 24, 1999, all as amended from
time to time.
"Commitment Fee" means an amount equal to 1% of the Acquisition
Amount.
"Effective Date" is the date hereof as first set forth above.
"Environmental Laws" means all federal, state, and local ecological,
wetlands, and other environmental laws and regulations, as amended from time to
time, including but not limited to [i] CERCLA; [ii] the Resource Conservation
and Recovery Act; [iii] the Hazardous Materials Transportation Act; [iv] the
Clean Air Act; [v] Clean Water Act; [vi] the Toxic Substances Control Act; and
[vii] the Safe Water Drinking Act.
"Event of Default" has the meaning set forth in Section 8.1.
"Expiration Date" has the meaning set forth in Section 1.2.
"Extended Term" has the meaning set forth in Section 12.3(a).
"Facility" means the 42 unit/42 bed assisted living facility known as
Sterling House of Columbia and located on the Leased Property.
"Facility Financial Statement" means the financial statement for the
Facility which shall include the statement of income and expense, occupancy
census data (including
3
<PAGE> 5
payor mix to the extent presently provided by Affiliates) and a comparison of
the actual financial data versus the Annual Facility Budget for the applicable
period.
"Facility Uses" means the uses relating to the operation of the
Facility as a 42 unit/42 bed assisted living facility.
"Fair Market Value" has the meaning set forth in Section 12.2(d).
"Financial Statements" means [i] the annual, quarterly and year to
date financial statements of Tenant; and [ii] all operating statements for the
Facility, that were submitted to Landlord prior to the Effective Date.
"Government Authorizations" means all permits, licenses, approvals,
consents, and authorizations required to comply with all Legal Requirements,
including but not limited to, [i] zoning permits, variances, exceptions,
special use permits, conditional use permits, and consents; [ii] to the extent
applicable, the permits, licenses, provider agreements and approvals required
for licensure and operation of an assisted living facility; [iii]
environmental, ecological, coastal, wetlands, air, and water permits, licenses,
and consents; [iv] curb cut, subdivision, land use, and planning permits,
licenses, approvals and consents; [v] building, sign, fire, health, and safety
permits, licenses, approvals, and consents; and [vi] architectural reviews,
approvals, and consents required under restrictive covenants.
"Hazardous Materials" means any substance [i] the presence of which
poses a hazard to the health or safety of persons on or about the Land
including but not limited to asbestos containing materials; [ii] which requires
removal or remediation under any Environmental Law, including without
limitation any substance which is toxic, explosive, flammable, radioactive, or
otherwise hazardous; or [iii] which is regulated under or classified under any
Environmental Law as hazardous or toxic including but not limited to any
substance within the meaning of "hazardous substance", "hazardous material",
"hazardous waste", "toxic substance", "regulated substance", "solid waste", or
"pollutant" as defined in any Environmental Law.
"Impositions" has the meaning set forth in Section 3.2.
"Initial Term" has the meaning set forth in Section 1.2.
"Landlord Affiliate" means any person, corporation, partnership,
limited liability company, trust, or other legal entity that, directly or
indirectly, controls, or is controlled by, or is under common control with
Landlord. "Control" (and the correlative meanings of the terms "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity. "Landlord Affiliate" includes, without limitation, Health Care
REIT, Inc., HCRI Texas Properties, Ltd., HCRI Pennsylvania Properties, Inc.,
HCRI Nevada Properties, Inc., HCRI Tennessee Properties, Inc. and HCRI
Louisiana Properties, L.P.
4
<PAGE> 6
"Lease Advance" means each advance of funds by Landlord to Tenant
pursuant to the term of this Lease, including the first Lease Advance in the
amount equal to the Acquisition Amount.
"Lease Advance Amount" means the amount of any Lease Advance.
"Lease Advance Date" means the date on which Landlord makes a Lease
Advance.
"Lease Amount" is an aggregate concept and means the sum of the Lease
Advance Amounts outstanding at the applicable time.
"Lease Payments" means the sum of the Base Rent payments (as increased
from time to time) for the applicable period.
"Lease Rate" means the annual rate used to determine Base Rent for
each Lease Advance. The Lease Rate is the greater of [i] 950 basis points or
[ii] the sum of the applicable Rate Index plus the applicable Rate Spread,
computed using the 365/360 method.
"Lease Year" means each consecutive period of 365 or 366 days
throughout the Term. The first Lease Year commences on the Commencement Date
and expires on the day before the first anniversary of the Commencement Date.
"Legal Requirements" means all laws, regulations, rules, orders,
writs, injunctions, decrees, certificates, requirements, agreements, conditions
of participation and standards of any federal, state, county, municipal or
other governmental entity, administrative agency, insurance underwriting board,
architectural control board, private third-party payor, accreditation
organization, or any restrictive covenants applicable to the development,
construction, condition and operation of each Facility by Tenant, including but
not limited to, [i] zoning, building, fire, health, safety, sign, and
subdivision regulations and codes; [ii] certificate of need laws, if
applicable; [iii] licensure to operate as an assisted living facility; [iv]
Medicare and Medicaid certification requirements, if applicable, and if Tenant
elects to participate in such programs; [v] the ADA; [vi] any Environmental
Laws; and [vii] requirements, conditions and standards for participation in
third-party payor insurance programs.
"Material Obligation" means [i] any indebtedness secured by a security
interest in or a lien, deed of trust or mortgage on any of the Leased Property
and any agreement relating thereto; [ii] any obligation or agreement that is
material to the operation of the Facility; [iii] any indebtedness or capital
lease of Tenant that has an outstanding principal balance of at least
$1,000,000.00 in any one instance or at least $1,000,000.00 in the aggregate
and any agreement relating thereto; and [iv] any sublease of the Leased
Property.
"Overdue Rate" has the meaning set forth in Section 8.6.
5
<PAGE> 7
"Periodic Financial Statements" means [i] for Tenant, the unaudited
balance sheet and statement of income of Tenant for the most recent quarter;
and [ii] for the Facility, the unaudited Facility Financial Statement for the
most recent month.
"Permitted Exceptions" means the exceptions to title set forth on
Exhibit B.
"Permitted Liens" means [i] liens granted to Landlord; [ii] liens
customarily incurred by Tenant in the ordinary course of business for items not
delinquent including mechanic's liens and deposits and charges under worker's
compensation laws; [iii] liens for taxes and assessments not yet due and
payable; [iv] any lien, charge, or encumbrance which is being contested in good
faith pursuant to this Agreement; [v] the Permitted Exceptions; and [vi]
purchase money financing and capitalized equipment leases for the acquisition
of personal property provided, however, that Landlord obtains a nondisturbance
agreement from the purchase money lender or equipment lessor in form and
substance as may be satisfactory to Landlord if the original cost of the
equipment exceeds $50,000.00.
"Phase I Lease" means each lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Sterling, or any successor or assign of
Sterling, relating to the 8 assisted living facilities located in Bartlesville,
Oklahoma, Midwest City, Oklahoma, Stillwater, Oklahoma, Enid, Oklahoma, S.W.
Oklahoma City, Oklahoma, Shawnee, Oklahoma, Chickasha, Oklahoma and Ponca City,
Oklahoma, as amended from time to time.
"Phase I Tenant" means each tenant under any Phase I Lease.
"Phase II Lease" means each lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Sterling, or any successor or assign of
Sterling, relating to the 9th through 16th assisted living facilities (or other
similar facilities) developed by Sterling in association with Landlord or any
Landlord Affiliate, as amended from time to time.
"Phase II Tenant" means each tenant under any Phase II Lease.
"Phase III Lease" means each lease now or hereafter existing, between
Landlord or any Landlord Affiliate and Tenant, Sterling or any Affiliate
relating to the 17th through 23rd assisted living facilities (or other similar
facilities) developed by Tenant, Sterling or any Affiliate in association with
Landlord or any Landlord Affiliate, as amended from time to time.
"Phase III Tenant" means each tenant under any Phase III Lease.
"Phase IV Lease" means each lease, including this Lease, now or
hereafter existing, between Landlord or any Landlord Affiliate and Tenant,
Sterling or any Affiliate relating to the 24th through 35th assisted living
facilities (or other similar facilities) developed by Tenant, Sterling or any
Affiliate in association with Landlord or any Landlord Affiliate, as amended
from time to time.
"Phase IV Tenant" means each tenant under any Phase IV Lease.
6
<PAGE> 8
"Pro Forma Statement" means a financial forecast for the Facility for
the next five year period prepared in accordance with the standards for
forecasts established by the American Institute of Certified Public
Accountants.
"Rate Determination Date" means the date on which the value for the
Rate Index is established for computing any Lease Rate. For any Lease Advances
made during the Initial Term, the Rate Determination Date is the Lease Advance
Date.
"Rate Index" means the yield quoted in the Wall Street Journal on the
applicable Rate Determination Date for the most actively traded United States
Treasury Notes having the nearest equivalent maturity date to the Expiration
Date. For any Lease Advance other than the first Lease Advance, the yield shall
be computed based upon the remainder of the Initial Term.
"Rate Spread" means the rate spread from time to time used to
calculate the Lease Rate applicable to any Lease Advance. The Rate Spread is
330 basis points for the Initial Term.
"Receivables" means [i] all of Tenant's rights to receive payment for
providing resident care and services at the Facility as set forth in any
accounts, contract rights, and instruments, and [ii] those documents, chattel
paper, inventory proceeds, provider agreements, participation agreements,
ledger sheets, files, records, computer programs, tapes, and agreements
relating to Tenant's rights to receive payment for providing resident care
services at the Facility.
"Related Lease" means any Phase I Lease, Phase II Lease, Phase III
Lease, Phase IV Lease or any other lease, now or hereafter existing, between
Landlord or any Landlord Affiliate and Tenant, Sterling or any Affiliate.
"Related Tenant" means any Phase I Tenant, Phase II Tenant, Phase III
Tenant, Phase IV Tenant or any other tenant under any Related Lease.
"Renewal Date" means the date on which the Lease Rate is reset and
will be the first day of the Renewal Term.
"Renewal Option" has the meaning set forth in Section 12.1.
"Renewal Rate" means the Lease Rate established on the Renewal Date in
accordance with Section 12.2(c).
"Renewal Term" has the meaning set forth in Section 12.1.
"Seller" means Sterling House Corporation.
"Sterling" means Sterling House Corporation, a corporation organized
under the laws of the State of Kansas.
7
<PAGE> 9
"State" means the State in which the Facility is located.
"Tenant's Obligations" means all payment and performance obligations
of Tenant under this Lease and all documents executed by Tenant in connection
with this Lease.
"Term" means the Initial Term and the Renewal Term.
ARTICLE 2: RENT
2.1 Base Rent. Tenant shall pay Landlord base rent ("Base Rent") in
advance in consecutive monthly installments payable on the first day of each
month during the Term commencing on the Commencement Date. If the Effective
Date is not the first day of a month, Tenant shall pay Landlord Base Rent on
the Effective Date for the partial month, i.e., for the period commencing on
the Effective Date and ending on the day before the Commencement Date. The
annual Base Rent for the Initial Term will be equal to the sum of the products
of each Lease Advance times the Lease Rate for each Lease Advance. The Base
Rent will be computed monthly based on the actual number of days elapsed over a
360-day year (365/360 method). The Base Rent for the Renewal Term will be
computed in accordance with Section 12.2. The Acquisition Amount paid by
Landlord to Tenant is the first Lease Advance under this Lease.
2.2 Increase of Lease Rate and Base Rent. Commencing on the first
anniversary of the Commencement Date and on each anniversary thereafter during
the Term, including any Renewal Term and Extended Term, (each such date shall
be herein defined as "Rent Adjustment Date") the Base Rent shall be increased
so as to equal the lesser of (a) the Maximum Rent Adjustment (defined below),
or (b) an amount determined by multiplying the Base Rent then in effect times a
fraction, the numerator of which shall be the CPI Index on the applicable Rent
Adjustment Date and the denominator of which shall be the CPI Index on the
preceding Rent Adjustment Date (or on the Effective Date in the case of the
first Rent Adjustment Date).
If, for any Lease Year or any portion thereof, the Base Rent is
adjusted in accordance with clause (b) above, then the difference between the
Base Rent for such Lease Year, and the Base Rent for such Lease Year if
adjusted in accordance with clause (a) above shall be referred to herein as the
"Rent Shortfall." If, for any Lease Year, the Base Rent is adjusted in
accordance with clause (a), then the difference between the Base Rent for such
Lease Year and the Base Rent for such Lease Year if adjusted in accordance with
clause (b), shall be referred to herein as the "Rent Surplus."
Any Rent Surplus for a Lease Year shall be applied first to payment of
the unpaid balance of any Rent Shortfalls for any previous Lease Years.
As used herein, the "Maximum Rent Adjustment" shall be the Base Rent
in any applicable year, which would result solely by multiplying, in each year,
on the Rent Adjustment Date, the Base Rent then in effect (as adjusted pursuant
to this Section 2.2 only) by 1.025.
As used herein, the "CPI Index" shall mean and refer to the Consumer
Price Index for Urban Wage Earners and Clerical Workers, U.S. Cities Average.
All items (1982-84-100) published by the Bureau of Labor Statistics of the U.S.
Department of Labor; provided that if
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compilation of the CPI Index in its present form and calculated on its present
basis is discontinued or transferred to any other governmental department or
bureau, then the index most nearly the same as the CPI 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 CPI
Index shall be used, such substitute index to be reasonably selected by
Landlord. Until the CPI Index is established, Tenant shall pay the Base Rent
calculated in accordance with clause (a) above, and once the CPI Index for the
Rent Adjustment Date of such Lease Year is published, the new Base Rent (as
increased) shall be effective retroactively as of the Rent Adjustment Date with
the remaining payments to be adjusted ratably.
2.3 Additional Rent. In addition to Base Rent, Tenant shall pay all
other amounts, liabilities, obligations and Impositions which Tenant assumes or
agrees to pay under this Lease and any fine, penalty, interest, charge and cost
which may be added for nonpayment or late payment of such items (collectively
the "Additional Rent"). Base Rent and Additional Rent are hereinafter referred
to as "Rent". Landlord shall have all legal, equitable and contractual rights,
powers and remedies provided either in this Lease or by statute or otherwise in
the case of nonpayment of the Rent.
2.4 Place of Payment of Rent. Tenant shall make all payments of Base
Rent and any additional Rent required to be paid to Landlord at the Landlord's
address set forth in the first paragraph of this Lease or at such other place
as Landlord may designate from time to time. If delivery is by overnight mail,
the address for Landlord shall be One SeaGate, Suite 1500, Toledo, Ohio 43604.
2.5 Net Lease. This Lease shall be deemed and construed to be an
"absolute net lease", and Tenant shall pay all Rent and other charges and
expenses in connection with the Leased Property throughout the Term, without
abatement, deduction or set-off.
2.6 No Termination, Abatement, Etc. Except as otherwise specifically
provided in this Lease, Tenant shall remain bound by this Lease in accordance
with its terms. Tenant shall not, without the consent of Landlord, modify,
surrender or terminate the Lease, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent. Except
as expressly provided in this Lease, the obligations of Landlord and Tenant
shall not be affected by reason of [i] any damage to, or destruction of, the
Leased Property or any part thereof from whatever cause or any Taking (as
hereinafter defined) of the Leased Property or any part thereof; [ii] the
lawful or unlawful prohibition of, or restriction upon, Tenant's use of the
Leased Property, or any part thereof, the interference with such use by any
person, corporation, partnership or other entity, or by reason of eviction by
paramount title (subject to the provisions of Article 10); [iii] any claim
which Tenant has or might have against Landlord or by reason of any default or
breach of any warranty by Landlord under this Lease or any other agreement
between Landlord and Tenant, or to which Landlord and Tenant are parties; [iv]
any bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceeding affecting Landlord or
any assignee or transferee of Landlord; or [v] any other cause, whether similar
or dissimilar to any of the foregoing, other than a discharge of Tenant from
any such obligations as a matter of law. Except as otherwise specifically
provided in this Lease, Tenant hereby specifically waives all rights, arising
from any
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occurrence whatsoever, which may now or hereafter be conferred upon it by law
[a] to modify, surrender or terminate this Lease or quit or surrender the
Leased Property or any portion thereof; or [b] entitling Tenant to any
abatement, reduction, suspension or deferment of the Rent or other sums payable
by Tenant hereunder. The obligations of Landlord and Tenant hereunder shall be
separate and independent covenants and agreements and the Rent and all other
sums payable by Tenant hereunder shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to the
express provisions of this Lease or by termination of this Lease other than by
reason of an Event of Default.
2.7 Computational Method. Landlord and Tenant acknowledge that all
rates under this Lease will be computed based on the actual number of days
elapsed over a 360-day year (365/360 method).
2.8 Commitment Fee. On the Effective Date, Tenant shall pay to
Landlord the Commitment Fee.
ARTICLE 3: IMPOSITIONS AND UTILITIES
3.1 Payment of Impositions. Tenant shall pay, as Additional Rent, all
Impositions that may be levied or become a lien on the Leased Property or any
part thereof at any time (whether prior to or during the Term), without regard
to prior ownership of said Leased Property, before any fine, penalty, interest,
or cost is incurred; provided, however, Tenant may contest any Imposition in
accordance with Section 3.7. Tenant shall deliver to Landlord [i] not more
than five days after the due date of each Imposition, copies of the invoice for
such Imposition and the check delivered for payment thereof; and [ii] not more
than 15 business days after the due date of each Imposition, a copy of the
official receipt evidencing such payment or other proof of payment satisfactory
to Landlord. Tenant's obligation to pay such Impositions shall be deemed
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property or any part thereof. Tenant, at its expense, shall prepare and file
all tax returns and reports in respect of any Imposition as may be required by
governmental authorities. Tenant shall be entitled to any refund due from any
taxing authority if no Event of Default shall have occurred hereunder and be
continuing. Landlord shall be entitled to any refund from any taxing authority
if an Event of Default has occurred and is continuing. Any refunds retained by
Landlord due to an Event of Default shall be applied as provided in Section
8.8. Landlord and Tenant 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 governmental authorities classify any property covered by
this Lease as personal property, Tenant shall file all personal property tax
returns in such jurisdictions where it may legally so file. Landlord, to the
extent it possesses the same, and Tenant, 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 property so classified as personal
property. Where Landlord is legally required to file personal property tax
returns, Tenant will be provided with copies of assessment notices indicating a
value in excess of the reported value in sufficient time for Tenant to file a
protest. Tenant may, upon notice to Landlord, at Tenant's option and at
Tenant's sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Landlord, at
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Tenant's expense as aforesaid, shall fully cooperate with Tenant in such
protest, appeal, or other action. Tenant shall reimburse Landlord for all
personal property taxes paid by Landlord within 30 days after receipt of
billings accompanied by copies of a bill therefor and payments thereof which
identify the personal property with respect to which such payments are made.
Impositions imposed in respect to the tax-fiscal period during which the Term
terminates shall be adjusted and prorated between Landlord and Tenant, whether
or not such Imposition is imposed before or after such termination, and
Tenant's obligation to pay or Landlord's obligation to refund its prorated
share thereof shall survive such termination.
3.2 Definition of Impositions. "Impositions" means, collectively, [i]
taxes (including without limitation, all capital stock and franchise taxes of
Landlord imposed by the State or any governmental entity in the State due to
this lease transaction or Landlord's ownership of the Leased Property and the
income arising therefrom, or due to Landlord being considered as doing business
in the State because of Landlord's ownership of the Leased Property or lease
thereof to Tenant), all real estate and personal property ad valorem, sales and
use, business or occupation, single business, gross receipts, transaction
privilege, rent or similar taxes; [ii] 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 with the Term); [iii] ground rents, water, sewer or other rents and
charges, excises, tax levies, and fees (including without limitation, license,
permit, inspection, authorization and similar fees); [iv] all taxes imposed on
Tenant's operations of the Leased Property, including without limitation,
employee withholding taxes, income taxes and intangible taxes; [v] all real
property conveyance taxes, transfer fees, deed stamps and similar charges
imposed by the State or any governmental entity in the State with respect to
the conveyance of the Leased Property from Seller to Landlord (if applicable)
and from Landlord to Tenant; and [vi] all other governmental charges, in each
case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Leased Property or any part
thereof and/or the Rent (including all interest and penalties thereon due to
any failure in payment by Tenant), which at any time prior to, during or in
respect of the Term hereof may be assessed or imposed on or in respect of or be
a lien upon [a] Landlord or Landlord's interest in the Leased Property or any
part thereof; [b] the Leased Property or any part thereof or any rent therefrom
or any estate, right, title or interest therein; or [c] any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Leased Property or the leasing or use of the Leased
Property or any part thereof. Tenant shall not, however, be required to pay any
tax based on net income (whether denominated as a franchise or capital stock or
other tax) imposed on Landlord by any governmental entity other than as
described in clause [i] above.
3.3 Escrow of Impositions. If an Event of Default occurs and while it
remains uncured, Tenant shall, at Landlord's election, deposit with Landlord on
the first day of each month a sum equal to 1/12th of the Impositions assessed
against the Leased Property for the preceding tax year, which sums shall be
used by Landlord toward prompt payment of such Impositions. Tenant, on demand,
shall pay to Landlord any additional funds necessary to pay and discharge the
obligations of Tenant pursuant to the provisions of this section. The receipt
by Landlord of the payment of such Impositions by and from Tenant shall only be
as an accommodation to Tenant, the mortgagees, and the taxing authorities, and
shall not be construed as rent or income to Landlord, Landlord serving, if at
all, only as a conduit for delivery purposes.
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3.4 Utilities. Tenant shall pay, or cause to be paid, as Additional
Rent, all taxes, assessments, charges, deposits, and bills for utilities,
including without limitation charges for water, gas, oil, sanitary and storm
sewer, electricity, telephone service, and trash collection, which may be
charged against the occupant of the Improvements during the Term. If an Event
of Default occurs and while it remains uncured, Tenant shall, at Landlord's
election, deposit with Landlord on the first day of each month a sum equal to
1/12th of the amount of the annual utility expenses for the preceding Lease
Year, which sums shall be used by Landlord to promptly pay such utilities.
Tenant shall, on demand, pay to Landlord any additional amount needed to pay
such utilities. Landlord's receipt of such payments shall only be an
accommodation to Tenant and the utility companies and shall not constitute rent
or income to Landlord. Tenant shall at all times maintain that amount of heat
necessary to ensure against the freezing of water lines. Tenant hereby agrees
to indemnify and hold Landlord harmless from and against any liability or
damages to the utility systems and the Leased Property that may result from
Tenant's failure to maintain sufficient heat in the Improvements unless the
failure arises from Landlord's failure to make prompt payment of utility
expenses to the extent that funds for such expenses have been deposited with
Landlord under this section.
3.5 Discontinuance of Utilities. Landlord will not be liable for
damages to person or property or for injury to, or interruption of, business
for any discontinuance of utilities nor will such discontinuance in any way be
construed as an eviction of Tenant or cause an abatement of rent or operate to
release Tenant from any of Tenant's obligations under this Lease unless
Landlord has failed to make prompt payment of utility expenses to the extent
that funds for such expenses have been deposited with Landlord under Section 3.4
above.
3.6 Business Expenses. Tenant shall promptly pay all expenses and
costs incurred in connection with the operation of the Facility on the Leased
Property, including without limitation, employee benefits, employee vacation
and sick pay, consulting fees, and expenses for inventory and supplies.
3.7 Permitted Contests. Tenant, on its own or on Landlord's behalf (or
in Landlord's name), but at Tenant's expense, may contest, by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Imposition or any Legal
Requirement or insurance requirement or any lien, attachment, levy,
encumbrance, charge or claim provided that [i] in the case of an unpaid
Imposition, lien, attachment, levy, encumbrance, charge or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Landlord and from the Leased Property; [ii] neither the Leased
Property nor any Rent therefrom nor any part thereof or interest therein would
be in any immediate danger of being sold, forfeited, attached or lost; [iii] in
the case of a Legal Requirement, Landlord would not be in any immediate danger
of civil or criminal liability for failure to comply therewith pending the
outcome of such proceedings; [iv] in the event that any such contest shall
involve a sum of money or potential loss in excess of $50,000.00, Tenant shall
deliver to Landlord and its counsel an opinion of Tenant's counsel to the
effect set forth in clauses [i], [ii] and [iii], to the extent applicable; [v]
in the case of a Legal Requirement and/or an Imposition, lien, encumbrance or
charge, Tenant shall give such reasonable security as may be demanded by
Landlord to insure ultimate payment of the same and
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to prevent any sale or forfeiture of the affected Leased Property or the Rent
by reason of such nonpayment or noncompliance; provided, however, the
provisions of this section shall not be construed to permit Tenant to contest
the payment of Rent (except as to contests concerning the method of computation
or the basis of levy of any Imposition or the basis for the assertion of any
other claim) or any other sums payable by Tenant to Landlord hereunder; [vi] in
the case of an insurance requirement, the coverage required by Article 4 shall
be maintained; and [vii] if such contest be finally resolved against Landlord
or Tenant, Tenant shall, as Additional Rent due hereunder, promptly pay the
amount required to be paid, together with all interest and penalties accrued
thereon, or comply with the applicable Legal Requirement or insurance
requirement. Landlord, at Tenant's expense, shall execute and deliver to Tenant
such authorizations and other documents as may be reasonably required in any
such contest, and, if reasonably requested by Tenant or if Landlord so desires,
Landlord shall join as a party therein. Tenant hereby agrees to indemnify and
save Landlord harmless from and against any liability, cost or expense of any
kind that may be imposed upon Landlord in connection with any such contest and
any loss resulting therefrom.
ARTICLE 4: INSURANCE
4.1 Property Insurance. At Tenant's expense, Tenant shall maintain in
full force and effect a property insurance policy or policies insuring the
Leased Property against the following:
(a) Loss or damage commonly covered by a "Special Form" policy
insuring against physical loss or damage to the Improvements and Personal
Property, including but not limited to, risk of loss from fire and other
hazards, collapse, transit coverage, vandalism, malicious mischief, theft,
earthquake (if the Leased Property is in earthquake zone 1 or 2 per the ISO
rating system,) and sinkholes (if usually recommended in the area of the Leased
Property). The policy shall be in the amount of the full replacement value (as
defined in Section 4.5) of the Improvements and Personal Property and shall
contain a deductible amount acceptable to Landlord. Landlord shall be named as
an additional insured. The policy shall include a stipulated value endorsement
or agreed amount endorsement and endorsements for contingent liability for
operations of building laws, demolition costs, and increased cost of
construction.
(b) If applicable, loss or damage by explosion of steam boilers,
pressure vessels, or similar apparatus, now or hereafter installed on the
Leased Property, in commercially reasonable amounts acceptable to Landlord.
(c) Consequential loss of rents and income coverage insuring
against all "Special Form" risk of physical loss or damage with limits and
deductible amounts acceptable to Landlord covering risk of loss during the
first 9 months of reconstruction, and containing an endorsement for extended
period of indemnity of at least six months, and shall be written with a
stipulated amount of coverage if available at a reasonable premium.
(d) If the Leased Property is located, in whole or in part, in a
federally designated 100-year flood plain area, flood insurance for the
Improvements in an amount equal to the lesser of [i] the full replacement value
of the Improvements; or [ii] the maximum amount
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of insurance available for the Improvements under all federal and private flood
insurance programs.
(e) Loss or damage caused by the breakage of plate glass in
commercially reasonable amounts acceptable to Landlord.
(f) Loss or damage commonly covered by blanket crime insurance
including employee dishonesty, loss of paper currency, depositor's forgery, and
loss of property of patients accepted by Tenant for safekeeping, in
commercially reasonable amounts acceptable to the Landlord.
4.2 Liability Insurance. At Tenant's expense, Tenant shall maintain
liability insurance against the following:
(a) Claims for personal injury or property damage commonly covered
by comprehensive general liability insurance with endorsements for incidental
malpractice, contractual, personal injury, owner's protective liability,
voluntary medical payments, products and completed operations, broad form
property damage, and extended bodily injury, with commercially reasonable
amounts for bodily injury, property damage, and voluntary medical payments
acceptable to Landlord, but with a combined single limit of not less than
$5,000,000.00 per occurrence.
(b) Claims for personal injury and property damage commonly
covered by comprehensive automobile liability insurance, covering all owned and
non-owned automobiles, with commercially reasonable amounts for bodily injury,
property damage, and for automobile medical payments acceptable to Landlord,
but with a combined single limit of not less than $5,000,000.00 per occurrence.
(c) Claims for personal injury commonly covered by medical
malpractice insurance in commercially reasonable amounts acceptable to
Landlord.
(d) Claims commonly covered by worker's compensation insurance for
all persons employed by Tenant on the Leased Property. Such worker's
compensation insurance shall be in accordance with the requirements of all
applicable local, state, and federal law.
4.3 Builder's Risk Insurance. In connection with any construction,
Tenant shall maintain in full force and effect a builder's completed value risk
policy ("Builder's Risk Policy") of insurance in a nonreporting form insuring
against all "Special Form" risk of physical loss or damage to the Improvements,
including but not limited to, risk of loss from fire and other hazards,
collapse, transit coverage, vandalism, malicious mischief, theft, earthquake
(if Leased Property is in earthquake zone 1 or 2) and sinkholes (if usually
recommended in the area of the Leased Property). The Builder's Risk Policy
shall include endorsements providing coverage for building materials and
supplies and temporary premises. The Builder's Risk Policy shall be in the
amount of the full replacement value of the Improvements and shall contain a
deductible
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amount acceptable to Landlord. Landlord shall be named as an additional
insured. The Builder's Risk Policy shall include an endorsement permitting
initial occupancy.
4.4 Insurance Requirements. The following provisions shall apply to
all insurance coverages required hereunder:
(a) The form and substance of all policies shall be subject to the
approval of Landlord, which approval will not be unreasonably withheld.
(b) The carriers of all policies shall have a Best's Rating of "A"
or better and a Best's Financial Category of IX or higher and shall be
authorized to do insurance business in the State.
(c) Tenant shall be the "named insured" and Landlord shall be an
"additional insured" on each liability policy. On all property and casualty
policies, Landlord and Tenant shall be joint loss payees.
(d) Tenant shall deliver to Landlord certificates or policies
showing the required coverages and endorsements. The policies of insurance
shall provide that the policy may not be cancelled or not renewed, and no
material change or reduction in coverage may be made, without at least 30 days'
prior written notice to Landlord.
(e) The policies shall contain a severability of interest and/or
cross-liability endorsement, provide that the acts or omissions of Tenant or
Landlord will not invalidate the coverage of the other party, and provide that
Landlord shall not be responsible for payment of premiums.
(f) All casualty loss adjustment shall require the written consent
of Landlord and Tenant, as their interests may appear.
(g) At least 30 days prior to the expiration of each policy,
Tenant shall deliver to Landlord a certificate showing renewal of such policy
and payment of the annual premium therefor and a current Certificate of
Compliance (in the form delivered at the time of Closing) completed and signed
by Tenant's insurance agent.
4.5 Replacement Value. The term "full replacement value" means the
actual replacement cost thereof from time to time including increased cost of
construction endorsement, with no reductions or deductions. Tenant shall, in
connection with each annual policy renewal, deliver to Landlord a
redetermination of the full replacement value by the insurer or an endorsement
indicating that the Leased Property is insured for its full replacement value.
If Tenant makes any Permitted Alterations (as hereinafter defined) to the
Leased Property, Landlord may have such full replacement value redetermined at
any time after such Permitted Alterations are made, regardless of when the full
replacement value was last determined.
4.6 Blanket Policy. Notwithstanding anything to the contrary contained
in this section, Tenant may carry the insurance required by this Article under
a blanket policy of
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insurance, provided that the coverage afforded Tenant will not be reduced or
diminished or otherwise be different from that which would exist under a
separate policy meeting all of the requirements of this Lease.
4.7 No Separate Insurance. Tenant shall not take out separate
insurance concurrent in form or contributing in the event of loss with that
required in this Article, or increase the amounts of any then existing
insurance, by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including Landlord and any mortgagees, are included therein as additional
insureds or loss payees, the loss is payable under said insurance in the same
manner as losses are payable under this Lease, and such additional insurance is
not prohibited by the existing policies of insurance. Tenant shall immediately
notify Landlord of the taking out of such separate insurance or the increasing
of any of the amounts of the existing insurance by securing an additional
policy or additional policies.
4.8 Waiver of Subrogation. Each party hereto hereby waives any and
every claim which arises or may arise in its favor and against the other party
hereto during the Term for any and all loss of, or damage to, any of its
property located within or upon, or constituting a part of, the Leased
Property, which loss or damage is covered by valid and collectible insurance
policies, to the extent that such loss or damage is recoverable under such
policies. Said mutual waiver shall be in addition to, and not in limitation or
derogation of, any other waiver or release contained in this Lease with respect
to any loss or damage to property of the parties hereto. Inasmuch as the said
waivers will preclude the assignment of any aforesaid claim by way of
subrogation (or otherwise) to an insurance company (or any other person), each
party hereto agrees immediately to give each insurance company which has issued
to it policies of insurance, written notice of the terms of said mutual
waivers, and to have such insurance policies properly endorsed, if necessary,
to prevent the invalidation of said insurance coverage by reason of said
waivers, so long as such endorsement is available at a reasonable cost.
4.9 Mortgages. The following provisions shall apply if Landlord now or
hereafter places a mortgage on the Leased Property or any part thereof: [i]
Tenant shall obtain a standard form of lender's loss payable clause insuring
the interest of the mortgagee; [ii] Tenant shall deliver evidence of insurance
to such mortgagee; [iii] loss adjustment of claims in excess of $50,000.00
shall require the consent of the mortgagee, which consent shall not be
unreasonably withheld; and [iv] Tenant shall provide such other information and
documents as may be reasonably required by the mortgagee.
4.10 Escrows. After an Event of Default occurs hereunder and until
such Event of Default is cured, Tenant shall make such periodic payments of
insurance premiums in accordance with Landlord's requirements after receipt of
notice thereof from Landlord.
ARTICLE 5: INDEMNITY
5.1 Tenant's Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors or assigns of Landlord, and Landlord's
and such successor's and assign's directors, officers, employees and agents
from and against any and all demands,
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claims, causes of action, fines, penalties, damages (including consequential
damages), losses, liabilities (including strict liability), judgments, and
expenses (including, without limitation, reasonable attorneys' fees, court
costs, and the costs set forth in Section 8.7) incurred in connection with or
arising from: [i] the use or occupancy of the Leased Property by Tenant or any
persons claiming under Tenant; [ii] any activity, work, or thing done, or
permitted or suffered by Tenant in or about the Leased Property; [iii] any
acts, omissions, or negligence of Tenant or any person claiming under Tenant,
or the contractors, agents, employees, invitees, or visitors of Tenant or any
such person; [iv] any breach, violation, or nonperformance by Tenant or any
person claiming under Tenant or the employees, agents, contractors, invitees,
or visitors of Tenant or of any such person, of any term, covenant, or
provision of this Lease or any law, ordinance, or governmental requirement of
any kind including, without limitation, any failure to comply with any
applicable requirements under the ADA; [v] any injury or damage to the person,
property or business of Tenant, its employees, agents, contractors, invitees,
visitors, or any other person entering upon the Leased Property; and [vi] any
construction, alterations, changes or demolition of the Facility performed by
or contracted for Tenant or its employees, agents or contractors. Provided,
however, that Tenant shall have no indemnity obligation with respect to
matters, liabilities, obligations, claims, damages, penalties, causes of
actions, costs and expenses caused by Landlord's gross negligence or willful
misconduct. If any action or proceeding is brought against Landlord, its
employees, or agents by reason of any such claim, Tenant, upon notice from
Landlord, will defend the claim at Tenant's expense with counsel reasonably
satisfactory to Landlord. All amounts payable to Landlord under this section
shall be payable on written demand and any such amounts which are not paid
within 10 days after demand therefor by Landlord shall bear interest at the
Overdue Rate. In case any action, suit or proceeding is brought against Tenant
by reason of any such occurrence, Tenant shall use its best efforts to defend
such action, suit or proceeding.
5.1.1 Notice of Claim. Landlord shall notify Tenant in writing of any
claim or action brought against Landlord in which indemnity may be sought
against Tenant pursuant to this section. Such notice shall be given in
sufficient time to allow Tenant to defend or participate in such claim or
action, but the failure to give such notice in sufficient time shall not
constitute a defense hereunder nor in any way impair the obligations of Tenant
under this section unless the failure to give such notice precludes or
materially prejudices Tenant's defense of any such action.
5.1.2 Survival of Covenants. The covenants of Tenant contained in this
section shall remain in full force and effect after the termination of this
Agreement until the expiration of the period stated in the applicable statute
of limitations during which a claim or cause of action may be brought and
payment in full or the satisfaction of such claim or cause of action and of all
expenses and charges incurred by Landlord relating to the enforcement of the
provisions herein specified.
5.1.3 Reimbursement of Expenses. Unless prohibited by law, Tenant
hereby agrees to pay to Landlord all of the reasonable fees, charges and
reasonable out-of-pocket expenses related to the Facility and required hereby,
or incurred by Landlord in enforcing the provisions of this Agreement.
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5.2 Environmental Indemnity; Audits.
5.2.1 Indemnification. Tenant hereby indemnifies and agrees to
hold harmless Landlord, any successors to Landlord's interest in this Lease, and
Landlord's and such successors' directors, officers, employees and agents from
and against any losses, claims, damages (including consequential damages),
penalties, fines, liabilities (including strict liability), costs (including
cleanup and recovery costs), and expenses (including expenses of litigation and
reasonable attorneys' fees) incurred by Landlord or any other indemnitee or
assessed against the Leased Property by virtue of any claim or lien by any
governmental or quasi-governmental unit, body, or agency, or any third party,
for cleanup costs or other costs pursuant to any Environmental Law. Tenant's
indemnity shall survive the termination of this Lease. Provided, however, Tenant
shall have no indemnity obligation with respect to [i] Hazardous Materials first
introduced to the Leased Property subsequent to the date that Tenant's occupancy
of the Leased Property shall have fully terminated; or [ii] Hazardous Materials
introduced to the Leased Property by Landlord, its agent, employees, successors
or assigns. If at any time during the Term of this Lease any governmental
authority notifies Landlord or Tenant of a violation of any Environmental Law or
Landlord reasonably believes that a Facility may violate any Environmental Law,
Landlord may require one or more environmental audits of the Leased Premises, in
such form, scope and substance as specified by Landlord, at Tenant's expense.
Tenant shall, within 30 days after receipt of an invoice from Landlord,
reimburse Landlord for all costs and expenses incurred in reviewing any
environmental audit, including without limitation, reasonable attorneys' fees
and costs.
5.3 Limitation of Landlord's Liability. Landlord, its agents,
and employees, will not be liable for any loss, injury, death, or damage
(including consequential damages) to persons, property, or Tenant's business
occasioned by theft, act of God, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition, order of governmental body or
authority, fire, explosion, falling objects, steam, water, rain or snow, leak or
flow of water (including water from the elevator system), rain or snow from the
Leased Property or into the Leased Property or from the roof, street, subsurface
or from any other place, or by dampness or from the breakage, leakage,
obstruction, or other defects of the pipes, sprinklers, wires, appliances,
plumbing, air conditioning, or lighting fixtures of the Leased Property, or from
construction, repair, or alteration of the Leased Property or from any acts or
omissions of any other occupant or visitor of the Leased Property, or from any
other cause beyond Landlord's control. The foregoing limitation does not apply
to loss, injury, death or damage caused by Landlord's gross negligence or
willful misconduct.
ARTICLE 6: USE AND ACCEPTANCE OF PREMISES
6.1 Use of Leased Property. Tenant shall use and occupy the
Leased Property exclusively for the Facility Uses and for all lawful and
licensed ancillary uses, and for no other purpose without the prior written
consent of the Landlord which consent shall not be unreasonably withheld. Tenant
shall obtain and maintain all approvals, licenses, and consents needed to use
and operate the Leased Property as herein permitted. Tenant shall deliver to
Landlord complete copies of surveys, examinations, certification and licensure
inspections,
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compliance certificates, and other similar reports issued to Tenant by any
governmental agency within 10 days after Tenant's receipt of each item.
6.2 Acceptance of Leased Property. Tenant acknowledges that
[i] Tenant and its agents have had an opportunity to inspect the Leased
Property; [ii] Tenant has found the Leased Property fit for Tenant's use; [iii]
Landlord will deliver the Leased Property to Tenant in "as-is" condition; [iv]
Landlord is not obligated to make any improvements or repairs to the Leased
Property; and [v] the roof, walls, foundation, heating, ventilating, air
conditioning, telephone, sewer, electrical, mechanical, elevator, utility,
plumbing, and other portions of the Leased Property are in good working order.
Tenant waives any claim or action against Landlord with respect to the condition
of the Leased Property. LANDLORD MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS
FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR
OTHERWISE, OR AS TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT.
6.3 Conditions of Use and Occupancy. Tenant agrees that during
the Term it shall use and keep the Leased Property in a careful, safe and proper
manner; not commit or suffer waste thereon; not use or occupy the Leased
Property for any unlawful purposes; not use or occupy the Leased Property or
permit the same to be used or occupied, for any purpose or business deemed extra
hazardous on account of fire or otherwise; keep the Leased Property in such
repair and condition as may be required by the Board of Health, or other city,
state or federal authorities, free of all cost to Landlord; not permit any acts
to be done which will cause the cancellation, invalidation, or suspension of any
insurance policy; and permit Landlord and its agents to enter upon the Leased
Property at all reasonable times to examine the condition thereof and
accompanied by a representative of Tenant to the extent such a representative is
available.
ARTICLE 7: REPAIRS AND MECHANICS' LIENS
7.1 Maintenance. Tenant shall maintain, repair, and replace
the Leased Property, including without limitation, all structural and
nonstructural repairs and replacements to the roof, foundations, exterior walls,
parking areas, sidewalks, water, sewer, and gas connections, pipes, and mains.
Tenant shall pay, as Additional Rent, the full cost of maintenance, repairs, and
replacements. Tenant shall maintain all drives, sidewalks, parking areas, and
lawns on or about the Leased Property in a clean and orderly condition, free of
accumulations of dirt, rubbish, snow and ice. Tenant shall permit Landlord to
inspect the Leased Property at all reasonable times, and shall implement all
reasonable suggestions of the Landlord as to the maintenance and replacement of
the Leased Property.
7.2 Required Alterations. Tenant shall, at Tenant's sole cost
and expense, make any additions, changes, improvements or alterations to the
Leased Property, including structural alterations, which may be required by any
governmental authorities, including those required to maintain licensure or
certification under the Medicare and Medicaid programs (if so certified),
whether such changes are required by Tenant's use, changes in the law,
ordinances, or
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governmental regulations, defects existing as of the date of this Lease, or any
other cause whatever. All such additions, changes, improvements or alterations
shall be deemed to be Permitted Alterations and shall comply with all laws
requiring such alterations and with the provisions of Section 16.4.
7.3 Mechanic's Liens. Tenant shall have no authority to permit
or create a lien against Landlord's interest in the Leased Property, and upon
Landlord's request, Tenant shall post notices during construction or file such
documents as may be required to protect Landlord's interest in the Leased
Property against liens. Tenant hereby agrees to defend, indemnify, and hold
Landlord harmless from and against any mechanic's liens against the Leased
Property by reason of work, labor, services or materials supplied or claimed to
have been supplied on or to the Leased Property. Tenant shall remove, bond-off,
or otherwise obtain the release of any mechanic's lien filed against the Leased
Property within 10 days after Tenant receives notice of the filing thereof;
provided, however, that Tenant shall have the right to contest in good faith and
with due diligence the validity of any such lien upon furnishing such security
or indemnity as may be reasonably required by Landlord. Tenant shall pay all
Landlord's expenses in connection therewith, including without limitation,
damages, interest, court costs and reasonable attorneys' fees.
7.4 Replacements of Fixtures and Personal Property. Tenant
shall not remove Fixtures and Personal Property from the Leased Property except
to replace the Fixtures and Personal Property by other similar items of equal
quality and value. Items being replaced by Tenant may be removed and shall
become the property of Tenant and items replacing the same shall be and remain
the property of Landlord. Tenant shall execute, upon written request from
Landlord, any and all documents necessary to evidence Landlord's ownership of
the Personal Property and replacements therefor. Tenant may finance replacements
for the Fixtures and Personal Property by equipment lease or by a security
agreement and financing statement and if the original cost of the equipment
exceeds $50,000.00, Tenant must obtain the following: [i] Landlord's consent to
the terms and conditions of the equipment lease or security agreement; and [ii]
a nondisturbance agreement from the equipment lessor or lender upon terms and
conditions reasonably acceptable to Landlord, including without limitation, the
following: [a] Landlord shall have the right (but not the obligation) to assume
such security agreement or equipment lease upon the occurrence of an Event of
Default under this Lease; [b] the equipment lessor or lender shall notify
Landlord of any default by Tenant under the equipment lease or security
agreement and give Landlord a reasonable opportunity to cure such default; and
[c] Landlord shall have the right to assign its rights under the equipment
lease, security agreement, or nondisturbance agreement. Tenant shall, within 30
days after receipt of an invoice from Landlord, reimburse Landlord for all costs
and expenses incurred in reviewing and approving the equipment lease, security
agreement, and nondisturbance agreement, including without limitation,
reasonable attorneys' fees and costs.
ARTICLE 8: DEFAULTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of
the following shall be an event of default ("Event of Default") hereunder:
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(a) Tenant fails to pay in full any installment of
Rent, or any other monetary obligation payable by Tenant under this Lease
within three business days after Tenant is given written notice of such
failure, which written notice shall be given, at Landlord's option, at any time
after the expiration of 10 days from the date such payment is due; provided,
however, that if Tenant receives two notices of default during any one year
period, regardless of any subsequent cure of such default, thereafter Landlord
shall not be obligated to give Tenant written notice of any failure to make any
such payments, and it shall be an Event of Default if Tenant fails to pay any
installment of Rent or any other monetary obligation payable by Tenant under
this Lease within 10 days after such payment is due.
(b) [DELETED]
(c) Tenant fails to comply with any covenant set
forth in Article 14, Section 15.6 or Section 15.7 of this Lease, to the extent
such covenant is applicable to such entity.
(d) Tenant fails to observe and perform any other
covenant, condition or agreement under this Lease to be performed by Tenant and
[i] such failure continues for a period of 30 days after written notice thereof
is given to Tenant by Landlord; or [ii] if, by reason of the nature of such
default, the same cannot be remedied within said 30 days, Tenant fails to
proceed with diligence reasonably satisfactory to Landlord after receipt of the
notice to cure the same or, in any event, fails to cure such default within 90
days after receipt of the notice. The foregoing notice and cure provisions do
not apply to any Event of Default otherwise specifically described in any other
subsection of Section 8.1.
(e) Tenant abandons or vacates the Leased Property
or any material part thereof or ceases to do business or ceases to exist for
any reason for any one or more days except as a result of condemnation or
casualty.
(f) [i] The filing by Tenant of a petition under 11
U.S.C. or the commencement of a bankruptcy or similar proceeding by Tenant;
[ii] the failure by Tenant within 60 days to dismiss an involuntary bankruptcy
petition or other commencement of a bankruptcy, reorganization or similar
proceeding against Tenant or to lift or stay any execution, garnishment or
attachment of such consequence as will impair its ability to carry on its
operation at the Leased Property; [iii] the entry of an order for relief under
11 U.S.C. in respect of Tenant; [iv] any assignment by Tenant for the benefit
of its creditors; [v] the entry by Tenant into an agreement of composition with
its creditors; [vi] the approval by a court of competent jurisdiction of a
petition applicable to Tenant in any proceeding for its reorganization
instituted under the provisions of any state or federal bankruptcy, insolvency,
or similar laws; [vii] appointment by final order, judgment, or decree of a
court of competent jurisdiction of a receiver of a whole or any substantial
part of the properties of Tenant (provided such receiver shall not have been
removed or discharged within 60 days of the date of his qualification).
(g) [i] Any receiver, administrator, custodian or
other person takes possession or control of any of the Leased Property and
continues in possession for 60 days; [ii] any writ against any of the Leased
Property is not released within 60 days; [iii] any judgment is rendered or
proceedings are instituted against the Leased Property or Tenant which affect
the
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Leased Property or any part thereof, which is not dismissed for 60 days
(except as otherwise provided in this section); [iv] all or a substantial part
of the assets of Tenant are attached, seized, subjected to a writ or distress
warrant, or are levied upon, or come into the possession of any receiver,
trustee, custodian, or assignee for the benefit of creditors; [v] Tenant is
enjoined, restrained, or in any way prevented by court order (other than ex
parte order) from conducting all or a substantial part of its business or
affairs; or [vi] except as otherwise permitted hereunder, a final notice of
lien, levy or assessment is filed of record with respect to all or any part of
the Leased Property or any property of Tenant located at the Leased Property
and is not dismissed, discharged, or bonded-off within 30 days or is not
otherwise addressed pursuant to Section 7.3.
(h) Any representation or warranty made by Tenant in
this Lease or any other document executed in connection with this Lease, any
guaranty of or other security for this Lease, or any report, certificate,
application, financial statement or other instrument furnished by Tenant
pursuant hereto or thereto shall prove to be false, misleading or incorrect in
any material respect as of the date made.
(i) Tenant or any Affiliate defaults on any
indebtedness or obligation to Landlord or any Landlord Affiliate, including,
without limitation, any lease with Landlord or any Landlord Affiliate, or
Tenant, Sterling or any Affiliate receives notice of acceleration of payment in
connection with a default under any Material Obligation unless Tenant can
demonstrate to Landlord that such acceleration will not cause Tenant to be in
violation of Section 15.7, and any applicable grace or cure period with respect
to default under such indebtedness or obligation expires without such default
having been cured. This provision applies to all such indebtedness and
obligations as they may be amended, modified, extended, or renewed from time to
time.
(j) Except as otherwise specifically permitted
herein, the assignment, sublease or the occurrence of any other change in
Tenant's leasehold interest in the Leased Property, which shall not include any
change in Tenant's stock ownership.
(k) The license for the Facility or any other
Government Authorization, is cancelled, suspended or otherwise invalidated,
notice of impending revocation proceedings is received and Tenant fails to
diligently contest such proceeding, or any reduction occurs in the number of
licensed beds or units at the Facility in excess of 3%.
8.2 Remedies. Landlord may exercise any one or more
of the following remedies upon the occurrence of an Event of Default:
(a) Landlord may re-enter and take possession of the
Leased Property without terminating the Lease, and lease the Leased Property
for the account of Tenant at a commercially reasonable rate, holding Tenant
liable for all costs of the Landlord in reletting the Leased Property and for
the difference in the amount received by such reletting and the amounts payable
by Tenant under the Lease.
(b) Landlord may terminate this Lease, exclude
Tenant from possession of the Leased Property and use efforts to lease the
Leased Property to others at a
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commercially reasonable rate, holding Tenant liable for the difference in the
amounts received from such reletting and the amounts payable by Tenant under
the Lease.
(c) Landlord may re-enter the Leased Property and
have, repossess and enjoy the Leased Property as if the Lease had not been
made, and in such event, Tenant and its successors and assigns shall remain
liable for any contingent or unliquidated obligations or sums owing at the time
of such repossession.
(d) Landlord may have access to and inspect, examine
and make copies of the books and records and any and all accounts, data and
income tax and other returns of Tenant insofar as they pertain to the Leased
Property.
(e) Landlord may accelerate all of the unpaid Rent
hereunder so that the aggregate Rent for the unexpired term of this Lease
becomes immediately due and payable.
(f) Landlord may take whatever action at law or in
equity as may appear necessary or desirable to collect the Rent and other
amounts payable under the Lease then due and thereafter to become due, or to
enforce performance and observance of any obligations, agreements or covenants
of Tenant under the Commitment and this Lease, and may exercise all of
Landlord's remedies set forth in the Commitment and this Lease.
(g) With respect to the Collateral and Landlord's
security interest therein, Landlord may exercise all of its rights as secured
party under Article 9 of the Uniform Commercial Code as adopted in the State.
Landlord may sell the Collateral by public or private sale upon 10 days notice
to Tenant. Tenant agrees that a commercially reasonable manner of disposition
of the Collateral shall include, without limitation and at the option of
Landlord, a sale of the Collateral, in whole or in part, concurrently with the
sale of the Leased Property.
(h) Landlord may obtain control over and collect the
Receivables and apply the proceeds of the collections to satisfaction of
Tenant's Obligations unless prohibited by law. Tenant appoints Landlord or its
designee as attorney for Tenant with powers [i] to receive, to endorse, to sign
and/or to deliver, in Tenant's name or Landlord's name, any and all checks,
drafts, and other instruments for the payment of money relating to the
Receivables, and to waive demand, presentment, notice of dishonor, protest, and
any other notice with respect to any such instrument; [ii] to sign Tenant's
name on any invoice or bill of lading relating to any Receivable, drafts
against account debtors, assignments and verifications of Receivables, and
notices to account debtors; [iii] to send verifications of Receivables to any
account debtor; and [iv] to do all other acts and things necessary to carry out
this Lease. Landlord shall not be liable for any omissions, commissions, errors
of judgment, or mistakes in fact or law made in the exercise of any such powers
provided Landlord's exercise of such power is commercially reasonable. At
Landlord's option, Tenant shall [i] provide Landlord a full accounting of all
amounts received on account of Receivables with such frequency and in such form
as Landlord may require, either with or without applying all collections on
Receivables in payment of Tenant's Obligations or [ii] deliver to Landlord on
the day of receipt all such collections in the form received and duly endorsed
by Tenant. At Landlord's request, Tenant shall institute any action or enter
into any settlement determined by Landlord to be necessary to obtain recovery
or redress from any
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account debtor in default of Receivables. Landlord may give notice of its
security interest in the Receivables to any or all account debtors with
instructions to make all payments on Receivables directly to Landlord, thereby
terminating Tenant's authority to collect Receivables. After terminating
Tenant's authority to enforce or collect Receivables, Landlord shall have the
right to take possession of any or all Receivables and records thereof and is
hereby authorized to do so, and only Landlord shall have the right to collect
and enforce the Receivables. Prior to the occurrence of an Event of Default, at
Tenant's cost and expense, but on behalf of Landlord and for Landlord's
account, Tenant shall collect or otherwise enforce all amounts unpaid on
Receivables and hold all such collections in trust for Landlord, but Tenant may
commingle such collections with Tenant's own funds, until Tenant's authority to
do so has been terminated, which may be done only after an Event of Default.
Notwithstanding any other provision hereof, Landlord does not assume any of
Tenant's obligations under any Receivable, and Landlord shall not be
responsible in any way for the performance of any of the terms and conditions
thereof by Tenant.
(i) Without waiving any prior or subsequent Event of
Default, Landlord may waive any Event of Default or, with or without waiving
any Event of Default, remedy any default.
(j) Landlord may terminate its obligation to
disburse Lease Advances.
(k) Landlord may enter and take possession of the
Land and Facility without terminating the Lease and complete renovation of the
Improvements (or any part thereof) and perform the obligations of Tenant under
this Lease. Without limiting the generality of the foregoing and for the
purposes aforesaid, Tenant hereby appoints Landlord its lawful attorney-in-fact
with full power to do any of the following: [i] complete renovation and
equipping of the Improvements in the name of Tenant; [ii] use unadvanced funds
remaining under the Lease Amount, or funds that may be reserved, escrowed, or
set aside for any purposes hereunder at any time, or to advance funds in excess
of the Lease Amount, to complete the Improvements; [iii] make changes in the
plans and specifications that shall be necessary or desirable to complete the
Improvements in substantially the manner contemplated by the plans and
specifications; [iv] retain or employ new general contractors, subcontractors,
architects, engineers, and inspectors as shall be required for said purposes;
[v] pay, settle, or compromise all existing bills and claims, which may be
liens or security interests, or to avoid such bills and claims becoming liens
against the Facility or security interest against fixtures or equipment, or as
may be necessary or desirable for the completion of the construction and
equipping of the Improvements or for the clearance of title; [vi] do any and
every act that Tenant might do in its own behalf, to prosecute and defend all
actions or proceedings in connection with the Improvements; and [vii] to
execute, deliver and file all applications and other documents and take any and
all actions necessary to transfer the operations of the Facility to Landlord or
Landlord's designee. This power of attorney is a power coupled with an interest
and cannot be revoked.
8.3 Right of Set-Off. After an Event of Default occurs
hereunder and is continuing, Landlord may, and is hereby authorized by Tenant
to, at any time and from time to time without advance notice to Tenant (any such
notice being expressly waived by Tenant),
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set-off and apply any and all sums held by Landlord, any indebtedness of
Landlord to Tenant, and any claims by Tenant against Landlord, against any
obligations of Tenant hereunder and against any claims by Landlord against
Tenant, whether or not such obligations or claims of Tenant are matured and
whether or not Landlord has exercised any other remedies hereunder. The rights
of Landlord under this section are in addition to any other rights and remedies
Landlord may have against Tenant.
8.4 Performance of Tenant's Covenants. Landlord may perform
any obligation of Tenant which Tenant has failed to perform within 10 days after
Landlord has sent a written notice to Tenant informing it of its specific
failure. Tenant shall reimburse Landlord on demand, as Additional Rent, for any
expenditures thus incurred by Landlord and shall pay interest thereon at the
Overdue Rate (as defined in Section 8.6).
8.5 Late Payment Charge. Tenant acknowledges that any default
in the payment of any installment of Rent payable hereunder will result in loss
and additional expense to Landlord in servicing any indebtedness of Landlord
secured by the Leased Property, handling such delinquent payments, and meeting
its other financial obligations, and because such loss and additional expense is
extremely difficult and impractical to ascertain, Tenant agrees that in the
event any Rent payable to Landlord hereunder is not paid within 10 days after
the due date, Tenant shall pay a late charge of 5% of the amount of the overdue
payment as a reasonable estimate of such loss and expenses, unless applicable
law requires a lesser charge, in which event the maximum rate permitted by such
law may be charged by Landlord. The 10 day grace period set forth in this
section shall not extend the time for payment of Rent or the period for curing
any default or constitute a waiver of such default.
8.6 Interest. In addition to the late payment charge, any
payment not made by Tenant within 10 days after the due date shall thereafter
bear interest at the rate (the "Overdue Rate") of the greater of [i] 18.5% per
annum; or [ii] 2.5% per annum above the Lease Rate then in effect (except that
if this Lease is governed by Texas law, the Overdue Rate shall be 18.0% per
annum); provided, however, that at no time will Tenant be required to pay
interest at a rate higher than the maximum legal rate and, provided further,
that if a court of competent jurisdiction determines that any other charges
payable under this Lease are deemed to be interest, the Overdue Rate shall be
adjusted to ensure that the aggregate interest payable under this Lease does not
accrue at a rate in excess of the maximum legal rate. Tenant shall not be
required to pay interest upon any late payment fees assessed pursuant to Section
8.5.
8.7 Litigation; Attorneys' Fees. Within five days after Tenant
has knowledge of any litigation or other proceeding that may be instituted
against Tenant that is material to the construction or operation of the Facility
or that is material to Tenant's business or financial condition, against the
Leased Property to secure or recover possession thereof, or that may affect the
title to or the interest of Landlord in the Leased Property, Tenant shall give
written notice thereof to Landlord. Tenant shall pay all reasonable costs and
expenses incurred by Landlord in enforcing or preserving Landlord's rights under
this Lease, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including without limitation, [i] the fees,
expenses, and costs of any litigation, receivership, administrative, bankruptcy,
insolvency or other similar proceeding; [ii] reasonable attorney, paralegal,
consulting and witness
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fees and disbursements, whether in house counsel or outside counsel; and [iii]
the expenses, including without limitation, lodging, meals, and transportation,
of Landlord and its employees, agents, attorneys, and witnesses in preparing
for litigation, administrative, bankruptcy, insolvency or other similar
proceedings and attendance at hearings, depositions, and trials in connection
therewith. All such costs, charges and fees payable by Tenant shall be deemed
to be Additional Rent under this Lease.
8.8 Escrows and Application of Payments. As security for the
performance of its obligations hereunder, Tenant hereby assigns to Landlord all
its right, title, and interest in and to all monies escrowed with Landlord under
this Lease and all deposits with utility companies, taxing authorities and
insurance companies; provided, however, that Landlord shall not exercise its
rights hereunder until an Event of Default has occurred. Any payments received
by Landlord under any provisions of this Lease during the existence or
continuance of an Event of Default shall be applied to Tenant's obligations in
the order which Landlord may determine.
8.9 Remedies Cumulative. The remedies of Landlord herein are
cumulative to and not in lieu of any other remedies available to Landlord at law
or in equity. The use of any one remedy shall not be taken to exclude or waive
the right to use any other remedy.
ARTICLE 9: DAMAGE AND DESTRUCTION
9.1 Notice of Casualty. If the Leased Property shall be
destroyed, in whole or in part, or damaged by fire, flood, windstorm or other
casualty (a "Casualty"), Tenant shall give written notice thereof to the
Landlord within three business days after the occurrence of the Casualty. Within
15 days after the occurrence of the Casualty or as soon thereafter as such
information is reasonably available to Tenant, Tenant shall provide the
following information to Landlord: [i] the date of the Casualty; [ii] the nature
of the Casualty; [iii] a description of the damage or destruction caused by the
Casualty including the type of Leased Property damaged and the area of the
Improvements damaged; [iv] a preliminary estimate of the cost to repair,
rebuild, restore or replace the Leased Property; [v] a preliminary estimate of
the schedule to complete the repair, rebuilding, restoration or replacement of
the Leased Property; [vi] a description of the anticipated property insurance
claim including the name of the insurer, the insurance coverage limits, the
deductible amount, the expected settlement amount, and the expected settlement
date; and [vii] a description of the business interruption claim including the
name of the insurer, the insurance coverage limits, the deductible amount, the
expected settlement amount, and the expected settlement date. Within five days
after request from Landlord, Tenant will provide Landlord with copies of all
correspondence to the insurer and any other information reasonably requested by
Landlord.
9.2 Substantial Destruction.
9.2.1 If the Improvements are substantially destroyed at any
time other than during the final 18 months of the Initial Term or any Renewal
Term, Tenant shall promptly rebuild and restore the Leased Property in
accordance with Section 9.4 through Section 9.9 and Landlord shall make the
insurance proceeds available to Tenant for such restoration. The term
"substantially
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destroyed" means any casualty resulting in the loss of use of 35% or more of the
licensed beds or units at any one Facility.
9.2.2 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term or any Renewal Term, Tenant shall have
the option to either [i] rebuild the Leased Property in accordance with Section
9.4 through Section 9.9; or [ii] terminate this Lease; subject, however, to the
following conditions. In order for Tenant to elect to rebuild the Leased
Property, Tenant must satisfy the following conditions within 60 days after the
occurrence of the damage: [i] Tenant must give irrevocable notice to Landlord of
Tenant's election to rebuild and Tenant's election to either [a] renew this
Lease pursuant to Section 9.2.3 (if the damage occurred during the Initial
Term), or [b] purchase the Leased Property in accordance with the applicable
provisions of this Article 9 and Article 13; and [ii] if Tenant elects to renew
this Lease, each Phase IV Tenant must give irrevocable notice to Landlord that
such Phase IV Tenant elects to renew its respective Phase IV Lease or, if Tenant
elects to purchase, each Phase IV Tenant must give irrevocable notice to
Landlord that such Phase IV Tenant elects to purchase the Leased Property
subject to its respective Phase IV Lease. In order for Tenant to elect to
terminate this Lease, Tenant must give irrevocable notice to Landlord, within 60
days after the occurrence of the damage, of Tenant's election to terminate this
Lease; provided, however, that Tenant shall pay to Landlord all Rent and all
other obligations accrued under this Lease through the effective date of
termination and, if the amount of insurance proceeds received or to be received
by Landlord is less than the Lease Amount, Tenant shall pay to Landlord the
amount by which the Lease Amount exceeds the amount of insurance proceeds.
Termination of this Lease shall not be effective until all such amounts have
been paid by Tenant to Landlord and the insurance proceeds have been paid to
Landlord.
The failure of Tenant to give Landlord notice of Tenant's
election within 60 days after the occurrence of the damage shall constitute an
election to terminate and Tenant shall be liable to Landlord for all Rent and
other obligations under this Lease and the amount, if any, by which the Lease
Amount exceeds the amount of insurance proceeds received by Landlord.
9.2.3 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term and if Tenant and each Phase IV Tenant
give irrevocable notice to Landlord of its respective election to renew, the
current Term of each Phase IV Lease shall continue until its expiration date and
the Renewal Term shall commence on the day following the expiration date. All
other terms of each Phase IV Lease for the Renewal Term shall be in accordance
with Article 12 of such Phase IV Lease. The Leased Property will be restored by
Tenant in accordance with Section 9.4 through Section 9.9.
9.2.4 If the Improvements are substantially destroyed during
the final 18 months of the Initial Term or the Renewal Term and if Tenant and
each Phase IV Tenant gives irrevocable notice to Landlord of its respective
election to purchase its respective Leased Property, the purchase price will be
the Fair Market Value determined in accordance with Section 12.2(d). For
purposes of determining the Fair Market Value, the Leased Property will be
valued as if it had been restored to be equal in value to the Leased Property
existing immediately prior to the occurrence of the damage. All other terms of
such purchase shall be in accordance with Article 13. The closing shall occur
not more than 60 days after the Fair Market Value of the
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Leased Property has been determined. Landlord shall hold the insurance proceeds
until the closing of the purchase of the Leased Property and at closing shall
deliver the proceeds to Tenant.
9.3 Partial Destruction. If the Leased Property is not
substantially destroyed, then Tenant shall comply with the provisions of Section
9.4 and Landlord shall make the insurance proceeds available to Tenant for such
restoration.
9.4 Restoration. Tenant shall promptly repair, rebuild, or
restore the Leased Property, at Tenant's expense, so as to make the Leased
Property at least equal in value to the Leased Property existing immediately
prior to such occurrence and as nearly similar to it in character as is
practicable and reasonable. Before beginning such repairs or rebuilding, or
letting any contracts in connection with such repairs or rebuilding, Tenant will
submit for Landlord's approval, which approval Landlord will not unreasonably
withhold or delay, plans and specifications meeting the requirements of Section
16.2 for such repairs or rebuilding. Promptly after receiving Landlord's
approval of the plans and specifications and receiving the proceeds of
insurance, Tenant will begin such repairs or rebuilding and will prosecute the
repairs and rebuilding to completion with diligence, subject, however, to
strikes, lockouts, acts of God, embargoes, governmental restrictions, and other
causes beyond Tenant's reasonable control. Landlord will make available to
Tenant the net proceeds of any fire or other casualty insurance paid to Landlord
for such repair or rebuilding as the same progresses. Tenant shall be
responsible for collection of the insurance proceeds, subject to Landlord's
prior reasonable consent to any settlement, and Tenant shall bear all costs of
collection, including attorneys' fees. Payments will be made against properly
certified vouchers of a competent architect in charge of the work and approved
by Landlord. Prior to commencing the repairing or rebuilding, Tenant shall
deliver to Landlord for Landlord's approval a schedule setting forth the
estimated monthly draws for such work. Landlord will contribute to such payments
out of the insurance proceeds an amount equal to the proportion that the total
net amount received by Landlord from insurers bears to the total estimated cost
of the rebuilding or repairing, multiplied by the payment by Tenant on account
of such work. Landlord may, however, withhold 10% from each payment due
subcontractors until the work is completed and proof has been furnished to
Landlord that no lien or liability has attached or will attach to the Leased
Property or to Landlord in connection with such repairing or rebuilding. Upon
the completion of rebuilding and the furnishing of such proof, the balance of
the net proceeds of such insurance payable to Tenant on account of such
repairing or rebuilding will be paid to Tenant. Tenant will obtain and deliver
to Landlord a temporary or final certificate of occupancy before the Leased
Property is reoccupied for any purpose. Tenant shall complete such repairs or
rebuilding in accordance with the building codes and all applicable laws,
ordinances, regulations, or orders of any state, municipal, or other public
authority affecting the repairs or rebuilding, and also in accordance with all
requirements of the insurance rating organization, or similar body. Any
remaining proceeds of insurance after such restoration will be Tenant's
property.
9.5 Insufficient Proceeds. If the proceeds of any insurance
settlement are not sufficient to pay the costs of Tenant's repair, rebuilding or
restoration under Section 9.4 in full, Tenant shall deposit with Landlord at
Landlord's option, and within 20 days of Landlord's request, an amount
sufficient in Landlord's reasonable judgment to complete such repair, rebuilding
or
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restoration. Tenant shall not, by reason of the deposit or payment, be entitled
to any reimbursement from Landlord or diminution in or postponement of the
payment of the Rent.
9.6 Not Trust Funds. Notwithstanding anything herein or at law
or equity to the contrary, none of the insurance proceeds paid to Landlord as
herein provided shall be deemed trust funds, and Landlord shall be entitled to
dispose of such proceeds as provided in this Article 9. Tenant expressly assumes
all risk of loss, including a decrease in the use, enjoyment or value, of the
Leased Property from any casualty whatsoever, whether or not insurable or
insured against.
9.7 Landlord's Inspection. During the progress of such repairs
or rebuilding, Landlord and its architects and engineers may, from time to time,
inspect the Leased Property and will be furnished, if required by them, with
copies of all plans, shop drawings, and specifications relating to such repairs
or rebuilding. Tenant will keep all plans, shop drawings, and specifications at
the building, and Landlord and its architects and engineers may examine them at
all reasonable times. If, during such repairs or rebuilding, Landlord and its
architects and engineers determine that the repairs or rebuilding are not being
done in accordance with the approved plans and specifications, Landlord will
give prompt notice in writing to Tenant, specifying in detail the particular
deficiency, omission, or other respect in which Landlord claims such repairs or
rebuilding do not accord with the approved plans and specifications. Upon the
receipt of any such notice, Tenant will cause corrections to be made to any
deficiencies, omissions, or such other respect. Tenant's obligations to supply
insurance, according to Article 4, will be applicable to any repairs or
rebuilding under this section.
9.8 Landlord's Costs. Tenant shall, within 30 days after
receipt of an invoice from Landlord, pay the reasonable costs, expenses, and
fees of any architect or engineer employed by Landlord to review any plans and
specifications and to supervise and approve any construction, or for any
services rendered by such architect or engineer to Landlord as contemplated by
any of the provisions of this Lease, or for any services performed by Landlord's
attorneys in connection therewith. With respect to any inspections by the
architect or engineer employed by Landlord, Tenant shall pay no more than
$500.00 per day plus out of pocket expenses for travel, lodging, food and
transportation.
9.9 No Rent Abatement. Except to the extent that business
interruption insurance proceeds are received by Landlord, Rent will not abate
pending the repairs or rebuilding of the Leased Property.
ARTICLE 10: CONDEMNATION
10.1 Total Taking. If, by exercise of the right of eminent
domain or by conveyance made in response to the threat of the exercise of such
right ("Taking"), the entire Leased Property is taken, or so much of the Leased
Property is taken that the Leased Property cannot be used by Tenant for the
purposes for which it was used immediately before the Taking, then this Lease
will end on the earlier of the vesting of title to the Leased Property in the
condemning authority or the taking of possession of the Leased Property by the
condemning authority. All damages awarded for such Taking under the power of
eminent domain shall be the
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property of the Landlord, except for damages awarded to Tenant as compensation
for diminution in value of the leasehold of the Leased Property provided the
award to Landlord is not less than the Lease Amount.
10.1.1 If the entire Leased Property is taken during the final
18 months of the Initial Term or the Renewal Term and Landlord elects to
terminate each Phase IV Lease, Tenant shall have the option to purchase each
Phase IV Facility (but not less than all Phase IV Facilities). Tenant shall give
Landlord notice of Tenant's election to purchase within 15 days after delivery
of the notice of Landlord's intent to terminate. If Tenant elects to purchase
each Phase IV Facility, the purchase price shall be the Fair Market Value as
determined in accordance with Section 12.2(d). All other terms of the option to
purchase shall be in accordance with Article 13.
10.2 Partial Taking. If, after a Taking, so much of the Leased
Property remains that the Leased Property can be used for substantially the same
purposes for which it was used immediately before the Taking, then [i] this
Lease will end as to the part taken on the earlier of the vesting of title to
the Leased Property in the condemning authority or the taking of possession of
the Leased Property by the condemning authority; [ii] at its cost, Tenant shall
restore so much of the Leased Property as remains to a sound architectural unit
substantially suitable for the purposes for which it was used immediately before
the Taking, using good workmanship and new, first-class materials; [iii] upon
completion of the restoration, Landlord will pay Tenant the lesser of the net
award made to Landlord on the account of the Taking (after deducting from the
total award, attorneys', appraisers', and other reasonable fees and costs
incurred in connection with the obtaining of the award and amounts paid to the
holders of mortgages secured by the Leased Property), or Tenant's actual
out-of-pocket costs of restoring the Leased Property; and [iv] Landlord shall be
entitled to the balance of the net award. The restoration shall be completed in
accordance with Section 9.4, 9.5, 9.7, 9.8 and 9.9 with such provisions deemed
to apply to condemnation instead of casualty.
10.3 Condemnation Proceeds Not Trust Funds. Notwithstanding
anything in this Lease or at law or equity to the contrary, none of the
condemnation award paid to Landlord shall be deemed trust funds, and Landlord
shall be entitled to dispose of such proceeds as provided in this Article 10.
Tenant expressly assumes all risk of loss, including a decrease in the use,
enjoyment, or value, of the Leased Property from any Condemnation.
ARTICLE 11: TENANT'S PROPERTY
11.1 Tenant's Property. Tenant shall install, place, and use
on the Leased Property such fixtures, furniture, equipment, inventory and other
personal property in addition to the Personal Property as may be required or as
Tenant may, from time to time, deem necessary or useful to operate the Leased
Property for its permitted purposes. All fixtures, furniture, equipment,
inventory, and other personal property installed, placed, or used on the Leased
Property which is owned by Tenant or leased by Tenant from third parties is
hereinafter referred to as "Tenant's Property".
11.2 Requirements for Tenant's Property. Tenant shall comply
with all of the following requirements in connection with Tenant's Property:
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(a) Tenant shall, at Tenant's sole cost and expense,
maintain, repair, and replace Tenant's Property.
(b) Tenant shall, at Tenant's sole cost and expense,
keep Tenant's Property insured against loss or damage by fire, vandalism and
malicious mischief, sprinkler leakage, earthquake, and other physical loss
perils commonly covered by fire and extended coverage, boiler and machinery, and
difference in conditions insurance in an amount not less than 90% of the then
full replacement cost thereof. Tenant shall use the proceeds from any such
policy for the repair and replacement of Tenant's Property.
(c) Tenant shall pay all taxes applicable to Tenant's
Property.
(d) If Tenant's Property is damaged or destroyed by
fire or any other cause, Tenant shall promptly repair or replace Tenant's
Property unless Landlord elects to terminate this Lease pursuant to Section
9.2.2.
(e) Unless an Event of Default or any event which,
with the giving of notice or lapse of time, or both, would constitute an Event
of Default has occurred, Tenant may remove Tenant's Property from the Leased
Property from time to time provided that [i] the items removed are not required
to operate the Leased Property for the Facility Uses (unless such items are
being replaced by Tenant); and [ii] Tenant repairs any damage to the Leased
Property resulting from the removal of Tenant's Property.
(f) Tenant shall not, without the prior written
consent of Landlord or as otherwise provided in this Lease, remove any Tenant's
Property or Leased Property. Tenant shall, at Landlord's option, remove Tenant's
Property upon the termination or expiration of this Lease and shall repair any
damage to the Leased Property resulting from the removal of Tenant's Property.
If Tenant fails to remove Tenant's Property within 30 days after request by
Landlord, then Tenant shall be deemed to have abandoned Tenant's Property,
Tenant's Property shall become the property of Landlord, and Landlord may
remove, store and dispose of Tenant's Property. In such event, Tenant shall have
no claim or right against Landlord for such property or the value thereof
regardless of the disposition thereof by Landlord. Tenant shall pay Landlord,
upon demand, all expenses incurred by Landlord in removing, storing, and
disposing of Tenant's Property and repairing any damage caused by such removal.
Tenant's obligations hereunder shall survive the termination or expiration of
this Lease.
(g) Tenant shall perform its obligations under any
equipment lease or security agreement for Tenant's Property. For equipment loans
or leases for equipment having an original cost in excess of $50,000.00, Tenant
shall cause such equipment lessor or lender to enter into a nondisturbance
agreement with Landlord upon terms and conditions acceptable to Landlord,
including without limitation, the following: [i] Landlord shall have the right
(but not the obligation) to assume such equipment lease or security agreement
upon the occurrence of an Event of Default by Tenant hereunder; [ii] such
equipment lessor or lender shall notify Landlord of any default by Tenant under
the equipment lease or security agreement and give Landlord a reasonable
opportunity to cure such default; and [iii] Landlord shall have the right to
assign its
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interest in the equipment lease or security agreement and nondisturbance
agreement. Tenant shall, within 30 days after receipt of an invoice from
Landlord, reimburse Landlord for all costs and expenses incurred in reviewing
and approving the equipment lease, security agreement and nondisturbance
agreement, including without limitation, reasonable attorneys' fees and costs.
ARTICLE 12: RENEWAL OPTIONS
12.1 Renewal Options. Tenant has the option to renew ("Renewal
Option") this Lease for one 15-year renewal term ("Renewal Term"). Tenant can
exercise each Renewal Option only upon satisfaction of the following conditions:
(a) There shall be no uncured Event of Default, or
any event which with the passage of time or giving of notice would constitute an
Event of Default, at the time Tenant exercises its Renewal Option nor on the
date the Renewal Term is to commence.
(b) Tenant shall give Landlord irrevocable written
notice of renewal ("Renewal Notice") no later than the date which is [i] 90 days
prior to the expiration date of the Initial Term; or [ii] if applicable, 15 days
after the occurrence of the substantial destruction of the Improvements as set
forth in Sections 9.2.2 and 9.2.3.
(c) Each Phase IV Tenant shall concurrently give
irrevocable notice of renewal for each Phase IV Lease.
12.2 Effect of Renewal. The following terms and conditions
will be applicable if Tenant renews the Lease:
(a) Effective Date. The effective date of the Renewal
Term will be the first day after the expiration date of the Initial Term. The
first day of the Renewal Term is also referred to as the Renewal Date.
(b) Lease Amount. Effective as of the Renewal Date, a
single Lease Amount will be computed by summing all Lease Advance Amounts
(including the Acquisition Amount).
(c) Lease Rate. Effective as of the Renewal Date, a
single Lease Rate will be computed equal to the Renewal Rate. The Renewal Rate
for the Renewal Term shall be the fair market value lease rate for this type of
lease as determined in accordance with the following provisions. The parties
shall attempt to determine the fair market value lease rate by mutual agreement
within 15 days after the date Tenant gives the Renewal Notice. If the parties do
not agree on such lease rate within the 15 day period, the appraisal procedure
set forth in Section 12.2(d) shall be used. The appraisers shall be instructed
to appraise the fair market value lease rate as a financing lease rate for a
health care facility of the same type as the Facility. The appraised rates
submitted by the three appraisers shall be ranked from highest to lowest, the
rate (highest or lowest) which is furthest from the middle rate shall be
discarded, and the remaining two appraised rates shall be averaged to arrive at
the appraised lease rate. The Renewal Rate shall be the appraised lease rate
provided, however, that Landlord shall not be obligated to renew
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this Lease at a Renewal Rate less than the lease rate then being charged by
Landlord to tenants of comparable creditworthiness for comparable facilities.
(d) Fair Market Value. The fair market value lease
rate or fair market value, as the case may be (the "Fair Market Value"), of the
Leased Property shall be determined as follows:
(i) Landlord and Tenant shall each give the
other party notice of the name of a qualified MIA or SRA appraiser 15 days after
giving of the Renewal Notice. The two appraisers will then select a third
appraiser within an additional five days. Each appraiser must demonstrate to the
reasonable satisfaction of both Landlord and Tenant that it has significant
experience in appraising assisted living and other health care properties
substantially similar to the Leased Property. Within five days after
designation, each appraiser shall submit a resume to Landlord and Tenant setting
forth such appraiser's qualifications including education and experience with
similar properties. A notice of objections to the qualifications of any
appraiser shall be given within 10 days after receipt of such resume. If a party
fails to timely object to the qualifications of an appraiser, then the appraiser
shall be conclusively deemed satisfactory. If a party gives a timely notice of
objection to the qualifications of an appraiser, then the disqualified appraiser
shall be replaced by an appraiser selected by the qualified appraisers or, if
all appraisers are disqualified, then by an appraiser selected by a commercial
arbitrator acceptable to Landlord and Tenant.
(ii) The Fair Market Value shall be
determined by the appraisers within 60 days after the appointment of the
appraisers as follows. Each of the appraisers shall be instructed to prepare an
appraisal of the Leased Property in accordance with the following instructions:
The Leased Property is to be valued upon the three
conventional approaches to estimate value known as the Income,
Sales Comparison and Cost Approaches. Once the approaches are
completed, the appraiser correlates the individual approaches
into a final value conclusion.
The three approaches to estimate value are summarized as follows:
INCOME APPROACH: This valuation approach recognizes that the
value of the operating tangible and intangible asset can be
represented by the expected economic viability of the business
giving returns on and of the assets and shall use a management
fee of 7%.
SALES COMPARISON APPROACH: This valuation approach is based
upon the principle of substitution. When a facility is
replaceable in the market, the market approach assumes that
value tends to be set at the price of acquiring an equally
desirable substitute facility. Since healthcare market
conditions change and frequently are
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subject to regulatory and financing environments, adjustments
need to be considered. These adjustments also consider the
operating differences such as services and demographics.
COST APPROACH: This valuation approach estimates the value of
the tangible assets only. Value is represented by the market
value of the land plus the depreciated reproduction cost of
all improvements and equipment.
In general, the Income and Sales Comparison Approaches are considered the best
representation of value because they cover both tangibles and intangible assets,
consider the operating characteristics of the business and have the most
significant influence on attracting potential investors.
The appraised values submitted by the three appraisers shall be ranked from
highest value to middle value to lowest value, the appraised value (highest or
lowest) which is furthest from the middle appraised value shall be discarded,
and the remaining two appraised values shall be averaged to arrive at the Fair
Market Value.
(iii) Tenant shall pay, or reimburse
Landlord for, all costs and expenses in connection with the appraisals.
(e) Base Rent. Effective as of the Renewal Date, the
annual Base Rent will be changed to equal the product of [i] the Lease Amount on
the applicable Renewal Date times [ii] the new Lease Rate equal to the Renewal
Rate.
(f) Other Terms and Conditions. Except for the
modifications set forth in this Section 12.2, all other terms and conditions of
the Lease will remain the same for the Renewal Term. The Lease Rate and Base
Rent will increase annually as set forth in Section 2.2.
12.3 Effect of Non-Renewal or Expiration of Lease. The
following terms and conditions will be applicable if Tenant does not renew this
Lease:
(a) Extension of Current Term. The Initial Term will
be extended for 180 days (the "Extended Term").
(b) Lease Payments. During the Extended Term, Tenant
shall continue to make monthly payments of Rent (including Base Rent) based upon
the then existing Lease Rate.
ARTICLE 13: RIGHT OF FIRST REFUSAL
13.1 Right of First Refusal.
Tenant shall have a right of first refusal to purchase the
Facility. If at any time during the Term, Landlord shall receive a bona fide
offer ("Offer") from a third person for the
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purchase of the Leased Property, which Offer Landlord desires to accept,
Landlord shall promptly deliver to Tenant a copy of such Offer. Tenant shall
have the right for a period of 60 days thereafter to elect to purchase the
Leased Property on the same terms and conditions as those set forth in the
Offer. If Tenant elects to purchase the Leased Property, Tenant must give
written notice thereof to Landlord no later than the 60th day after the date
Landlord delivers the Offer to Tenant. If Tenant does not elect to exercise its
right of first refusal as set forth in this section, Landlord shall be free to
sell and convey the Leased Property to the third party purchaser in accordance
with the terms and provisions of the Offer, subject to this Lease. In the event
that Landlord does not consummate the sale of the Leased Property to such
purchaser, Tenant's right of first refusal under this section shall remain
applicable to subsequent bona fide offers from third persons.
13.2 Closing. The purchase of the Leased Property by Tenant
shall close in accordance with the Offer. At the closing, Tenant shall pay the
Purchase Price and all closing costs in immediately available funds and Landlord
shall convey title to the Leased Property to Tenant or to Tenant's assignee by a
recordable limited warranty deed subject only to Permitted Exceptions and
encumbrances approved in writing by Tenant and limited warranty bill of sale.
The warranties provided for in such documents shall not be limited by any
limitations upon Landlord's liability as provided in this Lease. Landlord shall
also execute those affidavits reasonably required by the title company for the
issuance of an owner's policy of title insurance.
13.3 Failure to Close. If Tenant for any reason fails to
purchase the Leased Property after Tenant has accepted the Offer, then Tenant
shall pay Landlord all costs and expenses incurred by Landlord as a result of
the failure to close including costs of unwinding swap transactions or other
interest rate protection devices and preparing for the closing. Tenant shall
continue to be obligated as lessee hereunder for the remainder of the Term
(including the Extended Term as set forth in Section 12.3).
13.4 Failure to Exercise Renewal Option. If Tenant for any
reason does not exercise its Renewal Option in accordance with the terms and
conditions of this Lease before the expiration of the then current Term, Tenant
shall be deemed to have forfeited its equity contribution and all proprietary
and ownership interest in the Leased Property.
ARTICLE 14: NEGATIVE COVENANTS
Until Tenant's Obligations shall have been performed in full,
Tenant covenants and agrees that Tenant shall not do any of the following
without the prior written consent of Landlord which consent shall not be
unreasonably withheld:
14.1 No Debt. Tenant shall not create, incur, assume, or
permit to exist any indebtedness related to the Facility other than [i] trade
debt incurred in the ordinary course of Tenant's business; [ii] indebtedness for
Facility working capital purposes in an amount not to exceed $150,000.00; [iii]
indebtedness that is secured by any Permitted Lien; and [iv] unsecured
indebtedness that will not cause Tenant to be in violation of Section 15.7.
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14.2 No Liens. Tenant shall not create, incur, or permit to
exist any lien, charge, encumbrance, easement or restriction upon the Leased
Property or any lien upon or pledge of any interest in Tenant related to the
Facility, except for Permitted Liens.
14.3 No Guaranties. Tenant shall not create, incur, assume, or
permit to exist any guarantee of any loan or other indebtedness except for the
endorsement of negotiable instruments for collection in the ordinary course of
business or guaranties that will not cause Tenant to be in violation of Section
15.7.
14.4 No Transfer. Tenant shall not sell, lease, sublease,
mortgage, convey, assign or otherwise transfer any legal or equitable interest
in the Leased Property or any part thereof, except for transfers made in
connection with any Permitted Lien and transfers to an Affiliate.
14.5 No Dissolution. Tenant shall not dissolve, liquidate,
merge, consolidate or terminate its existence or sell, assign, lease, or
otherwise transfer (whether in one transaction or in a series of transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
except for mergers, consolidations or other structural changes in Tenant that
will not cause Tenant to be in violation of Section 15.7.
14.6 [INTENTIONALLY OMITTED]
14.7 No Investments. Tenant shall not purchase or otherwise
acquire, hold, or invest in securities (whether capital stock or instruments
evidencing indebtedness) of or make loans or advances to any person, including,
without limitation, any Affiliate, or any shareholder, member or partner of
Tenant, or any Affiliate, except for cash balances temporarily invested in
short-term or money market securities and except for purchases, acquisitions,
advances, investments or loans that will not cause Tenant to be in violation of
Section 15.7.
14.8 Contracts. Tenant shall not execute or modify any
material contracts or agreements with respect to the Facility except for
contracts and modifications approved by Landlord. Contracts made in the ordinary
course of business and in an amount less than $150,000.00 shall not be
considered "material" for purposes of this paragraph.
14.9 Subordination of Payments to Affiliates. After the
occurrence of an Event of Default and until such Event of Default is cured,
Tenant shall not make any payments or distributions (including, without
limitation, salary, bonuses, fees, principal, interest, dividends, liquidating
distributions, management fees, cash flow distributions or lease payments) to
any Affiliate, or any shareholder, member or partner of Tenant or any Affiliate,
except for ordinary payroll.
14.10 Change of Location or Name. Tenant shall not change any
of the following without giving Landlord at least 60 days' advance written
notice: [i] the location of the principal place of business or chief executive
office of Tenant, or any office where any of Tenant's books and records are
maintained; or [ii] the name under which Tenant conducts any of its business or
operations.
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ARTICLE 15: AFFIRMATIVE COVENANTS
15.1 Perform Obligations. Tenant shall perform all of its
obligations under this Lease, the Government Authorizations, the Permitted
Exceptions, and all Legal Requirements. Tenant shall take all necessary action
to obtain all Government Authorizations required for the operation of the
Facility as soon as possible after the Effective Date.
15.2 Proceedings to Enjoin or Prevent Construction. If any
proceedings are filed seeking to enjoin or otherwise prevent or declare invalid
or unlawful Tenant's construction, occupancy, maintenance, or operation of the
Facility or any portion thereof, Tenant will cause such proceedings to be
vigorously contested in good faith, and in the event of an adverse ruling or
decision, prosecute all allowable appeals therefrom, and will, without limiting
the generality of the foregoing, resist the entry or seek the stay of any
temporary or permanent injunction that may be entered, and use its best efforts
to bring about a favorable and speedy disposition of all such proceedings and
any other proceedings.
15.3 Documents and Information.
15.3.1 Furnish Documents. Tenant shall periodically during the
term of the Lease deliver to Landlord the Annual Financial Statements, Periodic
Financial Statements and other documents described on Exhibit C within the
specified time periods. With each delivery of Annual Financial Statements and
Periodic Financial Statements to Landlord, Tenant shall also deliver to Landlord
a certificate signed by the Chief Financial Officer of Tenant, an Annual
Facility Financial Report or Quarterly Facility Financial Report, as applicable,
and a Quarterly Facility Accounts Receivable Aging Report all in the form of
Exhibit D. In addition, Tenant shall deliver to Landlord the Annual Facility
Financial Report and a Quarterly Facility Accounts Receivable Aging Report
(based upon internal financial statements) within 90 days after the end of each
fiscal year.
15.3.2 Furnish Information. Tenant shall [i] promptly supply
Landlord with such information concerning its financial condition, affairs and
property, as Landlord may reasonably request from time to time hereafter; [ii]
promptly notify Landlord in writing of any condition or event that constitutes a
breach or event of default of any term, condition, warranty, representation, or
provisions of this Agreement or any other agreement, and of any material adverse
change in its financial condition; [iii] maintain a standard and modern system
of accounting; [iv] permit Landlord or any of its agent or representatives to
have access to and to examine all of its books and records regarding the
financial condition of the Facility at any time or times hereafter during
business hours and after reasonable oral or written notice; and [v] permit
Landlord to copy and make abstracts from any and all of said books and records.
15.3.3 Further Assurances and Information. Tenant shall, on
request of Landlord from time to time, execute, deliver, and furnish documents
as may be necessary to fully consummate the transactions contemplated under this
Agreement. Within 15 days after a request from Landlord, Tenant shall provide to
Landlord such additional information regarding Tenant, Tenant's financial
condition or any Facility as Landlord, or any existing or proposed creditor of
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Landlord, or any auditor or underwriter of Landlord, may reasonably require from
time to time, including, without limitation, a current Tenant's Certificate and
Facility Financial Report in the form of Exhibit D.
15.3.4 Material Communications. Tenant shall transmit to
Landlord, within five business days after receipt thereof, any material
communication affecting the Facility, this Lease, the Legal Requirements or the
Government Authorizations, and Tenant will promptly respond to Landlord's
inquiry with respect to such information. Tenant shall promptly notify Landlord
in writing after Tenant has knowledge of any potential, threatened or existing
litigation or proceeding against, or investigation of, Tenant or the Facility
that may affect the right to operate the Facility or Landlord's title to the
Facility or Tenant's interest therein. Without otherwise limiting the term
"material" as used in the preceding sentence, any litigation or proceeding
involving a claim of $50,000.00 or more or involving a threatened or alleged
violation of an Environmental Law shall be deemed to be material.
15.3.5 Requirements for Financial Statements. Tenant shall
meet the following requirements in connection with the preparation of the
financial statements: [i] all audited financial statements shall be prepared in
accordance with general accepted accounting principles consistently applied;
[ii] all unaudited financial statements shall be prepared in a manner
substantially consistent with prior audited and unaudited financial statements
submitted to Landlord; [iii] all financial statements shall fairly present the
financial condition and performance for the relevant period in all material
respects; [iv] the financial statements shall include all notes to the financial
statements and a complete schedule of contingent liabilities and transactions
with Affiliates; and [v] the audited financial statements shall contain an
unqualified opinion, except to the extent such opinion references a change in
treatment made in accordance with generally accepted accounting principles.
15.3.6 Confidentiality. Landlord shall use reasonable efforts
not to disclose the information provided by Tenant under this Section 15.3;
provided, however, that Landlord may disclose such information to any person or
entity to whom Landlord is required to make such disclosure; to governmental
authorities; and to any other person or entity having a legitimate business
interest in the Landlord, including, but not limited to, regulators, auditors,
accountants, attorneys, investors, underwriters, rating agencies, bond or surety
companies, and lenders of Landlord (including, but not limited to, collateral
pool lenders and line of credit lenders).
15.4 Compliance With Laws. Tenant shall comply with all Legal
Requirements and keep all Government Authorizations in full force and effect.
Tenant shall pay when due all taxes and governmental charges of every kind and
nature that are assessed or imposed upon Tenant at any time during the term of
the Lease, including, without limitation, all income, franchise, capital stock,
property, sales and use, business, intangible, employee withholding, and all
taxes and charges relating to Tenant's business and operations. Tenant shall be
solely responsible for compliance with all Legal Requirements, including the
ADA, and Landlord shall have no responsibility for such compliance.
15.5 Broker's Commission. Tenant and Landlord shall indemnify
each other from claims of brokers arising by the execution hereof or the
consummation of the transactions
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contemplated hereby and from expenses incurred by Landlord or Tenant in
connection with any such claims (including attorneys' fees).
15.6 Existence and Change in Control. Tenant or any entity
into which Tenant is merged shall maintain its existence throughout the term of
this Agreement.
15.7 Financial Covenants. The defined terms used in this
section are defined in Section 15.7.1. The method of calculating Net Worth and
valuing assets shall be consistent with the Financial Statements. The following
financial covenants shall be met throughout the term of this Lease:
15.7.1 Definitions.
(a) "Cash Flow" means the net income of Tenant as
reflected on the income statement of Tenant plus [i] the amount of the provision
for depreciation and amortization; [ii] the amount of the provision for
management fees; plus [iii] the amount of the provision for income taxes; plus
[iv] the amount of the provision for Rent payments and interest and lease
payments, if any; minus [v] an imputed management fee equal to 8% of revenues
(net of contractual allowances); and minus [vi] an imputed replacement reserve
of $300.00 per unit at the Facility, per year.
(b) "Coverage Ratio" is the ratio of [i] Cash Flow
for each applicable period; [ii] to the Rent payments due pursuant to this Lease
and all other debt service of Tenant and lease payments relating to the Leased
Property for the applicable period.
(c) "Net Worth" means an amount equal to the total
consolidated fair market value of the tangible assets of the entity (excluding
good will and other intangible assets) minus the total consolidated liabilities
of such entity.
15.7.2 Coverage Ratio. Tenant shall maintain a Coverage Ratio
of not less than 1.25 to 1.0 [i] during at least one month of the 8 month period
following the Commencement Date and [ii] for each fiscal year during the second
full year that the Facility is operational and for each year thereafter;
provided, however, that after two or more of Tenant's and Sterling's assisted
living facilities financed by Landlord are in their second full year of
operation, the Coverage Ratio for any one or more facilities may be as low as
1.15 to 1.0 if the collective Coverage Ratio for all such facilities (that are
in operation at least one year) is at least 1.25 to 1.0.
15.7.3 Shareholders' Equity. Tenant and its consolidated
subsidiaries shall maintain combined shareholders' equity and subordinated debt
of at least $10,000,000.00.
15.7.4 Current Ratio. Tenant and its consolidated subsidiaries
shall maintain for each fiscal quarter a ratio of current assets to current
liabilities of not less than 1.25 to 1.00 for the second full year that the
Facility is operational and for each year thereafter.
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15.7.5 Minimum Cash Requirement. Tenant shall maintain cash
and cash equivalents of at least $500,000.00.
15.7.6 Working Capital. Tenant shall maintain available
working capital for the Facility in the amount not less than $100,000.00. The
available working capital may be included as part of the cash requirement under
Section 15.7.5.
15.8 Transfer of License. If this Lease is terminated due to
expiration of the Term, pursuant to an Event of Default or for any reason other
than Tenant's purchase of the Leased Property, or if Tenant vacates the Leased
Property without termination of this Lease, Tenant shall execute, deliver and
file all documents and statements requested by Landlord to effect the transfer
of the Facility license and Government Authorizations to an entity designated by
Landlord, subject to any required approval of governmental regulatory
authorities, and Tenant shall provide to Landlord all information and records
required by Landlord in connection with the transfer of the license and
Government Authorizations.
ARTICLE 16: ALTERATIONS, CAPITAL IMPROVEMENTS, AND SIGNS
16.1 Prohibition on Alterations and Improvements. Except for
Permitted Alterations (as hereinafter defined), Tenant shall not make any
structural or nonstructural changes, alterations, additions and/or improvements
(hereinafter collectively referred to as "Alterations") to the Leased Property.
16.2 Approval of Alterations. If Tenant desires to perform any
Permitted Alterations, Tenant shall deliver to Landlord plans, specifications,
drawings, and such other information as may be reasonably requested by Landlord
(collectively the "Plans and Specifications") showing in reasonable detail the
scope and nature of the Alterations that Tenant desires to perform. It is the
intent of the parties hereto that the level of detail shall be comparable to
that which is referred to in the architectural profession as "design development
drawings" as opposed to working or biddable drawings. Landlord agrees not to
unreasonably delay its review of the Plans and Specifications. Provided Tenant
has given Landlord written notice at the time of delivery of the Plans and
Specifications of the effect of Landlord's failure to respond, Landlord's
failure to respond within 60 days of receipt of Plans and Specifications shall
be deemed to constitute Landlord's approval. Within 30 days after receipt of an
invoice, Tenant shall reimburse Landlord for all costs and expenses incurred by
Landlord in reviewing and, if required, approving or disapproving the Plans and
Specifications, inspecting the Leased Property, and otherwise monitoring
compliance with the terms of this Article 16. Tenant shall comply with the
requirements of Section 16.4 in making any Permitted Alterations.
16.3 Permitted Alterations. Permitted Alterations means any
one of the following: [i] Alterations approved by Landlord; [ii] Alterations
required under Section 7.2; [iii] Alterations having a total cost of less than
$100,000.00; or [iv] repairs, rebuilding and restoration required or undertaken
pursuant to Section 9.4.
16.4 Requirements for Permitted Alterations. Tenant shall
comply with all of the following requirements in connection with any Permitted
Alterations:
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(a) The Permitted Alterations shall be made in
accordance with the approved Plans and Specifications.
(b) The Permitted Alterations and the installation
thereof shall comply with all applicable legal requirements and insurance
requirements.
(c) The Permitted Alterations shall be done in a good
and workmanlike manner, shall not impair the value or the structural integrity
of the Leased Property, and shall be free and clear of all mechanic's liens.
(d) Tenant shall, at Tenant's expense, obtain a
builder's completed value risk policy of insurance insuring against all risks of
physical loss, including collapse and transit coverage, in a nonreporting form,
covering the total value of the work performed, and equipment, supplies, and
materials, and insuring initial occupancy. Landlord and any mortgagee of
Landlord shall be additional insureds of such policy. Landlord shall have the
right to approve the form and substance of such policy.
(e) Tenant shall pay the premiums required to
increase the amount of the insurance coverages required by Article 4 to reflect
the increased value of the Improvements resulting from installation of the
Permitted Alterations, and shall deliver to Landlord a certificate evidencing
the increase in coverage.
(f) Tenant shall, not later than 60 days after
completion of the Permitted Alterations, deliver to Landlord a revised
"as-built" survey of the Leased Property if the Permitted Alterations altered
the Land or "footprint" of the Improvements and an "as-built" set of Plans and
Specifications for the Permitted Alterations in form and substance satisfactory
to Landlord.
(g) Tenant shall, not later than 30 days after
Landlord sends an invoice, reimburse Landlord for any reasonable costs and
expenses, including attorneys' fees and architects' and engineers' fees,
incurred in connection with reviewing and approving the Permitted Alterations
and ensuring Tenant's compliance with the requirements of this section. The fee
for Landlord's consulting engineer is $500.00 per day plus out-of-pocket
expenses for travel, lodging, food and transportation.
16.5 Ownership and Removal of Permitted Alterations. The
Permitted Alterations shall become a part of the Leased Property, owned by
Landlord, and leased to Tenant subject to the terms and conditions of this
Lease. Tenant shall not be required or permitted to remove any Permitted
Alterations.
16.6 Signs. Tenant may, at its own expense, erect and maintain
identification signs at the Leased Property, provided such signs comply with all
laws, ordinances, and regulations. Upon the termination or expiration of this
Lease, Tenant shall, within 30 days after notice from Landlord, remove the signs
and restore the Leased Property to its original condition.
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ARTICLE 17: [RESERVED]
ARTICLE 18: ASSIGNMENT AND SALE OF LEASED PROPERTY
18.1 Prohibition on Assignment and Subletting. Tenant
acknowledges that Landlord has entered into this Lease in reliance on the
personal services and business expertise of Tenant. Tenant may not assign,
mortgage, hypothecate, pledge, or transfer any interest in this Lease, or in the
Leased Property, in whole or in part, without the prior written consent of
Landlord, which Landlord may withhold in its sole and absolute discretion. The
following transactions will be deemed an assignment or sublease requiring
Landlord's prior written consent: [i] an assignment by operation of law (other
than as a result of mergers, consolidation or other structured changes in Tenant
that will not cause Tenant to be in violation of Section 15.7; [ii] an
imposition (whether or not consensual) of a lien, mortgage, or encumbrance upon
Tenant's interest in the Lease; and [iii] an arrangement (including but not
limited to, management agreements, concessions, licenses, and easements) which
allows the use or occupancy of all or part of the Leased Property by anyone
other than Tenant or any other permitted manager. Landlord's consent to any
assignment or sublease will not release Tenant (or any guarantor) from its
payment and performance obligations under this Lease, but rather Tenant, any
guarantor, and Tenant's assignee or sublessee will be jointly and severally
liable for such payment and performance. An assignment or sublease without the
prior written consent of Landlord will be void at the Landlord's option.
Landlord's consent to one assignment or sublease will not waive the requirement
of its consent to any subsequent assignment or sublease. Subject to the
foregoing and Section 18.2, Landlord shall consent to a sublease of the Facility
or a management agreement, provided the sublessee or manager is an Affiliate and
the execution of the sublease or management agreement does not result in a lapse
in licensure.
18.2 Requests for Landlord's Consent to Assignment, Sublease
or Management Agreement. If Tenant requests Landlord's consent to a specific
assignment, sublease, or management agreement, Tenant shall give Landlord [i]
the name and address of the proposed assignee, subtenant or manager; [ii] a copy
of the proposed assignment, sublease or management agreement; [iii] reasonably
satisfactory information about the nature, business and business history of the
proposed assignee, subtenant, or manager and its proposed use of the Leased
Property; and [iv] banking, financial, and other credit information, and
references about the proposed assignee, subtenant or manager sufficient to
enable Landlord to determine the financial responsibility and character of the
proposed assignee, subtenant or manager. Any assignment, sublease or management
agreement shall contain provisions to the effect that [a] such assignment,
sublease or management agreement is subject and subordinate to all of the terms
and provisions of this Lease and to the rights of Landlord; [b] such assignment,
sublease or management agreement may not be modified without the prior written
consent of Landlord not to be unreasonably withheld or delayed; [c] if this
Lease shall terminate before the expiration of such assignment, sublease or
management agreement, the assignee, subtenant or manager thereunder will, at
Landlord's option, attorn to Landlord and waive any right the assignee,
subtenant or manager may have to terminate the assignment, sublease or
management agreement or surrender possession thereunder as a result of the
termination of this Lease; and [d] if the assignee, subtenant or manager
receives a written notice from Landlord stating that Tenant is in default under
this Lease, the assignee, subtenant or manager shall thereafter pay all rentals
or
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payments under the assignment, sublease or management agreement directly to
Landlord until such default has been cured. Tenant hereby collaterally assigns
to Landlord, as security for the performance of its obligations hereunder, all
of Tenant's right, title, and interest in and to any assignment, sublease or
management agreement now or hereafter existing for all or part of the Leased
Property. Tenant shall, at the request of Landlord, execute such other
instruments or documents as Landlord may request to evidence this collateral
assignment. If Landlord, in its sole and absolute discretion, consents to such
assignment, sublease, or management agreement, such consent shall not be
effective until [i] a fully executed copy of the instrument of assignment,
sublease or management agreement has been delivered to Landlord; [ii] in the
case of an assignment, Landlord has received a written instrument in which the
assignee has assumed and agreed to perform all of Tenant's obligations under the
Lease; and [iii] Tenant has paid to Landlord a fee in the amount of $1,500.00;
and [iv] Landlord has received reimbursement from Tenant or the assignee for all
reasonable attorneys' fees and expenses and all other reasonable out-of-pocket
expenses incurred in connection with determining whether to give its consent,
giving its consent and all matters relating to the assignment.
18.3 Agreements with Residents. Notwithstanding Section 18.1,
Tenant may enter into an occupancy agreement with residents of the Leased
Property without the prior written consent of Landlord provided that [i] the
agreement does not provide for lifecare services (a single payment to provide
services for the remainder of occupants life); [ii] Tenant may not collect rent
for more than one month in advance except that Tenant may collect security
deposits in an amount that does not exceed two months rent; and [iii] all
residents of the Leased Property are accurately shown in Tenant's accounting
records.
18.4 Sale of Leased Property. If Landlord or any subsequent
owner of the Leased Property sells the Leased Property, its liability for the
performance of its agreements in this Lease will end on the date of the sale of
the Leased Property, and Tenant will look solely to the purchaser for the
performance of those agreements. Landlord shall remain liable to Tenant for any
breach of this Lease by Landlord that occurs during the period of Landlord's
ownership of the Leased Property. For purposes of this section, any holder of a
mortgage or security agreement which affects the Leased Property at any time,
and any landlord under any lease to which this Lease is subordinate at any time,
will be a subsequent owner of the Leased Property when it succeeds to the
interest of Landlord or any subsequent owner of the Leased Property.
18.5 Assignment by Landlord. Landlord may transfer, assign,
mortgage, collaterally assign, or otherwise dispose of Landlord's interest in
this Lease or the Leased Property.
ARTICLE 19: HOLDOVER AND SURRENDER
19.1 Holding Over. Should Tenant, with or without the express
or implied consent of Landlord, continue to hold and occupy the Leased Property
after the expiration of the Term, such holding over beyond the Term and the
acceptance or collection of Rent by the Landlord shall operate and be construed
as creating a tenancy from month-to-month and not for any other term whatsoever.
Said month-to-month tenancy may be terminated by Landlord by
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giving Tenant 10 days written notice, and at any time thereafter Landlord may
re-enter and take possession of the Leased Property.
19.2 Surrender. Except for [i] Permitted Alterations; [ii]
normal and reasonable wear and tear (subject to the obligation of Tenant to
maintain the Leased Property in good order and repair during the Term); and
[iii] damage and destruction not required to be repaired by Tenant, Tenant shall
surrender and deliver up the Leased Property at the expiration or termination of
the Term in as good order and condition as of the Commencement Date.
ARTICLE 20: [RESERVED]
ARTICLE 21: QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT AND
ESTOPPEL CERTIFICATES
21.1 Quiet Enjoyment. So long as Tenant performs all of its
obligations under this Lease, Tenant's possession of the Leased Property will
not be disturbed by Landlord.
21.2 Subordination. Subject to the terms and conditions of
this section, this Lease and Tenant's rights under this Lease are subordinate to
any ground lease or underlying lease, first mortgage, first deed of trust, or
other first lien against the Leased Property, together with any renewal,
consolidation, extension, modification or replacement thereof, which now or at
any subsequent time affects the Leased Property or any interest of Landlord in
the Leased Property, except to the extent that any such instrument expressly
provides that this Lease is superior. The foregoing subordination provision is
expressly conditioned upon any lessor or mortgagee being obligated and bound to
recognize Tenant as the tenant under this Lease, and such lessor or mortgagee
shall have no right to disturb Tenant's possession, use and occupancy of the
Leased Property or Tenant's enjoyment of its rights under this Lease unless and
until an Event of Default occurs hereunder. Any foreclosure action or proceeding
by any mortgagee with respect to the Leased Property shall not affect Tenant's
rights under this Lease and shall not terminate this Lease unless and until an
Event of Default occurs hereunder. The foregoing provisions will be
self-operative, and no further instrument will be required in order to effect
them. However, Tenant shall execute, acknowledge and deliver to Landlord, at any
time and from time to time upon demand by Landlord, such documents as may be
requested by Landlord or any mortgagee or any holder of any mortgage or other
instrument described in this section, to confirm or effect any such
subordination, provided that any such document shall include a non-disturbance
provision as set forth in this section satisfactory to Tenant. Any mortgagee of
the Leased Property shall be deemed to be bound by the non-disturbance provision
set forth in this section. If Tenant fails or refuses to execute, acknowledge,
and deliver any such document within 20 days after written demand, Landlord may
execute acknowledge and deliver any such document on behalf of Tenant as
Tenant's attorney-in-fact. Tenant hereby constitutes and irrevocably appoints
Landlord, its successors and assigns, as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on behalf of Tenant any documents described in this
section. This power of attorney is coupled with an interest and is irrevocable.
21.3 Attornment. If any holder of any mortgage, indenture,
deed of trust, or other similar instrument described in Section 21.2 succeeds to
Landlord's interest in the Leased
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Property, Tenant will pay to such holder all Rent subsequently payable under
this Lease. Tenant shall, upon request of anyone succeeding to the interest of
Landlord, automatically become the tenant of, and attorn to, such successor in
interest without changing this Lease. The successor in interest will not be
bound by [i] any payment of Rent for more than one month in advance; [ii] any
amendment or modification of this Lease thereafter made without its consent as
provided in this Lease provided Tenant has knowledge that Landlord's interest
has been transferred and that such successor in interests consent is required;
[iii] any claim against Landlord arising prior to the date on which the
successor succeeded to Landlord's interest; or [iv] any claim or offset of Rent
against the Landlord. Upon request by Landlord or such successor in interest and
without cost to Landlord or such successor in interest, Tenant will execute,
acknowledge and deliver an instrument or instruments confirming the attornment.
If Tenant fails or refuses to execute, acknowledge, and deliver any such
instrument within 20 days after written demand, then Landlord or such successor
in interest will be entitled to execute, acknowledge, and deliver any document
on behalf of Tenant as Tenant's attorney-in-fact. Tenant hereby constitutes and
irrevocably appoints Landlord, its successors and assigns, as Tenant's
attorney-in-fact to execute, acknowledge, and deliver on behalf of Tenant any
such document. This power of attorney is coupled with an interest and is
irrevocable.
21.4 Estoppel Certificates. At the request of Landlord or any
mortgagee or purchaser of the Leased Property, Tenant shall execute,
acknowledge, and deliver an estoppel certificate, in recordable form, in favor
of Landlord or any mortgagee or purchaser of the Leased Property certifying the
following: [i] that the Lease is unmodified and in full force and effect, or if
there have been modifications that the same is in full force and effect as
modified and stating the modifications; [ii] the date to which Rent and other
charges have been paid; [iii] whether Tenant or Landlord is in default or
whether there is any fact or condition which, with notice or lapse of time, or
both, would constitute a default, and specifying any existing default, if any;
[iv] that Tenant has accepted and occupies the Leased Property; [v] that Tenant
has no defenses, set-offs, deductions, credits, or counterclaims against
Landlord, if that be the case, or specifying such that exist; and [vi] such
other information as may reasonably be requested by Landlord or any mortgagee or
purchaser. Any purchaser or mortgagee may rely on this estoppel certificate. If
Tenant fails to deliver the estoppel certificates to Landlord within 10 days
after the request of the Landlord, then Tenant shall be deemed to have certified
that [a] the Lease is in full force and effect and has not been modified, or
that the Lease has been modified as set forth in the certificate delivered to
Tenant; [b] Tenant has not prepaid any Rent or other charges except for the
current month; [c] Tenant has accepted and occupies the Leased Property; [d] to
Tenant's knowledge, neither Tenant nor Landlord is in default nor is there any
fact or condition which, with notice or lapse of time, or both, would constitute
a default; and [e] to Tenant's knowledge, Tenant has no defenses, set-offs,
deductions, credits, or counterclaims against Landlord. Tenant hereby
irrevocably appoints Landlord as Tenant's attorney-in-fact to execute,
acknowledge, and deliver on Tenant's behalf any estoppel certificate to which
Tenant does not object within the time period specified in Landlord's
transmittal of the certificate to Tenant. This power of attorney is coupled with
an interest and is irrevocable.
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ARTICLE 22: REPRESENTATIONS AND WARRANTIES
Tenant hereby makes the following representations and
warranties, as of the Effective Date, to Landlord and acknowledges that Landlord
is granting the Lease in reliance upon such representations and warranties.
Tenant's representations and warranties shall survive the Closing and, except to
the extent made as of a specific date, shall continue in full force and effect
until Tenant's Obligations have been performed in full.
22.1 Organization and Good Standing. Tenant is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is qualified to do business in and is in good standing
under the laws of the State.
22.2 Power and Authority. Tenant has the power and authority
to execute, deliver and perform this Lease. Tenant has taken all requisite
action necessary to authorize the execution, delivery and performance of
Tenant's obligations under this Lease.
22.3 Enforceability. This Lease constitutes a legal, valid,
and binding obligation of Tenant enforceable in accordance with its terms.
22.4 Government Authorizations. The Facility is in compliance
with all Legal Requirements. All Government Authorizations are in full force and
effect. Except as otherwise noted in Exhibit E, Tenant holds all Government
Authorizations necessary for the operation of the Facility as a 42 unit/42 bed
assisted living facility. Seller presently holds all Government Authorizations
necessary for the Facility's operation as a 42 unit/42 bed assisted living
facility. Upon admission of residence, Tenant will be authorized to operate the
Facility as a 42 unit/42 bed assisted living facility until a license to operate
the Facility is issued to Tenant. Tenant has filed all applications and reports
and taken all necessary action to obtain all Government Authorizations as soon
as possible after the Effective Date, subject to governmental approval, and
Tenant has no knowledge of any fact or circumstance that would prevent or delay
Tenant's obtaining of such Government Authorizations.
22.5 Financial Statements. Tenant has furnished Landlord with
true, correct, and complete copies of the Financial Statements. The Financial
Statements fairly present the financial position of Tenant, as of the respective
dates and the results of operations for the periods then ended in conformance
with generally accepted accounting principles applied on a basis consistent with
prior periods. The Financial Statements and other information furnished to
Landlord are true, complete and correct and, as of the Effective Date, no
material adverse change has occurred since the furnishing of such statements and
information. As of the Effective Date, the Financial Statements and other
information do not contain any untrue statement or omission of a material fact
and are not misleading in any material respect. Tenant is solvent, and no
bankruptcy, insolvency, or similar proceeding is pending or contemplated by or,
to the knowledge of Tenant, against Tenant.
22.6 Condition of Facility. To the best of Tenant's knowledge,
all of the mechanical and electrical systems, heating and air-conditioning
systems, plumbing, water and sewer systems, and all other items of mechanical
equipment or appliances are in good working order,
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condition and repair, are of sufficient size and capacity to service the
Facility for the Facility Uses and conform with all applicable ordinances and
regulations, and with all building, zoning, fire, safety, and other codes, laws
and orders. The Improvements, including the roof and foundation, are
structurally sound and free from leaks and other defects.
22.7 Compliance with Laws. To the best of Tenant's knowledge,
there is no violation of, or noncompliance with, [i] any laws, orders, rules or
regulations, ordinances or codes of any kind or nature whatsoever relating to
the Facility or the ownership or operation thereof (including without
limitation, building, fire, health, occupational safety and health, zoning and
land use, planning and environmental laws, orders, rules and regulations); [ii]
any covenants, conditions, restrictions or agreements affecting or relating to
the ownership, use or occupancy of the Facility; or [iii] any order, writ,
regulation or decree relating to any matter referred to in [i] or [ii] above.
22.8 No Litigation. As of the Effective Date [i] there are no
actions or suits, or any proceedings or investigations by any governmental
agency or regulatory body pending against Tenant or the Facility which, if
determined adversely to Tenant, would materially and adversely affect the
Facility, title thereto, operation thereof or the financial condition of Tenant
and Tenant has not received notice of any threatened actions, suits, proceedings
or investigations against Tenant or the Facility at law or in equity, or before
any governmental board, agency or authority, which, if determined adversely to
Tenant, would materially and adversely affect the Facility or title to the
Facility (or any part thereof), the right to operate the Facility as presently
operated, or the financial condition of Tenant; [ii] there are no unsatisfied or
outstanding material or adverse judgments against Tenant or the Facility; [iii]
there is no labor dispute materially and adversely affecting the operation or
business conducted by Tenant at the Facility; and [iv] Tenant has not been
notified in writing of any facts or circumstances which might reasonably form
the basis for any such action, suit, or proceeding.
22.9 Consents. The execution, delivery and performance of this
Lease will not require any consent, approval, authorization, order, or
declaration of, or any filing or registration with, any court, any federal,
state, or local governmental or regulatory authority, or any other person or
entity, the absence of which would materially impair the ability of Tenant to
operate the Facility as presently operated.
22.10 No Violation. The execution, delivery and performance of
this Lease [i] do not and will not conflict with, and do not and will not result
in a breach of the Articles of Incorporation or Bylaws of Tenant; [ii] do not
and will not conflict with, and do not and will not result in a breach of, and
do not and will not constitute a default under (or an event which, with or
without notice or lapse of time, or both, would constitute a default under), any
of the terms, conditions or provisions of any agreement or other instrument or
obligation to which Tenant is a party or by which its assets are bound; and
[iii] do not and will not violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Tenant or the Facility.
22.11 Reports and Statements. All reports, statements,
certificates and other data furnished by or on behalf of Tenant to Landlord in
connection with this Lease, and all representations and warranties made herein
or in any certificate or other instrument delivered in
47
<PAGE> 49
connection herewith and therewith, are true and correct in all material respects
and do not omit to state any material fact or circumstance necessary to make the
statements contained herein or therein, in light of the circumstances under
which they are made, not misleading as of the date of such report, statement,
certificate or other data. The copies of all agreements and instruments
submitted to Landlord, including, without limitation, all agreements relating to
management of the Facility, the Letter of Credit, and Tenant's working capital
are true, correct and complete copies and include all amendments and
modifications of such agreements.
22.12 ERISA. All plans (as defined in Section 4021(a) of the
Employee Retirement Income Security Act of 1974, as amended or supplemented from
time to time ("ERISA")) for which Tenant is an "employer" or a "substantial
employer" (as defined in Sections 3(5) and 4001(a)(2) of ERISA,
respectively) are in compliance with ERISA and the regulations and published
interpretations thereunder. To the extent Tenant maintains a qualified defined
benefit pension plan: [i] there exists no accumulated funding deficiency; [ii]
no reportable event and no prohibited transaction has occurred; [iii] no lien
has been filed or threatened to be filed by the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA; and [iv]
Tenant has not been deemed to be a substantial employer.
22.13 Chief Executive Office. Tenant maintains its chief
executive office and its books and records at the address set forth in the
introductory paragraph of this agreement.
22.14 Other Name or Entities. Tenant has not, since November
1, 1997, [i] changed its name, [ii] used any name other than the name stated at
the beginning of this agreement, or other than names under which Tenant's
facilities do business, such as the name of the Facility, or [iii] merged or
consolidated with, or acquired any of the assets of, any corporation or other
business, other than acquisitions of operating facilities.
22.15 Parties in Possession. Except as disclosed on Exhibit B,
there are no parties in possession of any Leased Property or any portion thereof
as managers, lessees, tenants at sufferance, or trespassers.
22.16 Access. Access to the Land is directly from a dedicated
public right-of-way without any easement. To the knowledge of Tenant, there is
no fact or condition which would result in the termination or reduction of the
current access to and from the Land to such right-of-way.
22.17 Utilities. There are available at the Land gas,
municipal water, and sanitary sewer lines, storm sewers, electrical and
telephone services in operating condition which are adequate for the operation
of the Facility at a reasonable cost. The Land has direct access to utility
lines located in a dedicated public right-of-way without any easement. As of the
Effective Date, there is no pending or, to the knowledge of Tenant, threatened
governmental or third party proceeding which would impair or result in the
termination of such utility availability.
22.18 Condemnation and Assessments. As of the Effective Date,
Tenant has not received notice of, and there are no pending or, to the best of
Tenant's knowledge, threatened, condemnation, assessment or similar proceedings
affecting or relating to the Facility, or any
48
<PAGE> 50
portion thereof, or any utilities, sewers, roadways or other public improvements
serving the Facility.
22.19 Zoning. As of the Effective Date, [i] the use and
operation of the Facility as a 42 unit/42 bed assisted living facility is a
permitted use under the applicable zoning code; [ii] except as disclosed on
Exhibit E hereto, no special use permits, conditional use permits, variances, or
exceptions have been granted or are needed for such use of each Facility; [iii]
the Land is not located in any special districts such as historical districts or
overlay districts; and [iv] the Facility has been constructed in accordance with
and complies with all applicable zoning laws, including but not limited to,
dimensional, parking, setback, screening, landscaping, sign and curb cut
requirements.
22.20 Pro Forma Statement. Tenant has delivered to Landlord a
true, correct and complete copy of the Pro Forma Statement. The Pro Forma
Statement shows Tenant's reasonable expectation of the most likely results of
Facility operations for the five year period.
22.21 Environmental Matters. During the period of Tenant's
ownership of the Leased Property, if any, and to the best of Tenant's knowledge
after diligent inquiry, for the period Tenant did not own the Leased Property,
[i] the Leased Property is in compliance with all Environmental Laws; [ii] there
were no releases of Hazardous Materials on, from, or under the Leased Property,
except in compliance with all Environmental Laws; [iii] no Hazardous Materials
have been, are or will be used, generated, stored, or disposed of on the Leased
Property, except in compliance with all Environmental Laws; [iv] no permit is or
has been required to be obtained by Tenant from the Environmental Protection
Agency or any similar agency or department of any state or local government for
the use or maintenance of any Improvements; and [v] no summons, citation or
inquiry has been made by any such environmental unit, body or agency or a third
party demanding any right of recovery for payment or reimbursement for costs
incurred under CERCLA or any other Environmental Laws and the Land is not
subject to the lien of any such agency. "Disposal" and "release" shall have the
meaning set forth in CERCLA.
22.22 Leases and Contracts. As of the Effective Date and
except as disclosed on Exhibit F, there are no leases or contracts (including
but not limited to, insurance contracts, maintenance contracts, construction
contracts, employee benefit plans, employment contracts, equipment leases,
security agreements, architect agreements, and management contracts) to which
Tenant is a party relating to any part of the ownership, operation, possession,
construction, management or administration of the Land or the Facility.
22.23 No Default. As of the Effective Date, [i] there is no
existing Event of Default under this Lease; and [ii] no event has occurred
which, with the giving of notice or the passage of time, or both, would
constitute or result in such an Event of Default. Except as disclosed to
Landlord in writing, Tenant and Sterling are not in default, after expiration of
any applicable grace period, under any Related Lease.
22.24 Tax Status. To the best of Tenant's knowledge, all
of the mechanical and electrical systems, heating and air conditioning systems,
plumbing, water and sewer systems, and
49
<PAGE> 51
all other items of mechanical equipment or appliances are in good working order,
condition and repair, or of sufficient size and capacity to service the Facility
as presently operated, and conform with all applicable ordinances and
regulations, and with all building, zoning, fire, safety, and other codes, laws
and orders. The Improvements, including the roof and foundation, are
structurally sound and free from leaks and other defects.
ARTICLE 23: FUTURE PROJECTS
23.1 Obligation for Future Projects. Subject to the
requirements, terms and conditions of the Commitment and this Lease, Landlord
has committed to finance additional assisted living facilities to be developed
by Tenant, Sterling or an Affiliate ("Tenant Projects"). Landlord's obligation
to provide financing for each Tenant Project is subject to the satisfaction of
Landlord's due diligence requirements and the closing conditions set forth in
the Commitment.
ARTICLE 24: SECURITY INTEREST
24.1 Collateral. Tenant hereby grants to Landlord a security
interest in the following described property, whether now owned or hereafter
acquired by Tenant (the "Collateral"), to secure the payment and performance of
Tenant's obligations under this Lease:
(a) All machinery, furniture, equipment, trade
fixtures, appliances, inventory and all other goods (as "equipment," "inventory"
and "goods" are defined for purposes of Article 9 ("Article 9") of the Uniform
Commercial Code as adopted in the State) and any leasehold interest of Tenant in
any of the foregoing (except for any leasehold interest in property owned by
Landlord), now or hereafter located in or on or used or usable in connection
with the Land, Improvements, or Fixtures and replacements, additions, and
accessions thereto, including without limitation those items which are to become
fixtures or which are building supplies and materials to be incorporated into an
Improvement or Fixture.
(b) All accounts, contract rights, general
intangibles, instruments, documents, and chattel paper [as "accounts", "contract
rights", "general intangibles", "instruments", "documents", and "chattel paper",
are defined for purposes of Article 9] now or hereafter arising in connection
with the business located in or on or used or usable in connection with the
Land, Improvements, or Fixtures, and replacements, additions, and accessions
thereto.
(c) All franchises, permits, licenses, operating
rights, certifications, approvals, consents, authorizations and other general
intangibles regarding the use, occupancy or operation of the Improvements, or
any part thereof, including without limitation, certificates of need, state
health care facility licenses, and Medicare and Medicaid provider agreements, to
the extent permitted by law.
(d) Unless expressly prohibited by the terms thereof,
all contracts, agreements, contract rights and materials relating to the design,
construction or operation of the Improvements, including but not limited to,
plans, specifications, drawings, blueprints, models, mock-ups, brochures,
flyers, advertising and promotional materials and mailing lists.
50
<PAGE> 52
(e) All ledger sheets, files, records, computer
programs, tapes, other electronic data processing materials, and other
documentation relating to the preceding listed property or otherwise used or
usable in connection with the Land and Improvements.
(f) The products and proceeds of the preceding listed
property, including without limitation cash and non-cash proceeds, proceeds of
proceeds, and insurance proceeds.
24.2 Additional Documents. At the request of Landlord, Tenant
shall execute additional security agreements, financing statements, and such
other documents as may be requested by Landlord to maintain and perfect such
security interest. Tenant hereby irrevocably appoints Landlord, its successors
and assigns, as Tenant's attorney-in-fact to execute, acknowledge, deliver and
file such documents on behalf of Tenant. This power of attorney is coupled with
an interest and is irrevocable.
24.3 Notice of Sale. With respect to any sale or other
disposition of any of the Collateral after the occurrence of an Event of
Default, Landlord and Tenant agree that the giving of five days notice by
Landlord, sent by overnight delivery, postage prepaid, to Tenant's notice
address designating the time and place of any public sale or the time after
which any private sale or other intended disposition of such Collateral is to be
made, shall be deemed to be reasonable notice thereof and Tenant waives any
other notice with respect thereto.
ARTICLE 25: MISCELLANEOUS
25.1 Notices. Landlord and Tenant hereby agree that all
notices, demands, requests, and consents (hereinafter "notices") required to be
given pursuant to the terms of this Lease shall be in writing, shall be
addressed to the addresses set forth in the introductory paragraph of this
Lease, and shall be served by [i] personal delivery; [ii] United States mail,
postage prepaid; or [iii] nationally recognized overnight courier; provided,
however, that any notice of an Event of Default shall be served by (I) personal
delivery; (ii) certified United States mail, postage prepaid, return receipt
requested; or (iii) nationally recognized overnight courier. A copy of any
notice given to Tenant shall be sent to Miriam J. Dent, Esq., Rogers & Hardin,
229 Peachtree Street, N.E., 2700 International Tower, Peachtree Center, Atlanta,
Georgia 30303, but the failure to give the notice required by this sentence
shall not affect the validity or effectiveness of the notices to Tenant
hereunder. All notices shall be deemed to be given upon the earlier of actual
receipt or three business days after mailing, or one business day after deposit
with the overnight courier. Any notices meeting the requirements of this section
shall be effective, regardless of whether or not actually received. Landlord or
Tenant may change its notice address at any time by giving the other party
notice of such change.
25.2 Advertisement of Leased Property. In the event the
parties hereto have not executed a renewal Lease within 120 days prior to the
expiration of this Lease, then Landlord or its agent shall have the right to
enter the Leased Property at all reasonable times for the purpose of exhibiting
the Leased Property to others and to place upon the Leased Property for and
during the period commencing 120 days prior to the expiration of this Lease,
"for sale" or "for rent" notices or signs.
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<PAGE> 53
25.3 Entire Agreement. The Commitment and this Lease
constitute the entire agreement between Landlord and Tenant with respect to the
subject matter hereof. No representations, warranties, and agreements have been
made by Landlord except as set forth in the Commitment and this Lease. If there
is any direct conflict between the terms and provisions of the Commitment and
the terms of this Lease, this Lease shall govern. Tenant hereby reaffirms the
Commitment and all provisions thereof. The Commitment shall survive the
execution of this Lease.
25.4 Severability. If any term or provision of this Lease is
held to be invalid or unenforceable, such holding shall not affect the remainder
of this Lease and the same shall remain in full force and effect, unless such
holding substantially deprives Tenant of the use of the Leased Property or
Landlord of the rents herein reserved, in which event this Lease shall forthwith
terminate as if by expiration of the Term.
25.5 Captions and Headings. The captions and headings are
inserted only as a matter of convenience and for reference and in no way define,
limit or describe the scope of this Lease or the intent of any provision hereof.
25.6 Governing Law. This Lease shall be construed under the
laws of the State.
25.7 Memorandum of Lease. Tenant shall not record this Lease.
Tenant may, however, record a memorandum of lease approved by Landlord.
25.8 Waiver. No waiver by Landlord of any condition or
covenant herein contained, or of any breach of any such condition or covenant,
shall be held or taken to be a waiver of any subsequent breach of such covenant
or condition, or to permit or excuse its continuance or any future breach
thereof or of any condition or covenant, nor shall the acceptance of Rent by
Landlord at any time when Tenant is in default in the performance or observance
of any condition or covenant herein be construed as a waiver of such default, or
of Landlord's right to terminate this Lease or exercise any other remedy granted
herein on account of such existing default.
25.9 Binding Effect. This Lease will be binding upon and inure
to the benefit of the heirs, successors, personal representatives, and permitted
assigns of Landlord and Tenant.
25.10 Power of Attorney. Effective upon [i] the occurrence and
during the continuance of an Event of Default or upon [ii] termination of the
Lease, Tenant hereby irrevocably and unconditionally appoints Landlord, or
Landlord's authorized officer, agent, employee or designee, as Tenant's true and
lawful attorney-in-fact, to act for Tenant in Tenant's name, place, and stead,
to execute, deliver and file all applications and any and all other necessary
documents or things to effect the issuance, transfer, reinstatement, renewal
and/or extension of any and all Governmental Authorizations issued to Tenant or
applied for by Tenant in connection with Tenant's operation of the Facility, to
permit any transferee to operate the Facility under the Governmental
Authorizations, and to do any and all other acts incidental to any of the
foregoing. Tenant irrevocably and unconditionally grants to Landlord as its
52
<PAGE> 54
attorney-in-fact full power and authority to do and perform every act necessary
and proper to be done in the exercise of any of the foregoing powers as fully as
Tenant might or could do if personally present or acting, with full power of
substitution, hereby ratifying and confirming all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of attorney is
coupled with an interest and is irrevocable prior to the full performance of
Tenant's Obligations. Except in the case of an emergency, Landlord shall give
Tenant three business days prior written notice before acting on behalf of
Tenant pursuant to this power of attorney.
25.11 No Offer. Landlord's submission of this Lease to Tenant
is not an offer to lease the Leased Property, or an agreement by Landlord to
reserve the Leased Property for Tenant. Landlord will not be bound to Tenant
until Tenant has duly executed and delivered duplicate original leases to
Landlord, and Landlord has duly executed and delivered one of these duplicate
original leases to Tenant.
25.12 Modification. This Lease may only be modified by a
writing signed by both Landlord and Tenant except for the automatic extension of
the Term pursuant to Section 1.2. All references to this Lease, whether in this
Lease or in any other document or instrument, shall be deemed to incorporate all
amendments, modifications and renewals of this Lease, made after the date
hereof. If Tenant requests Landlord's consent to any change in ownership, merger
or consolidation of Tenant, any assumption of the Lease, or any modification of
the Lease, Tenant shall provide Landlord all relevant information and documents
sufficient to enable Landlord to evaluate the request. In connection with any
such request, Tenant shall pay to Landlord a fee in the amount of $1,500.00 and
shall pay all of Landlord's reasonable attorney's fees and expenses and other
reasonable out-of-pocket expenses incurred in connection with Landlord's
evaluation of Tenant's request, the preparation of any documents and amendments,
the subsequent amendment of any documents between Landlord and its collateral
pool lenders (if applicable), and all related matters.
25.13 Landlord's Modification. Tenant acknowledges that
Landlord may mortgage the Leased Property or use the Leased Property as
collateral for a collateralized mortgage obligations or Real Estate Mortgage
Investment Companies (REMICS). If any mortgage lender of Landlord desires any
modification of this Lease, Tenant agrees to consider such modification in good
faith and to execute an amendment of this Lease if Tenant finds such
modification acceptable in Tenant's reasonable discretion provided such
modification does not materially diminish Tenant's rights under the Lease.
25.14 No Merger. The surrender of this Lease by Tenant or the
cancellation of this Lease by agreement of Tenant and Landlord or the
termination of this Lease on account of Tenant's default will not work a merger,
and will, at Landlord's option, terminate any subleases or operate as an
assignment to Landlord of any subleases. Landlord's option under this paragraph
will be exercised by notice to Tenant and all known subtenants of the Leased
Property.
25.15 Laches. No delay or omission by either party hereto to
exercise any right or power accruing upon any noncompliance or default by the
other party with respect to any of the terms hereof shall impair any such right
or power or be construed to be a waiver thereof.
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<PAGE> 55
25.16 Limitation on Tenant's Recourse. Tenant's sole recourse
against Landlord, and any successor to the interest of Landlord in the Leased
Property, is to the interest of Landlord, and any such successor, in the Leased
Property. Tenant will not have any right to satisfy any judgment which it may
have against the Landlord, or any such successor, from any other assets of
Landlord, or any such successor. In this section, the terms "Landlord" and
"successor" include the shareholders, venturers, and partners of "Landlord" and
"successor" and the officers, directors, and employees of the same. The
provisions of this section are not intended to limit Tenant's right to seek
injunctive relief or specific performance.
25.17 Construction of Lease. This Lease has been prepared by
Landlord and its professional advisors and reviewed by Tenant and its
professional advisors. Landlord, Tenant, and their advisors believe that this
Lease is the product of all their efforts, that it expresses their agreement,
and agree that it shall not be interpreted in favor of either Landlord or Tenant
or against either Landlord or Tenant merely because of their efforts in
preparing it.
25.18 Counterparts. This Lease may be executed in multiple
counterparts, each of which shall be deemed an original hereof.
25.19 Custody of Escrow Funds. Any funds paid to Landlord in
escrow hereunder may be held by Landlord or, at Landlord's election, by a
financial institution, the deposits or accounts of which are insured or
guaranteed by a federal or state agency. The funds shall not be deemed to be
held in trust, may be commingled with the general funds of Landlord or such
other institution, and shall not bear interest.
25.20 Landlord's Status as a REIT. Tenant acknowledges that
Landlord has now and may hereafter elect to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code.
25.21 Exhibits. The following exhibits are attached hereto and
incorporated herein:
Exhibit A: Legal Description
Exhibit B: Permitted Exceptions
Exhibit C: Documents to be Delivered
Exhibit D: Certificate and Facility Financial Report
Exhibit E: Government Authorizations
Exhibit F: List of Leases and Contracts
25.22 Waiver of Jury Trial. Landlord and Tenant waive trial by
jury in any action, proceeding or counterclaim brought by either of them against
the other on all matters arising out of this Lease or the use and occupancy of
the Leased Property (except claims for personal injury or property damage). If
Landlord commences any summary proceeding for nonpayment of Trent, Tenant will
not interpose, and waives the right to interpose, any counterclaim in any such
proceeding.
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25.23 Attorney's Fees and Expenses. Tenant shall pay to
Landlord all reasonable costs and expenses incurred by Landlord in administering
this Lease and the security for this Lease, enforcing or preserving Landlord's
rights under this Lease and the security for this Lease, and in all matters of
collection, whether or not an Event of Default has actually occurred or has been
declared and thereafter cured, including but not limited to, [a] reasonable
attorney's and paralegal's fees and disbursements; [b] the fees and expenses of
any litigation, administrative, bankruptcy, insolvency, receivership and any
other similar proceeding; [c] court costs; [d] the expenses of Landlord, its
employees, agents, attorneys and witnesses in preparing for litigation,
administrative, bankruptcy, insolvency and other proceedings and for lodging,
travel, and attendance at meetings, hearings, depositions, and trials; and [e]
consulting and witness fees incurred by Landlord in connection with any
litigation or other proceeding.
25.24 CONSENT TO JURISDICTION. TENANT HEREBY IRREVOCABLY
SUBMITS AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR
FEDERAL COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO FOR ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO [I] THE
COMMITMENT; [II] THIS LEASE; OR [III] ANY DOCUMENT EXECUTED BY TENANT IN
CONNECTION WITH THIS LEASE. TENANT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT TENANT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. TENANT AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW.
TENANT AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING
AGAINST LANDLORD OR ANY DIRECTOR, OFFICER, EMPLOYEE, AGENT OR PROPERTY OF
LANDLORD, CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THE COMMITMENT,
THIS LEASE OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A STATE OR FEDERAL
COURT HAVING JURISDICTION OVER LUCAS COUNTY, OHIO, WAUKESHA COUNTY, WISCONSIN OR
MAURY COUNTY, TENNESSEE.
TENANT HEREBY CONSENTS TO SERVICE OF PROCESS BY LANDLORD IN
ANY MANNER AND IN ANY JURISDICTION PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT
OR IMPAIR LANDLORD'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY
LAW, OR LANDLORD'S RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST TENANT OR THE
PROPERTY OF TENANT IN THE COURTS OF ANY OTHER JURISDICTION.
25.25 Survival. The following provisions shall survive
termination of the Lease: Article 9 (Damage & Destruction); Article 10
(Condemnation); Article 16 (Alterations); and Section 25.25 (Survival).
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<TABLE>
IN WITNESS WHEREOF, the parties hereto have executed this
Lease or caused the same to be executed by their respective duly authorized
officers as of the date first set forth above.
Signed and acknowledged
in the presence of HCRI TENNESSEE PROPERTIES, INC.
By: HCRI Tennessee Properties, L.P.,
Its General Partner
<S> <C>
Signature By: /s/ Erin C. Ibele
----------------------------------- -----------------------------------------
Print Name
----------------------------------- Title:Vice President, Corporate Secretary
-----------------------------------
Signature
-----------------------------------
Print Name
-----------------------------------
ALTERNATIVE LIVING SERVICES, INC.
d/b/a ALTERRA
Signature By: /s/ Mark Ohlendorf
----------------------------------- ------------------------------------------
Print Name
----------------------------------- Title: Senior Vice President
------------------------------------
Signature
-----------------------------------
Print Name Tax I.D. No.: 39-1771281
----------------------------------- ------------------
</TABLE>
STATE OF OHIO )
) SS:
COUNTY OF LUCAS )
The foregoing instrument was acknowledged before me this ___
day of March, 1999 by _________________________, the _________________________
of HCRI Tennessee Properties, L.P., a Tennessee limited partnership, as the
general partner of HCRI Tennessee Properties, Inc., a Delaware corporation, on
behalf of the corporation.
-------------------------------
Notary Public
My Commission Expires: [SEAL]
---------------
56
<PAGE> 58
STATE OF WISCONSIN )
) SS:
COUNTY OF WAUKESHA )
The foregoing instrument was acknowledged before me this ___
day of March, 1999 by _________________________, the _________________________
of Alternative Living Services, Inc. d/b/a Alterra, a Delaware corporation, on
behalf of the corporation.
-------------------------------
Notary Public
My Commission Expires: --------------- [SEAL]
THIS INSTRUMENT PREPARED BY:
OKSANA M. LUDD, ESQ.
SHUMAKER, LOOP & KENDRICK, LLP
1000 JACKSON STREET
57
<PAGE> 1
EXHIBIT 10.14
SCHEDULE OF HEALTH CARE REIT LEASES
WHICH ARE SUBSTANTIALLY IN THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.13 TO THE COMPANY'S FORM
10-Q FOR THE PERIOD ENDING 6/30/99
<TABLE>
<CAPTION>
LEASING ORIGINAL HEALTH CARE
FACILITY NAME LOCATION COMMITMENT FEE REIT INVESTMENT ANNUAL BASE RENT
- ------------- -------- -------------- -------------------- ----------------
<S> <C> <C> <C> <C>
Alterra Clare Bridge of Salem 1355 Boone Road, SE $562,030 $5,620,298 $525,500
Salem, OR 97306
Alterra Wynwood of Rochester 3035 Salem Meadows Dr. 666,711 6,667,105 620,048
Rochester, MN 55902
Alterra Sterling House of 5011 Trotwood Avenue 263,562 2,635,620 245,338
Columbia Columbia, TN 38401
Alterra Clare Bridge of #4 Walden Ridge Drive 369,268 3,692,675 344,487
Asheville Asheville, NC 28803
Alterra Sterling House of N. 105 North Hills Drive 339,000 3,390,000 269,171
Augusta N. Augusta, SC 29841
Alterra Clare Bridge of Adams 500 Seven Fields 514,750 5,147,504 470,723
Seven Fields, PA 16046
Alterra Clare Bridge of Everett 2015 Lake Heights Drive 687,620 6,876,202 627,180
Everett, WA 98208
Alterra Clare Bridge of 3501 Converse Drive 320,094 3,200,939 298,322
Wilmington Wilmington, NC 28412
Alterra Sterling House of 1119 Perry Drive NW 239,810 2,398,100 236,753
Canton Canton, OH 44708
Alterra Sterling House of 2183 Memorial Drive 262,228 2,622,279 242,561
Clarksville Clarksville, TN 37043-4447
</TABLE>
<PAGE> 1
EXHIBIT 11.1 COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic:
Net income attributable to common shares ..................................... $ 4,838 $ 4,875 $ 6,266 $ 8,458
======= ======= ======= =======
Weighted average common shares outstanding ................................... 22,085 21,912 22,080 21,840
======= ======= ======= =======
Per share amount ............................................................. $ 0.22 $ 0.22 $ 0.28 $ 0.39
======= ======= ======= =======
Diluted:
Net income ................................................................... $ 4,838 $ 4,875 $ 6,266 $ 8,458
Net effect of convertible debentures based on the
if-converted method, assuming 100% conversion:
$35,000,000, 6.75%, due 2006 ............................................. 391 591 782 1,181
$50,000,000, 7.0%, due 2004 .............................................. 587 875 1,174 1,750
$143,750,000, 5.25%, due 2002 ............................................ 1,295 1,887 1,590 3,773
------- ------- ------- -------
Net income (loss) attributable to common shares .............................. $ 7,111 $ 8,228 $ 9,812 $15,162
======= ======= ======= =======
Weighted average common shares outstanding ................................... 22,085 21,912 22,080 21,840
Net effect of convertible debentures based on the if-converted method,
assuming 100% conversion:
$35,000,000, 6.75%, due 2006 ............................................. 1,717 1,717 1,717 1,717
$50,000,000, 7.0%, due 2004 .............................................. 2,469 2,469 2,469 2,469
$143,750,000, 5.25%, due 2002 ............................................ 5,000 5,000 5,000 5,000
Net effect of dilutive stock options based on the Treasury stock method, using
average market price........................................................ 260 501 362 527
------- ------- ------- -------
Totals ................................................................... 31,531 31,599 31,628 31,553
======= ======= ======= =======
Per share amount ............................................................. $ 0.23 $ 0.26 $ 0.31 $ 0.48
======= ======= ======= =======
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS OF ALTERRA
HEALTHCARE CORPORATION FILED WITH THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND RELATED FOOTNOTES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 57,930
<SECURITIES> 0
<RECEIVABLES> 7,244
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 106,337
<PP&E> 756,037
<DEPRECIATION> (29,476)
<TOTAL-ASSETS> 893,081
<CURRENT-LIABILITIES> 61,348
<BONDS> 634,873
0
0
<COMMON> 179,264
<OTHER-SE> 5,295
<TOTAL-LIABILITY-AND-EQUITY> 893,081
<SALES> 174,811
<TOTAL-REVENUES> 174,811
<CGS> 0
<TOTAL-COSTS> 157,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,075
<INCOME-PRETAX> 16,296
<INCOME-TAX> 6,193
<INCOME-CONTINUING> 10,103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 3,837
<NET-INCOME> 10,103
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.28
</TABLE>
