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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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[MARK ONE]
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-11999
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ALTERRA HEALTHCARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 39-1771281
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
10000 INNOVATION DRIVE
MILWAUKEE, WI 53226
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (414) 918-5000
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<S><C>
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE AMERICAN STOCK EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
COMMON STOCK, PAR VALUE $.01 AMERICAN STOCK EXCHANGE
5.25% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2002 AMERICAN STOCK EXCHANGE
SERIES A JUNIOR PREFERRED STOCK PURCHASE RIGHTS AMERICAN STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. | |
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $94,056,168 as of March 24, 2000. The number of outstanding
shares of the Registrant's Common Stock was 22,100,032 shares as of March 24,
2000.
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Documents Incorporated by Reference
Portions of the Registrant's definitive proxy statement for its 2000 Annual
Meeting of Stockholders are incorporated into Part III.
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The statements in this annual report on Form 10-K relating to matters that are
not historical facts, including, but not limited to, statements found in Item 1.
"Business" and Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are forward looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from expectations. These include, without limitation, those set forth
under "Item 1. Business". These and other risks are set forth in the reports
filed by us with the Securities and Exchange Commission.
PART I
References in this report to the "Company," "us" or "we" refer to Alterra
Healthcare Corporation and its subsidiaries.
ITEM 1. BUSINESS
OVERVIEW
We are a leading national assisted living company operating assisted living
residences and providing assisted living services in 27 states. Our growth in
recent years has had a significant impact on our results of operations and
accounts for most of the changes in our results between 1999 and 1998. As of
December 31, 1999 and 1998, we operated or managed 450 and 350 residences with
aggregate capacity of approximately 20,700 and 15,000 residents, respectively.
We, together with other parties who have purchased interests in some of our
development residences, are also constructing or developing 55 additional
residences with additional capacity for 2,900 residents as of December 31, 1999.
During 1999, we generated operating revenue of $376.2 million and realized
operating income of $44.9 million and net income of $8.8 million prior to the
non-recurring charge, other one time adjustments and the cumulative effect of a
change in accounting principle.
Since 1993, we have grown as a result of our development and acquisition
activities, which have focused on purpose built, free-standing assisted living
residences. We have announced our intention to discontinue or defer a
substantial portion of our development projects not yet in construction in light
of the competitive environment and tighter capital markets.
In October 1997, we completed our merger (the "Sterling Merger") with Sterling
House Corporation ("Sterling"), which at the time of the merger operated 104
residences with an aggregate capacity of approximately 3,900 residents. In May
1996, we acquired New Crossings International Corporation ("Crossings"), an
assisted living company which operated 15 Crossings residences with a capacity
to accommodate approximately 1,420 residents throughout the western United
States; and in January 1996, we acquired Heartland Retirement Services, Inc.
("Heartland"), an assisted living company which operated 20 WovenHearts
residences with an aggregate capacity of approximately 330 residents throughout
Wisconsin. The Sterling Merger was accounted for as a pooling-of-interests and
both of the 1996 acquisition transactions were accounted for as purchases.
During the fourth quarter of 1999, we began to implement several strategic
initiatives designed to strengthen our balance sheet and to enable us to focus
on stabilizing and enhancing our core business operations. The principal
components of these strategic initiatives include (i) a substantial reduction in
our development activity; (ii) a reduction in our utilization of and reliance
upon the use of joint venture (so called "black box" ) arrangements; (iii)
deleveraging our balance sheet; and (iv) focusing our activities on improving
the Company's cash flow. To implement these strategic initiatives and to address
our short- and long-term liquidity and capital needs, we intend to secure an
equity or equity-linked investment in the Company of at least $100 million
during the second quarter of 2000 (the "Equity Transaction").
Our statements in this annual report relating to matters that are not historical
facts are forward-looking statements based on our management's belief and
assumptions based upon currently available information. Although we believe that
the expectations reflected in these forward-looking statements are reasonable,
we are unable to provide assurances that our expectations will prove to be
correct. Forward-looking 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, our need for
additional financing and liquidity, our ability to implement our new strategic
initiatives and improve cash flow, risks associated with our development and
construction activities, risks associated with acquisitions, competition,
governmental regulation and other uncertainties outlined in our reports filed
with the Securities and Exchange Commission. Should one or more of these risks
materialize (or the consequences of one or more of these risks worsen) or should
our underlying assumptions prove incorrect, our actual results of operation and
our financial position in the future could differ materially from those
forecasted or expected. We do not assume any duty to publicly update these
forward-looking statements.
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NEW CORPORATE BRAND NAME
In May of 1999, we changed the name of the corporation to Alterra Healthcare
Corporation. In doing so we have created a corporate brand name, Alterra, to
provide better consumer recognition of our products and service offerings. Our
residences operate under several brand names, including Clare Bridge, and Clare
Bridge Cottage, the brand names of our primary free-standing, dementia care
models, Wynwood, the brand name of our upper income, frail elderly model,
Sterling House, the brand name of our moderately priced frail elderly model, and
Alterra Villas, the brand name of our independent living model. Through the
Alterra brand name, we intend to create a strong, corporate level brand identity
across all of our residence model and service level offerings. We believe that
corporate level branding will leverage our national scale and will focus
potential residents and referral sources on the range of services we offer
rather than those offered by a single residence model. In addition, we believe
that corporate level branding will provide an opportunity to reduce future
marketing expenditures by eliminating duplication inherent in marketing each
product line and residence model separately.
ASSISTED LIVING SERVICES
We offer a full range of assisted living services based upon individual resident
needs. Prior to admission, residents are assessed by our staff to determine the
appropriate level of personal care and services required. Subsequently,
individual service agreements are developed by residence staff in conjunction
with the residents, their families and their physicians. These plans are
periodically reviewed, typically at six month intervals, or when a change in
medical or cognitive status occurs.
FRAIL-ELDERLY SERVICES. We offer residents 24-hour assistance with activities of
daily living ("ADLs"), ongoing health assessments, organized social activities,
three meals a day plus snacks, housekeeping and personal laundry services. All
residents are assessed at admission to determine the level of personal care and
service required and placed in a care level ranging from basic care to different
levels of advanced personal care. In addition, in some locations we offer our
residents exercise programs and programs designed to address issues associated
with early stages of Alzheimer's and other forms of dementia as more fully
described below.
Basic Care. At this level, residents are provided with a variety of
services, including 24 hour assistance with ADLs, ongoing health
assessments, three meals per day and snacks, coordination of special
diets planned by a registered dietitian, assistance with coordination
of physician care, social and recreational activities, housekeeping and
personal laundry services.
Additional Care. We also offer higher levels of personal care services
to residents who require more frequent or intensive physical assistance
or increased personal care and supervision due to cognitive
impairments. We refer to this care as "YourCare." Pricing for YourCare
is determined using a proprietary assessment tool which determines
additional services provided above basic care. Charges are based on
market rates and the cost of additional personal care required,
typically staffing. Rates charged for these services are added to the
rate charged for basic personal care, and depends upon the level and
frequency of personal care required and staffing needs. Residents
requiring the highest personal care level are typically very physically
frail or experiencing early stages of Alzheimer's disease or other
dementia. Physically frail residents may require medication management,
assistance with various ADLs, two-person transfer from a wheelchair or
incontinence care. Residents with cognitive impairment may require
frequent staff interaction and intervention due to confusion.
RISE (Restoring Independence, Strength and Energy). Some Wynwood
residences also offer RISE, a one-on-one exercise program designed to
help residents regain their independence and become healthier, and
stronger by improving flexibility, balance, strength and endurance. The
program is targeted to residents with health concerns related to
Parkinson's disease, strokes, osteoarthritis, osteoporosis, congestive
heart disease, hip fractures and other limitations in ambulation and
mobility. Monthly rates for the program range from $90 to $400
depending on the frequency and duration of sessions.
ESP (Extended Support Program). ESP, also offered at some Wynwood
residences, is a program designed to provide additional structure and
personal attention to residents with early stages of dementia.
Scheduled group recreational activities and social events help
residents build self-esteem and decrease anxiety related to confusion
and disorientation. The ESP program has been successful in retaining
residents who, due to their dementia, might otherwise need to relocate
to a more supportive environment. The monthly program rates range from
$325 to $450.
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Personal care and supportive services are offered in different residence models
which incorporate our philosophy of preserving resident's privacy, encouraging
choice and fostering independence in a home-like setting.
- - Wynwood. These multi-story residences are designed to serve primarily upper
income frail elderly individuals in metropolitan and suburban markets. The
Wynwood residences typically range in size from 37,500 to 45,000 square
feet and accommodate 60 to 78 residents. To achieve a more residential
environment in these large buildings, each wing or "neighborhood" in the
residence contains design elements scaled to a single-family home and
includes a living room, dining room, patio or enclosed porch, laundry room
and personal care area, as well as a care giver work station. We
customarily charge monthly rates per resident ranging from $1,800 to $2,700
for a shared room and from $2,500 to $3,100 for a private room. The average
rate in Wynwood residences during the fourth quarter of 1999 was
approximately $2,200.
- - Sterling House. These apartment-style residences are generally located in
select suburban communities and in small or medium sized towns with
populations of 10,000 or more persons. These residences range in size from
20,000 to 30,000 square feet and usually contain from 33 to 50 private
apartments, offering residents a choice of studio, one-bedroom and
one-bedroom deluxe apartments. These apartments typically include a bedroom
area, private bath, living area, individual temperature control and
kitchenettes and range in size from 320 to 420 square feet. Common space is
dispersed throughout the building and is residentially scaled. We
customarily charge monthly rates per resident from $1,300 to $2,800
depending on the apartment type, level of services required, resident
acuity and the geographic location of the residence. The average rate in
Sterling House residences during the fourth quarter of 1999 was
approximately $2,100.
- - Villas. These private apartment-style residences are designed to serve
upper income independent individuals in metropolitan and suburban markets.
The Villas residences typically range in size from 45,000 to 65,000 square
feet and contain 63 to 218 private apartments. These apartments typically
include a bedroom area, private bath, living/dining area, and kitchenettes
and range in size from 280 to 700 square feet. We offer a secure building
with comfortable common areas and pleasant outdoor surroundings. We
customarily charge monthly rates per resident ranging from $1,125 to $2,750
depending on the apartment type, level of services required, and geographic
location of the residence. The average rate in Villas residences during the
fourth quarter of 1999 was approximately $1,500.
ALZHEIMER'S DEMENTIA SERVICES. We believe we are one of the leading providers of
care to residents with cognitive impairments, including Alzheimer's and other
dementias, in our free-standing Clare Bridge and Clare Bridge Cottage
residences. Our programs provide the attention, personal care and services
needed to help cognitively impaired residents maintain a higher quality of life.
Specialized services include assistance with ADLs, behavior management and an
activities program, the goal of which is to provide a normalized environment
that supports resident's remaining functional abilities. Whenever possible,
residents participate in all facets of daily life at the residence, such as
assisting with meals, laundry and housekeeping.
Our specially designed, free-standing dementia residence models serve the
programmatic needs of individuals with Alzheimer's disease and other dementias.
Our dementia model residents typically require higher levels of personal care
and services as a result of their progressive decline in cognitive abilities,
including impaired memory, thinking and behavior. These residents require
increased supervision because they are typically highly confused, wander prone
and incontinent.
- - Clare Bridge. Our Clare Bridge dementia residence model ranges in size from
20,500 to 28,000 square feet, is a single-story residence accommodating 38
to 52 residents and is primarily located in metropolitan and suburban
markets. We seek to create a "home-like" setting that addresses the
resident's cognitive limitations using internal neighborhoods consisting of
rooms which are scaled to the size typically found in an upper-income,
single family home with the same level of furniture, fixtures and
carpeting. Key features specific to the needs of Clare Bridge residents
generally include indoor wandering paths, a simulated "town-square" area,
secure outdoor spaces with raised gardening beds, directional aids to
assist in "wayfinding" such as signs, color-coded neighborhoods and memory
boxes with the resident's photograph outside of their unit, and
specifically designed furniture suitable for incontinent residents. We
generally charge monthly rates per resident ranging from $2,800 for a
shared room to $4,000 for a private room in our Clare Bridge residences.
The average rate in Clare Bridge residences during the fourth quarter of
1999 was approximately $3,100.
- - Clare Bridge Cottage. During 1998 we introduced dementia residence models
focused on smaller to medium sized markets where income levels would not
support a more upscale Clare Bridge model. These residences range from 20
to 40 residents and offer services similar to the Clare Bridge. These
buildings resemble the Sterling House architectural styles with
enhancements for wandering paths, security and other features associated
with Clare Bridge. We customarily charge monthly rates between $2,600 and
$3,500 for services provided in the Clare Bridge Cottage. The average rate
in Clare Bridge Cottage residences during the fourth quarter of 1999 was
approximately $2,700.
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ACCESS TO SPECIALIZED MEDICAL SERVICES. In addition to our care and supportive
services we assist our residents with the coordination of access to medical
services from third parties, including home health care, rehabilitation therapy,
pharmacy services and hospice care. These providers are often reimbursed
directly by the resident or a third party payor, such as Medicare. In the
future, we may elect to provide these services directly using our own employees
or through contracts or joint venture agreements with other providers.
Commencing in early 1999, Crystal Health LLC, a joint venture formed by us and
Omnicare, Inc., a national institutional pharmacy company, commenced providing
pharmaceutical care services and medications to our residents and other elderly
customers.
JOINT VENTURES AND STRATEGIC ALLIANCES
Historically we have formed strategic alliances and joint ventures with
established real estate development and financial partners. These alliances and
joint ventures enabled us to develop and construct additional residences while
reducing the investment of, and associated risk to, us. Although we intend to
reduce our utilization and reliance upon joint venture and other off-balance
sheet ownership structures in the future, we operated or managed approximately
87 residences utilizing these types of arrangements as of December 31, 1999.
Joint Venture with Pioneer Development Company. In 1996, we established a joint
venture relationship (the "ALS-Northeast J.V.") with Pioneer Development
Company, a Syracuse, New York-based commercial real estate development and
construction company ("Pioneer"), to develop, own and operate assisted living
residences in targeted market areas throughout New York, Massachusetts,
Connecticut and Rhode Island (the "ALS-Northeast Territory"). We agreed with
Pioneer to capitalize and form separate project entities during a five-year
development term commencing in September 1996 to develop, construct, open and
operate residences in the ALS-Northeast Territory, with the Company and Pioneer
owning and funding either a 51% and 49% equity interest, a 65% and 35% equity
interest, or an 80% and 20% equity interest, respectively, in these project
entities. Under some circumstances, the development term for one or more states
in the ALS-Northwest Territory will be extended or shortened from the original
five-year term. During the development term, the Company and Pioneer have agreed
not to independently engage in other competitive activities in the ALS-Northeast
Territory, subject to limited exceptions. Pioneer will provide development and
construction management services to the ALS-Northeast J.V. and we will manage
the ALS-Northeast residences, all pursuant to agreed upon arrangements. Any
losses from the operation of residences jointly owned or leased by Alterra and
Pioneer are allocated on a basis consistent with the economic risk assumed by
each of the partners, which results in losses being disproportionately allocated
to Pioneer to the extent of its capital.
With respect to each ALS Northeast Territory residence, upon the first to occur
of (i) a residence achieving a 75% occupancy or (ii) the six-month anniversary
of the opening of a residence, Pioneer shall have the right to require us to
purchase Pioneer's interest in the residence (put option) and we shall have an
option to acquire (call option) Pioneer's interest in a ALS-Northeast residence.
The purchase price payable upon exercise of the put and call options are based
on the appraised fair market value of the residence or leasehold interest and
shall be payable in cash and/or shares of our Common Stock. At December 31,
1999, 12 of our residences were held in joint ventures with Pioneer.
Synthetic Lease Joint Venture Arrangements. In December 1998, we agreed to
purchase 28 assisted living residences from Manor Care and its affiliates, 26 of
which we acquired by obtaining approximately $190 million of financing through a
synthetic lease arrangement structured by Key Global Finance, an affiliate of
Key Bank National Association. The synthetic lease is a financing arrangement
that is similar to the sale/leaseback financing that has been offered to the
assisted living industry by various healthcare real estate investment trusts
(REITs), but under which the lessee party is treated as the fee owner of the
subject property for tax purposes and is entitled to acquire the leased property
for a predetermined price at the conclusion of the synthetic lease term.
Pursuant to this synthetic lease arrangement, an affiliate of Key Bank, Pita
General Corporation (the "Synthetic Lessor"), purchased the fee interest in the
26 residences from Manor Care and its affiliates (20 of the residences were
acquired by the Synthetic Lessor as of July 20, 1999 and the other six
residences were acquired as of September 30, 1999) utilizing mortgage loan
financing provided by Greenwich Capital Financial Products, Inc. ("Greenwich").
Greenwich's loan to the Synthetic Lessor is secured by, among other collateral,
mortgages on the 26 residences as well as by a surety bond provided by the
Centre group of companies, a member of the Zurich Financial Services Group. The
Greenwich loan is also secured by our guaranty as well as by our pledge of our
general partner interest in each of the "Synthetic Lease JVs" described below.
Simultaneously with its acquisition of the 26 residences, (i) the Synthetic
Lessor leased all 26 residences to AHC Tenant, Inc., one of our wholly-owned
subsidiaries ("AHC Tenant"), and (ii) AHC Tenant subleased the residences to the
26 Synthetic Lease JVs. Accordingly, each Synthetic Lease JV is operating its
respective residence pursuant to the terms of a sublease.
Each of the 26 "Synthetic Lease JVs" is a Delaware limited partnership having us
as the 1% general partner and TPI-HCR, LLC, a Delaware limited liability company
("TPI-HCR"), as the 99% limited partner.
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From June 30, 1999 through September 30, 1999, TPI-HCR contributed a total of
$15,750,000 of equity to the 26 Synthetic Lease JVs (with us also contributing
equity commensurate with our 1% interest therein). Then, in October 1999,
TPI/MFG Investors L.P., a Delaware limited partnership ("TPI/MFG"), was
organized to acquire a limited partner interest in TPI-HCR for an equity
contribution of $5,000,000, which amount was in turn contributed by TPI-HCR to
the capital of the Synthetic Lease JVs. We are the 1% general partner of
TPI/MFG and we also hold a 33.6% interest as a limited partner, having
contributed total equity to TPI/MFG in the amount of $1,728,723. The remaining
$3,271,277 of TPI/MFG's capital was contributed by a number of third-party
investors in exchange for limited partner interests aggregating 65.426%.
All profit and gain allocations and distributions of each of the Synthetic Lease
JVs, TPI-HCR, and TPI/MFG are made in proportion to the members' contributed
capital (subject to a preference totaling $942,123 to be paid to members of
TPI-HCR other than TPI/MFG to provide them with a negotiated return on, but not
a return of, their contributed capital through the date of TPI/MFG's investment
in October 1999). We have been retained by each Synthetic Lease JV to manage the
operations of its respective residence for a management fee and have also
received fees for certain other services rendered in connection with the
synthetic lease joint venture.
TPI-HCR has a currently exercisable "put option" to sell to us its interest in
any or all of the Synthetic Lease JVs. The purchase price payable by us pursuant
to the "put option" would be equal to the amount that TPI-HCR would receive if
the particular Synthetic Lease JV were to sell its respective residence at fair
market value (as determined pursuant to one or more appraisals), allocate any
resulting gain or loss as provided in the applicable partnership agreement,
satisfy all creditors, and then distribute any remaining proceeds to the JV
partners in liquidation of the Synthetic Lease JV in accordance with the
partnership agreement. Further, we have a currently exercisable "call option" to
purchase from TPI-HCR its interest in any or all of the Synthetic Lease JVs at a
purchase price equal to an amount computed to return to TPI-HCR its paid-in
capital contributions plus provide a negotiated return thereon. However, each
Synthetic Lease JV partnership agreement provides that a book account is to be
maintained to track the excess, if any, of any call option price paid with
respect to any Synthetic Lease JV over the price that would have been paid
pursuant to an exercise of the put option with respect to the Synthetic Lease
JV, with us ultimately being required also to pay such excess to TPI-HCR to the
extent (if any) that TPI-HCR does not receive the negotiated return on its
aggregate capital contributions to all the Synthetic Lease JVs.
The third-party limited partner investors in TPI/MFG, upon the election of a
majority (by percentage ownership) thereof, have the right to sell to us
all (but not less than all) of their interests in TPI/MFG. This "put option"
generally will be exercisable by the investors commencing in May 2000. The
purchase price payable by us pursuant to the put option would be equal to the
amount that the limited partner investors would receive if TPI/MFG were to sell
its membership interest in TPI-HCR at fair market value (as determined pursuant
to one or more appraisals), allocate any resulting gain or loss as provided in
the TPI/MFG partnership agreement, satisfy all creditors, and then distribute
any remaining proceeds to the TPI/MFG partners in liquidation of TPI/MFG in
accordance with its partnership agreement. Further, we have a call option to
purchase all (but not less than all) of the limited partner investors' interests
in TPI/MFG generally at any time at a purchase price equal to an amount computed
to return to the limited partner investors their paid-in capital contributions
plus provide a negotiated return thereon.
Franchise Arrangement with Eby Holdings. We have a franchise relationship with
Eby Holdings Inc. ("Eby"). Under the terms of this agreement, Eby receives the
right to build and operate residences using our branding, designs and operating
systems in designated geographic areas. Currently, Eby operates 21 residences in
the states of Iowa and Nebraska under the Sterling House brand. In consideration
for a franchise relationship, we receive fees payable at the opening of the
franchised residence. In addition, we receive fees equal to 3% of resident
service revenue generated by the franchised residences. We have options to
purchase franchised residences based on fixed valuation criteria or actual
prices per unit and right of first refusal.
Development Arrangement with Investor Group. In December 1998 and March 1999, we
entered into a series of transactions with a group of investors (the "Investor")
pursuant to which we agreed to develop for the Investor 16 assisted
living/dementia care residences in our construction or development pipeline. The
Investor acquired our development rights in these 16 projects for approximately
$21 million. We have agreed to complete construction of these residences on the
Investor's behalf, and will be reimbursed by the Investor for costs incurred
related to this construction (estimated to be approximately $56.0 million). We
also agreed to provide a $10 million supplemental financing loan to the Investor
to permit them to satisfy a portion of obligations not financed through third
party mortgages for these residences. The supplemental financing loan matures on
the date of maturity of the third party mortgages. In addition, we have agreed
to loan the Investor up to $1.6
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million for working capital purposes and to guarantee, subject to limitations,
the Investor's third party mortgage financing of the residences.
Alterra and the Investor also entered into a (i) development agreement
pursuant to which we are providing the development and management services
necessary to develop and construct the residences for a fee, and (ii) management
agreement pursuant to which we will manage the completed residences on terms
generally consistent with our other management agreements. We have a right of
first offer with respect to any proposed sale of these residences by the
Investor.
Joint Venture with Manor Care, Inc. On December 31, 1998, Alterra and Manor
Care, Inc., f/k/a HCR Manor Care, Inc. ("Manor Care") agreed to establish and
capitalize a joint venture to develop up to $500 million of Alterra-branded
Alzheimer's/dementia care and assisted living residences in Manor Care's core
markets over a three to five year period. Specifically, each of Alterra and
Manor Care agreed to transfer (at capitalized cost) development projects to this
venture from their respective development pipelines, forming separate joint
venture project entities to acquire, develop, own and operate each such project.
It was intended that majority equity ownership interests in these joint venture
project entities be funded and held by third-party investors.
On June 30, 1999, 14 Manor Care residences were placed into a joint venture
structure pursuant to the joint venture agreement with Manor Care. Those
residences were each transferred by Manor Care (or a subsidiary thereof) to a
separate Delaware limited partnership having HCR/Alterra Development LLC ("DevCo
I") (an entity owned 50% by us and 50% by Manor Care) as the 10% general
partner and a number of third-party investors as the 90% (in the aggregate)
limited partners. The total equity contributed to these "DevCo I JVs" by the
limited partners (excluding the 10% equity contribution by DevCo I as general
partner) has been $15.2 million.
The cash needs of each DevCo I JV were originally met by a combination of equity
contributions from DevCo I JV members and bridge loans from Manor Care, with
such bridge loans to be repaid upon the DevCo I JVs obtaining bank financing for
the residence. In addition to funding the purchase of the applicable residence
from Manor Care, each DevCo I JV has utilized such proceeds to complete
construction of the applicable residence and to fund startup losses during the
lease-up of such residence.
All profit and gain allocations and distributions of the DevCo I JVs are made in
proportion to the members' contributed capital (i.e., 90% to the limited partner
investors; 10% to DevCo I as general partner). Losses are allocated to the
members in proportion to contributed capital, with any losses in excess of
contributed capital to be allocated to DevCo I. We have been retained by
thirteen of the DevCo I JVs to manage the operations of its respective residence
for a management fee. Alterra and Manor Care have also received fees for certain
other services rendered in connection with the DevCo I joint venture.
Thirteen of the DevCo I JVs obtained construction/mini-perm mortgage financing
from a syndicate of banks assembled by Bank of America, which financing is
providing for approximately 75%-80% of the DevCo I JVs' projected capital needs.
Each of Manor Care and Alterra have guaranteed repayment of the Bank of America
facility, and Manor Care will receive for its guaranty an initial debt guaranty
fee equal to 1 1/4% and an ongoing debt guaranty fee equal to 1/2% per annum
(for the initial 18 months of the joint venture). Manor Care is also entitled to
a fee of $40,000 per residence related to the closing of the secured financing
for each residence.
The limited partner investors in each DevCo I JV, upon the election of a
majority (by percentage ownership) thereof, have the right to sell to us all
(but not less than all) of their interests in that or any or all other DevCo I
JVs. This put option generally is exercisable by the limited partners anytime
after one year from the date that the residence owned by the applicable DevCo I
JV first opens for business (the "Opening Date"). Upon any exercise of the put
option, DevCo I shall be obligated to sell to us all of its interest in that
particular DevCo I JV on the same terms as the sale of the limited partners'
interests. The purchase price payable by us pursuant to the put option would be
equal to the amount that the limited partners would receive if the DevCo I JV
were to sell its respective residence at fair market value (as determined
pursuant to one or more appraisals), allocate any resulting gain or loss as
provided in the applicable partnership agreement, satisfy all creditors, and
then distribute any remaining proceeds to the JV members in liquidation of the
DevCo I JV in accordance with the partnership agreement. Further, we have a
"call option" to purchase all (but not less than all) of the limited partners'
interests DevCo I JVs generally anytime after the applicable Opening Date at a
purchase price equal to an amount computed to return to the limited partners
their paid-in capital contributions plus provide a negotiated return in that
particular DevCo I JV thereon. Upon any exercise of the call option, we are
obligated to purchase all of DevCo I's interest on the same terms as the
purchase of the limited partners' Interests.
On September 30, 1999, an additional 29 residences were placed into a joint
venture structure pursuant to the joint venture
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agreement with Manor Care. Manor Care transferred 6 of the residences and we
transferred 16 properties constituting 23 residences (i.e., 7 of our properties
are "campus" properties having 2 residences each) to 22 separate Delaware
limited liability companies having HCR/Alterra Development II, LLC ("DevCo II")
as the 10% managing member and an unrelated investor as a 90% member (the "DevCo
II Investor"). The DevCo II Investor does not have any economic interest in any
of the 14 DevCo I JVs. The total equity contributed to these 22 "DevCo II JVs"
by the DevCo II Investor (excluding the 10% equity contribution by DevCo II) has
been $8.0 million.
The cash needs of each DevCo II JV have been met by a combination of the equity
contributions from the DevCo II Investor and DevCo II and from bridge loans made
by the party (as between Alterra and Manor Care) who transferred the particular
residence to such DevCo II JV, with such bridge loans to be repaid upon the
DevCo II JV's obtaining bank financing for the residence. In addition to funding
the purchase of the applicable residence from us or Manor Care, as the case may
be, each DevCo II JV has utilized such proceeds to develop and construct the
applicable residence and/or to fund startup losses during the lease-up of such
residence.
All profit and gain allocations and distributions of the DevCo II JVs are made
in proportion to the members' contributed capital (i.e., 90% to the DevCo II
Investor; 10% to DevCo II). Losses are allocated to the members in proportion to
contributed capital, with any losses in excess of contributed capital to be
allocated to DevCo II. We have been retained by each DevCo II JV to manage the
operations of its respective residence for a management fee. We and Manor Care
have also received fees for certain other services rendered in connection with
the DevCo II joint venture.
We have a "call option", currently exercisable through April 30, 2000, to
purchase the DevCo II Investor's interests in all (but not less than all) of the
DevCo II JVs at a purchase price equal to an amount computed to return to the
DevCo II Investor its paid in capital contributions plus provide a negotiated
return. Upon any exercise of that call option, we may also purchase DevCo II's
interests in any or all of the DevCo II JVs at a purchase price equal to the
amount of DevCo II's capital contributions (i.e., $888,888, if DevCo II's
interests in all of the DevCo II JVs were to be purchased). Upon any exercise of
these call options, we may elect to require Manor Care to acquire directly from
the DevCo II Investor and DevCo II their respective interest in those six DevCo
II JVs owning residences that were acquired from Manor Care or its affiliates.
In the event of such an election, the total call option price payable
(calculated as of March 31, 2000) to the Devco II Investor by Manor Care with
respect to those six Devco II JVs would be approximately $3.0 million, with our
purchase price for the remaining 16 Devco II JVs (again, which own 23
residences) being approximately $8.0 million. In the event that we do not
exercise the call option with respect to the DevCo II Investor's interests by
the April 30, 2000 expiration date, the DevCo II Investor thereafter will have a
"fair market value" put option to us similar to that described above with
respect to the DevCo I JV limited partner investors and, if such put option is
not exercised, will also have the right to remove us as managing member and as
the day-to-day operational manager of each DevCo II JV and also may cause the
DevCo II JVs to sell their respective residences at the DevCo II Investor's
discretion.
DevCo II has not been able to obtain third-party mortgage financing to refinance
the DevCo II JV bridge loans from us and from Manor Care and to otherwise fund
the development, construction, and startup expenditures for the DevCo II JV
residences. As a result, we currently anticipate and are exploring the
disposition by sale of the DevCo II JV residences to one or more third parties.
In the course of our effort to dispose of these residences, we may elect to buy
out the DevCo II Investor by exercising the call option for its interests in
these entities.
Other Joint Venture Structures. We are a party to various other joint venture
arrangements pursuant to which we and other third party partners are jointly
developing, constructing and operating Alterra-branded assisted living
residences. Generally, the Company and our joint venture partner form and
capitalize a limited partnership or a limited liability company that either
acquires a fee interest or a leasehold interest in an assisted living residence
under development by us. Our percentage equity interests in these joint venture
entities varies from joint venture to joint venture, ranging from 1% minority
interests up to 80% majority interests. These joint venture entities typically
retain us as manager pursuant to a market rate management agreement. Pursuant to
the operative agreements, we have the right to acquire (call option) the joint
venture partner's equity interest in the joint venture entity at a price based
upon an agreed upon return on investment or fair market value to the joint
venture partner. Similarly, after a specified waiting period, the joint venture
partner has the right to require us to purchase (put option) the partner's
equity interest in the joint venture entity at a price based upon the appraised
fair market value of the residence operated by the joint venture entity. Any
losses from the operation of residences owned or leased by these joint venture
structures are generally allocated on a basis consistent with the respective
partner's interest in overall cash distributions and the economic substance of
the joint venture arrangement, which may result in losses being
disproportionately allocated to the joint venture partners to the extent of
their invested capital.
GOVERNMENT REGULATION
Healthcare is an area of extensive and frequent regulatory change. The assisted
living industry is relatively new and, accordingly, the manner and extent to
which it is regulated at the Federal and state levels is evolving.
Our assisted living residences are subject to regulation and licensing by state
and local health and social service agencies and other regulatory authorities.
In some states in which we operate, the term "assisted living" may have a
statutory definition limited to a particular type of program or population. Some
of our assisted living residences may fall into other licensing categories or
may not require licensing in states with specific "assisted living" programs,
although these residences may offer services requiring licensure (e.g., licensed
home care services). Although regulatory requirements vary from state to state,
these requirements generally address, among other things: personnel education,
training and records; staffing levels; facility services, including
administration and assistance with self-administration of medication, and
limited nursing services; physical residence specification; furnishing of
residence units; food and housekeeping services; emergency evacuation plans; and
residence rights and responsibilities. New Jersey, Kentucky and Illinois also
require each assisted living residence to obtain a
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Certificate of Need ("CON") prior to its opening. Our residences are also
subject to various state or local building codes and other ordinances, including
safety codes. We anticipate that the states which are establishing regulatory
frameworks for assisted living residences will require licensing of assisted
living residences and will establish varying requirements with respect to this
licensing.
We have obtained all required licenses for each of our residences and expect
that we will obtain all required licenses for each new residence. Each of our
licenses must be renewed annually or biannually. We have also obtained a CON for
each residence under construction or development in New Jersey and Kentucky.
There is no construction or development currently in Illinois.
Like other health care facilities, assisted living residences are subject to
periodic survey or inspection by governmental authorities. From time to time in
the ordinary course of business, we receive deficiency reports. We review these
reports and seek to take appropriate corrective action. Although most inspection
deficiencies are resolved through a plan of correction, the reviewing agency
typically is authorized to take action against a licensed facility where
deficiencies are noted in the inspection process. Action may include imposition
of fines, imposition of a provisional or conditional license or suspension or
revocation of a license or other sanctions. Any failure by us to comply with
applicable requirements could have a material adverse effect on our business,
financial condition and results of operations. We believe that our residences
are in substantial compliance with all applicable regulatory requirements.
Federal and state anti-remuneration laws, such as the Medicare/Medicaid
anti-kickback law, govern some financial arrangements among health care
providers and others who may be in a position to refer or recommend patients to
providers. These laws prohibit, among other things, direct and indirect payments
that are intended to induce the referral of patients to, the arranging for
services by, or, the recommending of, a particular provider of health care items
or services. The Medicare/Medicaid anti-kickback law has been broadly
interpreted to apply to contractual relationships between health care providers
and sources of patient referral. State anti-remuneration laws vary from state to
state. Violation of these laws can result in loss of licensure, civil and
criminal penalties, and exclusion of health care providers or suppliers from
participation in (i.e., furnishing covered items or services to beneficiaries)
the Medicare and Medicaid programs. Although we receive only a minor portion of
our total revenues from Medicaid waiver programs and are otherwise not a
Medicare or Medicaid provider or supplier, we are subject to these laws because
(i) applicable state laws typically apply regardless of whether Medicare or
Medicaid payments are at issue and (ii) some of our assisted living residences
maintain contracts with health care providers and practitioners, including
pharmacies, home health organizations and hospices, through which the health
care providers make their health care products or services (some of which may be
covered by Medicare or Medicaid) available to our residents. There can be no
assurance that these laws will be interpreted in a manner consistent with our
practices.
In order to comply with the terms of the revenue bonds used to finance nine of
our residences, we are required to lease a minimum of 20% of the apartments in
each of the nine residences to low or moderate income persons as defined
pursuant to the Internal Revenue Code of 1986, as amended.
We are subject to the Fair Labor Standards Act, which governs matters including
minimum wage, overtime and other working conditions. A portion of our personnel
is paid at rates related to the federal minimum wage and accordingly, increases
in the minimum wage will result in an increase in our labor costs.
The sale of franchises is regulated by the Federal Trade Commission and by state
agencies located in jurisdictions other than those states where we currently
operate. Principally, these regulations require that written disclosures be made
prior to the offer for sale of a franchise. The disclosure documents are subject
to state review and registration requirements and must be periodically updated,
not less frequently than annually. In addition, some states have relationship
laws which prescribe the basis for terminating a franchisee's rights and
regulate both our and our franchisee's post-termination rights and obligations.
We are not aware of any non-compliance by the Company with applicable regulatory
requirements that would have a material adverse effect on our financial
condition or results of operations.
COMPETITION
The long-term care industry is highly competitive and, given the relatively low
barriers to entry and continuing health care costs containment pressures, we
expect that the assisted living segment of the industry will become increasingly
competitive in the future. We compete with other providers of elderly
residential care on the basis of the breadth and quality of our services, the
quality of our residences and, with respect to private pay patients or
residents, price. We also compete with other providers of long-term care in the
acquisition and development of additional residences. Our current and potential
competitors include national, regional and local operators of long-term care
residences, extended care centers,
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assisted/independent living centers, retirement communities, home health
agencies and similar providers, many of which have significantly greater
financial and other resources than we have. In addition, we compete with a
number of tax-exempt nonprofit organizations which can finance capital
expenditures on a tax-exempt basis or receive charitable contributions
unavailable to us and which are generally exempt from income tax. While our
competitive position varies from market to market, we believe that we compete
favorably in substantially all of the markets in which we operate based on key
competitive factors such as the breadth and quality of services offered,
residence quality, recruitment and retention of qualified health care personnel
and reputation among local referral sources.
TRADEMARKS
Sterling House(R), Crossings(R), WovenHearts(R), Wynwood(R), Clare Bridge(R),
and Clare Bridge Cottage(R) are registered service marks of ours and we claim
service mark protection in the marks Alternative Living Services(SM), Clare
Bridge(SM), Crystal Health Services(SM), and Alterra(SM).
EMPLOYEES
At December 31, 1999, we employed approximately 9,400 full-time employees and
4,400 part-time employees. None of our employees are represented by a collective
bargaining group.
FACTORS AFFECTING FUTURE RESULTS AND REGARDING FORWARD-LOOKING STATEMENTS
Our business, results of operations and financial condition are subject to many
risks, including those set forth below. In addition, the following important
factors, among others, could cause our actual results to differ materially from
those expressed in our forward-looking statements in this report and presented
elsewhere by us from time to time. When used in this report, the words
"believes," "anticipates" and similar expressions are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. We undertake no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date of this report or to reflect the occurrence of
unanticipated events. The following discussion highlights some of these risks
and others are discussed in this Form 10-K herein or in other documents filed by
us with the Securities and Exchange Commission.
RISKS ASSOCIATED WITH SHORTFALL IN LIQUIDITY. We will require a significant
amount of additional capital to complete the construction of residences under
construction and to fund the operating losses associated with newly open
residences until such residences reach stabilized occupancy. In addition, as
noted below, we have substantial debt and operating lease payment obligations.
The combination of a difficult financing and operating environment for
healthcare service companies has significantly reduced our access to additional
capital. A number of our traditional financing sources, including commercial
banks and other secured lenders have substantially reduced their lending
activities to the healthcare sector. In addition, the credit availability under
certain of our credit facilities has either been reduced or eliminated due to a
variety of factors, including our requests for modifications of some of the
financial covenants in certain of our credit agreements. To address our need for
capital, we are in the process of seeking to raise at least $100.0 million of
equity or equity-linked financing and expect to consummate such a transaction
during the second quarter of 2000. While we believe that we will be able to
consummate the Equity Transaction, there can be no assurances that we will do
so. If we are not able to consummate the Equity Transaction in a timely fashion,
we may not have sufficient liquidity to fund our construction and development
activities and to satisfy our debt and lease payment obligations. Because of
cross-default and cross-collateralization provisions in various of our
mortgages, debt instruments and in many of our leases, a default on one of our
payment obligations could result in acceleration of other obligations and could
materially adversely affect the Company. See "Substantial Debt and Operating
Lease Payment Obligations," "Development and Construction Risks" and
"Managment's Discussion and Analysis and Results of Operations -- Liquidity and
Capital Resources."
SUBSTANTIAL DEBT AND OPERATING LEASE PAYMENT OBLIGATIONS. We had lease expense
of $69.4 million and $44.2 million excluding sublease income for the years ended
December 31, 1999 and 1998, respectively, and our total indebtedness as of
December 31, 1999 was $830.6 million, and our net interest expense was $35.9
million and $11.0 million for the years ended December 31, 1999 and 1998,
respectively. Debt and annual operating lease payment obligations will continue
to increase significantly as we complete our pending construction and
development activities. In addition, development-stage residences may be
financed with construction loans and, therefore, there is a risk that, upon
completion of construction and/or lease up, permanent financing for newly
developed residences may not be available or may be available only on terms that
are unfavorable or unacceptable to us. Approximately $38.9 million of our total
indebtedness matures before December 31, 2000.
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Historically, we have not consistently had sufficient earnings to cover fixed
charges. In 1999, earnings were insufficient to cover fixed charges by $4.1
million prior to the non-recurring charge, other one time adjustments and the
cumulative effect of a change in accounting principle; and insufficient by $13.9
million for 1998. There can be no assurance that we will generate sufficient
cash flow to meet our future obligations. Any payment default or other default
with respect to outstanding obligations could cause the lender to foreclose upon
the residences securing the indebtedness or, in the case of an operating lease,
to terminate the lease, with a consequent loss of income and asset value to us.
Moreover, as noted above, the cross-default and cross-collateralization
provisions in various of our mortgages, debt instruments, and in many of our
leases, could result in acceleration of other obligations and adversely affect a
significant number of our other residences if we default in one of our payment
obligations. See "Need for Additional Financing; Risk of Rising Interest Rates."
OPERATING LOSSES ASSOCIATED WITH NEW RESIDENCES. Newly opened assisted living
residences typically operate at a loss during the first six to 18 months of
operation, primarily due to the incurrence of fixed and variable expenses in
advance of the achievement of targeted rent and service fee revenues from the
lease-up of these residences. As of December 31, 1999, of our 450 residences, 67
newly developed residences opened during 1999 and 27 residences purchased during
1999 were in lease up. In addition, the development and construction of assisted
living residences requires the commitment of substantial capital over a typical
six to 12 month construction period, the consequence of which may be an adverse
impact on our liquidity. As of December 31, 1999, we had 53 residences under
construction and two residences under development. In the case of acquired
residences, resident turnover and increased marketing expenditures which may be
required to reposition these residences, together with the possible disruption
of operations resulting from the implementation of renovations, may adversely
impact the financial performance of these residences for a period of time after
their acquisition. In addition, occupancy levels and the rates which we may be
able to charge for our services may be adversely affected in competitive market
circumstances which would negatively impact the operating results of affected
residences. Accordingly, there can be no assurance that we will not experience
unforeseen expenses, difficulties, complications and delays which could result
in greater than anticipated operating losses or otherwise materially adversely
affect our financial condition and results of operations. See "Development and
Construction Risks" and "--Competition."
ABILITY TO MANAGE EXPANSION AND BUSINESS DIVERSIFICATION. We intend to review
and, in appropriate circumstances, pursue opportunities for development and
expansion of new products and services, such as home health care, rehabilitation
and pharmacy services. Efforts to achieve business diversification, however, are
subject to risks, including our relative unfamiliarity with these businesses,
additional uncertainties related to government regulation and possible
difficulties in integrating new products or businesses.
NEED FOR FINANCING TO COMPLETE CONSTRUCTION AND FUND OPERATING LOSSES. We will
need to obtain sufficient financing to fund our remaining development and
construction activities. As of December 31, 1999, we had 53 residences under
construction and two residences under development. We estimate that we will
incur between $115.0 million and $125.0 million of additional costs to complete
these residences, of which between $65.0 million and $70.0 million relate to
Company owned or leased residences and between $50.0 million and $55.0 million
relate to residences which we are jointly developing with other parties. As
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources," some of our lenders
have required that we complete the Equity Transaction by the end of the second
quarter of 2000. If we do not complete the Equity Transaction by that time, our
lenders may not continue to make advances under our credit arrangements in a
manner that would allow us to finish our pending construction activity. In
addition, there can be no assurance that we will not experience unforeseen
expenses, difficulties, complications and delays which could result in greater
than anticipated operating losses or otherwise materially adversely affect our
financial condition and results of operations. We believe that upon successful
completion of the Equity Transaction the financing available from our existing
credit arrangements and pursuant to other sources of financing that we expect
would then be available to us would be sufficient to fund our remaining
development and acquisition activities.
We will from time to time seek additional funding through public or private
financing, including equity or debt financing. If additional funds are raised by
issuing equity or equity-linked securities, which we expect to do as part of the
Equity Transaction, our stockholders may experience dilution. In addition, we
will require significant financial resources to meet our operating and working
capital needs, including contractual obligations to purchase the equity interest
of joint venture partners in residences owned in joint ventures. See "Joint
Ventures and Related Mandatory Purchase Obligations." There can be no assurance
that any newly constructed residences will achieve a stabilized occupancy rate
and attain a resident mix that meet our expectations or generate sufficient
positive cash flow to cover operating and financing costs associated with these
residences. There can be no assurance that we 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 us. A lack of funds may
require us to delay or eliminate all or some of our development projects and
acquisition plans. In addition, we may require additional financing to enable us
to respond to
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changing economic conditions, to expand our development program, although no
such expansion is currently under consideration, or to account for changes in
assumptions related to our development program.
Approximately $337.0 million, or 40.6%, of our total indebtedness as of December
31, 1999 was subject to floating interest rates. Although a majority of our debt
and lease payment obligations are not subject to floating interest rates,
indebtedness that we may incur in the future may bear interest at a floating
rate. We expect to restructure $130.8 million of our fixed rate debt in 2000
and, as a result, convert this into variable rate debt. See "Quantitative and
Qualitative Disclosures about Market Risk." In addition, future fixed rate
indebtedness and lease obligations will be based on interest rates prevailing at
the time these arrangements are obtained. Therefore, increases in prevailing
interest rates could increase our interest or lease payment obligations and
could have an adverse effect on our business, financial condition and results of
operations.
DEVELOPMENT AND CONSTRUCTION RISKS. As of December 31, 1999, we had 53
residences under construction and two residences under development. Development
projects generally are subject to various risks, including zoning, permitting,
health care licensing and construction delays, that may result in construction
cost overruns and longer development periods and, accordingly, higher than
anticipated start-up losses. Project management is subject to a number of
contingencies over which we will have little or no control and which might
adversely affect project costs and completion time. These contingencies include
shortages of, or the inability to obtain, labor or materials, the inability of
the general contractor or subcontractors to perform under their contracts,
strikes, adverse weather conditions and changes in applicable laws or
regulations or in the method of applying these laws and regulations. In
addition, we have slowed down this construction until the Equity Transaction is
completed. One of our principal construction lenders has delayed making further
advances on five residences currently in construction. As a result, liens have
been filed on these construction projects resulting in defaults under the
operative construction loan credit agreements. Although we have obtained waivers
through June 30, 2000 of these defaults, payment of these suppliers and
contractors will need to be effected in order to permanently resolve these
defaults. In addition, additional liens or lawsuits may be filed by contractors
and subcontractors unless the credit facility can be restored, which will in
turn result in further defaults under the operative credit agreements. Moreover,
upon resuming construction we may incur increased costs in order to complete
construction. As a result of these various factors, there can be no assurance
that we will not experience construction delays, that we will be successful in
developing and constructing currently planned or additional residences or that
any developed residence will be economically successful. Delays in our planned
development could result in increased costs or litigation costs which could
adversely affect our business, operating results and financial condition.
RISKS ASSOCIATED WITH ACQUISITIONS. We have acquired residences in the past, and
in 1999 completed a major transaction involving 28 residences from Manor Care,
Inc. Although we currently have no plans to do so, we may seek additional
acquisition opportunities in the future. However, no assurances can be given
that we will be successful in identifying any future acquisition opportunities
or completing any identified acquisitions. The acquisition of residences
involves a number of risks. Existing residences available for acquisition
frequently serve or target different market segments than those we presently
serve. It may be necessary in some cases to reposition and renovate acquired
residences or turn over the existing resident population to achieve a resident
acuity and income profile which is consistent with our current operations. In
addition, we may also determine that staff and operating management personnel
changes are necessary to successfully integrate these residences into our
existing operations. There can be no assurance that we will be successful in
repositioning any acquired residences or in effecting any necessary operational
or structural changes and improvements on a timely basis. Any failure by us to
make necessary operational or structural changes or to successfully reposition
acquired residences may adversely impact our business, operating results and
financial condition. In undertaking acquisitions of residences, we also may be
adversely impacted by unforeseen liabilities attributable to the prior operators
of these residences, against whom we may have little or no recourse.
JOINT VENTURES AND RELATED MANDATORY PURCHASE OBLIGATIONS. We have entered into
several joint ventures with regional real estate development partners and others
for the construction, development and ownership of assisted living residences in
targeted geographic areas. As of December 31, 1999, 97 of our operating
residences were jointly owned, directly or indirectly, with venture partners. Of
the 55 residences which were either under construction or development by us as
of December 31, 1999, a portion of these residences is being or will be
constructed or developed under joint venture agreements. We have agreed not to
own or operate competing assisted living residences during specified contractual
periods within specified geographic areas adjacent to residences developed
through several of our joint ventures. While we typically receive a fee for
managing residences developed through joint ventures, we share with our joint
venture partners any profits or losses realized from the operation or sale of
these residences. We are obligated under our joint venture arrangements to
purchase the equity interests of our joint venture partners upon the election of
the joint venture partners at a price based on the appraised value of the
residence owned by the applicable joint venture. These purchase rights generally
become exercisable during the period of six months to two years following the
opening of the residence owned by these joint ventures. As a result of these
provisions, we might become obligated to acquire additional interests in
residences developed through joint ventures on terms
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or at times that would otherwise not be acceptable to us, including times during
which we may not have adequate liquidity to fund acquisitions.
RESIDENCE MANAGEMENT, STAFFING AND LABOR COSTS. We compete with other providers
of assisted living services and long-term care with respect to attracting and
retaining personnel. We are dependent upon our ability to attract and retain
management personnel responsible for the day-to-day operations of each of our
residences. Any inability of ours to attract or retain qualified residence
management personnel could have a material adverse effect on our financial
condition or results of operations. In addition, a possible shortage of nurses
or trained personnel may require us to enhance our wage and benefits package in
order to compete in the hiring and retention of personnel. We are also dependent
upon the available labor pool of semi-skilled and unskilled employees in each of
the markets in which we operate. There can be no assurance that our labor costs
will not increase, or that, if they do increase, they can be matched by
corresponding increases in rates charged to residents. Any significant failure
by us to attract and retain qualified management and staff personnel, to control
our labor costs or to pass on any increased labor costs to residents through
rate increases would have a material adverse effect on our business, operating
results and financial condition.
COMPETITION. The long-term care industry is highly competitive and, given the
relatively low barriers to entry and continuing health care cost containment
pressures, we expect that the assisted living segment will become increasingly
competitive in the future. We compete with other companies providing assisted
living services as well as numerous other companies providing similar service
and care alternatives, such as home health care agencies, congregate care
facilities, retirement communities and skilled nursing facilities. While we
believe there is a need for additional assisted living residences in the markets
where we are constructing and developing residences, we expect that, as assisted
living residences receive increased market awareness and the number of states
which include assisted living services in their Medicaid programs increases,
competition will increase from new market entrants, many of whom may have
substantially greater financial resources than we have. There can be no
assurance that increased competition will not adversely affect our ability to
attract or retain residents or maintain our existing rate structures. Some of
our present and potential competitors have, or may have access to, greater
financial resources than those available to us. Consequently, there can be no
assurance that we will not encounter increased competition in the future which
could limit our ability to attract and retain residents, to maintain or increase
resident service fees or to expand our business and could have a material
adverse effect on our business, operating results and financial condition. We
are not able to accurately predict the effect that the health care industry
trend towards managed care will have on the assisted living marketplace. Managed
care, an arrangement whereby service and care providers agree to sell
specifically defined services to one or more public or private payors
(frequently not the end user or resident) subject to a predefined system in an
effort to achieve more efficiency with respect to utilization and cost, is not
currently a significant factor in the assisted living marketplace. However,
managed care plans sponsored by insurance companies or HMOs may in the future be
a factor in the assisted living marketplace. There can be no assurance that we
will not encounter increased competition or be subject to other competitive
pressures that could affect our business, operating results or financial
condition as a result of managed care.
GOVERNMENT REGULATION. Health care is an area of extensive and frequent
regulatory change. The assisted living industry is relatively new, and,
accordingly, the manner and extent to which it is regulated at the Federal and
state levels is evolving. Changes in the laws or new interpretations of existing
laws may have a significant impact on our methods and costs of doing business.
We are, and will continue to be, subject to varying degrees of regulation and
licensing by health or social service agencies and other regulatory authorities
in the various states and localities where we operate or intend to operate. We
and our activities are subject to zoning, health and other state and local
government laws and regulations. Zoning variances or use permits are often
required for construction. Severely restrictive regulations could impair our
ability to open additional residences at desired locations or could result in
costly delays. Several of our residences have been financed by revenue bonds. In
order to continue to qualify for favorable tax treatment of the interest payable
on these bonds, the financed residences must comply with federal income tax
requirements, principally pertaining to the maximum income level of a specified
portion of the residents. Failure to satisfy these requirements constitutes an
event of default under the bonds, thereby accelerating their maturity. Our
success will depend in part upon our ability to satisfy applicable regulations
and requirements and to procure and maintain required licenses in rapidly
changing regulatory environments. Any failure to satisfy applicable regulations
or to procure or maintain a required license could have a material adverse
effect on our business, operating results and financial condition.
Our operations could also be adversely affected by, among other things,
regulatory developments such as revisions in building code requirements for
assisted living residences, mandatory increases in the scope and quality of care
to be offered to residents and revisions in licensing and certification
standards. There can be no assurance that Federal, state or local laws or
regulations will not be imposed or expanded based on evolving regulatory
interpretations or based on new statutory or regulatory provisions which
adversely impact our business, financial condition, results of operations or
prospects. Our residence operations are also subject to health and other state
and local government regulations.
12
<PAGE> 14
We have entered into franchise agreements with third parties pursuant to which
these third parties operate assisted living residences under registered service
marks of ours utilizing systems and procedures prescribed by us. The sale of
franchises is regulated by the Federal Trade Commission and by state agencies.
Principally, these regulations require that written disclosures be made prior to
the sale of a franchise. In addition, some states have relationship laws which
prescribe the basis for terminating a franchisee's rights and regulate both the
franchisor's and our franchisees' post-termination rights and obligations. There
can be no assurance that changes in these regulations will not have an adverse
impact upon our ability to continue our franchising activities.
We intend to review and, in appropriate circumstances, pursue opportunities for
development and expansion into new products and services, among others. These
new products and services may include home health care, rehabilitation and
pharmacy services, among others. The Federal and state regulation of these
additional products and services may be more extensive than that related to our
assisted living operations. We have not in the past engaged in significant
activities outside of our core assisted living business. As we expand into new
products and services, we will be subject to additional Federal, state and local
laws and regulations. Non-compliance with these laws and regulations could have
a material adverse effect on our business, financial condition, results of
operations or prospects.
LIABILITY AND INSURANCE. The provision of personal and health care services
entails an inherent risk of liability. In recent years, participants in the
long-term care industry have become subject to an increasing number of lawsuits
alleging malpractice or related legal theories, many of which involved large
claims and resulted in the incurrence of significant defense costs. In addition,
compared to more institutional long-term care facilities, assisted living
residences (especially dementia care residences) of the type we operate offer
residents a greater degree of independence in their daily lives. This increased
level of independence, however, may subject the resident and us to risks that
would be reduced in more institutionalized settings. We currently maintain
liability insurance intended to cover these claims which we believe is adequate
based on the nature of the risks, historical experience and industry standards.
There can be no assurance, however, that claims in excess of this insurance or
claims not covered by insurance, such as claims for punitive damages, will not
arise. A successful claim against us not covered by, or in excess of, our
insurance could have a material adverse effect upon our financial condition and
results of operations. Claims against us, regardless of their merit or eventual
outcome, may also have a material adverse effect upon our ability to attract or
retain residents or expand our business and may require us to devote substantial
time to matters unrelated to day-to-day operations. In addition, insurance
policies must be renewed annually. There can be no assurance that we will be
able to obtain liability insurance in the future or that, if this insurance is
available, it will be available on acceptable economic terms.
DEPENDENCE ON ATTRACTING SENIORS WITH SUFFICIENT RESOURCES TO PAY. We currently
rely, and for the foreseeable future, we expect to rely, primarily on the
ability of our residents to pay for services from their own and their families'
financial resources. Generally, only elderly adults with income or assets
meeting or exceeding the comparable median in the region where our assisted
living residences are located can afford the fees for these residences.
Inflation or other circumstances which adversely affect the ability of residents
and potential residents to pay for assisted living services could have an
adverse effect on us. In the event that we encounter difficulty in attracting
seniors with adequate resources to pay for our services, we would be adversely
affected.
ENVIRONMENTAL LIABILITY RISKS ASSOCIATED WITH REAL PROPERTY. Under various
Federal, state and local environmental laws, ordinances and regulations, a
current or previous owner or operator of real estate may be required to
investigate and clean up hazardous or toxic substances or petroleum product
releases at these properties, and may be held liable to a governmental entity or
to third parties for property damage and for investigation and cleanup costs
incurred by these parties in connection with the contamination. These laws
typically impose clean up responsibility and liability without regard to whether
the owner knew of or caused the presence of contaminants, and liability under
these laws has been interpreted to be joint and several unless the harm is
divisible and there is a reasonable basis for allocation or responsibility. The
costs of investigation, remediation or removal of these substances may be
substantial, and the presence of these substances, or the failure to properly
remediate these properties, may adversely affect the owner's ability to sell or
lease the property or to borrow using the property as collateral. In addition,
some environmental laws create a lien on the contaminated site in favor of the
government for damages and costs it incurs in connection with the contamination.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances also may be liable for the costs of removal or remediation of these
substances at the disposal or treatment facility, whether or not the facility is
owned or operated by this person. Finally, the owner of a site may be subject to
common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. With the exception of four
Sterling House residences operated by us or our predecessors since prior to
1995, we have conducted environmental assessments of all of our operating
residences and have conducted, or are in the process of conducting,
environmental assessments of all of our undeveloped sites and sites currently
under construction. These assessments have not revealed, and we are not
otherwise aware of, any environmental liability that we believe would have a
material adverse effect on our business, assets or results of operations. There
can be no assurance, however, that
13
<PAGE> 15
environmental assessments would detect all environmental contamination which
may give rise to material environmental liabilities. We believe that our
respective residences are in compliance in all material respects with all
applicable environmental laws. We have not been notified by any governmental
authority, or are otherwise aware, of any material non-compliance, liability or
claim relating to hazardous toxic substances or petroleum products in connection
with any of the residences we currently operate.
ANTI-TAKEOVER PROVISIONS. Our Restated Certificate of Incorporation authorizes
the issuance of 5,000,000 shares of preferred stock and 100,000,000 shares of
Common Stock. Subject to the rules of the American Stock Exchange ("AMEX") upon
which our Common Stock is listed, our Board of Directors have the power to issue
any or all of the authorized and unissued shares without stockholder approval,
and the preferred shares can be issued with rights, preferences and limitations
as may be determined by our Board. The rights of the holders of our Common Stock
will be subject to, and may be adversely affected by, the rights of any holders
of preferred stock that may be issued in the future. Although as part of the
Equity Transaction we expect to issue either preferred stock or debentures that
(in either case) would be convertible into our Common Stock, we presently have
no commitments or contracts to issue any additional shares of common stock
(other than pursuant to the exercise of outstanding stock options or the
conversion of our 6.75% Convertible Subordinated Debentures due 2006, 7%
Convertible Subordinated Debentures due 2004 or 5.25% Convertible Subordinated
Debentures due 2002) or any shares of preferred stock. Authorized and unissued
preferred stock and common stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could delay,
discourage, hinder or preclude an unsolicited acquisition of the Company, could
make it less likely that stockholders receive a premium for their shares as a
result of any attempt and could adversely affect the market price of and the
voting and other rights of the holders of outstanding shares of Common Stock. As
a Delaware corporation, we are subject to Section 203 of the Delaware General
Corporation Law (the "DGCL") which, in general, prevents an "interested
stockholder" (defined generally as a person owning 15% or more of the
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) for three years following the date a
person became an interested stockholder unless specific conditions are
satisfied. In addition, the indenture relating to our approximately $143.8
million aggregate principal amount outstanding 5.25% Convertible Subordinated
Debentures provides that, upon a "change of control" (as defined in that
indenture), the holders of those debentures would have the right to require us
to repurchase those debentures at 101% of their face value.
On December 10, 1998, we entered into a Rights Agreement with American Stock
Transfer & Trust Company, as Rights Agent, pursuant to which we declared and
paid a dividend of one preferred share purchase right (a "Right") for each
outstanding share of our Common Stock. Each Right entitles the registered holder
to purchase from us one one-hundredth of a share of Series A Junior
Participating Preferred Stock, $.01 par value per share (the "Preferred
Shares"), at a price of $130.00 per one one-hundredth of a Preferred
Share. The Rights have anti-takeover effects, and they will cause substantial
dilution to a person or group that attempts to acquire us without conditioning
the offer on redemption of the Rights or on substantially all of the Rights also
being acquired. The Rights should not interfere with any merger or other
business combination approved by our Board since the Rights may be redeemed by
us in accordance with the Rights Agreement.
POSSIBLE PRICE VOLATILITY OF THE COMMON STOCK. The market price of our Common
Stock could be subject to significant fluctuations in response to various
factors and events, including variations in our operating results, and new
statutes or regulations or changes in the interpretation of existing statutes or
regulations affecting the health care industry generally or the assisted living
industry in particular. In addition, the stock market in recent years has
experienced broad price and volume fluctuations that often have been unrelated
to the operating performance of particular companies. These market fluctuations
also may adversely affect the market price of our Common Stock.
14
<PAGE> 16
ITEM 2. PROPERTIES
The table below shows information with respect to the residences which we
operated as of December 31, 1999. We own, lease, hold equity interest in or
manage, on behalf of third parties, these residences.
<TABLE>
<CAPTION>
OPERATING RESIDENCES
OWNED (1) LEASED (2) UNCONSOLIDATED (3) MANAGED (4) TOTAL
------------------ ----------------- ------------------- -------------------- -------------------
LOCATION RES. CAP. RES. CAP. RES. CAP. RES. CAP. RES. CAP.
----------- ------- -------- ------ -------- ------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AZ 7 349 4 190 5 313 -- -- 16 852
CA 2 307 -- -- 6 596 -- -- 8 903
CO 4 220 11 689 3 156 2 104 20 1,169
DE 1 72 -- -- -- -- -- -- 1 72
FL 13 564 32 1,374 13 856 -- -- 58 2,794
GA -- -- -- -- 4 281 1 36 5 317
ID 1 70 2 158 -- -- -- -- 3 228
IN 5 210 -- -- 12 488 -- -- 17 698
KS 13 436 11 357 2 96 1 50 27 939
MA 1 72 -- -- -- -- -- -- 1 72
MI 21 700 9 392 2 116 -- -- 32 1,208
MN 10 318 9 363 1 78 -- -- 20 759
NC 5 242 11 524 2 94 1 42 19 902
ND -- -- 1 71 -- -- -- -- 1 71
NJ 4 152 -- -- 3 322 2 98 9 572
NV 1 54 2 154 1 56 -- -- 4 264
NY 15 906 1 80 -- -- -- -- 16 986
OH 5 205 16 653 8 417 -- -- 29 1,275
OK -- -- 26 906 2 74 -- -- 28 980
OR 1 56 8 650 1 52 -- -- 10 758
PA 13 601 1 48 2 112 -- -- 16 761
SC 3 126 8 330 1 42 1 42 13 540
TN 2 90 2 86 5 212 -- -- 9 388
TX 1 37 25 963 5 272 -- -- 31 1,272
VA -- -- -- -- 2 96 -- -- 2 96
WA 3 156 4 388 3 164 -- -- 10 708
WI 14 354 21 532 4 135 6 48 45 1,069
------ ------- ----- ------- ------ ------- ------- ------- ------- ------
TOTAL 145 6,297 204 8,908 87 5,089 14 420 450 20,653
====== ======= ===== ======= ====== ======= ======= ======= ======= ======
</TABLE>
(1) Owned residences are those that are wholly or majority owned by us.
(Twelve of these residences with a capacity of 619 are majority owned).
(2) Leased residences are those that we operate and lease from a third party.
(3) Unconsolidated residences are those residences managed by us, but
operated by an entity in which we own a minority equity interest.
(4) Managed residences are those residences that we manage under management
arrangements but in which we do not possess an ownership interest. We
have an option to purchase or lease eleven of these residences.
Of our 450 operating residences, 85% of them are five years old or less and 95%
are ten years old or less.
15
<PAGE> 17
At December 31, 1999, we were in various stages of constructing 53 residences
and developing two residences. Set forth below is information with respect to
residences in construction and residence sites in development on December 31,
1999.
<TABLE>
<CAPTION>
RESIDENCES UNDER CONSTRUCTION OR DEVELOPMENT
UNDER CONSTRUCTION UNDER DEVELOPMENT
------------------------------ ------------------------------
LOCATION RESIDENCES CAPACITY RESIDENCES CAPACITY
- --------------- -------------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
CA 5 298 -- --
CT 1 52 -- --
DE 1 52 -- --
FL 7 507 -- --
IN 1 38 -- --
KS 2 77 -- --
KY 2 78 -- --
MD 4 180 -- --
MN 1 26 -- --
NJ 6 282 1 78
NV 1 52 -- --
NY 4 178 -- --
NC 2 74 -- --
OH 2 120 -- --
OR 3 156 -- --
PA 2 124 -- --
SC 2 76 -- --
TN 2 78 -- --
TX 3 191 -- --
WI 2 118 1 52
------------- ---------- ------------- -----------
TOTAL 53 2,757 2 130
============= ========== ============= ===========
</TABLE>
The residences under construction or development may be owned directly by joint
venture entities in which we will own varying percentages of equity interests.
See "Business - Joint Ventures and Strategic Alliances."
"Construction" means that construction activities have commenced (ground
breaking) and are ongoing. "Development" means that the site is under "control"
(pursuant to purchase agreements or options or otherwise) and development
activities with respect to the site have commenced and are ongoing (such as site
permitting, preparation of surveys and architectural plans, and negotiation of
construction contracts).
Residences under development may not in fact be constructed for a variety of
reasons, including zoning, permitting, health care licensing, financing and cost
related issues. In addition to residences listed in the table above as "under
development," we may also engage in preliminary development activities with
respect to other possible sites for future residences.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are involved in various legal proceedings relating to
claims arising in the ordinary course of our business. Neither we nor any of our
subsidiaries is a party to any legal proceeding, the outcome of which,
individually or in the aggregate, is expected to have a material adverse affect
on our financial condition or results of operations, with the possible exception
of the following matter.
During 1999, Altera Corporation, a San Jose, California based company engaged in
the business of designing, manufacturing and selling high-performance,
high-density programmable logic devices and associated development tools,
commenced litigation with the Company in the United States District Court for
the Northern District of California. The Plaintiff's complaint alleges claims
for trademark infringement, unfair competition, and trademark dilution under
federal, state and common law arising from the Company's use of the name
"Alterra". Plaintiff Altera Corporation seeks an injunction against the
Company's use of the Alterra name, as well as damages and attorneys' fees.
Plaintiff Altera Corporation sought both a temporary restraining order and a
preliminary injunction, but the District Court denied that relief. The District
Court's denials of the Plaintiff's motions were affirmed by the United States
Court of Appeals for the Ninth Circuit upon Plaintiff's appeal. The parties are
currently in the discovery phase of the litigation. Although we cannot provide
any assurances as to the
16
<PAGE> 18
outcome of this litigation, we believe that Plaintiff's claims are without merit
and intend to contest them vigorously. If the Plaintiff prevails in this matter,
it could have a material adverse effect on us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We did not submit any matters to a vote of security holders during the fourth
quarter of our fiscal year ended December 31, 1999.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Our Common Stock is listed and traded on the American Stock Exchange (AMEX)
under the symbol "ALI". The Common Stock has been listed on the AMEX since
August 6, 1996, the date of our initial public offering. The number of holders
of record of the Common Stock as of March 24, 2000, was approximately 8,200.
The following table sets forth, for the periods indicated, the high and low
closing prices for the Common Stock as reported on AMEX.
<TABLE>
<CAPTION>
HIGH LOW
------------- -----------
<S> <C> <C>
1999:
First Quarter........................ $ 33-9/16 $ 17
Second Quarter....................... 23-1/2 10-7/16
Third Quarter........................ 13-11/16 8-3/16
Fourth Quarter....................... 8-15/16 5-3/4
1998:
First Quarter........................ 34-1/2 27
Second Quarter....................... 35 24-3/4
Third Quarter........................ 30-1/2 17-1/8
Fourth Quarter....................... 34-1/4 17-1/4
</TABLE>
We have never paid or declared cash dividends and currently intend to retain any
future earnings for the operation and expansion of our business. Any
determination to pay cash dividends in the future will be at the discretion of
the Board of Directors and will be dependent on our financial condition, results
of operations, contractual restrictions, capital requirements, business
prospects, restrictive debt covenants and other factors as the Board of
Directors deems relevant.
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<PAGE> 19
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated historical financial data of ours presented below for
each of the five years ended December 31, 1999 has been derived from our audited
consolidated financial statements appearing elsewhere in this report. The
selected consolidated financial data presented below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and notes
thereto included in this report (in thousands, except per share data).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA :
Revenue:
Operating revenue.............................. $ 376,181 $244,423 $ 130,744 $ 55,637 $ 15,061
----------- ----------- ----------- ---------- ----------
Operating expenses:
Residence operations........................... 224,213 147,931 81,558 35,977 8,717
Lease expense.................................. 69,375 44,174 25,524 9,035 944
Lease income................................... (25,507) (4,915) -- -- --
General and administrative..................... 44,898 23,200 22,168 11,143 5,890
Depreciation and amortization.................. 21,178 19,730 9,271 4,223 1,275
Non-recurring charge........................... 47,280 -- 4,656 976 --
----------- ----------- ----------- ---------- ----------
Total operating expenses................... 381,437 230,120 143,177 61,354 16,826
----------- ----------- ----------- ---------- ----------
Operating (loss) income.......................... (5,256) 14,303 (12,433) (5,717) (1,765)
Other (expense) income:
Interest expense, net.......................... (35,938) (11,024) (3,932) (3,231) (984)
Equity in losses of unconsolidated affiliates.. (1,442) (31) (226) (52) (716)
Minority interest in losses of consolidated
subsidiaries............................... 4,018 20,610 8,440 76 160
Other, net..................................... (20) (170) (112) (31) 479
---------- ----------- ----------- ---------- ----------
Total other (expense) income, net........ (33,382) 9,385 4,170 (3,238) (1,061)
---------- ----------- ----------- ---------- ----------
(Loss) income before income taxes, extraordinary
item and cumulative effect..................... (38,638) 23,688 (8,263) (8,955) (2,826)
---------- ----------- ----------- ---------- ----------
Income tax benefit (expense)..................... 14,669 (3,136) -- 159 991
---------- ----------- ----------- ---------- ----------
(Loss) income before extraordinary item and the
cumulative effect of a change in accounting
principle...................................... (23,969) 20,552 (8,263) (8,796) (1,835)
Extraordinary item - loss from early retirement
of financing agreements...................... -- -- -- -- (1,176)
Cumulative effect of a change in accounting
principle........................................ (3,837) -- -- -- --
----------- ----------- ----------- ---------- ----------
Net (loss) income ....................... $ (27,806) $ 20,552 $ (8,263) $ (8,796) $ (3,011)
=========== =========== =========== ========== ==========
Basic (loss) income per common share:
(Loss) income before extraordinary item (1), and
a change in accounting principle.............. $ (1.09) $ 0.94 $ (0.44) $ (0.57) $ (0.24)
Extraordinary item (1)......................... -- -- -- -- (0.15)
Change in accounting principle................ (0.17) -- -- -- --
----------- ----------- ----------- ---------- ----------
Basic (loss) income per common share (1)......... $ (1.26) $ 0.94 $ (0.44) $ (0.57) $ (0.39)
=========== =========== =========== ========== ==========
Diluted (loss) income per common share:
(Loss) income before extraordinary item (1), and
a change in accounting principle.............. $ (1.09) $ 0.92 $ (0.44) $ (0.57) $ (0.24)
Extraordinary item (1)......................... -- -- -- -- (0.15)
Change in accounting principle................. (0.17) -- -- -- --
----------- ----------- ----------- ---------- ----------
Diluted (loss) income per common share (1)...... $ (1.26) $ 0.92 $ (0.44) $ (0.57) $ (0.39)
=========== =========== =========== ========== ==========
Weighted average common shares outstanding (1):
Basic.......................................... 22,088 21,905 18,651 15,429 7,782
=========== =========== =========== ========== ==========
Diluted........................................ 22,088 24,145 18,651 15,429 7,782
=========== =========== =========== ========== ==========
</TABLE>
(1) Basic and diluted share amounts are the same for 1995-1997 and 1999
since potentially issuable shares related to stock options and
convertible debt would have an anti-dilutive effect.
18
<PAGE> 20
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 18,728 $40,621 $79,838 $ 39,455 $20,394
Short-term investments...................... -- -- 90,000 -- --
Working capital............................. 5,452 28,305 129,528 20,532 10,425
Total assets................................ 1,061,397 777,810 553,552 204,353 82,450
Long-term obligations....................... 791,672 515,584 318,069 68,625 23,663
Stockholders' equity........................ $150,643 $177,112 $143,897 $ 91,064 $45,466
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
We are a leading national assisted living company operating assisted living
residences and providing assisted living services in 27 states. Our growth in
recent years has had a significant impact on our results of operations and
accounts for most of the changes in our results between 1999 and 1998. As of
December 31, 1999 and 1998, we operated or managed 450 and 350 residences with
aggregate capacity of approximately 20,700 and 15,000 residents, respectively.
We, together with other parties who have purchased interests in some of our
development residences, were also constructing or developing 55 additional
residences with additional capacity for 2,900 residents as of December 31, 1999.
During 1999, we generated operating revenue of $376.2 million and realized
operating income of $44.9 million and net income of $8.8 million prior to a
non-recurring charge, other one time adjustments, and the cumulative effect of a
change in accounting principle.
During the fourth quarter of 1999, we began to implement several strategic
initiatives designed to strengthen our balance sheet and to enable us to focus
on stabilizing and enhancing our core business operations. The principal
components of these strategic initiatives include:
- Reduced Development Activity. In light of the competitive environment
and tightening capital markets, we elected to significantly reduce the
scope of our assisted living development activities. Specifically, in
the fourth quarter of 1999 and the first quarter of 2000, we have
discontinued development activity with respect to a substantial number
of development sites. As a consequence of this decision, we recorded
one time, non-recurring, pre-tax charges of $47.3 million ($29.3
million net of income tax benefit) in the fourth quarter of 1999
reflecting (i) our write-down of the carrying costs of discontinued
development sites and failed acquisitions, (ii) costs associated with
the planned reduction in development activities and the
discontinuation of operations of our wholly-owned construction
subsidiary, (iii) our write-off of deferred financing costs associated
with construction loan credit lines that will not be fully utilized,
and (iv) a reserve established against our note receivable with a
development joint venture resulting from the reduction of a previously
established financing commitment with that joint venture.
- Reduced Reliance upon Joint Venture Arrangements. In order to simplify
our capital structure, we have elected to reduce our utilization of
joint venture development arrangements and other off-balance sheet
ownership and development structures (so-called "black box"
structures). Historically, these arrangements were a source of fee
income for us and served to reduce the adverse impact on our earnings
of start-up losses associated with our substantial volume of
newly-opened residences. We believe, however, that we can improve our
future cash flow and liquidity by retaining 100% of the revenue and
operating cash flow from more of our residences.
- Deleveraging of our Balance Sheet. We are seeking to strengthen and
deleverage our balance sheet and to address our short and long-term
capital needs by securing an additional equity or equity-linked
investment in the Company. We have retained financial advisors to
assist us in securing this investment, and are currently in
negotiations with parties interested in making an investment in the
Company.
- Focus on Cash Flow. As our portfolio of assisted living residences
stabilizes and matures, we intend to focus on cash flow. In this
regard, we will seek to own (as opposed to lease) as much of our real
estate as we can, given our capital constraints. Ownership of a
greater percentage of our residences will increase depreciation and
amortization expenses but only impact our operating cash flow to the
extent of any related interest expense.
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<PAGE> 21
We are currently seeking to address both our short and long-term liquidity
requirements. The combination of a difficult financing and operating environment
healthcare service companies has significantly reduced the Company's access
to credit. A number of the Company's traditional financing sources, including
commercial banks and other secured lenders, have substantially reduced their
lending activities to the healthcare sector. In addition, the credit
availability under certain of our credit facilities has either been reduced or
eliminated due to a variety of factors, including our request for modifications
of some of our financial covenants in certain of our credit agreements. To
address our need for capital, we are in the process of seeking to raise at least
$100.0 million of equity or equity-linked financing, and expect to consummate
such a transaction during the second quarter of 2000. Given that we have not
committed to a specific equity transaction with any of our prospective
investors, there is a risk that we will not complete an equity transaction.
However, given the high level of interest of our prospective investors, the
advanced stage of these negotiations and the familiarity and understanding that
these prospective investors have with respect to our Company and business, our
management team believes that the Company has the ability to complete a
substantial equity investment transaction in the second quarter of 2000. If we
are not able to consummate this equity transaction in a timely fashion, we may
not have sufficient liquidity to fund our future operations and other
obligations.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Residence Service Fees. Residence service fees for the year ended December 31,
1999 were $349.8 million representing an increase of $113.9 million, or 48%,
from the $235.9 million for 1998. Substantially all of this increase resulted
from the addition of newly constructed residences, residences we acquired the
majority ownership interest in during 1999, and other residences we acquired. We
operated or managed 450 and 350 residences at December 31, 1999 and 1998,
respectively.
Other Revenues. Other revenues for the year ended December 31, 1999 were $26.4
million, an increase of $17.9 million over the $8.5 million of other revenue for
the year ended December 31, 1998. The increase is attributable to management
fees on an increased number of residences which were either managed for third
parties or operated in minority joint ventures in 1999 versus 1998. As of
December 31, 1999, we had 101 residences held in minority joint ventures or
managed for other owners as compared to 66 residences as of December 31, 1998.
Management fees include charges for transitional services to recruit and train
staff, initial and recurring fees for use of our name and branding, initial and
recurring fees for use of our methodologies, and services for assisting with
finance processing, which are incurred during the start-up period of a new
residence, and ongoing management services provided to operate the residence.
Residence Operating Expenses. Residence operating expenses for the year ended
December 31, 1999 increased to $224.2 million, from $147.9 million in 1998, due
to the increased number of residences operated during 1999. Operating expenses
as a percentage of residence service fees, for the years ended December 31, 1999
and 1998 were 64.1% and 62.7%, respectively.
Lease Expense. Lease expense for the year ended December 31, 1999 was $69.4
million, compared to $44.2 million in 1998. This increase was primarily
attributable to the utilization of additional sale/leaseback financing totaling
$78.4 million during 1999 and to the incurrence of a full year of lease expense
in 1999 related to leases entered into in 1998.
Lease Income. We recorded lease income on residences we owned and leased to
unconsolidated joint ventures of $25.5 million for the year ended 1999, versus
$4.9 million for 1998. Under this arrangement, we retain ownership in underlying
assets in order to allow the use of our corporate financing arrangements. Lease
payment obligations of the unconsolidated joint venture entities are
approximately equivalent to the debt service payable by us on the leased
residences, which thereby, offset our costs associated with retaining ownership
in the fixed assets. As of December 31, 1999, we had 87 unconsolidated joint
ventures compared to 45 as of December 31, 1998.
General and Administrative Expense. General and administrative expenses for the
year ended December 31, 1999 were $42.6 million prior to a write-off of $2.3
million for failed acquisitions, corporate downsizing, and corporate office
relocation costs, compared to $23.2 million for 1998, representing an increase
as a percentage of operating revenue to 11.3% in 1999 from 9.5% in 1998. The
increase in expenses was primarily attributable to salaries, related payroll
taxes and employee benefits for additional corporate personnel retained to
support our growth and to support the increased number of unconsolidated
residences we manage.
Depreciation and Amortization. Depreciation and amortization for the year ended
December 31, 1999 was $20.6 million prior to a $600,000 write-off due to the
relocation of our national headquarters, representing an increase of $848,000,
or 4.3%, from the $19.7 million of depreciation and amortization for 1998. This
increase resulted primarily from depreciation of fixed assets on the larger
number of new residences that were operated by us during the year ended December
31, 1999, versus 1998. The increase in depreciation is partially offset by the
elimination of amortization on pre-opening costs which are now expensed when
they are incurred. Depreciation and amortization in 1998 includes $8.3 million
of amortization of pre-opening costs. As discussed below, we adopted a new
accounting principle related to pre-opening costs on January 1, 1999.
Non-recurring charge. We recorded a non-recurring charge of $47.3 million in the
fourth quarter of 1999 as a result of the decision to exit development
activities. The charge consists of the write-off of $28.4 million in costs
already incurred on
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development projects that will not be completed and the establishment of $8.6
million in reserves for costs related to exiting these activities. In
addition, the charge includes a $3.3 million reserve for employee costs and
lease obligations associated with closing down our construction subsidiary and
related activities at the national office. The Company also established a $7.0
million reserve related to a development joint venture with Manor Care, Inc.
which is further discussed in Note 2.
Interest Expense, Net. Interest expense, net of interest income, was $33.2
million for the year ended December 31, 1999 prior to a $2.7 million write-off
of deferred financing commitment fees, compared to $11.0 million for 1998. Gross
interest expense (before interest capitalization and interest income) for the
1999 period was $48.6 million prior to the commitment fee write-off, compared to
$29.8 million for 1998, an increase of $18.8 million. This increase is primarily
attributable to an increase in the amount of mortgage financing used in 1999 as
compared to 1998. We capitalized $10.3 million of interest expense in 1999
compared to $13.8 million in 1998. This decrease is a result of our decision to
reduce development and construction activity in 1999. We opened 67 newly
constructed residences during the year ended December 31, 1999 compared to 116
newly constructed residences in 1998. Interest income for 1999 was $5.1 million
as compared to $5.0 million for 1998.
Minority Interest in Losses of Consolidated Subsidiaries. Minority interest in
losses of consolidated subsidiaries for the year ended December 31, 1999 was
$4.0 million, representing a decrease of $16.6 million from $20.6 million for
1998. The decrease was primarily attributable to the decrease in the number of
residences in various stages of lease-up that we owned in majority owned joint
venture arrangements. Throughout 1999, we had an average of 19 residences held
in these majority owned joint venture arrangements compared to an average of 46
residences held in similar majority owned joint venture arrangements during the
year ended December 31, 1998.
Income Taxes. For 1999, we recorded a current income tax benefit of $345,000 and
recognized a $14.4 million deferred asset resulting in a current income tax
benefit of $14.7 million before the cumulative effect of the change in
accounting principle. For 1998, we recorded a current income tax provision of
$9.6 million which was offset by the recognition of $6.5 million of deferred tax
assets resulting in a current income tax expense of $3.1 million.
Cumulative Effect of Change in Accounting Principle. During the first quarter of
1999, we incurred a cumulative effect of a change in accounting principle of
$3.8 million relating to the adoption of SOP 98-5, which requires that costs of
start-up activities and organization costs be expensed as incurred.
Net Income. As a result of the foregoing, net income prior to the previously
mentioned one time write-offs of $3.5 million ($5.6 million pre tax), the
non-recurring charge of $29.3 million ($47.3 million pre tax) and the cumulative
effect of a change in accounting principle of $3.8 million (net of tax), was
$8.8 million compared to net income of $20.6 million for 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997
Resident Service Fees. Resident services fees for the year ended December 31,
1998 were $235.9 million representing an increase of $107.1 million, or 83%,
from the $128.9 million for 1997. Substantially all of this increase resulted
from the addition of newly constructed residences and other residences we
acquired. We operated or managed 350 and 223 residences at December 31, 1998 and
1997, respectively.
Other Revenues. Other revenues for the year ended December 31, 1998 were $8.5
million, an increase of $6.6 million over the $1.9 million of other revenue for
the year ended December 31, 1997. The increase is attributable to management
fees on an increased number of residences which were either managed for third
parties or operated in minority joint ventures in 1998 versus 1997. As of
December 31, 1998, we had 66 residences operated in minority joint ventures or
managed for other owners as compared to 36 of these residences on December 31,
1997. The increase in other revenue was also impacted by 14 new residences
opened under franchise arrangements in 1998 and fees recognized from a
development arrangement in 1998.
Residence Operating Expenses. Residence operating expenses for the year ended
December 31, 1998 increased to $147.9 million from $81.6 million in 1997 due to
the increased number of residences operated during 1998. Operating expenses as a
percentage of resident service fees for the years ended December 31, 1998 and
1997 were 62.7% and 63.2%, respectively.
Lease Expense. Lease expense for the year ended December 31, 1998 was $44.2
million, compared to $25.5 million in 1997. This increase was primarily
attributable to the utilization of additional sale/leaseback financing totaling
$146.0 million during the twelve-month period ended December 31, 1998.
Sublease Income. We recorded $4.9 million of lease income on residences we owned
and leased to unconsolidated joint ventures in 1998. Under this arrangement, we
retain ownership in underlying assets in order to allow the use of our corporate
financing arrangements. Lease payment obligations of the unconsolidated joint
venture entities are approximately equivalent
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to the debt service payable by us on the leased residences, which thereby,
offset our costs associated with retaining ownership in the fixed assets. We had
no similar arrangements in 1997.
General and Administrative Expense. General and administrative expenses for the
year ended December 31, 1998 were $23.2 million compared to $16.5 million,
before Sterling Merger related charges of $5.7 million, for 1997. This
represents a decline as a percentage of operating revenue to 9.5% in 1998 from
12.6% in 1997. The increase in expenses was primarily attributable to salaries,
related payroll taxes and employee benefits for additional corporate personnel
retained to support our actual and anticipated growth.
Depreciation and Amortization. Depreciation and amortization for the year ended
December 31, 1998 was $19.7 million, representing an increase of $10.4 million,
or 113%, from the $9.3 million of depreciation and amortization for 1997. This
increase resulted primarily from depreciation of fixed assets and amortization
of pre-opening costs on the larger number of new residences that we operated
during the year ended December 31, 1998, versus 1997. We previously amortized
pre-opening costs over a twelve-month period from the date the residence opened.
Upon the adoption of the AICPA Statement of Position No. 98-5 "Reporting on the
Costs of Start-up Activities," on January 1, 1999, we expensed pre-opening
costs, as defined, when incurred.
Interest Expense, Net. Interest expense, net of interest income, was $11.0
million for the year ended December 31, 1998, compared to $3.9 million for 1997.
Gross interest expense (before interest capitalization and interest income) for
1998 was $29.8 million compared to $13.4 million for 1997, an increase of $16.4
million. This increase is primarily attributable to the issuance in May 1997 of
the 7% Convertible Subordinated Debentures due 2004, (the "7% Debentures") the
issuance in December 1997 of the 5.25% Convertible Subordinated Debentures due
2002, (the "5.25% Debentures") and an increase in the amount of mortgage
financing used in 1998 as compared to 1997. We capitalized $13.8 million of
interest expense in 1998 compared to $6.7 million in 1997 due to increased
construction activity in 1998. We opened 116 newly constructed residences during
the year ended December 31, 1998 compared to 78 newly constructed residences
opened in 1997. Interest income for 1998 was $5.0 million as compared to $2.8
million for 1997. This increase was primarily due to the investment of 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 year ended December 31, 1998 was
$20.6 million, representing an increase of $12.2 million from $8.4 million for
1997. The increase was primarily attributable to the increase in the number of
residences in various stages of lease-up that we owned in majority owned joint
venture arrangements. Throughout 1998, we had an average of 46 residences held
in these majority owned joint venture arrangements compared to an average of 17
residences held in similar majority owned joint venture arrangements during the
year ended December 31, 1997.
Income Taxes. For the year ended December 31, 1998, we recorded a current income
tax provision of $9.6 million which was offset by the recognition of $6.5
million of deferred tax assets resulting in a current income tax expense of $3.1
million. The deferred tax asset recognition was generated primarily due to the
elimination of valuation allowances associated with net deferred tax assets in
1997 and prior.
Net Income. As a result of the foregoing, the net income for the year ended
December 31, 1998 was $20.6 million compared to a net loss of $8.3 million for
1997.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, we had approximately $18.7 million in unrestricted cash
and cash equivalents and $5.4 million of working capital compared to
unrestricted cash and cash equivalents of $40.6 million and working capital of
$28.3 million at December 31, 1998.
For the year ended December 31, 1999, cash flow from operations was $5.4 million
versus an operating cash flow deficit of $5.0 million and $7.8 million for the
years ended December 31, 1998 and 1997, respectively. The significant increase
in cash flow from operating activities is attributable to the greater number of
consolidated residences operating at or near stabilized occupancy levels during
1999 in comparison to 1998 and 1997.
During 1999, we closed on approximately $273.0 million of new debt financing and
capital lease obligations which included approximately $80.0 million of debt
used to refinance properties having prior debt balances of $75.0 million.
Additionally, financing was provided through $78.4 million of sale/leaseback
financing, $3.5 million of minority joint venture partner contributions and
$44.0 million of bridge loan financing.
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Net cash provided by these financing activities together with cash from
operations was used during 1999 to fund $181.8 million in construction and
development activity, $64.4 million in joint venture buyouts, $21.8 million in
acquisition activity and $21.5 million of construction bridge financing that we
provided to others under third party development arrangements.
Historically, we have financed our operations and growth through a combination
of various forms of real estate financing (mortgage, synthetic lease and
sale/leaseback financing), capital contributions from joint venture partners and
the sale of our securities (common stock and convertible debentures), and, to a
lesser extent, cash from operations. At December 31, 1999, we had $830.6 million
of outstanding debt principally consisting of $228.6 million of convertible
debentures having a weighted average interest rate of 5.86%, $168.7 million of
fixed rate debt having a weighted average interest rate of 7.53%, capitalized
lease obligations of $67.3 million having a weighted average interest rate of
9.93%, $337.0 million of variable rate debt having a weighted average interest
rate of 8.79% and short-term borrowings of approximately $29.0 million. Through
December 31, 1999, we have also entered into approximately $893.7 million of
sale/leaseback and synthetic lease financings. In addition, we have guaranteed
an aggregate of $114.0 million of indebtedness of joint venture and other
off-balance sheet third party entities.
During 1999 we completed a synthetic lease transaction relating to 26 assisted
living and Alzheimer's/dementia care residences that were previously owned and
operated by Manor Care, Inc. Pursuant to this transaction, an affiliate of a
commercial bank acquired the 26 residences for an aggregate purchase price of
approximately $189.1 million (including closing costs) and simultaneously leased
the 26 residences to a wholly-owned subsidiary of the Company. Our lease of
these 26 residences has a term of ten years, reflects initial rental based on a
lease constant of 9.93% and contains an option to purchase the 26 residences at
the end of the lease term for a pre-negotiated fixed price. For financial
accounting purposes, leases for 17 of the residences have been treated as
operating leases and leases for nine residences were treated as capital leases.
We have the following three series of convertible subordinated debentures
outstanding:
- $143.8 million aggregate principal amount of 5.25% convertible
subordinated debentures due December 15, 2002. These convertible
debentures bear interest at 5.25% per annum payable semi-annually on
June 15 and December 15 of each year. The conversion price is $28.75,
which is equivalent to a conversion ratio of 34.8 shares of common
stock per $1,000 in principal amount of the convertible debentures.
The convertible debentures are redeemable at our option commencing on
December 31, 2000, at specified premiums. The holders of the
convertible debentures may require us to repurchase the convertible
dentures at 101% of face value upon a change of control of the
Company, as defined in the convertible debenture;
- $50.0 million aggregate principal amount of 7.00% convertible
subordinated debentures due June 1, 2004. These convertible debentures
bear interest at 7.00% per annum payable semi-annually on June 1 and
December 1 of each year. The conversion price is $20.25, which is
equivalent to a conversion ratio of 49.4 shares of common stock per
$1,000 in principal amount of the convertible debentures. The
convertible debentures are redeemable at our option commencing on June
15, 2000, at specified premiums; and
- $35.0 million aggregate principal amount 6.75% convertible
subordinated debentures due June 30, 2006. These convertible
debentures bear interest at 6.75% per annual payable semi-annually on
June 30 and December 30 of each year. The conversion price is $20.38,
which is equivalent to a conversion ratio of 49.3 shares of common
stock per $1,000 principal amount of the convertible debentures. The
convertible debentures are redeemable at our option commencing on July
15, 1999, at specified premiums.
Our principal credit and financing agreements, including our convertible
debentures and our synthetic lease agreements, include cross-default provisions
that provide that a material default under our other credit facilities
constitute a default under that credit or financing agreement. Accordingly, any
material default arising under one of our credit or financing agreements could
result in many of our other major credit and financing arrangements being in
default. In addition, our principal credit agreements and debt instruments
include various financial covenants and other restrictions, including: (i) fixed
charge coverage requirements, typically measured on a trailing four quarter
basis and which generally increase over the term of the applicable credit
agreement; (ii) maximum leverage ratios which limit our aggregate senior
indebtedness to total capitalization; (iii) various minimum net worth or
tangible net worth requirements; (iv) in certain cases, property specific debt
service coverage requirements and similar financial covenants of the type
referenced above applicable to individual properties or to the pool of
residences financed by the applicable lender; and (v) the maintenance of
operating and other reserves for the benefit of the residences serving as
collateral for the applicable lender. In addition, under certain of our credit
and sale/leaseback facilities we are required to secure lender or lessor consent
prior to engaging in certain mergers, business combinations or change in control
transactions. As noted below, as a result of the non-recurring charges taken in
the fourth
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quarter of 1999 and reductions in our expected future earnings resulting from
our decision to reduce development and utilization of off-balance sheet joint
venture structures, we would have been in violation of net worth and fixed
charge coverage covenants imposed by several of our lenders had we not secured
modifications or waivers of these covenants.
Our operations and remaining construction activity will require significant
additional capital resources in the future in order to fund: (i) our remaining
construction of 55 assisted living and Alzheimer's care residences; (ii) our
purchase from the third party joint venture partners of minority and majority
equity interests in assisted living residences operated by us; (iii) our ongoing
debt service obligations, including maturities of our long-term debt and
refinancing of short term debt; and (iv) our obligation to finance the
operations of third party development partners. Each of these principal uses of
capital resources are summarized below:
DEVELOPMENT ACTIVITIES. The development and construction of new,
purpose-built assisted living and Alzheimer's care residences has
historically been the principal use of the Company's capital resources.
Although we elected to discontinue a significant portion of our pending
development projects, we are continuing to construct and complete
approximately 55 residences currently in construction and development.
We estimate that between $65.0 million and $70.0 million will be
required to fund our ongoing construction during the twelve month
period ending December 31, 2000 and that other entities for whom we are
constructing residences will need to fund between $50.0 million and
$55.0 million during that same time period.
PURCHASE OF JOINT VENTURE INTERESTS. We are obligated under many of our
joint venture arrangements to purchase the equity interests of our
joint venture partners at fair market value upon the election of our
partners. During the next twelve months, we will be subject to
contingent purchase obligations with respect to equity interests held
by joint venture partners, exercisable at their election, related to
approximately 101 of our residences. At designated times or earlier, as
contingent purchase obligations are exercisable, we may also elect to
exercise our rights to purchase these interests. Based on a number of
assumptions, including assumptions as to the number of residences to be
operated with joint venture partners, the timing of completion of
development, the time at which these options may be exercised and the
fair market value of these residences at the date these options are
exercised, we estimate that we may need approximately $75 million to
$85 million to satisfy these purchase obligations during the twelve
month period ending December 31, 2000.
DEBT SERVICE. In addition to ongoing debt service and lease payment
obligations, including interest payments due on our convertible
debentures, we will be required to fund or refinance approximately
$29.0 million of short-term indebtedness and $9.9 million of long-term
indebtedness that will mature during the twelve month period ending
December 31, 2000. As of December 31, 1999, we had outstanding
approximately $130.8 million of debt (currently held by two lenders)
which includes provisions requiring us to repay a portion of the debt
if the operating cash flow from the residences financed by such debt
falls below specified levels, which we expect to occur. The repayment
of a portion of this debt was scheduled to occur in March and August of
2000. We have preliminary understandings with the two lenders holding
the debt that the terms of such debt will be modified during 2000 to
eliminate any required repayment in exchange for shortening the
maturity date of such debt to approximately two years and converting
the pricing on such debt to a floating rate structure. If these
modifications had been effected as of March 24, 2000, the floating rate
would be approximately 8.75%. Prior to these anticipated modifications,
this debt would mature in approximately 15 years and would bear
interest at fixed rates ranging from 7.56% to 7.63%. No assurance can
be given that we will be successful in obtaining the modifications
described above of this debt.
ADVANCES TO DEVELOPMENT PARTNERS. We have committed to provide up to
$113.9 million in financing to development partners under third party
arrangements. We have advanced $37.5 million pursuant to these
arrangements as of December 31, 1999. Subject to resolving any pending
loan covenant issues, we intend to finance or refinance these projects
under existing or future bank credit facilities.
We expect to fund a portion of our capital and liquidity requirements from cash
on hand, cash generated from operations, financing under existing debt and lease
commitments and, to a limited extent, equity from our joint venture development
partners. Our ability to utilize previously secured non-binding financing
commitments from REITs and other lenders has become substantially limited due in
part to our request and receipt of modifications of some of the lenders'
financial covenants, the volatility in the capital markets and factors affecting
the assisted living industry generally. In particular, one of our construction
loan facilities has delayed advances due on ongoing construction pending the
resolution of a number of loan facility capacity and residence construction
issues. In addition, many healthcare REITs and lenders are currently not
extending new financing and the property level underwriting requirements of
certain of our lenders are being more strictly applied. Accordingly, our ability
to secure financing on acceptable terms has become increasingly difficult. We
currently expect to have access to no
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more than $50 to $70 million of additional mortgage financing from existing
construction loan facilities during the twelve month period ending December 31,
2000. We do not expect to have access to any significant sale/leaseback
financing during the twelve month period ending December 31, 2000.
We are seeking to address our anticipated shortfall of our capital resources to
fund anticipated capital needs through the sale of at least $100 million of
additional equity or equity-linked securities of the Company. We have retained
investment bankers to assist us in identifying possible sources of equity
capital and to structure and negotiate an appropriate transaction. Although we
have had and are continuing to have discussions with a number of potential
investors, we are currently engaged in detailed negotiations with two investor
groups, both of which include existing shareholders of the Company. We believe
these investor groups have access to substantial financial resources and have a
history of making investments in the senior housing and assisted living
industries. While the transactions proposed by these two groups vary, we expect
that these transactions may involve either the issuance of convertible preferred
stock or convertible debentures of the Company, each convertible into our common
stock. In the case of convertible debentures, these debt securities would rank
senior to our $228.6 million of subordinated convertible debentures and would
accrue interest payable by the issuance of additional convertible debentures of
the Company. In the case of convertible preferred stock, these equity securities
would rank senior to all other classes of our capital stock and would be
entitled to quarterly dividends payable by the issuance of additional shares of
convertible preferred stock. Accordingly, we expect this transaction would be
dilutive to the current common stockholders of the Company. Any equity
transaction likely would be subject to various conditions, including: (i)
modification of certain financial covenants or other structural amendments in
some of our credit agreements to provide the Company more flexibility in
executing our business plan; (ii) the commitment of certain of our lenders to
extend maturities as well as to resume funding of their credit facilities in the
ordinary course; and (iii) various contractual consents and approvals. Given
that we have not committed to a specific equity transaction with any of our
prospective investors, there is a risk that we will not complete an equity
transaction. However, given the high level of interest of our prospective
investors, the advanced stage of these negotiations and the familiarity and
understanding that these prospective investors have with respect to our Company
and business, our management team believes that the Company has the ability to
complete an equity investment transaction in the second quarter of 2000.
We have taken several steps to maintain sufficient operational liquidity pending
finalizing and funding an equity transaction. These steps have included: (i)
stopping and/or slowing construction in progress in order to reduce
construction-related spending; (ii) borrowing $44.0 million pursuant to bridge
loan financing; and (iii) allowing construction-related payables to build up
over normal levels. Notwithstanding these measures, one of our principal
construction lenders has delayed making further advances on five residences
currently in construction. As a result, liens have been filed on these
construction projects resulting in defaults under the operative construction
loan credit agreements. Although the Company has obtained waivers through June
30, 2000 of these defaults, payment of these suppliers and contractors will need
to be effected in 2000 in order to permanently resolve these defaults. In
addition, additional liens or lawsuits may be filed by contractors and
subcontractors unless the advances under the credit facility are resumed, which
additional liens or lawsuits will in turn result in further defaults under the
operative credit agreements. Moreover, although the stopping or slowing of
construction in progress has helped to preserve operating liquidity, upon
resuming construction we may incur increased costs in order to complete
construction.
Due to the fourth quarter non-recurring charges and the anticipated reduction in
our projected earnings due to planned reduction in development activity and
reduced utilization of off-balance sheet joint venture structures, we would have
been in violation of some of the financial covenants in our major credit
facilities. However, we have obtained from these lenders either suspensions,
amendments or waivers of net worth or fixed charge coverage covenants in order
to avoid any actual default under these agreements and provide relief to the
Company through June 30, 2000. These suspensions, amendments and waivers impose
various conditions on the Company, including the requirement to secure equity or
equity-linked funding of at least $100.0 million on or before June 30, 2000 and,
in the case of one lender group, to have secured a written commitment with
respect to an equity transaction during the second quarter. To secure these
accommodations from our lenders, we have (i) agreed to pay various fees both in
form of cash and other consideration as well as established additional cash
reserves; (ii) increased the pricing on some of our financing, some of which
increases are permanent and others of which are temporary pending the completion
of our contemplated equity transaction; (iii) shortened the maturity dates on
some of our financing; (iv) delayed or waived our receipt of management fees and
reimbursement of operating costs of residences serving as collateral; and (v)
consented to the reduction of existing financing commitments of some of our
lenders.
If we are unable to finalize negotiations with an investor with respect to an
equity transaction or if we are unable to satisfy the conditions to a proposed
equity investment, the Company will need to seek to address its significant
short- and long-term liquidity shortfall through various measures, which may
include further debt restructuring, sale of assets on an expedited basis, the
surrender of collateral to certain of our lenders and further reduction of
overhead generally. However, we are not able to provide any assurance that,
without a significant equity transaction, the Company will be able to satisfy
its short-term or long-term liquidity needs. In addition, as we are seeking to
finalize and complete an equity transaction, we will need
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access to further advances under our construction lines, further extensions of
terms by construction-related creditors and access to further bridge financing.
We believe that upon executing and announcing a definitive agreement with
respect to an equity transaction that we will be able to work with various of
our lenders and lessors pending the closing and funding of the equity
transaction. However, we can provide no assurance that we will be able to reach
an accommodation with all of our lenders and lessors to accomplish this
objective.
IMPACT OF INFLATION
To date, inflation has not had a significant impact on us. Inflation could,
however, affect our results of operations due to our dependence on our senior
resident population who rely on liquid assets and relatively fixed incomes to
pay for our services. As a result, we may not be able to increase residence
service fees to account fully for increased operating expenses. In structuring
our fees, we attempt to anticipate inflation levels, but there can be no
assurance that we 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 we anticipate, inflationary
pressures could affect our cost of new product deployment and financing. There
can be no assurances that financing will be available on terms acceptable to us.
ITEM 7A. 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
our earnings and cash flows.
We performed a sensitivity analysis which presents the hypothetical change in
fair value of those financial instruments held by us at December 31, 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 $337.0 million. Although not expected, a one
percentage point change in the interest rates would have caused our annual
interest expense to change by approximately $3.4 million. Accordingly, a
significant increase in London Inter Bank Offered Rate ("LIBOR") could have a
material adverse effect on our earnings.
Although a majority of the debt and lease payment obligations we have as of, or
during the twelve months ended, December 31, 1999 are not subject to floating
interest rates, indebtedness that we may incur in the future may bear interest
at a floating rate. Debt and annual operating lease payment obligations will
continue to increase significantly as we complete our pending development and
construction activity. We expect to refinance $130.8 million of our fixed rate
debt in 2000 and, as a result, convert this into variable rate debt.
We do not presently use financial derivative instruments to manage our interest
costs. We do not use foreign currency exchange rate forward contracts or
commodity contracts and do not have foreign currency exposure as of December 31,
1999.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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Page
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<S> <C>
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES:
Independent Auditors' Report.................................................................. 28
Consolidated Balance Sheets, as of December 31, 1999 and 1998................................. 29
Consolidated Statements of Operations for Years Ended December 31, 1999, 1998 and 1997........ 30
Consolidated Statements of Changes in Stockholders' Equity for Years Ended December 31,
1999, 1998 and 1997....................................................................... 31
Consolidated Statements of Cash Flows for Years Ended December 31, 1999, 1998 and 1997........ 32
Notes to Consolidated Financial Statements.................................................... 33-47
</TABLE>
27
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Alterra Healthcare Corporation:
We have audited the accompanying consolidated balance sheets of Alterra
Healthcare Corporation and subsidiaries (the Company) as of December 31, 1999
and 1998, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company at December 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for the cost of start-up activities.
KPMG LLP
Chicago, Illinois
March 29, 2000
28
<PAGE> 30
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
------------- ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................ $ 18,728 $ 40,621
Accounts receivable, net............................................. 7,150 4,045
Pre-opening costs, net of amortization............................... -- 7,856
Notes receivable, net................................................ 32,530 10,986
Land held for sale................................................... 9,501 --
Other current assets................................................. 41,320 27,344
------------- ------------
Total current assets............................................. 109,229 90,852
------------- ------------
Property and equipment, net.............................................. 863,163 640,211
Restricted cash and investments.......................................... 28,325 4,504
Goodwill, net............................................................ 5,106 5,243
Other assets............................................................. 55,574 37,000
------------- ------------
Total assets..................................................... $1,061,397 $ 777,810
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term obligations........................ $ 9,945 $ 4,376
Short-term notes payable............................................. 29,009 8,363
Accounts payable - trade............................................. 11,036 9,954
Accounts payable - construction...................................... 6,616 18,712
Accrued expenses..................................................... 37,972 15,723
Deferred rent and refundable deposits................................ 9,199 5,419
------------- ------------
Total current liabilities..................................... 103,777 62,547
------------- ------------
Long-term obligations, less current installments......................... 563,072 286,984
Convertible debt......................................................... 228,600 228,600
Deferred gain on sale and other.......................................... 11,592 18,347
Minority interest........................................................ 3,713 4,220
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
none issued or outstanding......................................... -- --
Common stock, $.01 par value; 100,000,000 shares authorized;
issued 22,111,671 shares of which 22,100,032 were outstanding
on December 31, 1999 and 22,030,097 shares of which
22,018,458 were outstanding on December 31, 1998.................. 221 220
Treasury stock, $.01 par value; 11,639 shares in 1999 and 1998....... (163) (163)
Additional paid-in capital........................................... 179,362 178,026
Accumulated deficit.................................................. (28,777) (971)
------------- ------------
Total stockholders' equity....................................... 150,643 177,112
------------- ------------
Total liabilities and stockholders' equity....................... $1,061,397 $ 777,810
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 31
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- -----------
<S> <C> <C> <C>
Revenue:
Resident service fees............................................ $349,770 $ 235,909 $ 128,856
Other............................................................ 26,411 8,514 1,888
-------- --------- -----------
Operating revenue.................................................... 376,181 244,423 130,744
Operating expenses (income):
Residence operations............................................. 224,213 147,931 81,558
Lease expense.................................................... 69,375 44,174 25,524
Lease income .................................................... (25,507) (4,915) --
General and administrative....................................... 44,898 23,200 22,168
Depreciation and amortization.................................... 21,178 19,730 9,271
Non-recurring charge (Note 5).................................... 47,280 -- 4,656
-------- --------- -----------
Total operating expenses..................................... 381,437 230,120 143,177
-------- --------- -----------
Operating (loss) income.............................................. (5,256) 14,303 (12,433)
Other (expense) income:
Interest expense, net............................................ (35,938) (11,024) (3,932)
Equity in losses of unconsolidated affiliates.................... (1,442) (31) (226)
Other expense.................................................... (20) (170) (112)
Minority interest in losses of consolidated
subsidiaries................................................... 4,018 20,610 8,440
-------- --------- -----------
Total other (expense), income, net........................... (33,382) 9,385 4,170
-------- --------- -----------
(Loss) income before income taxes and the cumulative effect of a change
in accounting principle........................................... (38,638) 23,688 (8,263)
Income tax benefit (expense)......................................... 14,669 (3,136) --
-------- --------- -----------
(Loss) income before the cumulative effect of a change in accounting
principle......................................................... (23,969) 20,552 (8,263)
-------- --------- -----------
Cumulative effect of change in accounting principle (net of tax
benefit) ............................................................ (3,837) -- --
-------- --------- -----------
Net (loss) income.................................................... $(27,806) $ 20,552 $ (8,263)
======== ========= ===========
(Loss) income per share before change in accounting principle:
Basic............................................................ $ (1.09) $ 0.94 $ (0.44)
======== ========= ===========
Diluted.......................................................... $ (1.09) $ 0.92 $ (0.44)
======== ========= ===========
Net (loss) income per share:
Basic............................................................ $ (1.26) $ 0.94 $ (0.44)
======== ========= ===========
Diluted.......................................................... $ (1.26) $ 0.92 $ (0.44)
======== ========= ===========
Weighted average common shares outstanding:
Basic............................................................ 22,088 21,905 18,651
======== ========= ===========
Diluted.......................................................... 22,088 24,145 18,651
======== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 32
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK, TREASURY STOCK
AND ADDITIONAL
PAID-IN CAPITAL
--------------------------------
SHARES ACCUMULATED
OUTSTANDING AMOUNTS DEFICIT TOTAL
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1996.................. 18,539 $104,324 $(13,260) $ 91,064
--------------- ------------ --------------- ------------
Proceeds from issuance of common stock......... 2,800 60,744 -- 60,744
Shares issued - options exercised.............. 52 352 -- 352
Net loss..................................... -- -- (8,263) (8,263)
--------------- ------------ --------------- ------------
BALANCES AT DECEMBER 31, 1997.................. 21,391 $165,420 $(21,523) $143,897
--------------- ------------ --------------- ------------
Proceeds from issuance of common stock......... 427 9,331 -- 9,331
Shares issued - options exercised.............. 201 3,332 -- 3,332
Net income..................................... -- -- 20,552 20,552
--------------- ------------ --------------- ------------
BALANCES AT DECEMBER 31, 1998.................. 22,019 $178,083 $ (971) $177,112
--------------- ------------ --------------- ------------
Shares issued - options exercised.............. 81 1,337 -- 1,337
Net loss....................................... -- -- (27,806) (27,806)
--------------- ------------ --------------- ------------
BALANCES AT DECEMBER 31, 1999.................. 22,100 $179,420 $(28,777) $150,643
=============== ============ =============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 33
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income ................................................. $ (27,806) $ 20,552 $ (8,263)
Adjustment to reconcile net (loss) income to net cash provided by
(used in) operating activities:
Depreciation and amortization ..................................... 21,178 19,730 9,271
Amortization of deferred financing ................................ 3,679 1,593 123
Deferred income taxes ............................................. (16,732) (6,468) --
Equity in net loss from investments in unconsolidated affiliates .. 1,442 31 226
Minority interest in losses of consolidated subsidiaries .......... (4,018) (20,610) (8,440)
Tax effect of stock options exercised ............................. 537 1,709 --
Increase in net resident receivable ............................... (3,106) (2,213) (4,333)
Decrease (increase) in pre-opening costs .......................... 7,856 (11,965) (3,097)
Increase in income tax receivable ................................. (5,557) -- --
(Increase) decrease in other current assets ....................... (7,569) 3,347 (7,899)
Increase in accounts payable trade ................................ 1,082 4,077 (180)
Increase (decrease) in accrued expenses ........................... 10,011 (729) 8,583
(Decrease) increase in accrued merger charges ..................... (340) (5,151) 5,863
Increase in accrued development reduction charge .................. 13,348 -- --
Changes in other assets and liabilities, net ...................... 11,353 (8,971) 339
--------- --------- ---------
Net cash provided by (used in) operating activities ................. 5,358 (5,068) (7,807)
--------- --------- ---------
Cash flows from investing activities:
Payments for property, equipment and project development costs .... (181,794) (372,289) (286,487)
Net proceeds from sale of property and equipment .................. 18,263 -- 2,188
Increase in notes receivable, net of reserve....................... (21,544) (10,986) --
Acquisitions of facilities, net of cash .......................... (21,806) (49,509) (23,189)
Changes in investments in and advances to unconsolidated affiliates -- (4,682) (1,148)
Purchase of limited partnership interests ......................... (64,355) (27,053) (5,590)
Increase in long-term investments ................................. (23,821) (69) (1,600)
Decrease (increase) in short-term investments .................... -- 90,000 (90,000)
--------- --------- ---------
Net cash used in investing activities ............................... (295,057) (374,588) (405,826)
--------- --------- ---------
Cash flows from financing activities:
Repayments of short-term borrowings ............................... (1,130) (15,537) (34,335)
Repayments of long-term obligations ............................... (78,258) (53,089) (53,887)
Proceeds from issuance of debt .................................... 273,049 216,286 145,943
Proceeds from issuance of convertible debt ........................ -- 18,600 175,000
Payments for financing costs ...................................... (8,550) (8,932) (7,131)
Proceeds from sale/leaseback transactions ......................... 78,387 145,669 160,748
Issuance of common stock and other capital contributions .......... 797 10,710 61,285
Contributions by minority partners and minority stockholders ...... 3,511 26,732 6,393
--------- --------- ---------
Net cash provided by financing activities ........................... 267,806 340,439 454,016
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents ................ (21,893) (39,217) 40,383
--------- --------- ---------
Cash and cash equivalents:
Beginning of year ................................................ 40,621 79,838 39,455
--------- --------- ---------
End of year ...................................................... $ 18,728 $ 40,621 $ 79,838
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest, including amounts capitalized ............. $ 46,523 $ 27,631 $ 11,660
========= ========= =========
Cash paid during year for income taxes ............................ $ 1,424 $ 5,219 $ 94
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 34
ALTERRA HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Alterra Healthcare Corporation (the "Company") develops, owns,
and operates assisted living residences. As of December 31,
1999, the Company operated and managed 450 residences with
approximate capacity to accommodate 20,700 residents located
throughout the United States.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Alterra Healthcare Corporation and its majority-owned
subsidiaries. Results of operations of the majority-owned
subsidiaries are included from the date of acquisition. All
significant intercompany balances and transactions with such
subsidiaries have been eliminated in the consolidation.
Investments in other affiliated companies in which the Company
has a minority ownership position are accounted for on the
equity method.
Included in the consolidated financial statements are the
accounts of certain wholly owned subsidiaries that have been
formed as "special purpose entities" (SPEs) in accordance with
the requirements of certain of the Company's lenders. Mortgage
lenders imposing SPE requirements typically require that, in
connection with providing mortgage financing with respect to a
pool of residences, the residences actually be owned by one or
more SPEs, which become the borrower or borrowers under the
mortgage financing arrangement. Although lender requirements
with respect to such SPEs vary, a SPE typically is required to
maintain separate corporation records and books of account,
not commingle its assets with those of the parent company,
have a separate board of directors from the parent company,
(including at least one individual board member who is
independent of the parent company), maintain arm's length
relationships with the parent company, not guarantee or become
obligated for the debts of any other entity, including the
parent company, or to hold its credit as being available to
satisfy the obligations of others and not pledge its assets
for the benefit of any other entity, including the parent
company. Given the separate corporate existence of these SPEs
and the fact that the assets of each SPE are subject to the
prior claims of the individual creditors of the SPE, neither
the creditors nor stockholders of the Company (or of any other
of its subsidiaries) have any right to the assets of these
SPEs except indirectly by virtue of its (or the subsidiary's)
equity interest in such SPEs. SPEs included in the
consolidated financial statements include ALS Venture I, Inc.
(which owns 19 residences), ALS Venture II, Inc. (which owns
28 residences), ALS Financing, Inc. (which owns 5 residences)
and ALS Financing II, Inc. (which owns 7 residences and holds
a leasehold interest in one residence and an equitable
interest in one residence pursuant to an installment sale
contact), AHC Properties, Inc (which owns 10 residences), ALS
National SPE I, Inc. (which owns 5 residences), ALS Kansas,
Inc. (which owns 7 residences), ALS National, Inc. (which owns
2 residences), ALS West, Inc. (which owns 14 residences), ALS
Kenosha, Inc. (which owns 1 residence), ALS Olathe I, Inc.
(which owns 1 residence), AHC Purchaser, Inc. (which owns 19
residences), and AHC Tenant, Inc. (which leases 26
residences).
(C) USE OF ESTIMATES
The Company's financial statements have been prepared in
accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
(D) RECENT ACCOUNTING PRONOUNCEMENTS
In April 1998, the AICPA issued 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
33
<PAGE> 35
organization costs. It requires that costs of start-up
activities and organization costs be expensed when incurred.
The Company adopted the statement effective January 1, 1999,
and reported the impact as a cumulative effect of a change in
accounting principle. As of December 31, 1999, the effect of
adoption of this statement resulted in an after tax charge to
earnings of approximately $3.8 million, or $0.17 per diluted
share.
In September of 1998 the Financial Accounting Standards Board
issued SFAS 133 "Accounting for Derivative Instruments and
Hedging Activities," which is effective for the Company's
fiscal year 1999. This statement establishes accounting and
reporting standards requiring that every derivative
instrument, including certain derivative instruments imbedded
in other contracts, be recorded in the balance sheet as either
an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair
value be recognized in earnings unless specific hedge
accounting criteria are met. The Company currently does not
participate in any hedging activities. However, the Company
will assess the impact of this new statement on any future
hedging transactions.
(E) CASH EQUIVALENTS
The Company considers all highly liquid investments with
original maturities of less than ninety days to be cash
equivalents for purposes of the consolidated financial
statements.
(F) FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF
CREDIT RISK
The Company determines fair value of financial assets based on
quoted market values. The fair value of debt is estimated
based on quoted market values, where available, or on current
rates offered to us for debt of the same maturities.
The Company's financial instruments exposed to concentrations
of credit risk consist primarily of cash and short-term
investments. The Company places its funds into high credit
quality financial institutions and, at times, such funds may
be in excess of the Federal Deposit Insurance Corporation
limits.
(G) LONG-LIVED ASSETS
Property and equipment are stated at cost, net of accumulated
depreciation. Property and equipment under capital leases are
stated at the present value of minimum lease payments.
Depreciation is computed over the estimated lives of the
assets using the straight-line method. Buildings and
improvements are depreciated over 20 to 40 years, and
furniture, fixtures, and equipment are depreciated over three
to seven years. Maintenance and repairs are expensed as
incurred.
Goodwill represents the costs of acquired net assets in excess
of their fair market values. Amortization of goodwill is
computed using the straight-line method over the expected
periods to be benefited, generally 40 years. The Company's
management periodically evaluates goodwill for impairment
based upon expectations of undiscounted cash flows in relation
to the net capital investment in the entity. Accumulated
amortization of goodwill was $586,485 and $449,649 as of
December 31, 1999 and 1998, respectively.
(H) DEFERRED FINANCING COSTS
Financing costs related to the issuance of debt are
capitalized and included in other assets, and are amortized to
interest expense using the effective-interest method over the
term of the related debt.
34
<PAGE> 36
(I) REVENUE
Revenue, which is recorded when services are rendered,
consists primarily of resident service fees which are reported
at net realizable amounts. Other revenue consists of the
following components (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ---------- ----------
<S> <C> <C> <C>
Management fees............................. $22,956 $5,676 $1,287
Franchise fees.............................. 2,290 1,545 305
Development fees........................... 1,165 1,293 296
-------------- ---------- ----------
Total other revenue....................... $26,411 $8,514 $1,888
============== ========== ==========
</TABLE>
Management fees are recognized based on the terms of the
management agreements in place for managed residences owned by
third parties and those operated under unconsolidated joint
venture arrangements. Fees are generally recognized based on a
percentage of stabilized revenues. Fees are recognized during
the start up period to offset costs to hire and train staff,
licensing and other activities, as well as after managed
residences are open and operating.
Franchise fees are recognized based on the applicable
franchise agreements which charge fees for the right to use
Company brand names and operating systems. Fees are recognized
based on a fixed fee when franchised residences open and a
percentage of revenue once in operation.
Development fees are recognized based on the applicable
agreements whereby the Company receives fees for construction
of Company prototype buildings for the benefit of third
parties. These fees are recorded during the construction
period based on achievement of certain milestones as defined
in the development agreement.
(J) INCOME TAXES
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the expected future tax consequences attributable to temporary
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
(K) NET INCOME (LOSS) PER COMMON SHARE
The Company presents both basic and diluted earnings per
share, where applicable. Basic earnings per share is computed
by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential
dilution that could occur if common stock equivalents were
exercised and then shared in the earnings of the Company.
Common stock equivalents were anti-dilutive in 1999 and 1997,
accordingly, basic and diluted loss per share amounts were the
same.
35
<PAGE> 37
(L) RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997
financial statements to conform with the 1999 presentation.
(2) ACQUISITIONS AND DEVELOPMENT JOINT VENTURE
The Company completed the following acquisitions during 1998:
- An assisted living residence located in Southern California in
March 1998;
- Seven assisted living residences located in Kansas in
September 1998 acquired from a franchisee of the Company;
- Two assisted living residences located in Wisconsin, one of
which was still under construction, in September 1998.
The aggregate purchase price for all 1998 acquisitions totaled $62.8
million, $49.5 million of which was paid in cash and the remainder was
debt assumed by the Company. All 1998 acquisitions have been accounted
for using the purchase method.
During 1999, the Company completed the following acquisitions:
- An assisted living residence located in Wisconsin in May 1999;
- A leasehold interest in an assisted living residence located
in Washington in October 1999 accounted for as an operating
lease;
- A leasehold interest in an assisted living residence located
in California in November 1999 accounted for as a capital
lease.
The Company also consummated a synthetic lease transaction relating to
26 assisted living and Alzheimer's/dementia care residences that were
previously owned and operated by Manor Care, Inc. and its affiliates
(the "Transaction") in July and September 1999. Pursuant to the
Transaction, an affiliate of a commercial bank acquired the 26
residences for an aggregate purchase price of approximately $189.1
million (including closing costs) and simultaneously leased the 26
residences to AHC Tenant, Inc., a wholly-owned subsidiary of the
Company. The Company's lease of these 26 residences has a term of ten
years, reflects initial rental based on a lease constant of 9.93% and
contains an option to purchase the 26 residences at the end of the
lease term for a pre-negotiated fixed price. For financial accounting
purposes, leases for 17 of the residences have been treated as
operating leases and leases for nine residences were treated as capital
leases. The Company recorded $53.2 million of property and equipment
and $53.2 million of long term obligations upon completion of the
transaction related to these capital leases. As part of this
Transaction, the Company entered into 26 joint venture arrangements
with a third party investor which owns 99% of each joint venture. The
joint ventures sublease the real estate from AHC Tenant, Inc. The
Company manages these residences on behalf of the joint ventures.
The aggregate purchase price for all 1999 acquisitions and synthetic
lease transaction totaled $198.4 million, $21.8 million of which was
paid in cash and the remainder was debt and lease obligations assumed
by the Company. All 1999 acquisitions have been accounted for using the
purchase method.
The Company entered into the following significant joint ventures
during 1999:
Manor Care, Inc. and the Company established a joint venture to develop
up to $500 million of Alterra-branded Alzheimer's/dementia care and
assisted living residences in Manor Care's core markets over the next
three to five years. The Company began joint development under this
arrangement in the second quarter of 1999 with plans to continue joint
development activities over a three to five year period. As of
December 31, 1999, 43 residences have been contributed to this
development joint venture; 13 of these residences were open as of
December 31, 1999 with the remainder in various states of construction.
The Company has a 5% ownership interest in this joint venture and
certain call option rights and put option obligations with respect to
the equity interests held by joint venture partners.
36
<PAGE> 38
The joint venture had $200 million of debt financing commitments from a
bank syndicate available of which $50.7 million was outstanding at
December 31, 1999 primarily relating to the 13 residences open at
December 31, 1999. This debt is guaranteed by both Manor Care Inc. and
the Company. The Company had $24.7 million in notes receivable
outstanding as of December 31, 1999 relating primarily to construction
costs on the 23 residences contributed by the Company not open as of
December 31, 1999. This receivable was to be satisfied through the
funding of the in-place bank financing.
On March 30, 2000, the Company and Manor Care, Inc. agreed to amend the
original $200 million financing commitment and lower the commitment to
$60 million. As a result, the Company has established a reserve of $5.0
million against the $24.7 million note receivable as of December 31,
1999. Of the $5.0 million reserve, $1.7 million relates to management
fees previously recorded as revenue by the Company per the original
agreement. The remaining $3.3 million represents reserves against
construction and development costs already incurred associated with a
portion of the residences which the Company does not plan to continue
developing. In addition, $2.0 million of the $10.6 million reserve
established for future costs associated with development activity
relates to anticipated additional costs incurred on development
projects currently in this joint venture for which the Company now
plans to terminate construction and dispose of the land.
(3) NOTES RECEIVABLE
Notes receivable represent balances due from third party investors. The
Company funds construction and working capital on behalf of the third
parties and anticipates payment upon the closing of construction
financing on these properties. The $32.5 million of notes receivable is
net of a $5.0 million reserve (See Note 2).
(4) LAND HELD FOR SALE AND OTHER CURRENT ASSETS
Land held for sale represents the net realizable value of 25 sites the
Company has decided not to develop and are currently offered for sale
(see Note 5).
Other current assets are comprised of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Supply inventory.................................. $ 9,502 $ 7,511
Restricted cash................................... 7,191 9,313
Deferred tax...................................... 5,708 2,346
Income tax refund receivable...................... 5,557 --
Prepaid expenses.................................. 2,782 4,648
Other current assets.............................. 10,580 3,526
------------ -----------
Total other current assets.................... $41,320 $27,344
============ ===========
</TABLE>
(5) PROPERTY AND EQUIPMENT
A summary of property and equipment at December 31 follows (in
thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Land and improvements .................... $ 70,916 $ 55,037
Buildings and leasehold improvements 656,267 407,631
Furniture, fixtures, and equipment ....... 84,941 55,655
Construction in progress ................. 92,741 142,433
--------- ---------
Total property and equipment ............. 904,865 660,756
Less accumulated depreciation ............ (41,702) (20,545)
--------- ---------
Property and equipment, net .............. $ 863,163 $ 640,211
========= =========
</TABLE>
At December 31, 1999, property and equipment includes $67.4 million of
buildings and improvements held under capital leases. The related
accumulated amortization totaled $945,689 at December 31, 1999.
37
<PAGE> 39
Interest is capitalized in connection with the construction of
residences and is amortized over the estimated useful lives of the
residences. Interest capitalized in 1999, 1998 and 1997 was
approximately $10.3 million, $13.8 million and $6.7 million,
respectively.
During the fourth quarter of 1999, management reviewed development
projects not yet in construction and, in light of the competitive
environment and tighter capital markets, implemented a plan to exit or
defer a substantial portion of these projects. The plan to exit these
activities, including writing off costs, reclassification of land to
land held for sale and the closing of our construction subsidiary has
commenced. The write off of $28.4 million for costs already incurred on
development projects that will not be completed was charged to
operations, a reserve of $8.6 million was established for costs related
to exiting these activities, a reserve was established for the employee
costs and lease obligations associated with closing down our
construction subsidiary and related activities at the national office.
The Company also established a $7.0 million reserve related to projects
currently in a development joint venture with Manor Care, Inc. which is
discussed further in Note 2. In addition, the Company recorded other
charges as set forth in the following table, including a charge for
failed acquisitions, corporate downsizing, office relocation costs, and
additional asset write-off due to the relocation of the Company's
national headquarters. The following is a summary of the non-recurring
charge and other one-time charges (in thousands):
<TABLE>
<CAPTION>
Non-recurring Charge: 1999
-------
<S> <C>
Exiting construction and development activities.................... $28,400
Construction and development costs related to exit................. 8,600
Employee costs and lease obligations............................... 2,800
Other.............................................................. 480
-------
Restructuring charge $40,280
-------
Reserve related to development joint venture costs 7,000
-------
Total non-recurring charge $47,280
=======
Other:
Write-off of failed acquisitions, corporate downsizing, and office
relocation costs.................................................. $ 2,300
Write-off of deferred financing commitment fees................... 2,700
Write-off of assets due to national office relocation............. 600
-------
$ 5,600
=======
</TABLE>
38
<PAGE> 40
Other one time charges of $2.3 million were recorded in general and
administrative expenses, $600,000 in depreciation and amortization, and
$2.7 million in interest expense in the fourth quarter of 1999.
Construction in progress consisted principally of costs related to the
construction of assisted living residences with outstanding
construction commitments totaling between $65.0 million and $70.0
million and $93.9 million at December 31, 1999 and 1998.
(6) UNCONSOLIDATED AFFILIATES AND MANAGED RESIDENCES
The Company manages residences primarily in the start-up or lease-up
phases of operations in which it either has no ownership or a minority
ownership position, typically less than 10%. Historically, the Company
has subsequently elected to purchase or acquire the remaining ownership
interest in a majority of these residences, at which point the
residences are included in consolidated operating results. As of
December 31, 1999, the Company owned minority interests in entities
owning or leasing (and also manages) 87 residences and managed 14 other
residences. As of December 31, 1998, the Company owned minority equity
interests in entities owning or leasing (and also manages) 49
residences and managed 17 other residences. Included in other
liabilities of the Company's balance sheet are net advances from the
affiliates of $1.6 million and $2.0 million as of December 31, 1999 and
1998, respectively.
The results of operations of these unconsolidated and managed
residences for 1999, 1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Residence service fees ............... $ 58,409 $ 20,693 $ 7,268
Residence operation expenses 65,374 18,602 5,692
-------- -------- --------
Residence (loss) profit .............. (6,965) 2,091 1,576
Management fee expense ............... 24,133 5,220 1,583
Financing expense .................... 28,660 12,551 2,367
-------- -------- --------
Loss before tax ...................... $(59,758) $(15,680) $ (2,374)
======== ======== ========
</TABLE>
Financing expense on these residences includes $25.5 million and $4.9
million of lease expense in 1999 and 1998, respectively, which
represents lease income to the Company from these residences. The
Company retains ownership in the underlying assets and then leases the
assets to the unconsolidated and managed affiliates.
Included in the results above are six residences managed pursuant to an
agreement with an affiliate under which the Company provides payroll
processing and financial statement preparation services for a
partnership that is 50% owned by an officer and a stockholder. Under
the terms of this agreement, the Company charged an annual fee of
$10,000 in 1999 and $10,000 in 1998 for provision of such management
services.
39
<PAGE> 41
(7) RESTRICTED CASH AND INVESTMENTS
Restricted cash and investments consist of certificates of deposit
restricted as collateral for lease arrangements and debt service
reserves with interest rates ranging from 4.0% to 5.5% and maturities
ranging from 1.5 years up to 10 years.
(8) OTHER ASSETS
Other assets are comprised of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---------- ------------
<S> <C> <C>
Deferred financing costs, net............ $23,242 $18,290
Deferred tax............................. 12,645 5,114
Lease security deposits.................. 9,663 5,685
Organizational and other costs, net...... -- 2,631
Deposits and other....................... 10,024 5,280
---------- ------------
Total other assets................... $55,574 $37,000
========== ============
</TABLE>
(9) LONG-TERM DEBT, CAPITAL LEASES, AND FINANCING OBLIGATIONS
Long-term debt, capital leases, and financing obligations consist of
the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
5.25% convertible subordinated debentures due December 15,
2002, callable by the Company on or after December 31, 2000.... $143,750 $143,750
7.00% convertible subordinated debentures due June 1, 2004,
callable by the Company on or after June 15, 2000.............. 50,000 50,000
6.75% convertible subordinated debentures due June 30, 2006,
callable by the Company on or after July 15, 1999.............. 34,850 34,850
----------- ------------
Total convertible debt................................. $228,600 $228,600
----------- ------------
Mortgages payable, due from 2000 through 2022; weighted
average interest rates of 8.04%............................. $471,319 $280,219
Capital lease obligation payable through 2009; weighted
average interest rate of 9.93%................................. 53,079 --
Capital lease obligation payable through 2004; weighted
average interest rate of 10.00%................................ 14,299 --
Serial and term revenue bonds maturing serially from 1999
through 2013; interest rates ranging from 4.00% to 9.50%....... 4,320 6,761
Bridge loan financing at 8.00% interest........................ 30,000 --
Sale/leaseback financing obligation, variable interest at the
11th District FHLB rate plus 2-3/4%, payable in monthly
installments, due 2000......................................... -- 4,227
Other.......................................................... -- 153
----------- ------------
Total long-term obligations.............................. 801,617 519,960
Less current installments...................................... 9,945 4,376
----------- ------------
Total long-term obligations, less current
installments........................................... $791,672 $515,584
=========== ============
</TABLE>
The mortgages payable and capital lease obligations are secured through
security agreements and guarantees by the Company. In addition, certain
security agreements require the Company to maintain collateral and debt
reserve
40
<PAGE> 42
funds. These funds, which are recorded as restricted cash and long-term
investments, consist of certificates of deposit and restricted cash
required to be maintained from 1999 through 2009.
At December 31, 1999, the Company has outstanding $3.4 million of
mortgage notes payable that were assumed in conjunction with non-cash
acquisition activities in 1999.
In December 1999, the Company entered into a bridge loan arrangement
with an affiliated group (the "Bridge Lender") in connection with the
Company's repurchase of 19 Alterra residences then leased from a health
care REIT (the "REIT Residences"). Pursuant to this arrangement, the
Company borrowed $14.0 million (the "Tranche A Loan") for working
capital purposes and $30.0 million (Tranche B Loan") as bridge
financing for its initial purchase of seven REIT Residences in December
1999. The Tranche A Loan has a term of up to 12 months and bore
interest at an initial annual rate of 8% for the first three months, 9%
for the next three months and increasing thereafter by 0.5% per month.
The Tranche A Loan is secured by mortgages on certain land and a stock
pledge of a subsidiary corporation (the "Holding Subsidiary") formed to
serve as the holding company for the subsidiary formed to acquire the
REIT Residences. The Tranche B Loan had a term of up to six months,
bore interest at an annual rate of 10% for the first three months and
at a rate escalating by 0.5% per month thereafter. The Tranche B Loan
was secured by mortgages on the seven REIT Residences acquired with the
proceeds from the Tranche B Loan.
In February 2000, the Company acquired the remaining 12 REIT
Residences. In connection therewith, the Company obtained $60.0 million
of mortgage financing from one of its bank lenders, and utilized $30.0
million of the proceeds to purchase the 12 REIT Residences and $30.0
million to repay the Tranche B Loan.
In connection with this bridge loan arrangement, the Bridge Lender was
paid commitment and loan fees aggregating $820,000, acquired a $1.0
million redeemable, convertible preferred stock interest in the Holding
Subsidiary and was given the right to co-invest in certain future
Alterra equity transactions by converting its Tranche A Loan receivable
into an equity investment in Alterra. The Holding Subsidiary preferred
stock acquired by the Bridge Lender accrues dividends at 8% per annum,
is convertible at any time after December 31, 2000 into common shares
of the Holding Subsidiary representing approximately 35% of the
outstanding common stock of the Holding Subsidiary and may be redeemed
by Holding Subsidiary at any time for an amount equal to the fair
market value of the Subsidiary Preferred at that time provided that
such fair market value shall in no event exceed the sum of (i) its
stated value of $1.0 million (ii) the accrued and unpaid dividends
thereon and (iii) a redemption premium of $1.5 million if redeemed on
or before March 31, 2000, increasing by $300,000 per month thereafter.
One member of the Board of Directors of the Company, and certain of his
affiliates, hold equity interests in the Bridge Lender.
We expect to refinance $130.8 million of our fixed rate debt in 2000
and, as a result, convert this into variable rate debt. See
"Quantitative and Qualitative Disclosures about Market Risk."
Principal payments on long-term debt, capital leases, and financing
obligations for the next five years and thereafter are as follows (in
thousands):
<TABLE>
<S> <C>
2000............................................................. $ 9,945
2001............................................................. 4,601
2002............................................................. 155,695
2003............................................................. 27,335
2004............................................................. 55,228
Thereafter....................................................... 548,813
-----------
Total long-term debt, capital leases, and financing obligations.. $801,617
===========
</TABLE>
41
<PAGE> 43
(10) ACCRUED EXPENSES
Accrued expenses are comprised of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Accrued charges related to exiting development activity..... $13,348 $ --
Accrued salaries and wages.................................. 6,016 4,780
Accrued vacation............................................ 4,671 2,819
Accrued property taxes...................................... 3,131 2,562
Accrued interest............................................ 3,036 1,295
Other....................................................... 7,770 4,267
----------- ----------
Total accrued expenses.................................. $37,972 $15,723
=========== ==========
</TABLE>
(11) SHORT-TERM NOTES PAYABLE
As of December 31, 1999 short-term notes payable consist of a $15.0
million unsecured line of credit bearing interest at the then current
prime rate and a $14.0 Tranche A Loan obtained from the Bridge Lender
(see Note 9).
As of December 31, 1998, short-term notes payable consisted of a $5.0
million line of credit bearing interest at the then current prime rate
and $3.4 million of notes payable to a health care real estate
investment trust which were subsequently repaid upon repurchase of
seven buildings in December 1999.
(12) STOCKHOLDERS' EQUITY
In August 1996 the Company completed an initial public offering of
6,000,000 shares of common stock, of which 3,443,206 shares were sold
by the Company and 2,556,794 shares were sold by existing stockholders.
Net proceeds to the Company were approximately $40.0 million.
In December 1997 the Company completed a second public offering of
2,800,000 shares of common stock. Net proceeds to the Company were
approximately $61.0 million.
On December 10, 1998, the Company entered into a Rights Agreement with
American Stock Transfer & Trust Company, as Rights Agent, pursuant to
which it declared and paid a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred
Stock, $.01 par value per share (the "Preferred Shares"), of the
Company at a price of $130.00 per one one-hundredth of a preferred
share.
(13) STOCK OPTION PLAN
In 1995 the Company adopted a stock option plan (the "1995 Plan")
pursuant to which the Company's Board of Directors may grant stock
options to officers and key employees. The 1995 Plan authorizes grants
of options to purchase up to 2,500,000 shares of authorized but
unissued common stock. Stock options are granted with an exercise price
equal to the stock's fair market value at the date of grant. Generally,
stock options have 10-year terms, vest 25% per year, and become fully
exercisable after four years from the date of grant.
At December 31, 1999, 1,056,453 shares were available for grant under
the 1995 Plan. The per share weighted-average fair value of stock
options granted during 1999 and 1998 were $12.63 and $10.44 on the date
of grant using the Black Scholes option-pricing model with the
following weighted-average assumption: expected dividend yield 0.0%,
risk-free interest rate of 5.0%, expected volatility of 63% for 1999
grants and 43% for 1998 grants and an expected life of 7 years.
In conjunction with the 1997 merger of the Company and Sterling House
Corporation, Sterling stock options that were outstanding were
exchanged for options to purchase the Company's common stock, adjusted
for the exchange ratio operative in the merger. Under the terms of the
Sterling House Corporation 1995 Incentive Stock Option Plan, all
options became vested and immediately exercisable as a result of the
Sterling merger.
For financial reporting, the Company applies the intrinsic value method
of APB Opinion No. 25 in accounting for stock options and, accordingly,
compensation cost has been recognized only for stock options granted
below fair market value. Had the Company determined compensation cost
based on the fair value method prescribed by SFAS
42
<PAGE> 44
No. 123 for stock options granted in 1999, 1998 and 1997, its net
(loss) income and net (loss) income per share would have been increased
(decreased) to the pro forma amounts indicated below, (in thousands,
except per share data):
<TABLE>
<CAPTION>
NET (LOSS) INCOME NET (LOSS) INCOME
PER SHARE
---------------------------------------- -------------------------------------
1999 1998 1997 1999 1998 1997
----------- ----------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
As reported...... $(27,806) $20,552 $(8,263) $(1.26) $0.92 $(0.44)
Pro forma........ $(27,857) $18,821 $(10,267) $(1.26) $0.78 $(0.55)
</TABLE>
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WTD.-AVG.
NUMBER OF EXERCISE
SHARES PRICE
-------------- --------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1997 1,187,401 $ 9.43
Granted...................... 893,801 19.77
Exercised.................... (200,579) 8.15
Forfeited.................... (42,997) 17.49
------------ ---------
BALANCE AT DECEMBER 31, 1998 1,837,626 $14.45
Granted...................... 20,100 18.75
Exercised.................... (81,574) 9.66
Forfeited.................... (180,114) 19.24
------------ ---------
BALANCE AT DECEMBER 31, 1999..... 1,596,038 $14.20
============== =========
</TABLE>
Stock options outstanding at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
AVERAGE
RANGE OF NUMBER REMAINING WTD.-AVG. NUMBER WTD.-AVG.
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICES 12/31/99 LIFE PRICE AT 12/31/99 PRICE
- -------------------- --------------- ---------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
$ 0.00 - 0.09 11,007 5.8 $ 0.09 11,007 $ 0.09
$ 0.10 - 8.69 456,569 5.7 5.56 434,861 5.41
$ 8.70 - 11.12 65,175 7.3 11.02 65,175 11.02
$11.13 - 17.94 278,328 6.9 14.23 192,833 14.62
$17.95 - 20.81 703,386 8.4 18.65 185,499 18.69
$20.82 - 29.56 81,573 7.4 28.59 27,318 28.01
--------------- ---------------- ------------ -------------- -------------
Total 1,596,038 7.2 $14.20 916,693 $11.04
=============== ================ ============ ============== =============
</TABLE>
(14) INCOME TAXES
The components of the provision for income taxes for the years ended
December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------ ---------- -----------
<S> <C> <C> <C>
Income tax expense (benefit):
Current:
Federal............... $ (410) $ 8,577 $ 726
State................. 65 1,027 200
------------ ---------- -----------
Total current.............. (345) 9,604 926
Deferred:
Federal............... (15,017) (5,795) (726)
State................. (1,716) ( 673) (200)
------------ ---------- -----------
Total deferred........... (16,733) (6,468) (926)
------------ ---------- -----------
Total.................... $(17,078) $ 3,136 $ --
============ ========== ===========
</TABLE>
43
<PAGE> 45
Deferred tax assets and liabilities consist of the following at December
31 (in thousands):
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............. $10,686 $1,154
Development write-off........................ 11,637 ---
Deferred gain sale/leaseback................. 2,825 5,392
Accrued expenses............................. 3,129 2,140
Investment in consolidated affiliates........ 1,076 1,194
Other........................................ 449 --
------------- -------------
Total deferred tax assets........................ $29,802 $9,880
============= =============
Deferred tax liabilities:
Acquisition basis............................ $ 1,715 $ 1,715
Depreciation................................. 8,894 771
------------- -------------
Deferred tax liabilities......................... $10,609 $2,486
============= =============
</TABLE>
During 1999, a final reconciliation of the 1998 tax return resulted in
a depreciation reclassification. This reclassification reduced the
current payable and increased the deferred tax liability by $5.4
million. The valuation allowance for deferred tax assets as of December
31, 1999 and 1998 was $0. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not
that some portion of all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. The Company believes that it is more likely than not that
the deferred tax asset will be realized.
The effective tax rate on income before income taxes varies from the
statutory Federal income tax rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Statutory rate............. 35.0% 35.0% (34.0)%
State taxes, net........... 2.3 4.0 (5.5)
Valuation allowance........ -- (28.7) 39.5
Other...................... 0.7 2.9 --
----------- ------------ ------------
Effective tax rate......... 38.0% 13.2% 0.0%
=========== ============ ============
</TABLE>
The Company has approximately $27.4 million of tax net operating loss
carryforwards at December 31, 1999. Any unused net operating loss
carryforwards will expire commencing in the year 2007 through 2019. The
utilization of net operating loss carryforwards may be further limited
as to future use due to the change in control provisions in the
Internal Revenue Code. In addition, the Company has alternative minimum
tax credit carryforwards of approximately $136,000 which are available
to reduce future federal regular income taxes, if any, over an
indefinite period.
(15) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practical
to estimate that value:
Cash and cash equivalents:
The carrying amount approximates fair value because of the short
maturity of those instruments.
Restricted cash and long-term investments:
The carrying amount approximates fair value because of the short
maturity of the underlying investments. Restricted cash and long-term
investments are classified as such because they are restricted as
collateral for lease arrangements and debt service reserves.
44
<PAGE> 46
Short-term notes payable, mortgage notes payable, convertible
debentures payable:
The carrying amount of short-term notes payable approximates fair value
because of the short maturity of those instruments.
The carrying amount of mortgage notes payable approximates fair value
because the stated interest rates approximate fair value.
The fair value of the Company's convertible debentures is estimated
based on quoted market prices. At December 31, 1999, the Company's
convertible debentures had a book value of $228.6 million. Based on
quoted market prices at December 31, 1999, the fair value of those
convertible securities was estimated to be $130.0 million.
(16) COMMITMENTS AND CONTINGENCIES
The Company has entered into sale/leaseback agreements with certain
REITs as a source of financing the development, construction, and to a
lesser extent, acquisitions of assisted living residences. Under such
agreements, the Company typically sells to the REIT one or more
residences at a negotiated value and simultaneous with such sale the
Company enters into a lease agreement for such residences. The initial
terms of the leases vary from 10 to 15 years and include aggregate
renewal options ranging from 15 to 30 years. The Company is responsible
for all operating costs, including repairs, property taxes, and
insurance. The annual minimum lease payments are based upon a
percentage of the negotiated sales value of each residence. The
residences sold in sale/leaseback transactions typically are sold for
an amount equal to or less than their fair market value. The leases are
accounted for as operating leases with any applicable gain or loss
realized in the initial sales transaction being deferred and amortized
into income in proportion to rental expense over the initial term of
the lease.
During 1998 the Company entered into sale and leaseback financing
agreements with certain REITs for approximately $148.0 million with
financing terms similar to the arrangements described above. Any gain
or loss was deferred and will be amortized into income in proportion to
rental expense over the initial term of the lease.
During 1999 the Company entered into additional sale and leaseback
financing arrangements with certain REITs for approximately $78.4
million with financing terms similar to the arrangements described
above. Any gain or loss was deferred and will be amortized into income
in proportion to rental expense over the initial term of the lease.
The Company is required by certain REITs to obtain a letter of credit
as collateral for leased residences. Outstanding letters of credit at
December 31, 1999 and 1998 were $4.6 million and $4.3 million,
respectively.
In addition to leased residences, the Company leases certain office
space and equipment under noncancelable operating leases from
nonaffiliates that expire at various times through 2017. Rental expense
on all such operating leases, including residences, for the years ended
December 31, 1999, 1998, and 1997 was $69.4 million, $44.2 million and
$25.5 million, respectively.
Future minimum lease payments for the next five years and thereafter
under noncancelable leases at December 31, 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
----------- -------------
<S> <C> <C>
2000..................................................... $6,335 $ 80,321
2001..................................................... 6,377 80,502
2002..................................................... 6,412 80,507
2003..................................................... 6,406 80,511
2004..................................................... 21,435 80,516
Thereafter............................................... 76,273 384,344
----------- -------------
Total minimum lease payment.............................. $123,238 $786,701
=============
Less amount representing interest........................ 55,860
-----------
Present value of net minimum capital lease payments...... 67,378
Less current portion..................................... 397
-----------
Long-term capital lease obligations...................... $ 66,981
===========
</TABLE>
45
<PAGE> 47
The Company has an option under most of its joint venture arrangements
to purchase the equity interests of its joint venture partners based
upon agreed upon terms and conditions (call option). If the Company
elects not to exercise this option, the joint venture partner can
require the Company to buy out the joint venture partner's equity
interest at the current fair market value (put option). 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 will be exercised, and
the fair market value of such residences at the date such options are
exercised, the Company estimates that it may require approximately $75
million to $85 million to satisfy these purchase obligations during
2000.
(17) EARNINGS PER COMMON SHARE
In February 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). SFAS 128 was designed to simplify the standards
for computing earnings per share and increase the comparability of
earnings per share data on an international basis. SFAS 128 replaces
the presentation of primary earnings per share with a presentation of
basic earnings per share and requires dual presentation of basic and
diluted earnings per share on the face of the statement of income of
all entities with complex capital structures. The Company adopted SFAS
128 during the first quarter of fiscal 1998 and, accordingly, earnings
per share for all prior periods presented have been restated to conform
to the requirements of this new standard. The following table sets
forth the computation of basic and diluted earnings per share (in
thousands, except per share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997
------------- ------------- --------------
<S> <C> <C> <C>
Numerator:
Numerator for basic earnings per share--net
(loss) income............................. $(27,806) $20,552 $(8,263)
Convertible debt interest add-back.......... -- 1,563 --
------------- ------------- --------------
Numerator for diluted earnings per
share--net (loss) income.................. $(27,806) $22,115 $(8,263)
============= ============= ==============
Denominator:
Denominator for basic earnings per
share--weighted average shares.............. 22,088 21,905 18,651
Effect of dilutive securities--stock
options.................................... -- 523 --
Effect of dilutive securities--convertible
debt....................................... -- 1,717 --
------------- ------------- --------------
Denominator for diluted earnings per
share--adjusted weighted-average shares and
assumed conversions......................... 22,088 24,145 18,651
============= ============= ==============
Basic (loss) earnings per common share........ $(1.26) $0.94 $ (0.44)
============= ============= ==============
Diluted (loss) earnings per common share...... $(1.26) $0.92 $ (0.44)
============= ============= ==============
</TABLE>
46
<PAGE> 48
(18) SUBSEQUENT EVENTS
In February 2000 the Company borrowed an additional $20.0 million from
the Bridge Lender (see Note 9) by amending and increasing the amount
borrowed under its Tranche A Loan. Upon amending the Tranche A Loan,
the interest rate on this loan increased to 10% per annum. As
additional security for the Tranche A Loan, the Company granted the
bridge lender mortgages on six residences. Of the $20.0 million
additional advance on the Tranche A Bridge Loan, $4.1 million was
placed in escrow to facilitate the funding of the remaining
construction costs with respect to the mortgaged residences. A facility
fee of $800,000 was paid to the Bridge Lender upon the closing of the
amended Tranche A Bridge Loan.
As discussed in Note 2, on March 30, 2000, the Company, together with
Manor Care Inc. modified the $200 million financing commitment under
its joint venture arrangement which will reduce the commitment to $60.0
million. As a result, the Company has established in the 1999 financial
statements a $5.0 million reserve against its note receivable from the
joint venture to reflect the estimated realizable value. An additional
$2.0 million reserve was established in the 1999 financial statements
for cost associated with exiting development projects which the Company
will not continue due to this renegotiation.
The Company is seeking to address its anticipated short and long term
capital needs through the sale of at least $100 million of additional
equity or equity-linked securities of the Company during the second
quarter of 2000. The Company has retained investment bankers to assist
in identifying possible sources of equity capital and to structure and
negotiate an appropriate transaction. The Company is currently engaged
in detailed negotiations with two investor groups, both of which
include existing stockholders of the Company.
SUPPLEMENTARY FINANCIAL INFORMATION
QUARTERLY FINANCIAL SUMMARY
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
12/31 9/30 6/30 3/31
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
1999
- -----------------------------------------------
Operating revenues.......................... $ 101,259 $100,111 $91,920 $82,891
Operating (loss) income..................... (32,325) 9,698 9,681 7,690
Net (loss) income........................... (39,096) 5,024 4,838 1,428
Basic (loss) income per share............... (1.81) 0.23 0.22 0.06
Diluted (loss) income per share............. $ (1.81) $ 0.23 $ 0.22 $ 0.06
1998
- -----------------------------------------------
Operating revenues.......................... $76,454 $66,286 $55,199 $46,484
Operating income (loss)..................... 10,778 2,064 1,578 (148)
Net income (loss)........................... 6,273 5,821 4,875 3,583
Basic income (loss) per share............... 0.29 0.27 0.22 0.16
Diluted income (loss) per share............. $ 0.27 $ 0.26 $ 0.22 $ 0.16
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item with respect to the Company's
directors and executive officers and compliance with Section 16(a) of the
Securities Exchange Act of 1934, as amended, is incorporated herein by reference
to the Alterra Healthcare Corporation definitive proxy statement to be filed
with the Securities and Exchange Commission in connection with the 2000 Annual
Meeting of Stockholders (the "2000 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
47
<PAGE> 49
The information required under this item is incorporated by reference
to the 2000 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated by reference
to the 2000 Proxy Statement.
48
<PAGE> 50
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated herein by
reference to the 2000 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1. The following documents are filed as part of the report:
(a) FINANCIAL STATEMENTS. The following financial statements of
the Registrant and the Report of Independent Public
Accountants therein are filed as part of this Report on Form
10-K:
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
Independent Auditor's Report........................... 28
Consolidated Balance Sheets............................ 29
Consolidated Statements of Operations.................. 30
Consolidated Statements of Shareholders' Equity........ 31
Consolidated Statements of Cash Flows.................. 32
Notes to Consolidated Financial Statements............. 33-47
</TABLE>
(b) SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted as the required information either
is not applicable or is included in the Consolidated Financial
Statements or related notes.
(c) 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 December 31, 1999, other than its Form 8-K dated
October 19, 1999 in which the Registrant announced that it had
completed the acquisition of eight additional residences from
Manor Care, Inc.
(d) EXHIBITS. The following exhibits are filed as part of, or
incorporated by reference into this report on Form 10-K:
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1, Registration No.
333-04595, filed with the Commission on July 30, 1996 (the "Form
S-1")).
3.2 Certificate of Merger, dated May 24, 1996 (incorporated herein by
reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-3, Registration No. 333-37737, filed with the
Commission on October 14, 1997 (the "Form S-3")).
3.3 Certificate of Amendment to the Restated Certificate of
Incorporation, dated August 1, 1996 (incorporated herein by
reference to Exhibit 3.2 to the Form S-3).
3.4 Certificate of Amendment to Restated Certificate of Incorporation
effective May 26, 1998 (incorporated herein by reference to
Exhibit 3.1 to the Registrant's Form 10-Q for period ending June
30, 1998).
3.5 Certificate of Designation of Series A Junior Participating
Preferred Stock, dated December 10, 1998 (incorporated by
reference to Exhibit A to Exhibit 4.1 to the Registrant's
Registration Statement on Form 8-A, filed December 17, 1998).
3.6 Certificate of Amendment to Restated Certificate of Incorporation,
dated May 19, 1999.
</TABLE>
49
<PAGE> 51
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
3.7 Certificate of Ownership Merging Sterling House Corporation into
the Registrant effective December 31, 1999.
3.8 Restated Bylaws of the Registrant (incorporated herein by
reference to Exhibit 3.4 to the Registrant's Registration
Statement on Form S-3, Registration No. 333-39705, filed with the
Commission on November 6, 1997 (the "November S-3")).
3.9 Amendment to Restated Bylaws dated August 3, 1998 (incorporated by
reference to Registrant's Form 10-K for the period ending December
31, 1998).
4.1 Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.2 to the Form S-1).
4.2 See Articles Four, Six, Seven, Eight, Nine, Ten and Eleven of the
Registrant's Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 to the Form S-1) and the
Certificate of Amendment to the Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.2 to the
Form S-3).
4.3 See Articles 2, 3, 5, 7 and 8 of the Registrant's Restated Bylaws
(incorporated herein by reference to Exhibit 3.4 to the November
S-3).
4.4 Indenture dated as of May 23, 1996 by and between Sterling House
Corporation ("Sterling") and Fleet National Bank, as Trustee
(incorporated by reference to Exhibit 4.11 to Sterling's
Registration Statement on Form S-3 (Registration No. 333-15329
filed on November 1, 1996 (the "Sterling S-3")).
4.5 Form of Registration Rights Agreement dated as of May 17, 1996 by
and between Sterling and the initial purchasers of the 6.75%
Convertible Subordinated Debentures due 2006 (incorporated herein
by reference to Exhibit 4.9 to the Sterling S-3).
4.6 First Supplemental Indenture dated as of October 23, 1997 among
the Registrant, Sterling and State Street Bank and Trust Company,
as successor Trustee (incorporated herein by reference to Exhibit
4.9 to the November S-3).
4.7 Second Supplemental Indenture dated as of December 31, 1999 among
the Registrant and State Street Bank and Trust Company, as
successor trustee to Indenture dated as of May 23, 1996 between
Sterling House Corporation and Fleet National Bank, as Trustee.
4.8 Indenture dated as of May 21, 1996 by and between the Registrant
and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by
reference to Exhibit 4.1 to the Registrant's Current Report on
Form 8-K filed on May 27, 1997 (the "Form 8-K")).
4.9 Form of Registration Rights Agreement dated as of May 21, 1997 by
and between the Registrant and the purchasers of the 7%
Convertible Subordinated Debentures due 2004 (incorporated by
reference to Exhibit 99.2 to the Form 8-K).
4.10 Indenture dated as of December 19, 1997 by and between the
Registrant and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 1.1 to Registrant's
Registration Statement on Form 8-A, relating to Registration file
number 333-39705, filed with the Commission on December 16, 1997
(the "Form 8-A")).
4.11 First Supplemental Indenture dated as of December 19, 1997 by and
between the Registrant and United States Trust Company of New
York, as Trustee (incorporated by reference to Exhibit 1.2 to the
Form 8-A).
4.12 Second Supplemental Indenture dated as of January 2, 1998 by and
between the Registrant and United States Trust Company of New
York, as Trustee (incorporated by reference to Exhibit 4.3 to the
Registrant's Form 8-K filed on January 26, 1998).
4.13 Amended and Restated Alternative Living Services, Inc. 1995
Incentive Compensation Plan (incorporated by reference to Exhibit
10.10 of the Form S-1). Represents an executive compensation plan
or arrangement.
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
4.14 Amendment to the Registrant's 1995 Amended and Restated Incentive
Compensation Plan (incorporated by reference to Exhibit 10.1 to
the Registrant's Form 10-Q for period ending September 30, 1998).
4.15 Rights Agreement dated as of December 10, 1998 between The
Registrant and American Stock Transfer & Trust Company, including
the form of Certificate of Designations of Series A Junior
Participating Preferred Stock of Alternative Living Services, Inc.
(Exhibit A), Form of Rights Certificate (Exhibit B), and Form of
Summary of Rights to Purchase Preferred Shares (Exhibit C)
(incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form 8-A, filed with the Commission on
December 17, 1998).
10.1 Services Agreement effective as of January 1, 1996 by and between
Petty, Kneen & Company, L.L.C. and the Company (incorporated by
reference to Exhibit 10.2 of the Form S-1). Represents an
executive compensation plan or arrangement.
10.2 Services Agreement by and between the Registrant and Richard W.
Boehlke dated as of May 23, 1996. (incorporated by reference to
Exhibit 10.7 of the Form S-1). Represents an executive
compensation plan or arrangement.
10.3 Employment Agreement by and between the Registrant and David M.
Boitano dated as of May 23, 1996 (incorporated by reference to
Exhibit 10.9 of the Form S-1). Represents an executive
compensation plan or arrangement.
10.4 Employment Agreement by and between the Registrant and G. Faye
Godwin dated as of May 23, 1996. (incorporated by reference to
Exhibit 10.11 of the Form S-1). Represents an executive
compensation plan or arrangement.
10.5 Employment Agreement dated as of January 1, 1999 by and between
the Registrant and William F. Lasky (incorporated by reference to
Exhibit 10.7 of the Registrant's Form 10-Q for period ending March
31, 1999). Represents an executive compensation plan or
arrangement.
10.6 Employment Agreement dated as of July 30, 1997 by and between the
Registrant. and Timothy J. Buchanan (incorporated by reference to
Exhibit 10.9 of the Registrant's Form 10-K for the year ended Dec.
31, 1997). Represents an executive compensation plan or
arrangement.
10.7 Employment Agreement dated as of July 30, 1997 by and between the
Registrant. and Steven L. Vick (incorporated by reference to
Exhibit 10.10 of the Registrant's Form 10-K for the year ended
Dec. 31, 1997). Represents an executive compensation plan or
arrangement.
10.8 Employment Agreement dated as of October 23, 1997 by and between
the Registrant and Mark W. Ohlendorf (incorporated by reference to
Exhibit 10.11 of the Registrant's Form 10-K for the year ended
Dec. 31, 1997). Represents an executive compensation plan or
arrangement.
10.9 Employment Agreement by and between the Registrant and Thomas E.
Komula dated as of July 3, 1996 (incorporated by reference to
Exhibit 10.63 of the Form S-1). Represents an executive
compensation plan or arrangement.
10.10 First Amended Joint Venture Agreement dated as of April 30, 1997
between the Registrant and Assisted Living Equities, LLC.
(incorporated by reference to Exhibit 10.18 of the Form S-1).
10.11 Amendment No. 1 to First Amended Joint Venture Agreement dated as
of January 1, 1999 between the Registrant and Assisted Living
Equities (incorporated by reference to Exhibit 10.16 of the
Registrant's Form 10-K for the year ended December 31, 1998).
10.12 Second Amended Joint Venture Agreement dated as of January 1, 1999
between the Registrant and Assisted Living Equities, LLC
(incorporated by reference to Exhibit 10.17 of the Registrant's
Form 10-K for the year ended December 31, 1998).
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
No. EXHIBIT
Description
- ------ ------------------------------------------------------------------
<S> <C>
10.13 Assisted Living Consultant and Management Services Agreement by
and between Alternative Living Services and the Registrant dated
as of December 14, 1993. (incorporated by reference to Exhibit
10.32 of the Form S-1.)
10.14 Lease and Security Agreement by and between Nationwide Health
Properties, Inc. and New Crossings International Corporation dated
as of December 15, 1995 (the Atrium) (incorporated by reference to
Exhibit 10.35 of the Form S-1).
10.15 Schedule of Lease and Security Agreements by and between
Nationwide Health Properties, Inc. and New Crossings International
Corporation substantially similar to Exhibit 10.14 (incorporated
by reference to Exhibit 10.36 of the Form S-1).
10.16 Assumption Agreement dated December 18, 1995 by and between
Crossings International Corporation, New Crossings International
Corporation, Oregon Housing Agency and National Health Properties,
Inc. (Albany Residential) (incorporated by reference to Exhibit
10.53 of the Form S-1).
10.17 Schedule of Assumption Agreements substantially similar to Exhibit
10.16 (incorporated by reference to Exhibit 10.53 of the Form
S-1).
10.18 Lease Approval Agreement dated December 18, 1995 by and between
National Health Properties, Inc., New Crossings International
Corporation and Oregon Housing Agency (Albany Residential)
(incorporated by reference to Exhibit 10.55 of the Form S-1).
10.19 Schedule of Lease Approval Agreements substantially similar to
Exhibit 10.18 (incorporated by reference to Exhibit 10.56 of the
Form S-1).
10.20 Management Agreement dated August 30, 1990 by and between Housing
Division, State of Oregon and New Crossing International
Corporation (Albany Residential) (incorporated by reference to
Exhibit 10.59 of the Form S-1).
10.21 Facility Lease dated as of December 30, 1996, between Meditrust
Acquisition Corporation III and ALS Leasing, Inc. ("Form of
Facility Lease") (incorporated by reference to Exhibit 99.1 of the
Registrant's Form 8-K dated January 14, 1997).
10.22 Amended Schedule of Facility Leases which are substantially
similar to the Form of Facility Lease attached as Exhibit 10.21.
10.23 Guaranty by The Registrant to Meditrust Acquisition Corporation
III (incorporated by reference to Exhibit 99.3 of the Registrant's
Form 8-K dated January 14, 1997).
10.24 Affiliated Party Subordination Agreement dated December 30, 1996,
by and among ALS Leasing, Inc., the Registrant, the parties listed
on Schedule A thereto, all other Affiliates as defined therein and
Meditrust Acquisition Corporation III (incorporated by reference
to Exhibit 99.4 of the Registrant's Form 8-K dated January 14,
1997).
10.25 Agreement Regarding Related Lease Transactions dated December 30,
1996, by and among ALS Leasing, Inc., the Registrant and Meditrust
Acquisition Corporation III (incorporated by reference to Exhibit
99.5 of the Registrant's Form 8-K dated January 14, 1997).
10.26 Form of Facility Lease dated as of November 21, 1997, between
Meditrust Acquisition Corporation III and ALS Leasing, Inc. ("Form
of Facility Lease") (incorporated by reference to Exhibit 99.1 of
the Registrant's Form 8-K filed December 2, 1997).
10.27 Amended Schedule of Facility Leases which are substantially
similar to the Form of Facility Lease attached as Exhibit 10.26.
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.28 Guaranty by The Registrant to Meditrust Acquisition Corporation
III (incorporated by reference to Exhibit 99.3 of the Registrant's
Form 8-K filed December 2, 1997).
10.29 Affiliated Party Subordination Agreement dated November 21, 1997,
by and among ALS Leasing, Inc., the Registrant, the parties listed
on Schedule A thereto, all other Affiliates as defined therein and
Meditrust Acquisition Corporation III (incorporated by reference
to Exhibit 99.4 of the Registrant's Form 8-K filed December 2,
1997).
10.30 Agreement Regarding Related Lease Transactions dated November 21,
1997, by and among ALS Leasing, Inc., the Registrant and Meditrust
Acquisition Corporation III (incorporated by reference to Exhibit
99.5 of the Registrant's Form 8-K filed December 2, 1997).
10.31 Sixth Amendment to Amended and Restated Agreement Regarding
Related Lease Transactions, Amended and Restated Environmental
Indemnity Agreement and Amended and Restated Affiliated Party
Subordination Agreement dated September 4, 1998, by and among ALS
Leasing, Inc., the Registrant and Meditrust Acquisition
Corporation III (incorporated by reference to Exhibit 10.9 to the
Registrant's Form 10-Q for period ending September 30, 1998).
10.32 Seventh Amendment to Amended and Restated Agreement Regarding
Related Lease Transactions, dated September 4, 1998 by and among
ALS Leasing, Inc., the Registrant and Meditrust Acquisition
Corporation III (incorporated by reference to Exhibit 10.10 to the
Registrant's Form 10-Q for period ending September 30, 1998).
10.33 Eleventh Amendment to Amended and Restated Agreement Regarding
Related Lease Transactions, dated September 4, 1998, by and among
Assisted Living Properties, Inc., Meditrust Company, LLC Meditrust
Of Texas, Inc., Meditrust of Kansas, Inc., Meditrust of Ohio, Inc.
and MOC Health Care Company (incorporated by reference to Exhibit
10.11 to the Registrant's Form 10-Q for period ending September
30, 1998).
10.34 Form of Facility Lease dated as of September 4,1998 between
Meditrust Acquisition Corporation III and ALS Leasing, Inc. ("Form
of Facility Lease") (incorporated by reference to Exhibit 10.7 to
the Registrant's Form 10-Q for period ending September 30, 1998).
10.35 Amended Schedule of Facility Leases which are substantially
similar to the Form of Facility Lease attached as Exhibit 10.34.
10.36 Facility Lease Agreement dated as of April 30, 1997 between
Meditrust Acquisition Corporation III and ALS Leasing, Inc. for
property located in Manlius, New York.
10.37 Form of Facility Lease Agreement dated February 20, 1998 between
Meditrust of Ohio, Inc. and Assisted Living Properties, Inc. (the
"ALP Facility Leases")
10.38 Schedule of ALP Facility Leases which are substantially similar to
the Form of Lease attached as Exhibit 10.37.
10.39 Amendment to Sterling - Meditrust Leases dated as of December 23,
1999 among Assisted Living Properties, Inc., Sterling House
Corporation, the Registrant, ALS Leasing, Inc., Meditrust of
Kansas, Inc., New Meditrust Company LC, Meditrust Company LLC, T
and F Properties, LP and Meditrust Acquisition Company LLC.
10.40 Second Omnibus Amendment dated as of January 28, 2000 among
Assisted Living Properties, Inc., the Registrant, ALS Leasing,
Inc., Meditrust of Kansas, Inc., New Meditrust Company LC,
Meditrust Company LLC, T and F Properties, LP and Meditrust
Acquisition Company LLC.
10.41 Agreement of Purchase and Sale dated November 30, 1999 by the
Registrant, Meditrust Acquisition Company LLC, New Meditrust
Company LLC and T and F Properties, LP.
10.42 Guaranty and Suretyship Agreement by the Registrant in favor of
Nomura Asset Capital Corporation dated March 31, 1998
(incorporated by reference to Exhibit 10.1 to the Registrant's
Form 10-Q for period ending March 31, 1998).
</TABLE>
53
<PAGE> 55
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.43 Loan Agreement dated March 31, 1998 by and between ALS-Venture I,
Inc. and Nomura Asset Capital Corporation (incorporated by
reference to Exhibit 10.2 to the Registrant's Form 10-Q for period
ending March 31, 1998).
10.44 Guaranty and Suretyship Agreement by the Registrant in favor of
Nomura Asset Capital Corporation dated May 26, 1998 (incorporated
by reference to Exhibit 10.1 to the Registrant's Form 10-Q for
period ending June 30, 1998).
10.45 Loan Agreement dated May 26, 1998, by and between ALS-Venture II,
Inc. and Nomura Asset Capital Corporation (incorporated by
reference to Exhibit 10.2 to the Registrant's Form 10-Q for period
ending June 30, 1998).
10.46 First Amendment to Loan Agreement and Reaffirmation Agreement
dated July 30, 1998, by and between The Capital Company of America
LLC and ALS Venture II, Inc. (incorporated by reference to Exhibit
10.2 to the Registrant's Form 10-Q for period ending September 30,
1998).
10.47 First Amendment to Loan Agreement and Reaffirmation Agreement
dated August 28, 1998, by and between Nomura Asset Capital Company
and ALS Venture I, Inc. (incorporated by reference to Exhibit 10.3
to the Registrant's Form 10-Q for period ending September 30,
1998).
10.48 Second Amendment to Loan Agreement, First Amendment to Guaranty
and Suretyship Agreement, and Reaffirmation Agreement dated
September 30, 1998, by and between The Capital Company of America
LLC and ALS-Venture II, Inc. (incorporated by reference to Exhibit
10.6 to the Registrant's Form 10-Q for period ending September 30,
1998).
10.49 Financing and Security Agreement dated September 28, 1998, by and
between ALS Holdings, Inc. and Bank United (incorporated by
reference to Exhibit 10.5 to the Registrant's Form 10-Q for period
ending September 30, 1998).
10.50 Form of Mortgage, Assignment and Security Agreement between ALS
Holdings, Inc., the Registrant and Bank United. (incorporated by
reference to Exhibit 10.53 to the Registrant's Form 10-K for
period ending December 31, 1998).
10.51 Guaranty of Payment Agreement dated September 28, 1998, by the
Registrant, for the benefit of Bank United (incorporated by
reference to Exhibit 10.4 to the Registrant's Form 10-Q for period
ending September 30, 1998).
10.52 Additional Borrower Joinder Supplement by and among ALS Holdings,
Inc., ALS Wisconsin Holdings, Inc., the Registrant and Bank
United, dated December 10, 1998. (incorporated by reference to
Exhibit 10.55 to the Registrant's Form 10-K for period ending
December 31, 1998).
10.53 Amended and Restated Financing and Security Agreement (Master
Agreement) between ALS Holdings, Inc., et al, as Borrower, and
Bank United, as agent, dated as of February 12, 1999 (incorporated
by reference to Exhibit 10.2 of the Registrant's Form 10-Q for
period ending March 31, 1999).
10.54 First Amendment to Amended and Restated Financing and Security
Agreement dated as of October 29, 1999 between ALS Holdings, Inc.,
ALS Wisconsin Holdings, Inc. and Bank United, individually and as
agent for itself and certain other lenders (incorporated by
reference to Exhibit 10.19 of the Registrant's Form 10-Q for
period ending September 30, 1999).
10.55 First Amendment to Guaranty of Payment Agreement dated as of
October 29, 1999 by and among the Registrant and Bank United
individually and as agent for itself and certain additional
lenders (incorporated by reference to Exhibit 10.20 of the
Registrant's Form 10-Q for period ending September 30, 1999).
10.56 Amended Schedule of Bank United Mortgage, Assignment and Security
Agreements ("Mortgage") which are substantially similar to the
Form of Mortgage referenced in Exhibit 10.50.
10.57 Master Purchase Agreement between the Registrant and National
Health Investors, Inc. dated December 22, 1998. (incorporated by
reference to Exhibit 10.56 of the Registrant's Form 10-K for
period ending December 31, 1998).
</TABLE>
54
<PAGE> 56
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.58 Form of Lease between National Health Investors, Inc. and the
Registrant. ("Lease") dated as of December 22,1998 (incorporated
by reference to Exhibit 10.57 of the Registrant's Form 10-K for
period ending December 31, 1998).
10.59 Amended Schedule of Additional NHI Leases which are substantially
similar to the Form of Lease referenced in Exhibit 10.58
(incorporated by reference to Exhibit 10.6 of the Registrant's
Form 10-Q for period ending March 31, 1999).
10.60 Credit Agreement between the Registrant and Deutsche Bank AG dated
October 6, 1998 (incorporated by reference to Exhibit 10.59 of the
Registrant's Form 10-K for period ending December 31, 1998).
10.61 Master Construction Line of Credit Agreement between the
Registrant, Key Corporate Capital, Inc., and the lending
institutions named therein, dated October 6, 1998 (incorporated by
reference to Exhibit 10.60 of the Registrant's Form 10-K for
period ending December 31, 1998).
10.62 Form of Deed of Trust and Security Agreement ("Form of Key
Mortgage") between ALS National, Inc. and Key Corporate Capital,
Inc. dated September 1999 (incorporated by reference to Exhibit
10.2 of the Registrant's Form 10-Q for period ending September 30,
1999).
10.63 Form of Project Promissory Note ("Form of Key Note") by ALS
National, Inc. to Key Corporate Capital, Inc. (incorporated by
reference to Exhibit 10.3 of the Registrant's Form 10-Q for period
ending September 30, 1999).
10.64 Schedule of Mortgages and Notes which are substantially similar to
the Form of Key Mortgage referenced in Exhibit 10.62 and Form of
Key Note referenced in Exhibit 10.63 herein (incorporated by
reference to Exhibit 10.4 of the Registrant's Form 10-Q for period
ending September 30, 1999).
10.65 Master Loan Agreement between ALS West, Inc., the Registrant and
Guaranty Federal Bank, F.S.B., as agent, and the Lenders named
therein, dated as of January 8, 1999 (incorporated by reference to
Exhibit 10.1 of the Registrant's Form 10-Q for period ending March
31, 1999).
10.66 Loan Agreement dated July 30, 1998, by and between ALS Financing,
Inc. and GMAC Commercial Mortgage Corporation (incorporated by
reference to Exhibit 10.1 to the Registrant's Form 10-Q for period
ending September 30, 1998).
10.67 Loan Agreement between ALS Financing II, Inc. and GMAC Commercial
Mortgage Corporation dated as of March 23, 1999 (incorporated by
reference to Exhibit 10.4 of the Registrant's Form 10-Q for period
ending March 31, 1999).
10.68 Lease and Security Agreement between the Registrant and SELCO
Service Corporation (regarding corporate office) dated as of
February 10, 1999 (incorporated by reference to Exhibit 10.5 of
the Registrant's Form 10-Q for period ending March 31, 1999).
10.69 Management Fee Loan Agreement between the Registrant and Third
Party Investors I, L.L.C. dated as of December 31, 1998
(incorporated by reference to Exhibit 10.9 of the Registrant's
Form 10-Q for period ending March 31, 1999).
10.70 Working Capital Loan Agreement between the Registrant and Third
Party Investors I, L.L.C. dated as of December 31, 1998
(incorporated by reference to Exhibit 10.10 of the Registrant's
Form 10-Q for period ending March 31, 1999).
10.71 Phase II Management Fee Loan Agreement between the Registrant and
Third Party Investors I, L.L.C. dated as of March 31, 1999
(incorporated by reference to Exhibit 10.12 of the Registrant's
Form 10-Q for period ending March 31, 1999).
</TABLE>
55
<PAGE> 57
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.72 Phase II Working Capital Loan Agreement between the Registrant and
Third Party Investors I, L.L.C. dated as of March 31, 1999
(incorporated by reference to Exhibit 10.13 of the Registrant's
Form 10-Q for period ending March 31, 1999).
10.73 Form of Development Agreement by and between the Registrant and
Third Party Investors I, L.L.C. dated as of March 31, 1999
(incorporated by reference to Exhibit 10.14 of the Registrant's
Form 10-Q for period ending March 31, 1999).
10.74 Schedule of additional TPI Development Agreements "Development
Agreement" which are substantially in the form of Development
Agreement attached as Exhibit 10.15 (incorporated by reference to
Exhibit 10.15 of the Registrant's Form 10-Q for period ending
March 31, 1999).
10.75 Form of Assisted Living Consultant and Management Services
Agreement by and between the Registrant and Third Party Investors
I, L.L.C. dated as of March 31, 1999 (incorporated by reference to
Exhibit 10.16 of the Registrant's Form 10-Q for period ending
March 31, 1999).
10.76 Schedule of additional TPI Assisted Living Consultant and
Management Services Agreements ("Management Agreements") which are
substantially in the form of Management Agreements referenced in
Exhibit 10.17 (incorporated by reference to Exhibit 10.17 of the
Registrant's Form 10-Q for period ending March 31, 1999).
10.77 Subordination, Representation and Guaranty Agreement between the
Registrant, Greenwich Capital Financial Products, Inc., and Third
Party Investors I, L.L.C. dated as of June 30, 1999 (incorporated
by reference to Exhibit 10.2 of the Registrant's Form 10-Q for
period ending June 30, 1999).
10.78 Guaranty dated August 31, 1999 by the Registrant in favor of Key
Corporate Capital Inc. as Administrative Agent under the Master
Construction Line of Credit Agreement among Third Party Investors
I, L.L.C., as Borrower, and the lending institutions and co-agents
named therein, and Key Corporate Capital Inc. (incorporated by
reference to Exhibit 10.11 of the Registrant's Form 10-Q for
period ending September 30, 1999).
10.79 Amended and Restated Purchase Rights and Financing Agreement dated
as of June 30, 1999 between the Registrant and Third Party
Investors I, L.L.C. (incorporated by reference to Exhibit 10.12 of
the Registrant's Form 10-Q for period ending September 30, 1999).
10.80 Convertible Subordinated Loan Agreement among Third Party
Investors I, L.L.C. and the Registrant dated September 30, 1999
(incorporated by reference to Exhibit 10.13 of the Registrant's
Form 10-Q for period ending September 30, 1999).
10.81 Bridge Construction Loan Agreement among Third Party Investors I,
L.L.C. and the Registrant dated September 30, 1999 (incorporated
by reference to Exhibit 10.14 of the Registrant's Form 10-Q for
period ending September 30, 1999).
10.82 Bridge Construction Loan Note by Third Party Investors I, L.L.C.
to the Registrant dated September 30, 1999 (incorporated by
reference to Exhibit 10.15 of the Registrant's Form 10-Q for
period ending September 30, 1999).
10.83 Supplementary Financing Loan Agreement among Third Party Investors
I, L.L.C. and the Registrant dated September 30, 1999
(incorporated by reference to Exhibit 10.16 of the Registrant's
Form 10-Q for period ending September 30, 1999).
10.84 Supplementary Financing Loan Note by Third Party Investors I,
L.L.C. to the Registrant dated September 30, 1999 (incorporated by
reference to Exhibit 10.17 of the Registrant's Form 10-Q for
period ending September 30, 1999).
10.85 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
Registrant (incorporated by reference to Exhibit 10.3 of the
Registrant's Form 10-Q for period ending June 30, 1999).
</TABLE>
56
<PAGE> 58
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.86 Master Lease dated as of June 14, 1999, by and between Omega
Healthcare Investors, Inc. as Lessor and AHC Properties, Inc. as
Lessee (incorporated by reference to Exhibit 10.4 of the
Registrant's Form 10-Q for period ending June 30, 1999).
10.87 Kansas Master Lease dated as of June 14, 1999, by and between
Omega (Kansas), Inc. as Lessor and AHC Properties, Inc. as Lessee
(incorporated by reference to Exhibit 10.5 of the Registrant's
Form 10-Q for period ending June 30, 1999).
10.88 Lease Guaranty dated as of June 14, 1999, by the Registrant in
favor of Omega Healthcare Investors, Inc. and Omega (Kansas), Inc.
(incorporated by reference to Exhibit 10.6 of the Registrant's
Form 10-Q for period ending June 30, 1999).
10.89 Form of Lease Agreement by and between the Registrant and Health
Care REIT, Inc. dated as of January 22, 1996 (incorporated by
reference to Exhibit 10.7 of the Registrant's Form 10-Q for period
ending June 30, 1999).
10.90 Schedule of Health Care REIT, Inc. Leases which are substantially
similar to the Form of Lease referenced in Exhibit 10.89
(incorporated by reference to Exhibit 10.8 of the Registrant's
Form 10-Q for period ending June 30, 1999).
10.91 Form of Lease Agreement by and between Sterling House Corporation
and Health Care REIT, Inc. dated as of September 1995
(incorporated by reference to Exhibit 10.9 of the Registrant's
Form 10-Q for period ending June 30, 1999).
10.92 Schedule of Health Care REIT, Inc. Leases which are substantially
similar to the Form of Lease referenced in Exhibit 10.91
(incorporated by reference to Exhibit 10.10 of the Registrant's
Form 10-Q for period ending June 30, 1999).
10.93 Form of Lease Agreement by and between the Registrant and Health
Care REIT, Inc. dated as of December 1998 (incorporated by
reference to Exhibit 10.11 of the Registrant's Form 10-Q for
period ending June 30, 1999).
10.94 Schedule of Health Care REIT, Inc. Leases which are substantially
similar to the Form of Lease referenced in Exhibit 10.93
(incorporated by reference to Exhibit 10.12 of the Registrant's
Form 10-Q for period ending June 30, 1999).
10.95 Form of Lease Agreement by and between the Registrant and Health
Care REIT, Inc. dated as of March 1999 (incorporated by reference
to Exhibit 10.13 of the Registrant's Form 10-Q for period ending
June 30, 1999).
10.96 Schedule of Health Care REIT, Inc. Leases which are substantially
similar to the Form of Lease referenced in Exhibit 10.95
(incorporated by reference to Exhibit 10.14 of the Registrant's
Form 10-Q for period ending June 30, 1999).
10.97 Consent to Merger and Amendment to Sterling House Corporation -
Health Care REIT, Inc. Leases dated November 1, 1999 between
Sterling House Corporation, the Registrant and Health Care REIT,
Inc.
10.98 Master Lease Agreement dated as of July 16, 1999 between Pita
General Corporation ("Synthetic Lessor") and AHC Tenant, Inc.
("AHC Tenant"), a wholly-owned subsidiary of the Registrant (Annex
A to this agreement has been filed as Exhibit A to the Loan
Agreement filed as Exhibit 2.6 hereto) (incorporated by reference
to Exhibit 2.5 of the Registrant's Form 8-K filed August 4, 1999).
10.99 Loan Agreement dated as of July 16, 1999 between Synthetic Lessor,
AHC Tenant and Greenwich Capital Financial Products, Inc.
("Lender"), including the Master Glossary of Definitions included
as Exhibit A thereto (other exhibits and schedules to this
agreement, which are listed and summarized in the table of
contents to the agreement, have been omitted pursuant to Item
601(b)(2) of the Regulation S-K; the Registrant agrees to furnish
supplementally to the Commission, upon request, a copy of these
exhibits and schedules) (incorporated by reference to Exhibit 2.6
of the Registrant's Form 8-K filed August 4, 1999).
</TABLE>
57
<PAGE> 59
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.100 Participation Agreement dated as of July 16, 1999 between AHC
Tenant, Synthetic Lessor, Lender, SELCO Service Corporation
("SELCO"), The First National Bank of Chicago ("FNB"), ZC
Specialty Insurance Company ("ZC") and the Registrant
(incorporated by reference to Exhibit 2.7 of the Registrant's Form
8-K filed August 4, 1999).
10.101 Trust Agreement dated as of July 16, 1999 between FNB, Lender, ZC,
AHC Tenant, Synthetic Lessor, SELCO and the Registrant
(incorporated by reference to Exhibit 2.8 of the Registrant's Form
8-K filed August 4, 1999).
10.102 Flow of Funds Agreement dated as of July 16, 1999 between
Synthetic Lessor, Lender, ZC, FNB, AHC Tenant, the Registrant and
certain other parties thereto (incorporated by reference to
Exhibit 2.9 of the Registrant's Form 8-K filed August 4, 1999).
10.103 Reimbursement Agreement dated as of July 16, 1999 between ZC, AHC
Tenant and Synthetic Lessor (exhibits and schedules to this
agreement, which are listed and summarized in the table of
contents to the agreement, have been omitted pursuant to Item
601(b)(2) of the Regulation S-K; the Registrant agrees to furnish
supplementally to the Commission, upon request, a copy of these
exhibits and schedules) (incorporated by reference to Exhibit 2.10
of the Registrant's Form 8-K filed August 4, 1999).
10.104 Guaranty dated as of July 16, 1999 executed by the Registrant
(incorporated by reference to Exhibit 2.11 of the Registrant's
Form 8-K filed August 4, 1999).
10.105 Promissory Note dated as of July 16, 1999 executed by Synthetic
Lessor (incorporated by reference to Exhibit 2.12 of the
Registrant's Form 8-K filed August 4, 1999).
10.106 Master Amendment, Confirmation and Acknowledgment Agreement dated
September 28, 1999 between Pita General Corporation, AHC Tenant,
Inc., the Registrant, Greenwich Capital Financial Products, Inc.,
SELCO Service Corporation, The First National Bank of Chicago, ZC
Specialty Insurance Company, and certain other parties as defined
therein, including Exhibit 3.1(e) thereto (other exhibits and
schedules to this agreement have been omitted; the Registrant
agrees to furnish supplementally to the Commission, upon request,
a copy of these exhibits and schedules) (incorporated by reference
to Exhibit 10.18 of the Registrant's Form 10-Q for period ending
September 30, 1999).
10.107 Form of Multifamily Mortgage, Assignment of Rents and Security
Agreement ("Form of Amresco Mortgage") between ALS Kansas, Inc.
and Amresco Capital, L.P. dated July 16, 1999, including Exhibit B
thereto (other exhibits to this agreement have been omitted; the
Registrant agrees to furnish supplementally to the Commission,
upon request, a copy of these exhibits) (incorporated by reference
to Exhibit 10.5 of the Registrant's Form 10-Q for period ending
September 30, 1999).
10.108 Form of Multifamily Note ("Form of Amresco Note") by ALS Kansas,
Inc. to Amresco Capital, L.P. dated July 16, 1999 (incorporated by
reference to Exhibit 10.6 of the Registrant's Form 10-Q for period
ending September 30, 1999).
10.109 Schedule of Mortgages and Notes which are substantially similar to
the Form of Amresco Mortgage referenced in Exhibit 10.107 and Form
of Amresco Note referenced in Exhibit 10.108 (incorporated by
reference to Exhibit 10.7 of the Registrant's Form 10-Q for period
ending September 30, 1999).
10.110 Credit Agreement ("the Bank of America Credit Agreement") between
the Borrowers defined therein ("Devco I Entities"), HCR/Alterra
Development, LLC ("HCR/Alterra"), as Guarantor, the Lenders
defined therein, Bank of America, N.A. as Administrative Agent,
The Chase Manhattan Bank as Syndication Agent, and Deutsche Bank
AG New York and/or Cayman Islands Branches and Bank United, F.S.B.
as Co-Agents, dated September 30, 1999 (exhibits and schedules to
this agreement, which are listed and summarized in the table of
contents to the agreement, have been omitted; the Registrant
agrees to furnish supplementally to the Commission, upon request,
a copy of these exhibits and schedules) (incorporated by reference
to Exhibit 10.8 of the Registrant's Form 10-Q for period ending
September 30, 1999).
</TABLE>
58
<PAGE> 60
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.111 Guaranty Agreement dated September 30, 1999 by the Registrant in
favor of Bank of America, N.A. as Administrative Agent under the
Credit Agreement referenced in Exhibit 10.8 herein (exhibits to
this agreement have been omitted; the Registrant agrees to furnish
supplementally to the Commission, upon request, a copy of these
exhibits) (incorporated by reference to Exhibit 10.9 of the
Registrant's Form 10-Q for period ending September 30, 1999).
10.112 Schedule of properties owned by Devco I and mortgaged under the
Bank of America Credit Agreement referenced in Exhibit 10.110
(incorporated by reference to Exhibit 10.10 of the Registrant's
Form 10-Q for period ending September 30, 1999).
10.113 Form of Lease dated July 16, 1999 between LTC Properties, Inc. and
the Registrant.
10.114 Schedule of LTC Leases which are substantially similar to the Form
of Lease referenced in Exhibit 10.113.
10.115 Amendment to Leases dated as of November 30, 1998 between LTC
Properties, Inc., Kansas-LTC Corporation, Texas-LTC Limited
Partnership, the Registrant and Sterling House Corporation.
10.116 Form of Building Loan Agreement ("Key Loan Agreement") dated as of
January 14, 2000 between Key Corporate Capital Inc. and Clinton
Brookside Drive, LLC.
10.117 Form of Secured Promissory Note ("Key Promissory Note") dated
January 14, 2000 between Key Corporate Capital Inc. and Clinton
Brookside Drive, LLC.
10.118 Form of Guaranty of Payment and Performance dated as of January
14, 2000 from the Registrant to Key Corporate Capital Inc. ("Key
Guaranty").
10.119 Schedule of Key Loan Agreements, Promissory Notes and Guaranties
which are substantially similar to the Forms referenced in
Exhibits 10.116, 10.117 and 10.118.
10.120 Loan Agreement dated as of December 13, 1999 between the
Registrant and RDVEPCO, L.L.C.
10.121 AHC Purchaser Holding, Inc. Subscription and Organizational
Agreement dated as of December 13, 1999 between AHC Purchaser
Holding, Inc., RDVEPCO, L.L.C. and the Registrant.
10.122 Amended and Restated Loan Agreement dated as of February 3, 2000
between the Registrant and RDVEPCO, L.L.C.
10.123 Amended and Restated Guaranty dated as of February 3, 2000 by ACH
Purchaser Holding, Inc. and RDVEPCO, L.L.C.
10.124 Construction Loan and Security Agreement dated as of May 1, 1998
between ALS Clare Bridge, Inc. and Sovereign Bank (the "Sovereign
Bank Loan Agreement").
10.125 Form of Open End Mortgage and Security Agreement dated May 1, 1998
between ALS-Clare Bridge, Inc. and Sovereign Bank.
10.126 Form of Guaranty and Surety Agreement dated May 1, 1998 between
the Registrant and Sovereign Bank.
10.127 Schedule of properties mortgaged under the Sovereign Bank Loan
Agreement and mortgages which are substantially similar to the
Form of Mortgage attached as Exhibit 10.125.
10.128 Revolving Credit Agreement dated August 19, 1997 between the
Registrant and Firstar Bank Milwaukee, NA.
10.129 Revolving Credit Note dated August 19, 1997 between Registrant and
Firstar Bank Milwaukee, NA.
</TABLE>
59
<PAGE> 61
<TABLE>
<CAPTION>
NO. EXHIBIT
DESCRIPTION
- ------ ------------------------------------------------------------------
<S> <C>
10.130 Amendment to Revolving Credit Agreement and Revolving Credit Note
dated February 27, 1999 between Registrant and Firstar Bank
Milwaukee, NA.
10.131 Second Amendment to Loan Agreement and Related Documents dated
September 9, 1999 between Registrant and Firstar Bank Milwaukee,
NA.
10.132 Form Consolidated Mortgage (the "M&T Mortgage") dated December 22,
1999 between Clifton Park Route 146, LLC and Manufacturers and
Traders Trust Company.
10.133 Continuing Guaranty dated December 22, 1999 between the Registrant
and Manufacturers and Traders Trust Company.
10.134 Schedule of M&T Mortgages which are substantially similar to the
form of M&T Mortgage attached as Exhibit 10.132.
10.135 Development Joint Venture Agreement between the Registrant and HCR
Manor Care, Inc. dated December 31, 1998. (incorporated by
reference to Exhibit 10.61 of the Registrant's Form 10-K for
period ending December 31, 1998).
11.1 Statement re: Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of KPMG LLP.
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
60
<PAGE> 62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Milwaukee,
State of Wisconsin, on the 30th day of March, 2000.
ALTERRA HEALTHCARE CORPORATION
By: /s/ Mark W. Ohlendorf
---------------------------------------------------
Senior Vice President, Chief Financial
Officer and Assistant Secretary
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------------- ------------------------------------------- ---------------
<S> <C> <C>
/S/ WILLIAM F. LASKY
- -------------------------------------
William F. Lasky President, Chief Executive Officer and March 30, 2000
Director (Principal Executive Officer)
/S/ STEVEN L. VICK
- -------------------------------------
Steven L. Vick Chief Operating Officer and Director March 30, 2000
/S/ MARK W. OHLENDORF
- -------------------------------------
Mark W. Ohlendorf Senior Vice President, Chief Financial March 30, 2000
Officer and Assistant Secretary
/S/ JOHN D. PETERSON
- -------------------------------------
John D. Peterson Vice President, Controller and Assistant March 30, 2000
Secretary (Principal Accounting Officer)
/S/ WILLIAM G. PETTY, JR.
- -------------------------------------
William G. Petty , Jr. Chairman of the Board and Director March 30, 2000
/S/ TIMOTHY J. BUCHANAN
- -------------------------------------
Timothy J. Buchanan Vice Chairman and Director March 30, 2000
/S/ RICHARD W. BOEHLKE
- -------------------------------------
Richard W. Boehlke Director March 30, 2000
/S/ GENE E. BURLESON
- -------------------------------------
Gene E. Burleson Director March 30, 2000
/S/ ROBERT HAVEMAN
- -------------------------------------
Robert Haveman Director March 30, 2000
/S/ JERRY L. TUBERGEN
- -------------------------------------
Jerry L. Tubergen Director March 30, 2000
</TABLE>
61
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
ALTERNATIVE LIVING SERVICES, INC.
ALTERNATIVE LIVING SERVICES, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
FIRST: That, the Board of Directors of the Corporation unanimously
adopted a resolution setting forth a proposed amendment to the Restated
Certificate of Incorporation of the Corporation, declaring said amendment to be
advisable, and directing that said amendment be presented to the stockholders of
the Corporation for consideration at the annual meeting of the stockholders. The
resolution setting forth the proposed amendment is as follows:
"RESOLVED, that the Corporation's Restated Certificate of Incorporation
be amended to change the name of the Corporation and that such amendment be
effected by deleting Article 1 of the Corporation's Restated Certificate of
Incorporation in its entirety and substituting in lieu thereof:
"Article 1
The name of the Corporation is ALTERRA HEALTHCARE CORPORATION."
SECOND: That thereafter an annual meeting of the stockholders of the
Corporation was duly called and held, upon notice in accordance with Section 222
of the General Corporation Law of the State of Delaware, at which meeting the
foregoing resolution was adopted by a majority of the holders of the
Corporation's outstanding common stock entitled to vote at the annual meeting of
the stockholders.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
FOURTH: This Amendment shall not become effective until and shall
become effective at 5:00 p.m. (local time in Dover, Delaware) on May 19, 1998.
<PAGE> 2
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be signed as of this 19th day of May, 1999.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ William F. Lasky
------------------------------
William F. Lasky, President
Attested by:
/s/ Thomas E. Komula
- ----------------------------
Thomas E. Komula, Secretary
<PAGE> 1
EXHIBIT 3.7
CERTIFICATE OF OWNERSHIP
MERGING
STERLING HOUSE CORPORATION
INTO
ALTERRA HEALTHCARE CORPORATION
(Pursuant to Section 253 of the General
Corporation Law of Delaware and Section 17-6703
of the Kansas General Corporation Code)
ALTERRA HEALTHCARE CORPORATION ("Alterra"), a corporation incorporated
on the 13th day of December, 1993, pursuant to the provisions of the General
Corporation Law of the State of Delaware does hereby certify that it owns all of
the capital stock of Sterling House Corporation ("Sterling House"), a
corporation incorporated under the laws of the State of Kansas, and that
Alterra, by a resolution of its board of directors duly adopted at a meeting
held on the 11th day of November 1999, determined to and did merge into itself
Sterling House to be effective as of December 31, 1999 which resolution is in
the following words to wit:
WHEREAS, Alterra lawfully owns all the outstanding capital
stock of Sterling House Corporation, a corporation organized and
existing under the laws of the State of Kansas ("Sterling House"); and
WHEREAS, Alterra desires to merge into itself Sterling House
and to thereupon be possessed of all the estate, property, rights,
privileges and franchises of Sterling House.
NOW, THEREFORE, BE IT RESOLVED, that, effective as of December
31, 1999, Alterra merge into itself and it does hereby merge into
itself Sterling House and assumes all of the liabilities and
obligations of Sterling House;
FURTHER RESOLVED, that Alterra does hereby agree that it may
be served with process in the State of Kansas in any proceeding for
enforcement of any obligation of Sterling House or Alterra arising from
the merger contemplated hereby, and Alterra does hereby irrevocably
appoint the Secretary of State of the State of Kansas as its
<PAGE> 2
agent to accept service of process in any such suit or proceeding and
directs that a copy of such process be mailed to Alterra at the
following address:
Alterra Healthcare Corporation
450 N. Sunnyslope Road
Suite 300
Brookfield, Wisconsin 53005
Attention: Chief Executive Officer
FURTHER RESOLVED, that the President, any Senior Vice
President, the Secretary and any Assistant Secretary (the "Authorized
Officers") of Alterra be, and each of them hereby is, directed to make
and execute, under the corporate seal of Alterra, a certificate of
ownership setting forth a copy of the resolution to merge Sterling
House and assume its liabilities and obligations, and the date of
adoption thereof, and to file the same in the offices of the Secretary
of State of the State of Delaware and the Secretary of State of the
State of Kansas, and a certified copy thereof in the office of the
Recorder of Deeds of New Castle County; and
FURTHER RESOLVED, that the Authorized Officers are, and each
of them is, duly authorized and empowered to take all action and to
execute and deliver and to file or record, as the case may be, any and
all such documents, agreements, instruments, certificates or
instructions as they, or any of them, may deem necessary or advisable
in order to carry into effect the purposes and intent of the foregoing
resolutions or the transactions contemplated therein or thereby, as
shall be evidenced conclusively by the taking of such actions or the
execution and delivery and the filing and recording, as the case may
be, of such documents, agreements, instruments, certificates or
instructions by said Authorized Officer or Officers.
IN WITNESS WHEREOF, Alterra has caused this Certificate of Ownership to
be signed by its duly authorized officer, the 29th day of December, 1999.
By: /s/ Mark W. Ohlendorf
---------------------
Its: Senior Vice President and Asst. Secretary
Attest:
/s/ Thomas E. Komula
- --------------------
Senior Vice President and Secretary
<PAGE> 1
EXHIBIT 4.7
SECOND SUPPLEMENTAL INDENTURE
DATED AS OF DECEMBER 31, 1999
AMONG
ALTERRA HEALTHCARE CORPORATION (F/K/A
ALTERNATIVE LIVING SERVICES, INC.)
AND
STATE STREET BANK AND TRUST COMPANY,
AS SUCCESSOR TRUSTEE
TO
INDENTURE
DATED AS OF MAY 23, 1996 BETWEEN
STERLING HOUSE CORPORATION
AND
FLEET NATIONAL BANK,
AS TRUSTEE,
AS SUPPLEMENTED BY THE FIRST SUPPLEMENTAL INDENTURE
THERETO DATED AS OF OCTOBER 23, 1997
----------------------------------------
6.75% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2006
----------------------------------------
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of December 31, 1999 (this
"SECOND SUPPLEMENTAL INDENTURE"), among ALTERRA HEALTHCARE CORPORATION (f/k/a
Alternative Living Services, Inc.), a Delaware corporation ("ALTERRA"), and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company, as successor
to Fleet National Bank, as Trustee (the "TRUSTEE"), to that certain Indenture,
dated as of May 23, 1996 (the "INDENTURE"), between the Sterling House
Corporation, a Kansas corporation (the "COMPANY"), and Fleet National Bank, as
Trustee, as supplemented by the First Supplemental Indenture thereto dated as of
October 23, 1997 between Alterra, the Company and the Trustee (the "FIRST
SUPPLEMENTAL INDENTURE").
WHEREAS, the Company has heretofore executed and delivered to the
Trustee the Indenture providing for the issuance by the Company of up to
$35,000,000 in aggregate principal amount of 6.75% Convertible Subordinated
Debentures Due 2006 (the "SECURITIES");
WHEREAS, Alterra and the Company have heretofore executed and delivered
to the Trustee the First Supplemental Indenture in connection with the merger of
Tango Merger Corporation (the "MERGER SUB"), a Kansas corporation and a
wholly-owned subsidiary of Alterra with and into the Company (the "INITIAL
MERGER"), pursuant to the provisions of that certain Agreement and Plan of
Merger, dated as of July 30, 1997, among Alterra, Merger Sub and the Company, as
amended as of September 2, 1997;
WHEREAS, as a result of the Initial Merger, the Company became a
wholly-owned subsidiary of Alterra and the Securities became convertible into
shares of Alterra's common stock, $.01 par value per share, as provided in the
First Supplemental Indenture;
WHEREAS, effective as of December 31, 1999, Alterra has merged the
Company with and into itself (the "FINAL MERGER") such that the separate
corporate existence of the Company has been extinguished and Alterra has
succeeded by operation of merger to all of the estate, property, rights,
privileges and franchises of the Company;
WHEREAS, in connection with the Final Merger, the outstanding capital
stock of the Company has been cancelled;
WHEREAS, Section 10.10 of the Indenture requires that the merger of any
corporation with or into the Company shall be conditioned upon the execution and
delivery to the Trustee of a supplemental indenture which provides that the
holder of each Security then outstanding shall have the right thereafter, during
the period such Security shall be convertible as specified in Section 10.1 of
the Indenture, to convert such Security into the kind and amount of securities,
cash and other property receivable upon such merger by a holder of the number of
shares of common stock into which such Security might have been converted
immediately prior to such merger; and
<PAGE> 3
WHEREAS, the First Supplemental Indenture sets forth the conversion
rights of the holders of the Securities arising out of the Initial Merger in
accordance with Section 10.10 of the Indenture and the Final Merger does not
affect such conversion rights in any way;
NOW, THEREFORE, this Second Supplemental Indenture witnesseth:
In order to comply with the requirements of the Indenture, Alterra
covenants and agrees with the Trustee for the equal and proportionate benefit,
security and protection of the respective holders from time to time of the
Securities, as follows:
ARTICLE ONE
ASSUMPTION AND SUBSTITUTION
SECTION 1.01. Alterra hereby represents and warrants to the Trustee and
to the holders of the Securities as follows:
(a) Alterra is a corporation organized and existing under
the laws of the State of Delaware.
(b) On the date hereof the Company has been merged with
and into Alterra, said merger hereinafter referred to
as the "MERGER."
(c) Immediately after giving effect to the Merger no
Event of Default and no event which, after notice or
passage of time, or both, would become an Event of
Default has happened and is continuing.
SECTION 1.02. In accordance with Section 5.1 of the Indenture, Alterra
hereby expressly assumes the due and punctual payment of the principal of and
premium, if any, and interest on all of the Securities, according to their
tenor, and the due and punctual performance and observance of all of the terms,
covenants and conditions of the Indenture to be kept or performed by the
Company.
SECTION 1.03. Pursuant to Section 5.2 of the Indenture, Alterra shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture with the same effect as if Alterra had been
named as the Company therein.
ARTICLE TWO
MISCELLANEOUS
SECTION 2.01. The Trustee accepts the trusts in this Second
Supplemental Indenture declared and provided upon the terms and conditions set
forth in the Indenture. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or
2
<PAGE> 4
sufficiency of this Second Supplemental Indenture or the due execution hereof by
Alterra or for or in respect of the recitals and statements contained herein,
all of which recitals and statements are made solely by Alterra.
SECTION 2.02. Except as hereby expressly modified hereby and by the
First Supplemental Indenture, the Indenture and the Securities issued thereunder
are in all respect ratified and confirmed and all of the terms, conditions and
provisions thereof shall remain in full force and effect.
SECTION 2.03. The recitals contained herein shall be taken as the
statements of Alterra and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Second Supplemental Indenture.
SECTION 2.04. This Second Supplemental Indenture shall be effective as
of the date and time of the effectiveness of the Final Merger.
SECTION 2.05. Unless otherwise defined herein, or unless the context
otherwise requires, the capitalized terms used herein shall have the respective
meanings assigned to them in the Indenture.
SECTION 2.06. The parties may sign multiple counterparts of this Second
Supplemental Indenture. Each signed counterpart shall be deemed an original, but
all of them together shall represent the same agreement.
SECTION 2.07. The laws of the State of New York shall govern this
Second Supplemental Indenture without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, all as of the date first written
above.
ALTERRA HEALTHCARE CORPORATION
By: /s/Mark W. Ohlendorf
Name: Mark W. Ohlendorf
Title: Sr. Vice President, Asst. Secretary
STATE STREET BANK AND TRUST
COMPANY, as successor Trustee
By: /s/ M. L. Storrs
Name: M. L. Storrs
Title: Vice President
3
<PAGE> 1
EXHIBIT 10.22
Amended Schedule of Meditrust Facility Leases
Which are Substantially Similar to the Facility Lease Attached as Exhibit 10.21
<TABLE>
<CAPTION>
ORIGINAL
LEASING MEDITRUST NO. OF UNITS
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT BASE RENT IN FACILITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alterra Clare Bridge of Farmington Hills Farmington Hills, Michigan 34,209.00 3,420,850.00 329,770.00 28
Alterra Clare Bridge of Farmington Hills Farmington Hills, Michigan 37,510.00 3,750,992.00 361,596.00 28
Alterra Clare Bridge of Fort Myers Fort Myers, Florida 37,655.00 3,765,481.00 362,922.00 32
Alterra Clare Bridge of Lower Makefield Yardley, Pennsylvania 49,989.00 4,998,920.00 481,896.00 36
Alterra Clare Bridge of Tampa Tampa, Florida 37,655.00 3,765,481.00 362,992.00 32
Alterra Clare Bridge of Utica Utica, Michigan 33,546.00 3,354,614.00 323,385.00 28
Alterra Sterling House of Brown Deer Brown Deer, Wisconsin 7,073.00 707,266.00 68,180.00 15
Alterra Sterling House of Onalaska Onalaska, Wisconsin 12,899.00 1,289,931.00 124,349.00 19
</TABLE>
<PAGE> 1
EXHIBIT 10.27
<TABLE>
<CAPTION>
Amended Schedule of Meditrust Facility Leases
Which are Substantially Similar to the Facility Lease Attached as Exhibit 10.26
ORIGINAL
LEASING MEDITRUST NO. OF UNITS
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT BASE RENT IN FACILITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alterra Clare Bridge of Charleston Charleston, South Carolina $ 15,381.00 $ 4,075,366.00 $ 372,488.00 38
Alterra Clare Bridge of Charlotte Charlotte, North Carolina 19,516.00 5,170,973.00 472,627.00 52
Alterra Clare Bridge of Columbia Columbia, South Carolina 14,321.00 3,794,584.00 346,825.00 38
Alterra Clare Bridge of Greensboro Greensboro, North Carolina 14,559.00 3,857,509.00 352,576.00 38
Alterra Clare Bridge of Jacksonville Jacksonville, Florida 14,070.00 3,728,171.00 340,755.00 38
Alterra Sterling House of Eau Claire Eau Claire, Wisconsin 4,847.00 1,284,173.00 117,373.00 20
Alterra Sterling House of Faribault Faribault, Minnesota 4,474.00 1,185,390.00 108,345.00 20
Alterra Sterling House of Manitowoc Manitowoc, Wisconsin 4,101.00 1,086,608.00 99,316.00 20
Alterra Sterling House of Mankato Mankato, Minnesota 4,847.00 1,284,173.00 117,373.00 20
Alterra Sterling House of Medford Medford, Wisconsin 4,545.00 930,802.00 85,075.00 19
Alterra Sterling House of Middleton Middleton, Wisconsin 5,592.00 1,481,738.00 135,431.00 20
Alterra Sterling House of Neenah Neenah, Wisconsin 5,219.00 1,382,955.00 126,402.00 20
Alterra Sterling House of Oshkosh Oshkosh, Wisconsin 4,101.00 1,086,608.00 99,316.00 20
Alterra Sterling House of Plover Plover, Wisconsin 10,909.00 2,233,924.00 204,181.00 18
Alterra Sterling House of Sauk Rapids Sauk Rapids, Minnesota 3,728.00 987,825.00 90,287.00 20
Alterra Sterling House of Sun Prairie Sun Prairie, Wisconsin 4,474.00 1,185,390.00 108,345.00 20
Alterra Sterling House of The Oaks Wisconsin Rapids, Wisconsin 6,364.00 1,303,123.00 119,105.00 19
Alterra Sterling House of Wausau Wausau, Wisconsin 8,182.00 1,675,443.00 153,135.00 40
Alterra Sterling House of Willmar Willmar, Minnesota 4,474.00 1,185,390.00 108,345.00 20
Alterra Sterling House of Winona Winona, Minnesota 4,847.00 1,284,173.00 117,373.00 20
Alterra Wynwood of Charlotte Charlotte, North Carolina 26,492.00 7,019,381.00 641,571.00 72
Alterra Wynwood of Greensboro Greensboro, North Carolina 26,031.00 6,897,281.00 639,411.00 72
Alterra Wynwood of Meridian Haslett, Michigan 26,248.00 6,954,771.00 635,666.00 60
</TABLE>
<PAGE> 2
EXHIBIT 10.27
Amended Schedule of Meditrust Facility Leases
Which are Substantially Similar to the Facility Lease Attached as Exhibit 10.26
<TABLE>
<S> <C> <C> <C> <C> <C>
Alterra Sterling House of Menomonie Menomonie, Wisconsin NONE 969,000.00 93,993.00 19
Alterra Sterling House of New Richmond New Richmond, Wisconsin NONE 750,000.00 72,750.00 15
Alterra Sterling House of Plymouth Plymouth, Wisconsin NONE 760,000.00 73,720.00 15
Alterra Sterling House of Wisconsin Rapids Wisconsin Rapids, Wisconsin 4,590.00 1,020,000.00 98,940.00 19
</TABLE>
<PAGE> 1
EXHIBIT 10.35
Amended Schedule of Meditrust Facility Leases
Which are Substantially Similar to the Facility Lease Attached as Exhibit 10.34
<TABLE>
<CAPTION>
ORIGINAL
LEASING MEDITRUST NO. OF UNITS
FACILITY NAME LOCATION COMMITMENT FEE INVESTMENT BASE RENT IN FACILITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alterra Sterling House of Davison Davison, Michigan NONE $ 1,425,648.0 $ 124,174.0 19
Alterra Sterling House of Kenosha Kenosha, Wisconsin NONE $ 1,399,524.0 $ 121,899.0 19
Alterra Clare Bridge of Delta and Alterra
Sterling House of Delta Lansing, Michigan $ 6,180.0 $ 5,618,049.0 $ 495,512.0 38; 19
Alterra Clare Bridge of Grand Blanc and
Alterra Wynwood of Grand Blanc Grand Blanc Township, Michigan $ 31,867.0 $13,186,688.0 $1,103,726.0 46; 66
Alterra Clare Bridge of Troy and Alterra
Wynwood of Troy Troy, Michigan $ 33,891.0 $13,389,148.0 $1,120,672.0 46; 66
</TABLE>
<PAGE> 1
EXHIBIT 10.36
FACILITY LEASE AGREEMENT
MEDITRUST ACQUISITION CORPORATION III
(A Delaware Corporation)
as
Lessor
AND
ALS LEASING, INC.
(A Delaware Corporation)
as
Lessee
Dated As Of April 30, 1997
For Premises Located At
100 Flume Road
Manlius, New York 13104
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE 1 LEASED PROPERTY; TERM; EXTENSIONS 1
1.1 Leased Property 1
1.2 Term 2
1.3 Extended, Terms 2
ARTICLE 2 DEFINITIONS AND RULES OF CONSTRUCTION 3
2.1 Definitions 3
2.2 Rules of Construction 20
ARTICLE 3 RENT 21
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures 21
3.1.1 Base Rent 21
3.1.2 Additional Rent 22
3.2 Calculation and Payment of Additional Rent; Annual Reconciliation 22
3.2.1 Estimates and Payments 22
3.2.2 Annual Statement 22
3.2.3 Deficits 23
3.2.4 Overpayments 23
3.2.5 Final Determination 23
3.2.6 Best Efforts To Maximize 23
3.3 Confirmation and Audit of Additional Rent 23
3.3.1 Maintain Accounting Systems 23
3.3.2 Audit By Lessor 24
3.3.3 Deficiencies and Overpayment 24
3.3.4 Survival 24
3.4 Additional Charges 24
3.5 Leasing Commitment Fee 25
3.6 Net Lease 25
3.7 No Lessee Termination or Offset 25
3.7.1 No Termination 25
3.7.2 Waiver 26
3.7.3 Independent Covenants 26
3.8 Abatement of Rent Limited 26
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS 27
4.1 Payment of Impositions 27
4.1.1 Lessee To Pay 27
4.1.2 Installment Elections 27
4.1.3 Returns and Reports 27
4.1.4 Refunds 28
4.1.5 Protest 28
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C>
4.2 Notice of Impositions 28
4.3 Adjustment of Impositions 28
4.4 Utility Charges 28
4.5 Insurance Premiums 28
4.6 Deposits 29
4:6.1 Lessor's Option 29
4.6.2 Use of Deposits 29
4.6.3 Deficits 30
4.6.4 Other Properties 30
4.6.5 Transfers 30
4.6.6 Security 31
4.6.7 Return 31
4.6.8 Receipts 31
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL
PROPERTY; INSTALLATION' REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY 31
5.1 Ownership of the Leased Property 31
5.2 Personal Property; Removal and Replacement of Personal Property 31
5.2.1 Lessee To Equip Facility 31
5.2.2 Sufficient Personal Property 32
5.2.3 Removal and Replacement; Lessor's Option to Purchase 32
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS 33
6.1 Security for the Lessee's Obligations; Permitted Prior Security Interests 33
6.1.1 Security 33
6.1.2 Purchase-Money Security Interests and Equipment Leases 34
6.2 Cash Collateral 34
6.2.1 Cash Collateral 34
6.2.2 Application of Cash Collateral 34
6.2.3 Replenishment of Cash Collateral 35
6.3 Guaranty 35
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY; MANAGEMENT
AGREEMENTS 35
7.1 Condition of the Leased Property 35
7.2 Use of the Leased Property; Compliance; Management 36
7.2.1 Obligation to Operate 36
7.2.2 Permitted Uses 36
7.2.3 Compliance With Insurance Requirements 36
7.2.4 No Waste 36
7.2.5 No Impairment 36
7.2.6 No Liens 37
7.3 Compliance with Legal Requirements 37
7.4 Management Agreements 37
7.5 Compliance With and Satisfaction of Bond-Related Obligations 38
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C>
7.6 Compliance With Superior Lease Obligations 38
ARTICLE 8 REPAIRS; RESTRICTIONS 39
8.1 Maintenance and Repair 39
8.1.1 Lessee's Responsibility 39
8.1.2 No Lessor Obligation 40
8.1.3 Lessee May Not Obligate Lessor 40
8.1.4 Lessee's Obligation to Perform Upgrade Renovations 40
8.2 Encroachments; Title Restrictions 41
ARTICLE 9 MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS 42
9.1 Lessor's Approval 42
9.2 General Provisions as to Capital Additions and Certain
Material Structural Work 42
9.2.1 No Liens 42
9.2.2 Lessee's Proposal Regarding Capital Additions and
Material Structural Work 42
9.2.3 Lessor's Options Regarding Capital Additions
and Material Structural Work 43
9.2.4 Lessor May Elect to Finance Capital Additions
or Material Structural Work 43
9.2.5 Legal Requirements; Quality of Work 43
9.3 Capital Additions and Material Structural Work Financed by Lessor 43
9.3.1 Lessee's Financing Request 43
9.3.2 Lessor's General Requirements 44
9.3.3 Payment of Costs 45
9.4 General Limitations 46
9.5 Non-Capital Additions 46
9.6 Permitted Work 47
ARTICLE 10 WARRANTIES AND REPRESENTATIONS 47
10.1 Representations and Warranties 47
10.1.1 Existence; Power; Qualification 47
10.1.2 Valid and Binding 47
10.1.3 Single Purpose 47
10.1.4 No Violation 48
10.1.5 Consents and Approvals 48
10.1.6 No Liens or Insolvency Proceedings 48
10.1.7 No Burdensome Agreements 49
10.1.8 Commercial Acts 49
10.1.9 Adequate Capital, Not Insolvent 49
10.1.10 Not Delinquent 49
10.1.11 No Affiliate Debt 49
10.1.12 Taxes Current 49
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C> <C>
10.1.13 Financials Complete and Accurate 50
10.1.14 Pending Actions, Notices and Reports 50
10.1.15 Compliance with Legal and Other Requirements 51
10.1.16 No Action By Governmental Authority 52
10.1.17 Property Matters 52
10.1.18 Third Party Payor Agreements 53
10.1.19 Rate Limitations 54
10.1.20 Free Care 54
10.1.21 No Proposed Changes 54
10.1.22 ERISA 54
10.1.23 No Broker 54
10.1.24 No Improper Payments 54
10.1.25 Nothing Omitted 55
10.1.26 No Margin Security 55
10.1.27 No Default 56
10.1.28 Principal Place of Business 56
10.1.29 Labor Matters 56
10.1.30 Intellectual Property 56
10.1.31 Management Agreements 56
10.1.32 Fiscal Year 56
10.2 Continuing Effect of Representations and Warranties 56
ARTICLE 11 FINANCIAL AND OTHER COVENANTS 57
11.1 Status Certificates 57
11.2 Financial Statements; Reports; Notice and Information 57
11.2.1 Obligation To Furnish 57
11.2.2 Responsible Officer 61
11.2.3 No Material Omission 61
11.2.4 Confidentiality 62
11.3 Financial Covenants 62
11.3.1 Rent Coverage Ratio 62
11.3.2 [Intentionally Omitted] 62
11.3.3 [Intentionally Omitted] 62
11.3.4 [Intentionally Omitted] 63
11.3.5 Current Ratio - Guarantor 63
11.3.6 Net Worth of Guarantor After a Permitted Transaction or
Permitted Merger 63
11.3.7 [Intentionally Omitted] 63
11.3.8 Tangible Net Worth - Guarantor 63
11.3.9 No Indebtedness 63
11.3.10 No Guaranties 63
11.4 Affirmative Covenants 64
11.4.1 Maintenance of Existence 64
11.4.2 Materials 64
11.4.3 Compliance With Legal Requirements And Applicable
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C>
Agreements 64
11.4.4 Books And Records 64
11.4.5 Participation in Third Party Payor Programs 64
11.4.6 Conduct of its Business 65
11.4.7 Address 65
11.4.8 Subordination of Affiliate Transactions 65
11.4.9 Inspection 65
11.4.10 Additional Property 65
11.4.11 Acceptable Licensed Operator 66
11.4.12 [Intentionally Omitted] 66
11.5 Additional Negative Covenants 66
11.5.1 Restrictions Relating to Lessee 67
11.5.2 No Liens 67
11.5.3 Limits on Affiliate Transactions 68
11.5.4 Non-Competition 68
11.5.5 No Default 69
11.5.6 Restrictions Relating to the Guarantor 70
11.5.7 [Intentionally Omitted] 70
11.5.8 ERISA 70
11.5.9 Forgiveness of Indebtedness 70
11.5.10 Value of Assets 70
11.5.11 Changes in Fiscal Year and Accounting Procedures 70
11.5.12 [Intentionally Omitted] 70
ARTICLE 12 INSURANCE AND INDEMNITY 71
12.1 General Insurance Requirements 71
12.1.1 Types and Amounts of Insurance 71
12.1.2 Insurance Company Requirements 72
12.1.3 Policy Requirements 73
12.1.4 Notices; Certificates and Policies 73
12.1.5 Lessor's Right to Place Insurance 74
12.1.6 Payment of Proceeds 74
12.1.7 Irrevocable Power of Attorney 74
12.1.8 Blanket Policies 75
12.1.9 No Separate Insurance 75
12.1.10 Assignment of Unearned Premiums 75
12.2 Indemnity 76
12.2.1 Indemnification 76
12.2.2 Indemnified Parties 76
12.2.3 Defense of Actions by the Lessee 76
12.2.4 Limitation on Lessor Liability 77
12.2.5 Risk of Loss 77
ARTICLE 13 FIRE AND CASUALTY 78
13.1 Restoration Following Fire or Other Casualty 78
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C>
13.1.1 Following Fire or Casualty 78
13.1.2 Procedures 78
13.1.3 Disbursement of Insurance Proceeds 79
13.2 Disposition of Insurance Proceeds 83
13.2.1 Proceeds To Be Released to Pay For Work 83
13.2.2 Proceeds Not To Be Released 83
13.2.3 Lessee Responsible for Short-Fall 84
13.3 Tangible Personal Property 84
13.4 Restoration of Certain Improvements and the Tangible Personal Property 85
13.5 No Abatement of Rent 85
13.6 Termination of Certain Rights 85
13.7 Waiver 85
13.8 Application of Rent Loss and/or Business Interruption Insurance 85
13.9 Obligation To Account 86
ARTICLE 14 CONDEMNATION 86
14.1 Parties' Rights and Obligations 86
14.2 Total Taking 86
14.3 Partial or Temporary Taking 86
14.4 Restoration 87
14.5 Award Distribution 88
14.6 Control of Proceedings 88
ARTICLE 15 PERMITTED CONTESTS 88
15.1 Lessee's Right to Contest 88
15.2 Lessor's Cooperation 89
15.3 Lessee's Indemnity 89
ARTICLE 16 DEFAULT 89
16.1 Events of Default 89
16.2 Remedies 95
16.3 Damages 96
16.4 Lessee Waivers 97
16.5 Application of Funds 97
16.6 Intentionally Omitted 97
16.7 Lessor's Right to Cure 97
16.8 No Waiver By Lessor 98
16.9 Right of Forbearance 98
16.10 Cumulative Remedies 99
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER 99
17.1 Surrender 99
17.2 Transfer of Permits and Contracts 99
</TABLE>
7
<PAGE> 8
<TABLE>
<S> <C> <C>
17.3 No Acceptance of Surrender 100
17.4 Holding Over 100
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY 100
18.1 [Intentionally Omitted] 101
18.2 [Intentionally Omitted] 101
18.3 [Intentionally Omitted] 101
18.4 Lessee's Option to Purchase 101
18.4.1 Conditions to Option 101
18.4.2 Exercise of Option 101
18.4.3 Conveyance 101
18.4.4 Calculation of Purchase Price 101
18.4.5 Payment of Purchase Price 102
18.4.6 Place and Time of Closing 102
18.4.7 Condition of Leased Property 102
18.4.8 Quality of Title 102
18.4.9 Lessor's Inability to Perform 102
18.4.10 Merger by Deed 102
18.4.11 Use of Purchase Price to Clear Title 103
18.4.12 Lessee's Default 103
ARTICLE 19 SUBLETTING AND ASSIGNMENT 103
19.1 Subletting and Assignment 103
19.2 Permitted Subleases 103
19.3 Attornment 103
ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR 104
20.1 No Merger of Title 104
20.2 Transfers By Lessor 104
20.3 Lessor May Grant Liens 104
20.4 Subordination and Non-Disturbance 104
ARTICLE 21 LESSOR OBLIGATIONS 106
21.1 Quiet Enjoyment 106
21.2 Memorandum of Lease 106
21.3 Default by Lessor 106
ARTICLE 22 NOTICES 107
ARTICLE 23 LIMITATION OF MEDITRUST LIABILITY 108
ARTICLE 24 MISCELLANEOUS PROVISIONS 108
24.1 Broker's Fee Indemnification 108
24.2 No Joint Venture or Partnership 109
24.3 Amendments, Waivers and Modifications 109
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C> <C>
24.4 Captions and Heading 110
24.5 Time is of the Essence 110
24.6 Counterparts 110
24.7 Entire Agreement 110
24.8 WAIVER OF JURY TRIAL 110
24.9 Successors and Assigns 110
24.10 No Third Party Beneficiaries 111
24.11 Governing Law 111
24.12 General 111
24.13 Intention of Parties 112
24.14 Appraisal 112
24.14.1 Designation of Appraisers 112
24.14.2 Appraisal Process 112
24.14.3 Specific Enforcement and Costs 113
EXHIBIT A LEGAL DESCRIPTION OF THE LAND 115
EXHIBIT B PERMITTED ENCUMBRANCES 116
EXHIBIT C LIST OF SHAREHOLDERS 117
EXHIBIT D NATIONAL ACCOUNTS AND LOCAL DISCOUNTS 118
EXHIBIT E OPEN COST REPORTS 119
EXHIBIT F RATE LIMITATIONS 120
EXHIBIT G FREE CARE REQUIREMENTS 121
EXHIBIT H CURRENT RATES 122
EXHIBIT I RENT COVERAGE RATIO CALCULATION 123
EXHIBIT J [INTENTIONALLY OMITTED] 124
</TABLE>
9
<PAGE> 10
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 30th day of April,
1997 and is between MEDITRUST ACQUISITION CORPORATION III ("Lessor"), a Delaware
corporation having its principal office at 197 First Avenue, Needham Heights,
Massachusetts 02194, and AILS LEASING, INC. ("Lessee"), a Delaware corporation,
having its principal office at 450 N. Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005, Attn: Mr. William F. Lasky.
ARTICLE 1
LEASED PROPERTY; TERM; EXTENSIONS
1.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the Lessor's rights and interests in and to the
following real and personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A attached
hereto (the "Land");
(b) all buildings, structures, Fixtures (as hereinafter
defined) and other improvements of every kind including, but not
limited to, alleyways and connecting tunnels, sidewalks, utility
pipes, conduits and lines, and parking areas and roadways appurtenant
to such buildings and structures presently or hereafter situated upon
the Land (collectively, the "Leased Improvements");
(c) all easements, rights and appurtenances of every
nature and description now or hereafter relating to or benefitting any
or all of the Land and the Leased Improvements; and
(d) all equipment, machinery, building fixtures, and
other items of property (whether realty, personalty or mixed),
including all components thereof, now or hereafter located in, on or
used in connection with, and permanently affixed to or incorporated
into the Leased Improvements, including, without limitation, all
furnaces, boilers, heaters, electrical equipment, heating, plumbing,
lighting, ventilating, refrigerating, incineration, air and water
pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, and built-in oxygen and vacuum systems, all of which, to
the greatest extent permitted by law, are hereby deemed by the parties
hereto to constitute real estate, together with all replacements,
modifications, alterations and additions thereto, but specifically
excluding all items included within the category of Tangible Personal
Property (as hereinafter defined) which are not permanently affixed to
or incorporated in the Leased Property (collectively, the "Fixtures").
The Leased Property is leased in its present condition, AS IS, without
representation or
<PAGE> 11
warranty of any kind, express or implied, by the Lessor and subject to: (i) the
rights of parties in possession; (ii) the existing state of title including all
covenants, conditions, Liens (as hereinafter defined) and other matters of
record (including, without limitation, the matters set forth in EXHIBIT B);
(iii) all applicable laws; and (iv) all matters, whether or not of a similar
nature, which would be disclosed by an inspection of the Leased Property or by
an accurate survey thereof.
Without limiting the generality of the foregoing, the Lessee
acknowledges and agrees that the following accurately describes the Lessor's
current ownership interests in the Leased Property:
(a) the Land is owned by the Lessor in fee simple subject to the
Permitted Encumbrances (defined below);
(b) Lessor is the assignee of the landlord's interest in a
ground lease (the "EDC Ground Lease"), dated October 13, 1993,
of the Land from Pioneer Liberty Square Company, LLC to the
Manlius Liberty Commons Economic Development Corporation
("Manlius Liberty Commons EDC");
(c) Manlius Liberty Commons EDC has executed a sublease (the
"IDA Sublease"), dated October 13, 1993 subleasing the Land to
Onondaga County Industrial Development Agency ("Onondaga
County IDA") which has caused the Leased Improvements to be
constructed on the Land; and
(d) Onondaga County IDA has executed a sub-sublease (the
"Liberty Commons Sub-sublease"), dated October 13, 1993, of
the Land and. Leased Improvements to Liberty Commons
Associates LLC, which in turn has assigned its subsublessee's
interest in its entirety to the Lessor.
1.2 Term. The term of this Lease shall consist of the "Initial
Term", which shall commence on April 30, 1997 (the "Commencement
Date") and end on April 30, 2010 (the "Expiration Date"); provided,
however, that this Lease may be sooner terminated as hereinafter
provided. In addition, the Lessee shall have the option(s) to extend
the Term (as hereinafter defined) as provided for in Section 1.3.
1.3 Extended Terms. Provided that this Lease has not been
previously terminated, and as long as there exists no Lease Default (as
hereinafter defined) at the time of exercise and on the last day of .the Initial
Term or the then current Extended Term (as hereinafter defined), as the case may
be, the Lessee is hereby granted the option to extend the Initial Term of this
Lease for three (3) additional periods (collectively, the "Extended Terms") as
follows: three (3) successive five (5) year periods for a maximum Term, if all
such options are exercised, which ends on April 30, 2025. The Lessee's extension
options shall be exercised by the Lessee by giving written notice to the Lessor
of the Lessee's exercise of each such extension at least one hundred eighty
(180) days, but not more than three hundred sixty (360) days, prior to the
termination of the Initial Term or the then current Extended Term, as the case
may be. The Lessee shall have no
11
<PAGE> 12
right to rescind any such notice once given. The Lessee may not exercise its
option for more than one Extended Term at a time. During each effective Extended
Term, all of the terms and conditions of this Lease shall continue in full force
and effect, except that the Base Rent (as hereinafter defined) for each such
Extended Term shall be adjusted as set forth in Section 3.1.1.
Notwithstanding anything to the contrary set forth herein, the Lessee's
rights to exercise the options granted in this Section 1.3 are subject to the
further condition that concurrently with the exercise of any extension option
hereunder, the Lessee shall have exercised its option to extend the terms of all
of the Group Two Acquisition Facility Leases (as defined in the Agreement
Regarding Related Lease Transactions) in accordance with the provisions of the
Agreement Regarding Related Lease Transactions and the provisions of Section 1.3
of each of the Related Leases.
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (ii) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
Acceptable Licensed Operator: Any of (a) the Current Manager, (b) the
Lessee, or (c) any Sublessee or Manager of the Facility (pursuant to a Sublease
or Management Agreement approved by the Lessor) that is wholly-owned by
Alternative Living Services, Inc. and is, during the Term, engaged in no
business or venture other than the ownership and/or operation of any health care
facility owned or financed by any Meditrust Entity; provided, however, that the
Current Manager shall not continue to manage the Facility for more than six (6)
months after the Commencement Date and shall not be deemed an Acceptable
Licensed Operator beyond such six-month term.
Accounts: As defined in the UCC.
Accreditation Body: All Persons having jurisdiction over the
accreditation, certification, evaluation or operation of the Facility. The
Lessor understands that neither the Lessee nor any Sublessee nor the Facility is
currently under the jurisdiction, or is otherwise subject to the rules, of any
Accreditation Body and that, accordingly, the provisions of this Lease relating
in any way to an Accreditation Body are presently inapplicable to this
transaction; however, in the event that at any time during the Term, any of the
Lessee, any Sublessee or the Facility falls under the jurisdiction of, or
otherwise becomes subject to the rules of, any Accreditation Body, then all such
provisions of this Lease and the other Lease Documents relating to an
Accreditation Body shall apply with full force and effect.
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Addendum to Lease: The addendum attached to this Lease, dated of even
date herewith by and between the Lessor and the Lessee.
Additional Rent: As defined in Section 3.1.2.
Additional Rent Commencement Date: As defined in Section 3.1.2.
Additional Charges: As defined in Section 3.2.
Additional Land: As defined in Section 9.3.
Affiliate: With respect to any Person (i) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (ii) any other Person that owns, beneficially, directly or
indirectly, five percent (5%) or more of the outstanding capital stock, shares
or equity interests of such Person, or (iii) any officer, director, employee,
general partner or trustee of such Person, or any other Person controlling,
controlled by, or under common control with, such Person (excluding trustees and
Persons serving in a fiduciary or similar capacity who are not otherwise an
Affiliate of such Person). For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction, of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
Affiliated Party Subordination Agreement: That certain Amended and
Restated Affiliated Party Subordination Agreement of even date by and among the
Lessee, the Guarantor, the Lessor and various Affiliates of the Lessor.
Agreement Regarding Related Lease Transactions: The Amended and
Restated Agreement Regarding Related Lease Transactions of even date, as amended
from time to time, between Lessee, Lessor and the Guarantor. Lessor and Lessee
anticipate that the Agreement Regarding Related Lease Transactions will be
amended from time to time in order to (a) include Affiliates of each of Lessor
and Lessee as parties thereto in connection with future transactions and (b)
include additional facilities within the scope of such related transactions and
acknowledge and agree that for all purposes under this Lease such amendments
shall be deemed to be included in this definition.
Annual Facility Upgrade Expenditure: The aggregate amount spent on
Upgrade Renovations during any Lease Year.
Appurtenant Agreements: Collectively, all instruments, documents and
other agreements that now or hereafter create any utility, access or other
rights or appurtenances benefiting or relating to the Leased Property.
Award: All compensation, sums or anything of value awarded, paid or
received on a total
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or partial Condemnation.
Asset Purchase Agreement: That certain Asset Purchase Agreement dated
as of February 12, 1997 by and between the Seller, the Guarantor and other
parties, as amended by a First Amendment to .Acquisition Agreement, dated March
25, 1997, and Second Amendment to Acquisition Agreement, dated April 15, 1997.
Asset Purchase Documents: Collectively, the Asset Purchase Agreement
and all other documents and instruments now or hereafter executed and/or
delivered in. connection therewith or pursuant thereto, but only to the extent
such Agreement, documents and instruments apply to the Leased Property and the
transactions contemplated by this Lease.
Bankruptcy Code: Subsection 365(h) of the United States Bankruptcy
Code, 11 U.S.C. ss.365(h), as the same may hereafter be amended and including
any successor provision thereto.
Base Rent: As defined in Section 3.1.1 and adjusted pursuant to
Sections 3.1.1.
Bond: The Industrial Development Revenue Bond in the original face
amount of $5,000,000.00 issued by Onondaga County Industrial Development Agency
titled "(Manlius Liberty Commons Project), Series 1993A" and dated October 13,
1993.
Bond-Related Obligations: Any and all duties, responsibilities or
obligations to be performed by the owner of the Leased Property under any
promissory note, agreement, certificate, instrument or other document issued to
evidence or secure in any way the Bond or the repayment of the Bond, including,
without limitation, (a) the Loan Agreement ("Loan Agreement"), dated as of
October 1, 1993, by and between Manlius Liberty Commons EDC, Onondaga County IDA
and Liberty Commons Associates, (b) the Building Loan Agreement ("Building Loan
Agreement"), dated as of October 1, 1993, by and between Manlius Liberty Commons
EDC, Onondaga County IDA, Liberty Commons Associates and Key Bank of New York,
(c) any of the promissory notes, mortgages or other instruments executed and
delivered in connection with either the Loan Agreement or the Building Loan
Agreement, and (d) the Mortgage, dated April _1997 from Manlius Liberty Commons
EDC, Onondaga County IDA, the Lessor and the Lessee, as mortgagors, to the
Village of Manlius, as mortgagee.
Business Day: Any day which is not a Saturday or Sunday or a public
holiday under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which the Lessor's depository bank is
located.
Capital Additions: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property in order to provide a functionally new
facility that is needed or used to provide services not previously offered, and
any expansion, construction, renovation or conversion or in order to (i)
increase the unit capacity of a Facility, (ii) change the
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<PAGE> 15
purpose for which such units are utilized and/or (iii) change the utilization of
any material portion of any of the Leased Improvements.
Capital Addition Cost: The cost of any Capital Addition made by the
Lessee whether paid for by the Lessee or the Lessor. Such cost shall include all
costs and expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, the Lessor.
Cash Collateral: As defined in Section 6.2.1.
Cash Flow: The Consolidated Net Income-(or Consolidated Net Loss),
arising solely from the operation of the Leased Property, before federal and
state income taxes for any period plus (i) the amount of the provision for
depreciation and amortization actually deducted on the books of the applicable
Person for the purposes of computing such Consolidated Net Income (or
Consolidated Net Loss) for the period involved, plus (ii) Rent and interest on
all other payments with respect to all Indebtedness and/or other obligations
(including, without limitation, management fees) which are fully subordinated to
the Lease Obligations pursuant to the Affiliated Party Subordination Agreement.
Casualty: As defined in Section 13.1.1.
Chattel Paper: As defined in the UCC.
Code: The Internal Revenue Code of 1986, as amended.
Collateral: All of the property in which security interests are granted
to the Lessor and the other Meditrust Entities pursuant to the Lease Documents
and the Related Party Agreements to secure the Lease Obligations, including,
without limitation, the Cash Collateral and the Receivables.
Commencement Date: As defined in Section 1.2.
Competitive Activity: As defined in Section 11.5.4.
Condemnation: With respect to the Leased Property or any interest
therein or right accruing thereto or use thereof (i) the exercise by a
Condemnor, whether by legal proceedings or otherwise, resulting in a Taking or
(ii) a voluntary sale or transfer by the Lessor to any Condemnor, either under
threat of Condemnation or Taking or while legal proceedings for a Taking are
pending.
Condemnor: Any public or quasi-public authority, or private corporation
or individual, having the power of condemnation.
Consolidated and Consolidating: When used with reference to any term
otherwise
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defined herein, means such term as applied to the consolidated and consolidating
accounts of the relevant Person and its Subsidiaries consolidated in accordance
with GAAP.
Consolidated Financials: For any fiscal year or other accounting period
for any Person and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP.
Consultants: Collectively, the architects, engineers, inspectors,
surveyors and other consultants that are engaged from time to time by the Lessor
to perform services for the Lessor in connection with this Lease.
Consumer Price Adjustment Factor: A fraction, the numerator of which is
the Consumer Price Index in effect as of first day of the Lease Year for which
the Annual Facility Upgrade Expenditure increase is being calculated and the
denominator of which is the Consumer Price Index in effect as of the
Commencement Date.
Consumer Price Index: The Consumer Price Index for Urban Wage Earners
and Clerical Workers, All Items-U.S. Cities Average (1982-84=100), published by
the Bureau of Labor Statistics, U.S. Department of Labor; provided, that, if the
compilation of the Consumer Price Index in its present form and calculated on
its present basis is discontinued or transferred to any other Governmental
Authority, then, the index most similar to the Consumer Price Index published by
the Bureau of Labor Statistics shall be used. If there is no such similar index,
a substitute index which is then generally recognized as being similar to the
Consumer Price Index shall be used, with such substitute index to be reasonably
selected by the Lessor and reasonably approved by the Lessee.
Contracts: All agreements (including, without limitation, Provider
Agreements and Resident Agreements), contracts, (including without limitation,
construction contracts, subcontracts, and architects' contracts,) contract
rights, warranties and representations, franchises, and records and books of
account benefiting, relating to or affecting the Leased Property or the
ownership, -construction, development, maintenance, management, repair, use,
occupancy, possession, or operation thereof, or the operation of any programs or
services in conjunction with the Leased Property and all renewals, replacement
and substitutions therefor, now or hereafter issued by or entered into with any
Governmental Authority, Accreditation Body or Third Party Payor or maintained or
used by any member of the Leasing Group or entered into by any member of the
Leasing Group with any third Person.
Current Assets: All assets of any Person which would, in accordance
with GAAP, be classified as current assets of a Person.
Current Liabilities: All liabilities of any Person which would, in
accordance with GAAP,
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be classified as current liabilities of a Person.
Current Management Agreement: The "Service Agreement" and "Home Care
Agreement" as each is defined in and modified by the Assignment and Assumption
Agreement, dated as of April 28, 1997, by and between the Lessee, the Current
Manager, Pioneer Liberty Square Company, LLC, Liberty Common Associates, and
Loretto Adult Community Inc.
Current Manager: Loretto Management Corporation and Brighton Management
Services, Inc.
Date of Taking: The date the Condemnor has the right to possession of
the property being condemned.
Declaration: As defined in Article 23.
Deposit Pledge Agreement: The pledge and security agreement so
captioned and dated as of even date herewith between the Lessee and the Lessor.
Documents: As defined in the UCC.
EDC Ground Lease: As defined in Section 1.1.
Encumbrance: As defined in Section 20.3.
Environmental Indemnity Agreement: The Amended and Restated
Environmental Indemnity Agreement of even date herewith by and among the Lessee,
the Guarantor and the Lessor.
Environmental Laws: As defined in the Environmental Indemnity
Agreement.
ERISA: The Employment Retirement Income Security Act of 1.974, as
amended.
Event of Default: As defined in Section 16.1.
Excess Gross Revenues: Gross Revenues for a calendar year less the
Gross Revenues for the immediately preceding calendar year.
Excluded Facilities: As defined in Section 11.5.4.
Expiration Date: As defined in Section 1.2.
Extended Terms: As defined in Section 1.3.
Facility: The eighty (80) unit, eighty-four (84) bed, fully licensed
(to the extent licensing is required by the State) assisted living facility
known as "Liberty Commons" and located in
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Manlius, New York, on the Land (together with related parking and other
amenities).
Failure to Operate: As defined in Section 16.1.
Failure to Perform: As defined in Section 16.1.
Fair Market Added Value: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by the Lessee had been
constructed.
Fair Market Value of the Capital Addition: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
Fair Market Value of the Leased Property: The fair market: value of the
Leased Property, including all Capital Additions, and including the Land and
all. other portions of the Leased Property, and (a) assuming the same is
unencumbered by this Lease, (b) determined in accordance with the appraisal
procedures set forth in Section 24.14 or in such other manner as shall be
mutually acceptable to the Lessor and the Lessee and (c) not taking into account
any reduction in value resulting from any Lien to which the Leased Property is
subject and which Lien the Lessee or the Lessor is otherwise required to remove
at or prior to closing of the transaction. However, the positive or negative
effect on the value of the Leased Property attributable to the interest rate,
amortization schedule, maturity date, prepayment provisions and other terms and
conditions of any Lien on the Leased Property which is not so required or agreed
to be removed shall be taken into account in determining the Fair Market Value
of the Leased Property. The Fair Market Value of the Leased Property shall be
determined as the overall value based on due consideration of the "income"
approach, the "comparable sales" approach and the "replacement cost" approach.
Fair Market Value of the Material Structural Work: The amount by which
the Fair Market Value of the Leased Property upon the completion of any
particular Material Structural Work exceeds the Fair Market Value of the Leased
Property just prior to the construction of the applicable Material Structural
Work.
Fee Mortgage: As defined in Section 20.3.
Fee Mortgagee: As defined in Section 20.3.
Financing Party: Any Person who is or may be participating with the
Lessor in any way in connection with the financing of any Capital Addition.
Financing Statements: Uniform Commercial Code financing statements
evidencing the security interests granted to the Lessor in connection with the
Lease Documents.
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Fiscal Quarter: Each of the three (3) month periods commencing on
January 1st, April 1st, July 1st and October 1st.
Fiscal Year: The twelve (12) month period from January 1st to December
31st.
Fixtures: As defined in Section 1.1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
General Intangibles: As defined in the UCC.
Governmental Authorities: Collectively, all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures, and
offices of any nature whatsoever of any government, quasi-government unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise and whether now or hereinafter in existence.
Gross Revenues: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly received or to be received by the Lessee, including,
without limitation, all resident revenues received or receivable for the use of,
or otherwise by reason of, all rooms, units and other facilities provided, meals
served, services performed, space or facilities subleased or goods sold on or
from the Leased Property and further -including, without limitation, except as
otherwise specifically provided below, any consideration received under any
subletting, licensing, or other arrangements with any Person relating to the
possession or use of the Leased Property and all revenues from all ancillary
services provided at or relating to the Leased Property; provide however, that
Gross Revenues shall not include non-operating revenues such as interest income
or gain from the sale of assets not sold in the ordinary course of business; and
provide , further, that there shall be excluded or deducted (as the case may be)
from such revenues:
(i) contractual allowances (relating to any period during
the Term of this Lease and thereafter until the Rent hereunder is paid
in full) for billings not paid by or received from the appropriate
Governmental Agencies or Third Party Payors,
(ii) allowances according to GAAP for uncollectible
accounts,
(iii) all proper resident billing credits and adjustments
according to GAAP relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts and
excise taxes and any tax based upon or measured by said Gross Revenues
which is added to or made a part of the amount billed to the resident
or other recipient of such services or goods, whether included in the
billing or stated separately, and
(v) deposits refundable to residents of the Facility.
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To the extent that the Leased Property is subleased or occupied by an
Affiliate of the Lessee, Gross Revenues calculated for all purposes of this
Lease (including, without limitation, the determination of the Additional Rent
payable under this Lease) shall include the Gross Revenues of such Sublessee
with respect to the premises demised under the applicable Sublease (i.e., the
Gross Revenues generated from the operations conducted on such subleased portion
of the Leased Property) and the rent received or receivable from such Sublessee
pursuant to such Subleases shall be excluded from Gross Revenues for all such
purposes. As to any Sublease between the Lessee and a non- Affiliate of the
Lessee, only the rental actually received by the Lessee from such non-Affiliate
shall be included in Gross Revenues.
Group One Acquisition Transaction Documents: As defined in the
Agreement Regarding Related Lease Transactions.
Group Two Acquisition Transaction Documents: As defined in the
Agreement Regarding Related Lease Transactions.
Guarantor: Alternative Living Services, Inc. and its successors and
assigns.
Guaranty: The Amended and Restated Guaranty of even date executed by
Guarantor in favor of the Lessor.
Hazardous Substances: As defined in the Environmental Indemnity
Agreement.
IDA Sublease: As defined in Section 1.1.
Impositions: Collectively, all taxes (including, without limitation,
all capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts, transaction privilege, rent or
similar taxes), payments due under the Payment In Lieu of Tax Agreement, dated
as of September 1, 1993 between Pioneer Liberty Square Company, LLC and the
Village of Manlius, payments due under the Agreement, dated June 2, 1993 by and
between Pioneer Liberty Square Company and the Village of Manlius (the so-called
"Impact Fee Agreement"), assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term), ground rents, water and sewer rents, water charges or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), transfer taxes and
recordation taxes imposed as a result of the conveyance of the Land to the
Lessor (and/or the conveyance of the Leased Property to the Lessee pursuant to
the terms of this Lease), this Lease or any extensions hereof, and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of
either or both of the Leased Property and the Rent (including all interest and
penalties thereon due to any failure in payment by the Lessee), which at any
time prior to, during or in respect of the Term hereof and thereafter until the
Leased Property is surrendered to the Lessor as required by the terms of this
Lease, may be assessed or imposed on or in respect of or be a Lien upon (a) the
Lessor or the
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Lessor's interest in the Leased Property, (6) the Leased Property or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, sales from, or activity conducted on, or in
connection with, the Leased Property or the leasing or use of the Leased
Property. Notwithstanding the foregoing, nothing contained in this Lease shall
be construed to require the Lessee to pay (1) any tax based on net income
(whether denominated as a franchise or capital stock or other tax) imposed on
the Lessor or any other Person, except the Lessee or its successors, (2) any net
revenue tax of the Lessor or any other Person, except the Lessee and its
successors, (3) any tax imposed with respect to the sale, exchange or other
disposition by the Lessor of the Leased Property or the proceeds thereof, (4)
any tax imposed with respect to any Fee Mortgage or any Fee Mortgagee, (5)
except as expressly provided elsewhere in this Lease, any principal or interest
on any Encumbrance on the Leased Property, or (6) any portion of assessments
which are assessed during the Term of this Lease and amortized over a period
which extends beyond the Term of this Lease provided the Lessee (and not the
Lessor) shall be responsible for that portion of the amortized assessment due
and owing during the Term and any and all finance charges and/or penalties which
accrue as a result of amortizing any such assessments, including, without
limitation, any finance charges and/or penalties (other than penalties which
accrue as a result of late payment after the expiration of the Term of this
Lease) which accrue after the expiration of the Term of this Lease; provide ,
however, the provisos set forth in clauses (1) and (2) of this sentence shall
not be applicable to the extent that any tax, assessment, tax levy or charge
which the Lessee is obligated to pay pursuant to the first sentence of this
definition and which is in effect at any time during the Term hereof is totally
or partially repealed, and a tax, assessment, tax levy or charge set forth in
clause (1) or (2) is levied, assessed or imposed expressly in lieu thereof. In
computing the amount of any franchise tax or capital stock tax which may be or
become an Imposition, the amount payable by the Lessee shall be equitably
apportioned based upon all properties owned by the Lessor that are located
within the particular jurisdiction subject to any such tax. Indebtedness: The
total of all obligations of a Person, whether current or long-term, which in
accordance with GAAP, would be included as liabilities upon such Person's
balance sheet at the date as of which Indebtedness is to be determined.
Indemnified Parties: As defined in Section 12.2.2.
Index: The rate of interest of actively traded marketable United States
Treasury Securities bearing a fixed rate of interest adjusted for a constant
maturity of ten (10) years as calculated by the Federal Reserve Board.
Initial Term: As defined in Section 1.2.
Instruments: As defined in the UCC.
Insurance Requirements: All terms of any insurance policy required by
this Lease, all requirements of the issuer of any such policy with respect to
the Leased Property and the activities conducted thereon and the requirements of
any insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
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JCAHO: The Joint Commission on Accreditation of Health Care
Organizations.
Land: As defined in Article 1.
Lease: As defined in the preamble of this Lease.
Lease Default: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace and/or cure periods under
this Lease and/or any of the other Lease Documents.
Lease Documents: Collectively, this Lease, the Guaranty, the Security
Agreement, the Deposit Pledge Agreement, the Pledge Agreement, the Agreement
Regarding Related Lease Transactions, the Permits Assignment, the Financing
Statements, the Affiliated Party Subordination Agreement, the Environmental
Indemnity Agreement, the other Facility Lease Agreements referred to in the
Agreement Regarding Related Lease Transactions, and any and all other
instruments, documents, certificates or agreements now or hereafter (i) executed
or furnished by any member of the Leasing Group in connection with the
transactions evidenced by this Lease and/or any of the foregoing documents
and/or (ii) evidencing or securing any of the Lessee's obligations. relating to
the Leased Property, including, without limitation, the Lessee's obligations
hereunder.
Lease Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than the Lessor's
obligations) under this Lease and the other Lease Documents.
Lease Year: A twelve-month period ending on December 31 of each year;
provided, that the first Lease Year shall begin on the Commencement Date and
shall end on December 31, 1997.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Commitment Fee: NINETY-ONE THOUSAND TWO HUNDRED AND 00/100
DOLLARS ($91,200.00).
Leasing Group: Collectively, the Lessee, the Guarantor, any Sublessee
which is an Affiliate of the Lessee or the Guarantor and any Manager which is an
Affiliate of the Lessee or the Guarantor.
Legal Requirements: Collectively, all statutes, ordinances, by-laws,
codes, rules, regulations, restrictions, orders, judgments, decrees and
injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision, and other land use and assisted living licensing
statutes, ordinances, by-laws, codes, rules and regulations), whether now or
hereafter enacted, promulgated or issued by any Governmental Authority,
Accreditation Body
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or Third Party Payor affecting any member of the Leasing Group and relating to
the Leased Property or the ownership, construction, development, maintenance,
management, repair, use, occupancy, possession or operation thereof or the
operation of any programs or services in connection with the Leased Property,
including, without limitation, any of the foregoing which may (i) require
repairs, modifications or alterations in or to the Leased Property, (ii) in any
way affect (adversely or otherwise) the use and enjoyment of the Leased Property
or (iii) require the assessment, monitoring, clean-up, containment, removal,
remediation or other treatment of any Hazardous Substances on, under or from the
Leased Property. Without limiting the foregoing, the term Legal Requirements
includes all Environmental Laws and shall also include all Permits and Contracts
issued or entered into by any Governmental Authority, any Accreditation Body
and/or any Third Party Payor and all Permitted Encumbrances, but shall exclude
any non-binding or non-mandatory rules or guidelines promulgated by an
Accreditation Body or Third Party Payor.
Lessee: As defined in the preamble of this Lease and its successors and
assigns.
Lessee's Election Notice: As defined in Section 14.3.
Lessor: As defined in the preamble of this Lease and its successors and
assigns.
Liberty Commons Sub-sublease: As defined in Section 1.1.
Lien: With respect to any real or personal property, any mortgage, deed
of trust, easement, restriction, lien, pledge, collateral assignment,
hypothecation, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment or other encumbrance of any kind in
respect of such property, whether or not choate, vested or perfected.
Limited Parties: As defined in Section 11.5.4; provide , however, in no
event shall the term Limited Parties include any Person in its capacity as a
shareholder of a public entity, unless such shareholder is a member of the
Leasing Group or an Affiliate of any member of the Leasing Group.
Managed Care Plans: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
Management Agreement: Any agreement, whether written or oral, between
the Lessee or any Sublessee and any other Person pursuant to which the Lessee or
such Sublessee provides any payment, fee or other consideration to any other
Person to operate or manage the Facility.
Manager: Any Person who has entered into a Management Agreement with
the Lessee or any Sublessee.
Material Structural Work: Any (i) structural alteration, (ii)
structural repair or (iii) structural renovation to the Leased Property that
would require (a) the design and/or involvement of a structural engineer and/or
architect and/or (b) the issuance of a Permit.
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Medicaid: The medical assistance program established by Title XIX of
the Social Security Act (42 USC ss.ss. 1396 et seq.) and any statute succeeding
thereto.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.ss. 1395 et
sect.) and any statute succeeding thereto.
Meditrust: As defined in Article 23.
Meditrust/ALS Transaction Documents: As defined in the Agreement
Regarding Related Lease Transactions, including Meditrust/ALS Transaction
Documents which are by implication added to, or deleted from, such definition as
EXHIBITS A or B to the Agreement Regarding Related Lease Transactions is amended
or modified from time to time in order to reflect the addition of new facilities
or the removal of one or more facilities.
Meditrust - Entities: Collectively, Meditrust, the Lessor and any other
Affiliate of the Lessor which may now or hereafter be a party to any Related
Party Agreement.
Meditrust Investment: The sum of (i) the Original Meditrust Investment
plus (ii) the aggregate amount of all Subsequent Investments.
Monthly Deposit Date: As defined in Section 4.6.1.
Net Income (or Net Loss): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP;
it being expressly understood that any debt service paid by the Lessee on the
Bond-Related Obligations or any indebtedness which may refinance the
Bond-Related Obligations shall be calculated as an expense for purposes of
determining the Lessee's Net Income in connection with the Facility.
Obligations: Collectively, the Lease Obligations and the Related Party
Obligations.
Offer: As defined in Section 18.1.
Offered Property: As defined in Section 18.1.
Officer's Certificate: A certificate of the Lessee signed on behalf of
the Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of the Lessee, or another officer authorized to so
sign by the Board of Directors or By-Laws of the Lessee, or any other Person
whose power and authority to act has been authorized by delegation in writing by
any of the Persons holding the foregoing offices.
Original Meditrust Investment: NINE MILLION ONE HUNDRED TWENTY THOUSAND
AND 00/100 DOLLARS ($9,120,000.00).
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Other Permitted Uses: To the extent the Lessee elects, in its sole
discretion, to engage in same and then only if permitted under Legal
Requirements and under Insurance Requirements, and so long as the same do not
detract in any material manner from the Primary Intended Use, (i) medical or
dental offices or clinics, (ii) medical or dental laboratories, (iii) day care
center, (iv) hospitals, (v) pharmacy, (vi) medical services and physical
therapy, (vii) florists and card shops which do not have a separate entrance,
(viii) ancillary parking and (ax) beauty salons, and (x) other similar ancillary
uses currently being conducted at the Facility.
Overdue Rate: On any date, a rate of interest per annum equal to the
greater of (i) a variable rate of interest per annum equal to one hundred twenty
percent (120%) of the Prime Rate, or (ii) eighteen percent (18%) per annum;
provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by the Lessor.
PBGC: Pension Benefit Guaranty Corporation.
Permits: Collectively, all permits, licenses, approvals,
qualifications, rights, variances, permissive uses, accreditations,
certificates, certifications, consents, agreements, contracts, contract rights,
franchises, interim licenses, permits and other authorizations of every nature
whatsoever required by, or issued under, applicable Legal Requirements
benefiting, relating or affecting the Leased Property or the construction,
development, maintenance, management, use or operation thereof, or the operation
of any programs or services in conjunction with the Leased Property and all
renewals, replacements and substitutions therefor, now or hereafter required or
issued by any Governmental Authority, Accreditation Body or Third Party Payor to
any member of the Leasing Group, or maintained or used by any member of the
Leasing Group, or entered into by any member of the Leasing Group with any third
Person.
Permits Assignment: The Amended and Restated Collateral Assignment of
Permits, Licenses and Contracts of even date granted by the Lessee to the
Lessor.
Permitted Encumbrances: As defined in Section 10.1.17.
Permitted Prior Security Interests: As defined in Section 6.1.2.
Person: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
Plans and Specifications: As defined in Section 13.1.2.
Pledge Agreement: The Amended and Restated Stock Pledge Agreement of
even date by and between the Guarantor, the Lessee and the Lessor.
Primary Intended Use: The use of the Facility as an assisted living
facility with eighty
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(80) assisted living units and such ancillary uses as are permitted by law and
may be necessary in connection therewith or incidental thereto.
Prime Rate: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by the Lessor.
Principal Place of Business: As defined in Section 10.1.28.
Proceeds: As defined in the UCC.
Provider Agreements: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of the
Lessee or any Sublessee in connection with the operation of the Facility
relating to any right of payment or other claim arising out of or in connection
with the Lessee's or such Sublessee's participation in any Third Party Payor
Program.
Purchaser: As defined in Section 11.5.4.
Purchase Option: As defined in Section 18.4.1.
Purchase Option Date: As defined in Section 18.4.2.
Purchase Price: As defined in Section 18.4.4.
Receivables: Collectively, all (i) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (ii) rights to payment for
goods sold or leased or services rendered by the Lessee or any other party in
connection with the operation of the Facility, whether now in existence or
arising from time to time hereafter and whether or not yet earned by
performance, including, without limitation, obligations evidenced by an account,
note, contract, security agreement, chattel paper, or other evidence of
indebtedness.
Reference Bank: Fleet Bank of Connecticut, N.A.
Related Leases: Collectively, those Facility Leases relating to each of
the facilities listed on EXHIBITS A and B of the Agreement Regarding Related
Lease Transactions, as such Exhibits may be amended or modified from time to
time in order to reflect the addition of new facilities or the removal of one or
more facilities.
Related Parties: Collectively, each Person that may now or hereafter be
a party to any Related Party Agreement other than the Meditrust Entities.
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Related Party Agreement: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation, including without
limitation, the Meditrust/ALS Transaction Documents.
Related Party Default: The occurrence of a default or breach of
condition continuing beyond the expiration of any applicable notice and grace
and cure periods, if any, under the terms of any Related Party Agreement.
Related Party Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, the Lessor or any of the other Meditrust Entities by the Lessee or
any other member of the Leasing Group or any of their respective Affiliates;
whether such indebtedness, covenants, liabilities, obligations, agreements
and/or undertakings are direct or indirect, absolute or contingent, liquidated
or unliquidated, due or to become due, joint, several or joint and several,
primary or secondary, now existing or hereafter arising, including, without
limitation, the obligations under the Meditrust/ALS Transaction Documents.
Rent: Collectively, the Base Rent, the Additional Rent, the Additional
Charges and all other sums payable under this Lease and the other Lease
Documents.
Rent/Adjustment Date: The first day of each Extended Term.
Rent Adjustment Rate: Three hundred thirty (330) basis points over the
Index.
Rent Coverage Ratio: The ratio of (i) Cash Flow for each applicable
period to (ii) the total of all Rent paid or payable during such period or
accrued for such period.
Rent Insurance Proceeds: As defined in Section 13.8.
Rent Shortfall: As defined in Section 3.1.
Rent Surplus: As defined in Section 3.1.
Resident Agreements: Collectively, all Subleases now or hereafter
executed or entered into by or on behalf of any Person allowing such Person to
reside at the Facility.
Retainage: As defined in Section 13.1.3.
Security Agreement: The Security Agreement as of even date herewith
between the Lessee and the Lessor.
Seller: Collectively, Pioneer Liberty Square Company, LLC and Liberty
Commons Associates, LLC.
State: The state or commonwealth in which the Leased Property is
located.
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Stated Amount: An amount equal to three (3) months Base Rent during the
first Lease Year.
Sublease: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements, rentals of other facilities
of the Leased Property and all other occupancy agreements of every kind and
nature (including all Resident Agreements), whether oral or in writing, now in
existence or subsequently entered into by the Lessee, encumbering or affecting
the Leased Property.
Sublessee: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but excluding any resident of the Facility
under any Resident Agreement.
Subsequent Investments: The aggregate amount of all sums expended and
liabilities incurred by the Lessor in connection with Capital Additions.
Subsidiary or Subsidiaries: With respect to any Person, any corporation
or other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50%) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
Superior Lease Obligations: Any and all duties, obligations and
responsibilities to be performed or fulfilled by the holder of the
sub-subleasehold interest under the Liberty Commons Sub-sublease or otherwise
required to be performed or fulfilled by the Lessor under either the EDC Ground
Lease or the IDA Sublease.
Taking: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property.
Tangible Net Worth: An amount determined in accordance with GAAP equal
to the total assets of any Person, excluding the total intangible assets of such
Person, minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
Tangible Personal Property: All vehicles, machinery, equipment,
furniture, furnishings, movable walls or partitions, computers or trade
fixtures, goods, inventory, supplies, and other personal property owned or
leased (pursuant to equipment leases) by the Lessee and used in connection with
the operation of the Leased Property.
Term: Collectively, the Initial Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the
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provisions hereof.
Third Party Payor Programs: Collectively, all third party payor
programs in which the Lessee or any Sublessee presently or in the future may
participate, including without limitation, Medicare, Medicaid, Blue Cross and/or
Blue Shield, Managed Care Plans, other private insurance plans and employee
assistance programs.
Third Party Payors: Collectively, Medicare, Medicaid, Blue Cross and/or
Blue Shield, private insurers and any other Person which presently or in the
future maintains Third Party Payor Programs.
UCC: The Uniform Commercial Code as in effect from time to time in the
State.
Unavoidable Delays: Delays due to strikes, lockouts, inability to
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto.
United States Treasury Securities: The uninsured treasury securities
issued by the United States Federal Reserve Bank.
Unsuitable For Its Primary Intended Use: As used anywhere in this
Lease, the term "Unsuitable For Its Primary Intended Use" shall mean that, by
reason of Casualty, or a partial or temporary Taking by Condemnation, as jointly
determined by the Lessor and the Lessee in good faith, the Facility cannot be
operated on a commercially practicable basis for the Primary Intended Use,
taking into account, among other relevant factors, the number of usable units
affected by such Casualty or partial or temporary Taking.
Upgrade Renovations: As defined in Section 8.1.4.
Work: As defined in Section 13.1.1.
Work Certificates: As defined in Section 13.1.3.
2.2 Rules of Construction. The following rules of construction shall
apply to the Lease and each of the other Lease Documents: (a) references to
"herein", "hereof' and "hereunder" shall be deemed to refer to this Lease or the
other applicable Lease Document, and shall not be limited to the particular text
or section or subsection in which such words appear; (b) the use of any gender
shall include all genders and the singular number shall include the plural and
vice versa as the context may require; (c) references to the Lessor's attorneys
shall be deemed to include, without limitation, special counsel and local
counsel for the Lessor; (d) reference to attorneys' fees and expenses shall be
deemed to include only actual attorneys' fees reasonably incurred and only
actual costs reasonably incurred for administrative, paralegal and other support
staff; (e) references to Leased Property shall be deemed to include references
to all
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of the Leased Property and references to any portion thereof; (f) references to
the Lease Obligations shall be deemed to include references to all of the Lease
Obligations and references to any portion thereof; (g) references to the
Obligations shall be deemed to include references to all of the Obligations and
references to any portion thereof; (h) the term "including", when following any
general statement, will not be construed to limit such statement to the specific
items or matters as provided immediately following the term "including" (whether
or not non-limiting language such as "without limitation" or "but not limited
to" or words of similar import are also used), but rather will be deemed to
refer to all of the items or matters that could reasonably fall within the
broadest scope of the general statement; (i) any requirement that financial
statements be Consolidated in form shall apply only to such financial statements
as relate to a period during any portion of which the relevant Person has one or
more Subsidiaries; (j) all accounting terms not specifically defined in the
Lease Documents shall be construed in accordance with GAAP; and (k) all exhibits
annexed to any of the Lease Documents as referenced therein shall be deemed
incorporated in such Lease Document by such annexation and/or reference.
ARTICLE 3
RENT
3.1 Rent for Land, Leased Improvements, Related Rights and
Fixtures. The Lessee will pay to the Lessor, in lawful money of the United
States of America, at the Lessor's address set forth herein or at such other
place or to such other Person as the Lessor from time to time may designate in
writing not less than five (5) Business Days in advance, rent for the Leased
Property, as follows.
3.1.1 Base Rent: The Lessee shall pay to the Lessor a base
rent (the "Base Rent") per annum that is equal to EIGHT HUNDRED
TWENTY-NINE THOUSAND EIGHT HUNDRED SIXTY-THREE AND 96/100 DOLLARS
($829,863.96), subject to adjustment as provided herein, payable in
advance in equal, consecutive monthly installments due on the first day
of each calendar month, commencing on June 1, 1997, provided that from
May 5, 1997 through and including May 31, 1997 the Lessee shall pay to
the Lessor a prorated portion of the Base Rent; and provided further
that on each Rent Adjustment Date, the Base Rent shall be adjusted to
equal the greater of (i) the then current Base Rent or (ii) an amount
equal to the Meditrust Investment multiplied by the Rent Adjustment
Rate then in effect on such Rent Adjustment Date.
3.1.2 Additional Rent: In addition to the Base Rent, the
Lessee shall pay to the Lessor additional rent (the "Additional Rent")
which shall equal, in each calendar year, the sum of (i) the Additional
Rent payable in the immediately preceding calendar year plus (ii)
twelve percent (12%) of Excess Gross Revenues for the then current
calendar year during the Tenn. Additional Rent shall accrue commencing
on May 1, 1998, and shall be payable during the Term, quarterly in
arrears, commencing on July 20, 1998 ("Additional Rent Commencement
Date") and there shall be an annual reconciliation as provided in
Section 3.2 below. Notwithstanding the foregoing, in no event shall any
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increase to Additional Rent for any calendar year exceed two and
one-half percent (2.5%) of the total of Base Rent and Additional Rent
payable for the immediately preceding calendar year.
Additional Rent payable hereunder for any fractional calendar
year shall be prorated so that such Additional Rent shall equal the
product of (x) the Additional Rent payable with respect to the
immediately preceding calendar year ~l an amount equal to twelve
percent (12%) of the annualized Excess Gross Revenues for the
applicable fractional calendar year multiplied by (y) a fraction (the
"Proration Factor"), the numerator of which is the number of days in
the applicable fractional calendar year and the denominator of which is
365; provided, however, that, in no event: shall the Additional Rent
payable during (A) the calendar year in which the Additional Rent
Commencement Date occurs exceed the product of two and one-half percent
(2.5%) of the total of Base Rent payable with respect to the
immediately preceding calendar year multiplied by the applicable
Proration Factor and (B) any other fractional calendar year increase by
more than the product of two and one-half percent (2.5%) of the total
of Base Rent and Additional Rent payable with respect to the
immediately preceding calendar year multiplied by the applicable
Proration Factor.
3.2 Calculation and Payment of Additional Rent; Annual
Reconciliation.
3.2.1 Estimates and Payments. Commencing on July 20, 1998, Additional
Rent to be paid during each calendar year during the Term shall be paid
quarterly in arrears (in equal installments on the 20th day of April, July,
October and January) based on the actual increase in Gross Revenues over the
comparable fiscal quarter for the immediately preceding calendar year, to be
adjusted at the end of each such year based on the actual Excess Gross Revenues
calculated for that calendar year. Additional Rent due for any portion of any
calendar year shall be prorated accordingly.
3.2.2 Annual Statement. In addition, on or before the first day of
April of each year following any calendar year for which Additional Rent is
payable hereunder, the Lessee shall deliver to the Lessor an Officer's
Certificate, reasonably acceptable to the Lessor and certified by the chief
financial officer of the Lessee, setting forth the Gross Revenues for the
immediately preceding calendar year.
3.2.3 Deficits. If the Additional Rent, as finally determined for any
calendar year (or portion thereof), exceeds the sum of the quarterly payments of
Additional Rent previously paid by the Lessee with respect to said calendar
year, within thirty (30) days after such determination is required to be made
hereunder, the Lessee shall pay such deficit to the Lessor and, if the deficit
exceeds five percent (5%) of the Additional Rent which was previously paid to
the Lessor with respect to said calendar year, then the Lessee shall also pay
the Lessor interest on such deficit at the Overdue Rate from the applicable
quarterly date that such payment should have originally been made by the Lessee
to the date that the Lessor receives such payment.
3.2.4 Overpayments. If the Additional Rent, as finally determined for
any calendar year
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(or portion thereof), is less than the amount previously paid with respect
thereto by the Lessee, and if no Lease Default exists, the Lessee shall notify
the Lessor either (a) to pay to the Lessee an amount equal to such difference or
(b) to grant the Lessee a credit against Additional Rent next coming due in the
amount of such difference.
3.2.5 Final Determination. The obligation to pay Additional Rent shall
survive the expiration or earlier termination of the Term (as to Additional Rent
payments that are due and payable with respect to periods prior to the
expiration or earlier termination of the Term and during any periods that the
Lessee remains in possession of the Leased Property), and a final
reconciliation, taking into account, among other relevant adjustments, any
contractual allowances which related to Gross Revenues that accrued prior to the
date of such expiration or earlier termination, but which have been determined
to be not payable. The Lessee's good faith best estimate of the amount of any
unresolved contractual allowances shall be made not later than two (2) years
after said expiration or termination date. Within sixty (60) days after the
expiration or earlier termination of the Term, the Lessee shall advise the
Lessor of the Lessee's best estimate of the approximate amount of such
adjustments, which estimate shall not be binding on the Lessee or have any legal
effect whatsoever.
3.2.6 Best Efforts To Maximize. The Lessee further covenants that the
operation of the Facility shall be conducted in a manner consistent with the
prevailing standards and practices recognized in the assisted living industry as
those customarily utilized by first class business operations. Subject to any
applicable Legal Requirements, the members of the Leasing Group shall use their
best efforts to maximize the Facility's Gross Revenues.
3.3 Confirmation and Audit of Additional Rent.
3.3.1 Maintain Accounting Systems. The Lessee shall utilize, or cause
to be utilized, an accounting system for the Leased Property in accordance with
usual and customary practices in the assisted living industry and in accordance
with GAAP which will accurately record all Gross Revenues. The Lessee shall
retain, for at least three (3) years after the expiration of each calendar year
(and in any event until the final reconciliation described in Section 3.2 above
has been made), adequate records conforming to such accounting system showing
all Gross Revenues for such calendar year.
3.3.2 Audit By Lessor. The Lessor, at its own expense except as
provided hereinbelow, shall have the right from time to time to have its
accountants or representatives audit the information set forth in the Officer's
Certificate referred to in Section 3.2 and in connection with such audits, to
examine the Lessee's records with respect thereto (including supporting data,
income tax and sales tax returns), subject to any prohibitions or limitations on
disclosure of any such data under applicable law or regulations, including
without limitation, any duly enacted "Patients' Bill of Rights" or similar
legislation, including such limitations as may be necessary to preserve the
confidentiality of any Facility-patient relationship and any physician-patient
privilege.
3.3.3 Deficiencies and Overpayments. If any such audit discloses a
deficiency in the
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reporting of Gross Revenues and either the Lessee agrees with the result of such
audit or the matter is compromised, the Lessee shall forthwith pay to the Lessor
the amount of the deficiency in Additional Rent which would have been payable by
it had such deficiency in reporting Gross Revenues not occurred, as finally
agreed or determined, together with interest on the Additional Rent which should
have been payable by it, calculated at the Overdue Rate, from the date when said
payment should have been made by the Lessee to the date that the Lessor receives
such payment. Notwithstanding anything to the contrary herein, with respect to
any audit that is commenced more than two (Z) years after the date Gross
Revenues for any calendar year are reported by the Lessee to the Lessor, the
deficiency, if any, with respect to Additional Rent shall bear interest as
permitted herein only from the date such determination of deficiency is made,
unless such deficiency is the result of gross negligence or willful misconduct
on the part of the Lessee (or any Affiliate thereof). If any audit conducted for
the Lessor pursuant to the provisions hereof discloses that (a) the Gross
Revenues actually received by the Lessee for any calendar year exceed those
reported by the Lessee by more than five percent (5%), the Lessee shall pay the
reasonable cost of such audit and examination or (b) the Lessee has overpaid
Additional Rent, and if no Lease Default exists, the Lessor shall so notify the
Lessee and the Lessee shall direct the Lessor either (i) to refund the
overpayment to the Lessee or (ii) grant a credit against Additional Rent next
coming due in the amount of such difference.
3.3.4 Survival. The obligations of the Lessor and the Lessee
contained in this Section shall survive the expiration or earlier
termination of this Lease.
3.4 Additional Charges. Subject to the rights to contest as set forth
in Article 15, in addition to the Base Rent and the Additional Rent, (a) the
Lessee will also pay and discharge as and when due and payable all Impositions,
all amounts, liabilities and obligations under the Appurtenant Agreements due
from or payable by the owner of the Leased Property, all amounts, liabilities
and obligations under the Permitted Encumbrances due from or payable by the
owner of the Leased Property and all other amounts, liabilities and obligations
which the Lessee assumes or agrees to pay under this Lease, and (b) in the event
of any failure on the part of the Lessee to pay any of those items referred to
in clause (a) above, the Lessee will also promptly pay and discharge every fine,
penalty, interest and cost which may be added for non-payment or late payment of
such items (the items referred to in clauses (a) and (b) above being referred to
herein collectively as the "Additional Charges"), and the Lessor shall have all
legal, equitable and contractual rights, powers and remedies provided in this
Lease, by statute or otherwise, in the case of non-payment of the Additional
Charges, as well as the Base Rent and the Additional Rent. To the extent that
the Lessee pays any Additional Charges to the Lessor pursuant to any requirement
of this Lease, the Lessee shall be relieved of its obligation to pay such
Additional Charges to any other Person to which such Additional Charges would
otherwise be due, and the Lessor shall be obligated to pay such Additional
Charges to any Person to whom such Additional Charges are due promptly and prior
to any additional costs or expenses being incurred.
3.5 Leasing Commitment Fee: The Lessee shall pay to the Lessor the
Leasing Commitment Fee simultaneously with the execution of this Lease;
provided, however, that, at the Lessor's option, the Leasing Commitment Fee
shall be held in an escrow account established with a Person designated by the
Lessor pursuant to an escrow arrangement satisfactory to the
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Lessor, with interest thereon benefiting the Lessor. If the Lessor exercises its
option to require that the Leasing Commitment Fee be held in such an escrow
account (a) the Leasing Commitment Fee shall be disbursed from said escrow
account only upon the joint instructions of the Lessee and the Lessor (which
instructions from the Lessee shall be immediately given upon the request of the
Lessor) and in no event shall the Leasing Commitment Fee be disbursed therefrom,
in whole or in part, unless and until so requested by the Lessor and (b) the
Lessor shall bear the risk of loss of or misappropriation of the Leasing
Commitment Fee by such escrow agent.
3.6 Net Lease. The Rent shall be paid absolutely net to the
Lessor, so that this Lease shall yield to the Lessor throughout the Term the
full amount of the installments of Base Rent, the Additional Rent and the
payments of Additional Charges (it being understood, however, that certain
Additional Charges are required to be paid directly to some third party other
than the Lessor).
3.7 No Lessee Termination or Offset.
3.7.1 No Termination. Except as may be otherwise specifically and
expressly provided in Article 13 or Article 14 of this Lease, the
Lessee, to the extent not prohibited by applicable law, shall remain
bound by this Lease in accordance with its terms and shall neither take
any action without the consent of the Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent,
nor shall the respective obligations of the Lessor and the Lessee be
otherwise affected by reason of (a) any Casualty or any Taking of the
Leased Property, (b) the lawful or unlawful prohibition of, or
restriction upon, the Lessee's use of the Leased Property or the
interference with such use by any Person (other than the Lessor, except
to the extent permitted hereunder) or by reason of eviction by
paramount title; (c) any claim that the Lessee has or might have
against the Lessor, (d) any default or breach of any warranty by the
Lessor or any of the other Meditrust Entities under this Lease, any
other Lease Document or any Related Party Agreement, (e) any
bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding up or other proceedings affecting the
Lessor or any assignee or transferee of the Lessor or (f) any other
cause whether similar or dissimilar to any of the foregoing, other than
a discharge of the Lessee from any of the Lease Obligations as a matter
of law.
3.7.2 Waiver. The Lessee, to the fullest extent not prohibited by
applicable law, hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it
by law to (a) modify, surrender or terminate this Lease or quit or
surrender the Leased Property or (b) entitle the Lessee to any
abatement, reduction, suspension or deferment of the Rent or other sums
payable by the Lessee hereunder, except as otherwise specifically and
expressly provided in this Lease.
3.7.3 Independent Covenants. The obligations of the Lessor and
the Lessee hereunder shall be separate and independent covenants and
agreements and the Rent and
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all other sums payable by the Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be
terminated pursuant to the express provisions of this Lease or (except
in those instances where the obligation to pay expressly survives the
termination of this Lease) by termination of this Lease other than by
reason of an Event of Default.
3.8 Abatement of Rent Limited. There shall be no abatement of Rent on
account of any Casualty, Taking or other event, except that in the event of a
partial Taking or a temporary Taking as described in Section 14.3 or in the
event of a Casualty described in Section 13.1.1, the Base Rent shall be abated
as follows: (a) in the case of such a partial Taking, the Meditrust Investment
shall be reduced for the purposes of calculating Base Rent pursuant to Section
3.1 by subtracting therefrom, as applicable, the net amount of the Award
received by the Lessor; (b) in the case of such a temporary Taking, by reducing
the Base Rent for the period of such a temporary Taking, by the net amount of
the Award received by the Lessor; and (c) in the event of a Casualty which is
not the result of the gross negligence or willful misconduct of any member of
the Leasing Group and which the Lessee is proceeding to restore in. accordance
with the provisions of this Lease, by reducing the Base Rent during the period
the Lessee is unable to use the Leased Property for the Primary Intended Use by
the net amount of rent loss and/or business interruption insurance received by
the Lessor.
For the purposes of this Section 3.8, the "net amount of the Award
received by the Lessor" shall mean the Award paid to the Lessor on account of
such Taking, minus all costs and expenses incurred by the Lessor in connection
therewith, and minus any amounts paid to or for the account of the Lessee to
reimburse for the costs and expenses of reconstructing the Facility following
such Taking in order to create a viable and functional Facility under all of the
circumstances.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES;
INSURANCE PAYMENTS
4.1 Payment of Impositions.
4.1.1 Lessee To Pay. Subject to the provisions of Section 4.1.2
and Article 15, the Lessee will pay or cause to be paid all Impositions
before any fine, penalty, interest or cost may be added for
non-payment, such payments to be made directly to the taxing authority
where feasible, and the Lessee, upon request by the Lessor, will
promptly furnish the Lessor copies of official receipts or other
satisfactory proof evidencing payment not later than the last day on
which the same may be paid without penalty or interest. The Lessor
shall promptly forward to the Lessee for payment any and all bills or
invoices it receives with respect to Impositions.
4.1.2 Installment Elections. If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or
not interest shall accrue on the
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unpaid balance of such Imposition), the Lessee may exercise the option
to pay the same (and any accrued interest on the unpaid balance of such
imposition) in installments and, in such event, shall pay such
installments during the Term hereof (subject to the Lessee's right to
contest pursuant to the provisions of Section 4.1.5 below) as the same
respectively become due and before any fine, penalty, premium, further
interest or cost may be added thereto.
4.1.3 Returns and Reports. The Lessor, at its expense, shall,
to the extent permitted by applicable law, prepare and file all tax
returns and reports as may be required by Governmental Authorities in
respect of the Lessor's net income, gross receipts, franchise taxes and
taxes on its capital stock, and the Lessee, at its expense, shall, to
the extent permitted by applicable laws and regulations, prepare and
fine all other tax returns and reports in respect of any Imposition as
may be required by Governmental Authorities. The Lessor and the Lessee
shall, upon request of the other, provide such data as is maintained by
the party to whom the request is made with respect to the Leased
Property as may be necessary to prepare any required returns and
reports. In the event that any Governmental Authority classifies any
property covered by this Lease as personal property, the Lessee shall
file all personal property tax returns in such jurisdictions where it
may legally so file. The Lessor, to the extent it possesses the same,
and the Lessee, to the extent it possesses the same, will provide the
other party, upon request, with cost and depreciation records necessary
for filing returns for any portion of Leased Property so classified as
personal property. Where the Lessor is legally required to file
personal property tax returns, if the Lessee notifies the Lessor of the
obligation to do so in each year at least thirty (30) days prior to the
date any protest must be filed, the Lessee will be provided with copies
of assessment notices so as to enable the Lessee to file a protest.
4.1.4 Refunds. If no Lease Default shall have occurred and be
continuing, any refund due from any taxing authority in respect of any
Imposition paid by the Lessee shall be paid over to or retained by the
Lessee. If a Lease Default shall have occurred and be continuing, at
the Lessor's option, such funds shall be paid over to the Lessor and/or
retained by the Lessor and applied toward the Obligations in accordance
with the Lease Documents and/or the Related Party Agreements.
4.1.5 Protest. Upon giving notice to the Lessor, at the
Lessee's option and sole cost and expense, and subject to compliance
with the provisions of Article 15, the Lessee may contest, protest,
appeal, or institute such other proceedings as the Lessee may deem
appropriate to effect a reduction of any Imposition and the Lessor, at
the Lessee's cost and expense as aforesaid, shall fully cooperate in a
reasonable manner with the Lessee in connection with such protest,
appeal or other action.
4.2 Notice of Impositions. The Lessor shall give prompt notice to the
Lessee of all Impositions payable by the Lessee hereunder of which the Lessor at
any time has knowledge, but the Lessor's failure to give any such notice shall
in no way diminish the Lessee's obligations hereunder to pay such Impositions.
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4.3 Adjustment of Impositions. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between the Lessor and the Lessee, whether or not
such Impositions are imposed before or after such expiration or termination, and
the Lessee's obligation to pay and the Lessor's obligation to refund their
respective prorated share thereof shall survive such expiration or termination.
4.4 Utility Charges. The Lessee will pay or cause to be paid all
charges for electricity, power, gas, oil, water, telephone and other utilities
used in the Leased Property during the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease. If the
Lessee is required to pay a deposit to any of the utility providers serving the
Leased Property, any and all such deposits shall become the property of the
Lessee at the expiration of the Term (as opposed to an earlier termination of
this Lease) if and when the Lessee surrenders the Leased Property in the manner
required by this Lease.
4.5 Insurance Premiums. The Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until the Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and the Lessee, at the Lessor's request, shall furnish the
Lessor with evidence satisfactory to the Lessor that all such premiums have been
so paid prior to the commencement of the Term and thereafter at least thirty
(30) days prior to the due date of each premium which thereafter becomes due.
Notwithstanding the foregoing, the Lessee may pay such insurance premiums to the
insurer in monthly installments so long as the applicable insurer is
contractually obligated to give the Lessor not less than a sixty (60) days
notice of non-payment and so long as no Lease Default has occurred and is
continuing. In the event of the failure of the Lessee either to comply with the
insurance requirements in Article 12, or to pay the premiums for such insurance,
or to deliver such policies or certificates thereof to the Lessor at the times
required hereunder, the Lessor shall be entitled, but shall have no obligation,
to effect such insurance and pay the premiums therefor, which 'premiums shall be
a demand obligation of the Lessee to the Lessor.
4.6 Deposits.
4.6.1 Lessor's Option. At the option of the Lessor, which may
be exercised at any time after an Event of Default occurs, the Lessee
shall, upon written request of the Lessor, on the first day on the
calendar month, immediately following such request, and on the first
day of each calendar month thereafter during the Term (each of which
dates is referred to as a "Monthly Deposit Date"), pay to and deposit
with the Lessor a sum equal to one-twelfth (1/12th) of the Impositions
to be levied, charged, filed, assessed or imposed upon or against the
Leased Property within one (1) year after said Monthly Deposit Date and
a sum equal to one-twelfth (1/12th) of the premiums for the insurance
policies required pursuant to Article 12 which are payable within one
(1) year after said Monthly Deposit Date. If the amount of the
Impositions to be levied, charged, assessed or imposed or insurance
premiums to be paid within the ensuing one (1) year period shall not be
fixed upon any Monthly Deposit Date, such amount for the purpose of
computing the deposit to be made by the Lessee hereunder shall be
reasonably estimated by the Lessor with an
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appropriate adjustment to be promptly made between the Lessor and the
Lessee as soon as such amount becomes determinable. In addition, the
Lessor may, at its option, from time to time require that any
particular deposit be greater than one-twelfth (1/12th) of the
estimated amount payable within one (1) year after .said Monthly
Deposit Date, if such additional deposit is reasonably required in
order to provide to the Lessor a sufficient fund from which to make
payment of all Impositions on or before the next due date of any
installment thereof, or to make payment of any required insurance
premiums not later than the due date thereof.
4.6.2 Use of Deposits. The sums deposited by the Lessee under this
Section 4.6 shall be held by the Lessor and shall be applied by the Lessor in
payment of the Impositions or insurance premiums, as the case may be, on or
before the due date thereafter and prior to any penalty, interest, late fee or
other similar charge being imposed to the extent of available funds deposited by
the Lessee under this Section 4.6. Any such deposits may be commingled with
other assets of the Lessor, and shall be deposited by the Lessor at such bank as
the Lessor may, from time to time select, and the Lessor shall not be liable to
the Lessee or any other Person (a) based on the Lessor's (or such bank's) choice
of investment vehicles, (b) for any consequent loss of principal or interest or
(c) for any unavailability of funds based on such choice of investment;
provided, however, that notwithstanding the foregoing, the Lessor shall only
invest any such deposit in any of the investment vehicles described on Exhibit A
of the Deposit Pledge Agreement. Furthermore, the Lessor shall bear no
responsibility for the financial condition of, nor any act or omission by, the
Lessor's depository bank. The income from such investment or interest on such
deposit shall be paid to the Lessee on a semi-annual basis as long as no Lease
Default has occurred and is then continuing, and as long as no fact or
circumstance exists which, with the giving of notice and/or the passage of time,
would constitute a Lease Default. The Lessee shall give not less than ten (10)
days prior written notice to the Lessor in each instance when an Imposition or
insurance premium is due, specifying the Imposition or premium to be paid and
the amount thereof, the place of payment, and the last day on which the same may
be paid in order to comply with the requirements of this Lease. If the Lessor,
in violation of its obligations under this Lease, does not pay any Imposition or
insurance premium when due, for which a sufficient deposit exists, the Lessee
shall not be in default hereunder by virtue of the failure of the Lessor to pay
such Imposition or such insurance premium and the Lessor shall pay any interest
or fine assessed by virtue of the Lessor's failure to pay such Imposition or
insurance premium.
4.6.3 Deficits. If for any reason any deposit held by the Lessor under
this Section 4.6 shall not be sufficient to pay an Imposition or insurance
premium within the time specified therefor in this Lease, then, within ten (10)
days after demand by the Lessor, the Lessee shall deposit an additional amount
with the Lessor, increasing the deposit held by the Lessor so that the Lessor
holds sufficient funds to pay such Imposition or premium in full (or in
installments as otherwise provided for herein), together with any penalty or
interest due thereon. The Lessor may change its estimate of any Imposition or
insurance premium for any period on the basis of a change in an assessment or
tax rate or on the basis of a prior miscalculation; in which event, within ten
(10) days after demand by the Lessor, the Lessee shall deposit with the Lessor
the amount in excess of the sums previously deposited with the Lessor for the
applicable period which would theretofore have been payable under the revised
estimate.
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4.6.4 Other Properties. If any Imposition shall be levied, charged,
filed, assessed, or imposed upon or against the Leased Property, and if such
Imposition shall also lie a levy, charge, assessment, or imposition upon or for
any other real or personal property that does not constitute a part of the
Leased Property, then the computation of the amounts to be deposited under this
Section 4.6 shall be based upon the entire amount of such Imposition and the
Lessee shall not have the right to apportion any deposit with respect to such
Imposition. However, the Lessor will reasonably cooperate with the Lessee (but
at no cost or expense to the Lessor) to change the manner of assessment for such
Imposition so that such Imposition will thereafter relate only to the Leased
Property.
4.6.5 Transfers. In connection with any assignment of the Lessor's
interest under this Lease, the original Lessor named herein and each successor
in interest shall be obligated to transfer all amounts deposited pursuant to the
provisions of this Section 4.6 then in its possession to such assignee (as the
subsequent holder of the Lessor's interest in this Lease), who shall be
obligated to assume the Lessor's obligations with respect to all such deposited
amounts, and upon such transfer, the original Lessor named herein or the
applicable successor in interest transferring the deposits shall thereupon be
completely released from all liability with respect to such deposits so
transferred and the Lessee shall look solely to said assignee, as the subsequent
holder of the Lessor's interest under this Lease, in reference thereto. The
original Lessor named herein or the applicable successor in interest
transferring the deposits shall provide written notice to the Lessee of such
transfer. The original Lessor named herein or the applicable successor in
interest shall not be released from liability with respect to the deposits so
transferred unless the next successor in interest assumes liability for such
deposits.
4.6.6 Security. All amounts deposited with the Lessor pursuant to the
provisions of this Section 4.6 shall be held by the Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, the Lessor may, in its sole and absolute
discretion, apply said amounts towards payment or performance of such
Obligations.
4.6.7 Return. Upon the expiration or earlier termination of this Lease,
provided, that, all of the Lease Obligations have been fully paid and performed,
any sums then held by the Lessor under this Section 4.6 shall be refunded to the
Lessee; unless a Related Party Default has occurred, in which event such sums
may be applied towards the Obligations in accordance with the Related Party
Agreements.
4.6.8 Receipts. The Lessee shall immediately deliver to the Lessor
copies of all notices of non-payment of any insurance premiums and/or
Impositions and, upon the Lessor's request, shall deliver to the Lessor copies
of all other notices, demands, claims, bills and receipts in relation to the
Impositions and insurance premiums immediately upon receipt thereof by the
Lessee.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION. REMOVAL AND REPLACEMENT OF
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PERSONAL PROPERTY
5.1 Ownership of the Leased Property. The Lessee acknowledges that the
Leased Property is the property of the Lessor and that the Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease.
5.2 Personal Property; Removal and Replacement of Personal
Property.
5.2.1 Lessee To Equip Facility. The Lessee, at its sole cost
and expense, shall install, affix or assemble or place on the Leased
Property, sufficient items of Tangible Personal Property to enable the
Leased Property to be operated in accordance with the requirements of
this Lease for the Primary Intended Use and the Other Permitted Uses,
and such Tangible Personal Property and replacements thereof, shall be
at all times the property of the Lessee.
5.2.2 Sufficient Personal Property. The Lessee shall maintain,
during the entire Term, the Tangible Personal Property in good order
and repair and shall provide at its expense all necessary replacements
thereof, as may be necessary in order to operate the Leased Property in
compliance with all applicable Legal Requirements and Insurance
Requirements and otherwise in accordance with customary practice in the
industry for the Primary Intended Use and the Other Permitted Uses,
unless the failure to comply with the same will not have any adverse
effect on either the Leased Property or the Lessee. In addition, the
Lessee shall (a) furnish all necessary replacements of obsolete items
of the Tangible Personal Property during the Term, unless the Lessee
provides the Lessor with an explanation (reasonably acceptable to the
Lessor) as to why such Tangible Personal Property is no longer required
in connection with the operation of the Leased Property and (b) if
requested by the Lessor, deliver to the Lessor, a detailed inventory of
all such Tangible Personal Property.
5.2.3 Removal and Replacement; Lessor's Option to Purchase. The
Lessee shall not remove from the Leased Property any one or more items
of Tangible Personal Property (whether now-owned or hereafter
acquired), the fair market value of which exceeds TWENTY-FIVE THOUSAND
and NO/100 DOLLARS ($25,000.00), individually or ONE HUNDRED THOUSAND
and NO/100 DOLLARS ($100,000.00) collectively, except if such Tangible
Personal Property is simultaneously suitably replaced or the Lessee
provides the Lessor with an explanation (reasonably satisfactory to the
Lessor) as to why such Tangible Personal Property is no longer required
in connection with the operation of the Leased Property. At its sole
cost and expense, the Lessee shall restore the Leased Property to the
condition required by Article 8, including repair of all damage to the
Leased Property caused by the removal of the Tangible Personal
Property, whether effected by the Lessee or the Lessor. Upon the
expiration or earlier termination of this Lease, the Lessor shall have
the option, which may be exercised prior to or within the relevant
Decision Period (defined below), of (a) acquiring the Tangible Personal
Property (pursuant to a bill of sale and assignments of any equipment
leases, all in such forms as are reasonably satisfactory to the Lessor)
upon payment of its fair market value or (b)
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requiring the Lessee to remove the Tangible Personal Property. For
purposes of the preceding sentence, the "Decision Period" shall mean
(1) the last day of the Term with respect to the expiration thereof in
accordance with the provisions of this Lease, (2) the fifth (5th)
Business Day after the date of any earlier termination of this Lease
based on either Casualty or Condemnation or (3) the thirtieth (30th)
day after the date of any earlier termination of this Lease based on
any Event of Default. If the Lessor exercises its option to purchase
the Tangible Personal Property, the price to be paid by the Lessor
shall be (i) reduced by the amount of all payments due on any equipment
leases or any other Permitted Prior Security Interests assumed by the
Lessor and (ii) applied to the Lease Obligations before any payment to
the Lessee. If the Lessor requires the removal of the Tangible Personal
Property, then all of the Tangible Personal Property that is not
removed by the Lessee within ten (10) days following such request shall
be considered abandoned by the Lessee and may be appropriated, sold,
destroyed or otherwise disposed of by the Lessor without first giving
notice thereof to the Lessee, without any payment to the Lessee and
without any obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 Security for the Lessee's Obligations: Permitted Prior
Security Interests.
6.1.1 Security. In order to secure the payment and performance of all
of the Obligations, the Lessee agrees to provide or cause there to be provided,
among other things, the following security:
(a) a first lien and exclusive security interest in the
Tangible Personal Property, Receivables and certain other Collateral as
more particularly provided for in the Security Agreement;
(b) the Cash Collateral described in Section 6.2;
(c) a first lien and exclusive pledge of all of the capital
stock of the Lessee all as more particularly set forth in the Pledge
Agreement(s). If any Person other than the Lessee or the Guarantor
shall ever operate the Facility, a pledge of all capital stock of, or
partnership or other ownership interests, in such Person shall also be
provided pursuant to a pledge and security agreement substantially
similar to the Pledge Agreements;
(d) a first lien and exclusive pledge and assignment of, and
security interest in, all Permits and Contracts, as more particularly
provided for in the Permits Assignment, to the extent permitted by law
or the terms thereof; and
(e) in the event that at any time during the Term, the Lessee
holds the fee title to or a leasehold interest in any real property and/or
personal property which is used as an integral part of the operation of the
Leased Property (but is not subject to this Lease), the Lessee shall (i)
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provide the Lessor with prior notice of such acquisition and (ii) shall take
such actions and enter into such agreements as the Lessor shall reasonably
request in order to grant the Lessor a first priority mortgage or other security
interest in such real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably acceptable to the Lessor.
6.1.2 Purchase-Money Security Interests and Equipment Leases.
Notwithstanding any other provision hereof regarding the creation of Liens, but
subject to Section 11.3.8, the Lessee may (a) grant priority purchase money
security interests in items of Tangible Personal Property and (b) lease Tangible
Personal Property from equipment lessors, as long as in each instance where the
aggregate amount of such purchase money security interests and equipment leases
will exceed TWO HUNDRED THOUSAND and NO/100 DOLLARS ($200,000.00): (i) all of
the terms, conditions and provisions of the purchase money security agreements
or equipment. leases evidencing the financing arrangement are reasonably
acceptable to the Lessor; (ii) promptly after the execution thereof, the Lessee
provides to the Lessor true and complete copies, as executed, of all such
purchase money security agreements and equipment leases (and all amendments
thereto); (iii) no such purchase money security interest or equipment lease
shall be cross-defaulted or cross-collateralized with any other obligation other
than a purchase money security interest or equipment lease entered into by the
Lessee involving Tangible Personal Property and the same secured party or
equipment lessor, as applicable; (iv) the secured party or equipment lessors
enter into an intercreditor agreement with, and satisfactory to, the Lessor,
pursuant to which, without limiting the foregoing: (x) the Lessor shall be
afforded the option of curing defaults and the option of succeeding to the
rights of the Lessee; (y) the Lessor's security interest in Tangible Personal
Property shall be subordinated to the security interest granted to such secured
party; and (z) the secured party or equipment lessor is not a member of the
Leasing Group or an Affiliate of any member of the Leasing Group. Security
interests granted by the Lessee in full compliance with the provisions of this
Section 6.1.2 are referred to as "Permitted Prior Security Interests".
6.2 Cash Collateral.
6.2.1 Cash Collateral. In order to further secure the Lessee's
performance of the Obligations, on the Commencement Date, pursuant to the terms
of the Deposit Pledge Agreement, the Lessee shall provide and pledge to the
Lessor a credit enhancement for the benefit of the Lessor in the form of cash or
other specified investments approved by the Lessor in the Lessor's name in the
total of the Stated Amount (the "Cash Collateral"). The Cash Collateral shall
serve as additional security for the Obligations and may be drawn upon by the
Lessor upon any Lease Default. The Lessee shall maintain the Cash Collateral in
the full Stated Amount throughout the Term, subject to the provisions of the
Agreement Regarding Related Lease Transactions. The Cash Collateral shall be in
form and substance and, if the Lessor elects a form of Cash Collateral other
than actual cash, from a bank continually acceptable to the Lessor in the
Lessor's reasonable discretion and shall be pledged to the Lessor pursuant to
the Deposit Pledge Agreement.
6.2.2 Application of Cash Collateral. Upon the occurrence of
any Lease Default, the Lessor shall be entitled, at its option, to use all or
any portion of the Cash Collateral,
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including interest thereon, then held by it to pay any amount otherwise payable
by the Lessee or the Guarantor under any of the Lease Documents, in accordance
with the terms of this Lease or the other Lease Documents.
6.2.3 Replenishment of Cash Collateral. If the Lessor expends
any of the Cash Collateral to pay any amount payable by the Lessee, or otherwise
applies the same to or towards the Obligations, the Lessee shall, upon demand of
the Lessor, immediately augment the Cash Collateral so as to increase the amount
held by the Lessor to the full Stated Amount.
6.3 Guaranty. All of the Lease Obligations shall be unconditionally and
irrevocably guaranteed by the Guarantor pursuant to the Guaranty.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Property. The Lessee acknowledges that the
Guarantor has caused the Leased Property to be sold to the Lessor and that the
Lessee and the Lessor have concurrently entered into this Lease. The Lessee
acknowledges receipt and delivery of possession of the Leased Property and that
the Lessee has examined and otherwise has acquired knowledge of the condition of
the Leased Property prior to the execution and delivery of this Lease and has
found the same to be in good order and repair and satisfactory for its purposes
hereunder. The Lessee is leasing the Leased Property "AS-IS" in its present
condition. The Lessee waives any claim or action against the Lessor in respect
of the condition of the Leased Property. THE LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY, EITHER
AS TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS DESIGN OR CONDITION OR
OTHERWISE, OR AS TO DEFECTS IN THE QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, LATENT OR PATENT; IT BEING AGREED THAT ALL RISKS RELATING TO THE
DESIGN, CONDITION AND/OR USE OF THE LEASED PROPERTY ARE TO BE BORNE BY THE
LESSEE. THE LESSEE HEREBY ASSUMES ALL RISK OF THE PHYSICAL CONDITION OF THE
LEASED PROPERTY, THE SUITABILITY OF THE LEASED PROPERTY FOR THE LESSEE'S
PURPOSES, AND THE COMPLIANCE OR NON-COMPLIANCE OF THE LEASED PROPERTY WITH ALL
APPLICABLE REQUIREMENTS OF LAW, INCLUDING BUT NOT LIMITED TO ENVIRONMENTAL LAWS
AND ZONING OR LAND USE LAWS.
Upon the request of the Lessor following a Lease Default or if the
Lessor has a reasonable basis to believe any of the following circumstances
exist, at any time and from time to time during the Term, the Lessee shall
engage one (1) or more independent professional consultants, engineers and
inspectors, qualified to do business in the State and acceptable to the Lessor
to perform any environmental and/or structural investigations and/or other
inspections of the Leased Property and the Facility as the Lessor may reasonably
request in order to detect (a) any structural deficiencies in the Leased
Improvements or the utilities servicing and/or located on the
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Leased Property or (b) the presence of any condition that (i) in the Lessor's
reasonable judgment is likely to be harmful or present a health hazard to the
residents and other occupants of the Leased Property or (ii) constitutes a
breach or violation of any of the Lease Documents. In the event that the Lessor
reasonably determines that the results of such testing or inspections are
unsatisfactory, within thirty (30) days of notice from the Lessor (except as
otherwise provided in the Environmental Indemnity Agreement), the Lessee shall
commence such appropriate remedial actions as may be required under this Lease
and reasonably requested by the Lessor to correct such unsatisfactory conditions
and, thereafter, shall diligently and continuously prosecute such remedial
actions to completion within the time limits prescribed in this Lease or the
other Lease Documents. Any report produced by any aforementioned consultant,
engineer or inspector in connection with an environmental and/or structural
investigation and/or other investigation of the Leased Property shall be
addressed to and provided to both the Lessor and the Lessee.
7.2 Use of the Leased Property: Compliance: Management.
7.2.1 Obligation to Operate. The Lessee or any other
Acceptable Licensed Operator shall continuously operate the Leased
Property in accordance with the Primary Intended Use and the Other
Permitted Uses and maintain its qualifications for licensure and
accreditation as required by all applicable Legal Requirements and
Insurance Requirements.
7.2.2 Permitted Uses. During the entire Term, the Lessee shall
use the Leased Property, or permit the Leased Property to be used, only
for the Primary Intended Use and the Other Permitted Uses. The Lessee
shall not use the Leased Property or permit the Leased Property to be
used for any other use without the prior written consent of the Lessor,
which consent may be withheld in the Lessor's sole and absolute
discretion.
7.2.3 Compliance With Insurance Requirements. No use shall be
made or permitted to be made of the Leased Property and no acts shall
be done which will cause the cancellation of any insurance policy
covering the Leased Property, nor shall the Lessee, any Manager or any
other Person sell or otherwise provide to any residents, other
occupants or invitees therein, or permit to be kept, used or sold in or
about the Leased Property, any article which may be prohibited by any
Legal Requirement or by any of the Insurance Requirements. Furthermore,
the Lessee shall, at its sole cost and expense, take whatever other
actions that may be necessary to comply with and to insure that the
Leased Property complies with all Insurance Requirements.
7.2.4 No Waste. The Lessee shall not commit or suffer to be
committed any waste on, in or under the Leased Property, nor shall the
Lessee cause or permit any nuisance thereon.
7.2.5 No Impairment. The Lessee shall neither suffer nor
permit the Leased Property to be used in such a manner as (a) might
reasonably tend to impair the Lessor's title thereto or (b) may
reasonably make possible a claim or claims of adverse usage or adverse
possession by the public or of implied dedication of the Leased
Property.
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7.2.6 No Liens. Except as permitted pursuant to Section 6.1.2,
the Lessee shall not permit or suffer any Lien to exist on the Tangible
Personal Property and shall in no event cause, permit or suffer any
Lien to exist with respect to the :Leased Property other than as set
forth in Section 11.5.2.
7.3 Compliance with Legal Requirements. The Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that the
Lessee and any other Acceptable Licensed Operator, at their sole cost and
expense, shall promptly (a) comply with, and shall cause every other member of
the Leasing Group to comply with, all Legal Requirements relating to the use,
operation, maintenance, repair and restoration of the Leased Property, whether
or not compliance therewith shall require structural change in any of the Leased
Property or interfere with the use and enjoyment of the Leased Property and (b)
procure, maintain and comply with (in all material respects), and shall cause
every other member of the Leasing Group to procure, maintain and comply with (in
all material respects), all Contracts and Permits necessary or desirable in
order to operate the Leased Property for the Primary Intended Use and/or Other
Permitted Uses, and for compliance with all of the terms and conditions of this
Lease. Unless a Lease Default has occurred or any event has occurred which, with
the passage of time and/or the giving of notice would constitute a Lease
Default, the Lessee may, upon prior written notice to the Lessor, contest any
Legal Requirement to the extent. permitted by, and in accordance with, Article
15.
7.4 Management Agreements. From and after the Commencement Date, the
Lessee shall not enter into any Management Agreement without the prior written
approval of the Lessor, in each instance, which approval shall not be
unreasonably withheld. The Lessee shall not, without the prior written approval
of the Lessor, in each instance, which approval shall not be unreasonably
withheld, agree to or allow (a) any change in any Manager or any change in the
ownership or control of any Manager except as otherwise permitted by the
provisions of Sections 16.1(h)(vi) and 16.1(i), (b) the termination of any
Management Agreement (other than in connection with the exercise by the Lessee
of any of its remedies under the Management Agreement as a result of any default
by the Manager thereunder), (c) any assignment by any Manager of its interest
under any Management Agreement or (d) any material amendment of any Management
Agreement. In addition, the Lessee shall, at its sole cost and expense, promptly
and fully perform or cause to be performed every covenant, condition, promise
and obligation of the licensed operator of the Leased Property under any
Management Agreement. Notwithstanding the foregoing, in the event that the
Lessee enters into any Management Agreement with an Affiliate of the Lessee, the
Lessor shall consent to the execution and delivery of such Management Agreement,
provided, that, concurrently with the execution and delivery of such Management
Agreement, the Affiliated Party Subordination Agreement and the Environmental
Indemnity Agreement are amended so as to add as a party thereto the applicable
Affiliate of the Lessee that is to be the Manager (so that, among other things,
the payments to be made under such Management Agreement are fully subordinated
to the Lease Obligations).
Each Management Agreement shall provide that the Lessor shall be
provided notice of any defaults thereunder and, at the Lessor's option, an
opportunity to cure such default. The
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Lessee shall furnish to the Lessor, within three (3) days after receipt thereof,
or after the mailing or service thereof by the Lessee, as the case may be, a
copy of each notice of default which the Lessee shall give to, or receive from
any Person, based upon the occurrence, or alleged occurrence, of any default in
the performance of any covenant, condition, promise or obligation under any
Management Agreement.
Whenever and as often as the Lessee shall fail to perform, promptly and
fully, at its sole cost and expense, any covenant, condition, promise or
obligation on the part of the licensed operator of the Leased Property under and
pursuant to any Management Agreement, the Lessor, or a lawfully appointed
receiver of the Leased Property, may, at their respective options (and without
any obligation to do so), after five (5) days' prior notice to the Lessee
(except in the case of an emergency) enter upon the Leased Property and perform,
or cause to be performed, such work, labor, services, acts or things, and take
such other steps and do such other acts as they may deem advisable, to cure such
defaulted covenant, condition, promise or obligation, and any amount so paid or
advanced by the Lessor or such receiver and all costs and expenses reasonably
incurred in connection therewith (including, without limitation, attorneys' fees
and expenses and court costs), shall be a demand obligation of the Lessee to the
Lessor or such receiver, and, the Lessor shall have the same rights and remedies
for failure to pay such costs on demand as for the Lessee's failure to pay any
other sums due hereunder.
7.5 Compliance With and Satisfaction of Bond-Related Obligations. The
Lessee covenants and agrees that the Lessee shall perform and satisfy any and
all Bond-Related Obligations to be performed and satisfied by the sub-sublessee
of the Leased Property or the owner of the Land or in any other way imposed upon
the Lessor by any of the documents executed by the Lessor in connection with
this Lease or any of the transactions contemplated by this Lease, including,
with limitation, any and all of the obligations assumed by the Lessor in either
the Assignment and Assumption of Project Documents dated April 30, 1997 by and
between the Lessor, Liberty Commons Associates, LLC, the Guarantor, the Lessee
and Onondaga County IDA or the Assumption and Modification Agreement (the "Key
Bank Modification Agreement"), dated April 30, 1997, by and between the Lessor
and KeyBank National Association ("KeyBank") (successor to Key Bank of New
York). Without limiting the generality of the foregoing, the Lessee shall pay
directly to KeyBank (or any successor or assignee of KeyBank) or any other party
entitled to payment, all debt service and any other amounts owed in connection
with the Building Loan Agreement or Loan Agreement. Further, Lessee shall be
fully responsible to obtain any loan required to refinance the indebtedness
evidenced by the Bond or any other indebtedness which encumbers the Land or the
Leased Property which Lessor has agreed to assume (or take subject to) in
connection with its acquisition of the Land and Leased Property and shall pay in
full any and all costs associated with any such refinancing. The Lessor will
reasonably cooperate with the Lessee in allowing such refinancing to be
implemented, provided that (1) the Lessor shall not be required to incur any
expense in connection with such cooperation, (2) such refinancing shall (a) be
non-recourse to the Lessor, (b) include terms similar to the KeyBank
Modification Agreement regarding prepayment, (ii) purchase of such loan by
Lessor, (iii) no regulation on stock ownership or merger of the Lessor, (iv)
notice to, and unity to cure by the Lessor and (v) financial reporting
requirements of the Lessor and (c) otherwise be on terms and conditions
reasonably acceptable to
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the Lessor in its posture as owner of the Leased Property. Finally, the Lessee
agrees it will not exercise any right it may have to purchase the Borrower Note
(as defined in the Key Bank Modification Agreement without the prior written
consent of the Lessor.
7.6 Compliance With Superior Lease Obligations. The Lessee covenants
and agrees that the Lessee shall perform all of the Superior Lease Obligations
to be performed by Lessor as the sub-sublessee of the Leased Property or the
owner of the Land or otherwise imposed upon the Lessor by any of the documents
executed by the Lessor in connection with this Lease or any of the transactions
contemplated by this Lease.
ARTICLE 8
REPAIRS: RESTRICTIONS
8.1 Maintenance and Repair.
8.1.1 Lessee's Responsibility. The Lessee, at its sole cost and
expense, shall keep the Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto which are under the Lessee's control in good order and
repair (whether or not the need for such repairs occurs as a result of the
Lessee's use, any prior use, the elements or the age of the Leased Property or
such private roadways, sidewalks and curbs or any other cause whatsoever).
Subject to Articles 9, 13 and 14, the Lessee shall promptly, with the exercise
of all reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition (concealed or otherwise) existing prior to
the commencement of, or during, the Term and thereafter until the Lessee
surrenders the Leased Property in the manner required by this Lease. The Lessor
understands that the Facility will incur reasonable, normal wear and tear during
the Term of this Lease and agrees that the Lessee shall not be obligated to
repair or replace every incidence of reasonable and normal wear and tear.
However, nothing herein shall relieve the Lessee of its obligation to maintain
the Leased Property and all private roadways, sidewalks and curbs appurtenant
thereto which are under the Lessee's control in good order and repair. And
further, in no event shall such wear and tear present any condition which may be
harmful to residents or other occupants of the Leased Property or which prevents
the Leased Property from being operated for the Primary Intended Use in
accordance with the provisions of this Lease. In addition, the Lessee, at its
sole cost and expense, shall make all repairs, modifications, replacements,
renovations and alterations of the Leased Property (and such private roadways,
sidewalks and curbs) that are necessary to comply with all applicable Legal
Requirements and Insurance Requirements so that the Leased Property can be
legally operated for the Primary Intended Use and the Other Permitted Uses. All
repairs, replacements, renovations, alterations, and modifications required by
the terms of this Section 8.1 shall be (a) performed in a good and workmanlike
manner in compliance with all Legal Requirements, Insurance Requirements and the
requirements of Article 9 hereof, using new materials well suited for their
intended purpose and (b) consistent with the operation of the Leased Property in
a
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first class manner. The Lessee will not take or omit to take any action the
taking or omission of which might materially impair the value or the usefulness
of the Leased Property for the Primary Intended Use and the Other Permitted
Uses. To the extent that any of the repairs, replacements, renovations,
alterations or modifications required by the terms of this Section 8.1
constitute Material Structural Work, the Lessee shall obtain the Lessor's prior
written approval (which approval shall not be unreasonably withheld) of the
specific repairs, replacements, renovations, alterations and modifications to be
performed by or on behalf of the Lessee in connection with such Material
Structural Work, and shall perform the same in accordance with the provisions of
this Lease upon receipt of such approval. Notwithstanding the foregoing, in the
event of a bona fide emergency during which the Lessee is unable to contact the
appropriate representatives of the Lessor, the Lessee may commence such Material
Structural Work as may be necessary in order to address such emergency without
the Lessor's prior approval, provided, however, that the Lessee shall
immediately thereafter advise the Lessor of such emergency and the nature and
scope of the Material Structural Work commenced and shall obtain the Lessor's
approval of the remaining Material Structural Work to be completed.
8.1.2 No Lessor Obligation. The Lessor shall not, under any
circumstances (except to the extent of any damage caused thereto as a result of
the gross negligence or wilful misconduct of the Lessor or the Lessor's
employees, agents or contractors), be required to build or rebuild any
improvements on the Leased Property (or any private roadways, sidewalks or curbs
appurtenant thereto), or to make any repairs, replacements, renovations,
alterations, restorations, modifications, or renewals of any nature or
description to the Leased Property (or any private roadways, sidewalks or curbs
appurtenant thereto), whether ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto -in connection with this Lease, or to maintain the Leased
Property (or any private roadways, sidewalks or curbs appurtenant thereto) in
any way.
8.1.3 Lessee May Not Obligate Lessor. Nothing contained herein nor any
action or inaction by the Lessor shall be construed as (a) constituting the
consent or request of the Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) giving the :Lessee any right,
power or permission to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion as
would permit the making of any claim against the Lessor for the payment thereof
or to make any agreement that may create, or in any way be the basis for, any
right, title or interest in, or Lien or claim against, the estate of the Lessor
in the Leased Property. Without limiting the generality of the foregoing, the
right, title and interest of the Lessor in and to the Leased Property shall not
be subject to liens or encumbrances for the performance of any labor or services
or the furnishing of any materials or other property furnished to the Leased
Property at or by the request of the Lessee or any other Person other than the
Lessor. The Lessee shall notify any contractor, subcontractor, laborer,
materialman or vendor providing any labor, services or materials to the Leased
Property of this provision.
8.1.4 Lessee's Obligation to Perform Upgrade Renovations. Without
limiting the Lessee's obligations to maintain the Leased Property under this
Lease, within thirty (30) days after the end
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of each Lease Year commencing with the end of the fourth (4th) Lease Year, the
Lessee shall provide the Lessor with evidence reasonably satisfactory to the
Lessor that the Lessee has in each and every consecutive thirty-six (36) month
period commencing with such fourth (4th) Lease Year spent an average annual
amount on Upgrade Renovations (collectively, the "Annual Facility Upgrade
Expenditure") equal to $200.00 per living unit within the Facility (as such per
living unit amount shall be adjusted annually at the beginning of each Lease
Year (commencing with the second (2nd) Lease Year) by an amount equal to the
product of (i) $200.00 multiplied by (ii) the Consumer :Price Adjustment Factor.
The term "Upgrade Renovations" is defined to mean upgrades or improvements to
the Leased Property which have the effect of maintaining or improving the
competitive position of the Leased Property in its marketplace; and Upgrade
Expenditures shall not include normal janitorial, cleaning and maintenance
activities. Non-exclusive examples of Upgrade Renovations include new or
replacement wallpaper, tiles, window coverings, lighting fixtures, painting,
upgraded landscaping, carpeting, architectural adornments, common areas
amenities and the like. It is expressly understood that capital improvements or
repairs (such as but not limited to repairs or replacements to the structural
elements of the walls, parking area, or the roof or to the electrical, plumbing,
HVAC or other mechanical or structural systems in the Leased Property) shall not
be considered Upgrade Renovations. In the event that during a given Lease Year
Upgrade Renovations are not necessary (which necessity shall be determined in
the Lessee's reasonable discretion) and/or the full amount of the respective
Annual Facility Upgrade Expenditure is not made for the Facility for whatever
reason, the Lessee shall be required to show evidence that a reserve fund has
been established with the balance of the unexpended Annual Facility Upgrade
Expenditure to be used solely for Upgrade Renovations in future Lease Years or
as otherwise requested by the Lessor. If the Lessee fails in each and every
consecutive thirty-six (36) month period (commencing with the end of the fourth
(4th) Lease Year) to make Upgrade Renovations in an average annual amount equal
to the Annual Facility Upgrade Expenditure or to establish a reserve fund as
aforesaid, the Lessee shall promptly on demand from the Lessor (but in no event
within more than five (5) days) pay to the Lessor the applicable shortfall in
the Annual Facility Upgrade Expenditure over any aforementioned thirty-six (36)
month period, as applicable; and the Lessor may retain such funds as additional
rent hereunder or, in its sole discretion, provide such funds to the Lessee to
perform Upgrade Renovations.
8.2 Encroachments: Title Restrictions. If any of the Leased
Improvements shall, at any time, encroach upon any property, street or
right-of-way adjacent to the Leased Property, or shall violate the agreements or
conditions contained in any lawful restrictive covenant or other Lien now or
hereafter affecting the Leased Property, or shall impair the rights of others
under any easement, right-of-way or other Lien to which the Leased Property is
now or hereafter subject, then promptly upon the request of the Lessor, the
Lessee shall, at its sole cost and expense, subject to the Lessee's right to
contest the existence of any encroachment, violation or impairment as set forth
in Article 15, (a) obtain valid and effective waivers or settlements of all
claims, liabilities and damages resulting from each such encroachment, violation
or impairment or (b) make such alterations to the Leased Improvements, and take
such other actions, as the Lessee in the good faith exercise of its judgment
deems reasonably practicable, to remove such encroachment, or to end such
violation or impairment, including, if necessary, the alteration of any of the
Leased Improvements. Notwithstanding the foregoing, the Lessee shall, in any
event,
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take all such actions as may be reasonably necessary in order to be able
to continue the operation of the Leased Improvements for the Primary Intended
Use and the Other Permitted Uses substantially in the manner and to the extent
that the Leased Improvements were operated prior to the assertion of such
encroachment, violation or impairment and nothing contained herein shall limit
the Lessee's obligations to operate the Leased Property in accordance with its
Primary Intended Use. Any such alteration made pursuant to the terms of this
Section 8.2 shall be completed in conformity with the applicable requirements of
Section 8.1 and Article 9. The Lessee's obligations under this Section 8.2 shall
be in addition to and shall in no way discharge or diminish any obligation of
any insurer under any policy of title or other insurance.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 Lessor's Approval. Without the prior written consent of the Lessor,
which consent may be withheld by the Lessor, in its sole and absolute
discretion, the Lessee shall make no Capital Addition or Material Structural
Work to the Leased Property (including, without limitation, any change in the
size or unit capacity of the Facility), except as may be otherwise expressly
required pursuant to Article 8.
9.2 General Provisions as to Capital Additions and Certain Material
Structural Work. As to any Capital Addition or Material Structural Work (other
than such Material Structural Work that is required to be performed pursuant to
the terms of Section 8.1) for which the Lessor has granted its prior written
approval, the following terms and conditions shall apply unless otherwise
expressly set forth in the Lessor's written approval.
9.2.1 No Liens. Subject to Article 15 of this Lease, the
Lessee shall not be permitted to create, nor suffer to exist, any Lien
on the Leased Property in connection with any Capital Addition or
Material Structural Work. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT
AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED
OR TO BE FURNISHED TO THE LESSEE OR TO ANYONE HOLDING ANY PART OF THE
LEASED PROPERTY, AND THAT NO MECHANICS' LIENS, CONSTRUCTION LIENS OR
OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO
OR AFFECT THE INTEREST OF THE LESSOR IN AND TO THE LEASED PROPERTY.
9.2.,2 Lessee's Proposal Regarding Capital Additions and
Material Structural Work. If the Lessee desires to undertake any
Capital Addition or Material Structural Work, the Lessee shall submit
to the Lessor in writing a proposal setting forth in reasonable detail
any proposed Capital Addition or Material Structural Work and shall
provide to the Lessor copies of, or information regarding, the
applicable plans and specifications, Permits, Contracts and any other
materials concerning the proposed Capital Addition or Material
Structural Work, as the case may be, as the Lessor may reasonably
request. Without limiting the generality of the foregoing, each such
proposal
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pertaining to any Capital Addition shall indicate the approximate
projected cost of constructing such Capital Addition and the use or
uses to which it will be put.
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work. The Lessor shall have the options of (a) denying permission for
the construction of the applicable Capital Addition or Material Structural Work,
(b) offering to finance the construction of the Capital Addition or Material
Structural Work pursuant to Section 9.3, (c) allowing the Lessee to pay for or
separately finance the construction of the Capital Addition or Material
Structural Work, subject to compliance with the terms and conditions of Section
9.2.1, Section 9.4, Section 13.1, all Legal Requirements and all other
requirements of this Lease and to such other terms and conditions as the Lessor
may in its discretion impose or (d) any combination of the foregoing. Unless the
Lessor notifies the Lessee in writing of a contrary election within thirty (30)
days of the Lessee's request, the Lessor shall be, deemed to have denied the
request for the Capital Addition or Material Structural Work.
9.2.4 Lessor May Elect to Finance Capital Additions or Material
Structural Work. If the Lessor elects to offer financing for the proposed
Capital Addition or Material Structural Work, the provisions of Section 9.3
shall apply.
9.2.5 Legal Requirements; Quality of Work. All Capital Additions and/or
Material Structural Work shall be performed in full compliance with all
applicable Legal Requirements and shall be performed in a good and workmanlike
manner.
9.3 Capital Additions and Material Structural Work Financed by
Lessor.
9.3.1 Lessee's Financing Request. The Lessee may request that the
Lessor provide or arrange financing for a Capital Addition or Material
Structural Work by providing to the Lessor such information about the Capital
Addition or Material Structural Work as the Lessor may reasonably request,
including, without limitation, all information referred to in Section 9.2 above.
The Lessee understands, however, that the Lessor shall be under no obligation to
agree to such request. Nevertheless, the Lessor shall notify the Lessee, within
forty-five (45) days of receipt of such information, as to whether the Lessor
will finance the proposed Capital Addition or Material Structural Work and, if
so, the terms and conditions upon which it would do so, including the terms of
any amendment to this Lease (including, without limitation, an increase in Base
Rent based on the Lessor's then existing terms and prevailing conditions to
compensate the Lessor for the additional funds advanced by it). The Lessee may
withdraw its request by notice to the Lessor at any time before such time as the
Lessee accepts the Lessor's terms and conditions. All advances of funds for any
such financing shall be made in accordance with the Lessor's then standard
construction loan requirements and procedures, which may include, without
limitation, the requirements and procedures applicable to Work under Section
13.1.
9.3.2 Lessor's General Requirements. If the Lessor agrees to finance
the proposed Capital Addition or Material Structural Work and the Lessee accepts
the Lessor's proposal therefor, in addition to all other items which the Lessor
or any applicable Financing Party may reasonably require, the Lessee shall
provide to the Lessor the following:,
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(a) prior to any advance of funds, (i) any information,
opinions, certificates, Permits or documents reasonably requested by
the Lessor or any applicable Financing Party which are necessary to
confirm that the Lessee will be able to use the Capital Addition upon
the completion thereof or the applicable portion of the Facility upon
the completion of the Material Structural Work in accordance with the
Primary Intended Use and/or the Other Permitted Uses and (ii) evidence
satisfactory to the Lessor and any applicable Financing Party that all
Permits required for the construction and use of the Capital Addition
or the applicable portion of the Facility have been obtained, are in
full force and effect and are not subject to appeal, except only for
those Permits which cannot in the normal course be obtained prior to
commencement or completion of the construction; provided, that the
Lessor and any applicable Financing Party are furnished with reasonable
evidence that the same will be available in the normal course of
business without unusual condition;
(b) prior to any advance of funds, an Officer's Certificate
and, if requested, a certificate from the Lessee's architect, setting
forth in reasonable detail the projected (or actual, if available)
Capital Addition Cost or the cost of the Material Structural Work;
(c) bills of sale, instruments of transfer and other documents
required by the Lessor so as to vest title to the Capital Addition or
the applicable Material Structural Work in the Lessor free and clear of
all Liens, and amendments to this Lease and any recorded notice or
memorandum thereof, duly executed and acknowledged, in form and
substance reasonably satisfactory to the Lessor, providing for any
changes required by the Lessor including, without limitation, changes
in the Base Rent and the legal description of the Land;
(d) upon payment therefor, a deed conveying to the Lessor
title to any land acquired for the purpose of constructing the Capital
Addition or the applicable Material Structural Work ("Additional Land")
free and clear of any Liens except those approved by the Lessor;
(e) upon completion of the Capital Addition or the Material
Structural Work, a final as-built survey thereof reasonably
satisfactory to the Lessor, if required by the Lessor;
(f) during and following the advance of funds and the
completion of the Capital Addition or the Material Structural Work,
endorsements to any outstanding policy of title insurance covering the
Leased Property satisfactory in form and substance to the Lessor and
any Financing Party (i) updating the same without any additional
exception except as may be reasonably permitted by the Lessor, (ii) if
applicable, including the Additional Land in the premises covered by
such title insurance policy and (iii) increasing the coverage thereof
by an amount equal to any amount paid by the Lessor for the Additional
Land ~l the Fair Market Value of the Capital Addition or the Fair
Market Value of the Material Structural Work (except to the extent
covered by the owner's policy of title
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insurance referred to in subparagraph (g) below);
(g) simultaneous with the initial advance of funds, if
appropriate, (i) an owner's policy of title insurance insuring fee
simple title to any Additional Land conveyed to the Lessor pursuant to
subparagraph (d) free .and clear of all Liens except those approved by
the Lessor and (ii) a lender's policy of title insurance reasonably
satisfactory in form and substance to any applicable Financing Party;
(h) following the completion of the Capital Addition or the
Material Structural Work, if reasonably deemed necessary by the Lessor,
an appraisal of the Leased Property by an M.A.I. appraiser acceptable
to the Lessor, which states that the Fair Market Value of the Leased
Property upon completion of the Capital Addition or the Material
Structural Work exceeds the Fair Market Value of the Leased Property
prior to the commencement of the construction of such Capital Addition
or Material Structural Work by an amount not less than one hundred
percent (100%) of the Capital Addition Cost or the cost of the Material
Structural Work; and
(i) during or following the advancement of funds., prints of
architectural and engineering drawings relating to the Capital Addition
or the Material Structural Work and such other materials, including,
without limitation, endorsements to the title insurance policies
(insuring the Lessor and any applicable Financing Party with respect to
the Leased Property) contemplated by subsection (f) above, opinions of
counsel, appraisals, surveys, certified copies of duly adopted
resolutions of the board of directors of the Lessee authorizing the
execution and delivery of the lease amendment and any other documents
and instruments as may be reasonably required by the Lessor and any
applicable Financing Party.
9.3.3 Payment of Costs. By virtue of making a request to finance a
Capital Addition or any Material Structural Work, whether or not such
financing is actually consummated, the Lessee shall be deemed to have
agreed to pay, upon demand, all costs and expenses reasonably incurred
by the Lessor and any Person participating with the Lessor in any way
in the financing of the Capital Addition or Material Structural Work,
including, but not limited to (a) fees and expenses of their respective
attorneys, (b) all photocopying expenses, if any, (c) the amount of any
filing, registration and recording taxes and fees, (d) documentary
stamp taxes and intangible taxes and (e) title insurance charges and
appraisal fees.
9.4 General Limitations. Without in any way limiting the Lessor's
options with respect to proposed Capital Additions or Material Structural Work,
(a) no Capital Addition or Material Structural Work shall be completed that
could, upon completion, significantly alter the character or purpose or detract
from the value or operating efficiency of the Leased Property, or significantly
impair the revenue-producing capability of the Leased Property, or adversely
affect the ability of the Lessee to comply with the terms of this Lease, (b) no
Capital Addition or Material Structural Work shall be completed which would tie
in or connect any Leased Improvements on the Leased Property with any other
improvements on property adjacent to the
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Leased Property (and not part of the Land covered by this Lease) including,
without limitation, tie-ins of buildings or other structures or utilities,
unless the Lessee shall have obtained the prior written approval of the Lessor,
which approval may be withheld in the Lessor's sole and absolute discretion and
(c;) all proposed Capital Additions and Material Structural Work shall be
architecturally integrated and consistent with the Leased Property.
9.5 Non-Capital Additions. The Lessee shall have the obligation and
right to make repairs, replacements and alterations which are not Capital
Additions as required by the other Sections of this Lease, but in so doing, the
Lessee shall always comply with and satisfy the conditions of Sections 9.2.1,
9.2.5 and 9.4, mutatis, mutandis. The Lessee shall have the right, from time to
time, to make additions, modifications or improvements to the Leased Property
which do not constitute Capital Additions or Material Structural Work as it may
deem to be desirable or necessary for its uses and purposes, subject to the same
limits and conditions imposed under Sections 9.2.1, 9.2.5 and 9.4. The cost of
any such repair, replacement, alteration, addition, modification or improvement
shall be paid by the Lessee and the results thereof shall be included under the
terms of this Lease and become a part of the Leased Property, without payment
therefor by the Lessor at any time. Notwithstanding the foregoing, all such
additions, modifications and improvements which affect the structure of any of
the Leased Improvements, or which involve the expenditure of more than FIFTY
THOUSAND and NO/100 DOLLARS ($50,000.00) in any consecutive twelve (12) month
period, shall be undertaken only upon compliance with the provisions of Section
13.1, all Legal Requirements and all other applicable requirements of this
Lease; provided, however, that in the event of a bona fide emergency during
which the Lessee is unable to contact the appropriate representatives of the
Lessor, the Lessee may commence such additions, modifications and improvements
as may be necessary in order to address such emergency without the Lessor's
prior approval, as long as the Lessee immediately thereafter advises the Lessor
of such emergency and the nature and scope of the additions, modifications and
improvements performed and obtains the Lessor's approval of the remaining work
to be completed.
9.6 Permitted Work. Notwithstanding Section 9.1 above, the Lessee shall
have the right to perform Permitted Work (as defined below) without the Lessor's
prior approval or consent as long as the Lessee gives to the Lessor prior notice
that the Lessee is undertaking such Permitted Work and provides the Lessor with
reasonably detailed plans and specifications describing the work to be done.
"Permitted Work" shall mean work to the Leased Improvements which will not
affect any of the structural elements of the Leased Improvements and which, in
the aggregate, costs less than FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00)
during any consecutive twelve (12) month period. Any work to the Facility,
regardless of cost, which (a) will affect any structural element of any of the
Leased Improvements and (b) is not otherwise subject to an approval of the
Lessor pursuant to any other provision of this Lease, shall still require the
prior written consent of the Lessor, which consent may be withheld by the Lessor
in its sole and absolute discretion.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
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10.1 Representations and Warranties. The Lessee hereby represents and
warrants to, and covenants and agrees with, the Lessor that:
10.1.1 Existence; Power; Qualification. The Lessee is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. The Lessee has all requisite
corporate power to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted and is duly
qualified to transact business and is in good standing in each
jurisdiction where such qualification is necessary or desirable in
order to carry out its business as presently conducted and as proposed
to be conducted. As of the date of this Lease, the Lessee does not have
any Subsidiaries and the Lessee is not a member of any partnership or
joint venture (except for each of the limited partnerships which have
been created with the Lessor's approval to be the sublessees of the
facilities known as Clare Bridge of Ft. Myers, Florida and Clare Bridge
of Tampa, Florida, respectively). Attached hereto as EXHIBIT C is a
true and correct list of all of the shareholders of the Lessee and
their respective ownership interests in the Lessee.
10.1.2 Valid and Binding. The Lessee is duly authorized to
make and enter into all of the Lease Documents to which the Lessee is a
party and to carry out the transactions contemplated therein. All of
the Lease Documents to which the Lessee is a party have been duly
executed and delivered by the Lessee, and each is a legal, valid and
binding obligation of the Lessee, enforceable in accordance with its
terms.
10.1.3 Single Purpose. The Lessee is, and during the entire
time that this Lease remains in force and effect the Lessee and any
other Acceptable Licensed Operator (other than the Guarantor or Current
Manager, if other than the Guarantor) shall be, engaged in
no business, trade or activity other than the operation of the Leased Property
for the Primary Intended Use and the Other Permitted Uses or the lease and
operation of other assisted living facilities and/or Alzheimer's dementia care
facilities where the Lessor or some other Meditrust Entity is the owner, lessor
or holder of a first priority fee mortgage on such other facility.
10.1.4 No Violation. The execution, delivery and performance of the
Lease Documents and the consummation of the transactions thereby contemplated
shall not result in any breach of, or constitute a default under, or result in
the acceleration of, or constitute an event which, with the giving of notice or
the passage of time, or both, could result in default or acceleration of any
obligation of any member of the Leasing Group under any of the Permits or
Contracts or any other contract, mortgage, lien, lease, agreement, instrument,
franchise, arbitration award, judgment, decree, bank loan or credit agreement,
trust indenture or other instrument to which any member of the Leasing Group is
a party or by which any member of the Leasing Group or the Leased Property may
be bound or affected and do not violate or contravene any Legal Requirement.
10.1.5 Consents and Approvals. Except as already obtained or filed, or
except as
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otherwise expressly contemplated in any of the Lease Documents, as the case may
be, no consent or approval or other authorization of, or exemption by, or
declaration or filing with, any Person and no waiver of any right by any Person
is required to authorize or permit, or is otherwise required as a condition of
the execution and delivery of any of the Lease Documents by any member of the
Leasing Group and the performance of such member's obligations thereunder or as
a condition to the validity (assuming the due authorization, execution and
delivery by the Lessor of the Lease Documents to which it is a party) and the
first priority of any Liens granted under the Lease Documents, except the filing
of the Financing Statements.
10.1.6 No Liens or Insolvency Proceedings. Each member of the Leasing
Group is financially solvent and there are no actions, suits, investigations or
proceedings including, without limitation, outstanding federal or state tax
liens, garnishments or insolvency or bankruptcy proceedings, pending or, to the
best of the Lessee's knowledge and belief; threatened:
(a) against or affecting any member of the Leasing Group,
which if adversely resolved to such member of the Leasing Group, would
materially adversely affect the ability of any of the foregoing to
perform their respective obligations under the Lease Documents;
(b) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use,
occupancy, possession or operation thereof; or
(c) which may involve or affect the validity, priority or
enforceability of any of the Lease Documents, at law or in equity, or
before or by any arbitrator or Governmental Authority.
10.1.7 No Burdensome Agreements. No member of the Leasing Group is a
party to any agreement the terms of which now have, or, as far as can be
reasonably foreseen, may have, a material adverse affect on its respective
financial condition or business or operation of the Leased Property for its
Primary Intended Use or any Other Permitted Use.
10.1.8 Commercial Acts. The Lessee's performance of and compliance with
the obligations and conditions set forth herein and in the other Lease Documents
will constitute commercial acts done and performed for commercial purposes.
10.1.9 Adequate Capital. Not Insolvent. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each of
the Lessee and the Guarantor, taken as a whole:
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds and capital to carry on its
business as now conducted or as contemplated to be conducted (in
accordance with the terms of the Lease Documents);
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(c) will own property having a value both at fair valuation
and at present fair saleable value greater than the amount required to
pay its debts as they become due; and
(d) will not be rendered insolvent as determined by applicable
law.
10.1.10 Not Delinquent. No member of the Leasing Group is delinquent or
claimed to be delinquent under any obligation for the payment of borrowed money
in excess of ONE HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00).
10.1.11 No Affiliate Debt: The Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether direct
or contingent) for borrowed money from the Guarantor (or any of its Affiliates)
or any Affiliate of the Lessee that is not fully subordinated to the Lease
Obligations pursuant to the Affiliated Party Subordination Agreement.
10.1.12 Taxes Current. Each member of the Leasing Group (a) has filed
all federal, state and local tax returns which are required to be filed and as
to which extensions are not currently in effect and (b) has paid all taxes,
assessments, impositions, fees and other governmental charges (including
interest and penalties) (i) which have become due pursuant to such returns or
pursuant to any assessment or notice of tax claim or deficiency received by each
such member of the Leasing Group and (ii) for which nonpayment could result in
assessment of a penalty against (1) such member of the Leasing Group other than
the Guarantor in excess of ONE THOUSAND and NO/100 DOLLARS ($1,000.00) or (2)
the Guarantor in excess of FIVE THOUSAND and NO/100 DOLLARS ($5,000.00). No tax
liability has been asserted by the Internal Revenue Service against any member
of the Leasing Group or any other federal, state or local taxing authority for
taxes, assessments, impositions, fees or other governmental charges (including
interest or penalties thereon) in excess of those already paid.
10.1.13 Financials Complete and Accurate. The financial statements of
each member of the Leasing Group given to the Lessor in connection with the
execution and delivery of the Lease Documents were true, complete and accurate,
in all material respects, and fairly presented the financial condition of each
such member of the Leasing Group as of the date thereof and for the periods
covered thereby, having been prepared in accordance with GAAP and such financial
statements disclosed all material liabilities. There has been no material
adverse change since such date with respect to the Tangible Net Worth of any
member of the Leasing Group or with respect to any other matters contained in
such financial statements, nor have any additional material liabilities,
including, without limitation, contingent liabilities, of any member of the
Leasing Group arisen or been incurred or asserted since such date. The
projections heretofore delivered to the Lessor continue to be reasonable (with
respect to the material assumptions upon which such projections are based) and
the Lessee reasonably anticipates the results projected therein will be
achieved, there having been (a) no material adverse change in the business,
assets or condition, financial or otherwise of any member of the Leasing Group
or the Leased Property and (b) no material depletion of the cash or decrease in
working capital of any member of the Leasing Group.
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10.1.14 Pending Actions. Notices and Reports.
(a) There is no action or investigation pending or, to the best
knowledge and belief of the Lessee, threatened, anticipated or contemplated
(nor, to the knowledge of the Lessee, is there any reasonable basis therefor)
against or affecting the Leased Property or any member of the Leasing Group (or
any Affiliate thereof) before any Governmental Authority, Accreditation Body or
Third Pasty Payor which could prevent or hinder the consummation of the
transactions contemplated hereby or call into question the validity of any of
the Lease Documents or any action taken or to be taken in connection with the
transactions contemplated thereunder or which in any single case or in the
aggregate might result in any material adverse change in the business,
prospects, condition, affairs or operations of the Lessee or the Guarantor or
the Leased Property (including, without limitation, any action to revoke,
withdraw or suspend any Permit necessary or desirable for the operation of the
Leased Property in accordance with its Primary Intended Use and any action to
transfer or relocate any such Permit to a location other than the Leased
Property) or any material impairment of the right or ability of the Lessee or
the Guarantor to carry on its operations as presently conducted or proposed to
be conducted or which may materially adversely impact reimbursement to the
Lessee for services rendered to beneficiaries of Third Party Payor Programs.
(b) Neither the Facility nor any member of the Leasing Group has
received any notice' of any claim, requirement or demand of any Governmental
Authority, Accreditation Body, Third Party Payor or any insurance body having or
claiming any licensing, certifying, supervising, evaluating or accrediting
authority over the Leased Property to rework or redesign the Leased Property,
its professional staff or its professional services, procedures or practices in
any material respect or to provide additional furniture, fixtures, equipment or
inventory or to otherwise take action so as to make the Leased Property conform
to or comply with any Legal Requirement;
(c) The most recent utilization reviews relating to the Leased Property
by all applicable Third Party Payors, Accreditation Bodies and Governmental
Authorities and reviews or scrutiny by any managed care or utilization review
companies have not had a material adverse impact on the utilization of units or
programs at the Leased Property. No claims or assertions have been made in any
utilization review that any of the practices or procedures used at the Leased
Property are improper or inappropriate other than such claims or assertions
which singly and in the aggregate will not have a material adverse impact on the
Leased Property; and
(d) The Lessee has delivered or caused to be delivered to the Lessor
true and correct copies of all licenses, inspection surveys and accreditation
reviews relating to the Leased Property, issued by any Governmental Authority or
Accreditation Body during the most recent licensing period, together with all
plans of correction relating thereto.
10.1.15 Compliance with Legal and Other Requirements.
(a) The Lessee and the Leased Property and the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession and
operation thereof comply with all applicable Legal Requirements and there is no
claim of any violation thereof known to the
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Lessee which could have a material adverse effect on the Leased Property or the
Lessee. Without limiting the foregoing, the Lessee is or will become the
licensed operator of the Facility, the Lessee has obtained all Permits that are
necessary to operate the-Leased Property in accordance with its Primary Intended
Use and the Other :permitted Uses, if any, and all such Permits are in full
force and effect.
(b) Except as previously delivered to the Lessor pursuant to Section
10.1.14(d) hereof, there are no outstanding notices of deficiencies, notices of
proposed action or orders of any kind relating to the Leased Property issued by
any Governmental Authority requiring conformity to any of the Legal Requirements
and which could have a material adverse effect on the Leased Property or the
Lessee.
(c) There exists no event of default by any party under the EDC Ground
Lease, the IDA Sublease or the Liberty Commons Sub-sublease nor is there any
event of default by any party with respect to any of the Bond-Related
Obligations.
10.1.16 No Action By Governmental Authority. There is no action
pending or, to the best knowledge and belief of the Lessee, recommended, by any
Governmental Authority or Accreditation Body to revoke, repeal, cancel, modify,
withdraw or suspend any Permit or Contract or to take any other action of any
other type which could have a material adverse effect on the Leased Property.
10.1.17 Property Matters.
(a) The Leased Property is free and clear of agreements, covenants and
Liens, except those agreements, covenants and Liens to which this Lease is
expressly subject, whether presently existing, as are listed on EXHIBIT B or
were listed on the UCC lien search results delivered to the Lessor at or prior
to the execution and delivery of this Lease (and were not required to be
terminated as a condition of the execution and delivery of this Lease), or which
may hereafter be created in accordance with the terms hereof (collectively
referred to herein as the "Permitted Encumbrances"); and the Lessee shall
warrant anal defend the Lessor's title to the Leased Property against any and
all claims and demands of every kind and nature whatsoever, subject to the
Permitted Encumbrances;
(b) There is no Condemnation or similar proceeding pending with
respect to or affecting the Leased Property, and the Lessee is not aware, to the
best of the Lessee's knowledge and belief, that any such proceeding is
contemplated;
(c) No part of the Collateral or the Leased Property has been damaged
by any fire or other casualty. The Leased Improvements, Fixtures and Tangible
Personal Property are in good operating condition and repair, ordinary wear and
tear excepted, free from known defects in construction or design;
(d) All buildings, facilities and other improvements necessary, both
legally and practically;, for the proper and efficient operation of the Facility
are located upon the Leased
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Property and all real property and personal property currently utilized by the
Lessee is included within the definition of the Leased Property or the
Collateral;
(e) The Leased Property abuts on and has direct vehicular access
to a public road or access to a public road via permanent, irrevocable,
appurtenant easements;
(f) The Leased Property constitutes a separate parcel for real
estate tax purposes and no portion of any real property that does not constitute
a portion of the Leased Property is part of the same tax parcel as any part of
the Leased Property;
(g) All utilities necessary for the use and operation of the
Facility are available to the' lot lines of the Leased Property:
(i) in sufficient supply and capacity;
(ii) through validly created and existing easements of record
appurtenant to or encumbering the Leased Property (which easements
shall not impede or restrict the operation of the Facility); and
(iii) without need for any Permits and/or Contracts to be
issued by or entered into with any Governmental Authority, except as
already obtained or executed, as the case may be, or as otherwise
shown to the satisfaction of the Lessor to be readily obtainable; and
(h) Since the initial construction of the Facility, except as may be
shown on the survey of the Leased Property that has been reviewed and approved
by the Lessor, the Lessee has made no structural alterations or improvements to
any of the Leased Improvements that changed the foot-print of any of the Leased
Improvements, added an additional story to any of the Leased Improvements,
decreased the amount of parking available on the Leased Property or otherwise
involved any alteration which would be regulated by applicable zoning
requirements.
10.1.18 Third Part Payor Agreements.
(a) The Lessee or the Facility is fully qualified as a provider of
services under and participates in all Third Party Payor Programs and referral
programs as is necessary for the prudent operation of the Facility in the
Lessee's good faith exercise of commercially reasonable business judgment.
(b) Attached hereto as EXHIBIT D is a list of national accounts and
local discount agreements, which constitute all of the agreements between the
Lessee or the Facility, on the one hand, and Third Party Payors on the other
hand, pursuant to which the Lessee or the Facility agrees to provide services
based on a discount factor from the rates regularly charged for services
rendered by the Lessee or the Facility.
(c) No member of the Leasing Group, nor the Facility has any rate
appeal currently
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pending before any Governmental Authority or any administrator of any Third
Party Payor Program or any other referral source other than such appeals which,
if determined adversely to any member of the Leasing Group or the Facility would
not have a materially adverse effect, either singly or in the aggregate, on the
financial condition of any member of the Leasing Group or the Facility.
(d) All cost reports and financial reports submitted to any Third Party
Payor with respect to the Facility by any member of the Leasing Group have been
materially accurate and complete and have not been misleading in any material
respect. As a result of any audits by any Third Party Payor, there are no
related recoupment claims made or contests pending or threatened other than such
recoupment claims or contests which, if determined adversely to any member of
the Leasing Group or the Facility, would not have a materially adverse effect,
either singly or in the aggregate, on the financial condition of any member of
the Leasing Group or the Facility. As of the date hereof, no cost reports for
the Facility remain open or unsettled other than those listed on EXHIBIT E.
10.1.19 Rate Limitations. Except as disclosed on EXHIBIT F, the State
currently imposes no restrictions or limitations on rates which may be charged
to private pay residents receiving services at the Facility.
10.1.20 Free Care. Except as disclosed on EXHIBIT G, there are no
Contracts, Permits or Legal Requirements which require that a percentage of
units or slots in any program at the Facility be reserved for Medicaid or
Medicare eligible patients or that the Facility provide a certain amount of
welfare, free or charity care or discounted or government assisted resident
care.
10.1.21 No Proposed Changes. The Lessee has no actual knowledge of any
Legal Requirements which have been enacted, promulgated or issued within the
eighteen (18) months preceding the date of this Lease or any proposed Legal
Requirements currently pending in the State which may materially adversely
affect rates at the Facility (or any program operated in conjunction with the
Facility) or the imposition of Medicaid, Medicare, charity, free care, welfare
or other discounted or government assisted residents at the Facility or require
that the Lessee or the Facility obtain a certificate of need, Section 11122
approval or the equivalent, which the Lessee or the Facility does not currently
possess.
10.1.22 ERISA. No employee pension benefit plan maintained by any
member of the Leasing Group has any accumulated funding deficiency within the
meaning of the ERISA, nor does any member of the Leasing Group have any material
liability to the PBGC established under ERISA (or any successor thereto) in
connection with any employee pension benefit plan (or other class of benefit
which the PBGC has elected to insure), and there have been no "reportable
events" (not waived) or "prohibited transactions" with respect to any such plan,
as those terms are defined in Section 4043 of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as now or hereafter amended, respectively.
10.1.23 No Broker. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection with the
transactions contemplated by
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the Lease Documents. The Lessor hereby represents and warrants to the Lessee
that no Meditrust Entity has dealt with any broker or agent in connection with
the transactions contemplated by the Lease Documents.
10.1.24 No Improper Payments. No member of the Leasing Group nor, to
the best knowledge of the Lessee, any of their respective Affiliates (other than
individuals who are not acting on behalf of any such non-individual Affiliates)
has:
(a) made any contributions, payments or gifts of its funds or property
to or for the private use of any government official, employee, agent or other
Person where either the payment or the purpose of such contribution, payment or
gifts is illegal under the laws of the United States, any state thereof or any
other jurisdiction (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for any
purpose or has made .any false or artificial entries on any of its books or
records for any reason;
(c) made any payments to any Person with the intention or
understanding that any part of such payment was to be used for any other purpose
other than that described in the' documents supporting the payment; or
(d) made any contribution, or has reimbursed any political gift or
contribution made by any other Person, to candidates for public office, whether
federal, state or local, where such contribution would be in violation of
applicable law.
10.1.25 Nothing Omitted.
(a) Neither this Lease, nor any of the other Lease Documents, nor any
certificate, agreement, statement or other document, including, without
limitation, any financial statements concerning the financial condition of any
member of the Leasing Group, furnished to or to be furnished to the Lessor or
its attorneys in connection with the transactions contemplated by the Lease
Documents, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to prevent all
statements contained herein and therein from being misleading.
(b) There is no fact within the special knowledge of the Lessee which
has not been disclosed herein or in writing to the Lessor that materially
adversely affects, or in the future, insofar as the Lessee can reasonably
foresee, may materially adversely affect the business, properties, assets or
condition, financial or otherwise, of any member of the Leasing Group or the
Leased Property.
10.1.26 No Margin Security. The Lessee is not engaged in the business
of extending. credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of the Meditrust Investment will be
used to purchase or carry any margin security or to extend credit to others for
the purpose of purchasing or carrying any margin security or in any other manner
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which would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System. The Lessee is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
10.1.27 No Default. No event or state of facts which
constitutes, or which, with notice or lapse of time, or both, could
constitute, a Lease Default has occurred and is continuing.
10.1.28 Principal Place of Business. The principal place of
business and chief executive office of the Lessee is located at 450 N.
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 (the "Principal
Place of Business").
10.1.29 Labor Matters. There are no proceedings now pending,
nor, to the best of the Lessee's knowledge, threatened with respect to
the operation of the Facility before the National Labor Relations
Board, State Commission on Human Rights and Opportunities, State
Department of Labor, U.S. Department of Labor or any other Governmental
Authority having jurisdiction of employee rights with respect to
hiring, tenure and conditions of employment, and no member of the
Leasing Group has experienced any material controversy with any
Facility administrator or other employee of similar stature or with any
labor organization.
10.1.30 Intellectual Property. The Lessee is duly licensed or
authorized to use all (if any) copyrights, rights of reproduction,
trademarks, trade-names, trademark applications, service marks, patent
applications, patents and patent license rights, (all whether
registered or unregistered, U.S. or foreign), inventions, franchises,
discoveries, ideas, research, engineering, methods, practices,
processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how and trade secrets which are used
in or necessary for the operation of the Facility in accordance with
its Primary Intended Use, without conflict with or infringement of any,
and subject to no restriction, lien, encumbrance, right, title or
interest in others.
10.1.31 Management Agreements. There is no Management
Agreement in force and effect as of the date hereof other than the
Current Management Agreement, and the Current Management Agreement
shall terminate not later than six (6) months after the Commencement
Date.
10.1.32 Fiscal Year. The fiscal year of each of the Lessee and
the Guarantor is the Fiscal Year.
10.2 Continuing Effect of Representations and Warranties. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term. Notwithstanding the
provisions of the foregoing sentence but without derogation from any other terms
and provisions of this Lease, including, without limitation, those terms and
provisions containing covenants to be performed or conditions to be satisfied on
the part of the
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Lessee, the representations and warranties contained in Sections 10.1.6, 10.1.7,
10.1.10, 10.1.14, 10.1.15, 10.1.17(b), l0.1.17(c), 10.1.18(b), 10.1.18(c),
10.1.19, 10.1.20, 10.1.21, 10.1.22, 10.1.25(b), 10.1.28, 10.1..29, in the second
sentence of Section 10.1.12, in the second and third sentences of Section
10.1.'113, and in the second and third sentences of Section 10.1.18(d) shall not
constitute continuing representations and warranties throughout the Term.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 Status Certificates. At any time, and from time to time, upon
request from the Lessor, the Lessee; shall furnish to the Lessor, within ten
(10) Business Days' after receipt of such request, an Officer's Certificate
certifying that this Lease is unmodified and in full force and effect (or that
this Lease is in full force and effect as modified and setting forth the
modification) and the dates to which the Rent has been paid. Any Officer's
Certificate furnished pursuant to this Section shall be addressed to any
prospective purchaser or mortgagee of the Leased Property as the Lessor may
request and may be relied upon by the Lessor and any such prospective purchaser
or mortgagee of the Leased Property.
11.2 Financial Statements; Reports; Notice and Information.
11.2.1 Obligation To Furnish. The Lessee will furnish and
shall cause to be furnished to the Lessor the following statements,
information and other materials:
(a) Annual Statements. Within ninety (90) days after
the end of each of their respective fiscal years, (i) a copy
of the Consolidated Financials for each of (x) the Lessee, (y)
the Guarantor and (z) any other Acceptable Licensed Operator
(other than the Current Manager) for the preceding fiscal
year, certified and audited (only with respect to the
Guarantor) by, and with the unqualified opinion of,
independent certified public accountants from a nationally
recognized public accounting firm (it being hereby
acknowledged that KPMG Peat Marwick is acceptable for this
purpose) and certified as true and correct by the Lessee, the
Guarantor or the applicable Acceptable Licensed Operator
(other than the Current Manager), as the case may be (and,
without limiting anything else contained herein, the
Consolidated Financials for the Lessee and for any other
Acceptable Licensed Operator (other than the Current Manager)
shall include a detailed income statement for Leased Property
as of the last day of such fiscal year and an unaudited
statement of earnings from the Leased Property for such fiscal
year showing, among other things, all rents and other income
therefrom and all expenses paid or incurred in connection with
the operation of the Leased Property); (ii) separate
statements, certified as true and correct by the Lessee, the
Guarantor and any other Acceptable Licensed Operator (other
than the Current Manager), stating whether, to the best of the
signer's knowledge and belief after making due inquiry, the
Lessee, the Guarantor or such Acceptable Licensed Operator
(other than the Current Manager), as the case may be, is in
default in the
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performance or observance of any of the terms of this Lease or
any of the other Lease Documents and, if so, specifying all
such defaults, the nature thereof and the steps being taken to
immediately remedy the same; (iii) a copy of all letters from
the independent certified accountants engaged to perform the
annual audits referred to above, directed to the management of
the Lessee, the Guarantor or any other Acceptable Licensed
Operator (other than the Current Manager), as the case may be,
regarding the existence of any reportable conditions or
material weaknesses and (iv) a statement certified as true and
correct by the Lessee setting forth any and all Subleases
(excluding Resident Agreements) as of the last day of such
fiscal year, the respective areas demised thereunder, the
names of the Sublessees thereunder, the respective expiration
dates of such Subleases, the respective rentals provided for
therein, and such other information pertaining to such
Subleases as may be reasonably requested by the Lessor and (v)
evidence satisfactory to the Lessor that the Lessee has
fulfilled its obligation to make the Annual Facility Upgrade
Expenditure in accordance with the provisions of Section
11.4.11. Notwithstanding any provisions of this Section 11.2.1
(a) to the contrary, the Lessee may provide the Lessor with
Consolidated Financials covering each of the Lessee, the
Guarantor and any other Acceptable Licensed Operator (other
than the Current Manager) in accordance with the
aforementioned provisions; provided, however, the Lessee shall
provide the Lessor with a separate detailed balance sheet and
an unaudited statement of earnings for the Leased Property.
(b) Monthly Statements of Lessee. Within thirty (30) days after the
end of each calendar month during the pendency of this Lease, (i) an unaudited,
detailed month and year to date income and expense statement for the Leased
Property which shall include a comparison to corresponding budget figures,
occupancy statistics (including the actual number of residents, the number of
units available and total patient days for such month) and resident mix
breakdowns (for each resident day during such month classifying residents by the
type of care required and source of payment) and (ii) an express written
calculation showing the compliance or non-compliance, as the case may be, with
the specific financial covenants set forth in Section 11.3 for the applicable
period, including, with respect to the calculation of the Lessee's Rent Coverage
Ratio, a schedule substantially in the form attached hereto as EXHIBIT I (which
calculation with respect to the Lessee's Rent Coverage Ratio shall be provided
only within thirty (30) days after the end of each Fiscal Year).
(c) [Intentionally Omitted].
(d) Quarterly Statements of the Guarantor. Within forty-five (45) days
after the end of each Fiscal Quarter ending March 31, June 30 and September 30
respectively, all 10Q reports required to be filed with the Securities and
Exchange Commission for the Guarantor, certified as true and correct by the
Guarantor.
(e) Permits and Contracts. Promptly after the issuance or the
execution thereof, as the case may be, true and complete copies of (i) all
Permits which constitute operating licenses for the Facility issued by any
Governmental Authority having jurisdiction over assisted living
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matters and (ii) Contracts (involving payments in the aggregate in excess of
$100,000 per annum), including, without limitation, all Provider Agreements:
(f) Contract Notices. Promptly after the receipt thereof, true and
complete copies of any notices, consents, terminations or statements of any kind
or nature relating to any of the Contracts (involving payments in the aggregate
in excess of $100,000 per annum) other than those issued in the ordinary course
of business.
(g) Permit or Contract Defaults. Promptly after the receipt thereof,
true and complete copies of all surveys, follow-up surveys, licensing surveys,
complaint surveys, examinations, compliance certificates, inspection reports,
statements (other than those statements that are issued in the ordinary course
of business), terminations and notices of any kind (other than those notices
that are furnished in the ordinary course of business) issued or provided to the
Lessee or any other Acceptable Licensed Operator by any Governmental Authority,
Accreditation Body or any Third Party Payor, including, without limitation, any
notices pertaining to any delinquency in, or proposed revision of, the Lessee's
or any Acceptable Licensed Operator's obligations under the terms and conditions
of any Permits or Contracts now or hereafter issued by or entered into with any
Governmental Authority, Accreditation Body or Third Party Payor and the
response(s) thereto made by or on behalf of the Lessee or any Acceptable
Licensed Operator.
(h) Official Reports. Upon completion or filing thereof, complete
copies of all applications (other than those that are furnished in the ordinary
course of business), notices (other than those that are furnished in the
ordinary course of business), statements, annual reports, cost reports and other
reports or filings of any kind (other than those that are furnished in the
ordinary course of business) provided by the Lessee or any other Acceptable
Licensed Operator to any Governmental Authority, Accreditation Body or any Third
Party Payor with respect to the Leased Property.
(i) Other Information. With reasonable promptness, such other
information as the Lessor may from time to time reasonably request respecting
(i) the financial condition and affairs of each member of the Leasing Group and
the Leased Property and (ii) the licensing and operation of the Leased Property;
including, without limitation, audited financial statements, certificates and
consents from accountants and all other financial and licensing/operational
information as may be required or requested by any Governmental Authority.
(j) Default Conditions. As soon as possible, and in any event within
five (5) Business Days after the occurrence of any Lease Default, or any event
or circumstance which, with the giving of notice or the passage of time, or
both, could constitute a Lease Default, a written statement of the Lessee
setting forth the details of such Lease Default, event or circumstance and the
action which the Lessee proposes to take with respect thereto.
(k) Official Actions. Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any Governmental Authority or
Accreditation Body which could have a material adverse effect on (i) any member
of the Leasing Group to perform any of its obligations under any of the Lease
Documents or (ii) the Leased Property.
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(1) Audit Reports. Promptly after receipt, a copy of all audits or
reports submitted to any member of the Leasing Group by any independent public
accountant in connection with any annual, special or interim audits of the books
of any such member of the Leasing Group and, if requested by the Lessor, any
letter of comments directed by such accountant to the management of any such
member of the Leasing Group.
(m) Adverse Developments. Promptly after the Lessee acquires knowledge
thereof, written notice of
(i) the potential termination of any Permit or Provider
Agreement necessary for the operation of the Leased
Property;
(ii) any loss, damage or destruction to or of the Leased
Property in excess of FIFTY THOUSAND and NO/100 DOLLARS
($50,000.00) occurring within any twelve (12) month
period (regardless of whether the same is covered by
insurance);
(iii) any material controversy involving the Lessee or any
other Acceptable Licensed Operator and;
(iv) any controversy that calls into question the
eligibility of the Lessee, any other Acceptable
Licensed Operator or the Facility for the participation
in any Medicaid, Medicare or other Third Party Payor
Program;
(v) any refusal of reimbursement by any Third Party Payor
which, singularly or together with all other such
refusals by any Third Party Payors, could have a
material adverse effect on the financial condition of
the Lessee or any other Acceptable Licensed Operator;
and
(vi) any fact within the special knowledge of any member of
the Leasing Group, or any other development in the
business or affairs of any member of the Leasing Group,
which may be materially adverse to the business,
properties, assets or condition, financial or
otherwise, of any member of the Leasing Group or the
Leased Property.
(n) Intentionally Omitted.
(o) Responses To Inspection Reports. Within thirty (30) days after
receipt of an inspection report relating to the Leased Property from the Lessor,
a written response describing in detail prepared plans to address concerns
raised by the inspection report.
(p) Public Information. Upon the completion or filing, mailing or
other delivery thereof, complete copies of all financial statements, reports,
notices and proxy statements, if any, sent by any member of the Leasing Group
(which is a publicly held corporation) to its shareholders and
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of all reports, if any, filed by any member of the Leasing Group (which is a
publicly held corporation) with any securities exchange or with the Securities
Exchange Commission.
(q) Annual Budgets. At least thirty (30) days prior to the end of each
Fiscal Year, the Lessee, any Sublessee and/or any Manager (other than the
Current Manager) shall submit to the Lessor a preliminary annual financial
budget for the Facility for the next Fiscal Year, a preliminary capital
expenditures budget for the Facility for the next Fiscal Year and a report
detailing the capital expenditures made in the then current Fiscal Year and on
or before the end of the first month of each Fiscal Year, the Lessee, any
Sublessee and/or any Manager (other than the Current manager) shall submit to
the Lessor revised finalized versions of such budgets and report.
11.2.2 Responsible Officer. Any certificate, instrument, notice, or other
document to be provided to the Lessor hereunder by any member of the Leasing
Group shall be signed by an executive officer of such member (in the event that
any of the foregoing is not an individual), having a position of Vice President
or higher and with respect to financial matters, any such certificate,
instrument, notice or other document shall be signed by the chief financial
officer of such member.
11.2.3 No Material Omission. No certificate, instrument,
notice or other document, including without limitation, any financial
statements furnished or to be furnished to the Lessor pursuant to the
terms hereof or of any of the other Lease Documents shall contain any
untrue statement of a material fact or shall omit to state any material
fact necessary in order to prevent all statements contained therein
from being misleading.
11.2.4 Confidentiality. The Lessor shall not disclose any
information received pursuant to the provisions of the Lease Documents
to any competitor of the Lessee and shall afford any such information
the same degree of confidentiality that the Lessor affords similar
information proprietary to the Lessor; provided. however, that the
Lessor does not in any way warrant or represent that such information
received from any member of the Leasing Group shall remain confidential
(and shall not be liable in any way for any subsequent disclosure of
such information .by any Person that the Lessor has provided such
information in accordance with the terms hereof, including, without
limitation, a disclosure by such Person to any competitor of the
Lessee) and provided, further, that the Lessor shall have the
unconditional right to (a) disclose any such information as the Lessor
deems necessary or appropriate in connection with any sale, transfer,
conveyance, participation or assignment of the Leased Property or any
of the Lease Documents or any interest therein and (b) use such
information in any litigation or arbitration proceeding between the
Lessor and any member of the Leasing Group. Without limiting the
foregoing, the Lessor may also utilize any information furnished to it
hereunder as and to the extent (i) counsel to the Lessor determines
that such utilization is necessary pursuant to 15 U.S.C. 77a-77aa or 15
U.S.C. 78a-78jj and the rules and regulations promulgated thereunder,
(ii) the Lessor is required or requested by any Governmental Authority
to disclose any such information and/or (iii) the Lessor is requested
to disclose any such
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information by any of the Meditrust Entities' lenders or potential
lenders. The Lessor shall not be liable in any way for any subsequent
disclosure of such information by any Person to whom the Lessor
provided such information in accordance with the terms hereof.
Nevertheless, in connection with any such disclosure, the Lessor shall
inform the recipient of any such information of the confidential nature
thereof. The Lessor shall observe any prohibitions or limitations on
the disclosure of any such information under applicable confidentiality
law or regulations, to the extent that the same are applicable to such
information, including, without limitation, any duly enacted "Patients'
Bill of Rights" or similar legislation, including such limitations as
may be necessary to preserve the confidentiality of the
facility-patient relationship and the physician-patient privilege.
11.3 Financial Covenants. The Lessee covenants and agrees that,
throughout the Term and as long as the Lessee is in possession of the Leased
Property:
11.3.1 Rent Coverage Ratio. The Lessee shall comply with
the provisions of the Agreement Regarding Related Lease Transactions
pertaining to Rent Coverage Ratio.
11.3.2 [Intentionally Omitted.
11.3.3 [Intentionally Omitted].
11.3.4 [Intentionally Omitted.
11.3.5 Current Ratio - Guarantor. The Guarantor shall achieve, as of
December 31, 1997, a ratio of Consolidated Current Assets to Consolidated
Current Liabilities equal to or greater than 0.5 to 1 and, as of December 31 of
each year thereafter during the Term, a ratio of Consolidated Current Assets to
Consolidated Current Liabilities equal to or greater than 1.0 to 1; provided
however that if a Permitted Transaction (as defined in Section 16.1(h)(vi))
occurs, or if increased ratios are triggered by a Permitted Merger pursuant to
Section 16.1(i), then such ratios shall increase to 1.0 to 1.0 and 1.2 to 1.0,
respectively.
11.3.6 Net Worth of Guarantor After a Permitted Transaction or
Permitted Merger. From and after the occurrence of a Permitted Transaction or if
triggered by a Permitted Merger pursuant to Section 16.1(i), the Guarantor shall
maintain a "Net Worth" (determined in accordance with GAAP) of not less than
FIFTY FIVE MILLION DOLLARS ($55,000,000.00).
11.3.7 Tangible Net Worth - Guarantor. The Guarantor shall maintain,
at all times, a Tangible Net Worth of not less than FORTY MILLION AND NO/100
DOLLARS ($40,000,000.00).
11.3.8 No Indebtedness. The Lessee shall not create, incur, assume or
suffer to exist any liability for borrowed money except (i) Indebtedness to the
Lessor under the Lease Documents and, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred upon
customary terms in the ordinary course of business, (iv) Indebtedness created in
connection with any financing of any Capital Addition, provided, that each such
financing has
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been approved by the Lessor in accordance with the terms of Article 9 hereof,
(v) Indebtedness to any Affiliate, provided, that, such Indebtedness is fully
subordinated to the Lease Obligations pursuant to the Affiliated Party
Subordination Agreement, (vi) other Indebtedness of the Lessee in the aggregate
amount not to exceed TWO HUNDRED THOUSAND and NO/100 DOLLARS ($200,000.00)
incurred, for the exclusive use of the Leased Property, on account of purchase
money indebtedness or finance lease arrangements, each of which shall not exceed
the fair market value of the assets or property acquired or leased and shall not
extend to any assets or property other than those purchased or leased, (vii)
purchase money security interests in equipment and equipment leases which comply
with the provisions of Section 6.1.2 and (viii) the Bond-Related Obligations.
11.3.9 No Guaranties. The Lessee shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise to invest in any debtor or otherwise to assure any creditor against
loss) in connection with any Indebtedness of any other Person, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
11.4 Affirmative Covenants. The Lessee covenants and agrees that
throughout the Term and any periods thereafter that the Lessee remains in
possession of the Leased Property:
11.4.1 Maintenance of Existence. If the Lessee is a
corporation, trust or partnership, during the entire time that this
Lease remains in full force and effect, the Lessee shall keep in effect
its existence and rights as a corporation, trust or partnership under
the laws of the state of its incorporation or formation and its right
to own property and transact business in the State.
11.4.2 Materials. Except as provided in Section 6.1.2, the
Lessee shall not suffer the use in connection with any renovations or
other construction relating to the Leased Property of any materials,
fixtures or equipment intended to become part of the Leased Property
which are purchased upon lease or conditional bill of sale or to which
the Lessee does not have absolute and unencumbered title, and the
Lessee covenants to cause to be paid punctually all sums becoming due
for labor, materials, fixtures or equipment used or purchased in
connection with any such renovations or construction, subject to the
Lessee's right to contest to the extent provided for in Article 15.
11.4.3 Compliance With Legal Requirements And Applicable
Agreements. The Lessee and the Leased Property and all uses thereof
shall comply with (i) all Legal Requirements, (ii) all Permits and
Contracts, (iii) all Insurance Requirements, (iv) the Lease Documents,
(v) the Permitted Encumbrances and (vi) the Appurtenant Agreements.
11.4.4 Books And Records. The Lessee shall cause to be kept
and maintained, and shall permit the Lessor and its representatives to
inspect at ,all reasonable times, accurate books of accounts in which
complete entries will be made in accordance with
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GAAP reflecting all financial transactions of the Lessee (showing, at a
minimum, all income and expenses of the Leased Property as a
discernible component of such books of account).
11.4.5 Participation in Third Party Payor Programs. The
Lessee and any other Acceptable Licensed Operator shall participate in
all Third Party Payor Programs (which would be participated in by a
prudent operator in the good faith exercise of commercially reasonable
business judgment), in accordance with all requirements thereof
(including, without limitation, all applicable Provider Agreements),
and shall remain eligible to participate in such Third Party Payor
Programs, all as shall be necessary for the prudent operation of the
Facility in the good faith exercise of commercially reasonable
business judgment.
11.4.6 Conduct of its Business. The Lessee will maintain, and cause any
Sublessee and any Manager to maintain, experienced and competent professional
management with respect to its business and with respect to the Leased Property.
The Lessor agrees that management by the executive officers listed on EXHIBIT J
attached hereto is satisfactory for the purposes of this provision. The Lessee,
any Sublessee and any Manager shall conduct, in the ordinary course, the
operation of the Facility, and the Lessee and any other Acceptable Licensed
Operator (other than the Guarantor, if applicable, or the Current Manager) shall
not enter into any other business or venture during the Term or such time as the
Lessee or any other Acceptable Licensed Operator (other than the Current
Manager) is in possession of the Leased Property, other than the development,
ownership and/or operation of any other health care facility owned or financed
by any Meditrust Entity.
11.4.7 Address. The Lessee shall provide the Lessor thirty (30) days'
prior written notice of any change of its Principal Place of Business from. its
current Principal Place of Business. The Lessee shall maintain the Collateral,
including without limitation, all books and records relating to its business,
solely at its Principal Place of Business and at the Leased Property. The Lessee
shall not remove the Collateral, including, without limitation, any books or
records relating to the Lessee's business from either the Leased Property or the
Lessee's Principal Place of Business.
11.4.8 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease or the Affiliated Party
Subordination Agreement, any payments to be made by the Lessee to (a) any member
of the Leasing Group (or any Affiliate of any member of the Leasing Group) or
(b) any Affiliate of the Lessee, in connection with any transaction between the
Lessee and such Person, including, without limitation, the purchase, sale or
exchange of any property, the rendering of any service to or with any such
Person (including, without limitation, all allocations of any so-called
corporate or central office costs, expenses and charges of any kind or nature)
or the making of any loan or other extension of credit or the making of any
equity investment, shall be subordinate to the complete payment and performance
of the Lease Obligations; provided. however, that all such subordinated payments
may be paid at any time unless: (x) after giving effect to such payment, the
Lessee shall be unable to comply with any of its obligations under any of the
Lease Documents or (y) a Lease Default has occurred and is continuing and has
not been expressly waived in writing by the Lessor or an event or state of
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facts exists, which, with the giving of notice or the passage of time, or both,
would constitute a Lease Default.
11.4.9 Inspection. At reasonable times and upon reasonable notice, the
Lessee shall permit (and shall cause arty other Acceptable Licensed Operator to
permit) the Lessor and its authorized representatives (including, without
limitation, the Consultants) to inspect the Leased Property as provided in
Section 7.1 above.
11.4.10 Additional Property. In the event that at any time during the
Term, the Lessee holds the fee title to or a leasehold interest in (a) any
personal property which was purchased or financed by a Meditrust Entity or which
replaces any personal property purchased or financed by a Meditrust Entity or
which is a Fixture or (b) any real property and such real or personal property
is used as an integral part of the operation of the Leased Property (but is not
subject to this Lease), the Lessee shall (i) provide the Lessor with prior
notice of such acquisition and (ii) shall take such actions and enter into such
agreements as the Lessor shall reasonably request in order to grant the Lessor a
first priority mortgage or other security interest in such real property and
personal property, subject only to the Permitted Encumbrances and other Liens
reasonably acceptable to the Lessor.
11.4.11 Acceptable Licensed Operator. In the event that the Lessee
proposes that any other Acceptable Licensed Operator become the licensed
operator of the Facility, the Lessee shall so advise the Lessor and, subject to
the Lessor's review and approval of any applicable Sublease or Management
Agreement (pursuant to which the proposed Acceptable Licensed Operator shall
operate the Facility), the Lessor shall consent to such operation of the
Facility by the proposed Acceptable Licensed Operator, as long as, prior to or
contemporaneously with the commencement of the operation of the Facility by such
proposed Acceptable Licensed Operator and without limiting any other terms and
conditions of the Lease Documents, the Lessor receives (a) such evidence as the
Lessor may request evidencing that the proposed Acceptable Licensed Operator has
received all Permits necessary for the operation of the Facility in accordance
with its Primary Intended Use, (b) such documents executed by the proposed
Acceptable Licensed Operator as the Lessor may request to maintain and protect
the Lessor's security for the Lease Obligations (including, without limitation,
documents in form and substance substantially similar to the Permits Assignment
and Security Agreement), (c) a copy of the proposed Acceptable Licensed
Operator's articles of incorporation as certified by the Secretary of State of
the state of its incorporation, (d) a certificate of the Secretary of State of
the state of incorporation of the proposed Acceptable Licensed Operator to the
effect that the proposed Acceptable Licensed Operator is in legal existence and
good standing on the records of such Secretary of State as of the date of such
Certificate, (e) a copy of the bylaws of the proposed Acceptable Licensed
Operator as certified by the Secretary of the proposed Acceptable Licensed
Operator, (t) resolutions certified by the Secretary of the proposed Acceptable
Licensed Operator evidencing the execution and delivery of the documents
required under this Section 11.4.11 by the Lessor and (g;) if requested by the
Lessor, a due authorization and enforceability opinion, addressed to the Lessor,
in form and substance reasonably acceptable to the Lessor, rendered by counsel
to the Lessee and the proposed Acceptable Licensed Operator, opining as to the
due authorization, execution, delivery and enforceability of the documents
required under this Section 11.4.11 by
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the Lessor.
11.4.12 [Intentionally Omitted.
11.5 Additional Negative Covenants. The Lessee covenants and agrees
that, throughout the Term and such time as the Lessee remains in possession of
the Leased Property:
11.5.1 Restrictions Relating to Lessee. Except as may
otherwise be expressly provided in any of the other Lease Documents,
the Lessee shall not, without the prior written consent of the Lessor,
in each instance, which consent may be; withheld in the sole and
absolute discretion of the Lessor:
(a) convey, assign, hypothecate, transfer,
dispose of or encumber, or permit the conveyance, assignment,
transfer, hypothecation, disposal or encumbrance of all or any
part of any legal or beneficial interest in this Lease, its
other assets or the Leased Property; provided, however, that
this restriction shall not apply to (i) the Permitted
Encumbrances that may be created after the date hereof
pursuant to the Lease Documents; (ii) Liens created in
accordance with the applicable provisions of Section 6.1.2
against Tangible Personal Property securing Indebtedness
permitted under Section 11.3.8(vi) relating to equipment
leasing or financing for the exclusive use of the Leased
Property; (iii) the sale, conveyance, assignment,
hypothecation, lease or other transfer of any material asset
or assets (whether now owned or hereafter acquired), the fair
market value of which equals or is less than TWENTY-FIVE
THOUSAND and NO/100 DOLLARS ($25,000.00), individually, or ONE
HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00)
collectively; (iv) without limitation as to amount, the
disposition in the ordinary course of business of any
obsolete, worn out or defective fixtures, furnishings or
equipment used in the operation of the Leased Property
provided that the same are replaced with fixtures, furnishings
or equipment of equal or greater utility or value or the
Lessee provides the Lessor with an explanation (reasonably
satisfactory to the Lessor) as to why such fixtures,
furnishings or equipment is no longer required in connection
with the operation of the Leased Property; (v) without
limitation as to amount, any sale of inventory by the Lessee
in the ordinary course of business; (vi) agreements entered
into with utility companies creating easements in favor of
such companies as are required to service the Facility,
provided, however, the term of any such. agreement shall not
extend beyond the Term and shall be in form reasonably
acceptable to the Lessor; and (vii) subject to the terms of
the Pledge Agreement and the Affiliated Party Subordination
Agreement, distributions to the shareholders of the Lessee;
(b) permit the use of the Facility for any
purpose other than the Primary Intended Use and the Other
Permitted Uses;
(c) subject to the terms of Section 11.4.11,
permit any Person other than the Lessee to be the Licensed
Operator of the Facility; or
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(d) liquidate, dissolve or merge or consolidate
with any other Person.
11.5.2 No Liens. The Lessee will not directly or indirectly create or
allow to remain and will promptly discharge at its expense any Lien; title
retention agreement or claim upon or against the Leased Property (including the
Lessee's interest therein) or the Lessee's interest in this Lease or any of the
other Lease Documents, or in respect of the Rent, excluding (a) this Lease and
any permitted Subleases, (b) the Permitted Encumbrances, (c) Liens which are
consented to in writing by the Lessor, (d) Liens for those taxes of the Lessor
which the Lessee is not required to pay hereunder, (e) Liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either not yet due or being
contested in strict compliance with the terms and conditions of Article 15, (f)
any Liens which are the responsibility of the Lessor pursuant to the provisions
of Article 20, (g) Liens for Impositions which are either not yet due and
payable or which are in the process of being contested in strict compliance with
the terms and conditions of Article 15 and (h) involuntary Liens caused by the
actions or omissions of the Lessor.
11.5.3 Limits on Affiliate Transactions. The Lessee shall not enter
into any transaction with any Affiliate, including, without limitation, the
purchase, sale or exchange of any property, the rendering of any service to or
with any Affiliate and the making of any loan or other extension of credit,
except in the ordinary course of, and pursuant to the reasonable requirements
of, the Lessee's business and upon fair and reasonable terms no less favorable
to the Lessee than would be obtained in a comparable arms'-length transaction
with any Person that is not an Affiliate.
11.5.4 Non-Competition. The Lessee acknowledges that upon and after
any termination of this Lease, any competition by any member of the Leasing
Group with any subsequent owner or subsequent lessee of the Leased Property (the
"Purchaser") would cause irreparable harm to the Lessor and any such Purchaser.
To induce the Lessor to enter into this Lease, the Lessee agrees that, from and
after the end of the seventh (7th) Lease Year and thereafter until the later of
(a) the expiration of this Lease or (b) the fifth (5th) anniversary of the
termination of this Lease on account of a Lease Default, without the prior
written consent of the Lessor (which consent shall not be unreasonably withheld
or delayed), no member of the Leasing Group nor any Subsidiary of any member of
the Leasing Group (collectively, the "Limited Parties") shall be involved in any
capacity in or lend any of their names to or engage in any capacity in any
assisted living facility (or other facility operated for any use included within
the definition of the Primary Intended Use), center, unit or program (or in any
Person engaged in any such activity or any related activity competitive
therewith), excluding however any of the facilities described on Schedule 11.5
attached hereto (collectively, the "Excluded Facilities"), whether such
competitive activity (the "Competitive Activity") shall be as an officer,
director, owner, employee, agent, advisor, independent contractor, developer,
lender, sponsor, venture capitalist, administrator, manager, investor, partner,
joint venturer, consultant or other participant in any capacity whatsoever with
respect to an assisted living facility (or other facility operated for any use
included within the definition of Primary Intended Use), center, unit or program
located within a seven (7) mile radius of the Leased Property.
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The Lessee hereby acknowledges and agrees that none of the time span,
scope or area covered by the foregoing restrictive covenants is or are
unreasonable and that it is the specific intent of the Lessee that each and all
of the restrictive covenants set forth hereinabove shall be valid and
enforceable as specifically set forth herein. The Lessee further agrees that
these restrictions are special, unique, extraordinary and reasonably necessary
for the protection of the Lessor and any Purchaser and that the violation of any
such covenant by any of the Limited Parties would cause irreparable damage to
the Lessor and any Purchaser for which a legal remedy alone would not be
sufficient to fully protect such parties.
Therefore, in addition to and without limiting any other remedies
available at law or hereunder, in the event that any of the Limited Parties
breaches any of the restrictive covenants hereunder or shall threaten breach of
any of such covenants, then the Lessor and any Purchaser shall be entitled to
obtain equitable remedies, including specific performance and injunctive relief,
to prevent or otherwise restrain a breach of this Section 11.5.4 (without the
necessity of posting a bond) and, unless the Lessee prevails, to recover any and
all costs and expenses (including, without limitation, attorneys' fees and
expenses and court costs) reasonably incurred in enforcing the provisions of
this Section 11.5.4. The existence of any claim or cause of action of any of the
Limited Parties or any member of the Leasing Group against the Lessor or any
Purchaser, whether predicated on this Lease or otherwise, shall not constitute a
defense to the enforcement by the Lessor or any Purchaser of the foregoing
restrictive covenants and the Limited Parties shall not defend on the basis that
there is an adequate remedy at law.
Without limiting any other provision of this Lease, the parties hereto
acknowledge that the foregoing restrictive covenants are severable and separate.
If at any time any of the foregoing restrictive covenants shall be deemed
invalid or unenforceable by a court having jurisdiction over this Lease, by
reason of being vague or unreasonable as to duration, or geographic scope or
scope of activities restricted, or for any other reason, such covenants shall be
considered divisible as to such portion and such covenants shall be immediately
amended and reformed to include only such covenants as are deemed reasonable and
enforceable by the court having jurisdiction over this Lease to the full
duration, geographic scope and scope of restrictive activities deemed reasonable
and thus enforceable by said court; and the parties agree that such covenants as
so amended and reformed, shall be valid and binding as through the invalid or
unenforceable portion has not been included therein.
The provisions of this Section 11.5.4 shall survive the termination of
the Lease and any satisfaction of the Lease Obligations in connection therewith
or subsequent thereto. The parties hereto acknowledge and agree that any
Purchaser may enforce the provisions of this Section 11.5.4 as a third party
beneficiary.
11.5.5 No Default. The Lessee shall not commit any default or breach
under any of the Lease Documents.
11.5.6 Restrictions Relating to the Guarantor. If, at any time during
the Term, the Tangible Net Worth of the Guarantor is less than FORTY MILLION AND
NO/100 ($40,000,000.00), the Guarantor shall not, without the prior written
consent of the Lessor, in each
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instance, which consent may be withheld in the sole and absolute discretion of
the Lessor, convey, assign, donate, sell, mortgage or pledge any real or
personal property or take any other action which would have a materially adverse
effect upon the Tangible Net Worth or general financial condition of the
Guarantor.
11.5.7 [Intentionally Omitted].
11.5.8 ERISA. The Lessee shall not establish or permit any Sublessee to
establish any new pension or defined benefit plan or modify any such existing
plan for employees subject to ERISA, which plan provides any benefits based on
past service without the advance consent of the Lessor to the amount of the
aggregate past service liability thereby created, which consent shall not be
unreasonably withheld.
11.5.9 Forgiveness of Indebtedness. The Lessee will not waive, or
permit any Sublessee or Manager which is an Affiliate of the Lessee or the
Guarantor to waive any debt or claim, except in the ordinary course of its
business.
11.5.10 Value of Assets. Except as disclosed in the financial
statements provided to the Lessor as of the date hereof, the Lessee will not
write up (by creating an appraisal surplus or otherwise) the value of any assets
of the Lessee above their cost to the Lessee, less the depreciation regularly
allowable thereon, unless the same is allowed to be done by GAAP in the normal
course of business.
11.5.11 Changes in Fiscal Year and Accounting Procedures. The Lessee
may (a) change its fiscal year or capital structure or (b) change, alter, amend
or modify, but only in accordance with GAAP, any of its current accounting
procedures related to the method of revenue recognition, billing procedures or
determinations of doubtful accounts or bad debt expenses or (c) permit any of
its Subsidiaries to change its fiscal year provided that (i) the Lessee shall
have notified the Lessor of any such change not less than thirty (30) days prior
to the proposed effective date of such change and shall have promptly furnished
to the Lessor all such financial information as the Lessor may have reasonably
requested in order to determine the impact of such change on the Lessee's
financial statements, (ii) no such change shall be permitted if its effect would
be to enable the Lessee to satisfy any covenant contained in this Lease which,
absent such change, would not have been satisfied and (iii) the Lessee shall
have entered into any amendment to this Lease which the Lessor shall have
reasonably requested in order to maintain the intended effect of the covenants
contained in this Lease.
11.5.12 [Intentionally Omitted].
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 General Insurance Requirements. During the Term of this Lease and
thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the Lessee shall
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at its sole cost and expense keep the Leased Property and the Tangible Personal
Property located thereon and the business operations conducted on the Leased
Property insured as set forth below.
12.1.1 Types and Amounts of Insurance. The Lessee's insurance
shall include the following:
(a) property loss and physical damage insurance; on an
all-risk basis (with only such exceptions as the Lessor may in
its reasonable discretion approve) covering the Leased
Property (exclusive of Land) for its full replacement cost,
which cost shall be reset once a year at the Lessor's option,
with an agreed-amount endorsement and a deductible not in
excess of FIFTY THOUSAND and NO/100 DOLLARS ($50,000.00). Such
insurance shall include, without limitation, the following
coverages: (i) increased cost of construction, (ii) cost of
demolition, (iii) the value of the undamaged portion of the
Facility and (iv) contingent liability from the operation of
building laws, less, exclusions provided in the normal "All
Risk" insurance policy. During any period of construction,
such insurance shall be on a builder's-risk, completed value,
non-reporting form with permission to occupy;
(b) flood insurance (if the Leased Property or any
portion thereof is situated in an area which is considered a
flood risk area by the U.S. Department of Housing and Urban
Development or any other Governmental Authority that may in
the future have jurisdiction over flood risk analysis) in
limits acceptable to the Lessor;
(c) boiler and machinery insurance (including related
electrical apparatus and components) under a standard
comprehensive form, providing coverage against loss or damage
caused by explosion of steam boilers, pressure vessels or
similar vessels, now or hereafter installed on the Leased
Property, in limits acceptable to the Lessor;
(d) earthquake insurance (if deemed necessary by the
Lessor) in limits and with deductibles acceptable to the
Lessor;
(e) business interruption and/or rent loss insurance in
an amount equal to the annual Base Rent and Additional Rent
due hereunder plus the aggregate sum of the Impositions
relating to the Leased Property due and payable during one
year;
(f) comprehensive general public liability insurance
including coverages commonly found in the Broad Form
Commercial Liability Endorsements with amounts not less than
FIVE MILLION and NO/100 DOLLARS ($5,000,000.00) per occurrence
with respect to bodily injury and death and THREE MILLION and
NO/100 DOLLARS ($3,000,000.00) for property damage and with
all limits based solely upon occurrences at the Leased
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Property without any other impairment;
(g) professional liability insurance in an amount not
less than TEN MILLION and NO/100 DOLLARS ($10,000,000.00) for
each medical incident;
(h) physical damage insurance on an all-risk basis
(with only such exceptions as the Lessor in its reasonable
discretion shall approve) covering the Tangible Personal
Property for the full replacement cost thereof and with a
deductible not in excess of one percent (1%) of the full
replacement cost thereof;
(i) Workers' Compensation and Employers' Liability
Insurance providing protection against all claims arising out
of injuries to all employees of the Lessee or of any Sublessee
(employed on the Leased Property or any portion thereof) in
amounts equal for Workers' Compensation, to the statutory
benefits payable to employees in the State and for Employers'
Liability, to limits of not less than ONE HUNDRED THOUSAND and
NO/100 DOLLARS ($100,000.00) for injury by accident, ONE
HUNDRED THOUSAND and 1140/100 DOLLARS ($100,000.00) per
employee for disease, and FIVE HUNDRED THOUSAND and NO/100
DOLLARS ($500,000.00) disease policy limit;
(j) subsidence insurance (if deemed necessary by the
Lessor) in limits acceptable to the Lessor; and
(k) such other insurance as the Lessor from time to
time may reasonably require and also, as may from time to time
be required by applicable Legal Requirements and/or by any Fee
Mortgagee (other than a Meditrust Entity); provided, however,
that the cost of any additional insurance required by any Fee
Mortgagee shall be borne by the Lessor.
12.1.2 Insurance Company Requirements. All such insurance required by
this Lease or the other Lease Documents shall be issued and underwritten by
insurance companies licensed to do insurance business by, and in good standing
under the laws of, the State and which companies have and maintain a rating of
A- or better by A.M. Best Co.
12.1.3 Policy Requirements. Every policy of insurance from time to time
required under this Lease or any of the other Lease Documents (other than
worker's compensation) shall name the Lessor as owner, loss payee, secured party
(to the extent applicable) and an additional named insured as its interests may
appear. To the extent appropriate, the same policies may be used to insure the
Lessee's various interests in the Leased Property and to provide liability
coverage to the Lessee as long as combining the interests of the Lessor and the
Lessee in a single policy in no way impairs or diminishes the Lessor's rights in
such policies. If an insurance policy covers properties other than the Leased
Property, then the Lessor shall be so named with respect only to the Leased
Property. Each such policy, where applicable or appropriate, shall:
(a) include an agreed amount endorsement and loss payee,
additional named
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insured and secured party endorsements, in forms acceptable to the
Lessor in its sole and absolute discretion;
(b) include mortgagee, secured party, loss payable and
additional named insured endorsements reasonably acceptable to each Fee
Mortgagee; provided, however, that the cost of any additional insurance
required by any Fee Mortgagee shall be borne by the Lessor.
(c) provide that the coverages may not be cancelled or
materially modified except upon thirty (30) days' prior written notice
to the Lessor and any Fee Mortgagee;
(d) be payable to the Lessor and any Fee Mortgagee
notwithstanding any defense or claim that the insurer may have to the
payment of the same against any other Person holding any other interest
in the Leased Property;
(e) be endorsed with standard noncontributory clauses in favor
of and in form reasonably acceptable to the Lessor and any Fee
Mortgagee; provided, however, that the cost of any additional insurance
required by any Fee Mortgagee shall be borne by the Lessor.
(t) expressly waive any right of subrogation on the part of
the insurer against the Lessor, any Fee Mortgagee or the Leasing Group;
and
(g) otherwise be in such forms as shall be reasonably
acceptable to the Lessor.
12.1.4 Notices: Certificates and Policies. The Lessee shall promptly
provide to the Lessor copies of any and all notices (including notice of
non-renewal), claims and demands which the Lessee receives from insurers of the
Leased Property. At least ten (10) days prior to the expiration of any insurance
policy required hereunder, the Lessee shall deliver to the Lessor certificates
and evidence of insurance relating to all renewals and replacements thereof,
together with evidence, satisfactory to the Lessor, of payment of the premiums
thereon. The Lessee shall deliver to the Lessor original counterparts or copies
certified by the insurance company to be true and complete copies, of all
insurance policies required hereunder not later than the earlier to occur of (a)
ninety (90) days after the effective date of each such policy and (b) ten (10)
days after receipt thereof by the Lessee.
12.1.5 Lessor's Right to Place Insurance. If the Lessee shall fail to
obtain any insurance policy required hereunder by the Lessor, or shall fail to
deliver the certificate and evidence of insurance relating to any such policy to
the Lessor, or if any insurance policy required hereunder (or any part thereof)
shall expire or be cancelled or become void or voidable by reason of any breach
of any condition thereof, or if the Lessor determines that such insurance
coverage is unsatisfactory by reason of the failure or impairment of the capital
of any insurance company which wrote any such policy, upon demand by the Lessor,
the Lessee shall promptly obtain new or additional insurance coverage on the
Leased Property, or for those risks required to be insured
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by the provisions hereof, satisfactory to the Lessor, and, at its option, if the
Lessee fails to obtain any insurance coverage required under this Lease or after
demand by the Lessor, the Lessor may obtain such insurance and pay the -premium
or premiums therefor; in which event, any amount so paid or advanced by the
Lessor and all costs and expenses incurred in connection therewith (including,
without limitation, attorneys' fees and expenses and court costs), shall be a
demand obligation of the Lessee to the Lessor, payable as an Additional Charge.
12.1.6 Payment of Proceeds. All insurance policies required hereunder
(except for general public liability, professional liability and workers'
compensation and employers liability insurance) shall provide that, in the event
of loss, injury or damage, all proceeds shall be paid to the Lessor alone
(rather than jointly to the Lessee and the Lessor). The Lessor is hereby
authorized to adjust and compromise any such loss with the consent of the Lessee
or, following any Lease Default, if not cured, without the consent of the
Lessee, and to collect and receive such proceeds in the name of the Lessor and
the Lessee, and the Lessee appoints the Lessor (or any agent designated by the
Lessor) as the Lessee's attorney-in-fact with full power of substitution, to
endorse the Lessee's name upon any check in payment thereof. Subject to the
provisions of Article 13, such insurance proceeds shall be applied first toward
reimbursement of all costs and expenses reasonably incurred by the Lessor in
collecting said insurance proceeds, then toward payment of the Lease Obligations
or any portion thereof, then due and payable, in such order as the. Lessor
determines, and then in whole or in part toward restoration, repair or
reconstruction of the Leased Property for which such insurance proceeds shall
have been paid.
12.1.7 Irrevocable Power of Attorney. The power of attorney conferred
on the Lessor pursuant to the provisions of this Section 12.1, being coupled
with an interest, shall be irrevocable for as long as this Lease is in effect or
any Lease Obligations are outstanding, shall not be affected by any disability
or incapacity which the Lessee may suffer and shall survive the same. Such power
of attorney is provided solely to protect the interests of the Lessor and shall
not impose any duty on the Lessor to exercise any such power, and neither the
Lessor nor such attorney-in-fact shall be liable for any act, omission, error in
judgment or mistake of law, except as the same may result from its gross
negligence or wilful misconduct.
12:1.8 Blanket Policies. Notwithstanding anything to the contrary
contained herein, the Lessee's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by the Lessee and its Affiliates;
provided, however. that the coverage afforded to the Lessor shall not be reduced
or diminished or otherwise be different from that which would exist under a
separate policy meeting all other requirements of this Lease by reason of the
use of such blanket policy of insurance, and provided, further that the
requirements of this Section 12.1 are otherwise satisfied.
12.1.9 No Separate Insurance. The Lessee shall not, on the Lessee's own
initiative or pursuant to the request or requirement of any other Person, take
out separate insurance concurrent in form or contributing in the event of loss
with the insurance required hereunder to be furnished by the Lessee, or increase
the amounts of any then existing insurance by securing an additional policy or
additional policies, unless (a) all parties having an insurable interest in the
subject matter of the insurance, including the Lessor, arc included therein as
additional insureds
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and (b) losses are payable under said insurance in the same manner as losses are
required to be payable under this Lease. The Lessee shall immediately notify the
Lessor of the taking out of any such separate insurance or of the increasing of
any of the amounts of the then existing insurance by securing an additional
insurance policy or policies.
12.1.10 Assignment of Unearned Premiums. The Lessee hereby assigns to
the Lessor all rights of the Lessee in and to any unearned premiums on any
insurance policy required hereunder to be furnished by the Lessee which may
become payable or are refundable after the occurrence of an Event of Default
hereunder. In the event that this Lease is terminated for any reason (other than
the purchase of the Leased Property by the Lessee), the insurance policies
required to be maintained hereunder, including all right, title and interest of
the Lessee thereunder, shall become the absolute property of the Lessor.
In the event that this Lease is terminated for any reason (other than
the purchase of the Leased Property by the Lessee), the insurance policies
required to be maintained hereunder, excluding Workers' Compensation and
Employers Liability Insurance, shall continue to be maintained for a period of
fifteen (15) days following such termination; provided, however, that the Lessee
shall not be obligated to maintain commercial general liability and professional
liability insurance for such fifteen (15) day period to the extent that any such
insurance is unavailable from the then current insurer as a result of any such
termination. The provisions of this Section 12.1.10 shall survive any
termination of this Lease.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross negligence or
wilful misconduct of the Lessor or any of the other Indemnified Parties, as to
which no indemnity is provided, the Lessee hereby agrees to defend with counsel
acceptable to the Lessor, indemnify and hold harmless the Lessor and each of the
other Indemnified Parties from and against all damages, losses, claims,
liabilities, obligations, penalties, causes of action, costs and expenses
(including, without limitation, attorneys' fees, court costs and other expenses
of litigation) suffered by, or claimed or asserted against, the Lessor or any of
the other Indemnified Parties, directly or indirectly, based on, arising out of
or resulting from (a) the use and occupancy of the Leased Property or any
business conducted therein, (b) any act, fault, omission to act or misconduct by
(i) any member of the Leasing Group, (ii) any Affiliate of the Lessee or (iii)
any employee, agent, licensee, business invitee, guest, customer, contractor or
sublessee of any of the foregoing parties, relating to, directly or indirectly,
the Leased Property, (c) any accident, injury or damage whatsoever caused to any
Person, including, without limitation, any claim of malpractice, or to the
property of any Person in or about the Leased Property or outside of the Leased
Property where such accident, injury or damage results or is claimed to have
resulted from any act, fault, omission to act or misconduct by any member of the
Leasing Group or any Affiliate of the Lessee or any employee, agent, licensee,
contractor or sublessee of any of the foregoing parties, (d) any Lease Default,
(e) any claim brought or threatened against any of the Indemnified Parties by
any member of the Leasing Group (unless such member of the Leasing Group
prevails in such claim against one of the Indemnified Parties) or by any other
Person on account of (i) the Lessor's relationship with any member of the
Leasing Group pertaining in any way to the Leased
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Property and/or the transaction evidenced by the Lease Documents and/or (ii) the
Lessor's negotiation of, entering into and/or performing any of its obligations
and/or exercising any of its right and remedies under any of the Lease
Documents, (f) any attempt by any member of the Leasing Group or any Affiliate
of the Lessee to transfer or relocate any of the Permits to any location other
than the Leased Property and/or (g) the enforcement of this indemnity. Any
amounts which become payable by the Lessee under this Section 12.2.1 shall be a
demand obligation of the Lessee to the Lessor, payable as an Additional Charge.
The indemnity provided for in this Section 12.2.1 shall survive any termination
of this Lease.
12.2.2 Indemnified Parties. As used in this Lease the term "Indemnified
Parties" shall mean the Meditrust Entities, any Fee Mortgagee which is an
Affiliate of Meditrust and their respective successors, assigns, employees,
servants, agents, attorneys, officers, directors, shareholders, partners and
owners.
12.2.3 Defense of Actions by the Lessee. The Lessee's obligation to
defend, set forth in Section 12.2.1 above, may be satisfied by the defense of
such actions by counsel retained by any insurance carrier having an obligation
to defend any such action provided the counsel is acceptable to the Lessor in
its reasonable discretion. Further, if the insurance carrier having the
obligation to defend such action makes available insurance proceeds for the
payment of defense rather than retaining its own defense counsel, then such
insurance proceeds shall be made available to the Lessee to defray the costs of
such defense.
12.2.4 Limitation on Lessor Liability. Neither the Lessor nor any
Affiliate of the Lessor shall be liable to any member of the Leasing Group or
any Affiliate of any member of the Leasing Group, or to any other Person
whatsoever for any damage, injury, loss, compensation, or claim (including, but
not limited to, any claim for the interruption of or loss to any business,
conducted on the Leased Property) based on, arising out of or resulting from any
cause whatsoever, including, but not limited to, the following: (a) repairs to
the Leased Property, (b) interruption in use of the Leased Property; (c) any
accident or damage resulting from the use or operation of the Leased Property or
any business conducted thereon; (d) the termination of this Lease by reason of
Casualty or Condemnation, (e) any fire, theft or other casualty or crime, (f)
the actions, omissions or misconduct of any other Person, (g) damage to any
property, or (h) any damage from the flow or leaking of water, rain or snow. All
Tangible Personal Property and the personal property of any other Person on the
Leased Property shall be at the sole risk of the Lessee and the Lessor shall not
in any manner be held responsible therefor. Notwithstanding the foregoing, the
Lessor shall not be released from liability for any injury, loss, damage or
liability suffered directly by the Lessee to the extent caused directly by the
gross negligence or willful misconduct of the Lessor, any Affiliate of the
Lessor or any of their respective successors, assigns, employees, servants,
agents, attorneys, officers, directors, shareholders, partners or owners on or
about the Leased Property or in regards to the Lease; provided, however, that in
no event shall the Lessor, any Affiliate of the Lessor or any of their
respective successors, assigns, employees, servants, agents, attorneys,
officers, directors, shareholders, partners or owners have any liability based
on any loss with respect to or interruption in the operation of any business at
the Leased Property or for any indirect or consequential damages.
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12.2.5 Risk of Loss. During the Term of this Lease, the risk of loss or
of decrease in the enjoyment and beneficial use of the Leased Property in
consequence of any damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures,
levies or executions of Liens (other than those created by the Lessor in
accordance with the provisions of Article 20) is assumed by the Lessee and, in
the absence of the gross negligence or willful misconduct as set forth in
Section 12.2.4, the Lessor shall in no event be answerable or accountable
therefor (except for the obligation to account for insurance proceeds and Awards
to the extent provided for in Articles 13 and 14) nor shall any of the events
mentioned in this Section entitle the Lessee to any abatement of Rent (except
for an abatement, if any, as specifically provided for in Section 3.6).
ARTICLE 13
FIRE AND CASUALTY
13.1 Restoration Following Fire or Other Casualty.
13.1.1 Following Fire or Casualty. In the event of any damage or
destruction to the Leased Property by reason of fire or other hazard or
casualty, (a "Casualty"), the Lessee shall give immediate written notice thereof
to the Lessor and, subject to the terms of this Article 13, the Lessee shall
proceed with reasonable diligence, in full compliance with all applicable Legal
Requirements, to perform such repairs, replacement and reconstruction work
(referred to herein as the "Work") to restore the Leased Property to the
condition it was in immediately prior to such damage or destruction and to a
condition adequate to operate the Facility for the Primary Intended Use and the
Other Permitted Uses and in compliance with Legal Requirements. All Work shall
be performed and completed in accordance with all Legal Requirements and the
other requirements of this Lease within one hundred eighty (180) days following
the occurrence of the damage or destruction plus a reasonable time to compensate
for Unavoidable Delays (including for the purposes of this Section, delays in
obtaining Permits and in adjusting insurance losses), but in no event beyond
two-hundred and seventy (270) days following the occurrence of the Casualty.
13.1.2 Procedures. In the event that any Casualty results in
non-structural damage to the Leased Property in excess of FIFTY THOUSAND and
NO/100 DOLLARS ($50,000.00) or in any structural damage to the Leased Property,
regardless of the extent of such structural damage, prior to commencing the
Work, the Lessee shall comply with the following requirements:
(a) The Lessee shall furnish to the Lessor complete plans
and specifications for the Work (collectively, the "Plans and
Specifications"), for the Lessor's approval, in each instance, which
approval shall riot be unreasonably withheld or delayed. The Plans and
Specifications shall bear the signed approval thereof by an architect,
licensed to do business in the State, reasonably satisfactory to the
Lessor and shall be accompanied by a written estimate from the
architect, bearing the architect's seal, of the entire cost of
completing the Work, and to the extent feasible, the Plans and
Specifications shall
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provide for Work of such nature, quality and extent, that, upon the
completion thereof, the Leased Property shall be at least equal in
value and general utility to its value and general utility prior to the
Casualty and shall be adequate to operate the Leased Property for the
Primary Intended Use and the Other Permitted Uses;
(b) The Lessee shall furnish to the Lessor certified or
photostatic copies of all Permits and Contracts required by all
applicable Legal Requirements in ' connection with the commencement and
conduct of the Work;
(c) The Lessee shall furnish to the Lessor- a cash deposit or
a payment and performance bond sufficient to pay for completion of and
payment for the Work in an amount not less than the architect's
estimate of the entire cost of completing the Work, less the amount of
property insurance proceeds, if any, then held by the Lessor and which
the Lessor shall be required to apply toward restoration of the Leased
Property as provided in Section 13.2;
(d) The Lessee shall furnish to the Lessor such insurance with
respect to the Work (in addition to the insurance required under
Section 12.1 hereof) in such amounts and in such forms as is reasonably
required by the Lessee; and
(e) The Lessee shall not commence any of the Work until the
Lessee shall have complied with the requirements set forth in clauses
(a) through (d) immediately above, as applicable, and, thereafter, the
Lessee shall perform the Work diligently, in a good and workmanlike
fashion anal in good faith in accordance with (i) the Plans and
Specifications referred to in clause (a) immediately above, (ii) the
Permits and Contracts referred to in clause (b) immediately above and
(iii) all applicable Legal Requirements and other requirements of this
Lease; provided, however, that in the event of a bona fide emergency
during which the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such Work as may
be necessary in order to address such emergency without the Lessor's
prior approval, as long as the Lessee immediately thereafter advises
the Lessor of such emergency and the nature and scope of the Work
performed and obtains the Lessor's approval of the remaining Work to be
completed.
13.1.3 Disbursement of Insurance Proceeds. If, as provided in Section
13.2, the Lessor is required to apply any property insurance proceeds toward
repair or restoration of the Leased Property, then as long as the Work is being
diligently performed by the Lessee in accordance with the terms and conditions
of this Lease, the Lessor shall disburse such insurance proceeds from time to
time during the course of the Work in accordance with and subject to
satisfaction of the following provisions and conditions. The Lessor shall not be
required to make disbursements more often than at thirty (30) day intervals. The
Lessee shall submit a written request for each disbursement at least ten (10)
Business Days in advance and shall comply with the following requirements in
connection with each disbursement:
(a) Prior to the commencement of any Work, the Lessee shall
have received the Lessor's written approval of the Plans and
Specifications (which approval shall not be
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unreasonably withheld or delayed) and the Work shall be supervised by
an experienced construction manager with the consultation of an
architect or engineer qualified and licensed to do business in the
State.
(b) Each request for payment shall be accompanied by (x) a
certificate of the architect or engineer, bearing the architect's or
engineer's seal, and (y) a certificate of the general contractor,
qualified and licensed to do business in the State, that is performing
the Work (collectively, the "Work Certificates"), each dated not more
than ten (10) days prior to the application for withdrawal of funds,
and each stating:
(i) that all of the Work performed as of the date of the
certificates has been completed in compliance with the
approved Plans and Specifications, applicable Contracts and
all applicable Legal Requirements;
(ii) that the sum then requested to be withdrawn has been paid by
the Lessee or is justly due to contractors, subcontractors,
materialmen, engineers, architects or other Persons, whose
names and addresses shall be stated therein, who have
rendered or furnished certain services or materials for the
Work, and the certificate shall also include a brief
description of such services and materials and the principal
subdivisions or categories thereof and the respective amounts
so paid or due to each of said Persons in respect thereof and
stating the progress of the Work up to the date of said
certificate;
(iii) that the sum then requested to be withdrawn, plus all sums
previously withdrawn, does not exceed the cost of the Work
insofar as actually accomplished up to the date of such
certificate;
(iv) that the remainder of the funds held by the Lessor will be
sufficient to pay for the full completion of the Work in
accordance with the Plans and Specifications;
(v) that no part of the cost of the services and materials
described in the applicable Work Certificate has been or is
being made the basis of the withdrawal of any funds in any
previous or then pending application; and
(vi) that, except for the amounts, if any, specified in the
applicable Work Certificate to be due for services and
materials, there is no outstanding indebtedness known, after
due inquiry, which is then due and payable for work, labor,
services or materials in connection with the Work which, if
unpaid, might become the basis of a vendor's, mechanic's,
laborer's or materialman's statutory or other similar Lien
upon the Leased Property.
(c) The Lessee shall deliver to the Lessor satisfactory
evidence that the Leased Property and all materials and all property
described in the Work Certificates are free and clear of Liens, except
(i) Liens, if any, securing indebtedness due to Persons (whose names
and addresses and the several amounts due them shall be stated therein)
specified
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in an applicable Work Certificate, which Liens shall be discharged upon
disbursement of the funds then being requested, (ii) any Fee Mortgage
and (iii) the Permitted Encumbrances. The Lessor shall accept as
satisfactory evidence of the foregoing lien waivers in customary form
from the general contractor and all subcontractors performing the Work,
together with an endorsement of its title insurance policy (relating to
the Leased Property) in form acceptable to the Lessor, dated as of the
date of the making of the then current disbursement, confirming the
foregoing.
(d) If the Work involves alteration or restoration of the
exterior of any Leased Improvement that changes the footprint of any
Leased Improvement, the Lessee shall deliver to the Lessor, upon the
request of the Lessor, an "as-built" survey of the Leased Property
dated as of a date within ten (10) days prior to the making of the
first and final advances (or revised to a date within ten (10) days
prior to each such advance) showing no encroachments other than such
encroachments, if any, by the Leased Improvements upon or over the
Permitted Encumbrances as are in existence as of the date hereof.
(e) The Lessee shall deliver to the Lessor (i) an opinion of
counsel or licensed architect or engineer (satisfactory to the Lessor
both as to counsel, architect or engineer and as to the form of
opinion) prior to the first advance opining that all necessary Permits
for the repair, replacement and/or restoration of the Leased Property
have been obtained and that the Leased Property, if repaired, replaced
or rebuilt in accordance, in all material respects, with the approved
Plans and Specifications and such Permits, shall comply with all
applicable Legal Requirements and (ii) an architect's certificate
(satisfactory to the Lessor both as to the architect and as to the form
of the certificate) prior to the final advance, certifying that the
Leased Property was repaired, replaced or rebuilt in accordance, in all
material respects, with the approved Plans and Specifications and
complies with all applicable Legal Requirements, including, without
limitation, all Permits referenced in the foregoing clause (i).
(t) There shall be no Lease Default or any state of facts or
circumstance existing which, with the giving of notice and/or the
passage of time, would constitute any Lease Default.
The Lessor, at its option, may waive any of the foregoing requirements in whole
or in part in any instance. Upon compliance by the Lessee with the foregoing
requirements (except for such requirements, if any, as the Lessor may have
expressly elected to waive), and to the extent of (g) the insurance proceeds, if
any, which the Lessor may be required to apply to restoration of the Leased
Property pursuant to the provisions of this Lease and (y) all other cash
deposits made by the Lessee, the Lessor shall make available for payment to the
Persons named in the Work Certificate the respective amounts stated in said
certificate(s) to be due, subject to a retention of ten percent (10%) ass to all
hard costs of the Work (the "Retainage"). It is understood that the Retainage is
intended to provide a contingency fund to assure the Lessor that the Work shall
be fully completed in accordance with the Plans and Specifications and the
requirements of the Lessor. Upon the full and final completion of all of the
Work in accordance with the provisions hereof, the Retainage shall be made
available for payment to those Persons entitled thereto.
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Upon completion of the Work, and as a condition precedent to making any further
advance, in addition to the requirements set forth above, the Lessee shall
promptly deliver to the Lessor:
(i) written certificates of the architect or engineer, bearing the
architect's or engineer's seal, and the general contractor,
certifying that the Work has been fully completed in a good and
workmanlike manner in material compliance with the Plans and
Specifications and all Legal Requirements;
(iii) an endorsement of its title insurance policy (relating to the
Leased Property) in form reasonably acceptable to the Lessor
insuring the Leased Property against all mechanic's and
materialman's liens accompanied by the final lien waivers from
the general contractor and all subcontractors;
(iii) a certificate by the Lessee in form and substance reasonably
satisfactory to the Lessor, listing all costs and expenses in
connection with the completion of the Work and the amount paid
by the Lessee with respect to the Work; and
(iv) a temporary certificate of occupancy (if obtainable) and all
other applicable Permits and Contracts (that have not previously
been delivered to the Lessor) issued by or entered into with any
Governmental Authority with respect to the Leased Property and
the Primary Intended Use and the Other Permitted Uses and by the
appropriate Board of Fire Underwriters or other similar bodies
acting in and for the locality in which the Leased Property is
situated; provided, that within thirty (30) days prior to the
expiration of any temporary certificate of occupancy, the Lessee
shall obtain and deliver to the Lessor a permanent certificate
of occupancy for the Leased Property.
Upon completion of the Work and delivery of the documents required
pursuant to the provisions of this Section 13.1, the Lessor shall pay the
Retainage to the Lessee or to those Persons entitled thereto and if there shall
be insurance proceeds or cash deposits, other than the Retainage, held by the
Lessor in excess of the amounts disbursed pursuant to the foregoing provisions,
then provided that no Lease Default has occurred and is continuing, nor any
state of facts or circumstances which, with the giving of notice and/or the
passage of time would constitute a Lease Default, the-Lessor shall pay over such
proceeds or cash deposits to the Lessee.
No inspections or any approvals of the Work during or after
construction shall constitute a warranty or representation by the Lessor, or any
of its agents or Consultants, as to the technical sufficiency, adequacy or
safety of any structure or any of its component parts, including, without
limitation, any fixtures, equipment or furnishings, or as to the subsoil
conditions or any other physical condition or feature pertaining to the Leased
Property. All acts described in this paragraph, including any failure to act,
relating to the Lessor are performed solely for the benefit of the Lessor to
assure the payment and performance of the Lease Obligations and are not for the
benefit of the Lessee or the benefit of any other Person.
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13.2 Disposition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to Pay For Work. In the event of any
Casualty, except as provided for in Section 13.2.2, the Lessor shall release
proceeds of property insurance held by it to pay for the Work in accordance with
the provisions and procedures set forth in this Article 13, only if
(a) all of the terms, conditions and provisions of Sections 13.1
and 13.2.1 are satisfied;
(b) there does not then exist any Lease Default or any state of
facts or circumstance which, with the giving of notice and/or the
passage of time, would constitute such a Lease Default;
(c) The Lessee demonstrates to the Lessor's satisfaction that
the Lessee has the financial ability to satisfy the Lease Obligations
during such repair or restoration; and
(d) no Sublease (excluding Resident Agreements) material to the
operation of the Facility immediately prior to such damage or taking
shall have been cancelled or terminated, nor contain any still
exercisable right to cancel or terminate, due to such Casualty if and
to the extent that the; income from such Sublease is necessary in order
to avoid the violation of any of the financial covenants set forth in
this Lease or otherwise to avoid the creation of an Event of Default.
13.2.2 Proceeds Not To Be Released. If, as the result of any Casualty,
the Leased Property is damaged to the extent it is rendered Unsuitable For Its
Primary Intended Use and if either: (a) the Lessee, after exercise of diligent
efforts, cannot within a reasonable time (not in excess of ninety (90) days)
obtain all necessary Permits in order to be able to perform all required Work
and to again operate the Facility for its Primary Intended Use and the Other
Permitted Uses within two hundred and seventy (270) days from the occurrence of
the damage or destruction in substantially the manner as immediately prior to
such damage or destruction or (b) such Casualty occurs during the last
twenty-four (24) months of the Term and would reasonably require more than nine
(9) months to obtain all Permits and complete the Work, then the Lessee may
either (i) acquire the Leased Property from the Lessor for a purchase price
equal to the greater of (x) the Meditrust Investment or (y) the Fair Market
Value of the Leased Property minus the Fair Market Added Value, with the Fair
Market Value and the Fair Market Added Value to be determined as of the day
immediately prior to such Casualty and prior to any other Casualty which has not
been fully repaired, restored or replaced, in which event, the Lessee shall be
entitled upon payment of the full purchase price to receive all property
insurance proceeds (less any costs and expenses incurred by the Lessor in
collecting the same), or (ii) terminate this Lease, in which event (subject to
the provisions of the last sentence of this Section 13.2.2) the Lessor shall be
entitled to receive and retain the insurance proceeds; provided, however. that
the Lessee shall only have such right of termination effective upon payment to
the Lessor of all Rent and other sums due under this Lease and the other Lease
Documents through the date of termination plus an amount,
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which when added to the sum of (1) the Fair Market Value of the Leased Property
as affected by all unrepaired or unrestored damage due to any Casualty (and
giving due regard for delays, costs and expenses incident to completing all
repair or restoration required to fully repair or restore the same) ~l (2) the
amount of insurance proceeds actually received by the Lessor (net of costs and
expenses incurred by the Lessor in collecting the same) equals (3) the greater
of the Meditrust Investment or the Fair Market Value of the Leased Property
minus the Fair Market Added Value, with the Fair Market Value and the Fair
Market Added Value to be determined as of the day immediately prior to such
Casualty and prior to any other Casualty which has not been fully repaired. Any
acquisition of the Leased Property pursuant to the terms of this Section 13.2.2
shall be consummated in accordance with the terms and conditions of this Lease
and normal and customary practices of the State and at a time satisfactory to
the Lessor. If such termination becomes effective, the Lessor shall assign to
the Lessee any outstanding insurance claims.
13.2.3 Lessee Responsible for Short-Fall. If the cost of the
Work exceeds the amount of proceeds received by the Lessor from the
property insurance required under Article 12 (net of costs and expenses
incurred by the Lessor in collecting the same), the Lessee shall be
obligated to contribute any excess amount needed to repair or restore
the Leased Property and pay for the Work. Such amount shall be paid by
the Lessee to the Lessor together with any other property insurance
proceeds for application to the cost of the Work.
13.3 Tangible Personal Property. All insurance proceeds payable by
reason of any loss of or damage to any of the Tangible Personal Property shall
be paid to the Lessor as secured party, subject to the rights of the holders of
any Permitted Prior Security Interests, and, thereafter, provided that no Lease
Default, nor any fact or circumstance which with the giving of notice and/or the
passage of time could constitute a Lease Default, has occurred and is
continuing, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the Lessee for the cost of repairing or replacing the damaged Tangible
Personal Property, subject to the terms and conditions set forth in the other
provisions of this Article 13, mutatis mutamdis.
13.4 Restoration of Certain Improvements and the Tangible Personal
Property. If the Lessee is required or elects to restore the Facility, the
Lessee shall either (a) restore (i) all alterations and improvements to the
Leased Property made by the Lessee and (ii) the Tangible Personal Property or
(b) replace such alterations and improvements and the Tangible Personal Property
with improvements or items of the same or better quality and utility in the
operation of the Leased Property.
13.5 No Abatement of Rent. The obligation to pay Rent shall not abate
as a result of any Casualty. However, any insurance proceeds received by the
Lessor on account of rent loss insurance carried by the Lessee shall be credited
against Rent and any other amounts due hereunder or owed during the period of
restoration on account of such Casualty as provided in Section 13.8(b) below
provided no fact or circumstance exists which constitutes, or with notice, or
passage of time, or both, would constitute a Lease. Default.
13.6 Termination of Certain Rights. Any termination of this Lease
pursuant to this Article
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13 shall cause any right of the Lessee to extend the Term of this Lease, any
right of first refusal granted to the Lessee herein and any right of the Lessee
to purchase! the Leased Property contained in this Lease to be terminated and to
be without further force or effect.
13.7 Waiver. The Lessee hereby waives any statutory rights of
termination which may arise by reason of any damage or destruction to the Leased
Property due to any Casualty which the Lessee is obligated to restore or may
restore under any of the provisions of this Lease.
13.8 Application of Rent Loss and/or Business Interruption Insurance.
All proceeds of rent loss and/or business interruption insurance (collectively,
"Rent Insurance Proceeds") shall be paid to the Lessor and dealt with as
follows:
(a) if the Work has been promptly and diligently commenced by
the Lessee and is in the process of being completed in accordance with
this Lease and no fact or condition exists which constitutes, or which
with the giving of notice and/or the passage of time would constitute,
a Lease Default, the Lessor shall each month pay to the Lessee out of
the Rent Insurance Proceeds a sum equal to that amount, if any, of the
Rent Insurance Proceeds paid by the insurer which is allocable to the
rental loss and/or business interruption for the preceding month minus
an amount equal to the sum of the Rent due hereunder for such month
plus any Impositions relating to the Leased Property then due and
payable;
(b) if the Work has not been promptly and diligently commenced
by the Lessee or is not in the process of being completed in accordance
with this Lease, the Rent Insurance Proceeds shall be applied to any
Rent then due, and, to the extent sufficient therefor, an amount equal
to Base Rent, Additional Rent, Impositions and insurance premiums
payable for the next twelve (12) months, as reasonably projected by the
Lessor, shall be held by the Lessor as security for the Lease
Obligations and applied to the payment of Rent as it becomes due;
(e) if such Rent Insurance Proceeds received by the Lessor
(net of costs and expenses incurred by the Lessor in collecting the
same) exceed the amounts required under clauses (a) and (b) above, the
excess shall be paid to the Lessee, provided no fact or circumstance
exists which constitutes, or with notice, or passage of time, or both,
would constitute, a Lease Default; and
(d) if the Casualty causing such business interruption of the
Lessee is the result of the gross negligence or willful misconduct of
the Lessor or any of Lessor's employees, agents or contractors, then
the proceeds of business interruption insurance (as distinguished from
proceeds of rent loss insurance) shall be paid over to the Lessee,
provided no fact or circumstance exists which constitutes, or with
notice, or passage of time, or both, would constitute, a Lease Default.
Notwithstanding the foregoing, the Lessor may at its option use or release the
Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists, the
Lessor may apply all such
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insurance proceeds towards the Lease Obligations or hold such proceeds as
security therefor.
13.9 Obligation To Account. Within fifteen (15) Business Days of the
Lessee's written request, which may not be made not more than once in any three
(3) month period, the Lessor shall provide the Lessee with a written accounting
of the application of all insurance proceeds received by the Lessor.
ARTICLE 14
CONDEMNATION
14.1 Parties' Rights and Obligations. If during the Term there is any
Taking of all or any part of the Leased Property or any interest in this Lease,
the rights and obligations of the parties shall be determined by this Article
14.
14.2 Total Taking. If there is a permanent Taking of all or
substantially all of the Leased Property, this Lease shall terminate on the Date
of Taking.
14.3 Partial or Temporary Taking. If there is a Permanent Taking of a
portion of the Leased Property, or if there is a temporary Taking of all or a
portion of the :Leased Property, this Lease shall remain in effect so long as
the Leased Property is not thereby rendered permanently Unsuitable For Its
Primary Intended Use or temporarily Unsuitable For Its Primary Intended Use for
a period not likely to, or which does not, exceed two hundred and seventy (270)
days. If, however, the Leased Property is thereby so rendered permanently or
temporarily Unsuitable For Its Primary. Intended Use: (a) the Lessee shall have
the right to restore the; Leased Property, at its own expense, (subject to the
right under certain circumstances as provided for in Section 14.5 to receive the
net proceeds of an Award for reimbursement) to the extent possible, to
substantially the same condition as existed immediately before the partial or
temporary Taking or (b) the Lessee shall have the right to acquire the Leased
Property from the Lessor (i) upon payment of all Rent due through the date that
the purchase price is paid, for a purchase price equal to the greater of (x) the
Meditrust Investment or (y) the Fair Market Value of the Leased Property minus
the Fair Market Added Value, with the Fair Market Value of the Leased Property
and the Fair Market Added Value to be determined as of the day immediately prior
to such partial or temporary Taking and (ii) in accordance with the terms and
conditions set forth in Section 24.14; in which event, this Lease shall
terminate upon payment of such purchase price and the consummation of such
acquisition. Notwithstanding the foregoing, (1) if the Taking occurs at a time
when there is less than two (2) years remaining on the Term of this Lease and
the Lessee has elected to restore the Leased Property under clause (a) above,
then, unless the Lessee extends the Term pursuant to the provisions hereof, the
Lessor may overrule the Lessee's election and terminate this Lease as of the
date when the Lessee is required to surrender possession of the portion of the
Leased Property so taken and (2) if the Taking occurs at a time when there are
two (2) years or more remaining on the Term and the Lessee elects to acquire the
Leased Property under clause (b) above, then the Lessor may overrule the
Lessee's election and compel the Lessee to keep the Lease in full force and
effect and to restore the Leased Property as provided in clause (a) above, but
only if the Leased Property may be operated for at least eighty
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percent (80%) of the licensed unit capacity of the Facility if operated in
accordance with its Primary Intended Use. The Lessee shall exercise its election
under this Section 14.3 by giving the :Lessor notice thereof ("Lessee's Election
Notice") within sixty (60) days after the Lessee receives notice of the Taking.
The Lessor shall exercise its option to overrule the Lessee's election under
this Section 14.3 by giving the Lessee notice of the Lessor's exercise of its
rights under Section 14.3 within thirty (30) days after the Lessor receives the
Lessee's Election Notice. If, as the result of any such partial or temporary
Taking, this Lease is not terminated as provided above, the Lessee shall be
entitled to an abatement of Rent, but only to the extent, if any, provided for
in Section 3.6, effective as of the date upon which the Leased Property is
rendered Unsuitable For Its Primary Intended Use.
14.4 Restoration. If there is a partial or temporary Taking of the
Leased Property and this Lease remains in full force and effect pursuant to
Section 14.3, the Lessee shall accomplish all necessary restoration and the
Lessor shall release the net proceeds of such Award to reimburse the Lessee for
the actual reasonable costs and expenses thereof, subject to all of the
conditions and provisions set forth in Article 13 as though the Taking was a
Casualty and the Award was insurance proceeds. If the cost of the restoration
exceeds the amount of the Award (net of costs and expenses incurred in obtaining
the Award), the Lessee shall be obligated to contribute any excess amount needed
to restore the Facility or pay for such costs and expenses. To the extent that
the cost of restoration is less than the amount of the Award (net of cost and
expenses incurred in obtaining the Award), the remainder of the Award shall be
retained by the Lessor and Rent shall be abated as set forth in Section 3.6.
14.5 Award Distribution. In the event the Lessee completes the purchase
of the Leased Property, as described in Section 14.3, the entire Award shall,
upon payment of the purchase price and all Rent and other sums due under this
Lease and the other Lease Documents, belong to the Lessee and the Lessor agrees
to assign to the Lessee all of the Lessor's rights thereto. In any other event,
the entire Award shall belong to and be paid to the Lessor. However, if the
Lessor has recovered the entire Meditrust Investment from such Award, then the
Lessee shall be entitled to prosecute a claim against the Condemnor for the
value of the Lessee's leasehold estate under this Lease (although in no event
shall the Lessee be entitled to seek or recover any portion of the leasehold
value from the Lessor).
14.6 Control of Proceedings. Subject to the rights of any Fee
Mortgagee, unless and until the Lessee completes the purchase of the Leased
Property as provided in Section 14.3, all proceedings involving any Taking and
the prosecution of claims arising out of any Taking against the Condemnor shall
be conducted, prosecuted and settled by the Lessor; provided, however, that the
Lessor shall keep the Lessee apprised of the progress of all such proceedings
and shall solicit the Lessee's advice with respect thereto and shall give due
consideration to any such advice. In addition, the Lessee shall reimburse the
Lessor (as an Additional Charge) for all costs and expenses, including
reasonable attorneys' fees, appraisal fees, fees of expert witnesses and costs
of litigation or dispute resolution, in relation to any Taking, whether or not
this Lease is terminated; provided, however, if this Lease is terminated as a
result of a Taking, the Lessee's obligation to so reimburse the Lessor shall be
diminished by the amount of the Award, if any, received by the Lessor which is
in excess of the Meditrust Investment.
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ARTICLE 15
PERMITTED CONTESTS
15.1 Lessee's Right to Contest. To the extent of the express references
made to this Article 15 in other Sections of this Lease, the Lessee, any
Sublessee or any Manager on their own or on the Lessor's behalf (or in the
Lessor's name), but at their sole cost and expense, may contest, by appropriate
legal proceedings conducted in good faith and with due diligence (until the
resolution thereof), the amount, validity or application, in whole or in part,
of any Imposition, Legal Requirement, the decision of any Governmental Authority
related to the operation of the Leased Property for its Primary Intended Use
and/or any of the Other Permitted Uses or any Lien or claim relating to the
Leased Property not otherwise permitted by this Lease; provided. that (a) prior
written notice of such contest is given to the Lessor, (b) in the case of an
unpaid Imposition, Lien or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from the Lessor and/or
compliance by any applicable member of the Leasing Group with the contested
Legal Requirement or other matter may be legally delayed pending the prosecution
of any such proceeding without the occurrence or creation of any Lien, charge or
liability of any kind against the Leased Property, (c) neither the Leased
Property nor any rent therefrom would be in any immediate danger of being sold,
forfeited, attached or lost as a result of such proceeding, (d) in the case of a
Legal Requirement, neither the Lessor nor any member of the Leasing Group would
be in any immediate danger of civil or criminal liability for failure to comply
therewith pending the outcome of such proceedings, (e) in the event that any
such contest shall involve a sum of money or potential loss in excess of TEN
THOUSAND and NO/100 DOLLARS ($10,000.00), the Lessee shall deliver to the Lessor
an Officer's Certificate and opinion of counsel, if the Lessor deems the
delivery of an opinion to be appropriate, certifying or opining, as the case may
be, as to the validity of the statements set forth to the effect set forth in
clauses (b), (c) and (d), to the extent applicable, (f) the Lessee shall give
such cash security (or letter of credit in form and substance acceptable to the
Lender) as may be demanded in good faith by the Lessor to insure ultimate
payment of any fine, penalty, interest or cost and to prevent any sale or
forfeiture of the affected portion of the Leased Property by reason of such
non-payment or non-compliance, (g) if such contest is finally resolved against
the Lessor or any member of the Leasing Group, the Lessee shall promptly pay, as
Additional Charges due hereunder, the amount required to be paid, together with
all interest and penalties accrued thereon and/or comply (and cause any
Sublessee and any Manager to comply) with the applicable Legal Requirement, and
(h) no state of facts or circumstance exists which constitutes, or with the
passage of time and/or the giving of notice, could constitute a Lease Default;
provided. however. the provisions of this Article 15 shall not be construed to
permit the Lessee to contest the payment of Rent or any other sums payable by
the Lessee to the Lessor under any of the Lease Documents.
15.2 Lessor's Cooperation. The Lessor, at the Lessee's sole cost and
expense, shall execute and deliver to the Lessee such authorizations and other
documents as may reasonably be required in any such contest, so long as the same
does not expose the Lessor to any civil or criminal liability, and, if
reasonably requested by the Lessee or if the Lessor so desires, the Lessor shall
join as a party therein.
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15.3 Lessee's Indemnity. The Lessee, as more particularly provided for
in Section 12.2, shall indemnify, defend (with counsel acceptable to the Lessor)
and save the Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon the Lessor in connection with any such contest and any loss resulting
therefrom and in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
16.1 Events of Default. Each of the following shall constitute an
"Event of Default" hereunder and shall entitle the Lessor to exercise its
remedies hereunder and under any of the other Lease Documents:
(a) any failure of the Lessee to pay any amount due hereunder or under any of
the other Lease Documents within ten (10) days following the date when such
payment was due;
(b) any failure in the observance or performance of any other covenant, term,
condition or warranty provided in this Lease or any of the other Lease
Documents, other than the payment of any monetary obligation and other than as
specified in subsections (c) through (w) below (a "Failure to Perform"),
continuing for thirty (30) days after the giving of notice by the Lessor to the
Lessee specifying the nature of the Failure to Perform; except as to matters not
susceptible to cure within thirty (30) days, provided that with respect to such
matters, (i) the Lessee commences the cure thereof within thirty (30) days after
the giving of such notice by the Lessor to the Lessee, (ii) the Lessee
continuously prosecutes such cure to completion, (iii) such cure is completed
within one hundred eighty (180) days after the giving of such notice by the
Lessor to the Lessee, and (iv) such Failure to .Perform does not materially
impair the value of, or the Lessor's rights with respect to, the Leased Property
or otherwise materially impair the Collateral or the Lessor's security interest
therein;
(c) the occurrence of any default or breach of condition continuing beyond the
expiration of the applicable notice and grace periods, if any, under any of the
other Lease Documents;
(d) if any representation, warranty or statement contained herein or in any of
the other Lease Documents proves to be untrue in any material respect as of the
date when made or at any time during the Term if such representation or warranty
is a continuing representation or warranty pursuant to Section 10.2 and the
breach of any such representation or warranty is not cured by the Lessee after
notice from the Lessor in the same time periods specified for a cure under
Section 16.1 (b) above;
(e) if any member of the Leasing Group shall (i) voluntarily be adjudicated a
bankrupt or insolvent, (ii) seek or consent to the appointment of a receiver or
trustee for itself or for the Leased Property, (iii) file a petition seeking
relief under the bankruptcy or other similar laws of the United States, any
state or any jurisdiction, (iv) make a general assignment for the benefit of
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creditors, (v) make or offer a composition of its debts with its creditors or
(vi) be unable to pay its debts as such debts mature;
(f) if any court shall enter an order, judgment or decree appointing, without
the consent of any member of the Leasing Group, a receiver or trustee for such
member or for any of its property and such order, judgment or decree shall
remain in force, undischarged or unstayed, sixty (60) days after it is entered;
(g) if a petition is filed against any member of the Leasing Group which seeks
relief under the bankruptcy or other similar laws of the United States, any
state or any other jurisdiction, and such petition is not dismissed within sixty
(60) days after it is filed;
(h) in the event that, without the prior written consent of the Lessor, in each
instance, which consent may be withheld by the Lessor in its sole and absolute
discretion, and except as permitted in subsection (h)(vi) and subsection (i)
below:
i. there shall be a change in the Person or Persons presently in
control of any member of the Leasing Group (other than changes
in stock ownership of the Guarantor or changes in the officers
or directors of either the Lessee or the Guarantor), (whether
by operation of law or otherwise);
ii. any member of the Leasing Group (other than changes in the
stock ownership of the Guarantor), all or any portion of the
interest of any partner or member of any member of the Leasing
Group shall be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise), if
such member of the Leasing Group shall be a partnership, joint
venture, syndicate or other group; any of the shares of the
issued and outstanding capital stock of any member of the
Leasing Group (other than changes of stock ownership of the
Guarantor) shall be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise), if
such member of the Leasing Group shall be a corporation;
iv. all or any portion of the beneficial interest in any member of
the Leasing Group shall be, directly or indirectly, sold or
otherwise transferred (whether by operation of law or
otherwise), if such member of the Leasing Group shall be a
trust;
v. except as otherwise expressly permitted in accordance with the
provisions of Section 11.4.11, if any Person other than the
Lessee is the licensed operator of the Facility; or
vi. more than fifty percent (50%), in the aggregate, of the shares
of the issued and outstanding capital stock of the Guarantor
are held by a single Person or two (2) or more Affiliates
(collectively, an "Acquiror"), except in a "Permitted
Transaction". If immediately after the date on which the
Acquiror acquires) more
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than fifty percent (50%) of such stock, the "Net Worth"
(defined as an amount determined in accordance with GAAP) of
the Guarantor is equal to or greater than Fifty-Five Million
Dollars ($55,000,000.00), then such acquisition shall be
deemed to be an "Permitted Transaction." However, in the event
that a Permitted Transaction occurs, then the higher ratios
specified in Section 11.3.5 and the Net Worth covenant
specified in Section 11.3.6 shall both become operative and
effective.
(i) the death, incapacity, liquidation, dissolution or termination of
existence of any member of the Leasing Group (except in the case of a merger or
consolidation with the Guarantor (which shall be a "Permitted Merger");
provided, however, if the Persons who were the shareholders of the Guarantor
immediately prior to the Permitted Merger hold in the aggregate less than 50% of
the outstanding voting stock of the surviving corporation which results from the
Permitted Merger, then (A) the higher ratios specified in Section 11.3.5 and the
Net Worth covenant specified in Section 11.3.6 shall both become operative and
effective and (B) if Alternative Living Services, Inc. is not the surviving
corporation which results from such Permitted Merger, the new surviving
corporation will affirm in writing its obligations under the Guaranty.
(j) except as otherwise permitted pursuant to Article 15 or Section
19.2 hereof, if, without the prior written consent of the Lessor, in each
instance, which consent may be withheld by the Lessor in its sole and absolute
discretion, the Lessee's or any Sublessee's interest in the Leased Property
shall be, directly or indirectly, mortgaged, encumbered (by any voluntary or
involuntary Lien other than the Permitted Encumbrances), subleased, sold,
assigned, hypothecated or otherwise transferred (whether by operation of law or
otherwise);
(k) the occurrence of a default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, in
connection with the payment or performance of any other material obligation of
the Lessee or any Sublessee, whether or not the applicable creditor or obligee
elects to declare the obligations of the Lessee or the applicable Sublessee
under the applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee, if such creditor's or obligee's
rights and remedies may involve or result in (i) the taking of possession of the
Leased Property or (ii) the assertion of any other right or remedy that, in the
Lessor's reasonable opinion, may impair the Lessee's ability punctually to
perform all of its obligations under this Lease and the other Lease Documents,
may impair such Sublessee's ability punctually to perform all of its obligations
under its Sublease or may materially impair the Lessor's security for the Lease
Obligations; provided. however, that in any event, the election by the
applicable creditor or obligee to declare the obligations of the Lessee under
the applicable agreement due and payable or to exercise any other right or
remedy available to such creditor or obligee shall be an Event of Default
hereunder only if such obligations, individually or in the aggregate, are in
excess of FIVE HUNDRED THOUSAND and NO/100 DOLLARS ($500,000.00);
(l) the occurrence of a Related Party Default;
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(m) the occurrence of any default or breach of condition continuing
beyond the expiration of the applicable notice and grace periods, if any, under
any credit agreement, loan agreement or other agreement establishing a major
line-of credit (or any documents executed in connection with such lines of
credit) on behalf of any member of the Leasing Group whether or not the
applicable creditor has elected to declare the indebtedness due and payable
under such line of credit or to exercise any other right or remedy available to
it. For the purposes of this provision, a major line of credit shall, with
respect to any member of the Leasing Group other than the Guarantor, mean and
include any line of credit established in an amount equal to or greater than ONE
MILLION and NO/100 DOLLARS ($1,000,000.00) and, with respect to the Guarantor
mean and include any line of credit established in an amount equal to or greater
than FIVE MILLION and NO/100 DOLLARS ($5,000,000.00);
(n) except as a result of Casualty or a partial or complete
Condemnation, if the Lessee or any Sublessee ceases operation of the Facility
for a period in excess of thirty (30) days, except that if it is not possible to
resume operation of the Facility within thirty (30) days then the Lessee shall
have up to ninety (90) days to reopen the Facility subject to the terms of
subparts (i) and (ii) of Section 16.1 (b) above (a "Failure to Operate");
(o) if one or more judgments against the Lessee or any other Acceptable
Licensed Operator or attachments against the. Lessee's interest or any other
Acceptable Licensed Operator's interest in the Leased Property, which in the
aggregate exceed ONE HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00) or which
may materially and adversely interfere with the operation of the Facility,
remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a
period of thirty (30) days;
(p) if any malpractice award or judgment exceeding any applicable
professional liability insurance coverage by more than FIVE HUNDRED THOUSAND and
NO/100 DOLLARS ($500,000) shall be rendered against any member of the Leasing
Group and either (i) enforcement proceedings shall have been commenced by any
creditor upon such award or judgment or (ii) such award or judgment shall
continue unsatisfied and in effect for a period of ten (10) consecutive days
without an insurance company satisfactory to the Lessor (in its sole and
absolute discretion) having agreed to fund such award or judgment in a manner
satisfactory to the Lessor (in its sole and absolute discretion) and in either
case such award or judgment shall, in the reasonable opinion of the Lessor, have
a material adverse effect on the ability of any member of the Leasing Group to
operate the Facility;
(q) any failure to comply with the Legal Requirements applicable to any
Third Party Payor Program in which the Lessee or the Applicable Licensed
Operator elects to participate, continuing for thirty (30) days after the giving
of notice by the Lessor to the Lessee specifying the nature of any such failure
(except as to matters not susceptible to cure within thirty (30) days, provided
that with respect to such matters, (i) the Lessee commences the cure thereof
within thirty (30) days after the giving of such notice by the Lessor to the
Lessee, (ii) the Lessee continuously prosecutes such cure to completion, (iii)
such cure is completed within one hundred eighty (180) days after the giving of
such notice by the Lessor to the Lessee, and (iv) such failure to comply does
not materially impair the value of, or the Lessor's rights with respect to, the
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Leased Property or otherwise materially impair the Collateral or the Lessor's
security interest therein), unless the Lessee elects to no longer participate in
any such Third Party Payor Program and sends written notice of such election to
the Lessor;
(r) any failure to comply with the Legal Requirements applicable to any
Accreditation Body under whose jurisdiction the Lessee or any other Acceptable
Licensed Operator elects to subject itself, continuing for thirty (30) days
after the giving of notice by the Lessor to the Lessee specifying the nature of
any such failure (except as to matters not susceptible to cure within thirty
(30) days, provided that with respect to such matters, (i) the Lessee commences
the cure thereof within thirty (30) days after the giving of such notice by the
Lessor to the Lessee, (ii) the Lessee continuously prosecutes such cure to
completion, (iii) such cure is completed within one hundred eighty (180) days
after the giving of such notice by the Lessor to the Lessee, and (iv) such
failure to comply does not materially impair the value of, or the Lessor's
rights with respect to, the Leased Property or otherwise materially impair the
Collateral or the Lessor's security interest therein), unless the Lessee elects
to no longer be subject to the jurisdiction of any such Accreditation Body and
sends written notice of such election to the Lessor;
(s) if any member of the Leasing Group receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful construction or operation of
the Facility in accordance with the Primary Intended Use or the loss of, or the
failure to obtain and/or renew, any Permit under any other circumstances under
which any member of the Leasing Group is required to cease the operation of the
Facility in accordance with the Primary Intended Use; and
(t) any failure to maintain the insurance required pursuant to Section
12 of this Lease in force and effect at all times until the Lease Obligations
are fully paid and performed;
(u) the appointment of a temporary manager (or operator) for the Leased
Property by any Governmental Authority;
(v) the entry of an order by a court with jurisdiction over the Leased
Property to close the Facility; or
(w) the entry of an order to transfer one or more residents from the
Facility as a result of an allegation of abuse or neglect or to take any action
to eliminate an emergency situation then existing at the Facility where such
order would have a material adverse effect in the Lessor's reasonable judgment
on the continued operation of the Facility (it being understood, however, that
if there are more than three (3) such orders at any time during the term of this
Lease, then, ipso facto, the Lessor shall be entitled to deem there to 'be a
material adverse effect on the operation of the Facility)
16.2 Remedies.
(a) If any Lease Default shall have occurred, the Lessor may at its
option terminate this Lease by giving the Lessee not less than ten (10) days'
notice of such termination, or exercise any
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one or more of its rights and remedies under this Lease or any of the other
Lease Documents, or as available at law or in equity and upon the expiration of
the time fixed in such notice, the Term shall terminate (but only if the Lessor
shall have specifically elected by a written notice to so terminate, the Lease)
and all rights of the Lessee under this Lease shall cease as though that date
was the date originally set as the Expiration Date. Notwithstanding the
foregoing, in the event of the Lessee's failure to pay Rent, if such Rent
remains unpaid beyond ten (10) days from the due date thereof, the Lessor shall
not be obligated to give ten (10) days notice of such termination or exercise of
any of its other rights and remedies under this Lease, or the other Lease
Documents, or otherwise available at law or in equity, and the Lessor shall be
at liberty to pursue any one or, more of such rights or remedies without further
notice. No taking of possession of the Leased Property by or on behalf of the
Lessor, and no other act done by or on behalf of the Lessor, shall constitute an
acceptance of surrender of the Leased Property by the Lessee or reduce the
Lessee's obligations under this Lease or the other Lease Documents, unless
otherwise expressly agreed to in a written document signed by an authorized
officer or agent of the Lessor.
(b) To the extent permitted under applicable law, the Lessee shall pay
as Additional Charges all costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of the Lessor
as a result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not this Lease
has been terminated pursuant to Paragraph (a) of this Section, the Lessee shall,
to the extent permitted under applicable law, if required by the Lessor so to
do, upon not less than ten (10) days' prior notice from the Lessor, immediately
surrender to the Lessor the Leased Property pursuant to the provisions of
Paragraph (a) of this Section and quit the same, and the Lessor may enter upon
and repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove the Lessee and all other Persons and any
and all of the Tangible Personal Property from the Leased Property, subject to
the rights of any residents or patients of the Facility and any Sublessees who
are not Affiliates of any member of the Leasing Group and to any requirements of
applicable law, or the Lessor may claim ownership of the Tangible Personal
Property as set forth in Section 5.2.3 hereof or the Lessor may exercise its
rights as secured party under the Security Agreement. The Lessor shall use
reasonable, good faith efforts to relet the Leased Property or otherwise
mitigate damages suffered by the Lessor as a result of the Lessee's breach of
this Lease.
(d) In addition to all of the rights and remedies of the Lessor set
forth in this Lease and the other Lease Documents, if the Lessee shall fail to
pay any rental or other charge due hereunder (whether denominated as Base Rent,
Additional Rent, Additional Charges or otherwise) within ten (10) days after
same shall have become due and payable, then and in such event the Lessee shall
also pay to the Lessor (i) a late payment service charge (in order to partially
defray the Lessor's administrative and other overhead expenses) equal to two
hundred fifty ($250) dollars and (ii) to the extent permitted by applicable law,
interest on such unpaid sum at the Overdue Rate; it being understood, however,
that nothing herein shall be deemed to extend the due date for payment of any
sums required to be paid by the Lessee hereunder or to relieve the Lessee of its
obligation to pay such sums at the time or times required by this Lease.
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16.3 Dates. None of (a) the termination of this Lease pursuant to
Section 16.2, (b) the eviction of the Lessee or the repossession of the Leased
Property, (c) the failure or inability of the Lessor, notwithstanding reasonable
good faith efforts, to relet the Leased Property, (d) the reletting of the
Leased Property or (e) the failure of the Lessor to collect or receive any
rentals due upon any such reletting, shall relieve the Lessee of its liability
and obligations hereunder, all of which shall survive any such termination,
repossession or reletting. In any such event, the Lessee shall forthwith pay to
the Lessor all Rent due and payable with respect to the Leased Property to and
including the date of such termination, repossession or eviction. Thereafter,
the Lessee shall forthwith pay to the Lessor, at the Lessor's option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later to
occur of termination, repossession or eviction, together with
interest thereon at the Overdue Rate to the date of payment,
plus (y) the worth (calculated in the manner stated below) of
the amount by which the unpaid Rent for the balance of the
Term after the later to occur of the termination, repossession
or eviction exceeds the fair market rental value of the Leased
Property for the balance of the Term, plus (z) any other
amount necessary to compensate the Lessor for all damage
proximately caused by the Lessee's failure to perform the
Lease Obligations or which in the ordinary course would be
likely to result therefrom; or
(ii) each payment of Rent as the same would have become due and
payable if the Lessee's right of possession or other rights
under this Lease had not been terminated, or if the Lessee had
not been evicted, or if the Leased Property had not been
repossessed which Rent, to the extent permitted by law, shall
bear interest at the Overdue Rate from the date when due until
the date paid, and the Lessor may enforce, by action or
otherwise, any other term or covenant of this Lease. There
shall be credited against the Lessee's obligation under this
Clause (ii) amounts actually collected by the Lessor from
another tenant to whom the Leased Property may have actually
been leased or, if the Lessor is operating the Leased Property
for its own account, the actual Cash Flow of the Leased
Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
16.4 Lessee Waivers. If this Lease is terminated pursuant to Section
16.2, the Lessee waives, to the extent not prohibited by applicable law, (a) any
right of redemption, re-entry or repossession, (b) any right to a trial by jury
in the event of summary proceedings to enforce the remedies set forth in this
Article 16, and (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
In the event the Lessor elects to regain possession of the Leased
Property by a forcible detainer proceeding, the Lessee hereby specifically
waives any statutory notice which may be required prior to any such proceeding,
and agrees that the Lessor's execution of this Lease is, in
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part, consideration for this waiver. Except as otherwise set forth herein, the
Lessee further waives any demand for Rent, notice of termination and any notice
to quit required pursuant to statutes of the State or otherwise, and agrees that
the Lessor's execution of this Lease is, in part, consideration for these
waivers.
All claims for damages by reason of re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. The Lessee agrees
that any re-entry by the Lessor may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as the Lessor may elect, and the Lessor shall not be liable
in trespass or otherwise.
The Lessee shall not interpose any counterclaim of any kind in any
action or proceeding commenced by the Lessor to recover possession of the Leased
Property.
16.5 Application of Funds. Any payments otherwise payable to the Lessee
which are received by the Lessor under any of the provisions of this Lease
during the existence or continuance of any Lease Default shall be applied to the
Lease Obligations in the order which the Lessor may reasonably determine or as
may be required by the laws of the State.
16.6 Intentionally Omitted.
16.7 Lessor's Right to Cure. If the Lessee shall fail to make any
payment, or to perform any act required to be made or performed under this Lease
and to cure the same within the relevant time periods provided in Section 16.1,
the Lessor, after five (5) Business Days' prior notice to the Lessee (except in
an emergency when such shorter notice shall be given as is reasonable under the
circumstances), and without waiving or releasing any obligation or Event of
Default, may (but shall be under no obligation to) at any time thereafter make
such payment or perform such act for the account and at the expense of the
Lessee, and may, to the extent permitted by law, enter upon the Leased Property
for such purpose and take all such action thereon as, in the Lessor's opinion,
may be necessary or appropriate therefor. No such entry shall be deemed an
eviction of the Lessee. All sums so paid by the Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by the Lessee to the Lessor on demand as an Additional Charge. The
obligations of the Lessee and rights of the Lessor contained in this Article
shall survive the expiration or earlier termination of this Lease.
16.8 No Waiver By Lessor. The Lessor shall not by any act, delay,
omission or otherwise (including, without limitation, the exercise of any right
or remedy hereunder) be deemed to have waived any of its right or remedies
hereunder or under any of the other Lease Documents unless such waiver is in
writing and signed by the Lessor, and then, only to the extent specifically set
forth therein. No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time periods set forth therein for
the performance of the Lease Obligations) shall be construed as a waiver of any
other term, condition, covenant, representation or warranty of any of the Lease
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Documents, nor shall such a waiver in any one instance or circumstances be
construed as a waiver of the same term, condition, covenant, representation or
warranty in any subsequent instance or circumstance. No such failure, delay or
waiver shall be construed as creating a requirement that the Lessor must
thereafter, as a result of such failure, delay or waiver, give notice to the
Lessee, any guarantor of the Lease Obligations, or any other Person that the
Lessor does not intend to, or may not, give a further waiver or to refrain from
insisting upon the strict performance of the terms, conditions, covenants,
representations and warranties set forth in the Lease Documents before the
Lessor can exercise any of its rights or remedies under any of the Lease
Documents or before any Lease Default can occur, or as establishing a course of
dealing for interpreting the conduct of and agreements between the Lessor and
the Lessee, any guarantor of the Lease Obligations or any other Person.
The acceptance by the Lessor of any payment that is less than payment
in full of all amounts then due under any of the Lease Documents at the time of
the making of such payment shall not: (a) constitute a waiver of the right to
exercise any of the Lessor's remedies at that time or at any subsequent time,
(b) constitute an accord and satisfaction or (c) nullify any prior exercise of
any remedy, without the express written consent of the Lessor. Any failure by
the Lessor to take any action under this Lease or any of the other Lease
Documents by reason of a default hereunder or thereunder, any acceptance of a
past due installment, or any indulgence granted from time to time shall not be
construed (i) as a novation of this Lease or any of the other Lease Documents,
(ii) as a waiver of any right of the Lessor thereafter to insist upon strict
compliance with the terms of this Lease or any of the other Lease Documents or
(iii) to prevent the exercise of any right of acceleration or any other right
granted hereunder or under applicable law; and to the maximum extent not
prohibited by applicable law, the Lessor hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be
provided, which would produce a result contrary to or in conflict with the
foregoing.
16.9 Right of Forbearance. Whether or not for consideration paid or
payable to the Lessor and, except as may be otherwise specifically agreed to by
the Lessor in writing, no forbearance on the part of the Lessor, no extension of
the time for the payment of the whole or any part of the Obligations, and no
other indulgence given by the Lessor to the Lessee or any other Person, shall
operate to release or in any manner affect the original liability of the Lessee
or such other Persons, or to limit, prejudice or impair any right of the Lessor,
including, without limitation, the right to realize upon any collateral, or any
part thereof, for any of the Obligations evidenced or secured by the Lease
Documents; notice of any such extension, forbearance or indulgence being hereby
waived by the Lessee and all those claiming by, through or under the Lessee.
16.10 Cumulative Remedies. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to the Lessor
under any of the other Lease Documents or at law or in equity, all of which are
hereby reserved by the Lessor, and this Lease is made and accepted without
prejudice to any such rights and remedies. All of the rights and remedies of the
Lessor under each of the Lease Documents shall be separate and cumulative and
may be exercised concurrently or successively in the Lessor's sole and absolute
discretion.
ARTICLE 17
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SURRENDER OF LEASED PROPERTY OR LEASE: HOLDING OVER
17.1 Surrender. The Lessee shall, upon the expiration or prior
termination of the Term (unless the Lessee has concurrently purchased the Leased
Property in accordance with the terms hereof), vacate and surrender the Leased
Property to the Lessor in good repair and condition, in compliance with all
Legal Requirements, all Insurance Requirements, and in compliance with the
provisions of Article 8, except for: (a) ordinary wear and tear (subject to the
obligation of the Lessee to maintain the Leased Property in good order and
repair during the entire Term of the Lease), (b) damage caused by the gross
negligence or willful acts of the Lessor, any Affiliate of the Lessor and any of
their respective successors, assigns, employees, servants, agents, attorneys,
officers, directors, shareholders, partners or owners, and (c) any damage or
destruction resulting from a Casualty or Taking that the Lessee is not required
by the terms of this Lease to repair or restore.
17.2 Transfer of Permits and Contracts. In connection with the
expiration or any earlier termination of this Lease (unless the Lessee has
concurrently purchased the Leased Property in accordance with the terms hereof),
upon any request made from time to time by the Lessor, the Lessee shall (at no
out-of-pocket costs to the Lessee in connection with the expiration or
termination of this Lease for reasons other than a Lease Default) (a) promptly
and diligently use its best efforts to (i) transfer and assign all Permits and
Contracts necessary or desirable for the operation of the Leased Property in
accordance with its Primary Intended Use to the Lessor or its designee and/or
(ii) arrange for the transfer or assignment of such Permits and Contracts to the
Lessor or its designee, all to the extent the same may be transferred or
assigned under applicable law and the terms thereof, and (b) cooperate in every
respect (and to the fullest extent possible) and assist the Lessor or its
designee in obtaining such Permits and Contracts (whether by transfer,
assignment or otherwise). Such efforts and cooperation on the part of the Lessee
shall include, without limitation, the execution, delivery and filing with
appropriate Governmental Authorities and Third Party Payors of any applications,
petitions, statements, notices, requests, assignments and other documents or
instruments requested by the Lessor. Furthermore, the Lessee shall not take any
action or refrain from taking any action which would defer, delay or jeopardize
the process of the Lessor or its designee obtaining said Permits and Contracts
(whether by transfer, assignment or otherwise). Without limiting the foregoing,
the Lessee shall not seek to transfer or relocate any of said Permits or
Contracts to any location other than the Leased Property. The provisions of this
Section 17.2 shall survive the expiration or earlier termination of this Lease.
The Lessee hereby appoints the Lessor as its attorney-in- fact, with
full power of substitution to take such actions, in the event that the Lessee
fails to comply with any request made by the Lessor hereunder, as the Lessor (in
its sole absolute discretion) may deem necessary or desirable to effectuate the
intent of this Section 17.2. The power of attorney conferred on the Lessor by
the provisions of this Section 17.2, being coupled with an interest,, shall be
irrevocable until the Obligations are fully paid and performed and shall not be
affected by any disability or incapacity which the Lessee may suffer and shall
survive the same. Such power of attorney is provided solely to protect the
interests of the Lessor and shall not impose any duty on the Lessor
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to exercise any such power and neither the Lessor nor such attorney-in-fact
shall be liable for any act, omission, error in judgment or mistake of law,
except as the same may result from its gross negligence or willful misconduct.
17.3 No Acceptance of Surrender. Except at the expiration of the Term
in the ordinary course, no surrender to the Lessor of this Lease or of the
Leased Property or any interest therein shall be valid or effective unless
agreed to and accepted in writing by the Lessor and no act by the Lessor or any
representative or agent of the Lessor; other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
17.4 Holding, Over. If, for any reason, the Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as a tenant at sufferance
during which time the Lessee shall pay as rental each month, one and one-half
times the aggregate of (i) one-twelfth of the aggregate Base Rent and Additional
Rent payable at the time of such expiration or earlier termination of the Term;
(ii) all Additional Charges accruing during the month and (iii) all other sums,
if any, payable by the Lessee pursuant to the provisions of this Lease with
respect to the Leased Property., During such period of tenancy, the Lessee shall
be obligated to perform and observe all of the terms, covenants and conditions
of this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue its occupancy and use
of the Leased Property. Nothing contained herein shall constitute the consent,
express or implied, of the Lessor to the holding over of the Lessee after the
expiration or earlier termination of this Lease.
ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 [Intentionally Omitted].
18.2 [Intentionally Omitted].
18.3 [Intentionally Omitted].
18.4 Lessee's Option to Purchase.
18.4.1 Conditions to Option. On the conditions (which conditions the
Lessor may waive, at its sole option, by notice to the Lessee at any time) that
(a) at the time of exercise of the Purchase Option (defined below) and on the
applicable Purchase Option Date (defined below), there then exists no Lease
Default, nor any state of facts or circumstance which constitutes, or with the
passage of time and/or the giving of notice, would constitute a Lease Default
and (b) the Lessee strictly complies with the provisions of this Section 18.4,
then the Lessee shall have the option to purchase the Leased Property, at the
price and upon the terns hereinafter set forth (the "Purchase Option").
18.4.2 Exercise of Option. The Purchase Option shall permit the Lessee
to purchase the
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Leased Property (a) on the last day of the Initial Term or (b) on the last day
of any Extended Term effectively exercised by the Lessee (each of such dates are
referred to herein as a "Purchase Option Date") and shall be exercised by notice
given by the Lessee to the Lessor (the "Lessee's Purchase Option Notice") at
least one hundred eighty (180) days (but not more than two hundred seventy (270)
days) prior to the relevant Purchase Option Date. Notwithstanding anything to
the contrary set forth in this Lease, the Lessee's right to purchase the Leased
Property is subject to the further condition that all of the conditions in the
Agreement Regarding Related Lease Transactions pertaining to the Purchase Option
are satisfied. Once given, the Lessee shall have no right to rescind the
Lessee's Purchase Option Notice.
18.4.3 Conveyance. If the Purchase Option is exercised by the Lessee in
accordance with the terms hereof, the Leased Property shall be conveyed by a
good and sufficient deed with covenants only against acts of the Lessor (the
"Deed") running to the Lessee or to such grantee as the Lessee may designate by
notice to the Lessor at least seven (7) days before the Time of Closing. At the
Closing, the Lessor shall also deliver or cause to be delivered (a) a title
insurance affidavit in the usual form (but limited to the Lessor's own acts
during its ownership), (b) releases or discharges of any liens against the
Leased Property granted by the Lessor to any Meditrust Entity, except for any
Lien described in the first sentence of Section 18.4.8 below, and (c) a FIRPTA
Affidavit; and the Lessee shall cause to be delivered to the Lessor a release of
all liability under the Bond-Related Obligations and the Superior Lease
Obligations.
18.4.4 Calculation of Purchase Price. Subject to the terms of the
Agreement Regarding Related Lease Transactions, the price to be paid by the
Lessee for the acquisition of the Leased Property pursuant to this Purchase
Option (the "Purchase Price") shall be' equal to the greater of (a) the
Meditrust Investment or (b) an amount equal to the then Fair Market Value of the
Leased Property minus the Fair Market Added Value, as determined in accordance
with the procedures set forth in Section 24.14 below. If the Purchase Price is
calculated in accordance with clause (b) above, fifty percent (50%) of the
Overage Amount shall be deducted from the Purchase Price. As used herein, the
"Overage Amount" is the amount by which (i) the Fair Market Value of the Leased
Property minus the Fair Market Added Value exceeds (ii) 115% of the Meditrust
Investment.
18.4.5 Payment of Purchase Price. Subject to the terms of the Agreement
Regarding Related Lease Transactions, the Purchase Price shall be paid by the
Lessee at the Time of Closing by certified, cashier's, treasurer's or bank
checks) or wire transfer pursuant to instructions received from the Lessor.
18.4.6 Place and Time of Closing. Subject to the terms of the Agreement
Regarding Related Lease Transactions, if the Purchase Option is exercised, the
closing shall occur and the Deed shall be delivered (the "Closing") at the
office of the Lessor at 12:00 o'clock noon (E.S.T.) on the applicable Purchase
Option Date (such time, as the same may be extended by mutual written agreement
of the Lessor and the Lessee, being hereinafter referred to as the "Time of
Closing"). It is agreed that time is of the essence of the purchase Option.
18.4.7 Condition of Leased Property. The Leased Property is to be
purchased "AS IS"
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and "WHERE IS" as of the Time of Closing.
18.4.8 Quality of Title. Such conveyance shall be made subject to all
Legal Requirements, all of the matters described in clauses (a), (b), (e) and
(g) of Section 11.5.2 of the Lease, Impositions, any Liens created by the
Lessee, any Liens created in accordance with the terms of the Lease or consented
to by the Lessee, the claims of all Persons claiming by, through or under the
Lessee or any Affiliate thereof, and any other matters assented to by the Lessee
or any Affiliate thereof, and all matters for which the Lessee or any .Affiliate
thereof has responsibility under any of the Lease Documents; however, the Leased
Property shall not be conveyed subject to any Lien created by the Lessor from
and after the Commencement Date (other than an Encumbrance permitted under
Article 20 of the Lease which the Lessee elects to assume). If the Lessor shall
be unable to give title or to make conveyance, as stipulated in this Section
18.4, then, at the Lessor's option, the Lessor shall use reasonable efforts to
remove all defects in title and the applicable Purchase Option Date and Time of
Closing shall be extended for period of thirty (30) days. The Lessor shall not
be required to expend more than FIFTY THOUSAND and NO/100 DOLLARS ($50,000.00)
(inclusive of attorney's fees, but exclusive of payments needed to discharge any
voluntary liens or encumbrances imposed against the Leased Property by the
Lessor and not otherwise permissible under the first sentence of this section)
in order to have used "reasonable efforts."
18.4.9 Lessor's Inability or Failure to Perform. If at the expiration
of the extended time the Lessor shall have failed so to remove any such defects
in title, then all other obligations of all parties hereto under Section 18.4
shall cease and Section 18.4 shall be void and without recourse to the parties
hereto. Notwithstanding the foregoing, the Lessee shall have the election, at
either the original or extended Purchase Option Date and Time of Closing, to
accept such title as the Lessor can deliver to the Leased Property in its then
condition and to pay therefor the Purchase Price without reduction, in which
case the Lessor shall convey such title; provided, that, in the event of such
conveyance, if any portion of the Leased Property shall have been taken by
Condemnation prior to the applicable Purchase Option Date and Time of Closing,
the Lessor shall pay over or assign to the Lessee at the Time of Closing, all
Awards recovered on account of such Taking, less any amounts reasonably expended
by the Lessor in obtaining such Awards, or, to the extent such Awards have not
been recovered as of the applicable Purchase Option Date and Time of Closing,
the Lessor shall assign to the Lessee all its rights with respect to any claim
therefor. If the Lessor simply refuses to perform its obligations under the
Purchase Option, the Lessee shall have the right to sue for specific performance
of such obligations.
18.4.10 Merger by Deed. The acceptance of the Deed by the Lessee or the
grantee designated by the Lessee, as the case may be, shall be deemed to be a
full performance and discharge of every agreement and obligation to be performed
by the Lessor contained or expressed in this Lease.
18.4.11 Use of Purchase Price to Clear Title. To enable the Lessor to
make conveyance as provided in this Section, the Lessor may, at the Time of
Closing, use the Purchase Price or any portion thereof to clear the title of any
Lien, provided that all instruments so procured are recorded contemporaneously
with the Closing or reasonable arrangements are made for a
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recording subsequent to the Time of Closing in accordance with customary
conveyancing practices.
18.4.12 Lessee's Default. If the Lessee delivers the Lessee's Purchase
Option Notice and fails to consummate the purchase of the Leased Property in
accordance with the terms hereof for any reason other than (i) the Lessor's
willful and unexcused refusal to deliver the Deed or (ii) the Lessor's inability
after satisfying the requirements of Section 18.4.8 to deliver to the Lessee the
quality of title required by this Lease, (a) the Lessee shall thereafter have no
further right to purchase the Leased Property pursuant to this Section, although
this Lease shall otherwise continue in full force and effect and (b) the Lessor
shall have the right to sue for specific performance of the Lessee's obligations
to purchase the Leased Property provided such suit for specific performance is
commenced within one (1) year after the applicable Purchase Option Date on which
such sale was supposed to occur.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 Subletting and Assignment. Except as specifically set forth in
Section 19.2 below, the Lessee may not, without the prior written consent of the
Lessor, which consent may be withheld in' the Lessor's sole and absolute
discretion, assign or pledge all or any portion of its interest in this Lease or
any of the other Lease Documents (whether by operation of law or otherwise) or
sublet all. or any part of the Leased Property. For purposes of this Section
19.1, the term "assign" shall be deemed to include, but not be limited to, any
one or more sales, pledges, hypothecations or other transfers (including,
without limitation, any transfer by operation of law) of any of the capital
stock of or partnership interest in the Lessee or sales, pledges, hypothecations
or other transfers (including, without limitation, any transfer by operation of
law) of the capital or the assets of the Lessee. Any such assignment, pledge,
sale, hypothecation or other transfer made without the Lessor's consent shall be
void and of no force and effect.
19.2 Permitted Subleases. Notwithstanding the foregoing, the Lessee
shall have the right to enter into Resident Agreements without the prior consent
of the Lessor.
19.3 Attornment. The Lessee shall insert in each Sublease approved by
the Lessor or permitted under Section 19.2, provisions to the effect that (a)
such Sublease is subject and subordinate to all of the terms and provisions of
this Lease and to the rights of the Lessor hereunder, (b) in the event this
Lease shall terminate before the expiration of such Sublease, the Sublessee
thereunder will, at the Lessor's option, attorn to the Lessor and waive any
right the Sublessee may have to terminate the Sublease or to surrender
possession thereunder, as a result of the termination of this Lease and (c) in
the event the Sublessee receives a written notice from the Lessor stating that
the Lessee is in default under this Lease, the Sublessee shall thereafter be
obligated to pay all rentals accruing under said Sublease directly to the Lessor
or as the Lessor may direct. All rentals received from the Sublessee by the
Lessor shall be credited against the amounts owing by the Lessee under this
Lease.
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ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
20.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby with the fee estate in the Leased Property
by reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this Lease or the leasehold estate created hereby or any interest
in this Lease or such leasehold estate and (b) the fee estate in the Leased
Property.
20.2 Transfers By Lessor. If the original Lessor named herein or any
successor in interest shall' convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of the Lessor
hereunder arising or accruing from- and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of the Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 Lessor May Grant Liens. Without the consent of the Lessee, but
subject to the terms and conditions set forth below in this Section 20.3, the
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any lien, encumbrance or title retention agreement upon the Leased
Property or any interest therein ("Encumbrance"), whether to secure any
borrowing or other means of financing or refinancing, provided that the Lessee
shall have no obligation to make payments under such Encumbrances. The Lessee
shall subordinate this Lease to the lien of any such Encumbrance, on the
condition that the beneficiary or holder of such Encumbrance executes a
non-disturbance agreement in conformity with the provisions of Section 20.4. To
the extent that any such Encumbrance consists of a mortgage or deed of trust on
the Lessor's interest in the Leased Property the same shall be referred to
herein as a "Fee Mortgage" and the holder thereof shall be referred to herein as
a "Fee Mortgagee".
20.4 Subordination and Non-Disturbance. Concurrently with the execution
and delivery of any Fee Mortgage entered into after the date hereof, provided
that the Lessee executes and delivers an agreement of the type described in the
following paragraph, the Lessor shall obtain and deliver to the Lessee an
agreement by the holder of such Fee Mortgage, pursuant to which, (a) the
applicable Fee Mortgagee consents to this Lease and (b) agrees that,
notwithstanding the terms of the applicable Fee Mortgage held by such Fee
Mortgagee, or any default, expiration, termination, foreclosure, sale, entry or
other act or omission under or pursuant to such Fee Mortgage or a transfer in
lieu of foreclosure, (i) the Lessee shall not be disturbed in peaceful enjoyment
of the Leased Property nor shall this Lease be terminated or cancelled at any
time, except in the event that the Lessor shall have the right to terminate this
Lease under the terms and provisions expressly set forth herein, (ii) the
Lessee's rights under this Lease shall not be diminished or adversely effected
in any way provided no Event of Default exists hereunder, (iii) all insurance
proceeds received in connection with any loss, injury or damage relating to the
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Leased Property shall be paid to the Lessor in accordance with the provisions of
this Lease and the Fee Mortgagee shall have no rights with respect to any such
proceeds unless the Lessee elects to terminate this Lease pursuant to the
provisions of Section 13.2.2, (iv) the Lessee's Purchase Option shall remain in
force and effect pursuant to the terms hereof and (v) in the event that the
Lessee elects to exercise the Right of First Refusal to purchase the Leased
Property and performs all of its obligations hereunder in connection with any
such election, the holder of the Fee Mortgage shall release its Fee Mortgage
upon payment by the Lessee of the purchase price required hereunder, provided.
that (1) such purchase price is paid to the holder of the Fee Mortgage, in the
event that the Indebtedness secured by the applicable Fee Mortgage is equal to
or greater than the purchase price or (2) in the event that the purchase price
is greater than the Indebtedness secured by the Fee Mortgage, a portion of the
purchase price equal to the Indebtedness secured by the Fee Mortgage is paid to
the Fee Mortgagee and the remainder of the purchase price is paid to the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee shall
(a) subordinate this Lease and all of the Lessee's rights and estate hereunder
to the Fee Mortgage held by such Fee Mortgagee, (b) agree that the Lessee will
attorn to and recognize such Fee Mortgagee or the purchaser at any foreclosure
sale or any sale under a power of sale contained in any such Fee Mortgage as the
Lessor under this Lease for the balance of the Term then remaining and (c) enter
into a new lease with the Fee Mortgagee or the purchaser at any such sale on the
same terms and conditions of this Lease for the balance of the Term then
remaining. To effect the intent and purpose of the immediately preceding
sentence, the Lessee agrees to execute and deliver such instruments in
recordable from as are reasonably requested by the Lessor or the applicable Fee
Mortgagee; provided. however. that such Fee Mortgagee simultaneously executes,
delivers and records a written agreement of the type described in the preceding
paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 Quiet Enjoyment. As long as the Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and the other Lease Documents
and fully perform its obligations thereunder, the Lessee shall peaceably and
quietly have, hold and enjoy the Leased Property throughout the Term, free of
any claim or other action by the Lessor or anyone claiming by, through or under
the Lessor, but subject to the Permitted Encumbrances and such Liens as may
hereafter be consented to by the Lessee. No failure by the Lessor to comply with
the foregoing covenant shall give the Lessee any right to cancel or terminate
this Lease, or to fail to pay any other sum payable under this Lease, or to fail
to perform any other obligation of the Lessee hereunder. Notwithstanding the
foregoing, the Lessee shall have the right by separate and independent action to
pursue any claim it may have against the Lessor as a result of a breach by the
Lessor of the covenant of quiet enjoyment contained in this Article 21.
21.2 Memorandum of Lease. The Lessor and the Lessee shall, promptly
upon the request of either, enter into a short form memorandum of this Lease, in
form suitable for recording under
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the laws of the State, in which reference to this Lease and all options
contained herein shall be made. The Lessee shall pay all recording costs and
taxes associated therewith.
21.3 Default by Lessor. The Lessor shall be in default of its
obligations under this Lease only if the Lessor shall fail to observe or perform
any term, covenant or condition of this Lease on its part to be performed and
such failure shall continue for a period of thirty (30) days after notice
thereof from the Lessee (or such shorter time as may be necessary in order to
protect the health or welfare of any residents of the Facility or to insure the
continuing compliance of the Facility with the applicable Legal Requirements),
unless such failure cannot with due diligence be cured within a period of thirty
(30) days, in which case such failure shall not be deemed to continue if the
Lessor, within said thirty (30) day period, proceeds promptly and with due
diligence to cure the failure and diligently completes the curing thereof. The
time within which the Lessor shall be obligated to cure any such failure shall
also be subject to extension of time due to the occurrence of any Unavoidable
Delay.
ARTICLE 22
NOTICES
Any notice, request, demand, statement or consent made hereunder or
under any of the other Lease Documents shall be in writing and shall be deemed
duly given if personally delivered, sent by certified mail, return receipt
requested, or sent by a nationally recognized commercial overnight delivery
service with provision for a receipt, postage or delivery charges prepaid, and
shall be deemed given when so personally delivered or postmarked or placed in
the possession of such mail or delivery service and addressed as follows:
If to the Lessee: ALS Leasing, Inc.
c/o Alternative Living Services, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
With a copy to: Miriam J. Dent, Esq.
[The Lessee's counsel] Rogers & Hardin
229 Peachtree Street, N.E., 2700 International Tower
Atlanta, Georgia 30303
If to the Guarantor: Alternative Living Services, Inc.
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
With a copy to: Miriam J. Dent, Esq.
[Guarantor's Counsel] Rogers & Hardin
229 Peachtree Street, N.E., 2700 International Tower
Atlanta, Georgia 30303
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If to the Lessor: Meditrust Acquisition Corporation III
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies tai: Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and Frank Giso III, Esq.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
or such other address as the Lessor, the Lessee or the Guarantor shall
hereinafter from time to time designate, by a written notice to the others given
in such manner. Any notice given to the Lessee or the Guarantor by the Lessor at
any time shall not imply that such notice or any further or similar notice was
or is required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
The Declaration of Trust establishing the sole shareholder of the
Lessor, Meditrust, a Massachusetts business trust ("Meditrust"), dated August 6,
1985 (the "Declaration"), as amended, a copy of which is duly filed in the
office of the Secretary of State of the Commonwealth of Massachusetts, provides
that the name "Meditrust" refers to the trustees under the Declaration
collectively as trustees, but not individually or personally; and that no
trustee, officer, shareholder, employee or agent of Meditrust or any of its
Subsidiaries shall be held to any personal liability, jointly, or severally, for
any obligation of, or claim against Meditrust or any of its Subsidiaries. All
Persons dealing with Meditrust or the Lessor, in any way, shall look only to the
assets of Meditrust or the Lessor, as applicable, for the payment of any sum or
the performance of any obligation. Furthermore, in no event shall Meditrust or
the Lessor ever be liable to the Lessee or any other Person for any indirect or
consequential damages incurred by the Lessee or such other Person resulting from
any cause whatsoever. Notwithstanding the foregoing, the Lessee hereby
acknowledges and agrees that Meditrust is not a party to this Lease and that the
Lessee shall look only to the assets of the Lessor for the payment of any sum or
performance of any obligation due by or from the Lessor pursuant to the terms
and provisions of the Lease Documents.
ARTICLE 24
MISCELLANEOUS PROVISIONS
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24.1 Broker's Fee Indemnification. Each of the Lessor and the Lessee
hereby represents and warrants to the other that it has not dealt with any
broker or any other similar agent in connection with any of the transactions
contemplated by the Lease Documents. Each of the Lessor and the Lessee shall and
hereby agrees to indemnify, defend (with counsel acceptable to the other) and
hold the other harmless from and against any and all claims for premiums or
other charges, finder's fees, taxes, brokerage fees or commissions and other
similar compensation and all other costs and expenses, including, without
limitation, reasonable attorneys' fees, due in connection with or otherwise
incurred as a result of the indemnifying party's breach of the representation
and warranty set forth in the preceding sentence. Notwithstanding the foregoing,
each of the Lessor and the Lessee shall have the option of conducting its own
defense against any such claims with counsel of its own choice, but at the
expense of the other, as aforesaid. This indemnification shall include all
attorneys' fees and expenses and court costs reasonably incurred by the Lessor
in connection with the defense against any such claims and the enforcement of
this indemnification agreement and shall survive the termination of this Lease.
24.2 No Joint Venture or Partnership. Neither anything contained in any
of the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between the Lessor and the
Lessee. The Lessee is not the agent or representative of the Lessor and nothing
contained herein or in any of the other Lease Documents shall make, or be
construed to make, the Lessor liable to any Person for goods delivered to the
Lessee, services performed with respect to the Leased Property at the direction
of the Lessee or for debts or claims accruing against the Lessee.
24.3 Amendments, Waivers and Modifications. Except as otherwise
expressly provided for herein or in any other Lease Document, none of the terms,
covenants, conditions, warranties or representations contained in this Lease or
in any of the other Lease Documents may be renewed, replaced, amended, modified,
extended, substituted, revised, waived, consolidated or terminated except by an
agreement in writing signed by (a) all parties to this Lease or the other
applicable Lease Document, as the case may be, with regard to any such renewal,
replacement, amendment, modification, extension, substitution, revision,
consolidation or termination and (b) the Person against whom enforcement is
sought with regard to any waiver. The provisions of this Lease and the other
Lease Documents shall extend and be applicable to all renewals, replacements,
amendments, extensions, substitutions, revisions, consolidations and
modifications of any of the Lease Documents, the Management Agreements, the
Related Party Agreements, the Permits and/or the Contracts. References herein
and in the ~ other Lease Documents to any of the Lease Documents, the Management
Agreements, the Related Party Agreements, the Permits and/or the Contracts shall
be deemed to include any renewals, replacements, amendments, extensions,
substitutions, revisions, consolidations or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the
Lease Documents, whether express or implied, to any renewal, replacement,
amendment, extension, substitution, revisions, consolidation or modification of
any of the Lease Documents or any Management Agreement, Related Party Agreement,
Permit and/or the Contract is not intended to constitute an agreement or consent
by the Lessor to any such renewal, replacement, amendment, substitution,
revision, consolidation or modification; but, rather as a reference only to
those instances where
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the Lessor may give, agree or consent to any such renewal, replacement,
amendment, extension, substitution, revision, consolidation or modification as
the same may be required pursuant to the terms, covenants and conditions of any
of the Lease Documents.
24.4 Captions and Headings. The captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.5 Time is of the Essence. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.6 Counterparts. This Lease may be executed in one or more
counterparts, each of which taken together shall constitute an original and all
of which shall constitute one and the same instrument.
24.7 Entire Agreement. This Lease and the other Lease Documents set
forth the entire agreement of the parties with respect to the Facility and the
other Leased Property and shall, with respect to the Facility and the other
Leased Property, supersede in all respect the letter of intent dated July 22,
1996 (and all prior iterations thereof) from Meditrust to the Guarantor;
provided, however, said letter of intent is not superseded with respect to the
subject matter not contemplated by the Lease Documents.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, THE LESSOR AND THE LESSEE HEREBY MUTUALLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR
HEREAFTER HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. The
Lessee hereby certifies that neither the Lessor nor any of the Lessor's
representatives, agents or counsel has represented expressly or otherwise that
the Lessor would not, in the event of any such suit, action or proceeding seek
to enforce this waiver to the right of trial by jury and acknowledges that the
Lessor has been induced by this waiver (among other things) to enter into the
transactions evidenced by this Lease and the other Lease Documents and further
acknowledges that the Lessee (a) has read the provisions of this Lease, and in
particular, the paragraph containing this waiver, (b) has consulted legal
counsel, (c) understands the rights that it is granting in this Lease and the
rights that it waiving in this paragraph in particular and (d) makes the waivers
set forth herein knowingly, voluntarily and intentionally.
24.9 Successors and Assigns. This Lease and the other Lease Documents
shall be binding and inure to the benefit of (a) upon the Lessee and the
Lessee's legal representatives and permitted successors and assigns and (b) the
Lessor and any other Person .who may now or hereafter hold the interest of the
Lessor under this Lease and their respective successors and assigns.
Notwithstanding the foregoing, except as may be permitted pursuant to Article
19, the
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Lessee shall not assign any of its rights or obligations hereunder or under any
of the other Lease Documents without the prior written consent of the Lessor, in
each instance, which consent may be withheld in the Lessor's sole and absolute
discretion.
24.10 No Third Party Beneficiaries. This Lease and the other Lease
Documents are solely for the benefit of the Lessor, its successors, assigns and
participants (if any), the Meditrust Entities, the Indemnified Parties, the
Lessee, the Guarantor, the other members of the Leasing Group and their
respective permitted successors and assigns, and, except as otherwise expressly
set forth in any of the Lease Documents, nothing contained therein shall confer
upon any Person other than such parties any right to insist upon or to enforce
the performance or observance of any of the obligations contained therein. All
conditions to the obligations of the Lessor to advance or make available
proceeds of insurance or Awards, or to release any deposits held for Impositions
or insurance premiums are imposed solely and exclusively for the benefit of the
Lessor, its successors and assigns. No other Person shall have standing to
require satisfaction of such conditions in accordance with their terms, and no
other Person shall, under any circumstances, be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by the
Lessor at any time, if, in the Lessor's sole and absolute discretion, the Lessor
deems it advisable or desirable to do so.
24.11 Governing Law. This Lease shall be construed and the rights and
obligations of the Lessor and the Lessee shall be determined in accordance with
the laws of the State.
The Lessee hereby consents to personal jurisdiction in the courts of
the State and the United States District Court for the District in which the
Leased Property is situated as well as to the jurisdiction of all courts from
which an appeal may be taken from the aforesaid courts, for the purpose of any
suit, action or other proceeding arising out of or with respect to any of the
Lease Documents, the negotiation and/or consummation of the transactions
evidenced by the Lease Documents, the Lessor's relationship of any member of the
Leasing Group in connection with the transactions evidenced by the Lease
Documents and/or the performance of any obligation or the exercise of any remedy
under any of the Lease Documents and expressly waives any and all objections the
Lessee may have as to venue in any of such courts.
24.12 General. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
Lessor arising prior to any date of termination of this Lease or any of the
other Lease Documents shall survive such termination.
If any provision of this Lease or any of the other Lease Documents or
any application thereof shall be invalid or unenforceable, the remainder of this
Lease or the other applicable Lease Document, as the case may be, and any other
application of such term or provision shall not be affected thereby.
Notwithstanding the foregoing, it is the intention of the parties hereto that if
any provision of any of this Lease is capable of two (2) constructions, one of
which would render the provision void and the other of which would render the
provision valid, then such provision shall be construed in accordance with the
construction which renders such provision valid.
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If any late charges provided for in any provision of this Lease or any
of the other Lease Documents are based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
The Lessee waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance and waives all notices of the existence, creation, or incurring of
new or additional obligations, except as to all of the foregoing as expressly
provided for herein.
24.13 Intention of Parties. The Lessor and the Lessee acknowledge and
agree that this Lease is intended to be a lease of the Leased Property and is in
no way intended to be a mortgage encumbering the Leased Property.
24.14 Appraisal.
24.14.1 Designation of Appraisers. In the event that it
becomes necessary to determine the Fair Market Value of the Leased
Property for any purpose of this Lease, the party required or permitted
to give notice of such required determination shall include in the
notice the name of a Person selected to act as appraiser on its behalf.
Within ten (10) days after receipt of any such notice, the Lessor (or
the Lessee, as the case may be) shall by notice to the Lessee (or the
Lessor, as the case may be) appoint a second Person as appraiser on its
behalf.
24.14.2 Appraisal Process. The appraisers thus appointed, each
of whom must be a member of the American Institute of Real Estate
Appraisers (or any successor organization thereto), shall, within
forty-five (45) days after the date of the notice appointing the first
appraiser, proceed to appraise the Leased Property to determine the
Fair Market Value of the Leased Property as of the relevant date
(giving effect to the impact, if any, of inflation from the date of
their decision to the relevant date); provided, however, that if only
one appraiser shall have been so appointed, or if two appraisers shall
have been so appointed but only one such appraiser shall have made such
determination within fifty (50) days after the making of the Lessee's
or the Lessor's request, then the determination of such appraiser shall
be final and binding upon the parties. If two appraisers shall have
been appointed and shall have made their determinations within the
respective requisite periods set forth above and if the difference
between the amounts so determined shall not exceed ten per cent (10%)
of the lesser of such amounts, then the Fair Market Value of the Leased
Property shall be an amount equal to fifty percent (50%) of the sum of
the amounts so determined. If the difference between the amounts so
determined shall exceed ten percent (10%) of the lesser of such
amounts, then such two appraisers shall have twenty (20) days to
appoint a third appraiser, but if such appraisers fail to do so, then
either party may request the American Arbitration Association or any
successor organization thereto to appoint an appraiser within twenty
(20) days of such request; and both parties shall be bound by any
appointment so made within such twenty (20) day period. If no such
appraiser shall have been appointed within such twenty (20) days or
within ninety (90) days of the original request for a determination of
Fair Market
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Value of the Leased Property, whichever is earlier, either the Lessor
or the Lessee may apply to any court having jurisdiction to have such
appointment made by such court. Any appraiser appointed by the original
appraisers, by the American Arbitration Association or by such court
shall be instructed to determine the Fair Market Value of the Leased
Property within thirty (30) days after appointment of such Appraiser.
The determination of the appraiser which differs most in terms of
dollar amount from the determinations of the other two appraisers shall
be excluded, and fifty percent (50%) of the sum of the remaining two
determinations shall be final and binding upon the Lessor and the
Lessee as the Fair Market Value of the Leased Property.
24.14.3 Specific Enforcement and Costs. This provision for
determination by appraisal shall be specifically enforceable to the extent such
remedy is available under applicable law, and any determination hereunder shall
be final and binding upon the parties except as otherwise provided by applicable
law. The Lessor and the Lessee shall each pay the fees and expenses of the
appraiser appointed by it and each shall pay one-half of the fees and expenses
of the third appraiser and one-half of all other cost and expenses incurred in
connection with each appraisal.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
WITNESSES: LESSEE:
ALS LEASING, INC., a Delaware
corporation
/s/ Miriam J. Dent By:/s/ David M. Boitano
Name: Miriam J. Dent Name: David M. Boitano
Title: Vice President
Name:
WITNESSES: LESSOR:
MEDITRUST ACQUISITION
CORPORATION III, a Delaware
corporation
By:
/s/ Susan E. Douglas By: /s/ Michael F. Bushee
Name: Susan E. Douglas Name: Michael F. Bushee
Title: Chief Operating Officer
/s/ Frank Giso III
Name Frank Giso III
117
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EXHIBIT 10.37
FACILITY LEASE AGREEMENT
MEDITRUST OF OHIO, INC.
(A Delaware Corporation)
as
Lessor
AND
ASSISTED LIVING PROPERTIES, INC.
(A Kansas Corporation)
as
Lessee
Dated As Of February 20, 1998
For Premises Known as and Located At:
Sterling House of Englewood
350 Union Boulevard
Englewood, Ohio
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1 - LEASED PROPERTY; TERM; EXTENSIONS 1
1.1 Leased Property 1
1.2 Term 2
1.3 Extended Terms 2
ARTICLE 2 - DEFINITIONS AND RULES OF CONSTRUCTION 3
2.1 Definitions 3
2.2 Rules of Construction 19
ARTICLE 3 - RENT 19
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures 19
3.1.1 Base 19
3.1.2 Increase to Base Rent 20
3.1.3 Base Rent for Extended Terms 21
3.2 Best Efforts To Maximize 21
3.3 [Intentionally Omitted] 21
3.4 Additional Charges 21
3.5 Leasing Commitment Fee 21
3.6 Net Lease 22
3.7 No Lessee Termination or Offset 22
3.7.1 No Termination 22
3.7.2 Waiver 22
3.7.3 Independent Covenants 22
3.8 Abatement of Rent Limited 22
ARTICLE 4 - IMPOSITIONS; TAXES; UTILITIES; INSURANCE PAYMENTS 23
4.1 Payment of Impositions 23
4.1.1 Lessee To Pay 23
4.1.2 Installment Elections 23
4.1.3 Returns and Reports 23
4.1.4 Refunds 24
4.1.5 Protest 24
4.2 Notice of Impositions 24
4.3 Adjustment of Impositions 24
4.4 Utility Charges 24
4.5 Insurance Premiums 24
4.6 Deposits 25
4.6.1 Lessor's Option 25
4.6.2 Use of Deposits 25
4.6.3 Deficits 26
4.6.4 Other Properties 26
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4.6.5 Transfers 26
4.6.6 Security 26
4.6.7 Return 26
4.6.8 Receipts 27
ARTICLE 5 - OWNERSHIP OF LEASED PROPERTY AND PERSONAL
PROPERTY; INSTALLATION, REMOVAL AND REPLACEMENT
OF PERSONAL PROPERTY 27
5.1 Ownership of the Leased Property 27
5.2 Personal Property; Removal and Replacement of Personal Property 27
5.2.1 Lessee To Equip Facility 27
5.2.2 Sufficient Personal Property 27
5.2.3 Removal and Replacement; Lessor's Option to Purchase 27
ARTICLE 6 - SECURITY FOR LEASE OBLIGATIONS 28
6.1 Security for Lessee's Obligations; Permitted Prior Security Interests 28
6.1.1 Security 28
6.1.2 Purchase-Money Security Interests and Equipment Leases 29
6.2 [Intentionally Omitted] 29
6.2.1 [Intentionally Omitted] 29
6.2.2 [Intentionally Omitted] 30
6.2.3 [Intentionally Omitted] 31
6.3 Guaranty 31
ARTICLE 7 - CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS 31
7.1 Condition of the Leased Property 31
7.2 Use of the Leased Property; Compliance; Management 32
7.2.1 Obligation to Operate 32
7.2.2 Permitted Uses 32
7.2.3 Compliance With Insurance Requirements 32
7.2.4 No Waste 32
7.2.5 No Impairment 32
7.2.6 No Liens 32
7.3 Compliance with Legal Requirements 33
7.4 Management Agreements 33
ARTICLE 8 - REPAIRS; RESTRICTIONS 33
8.1 Maintenance and Repair 33
8.1.1 Lessee's Responsibility 33
8.1.2 No Lessor Obligation 34
8.1.3 Lessee May Not Obligate Lessor 34
8.1.4 Lessee's Obligation to Perform Upgrade Expenditures 35
8.2 Encroachments; Title Restrictions 35
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ARTICLE 9 - MATERIAL STRUCTURAL WORK AND CAPITAL ADDITIONS 36
9.1 Lessor's Approval 36
9.2 General Provisions as to Capital Additions and Certain Material Structural
Work 36
9.2.1 No Liens 36
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work 37
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural 37
9.2.4 Lessor May Elect to Finance Capital Additions 37
9.2.5 Legal Requirements; Quality of Work 37
9.3 Capital Additions Financed by Lessor 37
9.3.1 Lessee's Financing Request 37
9.3.2 Lessor's General Requirements 38
9.3.3 Payment of Costs 39
9.4 General Limitations 40
9.5 Non-Capital Additions 40
9.6 Permitted Work 40
ARTICLE 10 - WARRANTIES AND REPRESENTATIONS 41
10.1 Representations and Warranties 41
10.1.1 Existence; Power; Qualification 41
10.1.2 Valid and Binding 41
10.1.3 Single Purpose 41
10.1.4 No Violation 41
10.1.5 Consents and Approvals 42
10.1.6 No Liens or Insolvency Proceedings 42
10.1.7 No Burdensome Agreements 42
10.1.8 Commercial Acts 42
10.1.9 Adequate Capital, Not Insolvent 42
10.1.10 Not Delinquent 43
10.1.11 No Affiliate Debt 43
10.1.12 Taxes Current 43
10.1.13 Financials Complete and Accurate 43
10.1.14 Pending Actions, Notices and Reports 44
10.1.15 Compliance with Legal and Other Requirements 44
10.1.16 No Action By Governmental Authority or
Accreditation Body 45
10.1.17 Property Matters 45
10.1.18 Rate Limitations 46
10.1.19 Free Care 46
10.1.20 No Proposed Changes 46
10.1.21 ERISA 47
10.1.22 No Broker 47
10.1.23 No Improper Payments 47
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10.1.24 Nothing Omitted 47
10.1.25 No Margin Security 48
10.1.26 No Default 48
10.1.27 Principal Place of Business 48
10.1.28 Third Party Payor Agreements 48
10.1.29 Rates 49
10.1.30 Labor Matters 49
10.1.31 Intellectual Property 49
10.1.32 Management Agreements 49
10.1.33 Fiscal Year 49
10.2 Continuing Effect of Representations and Warranties 49
ARTICLE 11 - FINANCIAL AND OTHER COVENANTS 50
11.1 Status Certificates 50
11.2 Financial Statements; Reports; Notice and Information 50
11.2.1 Obligation To Furnish 50
11.2.2 Responsible Officer 53
11.2.3 No Material Omission 53
11.2.4 Confidentiality 54
11.3 Financial Covenants 54
11.3.1 Rent Coverage Ratio of Lessee 54
11.3.2 [Intentionally Omitted] 54
11.3.3 [Intentionally Omitted] 54
11.3.4 [Intentionally Omitted] 54
11.3.5 Current Ratio - Guarantor 54
11.3.6 [Intentionally Omitted] 54
11.3.7 Tangible Net Worth - Guarantor 54
11.3.8 [Intentionally Omitted] 55
11.3.9 [Intentionally Omitted] 55
11.3.10 No Indebtedness 55
11.3.11 No Guaranties 55
11.3.12 [Intentionally Omitted] 55
11.4 Affirmative Covenants 55
11.4.1 Maintenance of Existence 55
11.4.2 Materials 55
11.4.3 Compliance With Legal Requirements And Applicable
Agreements 56
11.4.4 Books And Records 56
11.4.5 Participation in Third Party Payor Programs 56
11.4.6 Conduct of its Business 56
11.4.7 Address 56
11.4.8 Subordination of Affiliate Transactions 57
11.4.9 Inspection 57
11.5 Additional Negative Covenants 57
11.5.1 Restrictions Relating to Lessee 57
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11.5.2 No Liens 58
11.5.3 Limits on Affiliate Transactions 58
11.5.4 Non-Competition 58
11.5.5 No Default 60
11.5.6 Restrictions Relating to the Guarantor 60
11.5.7 [Intentionally Omitted] 60
11.5.8 ERISA 60
11.5.9 Forgiveness of Indebtedness 60
11.5.10 Value of Assets 60
11.5.11 Changes in Fiscal Year and Accounting Procedures 60
11.5.12 Changes in Executive Officers 61
ARTICLE 12 - INSURANCE AND INDEMNITY 61
12.1 General Insurance Requirements 61
12.1.1 Types and Amounts of Insurance 61
12.1.2 Insurance Company Requirements 63
12.1.3 Policy Requirements 63
12.1.4 Notices; Certificates and Policies 63
12.1.5 Lessor's Right to Place Insurance 64
12.1.6 Payment of Proceeds 64
12.1.7 Irrevocable Power of Attorney 64
12.1.8 Blanket Policies 64
12.1.9 No Separate Insurance 65
12.1.10 Assignment of Unearned Premiums 65
12.2 Indemnity 65
12.2.1 Indemnification 65
12.2.2 Indemnified Parties 66
12.2.3 Limitation on Lessor Liability 66
12.2.4 Risk of Loss 67
ARTICLE 13 - FIRE AND CASUALTY 67
13.1 Restoration Following Fire or Other Casualty 67
13.1.1 Following Fire or Casualty 67
13.1.2 Procedures 67
13.1.3 Disbursement of Insurance Proceeds Less Than
50,000.00 68
13.1.4 Disbursement of Insurance Proceeds $50,000.00 or More 68
13.2 Disposition of Insurance Proceeds 72
13.2.1 Proceeds To Be Released to Pay For Work 72
13.2.2 Proceeds Not To Be Released 72
13.2.3 Lessee Responsible for Short-Fall 73
13.3 Tangible Personal Property 73
13.4 Restoration of Certain Improvements and the Tangible Personal Property 73
13.5 No Abatement of Rent 73
13.6 Termination of Certain Rights 74
</TABLE>
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13.7 Waiver 74
13.8 Application of Business Interruption Insurance 74
13.9 Obligation To Account 74
ARTICLE 14 - CONDEMNATION 75
14.1 Parties' Rights and Obligations 75
14.2 Total Taking 75
14.3 Partial or Temporary Taking 75
14.4 Restoration 76
14.5 Award Distribution 76
14.6 Control of Proceedings 76
ARTICLE 15 - PERMITTED CONTESTS 76
15.1 Lessee's Right to Contest 76
15.2 Lessor's Cooperation 77
15.3 Lessee's Indemnity 77
ARTICLE 16 - DEFAULT 77
16.1 Events of Default 77
16.2 Remedies 81
16.3 Damages 82
16.4 Lessee Waivers 83
16.5 Application of Funds 84
16.6 [Intentionally Omitted] 84
16.7 [Intentionally Omitted] 84
16.8 Lessor's Right to Cure 84
16.9 No Waiver By Lessor 84
16.10 Right of Forbearance 85
16.11 Cumulative Remedies 85
ARTICLE 17 - SURRENDER OF LEASED PROPERTY OR LEASE;
HOLDING OVER 86
17.1 Surrender 86
17.2 Transfer of Contracts and Permits 86
17.3 Management of Leased Property 86
17.4 Correction of Deficiencies 86
17.5 No Acceptance of Surrender 86
17.6 Holding Over 86
ARTICLE 18 - PURCHASE OF THE LEASED PROPERTY 87
18.1 Purchase of the Leased Property 87
18.2 Appraisal 87
18.2.1 Designation of Appraisers 87
18.2.2 Appraisal Process 88
18.2.3 Specific Enforcement and Costs 88
</TABLE>
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18.3 Lessee's Right of First Refusal 88
18.4 [Intentionally Omitted] 89
ARTICLE 19 - SUBLETTING AND ASSIGNMENT 89
19.1 Subletting and Assignment 89
19.2 Permitted Subleases 89
19.3 Attornment 90
19.4 [Intentionally Omitted] 90
ARTICLE 20 - TITLE TRANSFERS AND LIENS GRANTED BY LESSOR 91
20.1 No Merger of Title 91
20.2 Transfers By Lessor 91
20.3 Lessor May Grant Liens 91
20.4 Subordination and Non-Disturbance 91
ARTICLE 21 - LESSOR OBLIGATIONS 92
21.1 Quiet Enjoyment 92
21.2 Memorandum of Lease 92
21.3 Default by Lessor 92
21.4 Computer Disc 93
ARTICLE 22 - NOTICES 93
ARTICLE 23 - LIMITATION OF MEDITRUST LIABILITY 94
ARTICLE 24 - MISCELLANEOUS PROVISIONS 95
24.1 Broker's Fee Indemnification 95
24.2 No Joint Venture or Partnership 95
24.3 Amendments, Waivers and Modifications 95
24.4 Further Assurances 96
24.5 Invalidity 96
24.6 Captions and Headings 97
24.7 Time is of the Essence 97
24.8 Counterparts 97
24.9 Entire Agreement 97
24.10 WAIVER OF JURY TRIAL 97
24.11 Successors and Assigns 97
24.12 No Third Party Beneficiaries 98
24.13 Governing Law 98
24.14 General 98
24.15 Intention of Parties 99
24.16 Radon Gas 99
EXHIBIT A LEGAL DESCRIPTION OF THE LAND
</TABLE>
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EXHIBIT B PERMITTED TITLE EXCEPTIONS
EXHIBIT C LIST OF PARTNERS AND/OR SHAREHOLDERS
EXHIBIT D RATE LIMITATIONS
EXHIBIT E FREE CARE REQUIREMENTS
EXHIBIT F PROVIDER AGREEMENTS
EXHIBIT G NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
EXHIBIT H OPEN COST REPORTS
EXHIBIT I RENT COVERAGE RATIO CALCULATION
EXHIBIT J EXECUTIVE OFFICERS
SCHEDULE 4.6.2 INVESTMENT VEHICLES FOR IMPOSITION DEPOSITS
9
<PAGE> 10
FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the 20th day of
February, 1998 and is between MEDITRUST OF OHIO, INC. ("Lessor"), a Delaware
corporation, having its principal office at 197 First Avenue, Needham Heights,
Massachusetts 02194, and ASSISTED LIVING PROPERTIES, INC. ("Lessee"), a Kansas
corporation, having its principal office at 453 S. Webb Road, Suite 500,
Wichita, Kansas 67207.
ARTICLE 1
LEASED PROPERTY; TERM; EXTENSIONS
1.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, Lessor leases to Lessee and Lessee rents and leases from
Lessor all of Lessor's rights and interests in and to the following real and
personal property (collectively, the "Leased Property"):
(a) the real property described in EXHIBIT A attached hereto
(the "Land");
(b) all buildings, structures, Fixtures (as hereinafter
defined) and other improvements of every kind including, but not limited to,
alleyways and connecting tunnels, sidewalks, utility pipes, conduits and lines,
and parking areas and roadways appurtenant to such buildings and structures
presently or hereafter situated upon the Land (collectively, the "Leased
Improvements");
(c) all easements, rights and appurtenances of every nature and
description now or hereafter relating to or benefitting any or all of the Land
and the Leased Improvements;
(d) all equipment, machinery, building fixtures, and other items
of property (whether realty, personalty or mixed), including all components
thereof, now or hereafter located in, on or used in connection with, and
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air-conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, and built-in oxygen and vacuum systems, all of which, to the greatest
extent permitted by law, are hereby deemed by the parties hereto to constitute
real estate, together with all replacements, modifications, alterations and
additions thereto, but specifically excluding all items included within the
category of Tangible Personal Property (as hereinafter defined) which are not
permanently affixed to or incorporated in the Leased Property (collectively, the
"Fixtures"); and
(e) Lessor's Personal Property.
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by Lessor and
subject to: (i) the rights of parties in possession; (ii) the existing state of
title including all covenants, conditions, Liens (as hereinafter
<PAGE> 11
defined) and other matters of record (including, without limitation, the matters
set forth in EXHIBIT B); (iii) all applicable laws; and (iv) all matters,
whether or not of a similar nature, which would be disclosed by an inspection of
the Leased Property or by an accurate survey thereof.
1.2 Term. The term of this Lease shall consist of: the "Fixed Term",
which shall commence on February 20, 1998 (the "Fixed Term Commencement Date")
and end on September 29, 2009 (the "Fixed Term Expiration Date"); provided,
however that this Lease may be sooner terminated as hereinafter provided. In
addition, Lessee shall have the options to extend the Term (as hereinafter
defined) as provided for in Section 1.3.
1.3 Extended Terms. Provided that this Lease has not been previously
terminated, and so long as no Lease Default (as hereinafter defined) shall have
occurred and be continuing, Lessee is hereby granted the right to extend the
Fixed Term of this Lease for three (3) additional periods (collectively, the
"Extended Terms") as follows: three (3) successive five (5) year periods for a
maximum Term, if all such options are exercised, which ends on September 29,
2024. Lessee's extension rights shall be exercised by Lessee by giving written
notice to Lessor of each such extension at least one hundred eighty (180) days,
but not more than three hundred sixty (360) days, prior to the termination of
the Fixed Term or then current Extended Term. Lessee may not exercise its option
for more than one Extended Term at a time. During each effective Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, except that the Base Rent (as hereinafter defined) for each such
Extended Term shall be adjusted as set forth in Section 3.1.3.
Notwithstanding anything to the contrary set forth herein, Lessee's
rights to extend the Fixed Term granted in this Section 1.3 are subject to the
further condition that concurrently with the exercise of any extension option
hereunder, Lessee shall have exercised its option to extend the terms of all of
the Related Leases in accordance with the provisions of the Agreement Regarding
Related Transactions and the provisions of Section 1.3 of each of the Related
Leases. For the purposes of this Section 1.3, the Related Leases are those
leases which pertain to the Acquisition Facilities (as such term is defined in
the Agreement Regarding Related Transactions).
ARTICLE 2
DEFINITIONS AND RULES OF CONSTRUCTION
2.1 Definitions. For all purposes of this Lease and the other Lease
Documents (as hereinafter defined), except as otherwise expressly provided or
unless the context otherwise requires, (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular and (ii) all references in this Lease or any of the other
Lease Documents to designated "Articles", "Sections" and other subdivisions are
to the designated Articles, Sections and other subdivisions of this Lease or the
other applicable Lease Document.
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Accounts: As defined in the UCC.
Accreditation Body: Department of Health and Rehabilitative Services
within the Agency for Health Care Administration, and all other Persons having
or claiming jurisdiction over the accreditation, certification, evaluation or
operation of the Facility. Lessor understands that neither Lessee nor any
Sublessee nor the Facility is currently under the jurisdiction, or is otherwise
subject to the rules, of any Accreditation Body and that, accordingly, the
provisions of this Lease relating in any way to an Accreditation Body are
presently inapplicable to this transaction; however, in the event that at any
time during the Term, any of Lessee, any Sublessee or the Facility falls under
the jurisdiction of, or otherwise becomes subject to the rules of, any
Accreditation Body, then all such provisions of this Agreement and the other
Lease Documents shall apply with full force and effect.
Additional Charges: As defined `in Article 3.
Additional Land: As defined in Section 9.3.
Affiliate: With respect to any Person (i) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (ii) any other Person (other than a shareholder of Guarantor)
that owns, beneficially, directly or indirectly, five percent (5 %) or more of
the outstanding capital stock, shares or equity interests of such Person or
(iii) any officer, director, employee, general partner or trustee of such
Person, or any other Person controlling, controlled by, or under common control
with, such Person (excluding trustees and Persons serving in a fiduciary or
similar capacity who are not otherwise an Affiliate of such Person). For the
purposes of this definition, "control" (including the correlative meanings of
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, partnership interests or other
equity interests.
Affiliated Party Subordination Agreement: That certain Affiliated Party
Subordination Agreement dated as of September 30, 1997 by and among Lessee, the
Guarantor, various Affiliates of Lessee and various Affiliates of Lessor.
Agreement Regarding Related Transactions: The Agreement Regarding
Related Transactions dated as of September 30, 1997, as amended from time to
time, between Lessee, Lessor, certain Affiliates of Lessor and any Related Party
that is party to any Related Lease or any Related Party Agreement. Lessor and
Lessee anticipate that the Agreement Regarding Related Transactions will be
amended from time to time in order to (a) include Affiliates of each of Lessor
and Lessee as parties thereto in connection with future transactions and (b)
include additional facilities within the scope of such related transactions and
acknowledge and agree that for all purposes under this Lease such amendments
shall be deemed to be included in this definition.
Appurtenant Agreements: Collectively, all instruments, documents and
other agreements
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<PAGE> 13
that now or hereafter create any utility, access or other right or appurtenances
benefitting or relating to the Leased Property.
Award: All compensation, sums or anything of value awarded, paid
or received on a total or partial Condemnation.
Base Rent: As set forth in Article 3.
Business Day: Any day which is not a Saturday or Sunday or a public
holiday under the laws of the United States of America, the Commonwealth of
Massachusetts, the State or the state in which Lessor's depository bank is
located.
Capital Additions: Collectively, all new buildings and additional
structures annexed to any portion of any of the Leased Improvements and material
expansions of any of the Leased Improvements which are constructed on any
portion of the Land during the Term, including, without limitation, the
construction of a new wing or new story, the renovation of any of the Leased
Improvements on the Leased Property and any expansion, construction, renovation
or conversion in connection therewith (a) in order to provide a functionally new
facility that is needed or used to provide services not previously offered or
(b) in order to (i) increase the unit capacity of a Facility, (ii) change the
purpose for which such units are utilized and/or (iii) change the utilization of
any material portion of any of the Leased Improvements.
Capital Addition Cost: The cost of any Capital Addition made by Lessee
whether paid for by Lessee or Lessor. Such cost shall include all costs and
expenses of every nature whatsoever incurred directly or indirectly in
connection with the development, permitting, construction and financing of a
Capital Addition as reasonably determined by, or to the reasonable satisfaction
of, Lessor.
Cash Collateral: None.
Cash Flow: The Consolidated Net Income (or Consolidated Net Loss)
before federal and state taxes for any period plus (i) the amount of the
provision for depreciation and amortization actually deducted on the books of
the applicable Person for the purposes of computing such Consolidated Net Income
(or Consolidated Net Loss) for the period involved, plus (ii) Rent and interest
on all other Indebtedness which is fully subordinated to the Lease Obligations,
plus (iii) management fees which are fully subordinated to the Lease Obligations
pursuant to the Affiliated Party Subordination Agreement.
Casualty: As defined in Section 13.1.
CHAMPUS: The Civilian Health and Medical Program of the Uniform
Service, a program of medical benefits covering retirees and dependents of
members or former members of a uniformed service provided, financed and
supervised by the United States Department of Defense and established by 10 USC
ss.ss.1071 et seq.
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Chattel Paper: As defined in the UCC.
Code: The Internal Revenue Code of 1986, as amended.
Collateral: All of the property in which security interests are granted
to Lessor and the other Meditrust Entities pursuant to the Lease Documents and
the Related Party Agreements to secure the Lease Obligations, including, without
limitation, the Cash Collateral and the Receivables.
Collateral Assignment of Permits and Contracts: The Collateral
Assignment of Permits, Licenses, Approvals and Contracts dated as of September
30, 1997 granted by Lessee to Lessor and certain Affiliates of Lessor.
Condemnation: With respect to the Leased Property or any interest
therein or right accruing thereto or use thereof (i) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor or
(ii) a voluntary sale or transfer by Lessor to any Condemnor, either under
threat of Condemnation or Taking or while legal proceedings for Condemnation or
Taking are pending.
Condemnor: Any public or quasi-public authority, or private
corporation or individual, having the power of condemnation or eminent domain.
Consolidated and Consolidating: When used with reference to any term
otherwise defined herein, means such term as applied to the consolidated and
consolidating accounts of the relevant Person and its Subsidiaries consolidated
in accordance with GAAP.
Consolidated Financials: For any fiscal year or other accounting period
for any Person and its consolidated Subsidiaries, statements of earnings and
retained earnings and of changes in financial position for such period and for
the period from the beginning of the respective fiscal year to the end of such
period and the related balance sheet as at the end of such period, together with
the notes thereto, all in reasonable detail and setting forth in comparative
form the corresponding figures for the corresponding period in the preceding
fiscal year, and prepared in accordance with GAAP, and disclosing all
liabilities of such Person and its consolidated Subsidiaries, including, without
limitation, contingent liabilities.
Contracts: All agreements (including, without .limitation, Provider
Agreements and Resident Admission Agreements), contracts (including without
limitation, construction contracts, subcontracts, and architects' contracts),
contract rights, warranties and representations, franchises, and records and
books of account benefiting, relating to or affecting the Leased Property or the
ownership, construction, development, maintenance, management, repair, use,
occupancy, possession, or operation thereof, or the operation of any programs or
services in conjunction with the Facility and all renewals, replacement and
substitutions therefor, now or hereafter issued by or entered into with any
Governmental Authority, Accreditation Body or Third Party Payor or maintained or
used by any member of the Leasing Group or entered into by any member of the
Leasing Group with any other Person.
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Consultants: Architects, engineers, inspectors, surveyors and
other consultants engaged by Lessor to perform services for Lessor in connection
with this Lease.
Current Assets: All assets of any Person which would, in accordance
with GAAP, be classified as current assets of a Person conducting a business the
same as or similar to that of such Person, excluding however, any and all
advances to or Current Liabilities owed to such Person by its Subsidiaries.
Current Liabilities: All liabilities of any Person which would, in
accordance with GAAP, be classified as current liabilities of a Person
conducting a business the same as or similar to that of such Person, including
without limitation, all rental and other payments under leases and fixed
payments of, and sinking fund payments with respect to, Indebtedness required to
be made within one (1) year from the date of determination.
Current Manager: Sterling House Corporation; a Kansas corporation.
Current Sublessee: York Development, Limited, an Ohio limited
liability company.
Date of Taking: The date the Condemnor has the right to possession of
the property being condemned.
Declaration: As defined in Article 23.
Documents: As defined in the UCC.
Earnings Before Interest and Taxes: The Consolidated Net Income (or
Consolidated Net Loss) for any period, plus (i) all federal and state income
taxes (but not taxes in the nature of an ad valorem property tax or a sales tax
or an excise tax) paid or accrued with respect to such period, plus (ii) all
interest on any Indebtedness paid or payable during such period.
Encumbrance: As defined in Section 20.3.
Environmental Indemnity Agreement: The Environmental Indemnity
Agreement dated as of September 30, 1997 by and among Lessee, the Guarantor,
Current Manager, Lessor and certain Affiliates of Lessor.
Environmental Laws: As defined in the Environmental Indemnity
Agreement.
ERISA: The Employment Retirement Income Security Act of 1974, as
amended.
Event of Default: As defined in Article 16.
Extended Terms: As defined in Section 1.3.
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Facility: The forty two (42) units, fully licensed residential care
facility located on the Land and known as "Sterling House of Englewood".
Failure to Operate: As defined in Article 16.
Failure to Perform: As defined Article 16.
Fair Market Added Value: The Fair Market Value of the Leased Property
(including all Capital Additions) minus the Fair Market Value of the Leased
Property determined as if no Capital Additions paid for by Lessee and approved
by Lessor had been constructed.
Fair Market Value of a Capital Addition: The amount by which the Fair
Market Value of the Leased Property upon the completion of a particular Capital
Addition exceeds the Fair Market Value of the Leased Property just prior to the
construction of the particular Capital Addition.
Fair Market Value of the Leased Property: The fair market value of the
Leased Property, including all Capital Additions, and including the Land and all
other portions of the Leased Property, and (a) assuming the same is unencumbered
by this Lease, (b) determined in accordance with the appraisal procedures set
forth in Section 18.2 and (c) not taking into account any reduction in value
resulting from any Lien to which the Leased Property is subject and which Lien
Lessee or Lessor is otherwise required to remove at or prior to closing of the
transaction. However, the positive or negative effect on the value of the Leased
Property attributable to the interest rate, amortization schedule, maturity
date, prepayment provisions and other terms and conditions of any Lien on the
Leased Property which is not so required or agreed td be removed shall be taken
into account in determining the Fair Market Value of the Leased Property. The
Fair Market Value shall be determined as the overall value based on due
consideration of the "income" approach, the "comparable sales" approach, and the
"replacement cost" approach.
Fee Mortgage: As defined in Section 20.3.
Fee Mortgagee: As defined in Section 20.3.
Financing Party: Any Person who is or may be participating with
Lessor in any way in connection with the financing of any Capital Addition.
Financing Statements: Uniform Commercial Code financing
statements evidencing the security interests granted to Lessor in connection
with the Lease Documents.
Fiscal Quarter: Each of the three (3) month periods commencing
January, April, July and October.
Fiscal Year: The twelve (12) month period from January 1 to December
31.
Fixed Term: As defined in Section 1.2.
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<PAGE> 17
Fixed Term Commencement Date: As defined in Section 1.2.
Fixed Term Expiration Date: As defined in Section 1.2.
Fixtures: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
General Intangibles: As defined in the UCC.
Governmental Authorities: Collectively, all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures, and
offices of any nature whatsoever of any government, quasi-government unit or
political subdivision, whether with a federal, state, county, district,
municipal, city or otherwise and whether now or hereinafter in existence.
Gross Revenues: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly received or to be received by Lessor, including,
without limitation, all resident revenues received or receivable for the use of,
or otherwise by reason of, all rooms, units and other facilities provided, meals
served, services performed, space or facilities subleased or goods sold on or
from the Leased Property and further including, without limitation, except as
otherwise specifically, provided below, any consideration received under any
subletting, licensing, or other arrangements with any Person relating to the
possession or use of the Leased Property and all revenues from all ancillary
services provided at or relating to the Leased Property; provided, however, that
Gross Revenues shall not include non-operating revenues such as interest income
or gain from the sale of assets not sold in the ordinary course of business; and
provided, further, that there shall be excluded or deducted (as the case may be)
from such revenues:
(i) contractual allowances (relating to any period
during the Term of this Lease and thereafter until the Rent hereunder is paid in
full) for billings not paid by or received from the appropriate Governmental
Agencies or Third Party Payors,
(ii) allowances according to GAAP for uncollectible
accounts,
(iii) all proper resident billing credits and adjustments
according to GAAP relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts
and excise taxes and any tax based upon or measured by said Gross Revenues which
is added to or made a part of the amount billed to the resident or other
recipient of such services or goods, whether included in the billing or stated
separately,
(v) provider discounts for hospital or other medical
facility utilization
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<PAGE> 18
contracts,
(vi) the cost of any federal, state or local governmental
program imposed specially to provide or finance indigent resident care (other
than Medicare, Medicaid and the like), and
(vii) resident trust accounts which Lessee has no
beneficial interest.
To the extent that the Leased Property is subleased or occupied by an
Affiliate or Affiliates of Lessee, Gross Revenues calculated for all purposes of
this Lease shall include the Gross Revenues of such Sublessee with respect to
the premises demised under the applicable Sublease (i.e., the Gross Revenues
generated from the operations conducted on such subleased or occupied portion of
the Leased Property) and the rent received or receivable from such Sublessee
pursuant to such Subleases shall be excluded from Gross Revenues for all such
purposes. As to any Sublease between Lessee and a non-Affiliate of Lessee, only
the rental actually received by Lessee from such non-Affiliate shall be included
in Gross Revenues.
Guarantor: Sterling House Corporation and its successors and assigns.
Guaranty: The Guaranty dated as of September 30, 1997 executed by
Guarantor in favor of Lessor and certain Affiliates of Lessor.
Hazardous Substances: As defined in the Environmental Indemnity
Agreement.
Impositions: Collectively, all taxes (including, without limitation,
all capital stock and franchise taxes of Lessor (but excluding franchise taxes
relating to the restructuring of Lessor's liabilities as opposed, for example,
to franchise taxes derived as a result of an appreciation of the fair market
value of the Leased Property or to a change in the method of calculating
franchise taxes), all ad valorem, sales and use, single business, gross
receipts, transaction privilege, rent or similar taxes) relating in any way to
any one or more of the Lease, the Leased Property or the Rent, assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and
whether or not to be completed within the Term), ground rents, water and sewer
rents, water charges or other rents and charges, excises, tax levies, fees
(including, without limitation, license, permit, inspection, authorization and
similar fees), transfer taxes and recordation taxes imposed as a result of this
Lease or any extensions hereof, and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of either or both of the Leased
Property and the Rent (including all interest and penalties thereon due to any
failure in payment by Lessee), which at any time prior to, during or in respect
of the Term hereof and thereafter until the Leased Property is surrendered to
Lessor as required by the terms of this Lease, may be assessed or imposed on or
in respect of or be a Lien upon (a) Lessor or Lessor's interest in the Leased
Property, (b) the Leased Property or any rent therefrom or any estate, right,
title or interest therein, or (c) any occupancy, operation, use or possession
of, sales from, or activity conducted on, or in connection with, the Leased
Property or the leasing or use of the Leased Property. Notwithstanding the
foregoing, nothing contained in this Lease shall be
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<PAGE> 19
construed to require Lessee to pay (1) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or
any other Person, except Lessee ,or its successors, (2) any transfer or net
revenue tax of Lessor or any other Person, except Lessee and its successors, (3)
any tax imposed with respect to the sale, exchange or other disposition by
Lessor of the Leased Property or the proceeds thereof, or (4) except as
expressly provided elsewhere in this Lease, any principal or interest on any
Encumbrance on the Leased Property; provided, however, the provisos set forth in
clauses (1) and (2) of this sentence shall not be applicable to the extent that
any tax, assessment, tax levy or charge which Lessee is obligated to pay
pursuant to the first sentence of this definition and which is in effect at any
time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (1) or (2) is levied,
assessed or imposed expressly in lieu thereof. In computing the amount of any
franchise tax or capital stock tax which may be or become an Imposition, the
amount payable by Lessee shall be equitably apportioned based upon all
properties owned by Lessor that are located within the particular jurisdiction
subject to any such tax..
Indebtedness: The total of all obligations of a Person, whether current
or long-term, which in accordance with GAAP would be included as liabilities
upon such Person's balance sheet at the date as of which Indebtedness is to be
determined, and shall also include (i) all capital lease obligations and (ii)
all guarantees, endorsements (other than for collection of instruments in the
ordinary course of business), or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement contingent
or otherwise to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
Indemnified Parties: As defined in Section 12.2.2.
Index: The rate of interest of actively traded marketable United States
Treasury Securities bearing a fixed rate of interest adjusted for a constant
maturity of ten (10) years as calculated by the Federal Reserve Board.
Institutional Lender: Any insurance company, federally insured
commercial or savings bank, national banking association, savings and loan
association, employees' welfare, pension or retirement fund or system, corporate
profit-sharing or pension trust, college or university, or real estate
investment trust, including any corporation qualified to be treated for federal
tax purposes as a real estate investment trust, having a net worth of at least
ONE HUNDRED MILLION and NO/100 DOLLARS ($100,000,000.00).
Instruments: As defined in the UCC.
Insurance Requirements: All terms of any insurance policy required by
this Lease, all requirements of the issuer of any such policy with respect to
the Leased Property and the activities conducted thereon and the requirements of
any insurance board, association or organization or underwriters' regulations
pertaining to the Leased Property.
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<PAGE> 20
Land: As defined in Article 1.
Lease: As defined in the preamble of this Lease.
Lease Default: The occurrence of any default or breach of condition
continuing beyond any applicable notice and/or grace periods under this Lease
and/or any of the other Lease Documents.
Lease Documents: Collectively, this Lease, the Leases with respect to
each of the other facilities listed on Exhibit, A to the Agreement Regarding
Related Transactions (as such Exhibit may be amended from time to time to
include additional facilities or to eliminate one or more facilities), the
Guaranty, the Agreement Regarding Related Transactions, the Security Agreement,
the Deposit Pledge Agreement, the Pledge Agreement, the Collateral Assignment of
Permits and Contracts, the Financing Statements, the Affiliated Party
Subordination Agreement, the Environmental Indemnity Agreement, the Memoranda of
Lease and any and all other instruments, documents, certificates or agreements
executed or furnished by any member of the Leasing Group in connection with the
transactions evidenced by the Lease and/or any of the foregoing documents.
Lease Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than Lessor's
obligations) under this Lease and the other Lease Documents.
Lease Year: A twelve month period ending on June 30 of each year;
provided, that the first Lease Year shall begin on the Fixed Term Commencement
Date and shall end on June 30, 1999.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Commitment Fee: None.
Leasing Group: Collectively, Lessee, the Guarantor, any Sublessee
which is an Affiliate of Lessee or the Guarantor and any Manager which is an
Affiliate of Lessee or the Guarantor.
Legal Requirements: Collectively, all statutes, ordinances, by-laws,
codes, rules, regulations, restrictions, orders, judgments, decrees and
injunctions (including, without limitation, all applicable building, health
code, zoning, subdivision, and other land use and health-care licensing
statutes, ordinances, by-laws, codes, rules and regulations), whether now or
hereafter enacted, promulgated or issued by any Governmental Authority,
Accreditation Body or Third Party Payor affecting Lessor, any member of the
Leasing Group or the Leased Property or the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession or
operation thereof or the operation of any programs or services in connection
with the Leased Property, including, without limitation, any of the foregoing
which may (i) require
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<PAGE> 21
repairs, modifications or alterations in or to the Leased Property, (ii) in any
way affect (adversely or otherwise) the use and enjoyment of the Leased Property
or (iii) require the assessment, monitoring, cleanup, containment, removal,
remediation or other treatment of any Hazardous Substances on, under or from the
Leased Property. Without limiting the foregoing, the term Legal Requirements
includes all Environmental laws and shall also include all Permits and Contracts
issued or entered into by any Governmental Authority, any Accreditation Body
and/or any Third Party Payor and all Permitted Encumbrances.
Lessee: As defined in the preamble of this Lease and its successors and
assigns.
Lessee's Election Notice: As defined in Section 14.3.
Lessor: As defined in the preamble of this Lease and its successors and
assigns.
Lessor's Personal Property: The personal property conveyed to Lessor by
the Seller in accordance with a bill of sale.
Letter of Credit: As defined in Section 6.2.1.
Lien: With respect to any real or personal property, any mortgage, deed
of trust, easement, restriction, lien, pledge, collateral assignment,
hypothecation, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment or other encumbrance of any kind in
respect of such property, whether or not choate, vested or perfected.
Managed Care Plans: All health maintenance organizations, preferred
provider organizations, individual practice associations, competitive medical
plans, and similar arrangements.
Management Agreement: Any agreement, whether written or oral, between
Lessee or any Sublessee and any other Person pursuant to which Lessee or such
Sublessee provides any payment, fee or other consideration to any other Person
to operate or manage the Facility.
Manager: Any Person who has entered into a Management Agreement with
Lessee or any Sublessee.
Material Structural Work: Any material (i) structural alteration, (ii)
structural repair or (iii) structural renovation to the Leased Property.
Medicaid: The medical assistance program established by Title XIX of
the Social Security Act (42 USC ss.ss.1396 et seq.) and any statute succeeding
thereto.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC ss.ss.1395 et
seq.) and any statute succeeding thereto.
Meditrust: As defined in Article 23.
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Meditrust/ALP Transaction Affiliate: An Affiliate of Lessee who is a
party to one or more of the Meditrust/ALP Transaction Documents (other than the
Affiliated Party Subordination Agreement, the Agreement Regarding Related
Transactions and comparable agreement now or hereafter in effect among
Affiliates of each of Lessee and Lessor).
Meditrust/ALP Transaction Documents: As defined in the Agreement
Regarding Related Transactions.
Meditrust Investment: The sum of (i) the Original Meditrust Investment
plus (ii) the aggregate amount of all Subsequent Investments less (iii) the sum
of any net amount of the Award received by Lessor (as defined in Section 3.7
below).
Meditrust Entities: Collectively, Meditrust, Lessor and any other
Affiliate of Lessor which may now or hereafter be a party to any Related Party
Agreement.
Monthly Deposit Date: As defined in Section 4.6.
Net Income for Net Loss): The net income (or net loss, expressed as a
negative number) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with GAAP.
Obligations: Collectively, the Lease Obligations and the Related Party
Obligations.
Officer's Certificate: A certificate of Lessee signed on behalf of
Lessee by the Chairman of the Board of Directors, the President, any Vice
President or the Treasurer of Lessee, or another officer authorized to so sign
by the Board of Directors or By-Laws of Lessee, or any other Person whose power
and authority to act has been authorized by delegation in writing by any of the
Persons holding the foregoing offices.
Original Meditrust Investment: The sum of TWO MILLION THREE HUNDRED
FORTY THOUSAND and 00/100 DOLLARS ($2,340,000.00).
Other Permitted Uses: To the extent permitted under Legal Requirements
and under Insurance Requirements, and so long as the same do not detract in any
material manner from the Primary Intended Use: (i) medical or dental offices,
(ii) medical or dental laboratories, (iii) day care center, (iv) pharmacy, (v)
medical services, (vi) florists and card shops which do not have a separate
entrance, (vii) ancillary parking, and (viii) beauty salons.
Overdue Rate: On any date, a rate of interest per annum equal no the
greater of: (i) a variable rate of interest per annum equal to one hundred
twenty percent (120 %) of the Prime Rate, or (ii) eighteen percent (18%) per
annum; provided, however, in no event shall the Overdue Rate be greater than the
maximum rate then permitted under applicable law to be charged by Lessor.
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PBGC: Pension Benefit Guaranty Corporation.
Permits: Collectively, all permits, licenses, approvals, variances,
permissive uses, accreditations, certificates, certifications, consents,
agreements, contracts, contract rights, franchises, interim licenses, permits
and other authorizations of every nature whatsoever required by, or issued
under, applicable Legal Requirements benefiting, relating or affecting the
Leased Property or the construction, development, maintenance, management, use
or operation thereof, or the operation of any programs or services in
conjunction with the Facility and all renewals, replacements and substitutions
therefor, now or hereafter required or issued by any Governmental Authority,
Accreditation Body or Third Party Payor, or maintained or used by any member of
the Leasing Group, or entered into by any member of the Leasing Group with any
Person.
Permitted Encumbrances: As defined in Section 10.1.17.
Permitted Prior Security Interests: As defined in Section 6.1.2.
Person: Any individual, corporation, general partnership, limited
partnership, joint venture, stock company or association, company, bank, trust,
trust company, land trust, business trust, unincorporated organization,
unincorporated association, Governmental Authority or other entity of any kind
or nature.
Pledge Agreement: The Stock Pledge Agreement dated as of September 30,
1997 between Guarantor, Lessee, Lessor and certain Affiliates of Lessor, as
amended from time to time.
Primary Intended Use: The use of the Facility as an assisted living
facility or residential care facility with the number of licensed (if
applicable) units as defined herein and such ancillary uses as are permitted by
law and may be necessary in connection therewith or incidental thereto.
Prime Rate: The variable rate of interest per annum from time to time
announced by the Reference Bank as its prime rate of interest and in the event
that the Reference Bank no longer announces a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any other major bank or other financial institution reasonably
selected by Lessor.
Principal Place of Business: As defined in Section 10.1.27.
Proceeds: As defined in the UCC.
Provider Agreements: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of Lessee
or any Sublessee in connection with the operation of the Facility relating to
any right of payment or other claim arising out of or in connection with
Lessee's or such Sublessee's participation in any Third Party Payor Program.
Lessor understands that no Provider Agreements presently exist with respect to
any activities of
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Lessee or any Sublessee and that, accordingly, the provisions of this Lease
relating in any way to Provider Agreements are presently inapplicable to this
transaction; however, in the event that at any time during the Term, any of
Lessee, any Sublessee or the Facility enter into, or otherwise become involved
in, any Provider Agreements, then all such provision of this Lease and the other
Lease Documents shall apply with full force and effect.
Purchaser: As defined in Section 11.5.4.
Receivables: Collectively, all (i) Instruments, Documents, Accounts,
Proceeds, General Intangibles and Chattel Paper and (ii) rights to payment for
goods sold or leased or services rendered by Lessee or any other party, whether
now in existence or arising from time to time hereafter and whether or not yet
earned by performance, including, without limitation, obligation evidenced by an
account, note, contract, security agreement, chattel paper, or other evidence of
indebtedness.
Reference Bank: Fleet Bank of Connecticut, N.A.
Related Leases: Acquisition Facility Leases (as defined in the
Agreement Regarding Related Transactions), together with such other new leases
identified from time to time in the Agreement Regarding Related Transactions.
Related Parties: Collectively, each Person that may now or hereafter be
a party to any Related Party Agreement other than the Meditrust Entities.
Related Party Agreement: Any agreement, document or instrument now or
hereafter evidencing or securing any Related Party Obligation, including without
limitation, the Meditrust/ALP Transaction Documents (as defined in the Agreement
Regarding Related Transactions) and those agreements listed in Schedule 2.6 of
the Security Agreement.
Related Party Default: The occurrence of a default or breach of
condition continuing beyond the expiration of any applicable notice and grace
periods, if any, under the terms of any Related Party Agreement.
Related Party Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings due to, or made for the
benefit of, Lessor or any of the other Meditrust Entities by Lessee or any other
member of the Leasing Group or any of their respective Affiliates; whether such
indebtedness, covenants, liabilities, obligations, agreements and/or
undertakings are direct or indirect, absolute or contingent, liquidated or
unliquidated, due or to become due, joint, several or joint and several, primary
or secondary, now existing or hereafter arising.
Rent: Collectively, the Base Rent, the Additional Charges and all other
sums payable under this Lease and the other Lease Documents.
Rent Adjustment Date: Each yearly anniversary of the Fixed Term
Commencement Date
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during the Term of the Lease including any exercised extension
thereof.
Rent Adjustment Rate: 320 basis points over the Index.
Rent Coverage Ratio: The ratio of (i) Cash Flow for each applicable
period to (ii) the total of all Rent paid or payable during such period or
accrued for such period.
Rent Insurance Proceeds: As defined in Section 13.8.
Resident Agreements: All contracts, agreements and consents executed by
or on behalf of any resident or other Person seeking services at the Facility,
including, without limitation, assignments of benefits and guarantees.
Retainage: As defined in Section 13.1.4.
Security Agreement: The Security Agreement dated as of September 30,
1997 between Lessee, Lessor and certain Affiliates of Lessor.
Seller: York Development, Limited, an Ohio limited liability company.
State: The state(s) or commonwealth(s) in which the Leased Property is
located.
Stated Amount: None.
Sublease: Collectively, all subleases, licenses, use agreements,
concession agreements, tenancy at will agreements and other occupancy agreements
of every kind and nature (but excluding resident occupancy agreements), whether
oral or in writing, now in existence or subsequently entered into by Lessee in
accordance with the applicable provisions hereof, encumbering or affecting the
Leased Property.
Sublessee: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases.
Subsequent Investments: The aggregate amount of all sums expended and
liabilities incurred by Lessor in connection with each Capital Addition.
Subsidiary or Subsidiaries: With respect to any Person, any corporation
or other entity of which such Person, directly, or indirectly, through another
entity or otherwise, owns, or has the right to control or direct the voting of,
fifty percent (50 %) or more of the outstanding capital stock or other ownership
interest having general voting power (under ordinary circumstances).
Taking: A taking or voluntary conveyance during the Term of the Leased
Property, or any interest therein or right accruing thereto, or use thereof, as
the result of, or in settlement of, any Condemnation or other eminent domain
proceeding affecting the Leased Property whether or not the same shall have
actually been commenced.
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Tangible Net Worth: An amount determined in accordance with GAAP equal
to the total assets of any Person, excluding the total intangible assets of such
Person, minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to, unamortized debt discount and expense,
organizational expense and experimental and development expenses).
Tangible Personal Property: All machinery, equipment, furniture,
furnishings, movable walls or partitions, computers or trade fixtures, goods,
inventory, supplies, and other personal property owned or leased (pursuant to
equipment leases) by Lessee and used or useful in the operation of the Leased
Property or arising in connection therewith or relating thereto.
Term: Collectively, the Fixed Term and each Extended Term which has
become effective pursuant to Section 1.3, as the context may require, unless
earlier terminated pursuant to the provisions hereof.
Third Party Payor Programs: Collectively, all third party payor
programs in which Lessee or any Sublessee presently or in the future may
participate, including without limitation, Medicare, Medicaid, CHAMPUS, Blue
Cross and/or Blue Shield, Managed Care Plans, other private insurance plans and
employee assistance programs. Lessor understands that neither Lessee nor any
Sublessee nor the Facility presently participates in, or otherwise receives
reimbursement from, any Third Party Payor Program and, accordingly, the
provisions of this Lease relating to Third Party Payor Programs are currently
inapplicable; however, in the event that at any time during the Term, any of
Lessee, any Sublessee or the Facility elect to participate in, or otherwise
receive reimbursement from, any Third Party Payor Program, or in the event that
it becomes reasonably prudent business practice for any assisted living facility
to participate in, or otherwise receive reimbursement from a Third Party Payor
Program, then all provisions in this Lease and the other Lease Documents
relating to Third Party Payor Programs shall apply with full force and effect.
Third Party Payors: Collectively, Medicare, Medicaid, CHAMPUS, Blue
Cross and/or Blue Shield, private insurers and any other Person which presently
or in the future maintains Third Party Payor Programs.
Time of Closing: [Intentionally Omitted]
UCC: The Uniform Commercial Code as in effect from time to time in the
State.
United States Treasury Securities: The uninsured treasury securities
issued by the United States Federal Reserve Bank.
Unsuitable For Its Primary Intended Use: As used anywhere in this
Lease, the term "Unsuitable For Its Primary Intended Use" shall mean that, by
reason of Casualty, or a partial or
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temporary Taking by Condemnation, in the good faith judgment of Lessor, the
Facility cannot be operated on a commercially practicable basis for the Primary
Intended Use, taking into account, among other relevant factors, the number of
usable units affected by such Casualty or partial or temporary Taking.
Unavoidable Delays: Delays due to strikes, lockouts, inability to
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto. .
Upgrade Expenditures: As defined in Section 8.1.4.
Work: As defined in Section 13.1.1.
Work Certificates: As defined in Section 13.1.3.
2.2 Rules of Construction. The following rules of construction shall
apply to the Lease and each of the other Lease Documents: (a) references to
"herein", "hereof" and "hereunder" shall be deemed to refer to this Lease or the
other applicable Lease Document, and shall not be limited to the particular text
or section or subsection in which such words appear; (b) the use of any gender
shall include all genders and the singular number shall include the plural and
vice versa as the context may require; (c) references to Lessor's attorneys
shall be deemed to include, without limitation, special counsel and local
counsel for Lessor; (d) reference to attorneys' fees and expenses shall be
deemed to include all costs for administrative, paralegal and other support
staff; (e) references to the Land, Leased Improvements, Fixtures, Lessor's
Personal Property, Facility, and Leased Property shall be deemed to include
references to all of the Land, Leased Improvements, Fixtures, Lessor's Personal
Property, Facility, and Leased Property, respectfully, and references to any
portion thereof; (f) references to the Lease Obligations shall be deemed to
include references to all of the Lease Obligations and references to any portion
thereof; (g) references to the Obligations shall be deemed to include references
to all of the Obligations and references to any portion thereof; (h) the term
"including", when following any general statement, will not be construed to
limit such statement to the specific items or matters as provided immediately
following the term "including" (whether or not non-limiting language such as
"without limitation" or "but not limited to" or words of similar import are also
used), but rather will be deemed to refer to all of the items or matters that
could reasonably fall within the broadest scope of the general statement; (i)
any requirement that financial statements be Consolidated in form shall apply
only to such financial statements as relate to a period during any portion of
which the relevant Person has one or more Subsidiaries; (j) all accounting terms
not specifically defined in the Lease Documents shall be construed in accordance
with GAAP and (k) all exhibits annexed to any of the Lease Documents as
referenced therein shall be deemed incorporated in such Lease Document by such
annexation and/or reference.
ARTICLE 3
RENT
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3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures.
Lessee will pay to Lessor, in lawful money of the United States of America, at
Lessor's address set forth herein or at such other place or to such other Person
as Lessor from time to time may designate in writing, rent for the Leased
Property, as follows.
3.1.1 Base Rent. Lessee shall pay to Lessor a base rent (the
"Base Rent") per annum which is equal to TWO HUNDRED TWO THOUSAND NINE HUNDRED
NINETY FIVE DOLLARS AND 00/100 ($202,995.00), subject to adjustment as provided
herein, and which is payable in advance in equal, consecutive monthly
installments due on the first day of each calendar month, commencing on the
Fixed Term Commencement Date. Notwithstanding the foregoing, if the Fixed Term
Commencement Date is a date other than the first of the month, Base Rent for the
month in which the Fixed Term Commencement Date occurs shall be prorated and due
on such Date.
3.1.2 Increase to Base Rent. Commencing on March 1, 1999 and on
each March 1 during the Term (each such date shall be referred to herein as a
"Rent Adjustment Date"), Base Rent per annum 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 Fixed Term Commencement Date in the case of the first
Rent Adjustment Date). Monthly payments of Base Rent shall be adjusted so as to
reflect the increase in Base Rent.
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".
In the event there is a Rent Shortfall for any Lease Year, Lessee shall
also pay to Lessor, as part of the Base Rent due hereunder, ark amount equal to
such Rent Shortfall, plus any Rent Shortfall in any previous Lease Years, up to
an amount equal to the Rent Surplus, if any, for the then current Lease Year,
less any prior payments on account of a Rent Shortfall.
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 relevant Rent Adjustment Date, the Base Rent then in effect (i.e., the Base
Rent for the twelve month period immediately preceding such Rent Adjustment
Date) by one hundred two percent (102%).
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)
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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 Lessor. Until the CPI Index is established, Lessee 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.
3.1.3 Base Rent for Extended Terms. Notwithstanding any
provisions of this Section 3.1 to the contrary, commencing on the first day of
each Extended 'Term, the Base Rent for the first year of such Extended Term
shall be an amount equal to the product of (x) the greater of (a) the
then-current Base Rent (before any adjustment for such year pursuant to Section
3.1.2) or (b) an amount equal to the product of the then Meditrust Investment
multiplied by the Rent Adjustment Rate then in effect on the first day of the
applicable Extended Term times (y) one hundred two percent (102%). With respect
to each year of an Extended Term other than the first year of the same, Base
Rent shall be subject to adjustment as set forth above in Section 3.1.2.
3.2 Best Efforts To Maximize. Lessee further covenants that the
operation of the Facility shall be conducted in a manner consistent with the
prevailing standards and practices recognized in the health care industry as
those customarily utilized by first class business operations.
3.3 [Intentionally Omitted]
3.4 Additional Charges. Subject to the rights to contest as set forth
in Article 15, in addition to the Base Rent, (a) Lessee will also pay and
discharge as and when due and payable all Impositions, all amounts, liabilities
and obligations under the Appurtenant Agreements and other amounts, liabilities
and obligations which Lessee assumes or agrees to pay under this Lease, and (b)
in the event of any failure on the part of Lessee to pay any of those items
referred to in clause (a) above, Lessee will also promptly pay and discharge
every fine, penalty, interest and cost which may be added for non-payment or
late payment of such items (the items referred to in clauses (a) and (b) above
being referred to herein collectively as the "Additional Charges"), and Lessor
shall have all legal, equitable and contractual rights, powers and remedies
provided in this Lease, by statute or otherwise, in the case of non-payment of
the Additional Charges, as well as the Base Rent. To the extent that Lessee pays
any Additional Charges to Lessor pursuant to any requirement of this Lease,
Lessee shall be relieved of its obligation to pay such Additional Charges to any
other Person to which such Additional Charges would otherwise be due.
3.5 Leasing Commitment Fee: The Lessee shall pay to the Lessor the
Leasing Commitment Fee simultaneously with the execution of this Lease;
provided, however, that, at the Lessor's option, the Leasing Commitment Fee
shall be held in an escrow account established with a Person designated by the
Lessor pursuant to an escrow arrangement satisfactory to the
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Lessor, with interest thereon benefiting the Lessor. If the Lessor exercises its
option to require that the Leasing Commitment Fee be held in such an escrow
account (a) the Leasing Commitment Fee shall be disbursed from said escrow
account only upon the joint instructions of the Lessee and the Lessor (which
instructions from the Lessee shall be immediately given upon the request of the
Lessor) and in no event shall the Leasing Commitment Fee be disbursed therefrom,
in whole or in part, unless and until so requested by the Lessor and (b) the
Lessor shall bear the risk of loss of or misappropriation of the Leasing
Commitment Fee by such escrow agent.
3.6 Net Lease. The Rent shall be paid absolutely net to Lessor, so that
this Lease shall yield to Lessor the full amount of the installments of Base
Rent, and the payments of Additional Charges throughout the Term.
3.7 No Lessee Termination or Offset.
3.7.1 No Termination. Except as may be otherwise specifically
and expressly provided in this Lease, Lessee, to the extent not prohibited by
applicable law, shall remain bound by this Lease in accordance with its terms
and shall neither take any action without the consent of Lessor to modify,
surrender or terminate the same, nor seek nor be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent, nor
shall the respective obligations of Lessor and Lessee be otherwise affected by
reason of (a) any Casualty or any Taking of the Leased Property, (b) the lawful
or unlawful prohibition of, or restriction upon, Lessee's use of the Leased
Property or the interference with such use by any Person or by reason of
eviction by paramount title, (c) any claim that Lessee has or might have against
Lessor, (d) any default or breach of any warranty by Lessor or any of the other
Meditrust Entities under this Lease, any other Lease Document or any Related
Party Agreement, (e) any bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding up or other proceedings
affecting Lessor or any assignee or transferee of Lessor or (f) for any other
cause whether similar or dissimilar to any of the foregoing, other than a
discharge of Lessee from any of the Lease Obligations as a matter of law.
3.7.2 Waiver. To the fullest extent not prohibited by
applicable law, Lessee hereby specifically waives all rights, arising from any
occurrence whatsoever, which may now or hereafter be conferred upon it by law to
(a) modify, surrender or terminate this Lease or quit or surrender the Leased
Property or (b) entitle Lessee to any abatement,, reduction, suspension or
deferment of the Rent or other sums payable by Lessee hereunder, except as
otherwise specifically and expressly provided in this Lease.
3.7.3 Independent Covenants. The obligations of Lessor and
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by Lessee hereunder shall continue to be
payable in all events unless the obligations to pay the same shall be terminated
pursuant to the express provisions of this Lease or (except in those instances
where the obligation to pay expressly survives the termination of this Lease) by
termination of this Lease other than by reason of a Lease Default.
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3.8 Abatement of Rent Limited. There shall be absolutely no abatement
of Rent on account of any Casualty, Taking or other event, except that in the
event of a partial Taking or a temporary Taking as described in Section 14.3,
the Base Rent shall be abated as follows: (a) in the case of such a partial
Taking, the Meditrust Investment shall be reduced for the purposes of
calculating Base Rent pursuant to Section 3.1 by subtracting therefrom, as
applicable, the net amount of the Award received by Lessor, and (b) in the case
of such a temporary Taking, by reducing the Base Rent for the period of such a
temporary Taking, by the net amount of the Award received by Lessor.
For the purposes of this Section 3.8, the "net amount of the Award
received by Lessor" shall mean the Award paid to Lessor on account at such
Taking, minus all costs and expenses incurred by Lessor in connection therewith,
and minus any amounts paid to or for the account of Lessee to reimburse for the
costs and expenses of reconstructing the Facility following such Taking in order
to create a viable and functional Facility under all of the circumstances.
ARTICLE 4
IMPOSITIONS; TAXES; UTILITIES:
INSURANCE PAYMENTS
4.1 Payment of Impositions.
4.1.1 Lessee To Pay. Lessee will pay or cause to be Paid all
Impositions before any fine, penalty, interest or cost may be added for
non-payment, such payments to be made directly to the taxing authority where
feasible, and Lessee will promptly furnish Lessor copies of official receipts or
other satisfactory proof evidencing payment not later than the last day on which
the same may be paid without penalty or interest. Subject to Section 4.1.2,
Lessee'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.
4.1.2 Installment Elections. If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Lessee may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and, in such event, shall pay such
installments during the Term hereof (subject to Lessee's right to contest
pursuant to the provisions of Section 4.1.5 below) as the same respectively
become due and before any fine, penalty, premium, further interest or cost may
be added thereto.
4.1.3 Returns and Reports. Lessor, at its expense, shall, to
the extent permitted by applicable law, prepare and file all tax returns and
reports as may be required by Governmental Authorities in respect of Lessor's
net income, gross receipts, franchise taxes and taxes on its capital stock, and
Lessee, at its expense, shall, to the extent permitted by applicable laws and
regulations, prepare and file all other tax returns and reports in respect of
any Imposition as may be required by Governmental Authorities. Lessor and Lessee
shall, upon request of the other, provide such data as is maintained by the
party to whom the request is made
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with respect to the Leased Property as may be necessary to prepare any required
returns arid reports. In the event that any Governmental Authority classifies
any property covered by this Lease as personal property, Lessee shall file all
personal property tax returns in such jurisdictions where it may legally so
file. Lessor, to the extent it possesses the same, and Lessee, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any portion of Leased
Property so classified as personal property. Where Lessor is legally required to
file personal property tax returns, if Lessee notifies Lessor of the obligation
to do so in each year at least thirty (30) days prior to the date any protest
must be filed, Lessee will be provided with copies of assessment notices so as
to enable Lessee to file a protest.
4.1.4 Refunds. If no Lease Default or Related Party Default
shall have occurred and be continuing, any refund due from any taxing authority
in respect of any Imposition paid by Lessee shall be paid over to or retained by
Lessee. If a Lease Default or Related Party Default shall have occurred and be
continuing, at Lessor's option, such funds shall be paid over to Lessor and/or
retained by Lessor and applied toward the Obligations in accordance with the
Lease Documents and/or any Related Party Agreement.
4.1.5 Protest. Upon giving notice to Lessor, at Lessee's option
and at Lessee's sole cost and expense, and subject to compliance with the
provisions of Article 15, Lessee may contest, protest, appeal, or institute such
other proceedings as Lessee may deem appropriate to effect a reduction of any
Imposition and Lessor, at Lessee's cost and expense as aforesaid, shall fully
cooperate in a reasonable manner with Lessee in connection with such protest,
appeal or other action.
4.2 Notice of Impositions. Lessor shall give prompt notice to Lessee
of all Impositions payable by Lessee hereunder of which Lessor at any time has
knowledge, but Lessor's failure to give any such notice shall in no way diminish
Lessee's obligations hereunder to pay such Impositions.
4.3 Adjustment of Impositions. Impositions imposed in respect of the
period during which the expiration or earlier termination of the Term occurs
shall be adjusted and prorated between Lessor and Lessee, whether or not such
Impositions are imposed before or after such expiration or termination, and
Lessee's obligation to pay its prorated share thereof shall survive such
expiration or termination.
4.4 Utility, Charges. Lessee will pay or cause to be paid all charges
for electricity, power, gas, oil, water, telephone and other utilities used in
the Leased Property during the Term and thereafter until Lessee surrenders the
Leased Property in the manner required by this Lease.
4.5 Insurance Premiums. Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article 12 during the Term, and thereafter until Lessee yields up the Leased
Property in the manner required by this Lease. All such premiums shall be paid
annually in advance and Lessee shall furnish Lessor with evidence satisfactory
to Lessor that all such premiums have been so paid prior to the commencement of
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the Term and thereafter at least thirty (30) days prior to the due date of each
premium which thereafter become due. Notwithstanding the foregoing, Lessee may
pay such insurance premiums to the insurer in monthly installments so long as
the applicable insurer is contractually obligated to give Lessor not less than a
thirty (30) days notice of non-payment and so long as no Lease Default has
occurred and is continuing. In the event of the failure of Lessee either to
comply wit the insurance requirements in Article 12, or to pay the premiums for
such insurance, r to deliver such policies or certificates thereof to Lessor at
the times required hereunder, Lessor shall be entitled, but shall have no
obligation, to effect such insurance and pay the premiums therefor, which
premiums shall be a demand obligation of Lessee to Lessor.
4.6 Deposits.
4.6.1 Lessor's Option. At the option of Lessor, which may be
exercised at any time of after a default has occurred and is continuing, Lessee
shall, upon written request of Lessor, on a first day on the calendar month
immediately following such request, and on the first day of each calendar month
thereafter during the Term (each of which dates is referred to as a "Monthly
Deposit Date"), pay to and deposit with Lessor a sum equal to one-twelfth
(1/12th) of a Impositions to be levied, charged, filed, assessed or imposed upon
or against the Leased Property within one (1) year after said Monthly Deposit
Date and a sum equal to one-twelfth (1/12th) of the premiums for the insurance
policies required pursuant to Article 12 which are payable within one (1) year
after said Monthly Deposit Date. If the amount of the Impositions o be levied,
charged, assessed or imposed or insurance premiums to be paid within the ensuing
one (1) year period shall not be fixed upon any Monthly Deposit Date, such
amount for the p se of computing the deposit to be made by Lessee hereunder
shall be estimated by Lessor with appropriate adjustment to be promptly made
between Lessor and Lessee as soon as such amount becomes determinable. In
addition, Lessor may, at its option, from time to time require that y particular
deposit be greater than one-twelfth (1/12th) of the estimated amount payable
within one (1) year after said Monthly Deposit Date, if such additional deposit
is required in order to provide to Lessor a sufficient fund from which to make
payment of all Impositions on or before the next due date of any installment
thereof, or to make payment of any require insurance premiums not later than the
due date thereof.
4.6.2 Use of Deposits. The sums deposited by Lessee under this
Section 4.6 shall be held by Lessor and shall be applied in payment of the
Impositions or insurance premiums, as the case may be, when due. Any such
deposits may be commingled with other assets of Lessor, and shall be invested by
Lessor at such bank as Lessor may, from time to time select, and Lessor shall
not be liable to Lessee or any other Person (a) based on Lessor's choice of
investment vehicles provided Lessor chooses one or more of the investment
vehicles described on SCHEDULE 4.6.2 attached hereto and incorporated by
reference, (b) for any consequent loss of principal or interest or (c) for any
unavailability of funds based on such choice of investment. Furthermore, Lessor
shall bear no responsibility for the financial condition of, nor any act or
mission by, Lessor's depository bank. The income from such investment or
interest on such deposit shall be paid to Lessee on a semi-annual basis as long
as no Lease Default has occurred d is then continuing, and as long as no fact or
circumstance exists which, with the giving of notice and/or the passage of time,
would constitute a Lease Default. Lessee shall give not less than ten
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(10) days prior written notice to Lessor in each instance when an Imposition or
insurance premium is due, specifying the Imposition or premium to be paid and
the amount thereof, the place of payment, and the last day on which the same may
be paid in order to comply with the requirements of this Lease. If Lessor, in
violation of its obligations under this Lease, doe not pay any Imposition or
insurance premium when due, for which a sufficient deposit exists, Lessee shall
not be in default hereunder by virtue of the failure of Lessor to pay such
Imposition or such insurance premium.
4.6.3 Deficits. If for any reason any deposit held by Lessor
under this Section 4.6 shall not be sufficient to pay an Imposition or insurance
premium within the time specified therefor in this Lease, then, within ten (10)
days after demand by Lessor, Lessee shall deposit an additional amount with
Lessor, increasing the deposit held by Lessor so that Lessor holds sufficient
funds to pay such Imposition or premium in full (or in installments as otherwise
provided for herein), together with any penalty or interest thereon. Lessor may
change its estimate of any Imposition or insurance premium for any period on the
basis of a change in an assessment or tax rate or on the basis of a prior
miscalculation or for any other good faith reason; in which event, within ten
(10) days after demand by Lessor, Lessee shall deposit with Lessor the amount in
excess of the sums previously deposited with Lessor for the applicable period
which would theretofore have been payable under the revised estimate.
4.6.4 Other Properties. If any Imposition shall be levied,
charged, filed, assessed, or imposed upon or against the Leased Property, and if
such Imposition shall also be a levy, charge, assessment, or imposition upon or
for any other real or personal property that does not constitute a part of the
Leased Property, then the computation of the amounts to be deposited under this
Section 4.6 shall be based upon the entire amount of such Imposition and Lessee
shall not have the right to apportion any deposit with respect to such
Imposition.
4.6.5 Transfers. In connection with any assignment of Lessor's
interest under this Lease, a original Lessor named herein and each successor in
interest shall have the right to transfer all amounts deposited pursuant to the
provisions of this Section 4.6 and still in its possession such assignee (as the
subsequent holder of Lessor's interest in this Lease) and upon such transfer,
the original Lessor named herein or the applicable successor in interest
transferring the deposits shall thereupon be completely released from all
liability with respect to such deposits so transferred and Lessee shall look
solely to said assignee, as the subsequent holder of Lessor's interest under
this Lease, in reference thereto.
4.6.6 Security. All amounts deposited with Lessor pursuant to
the provisions of this Section 4.6 shall be held by Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, Lessor may, in its sole an absolute discretion,
apply said amounts towards payment or performance of such Obligations.
4.6.7 Return. Upon the expiration or earlier termination of
this Lease, provided, that, all of the Lease Obligations have been fully paid
and performed, any sums then held by Lessor under this Section 4.6 shall be
refunded to Lessee; unless a Related Party Default has occurred, in which event
such sums may be applied towards the Obligations.
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4.6.8 Receipts. Lessee shall deliver to Lessor copies of all
notices, demands, claims, bills and receipts in relation to the Impositions and
an annual summary invoice of insurance premiums immediately upon receipt thereof
by Lessee.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY:
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY
5.1 Ownership of the Leased Property. Lessee acknowledges that the
Leased Property is the property of Lessor and that Lessee has only the right to
the exclusive possession and use of the Leased Property upon the terms and
conditions of this Lease.
5.2 Personal Property: Removal and Replacement of Personal Property.
5.2.1 Lessee To Equip Facility. Lessee, at its sole cost and
expense, shall install, arc or assemble or place on the Leased Property,
sufficient items of Tangible Personal Property in addition to Lessor's Personal
Property, to enable the operation of the Facility in accordance with the
requirements of this Lease for the Primary Intended Use and, to the extent
applicable, the Other Permitted Uses and such Tangible Personal Property and
replacements thereof, shall be at all times the property of Lessee.
5.2.2 Sufficient Personal Property. Lessee shall maintain,
during the entire Term, the Tangible Personal Property and Lessor's Personal
Property in good order and repair and shall provide at its expense all necessary
replacements thereof, as may be necessary in order to operate the Facility in
compliance with all applicable Legal Requirements and Insurance Requirements and
otherwise in accordance with customary practice in the industry for the Primary
Intended Use and, to the extent applicable, the Other Permitted Uses. In
addition, Lessee shall (a) furnish all necessary replacements of obsolete items
of the Tangible Personal Property and Lessor's Personal Property during the
Term, unless Lessee provides Lessor with an explanation (reasonably acceptable
to Lessor) as to why such Tangible Personal Property and Lessor's Personal
Property is no longer required in connection with the operation of the Leased
Property and (b) at least once a year, and more frequently if requested by
Lessor, deliver to Lessor, a detailed inventory of all such Tangible Personal
Property and Lessor's Personal Property.
5.2.3 Removal and Replacement: Lessor's Option to Purchase.
Lessee shall not remove from the Leased Property any one or more items of
Tangible Personal Property (whether now owned or hereafter acquired), the fair
market value of which exceeds TWENTY-FIVE THOUSAND and NO/100 DOLLARS
($25,000.00), individually or ONE HUNDRED THOUSAND and NO/100 DOLLARS
($100,000.00) collectively, except if such Tangible Personal Property is
simultaneously suitably replaced or Lessee provides Lessor with an explanation
(reasonably satisfactory to Lessor) as to why such Tangible Personal Property is
no
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longer required in connection with the operation of the Leased Property. At
its sole cost and expense, Lessee shall restore the Leased Property to the
condition required by Article 8, including repair of all damage to the Leased
Property caused by the removal of the Tangible Personal Property, whether
effected by Lessee or Lessor. Upon the expiration or earlier termination of this
Lease, Lessor shall have the option, which may be exercised prior to or within
sixty (60) days following such expiration or termination, of (a) acquiring the
Tangible Personal Property (pursuant to a bill of sale and assignments of any
equipment leases, all in such forms as are reasonably satisfactory to Lessor)
upon payment of its book value (Lessee's cost, minus depreciation), but not in
excess of its fair market value or (b) requiring Lessee to remove the Tangible
Personal Property. If Lessor exercises its option to purchase the Tangible
Personal Property, the price to be paid by Lessor shall be (i) reduced by the
amount of all payments due on any equipment leases or any other Permitted Prior
Security Interests and (ii) applied to the Lease Obligations before any payment
to Lessee. If Lessor requires the removal of the Tangible Personal Property,
then all of the Tangible Personal Property that is not removed by Lessee within
ten (10) days following such request shall be considered abandoned by Lessee and
may be appropriated, sold, destroyed or otherwise disposed of by Lessor without
first giving notice thereof to Lessee, without any payment to Lessee and without
any obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 Security for Lessee's Obligations: Permitted Prior Security
Interests.
6.1.1 Security. In order to secure the payment and performance of
all of the Obligations, Lessee agrees to provide or cause there to be provided
the following security:
(a) a first lien and exclusive security interest in the
Collateral, as more particularly provided for in the Security Agreement;
(b) the Guaranty described in Section 6.3;
(c) a first lien and exclusive pledge of all of the
capital stock of Lessee all as more particularly set forth in the Pledge
Agreement. If any Person other than the Lessee or Guarantor shall ever operate
the Facility, a pledge of all capital stock of or partnership or other ownership
interests in such Person shall also be provided pursuant to a pledge and
security agreement substantially similar to the Pledge Agreements;
(d) a first lien and exclusive pledge and assignment
of, and security interest in, all Permits and Contracts, as more particularly
provided for in the Collateral Assignment f Permits and Contracts; and
(e) in the event that at any time during the Term, Lessee
holds the fee title to or a leasehold interest in any real property and/or
personal property which is used as an integral part of the operation of the
Leased Property (but is not subject to this Lease), Lessee
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shall (i) provide Lessor with prior notice of such acquisition and (ii) shall
take such actions and enter into such agreements as Lessor shall reasonably
request in order to grant Lessor a first priority mortgage or other security
interest in such real property and personal property, subject only to the
Permitted Encumbrances and other Liens reasonably acceptable to Lessor.
6.1.2 Purchase-Money Security Interests and Equipment Leases.
Lessee may (a) grant priority purchase money security interests in items of
Tangible Personal Property and (b) lease Tangible Personal Property from
equipment lessors as long as in each instance: (i) the secured party or
equipment lessor enters into an intercreditor agreement with, and satisfactory
to, Lessor, pursuant to which, without limiting the foregoing, (x) Lessor shall
be afforded the option of curing defaults and the option of succeeding to the
rights of Lessee and (y) Lessor's security interest in Tangible Personal
Property shall be subordinated to the security interest granted to such secured
party, (ii) all of the terms, conditions and provisions of the financing,
security interest or lease are reasonably acceptable to Lessor, (iii) Lessee
provides a true and complete copy, as executed, of each such purchase money
security agreement, financing document and equipment lease, (iv) no such
security interest, financing agreement or lease is cross-defaulted or
cross-collateralized with any other obligation and (v) the secured party or
equipment lessor is not a member of the Leasing Group or an Affiliate of any
member of the Leasing Group. Security interests granted by Lessee in full
compliance with the provisions of this Section 6.1.2 are referred to as
"Permitted Prior Security Interests".
6.2 [Intentionally Omitted]
6.3 Guaranty. All of the Lease Obligations shall be unconditionally
and irrevocably guaranteed y the Guarantor pursuant to the Guaranty.
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Property. Lessee acknowledges that Seller
has caused the Leased Property to be sold to Lessor and Lessee has concurrently
entered into this Lease. Lessee acknowledges receipt and delivery of possession
of the Leased Property and that Lessee has examined and otherwise has acquired
knowledge of the condition of the Leased Property prior to the execution and
delivery of this Lease and has found the same to be in good order and repair and
satisfactory for its purposes hereunder. Lessee is leasing the Leased Property
"AS-IS" in its present condition. Lessee waives any claim or action against
Lessor in respect of the condition of the Leased Property. LESSOR MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED
PROPERTY, EITHER AS TO ITS FITNESS FOR ANY PARTICULAR PURPOSE OR USE, ITS DESIGN
OR CONDITION OR OTHERWISE, OR AS TO DEFECTS IN QUALITY OF THE MATERIAL OR
WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING AGREED THAT ALL RISKS RELATING
TO THE DESIGN, CONDITION OR USE OF THE LEASED PROPERTY ARE TO BE BORNE BY
LESSEE. LESSEE HEREBY ASSUMES
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ALL RISK OF THE PHYSICAL CONDITION OF THE LEASED PROPERTY, THE SUITABILITY OF
THE LEASED PROPERTY FOR LESSEE'S PURPOSES, AND THE COMPLIANCE OR NON-COMPLIANCE
OF THE LEASED PROPERTY WITH ALL APPLICABLE LEGAL REQUIREMENTS, INCLUDING BUT NOT
LIMITED TO ENVIRONMENTAL LAWS AND ZONING OR LAND US LAWS.
Upon the request of Lessor, at any time and from time to time during
the Term if Lessor has reason to believe that any of the conditions described in
(a) or (b) below may exist, Lessee shall engage one (1) or more independent
professional Consultants, qualified to do business in the State an acceptable to
Lessor to perform any environmental and/or structural investigations and/or
other inspections of the Leased Property and the Facility as Lessor may
reasonably request in order to detect (a) any structural deficiencies in the
Leased Improvements or the utilities se icing the Leased Property or (b) the
presence of any condition that (i) may be harmful or resent a health hazard to
the residents and other occupants. of the Leased Property or (ii) constitutes a
breach or violation of any of the Lease Documents. In the event that Lessor
reasonably determines that the results of such testing or inspections are
unsatisfactory, within thirty (30) days of notice from Lessor, Lessee shall
commence such appropriate remedial actions as may be reasonably requested by
Lessor to correct such unsatisfactory conditions and, thereafter, diligently and
continuously prosecute such remedial actions to completion within the time
limits prescribed in this Lease or the other Lease Documents.
7.2 Use of the Leased Property; Compliance; Management.
7.2.1 Obligation to Operate. Lessee shall continuously operate
the Leased Property in accordance with the Primary Intended Use and, to the
extend applicable, the Other Permitted Uses and maintain its qualifications for
licensure and accreditation as required by all applicable Legal Requirements and
Insurance Requirements.
7.2.2 Permitted Uses. During the entire Term, Lessee shall use
the Leased Property, or permit the Leased Property to be used, only for the
Primary Intended Use and the Other Permitted Uses. Lessee shall not use the
Leased Property or permit the Leased Property to be used or any other use
without the prior written consent of Lessor, which consent may be withheld in
Lessons sole and absolute discretion.
7.2.3 Compliance With Insurance Requirements. No use shall be
made or permitted to be made of the Leased Property and no acts shall be done
which will cause the cancellation of any insurance policy covering the Leased
Property, nor shall Lessee sell or otherwise provide to residents therein, or
permit to be kept, used or sold in or about the Leased Property, any article
which may be prohibited by any Legal Requirement or by any of the Insurance
Requirements. Furthermore, Lessee shall, at its sole cost and expense, take
whatever other actions that may be necessary to comply with and to insure that
the Leased Property complies with all Insurance Requirements.
7.2.4 No Waste. Lessee shall not commit or suffer to be committed
any waste on, in or under the Leased Property, nor shall Lessee cause or permit
any nuisance thereon.
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7.2.5 No Impairment. Lessee shall neither suffer nor permit the
Leased Property to be used in such a manner as (a) might reasonably tend to
impair Lessor's title thereto or (b) may reasonably make possible a claim or
claims of adverse usage or adverse possession by the public or of implied
dedication of the Leased Property.
7.2.6 No Liens. Except for Permitted Prior Security Interests
and any other Liens which may be specifically permitted by the express terms of
this Lease, Lessee shall not permit or suffer any Lien to exist on the
Collateral and shall in no event cause, permit or suffer any Lien to exist with
respect to the Leased Property.
7.3 Compliance with Legal Requirements. Lessee covenants and agrees
that the Leased Property shall not be used for any unlawful purpose and that
Lessee, at its sole cost and expense, will promptly (a) comply with, and shall
cause every other member of the Leasing Group to comply with, all Legal
Requirements relating to the use, operation, maintenance, repair and restoration
of the Leased Property, whether or not compliance therewith shall require
structural change in any of the Leased Property or interfere with the use and
enjoyment of the Leased Property and (b) procure, maintain and comply with (in
all material respects), and shall cause every other member of the Leasing Group
to procure, maintain and comply with (in all material respects), all Contracts
and Permits necessary or desirable in order to operate the Leased Property for
the Primary Intended Use and, to the extent applicable, Other Permitted Uses,
and for the proper erection, installation, operation and maintenance of the
Leased Property. Unless a Lease Default has occurred and is continuing, Lessee
may, upon prior written notice to Lessor, contest any Legal Requirement to the
extent permitted by, and in accordance with, Article 15 below.
7.4 Management Agreements. Throughout the Term, Lessee shall not enter
into any Management Agreement without the prior written approval of Lessor
(unless Guarantor is the Manager), in each instance, which approval shall not be
unreasonably withheld. Lessee shall not, without the prior written approval of
Lessor, in each instance, which approval shall not be unreasonably withheld,
agree to: (a) any change in the Manager, (b) any change in the Management
Agreement or change in the ownership or control of the Manager, (c) the
termination of any Management Agreement or (d) permit the Manager to assign the
Management Agreement. Each Management Agreement shall provide that Lessor shall
be provided notice of any defaults thereunder and, at Lessor's option, an
opportunity to cure such default; all in form and substance approved by Lessor.
If Lessor shall cure any of Lessee's defaults under the Management Agreement,
the cost of such cure shall be payable upon demand by Lessee to Lessor and
Lessor shall have the same rights and remedies for failure to pay such costs on
demand as or Lessee's failure to pay any other sums due hereunder. Lessee shall
deliver to Lessor any instrument requested by Lessor to implement the intent of
the foregoing provision, including, but not limited to, the Affiliated Party
Subordination Agreement. All management fees, payments in connection with any
extension of credit and fees for services provided in connection with the
operation of the Leased Property, and all other payments and fees, payable by
Lessee, to (i) the Guarantor or any of its Affiliates or (ii) any Affiliate of
Lessee, shall be subordinated to the Lease Obligations pursuant to the
Affiliated Party Subordination Agreement.
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ARTICLE 8
REPAIRS; RESTRICTIONS
8.1 Maintenance and Repair.
8.1.1 Lessee's Responsibility. Lessee, at its sole cost and
expense, shall keep the Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto which are under Lessee's control in good order and
repair (whether or not the need for such repairs occurs as a result of Lessee's
use, any prior use, the elements or the age of the Leased Property or such
private roadways, sidewalks and curbs or any other cause whatsoever) and,
subject to Articles 9, 13 and 14, Lessee shall promptly, with the exercise of
all reasonable efforts, undertake and diligently complete all necessary and
appropriate repairs, replacements, renovations, restorations, alterations and
modifications thereof of every kind and nature, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen
or arising by reason of a condition (concealed or otherwise) existing prior to
the commencement of, or during, the Term and thereafter until Lessee surrenders
the Leased Property in a manner required by this Lease. In addition, Lessee, at
its sole cost and expense, shall make all repairs, modifications, replacements,
renovations and alterations of the Leased Property (a d such private roadways,
sidewalks and curbs) that are necessary to comply with all applicable Legal
Requirements and Insurance Requirements so that the Leased Property can be
legally operated for the Primary Intended Use and, to the extent applicable, the
Other Permitted Uses. All repairs, replacements, renovations, alterations, and
modifications required by the to s of this Section 8.1 shall be (a) performed in
a good and workmanlike manner in compliance with all Legal Requirements,
Insurance Requirements and the requirements of Article 9 hereof, using new
materials well suited for their intended purpose and (b) consistent with the
operation o the Facility in a first class manner. Lessee will not take or omit
to take any action the taking or omission of which might materially impair the
value or the usefulness of the Leased Property for the Primary Intended Use and,
to the extent applicable, the Other Permitted Uses. To the extent that any of
the repairs, replacements, renovations, alterations or modifications required by
the terms of this Section 8.1 constitute Material Structural Work, Lessee shall
obtain Lessor's prior written approval (which approval shall not be unreasonably
withheld) of the specific repairs, replacements, renovations, alterations and
modifications to be performed by or on behalf of Lessee in connection with such
Material Structural Work, and shall perform the same in accordance with the
provisions of Sections 9.2.1, 9.2.2, 9.4 and 13.1.3, all Legal Requirements, and
all other requirements of this Lease.
8.1.2 No Lessor Obligation. Lessor shall not, under any
circumstances, be required to build or rebuild any improvements on the Leased
Property (or any private roadways, sidewalks or curbs appurtenant thereto), or
to make any repairs, replacements, renovations, alterations, restorations,
modifications, or renewals of any nature or description to the Leased Property
(or any private roadways, sidewalks or curbs appurtenant thereto), whether
ordinary or extraordinary, structural or non-structural, foreseen or unforeseen,
or to make any expenditure whatsoever with respect thereto in connection with
this Lease, or to maintain the Leased Property
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in any way (or any private roadways, sidewalks or curbs appurtenant thereto).
8.1.3 Lessee May Not Obligate Lessor. Nothing contained herein nor
any action or inaction by Lessor shall be construed as (a) constituting the
consent or request of Lessor, express or implied, to any contractor,
subcontractor, laborer, materialman or vendor to or for the performance of any
labor or, services for any construction, alteration, addition, repair or
demolition of or to the Leased Property or (b) giving 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 for the payment thereof or to make
any agreement that may create, or in any way be the basis for, any right, title
or interest in, or Lien or claim against, the estate of Lessor in the Leased
Property.
8.1.4 Lessee's Obligation to Perform Upgrade Expenditures. Without
limiting Lessee's obligations to maintain the Leased Property under this Lease,
within thirty (30) days after the end of each Lease Year commencing with the end
of the third (3rd) Lease Year, Lessee shall provide Lessor with evidence
reasonably satisfactory to Lessor that Lessee has in such Lease Year spent an
annual amount on Upgrade Expenditures (collectively, the "Required Lease Year
Upgrade Expenditures") equal to $150.00 per living unit within the Facility (as
such per living unit amount shall be adjusted annually at the end of each Lease
Year for increases in the U. S. Department of Labor Cost of Living Index (All
Consumers - Cleveland, Ohio - 1982-1984 = 100) or similar replacement index
since the commencement of the Term). The term "Upgrade Expenditures" is defined
to mean upgrades or improvements to the Leased Property which have the effect of
maintaining or improving the competitive position of the Leased Property in its
marketplace. Non-exclusive examples of Upgrade Expenditures include new or
replacement wallpaper, tiles, window coverings, lighting fixtures, painting,
upgraded landscaping, carpeting, architectural adornments, common areas
amenities and the like. It is expressly understood that capital improvements or
repairs (such as but not limited to repairs or replacements to the structural
elements of the walls, parking area, or the roof or to the electrical, plumbing,
HVAC or other mechanical or structural systems in the Leased Property) shall not
be considered Upgrade Expenditures. In the event that during a given Lease Year
Upgrade Expenditures are not necessary (which necessity shall be determined in
Lessor's sole discretion) and/or the full amount of the respective Required
Lease Year Upgrade Expenditures are not made for the Facility for whatever-
reason, Lessee shall be required to show evidence that a reserve fund has been
established with the balance of the unexpended Required Lease Year Upgrade
Expenditures to be used solely for Upgrade Expenditures in future Lease Years or
as otherwise requested by Lessor. If Lessee fails in any given Lease Year to
make Upgrade Expenditures in an amount equal to the Required Lease Year Upgrade
Expenditures or to establish a reserve fund as aforesaid, Lessee shall promptly
on demand from Lessor (but in no event within more than five (5) days) pay to
Lessor the applicable shortfall in the Required Lease Year Upgrade Expenditures;
and Lessor may retain such funds as additional rent hereunder or, in its sole
discretion, provide such funds to Lessee to perform Upgrade Expenditures.
8.2 Encroachments; Title Restrictions. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other
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Lien now or hereafter affecting the Leased Property, or shall impair the rights
of others under any easement, right-of-way or other Lien to which the Leased
Property is now or hereafter subject, then promptly upon the request of Lessor,
Lessee shall, at its sole cost and expense, subject to Lessee's right to contest
the existence of any encroachment, violation or impairment as set forth in
Article 15, (a) obtain valid and effective waivers or settlements of all claims,
liabilities and damages resulting from each such encroachment, violation or
impairment or (b) make such alterations to the Leased Improvements, and take
such other actions, as Lessee in the good faith exercise of its judgment deems
reasonably practicable, to remove such encroachment, or to end such violation or
impairment, including, if necessary, the alteration of any of the Leased
Improvements. Notwithstanding the foregoing, Lessee shall, in any event, take
all such actions as may be reasonably necessary in order to be able to continue
the operation of the Leased Improvements for the Primary Intended Use and, to
the extent applicable, the Other Permitted Uses substantially in the manner and
to the extent that the Leased Improvements were operated prior to the assertion
of such encroachment, violation or impairment and nothing contained herein shall
limit Lessee's obligations to operate the Leased Property in accordance with its
Primary Intended Use. Any such alteration made pursuant to the terms of this
Section 8.2 shall be completed in conformity with the applicable requirements of
Section 8.1 and Article 9. Lessee's obligations under this Section 8.2 shall be
in addition to and shall in no way discharge or diminish any obligation of any
insurer under any policy of title or other insurance.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 Lessor's Approval. Without the prior written consent of Lessor, which
consent may be withheld by Lessor, in its sole and absolute discretion, Lessee
shall make no Capital Addition or Material Structural Work to the Leased
Property (including, without limitation, any change in a size or unit capacity
of the Facility), except Material Structural Work as may be otherwise expressly
required pursuant to Article 8 and except for the Permitted Work described in
Section .6 below.
9.2 General Provisions as to Capital Additions and Certain Material
Structural Work. As to Capital Additions or Material Structural Work (other than
such Material Structural Work that s required to be performed pursuant to the
terms of Section 8.1) for which Lessor has granted its prior written approval,
the following terms and conditions shall apply unless otherwise expressly set
forth in Lessor's written approval.
9.2.1 No Liens. Subject to the provisions of Article 15, Lessee shall
not be permitted to create any Lien on the Leased Property in connection with
any Capital Addition or Material Structural Work. NOTICE IS HEREBY GIVEN THAT
LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO LESSEE OR TO ANYONE HOLDING ANY PART OF THE
LEASED PROPERTY, AND THAT NO MECHANICS' LIENS, CONSTRUCTION LIENS OR OTHER LIENS
FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH
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TO OR AFFECT THE INTEREST OF LESSOR IN AND TO THE LEASED PROPERTY.
9.2.2 Lessee's Proposal Regarding Capital Additions and Material
Structural Work. If Lessee desires to undertake any Capital Addition or Material
Structural Work, Lessee shall submit to Lessor in writing a proposal setting
forth in reasonable detail any proposed Capital Addition or Material Structural
Work and shall provide to Lessor copies of, or information regarding, the
applicable plans and specifications, Permits, Contracts and any other materials
concerning the proposed Capital Addition or Material Structural Work, as the
case may be, as Lessor may reasonably request. Without limiting the generality
of the foregoing each such proposal pertaining to a Capital Addition shall
indicate the approximate projected cost of constructing such Capital Addition,
the use or uses to which it will be put.
9.2.3 Lessor's Options Regarding Capital Additions and Material Structural
Work. Lessor shall have the options of: (a) denying permission for the
construction of the Capital Addition and/or Material Structural Work, (b)
offering to finance the construction of the Capital Addition or Material
Structural Work pursuant to Section 9.3, (c) allowing Lessee to pay for or
separately finance the construction of the Capital Addition and/or Material
Structural Work, subject to the same limits and conditions imposed under Section
9.4, Section 13.1.3, all Legal Requirements, all other applicable requirements
of this Lease and to such other terms and conditions as Lessor may in its
discretion impose or (d) any combination of the foregoing. Unless Lessor
notifies Lessee in writing of a contrary election within forty-five (45) days of
Lessee's request, Lessor shall be deemed to have denied the request for the
Capital Addition or Material Structural Work.
9.2.4 Lessor May Elect to Finance Capital Additions. If Lessor elects
to offer financing for the proposed Capital Addition or Material Structural
Work, the provisions of Section 9.3 shall apply.
9.2.5 Legal Requirements: Quality of Work. All work shall be performed
in full compliance with all applicable Legal Requirements and shall be performed
in a good and workmanlike manner.
9.3 Capital Additions Financed by Lessor.
9.3.1 Lessee's Financing Request. Lessee may request that Lessor
provide or arrange financing for a Capital Addition or Material Structural Work
by providing to Lessor such information about the Capital Addition or Material
Structural Work as Lessor may reasonably request, including, without limitation,
all information referred to in Section 9.2 above. Lessee understands, however,
that Lessor shall be under no obligation to agree to such request. Nevertheless,
Lessor shall use reasonable efforts to notify Lessee, within forty-five (45)
days of receipt of such information, as to whether Lessor will finance the
proposed Capital Addition or Material Structural Work and, if so, the terms and
conditions upon which it would do so, including the terms of any amendment to
this Lease (including, without limitation, an increase in Base Rent based on
Lessor's (degree) then existing terms and prevailing conditions to compensate
Lessor for its Subsequent Investment with respect to such Capital Addition or
Material Structural
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Work, as the case may be). Lessee may withdraw its request by notice to Lessor
at any time before such time as Lessee accepts Lessor's terms and conditions.
All advances of funds for any such financing shall be made in accordance with
Lessor's then standard construction loan requirements and procedures, which may
include, without limitation, the requirements and procedures applicable to Work
under Section 13.1.3.
9.3.2 Lessor's General Requirements. If Lessor agrees to finance the
proposed Capital Addition or Material Structural Work and Lessee accepts
Lessor's proposal therefor, in addition to all other items which Lessor or any
applicable Financing Party may reasonably require, Lessee shall provide to
Lessor the following:
(a) prior to any advance of funds; (i) any information, opinions,
certificates, Permits or documents reasonably requested by Lessor or any
applicable Financing Party which are necessary to confirm that Lessee will be
able to use the Capital Addition upon completion thereof or the applicable
portion of the Facility upon completion of the Material Structural Work in
accordance with the Primary Intended Use and, to the extent applicable, the
Other Permitted Uses and (ii) evidence satisfactory to Lessor and any applicable
Financing Party that all Permits required for the construction and use of the
Capital Addition or applicable portion of the Facility have been received, are
in full force and effect and are not subject to appeal, except only for those
Permits which cannot in the normal course be obtained prior to commencement or
completion of the construction; provided, that Lessor and any applicable
Financing Party are furnished with reasonable evidence that the same will be
available in the normal course of business without unusual condition;
(b) prior to any advance of funds, an Officer's Certificate and,
if requested, a certificate from Lessee's architect, setting forth in reasonable
detail the projected (or actual, if available) Capital Addition Cost or the cost
of the Material Structural Work;
(c) bills of sale, instruments of transfer and other documents
required by Lessor so as to vest title to the Capital Addition or the applicable
Material Structural Work in Lessor free and clear of all Liens, and amendments
to this Lease and any recorded notice or memorandum thereof, duly executed and
acknowledged, in form and substance reasonably satisfactory to Lessor, providing
for any changes required by Lessor including, without limitation, changes in the
Base Rent and the legal description of the Land;
(d) upon payment therefor, a deed conveying to Lessor title to any
land acquired for the purpose of constructing the Capital Addition or the
applicable Material Structural Work ("Additional Land") free and clear of any
Liens except those approved by Lessor;
(e) upon completion of the Capital Addition or applicable Material
Structural Work, a final as-built survey thereof reasonably satisfactory to
Lessor, if required by Lessor;
(f) during and following the advance of funds and the completion
of
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the Capital Addition or Material Structural Work, endorsements to any
outstanding policy of title insurance covering the Leased Property satisfactory
in form and substance to Lessor (i) updating the same without any additional
exception except as may be reasonably permitted by Lessor and (ii) increasing
the coverage thereof by an amount equal to the Fair Market Value of the Capital
Addition or the Fair Market Value of the Material Structural Work and including
the Additional Land in the premises covered by such title insurance policy
(except to the extent covered by the owner's policy of title insurance referred
to in subparagraph (g) below);
(g) simultaneous with the initial advance of funds, if
appropriate, (i) an owner's policy of title insurance insuring fee simple title
to any Additional Land conveyed to Lessor pursuant to subparagraph (d) above
free and clear of all Liens except those approved by Lessor, reasonably
satisfactory in form and substance to Lessor, and (ii) an owner's policy of
title insurance reasonably satisfactory in form and substance to Lessor and a
lender's policy of title insurance reasonably satisfactory in form and substance
to any applicable Financing Party;
(h) following the completion of the Capital Addition or the
Material Structural Work, if reasonably deemed necessary by Lessor, an appraisal
of the Leased Property by an M.A.I. appraiser acceptable to Lessor, which states
that the Fair Market Value of the Leased Property upon completion of the Capital
Addition or the Material Structural Work exceeds the Fair Market Value of the
Leased Property prior to the commencement of such Capital Addition or the
Material Structural Work by an amount not less than one hundred twenty-five
percent (125%) of the Capital Addition Cost or the cost of the Material
Structural Work; and (i) during or following the advancement of funds, prints of
architectural and engineering drawings relating to the Capital Addition or
Material Structural Work and such other materials, including, without
limitation, endorsements increasing the amount of title insurance coverage in
the title insurance policies insuring Lessor and any applicable Financing Party
with respect to the Leased Property, opinions of counsel, appraisals, surveys,
certified copies of duly adopted resolutions of the board of directors of Lessee
authorizing the execution and delivery of the lease amendment and any other
documents and instruments as may be reasonably required by Lessor and any
applicable Financing Party.
9.3.3 Payment of Costs. By virtue of making a request to finance a
Capital Addition or any Material Structural Work, whether or not such financing
is actually consummated, Lessee shall be deemed to have agreed to pay, upon
demand, all costs and expenses reasonably incurred by Lessor and any Person
participating with Lessor in any way in the financing of the Capital Addition
Cost or Material Structural Work, including, but not limited to (a) fees and
expenses of their respective attorneys, (b) all photocopying expenses, if any,
(c) the amount of any filing, registration and recording taxes and fees, (d)
documentary stamp taxes and (e) title insurance charges and appraisal fees. To
the extent that the same are paid by Lessee on demand, the amount thereof shall
b6 excluded from the calculation of the Subsequent Investment made with respect
to such Capital Addition or Material Structural Work.
9.4 General Limitations: Without in any way limiting Lessor's options with
respect to proposed Capital Additions or Material Structural Work: (a) no
Capital Addition or Material Structural Work shall be completed that could, upon
completion, significantly alter the character
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or purpose or detract from the value or operating efficiency of the Leased
Property, or significantly impair the revenue-producing capability of the Leased
Property, or adversely affect the ability of Lessee to comply with the terms of
this Lease; (b) no Capital Addition or Material Structural Work shall be
completed which would tie in or connect any Leased Improvements on the Leased
Property with any other improvements on property adjacent to the Leased Property
(and not part of the Land covered by this Lease) including, without limitation,
tie-ins of buildings or other structures or utilities, unless Lessee shall have
obtained the prior written approval of Lessor, which approval may be withheld in
Lessor's sole and absolute discretion and (c) all proposed Capital Additions and
Material Structural Work shall be architecturally integrated and consistent with
the Leased Property.
9.5 Non-Capital Additions. Lessee shall have the obligation and sight to
make repairs, replacements and alterations which are not Capital Additions and
which are required by the other Sections of this Lease, but in so doing, Lessee
shall always comply with and satisfy the conditions of Sections 9.2.1 and 9.4.
Lessee shall have the right, from time to time, to make additions, modifications
or improvements to the Leased Property which do not constitute Capital Additions
or Material Structural Work and are not required by the other Sections of this
Lease from time to time as it may deem to be desirable or necessary for its uses
and purposes, subject to the same limits and conditions imposed under Sections
9.2.1 and 9.4. The cost of any such repair, replacement, alteration, addition,
modification or improvement shall be paid by Lessee and the results thereof
shall be included under the terms of this Lease and become a part of the Leased
Property, without payment therefor by Lessor at any time. Notwithstanding the
foregoing, all such additions, modifications and improvements which affect the
structure of the Facility, or which involve the expenditure of more than FIFTY
THOUSAND and NO/100 DOLLARS ($50,000.00), shall be undertaken only upon
compliance with the provisions of Section 13.1.3, all Legal Requirements and all
other requirements of this Lease.
9.6 Permitted Work. Notwithstanding Section 9.1 above, Lessee shall have the
right to perform Permitted Work (as defined below) without Lessor's prior
approval or consent as long as Lessee gives to Lessor prior notice that Lessee
is undertaking such Permitted Work and provides Lessor with reasonably detailed
plans and specifications describing the work to be done. "Permitted Work" shall
mean work to the Facility which will not affect any of the structural elements
of the Facility and which costs less than FIFTY THOUSAND AND NO/100 DOLLARS
($50,000.00) during any consecutive twelve (12) month period. Any work to the
Facility, regardless of cost, which (a) will affect any structural element of
the Facility and (b) is not otherwise subject to an approval of Lessor pursuant
to any other provision of this Lease, shall still require the prior written
consent of Lessor, which consent may be withheld by Lessor in its sole and
absolute discretion.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 Representations and Warranties. Lessee hereby represents and warrants
to, and covenants and agrees with, Lessor that:
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10.1.1 Existence; Power; Qualification. Lessee is a corporation. duly
organized, validly existing and in good standing under the laws of the State of
Kansas. Lessee has all requisite corporate power to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted and is duly qualified to do business and is in good standing in each
jurisdiction (including, without limitation, the State) where such qualification
is necessary or desirable in order to carry out its business as now conducted
and as proposed to be conducted. As of the date of this Lease, Lessee does not
have any Subsidiaries and Lessee is not a member of any partnership or joint
venture. Attached hereto as EXHIBIT C is a true and correct list of all the
shareholders of Lessee and their respective ownership interests in Lessee.
10.1.2 Valid and Binding. Lessee is duly authorized to make and enter
into all of the ease Documents to which Lessee is a party and to carry out the
transactions contemplate therein. All of the Lease Documents to which Lessee is
a party have been duly executed an delivered by Lessee, and each is a legal,
valid and binding obligation of Lessee, enforceable in accordance with its
terms.
10.1.3 Single Purpose. Lessee is, and during the entire time that this
Lease remains in force and effect shall be; engaged in no business, trade or
activity other than the operation of the Leased Property for the Primary
Intended Use and the Other Permitted Uses and such other activities in which
Lessee is permitted to engage by the provisions of the Meditrust/LP Transaction
Documents.
10.1.4 No Violation. The execution, delivery and performance of the
Lease Documents d the consummation of the transactions thereby contemplated
shall not result in any breach of, r constitute a default under, or result in
the acceleration of, or constitute an event which, with the giving of notice or
the passage of time, or both, could result in default or acceleration of any
obligation of any member of the Leasing Group under any of the Permits or
Contracts o any other contract, mortgage, lien, lease, agreement, instrument,
franchise, arbitration award, judgment, decree, bank loan or credit agreement,
trust indenture or other instrument to which any member of the Leasing Group is
a party or by which any member of the Leasing Group may be bound or affected and
do not violate or contravene any Legal Requirement.
10.1.5 Consents and Approvals. Except as already obtained or filed, as
the case may be, no consent or approval or other authorization of, or exemption
by, or declaration or filing with, any Person and no waiver of any right by any
Person is required to authorize or permit, or is otherwise required as a
condition of Lessee's execution, delivery and performance of its obligations
under the Lease Documents or as a condition to the validity (assuming the due
authorization, execution and delivery by Lessor of the Lease Documents to which
it is a party) and the first priority of any Liens granted under the Lease
Documents or, as to any Tangible Personal Property and/or Receivables, as the
case may be, as to which there are Permitted Prior Security Interests, the
agreed junior priority of any such Liens, except the filing of the Financing
Statements.
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10.1.6 No Liens or Insolvency Proceedings. Each member of the Leasing
Group is financially solvent and there are no actions, suits, investigations or
proceedings including, without limitation, outstanding federal or state tax
liens, garnishments or insolvency or bankruptcy proceedings, pending or, to the
best of Lessee's knowledge and belief, threatened:
(a) against or affecting any member of the Leasing Group, which if
adversely r solved to such member of the Leasing Group, would materially
adversely affect the ability of any of the foregoing to perform their respective
obligations under the Lease Documents;
(b) against or affecting the Leased Property or the ownership,
construction, development, maintenance, management, repair, use; occupancy,
possession or operation thereof; or
(c) which may involve or affect the validity, priority or
enforceability of any of the Lease Documents, at law or in equity, or before or
by any arbitrator .or Governmental Authority.
10.1.7 No Burdensome Agreements. Neither Lessee nor the Guarantor is a
party to any agreement the terms of which now have, or, as far as can be
reasonably foreseen, may have, a material adverse affect on its respective
financial condition or business or on the operation of the Leased Property.
10.1.8 Commercial Acts. Lessee's performance of and compliance with the
obligations and conditions set forth herein and in the other Lease Documents
will constitute commercial acts done and performed for commercial purposes.
10.1.9 Adequate Capital. Not Insolvent. After giving effect to the
consummation of the transactions contemplated by the Lease Documents, each
member of the Leasing Group:
(a) will be able to pay its debts as they become due;
(b) will have sufficient funds and capital to carry on its
business as now conducted or as contemplated to be conducted (in accordance with
the terms of the Lease Documents);
(c) will own property having a value both at fair valuation and at
present fair saleable value greater than the amount required to pay its debts as
they become due (it being understood, however, that Lessee will not own any
assets until the operating license and Resident Agreements for the Facility are
transferred to Lessee by the Guarantor); and
(d) will not be rendered insolvent as determined by applicable
law.
10.1.10 Not Delinquent. No member of the Leasing Group is delinquent or
claimed to be delinquent under any obligation for the payment of borrowed money.
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10.1.11 No Affiliate Debt. Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether direct
or contingent) for borrowed money from the Guarantor (or any of its Affiliates)
or any Affiliate of Lessee.
10.1.12 Taxes Current. Each member of the Leasing Group has filed all
federal, state and local tax returns which are required to be filed as to which
extensions are not currently in effect and have paid all taxes, assessments,
impositions, fees and other governmental charges (including interest and
penalties) which have become due pursuant to such returns or pursuant to any
assessment or notice of tax claim or deficiency received by each such member of
the Leasing Group. No tax liability has been asserted by the Internal Revenue
Service against any member of the Leasing Group or any other federal, state or
local taxing authority for taxes, assessments, impositions, fees or other
governmental charges (including interest or penalties thereon) in excess of
those already paid.
10.1.13 Financials Complete and Accurate. The financial statements of
each member of the Leasing Group given to Lessor in connection with the Lease
were true, complete and accurate and fairly presented the financial condition of
each such member of the Leasing Group as of the date thereof and for the periods
covered thereby, having been prepared in accordance with GAAP and such financial
statements disclosed all liabilities, including, without limitation, contingent
liabilities, of each such member of the Leasing Group. There has been no
material adverse change since such date with respect to the Tangible Net Worth
of any member of the Leasing Group or with respect to any other matters
contained in such financial statements, nor have any additional material
liabilities, including, without limitation, contingent liabilities, of any
member of the Leasing Group arisen or been incurred or asserted since such date.
The projections heretofore delivered to Lessor continue to be reasonable (with
respect to the material assumptions upon which such projections are based) and
Lessee reasonably anticipates the results projected therein will be achieved,
there having been (a) no material adverse change in the business, assets or
condition, financial or otherwise of any member of the Leasing Group and (b) no
material depletion of the cash or decrease in working capital of any member of
the Leasing Group.
10.1.14 Pending Actions, Notices and Reports.
(a) There are no actions or investigations pending or, to the best
knowledge and belief of either Lessee or Guarantor, threatened, anticipated or
contemplated (nor, to the knowledge of either Lessee or Guarantor, is there any
reasonable basis therefor) against or affecting the Leased Property or any
member of the Leasing Group (or any Affiliate thereof) before any Governmental
Authority, Accreditation Body or Third Party Payor which could prevent or hinder
the consummation of the transactions contemplated hereby or call into question
the validity of any of the Lease Documents or any action taken or to be taken in
connection with the transactions contemplated thereunder or which in any single
case or in the aggregate might result in any material adverse change in the
business, prospects, condition, affairs or operations of any member of the
Leasing Group or the Leased Property (including, without limitation, any action
to revoke, withdraw or suspend any Permit necessary or desirable for the
operation of the
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Leased Property in accordance with its Primary Intended Use and any action to
transfer or relocate any such Permit to a location other than the Leased
Property) or any material impairment of the right or ability of any member of
the Leasing Group to carry on its operations as presently conducted upon
Completion of the Project or proposed, upon Completion of the Project, to be
conducted with respect to the Leased Property or with respect to its obligations
under the Lease Documents or which may materially adversely impact reimbursement
to any member of the Leasing Group for services rendered to beneficiaries of
Third Party Payor Programs.
(b) No member of the Leasing Group has received any notice of any
claim, requirement or demand of any Governmental Authority, Accreditation Body,
Third Party Payor or any ins ante body having or claiming any licensing,
certifying, supervising, evaluating or accrediting authority over the Facility
to rework or redesign the Facility, its professional staff or its professional
services, procedures or practices in any material respect or to provide
additional furniture, fixtures, equipment or inventory or to otherwise take
action so as to make the Facility conform t or comply with any Legal
Requirement;
(c) The most recent utilization reviews relating to the Facility by all
applicable Third Party Payors, Accreditation Bodies and Governmental Authorities
and reviews or scrutiny by any m aged care or utilization review companies have
not had a material adverse impact on the utilization of units or programs at the
Facility. No claims or assertions have been made in any utilization review that
any of the practices or procedures used at the Facility are improper or
inappropriate other than such claims or assertions which singly and in the
aggregate will not have a material adverse impact on the Facility; and
(d) Lessee and Guarantor have delivered or caused to be delivered to
Lessor true and correct copies of all licenses, inspection surveys and
accreditation reviews relating to the Facility, issued by any Governmental
Authority or Accreditation Body during the most recent licensing period,
together with all plans of correction relating thereto.
10.1.15 Compliance with Legal and Other Requirements.
(a) To the extent consistent with the stage of construction of the
Project, Lessee and the Leased Property and the ownership, construction,
development, maintenance, management, repair, use, occupancy, possession and
operation thereof comply with all applicable Legal Requirements and there is no
claim of any violation thereof known to Lessee or Guarantor. Without limiting
the foregoing, Lessee has obtained all Permits that are necessary or desirable
to operate the Leased Property in accordance with its Primary Intended Use or
reasonably expects to obtain such Permits prior to, or upon, the Completion of
the Project; and
(b) Except as previously delivered to Lessor pursuant to Section
10.1.14(d) hereof, there are no outstanding notices of deficiencies, notices of
proposed action or orders of any kind relating to the Leased Property issued by
any Governmental Authority, Accreditation Body or Third Party Payor requiring
conformity to any of the Legal Requirements.
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10.1.16 No Action By Governmental Authority or Accreditation Body.
There is no action pending or, to the best knowledge and belief of either Lessee
or Guarantor, recommended, by any Governmental Authority or Accreditation Body
or Third Party Payor to revoke, repeal, cancel, modify, withdraw or suspend any
Permit or Contract or to take any other action of any other type which could
have a material adverse effect on the Leased Property.
10.1.17 Property Matters.
(a) The Leased Property is free and clear of agreements, covenants
and Liens, except those agreements, covenants and Liens to which this Lease is
expressly subject, whether presently existing, as are listed on EXHIBIT B or
were listed on the UCC lien search results delivered to Lessor at or prior to
the execution and delivery of this Lease (and were not required to be terminated
as a condition of the execution and delivery of this Lease), or which may
hereafter be created in accordance with the terms hereof (collectively referred
to herein as the "Permitted encumbrances"); and Lessee shall warrant and defend
Lessor's title to the Leased Property against any and all claims and demands of
every kind and nature whatsoever;
(b) There is no Condemnation or similar proceeding pending with
respect to or affecting the Leased Property, and neither Lessee nor Guarantor is
aware, to the best of its knowledge and belief, that any such proceeding is
contemplated;
(c) The Leased Property has not been damaged by any Casualty. To
the extent the same halve either been constructed or are located on the Land,
the Leased Improvements, Fixtures, Lessor's Personal Property and Tangible
Personal Property are in good operating condition and repair, ordinary wear and
tear excepted, free from known defects in construction or design;
(d) None of the Permitted Encumbrances has or is likely to have a
material adverse impact upon, nor interfere with or impede, in any material
respect, the operation of the Leased Property in accordance with the Primary
Intended Use;
(e) All building facilities and other improvements necessary, both
legally and practically, for the proper and efficient operation of the Facility
will be located upon the Leased Property and all real property and personal
property currently utilized by Lessee will be included within the definition of
the Leased Property or the Collateral;
(f) The Leased Property abuts on and has direct vehicular access to a
public road or access t& a public road via permanent, irrevocable, appurtenant
easements;
(g) Each parcel comprising a portion of the Land constitutes a
separate parcel for real estate tax purposes and no portion of any real property
that does not constitute a portion of the Leased Property is part of the same
tax parcel as any part of the Leased Property;
(h) All utilities necessary for the use and operation of the
Facility are available to the lot lines of the Leased Property:
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(i) in sufficient supply and capacity;
(ii) through validly created and existing easements of record
appurtenant to or encumbering the Leased Property (which easements shall not
impede or restrict the operation o the Facility); and
(iii) without need for any Permits and/or Contracts to be issued
by or entered into with any Governmental Authority, except as already obtained
or executed, as the case may be, or as otherwise shown to the satisfaction of
Lessor to be readily obtainable; and
(i) Neither Lessee nor Guarantor has made any structural alterations or
improvements to any of the Leased Improvements that changed the foot-print of
any Leased improvement, added an additional story to any Leased Improvement,
decreased the amount of parking available at the Facility or otherwise involved
any alteration which would be regulated by applicable zoning requirements.
10.1.18 Rate Limitations. Except as disclosed on EXHIBIT D, the State
currently imposes no restrictions or limitations on rates which may be charged
to private pay residents receiving services at the Facility.
10.1.19 Free Care. Except as disclosed on EXHIBIT E, there are no
Contracts, Permits or Legal Requirements which require that a percentage of
units or slots in any program at the Facility be reserved for Medicaid or
Medicare eligible residents or that the Facility provide a certain amount of
welfare, free or charity care or discounted or government assisted resident
care.
10.1.20 No Proposed Changes. Neither Lessee nor Guarantor has any
actual knowledge of an, Legal Requirements which have been enacted, promulgated
or issued within the eighteen (18) months preceding the date of this Lease or
any proposed Legal Requirements currently pending in the State which may
materially adversely affect rates at the Facility (or any program operated in
conjunction with the Facility) or may result in the likelihood of increased
competition", at the Facility or the imposition of Medicaid, Medicare, charity,
free care, welfare or other discounted or government assisted residents at the
Facility or require that Lessee or the Facility obtain a certificate of need,
Section 1122 approval or the equivalent, which Lessee or the Facility does not
currently possess.
10.1.21 ERISA. No employee pension benefit plan maintained by any
member of the Leasing Group has any accumulated funding deficiency within the
meaning of the ERISA, nor does any member of the Leasing Group have any material
liability to the PBGC established under ERISA (or any successor thereto) in
connection with any employee pension benefit plan (or other class of benefit
which the PBGC has elected to insure), and there have been no "reportable
';events" (not waived) or "prohibited transactions" with respect to any such
plan, as those terms are defined in Section 4043 of ERISA and Section 4975 of
the Internal Revenue Code of 19$6, as now or hereafter amended, respectively.
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10.1.22 No Broker. No member of the Leasing Group nor any of their
respective Affiliates has dealt with any broker or agent in connection with the
transactions contemplated by the Lease Documents.
10.1.23 No Improper Payments. No member of the Leasing Group nor any of
their respective Affiliates has:
(a) made any contributions, payments or gifts of its funds or property
to or for the private use of any government official, employee, agent or other
Person where either the payment the purpose of such contribution, payment or
gifts is illegal under the laws of the United States any state thereof or any
other jurisdiction (foreign or domestic);
(b) established or maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on any of its books or records
for any reason;
(c) made any payments to any Person with the intention or understanding
that any part of such payment was to be used for any other purpose other than
that described in the documents supporting the payment; or
(d) made any contribution, or has reimbursed any political gift or
contribution made by any other Person, to candidates for public office, whether
federal, state or local, where !such contribution would be in violation of
applicable law.
10.1.24 Nothing Omitted. Neither this Lease, nor any of the other Lease
Documents, nor any certificate, agreement, statement or other document,
including, without limitation, any financial statements concerning the financial
condition of Lessee or the Guarantor, furnished to pr to be furnished to Lessor
or its attorneys in connection with this Lease, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to prevent all statements contained herein and therein
from being misleading. There is no fact within the special knowledge of Lessee
which has not been disclosed herein or in writing to Lessor that materially
adversely affects, or in the future, insofar as Lessee c reasonably foresee, may
materially adversely affect the business, properties, assets or condition,
financial or otherwise, of the Guarantor, Lessee or the Facility.
10.1.25 No Margin Security. Lessee is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds o f the Meditrust Investment will be used
to purchase or carry any margin security or to extend credit to others for the
purpose of purchasing or carrying any margin security or in any other manner
which would involve a violation of any of the regulations of the Board of
Governors of the Federal Reserve System. Lessee is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
10.1.26 No Default. No event or state of facts which constitutes, or
which,
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with notice or lapse of time, or both, could constitute, a Lease Default has
occurred and is continuing.
10.1.27 Principal Place of Business. The principal place of business
and chief executive office of Lessee is located at 453 S. Webb Road, Suite 500,
Wichita, Kansas 67207 (the "Principal Place of Business").
10.1.28 Third Party Payor Agreements.
(a) Lessee or the Facility is fully qualified as a provider of services
under and participates 'n all Third Party Payor Programs and referral programs
as is necessary, in Lessee's reasonable discretion, for the prudent operation of
the Facility in the good faith exercise of commercial y reasonable business
judgment.
(b) Attached hereto as EXHIBIT F is a list of Provider Agreements
currently in effect.
(c) Attached hereto as EXHIBIT G is a list of national accounts and
local discount agreements, which constitute all of the agreements between Lessee
or the Facility, on the one hand, and Third Party Payors on the other hand,
pursuant to which Lessee or the Facility agrees to provide services based on a
discount factor from the rates regularly charged for services rendered by Lessee
or the Facility.
(d) No member of the Leasing Group, nor the Facility has any rate
appeal currently pending before any Government Authority or any administrator of
any Third Party Payor Program or any other referral source other than such
appeals which, if determined adversely to any member of the Leasing Group or the
Facility would not have a materially adverse effect, either singly or in the
aggregate, on the financial condition of any member of the Leasing Group or the
Facility.
(e) All cost reports and financial reports submitted to any Third Party
Payor with respect to the Facility by any member of the Leasing Group have been
materially accurate and complete and have not been misleading in any material
respect. As a result of any audits by any Third Party Payor, there are no
related recoupment claims made or contests pending or threatened other than such
recoupment claims or contests which, if determined adversely to any member of
the Leasing Group or the Facility, would not have a materially adverse effect,
either singly or in the aggregate, on the financial condition of any member of
the Leasing Group or the Facility. As of the date hereof, no cost reports for
the Facility remain open or unsettled other than those listed on EXHIBIT H.
10.1.29 Rates. Lessee or the Facility shall charge rates for private
pay residents which are legal, valid and enforceable and shall provide Lessor
with a schedule of all such rates as soon as they are set;
10.1.30 Labor Matters. There are no proceedings now pending, nor, to
the
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best of Lessee's knowledge, threatened with respect to the operation of the
Facility before the National Labor Relations Board, State Commission on Human
Rights and Opportunities, State Department of Labor, U. S. Department of Labor
or any other Governmental Authority having jurisdiction of employee rights with
respect to hiring, tenure and conditions of employment, and no member of the
Leasing Group has experienced any material controversy with any Facility
administrator or other employee of similar stature or with any labor
organization.
10.1.31 Intellectual Property. Lessee is duly licensed or authorized
to use all (if any) copyrights, rights of reproduction, trademarks, trade-names,
trademark applications; service mars, patent applications, patents and patent
license rights, (all whether registered or unregistered U.S. or foreign),
inventions, franchises, discoveries, ideas, research, engineering, methods,
practices, processes, systems, formulae, designs, drawings, products, projects,
improvements, developments, know-how and trade secrets which are used in, will
be used in or necessary for the operation of the Facility in accordance with its
Primary Intended Use, without conflict with or infringement of any, and subject
to no restriction, lien, encumbrance, right, title or interest in others.
10.1.32 Management Agreements. There is no Management Agreement in
force and effect of the date hereof.
10.1.33 Fiscal Year. The fiscal year of Lessee and the (Guarantor is
the Fiscal Year.
10.2 Continuing Effect of Representations and Warranties. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing representations and warranties which shall
remain true, correct and complete throughout the Term.
ARTICLE 11
FINANCIAL AND OTHER COVENANTS
11.1 Status Certificates. At any time, and from time to time, upon request
from Lessor, Lessee shall furnish to Lessor, within ten (10) Business Days after
receipt of such request, an Officer's Certificate certifying that this Lease is
unmodified and in full force and effect (or that this Lease is in full force and
effect as modified and setting forth the modifications) and the dates to which
the Rent has been paid. Any Officer's Certificate furnished pursuant to this
Section shall be addressed to any prospective purchaser or mortgagee of the
Leased Property as Lessor may request and may be relied upon by Lessor and any
such prospective purchaser or mortgagee of the Leased Property.
11.2 Financial Statements; Reports; Notice and Information.
11.2.1 Obligation To Furnish. Lessee will furnish and shall cause to be
furnished to Lessor the following statements, information and other materials:
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(a) Annual Statements. Within ninety (90) days after the end of each of
their respective fiscal years, (i) a copy of the Consolidated Financials for
each of (x) the Guarantor d (y) any Sublessee for the preceding fiscal year,
certified and audited by, and with the unqualified opinion of, independent
certified public accountants acceptable to Lessor and certified as true and
correct by the Guarantor or the applicable Sublessee, as the case may be (and,
without limiting anything else contained herein, the Consolidated Financials for
each Sublessee shall include, as supplemental information, a detailed balance
sheet for Leased Property and the Facility thereof as of the last day of such
fiscal year and a statement of earnings from the Leased Property and the
Facility thereof for such fiscal year showing, among other things, all Rents d
other income therefrom and all expenses paid or incurred in connection with the
operation of the Leased Property); (ii) separate statements, certified as true
and correct by Lessee, the Guarantor and each Sublessee, stating whether, to the
best of the signer's knowledge and belief after making due inquiry, Lessee, the
Guarantor or such Sublessee, as the case may be, is in default in the
performance or observance of any of the terms of this Lease or any of the other
Lease Documents and, if so, specifying all such defaults, the nature thereof and
the steps being taken to immediately remedy the same; (iii) a copy of all
letters from the independent certified accountants engaged to perform the annual
audits referred to above, directed to the management of Lessee, the Guarantor or
the applicable Sublessee, as the case may be, regarding the existence of any
reportable conditions or material weaknesses and (iv) a statement certified as
true and correct by Lessee setting forth all Subleases as of the last day of
such fiscal year, the respective areas demised thereunder, the names of the
Sublessees thereunder, the respective expiration dates of the Subleases, the
respective rentals provided for therein, and such other information pertaining
to the Subleases as may be reasonably requested by Lessor.
(b) Monthly Statements of Lessee. Within thirty-five (35) days after
the end of 'each calendar month during the pendency of this Lease, (i) an
unaudited, detailed month and year to date income and expense statement for the
Leased Property which shall include a comparison to corresponding budget
figures, occupancy statistics (including the actual number of (,residents, the
number of units available and the unit occupancy for such month), (ii) an
unaudited balance sheet for the Leased Property and (iii) an express written
calculation showing the compliance or non-compliance, as the case may be, with
the specific financial covenants set forth in Section 11.3 for the applicable
period, including, with respect to the calculation of Lessee's and the
Facility's Rent Coverage Ratio, a schedule substantially in the form attached
hereto as EXHIBIT I.
(c) [Intentionally Omitted]
(d) Quarterly Statements of the Guarantor. Within forty-five (45) days
after the end of each of the Fiscal Quarters ending March 31, June 30 and
September 30, respectively, all 10Q reports required to be filed by the Security
and Exchange Commission for the Guarantor ,certified as true and correct by the
Guarantor.
(e) Permits and Contracts. Promptly after the issuance or execution
thereof, as the case may be, true and complete copies of (i) all Permits which
constitute operating licenses
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for a Facility issued by any Governmental Authority having jurisdiction over
health care matters d (ii) Contracts (involving payments in the aggregate in
excess of $100,000 per annum), including, without limitation, all Provider
Agreements.
(f) Contract Notices. Promptly after the receipt thereof, true and
complete copies of any notices, consents, terminations or statements of any kind
or nature relating to any of the Contracts (involving payments in the aggregate
in excess of $100,000 per annum) other than those issued in the ordinary course
of business.
(g) Regulatory Surveys. Promptly after the receipt thereof, true and
complete copies of all surveys, follow-up surveys, licensing surveys, complaint
surveys, examinations compliance certificates, inspection reports, statements,
terminations and notices of any kind is used or provided to Lessee or any
Sublessee by any Governmental Authority, Accreditation Body or any Third Party
Payor, including, without limitation, any notices pertaining to any delinquency
in, or proposed revision of, Lessee's or any Sublessee's obligations under the
terms and conditions of any Permits or Contracts now or hereafter issued by or
entered into with any Governmental Authority, Accreditation Body or Third Party
Payor and the response(s) thereto made by or on behalf of Lessee or any
Sublessee.
(h) Official Reports. Upon completion or filing thereof, complete
copies of all applications, notices, statements, annual reports, cost reports
and other reports or filings of any kind provided by Lessee or any Sublessee to
any Governmental Authority, Accreditation Body or any Third Party Payor with
respect to the Leased Property.
(i) Other Information. With reasonable promptness, such other
information as Lessor may from time to time reasonably request respecting (i)
the financial condition and affairs of each member of the Leasing Group and the
Leased Property and (ii) the licensing aid operation of the Leased Property;
including, without limitation, audited financial statements, certificates and
consents from accountants and all other financial and licensing/operational
information as may be required or requested by any Governmental Authority.
(j) Default Conditions. As soon as possible, and in any event within
five (5) days after the occurrence of any Lease Default, or each event or
circumstance which, with the giving of notice or lapse of time, or both, could
constitute such a Lease Default, a written statement of Lessee setting forth the
details of such Lease Default, event or circumstance and the action which Lessee
proposes to take with respect thereto.
(k) Official Actions. Promptly after the commencement thereof, notice
of all action;, suits and proceedings before any Governmental Authority or
Accreditation Body which may have a material adverse effect on any member of the
Leasing Group or the Leased Property.
(1) Audit Reports. Promptly after receipt, a copy of all audits or
reports submitted to Lessee by any independent public accountant in connection
with any annual, special or interim audits of the books of Lessee and, if
requested by Lessor, any letter of comments directed by such accountant to the
management of Lessee.
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(m) Adverse Developments. Promptly after Lessee acquires knowledge
thereof, written notice of:
(i) the potential termination of any Permit or Provider
Agreement necessary for the operation of the Leased Property;
I
(ii) any loss, damage or destruction to or of the Leased Property
in excess of TWENTY-FIVE THOUSAND and NO/100 DOLLARS ($25,000.00) (regardless of
whether a same is covered by insurance);
(iii) any material controversy involving Lessee or any Sublessee
and (x) Facility administrator or Facility employee of similar stature or (y)
any labor organization;
(iv) any controversy that calls into question the eligibility of
Lessee or the Facility for the participation in any Medicaid, Medicare or other
Third Party Payor Program, if applicable;
(v) any refusal of reimbursement by any Third Party Payor which,
singularly or together with all other such refusals by any Third Party Payors,
could have a material adverse effect on the financial condition of Lessee or any
Sublessee; and
(vi) any other development materially and adversely affecting or
which may materially or adversely affect the condition, financial or otherwise
of any member of the Leasing Group or the Leased Property.
(n) Line of Credit Default. Within five (5) days after becoming aware
of a claim by any Person that Lessee is in default of the line of credit
arrangement referred to in Section 13.3.10 or any other agreement in connection
with the borrowing of money which is not prohibited hereunder, notice of any
such claim or default.
(o) Responses To Inspection Reports. Within thirty (30) days after
receipt of an inspection report relating to the Leased Property from Lessor, a
written response describing i detail prepared plans to address concerns raised
by the inspection report.
(p) Public Information. Upon the completion or filing, mailing or other
delivery thereof, complete copies of all financial statements, reports, notices
and proxy statements, if any, sent by any member of the -Leasing Group (which is
a publicly held corporation to its shareholders and of all reports, if any,
filed by any member of the Leasing Group (which is a publicly held corporation)
with any securities exchange or with the Securities Exchange Commission.
(q) Annual Budgets. At least thirty (30) days prior to the end of each
Fiscal Year, Lessee, any Sublessee and/or any Manager shall submit to Lessor a
proposed financial d capital expenditures budget for the Facility for the next
Fiscal Year and a report detailing the
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capital expenditures made in the then current Fiscal Year and on or before
January 31st of each year, Lessee, any Sublessee and/or any Manager shall submit
to Lessor revised finalized versions of such budgets and report.
(r) Lender Compliance Reports. Simultaneously with sending the same to
an lender of Lessee or Guarantor, copies of any reports relating to compliance
with financial covenants contained in any credit agreement involving the
extension of more than $500,000 f credit to either or both of the Lessee or
Guarantor, provided, however, that Guarantors extension of credit is related
primarily to the Leased Property.
11.2.2 Responsible Officer. Any certificate, instrument, notice, or
other document o be provided to Lessor hereunder by any member of the Leasing
Group shall be signed by executive officer of such member (in the event that any
of the foregoing is not an individual) having a position of Vice President or
higher and with respect to financial matters, any such certificate, instrument,
notice or other document shall be signed by the chief financial officer of such
member.
11.2.3 No Material Omission. No certificate, instrument, notice or
other document, including, without limitation, any financial statements
furnished or to be furnished to Lessor pursuant to the terms hereof or of any of
the other Lease Documents shall contain any untrue statement of a material fact
or shall omit to state any material fact necessary in order to prevent al
statements contained therein from being misleading.
11.2.4 Confidentiality. Lessor shall afford any information received
pursuant to the provisions of the Lease Documents the same degree of
confidentiality that Lessor affords similar information proprietary to Lessor;
provided, however, that Lessor does not in any way warrant or represent that
such information received from any member of the Leasing Group shall remain
confidential (and shall not be liable in any way for any subsequent disclosure
of such information by any Person that Lessor has provided such information in
accordance with the terms hereof) and provided, further, that Lessor shall have
the unconditional right to (a) disclose any such information as Lessor deems
necessary or appropriate in connection with any sale, transfer, conveyance,
participation or assignment of the Leased Property or any. of the Lease
Documents or any interest therein and (b) use such information in any litigation
or arbitration proceeding between Lessor and any member of the Leasing Group.
Without limiting the foregoing, Lessor may also utilize any information
furnished to it hereunder as and to the extent (i) counsel t Lessor determines
that such utilization is necessary pursuant to 15 U.S.C. 77a-77aa or 15 U.S.
78a-78jj and the rules and regulations promulgated thereunder, (ii) Lessor is
required or requested by any Governmental Authority to disclose any such
information and/or (iii) Lessor is requested to disclose any such information by
any of the Meditrust Entities' lenders or potential lenders. In connection with
any such disclosure, Lessor shall inform the recipient of any such information
of the confidential nature thereof.
11.3 Financial Covenants. Lessee covenants and agrees that, throughout
the Term and as long as Lessee is in possession of the Leased Property:
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11.3.1 Rent Coverage Ratio of Lessee. The Lessee shall comply with the
provisions o the Agreement Regarding Related Transactions pertaining to Rent
Coverage Ratio.
11.3.2 [Intentionally Omitted]
11.3.3 [Intentionally Omitted]
11.3.4 [Intentionally Omitted]
11.3.5 Current Ratio - Guarantor. The Guarantor shall maintain, at all
times, a ratio of Consolidated Current Assets to Consolidated Current
Liabilities equal to or greater than 1.0 to 1.
11.3.6 [Intentionally Omitted]
11.3.7 Tangible Net Worth - Guarantor. The Guarantor shall maintain, at
all times, a Tangible Net Worth of not less than SEVEN MILLION and NO/100
DOLLARS ($7,000,000 00).
11.3.8 [Intentionally Omitted]
11.3.9 [Intentionally Omitted]
11.3.10 No Indebtedness. Lessee shall not create, incur, assume or
suffer to exist any liability for borrowed money except (i) Indebtedness to
Lessor under the Lease Documents, (ii) Impositions allowed pursuant to the
provisions of the Lease, (iii) unsecured normal trade debt incurred upon
customary terms in the ordinary course of business, (iv) Indebtedness created in
connection with any financing of any Capital Addition, provided. that each such
financing has been approved by Lessor in accordance with the terms of Article 9
hereof, (v) other Indebtedness of Lessee in the aggregate amount not to exceed
FIVE HUNDRED THOUSAND and NO/100 DOLLARS ($500,000.00), incurred for the
exclusive use of the Leased Property, on account of purchase money indebtedness
or finance lease arrangements, each of which shall not exceed the fair market
value of the assets or property acquired or leased and shall not extend to any
assets or property other than those purchased or leased and purchase money
security interests in equipment d equipment leases which comply with the
provisions of Section 6.1.2, and (vi) Indebtedness from the shareholders of
Lessee and/or any other Affiliate which has been expressly subordinate in
writing pursuant to the Affiliated Party Subordination Agreement.
11.3.11 No Guaranties. Lessee shall not assume, guarantee, endorse,
contingently agree to purchase or otherwise become directly or contingently
liable (including, without limitation, liable by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise to invest in any debtor or otherwise to assure any creditor against
loss) in connection with any Indebtedness of any other Person, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the
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ordinary co se of business.
11.3.12 [Intentionally Omitted]
11.4 Affirmative Covenants. Throughout the Term and such time as Lessee is
in possession f the Leased Property, Lessee covenants and agrees that:
11.4.1 Maintenance of Existence. If Lessee is a corporation, trust or
partnership, during the entire time that this Lease remains in full force and
effect, Lessee shall keep in effect its existence and rights as a corporation,
trust or partnership under the laws of the state of its corporation or formation
and its right to own property and transact business in the State.
11.4.2 Materials. Except as provided in Section 6.1.2, Lessee shall not
suffer the use in connection with any renovations or other construction relating
to the Leased Property of any materials, fixtures or equipment intended to
become part of the Leased Property which are purchased upon lease or conditional
bill of sale or to which Lessee does not have absolute and unencumbered title,
and Lessee covenants to cause to be paid punctually all sums becoming due for
lab r, materials, fixtures or equipment used or purchased in connection with any
such renovations or construction, subject to Lessee's right to contest to the
extent provided for in Article 15.
11.4.3 Compliance With Legal Requirements And Applicable Agreements.
Lessee and the Leased Property and all uses thereof shall comply with (i) all
Legal Requirements, (ii) all Permits and Contracts, (iii) all Insurance
Requirements, (iv) the Lease Documents, (v) the Permitted Encumbrances and (vi)
the Appurtenant Agreements.
11.4.4 Books And Records. Lessee shall cause to be kept and maintained,
and shall permit Lessor and its representatives to inspect at all reasonable
times, accurate books of accounts in which complete entries will be made in
accordance with GAAP reflecting all financial transaction of Lessee (showing,
without limitation, all materials ordered and received and all disbursements,
accounts payable and accounts receivable in connection with the operation of the
Leased Property).
11.4.5 Participation in Third Party Pa or Programs. Lessee and each
Sublessee shall participate in all Third Party Payor Programs (which would be
participated in, in Lessee's reasonable discretion, by a prudent operator in the
good faith exercise of commercially reasonable business judgment), in accordance
with all requirements thereof (including, without limitation, all applicable
Provider Agreements), and shall remain eligible to participate in such Third
Party Payor Programs, all as shall be necessary, in Lessee's reasonable
discretion, for the prudent operation of the Facility in the good faith exercise
of commercially reasonable business judgment.
11.4.6 Conduct of its Business. Lessee will maintain, anal cause any
Sublessee and any Manager to maintain, experienced and competent professional
management with respect to its business and with respect to the Leased Property.
Lessor agrees that management by the
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executive officers listed on EXHIBIT J attached hereto is satisfactory for the
purposes of this provision. a Facility shall be managed by the Current Manager,
Lessee or a Subsidiary of the Guarantor. Lessee, any Sublessee and any Manager
shall conduct, in the ordinary course, the operation o the Facility, and Lessee
and any Sublessee shall not enter into any other business or venture during the
Term or such time as Lessee or any Sublessee is in possession of the Leased
Property other than activities in which Lessee or such Sublessee are permitted
to engage by the provisions of the Meditrust/ALP Transaction Documents.
11.4.7 Address. Lessee shall provide Lessor thirty (30) days' prior
written notice of a y change of its Principal Place of Business from its current
Principal Place of Business. Lessee shall maintain the Collateral, including,
without limitation, all books and records relating to its business, solely at
its Principal Place of Business and at the Leased Property. Lessee shall not (a)
remove the Collateral, including, without limitation, any books or records
relating to Lessee's business from either the Leased Property or Lessee's
Principal Place of Business or (b) relocate its Principal Place of Business
until after receipt of a certificate from Lessor, signed by an officer thereof,
stating that Lessor has, to its satisfaction, obtained all documentation that it
deems necessary or desirable to obtain, maintain, perfect and confirm the first
priority security interests granted in the Lease Documents.
11.4.8 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease or the Affiliated Party
Subordination Agreement, any payment is to be made by Lessee to (a) any member
of the Leasing Group (or any of its Affiliates) or (b) any Affiliate of Lessee,
in connection with any transaction between Lessee and such Person, including,
without limitation, the purchase, sale or exchange of any property, the
rendering of any service to or with any such Person (including, without
limitation, all allocations of any so-called corporate or central office costs,
expenses and charges of any kind or nature) or the making of any .loan or other
extension of credit or the making of any equity investment, shall be subordinate
to the complete payment and performance of all the Lease Obligations; provided,
however, at all such subordinated payments may be paid at any time unless: (x)
after giving effect to such payment, Lessee shall be unable to comply with any
of its obligations under any of the Leas Documents or (y) a Lease Default has
occurred and is continuing and has. not been expressly waved in writing by
Lessor or an event or state of facts exists, which, with the giving of notice or
he passage of time, or both, would constitute a Lease Default.
11.4.9 Inspection. At reasonable times and upon reasonable notice,
Lessee shall permit Lessor and its authorized representatives (including,
without limitation, the Consultants) to inspect the Leased Property as provided
in Section 7.1 above.
11.5 Additional Negative Covenants. Lessee covenants and agrees that,
throughout the Term and such time as Lessee is in possession of the Leased
Property:
11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided or in any of the other Lease Documents, Lessee shall not,
without the prior written consent of Lessor, in each instance, which consent may
be withheld in the sole and absolute discretion of Lessor:
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(a) convey, assign, hypothecate, transfer, dispose of or encumber,
or permit the conveyance, assignment, transfer, hypothecation, disposal or
encumbrance of all or any part of any legal or beneficial interest in this
Lease, its other assets or the Leased Property; provided; however, that this
restriction shall not apply to (i) the Permitted Encumbrances that may be
created after the date hereof pursuant to the Lease Documents; (ii) Liens
created in accordance with the applicable provisions of Section 6.1.2 against
Tangible Personal Property securing Indebtedness permitted under Section
11.3.10; (iii) the sale, conveyance, assignment, hypothecations, lease or other
transfer of any material asset or assets (whether now owned or hereafter
acquired), the fair market value of which equals or is less than TWENTY-FIVE
THOUSAND and NO/100 DOLLARS 19($25,000.00), individually, or ONE HUNDRED
THOUSAND and NO/100 DOLLARS ($100,000.00) collectively; (iv) without limitation
as to amount, the disposition in the ordinary course of business of any
obsolete, worn out or defective fixtures, furnishings or equipment used in the
operation of the Leased Property provided that the same are replaced with
fixtures, furnishings or equipment of equal or greater utility or value or
Lessee provides Lessor with an explanation (reasonably satisfactory to Lessor)
as to why such Tangible Personal Property is no longer required in connection
with the operation of the Leased Property; (v) without limitation as to amount;
any sale of inventory by Lessee in the ordinary course of business; and (vi)
subject to the terms of the Pledge Agreement and the Affiliated Subordination
Party Agreement, distributions to Lessee's shareholder(s);
(b) permit the use of the Facility for any purpose other than the
Primary Intended Use and the Other Permitted Uses; or
(c) liquidate, dissolve or merge or consolidate with any other
Person.
11.5.2 No Liens. Lessee will not directly or indirectly create or allow
to remain and will promptly discharge at its expense any Lien, title retention
agreement or claim upon or against the Leased Property (including Lessee's
interest therein) or Lessee's interest in this Lease or any of the other Lease
Documents, or in respect of the Rent, excluding (a) this Lease and any permitted
Subleases, (b) the matters, if any, set forth in EXHIBIT B, (c) Liens which are
consented to in writing by Lessor, (d) Liens for those taxes of Lessor which
Lessee is not required to pay hereunder, (e) Liens of mechanics, laborers,
materialmen, suppliers or vendors for sums either not yet due or being contested
in strict compliance with the terms and conditions of Article 15, (f) any Liens
which are the responsibility of Lessor pursuant to the provisions of Article 20,
g) Liens for Impositions which are either not yet due and payable or which are
in the process f being contested in strict compliance with the terms and
conditions of Article 15 and (h) involuntary Liens caused by the actions or
omissions of Lessor.
11.5.3 Limits on Affiliate Transactions. Lessee shall not enter into
any transaction with any Affiliate, including, without limitation, the purchase,
sale or exchange of any property, the rendering of any service to or with any
Affiliate and the making of any loan or other extension of credit, except in the
ordinary course of, and pursuant to the reasonable requirements of, Lessee's
business and upon fair and reasonable terms no less favorable to Lessee than
would obtained in a comparable arms'-length transaction with any Person that is
not an
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Affiliate.
11.5.4 Non-Competition. Lessee acknowledges that upon and after any
termination of this Lease, any competition by any member of the Leasing Group
with any subsequent owner or subsequent lessee of the Leased Property
("Purchaser") would cause irreparable arm to Lessor and any such Purchaser. To
induce Lessor to enter into this Lease, Lessee agree that, from and after the
date hereof and thereafter until the third (3rd) anniversary of the termination
hereof, no member of the Leasing Group nor any Person holding or controlling,
directly or indirectly, any interest in any member of the Leasing Group (other
than stockholders of Guarantor) shall be involved in any capacity in or lend any
of their names to or engage in y capacity in any assisted living. facility,
center, unit or program (or in any partnership, firm, company, corporation or
other entity engaged in any such activity or any related activity competitive
therewith), whether such competitive activity shall be as an officer, director,
owner, employee, agent, advisor, independent contractor, developer, lender,
sponsor, venture capitalist, administrator, manager, investor, partner, joint
venturer, consultant or other participant in any capacity whatsoever within a
one (1) mile radius of the Facility. Notwithstanding any provisions of this
Section 11.5.4 to the contrary, any member of the Leasing Group shall have the
option to develop and operate other assisted living facilities within the
aforementioned radius restriction at any time prior to the last twenty-four (24)
months of ,the Term and during the last twenty-four months of the Term if Lessee
extends the Term by an Extended Term pursuant to Section 1.3 above of this
Lease, provided Lessor shall have the right of fast re to finance such Facility
on terms no less favorable than those offered by any other lender.
Lessee hereby acknowledges and agrees that none of the time span, scope
or area covered by the foregoing restrictive covenants is or are unreasonable
and that it is the specific intent of Lessee that each and all of the
restrictive covenants set forth hereinabove shall be valid and enforceable as
specifically set forth herein. Lessee further agrees that these restrictions are
special, unique, extraordinary and reasonably necessary for the protection of
Lessor and any Purchaser an that the violation of any such covenant by Lessee
would cause irreparable damage to Lessor an any Purchaser for which a legal
remedy alone would not be sufficient to fully protect such parties.
Therefore, in addition to and without limiting any other remedies
available at law or hereunder, in the event that Lessee breaches any of its
restrictive covenants hereunder or shall threaten breach of any of such
covenants, then Lessor and any Purchaser shall be entitled to obtain equitable
remedies, including specific performance and injunctive relief, to prevent or
otherwise restrain a breach of this Section 11.5.4 (without the necessity of
posting a bond) and to recover any and all costs and expenses (including,
without limitation, attorneys' fees and expenses an court costs) incurred in
enforcing the provisions of this Section 11.5.4. The existence of any claim or
cause of action of any member of the Leasing Group against Lessor or any
Purchaser, whether predicated on this Lease or otherwise, shall not, constitute
a defense to the enforcement by Lessor or any Purchaser of the foregoing
restrictive covenants and Lessee shall not defend on the basis that there is an
adequate remedy at law.
Without limiting any other provision of this Lease, the parties hereto
acknowledge
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that the for going restrictive covenants are severable and separate. If at any
time any of the foregoing restrictive covenants shall be deemed invalid or
unenforceable by a court having jurisdiction over this Lease, by reason of being
vague or unreasonable as to duration, or geographic scope or scope of activities
restricted, or for any other reason, such covenants shall be considered
divisible as to such portion and such covenants shall be immediately amended and
reformed to include only such covenants as are deemed reasonable and enforceable
by the court having jurisdiction over this Lease to the full duration,
geographic scope and scope of restrictive activities deemed reasonable and thus
enforceable by said court; and the parties agree that such covenants so amended
and reformed, shall be valid and binding as through the invalid or unenforceable
portion had not been included therein.
The provisions of this Section 11.5.4 shall survive the termination of
the Lease and any satisfaction of the Lease Obligations in connection therewith
or subsequent thereto. The parties hereto acknowledge and agree that any
Purchaser may enforce the provisions of this Section 11.5.4 as a third party
beneficiary.
11.5.5 No Default. Lessee shall not commit any default or breach under
any of the Leas Documents.
11.5.6 Restrictions Relating to the Guarantor. Except as may otherwise
be expressly provided herein or in any of the other Lease Documents, the
Guarantor shall not, without the nor written consent of Lessor, in each
instance, which consent may be withheld in the sole and absolute discretion of
Lessor, convey, assign, donate, sell, mortgage or pledge any real or personal
property or take any other action which would have a materially adverse effect
upon the Tangible Net Worth or general financial condition of the Guarantor.
11.5.7 [Intentionally Omitted
11.5.8 ERISA. Lessee shall not establish or permit any Sublessee to
establish any new pension or defined benefit plan or modify any such existing
plan for employees subject to ERISA, which plan provides any benefits based on
past service without the advance consent of Lessor to the amount of the
aggregate past service liability thereby created.
11.5.9 Forgiveness of Indebtedness. Lessee will not waive, or permit
any Sublessee o Manager which is an Affiliate to waive any debt or claim, except
in the ordinary course of its business.
11.5.10 Value of Assets. Except as disclosed in the financial
statements provided to Lessor a of the date hereof, Lessee will not write up (by
creating an appraisal surplus or otherwise) a value of any assets of Lessee
above their cost to Lessee, less the depreciation regularly all allowable
thereon.
11.5.11 Changes in Fiscal Year and Accounting Procedures. Lessee shall
not, without the nor written consent of Lessor, in each instance, which consent
may be withheld in Lessor's reasonable discretion (a) change its fiscal year or
capital structure or (b) change, alter,
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amend or in any manner modify, except in accordance with GAAP, any of its
current accounting procedures related to the method of revenue recognition,
billing procedures or determinations of doubtful accounts or bad debt expenses
nor will Lessee permit any of its Subsidiaries to change its fiscal y or suffer
or permit any circumstance to exist in which any Subsidiary is not wholly-owned,
directly or indirectly, by Lessee. Notwithstanding the foregoing, Lessor agrees
to consent to any a in Lessee's fiscal year, provided that (i) Lessee shall have
requested such consent not less than thirty (30) days prior to the proposed
effective date of such change and shall have promptly furnished to Lessor all
such financial information as Lessor may have reasonably requested in order to
determine the impact of such change on Lessee's financial statements, (ii) no
such change shall be permitted if its effect would be to enable Lessee to
satisfy any covenant contained in this Agreement which, absent such change,
would not have been satisfied and (iii) Lessee shall have entered into any
amendment to this Lease which Lessor shall have reasonably r quested in order to
maintain the intended effect of the covenants contained in this Lease.
11.5.12 Changes in Executive Officers. Lessee shall not suffer or
permit to exist any circumstance in which any of the executive officers listed
on EXHIBIT J hereto ceases for any reason o serve as an executive officer of
Lessee, unless succeeded in such position within thirty (30) days by another
individual reasonably satisfactory to Lessor, and this provision will, in turn,
become effective as to each such successive executive officer.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 General Insurance Requirements. During the Term of this Lease and
thereafter until Lessee surrenders the Leased Property in the manner required by
this Lease, Lessee shall at its sole cost and expense keep the Leased Property,
the Tangible Personal Property and Lessor's Personal Property located thereon
and the business operations conducted thereon insured as set forth below.
12.1.1 Types and Amounts of Insurance. Lessee's insurance shall include
the following:
(a) property loss and physical damage insurance on an all-risk
basis (with only such exceptions as Lessor may in its reasonable discretion
approve) covering the Leased Property (exclusive of Land) for its full
replacement cost, which cost shall be reset once a year at Lessor's option, with
an agreed-amount endorsement and a deductible not in excess of TEN THOUSAND and
NO/100 DOLLARS ($10,000.00). Such insurance shall include, without limitation,
the following coverages: (i) increased cost of construction, (ii) cost of
demolition, iii) the value of the undamaged portion of the Facility and (iv)
contingent liability from the o ration of building laws, less exclusions
provided in the normal "All Risk" insurance policy. D g any period of
construction, such insurance shall be on a builder's-risk, completed value, non-
reporting form with permission to occupy;
(b) flood insurance (if the Leased Property or any portion thereof
is
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situated in area which is considered a flood risk area by the U.S. Department of
Housing and Urban Development) in limits acceptable to Lessor;
(c) boiler and machinery insurance (including related electrical
apparatus and components) under a standard comprehensive form, providing
coverage against loss or damage caused by explosion of steam boilers, pressure
vessels or similar vessels, now or hereafter installed on the Leased Property,
in limits acceptable to Lessor;
(d) earthquake insurance (if deemed necessary by Lessor) in limits
and with deductibles acceptable to Lessor;
(e) environmental impairment liability insurance (if available) in
limits and with deductibles acceptable to Lessor;
(f) business interruption insurance in an amount equal to the
annual Base Rent due hereunder plus the aggregate sum of the Impositions
relating to the Leased Property due and payable during one year;
(g) comprehensive general public liability insurance including
coverages commonly found in the Broad Form Commercial Liability Endorsements
with amounts not less than FIVE MILLION and NO/100 DOLLARS ($5,000,000.00) per
occurrence with respect to bodily injury d death and THREE MILLION and NO/100
DOLLARS ($3,000,000.00) for property damage and with all limits based solely
upon occurrences at the Leased Property without any other impairment;
(h) professional liability insurance in an amount not less than
FIVE MILLION and NO/100 DOLLARS ($5,000,000.00) for each medical incident;
(i) physical damage insurance on an all-risk basis (with only such
exceptions s Lessor in its reasonable discretion shall approve) covering
Lessee's Tangible Personal Property for the full replacement cost thereof and
with a deductible not in excess of one percent (1% of the full replacement cost
thereof;
(j) Workers' Compensation and Employers' Liability Insurance
providing protection against all claims arising out of injuries to all employees
of Lessee or of any Sublessee (employed on the Leased Property or any portion
thereof) in amounts equal for Workers' Compensation, to the statutory benefits
payable to employees in the State and for Employers' Liability, to limits of not
less than ONE HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00) for injury by
accident, ONE HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00) per employee for
disease and FIVE HUNDRED THOUSAND and NO/100 DOLLARS ($500,000.00) disease
policy limit;
(k) subsidence insurance (if deemed necessary by Lessor) in limits
acceptable o Lessor;
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(1) contractual liability insurance; and
(m) such other insurance as Lessor from time to time may
reasonably require and also, as may from time to time be required by applicable
Legal Requirements and/or by any Fe Mortgagee.
12.1.2 Insurance Company Requirements. All such insurance required by
this Lease or t e other Lease Documents shall be issued and underwritten by
insurance companies licensed to do insurance business by, and in good standing
under the laws of, the State and which companies have and maintain a rating of
A:IX or better by A.M. Best Co. and have been previous/ approved in writing by
Lessor.
12.1.3 Policy Requirements. Every policy of insurance from time to time
required under this Lease or any of the other Lease Documents shall name Lessor
as owner, loss payee, se d party (to the extent applicable) and additional named
insured as its interests may appear. If an insurance policy covers properties
other than the Leased Property, then Lessor shall be so named with respect only
to the Leased Property. Each such policy, where applicable or appropriate, hall:
(a) include an agreed amount endorsement and loss payee,
additional named insured and secured party endorsements, in forms acceptable to
Lessor in its sole and absolute discretion;
(b) include mortgagee, secured party, loss payable and additional
named insured endorsements reasonably acceptable to each Fee Mortgagee;
(c) provide that the coverages may not be cancelled, reduced or
materially modified in any manner which might adversely affect Lessor except
upon thirty (30) days' prior written notice to Lessor and any Fee Mortgagee;
(d) be payable to Lessor and any Fee Mortgagee notwithstanding any
defense or claim that the insurer may have to the payment of the same against
any other Person holding any other interest in the Leased Property;
(e) be endorsed with standard noncontributory clauses in favor of
and in form reasonably acceptable to Lessor and any Fee Mortgagee;
(f) expressly waive any right of subrogation on the part of the
insurer against Lessor, any Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be reasonably acceptable
to Lessor.
12.1.4 Notices; Certificates and Policies. Lessee shall promptly provide to
Lessor copies of any and all notices (including notice of non-renewal), claims
and demands which Lessee receives from insurers of the Leased Property. At least
ten (10) days prior to the expiration of any
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insurance policy required hereunder, Lessee shall deliver to Lessor certificates
and evidence of insurance relating to all renewals and replacements thereof,
together with evidence, satisfactory to Lessor, of payment of the premiums
thereon. Lessee shall deliver to Lessor original counterparts or copies
certified by the insurance company to be true and complete copies, of al
insurance policies required hereunder not later than the earlier to occur of (a)
ninety (90) days after the effective date of each such policy and (b) ten (10)
days after receipt thereof by Lessee.
12:1.5 Lessor's Right to Place Insurance. If Lessee shall fail to
obtain any insurance policy required hereunder by Lessor, or shall fail to
deliver the certificate and evidence of insurance relating to any such policy to
Lessor, or if any insurance policy required hereunder (or any par thereof) shall
expire or be cancelled or become void or voidable by reason of any breach of y
condition thereof, or if Lessor determines that such insurance coverage is
unsatisfactory by reason of the failure or impairment of the capital of any
insurance company which wrote any such policy, upon demand by Lessor, Lessee
shall promptly obtain new or additional insurance coverage on the Leased
Property, or for those risks required to be insured by the provisions hereof,
satisfactory to Lessor, and, at its option, Lessor may obtain such insurance and
pay the premium or premiums therefor; in which event, any amount so paid or
advanced b Lessor and all costs and expenses incurred in connection therewith
(including, without limitation, attorneys' fees and expenses and court costs),
shall be a demand obligation of Lessee to Lessor, payable as an Additional
Charge.
12.1.6 Payment of Proceeds. All insurance policies required hereunder
(except for general public liability, professional liability and workers'
compensation and employers liability insurance) shall provide that in the event
of loss, injury or damage, subject to the rights of any Fee Mortgagee, all
proceeds shall be paid to Lessor alone (rather than jointly to Lessee and
Lessor) Lessor is hereby authorized to adjust and compromise any such loss with
the consent of Lessee or, following any Lease Default, whether or not cured,
without the consent of Lessee, and o collect and receive such proceeds in the
name of Lessor and Lessee, and Lessee appoints Le r (or any agent designated by
Lessor) as Lessee's attorney-in-fact with full power of substitution, to endorse
Lessee's name upon any check in payment thereof. Subject to the provisions
Article 13, such insurance proceeds shall be applied first toward reimbursement
of all costs an expenses of Lessor in collecting said insurance proceeds, then
toward payment of the Lease Obligations or any portion thereof, then due and
payable, in such order as Lessor determines, and then in whole or in part toward
restoration, repair or reconstruction of the Leased Property for which such
insurance proceeds shall have been paid.
12.1.7 Irrevocable Power of Attorney. The power of attorney conferred
on Lessor pursuant to the provisions of Section 12.1.6, being coupled with an
interest, shall be irrevocable for so long as this Lease is in effect or any
Lease Obligations are outstanding, shall not be affected by any disability or
incapacity which Lessee may suffer and shall survive the same. Such power of
attorney is provided solely to protect the interests of Lessor and shall not
impose any duty on Lessor to exercise any such power, and neither Lessor nor
such attorney-in-fact shall be liable for any act, omission, error in judgment
or mistake of law, except as the same may result from its gross negligence or
wilful misconduct.
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12.1.8 Blanket Policies. Notwithstanding anything to the contrary
contained herein, Lessee's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee and its A Hates covering
all of the Leased Property or covering some or all of the Leased Property a d
other property owned by Lessee or its Affiliates; provided, however. that the
coverage afforded to Lessor shall not be reduced or diminished or otherwise be
different from that which would exist under a separate policy for each of the
properties comprising the Facility meeting al other requirements of this Lease
by reason of the use of such blanket policy of insurance, and provided, further
that the requirements of Section 12.1 are otherwise satisfied.
12.1.9 No Separate Insurance. Lessee shall not, on Lessee's own
initiative or pursuant to the request or requirement of any other Person, take
out separate insurance concurrent in form or contributing in the event of loss
with the insurance required hereunder to be furnished by Lessee, o increase the
amounts of any then existing insurance by securing an additional policy or
additional policies, unless (a) all parties having an insurable interest in the
subject matter of the insurance, including Lessor, are included, therein as
additional insureds and (b) losses are payable under said insurance in the same
manner as losses are required to be payable under this Lease. Less a shall
immediately notify Lessor of the taking out of any such separate insurance or of
the increasing of any of the amounts of the then existing insurance by securing
an additional insurance policy or policies.
12.1.10 Assignment of Unearned Premiums. Lessee hereby assigns to
Lessor all rights of Lessee in and to any unearned premiums allocable to the
Leased Property on any insurance policy required hereunder to be furnished by
Lessee which may become payable or are refundable after the occurrence of a
Lease Default hereunder. In the event that this Lease is terminated or any
reason (other than the purchase of the Leased Property by Lessee), the insurance
policies required to be maintained pursuant to subsections 12.1.1(a), (b), (c),
(d) and (e) hereunder with respect to the Leased Property or any portion of such
insurance policies relating to Leased Premises, including all right, title and
interest of Lessee thereunder, shall become the absolute property of Lessor.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross negligence or
wilful misconduct of Lessor or any of the other Indemnified Parties and to any
loss of reputation or diminution n stock price suffered by Lessor or any of its
Affiliates, as to which no indemnity is provided Lessee hereby agrees to defend
with counsel acceptable to Lessor, indemnify and hold harmless Lessor and each
of the other Indemnified Parties from and against all direct and indirect
damages, losses, claims, liabilities, obligations, penalties, causes of action,
costs and expenses (including, without limitation, attorneys' fees, court costs
and other expenses of litigation) suffered by, or claimed or asserted against,
Lessor or any of the other Indemnified Parties directly or indirectly, based on,
arising out of or resulting from: (a) the use and occupancy f the Leased
Property or any business conducted therein, (b) any act, fault, omission to act
or misconduct by any member of the Leasing Group or any Affiliate of Lessee or
any employee, agent, licensee, business invitee, guest, customer, contractor or
sublessee of any of the foregoing
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parties, (c) any accident, injury or damage whatsoever caused to any Person,
including without limitation any claim of malpractice, or to the property of any
Person in or about the Leased Property or outside of the Leased Property where
such accident, injury or damage results or is claim to have resulted from any
act, fault, omission to act or misconduct by any member of the Leas' g Group or
any Affiliate of Lessee or any employee, agent, licensee, contractor or
sublessee o any of the foregoing parties, (d) any default or breach of condition
under any of the Lease Documents (other than a default by Lessor in the
performance of any of its obligations thereunder), (e) Lessor's relationship
with any member of the Leasing Group, (f) Lessor being named, or required to be
named, as a co-licensee on any license and/or permit required and/or desirable t
operate all or any of the Facilities, (g) Lessee's failure to renew, obtain
and/or maintain all licenses and/or permits required by all applicable Legal
Requirements to own, manage and operate the Facility, including, without
limitation, Lessee's failure to renew and/or obtain all such licenses and/or
permits required in connection with the transfer of the Facility to Lessor, (h)
y labor, services or materials furnished or to be furnished to Lessee or
Guarantor or any of heir respective Affiliates in connection with the Leased
Property and/or (i) the enforcement of this indemnity. Any amounts which become
payable by Lessee under this Section 12.2.1 shall be a demand obligation of
Lessee to Lessor, payable as an Additional Charge. The indemnity provided for in
this Section 12.2 shall survive the expiration or any termination of this Lease.
12.2.2 Indemnified Parties. As used in this Lease the term "Indemnified
Parties" shall mean Lessor, any Fee Mortgagee and their respective Affiliates,
successors, assigns, employees, servants, agents, attorneys, officers,
directors, shareholders, partners and owners.
12.2.3 Limitation on Lessor Liability. Neither Lessor nor any Affiliate
of Lessor shall be liable to any member of the Leasing Group or any Affiliate of
Lessee, or to any other Person whatsoever for any damage, injury, loss,
compensation, or claim (including, but not limited to, any claim for the
interruption of or loss to any business conducted on the Leased Property) based
on, arising out of or resulting from any cause whatsoever, including, but not
limited to, the following: (a) repairs to the Leased Property; (b) interruption
in use of the Leased Property; (c) any accident or damage resulting from the use
or operation of the Leased Property or any business conducted thereon; (d) the
termination of this Lease by reason of Casualty or Condemnation; (e) any fire,
theft or other casualty or crime; (f) the actions, omissions or misconduct of
any other Person; (g) damage to any property; or (h) any damage from the flow or
leaking f water, rain or snow. All Tangible Personal Property and the personal
property of any other Person on the Leased Property (including, without
limitation, Lessor's Personal Property) shall be at the sole risk of Lessee and
Lessor shall not in any manner be held responsible therefor. Notwithstanding the
foregoing, Lessor shall not be released from liability for any injury, loss,
damage or liability suffered directly by Lessee to the extent caused directly by
the gross negligence or willful misconduct of Lessor, its servants, employees or
agents acting within the scope of their authority on or about the Leased
Property or in regards to the Lease; provided, however, that in no event shall
Lessor, its servants, employees or agents have any liability based on any loss
with respect to or interruption in the operation of any business at the Leased
Property or for any indirect or consequential damages.
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12.2.4 Risk of Loss. During the Term of this Lease, the risk of loss or
of decrease in the enjoyment and beneficial use of the Leased Property in
consequence of any damage or destruction thereof by the elements, Casualty,
thefts, riots, wars or otherwise, or in consequence of foreclosures, levies or
executions of Liens (other than those created by Lessor in accordance with the
provisions of Article 20) is assumed by Lessee and, in the absence of the gross
negligence or willful misconduct as set forth in Section 12.2.3, Lessor shall in
no event be answerable or accountable therefor (except for the obligation to
account for insurance proceeds and Awards to the extent provided for in Articles
13 and 14) nor shall any of the events mentioned in this Section entitle Lessee
to any abatement of Rent (except for an abatement, if any, as specifically
provided for in Section 3.7).
ARTICLE 13
FIRE AND CASUALTY
13.1 Restoration Following, Fire or Other Casualty.
13.1.1 Following Fire or Casualty. In the event of any damage or
destruction to the Leased Property by reason of fire or other hazard or casualty
(a "Casualty"), Lessee shall give immediate written notice thereof to Lessor
and, subject to the terms of this Article 13, Lessee shall diligently and
continuously proceed to perform such repairs, replacement and reconstruction
work (referred to herein as the "Work") to restore the Leased Property to the
condition it was in immediately prior to such damage or destruction and to a
condition adequate to operate the Facility for the Primary Intended Use and, to
the extent applicable, the Other Permitted Uses and in compliance with Legal
Requirements. All Work shall be performed and completed in accordance with all
Legal Requirements and the other requirements of this Lease within one hundred
and twenty (120) days following the occurrence of the damage or destruction plus
a reasonable time to compensate for Unavoidable Delays (including for the
purposes of this Section, delays in obtaining Permits and in adjusting insurance
losses), but in no event beyond three hundred sixty-five (365) days following
the occurrence of the Casualty.
13.1.2 Procedures. In the event that any Casualty results in
non-structural damage to the Leased Property in excess of FIFTY THOUSAND and
NO/100 DOLLARS ($50,000.00) or in any structural damage to the Leased Property,
regardless of the extent of such structural damage, prior to commencing ,the
Work, Lessee shall comply with the following requirements:
(a) Lessee shall furnish to Lessor complete plans and
specifications for the Work (collectively, the "Plans and Specifications"), for
Lessor's approval, in each instance, which approval shall not be unreasonably
withheld. The Plans and Specifications shall bear the signed approval thereof by
an architect, licensed to do business in the State, satisfactory to Lessor and
shall be accompanied by a written estimate from the architect, bearing the
architect's seal, of the entire cost of completing the Work, and to the extent
feasible, the Plans and Specifications shall provide for Work of such nature,
quality and extent, that, upon the completion thereof, the Leased Property shall
be at least equal in value and general utility to its value and general utility
prior to the Casualty and shall be adequate to operate the Leased
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Property for the Primary Intended Use and, to the extent applicable, the Other
Permitted Uses;
(b) Lessee shall furnish to Lessor certified or photostatic copies
of all Permits and Contracts required by all applicable Legal Requirements in
connection with the commencement and conduct of the Work;
(c) Lessee shall furnish to Lessor a cash deposit or a payment and
performance bond sufficient to pay for completion of and payment for the Work in
an amount not less than the architect's estimate of the entire cost of
completing the Work, less the amount of property insurance proceeds, if any,
then held by Lessor and which Lessor shall be required to apply toward
restoration of the Leased Property as provided in Section 13.2;
(d) Lessee shall furnish to Lessor such insurance with respect to
the Work (in addition to the insurance required under Section 12.1 hereof) in
such amounts and in such forms as is reasonably required by Lessee; and
(e) Lessee shall not commence any of the Work until Lessee shall
have complied with the requirements set forth in clauses (a) through (d)
immediately above, as applicable, and thereafter Lessee shall perform the Work
diligently, in a good and workmanlike fashion and in good faith in accordance
with (i) the Plans and Specifications referred to clause (a) immediately above,
(ii) the Permits and Contracts referred to in clause (b) immediately above and
(iii) all applicable Legal Requirements and other requirements of this Lease.
13.1.3 Disbursement of Insurance Proceeds Less Than $50,000.00. In the
event of any Casualty which, in the aggregate, does not exceed $50,000.00
(determined by Lessor in its reasonable discretion), all proceeds relating
thereto shall be paid to Lessee in a lump sum to defray the cost of the repair
or restoration needed to respond to such loss or damage, provided that (a) there
does not exist an Event of Default under this Lease and (b) Lessee has received
no notice regarding an event or state of facts which, with the passage of time
and/or the giving of notice, would constitute an Event of Default if not cured
by Lessee, and Lessee has not yet effected such cure.
13.1.4 Disbursement of Insurance Proceeds $50,000.00 or More. With
respect to any Casualty equal to or in excess of $50,000.00, if Lessor is
required to apply any property insurance proceeds toward repair or restoration
of the Leased Property as provided in Section 13.2, then as long as the Work is
being diligently and continuously performed by Lessee in accordance with the
terms and conditions of this Lease, Lessor shall disburse such insurance
proceeds from time to time during the course of the Work in accordance with and
subject to satisfaction of the following provisions and conditions. Lessor shall
not be required to make disbursements more often than at thirty (30) day
intervals. Lessee shall submit a written request for each disbursement at least
ten (10) Business Days in advance and shall comply with the following
requirements in connection with each disbursement:
(a) Prior to the commencement of any Work, Lessee shall have
received Lessor's written approval of the Plans and Specifications (which
approval shall not be unreasonably withheld) and the Work shall be supervised by
an experienced construction
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manager with the consultation of an architect or engineer qualified and licensed
to do business in the State.
(b) Each request for payment shall be accompanied by (x) a
certificate of the architect or engineer, bearing the architect's or engineer's
seal, and (y) a certificate of the general contractor, qualified and licensed to
do business in the State, that is performing the Work (collectively, the "Work
Certificates"), each dated not more than ten (10) days prior to the application
for withdrawal of funds, and each stating:
(i) that all of the Work performed as of the date of the
certificates has been completed in compliance with the approved Plans and
Specifications, applicable Contract and all applicable Legal Requirements;
(ii) that the sum then requested to be withdrawn has been
paid by Lessee or is justly due to contractors, subcontractors, materialmen,
engineers, architects or other Persons, whose names and addresses shall be
stated therein, who have rendered or furnished certain services or materials for
the Work, and the certificate shall also include a brief description of such
services and materials and the principal subdivisions or categories thereof and
the respective amounts so paid or due to each of said Persons in respect thereof
and stating the progress of the Work up to the date of said certificate;
(iii) that the sum then requested to be withdrawn, plus all
sums previously withdrawn, does not exceed the cost of the Work insofar as
actually accomplished up to the date of such certificate;
(iv) that the remainder of the funds held by Lessor will be
sufficient to pay for the full completion of the Work in accordance with the
Plans and Specifications;
(v) that no part of the cost of the services and materials
described in the applicable Work Certificate has been or is being made the basis
of the withdrawal of any funds in any previous or then pending application; and
(vi) that, except for the amounts, if any, specified in the
applicable Work Certificate to be due for services and materials, there is no
outstanding indebtedness known, after due inquiry, which is then due and payable
for work, labor, services or materials in connection with the Work which, if
unpaid, might become the basis of a vendor's, mechanic's, laborer's or
materialman's statutory or other similar Lien upon the Leased Property.
(c) Lessee shall deliver to Lessor satisfactory evidence that the
Leased Property and all materials and all property described in the Work
Certificates are free and clear of Liens, except (i) Liens, if any, securing
indebtedness due to Persons (whose names and addresses and the several amounts
due them shall be stated therein) specified in an applicable Work Certificate,
which Liens shall be discharged upon disbursement of the funds then being
requested, (ii) any Fee Mortgage, (iii) the Permitted Encumbrances and (iv) as
otherwise
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provided pursuant to the provisions of Article 15 provided however Lessor may
withhold any such property insurance proceeds which are the subject of any
contest involving the general contractor or any subcontractor. Lessor shall
accept as satisfactory evidence of the foregoing lien waivers in customary form
from the general contractor and all subcontractors performing the Work, together
with an endorsement of its title insurance policy (relating to the Leased
Property) in form acceptable to Lessor, dated as of the date of the making of
the disbursement, confirming the foregoing.
(d) If the Work involves alteration or restoration of the exterior
of any Leased Improvement, Lessee shall deliver to Lessor, upon the request of
Lessor, an "as-built" survey of the Leased Properly dated as of a date within
ten (10) days prior to the making of the first and final advances (or revised to
a date within ten (10) days prior to each such advance) showing no encroachments
other than such encroachments, if any, by the Leased Improvements upon or over
the Permitted Encumbrances as are in existence as of the date hereof.
(e) Lessee shall deliver to Lessor (i) an opinion of counsel or
licensed architect or engineer (satisfactory to Lessor both as to counsel,
architect or engineer and as to the form of opinion) prior to the first advance
opining that all necessary Permits for the repair, replacement and/or
restoration of the Work have been obtained and that the Work, if performed in
accordance, in all material respects, with the approved Plans and Specifications
and such Permits, shall comply with all applicable Legal Requirements and (ii)
an architect's certificate (satisfactory to Lessor both as to the architect and
as to the form of the certificate) prior to the final advance, certifying that
the Work was performed in accordance, in all material respects, with the
approved Plans and Specifications and complies with all applicable Legal
Requirements, including, without limitation, all Permits referenced in the
foregoing clause (i).
(f) There shall be no Lease Default or any state of facts or
circumstance existing which, with the giving of notice and/or the passage of
time, would constitute any Lease Default.
Lessor, at its option, may waive any of the foregoing requirements in
whole or in part in any instance. Upon compliance by Lessee with the foregoing
requirements (except for such requirements, if any, as Lessor may have expressly
elected to waive), and to the extent of (x) the insurance proceeds, if any,
which Lessor may be required to apply to restoration of the Leased Property
pursuant to the provisions of this Lease and (Y) all other cash deposits made by
Lessee, Lessor shall make available for payment to the Persons named in the Work
Certificate(s) the respective amounts stated in said Certificate(s) to be due,
subject to a retention of ten percent (10%) as to all hard costs of the Work
(the "Retainage"). It is understood that the Retainage is intended to provide a
contingency fund to assure Lessor that the Work shall be fully completed in
accordance with the Plans and Specifications and the requirements of Lessor.
Upon the full and final completion of all of the Work in accordance with the
provisions hereof, the Retainage shall be made available for payment to those
Persons entitled thereto.
Upon completion of the Work, and as a condition precedent to making any
further advance, in addition to the requirements set forth above, Lessee shall
promptly deliver to Lessor:
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(i) written certificates of the architect or engineer, bearing the
architect's or engineer's seal, and the general contractor, certifying that the
Work has been fully completed in a good and workmanlike manner in material
compliance with the Plans and Specifications and all Legal Requirements;
(ii) an endorsement of its title insurance policy (relating to the
Leased Property) in form reasonably acceptable to Lessor insuring the Leased
Property against all mechanic's and materialman's liens accompanied by the final
lien waivers from the general contractor d all subcontractors except as
otherwise provided pursuant to the provisions of Article 15 provided however
Lessor may withhold any such property insurance proceeds which are the subject
of any contest involving the general or any subcontractor;
(iii) a certificate by Lessee in form and substance reasonably
satisfactory to Lessor, listing all costs and expenses in connection with the
completion of the Work and a amount paid by Lessee with respect to the Work; and
(iv) a temporary certificate of occupancy (if obtainable) and all other
applicable Permits and Contracts issued by or entered into with any Governmental
Authority with respect to the Leased Property and the Primary Intended Use and,
to the extent applicable, the Other Permitted Uses and by the appropriate Board
of Fire Underwriters or other similar bodies acting in and for the locality in
which the Leased Property is situated; provided, that within thirty (30) days
after completion of the Work, Lessee shall obtain and deliver to Lessor a
permanent certificate of occupancy for the Leased Property.
Upon completion of the Work and delivery of the documents required pursuant
to the provisions of this Section 13.1, Lessor shall pay the Retainage to Lessee
or to those Persons entitled thereto and if there shall be insurance proceeds or
cash deposits, other than the Retainage, held by Lessor in excess of the
amounts' disbursed pursuant to the foregoing provisions, then provided t at no
Lease Default has occurred and is continuing, nor any state of facts or
circumstances has occurred which, with the giving of notice and/or the passage
of time could constitute Lease Default, Lessor shall pay over such proceeds or
cash deposits to Lessee.
No inspections or any approvals of the Work during or after construction
shall constitute a warranty or representation by Lessor, or any of its agents or
Consultants, as to the technical sufficiency, adequacy or safety of any
structure or any of its component parts, including, without limitation, any
fixtures, equipment or furnishings, or as to the subsoil conditions or any other
physical condition or feature pertaining to the Leased Property. All acts,
including any failure to act, relating to Lessor are performed solely for the
benefit of Lessor to assure the payment and performance of the Lease Obligations
and are not for the benefit of Lessee or the benefit of any other Person.
13.2 Disposition of Insurance Proceeds.
13.2.1 Proceeds To Be Released to Pay For Work. In the event of any
Casualty,
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except as provided for in Section 13.2.2, Lessor shall release proceeds of
property insurance held by it to pay for the Work in accordance with the
provisions and procedures set forth in this Article 13, only if:
(a) all of the terms, conditions and provisions of Sections 13.1 and
13.2.1 are satisfied;
(b) there does not then exist any Lease Default or any state of facts
or circumstance which, with the giving of notice and/or the passage of time,
would constitute such a Lease Default;
(c) Lessee demonstrates to Lessor's satisfaction that Lessee has the
financial ability to satisfy the Lease Obligations during such repair or
restoration; and
(d) no Sublease material to the operation of the Facility immediately
prior to such damage or taking shall have been cancelled or terminated, nor
contain any still exercisable right to cancel or terminate, due to such Casualty
if and to the extent that the income from such Sublease is necessary in order to
avoid the violation of any of the financial covenants set forth in this Lease or
otherwise to avoid the creation of a Lease Default.
13.2.2 Proceeds Not To Be Released. If, as the result of any Casualty,
the Leased Property or the Facility is damaged to the extent it is rendered
Unsuitable For Its Primary Intended Use and if either: (a) Lessee, after
exercise of diligent efforts, cannot within a reasonable time (not in excess of
ninety (90) days) obtain all necessary Permits in order to be able to perform
all required Work and to again operate such Facility for its Primary Intended
Use and, to the extent applicable; the Other Permitted Uses within two hundred
and seventy (270) days from the occurrence of the damage or destruction in
substantially the manner as immediately prior to such damage or destruction or
(b) such Casualty occurs during the last twenty-four (24) months of the Term and
would reasonably require more than nine (9) months to obtain all Permits and
complete the Work, then Lessee may either (i) acquire the Leased Property from
Lessor for a purchase price equal to the greater of (x) the Meditrust Investment
or (y) the Fair Market Value of the Leased Property minus the Fair Market Added
Value, with the Fair Market Value and the Fair Market Added Value to be
determined as of the day immediately prior to such Casualty and prior to any
other Casualty which has not been fully repaired, restored or replaced, in which
event, Lessee shall be entitled upon payment of the full purchase price to
receive all property insurance proceeds (less any costs and expenses incurred by
Lessor in collecting the same), or (ii) terminate this Lease, in which event
(subject to the provisions of the last sentence of this Section 13.2.2) Lessor
shall be entitled to receive and retain the insurance proceeds; provided,
however, that Lessee shall only have such right of termination effective upon
payment to Lessor of all Rent and other sums due under this Lease and the other
Lease Documents through the date of termination plus an amount, which when added
to the sum of (1) the Fair Market Value of the Leased Property as affected by
all unrepaired or unrestored damage due to any Casualty (and giving due regard
for delays, costs and expenses incident to completing all repair or restoration
required to fully repair or restore the same) plus (2) the amount of insurance
proceeds actually received by Lessor (net of costs and expenses incurred by
Lessor in
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collecting the same) equals (3) the greater of the Meditrust Investment or the
Fair Market Value of the Leased Property minus the Fair Market Added Value, with
the Fair Market Value and the Fair Market Add Value to be determined as of the
day immediately prior to such Casualty and prior to any other casualty which has
not been fully repaired. Any acquisition of the Leased Property pursuant to the
terms of this Section 13.2.2 shall be consummated in accordance with the
provisions of Article 18, mutatis, mutandis. If such termination becomes
effective, Lessor shall assign to Le see any outstanding insurance claims.
13.2.3 Lessee Responsible for Short-Fall. If the cost of the Work
exceeds the amount of proceeds received by Lessor from the property insurance
required under Article 12 (net of costs an expenses incurred by Lessor in
collecting the same), Lessee shall be obligated to contribute y excess amount
needed to repair or restore the Leased Property and pay for the Work. Such
amount shall be paid by Lessee to Lessor together with any other property
insurance proceeds for application to the cost of the Work.
13.3 Tangible Personal Property. All insurance proceeds payable by reason of
any loss of or d age to any of the Tangible Personal Property shall be paid to
Lessor as secured party, subject to the rights of the holders of any Permitted
Prior Security Interests, and, thereafter, provided that no Lease Default, nor
any fact or circumstance which with the giving of notice and/or the passage of
time could constitute a Lease Default, has occurred and is continuing, Lessor
shall pay such insurance proceeds to Lessee to reimburse Lessee for the cost of
repairing or replacing the damaged Tangible Personal Property, subject to the
terms and conditions set forth in the other provisions of this Article 13,
mutatis mutandis.
13.4 Restoration of Certain Improvements and the Tangible Personal Property.
If Lessee is required or elects to restore the Leased Property, Lessee shall
either (a) restore (i) all alterations and improvements made by Lessee, (ii) the
Tangible Personal Property and (iii) Lessor' Personal Property or (b) replace
such alterations and improvements, the Tangible Personal Property and Lessor's
Personal Property with improvements or items of the same or better quality and
utility in the operation of the Leased Property.
13.5 No Abatement of Rent. In no event shall any Rent abate as a result of
any Casualty.
13. Termination of Certain Rights. Any termination of this Lease pursuant to
this Article 13 hall cause any right of Lessee to extend the Term of this Lease,
and any right of Lessee to p chase the Leased Property contained in this Lease
to be terminated and to be without further for a or .effect.
13. Waiver. Lessee hereby waives any statutory rights of termination which
may arise by reason any damage or destruction to the Leased Property due to any
Casualty which Lessee is obligate to restore or may restore under any of the
provisions of this Lease.
13.8 Application of Business Interruption Insurance. All proceeds of
business interruption insurance (collectively, "Rent Insurance Proceeds") shall
be paid to Lessor and dealt
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with as follows:
(a) if the Work has been promptly and diligently commenced by Lessee
and is in the process of being completed in accordance with this Lease and no
fact or condition exists which constitutes, or which with the giving of notice
and/or the passage of time would constitute, a Lease Default, Lessor shall each
month pay to Lessee out of the Rent Insurance Proceeds a sum equal to that
amount, if any, of the Rent Insurance Proceeds paid by the insurer which is
allocable to a rental loss and/or business interruption for the preceding month
minus an amount equal to the um of the Rent due hereunder for such month plus
any Impositions relating to the Leased Property then due and payable;
(b) if the Work has not been promptly and diligently commenced by
Lessee or is not in the process of being completed in accordance with this
Lease, such proceeds shall be applied to an Rent then due, and, to the extent
sufficient therefor, an amount equal to Base Rent, Impositions and insurance
premiums payable for the next twelve (12) months, as reasonably projected by
Lessor, shall be held by Lessor as security for the Lease Obligations and
applied to the payment of Rent as it becomes due; and
(c) if such Rent Insurance Proceeds received by Lessor (net of costs
and expenses incurred by Lessor in collecting the same) exceed the amounts
required under clauses (a) and (b) above, the excess shall be paid to Lessee,
provided no fact or circumstance exists which constitutes, r with notice, or
passage of time, or both, would constitute, a Lease Default.
Notwithstanding the foregoing, Lessor may at its option use or release such
insurance proceeds to pay for the Work and, if a Lease Default exists, Lessor
may apply all such insurance proceeds towards the Lease Obligations or hold such
proceeds as security therefor.
13.9 Obligation To Account. Upon Lessee's written request, which may not be
made not more than once in any three (3) month period, Lessor shall provide
'Lessee with a written accounting f the application of all insurance proceeds
received by Lessor.
ARTICLE 14
CONDEMNATION
14.1 Parties' Rights and Obligations. If during the Term there is any Taking
of all or any part f the Leased Property or any interest in this Lease, the
rights and obligations of the parties shall be determined by this Article 14.
14.2 Total Taking. If there is a permanent Taking of all or substantially
all of the Leased Property, this Lease shall terminate on the Date of Taking.
14.3 Partial or Temporary Taking. If there is a Permanent Taking of a
portion of the Leased Property (but not substantially all of the Leased Property
or the Facility as provided above in Section 14.2), or if there is a temporary
Taking of all or a portion of the Leased
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Property, this Lease shall remain in effect so long as the Facility is not
thereby rendered permanently unsuitable For Its Primary Intended Use or
temporarily Unsuitable For Its Primary Intended Use for a period not likely to,
or which does not, exceed two hundred and seventy (270) days. If, however, the
Facility is thereby so rendered permanently or temporarily Unsuitable For Its
Primary I tended Use: (a) Lessee shall have the right to restore any the
Facility, at its own expense (subject to the right under certain circumstances
as provided for in Section 14.5 to receive the n t proceeds of an Award for
reimbursement), to the extent possible, to substantially the same condition as
existed immediately before the partial or temporary Taking or (b) Lessee shall
have a right to acquire the entire Leased Property from Lessor (i) upon payment
of all Rent due through the date that the purchase price is paid, for a purchase
price equal to the greater of (x) the Meditrust Investment or (y) the Fair
Market Value of the Leased Property minus the Fair Market Added Value, with the
Fair Market Value of the Leased Property and the Fair Market Added Value to be
determined as of the day immediately prior to such partial or temporary Taking
and (ii) in accordance with the applicable terms and conditions set forth in
Article 18; in which event, this Lease shall terminate upon payment of such
purchase price and the consummation of such acquisition. Notwithstanding the
foregoing, Lessor may overrule Lessee's election under clause (a) or (b) and
instead either (1) terminate this Lease as of the date when Lessee is required
to surrender possession of the portion of the Leased Property so taken or (2)
compel Lessee to keep the Lease in full force and effect and to restore the
Leased Property as provide in clause (a) above, but only if the Facility may be
operated for at least eighty percent( 80(degree) ) of the licensed unit capacity
of such Facility in effect prior to the Taking. Lessee -shall exercise its
election under this Section 14.3 by giving Lessor notice thereof ("Lessee's
Election No ice") within sixty (60) days after Lessee receives notice of the
Taking. Lessor shall exercise its option to overrule Lessee's election under
this Section 14.3 by giving Lessee notice of Lessor's exercise of its rights
under Section 14.3 within thirty (30) days after Lessor receives Lessee's
Election Notice. If, as the result of any such partial or temporary Taking, this
Lease is not terminated as provided above, Lessee shall be entitled to abatement
of Rent, but only to the extent, f any, provided for in Section 3.7, effective
as of the date upon which the Facility or portion thereof is rendered Unsuitable
For Its Primary Intended Use.
14.4 Restoration. If there is a partial or temporary Taking of the Leased
Property and this Lease re mains in full force and effect pursuant to Section
14.3, Lessee shall accomplish all necessary restoration and Lessor shall release
the net proceeds of such Award to reimburse Lessee for the ac al reasonable
costs and expenses thereof, subject to all of the conditions and provisions set
forth in Article 13 relating to insurance proceeds as though the Taking was a
Casualty and the Award was insurance proceeds. If the cost of the restoration
exceeds the amount of a Award (net of costs and expenses incurred in obtaining
the Award), Lessee shall be obligated to contribute any excess amount needed to
restore the Facility or pay for such costs and expenses.
14.5 Award Distribution. In the event Lessee completes the purchase of the
Leased Property, as described in Section 14.3, the entire Award shall, upon
payment of the purchase price and all Rent and other sums due under this Lease
and the other Lease Documents, belong to Lessee an Lessor agrees to assign to
Lessee all of Lessor's rights thereto. In any other event, the entire A and
shall belong to and be paid to Lessor.
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14.6 Control of Proceedings. Subject to the rights of any Fee
.Mortgagee, unless and until Lessee completes the purchase of the Leased
Property as provided in Section 14.3, all proceedings involving any Taking and
the prosecution of claims arising out of any Taking against the Condemnor or
shall be conducted, prosecuted and settled by Lessor; provided, however, that
Lessor shall keep Lessee apprised of the progress of all such proceedings and
shall solicit Lessee's ad ice with respect thereto and shall give due
consideration to any such advice. In addition, Lessee shall reimburse Lessor (as
an Additional Charge) for all costs and expenses, including reasonable
attorneys' fees, appraisal fees, fees of expert witnesses and costs of
litigation or dispute resolution, in relation to any Taking, whether or not this
Lease is terminated; provided, however, if this Lease is terminated as a result
of a Taking, Lessee's obligation to so reimburse Lessor shall be diminished by
the amount of the Award, if any, received by Lessor which is in excess of the
Meditrust Investment.
ARTICLE 15
PERMITTED CONTESTS
15.1 Lessee's Right to Contest. To the extent of the express references
made to this Article 15 in other Sections of this Lease, Lessee, any Sublessee
or any Manager on their own or on Lessor's behalf (or in Lessor's name), but at
their sole cost and expense, may contest, by appropriate legal proceedings
conducted in good faith and with due diligence (until the resolution thereof),
the amount, validity or application, in whole or in part, of any Imposition,
Legal Requirement, the decision of any Governmental Authority related to the
operation of the Leased Property for its Primary Intended Use and, to the extent
applicable, any of the Other Permitted Uses or a y Lien or claim relating to the
Leased Property not otherwise permitted by this Agreement; provided, that (a)
prior written notice of such contest is given to Lessor, (b) in the case of an
unpaid Imposition, Lien or claim, the commencement and continuation of such
proceeding shall suspend the collection thereof from Lessor and compliance by
Lessee, any Sublessee and/or any Manager with the contested Legal Requirement or
other matter may be legally delayed pending the prosecution of any such
proceeding without the occurrence or creation of y Lien, charge or liability of
any kind against the Leased Property, (c) 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, (d) in the case of
a Legal Requirement or decision of Governmental Authority, Lessor would not be
in any immediate danger of civil or criminal liability for failure to comply
therewith pending the outcome of such proceedings, (e) in the eve t that any
such contest shall involve a sum of money or potential loss in excess of TEN
THOUSAND and NO/100 DOLLARS ($10,000.00), Lessee shall deliver to Lessor an
Officer's Certificate and opinion of counsel, if Lessor deems the delivery of an
opinion to be appropriate, certifying or opining, as the case may be, as to the
validity of the statements set forth in clauses (b) , (c) and (d), to the extent
applicable, (f) Lessee shall give such cash security as may be demanded in good
faith by Lessor to insure ultimate payment of any fine, penalty, interest or
cost and to prevent any sale or forfeiture of the affected portion of the Leased
Property by reason of such non payment or non-compliance, (g) if such contest is
finally resolved against Lessor, Lessee, any Sublessee and/or any Manager,
Lessee shall promptly pay, as Additional Charges
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due hereunder, a amount required to be paid, together with all interest and
penalties accrued thereon and/or comp y (and cause any Sublessee and any Manager
to comply) with the applicable Legal Requirement or decision, and (h) no fact or
condition exists which constitutes, or with the passage of time and/or the
giving of notice, could constitute a Lease Default; provided, however, the
provisions of this Article 15 shall not be construed to permit Lessee to contest
the payment of Rent or y other sums payable by Lessee to Lessor under any of the
Lease Documents.
15.2 Lessor's Cooperation. Lessor, at Lessee's sole cost and expense,
shall execute and deliver o Lessee such authorizations and other documents as
may reasonably be required in any such contest, so long as the same does not
expose Lessor to any civil or criminal liability, and, if reasonably requested
by Lessee or if Lessor so desires, Lessor shall join as a party therein.
15.3 Lessee's Indemnity. Lessee, as more particularly provided for in
Section 12.2, shall indemnify, defend (with counsel acceptable to Lessor) and
save Lessor harmless against any liability, cost or expense of any kind,
including, without limitation, attorneys' fees and expenses that may be imposed
upon Lessor in connection with any such contest and any loss resulting therefrom
d in the enforcement of this indemnification.
ARTICLE 16
DEFAULT
16.1 Events of Default. Each of the following shall constitute an
"Event of Default" or "Lease Default" hereunder and shall entitle Lessor to
exercise its remedies hereunder and under any of the other Lease Documents:
(a) any failure of Lessee to pay any amount due hereunder
or under any of the other Leas Documents within ten (10) days following the
date when such payment was due;
(b) any failure in the observance or performance of any
other covenant, term, condition o warranty provided in this Lease or any of the
other Lease Documents, other than the payment o any monetary obligation and
other than as specified in subsections (c) through (u) below (a "Failure to
Perform"), continuing for thirty (30) days after the giving of notice by Lessor
to Lessee specifying the nature of the Failure to Perform; except as to matters
not susceptible to cure within thirty (30) days, provided that with respect to
such matters, (i) Lessee commence the cure thereof within thirty (30) days after
the giving of such notice by Lessor to Lessee, (ii) Lessee continuously
prosecutes such cure to completion, (iii) such cure is completed within ninety
(90) days after the giving of such notice by Lessor to Lessee and (iv) such
Failure to Perform does not impair the value of, or Lessor's rights with respect
to, the Leased Property or otherwise impair the Collateral or Lessor's security
interest therein;
(c) the occurrence of any default or breach of condition
continuing beyond the expiration of the applicable notice and grace periods, if
any, under any of the other Lease Documents, including, without limitation, the
Agreement Regarding Related Transactions, provided, ho ever, that if the cure
period specified in any of the other Lease Documents is
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different than that provided herein, the grace period provided herein shall
control, or if no grace period is provided herein, then no such grace period
shall be afforded;
(d) if any representation, warranty or statement
contained herein or in any of the other Lease Documents proves to be untrue in
any material respect as of the date when made or at any time d ' g the Term if
such representation or warranty is a continuing representation or warranty
pursuant to Section 10.2;
(e) if any member of the Leasing Group shall (i)
voluntarily be adjudicated a bankrupt or insolvent; (ii) seek or consent to the
appointment of a receiver or trustee for itself or for the L d Property; (iii)
file a petition seeking relief under the bankruptcy or other similar laws of the
United States, any state or any jurisdiction; (iv) make a general assignment for
the benefit of c editors; (v) make or offer a composition of its debts with its
creditors or (vi) be, unable to pa its debts as such debts mature;
(f) if any court shall enter an order, judgment or decree
appointing, without the consent of y member of the Leasing Group, a receiver or
trustee for such member or for any of its prop and such order, judgment or
decree shall remain in force, undischarged or unstayed, sixty (60) days after it
is entered;
(g) if a petition is filed against any member of the
Leasing Group which seeks relief under the bankruptcy or other similar laws of
the United States, any state or any other jurisdiction, and such petition is not
dismissed within sixty (60) days after it is filed;
(h) in the event that, without the prior written consent
of Lessor, in each instance, which consent may be withheld by Lessor in its sole
and absolute discretion: (i) there shall be a change in the Person or Persons
presently holding management or ownership control of any member of the Leasing
Group (other than changes in stock ownership of, or the individuals managing,
Guarantor), whether by operation of law or otherwise; (ii) all or any portion of
the interest of any partner or member of any member of the Leasing Group (other
than changes in the stock ownership of Guarantor) shall be, on any one or more
occasions, directly or indirectly sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise), if such member of the
Leasing Group shall be a partnership, joint venture, syndicate or other group;
(iii) more than twenty-five percent (25%), in the aggregate, of the shares of t
e issued and outstanding capital stock of any member of the Leasing Group (other
than changes of stock ownership of Guarantor) shall be, on any one or more
occasions, directly or indirectly, sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise), if such member of the
Leasing Group shall be a corporation; or (iv) all or any portion of the
beneficial interest in any member of the Leasing Group shall be, directly or
indirectly, sold or otherwise transferred (whether by operation of law or
otherwise), if such member of the Leasing Group shall be a trust;
(i) the death, incapacity, liquidation, dissolution or
termination of existence of any member of the Leasing Group or the merger or
consolidation of any member of the Leasing Group with any other Person;
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(j) except as otherwise permitted pursuant to Section 11.5.1
and/or Article 15 (as this Article relates only to involuntary Liens) hereof,
if, without the prior written consent of Lessor, in each instance, which consent
may be withheld by Lessor in its sole and absolute discretion, Lessee's or any
Sublessee's interest in the Leased Property shall be, directly or indirectly,
mortgaged, encumbered (by any voluntary or involuntary Lien other than the
Permitted Encumbrances), subleased, sold, assigned, hypothecated or otherwise
transferred (whether by operation of law or otherwise);
(k) except as otherwise permitted pursuant to Article 15, the
occurrence of a default or breach of condition continuing beyond the expiration
of the applicable notice and grace periods, if any, in connection with the
payment or performance of any other material obligation of Lessee or any
Sublessee, whether or not the applicable creditor or obligee elects to declare
the obligations of Lessee or the applicable Sublessee under the applicable
agreement due and payable or to exercise any other right or remedy available to
such creditor or obligee, if such creditor's or obligee's rights and remedies
may involve or result in (i) the taking of possession of the Leased Property or
(ii) the assertion of any other right or remedy that, in Lessor's reasonable
opinion, may impair Lessee's ability punctually to perform all of its
obligations under this Lease and the other Lease Documents, may impair such
Sublessee's ability punctually to perform all of its obligations under its
Sublease or may materially impair Lessor's security for the Lease Obligations;
provided, however, that in any event, the election by the applicable creditor or
obligee to declare the obligations of Lessee or such Sublessee under the
applicable agreement due and payable or to exercise any other right or remedy
available to such creditor or obligee shall be a Lease Default hereunder only if
such obligations, individually or in the aggregate, are in excess of ONE HUNDRED
THOUSAND and NO/100 DOLLARS ($100,000.00);
(1) the occurrence of a Related Party Default;
(m) the occurrence of any default or breach of condition.
continuing beyond the expiration of the applicable notice and grace periods, if
any, under any credit agreement, loan agreement or other agreement establishing
a major line of credit (or any documents executed in connection with such lines
of credit) on behalf of any member of the Leasing Group whether or not the
applicable creditor has elected to declare the indebtedness due and payable
under such line of credit or to exercise any other right or remedy available to
it. For the purposes of this provision, (1) a major line of credit shall mean
and include any line of credit established in an amount equal to or greater than
FIVE HUNDRED THOUSAND and NO/100 DOLLARS ($500,000.00) and (2) any such major
line of credit of Guarantor shall relate primarily to the Leased Property;
(n) except as a result of Casualty or a partial or complete
Condemnation, if Lessee or any Sublessee ceases operation of the Facility for a
period in excess of thirty (30) days (a "Failure to Operate");
(o) if one or more judgments against Lessee or any Sublessee
or attachments against Lessee's interest or any Sublessee's interest in the
Leased Property, which in the
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aggregate exceed ONE HUNDRED THOUSAND and NO/100 DOLLARS ($100,000.00) or which
may materially and adversely interfere with the operation of the Facility,
remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed fore a
period of thirty (30) days;
(p) if any malpractice award or judgment exceeding any
applicable professional liability insurance coverage by more than FIVE HUNDRED
THOUSAND and NO/100 DOLLARS ($500,000.00) shall be rendered against any member
of the Leasing Group and either (i) enforcement proceedings shall have been
commenced by any creditor upon such award or judgment or (u') 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) and in
either case such award or judgment shall, in the reasonable opinion of Lessor,
have a material adverse affect on the ability of Lessee or any Sublessee to
operate the Facility;
(q) if any Provider Agreement material to the operation or
financial condition of any member of the Leasing Group shall be terminated prior
to the expiration of the term thereof or, without the prior written consent of
Lessor, in each instance, which consent may be withheld in Lessor's reasonable
discretion, shall not be renewed or extended upon the expiration of the stated
term thereof;
(r) if, after Lessee or any Sublessee has obtained approval
for Medicare and/or Medicaid funding, a final unappealable determination is made
by the applicable Governmental Authority that Lessee or any Sublessee shall have
failed to comply with applicable Medicare and/or Medicaid regulations in the
operation of the Facility, as a result of which failure Lessee or such Sublessee
is declared ineligible to receive reimbursements under the Medicare and/or
Medicaid programs and such reimbursements are material to the operation or
financial condition of any member of the Leasing Group;
(s) if Lessee or any Sublessee receives notice of a final
unappealable determination by applicable Governmental Authorities of the
revocation of any Permit required for the lawful construction or operation of
the Facility in accordance with the Primary Intended Use and, to the extent
applicable, any of the Other Permitted Uses or the loss of any Permit under any
other circumstances under which Lessee or such Sublessee is required to cease
the construction or operation of the Facility in accordance with the Primary
Intended Use;
(t) any failure to maintain the insurance required pursuant to
Section 12 of this Lease in force and effect at all times until the Lease
Obligations are fully paid and performed; or
(u) the entry of a final unappealable order by a court with
jurisdiction over the Leased Property to close the Facility, to transfer one or
more residents from the Facility as a result of a allegation of abuse or neglect
or to take any action to eliminate an emergency situation than existing at the
Facility.
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16.2 Remedies.
(a) If any Lease Default shall have occurred, Lessor may at its option
terminate this Lease by giving Lessee not less than ten (10) days' notice of
such termination, or exercise any one or more of its rights and remedies under
this Lease, or the other Lease Documents, or as available at law or in equity
and upon the expiration of the time fixed in such notice, the Term shall
terminate (but only if Lessor shall have specifically elected by a written
notice to so terminate the Lease) and all rights of Lessee under this Lease
shall cease. Notwithstanding the foregoing, in the event of Lessee's failure to
pay Rent, if such Rent remains unpaid beyond ten (10) days from the due date
thereof, Lessor shall not be obligated to give ten (10) days notice of such
termination or exercise of any of its other rights and remedies under this
Lease, or the other Lease Documents, or otherwise available at law or in equity,
and Lessor shall be at liberty to pursue by one or more of such rights or
remedies without further notice. No taking of possession of the Leased Property
by or on behalf of Lessor, and no other act done by or on behalf of Lessor,
shall constitute an acceptance of surrender of the Leased Property by Lessee or
reduce Lessee's obligations under this Lease or the other Lease Documents,
unless otherwise expressly a reed to in a written document signed by an
authorized officer or agent of Lessor.
(b) To the extent permitted under applicable law, Lessee shall
pay as Additional Charges al costs and expenses (including, without limitation,
attorneys' fee and expenses) reasonably incurred by or on behalf of Lessor as a
result of any Lease Default.
(c) If any Lease Default shall have occurred, whether or not
this Lease has been terminated pursuant to Paragraph (a) of this Section, Lessee
shall, to the extent permitted under applicable law, if required by Lessor so to
do, upon not less than ten (10) days' prior notice from Lessor, immediately
surrender to Lessor the Leased Property pursuant to the provisions of Paragraph
(a) of this Section and quit the same, and Lessor may enter upon and repossess
the Leased Property by reasonable force, summary proceedings, ejectment or
otherwise, and may remove Le see and all other Persons and any and all of the
Tangible Personal Property from the Leased Property, subject to the rights of
any residents of the Facility and any Sublessees who are not Affiliates of any
member of the Leasing Group and to any requirements of applicable law, or Lessor
my claim ownership of the Tangible Personal Property as set forth in Section
5.2.3 hereof or Lessor may exercise its rights as secured party under the
Security Agreement. Lessor shall use reasonable, good faith efforts to relet the
Leased Property or otherwise mitigate damages suffered by Lessor as a result of
Lessee's breach of this Lease.
(d) In addition to all of the rights and remedies of Lessor
set forth in this Lease and the other Lease Documents, if Lessee shall fail to
pay any rental or other charge due hereunder (whether denominated as Base Rent
or otherwise) within ten (10) days after same shall have become due and payable,
then and in such event Lessee shall also pay to Lessor (i) a late payment
service charge (in order to partially defray Lessor's administrative and other
overhead expenses) equal to two hundred-fifty and NO/100 ($250.00) dollars and
(ii) to the extent permitted by applicable law, interest on such unpaid sum at
the Overdue Rate; it being understood, however, that nothing herein shall be
deemed to extend the due date for payment of any sums required to be paid by
Lessee hereunder or to relieve Lessee of its obligation to pay
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such sums at the time or times required by this Lease.
16.3 Damages. None of (a) the termination of this Lease pursuant to
Section 16.2, (b) the eviction of Lessee or the repossession of the Leased
Property, (c) the failure of Lessor, notwithstanding reasonable good faith
efforts, to relet the Leased Property, (d) the reletting of the Leased Property
or (e) the failure of Lessor to collect or receive any rentals due upon any such
reletting, shall relieve Lessee of its liability and obligations hereunder, all
of which shall survive any such termination, repossession or reletting. In any
such event, Lessee shall forthwith pay to Lessor all Rent due and payable with
respect to the Leased Property to and including the date of such termination,
repossession or eviction. Thereafter, Lessee shall forthwith pay to Lessor, at
Lessor's option, either:
(i) the sum of: (x) all Rent that is due and unpaid at later
to occur of termination, repossession or eviction, together with interest
thereon at the Overdue Rate to the date of payment, plus (y) the worth
(calculated in the manner stated below) of the amount by which the unpaid Rent
for the balance of the Term after the later to occur of the termination,
repossession or eviction exceeds the fair market rental value of the Leased
Property for the balance of the Term, plus (z) any other amount necessary to
compensate Lessor for all damage proximately caused by Lessee's failure to
perform the Lease Obligations or which in the ordinary course would be likely to
result therefrom; or
(ii) each payment of Rent as the same would have become due
and payable if Lessee's right of possession or other rights under this Lease had
not been terminated, or if Lessee had not been evicted, or if the Leased
Property had not been repossessed which Rent, to the extent permitted by law,
shall bear interest at the Overdue Rate from the date when due until paid, and
Lessor may enforce, by action or otherwise, any other term or covenant of this
Lease. There shall be credited against Lessee's obligation under this Clause
(ii) amounts actually collected by Lessor from another tenant to whom the Leased
Property may have actually been leased or, if Lessor is operating the Leased
Property for its own account, the actual Cash Flow of the Leased Property.
In making the determinations described in subparagraph (i) above, the
"worth" of unpaid Rent shall be determined by a court having jurisdiction
thereof using the lowest rate of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
For the purposes of this Lease, the use of the word "termination" shall
mean either "termination" or "cancellation" as such words are defined in the
UCC.
16.4 Lessee Waivers. If this Lease is terminated pursuant to Section
16.2, Lessee waives, to the extent not prohibited by applicable law, (a) any
right of redemption, re-entry or repossession, (b) any right to a trial by jury
in the event of summary proceedings to enforce the remedies set forth in this
Article 16, and (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt.
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In the event Lessor may elect to regain possession of the Leased
Property by a forcible detainer proceeding, Lessee hereby specifically waives
any statutory notice which may be required prior to any such proceeding, and
agrees that Lessor's execution of this Lease is, in part, consideration for this
waiver. Except as otherwise set forth herein, Lessee further waives any demand
for Rent, notice of termination and any notice to quit required pursuant to Ohio
statutes or otherwise, and agrees that Lessor's execution of this Lease is, in
part, consideration for these waivers.
All claims for damages by reason of re-entry and/or repossession and/or
alteration of locks or other security devices are hereby waived, as are all
claims for damages by reason of any distress warrant, forcible detainer
proceedings, sequestration proceedings or other legal process. Lessee agrees
that any re-entry by Lessor may be pursuant to judgment obtained in forcible
detainer proceedings or other legal proceedings or without the necessity for any
legal proceedings, as Lessor may elect, and Lessor shall not be liable in
trespass or otherwise.
Lessee shall not interpose any counterclaim of any kind in any action
or proceeding commenced by Lessor to recover possession of the Leased Property.
In the event Lessee violates this provision, the parties stipulate that .any
such counterclaim shall be severed and tried separately from the action for
eviction pursuant to Ohio Rules of Civil Procedure ss.42B or other applicable
law. The eviction action shall proceed pursuant to the summary procedures set
forth in Ohio Revised Code ss. 1923.
In any distress for rent action filed by Lessor against Lessee, Lessee
waives all constitutional, statutory or common law bonding requirements. Lessee
specifically agrees that no bond shall be required in any such action and Lessee
further waives the right under Ohio Revised Code ss. 2737, to replevin
distrained property.
16.5 Application of Funds. Any payments otherwise payable to Lessee
which are received by Lessor under any of the provisions of this Lease during
the existence or continuance of any Leas Default shall be applied to the Lease
Obligations in the order which Lessor may reasonably determine or as may be
required by the laws of the State.
16.6 [Intentionally Omitted]
16.7 [Intentionally Omitted]
16.8 Lessor's Right to Cure. If Lessee shall fail to make any payment,
or to perform any act required to be made or performed under this Lease or the
other Lease Documents and to cure the same within the relevant time periods
provided in Section 16.1, Lessor, after five (5) Business Days' prior notice to
Lessee (except in an emergency when such shorter notice shall be given a is
reasonable under the circumstances), and without waiving or releasing any
obligation r Lease Default, may (but shall be under no obligation to) at any
time thereafter make such payment or perform such act for the account and at the
expense of Lessee, and may, to the extent permitted by law, enter upon the
Leased Property for such purpose and take all such action thereon as, in
Lessor's opinion, may be necessary or appropriate therefor. No such entry shall
be
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deemed an eviction of Lessee. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case, to the extent permitted by law) so incurred shall be
paid by Lessee to Lessor on demand as an Additional Charge. The obligations of
Lessee and rights of Lessor contained in this Article shall survive the
expiration or earlier termination of this Lease.
16.9 No Waiver By Lessor. Lessor shall not by any act, delay,, omission
or otherwise (including, without limitation, the exercise of any right or remedy
hereunder) be deemed to have waived any of its right or remedies hereunder or
under any of the other Lease Documents unless such waive is in writing and
signed by Lessor, and then, only to the extent specifically set forth therein.
No waiver at any time of any of the terms, conditions, covenants,
representations or warranties set forth in any of the Lease Documents
(including, without limitation, any of the time period set forth therein for the
performance of the Lease Obligations) shall be construed as a waive of any other
term, condition, covenant, representation or warranty of any of the Lease
Documents, nor shall such a waiver in any one instance or circumstances be
construed as a waiver of the same term, condition, covenant, representation or
warranty in any subsequent instance o circumstance. No such failure, delay or
waiver shall be construed as creating a requirement that Lessor must thereafter,
as a result of such failure, delay or waiver, give notice to Lessor o any
Guarantor, or any other Person that Lessor does not intend to, or may not, give
a further waiver or to refrain from insisting upon the strict performance of the
terms, conditions, covenants, representations and warranties set forth in the
Lease Documents before Lessor can exercise a y of. its rights or remedies under
any .of the Lease Documents or before any Lease Default ca occur, or as
establishing a course of dealing for interpreting the conduct of and agreement
between Lessor and Lessee, the Guarantor or any other Person.
The acceptance by Lessor of any payment that is less than payment in
full of all amounts then due under any of the Lease Documents at the time of the
malting of such payment shall not: (a) constitute a waiver of the right to
exercise any of Lessor's remedies at that time or at any subsequent time, (b)
constitute an accord and satisfaction or (c) nullify any prior exercise of any
remedy, without the express written consent of Lessor. Any failure by Lessor to
take any action under this Lease or any of the other Lease Documents by reason
of a default hereunder or thereunder, acceptance of a past due installment, or
indulgences granted from time to time shall not be construed as a novation of
this Lease or any of the other Lease Documents or as a waiver of such right or
of the right of Lessor thereafter to insist upon strict compliance with the
terms of this Lease or any of the other Lease Documents, or (d) to prevent the
exercise of such right of acceleration or any other right granted hereunder or
under applicable law; and to the maximum extent not prohibited by applicable
law, Lessor hereby expressly waives the benefit of any statute or rule of law or
equity now provided, or which may hereafter be provided, which would produce a
result contrary to or in conflict with the foregoing.
16.10 Right of Forbearance. Whether or not for consideration paid or
payable to Lessor and, except as may be otherwise specifically agreed to by
Lessor in writing, no forbearance on the part of Lessor, no extension of the
time for the payment of the whole or any part of the Obligations, and no other
indulgence given by Lessor to Lessee or any other Person, shall operate to
release or in any manner affect the original liability of Lessee or such other
Persons, or
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to limit, prejudice or impair any right of Lessor, including, without
limitation, the right to realize upon any Collateral, or any part thereof, for
any of the Obligations; notice of any such extension, forbearance or indulgence
being hereby waived by Lessee and all those claiming by, through or under
Lessee.
16.11 Cumulative Remedies. The rights and remedies set forth under this
Lease are in addition to all other rights and remedies afforded to Lessor under
any of the other Lease Documents or at law or in equity, all of which are hereby
reserved by Lessor, and this Lease is made and accepted without prejudice to any
such rights and remedies. All of the rights and remedies of Lessor under each of
the Lease Documents shall be separate and cumulative and may be exercised
concurrently or successively in Lessor's sole and absolute discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 Surrender. Lessee shall, upon the expiration or prior termination
of the Term, vacate and surrender the Leased Property to Lessor in good repair
and condition, in compliance with all Legal Requirements, all Insurance
Requirements, and in compliance with the provisions of Article 8 except for: (a)
ordinary wear and tear (subject to the obligation of Lessee to maintain the
Leased Property in good order and repair during the entire Term of the Lease);
(b) damage caused by the gross negligence or willful acts of Lessor; and (c) any
damage or destruction resulting from a Casualty or Taking that Lessee is not
required by the terms of this Lease to repair or restore.
17.2 Transfer of Contracts and Permits. In connection with the
expiration or earlier termination of this Lease, Lessee shall use its best
efforts to transfer and assign to Lessor or its designee, shall assist Lessor or
its designee in obtaining, any Contracts and Permits required for the operation
of the Facility. The provisions of this Section 17.2 shall survive the
expiration or earlier termination of this Lease.
17.3 Management of Leased Property. Upon the expiration or earlier
termination of the Term, Lessor or its designee, upon written notice to Lessee,
may elect to assume the responsibilities and obligations for the management and
operation of the Leased Property and Lessee agrees to cooperate fully with
Lessor or its designee to accomplish the transfer of such management and
operation without interrupting the operation of the Leased Property. Lessee
shall not commit an act or be remiss in the undertaking of any act that would
jeopardize the licensure or certification of the Facility, and Lessee shall
comply with all requests by Lessor for possession of the Facility at the time of
any such surrender. Upon the expiration or earlier termination of the Term,
Lessee shall promptly deliver copies of all of Lessee's books and records
relating to the Leased Property and its operations to Lessor.
17.4 Correction of Deficiencies. Upon termination or cancellation of
this Lease, Lessee hereby indemnifies Lessor for any loss, damage, cost or
expense incurred by Lessor to correct all deficiencies of a physical nature
identified by any applicable Government Authorities in the course of the change
of ownership, inspection and audit, normal wear and tear excluded.
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17.5 No Acceptance of Surrender. Except at the expiration of the Term
in the ordinary course, no surrender to Lessor of this Lease or of the Leased
Property or any interest therein shall be valid or effective unless agreed to
and accepted in writing by 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.
17.6 Holding Over. If, for any reason, Lessee shall remain in
possession of the Leased Property after the expiration or any earlier
termination of the Term, such possession shall be as tenant at sufferance during
which time Lessee shall pay as rental each month, one and one-half times the
aggregate of (i) one-twelfth of the aggregate Base Rent payable with respect to
he last complete Fiscal Year prior to the expiration or earlier termination of
the Term; (ii) all Additional Charges accruing during the month and (iii) all
other sums, if any, payable by Lessee pursuant to the provisions of this Lease
with respect to the Leased Property. During such period of 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 law to tenants at sufferance, to continue its occupancy and use
of the Leased Property. Nothing contained herein shall constitute the consent,
express or implied, of Lessor t the holding over of Lessee after, the expiration
or earlier termination of this Lease.
ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 Purchase of the Leased Property. In the event Lessee purchases all
or a portion of the Leased Property from Lessor pursuant to any of the terms of
this Lease, Lessor shall, upon receipt from Lessee of the applicable purchase
price, together with full payment of any unpaid Rent due and payable with
respect to any period ending on or before the date of the purchase, deliver to
Lessee an appropriate special warranty deed conveying the entire interest of
Lessor in and to the Leased Property or the applicable portion thereof to Lessee
subject to the Lease, all Legal Requirements, all of the matters described in
clauses (a), (b), (e) and (g) of Section 11.5.2, Impositions, any Liens created
by Lessee, any Liens in accordance with the terms of this Lease or consented to
by Lessee, the claims of all Persons claiming by through or under Lessee, any
other matters assented to by Lessee and all matters for which Lessee has
responsibility under any of the Lease Documents, but otherwise not subject to
any other Lien created by Lessor (other than an Encumbrance permitted under
Article 20 which Lessee elects to assume). The applicable purchase price shall
be paid in cash to Lessor, or as Lessor may direct, in federal or other
immediately available funds except as otherwise mutually agreed by Lessor and
see. All expenses of such conveyance, including, without limitation, the cost of
title examination or standard coverage tide insurance, attorneys' fees incurred
by Lessor in connection with such conveyance, recording and transfer taxes and
recording fees and similar charges shall be paid by Lessee.
18.2 Appraisal.
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18.2.1 Designation of Appraisers. In the event that it becomes
necessary to determine a Fair Market Value of all or a portion of the Leased
Property for any purpose of this Lease, the party required or permitted to give
notice of such required determination shall include in a notice the name of a
Person selected to act as appraiser on its behalf. Within ten (10) days after
receipt of any such notice, Lessor (or Lessee, as the case may be) shall by
notice to Lessee ( r Lessor, as the case may be) appoint a second Person as
appraiser on its behalf.
18.2.2 Appraisal Process. The appraisers thus appointed, each of whom
must be a member of the American Institute of Real Estate Appraisers (or any
successor organization thereto), s 11, within thirty (30) days after the date of
the notice appointing the first appraiser, proceed to appraise all or a portion
of the Leased Property, as applicable, to determine the Fair Market Val a of the
Leased Property as of the relevant date (giving effect to the impact, if any, of
inflation from the date of their decision to the relevant date); provided,
however, that if only one appraiser shall have been so appointed, or if two
appraisers shall have been so appointed but only one such appraiser shall have
made such determination within thirty-five (35) days after the making of
Lessee's or Lessor's request, then the determination of such appraiser shall be
final and binding upon the parties. If two appraisers shall have been appointed
and shall have made the' determinations within the respective requisite periods
set forth above and if the difference between the amounts so determined shall
not exceed ten percent (10 %) of the lesser of such amounts, then the Fair
Market Value of all or a portion of the Leased Property, as applicable, shall be
an amount equal to fifty percent (50%) of the sum of the amounts so determined.
If the difference between the amounts so determined shall exceed ten percent (10
% ) of the lesser of such amounts, then such two appraisers shall have ten (10)
days to appoint a third appraiser, but if such appraisers fail to do so, then
either party may request the American Arbitration Association or any successor
organization thereto to appoint an appraiser within ten (10) days of such
request, and both parties shall be bound by any appointment so made within such
ten (10) day period. If no such appraiser shall have been appointed within such
ten (10) days or within sixty (60) days of the original request for a
determination of Fair Market Value of all or a portion of the Leased Property,
as applicable, 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, by the American Arbitration
Association or by such court shall be instructed to determine the Fair Market
Value of all or a portion of the Leased Property, as applicable, within thirty
(30) days after appointment of such appraiser. The determination of the
appraiser which differs most in terms of dollar amount from the determinations
of the other two appraisers shall be excluded, and. fifty percent (50 %) of the
sum of the remaining two determinations shall be final and binding upon Lessor
and Lessee as the Fair Market Value of all or a portion of the Leased Property,
as applicable.
18.2.3 Specific Enforcement and Costs. This provision for determination
by appraisal shall be specifically enforceable to the extent such remedy is
available under applicable law, and any determination hereunder shall be final
and binding upon the parties except as otherwise provided by applicable law.
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 cost and expenses incurred in
connection with each appraisal.
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18.3 Lessee's Right of First Refusal. During the Term of this Lease, so
long as there exists no Event of Default under this Lease at the time of
exercise and on the date of closing, and there is no event or state of facts
which, with the passage of time and/or the giving of notice, would constitute an
Event of Default if not cured by Lessee, and Lessee has not effected such cure,
Lessee shall have a "Right of First Refusal" as hereinafter described. If Lessor
receives a bona fide written offer to purchase the Facility (the "Subject
Property") from a Person unaffiliated with Lessee (the "Offer"), acceptable to
Lessor in Lessor's sole and absolute discretion and Lessor elects, in Lessor's
sole and absolute discretion, to sell, ground lease or otherwise transfer the
Subject Property other than as permitted by Article 20 below in accordance with
the Offer, Lessor shall notify Lessee and Lessee shall have thirty (30) days
following Lessee's receipt of Lessor's notice of the Offer to elect to purchase
the Subject Property on the. same terms and conditions as specified in the
Offer. Unless Lessor receives notice from Lessee within such thirty (30) day
period setting forth Lessee's election to so purchase the Subject Property and
unless thereafter Lessee completes the acquisition of the Subject Property
exactly as provided for, and by the date specified, in the Offer, Lessor shall
be at liberty, and shall have the absolute and unconditional right, to sell the
Subject Property to any Person, within the next twelve (12) months substantially
on the terms and conditions set forth in the Offer or on any other terms and
conditions more favorable to Lessor and such sale, if so completed, shall
extinguish Lessee's Right of First Refusal with respect to the Subject Property.
Lessee's Right of First Refusal shall not apply to and shall survive: (a) any
sale or transfer of the Subject Property or any portion thereof to Meditrust or
any Affiliate of Lessor or of Meditrust; or (b) any foreclosure of any Fee
Mortgage. The Right of Refusal shall in all events terminate upon any
termination of this Lease.
18.4 [Intentionally Omitted]
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 Subletting and Assignment. Lessee may not, without the prior
written consent of Lessor, which consent may be withheld in Lessor's sole and
absolute discretion, assign or pledge all or any portion of its interest in this
Lease or any of the other Lease Documents (whether by operation of law or
otherwise) or sublet all or any part of the Leased Property. For purposes of
this Section 19.1, the term "assign" shall be deemed to include, but not be
limited to, any one or more sales, pledges, hypothecations or other transfers
(including, without limitation, any transfer by operation of law) of any of the
capital stock of Lessee or sales, pledges, hypothecations or other transfers
(including, without limitation, any transfer by operation of law) of the capital
or the assets of Lessee. Any such assignment, pledge, sale, hypothecation or
other transfer made without Lessor's consent shall be void and of no force and
effect.
19.2 Permitted Subleases. (a) Notwithstanding the foregoing, the
Lessee shall have the right to enter into Resident Agreements without the prior
consent of the Lessor.
(b) Notwithstanding the foregoing, the Lessee may sublease the
Leased
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Property to the Current Sublessee for a term not to exceed eighteen (18)
months from the Commencement Date, provided that: (i) the Lessor is provided
with a copy of the sublease with the Current Sublessee prior to the effective
date thereof (which sublease shall be in form and substance satisfactory to the
Lessor in its reasonable discretion); (ii) the Current Sublessee agrees directly
with the Lessor, by written instrument in form reasonably satisfactory to the
Lessor, to be bound by all the obligations of the Lessee hereunder; (iii) the
Current Sublessee shall acknowledge in the sublease that a termination of this
Lease for whatever reason shall result in an automatic termination of the
sublease; (iv) the Current Sublessee, in the sublease and, if requested by the
Lessor, in any other document reasonably satisfactory to the Less or, represents
and warrants that its only right, title or interest in and to any Permits,
Contracts, Resident Agreements, Tangible Personal Property or other Collateral
relating to the Leased Property arises solely out of the sublease and upon any
termination of the sublease any and all such right, title and interest shall
automatically terminate; (v) the Current Sublessee enters into the Affiliated
Party Subordination Agreement with, among others, the Lessor; (vi) the Current
Sublessee enters into an Environmental Indemnity Agreement with the Lessor; and
(vii) the Lessee shall not be released from any of its obligations under this
Lease,, but rather the Lessee and the Current Sublessee shall be jointly and
severally liable therefor. The Lessee covenants, represents and warrants that
(x) the Lessee (or a wholly-owned, single purpose subsidiary of the Lessee or
the Guarantor) holds and shall continue to hold at least an fifty-one percent
(S1%) ownership interest in the Current Sublessee as its managing member and the
Lessee (or a wholly-owned, single purpose subsidiary of the Lessee or the
Guarantor) shall maintain complete management and control of the Current
Sublessee and (y) Elderly Living, Limited Partnership holds and shall continue
to hold not more than forty-nine percent (49%) ownership interest in the Current
Sublessee as the minority member of the Current Sublessee, and (z) the Current
Sublessee is, and shall remain for so long as Current Sublessee subleases any
portion of the Leased Property, a single purpose entity whose sole purpose is to
sublease the Leased Property or other properties owned by a Meditrust Entity. A
termination of this Lease for whatever reason shall result in an automatic
termination of the sublease.
19.3 Attornment. Lessee shall insert in each Sublease approved by
Lessor, provisions to the effect that (a) such Sublease is subject and
subordinate to all of the; terms and provisions of this Lease and to the rights
of Lessor hereunder, (b) in the event this Lease shall terminate before the
expiration of such Sublease, the Sublessee thereunder will, at Lessor's option,
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 (c) in the event the Sublessee receives a written notice from
Lessor stating that Lessee is in default under this Lease, the Sublessee shall
thereafter be obligated to pay all rentals accruing under said Sublease directly
to Lessor or as Lessor may direct. All rentals received from the Sublessee by
Lessor shall be credited against the amounts owing by Lessee under this Lease.
19.4 [Intentionally Omitted]
ARTICLE 20
TITLE TRANSFERS AND LIENS GRANTED BY LESSOR
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20.1 No Merger of Title. There shall be no merger of this Lease or of
the leasehold estate created hereby with the fee estate in the Leased Property
by reason of the fact that the same Person may acquire, own or hold, directly or
indirectly (a) this :Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate: and (b) the fee estate in the
Leased Property.
20.2 Transfers By Lessor. If the original Lessor named herein or any
successor in interest shall convey the Leased Property in accordance with the
terms hereof, other than as security for a debt, and the grantee or transferee
of the Leased Property shall expressly assume all obligations of Lessor
hereunder arising or accruing from and after the date of such conveyance or
transfer, the original Lessor named herein or the applicable successor in
interest so conveying the Leased Property shall thereupon be released from all
future liabilities and obligations of Lessor under this Lease arising or
accruing from and after the date of such conveyance or other transfer as to the
Leased Property and all such future liabilities and obligations shall thereupon
be binding upon the new owner.
20.3 Lessor May Grant Liens. Without the consent of Lessee, but subject
to the terms and conditions set forth below in this Section 20.3, Lessor may,
from time to time, directly or indirectly, create or otherwise cause to exist
any lien, encumbrance or title retention agreement upon the Leased Property or
any interest therein ("Encumbrance"), whether to secure any borrowing or other
means of financing or refinancing, provided that Lessee shall have no obligation
to make payments under such Encumbrances. Lessee shall subordinate this Lease to
the lien of arty such Encumbrance, on the condition that the beneficiary or
holder of such Encumbrance executes a non-disturbance agreement in conformity
with the provisions of Section 20.4. To the extent that any such Encumbrance
consists of a mortgage or deed of trust on Lessor's interest in the Leased
Property the same shall be referred to herein as a "Fee Mortgage" and the holder
thereof shall be referred to herein as a "Fee Mortgagee".
20.4 Subordination and Non-Disturbance. Concurrently with the execution
and delivery of any Fee Mortgage entered into after the date hereof, provided
that the Lessee executes and delivers an agreement of the type described in the
following paragraph, Lessor shall obtain and deliver to Lessee an agreement by
the holder of such Fee Mortgage, pursuant to which, (a) the applicable Fee
Mortgagee consents to this Lease and (b) agrees that, notwithstanding the terms
of the applicable Fee Mortgage held by such Fee Mortgagee, or any default,
expiration, termination, foreclosure, sale, entry or other act or omission under
or pursuant to 'such Fee Mortgage or a transfer in lieu of foreclosure, (i)
Lessee shall not be disturbed in peaceful enjoyment of the Leased Property nor
shall this Lease be terminated or cancelled at any time, except in the event
that Lessor shall have the right to terminate this Lease under the terms and
provisions expressly set forth herein, (ii) Lessee's option to purchase the
Leased Property shall remain in force and effect pursuant to the terms hereof
and (iii) in the event that Lessee elects its option to purchase the Leased
Property and performs all of its obligations hereunder in connection with any
such election, the holder of the Fee Mortgage shall release its Fee Mortgage
upon payment by Lessee of the purchase price required hereunder, provided, that
(1) such purchase price is paid to the holder of the Fee Mortgage, in the event
that the Indebtedness
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secured by the applicable Fee Mortgage is equal to or greater than the purchase
price or (2) in the event that the purchase price is greater than the
Indebtedness secured by the Fee Mortgage, a portion of the purchase price equal
to the Indebtedness secured by the Fee Mortgage is paid to the Fee Mortgagee and
the remainder of the purchase price is paid to Lessor.
At the request from time to time by any Fee Mortgagee, Lessee shall (a)
subordinate this Lease and all of Lessee's rights and estate hereunder to the
Fee Mortgage held by such Fee Mortgagee and (b) agree that Lessee will attorn to
and recognize such Fee Mortgagee or the purchaser at any foreclosure sale or any
sale under a power of sale contained in any such Fee Mortgage as Lessor under
this Lease for the balance of the Term then remaining. To effect the intent and
purpose of the immediately preceding sentence, Lessee agrees to execute and
deliver such instruments in recordable from as are reasonably requested by
Lessor or the applicable Fee Mortgagee; provided, however, that such Fee
Mortgagee simultaneously executes, delivers and records a written agreement of
the type described in the preceding paragraph.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 Quiet Enjoyment. As long as Lessee shall pay all Rent and all
other sums due under any of the Lease Documents as the same become due and shall
fully comply with all of the terms of this Lease and fully perform its
obligations thereunder, Lessee shall peaceably and quietly have, hold and enjoy
the Leased Property throughout the Term, free of any claim or other action by
Lessor or anyone claiming by, through or under Lessor, but subject to all the
Permitted Encumbrances and such Liens as may hereafter be consented to by
Lessee. No failure by Lessor to comply with the foregoing covenant shall give
Lessee any right to cancel or terminate this Lease, or to fail to perform any
other sum payable under this Lease, or to fail to perform any other obligation
of Lessee hereunder. Notwithstanding the foregoing, Lessee shall 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 Article 21.
21.2 Memorandum of Lease. Lessor and Lessee shall, promptly upon the
request of either, enter into a short form memorandum of this Lease, in form
suitable for recording under the laws of the State, in which reference to this
Lease and all options contained herein shall be made. Lessee shall pay all
recording costs and taxes associated therewith.
21.3 Default by Lessor. Lessor shall be in default of its obligations
under this Lease only if Lessor shall fail to observe or perform any term,
covenant or condition of this Lease on its part to be performed and such failure
shall continue for a period of thirty (30) days after notice thereof from Lessee
(or such shorter time as may be necessary in order to protect the health or
welfare of any residents of the Facility), unless such failure cannot with due
diligence be cured within a period of thirty (30) days, in which case such
failure shall not be deemed to continue if 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 the occurrence
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of any Unavoidable Delay.
21.4 Computer Disc. In order to facilitate the electronic filing of
this Lease with the United States Securities and Exchange Commission and other
governmental agencies, Lessor shall provide or cause to be provided to Guarantor
a computer disc containing this Lease, together with all exhibits, schedules and
ancillary documents related thereto, formatted in WordPerfect 5.1, Times New
Roman Font 12, upon Lessee's one-time request for same.
ARTICLE 22
NOTICE
Any notice, request, demand, statement or consent made hereunder or
under any of the other Lease Documents shall be in writing and shall be deemed
duly given if personally delivered, sent by certified mail, return receipt
requested, or sent by a nationally recognized commercial overnight delivery
service with provision for a receipt, postage or delivery charges prepaid, and
shall be deemed given when so personally delivered or postmarked or placed in
the possession of such mail or delivery service and addressed as follows:
If to Lessee or Guarantor: c/o Sterling House Corporation
453 S. Webb Road, Suite 500
Wichita, KS 67207
Attn: President
With a copy to: David G. Crockett, Esq.
[Lessee's and Guarantor's Crockett & Gilhousen
counsel] 1005 North Market
Wichita, KS 67214
and c/o Sterling House Corporation
453 S. Webb Road, Suite 500
Wichita, KS 67207
Attn: Secretary
If to Lessor: Meditrust of Ohio, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: President
With copies to: Meditrust Mortgage Investments, Inc.
197 First Avenue
Needham Heights, Massachusetts 02194
Attn: General Counsel
and Frank Giso III, Esq.
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<PAGE> 98
Choate, Hall & Stewart
Exchange Place
Boston, MA 02109
or such other address as Lessor, Lessee or the Guarantor shall hereinafter from
time to time designate by a written notice to the others given in such manner.
Any notice given to Lessee or the Guarantor by Lessor at any time shall not
imply that such notice or any further or similar notice was or is required.
ARTICLE 23
LIMITATION OF MEDITRUST LIABILITY
All Persons dealing with the Lessor, in any way, shall look only to the
assets of the Lessor for the payment of any sum or the performance of any
obligation. Furthermore, in no event shall Lessor ever be liable to Lessee or
any other Person for any indirect or consequential damages incurred by Lessee or
such other Person resulting from any cause whatsoever. Notwithstanding the
foregoing, Lessee hereby acknowledges and agrees that the Lessee shall look only
to the assets of Lessor for the payment of any sum or performance of any
obligation due by or from Lessor pursuant to the terms and provisions of the
Lease Documents.
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 Broker's Fee Indemnification. Lessee shall and hereby agrees to
indemnify, defend (with counsel acceptable to Lessor) and hold Lessor harmless
from and against any and all claims for premiums or other charges, finder's
fees, taxes, brokerage fees or commissions and other similar compensation due in
connection with any of the transactions contemplated by the Lease Documents.
Notwithstanding the foregoing, Lessor shall have the option of conducting its
own defense against any such claims with counsel of Lessor's choice, but at the
expense of Lessee, as aforesaid. This indemnification shall include all
attorneys' fees and expenses and court costs reasonably incurred by Lessor in
connection with the defense against any such claims and the enforcement of this
indemnification agreement and shall survive the termination of this Lease.
24.2 No Joint Venture or Partnership. Neither anything contained in any
of the Lease Documents, nor the acts of the parties hereto, shall create, or be
construed to create, a partnership or joint venture between Lessor and Lessee.
Lessee is not the agent or representative of Lessor and nothing contained herein
or in any of the other Lease Documents shall make, or be construed to make,
Lessor liable to any Person for goods delivered to Lessee, services performed
with respect to the Leased Property at the direction of Lessee or for debts or
claims acting against Lessee.
24.3 warrant Amendments. Waivers and Modifications. None of the terms,
covenants,
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conditions, warranties or representations contained in this Lease or in any of
the other Lease Documents ray be renewed, replaced, amended, modified, extended,
substituted, revised, waived, consolidated or terminated except by an agreement
in writing signed by the Person against who enforcement is sought or except as
otherwise expressly provided for herein or in any other a Document. The
provisions of this Lease and the other Lease Documents shall extend and b
applicable to all renewals, replacements, amendments, extensions, substitutions,
revisions, consolidations and modifications of any of the Lease Documents, the
Management Agreements, a Related Party Agreements, the Permits and/or the
Contracts. References herein and in the other Lease Documents to any of the
Lease Documents, the Management Agreements, the Related Party Agreements, the
Permits and/or the Contracts shall be deemed to include any renewals,
replacements, amendments, extensions, substitutions, revisions, consolidations
or modifications thereof.
Notwithstanding the foregoing, any reference contained in any of the
Lease Documents, whether express or implied, to any renewal, replacement,
amendment, extension, substitution, revisions, consolidation or modification of
any of the Lease Documents or any Management Agreement, elated Party Agreement,
Permit and/or the Contract is not intended to constitute an agreement or consent
by Lessor to any such renewal, replacement, amendment, substitution, revision,
consolidation or modification; but, rather as a reference only to those
instances where Lessor may give, agree or consent to any such renewal,
replacement, amendment, extension, substitution, revision, consolidation or
modification as the same may be required pursuant to the terms, cove is and
conditions of any of the Lease Documents.
24.4 Further Assurances. At any time and from time to time, upon the
written request by Lessor, Lessee (and .any of its Affiliates) and the Guarantor
(and any of its Affiliates) shall promptly make, execute and deliver, or cause
to be made, executed and delivered, to Lessor and, here appropriate, cause to be
recorded or filed (and, from time to time thereafter, to be re-recorded or
refiled) at such time and in such offices and places as shall be deemed
desirable by Lessor (in its reasonable discretion), any such agreements,
amendments, assignments, instruments of further assurance, certificates and
other documents as Lessor may, in its reason discretion, deem desirable to (a)
enable Lessor to assign the Lease or any portion of its interest; (b) enable
Lessor to enter into participation agreements with respect to all or any portion
of the Lease; or (c) effectuate, complete, perfect or continue and preserve the
rights, remedies and obligations under the Lease; provided, however that, except
as to the costs and expense of Lessor in connection with the items referred to
in the foregoing clause (c), no such additional document or other instrument
requested by Lessor hereunder shall (i) increase the obligations of Lessee (or
any of its Affiliates) or the Guarantor (or any of its Affiliates), or (ii)
require Lessee or the Guarantor to incur any cost or expense (other than the
fees and costs of any attorney(s) either Lessee or the Guarantor may choose to
retain in connection with such transaction);
Any failure by Lessee (or any of its Affiliates) or the Guarantor (or
any of its Affiliates) to comply with any request pursuant to this Section 24.4
within twenty (20) days after such written request is made by Lessor shall be an
Event of Default hereunder and upon such Event of Default, Lessor may make,
execute, record, file, re-record and refile any and all such amendments,
assignments, instruments, certificates and documents for and in the name of
Lessee
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<PAGE> 100
(or any of its Affiliates) or the Guarantor (or any of its Affiliates), and
Lessee (or any of its Affiliates) or the Guarantor (or any of its Affiliates)
each hereby appoints Lessor as its attorney-in-fact, with full power of
substitution, to take such actions (on behalf of and in the name of Lessee (or
any of its Affiliates) or the Guarantor (or any of its Affiliates) as the case
may be) as Lessor, in its sole and absolute discretion, may deem necessary or
desirable to effectuate the intent of this Section 24.4.
24.5 Invalidity. If any provision of this Lease or any of the other
Lease Documents or the application thereof to any Person or circumstance, for
any reason and to any extent, shall be held to be invalid or unenforceable,
neither the remainder of this Lease or other Lease Documents nor the application
of such provision to any other Person or circumstance shall be affected thereby,
but rather the same shall be enforced to the greatest extent permitted by
applicable law.
Notwithstanding the foregoing, it is the intention of the parties
hereto that if any provision of the Lease or the other Lease Documents is
capable of two (2) constructions, one of which would render the provision void
and the other of which would render the provision valid, then such provision
shall be construed in accordance with the construction which renders such
provision valid.
24.6 Captions and Headings. the captions and headings set forth in this
Lease and each of the other Lease Documents are included for convenience and
reference only, and the words contained therein shall in no way be held or
deemed to define, limit, describe, explain, modify, amplify or add to the
interpretation, construction or meaning of, or the scope or intent of, this
Lease, any of the other Lease Documents or any parts hereof or thereof.
24.7 Time is of the Essence. Time is of essence of each and every term,
condition, covenant and warranty set forth herein and in the other Lease
Documents.
24.8 Counterparts. This Lease and the other Lease Documents may be
executed in one or more counterparts, each of which taken together shall
constitute an original and all of which shall constitute one and the same
instrument.
24.9 Entire Agreement. This Lease and the other Lease Documents set
forth the entire agreement of the parties with respect to the subject matter and
shall supersede in all respect the Letter of Intent, dated July 8, 1997 (and all
prior iterations thereof), from Meditrust to Guarantor.
24.10 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, LESSOR AND LESSEE HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT WHICH ANY PARTY HERETO MAY NOW OR HEREAFTER HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. Lessee hereby certifies
that neither Lessor nor any of Lessor's representatives, agents or counsel has
represented expressly or otherwise at Lessor would not, in the event of any such
suit, action or proceeding seek to enforce this waiver
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<PAGE> 101
to the right of trial by jury and acknowledges that Lessor has been induced by
this waiver (among other things) to enter into the transactions evidenced by
this Lease and the other Documents and further acknowledges that Lessee (a) has
read the provisions of this Lease, and in particular, the paragraph containing
this waiver, (b) has consulted legal counsel, (c) understands the rights that it
is granting in this Lease and the rights that it is waiving in is paragraph in
particular and (d) makes the waivers set forth herein knowingly, voluntarily and
intentionally.
24.11 Successors and Assigns. This Lease and the other Lease Documents
shall be binding upon and inure to the benefit of (a) upon Lessee and Lessee's
legal representatives and permitted successors and assigns and (b) Lessor and
any other Person who may now or hereafter hold the interest of Lessor under this
Lease and their respective successors and assigns. Notwithstanding the
foregoing, except as may be permitted pursuant to Article 19, Lessee shall not
assign a y of its rights or obligations hereunder or under any of the other
Lease Documents without the prior written consent of Lessor, in each instance,
which consent may be withheld in Lessor's sole and absolute discretion.
24.12 No Third Party Beneficiaries. This Lease and the other Lease
Documents are solely for the benefit of Lessor, its successors, assigns and
participants (if any), the Meditrust Entities, Lessee, the Guarantor, the other
members of the Leasing Group and their respective permitted successors and
assigns, and, except as otherwise expressly set forth in any of the Lease
Documents, nothing contained therein shall confer upon any Person other than
such patties any right to insist upon or to enforce the performance or
observance of any of the obligations contained therein. All conditions to the
obligations of Lessor to advance or make available proceeds of insurance or
Awards, or to release any deposits held for Impositions or insurance premiums re
imposed solely and exclusively for the benefit of Lessor, its successors and
assigns. o other Person shall have standing to require satisfaction of such
conditions in accordance' with their terms, and no other Person shall, under any
circumstances, be a beneficiary f such conditions, any or all of which may be
freely waived in whole or in part by Lessor at a y time, if, in Lessor's sole
and absolute discretion, Lessor deems it advisable or desirable t do so.
24.13 Governing Law. This Lease shall be construed and the rights and
obligations of Lessor and Lessee shall be determined in accordance with the laws
of the State.
Lessee hereby consents to personal jurisdiction in the courts of the
State and the United States District Court for the District in which the Leased
Property is situated as well as to the jurisdiction of all courts from which an
appeal may be taken from the aforesaid courts, for the purpose of any suit,
action or other proceeding arising out of or with respect to any of the other
Lease Documents and expressly waives any and all objections Lessee may have as
to venue in any of such courts.
24.14 General. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, Lessee or Lessor
arising prior to any date of termination of this Lease or of the other Lease
Documents shall survive such termination. If any term or provision of this Lease
or any of the other Lease Documents or any application thereof shall be invalid
or unenforceable, the remainder of this Lease or the other Lease Document, as
the case may be, an
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<PAGE> 102
any other application of such term or provision shall not be affected thereby.
If any late charges provided for in any provision of this Lease or any of the
other Lease Documents a based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate. 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, o p incurring of new or additional obligations, except as to all of
the foregoing as expressly provided for herein.
24.11 Intention of Parties. Lessor and Lessee acknowledge and agree
that this Lease is intended to be a lease of the Leased Property and is in no
way intended to be a mortgage or any other security instrument encumbering the
Leased Property.
24.11 Radon Gas. Radon is naturally occurring radioactive gas that,
when it has accumulate in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings in Ohio.
Additional information regarding radon and radon testing may be obtained from
the county public health unit.
IN WITNESS WHEREOF, the parties have caused this Facility Lease
Agreement to be executed and attested by their respective officers thereunto
duly authorized.
WITNESSES: LESSEE:
ASSISTED LIVING PROPERTIES, INC.,
a Kansas corporation
By: /s/ R. Gail Knott
Name Name: R. Gail Knott
Title: Secretary/Treasurer
Name
WITNESSES: LESSEE:
MEDITRUST OF OHIO, INC.
a Delaware corporation
By: /s/ David S. Benson
Name Name: David S. Benson
Title: President
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<PAGE> 103
COMMONWEALTH OF MASSACHUSETTS
NORFOLK, ss. February 17, 1998
Then personally appeared the above-named David S. Benson,
President of MEDITRUST OF OHIO, INC., a Delaware corporation, and acknowledged
the foregoing instrument to be his free act and deed and the free act and deed
of said corporation before me.
/s/
NOTARY PUBLIC
My commission expires:
(SEAL)
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, the undersigned, a notary public in and for said County and
State, on this day of February, 1998, personally appeared R. Gail Knott, to
me known to be the identical person who signed the name of the maker thereof to
the within and foregoing instrument as its president and acknowledged to me that
he/she executed the same as his/her free and voluntary act and deed and as the
free and voluntary act and deed of said corporation for the uses and purposes
therein set forth
/s/
NOTARY PUBLIC
My Commission Expires:
(SEAL)
104
<PAGE> 1
EXHIBIT 10.38
Schedule of ALP Facility Leases
which are Substantially in the Form Attached as Exhibit 10.37
<TABLE>
<CAPTION>
ORIGINAL
LEASING NO. OF UNITS
FACILITY NAME LOCATION COMMITMENT FEE BASE RENT IN FACILITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alterra Sterling House of Lancaster Lancaster, Texas $ 1,675,000.0 $ 155,607.5 37
Alterra Sterling House of Bartlesville South Bartlesville, Oklahoma $ 1,910,000.0 $ 173,810.3 33
Alterra Sterling House of Englewood Englewood, Ohio $ 2,340,000.0 $ 202,995.0 42
Alterra Sterling House of Bethany, Alterra
Sterling House of Derby, and Alterra Sterling
House of Wellington Bethany, Kansas; Derby,
Kansas; Wellington, Kansas $ 7,510,000.0 $ 735,229.0 26; 26; 26
Alterra Sterling House of Temple Temple, Texas $ 4,750,000.0 $ 221,450.0 42
Alterra Sterling House of Barberton Barberton, Ohio $ 2,400,000.0 $ 212,640.0 42
Alterra Sterling House of Kerrville Kerrville, Texas $ 3,831,000.0 $ 204,336.2 37
Alterra Sterling House of Marion Marion, Ohio $ 2,785,000.0 $ 246,472.5 43
Alterra Sterling House of Ormond Beach Ormond Beach, Florida $ 2,890,000.0 $ 268,481.0 42
Alterra Sterling House of Whitby San Antonio, Texas $ 2,700,000.0 $ 267,300.0 50
Alterra Sterling House of Ocala Ocala, Florida $ 5,460,000.0 $ 247,911.0 42
</TABLE>
<PAGE> 1
EXHIBIT 10.39
AMENDMENT TO STERLING - MEDITRUST LEASES
This AMENDMENT is made as of the 23rd of December, 1999 by and among
(i) ASSISTED LIVING PROPERTIES, INC., a Kansas corporation having its principal
place of business c/o Sterling House Corporation, 450 North Sunnyslope Road,
Suite 300, Brookfield, Wisconsin 53005 ("ALP"); (ii) STERLING HOUSE CORPORATION,
a Kansas corporation having its principal place of business at 450 North
Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 ("Sterling"); (iii)
ALTERRA HEALTHCARE CORPORATION, a Delaware corporation formerly known as
ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation having its principal
place of business at 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin
53005 ("Alterra"); (iv) ALS LEASING, INC., a Delaware corporation, having its
principal place of business at 450 North Sunnyslope Road, Suite 300, Brookfield,
Wisconsin 53005 ("ALS Leasing"); (v) MEDITRUST OF KANSAS, INC., a Delaware
corporation, having a principal place of business c/o MEDITRUST CORPORATION, 197
First Avenue, Needham Heights, Massachusetts 02494 ("MOK"); (vi) NEW MEDITRUST
COMPANY LLC, a Delaware limited liability company and successor by merger to
MEDITRUST COMPANY LLC (the successor by merger to MEDITRUST OF FLORIDA, INC., a
New York corporation, MEDITRUST OF TEXAS, INC., a Delaware corporation, and
MEDITRUST OF OHIO, INC., a Delaware corporation), having a principal place of
business c/o MEDITRUST CORPORATION, 197 First Avenue, Needham Heights,
Massachusetts 02494 (collectively, "Meditrust"); (vii) T AND F PROPERTIES, LP, a
Delaware limited partnership (successor in title to certain Meditrust/ALS
Facilities (as such term is defined in the Meditrust Agreements) located in
Texas), having a principal place of business c/o MEDITRUST CORPORATION, 197
First Avenue, Needham, Massachusetts 02494 ("T and F"); and (viii) MEDITRUST
ACQUISITION COMPANY LLC, a Delaware limited liability company (the successor by
merger to MEDITRUST ACQUISITION CORPORATION III, a Delaware corporation), having
its principal place of business c/o MEDITRUST CORPORATION, 197 First Avenue,
Needham Heights, Massachusetts 02494 ("MAC").
W I T N E S S E T H:
WHEREAS, ALP, Meditrust and MOK are parties to that certain Amended and
Restated Agreement Regarding Related Transactions ($35,000,000 Combined
Sale/Leaseback) dated as of March 31, 1997, as amended (the "$35,000,000
Meditrust Agreement"); and
WHEREAS, ALS Leasing, Alterra and MAC are parties to that certain
Amended and Restated Agreement Regarding Related Lease Transactions
($100,000,000 Meditrust Investment) dated as of April 30, 1997, as amended (the
"$100,000,000 Meditrust Agreement"); and
<PAGE> 2
WHEREAS, ALP, Meditrust and MOK are parties to that certain Agreement
Regarding Related Transactions ($50,000,000 Combined Sales/Lease Back) dated as
of September 30, 1997, as amended (the "$50,000,000 Meditrust Agreement"); and
WHEREAS, ALS Leasing, Alterra and MAC are parties to that certain
Agreement Regarding Related Lease Transactions ($150,000,000 Meditrust
Investment) dated as of November 21, 1997, as amended (the "$150,000,000
Meditrust Agreement"). The $35,000,000 Meditrust Agreement, the $100,000,000
Meditrust Agreement, the $50,000,000 Meditrust Agreement and the $150,000,000
Meditrust Agreement may be referred to herein collectively as the "Meditrust
Agreements"; and
WHEREAS, Alterra and Sterling (as the sole shareholder of ALP)
consummated on or about October 23, 1997 an Agreement and Plan of Merger dated
as of July 30, 1997, as amended, pursuant to which Sterling became a
wholly-owned subsidiary of Alterra and a sister corporation to ALS Leasing; and
WHEREAS, Meditrust consented to the aforesaid merger on certain terms
and conditions, including, without limitation, that Alterra guaranty the Lease
Obligations, as such term is defined in those certain Facility Lease Agreements
by and among Meditrust and ALP (the "Sterling Leases");
WHEREAS, in conjunction with the aforesaid merger of Sterling and upon
receipt of the aforesaid Alterra guaranty, Meditrust agreed to amend the
Sterling Leases to make certain provisions thereof consistent with certain
provisions of the Facility Lease Agreements by and between MAC and ALS Leasing
(the "ALS Leases"); and
WHEREAS, Alterra and Sterling now desire to merge Sterling with
Alterra, with Alterra to become the surviving entity, and MOK, Meditrust, MAC
and T and F agree to consent to such merger, contingent upon the execution of
this Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. Initial capitalized terms used herein and not
otherwise defined shall have the meanings respectively ascribed to such terms in
the ALS Leases.
2. CONSENT TO MERGER. MOK, Meditrust, MAC and T and F hereby (i)
consent to the merger of Sterling with Alterra, with Alterra to be the surviving
corporation following such merger, (ii) accept Alterra as the guarantor under
the Sterling Leases immediately following the merger and (iii) agree that such
merger and the failure of Sterling to be the surviving corporation shall not be
or constitute a Default or Event of Default under the Sterling Leases, the ALS
Leases, the Meditrust Agreements or any documents or instruments executed or
delivered in connection therewith. MOK, Meditrust, MAC and T and F further
represent and warrant that they collectively are the owners of all of the
Facilities subject to the Sterling Leases and the ALS
2
<PAGE> 3
Leases and no other persons or entities claiming by, through or under MOK,
Meditrust, MAC or T and F are required to consent to the merger or the other
matters set forth in this Amendment. As partial consideration to the
aforementioned consent to merger, ALP, Sterling (if prior to the date said
merger is consummated), Alterra and ALS Leasing shall, within ten (10) business
days of the request of any of MOK, Meditrust, T and F or MAC, execute any
amendments to the Meditrust Agreements reasonably requested by any such party to
reflect the facts as they currently exist and/or to make modifications
consistent with this Amendment. Alterra shall notify MAC as soon as the
aforementioned merger is consummated.
3. ALTERRA AS GUARANTOR OF STERLING LEASES. Simultaneously with the
consummation of the merger of Sterling with Alterra, resulting in Alterra as the
surviving corporation, all references in the Sterling Leases to the Guarantor
shall mean and refer to only Alterra. Effective upon the consummation of such
merger, ALP shall be a wholly-owned subsidiary of Alterra.
4. CHANGES IN EXECUTIVE OFFICERS. The following language (or any
substantially similar language) appearing in each Sterling Lease shall be
deleted in its entirety:
"CHANGES IN EXECUTIVE OFFICERS. Lessee shall not suffer of permit to
exist any circumstance in which any of the executive officers listed on
EXHIBIT J hereto ceases for any reason to serve as an executive officer
of Lessee, unless succeeded in such position within thirty (30) days by
another individual reasonably satisfactory to Lessor, and this
provision will, in turn become effective as to each such successive
executive officer."
5. DEFAULT: CHANGE IN CONTROL. The following language (or any
substantially similar language) appearing in the Article entitled "Default"
under each Sterling Lease shall be deleted in its entirety:
"(h) in the event that, without the prior written consent of
Lessor, in each instance, which consent may be withheld by Lessor in
its sole and absolute discretion: (i) there shall be a change in the
Person or Persons presently holding management or ownership control of
any member of the Leasing Group (other than changes in stock ownership
of, or the individuals managing, Guarantor), whether by operation of
law or otherwise; (ii) all or any portion of the interest of any
partner or member of any member of the Leasing Group (other than
changes in the stock ownership of Guarantor) shall be, on any one or
more occasions, directly or indirectly, sold, assigned, hypothecated or
otherwise transferred (whether by operation of law or otherwise), if
such member of the Leasing Group shall be a partnership, joint venture,
syndicate or other group; (iii) more than twenty-five (25%), in the
aggregate, of the shares of the issued and outstanding capital stock of
any member of the Leasing Group (other than changes of stock ownership
of Guarantor) shall be, on any one or more occasions, directly or
indirectly, sold, assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise), if such member of the
Leasing Group shall be a corporation; or (iv) all or any
3
<PAGE> 4
portion of the beneficial interest in any member of the Leasing Group
shall be, directly or indirectly, sold or otherwise transferred
(whether by operation of law or otherwise), if such member of the
Leasing Group shall be a trust;
(i) the death, incapacity, liquidation, dissolution or
termination of existence of any member of the Leasing Group with any
other Person;"
Said language shall be replaced by the following:
"(h) in the event that, without the prior written consent of
the Lessor, in each instance, which consent may be withheld by the
Lessor in its sole and absolute discretion, and except as specifically
permitted in subsection (h)(vi) or subsection (i) below:
i. there shall be a change in the Person or Persons
presently in control of any member of the Leasing
Group (other than changes in stock ownership of the
Guarantor or changes in the officers or directors of
either the Lessee or the Guarantor) (whether by
operation of law or otherwise);
ii. any member of the Leasing Group (other than
changes in the stock ownership of the Guarantor), all
or any portion of the interest of any partner or
member of any member of the Leasing Group shall be,
on any one or more occasions, directly or indirectly,
sold, assigned, hypothecated or otherwise transferred
(whether by operation of law or otherwise), if such
member of the Leasing Group shall be a partnership,
joint venture, syndicate or other group;
iii. any of the shares of the issued and outstanding
capital stock of any member of the Leasing Group
(other than changes of stock ownership of the
Guarantor) shall be, on any one or more occasions,
directly or indirectly, sold, assigned, hypothecated
or otherwise transferred (whether by operation of law
or otherwise), if such member of the Leasing Group
shall be a corporation;
iv. all or any portion of the beneficial interest in
any member of the Leasing Group shall be, directly or
indirectly, sold or otherwise transferred (whether by
operation of law or otherwise), if such member of the
Leasing Group shall be a trust;
v. except as otherwise expressly permitted herein, if
any Person other than the Lessee is the licensed
operator of the Facility; or
vi. more than fifty percent (50%), in the aggregate,
of the shares of the issued and outstanding capital
stock of the Guarantor are held by a single Person or
two (2) or more Affiliates (collectively, an
"Acquiror"),
4
<PAGE> 5
except in a Permitted Transaction (defined below). If
immediately after the date on which the Acquiror
acquire(s) more than fifty percent (50%) of such
stock, the "Net Worth" (defined as an amount
determined in accordance with GAAP) of the Guarantor
is equal to or greater than FIFTY-FIVE MILLION
DOLLARS ($55,000,000.00), then such acquisition shall
be deemed to be a "Permitted Transaction." However,
in the event that a Permitted Transaction occurs,
then the higher ratios and the Net Worth covenant
pertaining to the Guarantor specified in the
financial covenants of this Lease shall both become
operative and effective;
(i) the death, incapacity, merger, liquidation, dissolution or
termination of existence of any member of the Leasing Group (except (a)
in the case of a merger or consolidation of some other Person with the
Guarantor, which shall be a "Permitted Merger" or (b) in the case of a
Permitted Transaction); provided however, if the Persons who were the
shareholders of the Guarantor immediately prior to the Permitted Merger
hold in the aggregate less than 50% of the outstanding voting stock of
the surviving corporation which results from the Permitted Merger, then
(i) the higher ratios specified in Section 11.3.5 and the Net Worth
requirement for the Guarantor specified above shall both become
operative and effective, and (ii) if Alterra Healthcare Corporation is
not the surviving corporation which results from such Permitted Merger,
the new surviving corporation will affirm in writing its obligations
under the Guaranty;"
6. RENT COVERAGE RATIO. The financial covenant entitled "Rent Coverage
Ratio of Lessee" or "Debt Coverage Ratio of Lessee" contained in any of the
Sterling Leases shall be deleted in its entirety, and the Rent Coverage Ratio
provisions of the $35,000,000 Meditrust Agreement or the $50,000,000 Meditrust
Agreement, as applicable, shall control.
7. GUARANTOR. Notwithstanding any provisions of the Sterling Leases to
the contrary, the definition of "Guarantor" shall mean and be Alterra Healthcare
Corporation and its successors and assigns.
8. CURRENT RATIO - GUARANTOR. Notwithstanding any provisions of the
Sterling Leases to the contrary, the text of the financial covenant entitled
"Current Ratio - Guarantor" shall be deleted in its entirety, and the following
text shall be substituted therefor:
"CURRENT RATIO - GUARANTOR. The Guarantor shall achieve, as of
December 31, 1997, a ratio of Consolidated Current Assets to
Consolidated Current Liabilities equal to or greater than 0.5 to 1 and,
as of December 31 of each year thereafter during the Term, a ratio of
Consolidated Current Assets to Consolidated Current Liabilities equal
to or greater than 1.0 to 1; provided however that if a Permitted
Transaction (as defined in Section 16.1(h)(vi)) occurs, or if increased
ratios are triggered by a Permitted Merger pursuant to
5
<PAGE> 6
Section 16.1(i), then such ratios shall increase to 1.0 to 1.0 and 1.2
to 1.0, respectively."
9. NET WORTH OF GUARANTOR AFTER A PERMITTED TRANSACTION OR PERMITTED
MERGER. The following financial covenant shall be inserted in the Financial
Covenants section of each Sterling Lease:
"NET WORTH OF GUARANTOR AFTER A PERMITTED TRANSACTION OR
PERMITTED MERGER. From and after the occurrence of a Permitted
Transaction or if triggered by a Permitted Merger pursuant to Section
16.1(i), the Guarantor shall maintain a "Net Worth" (determined in
accordance with GAAP) of not less than FIFTY-FIVE MILLION DOLLARS
($55,000,000.00)."
10. TANGIBLE NET WORTH - GUARANTOR. Notwithstanding any provisions of
the Sterling Leases to the contrary, the text of the financial covenant entitled
"Tangible Net Worth - Guarantor" shall be deleted in its entirety, and the
following text shall be substituted therefor:
"TANGIBLE NET WORTH - GUARANTOR. The Guarantor shall maintain,
at all times, a Tangible Net Worth of not less than FORTY MILLION AND
NO/100 DOLLARS ($40,000,000.00)."
11. RESTRICTIONS RELATING TO THE GUARANTOR. Notwithstanding any
provisions of the Sterling Leases to the contrary, the text of the negative
covenant entitled "Restrictions Relating to the Guarantor" contained in the
Sterling Leases shall be deleted in its entirety, and the following text shall
be substituted therefor:
"RESTRICTIONS RELATING TO THE GUARANTOR. If, at any time
during the Term, the Tangible Net Worth of the Guarantor is less than
FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00), the Guarantor shall
not, without the prior written consent of the Lessor, in each instance,
which consent may be withheld in the sole and absolute discretion of
the Lessor, convey, assign, donate, sell, mortgage or pledge any real
or personal property or take any other action which would have a
materially adverse effect upon the Tangible Net Worth or general
financial condition of Guarantor."
12. ACCEPTABLE LICENSED OPERATOR.
(a) DEFINITION. The following definition shall be added to the
definition section of each Sterling Lease:
"ACCEPTABLE LICENSED OPERATOR: Any of (a) the Current Manager,
(b) the Lessee, (c) the Guarantor, (d) any Manager of the Facility
(pursuant to a Management Agreement approved by the Lessor) that is
wholly-owned by Alterra Healthcare Corporation and, during the Term, is
engaged in no business or
6
<PAGE> 7
venture other than the ownership and/or operation of any health care
facility owned or financed by any Meditrust Entity, or (e) any
Sublessee of the Facility (pursuant to a Sublease approved by the
Lessor) that is wholly-owned or is controlled by Alterra Healthcare
Corporation and, during the Term, is engaged in no business or venture
other than the ownership and/or operation of any health care facility
owned or financed by any Meditrust Entity."
(b) AFFIRMATIVE COVENANT. The following covenant shall be added to the
Affirmative Covenant section of each Sterling Lease:
"ACCEPTABLE LICENSED OPERATOR. In the event that the Lessee
proposes that any other Acceptable Licensed Operator become the
licensed operator of the Facility, the Lessee shall so advise the
Lessor and, subject to the Lessor's review and approval of any
applicable Sublease or Management Agreement (pursuant to which the
proposed Acceptable Licensed Operator shall operate the Facility), the
Lessor shall consent to such operation of the Facility by the proposed
Acceptable Licensed Operator, as long as, prior to or contemporaneously
with the commencement of the operation of the Facility by such proposed
Acceptable Licensed Operator and without limiting any other terms and
conditions of the Lease Documents, the Lessor receives (a) such
evidence as the Lessor may request evidencing that the proposed
Acceptable Licensed Operator has received all Permits necessary for the
operation of the Facility in accordance with its Primary Intended Use,
(b) such documents executed by the proposed Acceptable Licensed
Operator as the Lessor may request to maintain and protect the Lessor's
security for the Lease Obligations (including, without limitation,
documents in form and substance substantially similar to the Permits
Assignment and Security Agreement), (c) a copy of the proposed
Acceptable Licensed Operator's articles of incorporation as certified
by the Secretary of State of the state of its incorporation, (d) a
certificate of the Secretary of State of the state of incorporation of
the proposed Acceptable Licensed Operator to the effect that the
proposed Acceptable Licensed Operator is in legal existence and good
standing on the records of such Secretary of State as of the date of
such Certificate, (e) a copy of the by-laws of the proposed Acceptable
Licensed Operator as certified by the Secretary of the proposed
Acceptable Licensed Operator, (f) resolutions certified by the
Secretary of the proposed Acceptable Licensed Operator evidencing the
execution and delivery of the documents required under this Section by
the Lessor and (g) if requested by the Lessor, a due authorization and
enforceability opinion, addressed to the Lessor, in form and substance
reasonably acceptable to the Lessor, rendered by counsel to the Lessee
and the proposed Acceptable Licensed Operator, opining as to the due
authorization, execution, delivery and enforceability of the documents
required under this Section by the Lessor."
7
<PAGE> 8
13. MISCELLANEOUS. Except as expressly modified above, the Sterling
Leases are hereby ratified and confirmed and shall remain in full force and
effect.
8
<PAGE> 9
IN WITNESS WHEREOF the parties hereto have executed this Amendment
under seal as of the date first above written.
WITNESS: ASSISTED LIVING PROPERTIES,
INC., a Kansas corporation
By: /s/ Thomas E. Komula
- ---------------------------- --------------------------------
Name: Name: Thomas E. Komula
Title: Vice President
WITNESS STERLING HOUSE CORPORATION,
a Kansas corporation
By: /s/ Thomas E. Komula
- ---------------------------- --------------------------------
Name: Name: Thomas E. Komula
Title: Vice President:
WITNESS: ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation
By: /s/ Thomas E. Komula
- ---------------------------- --------------------------------
Name: Name: Thomas E. Komula
Title: Senior Vice President
WITNESS: ALS LEASING, INC, a Delaware
corporation
By: /s/ Thomas E. Komula
- ---------------------------- --------------------------------
Name: Name: Thomas E. Komula
Title: Vice President
WITNESS: MEDITRUST OF KANSAS, INC.,
a Delaware corporation
By: /s/ Michael S. Benjamin
- ---------------------------- --------------------------------
Name: Name: Michael S. Benjamin
Title: Senior Vice President
9
<PAGE> 10
WITNESS: NEW MEDITRUST COMPANY LLC, a
Delaware limited liability company
By: /s/ Michael S. Benjamin
- ---------------------------- --------------------------------
Name: Name: Michael S. Benjamin
Title: Senior Vice President
WITNESS: MEDITRUST ACQUISITION
COMPANY LLC, a Delaware limited
liability company
By: /s/ Michael S. Benjamin
- ---------------------------- --------------------------------
Name: Name: Michael S. Benjamin
Title: Senior Vice President
WITNESS: T AND F PROPERTIES, LP, a Delaware
limited partnership
By: /s/ Michael S. Benjamin
- ---------------------------- --------------------------------
Name: Name: Michael S. Benjamin
Title: Senior Vice President
10
<PAGE> 1
EXHIBIT 10.40
SECOND OMNIBUS AMENDMENT
This AMENDMENT (this "Amendment") is made as of the 28th day of
January, 2000, by and among (i) ASSISTED LIVING PROPERTIES, INC., a Kansas
corporation having its principal place of business c/o Alterra Healthcare
Corporation, 10000 Innovation Drive, Milwaukee, Wisconsin 53226 ("ALP"); (ii)
ALTERRA HEALTHCARE CORPORATION, a Delaware corporation formerly known as
ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation having its principal
place of business at 10000 Innovation Drive, Milwaukee, Wisconsin 53226
("Alterra"); (iii) ALS LEASING, INC., a Delaware corporation, having its
principal place of business at 10000 Innovation Drive, Milwaukee, Wisconsin
53226 ("ALS Leasing"); (iv) MEDITRUST OF KANSAS, INC., a Delaware corporation,
having a principal place of business c/o MEDITRUST CORPORATION, 197 First
Avenue, Needham Heights, Massachusetts 02494 ("MOK"); (v) NEW MEDITRUST COMPANY
LLC, a Delaware limited liability company and successor by merger to MEDITRUST
COMPANY LLC (the successor by merger to MEDITRUST OF FLORIDA, INC., a New York
corporation, MEDITRUST OF TEXAS, INC., a Delaware corporation, and MEDITRUST OF
OHIO, INC., a Delaware corporation), having a principal place of business c/o
MEDITRUST CORPORATION, 197 First Avenue, Needham Heights, Massachusetts 02494
(collectively, "Meditrust"); (vi) T AND F PROPERTIES, LP, a Delaware limited
partnership (successor in title to certain Meditrust/ALS Facilities (as such
term is defined in the Meditrust Agreements) located in Texas), having a
principal place of business c/o MEDITRUST CORPORATION, 197 First Avenue,
Needham, Massachusetts 02494 ("T and F"); and (VII) MEDITRUST ACQUISITION
COMPANY LLC, a Delaware limited liability company (the successor by merger to
MEDITRUST ACQUISITION CORPORATION III, a Delaware corporation), having its
principal place of business c/o MEDITRUST CORPORATION, 197 First Avenue, Needham
Heights, Massachusetts 02494 ("MAC").
W I T N E S S E T H:
WHEREAS, ALP, Meditrust and MOK are parties to that certain Amended and
Restated Agreement Regarding Related Transactions ($35,000,000 Combined
Sale/Leaseback) dated as of March 31, 1997, as amended (the "$35,000,000
Meditrust Agreement"); and
WHEREAS, ALS Leasing, Alterra and MAC are parties to that certain
Amended and Restated Agreement Regarding Related Lease Transactions
($100,000,000 Meditrust Investment) dated as of April 30, 1997, as amended (the
"$100,000,000 Meditrust Agreement"); and
<PAGE> 2
WHEREAS, ALP, Meditrust and MOK are parties to that certain Agreement
Regarding Related Transactions ($50,000,000 Combined Sales/Lease Back) dated as
of September 30, 1997, as amended (the "$50,000,000 Meditrust Agreement"); and
WHEREAS, ALS Leasing, Alterra and MAC are parties to that certain
Agreement Regarding Related Lease Transactions ($150,000,000 Meditrust
Investment) dated as of November 21, 1997, as amended (the "$150,000,000
Meditrust Agreement"). The $35,000,000 Meditrust Agreement, the $100,000,000
Meditrust Agreement, the $50,000,000 Meditrust Agreement and the $150,000,000
Meditrust Agreement may be referred to herein collectively as the "Meditrust
Agreements"; and
WHEREAS, each of the Meditrust Agreements have been amended by Omnibus
Amendment dated December 29, 1999, by and among the parties hereto (the "First
Omnibus Amendment"); and
WHEREAS, the parties desire to further amend each of the Meditrust
Agreements as more specifically set forth herein.
NOW THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. RELEASE OF COLLATERAL. The parties acknowledge that the following
properties have been sold by the applicable Meditrust subsidiary to an affiliate
of Alterra, and that accordingly, effective as of the date of such sale, such
properties no longer serve as collateral for any of the lessees' obligations
under any of the Meditrust Agreements or any other documents or instruments in
effect with respect to the entire Alterra/Meditrust Pool (as hereinafter
defined), including, without limitation, those documents and instruments by and
among or between MOK, Meditrust, T and F, MAC, or any affiliate of the
foregoing, on one hand, and ALP, ALS Leasing, Alterra or any affiliate of the
foregoing, on the other hand:
Sterling House at Tallgrass, Wichita, KS;
Sterling House of Hays, Hays, KS;
Sterling House of Abilene II, Abilene, KS;
Woven Hearts of Sussex, Sussex, WI;
Sterling House of West Melbourne, Melbourne, FL;
Sterling House of Tequesta I (Jupiter), Tequesta, FL;
Sterling House of Stuart, Stuart, FL;
Sterling House of Leesburg, Leesburg, Fl;
Sterling House of Port Orange, Port Orange, FL;
Sterling House of Deland, Deland, FL;
2
<PAGE> 3
Sterling House of West Melbourne II, Melbourne, FL; and
Sterling House of Tequesta II, Tequesta, FL.
2. REPRESENTATIONS AND WARRANTIES. The following representations and
warranties are made by the Waiving Parties (as hereinafter defined), with
knowledge that they will be relied upon by ALP, Alterra, ALS Leasing and AHC
Purchaser, Inc.:
a. There are no persons or entities holding any of the interests
of the landlords or lessors with respect to the entirety of
the Alterra/Meditrust Pool, other than MOK, Meditrust, T and F
and MAC, all of which are parties hereto;
b. With respect to all properties within the Alterra/Meditrust
Pool, except with respect to the Acquisition Facility Lease
related to a facility known as "Liberty Commons" in Manlius,
New York, as to which no representation or warranty is made,
(i) the only holders of any mortgages, deeds of trust or
"Encumbrances", including, without limitation, "Fee
Mortgagees" (as such terms are defined in the various facility
lease agreements that exist with respect to the entire
Alterra/Meditrust Pool (collectively "Holders")) are
affiliates of MOK, Meditrust, T and F and MAC and per se fall
with the definition of "Waiving Parties" and (ii) no such
Holders are required to consent to any modification or
amendment to any facility lease agreement or any other
Meditrust Agreement.
c. As used herein, "Waiving Parties" means MOK, Meditrust, T and
F and MAC, on their own behalf and on behalf of any affiliates
of the foregoing or of Meditrust Corporation. As used herein,
the "Alterra/Meditrust Pool" means and refers to each and
every assisted living facility subject to a facility lease
agreement with MOK, Meditrust, T and F or MAC, or any
affiliate thereto, on the one hand, as lessor and landlord,
and ALS Leasing or ALP or any affiliate thereof, as lessee or
tenant, on the other hand. As used herein, "affiliate" means
any person or entity controlled by, controlling or under
common control with such other person.
3. MISCELLANEOUS. The parties hereto acknowledge and agree that, except
as specifically amended by the terms of this Amendment, all terms, covenants and
provisions of the Meditrust Agreements are hereby ratified and confirmed and
shall remain in full force and effect. This Amendment constitutes an amendment
supplemental to each of the Meditrust Agreements which is to be construed
together with and as part of the Meditrust Agreements. All references to the
Meditrust Agreements shall refer to the Meditrust Agreements as amended hereby.
3
<PAGE> 4
4. COUNTERPARTS. This Amendment may be executed in several
counterparts, each of which when executed and delivered shall constitute one
instrument. In proving this Agreement it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
5. EFFECTIVE DATE. This Amendment is executed as an instrument under
seal and shall be effective as of January , 2000.
6. ADDITIONAL DOCUMENTATION. The parties shall promptly execute and
furnish such other documentation, agreements and assurances as the parties shall
from time to time reasonably require in furtherance of the purposes of this
Amendment.
7. CAPITALIZED TERMS. All capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the Meditrust
Agreements.
WITNESS: ASSISTED LIVING PROPERTIES,
INC., a Kansas corporation
/s/ J. C. Hansen By: /s/ Mark W. Ohlendorf
- -------------------------- --------------------------------
Name: J. C. Hansen Name: Mark W. Ohlendorf
Title: Vice President
WITNESS: ALTERRA HEALTHCARE CORPORATION, a
Delaware corporation
/s/ J. C. Hansen By: /s/ Mark W. Ohlendorf
- -------------------------- --------------------------------
Name: J. C. Hansen Name: Mark W. Ohlendorf
Title: Senior Vice President
WITNESS: ALS LEASING, INC, a Delaware
corporation
4
<PAGE> 5
/s/ J. C. Hansen By: /s/ Mark W. Ohlendorf
- -------------------------- --------------------------------
Name: J. C. Hansen Name: Mark W. Ohlendorf
Title: Vice President
WITNESS: MEDITRUST OF KANSAS, INC., a
Delaware corporation
/s/AnnMarie Wasniewski By: /s/ Michael S. Benjamin
- -------------------------- --------------------------------
Name: AnnMarie Wasniewski Name: Michael S. Benjamin
Title: Senior Vice President
WITNESS: NEW MEDITRUST COMPANY LLC, a
Delaware limited liability company
/s/AnnMarie Wasniewski By: /s/ Michael S. Benjamin
- -------------------------- --------------------------------
Name: AnnMarie Wasniewski Name: Michael S. Benjamin
Title: Senior Vice President
WITNESS: MEDITRUST ACQUISITION COMPANY LLC,
a Delaware limited liability company
/s/AnnMarie Wasniewski By: /s/ Michael S. Benjamin
- -------------------------- --------------------------------v
Name: AnnMarie Wasniewski Name: Michael S. Benjamin
Title: Senior Vice President
WITNESS: T AND F PROPERTIES, LP, a Delaware
limited partnership
By: MT GENERAL LLC, sole general
partner
/s/AnnMarie Wasniewski By: /s/ Michael S. Benjamin
- -------------------------- --------------------------------
Name: AnnMarie Wasniewski Name: Michael S. Benjamin
Title: Senior Vice President
5
<PAGE> 1
EXHIBIT 10.41
[EXECUTION COPY]
AGREEMENT OF PURCHASE AND SALE
By and Between
ALTERRA HEALTHCARE CORPORATION
a Delaware corporation, as "Purchaser"
and
MEDITRUST ACQUISITION COMPANY LLC,
a Delaware limited liability company,
NEW MEDITRUST COMPANY LLC,
a Delaware limited liability company,
and
T and F PROPERTIES, LP,
a Delaware limited partnership,
collectively as "Seller"
<PAGE> 2
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made and
entered into effective as of the 30th day of November, 1999, by and between
MEDITRUST ACQUISITION COMPANY LLC, a Delaware limited liability company, NEW
MEDITRUST COMPANY LLC, a Delaware limited liability company, and T AND F
PROPERTIES, LP, a Delaware limited partnership (hereinafter collectively
referred to as "Seller"), and ALTERRA HEALTHCARE CORPORATION, a Delaware
corporation (hereinafter referred to as "Purchaser").
W I T N E S S E T H:
WHEREAS, one (1) of entities comprising Seller owns one (1) or more of
the nineteen (19) assisted living and dementia care facilities being more
particularly identified on Exhibit A, attached hereto and incorporated herein by
reference (collectively, and as more particularly described in Paragraph 1
hereof, the "Facilities," as such term is more particularly defined below);
WHEREAS, ALS Leasing, Inc., a Delaware corporation, and Assisted Living
Properties, Inc., a Kansas corporation (collectively, the "Alterra Lessees") are
the tenants in possession of the Facilities pursuant to certain Facility Lease
Agreements executed and entered into between one (1) of the entities comprising
Seller (or its predecessor) and one (1) of the Alterra Lessees, such Facility
Lease Agreements being more particularly described on Exhibit B attached hereto
and incorporated herein by reference (collectively, the "Existing Leases"); and
WHEREAS, Seller desires to sell, and Purchaser desires to purchase,
each of the Facilities, upon and in accordance with the terms and conditions
hereinafter set.
NOW, THEREFORE, for and in consideration of the foregoing, the sum of
Ten Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Seller hereby agree
as follows:
1. PURCHASE AND SALE OF FACILITIES.
Upon and subject to the terms and conditions set forth in this
Agreement, Purchaser shall purchase from Seller, and Seller shall sell to
Purchaser, the following described property:
<PAGE> 3
A. Real Property. Fee simple title in and to all those tracts or
parcels of land described on Exhibit C attached hereto and made a part hereof
(the "Land"), including, without limitation, (a) any and all buildings or
structures located on the Land and all other Improvements (as hereinafter
defined), (b) all easements appurtenant to the Land and other licenses, grants
of right, privileges or other agreements appurtenant to the Land or for the
benefit of or belonging to the Land regardless of whether situate upon the Land,
and regardless of whether specifically referenced on Exhibit C attached hereto,
(c) all mineral, oil and gas rights, riparian rights, water rights, sewer rights
and other utility rights of Seller as the owner of the Land, if any, (d) all
right, title and interest, if any, of Seller as the owner of the Land in and to
any and all swales, strips and gores of land located on or adjacent to the Land,
(e) all right, title and interest of Seller as the owner of the Land in and to
any roads, streets and ways, public or private, open or proposed, in front of or
adjoining all or any part of the Land and serving the Land, and (f) all rights
of Seller, if any, as the owner of the Land to development of the Land
appurtenant to the Land and granted by governmental entities having jurisdiction
over the Land (the Land and all of the foregoing interests are sometimes
hereinafter collectively referred to as the "Real Property").
B. Residency Agreements. The interest of Seller, if any, in and to all
residency agreements, entrance agreements and other agreements for use or
occupancy of all or any portion of each of the Facilities entered into by all
residents currently occupying beds or units in the Facilities (hereinafter
collectively referred to as "Residents") (collectively, the "Residency
Agreements").
C. Leases. The interest of Seller, as lessor under the Existing Leases,
together with all rights appurtenant thereto including without limitation any
letters of credit or cash collateral posted as security for the Existing Leases
(which are hereinafter collectively called the "Deposits"). The name of each
current lessor (together with any original lessor entities) and each lessee
under the Leases for each Facility, the date of each Lease, and the Deposits
therefor, are set forth on Exhibit B.
D. Improvements. All buildings, structures (surface and subsurface) and
other improvements and fixtures situated on or attached to or constituting a
portion of all or any portion of the Real Property (herein collectively referred
to as the "Improvements").
E. Personal Property. The interest of Seller, if any, in and to all
personal property located at the Facilities and used or useable in connection
with any present or future occupation, operation or maintenance of all or any
part of the Real Property or the Improvements or both, together with (to the
extent not constituting a portion of the Real Property or the Improvements) all
fixtures, trade fixtures, furniture, furnishings, carpeting, draperies, linens,
fittings, equipment, machinery, apparatus and appliances, now located on the
Real Property or the Improvements or both and used or useable in connection with
any present or future occupation or operation of all or any part of the Real
Property or the Improvements or both, including, without limitation, all
elevators, escalators, boilers, furnaces, heating, ventilating and
air-conditioning systems, furnishings and equipment,
3
<PAGE> 4
building drawings, plans and specifications, building materials and wall
partitions, sprinkler and well systems, sewerage systems, electrical equipment,
fire prevention and extinguishing apparatus, engineering, maintenance, cooking,
housekeeping and medical or therapeutical supplies and materials, mowers and
edgers and other lawn maintenance equipment and supplies, vans, buses,
automobiles or other motor vehicles, fuel and other supplies of all kinds
whether used, unused or in stock for future use in connection with the
occupation, maintenance or operation of the Facilities, which are on hand on the
date hereof, subject to such depletion and including such resupplying as shall
occur and which the Alterra Lessees are obligated to make pursuant to the
Facility Leases in the ordinary course of operating the ongoing business at the
Facilities (the aforesaid items are hereinafter collectively referred to as the
"Personal Property").
F. Service Contracts. The interest of Seller, if any, in and to any
service, supply, development, construction, management, maintenance or other
contracts for leasing, management, maintenance or operation of the Facilities
(other than the Existing Leases), including, but not limited to, all leases by
which equipment is leased and is located at the Facilities and used in
connection with the occupation, operation or maintenance of the Facilities, and
all operating files relating to all of the aforesaid (herein collectively
referred to as the "Service Contracts"). A summary list of all Service Contracts
in effect as of the date of this Agreement to which Seller is a party but to
which the Alterra Lessees are not a party is attached hereto as Exhibit D and
made a part hereof (the "List of Service Contracts").
G. Operating Interests. Any other interest, if any, of Seller, in and
to the Real Property and the Improvements or pertaining thereto (hereinafter
collectively referred to as the "Operating Interests"), including, without
limitation, any and all of the following:
(i) The interest, if any, of Seller conducted at the Facilities
as a going concern, including without limitation, any name or trade
name by which the Improvements or the Facilities or any part thereof
may be known (expressly excluding, however the name "Meditrust", the
names of Seller and any affiliates of Seller and all derivations
thereof) including, but not limited to names, if any, used on the date
hereof in connection with the ownership and operation of the
Facilities, and all registrations for such names, if any, and all
intangible rights or interests associated with the Facility, including
without limitation goodwill and going concern value, the registrations
therefor and any and all marketing materials, promotional materials,
letterhead, envelopes or other materials bearing such names and logos,
if any;
(ii) To the extent assignable or transferable, the interest of
Seller, if any, in each and every bond, guaranty and warranty
concerning the Improvements and the Personal Property, including,
without limitation, any roofing, air conditioning, heating, elevator
or other bond, guaranty and warranty relating to the construction,
maintenance or replacement of the Improvements or any portion thereof;
4
<PAGE> 5
(iii) The interest of Seller, if any, in and to all licenses,
permits, accreditations, approvals and certificates used in or
relating to the ownership, occupancy or operation of any part of the
Facilities, to the extent and only to the extent the same can be
assigned or transferred in accordance with applicable law (hereinafter
collectively referred to as the "Permits"), including, without
limitation, (a) any permit, license, accreditation or other approval
necessary under applicable federal, state or local law in order to
permit the operation of the Facilities as the type of Facility, and
for the number of Residents, set forth with respect to each such
Facility on Exhibit A and (b) any provider agreements with
Medicaid, Medicare and any other third-party payor programs entered
into with respect to the Facilities and any other requirement of any
federal, state or local governmental agency or organization to qualify
for payment or reimbursement for medical or therapeutic care or other
goods or services rendered or supplied to any Resident; and
(iv) Any appurtenant and reciprocal easements or other
instruments affecting the Real Property, including all amendments and
modifications and Seller's operating files, if any, relating thereto.
The Real Property, the Improvements, the Residency Agreements, the Existing
Leases, the Service Contracts, the Personal Property and the Operating Interests
related to and associated with a specific Facility are herein collectively
referred to as the "Facility."
2. PURCHASE PRICE FOR THE FACILITIES; EARNEST MONEY.
A. Payment. Subject to adjustments as may be applicable pursuant to
Paragraph 5 hereof, the purchase price for each Facility shall be as set forth
on Exhibit E attached hereto and made a part hereof (each, the "Facility
Purchase Price"). The Facility Purchase Price for a Facility shall be payable to
Seller on the Facility Closing Date for such Facility in accordance with
Paragraph 3 hereof, subject to the prorations and adjustments set forth herein,
by wire transfer through the federal reserve system in immediately available
funds to an account designated by Seller in advance. At each such Facility
Closing, Seller hereby authorizes Purchaser to wire transfer such portion of the
Facility Purchase Price as is necessary to satisfy any and all existing Monetary
Encumbrances (as hereinafter defined) with respect to such Facility, all of
which shall be paid and satisfied at such Facility Closing, including without
limitation, the amount of the outstanding principal, accrued but unpaid
outstanding interest, all prepayment penalties and all other sums owed or
claimed in order to cause the holder of any Monetary Encumbrance secured by such
Facility to release and satisfy all amounts due with respect thereto as of the
Facility Closing Date directly to the holder of such Monetary Encumbrances.
B. Allocation. Purchaser and Seller hereby agree that for purposes of
reporting this transaction to the Internal Revenue Service the Facility Purchase
Prices for each Facility shall be allocated entirely to the Real Property, and
the Improvements, and no portion of the Facility Purchase Prices will be
allocated to the Personal Property or the Operating Interests.
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C. Earnest Money Deposit with Escrow Agent. Within ten (10) days after
the date of this Agreement, Purchaser shall deposit into escrow the sum of Fifty
Thousand and No/100 Dollars ($50,000.00) as earnest money (which sum, together
with all interest actually earned thereon, is hereinafter referred to
collectively as the "Earnest Money") with an agent of Chicago Title Insurance
Company at their national office in Atlanta, Georgia ("Escrow Agent"). The
address, phone number and facsimile number for Escrow Agent is set forth in
Paragraph 14 hereof. The Earnest Money shall be held and disbursed by Escrow
Agent in accordance with the terms of this Agreement and shall be invested by
Escrow Agent in an interest bearing account (and all such interest shall
constitute part of the Earnest Money) that is fully insured by the Federal
Deposit Insurance Corporation. Except as otherwise provided in this Agreement,
the Earnest Money applicable to each Facility, which amount is set forth on
Exhibit E, shall be paid to Seller at the respective Facility Closing and
Purchaser shall receive a credit against the Facility Purchase Price in the
amount thereof. In all instances where Purchaser is entitled to terminate this
Agreement and receive a refund of the Earnest Money, Escrow Agent's receipt of a
copy of Purchaser's termination notice to Seller shall constitute full
authorization for Escrow Agent to release the Earnest Money to Purchaser unless
Seller gives written objection to such disbursement in writing to Purchaser and
Title Company within three (3) Business Days of receipt of such termination
notice. In all other instances (other than Closing), Escrow Agent must receive
the joint written instructions of Purchaser and Seller for authorization to act
hereunder.
D. Earnest Money Disputes. In the event of any dispute arising under
this Agreement with respect to disposition of the Earnest Money or the
entitlement of any party to the Earnest Money, Escrow Agent shall not be
required to determine the resolution of any such dispute and Escrow Agent shall
not be obligated to make any delivery of the Earnest Money, but in such event,
Escrow Agent may hold the Earnest Money until receipt by Escrow Agent of an
authorization in writing signed by both Seller and Purchaser directing the
disposition of same. In the absence of such authorization, Escrow Agent may hold
the Earnest Money until the final determination of the rights of the parties in
an appropriate proceeding. If such written authorization is not given, or if
proceedings for such determination are not commenced and diligently continued to
a resolution of such dispute, Escrow Agent may, but is not required to, bring an
appropriate action or proceeding for leave to deposit the Earnest Money in any
court of competent jurisdiction in the state of Georgia, as Escrow Agent shall
elect, pending such determination and to submit resolution of such dispute to a
court of competent jurisdiction by action of interpleader. Escrow Agent shall
not be responsible for any acts or omissions unless same constitute willful
misconduct or negligence, and upon delivery of the Earnest Money in accordance
with the terms of this Agreement, Escrow Agent shall have no further obligations
or liabilities to the parties hereunder or in connection herewith in Escrow
Agent's capacity as escrow agent, except for any obligations or liabilities
arising from Escrow Agent's negligence or willful misconduct. In the event
Escrow Agent places the Earnest Money in the registry of a court as aforesaid,
and files an action of interpleader, Escrow Agent shall be released and relieved
from any and all further obligations and liabilities to the parties hereunder or
in connection herewith in Escrow Agent's capacity as escrow agent, except for
any obligations or liabilities arising from Escrow Agent's negligence or willful
misconduct.
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3. CLOSING.
The closing or settlement of the purchase and sale of each of the
Facilities contemplated by this Agreement shall be held in accordance with the
provisions of this Paragraph 3. The parties hereby acknowledge that, to
facilitate an orderly transfer of the Facilities from Seller to Purchaser in
light of the financing and governmental approval contingencies as hereinafter
set forth, it may be desirable to schedule multiple closings whereby closings
will be held with respect to one (1) or more (but less than all) of the
Facilities during the period commencing after the date of this Agreement and
ending January 30, 2000. Each closing for such Facility shall be held at the
offices of Rogers & Hardin LLP, 2700 International Tower, 229 Peachtree St.,
N.E., Atlanta, Georgia 30303 or such other location as Purchaser shall specify
upon not less than five (5) days advance notice to Seller. Each closing of one
(1) or more Facilities contemplated hereby shall be referred to herein as a
"Facility Closing" and the date of any such Facility Closing shall be referred
to herein as the "Facility Closing Date." Notwithstanding anything contained
herein to the contrary, and provided in all respects that there is complete
satisfaction of the conditions precedent contained in Paragraph 12 hereof,
Purchaser shall be obligated to consummate the Facility Closings for Facilities
having aggregate Facility Purchase Prices of at least Thirty Million and No/100
Dollars ($30,000,000.00) on or before December 30, 1999 (the "Tranche A
Closing"), with the Facility Closings for the remaining Facilities to be
consummated on or before January 30, 2000 (the "Tranche B Closing"). Purchaser
shall deliver notice to Seller on or before December 22, 1999 tentatively
identifying the Facilities to be closed on or before December 30, 1999 (the
"Tranche A Facilities") (subject to complete satisfaction of the conditions set
forth in Paragraph 12) and provided that the Tranche A Closing actually occurs,
the remaining Facilities shall be closed (subject to the complete satisfaction
of the conditions set forth in Paragraph 12) on or before January 30, 2000 (the
"Tranche B Facilities"). Identification of Facilities as Tranche A Facilities
and Tranche B Facilities shall represent Purchaser's reasonable commercial
judgment of those Facilities that Purchaser reasonably believes are capable of
satisfaction of all conditions to closing on December 30, 1999 without prejudice
to the right of Purchaser at any time prior to December 30, 1999 to (i)
substitute Tranche B Facilities for Tranche A Facilities if Purchaser in
Purchaser's reasonable commercial judgment determines such substitution is more
likely to result in the Facility Closing for such Facility on December 30, 1999
or (ii) thereafter elect to redesignate any such Tranche A Facility as a Tranche
B Facility. Notwithstanding anything to the contrary contained herein, Seller
shall have no obligation to sell any additional Facilities to Purchaser pursuant
to the terms of this Agreement if Purchaser fails to consummate the purchase of
Facilities having aggregate Facility Purchase Prices of at least Thirty Million
and No/100 Dollars ($30,000,000.00), on or before December 30, 1999 for any
reason (including without limitation the nonfulfillment of any condition in
Paragraph 12 hereof) other than Seller's default hereunder.
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<PAGE> 8
A. Delivery; Possession. At the Facility Closing for any Facility,
Seller shall deliver to Purchaser the items required of Seller as elsewhere set
forth herein and Purchaser shall deliver to Seller the Facility Purchase Price,
subject to the prorations and adjustments as provided in Paragraph 5, and the
items required of Purchaser as elsewhere set forth herein. Seller shall deliver
possession of the applicable Facility to Purchaser at the time of such Facility
Closing subject only to the applicable Permitted Title Exceptions (as
hereinafter defined).
B. Transfer Taxes. Purchaser shall pay any and all city, county or
state conveyance or transfer taxes, state stamp or documentary taxes and surtax
stamps due upon the transfer of any Facility or the deed evidencing same
(including recording costs).
C. Seller's Closing Costs. Seller shall pay the costs (including
recording costs) of any cure of title defects required of Seller hereunder and
the fees and expenses of Seller's own attorneys.
D. Purchaser's Closing Costs. Purchaser shall pay the cost of the title
examinations, the premium for the Title Policies (as hereinafter defined), the
costs of any surveys of the Real Property obtained by Purchaser, the costs of
any other investigations, studies and appraisals conducted by Purchaser, and the
fees and expenses of Purchaser's own attorneys.
E. Other Costs. All other closing costs shall be paid by the party
incurring same.
4. TITLE.
At each Facility Closing, Seller shall convey and transfer to Purchaser
title to the applicable Facility which shall be free and clear of, and shall not
be subject to any of the following matters arising by, through or under Seller
(but not arising by, through or under the Alterra Lessees, which shall be deemed
to be Permitted Title Exceptions hereunder): any mechanics', materialmen's or
similar liens, pledges, mortgages, deeds of trust, security deeds, security
agreements, liens, judgments, conditional sales contracts, UCC's, encumbrances,
ground rents, past due taxes or assessments (other than those that the Alterra
Lessees are responsible for under the Existing Leases), fines, levies or other
encumbrances of a monetary nature or capable of being released upon payment of a
specified amount (herein collectively referred to as "Monetary Encumbrances") or
leases, tenancies, parties in possession, covenants, conditions, restrictions,
right-of-ways, easements, encroachments or any other agreements, contracts,
rights, acts or other matters of any nature affecting the title thereto, except
for the Permitted Title Exceptions or arising by, through or under the Alterra
Lessees. Purchaser shall at its option obtain through Chicago Title Insurance
Company ("Title Company") an owner's policy of title insurance (the "Title
Policy").
A. Examination of Title. Purchaser shall have until (i) December 28,
1999 with respect to the Tranche A Facilities and (ii) January 21, 2000 with
respect to the Tranche B Facilities to examine title to each of the Facilities
and to obtain Surveys (as hereinafter
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<PAGE> 9
defined) and to notify Seller in writing of any defects in title which may be
revealed by Purchaser's examination (which defects may include any matters
revealed by the Surveys), including Monetary Encumbrances and any title defects
that are non-monetary in nature ("Non-Monetary Defects") (provided, however,
that Purchaser shall not object to matters or defects, other than Monetary
Encumbrances, to the extent such matters or defects were specified as exceptions
on any proforma marked leasehold title insurance policies delivered to the
Alterra Lessees in connection with the inception of the Existing Leases, which
matters or defects shall be deemed to be Permitted Title Exceptions hereunder).
Within one (1) day after Seller's receipt of Purchaser's notice with respect to
any Facility, Seller shall give notice to Purchaser either refusing to cure the
applicable Non-Monetary Defects or setting forth Seller's intent to cure such
Non-Monetary Defects and stating in detail how Seller will accomplish same.
Failure of Seller to timely give such notice shall be deemed to be a refusal by
Seller to cure any such Non-Monetary Defects. Upon the later of receipt of
Seller's notice or expiration of the one (1) day period, then Purchaser may, at
any time on or prior to December 30, 1999 with respect to the Tranche A
Facilities or January 25, 2000 with respect to the Tranche B Facilities, by
notice to Seller, (i) elect to terminate Purchaser's obligation to purchase such
Facility pursuant to this Agreement, whereupon the Earnest Money with respect to
such Facility shall be promptly refunded to Purchaser, this Agreement shall be
null and void with respect to such Facility and neither party shall have any
further rights, duties or obligations hereunder with respect to such Facility
but which termination shall not release or relieve either party hereunder with
respect to the remainder of the Facilities for which no such termination notice
was given or (ii) accept title to such Facility subject to the Non-Monetary
Defects that Seller has not undertaken to cure, in which event such Non-Monetary
Defects, together with all title exceptions and matters appearing on the Title
Commitment with respect to such Facility to which Purchaser did not object, will
be deemed Permitted Title Exceptions hereunder. If Purchaser elects option (ii)
as to any Facility and at the applicable Facility Closing Seller fails to cure
the applicable Non-Monetary Defects in the manner Seller has undertaken to so
cure in its notice to Purchaser to the satisfaction of Purchaser, Purchaser will
again have the options set forth in (i) and (ii) above as its sole and exclusive
remedy; provided, however, in the event Seller was unable to effect such cure
after exercise of reasonable efforts, Seller may by notice extend the Facility
Closing Date for such Facility for an additional ninety (90) days to enable
Seller to attempt to effect such cure, in which event if Seller is unable to
cure Purchaser will once again have the options set forth in (i) and (ii) above
as its sole and exclusive remedy and provided further, however, the Facility
Purchase Price applicable to any Facility for which Seller has so extended shall
be deducted from the $30,000,000.00 aggregate Facility Purchase Prices required
to be consummated by Purchaser by December 30, 1999 pursuant to Paragraph 3.
Seller agrees not to further voluntarily alter or encumber in any way title to
any Facility after the date of this Agreement. In the event that Purchaser fails
to timely notify Seller of title defects as to any Facility, then such failure
to notify Seller shall constitute a waiver of Purchaser's right to object to any
Non-Monetary Defects with respect to any Facility but shall not be a waiver of
Seller's absolute obligation hereunder to cure Monetary Defects, nor a waiver of
Purchaser's right to object to matters that arise subsequent to such date.
Purchaser shall have the right to re-examine and update title to any Facility
and update the applicable Survey through and including the applicable Facility
Closing Date and in the event any such examination or
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update reveals any new matters first arising or appearing of record subsequent
to Purchaser's first examination of title, then (i) if such new matters were
voluntarily imposed by Seller, Seller shall be in default hereunder and the
provisions of Paragraph 17 shall apply or (ii) if such new matters were not
voluntarily imposed by Seller, then Purchaser shall have the right to object to
same and will again have the options set forth in (i) and (ii) above as its sole
and exclusive remedy.
B. Survey Matters. Purchaser may obtain a current as-built plat of
survey ("Survey") of the Land for each Facility. Each Survey shall be prepared
for and certified by a registered land surveyor licensed as such in the state in
which the Facility is located. Purchaser's and Seller's rights and obligations
with regard to title defects revealed by Surveys shall be those indicated in
Paragraph 4.A. above. Purchaser agrees to request that the Title Company and any
surveyors provide copies of all title commitments, title exceptions and surveys
directly to Seller and in the event the Title Company or surveyors fail to do so
Purchaser shall provide same promptly to Seller upon request.
5. PRORATIONS AND CREDITS AT CLOSING.
Inasmuch as the Alterra Lessees are responsible for payments of all
costs and expenses associated with the Facilities pursuant to the Existing
Leases, Seller and Purchaser agree that there shall be no prorations or credits
at the applicable Facility Closings for matters customarily prorated at closings
of improved real property, including without limitation real estate taxes and
assessments, prepaid monthly rent paid by Residents, security deposits or
custodial accounts with respect to Residents, utility expenses or deposits,
service contract payments, personal property taxes, payroll or accrued benefits
or other similar items. Notwithstanding the foregoing, however, in the event
that on the applicable Facility Closing Date, there has been any rent prepaid
under the Existing Leases by the Alterra Lessees, Purchaser shall receive a
credit for such amount against the applicable Facility Purchase Price. In
addition, all Deposits shall be refunded by Seller to Purchaser with respect to
any Facility on its respective Facility Closing Date and all original letters of
credit posted in connection with the Existing Leases related to such Facility
shall be delivered by Seller to Purchaser. With respect to any Additional Rent
(as defined in the Existing Leases), the obligation of the Alterra Lessees to
pay Additional Rent, if any, shall survive the applicable Facility Closing Date
and be determined in accordance with the terms of the Existing Leases.
6. CONFIDENTIALITY.
Purchaser agrees that all nonpublic documents and information provided
to Purchaser by Seller and/or their advisors, affiliates and agents regarding
the Facilities (excluding, however, such information already in possession of
Purchaser, the Alterra Lessees and/or their advisors, affiliates and agents)
(the "Confidential Information") shall remain confidential and neither Purchaser
nor its advisors, affiliates or agents shall disclose the Confidential
Information to any person, unless required by law, other than Purchaser's
advisors, affiliates and agents for the purposes of consummating the
transactions contemplated herein, all of whom shall be bound by this
confidentiality provision. Purchaser
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<PAGE> 11
will be responsible for any breach of the provisions of this Paragraph 6 by any
of its advisors, affiliates or agents that have received the Confidential
Information. In the event that Purchaser or anyone to whom Purchaser has
transmitted such Confidential Information are requested to or become legally
compelled to disclose any of such Confidential Information, Purchaser will
provide Seller with prompt notice so that Seller may seek a protective order or
other appropriate remedy or waive compliance with the provisions of this
Paragraph. In the event that such protective order or other remedy is not
obtained, or Seller waives compliance with the provisions of this Paragraph,
Purchaser will furnish only that portion of the Confidential Information which
is legally required and will exercise reasonable commercial efforts to obtain
reliable assurance that confidential treatment will be accorded such disclosed
Confidential Information. The provisions of this Paragraph 6 shall survive the
Facility Closings or any earlier termination of this Agreement and shall not
reduce any liability of any affiliate of Purchaser that may exist under any
preexisting confidentiality or similar agreement.
7. CONVEYANCES AND DELIVERIES AT EACH FACILITY CLOSING.
A. Deed; Affidavit. At each Facility Closing, Seller shall convey the
Land comprising a part of such Facility, together with any easements appurtenant
thereto and any Improvements thereon, to Purchaser using the form of deed used
in the jurisdiction in which the Facility is located that limits the warranties
of title therein contained to matters arising by, through or under the grantor
thereunder (the "Limited Warranty Deed"), subject only to the Permitted Title
Exceptions and using a legal description based upon the Survey and approved by
Title Company. The Limited Warranty Deed shall be accompanied by a completed and
executed transfer tax affidavit or similar instrument in the prescribed form and
if permissible under applicable law Purchaser agrees to execute same. Seller
shall also execute and deliver an owner's affidavit limited to Seller's
knowledge and relating only to matters arising by, through or under Seller in
the form prescribed by Title Company and reasonably acceptable to Seller to
enable Title Company to endorse over or delete the exceptions from the Title
Policy related to Seller for mechanics', materialmen's and other similar liens,
rights of parties in possession under unrecorded leases (other than the
applicable Residents at a Facility), and the other standard exceptions.
B. Bill of Sale. At each Facility Closing, Seller shall also convey
Seller's interest, if any, in the Personal Property comprising a part of such
Facility to Purchaser by Limited Warranty Bill of Sale, which Bill of Sale shall
contain only such warranties and representations as are necessary to ensure to
Purchaser that Seller's title to the Personal Property, if any, is free and
clear of any encumbrances or interests of others arising by, through or under
Seller. Seller shall also deliver properly endorsed certificates of title to any
motor vehicles to be conveyed pursuant hereto, if any, and releases of any UCC
Financing Statements related to the Facilities.
C. Assignment of Residency Agreements and Leases. At each Facility
Closing, Seller shall quitclaim to Purchaser Seller's interest, if any, in and
to the Residency Agreements. At Purchaser's option, Seller shall either assign
the Existing Leases by a duly
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<PAGE> 12
executed assignment of leases to Purchaser or shall execute a termination
agreement with respect to the Existing Leases and in such event Purchaser shall
be obligated to cause the Alterra Lessees to execute same. Purchaser and Seller
acknowledge that it may be necessary to leave some of the Existing Leases in
effect in order to effect an orderly transition without violation of state
licensure statutes and that as a result thereof it may be necessary for the
licenses to continue to be held in the name of the Alterra Lessees until the
next occurring licensure renewal. In the event that Purchaser elects to accept
an assignment of Existing Leases rather than to terminate same, then Purchaser
shall indemnify Seller with respect to the obligations of the Lessor under the
Existing Leases arising after the applicable Facility Closing Date and Purchaser
shall cause the Alterra Lessees to likewise so indemnify Seller.
D. Assignment of Operating Interests. At each Facility Closing, Seller
shall quitclaim to Purchaser Seller's interest, if any, in the Operating
Interests comprising a part of such Facility.
E. Notices of Conveyance. On or before each Facility Closing Date (or
earlier if Purchaser and Seller shall so agree), Seller and Purchaser shall send
any other written notice and make any necessary filing as may be required under
applicable law with respect to the sale of the Facility or a transfer of
ownership of such Facility.
F. Section 1445 Certificate; Form 8594. At each Facility Closing,
Seller shall also execute and deliver to Purchaser a certificate and affidavit
with respect to Section 1445 of the Internal Revenue Code stating that Seller is
not a foreign person as defined in said Section 1445 and applicable regulations
thereunder. At such Facility Closing, Seller and Purchaser shall execute an
agreement to timely file IRS Form 8594 with the Internal Revenue Service
reflecting the agreed upon allocation of the Facility Purchase Price as provided
in Paragraph 2.B.
G. Closing Statement. At each Facility Closing, Seller and Purchaser
shall execute and deliver a Closing Statement which shall, among other items,
set forth the applicable Facility Purchase Price, all credits against such
Facility Purchase Price, the amounts of all prorations and other adjustments to
such Facility Purchase Price and all disbursements made at such Facility Closing
and which shall recite that the provisions of this Agreement shall survive such
Facility Closing in the manner expressly set forth herein.
H. Reaffirmation of Representations and Warranties. At each Facility
Closing, both Seller and Purchaser shall reaffirm in writing that all
representations and warranties made by each of them, respectively, with respect
to such Facility are true, correct and complete as of such Facility Closing
Date.
I. Release of Monetary Encumbrances; Amendment to Meditrust Documents.
At each Facility Closing, Seller shall cause all Monetary Encumbrances
encumbering such Facility to be paid and satisfied in full and released of
record and Seller and Purchaser and the Alterra Lessees shall execute and
deliver such documents and instruments as necessary or appropriate (i) to cause
such Facilities to be released from all security interests granted in
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connection with the Existing Leases as security therefor and (ii) to modify and
amend all documents and instruments between Seller, Seller's affiliates and
Purchaser and the Alterra Lessees with respect to the remainder of the portfolio
of assisted living facilities leased to the Alterra Lessees by Seller and
Seller's affiliates (the Facilities and the remainder of such portfolio are
hereinafter collectively the "Alterra-Meditrust Pool") to release therefrom as
collateral the Facilities (provided such releases shall expressly exclude any
obligations which by their terms survive termination).
J. Acknowledgement of Survival. At each Facility Closing, Seller, the
applicable Alterra Lessees and Purchaser shall execute and deliver an agreement
acknowledging that certain provisions of the Facility Leases relating to such
Facility and of other documents and instruments executed in connection with the
Alterra-Meditrust Pool survive any termination of the Facility Lease,
notwithstanding the release of such Facility as collateral for the obligations
of the Alterra Lessees and the guarantor with respect to the Alterra-Meditrust
Pool.
K. Other Conveyances and Instruments. At each Facility Closing, Seller
shall also execute and deliver to Purchaser a conveyance or assignment of any
portion of the Facility sold hereunder for which the conveyance or assignment is
not otherwise provided in this Paragraph 7.
8. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Each entity comprising Seller represents, warrants and covenants to and
with Purchaser that, as to such Seller entity, as applicable, and as to each
Facility shown as owned by each entity on Exhibit B, as follows:
A. Title to Real Property and Personal Property. The Seller entity
identified on Exhibit A for each Facility is the owner of title to the Real
Property and the Improvements comprising a portion of such Facility and is the
holder of the interest of the landlord under the applicable Existing Lease for
such Facility free and clear of all encumbrances arising by, through or under
such Seller entity except for the Permitted Title Exceptions and except for
liens and encumbrances that will be paid by Seller at the applicable Facility
Closing.
B. Existing Leases. The Existing Leases are in full force and effect as
of the execution of this Agreement.
C. [INTENTIONALLY DELETED].
D. No Other Leases. There are no leases or other agreements relating to
use or occupancy of the Facilities arising by, through or under Seller, except
for the Existing Leases.
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E. Service Contracts; Other Contracts. As of the applicable Facility
Closing Date, there will be no Service Contracts or other management, real
estate, leasing, rental commission, service, maintenance, employment, union or
other contracts of any kind or description in existence relating to the
applicable Facility and which arise by, through or under Seller, except for the
Permitted Title Exceptions and the Existing Leases (in the event Purchaser
elects not to terminate the Existing Leases).
F. [INTENTIONALLY DELETED].
G. Litigation and Other Proceedings. To Seller's knowledge there are no
judgments entered or unsatisfied against Seller which have attached or could
attach to the Facilities or title thereto. To Seller's knowledge there is no
litigation, claim or proceeding pending or threatened against or relating to
Seller's ownership or title to any Facility, nor does Seller know of any basis
for any such action. To Seller's knowledge there is no governmental
investigation relative to Seller (i) which relates to any Facility or Seller's
ownership or title to any Facility or (ii) which could have a material adverse
effect on the Facilities, Seller's ownership thereof or Seller's ability to
perform hereunder, nor does Seller know of any basis for any such action. Seller
is not in the hands of a receiver nor has Seller filed for protection under any
bankruptcy or insolvency statute nor has an order for a receivership, stay, or
other similar relief under any bankruptcy or insolvency statute been entered
with respect to Seller.
H. Compliance of Property With Zoning and Other Laws. Seller has not
received any written notification from any governmental or public authority that
any Facility violates any existing fire, health, building, handicapped persons,
environmental, sanitation, use and occupancy or zoning laws or that any work is
required to be done upon or in connection with any Facility or that any
modifications or alterations now or in the future will need to be made to
maintain the licensure category of any Facility. No written notice or warning
from any governmental authority with respect to any failure or alleged failure
of Seller to comply with any law, regulation or order has been received by
Seller, nor to Seller's knowledge is any such notice or warning threatened
except as already disclosed to one or more of the Alterra Lessees.
I. Environmental Matters. Except for matters arising by, through or
under the Alterra Lessees or medical waste or cleaning solvents, Seller has not
used, nor knowingly allowed the use of any Facility for the generating,
handling, treatment, storage, disposal or release of any hazardous substance,
hazardous waste, petroleum or petroleum products, asbestos, lead-based paint,
contaminant, pollutant or other words of similar import (hereinafter
collectively referred to as "Hazardous Substances") referred to or defined as
such under any applicable local, state or federal law or regulation regulating
the discharge of solid, liquid or gaseous waste into the environment or the
placement of structures or materials into any waters (surface or subsurface) or
otherwise regulating or appertaining to matters affecting the environment
(hereinafter collectively referred to as "Environmental Laws"). Seller has
received no notice and there are no claims, actions, suits, proceedings or
investigations known to Seller, pending or threatened, related to Hazardous
Substances with
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respect to the ownership, use, condition, or operation of any of the Facility,
in any court or before or by any federal, state or other governmental or
quasi-governmental agency or authority or private arbitration tribunal except as
previously disclosed to one or more of the Alterra Lessees (hereinafter
collectively referred to as "Environmental Litigation").
J. [INTENTIONALLY DELETED].
K. Pending Condemnation Proceedings. Seller has received no written
notice of, and to Seller's knowledge there is no pending condemnation or eminent
domain proceedings which would affect any Facility, or any part thereof or
access thereto.
L. Disclosure. No statement, warranty or representation by Seller
contains an untrue statement of material fact or omits to state a material fact
necessary in order to make the statements made in light of the circumstances
under which such statements are made not misleading.
M. Authority. Each Seller entity is duly organized or formed, validly
existing and in good standing under the laws of the state of its incorporation
or organization, and each has all necessary power to execute and deliver this
Agreement and perform all its obligations hereunder. Each Seller entity has the
full power and authority to enter into and perform this Agreement and the
execution, delivery and performance of this Agreement by such Seller entity (i)
has been duly and validly authorized by all necessary action on the part of such
Seller entity, (ii) does not conflict with or result in a violation of such
Seller entity's articles of incorporation, bylaws, partnership agreement,
operating agreement or other governing instruments, or any judgment, order or
decree of any court or arbiter in any proceeding to which such Seller entity is
a party, and (iii) does not conflict with or constitute a material breach of, or
constitute a material default under, any contract, agreement or other instrument
by which such Seller entity is bound or to which it is a party. This Agreement
is the valid and legally binding obligation of each Seller entity enforceable in
accordance with its terms.
All of the foregoing representations, warranties and covenants of each
Seller shall be reaffirmed by such Seller in writing at each Facility Closing as
true, correct and complete as of the Facility Closing Date and such
representations, warranties and covenants shall survive the Facility Closing for
the period set forth in Paragraph 18. From and after the date of this Agreement,
Seller will not take any action, or fail to take any action or suffer or permit
any third party (other than Purchaser or its affiliates or those acting on
behalf of Purchaser or its affiliates) to take or fail to take any action, which
would result in a breach of any warranty, representation or covenant contained
in this Paragraph 8 or which would impair or impede Seller's ability to reaffirm
such representations, warranties and covenants as true, correct and complete as
of the Facility Closing Date.
Except for Seller's representations and warranties contained in this
Agreement and in any other documents or instruments executed or delivered in
connection with any Facility Closings (including without limitation any
representations or warranties contained in any modification or amendment of the
documents or instruments with respect to the removal of
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<PAGE> 16
the Facilities from the remainder of the Alterra-Meditrust Pool), Purchaser is
acquiring the Facilities "AS IS" and "WHERE IS", without express or implied
warranty of any kind or nature from Seller or anyone acting by, through or under
Seller. Purchaser specifically acknowledges that affiliates of Purchaser have
been the lessees and operators of the Facilities since the inception of the
Existing Leases (and in some instances, prior thereto) and as a result thereof
Purchaser, through such affiliates, is fully familiar with the Facilities and
the operation thereof.
9. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Purchaser, as of the date of the execution of this Agreement by
Purchaser, represents and warrants to Seller as follows:
A. Organization, Power and Authority. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary power to execute and deliver this Agreement and
perform all its obligations hereunder. Purchaser has the full power and
authority to enter into and perform this Agreement and the execution, delivery
and performance of this Agreement by Purchaser (i) has been duly and validly
authorized by all necessary action on the part of Purchaser, (ii) does not
conflict with or result in a violation of Purchaser's Articles of Incorporation
or Bylaws, each as amended, or any judgment, order or decree of any court or
arbiter in any proceeding to which Purchaser is a party, and (iii) does not
conflict with or constitute a material breach of, or constitute a material
default under, any contract, agreement or other instrument by which Purchaser is
bound or to which it is a party. This Agreement is the valid and legally binding
obligation of Purchaser enforceable in accordance with its terms.
B. No Bankruptcy. Purchaser is not in the hands of a receiver nor has
Purchaser filed for protection under any bankruptcy or insolvency statute nor
has an order for a receivership, stay or other similar relief under any
bankruptcy or insolvency statute been entered with respect to Purchaser.
C. Purchaser's Investigation. Except with respect to the
representations and warranties of Seller set forth in this Agreement or in any
other documents or instruments executed or delivered in connection with any
Facility Closings (including without limitation any representations or
warranties contained in any modification or amendment of the documents or
instruments with respect to the removal of the Facilities from the remainder of
the Alterra-Meditrust Pool), Purchaser has and will makes its own inquiry and
investigation into, and based thereon will form an independent judgment
concerning, the Facilities and the operation thereof and, except with respect to
the aforedescribed representations and warranties Purchaser will not rely on
Seller for any facts or information with respect thereto.
D. Hart-Scott-Rodino. The value of assets being acquired in connection
with the Facilities, collectively, that are not exempt from the requirements of
the Hart-Scott-Rodino Act pursuant to 16 C.F.R. ss. 802.2 does not equal or
exceed $15,000,000 in the aggregate.
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All of the foregoing representations, warranties and covenants of
Purchaser shall be reaffirmed by Purchaser in writing at each Facility Closing
as true, correct and complete as of the Facility Closing Date and such
representations, warranties and covenants shall survive the Facility Closing for
the period set forth in Paragraph 18. From and after the date of this Agreement,
Purchaser will not take any action, or fail to take any action or suffer or
permit any third party (other than Seller or its affiliates or those acting on
behalf of Seller or its affiliates) to take or fail to take any action, which
would result in a breach of any warranty, representation or covenant contained
in this Paragraph 9 or which would impair or impede Purchaser's ability to
reaffirm such representations, warranties and covenants as true, correct and
complete as of the Facility Closing Date.
10. PRE-CLOSING COVENANTS.
Purchaser and Seller covenant and agree that between the date hereof
and the last to occur of the Facility Closing Dates:
A. [INTENTIONALLY DELETED].
B. New Leases. After the date of this Agreement, Seller shall not enter
into any new leases with respect to the Facilities without in each case the
prior written consent of Purchaser.
C. New Service Contracts. After the date of this Agreement, Seller
shall not enter into any new Service Contracts with respect to the Facilities.
D. Notice of Revision of Representations Due to Discovery of New Facts.
Seller and Purchaser shall notify the other promptly if Seller or Purchaser
become aware of any fact, transaction, event or occurrence which could make any
of the warranties, representations and covenants of Seller or Purchaser under
this Agreement not true with the same force and effect as if made on or as of
the date hereof.
E. Personal Property Inventory. Seller shall not remove any of the
Personal Property from any Facility during the term of this Agreement.
F. Transfer of Permits. To the extent required under applicable law,
Seller shall execute all applications and instruments required in connection
with the transfer of Permits to the extent transferable, in order to transfer
the benefits of each such Permits to Purchaser and, if requested by Purchaser,
to reasonably cooperate (at Purchaser's expense) with Purchaser's efforts to
have all Permits required for the operation of the Facility issued to and in the
name of Purchaser on or prior to the applicable Facility Closing Date, except
that Seller makes no representation or warranty with respect to the necessity
for any approvals, consents or filings referred to in this subparagraph F.
G. Notices and Consents At Purchaser's expense Purchaser and Seller
will (and will cause any of its affiliates to) give any notices to, make any
filings with, and use
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commercially reasonable efforts to obtain any authorizations, consents and
approvals of governments and governmental agencies required in connection with
consummating the sale of the Facilities pursuant hereto.
11. PURCHASER'S INSPECTION OF PROPERTY.
A. Access. Subject to the rights of Residents and subject to the
rights of the Alterra Lessees, Purchaser shall, at all reasonable times prior to
the applicable Facility Closing Date, have the privilege of visiting and
inspecting each Facility with its agents, representatives and contractually
retained independent contractors as needed to inspect, examine, test, appraise
and survey such Facility, including, but not limited to, investigations of the
zoning status and physical status thereof and verification of all information
made or to be made available to Purchaser with respect to such Facility. In
addition, Purchaser shall have the right to obtain such letters, certificates or
statements from appropriate governmental officials or other experts concerning
zoning and other matters related to the Facilities. This privilege shall include
the right to make surveys, examinations, appraisals and other tests to obtain
any relevant information necessary to determine subsurface and topographic
conditions, including, but not limited to, Hazardous Substances studies, soil
tests, asbestos analysis and structural review, all of which tests, studies and
reviews shall be performed at Purchaser's sole cost and expense. In addition,
Purchaser shall have the right to inspect all other matters required to be
delivered by Seller to Purchaser hereunder. In consideration of Purchaser's
right to inspect the Facilities as described in this Paragraph 11.A, Purchaser
shall, and does hereby agree to repair any damage to any Facility resulting
therefrom and to indemnify, defend and hold Seller harmless from any losses,
costs or expenses (including reasonable attorneys fees) arising out of the
negligent exercise of such privileges by Purchaser (including any rights or
claims of materialmen or mechanics to liens on the Facilities, but excepting
acts resulting from the gross negligence or willful conduct of Seller or
Seller's agents, principals, employees, representatives, affiliates or others
whose presence is suffered or permitted by Seller other than Residents or the
Alterra Lessees), which indemnity, defense and hold harmless agreement shall
survive any termination of this Agreement.
B. Termination Election. In the event that any of Purchaser's
inspections, examinations, tests or surveys of any Facility reveal any condition
or fact (or raises substantial uncertainty with respect to the existence of any
such condition or fact) which, results in Purchaser's determination that the
Facilities or any one of them, are unsuitable for Purchaser's purposes in
Purchaser's sole and absolute discretion, then Purchaser shall give notice to
Seller thereof on or before (i) December 28, 1999 with respect to the Tranche A
Facilities and (ii) January 25, 2000 with respect to the Tranche B Facilities
(the "Review Period") electing to terminate this Agreement with respect to such
Facility, whereupon such Facility or Facilities shall be deemed to be deleted
from the Facilities to be sold pursuant hereto, this Agreement shall be
terminated as to those (and only those) Facilities and Purchaser and Seller
shall have no further rights, duties or obligations hereunder with respect to
such Facilities. Failure of Purchaser to give notice of a termination election
pursuant to this Paragraph 11.B. prior to the expiration of the Review Period
shall constitute a waiver of
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Purchaser's right to terminate this Agreement with respect to any Facilities not
so terminated pursuant to this Paragraph 11.B.
12. CONDITIONS TO EACH FACILITY CLOSING.
A. [INTENTIONALLY DELETED].
B. Conditions to Purchaser's Obligation to Close. The obligation
of Purchaser to purchase each Facility hereunder is subject to the following
additional conditions, any or all of which may be waived by Purchaser to the
extent permitted by applicable law:
(i) Accuracy of Representations (and the facts recited
therein); No Default by Seller. All the warranties, representations and
covenants of Seller contained in this Agreement with respect to such
Facility or the Seller entities owning such Facility shall be true in
all material respects on the applicable Facility Closing Date with the
same effect as if they had been made on such Facility Closing Date and
shall be reaffirmed by Seller in writing at the Facility Closing, and
Seller shall have performed all covenants and obligations to have been
performed and satisfied by Seller with respect to such Facility prior
to the Facility Closing Date.
(ii) Licensing. Purchaser shall have received all necessary
permits, licenses, approvals, accreditations and certificates from all
applicable federal, state and local governmental authorities or
agencies or others having jurisdiction in order to (a) permit Purchaser
or its designee to operate the Facility and (b) permit the transfer of
the Facility from Seller to Purchaser except for such permits,
licenses, approvals, accreditations or certificates which, if not
received by Purchaser, would not materially and adversely affect
Purchaser's ability to operate the Facility.
(iii) Financing. Purchaser shall have obtained financing on
commercially reasonable terms to enable Purchaser to finance
Purchaser's acquisition of the Facilities, which contingency shall not
be deemed satisfied until the lender shall be satisfied with respect to
such lender's due diligence inquiries regarding the Facilities.
Purchaser agrees that the foregoing condition precedent shall be deemed
to be satisfied in the event that Purchaser has obtained financing at
an initial interest rate not to exceed nine percent (9%) per annum in
an initial principal amount of not less than Fifty-Five Million and
No/100 Dollars ($55,000,000.00), which loan will be secured by first
priority mortgages or deeds of trust with respect to the Facilities.
Purchaser shall apply for such loan within ten (10) days from and after
the date hereof and use Purchaser's reasonable commercial efforts to
obtain such loan.
(iv) Termination Election. Purchaser shall not have given
notice to Seller of Purchaser's election to terminate this Agreement
with respect to such Facility pursuant to any express right to do so
hereunder.
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<PAGE> 20
C. Conditions to Seller's Obligation to Close. The obligation of Seller
to sell each Facility hereunder is subject to the following additional
condition, which may be waived by Seller to the extent permitted by applicable
law:
(i) Accuracy of Representations (and facts recited herein); No
Default by Purchaser. All of the warranties, representations and
covenants of Purchaser contained in this Agreement shall be true in all
material respects on the applicable Facility Closing Date with the same
effect as if they had been made on such Facility Closing Date and shall
be reaffirmed by Purchaser in writing at the Facility Closing, and
Purchaser shall have performed all covenants and obligations to have
been performed and satisfied by Purchaser prior to the Facility Closing
Date.
D. Result of Failure to Satisfy Conditions. In the event that any
condition hereunder shall not be satisfied on or before December 30, 1999 with
respect to the Tranche A Facilities or January 30, 2000 with respect to the
Tranche B Facilities, then Purchaser (if such failed condition is set forth in
subparagraph B above) or Seller (if such failed condition is set forth in
subparagraph C above) may upon notice to the other party terminate this
Agreement with respect to any Facility for which such condition was not
satisfied, whereupon this Agreement shall be null and void with respect to such
Facility or Facilities, all Earnest Money allocable to such Facility or
Facilities shall be refunded immediately to Purchaser and neither party shall
have any further rights, duties or obligations hereunder with respect to such
Facility or Facilities but which termination shall not release or relieve either
party hereunder with respect to the remainder of the Facilities for which no
such termination notice was given.
13. STANDSTILL.
From and after the date hereof, and provided that the Tranche A Closing
and the Tranche B Closing are consummated on or before the dates and as herein
provided, Seller agrees that Seller will not offer, solicit or obtain any offer
for the Facilities or for the additional Facilities identified on Exhibit "F"
(the "Additional Facilities") from any person or entity other than Purchaser,
nor shall Seller enter into negotiations with any person or entity with respect
to the Facilities or the Additional Facilities other than Purchaser for the
period through and including March 31, 2000. Notwithstanding the foregoing, the
obligations of Seller pursuant to this Paragraph 13 shall remain in full force
and effect through March 31, 2000 in the even that the Tranche A or the Tranche
B Closings do not occur as a result of the default of the Sellers, or any of
them, hereunder. The provisions of this Paragraph 13 shall survive any Closing
hereunder.
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<PAGE> 21
14. NOTICES.
All notices, consents, approvals and other communications which may be
or are required to be given by either Seller or Purchaser under this Agreement
shall be properly given if made in writing and sent by (a) hand delivery, or (b)
certified mail, return receipt requested, or (c) nationally recognized overnight
delivery service for next business day delivery (such as Express Mail, Federal
Express or Airborne Express), or (d) facsimile or telecopier, provided a
confirming copy thereof is thereafter also sent via the methods described in
(a)-(c), above, with all postage and delivery charges paid by the sender and
addressed to Purchaser or Seller, as applicable, as follows. Such notices
delivered (a) by hand shall be deemed received upon actual delivery, (b) by
overnight delivery service shall be deemed received on the business day
following the date of deposit with such overnight service, (c) by mail shall be
deemed received upon the earlier of actual receipt or two (2) business days
after mailing, and (d) by facsimile or telecopier shall be deemed received upon
the date the sender receives verbal or electronic confirmation of such
transmission, without regard to when the confirming copy is sent or delivered.
Said notice addresses are as follows:
IF TO SELLER:
c/o Meditrust Corporation
197 First Avenue, Suite 300
Needham, MA 02494-9127
Attn: Michael S. Benjamin, Sr. V. P. & Gen. Counsel
Telecopier: (781) 433-1290
Telephone: (781) 433-6000
with a copy to:
Hutchins, Wheeler & Dittmar, P.C.
101 Federal Street
Boston, MA 02110
Attn: Jack Fainberg
Telecopier: (617) 951-1295
Telephone: (617) 951-6600
IF TO PURCHASER:
Alterra Healthcare Corporation
450 N. Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attn: William F. Lasky
Telecopier: (414) 789-6677
Telephone: (414) 641-7401
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with a copy to:
Rogers & Hardin LLP
2700 International Tower
Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Miriam J. Dent
Telecopier: (404) 525-2224
Telephone: (404) 420-4608
IF TO TITLE COMPANY:
Chicago Title Insurance Company
5775-C Peachtree Dunwoody Rd.
Suite 200
Atlanta, GA 30342
Attention: Mr. Christopher J. Valentine
Telephone: (404) 303-6300
Facsimile: (404) 303-6307
Either party may change its address for notices hereunder upon not less than
five (5) days notice to the other, and either party's counsel may give notice on
behalf of their respective clients. Inability to give notices due to incorrect
address or due to failure of a party to give notice of a change of address,
refusal to accept notices, and inability to transmit notices due to mechanical
or other difficulties on the recipient's end (including without limitation a
malfunctioning facsimile machine) shall be deemed to be effective notice
hereunder.
15. CASUALTY AND CONDEMNATION.
A. Casualty. In the event that prior to the applicable Facility Closing
Date any of the Improvements of the applicable Facility are damaged or destroyed
by fire or other casualty to any extent then Purchaser shall have the right to
elect not to purchase such Facility so damaged or destroyed (a "Paragraph 15.A.
Election") by written notice to Seller within ten (10) days after such fire or
other casualty, and thereafter the Earnest Money applicable to such Facility
shall be immediately paid over to Purchaser and neither party hereto shall have
any further rights, obligations or liabilities hereunder with respect to such
Facility except pursuant to the Existing Leases therefor and to the extent that
any right, obligation or liability set forth herein expressly survives
termination of this Agreement. In the event that Purchaser does not make a
Section 15.A. Election with respect to a Facility, Purchaser shall be obligated
to close the purchase and sale contemplated by this Agreement as scheduled
without adjustment of the applicable Facility Purchase Price and Seller shall
assign to Purchaser at such Facility Closing all of Seller's interests in any
insurance proceeds payable under any insurance policies on account of such
damage or destruction or pay to Purchaser all such insurance proceeds previously
paid, and any obligation to repair or restore
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<PAGE> 23
shall be governed by the terms of the applicable Existing Lease. The applicable
Facility Closing Date shall be extended, if necessary, for ten (10) days to
permit Purchaser to make Purchaser's election as set forth above.
B. Condemnation. In the event that prior to any Facility Closing Date
there shall be instituted against any portion of the applicable Facility any
proceeding in condemnation, eminent domain or any written request for a
conveyance in lieu thereof, or limiting or restricting access thereto or should
Seller receive notice that such proceedings are threatened or have been
commenced against such Facility (hereinafter collectively referred to as
"Condemnation Proceedings"), then if Seller shall have notice thereof Seller
shall give Purchaser immediate notice thereof and Purchaser shall have the right
to elect not to purchase such Facility (a "Paragraph 15.B. Election") by written
notice to Seller within ten (10) days after Purchaser obtains knowledge (through
Seller or otherwise) of such Condemnation Proceedings, and thereafter the
Earnest Money applicable to such Facility shall be immediately paid over to
Purchaser and neither party hereto shall have any further rights, obligations or
liabilities hereunder with respect to such Facility except pursuant to the
Existing Lease and except to the extent that any right, obligation or liability
set forth herein expressly survives termination of this Agreement. In the event
that Purchaser shall not make a Section 15.B. Election with respect to an
Facility, Purchaser shall be obligated to close the purchase and sale
contemplated hereby less the portion of such Facility so taken or subject to
said Condemnation Proceedings without adjustment of the applicable Facility
Purchase Price and Seller shall assign or pay to Purchaser at the applicable
Facility Closing all of Seller's right, title and interest in any award payable
on account of such Condemnation Proceedings or pay to Purchaser all such awards
previously paid and any obligation to repair or restore shall be governed by the
terms of the applicable Existing Lease. The Closing Date shall be extended, if
necessary, for ten (10) days to permit Purchaser to make Purchaser's election as
set forth above.
16. BROKERS.
Each party hereto represents and warrants to the other that it has not
employed any broker, finder or other person or entity who might, by reason
thereof, have any claim for payment of any brokerage commission, finder's fee or
other similar compensation from any other party hereto. Seller and Purchaser
further represent and warrant that they each shall be responsible for payment of
any broker or finder employed (expressly or impliedly) by them, respectively.
Seller and Purchaser shall and do hereby indemnify and defend the other against
and hold the other harmless of and from all claims, demands and liabilities for
any breach of the foregoing representations and warranties, including without
limitation, for any commission, fee or other compensation payable to or claimed
by any broker or finder employed (express or implied) by it or with whom it made
an agreement (express or implied) to pay a broker's commission, a finder's fee
or other compensation. The provisions of this Paragraph 16 shall survive any
closings hereunder.
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<PAGE> 24
17. DEFAULT.
A. By Purchaser. In the event that Purchaser defaults in the observance
or performance of its covenants and obligations hereunder after written notice
by Seller to Purchaser of such default and Purchaser's failure to cure such
default within two (2) Business Days after receipt of such notice, Seller shall
be entitled to terminate this Agreement with respect to any Facility for which a
Facility Closing has not yet occurred and to which such default relates by
written notice to Purchaser of such termination and shall also be entitled, as
its sole and exclusive remedy hereunder, to receive payment from Escrow Agent of
any Earnest Money relating to such Facility then being held by Escrow Agent and
not previously disbursed at any prior Facility Closing hereof as full liquidated
damages for such default of Purchaser. The parties hereby acknowledge the
difficulty of ascertaining the actual damages in the event of such a default,
that it is impossible more precisely to estimate the damages to be suffered by
Seller upon Purchaser's default and that the aforesaid payments are intended not
as a penalty, but as full liquidated damages and that such amounts constitutes a
good faith estimate of the potential damages arising therefrom. Seller's right
to so terminate this Agreement and to receive aforesaid payment as full
liquidated damages is Seller's sole and exclusive remedy in the event of default
hereunder by Purchaser, and Seller hereby waives, relinquishes, releases and
covenants not to pursue any and all other rights and remedies, including, but
not limited to (i) any right to sue Purchaser for specific performance of this
Agreement, (ii) any right to sue Purchaser for damages or to prove that Seller's
actual damages exceed the amounts agreed upon herein as full liquidated damages,
and (iii) any other right or remedy which Seller may otherwise have against
Purchaser, either hereunder, at law, in equity or otherwise.
B. By Seller. In the event that Seller defaults in the observance or
performance of its covenants and obligations hereunder after written notice by
Purchaser to Seller of such default and Seller's failure to cure such default
within two (2) Business Days after receipt of such notice, Purchaser shall be
entitled to pursue any and all rights or remedies available at law, in equity or
otherwise, including without limitation an action for specific performance or an
action for damages resulting from such breach, including without limitation an
action to recover all costs and expenses incurred by Purchaser in pursuing such
damages, including attorneys' fees and expenses; provided, however, an action
for damages shall be limited to actual damages and shall not include special,
consequential or punitive or other damages.
C. Lease Obligations Not Affected. It is Purchaser's and Seller's intent that
their respective obligations pursuant to this Agreement be separate and distinct
from the obligations of Seller and the obligations of Purchaser and Purchaser's
respective affiliates with respect to the Existing Leases and with respect to
the remainder of the Alterra-Meditrust Pool. Accordingly the parties acknowledge
that any defaults hereunder shall be subject to remedy only pursuant the
provisions of this Paragraph 17 and there shall be no rights of offset or cross
defaults under or pursuant to the Existing Leases or any other documents or
instruments executed in connection with the Existing Leases or the remainder of
Alterra-Meditrust Pool, nor shall anything contained herein reduce, eliminate or
impair the obligations of the Sellers or the Alterra Lessees under the Existing
Leases or the obligations
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<PAGE> 25
of the Sellers or the Alterra Lessees or Purchaser under any guaranty or other
document or instrument executed in connection with the Existing Leases or the
remainder of the Alterra-Meditrust Pool.
18. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
A. Survival of Representations and Warranties. The provisions of
Paragraph 20 and 21, the other paragraphs of this Agreement that expressly
provide they will survive and all representations and warranties contained
herein and in any certificate delivered at any Facility Closing shall be deemed
to have been relied upon notwithstanding any investigation heretofore or
hereafter made or omitted by any party hereto and shall survive each Facility
Closing for a period of one (1) year after the date of the respective Facility
Closing hereunder.
19. GENERAL PROVISIONS.
A. Agreement Binding; Assignment. This Agreement shall be binding upon
each party hereto and such party's successors and assigns and shall inure to the
benefit of each party hereto and such party's successors and assigns. As used
herein, all references to "Seller" shall mean individually each entity
constituting a Seller hereunder and collectively all such entities, all of which
shall be jointly and severally liable for the performance of all obligations of
Seller hereunder. Any reference herein to any "Seller entity" (or words of
similar import) are not intended to be in limitation of the foregoing definition
but are included for clarity purposes only. Purchaser may assign this Agreement
and Purchaser's rights hereunder without the prior written consent of Seller to
any person or entity.
B. Entire Agreement. This Agreement and all the exhibits referenced
herein and annexed hereto contain the entire agreement of the parties hereto
with respect to the matters contained herein, and no prior agreement or
understanding pertaining to any of the matters connected with this transaction
shall be effective for any purpose. Except as may be otherwise provided herein,
the agreements embodied herein may not be amended except by an agreement in
writing signed by the parties hereto.
C. Execution Necessary. This Agreement shall not be binding upon Seller
or Purchaser until fully executed and delivered by representatives of Seller or
Purchaser, as the case may be, and no action taken by Seller's or Purchaser's
representatives shall be deemed an acceptance of this Agreement until this
Agreement has been so executed by Seller or Purchaser, as the case may be, and
delivered to the other party hereto.
D. Time is of the Essence. Time is of the essence of the transaction
contemplated by this Agreement.
E. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
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<PAGE> 26
F. Interpretation; Date of Agreement. The titles, captions and
Paragraph headings are inserted for convenience only and are in no way intended
to interpret, define, limit or expand the scope or content of this Agreement or
any provision hereof. If any party to this Agreement is made up of more than one
person or entity, then all such persons and entities shall be jointly and
severally liable hereunder, even though the defined term for such party is used
in the singular in this Agreement and in each instance in which a defined term
for such party is used in the singular it shall mean, collectively, all persons
and entities, jointly and severally, and each person or entity constituting a
portion thereof, severably. If any time period under this Agreement ends on a
day other than a Business Day (as hereinafter defined), then the time period
shall be extended until the next business day. The term "Business Day" shall
mean Monday through Friday excluding holidays recognized by the state government
of the States of Massachusetts and Wisconsin. All references in this Agreement
to "the date of this Agreement" shall be deemed to refer to the date set forth
in the first Paragraph hereof, which date evidences the effective date of the
agreement of the parties as to the terms and conditions set forth herein,
regardless of the date when this Agreement was actually executed by both
parties. All references in this Agreement to the words "herein", "hereunder",
"hereof" or words of similar import shall be deemed to refer to the entirety of
this Agreement unless the reference by its terms specifies only a specific
portion of this Agreement. Wherever used in this Agreement the phrase "by,
through or under Seller" or "by, through or under grantor" shall specifically
exclude any actions or omissions by Purchaser and/or the Alterra Lessees.
G. Waiver. Purchaser or Seller, as the case may be, reserves the right
to waive, in whole or in part, any provision hereof which is for the benefit of
the party so waiving, including without limitation any condition precedent under
Paragraph 12 hereof.
H. Facsimile Signature; Counterparts. This Agreement may be executed by
facsimile signature and in separate counterparts, each of which shall be deemed
an original and all of which, taken as a whole, shall be deemed to be one (1)
original. This Agreement shall be deemed fully executed when each party whose
signature is required has signed at least one (1) counterpart even though no one
(1) counterpart contains the signatures of all of the parties to this Agreement.
I. Non-Waiver. Unless otherwise expressly provided herein, no waiver by
Seller or Purchaser of any provision hereof shall be deemed to have been made
unless expressed in writing and signed by such party. No delay or omission in
the exercise of any right or remedy accruing to Seller or Purchaser upon any
breach under this Agreement shall impair such right or remedy or be construed as
a waiver of any such breach theretofore or thereafter occurring. The waiver by
Seller or Purchaser of any breach of any term, covenant or condition herein
stated shall not be deemed to be a waiver of any other breach, or of a
subsequent breach of the same or any other term, covenant or condition herein
contained.
J. Rights Cumulative. All rights, powers, options or remedies afforded
to Seller or Purchaser either hereunder or by law shall be cumulative and not
alternative, unless expressly provided to the contrary herein, and the exercise
of one right, power, option or
26
<PAGE> 27
remedy shall not bar other rights, powers, options or remedies allowed herein or
by law, unless expressly provided to the contrary herein.
K. Exhibits. The exhibits referred to in and attached to this Agreement
are incorporated herein in full by reference.
L. Attorneys' Fees. If there is any legal action, arbitration or
proceeding between Seller and Purchaser arising from or based on this Agreement
or the interpretation or enforcement of any provisions hereof, then the
unsuccessful party to such action, arbitration or proceeding shall pay to the
prevailing party all reasonable costs and expenses, including reasonable
attorneys' fees, incurred by such prevailing party in such action, arbitration
or proceeding and in any appeal in connection therewith. If such prevailing
party recovers a judgment in any such action, arbitration, proceeding or appeal,
then such costs, expenses and attorneys' fees shall be included in and as a part
of such judgment.
20. WAIVER OF PRIOR POST-CLOSING OBLIGATIONS; DISBURSEMENT OF POST-CLOSING
FUNDS.
Purchaser and Seller acknowledge that there are several open
post-closing obligations that exist with respect to the following facilities
within the Alterra-Meditrust Pool: Clare Bridge of Charleston, South Carolina,
Clare Bridge of Charlotte, North Carolina, Clare Bridge of Columbia, South
Carolina, Wynnwood of Charlotte, North Carolina, Wynnwood of Greensboro, North
Carolina, Wynnwood of Lansing, Michigan (the "Prior Post-Closing Obligations").
Purchaser and Seller further acknowledge that Seller has been holding the sum of
approximately Three Million Eight Hundred Thousand and No/100 Dollars
($3,800,000.00) (the "Post-Closing Funds"), which represents approximately
$3,500,000 in principal and the remainder of which constitutes accrued interest
to date, with respect to the Prior Post-Closing Obligations in an interest
bearing account. With respect to the Post-Closing Funds and the Prior
Post-Closing Obligations, Seller, on its own behalf and on behalf of any
additional affiliates of Seller who constitute the remaining landlords, lessors
or holders of any "Encumbrances", including without limitation any "Fee
Mortgagees" (as such terms are defined in the various facility lease agreements
that exist with respect to the remainder of the Alterra-Meditrust Pool) holding
any interest in the facilities to which the Prior Post-Closing Obligations apply
(Seller and all such affiliates being hereinafter collectively called the
"Waiving Parties") agree to comply with the provisions of this Paragraph 20. The
Waiving Parties hereby agree that provided that the Waiving Parties receive the
certificates of occupancy for the facilities identified above, simultaneously
with the consummation of the Tranche A Closing the Waiving Parties will
collectively (i) waive any further duty or obligation of the Alterra Lessees,
Purchaser and any affiliate thereof to cure or comply with any of the Prior
Post-Closing Obligations and (ii) release the Post-Closing Funds to Purchaser
simultaneously with the consummation of the Tranche A Closing.
27
<PAGE> 28
21. MODIFICATION OF REMAINDER OF ALTERRA-MEDITRUST POOL DOCUMENTS.
Simultaneously with the Tranche A Closing hereunder, Seller, the Alterra
Lessees and any applicable Waiving Parties shall execute and enter into
amendments to the facility lease agreements and related documents (including
without limitation in the Agreement Regarding Related Lease Transaction, as
amended) in effect for the entire remainder of the Alterra-Meditrust Pool to
reduce the Rent Coverage Ratio so that the applicable ratio that must be
satisfied as to the entire remaining Alterra-Meditrust Pool (excluding any
Facilities previously conveyed to Purchaser hereunder or to any affiliate of
Purchaser prior hereof) shall be as follows on the following applicable dates:
As of 12/31/00 - 1.0
As of 12/31/01 - 1.1
As of 12/31/02 - 1.2
28
<PAGE> 29
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
representatives to execute and deliver this Agreement as of the day and year
first above written.
SELLER:
MEDITRUST ACQUISITION
COMPANY LLC, a Delaware limited
liability company
By: s/s Michael S. Benjamin
-----------------------
Name: Michael S. Benjamin
Its: Senior Vice President
NEW MEDITRUST COMPANY LLC, a
Delaware limited liability company
By: s/s Michael S. Benjamin
-----------------------
Name: Michael S. Benjamin
Its: Senior Vice President
T and F PROPERTIES, LP, a Delaware
limited partnership
By: s/s Michael S. Benjamin
-----------------------
Name: Michael S. Benjamin
Its: Senior Vice President
PURCHASER:
ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation
By: /s/ Mark W. Ohlendorf
---------------------
Name: Mark W. Ohlendorf
Its: Senior Vice President
29
<PAGE> 30
EXHIBIT A List of Facilities.
EXHIBIT B Existing leases, facility names and dates and deposits.
EXHIBIT C Legal Descriptions (labeled by Facility name).
EXHIBIT D Service Contracts - NONE.
EXHIBIT E Purchase Price and Earnest Money, allocated by Facility.
EXHIBIT F Additional Facilities
30
<PAGE> 1
EXHIBIT 10.56
AMENDED SCHEDULE OF MORTGAGES
WHICH ARE SUBSTANTIALLY IN THE FORM OF BANK UNITED MORTGAGE
ATTACHED AS EXHIBIT 10.53 TO THE COMPANY'S FORM
10-K FOR THE PERIOD ENDING 12/31/98
<TABLE>
<CAPTION>
MORTGAGOR FACILITY NAME LOCATION MORTGAGE AMOUNT
--------- ------------- -------- ---------------
<S> <C> <C> <C>
ALS Holdings, Inc. Sterling House of Lawrence 3220 Peterson Road $3,210,000
Lawrence, KS 66049
ALS Holdings, Inc. Sterling House of Lenexa I 8710 Caenen Lake Road $2,325,000
Lenexa, KS 66215
ALS Wisconsin Wynwood of Appleton 5800 Pennsylvania Avenue $5,397,360
Holdings, Inc.* Grand Chute, WI
ALS Holdings, Inc.* Sterling Cottage of Lady Lake I 17395 S.E. 109th Terrace Road $2,850,000
Summerfield, FL 34491
ALS Holdings, Inc.* Sterling House of Lady Lake II 17421 S.E. 109th Terrace Road $2,521,102
Summerfield, FL 34491
ALS Holdings, Inc.* Sterling Cottage of Michigan City I 1300 East Coolspring Avenue $2,981,250
Michigan City, IN 46360
ALS Holdings, Inc.* Sterling House of Michigan City II 1400 East Coolspring Avenue $2,483,613
Michigan City, IN 46360
ALS Holdings, Inc.* Sterling House of Southern Pines II 101 Brucewood Road $2,925,000
Southern Pines, NC 28387
ALS Holdings, Inc.* Sterling Cottage of Valparaiso I 2501 Valparaiso Street $2,793,143
Valparaiso, IN 46383
<CAPTION>
DATE OF
MORTGAGOR MORTGAGE
--------- --------
<S> <C>
ALS Holdings, Inc. November 18, 1998
ALS Holdings, Inc. November 18, 1998
ALS Wisconsin December 10, 1998
Holdings, Inc.*
ALS Holdings, Inc.* March 22, 1998
ALS Holdings, Inc.* March 22, 1998
ALS Holdings, Inc.* March 22, 1998
ALS Holdings, Inc.* March 22, 1998
ALS Holdings, Inc.* March 22, 1998
ALS Holdings, Inc.* March 22, 1998
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
MORTGAGOR FACILITY NAME LOCATION MORTGAGE AMOUNT
--------- ------------- -------- ---------------
<S> <C> <C> <C>
ALS Holdings, Sterling House of Valparaiso II 2601 Valparaiso Street $2,583,820
Inc.* Valparaiso, IN 46383
ALS Holdings, Clare Bridge of Pin Oak I 8015 Pin Oak Drive $9,324,992
Inc.* Orlando, FL 32819
and
Wynwood of Pin Oak II 8001 Pin Oak Drive
Orlando, FL 32819
ALS Holdings, Inc. Alterra Clare Bridge of Southern Pines 101 Brucewood Road $3,244,249
Southern Pines, NC 28387-5144
ALS Holdings, Inc. Alterra Clare Bridge Cottage of Dublin 160 Elephant Rd. $2,026,006
Borough Dublin, PA 18917-2202
ALS Holdings, Inc. Alterra Clare Bridge Cottage of Vero 420 4th Ct. $2,325,000
Beach Vero Beach, FL 32962-1812
ALS Holdings, Inc. Alterra Sterling House of Vero Beach 410 4th Ct. $3,150,000
Vero Beach, FL 32962-1812
ALS Holdings, Inc. Alterra Clare Bridge Cottage of Leesburg 710 South Lake Street $2,813,522
Leesburg, FL 34748-7316
ALS Holdings, Inc. Alterra Clare Bridge Cottage of Muncie 1605 North Morrison Road $2,707,813
Muncie, IN 47304-5329
ALS Holdings, Inc. Alterra Sterling House of Muncie 1601 North Morrison Road $3,000,000
Muncie, IN 47304-5329
ALS Holdings, Inc. Alterra Clare Bridge Cottage of Florence 467 Sterling Drive $2,700,000
Florence, SC 29505
ALS Holdings, Inc. Alterra Sterling House of Florence 3006 Hoffmeyer Road $2,700,000
Florence, SC 29501-7551
<CAPTION>
DATE OF
MORTGAGOR MORTGAGE
--------- --------
<S> <C>
ALS Holdings, March 22, 1998
Inc.*
ALS Holdings, March 22, 1998
Inc.*
ALS Holdings, Inc. June 4, 1999
ALS Holdings, Inc. June 4, 1999
ALS Holdings, Inc. June 11, 1999
ALS Holdings, Inc. June 11, 1999
ALS Holdings, Inc. June 30, 1999
ALS Holdings, Inc. June 30, 1999
ALS Holdings, Inc. June 30, 1999
ALS Holdings, Inc. June 30, 1999
ALS Holdings, Inc. June 30, 1999
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
MORTGAGOR FACILITY NAME LOCATION MORTGAGE AMOUNT
--------- ------------- -------- ---------------
<S> <C> <C> <C>
ALS Holdings, Inc. Alterra Sterling House of Carrollton 1029 Seminole Trail $3,150,000
Carrollton, TX 75007-6275
ALS Holdings, Inc. Alterra Sterling House of Owatonna 334 Cedardale Drive $1,125,000
Owatonna, MN 55060-4467
and
Alterra Clare Bridge Cottage of Owatonna 334 Cedardale Drive $1,720,627
Owatonna, MN 55060-4467
ALS Holdings, Inc. Alterra Wynwood of Brush Creek 4225 Wayvern Drive $8,100,000
Santa Rosa, CA 95409-4193
ALS Holdings, Inc. Alterra Villas of Tequesta 217 Village Boulevard $3,269,844
Tequesta, FL
and
Altera Clare Bridge of Tequesta DC 223 Village Boulevard
Tequesta, FL
ALS Holdings, Inc. Alterra Sterling House of Winter Haven 6110 Cypress Gardens Blvd. $4,830,010
Winter Haven, FL
and
Alterra Clare Bridge Cottage of
Winter Haven 6120 Cypress Gardens Blvd.
Winter Haven, FL
<CAPTION>
DATE OF
MORTGAGOR MORTGAGE
--------- --------
<S> <C>
ALS Holdings, Inc. June 30, 1999
ALS Holdings, Inc. September 27, 1999
ALS Holdings, Inc. September 27, 1999
ALS Holdings, Inc. December 13, 1999
ALS Holdings, Inc. December 22, 1999
</TABLE>
*The form of mortgages entered into for these properties were conformed to meet
the requirements of applicable state law.
<PAGE> 1
EXHIBIT 10.97
CONSENT TO MERGER
AND AMENDMENT TO STERLING HOUSE CORPORATION -
HEALTH CARE REIT, INC. LEASES
THIS CONSENT TO MERGER AND AMENDMENT TO LEASES (this "Agreement") is
made effective as of the 1st day of November, 1999, by and among STERLING HOUSE
CORPORATION, a Kansas corporation having its principal place of business at 450
North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005 ("Sterling"), in
its individual capacity and on behalf of certain of its subsidiaries and
affiliates, ALTERRA HEALTHCARE CORPORATION, a Delaware corporation formerly
known as Alternative Living Services, Inc., having its principal place of
business at 450 North Sunnyslope Road, Suite 300, Brookfield, Wisconsin 53005
("Alterra"), and HEALTH CARE REIT, INC., a Delaware corporation having its
principal place of business at One SeaGate, Suite 1500, P.O. Box 1475, Toledo,
Ohio 43603-1475 ("HCRI"), in its individual capacity and on behalf of certain of
its subsidiaries and affiliates.
W I T N E S S E T H:
WHEREAS, HCRI, and certain of its subsidiaries and affiliates as
landlords or lessors (HCRI, and such subsidiaries and affiliates being
hereinafter collectively referred as "Landlord"), and Sterling, and certain of
its subsidiaries and affiliates as tenants or lessees (Sterling, and such
subsidiaries and affiliates being hereinafter collectively referred to as
"Tenant"), have from time to time executed and entered into certain Lease
Agreements with respect to certain assisted living facilities, such Lease
Agreements being more particularly described and identified on Exhibit "A",
attached hereto and incorporated herein by reference (collectively the "Sterling
Leases");
WHEREAS, Sterling is a wholly-owned subsidiary of Alterra, and Alterra
has guaranteed the Sterling Leases;
WHEREAS, Alterra and Sterling intend to consummate a merger pursuant to
which Sterling will be merged into Alterra and Alterra shall be the surviving
corporation and Alterra, as successor by merger to Sterling, will succeed as a
matter of law to all liabilities and obligations of Sterling as tenant under the
Sterling Leases (the "Merger"); and
WHEREAS, HCRI, on behalf of itself and its subsidiaries and affiliates,
desires to consent to the Merger and, in connection therewith, HCRI, on behalf
of itself and its subsidiaries and affiliates, and Sterling, on behalf of itself
and its subsidiaries and affiliates, desire to modify and amend the Sterling
Leases as is more particularly described below to make certain provisions of the
Sterling Leases
<PAGE> 2
consistent with the provisions of other lease agreements existing by and between
Alterra and HCRI (collectively the "Alterra Leases").
NOW, THEREFORE, for and in consideration of the foregoing recitals, the
sum of Ten and No/100 Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. CONSENT TO MERGER. HCRI, on behalf of itself and its subsidiaries
and affiliates, hereby (i) consents to the Merger, (ii) accepts Alterra as the
tenant under the Sterling Leases, and (iii) agrees that the Merger and the
failure of Sterling to survive the merger shall not cause or create any event of
default or default under the Sterling Leases or the Alterra Leases or any
guaranty, security agreement or other document or instrument executed or
delivered in connection therewith.
2. DEFINED TERMS. Initial capitalized terms used herein and not
otherwise defined herein shall have the meanings respectively ascribed to such
defined terms in the Alterra Leases.
3. ANNUAL FINANCIAL STATEMENTS. The definition of "Annual Financial
Statements" appearing in Article 1.3 of each Sterling Lease shall be deleted in
its entirety and the following substituted in lieu thereof:
"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."
4. MATERIAL OBLIGATION. The definition of "Material Obligation"
appearing in Article 1.3 of each Sterling Lease shall be deleted in its entirety
and the following substituted in lieu thereof:
"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."
5. IMPOSITIONS AND UTILITIES.
2
<PAGE> 3
(a) Payment of Impositions. The Section entitled "Payment of
Impositions" in each Sterling Lease shall be amended to provide Tenant with
fifteen (15) business days after the due date of each Imposition to provide
Landlord with proof of payment.
(b) Discontinuance of Utilities. The following language (in
bold type) shall be added to the last sentence of the Section entitled
"Discontinuance of Utilities" appearing in each Sterling Lease:
"...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 SS.3.4 ABOVE."
6. INSURANCE.
(a) Mortgages. The following language (or substantially
similar language) appearing in the Section entitled "Mortgages" in the Article
dealing with insurance in each Sterling Lease shall be deleted in its entirety:
"[iii] loss adjustment of claims in excess of $5,000.00 shall
require the consent of the mortgagee;"
Said language shall be replaced by the following:
"[iii] loss adjustment of claims in excess of $50,000.00 shall
require the consent of mortgagee, which consent shall not be
unreasonably withheld;"
7. INDEMNITY.
(a) Limitation of Landlord's Liability. The following language
shall be added as the last sentence of the Section entitled "Limitation of
Landlord's Liability" in each Sterling Lease:
"The foregoing limitation does not apply to loss, injury, death or
damage caused by Landlord's gross negligence or willful
misconduct."
8. USE AND ACCEPTANCE OF PREMISES.
(a) Conditions of Use and Occupancy. The following language
(in bold type) shall be added to the last sentence of the Section entitled
"Conditions of Use and Occupancy" in each Sterling Lease:
3
<PAGE> 4
"... condition thereof AND ACCOMPANIED BY A REPRESENTATIVE OF
TENANT TO THE EXTENT SUCH A REPRESENTATIVE IS AVAILABLE."
9. DEFAULT AND REMEDIES.
(a) Events of Default.
(i) The following language (or any substantially
similar language) appearing in subsection (e) of the Section entitled "Events of
Default" in each Sterling Lease shall be deleted in its entirety:
"(e) Tenant abandons or vacates the Leased Property or any material
part thereof or ceases to do business for any reason."
Said language shall be replaced by the following:
"(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."
(ii) The following language (or any substantially
similar language) appearing in subsection (j) of the Section entitled
"Events of Default" in each Sterling Lease shall be deleted in its entirety:
"(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 ss.14.6 hereof, without the prior
written consent of Landlord."
Said language shall be replaced by the following:
"(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."
10. DAMAGE AND DESTRUCTION.
(a) No Rent Abatement. The following language (or any
substantially similar language) appearing in the Section entitled "No Rent
Abatement" in each Sterling Lease shall be deleted in its entirety:
4
<PAGE> 5
"Rent will not abate pending the repairs or rebuilding of the Leased
Property."
Said language shall be replaced by the following:
"Except to the extent that business interruption insurance
proceeds are received by Landlord, Rent will not abate pending
the repairs or rebuilding of the Lease Property."
11. CONDEMNATION.
(a) Total Taking. The following language (or any substantially
similar language) appearing in the Section entitled "Total Taking" in each
Sterling Lease shall be deleted in its entirety:
"All damages awarded for 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."
Said language shall be replaced by the following:
"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."
(b) The following language shall be added to the Section of
each Sterling Lease entitled "Total Taking" as Section 10.1.1:
"If the entirety of any Leased Property is taken during the final 18
months of the Initial Term or the Renewal Term and Landlord
elects to terminate each applicable Phase Lease, Tenant shall
have the option to purchase each applicable Phase Leased
Property (but not less than all applicable Phase Leased
Property). 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 all of the Leased Property, the purchase price shall
be the Fair Market Value as determined in accordance with the
provisions of this Lease entitled "Option to Purchase" and all
other terms of the option to purchase shall be in accordance
with such provisions.
5
<PAGE> 6
12. NEGATIVE COVENANTS.
(a) No Debt. The following language (or any substantially
similar language) appearing in the subsection of each Sterling Lease entitled
"No Debt" in the Article entitled "Negative Covenants" shall be deleted in its
entirety:
"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 or leased to Tenant by Landlord; and [v] unsecured
indebtedness for working capital in any amount for facilities
not financed by Landlord."
Said language shall be replaced by the following:
"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 each Facility working capital purposes
in an amount not to exceed $150,000.00 per Facility; [iii]
indebtedness that is secured by any Permitted Lien; and [iv]
unsecured indebtedness that will no cause Tenant to be in
violation of ss.15.7.
(b) No Transfer. The following language (in bold type) shall
be added to the last sentence of the subsection entitled "No Transfer" in the
Article of each Sterling Lease entitled "Negative Covenants" appearing in each
Sterling Lease:
"... any Permitted Lien AND TRANSFERS TO AN AFFILIATE."
(c) No Dissolution. The following language (in bold type)
shall be added to the last sentence of the subsection entitled "No Dissolution"
in the Article entitled "Negative Covenants" appearing in each Sterling Lease:
"... acquired) EXCEPT FOR MERGERS, CONSOLIDATIONS OR OTHER STRUCTURAL
CHANGES IN TENANT THAT WILL NOT CAUSE TENANT TO BE IN
VIOLATION of SS.15.7."
6
<PAGE> 7
(d) Changes in Executive Officers. The following language (or
any substantially similar language) appearing in the subsection entitled "No
Change in Management" in the Article entitled "Negative Covenants" in each
Sterling Lease shall be deleted in its entirety:
"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."
(e) Subordination of Payments to Affiliates. The following
language (in bold type) shall be added to the Section entitled "Subordination of
Payment to Affiliates" appearing in the Article entitled "Negative Covenants" in
each Sterling Lease:
"... any Affiliate, EXCEPT FOR ORDINARY PAYROLL."
(f) Limits on Management Fees. The following language (or any
substantially similar language) appearing in the Section entitled "Limits on
Management Fees" in the Article entitled "Negative Covenants" in each Sterling
Lease shall be deleted in its entirety:
"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."
13. AFFIRMATIVE COVENANTS.
(a) Change in Control. The following language (or any
substantially similar language) appearing in the subsection entitled "Existence
and Change in Ownership" appearing in the Section entitled "Affirmative
Covenants" in each Sterling Lease shall be deleted in its entirety:
"Existence and Change in Ownership. Tenant shall maintain its
existence throughout the terms of this Agreement."
Said language shall be replaced by the following:
7
<PAGE> 8
"Existence and Change in Control. Tenant or any entity into
which Tenant is merged shall maintain its existence throughout
the term of this Agreement."
(b) No Investments. The text of the subsection entitled "No
Investments" appearing in the Article entitled "Affirmative Covenants" in each
Sterling Lease shall be deleted in its entirety and the following text shall be
substituted therefor:
"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 ss.15.7."
(c) Furnish Documents. The Article entitled "Furnish
Documents" appearing in each Sterling Lease shall be amended to provide Tenant
with ninety (90) days after the end of each fiscal year to deliver the documents
set forth therein.
14. ALTERATIONS, CAPITAL IMPROVEMENTS AND SIGNS.
(a) Approval of Alterations. The following language shall be
added as the fourth sentence of the Section entitled "Approval of Alterations"
appearing in each Sterling Lease:
"Approval of Alterations. 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 sixty (60) days of receipt of Plans
and Specifications shall be deemed to constitute Landlord's
approval."
15. ASSIGNMENT AND SALE OF LEASED PROPERTY.
(a) Prohibition on Assignment and Subletting. The following
language (or any substantially similar language) appearing in the subsection
entitled "Prohibition on Assignment and Subletting" in the Article entitled
"Assignment and Sale of Leased Property" in each Sterling Lease shall be deleted
in its entirety:
8
<PAGE> 9
"Prohibition on Assignment or 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 no 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, Sterling Management Company, Inc. or
any other permitted manager; and [iv] a change of ownership of
Tenant except as permitted under ss.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."
Said language shall be replaced by the following:
"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: [1] 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 ss.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
9
<PAGE> 10
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 ss.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."
16. QUIET ENJOYMENT, SUBORDINATION, ATTACHMENTS AND ESTOPPEL
CERTIFICATES.
(a) Estoppel Certificates. The text of the Article
entitled "Estoppel Certificates" appearing in each Sterling Lease shall be
amended as follows:
"[d] to Tenant's knowledge,... [e] to Tenant's knowledge,..."
17. MISCELLANEOUS.
(a) Landlord's Modification. The following language (in bold
type) shall be added to the Article entitled "Landlord's Modification" appearing
in each Sterling Lease:
"... modification acceptable IN TENANT'S REASONABLE DISCRETION PROVIDED
SUCH MODIFICATION DOES NOT MATERIALLY DIMINISH TENANT'S RIGHTS
UNDER THE LEASE."
18. Except as expressly modified above, the Sterling Leases are hereby
ratified and confirmed and shall remain in full force and effect. It is the
intent of the parties that the modifications and amendments set forth herein be
liberally construed consistent with the parties intent for the provisions of the
Sterling Leases to be consistent with the comparable provisions of the Alterra
Leases, and the failure of any particular Sterling Lease to not contain any
provision herein referenced shall not impair or impact the effect of such
provision as so modified or amended in the remainder of the Sterling Leases.
19. SUCCESSORS AND ASSIGN. This Agreement shall be binding upon and
10
<PAGE> 11
inure to the benefit of the parties hereto and their respective successors and
assigns.
20. FURTHER ASSISTANCE. The parties hereto hereby agree to execute and
deliver such further assurances as shall be necessary or appropriate to evidence
the Consent to the Merger and the modifications and amendments to the Sterling
Leases as herein set forth.
[SIGNATURES ARE ON FOLLOWING PAGES]
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
WITNESS: STERLING HOUSE CORPORATION,
a Kansas corporation
/s/Kristin A. Ferge By: /s/ Mark W. Ohlendorf
------------------- ----------------------
Name: Kristin A. Ferge Name: Mark W. Ohlendorf
Title: Vice Prseident
[SIGNATURES CONTINUE ON NEXT PAGE]
12
<PAGE> 13
WITNESS: HEALTH CARE REIT, INC., a Delaware
corporation
/s/ Rita J. Rogge By: /s/ Erin L. Ibele
----------------- -----------------
Name: Name: Erin L. Ibele
Title: Vice President and
Corporate Secretary
[SIGNATURES CONTINUE ON NEXT PAGE]
13
<PAGE> 14
Alterra Healthcare Corporation hereby acknowledges and agrees to the foregoing
modifications and amendments and is relying hereon in consummating the Merger.
WITNESS: ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation
/s/Kristin A. Ferge By: /s/ Mark W. Ohlendorf
------------------- -------------------------
Name: Kristin A. Ferge Name: Mark W. Ohlendorf
Title: Senior Vice Prseident
14
<PAGE> 15
EXHIBIT A
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
RESIDENCE ADDRESS DATE OF TRANSACTION
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alterra Sterling House of Bartlesville North 5420 S.E. Adams Blvd. 2/9/96
Bartlesville, OK 74006
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Cedar Hill 602 E. Beltline Road 3/10/97
Cedar Hill, TX 75104
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Chickasha 801 Country Club Road 4/18/96
Chickasha, OK 73018
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Claremore 1605 N. Hwy. 88 2/26/96
Claremore, OK 74017
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Desoto 747 W. Pleasant Run Road 5/15/96
Desoto, TX 75115-3838
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Duncan 915 W. Plato Road 11/22/95
Duncan, OK 73533
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Edmond 116 W. Danforth 10/5/95
Edmond, OK 73003
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Enid 4613 W. Willow Road 2/9/96
Enid, OK 73703
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Lawton 6302 S. W. Lee Blvd. 11/22/95
Lawton, OK 73505
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Midwest City 615 W. Blue Ridge Drive 2/9/96
Midwest City, OK 73110
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Muskogee 3211 Chandler Road 3/6/96
Muskogee, OK 74403
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Norman 1701 E. Alameda St. 10/10/95
Norman, OK 73071
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Oklahoma City South 2500 SW 89th Street 6/13/95
Oklahoma City, OK 73162
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Owasso 12807 E. 86th Place North 3/28/96
Owasso, OK 74055
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Palestine 101 Trinity Court 2/21/96
Palestine, TX 75801
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Ponca City 1500 E. Bradley Ave. 9/27/95
Ponca City, OK 74604
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alterra Sterling House of Shawnee 3947 N. Kickapoo 2/9/96
Shawnee, OK 74801
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Stillwater 1616 E. McElroy Road 4/20/95
Stillwater, OK 74075
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Texarkana 4204 Moores Lane 3/28/96
Texarkana, TX 75503
- -------------------------------------------------------------------------------------------------------------------------
Alterra Sterling House of Waxahachie 2250 Brown Street 2/21/96
Waxahachie, TX 75165
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 1
EXHIBIT 10.113
LEASE
DATED JULY 16, 1999
BETWEEN
LTC PROPERTIES, INC., AS LESSOR
AND
ALTERRA HEALTHCARE CORPORATION, AS LESSEE
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I......................................................................1
1.1 Leased Property........................................................1
1.2 Term...................................................................2
ARTICLE II.....................................................................2
Definitions.................................................................2
ARTICLE III....................................................................6
3.1 Minimum Rent...........................................................6
3.2 Annual Escalation of Minimum Rent......................................6
3.3 Additional Charges.....................................................7
3.4 Net Lease..............................................................7
3.5 Late Charge............................................................7
ARTICLE IV.....................................................................8
4.1 Payment of Impositions.................................................8
4.2 Notice of Impositions..................................................9
4.3 Utility Charges........................................................9
4.4 Insurance Premiums.....................................................9
4.5 Payables...............................................................9
ARTICLE V.....................................................................10
5.1 No Termination, Abatement, etc........................................10
5.2 Abatement Procedures..................................................10
ARTICLE VI....................................................................10
6.1 Ownership of the Leased Property......................................10
6.2 Lessee's Personal Property............................................10
6.3 Consumable Inventory..................................................11
ARTICLE VII...................................................................11
7.1 Condition of Leased Property..........................................11
7.2 Use of the Leased Property............................................12
ARTICLE VIII..................................................................12
8.1 Compliance with Legal and Insurance Requirements, Instruments, etc....12
8.2 Legal Requirement Covenants...........................................13
ARTICLE IX....................................................................14
9.1 Maintenance and Repair................................................14
9.2 Expenditures to Comply with Law; Construction of Additional
Improvements Pursuant to Certificate of Need..........................15
9.3 Encroachments, Restrictions, etc......................................15
ii
<PAGE> 3
ARTICLE X.....................................................................16
10.1 Lessee's Obligations for Hazardous Materials..........................16
10.2 Definition of Hazardous Materials.....................................16
ARTICLE XI....................................................................16
No Liens...................................................................16
ARTICLE XII...................................................................17
Permitted Contests.........................................................17
ARTICLE XIII..................................................................17
13.1 General Insurance Requirements........................................17
13.2 Replacement Cost......................................................18
13.3 Additional Insurance..................................................19
13.4 Waiver of Subrogation.................................................19
13.5 Form Satisfactory, etc................................................19
13.6 Increase in Limits....................................................19
13.7 Blanket Policy........................................................20
13.8 No Separate Insurance.................................................20
13.9 Continuous Coverage...................................................20
ARTICLE XIV...................................................................20
14.1 Insurance Proceeds....................................................20
14.2 Reconstruction in the Event of Damage or Destruction Covered by
Insurance Proceeds...................................................21
14.3 Reconstruction in the Event of Damage or Destruction Not Covered
by Insurance.........................................................21
14.4 Lessee's Property.....................................................21
14.5 Restoration of Lessee's Property......................................21
14.6 No Abatement of Rent..................................................21
14.7 Termination of Option to Extend.......................................21
14.8 Waiver................................................................22
ARTICLE XV....................................................................22
15.1 Definitions...........................................................22
15.2 Parties'Rights and Obligations........................................22
15.3 Total Condemnation....................................................22
15.4 Allocation of Portion of Award........................................22
15.5 Partial Condemnation..................................................23
15.6 Temporary Condemnation................................................23
ARTICLE XVI...................................................................24
16.1 Events of Default.....................................................24
16.2 Certain Remedies......................................................27
16.3 Damages...............................................................27
iii
<PAGE> 4
16.4 Waiver..............................................................29
16.5 Application of Funds................................................29
ARTICLE XVII..................................................................29
Lessor's Right to Cure Lessee's Default....................................29
ARTICLE XVIII.................................................................29
18.1 Options to Extend...................................................29
18.2 Minimum Rent During Extended Terms..................................30
ARTICLE XIX...................................................................31
Holding Over...............................................................31
ARTICLE XX....................................................................31
Risk of Loss...............................................................31
ARTICLE XXI...................................................................32
Indemnification............................................................32
ARTICLE XXII..................................................................33
22.1 Attornment..........................................................33
22.2 Sublease Limitation.................................................33
ARTICLE XXIII.................................................................34
Officer's Certificates and Financial Statements............................34
ARTICLE XXIV..................................................................34
Lessor's Right to Inspect..................................................34
ARTICLE XXV...................................................................34
No Waiver..................................................................34
ARTICLE XXVI..................................................................35
Remedies Cumulative........................................................35
ARTICLE XXVII.................................................................35
Acceptance of Surrender....................................................35
ARTICLE XXVIII................................................................35
No Merger of Title.........................................................35
ARTICLE XXIX..................................................................35
Conveyance by Lessor.......................................................35
ARTICLE XXX...................................................................35
Quiet Enjoyment............................................................35
iv
<PAGE> 5
ARTICLE XXXI..................................................................36
Notices....................................................................36
ARTICLE XXXII.................................................................37
32.1 Lessor May Grant Liens..............................................37
32.2 Attornment..........................................................37
32.3 Lessee's Right to Cure..............................................37
32.4 Breach by Lessor....................................................38
ARTICLE XXXIII................................................................38
33.1 Survival of Obligations.............................................38
33.2 Late Charges; Interest..............................................38
33.3 Limits of Lessor's Liability........................................38
33.4 Transfer of Operations..............................................38
33.5 Addendum, Amendments and Exhibits...................................39
33.6 Headings............................................................39
33.7 Time................................................................39
33.8 Days................................................................39
33.9 Rent................................................................39
33.10 Applicable Law......................................................39
33.11 Successors and Assigns..............................................39
33.12 Recordation.........................................................39
33.13 Prior and Future Agreements.........................................39
33.14 Partial Invalidity..................................................39
33.15 Attorneys'Fees......................................................40
33.16 Authority of Lessor and Lessee......................................40
33.17 Relationship of the Parties.........................................40
33.18 Counterparts........................................................40
33.19 Brokers.............................................................40
33.20 Computer Disc.......................................................40
v
<PAGE> 6
LEASE
THIS LEASE (this "Lease") is made as of this 16th day of July, 1999, by
and between LTC PROPERTIES, INC., a Maryland corporation, herein called
"Lessor", and ALTERRA HEALTHCARE CORPORATION, a Delaware corporation, herein
called "Lessee", subject to the terms, conditions and contingencies set forth
below.
ARTICLE I
1.1 LEASED PROPERTY. Upon and subject to the terms and conditions
hereinafter set forth, Lessor leases to Lessee, and Lessee rents and hires from
Lessor all of the following (the "Leased Property"):
(i) The real property situated in the City of Fort Collins,
Larimer County, Colorado and more particularly described in EXHIBIT "A" attached
hereto (the "Land");
(ii) All buildings, structures, Fixtures (as hereinafter defined)
and other improvements of every kind including, but not limited to, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines (on-site
and off-site), parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land (collectively, the "Leased
Improvements");
(iii) All easements, rights and appurtenances relating to the Land
and the Leased Improvements;
(iv) All permanently affixed equipment, machinery, fixtures, and
other items of real and/or personal property, including all components thereof,
permanently affixed to or incorporated into the Leased Improvements, including,
without limitation, all furnaces, boilers, heaters, electrical equipment,
heating, plumbing, lighting, ventilating, refrigerating, incineration, air and
water pollution control, waste disposal, air-cooling and air conditioning
systems and apparatus, sprinkler systems and fire and theft protection
equipment, all of which to the greatest extent permitted by the law, are hereby
deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto, to the extent
acquired by Lessor pursuant to the "Purchase Agreement" as defined in Article II
hereof (collectively the "Fixtures"); and
(v) All tangible and intangible personal property included in the
"Property" acquired by Lessor pursuant to the Purchase Agreement, as more
particularly described in EXHIBIT "B" attached hereto and made a part hereof,
including without limitation all replacements, substitutions, additions or
improvements thereto, whether now existing or hereafter acquired (collectively,
the "Personal Property").
The Leased Property includes that certain 36-unit assisted living
facility located in the City of Fort Collins, Larimer County, Colorado, known as
"Clare Bridge Cottage." Notwithstanding the foregoing, the Leased Property shall
not include any property not acquired by Lessor from ALS pursuant to the
Purchase Agreement (as such terms are defined below. The Leased Property is
demised subject to all covenants, conditions, restrictions, easements, and other
matters of record, and all other matters that affect title, zoning and any other
matters set
1
<PAGE> 7
forth in that certain Title Policy issued by Chicago Title Company concurrently
with Lessor's purchase of the Leased Property and all matters disclosed in the
ALTA survey obtained in connection with such title insurance (collectively the
"Permitted Title Matters").
1.2 TERM. The initial term of the Lease (the "Initial Term") shall be
the period commencing on June 30, 1999 (the "Commencement Date") and expiring on
December 31, 2008. Lessee has the right to extend the term of this Lease, at
Lessee's option, as provided in Article XVIII, below. (The Initial Term plus all
validly exercised options to extend, if any, shall be referred to herein as the
"Term").
ARTICLE II
DEFINITIONS. For all purposes of this Lease, except as otherwise
expressly provided, (i) the terms defined in this Article II have the meanings
assigned to them in this Article II 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 at the time applicable; and (iii) the words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Lease as a whole and
not to any particular Article, Paragraph or other subdivision:
ADDITIONAL CHARGES. As defined in Article III.
AFFILIATE. When used with respect to any person, the term
"Affiliate" shall mean any other person which, directly or indirectly, whether
by operation of law or otherwise, controls or is controlled by or is under
common control with such person. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any person, shall mean the
possession, directly or indirectly, whether by operation of law or otherwise, of
the power to direct or cause the direction of the management and policies of
such person, through the ownership of voting securities, partnership interests
or other equity interests or the ownership of more than thirty percent (30%) of
the stock of any corporation directly or indirectly controlling such person by
operation of law or otherwise. For the purposes of this definition, "person"
shall mean any natural person, trust, partnership, corporation, joint venture or
other legal entity.
BUSINESS DAY. Each Monday, Tuesday, Wednesday, Thursday, and
Friday, which is not a day on which national banks in the State of California
are authorized or obligated, by law or executive order, to close.
CALENDAR YEAR. The period from January 1 through and including
December 31 in the
same calendar year.
CODE. The Internal Revenue Code of 1986, as amended.
CONSOLIDATED FINANCIALS. For any Fiscal Year or other
accounting period for Lessee and its consolidated subsidiaries, statements of
earnings and retained earnings and of changes in financial position for such
period and the related balance sheet as of the end of such period, together with
the notes thereto, all audited by a certified public accountant and in
reasonable detail and setting forth in comparative form the corresponding
figures for the
2
<PAGE> 8
corresponding period in the preceding Fiscal Year, and prepared in accordance
with generally accepted accounting principles.
ENCUMBRANCE. As defined in Article XXXII.
EVENT OF DEFAULT. As defined in Article XVI.
EXTENDED TERM. As defined in Article XVIII.
FACILITY. That certain 36-unit assisted living facility which
is part of the Leased Property, as defined in Article I, above.
FACILITY MORTGAGE. As defined in Article XIII.
FACILITY MORTGAGEE. As defined in Article XIII.
FISCAL YEAR. The twelve (12) month period from January 1
through the following
December 31.
FIXTURES. As defined in Article I.
IMPOSITIONS. Collectively, all taxes (including, without
limitation, all ad valorem, sales and use, single business, gross receipts,
transaction, privilege, rent taxes, bed taxes or fees or any other taxes as the
same relate to or are imposed upon Lessee or Lessor or the business conducted
upon the Leased Property), assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not to be completed within the
Term), 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 Property, Lessor, or the business conducted
thereon by Lessee (including all interest and penalties thereon due to any
failure in payment by Lessee), and all increases in all the above from any cause
whatsoever, including reassessment, 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 (a) Lessor's interest in the Leased Property or any part thereof; (b) the
Leased Property or any part thereof, including without limitation any Personal
Property located thereon or used in connection therewith, 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 by Lessee. Without limiting the foregoing, the term
"Imposition" shall include any sales tax on rents paid under this Lease or by
residents of the Facility (including, but not limited to, rental receipts
taxes), bed taxes, depreciation recapture, any other taxes (except for the
specific exclusions stated below), fees or charges imposed by the State of
Colorado and any potential subdivision thereof relating to the Facility or the
Leased Property, this Lease, or rents received under this Lease, whether
relating to any period prior to or after the Commencement Date. Nothing
contained in this Lease shall be construed to require Lessee to pay (1) the
following taxes and fees to the extent they relate to Lessor's business
generally (as opposed to relating specifically to Lessor's ownership of the
Facility, lease thereof to Lessee or income therefrom):
3
<PAGE> 9
any federal, state or local income tax of Lessor, taxes based on outstanding
corporate shares of Lessor or Lessor's equity or capitalization, regardless of
whether denominated as an income tax, franchise tax, capital tax or otherwise;
(2) any income or capital gain tax imposed with respect to the sale, exchange or
other disposition, or operation, by Lessor of any Leased Property or the
proceeds thereof; or (3) estate, inheritance, gift taxes or documentary transfer
taxes. In addition, Lessee shall not be required to pay any franchise,
registration, or qualification tax or fee to the extent such tax or fee exceeds
the minimum amount which would be imposed on Lessor if Lessor reported
liabilities equal to at least eighty percent (80%) of Lessor's assets.
INSURANCE REQUIREMENTS. All terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy.
LAND. As defined in Article I.
LEASE. As defined in the Preamble.
LEASED IMPROVEMENTS; LEASED PROPERTY. Each as defined in
Article I.
LEGAL REQUIREMENTS. All federal, state, county, municipal, and
other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees, and injunctions affecting either the Leased Property or the
construction, use or alteration thereof whether now or hereafter enacted and in
force, including any which may (i) require repairs, modifications or alterations
in or to the Leased Property; or (ii) in any way adversely affect the use and
enjoyment thereof, and all permits, licenses and authorizations and regulations
thereto, and all covenants, agreements, restrictions, and encumbrances contained
in any instruments, either of record or known to Lessee, at any time in force
affecting the Leased Property.
LESSEE. Alterra Healthcare Corporation, a Delaware corporation
(and any assignee permitted subject to the terms and conditions in this Lease).
LESSEE'S PERSONAL PROPERTY. All machinery, equipment,
furniture, furnishings, movable walls or partitions, computers, or trade
fixtures or other personal property, and consumable inventory and supplies,
owned by Lessee and used or useful in Lessee's business on the Leased Property,
including without limitation, all items of furniture, furnishings, equipment,
supplies and inventory, except items acquired by Lessor pursuant to the Purchase
Agreement.
LESSOR. LTC Properties, Inc., a Maryland corporation, and its
successors and assigns. Unless Lessee is notified by Lessor otherwise, Lessor's
address is: 300 Esplanade Drive, Suite 1860, Oxnard, California 93030,
Attention: James J. Pieczynski
MINIMUM RENT. As defined in Article III.
NOTICE. A notice given pursuant to Article XXXI hereof.
OFFICER'S CERTIFICATE. A certificate of Lessee signed by (i)
the Chairman of the Board of Directors or the President or any authorized Vice
President; and (ii) the secretary, or another officer authorized by appropriate
resolution to so sign by the Board of Directors. Any
4
<PAGE> 10
signature required above may be substituted with a signature of another person
whose power and authority to act has been authorized by an appropriate corporate
resolution.
OTHER LEASES. Any Lease of an assisted living facility now
existing or hereafter entered into between Lessor (or any of its Affiliates) and
Lessee (or any of its Affiliates) of any assisted living facility in any state
of the United States, irrespective of the terms and conditions of such lease,
irrespective of the date such lease is (or was) entered into, irrespective of
the total number of leases of assisted living facilities by and between Lessor
and Lessee, and irrespective of the location of any such assisted living
facilities; provided, however, that the term Other Leases shall not include
those certain four (4) existing leases by and between Lessor and Sterling House
Corporation, a Kansas corporation (an Affiliate of Lessee), of assisted living
facilities located in Dodge City, Kansas; McPherson, Kansas; Great Bend, Kansas;
and Salina, Kansas ("Existing Four Kansas Leases"). It is Lessor's and Lessee's
intention that the term "Other Leases" shall mean and include each and every
lease of an assisted living facility between Lessor and Lessee within the United
States other than Existing Four Kansas Leases.
OVERDUE RATE. On any date, a rate equal to the Prime Rate
(defined below), plus two percent (2%); provided, however, that it is the intent
of Lessor and Lessee that the Overdue Rate (and all other interest rates
provided for hereunder) be in strict compliance with applicable usury laws of
the State of Colorado, and that in the event the Overdue Rate (or other interest
rate provided for hereunder) shall be deemed to exceed that permitted to be
charged by the laws of the State of Colorado, any and all excess sums collected
by Lessor shall be credited against the Rent payable under this Lease or if
there is no Rent due, promptly refunded to Lessee.
PAYMENT DATE. Any due date for the payment of the installments
of Minimum Rent or any other payments required under this Lease.
PRIMARY INTENDED USE. As defined in Article VII.
PRIME RATE. On any date, a rate equal to the annual rate on
such date announced by Citibank, N.A. to be its prime rate for 90-day unsecured
loans to its corporate borrowers of the highest credit standing or, if not
available, such other rate as may be published by The Wall Street Journal as the
prime rate in its listing of "Money Rates."
PURCHASE AGREEMENT. That certain Agreement of Purchase and
Sale and Joint Escrow Instructions, dated as of December 1, 1998, between
ALS-Wovenhearts, Inc., a Delaware corporation ("ALS"), as "Seller" and Lessor as
"Buyer" providing for Lessor's acquisition of all of ALS's interest in and to
the Leased Property.
RELATED LEASES. Those certain leases executed or to be
executed by and between Lessee (or any of its Affiliates) and Lessor (or any of
its Affiliates), relating to the assisted living facilities in the locations
listed on Exhibit "D" attached hereto.
RENT. Any and all monetary obligations of Lessee owing under
this Lease.
SUBSIDIARIES. Corporations, of which either Lessee or Lessor
owns, directly or indirectly, more than 50% of the voting stock (individually, a
"Subsidiary").
5
<PAGE> 11
TERM. Collectively, the Initial Term plus any Extended Terms,
as the context may require, unless earlier terminated pursuant to the provisions
hereof.
UNSUITABLE FOR ITS PRIMARY INTENDED USE. A state of condition
of the Facility such that by reason of damage or destruction, or a partial
taking by Condemnation, in the good faith judgment of Lessor, reasonably
exercised, 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 units affected by such damage or destruction or partial
Condemnation.
UNAVOIDABLE DELAYS. Delays due to strikes, lock-outs,
inability to procure materials, power failure, acts of God, governmental
restrictions, enemy action, civil commotion, fire, unavoidable casualty or other
causes beyond the control of the party responsible for performing an obligation
hereunder; provided that lack of funds shall not be deemed a cause beyond the
control of either party hereto unless such lack of funds available to Lessor
results from Lessee's failure to perform any of its obligations under this
Lease.
The above does not include all the definitions to be used in
this Lease. Various definitions of other terms are included in the other
Articles of this Lease.
ARTICLE III
3.1 MINIMUM RENT. Lessee will pay to Lessor in lawful money of the
United States of America which shall be legal tender for the payment of public
and private debts, at Lessor's address set forth above or at such other place or
to such other person, firms or corporations as Lessor from time-to-time may
designate in a Notice, Minimum Rent (as defined below), during the Term, as
follows:
(a) INITIAL TERM. The initial "Minimum Rent" is the
annual sum of $329,000.00. The Minimum Rent shall be subject to increase as and
when provided below in this Article III. The Minimum Rent shall be paid in
advance in equal, consecutive monthly installments on the first day of each
calendar month of the Term. Minimum Rent shall be prorated for any partial month
at the beginning or end of the Term; and
(b) EXTENDED Terms. The Minimum Rent during the Extended
Terms shall be as stated in Article XVIII, below.
3.2 ANNUAL ESCALATION OF MINIMUM RENT. For purposes of this Paragraph
3.2, the "Adjusted Commencement Date" shall be the first (1st) day of the first
calendar month following the Commencement Date (as defined in Paragraph 1.2 of
this Lease), unless the Commencement Date falls on the first (1st) day of a
calendar month, in which case the "Adjusted Commencement Date" shall be the
Commencement Date. Commencing on the one year anniversary of the Adjusted
Commencement Date, and continuing on each subsequent one year anniversary
thereof during the Term (the Initial Term as well as any Extended Terms, but
specifically excluding the first year of any such Extended Terms, for which the
Minimum Rent shall be calculated as set forth in Paragraph 18.2 below) (each, an
"Escalation Date"), the Minimum Rent (irrespective of any prorations made
pursuant to Paragraph 3.1(a) of this Lease) shall increase by an amount equal to
the Minimum Rent for the immediately preceding twelve (12) month period
multiplied
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by an amount ("Annual Multiplier") equal to one hundred fifty percent (150%) of
the following fraction: (i) the numerator of which shall be the C.P.I. (defined
below) for the second month preceding the month in which such Escalation Date
occurs (for example, if the Escalation Date is March 1, 2000, then the C.P.I.
from January, 2000 shall be used); and (ii) the denominator of which shall be
the C.P.I. for the second month preceding the month in which the prior year's
Escalation Date occurred (or, in the case of the first Escalation Date, the
second month preceding the month in which the Adjusted Commencement Date
occurred); provided, however, that the Annual Multiplier shall not ever exceed
two percent (2%) per year, nor shall it ever result in a decrease in the Minimum
Rent payable hereunder. "C.P.I." shall mean and refer to the Consumer Price
Index published as the "CPI-U" index by the Bureau of Labor Statistics of the
Department of Labor, U.S. Cities Average, All Items (1982-84=100) in the manner
calculated as of the date of this Lease; provided that if compilation of the
C.P.I. is discontinued or transferred to any other governmental department or
bureau, then the index most nearly the same as the C.P.I. shall be used.
3.3 ADDITIONAL CHARGES. In addition to the Minimum Rent, (1) Lessee
will also pay and discharge as and when due and payable all other amounts,
liabilities, obligations and Impositions which Lessee assumes or agrees to pay
under this Lease, and (2) in the event of any failure on the part of Lessee to
pay any of those items referred to in the immediately preceding clause (1)
above, Lessee will also promptly pay and discharge every fine, penalty, interest
and cost which may be added for non-payment or late payment of such items (the
items referred to in clauses (1) and (2) above being referred to herein
collectively as the "Additional Charges"), and Lessor 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 non-payment of the Additional
Charges. If any elements of Additional Charges shall not be paid within seven
(7) Business Days after its due date and Lessor pays any such amount (which
Lessor shall have the right, but not the obligation, to do), then, in addition
to Lessor's other rights and remedies, Lessee will pay Lessor on demand, as
Additional Charges, interest on such unpaid Additional Charges computed at the
Overdue Rate from the due date of such installment to the date of Lessee's
payment thereof.
3.4 NET LEASE. Subject to the provisions of Article V, below, without
limiting any provision of this Lease, the Rent shall be paid absolutely net to
Lessor, so that this Lease shall yield to Lessor the full amount of the
installments of Minimum Rent throughout the Term, all as more fully set forth in
Articles IV, VIII, IX and XIII, and other provisions of this Lease, so that,
accordingly, Lessee shall pay all Additional Charges and any other expenses of
any kind associated with this Lease and the Leased Property to insure that
Lessor receives the Minimum Rent, net of all expenses. Further, because Lessee,
prior to the date of this Lease, is the opera-tor of the Facility pursuant to a
management agreement, Lessee shall be responsible for all Additional Charges and
all other amounts due under this Lease for any period prior to and during the
Term.
3.5 LATE CHARGE. LESSEE HEREBY ACKNOWLEDGES THAT LATE PAYMENT BY LESSEE
TO LESSOR OF RENT (INCLUDING WITHOUT LIMITATION MINIMUM RENT AND ADDITIONAL
CHARGES) WILL CAUSE LESSOR TO INCUR COSTS NOT CONTEMPLATED BY THIS LEASE, THE
EXACT AMOUNT OF WHICH WILL BE EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS
INCLUDE, BUT ARE NOT LIMITED TO, PROCESSING AND ACCOUNTING
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CHARGES. ACCORDINGLY, IF ANY INSTALLMENT OF MINIMUM RENT OR ANY OTHER SUM DUE
FROM LESSEE SHALL NOT BE RECEIVED BY LESSOR WITHIN SEVEN (7) BUSINESS DAYS AFTER
SUCH AMOUNT SHALL BE DUE, THEN WITHOUT ANY REQUIREMENT FOR NOTICE TO LESSEE,
LESSEE SHALL PAY TO LESSOR A LATE CHARGE EQUAL TO FIVE PERCENT (5%) OF SUCH
OVERDUE AMOUNT. THE PARTIES HEREBY AGREE THAT SUCH LATE CHARGE REPRESENTS A FAIR
AND REASONABLE ESTIMATE OF THE COSTS LESSOR WILL INCUR BY REASON OF LATE PAYMENT
BY LESSEE. ACCEPTANCE OF SUCH LATE CHARGE BY LESSOR SHALL IN NO EVENT CONSTITUTE
A WAIVER OF LESSEE'S DEFAULT OR BREACH WITH RESPECT TO ANY UNPAID OVERDUE
AMOUNTS, NOR PREVENT LESSOR FROM EXERCISING ANY OF THE OTHER RIGHTS AND REMEDIES
GRANTED UNDER THIS LEASE WITH RESPECT TO ANY SUCH UNPAID OVERDUE AMOUNTS.
ARTICLE IV
4.1 PAYMENT OF IMPOSITIONS. Subject to Article XII relating to
permitted contests, Lessee will pay, or cause to be paid, all Impositions coming
due prior to or during the Term, or which relate to any period within the Term
or prior to the Term, before any fine, penalty, interest or cost may be added
for non-payment (or earlier if required by any taxing authority), such payments
to be made directly to the taxing authorities where feasible, and will promptly
furnish to Lessor copies of official receipts or other satisfactory proof
evidencing such payments. Lessee's obligation to pay Impositions shall be deemed
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property or any part thereof. If any Imposition may, at the option of the
taxpayer, lawfully (without penalty) be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Lessee may
exercise the option to pay the same (and any accrued interest on the unpaid
balance of such Imposition) in installments and in such event, shall pay such
installments during the Term hereof (subject to Lessee's right of contest
pursuant to the provisions of Article XII) as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. Lessee, at its expense, shall, to the extent required or permitted by
Legal Requirements, prepare and file all tax returns and reports in respect of
any Imposition as may be required by governmental authorities. If any refund
shall be due from any taxing authority in respect of any Imposition, the same
shall be paid over to or retained by Lessee if no Event of Default shall have
occurred hereunder and be continuing, but if such Event of Default has occurred
and is continuing (i.e., it has not been cured), such refund shall be paid to
Lessor and utilized to cure any such continuing Event of Default. After fully
curing such Event of Default, any excess funds from such refund shall be paid by
Lessor to Lessee. Any such funds retained by Lessor, as provided above, shall be
applied as provided in Article XVI. Lessor and Lessee shall, upon request of the
other, provide such data as is maintained by the party to whom the request is
made with respect to the Leased Property as may be necessary to prepare any
required returns and reports. If governmental authorities classify any property
covered by this Lease as personal property, Lessee shall file all personal
property tax returns in such jurisdictions where it must legally so file.
Lessor, to the extent it possesses the same, and Lessee, to the extent it
possesses the same, will provide the other party, upon request, with cost and
depreciation records necessary for filing returns for any property so classified
as personal property. Where Lessor is legally required to file personal property
tax returns, Lessee will provide to Lessor copies of assessment
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notices indicating a value in excess of the reported value in sufficient time
for Lessor to file a protest. Lessee may, upon notice to Lessor, at Lessee's
option and at Lessee's sole cost and expense, protest, appeal or institute such
proceedings as Lessee may deem appropriate to effect a reduction of real estate
or personal property assessments and Lessor, at Lessee's sole cost and expense
as aforesaid, shall fully cooperate with Lessee in such protest, appeal, or
other action, provided that Lessee may not withhold payments pending such
challenges except under the conditions set forth in Article XII. Billings for
reimbursement by Lessee to Lessor of personal property taxes shall be
accompanied by copies of a bill therefor and payments thereof which identify the
personal property with respect to which such payments are made. Lessor shall
have the right to require that Lessee pay to Lessor 1/12th of the annual
Impositions each month concurrently with the payment of Minimum Rent, effective
(a) upon the occurrence of any Event of Default relating to the payment or
nonpayment of Impositions (and irrespective of whether such Event of Default is
continuing or has been cured); (b) as to any Event of Default not covered in the
preceding subparagraph (a), upon the occurrence of the second Event of Default
under this Lease (and irrespective of whether any such Events of Default are
continuing or have been cured); and (c) once any Event of Default has occurred
hereunder that has not been cured within sixty (60) days. Unless Lessee is
notified by Lessor otherwise, Lessee shall pay all Impositions directly to the
appropriate taxing or other authorities to which payments are due, and Lessee
shall provide Lessor written evidence and notice that all such payments have
been made. Without limiting any of the other indemnities set forth in this
Lease, Lessee hereby agrees to defend, indemnify, protect and hold harmless
Lessor in connection with any Impositions that relate to any time prior to or
during the Term, and Lessee acknowledges and agrees that it will not make claims
against, or otherwise look to, Lessor to reimburse Lessee for payments made
relating to any period prior to the Commencement Date.
4.2 NOTICE OF IMPOSITIONS. Lessor shall give prompt Notice to Lessee
for all Impositions payable by Lessee hereunder of which Lessor has knowledge,
but Lessor's failure to give any such Notice shall in no way diminish Lessee's
obligations hereunder to pay such Impositions, but such failure shall obviate
any default hereunder for a reasonable time after Lessee receives notice (from
any source) of any Imposition which it is obligated to pay. However,
notwithstanding the foregoing, it shall be Lessee's sole duty to inquire and
determine all of the Impositions for which it is liable as provided herein and
shall promptly pay such Impositions when due, and Lessor shall have no duty of
inquiry concerning Impositions.
4.3 UTILITY CHARGES. Lessee will pay or cause to be paid all charges
for electricity, power, gas, oil, water, sewer connection and all other
utilities used in or for the Leased Property during the Term.
4.4 INSURANCE PREMIUMS. Lessee will pay or cause to be paid all
premiums for the insurance coverage required to be maintained pursuant to
Article XIII during the Term.
4.5 PAYABLES. Lessee acknowledges and agrees that prior to the
Commencement Date, certain liabilities and other obligations were incurred
arising from the development, construction and operation of the Facility for
which Lessee is and shall remain responsible and liable and Lessor shall have no
responsibility, liability or obligation whatsoever with respect to the same.
Therefore, Lessee agrees as part of this Lease to pay all liabilities and
obligations concerning the Facility, whether arising before or after the
Commencement Date.
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ARTICLE V
5.1 NO TERMINATION, ABATEMENT, ETC. Subject to the provisions of
Paragraph 5.2, Lessee shall not be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent, nor shall the
respective obligations of Lessor and Lessee be otherwise affected by reasons of
(a) any damage to, or destruction of, any Leased Property or any portion
thereof; (b) the lawful or unlawful prohibition of, or restriction upon,
Lessee's use of the Leased Property, or any portion thereof, the interference
with such use by any person, corporation, partnership or other entity, or by
reason of eviction by paramount title; (c) 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, or to
which Lessor and Lessee are parties; (d) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding-up
or other proceedings affecting Lessor or any assignee or transferee of Lessor;
or (e) for 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
Property or any portion thereof; or (ii) entitle Lessee to any abatement,
reduction, suspension or deferment of the Rent payable under this Lease. The
obligations of Lessor and Lessee hereunder shall be separate and independent
covenants and agreements and the Rent due under this Lease shall continue to be
payable in all events, irrespective of Lessor's performance or non-performance
under this Lease, 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.
5.2 ABATEMENT PROCEDURES. If Lessee is entitled to an abatement of
Minimum Rent under Article XV (by reason of any Condemnation as provided
thereunder), the Lease shall not terminate (except as provided in Article XV)
but the Minimum Rent shall be abated in proportion to the reduced capacity of
the Leased Property for the use made of the same by Lessee at the time of the
Condemnation (i.e., the reduction in the number of units to less than 36 and/or
a reduction in the maximum allowable resident occupancy to less than 36). If
Lessor and Lessee are unable to agree upon the amount of such abatement within
thirty (30) days after any partial taking as provided under Article XV, the
matter shall be submitted by either party to a court of competent jurisdiction
for resolution, but Lessee during such resolution shall continue to perform its
obligations hereunder, including, but not limited to, payment of that portion of
the Minimum Rent which is not then in dispute.
ARTICLE VI
6.1 OWNERSHIP OF THE LEASED PROPERTY. Lessee acknowledges and agrees
that the Leased Property is the property of Lessor and that Lessee has only the
right to the exclusive possession and use of the Leased Property upon the terms
and conditions of this Lease.
6.2 LESSEE'S PERSONAL PROPERTY. Lessee may (and shall as provided
herein below), at its expense, install, assemble or place on any parcels of the
Land or in any of the Leased Improvements, any items of Lessee's Personal
Property, and Lessee may, subject to the conditions set forth below, remove the
same upon the expiration or any prior termination of the
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Term. Lessee shall provide and maintain during the entire Term all such Lessee's
Personal Property as shall be necessary in order to operate the Facility 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.
All of Lessee's Personal Property not removed by Lessee within twenty-one (21)
days following the expiration or earlier termination of this Lease shall be
subjected to Landlord's lien and may be removed, stored or sold pursuant to
Colorado Law. Lessee shall, within twenty-one (21) days following the expiration
or earlier termination of this Lease, at its sole cost and expense, repair any
damage to the Land or the Leased Improvements occasioned by the installation,
maintenance or removal of Lessee's Personal Property, and restore the Land or
Leased Improvements to its condition immediately prior to any such installation.
Lessor and Lessee agree that Lessor shall not be required to sell Lessee's
Personal Property or account to Lessee therefor. To that end, Lessee
specifically waives any and all rights Lessee may have under Colorado law for
damages against Lessor for failure to comply with the provisions thereof.
6.3 CONSUMABLE INVENTORY. Lessor and Lessee acknowledge that certain
inventory, including consumables, at the Facility, as of the Commencement Date
("Consumable Inventory") will be completely consumed or otherwise disposed of
during the course of Lessee's operation of the Facility. Lessee agrees that, at
the end of the Term or earlier termination of the Lease, it shall replace and
restore the Consumable Inventory to the type and amount (with the same value) as
that existing as of the Commencement Date, and as may otherwise be sufficient to
fully equip the Facility for its operation and maintenance as may be customary
for assisted living facilities comparable to the Leased Property in the State of
Colorado.
ARTICLE VII
7.1 CONDITION OF LEASED PROPERTY. Lessee acknowledges receipt and
delivery of possession of the Leased Property and further acknowledges that
Lessee has examined and otherwise has knowledge of the condition of the Leased
Property prior to the execution and delivery of this Lease and has found the
same to be in good order and repair and satisfactory for it purposes hereunder.
Lessee represents and warrants that the Personal Property (as defined in Article
I hereof) includes all equipment and property required under applicable federal
and state law to operate the Facility at full capacity. Lessee is leasing the
Leased Property "AS-IS" in its present condition. Lessee waives any claim or
action against Lessor in respect of the condition of the Leased Property. LESSOR
MAKES NO WARRANTY OR REPRESENTATIONS, EXPRESS OR IMPLIED, IN RESPECT OF THE
LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR
CONDITION FOR THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. LESSEE ACKNOWLEDGES THAT
THE LEASED PROPERTY HAS BEEN INSPECTED BY LESSEE AND IS SATISFACTORY TO IT.
WITHOUT LIMITING THE FOREGOING, IT SHALL BE LESSEE'S RESPONSIBILITY TO DETERMINE
THE AMOUNT OF REIMBURSEMENT AND OTHER PAYMENTS THAT IT IS ENTITLED TO RECEIVE
FROM THE FEDERAL, STATE OR LOCAL GOVERNMENTS AND LESSEE'S OBLIGATIONS UNDER THIS
LEASE SHALL NOT BE MODIFIED, CHANGED OR OTHERWISE BE REDUCED IN THE EVENT THAT
LESSEE HAS INCORRECTLY
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ANALYZED THE AMOUNTS TO BE PAID TO LESSEE BY ANY GOVERNMENT OR AGENCY THEREOF.
7.2 USE OF THE LEASED PROPERTY.
7.2.1 Lessee covenants that it will obtain and, at all times
during the Term, maintain all approvals needed to use and operate the Leased
Property and the Facility under applicable federal, state and local law,
including, but not limited to, licensure and Medicaid certification, as
applicable. Lessee shall provide to Lessor, at Lessor's request a copy of any
report or survey conducted by any federal, state or local government entity
regarding the quality of care at the Facility, and any other such information or
documents concerning the operation of the Facility.
7.2.2 After the Commencement Date and during the entire Term,
Lessee shall use or cause to be used the Leased Property as an assisted living
facility licensed by the State of Colorado and uses incidental to the foregoing
(the particular such use to which the Leased Property is put at any particular
time is herein referred to as the "Primary Intended Use"). Lessee shall not use
the Leased Property or any portion thereof for any other use without the prior
written consent of Lessor, which consent may be withheld in Lessor's sole and
absolute discretion; provided, however, that Lessor shall not unreasonably
withhold its consent to any alternate use that is within the long term care
industry. No use shall be made of the Leased Property, and no acts shall be
done, which will cause the cancellation of any insurance policy to residents
therein, or permit to be kept, used or sold in or about the Leased Property any
article which may be prohibited by law or by the standard form of fire insurance
policies, or any other insurance policies required to be carried hereunder, or
fire underwriter's regulations. Lessee shall, at its sole cost, comply with all
of the requirements pertaining to the Leased Property or other improvements of
any insurance board, association, organization, or company necessary for the
maintenance of insurance, as herein provided, covering the Leased Property and
Lessee's Personal Property.
7.2.3 Lessee covenants and agrees that during the Term it will
operate continuously the Leased Property in accordance with its Primary Intended
Use and will maintain its certifications for reimbursement and its licensure.
7.2.4 Lessee shall not commit or suffer to be committed any
waste on the Leased Property, or in the Facility nor shall Lessee cause or
permit any nuisance thereon.
7.2.5 Lessee shall neither suffer nor permit the Leased
Property or any portion thereof, including 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
Property or any portion thereof.
ARTICLE VIII
8.1 COMPLIANCE WITH LEGAL AND INSURANCE REQUIREMENTS, INSTRUMENTS, ETC.
Subject to Article XII relating to permitted contests, Lessee, at its sole cost
and expense, will
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promptly (a) comply with all applicable Legal Requirements and Insurance
Requirements in respect of the use, operation, maintenance, repair, and
restoration of the Leased Property, whether or not compliance therewith shall
require structural changes in any of the Leased Improvements or interfere with
the use and enjoyment of the Leased Property; and (b) procure, maintain and
comply with all licenses, certificates of need, provider agreements and other
authorizations, if any, required for any use of the Leased Property and Lessee's
Personal Property then being made, and for the proper erection, installation,
operation, and maintenance of the Leased Property or any part thereof.
8.2 LEGAL REQUIREMENT COVENANTS. Lessee covenants and agrees that the
Leased Property and Lessee's Personal Property shall not be used for any
unlawful purpose. Lessee further warrants and represents that Lessee has
obtained all necessary governmental approvals and has given all necessary
notices to allow Lessee to operate the Leased Property for its Primary Intended
Use. Lessee shall acquire and maintain all licenses, certificates, permits,
provider agreements and other authorizations and approvals needed to operate the
Leased Property in its customary manner for the Primary Intended Use, and any
other use conducted on the Leased Property as may be permitted by Lessor from
time-to-time hereunder. Lessee shall deliver to Lessor within five (5) Business
Days after Lessee's receipt thereof, copies of any written notices, demands,
claims, inquiries, investigations, reports or correspondence from any third
party, whether governmental, quasi-governmental or private, stating or in any
manner indicating that any of Lessee's licenses, certificates, permits, provider
agreements and/or other authorizations and approvals in connection with the
Leased Property is or may be downgraded, revoked, cancelled, suspended or
otherwise adversely affected, or that an action of any kind is pending or being
considered to downgrade, revoke, cancel, suspend or otherwise adversely affect
any of the same. Lessee further covenants and agrees that Lessee's use of the
Leased Property and maintenance, alteration and operation of the same, and all
parts thereof, shall at all times conform to all applicable federal, state and
local laws, ordinances, rules, and regulations unless the same are held by a
court of competent jurisdiction to be unlawful. Lessee, may, however, upon prior
written notice to Lessor, contest the legality or applicability of any such law,
ordinance, rule, or regulation, or any licensure or certification decision if
Lessee maintains such action in good faith, with due diligence, without
prejudice to Lessor's rights hereunder, and at Lessee's own expense. If by the
terms of any such law, ordinance, rule or regulation, compliance therewith
pending the prosecution of any such proceeding may legally be delayed without
the incurrence of any fine, charge or liability of any kind against the Leased
Property, including the Facility, or Lessee's leasehold interest therein and
without subjecting Lessor to any liability, civil or criminal, for failure so to
comply therewith, Lessee may delay compliance therewith until the final
determination of such proceeding. If any lien, charge or civil or criminal
liability would be incurred by reason of any such delay, Lessee, on the prior
written consent of Lessor, may nonetheless contest as aforesaid and delay as
aforesaid provided that such delay would not subject Lessor to criminal
liability and Lessee both (a) furnishes to Lessor security reasonably
satisfactory to Lessor against any loss or injury by reason of such contest or
delay; and (b) prosecutes the contest continuously, with due diligence and in
good faith.
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ARTICLE IX
9.1 MAINTENANCE AND REPAIR.
9.1.1 Lessee, at its sole cost and expense, will keep the
Leased Property and Lessee's Personal Property and all private roadways,
sidewalks and curbs appurtenant thereto and which are under Lessee's control in
good order and repair (whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of the Leased
Property, or any portion thereof), and, except as otherwise provided in Article
XIV, with reasonable promptness, 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). All repairs shall, to the extent reasonably achievable, be at least
equivalent in quality to the original work. Lessee will not take or omit to take
any action the taking or omission of which may materially or adversely impair
the value or the usefulness of the Leased Property or any part thereof for its
Primary Intended Use. Any repair work performed by Lessee shall be paid for so
that no lien (i.e., mechanics', materialmen's or other liens) shall attach to
the Leased Property, subject to the provisions of Article XII.
9.1.2 Lessor shall not under any circumstances be required in
connection with this Lease to build or rebuild any improvements on the Leased
Property, or to make any repairs, replacements, alterations, restorations, or
renewals of any nature or description to the Leased Property, whether ordinary
or extraordinary, structural or non-structural, foreseen or unforeseen, or to
make any expenditure whatsoever with respect thereto, or to maintain the Leased
Property in any way. 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. Lessor shall have
the right to give, record and post, as appropriate, notices of
non-responsibility (or similar notices) under any mechanics' or materialmen's
lien laws now or hereafter existing.
9.1.3 Lessee shall not make any modifications, alterations or
improvements to the Leased Improvements or any portion thereof, whether by
addition or deletion, without Lessor's prior written consent, which consent may
be given or withheld in Lessor's sole and absolute discretion; provided that
Lessor shall not unreasonably withhold its consent to any non-structural
modifications, alterations or improvements that do not constitute capital
improvements and that are otherwise made in compliance with this Lease, so long
as the total cost thereof does not exceed $50,000 and the total cost in any
twelve (12) month period does not exceed $100,000. Nothing contained in this
Lease and no action or inaction by Lessor shall be construed as (i) constituting
the consent or request of Lessor, express or implied, to any contractor,
sub-contractor, laborer, materialman, or vendor to or for the performance of any
labor or services or the furnishing of any materials or other property for the
construction, alteration, addition, repair, or demolition of, or to the 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 Property, or any portion thereof. Lessor shall have the right to
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give, record and post, as appropriate, notices of non-responsibility (or similar
notices) under any mechanics' or materialmen's lien laws now or hereafter
existing.
9.1.4 Lessee will, upon the expiration or prior termination of
the Term, vacate and surrender the Leased Property in the condition in which the
Leased Property was originally received from Lessor, except as repaired,
rebuilt, restored, altered or added to as permitted or required under this Lease
and except for ordinary wear and tear (subject to the obligation of Lessee to
maintain the Leased Property in good order and repair during the entire Term).
9.2 EXPENDITURES TO COMPLY WITH LAW; CONSTRUCTION OF ADDITIONAL
IMPROVEMENTS PURSUANT TO CERTIFICATE OF NEED. Without limiting Lessee's other
obligations, during the Term of this Lease, Lessee will, at its expense, make
whatever expenditures (including, but not limited to capital and non-capital
expenditures) that are required to conform the Leased Property to such standards
as may from time-to-time be required by Federal Medicaid (Title 19) assisted
living programs, if applicable, or any other applicable programs or legislation,
or capital improvements required by any other governmental agency having
jurisdiction over the Leased Property as a condition of the continued operation
of the Leased Property during the Term (as extended) as an assisted living
residence or other health-care related facility, approved for Medicaid and
similar programs, pursuant to present or future laws of governmental regulation.
Lessor shall not unreasonably withhold its consent to any expenditures or
capital improvements made by Lessee pursuant to this Paragraph 9.2 and otherwise
made in compliance with this Lease.
9.3 ENCROACHMENTS, RESTRICTIONS, ETC. If any of the Leased Improvements
shall, at any time, encroach upon any property, street or right-of-way adjacent
to the Leased Property, or shall violate the agreements or conditions contained
in any lawful restrictive covenant or other agreement affecting the Leased
Property, or any part thereof, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, then promptly
upon the request of Lessor at the behest of any person affected by any such
encroachment, violation or impairment, Lessee shall, at its sole cost and
expense (and after Lessor's prior approval), subject to Lessee's right to sue
Lessee's predecessors in title with respect thereto or to contest the existence
of any such encroachment, violation or impairment and, in such case, in the
event of an adverse final determination, either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation or impairment, whether the same shall affect
Lessor or the Leased Property; or (ii) make such changes in the Leased
Improvements, and take such other actions, as Lessee in the good faith exercise
of its judgment deems reasonably practicable, to remove such encroachment, and
to end such violation or impairment, including, if necessary, the alteration of
any of the Leased Improvements, and in any event take all such actions as may be
necessary in order to be able to continue the operation of the Leased
Improvements for the Primary Intended Use substantially in the manner and to the
extent the Leased Improvements were operated prior to the assertion of such
violation, impairment or encroachment. Any such alteration shall be made in
conformity with the applicable requirements of Paragraph 8.2 and this Article
IX. Lessee's obligations under this Paragraph 9.3 shall be in addition to and
shall in no way discharge or diminish any obligation of any insurer under any
policy of title or other insurance.
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ARTICLE X
10.1 LESSEE'S OBLIGATIONS FOR HAZARDOUS MATERIALS. Lessee shall, at its
sole cost and expense, take all actions as required to cause the Leased Property
including, but not limited to, the Land and all Leased Improvements, to be free
and clear of the presence of all Hazardous Materials during the Term; provided,
however, that Lessee shall be entitled to use and maintain Hazardous Materials
on the Leased Property in connection with Lessee's business and in compliance
with all applicable laws. In this connection, Lessee shall, upon its discovery,
belief or suspicion of the presence of Hazardous Materials on, in or under any
part of the Leased Property, including, but not limited to, the Land and all
Leased Improvements, immediately notify Lessor and, at no expense to Lessor,
cause any such Hazardous Materials to be removed immediately, in compliance with
all applicable laws and in a manner causing the least disruption of or
interference with the operation of Lessee's business. Lessee hereby agrees to,
and hereby does, fully indemnify, protect, defend and hold harmless Lessor from
any costs, damages, claims, liability or loss of any kind or nature arising out
of or in any way in connection with the presence, suspected presence, removal or
remediation of Hazardous Materials in, on, or about the Leased Property, or any
part thereof. Lessee acknowledges that it has received and reviewed that certain
environmental report, dated as of March 2, 1998, prepared by Giles Engineering
Associates, Inc., as Project No. 5E-9802003 and updated on June 10, 1999, as
project No. 1E-9906042 (the "Environmental Report"). Without limiting Lessee's
other obligations under this Lease, Lessee agrees, at Lessee's sole cost, to
fully comply with all recommendations set forth in the Environmental Report, as
updated, promptly after the Commencement Date hereunder. Lessee's obligations
hereunder shall apply to all Hazardous Materials, irrespective of whether the
existence of such Hazardous Materials is known by Lessor and no matter when they
arose or were discovered and therefore will include any Hazardous Materials that
existed prior to, at, or after the Commencement Date and during the Term.
10.2 DEFINITION OF HAZARDOUS MATERIALS. For purposes of this Lease,
"Hazardous Materials" shall include, but not be limited to, any substance,
material, waste, pollutant or contaminant, now or hereafter defined, listed or
regulated by the "Environmental Laws" (defined below) or any other federal state
or local law, regulation or order or by common law decision. "Environmental
Laws" means and includes any law, ordinance, regulation or requirement now or
hereinafter in effect relating to land use, air, soil, surface water,
groundwater (including the protection, cleanup, removal, remediation or damage
thereof), human health and safety or any other environmental matter, including,
without limitation, the following laws as the same may be amended from time to
time: Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA"), 42 U.S.C. ss. 9601, et seq.; Federal Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901, et seq.; Clean Water Act, 33 U.S.C. ss. 1251,
et seq.; Toxic Substances Control Act, 15 U.S.C. ss. 2601, et seq.; Refuse Act,
33 U.S.C. ss. 407; Occupational Safety and Health Act, 29 U.S.C. ss. 651, et
seq.; Clean Air Act, 42 U.S.C. ss. 7401, et seq.; and any and all similar state
and local laws and ordinances and the regulations now or hereafter adopted,
published and/or promulgated pursuant thereto.
ARTICLE XI
NO LIENS. Subject to the provisions of Article XII relating to
permitted contests, Lessee will not directly or indirectly, voluntarily or by
operation of law, create or allow to remain and
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will promptly discharge at its expense any lien, mortgage, encumbrance,
attachment, title retention agreement, or claim upon the Leased Property or any
attachment, levy, claim, or encumbrance in respect of the Rent.
ARTICLE XII
PERMITTED CONTESTS. Lessee shall have the right to contest the amount
or validity of any Imposition or any Legal Requirement or Insurance Requirement
or any lien, attachment, levy, encumbrance, charge or claim ("Claims") not
otherwise permitted by Article XI, by appropriate legal proceedings in good
faith and with due diligence, and to delay payment if legally permitted;
provided this shall not be deemed or construed in any way as relieving,
modifying or extending Lessee's covenants to pay or its covenants to cause to be
paid any such charges at the time and in the manner as in this Lease provided
and further provided that, such legal proceedings (and delay in payment) shall
not cause the sale of the Leased Property, or any part thereof, to satisfy the
same or cause Lessor or Lessee to be in default under any mortgage or deed of
trust encumbering the Leased Property or any interest therein or otherwise
threaten to cause loss or damage to Lessor or the Leased Property. Upon the
reasonable request of Lessor, Lessee shall provide to Lessor reasonable security
satisfactory to Lessor to assure the payment of all Claims which may be assessed
against the Leased Property, together with interest and penalties, if any,
thereon. Lessor agrees to join in any such proceedings if the same be required
to legally prosecute such contest of the validity of such Claims; provided,
however, that Lessor shall not thereby be subjected to any liability for the
payment of any costs or expenses in connection with any proceedings brought by
Lessee; and Lessee covenants to indemnify and save harmless Lessor from any such
costs or expenses. In the event that Lessee fails to pay any Claims when due or,
upon Lessor's request, to provide the security therefor as provided in this
Article XII and to diligently prosecute any contest of the same or in the event
the same threatens to cause loss or damage to Lessor or the Leased Property,
Lessor may, upon thirty (30) days advance written Notice to Lessee, pay such
charges together with any interest and penalties and the same shall be repayable
by Lessee to Lessor at the next Payment Date provided for in this Lease.
Provided, however, that should Lessor reasonably determine that the giving of
such Notice would risk loss to the Leased Property or otherwise threaten to
cause loss or damage to Lessor, then Lessor shall give such written Notice as is
practical under the circumstances. Lessee shall be entitled to any refund of any
Claims and such charges and penalties or interest thereon which have been paid
by Lessee or paid by Lessor and for which Lessor has been fully reimbursed.
ARTICLE XIII
13.1 GENERAL INSURANCE REQUIREMENTS. Subject to the provisions of
Paragraph 13.8, during the Term, Lessee shall at all times keep the Leased
Property, and all property located in or on the Leased Property, including
Lessee's Personal Property, insured with the kinds and amounts of insurance
described below. This insurance shall be written by companies authorized to do
insurance business in the state in which the Leased Property is located. The
policies must name Lessor as loss payee and additional named insured, shall
contain a provision that such insurance may not be cancelled or amended without
at least thirty (30) days' notice to Lessor and shall be payable to Lessor as
provided in Article XIV. In addition, upon Lessor's written request, the
policies shall name as mortgagee, loss payee and additional insured the holder
("Facility Mortgagee") of any mortgage, deed of trust or other security
agreement and any other
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Encumbrance placed on the Leased Property in accordance with the provisions of
Article XXXII, as well as any other entity interested in the Leased Property
("Facility Mortgage") by way of a standard form of mortgagee's loss payable
endorsement. Evidence of insurance shall be deposited with Lessor and, if
requested, with any Facility Mortgagee(s). If any provision of any Facility
Mortgage requires deposits of premiums for insurance to be made with such
Facility Mortgagee, or, pursuant to written direction by Lessor upon the
occurrence of any Event of Default hereunder (and irrespective of whether such
Event of Default is continuing or has been cured), Lessee shall make such
deposits directly with such Facility Mortgagee or with Lessor, as required. The
policies on the Leased Property, including the Leased Improvements, Fixtures and
Lessee's Personal Property, shall insure against the following risks:
13.1.1 Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils commonly known as "All Risk," and all
physical loss perils normally included in such All Risk insurance, including,
but not limited to, sprinkler leakage, in an amount not less than one hundred
percent (100%) of the then full replacement cost thereof (as defined below in
Paragraph 13.2);
13.1.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus, now or hereafter installed in the Facility, if
any, in such amounts with respect to any one accident as may be reasonably
requested by Lessor from time-to-time;
13.1.3 Loss of rental under a rental value insurance policy
covering risk of loss during the first twelve (12) months of reconstruction
necessitated by the occurrence of any of the hazards described in Paragraph
13.1.1 or 13.1.2 in an amount sufficient to prevent Lessor from becoming a
co-insurer.
13.1.4 Claims for personal injury or property damage under a
policy of comprehensive general public liability insurance with amounts not less
than One Million Dollars ($1,000,000.00) per occurrence, and with an annual
aggregate of Three Million Dollars ($3,000,000.00);
13.1.5 Claims arising out of malpractice or other professional
actions or omissions under a policy of professional liability insurance with
amounts not less than One Million Dollars ($1,000,000.00) per occurrence, and
with an annual aggregate of Three Million Dollars ($3,000,000.00);
13.1.6 Flood (if the Leased Property is located in whole or in
part within a flood plain area, as designated by any governmental or other
responsible agency and if such insurance is available pursuant to applicable
law) and such other hazards and in such amounts as may be customary for
comparable properties in the area; and
13.1.7 Any other kinds of insurance, and in such amounts, as
Lessor may reasonably require from time to time to the extent available in the
state where the Leased Property is located.
13.2 REPLACEMENT COST. The term "full replacement cost" as used herein,
shall mean the full actual replacement cost of the Leased Property as determined
from time-to-time upon the request of Lessor or Lessee (but not more frequently
than once in every 24 months), including an
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increased cost of construction endorsement, less exclusions provided in the
standard form of fire insurance policy in the state where the Leased Property is
located. Lessor and Lessee agree that as of the Commencement Date the full
replacement cost shall be deemed to be $2,240,000.00.
13.3 ADDITIONAL INSURANCE. In addition to the insurance described
above, Lessee shall maintain such additional insurance as may be reasonably
required from time-to-time by Lessor or any Facility Mortgagee (to the extent
available in the state where the Leased Property is located) and shall further
at all times maintain adequate worker's compensation insurance coverage for all
persons employed by Lessee on the Leased Property. Such worker's compensation
insurance shall be in accordance with the requirements of applicable federal,
state and local law.
13.4 WAIVER OF SUBROGATION. All insurance policies carried by either
party covering the Leased Property, the Fixtures, the Facility, or Lessee's
Personal Property including without limitations, contents, fire and casualty
insurance, shall expressly waive any right of subrogation on the part of the
insurer against the other party. The parties hereto agree that their policies
will include such waiver clause or endorsement so long as the same are
obtainable without extra cost, and in the event of such an extra charge the
other party, at its election, may pay the same, but shall not be obligated to do
so. Upon written request, each party shall provide the other party with a copy
of each insurance policy with the waiver clause or endorsement attached.
13.5 FORM SATISFACTORY, ETC. All of the policies of insurance referred
to in this Article XIII shall be written in a form reasonably satisfactory to
Lessor and by insurance companies reasonably satisfactory to Lessor. Subject to
the foregoing, Lessor agrees that it will not unreasonably withhold its approval
as to the form of the policies of insurance or as to the insurance companies
selected by Lessee. Lessee shall pay all of the premiums therefor, and deliver
such policies or evidence thereof to Lessor prior to their effective date (and,
with respect to any renewal policy, prior to the expiration of the existing
policy), and in the event of the failure of Lessee either to effect such
insurance as herein called for or to pay the premiums therefor, or to deliver
such policies or evidence thereof to Lessor at the times required, Lessor shall
be entitled, but shall have no obligation, to effect such insurance and pay the
premiums therefor, which premiums shall be repayable by Lessee to Lessor upon
written demand therefor, and failure to repay the same shall constitute an Event
of Default within the meaning of Paragraph 16.1(c). Each insurer mentioned in
this Article XIII shall agree, by endorsement on the policy or policies issued
by it, or by independent instrument furnished to Lessor, that will give to
Lessor (and to any Facility Mortgagee, if required by the same) thirty (30) days
written notice before the policy or policies in questions shall be altered,
allowed to expire or cancel.
13.6 INCREASE IN LIMITS. In the event that Lessor or a Facility
Mortgagee shall at any reasonable time deem the limits of the personal injury or
property damage public liability insurance then carried to be insufficient,
Lessee shall thereafter carry the insurance with increased limits until further
change pursuant to the provisions of this Paragraph; provided that if Lessor
desires to increase the limits of insurance, and such is not pursuant to the
request of a Facility Mortgagee, then Lessor may not demand an increase in
limits above the limits generally consistent with the requirements of owners of
long term care properties in the State of Colorado.
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13.7 BLANKET POLICY. Notwithstanding anything to the contrary contained
in this Article XIII, Lessee's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Lessee; provided, however, that
the coverage afforded Lessor will not be reduced or diminished or otherwise be
different from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XIII are
otherwise satisfied.
13.8 NO SEPARATE INSURANCE. Lessee shall not on Lessee's 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 in this Article, to be furnished or which may reasonably be required to
be furnished, by Lessee or increase the amount of any then existing insurance by
securing any 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 included therein as additional
insureds, and the loss is payable under said insurance in the same manner as
losses are payable under the Lease. Lessee shall immediately notify Lessor of
the taking out of any such separate insurance or of the increasing of any of the
amount of the then existing insurance.
13.9 CONTINUOUS COVERAGE. Lessee was the operator of the Leased
Property prior to the date of this Lease. Therefore, Lessee already has in place
insurance with respect to the Leased Property. Lessee shall assure that there is
no gap in the insurance coverage provided in connection with the Facility at or
after the Commencement Date, and therefore, the insurance provided by Lessee
shall be continuous, with the types and amounts of coverage, described herein to
be applicable on the Commencement Date. To the extent there is not full,
complete and continuous coverage for all issues, no matter when arising, claimed
or occurring, Lessee shall, at its sole cost, obtain such insurance.
ARTICLE XIV
14.1 INSURANCE PROCEEDS. All proceeds payable by reason of any loss of
or damage to the Leased Property, or any portion thereof, which is insured under
any policy of insurance required by Article XIII of the Lease, where the total
proceeds paid by the insurer are less than $150,000.00, shall be paid to Lessee
and applied to the reconstruction or repair, as the case may be, of any damage
to or destruction of the Leased Property, or any portion thereof. All proceeds
payable by reason of any loss of or damage to the Leased Property, or any
portion thereof, which is insured under any policy of insurance required by
Article XIII of this Lease where the total proceeds paid by the insurer are
equal to or in excess of $150,000.00 shall be paid to Lessor and held by Lessor
in trust (subject to the provisions of Paragraph 14.7) and shall be made
available for reconstruction or repair, as the case may be, of any damage to or
destruction of the Leased Property, or any portion thereof, and shall be paid
out by Lessor from time-to-time for the reasonable costs of such reconstruction
or repair. Any excess proceeds of insurance remaining after the completion of
the restoration or reconstruction of the Leased Property shall go to Lessee,
provided the Lease is in force and there exists no uncured Event of Default;
otherwise such excess shall be paid to Lessor for application as set forth in
Article XVI hereof. In the event neither Lessor nor Lessee is required or elects
to repair and restore, and the Lease is terminated as described in Paragraph
14.7, all such insurance proceeds shall be retained by
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Lessor. All salvage resulting from any risk covered by insurance shall belong to
Lessor except that any salvage relating to Lessee's Personal Property shall
belong to Lessee.
14.2 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION COVERED BY
INSURANCE PROCEEDS.
14.2.1 If during the Term, the Leased Property is totally or
partially destroyed by a risk covered by the insurance described in Article XIII
and whether or not the Facility thereby is rendered Unsuitable for Its Primary
Intended Use, Lessee shall restore the Leased Property to substantially the same
condition as existed immediately before the damage or destruction.
14.2.2 If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessee or Lessor from the insurance required
under Article XIII, Lessee shall be obligated to restore the Leased Property and
pay the extra cost therefor, provided that, prior to commencing the repair and
restoration, Lessee shall either (i) contribute any excess amount needed to
restore the Leased Property, or (ii) provide Lessor with satisfactory evidence
that such funds are, and throughout the entire period of reconstruction will be,
available. If Lessee contributes such excess in cash, such excess shall be paid
by Lessee to Lessor to be held in trust, together with any insurance proceeds,
for application to the cost of repair and restoration.
14.3 RECONSTRUCTION IN THE EVENT OF DAMAGE OR DESTRUCTION NOT COVERED
BY INSURANCE. If during the Term, the Leased Property is damaged or destroyed
irrespective of the extent of the damage from a risk not covered by the
insurance described in Article XIII, whether or not such damage or renders the
Facility Unsuitable for Its Primary Intended Use, Lessee shall restore the
Leased Property to substantially the same condition it was in immediately before
such damage or destruction and such damage or destruction shall not terminate
this Lease.
14.4 LESSEE'S PROPERTY. All insurance proceeds payable by reason of any
loss of or damage to any of Lessee's Personal Property shall be paid to Lessee,
and Lessee shall hold such insurance proceeds in trust to pay the cost of
repairing or replacing damaged Lessee's Personal Property. Any proceeds in
excess of the cost of repairing or replacing any such Lessee's Personal Property
shall belong to Lessee.
14.5 RESTORATION OF LESSEE'S PROPERTY. Without limiting Lessee's
obligation to restore the Leased Property as provided in Paragraphs 14.2 and
14.3, Lessee shall also pay the cost to restore all Alterations and other
improvements made by Lessee which Lessee elects to restore, including Lessee's
Personal Property to the extent that Lessee's Personal Property is necessary to
the operation of the Leased Property for its Primary Intended Use in accordance
with applicable Legal Requirements.
14.6 NO ABATEMENT OF RENT. This Lease shall remain in full force and
effect and Lessee's obligation to make rental payments and to pay all other
charges required by this Lease shall remain unabated during any period required
for repair and restoration.
14.7 TERMINATION OF OPTION TO EXTEND. Any termination of this Lease by
reason of damage to or destruction of the Leased Property shall cause any
options to extend the Lease under Article XVIII to be terminated and without
further force or effect.
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14.8 WAIVER. Lessee hereby waives any statutory rights
of termination which may arise by reason of any damage to or destruction of the
Leased Property which Lessor is obligated to restore or may restore under any of
the provisions of this Lease.
ARTICLE XV
CONDEMNATION.
15.1 DEFINITIONS.
15.1.1 "Condemnation" means (a) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor;
(b) a voluntary sale or transfer by Lessor to any Condemnor, either under threat
of Condemnation or while legal proceedings for Condemnation are pending.
15.1.2 "Date of Condemnation" means the date the Condemnor has
the right to possession of the property being condemned.
15.1.3 "Award" means all compensation, sums or anything of
value awarded, paid or received on a total or partial Condemnation.
15.1.4 "Condemnor" means any public or quasi-public authority,
or private corporation or individual, having the power of Condemnation.
15.2 PARTIES' RIGHTS AND OBLIGATIONS. If during the Term there is any
taking of all or any part of the Leased Property or any interest in this Lease
by Condemnation, the rights and obligations of the parties shall be determined
by this Article XV.
15.3 TOTAL CONDEMNATION. If title to the fee of the whole of the Leased
Property shall be taken or condemned by any Condemnor, this Lease shall cease
and terminate as of the Date of Condemnation by said Condemnor. If title to the
fee of less than the whole of the Leased Property shall be so taken or
condemned, which nevertheless renders the Leased Property Unsuitable for Its
Primary Intended Use, as reasonably determined by Lessor and Lessee, Lessee and
Lessor shall each have the option by written Notice to the other, at any time at
or prior to the taking of possession by, or the date of vesting of title in,
such Condemnor, whichever first occurs, to terminate this Lease as of the date
of the occurrence of such first event. If such Notice has timely been given,
this Lease shall thereupon cease and terminate. Upon the termination of the
Lease, all Minimum Rent, and Additional Charges paid or payable by Lessee
hereunder shall be apportioned as of the date the Lease terminates.
15.4 ALLOCATION OF PORTION OF AWARD. The total Award made with respect
to all or any portion of the Leased Property or for loss of rent, or for loss of
business, whether or not beyond the Term of this Lease, or for the loss of value
of the leasehold (including the bonus value of the Lease) shall be solely the
property of and payable to Lessor and Lessee hereby assigns to Lessor any and
all rights in such Award; provided, however, that Lessee shall be entitled to
make a separate claim for the taking of Lessee's Personal Property and
relocation expense as long as any such claim will not in any way diminish
Lessor's Award, or for any other loss that can be awarded to Lessee separately
from Lessor's claim and which will not in any
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respect whatsoever diminish or threaten to diminish the total amounts to be
awarded to Lessor, as set forth above or otherwise. To the extent Lessee's claim
may thereafter reduce Lessor's claim, Lessee shall, and hereby does, assign its
claim to Lessor. In any Condemnation proceedings, each of the Lessor and Lessee
shall seek its own claim in conformity herewith, at its own expense.
15.5 PARTIAL CONDEMNATION. If title to the fee of less than the whole
of the Leased Property shall be so taken or condemned, and the Leased Property
is still suitable for its Primary Intended Use, as reasonably determined by
Lessor and Lessee, or if Lessee or Lessor shall be so entitled, but shall not
elect to terminate this Lease as provided in Paragraph 15.3 hereof, Lessee, at
its own cost and expense (subject to Lessor's contribution described below),
shall with all reasonable dispatch restore the untaken portion of any Leased
Improvements on the Leased Property so that such Leased Improvements shall
constitute a complete architectural unit of the same general character and
condition (as nearly as may be possible under the circumstances) as the Leased
Improvements existed immediately prior to such Condemnation. Lessor shall
contribute to the cost of restoration that part of its Award specifically
allocated to such restoration; provided, however, the amount of such
contribution shall not exceed the cost of restoration. The Minimum Rent shall be
reduced as set forth in Paragraph 5.2.
15.6 TEMPORARY CONDEMNATION. Lessee agrees that if, at any time after
the date hereof, the whole or any part of the Leased Property or of Lessee's
interest under this Lease, shall be Condemned by any Condemnor for its temporary
use or occupancy, this Lease shall not terminate by reason thereof, and Lessee
shall continue to pay, in the manner and at the times herein specified, the full
amounts of Minimum Rent and Additional Charges. Except only to the extent that
Lessee may be prevented from doing so pursuant to the terms of the order of the
Condemnor, Lessee shall also continue to perform and observe all of the other
terms, covenants, conditions and obligations hereof, on the part of the Lessee
to be performed and observed, as though such Condemnation had not occurred. In
the event of any such Condemnation as in this Paragraph 15.6 described, the
entire amount of any such Award made for such temporary use, whether paid by way
of damages, rent or otherwise, shall be paid to Lessee to the extent
attributable to any period within the Initial Term (as extended by any already
exercised options to extend) and except as otherwise provided hereunder.
Notwithstanding the foregoing, in the event that any temporary use or occupancy
covered under this Paragraph 15.6 renders any portion of the Leased Property
Unsuitable for its Primary Intended Use (or otherwise reduces the number of
units to less than 42 and/or reduces the maximum allowable resident occupancy to
less than 42 residents) for a period in excess of twelve (12) calendar months,
Lessee shall have the right to elect a reduction in Minimum Rent as set forth in
Paragraph 5.2 commencing on the twelve (12) month anniversary of any such use or
occupancy and continuing so long as such temporary use or occupancy continues,
in which event any Award made for such temporary use or occupancy shall be paid
to Lessor to the extent attributable to the period that Minimum Rent is so
abated. Lessee covenants that upon the termination of any such period of
temporary use or occupancy as set forth in this Paragraph 15.6, it will, at its
sole cost and expense, restore the Leased Property as nearly as may be
reasonably possible, to the condition in which the same was immediately prior to
the Condemnation, unless such period of temporary use or occupancy shall extend
beyond the expiration of the Term, in which case Lessee shall not be required to
make such restoration, and in such case, Lessee shall contribute to the cost of
such restoration that
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portion of its entire Award which is specifically allocated to such restoration
in the judgment or order of the court, if any.
ARTICLE XVI
16.1 EVENTS OF DEFAULT. Any one or more of the following events shall
be an "Event of Default":
(a) if Lessee fails to make payment of the Rent payable by
Lessee under this Lease when the same becomes due and payable and such failure
is not cured by Lessee within a period of three (3) Business Days after Notice
thereof from Lessor; or
(b) if Lessee fails to observe or perform any other term,
covenant or condition of this Lease other than those described under Paragraphs
16.1(a) and 16.1(c) through and including 16.1(m) of this Lease, and such
failure is not cured by Lessee within a period of thirty (30) days after Notice
thereof from Lessor, unless such failure cannot with due diligence be cured
within a period of thirty (30) days, in which case such failure shall not be
deemed an Event of Default if Lessee proceeds promptly and with due diligence to
cure the failure and diligently completes the curing thereof within ninety (90)
days; or
(c) if Lessee commits an "Event of Default" under any of the
Other Leases. Without limiting the foregoing, if Lessee commits an "Event of
Default" under this Lease, Lessee shall thereby be in default (and shall
therefore have committed an "Event of Default") under all of the Other Leases;
or
(d) if Lessee does any of the following:
(i) admit in writing its inability to pay its debts
generally as they become due;
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency law;
(iii) make an assignment for the benefit of creditors;
(iv) consent to the appointment of a receiver of itself
or of the whole or any substantial part of its property; or
(v) file 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; or
(e) if Lessee, on a petition in bankruptcy filed against it,
is adjudicated as bankrupt or an order for relief thereunder is entered against
it or a court of competent jurisdiction shall enter an order or decree
appointing, without the consent of Lessee, a receiver for Lessee or of the whole
or substantially all of its property or the Facility, or approving a petition
filed against Lessee seeking reorganization or arrangement of Lessee under the
Federal bankruptcy laws or other applicable law or statute of the United States
of America or any state
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thereof, and such judgment, order or decree shall not be vacated or set aside
within sixty (60) days from the date of the entry thereof; or
(f) if Lessee shall be liquidated or dissolved, or shall begin
proceedings toward such liquidation or dissolution, or shall, in any manner,
permit the sale or divestiture of substantially all of its assets; or
(g) subject to the provisions of Article XII hereof, if the
estate or interest of Lessee in the Leased Property or any part thereof be
levied upon or attached in a proceeding and the same shall not be vacated or
discharged within the later of ninety (90) days after commencement thereof or
thirty (30) days after Notice thereof from Lessor, or a mechanic's or similar
lien is filed with respect to the Leased Property and is not released or bonded
around for a period exceeding sixty (60) days after Lessee first has knowledge
of the same; or
(h) if Lessee voluntarily ceases operations on the Leased
Property for a period in excess of two (2) days; or
(i) if any of Lessee's representations or warranties expressly
set forth in this Lease (or financial statements provided to Lessor) proves to
be untrue when made in any material respect which materially and adversely
affects Lessor; or
(j) if Lessee (or any of its Affiliates) commits an "Event of
Default" or any other form of default under any other lease or sublease now or
hereafter entered into between Lessor (or any of its Affiliates) and Lessee (or
any of its Affiliates). Without limiting the foregoing, if Lessee commits an
"Event of Default" under this Lease, Lessee (or any of its Affiliates) shall
thereby be in default (and shall therefore have committed an "Event of Default")
under all other leases between Lessor (or any of its Affiliates) and Lessee (or
any of its Affiliates); or
(k) if Lessee attempts to assign or sublease, in violation of
the provisions of this Lease; or
(l) subject to the provisions of Article XII hereof, if Lessee
ceases to maintain in effect any license, permit, certificate or approval
necessary or otherwise required to operate the Facility in accordance with its
Primary Intended Use or if Lessee fails to deliver to Lessor within five (5)
Business Days after Lessee's receipt thereof, copies of any written notices,
demands, claims, inquiries, investigations, reports or correspondence from any
third party, whether governmental, quasi-governmental or private, stating or in
any manner indicating that any of Lessee's licenses, certificates, permits,
provider agreements and/or other authorizations and approvals in connection with
the Leased Property is or may be downgraded, revoked, cancelled, suspended or
otherwise adversely affected, or that an action of any kind is pending or being
considered to downgrade, revoke, cancel, suspend or otherwise adversely affect
any of the same; or
(m) any Change of Control (as defined below) of Lessee
following the Commencement Date of this Lease. As used in this Paragraph
16.1(m), the term "Change of Control" shall mean any change (voluntary or
involuntary, by operation of law or otherwise) in
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the Person or Persons (as defined below) which ultimately exert effective
control over the management of the affairs of Lessee (a "Controlling Entity") as
of the date hereof. A Change of Control shall specifically include, but not be
limited to, any of the occurrences described in subparagraphs (i) through (iii)
below in this Paragraph 16.1(m).
Notwithstanding anything to the contrary set forth in this Paragraph
16.1(m), any Change of Control which either (a) has been previously agreed to in
writing by Lessor, or (b) constitutes a Permitted Transaction (as defined
below), shall not constitute an Event of Default under this Lease. For the
purpose of this Paragraph 16.1(m), the term "Permitted Transaction" shall mean
any transaction, whether by operation of law or otherwise, resulting in a Change
of Control in which, immediately following such Change of Control, the Person or
Persons which ultimately exert effective control over the management of the
affairs of Lessee and/or Lessee's Controlling Entity (such Person or Persons,
the "Successor Person") meet both of the following tests: (A) such Successor
Person or Persons has or have an audited consolidated tangible net worth,
determined in accordance with generally accepted accounting principles
consistently applied ("GAAP"), equal to or greater than One Hundred Fifty
Million and No/100 Dollars ($150,000,000.00), and (B) such Successor Person or
Persons then has or have issued and outstanding securities which are publicly
traded on the New York Stock Exchange ("NYSE"), the American Stock Exchange
("AMEX"), or the NASDAQ-National Markets System ("NASDAQ"). From and after the
occurrence of a Permitted Transaction, the failure by the Successor Person or
Persons to (AA) maintain an audited consolidated tangible net worth, determined
in accordance with GAAP, equal to or greater than One Hundred Fifty Million and
No/100 Dollars ($150,000,000.00), and (BB) continue to have issued and
outstanding securities which are publicly traded on the NYSE, the AMEX, or the
NASDAQ, shall constitute an Event of Default.
For purposes of this Paragraph 16.1(m), a Change of Control shall
include, but not be limited to, any of the following occurrences:
(i) any Person (defined below) is or becomes the
Beneficial Owner (defined below), directly or indirectly, of securities of
Lessee and/or Lessee's Controlling Entity, whether by operation of law or
otherwise, representing thirty percent (30%) or more of the combined voting
power of the then outstanding securities of Lessee and/or its Controlling Entity
(whereupon such Person shall be deemed a Successor Person hereunder); or
(ii) the stockholders of Lessee or its Controlling
Entity approve a merger or consolidation of Lessee or its Controlling Entity (as
applicable) with any other corporation (or other entity), other than a merger or
consolidation which would result in the voting securities of Lessee or its
Controlling Entity (as applicable) which are outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of Lessee or
its Controlling Entity or such surviving entity immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected to
implement a recapitalization of Lessee or its Controlling Entity (or similar
transaction) in which no Person acquires more than thirty percent (30%) of the
combined voting power of the then outstanding securities of Lessee and/or its
Controlling Entity shall not constitute a Change of Control; or
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(iii) the stockholders of Lessee or its Controlling
Entity approve a plan of complete liquidation of Lessee or its Controlling
Entity (as applicable) or an agreement for the sale or disposition by Lessee or
its Controlling Entity of all or substantially all of the assets of Lessee or
its Controlling Entity.
For purposes of this Paragraph 16.1(m), the term "Person" shall have
the meaning ascribed thereto in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the term "Beneficial
Owner" shall have the meaning ascribed thereto in Rule 13d-3 of the Exchange
Act."
Upon the occurrence of an Event of Default, in addition to all of
Lessor's other remedies, Lessor may terminate this Lease by giving Lessee not
less than ten (10) Business Days Notice of such termination and upon the
expiration of the time fixed in such Notice, the Term shall terminate and all
rights of Lessee under this Lease shall cease.
In the event litigation is commenced with respect to any alleged
default under this Lease, the prevailing party in such litigation shall receive,
in addition to its damages incurred, such sum as the court shall determine as
its reasonable attorneys' fees, and all costs and expenses incurred in
connection therewith, including reasonable attorneys' fees and costs incurred on
appeal.
16.2 CERTAIN REMEDIES. Lessor shall have all remedies and rights
provided under this Lease and/or otherwise available in law and equity as a
result of an Event of Default or Lessee's other breach under this Lease,
including, to the extent permitted by Colorado law, the right to appoint a
receiver as a matter of strict right without regard to the solvency of Lessee,
for the purpose of procuring the Leased Property, preventing waste, protecting
and otherwise enforcing the provisions of this Lease and for any and all other
purposes for which a receiver is allowed under the laws of the State of
Colorado. Without limiting the foregoing, if an Event of Default occurs (and the
event giving rise to such Event of Default has not been cured within the
curative period, if any, relating thereto as set forth in this Lease) whether or
not this Lease has been terminated pursuant to Paragraph 16.1, Lessee shall, to
the extent permitted by law, and if required by Lessor to so do, immediately
surrender to Lessor the Leased Property pursuant to the provisions of Paragraph
16.1 and quit the same and Lessor may enter upon and repossess the Leased
Property, in person, by agent or by a court-appointed receiver, summary
proceedings, ejectment or otherwise, and may remove Lessee and all other persons
and any and all personal property from the Leased Property subject to rights of
any residents (and their property) and to any requirements of law. Without
limiting all other rights and remedies of Lessor under this Lease and under law,
Lessor shall have the right to accelerate all Rent (including Minimum Rent) and
therefore, upon Lessee's default, at Lessor's option, all such Rent shall become
immediately due and payable in accordance with Paragraph 16.3, below. Further,
without limiting all other rights and remedies of Lessor under this Lease and
under law, Lessor shall be entitled to recover from Lessee, and Lessee shall
therefore be liable for, all costs of recovering possession (including without
limitation all costs associated with any receiver) and renovating the Leased
Property for a new lessee and all other costs of re-leasing, including, but not
limited to, broker's commissions and attorneys' fees, except as limited by
Paragraph 16.3 below.
16.3 DAMAGES. Neither (i) the termination of this Lease pursuant to
Section 16.1, (ii) the repossession of the Leased Property; (iii) the failure of
Lessor, notwithstanding
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reasonable good faith efforts, to relet the Leased Property; nor (iv) the
reletting of all or any portion thereof, shall relieve Lessee of its liability
and obligations hereunder, all of which shall survive any such termination,
repossession or reletting (except for proceeds received on subletting). In the
event of any such termination, Lessee shall forthwith pay to Lessor all Rent due
and payable with respect to the Leased Property to and including the date of
such termination.
(a) Lessor shall not be deemed to have terminated this Lease
unless Lessor delivers written Notice to Lessee of such election. If Lessor
voluntarily elects to terminate this Lease upon an Event of Default, then in
addition to all remedies available to Lessor, Lessor may recover the sum of:
(i) the worth at the time of award of the unpaid Rent
which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by
which the unpaid Rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Lessee proves could
have been reasonably avoided;
(iii) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such rental loss that Lessee proves could be reasonably
avoided; and
(iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom.
The "worth at the time of award" of the amounts referred
to in subparagraphs (i) and (ii) above is computed by allowing interest at the
Overdue Rate. The worth at the time of award of the amount referred to in
subparagraph (iii) is computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).
(b) Without limiting Lessor's other remedies provided herein
and provided by law, Lessor may continue the Lease in effect after Lessee's
breach and abandonment and recover Rent as it becomes due, provided that, in
such event, Lessee has the right to sublet or assign subject only to reasonable
conditions imposed by Lessor. Accordingly, without termination of Lessee's right
to possession of the Leased Property, Lessor may demand and recover each
installment of Minimum Rent and other sums payable by Lessee to Lessor under the
Lease as the same becomes due and payable, which Minimum Rent and other sums
shall bear interest at the maximum interest rate permitted in accordance with
the laws of the State of Colorado (or the Overdue Rate, whichever is lower),
from the date when due until paid, and Lessor may enforce, by action or
otherwise, any other term or covenant of this Lease. If Lessor elects to recover
each installment of Rent as it becomes due, then Lessor may file any number of
lawsuits for the recovery of the amounts due hereunder.
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16.4 WAIVER. If this Lease is terminated pursuant to Paragraph 16.1,
Lessee waives, to the extent permitted by applicable law, the benefit of any
laws now or hereafter in force exempting property from liability for rent or for
debt.
16.5 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 the laws of the State of Colorado.
ARTICLE XVII
LESSOR'S RIGHT TO CURE LESSEE'S DEFAULT. If Lessee fails to make any
payment or to perform any act required to be made or performed under this Lease,
and to cure the same within the relevant time periods, if any, provided under
this Lease, Lessor, after fifteen (15) days' Notice to and demand upon Lessee,
and without waiving or releasing any obligation of Lessee or default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of Lessee, and may, to the
extent permitted by law, enter upon the Leased Property, in person, by agent or
by court-appointed receiver, for such purpose and take all such action thereon
as, in Lessor's opinion, may be necessary or appropriate therefor. Provided,
however, that should Lessor reasonably determine that the giving of such Notice
would risk loss to the Leased Property, or cause damage to Lessor, then Lessor
shall give such written Notice as is practical under the circumstances. No such
entry shall be deemed an eviction of Lessee. In exercising any remedy under this
Article XVII, Lessor shall use its good faith efforts not to violate any rights
of residents of the Facility. All sums so paid by Lessor and all costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, in each case) so incurred, together with a late charge thereon (to the
extent permitted by law) at the Overdue Rate from the date on which sums or
expenses are paid or incurred by Lessor, 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 OPTIONS TO EXTEND. Provided there exists no uncured Event of
Default under this Lease or any of the Related Leases at the time Lessee
exercises any option to extend (in accordance with this Article XVIII), Lessee
will have the right to extend this Lease for two (2) periods of five (5) years
each (each such additional term shall be referred to herein as an "Extended
Term"), commencing immediately following the end of the Initial Term or the
immediately preceding Extended Term, as the case may be. Notwithstanding
anything stated in this Paragraph 18.1 or elsewhere in this Lease, Lessee shall
not be entitled to exercise its option to extend this Lease for any Extended
Term (and any such option to extend shall automatically expire and terminate)
unless Lessee concurrently exercises its option as to the applicable Extended
Term under each of the Related Leases, as provided in each of the Related
Leases; and any attempt to exercise Lessee's option to extend this Lease without
Lessee exercising its options under all of the Related Leases shall be null and
void. The Lease during any Extended Term shall be on the same terms and
conditions as during the Initial Term, except that the Minimum Rent shall be
determined as set forth in Paragraph 18.2 below. In the event Lessee desires to
exercise any option to extend granted in this Article XVIII, Lessee shall give
Landlord written
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notice ("Notice to Extend") not more than three hundred sixty (360) days prior
and not less than one hundred eighty (180) days prior to the expiration of the
Initial Term or the immediately preceding Extended Term, as the case may be. If
Lessee fails to give Landlord any such notice, then such option to extend and
all future options to extend granted in this Article XVIII shall be null and
void and of no further force or effect.
18.2 MINIMUM RENT DURING EXTENDED TERMS. The Minimum Rent at the
commencement of each Extended Term shall be the higher of: (i) the previous
year's Minimum Rent amount, increased in accordance with the method described in
Paragraph 3.2, above; and (ii) the Fair Market Rent, as determined below. The
Minimum Rent shall be redetermined at the commencement of both the first
Extended Term and the second Extended Term and upon such determination shall
apply for the entire Extended Term (subject to annual adjustments as provided in
Paragraph 3.2 hereof).
(a) If Lessor and Lessee cannot agree on the Fair Market Rent
within thirty (30) days after the date of any Notice to Extend, each party
shall, by notice to the other, appoint a disinterested and licensed M.A.I. Real
Estate Appraiser with at least five years of experience in appraising long term
care facilities in the State of Colorado (with the same type of operating
license as that which is then in effect for the Facility) to determine the Fair
Market Rent. If any party should fail to appoint an appraiser within ten (10)
days after notice, the appraiser selected by the other party shall determine the
Fair Market Rent. In determining the Fair Market Rent, each appraiser shall give
appropriate consideration to, among other things, generally applicable minimum
rent for tenancies of property comparable to the Leased Property in the area in
which the Leased Property is located.
(b) If the two appraisers selected pursuant to Paragraph
18.2(a) above, cannot agree upon the Fair Market Rent within forty-five (45)
days, they shall immediately give written notice of such inability ("Notice of
Disagreement") to both Lessor and Lessee setting forth the Fair Market Rent
determinations of each of the appraisers. If the determinations of each of the
two appraisers of the Fair Market Rent at the commencement of such Extended Term
differ by less than ten percent (10%) of the lower determination, the Fair
Market Rent shall be fixed at an amount equal to the average of the two
determinations.
(c) If the determinations of each of the two appraisers
selected pursuant to Paragraph 18.2(a), above, differ by ten percent (10%) or
more of the lower determination with respect to the Fair Market Rent to be paid
at the commencement of such Extended Term, then within thirty (30) days after
the giving of the Notice of Disagreement, the two appraisers shall appoint a
third disinterested and licensed M.A.I. Real Estate Appraiser with at least 5
years of experience appraising long term care facilities with the same type of
operating license which is then in effect for the Facility. If the parties
cannot then agree on the Fair Market Rent, the third appraiser shall determine
the Fair Market Rent, and in so doing, shall give appropriate consideration to
those items described in Paragraph 18.2(a). The third appraiser shall not select
a Fair Market Rent either (i) higher than the highest of the two appraisals made
pursuant to Paragraph 18.2(a); or (ii) lower than the lowest of the two
appraisals made pursuant to Paragraph 18.2(a), above. If the first two
appraisers cannot agree on the selection of a third appraiser within such thirty
(30) days, or if the first two appraisers fail to provide a Notice of
Disagreement (as stated above in Paragraph 18.2(b), above, then the Fair Market
Rent shall be
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determined by a third appraiser selected by the American Arbitration Association
(or such other organization at Lessor's election) upon application by Lessor.
(d) During the time before the determination of the Fair
Market Rent, Lessee shall pay Minimum Rent at the rate paid immediately
preceding such Extended Term, increased by two percent (2%); provided, however,
that, if the Fair Market Rent is determined to be higher than such amount, the
Minimum Rent owed by Lessee at the Fair Market Rent shall be effective
retroactively as of the first day of such Extended Term. If, after the Minimum
Rent for an Extended Term is adjusted and applied retroactively as of the first
day of such Extended Term, it is determined that additional Minimum Rent is due
Lessor, the aggregate amount of any such additional Minimum Rent shall be paid
to Lessor within thirty (30) days of the determination of the Fair Market Rent
for such Extended Term.
(e) Each of the parties shall pay the fees of the appraiser
that it selects pursuant to Paragraph 18.2(a), above, and shall equally share
the cost of the third appraiser, if necessary, and shall equally share the cost
of arbitration (excluding attorneys' fees), if necessary.
ARTICLE XIX
HOLDING OVER. If Lessee shall for any reason remain in possession of
the Leased Property after the expiration of the Term or earlier termination of
the Term hereof, such possession shall be as a month-to-month tenant during
which time Lessee shall pay as rental each month, one and one-half times the
aggregate of (i) one-twelfth of the aggregate Minimum Rent payable with respect
to the immediately preceding twelve (12) months of the Term; (ii) all Additional
Charges accruing during the month; and (iii) all other sums payable by Lessee
pursuant to the provisions of 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 law to month-to-month tenancies, to
continue its occupancy and use of the Leased Property. 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.
ARTICLE XX
RISK OF LOSS. During the Term of this Lease, the risk of loss or of
decrease in the enjoyment and beneficial use of the Leased Property in
consequence of the damage or destruction thereof by fire, the elements,
casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures
(to the extent caused by or through Lessee), attachments, levies or executions
(other than those caused by or through Lessor) is assumed by Lessee, and Lessor
shall in no event be answerable or accountable therefor, nor shall any of the
events mentioned in this Paragraph entitle Lessee to any abatement of Rent
except as specifically provided in this Lease, or any right to terminate this
Lease, except as provided in Articles XIV or XV, above. Without limiting the
foregoing, Lessor shall not be liable for injury or damage to the person or
goods, wares, merchandise or other property of Lessee, Lessee's employees,
contractors, invitees, customers, or any other person in or about the Leased
Property, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air
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conditioning, or lighting fixtures, or from any other cause, whether the said
injury or damage results from conditions arising upon the Leased Property, or
upon other portions of the Land, or any part thereof, or from other sources or
places, and regardless of whether the cause of such damage or injury or the
means of repairing the same is accessible or not. Lessor shall not be liable for
any damages arising from any act or neglect of Lessee, or any other party named
above. Lessor shall, however, remain liable for any damages arising from
Lessor's own gross negligence or willful misconduct.
ARTICLE XXI
INDEMNIFICATION. Notwithstanding the existence of any insurance
provided for in Article XIII, and without regard to the policy limits of any
such insurance, Lessee will, and hereby does, protect, indemnify, hold harmless
and defend Lessor from and against all liabilities, obligations, claims,
demands, damages, penalties, causes of action, costs, and expenses (including,
without limitation, actual reasonable attorneys' fees and expenses), to the
extent permitted by law, imposed upon or incurred by or asserted against Lessor
by reason of any of the following: (a) any accident, injury to or death of
persons or loss of or damage to property occurring on or about the Leased
Property or adjoining sidewalks, including without limitation any claims of
malpractice, whether occurring prior to or after the Commencement Date provided
however, that if any such liability, obligation, demand, claim or cause of
action is covered by liability insurance pursuant to Article XIII, and if the
insurance carrier is providing a defense acceptable to Lessor in the reasonable
exercise of Lessor's discretion, or has otherwise acknowledged coverage for
same, then Lessee shall not be obligated to duplicate the defense,
investigation, adjustment, or other steps being taken by the insurer; (b) any
occupancy, use, misuse, non-use, condition, maintenance, or repair by Lessee of
the Leased Property; (c) any Impositions (which are the obligations of Lessee to
pay pursuant to the applicable provisions of this Lease, which include any
Impositions arising prior to the Commencement Date); (d) any failure on the part
of Lessee to perform or comply with any of the terms of this Lease; (e) the
non-performance of any of the terms and provisions of any and all existing and
future subleases of the Leased Property to be performed by the landlord (Lessee)
thereunder; (f) any Hazardous Materials, as defined in Paragraph 10.2, above
that now or hereafter during the Term may be located in, on or around, or may
potentially affect, any part of the Land or Leased Improvements; (g) any and all
other matters pertaining to the Leased Property or the operation of the Facility
after the date of this Lease or otherwise during the Term, including without
limitation compliance with or failure to comply with the provisions of Section 8
of the United States Housing Act of 1937 as and to the extent applicable, and
the provisions of the Fair Housing Amendments Act of 1988, each as amended from
time to time; and (h) any liability relating to the construction or development
of the Facility, whether arising in connection with events occurring prior to or
after the Commencement Date, including without limitation compliance with or
failure to comply with the provisions of the federal Americans with Disabilities
Act, as amended from time to time. Any amounts which became payable by Lessee
under this Paragraph shall be paid within ten (10) days of the date the same
becomes due and if not timely paid, shall bear a late charge (to the extent
permitted by law) at the Overdue Rate from the date of such determination to the
date of payment. Lessee, at its expense, shall contest, resist and defend any
such claim, action or proceeding asserted or instituted against Lessor or may
compromise or otherwise dispose of the same as Lessee sees fit, at Lessee's sole
cost, but after consultation with and approval by Lessor. Nothing herein shall
be construed as indemnifying Lessor against its own gross negligence or
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willful misconduct. Lessee's liability for a breach of the provisions of this
article arising during the Term hereof shall survive any termination of this
Lease.
ARTICLE XXII
SUBLETTING AND ASSIGNMENT. Lessee may not assign, sublease or sublet,
encumber, appropriate, pledge or otherwise transfer, by operation of law or
otherwise, directly or indirectly, the Lease or the leasehold or other interest
in the Leased Property without the prior written consent of Lessor, which
consent shall not be unreasonably withheld; provided, however, that Lessee may
from time to time during the Term of this Lease enter into rental agreements
with residents of the Facility, and execute any documents necessary in
connection therewith, without obtaining Lessor's prior consent. Upon Lessor's
consent, (a) in the case of any subletting, the sublessee shall comply with the
provisions of Paragraph 22.2, and (b) in the case of any assignment, any such
assignee shall assume in writing and agree to keep and perform all of the terms
of this Lease on the part of Lessee to be kept and performed and shall be, and
become, jointly and severally liable with Lessee for the performance thereof. In
the case of either an assignment or a subletting, (i) an original counterpart of
each sublease and assignment and assumption, duly executed by Lessee and such
sublessee or assignee, as the case may be, in form and substance satisfactory to
Lessor, shall be delivered promptly to Lessor, (ii) Lessee shall remain
primarily liable, as principal rather than as surety, for the prompt payment of
the Rent and for the performance and observance of all of the covenants and
conditions to be performed by Lessee hereunder; and (iii) Lessee shall be solely
liable for all costs and expenses (including attorneys' fees and costs) incurred
by Lessor in connection with such assignment or subletting, including but not
limited to the evaluation, granting or withholding of consent, documentation and
closing of the assignment or subletting transaction.
22.1 ATTORNMENT. Lessee shall insert in each sublease permitted under
Paragraph 22 (not including rental agreements with residents) provisions to that
effect that (i) such sublease is subject and subordinate to all of the terms and
provisions of this Lease and the rights of Lessor hereunder; (ii) in the event
this Lease shall terminate before the expiration of such sublease, the sublessee
thereunder will, at Lessor's option, 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) in the event
the sublessee receives a written Notice from Lessor or Lessor's assignees, if
any, stating that Lessee is in default under this Lease, the sublessee shall
thereafter be obligated to pay all rentals accruing under said sublease directly
to the party giving such Notice, or as such party may direct. All rents received
from the sublessee by Lessor or Lessor's assignees, if any, as the case may be,
shall be credited against amounts owing by Lessee under this Lease.
22.2 SUBLEASE LIMITATION. Anything contained in this Lease to the
contrary notwithstanding, Lessee shall not sublet the 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 Paragraph 856(d) of the Code,
or any similar or successor provision thereto.
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ARTICLE XXIII
OFFICER'S CERTIFICATES AND FINANCIAL STATEMENTS.
(a) At any time from time-to-time upon not less than twenty
(20) days Notice by Lessor, Lessee will furnish to Lessor an Officer's
Certificate certifying that this Lease unmodified and in full force and effect
(or that this Lease is in full force and effect as modified and setting forth
the modifications), the date to which the Rent has been paid and such other
information concerning this Lease as may be reasonably requested by Lessor. Any
such certificate furnished pursuant to this Paragraph may be relied upon by
Lessor and any prospective purchaser or lender of the Leased Property.
(b) In addition to all other obligations to provide financial
information contained in the Lease, Lessee will furnish the following statements
to Lessor:
(i) within one hundred twenty (120) days after the end
of each Fiscal Year, an Officer's Certificate stating that to the best of the
signer's knowledge and belief after making reasonable inquiry, Lessee is not in
default in the performance or observance of any of the terms of this Lease, or
if Lessee shall be in default to its knowledge, specifying all such defaults,
the nature thereof, and the steps being taken to remedy the same, and
(ii) with reasonable promptness, such other information
respecting the financial condition and affairs of Lessee as Lessor may
reasonably request from time-to-time.
(c) Within one hundred twenty (120) days after the end of each
Fiscal Year, Lessee agrees to provide to Lessor Consolidated Financials of
Lessee for such Fiscal Year.
ARTICLE XXIV
LESSOR'S RIGHT TO INSPECT. Lessee shall permit Lessor and its
authorized representatives to inspect the Leased Property on at least one
Business Day's prior notice during usual business hours subject to any security,
health, safety, or confidentiality requirements of Lessee or any governmental
agency or insurance requirement relating to the Leased Property, or imposed by
law or applicable regulations. Lessor shall take reasonable steps to avoid
interference with the residents.
ARTICLE XXV
NO WAIVER. The waiver by Lessor or Lessee of any term, covenant or
condition in this Lease shall not be deemed to be a waiver of any other term,
covenant or condition or any subsequent waiver of the same or any other term,
covenant or condition contained in this Lease. The subsequent acceptance of rent
hereunder by Lessor or any payment by Lessee shall not be deemed to be a waiver
of any preceding default of any term, covenant or condition of this Lease, other
than the failure to pay the particular amount so received and accepted,
regardless of the knowledge of any preceding default at the time of the receipt
or acceptance.
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<PAGE> 40
ARTICLE XXVI
REMEDIES CUMULATIVE. To the extent permitted by law, each legal,
equitable or contractual right, power and remedy of each party 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 each party of any one or more of
such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by such party of any or all of such other rights, powers and
remedies.
ARTICLE XXVII
ACCEPTANCE OF SURRENDER. No surrender to Lessor of this Lease or of the
Leased Property or any part thereof, or of any interest therein, shall be valid
or effective unless agreed to and accepted in writing by 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 XXVIII
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, (a) this Lease or the leasehold estate created hereby or any
interest in this Lease or such leasehold estate; and (b) the fee estate in the
Leased Property.
ARTICLE XXIX
CONVEYANCE BY LESSOR. If Lessor or any successor owner of the Leased
Property shall transfer or assign Lessor's title or interest in the Leased
Property or this Lease other than as security for a debt, then, subject to the
provisions of this Article XXIX and provided the new owner has agreed in writing
for the benefit of Lessee to recognize this Lease and be bound by all of the
terms and conditions hereof, Lessor 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 transfer or assignment and all such future
liabilities and obligations shall thereupon be binding upon the new owner.
ARTICLE XXX
QUIET ENJOYMENT. So long as Lessee shall pay all Rent as the same
becomes due and shall comply with all of the terms of this Lease and perform its
obligations hereunder, and except for any claims, actions, liens or encumbrances
arising from the acts or omissions of Lessee or otherwise from events occurring
prior to the Commencement Date here-under, Lessee shall peaceably and quietly
have, hold and enjoy the Leased Property for the Term hereof, free of any claim
or other action by Lessor or anyone claiming by, through or under Lessor, but
subject to all liens and encumbrances of record as of the date hereof or
hereafter consented to by Lessee. Except as otherwise provided in this Lease, no
failure by Lessor to comply with the foregoing covenant or any covenant of this
Lease shall give Lessee any right to cancel or terminate this
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<PAGE> 41
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 hereunder.
ARTICLE XXXI
NOTICES. All notices, demands, requests, consents, approvals, and other
communications ("Notice" or "Notices") hereunder shall be in writing and
personally served upon an Executive Officer (defined below) of the party being
served or mailed (by registered or certified mail, return receipt requested and
postage prepaid), overnight delivery service addressed to the respective
parties, as follows:
(a) If to Lessee: Alterra Healthcare Corporation
450 North Sunnyslope Road, Suite 300
Brookfield, Wisconsin 53005
Attention: Mr. Mark Ohlendorf
with a copy to: Rogers & Hardin
2700 International Tower
Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Miriam J. Dent, Esq.
(b) If to Lessor: LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attention: James J. Pieczynski
with a copy to: LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attention: Senior Vice President/
General Counsel/Secretary
and: Stern, Neubauer, Greenwald & Pauly
1299 Ocean Avenue, Tenth Floor
Santa Monica, CA 90401-1007
Attention: Dennis L. Greenwald, Esq.
or to such other address as either party may hereafter designate by a Notice
pursuant to this Paragraph. Personally delivered Notice (including Notices sent
by overnight delivery service) shall be effective upon receipt, and Notice given
by mail shall be completed five (5) days after the time of deposit in the U.S.
Mail system. For the purposes hereof, the term "Executive Officer" shall mean
the Chairman of the Board of Directors, the President, any Vice President, or
the Secretary of the corporation upon which service is to be made.
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ARTICLE XXXII
32.1 LESSOR MAY GRANT LIENS. Without the consent of Lessee, but subject
to the terms and conditions set forth below in this Paragraph 32.1, Lessor may,
from time-to-time, directly or indirectly, create or otherwise cause to exist
any lien or encumbrance or any other change of title ("Encumbrance") upon the
Leased Property, or any portion thereof or interest therein, whether to secure
any borrowing or other means of financing or refinancing or other-wise. Provided
that Lessee receives the non-disturbance agreement described below, this Lease
is and at all times shall be subject and subordinate to any such Encumbrance
which may now or hereafter affect the Leased Property and to all renewals,
modifications, consolidations, replacements and extensions thereof. This clause
shall be self-operative and no further instruments of subordination shall be
required; provided, however that, at any time from time to time, within ten (10)
days after the request by Lessor or any holder of any Encumbrance, Lessee shall
execute an agreement to the effect that this Lease shall be subject and
subordinate to the lien of any such new Encumbrance on the Leased Property, and
that in the event of any default or foreclosure under such Encumbrance, Lessee
shall attorn to the holder of such lien, and as otherwise requested by Lessor;
provided further, however, that the subjection and subordination of this Lease
and Lessee's leasehold interest hereunder to any Encumbrance hereafter imposed
by Lessor shall be conditioned upon the execution by the holder of such
Encumbrance and delivery to Lessee of a commercially reasonable non-disturbance
agreement specifying, among other things, that (a) so long as Lessee is not in
default and no event has occurred which with the passage of time or the giving
of notice or both would constitute a default under this Lease, in the event of
any foreclosure, judicial sale or deed in lieu of foreclosure, Lessee's rights
and leasehold estate hereunder shall not be disturbed by the holder of such
Encumbrance, its successors or assigns or any successful bidder; and (b)
notwithstanding such subordination, so long as Lessor is not in default and no
event has occurred which with the passage of time or the giving of notice or
both would constitute a default under such Encumbrance, the holder of such
Encumbrance will recognize the rights of the parties under the terms of this
Lease with respect to the disposition of insurance payments and condemnation
proceeds in the event of any casualty or condemnation.
32.2 ATTORNMENT. If Lessor's interest in the Leased Property is sold or
conveyed upon the exercise of any remedy provided for in any Encumbrance, or
otherwise by operation of law: (i) at the new owner's option, Lessee shall
attorn to and recognize the new owner as Lessee's lessor under this Lease, in
which case this Lease shall automatically become a new lease between Lessee and
the new owner upon all of the terms and conditions hereof, or enter into a new
lease in the exact form and substance of this Lease with the new owner, and
Lessee shall take such actions to confirm the foregoing within ten (10) Business
Days after request; and (ii) the new owner (other than any new owner or other
entity which is an Affiliate of Lessor) (provided that LTC Healthcare, Inc. and
its subsidiaries and affiliates shall not be deemed an Affiliate of Lessor)
shall not be (a) liable for any act or omission of Lessor under this Lease
occurring prior to such sale or conveyance, or (b) subject to any offset,
abatement or reduction of rent because of any default of Lessor under this Lease
occurring prior to such sale or conveyance.
32.3 LESSEE'S RIGHT TO CURE. Subject to the provisions of Paragraph
32.4, if Lessor breaches any covenant to be performed by it under this Lease,
Lessee, after Notice to and demand upon Lessor, without waiving or releasing any
obligation hereunder, and in addition to
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any other remedies available to Lessee, may (but shall be under no obligation at
any time thereafter to) make such payment or perform such act for the account
and at the expense of Lessor. All sums so paid by Lessee and all costs and
expenses (including, without limitation, reasonable attorneys' fees) so
incurred, together with interest thereon from the date on which such sums or
expenses are paid or incurred by Lessee, shall be paid by Lessor to Lessee on
demand, but may not be offset by Lessee against payments of Rent hereunder.
32.4 BREACH BY LESSOR. It shall be a breach of this Lease if Lessor
fails to observe or perform any term, covenant or condition of this Lease on its
part to be performed, and such failure shall continue for a period of thirty
(30) days after Notice thereof from Lessee unless such failure cannot with due
diligence be cured within a period of thirty (30) days, in which case such
failure shall not be deemed to continue if Lessor, within said thirty (30) day
period, proceeds promptly, continuously 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 the occurrence of any Unavoidable Delay."
ARTICLE XXXIII
MISCELLANEOUS.
33.1 SURVIVAL OF OBLIGATIONS. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, Lessee or
Lessor arising prior to, or in connection with any event occurring prior to, the
date of any expiration or termination of this Lease or the date of Lessee's
surrender of possession, whichever is later, shall survive such termination or
surrender of possession.
33.2 LATE CHARGES; INTEREST. If any interest rate provided for in any
provision of this Lease is based upon a rate in excess of the maximum rate
permitted by applicable law, the parties agree that such charges shall be fixed
at the maximum permissible rate.
33.3 LIMITS OF LESSOR'S LIABILITY. Lessee specifically agrees to look
solely to the assets of Lessor for recovery of any judgment against Lessor, it
being specifically agreed that no constituent shareholder, officer or director
of Lessor shall ever be personally liable for any such judgment or the payment
of any monetary obligation to Lessee. The provision contained in the foregoing
sentence is not intended to, and shall not, limit any right that Lessee might
otherwise have to obtain injunctive relief against Lessor or Lessor's successors
in interest, or any action not involving the personal liability of Lessor
(original or successor). Additionally, Lessor shall be exonerated from any
further liability under this Lease upon Lessor's transfer or other divestiture
of its ownership of the Leased Property, provided that the assignee or grantee
shall expressly assume in writing the obligations of Lessor hereunder.
Furthermore, in no event shall Lessor (original or successor) ever be liable to
Lessee for any indirect or consequential damages suffered by Lessee from
whatever cause.
33.4 TRANSFER OF OPERATIONS. At Lessor's request, upon the expiration
or earlier termination of the Term, Lessee shall use its best efforts to
transfer to Lessor or Lessor's nominee (or to cooperate with Lessor or Lessor's
nominee in connection with the processing by Lessor or Lessor's nominee of any
applications for) all licenses, operating permits and other
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<PAGE> 44
governmental authorizations and all contracts, including contracts with
governmental or quasi-governmental entities which may be necessary for the
operation of the Facility; provided that the costs and expenses of any such
transfer or the processing of any such application shall be paid by Lessor or
Lessor's nominee.
33.5 ADDENDUM, AMENDMENTS AND EXHIBITS. Any addendum, amendments and
exhibits attached to this Lease are hereby incorporated in this Lease and made a
part of this Lease.
33.6 HEADINGS. The headings and paragraph titles in this Lease are not
a part of this Lease and shall have no effect upon the construction or
interpretation of any part of this Lease.
33.7 TIME. Time is of the essence of this Lease and each and all of its
provisions.
33.8 DAYS. Unless otherwise expressly indicated herein, any reference
to "days" in this Lease shall be deemed to refer to calendar days.
33.9 RENT. Each and every monetary obligation under this Lease shall be
deemed to be "Rent" under this Lease and for all other purposes under law.
33.10 APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Colorado, but not including its
conflicts of laws rules; thus the law that will apply is the law applicable to a
transaction solely within the State of Colorado, including parties solely
domiciled in the State of Colorado.
33.11 SUCCESSORS AND ASSIGNS. The covenants and conditions contained in
this Lease shall, subject to the provisions regarding assignment (Article XXII),
apply to and bind the heirs, successors, executors, administrators, and assigns
of Lessor and Lessee.
33.12 RECORDATION. Lessor and Lessee shall execute with appropriate
acknowledgments and record in the Official Records of Larimer County, Colorado,
that certain Short Form Lease in the form and content of EXHIBIT "C" attached
hereto. Lessor and Lessee shall equally share the cost of recording the
Memorandum of Lease.
33.13 PRIOR AND FUTURE AGREEMENTS. This Lease contains all of the
agreements of Lessor and Lessee with respect to any matter covered or mentioned
in this Lease, and no prior agreements or understanding pertaining to any such
matters shall be effective for any purpose. No provision of this Lease may be
amended or supplemented except by an agreement in writing signed by both Lessor
and Lessee or their respective successors in interest. This Lease shall not be
effective or binding on any party until fully executed and delivered by both
Lessor and Lessee.
33.14 PARTIAL INVALIDITY. Any provision of this Lease which shall be
held by a court of competent jurisdiction to be invalid, void or illegal shall
in no way affect, impair or invalidate any other provision or term of this
Lease, and such other provision or terms shall remain in full force and effect.
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33.15 ATTORNEYS' FEES. In the event of any action or proceeding brought
by one party against the other under this Lease, the prevailing party shall be
entitled to recover its attorneys' fees in such action or proceeding from the
other party, including all attorneys' fees incurred in connection with any
appeals, and any post-judgment attorneys' fees incurred in efforts to collect on
any judgment.
33.16 AUTHORITY OF LESSOR AND LESSEE. Lessor and Lessee each hereby
represent and warrant that the individuals signing on its behalf are duly
authorized to execute and deliver this Lease on behalf of the corporation, in
accordance with the bylaws of the corporation, and that this Lease is binding
upon the corporation.
33.17 RELATIONSHIP OF THE PARTIES. Nothing contained in this Lease
shall be deemed or construed by Lessor or Lessee, nor by any third party, as
creating the relationship of principal and agent or a partnership, or a joint
venture by Lessor or Lessee, it being understood and agreed that no provision
contained in this Lease nor any acts of Lessor and Lessee shall be deemed to
create any relationship other than the relationship of landlord and tenant.
33.18 COUNTERPARTS. This Lease may be executed in one or more separate
counterparts, each of which, once they are executed, shall be deemed to be an
original. Such counterparts shall be and constitute one and the same instrument.
33.19 BROKERS. Lessor and Lessee each warrants that it has had no
dealings with any real estate broker or agent in connection with the negotiation
of this Lease and it knows of no real estate broker or agent who is entitled to
a commission in connection with this Lease. Lessor and Lessee hereby agree to
indemnify the other and to hold the other harmless from and against any and all
costs, expenses, claims, damages, suits, including attorneys' fees, in any way
resulting from claims or demands for commissions or other compensation from any
real estate brokers claiming through such party with respect to this Lease.
33.20 COMPUTER DISC. In order to facilitate the electronic filing of
this document with the United States Securities Exchange Commission and other
governmental agencies, Lessor shall provide or cause to be provided to Lessee a
computer disc containing this document, together with all exhibits, schedules
and ancillary documents related thereto, formatted in WordPerfect 5.1 Times New
Roman Font 12, upon Lessee's one-time request for same.
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<PAGE> 46
WHEREFORE, each of the parties has accepted and agreed by affixing
their respective authorized signatures below as of the date first above written.
"LESSEE"
ALTERRA HEALTHCARE CORPORATION,
a Delaware corporation
By: /s/ Thomas E. Komula
------------------------------------
Name: Thomas E. Komula
------------------------------------
Its: Senior Vice President
------------------------------------
"LESSOR"
LTC PROPERTIES, INC.,
A MARYLAND CORPORATION
By: /s/ Andre C. Dimitriadis
------------------------------------
Name: Andre C. Dimitriadis
------------------------------------
Its: Chairman and Chief Executive Officer
-------------------------------------
41
<PAGE> 1
EXHIBIT 10.114
SCHEDULE OF LTC LEASES
WHICH ARE SUBSTANTIALLY TO THE FORM OF LEASE
ATTACHED AS EXHIBIT 10.113 TO THE COMPANY'S
FORM 10-K FOR THE PERIOD ENDING 12/31/99
<TABLE>
<CAPTION>
ORIGINAL ANNUAL
LTC MINIMUM
LESSOR/LESSEE FACILITY LOCATION LEASE TERM INVESTMENT* RENT
------------- ----------------- ---------- ----------- ----
<S> <C> <C> <C> <C>
LTC Properties, Inc., Lessor Ada, Pontotoc County, December 27, 1996 $2,275,000 $168,525
Sterling House Corporation, Lessee Oklahoma through December 31,
2006
LTC Properties, Inc., Lessor Arvada, Jefferson August 15, 1997 through $2,910,000 $312,000
Sterling House Corporation, Lessee County, Colorado December 31, 2008
LTC Properties, Inc. Lessor Blue Water Bay, June 2, 1998 through $2,720,000 $247,698
Sterling House Corporation, Lessee Okaloosa County, December 31, 2008
Florida
LTC Properties, Inc., Lessor Central, Pickens County, July, 1998 through $2,436,000 $257,000
Alternative Living Services, Inc., Lessee South Carolina December 31, 2008
LTC Properties, Inc., Lessor Durant, Bryan County, April 21, 1997 through $1,868,500 $190,587
Sterling House Corporation, Lessee Colorado December 31, 2006
Coronado Corporation, Lessor Dodge City, Ford December 22, 1995 $1,750,000 $165,550
Sterling House Corporation, Lessee County, Kansas through December 31,
2005
LTC Properties, Inc., Lessor Ft. Collins, Larimer April, 1998 through $2,815,000 $320,000
Sterling House Corporation, Lessee County, Colorado December 31, 2008
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C> <C>
LTC Properties, Inc., Lessor Ft. Meyers, Lee County, March 30, 1998 through $2,762,000 $251,944
Sterling House Corporation, Lessee Florida December 31, 2008
LTC Properties, Inc., Lessor Goldsboro, Wayne December 3, 1998 through $2,280,000 $261,900
Sterling House Corporation, Lessee County, N.C. December 31, 2008
Coronado Corporation, Lessor Great Bend, Barton County, December 22, 1995 $1,650,000 $158,565
Sterling House Corporation, Lessee Kansas through December 31,
2005
LTC Properties, Inc., Lessor Greeley, Weld County, July 31, 1997 through $2,600,000 $269,800
Sterling House Corporation, Lessee Colorado December 31, 2008
LTC Properties, Inc., Lessor Greenville, Cleveland June 2, 1998 through $2,397,000 $271,900
Sterling House Corporation, Lessee County, N.C. December 31, 2008
LTC Properties, Inc., Lessor Greenwood, May, 1998 through $2,275,000 $286,200
Sterling House Corporation, Lessee Greenwood County, December 31, 2008
South Carolina
LTC Properties, Inc., Lessor Longmont, Boulder April 3, 1998 through $2,440,000 $259,700
Sterling House Corporation, Lessee County, Colorado December 31, 2008
LTC Properties, Inc., Lessor Loveland, Larimer September 5, 1997 $2,965,000 $325,250
Sterling House Corporation, Lessee County, Colorado through December 31,
2008
Coronado Corporation, Lessor McPherson, McPherson December 22, 1995 $1,650,000 $156,090
Sterling House Corporation, Lessee County, Kansas through December 31,
2005
LTC Properties, Inc., Lessor New Bern, Craven November, 1998 through $2,687,000 $265,700
Sterling House Corporation, Lessee County, N.C. December 31, 2008
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
LTC Properties, Inc., Lessor Rocky Mount, Nash July, 1998 through $2,322,000 $273,100
Alternative Living Services, Inc., Lessee County, Colorado December 31, 2008
Coronado Corporation, Lessor Salina, Saline County, December 22, 1995 $1,650,000 $156,050
Sterling House Corporation, Lessee Kansas through December 31,
2005
Texas-LTC Limited Partnership, Lessor San Antonio, Bexar June 13, 1997 through $2,155,000 $212,052
Sterling House Corporation, Lessee County, Texas December 31, 2006
Texas-LTC Limited Partnership, Lessor San Antonio, Bexar May 1, 1997 through April $2,000,000 $201,200
Sterling House Corporation, Lessee County, Texas 30, 2007
LTC Properties, Inc., Lessor Shelby, Cleveland April 23, 1998 through $2,355,000 $277,595
Sterling House Corporation, Lessee County, N.C. December 31, 2008
LTC Properties, Inc., Lessor Springfield, Clark August 8, 1997 through $2,135,000 $238,900
Sterling House Corporation, Lessee County, Ohio December 31, 2008
LTC Properties, Inc., Lessor Springhill, Hernando June 12, 1998 through $2,720,000 $245,025
Sterling House Corporation, Lessee County, Florida December 31, 2008
LTC Properties, Inc., Lessor Sumter, Sumter July, 1998 through $2,262,000 $259,700
Alternative Living Services, Inc., Lessee County, S.C. December 31, 2008
LTC Properties, Inc., Lessor Tallahassee, Leon April 23, 1998 through $3,145,000 $282,893
Sterling House Corporation, Lessee County, Florida December 31, 2008
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C>
LTC Properties, Inc., Lessor Tulsa, Tulsa County, June 13, 1997 through $2,495,000 $245,505
Sterling House Corporation, Lessee Oklahoma December 31, 2006
Texas-LTC Properties Limited Partnership, Tyler, Smith County, December, 1996 through $1,900,000 $188,000
Lessor Texas December 31, 2006
Sterling House Corporation, Lessee
Texas-LTC Properties Limited Partnership, Waco, McLennan June 13, 1997 through $2,335,000 $229,764
Lessor County, Texas December 31, 2006
Sterling House Corporation, Lessee
Texas-LTC Properties Limited Partnership, Wautauga, Tarrant August 29, 1997 through $2,394,898 $217,718
Lessor County, Texas December 31, 2008
Sterling House Corporation, Lessee
</TABLE>
<PAGE> 1
EXHIBIT 10.115
AMENDMENT TO LEASES
This AMENDMENT TO LEASES (the "Amendment") is entered into and
effective as of the 30th day of November, 1998, by and among LTC PROPERTIES,
INC., a Maryland corporation ("LTC"), KANSAS-LTC CORPORATION (formerly known as
Coronado Corporation), a Delaware corporation ("Kansas-LTC"), AND TEXAS-LTC
LIMITED PARTNERSHIP, a Texas limited partnership ("Texas-LTC"), (LTC, Kansas-LTC
and Texas-LTC are sometimes hereinafter individually and collectively referred
to as "Lessor"), on the one hand, and ALTERNATIVE LIVING SERVICES, INC., a
Delaware corporation ("ALS"), and STERLING HOUSE CORPORATION, a Kansas
corporation ("SHC"), (ALS and SHC are sometimes hereinafter individually and
collectively referred to as "Lessee"), on the other hand.
RECITALS
A. Lessor and Lessee have heretofore entered into those certain
leases demising those certain real properties improved with assisted living
facilities in the locations and as otherwise described on the Schedule of Leases
attached hereto as EXHIBIT "A" and incorporated herein by this reference (each
individually a "Lease" and collectively, the "Leases").
B. Concurrently herewith, Lessor and Lessee are entering into those
certain Assignment and Assumptions of approximately even date herewith, whereby
SHC is assigning to ALS all of SHC's right, title, interest and estate under the
Leases described in Items 17, 18, 19, 20, 21, 22, 26, 28 and 29 of EXHIBIT "A"
attached hereto (the "Assumed Leases"), and ALS is assuming the obligations and
liabilities of SHC under the Assumed Leases.
C. Lessor and Lessee desire to amend all of the Leases as set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lessor and Lessee hereby agree as
follows:
1. LESSOR MAY GRANT LIENS. The Leases are hereby amended to delete
in its entirety Article XXXII containing Paragraphs 32.1, 32.2 and 32.3, and to
replace it with the following:
"ARTICLE XXXII
32.1 LESSOR MAY GRANT LIENS. Without the consent of Lessee, but
subject to the terms and conditions set forth below in this Paragraph 32.1,
1
<PAGE> 2
Lessor may, from time-to-time, directly or indirectly, create or otherwise cause
to exist any lien or encumbrance or any other change of title ("Encumbrance")
upon the Leased Property, or any portion thereof or interest therein, whether to
secure any borrowing or other means of financing or refinancing or other-wise.
Provided that Lessee receives the non-disturbance agreement described below,
this Lease is and at all times shall be subject and subordinate to any such
Encumbrance which may now or hereafter affect the Leased Property and to all
renewals, modifications, consolidations, replacements and extensions thereof.
This clause shall be self-operative and no further instruments of subordination
shall be required; provided, however that, at any time from time to time, within
ten (10) days after the request by Lessor or any holder of any Encumbrance,
Lessee shall execute an agreement to the effect that this Lease shall be subject
and subordinate to the lien of any such new Encumbrance on the Leased Property,
and that in the event of any default or foreclosure under such Encumbrance,
Lessee shall attorn to the holder of such lien, and as otherwise requested by
Lessor; provided further, however, that the subjection and subordination of this
Lease and Lessee's leasehold interest hereunder to any Encumbrance hereafter
imposed by Lessor shall be conditioned upon the execution by the holder of such
Encumbrance and delivery to Lessee of a commercially reasonable non-disturbance
agreement specifying, among other things, that (a) so long as Lessee is not in
default and no event has occurred which with the passage of time or the giving
of notice or both would constitute a default under this Lease, in the event of
any foreclosure, judicial sale or deed in lieu of foreclosure, Lessee's rights
and leasehold estate hereunder shall not be disturbed by the holder of such
Encumbrance, its successors or assigns or any successful bidder; and (b)
notwithstanding such subordination, so long as Lessor is not in default and no
event has occurred which with the passage of time or the giving of notice or
both would constitute a default under such Encumbrance, the holder of such
Encumbrance will recognize the rights of the parties under the terms of this
Lease with respect to the disposition of insurance payments and condemnation
proceeds in the event of any casualty or condemnation.
32.2 ATTORNMENT. If Lessor's interest in the Leased Property is
sold or conveyed upon the exercise of any remedy provided for in any
Encumbrance, or otherwise by operation of law: (i) at the new owner's option,
Lessee shall attorn to and recognize the new owner as Lessee's lessor under this
Lease, in which case this Lease shall automatically become a new lease between
Lessee and the new owner upon all of the terms and conditions hereof, or enter
into a new lease in the exact form and substance of this Lease with the new
owner, and Lessee shall take such actions to confirm the foregoing within ten
(10) Business Days after request; and (ii) the new owner (other than any new
owner or other entity which is an Affiliate of Lessor) (provided that LTC
Healthcare, Inc. and its subsidiaries and affiliates shall not be deemed an
Affiliate of Lessor) shall not be (a) liable for any act or omission of Lessor
under
2
<PAGE> 3
this Lease occurring prior to such sale or conveyance, or (b) subject to any
offset, abatement or reduction of rent because of any default of Lessor under
this Lease occurring prior to such sale or conveyance.
32.3 LESSEE'S RIGHT TO CURE. Subject to the provisions of
Paragraph 32.4, if Lessor breaches any covenant to be performed by it under this
Lease, Lessee, after Notice to and demand upon Lessor, without waiving or
releasing any obligation hereunder, and in addition to any other remedies
available to Lessee, may (but shall be under no obligation at any time
thereafter to) make such payment or perform such act for the account and at the
expense of Lessor. All sums so paid by Lessee and all costs and expenses
(including, without limitation, reasonable attorneys' fees) so incurred,
together with interest thereon from the date on which such sums or expenses are
paid or incurred by Lessee, shall be paid by Lessor to Lessee on demand, but may
not be offset by Lessee against payments of Rent hereunder.
32.4 BREACH BY LESSOR. It shall be a breach of this Lease if
Lessor fails to observe or perform any term, covenant or condition of this Lease
on its part to be performed, and such failure shall continue for a period of
thirty (30) days after Notice thereof from Lessee unless such failure cannot
with due diligence be cured within a period of thirty (30) days, in which case
such failure shall not be deemed to continue if Lessor, within said thirty (30)
day period, proceeds promptly, continuously 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 the occurrence of any Unavoidable Delay."
2. EVENT OF DEFAULT; CHANGE IN CONTROL. The Leases are hereby
amended by adding the following subparagraph (m) in Paragraph 16.1 as an "Event
of Default" under each of the Leases:
"(m) any Change in Control (as defined below) of Lessee
following the Commencement Date of this Lease. As used in this Paragraph
16.1(m), the term "Change of Control" shall mean any change (voluntary or
involuntary, by operation of law or otherwise) in the Person or Persons (as
defined below) which ultimately exert effective control over the management of
the affairs of Lessee (a "Controlling Entity") as of the date hereof. A Change
of Control shall specifically include, but not be limited to, any of the
occurrences described in subparagraphs (i) through (iii) below in this Paragraph
16.1(m).
Notwithstanding anything to the contrary set forth in this
Paragraph 16.1(m), any Change of Control which either (a) has been previously
agreed to in writing by Lessor, or (b) constitutes a Permitted Transaction (as
defined below), shall not constitute an Event of Default under this Lease. For
the purpose of this
3
<PAGE> 4
Paragraph 16.1(m), the term "Permitted Transaction" shall mean any transaction,
whether by operation of law or otherwise, resulting in a Change in Control in
which, immediately following such Change in Control, the Person or Persons which
ultimately exert effective control over the management of the affairs of Lessee
and/or Lessee's Controlling Entity (such Person or Persons, the "Successor
Person") meet both of the following tests: (A) such Successor Person or Persons
has or have an audited consolidated tangible net worth, determined in accordance
with generally accepted accounting principles consistently applied ("GAAP"),
equal to or greater than One Hundred Fifty Million and No/100 Dollars
($150,000,000.00), and (B) such Successor Person or Persons then has or have
issued and outstanding securities which are publicly traded on the New York
Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), or the
NASDAQ-National Markets System ("NASDAQ"). From and after the occurrence of a
Permitted Transaction, the failure by the Successor Person or Persons to (AA)
maintain an audited consolidated tangible net worth, determined in accordance
with GAAP, equal to or greater than One Hundred Fifty Million and No/100 Dollars
($150,000,000.00), and (BB) continue to have issued and outstanding securities
which are publicly traded on the NYSE, the AMEX, or the NASDAQ, shall constitute
an Event of Default.
For purposes of this Paragraph 16.1(m), a Change of Control shall
include, but not be limited to, any of the following occurrences:
(i) any Person (defined below) is or becomes the
Beneficial Owner (defined below), directly or indirectly, of securities of
Lessee and/or Lessee's Controlling Entity, whether by operation of law or
otherwise, representing thirty percent (30%) or more of the combined voting
power of the then outstanding securities of Lessee and/or its Controlling Entity
(whereupon such Person shall be deemed a Successor Person hereunder); or
(ii) the stockholders of Lessee or its Controlling
Entity approve a merger or consolidation of Lessee or its Controlling Entity (as
applicable) with any other corporation (or other entity), other than a merger or
consolidation which would result in the voting securities of Lessee or its
Controlling Entity (as applicable) which are outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of Lessee or
its Controlling Entity or such surviving entity immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected to
implement a recapitalization of Lessee or its Controlling Entity (or similar
transaction) in which no Person acquires more than thirty percent (30%) of the
combined voting power of the then outstanding securities of Lessee and/or its
Controlling Entity shall not constitute a Change in Control; or
4
<PAGE> 5
(iii) the stockholders of Lessee or its Controlling
Entity approve a plan of complete liquidation of Lessee or its Controlling
Entity (as applicable) or an agreement for the sale or disposition by Lessee or
its Controlling Entity of all or substantially all of the assets of Lessee or
its Controlling Entity.
For purposes of this Paragraph 16.1(m), the term "Person"
shall have the meaning ascribed thereto in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the term
"Beneficial Owner" shall have the meaning ascribed thereto in Rule 13d-3 of the
Exchange Act."
3. FURTHER ASSURANCES. Lessee agrees to execute and deliver such
other instruments as may be requested by Lessor from time to time to effect and
confirm the transactions described herein and contemplated hereby, including
without limitation, individual amendments to each of the individual Leases.
4. MISCELLANEOUS. The Leases, each as amended by this Amendment,
shall otherwise remain unchanged and in full force and effect. This Amendment
may be executed in one or more counterparts, which shall together constitute one
and the same instrument. Facsimile signatures shall have the same binding effect
as originals.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
"LESSOR" LTC PROPERTIES, INC.,
a Maryland corporation
By: /s/ Pamela Privett
---------------------------------------
Its: Senior VP and General Counsel
---------------------------------------
TEXAS-LTC LIMITED PARTNERSHIP,
a Texas limited partnership
By: L-Tex GP, Inc.,
a Delaware corporation,
Its General Partner
By: /s/ Pamela Privett
-----------------------------------
5
<PAGE> 6
Its: Senior VP and General Counsel
---------------------------------------
KANSAS-LTC CORPORATION,
a Delaware corporation (formerly known as
Coronado Corporation)
By: /s/ Pamela Privett
---------------------------------------
Its: Senior VP and General Counsel
---------------------------------------
[signatures continued on next page]
6
<PAGE> 7
[signatures continued from previous page]
"LESSEE" ALTERNATIVE LIVING SERVICES, INC.,
A DELAWARE CORPORATION
By: /s/ Mark W. Ohlendorf
-------------------------
Its: Senior Vice President
------------------------
STERLING HOUSE CORPORATION,
A KANSAS CORPORATION
By: /s/ Mark W. Ohlendorf
-------------------------
Its: Vice President
------------------------
7
<PAGE> 8
EXHIBIT "A"
SCHEDULE OF LEASES
1. ARVADA, COLORADO. That certain Lease dated as of August 15, 1997, between
LTC Properties, Inc., a Maryland corporation (hereinafter "LTC"), as lessor, and
Sterling House Corporation, a Kansas corporation (hereinafter "SHC"), as lessee,
demising certain real property improved with an assisted living facility
commonly known as Sterling House of Arvada and located in the City of Arvada,
State of Colorado, and as assigned from SHC to Alternative Living Services,
Inc., a Delaware corporation ("ALS") pursuant to that certain Assignment and
Assumption of Lease dated July 21, 1998.
2. GREELEY, COLORADO. That certain Lease dated as of July 31, 1997, as amended
by that certain Amendment to Lease dated May 1, 1998, between LTC, as lessor,
and SHC, as lessee, demising certain real property improved with an assisted
living facility commonly known as Sterling House of Greeley and located in the
City of Greeley, State of Colorado, and as assigned from SHC to ALS pursuant to
that certain Assignment and Assumption of Lease dated July 21, 1998.
3. LONGMONT, COLORADO. That certain Lease dated as of April 3, 1998, as
amended by that certain Amendment to Lease dated April 30, 1998, between LTC, as
lessor, and SHC, as lessee, demising certain real property improved with an
assisted living facility commonly known as Sterling House of Longmont and
located in the City of Longmont, State of Colorado, and as assigned from SHC to
ALS pursuant to that certain Assignment and Assumption of Lease dated July 21,
1998.
4. LOVELAND, COLORADO. That certain Lease dated as of September 5, 1997, as
amended by that certain Amendment to Lease dated May 1, 1998, between LTC, as
lessor, and SHC, as lessee, demising certain real property improved with an
assisted living facility commonly known as Sterling House of Loveland and
located in the City of Loveland, State of Colorado, and as assigned from SHC to
ALS pursuant to that certain Assignment and Assumption of Lease dated July 21,
1998.
5. BLUEWATER BAY, FLORIDA. That certain Lease dated as of June 2, 1998,
between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Bluewater Bay and located in the City of Bluewater Bay, State of Florida.
6. FORT MYERS, FLORIDA. That certain Lease dated as of March 30, 1998, as
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amended by that certain Amendment to Lease dated April 30, 1998, between LTC, as
lessor, and SHC, as lessee, demising certain real property improved with an
assisted living facility commonly known as Sterling House of Fort Myers and
located in the City of Fort Myers, State of Florida.
7. SPRING HILL, FLORIDA. That certain Lease dated as of June 12, 1998, between
LTC, as lessor, and SHC, as lessee, demising certain real property improved with
an assisted living facility commonly known as Sterling House of Spring Hill and
located in the City of Spring Hill, State of Florida.
8. TALLAHASSEE, FLORIDA. That certain Lease dated as of April 23, 1998,
between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Tallahassee and located in the City of Tallahassee, State of Florida.
9. DODGE CITY, KANSAS. That certain Lease dated as of December 22, 1995, as
amended by that certain Amendment to Lease dated June 25, 1996, between
Kansas-LTC Corporation, a Delaware corporation (formerly known as Coronado
Corporation) (hereinafter "Kansas-LTC") as lessor, and SHC, as lessee, demising
certain real property improved with an assisted living facility commonly known
as Sterling House of Dodge City and located in the City of Dodge City, State of
Kansas.
10. GREAT BEND, KANSAS. That certain Lease dated as of December 22, 1995, and
amended by that certain Amendment to Lease dated June 25, 1996, between
Kansas-LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Great Bend and located in the City of Great Bend, State of Kansas.
11. MCPHERSON, KANSAS. That certain Lease dated as of December 22, 1995, as
amended by that certain Amendment to Lease dated June 25, 1996, between
Kansas-LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
McPherson and located in the City of McPherson, State of Kansas.
12. SALINA, KANSAS. That certain Lease dated as of December 22, 1995, as
amended by that certain Amendment to Lease dated June 25, 1996, between
Kansas-LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Salina and located in the City of Salina, State of Kansas.
13. GREENVILLE, NORTH CAROLINA. That certain Lease dated as of June 2, 1998,
between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling
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House of Greenville and located in the City of Greenville, State of North
Carolina.
14. ROCKY MOUNT, NORTH CAROLINA. That certain Lease dated as of July 17, 1998,
between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Rocky Mount and located in the City of Rocky Mount, State of North Carolina.
15. SHELBY, NORTH CAROLINA. That certain Lease dated as of April 23, 1998,
between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Shelby and located in the City of Shelby, State of North Carolina.
16. SPRINGFIELD, OHIO. That certain Lease dated as of August 8, 1997, as amended
by that certain Amendment to Lease dated May 1, 1998, between LTC, as lessor,
and SHC, as lessee, demising certain real property improved with an assisted
living facility commonly known as Sterling House of Springdale and located in
the City of Springfield, State of Ohio.
17. ADA, OKLAHOMA. That certain Lease dated as of December 27, 1996, between
LTC, as lessor, and SHC, as lessee, demising certain real property improved with
an assisted living facility commonly known as Sterling House of Ada and located
in the City of Ada, State of Oklahoma.
18. DURANT, OKLAHOMA. That certain Lease dated as of April 21, 1997, as amended
by that certain Amendment to Lease" dated February 27, 1998, between LTC, as
lessor, and SHC, as lessee, demising certain real property improved with an
assisted living facility commonly known as Sterling House of Durant and located
in the City of Durant, State of Oklahoma.
19. EDMOND, OKLAHOMA. That certain Lease dated as of August 29, 1997, between
LTC, as lessor, and SHC, as lessee, demising certain real property improved with
an assisted living facility commonly known as Sterling House of Santa Fe Square
and located in the City of Edmond, State of Oklahoma.
20. TULSA, OKLAHOMA (MINGO ROAD). That certain Lease dated as of February 28,
1996, between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Tulsa-Mingo and located in the City of Tulsa, State of Oklahoma.
21. TULSA, OKLAHOMA. That certain Lease dated as of June 13, 1997, as amended by
that certain Amendment to Lease dated May 1, 1998, between LTC, as lessor, and
SHC, as lessee, demising certain real property improved
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with an assisted living facility commonly known as Sterling House of Tulsa and
located in the City of Tulsa, State of Oklahoma.
22. WEATHERFORD, OKLAHOMA. That certain Lease dated as of August 29, 1997,
between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Legacy Square and located in the City of Weatherford, State of Oklahoma.
23. SUMTER, SOUTH CAROLINA. That certain Lease dated as of July 16, 1998,
between LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Sumter and located in the City of Sumter, State of South Carolina.
24. SAN ANTONIO, TEXAS (MALTSBERGER). That certain Lease dated as of June 13,
1997, as amended by that certain Amendment to Lease dated May 1, 1998, between
Texas-LTC Limited Partnership, a Texas Limited Partnership (hereinafter
"Texas-LTC"), as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
San Antonio Maltsberger and located in the City of San Antonio, State of Texas.
25. SAN ANTONIO, TEXAS. That certain Lease dated as of May 1, 1997, between
Texas-LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
San Antonio and located in the City of San Antonio, State of Texas.
26. TYLER, TEXAS. That certain Lease dated as of December 27, 1996, between
Texas-LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Tyler and located in the City of Tyler, State of Texas.
27. WACO, TEXAS. That certain Lease dated as of June 13, 1997, and amended by
that certain amendment entitled "Amendment to Lease" dated May 1, 1998, between
Texas-LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Sterling House of
Waco and located in the City of Waco, State of Texas.
28. WATAUGA, TEXAS. That certain Lease dated as of August 29, 1997, between
Texas-LTC, as lessor, and SHC, as lessee, demising certain real property
improved with an assisted living facility commonly known as Savannah Square
Watauga and located in the City of Watauga, State of Texas.
29. WICHITA FALLS, TEXAS. That certain Lease dated as of December 27,
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1996, between Texas-LTC, as lessor, and SHC, as lessee, demising certain real
property improved with an assisted living facility commonly known as Sterling
House of Wichita Falls and located in the City of Wichita Falls, State of Texas.
12
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EXHIBIT 10.116
BUILDING LOAN AGREEMENT
THIS BUILDING LOAN AGREEMENT (this "Agreement") is made and entered into
this 14th day of January, 2000, by and between KEY CORPORATE CAPITAL INC., a
Michigan corporation with an office for the transaction of business at 127
Public Square, 6th Floor, Cleveland, Ohio 44114 (the "Lender"), and CLINTON
BROOKSIDE DRIVE, LLC, a New York limited liability company with an office for
the transaction of business at 250 South Clinton Street, Syracuse, New York
13202 (the "Borrower").
W I T N E S S E T H:
WHEREAS, the Lender is about to make a loan (the "Loan") to Borrower in
an amount not to exceed $3,300,000.00 (the "Loan Amount") for the purposes of
developing a facility in Clinton, New York; and
WHEREAS, of the Loan Amount, up to $2,299,578.00 is to be advanced by
Lender to Borrower pursuant to this Agreement and the balance of the Loan Amount
is to be advanced by Lender to Borrower pursuant to the terms of a Development
Agreement between the Lender and the Borrower of even date herewith.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE 1
TERMS AND DEFINITIONS
In addition to the other terms hereinafter defined, the following terms
shall have the meanings set forth in this Article. References to documents and
other materials shall include those documents and materials as they may be
revised, amended and modified, from time to time, with the prior written
approval of Lender.
1.1 ADVANCE. "Advance" means any disbursement of the proceeds of
the Loan by Lender pursuant to the terms of this Agreement.
1.2 APPROVAL. "Approval", "Approved", "approval" or "approved"
means, as the context so determines, an approval in writing given to the party
seeking approval after full and fair disclosure to the party giving approval of
all material facts necessary in order to determine whether approval should be
granted.
1.3 ARCHITECT'S CONTRACT. "Architect's Contract" means the
contract, dated September 17, 1998, between BCI Construction, Inc. (which in the
Architect's Contract is erroneously referred to as BCI/ALS, Inc., a non-existent
entity) and Borrower's Architect as assigned to Borrower pursuant to an
assignment dated ________ __, ___ between BCI Construction, Inc. and Borrower.
<PAGE> 2
1.4 BORROWER'S ARCHITECT. "Borrower's Architect" means Eppstein
Uhen, whose address is 210 East Michigan Street, Milwaukee, Wisconsin
53202-0728.
1.5 COMPLETION DATE. "Completion Date" means January 1, 2002.
1.6 COMMITMENT. "Commitment" means, collectively, (a) the
commitment letter for the Loan issued by Lender to ALS-Northeast, LLC dated
December 28, 1999, and (b) the master loan commitment issued by Lender to
ALS-Northeast, LLC dated May 5, 1998 and accepted by ALS - Northeast, LLC on May
6, 1998 (the "Master Commitment").
1.7 CONSTRUCTION BUDGET. "Construction Budget" means the budget for
total estimated Property Costs, submitted by Borrower, approved by Lender, and
attached hereto as Exhibit A.
1.8 CONSTRUCTION CONTRACT. "Construction Contract" means the
contract, dated September 30, 1999 between Borrower and Contractor and providing
for the construction of the Improvements on the Land.
1.9 CONSTRUCTION INSPECTOR. "Construction Inspector" means Clough
Harbour & Associates, LLP or at Lender's option either an officer or employee of
Lender or consulting architects, engineers or inspectors appointed by Lender.
1.10 CONSTRUCTION SCHEDULE. "Construction Schedule" means the
schedule, broken down by trade, of the estimated dates of commencement and
completion of the Improvements, submitted by Borrower, approved by Lender and
attached hereto as Exhibit B.
1.11 CONTINGENCY RESERVE. "Contingency Reserve" means the amount(s),
if any, allocated as contingency reserve(s) in the Construction Budget.
1.12 CONTRACTOR. "Contractor" means Central New York Contractors,
Inc., whose address is 250 Clinton Street, Syracuse, New York 13302-1258.
1.13 COSTS OF IMPROVEMENT. "Costs of Improvement" means those items
defined as such under Section 2(5) of the Lien Law.
1.14 DRAW REQUEST. "Draw Request" means, with respect to each
Advance, Borrower's request for such Advance, and documents required by this
Agreement to be furnished to Lender as a condition to such Advance.
1.15 EVENT OF DEFAULT. "Event of Default" means any condition or
event described herein as such.
1.16 GOVERNMENTAL APPROVALS. "Governmental Approvals" means all
approvals, consents, waivers, orders, acknowledgements, authorizations, permits
and licenses required under applicable Requirements to be obtained from any
Governmental Authority for the construction of the Improvements and the use,
<PAGE> 3
occupancy and operation of the Property following completion of construction of
the Improvements.
1.17 GOVERNMENTAL AUTHORITY. "Governmental Authority" means the
United States of America, the state in which the Land is located and Borrower is
organized, any political subdivision thereof, municipalities in which the Land
is located, and any agency, authority, department, commission, board, bureau, or
instrumentality of any of them.
1.18 GUARANTOR. "Guarantor" means, collectively, Assisted Living
Equities, LLC ("ALE"), with a business address of 250 South Clinton Street,
Syracuse, New York and Alterra Healthcare Corporation ("Alterra"), with a
business address of 10000 Innovation Drive, Milwaukee, Wisconsin 53226
(provided, however, that Guarantor shall mean Alterra once the Limited Recourse
Guaranty dated of even date herewith from ALE is terminated).
1.19 IMPROVEMENTS. "Improvements" means the assisted living facility
to be constructed on the Land in accordance with the Plans and Specifications.
1.20 INDIRECT COSTS. "Indirect Costs" mean and include title
insurance premiums, survey charges, engineering fees, architectural fees, and
all other expenses which are, in accordance with sound accounting practices,
capital expenditures relating to the Property, to the extent shown in Column B
on page 1 of Exhibit A.
1.21 LAND. "Land" means the real property described in Exhibit D
attached hereto.
1.22 LIEN LAW. "Lien Law" means the Lien Law of the State of New
York.
1.23 LOAN. "Loan" means the loan which is the subject of this
Agreement and the Development Agreement.
1.24 LOAN AMOUNT. "Loan Amount" means $3,300,000.
1.25 LOAN DOCUMENTS. "Loan Documents" means collectively, this
Agreement, all documents referred to in Article 2 hereof, and all other
agreements, documents and instruments now or hereafter evidencing, securing or
otherwise relating to the Loan.
1.26. PERMITTED CONTEST. "Permitted Contest" means a good faith
active contest of any taxes, assessment, sewer rates, water rates or sums due by
Borrower provided that (1) the Borrower first shall have notified Lender of such
contest, (2) an Event of Default has not occurred under any of the Loan
Documents, (3) the Borrower shall have set aside reasonable adequate reserves
for any such taxes, assessments and other charges, and (4) the Borrower
demonstrates to the reasonable satisfaction of the Lender that the non-payment
of such items will not subject the lien of the Mortgage as to any part of the
Land, to loss or forfeiture.
1.27 PERMITTED ENCUMBRANCES. "Permitted Encumbrances" means (A)
utility,
<PAGE> 4
access and other easements, rights of way, restrictions, encroachments and
exceptions that exist on the date hereof and benefit or do not materially impair
the utility or the value of the Improvements, (B) liens for taxes to the extent
being contested as permitted by Section 7 of the Mortgage or not yet delinquent,
(C) any lien on the Property obtained through any of the Loan Documents, (D) any
lien on the Property in favor of the Mortgagee, (E) any lien listed on Exhibit B
of the Mortgage, and (F) any lien permitted by the Lender.
1.28 PERSONAL PROPERTY. "Personal Property" means materials,
furnishings, fixtures, machinery, equipment and all items of tangible and
intangible personal property now or hereafter owned by Borrower, wherever
located, and either (i) to be incorporated into the Improvements, (ii) used in
connection with the construction of the Improvements or (iii) to be used in
connection with the operation of the Land or Improvements or both.
1.29 PLANS AND SPECIFICATIONS. "Plans and Specifications" means the
plans and specifications for the Improvements prepared by Borrower's Architect
and more particularly identified on Exhibit E attached hereto.
1.30 PROPERTY. "Property" means the Land, Improvements and Personal
Property.
1.31 PROPERTY COSTS. "Property Costs" shall mean and include all
costs that will be incurred by Borrower for the items listed in Column B on page
1 of Exhibit A.
1.32 REQUIRED EQUITY FUNDS. "Required Equity Funds" means the sums,
if any, required of Borrower by Lender, to be available to pay the difference
between Property Costs and the amount of the Loan.
1.33 REQUIREMENTS. "Requirements" means any law, ordinance, order,
rule or regulation of any Governmental Authority relating in any way to the
Property or the Borrower.
1.34 TAKING. "Taking" shall mean any condemnation for public use of,
or damage by reason of, the action of any Governmental Authority, or any
transfer by private sale in lieu thereof, either temporarily or permanently.
1.35 TERMINATION DATE. "Termination Date" means the earlier of
January 1, 2002, or such other date as may be set forth herein which fixes the
termination of Lender's obligations to make Advances.
ARTICLE 2
LOAN DOCUMENTS
The following documents have been duly authorized, executed and
delivered to Lender by the parties thereto:
2.1 NOTE. The Secured Promissory Note (the "Note") from Borrower to
Lender, dated as of even date herewith, in the Loan Amount.
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2.2 MORTGAGE AND SECURITY AGREEMENT. The Mortgage and Security
Agreement (the "Mortgage") from Borrower in favor of Lender, dated of even date
herewith, encumbering the Property as security for the Note and any sums in
addition to the Loan Amount advanced by Lender under the other Loan Documents,
which Mortgage is to be recorded in the appropriate public records on or about
the date hereof.
2.3 FINANCING STATEMENTS. Uniform Commercial Code, Form UCC-1
Financing Statements (the "Financing Statements") in favor of Lender giving
notice of a security interest, which Financing Statements are to be filed in the
appropriate public records on or about the date hereof.
2.4 ASSIGNMENT OF CONTRACT DOCUMENTS. The Assignment of Contract
Documents (the "Assignment of Contract Documents") from Borrower in favor of
Lender dated of even date herewith.
2.5 ASSIGNMENT OF RENTS AND LEASES. The Assignment of Rents and
Leases (the "Assignment") from Borrower in favor of Lender dated of even date
herewith which is to be recorded in the appropriate public records on or about
the date hereof.
2.6 GUARANTY. The Guaranty of Payment and Performance (the "ALS
Guaranty") from Alterra in favor of Lender dated of even date herewith.
2.7 LIMITED RECOURSE GUARANTY. The Limited Recourse Guaranty (the
"ALE Guaranty") from ALE in favor of Lender dated of even date herewith.
2.8 INDEMNITY AGREEMENT. The Hazardous Substances Indemnity
Agreement (the "Indemnity Agreement") from Borrower and Guarantor in favor of
Lender dated of even date herewith.
2.9 SECURITY AGREEMENT. The Security Agreement (the "Security
Agreement") from Borrower in favor of Lender dated of even date herewith.
2.10 DEVELOPMENT AGREEMENT. The Development Agreement (the
"Development Agreement") between the Borrower and Lender dated of even date
herewith providing for advancing the balance of the Loan not being advanced
hereunder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender as follows:
3.1 VALIDITY OF LOAN DOCUMENTS. That the Loan Documents are valid
and legally binding obligations, enforceable in accordance with their respective
terms.
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3.2 Title to Property. That Borrower has fee simple absolute title
to the Land, subject to no liens, security interests, charges or encumbrances in
favor of any person other than Lender and the Permitted Encumbrances, and that
no conditional sale contract, chattel mortgage, security agreement, lease,
financing statement or other title retention agreement has been or will be
executed in favor of any person other than Lender with respect to any of the
Personal Property.
3.3 Absence of Conflicts. That the execution and delivery of the
Loan Documents by Borrower and the performance and observance by Borrower of its
obligations thereunder will not, contravene or result in a breach of (a) if
Borrower purports to be a corporation, any provision of Borrower's corporate
charter or by-laws, or, if Borrower purports to be partnership, any provision of
Borrower's partnership agreement or certificate, or, if Borrower purports to be
a limited liability company, any provision of Borrower's articles of
organization or operating agreement, or (b) any material Requirements, or (c)
any decree or judgement binding on Borrower or (d) any material agreement or
instrument binding on Borrower or any of its property, nor will the same result
in the creation of any lien or security interest under any such agreement or
instrument.
3.4 Pending Litigation. That there are no actions, suits,
investigations or proceedings pending, or, to the knowledge of Borrower,
threatened against Borrower, or the Property, or involving the validity or
enforceability of any of the Loan Documents or the priority of the lien thereof,
or which will materially affect Borrower's ability to repay the Loan, at law or
in equity or before or by any Governmental Authority.
3.5 Violations of Requirements. That Borrower has no knowledge of
any violations or notices of violations of any Requirements which will
materially affect Borrower's ability to repay the Note of use and update the
Improvements.
3.6 Compliance with Requirements. That the Plans and Specifications
and construction of the Improvements pursuant thereto and the use of the
Property contemplated thereby will comply with all material Requirements.
3.7 Organization, Status and Authority.
(a) If Borrower is a corporation, that (i) it is a
corporation duly organized, validly existing and in good standing under
the laws of the state in which it is incorporated, (ii) if required by
the laws of the state in which the Land is located, it is duly qualified
to do business and is in good standing therein, (iii) it has the
corporate power, authority and legal right to own and operate its
properties and assets, carry on the business now being conducted and
proposed to be conducted by it, and to engage in the transactions
contemplated by the Loan Documents, and (iv) the execution and delivery
of the Loan Documents to which it is a party and the performance and
observance of the provisions thereof have been duly authorized by all
necessary corporate actions.
(b) If Borrower is a partnership, that (i) it is duly formed
and validly existing under the laws of the state in which it is formed,
(ii) if required by the
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laws of the state in which the Land is located, it is fully qualified to
do business therein, (iii) it has the power, authority and legal right
to own and operate its properties and assets, to carry on the business
conducted and to engage in the transactions contemplated by the Loan
Documents, and (iv) the execution and delivery of the Loan Documents to
which it is a party and the performance and observance of the provisions
thereof have all been duly authorized by all necessary actions of its
partners.
(c) If Borrower or any member of Borrower is a limited
liability company, that (i) it is a limited liability company duly and
validly existing and in good standing under the laws of the state in
which it is organized, (ii) if required by the laws of the state in
which the Land is located, it is duly qualified to so business therein,
(iii) it has the power, authority and legal right to own and operate its
properties and assets, carry on the business now being conducted and
proposed to be conducted by it, and to engage in the transactions
contemplated by the Loan Documents, and (iv) the execution and delivery
of the Loan Documents to which it is a party and the performance and
observance of the provisions thereof have been duly authorized by all
necessary corporate actions.
3.8 Availability of Utilities. That all utility services reasonably
necessary and sufficient for the construction, development and operation of the
Property for its intended purposes are presently available (or are reasonably
anticipated to be available so as not to materially delay construction of the
Improvements) to the boundaries of the Land through dedicated public rights of
way or through perpetual private easements, approved by Lender, with respect to
which the Mortgage creates a valid, binding and enforceable lien, including, but
not limited to, water supply, storm and sanitary sewer, gas, electric and
telephone facilities, and drainage.
3.9 Condition of Property. That neither the Property nor any
portion thereof is now materially damaged or injured as result of any fire,
explosion, accident, flood or other casualty or has been the subject of any
Taking, and to the knowledge of Borrower, no Taking is pending or contemplated.
3.10 Brokerage Commissions. That any brokerage commissions due in
connection with the transactions contemplated hereby and owned by Borrower have
been paid in full and that any such commissions coming due in the future will be
promptly paid by Borrower. Borrower agrees to and shall indemnify Lender from
any liability, claims or losses arising by reason of any such brokerage
commissions. This provision shall survive the repayment of the Loan and shall
continue in full force and effect so long as the possibility of such liability,
claims or losses exists.
3.11 Financial Statements. That the financial statements of Borrower
previously delivered to Lender are true and correct in all material respects,
have been prepared in accordance with generally accepted accounting principles
consistently applied, and fairly present the financial condition of Borrower as
of the respective dates thereof and the results of its operations for the
periods covered thereby; that no adverse change has occurred in the assets,
liabilities, or financial conditions reflected therein since the respective
dates thereof.
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3.12 Taxes. That all federal, state and other tax returns of
Borrower required by law to be filed have been filed, that except for Permitted
Contests all federal, state and other taxes, assessments and other governmental
charges upon Borrower and its respective properties which are due and payable
have been paid, and that Borrower has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods for which such return shave been filed.
3.13 Construction Contract. That (i) the Construction Contract is in
full force and effect; (ii) both Borrower and Contractor are in material
compliance with their respective obligations under the Construction Contract;
(iii) the work to be performed by Contractor under the Construction Contract is
the work called for by the Plans and Specifications and all work required to
complete the Improvements substantially in accordance with the Plans and
Specifications is provided for under the Construction Contract; and (iv) all
work on the Improvements shall be completed substantially in accordance with the
Plans and Specifications in a good and workmanlike manner and shall be free of
any material defects.
3.14 Access. That the rights of way for all roads necessary for the
full utilization of the Improvements for their intended purposes have either
been acquired by the Borrower, the appropriate Governmental Authority or have
been dedicated to public use and accepted by such Governmental Authority, and
all such roads shall have been completed, or all reasonably necessary steps
shall have been taken by Borrower and such Governmental Authority to assure the
complete construction and installation thereof prior to the date upon which
access to the Property via such roads will be necessary. All curb cuts, driveway
permits and traffic signals shown on the Plans and Specifications or otherwise
necessary for access to the Property are existing or have been fully approved by
the appropriate Governmental Authority or Borrower has taken all reasonably
necessary steps so that the obtaining of such approvals will not materially
delay the construction of the Improvements.
3.15 No Default. That no Event of Default exists.
3.16 Architect's Contract. That (i) the Architect's Contract is in
full force and effect; and (ii) both Borrower and Borrower's Architect are in
material compliance with their respective obligations under the Architect's
Contract.
3.17 Plans and Specifications. That Borrower has furnished Lender
complete sets of the Plans and Specifications which comply with all material
Requirements, all material Governmental Approvals, and all material
restrictions, covenants and easements affecting the Property, and which have
been approved by such Governmental Authority as is required for construction of
the Improvements.
3.18 Governmental Approvals. That Borrower has obtained all
Governmental Approvals from, and has given all such notices to, and has taken
all such other actions with respect to such Governmental Authority as may be
required under applicable Requirements for the construction of the Improvements
or Borrower has taken all reasonably necessary steps so that the obtaining of
such approvals will not materially delay the construction of the improvements.
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3.19 Construction Budget. That the Construction Budget accurately
reflects all material Property Costs.
3.20 Feasibility. That the Construction Schedule is realistic and
reasonably feasible, and is materially accurate to date.
3.21 Effect of Draw Request. That each Draw Request submitted to
Lender as provided in Article 6 hereof shall constitute an affirmation that the
representations and warranties contained in Article 3 of this Agreement and in
the other Loan Documents remain true and correct as of the date thereof; and
unless Lender is notified to the contrary, in writing, prior to the disbursement
of the requested Advance or any portion thereof, shall constitute an affirmation
that the same remain true and correct on the date of such disbursement.
ARTICLE 4
COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Lender as follows:
4.1 Commitments. To permit no default under the terms of the
Commitment.
4.2 Construction Contract. (i) To permit no material default under
the terms of the Construction Contract, (ii) to waive none of the material
obligations of Contractor thereunder, (iii) to do no act which would relieve
Contractor from its obligations to construct the Improvements substantially in
accordance with the Plans and Specifications, and (iv) to make no material
amendments to or material change orders (as defined in Section 4.11) under the
Construction Contract without the prior approval of Lender.
4.3 Architect's Contract. (i) To permit no material default under
the terms of the Architect's Contract, (ii) to waive none of the material
obligations of Borrower's Architect thereunder, (iii) to do no act which would
relieve Borrower's Architect from its material obligations under the Architect's
Contract, and (iv) to make no material amendments to the Architect's Contract
without the prior approval of Lender.
4.4 Insurance. To obtain insurance or evidence of insurance as
Lender may reasonably require, including, but not limited to, the following:
(a) Title Insurance. A mortgagee title insurance policy
(the "Title Insurance Policy") in an amount, and issued by a title
insurance company (the "Title Insurer") and through a title agent as
shall be approved by insuring a valid first lien upon and security
interest in and to the Property by virtue of the Mortgage, with such
reinsurance or co-insurance agreements as may be reasonably required by
Lender. The Title Insurance Policy shall contain a pending disbursements
clause or endorsement and such other endorsements as Lender may
reasonably require, and such affirmative insurance as Lender may
reasonably require. The Title Insurance Policy, together with evidence
of
<PAGE> 10
payment of premiums thereon, shall be delivered to Lender on or before
the date of this Agreement.
(b) Insurance Required by Mortgage. Such insurance as may
be required by the Mortgage. If any hazard insurance required by the
Mortgage is obtained as to all or part of the Property before completion
of construction then such policy shall contain an endorsement
recognizing that construction is in progress and agreeing that such
shall not adversely affect the coverage or be asserted as a defense on
any claim under such policy.
(c) Professional Liability Insurance. Evidence or
certificates from insurance companies indicating that Borrower's
Architect, and all other architects and engineers responsible for the
design of the Improvements are covered by professional liability
insurance in an amount of not less than $2,000,000.00 and such evidence
or certificates to be delivered to Lender on or before the date of this
Agreement.
4.5 Application of Loan Proceeds. To use the proceeds of the Loan
solely for the purpose of paying for the Property Costs in accordance with the
terms of this Agreement.
4.6 Property Costs and Expenses. To pay or cause to be paid all
properly incurred Property Costs, regardless of the amount, and to pay all
reasonable costs and expenses of Lender with respect to the financing,
acquisition and construction of the Property, including but not limited to,
appraisal fees, inspection fees, surveying costs, legal fees(including legal
fees incurred by Lender subsequent to the closing of the Loan in connection with
the collection of the Loan), recording expenses, surveys, intangible taxes,
expenses of foreclosure (including attorney's fees) and similar items.
4.7 Commencement and Completion of Construction. To commence
construction of the Improvements within thirty (30) days after the date hereof
and to diligently pursue construction to completion prior to the Completion Date
substantially in accordance with the Plans and Specifications, in material
compliance with all material restrictions, covenants and easements affecting the
Property, all material Requirements, and all material Governmental Approvals,
and with all material terms and conditions of the Loan Documents without
deviation from the Plans and Specifications unless with the prior approval of
Lender and the surety company or companies issuing any Payment and Performance
Bond; to pay all sums and to perform such duties as may be necessary to complete
such construction of the Improvements substantially in accordance with the Plans
and Specifications and in material compliance with all restrictions, covenants
and easements affecting the Property, all material Requirements and all material
Governmental Approvals, and with all material terms and conditions of the Loan
Documents, all of which shall be accomplished on or before the Completion Date,
free from any liens, claims or assessments (actual or contingent) asserted,
except for Permitted Encumbrances, against the Property for any material, labor
or other items furnished in connection therewith. Evidence of satisfactory
compliance with the foregoing shall be furnished by Borrower to Lender on or
before the Completion Date.
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4.8 Right of Lender to Inspect Property. To permit Lender and its
representatives and agents to enter upon the Property at reasonable times upon
reasonable notice and to inspect the Improvements and all materials to be used
in the construction thereof and to reasonably cooperate and cause Contractor to
reasonably cooperate with Lender and its representatives and agents during such
inspections (including making reasonably available to Lender working copies of
the Plans and Specifications together with all related supplementary materials);
provided, however, that this provision shall not be deemed to impose upon Lender
any obligation to undertake such inspections.
4.9 Correction of Defects. Unless Borrower demonstrates to Lender
that such corrective work is inappropriate or inconsistent with the Plans and
Specifications, to promptly correct all material defects in the Improvements or
any material departure from the Plans and Specifications not previously approved
by Lender. Borrower agrees that the advance of any proceeds of the Loan whether
before or after such defects or departures from the Plans and Specifications are
discovered by, or brought to the attention, of Lender, shall not constitute a
waiver of Lender's right to require compliance with this covenant.
4.10 Sign Regarding Construction Financing. At Lender's option and
expense, to erect promptly and maintain on a suitable site on the Land a sign
indicating that construction financing is being provided by Lender, all to the
reasonable satisfaction of Lender; and to prevent the destruction or removal of
said sign without the prior approval of Lender.
4.11 Approval of Change Orders. To permit no material change orders
during construction without the prior approval of Lender and the surety company
or companies issuing any Payment and Performance Bonds. For the purposes of this
Agreement a material change order shall mean a change order which, when added to
any previous change orders, if any, increases the cost of construction by more
than $50,000.00 individually or $200,000.00 in the aggregate and/or causes a
delay in the Completion Date of more than one (1) month.
4.12 Notice of Occupancy. To notify Lender at least ten (10) days
prior to, and again on, the date of occupancy of each tenant of any portion of
the Property (except for residents of the facility), such notice upon occupancy
to include the name of the tenant and the date of occupancy.
4.13 Books and Records. To keep and maintain reasonably complete
proper and accurate books, records and accounts reflecting material items of
material income and expense of Borrower in connection with the Property and the
construction of the Improvements and the results of the operation thereof; and,
upon the request of Lender, to make such books, records and accounts reasonably
available to Lender for inspection or independent audit.
4.14 Financial Statements and Other Information. To furnish to
Lender such financial statements and information as Borrower has agreed to
provide elsewhere in the Loan Documents.
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4.15 Construction Inspector. To permit Lender to retain the
Construction Inspector (the "Construction Inspector") at the cost of Borrower to
perform the following services on behalf of Lender:
(a) To review and advise Lender whether, in the opinion of
the Construction Inspector, the Plans and Specifications are
satisfactory;
(b) To review Draw Requests and material change orders;
(c) To make periodic inspections (approximately at the date
of each Draw Request) for the purpose of assuring that construction of
the Improvements to date is in substantial accordance with the Plans and
Specifications and to approve Borrower's then current Draw Request as
being consistent with Borrower's obligations under this Agreement,
including inter alia, an opinion as to Borrower's continued compliance
with the provisions of Section 6.1 (f) (4) hereof.
The reasonable fees of the Construction Inspector shall be paid by
Borrower promptly upon, but in no event later than sixty (60) days after billing
therefor and expenses incurred by Lender on account thereof shall be reimbursed
to Lender forthwith upon request therefor, but neither Lender nor the
Construction Inspector shall have any liability to Borrower on account of (i)
the services performed by the Construction Inspector, (ii) any neglect or
failure on the part of the Construction Inspector to properly perform its
services, or (iii) any approval by the Construction Inspector of construction of
the Improvements. Neither Lender nor the Construction Inspector assumes any
obligation to Borrower or any other person concerning the quality of
construction of the Improvements or the absence therefrom of defects.
4.16 Soil Tests. To provide promptly to Lender at Borrower's
reasonable expense such soil tests and environmental assessments of the Land as
Lender may require from time to time.
4.17 Insufficiency of Loan Proceeds. To deposit funds with Lender as
follows: if at any time or from time to time during the terms of this Agreement,
in Lender's reasonable judgment and opinion, the remaining undisbursed portion
of the Loan, together with the undisbursed balances of other sums previously
deposited by Borrower with Lender in connection with the Loan, is or will be
insufficient to complete the Improvements substantially in accordance with the
Plans and Specifications, and to pay all other sums due or to become due under
the Loan Documents, regardless of how such condition may be caused, Borrower
shall, within fifteen (15) days after written notice thereof from Lender,
deposit with Lender such sums of money in cash as Lender may reasonably require,
in an amount sufficient to remedy such condition, and, at Lender's option, no
further Advances of the Loan shall be made by Lender until the provisions of
this Paragraph have been fully complied with. All such deposited sums shall
stand as additional security for Borrower's obligations under this Agreement and
shall be disbursed by Lender in the same manner as Advances under this Agreement
before any further Advances of the Loan proceeds shall be made. Lender shall
have no obligation to pay Borrower interest with respect to such deposited
funds. If all or a portion of the money deposited with Lender hereunder has not
been disbursed and the remaining undisbursed portion of the Loan is reasonably
sufficient to complete the
<PAGE> 13
Improvements substantially in accordance with the Plans and Specifications, then
such undisbursed funds shall be immediately returned to Borrower.
4.18 Additional Documents. To perform hereunder as follows:
(a) Regarding Construction. To furnish to Lender all
instruments, documents, boundary surveys, footing or foundation surveys,
certificates, plans and specifications, appraisals, title and other
insurance, reports and agreements and each and every other document and
instrument required to be furnished by, the terms of the Commitment or
this Agreement or the other Loan Documents, all at Borrower's expense.
(b) Regarding Preservation of Security. To execute and
deliver to Lender such documents, instrument, assignments and other
writings, and to do such other acts reasonably necessary or desirable,
to preserve and protect the collateral at any time securing or intended
to secure the Loan, as Lender may reasonably require.
(c) Regarding this Agreement. To do and execute all and
such further lawful and reasonable acts, conveyances and assurances to
carry out of the intents and purposes of this Agreement as Lender shall
reasonably require from time to time.
4.19 Financing Publicity. To permit Lender to obtain publicity in
connection with the construction of the Improvements through press releases and
participation in such events as ground breaking and opening ceremonies; and to
give Lender reasonable advance notice of such events and to give Lender
reasonable assistance in connection with obtaining such publicity as Lender may
request without expense to Borrower and without specifying the principals of
Borrower, Alterra and ALE.
4.20 Easements and Restrictions. To submit to Lender for Lender's
approval prior to the execution thereof by Borrower all proposed easements,
restrictions, covenants, permits, licenses, and other instruments which would or
might materially affect the title to the Property, accompanied by a survey
showing the exact proposed location thereof and such other information as Lender
shall reasonably require. Borrower shall not subject the Property or any part
thereof to any easement, restriction or covenant (including any restriction or
exclusive use provision in any lease or other occupancy agreement) which would
or might materially affect the title to the Property without the prior approval
of Lender.
4.21 Compliance with Requirements. Except for Permitted Contests, to
materially comply promptly with all Requirements and Governmental Approvals and
to furnish Lender, on demand, with independent evidence of such compliance.
4.22 Leases. To enter into no leases or occupancy agreements
affecting the Property without the prior approval of Lender (except for leases
with residents of the facility). Borrower shall deliver to Lender executed
counterparts of all leases and occupancy agreements affecting the Property
(except for leases with residents of the facility) whether executed before or
after the date of this Agreement, and shall not
<PAGE> 14
amend any provision thereof or waive any obligations of tenants under any leases
or occupancy agreements affecting the Property without the prior approval of
Lender.
4.23 Compliance With Restrictions, Covenants and Easements. To
materially comply with all restrictions, covenants and easements affecting the
Property.
4.24 Laborers, Subcontractors and Materialmen. To furnish to Lender,
upon request at anytime, and from time to time, affidavits listing all laborers,
subcontractors, materialmen, and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished labor or
material to the Property or any portion thereof, together with affidavits, or
other evidence satisfactory to Lender, showing that such parties have been paid
all amounts then due for labor and materials furnished to the Property. In
addition, Borrower will promptly notify Lender, and in writing, if Borrower
receives any notice, written or oral, from any laborer, subcontractor or
materialmen to the effect that said laborer, subcontractor or materialmen has
not been paid when due for any labor or materials furnished in connection with
the construction of the Improvements. Borrower will also furnish to Lender, at
any time and from time to time upon demand by Lender, lien waivers bearing a
then current date from Contractor and such subcontractors or materialmen as
Lender may designate.
4.25 No Transfers or Encumbrances. Except as permitted by the
Mortgage, to cause or permit no sale, conveyance, transfer, assignment or
encumbering of the Property or any interest therein without the prior approval
of Lender.
ARTICLE 5
AGREEMENT TO LEND
Subject to the terms and conditions set forth in this Agreement, Lender
agrees to make Advances of the Loan to Borrower from time to time during the
period from the date hereof to the Termination Date in an aggregate principal
amount of up to and including the Loan Amount to pay Property Costs actually
incurred including costs incurred in the construction of the Improvements
(including Indirect Costs).
5.1 Note. The obligation of Borrower to pay the principal amount of
all Advances made by Lender to Borrower under this Agreement, plus all interest
accrued thereon at the rate or rates set forth in the Note, shall be evidenced
by the Note.
5.2 Advances. The Construction Budget reflects, by category and
line items, the purposes and the amounts for which funds to be advanced by
Lender under this Agreement are to be used. Lender shall not be required to
disburse for any category or line item more than the amount specified therefor
in the Construction Budget.
5.3 Cost Overruns. If Borrower becomes aware of any change in
Property Costs which will increase or decrease a category or line item of
Property Costs reflected on the Construction Budget (as the Construction Budget
is revised from time to time and approved by Lender), Borrower shall promptly
notify Lender in writing and promptly submit to Lender a revised Construction
Budget. No further Advances need
<PAGE> 15
be made by Lender if the revised Construction Budget, after the application of
line item savings, if any, savings in Development Costs (as that term is defined
in the Development Agreement) and contingency, reflects Project Costs which
cannot be funded by the Loan unless Borrower has deposited funds with Lender in
accordance with Section 4.18.If Lender approves the revised Construction Budget,
and such revised Construction Budget reflects Project Costs to be funded by
Lender in excess of the Loan Amount, the amount of such excess shall be added to
the Loan Amount, and Borrower's obligation to repay the same, together with
interest thereon at the rate or rates provided in the Note, shall be deemed to
be evidenced by the Note and secured by the Loan Documents.
5.4 Contingency Reserve. Any amount allocated as Contingency
Reserve in the Construction Budget is not intended to be disbursed and will only
be disbursed upon the prior approval of Lender, which approval will not be
unreasonably withheld of delayed. The disbursement of a portion of the
Contingency Reserve shall in no way prejudice Lender from withholding
disbursement of any further portion of the Contingency Reserve.
5.5 Stored Materials. Lender shall not be required to disburse any
funds for any materials, furnishings, fixtures, machinery or equipment not yet
incorporated into Land or Improvements (the "Stored Materials"). Any
disbursement for the cost of Stored Materials shall be contingent upon Lender
receiving satisfactory evidence that:
(a) The Stored Materials are components in a form ready for
incorporation into the Improvements;
(b) The Stored Materials are stored at the Land, in a bonded
warehouse, at a site controlled by Borrower, or at such other site as
Lender shall reasonably approve, and are reasonably protected against
theft and damage;
(c) The Stored Materials have been paid for in full or will
be paid for with the funds to be disbursed and all lien rights or claims
of the supplier have been released or will be released upon payment with
disbursed funds;
(d) Lender has or will have upon payment with disbursed
funds a perfected, first priority security interest in the Stored
Materials; and
(e) The Stored Materials are insured for an amount equal to
their replacement costs.
5.6 Amount of Advances. In no event shall any Advance exceed the
full amount of Indirect Costs approved by Lender and theretofore paid or to be
paid with the proceeds of such Advance plus ninety (90%) percent of all costs
for construction of Improvements approved by Lender and incurred by Borrower
through the date of the Draw Request for such Advance less the aggregate amount
of any Advances previously made by Lender. It is further understood that the
retainage described above is intended to provide a contingency fund protecting
Lender against failure of Borrower to fulfill any obligations under the Loan
Documents, and that Lender may charge amounts against such retainage in the
event Lender is required or elects to expend its
<PAGE> 16
own funds to cure any Event of Default. Notwithstanding the foregoing, no
retainage shall be required on Required Equity Funds, other funds provided to
Lender by Borrower to be disbursed hereunder, on the purchase of furniture,
fixtures and equipment, or on labor expenses. Further, the retainage shall be
reduced to five (5%) percent thirty (30) days after the substantial completion
of work by a contractor or subcontractor. Upon the completion of the
improvements the remaining retainage shall be released.
5.7 Quality of Work. No Advance or part thereof shall be due to the
extent work done at the date the Draw Request for such Advance is submitted is
not done in a good and workmanlike manner and without material defects, as
confirmed by the report of the Construction Inspector, but Lender may disburse
all or part of any Advance before the sum shall become due if Lender believes it
advisable to do so, and all such Advances or parts thereof shall be deemed to
have been made pursuant to this Agreement.
5.8 Required Equity Funds. Required Equity Funds shall be disbursed
in the same manner as Advances under this Agreement and shall be so disbursed
before any Advances of the Loan proceeds shall be made.
ARTICLE 6
CONDITIONS PRECEDENT TO
DISBURSEMENT OF LOAN PROCEEDS
6.1 Conditions of Initial Advance. The obligation of Lender to make
the initial Advance shall be subject to the following conditions precedent:
(a) Commitment. All items required by the Commitment or
letter of instructions from Lender to Borrower regarding the Loan shall
have been delivered to the proper parties as required therein, and all
conditions set forth in the Commitment or such letter of instructions
shall have been satisfied.
(b) Loan Documents. The Loan Documents shall have been duly
executed and delivered by the parties thereto and shall be in full force
and effect, and Lender shall have received the original or a fully
executed counterpart thereof. All Loan Documents to be filed or recorded
in the public records shall have been submitted for filing and
recording.
(c) Construction Documents. The Architect's Contract, if
any, and Construction Contract shall have been duly executed and
delivered by the parties thereto, shall be in full force and effect, and
Lender shall have received a certified or a fully executed counterpart
thereof. Borrower's Architect, if any, and the Contractor shall have
duly executed and delivered to Lender a consent to the assignment of the
Architect's Contract, if any, and Construction Contract, and Lender
shall have received the original or a fully executed counterpart
thereof.
<PAGE> 17
(d) Subcontracts. Borrower shall have delivered to Lender,
and Lender shall have approved, a list of all subcontractors and
materialmen who have been or, to the extent identified by Borrower, will
be supplying labor or materials for the construction of the
Improvements, a copy of the standard form of subcontract to be used by
the Contractor, and correct and complete photocopies of all executed
subcontracts.
(e) Other Contracts. Borrower shall have delivered to
Lender correct and complete photocopies of all other executed contracts
with contractors, engineers or consultants for the Property, and of all
development, management, brokerage, sales or leasing agreements for the
Property.
(f) Deliveries. The following items or documents shall have
been delivered to Lender:
(1) Plans and Specifications. Two complete sets of
the Plans and Specifications and approval thereof by any
necessary Governmental Authority.
(2) Title Insurance Policy. A paid Title Insurance
Policy or marked-up title insurance commitment in all respects
reasonably satisfactory to Lender and its counsel.
(3) Other Insurance. Policies (or, if permitted,
certificates or other evidence of) all insurance required by
this Agreement or any other Loan Document.
(4) Evidence of Sufficiency of Funds. Evidence
reasonably satisfactory to Lender that the proceeds of the Loan,
together with Required Equity Funds, will be sufficient to cover
all Property Costs reasonably anticipated to be incurred, and to
satisfy the obligations of Borrower to Lender under this
Agreement.
(5) Evidence of Access, Availability of Utilities,
Governmental Approvals. Evidence reasonably satisfactory to
Lender as to:
(A) the methods of access to and egress from
the Property, and nearby or adjoining public ways,
meeting the reasonable requirements of property of the
type contemplated to be completed under this Agreement
and the status of completion of any required
improvements to such access;
(B) the availability (or the reasonably
anticipated availability so as not to materially delay
construction of the Improvements) of storm and sanitary
sewer facilities meeting the reasonable requirements of
the Property;
(C) the availability (or the reasonably
anticipated
<PAGE> 18
availability so as not to materially delay construction
of the Improvements) of all other required utilities, in
location and capacity sufficient to meet the reasonable
needs of the Property; and
(D) the securing of all Governmental
Approvals from the applicable Governmental Authority
which are required under applicable Requirements for the
construction of the Improvements or the taking of such
reasonable steps so that the securing of such
Governmental Approvals will not materially delay
construction of the Improvements, together with copies
of all secured Governmental Approvals.
(6) Environmental Report. An environmental
assessment report or reports of one or more qualified
environmental engineering or similar inspection firms approved
by Lender in form, scope and substance reasonably satisfactory
to Lender, which report or reports shall indicate a condition of
the Land in all respects reasonably satisfactory to Lender and
upon which report or reports Lender is expressly entitled to
rely.
(7) Soil Report. A soil report for the Land
prepared by a soil engineer approved by Lender in form and
substance reasonably satisfactory to Lender, containing
recommendations for the design of foundations, paved areas and
underground utilities.
(8) Survey. A survey prepared in accordance with
Lender's survey requirements, certified by a land surveyor
registered as such in the state in which the Land is located,
which survey shall be in form and substance reasonably
satisfactory to Lender.
(9) Required Equity Funds. Borrower's Required
Equity Funds shall have been delivered to Lender.
(10) Draw Request. A Draw Request complying with the
provisions of this Agreement.
(g) Legal Opinions. Lender shall have received opinions in
form and substance reasonably satisfactory to Lender and Lender's
counsel from counsel satisfactory to Lender as to such matters as Lender
shall reasonably request.
(h) Certification Regarding Chattels. Lender shall have
received a certification from the Title Insurer or counsel reasonably
satisfactory to Lender (which shall be updated from time to time, but
not more frequently that once monthly, at Borrower's expense upon
request by Lender) that a search of the public records disclosed no
conditional sales contracts, chattel mortgages, leases of personalty,
financing statements or title retention agreements which affect the
Property.
(i) Notices. All notices required by any Governmental
Authority or by any applicable Requirement to be filed prior to
commencement of construction of the Improvements shall have been filed.
<PAGE> 19
(j) Appraisal. Any appraisal requirements set forth in the
Commitment shall have been satisfied.
(k) Performance; No Default. Borrower shall have performed
and complied with all terms and conditions herein required to be
performed or complied with by it at or prior to the date of the initial
Advance, and on the date of the initial Advance, there shall exist no
Event of Default.
(l) Representations and Warranties. The representations and
warranties made by Borrower and any Guarantor in the Loan Documents or
otherwise made by or on behalf of Borrower or any Guarantor in
connection therewith or after the date thereof shall have been true and
correct in all respects on the date on which made and shall also be true
and correct in all respects on the date of the initial Advance.
(m) Other Documents. Such other documents, opinions and
certificates as Lender or its counsel may reasonably require.
(n) Proceedings and Documents. Lender shall have received
all information and such counterpart originals on certified copies of
such documents and such other certificates, opinions or documents as
Lender and Lender's counsel may reasonably require.
6.2 Conditions of Subsequent Advances. The obligation of Lender to
make any Advance after the initial Advance shall be subject to the following
conditions precedent:
(a) Prior Conditions Satisfied. All conditions precedent to
the initial Advance and any prior Advance shall continue to be satisfied
as of the date of such subsequent Advance.
(b) Performance; No Default. Borrower shall have performed
and complied with all terms and conditions herein required to be
performed or complied with by it at or prior to the date of such
advance, and on the date of such Advance there shall exist no Event of
Default.
(c) Representations and Warranties. The representations and
warranties made by Borrower and any Guarantor in the Loan Documents or
otherwise made by or on behalf of Borrower or any Guarantor in
connection therewith after the date thereof shall have been true and
correct in all respects on the date on which made and shall also be true
and correct in all respects on the date of such Advance.
(d) No Material Damage. If a material casualty (as that
term is defined in the Mortgage) has occurred, that Borrower has
complied with Section 16 of the Mortgage.
<PAGE> 20
(e) Receipt by Lender. Lender shall have received:
(1) Draw Request. A Draw Request complying with the
requirements hereof;
(2) Endorsement to Title Insurance Policy. A "run
down" endorsement to the Title Insurance Policy or report
indicating no material change in the state of title and
containing no survey exceptions not approved by Lender, which
endorsement shall, expressly or by virtue of a proper "pending
disbursements" clause or endorsement in the policy, increase the
coverage of the policy to the aggregate amount of all proceeds
of the Loan advanced on or before the effective date of such
endorsement;
(3) Current Survey. An updated survey if required
by the Lender (but not more than twice per year);
(4) Certificates. Certificates from Borrower and
the Construction Inspector to the effect that in their knowledge
and in their opinion, based upon on-site observations and
submissions by the Contractor, the construction of the
Improvements to the date thereof was performed in a good and
workmanlike manner and substantially in accordance with the
Plans and Specifications; and
(5) Contracts. Evidence that one hundred percent
(100%) of the cost of the remaining construction work is covered
by firm contracts or subcontracts, or orders for the supplying
of materials, with contractors, subcontractors, materialmen or
suppliers reasonably satisfactory to Lender or reasonable
evidence that such contracts will be executed so as not to
materially delay construction of the Improvements.
(f) Other Documents. Such other documents, opinions and
certificates as Lender or its counsel may reasonably require.
6.3 Conditions of Final Advance. In addition to the conditions set
forth in Paragraph 6.2 above, Lender's obligation to advance sums retained
pursuant to this Agreement shall be subject to receipt by Lender of the
following:
(a) Approval of Improvements. Evidence of the approval by
all appropriate Governmental Authority of the Improvements in their
entirety for permanent occupancy to the extent any such approval is or
will be a condition of lawful use and occupancy of the Improvements, and
evidence of approval by all appropriate Governmental Authority of the
contemplated uses thereof.
(b) Approval by Construction Inspector. Notification from
the Construction Inspector to the effect that the Improvements have been
completed in a good and workmanlike manner substantially in accordance
with the Plans and Specifications.
(c) Final Survey. A final survey reasonably acceptable to
Lender
<PAGE> 21
showing the as- built location of the completed Improvements
(d) Certificate of Borrower's Architect. Certificate of
Borrower's Architect that the Improvements have been completed
substantially in accordance with the Plans and Specifications and that
the Improvements comply with all applicable material Requirements and
material Governmental Approvals and are in all material respects (except
for work to be performed by tenants) ready for occupancy.
(e) Payment of Costs. Evidence reasonably satisfactory to
Lender that all sums due in connection with the construction of the
Improvements have been paid in full (or will be paid out of the funds
requested to be advanced) and that no party claims or has a right to
claim any statutory or common law lien arising out of the construction
of the Improvements or the supplying of labor, material, and/or services
in connection therewith.
6.4. Lender's Approval. Upon Lender's initial, subsequent or final
Advance (as applicable), Borrower shall be deemed to have fully complied with
the conditions precedent thereto set forth in this Article unless, prior to
making such Advance, Lender notifies Borrower in writing of any specific
deficiencies.
ARTICLE 7
METHOD OF DISBURSEMENT OF LOAN PROCEEDS
Lender agrees to make Advances in accordance with the Construction
Budget and subject to the following procedures.
7.1 Draw Request to be Submitted to Lender. At such time as
Borrower shall desire to obtain an Advance, Borrower shall complete, execute and
deliver to Lender a Borrower's Requisition in the form attached hereto as
Exhibit F (hereinafter referred to as "Borrower's Requisition") and an Election
Notice as required by the Note. Each Borrower's Requisition shall be accompanied
by:
(a) if Borrower's Requisition includes amounts to be paid to
the Contractor under the Construction Contract, it shall be accompanied
by a completed and itemized Application and Certificate for Payment (AIA
Document No. G702) or similar form reasonably approved by Lender,
containing the certification of Borrower's Architect and the
Construction Inspector as to the accuracy of same, together with
invoices relating to all items of direct cost covered thereby. All such
applications for payment shall show all subcontractors by name and
trade, the total amount of each subcontract, the amount theretofore paid
to each subcontractor as of the date of such application, and the amount
to be paid from the proceeds of the Advance to each subcontractor;
(b) if Borrower's Requisition includes payments for Indirect
Costs, it shall be accompanied by a completed and itemized Indirect Cost
statement executed by Borrower, together with invoices for all items of
Indirect Costs covered thereby;
<PAGE> 22
(c) written lien waivers from the Contractor and
subcontractors and materialmen for work done and materials supplied by
them which were paid for pursuant to any prior Draw Request;
(d) a written notification of Borrower of any changes in the
Plans and Specifications, the Construction Budget the Disbursement
Schedule or the Construction Schedule;
(e) copies of all change orders and subcontracts, and, to
the extent requested by Lender, of all inspection or test reports and
other documents relating to the construction of the Improvements, not
previously delivered to Lender; and
(f) such other information, documentation and certification
as Lender shall reasonably request.
7.2 Notice and Frequency of Advances. Each Draw Request shall be
submitted to Lender at least ten (10) business days prior to the date of the
requested Advance, and no more frequently than monthly.
7.3 Deposit of Funds Advanced. Borrower shall open and maintain a
non-interest bearing loan checking account with Lender into which Lender shall
deposit the proceeds of each Advance. Lender is hereby irrevocably authorized to
make an Advance to and/or charge any account of Borrower with Lender, including
such loan checking account, without the further approval of Borrower, for (i)
any installment of interest due under the Note, (ii) any reasonable expenses
incurred by Lender (including without limiting the generality of the foregoing,
reasonable attorneys' fees and other fees incurred by Lender), or (iii) any
other sums due to Lender under the Note, this Agreement or any of the other Loan
Documents, all to the extent that the same are not paid by the respective due
dates thereof out of Advances of the Loan proceeds. Borrower shall at all times
maintain and keep collected balances in such loan checking account sufficient to
satisfy the foregoing obligations on the due date thereof.
7.4 Advances to Contractor. At its option, Lender may make any or
all Advances for construction expenses properly incurred by Contractor directly
to Contractor for deposit in an appropriately designated special bank account,
and the execution of this Agreement by Borrower shall, and hereby does,
constitute an irrevocable authorization so to advance the proceeds of the Loan
provided that Advances shall only be made directly to the Contractor if (i) sums
due to the Contractor are specifically set forth in the applicable draw request;
(ii) the sums have not been paid to the Contractor; and (iii) the Borrower
receives advance notice that the Lender intends to pay such portions of the
Advance directly to the Contractor. No further authorization from Borrower shall
be necessary to warrant such direct Advances to Contractor and all such Advances
shall satisfy pro tanto the obligations of Lender hereunder and shall be secured
by the Mortgage and the other Loan Documents as fully as if made directly to
Borrower.
<PAGE> 23
7.5 Advances Do Not Constitute a Waiver. No Advance shall
constitute a waiver of any of the conditions of Lender's obligation to make
further Advances nor, in the event Borrower is unable to satisfy any such
condition, shall any Advance have the effect of precluding Lender from
thereafter declaring such inability to be an Event of Default hereunder.
7.6 Trust Fund Provisions. All proceeds advanced hereunder shall be
subject to the trust fund provisions of Section 13 of the Lien Law. The
affidavit attached hereto as Exhibit G is made pursuant to and in compliance
with Section 22 of the Lien Law, and, if so indicated in said affidavit, Loan
proceeds will be used, in part, for reimbursement for payments made by the
Borrower prior to the initial Advance hereunder but subsequent to the
commencement of the construction and equipping of the Improvements for items
constituting Costs of Improvement.
ARTICLE 8
EVENTS OF DEFAULTS
The occurrence of any one or more of the following conditions or events
(each an "Event of Default") shall constitute a default under and breach of this
Agreement:
(a) any failure by Borrower to pay as and when due and
payable any interest on or principal of or other sum payable under the
Note; or
(b) any failure by Borrower to deposit with Lender any funds
required by this Agreement to be deposited with Lender and continuance
of such failure for a period of ten (10) days after written notice
thereof from Lender; or
(c) any failure by Borrower to pay as and when due and
payable any other sums to be paid by Borrower to Lender under this
Agreement and continuance of such failure for a period of twenty (20)
days after written notice thereof from Lender; or
(d) title to the Property is or becomes unsatisfactory to
Lender, in its reasonably judgement, by reason of any material lien,
charge, or encumbrance, title condition or exception (including without
limitation, any mechanic's, materialman's or similar statutory or common
law lien or notice thereof), but excluding the Permitted Encumbrances
and such matter causing title to be or become unsatisfactory is not
cured or removed (including by bonding) or reasonably satisfied within
thirty (30) days after notice thereof from Lender to Borrower; or
(e) any refusal by the Title Insurer to insure any Advance
as being secured by the Mortgage as a valid first lien on the Property
and continuance of such refusal for a period of thirty (30) days after
notice thereof by Lender to Borrower; or
(f) the Improvements are not substantially completed by the
<PAGE> 24
Completion Date or, in the reasonable estimation of Lender, construction
of the Improvements will not be substantially completed by the
Completion Date unless such delay is caused by reasons beyond Borrower's
reasonable control; or
(g) any material voucher or invoice is submitted at any time
which Borrower knows has not been earned by the payee for services
performed or for materials used in or furnished for the Property; or
(h) any cessation at any time in construction of the
Improvements for more than forty-five (45) consecutive days except for
strikes, acts of God, fire or other casualty, or other causes entirely
beyond Borrower's reasonable control; or
(i) any failure by Borrower to duly observe or perform any
material term, covenant, condition or agreement requiring Borrower to
maintain insurance or not to encumber or transfer the Property and
continuance of such failure for a period of thirty (30) days after
written notice thereof from Lender; or
(j) Borrower requests a termination of the Loan, or
confesses inability to continue or complete construction of the
Improvements in accordance with this Agreement; or
(k) any Guarantor denies that said Guarantor has any
liability or obligation under the Guaranty, or shall notify Lender of
the Guarantor's intention to attempt to cancel or terminate the Guaranty
unless such cancellation or termination is permitted under the
appropriate Guaranty; or
(l) any material representation or warranty made or deemed
to be made by or on behalf of Borrower or any Guarantor in this
Agreement or in any other Loan Document, or in any report, certificate,
financial statement, Draw Request or other instrument furnished in
connection with this Agreement, any Advance or any other Loan Document,
shall prove to have been false or incorrect in any material respect as
at the date of which made or deemed to be made; or
(m) any dissolution, termination, liquidation, merger or
consolidation of Borrower, or any sale, transfer or other disposition of
all or substantially all of the assets of Borrower, or any member of
Borrower, other than with the prior approval of Lender (which approval
shall not be unreasonably withheld or delayed)(and except for sales,
transfers or other dispositions permitted by Section 23 of the
Mortgage); or
(n) a court of competent jurisdiction shall enter an order,
judgment or decree, which shall be filed against Borrower, or the
Property which, would have a materially adverse affect on the ability of
Borrower to repay the Loan and to perform each and every one of its
obligations under and by virtue of the Loan Documents; or
(o) any failure by Borrower to obtain any material
Governmental Approvals, or the revocation or other invalidation of any
material Governmental Approvals previously issued; or
<PAGE> 25
(p) any change in the legal or beneficial ownership of
Borrower, other than with the prior approval of Lender, such approval
not to be unreasonably withheld or delayed, and except for sales,
transfers or other dispositions permitted under Section 23 of the
Mortgage; or
(q) any default in the payment of money in excess of
$50,000.00 shall occur under or in respect of any loan agreement, credit
agreement, promissory note, bond, trust deed, indenture, mortgage,
pledge, security agreement, indemnity or guaranty to which Borrower is a
party (whether as principal or guarantor or other surety), or any other
default shall occur thereunder which would entitle the holder thereof to
declare all amounts payable with respect thereto to be immediately due
and payable and such amount is in excess of $50,000.00; or
(r) any failure by Borrower to duly observe or perform any
other term, covenant, condition or agreement under this Agreement and
continuance of such failure for a period of thirty (30) days after
written notice thereof from Lender; provided, however, that if such
failure is not susceptible of cure during such thirty (30) day period
(but is susceptible of cure) and Borrower promptly commences and
diligently pursues cure of such failure during such thirty (30) day
period, then such thirty (30) day period shall be extended for an
additional consecutive period of thirty (30) days; or
(s) any "Event of Default" as said term is defined in any
of the other Loan Documents shall have occurred and continues beyond any
applicable notice and/or cure period; or
ARTICLE 9
RIGHTS AND REMEDIES OF LENDER
9.1 Remedies. Upon the occurrence of any Event of Default, Lender
may at any time thereafter, at its option, exercise any or all of the following
rights and remedies:
(a) Lender may declare its obligations to make Advances
hereunder to be terminated, whereupon the same shall terminate, and/or
declare all unpaid principal of and accrued interest on the Note,
together with all other sums payable under the Loan Documents, to be
immediately due and payable, whereupon same shall become and be
immediately due and payable, anything in the Loan Documents to the
contrary notwithstanding, and without presentation, protest or further
demand or notice of any kind, all of which are expressly hereby waived
by Borrower; provided, however, that Lender may make Advances or parts
of Advances thereafter without thereby waiving the right to demand
payment of the Note, without becoming liable to make any other or
further Advances, and without affecting the validity of or
enforceability of the
<PAGE> 26
Loan Documents. Notwithstanding and without limiting the generality of
the foregoing, if any event has occurred which but for the passage of
time, the giving of notice or both would constitute an Event of Default,
Lender's obligations to make Advances hereunder automatically shall so
terminate.
(b) If Lender has accelerated the Loan, Lender may also
cause the Property to be completed and may enter upon the Land and
construct, equip and complete the Property in accordance with the Plans
and Specifications, with such changes therein as Lender may, from time
to time, and in its reasonable discretion, deem appropriate. In
connection with any construction of the Property undertaken by Lender
pursuant to the provisions of this subparagraph, Lender may:
(1) use any funds of Borrower, including any balance
which may be held by Lender as security or in escrow, and any
funds remaining unadvanced under the Loan;
(2) employ existing contractors, subcontractors,
agents, architects, engineers, and the like, or terminate the
same and employ others pursuant to commercially reasonable terms
and conditions;
(3) employ, as reasonably necessary, security
watchmen to protect the Property;
(4) make such additions, changes and corrections in
the Plans and Specifications as shall, in the reasonable
judgment of Lender, be necessary;
(5) take over and use any and all Personal Property
contracted for or purchased by Borrower, if reasonably
appropriate, or reasonably dispose of the same;
(6) execute all applications and certificates on
behalf of Borrower which may be required by any Governmental
Authority or Requirement;
(7) reasonably pay, settle or compromise all
existing or future bills and claims which are or may be liens
against the Property, or may be necessary for the completion of
the Improvements or the clearance of title to the Property;
(8) complete the marketing and leasing of leasable
space in the Improvements, enter into new leases and occupancy
agreements, and modify or amend existing leases and occupancy
agreements, all as Lender shall deem to be reasonably necessary
or desirable;
(9) reasonably prosecute and defend all actions and
proceedings in connection with the construction of the
Improvements or in any other way affecting the Land or the
Improvements; and
(10) take such action hereunder, or refrain from
acting
<PAGE> 27
hereunder, as Lender may, in its reasonable discretion, from
time to time determine, to carry out the intent of this
subparagraph. Borrower shall be liable to Lender for all
reasonable costs paid or incurred for the construction,
completion and equipping of the Property, whether the same shall
be paid or incurred pursuant to the provisions of this
subparagraph or otherwise, and all payments made or liabilities
incurred by Lender hereunder of any kind whatsoever shall be
deemed advances made to Borrower under this Agreement and shall
be secured by the Mortgage and the other Loan Documents.
To the extent that any reasonable costs so paid or
incurred by Lender, together with all other Advances made by
Lender hereunder, exceed the Loan Amount, such excess costs
shall be paid by Borrower to Lender on demand, with interest
thereon at the Default Rate, if any, set forth in the Note or,
in the absence of a Default Rate, at the Interest Rate, until
paid; and Borrower shall execute such notes or amendments to the
Note as may be requested by Lender to evidence Borrower's
obligation to pay such excess costs and until such notes or
amendments are so executed by Borrower, Borrower's obligation to
pay such excess costs shall be deemed to be evidenced by this
Agreement. In the event Lender takes possession of the Property
and assumes control of such construction as aforesaid, it shall
not be obligated to continue such construction longer than it
shall see fit and may thereafter, at any time, reasonably change
any course of action undertaken by it or abandon such
construction and decline to make further payments for the
account of Borrower whether or not the Property shall have been
completed. For the purpose of this subparagraph, the
construction, equipping and completion of the Property shall be
deemed to include any action reasonably necessary to cure any
Event of Default by Borrower under any of the terms and
provisions of any of the Loan Documents.
(c) Lender may to the extent permitted by applicable law, at
any time and from time to time, without notice (any such notice being
expressly waived), without regard to the adequacy of any collateral, set
off and apply any and all deposits (general or specific, time on demand,
provisional or final, regardless of currency, maturity, or the branch of
Lender where the deposits are held) at any time held or other sums
credited by or due from Lender to Borrower against any and all
liabilities, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising of Borrower to Lender.
(d) Lender may exercise any or all of the rights and
remedies set forth in the other Loan Documents.
9.2 Power of Attorney. For the purposes of carrying out the
provisions and exercising the rights, powers and privileges granted by or
referred to in this Agreement, Borrower hereby irrevocably constitutes and
appoints Lender its true and lawful attorney-in-fact, with full power of
substitution, to execute, acknowledge and deliver any instruments and do and
perform any acts which are referred to in this Agreement, in the name and on
behalf of Borrower. The power vested in such attorney-in-fact is, and shall be
deemed to be, coupled with an interest and irrevocable.
9.3 Remedies Cumulative. Upon the occurrence of any Event of
Default, the
<PAGE> 28
rights, powers and privileges provided in this Article 9 and all other remedies
available to Lender under this Agreement or under any of the other Loan
Documents or at law or in equity may be exercised by Lender at any time and from
time to time and shall not constitute a waiver of any of Lender's other rights
or remedies thereunder, whether or not the Loan shall be due and payable, and
whether or not Lender shall have instituted any foreclosure proceedings or other
action for the enforcement of its rights under the Loan Documents.
9.4 Annulment of Defaults. An Event of Default shall not be deemed
to be in existence for any purpose of this Agreement or any Loan Document if
Lender shall have waived such Event of Default in writing or stated that the
same has been cured to its reasonable satisfaction, but no such waiver shall
extend to or affect any subsequent Event of Default or impair any of the rights
of Lender upon the occurrence thereof.
9.5 Waivers. Borrower hereby waives to the extent not prohibited by
applicable law (a) all presentments, demands for payment or performance, notices
of nonperformance (except to the extent required by the provisions hereof or of
any other Loan Documents), protests and notices of dishonor, (b) any requirement
of diligence or promptness on Lender's part in the enforcement of its rights
(but not fulfillment of its obligations) under the provisions of this Agreement
or any other Loan Document, and (c) any and all notices of every kind and
description which may be required to be given by any statute or rule of law and
any defense of any kind which Borrower may now or hereafter have with respect to
its liability under this Agreement or under any other Loan Document.
9.6 Course of Dealing, Etc. No course of dealing between Borrower
and Lender shall operate as a waiver of any of either parties' rights under this
Agreement or any Loan Document. No delay or omission on either parties' part in
exercising any right under this Agreement or any Loan Document shall operate as
a waiver of such right or any other right hereunder. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or remedy on
any future occasion No waiver or consent shall be binding upon either party
unless it is in writing and signed by the other party. The making of an Advance
hereunder during the existence of an Event of Default shall not constitute a
waiver thereof.
ARTICLE 10
GENERAL CONDITIONS
The following conditions shall be applicable throughout the term of this
Agreement:
10.1 Rights of Third Parties. All conditions of the obligations of
Lender hereunder, including the obligation to make Advances, are imposed solely
and exclusively for the benefit of Lender and its successors and assigns and no
other person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will make
Advances in the absence of strict compliance with any or all thereof and no
other person shall, under any
<PAGE> 29
circumstances, be deemed to be a beneficiary of such conditions, any and all of
which may be freely waived in whole or in part by Lender at any time if in its
sole discretion it deems it desirable to do so. In particular, Lender makes no
representations and assumes no obligations as to third parties concerning the
quality of the construction by Borrower of the Improvements or the absence
therefrom of defects. In this connection Borrower agrees to and shall indemnify
Lender from any liability, claims or losses resulting from the disbursement of
the Loan proceeds or from the condition of the Property whether related to the
quality of construction or otherwise and whether arising during or after the
term of the Loan made by Lender to Borrower in connection herewith. This
provision shall survive the repayment of the Loan and shall continue in full
force and effect so long as the possibility of such liability, claims or losses
exists.
10.2 Relationship. The relationship between Lender and Borrower is
solely that of a lender and borrower, and nothing contained herein or in any of
the other Loan Documents shall in any manner be construed as making the parties
hereto partners, joint venturers or any other relationship other than lender and
borrower.
10.3 Evidence of Satisfaction of Conditions. Any condition of this
Agreement which requires the submission of evidence of the existence or
non-existence of a specified fact or facts implies as a condition the existence
or non-existence, as the case may be, of such fact of facts and Lender shall, at
all times, be free independently to establish to its satisfaction and in its
reasonable discretion such existence or non-existence.
10.4 Notices. Any notices required or permitted to be given
hereunder shall be: (i) personally delivered or (ii) given by registered or
certified mail, postage prepaid, return receipt requested, or (iii) forwarded by
overnight courier service or (iv) sent by telecopy (with hard copy to follow by
another accepted method), in each instance addressed to the addresses set forth
at the head of this Note, or such other addresses as the parties may for
themselves designate in writing as provided herein for the purpose of receiving
notices hereunder. All notices shall be in writing and shall be deemed given, in
the case of notice by personal delivery or overnight courier, upon tender of
delivery, and in the case of mail, three business days after postmark and in the
case of telecopy, upon receipt of such telecopy independently confirmed by other
than sender's machine. A copy of any notice issued hereunder shall be sent to
ALE at 250 South Clinton Street, Syracuse, New York 13202 (Attention: Neil A.
Rube) and to Alterra at 10000 Innovation Drive, Milwaukee, Wisconsin 53226
(Attention: Mark Ohlendorf).
10.5 Assignment. Borrower may not assign this Agreement or any of
its rights or obligations hereunder without the prior approval of Lender. A
sale, transfer or other disposition of any interest of Borrower or the Property
that is permitted by Section 23 of the Mortgage shall not constitute an
assignment for the purposes of this Agreement.
10.6 Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors and assigns of such parties shall be included and
all covenants and agreements contained in this Agreement by or on behalf of
Borrower or by or on behalf of Lender shall bind and inure to the benefit of
their respective heirs, legal representatives, successors and assigns, whether
so expressed or not.
<PAGE> 30
10.7 Headings. The headings of the articles, paragraphs and
subparagraphs of this Agreement are for the convenience of reference only, are
not to be considered a part hereof and shall not limit or otherwise affect any
of the terms hereof.
10.8 Invalid Provisions to Affect No Others. If fulfillment of any
provision hereof or any transaction related hereto at the time performance of
such provisions shall be due, shall involve transcending the limit of validity
presently prescribed by law, with regard to obligations of like character and
amount, then ipso facto, the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision herein contained operates
or would prospectively operate to invalidate this Agreement in whole or in part,
then such clause or provision only shall be held for naught, as though not
herein contained, and the remainder of this Agreement shall remain operative and
in full force and effect.
10.9 Number and Gender. Whenever the singular or plural number, or
the masculine, feminine or neuter gender is used herein, it shall equally
include the other.
10.10 Governing Law. This Agreement shall be governed by and
construed in accordance with laws of the State of New York.
10.11 Consent to Jurisdiction. Borrower hereby irrevocably and
unconditionally (a) submits to personal jurisdiction in the State of New York
over any suit, action or proceeding arising out of or relating to this
Agreement, and (b) waives any and all personal rights under the laws of any
state (i) to the right, if any, to trial by jury, or (ii) to object to
jurisdiction within the State of New York or venue in any particular forum
within the State of New York. Nothing contained herein, however, shall prevent
Lender from bringing any suit, action or proceeding or exercising any rights
against any security and against Borrower, and against any property of Borrower,
in any other state. Initiating such suit, action or proceeding or taking such
action in any state shall in no event constitute a waiver of the agreement
contained herein that the laws of the State of New York shall govern the rights
and obligations of Borrower and Lender hereunder or the submission herein by
Borrower to personal jurisdiction within the State of New York.
10.12 Amendments. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
under seal on the date first above written.
BORROWER:
CLINTON BROOKSIDE DRIVE, LLC
By: ASSISTED LIVING EQUITITES, LLC,
its member
<PAGE> 31
By: |S| Neil A. Rube
---------------------------------------------
Neil A. Rube, Executive Committee Member
LENDER:
KEY CORPORATE CAPITAL INC.
By: /S/ Mark Wegener
---------------------------------------------
Name: Mark Wegener
Title: Vice President
<PAGE> 32
STATE OF NEW YORK )
) ss.:
COUNTY OF ONONDAGA )
On this __ day of January, 2000, before me, the undersigned, a Notary
Public in and for said State, personally appeared Neil A. Rube, personally known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.
____________________________________
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF ____________ )
On this __ day of January, 2000, before me, the undersigned, a Notary
Public in and for said State, personally appeared__________________, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.
____________________________________
Notary Public
<PAGE> 1
EXHIBIT 10.117
SECURED PROMISSORY NOTE
$3,300,000.00 ALBANY, NEW YORK
JANUARY 14, 2000
FOR VALUE RECEIVED, CLINTON BROOKSIDE DRIVE, LLC, a New York limited
liability company with an office for the transaction of business at 250 South
Clinton Street, Syracuse, New York 13202 (the "Borrower") promises to pay to the
order of KEY CORPORATE CAPITAL INC., a Michigan corporation with an office for
the transaction of business at 127 Public Square, 6th Floor, Cleveland, Ohio
44114 (the "Lender") the principal sum of Three Million Three Hundred Thousand
Dollars ($3,300,000.00), or so much thereof as may be advanced from time to time
in accordance with the terms of a building loan agreement dated of even date
herewith (the "Building Loan Agreement") and a development agreement dated of
even date herewith (the "Development Agreement"),with interest on the unpaid
principal balance of such amount from the date of this Note or such advance, as
the case may be, at the Interest Rate (as hereinafter defined). This Note
evidences a loan (the "Loan") made, or so much thereof as may be made, by Lender
to Borrower, in the principal amount hereof, and is secured by (a) a mortgage
and security agreement from Borrower to Lender dated of even date herewith in
the amount of $3,300,000.00 (the "Mortgage"), which creates a lien on certain
real property located in the Town of Clinton, County of Oneida, State of New
York (the "Real Property"), (b) a guaranty of payment and performance dated of
even date herewith from Alterra Healthcare Corporation ("Alterra") to Lender
(the "Guaranty"), (c) a limited recourse guaranty dated of even date herewith
from Assisted Living Equities, LLC ("ALE") (Alterra and ALE being sometimes
hereinafter referred to collectively as the "Guarantor" (provided, however, that
Guarantor shall mean Alterra once the Limited Recourse Guaranty is terminated))
to Lender (the "Limited Recourse Guaranty"), (d) a security agreement dated of
even date herewith from Borrower to Lender (the "Security Agreement") which,
together with financing statements executed in connection therewith (the
"Financing Statements") creates a lien security interest in certain personal
property (the "Personal Property") more particularly described in the Security
Agreement, (e) an assignment of rents and leases dated of even date herewith
from Borrower to Lender (the "Assignment") which conditionally assigns all rents
and absolutely assigns all leases in respect of the Real Property to Lender, (f)
an assignment of contract documents dated of even date herewith (the "Contract
Assignment") from Borrower to Lender, (g) a hazardous substances indemnity
agreement (the "Indemnity Agreement") dated of even date herewith from the
Borrower in favor of Lender, and (h) such other security as may now or hereafter
be given to Lender by Borrower and/or the Guarantors as collateral for the Loan
(the Building Loan Agreement, the Development Agreement, the Mortgage, the
Guaranty, the Limited Recourse Guaranty, the Security Agreement, the Financing
Statements, the Assignment, the Contract Assignment, the Indemnity Agreement,
this
<PAGE> 2
Note and such other documents evidencing such other security which may hereafter
be given as further security for, or in connection with, the Loan being
hereinafter collectively referred to as the "Loan Documents").
I
DEFINITIONS
Except as otherwise defined herein, capitalized terms used herein shall
have the following definitions:
"Adjusted Prime Rate" shall mean a rate per annum equal to the greater
of (a) the Prime Rate or (b) the Federal Funds Effective Rate plus one-half of
one percent (1/2%). Any change in the Adjusted Prime Rate shall be effective
immediately from and after such change in the Adjusted Prime Rate.
"Advance" shall mean each advance of Loan proceeds by Lender to the
Borrower, each of which will be treated separately for purposes of computing
interest and each of which will accrue interest at the Interest Rate selected by
Borrower pursuant to an Interest Rate Election.
"Business Day" means a day on which banks are not required or
authorized to close in Cleveland, Ohio and, if the applicable Business Day
relates to an Advance bearing interest at or with reference to the LIBOR Rate, a
day on which dealings are carried on in the London interbank Eurodollar market.
"Certificate of Occupancy" shall mean the document, temporary or
permanent, first issued by the local governmental authority certifying that the
Improvements (as defined in the Mortgage) are sufficiently completed to permit
occupancy.
"Completion Date" shall mean the date of admission of the first
resident of the Facility.
"Debt Service Coverage Ratio" shall mean the ratio of (i) net income
before interest expense (including capital leases), taxes, depreciation and
amortization to (ii) the sum of current maturities of long term debt, capital
lease payments and interest expense on the Loan. For the purposes of calculating
the Debt Service Coverage Ratio, it shall be assumed that the Borrower is
required to make monthly payments of principal in the amount of Three Thousand
One Hundred Twelve Dollars and 50/100 ($3,112.50) commencing February 1, 2001,
notwithstanding the actual amortization schedule set forth in Article V hereof.
"Default Interest Rate" shall mean the lesser of (a) the Prime Rate
plus four percent (4%) per annum or (b) the highest rate permitted by law.
"Extended Term" shall mean the period beginning on February 2, 2002 and
ending on February 1, 2004.
2
<PAGE> 3
"Extended Term Maturity Date" shall mean February 1, 2004.
"Election Notice" shall mean the Advance and/or Interest Rate Election
Notice which may be used by the Borrower when the Borrower is seeking an Advance
and/or electing a Prime Rate or a LIBOR Rate, said Election Notice to be in the
form of Exhibit "B" attached hereto and when delivered, to have been completed
by the Borrower to indicate an Advance amount (if applicable), an Interest Rate,
and, if such Advance is a LIBOR Rate Advance, an Interest Period. An Election
Notice shall be provided by Borrower to Lender at least three (3) business days
prior to each requested advance. The Election Notice may be delivered to the
Lender by telecopy as provided in the Loan Documents.
"Eurocurrency Reserve Percentage" means, for any Interest Period in
respect of any Advance, as of any date of determination of the Interest Rate,
the aggregate of the then stated required maximum reserve percentages (including
any marginal, special, emergency or supplemental reserves), expressed as a
decimal, applicable to such Interest Period (if more than one such percentage is
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) by the
Board of Governors of the Federal Reserve System, any successor thereto, or any
other banking authority, domestic or foreign, to which the Lender is subject in
respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Federal Reserve Board) or in respect of any
other category of liabilities including deposits by reference to which the
interest rate on Advances is determined or any category of extension of credit
or other assets that include the Advances. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under Regulation D
of the Federal Reserve Board and the Advances shall be deemed to constitute
Eurocurrency Liabilities subject to such reserve requirements without benefit of
credits for proration, exceptions or offsets which may be available from time to
time to any Lender under said Regulation D.
"Facility" shall mean the adult home facility to be located on the Real
Property.
"Federal Funds Effective Rate" shall mean, for any day, the rate per
annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of
1%)) announced by the Federal Reserve Bank (or any successor) on such day as
being the weighted average of the interest rates on overnight federal funds
transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the Closing Date.
"Initial Term" shall mean the period beginning on the date of the first
Advance and ending on February 1, 2002.
3
<PAGE> 4
"Initial Term Maturity Date" shall mean February 1, 2002.
"Interest Period" means, with respect to any Prime Rate Advance, the
period commencing on the date an Advance is made pursuant to an Election Notice
indicating that such Advance is a Prime Rate Advance and ending on the date a
LIBOR Interest Rate is selected for such Advance pursuant to a subsequent
Election Notice for such Advance. "Interest Period" means, with respect to any
LIBOR Rate Advance, the period commencing on the date an Advance is made
pursuant to an Election Notice indicating that such Advance is a LIBOR Rate
Advance having aduration of either 30, 60, 90 or 180 days and ending on the last
day of the Interest Period selected by Borrower, provided that if upon the
expiration of such Interest Period, Borrower has failed to timely deliver to
Lender a subsequent Election Notice, then the Interest Rate with respect to such
Advance shall be an Interest Rate having the duration of 30 days (unless at such
time, the Lender shall have determined that dollar deposits of the relevant
amount for the relevant Interest Period for such LIBOR Rate Advance is not
available to Lender in the applicable London interbank market or that, by reason
of circumstances affecting such market, adequate and reasonable means do not
exist for ascertaining the LIBOR Rate applicable to such Interest Period, in
which event the Interest Rate with respect to such Advance shall be the Adjusted
Prime Rate, but only until a new Interest Rate is selected by Borrower pursuant
to an Election Notice with respect to such Advance). The duration of each
Interest Period for any LIBOR Rate Advance shall be thirty, sixty or ninety or
one hundred eighty days, in each case as the Borrower shall select upon notice,
as set forth herein, provided that:
(i) no Interest Period with respect to a LIBOR Rate Advance shall be
selected which ends after the Initial Term Maturity Date or, in the
event the Borrower elects to continue the Loan for the Extended Term,
the Extended Term Maturity Date;
(ii) the Interest Rate that shall be in effect in the event that
Lender has declared Borrower in default (after the expiration of all
applicable notice and cure periods) under the Building Loan Agreement,
the Development Agreement or any other Loan Document shall be the
Default Interest Rate;
(iii) if any Interest Period would otherwise expire on a day which is
not a London Banking Day, such Interest Period shall expire on the next
London Banking Day, provided that if any Interest Period would
otherwise expire on a day which is not a London Banking Day but is a
day of the month after which no further London Banking Day occurs in
such month, such Interest Period shall expire on the next preceding
London Banking Day; and
(iv) if the Borrower fails to so select the duration of any Interest
Period, the duration of such Interest Period shall be thirty days.
4
<PAGE> 5
"Interest Rate" shall mean (a) during the Initial Term, a rate of
interest equal to either (i) the Prime Rate or (ii) the thirty, sixty, ninety,
or one hundred eighty day LIBOR Rate, in each case as selected by the Borrower
pursuant to an Interest Rate Election, plus two and eighty-five hundredths
percent (2.85%), (b) during the Extended Term, a rate of interest equal to
either (i) the Prime Rate or (ii) the thirty, sixty, ninety, or one hundred
eighty day LIBOR Rate, in each case as selected by the Borrower pursuant to an
Interest Rate Election, plus two and seventy-five hundredths percent (2.75%).
Notwithstanding the preceding sentence (i) (unless Borrower is entitled to a
lower Interest Rate pursuant to (ii) below, in which event such lower interest
rate will apply) from and after the first day of the month next succeeding the
date on which the Project achieves Stabilization, such rate shall be reduced to,
and shall thereafter be equal to: (a) if the project achieves Stabilization
during the period which is twelve (12) months after the Completion Date, a rate
of interest equal to either (i) the Prime Rate or (ii) the thirty, sixty, ninety
or one hundred eighty day LIBOR Rate, in each case as selected by the Borrower
pursuant to an Interest Rate Election, plus two and five tenths percent (2.50%),
(b) if the Project achieves Stabilization during the period which commences on
the first day of the thirteenth (13th) month after the Completion Date and
concluding on the last day of the twenty-fourth (24th) month after the
Completion Date, a rate of interest equal to either (i) the Prime Rate or (ii)
the thirty, sixty, ninety or one hundred eighty day LIBOR Rate, in each case as
selected by the Borrower pursuant to the Interest Rate Election, plus two and
six tenths percent (2.60%), and (c) if the Project achieves Stabilization during
the period which commences on the first day of the twenty-fifth (25th) month
after the Completion Date and ending on the last day of the thirty-sixth (36th)
month after the Completion Date, a rate of interest equal to either (i) the
Prime Rate or (ii) the thirty, sixty, ninety or one hundred eighty day LIBOR
Rate, in each case as selected by the Borrower pursuant to an Interest Rate
Election, plus two and seven tenths percent (2.70%); (ii) from and after the
first day of the month next succeeding the date on which the project achieves a
Debt Service Coverage Ratio of not less than 1.6 to 1.0 for a period of three
(3) consecutive months, and regardless of the date on which Stabilization
occurs, such rate shall be reduced to, and thereafter be equal to, a rate of
interest equal to either (i) the Prime Rate or (ii) the thirty, sixty, ninety or
one hundred eight day LIBOR Rate, in each case as selected by the Borrower
pursuant to an Interest Rate Election, plus two and forty-five hundredths
percent (2.45%); and (iii) (unless Borrower is entitled to a lower Interest Rate
pursuant to (i) or (ii) above, in which event such lower interest rate will
apply) from and after the first day of the month next succeeding the date on
which Borrower has submitted to Lender and Lender has approved (which approval
shall not be unreasonably withheld or delayed) a commitment for a permanent loan
take-out with respect to the Loan from a lender other than Lender, which
commitment does not include any covenants or requirements other than those
already attained by Borrower on the date of Lender's approval of such
commitment, and regardless of the date on which Stabilization occurs, such rate
shall be reduced to, and thereafter be equal to, a rate of interest equal to
either (i) the Prime Rate or (ii) the thirty, sixty, ninety or one hundred
eighty day LIBOR Rate, in each case as selected by Borrower pursuant to an
Interest Rate Election, plus two and fifty-five hundredths percent (2.55%).
5
<PAGE> 6
"Interest Rate Election" shall mean a written election on the part of the
Borrower to choose the thirty, sixty, ninety or one hundred eighty day LIBOR
Rate as the reference rate for the determination of the Interest Rate to be
charged on an Advance.
"LIBOR Rate" shall mean, for any Interest Period with respect to a
LIBOR Rate Advance, the quotient of: (x) the per annum rate of interest,
determined by the Lender in accordance with its usual procedures (which
determination shall be conclusive absent demonstrative error) as of
approximately 11:00 a.m. (London time) two Business Days prior to the beginning
of such Interest Period, appearing on Page 3750 of the Telerate Service (or any
successor or substitute page of such Service, or any successor to or substitute
for such Service providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Lender from time to
time for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) as the rate in the London interbank
market for dollar deposits in immediately available funds for an amount
comparable to such LIBOR Rate Advance and with a maturity comparable to the
Interest Period selected by Borrower with respect to such LIBOR Rate Advance
divided by (y) a number equal to 1.00 minus the Eurocurrency Reserve Percentage.
In the event that such rate quotation is not available for any reason, then the
rate (for purposes of clause (x) hereof) shall be the rate, determined by the
Lender as of approximately 11:00 a.m. (London time) two Business Days prior to
the beginning of such Interest Period pertaining to such LIBOR Rate Advance, to
be the average of the per annum rates at which dollar deposits in immediately
available funds in an amount comparable to such LIBOR Rate Advance and with a
maturity comparable to such Interest Period are offered to the prime banks by
leading banks in the London interbank market. The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in the Eurocurrency
Reserve Percentage. In respect of any LIBOR Rate Advance, in the event that
Lender shall have determined that dollar deposits of the relevant amount for the
relevant Interest Period for such LIBOR Rate Advance is not available to Lender
in the applicable London interbank market or that, by reason of circumstances
affecting such market, adequate and reasonable means do not exist for
ascertaining the LIBOR Rate applicable to such Interest Period, as the case may
be, Lender shall promptly give notice of such determination to Borrower and (a)
any notice of a new LIBOR Rate Advance previously given by Borrower and not yet
borrowed shall be deemed a notice to make a Prime Rate Advance, and (b) Borrower
shall be obligated either to prepay, or to convert to a Prime Rate Advance, any
outstanding LIBOR Rate Advance on the last day of the then current Interest
Period with respect thereto.
"LIBOR Rate Advance" shall mean an Advance with respect to which
interest is payable at an interest rate determined by reference to the LIBOR
Rate.
"London Banking Days" means any day on which commercial banks are open
for business in London, England.
6
<PAGE> 7
"Prime Rate" shall mean the rate of interest set, determined or
announced on a periodic basis by Key Bank National Association as its "Prime
Rate" which rate of interest is not necessarily the lowest rate charged by Key
Bank National Association on loans and other credits which may be extended by
Key Bank National Association at rates both above and below the Prime Rate
(although such other loans and credits shall have no bearing on the
determination of the Prime Rate for purposes hereof).
"Prime Rate Advance" shall mean an Advance with respect to which
interest is payable at an interest rate determined by reference to the Prime
Rate.
"Project" shall mean an assisted living project to be constructed on
the Real Property and operated by the Borrower.
"Real Property" shall mean 115 Brookside Drive, Town of Clinton, Oneida
County, New York 13323.
"Stabilization" shall mean the achievement of a Debt Service Coverage
Ratio of not less than 1.4 to 1.0 for a period of not less than three (3)
consecutive calendar months.
7
<PAGE> 8
II
INTEREST
(a) COMPUTATION OF INTEREST. Interest on the outstanding principal
balance of this Note shall be computed on the basis of "a 360-day year for the
actual number of days elapsed" (such phrase, as used throughout this Note, shall
mean that in computing interest for the subject period, the interest rate shall
be multiplied by a fraction, the denominator of which is 360 and the numerator
of which is the actual number of days elapsed from the date of the first
disbursement of the Loan or the date of the preceding interest and/or principal
due date, as the case may be, to the date of the next interest and/or principal
due date). Interest shall accrue until the Loan is repaid.
(b) INTEREST RATE CHANGE PROCEDURES. The Interest Rate calculated
hereunder for an Interest Period with respect to a LIBOR Rate Advance shall
remain constant for the Interest Period. In the event of a change in the LIBOR
Rate, the Interest Rate will change on the first day following the expiration of
each Interest Period. The Interest Rate calculated hereunder for an Interest
Period with respect to a Prime Rate Advance shall change on the first Business
Day following the date Lender changes the Prime Rate.
(c) IMPLEMENTATION OF DEFAULT INTEREST RATE. Upon the occurrence and
during the continuance of an Event of Default (hereinbelow defined), the
computation of interest under this Note shall immediately and without further
action by Lender be based upon the Default Interest Rate.
III
PROCEDURES FOR ADVANCES AND ELECTION NOTICES
(a) ADVANCES. Provided that no Event of Default (hereinafter defined)
has occurred, Advances shall be made available to the Borrower during the period
from the date hereof through February 1, 2002. Each Advance shall be either a
Prime Rate Advance or a LIBOR Rate Advance, as selected by Borrower pursuant to
an Election Notice. Information with regard to any Advance shall be recorded and
maintained by Lender in its internal records and such records shall be
conclusive as to the information set forth therein, absent demonstrative error.
(b) PROCEDURE FOR ADVANCES AND ELECTION NOTICES. Borrower may obtain
an Advance by delivering an Election Notice signed by any one of the Authorized
Individuals on the Schedule of Authorized Individuals attached hereto as Exhibit
"C" setting forth the amount of the Advance requested, and indicating an
Interest Period
8
<PAGE> 9
(which with respect to LIBOR Rate Advance must terminate no later than the
Initial Term Maturity Date or, in the event that Borrower elects to continue the
Loan for the Extended Term, the Extended Term Maturity Date) for such Advance.
Said Interest Rate as determined in accordance with the terms of this Note at
the beginning of the Interest Period with respect to LIBOR Rate Advance shall
remain in effect until expiration of the Interest Period chosen by the Borrower
for that Advance. With respect to each LIBOR Rate Advance, prior to the end of
each Interest Period, if Borrower will not be repaying the amount of that
Advance remaining unpaid, Borrower shall provide an Election Notice designating
a new Interest Period for that Advance. If Borrower fails to provide the
Election Notice to Lender prior to the expiration of any Interest Period with
respect to any Advance, and does not repay that Advance, interest shall accrue
on that Advance at the rate applicable to a LIBOR Rate, having an Interest
Period of thirty days until the Borrower delivers an Election Notice. The
Interest Rate as determined in accordance with the terms of this Note with
respect to a Prime Rate Advance shall remain in effect until a new Election
Notice is delivered to Lender indicating that Borrower has selected a LIBOR Rate
with respect to such Advance. Subject to the satisfaction by Borrower with the
conditions set forth in Article III(c) hereof, Advances shall be made to
Borrower by Lender within five (5) days of Lender's receipt of a properly
completed Election Notice. Any Advance shall be deposited by Lender in an
account to be opened by Borrower for that purpose with Lender (the "Advance
Account") and the deposit of any Advance in the Advance Account by Lender
(absent manifest error) shall be conclusive as to the receipt of said Advance by
Borrower and Borrower will be responsible for repaying any Advance so made
pursuant to the terms of this Note.
(c) ADVANCES BY LENDER. Advances hereunder shall be made in
accordance with, and shall be subject to the terms of the Building Loan
Agreement and the Development Agreement. In addition, Lender may make Advances
pursuant to the terms hereof, for the purpose of paying any sums which have
become due and payable hereunder or under any other Loan Document. Any such
Advance shall bear interest at the Interest Rate utilizing a LIBOR Rate
reference with an Interest Period of thirty days.
IV
LIBOR RESERVE REQUIREMENT
If because of the introduction of or any change in or because of any
judicial, administrative or other governmental interpretation of any law or
regulation, there shall be any increase in the direct cost to Lender of making,
funding, maintaining or allocating capital to any LIBOR Rate Advance, then
Borrower shall from time to time upon demand by Lender pay Lender additional
moneys sufficient to compensate Lender for such increased cost.
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Any amount or amounts payable by Borrower to Lender pursuant to this
Article shall be paid by Borrower to Lender within ten (10) days of receipt by
Borrower from Lender of a statement setting forth the amount or amounts due and
the basis for the determination from time to time of such amount or amounts,
which statement shall be conclusive and binding upon Borrower absent
demonstrative error.
V
PAYMENT OF PRINCIPAL AND INTEREST
Borrower shall pay interest at the applicable Interest Rate in arrears
on the sums advanced under this Note beginning on February 1, 2000 and said
payments of interest only shall continue through February 1, 2002. Borrower has
the right to extend the Loan to the Extended Term Maturity Date. In the event
that Borrower desires to extend the term of the Loan to the Extended Term
Maturity Date, Borrower shall provide Lender with a written notice of such
election not fewer than thirty (30) days prior to the Initial Term Maturity
Date, which election notice shall be accompanied by the payment to Lender of a
modification fee in an amount equal to .25% of the outstanding principal balance
of the Note (provided, however, that if the outstanding principal balance of the
Note on the date of the commencement of the Extended Term exceeds the
outstanding principal balance of the Note in respect of which the payment of the
modification fee was calculated, the Borrower shall pay to Lender on the date of
the commencement of the Extended Term an additional modification fee equal to
.25% of the difference between such principal balance). In the event of such
election, commencing on February 1, 2002, and continuing on the first day of
each month thereafter, monthly payments of principal and interest shall be due.
The interest portion of each monthly payment shall be calculated based on the
Interest Rate. The principal portion of each monthly payment shall be Three
Thousand One Hundred Twelve Dollars and 50/100 ($3,112.50) each month. In
addition, on the Extended Term Maturity Date, Borrower shall pay Lender the
outstanding principal balance of this Note, together with accrued interest
thereon and any other sums due hereunder.
VI
COVENANTS
So long as the Loan is outstanding, Borrower covenants that it shall:
(a) During the period commencing with the first day of the sixteenth
(16th) month after the Completion Date and concluding with the last day of the
eighteenth (18th) month after the Completion Date, (1) achieve a 75% occupancy
rate (based on the number of units comprising the Project), and (2) achieve and
sustain for each full month a Debt Service Coverage Ratio of not less than 1.0
to 1.0 provided that this covenant shall be deemed to be satisfied
(notwithstanding the failure of Borrower to
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<PAGE> 11
meet the tests set forth above) if by the last day of the twenty-first (21st)
month after the Completion Date, Borrower (1) achieves 75% occupancy rates and
(2) achieves and sustains for one full calendar month a Debt Service Coverage
Ratio of not less than 1.0 to 1.0.
(b) During the period commencing with the first day of the nineteenth
(19th) month after the Completion Date and concluding with the last day of the
twenty-fourth (24th) month after the Completion Date, (1) achieve an 85%
occupancy rate (based on the number of units comprising the Project) and (2)
achieve and sustain for each full month a Debt Service Coverage Ratio of not
less than 1.2 to 1.0, provided that this covenant shall be deemed to be
satisfied (notwithstanding the failure of Borrower to meet the tests set forth
above) if by the last day of the thirtieth (30th) month after the Completion
Date (or the last day of the twenty-seventh (27th) month after the Completion
Date, if Events of Default have occurred and are continuing under more than
forty percent (40%) of the credit facilities extended by Lender pursuant to the
master loan commitment issued by Lender to ALS-Northeast, LLC dated May 5,
1998), Borrower (1) achieves an 85% occupancy rate, (2) achieves and sustains
for one full calendar month a Debt Service Coverage Ratio of not less that 1.2
to 1.0, and (3) during the period commencing with the first day of the
nineteenth (19th) month after the Completion Date and concluding with the last
day of the thirtieth (30th) month after the Completion Date, achieves and
sustains for each full month a Debt Service Coverage Ratio of not less that 1.0
to 1.0.
(c) During the period commencing with the first day of the
twenty-fifth (25th) month after the Completion Date and concluding with the last
day of the thirty-sixth (36th) month after the Completion Date, (1) achieve a
90% occupancy rate (based on the number of units comprising the Project) and (2)
achieve and sustain a minimum Debt Service Coverage Ratio of not less than 1.4
to 1.0, provided that this covenant shall be deemed to be satisfied
(notwithstanding the failure of Borrower to meet the tests set forth above) if
by the last day of the forty-second (42nd) month after the Completion Date (or
the last day of the thirty-ninth (39th) month after the Completion Date, if
Events of Default have occurred and are continuing under more than forty percent
(40%) of the credit facilities extended by Lender pursuant to the master loan
commitment issued by Lender to ALS-Northeast, LLC dated May 5, 1998), Borrower
(1) achieves a 90% occupancy rate, (2) achieves and sustains for one full
calendar month a Debt Service Coverage Ratio of not less than 1.4 to 1.0, and
(3) from and after the first day of the twenty-fifth (25th) month after the
Completion Date, achieves and sustains for each full month a Debt Service
Coverage Ratio of not less than 1.0 to 1.0.
(d) Cause Alternative Living Services-New York, Inc. to fully
subordinate all management fees payable to it pursuant to the Property
Management Services Agreement between it and Clinton Sterling Cottage Operator,
Inc. to the payment of all debt service and other payments due to Lender in
respect of the Loan.
(e) Cause Alterra to maintain:
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<PAGE> 12
(i) a minimum net worth of One Hundred Five Million Dollars
($105,000,000.00), which minimum net worth requirement shall
be increased on the first day of each fiscal quarter,
commencing October 1, 1999, by an amount equal to fifty
percent (50%) of Alterra's net income for the immediately
preceding fiscal quarter, and shall be further increased in
the event of any equity offering by Alterra in an amount
equal to seventy-five percent (75%) of the net proceeds of
such equity offering;
(ii) a minimum ratio of (a) the sum of Alterra funded
non-convertible debt, plus funded non-convertible debt
guaranteed by Alterra plus any other contingent liabilities
of ALS not otherwise reflected on Alterra's balance sheet to
(b) Alterra's total capitalization (including all debt
specified in clause (e)(ii)(a) above) of not less than .7 to
1.0 on a rolling four (4) quarter basis; and
(iii) a minimum ratio of (a) the sum of Alterra's net income
before extraordinary items, plus income taxes, plus interest
expense to (b) interest expense of not less than 1.75 to 1.0
through December 1999 and 2.0 to 1.0 from January 1, 2000
through the balance term of the Loan on a rolling four (4)
quarter basis.
For purposes of this Article, whenever any accounting term is used
herein and is not otherwise defined, it shall be interpreted in accordance with
generally accepted accounting principles.
VII
GENERAL CONDITIONS
(a) METHOD OF PAYMENT. All payments under this Note are payable at
127 Public Square, 6th Floor, Cleveland, Ohio 44114, or at such other place as
Lender shall notify Borrower in writing. Lender reserves the right to require
any payment on this Note, whether such payment is of a regular installment or
represents a prepayment, to be by wired federal funds or other immediately
available funds or to be paid at a place other than the above address.
(b) APPLICATION OF PAYMENTS RECEIVED. Except as may otherwise be
provided in this Note, all payments received by Lender on this Note shall be
applied by Lender to any unpaid Late Payment Charges or Prepayment Penalty (each
hereinbelow defined), accrued and unpaid interest then due and owing and the
reduction of principal of this Note, in such order and in such amounts as Lender
may determine from time to time.
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<PAGE> 13
(c) LATE PAYMENT CHARGES. If Borrower fails to pay any amount of
principal and/or interest on this Note for ten (10) days after such payment
becomes due, whether by acceleration or otherwise, Lender may, at its option,
impose a late payment charge (the "Late Payment Charge") computed by multiplying
the amount of each past due payment by four (4%) percent. Until any and all Late
Payment Charges are paid in full, the amount thereof shall be added to the
indebtedness secured by any of the Loan Documents. The Late Payment Charge is
not a penalty and is deemed to be liquidated damages for the purpose of
compensating Lender for the difficulty in computing the actual amount of damages
incurred by Lender as a result of the late payment by Borrower.
(d) PREPAYMENT PENALTY. During the Initial Term, the principal
balance may be prepaid in whole or in part at any time without premium or
penalty. During the Extended Term, the principal balance may be prepaid in whole
or in part, provided, however, that Borrower shall pay Lender the actual
breakage fees incurred by Lender with respect to any LIBOR Rate Advances being
prepaid when the Interest Period for those Advances are greater that thirty (30)
days. Lender shall pay any actual breakage fees with respect to any LIBOR Rate
Advances being prepaid when the Interest Periods for those Advances are thirty
(30) days or less.
(e) REFUSAL TO MAKE FURTHER ADVANCES, ACCELERATION AND DEFAULT. If:
(1) Borrower fails to pay any sum due on this Note within ten
(10) days of the date the same is due; or
(2) Borrower shall fail to perform any other covenant,
obligation or agreement required to be performed by Borrower under this
Note, thirty (30) days after Lender has given written notice of such
failure to Borrower or if such failure is capable of cure but cannot be
reasonably cured in thirty (30) days, the failure of Borrower to
commence to cure such failure within thirty (30) days and thereafter
prosecute the same with due diligence; or
(3) Any material warranty or representation made or given by
Borrower or any material financial or other statement submitted by or
on behalf of Borrower or any Guarantor in any instrument furnished in
compliance with or in reference to this Note or the Loan Documents was
false or misleading in any material respect as of the date when made;
or
(4) Borrower or any Guarantor shall generally not be paying
debts as they become due or file a petition or seek relief under or
take advantage of any insolvency law; make an assignment for the
benefit of creditors; commence a proceeding for the appointment of a
receiver, trustee, liquidator, custodian or conservator of Borrower or
any Guarantor or of the whole or substantially all of
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<PAGE> 14
Borrower or any Guarantor's property or of any material portion of the
collateral pledged as security for this Note; or if Borrower or any
Guarantor shall file a petition or an answer to a petition under any
chapter of the Bankruptcy Reform Act of 1978, as amended (or any
successor statute thereto), or file a petition or seek relief under or
take advantage of any other similar law or statute of the United States
of America, any state thereof, or any foreign country or subdivision
thereof; or
(5) A court of competent jurisdiction shall enter an order,
judgment or decree appointing or authorizing a receiver, trustee,
liquidator, custodian or conservator of Borrower or any Guarantor or of
the whole or substantially all of Borrower or any Guarantor's property,
or any material portion of the collateral pledged as security for this
Note, or enter an order for relief against Borrower or any Guarantor in
any case commenced under any chapter of the Bankruptcy Reform Act of
1978, as amended (or any successor statute thereto), or grant relief
under any other similar law or statute of the United States of America,
any state thereof, or any foreign country or subdivision thereof and
the same is not stayed or discharged within one hundred twenty (120)
days of entry; or
(6) Under the provisions of any law for the relief or aid of
debtors, a court of competent jurisdiction or a receiver, trustee,
liquidator, custodian or conservator shall assume custody or control or
take possession from Borrower or any Guarantor of all or substantially
all of Borrower or any Guarantor's property or any material portion of
any collateral pledged as security for this Note; or
(7) There is commenced against Borrower or any Guarantor any
proceeding for any of the foregoing relief or if a petition is filed
against Borrower or any Guarantor under any chapter of the Bankruptcy
Reform Act of 1978, as amended (or any successor statute thereto), or
under any other similar law or statute of the United States of America,
any state thereof, or any foreign country or subdivision thereof, and
such proceeding or petition remains undismissed for a period of one
hundred eighty (180) days or if Borrower or any Guarantor by any act
indicates consent to, approval of or acquiescence in any such
proceeding or petition; or
(8) Lender receives a notice to creditors with regard to a
bulk transfer by Borrower or any Guarantor pursuant to Article VI of
the Uniform Commercial Code or if the Borrower shall dissolve,
terminate its existence, fail, cease normal business operation or
otherwise discontinue its existence; or
(9) An "Event of Default", as said term is defined in any of
the other Loan Documents, shall have occurred and continues beyond any
applicable notice and/or cure period;
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<PAGE> 15
then, and in any such event (an "Event of Default"), Lender may, at its option
refuse to make any further advances hereunder and declare the entire unpaid
balance of this Note together with interest accrued thereon and any other sums
due hereunder or under the Loan Documents, to be immediately due and payable and
Lender may proceed to exercise any rights or remedies that it may have under
this Note or any other Loan Documents, or such other rights and remedies which
Lender may have at law, equity or otherwise. In the event of such acceleration,
Borrower may discharge its obligations to Lender by paying:
(i) the unpaid principal balance hereof as at the date of
such payment, plus
(ii) accrued interest computed in the manner set forth
above, plus
(iii) any Late Payment Charge and Prepayment Penalty computed
in the manner set forth above, plus
(iv) any other sum due and owing Lender under this Note or
any other Loan Document.
(e) COSTS AND EXPENSES ON DEFAULT. After the occurrence of an Event
of Default, in addition to principal, interest, and any Late Payment Charge,
Lender shall be entitled to collect all reasonable costs of collection,
including, but not limited to, reasonable attorneys' fees, incurred in
connection with the protection or realization of collateral or in connection
with any of Lender's collection efforts, whether or not suit on this Note or any
foreclosure proceeding is filed, and all such reasonable costs and expenses
shall be payable on demand and until paid shall also be secured by the Loan
Documents and by all other collateral held by Lender as security for Borrower's
obligations to Lender.
(f) NO WAIVER BY KEY CORPORATE CAPITAL INC. No failure by any
Guarantor of the Loan to make any payments shall be deemed a waiver or release
of Borrower's obligations hereunder. No failure on the part of Lender or other
holder hereof to exercise any right or remedy hereunder, whether before or after
the happening of an Event of Default, shall constitute a waiver thereof, and no
waiver of any past default shall constitute waiver of any future default or of
any other default. No failure to accelerate the Loan evidenced hereby by reason
of an Event of Default hereunder, or acceptance of a past due installment, or
indulgence granted from time to time shall be construed to be a waiver of the
right to insist upon prompt payment thereafter, or shall be deemed to be a
novation of this Note or as a waiver of such right of acceleration or any other
right, or be construed so as to preclude the exercise of any right which Lender
may have, whether by the laws of the state governing this Note, by agreement or
otherwise; and Borrower and each endorser or Guarantor hereby expressly waive
the benefit of any statute or rule of law or equity which would produce a result
contrary to or in conflict with the foregoing. This Note may not be changed
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<PAGE> 16
orally, but only by an agreement in writing signed by the party against whom
such agreement is sought to be enforced.
(g) FINANCIAL INFORMATION. Borrower will advise Lender in writing if
it operates on other than a calendar year basis. Borrower will at all times keep
proper books of record and account in which full, true and correct entries shall
be made in accordance with sound accounting principles and will deliver to
Lender, within one hundred fifty (150) days after the end of its fiscal year, a
copy of the compiled or, if available, audited financial statements of Borrower
relating to such fiscal year, such statements to include (a) the balance sheet
of Borrower, at the end of such fiscal year and (b) the related income statement
and statement of changes in the financial position of Borrower, for such fiscal
year, prepared by such certified public accountants as may be reasonably
satisfactory to Lender. Borrower will also provide Lender with copies of
quarterly internally prepared financial statements and if requested by Lender a
covenant compliance certificate within thirty (30) days of the conclusion of the
last day of each quarter. Borrower will also provide Lender during the Project
lease-up period with such monthly lease-up information as Lender shall
reasonably request. Borrower also agrees to deliver to Lender within fifteen
(15) days after filing same, a copy of Borrower's income tax return and also,
from time to time, such other financial information with respect to Borrower as
Lender may reasonably request.
Borrower will cause Alterra to keep proper books of record and account
in which full, true and correct entries shall be made in accordance with
generally accepted accounting principles and will cause Alterra to deliver to
Lender, within one hundred twenty (120) days after the end of its fiscal year, a
copy of the annual audited financial statements of Alterra relating to such
fiscal year, such statements to include (a) the balance sheet of Alterra, at the
end of such fiscal year and (b) the related income statement and statement of
changes in the financial position of Alterra, for such fiscal year, prepared by
Alterra's certified public accountants. Borrower will also cause Alterra to
provide Lender with copies of quarterly internally prepared financial statements
within sixty (60) days of the conclusion of the last day of each of Alterra's
fiscal quarters.
Borrower will cause ALE to keep proper books of record and account in
which full, true and correct entries shall be made in accordance with sound
accounting principles and will cause ALE to deliver to Lender within one hundred
fifty (150) days after the end of its fiscal year, a copy of the annual compiled
or, if available, reviewed financial statements of ALE relating to such fiscal
year, such statements to include (a) the balance sheet of ALE, at the end of
such fiscal year and (b) the related income statement and statement of changes
in the financial position of ALE, for such fiscal year, prepared by such
certified public accountants as may be reasonably satisfactory to Lender.
(h) WAIVER BY BORROWER. Borrower and each endorser of this Note
hereby waives presentment, protest, demand, diligence, notice of dishonor and of
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nonpayment, and waives and renounces all rights to the benefits of any
moratorium, appraisement, exemption and homestead now provided or which may
hereafter be provided by any federal or state statute, including but not limited
to exemptions provided by or allowed under the Bankruptcy Code of 1978, both as
to itself personally and as to all of its or their property, whether real or
personal, against the enforcement and collection of the obligations evidenced by
this Note and any and all extensions, renewals and modifications hereof.
(i) COMPLIANCE WITH USURY LAWS. It is the intention of the parties to
conform strictly to the usury laws, whether state or federal, that are
applicable to this Note. All agreements between Borrower and Lender, whether now
existing or hereafter arising and whether oral or written, are hereby expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity hereof or otherwise, shall the amount paid or agreed to be paid to
Lender or the holder hereof, or collected by Lender or such holder, for the use,
forbearance or detention of the money to be loaned hereunder or otherwise, or
for the payment or performance of any covenant or obligation contained herein,
or in any of the Loan Documents, exceed the maximum amount permissible under
applicable federal or state usury laws. If under any circumstances whatsoever
fulfillment of any provision hereof or of the Loan Documents, at the time
performance of such provision shall be due, shall involve exceeding the limit of
validity prescribed by law, then the obligation to be fulfilled shall be reduced
to the limit of such validity; and if under any circumstances Lender or other
holder hereof shall ever receive an amount deemed interest by applicable law,
which would exceed the highest lawful rate, such amount that would be excessive
interest under applicable usury laws shall be applied to the reduction of the
principal amount owing hereunder or to other indebtedness secured by the Loan
Documents and not to the payment of interest, or if such excessive interest
exceeds the unpaid balance of principal and such other indebtedness, the excess
shall be deemed to have been a payment made by mistake and shall be refunded to
Borrower or to any other person making such payment on Borrower's behalf. All
sums paid or agreed to be paid to the holder hereof for the use, forbearance or
detention of the indebtedness of Borrower evidenced hereby, outstanding from
time to time shall, to the extent permitted by applicable law, and to the extent
necessary to preclude exceeding the limit of validity prescribed by law, be
amortized, pro-rated, allocated and spread from the date of disbursement of the
proceeds of this Note until payment in full of the Loan evidenced hereby and
thereby so that the actual rate of interest on account of such indebtedness is
uniform throughout the term hereof and thereof. The terms and provisions of this
paragraph shall control and supersede every other provision of all agreements
between Borrower, any endorser or Guarantor and Lender.
(j) GOVERNING LAW; SUBMISSION TO JURISDICTION. This Note shall be
governed by and construed under the laws of the State of New York. To the extent
permitted by applicable law, Borrower and each endorser hereby submits to
personal jurisdiction in said state for the enforcement of Borrower's
obligations hereunder or under any other Loan Document and waives any and all
personal rights under the law
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<PAGE> 18
of any other state to object to jurisdiction within such state for the purposes
of litigation to enforce such obligations of Borrower.
(k) WAIVER OF JURY TRIAL. BORROWER HEREBY EXPRESSLY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE
OF ACTION (1) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT, OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) CONNECTED WITH OR
RELATED TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE LOAN, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
BORROWER HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND KEY
CORPORATE CAPITAL INC. MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF BORROWER'S CONSENT TO THE WAIVER
OF ITS RIGHT TO TRIAL BY JURY.
(l) NOTICES. Any notices required or permitted to be given hereunder
shall be: (i) personally delivered or (ii) given by registered or certified
mail, postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service or (iv) sent by telecopy (with hard copy to follow by another
accepted method), in each instance addressed to the addresses set forth at the
head of this Note, or such other addresses as the parties may for themselves
designate in writing as provided herein for the purpose of receiving notices
hereunder. All notices shall be in writing and shall be deemed given, in the
case of notice by personal delivery or overnight courier, upon tender of
delivery, and in the case of mail, three business days after postmark and in the
case of telecopy, upon receipt of such telecopy independently confirmed by other
than sender's machine. A copy of any notice issued hereunder shall be sent to
ALE at 250 South Clinton Street, Syracuse, New York 13202 (Attention: Neil A.
Rube) and to Alterra at 10000 Innovation Drive, Milwaukee, Wisconsin 53226
(Attention: Mark Ohlendorf).
(m) ENTIRE AGREEMENT. This Note and the other Loan Documents
constitute the entire understanding between Borrower and Lender and to the
extent that any writings not signed by Lender or oral statements or
conversations at any time made or had shall be inconsistent with the provisions
of this Note and the other Loan Documents, the same shall be null and void.
(n) ALE OBLIGATIONS. ALE's obligations under this Note and the Loan
Documents shall terminate if ALE no longer has an interest in Borrower.
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IN WITNESS WHEREOF, Borrower has executed this instrument the date
first above written.
CLINTON BROOKSIDE DRIVE, LLC
By: ASSISTED LIVING EQUITIES, LLC,
its member
By: |S| Neil A. Rube
------------------------------------------
Neil A. Rube, Executive Committee Member
STATE OF NEW YORK )
) ss.:
COUNTY OF ONONDAGA )
On this __ day of January, 2000, before me, the undersigned, a Notary
Public in and for said State, personally appeared NEIL A. RUBE, personally known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.
--------------------------------------------
Notary Public
19
<PAGE> 1
EXHIBIT 10.118
GUARANTY OF PAYMENT AND PERFORMANCE
THIS GUARANTY dated as of January 14, 2000 (the "Guaranty") from
ALTERRA HEALTHCARE CORPORATION, a Delaware corporation with its principal
executive office and place of business at 10000 Innovation Drive, Milwaukee,
Wisconsin 53226 (the "Guarantor") to KEY CORPORATE CAPITAL INC., a Michigan
corporation with an office for the transaction of business located at 127 Public
Square, 6th Floor, Cleveland, OH 44114 (the "Lender").
W I T N E S S E T H :
WHEREAS, Clinton Brookside Drive, LLC, a New York limited liability
company (herein called the "Borrower"), is about to borrow from the Lender the
sum of up to Three Million Three Hundred Thousand Dollars ($3,300,000.00) (the
"Loan"); and
WHEREAS, the Lender is unwilling to make the Loan to the Borrower
unless it receives this Guaranty; and
WHEREAS, the Guarantor is willing to enter into this Guaranty in order
to induce the Lender to make the Loan and the Guarantor has approved the form
and substance of any documents executed or delivered by Borrower in connection
with the Loan (the "Loan Documents").
NOW, THEREFORE, in order to induce the Lender to make the Loan to the
Borrower and in consideration of the premises and of other good and valuable
consideration, the Guarantor intends to guarantee absolutely and unconditionally
to the Lender, the punctual payment of the Loan and all notes or other evidences
of indebtedness given by the Borrower to the Lender in connection therewith and
all extensions, modifications or renewals thereof (collectively, the "Note") and
all interest and other sums due under the Note or any Loan Document and such
further payment and performance as may be set forth in Article 2 hereof.
ARTICLE 1
REPRESENTATIONS AND WARRANTIES OF THE GUARANTORS
The Guarantor hereby represents and warrants to Lender that:
Section 1.1 Capacity of the Guarantor. Guarantor:
(A) Has the capacity to enter into this Guaranty.
(B) Has its principal place of business at the address set forth at
the head of this
<PAGE> 2
Guaranty.
Section 1.2 No Violation of Restrictions. Neither the execution and
delivery of this Guaranty, the consummation of the transactions contemplated
hereby nor the fulfillment of or compliance with the provisions of this Guaranty
will conflict with or result in a breach of any of the terms, covenants,
conditions or provisions of any agreement, judgment or order to which any party
named as a Guarantor is a party or by which any party named as a Guarantor is
bound, or will constitute a default under any of the foregoing, or result in the
creation or imposition of any lien of any nature whatsoever.
Section 1.3 Compliance with Law. Guarantor (A) is not in violation
of any law, ordinance, governmental rule, regulation, order or judgment to which
the Guarantor may be subject which would materially affect the business of the
Guarantor and (B) has not failed to obtain any material license, permit,
franchise or other governmental authorization necessary to the conduct of their
present business.
Section 1.4 Financial Statements. The financial statements
submitted by Guarantor, including balance sheets, statement of income, retained
earnings and other related schedules, to Lender fairly represent the financial
condition as of the date of each statement and there has been no adverse
material change in the financial condition of any Guarantor since the date of
the respective statements submitted to Lender.
Section 1.5 Solvency of Guarantor and Borrower. Guarantor is
solvent and has made an appropriate financial investigation of the Borrower and
has determined that the Borrower is solvent at the time of execution of this
Guaranty.
ARTICLE 2
COVENANTS AND AGREEMENTS
Section 2.1 Guaranty of Payment and Performance. The Guarantor
(jointly and severally, if there be more than one Guarantor) irrevocably,
absolutely and unconditionally guarantees to the Lender:
(A) The punctual payment of the Loan, the Note, all principal and
interest due thereunder and any other sums due under the Note or
any Loan Document.
(B) The full and prompt payment and performance of any and all
obligations of Borrower to Lender under the Loan Documents
including, without limitation, the obligations of Borrower
concerning hazardous materials and other environmental matters
contained in any of the Loan Documents.
Section 2.2 Obligations Unconditional. This Guaranty shall remain
in full force and effect until the Loan, the Note and all sums due thereunder or
under any Loan Document are paid in full, irrespective of any interruptions in
the business relationships of the Borrower and
2
<PAGE> 3
the Guarantor with the Lender, and shall not be affected, modified or impaired
by any state of facts or the happening from time to time of any event,
including, without limitation, any of the following, whether or not with notice
to or the consent of the Guarantor provided, however, that nothing contained in
this Section 2.2 shall relieve Lender from its obligation to give any notice or
opportunity to cure that may be required hereunder or under the Loan Documents:
(A) The invalidity, irregularity, illegality or unenforceability of,
or any defect in, the Note or any Loan Document or any collateral
security for the Loan (the "Collateral").
(B) The waiver, compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the
Borrower under the Note or any Loan Documents.
(C) The failure to give notice to the Guarantor of the occurrence of
an event of default under the Note or any other Loan Document,
except as required herein.
(D) The loss, release, sale, exchange, surrender or other change in
any Collateral.
(E) The extension of the time for payment of any principal of or
interest on the Note or of the time for performance of any other
obligations, covenants or agreements under or arising out of the
Note or any Loan Document or the extension or the renewal of any
thereof.
(F) The modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set forth in the Note or
any Loan Document.
(G) The taking of, or the omission to take, any of the actions
referred to in the Note or any Loan Document.
(H) Any failure, omission or delay on the part of the Lender to
enforce, assert or exercise any right, power or remedy conferred
on the Lender in the Note or any Loan Document.
(I) The voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or
readjustment of, or other similar proceedings affecting the
Guarantor or the Borrower or any of their assets, or any
allegation or contest of the validity of the Note or any Loan
Document.
(J) The default or failure of the Guarantor to fully perform any
obligations set forth in this Guaranty.
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<PAGE> 4
(K) Any event or action that would, in the absence of this paragraph,
result in the release or discharge of the Guarantor from the
performance or observance of any obligation, covenant or
agreement contained in this Guaranty.
(L) Any other circumstances which might otherwise constitute a legal
or equitable discharge or defense of a surety or a guarantor.
Section 2.3 Waiver by Guarantor. Provided that nothing contained in
this Section 2.3 shall relieve Lender from its
obligation to give any notice or opportunity to cure
that may be required hereunder or under the Loan
Documents, the Guarantor hereby waives:
(A) Notice of acceptance of this Guaranty.
(B) Diligence, presentment and demand for payment of the Loan and/or
the Note.
(C) Protest and notice of protest, dishonor or default to the
Guarantor or to any other party with respect to the Loan.
(D) Until such time as the Note is paid in full and the Lender has
received all other sums due under the terms of the Loan
Documents, any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution or any other claim which the
Guarantor may now or hereafter have against the Borrower or any
other person directly or contingently liable for the Loan
guaranteed hereunder, or against or with respect to the
Borrower's property (including, without limitation, property
collateralizing the Loan), arising from the existence or
performance of this Guaranty and whether or not such claim, right
or remedy arises in equity, under contract, by statute, under
common law or otherwise.
Section 2.4 Nature of Guaranty. This Guaranty is a guaranty of
payment and not of collection and the Guarantor hereby waives the right to
require that any action be brought first against the Borrower or any other
Guarantor, or any security, or to require that resort be made to any security or
to any balance of any deposit account on credit on the books of the Lender in
favor of the Borrower or of any Guarantor.
Section 2.5 Continuation of Guaranty. The Guarantor further agrees
that the obligations hereunder shall continue to be effective or reinstated, as
the case may be, if at any time payment or any part thereof of the Loan or the
Note is rescinded or must otherwise be restored by the Lender upon the
bankruptcy or reorganization of the Borrower, the Guarantor or otherwise.
Section 2.6 Subordination of Debt. The Guarantor hereby
subordinates any and all indebtedness of Borrower now or hereafter owed to
Guarantor to all indebtedness of Borrower to Lender and agrees with Lender that
from and after, but only from and after, the date
4
<PAGE> 5
whereon Lender notifies Guarantor that Borrower is then in default under the
Note or one or more of the Loan Documents, Guarantor shall not demand or accept
any payment from Borrower, shall not claim any offset or other reduction of
Guarantor's obligations hereunder because of any such indebtedness and shall not
take any action to obtain any interest in any of the security described in and
encumbered by the Loan Documents; provided, however, that, if Lender so
requests, such indebtedness shall be collected, enforced and received by
Guarantor as trustee for Lender and paid over to Lender on account of the
indebtedness of Borrower to Lender, but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty
except to the extent the principal amount of such outstanding indebtedness shall
have been reduced by such payment.
Section 2.7 Financial Statements. Guarantor will advise Lender in
writing if Guarantor operates on other than a calendar-year basis. Guarantor
will at all times keep proper books of record and account in which full, true
and correct entries shall be made in accordance with generally accepted
accounting principles and will deliver to Lender, within one hundred twenty
(120) days after the end of each fiscal year of Guarantor, a copy of the annual
financial statements of Guarantor relating to such fiscal year, such statements
to include (A) the balance sheet of Guarantor as at the end of such fiscal year
and (B) the related income statement and statement of changes in the financial
position of Guarantor for such fiscal year, prepared by such certified public
accountants as may be reasonably satisfactory to Lender. Guarantor also agrees
to deliver to Lender from time to time at the request of Lender, such other
financial information with respect to Guarantor as Lender may reasonably
request. Guarantor shall be deemed to have satisfied its obligation with respect
to Financial Statements by providing copies of all publicly filed Financial
Statements.
Section 2.8 Transfer of Interest. Except as permitted in Section 23
of the Mortgage and Security Agreement dated the date hereof from Borrower to
Lender., Guarantor agrees not to make or permit to be made, by voluntary or
involuntary means, any transfer of the interest of Guarantor in the Borrower,
without first obtaining the prior written consent of Lender.
ARTICLE 3
EVENTS OF DEFAULT
Section 3.1 Events of Default Defined. An "Event of Default" shall
exist if any of the following occurs:
(A) Any party named as a Guarantor fails to perform or observe any
covenant contained herein and the continuance of such failure for
a period of thirty (30) days after written notice thereof from
Lender unless such failure cannot reasonably be cured in thirty
(30) days in which case Guarantor shall commence to cure such
failure within such thirty (30) day period and shall thereafter
prosecute the same with due diligence.
5
<PAGE> 6
(B) Any warranty, representation or other statement by or on behalf
of any party named as a Guarantor contained in this Guaranty is
false or misleading in any material respect when made.
(C) A receiver, liquidator or trustee of any party named as a
Guarantor or any of his or its property is appointed by court
order, or any party named as a Guarantor is adjudicated bankrupt
or insolvent or any of his or its property is sequestered by
court order and such order remains in effect for more than thirty
(30) days, or a petition is filed against any party named as a
Guarantor under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law
of any jurisdiction, whether now or hereafter in effect, and is
not dismissed within ninety (90) days of such filing.
(D) Any party named as a Guarantor files a petition in voluntary
bankruptcy or seeks relief under any provision of any
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now
or hereafter in effect, or consents to the filing of any petition
against it under any such law.
(E) Any party named as a Guarantor makes an assignment for the
benefit of creditors or admits in writing inability to pay debts
generally as they become due, or consents to the appointment of a
receiver, trustee or liquidator of all or any part of his or its
property.
(F) The occurrence of an "event of default" under any other Loan
Document and the continuance thereof beyond any applicable notice
and/or cure period, provided a copy is sent to Guarantor.
Section 3.2 Remedies on Default. If an event of default exists,
Lender may proceed to enforce the provisions hereof and to exercise any other
rights, powers and remedies available to the Lender.
Section 3.3 Waiver and Notice.
(A) No remedy herein conferred upon or reserved to the Lender is
intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under this
Guaranty now or hereafter existing at law or in equity or by
statute.
(B) No delay or omission to exercise any right or power accruing upon
the occurrence of any Event of Default shall impair any such
right or power or shall be construed to be a waiver thereof, but
any such right or power may be exercised from time to time and as
often as may be deemed expedient.
6
<PAGE> 7
(C) In order to entitle the Lender to exercise any remedy reserved to
it in this Guaranty, it shall not be necessary to give any
notice, other than such notice as may be expressly required in
this Guaranty.
(D) No waiver, amendment, release or modification of this Guaranty
shall be established by conduct, custom or course of dealing.
ARTICLE 4
MISCELLANEOUS
Section 4.1 Construction. If this Guaranty is executed by two or
more parties, they shall be jointly and severally liable hereunder and the
phrase Guarantor whenever used herein shall be construed to refer to each of the
parties in the same manner and with the same effect as if each party had signed
a separate guaranty.
Section 4.2 Governing Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New York.
Section 4.3 Submission to Jurisdiction. The Guarantor hereby
irrevocably and unconditionally agrees that any suit, action or proceeding
arising out of or relating to this Guaranty shall be brought in the state courts
of the State of New York or any federal district court sitting therein and
waives any right to object to jurisdiction within either of the foregoing forums
by Lender.
Section 4.4 Waiver of Jury Trial. THE GUARANTOR HEREBY EXPRESSLY
WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION, OR CAUSE OF ACTION (1) ARISING UNDER THIS GUARANTY OR ANY OTHER
INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (2) CONNECTED WITH OR RELATED TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF
THEM WITH RESPECT TO THIS GUARANTY OR ANY OTHER INSTRUMENT, DOCUMENT, OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE LOAN, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE; AND GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THE LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF GUARANTOR'S CONSENT TO THE
WAIVER OF ITS RIGHT TO TRIAL BY JURY.
Section 4.5 Successors and Assigns. This Guaranty shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
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<PAGE> 8
Section 4.6 Notices. Any notices required or permitted to be given
hereunder shall be: (i) personally delivered or (ii) given by registered or
certified mail, postage prepaid, return receipt requested, or (iii) forwarded by
a nationally recognized overnight courier service for next morning delivery, in
each instance addressed to the addresses set forth at the head of this Guaranty,
or such other addresses as the parties may for themselves designate in writing
as provided herein for the purpose of receiving notices hereunder. All notices
shall be in writing and shall be deemed given, in the case of notice by personal
delivery or overnight courier, upon tender of delivery, and in the case of mail,
three (3) business days after postmark.
Section 4.7 Entire Agreement. This Guaranty and the other documents
executed by the Guarantor in connection with the Loan (the "Guarantor
Documents") constitutes the entire understanding between the Guarantor and the
Lender and to the extent that any writings not signed by the Lender or oral
statements or conversations at any time made or had are inconsistent with the
provisions of this Guaranty, the same shall be null and void.
Section 4.8 Amendments. No amendment, change, modification,
alteration or termination of this Guaranty shall be made except upon the written
consent of the Lender.
Section 4.9 Assignment. This Guaranty is assignable by Lender in
whole or in part in conjunction with an assignment of the Note and any
assignment hereof or any transfer or assignment of the Note or portions thereof
shall operate to vest in any such assignee the rights and powers, in whole or in
part, as appropriate, herein conferred upon and granted to Lender.
Section 4.10 Partial Invalidity. The invalidity or unenforceability
of any one or more phrases, sentences, clauses or sections in this Guaranty
shall not affect the validity or enforceability of the remaining portions of the
Guaranty or any part thereof.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
day and year first above written.
ALTERRA HEALTHCARE
CORPORATION
By: |S| Mark Ohlendorf
---------------------------
Name: Mark Ohlendorf
-------------------------
Title: Senior Vice President
------------------------
8
<PAGE> 9
STATE OF Wisconsin)
) ss.:
COUNTY OF Milwaukee)
On this 13th day of January, 2000, before me, the undersigned, a Notary
Public in and for said State, personally appeared Mark Ohlendorf personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to
me that he executed the same in his capacity, and that by his signature on the
instrument, the individual, or the person upon behalf of which the individual
acted, executed the instrument.
|S| J. C. Hansen
-------------------------
Notary Public
9
<PAGE> 1
EXHIBIT 10.119
SCHEDULE OF LOAN AGREEMENTS,
PROMISSORY NOTES, AND GUARANTIES ("LOAN DOCUMENTS")
WHICH ARE SUBSTANTIALLY IN THE FORM OF KEY CORPORATE CAPITAL, INC.
LOAN DOCUMENTS ATTACHED AS EXHIBITS 10.116, 10.117 AND 10.118 TO THE
COMPANY'S FORM 10-K FOR THE PERIOD ENDING 12/31/99
<TABLE>
<CAPTION>
MORTGAGOR FACILITY NAME LOCATION MORTGAGE DATE OF
--------- ------------- -------- -------- -------
AMOUNT MORTGAGE
------ --------
<S> <C> <C> <C> <C>
Ithaca Bundy Road, LLC Alterra Clare Bridge Cottage of Ithaca 101 Bundy Road $3,325,800 3/17/99
Ithaca, NY 14850-9252
Ithaca Trumansburg Road, LLC Alterra Sterling House of Ithaca 103 Bundy Road $2,862,608 3/17/99
Ithaca, NY 14850-9252
Niagara Nash Road, LLC Alterra Sterling House of Niagara 6751 Nash Road $3,420,000 10/20/99
North Tonawanda, NY 14120
Niagara SC Wheatfield, LLC Alterra Clare Bridge Cottage of Niagara 6741 Nash Road $3,367,010 10/20/99
North Tonawanda, NY 14120
Clinton Brookside Drive, LLC Alterra Clare Bridge Cottage of Clinton 115 Brookside Drive $3,300,000 1/14/00
Clinton, NY 13323
</TABLE>
<PAGE> 1
EXHIBIT 10.120
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") made and entered into as of this
13th day of December, 1999 between ALTERRA HEALTHCARE CORPORATION, a Delaware
corporation, (the "Company"), and RDVEPCO, L.L.C., a Michigan limited liability
company ("Lender").
Recitals:
Company desires to borrow from Lender and Lender agrees to lend to
Company on the terms and conditions set forth herein the sum of Fourteen Million
Dollars ($14,000,000.00).
NOW, THEREFORE, the parties promise and agree as follows:
ARTICLE I
Definitions
In addition to terms defined elsewhere in this Agreement, the following
definitions shall apply for purposes of this Agreement:
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Business Day" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the City of Grand Rapids,
Michigan are authorized by law, regulation or executive order to remain
closed. If a payment date is not a Business Day, payment may be made on
the next succeeding day that is a Business Day.
"Collateral Real Estate" means the parcels of unimproved real
estate owned by the Company identified on Exhibit A hereto.
"Contract" means any contract, agreement, undertaking or
commitment (written or oral, formal or informal, firm or contingent) to
which the Company or any of its Subsidiaries is a party or by which the
Company, any of its Subsidiaries, or any of their respective assets are
bound, and which has current operative or executory effect.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements
<PAGE> 2
of the Financial Accounting Standards Board (or agencies with similar
functions of comparable stature and authority within the U.S.
accounting profession), which are applicable to the circumstances as
of the date of determination.
"Governmental Authority" means the United States, any state or
municipality, the government of any foreign country, any subdivision of
any of the foregoing, or any authority, department, commission, board,
bureau, agency, court, or instrumentality of any of the foregoing.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate
swap agreements, currency exchange or interest rate cap agreements and
currency exchange or interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in currency exchange or interest rates.
"Holder" means the Lender and any subsequent holder of the
Note.
"Holding" means AHC Purchaser Holding, Inc., a Delaware
corporation.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof) or banker's acceptances or representing obligations in
respect of a lease that would at such time be required to be
capitalized on a balance sheet in accordance with GAAP or the balance
deferred and unpaid of the purchase price of any property (other than
contingent or "earnout" payment obligations) or representing any
Hedging Obligations, except any such balance that constitutes an
accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not
such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the guarantee, whether or not conditional, by such
Person of any indebtedness of any other Person.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing
of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
<PAGE> 3
"Permitted Liens" means (i) Liens for taxes and assessments
or governmental charges or levies not at the time due, and (ii)
easements that do not impair or restrict the Company's or Subsidiary's
use and enjoyment of the property affected thereby.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency
or political subdivision thereof or any other entity.
"Purchaser" means AHC Purchaser, Inc., a Delaware corporation.
"Subsidiary" means any corporation, partnership, limited
partnership, limited liability company, association or other business
entity of which securities or other ownership interests representing
more than fifty percent (50%) of the ordinary voting power are, at the
time as of which any determination is being made, owned or controlled
by the Company or one or more Subsidiaries of the Company.
"SEC" means the Securities and Exchange Commission.
"Subscription and Organizational Agreement" means the
Subscription and Organizational Agreement between Company, Lender and
Holding dated as of the date of this Agreement pursuant to which, among
other things, Lender has agreed to purchase from Holding and Holding
has agreed to issue and sell to Lender an aggregate of 1,000 shares of
the Convertible Preferred Stock of Holding.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
ARTICLE II
Loan; Note; Closing; Closing Date; and Commitment Fee
2.1. Tranche A Loan; Note. On the terms and conditions set forth in
this Agreement, Lender agrees to lend to Company on the Closing Date the sum of
Fourteen Million Dollars ($14,000,000.00) in principal amount (the "Tranche A
Loan Commitment"). The Fourteen Million Dollars ($14,000,000.00) borrowed by
Company pursuant to the Tranche A Loan Commitment (the "Tranche A Loan") shall
be evidenced by a note in the form of Exhibit B hereto payable to the order of
Lender and dated the Closing Date (the "Tranche A Note"), the terms and
conditions of which, are incorporated in and made a part of this Agreement.
2.2. Tranche B Loan Commitment. Lender agrees to make a loan to
Purchaser on or before December 30, 1999 (the "Tranche B Loan") substantially on
the terms and conditions set forth in Exhibit C, hereto, subject to (i) the
Closing of the Tranche A Loan occurring, (ii) no
<PAGE> 4
Default or Event of Default having occurred with respect to the Tranche A Loan,
(iii) GMAC shall be diligently pursuing completion of the Proposed GMAC
Financing, to the reasonable satisfaction of Lender and (iv) documentation of
the Tranche B Loan in form and substance reasonably satisfactory to Lender and
its counsel.
2.3. Closing; Closing Date. The closing of the Tranche A Loan (the
"Closing") shall occur at 10:00 a.m. at the offices of Company on or before
December 15, 1999 or such other time and place as the parties may agree in
writing (the "Closing Date") upon satisfaction of the terms and conditions to
Lender's obligations as set forth in Article IV, below.
2.4. Fees. On or before the Closing, the Company agrees to pay to the
Lender the following fees; (i) a Seventy Thousand Dollar ($70,000.00) loan fee
with respect to the Tranche A Loan, and (ii) on behalf of Purchaser One Hundred
and Fifty Thousand Dollar ($150,000.00) commitment fee with respect to the
Tranche B Loan. Neither of such fees shall be prorated in the event of
prepayment of the related loan and the commitment fee with respect to the
Tranche B Loan shall be deemed fully earned when paid and shall not be
non-refundable under any circumstances. If not paid prior to the Closing,
Company agrees that Lender may deduct such fees from the proceeds of the Tranche
A Loan and remit to Company the amount of the Tranche A Loan net of such fees.
ARTICLE III
Terms of Tranche A Loan and Note
3.1. Interest Rate; Payment; Usury.
(a) Provided that no Event of Default has occurred and is
continuing and subject to the other provisions of this Agreement (i)
during the period from and including the Closing Date to, but not
including, the third month anniversary of the Closing Date, the Tranche
A Loan shall bear interest at the rate of eight percent (8%) per annum;
(ii) from and including the third month anniversary of the Closing Date
through the sixth month anniversary of the Closing Date, the Tranche A
Loan shall bear interest at the rate of nine percent (9%) per annum;
and (iii) during each monthly period (or portion thereof) from and
after sixth month anniversary of the Closing Date until the principal
and all accrued interest on the Tranche A Loan have been paid, the
Tranche A Loan shall bear interest at a rate that is fifty basis points
(.5 of 1%) higher than the rate in effect immediately prior to the
commencement of such monthly period. During any period that an Event of
Default shall have occurred and be continuing, interest on the Tranche
A Loan shall accrue at a rate equal to the otherwise applicable
interest rate plus five hundred basis points (the "Default Interest
Rate"). Notwithstanding anything contained herein to the contrary, in
no event shall the interest rate on the Tranche A Loan, including the
Default Interest Rate, exceed the highest rate permitted by applicable
law. Interest on the Tranche A Loan, including interest at the Default
Rate, shall be based on a 360 day year and interest shall accrue and be
payable for the actual number of calendar days elapsed. Interest shall
be payable on the third month anniversary of the Closing Date and on
the
<PAGE> 5
same day of each subsequent month until the principal and all accrued
interest have been paid in full.
(b) It is the intention of the Company and Lender to conform
strictly to applicable usury laws now or hereafter in force, and any
interest payable under this Agreement or the Note shall be subject to
reduction to an amount not to exceed the maximum non-usurious amount
for commercial loans allowed under such applicable usury laws as now or
hereafter construed by the courts having jurisdiction over such
matters. In the event such interest (whether designated as interest,
service charges, points, or otherwise) does exceed the maximum legal
rate, it shall be (i) canceled automatically to the extent that such
interest exceeds the maximum legal rate; (ii) if already paid, at the
option of the Holder, either be rebated to the Company or credited on
the principal amount of the Tranche A Loan; or (iii) if the Tranche A
Loan has been prepaid in full, then such excess shall be rebated to the
Company. It is further agreed, without limitation of the foregoing,
that all calculations of the rate of interest contracted for, charged,
or received under this Agreement and the Note that are made for the
purpose of determining whether such rate exceeds the maximum legal
rate, shall be made, to the extent permitted by applicable law, by
amortizing, prorating, allocating, and spreading throughout the full
stated term of the Tranche A Loan (and any extensions of the term
thereof that may be hereafter granted) all such interest at any time
contracted for, charged, or received from the Company or otherwise by
the Holder so that the rate of interest on account of the Tranche A
Loan, as so calculated is uniform throughout the term thereof. If the
Company is exempt or hereafter becomes exempt from applicable usury
statutes or for any other reason the rate of interest to be charged on
the Tranche A Loan is not limited by law, none of the provisions of
this paragraph shall be construed so as to limit or reduce the interest
or other consideration payable under this Agreement or the Note or
under the instrument securing payment thereof. The terms and provisions
of this paragraph shall control and supersede every other provision of
all agreements between the parties hereto.
3.2. Maturity. Unless the same shall become due earlier as a result of
acceleration of the maturity, the Tranche A Loan shall mature on the first
anniversary of the Closing Date at which time the outstanding principal balance
of the Tranche A Loan and all accrued and unpaid interest shall become due and
payable.
3.3. Prepayments. The Company may from time to time prepay the Tranche
A Loan, in whole or in part, at any time. Any partial prepayment shall be
applied first to interest which is accrued and unpaid and then to principal.
3.4. Manner of Payment. The Company shall make payments in respect of
the Tranche A Loan (including principal and interest) by wire transfer of
immediately available funds to the account specified by the Holder.
<PAGE> 6
3.5. Events of Default. Each of the following constitutes an
"Event of Default":
(i) default for five (5) days in the payment when due of
interest on the Tranche A Loan;
(ii) default in payment when due of the principal of the
Tranche A Loan;
(iii) failure by the Company for 15 days after notice from the
Holder to comply with the provisions described under Article VI hereof;
provided, however, if the curing of such failure may not reasonably be
accomplished within such time frame, the Company shall have such
additional time as is necessary to effect such cure (not to exceed 30
days);
(iv) failure by the Company for 30 days after notice from the
Holder to comply with any of its other covenants or agreements in this
Agreement or the Note; provided, however, if the curing of such failure
may not reasonably be accomplished within such time frame, the Company
shall have such additional time as is necessary to effect such cure
(not to exceed 60 days);
(v) any of the representations or warranties of the Company
set forth in this Agreement or incorporated herein by reference or set
forth in any statement or schedule delivered pursuant to this Agreement
was untrue or incorrect in any material respect as of the date of
execution of this Agreement or as of the Closing Date as if made on
such date;
(vi) default by the Company or any of its Subsidiaries under
any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness of the
Company or any of its Subsidiaries, whether such Indebtedness now
exists, or is created after the date hereof, which default results in
the acceleration of such Indebtedness prior to its express maturity and
the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $5,000,000 or more;
(vii) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $1,000,000, which judgments
are not paid, discharged or stayed for a period of 45 days;
(viii) the Company or any of its Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
<PAGE> 7
(c) consents to the appointment of a custodian of it
or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become
due; or
(ix) a court of competent jurisdiction enters an order or
decree in an involuntary case or proceeding under any Bankruptcy Law
that:
(a) is for relief against the Company or any of its
Subsidiaries;
(b) appoints a custodian of the Company or any of its
Subsidiaries or for all or substantially all of the property
of the Company or any of its Subsidiaries; or
(c) orders the liquidation of the Company or any of
its Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days.
3.6. Acceleration.
(a) Declaration of Acceleration. If any Event of Default
occurs and is continuing, the Holder may, upon notice to the Company,
declare the Tranche A Loan to be due and payable immediately; and upon
any such declaration all principal and interest on the Tranche A Loan
shall become immediately due and payable; provided, however, in the
case of an Event of Default arising from certain events of bankruptcy
or insolvency described in clauses (viii) and (ix) of Section 3.5
hereof, with respect to the Company or any Subsidiary, the Tranche A
Loan shall ipso facto become due and payable without further action or
notice on the part of the Holder.
(b) Rescission. At any time after a declaration of
acceleration with respect to the Tranche A Loan, the Holder may, in its
sole discretion, rescind and cancel such declaration and its
consequences. No such rescission shall affect any subsequent Default or
impair any right with respect thereto.
3.7. Other Remedies. If an Event of Default occurs and is continuing,
the Holder may pursue any available remedy to collect the payment of principal
and interest (including interest at the Default Interest Rate) on the Tranche A
Loan or to enforce the performance of any provision of the Note or this
Agreement. A delay or omission by the Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
<PAGE> 8
3.8. Waiver Of Past Defaults. The Holder may waive any existing Default
or Event of Default and its consequences under this Agreement. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Agreement; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
3.9. Priorities. Any sums collected by the Holder hereunder and under
the Note shall be applied first to all costs and expenses of collection,
including reasonable attorneys' fees, then to accrued and unpaid interest
(including at the Default Interest Rate to the extent applicable) and then to
principal.
ARTICLE IV
Conditions to Lender's Obligations
4.1. Conditions. Lender's obligation to make the Tranche A Loan shall
be subject to the prior satisfaction of the following conditions, except to the
extent waived by Lender in writing:
(a) Company shall have paid to the Lender the loan fee with
respect to the Tranche A Loan and the commitment fee with respect to
the Tranche B Loan required pursuant to Section 2.4, above, and shall
have reimbursed Lender for the fees and expenses for which Company is
liable pursuant to the terms of Section 7.4, below, to the extent
documented to Company as of the Closing.
(b) With respect to the Collateral Real Estate:
(i) Company shall have provided evidence reasonably
satisfactory to Lender that the purchase price paid by the
Company for the Collateral Real Estate aggregated not less
than Eleven Million Dollars ($11,000,000.00);
(ii) none of the parcels shall be subject to any Lien
unacceptable to Lender;
(iii) Lender shall have received the commitment for
the issuance by Chicago Title & Trust Company of an ALTA
lender's policy of title insurance (without standard
exceptions and with such endorsement as directed by Lender)
with respect to each parcel (collectively, the "Title
Commitments") and
(iv) Company shall have executed and caused to be
duly recorded mortgages in favor of Lender in forms reasonably
acceptable to Lender and its counsel encumbering each and have
shall provided evidence thereof to Lender.
(c) Holding shall have performed its obligations to issue and
sell shares of its convertible preferred stock to Lender pursuant to
the Subscription and Organizational Agreement.
<PAGE> 9
(d) Holding shall have guaranteed the Tranche A Loan in form
and substance satisfactory to Lender and its counsel and shall have
pledged to Lender as collateral security for the performance of its
obligations pursuant to such guaranty all of the issued and outstanding
shares of Purchaser in form and substance satisfactory to Lender and
its counsel.
(e) Company shall have entered into an agreement with
Meditrust Acquisition Company LLC, New Meditrust Company LLC and T and
F Properties, LP to purchase certain assisted living and dementia care
residences for an aggregate price of approximately $59.1 million in
form and substance reasonably satisfactory to Lender and its counsel
(the "Meditrust Agreement"), and the rights of "purchaser" under such
Meditrust Agreement shall have been assigned to Purchaser.
(f) Lender shall have received an opinion of Rogers & Hardin,
counsel to Company and Holding, in form and substance acceptable to the
Lender and its counsel.
(g) Each of the representations and warranties of the Company
set forth in this Agreement or incorporated herein by reference or set
forth in any statement or schedule delivered pursuant to this Agreement
are true and correct in all material respects as of the date of
execution of this Agreement and as of the date of the Closing Date as
if made on such date;
(h) The Company shall not be in default with respect to any of
its covenants and agreements set forth in Article VI of this Agreement
or set forth elsewhere in this Agreement;
(i) No Default or Event of Default shall have occurred and be
continuing;
(j) Lender shall have received a copy of the Company's
executed term sheet with GMAC Commercial Mortgage ("GMAC") relating to
mortgage financing for the purchase of 19 assisted living residences,
as described therein (such financing, the "Proposed GMAC Financing").
4.2. Waiver; Termination. Lender may waive in writing any of the
conditions to its obligations set forth in Section 4.1 in its sole discretion.
If the conditions to Lender's obligations set forth in Section 4.1, shall not
have been satisfied or waived by Lender on or before December 30, 1999, Lender
may, in its sole discretion, terminate this Agreement without any liability on
the part of the Lender to any other Person.
<PAGE> 10
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company. In order to induce
the Lender to enter into this Agreement, the Company represents and warrants to
the Lender, which representation and warranties shall survive the Closing and be
independent of any investigation or lack of investigation of Company made by or
on behalf of Lender, as follows:
(a) Organization and Standing; Issued and Outstanding Shares.
Each of the Company, Holding and Purchaser is duly incorporated and
validly existing under the laws of the State of Delaware, and has all
requisite corporate power and authority to own or lease its properties
and assets and to conduct its business as it has been and is proposed
to be conducted. Each of the Company, Holding and Purchaser is
qualified to do business and in good standing in each jurisdiction in
which the failure to so qualify could have a material adverse effect
upon its assets, properties, liabilities, financial condition, results
of operations or business. Purchaser has no Subsidiaries and Holding
has no Subsidiaries other than Purchaser. The Certificate of
Incorporation of each of Holding and Purchaser is in the form
previously provided to Lender and the issued and outstanding capital
stock of each is as set forth in Schedule 5.1(a).
(b) Indebtedness and Contracts of Holding and Purchaser.
Except for the Subscription and Organizational Agreement, the Meditrust
Agreement, such Contracts or Indebtedness as are contemplated hereby or
thereby as set forth on Schedule 5.1(b), neither Holding nor Purchaser
has any Indebtedness or is a party to any Contracts (whether formal or
informal, written or oral, firm or contingent).
(c) Capacity of the Company; Consents; Execution of
Agreements. The Company has the requisite power, authority, and
capacity to enter into this Agreement, the Subscription and
Organizational Agreement and the agreements contemplated hereby and
thereby and to perform the transactions and obligations to be performed
by the Company hereunder and thereunder. Except as described on
Schedule 5.1(c) hereto, no consent, authorization, approval, license,
permit or order of, or filing with, any Person or Governmental
Authority is required in connection with the execution and delivery of
this Agreement, the Subscription and Organizational Agreement and
agreements contemplated thereby, or the performance by the Company of
the transactions and obligations to be performed by it hereunder and
thereunder, except as contemplated by said agreements. The failure to
obtain any of the consents described on Schedule 5.1(c) prior to the
Closing Date will not have a material adverse effect upon the Company's
assets, properties, liabilities, financial condition, results of
operations or business. The execution and delivery of this Agreement,
the Subscription and Organizational Agreement and agreements
contemplated thereby by the Company, and the performance of the
transactions and obligations contemplated hereby and thereby by the
Company have been duly authorized by all requisite action of the
Company and Holding, as applicable. This Agreement has been, and the
Subscription and Organizational Agreement and agreements contemplated
thereby will be, duly executed
<PAGE> 11
and delivered by a duly authorized officer of the Company and
constitutes, or when executed and delivered will constitute, a valid
and legally binding agreement of the Company, enforceable in accordance
with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws, both state and federal, affecting the enforcement of creditors'
rights or remedies in general from time to time in effect and the
exercise by courts of equity powers or their application of principles
of public policy.
(d) Status of Note. The Note to be issued hereunder, when
issued by the Company to the Lender pursuant to the terms of this
Agreement, will be duly authorized and validly issued.
(e) Conflicts; Defaults. The execution and delivery of this
Agreement, the Subscription and Organizational Agreement and agreements
contemplated thereby by the Company, the execution by Company of the
Meditrust Agreement and the execution by Holding of a guaranty of the
Tranche A Loan and a pledge of the shares of Purchaser to secure such
guaranty, and the performance by the Company and Purchaser of the
transactions and obligations contemplated hereby and thereby to be
performed by each will not (i) violate, conflict with, or constitute a
default under any of the terms or provisions of its certificate of
incorporation or bylaws, or any provisions of, or result in the
acceleration of any obligation under, any Contract, note, debt
instrument, security agreement, or other instrument to which the
Company, Purchaser or any other Subsidiary is a party or by which the
Company, Purchaser or any other Subsidiary or any of their respective
assets is bound; (ii) result in the creation or imposition of any Liens
or claims upon the assets of the Company, Purchaser or any other
Subsidiary or their issued and outstanding capital stock (except as
contemplated by this Agreement); (iii) constitute a violation of any
law, statute, judgment, decree, order, rule, or regulation of a
Governmental Authority applicable to the Company, Purchaser or any
other Subsidiary; or (iv) constitute an event which, after notice or
lapse of time or both, would result in any of the foregoing. The
Company is not presently in violation of any provision of its
certificate of incorporation or bylaws. Neither the Company nor any
Subsidiary is presently in default in any material respect under any of
the terms or provisions of any of its material Contracts, notes, debt
instruments, security agreements, or other instruments, or any order,
judgment, or decree relating to it or its business or by which it or
any of its assets is bound.
(f) Periodic Reports. The Company has timely filed with the
SEC all periodic reports heretofore required to be filed by it pursuant
to the 1934 Act and all such periodic reports (including the financial
statements or information forming a part thereof) are complete and
comply, in all material respects, with the requirements of the SEC
applicable to such periodic reports and financial statements.
(g) Compliance with Laws. The Company is not in violation of,
nor do any of its operations violate in any respect, any statute, law,
or regulation of any Governmental Authority applicable to the Company,
any of its assets, or the conduct of its business
<PAGE> 12
("Applicable Laws"), the violation of which reasonably could be
anticipated to have a material adverse effect upon the Company's
assets, properties, liabilities, financial condition, results of
operations or business, and no material expenditures are or, based on
present requirements, will be required of the Company in order for it
to comply or remain in compliance with any Applicable Laws.
(h) Litigation. The Company is not a party to any material
legal action, suit, claim, investigation or proceeding which is not
adequately described in a periodic report heretofore filed by the
Company with the SEC and, to the best of the Company's knowledge and
belief after due inquiry, there exist no facts or circumstances which
reasonably could be anticipated to result in any such action, suit,
claim, investigation, or proceeding.
(i) Taxes. The Company has prepared and duly and timely filed
with each appropriate Governmental Authority, all material federal,
state, municipal, local and foreign tax returns, information returns
and other reports required to be filed on or before the date of this
Agreement and has paid all material taxes required to be paid by the
Company prior to the date of this Agreement in respect of the periods
covered by such returns and reports, except such taxes as are being
contested in good faith.
(j) Environmental Compliance. The Company and its Subsidiaries
are in compliance with all applicable federal, state and local laws and
requirements (including permit requirements) relating to the protection
of health or the environment in connection with the ownership,
operation and condition of its properties and business, except where
failure to comply would not have material adverse effect.
(k) Securities Laws. No consent, authorization, approval,
permit, or order of or filing with any Governmental Authority is
required in order for the Company to execute and deliver this Agreement
or to offer, issue, sell, or deliver the Note. Based in part on the
representations of the Lender and under the circumstances contemplated
hereby and under current laws and regulations, the offer, issuance,
sale and delivery of the Note to the Lender is exempt from the
prospectus delivery and registration requirements of the 1933 Act.
(l) Hedging Obligations. Company and its Subsidiaries do not
have any outstanding Hedging Obligations except to the extent entered
into pursuant to and in compliance with any credit agreements to which
they may be a party.
(m) Disclosure. The Company has fully responded to all written
requests for information and has accurately answered, to the best of
the Company's knowledge and belief after due inquiry, all written
questions from the Lender concerning the assets, properties,
liabilities, financial condition, results of operations, business and
prospects of the Company, and has not knowingly withheld any facts
relating thereto which it reasonably believed to be material with
respect to the assets, properties, liabilities, financial condition,
results of operations, business or prospects of the Company. No
<PAGE> 13
information in this Agreement, or in any Schedule or Exhibit attached
to this Agreement or delivered to Lender in connection herewith,
contains any untrue statement of a material fact or when considered
together with all such information delivered to the Lender omits to
state any material fact necessary in order to make the statements made
in the light of the circumstances under which they were made, when
taken as a whole, not misleading. The disclosures made in writing by
the Company in connection with this Agreement do not contain any untrue
statement of a material fact nor omit to state a material fact
necessary to make the statements made therein not misleading. There is
no fact or circumstance relating to the Company which materially and
adversely affects or in the future may, in the reasonable business
judgment of the Company, be expected materially and adversely to affect
the same which has not been set forth in this Agreement or the
Schedules hereto.
(n) Changes in Circumstances. Since September 30, 1999, the
Company has not suffered any material adverse change in its assets,
properties, liabilities, financial condition, results of operations,
business or prospects except for (i) the previously announced charge to
be incurred in the fourth quarter of 1999 (the amount of which charge
has not yet been determined or disclosed) and (ii) the effect on future
periods of the Company's announced reduction in future new development
activities.
(o) Contracts. Except for this Agreement, the Subscription and
Organizational Agreement and the agreements contemplated hereby and
thereby, the Company has filed all material contracts required to be
filed by Item 601(b)(10) of Regulation S-K under the 1933 Act and the
1934 Act.
5.2 Representations and Warranties of the Lender. The Lender
represents and warrants to the Company that:
(a) Investment Intent. The Note is being acquired for its own
account and not with the view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the 1933
Act. The Lender understands that the Note has not been registered under
the 1933 Act by reason of its issuance in a transaction exempt from the
registration and prospectus delivery requirements of the 1933 Act
pursuant to Section 4(2) thereof. It further understands that the Note
will bear the following legend and agrees that it will hold the Note
subject thereto:
THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR
ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME
IS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION
REASONABLY
<PAGE> 14
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER
THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY).
(b) Capacity of the Lender; Execution of Agreement. Lender has
all requisite power, authority, and capacity to enter into this
Agreement, and to perform the transactions and obligations to be
performed by it hereunder. This Agreement has been duly authorized,
executed and delivered by it and constitutes its valid and legally
binding obligation, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws, both state and
federal, affecting the enforcement of creditors' rights or remedies in
general from time to time in effect and the exercise by courts of
equity powers or their application of principles of public policy.
(c) Accredited Investor. The Lender and each member of Lender
is an "accredited investor" as defined in Rule 501 (a) of Regulation D
promulgated under the 1933 Act.
ARTICLE VI
Covenants and Agreements
6.1. Affirmative Covenants. So long as any Indebtedness remains
outstanding under this Agreement and the Note, the Company covenants and agrees
that it will and will cause each Subsidiary to:
(a) Certain Information and SEC Reports. Furnish to Lender in
form and substance satisfactory to Lender:
(i) within five (5) days after the Company learns of
the commencement or overtly threatened commencement of any
material claim or suit, legal or equitable, or of any
administrative, arbitration, or other similar proceeding
against the Company or any of its Subsidiaries, or any of
their respective businesses, assets, or properties which claim
or proceeding, if determined adversely to the Company or such
Subsidiary, would be likely to have a material adverse effect
on the Company and its Subsidiaries, taken as a whole, written
notice of the nature and extent of such suit or proceeding;
(ii) within five (5) days after the Company learns of
any circumstance or event which reasonably can be expected to
have a material adverse effect on the assets, properties,
liabilities, financial condition, results of operations,
business, or prospects of the Company, written notice of the
nature and extent of such circumstance or event;
<PAGE> 15
(iii) simultaneous with the transmission thereof to
Company's shareholders, copies of (or notice from an EDGAR
watch service of) all financial statements, proxy statements,
reports and any other general written communications which the
Company sends to its shareholders and copies (or notice from
an EDGAR watch service of) of all registration statements and
all regular, special or periodic reports which it files with
the SEC or with any securities exchange on which any of its
securities are then listed, and copies of all press releases
and other statements made available generally by the Company
to the public concerning material developments in the
Company's businesses; and
(vii) within ten (10) days after the Holder makes a
reasonable request therefor, such other data relating to the
business, affairs and financial condition of the Company or
any of its Subsidiaries.
(b) Taxes. Pay and discharge all taxes and other governmental
charges before the same shall become overdue, unless and to the extent
only that such payment is being contested in good faith.
(c) Insurance. Maintain insurance coverage on its physical
assets and against other business risks in such amounts and of such
types as are customarily carried by companies similar in size and
nature, and in the event of acquisition of additional property, real or
personal, or of incurrence of additional risks of any nature, increase
such insurance coverage in such manner and to such extent as prudent
business judgment and present practice would dictate.
(d) Examination of Books. Permit the Lender, through its
authorized attorneys, accountants and representatives, to examine the
Company's books, accounts, records, ledgers and assets of every kind
and description at all reasonable times upon oral or written request of
the Lender, at the Company's cost and expense (provided that so long as
the Company shall not be in default, the Company shall be obligated to
pay for no more than one (1) such examination per year).
(e) Notification of Events of Default, Acceleration or
Material Adverse Effect. Promptly notify the Lender of any condition or
event which constitutes, or with the passage of time and/or the giving
of notice would constitute, an Event of Default under this Agreement or
of any acceleration of the maturity of any Indebtedness aggregating $5
million or more of the Company, and promptly inform Lender of the
existence or occurrence of any condition or event (other than
conditions having an effect on the economy in general) which could
reasonably be anticipated to have a material adverse effect upon the
Company's financial condition.
(f) Maintenance of Licenses. Maintain in good standing all
licenses required by any Governmental Authority that may be necessary
or required for the Company and its Subsidiaries to carry on their
respective businesses, where the failure to maintain such
<PAGE> 16
licenses would have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(g) ERISA Compliance. Comply with all material requirements
imposed by ERISA as presently in effect or hereafter promulgated,
including but not limited to, the minimum funding requirements of any
defined contribution employee benefit plan ("Pension Plan").
(h) Compliance with Law. Comply in all material respects with
all applicable laws, rules, regulations and orders of any Governmental
Authority, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property, including
without limitation the Collateral Real Estate, except to the extent
that compliance with any of the foregoing is then being contested in
good faith by appropriate legal proceedings and with respect to which
adequate financial reserves have been established on the books and
records of the Company and except where the failure to comply would not
have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
(i) Right of Co-Investment. Prior to issuing any equity
securities (otherwise than upon the exercise of currently outstanding
stock options or upon the conversion of currently outstanding
convertible debentures) for aggregate proceeds of in excess of $25
million at any time prior to December 31, 2000 (an "Alterra Equity
Transaction"), the Company shall use reasonable efforts to afford
Lender the opportunity to co-invest in the Alterra Equity Transaction
by converting the outstanding Indebtedness under this Agreement and the
Note into an equity investment in the Company on the terms of the
Alterra Equity Investment; provided, however, that (i) such
co-investment right must be exercised by Lender at the time of
execution of the definitive purchase agreement for the Alterra Equity
Transaction, and (ii) as a minority participant in such Alterra Equity
Transaction, Lender acknowledges that its control and voting rights may
be substantially limited (in the manner required by the principal
investor in such Alterra Equity Investment).
(j) Title Insurance. At the request of Lender, the Company
shall purchase mortgagee title insurance for the Lender pursuant to the
Title Commitments.
6.2. Negative Covenants. The Company covenants and agrees that so long
as any Indebtedness remains outstanding under this Agreement and the Note,
without the prior written consent of Lender, Company will not:
(a) No Mergers, Etc. Enter into any merger or consolidation or
sell, lease, transfer or dispose of all, substantially all, or any
material part of its assets, except in the ordinary course of its
business.
(b) Limitations on Indebtedness. Become or remain obligated, or
suffer or permit any Subsidiary to become or remain obligated, for any
Indebtedness, except:
<PAGE> 17
(i) Indebtedness arising pursuant to this Agreement;
and
(ii) other Indebtedness, whether now outstanding or
hereafter incurred, provided that the sum of all of the
Indebtedness of the Company and the Subsidiaries at any time
outstanding on a consolidated basis (excluding, however, any
Indebtedness arising as a result of acquisitions or business
combinations effected after the date of this Agreement) does
not exceed $1,850,000,000.00.
(c) Limitations on Mortgages. Create or permit to exist any
Lien on the Collateral Real Estate, other than Permitted Liens and
mortgages in favor of Lender.
ARTICLE VII
Miscellaneous
7.1. Waiver and Amendments. No failure or delay on the part of Lender
in the exercise of any power or right, and no course of dealing between Company
and Lender, shall operate as a waiver of such power or right, nor shall any
single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. Remedies provided
for herein are cumulative and not exclusive of any remedies which may be
available to the Lender at law or in equity. No notice to or demand on the
Company required hereunder or under the Note shall in any event entitle Company
to any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of Lender to any other or further action and
any circumstances without notice or demand. No amendment, modification or waiver
of, or consent with respect to, any provision of this Agreement or the Note
shall in any event be effective unless the same shall be in writing and signed
and delivered by Lender. Any waiver of any provision of this Agreement or the
Note, and any consent to any departure by Company from the terms of any
provision of this Agreement or the Note, shall be effective only in the specific
instance and for the specific purpose for which given.
7.2. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and, if mailed by prepaid
registered or certified mail, return receipt requested, shall be deemed to have
been received on the earlier of the date shown on the receipt or three (3)
Business Days after the post-mark date thereof. Notices may be given by
recognized overnight courier services and shall be deemed to have been received
as of the regularly scheduled time for delivery established by such courier
service. In addition, notices hereunder may be delivered by hand in which event
the notice shall be deemed effective when delivered or by telecopy in which case
it shall be deemed effective upon confirmation of transmission. All notices and
other communications under this Agreement shall be given to the parties hereto
at the following addresses:
<PAGE> 18
If to Company:
Alterra Healthcare Corporation
450 N. Sunnyslope Rd., Suite 300
Brookfield, WI 53005
Attention: President
Fax: (414) 789-6182
With a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia, 30303
Attn: Alan Leet, Esq.
Fax: (404) 525-2224
If to Lender:
RDVEPCO, L.L.C.
c/o RDV Corporation
126 Ottawa Avenue, N.W.
500 Grand Bank Building
Grand Rapids, Michigan 49503
Attention: President
Fax: (616) 454-4654
With a copy to:
Mr. Robert Haveman
190 River Avenue
Suite 300
Holland, Michigan 49423
Fax: (616) 494-8110
and
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, MI 49504
Attention: David M. Hecht, Esq.
Fax: (616) 776-7203
Any party hereto may change the address to which notices shall be directed under
this Section by giving written notice of such change to the other parties.
<PAGE> 19
7.3. Restriction on Transfer. The Lender acknowledges that the Note has
not been registered under the Securities Act of 1933, as amended, (the "1933
Act") or the securities laws of any state. Accordingly, the Note may not be sold
or otherwise disposed of or transferred, unless such sale, disposition or
transfer is registered under the 1933 Act and applicable state securities laws
or unless the Company has received an opinion of counsel reasonably acceptable
to the Company that such sale, disposition or transfer is exempt from such
registration. The Note shall bear a restrictive legend to the foregoing effect.
7.4. Expenses. Company shall reimburse Lender for all of its reasonable
out-of-pocket expenses incurred in the negotiation, preparation, execution and
delivery of this Agreement, the Note, the Share Purchase Agreement and, if not
consummated the Tranche B loan documentation and related matters, and all
related due diligence, including, without limitation, the expenses of legal
counsel and accountants. Company shall also reimburse Holder for all of its
out-of-pocket expenses incurred in the administration, waiver, modification and
enforcement of any of its rights under this Agreement and the Note, including,
without limitation, the reasonable expenses of legal counsel and accountants. In
addition, Company shall be responsible for any documentary taxes incurred in
connection with the transactions contemplated by this Agreement and the Note.
7.5. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction, shall as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
7.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan without giving effect to
any choice or conflict of law provision or rule (whether of the State of
Michigan or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Michigan.
7.7. Successors and Assigns. This Agreement shall be binding upon
Company and Lender and their respective successors and assigns, and shall inure
to the benefit of Company and Lender and their successors and assigns.
7.8. Headings. Headings used in this Agreement are for convenience only
and shall not be used in connection with the interpretation of any provision
hereof.
7.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute one and the same instrument.
* * * * * * * * * * * * *
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
THE COMPANY:
ALTERRA HEALTHCARE CORPORATION
By: /s/ Mark W. Ohlendorf
-----------------------------------
Name: Mark W. Ohlendorf
Title: Senior Vice President
LENDER:
RDVEPCO, L.L.C.
By: EDP Assisted Living Properties, L.L.C.,
a member
By: Elsa D. Prince Living Trust u/a dated
January 27, 1976
By: /s/ Elsa D. Prince
-----------------------------------
Elsa D. Prince, Trustee
<PAGE> 1
EXHIBIT 10.121
AHC PURCHASER HOLDING, INC.
SUBSCRIPTION AND ORGANIZATIONAL AGREEMENT
SUBSCRIPTION AND ORGANIZATIONAL AGREEMENT (the "Agreement"), dated as
of December 13, 1999, between AHC PURCHASER HOLDING, INC., a Delaware
corporation having an office at 450 North Sunnyslope Rd., Suite 300, Brookfield,
WI 53005 (the "Company"), and RDVEPCO, L.L.C., a Michigan limited liability
company having an office at c/o RDV Corporation, 126 Ottawa Avenue, N.W., 500
Grand Bank Building, Grand Rapids, MI 49503 (the "Investor"), and ALTERRA
HEALTHCARE CORPORATION, a Delaware corporation having an office at 450 North
Sunnyslope Rd., Suite 300, Brookfield, WI 53005 ("Alterra").
W I T N E S S E T H:
WHEREAS, Alterra and the Investor have caused the Company's Certificate
of Incorporation attached hereto as Exhibit A (the "Certificate") to be filed
with the Secretary of State of the State of Delaware;
WHEREAS, Alterra and Investor desire to complete the organization of
the Company;
WHEREAS, Alterra desires to subscribe for an aggregate of 1,857 shares
(the "Common Shares") of the Company's common stock, $.01 par value per share
(the "Common Stock"), pursuant to the terms and conditions hereinafter set
forth;
WHEREAS, the Investor desires to subscribe for an aggregate of 1,000
shares (the "Preferred Shares") of the Company's convertible preferred stock,
$0.01 par value (the "Preferred Stock"), which will, when issued, have a
liquidation preference of $1,000 per share and the designations, powers,
preferences, rights, qualifications, limitations and restrictions set forth in
the Certificate, pursuant to the terms and conditions hereinafter set forth; and
WHEREAS, the Common Shares and the Preferred Shares are collectively
referred to herein as the "Shares".
NOW, THEREFORE, in consideration of the premises, and the respective
representations and warranties hereinafter set forth, the Company, Alterra and
the Investor agree as follows:
1. SUBSCRIPTION
<PAGE> 2
1.1 Alterra, intending to be legally bound, hereby
irrevocably subscribes for and agrees to purchase the Common Shares, subject to
the conditions set forth in paragraph 1.3, below.
1.2 The Investor, intending to be legally bound, hereby
irrevocably subscribes for and agrees to purchase the Preferred Shares, subject
to the conditions set forth in paragraph 1.3, below.
1.3 The obligation of Alterra to purchase the Common Shares
and the obligation of the Investor to purchase the Preferred Shares is
conditioned upon the simultaneous closing of the "Tranche A Loan" pursuant to
the Loan Agreement, dated as of the date hereof, between Alterra and Investor
(the "Loan Agreement").
2. PURCHASE AND CLOSING
2.1 At the Closing (as hereinafter defined), the Company
shall issue and sell to (i) Alterra, and Alterra shall purchase from the
Company, the Common Shares; and (ii) the Investor, and the Investor shall
purchase from the Company, the Preferred Shares.
2.2 The aggregate consideration to be paid by the Investor
to the Company for the Preferred Shares (the "Preferred Purchase Price") at the
Closing shall be $1,000,000.00. The aggregate consideration to be paid by
Alterra to the Company for the Common Shares (the "Common Purchase Price") at
the Closing shall be $100.00 and the assignment to the Company of Alterra's
rights under that certain Agreement of Purchase and Sale dated as of November
30, 1999 by and between Alterra, Meditrust Acquisition Company LLC, New
Meditrust Company LLC and T and F Properties, LP (the "Purchase Agreement").
2.3 The closing of the purchase and sale of the Shares (the
"Closing") shall take place at 1:00 P.M. EST time on Monday, December 13, 1999
or on such date and at such time as the parties shall mutually select. The
Closing shall take place at the offices of the Company or at such other place or
in such other manner (including by exchange of deliverables via fax and air
courier) as the Company, Alterra and the Investor agree.
2.4 At Closing, the Company shall deliver the following to
the Investor:
(a) a certificate, in due and proper form, representing
the Preferred Shares purchased upon which a legend
substantially in the following form will be endorsed:
"THE SHARES REPRESENTED BY THIS CERTIFICATE AND THE
SHARES OF COMMON STOCK INTO WHICH THE SHARES
REPRESENTED BY THIS CERTIFICATE MANY BE CONVERTED
2
<PAGE> 3
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES
UNDER THE SECURITIES ACT OF 1933 OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE"; and
(b) a certificate of an authorized officer of the
Company confirming the accuracy as of the Closing of the
matters set forth in Section 4 of this Agreement.
2.5. At the Closing, the Company shall deliver the following
to Alterra:
(a) a certificate, in due and proper form,
representing the Common Shares purchased upon which a legend
substantially in the following form will be endorsed:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN
EXEMPTION FROM REGISTRATION IS AVAILABLE"; and
(b) a certificate of an authorized officer of the
Company confirming the accuracy as of the Closing of the
matters set forth in Section 4 of this Agreement.
2.6 At Closing, (i) the Investor shall deliver the Preferred
Purchase Price to the Company in immediately available funds by wire transfer to
a bank in the United States designated by the Company; and (ii) Alterra shall
deliver the Common Purchase Price, with the cash portion thereof to be delivered
in immediately available funds.
3
<PAGE> 4
3. REPRESENTATIONS AND ACKNOWLEDGEMENTS OF THE INVESTOR AND ALTERRA
3.1 The Investor hereby acknowledges, represents and
warrants to (which representations and will be true and correct as of the date
of the Closing as if the Agreement were made on the date of Closing), and agrees
with, the Company as follows:
(a) The Investor is acquiring the Preferred Shares
for its own account as principal, for investment
purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof, in whole or
in part;
(b) The Investor acknowledges its understanding
that the offering and sale of the Preferred Shares is
intended to be exempt from registration under the
Securities Act of 1933, as amended (the "1933 Act"), by
virtue of Section 4(2) of the 1933 Act and the
provisions of Regulation D thereunder. In furtherance
thereof, the Investor represents and warrants to and
agrees with the Company as follows:
(i) the Investor has the financial ability
to bear the economic risk of its investment, has
adequate means for providing for its current needs
and has no need for liquidity with respect to its
investment in the Company;
(ii) the Investor is a corporation, trust,
estate benefit plan, partnership or other entity
which comes within a category of "accredited
investor" as that term is defined in Rule 501(a)
of Regulation D under the 1933 Act (17 C.F.R.
230.501(a));
(c) The Investor:
(i) has had access to the Company's files
and records (including, without limitation, the
files and records of its wholly-owned subsidiary,
AHC Purchaser, Inc. ("AHC Subsidiary"))
(collectively, the "Documents") and understands
and has evaluated the risks of a purchase of the
Preferred Shares, and has relied solely on the
information contained in the Documents;
(ii) has been provided an opportunity to
obtain additional information concerning the
Company and AHC Subsidiary and has been given the
opportunity to ask questions of and receive
answers from the Company concerning the items and
conditions of this investment, and has been given
the
4
<PAGE> 5
opportunity to obtain such additional
information necessary to verify the accuracy
of the information contained in the
Documents or that which was otherwise
provided in order for the Investor to
evaluate the merits and risks of purchase of
the Preferred Shares, and has not been
furnished any other offering literature or
prospectus except as mentioned herein;
(iii) has not relied on any oral
representation or oral information in
connection with the offering of the
Preferred Shares which is not contained in
this Agreement or in the Documents; and
(iv) has determined that the
Preferred Shares are a suitable investment
and that at the time of Closing, the
Investor could bear a complete loss of its
investment.
(d) The Investor represents, warrants and
agrees that it will not sell or otherwise transfer
the Preferred Shares or the shares of the Company's
common stock into which the Preferred Shares may be
converted unless registered under the 1933 Act or in
reliance upon an exemption therefrom, and fully
understands and agrees that it must bear the economic
risk of its purchase for an indefinite period of time
because, among other reasons, the Preferred Shares or
underlying securities have not been registered under
the 1933 Act or under the securities laws of certain
states and, therefore, cannot be resold, pledged,
assigned or otherwise disposed of other than pursuant
to an exception from registration under the 1933 Act
and any other applicable securities laws.
(e) The person signing this Agreement on
behalf of Investor has been duly authorized by
Investor to do so.
(f) The execution and delivery by the
Investor of and the performance by the Investor of
its obligations under this Agreement will not
contravene any provision of applicable law or the
governing documents of the Investor or any agreement
or other instrument binding upon the Investor, or any
judgment, or decree of any governmental body, agency
or court having jurisdiction over the Investor, and
no consent approval, authorization or order of, or
qualification with, any governmental body or agency
is required for the performance by the Investor of
its obligations under this Agreement in accordance
with its terms.
5
<PAGE> 6
(g) The Investor has been duly organized, is
validly existing and is in good standing under the
laws of the State of Michigan. The Investor has full
limited liability company power and authority to
enter into this Agreement and this Agreement has been
duly and validly authorized, executed and delivered
by the Investor and constitutes the legal, valid and
binding obligations of the Investor, enforceable
against the Investor in accordance with its terms,
except as such enforcement may be limited by the laws
effecting creditors rights generally and general
equitable principles.
3.2 Alterra hereby acknowledges, represents and warrants to
(which representations and will be true and correct as of the date of the
Closing as if the Agreement were made on the date of Closing), and agrees with,
the Company as follows:
(a) Alterra is acquiring the Common Shares
for its own account as principal, for investment
purposes only, and not with a view to, or for,
resale, distribution or fractionalization thereof, in
whole or in part;
(b) Alterra acknowledges its understanding
that the offering and sale of the Shares is intended
to be exempt from registration under the 1933 Act, by
virtue of Section 4(2) of the 1933 Act and the
provisions of Regulation D thereunder. In furtherance
thereof, Alterra represents and warrants to and
agrees with the Company as follows:
(i) Alterra has the financial
ability to bear the economic risk of its
investment, has adequate means for providing
for its current needs and has no need for
liquidity with respect to its investment in
the Company;
(ii) Alterra is a corporation,
trust, estate benefit plan, partnership or
other entity which comes within a category
of "accredited investor" as that term is
defined in Rule 501(a) of Regulation D under
the 1933 Act (17 C.F.R. 230.501(a));
(c) Alterra:
(i) has had access to the Documents
and understands and has evaluated the risks
of a purchase of the Common Shares, and has
relied solely on the information contained
in the Documents;
(ii) has been provided an
opportunity to obtain additional information
concerning the Company and AHC
6
<PAGE> 7
Subsidiary and has been given the
opportunity to ask questions of and receive
answers from the Company concerning the
items and conditions of this investment, and
has been given the opportunity to obtain
such additional information necessary to
verify the accuracy of the information
contained in the Documents or that which was
otherwise provided in order for the Investor
to evaluate the merits and risks of purchase
of the Preferred Shares, and has not been
furnished any other offering literature or
prospectus except as mentioned herein;
(iii) has not relied on any oral
representation or oral information in
connection with the offering of the
Preferred Shares which is not contained in
this Agreement or in the Documents; and
(iv) has determined that the Common
Shares are a suitable investment and that at
the time of Closing, Alterra could bear a
complete loss of its investment.
(d) Alterra represents, warrants and agrees
that it will not sell or otherwise transfer the
Common Shares unless registered under the 1933 Act or
in reliance upon an exemption therefrom, and fully
understands and agrees that it must bear the economic
risk of its purchase for an indefinite period of time
because, among other reasons, the Common Shares have
not been registered under the 1933 Act or under the
securities laws of certain states and, therefore,
cannot be resold, pledged, assigned or otherwise
disposed of other than pursuant to an exception from
registration under the 1933 Act and any other
applicable securities laws.
(e) The person signing this Agreement on
behalf of Alterra has been duly authorized by Alterra
to do so.
(f) The execution and delivery by Alterra of
and the performance by Alterra of its obligations
under this Agreement will not contravene any
provision of applicable law or the governing
documents of Alterra or any agreement or other
instrument binding upon Alterra, or any judgment, or
decree of any governmental body, agency or court
having jurisdiction over the Investor, and no consent
approval, authorization or order of, or qualification
with, any governmental body or agency is required for
the performance by Alterra of its obligations under
this Agreement in accordance with its terms.
7
<PAGE> 8
(g) Alterra has been duly organized, is
validly existing and is in good standing under the
laws of the State of Delaware. Alterra has full
corporate power and authority to enter into this
Agreement and this Agreement has been duly and
validly authorized, executed and delivered by Alterra
and constitutes the legal, valid and binding
obligations of Alterra, enforceable against Alterra
in accordance with its terms, except as such
enforcement may be limited by the laws effecting
creditors rights generally and general equitable
principles.
3.3 Alterra and the Investor hereby acknowledge that they
have directed and caused the Certificate to be filed with the Secretary of State
of the State of Delaware and they have reviewed, and do hereby acknowledge their
approval of, the other organizational documents of the Company (together with
the Agreement, the "Organizational Documents") consisting of the Organizational
Minutes of the Company's Board of Directors attached hereto as Exhibit B, the
Company's Bylaws attached hereto as Exhibit C and the forms of the certificate
for each of the Common Stock and the Preferred Stock attached hereto as Exhibits
D-1 and D-2, respectively.
4. COMPANY REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company hereby acknowledges, represents and warrants to, and agrees
with the Investor and Alterra (which representations and will be true and
correct as of the date of the Closing as if the Agreement were made on the date
of Closing) as follows:
4.1 The Company is validly existing and is in good standing
under the laws of the State of Delaware. As a result of the execution or
approval of the Organizational Documents by the Company or the other signatories
thereto (as the case may be), the Company has full corporate power and authority
to enter into this Agreement and this Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement may be limited by laws
effecting creditors rights generally and general equitable principles. The sole
business of the Company is to serve as the parent company of AHC Subsidiary, and
the Company shall not engage in any business or activity other than (i) the
transactions contemplated by this Agreement, the Loan Agreement and by such
other agreements as may be contemplated thereby and (ii) serving as the parent
company of AHC Subsidiary. Immediately after the Closing, the Company shall
assign its rights under the Purchase Agreement to AHC Subsidiary in connection
with the initial capitalization thereof.
4.2 The execution and delivery by the Company of, and the
performance by the Company of its obligations under this Agreement in accordance
with the terms of this Agreement will not (a) contravene any provision of
applicable law or the charter documents or by-laws of the Company or any
agreement or other instrumental body, agency or court
8
<PAGE> 9
having jurisdiction over the Company, or (b) give any third party rights to
acquire capital stock of the Company. No filing (except for such filings as may
be required under applicable state and federal securities laws), notice,
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under this Agreement in accordance with the terms of this
Agreement.
4.3 The Documents do not, and through the date of the
Closing will not, contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.4 All of the Common Shares and the Preferred Shares have
been duly authorized and, when issued in accordance herewith, shall be validly
issued, fully paid, non-assessable and free of preemptive or similar rights. The
Company does not have any class of authorized stock other than Common Stock and
Preferred Stock. Except for Alterra with respect to the Common Shares and the
Investors with respect to the Preferred Shares (including the Common Stock
issuable upon the conversion thereof pursuant to the Certificate), no person has
any right to receive any additional shares of capital stock of the Company. In
addition, the shares of Common Stock issuable upon the conversion of the
Preferred Shares, when issued as provided in the Certificate shall be validly
issued and fully paid and non-assessable, and such shares shall not be subject
to any preemptive or similar rights.
4.5 The Company is not in violation of its charter or bylaws
and is not in default in the performance of any bond, debenture, note or any
other evidence of indebtedness or any indenture, mortgage, deed of trust,
license, contract, lease or other instrument to which the Company is a party or
by which it is bound, or to which any of the property or assets of the Company
is subject, except such as have been waived or which would not have, singly or
in the aggregate, a material adverse effect on the company, taken as a whole.
4.6 There is no litigation or governmental proceeding
pending, or to the knowledge of the Company, threatened against, or involving
the property or the business of the Company, or, to the best knowledge of the
Company which would adversely affect the condition (financial or otherwise),
business, prospects or results of operations of the Company, taken as a whole.
4.7 Except as set forth in the Certificate, there is no
existing option, warrant, call, right, commitment or other agreement of any
character to which the Company is a party requiring, and there are no securities
of the Company outstanding which upon conversion or exchange would require the
issuance, sale or transfer of any additional shares of capital stock
9
<PAGE> 10
or other equity securities of the Company or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase shares of
capital stock or other equity securities of the Company. The Company is not a
party to any voting trust or other voting agreement with respect to any of the
shares of the Common Stock or to any agreement relating to the issuance, sale,
redemption, transfer or other disposition of the capital stock of the Company,
except as set forth in the Certificate.
4.8 The Company at all times will keep sufficient shares of
its Common Stock available for issuance upon the conversion of the Preferred
Stock.
4.9 The foregoing representations, warranties and agreements
shall survive the Closing.
5. PREFERRED STOCK PUT OPTION
5.1 Alterra hereby grants to Investor the right to sell to
Alterra all, but not less than all, of the Preferred Shares to be purchased by
Investor pursuant to this Agreement pursuant to the terms and conditions set
forth herein (the "Put Option"). The Put Option shall be exercisable by the
Investor (assuming that the Preferred Shares have not previously been redeemed
by the Company in accordance with the Certificate) at any time from and after
March 1, 2000 if and only if AHC Subsidiary shall not have closed on the
acquisition of assisted living and (Alzheimer's care residences having an
aggregate purchase price of in excess of $30 million pursuant to the Purchase
Agreement. The Put Option shall be exercised by written notice from the Investor
to Alterra at any time from and after March 1, 2000.
5.2 The purchase price for each of the Preferred Shares
payable upon the exercise of the Put Option shall be equal to the sum of (i)
$1,000 (the liquidation preference per Preferred Share), (ii) any accrued and
unpaid dividends thereon (whether or not declared) at the time that the Put
Option is exercised and (iii) an escalating amount equal to $1,500 if the Put
Option is exercised at any time on or before March 31, 2000, which amount shall
increase by $300 per month thereafter (commencing with April 2000) through the
date that such Put Option is exercised. The repurchase of the Preferred Shares
pursuant to the exercise of the Put Option shall be closed ten (10) business
days following the exercise of the Put Option at the principal executive offices
of Alterra at 1:00 p.m. Milwaukee time unless the parties shall designate a
different date, time and place for such closing. At such closing: (i) Investor
shall deliver to Alterra an instrument evidencing the transfer of all of the
Preferred Shares, free and clear of all security interest, liens and
restrictions, together with such other documents as Alterra may reasonably
request in connection therewith; and (ii) Alterra shall deliver to Investor, by
bank wire transfer to an account designated by Investor, payment of the purchase
price payable pursuant to this Section 5.2, together with such other documents
as Investor may reasonably request.
10
<PAGE> 11
6. MISCELLANEOUS
6.1 Complete Agreement; Modification of Agreement. The
Agreement constitutes the complete agreement between the parties with respect to
the subject matter hereof and may not be modified, altered or amended excepted
by an agreement in writing signed by company and Investor.
6.2 Waiver of Jury Trial. THE PARTIES HERETO WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER THE LOAN DOCUMENTS.
6.3 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provision of this Agreement.
6.4 Parties. This Agreement shall be binding upon, and inure
to the benefit of, the successors of Company, Alterra and the Investor.
6.5 Governing Law. Except as to matters of internal
corporate law, which shall be governed by the general corporation law of
Delaware, in all other respects, including all matters of construction, validity
and performance, this Agreement and the obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Michigan applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, and any
applicable laws of the United States of America.
6.6 Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by another, or whenever any of the parties desires to give or
serve upon another any communication with respect to this Agreement, each such
notices, demand, request, consent, approval, declaration or other communication
shall be in writing and either shall be delivered in person with receipt
acknowledged or by registered or certified mail, return receipt requested,
postage prepaid, telecopied and confirmed by telecopy answerback or recognized
overnight courier service addressed as follows:
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<PAGE> 12
(a) If to Investor at:
c/o RDV Corporation
126 Ottawa Avenue, N.W.
500 Grand Bank Building
Grand Rapids, Michigan 49503
Attn: President
Fax: 616-454-4654
With copies to:
Hecht & Lentz
333 Bridge St., N.W.
Suite 330
Grand Rapids, MI 49504
Attn: David M. Hecht, Esq.
Fax: 616-776-7203
(b) If to Company or Alterra at:
c/o Alterra Healthcare Corporation
450 North Sunnyslope Rd.
Suite 300
Brookfield, MI 53005
Attn: Chief Executive Officer
Fax: 414-789-6677
With Copies to:
Rogers & Hardin
229 Peachtree St., N.E.
2700 International Tower
Atlanta, GA 30303
Attn: Alan C. Leet, Esq.
Fax: 404-525-2224
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on
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<PAGE> 13
which personally delivered, with receipt acknowledged, telecopied and confirmed
by telecopy answerback, as of the regularly scheduled time for delivery if
delivered by a recognized delivery service or three (3) Business Days after the
same shall have been deposited in the United States mail. Failure or delay in
delivering copies of nay notice, demand, request, consent, approval, declaration
or other communication to the persons designated above to receive copies shall
in no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
6.7 Counterparts; Facsimile. This Agreement may be executed by
facsimile signature and in any number of separate counterparts, each of which
shall, collectively and separately, constitute one agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
AHC PURCHASER HOLDING, INC.
By: /s/ Mark W. Ohlendorf
---------------------------------------
Name: Mark W. Ohlendorf
Title: Vice President
RDVEPCO, L.L.C.
By: EDP Assisted Living Properties, L.L.C.,
a member
By: Elsa D. Prince Living Trust u/a dated
January 27, 1976
By: /s/ Elsa D. Prince
-------------------------------
Elsa D. Prince, Trustee
ALTERRA HEALTHCARE CORPORATION
By: /s/ Mark W. Ohlendorf
-------------------------------------------
Name: Mark W. Ohlendorf
Title: Senior Vice President
13
<PAGE> 14
ARTICLE 1
The name of the Corporation is AHC PURCHASER HOLDING, INC.
ARTICLE 2
The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE 3
The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage solely in the following activities: (i)
the investment in and ownership of AHC Purchaser, Inc., a Delaware corporation
(the "Subsidiary"); and (ii) to perform its obligations and exercise its rights
arising under (a) the Subscription and Organizational Agreement dated as of
December 13, 1999 by and among the Company, RDVEPCO, L.L.C. (the "LLC") and
Alterra Healthcare Corporation ("Alterra"), (b) the Loan Agreement (the "Loan
Agreement") dated as of December 13, 1999 between LLC and Alterra, (c) the
Guaranty dated as of December 13, 1999 made by the Corporation in favor of the
LLC, (d) the Stock Pledge Agreement dated as of December 13, 1999 between the
Corporation and the LLC, and (e) such other agreements and instruments as are
contemplated by, the Loan Agreement and the Corporation shall have the power and
authority to exercise all powers enumerated in the General Corporation Law of
the State Delaware necessary or convenient to the conduct, promotion or
attainment of the business or purposes set forth herein.
ARTICLE 4
The total number of shares of all classes of stock which the
Corporation has authority to issue is 3,857 shares, of which 2,857 shares shall
be Common Stock, with par value of $.01 per share (the "Common Stock") and 1,000
shares shall be preferred stock, with $0.01 par value (the "Preferred Stock").
The designation and the powers, preferences and rights of the
shares of Common Stock are as follows:
<PAGE> 15
1. Shares of Common Stock may be issued from time to time as
the Board of Directors shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors. Each share of Common
Stock shall be equal to every other share of Common Stock in every respect.
2. Each holder of Common Stock shall be entitled at all
meetings of stockholders to one vote for each share of Common Stock held by it
of record on the books of the Corporation.
3. Following the conversion of the Preferred Stock pursuant to
the terms thereof, the holders of thirty percent (30%) of the then outstanding
shares of Common Stock shall have the right to compel an orderly liquidation of
the Corporation and the pro rata distribution of the funds thereby available to
be distributed to all of the holders of the Common Stock, and upon the exercise
of such liquidation right, the Corporation, as the sole stockholder of the
Subsidiary, shall take all action necessary to liquidate the Subsidiary.
The relative designations, powers, preferences, right, qualifications,
limitations and restrictions of 1,000 shares of Preferred Stock, designated the
"Convertible Preferred Stock", each of $.01 par value, are as follows:
For the purposes of this Certificate of Incorporation, "Corporation"
shall mean AHC Purchaser Holding, Inc.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Common Stock" shall mean the 2,857 authorized shares of common stock,
$.01 par value per share of the Corporation.
"Conversion Price" shall have the meaning provided in Subsection
(d)(6)(F) hereof.
"Conversion Rate" shall have the meaning provided in Subsection (d)(1)
hereof.
"Invested Amount" per share of Preferred Stock shall mean $1,000.00,
adjusted for subdivisions or combinations of the Preferred Stock. "Original
Issue Date" shall have the meaning provided in Subsection (d)(4) hereof.
"Preferred Stock" shall mean the 1,000 shares of Convertible Preferred
Stock, $.01 par value, hereby designated.
"Stockholders" shall mean the holders of the Preferred Stock and the
holders of the Common Stock.
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<PAGE> 16
The preferences, limitations and relative rights granted to and imposed
upon the Preferred Stock are as follows:
(a) Dividend Rights. From and after the Original Issue Date, the
holders of outstanding shares of Preferred Stock shall be entitled to receive
dividends at an annual rate of $80.00 per share, payable quarterly on or before
the end of each fiscal quarters of the Corporation, as and when declared by the
Board of Directors, prior and in preference to any declaration of payment of any
dividend on the Common Stock of the Corporation. Such dividends shall be
cumulative and shall accrue (on a daily basis) from the Original Issue Date,
whether or not declared by the Board of Directors of the Corporation. Without
the prior written consent of the holders of a majority of the outstanding
Preferred Stock, voting separately as a class, no dividends shall be paid with
respect to the Common Stock of the Corporation at any time as, and for so long
as any shares of the Preferred Stock remain outstanding. Notwithstanding the
foregoing, no dividends may be paid with respect to the Common Stock of the
Corporation until all dividends declared or accrued on all outstanding shares of
the Preferred Stock have been set apart and paid. Except as expressly set forth
in Section (d), the Corporation shall be under no obligation to pay such
dividends unless so declared by the Board of Directors.
(b) Liquidation Rights. In the event of liquidation, dissolution or
winding up of the Corporation, or a Sale or Merger (defined below), each holder
of an outstanding share of the Preferred Stock shall be entitled to receive in
exchange for and in redemption of his Preferred Stock by reason of the ownership
thereof, (i) in the case of a liquidation, dissolution or winding up of the
Corporation, from any funds legally available for distribution to Stockholders,
and (ii) in the case of a Sale or Merger, from the net proceeds therefrom
(defined for these purposes to mean the proceeds whether cash, securities or
property, available for distribution to Stockholders or payable to the
Stockholders by reason of the Sale or Merger), an amount equal to the Invested
Amount, plus the amount of all accrued and unpaid dividends thereon (whether or
not declared) on such share from the Original Issue Date (the "Liquidation
Value").
For purposes of this Section (b), a "Sale or Merger" of the Corporation
shall mean (i) the sale of all or substantially all the Corporation's assets and
(ii) the acquisition of the Corporation by another entity (other than an entity
that is wholly-owned by Alterra Healthcare Corporation, a Delaware corporation)
by way of merger or consolidation resulting in the exchange of the outstanding
shares of the Corporation for securities or consideration issued, or caused to
be issued, by the acquiring corporation or its parent or subsidiary.
All the preferential amounts to be paid to the holders of the Preferred
Stock under this Section (b) shall be paid or set apart for payment before the
payment or setting apart for payment of any amount for, or the distribution of
any assets of the Corporation to, the holders of the Common Stock or any class
or series of stock of the Corporation ranking junior to the Preferred Stock in
connection with a liquidation, dissolution or winding up, or a Sale or Merger.
If the assets or surplus funds to be distributed to the holders of the Preferred
Stock are insufficient to permit the payment to such holders of the full amounts
payable to such holders, the assets and surplus funds legally available for
distribution shall be distributed ratably among the holders of
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<PAGE> 17
the Preferred Stock in proportion to the full amount each such holder is
otherwise entitled to receive.
(c) Voting Rights. Except as otherwise provided in this Certificate of
Incorporation, each share of the Preferred Stock shall be non-voting. Each
holder of a share of the Preferred Stock shall be entitled to receive the same
prior notice of any Stockholders' meeting as provided to the holders of Common
Stock in accordance with the Bylaws of the Corporation, as well as prior notice
of all Stockholder actions to be taken by legally available means in lieu of
meeting, but, except as expressly provided in this Section (c) and, except for
those matters required by law, or by the terms hereof, to be submitted to a
class vote of the holders of Preferred Stock, the holders of the Preferred Stock
shall not be entitled to vote with holders of the Common Stock upon any matter
submitted to a vote of Stockholders. Fractional votes in any event shall not be
permitted, and any fractions shall be disregarded in computing voting rights.
Notwithstanding anything contained in this Section (c) to the contrary,
should the Corporation fail for any reason (i) to redeem the Preferred Stock
under the conditions and in accordance with the terms of Section (b) hereof,
(ii) to issue Common Stock in conversion of the Preferred Stock as provided in
Section (d) hereof, or (iii) to comply with the protective provisions of Section
(f) hereof, and should such failure continue for a period of thirty consecutive
(30) days, then, for so long as said failure remains uncured, the holders of
Preferred Stock shall be entitled, at any annual meeting of the Stockholders or
any special meeting called for such purpose, voting together as a single class,
to elect the smallest number of members of the Board of Directors necessary to
constitute a majority of the full Board of Directors of the Corporation, and the
holders of the Common Stock shall elect the remaining Directors. If, prior to
the end of the term of any director elected as aforesaid by the holders of
shares of the Preferred Stock, a vacancy in the office of such director shall
occur by reason of death, resignation, removal or disability, or for any other
reason, the right to fill such vacancy shall be vested in the holders of the
Preferred Stock unless the right of such holders to elect such director shall
have ceased as provided hereafter. At any time after such power to elect a
majority of directors shall have so vested in the Preferred Stock, the Secretary
of the Corporation may, and, upon the written request of the holders of record
of ten percent (10%) or more of the then outstanding shares of the Preferred
Stock, addressed to the Secretary at the principal office of the Corporation,
the Secretary shall, call a special meeting of the holders of Preferred Stock
for the election of the directors to be elected by them as hereinabove provided,
to be held within thirty (30) days after such call and at the place and upon the
notice provided by law and in the Bylaws of the Corporation for the holding of
meetings of Stockholders. If any such special meeting required to be called as
above provided shall not be called by the Secretary within thirty (30) days
after receipt of any such request, then the holders of record of ten percent
(10%) or more in amount of the Preferred Stock then-outstanding may designate in
writing one of their number to call such meeting, and the person so designated
may call such meeting to be held at the place and upon the notice above
provided, and for that purpose shall have access to the Stock ledger of the
Corporation. If any such special meeting shall be called by the Secretary of the
Corporation or by the holders of the Preferred Stock as above provided, and if
the holders of at least a majority of the Preferred Stock then outstanding and
entitled to vote at such meeting shall be present or
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<PAGE> 18
represented by proxy at such meeting or any adjournment thereof, then, by vote
of the holders of at least a majority of such Preferred Stock present or so
represented at such meeting, the then authorized number of directors of the
Corporation shall be increased by two fold plus one and, at such meeting, the
holders of the Preferred Stock shall be entitled to elect the additional
directors so provided for, but any directors so elected shall hold office only
until their respective successors are duly elected and qualified at the annual
meeting of Stockholders or special meeting held in place thereof next succeeding
their election. At such time, if any, as the holders of the Preferred Stock
shall obtain the redemption referred to in clause (i) above, or obtain
rectification of the failure to respect, or restoration of, the rights
referenced in clause (iii) above, as the case may be, then the terms of office
of all persons elected as directors by such holders shall forthwith terminate,
and the number of directors shall be reduced accordingly. The foregoing remedy
shall not be deemed exclusive, and shall be in addition to all other rights and
remedies available at law or equity to t he holders of Preferred Stock.
(d) Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(1) Conversion. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after
December 31, 2000 at the office of the Corporation or any transfer
agent for the Preferred Stock, into Common Stock at the initial
Conversion Rate of one (1) fully paid and nonassessable share of Common
Stock for each share of Preferred Stock, subject, however, to the
adjustments described below. (The quotient obtained by dividing the
number of shares of Common Stock into which each share of Preferred
Stock may be converted by one is hereinafter referred to as the
"Conversion Rate." The initial Conversion Rate shall be one (1).) Such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of the surrender of the shares of
Preferred Stock to be converted in accordance with the procedures
described in Subsection (d)(3) below. The Corporation shall pay to the
holder thereof promptly following such surrender all declared or
accrued but unpaid dividend on the shares of Preferred Stock so
converted to, and including, the date of such conversion; provided,
however, that the Corporation may, at its option, in lieu of making a
full cash payment of all such declared or accrued but unpaid dividends,
make payment thereof in that number of whole shares of Common Stock
calculated by dividing the total of such declared or accrued but unpaid
dividends due such holder by the fair market value per share of the
Common Stock, as determined in good faith by the Corporation's Board of
Directors.
(2) Treatment of Fractional Shares. No fractional shares of
Common Stock shall be issued upon conversion of Preferred Stock, and
any shares of Preferred Stock surrendered for conversion that would
other wise result in a fractional share of Common Stock shall be
redeemed at the then effective Conversion Price per share, payable as
promptly as possible when funds are legally available therefor.
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<PAGE> 19
(3) Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock
pursuant to Subsection (d)(1) above, such holder shall surrender the
certificate or certificates for such shares of Preferred Stock, duly
endorsed, at the office of the Corporation or of any transfer agent of
the Preferred Stock, and shall give written notice to the Corporation
at such office of the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued if
different from the name shown on the books and records of the
Corporation. Said conversion notice shall also contain such
representations as may reasonably be required by the Corporation to the
effect that the shares to be received upon conversion are not being
acquired and will not be transferred in any way that might violate the
then applicable laws. The Corporation shall, as soon as practicable
thereafter and in no event later than thirty (30) days after the
delivery of said conversion notice, issue and deliver at such office to
such holder of Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. The
person or persons entitled to receive the shares of Common Stock
issuable upon a conversion pursuant to Subsection (d)(1) shall be
treated for all purposes as the record holder or holders of such shares
of Common Stock as of the effective date of conversion specified in
such section. All certificates issued upon the exercise or occurrence
of the conversion shall contain a legend governing restrictions upon
such shares imposed by law or agreement of the holder or his
predecessors.
(4) Adjustment for Subdivisions or Combinations of Common Stock.
In the event the Corporation at any time or from time to time after the
original issuance by the Corporation of Preferred Stock (hereinafter
referred to as the "Original Issue Date") effects a subdivision or
combination of its outstanding Common Stock into a greater or lesser
number of shares without a proportionate and corresponding subdivision
or combination of its outstanding Preferred Stock, then and in each
such event the Conversion Rate shall be increased or decreased
proportionately.
(5) Adjustments for Dividends, Distributions and Common Stock
Equivalents. In the event the Corporation at any time or from time to
time after the Original Issue Date shall make or issue, or fix a record
date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares
of Common Stock or other securities or rights convertible into or
entitling the holder thereof to receive additional shares of Common
Stock (hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder of such Common Stock
Equivalents or the additional shares of Common Stock, and without a
proportionate and corresponding dividend or other distribution to
holders of Preferred Stock, then and in each such event the maximum
number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for subsequent
adjustment of such number) of Common Stock issuable in payment of such
dividend or distribution or upon conversion or exercise of such Common
Stock Equivalents shall be deemed, for purposes of this Subsection
(d)(5), to be issued and outstanding as of the time of such
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<PAGE> 20
issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date. In each such event the
Conversion Rate shall be increased as of the time of such issuance or,
in the event such a record date shall have been fixed, as of the close
of business on such record date, by multiplying the Conversion Rate by
a fraction:
(A) the numerator of which shall be the total number of
shares of Common Stock (x) issued and outstanding or deemed
pursuant to the terms hereof to be issued and outstanding (not
including any shares described in clause (y) immediately
below), immediately prior to the time of such issuance or the
close of business on such record date, plus (y) the number of
shares of Common Stock issuable in payment of such dividend or
distribution or upon conversion or exercise of such Common
Stock Equivalents; and
(B) the denominator of which shall be the total number
of shares of Common Stock issued and outstanding or deemed to
be issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date;
provided, however, that (i) if such record date shall have
been fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Conversion Rate shall
be recomputed accordingly as of the close of business on such record
date and thereafter the Conversion Rate shall be adjusted pursuant to
this Subsection (d)(5) as of the time of actual payment of such
dividends or distributions; or (ii) if such Common Stock Equivalents
provide, with the passage of time or otherwise, for any decrease in the
number of shares of Common Stock issuable upon conversion or exercise
thereof (or upon the occurrence of a record date with respect thereto),
the Conversion Rate computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such decrease be
coming effective, be recomputed to reflect such decrease insofar as it
affects the rights of conversion or exercise of the Common Stock
Equivalents then outstanding; or (iii) upon the expiration of any
rights of conversion or exercise under any unexercised Common Stock
Equivalents, the Conversion Rate computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if the only additional shares of Common
Stock issued were the shares of such Common Stock, if any, actually
issued upon the conversion or exercise of such Common Stock
Equivalents; or (iv) in the event of issuance of Common Stock
Equivalents that expire by their terms not more than sixty (60) days
after the date of issuance thereof, no adjustments of the Conversation
Rate shall be made until the expiration or exercise of all such Common
Stock Equivalents, whereupon such adjustment shall be made in the
manner provided in this Subsection (d)(5).
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<PAGE> 21
(6) Adjustment of Conversion Rate for Diluting Issues. Except
as otherwise provided in this Subsection (d)(6), in the event the
Corporation sells or issues any Common Stock or Common Stock
Equivalents at a per share consideration (as defined be low) less than
the Conversion Price (as such term is defined Subsection (d)(6)(F)
below) then in effect for the Preferred Stock, then the Conversion Rate
(and, thereby, the Conversion Price) then in effect shall be adjusted
as provided in paragraphs (A), (B), (C) and (F) hereof. For purposes of
the foregoing, the per share consideration with respect to the sale or
issuance of Common Stock shall be the price per share received by the
Corporation, prior to the payment of any expenses, commissions,
discounts and other applicable costs. With respect to the sale or
issuance of Common Stock Equivalents that are convertible into or
exchangeable for Common Stock without further consideration, the per
share consideration shall be determined by dividing the maximum number
of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for subsequent adjustment of
such number) of Common Stock issuable with respect to such Common Stock
Equivalents into the aggregate consideration received by the
Corporation upon the sale of issuance of such Common Stock Equivalents.
With respect to the issuance of other Common Stock Equivalents, the per
share consideration shall be determined by dividing the maximum number
of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for subsequent adjustment of
such number) of Common Stock issuable with respect to such Common Stock
Equivalents into the total aggregate consideration received by the
Corporation upon the sale or issuance of such Common Stock Equivalents
plus the total consideration receivable by the Corporation upon the
conversion or exercise of such Common Stock Equivalents. The issuance
of Common Stock or Common Stock Equivalents for no consideration shall
be deemed to be an issuance at a per share consideration of $.01. In
connection with the sale or issuance of Common Stock and/or Common
Stock Equivalents for non-cash consideration, the amount of
consideration shall be determined by the Board of Directors of the
Corporation
As used herein, "Additional Shares of Common Stock" shall mean
either shares of Common Stock issued subsequent to the Original Issue
Date or, with respect to the issuance of Common Stock Equivalents, the
maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for
subsequent adjustment of such number) of Common Stock issuable in
exchange for, upon conversion of, or upon exercise of such Common Stock
Equivalents.
(A) Upon each issuance of Common Stock for a per
share consideration less than the Conversion Price in effect
on the date of such issuance, the Conversion Rate of the
Preferred Stock in effect on such date shall be adjusted by
multiplying it by a fraction:
(x) the numerator of which shall be the
number of shares of Common Stock outstanding
immediately prior to the issuance of such
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<PAGE> 22
Additional Shares of Common Stock, plus the number of
such Additional shares of Common Stock so issued, and
(y) the denominator of which shall be the
number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional
shares of Common Stock plus the number of shares of
Common Stock that the aggregate net consideration
received by the Corporation for the total number of
such Additional Shares of Common Stock so issued
would purchase at the Conversion Price then in
effect.
(B) Upon each issuance of Common Stock Equivalents,
exchangeable without further consideration into Common Stock,
for a per share consideration less than the Conversion Price
in effect on the date of such issuance, the Conversion Rate of
the Preferred Stock in effect on such date shall be adjusted
as in paragraph (A) of this Subsection (d)(6) on the basis
that the related Additional Shares of Common Stock are to be
treated as having been issued on the date of issuance of the
Common Stock Equivalents, and the aggregate consideration
received by the Corporation for such Common Stock Equivalents
shall be deemed to have been received for such Additional
Shares of Common Stock.
(C) Upon each issuance of Common Stock Equivalents
other than those described in paragraph (B) of this Subsection
(d)(6), for a per share consideration less than the Conversion
Price in effect on the date of such issuance, the Conversion
Rate of the Preferred Stock in effect on such date shall be
adjusted as in paragraph (A) of this Subsection (d)(6) on the
basis that the related Additional Shares of Common Stock are
to be treated as having been issued on the date of issuance of
such Common Stock Equivalents, and the aggregate consideration
received and receivable by the Corporation on conversion or
exercise of such Common Stock Equivalents shall be deemed to
have been received for such Additional Shares of Common Stock.
(D) Once any Additional Shares of Common Stock have
been treated as having been issued for the purpose of this
Subsection (d)(6), they shall be treated as issued and
outstanding shares of Common Stock whenever any subsequent
calculations must be made pursuant hereto, provided that on
the expiration of any options, warrants or rights to purchase
Additional Shares of Common Stock, the termination of any
rights to convert or exchange for Additional Shares of Common
Stock, or the expiration of any options or rights related to
such convertible or exchangeable securities on account of
which an adjustment in the Conversion Rate has been made
previously pursuant to this Subsection (d)(6), the Conversion
Rate shall forthwith be readjusted to such Conversion Rate as
would have obtained had the adjustment made upon the issuance
of such options, warrants, rights, securities or options or
rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common
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<PAGE> 23
Stock actually issued upon the exercise of such options,
warrants or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights
related to such securities.
(E) The foregoing notwithstanding, no adjustment of
the conversion Rate (and, thereby, the Conversion Price) shall
be made as a result of the issuance of:
(x) any shares of Common Stock upon the
conversion of shares of Preferred Stock;
(y) any shares of Common Stock pursuant to
which the Conversion Rate and Conversion Price are
adjusted under Subsection (4) or (5) of this Section
(d); or
(z) any shares of Common Stock issued
pursuant to the exchange, conversion or exercise of
any Common Stock Equivalents that have previously
been incorporated into computations hereunder on the
date when such Common Stock Equivalents were issued;
or
(F) The Conversion Price at any one time hereunder
shall be equal to the quotient obtained by dividing the
Invested Amount (defined in Section (b) above) by the then
effective Conversion Rate. The initial Conversion Price
hereunder shall be $1,000.00.
(7) De Minimis Adjustments. No adjustment to the Conversion
Rate (and, thereby, the Conversion Price) shall be made if such
adjustment would result in a change in the Conversion Price of less
than $.01. Any adjustment of less than $.01 that is not made shall be
carried forward and shall be made at the time of, and together with,
any subsequent adjustment that, on a cumulative basis, amounts to an
adjustment of $.01 or more in the Conversion Price.
(8) No Impairment. Except as provided in Section (f) hereof,
the Corporation shall not, by amendment of this Certificate of
Incorporation or its Bylaws or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation, but shall at all times in good faith assisting the
carrying out of all the provisions of this Section (d) and in the
taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Preferred Stock
against impairment.
(9) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this
Section (d), the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Preferred Stock a certificate
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<PAGE> 24
setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder
of Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate at that time in effect, and (iii) the number
of shares of Common Stock and the amount, if any, of other property
that at that time would be received upon the conversion of Preferred
Stock.
(10) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities other
than Preferred Stock for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, any
Common Stock Equivalents or any right to subscribe for, purchase or
other wise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation
shall mail to each holder of Preferred Stock, at least twenty (20) days
prior to the date specified therein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend,
distribution or rights, and the amount and character of such dividend,
distribution or rights.
(11) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Preferred Stock such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the
Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall be insufficient to effect the
conversion of all then outstanding shares of the Preferred Stock, the
Corporation shall take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(e) Redemption of Preferred Stock. The Corporation may redeem all (but
not less than all) of the shares of Preferred Stock from the holders thereof at
any time after the Original Issue Date by delivering to such holders a
redemption notice (the "Redemption Notice") and by paying in cash to such holder
or holders in respect of each such shares the Redemption Price (defined below)
within ninety (90) days of the Redemption Notice. The price payable for each
redeemed share of Preferred Stock (the "Redemption Price") shall be equal to the
Appraised Value (as determined below) of each such share on as as-if-converted
basis; provided, however, that notwithstanding the foregoing, the amount payable
to such holder of a share of Preferred Stock in redemption thereof shall in no
event be less than the Invested Amount plus the aggregate amount of all accrued
and unpaid dividends (whether or not declared) thereon through the date of such
Redemption Notice, and shall be increased if necessary to equal the Liquidation
Value, and in no event shall be more than, and shall be decreased if necessary
to equal, an amount (the "Redemption Cap") equal to the Invested Amount plus the
sum of (i) the aggregate amount of all accrued and unpaid dividends (whether or
not declared) thereon through the date of such Redemption Notice and (ii) $1,500
if the Preferred Stock is redeemed on or before March
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<PAGE> 25
31, 2000, which amount shall increase by $300 per share of Preferred Stock for
each month (or portion thereof) following March 2000 in which such redemption
does not occur (e.g., the amount contemplated by this clause (ii) shall be
$1,800 for any redemption effected in April 2000, $2,100 for any redemption
effected in May 2000, etc.). Should the holders of the Preferred Stock and the
Corporation be unable to agree during the twenty (20)-day period immediately
succeeding the delivery of a Redemption Notice as to the Appraised Value without
the employment of appraisers, then the holders of the Preferred Stock and the
Corporation shall each select an appraiser experienced in the business of
evaluating or appraising the market value of commercial real estate and
long-term care and/or assisted living facilities (or similar businesses), and
the appraisers so selected (the "Initial Appraisers") shall appraise such shares
to be redeemed. If the difference between the resulting appraisals is not
greater than ten percent (10%) of the higher appraisal, then the average of the
appraisals shall be deemed the Appraised Value; otherwise, the Initial
Appraisers shall select an additional appraiser who shall be experienced in a
manner similar to the Initial Appraisers (the "Additional Appraiser"). If the
Initial Appraisers fail to select such Additional Appraiser as provided above,
then either the holders of the Preferred Stock or the Corporation may apply,
after written notice to the other, to any judge of any court of general
jurisdiction for the appointment of such Additional Appraiser. The Additional
Appraiser shall appraise such shares to be redeemed as of the date of the
redemption and shall forthwith give written notice of his determination to the
Corporation and the holders of the Preferred Stock. The Appraised Value shall
then be established by averaging all determinations of value, and then,
disregarding the value determination that deviates most from such average,
averaging the remaining value determinations. The Corporation shall pay the
expenses and fees of the appraisers selected hereby. Notwithstanding the
foregoing, the Corporation may always elect by written notice to the holders of
Preferred Stock to redeem the Preferred Stock by paying the Redemption Cap per
share, whereupon a determination of Appraised Value shall not be necessary. For
all purposes hereof, the Appraised Value shall be determined assuming that: (i)
the Corporation shall have caused its wholly-owned subsidiary, AHC Purchaser,
Inc., a Delaware corporation (the "Subsidiary"), to sell each of the assisted
living or dementia care facilities owned by the Subsidiary for the fair market
value thereof without regard to (x) the encumbrance of any management agreement
or other agreement with any affiliate of the Corporation or the Subsidiary
relating thereto and (y) the competitive impact of any assisted living facility
that is, or has been announced by Alterra Healthcare Corporation ("Alterra"), or
one of its affiliates, to be, owned, operated or managed by Alterra or any such
affiliate (excluding any facility then owned, operated, managed or under
development or construction by Alterra or any such affiliate as of the date of
this Certificate of Incorporation); (ii) the Subsidiary shall have satisfied all
of its liabilities with the proceeds of such sale; (iii) the remaining proceeds
shall have been distributed to the Corporation in complete liquidation of the
Subsidiary; and (iv) in turn, the complete liquidation of the Corporation with
the holders of the Preferred Stock receiving the greater of Liquidation Value
and the amount such holders would receive if they exercised the Conversion
Rights.
Upon the determination of the Redemption Price, each holder of shares
to be redeemed shall surrender the certificate representing such shares to the
Corporation and shall receive payment of the Redemption Price therefor in cash.
Redemption hereunder is subject to the legal
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availability of funds and to the extent delayed will occur as soon thereafter as
funds are legally available therefor, with the determination of the Redemption
Price to be made as of the date that the Corporation is first legally entitled
to effect such redemption; provided, however, that any such delay shall
nevertheless be subject to the remedial voting rights described in Section (c)
hereof.
(f) Protective Provisions. In addition to any other rights provided by
law, so long as any shares of Preferred Stock shall be outstanding, except where
the vote or written consent of the holders of a greater number of shares is
required by law or by the Certificate of Incorporation, without first obtaining
the affirmative vote or written consent of the holders of not less than
two-thirds of such outstanding shares of Preferred Stock, the Corporation shall
not:
(1) merge or consolidate with or into, or permit any
subsidiary to merge or consolidate with or into, any other corporation,
corporations, entity or entities;
(2) sell, abandon, transfer, lease or otherwise dispose of all
or substantially all its properties or assets;
(3) voluntarily dissolve, liquidate, or wind up or carry out
any partial liquidation, distribution or transaction in the nature of a
partial liquidation or distribution;
(4) create or authorize the creation or increase the
authorized amount of any additional class or series of shares of stock;
increase the authorized amount of Preferred Stock; issue any additional
shares of stock of any class or series other than (i) the 1,857 shares
of Common Stock outstanding prior to the filing of this Certificate of
Incorporation with the Secretary of State of the State of Delaware,
(ii) the 1,000 shares of Preferred Stock to be issued pursuant to this
Certificate of Incorporation and (iii) shares of Common Stock issued
upon conversion of the Preferred Stock in accordance herewith; or
create or authorize any obligation or security convertible into shares
of Preferred Stock or into shares of any other class or series of
stock, whether voting or non-voting; regardless of whether any such
creation, authorization or increase shall be by means of amendment to
the Certificate of Incorporation, or by merger, consolidation or
otherwise;
(5) amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation or Bylaws, or file any
certificate of designations, preferences and rights of any series of
stock of the Corporation, if such action would alter or change the
preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Preferred Stock;
(6) pay any dividends with respect to any Common Stock; or
(7) as the sole stockholder of the Subsidiary, vote for or
otherwise consent to amend or repeal any provision of, or add any
provision to, the Subsidiary's Certificate of Incorporation.
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(g) Notices. Any notice required by the provision hereof to be given to
the holders of shares of Preferred Stock shall be deemed given as of the second
business day following deposit with the United States Postal Service,
first-class, postage prepaid, and addressed to each holder of record at his
address appearing on the books of the Corporation.
ARTICLE 5
The name and mailing address of the incorporator are as follows:
NAME ADDRESS
Alan C. Leet 2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
ARTICLE 6
In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors shall have the power to make, adopt, amend
and repeal the bylaws of the Corporation, including, to the extent permitted by
law, any bylaw adopted by the stockholders of the Corporation unless such bylaw
specifically provides that it may not be amended or repealed by the Board of
Directors.
ARTICLE 7
Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation may
be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the
Corporation. Election of Directors need not be by written ballot unless the
Bylaws of the Corporation so provide.
ARTICLE 8
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed herein and by the laws of the State of
Delaware, and all rights conferred upon stockholders herein are granted subject
to this reservation.
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ARTICLE 9
The Corporation shall have the power and authority to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative and whether or not by or in the
right of the Corporation, by reason of the fact that he or she is or was a
Director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, judgments, fines and amounts paid in settlement to the maximum
extent permitted by the General Corporation Law of the State of Delaware or
other applicable law.
ARTICLE 10
No Director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director; provided, however, that the foregoing clause shall not apply
to any liability of a Director (i) for any breach of the Director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the Director derived an
improper personal benefit.
ARTICLE 11
Notwithstanding any provision hereof to the contrary, in order to
preserve and ensure its separate and distinct corporate identity, in addition to
the other provisions set forth in this Certificate of Incorporation, the
Corporation shall conduct its affairs in accordance with the following
provisions:
1. It shall maintain separate corporation records and books of
account from those of its parent and any affiliate;
2. Its Board of Directors shall hold appropriate meetings (or
act by unanimous consent) to authorize all appropriate corporate actions, and in
authorizing such actions, shall observe all corporate formalities;
3. It shall maintain financial statements separate from its
parent and any affiliate;
4. It shall maintain an arm's length relationship with its
parent and any affiliate;
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<PAGE> 29
5. It shall not enter into any contract or agreement with any
affiliate except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arm's-length basis
with third parties other than an affiliate; and
6. It shall not sell, transfer or encumber any interest in the
Subsidiary other than as contemplated by the Loan Agreement and the agreements
and instruments contemplated thereby.
For purposes of this Article 11, the following terms shall
have the following meanings:
"affiliate" means any person controlling or controlled by or
under common control with the parent, including, without limitation (i) any
person who has a familial relationship, by blood, marriage or otherwise with any
director, officer or employee of the Corporation, its parent, or any affiliate
thereof and (ii) any person which receives compensation for administrative,
legal or accounting services from this corporation, its parent or any affiliate.
For purposes of this definition, "control" when used with respect to any
specified person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the ownership of 10% or more of the
voting interest in any entity shall be deemed to constitute control of such
entity; and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.
"parent" means, with respect to a corporation, any other
corporation owning or controlling, directly or indirectly, fifty percent (50%)
or more of the voting stock of the Corporation.
"person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary
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<PAGE> 30
thereof), unincorporated organization, or government or any agency or political
subdivision thereof.
ARTICLE 12
That certain AHC Purchaser Holding, Inc. Subscription and
Organizational Agreement dated as of December 13, 1999 by and among the
Corporation, Alterra and the LLC is hereby made a part of this Certificate of
Incorporation and incorporated by reference as if fully set forth herein and a
conformed copy (without its exhibits) is attached hereto as Exhibit A.
I, the undersigned, being the incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this Certificate of Incorporation, hereby
declaring and certifying that this is my act and deed and the facts stated
herein are true, and accordingly have hereunto set my hand on this 13th day of
December, 1999.
-----------------------------------
Alan C. Leet, Incorporator
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ACTION OF THE BOARD OF DIRECTORS OF
AHC PURCHASER HOLDING, INC.
TAKEN BY UNANIMOUS WRITTEN CONSENT
IN LIEU OF AN ORGANIZATIONAL MEETING
Pursuant to Sections 108 and 141(f) of the General Corporation Law of
the State of Delaware, the undersigned, being all of the members of the Board of
Directors of AHC PURCHASER HOLDING, INC., a Delaware corporation (the
"Corporation"), do hereby consent to and adopt the following resolutions by
unanimous written consent (the "Consent") in lieu of a special meeting and
hereby waive any and all rights to notice of the time, place or purpose of such
meeting to consider the actions taken herein and hereby direct that this
instrument be filed with the minutes of the proceedings of the Board.
RESOLVED, that the Certificate of Incorporation of the Corporation, a
copy of which is attached hereto as Exhibit "A" and incorporated herein by this
reference, as certified by the Secretary of State of the State of Delaware on
December 13, 1999, is hereby accepted and approved for the Corporation;
RESOLVED, that the following named persons are hereby declared elected
to the offices of the Corporation set forth opposite their respective names to
serve as such officers pursuant to the Bylaws:
William F. Lasky Chief Executive Officer, President
Steven L. Vick Chief Operating Officer
Thomas E. Komula Vice President, Secretary, Treasurer
David M. Boitano Vice President, Assistant Secretary
Mark W. Ohlendorf Vice President, Assistant Secretary
John D. Peterson Vice President, Assistant Secretary
Mark Chapman Vice President
RESOLVED, that the Corporation shall have an executive committee (the
"Executive Committee") comprised of two (2) members. The Board of Directors
hereby delegates to the Executive Committee all of the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, except for such powers and authority which may not by law be
delegated to a committee of the Board of Directors of the Corporation. Any
action of the Executive Committee may be taken by a written instrument signed by
all the members of the Executive Committee, and such action shall be fully
effective as if taken at a meeting of the Executive Committee. The Executive
Committee shall keep regular minutes of the transactions of their meetings and
shall cause them to be recorded in books kept for that purpose in the office of
the Corporation. The Board shall have the power at any time to change the
membership of, to increase or decrease the membership of, to fill all vacancies
in and to discharge the Executive Committee of the Board, or any member thereof,
either with or without cause. The
<PAGE> 32
presence of all the members of the Executive Committee shall be required to
constitute a quorum for the transaction of any business at any meeting of the
Executive Committee, and all matters shall be decided at any such meeting by the
affirmative vote of all the members of the Executive Committee present.
RESOLVED, that the initial members of the Executive Committee shall be
Thomas E. Komula and Mark W. Ohlendorf, each to serve in such capacity until the
next annual meeting of the Board of Directors or until his successor is duly
elected and qualified.
RESOLVED, that the form of share certificate attached hereto as Exhibit
"B" and incorporated herein by this reference is hereby adopted as the form of
certificate to represent the shares of common stock of the Corporation;
RESOLVED, that the form of share certificate attached hereto as Exhibit
"C" and incorporated herein by this reference is hereby adopted as the form of
certificate to represent the shares of preferred stock of the Corporation;
RESOLVED, that the AHC Purchaser Holding, Inc. Subscription and
Organizational Agreement of the Corporation, Alterra Healthcare Corporation and
RDVEPCO, L.L.C. attached hereto as Exhibit "D" and incorporated herein by this
reference, is hereby accepted in accordance with its terms;
RESOLVED, that each of the Chief Executive Officer, President, any Vice
President, the Secretary and any Assistant Secretary of the Corporation is
hereby authorized to note acceptance upon said subscription agreement for the
Corporation and that the officers of the Corporation specified in the Bylaws are
hereby directed to issue share certificates to said subscriber in accordance
with said subscription agreement;
RESOLVED, that said shares, when issued in accordance with the
Subscription and Organizational Agreement and the resolutions adopted hereby,
shall be fully paid and nonassessable;
RESOLVED, that the fiscal year of the Corporation shall end on December
31;
RESOLVED, that each of the Chief Executive Officer, President, any Vice
President, the Secretary and any Assistant Secretary of the Corporation is
hereby authorized to take all steps necessary to qualify the Corporation to do
business in such other states or foreign jurisdictions as the President or any
Vice President may from time to time deem necessary, including, but not limited
to, the appointment of statutory agents in such states upon whom all legal
processes may be served;
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<PAGE> 33
RESOLVED, that each of the Chief Executive Officer, President or any
Vice President of the Corporation is hereby authorized to execute and deliver,
on behalf of the Corporation, all contracts, deeds and other instruments,
including, without limitation, the execution and delivery of all such documents
as the Chief Executive Officer, President or any Vice President of the
Corporation shall deem appropriate in connection with any business transactions
into which the Corporation shall enter in fulfillment of its purpose, and the
officers of the Corporation are hereby authorized to take such actions, in the
name and on behalf of the Corporation, as any of them in his or her sole
discretion deems necessary or appropriate to perform the Corporation's
obligations under and enforce the terms and conditions of all such contracts,
deeds and other instruments;
RESOLVED, that the officers are hereby authorized to establish a
banking relationship with any banking institution they deem proper, and all
actions taken by the officers to so establish a banking relationship are hereby
ratified, adopted and approved; that each of the Chief Executive Officer,
President, any Vice President, the Secretary, any Assistant Secretary and the
Treasurer of the Corporation is authorized to make checks and drafts against
funds deposited therein on behalf of the Corporation and to enter into loan
agreements with said banking institution as they deem proper in the best
interest of the Corporation; and that the Secretary and each Assistant Secretary
are each hereby authorized to execute and certify any standard form banking
resolutions or agreements required by any such banking institution, attaching a
copy of such resolutions to these minutes whereupon such resolutions shall be
deemed to have been duly adopted by the Board of Directors as a part of this
Consent;
RESOLVED, that the Board hereby further authorizes, empowers and
directs each of the Chief Executive Officer, President of the Corporation, and
such other officers of the Corporation as the Chief Executive Officer, President
may authorize, empower and direct, to take any and all such actions, and to pay
over to, execute and deliver and file and record, as the case may be, any and
all such documents, agreements, instruments, certificates or instructions
(however characterized or described) as he or any such officers may deem
necessary or advisable in order to carry into effect the purposes and intent of
the foregoing resolutions as shall be evidenced conclusively by the taking of
such actions or the execution and delivery and the filing and recording, as the
case may be, of such documents, agreements, instruments, certificates or
instructions; and
RESOLVED, that any and all actions heretofore taken and any and all
documents, agreements, instruments, certificates or instructions (however
characterized or described) heretofore executed and delivered or filed and
recorded, as the case may be, on behalf of the Corporation, by any duly elected
officer of the Corporation in order to carry into effect
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<PAGE> 34
the purposes and intent of the foregoing resolutions or the transactions
contemplated therein or thereby are hereby ratified, confirmed, adopted and
approved, in all respects.
This Consent may be executed in counterparts, each of which shall be an
original but all of which taken together shall constitute one and the same
instrument.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 35
WITNESS the consent of the Directors of the Corporation given as of
this day of December, 1999, which shall be the effective date of this
instrument.
---------------------------------
THOMAS E. KOMULA
---------------------------------
WILLIAM F. LASKY
---------------------------------
MARK W. OHLENDORF
---------------------------------
STEVEN L. VICK
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<PAGE> 36
BYLAWS
OF
AHC PURCHASER HOLDING, INC.
A Delaware Corporation
ARTICLE 1
OFFICES
Section 1.1 Registered office. The registered office of the Corporation
in the State of Delaware shall be at 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address shall be The Corporation Trust Company.
Section 1.2 Other offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors (the "Board") may from time to time determine or the business of
the Corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1 Place and Time of Meetings. An annual meeting of the
stockholders shall be held for the purpose of electing directors and conducting
such other business as may properly come before the meeting. The date, time and
place of the annual meeting, either within or without the State of Delaware,
shall be determined by resolution of the Board of Directors. Special meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof. Special meetings of the
stockholders may be called by the President for any purpose and shall be called
by the Secretary if directed by the Board of Directors.
Section 2.2 Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a written notice thereof to the stockholder personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to the stockholder at stockholder's post office address furnished by
stockholder to the Secretary of the Corporation for such purpose or, if
stockholder has not furnished to the Secretary stockholder's address for such
purpose, then at stockholder's post office address last known to the Secretary,
or by transmitting a notice thereof to stockholder at such address by telegraph,
cable or facsimile telecommunication. Notice shall be deemed
<PAGE> 37
given upon delivery (if by hand) or upon deposit in the mail (if by mail) or
upon stockholder's receipt (if by telegraph, cable or facsimile).
Except as otherwise expressly required by law, no publication of any
notice of a meeting of the stockholders shall be required. Every notice of a
meeting of the stockholders shall state the place, date and hour of the meeting,
and, in the case of a special meeting, shall also state the purpose or purposes
for which the meeting is called. Notice of any meeting of stockholders shall not
be required to be given to any stockholder who waives such notice, and such
notice shall be deemed waived by any stockholder who attends such meeting in
person or by proxy, except by a stockholder who attends such meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 2.3 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place and notice need not be given of any such adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken,
unless such notice is otherwise expressly required by law or hereunder. At the
adjourned meeting, the Corporation may transact any business that might have
been transacted at the original meeting. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, the notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the adjourned meeting. At the adjourned meeting,
the Corporation may transact any business that might have been transacted at the
original meeting.
Section 2.4 List of Stockholders. The Secretary shall make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in alphabetical order
and specifying the address and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting is
to be held. The list shall also be produced and kept at the place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present. Upon the willful neglect or refusal of the Directors to produce such a
list at any meeting for the election of Directors, they shall be ineligible for
election to any office at such meeting. The stock ledger shall be the only
evidence of which stockholders are entitled to examine the stock ledger, the
list required by this section or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
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<PAGE> 38
Section 2.5 Quorum. Except as otherwise provided by law or the
Certificate of Incorporation, at each meeting of stockholders the presence in
person or by proxy of the holders of shares of stock having a majority of the
votes that could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute
a quorum. If a quorum is not present, the holders of the shares present in
person or represented by proxy at the meeting, and entitled to vote thereat,
shall have the power to adjourn the meeting to another time and/or place by the
affirmative vote of the holders of a majority of such shares.
Section 2.6 Voting; Proxies.
(a) At each meeting of the stockholders, each stockholder
shall be entitled to vote in person or by proxy each share or fractional share
of the stock of the Corporation having voting rights on the matter in question
and held by the stockholder and registered in the stockholder's name on the
books of the Corporation:
(i) on the date fixed pursuant to Section 7.5 of
these Bylaws as the record date for the determination of
stockholders entitled to notice of and to vote at such
meeting; or
(ii) if no such record date is so fixed, then (a) at
the close of business on the day next preceding the day on
which notice of the meeting is given or (b) if notice of the
meeting is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(b) Unless otherwise provided in a shareholders agreement,
persons holding stock of the Corporation in a fiduciary capacity shall be
entitled to vote such stock. Persons whose stock is pledged shall be entitled to
vote such shares, unless in the pledgor's transfer on the books of the
Corporation he expressly empowered the pledgee to vote such shares, in which
case only the pledgee or the pledgee's proxy may represent and vote such stock.
Stock having voting power standing of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants in common,
tenants by entirety or otherwise, or with respect to which two or more persons
have the same fiduciary relationship, shall be voted in accordance with the
provisions of the General Corporation Law of the State of Delaware.
(c) Unless otherwise provided in a shareholders agreement,
voting rights may be exercised by the stockholder entitled thereto in person or
by the stockholder's proxy appointed by an instrument in writing, subscribed by
such stockholder or by his attorney thereunto authorized and delivered to the
secretary of the meeting; provided, however, that no
3
<PAGE> 39
proxy shall be voted or acted upon after three years from its date, unless that
proxy shall provide for a longer period. A duly executed proxy shall be
irrevocable if it so states and if, and only for so long as, it is coupled with
an interest sufficient in law to support an irrevocable power. A stockholder who
may have given a proxy prior to any meeting shall not, solely by attending such
meeting, revoke the same unless he notifies the secretary of the meeting of his
intent to revoke the proxy, in writing, prior to the voting of the proxy. At any
meeting of the stockholders at which a quorum is present, all matters (except as
otherwise provided in the Certificate of Incorporation, in these Bylaws or by
law) shall be decided by the vote of a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat and
thereon. Voting at any meeting of the stockholders on any question need not be
by ballot, unless so directed by the chairman of the meeting. On a vote by
ballot each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and it shall state the number of shares voted.
Section 2.7 Conduct of Meetings. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his or her absence by
the President, or in his or her absence by a Vice President, or in the absence
of the foregoing persons by a Chairman designated by the Board of Directors, or
in the absence of such designation by a Chairman chosen at the meeting by the
stockholders attending. The Corporation's Secretary shall act as secretary of
the meeting, but in his or her absence the Chairman of the meeting may appoint
any person to act as secretary of the meeting.
Section 2.8 Action Without Meeting. Any action required or permitted to
be taken at any annual or special meeting of stockholders of the Corporation may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing setting forth the action so taken shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Any action taken pursuant to such written consent of the stockholders shall have
the same force and effect as if taken by the stockholders at a meeting thereof.
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1 General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
4
<PAGE> 40
Section 3.2 Number and Term of Office. The number of directors shall be
initially as set forth in the Certificate of Incorporation of the Corporation or
as fixed by the Incorporator of the Corporation, and shall thereafter be as
fixed by the Board of Directors. Directors need not be stockholders of the
Corporation. The exact number of directors shall be as established by resolution
of the Board in conformity with applicable laws. The directors of the
Corporation shall hold office until their successors shall have been duly
elected or appointed and shall qualify or until their resignation or removal in
the manner hereinafter provided.
Section 3.3 Election of Directors. The Board of Directors shall
initially consist of the persons named as directors by the incorporator, and
each director so elected shall hold office until the first annual meeting of the
stockholders or until a successor is elected and qualified. At the first annual
meeting of the stockholders and at each annual meeting thereafter, the
stockholders shall elect directors, each of whom shall hold office for a term of
one year or until a successor is elected and qualified.
Section 3.4 Resignations; Removal. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein or, if the time is not specified, immediately upon its receipt by the
Board or Secretary. Unless otherwise specified in the notice, the acceptance of
such resignation shall not be necessary to make it effective. Any director may
be removed at any time, with or without cause, by the holders of a majority of
shares of stock of the Corporation then entitled to vote at an election of
directors, except as otherwise provided by statute.
Section 3.5 Vacancies. Any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors or
any other cause, may be filled by the remaining directors or by the shareholders
by a plurality of the votes cast at a meeting of stockholders. Each director so
chosen to fill a vacancy shall hold office until his successor shall have been
elected and shall qualify or until he shall resign or shall have been removed in
the manner provided herein.
Section 3.6 Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting.
Directors may participate in any regular or special meeting of the
Board by means of conference telephone or similar communications equipment
pursuant to which all persons
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participating in the meeting of the Board can hear each other, and such
participation shall constitute presence in person at such meeting.
Section 3.7 Annual Meeting. The Board shall meet as soon as practicable
after each annual election of directors, and notice of such annual meeting shall
not be required.
Section 3.8 Regular Meetings. Regular meetings of the Board may be held
at such times as the Board shall from time to time by resolution determine. If
any day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting shall be held at the same hour and
place on the next succeeding business day not a legal holiday. Except as
required by law, notice of regular meetings need not be given.
Section 3.9 Special Meetings. Special meetings of the Board shall be
held whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of the
time and place of each such special meeting shall be mailed to each director,
addressed to him at his residence or usual place of business, at least three (3)
days before the day on which the meeting is to be held, or shall be sent to him
at such place by facsimile telecommunication, telegraph or cable or be delivered
personally not less than forty-eight (48) hours before the time at which the
meeting is to be held. Except where otherwise required by law or by these
Bylaws, notice of the purpose of a special meeting need not be given. Notice of
any meeting of the Board shall not be required to be given to any director who
is present at such meeting other than a director who attends such meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Section 3.10 Quorum and Manner of Acting. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the authorized number
of directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. If no quorum exists, a majority of directors present at
any meeting may adjourn the same from time to time until a quorum is present.
Notice of any adjourned meeting need not be given.
Section 3.11 Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of the proceedings of the Board or committee.
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Section 3.12 Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
director for any expense incurred on account of attendance at any meetings of
the Board or committees of the Board. Neither the payment of such compensation
nor the reimbursement of such expenses shall be construed to preclude any
director from serving the Corporation or its subsidiaries in any other capacity
and receiving compensation therefor.
Section 3.13 Committees. By resolution passed by a majority of the
whole Board, the Board may designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the Board's resolution and except as otherwise limited
by law, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers requiring it. Any such
committee shall keep written minutes of its meetings and report the same to the
Board at the next regular meeting of the Board. In the absence or
disqualification of a member of a committee and that member's alternate, if the
Board appoints alternates, the member or members thereof present at any meeting
and not disqualified from voting (whether or not the member or members
constitute a quorum) may unanimously appoint another member of the Board to act
at the meeting in the place of any such absent or disqualified member.
Section 3.14 Committee Rules. Each committee of the Board of Directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by resolution of the Board
designating such committee, but in all cases the presence of at least a majority
of the members of such committee shall be necessary to constitute a quorum.
Section 3.15 Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors or any committee designated by
the Board at which action on any corporate matter is taken shall be deemed to
have assented to the action taken unless his dissent is entered in the minutes
of the meeting or unless he files his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof or
forwards such dissent by registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
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ARTICLE 4
OFFICERS
Section 4.1 Number. The officers of the Corporation shall be chosen by
the Board and shall consist of a President, a Secretary, a Treasurer and such
other officers and assistant officers as may be deemed necessary or desirable by
the Board of Directors. The Board may, if it so determines, elect one or more
Vice Presidents and may choose a Chairman of the Board and Chief Executive
Officer from among its members. Any number of offices may be held by the same
person. In its discretion, the Board of Directors may choose not to fill any
office for any period as it may deem advisable, except the offices of President
and Secretary.
Section 4.2 Election; Term of Office; Qualifications. The officers of
the Corporation, except such officers as may be appointed in accordance with
Section 4.3, shall be elected annually by the Board at the first meeting thereof
held after the election of the Board. Each officer shall hold office until his
successor has been duly chosen and qualifies or until his resignation or removal
in the manner hereinafter provided.
Section 4.3 Assistants, Agents and Employees, Etc. In addition to the
officers specified in Section 4.1, the Board may appoint such other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority and perform such duties
as the Board may from time to time determine. The Board may delegate to any
officer of the Corporation or any committee of the Board the power to appoint,
remove and prescribe the duties of any such assistants, agents or employees.
Section 4.4 Resignation; Removal. Any officer or agent may resign at
any time upon written notice to the Board or the Secretary of the Corporation.
Any officer or agent elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever in its judgment the best interests of
the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 4.5 Vacancies. A vacancy in any office caused by death,
resignation, removal, disqualification or otherwise, may be filled by the Board
for the unexpired portion of the term of that office by a majority vote of the
directors then in office.
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Section 4.6 Chairman of the Board and Chief Executive Officer
("Chairman"). The Chairman, if one is elected, shall preside at all meetings of
the Board and stockholders; shall have, with the assistance of the President,
general responsibility for the active management of the business of the
Corporation; and shall perform such other duties and have such other powers as
the Board may from time to time prescribe. In addition to the President, the
Chairman shall have authority to execute bonds, mortgages and other contracts
(whether or not requiring a seal), except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof are expressly delegated by the Board to some other officer or agent of
the Corporation.
Section 4.7 The President. The President, subject to guidance and
assistance of the Chairman of the Board, if one is elected, shall preside at all
meetings of the stockholders; shall have general and active management of the
business of the Corporation; shall, in the absence of the Chairman, preside at
meetings of the Board and stockholders; and shall see that all orders and
resolutions of the Board are carried into effect. The President shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof are expressly
delegated by the Board to some other officer or agent of the Corporation.
Section 4.8 Vice President. The Vice President, or if there shall be
more than one, the vice presidents in the order determined by the Board, shall,
in the absence or disability of the President, perform the duties and exercise
the powers of the President and shall perform such other duties and have such
other powers as the Board or the Chairman may, from time to time, determine or
these bylaws may prescribe.
Section 4.9 Secretary and Assistant Secretaries. The Secretary shall
attend all meetings of the Board and all meetings of the stockholders; shall
record all the proceedings of the meetings of the stockholders and of the Board
in a book to be kept for that purpose; and shall perform like duties for the
Board's standing committees when required. The Secretary shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of the
Board; shall perform such other duties as may be prescribed by the Board or
President, under whose supervision he or she shall act; shall have custody of
the corporate seal of the Corporation; and shall have authority to affix the
same to any instrument requiring it and, when it is so affixed, may attest it by
his or her signature. The Board may give general authority to any other officer
to affix the seal of the Corporation and to attest the affixing by his or her
signature. The Assistant Secretary, or if there be more than one, the assistant
secretaries in the order determined by the Board, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board may from time to time prescribe.
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Section 4.10 Treasurer and Assistant Treasurer. The Treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the Corporation as may be ordered by the Board taking proper
vouchers for such disbursements; and shall render to the President and to the
Board, at its regular meetings or when the Board so requires, an account of the
Corporation. If required by the Board, the Treasurer shall give the Corporation
a bond (which shall be rendered every six (6) years) in such sums and with such
surety or sureties as shall be satisfactory to the Board for the faithful
performance of the duties of the office of Treasurer and for the restoration to
the Corporation, in case of death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in the possession or under the control of the Treasurer belonging to the
Corporation. The Assistant Treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the Board, shall, in the absence
or disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers as
the Board may from time to time prescribe.
Section 4.11 Compensation. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such officers
shall be prevented from receiving such compensation by reason of the fact that
he or she is also a director of the Corporation. Nothing contained herein shall
preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he or she is also a director of the Corporation.
ARTICLE 5
INDEMNIFICATION
Section 5.1 Action, Etc. Other Than by or in the Right of the
Corporation. The Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit
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or proceeding by judgment, order, settlement or conviction, or upon a plea of
nolo contenders or its equivalent, shall not of itself create a presumption that
the person did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, or, with respect
to any criminal action or proceeding, that he had reasonable cause to believe
that his or her conduct was unlawful.
Section 5.2 Actions, Etc., by or in the Right of the Corporation. The
Corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys, fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the Court of Chancery of
the State of Delaware or such other court shall deem proper.
Section 5.3 Determination of Right of Indemnification. Any
indemnification under Section 5.1 or 5.2 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 5.1 or 5.2. Such determination shall be made (i) by
the Board by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or (iii) by the
stockholders.
Section 5.4 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 5.1 or 5.2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
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Section 5.5 Prepaid Expenses. Expenses incurred by an officer or
director in defending a civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
in the specific case upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the Corporation as
authorized in this Article. Such expenses (including attorneys' fees) incurred
by other employees and agents may be so paid upon such terms and conditions, as
the Board deems appropriate.
Section 5.6 Other Rights and Remedies. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 5.7 Insurance. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
Section 5.8 Constituent Corporations. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
Section 5.9 Other Enterprises, Fines, and Serving at Corporation's
Request. For the purposes of this Article, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall
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include any service as a director, officer, employee or agent of the Corporation
that imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as used in this Article.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 6.1 Execution of Contracts. The Board, except as otherwise
provided in these Bylaws, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name and on
behalf of the Corporation, and such authority may be general or confined to
specific instances. It may appoint, or authorize any officer or officers to
appoint, one or more transfer clerks or one or more transfer agents and one or
more registrars, and may require all certificates for stock to bear the
signature or signatures of any of them.
Section 6.2 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
Section 6.3 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power is
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, the President, any Vice President
or the Treasurer (or any other officer or officers, assistant or assistants,
agent or agents, or attorney or attorneys of the Corporation who shall from time
to time be determined by the Board) may endorse, assign and deliver checks,
drafts and other orders for the payment of money that are payable to the order
of the Corporation.
Section 6.4 General and Special Bank Accounts. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by any officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation
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to whom such power is delegated by the Board. The Board may make such special
rules and regulations with respect to such bank accounts, not inconsistent with
the provisions of these Bylaws, as it may deem expedient.
ARTICLE 7
STOCK
Section 7.1 Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
are issued and shall be signed in the name of the Corporation by the President
or a Vice President, and by the Secretary or an Assistant Secretary or by the
Treasurer or an Assistant Treasurer. Any or all of the signatures on the
certificates may be a facsimile. If any officer, transfer agent or registrar who
has signed, or whose facsimile signature has been placed upon, any such
certificate, has ceased to be such officer, transfer agent or registrar before
such certificate is issued, such certificate may nevertheless be issued by the
Corporation with the same effect as though the person who signed such
certificate, or whose facsimile signature was placed thereupon, were such
officer, transfer agent or registrar at the date of issue. A record shall be
kept of the respective names of the persons, firms or corporations owning the
stock represented by such certificates, the number and class of shares
represented by such certificates, respectively, and the respective dates
thereof, and in case of cancellation, the respective dates of cancellation.
Every certificate surrendered to the Corporation for exchange or transfer shall
be cancelled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
cancelled, except as provided in Section 7.4.
Section 7.2 Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 7.3, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed by the Corporation to be the owner thereof
for all purposes. Whenever any transfer of shares is made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates are presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
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Section 7.3 Regulations. The Board may make such rules and regulations
as it may deem expedient (if not inconsistent with these Bylaws) concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
Section 7.4 Lost, Stolen, Destroyed and Mutilated Certificates. In any
case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper to do so.
Section 7.5 Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders (or any adjournment thereof) or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If, in any case involving the
determination of stockholders for any purpose other than notice of or voting at
a meeting of stockholders or expressing consent to corporate action without a
meeting, the Board shall not fix such a record date, then the record date for
determining stockholders for such purpose shall be the close of business on the
day on which the Board adopts the resolution relating thereto. A determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of such meeting; provided, however, that the
Board may fix a new record date for the adjourned meeting.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board.
Section 8.2 Seal. The Board shall provide a corporate seal, which shall
be in the form of a circle and shall bear the name of the Corporation and words
and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
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Section 8.3 Waiver of Notices. Whenever notice is required to be given
by these Bylaws, by the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
Section 8.4 Amendments. These Bylaws, or any of them, may be amended,
modified, repealed or adopted and new Bylaws may be made (i) by the Board,
acting at any meeting of the Board, or (ii) by the stockholders, at any annual
meeting of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made or
altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
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EXHIBIT 10.122
[EXECUTION COPY]
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT (this "Agreement") made and
entered into as of this 3rd day of February, 2000 between ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation, (the "Company"), and RDVEPCO, L.L.C., a
Michigan limited liability company ("Lender").
Recitals:
The parties entered into a Loan Agreement dated as of December 13, 1999
pursuant to which the Company borrowed from Lender on December 14, 1999 the sum
of Fourteen Million Dollars ($14,000,000.00) (the "Original Loan Agreement").
The parties wish to amend and restate the Original Loan Agreement on the terms
and conditions set forth herein.
NOW, THEREFORE, the parties promise and agree as follows:
ARTICLE I
Definitions
In addition to terms defined elsewhere in this Agreement, the following
definitions shall apply for purposes of this Agreement:
"Additional Collateral Real Estate" means the parcels of
improved real estate owned by the Company identified on Exhibit B to
this Agreement.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Business Day" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the City of Grand Rapids,
Michigan are authorized by law, regulation or executive order to remain
closed. If a payment date is not a Business Day, payment may be made on
the next succeeding day that is a Business Day.
"Contract" means any contract, agreement, undertaking or
commitment (written or oral, formal or informal, firm or contingent) to
which the Company or any of its Subsidiaries is a party or by which the
Company, any of its Subsidiaries, or any of their respective assets are
bound, and which has current operative or executory effect.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
<PAGE> 2
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means the United States, any state or
municipality, the government of any foreign country, any subdivision of
any of the foregoing, or any authority, department, commission, board,
bureau, agency, court, or instrumentality of any of the foregoing.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate
swap agreements, currency exchange or interest rate cap agreements and
currency exchange or interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against
fluctuations in currency exchange or interest rates.
"Holder" means the Lender and any subsequent holder of the
Amended Note.
"Holding" means AHC Purchaser Holding, Inc., a Delaware
corporation.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof) or banker's acceptances or representing obligations in
respect of a lease that would at such time be required to be
capitalized on a balance sheet in accordance with GAAP or the balance
deferred and unpaid of the purchase price of any property (other than
contingent or "earnout" payment obligations) or representing any
Hedging Obligations, except any such balance that constitutes an
accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not
such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the guarantee, whether or not conditional, by such
Person of any indebtedness of any other Person.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect
of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing
of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
<PAGE> 3
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"Original Collateral Real Estate" means the parcels of
unimproved real estate owned by the Company identified on Exhibit A to
this Agreement.
"Permitted Liens" means (i) Liens for taxes and assessments
or governmental charges or levies not at the time due, and (ii)
easements that do not impair or restrict the Company's or Subsidiary's
use and enjoyment of the property affected thereby.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization, government or any agency
or political subdivision thereof or any other entity.
"Purchaser" means AHC Purchaser, Inc., a Delaware corporation.
"Subsidiary" means any corporation, partnership, limited
partnership, limited liability company, association or other business
entity of which securities or other ownership interests representing
more than fifty percent (50%) of the ordinary voting power are, at the
time as of which any determination is being made, owned or controlled
by the Company or one or more Subsidiaries of the Company.
"SEC" means the Securities and Exchange Commission.
"1934 Act" means the Securities Exchange Act of 1934, as
amended.
"1933 Act" means the Securities Act of 1933, as amended.
ARTICLE II
Amended Tranche A Loan; Amended Note; Amended Note Closing;
Amended Note Closing Date; Facility Fees
2.1. Amended Tranche A Loan; Amended Note. On December 14, 1999
pursuant to the Original Loan Agreement, Lender disbursed to Company the sum of
Fourteen Million Dollars ($14,000,000.00) in principal amount evidenced by a
promissory note in the form of Exhibit B to the Original Loan Agreement (the
"Original Note"). Under and subject to the terms and conditions of this
Agreement, Company shall borrow from Lender an additional Twenty Million Dollars
($20,000,000.00) (the "Additional Advance"), or a total of Thirty Four Million
Dollars ($34,000,000.00) (the "Amended Tranche A Loan"). At the time of
disbursement of the Additional Advance, the Original Note shall be marked
"Cancelled" by the Lender and returned to Company and Company shall execute and
deliver to Lender a promissory note in the form of
<PAGE> 4
Exhibit C attached hereto, the terms and conditions of which are incorporated in
and made a part of this Agreement (the "Amended Note"). Fifteen Million Dollars
($15,000,000.00) of the Additional Advance shall be disbursed directly to
Company and Five Million Dollars ($5,000,000.00) thereof shall be paid to Hecht
& Lentz as escrow agent pursuant to the escrow agreement in the form attached
hereto as Exhibit D (the "Escrow Agreement"). This is not a revolving credit
agreement and any part of the principal of the Amended Note which has been
repaid from time to time may not be reborrowed.
2.2. Closing; Closing Date. The closing of the Additional Advance (the
"Amended Note Closing") shall occur at 10:00 a.m. at the offices of Company on
or before February 1, 2000 or such other time and place as the parties may agree
in writing (the "Amended Note Closing Date") upon satisfaction of the terms and
conditions to Lender's obligations to make the Additional Advance as set forth
in Article IV, below.
2.3. Fees. In addition to the fees previously paid pursuant to the
Original Loan Agreement, on or before the Amended Note Closing, the Company
agrees to pay to the Lender a facility fee of Eight Hundred Thousand Dollars
($800,000.00). On each monthly anniversary of the Amended Note Closing Date,
starting with the third monthly anniversary, Company shall pay Lender an
additional facility fee equal to Thirteen Thousand Three Hundred Thirty Three
Dollars ($13,333.00), multiplied by a fraction, the numerator of which is the
amount by which the outstanding principal amount of the Amended Note at such
date exceeds Fourteen Million Dollars ($14,000,000.00) and the denominator of
which is One Million Dollars ($1,000,000.00). None of such facility fees shall
be prorated in the event of prepayment of the Amended Note. If not paid prior to
the Amended Note Closing, Company agrees that Lender may deduct the facility fee
due on or before the Amended Note Closing from the proceeds of the Additional
Advance advanced directly to Company. If any facility fee is not paid when due,
interest shall accrue thereon at the Default Interest Rate, as defined in
Section 3.1(a).
ARTICLE III
Terms of Amended Tranche A Loan and Amended Note
3.1. Interest Rate; Payment; Usury.
(a) Provided that no Event of Default has occurred and is
continuing and subject to the other provisions of this Agreement: (i)
during the period from and including December 14, 1999 to, but not
including, the Amended Note Closing Date, the Amended Tranche A Loan
shall bear interest at the rate of eight percent (8%) per annum, (ii)
during the period from and including the Amended Note Closing Date to,
but not including, the date on which all outstanding principal and
accrued and unpaid interest and facility fees on the Amended Tranche A
Loan have been paid in full, principal amount of the Amended Tranche A
Loan outstanding from time to time shall bear interest at the rate of
ten percent (10%) per annum. During any period that an Event of Default
shall have occurred and be continuing, interest on principal amount of
the Amended Tranche A Loan outstanding from time to time shall accrue
at a rate equal to fifteen percent per
<PAGE> 5
annum (15%) (the "Default Interest Rate"). Notwithstanding anything
contained herein to the contrary, in no event shall the interest rate
on the Amended Tranche A Loan, including the Default Interest Rate,
exceed the highest rate permitted by applicable law. Interest on the
Amended Tranche A Loan, including interest at the Default Interest
Rate, shall be based on a 360 day year and interest shall accrue and be
payable for the actual number of calendar days elapsed. Interest on the
principal amount outstanding from time to time shall be payable monthly
in arrears beginning on March 31, 2000 and on the last day of each
month thereafter until the principal and all accrued interest and
facility fees have been paid in full.
(b) It is the intention of the Company and Lender to conform
strictly to applicable usury laws now or hereafter in force, and any
interest payable under this Agreement or the Amended Note shall be
subject to reduction to an amount not to exceed the maximum
non-usurious amount for commercial loans allowed under such applicable
usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. In the event such interest (whether
designated as interest, service charges, points, or otherwise) does
exceed the maximum legal rate, it shall be (i) canceled automatically
to the extent that such interest exceeds the maximum legal rate; (ii)
if already paid, at the option of the Holder, either be rebated to the
Company or credited on the principal amount of the Amended Tranche A
Loan; or (iii) if the Amended Tranche A Loan has been prepaid in full,
then such excess shall be rebated to the Company. It is further agreed,
without limitation of the foregoing, that all calculations of the rate
of interest contracted for, charged, or received under this Agreement
and the Amended Note that are made for the purpose of determining
whether such rate exceeds the maximum legal rate, shall be made, to the
extent permitted by applicable law, by amortizing, prorating,
allocating, and spreading throughout the full stated term of the
Amended Tranche A Loan (and any extensions of the term thereof that may
be hereafter granted) all such interest at any time contracted for,
charged, or received from the Company or otherwise by the Holder so
that the rate of interest on account of the Amended Tranche A Loan, as
so calculated is uniform throughout the term thereof. If the Company is
exempt or hereafter becomes exempt from applicable usury statutes or
for any other reason the rate of interest to be charged on the Amended
Tranche A Loan is not limited by law, none of the provisions of this
paragraph shall be construed so as to limit or reduce the interest or
other consideration payable under this Agreement or the Amended Note or
under the instrument securing payment thereof. The terms and provisions
of this paragraph shall control and supersede every other provision of
all agreements between the parties hereto.
3.2. Maturity. Unless the same shall become due earlier as a result of
acceleration of the maturity, the Amended Tranche A Loan shall mature on the
first anniversary of the Amended Note Closing Date at which time the outstanding
principal balance of the Amended Tranche A Loan and all accrued and unpaid
interest and facility fees shall become due and payable.
<PAGE> 6
3.3. Prepayments; Partial Releases.
(a) The Company may from time to time prepay the Amended
Tranche A Loan, in whole or in part, at any time. Any partial
prepayment shall be applied first to interest which is accrued and
unpaid, including interest on any delinquent facility fees, then to the
payment of any facility fees that are due and payable and then to
principal.
(b) Attached hereto as Schedule 3.3 is a schedule of each
release price (the "Release Prices") applicable to each parcel of
Additional Collateral Real Estate. Upon payment by the Company of the
Release Price applicable to any particular parcel of Additional
Collateral Real Estate and during such time as no Event of Default is
then outstanding, Holder shall cause any and all mortgages, deeds of
trust, assignments of leases and rents, UCCs and other security
documents encumbering such Additional Collateral Real Estate to be
released and marked satisfied of record. No such partial release shall
limit or impair the right of Lender in any other collateral pledged
hereunder.
3.4. Manner of Payment. The Company shall make payments in respect of
the Amended Tranche A Loan (including principal and interest) by wire transfer
of immediately available funds to the account specified by the Holder.
3.5. Events of Default. Each of the following constitutes an "Event of
Default":
(i) default for five (5) days in the payment when due of
interest or any facility fee on the Amended Tranche A Loan;
(ii) default in payment when due of the principal of the
Amended Tranche A Loan;
(iii) failure of the Company to pay on or before the due date
thereof any construction or other costs and expenses with respect to
the Additional Collateral Real Estate required in order for such
properties to receive governmental approval for occupancy as assisted
living facilities, elder care facilities or Alzheimer care units;
(iv) failure by the Company for 15 days after notice from the
Holder to comply with the provisions described under Article VI hereof;
provided, however, if the curing of such failure may not reasonably be
accomplished within such time frame, the Company shall have such
additional time as is necessary to effect such cure (not to exceed 30
days);
(v) failure by the Company for 30 days after notice from the
Holder to comply with any of its other covenants or agreements in this
Agreement or the Amended Note; provided, however, if the curing of such
failure may not reasonably be accomplished within such time frame, the
Company shall have such additional time as is necessary to effect such
cure (not to exceed 60 days);
<PAGE> 7
(vi) any of the representations or warranties of the Company
set forth in the Original Loan Agreement or this Agreement or
incorporated herein by reference or set forth in any statement or
schedule delivered pursuant to the Original Loan Agreement or this
Agreement was untrue or incorrect in any material respect as of the
date of execution of the Original Loan Agreement or this Agreement,
respectively or as of the Amended Note Closing Date as if made on such
date;
(vii) default by the Company or any of its Subsidiaries under
any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness of the
Company or any of its Subsidiaries, whether such Indebtedness now
exists, or is created after the date hereof, which default results in
the acceleration of such Indebtedness prior to its express maturity and
the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which has been so
accelerated, aggregates $5,000,000 or more;
(viii) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $1,000,000, which
judgments are not paid, discharged or stayed for a period of 45 days;
(ix) the Company or any of its Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a custodian of it
or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become
due; or
(x) a court of competent jurisdiction enters an order or
decree in an involuntary case or proceeding under any Bankruptcy Law
that:
(a) is for relief against the Company or any of its
Subsidiaries;
(b) appoints a custodian of the Company or any of its
Subsidiaries or for all or substantially all of the property
of the Company or any of its Subsidiaries; or
<PAGE> 8
(c) orders the liquidation of the Company or any of
its Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days.
3.6. Acceleration.
(a) Declaration of Acceleration. If any Event of Default
occurs and is continuing, the Holder may, upon notice to the Company,
declare the Amended Tranche A Loan to be due and payable immediately;
and upon any such declaration all principal and interest on the Amended
Tranche A Loan shall become immediately due and payable; provided,
however, in the case of an Event of Default arising from certain events
of bankruptcy or insolvency described in clauses (ix) and (x) of
Section 3.5 hereof, with respect to the Company or any Subsidiary, the
Amended Tranche A Loan shall ipso facto become due and payable without
further action or notice on the part of the Holder.
(b) Rescission. At any time after a declaration of
acceleration with respect to the Amended Tranche A Loan, the Holder
may, in its sole discretion, rescind and cancel such declaration and
its consequences. No such rescission shall affect any subsequent
Default or impair any right with respect thereto.
3.7. Other Remedies. If an Event of Default occurs and is continuing,
the Holder may pursue any available remedy to collect the payment of principal
and interest (including interest at the Default Interest Rate) on the Amended
Tranche A Loan or to enforce the performance of any provision of the Amended
Note or this Agreement. A delay or omission by the Holder in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
3.8. Waiver Of Past Defaults. The Holder may waive any existing Default
or Event of Default and its consequences under this Agreement. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Agreement; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
3.9. Priorities. Any sums collected by the Holder hereunder and under
the Amended Note shall be applied first to all costs and expenses of collection,
including reasonable attorneys' fees, then to accrued and unpaid interest
(including at the Default Interest Rate to the extent applicable) and then to
principal.
<PAGE> 9
ARTICLE IV
Conditions to Lender's Obligations
4.1. Conditions. Lender's obligation to make the Additional Advance
shall be subject to the prior satisfaction of the following conditions, except
to the extent waived by Lender in writing:
(a) Company shall have paid to the Lender the facility fee due
on or before the Amended Note Closing Date required pursuant to Section
2.3, above, and shall have reimbursed Lender for the fees and expenses
for which Company is liable pursuant to the terms of Section 7.4,
below, to the extent documented to Company as of the Closing.
(b) With respect to each parcel of the Original Collateral
Real Estate, Company shall have executed and caused to be duly recorded
an amendment to the existing mortgage or deed of trust in favor of
Lender in form reasonably acceptable to Lender securing payment of all
amounts owing under this Agreement and the Amended Note.
(c) With respect to the Additional Collateral Real Estate:
(i) Company shall have provided evidence reasonably
satisfactory to Lender that the purchase price paid by the
Company and costs incurred by the Company to the date of this
Agreement for the Additional Collateral Real Estate aggregated
not less than Nineteen Million Seven Hundred Sixty Eight
Thousand Eight Hundred Six Dollars ($19,768,806.00) and that
not in excess of Three Million Six Hundred Eighty Four
Thousand Dollars ($3,684,000.00) is required to be expended in
order to receive governmental approval for occupancy thereof;
(ii) none of the such properties shall be subject to
any Lien unacceptable to Lender;
(iii) Company shall have provided to Lender surveys,
environmental reports and such other matters as reasonably
required by Lender relating to such properties and Lender
shall be satisfied therewith in its sole discretion;
(iv) Lender shall have received the commitment for
the issuance by Chicago Title Insurance Company of an ALTA
lender's policy of title insurance (without standard
exceptions and with such endorsement as directed by Lender)
with respect to each of such properties (collectively, the
"Additional Title Commitments");
(v) Company shall have executed and caused to be duly
recorded mortgages or deeds of trust and assignments of rent
in favor of Lender in forms reasonably acceptable to Lender
and its counsel encumbering each of such properties and shall
have executed and filed Forms UCC 1 with respect to the
<PAGE> 10
personal property located at each of such properties in forms
reasonably acceptable to Lender and its counsel and have shall
provided evidence of each of the foregoing requirements to
Lender; and
(vi) Each of the lessees of such properties shall
have executed an estoppel, subordination, non-disturbance and
attornment agreement in form and substance satisfactory to
Lender and its counsel.
(d) Holding shall have guaranteed the Amended Tranche A Loan
in form and substance satisfactory to Lender and its counsel.
(e) Company shall have pledged to Lender as collateral
security for the performance of its obligations pursuant to this
Agreement and the Amended Note all of the issued and outstanding shares
of Holding in form and substance satisfactory to Lender and its
counsel.
(f) Lender shall have received an opinion of Rogers & Hardin,
counsel to Company and Holding, in form and substance acceptable to the
Lender and its counsel and opinions of local counsel reasonably
satisfactory to Lender and its counsel with respect to the validity and
enforceability of each form of mortgage, deed of trust and assignment
of rents referred to in subsections (b) and (c) of this Section 4.1.
(g) Each of the representations and warranties of the Company
set forth in this Agreement or incorporated herein by reference or set
forth in any statement or schedule delivered pursuant to this Agreement
are true and correct in all material respects as of the date of
execution of this Agreement and as of the date of the Amended Note
Closing Date as if made on such date.
(h) The Company shall not be in default with respect to any of
its covenants and agreements set forth in Article VI of this Agreement
or set forth elsewhere in this Agreement; and
(i) No Default or Event of Default shall have occurred and be
continuing.
4.2. Waiver; Termination. Lender may waive in writing any of the
conditions to its obligations set forth in Section 4.1 in its sole discretion.
If the conditions to Lender's obligations set forth in Section 4.1, shall not
have been satisfied or waived by Lender on or before February 4, 2000, Lender
may, in its sole discretion, terminate its obligation to make the Additional
Advance without any liability on the part of the Lender to any other Person, in
which event this Agreement shall be null and void and the provisions of the
Original Loan Agreement and the Original Note shall remain in effect.
<PAGE> 11
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company. In order to induce
the Lender to enter into this Agreement, the Company represents and warrants to
the Lender, which representation and warranties shall survive the Closing and be
independent of any investigation or lack of investigation of Company made by or
on behalf of Lender, as follows:
(a) Organization and Standing; Issued and Outstanding Shares.
Each of the Company and Holding is duly incorporated and validly
existing under the laws of the State of Delaware, and has all requisite
corporate power and authority to own or lease its properties and assets
and to conduct its business as it has been and is proposed to be
conducted. Each of the Company and Holding is qualified to do business
and in good standing in each jurisdiction in which the failure to so
qualify could have a material adverse effect upon its assets,
properties, liabilities, financial condition, results of operations or
business. Holding has no Subsidiaries other than Purchaser, all of the
issued and outstanding shares of which are owned by Holding. The
Certificate of Incorporation and amendments thereto of each of Holding
and Purchaser are in the form previously provided to Lender and the
issued and outstanding capital stock of Holding is as set forth in
Schedule 5.1(a).
(b) Indebtedness and Contracts of Holding. Except for such
Contracts or Indebtedness as are contemplated hereby or thereby as set
forth on Schedule 5.1(b), Holding has no Indebtedness and is not a
party to any Contracts (whether formal or informal, written or oral,
firm or contingent), other than the pledge by Holding of the capital
stock of Purchaser delivered in connection with the recent financing
provided by GMAC.
(c) Capacity of the Company; Consents; Execution of
Agreements. The Company has the requisite power, authority, and
capacity to enter into this Agreement and the agreements contemplated
hereby and to perform the transactions and obligations to be performed
by the Company hereunder and thereunder. Except as described on
Schedule 5.1(c) hereto, no consent, authorization, approval, license,
permit or order of, or filing with, any Person or Governmental
Authority is required in connection with the execution and delivery of
this Agreement or the performance by the Company of the transactions
and obligations to be performed by it hereunder, except as contemplated
by this Agreement. The failure to obtain any of the consents described
on Schedule 5.1(c) prior to the Amended Note Closing Date will not have
a material adverse effect upon the Company's assets, properties,
liabilities, financial condition, results of operations or business.
The execution and delivery of this Agreement and the performance of the
transactions and obligations contemplated hereby by the Company have
been duly authorized by all requisite action of the Company and
Holding, as applicable. This Agreement has been duly executed and
delivered by a duly authorized officer of the Company and constitutes,
or when executed and delivered will constitute, a valid and legally
binding agreement of the Company, enforceable in accordance with its
<PAGE> 12
terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws, both
state and federal, affecting the enforcement of creditors' rights or
remedies in general from time to time in effect and the exercise by
courts of equity powers or their application of principles of public
policy.
(d) Status of Amended Note. The Amended Note to be issued
hereunder, when issued by the Company to the Lender pursuant to the
terms of this Agreement, will be duly authorized and validly issued.
(e) Conflicts; Defaults. The execution and delivery of this
Agreement and the execution by Holding of a guaranty of the Amended
Tranche A Loan and the pledge by Company of the shares of Holding to
secure the Company's obligations hereunder and under the Amended Note,
and the performance by the Company and Holding of the transactions and
obligations contemplated hereby and thereby to be performed by each
will not (i) violate, conflict with, or constitute a default under any
of the terms or provisions of its certificate of incorporation or
bylaws, or any provisions of, or result in the acceleration of any
obligation under, any Contract, note, debt instrument, security
agreement, or other instrument to which the Company, Holding or any
other Subsidiary is a party or by which the Company, Holding or any
other Subsidiary or any of their respective assets is bound; (ii)
result in the creation or imposition of any Liens or claims upon the
assets of the Company, Holding or any other Subsidiary or their issued
and outstanding capital stock (except as contemplated by this
Agreement); (iii) constitute a violation of any law, statute, judgment,
decree, order, rule, or regulation of a Governmental Authority
applicable to the Company, Holding or any other Subsidiary; or (iv)
constitute an event which, after notice or lapse of time or both, would
result in any of the foregoing. Neither the Company, Holding or
Purchaser is presently in violation of any provision of its certificate
of incorporation or bylaws. Neither the Company nor any Subsidiary is
presently in default in any material respect under any of the terms or
provisions of any of its material Contracts, notes, debt instruments,
security agreements, or other instruments, or any order, judgment, or
decree relating to it or its business or by which it or any of its
assets is bound.
(f) Periodic Reports. The Company has timely filed with the
SEC all periodic reports heretofore required to be filed by it pursuant
to the 1934 Act and all such periodic reports (including the financial
statements or information forming a part thereof) are complete and
comply, in all material respects, with the requirements of the SEC
applicable to such periodic reports and financial statements.
(g) Compliance with Laws. The Company is not in violation of,
nor do any of its operations violate in any respect, any statute, law,
or regulation of any Governmental Authority applicable to the Company,
any of its assets, or the conduct of its business ("Applicable Laws"),
the violation of which reasonably could be anticipated to have a
material adverse effect upon the Company's assets, properties,
liabilities, financial condition, results of operations or business,
and no material expenditures are or, based on
<PAGE> 13
present requirements, will be required of the Company in order for it
to comply or remain in compliance with any Applicable Laws.
(h) Litigation. The Company is not a party to any material
legal action, suit, claim, investigation or proceeding which is not
adequately described in a periodic report heretofore filed by the
Company with the SEC and, to the best of the Company's knowledge and
belief after due inquiry, there exist no facts or circumstances which
reasonably could be anticipated to result in any such action, suit,
claim, investigation, or proceeding.
(i) Taxes. The Company has prepared and duly and timely filed
with each appropriate Governmental Authority, all material federal,
state, municipal, local and foreign tax returns, information returns
and other reports required to be filed on or before the date of this
Agreement and has paid all material taxes required to be paid by the
Company prior to the date of this Agreement in respect of the periods
covered by such returns and reports, except such taxes as are being
contested in good faith.
(j) Environmental Compliance. The Company and its Subsidiaries
are in compliance with all applicable federal, state and local laws and
requirements (including permit requirements) relating to the protection
of health or the environment in connection with the ownership,
operation and condition of its properties and business, except where
failure to comply would not have material adverse effect.
(k) Securities Laws. No consent, authorization, approval,
permit, or order of or filing with any Governmental Authority is
required in order for the Company to execute and deliver this Agreement
or to offer, issue, sell, or deliver the Amended Note. Based in part on
the representations of the Lender and under the circumstances
contemplated hereby and under current laws and regulations, the offer,
issuance, sale and delivery of the Amended Note to the Lender is exempt
from the prospectus delivery and registration requirements of the 1933
Act.
(l) Hedging Obligations. Company and its Subsidiaries do not
have any outstanding Hedging Obligations except to the extent entered
into pursuant to and in compliance with any credit agreements to which
they may be a party.
(m) Disclosure. The Company has fully responded to all written
requests for information and has accurately answered, to the best of
the Company's knowledge and belief after due inquiry, all written
questions from the Lender concerning the assets, properties,
liabilities, financial condition, results of operations, business and
prospects of the Company, and has not knowingly withheld any facts
relating thereto which it reasonably believed to be material with
respect to the assets, properties, liabilities, financial condition,
results of operations, business or prospects of the Company. No
information in this Agreement, or in any Schedule or Exhibit attached
to this Agreement or delivered to Lender in connection herewith,
contains any untrue statement of a material fact or when considered
together with all such information delivered to the Lender omits
<PAGE> 14
to state any material fact necessary in order to make the statements
made in the light of the circumstances under which they were made, when
taken as a whole, not misleading. The disclosures made in writing by
the Company in connection with this Agreement do not contain any untrue
statement of a material fact nor omit to state a material fact
necessary to make the statements made therein not misleading. There is
no fact or circumstance relating to the Company which materially and
adversely affects or in the future may, in the reasonable business
judgment of the Company, be expected materially and adversely to affect
the same which has not been set forth in this Agreement or the
Schedules hereto.
(n) Changes in Circumstances. Since September 30, 1999, the
Company has not suffered any material adverse change in its assets,
properties, liabilities, financial condition, results of operations,
business or prospects except for (i) the previously announced charge to
be incurred in the fourth quarter of 1999 (the amount of which charge
has not yet been determined or disclosed) and anticipated fourth
quarter loss (ii) the effect on future periods of the Company's
announced reduction in future new development activities (iii) the
effect on future periods of the Company's announced reduction in joint
venture activities and resulting impact on the Company's projected
income and (iv) the possible failure of the Company to comply with
certain financial covenants in effect with respect to existing
lenders/landlords as a result of the foregoing, resulting in the need
for the Company to renegotiate such covenants.
(o) Contracts. Except for this Agreement, the Subscription and
Organizational Agreement and the agreements contemplated hereby and
thereby, the Company has filed all material contracts required to be
filed by Item 601(b)(10) of Regulation S-K under the 1933 Act and the
1934 Act.
(p) Additional Collateral Real Estate. The purchase price paid
by the Company and costs incurred by the Company to the date of this
Agreement for the Additional Collateral Real Estate aggregated not less
than Nineteen Million Seven Hundred Sixty Eight Thousand Eight Hundred
Six Dollars (19,768,806.00) and not in excess of an additional Three
Million Six Hundred Eighty Four Thousand Dollars ($3,684,000.00) is
required to be expended in order to receive governmental approval for
occupancy thereof;
5.2 Representations and Warranties of the Lender. The Lender represents
and warrants to the Company that:
(a) Investment Intent. The Amended Note is being acquired for
its own account and not with the view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of
the 1933 Act. The Lender understands that the Amended Note has not been
registered under the 1933 Act by reason of its issuance in a
transaction exempt from the registration and prospectus delivery
requirements of the 1933 Act pursuant to Section 4(2) thereof. It
further understands that the Amended Note
<PAGE> 15
will bear the following legend and agrees that it will hold the Amended
Note subject thereto:
THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER THIS NOTE NOR
ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME
IS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION
REASONABLY SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE,
AMONG OTHER THINGS, AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY).
(b) Capacity of the Lender; Execution of Agreement. Lender has
all requisite power, authority, and capacity to enter into this
Agreement, and to perform the transactions and obligations to be
performed by it hereunder. This Agreement has been duly authorized,
executed and delivered by it and constitutes its valid and legally
binding obligation, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws, both state and
federal, affecting the enforcement of creditors' rights or remedies in
general from time to time in effect and the exercise by courts of
equity powers or their application of principles of public policy.
(c) Accredited Investor. The Lender and each member of Lender
is an "accredited investor" as defined in Rule 501 (a) of Regulation D
promulgated under the 1933 Act.
ARTICLE VI
Covenants and Agreements
6.1. Affirmative Covenants. So long as any Indebtedness remains
outstanding under this Agreement and the Amended Note, the Company covenants and
agrees that it will and will cause each Subsidiary to:
(a) Certain Information and SEC Reports. Furnish to Lender in
form and substance satisfactory to Lender:
(i) within five (5) days after the Company learns of
the commencement or overtly threatened commencement of any
material claim or suit, legal or equitable, or of any
administrative, arbitration, or other similar proceeding
against the Company or any of its Subsidiaries, or any of
their
<PAGE> 16
respective businesses, assets, or properties which claim or
proceeding, if determined adversely to the Company or such
Subsidiary, would be likely to have a material adverse effect
on the Company and its Subsidiaries, taken as a whole, written
notice of the nature and extent of such suit or proceeding;
(ii) within five (5) days after the Company learns of
any circumstance or event which reasonably can be expected to
have a material adverse effect on the assets, properties,
liabilities, financial condition, results of operations,
business, or prospects of the Company, written notice of the
nature and extent of such circumstance or event;
(iii) simultaneous with the transmission thereof to
Company's shareholders, copies of (or notice from an EDGAR
watch service of) all financial statements, proxy statements,
reports and any other general written communications which the
Company sends to its shareholders and copies (or notice from
an EDGAR watch service of) of all registration statements and
all regular, special or periodic reports which it files with
the SEC or with any securities exchange on which any of its
securities are then listed, and copies of all press releases
and other statements made available generally by the Company
to the public concerning material developments in the
Company's businesses; and
(vii) within ten (10) days after the Holder makes a
reasonable request therefor, such other data relating to the
business, affairs and financial condition of the Company or
any of its Subsidiaries.
(b) Taxes. Pay and discharge all taxes and other governmental
charges before the same shall become overdue, unless and to the extent
only that such payment is being contested in good faith.
(c) Insurance. Maintain insurance coverage on its physical
assets and against other business risks in such amounts and of such
types as are customarily carried by companies similar in size and
nature, and in the event of acquisition of additional property, real or
personal, or of incurrence of additional risks of any nature, increase
such insurance coverage in such manner and to such extent as prudent
business judgment and present practice would dictate.
(d) Examination of Books. Permit the Lender, through its
authorized attorneys, accountants and representatives, to examine the
Company's books, accounts, records, ledgers and assets of every kind
and description at all reasonable times upon oral or written request of
the Lender, at the Company's cost and expense (provided that so long as
the Company shall not be in default, the Company shall be obligated to
pay for no more than one (1) such examination per year).
(e) Notification of Events of Default, Acceleration or
Material Adverse Effect. Promptly notify the Lender of any condition or
event which constitutes, or with the
<PAGE> 17
passage of time and/or the giving of notice would constitute, an Event
of Default under this Agreement or of any acceleration of the maturity
of any Indebtedness aggregating $5 million or more of the Company, and
promptly inform Lender of the existence or occurrence of any condition
or event (other than conditions having an effect on the economy in
general) which could reasonably be anticipated to have a material
adverse effect upon the Company's financial condition.
(f) Maintenance of Licenses. Maintain in good standing all
licenses required by any Governmental Authority that may be necessary
or required for the Company and its Subsidiaries to carry on their
respective businesses, where the failure to maintain such licenses
would have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(g) ERISA Compliance. Comply with all material requirements
imposed by ERISA as presently in effect or hereafter promulgated,
including but not limited to, the minimum funding requirements of any
defined contribution employee benefit plan ("Pension Plan").
(h) Compliance with Law. Comply in all material respects with
all applicable laws, rules, regulations and orders of any Governmental
Authority, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property, including
without limitation the Collateral Real Estate, except to the extent
that compliance with any of the foregoing is then being contested in
good faith by appropriate legal proceedings and with respect to which
adequate financial reserves have been established on the books and
records of the Company and except where the failure to comply would not
have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
(i) Right of Co-Investment. Prior to issuing any equity
securities (otherwise than upon the exercise of currently outstanding
stock options or upon the conversion of currently outstanding
convertible debentures) for aggregate proceeds of in excess of $25
million at any time prior to December 31, 2000 (an "Alterra Equity
Transaction"), the Company shall use reasonable efforts to afford
Lender the opportunity to co-invest in the Alterra Equity Transaction
by converting the outstanding Indebtedness under this Agreement and the
Amended Note into an equity investment in the Company on the terms of
the Alterra Equity Investment; provided, however, that (i) such
co-investment right must be exercised by Lender at the time of
execution of the definitive purchase agreement for the Alterra Equity
Transaction, and (ii) as a minority participant in such Alterra Equity
Transaction, Lender acknowledges that its control and voting rights may
be substantially limited (in the manner required by the principal
investor in such Alterra Equity Investment).
(j) Title Insurance. At the request of Lender, the Company
shall purchase mortgagee title insurance for the Lender pursuant to the
Additional Title Commitments
<PAGE> 18
furnished pursuant to this Agreement and to the Title Commitments
furnished pursuant to the Original Loan Agreement.
6.2. Negative Covenants. The Company covenants and agrees that so long
as any Indebtedness remains outstanding under this Agreement and the Amended
Note, without the prior written consent of Lender, Company will not:
(a) No Mergers, Etc. Enter into any merger or consolidation or
sell, lease, transfer or dispose of all, substantially all, or any
material part of its assets, except in the ordinary course of its
business.
(b) Limitations on Indebtedness. Become or remain obligated,
or suffer or permit any Subsidiary to become or remain obligated, for
any Indebtedness, except:
(i) Indebtedness arising pursuant to this Agreement;
and
(ii) other Indebtedness, whether now outstanding or
hereafter incurred, provided that the sum of all of the
Indebtedness of the Company and the Subsidiaries at any time
outstanding on a consolidated basis (excluding, however, any
Indebtedness arising as a result of acquisitions or business
combinations effected after the date of this Agreement) does
not exceed $1,850,000,000.00.
(c) Limitations on Mortgages. Create or permit to exist any
Lien on the Original Collateral Real Estate or Additional Collateral
Real Estate, other than Permitted Liens and mortgages in favor of
Lender.
ARTICLE VII
Miscellaneous
7.1. Waiver and Amendments. No failure or delay on the part of Lender
in the exercise of any power or right, and no course of dealing between Company
and Lender, shall operate as a waiver of such power or right, nor shall any
single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. Remedies provided
for herein are cumulative and not exclusive of any remedies which may be
available to the Lender at law or in equity. No notice to or demand on the
Company required hereunder or under the Amended Note shall in any event entitle
Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the right of Lender to any other or
further action and any circumstances without notice or demand. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement or the Amended Note shall in any event be effective unless the same
shall be in writing and signed and delivered by Lender. Any waiver of any
provision of this Agreement or the Amended Note, and any consent to any
departure by Company from the terms of any provision of this Agreement or the
Amended Note, shall be effective only in the specific instance and for the
specific purpose for which given.
<PAGE> 19
7.2. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and, if mailed by prepaid
registered or certified mail, return receipt requested, shall be deemed to have
been received on the earlier of the date shown on the receipt or three (3)
Business Days after the post-mark date thereof. Notices may be given by
recognized overnight courier services and shall be deemed to have been received
as of the regularly scheduled time for delivery established by such courier
service. In addition, notices hereunder may be delivered by hand in which event
the notice shall be deemed effective when delivered or by telecopy in which case
it shall be deemed effective upon confirmation of transmission. All notices and
other communications under this Agreement shall be given to the parties hereto
at the following addresses:
If to Company:
Alterra Healthcare Corporation
10000 Innovation Drive
Milwaukee, Wisconsin 53226
Attention: President
Fax: (414) 918-5055
With a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia, 30303
Attn: Alan Leet, Esq.
Fax: (404) 525-2224
If to Lender:
RDVEPCO, L.L.C.
c/o RDV Corporation
126 Ottawa Avenue, N.W.
500 Grand Bank Building
Grand Rapids, Michigan 49503
Attention: Robert H. Schierbeek, Treasurer
Fax: (616) 454-4654
With a copy to:
EDP Management Company
190 River Avenue
Suite 300
Holland, Michigan 49423
Fax: (616) 494-8110
<PAGE> 20
and
Hecht & Lentz
333 Bridge, N.W., Suite 330
Grand Rapids, MI 49504
Attention: David M. Hecht, Esq.
Fax: (616) 776-7203
Any party hereto may change the address to which notices shall be directed under
this Section by giving written notice of such change to the other parties.
7.3. Restriction on Transfer. The Lender acknowledges that the Amended
Note has not been registered under the Securities Act of 1933, as amended, (the
"1933 Act") or the securities laws of any state. Accordingly, the Amended Note
may not be sold or otherwise disposed of or transferred, unless such sale,
disposition or transfer is registered under the 1933 Act and applicable state
securities laws or unless the Company has received an opinion of counsel
reasonably acceptable to the Company that such sale, disposition or transfer is
exempt from such registration. The Amended Note shall bear a restrictive legend
to the foregoing effect.
7.4. Expenses. Company shall reimburse Lender for all of its reasonable
out-of-pocket expenses incurred in the negotiation, preparation, execution and
delivery of this Agreement, the Amended Note and other documents contemplated
hereby and all related due diligence, including, without limitation, the
expenses of legal counsel and accountants. Company shall also reimburse Holder
for all of its out-of-pocket expenses incurred in the administration, waiver,
modification and enforcement of any of its rights under this Agreement and the
Amended Note, including, without limitation, the reasonable expenses of legal
counsel and accountants. In addition, Company shall be responsible for any
documentary taxes incurred in connection with the transactions contemplated by
this Agreement and the Amended Note.
7.5. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction, shall as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
7.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan without giving effect to
any choice or conflict of law provision or rule (whether of the State of
Michigan or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Michigan.
7.7. Successors and Assigns. This Agreement shall be binding upon
Company and Lender and their respective successors and assigns, and shall inure
to the benefit of Company and Lender and their successors and assigns.
<PAGE> 21
7.8. Headings. Headings used in this Agreement are for convenience only
and shall not be used in connection with the interpretation of any provision
hereof.
7.9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute one and the same instrument.
* * * * * * * * * * * * *
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date first
written above.
THE COMPANY:
ALTERRA HEALTHCARE CORPORATION
By: /s/ Mark W. Ohlendorf
-------------------------------
Name: Mark W. Ohlendorf
Title: Senior Vice President
<PAGE> 23
LENDER:
RDVEPCO, L.L.C.
By: RDV Altco, L.L.C.,
a member
By: RDV Corporation
By: /s/ Robert Schierbeek
-------------------------------
Its: Treasurer
-------------------------------
<PAGE> 1
EXHIBIT 10.123
[EXECUTION COPY]
AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY (this "Amended and Restated
Guaranty") made and delivered as of this 3rd day of February, 2000 by AHC
PURCHASER HOLDING, INC., a Delaware corporation ("Guarantor"), for the benefit
of RDVEPCO, L.L.C., a Michigan limited liability company ("Lender") and its
assigns. Lender and its assigns are hereinafter sometimes referred to as
"Holder."
Recitals:
Alterra Healthcare Corporation, a Delaware corporation (the "Company"),
has borrowed from Lender the sum of Fourteen Million Dollars ($14,000,000.00) on
the terms and conditions set forth in that certain Loan Agreement between
Company and Lender dated as of the December 13, 1999 ( the "Original Loan
Agreement"), the obligations of the Company thereunder being guaranteed by
Guarantor pursuant to a Guaranty dated as of December 13, 1999 (the "Original
Guaranty").
Company and Lender propose to amend and restate the Original Loan
Agreement pursuant to the terms of an Amended and Restated Loan Agreement dated
as of the date of this Guaranty to provide for loans from Lender to Company
thereunder of an aggregate of up to $34,000,000.00 to be evidenced by the
Company's promissory note in the form attached as Exhibit C to the Amended and
Restated Loan Agreement (the "Note").
Guarantor is a Subsidiary of Company and benefited from the loan made
to Company pursuant to the Original Loan Agreement and will benefit from the
loans to be made to Company pursuant to the Amended and Restated Loan Agreement.
It is a condition to Lender's obligation to make the additional loan to Company
pursuant to the Amended and Restated Loan Agreement that Guarantor amend and
restate the Original Guaranty as provided in this Amended and Restated Guaranty.
NOW, THEREFORE, for good and valuable consideration, the receipt
of which the Guarantor acknowledges by the execution of this Amended and
Restated Guaranty, the Guarantor promises and agrees as follows:
NOW, THEREFORE, for good and valuable consideration, the receipt of
which the Guarantor acknowledges by the execution of this Amended and Restated
Guaranty, the Guarantor promises and agrees as follows:
1. Guaranty of Obligations under Note and Amended and Restated Loan
Agreement. The Guarantor hereby unconditionally guarantees to the Holder,
irrespective of the validity and enforceability of the Note or the obligations
of the Company thereunder or under the Amended
<PAGE> 2
and Restated Loan Agreement, that: (a) the principal of and interest on the Note
(including any interest due at the Default Interest Rate) shall be promptly paid
in full when due, whether at maturity, by acceleration, redemption, repurchase
or otherwise, and all other obligations of the Company to the Holder under the
Note and the Amended and Restated Loan Agreement shall be promptly paid in full
or performed, all in accordance with the terms thereof and of this Amended and
Restated Guaranty; and (b) in case of any extension of time of payment or
renewal of the Note or any of such other obligations, the same shall be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, whether at stated maturity, by acceleration, redemption, repurchase
or otherwise, and, failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantor shall be obligated
to pay the same immediately.
2. Unconditional Obligations of Guarantor. The Guarantor hereby agrees
that its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Note or the Amended and Restated
Loan Agreement, the absence of any action to enforce the same, any waiver or
consent by the Holder with respect to any provisions thereof or hereof, the
recovery of any judgment against the Company, and action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. The Guarantor agrees that the Holder may,
in its absolute discretion and without notice to or the consent of the
Guarantor:
(a) modify the terms of the Amended and Restated Loan
Agreement or Note or, compromise, extend, renew, or forbear to enforce
any part or all of the Company's obligations thereunder, without
affecting in any manner the obligations of the Guarantor pursuant to
this Amended and Restated Guaranty;
(b) take, release, exchange, enforce and otherwise deal with
any security given by any other guarantor of the obligations of the
Company under the Note, including the right to perfect or fail to
perfect any interest, without affecting in any manner the unconditional
obligation of the Guarantor pursuant to this Amended and Restated
Guaranty, whether such security be in the nature of a security
interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise;
(c) release any one or more other persons who shall have
guaranteed, in whole or in part, the obligations of the Company under
the Note upon such terms as it deems adequate, and may fail or elect
not to prove a claim against the estate of any bankrupt, insolvent,
incompetent or deceased guarantor, without affecting in any manner the
unconditional obligation of the remaining guarantors, including the
Guarantor, and the other rights and remedies provided in this Amended
and Restated Guaranty;
(d) settle or compromise any claim of the Holder against the
Company, or against any other person, firm or corporation, whose
obligation is held by the Holder as collateral security for any
obligation of the Company pursuant to the Note;
2
<PAGE> 3
(e) fail to give notice to any person of the occurrence of an
event of default under the terms and provisions of this Amended and
Restated Guaranty, the Note or the Amended and Restated Loan Agreement;
or
(f) take or omit to take any of the actions referred to in
the Note, the Amended and Restated Loan Agreement, this Amended and
Restated Guaranty or any other guarantee agreement or security
agreement or mortgage given by any other person.
The Guarantor ratifies and confirms any such extension, renewal, release,
exchange, forbearance, enforcement, modification, settlement, compromise or
setoff; and all such actions shall be binding upon the Guarantor, which hereby
waives all defenses, counterclaims, or offsets which the Guarantor might have by
reason of such.
3. Waivers. The Guarantor hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenant that its
obligations under this Amended and Restated Guaranty shall not be discharged
except by complete performance of the obligations contained in the Note and the
Amended and Restated Loan Agreement.
4. Reinstatement. If the Holder is required by any court or otherwise
to return to the Company or Guarantor, or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or Guarantor,
any amount paid by the Company or the Guarantor to the Holder, this Amended and
Restated Guaranty and the obligations of the Guarantor under this Amended and
Restated Guaranty, to the extent theretofore discharged, shall be reinstated and
shall be in full force and effect.
5. No Subrogation. The Guarantor agrees that it shall not be entitled
to any right of subrogation against the Company in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
The Guarantor further agrees that, as between the Guarantor, on the one hand,
and the Holder, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in the Amended and Restated
Loan Agreement for the purposes of this Amended and Restated Guaranty,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby and (y) in the
event of any declaration of acceleration of such obligations as provided in the
Amended and Restated Loan Agreement, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantor for the purpose
of this Amended and Restated Guaranty.
6. Miscellaneous.
6.1. Severability. Any provision of this Amended and Restated
Guaranty which is prohibited or unenforceable in any jurisdiction,
shall as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
3
<PAGE> 4
provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
6.2. Governing Law. This Amended and Restated Guaranty shall
be governed by and construed in accordance with the laws of the State
of Michigan without giving effect to any choice or conflict of law
provision or rule (whether of the State of Michigan or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Michigan.
6.3. Headings. Headings used in this Amended and Restated
Guaranty are for convenience only and shall not be used in connection
with the interpretation of any provision hereof.
IN WITNESS WHEREOF, the Guarantor has caused this Amended and Restated
Guaranty to be executed by the undersigned thereunto duly authorized as of the
date first written above.
AHC PURCHASER HOLDING, INC.
By: /s/ Mark W. Ohlendorf
-------------------------------
Its: Vice President
------------------------------
<PAGE> 1
Exhibit 10.124
CONSTRUCTION LOAN AND SECURITY AGREEMENT
BETWEEN
ALS-CLARE BRIDGE, INC.
AND
SOVEREIGN BANK
DATED AS OF MAY 1, 1998
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Section Heading Page
<S> <C> <C>
1. The Loan..............................................................1
2. The Project...........................................................1
3. Construction Contracts; Capital Costs.................................1
4. Collateral; General Assignment........................................1
5. Conditions Precedent..................................................3
6. Disbursement and Application of Loan Proceeds.........................3
7. Representations and Warranties........................................5
8. Construction of Improvements..........................................7
9. Completion............................................................7
10. Extensions of Construction Period; Failure to Achieve
Breakeven Operation.................................................8
11. Other Construction Obligations and Covenants of Borrower..............9
12. Change Orders........................................................10
13. Inspections..........................................................10
14. No Representation by Inspections.....................................10
15. Compliance With Contracts............................................11
16. Compliance With All Laws.............................................11
17. Proof of Title.......................................................11
18. Warrant of Attorney..................................................11
19. Indemnity............................................................11
20. Defaults.............................................................11
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Section Heading Page
<S> <C> <C>
21. Cross Default and Cross Collateralization............................11
22. Notices..............................................................12
23. Severability.........................................................12
24. Third Parties........................................................12
25. Complete Agreement...................................................12
26. Governing Law........................................................12
27. Waiver of Jury Trial.................................................12
28. Counterparts.........................................................12
29. Miscellaneous........................................................12
</TABLE>
EXHIBITS
A - Legal Description of Property
B - List of Plans
C - Statement of Sources and Application of Funds
D - Loan Advance Requisition Form
E - Loan Advance Certificate
(ii)
<PAGE> 4
CONSTRUCTION LOAN AND SECURITY AGREEMENT
This Agreement is made as of this 1st day of May, 1998 between
ALS-CLARE BRIDGE, INC. ("Borrower"), a Delaware corporation with an address at
c/o Alternative Living Services, Inc., 450 North Sunnyslope Road, Brookfield,
Wisconsin 53003 and SOVEREIGN BANK, ("Bank"), with an address at Two Aldwyn
Center, Lancaster Avenue and Route 320, Villanova, Pennsylvania 19085.
Intending to be legally bound, Borrower and Bank hereby agree as
follows:
1. The Loan. Pursuant to a Commitment Letter dated February 9,
1998 (such letter, including the General Conditions attached thereto, the
"Commitment Letter") and subject to the terms and conditions of this Agreement,
Bank agrees to lend to Borrower Three Million Four Hundred Fifty Thousand
Dollars ($3,450,000) (the "Funds" or the "Loan"). All capitalized terms used in
this Agreement and not otherwise defined shall have the meanings given to them
in the Commitment Letter.
2. The Project. Borrower owns approximately 5.0 acres of land
situated near the intersection of Blue Course and Whitehall Road, Furguson
Township, Centre County, Pennsylvania and more fully described in Exhibit A
attached hereto (the "Property"), and proposes to construct thereon a 20,987
square foot assisted living facility and related site improvements (the
"Improvements") as more fully described in the plans, drawings and
specifications prepared by Adrian Guszkowski (the "Architect"), delivered to
Bank and listed in Exhibit B attached hereto, as modified by any Change Orders
effected in accordance with the terms hereof (the "Plans"). The Property and the
Improvements are sometimes hereinafter collectively called the "Project".
3. Construction Contracts; Capital Costs. Borrower, as owner of
the Property, has entered into an agreement (the "Architect's Agreement") with
the Architect for the rendering of architectural services in connection with the
Project, and a guaranteed maximum price general construction contract dated
February 24, 1998 (the "General Contract") with Continuing Care Concepts, Inc.
(the "General Contractor") for the construction of the Improvements. The
Statement of Sources and Application of Funds attached hereto as Exhibit C is an
estimate of the capital requirements for the Project. Borrower will use the
Funds only to finance costs that have been or will be incurred by Borrower to
construct and complete the Improvements and other costs associated with the
development of the Project.
4. Collateral: General Assignment. Borrower hereby grants to
Bank, as security for the performance of this Agreement and payment of the
principal of and interest on the Note and all advances now or hereafter made by
Bank to or for the benefit of Borrower under this Agreement, the Mortgage or any
instrument delivered to Bank pursuant to this Agreement or any other evidence of
indebtedness, a security interest in (a) all materials delivered to the site of
the Project but not yet incorporated therein, now owned or hereafter acquired,
(b) all machinery, equipment, fixtures, furnishings, furniture, appliances,
general intangibles, accounts and other personalty of Borrower, now owned or
hereafter acquired, and intended to be incorporated into or used in connection
with construction or completion of the Improvements, (c) all insurance on
<PAGE> 5
all the foregoing and the proceeds of any sale or exchange of the foregoing in
whole or in part, and (d) all property of Borrower which at any time Bank shall
have or have the right to have in its possession, or which is in transit to it,
including without limitation, any balance or share of any deposit, trust,
agency, escrow or other account with Bank and any amounts which may be owing
from time to time by Bank to Borrower. Borrower hereby also assigns and grants
to Bank a security interest in, and agrees Bank shall have and be able to
exercise, until all amounts payable to Bank under the Note, the Mortgage: or
this Agreement have been paid in full, all of Borrower's right, title and
interest in, to and under all contracts, instruments, documents, licenses,
permits, surveys, approvals and agreements of any kind relating to construction
of the Improvements or marketing, sale, leasing, financing or operation of all
or any part of the Project, now owned or hereafter acquired, and the; proceeds
of any of the foregoing, including without limitation the Plans, the General
Contract, the Architect's Agreement and the Project Permits (as hereinafter
defined) provided that so long as no Event of Default (as hereinafter defined)
shall have occurred and be continuing hereunder, Borrower shall have the
benefits of such right, title and interest, except Borrower shall not terminate,
cancel or amend or suffer or permit the termination, cancellation or amendment
or default or expiration of any assigned instrument without Bank's prior
approval, except for any amendment (i) for which Bank's consent is not otherwise
expressly required by the terms of the Collateral Documents (as hereinafter
defined), (ii) which does not increase the cost of the Project or otherwise
jeopardize or adversely affect the completion or operation of the Project or
Bank's security for the Loan and (iii) of which Bank is given a copy. Borrower
shall continue to be solely liable for all obligations of Borrower under any
assigned instrument and neither Borrower nor any other party thereto shall look
to Bank to pay or perform any of such obligations unless and until Bank shall
have notified such party in writing that Bank has elected to assume such
obligations, and then only to the extent set forth in such assumption. In the
event of foreclosure of the Mortgage, the purchaser at such foreclosure shall
also acquire all of the right, title and interest of Borrower in, to and under
said contracts, instruments, documents, licenses, permits, surveys, approvals
and agreements, but such purchaser shall be liable only for the obligations
expressly assumed by such purchaser. The foregoing constitutes a security
agreement under the Uniform Commercial Code.
For purposes of this Agreement, the term "Collateral" shall
mean the right, title and interest of Bank in the property described in the
Mortgage and the property described in this Section 3, and the term "Collateral
Documents" shall mean such instruments and the Surety and the Completion
Guaranty (each as hereinafter defined).
Borrower will execute or join with Bank in executing such
financing statements and continuation statements under the Uniform Commercial
Code or other applicable law as Bank may specify in order to perfect and
maintain perfection of Bank's security interest in any of the Collateral and
will pay the costs of filing the same in such public offices as Bank may
designate.
5. Conditions Precedent. The obligation of Bank to make the
first advance of the Funds hereunder is subject to the condition precedent that
Bank shall have received (a) each of the items specified in Section 1 of the
General Conditions to the Commitment Letter in form and substance satisfactory
to Bank and Bank's counsel, and (b) the commitment fee specified in Section
5(A)(i) of the Commitment Letter.
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<PAGE> 6
6. Disbursement and Application of Loan Proceeds. So long as
there has occurred no Event of Default or any event or condition which, with the
passage of time or giving of notice or both could become an Event of Default,
Bank shall be obligated to advance the Funds against the Note upon Borrower's
request during the period commencing on the date of this Agreement and ending no
later than the last day of the eighteenth full month thereafter (the
"Construction Period") (as such period may be extended in accordance with
Section 10 of this Agreement), in amounts not in excess of costs which have been
incurred by Borrower for the development of the Project, as verified by Bank,
pursuant to Exhibit C and the Plans and subject to all limitations set forth in
the notes to Exhibit C.
Each request for an advance shall be made by a loan advance
requisition in the form attached hereto as Exhibit D, delineating the Funds to
be drawn against each item listed in Exhibit C (or at Bank's request, against a
more detailed breakdown of items). Each loan advance requisition shall be
accompanied by (a) as Bank may require from time to time, a copy of the AIA form
of requisition to Borrower from the General Contractor; (b) a certificate of
Borrower in the form attached hereto as Exhibit E; (c) an approval by Bank's
inspector of the requested advance; and (d) if requested by Bank, an endorsement
to the Bank's title insurance policy insuring Bank against any loss occasioned
by any liens of record, statutory or otherwise, held by mechanics, workmen,
contractors, suppliers or the employees or agents of any of them with respect to
the Project and that since the issuance of the Bank's Title Insurance Policy or
the last such endorsement, there has been no change in the state of title to the
Property and there have occurred no survey or other exceptions not previously
approved by Bank.
Anything herein to the contrary notwithstanding, (i) advances
of the Funds pursuant to Borrower's request shall be limited to no more than
once every two weeks, except as Bank in its discretion may otherwise permit from
time to time, (ii) each Loan advance requisition shall be for a minimum
aggregate amount of $100,000; and (iii) the aggregate of all advances made by
Bank at any time shall not exceed, in Bank's opinion, the value of work done and
materials physically incorporated into the Improvements or delivered to and
securely stored on the Property.
Sums advanced under the Note from time to time shall be
deposited by Bank into an account of Borrower at Bank, except that upon the
occurrence of an Event of Default, Bank shall have the option of disbursing the
Funds directly to the third parties to whom payments are due for Project costs.
All payments for Project costs made by Borrower shall be made promptly from
accounts at Bank regardless of the source of funds therefor. Bank may require
copies of any or all checks written by Borrower or the General Contractor for
payment of Project costs to be submitted to and approved by Bank prior to
issuance. In no event shall any Funds be used by Borrower for any purpose other
than payment of the costs and expenses shown on Exhibit C without Bank's prior
specific written approval.
Anything herein to the contrary notwithstanding, Bank may from
time to time, at its option, without requests or orders or vouchers from
Borrower, advance Funds against the Note and disburse the same to itself for
payment of interest due and payable under the Note.
3
<PAGE> 7
Any Project costs incurred in excess of the respective
budgeted amounts for the items shown on Exhibit C shall be promptly paid by
Borrower from sources other than the Funds. Should it appear at any time that
the balance of the Funds to be advanced against the Note is insufficient, in
Bank's reasonable judgment, to complete the Improvements, Bank may require that
Borrower pay, and Borrower will pay to Bank within 30 days of receipt of notice
from Bank, for disbursement by Bank, an amount equal to the deficiency, as
determined by Bank, and Bank shall not be obligated to make any further advances
of the Funds until such amount is paid to Bank and disbursed for payment of
Project costs. Notwithstanding the foregoing provisions, if the whole amount
allocated to any component of Project cost as set forth on Exhibit C is not, or
in Bank's judgment, will not be expended to complete the work covered by such
component, with Bank's approval, Borrower may request such excess to be
reallocated and used for any other component of Project cost as set forth on
Exhibit C prior to making any deposit required by the previous sentence,
provided that any proposed reallocation of Project cost components included
under the General Contract shall also be approved by the General Contractor.
All conditions to the obligation of Bank to make advances
hereunder are imposed solely and exclusively for the benefit of Bank and its
assigns, and no other person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Bank
will make or not make advances in the absence of strict compliance with any or
all thereof, and no other person shall, under any circumstances, be deemed to be
a beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by the Bank at any time if, in its sole discretion, it deems it
advisable to do so. In no event shall any other party be deemed to be a
beneficiary of the Funds that may be advanced to Borrower pursuant to the terms
hereof or have any right to an accounting therefor. Bank shall not in any way or
for any purpose be deemed to be or to become a partner of or a joint venturer or
a member of a joint enterprise with Borrower in connection with the construction
or installation of the Improvements or the ownership, development or operation
of the Project or the Loan contemplated herein.
7. Representations and Warranties. Borrower represents and
warrants that:
(a) Borrower is a corporation duly formed, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified and in good standing to conduct business in those jurisdictions in
which its ownership of property or the conduct of its business requires such
qualification, and has the requisite power and authority to make and perform its
obligations under this Agreement, the Note and the Collateral Documents and
under all other documents delivered to Bank pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
(b) The execution, delivery and performance of this
Agreement and the execution and delivery of the Note and the Collateral
Documents have been duly authorized by all requisite corporate action of
Borrower and will not violate any provision of law or any, judgment, order or
regulation of any court or of any public or governmental agency or authority
applicable to Borrower or the certificate of incorporation or by laws of
Borrower or conflict with or result in a breach of any of the terms, conditions
or provisions of or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the
4
<PAGE> 8
properties or assets of Borrower pursuant to the terms of any agreement,
indenture or instrument to which Borrower is a party or by which Borrower or any
of its properties are bound.
(c) This Agreement, the Note and the Collateral
Documents when executed and delivered by Borrower will be the legal, valid and
binding obligations of the parties thereto in accordance with their respective
terms.
(d) There is no claim, litigation or governmental
proceeding against Borrower now pending or, to the knowledge of Borrower,
threatened, which is substantial in amount or which, if adversely determined
would have a material adverse effect on the financial condition or business of
Borrower, or would adversely affect the Project or the ability of Borrower to
perform its respective obligations under this Agreement, the Note or the
Collateral Documents, except such as are adequately covered by insurance and
have been disclosed in the financial statements hereinafter referred to or
except such as have been disclosed to Bank in writing.
(e) Borrower has filed all federal, state and local tax
returns required to be filed and has paid all taxes as shown on said returns to
be due.
(f) Borrower has no knowledge of any violation, nor is
there any notice or other record of any violation, of any zoning, subdivision,
environmental, building or other statute, ordinance, regulation, restrictive
covenant or other restriction applicable to the Property or the Project.
(g) The Plans, the Property, the construction thereon
of the Improvements as contemplated by this Agreement, the use of the Property
and the Improvements for the purpose contemplated hereby and the development,
construction and operation of the Project do and shall, in all respects, comply
with, and are lawful, permitted and conforming uses under, all applicable
building, fire, safety, subdivision, zoning, sewer, environmental, securities,
health, insurance and other laws, ordinances, rules, regulations and plan
approval conditions of any governmental or public body or authority and Borrower
has obtained all permits, licenses or approvals from such governmental or public
bodies or authorities which are a necessary precondition to the construction of
the Improvements.
(h) No approval, consent or authorization of, or
registration, declaration or filing with, any governmental or public body or
authority is required in connection with the valid execution, delivery and
performance of this Agreement, the General Contract or the Collateral Documents,
the issuance of the Note or the carrying out by Borrower of the transactions
contemplated hereby, except such as have been or will, prior to the first
advance hereunder, be obtained.
(i) There exist no liens, encumbrances or other charges
against the Property, the Improvements or any property relating thereto other
than the Mortgage and the security interests created hereby or pursuant hereto,
including statutory and other liens of mechanics, workmen, contractors,
subcontractors, suppliers, taxing authorities (other than taxes
5
<PAGE> 9
not yet due and payable) and others, except those disclosed to and approved by
Bank (the "Permitted Liens").
(j) All utility services necessary for construction and
operation of the Project, including water supply, storm and sanitary sewer
facilities, gas, electricity and telephone facilities are, or prior to the
Completion Date (as hereinafter defined) will be, available within the
boundaries of the Property.
(k) All roads necessary for the full utilization of the
Property and the Improvements for their intended purposes have either been
completed or the necessary rights-of-way therefor have been acquired by the
appropriate governmental authority or others or have been or will, prior to the
Completion Date, be dedicated to public use and accepted by such governmental
authority, and all necessary steps have been taken by Borrower and all such
governmental authority or others to assure complete construction and
installation thereof by the Completion Date.
(1) The General Contract is in full force and effect
and has not been amended, modified or altered without Bank's written consent,
and Borrower is not in default thereunder, and, to the best knowledge and
information of Borrower, the General Contractor is not in default under the
General Contract, and there are no events, occurrences or conditions which with
the passage of time or the giving of notice or both, would constitute a default
thereunder.
All of the above representations and warranties shall be continuing
and survive the making of this Agreement and the issuance of the Note.
8. Construction of Improvements. Borrower will proceed
diligently to construct the Improvements upon the Property, according to Exhibit
C and the Plans, without delay or stoppage of fifteen working days or more, in a
good and workmanlike manner, employing therefor workmen and materials
satisfactory in quantity and quality to Bank.
9. Completion. The Improvements shall be completed on or before
the date that is eighteen (18) months from the date of this Agreement (the
"Completion Date") and at completion the Property and the Improvements shall be
free of any and all private or governmental charges or claims (filed or not) of
any nature, except for the Mortgage, the 1 security interests created hereby,
other interests granted to Bank and the Permitted Liens. Borrower will deliver
to Bank certified copies of all use, occupancy or completion certificates in
connection with the Project, immediately upon issuance.
As used in this Agreement the terms "complete", "completed" and
"completion" mean, with respect to the Improvements, that:
(a) all Improvements are, in Bank's reasonable
judgment, substantially physically complete in accordance with the Plans;
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<PAGE> 10
(b) Borrower has received all permits, approvals and
certificates required by law prior to the use and occupancy thereof and has
furnished true copies of such permits, approvals and certificates to Bank;
(c) the Property and the Improvements are free of any
and all private or governmental charges, claims or liens (filed or not) of any
nature excepting only the Mortgage, the security interests created hereby or
pursuant hereto, other liens in Bank's favor and Permitted Liens; and
(d) The Project has achieved "breakeven operation". For
purposes of this Agreement, the term "breakeven operation" shall mean that the
Project's "debt service coverage ratio" as defined in Section 4.03 of the
Mortgage is not less than 1.0 to 1. For purposes of this Section 9, the
determination of "breakeven operation" shall be based on Project operating
statements submitted in accordance with Section 11. Further, for purposes of
this Section 9 and Section 10, the determination of "breakeven operation" shall
be made assuming that debt service consists of interest payable on the amount of
the Loan outstanding after the final requisition, at a rate equal to the Fixed
Rate (as defined in the Note) determined on the fifteenth day of the month for
which any operating statement is submitted based on a five (5) year Fixed Rate
Period, and amortizing as provided in the Note.
10. Extensions of Construction Period: Failure to Achieve
Breakeven Operation. Borrower shall have the option of extending the duration of
the Construction Period beyond eighteen months for one (1) additional six (6)
month period upon satisfaction of the following terms and conditions:
(a) Borrower shall give not less than thirty (30) nor
more than sixty (60) days' prior written notice to Bank of Borrower's request to
extend the maturity date of the Note for the additional six month period;
(b) Bank shall have received the commitment fee
specified in Section 5(A)(ii) of the Commitment Letter; and
(c) At and as of the time any such extension is to take
effect
(i) the Project shall not have achieved
breakeven operation;
(ii) there shall have occurred no Event of
Default, or any event or condition which, with the passage of time or
giving of notice or both could become an Event of Default, provided
that if Borrower cures any such event or condition existing at such
time, within the applicable grace period set forth herein, if any, this
condition shall be deemed satisfied as of the date of such cure;
(iii) the costs incurred to date and remaining to
be incurred for the completion of construction of the Improvements are
within the budgeted amounts set forth on Exhibit C; and
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<PAGE> 11
(iv) the amount remaining in the budget category
interest reserve is, in Bank's reasonable judgment, sufficient to cover
the payment of interest during the remaining term of the Construction
Period, as extended.
Notwithstanding anything to the contrary in this Section 10 or
in this Agreement, the Construction Period shall end on the last day of the
month selected by Borrower after the Project achieves breakeven operation, but
not later than the eighteenth month after the execution of this Agreement (or
the twenty-fourth month if the Borrower elects to extend such period in
accordance with this Section 10). On the first day of the month immediately
following the month in which the Construction Period ends, Borrower shall pay to
Bank the commitment fee specified in Section 5(B) of the Commitment Letter.
If the Project fails to achieve breakeven operation by failing
to generate net operating income sufficient to meet the required debt service
coverage ratio, the entire outstanding principal amount of the Note and all
interest accrued thereon shall be due and payable on the last day of the
Construction Period (as it may have been extended), unless Borrower shall
promptly (i) make a prepayment sufficient to reduce projected debt service such
that the required debt service coverage ratio is met (such amount, the
"Shortfall") or (ii) obtain and deliver to Bank a letter of credit in form and
substance acceptable to Bank for a term of twelve (12) months, equal to the
Shortfall, but in no case to exceed $1,000,000, or (iii) provide Bank with some
combination of prepayment and letter of credit in the combined amount of the
Shortfall. If Borrower delivers a letter of credit, Borrower shall either (x)
achieve breakeven operation, or (y) make a prepayment equal to the Shortfall (as
reduced by any prepayment made in accordance with Subsections (i) or (iii)
above). If Borrower has not achieved breakeven operation or made such required
prepayment at least ten (10) days before the expiration of the letter of credit,
Bank may exercise its right to draw on the letter of credit up to the amount of
the Shortfall.
11. Other Construction Obligations and Covenants of Borrower.
(a) Borrower will not, without first obtaining written
approval of Bank, (i) execute any contract, subcontract or purchase order or
permit any subcontract or purchase order to be executed by any person or persons
with whom it has contracted in connection with the Improvements (except for such
contracts, subcontracts or purchase orders that have been executed prior to the
date hereof and that have been approved by Bank) unless the amounts thereof are
within the amounts budgeted therefor as set forth on Exhibit C; or (ii) execute
any amendment or modification to the Plans, the General Contract or any contract
the effect of which would be either to increase or decrease the amount to be
paid by or on behalf of Borrower under any contract except as permitted by
Section 12 of this Agreement.
(b) Borrower will not, without Bank's prior written
consent, contract for any services, work or materials if such are not required
by the Plans or if payment therefor is required to be made regardless of the
nondelivery or nonfurnishing of such materials or services or work.
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<PAGE> 12
(c) Borrower will forward to Bank promptly after
receipt, copies of all notices, permits or other documents (excepting only
notices for non-delinquent taxes due) received by Borrower from any governmental
authority relating to the Property or the Improvements or from any person
claiming a mechanic's or materialmen's lien against the Property or the Project.
(d) Prior to making final payment under any contract
relating to construction of the Improvements, Borrower will, upon Bank's written
request, require the contractor thereon to deliver to Borrower, from such
contractor and all of such contractor's subcontractors or materialmen, a general
release of mechanics' and materialmen's liens and Borrower will promptly deliver
to Bank copies of all such releases so obtained, certified by Borrower to be
true and correct.
(e) Beginning no later than the first month following
the opening of the Facility, Borrower shall submit, no later than twenty (20)
days after the end of each month, an operating statement for the Project,
detailing, inter alia, the number of beds occupied and the actual net operating
income (as defined in the Mortgage) of the Project in the preceding month. At
the expiration of the Construction Period, and provided there exists no Event of
Default (as defined in the Mortgage) or condition which, with the passage of
time, the giving of notice or both would become an Event of Default, Borrower
shall have no further obligation to submit such operating statements.
12. Change Orders. Borrower will not permit, without the prior
written consent of Bank, the performance of any work pursuant to any amendment
or modification of the Plans, the General Contract or any subcontract or
purchase order (any such amendment or modification being hereinafter called a
"Change Order") which (a) would impair the Project, (b) would result in an
increase or decrease in excess of $10,000 in the aggregate of the contract
prices for the construction of the Improvements or (c) when aggregated with
other Change Orders theretofore effected, would result in an increase or
decrease in excess of $50,000 in the aggregate of the contract prices for the
construction of the Improvements.
13. Inspections. Borrower will permit and assist Bank or Bank's
representatives to make inspections of the Property and the Improvements and
Borrower's books and records relating thereto at such time or times as Bank may
reasonably request. Borrower agrees to pay Bank an inspection fee of $500.00 for
each site visitation conducted by Bank or its representative until the principal
of and interest on the Note have been paid in full, provided that such visits at
Borrower's expense shall not be conducted more frequently than once in
connection with each request for an advance of Funds except when Borrower
requests and Bank agrees to more than one advance of the Funds per calendar
month and during such periods as an Event of Default shall have occurred and be
continuing. If upon any such inspection, Bank in writing condemns as unsound or
improper and not in substantial compliance with the Plans, any portion of the
Improvements or any materials used or to be used therein, Borrower will within
24 hours commence to remove from the Property or the Improvements (as the case
may be) all condemned materials, and will take down and replace (or, at Bank's
option, repair) any portion of the Improvements so condemned.
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<PAGE> 13
14. No Representation by Inspections. Bank's inspections are
solely for the protection of Bank's security and no action or inaction by Bank
shall constitute any representation that the Improvements comply with the Plans
or that the Improvements are sound or free from defects in material, design or
workmanship or that Bank approves thereof.
15. Compliance With Contracts. Borrower will comply with all
requirements and satisfy all conditions of all contracts, bonds or insurance
which insure or relate to all or any part of this Agreement, the Property, the
Improvements or Borrower. The foregoing includes without limitation compliance
with all the terms and satisfaction of all the conditions of the General
Contract. In the event of a failure by Borrower to comply with any of such terms
or satisfy any of such conditions, Bank may undertake such compliance or
satisfaction on Borrower's behalf and any sums expended by Bank in connection
therewith shall be deemed advances hereunder against the Note and secured by the
Collateral Documents.
16. Compliance With All Laws. Borrower will comply with all laws
applicable to Borrower or the Property or the Improvements, including without
limitation zoning and use laws and building restrictions and regulations.
17. Proof of Title. Borrower will deliver to Bank, upon demand,
any contracts, bills of sale, statements, receipted vouchers or agreements under
which Borrower claims title to any materials, fixtures, equipment, machinery,
appliances, furniture, furnishings or other personal property incorporated in
the Improvements or subject to the lien of the Mortgage or included in the
Collateral.
18. Warrant of Attorney. Borrower hereby irrevocably appoints
Bank as attorney-in-fact to do in Borrower's stead all things believed by Bank
reasonably necessary to effect performance of this Agreement, including without
limitation filing notices in public records and endorsing checks or drafts
payable to Borrower and Bank jointly. The foregoing appointment is coupled with
an interest and is solely for protection of Bank's security and, therefore, is
not intended to confer any right of action on any third party.
19. Indemnity. Borrower hereby indemnifies Bank and agrees to
hold Bank harmless from any loss, expense or damage on account of anything
arising out of or in connection with this Agreement, the Note, the Collateral
Documents, the Property, the Improvements or any of the documents and
instruments delivered to Bank in compliance with this Agreement unless caused
solely by the Bank's gross negligence or willful misconduct. This indemnity
shall survive the completion of the Improvements and payment of the Note.
20. Defaults. The occurrence of an "Event of Default" as defined
in the Mortgage shall constitute an event of default hereunder and under the
Note and the Collateral Documents.
21. Cross Default and Cross Collateralization. The Loan and the
Mortgage are cross defaulted and cross collateralized with loans given or being
given from Bank to (a) Borrower (the "East Hempfield Loan"), (b)
ALS-WovenHearts, Inc. (the "Bristol Loan"), (c) ALS-WovenHearts, Inc. (the
"Chambersburg Loan"), and (d) ALS-Wynwood, Inc. (the "New
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<PAGE> 14
Castle Loan") (the East Hempfield Loan, the Bristol Loan, the Chambersburg Loan
and the New Castle Loan are hereinafter collectively referred to as the "Other
Loans") so that an Event of Default (as defined in the Mortgage) under this Loan
or the Other Loans shall constitute an Event of Default under this Loan and all
of the Other Loans, and the mortgaged property for each of this Loan and the
Other Loans shall secure this Loan and all of the Other Loans.
22. Notices. Any notice, demand or request under this Agreement
shall be made in accordance with Section 6.03 of the Mortgage.
23. Severability. If any provision hereof or of the Note is
found by a court of competent jurisdiction to be prohibited or unenforceable, it
shall be ineffective only to the extent of such prohibition or unenforceability,
and such prohibition or unenforceability shall not invalidate the balance of
such provision to the extent it is not prohibited or unenforceable, nor
invalidate the other provisions hereof.
24. Third Parties. This Agreement shall be binding upon and
inure to the benefit of Bank and Borrower and their respective successors and
assigns. Borrower may not, without the prior written consent of Bank, assign any
of its rights or obligations under this Agreement. The parties intend that no
other person or entity is to have any claim or any interest under this
Agreement, and no other person or entity is to have any right of action hereon
or hereunder.
25. Complete Agreement. Taken together with the Note, the
Collateral Documents and the other instruments, contracts and documents
delivered in compliance herewith, this Agreement is a complete memorandum of the
agreement of Borrower and Bank. Waivers or modifications of any provision hereof
must be in writing signed by the party to be charged with the effect thereof.
26. Governing Law. Except to the extent applicable law may
require otherwise, this Agreement shall be construed in accordance with and
governed by the substantive laws of the Commonwealth of Pennsylvania.
27. Waiver of Jury Trial. Borrower and Bank hereby waive the
right to trial by jury in any action arising hereunder.
28. 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.
29. Miscellaneous. The captions preceding the text of the
Sections of this Agreement are for convenience of reference and shall not
constitute a part of this Agreement, nor shall they in any way affect its
meaning, construction or effect. Unless the context clearly indicates a contrary
intent:
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<PAGE> 15
(a) The term "Borrower" shall mean the person oar persons
specifically named herein as "Borrower" and their respective heirs, executors,
administrators, successors and assigns;
(b) The term "Bank" shall mean the person specifically
named herein as "Bank" or any successor to or assignee of its rights hereunder
and under the Note;
(c) The word "person" shall mean individual,
corporation, partnership, joint venture or unincorporated association;
(d) The use of any gender shall include all genders;
(e) The singular number shall include the plural and
the plural the singular as the context may require;
(f) If Borrower is more than one person, all
agreements, conditions, covenants, provisions, stipulations, warrants of
attorney, authorizations, waivers, releases, options, undertakings, indemnities,
rights and benefits made or given by Borrower shall be joint and several and
shall legally bind and affect all persons who are defined as "Borrower" as fully
as though all of them were specifically named herein wherever the term
"Borrower" is used, and each of them shall be deemed to have made the
representations and warranties of herein set forth.
[THE REMAINDER OF THIS PAGE INTENTIONALLY OMITTED]
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BORROWER:
ALS-CLARE BRIDGE, INC., a
Delaware corporation
By: /s/ Thomas E. Komula
-----------------------------------
Name: Thomas E. Komula
-----------------------------------
Title: Vice President
-----------------------------------
BANK:
SOVEREIGN BANK
By: /s/ William J. Mattern
-----------------------------------
Name: William J. Mattern
-----------------------------------
Title: Assistant Vice President
-----------------------------------
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<PAGE> 17
EXHIBITS
A - Legal Description of Property
B - List of Plans
C - Statement of Sources and Application of Funds
D - Loan Advance Requisition Form
E - Loan Advance Certificate
<PAGE> 1
EXHIBIT 10.125
OPEN-END MORTGAGE AND SECURITY AGREEMENT
by and between
ALS-CLARE BRIDGE, INC.
("Mortgagor")
and
SOVEREIGN BANK
("Mortgagee")
Dated: May 1, 1998
Premises: Assisted Living Facility located near
the intersection of Blue Course and Whitehall
Road, Furguson Township, Centre County,
Pennsylvania
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Parties 1
Granting Clause 1
Obligations Secured 4
Habendum 5
</TABLE>
<TABLE>
<S> <C> <C>
ARTICLE I
COVENANTS AND AGREEMENTS OF MORTGAGOR..............6
1.01 Payment and Performance of Secured Obligations.......................6
1.02 Warranty of Title....................................................6
1.03 Maintenance, Repair and Alterations..................................7
1.04 Required Insurance...................................................8
1.05 Delivery of Policies; Payment of Premiums............................9
1.06 Insurance Proceeds..................................................11
1.07 Assignment of Policies Upon Foreclosure.............................13
1.08 Indemnification; Subrogation; Waiver of Offset......................13
1.09 Taxes and Impositions...............................................14
1.10 Utilities...........................................................18
1.11 Mortgagor's Lease and Easement Obligations..........................18
1.12 Compliance with Laws; Actions Affecting Premises....................18
1.13 Actions by Mortgagee to Preserve Premises...........................18
1.14 Survival of Warranties..............................................19
1.15 Eminent Domain......................................................19
1.16 Additional Security.................................................21
1.17 Successors and Assigns..............................................21
1.18 Inspections.........................................................21
1.19 Liens...............................................................21
1.20 Mortgagee's Powers..................................................22
1.21 Tradenames; Fictitious Name Registration............................22
1.22 Representations and Warranties Concerning ERISA.....................23
1.23 Mortgagor's Existence; Transfers....................................23
1.24 Mortgagee's Right to Publicize Source of Financing..................24
1.25 Advance Money Mortgage..............................................24
ARTICLE II
ASSIGNMENT OF RENTS, ISSUES AND PROFITS...........24
2.01 Assignment of Rents.................................................24
2.02 Collection Upon Default.............................................25
2.03 Assignment of Leases................................................25
</TABLE>
ii
<PAGE> 3
ARTICLE III
SECURITY AGREEMENT.............................26
3.01 Creation of Security Interest........................................26
3.02 Warranties, Representations and Covenants of Mortgagor...............26
ARTICLE IV
FINANCIAL COVENANTS............................27
4.01 Financial Reporting..................................................27
4.02 Reserves.............................................................28
4.03 Debt Service Coverage Ratio..........................................28
ARTICLE V
DEFAULTS AND REMEDIES...........................29
5.01 Events of Default....................................................30
5.02 Acceleration Upon Default; Additional Remedies.......................32
5.03 Foreclosure and Other Actions by Mortgagee...........................35
5.04 Recovery of Expenses by Mortgagee....................................36
5.05 Mortgagee's Right of Possession in Case of Default...................36
5.06 Application of Income Received by Mortgagee..........................38
5.07 Appointment of Receiver..............................................39
5.08 Remedies Not Exclusive...............................................40
ARTICLE VI
MISCELLANEOUS...............................41
6.01 Governing Law........................................................41
6.02 Mortgagor Waiver of Rights...........................................41
6.03 Giving of Notice.....................................................42
6.04 Counsel Fees.........................................................43
6.05 Limitation of Interest...............................................43
6.06 Statements by Mortgagor..............................................44
6.07 Captions.............................................................44
6.08 Invalidity of Certain Provisions.....................................44
6.09 Subrogation..........................................................44
6.10 No Merger............................................................45
6.11 Definitions..........................................................45
6.12 Amendments...........................................................46
Exhibit A - Property Description
iii
<PAGE> 4
OPEN-END MORTGAGE AND SECURITY AGREEMENT
THIS IS AN OPEN-END MORTGAGE AND SECURES FUTURE ADVANCES
THIS MORTGAGE AND SECURITY AGREEMENT made the 1st day of May, 1998, by
and between ALS-CLARE BRIDGE, INC., a Delaware corporation ("Mortgagor"), whose
place of business and mailing address is c/o Alternative Living Services, Inc.,
450 North Sunnyslope Road, Brookfield, Wisconsin 53005 and SOVEREIGN BANK
("Mortgagee"), with offices at Two Aldwyn Center, Lancaster Avenue & Route 320,
Villanova, Pennsylvania 19085;
WITNESSETH:
Pursuant to a Construction Loan and Security Agreement (the "Loan
Agreement") between Mortgagor and Mortgagee of even date herewith, Mortgagor has
executed and delivered to Mortgagee its promissory note (as hereinafter amended,
restated, renewed, extended or modified, the "Note") bearing even date herewith
wherein Mortgagor promises to pay to Mortgagee the principal sum of Three
Million Four Hundred Fifty Thousand Dollars ($3,450,000) lawful money of the
United States of America, with interest thereon at the rate and times, in the
manner and according to the terms and conditions specified in the Note, all of
which are incorporated herein by reference.
NOW, THEREFORE, in consideration of the indebtedness described above
and other good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound, Mortgagor has granted,
conveyed, bargained, sold, aliened, enfeoffed, released, confirmed and
mortgaged, and by these presents does hereby grant, convey, bargain, sell,
alien, enfeoff, release, confirm and mortgage unto Mortgagee and does agree that
Mortgagee shall have a security interest: in that certain real estate described
in Exhibit A attached hereto and made a part hereof (the "Property").
TOGETHER WITH, all rents, issues, profits, royalties, income,
reversions and remainders, and other benefits derived from the Property, subject
to the right, power and authority hereinafter given to Mortgagor to collect and
apply such rents; and
TOGETHER WITH, all leasehold estate, right, title and interest of
Mortgagor in and to all leases, occupancy agreements, subleases, permits,
licenses, franchises or certificates covering the Property or any portion
thereof now existing or entered into, and all right, title and interest of
Mortgagor thereunder, including, without limitation, all cash or security
deposits, advance rentals, and deposits or payments of similar nature; and
TOGETHER WITH, all right, title and interest of Mortgagor in and to all
options to purchase or lease the Property or any portion thereof or interest
therein, and any greater estate in the Property now owned or hereafter acquired;
and
TOGETHER WITH, all interests, estate or other claims, both in law and
in equity, which Mortgagor now has or hereafter may acquire in the Property; and
<PAGE> 5
TOGETHER WITH, any and all tenements, hereditaments and appurtenances
belonging to the Property or any part thereof hereby mortgaged or intended so to
be, or in any way appertaining thereto, and all streets, alleys, gores,
passages, ways, watercourses, water rights and all leasehold estates, easements,
rights of way and covenants now existing or hereafter created for the benefit of
Mortgagor or any subsequent owner or tenant of the Property over ground
adjoining the Property and all rights to enforce the maintenance thereof,
including, without limitation, the easements described in Exhibit A attached
hereto and made a part hereof, and all other rights, liberties and privileges of
whatsoever kind or character, and all the estate, right, title, interest,
property, possession, claim and demand whatsoever, at law or in equity, of
Mortgagor in and to the Property or any part thereof; and
TOGETHER WITH, all right, title and interest of Mortgagor, now owned or
hereafter acquired, in and to any land lying within the right-of-way of any
street, open or proposed, adjoining the Property, and any and all sidewalks,
alleys and strips and gores of land adjacent to or used in connection with the
Property; and
TOGETHER WITH, all right, title and interest of Mortgagor in and to any
and all buildings and improvements now or hereafter erected on the Property, and
the fixtures, attachments, appliances, equipment, machinery, and other articles
attached to said buildings and improvements (the "Improvements"); and
TOGETHER WITH, all right, title and interest of Mortgagor in and to all
tangible personal property now or hereafter owned or leased by Mortgagor and now
or at any time hereafter located on or at the Property or used in connection
therewith or the business conducted thereon or related to the planning,
development, financing or operation thereof (the "Personal Property"),
including, but not limited to: all building materials and equipment, goods,
machinery, tools, insurance proceeds, equipment (including fire sprinklers and
alarm systems, office air conditioning, heating, refrigerating, electronic
monitoring, entertainment, recreational, window or structural cleaning rigs,
maintenance, equipment for the exclusion of vermin or insects, removal of dust,
refuse or garbage and all other equipment of every kind), lobby and all other
indoor or outdoor furniture (including tables, chairs, planters, desks,
partitions, sofas, shelves, lockers and cabinets), decorative accessories, works
of art, wall safes, furnishings, appliances, (including refrigerators, fans,
heaters, stoves, water heaters and incinerators), inventory, rugs, carpets and
other floor coverings, plants, draperies and drapery rods and brackets, awnings,
window shades, venetian blinds, curtains, lamps, chandeliers and other lighting
fixtures and office maintenance and other supplies; and
TOGETHER WITH, all the estate, interest, right, title, other claim or
demand, including claims or demands with respect to the proceeds of insurance
with respect thereto, which Mortgagor now has or may hereafter acquire in the
Property, Improvements and Personal Property, and any and all awards made for
the taking by eminent domain or condemnation, or by any proceeding or purchase
in lieu thereof, of the whole or any part of the Property, Improvements and
Personal Property, including, without limitation, any awards resulting from a
change of grade of streets and awards for severance damages; and
2
<PAGE> 6
TOGETHER WITH, all right, title and interest of Mortgagor in and to any
management and operating agreement between Mortgagor, as owner and Alternative
Living Services, Inc., as manager and operator of the Premises (as that term is
defined hereinbelow);
TOGETHER WITH, all right, title and interest of Mortgagor arising under
any contracts and subcontracts, including, without limitation, all rights
arising under any performance and payment bonds, now or hereafter executed with
respect to the Premises;
TOGETHER WITH, (to the extent assignable in accordance with their terms
and applicable laws), all permits, licenses, approvals or agreements of any kind
relating to the construction, development, use, occupancy or operation of the
Premises;
TOGETHER WITH, (to the extent assignable in accordance with their terms
and applicable laws), all right, title and interest of Mortgagor in, to and
under all contracts, instruments, documents, licenses, permits, surveys,
approvals, special ordinances and agreements of any kind relating to
construction of improvements on the real estate described in this financing
statement, now owned or hereafter acquired, including without limitation, plans
and specifications, construction contracts, architects' agreements and
engineers' agreements;
TOGETHER WITH, all right, title and interest of Mortgagor in and to all
deposits (including tenants' security deposits), funds, instruments, accounts
receivable, documents and general intangibles arising out of or used in
connection with the operation of the Premises and all notes anal chattel paper
arising from or by virtue of any transaction related to the Premises
(hereinafter collectively referred to as the "Accounts"); and
TOGETHER WITH, all right, title and interest of Mortgagor in and to all
reserve or escrow agreements now or hereafter created and the funds established
thereby, pursuant to the Mortgage, the Note or the Commitment (as that term is
defined hereinbelow).
All of the above mentioned Property, Improvements, Personal Property
and the balance of the entire estate, property and interest hereby conveyed to
Mortgagee is sometimes hereafter collectively referred to as the "Premises".
FOR THE PURPOSE OF SECURING:
(a) Performance of all obligations of Mortgagor under the
Loan Agreement.
(b) Payment of the indebtedness evidenced by the Note,
and any and all modifications, extensions and renewals thereof, including
indebtedness arising as a result of advances made in the future, and all
interest provided for in the Note.
(c) Payment and performance of all obligations of
Mortgagor under any agreement made between Mortgagor and Mortgagee related to
the use of the loan proceeds evidenced by the Note, and of each agreement of
Mortgagor incorporated by reference therein or herein, or contained therein or
herein; and
3
<PAGE> 7
(d) Payment and performance of all obligations of
Mortgagor under the commitment issued to Mortgagor by Mortgagee by letter dated
February 9, 1998, (the "Commitment") and each agreement of Mortgagor
incorporated by reference therein or herein.
(e) Payment of all sums advanced by Mortgagee to protect
the Premises or its interests therein, with interest thereon at the rate of five
percent (5%) per annum higher than the rate specified in the Note, or the
maximum rate of interest permitted by law in the Commonwealth of Pennsylvania
from time to time, whichever shall be less (the "Default Rate").
(f) Payment and performance of the obligations and
agreements of Alternative Living Services, Inc. (the "Shareholder") under a
Guaranty and Surety Agreement and Guaranty of Completion (the "Guaranties") of
even date herewith, or of any other guarantor of or surety for any of the
obligations of Mortgagor contained in this Mortgage, the Note or any other
instrument given to evidence or further secure the payment and performance of
any obligation secured hereby.
(g) Payment and performance under the loans from
Mortgagee (i) in the amount of $3,450,000 to Mortgagor with respect to the
property in East Hempfield, Pennsylvania, (ii) in the amount of $1,750,000 to
ALS-WovenHearts, Inc. with respect to the property in Bristol, Pennsylvania,
(iii) in the amount of $3,377,216 to ALS-WovenHearts, Inc. with respect to the
property in Chambersburg Boro, Pennsylvania, and (iv) in the amount of
$6,001,700 to ALS-Wynwood, Inc. with respect to the property in New Castle,
Delaware (collectively, the "Other Loans").
(h) Payment of all other sums, with interest thereon,
which hereafter may be loaned to Mortgagor, its successors or assigns, by
Mortgagee, when evidenced, by a promissory note or notes reciting that they are
secured by this Mortgage.
(i) Performance of the obligations and agreements of
Mortgagor and the Shareholder contained in the Assignment of Leases and
Agreements Affecting Real Estate (the "Assignment of Leases"), the Escrow,
Pledge and Security Agreement (the "Escrow, Pledge and Security Agreement") and
the Environmental Indemnity Agreement (the "Environmental Indemnity Agreement"),
all of even date herewith and any such assignment and agreement which may be
executed hereafter between, Mortgagor and Mortgagee which secures the Note, and
each agreement of Mortgagor incorporated by reference therein or herein, or
contained therein or herein.
(j) Payment and performance of all obligations and
agreements of Mortgagor contained herein or incorporated herein by reference.
This Mortgage, the Loan Agreement, the Note, the Assignment of Leases,
the Escrow, Pledge and Security Agreement, the Environmental Indemnity
Agreement, the Guaranties and any other instrument given to evidence or further
secure the payment and performance of any obligation secured hereby are
sometimes hereinafter collectively referred to as the "Loan Documents".
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<PAGE> 8
TO HAVE AND TO HOLD the Premises hereby conveyed or mentioned and
intended so to be, unto Mortgagee, to its own use forever.
PROVIDED ALWAYS, and this instrument is upon the express condition
that, if Mortgagor pays to Mortgagee the principal sum mentioned in the Loan
Documents, the interest thereon and all other sums payable by Mortgagor to
Mortgagee as are secured hereby, in accordance with the provisions of the Loan
Documents, at the times and in the manner specified, without deduction, fraud or
delay, and Mortgagor performs and complies with all the agreements, conditions,
covenants, provisions and stipulations contained herein and in the other Loan
Documents, then this Mortgage and the estate hereby granted shall cease and
become void.
TO PROTECT THE SECURITY OF THIS MORTGAGE, MORTGAGOR HEREBY COVENANTS
AND AGREES AS FOLLOWS:
ARTICLE I
COVENANTS AND AGREEMENTS OF MORTGAGOR
Until the indebtedness secured hereby is fully repaid, Mortgagor hereby
represents, covenants, warrants and agrees:
1.01 Payment and Performance of Secured Obligations. Mortgagor
shall pay to Mortgagee, in accordance with the terms of the Note, the principal
thereof and interest thereon and other sums set forth therein and in the other
Loan Documents; shall perform and comply with all the agreements, conditions,
covenants, provisions and stipulations of the Loan Documents; and shall timely
perform all of its obligations and duties under any lease, easement agreement,
license, permit, approval, covenant or other agreement, now or hereafter in
effect, relating to, affecting, created for the benefit of, or used in
connection with the operation of all or any portion of the Premises.
1.02 Warranty of Title.
(a) Mortgagor warrants that it has good and marketable
fee simple title to the Property and the Improvements.
(b) Mortgagor warrants that this Mortgage is a valid
first lien on the Premises, and that Mortgagee, subject to Mortgagor's right of
possession prior to default, shall. quietly enjoy and possess the Premises.
Mortgagor shall preserve such title and the validity and priority of the lien
hereof and shall forever warrant and defend the same to Mortgagee against the
claims of all persons and parties whatsoever.
(c) Without the prior written consent of mortgagee, which
consent may be unreasonably withheld by Mortgagee, Mortgagor shall not permit to
exist any lien except a "Permitted Lien" (as hereinafter defined) on all or any
portion of the Premises, including any beneficial interest in the Premises nor
shall Mortgagor incur any indebtedness for money borrowed which is secured by a
lien other than a Permitted Lien upon the Premises or any part
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<PAGE> 9
thereof, including any beneficial interest therein, other than the indebtedness
secured hereby and subordinate indebtedness to the Shareholder made with the
prior written consent of Bank, which consent shall not be unreasonably withheld.
For purposes of this Mortgage, "Permitted Lien" shall mean a purchase money
lien, lien or other security interest, including a lease obligation, on any item
of Personal Property created in connection with the acquisition of Personal
Property of Mortgagor, so long as such item of Personal Property is not affixed
to the Improvements and so long as the aggregate amount of Permitted Liens shall
not exceed $150,000.00.
1.03 Maintenance, Repair and Alteration. Mortgagor shall keep the
Premises, including the Property and the Improvements constituting any part
thereof, in good order and condition and in a rentable and tenantable state of
repair; shall make or cause to be made, as and when necessary, all repairs,
renewals and replacements, structural and non-structural, exterior and interior,
ordinary and extraordinary, foreseen and unforeseen; shall not remove, demolish
or alter (except such alterations as may be required by laws, ordinances or
regulations and except alterations not exceeding $50,000 at any one time and not
exceeding an aggregate of $250,000 during the time the Note remains outstanding)
any of the Improvements; shall complete promptly and in good and workmanlike
manner any building or other improvement which may be constructed on the
Property and promptly restore in like manner any Improvements which may be
damaged or destroyed thereon, and promptly pay when due all claims for labor
performed and materials furnished therefor; shall comply with all laws,
ordinances, regulations, covenants, conditions and restrictions now or hereafter
affecting the Premises or any part thereof or requiring any alterations or
improvements; shall not commit or permit any waste or deterioration of the
Premises; shall keep and maintain abutting grounds, sidewalks, roads, parking
and landscape areas in good and neat order and repair; shall comply with the
provisions of any lease, easement or other agreement affecting all or any part
of the Premise; shall not commit, suffer or permit any act to be done in or upon
the Premises in violation of any law, ordinance or regulation; and shall not
permit the Premises or any part thereof to become vacant, deserted or unguarded.
1.04 Required Insurance. Mortgagor shall provide, maintain and
keep in force the following insurance coverage with respect to the Premises,
written by stock or non-assessable mutual carriers with a general policy holders
rating of "B" or better and a financial rating of VI or better in the most
recent edition of "Best's Key Rating Guide, Property-Casualty":
(a) Insurance against loss or damage to the Improvements
and the Personal Property by fire and any of the risks covered by insurance of
the type now known as "fire and extended coverage", in an amount not less than
the full replacement cost (as such replacement cost is determined by Mortgagee
from time to time) of the Personal Property and the Improvements, including the
cost of debris removal (exclusive of the cost of excavations, foundations, and
footings). The policies of insurance carried in accordance with this
subparagraph (a) shall contain a "replacement cost coverage endorsement" and
shall at all times be in amounts sufficient to prevent the application of any
so-called "co-insurance" provisions;
(b) Business interruption insurance and/or loss of rental
value insurance insuring against any abatement of rent and/or other payments or
any tenant's failure to
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<PAGE> 10
perform any other duties or obligations required pursuant to leases and rental
contracts relating to the Premises, resulting from fire or other casualty, for a
period of eighteen (18) months;
(c) Comprehensive commercial general liability insurance
on an "occurrence basis" against claims for bodily injury or property damage
occurring on, in or about: the Premises, such insurance to afford immediate
minimum protection to a combined single limit of not less than One Million
Dollars ($1,000,000) per occurrence and not less than One Million Dollars
($1,000,000) in the aggregate;
(d) If the Premises are in an area designated by the
Secretary of Housing and Urban Affairs as an area having special flood or mud
slide hazards, flood insurance: in an amount equal to the full replacement cost
of the Improvements and any and all personal property used or to be used in
connection therewith; and
(e) Such other insurance, and in such amounts, as may
from time to time be reasonably required by Mortgagee against the same or other
hazards and risks insured against. by the operators of like properties in the
locality of the Property.
All policies of insurance (other than liability policies) required by
the terms of this Mortgage shall contain an endorsement or agreement by the
insurer that any loss shall be payable in accordance with the terms of such
policy notwithstanding any act or negligence of Mortgagor which might otherwise
result in forfeiture of said insurance and shall have attached thereto a
lender's loss payable endorsement for the benefit of Mortgagee, not subject to
contribution, in form satisfactory to mortgagee, and shall contain the further
agreement of the insurer waiving all rights of set off, counterclaim or
deductions against Mortgagee.
1.05 Delivery of Policies; Payment of Premiums. All policies of
insurance required by the terms of this Mortgage shall be issued by companies
and in amounts satisfactory to Mortgagee.
(a) Mortgagor shall furnish Mortgagee with a signed duplicate
original policy with respect to all required insurance coverage. If Mortgagee
shall in its discretion consent to Mortgagor providing any of the required
insurance through blanket policies carried by Mortgagor and covering more than
one location, Mortgagor shall furnish Mortgagee with a certificate of insurance
for each such policy setting forth the coverage, the limits of liability, the
name of the carrier, the policy number and the expiration date. At least thirty
(30) days prior to the expiration of each such policy, Mortgagor shall furnish
Mortgagee with evidence satisfactory to Mortgagee of the payment of premium and
the reissuance of a policy continuing insurance in force as required by this
Mortgage. All policies required to be maintained pursuant to this Mortgage shall
be in form satisfactory to Mortgagee; shall be maintained in full force and
effect; shall be assigned and delivered to Mortgagee, with premiums prepaid, as
collateral security for payment of the indebtedness secured hereby; and shall
contain a provision that such policies will not be cancelled or materially
amended, which term shall include any reduction in the scope or limits of
coverage, without at least thirty (30) days prior written notice to Mortgagee.
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<PAGE> 11
(b) In the event Mortgagor shall at: any time fail to
provide, maintain, keep in force or deliver and furnish to Mortgagee the
policies of insurance required by this Section 1.05, Mortgagee may procure such
insurance or single-interest insurance for such risks covering Mortgagee's
interest, and Mortgagor will pay or reimburse the cost of all premiums thereon
promptly upon demand by Mortgagee, and until such payment is made the amount of
all such premiums together with interest thereon at the Default Rate shall be
secured by this Mortgage.
(c) Upon the occurrence of an Event of Default (as defined in
Article V hereof), or an occurrence which, with the passage of time, the giving
of notice or both would become an Event of Default, Mortgagor shall, at
Mortgagee's request, deposit with Mortgagee, in monthly installments, an amount
equal to one-twelfth of the estimated aggregate annual insurance premiums on all
policies of insurance required by this Mortgage. Mortgagor further agrees, upon
Mortgagee's request, to cause all bills, statements or other documents relating
to the foregoing insurance premiums to be sent or mailed directly to Mortgagee.
Upon receipt of such bills, statements or other documents, and providing
Mortgagor has deposited sufficient funds with Mortgagee pursuant to this Section
1.05, Mortgagee shall pay such amounts as may be due thereunder out of the funds
so deposited with Mortgagee. If at any time and for any reason the funds
deposited with Mortgagee are or will be insufficient to pay such amounts as may
then or subsequently be due, Mortgagee shall notify Mortgagor and Mortgagor
shall immediately deposit an amount equal to such deficiency with Mortgagee.
Notwithstanding the foregoing, nothing contained herein shall cause Mortgagee to
be deemed a trustee of said funds or to be obligated to pay any amounts in
excess of the amount of funds deposited with Mortgagee pursuant to this Section
1.05. Mortgagee may commingle said deposits with its own funds and Mortgagor
shall be entitled to no interest on said funds. After the occurrence of an Event
of Default, Mortgagee may impound or reserve for future payment of premiums such
portion of such payments as Mortgagee may in its absolute discretion deem
proper, applying the balance on the principal of or interest on the obligations
secured hereby. Should Mortgagor fail to deposit with Mortgagee (exclusive of
any portion of said payments which may have been applied by Mortgagee to the
payment of the principal of or interest on the indebtedness secured by the Loan
Documents) sums sufficient to fully pay such premiums at least thirty (30) days
before they may be due, Mortgagee may, at Mortgagee's election, but without any
obligation so to do, advance any amounts required to make up the deficiency,
which advances, if any, shall be secured hereby and shall be repayable to
Mortgagee as herein elsewhere provided, or at its option Mortgagee may, without
making any advance whatsoever, apply any sums held by it upon any obligation of
the Mortgagor secured hereby. Should any default occur or exist in the payment
or performance of Mortgagor's and/or any guarantor's obligations under the terms
of the Loan Documents, Mortgagee may, at any time at Mortgagee's option, apply
any sums or amounts in its hands received pursuant hereto, or as rents or income
of the Premises or otherwise, to the payment or discharge of any indebtedness of
Mortgagor or obligation of Mortgagor secured hereby in such manner and order as
Mortgagee may elect. The receipt, use or application of any such sums paid by
Mortgagor to Mortgagee hereunder shall not be construed to affect the maturity
of any indebtedness secured by this Mortgage or any of the rights or powers of
Mortgagee under the terms of the Loan Documents or any of the obligations of
Mortgagor and/or any guarantor under this Mortgage.
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<PAGE> 12
1.06 Insurance Proceeds. In the event of any damage to or
destruction of the Premises or any part thereof, Mortgagor shall give prompt
written notice thereof to Mortgagee, and the following provisions shall apply:
(a) If an Event of Default (as hereinafter defined) shall
have occurred and be continuing hereunder, or if the estimated cost of
restoration exceeds $125,000, Mortgagee shall receive all insurance proceeds and
shall have the right to apply such proceeds, after deducting therefrom all costs
and expenses (regardless of the particular nature thereof and whether incurred
with or without suit), including reasonable attorneys' fees, incurred by it in
connection with the collection of such proceeds, to the payment of the principal
sum of the Note, all interest accrued thereon and all sums payable to Mortgagee
by Mortgagor under the Loan Documents, in which event the following provisions
shall apply:
(i) All proceeds of insurance shall be payable
to Mortgagee, and Mortgagee is hereby authorized and empowered by Mortgagor to
settle, adjust or compromise any claims for loss, damage or destruction under
any policy or policies of insurance.
(ii) Except to the extent that insurance proceeds
are received by Mortgagee and applied to the indebtedness secured hereby,
nothing herein contained shall be deemed to excuse Mortgagor from repairing or
maintaining the Premises as provided in Section 1.03 hereof or restoring all
damage or destruction to the Premises, regardless of whether or not there are
insurance proceeds available or whether any such proceeds are sufficient in
amount, and the application or release by Mortgagee of any insurance proceeds
shall not cure or waive any Event of Default or notice of default under this
Mortgage or invalidate any act done pursuant to such notice.
(b) If an Event of Default shall not have occurred and be
continuing hereunder; or if the cost of restoration is less than $125,000; or if
an Event of Default shall have occurred and be continuing hereunder or the cost
of restoration equals or exceeds $125,000, but Mortgagee shall not have elected
to avail itself of its rights under Section 1.06(a), the following provisions
shall apply:
(i) Mortgagor shall have the right to adjust or
compromise any claim under any policy of insurance, but Mortgagee shall have the
right to monitor the settlement process and the consent of Mortgagee shall be
required for any settlement, adjustment or compromise of any such claim.
(ii) Mortgagee shall have the right to retain and
apply the proceeds of any rent insurance and/or business interruption insurance
on account of the payments of the regular monthly installments of principal and
interest as they fall due. If Mortgagee receives proceeds of rent insurance
and/or business interruption insurance beyond those required to be applied for
the current month, Mortgagee may retain such additional proceeds in escrow, for
the account of Mortgagor, and so apply such proceeds on a monthly basis;
provided that any proceeds of such insurance in excess of those reasonably
estimated by Mortgagee to be required to pay all monthly installments of
principal and interest during the estimated period of restoration and leaseup
shall be paid over to Mortgagor to meet the other expenses of the Premises.
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(iii) Provided that (a) Mortgagee is satisfied that
there are sufficient proceeds of hazard and rental interruption insurance to
complete restoration of the same value and character as existed prior to such
damage and to fulfill Mortgagor's obligations with respect to the indebtedness
secured hereby, and (b) the insurers do not deny liability as to the insureds,
Mortgagee will consent to the use of the net proceeds of any casualty insurance
for restoration of the Premises in accordance with the following conditions:
(A) prior to commencement of
restoration, the contracts, contractors, plans and specifications for the
restoration shall have been approved by Mortgagee;
(B) at the time of any disbursement
there shall not be an Event of Default hereunder, or an event which with the
passage of time or giving of notice, or both, could become an Event of Default;
no mechanics' or materialmen's liens shall have been filed and remain
undischarged, and a satisfactory bringdown of title insurance shall be delivered
to Mortgagee;
(C) disbursements shall be made from
time to time each in an amount not exceeding the cost of the work completed
since the previous disbursement, upon receipt of satisfactory evidence (from an
architect or engineer satisfactory to Mortgagee and retained by Mortgagor at
Mortgagor's expense to supervise the restoration) of the stage of completion and
of performance of the work in good and workmanlike manner in accordance with the
contracts, plans and specifications; and
(D) the restoration fund shall be
deposited in a restricted money market account with Mortgagee (the "Restoration
Account").
If, prior to commencement of restoration, or at any time during the
restoration, the estimated cost of restoration, as determined by Mortgagee,
exceeds the net amount of insurance proceeds received, such difference shall be
paid by Mortgagor to Mortgagee for deposit in the Restoration Account and
disbursed prior to the disbursement of insurance proceeds. Any sum so added by
Mortgagor which remains in the Restoration Account upon completion of
restoration shall be refunded to Mortgagor. All insurance proceeds, if any,
remaining after completion of repairs and restoration or after the occurrence of
an Event of Default hereunder shall be applied by Mortgagee to the then
outstanding principal balance of the indebtedness secured hereby.
1.07 Assignment of Policies Upon Foreclosure. In the event of
foreclosure of this mortgage or other transfer of title or assignment of the
Premises in extinguishment, in whole or in part, of the debt secured hereby, all
right, title and interest of Mortgagor in and to all policies of insurance
required by this Mortgage shall inure to the benefit of and pass to the
successor or successors in interest to Mortgagor or the purchaser or grantee of
the Premises.
1.08 Indemnification; Subrogation; Waiver of Offset.
(a) If Mortgagee is made a party defendant to any
litigation concerning this Mortgage or the Premises or any part thereof or
therein, or the occupancy thereof
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by Mortgagor or persons claiming through Mortgagor, then Mortgagor shall
indemnify, defend and hold Mortgagee harmless from all liability arising by
reason of such litigation, including reasonable attorneys' fees and expenses
incurred by Mortgagee in any such litigation, whether or not any such litigation
is prosecuted to judgment. If Mortgagee commences an action against Mortgagor to
enforce any of the terms hereof or because of the breach by Mortgagor of any of
the terms hereof, or for the recovery of any sum secured :hereby, Mortgagor
shall pay to Mortgagee reasonable attorneys' fees and expenses, and the right to
such attorneys' fees and expenses shall be deemed to have accrued on the
commencement of such action, and shall be enforceable whether or not such action
is prosecuted to judgment. If Mortgagor shall breach any term of this Mortgage,
Mortgagee may employ an attorney or attorneys to protect its rights hereunder,
and in the event of such employment following any breach by Mortgagor, Mortgagor
shall pay to Mortgagee the reasonable attorneys' fees and expenses incurred by
Mortgagee, whether or not an action is actually commenced against Mortgagor by
reason of such breach.
Notwithstanding the foregoing, Mortgagor's obligation to Indemnify Mortgagee
shall not extend to any liability incurred by or asserted against Mortgagee to
the extent arising from Mortgagee's gross negligence or willful misconduct.
(b) Mortgagor waives any and all right to claim or
recover against Mortgagee, its officers, employees, agents and representatives,
for loss of or damage to Mortgagor, the Premises, property of Mortgagor or the
property of others under the control of Mortgagor from any cause insured against
or required to be insured against by the provisions of this Mortgage.
(c) Except as otherwise specifically provided in the Note
or this Mortgage, all sums payable by Mortgagor hereunder shall be payable
without notice, demand, counterclaim, setoff, deduction or defense and without
abatement, suspension, deferment, diminution or reduction, and the obligations
and liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of: (i)
any damage to or destruction of or any condemnation or similar taking of the
Premises or any part thereof; (ii) any restriction or prevention of or
interference with any use of the Premises or any part thereof; (iii) any title
defect or encumbrance or any eviction from the Property or the Improvements or
any part thereof by title paramount or otherwise; (iv) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceeding relating to Mortgagee, or any action taken with respect to
this Mortgage by any trustee or receiver of Mortgagee, or by any court, in any
such proceeding; (v) any claim which Mortgagor has or might have against
Mortgagee; (vi) any default or failure on the part of Mortgagee to perform or
comply with any of the terms hereof or of any other agreement with Mortgagor; or
(vii) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing; and whether or not Mortgagor shall have notice or knowledge of any of
the foregoing. Except as expressly provided herein, Mortgagor waives all rights
now or hereafter conferred by statute or otherwise to any abatement, suspension,
deferment, diminution or reduction of any sum secured hereby and payable by
Mortgagor.
1.09 Taxes and Impositions.
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(a) Mortgagor agrees to pay, at least ten (10) days prior
to the accrual of any interest or penalty thereon, all real property taxes and
assessments, general and special, and all other taxes arid assessments of any
kind or nature whatsoever, including, without limitation, nongovernmental levies
or assessments such as maintenance charges, owner association dues or charges or
fees, levies or charges resulting from covenants, conditions and restrictions
affecting the Premises, charges for any easement or agreement maintained for the
benefit of the Premises, which are assessed or imposed upon any of the Premises,
or against Mortgagor or arising in respect of the occupancy, use or possession
thereof, or become due and payable in respect thereof, or upon any Personal
Property, equipment or other facilities used in the operation or management
thereof (all of which taxes, assessments and other governmental charges of a
like or different nature are hereinafter referred to as "Impositions");
provided, however, that if any such Imposition lawfully may be paid in
installments, Mortgagor may pay such Imposition together with any accrued
interest on the unpaid balance of such Imposition, in installments as they
become due , and before any fine, penalty, interest or cost may be added thereto
for the nonpayment of any such installment and interest.
(b) If under the provisions of any law or ordinance now
or hereafter in effect there shall be assessed or . imposed (i) a tax or
assessment on the Premises in lieu of or in addition to the Impositions payable
by Mortgagor pursuant to subparagraph (a) hereof, or (ii) a license fee, tax or
assessment on Mortgagee measured by or based in whole or in part upon the amount
of the outstanding obligations secured hereby, then all such taxes, assessments
or fees shall be deemed to be included within the term "Impositions" as defined
in subparagraph (a) hereof, and Mortgagor shall pay and discharge the same as
herein provided with respect to the payment of Impositions and if such
Impositions are not paid by Mortgagor, then at the option of Mortgagee, all
obligations secured hereby together with all accrued interest thereon, shall
immediately become due and payable. Anything to the contrary herein
notwithstanding, Mortgagor shall have no obligation to pay any franchise,
estate, inheritance, income, excess profits or similar tax levied on Mortgagee
or on the obligations secured hereby.
(c) Subject to the provisions of subsection (d) of this
Section 1.09, Mortgagor covenants to furnish Mortgagee within thirty (30) days
after the date upon which any such Imposition is due and payable by Mortgagor,
official receipts of the appropriate taxing or other authority, or other proof
satisfactory to Mortgagee, evidencing the payments thereof.
(d) Mortgagor shall have the right, before any
delinquency occurs, to contest or object to the amount or validity of any such
Imposition by appropriate legal proceedings, but this shall not be deemed or
construed in any way as relieving, modifying or extending the covenants of
Mortgagor to pay any such Imposition at the time and in the manner provided in
this Section 1.09, unless Mortgagor shall have given prior written notice to
Mortgagee of intent to so contest or object to an Imposition, and unless, at
Mortgagee's sole option, (i) Mortgagor shall demonstrate to Mortgagee's
satisfaction that the legal proceeding shall operate conclusively to prevent the
sale of the Premises, or any part thereof, to satisfy such Imposition prior to
final determination of such proceedings; or (ii) Mortgagor shall furnish a good
and sufficient bond or surety as requested by and satisfactory to Mortgagee; or
(iii) Mortgagor shall have provided Mortgagee with a good and sufficient
undertaking as may be required or permitted by law to accomplish a stay of such
proceedings.
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(e) Mortgagor shall pay to Mortgagee on the day monthly
installments of interest or of principal and interest, as the case may be, are
payable under the Note until the Note is paid in full, an amount equal to
one-twelfth of the annual total of Impositions reasonably estimated by Mortgagee
to be assessed against the Premises in order to pay the installment of taxes and
assessments next due on the Premises. Mortgagor further agrees to cause all
bills, statements or other documents relating to Impositions to be sent or
mailed directly to Mortgagee. Upon receipt of such bills, statements or other
documents, and provided that Mortgagor has deposited sufficient funds with
Mortgagee pursuant to this Section 1.09, Mortgagee shall pay such amounts as
many be due thereunder out of the funds so deposited with Mortgagee. If at any
time and for any reason the funds deposited with Mortgagee are or will be
insufficient to pay such amounts as may then or subsequently be due, Mortgagee
shall notify Mortgagor and Mortgagor immediately shall deposit an amount equal
to such deficiency with Mortgagee. Notwithstanding the foregoing, nothing
contained herein shall cause Mortgagee to be deemed a trustee of such funds or
to be obligated to pay any amounts in excess of the amount of funds deposited
with Mortgagee pursuant to this Section 1.09. Mortgagee may commingle such
deposits with its own funds and Mortgagee shall not be obliged to pay or allow
any interest on any sums held by Mortgagee pending disbursement or application
hereunder, and Mortgagee after the occurrence of an Event of Default may impound
or reserve for future payment of Impositions such portion of such payments as
Mortgagee may in its absolute discretion deem proper, applying the balance to
the principal of or interest on the obligations secured hereby. Should Mortgagor
fail to deposit with Mortgagee (exclusive of any portion of said payments which
may have been applied by Mortgagee to the payment of the principal of or
interest on the indebtedness secured by the Loan Documents) sums sufficient to
fully pay such Impositions at least thirty (30) days before accrual of any
interest or penalty thereon, Mortgagee may, at Mortgagee's election, but without
any obligation so to do, advance any amounts required to make up the deficiency,
which advances, if any, shall accrue interest at the Default Rate, shall be
secured hereby and shall be repayable to Mortgagee as herein elsewhere provided,
or at the option of Mortgagee the latter may, without making any advance
whatsoever, apply any sums held by it upon any obligation of the Mortgagor
secured hereby. Should any default occur or exist in the payment or performance
of Mortgagor's and/or any guarantor's obligations under the terms of the Loan
Documents, Mortgagee may, at any time at Mortgagee's option, apply any sums or
amounts in its hands received pursuant hereto, or as rents or income of the
Premises or otherwise, to the payment or discharge of any indebtedness or
obligation of Mortgagor secured hereby in such manner and order as Mortgagee may
elect. The receipt, use or application of any such sums paid by Mortgagor to
Mortgagee hereunder shall not be construed to affect the maturity of any
indebtedness secured by this Mortgage or any of the rights or powers of
Mortgagee under the terms of the Loan Documents or any of the obligations of
Mortgagor and/or any guarantor under this Mortgage.
(f) If Mortgagor or any successor or grantee of Mortgagor
is or shall be or become a corporation, a limited liability company or a limited
or general partnership, it shall keep in effect its existence and rights as such
corporation, company or partnership under the laws of the state of its
incorporation or formation and its right to own property and transact business
in the state in which the Premises is situated during the entire time that it
has any ownership or other interest in the Premises. For all periods during
which the title to the Premises
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or any part thereof shall be held by a corporation or other entity subject to
corporate taxes or taxes similar to corporate taxes, Mortgagor shall file or
cause to be filed returns for such taxes with the proper authorities, bureaus or
departments and shall cause to be paid, when due and before interest or
penalties are due thereon, all taxes payable by such corporation or other entity
to the United States, to such state of incorporation or formation and to the
state in which the Premises is situated and any political subdivision thereof,
and shall produce to Mortgagee receipts showing payment of any and all such
taxes, charges or assessments prior to the last dates upon which such taxes,
charges or assessments are payable without interest or penalty charges;
provided, however, that Mortgagor shall have the right before any delinquency
occurs to contest or object to the amount or validity of any such taxes, charges
or assessments in good faith and by appropriate legal proceedings, but this
shall not be deemed or construed in any way as relieving, modifying or extending
Mortgagor's obligation to pay any such taxes, charges or assessments at the time
such contest, objection and legal proceedings have been terminated or
discontinued adversely to Mortgagor. Within ten (10) days of receipt thereof,
Mortgagor shall produce to Mortgagee all settlements, notices of deficiency or
overassessment and any other notices pertaining to Mortgagor's tax liability,
which may be issued by the United States, such state of incorporation or
formation, the state in which the Premises is situated and any political
subdivision thereof. If at any time the United States or any department or
bureau thereof shall require Internal Revenue stamps on the Note secured hereby,
Mortgagor on demand shall pay for. them with any interest or penalties payable
thereon.
1.10 Utilities. Mortgagor shall pay when due all utility charges
incurred by Mortgagor for the benefit of the Premises or which may become a
charge or lien against the Premises for gas, electricity, water or sewer
services furnished to the Premises and all other assessments or charges of a
similar nature, whether public or private, affecting the Premises or any portion
thereof, whether or not such taxes, assessments or charges are liens thereon.
1.11 Mortgagor's Lease and Easement Obligations. Mortgagor shall
pay when due all rents and other payments and perform all covenants and
agreements contained in any lease, sublease, ground lease or easement which may
constitute a portion of or an interest in the Premises, and shall not surrender,
assign or sublease any such lease, sublease, ground lease or easement, nor take
any other action which would affect or permit the termination of any such lease,
sublease, ground, lease or easement. Mortgagor covenants to furnish to Mortgagee
within thirty (30) days after the date upon which such rents or other payments
are due and payable by Mortgagor, receipts or other evidence satisfactory to
Mortgagee evidencing the payment thereof.
1.12 Compliance with Laws; Actions Affecting Premises. Mortgagor
shall promptly and faithfully comply with and obey all laws, ordinances, rules,
regulations, requirements and orders of every governmental authority or agent
having jurisdiction of the Premises. Mortgagor shall appear in and contest any
action or proceeding purporting to affect the security hereof or the rights or
powers of Mortgagee, and Mortgagor shall pay all costs and expenses, including
reasonable attorneys' fees, in any such action or proceeding.
1.13 Actions by Mortgagee to Preserve Premises. Should Mortgagor
fail to make any payment or to do any act as and in the manner provided in any
of the Loan Documents, Mortgagee in its sole discretion, without obligation so
to do and without notice to or demand
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upon Mortgagor and without releasing Mortgagor from any obligation, may make or
do the same in such manner and to such extent as Mortgagee may deem necessary to
protect the security hereof. In connection therewith, without limiting its
general powers, Mortgagee shall have and is hereby given the right, but not the
obligation, (i) to enter upon and take possession of the Premises; (ii) to make
additions, alterations, repairs and improvements to the Premises which it may
consider necessary or proper to keep the Premises in good condition and repair;
(iii) to appear and participate in any action or proceeding affecting or which
may affect the security hereof or the rights or powers of Mortgagee; (iv) to
pay, purchase, contest or compromise any encumbrance, claim, charge, lien or
debt which in the judgment of Mortgagee may affect or appear to affect the
security of this Mortgage or be prior or superior hereto; and (v) in exercising
such powers, to pay all necessary expenses, including the fees and expenses of
counsel and/or other necessary or desirable consultants. Immediately upon demand
therefor by Mortgagee, Mortgagor shall pay or reimburse all costs and expenses
incurred by Mortgagee in connection with the exercise by Mortgagee of the
foregoing rights, including, without limitation, costs of evidence of title,
court costs, appraisals, surveys and attorneys' fees.
1.14 Survival of Warranties. Mortgagor shall fully and faithfully
satisfy and perform the obligations of Mortgagor contained in the Commitment and
in the other Loan Documents and each agreement of Mortgagor incorporated by
reference therein or herein and any modification or amendment therefor. All
representations, warranties and covenants of Mortgagor contained therein or
herein or incorporated by reference therein or herein shall survive the closing
and funding of the loan evidenced by the Note and shall remain continuing
obligations, warranties and representations of Mortgagor during any time when
any portion of the indebtedness secured by this Mortgage shall remain
outstanding.
1.15 Eminent Domain. Should the Premises, or any part thereof or
interest therein, be taken or damaged by reason of any public improvement,
eminent domain or other similar proceeding, ("Condemnation"), or should
Mortgagor receive any notice or other information regarding such proceeding,
Mortgagor shall give prompt written notice thereof to Mortgagee, and the
following provisions shall apply:
(a) In the event of a Condemnation (x) requiring $50,000
or more to restore the Premises to the same value and character as existed
before the Condemnation or (y) requiring less than $50,000 to so restore
occurring after an. Event of Default has occurred and while such Event of
Default is continuing hereunder:
(i) Mortgagee shall receive all compensation,
awards and other payments of relief therefor made or granted for the benefit of
Mortgagor. Mortgagee shall have the exclusive right to settle, adjust or
compromise any claim and shall be entitled, at Mortgagee's option, to commence,
appear in and prosecute in its own name any action or proceedings. All such
compensation, awards, damages, rights of action and proceeds awarded to
Mortgagor (the "Proceeds") shall be deemed assigned to Mortgagee, and Mortgagor
agrees to execute such further assignments of the Proceeds as Mortgagee may
require. Such assignment shall not relieve Mortgagor of its obligations to
continue to pay and perform the obligations and indebtedness secured hereby or
such portion thereof as remains unpaid after any application by Mortgagee,
pursuant to this Section 1.15, of the Proceeds to the obligations or
indebtedness so secured.
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(ii) Mortgagee shall have the right to apply all
such Proceeds, after deducting therefrom all costs and expenses (regardless of
the particular nature thereof and whether incurred with or without suit),
including reasonable attorneys' fees, incurred by it in connection with the
collection of such Proceeds, to the indebtedness secured hereby. Such
application or release shall not, by itself, cure or waive any default hereunder
or notice of default under this Mortgage or invalidate any act done pursuant to
such notice.
(b) In the event of a condemnation of less than all or
substantially all of the Premises and so long as an Event of Default shall not
have occurred hereunder (or if an Event of Default shall have occurred hereunder
but Mortgagee shall not have elected to avail itself of its rights under
subparagraph (a)):
(i) Mortgagor shall have the exclusive right to
settle, adjustment or compromise any claim, but Mortgagee shall have the right
to monitor the settlement process and the consent of Mortgagee shall be required
for any settlement, adjustment or compromise of any such claim in excess of
$50,000.
(ii) Provided that (a) Mortgagee is satisfied
that there are sufficient Proceeds to complete restoration of the Improvements
to the same value and character as extended prior to the Condemnation and to
fulfill Mortgagor's obligations with respect to the indebtedness secured hereby,
Mortgagee shall apply the net Proceeds to restoration of the Improvements on the
terms and subject to the conditions set forth in Section 1.06(b)(iii).
(iii) If, prior to the commencement of
restoration, or at any time during restoration, the estimated cost of
restoration, as determined by Mortgagee, exceeds the net Proceeds, such
difference shall be paid by Mortgagor to Mortgagee for deposit into the
Restoration Account and disbursed prior to the disbursement of any Proceeds. Any
sum so added by Mortgagor which remains in the Restoration Account upon
completion of restoration shall be refunded by Mortgagor. All Proceeds, if any,
remaining after completion of restoration or after the occurrence of an Event of
Default hereunder shall be applied by Mortgagee to the then outstanding
principal balance of the indebtedness secured hereby.
1.16 Additional Security. In the event Mortgagee at any time holds
additional security for any of the obligations secured hereby, it may enforce
the sale thereof or otherwise realize upon such additional security, at its
option, either before or concurrently with or after enforcing its remedies
hereunder or under any of the Loan Documents.
1.17 Successors and Assigns. This Mortgage shall apply to, inure to
the benefit of and bind all parties hereto, their successors, representatives
and assigns.
1.18 Inspections. Mortgagee, its agents, representatives and
workers, are authorized to enter at any reasonable time upon or in any part of
the Premises for the purpose of inspecting the same and for the purpose of
performing any of the acts it is authorized to perform under the terms of any of
the Loan Documents.
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1.19 Liens. (a) Mortgagee may, at its sole option, declare the
entire unpaid balance of the principal of and the accrued interest on the Note
and all other sums secured by this Mortgage immediately due and payable if
Mortgagor, without the prior written consent of Mortgagee, shall create or cause
or permit to exist any lien on, or security interest in, the Mortgaged Property,
including any furniture, fixtures, appliances, equipment or other items of
personal property which are intended to be or become part of the Mortgaged
Property, except the lien created hereby, any other liens granted to or
heretofore approved by Mortgagee, purchase money liens for furniture, fixtures
and/or equipment not to exceed $150,000.00 in the aggregate and the Permitted
Liens and except in connection with subordinate financing from the Shareholder
and made with the prior written consent of Bank, which consent shall not be
unreasonably withheld.
(b) Prior to the commencement of any construction,
renovation, improvement or other work on the Premises, Mortgagor shall file or
cause to be filed waivers of mechanics' liens in a form and manner satisfactory
to Mortgagee. Mortgagor shall pay and promptly discharge, at Mortgagor's cost
and expense, all liens, encumbrances and charges upon the Premises, or any part
thereof or interest therein; provided, that Mortgagor shall have the right to
contest in good faith the validity of any such lien, encumbrance or charge,
provided Mortgagor shall first deposit with Mortgagee a bond or other security
satisfactory to Mortgagee in such amounts as Mortgagee shall require, and
provided further that Mortgagor shall thereafter diligently proceed to cause
such lien, encumbrance or charge to be removed and discharged. If Mortgagor
shall fail to discharge any such lien, encumbrance or charge, or provide such
security, then, in addition to any other right or remedy of Mortgagee, Mortgagee
may, but shall not be obligated to, discharge the same, either by paying the
amount claimed to be due, or by procuring the discharge of such lien by
depositing in court a bond or the amount claimed or otherwise giving security
for such claim, or in such manner as is or may be prescribed by law; and all
funds advanced by Mortgagee to pay such obligations, liabilities, costs and
expenses shall be reimbursed by Mortgagor upon demand by Mortgagee together with
interest thereon until reimbursement at the Default Rate; and all such advances
with interest thereon as aforesaid shall be secured by this Mortgage and the
other Loan Documents.
1.20 Mortgagee's Powers. Without affecting the liability of any
other person liable for the payment or performance of any obligation secured
hereby, and without affecting the lien or charge of this Mortgage upon any
portion of the Premises not then or theretofore released as security for the
full amount and extent of all unpaid and unperformed obligations, Mortgagee may,
from time to time and without notice (i) release any person so liable, (ii)
extend the maturity or alter any of the terms of any such obligation or grant
other indulgences, (iii) release or reconvey, or cause to be released or
reconveyed at any time at Mortgagee's option, any parcel, portion or interest in
all or any part of the Premises, (iv) take or release any other or additional
security for any obligation herein mentioned, (v) make compositions or other
arrangements with debtors in relation thereto, or (vi) advance additional funds
to protect the security hereof and pay or discharge the obligations of Mortgagor
hereunder or under the Loan Documents, and all amounts so advanced, with
interest thereon at the rate set forth in the Note, shall be secured hereby.
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1.21 Tradenames; Fictitious Name Registration. At the request of
Mortgagee, Mortgagor shall execute a certificate in form satisfactory to
Mortgagee listing the tradenames under which Mortgagor intends to operate the
Property and Improvements, and representing and warranting that Mortgagor does
business under no other tradename with respect to the Property and Improvements.
Mortgagor shall immediately notify Mortgagee in writing of any change in said
tradenames, and will, upon request of Mortgagee, execute additional UCC
financing statements and other instruments revised to reflect the change in
tradename. Mortgagor shall make all filings and take all other steps required in
order to comply with applicable fictitious name statutes, and shall provide
evidence of such compliance to Mortgagee.
1.22 Representations and Warranties Concerning ERISA. No employee
benefit plan maintained by Mortgagor which is subject to Part 3 of Title I of
the Employee Retirement Income Security Act of 1974 has an accumulated funding
deficiency (as such term is defined therein), and Mortgagor has not incurred any
liability to the Pension Benefit Guaranty Corporation. The foregoing
representation and warranty shall survive the execution of this Mortgage and the
Loan Documents, and shall continue in full force and effect so long as any
obligations secured hereby are unpaid or this Mortgage remains in effect.
1.23 Mortgagor's Existence; Transfers.
(a) Mortgagor, and any subsequent owner of any of the
Premises, shall do all things necessary to preserve and keep in full force and
effect its and their existence, franchises, rights and privileges as a
corporation, limited liability company or partnership, as the case may be, under
the laws of the state of its and their formation and its and their right to own
property and transact business in the state in which the Premises are situate.
Neither Mortgagor nor any subsequent owner of the Premises or any portion
thereof, shall amend or modify (in any way that would adversely affect the
rights of Mortgagee) or cancel the certificate of incorporation, partnership
agreement or operating agreement (as the case may be) of Mortgagor or such
subsequent owner without the prior written consent of Mortgagee. Neither the
composition nor form of business association of Mortgagor may be modified,
amended or altered, nor may the ownership of Mortgagor or the Premises, in whole
or. in part, be sold, transferred, assigned or otherwise disposed of (other than
as expressly set forth in subparagraph (b)) without the prior written consent of
Mortgagee, which consent may require such other terms and conditions as are
acceptable to Mortgagee.
(b) Notwithstanding anything in subparagraph (a) to the
contrary, (i) so long as the Shareholder shall continue to manage and operate
the Premises and shall, directly or indirectly, control a majority in interest,
including voting interest, in the Mortgagor, the Shareholder may transfer all or
any part of its ownership interests in Mortgagor, and Mortgagor may issue and
deliver shares to any Person, and (ii) Mortgagor may transfer the Premises to
any single purpose entity in which the Shareholder directly or indirectly
controls a majority in interest, including voting interest, subject to this
Mortgage and the assignment and assumption of the Loan Documents, all without
the prior written consent of, or notice to, the Mortgagee.
1.24 Mortgagee's Right to Publicize Source of Financing. Mortgagee
shall have the right to announce and publicize the source of financing for the
Improvements and/or the
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Property, and to select the media, means and frequency of such publicity, which
may include, but need not be limited to, the placing of a financing sign on the
Property and the use of advertisements and other devices of Mortgagee's choice.
1.25 Advance Money Mortgage.
(a) This Mortgage secures future advances made pursuant
to this Mortgage or pursuant to the Loan Documents. Without limiting the
foregoing, this Mortgage secures all advances made by Mortgagee of any kind or
nature described in 42 Pa. C.S.A. ss. 8144.
(b) If Mortgagor sends a written notice to Mortgagee
which purports to limit the indebtedness secured by this Mortgage and
to release the obligation of Mortgagee to make any additional advances to or for
the benefit of Mortgagor, such a notice shall be ineffective as to any future
advances made: (i) to pay taxes, assessments, maintenance charges and insurance
premiums; (ii) for costs incurred for the protection of the Premises or the lien
of this Mortgage; (iii) on account of expenses incurred by Mortgagee by reason
of a default of Mortgagor hereunder or under the Loan Documents; and (iv) on
account of any other costs incurred by Mortgagee to protect and preserve the
Premises or the lien of this Mortgage. It is the intention of the parties hereto
that any such advance made by Mortgagee after any such notice by Mortgagor shall
be secured by the lien of this Mortgage on the Premises.
ARTICLE II
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
2.01 Assignment of Rents. Mortgagor hereby assigns and transfers to
Mortgagee all the rents, issues and profits of the Premises, now or hereafter
existing, and hereby gives to and confers upon Mortgagee the right, power and
authority to collect such rents, issues and profits. Mortgagor irrevocably
appoints Mortgagee Mortgagor's true and lawful attorney-in-fact, at the option
of Mortgagee at any time and from time to time, to demand, receive arid enforce
payment, to give receipts, releases and satisfactions, and to sue, in the name
of Mortgagor or Mortgagee, for all such rents, issues and profits and apply them
to the indebtedness secured hereby; provided, however, that Mortgagor shall have
the right to collect such rents, issues and profits (but not more than one month
in advance) prior to or at any time there is not an Event of Default (as such
term is hereinafter defined in Section 5.01) under any of the Loan Documents.
The assignment of the rents, issues and profits of the Premises in this Article
II is intended to be an absolute assignment from Mortgagor to Mortgagee and not
merely the passing of a security interest. The rents, issues and profits are
hereby assigned absolutely by Mortgagor to Mortgagee contingent only upon the
occurrence of an Event of Default under any of the Loan Documents.
2.02 Collection Upon Default. Upon the occurrence of any Event of
Default under any of the Loan Documents, Mortgagee may, at any time and from
time to time without notice, either in person, by agent or by a receiver
appointed by a court, and without regard to the adequacy of any security for the
indebtedness hereby secured, enter upon and take possession of the Premises, or
any part thereof, in its own name and sue for of otherwise collect such rents,
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issues and profits, including those past due and unpaid, and apply the same,
less costs and expenses of operation and collection, including attorneys' fees,
upon any indebtedness secured hereby, and in such order as Mortgagee may
determine. The collection of such rents, issues and profits, or the entering
upon and taking possession of the Premises, or the application thereof as
aforesaid, shall not cure or waive any default or notice of default hereunder or
invalidate any act done in response to such default or pursuant to such notice
of default.
2.03 Assignment of Leases. Mortgagor agrees to assign and transfer
to Mortgagee as additional security for the payment of the indebtedness secured
hereby all present and future leases upon all or any part of the Premises and
further agrees to execute and deliver, at the request of Mortgagee, all such
further assurances and assignments of leases with respect to the Premises as
Mortgagee shall from time to time require. In the event Mortgagor has sold,
transferred and assigned, or may hereafter sell, transfer and assign, to
Mortgagee, its successors and assigns, any interest of Mortgagor as lessor in
any lease or leases, Mortgagor expressly covenants and agrees that if Mortgagor,
as lessor under said lease or leases so assigned, shall fail to perform and
fulfill any material term, covenant, condition or provision in said lease or
leases, or any of them, on Mortgagor's part to be performed or fulfilled, at the
times and in the manner in said lease or leases provided, or if Mortgagor shall
suffer or permit to occur any breach or default under the provisions of any such
assignment of any lease or leases, then and in any such event, such breach or
default shall constitute an Event of Default hereunder as such term is defined
in Section 5.01 hereof.
ARTICLE III
SECURITY AGREEMENT
3.01 Creation of Security Interest. Mortgagor hereby grants to
Mortgagee a security interest in Mortgagor's interest in all of the Personal
Property, the Accounts, all other personal property now or hereafter owned by
Mortgagor and located in, on or at the Property or the Improvements and the
proceeds thereof, for the purpose of securing all obligations of Mortgagor
contained in any of the Loan Documents.
3.02 Warranties, Representations and Covenants of Mortgagor.
Mortgagor hereby warrants, represents and covenants as follows:
(a) Except for the security interest granted hereby,
Mortgagor is, and as to the portions of the Personal Property and
Accounts to be acquired after the date hereof will be, the sole owner of the
Personal Property and Accounts free from any lien, security interest,
encumbrance or claim thereon of any kind whatsoever other than Permitted Liens.
Mortgagor will notify Mortgagee of, and will defend the Personal Property and
Accounts against, all claims and demands of all persons at any time claiming the
Personal Property, the Accounts or any interest therein.
(b) Mortgagor will not assign, pledge, encumber or lease
(other than with Permitted Liens), or sell, convey or in any manner transfer the
Personal Property, the Accounts or portions thereof without the prior written
consent of Mortgagee.
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(c) The Personal Property will be kept on or at the
Property, and Mortgagor will not remove any portion or item of Personal Property
affixed or attached to the Property without the prior written consent of
Mortgagee, except such portions or items of Personal Property which are consumed
or worn out in ordinary usage, and are promptly replaced by Mortgagor with new
items of equal or greater quality.
(d) At the request of Mortgagee, Mortgagor will join with
Mortgagee in executing one or more financing statements and renewals,
continuation statements and amendments thereof pursuant to the Pennsylvania
Uniform Commercial Code in form satisfactory to Mortgagee, and will pay the cost
of filing the same in all public offices wherever filing is deemed by Mortgagee
to be necessary or desirable. Without limiting the foregoing, Mortgagor hereby
irrevocably appoints Mortgagee attorney-in-fact for Mortgagor to execute,
deliver and file such instruments for and on behalf of Mortgagor, and Mortgagor
will pay the costs of any such filing.
(e) All covenants and obligations of Mortgagor contained
herein relating to the Premises shall be deemed to apply to the Personal
Property and the Accounts whether or not expressly referred to herein.
(f) This Mortgage constitutes a Security Agreement as
defined in the Uniform Commercial Code of the Commonwealth of Pennsylvania.
(g) Notwithstanding any release of any or all of that
property included in the Premises which is deemed "real property", any
proceedings to foreclose this Mortgage or its satisfaction of record, the terms
hereof shall survive as a security agreement with respect to the security
interest created hereby and referred to above until the repayment or
satisfaction in full of the obligations of Mortgagor as are now or hereafter
evidenced by the Note.
(h) Mortgagor hereby appoints Mortgagee or substitutes
appointed by Mortgagee or its successors and assigns as Mortgagor's true and
lawful attorney, for Mortgagor and in Mortgagor's name to perform and do all
every act and thing whatsoever requisite and necessary to be done under all
contracts, licenses, leases and similar documents and agreements in which
Mortgagee has a security interest, upon an Event of Default hereunder. This
appointment shall be coupled with an interest and shall be non-cancelable except
upon satisfaction of the indebtedness secured hereby. Mortgagor hereby ratifies
and confirms all that Mortgagee shall lawfully do or cause to be done pursuant
hereto.
ARTICLE IV
FINANCIAL COVENANTS
4.01 Financial Reporting. Mortgagor shall deliver or cause to be
delivered to Mortgagee (i) no later than March 1 of each year, an income and
expense statement for the Premises, reflecting the Premises' financial condition
as of each December 31, certified by Mortgagor's Chief Financial officer as true
and correct, (ii) as soon as practicable, but in any event within 10 days after
filing, copies of Mortgagor's federal tax returns, (iii) no later than the
twentieth day of each month, a rent roll for the Premises, (iv) no later than
April 30 of each year,
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the annual report (Form 10-K) of the Shareholder as submitted to the Securities
and Exchange Commission, and (v) such other financial information as Mortgagee
may from time to time reasonably request, all of the foregoing in form and
content reasonably acceptable to Mortgagee. Mortgagor further agrees to make the
books and accounts relating to the Premises available for inspection by
Mortgagee or its representatives upon request at any reasonable time.
4.02 Reserves. Mortgagor shall establish with Mortgagee a bank
account to be disbursed only for capital expenditures at or in connection with
the Premises, all in accordance with the Escrow, Pledge and Security Agreement.
4.03 Debt Service Coverage Ratio.
(a) Beginning no later than the last day of the sixth
full month after the month in which the Premises achieve "breakeven operation"
(as defined in the Loan Agreement), the ratio of "net operating income" to "debt
service" shall at no time be less than 1.20 to 1.0. Mortgagee's determination as
to Mortgagor's compliance with this Section 4.03 shall be based on the
information provided pursuant to Section 4.01 of this Mortgage and the
certificates supplied pursuant to Section 4.04 of this Mortgage. For purposes
hereof "Net Operating Income" for any period shall mean the amount by which the
aggregate of all rents, occupancy charges, payments for assisted living services
and other charges or sums received in such period with respect to the occupancy,
use or right to use all or any part of the Improvements and the services
available to its residents under any occupancy agreement, lease, license or
other agreement exceeds the aggregate amount of money actually expended in such
period on a cash basis pursuant to arms length transactions for the following:
labor costs; general maintenance, repairs and replacements; management fees to
Alternative Living Services, Inc. equal to the greater of five percent (5%) of
gross income of the Premises or the actual fee payable under any management
agreement approved by Mortgagee; costs of licenses, permits, and similar fees
relating to the operation of the Premises; premiums for insurance; charges for
electricity and other utilities, assessments, real estate taxes, water charges
and sewer rents (or the amounts deposited into escrow therefor); amounts
required to be paid into the escrow account at Bank for capital expenditures
pursuant to the Escrow, Pledge and Security Agreement; and other customary and
reasonable expenses in connection with the operation, maintenance and
preservation of the Property and the Improvements, all of which are subject to
Mortgagee's approval. Notwithstanding the foregoing, for purposes of calculating
such ratio for any period, any item of income collected or expense paid that is
applicable to other periods shall be amortized in equal installments over the
periods to which each such item of income or expense is applicable, so that only
that portion of such income and expense applicable to the period for which the
ratio is being calculated shall be included in such calculation. Without
limiting the generality of those items which shall not be included among the
expenses allowable for purposes of calculating net operating income, the
following shall be specifically excluded from such calculation: debt service;
capital expenditures; depreciation and other non-cash items; and prepaid
expenses that are not customarily prepaid in the ordinary course of business.
For purposes hereof, "debt service" for any period shall mean all principal and
interest which would be payable by Mortgagor in any such period pursuant to a
note in the outstanding principal amount of the Note, accruing interest at the
applicable rate set forth in the Note and amortizing over the applicable period
of time set forth in the Note.
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(b) Notwithstanding anything in Article V of this
Mortgage to the contrary, Mortgagor's failure to maintain the ratio of net
operating income to debt service required by the previous subparagraph shall not
constitute an Event of Default, so long as Mortgagor (i) deposits funds, or a
letter of credit in accordance with the Loan Agreement, with Mortgagee
sufficient to attain a 1.20 to 1.0 debt service coverage ratio and such funds,
or letter of credit, remain deposited with Mortgagee until a 1.20 to 1.0 debt
service coverage ratio has been reached and maintained for twelve consecutive
months, and (ii) Mortgagor delivers or causes to be delivered to Mortgagee
monthly operating statements for the Premises and such other additional
financial information as Mortgagee shall request until the debt service coverage
ratio meets or exceeds 1.20 to 1.0 for twelve consecutive months.
4.04 Compliance Certificates. Mortgagor shall deliver to Mortgagee
together with the statements and reports delivered pursuant to subsection 4.01
of this Mortgage, and more often as Mortgagee may reasonably request or as
Mortgagor may desire, a certificate stating whether or not the covenants in
subsection 4.03 of this Mortgage have been met and Mortgagor shall attach to
such certificate the calculations and other information necessary to evidence
such compliance.
ARTICLE V
DEFAULTS AND REMEDIES
5.01 Events of Default. The occurrence of any one or more of the
following events shall constitute a default (an "Event of Default") by Mortgagor
hereunder:
(a) Default shall be made in the payment of any
installment of principal or interest or any other sum secured hereby within five
(5) days after notice from Mortgagee that such sum is due and payable (other
than sums due on the "Maturity Date" of the Note, for which no notice shall be
required);
(b) Mortgagor shall file a voluntary petition in
bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall commence a
federal bankruptcy proceeding in which an order for relief or such other court
order or statutory procedure which authorizes the case to proceed is entered
against it, or shall file any petition or answer seeking or acquiescing in any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief for itself under any present or future federal, state or other
statute, law or regulation relating to bankruptcy, insolvency or other relief
for debtors; or shall seek or consent to or acquiesce in the appointment of any
custodian, trustee, receiver or liquidator of Mortgagor or of all or any part of
the Premises, or of any or all of the royalties, revenues, rents, issues or
profits thereof, or shall make any general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due;
(c) A court of competent jurisdiction shall enter an
order for relief, order, judgment or decree approving a petition filed against
Mortgagor seeking any reorganization, dissolution or similar relief under any
present or future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, and such
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order for relief, order, judgment or decree shall remain unvacated and unstayed
for an aggregate of sixty (60) days (whether or not consecutive) from the first
day of entry thereof; or any custodian, trustee, receiver or liquidator of
Mortgagor or of all or any part of the Premises, or of any or all of the
royalties, revenues, rents, issues or profits thereof, shall be appointed
without the consent or acquiescence of Mortgagor and such appointment shall
remain unvacated and unstayed for an aggregate of sixty (60) days (whether or
not consecutive);
(d) A writ of execution or attachment or any similar
process shall be issued or levied against all or any part of or interest in the
Premises, or any judgment involving monetary damages shall be entered against
Mortgagor which shall become a lien on the Premises or any portion thereof or
interest therein and such execution, attachment or similar process or judgment
is not released, bonded, satisfied, vacated or stayed within thirty (30) days
after its entry or levy;
(e) There shall have occurred a transfer of title,
conveyance, transfer of control or disposition by Mortgagor of all or any part
of Mortgagor's right, title and interest in and to the Premises, or any part
thereof, whether voluntarily or by operation of law, other than in accordance
with Section 1.23 (b) of this Mortgage;
(f) There has occurred a breach of or default by
Mortgagor under any term, covenant, agreement, condition or provision, contained
in any of the Loan Documents or any part thereof not referred to in this Section
4.01 and such breach or default remains uncured more than thirty (30) days after
notice , given by Mortgagee to Mortgagor of such default or breach, provided,
that if such default or breach cannot be cured within thirty (30) days with the
exercise of reasonable diligence by the Mortgagor, then so long as Mortgagor is
proceeding diligently to cure such default or breach, and completes such cure
within ninety (90) days, such shall not constitute an Event of Default
hereunder;
(g) Any representation or warranty made by Mortgagor in
any Loan Document or in any other instrument which pertains to this Mortgage or
any obligation secured hereby proves to be incorrect, now or hereafter, in any
material respect;
(h) A default by Mortgagor in any payment of principal or
interest on any other obligation for borrowed money in excess of $50,000 or in
the performance of any other provision contained in any instrument under which
any such obligation is created or secured, if an effect of such default is to
cause or permit the holder to cause such obligation to become due prior to its
stated maturity;
(i) A final judgment or judgments for the payment of
money shall be rendered against Mortgagor and Mortgagor shall have failed to
satisfy the same or to have obtained a stay on the execution on such judgment or
to have bonded the same to Bank's reasonable satisfaction for a period of thirty
(30) consecutive days following the later of the date of entry hereof or the
date Mortgagor has notice thereof;
(k) Any Improvement is damaged or destroyed by an
uninsured casualty and Mortgagor fails to provide satisfactory evidence to
Mortgagee within thirty (30)
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days of such casualty that the necessary funds for satisfactory restoration of
the Improvements will be available at the time of restoration;
(l) Construction of the Improvements is stopped for
fifteen consecutive working days or more;
(m) Mortgagor fails, in the opinion of Mortgagee, to
employ sufficient workmen and materials in the performance of the construction
of the Improvements to enable the Improvements to be completed by the Completion
Date (as defined in the Loan Agreement);
(n) Mortgagor fails to qualify for an advance of funds
under the Loan Agreement within five (5) days after receipt of notice from
Mortgagee that Mortgagor's request for such advance does not qualify pursuant to
the requirements of the Loan Agreement;
(o) The Premises do not achieve "breakeven operation" on
or before the last day of the Construction Period (as defined in the Loan
Agreement) as such period may be extended pursuant to the terms of Section 10 of
the Loan Agreement (taking into account any reduction in the outstanding
principal amount of the Note by reason of Mortgagor's pay down of the Note or
the posting of a letter of credit, in each case as provided in Section 10 of the
Loan Agreement; or
(p) An Event of Default has occurred under any of the
Other Loans.
5.02 Acceleration Upon Default: Additional Remedies.
(a) Upon the occurrence of an Event of Default, Mortgagee
may declare all indebtedness secured hereby to be due and payable and the same
shall thereupon become due and payable without any presentment, demand, protest
or notice of any kind. When the entire indebtedness shall become due and
payable, either because of maturity or because of the occurrence of an Event of
Default, or otherwise, then forthwith, Mortgagee may:
(i) Either in person or by agent, enter into
possession of the Premises, or any part thereof, in its own name, without legal
action, and by force if necessary, and do any acts which it deems necessary or
desirable to preserve the value, marketability or rentability of the Premises,
or any part thereof or interest therein, increase the income therefrom or
protect the security hereof, and, with or without taking possession of the
Premises, sue for or otherwise collect the rents, issues and profits thereof,
including those past due and unpaid, and including sums payable for use and
occupation and apply such sums in accordance with Section 5.06 hereof. The
entering upon and taking possession of the Premises, the collection of such
rents, issues and profits and the application thereof as aforesaid, shall not
cure or waive any default or notice of default hereunder or invalidate any act
done in response to such default or pursuant to such notice of default and,
notwithstanding the continuance in possession of the Premises or the collection,
receipt and application of rents, issues or profits, Mortgagee shall be entitled
to exercise every right provided for in any of the Loan Documents or by law upon
occurrence of any event of default, including the right to foreclose this
Mortgage. FOR THE PURPOSE OF ENABLING MORTGAGEE TO OBTAIN POSSESSION OF THE
PREMISES IN THE EVENT OF ANY
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DEFAULT HEREUNDER OR UNDER THE NOTE OR ANY OTHER LOAN DOCUMENT, MORTGAGOR HEREBY
AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD IN THE COMMONWEALTH
OF PENNSYLVANIA OR ELSEWHERE, AS ATTORNEY FOR MORTGAGOR AND ALL PERSONS CLAIMING
UNDER OR THROUGH MORTGAGOR, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST
MORTGAGOR, AND AGAINST ALL PERSONS CLAIMING UNDER OR THROUGH MORTGAGOR, IN AN
ACTION IN EJECTMENT FOR POSSESSION OF THE PREMISES, IN FAVOR OF MORTGAGEE, FOR
WHICH THIS MORTGAGE, OR A COPY THEREOF VERIFIED BY AFFIDAVIT, SHALL BE
SUFFICIENT WARRANT; AND THEREUPON A WRIT OF POSSESSION MAY IMMEDIATELY ISSUE FOR
POSSESSION OF THE PREMISES, WITHOUT ANY PRIOR WRIT OR PROCEEDING WHATSOEVER AND
WITHOUT ANY STAY OF EXECUTION. IF FOR ANY REASON AFTER SUCH ACTION HAS BEEN
COMMENCED IT SHALL BE DISCONTINUED, OR POSSESSION OF THE PREMISES SHALL REMAIN
IN OR BE RESTORED TO MORTGAGOR, MORTGAGEE SHALL HAVE THE RIGHT FOR THE SAME
DEFAULT OR ANY SUBSEQUENT DEFAULT TO BRING ONE OR MORE FURTHER ACTIONS AS ABOVE
PROVIDED TO RECOVER POSSESSION OF THE PREMISES. MORTGAGEE MAY CONFESS JUDGMENT
IN AN ACTION FOR EJECTMENT BEFORE OR AFTER THE INSTITUTION OF PROCEEDINGS TO
FORECLOSE THIS MORTGAGE OR TO ENFORCE THE NOTE OR ANY OTHER LOAN DOCUMENT, OR
AFTER ENTRY OF JUDGMENT THEREIN OR ON THE NOTE, OR AFTER A SHERIFF'S SALE,
JUDICIAL SALE OR OTHER FORECLOSURE SALE OF THE PREMISES IN WHICH MORTGAGEE IS
THE SUCCESSFUL BIDDER, IT BEING THE UNDERSTANDING OF THE PARTIES THAT THE
AUTHORIZATION TO PURSUE SUCH PROCEEDINGS FOR OBTAINING POSSESSION AND CONFESSION
OF JUDGMENT IS AN ESSENTIAL PART OF THE REMEDIES FOR ENFORCEMENT OF THE
MORTGAGE, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND SHALL SURVIVE ANY EXECUTION
SALE TO MORTGAGEE;
(ii) Commence an action to foreclose this
Mortgage, appoint a receiver, or specifically enforce any of the covenants
hereof;
(iii) Exercise any or all of the remedies available
to a secured party under the Pennsylvania Uniform Commercial Code, including,
but not limited to:
(1) Either personally or by means of a
court appointed receiver, taking possession of all or any of the Personal
Property and excluding therefrom Mortgagor and all others claiming under
Mortgagor, and thereafter holding, storing, using, operating, managing,
maintaining and controlling, making repairs, replacements, alterations,
additions and improvements to and exercising all rights and powers of Mortgagor
in respect of the Personal Property or any part thereof. In the event Mortgagee
demands or attempts to take possession of the Personal Property in the exercise
of any rights under any of the Loan Documents, Mortgagor promises and agrees
promptly to turn over and deliver complete possession thereof to Mortgagee;
(2) Without notice to or demand upon
Mortgagor, making such payments and doing such acts as Mortgagee may deem
necessary to protect its security interest in the Personal Property, including
without limitation, paying, purchasing, contesting or compromising any
encumbrance, charge or lien which is prior to or superior to the security
interest granted hereunder, and in exercising any such powers or authority to
pay all expenses incurred in connection therewith;
(3) Requiring Mortgagor to assemble the
Personal Property or any portion thereof, at a place designated by Mortgagee and
reasonably convenient
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to both parties, and promptly to deliver such Personal Property to Mortgagee, or
an agent or representative designated by it. Mortgagee, and its agents and,
representatives shall have the right to enter upon any or all of Mortgagor's
Premises and property to exercise Mortgagee's rights hereunder;
(4) Selling, leasing or otherwise
disposing of the Personal Property at public sale, with or without having the
Personal Property at the place of sale, and upon such terms and in such manner
as Mortgagee may determine. Mortgagee may be a purchaser at any such sale;
(5) Unless the Personal Property is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Mortgagee shall give Mortgagor at least ten (10)
days prior written notice of the time and place of any public sale of the
Personal Property or other intended disposition thereof. Such notice may be
mailed to Mortgagor at the address set forth at the beginning of this Mortgage.
(iv) At any time prior to completion of
construction of the Improvements: (1) decline to advance any additional funds to
or for the benefit of Mortgagor or any other person or entity; (2) order
construction of the Improvements stopped; and (3) make such additions, changes
or corrections to the plans and, specifications for the Improvements as
Mortgagee shall deem necessary or desirable.
(b) Upon the acceleration of the maturity of the
indebtedness as herein provided, a tender of payment of the amount necessary to
satisfy the entire indebtedness secured hereby made at any time prior to
foreclosure sale (including sale under the power of sale) by Mortgagor, its
successors or assigns or by anyone in behalf of Mortgagor, its successors or
assigns, shall constitute an evasion of the prepayment terms of the Note and be
deemed to be a voluntary prepayment thereunder, and any such payment, to the
extent permitted by law, will therefore include the additional payment, if any,
required under the prepayment privilege contained in the Note.
5.03 Foreclosure and Other Actions by Mortgagee. Where the
indebtedness hereby secured, or any part thereof, shall become due, whether upon
maturity, by acceleration, or otherwise, Mortgagee may institute an action of
mortgage foreclosure against the Premises, or take such other action at law or
in equity for the enforcement of this Mortgage and the Note and realization on
the mortgage security or any other security herein or elsewhere provided for as
the law may allow, and may proceed therein to final judgment and execution for
the entire unpaid balance of the principal debt, with interest at the rate
stipulated in the Note to the date of default, and thereafter at the Default
Rate, together with all other sums due by Mortgagor in accordance with the
provisions of the Note, this Mortgage, and the other Loan Documents, including
all sums which may have been loaned by Mortgagee to Mortgagor after the date of
this Mortgage and pursuant to the terms of this Mortgage, and all sums which may
have been paid, incurred or advanced by or on behalf of Mortgagee for taxes,
water or sewer rents, charges or claims, payments of prior liens, insurance or
repairs to the Premises, appraiser's fees, outlays for documentary and expert
evidence, stenographers' charges, publication costs, and costs (which may be
estimated as to items to be expended after entry of judgment) of procuring all
such
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abstracts of title, title searches and examinations, title insurance policies,
and similar data and assurances with respect to title as Mortgagee may deem
reasonably necessary either to prosecute such suit or to evidence to bidders at
any sale which may be had pursuant to such judgment the true condition of the
title to or the value of the Premises, all costs of suit, together with interest
at the Default Rate on any judgment obtained by Mortgagee from and after the
date of such judgment including the period from and after the date of any
Sheriff's or judicial sale until actual payment is made of the full amount due
Mortgagee, and an attorney's commission for collection which shall be the lesser
of five percent (5%) of the total of the foregoing sums or $10,000.00. Any real
estate or interest therein sold pursuant to any writ of execution issued on a
judgment obtained by virtue of the Note or this Mortgage, or pursuant to any
other judicial proceedings under this Mortgage, may be sold in one parcel, as an
entirety, or in such parcels, and such interests, and in such manner or order as
Mortgagee in its sole discretion may elect.
5.04 Recovery of Expenses by Mortgagee. All expenditures and
expenses of the nature mentioned in Section 5.03, and such reasonable expenses
and fees as may be incurred in the protection. of the Premises and the
maintenance of the lien of this Mortgage, including the reasonable fees of any
attorney employed by Mortgagee in any litigation or proceeding affecting this
Mortgage, the Note or other Loan Documents, or the Premises, including probate
and bankruptcy proceedings, or in preparation for the commencement or defense of
any proceeding or threatened suit or proceeding, whether incurred before or
after the entry of a judgment in favor of Mortgagee for the unpaid balance of
the debt evidenced by the Note, shall be immediately due and payable by
Mortgagor, with interest thereon at the Default Rate and shall be secured by
this Mortgage. Mortgagee shall have the right, from time to time, to bring an
appropriate action to recover any sums required to be paid by Mortgagor under
the terms of this Mortgage, as they become due, without regard to whether or not
the principal indebtedness or any other sums evidenced by the Note and secured
by this Mortgage shall be due, and without prejudice to the right of Mortgagee
thereafter to bring an action of mortgage foreclosure, or any other action, for
any default by Mortgagor existing at the time the earlier action was commenced.
5.05 Mortgagee's Right of Possession in Case of Default. In any
case in which under the provisions of this Mortgage Mortgagee has a right to
institute foreclosure proceedings, whether before or after the whole principal
sum secured hereby is declared to be immediately due, and whether before or
after the institution of legal proceedings to foreclose the lien hereof and
before or after sale thereunder, Mortgagee in its own discretion, without
obligation so to do and without notice to or demand upon Mortgagor, except as
specifically provided herein, and without releasing Mortgagor from any
obligation, may make any payment or do any act in such manner and to such extent
as Mortgagee may deem necessary to protect the security hereof. In connection
therewith (without limiting the foregoing general powers), Mortgagee shall have
and is hereby given the right, but not the obligation, (i) to make additions,
alterations, repairs, decorations, renewals, replacements, betterments and
improvements to the Premises which it may consider necessary or proper to keep
the Premises in good condition and repair; (ii) to appear and participate in any
action or proceeding affecting or which may affect the security hereof or the
rights or powers of Mortgagee; (iii) to pay, purchase, contest or compromise any
encumbrance, claim, charge, lien or debt which, in the judgment of Mortgagee,
may affect or appears to affect the security of this Mortgage or be prior or
superior hereto; and (iv) in exercising such powers, to pay necessary expenses,
including employment of counsel or other
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necessary or desirable consultants. Immediately upon demand therefor by
Mortgagee, Mortgagor shall pay all costs and expenses incurred by Mortgagee in
connection with the exercise by Mortgagee of the foregoing rights, including,
without limitation, costs of evidence of title, court costs, appraisals, surveys
and reasonable attorneys' fees. All such sums, as well as costs, advanced by
Mortgagee pursuant hereto or pursuant to any other Loan Document, shall be
secured hereby, and shall bear interest at the Default Rate from the date of
payment by Mortgagee until the date of repayment. In addition, upon demand of
Mortgagee, Mortgagor shall surrender to Mortgagee, and Mortgagee shall be
entitled to take actual possession of, the Premises or any part thereof
personally, or by its agent or attorneys, as for condition broken. In such
event, Mortgagee in its discretion may, with or without force and with or
without process of law, enter upon and take and maintain possession of all or
any part of the Premises, together with all documents, books, records, papers
and accounts of Mortgagor relating thereto, and may exclude Mortgagor, and
Mortgagor's agents or servants wholly therefrom and may as attorney-in-fact or
agent of Mortgagor, or in its own name as Mortgagee and under the powers herein
granted, hold, operate, manage and control the Premises and conduct the
business, if any, thereof, either personally or by its agents, and with full
power to use such measures, legal or equitable, as in its discretion or in the
discretion of its successors or assigns may be deemed proper or necessary to
enforce the payment or security of the avails, rents, issues, and profits of the
Premises, including actions for the recovery of rent, and with full power: (a)
to cancel or terminate any lease or sublease for any cause or on any ground
which would entitle Mortgagor to cancel such lease or sublease; (b) to elect to
disaffirm any lease or sublease, which is then subordinate to the lien hereof;
(c) to extend or modify any then existing leases and to make new leases, which
extensions, modifications and new leases may provide for terms to expire beyond
the maturity date of the indebtedness secured hereby and beyond the date of the
issuance of a deed or deeds to a purchaser or purchasers at a foreclosure sale,
it being understood and agreed that any such leases, and the options or other
such provisions to be contained therein, shall be binding upon Mortgagor and all
persons whose interests in the Premises are subject to the lien hereof and upon
the purchaser or purchasers at any foreclosure sale, notwithstanding any
discharge or satisfaction of the mortgage indebtedness, satisfaction of any
foreclosure decree or deficiency judgment, or issuance of any bill of sale or
deed to any purchaser; (d) to make all necessary or proper repairs, decorations,
renewals, replacements, alterations, additions, betterments and improvements to
the Premises as may seem judicious to Mortgagee; (e) to insure and reinsure the
Premises and all risks incidental to Mortgagee's possession, operation and
management thereof; and (f) to receive all of such avails, rents, issues and
profits, hereby granting full power and authority to exercise each and every of
the rights, privileges and powers herein granted at any and all times hereafter,
without notice to Mortgagor. Notwithstanding the foregoing rights and powers of
Mortgagee, Mortgagee shall not be obligated to perform or discharge, nor does it
hereby undertake to perform or discharge, any obligation, duty or liability
under any lease of the Premises or any part thereof. Mortgagor shall and does
hereby agree to indemnify and hold Mortgagee harmless of and from any and all
liability, loss , or damage which it may or might incur under such leases or
under or by reason of the assignment thereof and of and from any and all claims
and demands whatsoever which may be asserted against it by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in such leases. Should Mortgagee incur
any such liability, loss or damage, under such leases or under or by reason of
the assignment thereof, or in the defense of any claims or demands with respect
thereto, the amount thereof, including costs,
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expenses and reasonable attorneys' fees, shall be secured hereby, and Mortgagor
shall reimburse Mortgagee therefor immediately upon demand.
All references in this Section 5.05 to "leases" shall include all
leases and/or occupancy agreements affecting the Property and Improvements
whether superior or subordinate to this Mortgage.
5.06 Application of Income Received by Mortgagee. Mortgagee, in the
exercise of the rights and powers hereinabove conferred upon it by Article II
and Section 5.05 hereof shall have full power to use and apply the avails,
rents, issues and profits of the Premises to the payment of or on account of the
following, in, such order as Mortgagee may determine:
(a) to the payment of the operating expenses of the
Premises, including costs of management and leasing thereof (which shall include
reasonable compensation to Mortgagee and its agent or agents, if management be
delegated to an agent or agents, and shall also include lease commissions and
other compensation and expenses of seeking and procuring tenants and entering
into leases), established claims for damages, if any, and premiums on insurance
hereinabove authorized;
(b) to the payments of taxes and special assessments now
due or which may hereafter become due on the Premises, and of all rents due or
which may hereafter become due under any underlying lease;
(c) to the payment of all repairs, decorating, renewals,
replacements, alterations, additions, betterments, and improvements of the
Premises, including the cost from time to time of installing or replacing the
Personal Property therein, and of placing the Premises in such condition as
will, in the judgment of Mortgagee, make it readily rentable;
(d) to the payment of any indebtedness secured hereby or
any deficiency which may result from any foreclosure sale upon the Premises, or
any part thereof.
5.07 Appointment of Receiver. Upon, or at any time after the filing
of an action to foreclose this Mortgage, the court in which such action is filed
may appoint a receiver of the Premises. Such appointment may be made either
before or after sale, without notice, without regard to the solvency or
insolvency of Mortgagor at the time of application for such receiver and without
regard to the then current value of the Premises, and Mortgagee or any agent of
Mortgagee may be appointed as such receiver. Such receiver shall have power: (a)
to collect the rents, issues and profits of the Premises during the pendency of
such foreclosure suit as well as during any other times when Mortgagor, except
for the intervention of such receiver, would be entitled to collect such rents,
issues and profits; (b) to extend or modify any then existing leases and to make
new leases, which extensions, modifications and new leases may provide for terms
to expire, or for options to lessees to extend or renew terms to expire, beyond
the maturity date of the indebtedness secured hereby and beyond the date of the
issuance of a deed or deeds to a purchaser or purchasers at a foreclosure sale,
it being understood and agreed that any such leases, and the options or other
such provisions to be contained therein, shall be binding upon Mortgagor and all
persons whose interests in the Premises are subject to the lien
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<PAGE> 34
hereof and upon the purchaser or purchasers at any foreclosure sale,
notwithstanding any discharge: or satisfaction of the mortgage indebtedness,
satisfaction of any foreclosure decree or deficiency judgment, or issuance of
any bill of sale or deed to any purchaser; and (c) to exercise all other powers
which may be necessary or are usual in such cases for the protection,
possession, control, management and operation of the Premises during the whole
of such period. The court from time to time may authorize the receiver to apply
the net income in his hands in payment in whole or in part of: (a) the
indebtedness secured hereby, or by any judgment or decree foreclosing this
mortgage, or any tax, special assessment or other lien which may be or become
superior to the lien hereof or of such judgment: or decree, provided such
application is made prior to foreclosure sale; (b) and all rents due or which
may become due under any underlying lease; or (c) the deficiency judgment, in
case of an execution sale and deficiency judgment.
5.08 Remedies Not Exclusive. Mortgagor hereby agrees that:
(a) Mortgagee shall be entitled to enforce payment and
performance of any indebtedness or obligation secured hereby and to exercise all
rights, remedies and powers under this Mortgage or any other Loan Documents and
the warrants contained therein or any other agreement or any laws now or
hereafter in force, notwithstanding that some or all of such indebtedness and
obligations secured hereby may now or hereafter be otherwise secured, whether by
mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the
acceptance of this Mortgage nor its enforcement whether by court action or other
powers herein contained shall prejudice or in any manner affect Mortgagee's
right to realize upon or enforce this Mortgage and any other security now or
hereafter held by Mortgagee in such order and manner as it may in its absolute
discretion determine.
(b) No remedy herein conferred upon or reserved to
Mortgagee is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given by any of the Loan Documents
to Mortgagee or to which Mortgagee may be otherwise entitled maybe exercised
separately, successively, concurrently or independently, from time to time and
as often as it may be deemed expedient by Mortgagee and Mortgagee may pursue
inconsistent remedies.
(c) The failure to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof. Any failure by
Mortgagee to insist upon strict performance by Mortgagor of any of the terms and
provisions of this Mortgage or of the other Loan Documents shall not be deemed
to be a waiver of any of the terms or provisions of the Mortgage or other Loan
Documents, and Mortgagee shall have the right thereafter to insist upon strict
performance by Mortgagor of any and all of them.
(d) Neither Mortgagor nor any other person now or
hereafter obligated for payment of all or any part of the sums now or hereafter
secured by this Mortgage shall be relieved of such obligation by reason of the
failure of Mortgagee to comply with any request of Mortgagor or of any other
person so obligated to take action to foreclose on this Mortgage or otherwise
enforce any provisions of the Mortgage or the other Loan Documents, or by reason
of
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the release, regardless of consideration, of all or any part of the security
held for the indebtedness secured by this Mortgage, or by reason of any
agreement or stipulation between any subsequent owner of the Premises or any
interest therein and Mortgagee extending the time of payment or modifying the
terms of the Mortgage or other Loan Documents without first having obtained the
consent of Mortgagor or such other person; and in the latter event Mortgagor and
all such other persons shall continue to be liable to make payments according to
the terms of any such extension or modification agreement, unless expressly
released and discharged in writing by Mortgagee.
(e) Mortgagee may release, regardless of consideration,
any part of the security held for the indebtedness secured by this Mortgage
without, as to the remainder of the security, in anyway impairing or affecting
the lien of this Mortgage or its priority over any subordinate lien.
ARTICLE VI
MISCELLANEOUS
6.01 Governing Law. This Mortgage shall be subject to and governed
by the laws of the Commonwealth of Pennsylvania. In the event that any provision
or clause of any of the Loan Documents conflicts with applicable laws, such
conflicts shall not affect other provisions of such Loan Documents which can be
given effect without the conflicting provision, and to this end the provisions
of the Loan Documents are declared to be severable. This instrument cannot be
waived, amended, changed, released, discharged or satisfied orally, but only by
an instrument in. writing signed by the party against whom enforcement of any
waiver, amendment, change, release, discharge or satisfaction is sought.
6.02 Mortgagor Waiver of Rights. Mortgagor waives the benefit of
all laws now existing or that hereafter may be enacted providing for (i) any
appraisal before sale of any portion of the Premises, and (ii) the benefit of
all laws that may be hereafter enacted in: any way extending the time for the
enforcement of the collection of the Note or the debt evidenced thereby or
creating or extending a period of redemption from any sale made in collecting
such debt. To the full extent Mortgagor may do so, Mortgagor agrees that
Mortgagor will not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereafter in force providing for any appraisal,
valuation, stay, extension or redemption, and Mortgagor, for itself and its
successors and assigns, and for any and all persons ever claiming any interest
in the Premises, to the extent permitted by law, hereby waives and releases all
rights of redemption, valuation, appraisal, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshalling in the event of foreclosure of the liens hereby created. Mortgagor
hereby waives and releases all errors, defects and imperfections in any
proceeding instituted by Mortgagee under the Note or this Mortgage or the other
Loan Documents, or any of them, and unless specifically required herein, all
notices of Mortgagor's default or of Mortgagee's election to exercise, or
Mortgagee's actual exercise of any option under the Note or this Mortgage or the
other Loan Documents. If any law referred to in this Section and now in force of
which Mortgagor, or its successors and assigns or other person may take
advantage despite this Section, shall hereafter be repealed or cease to be in
force, such law shall not thereafter be deemed to preclude the application of
this Section. Mortgagor expressly waives and relinquishes
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any and all rights and remedies which Mortgagor may have or be able to assert by
reason of the laws of the Commonwealth of Pennsylvania pertaining to the rights
and remedies of sureties.
6.03 Giving of Notice.
(a) Any notice, demand or request under the Mortgage or
the Note shall be in writing and shall be delivered by personal service or shall
be sent postage prepaid by registered or certified mail, return receipt
requested, addressed to the parties at the addresses set forth below, or at such
other address as either party, by written notice given to the other parties
hereto, may designate from time to time.
Mortgagor
ALS-Clare Bridge, Inc.
c/o Alternative Living Services, Inc.
450 North Sunnyslope Road
Brookfield, Wisconsin 53003
Attn: Chief Financial Officer
with a copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Attn: Charles B. Congdon, Esquire
Mortgagee:
Sovereign Bank
Two Aldwyn Center
Lancaster Avenue & Route 320
Villanova, Pennsylvania 19085
Attention: Mr. William Mattern
with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
Attention: Philip B. Korb, Esquire
(b) Each notice, demand or request shall be deemed to
have been given on the date it is delivered in the case of personal service, or,
in the case of certified or registered mail, on the date it is deposited with
the Postal Service.
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6.04 Counsel Fees. If Mortgagee becomes a party to any suit or
proceeding affecting the Premises or title thereto, the lien created by this
Mortgage or Mortgagee's interest therein, or if Mortgagee or any successor or
assignee of Mortgagee has engaged counsel to prepare or review any of the Loan
Documents in preparation for the granting of the loan to Mortgagor evidenced
thereby, the costs, expenses and counsel fees of Mortgagee shall be paid by
Mortgagor to Mortgagee on demand and until paid they shall be deemed to be part
of the indebtedness evidenced by the Note and secured by this Mortgage.
6.05 Limitation of Interest. It is the intent of Mortgagor and
Mortgagee in the execution of this Mortgage and the Note and all other
instruments securing the Note to contract in strict compliance with the usury
laws of the Commonwealth of Pennsylvania governing the loan evidenced by the
Note. In furtherance thereof, Mortgagee and Mortgagor stipulate and agree that
none of the terms and provisions contained in the Loan Documents shall ever be
construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate in excess of the maximum interest rate
permitted to be charged by the laws of the Commonwealth of Pennsylvania
governing the loan evidenced by the Note. Mortgagor or any guarantor, endorser
or other party now or hereafter becoming liable for the payment of the Note
shall never be liable for unearned interest on the Note and shall never be
required to pay interest on the Note at a rate in excess of the maximum interest
that may be lawfully charged under the laws of the Commonwealth of Pennsylvania
and the provisions of this Section shall control over all other provisions of
the Note and any other instrument executed in connection herewith which may be
in apparent conflict herewith. In the event it is determined that any holder of
the Note has collected monies which are deemed to constitute interest and are
deemed to increase the effective interest rate on the Note to a rate in excess
of that permitted to be charged by the laws of the Commonwealth of Pennsylvania,
all such sums deemed to constitute interest in excess of such legal rate shall
be refunded to Mortgagor immediately after such determination. Such refund may
be made by application of the amount involved against the sums due under the
Note, but such crediting shall not cure or waive any default by Mortgagor
remaining uncorrected.
6.06 Statements by Mortgagor. Mortgagor, within ten (10) days after
being given notice by mail, will furnish to Mortgagee a written statement
stating the unpaid principal of and interest on the Note and any other amounts
secured by this Mortgage and stating whether any offset or defense exists
against such principal and interest.
6.07 Captions. The captions or headings at the beginning of each
Section hereof are for the convenience of the parties, are not a part of this
Mortgage and do not affect the meaning of the provisions of this Mortgage.
6.08 Invalidity of Certain Provisions. If the lien of this Mortgage
is invalid or unenforceable as to any part of the debt, or if the lien is
invalid or unenforceable as to any part of the Premises, the unsecured or
partially secured portion of the debt shall be paid completely prior to the
payment of the remaining and secured or partially secured portion of the debt,
and all payments made on the debt, whether voluntary or under foreclosure or
other enforcement action or procedure, shall be considered to have been first
paid on and applied to the full payment of that portion of the debt which is not
secured or fully secured by the lien of this Mortgage.
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6.09 Subrogation. To the extent that proceeds of the loan
evidenced by the Note are used to pay any outstanding lien, charge or prior
encumbrance against the Premises, such proceeds have been or will be advanced by
Mortgagee at Mortgagor's request and Mortgagee shall be subrogated to any and
all rights and liens held by any owner or holder of such outstanding liens,
charges and prior encumbrances, irrespective of whether such liens, charges or
encumbrances are released.
6.10 No Merger. If both the lessor's and lessee's estates under any
lease or any portion thereof which constitutes a part of the Premises shall at
any time become vested in one owner, this Mortgage and the lien created hereby
shall not be destroyed or terminated by application of the doctrine of merger,
and, in such event, Mortgagee shall continue to have and enjoy all of the rights
and privileges of Mortgagee as purchaser at any such foreclosure sale shall so
elect. No act by or on behalf of Mortgagee or any such purchaser shall
constitute a termination of any lease or sublease unless Mortgagee or such
purchaser shall give written notice thereof to such tenant or subtenant.
6.11 Definitions. Whenever used in this Mortgage, unless the
context clearly indicates a contrary intent:
(a) The word "Mortgagor" shall mean the person named in
this Mortgage and who executes the same and any subsequent owner of the Premises
and his or its respective heirs, executors, administrators, successors,
representatives and assigns;
(b) The word "Mortgagee" shall mean the person who is the
owner and holder of the Note whether or not specifically named herein as
"Mortgagee", or any subsequent owner and holder of the Note and this Mortgage;
(c) The word "person" shall mean individual, corporation,
partnership or unincorporated association;
(d) The use of any gender shall include all genders;
(e) The singular number shall include the plural and the
plural the singular as the context may require.
(f) If Mortgagor be or consist of more than one person,
all agreements, conditions, covenants, provisions, stipulations, warrants of
attorney, authorizations, waivers, releases, options, undertakings, rights and
benefits made or given by Mortgagor shall be joint and several, and shall bind
and affect all persons who are defined as "Mortgagor" as fully as though all of
them were specifically named herein wherever the word "Mortgagor" is used.
6.12 Amendments. This Mortgage may be amended only by written
agreement, executed by all of the parties hereto, and no other purported
agreement, written or oral, shall be effective to vary the terms hereof.
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IN WITNESS WHEREOF, Mortgagor has caused this mortgage to be duly
executed the day and year first above written.
ALS-CLARE BRIDGE, INC., a Delaware
corporation
[Corporate Seal]
Attest: /s/ Joyce Hansen By: /s/ Thomas E. Komula
--------------------------- -------------------------------
Name: Joyce Hansen Name: Thomas E. Komula
--------------------------- ------------------------------
Title: Executive Asst. Title: Vice President
--------------------------- -----------------------------
The precise address of Mortgagee is:
Sovereign Bank
Two Aldwyn Center
Lancaster Avenue & Route 320
Villanova, Pennsylvania 19085
/s/ William J. Mattern
- ------------------------------------------------
Agent for Mortgagee
37
<PAGE> 40
STATE OF WISCONSIN )
) ss
COUNTY OF WAUKESHA )
On this 1st day of May, 1998, before me, the subscriber, a
Notary Public in and for the State and the County aforesaid, personally appeared
Tom Komula, who acknowledged himself to be the Vice President of ALS-Clare
Bridge, Inc., a Delaware corporation, and that he, as such officer, being
authorized to do so, executed the foregoing Mortgage for the purposes therein
contained by signing the name of the corporation by himself as officer, and
desired that the same might be recorded as such.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Paul K. O'Connor
---------------------------
Notary Public
(NOTARIAL SEAL)
My Commission is permanent
<PAGE> 1
EXHIBIT 10.126
GUARANTY AND SURETY AGREEMENT
THIS GUARANTY is made as of this 1st day of May, 1998, by
ALTERNATIVE LIVING SERVICES, INC., a Delaware corporation with an address at 450
North Sunnyslope Road, Brookfield, Wisconsin 53005 ("Guarantor") in favor of
SOVEREIGN BANK, with an address at Two Aldwyn Center, Lancaster Avenue and Route
320, Villanova, Pennsylvania 19085, ("Bank"), to secure obligations of ALS-CLARE
BRIDGE, INC., a Delaware corporation ("Borrower").
Bank has agreed to lend to Borrower $3,450,000 (the "Loan").
The Loan will be evidenced by Borrower's Note (the "Note") of even date herewith
and secured by, among other things, a Mortgage and Security Agreement of even
date herewith from Borrower to Bank (the "Mortgage") encumbering an assisted
living facility located near the intersection of Blue Course and Whitehall Road,
Furguson Township, Centre County, Pennsylvania (the "Property"). As a condition
to making the Loan, Bank has required the execution and delivery of this
Guaranty.
NOW, THEREFORE, in consideration of the undertakings of Bank
pursuant to the Mortgage and intending to be legally bound, Guarantor hereby
agrees as follows:
1. Payment and Performance of the Obligations.
(a) In order to secure payment of the Note by
Borrower and performance of Borrower's obligation thereunder and under the
Mortgage, Guarantor hereby irrevocably and unconditionally guarantees to Bank,
and becomes surety to Bank for, the due and punctual payment and performance of
all the obligations of Borrower to Bank, whether primary, secondary, direct,
contingent, sole, joint, several or joint and several, including without
limitation the payment of principal and any interest accruing thereon, now
existing or hereafter at any time or times incurred, under the Note or the
Mortgage or under any of the Loan Documents (which term is used herein as
defined in the Note) or under any renewals, extensions or modifications thereof
(hereinafter referred to individually as "Obligation" and collectively as
"Obligation"). During the Construction Period (which term is used herein as
defined in the Note), Bank shall have full, complete and unlimited recourse
against any and all assets of Guarantor for repayment of Obligations. Beginning
on the first day of the month immediately following the month in which the
Construction Period ends, notwithstanding anything to the contrary contained
herein, Bank shall have recourse against any and all assets of Guarantor only
for repayment of Obligations up to the amount by which the outstanding principal
amount of the Loan (together with all accrued but unpaid interest thereon, and
all unpaid fees, premiums and penalties with respect thereto) exceeds 50 % of
the value of the Property as determined by an appraisal acceptable to Bank (the
"Full Recourse Portion"). Bank shall have recourse only against Guarantor's
partnership interests in Borrower for repayment of the balance of the
Obligations (the "Limited Recourse Portion"). If any Obligation is not paid or
performed by Borrower punctually when due, subject to any applicable grace
period, including without limitation any Obligation due by acceleration of the
maturity thereof following the occurrence of an Event of Default (as defined in
the Mortgage), Guarantor will, upon Bank's demand, immediately pay or perform
such Obligation or cause the same to be paid or performed strictly in accordance
with the terms thereof. Bank may cause judgment to be entered against Guarantor
for the full amount
<PAGE> 2
of the Obligations, which judgment shall reflect the limitations on recourse set
forth above. Guarantor will pay to Bank, upon demand, and Bank shall have
recourse against any and all of Guarantor's assets for payment of, all costs and
expenses, including without limitation reasonable counsel fees, which may be
incurred by Bank in the collection or enforcement of the Obligations or of
Guarantor's obligations under this Guaranty (which costs and expenses shall
constitute part of the Full Recourse Portion).
(b) Notwithstanding Paragraph 1(a), Bank may
seek and obtain a monetary judgment and have full recourse against any and all
assets of Guarantor for repayment of the Obligations if Borrower shall file a
petition in bankruptcy or a petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the bankruptcy laws of the United States or under any similar
federal, state or other statute relating to relief from indebtedness, or if Bank
incurs any loss, expense or damage by reason of (i) any fraud of Guarantor or of
Borrower in making any representation or warranty, or in the preparing or
delivery of any financial statement or other certificate or information
submitted to Bank; (ii) the misapplication of insurance proceeds or condemnation
awards; (iii) the misapplication of prepaid rent or rent collected after a
default; (iv) any environmental matters as more fully described in that certain
Environmental Indemnity Agreement of even date herewith. Guarantor hereby agrees
to indemnify, hold harmless and defend Bank from any such loss, expense or
damage, and this indemnity shall survive the satisfaction or foreclosure of the
Mortgage and the payment of the Note, and shall not be affected or limited by
any provision herein, including without limitation Paragraph 1(a).
(c) If the Property is sold to a third party in
execution proceedings, the proceeds of such sale or, if the Property is sold to
Bank, the amount of the fair market value of the Property fixed by the court
(less the amount of the prior liens, costs, taxes and municipal claims not
discharged by such sale) shall be applied first to the Limited Recourse Portion
of Guarantor's liability hereunder and then to the Full Recourse Portion. Bank
shall have recourse against any an all assets of Guarantor for the amount of the
Full Recourse Portion remaining after such application.
2. Representations and Warranties. Guarantor represents and
warrants to Bank that:
(a) Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and is in good
standing and authorized to do business in Pennsylvania and in those other
jurisdictions in which it does business;
(b) This Guaranty has been duly executed and
delivered by Guarantor, and such execution and delivery and the performance by
Guarantor of its Obligations hereunder will not violate Guarantor's articles of
incorporation or bylaws or any applicable provision of law or judgment, order or
regulation of any court or of any public or governmental agency or authority,
nor conflict with or constitute a breach of or a default under any instrument to
which Guarantor is a Party or by which Guarantor or Guarantor's property is
bound, and this Guaranty is a valid and binding obligation of Guarantor
enforceable in accordance with its terms;
2
<PAGE> 3
(c) There is no litigation, proceeding or
investigation pending or, to the knowledge of Guarantor, threatened against
Guarantor, the adverse result of which might in any material respect affect the
business, properties or financial condition of Guarantor or the performance by
Guarantor of its obligations hereunder except such as has been disclosed to Bank
in writing, an Guarantor is not in violation in any material respect of any
statute, rule, order or regulation any governmental body applicable to
Guarantor;
(d) The balance sheet and profit, loss and
surplus statement of Guarantor as of , 1998 are complete
and correct; were prepared in accordance with generally accepted accounting
principles consistently applied; said balance sheet accurately reflects all
liabilities of Guarantor, direct or contingent, as of the date thereof; and
there has occurred no material adverse change in the financial condition of
Guarantor as shown therein since a date thereof, except such changes as have
been heretofore disclosed to Bank in writing; and
(e) Guarantor has filed all federal, state and
local tax returns required to be filed (or has obtained valid extensions of the
dates on which such returns are required to be filed) and as paid all taxes as
shown on the said returns to be due.
3. General Terms and Conditions.
(a) All payments by Guarantor hereunder shall be
made in lawful money of the United States of America.
(b) Guarantor hereby waives (i) notice of
acceptance of this Guaranty and of any action by Bank in reliance thereon, (ii)
presentment, demand of payment, notice of dishonor or nonpayment, protest and
notice of protest with respect to the Obligations, and giving any notice of
default or other notice to, or making any demand on anyone (including without
limitation Borrower and Guarantor) liable in any manner for the payment of the
Obligations (except as provided below), (iii) any right to require Bank to
proceed initially against Borrower upon any default in the payment or
performance of the Obligations, and (iv) notice of any election by Bank to sell
any of the property mortgaged, assigned or pledged as security for any of the
Obligations at a public or private sale, provided that nothing contained in this
paragraph shall be deemed to be a waiver of any notice expressly required to be
given to Borrower pursuant to the Note or the Mortgage.
(c) Bank may at any time and from time to time
without the consent of or notice to Guarantor and without impairing or releasing
the obligations of Guarantor hereunder (i) exercise or refrain from exercising
any right or remedy against Borrower or others, including without limitation
Guarantor, (ii) modify, amend, extend, supplement or waive or consent to the
breach of any provision of the Note or any of the Loan Documents, and (iii)
release or accept a substitute for any collateral for the Loan, to which
modifications, amendments, extensions, supplements, waivers and consents
Guarantor hereby assents. Without limiting the foregoing, it is specifically
understood that any modification, limitation or discharge of Borrower's
liability under the Note or the Mortgage on any of the Loan Documents arising
out of or by virtue of any bankruptcy, arrangement, reorganization or similar
proceeding for relief of debtors under federal
3
<PAGE> 4
or state law hereinafter initiated by or against Borrower shall not affect,
modify, limit or discharge the liability of Guarantor in any manner and this
Guaranty shall remain in full force and effect and shall be enforceable against
Guarantor to the same extent and with the same effect as if such proceedings had
not been instituted.
(d) The guaranty and surety contained in
paragraph 1 hereof is absolute and unconditional, primary, direct and immediate
and shall be valid and binding upon Guarantor regardless of any (i) invalidity,
irregularity, defect or unenforceability of or in the Note or any of the Loan
Documents or any other obligation or agreement of Borrower or Guarantor, (ii)
any action or inaction by Bank or other occurrence referred to in subsection
3(c) above, or (iii) any other circumstance which might otherwise constitute a
defense available to, or a discharge or release of, Borrower or a guarantor, by
operation of law.
(e) No failure or delay on the part of Bank in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies of Bank
hereunder are cumulative and concurrent and not exclusive of any other rights or
remedies Bank may have.
(f) No set-off, counterclaim, reduction or
diminution of an obligation, or any defense of any kind or nature that Guarantor
has or may have against Borrower or Bank shall affect, modify or impair
Guarantor's obligations hereunder.
(g) Any claim that Guarantor now or hereafter
has against Borrower by way of subrogation, reimbursement, exoneration,
contribution or indemnification arising from this Guaranty, shall be fully
subordinate in priority of payment and lien to any claim Bank now or hereafter s
against Borrower. If any amount shall be paid to Guarantor on account of any
such subrogation or other right, at any time, such amount shall be held in trust
for the benefit of the Bank d shall forthwith be paid to the Bank to be credited
and applied to the Obligations, whether matured or unmatured.
(h) Guarantor will furnish Bank with true, complete
and correct copies of (i) annual financial statements audited by an independent
certified public accountant or as submitted to the Securities and Exchange
Commission, no later than April 30 of each year, and (ii) such additional
financial information as Bank may reasonably request from time to time. All
data, statements and information shall be in form and content reasonably
satisfactory to Bank. Guarantor shall timely file all tax returns (subject to
lawful extensions of time for fling), and shall furnish Bank evidence thereof
within ten days after Bank requests such filing.
(i) Upon the occurrence and during the
continuance of any Event of Default, Bank is hereby authorized at any time and
from time to time to set off against any or all of the property of Guarantor in
Bank's possession (including all deposits and other indebtedness owing by Bank
to or for the credit or the account of Guarantor) at or subsequent to the
occurrence of the Event of Default any and all of the obligations of Guarantor
now or hereafter
4
<PAGE> 5
existing under this Guaranty, irrespective of whether or not Bank shall have
made any demand under this Guaranty and although such obligations may be
contingent and unmatured.
(j) Bank and Guarantor hereby waive all right to
a trial by jury in any litigation relating to this Guaranty.
4. Termination. This Guaranty shall terminate and be of
no further force or effect upon a payment in full of all of the Obligations,
provided that this Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time payment of any of the obligations is rescinded
or must otherwise be returned by Bank upon the bankruptcy, arrangement,
reorganization or similar proceeding for relief of debtors under state or
federal law, all as though such payment had not been made.
5. Warranty of Attorney. Guarantor hereby authorizes and
empowers any attorney or attorneys or the prothonotary or clerk of any court of
record in the Commonwealth of Pennsylvania, upon the occurrence of an Event of
Default, to appear for Guarantor in any such court, with or without declaration
filed, as of any term or time there or elsewhere to be held and therein to
confess or enter judgment against Guarantor in favor of Bank for all sums due or
to become due from Guarantor to Bank under this Guaranty, with costs of suit and
release of errors and with the lesser of five percent (5%) of such sums or
$10,000.00 added as reasonable attorneys' fees; and for doing so this Guaranty
or copy verified by affidavit shall be sufficient warrant. Such authority and
power shall of be exhausted by any exercise thereof, and judgment may be
confessed as aforesaid from time to time as often as there is occasion therefor.
6. Miscellaneous.
(a) This Guaranty shall bind Guarantor and
Guarantor's successors and assigns and shall inure to the benefit of Bank and
its successors and assigns.
(b) Any notice, demand or request under this
Guaranty shall be in writing, and shall be delivered by personal service or
shall be sent by recognized overnight delivery service or by postage prepaid,
registered or certified mail, return receipt requested, addressed, if to
Guarantor or Bank, at the respective address set forth in the heading of this
Guaranty, or at such other address as the addressee may designate in writing.
Each notice, demand or request hereunder shall be deemed given on the date it is
delivered, in the case of personal service, or the date it is deposited with the
Postal Service, in the case of certified or registered mail or the date it is
delivered in the case of overnight delivery.
(c) Guarantor (a) hereby irrevocably submits to
the nonexclusive jurisdiction of the Court of Common Pleas of Delaware County,
Commonwealth of Pennsylvania, or any successor to said court, and to the
nonexclusive jurisdiction of the United States District Court for the Eastern
District of Pennsylvania, or any successor to said court (hereinafter referred
to as the "Pennsylvania Courts") for purposes of any suit, action or other
proceeding which relates to this Guaranty, (b) to the extent permitted by
applicable law, hereby waives and agrees not to assert by way of motion, as a
defense or otherwise in any such suit, action or proceeding, any claim that
Guarantor is not personally subject to the jurisdiction of the
5
<PAGE> 6
Pennsylvania Courts; that such suit, action or proceeding is brought in an
inconvenient forum; that the venue of such suit, action or proceeding is
improper; or that this Guaranty may not be enforced in or by the Pennsylvania
Courts, (c) hereby agrees not to seek, and hereby waives, any collateral review
by any other court, which may be called upon to enforce the judgment of any of
the Pennsylvania Courts, of the merits of any such suit, action or proceeding or
the jurisdiction of the Pennsylvania Courts, and (d) waives personal service of
any and all process upon Guarantor and consents that all such service of process
be made by certified or registered mail, and service so made shall be deemed to
be completed upon actual receipt thereof. Nothing herein shall limit the Bank's
right to bring any suit, action or other proceeding against any of Guarantor's
assets or to serve process on Guarantor by any means authorized by law for any
claim arising hereunder.
(d) No amendment, notification or release from
or waiver of any provision hereof shall be effective unless in writing and
signed by Bank and shall be effective only in the specific instance and for the
specific purpose for which given.
(e) This Guaranty and the rights and obligations
hereunder shall be construed in accordance with and governed by the substantive
laws of the Commonwealth of Pennsylvania.
(f) The paragraph headings used herein are for
convenience only and do not affect or modify the terms and conditions hereof.
(g) If any provision hereof is found by a
court of competent jurisdiction to be prohibited or unenforceable it shall be
ineffective only to the extent of such prohibition or unenforceability, and such
prohibition or unenforceability shall not invalidate the balance of such
provision to the extent it is not prohibited or unenforceable, nor invalidate
the other provisions hereof, all of which shall be liberally construed in favor
of Bank in order to effect the provisions hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
6
<PAGE> 7
IN WITNESS WHEREOF, Guarantor has caused this Agreement to be
duly executed as of the day and year first above written.
ALTERNATIVE LIVING SERVICES, INC.
By: /s/ Thomas E. Komula
------------------------------
Name: Thomas E. Komula
----------------------------
Title: Senior Vice President
---------------------------
7
<PAGE> 1
EXHIBIT 10.127
SCHEDULE OF PROPERTIES MORTGAGED UNDER
SOVEREIGN BANK OPEN-END MORTGAGE AND SECURITY AGREEMENT
ATTACHED AS EXHIBIT 10.125 TO THE COMPANY'S FORM 10-K FOR THE PERIOD
ENDING 12/31/99
<TABLE>
<CAPTION>
DATE OF
MORTGAGOR FACILITY NAME LOCATION MORTGAGE AMOUNT MORTGAGE
<S> <C> <C> <C> <C>
ALS-Clare Bridge, Inc. Alterra Clare Bridge of East Hempfield 1870 Rohrerstown Road $3,450,000 December, 1997
Lancaster, PA 17601
ALS-Clare Bridge, Inc. Alterra Clare Bridge of State College 610 W. Whitehall Road $3,450,000 May, 1998
State College, PA 16801
ALS-WovenHearts, Inc. Alterra Sterling House of Chambersburg 745 Norland Avenue $3,377,216 May, 1998
Chambersburg, PA 17201
ALS-Wynwood, Inc. Alterra Wynwood of New Castle 501 South Harmony road $6,001,700 May, 1998
Newark, DE
</TABLE>
<PAGE> 1
EXHIBIT 10.128
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement (the "Agreement") is made and entered into by
and between the undersigned borrower (the "Borrower") and the undersigned bank
(the "Bank") as of the date set forth on the last page of this Agreement.
ARTICLE I. LOANS
1.1 Revolving Credit Loans. From time to time prior to February 27, 1999
(the "Maturity Date") or the earlier termination hereof, the Borrower may borrow
from the Bank for working capital and general corporate purposes up to the
aggregate principal amount outstanding at any one time of the lesser of (i)
$5,000,000.00 (the "Loan Amount"), or (ii) if applicable, the Borrowing Base
(defined below). All revolving loans hereunder will be evidenced by a single
promissory note of the Borrower payable to the order of the Bank in the
principal amount of the Loan Amount (the "Note"). Although the Note will be
expressed to be payable in the full Loan Amount, the Borrower will be obligated
to pay only the amounts actually disbursed hereunder, together with accrued
interest on the outstanding balance at the rates and on the dates specified
therein and such other charges provided for herein. In the event that the
principal amount outstanding under the Note exceeds the Borrowing Base at any
time, the Borrower will immediately, without request, prepay an amount
sufficient to eliminate such excess.
1.2 Borrowing Base. The Borrowing Base will be an amount equal to 80% of
the sum of (i) the face amount of Eligible Accounts, and (ii) cash or cash
equivalent which is maintained in an appropriate deposit account at the Bank.
The Borrower will provide the Bank with information regarding the Borrowing Base
in such form and at such times as the Bank may request. The terms used in this
Section 1.2 will have the meanings set forth in a supplement entitled "Financial
Definitions," a copy of which the Borrower acknowledges having received with
this Agreement and which is incorporated herein by reference.
1.3 Advances and Paying Procedure. The Bank is authorized and directed to
credit any of the Borrower's accounts with the Bank (or to the account the
Borrower designates in writing) for all loans made hereunder, and the Bank is
authorized to debit such account or any other account of the Borrower with the
Bank for the amount of any principal or interest due under the Note or other
amount due hereunder on the due date with respect thereto.
1.4 [Intentionally Omitted]
1.5 Loan Facility Fee. The Borrower will pay a loan facility fee equal to:
[x] $ per annum, payable annually in advance; (or)
Page 1 of 11
<PAGE> 2
[ ] % per annum of the Loan Amount, payable annually in
advance; (or)
[X] 1/4 of 1% per annum of the difference between the Loan Amount
and the unpaid principal amount of the Note outstanding from
time to time, payable quarterly, in arrears, on the last
business day of each third calendar month, and at maturity;
(or)
[ ] % per annum of the unpaid principal amount of the
Note outstanding from time to time, payable quarterly, in
arrears, on the last business day of each third calendar
month, and at maturity.
The loan facility fee is payable for the entire period that this Agreement is in
effect, regardless of whether any amounts are outstanding hereunder at any given
time.
1.6 Expenses and Attorneys' Fees. The Borrower will reimburse the Bank and
any Participant (defined below) for all attorneys' fees and all other costs,
fees and out-of-pocket disbursements (including fees and disbursements of both
inside counsel and outside counsel) incurred by the Bank or any Participant in
connection with the preparation, execution, delivery, administration, defense
and enforcement of this Agreement or any of the other Loan Documents (defined
below), including fees and costs related to any waivers or amendments with
respect thereto (examples of costs and fees include but are not limited to fees
and costs for filing, perfecting or confirming the priority of the Bank's lien,
title searches or insurance, appraisals, environmental audits and other reviews
related to the Borrower, any collateral or the loans, if requested by the Bank).
The Borrower will also reimburse the Bank and any Participant for all costs of
collection before and after judgment, and the costs of preservation and/or
liquidation of any collateral (including fees and disbursements of both inside
and outside counsel).
1.7 [Intentionally Omitted]
1.8 Conditions to Borrowing. The Bank will not be obligated to make (or
continue to make) advances hereunder unless (i) the Bank has received executed
originals of the Note and all other documents or agreements applicable to the
loans described herein, including but not limited to the documents specified in
Article III (collectively with this Agreement the "Loan Documents"), in form and
content satisfactory to the Bank; (ii) if the loan is secured, the Bank has
received confirmation satisfactory to it that the Bank has a properly perfected
security interest, mortgage or lien, with the proper priority, (iii) the Bank
has received certified copies of the Borrower's Articles of Incorporation and
By-Laws, or its Partnership Agreement (as appropriate), certification of
corporate or partnership status satisfactory to the Bank and all other relevant
documents; (iv) the Bank has received a certified copy of a resolution or
authorization in form and content satisfactory to the Bank authorizing the loan
and all acts contemplated by this Agreement and all related documents, and
confirmation of all proper authorization of all guaranties and other acts of
third parties contemplated hereunder; (v) the Bank has been provided with an
Opinion of the Borrower's counsel in
Page 2 of 11
<PAGE> 3
form and content satisfactory to the Bank confirming the matters outlined in
Section 2.2 and such other matters as the Bank requests; (vi) no default exists
under this Agreement or under any other Loan Documents, or under any other
agreements by and between the Borrower and the Bank; and (vii) all proceeding
taken in connection with the transactions contemplated by this Agreement
(including any required environmental assessments), and all instruments,
authorizations and other documents applicable thereto, are satisfactory to the
Bank and its counsel.
ARTICLE II. WARRANTIES AND COVENANTS
While any part of the credit granted to the Borrower under this Agreement or the
other Loan Documents is available or any obligations under any of the Loan
Documents are unpaid or outstanding, the Borrower continuously warrants and
agrees as follows:
2.1 Accuracy of Information. All information, certificates or statements
given to the Bank pursuant to this Agreement and the other Loan Documents will
be true and complete when given.
2.2 Organization and Authority; Litigation. If the Borrower is a
corporation or partnership, the Borrower is a validly existing corporation or
partnership (as applicable) in good standing under the laws of its state of
organization, and has all requisite power and authority, corporate or otherwise,
and possesses all licenses necessary, to conduct its business and own its
properties. The execution, delivery and performance of this Agreement and the
other Loan Documents (i) are within the Borrower's power; (ii) have been duly
authorized by proper corporate or partnership action (as applicable); (iii) do
not require the approval of any governmental agency, other entity or person; and
(iv) will not violate any law, agreement or restriction by which the Borrower is
bound. There is no litigation or administrative proceeding threatened or pending
against the Borrower which would, if adversely determined, have a material
adverse effect on the Borrower's financial condition or its property.
2.3 Existence; Business Activities; Assets. The Borrower will (i)
preserve its corporate or partnership (as applicable) existence, rights and
franchises; (ii) not make any material change in the nature or manner of its
business activities; (iii) not liquidate, dissolve, merge or consolidate with or
into another entity; and (iv) not sell, lease, transfer or otherwise dispose of
all or substantially all of its assets.
2.4 Use of Proceeds; Margin Stock; Speculation. Advances by the Bank
hereunder will be used exclusively by the Borrower for working capital and other
regular and valid purposes. The Borrower will not, without the prior written
consent of the Bank, redeem, purchase, or retire any of the capital stock or
declare or pay any dividends, or make any other payments or distributions of a
similar type or nature. The Borrower will not use any of the loan proceeds to
purchase or carry "margin" stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System). No part of any of the proceeds will be
used
Page 3 of 11
<PAGE> 4
for speculative investment purposes, including, without limitation, speculating
or hedging in the commodities and/or futures market.
2.5 Environmental Matters. Except as disclosed in a written schedule
attached to this Agreement (if no schedule is attached, there are no
exceptions), there exists no uncorrected violation by the Borrower of any
federal, state or local laws (including statutes, regulations, ordinances or
other governmental restrictions and requirements) relating to the discharge of
air pollutants, water pollutants or process waste water or otherwise relating to
the environment or Hazardous Substances as hereinafter defined, whether such
laws currently exist or are enacted in the future (collectively "Environmental
Laws"). The term "Hazardous Substances" will mean any hazardous or toxic wastes,
chemicals or other substances, the generation, possession or existence of which
is prohibited or governed by any Environmental Laws. The Borrower is not subject
to any judgment, decree, order or citation, or a party to (or threatened with)
any litigation or administrative proceeding, which asserts that the Borrower (i)
has violated any Environmental Laws; (ii) is required to clean up, remove or
take remedial or other action with respect to any Hazardous Substances
(collectively "Remedial Action"); or (iii) is required to pay all or a portion
of the cost of any Remedial Action, as a potentially responsible party. Except
as disclosed on the Borrower's environmental questionnaire provided to the Bank,
there are not now, nor to the Borrower's knowledge after reasonable
investigation have there ever been, any Hazardous Substances (or tanks or other
facilities for the storage of Hazardous Substances) stored, deposited, recycled
or disposed of on, under or at any real estate owned or occupied by the Borrower
during the periods that the Borrower owned or occupied such real estate, which
if present on the real estate or in soils or ground water, could require
Remedial Action. To the Borrower's knowledge, there are no proposed or pending
changes in Environmental Laws which would adversely affect the Borrower or its
business, and there are no conditions existing currently or likely to exist
while the Loan Documents are in effect which would subject the Borrower to
Remedial Action or other liability. The Borrower currently complies with and
will continue to timely comply with all applicable Environmental Laws; and will
provide the Bank, immediately upon receipt, copies of any correspondence,
notice, complaint, order or other document from any source asserting or alleging
any circumstance or condition which requires or may require a financial
contribution by the Borrower or Remedial Action or other response by or on the
part of the Borrower under Environmental Laws, or which seeks damages or civil,
criminal or punitive penalties from the Borrower for an alleged violation of
Environmental Laws.
2.6 [Intentionally Omitted]
2.7 [Intentionally Omitted]
2.8 [Intentionally Omitted]
2.9 [Intentionally Omitted]
Page 4 of 11
<PAGE> 5
2.10 Insurance. The Borrower will maintain insurance to such extent,
covering such risks and with such insurers as is usual and customary for
businesses operating similar properties, and as is satisfactory to the Bank,
including insurance for fire and other risks insured against by extended
coverage, public liability insurance and workers' compensation insurance; and
will designate the Bank as loss payee with a "Lender's Loss Payable" endorsement
on any casualty policies and take such other action as the Bank may reasonably
request to ensure that the Bank will receive (subject to no other interests) the
insurance proceeds on the Bank's collateral.
2.11 Taxes and Other Liabilities. The Borrower will pay and discharge,
when due, all of its taxes, assessments and other liabilities, except when the
payment thereof is being contested in good faith by appropriate procedures which
will avoid foreclosure or liens securing such items, and with adequate reserves
provided therefor.
2.12 Financial Statements and Reporting. The financial statements and other
information previously provided to the Bank or provided to the Bank in the
future are or will be complete and accurate and prepared in accordance with
generally accepted accounting principles. There has been no material adverse
change in the Borrower's financial condition since such information was provided
to the Bank. The Borrower will (i) maintain accounting records in accordance
with generally recognized and accepted principles of accounting consistently
applied throughout the accounting periods involved; (ii) provide the Bank with
such information concerning its business affairs and financial condition
(including insurance coverage) as the Bank may request; and (iii) without
request, provide the Bank with management prepared financial statements:
[X] quarterly with 60 days of the end of each quarter;
[ ] monthly within ___________ days of the end of each month;
and annual _____________________________________________________________________
within ___________________ days of the end of each fiscal year (See Section 2(b)
of Appendix 1 to Addendum to Revolving Credit Agreement)
2.13 Inspection of Properties and Records; Fiscal Year. The Borrower will
permit representatives of the Bank to visit and inspect any of the properties
and examine any of the books and records of the Borrower at any reasonable time
and as often as the Bank may reasonably desire. The Borrower will not change its
fiscal year.
2.14 Financial Status. The Borrower will maintain at all times:
(i) $____________________
(ii) Tangible Net Worth in the amount of at least $100,000,000 at all times.
Page 5 of 11
<PAGE> 6
(iii) Debt Service Coverage Ratio of at least 1.5 tot 1 with the first
measurement December 31, 1997 (annualized for that quarter), thereafter
on a four-quarter, rolling basis.
The terms used in this Section 2.14 will have the meanings set forth in a
supplement entitled "Financial Definitions," a copy of which the Borrower hereby
acknowledges having received with this Agreement and which is incorporated
herein by reference.
2.15 Paid-In-Full. [ ] If checked here, all revolving loans under this
Agreement and the Note must be paid in full for a period of at least __________
consecutive days during each fiscal year.
3.1 [Intentionally Omitted]
3.2 [Intentionally Omitted]
3.3 Credit Balances; Setoff. As security for the payment of the
obligations described in the Loan Documents and any other obligations of the
Borrower to the Bank of any nature whatsoever (collectively the "Obligations"),
the Borrower hereby grants to the Bank a security interest in, a lien on and an
express contractual right to set off against all depository account balances,
cash and any other property of the Borrower now or hereafter in the possession
of the Bank. The Bank may, at any time upon the occurrence of a default
hereunder (notwithstanding any notice requirements or grace/cure periods under
this or other agreements between the Borrower and the Bank) set off against the
Obligations whether or not the Obligations (including future installments) are
then due or have been accelerated, all without any advance or contemporaneous
notice or demand of any kind to the Borrower, such notice and demand being
expressly waived.
The information in this Article III is for information only and the omission of
any reference to an agreement will not affect the validity or enforceability
thereof. The rights and remedies of the Bank outlined in this Agreement and the
documents identified above are intended to be cumulative.
ARTICLE IV. DEFAULTS
4.1 Defaults. Notwithstanding any cure periods described below, the
Borrower will immediately notify the Bank in writing when the Borrower obtains
knowledge of the occurrence of any default specified below. Regardless of
whether the Borrower has given the required notice, the occurrence of one or
more of the following will constitute a default:
(a) Nonpayment. The Borrower shall fail to pay (i) any interest due on the
Note or any fees, charges, costs or expenses under the Loan Documents
by 5 days after the same becomes due; or (ii) any principal amount of
the Note when due.
Page 6 of 11
<PAGE> 7
(b) Nonperformance. The Borrower or any guarantor of Borrower's Obligations
to the Bank ("Guarantor") shall fail to perform or observe any
agreement, term, provision, condition, or covenant (other than a
default occurring under (a), (c), (d), (e), (f) or (g) of this Section
4.1) required to be performed or observed by the Borrower or any
Guarantor hereunder or under any other Loan Document or other agreement
with or in favor of the Bank.
(c) Misrepresentation. Any financial information, statement, certificate,
representation or warranty given to the Bank by the Borrower or any
Guarantor (or any of their representatives) in connection with entering
into this Agreement or the other Loan Documents and/or any borrowing
thereunder, or required to be furnished under the terms thereof, shall
prove untrue or misleading in any material respect (as determined by
the Bank in the exercise of its judgment) as of the time when given.
(d) Default on Other Obligations. The Borrower or any Guarantor shall be in
default under the terms of any loan agreement, promissory note, lease,
conditional sale contract or other agreement, document or instrument
evidencing, governing or securing any indebtedness owing by the
Borrower or any Guarantor to the Bank or any indebtedness in excess of
$10,000 owing by the Borrower to any third party, and the period of
grace, if any, to cure said default shall have passed.
(e) Judgments. Any judgment shall be obtained against the Borrower or any
Guarantor which, together with all other outstanding unsatisfied
judgments against the Borrower (or such Guarantor), shall exceed the
sum of $10,000 and shall remain unvacated, unbonded or unstayed for a
period of 30 days following the date of entry thereof.
(f) Inability to Perform; Bankruptcy/Insolvency. (i) the Borrower or any
Guarantor shall die or cease to exist; or (ii) any Guarantor shall
attempt to revoke any guaranty of the Obligations described herein, or
any guaranty becomes unenforceable in whole or in part for any reason;
or (iii) any bankruptcy, insolvency or receivership proceedings, or an
assignment for the benefit of creditors, shall be commenced under any
Federal or state law by or against the Borrower or any Guarantor; or
(iv) the Borrower or any Guarantor shall become the subject of any
out-of-court settlement with its creditors; or (v) the Borrower or any
Guarantor is unable or admits in writing its inability to pay its debts
as they mature.
(g) Adverse Change; Insecurity. (i) there is a material adverse change in
the business, properties, financial condition or affairs of the
Borrower or any Guarantor, or in any collateral securing the
Obligations; or (ii) the Bank in good faith deems itself insecure.
4.2 Termination of Loans; Additional Bank Rights. Upon the Maturity Date or
the occurrence of any of the events identified in Section 4.1, the Bank may at
any time (notwithstanding any notice requirements or grace/cure periods under
this or other agreements between the Borrower and the Bank) (i) immediately
terminate its obligation, if
Page 7 of 11
<PAGE> 8
any, to make additional loans to the Borrower; (ii) set off; and/or (iii) take
such other steps to protect or preserve the Bank's interest in any collateral,
including without limitation, notifying account debtors to make payments
directly to the Bank, advancing funds to protect any collateral and insuring
collateral at the Borrower's expense; all without demand or notice of any kind,
all of which are hereby waived.
4.3 Acceleration of Obligations. Upon the Maturity Date or the occurrence
of any of the events identified in Sections 4.1(a) through 4.1(e) and 4.1(g),
and the passage of any applicable cure periods, the Bank may at any time
thereafter, by written notice to the Borrower, declare the unpaid principal
balance of any Obligations, together with the interest accrued thereon and other
amounts accrued hereunder and under the other Loan Documents, to be immediately
due and payable; and the unpaid balance will thereupon be due and payable, all
without presentation, demand, protest or further notice of any kind, all of
which are hereby waived, and notwithstanding anything to the contrary contained
herein or in any of the other Loan Documents. Upon the occurrence of any event
under Section 4.1(f), the unpaid principal balance of any Obligations, together
with all interest accrued thereon and other amounts accrued hereunder and under
the other Loan Documents, will thereupon be immediately due and payable, all
without presentation, demand, protest or notice of any kind, all of which are
hereby waived, and notwithstanding anything to the contrary contained herein or
in any of the other Loan Documents. Nothing contained in Section 4.1, Section
4.2 or this section will limit the Bank's right to set off as provided in
Section 3.3 or otherwise in this Agreement.
4.4 Other Remedies. Nothing in this Article IV is intended to restrict the
Bank's rights under any of the Loan Documents or at law, and the Bank may
exercise all such rights and remedies as and when they are available.
ARTICLE V. OTHER TERMS
5.1 Financial Definitions Supplement. If a Borrowing Base or covenants
regarding financial status apply to this loan, the "Financial Definitions"
Supplement identified in Sections 1.2 and 2.14 of this Agreement is hereby
incorporated into this Agreement. The Borrower acknowledges receiving a copy of
such Supplement.
5.2 Additional Terms; Addendum/Supplements. The warranties, covenants,
conditions and other terms described in this Section and/or in the Addendum
and/or other attached document(s) referenced in this Section are incorporated
into this Agreement:
Appendix 1 to Addendum to Revolving Credit Agreement
ARTICLE VI. MISCELLANEOUS
6.1 Delay; Cumulative Remedies. No delay on the part of the Bank in
exercising any right, power or privilege hereunder or under any of the other
Loan Documents will operate as a waiver thereof, nor will any single or partial
exercise of any right, power or privilege
Page 8 of 11
<PAGE> 9
hereunder preclude other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein specified are
cumulative and are not exclusive of any rights or remedies which the Bank would
otherwise have.
6.2 Relationship to Other Documents. The warranties, covenants and other
obligations of the Borrower (and the rights and remedies of the Bank) that are
outlined in this Agreement and the other Loan Documents are intended to
supplement each other. In the event of any inconsistencies in any of the terms
in the Loan Documents, all terms will be cumulative so as to give the Bank the
most favorable rights set forth in the conflicting documents, except that if
there is a direct conflict between any preprinted terms and specially negotiated
terms (whether included in an addendum or otherwise), the specially negotiated
terms will control.
6.3 Participations; Guarantors. The Bank may, at its option, sell all or
any interests in the Note and other Loan Documents to other financial
institutions (the "Participant"), and in connection with such sales (and
thereafter) disclose any financial information the Bank may have concerning the
Borrower to any such Participant or potential Participant. From time to time,
the Bank may, in its discretion and without obligation to the Borrower, any
guarantor or any other third party, disclose information about the Borrower and
this loan to any guarantor, surety or other accommodation party. This provision
does not obligate the Bank to supply any information or release the Borrower
from its obligation to provide such information, and the Borrower agrees to keep
all Guarantors advised of its financial condition and other matters which may be
relevant to the Guarantors' obligations to the Bank.
6.4 Successors. The rights, options, powers and remedies granted in this
Agreement and the other Loan Documents will extend to the Bank and to its
successors and assigns, will be binding upon the Borrower and its successors and
assigns and will be applicable hereto and to all renewals and/or extensions
hereof.
6.5 Indemnification. Except for harm arising from the Bank's willful
misconduct, the Borrower hereby indemnifies and agrees to defend and hold the
Bank harmless from any and all losses, costs, damages, claims and expenses of
any kind suffered by or asserted against the Bank relating to claims by third
parties arising out of the financing provided under the Loan Documents or
related to any collateral (including, without limitation, the Borrower's failure
to perform its obligations relating to Environmental Matters described in
Section 2.5 above). This indemnification and hold harmless provision will
survive the termination of the Loan Documents and the satisfaction of the
Obligations due the Bank.
6.6 Notice of Claims Against Bank; Limitation of Certain Damages. In order
to allow the Bank to mitigate any damages to the Borrower from the Bank's
alleged breach of its duties under the Loan Documents or any other duty, if any,
to the Borrower, the Borrower agrees to give the Bank immediate written notice
of any claim or defense it has against the Bank, whether in tort or contract,
relating to any action or inaction by the Bank under the Loan Documents, or the
transactions related thereto, or of any defense to payment of the Obligations
for any reason. The requirement of providing timely notice to the Bank
Page 9 of 11
<PAGE> 10
represents the parties' agreed-to standard of performance regarding claims
against the Bank. Notwithstanding any claim that the Borrower may have against
the Bank, and regardless of any notice the Borrower may have given the Bank, the
Bank will not be liable to the Borrower for consequential and/or special damages
arising therefrom, except those damages arising from the Bank's willful
misconduct.
6.7 Notices. Although any notice required to be given hereunder or under
any of the other Loan Documents might be accomplished by other means, notice
will always be deemed given when placed in the United States Mail, with postage
prepaid, or sent by overnight delivery service, or sent by telex or facsimile,
in each case to the address set forth below or as amended.
6.8 Payments. Payments due under the Note and other Loan Documents will be
made in lawful money of the United States, and the Bank is authorized to charge
payments due under the Loan Documents against any account of the Borrower. All
payments may be applied by the Bank to principal, interest and other amounts due
under the Loan Documents in any order which the Bank elects.
6.9 Applicable Law and Jurisdiction; Interpretation; Joint Liability. This
Agreement and all other Loan Documents will be governed by and interpreted in
accordance with the internal laws of the state where the Bank's main office is
located, except to the extent superseded by Federal law. Invalidity of any
provisions of this Agreement will not affect any other provision. THE BORROWER
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
SITUATED IN THE COUNTY OR FEDERAL JURISDICTION OF THE BANK'S LOCAL OFFICE, AND
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, WITH REGARD TO ANY ACTIONS,
CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE NOTE, THE
COLLATERAL, ANY OTHER LOAN DOCUMENT, OR ANY TRANSACTIONS ARISING THEREFROM, OR
ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE FOREGOING. Nothing herein will
affect the Bank's rights to serve process in any manner permitted by law, or
limit the Bank's right to bring proceedings against the Borrower in the
competent courts of any other jurisdiction or jurisdictions. This Agreement, the
other Loan Documents and any amendments hereto (regardless of when executed)
will be deemed effective and accepted only upon the Bank's receipt of the
executed originals thereof. If there is more than one Borrower, the liability of
the Borrowers will be joint and several, and the reference to "Borrower" will be
deemed to refer to all Borrowers.
6.10 Copies; Entire Agreement; Modification. The Borrower hereby
acknowledges the receipt of a copy of this Agreement and all other Loan
Documents.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY
Page 10 of 11
<PAGE> 11
CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. THIS
NOTICE SHALL ALSO BE EFFECTIVE WITH RESPECT TO ALL OTHER CREDIT AGREEMENTS NOW
IN EFFECT BETWEEN YOU AND THIS LENDER. A MODIFICATION OF ANY OTHER CREDIT
AGREEMENTS NOW IN EFFECT BETWEEN YOU AND THIS LENDER, WHICH OCCURS AFTER RECEIPT
BY YOU OF THIS NOTICE, MAY BE MADE ONLY BY ANOTHER WRITTEN INSTRUMENT. ORAL AND
IMPLIED MODIFICATIONS TO SUCH CREDIT AGREEMENTS ARE NOT ENFORCEABLE AND SHOULD
NOT BE RELIED UPON.
6.11 Waiver of Jury Trial. THE BORROWER AND THE BANK HEREBY JOINTLY AND
SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
RELATING TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS THEREUNDER, ANY
COLLATERAL SECURING THE OBLIGATIONS, OR ANY TRANSACTION ARISING THEREFROM OR
CONNECTED THERETO. THE BORROWER AND THE BANK EACH REPRESENTS TO THE OTHER THAT
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.
IN WITNESS WHEREOF, the undersigned have executed this REVOLVING CREDIT
AGREEMENT as of August 19, 1997.
ALTERNATIVE LIVING SERVICES, INC.
(Individual Borrower) Borrower Name (Organization)
(SEAL) a Delaware corporation
- ------------------------
Borrower Name By /s/ Thomas E. Komula
--------------- ---------------------------------------
Name and Title Thomas E. Komula
- ----------------------------- --------------------------
(SEAL) Senior Vice President
--------------------------
- ----------------------------- By:
Borrower Name --------------------------------------
Name and Title
---------------------------
FIRST STAR MILWAUKEE, N.A.
(Bank)
By /s/ James A. Meyer
---------------------------------------
Name and Title James A. Meyer, President
--------------------------
Page 11 of 11
<PAGE> 12
FINANCIAL DEFINITIONS SUPPLEMENT
TO
REVOLVING CREDIT AGREEMENT
1. The term "Capital Expenditures" shall mean the aggregate amount of all
purchases or acquisition of fixed assets, including real estate, motor
vehicles, equipment, fixtures, leases and any other items that would be
capitalized on Debtor's books under generally accepted accounting
principles. The term "Capital Expenditures" will not include
expenditures or charges for the usual and customary maintenance, repair
and retooling Of any fixed asset, the acquisition of new tooling in the
ordinary course of business or fixed asset acquisitions evidenced by a
binding purchase order or agreement made prior to the date of this
Agreement.
2. The term "Debt Service Coverage Ratio" shall mean the relationship,
expressed as a numerical ratio, between:
(i) The total of Borrower's earnings plus interest expense, tax
expense, depreciation and amortization; and
(ii) Current maturities of long-term debt, plus interest expense.
3. [Intentionally omitted]
4. [Intentionally omitted]
The term "Eligible Account" shall mean an account owing to the Borrower
or any subsidiary or joint venture in which Borrower is a member, which
meets all of the following requirements at the time it comes into
existence and continues to meet the same until it is collected in full:
(i) Sale of Goods or Services Rendered. It arose from the
performance of services by the Borrower, or from a bona fide sale or
lease of goods on terms in effect as of the date of this Agreement as
disclosed by the Borrower to the Bank; which services have been fully
performed for an account debtor or which goods have been delivered or
shipped to an account debtor residing in the United States or to a
foreign account debtor acceptable to the Bank and supported by a letter
of credit acceptable to the Bank or to the United States or any agency
or department thereof whose accounts are assigned to the Bank under the
Federal Assignment of Claims Act; and for which the Borrower has
genuine and complete invoices, shipping documents or receipts;
(ii) Age and Due Date. It is payable within N/A days of the date of
invoice, and in each instance is not more than N/A days past due;
<PAGE> 13
(iii) Ownership. It is owned and assignable by the Borrower free of
all claims, encumbrances and security interests (except the Banks
paramount security interest);
(iv) No Defenses. It is enforceable by the Borrower and the Bank
against the account debtor for the amount shown as owing in the
statements furnished by the Borrower to the Bank; it and the
transaction out of which it arose comply with all applicable laws and
regulations; it is not subject to any setoff, credit allowance or
adjustment except discount for prompt payment, nor has the account
debtor returned the goods or disputed liability; and it did not arise
from a conditional sale, guaranteed sale, sale on approval, sale or
return or sale on consignment;
(v) Financial Condition of Account Debtor. Neither the borrower
nor the Bank has any notice or knowledge of anything which might impair
the credit standing of the account debtor or the prospect of payment of
the account, nor does the dollar amount of past due invoices as a
portion of the total dollar amount due from an account debtor exceed
N/A %, which imitation may change from time to time;
(vi) Affiliates. It is not due from an Affiliate of the Borrower,
including, without limitation, (a) a parent corporation; (b) subsidiary
corporation; (c) an entity controlled by any controlling shareholder(s)
of the Borrower; or (d) any officer, director, shareholder or owner of
the Borrower or of any Affiliate, (collectively "Affiliate");
(vii) Other Provisions.
6. [Intentionally Omitted]
7. [Intentionally Omitted]
8. [Intentionally Omitted]
9. The term "Tangible Net Worth" shall mean the total of all assets
properly appearing on the balance sheet of the Borrower in accordance with
generally accepted accounting principles, less the sum of the following:
(i) the book amount of all such assets which would be treated as
intangibles under generally accepted accounting principles, including,
without limitation, all such items as goodwill, trademarks, trademark
rights, trade names, trade name rights, brands, copyrights, patents,
patent rights, licenses, deferred charges and unamortized debt discount
and expense;
(ii) any write-up in the book value of any such assets resulting
from a revaluation thereof subsequent to the date of the Revolving
Credit Agreement, or the Term Loan Agreement, as the case may be;
<PAGE> 14
(iii) all reserves, including reserves for depreciation,
obsolescence, depletion, insurance, and inventory valuation, but
excluding contingency reserves not allocated for any particular purpose
and not deducted from assets;
(iv) the amount, if any, at which any shares of stock of the
Borrower appear on the asset side of such balance sheet;
(v) all liabilities of the Borrower shown on such balance sheet,
but not including such indebtedness of the Borrower that is fully
subordinated on its terms or convertible to equity at the option of the
Borrower;
(vi) all investments in foreign affiliates and nonconsolidated
domestic affiliates; and
(vii) all accounts or notes due to the Borrower from any
shareholder, director, officer, employee or affiliate of the Borrower
or from any relative of such party.
<PAGE> 15
ADDENDUM TO REVOLVING CREDIT AGREEMENT
This Addendum is made part of the Revolving Credit Agreement (the
"Agreement") made and entered into by and between the undersigned borrower (the
"Borrower") and the undersigned bank (the "Bank") as of the date identified
below. The warranties, covenants and other terms described below are hereby
added to the Agreement.
See Appendix 1 attached hereto and incorporated herein.
Dated as of
------------------------
(Individual Borrower) ALTERNATIVE LIVING SERVICES, INC.
(SEAL) a Delaware corporation
- ----------------------------------
Borrower Name By: /s/ Thomas E. Komula
-------------------- ----------------------------------------
Name and Title: Thomas E. Komula,
---------------------------
Senior Vice President
---------------------------
(SEAL)
- ----------------------------------
By
Borrower Name -----------------------------------------
-------------------- Name and Title:
----------------------------
FIRSTAR BANK MILWAUKEE, NA.
By: /s/ James A. Meyer
----------------------------------------
Name and Title: James A. Meyer, President
----------------------------
<PAGE> 16
APPENDIX 1
1. Additional Loan Terms.
a. The Bank may require any LIBOR Rate Loans to be
repaid prior to the Termination Date for Revolving Loans and may refuse to make
LIBOR Rate Loans in the event the Bank determines that (i) maintenance of the
LIBOR Rate Loans would violate any applicable Requirements of Law, (ii) the
interest rates on LIBOR Rate Loans do not accurately reflect the cost of making
such Revolving Loans, or (iii) deposits in the amount of any LIBOR Rate Loan are
not available to the Bank in the London Interbank Eurodollar Market.
b. In the event the Bank shall incur any loss, cost,
expense or premium (including, without limitation, any loss of profit or loss,
cost, expense or premium incurred by reason of the liquidation or reemployment
of deposits or other funds acquired or contracted to be acquired by the Bank to
fund or maintain LIBOR Rate Loans or the relending or reinvesting of such
deposits or other funds or amounts paid or prepaid to the Bank), as a result of:
(i) any payment of any LIBOR Rate Loans on a date other
than the last day of the then applicable Loan Period for any reason,
whether before or after Default, and whether or not such payment is
required by any provisions of this Agreement; or
(ii) any failure by the Company to create, borrow,
continue or effect by conversion of any LIBOR Rate Loans on the date
specified in a notice given pursuant to this Agreement;
then upon the demand of the Bank, the Company shall pay to the Bank such amount
as will reimburse the Bank for such loss, cost, expense or premium. If the Bank
requests such a reimbursement it shall provide the Company with a certificate
setting forth the computation of the loss, cost, expense or premium giving rise
to the request for reimbursement in reasonable detail and such certificate shall
be deemed prima facie correct.
2. Additional Covenants. While any part of the credit granted to
the Borrower under this Agreement or the other Loan Documents is available or
any obligations under any of the Loan Documents are unpaid or outstanding, the
Borrower covenants and agrees as follows:
a. SEC Reports. Within 10 days after transmission
thereof, the Company shall deliver to the Bank copies of all annual reports,
financial statements, proxy statements or other written communications which the
Company sends to its stockholders and copies of all registration statements,
proxy statements, all regular, special or periodic reports which it files, or
any of its officers or directors or any shareholder which owns more than 10% of
the outstanding securities of the Company files with respect to the Company,
with the Securities
<PAGE> 17
and Exchange Commission or with any securities exchange on which any of the
Company's securities are then listed, and copies of all press releases and other
statements made available generally by the Company to the public concerning
material developments in the Company's and its Subsidiaries' business.
b. As soon as available, and in any event within 115
days after the close of each fiscal year, a copy of the detailed annual audit
report for such year and accompanying financial statements for the Company as of
the end of such year, containing balance sheets and statements of income,
retained earnings and cash flows for such year and for the previous fiscal year,
as audited by independent certified public accountants of recognized standing
selected by the Company and satisfactory to the Bank, which report shall be
accompanied by (i) the unqualified opinion of such accountants to the effect
that the statements present fairly, in all material respects, the financial
position of the Company as of the end of such year and the results of its
operations and its cash flows for the year then ended in conformity with GAAP;
(ii) a certificate of such accountants showing their calculation of the
financial covenants contained herein and stating that their review disclosed no
Default or that their review disclosed a Default and specifying the same and the
action taken or proposed to be taken with respect thereto; and (iii) any
supplementary comments and reports submitted by such accountants to the Company
including the management letter, if any.
c. Accounts. The Company shall maintain its primary
deposit, operating, and cash management accounts with Bank.
3. Additional Miscellaneous Term.
a. Accounting and Financial Determinations. Where the
character or amount of any asset or liability or item of income or expense is
required to be determined, or any accounting computation is required to be made,
for the purpose of this Agreement, such determination or calculation shall be
made on a consolidated basis so as to include the Company and its Subsidiaries,
if any, in each such calculation and, to the extent applicable and except as
otherwise specified in this Agreement, shall be made in accordance with GAAP;
provided, however, that if any change in GAAP from those applied in the
preparation of the financial statements referred to in Section 2.12 or Section
2(b) of this Appendix is occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the American Institute of
Certified Public Accountants (or its boards or committees or successors thereto
or agencies with similar functions), the initial announcement of which change is
made after the date hereof, results in a change in the method of calculation of
financial covenants, standards or terms found in Section 2.12 or Section 2(b) of
this Appendix, the parties hereto agree to enter into good faith negotiations in
order to amend such provisions so as to reflect such changes with the desired
result that the criteria for evaluating the Company's financial condition shall
be the same after such changes as if such changes had not been made; and
provided, further, that until such time as the parties hereto agree upon such
amendments, such financial covenants, standards and terms shall be construed and
calculated as though no change had taken place.
2
<PAGE> 1
EXHIBIT 10.129
REVOLVING CREDIT NOTE
$5,000,000.00 August 19, 1997
FOR VALUE RECEIVED, the undersigned borrower (the "Borrower"), promises
to pay to the order of Firstar Bank Milwaukee, N.A. (the "Bank"), at its main
office in Milwaukee, Wisconsin the principal sum of Five Million and 00/100ths
dollars ($5,000,000.00), payable February 27, 1999.
Interest. Each advance hereunder will bear interest at Borrower's
option at either (i) the prime rate (the "Prime Rate") of interest announced by
the Bank and in effect from time to time (with the rate changing as and when
such prime rate changes) (a "Prime Rate Loan") OR (ii) the one, two or
three-month LIBOR rate quoted by the Bank plus 175 basis points (a "LIBOR Rate
Loan"). In the event that for whatever reason a LIBOR Rate Loan is not
available, the interest rate hereunder will be the Prime Rate. The Prime Rate
will apply if the Borrower fails to select a rate (whether initially or at the
end of a LIBOR Rate Loan). The Borrower may have more than one rate (but no more
than seven rates) in effect at any time provided that LIBOR Rate Loans will be
in minimum principal amounts of $250,000. The Bank's internal records of
applicable interest rates will be determinative in the absence of manifest
error.
Interest Payment Schedule. Interest under a Prime Rate Loan is payable
monthly beginning September 19, 1997 and on the same day of each consecutive
month thereafter, and a final payment of all accrued and unpaid interest shall
be due on February 27, 1999. Interest under a LIBOR Rate Loan is payable on the
last day of the interest period applicable thereto and a final payment of all
accrued and unpaid interest shall be payable on February 27, 1999.
Interest will be computed for the actual number of days principal is
unpaid, using a daily factor obtained by dividing the stated interest rate by
360.
Principal amounts remaining unpaid after the maturity thereof, whether
at fixed maturity or by reason of acceleration of maturity, shall bear interest
from and after maturity until paid at a rate of 2% per annum plus the rate
otherwise payable hereunder.
In no event will the interest rate hereunder exceed that permitted by
applicable law. If any interest or other charge is finally determined by a court
of competent jurisdiction to exceed the maximum amount permitted by law, the
interest or charge shall be reduced to the maximum permitted by law, and the
Bank may credit any excess amount previously collected against the balance due
or refund the amount to the Borrower.
<PAGE> 2
Without affecting the liability of any Borrower, endorser, surety or
guarantor, the Bank may, without notice, renew or extend the time for payment,
accept partial payments, release or impair any collateral security for the
payment of this Note, or agree not to sue any party liable on it.
This Revolving Credit Note constitutes the Note issued under a
Revolving Credit Agreement dated as of the date hereof between the Borrower and
the Bank, to which Agreement reference is hereby made for a statement of the
terms and conditions under which loans evidenced hereby were or may be made and
a description of the terms and conditions upon which the maturity of this Note
may be accelerated.
The Borrower hereby acknowledges the receipt of a copy of this Note.
ALTERNATIVE LIVING SERVICES, INC.
(Individual Borrower) Borrower Name (Organization)
a
- ------------------------------ ---------------------------------------
Borrower Name By /s/ Thomas E. Komula
---------------- -------------------------------------
Name and Title Thomas E. Komula,
-------------------------
Senior Vice President
-------------------------
(Seal)
- ------------------------ By /s/ James A. Meyer
-------------------------------------
Borrower Name Name and Title James A. Meyer, President
---------------- -------------------------
<PAGE> 1
EXHIBIT 10.130
AMENDMENT TO REVOLVING CREDIT AGREEMENT
AND REVOLVING CREDIT NOTE
This amendment (the "Amendment"), dated as of the date specified below,
is by and between the borrower (the "Borrower") and the bank (the "Bank")
identified below.
RECITALS
A. The Borrower and the Bank have executed a Revolving Credit Agreement
(the "Agreement") and the Borrower has executed a Revolving Credit Note (the
"Note"), both dated ___________________________ and as amended from time to
time, and the Borrower (and if applicable, certain third parties) have executed
the collateral documents identified in Article III of the Agreement and certain
other related documents (collectively the "Loan Documents"), setting forth the
terms and conditions upon which the Borrower may obtain loans from the Bank from
time to time in the original amount not to exceed $____________, as may be
amended from time to time.
B. The Borrower has requested that the Bank permit certain
modifications to the Agreement and the Note as described below.
C. The Bank has agreed to such modifications, but only upon the terms
and conditions outlined in this Amendment.
TERMS OF AGREEMENT
In consideration of the mutual covenants contained herein, and for
other good and valuable consideration, the Borrower and the Bank agree as
follows:
[X] Extension of Maturity Date. If checked here, the references to
"February 27, 1999" in the Revolving Credit Agreement and Revolving Credit Note
are hereby deleted and replaced with "February 28, 2000."
[ ] Change in Maximum Loan Amount. If checked here, all references
to "$___________" in the Agreement and in the Note (whether or not numerically)
as the maximum Loan Amount which may be borrowed from time to time are hereby
deleted and replaced with "____________________."
[ ] Change in Multiple Advance Termination Date. If checked here,
all references to " N/A " as the termination date for multiple advances are
hereby deleted and replaced with " N/A ."
Change in Financial Covenant(s).
<PAGE> 2
(i) [ ] If checked here, all references to "$______________"
in the Agreement as the minimum Net Working Capital amount are hereby
deleted and replaced with "$_____________" for the period beginning
____________________ and thereafter.
(ii) [ ] If checked here, all references to "$______________"
in the Agreement as the minimum Tangible Net Worth amount are hereby
deleted and replaced with "$_____________" for the period beginning
____________________ and thereafter.
(iii) [ ] If checked here, all references to "______________"
in the Agreement as the maximum Debt to Worth Ratio are hereby deleted
and replaced with "_____________" for the period beginning
____________________ and thereafter.
(iv) [ ] If checked here, all references to "______________"
in the Agreement as the minimum Current Ratio are hereby deleted and
replaced with "_____________" for the period beginning
____________________ and thereafter.
(v) [ ] If checked here, all references to "$______________"
in the Agreement as the maximum Capital Expenditures amount are hereby
deleted and replaced with "$_____________" for the period beginning
____________________ and thereafter.
(vi) [ ] If checked here, all references to "______________"
in the Agreement as the minimum Cash Flow Coverage Ratio are hereby
deleted and replaced with "_____________" for the period beginning
____________________ and thereafter.
(vii) [ ] If checked here, all references to "$______________"
in the Agreement as the maximum Officers, Directors, Partners, and
Management Salaries and Other Compensation amount are hereby deleted
and replaced with "$_____________" for the period beginning
____________________ and thereafter.
[ ] Change in Payment Schedule. If checked here, effective upon
the date of this Amendment, the information under the heading "Payment Schedule"
is deleted and replaced with the following:
Effectiveness of Prior Documents. Except as specifically amended
hereby, the Agreement, the Note and the other Loan Documents shall remain in
full force and effect in accordance with their respective terms. All warranties
and representations contained in the Agreement and the other Loan Documents are
hereby reconfirmed as of the date hereof. All collateral previously provided to
secure the Agreement and/or Note continues as security, and all guaranties
guaranteeing obligations under the Loan Documents remain in full force and
effect. This is an amendment, not a novation.
Preconditions to Effectiveness. This Amendment shall only become
effective upon execution by the Borrower and the Bank, and approval by the
guarantors (if any) and any other third party required by the bank.
<PAGE> 3
No Waiver of Defaults; Warranties. This Amendment shall not be
construed as or be deemed to be a waiver by the Bank of existing defaults by the
Borrower, whether known or undiscovered. All agreements, representations and
warranties made herein shall survive the execution of this Amendment.
Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be considered an original, but when taken
together shall constitute one document.
Authorization. The Borrower and all guarantors (if any) represent and
warrant that the execution, delivery and performance of this Amendment and the
documents referenced herein are within the corporate or partnership powers (as
applicable) of the Borrower and all corporate or partnership guarantors, and
have been duly authorized by all necessary corporate or partnership action.
Dated as of: February 27, 1999
(Individual Borrower) Alternative Living Services, Inc.
Borrower Name (Organization)
(SEAL) a Delaware Corporation
- ---------------------------
Borrower Name By: /s/ Mark Ohlendorf
------------------- -----------------------------------
Name and Title: Mark Ohlendorf, Senior
----------------------
(SEAL) Vice President
- --------------------------- ----------------------
By:
----------------------------------
Name and Title:
----------------------
Borrower Name
------------------
Agreed to:
Firstar Bank Milwaukee, N.A.
(Firstar Bank)
By: /S/ Thomas Richtman
-----------------------------
Name and Title: Thomas Richtman, Vice President
-----------------
<PAGE> 1
EXHIBIT 10.131
SECOND AMENDMENT TO LOAN AGREEMENT
AND RELATED DOCUMENTS
WHEREAS, Alterra Healthcare Corporation, formally known as Alternative
Living Services, Inc. (the "Borrower") and Firstar Bank Milwaukee, N.A. (the
"Bank") have executed a Revolving Credit Note in the original amount of
$5,000,000.00 dated August 19, 1997 (the "Note"), and a Revolving Credit
Agreement in the original amount of $5,000,000.00 dated August 19, 1997 (the
"Agreement") and as amended, (collectively with the Agreement and the Note
referred to as the "Loan Documents"), setting forth the terms and conditions
upon which the Borrower has obtained a loan from the Bank.
WHEREAS, the Borrower has requested that the Bank permit certain
modifications to the Agreement and Note as described below; and
WHEREAS, the Bank has agreed to such modifications but only upon the
terms and conditions outlined in this Amendment.
NOW, THEREFORE, it is hereby agreed by and between the Borrower and the
Bank as follows:
1. Change in Maximum Loan Amount. All references to $5,000,000.00 in
the Agreement and in the Note (whether or not numerically) as the maximum Loan
Amount which may be borrowed from time to time are hereby deleted and replaced
with $15,000,000.00.
2. Extension of Maturity Date. All references in the loan
documents to February 28, 2000 as the maturity of the Note are hereby deleted
and replaced with March 31, 2000.
3. Change in Borrowing Base. All references to section 1.2
Borrowing Base in the Agreement are hereby deleted.
4. Change in Financial Covenants. All references to $100,000,000.00
in the Agreement as the minimum Tangible Net Worth are hereby deleted and
replaced with $154,561,000.00 for the period beginning July 1, 1999 and
thereafter.
5. Change in Financial Covenant Definition. All references to the
definition of Minimum Tangible Net Worth are hereby deleted and replaced with
"Total stockholder's or partner's equity less the sum of all intangible assets,
pre-opening costs, organization costs, deferred financing costs and loans to or
receivables from unconsolidated affiliates." The terms used herein shall have
the respective meanings given to them under generally accepted accounting
principles in effect in the United States of America from time to time.
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6. Addition to Financial Covenants. Section 2.14 of the Agreement is
hereby amended to create a "Minimum Net Profit" requirement as follows: The
Borrower shall achieve an after-tax profit of at least $1 for each calendar
quarter commencing for the calendar quarter ending 9/30/99.
7. Change to Article IV Defaults. Article IV is hereby amended to
create Section 4.5, "Cross Default with Bank United Credit Facility." The
Borrower shall be deemed to be in default under the Agreement in the event that
the Borrower is declared in default under its Loan and or Security Agreements
with Bank United.
8. Effectiveness of Prior Documents. Except as specifically amended
hereby, the Agreement and the other Loan Documents shall remain in full force
and effect in accordance with their respective terms. All warranties and
representations contained in the Agreement and the other Loan Documents are
hereby reconfirmed as of the date hereof. All collateral previously provided to
secure the Loan Documents, including but not limited to collateral described in
the Mortgage, continues as security remain in full force and effect. This is an
amendment, not a novation.
9. Preconditions to Effectiveness. This Amendment shall only become
effective upon execution of the Borrower and the Bank.
10. No Waiver of Defaults. This Amendment shall not be construed as
or be deemed to be a waiver by the Bank of existing defaults by the Borrower,
whether known or undiscovered.
11. Expenses. The Borrower shall be responsible for payment of all
fees and out-of-pocket disbursements incurred by the Bank in connection with the
preparation, execution, delivery, administration and enforcement of this
Amendment, including all costs of collection, and including without limitation
the fees and disbursements of counsel (including inside counsel) for the Bank.
12. Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution of this Amendment.
13. Applicable Law. This Amendment shall be governed by and construed
in accordance with the internal laws of the State of Wisconsin.
14. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be considered an original, but when taken
together shall constitute one document.
15. Authorization. The Borrower represents and warrants that the
execution, delivery and performance of this Amendment, and the documents
referenced herein, are within the corporate powers of the Borrower and have been
duly authorized by all necessary corporate action.
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16. Captions. The captions contained herein are for convenience only,
and do not restrict or otherwise affect the interpretation of any of the
paragraphs to which they relate.
September 9, 1999
ALTERRA HEALTHCARE CORPORATION FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ Mark Ohlendorf SVP By: /s/ Thomas V. Richtman
----------------------------- ------------------------------
Name: Mark Ohlendorf Name: Thomas V. Richtman
-------------- ------------------
<PAGE> 1
Exhibit 10.132
CONSOLIDATED
MORTGAGE
This Mortgage is made the 22nd day of December, 1999, between
(month) (year)
CLIFTON PARK ROUTE 146, LLC
a New York limited liability company
having an address for the receipt of notices of
250 South Clinton Street, Syracuse, New York 13202
(Individually and collectively "Mortgagor") and MANUFACTURERS AND TRADERS TRUST
COMPANY, a New York banking corporation with its principal banking office at One
M&T Plaza, Buffalo, NY 14240 Attention: Office of General Counsel (tire
"Mortgagee'). FOUR MILLION SEVEN HUNDRED TWENTY THOUSAND AND 00/100
xxxxxxxxxxxxxx Dollars ($4,720,000.00 ), lawful money of the United States,
together with interest thereon and other charges with respect thereto, to be
paid according to a certain bond, note or other obligation dated on or about
this date ,(i) made and delivered by each Mortgagor to the Mortgagee (the
"Note") and (b) if the Note is guaranteed by each Mortgagor, to the extent of
such principal sum and such interest and other charges, such guaranty (the
"Guaranty"), each Mortgagor hereby mortgages to the Mortgagee, as continuing and
collateral security for the payment of any and all indebtedness, liabilities and
obligations now existing or which may hereafter arise by reason of the Note, the
Guaranty this Mortgage or any amendments, renewals, extensions, modifications or
substitutions of the Note, the Guaranty or this Mortgage (collectively the
"Indebtedness"), the premises described on the attached Schedule A.
TOGETHER with all buildings, structures and other improvements now or
hereafter erected, constructed or situated upon said premises, and all fixtures
and equipment and other personal property now or hereafter affixed to, or used
in connection with, said premises and any and all replacements thereof and
additions thereto, all of which shall be deemed to be and remain and form a part
of said premises and are covered by the lien of this Mortgage (said premises,
buildings, structures, other improvements, fixtures and equipment and other
personal property being collectively referred to in this Mortgage as the
"Premises"),
TOGETHER with all strips and gores of land adjoining or abutting the
Premises,
TOGETHER with all right, title and interest of each Mortgagor in and to
all streets, alleys, highways, waterways and public places open or proposed in
front of, running through or adjoining the Premises, and all easements and
rights of way, public and private, now or hereafter used in connection with the
Premises,
TOGETHER with all tenements, hereditaments and appurtenances and all
the estate and rights of each Mortgagor in and to the Premises,
<PAGE> 2
TOGETHER with all awards heretofore or hereafter made by any federal,
state, county, municipal or other governmental authority, or by whomsoever made
in any condemnation or eminent domain proceedings whatsoever, to the present or
subsequent owners of the Premises or any portion thereof, for the acquisition
for public purposes of the Premises or any portion thereof or any interest
therein or any use thereof, or for consequential damages on account thereof,
including, but not limited to, any award for any change of grade of streets
affecting the Premises or any portion thereof and any award for any damage to
the Premises or any portion thereof or any interest therein or any use thereof.
EACH MORTGAGOR COVENANTS WITH THE MORTGAGEE SO LONG AS THIS MORTGAGE IS
IN EFFECT AS FOLLOWS:
1. PAY INDEBTEDNESS. The Indebtedness shall be paid as provided in the
Note or Guaranty, as the case maybe, and as provided herein.
2. INSURANCE. Each Mortgagor shall keep the Premises insured against
each risk to which the Premises may from time to time be subject (including, but
not limited to, fire, vandalism and other risks covered by all risk insurance;
if requested by the Mortgagee, earthquake; if the Premises or any portion
thereof are located in an area identified as an area having special flood
hazards and in which flood insurance has been made available, flood; and loss of
rents by reason of such risks) for the benefit of the Mortgagee. Such insurance
shall be provided in such amounts, for such periods, in such form, with such
special endorsements, on such terms and by such companies and against such risks
as shall be satisfactory to the Mortgagee. Without limiting the generality of
the preceding two sentences, each policy pursuant to which such insurance is
provided shall contain a mortgagee clause, in form and substance satisfactory to
the Mortgagee, (a) naming the Mortgagee as mortgagee and (b) providing that (i)
all moneys payable pursuant to such insurance shall be payable to the Mortgagee,
(ii) such insurance shall not be affected by any act or neglect of any Mortgagor
or the Mortgagee, any occupancy, operation or use of the Premises or any portion
thereof for purposes more hazardous than permitted by the terms of such policy,
any foreclosure or other proceeding or notice of sale relating to the Premises
or any portion thereof or any change in the title to or ownership of the
Premises or any portion thereof and (iii) such policy and such mortgagee clause
may not be cancelled or amended except upon thirty (30) days' prior written
notice to the Mortgagee. Each Mortgagor hereby assigns and shall deliver each
policy pursuant to which any such insurance is provided to the Mortgagee. The
acceptance by the Mortgagee of such policies from any Mortgagor shall not be
deemed or construed as an approval by the Mortgagee of the form, sufficiency or
amount of such insurance. The Mortgagee does not in any way represent that such
insurance, whether in scope or coverage or limits of coverage, is adequate or
sufficient to protect the business or interest of any Mortgagor. In the event of
the foreclosure of this Mortgage, or a transfer of title to the Premises in
extinguishment of the Indebtedness, all right, title and interest of each
Mortgagor in and to any such policies then in force shall pass to the purchaser
or grantee of the Premises. All the provisions of this Section 2 and any other
provisions of this Mortgage pertaining to insurance which may be required under
this Mortgage shall be construed with Section 254, Subdivision 4 of the New York
Real Property Law, but, said Section 254 to the contrary notwithstanding, each
Mortgagor consents that the Mortgagee may, without qualification or limitation
by virtue of said Section 254, retain and apply the proceeds of any such
insurance in satisfaction or reduction of the Indebtedness, whether or not then
due and
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payable or it may pay the same, wholly or in part, to any Mortgagor for
the repair or replacement of the Premises or for any other purpose satisfactory
to the Mortgagee, without affecting the lien of this Mortgage for the full
amount of the Indebtedness before the making of such payment.
3. ALTERATIONS, DEMOLITION OR REMOVAL. No building, structure, other
improvement, fixture or equipment or other personal property constituting any
portion of the Premises shall be removed, demolished or substantially altered
without the prior written consent of the Mortgagee.
4. WASTE AND CHANGE IN USE. No Mortgagor shall commit any waste on the
Premises or make any change in the use of the Premises which may in any way
increase any ordinary fire, environmental or other risk arising out of
construction or operation.
5. MAINTENANCE AND REPAIRS. Each Mortgagor shall keep and maintain all
buildings, structures, other improvements, fixtures and equipment and other
personal property constituting any portion of the Premises and the sidewalks and
curbs abutting the Premises in good order and rentable and tenantable condition
and state of repair. In the event that the Premises or any portion thereof shall
be damaged or destroyed by fire or any other casualty, or in the event of the
condemnation or taking of any portion of the Premises as a result of any
exercise of the power of eminent domain, each Mortgagor shall promptly restore,
replace, rebuild or alter the same as nearly as possible to the condition
immediately prior to such fire, other casualty, condemnation or taking without
regard to the adequacy of any proceeds of any insurance or award received. Each
Mortgagor shall give prompt written notice to the Mortgagee of any such damage
or destruction or of the commencement of any condemnation or eminent domain
proceeding affecting the Premises or any portion thereof.
6. EXISTENCE AND AUTHORITY. If Mortgagor is a corporation, partnership
or a limited liability company (i) so long as this Mortgage remains in effect.
Mortgagor will do all things necessary to preserve and keep in full force and
effect the existence, franchises, rights and privileges of Mortgagor as a
business or stock corporation, a partnership (limited or general) or as a
limited liability company, under the laws of the state of its organization and
(ii) if a corporation, warrants that neither its certificate of incorporation,
nor any amendment thereto, nor its by-laws, requires the consent of shareholders
to the execution and delivery of this Mortgage, and that the execution and
delivery of this Mortgage have been duly authorized by its Board of Directors;
(iii) if a limited liability company, warrants that the execution and delivery
of this Mortgage has been duly authorized by the members of the limited
liability company and no other action is required under its articles of
organization or the operating agreement and (iv) if a partnership, warrants that
the execution and delivery of this Mortgage has been duly authorized by its
partners and no other action is required under its partnership agreement.
Mortgagor shall take all necessary steps to preserve its corporate, partnership
or limited liability company existence (as the case may be) and its right to
conduct business in all states in which the nature of its business or ownership
of its property requires such qualification. Mortgagor shall engage only in the
business conducted by it on the date of this Agreement.
7. TAXES AND ASSESSMENTS. Unless paid from an escrow established
pursuant to Section 8 of this Mortgage, each Mortgagor shall pay all taxes,
general and special assessments and other governmental impositions with respect
to the Premises before the end of any applicable
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grace period. Upon request by the Mortgagee, each Mortgagor shall promptly
deliver to the Mortgagee receipted bills showing payment of all such taxes,
assessments and impositions within the applicable grace period.
8. ESCROW FOR TAXES, ASSESSMENTS AND INSURANCE. Upon request by the
Mortgagee, each Mortgagor shall pay (a) monthly to the Mortgagee on or before
the first day of each and every calendar month, until the Indebtedness is fully
paid, a sum equal to one-twelfth (1/12th) of the yearly taxes, general and
special assessments, other governmental impositions and other liens and charges
with respect to the Premises to be imposed for the ensuing year, as estimated by
the Mortgagee in good faith, and annual premiums for insurance on the Premises
and (b) an initial payment such that, when such monthly payments are added
thereto, the total of such payments wilt be sufficient to pay such taxes,
assessments, impositions and other liens and charges and such insurance premiums
on or before the date when they become due. So long as no Event of Default (as
hereinafter defined) shall have occurred or exists, the Mortgagee shall hold
such payments in trust in an account maintained with Manufacturers and Traders
Trust Company without obligation to pay interest thereon, except such interest
as may be mandatory by any applicable statute, regulation or other law, to pay,
to the extent funds are available, such taxes, assessments, impositions and
other liens and charges and such insurance premiums within a reasonable time
after they become due; provided, however, that upon the occurrence or existence
of any Event of Default, the Mortgagee may apply the balance of any such
payments held to the Indebtedness. If the total of such payments made by any
Mortgagor shall exceed the amount of such payments made by the Mortgagee, such
excess shall be held or credited by the Mortgagee for the benefit of each
Mortgagor. If the total of such payments made by any Mortgagor shall be less
than the amount of such taxes, assessments, impositions and other liens and
charges and such insurance premiums, then each Mortgagor shall pay to the
Mortgagee any amount necessary to make up the deficiency on or before the date
when any such amount shall be due.
9. LEASES. Pursuant to the provisions of Section 291-f of the New York
Real Property Law, no Mortgagor shall (a) amend, cancel, abridge, terminate, or
otherwise modify any lease of the Premises or of any portion thereof or (b)
accept any prepayment of installments of rent to become due thereunder for more
than one month in advance, without the prior written consent of the Mortgagee or
its agents. No Mortgagor shall make any new lease in place of or any lease
renewal or extension of any lease of the Premises or any portion thereof (other
than those such Mortgagor as landlord may be required to grant by the terms of
an existing lease) without the prior written consent of the Mortgagee or its
agents. Upon request by the Mortgagee or its agents, each Mortgagor shall
promptly furnish to the Mortgagee a written statement containing the names and
mailing addresses of all lessees of the Premises or of any portion thereof, the
terms of their respective leases, the space occupied and the rentals payable
thereunder and copies of their respective leases and shall cooperate in
effecting delivery of notice of this covenant to each affected lessee.
10. ASSIGNMENT OF LEASES AND RENTS. Each Mortgagor hereby assigns to
the Mortgagee all existing and future leases of the Premises or any portion
thereof (including, but not limited to, any amendments, renewals, extensions or
modifications thereof) and the rents, issues and profits of the Premises
including without limitation accounts receivable for use of the Premises for
hotel or lodging services ("Accounts"), as further security for the payment of
the
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Indebtedness, and each Mortgagor grants to the Mortgagee the right to enter upon
and to take possession of the Premises for the purpose of collecting the same
and to let the Premises or any portion thereof, and, after payment of each cost
and expense (including, but not limited to, each fee and disbursement of counsel
to the Mortgagee) incurred by the Mortgagee in such entry and collection, to
apply the remainder of the same to the Indebtedness, without affecting its right
to maintain any action theretofore instituted, or to bring any action
thereafter, to enforce the payment of the Indebtedness. In the event the
Mortgagee exercises such rights, it shall not thereby be deemed a mortgagee in
possession, and it shall not in any way be made liable for any act or omission.
This assignment and grant shall continue in effect until the Indebtedness is
fully paid. No Mortgagor shall assign such leases, rents, issues or profits or
any interest therein or grant any similar rights to any other person without the
Mortgagee's prior written consent. The Mortgagee hereby waives the right to
enter upon and to take possession of the Premises for the purpose of collecting
said rents, issues and profits, and each Mortgagor shall be entitled to collect
the same, until the occurrence or existence of any Event of Default, but such
right of each Mortgagor may be revoked by the Mortgagee upon the occurrence or
existence of any Event of Default. Upon the occurrence or existence of any Event
of Default, each Mortgagor shall pay monthly in advance to the Mortgagee, or to
any receiver appointed to collect said rents, issues and profits, a fair and
reasonable monthly rental value for the use and occupation of the Premises, and
upon default in any such payment shall vacate and surrender the possession of
the Premises to the Mortgagee or to such receiver, and in default thereof may be
evicted by summary proceedings pursuant to Article 7 of the New York Real
Property Actions and Proceedings Law. The rights and remedies under this section
and any separately recorded assignment of rents and/or leases in favor of
Mortgagee shall be cumulative. In the event of any irreconcilable
inconsistencies between such agreements and this section, the separately
recorded assignment of rents and/or leases shall control.
11. SECURITY AGREEMENT. This Mortgage constitutes a security agreement
under the New York Uniform Commercial Code and each Mortgagor hereby grants to
the Mortgagee a security interest in all fixtures, equipment and other personal
property now or hereafter owned and affixed to, used in connection with any
portion of or constituting any portion of the Premises and in the proceeds,
rents, issues, profits and Accounts arising therefrom, to secure the
Indebtedness. The Mortgagee shall have the right to file in any public office,
without the signature of any Mortgagor, each financing statement relating to
such fixtures and equipment and other personal property and proceeds, rents,
issues, profits and Accounts arising therefrom that the Mortgagee shall deem
necessary or desirable at the sole option of the Mortgagee. With respect to such
fixtures and equipment and other personal property and proceeds, the Mortgagee
shall have each applicable right and remedy of a secured party under the New
York Uniform Commercial Code and each applicable right and remedy pursuant to
any other statute, regulation or other law or pursuant to this Mortgage.
12. NO TRANSFER. No Mortgagor shall, without the Mortgagee's prior
written consent, sell, conveyor transfer the Premises or any portion thereof or
any interest therein or contract to do so. If any Mortgagor, Debtor or any
endorser or guarantor of the Note (a "Guarantor") is a corporation, or if any
other person liable with respect to the Indebtedness or any portion thereof
other than any Mortgagor or any general partner of any Mortgagor, Debtor or any
Guarantor, is a corporation, any direct or indirect change in the beneficial
ownership or number of issued and outstanding shares of any class of stock of
such Mortgagor, such Debtor,
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such Guarantor or such general partner, whether by operation of law or
otherwise, after which the percentage of such shares beneficially owned by any
person or group of persons having beneficial ownership of any such shares has
changed by at least ten percent (10%) more or less than it was on the date of
this Mortgage shall be deemed a sale, conveyance or transfer of the Premises
within the meaning of this Section 12. If any Mortgagor, Debtor or Guarantor is
a partnership, including a limited liability partnership, any change in the
partnership interests of the general partners of such Mortgagor, Debtor or
Guarantor or in the composition of the general partners of such Mortgagor,
Debtor or Guarantor, whether by operation of law or otherwise, shall be deemed a
sale, conveyance or transfer of the Premises within the meaning of this Section
12. If any Mortgagor, Debtor or Guarantor is a limited liability company, any
change in the direct or indirect membership interest of any member or class of
members of such Mortgagor, Debtor or Guarantor, whether by operation of law or
otherwise, after which the percentage of such membership interest owned by any
such member or class has changed by at least ten percent (10%) more or less than
it was on the date of this Mortgage shall be deemed a sale, conveyance or
transfer of the Premises within the meaning of this Section 12.
13. NO SECONDARY FINANCING OR OTHER LIENS. No Mortgagor shall, without
the Mortgagee's prior written consent, mortgage, pledge, assign, grant a
security interest in or cause any other lien or encumbrance to be made or permit
any other lien or encumbrance to exist upon the Premises or any portion thereof
except for (a) taxes and assessments not yet delinquent and (b) any mortgage,
pledge, security interest, assignment or other lien or encumbrance to the
Mortgagee.
14. COMPLIANCE WITH LAWS. Each Mortgagor represents and warrants to the
Mortgagee, and continues to represent and warrant as long as this Mortgage is in
effect, as follows: (a) the buildings, structures and other improvements now
constituting any portion of the Premises are in full compliance with all
applicable statutes, regulations and other laws (including, without limitation,
all applicable zoning, building, fire and health codes and ordinances and the
Americans With Disabilities Act of 1990) and all applicable deed restrictions,
if any and is not and shall not be used for any illegal purpose; (b) such
compliance is based solely upon each Mortgagor's ownership of the Premises and
not upon title to or interest in any other property. Each Mortgagor shall comply
with or cause compliance with all statutes, regulations and other laws
(including, without limitation, all applicable zoning, building, fire and health
codes and ordinances and the Americans With Disabilities Acts of 1990), all
other requirements of all governmental authorities whatsoever having
jurisdiction over or with respect to the Premises or any portion thereof or the
use or occupation thereof and with all applicable deed restrictions, if any;
provided, however, that any Mortgagor may postpone such compliance if and so
long as the validity or legality of any such requirement or restriction shall be
contested by such Mortgagor, with diligence and in good faith, by appropriate
legal proceedings and the Mortgagee is satisfied that such non-compliance will
not impair or adversely affect the value of its security.
15. WARRANTY OF TITLE; TITLE INSURANCE. Each Mortgagor represents and
warrants to the Mortgagee, and continues to represent and warrant as long as
this Mortgage is in effect, good and marketable title in fee simple absolute to
the Premises. Upon request by the Mortgagee, each Mortgagor shall furnish to the
Mortgagee at such Mortgagor's own cost and expense a title insurance policy in
the then amount of the Indebtedness, (a) naming the
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Mortgagee as mortgagee, (b) covering the lien on the Premises granted pursuant
to this Mortgage, (c) containing no exception not approved by the Mortgagee, (d)
issued by a title insurance company qualified to do business in the State of New
York and satisfactory to the Mortgagee and (e) otherwise in form and substance
satisfactory to the Mortgagee.
16. CERTAIN RIGHTS AND OBLIGATIONS.
(a) Mortgagee or its agents may take such action as Mortgagee or
its agents deem appropriate to protect the Premises or the status or priority of
the lien of this Mortgage, including, but not limited to: entry upon the
Premises to protect the Premises from deterioration or damage, or to cause the
Premises to be put in compliance with any governmental, insurance rating or
contract requirements; payment of amounts due on liens having priority over this
Mortgage; payment of any tax or charge for purposes of assuring the priority or
enforceability of this Mortgage; obtaining insurance on the Premises; or
commencement or defense of any legal action or proceeding to asset or protect
the validity or priority of the lien of this Mortgage. On demand, Mortgagor
shall reimburse Mortgagee or its agents for all expenses in taking any such
action, with interest, and the amount thereof shall be secured by this Mortgage
and shall, to the extent permitted by law, be in addition top the maximum amount
of the indebtedness evidenced by the Note.
(b) Mortgagor authorizes Mortgagee, without notice, demand or any
reservation of rights and without affecting this Mortgage, from time to time:
(i) to accept from any person or entity and hold additional collateral for the
payment of the Indebtedness or any part thereof, and to exchange, enforce or
refrain from enforcing, or release such collateral or any part thereof; (ii) to
accept and hold any indorsement or guaranty of payment of the Indebtedness or
any part thereof, and to release or substitute any such obligation of any such
indorser or guarantor or any person or entity who has given any collateral as
security for the payment of the Indebtedness or any part thereof, or any other
person or entity in any way obligated to pay the Indebtedness or any part
thereof, and to enforce or refrain from enforcing, or compromise or modify, the
terms of any obligation of any such indorser, guarantor, person or entity; (iii)
to direct the order or manner of the disposition of any and all collateral and
the enforcement of any and all indorsements and guaranties relating to the
Indebtedness or any part thereof as Mortgagee, in its sole discretion, may
determine; and (iv) upon the occurrence of an Event of Default to determine the
manner, amount and time of application of payments and credits, if any, to be
made on all or any part of any component or components of the Indebtedness
(whether principal, interest, costs and expenses, or otherwise) including,
without limitation, if the amount of the Indebtedness secured by this Mortgage
is less than the total amount of the obligations under the Note or the Guaranty,
to make any such application to such obligations, if any, in excess of the
amount of the Indebtedness secured by this Mortgage.
(c) If any default shall be made in the payment of any
Indebtedness, this Mortgage shall remain valid, binding and enforceable: (i)
without deduction by reason of any setoff, defense or counterclaim of Mortgagor,
Guarantor or Debtor; (ii) without requiring protest or notice of nonpayment or
notice of default to Mortgagor, to Guarantor, to Debtor, or to any other person;
(iii) without demand for payment or proof of such demand; (iv) without requiring
Mortgagee to resort first to Mortgagor or to any other guaranty or any
collateral which Mortgagee may hold; (v) without requiring notice of acceptance
hereof or assent hereto by
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Mortgagee; and (vi) without requiring notice that any indebtedness has been
incurred or of the reliance by Mortgagee upon this Mortgage; all of which
Mortgagor hereby waives.
(d) The enforceability of this Mortgage shall not be affected by:
(i) any failure to perfect or continue the perfection of any security interest
in or other lien on any other collateral securing payment of the Indebtedness;
(ii) the invalidity, unenforceability, or loss or change in priority of any such
security interest or other lien; (iii) any failure to protect, preserve or
insure any such collateral; (iv) any defense arising by reason of the cessation
from any cause whatsoever of liability of Debtor or any Guarantor; (v) any
compromise of any obligation of a Mortgagor, Debtor or any Guarantor; (vi) the
invalidity or unenforceability of any of the Indebtedness; or (vii) any renewal,
extension, acceleration, or other change in the time for payment of, or the
terms of the interest on the indebtedness or any part thereof; all of which
Mortgagor hereby waives.
(e) If Mortgagee shall receive from or on behalf of Mortgagor any
sum less than the full amount then due and payable, Mortgagee may, but shall not
be obligated to, accept the same and, if it elects to accept any such payment,
it may without waiving any event of default: (i) apply such payment on account
of the Indebtedness or any amount payable hereunder, or (ii) hold same or any
part thereof, without liability for interest, in a special account and from time
to time apply same or any part thereof as specified in subsection (i) of this
subsection.
17. LIEN LAW COVENANT. Each Mortgagor shall receive the advances
secured by this Mortgage and shall hold the right to receive such advances as a
trust fund in accordance with the provisions of Section 13 of the New York Lien
Law.
18. APPLICATION OF AND INTEREST ON CONDEMNATION AWARD. Each Mortgagor
consents that the Mortgagee may retain and apply the proceeds of any award by a
condemning authority in satisfaction or reduction of the Indebtedness, whether
or not then due and payable, or it may pay the same, wholly or in part, to any
Mortgagor for the restoration or alteration of the Premises or for any other
purpose satisfactory to the Mortgagee, without affecting the lien of this
Mortgage for the full amount of the Indebtedness before the making of such
payment. In the event of the condemnation or taking by eminent domain of the
Premises or any portion thereof, the Mortgagee shall not be limited to the
interest paid on the award by the condemning authority, but shall be entitled to
receive out of the award interest on the Indebtedness in accordance with its
terms.
19. APPOINTMENT OF RECEIVER. In addition to any other remedy, upon the
occurrence of any Event of Default, the Mortgagee, in any action to foreclose
this Mortgage, shall be entitled, without notice or demand and without regard to
the adequacy of any security for the Indebtedness or the solvency or insolvency
of any person liable for the payment thereof, to the appointment of a receiver
of the rents, issues and profits of the Premises.
20. SALE IN ONE OR MORE PARCELS. In case of a foreclosure sale, the
Premises maybe sold in one or more parcels, any provision of any statute,
regulation or other law to the contrary notwithstanding.
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21. ESTOPPEL STATEMENT. Upon request by the Mortgagee, each Mortgagor
shall furnish to the Mortgagee within five (5) days if such request is made in
person or within ten (10) days if such request is otherwise made a written
statement duly acknowledged of the amount of the Indebtedness and whether any
offsets or defenses exist against the Indebtedness.
22. RIGHT TO INSPECT AND EXAMINE. Upon request by the Mortgagee or its
agents, each Mortgagor shall immediately permit the Mortgagee and each officer,
employee, accountant, attorney and other agent of the Mortgagee to enter and
inspect the Premises and to examine, audit, copy and extract each record of any
Mortgagor relating to the Premises or any portion thereof.
23. FINANCIAL STATEMENTS. Each Mortgagor shall provide, shall cause
each Guarantor and Debtor to provide, and shall use its best efforts to cause
each lessee of the Premises or any material portion thereof (a "Material
Lessee") to provide, to the Mortgagee, in form satisfactory to the Mortgagee,
promptly upon request by the Mortgagee, all information relating to such
Mortgagor, Guarantor, Debtor or Material Lessee or to such Mortgagor's,
Guarantor's, Debtor's or Material Lessee's business, operations, assets, affairs
or condition (financial or otherwise) or to the Premises or any portion thereof
that is so requested. Without limiting the generality of the preceding sentence,
each Mortgagor shall so provide (a) if such Mortgagor is an individual, at least
once during each period of twelve (12) consecutive months, a personal financial
statement of such Mortgagor for a year ending not more than sixty (60) days
earlier, in reasonable detail and certified by such Mortgagor to be complete and
accurate and (b) if such Mortgagor is not an individual, (i) promptly copies of
all annual reports, proxy statements and similar information distributed to
shareholders, partners or other owners and of all filings with the Securities
and Exchange Commission and the Pension Benefit Guaranty Corporation, (ii)
within sixty (60) days after the end of each of its first three fiscal quarters,
consolidating and consolidated statements of income and cash flows for the
quarter, for the corresponding quarter in the previous fiscal year and for the
period from the end of the previous fiscal year, with a consolidating and
consolidated balance sheet as of the quarter end, (ii) within ninety (90) days
after the end of each fiscal year, consolidating and consolidated statements of
such Mortgagor's income and cash flows and its consolidating and consolidated
balance sheet as of the end of such fiscal year, setting forth comparative
figures for the preceding fiscal year and to be |_| audited |_| reviewed |X|
compiled (check appropriate box. If no box is selected, all financial statements
shall be audited.) by an independent certified public accountant acceptable to
the Mortgagee, all such statements to be certified by such Mortgagor's chief
financial officer or partner to be correct and in accordance with such
Mortgagor's records and to present fairly the results of such Mortgagor's
operations and cash flows and its financial position at year end in conformity
with generally accepted accounting principles, and (iii) with each statement of
income, a certificate executed by such Mortgagor's chief executive and chief
financial officers or managing partners (A) stating that the signers of the
certificate have reviewed this Mortgage and the operations and condition
(financial or other) of such Mortgagor and any subsidiaries during the relevant
period and (B) stating that no Event of Default occurred during the period, or
if an Event of Default did occur, describing its nature, the date(s) of its
occurrence or period of existence and what action such Mortgagor has taken with
respect thereto.
24. AUTHORIZATION AND POWER OF ATTORNEY. The Mortgagee is irrevocably
and unconditionally authorized to take, and each Mortgagor irrevocably and
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unconditionally appoints the Mortgagee as the attorney-in-fact of such
Mortgagor, with full power of substitution and of revocation, to take, in the
name of such Mortgagor or otherwise at the sole option of the Mortgagee, each
action relating to the Premises of any portion thereof that, subject to this
Mortgage, such Mortgagor could take in the same manner, to the same extent and
with the same effect as if such Mortgagor were to take such action; provided,
however, that the Mortgagee shall not have the right, pursuant to such
authorization or as such attorney-in-fact, to sell or otherwise dispose of the
Premises or any portion thereof. Such power of attorney is coupled with an
interest in favor of the Mortgagee, and shall not be terminated or otherwise
affected by the death, disability or incompetence of any Mortgagor.
25. FURTHER ASSURANCES. Promptly upon request by the Mortgagee, each
Mortgagor shall execute and deliver each writing, and take each other action,
that the Mortgagee shall deem necessary or desirable at the sole option of the
Mortgagee (a) to perfect or accomplish any lien or security interest granted, or
assignment made, pursuant to this Mortgage; (b) otherwise to accomplish any
purpose of this Mortgage; (c) in connection with any transaction contemplated by
this Mortgage; or (d) in connection with the Premises or any portion thereof.
26. ENVIRONMENTAL REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION. Each
Mortgagor represents and warrants, and continues to represent and warrant as
long as this Mortgage is in effect, to the Mortgagee that (a) each Mortgagor and
the Premises are in compliance with each statute, regulation or other law and
each judgment, order or award of any court, agency or other governmental
authority or of any arbitrator (individually an "Environmental Requirement")
relating to the protection of any water, water vapor, land surface or
subsurface, air, fish, wildlife, biota or other natural resources or governing
the use, storage, treatment, generation, transportation, processing, handling,
production or disposal of any chemical, natural or synthetic substance, waste,
pollutant or contaminant (collectively "Regulated Materials"), (b) no Mortgagor
has been charged with, or has received any notice that such Mortgagor is under
investigation for, the failure to comply with any Environmental Requirement, nor
has any Mortgagor received any notice that such Mortgagor has or may have any
liability or responsibility under any Environmental Requirement with respect to
the Premises or otherwise, (c) the Premises have never been used for (i) the
storage, treatment, generation, transportation, processing, handling, production
or disposal of Regulated Materials, except as permitted by law, (ii) a landfill
or other waste disposal site or (iii) military purposes, (d) no underground
storage tanks are located on the Premises, (e) the environmental media at the
Premises do not contain Regulated Materials beyond any legally permitted level,
(f) there has never been any release, threatened release, migration or
uncontrolled presence of any Regulated Materials on, at or from the Premises or,
to the knowledge of such Mortgagor, within the immediate vicinity of the
Premises and (g) no Mortgagor has received any notice of any such release,
threatened release, migration or uncontrolled presence. No Mortgagor shall cause
or permit the Premises to be used in any way that would result in any of the
representations and warranties contained in the preceding sentence to be false
or misleading at any future time. To the extent any such representation or
warranty at any time is or becomes false or misleading, each Mortgagor shall
promptly notify the Mortgagee thereof. Each Mortgagor shall, at such Mortgagor's
own cost and expense, conduct and complete all investigations, studies, sampling
and testing with respect to the Premises requested by the Mortgagee. Each
Mortgagor shall promptly furnish to the Mortgagee copies of all such
investigations, studies, samplings and tests. Each Mortgagor shall (a) conduct
and complete all such investigations, studies, samplings and
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testing, and all remedial, removal and other actions necessary with respect to
the Premises, in accordance with all applicable Environmental Requirements and
promptly furnish to the Mortgagee copies of all documents generated in
connection therewith and (b) defend, reimburse, indemnify and hold harmless the
Mortgagee, its employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses of whatever kind or nature, known or unknown, contingent or otherwise,
arising out of, or in any way related to, the violation of, or other liability
or responsibility under, any Environmental Requirements, or the release,
threatened release, migration or uncontrolled presence of any Regulated
Materials on, at or from the Premises including, without limitation, attorney
and consultant fees, investigation and laboratory fees, court costs and
litigation expenses. In the event this Mortgage is foreclosed, or the Mortgagors
tender a deed in lieu of foreclosure which the Mortgagee agrees to accept, each
Mortgagor shall be responsible to deliver the Premises to the Mortgagee free of
any and all Regulated Materials other than any that are (a) normally used in
such Mortgagor's business and (b) located and maintained thereon in compliance
with all applicable Environmental Requirements and in a condition that conforms
with all applicable Environmental Requirements. The provisions of this Section
26 shall be in addition to any and all other obligations and liabilities any
Mortgagor may have to the Mortgagee at common law or any other agreement with
Mortgagee, and shall survive the transactions contemplated in this Mortgage and
the termination of this Mortgage.
27. EVENTS OF DEFAULT.
(a) An event of default ("Event of Default") will have
occurred if: (i) any Mortgagor or Debtor fails to pay when due whether by
acceleration or otherwise the Indebtedness or any portion thereof or there
occurs any event which after notice or lapse of time will permit such
acceleration; (ii) any of any Mortgagor's debts or those of Debtor or any
Guarantor is accelerated or an event occurs which after notice or lapse of time
would permit such acceleration; (iii) any Mortgagor. Debtor or Guarantor
breaches or is in default under this Mortgage (including but not limited to any
default in the payment of any amount any Mortgagor is obligated to pay pursuant
to Sections 2, 6, 8 or 16 of this Mortgage or in the performance of any
obligation of any Mortgagor pursuant to Sections 23 or 26 of this Mortgage) or
under any other agreement with the Mortgagee or Mortgagee's affiliates
including, without limitation, Manufacturers and Traders Trust Company; (iv)
any Mortgagor, Debtor or Guarantor is dissolved, suspends his, her or its
present business, agrees to a merger or other absorption or to transfer or
otherwise dispose of substantially all of his, her or its assets, makes or
sends notice of a bulk sale, dies, becomes incompetent or insolvent (however
such insolvency is evidenced), generally fails to pay his, her or its debts as
they become due, fails to pay, withhold or collect any tax as required by law,
has served or filed against his, her or its assets any lien or has entered
against him, her or it or his, her or its assets any judgment, order or award;
(v) a receiver or similar trustee is appointed for any Mortgagor, Debtor or
Guarantor or his, her or its assets (with or without his, her or its consent),
or any Mortgagor, Debtor or Guarantor makes an assignment for the benefit of
creditors or commences or has commenced against him, her or it a proceeding
pursuant to any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution or liquidation laws calling a meeting of
creditors or offering a composition or extension to creditors; (vi) any
representation or warranty made in this Mortgage, any related documents, any
agreement between Mortgagor, Debtor, or any Guarantor and Mortgagee or any of
Mortgagee's affiliates, any Material Lease or any financial statements provided
by
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Mortgagor, Debtor or any Guarantor proves to have been misleading in any
material respect when made; Mortgagor, Debtor or any Guarantor omits to state a
material fact necessary to make the representation, warranty or financial
statement not misleading considering the circumstances in which they were made;
or, if upon the date of execution of this Mortgage, there shall have been any
material adverse change in any of the facts disclosed in any financial
statement, representation or warranty which change was not disclosed in writing
to the Mortgagee at or before the time of execution hereof; (vii) any pension
plan of any Mortgagor, Debtor or Guarantor fails to comply with applicable law
or has vested unfunded liabilities that, in the opinion of the Mortgagee, might
have a material adverse effect on any Mortgagor's, Debtor's or Guarantor's
ability to repay his, her or its debts; (viii) there occurs any change in the
management of any Mortgagor, Debtor or Guarantor which is, in the opinion of the
Mortgagee, materially adverse to its interest and which remains uncorrected for
thirty (30) days after the Mortgagee notifies any Mortgagor of its opinion; (ix)
any Mortgagor; Debtor or Guarantor fails to pay when due whether by acceleration
or otherwise any amount due to any person other than the Mortgagee; or (x) any
Mortgagor or Debtor is convicted of a felony. Automatically upon the occurrence
or existence of any Event of Default, the annual interest rate applicable to the
Indebtedness shall be increased by the greater of (a) the amount needed to equal
any default rate specified in the Note or other instrument evidencing the
Indebtedness or (b) three percent (3%).
(b) Mortgagee, at its sole election, may declare all or any part
of any Indebtedness not payable on demand to be immediately due and payable
without demand or notice of any kind upon the happening of any Event of Default,
or if Mortgagee in good faith believes that the prospect of payment of all or
any part of the Indebtedness or performance of Mortgagor's or Debtor's
obligations under this Mortgage or any other agreement now or hereafter in
effect between Mortgagor or Debtor and Mortgagee is impaired. All or any part of
any Indebtedness not payable on demand shall be immediately due and payable,
without demand or notice of any kind, upon the commencement of any Mortgagor's
or Debtor's bankruptcy if voluntary and upon the lapse of thirty (30) days
without dismissal if involuntary. The provisions of this paragraph are not
intended in any way to affect any rights of Mortgagee with respect to any
Indebtedness which may now or hereafter be payable on demand.
(c) Upon the happening of an Event of Default, whether or not
foreclosure proceedings have been instituted, Mortgagor shall, upon demand,
surrender possession of the Premises to Mortgagee. If Mortgagor remains in
possession of the Premises after the happening of an Event of Default, the
possession shall be as tenant of Mortgagee and Mortgagor agrees to pay in
advance upon demand to Mortgagee a reasonable monthly rental for the Premises or
portion so occupied. Mortgagee may dispossess, by summary proceedings or
otherwise, any tenant or Mortgagor defaulting in the payment of rent. If a
receiver is appointed, this covenant shall inure to the benefit of such
receiver. Notwithstanding any provision of law to the contrary, Mortgagee may,
at its option, foreclose this Mortgage subject to the rights of tenants of the
Premises which are subordinate to the lien of this Mortgage.
(d) If the indebtedness, as evidenced by a single note or other
written instrument shall exceed the amount secured by this Mortgage, or as
evidenced by a combination of same that singularly or in part collectively may
be less than said secured amount but combined exceed said secured amount,
Mortgagee, in any foreclosure hereof, shall have the right to sue and collect
the excess in the same action as commenced for the foreclosure hereof, and
recover a
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money judgment for said excess with all the rights attendant thereto,
including, without limitation, the issuance of an execution to the Sheriff for
collection thereof, and Mortgagor hereby waives any defense based upon a claim
that in doing so, Mortgagee is splitting its cause of action if it seeks to
foreclose this Mortgage for part of the Indebtedness and recover at law for
another part.
(e) Upon the happening of an Event of Default, Mortgagee or its
agents may pursue, take or refrain from pursuing any remedy for collection of
the Indebtedness, including foreclosure of this Mortgage.
(f) Mortgagee may, either with or without entry or taking
possession of the Premises as provided in this Mortgage or otherwise, personally
or by its agents or attorneys, and without prejudice to the right to bring an
action of foreclosure, sell the Premises or any part thereof pursuant to any
procedures provided by applicable law including, without limitation, the
procedures set forth in Article 14 of the New York Real Property Actions and
Proceedings Law (and any amendments or substitute statutes in regard thereto),
and all estate, right, title interest, claim and demand therein, and right of
redemption thereof, at one or more sales as an entity or in parcels, and at such
time and place upon such terms and after such notice thereof as may be required
or permitted by applicable law. Any reference in this Mortgage to an action or
right of the Mortgagee in regard to or in connection with a "foreclosure
proceeding" shall be deemed to include a sale and/or proceeding under this
subsection.
28. EXPENSES. Each Mortgagor shall pay to the Mortgagee or its agents
on demand all costs and expenses (including but not limited to attorneys' fees
and disbursements whether for internal or outside counsel) incurred by the
Mortgagee or its agents in connection with the Indebtedness including without
limitation costs of collection, of preserving or exercising any right or remedy
of the Mortgagee or its agents under this Mortgage or any related security
agreement or guaranty, of workout or bankruptcy proceedings by or against any
Mortgagor, of defending against any claim asserted as a direct or indirect
result of the Indebtedness or of performing any obligation of any Mortgagor
pursuant to this Mortgage or otherwise (including but not limited to payment of
any amount any Mortgagor is obligated to pay pursuant to Sections 2, 6, 8 or 16
of thus Mortgage and performance of any obligation of any Mortgagor pursuant to
Section 23 or 26 of this Mortgage). Costs and expenses shall accrue interest at
the highest legal rate from the date of demand until payment is actually
received by the Mortgagee. Each such cost and expense and any interest thereon
shall constitute part of the Indebtedness and be secured by this Mortgage and
may be added to the judgment in any suit brought by the Mortgagee or its agents
against any Mortgagor on this Mortgage.
29. NOTICES. Each notice to, and each demand upon, any Mortgagor by the
Mortgagee relating to this Mortgage maybe orator in writing and, if in writing,
may be served in person or by mail. Notice by electronic communication (i.e.,
e-mail) shall not be valid notice under this Mortgage or any other agreement
between Mortgagor and Mortgagor and its affiliates.
30. LITIGATION. Mortgagor shall promptly notify Mortgagee in writing of
any litigation, proceeding, or counterclaim against, or of any investigation of,
Mortgagor if: (i) the outcome of such litigation, proceeding, counterclaim, or
investigation may materially and adversely affect the finances or operations of
Mortgagor or title to, or the value of, any assets
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secured by the Mortgage or (ii) such litigation, proceeding, counterclaim, or
investigation questions the validity of the Mortgage, the Note or any document
executed in connection therewith including any guaranties or any action taken,
or to be taken, pursuant to any such documents. Mortgagor shall furnish to
Mortgagee such information regarding any such litigation, proceeding,
counterclaim, or investigation as Mortgagee shall request.
31. NOTICE OF NON-COMPLIANCE. Mortgagor shall notify Mortgagee in
writing of any failure by Mortgagor to comply with any provision of the Note,
the Mortgage or any document executed in connection therewith immediately upon
learning of such non-compliance, or if any representation, warranty or covenant
contained in such document is no longer true. Mortgagor shall also immediately
notify Mortgagee in writing if there is any material adverse change in any of
the information or financial statements supplied to Mortgagee or its agents to
induce Mortgagee to extend credit to Mortgagor or if such information or
financial statement is required under this Mortgage or any other document
executed in connection therewith.
32. COVENANTS SHALL RUN WITH THE LAND. The covenants contained in this
Mortgage shall run with the land and bind each Mortgagor, each heir, legal
representative, successor and assign of each Mortgagor and each subsequent
owner, encumbrancer, tenant and subtenant of the Premises or any portion
thereof, and shall inure to the benefit of, and be enforceable by, the Mortgagee
and each successor and assign of the Mortgagee.
33. NONWAIVER BY MORTGAGEE. All rights and remedies of the Mortgagee
under this Mortgage and its other agreements with Mortgagor are cumulative, and
no right or remedy shall be exclusive of any other right or remedy. No single,
partial or delayed exercise by the Mortgagee or its agents of any right or
remedy shall preclude full and timely exercise by the Mortgagee or its agents at
any time of any right or remedy of the Mortgagee without notice or demand, at
the Mortgagee's sole option. No course of dealing or other conduct, no oral
agreement or representation made by the Mortgagee or its agents or usage of
trade shall operate as a waiver of any right or remedy of the Mortgagee. No
waiver of any right or remedy of the Mortgagee shall be effective unless made
specifically in writing by the Mortgagee.
34. RIGHT OF SETOFF. If an Event of Default occurs, the Mortgagee and
its agents and affiliates shall also have the right to setoff against the
Indebtedness any property held in a deposit or other account or otherwise owing
by the Mortgagee or its agents or affiliates including, without limitation,
Manufacturers and Traders Trust Company and M&T Bank, National Association, in
any capacity to any Mortgagor, Debtor or Guarantor in any capacity whether or
not the Indebtedness or the obligation to pay such moneys owed by Mortgagee is
then due, and Mortgagee shall be deemed to have exercised such right of setoff
immediately at the time of such election.
35. TERM; SURVIVAL. The term of this Mortgage shall continue until the
Indebtedness has been fully paid to the Mortgagee's satisfaction. Each
Mortgagor's obligation to pay the costs and expenses hereunder shall survive the
term of this Mortgage. Each of each Mortgagor's representations, warranties,
covenants and agreements shall survive during the term of this Mortgage and
shall be presumed to have been relied upon by the Mortgagee. If after receipt of
any payment of all or any part of the indebtedness, Mortgagee is for any reason
compelled to surrender such payment to any person or entity because such payment
is
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determined to be void or voidable as a preference, impermissible set-off, or a
diversion of trust funds, or for any other reason, this Mortgage shall continue
in full force notwithstanding any contrary action which may have been taken by
Mortgagee in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to Mortgagee's rights under this Mortgage and shall
be deemed to have been conditioned upon such payment having become final and
irrevocable.
36. MISCELLANEOUS. This Mortgage is absolute and unconditional and it
along with the Note, the Guaranty and all collateral documents including without
limitation security agreements and guarantees contains the entire agreement
between the Mortgagee and each Debtor or Mortgagor with respect to the
Indebtedness, and supersedes every course of dealing, other conduct, oral
agreement and representation previously made by the Mortgagee and its agent in
their capacity as agent for Mortgagee. No change in this Mortgage shall be
effective unless made in a writing duly executed by the Mortgagee. This Mortgage
shall be governed by the laws of the State of New York, without regard to its
principles of conflict of laws. This Mortgage is a binding obligation
enforceable against each Mortgagor and his or her heirs and legal
representatives and his, her or its successors and assigns and shall inure to
the benefit of the Mortgagee and its successors and assigns. Any reference
herein to "Mortgagee" shall be deemed to include and apply to every subsequent
holder of this Mortgage and any reference herein to "Mortgagor", "Debtor" or
"Guarantor" as the case may be, shall be deemed to include and apply to every
subsequent owner of the Premises and every person liable upon the Indebtedness,
unless the language or circumstances clearly requires the contrary. Further, the
term "Debtor", "Mortgagor" and "Guarantor" shall include: (i) any successor
individual or individuals, association, partnership, limited liability company
or corporation to which all or substantially all of the business or assets of
Debtor, Mortgagor or Guarantor, as the case may be shall have been transferred;
(ii) in the case of a partnership Debtor, Mortgagor or Guarantor (as the case
may be) any new partnership which shall have been created by reason of the
admission of any new partner or partners therein,or by reason of the dissolution
of the existing partnership by voluntary agreement or the death, resignation or
other withdrawal of any partner; and (iii) in the case of a corporate or limited
liability company Debtor, Mortgagor or Guarantor (as the case may be) any other
entity into or with which Debtor, Mortgagor or Guarantor (as the case may be)
shall have been merged, consolidated, reorganized, or absorbed. Each provision
of this Agreement shall be interpreted as consistent with existing law and shall
be deemed amended to the extent necessary to comply with any conflicting law. If
a court deems any provision invalid, the remainder of this Mortgage shall remain
in effect. Section headings are for convenience only. It is the intent of each
Mortgagor and the Mortgagee that the provisions of this Mortgage, other than
those included in the New York statutory form of mortgage, shall be construed as
affording to the Mortgagee rights additional to, and not exclusive of, the
rights conferred under the provisions contained in such Statutory form. Without
limiting the generality of any reference hereunder to an agent of the Mortgagee,
any right or remedy granted to the Mortgagee under this Mortgage, including,
without limitation, the right to be reimbursed for expenses under Section 28,
shall inure to the benefit of and be enforceable by both the Mortgagee and its
agents.
37. CONSENT TO JURISDICTION. In any action or other legal proceeding
relating to the Note, the Guaranty or this Mortgage, each Mortgagor (i) consents
to the personal jurisdiction of any State or federal court located in the State
of New York, (ii) waives objection to the laying of venue, and (iii) waives
personal service of process and subpoenas and consents to service of
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process and subpoenas by registered mail directed to such Mortgagor at the last
address shown in the Mortgagee's records relating to this Mortgage, with such
service to be deemed completed five (5) days after mailing, or as otherwise
provided by the laws of the State of New York or the United States.
38. WAIVER OF JURY TRIAL. THE MORTGAGOR AND THE MORTGAGEE HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY EACH WAIVE ANY RIGHT TO TRIAL BY JURY
THEY MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION
WITH THIS MORTGAGE OR THE TRANSACTIONS RELATED THERETO. THE MORTGAGOR REPRESENTS
AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE MORTGAGEE HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE MORTGAGEE WILL NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. THE MORTGAGOR ACKNOWLEDGES THAT
THE MORTGAGEE HAS BEEN INDUCED TO ACCEPT THIS MORTGAGE BY, AMONG OTHER THINGS,
THE PROVISIONS OF THIS SECTION.
IN WITNESS WHEREOF, this Mortgage has been duly executed by each
Mortgagor the day and year first above written.
CLIFTON PARK ROUTE 146, LLC (L.S.)
SEE ACKNOWLEDGEMENT(S) -----------------------------------------------
ATTACHED HERETO AND MADE By: Assisted Living Equities, LLC (L.S.)
A PART HEREOF. ----------------------------------------------
By:/s/ Neil A. Rule (L.S.)
-----------------------------------------
Neil A. Rube (L.S.)
---------------------------------------
Its: Executive Committee Member
ACKNOWLEDGEMENT
STATE OF NEW YORK )
COUNTY OF ONONDAGA ) SS:
On this day of December, 1999, before me, the undersigned, a
notary public in and for said state, personally appeared NEIL A. RUBE,
personally known to me or proved to me on the basis of satisfactory evidence to
be the individual(s) whose name(s) is (are) subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
capacity(ies), and that by his/her/their signature(s) on the instrument, the
individual(s) or the person upon behalf of which the individual(s) acted,
executed the instrument.
--------------------------------
Notary Public
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RIDER A TO CONSOLIDATED MORTGAGE
RIDER A TO CONSOLIDATED MORTGAGE
Rider A to Mortgage dated December________, 1999
in the Original Principal Amount of $4,720,000.00
and Executed by: CLIFTON PARK ROUTE 146, LLC (the "Borrower" and/or
"Mortgagor") to Mortgagee
In the event of any inconsistency between this Rider A to the pre-printed
Mortgage to which this Rider A is attached and the terms of the Mortgage, this
Rider A to the Mortgage shall prevail. Otherwise, the terms of the Mortgage (to
which this Rider is attached) shall remain in full force and effect.
Capitalized terms not specifically defined in this Rider shall have the meaning
given them in the Note.
Paragraph 1 of the Mortgage shall be deleted in its entirety and replaced with
the following:
1. PAY INDEBTEDNESS. The Indebtedness shall be paid as provided in the
Note or Guaranty, as the case may be, and as provided herein. For purposes of
this Mortgage the Guaranty shall mean, collectively, certain Continuing
Guarantees given in connection with the indebtedness set forth in the Note,
dated the date hereof, executed and delivered to Mortgagee by each of Alterra
Healthcare Corporation ("Alterra"), Assisted Living Equities, LLC ("ALE"), Mark
A. Belanger, Neil A. Rube, and David A. Urcuioli (all of whom collectively,
jointly and severally shall be the "Guarantors").
Paragraph 2 of the Mortgage shall be deleted in its entirety and replaced with
the following:
2. INSURANCE. Each Mortgagor shall keep the Premises insured against
each risk to which the Premises may from time to time be subject (including, but
not limited to, fire, vandalism and other risks covered by all risk insurance;
if requested by the Mortgagee, earthquake; if the Premises or any portion
thereof are located in an area identified as an area having special flood
hazards and in which flood insurance has been made available, flood; and loss of
rents by reason of such risks) for the benefit of the Mortgagee. Such insurance
shall be provided in such amounts, for such periods, in such form, with such
special endorsements, on such terms and by such companies and against such risks
as are customary or as are reasonably requested by the Mortgagee. Without
limiting the generality of the preceding two sentences, each policy pursuant to
which such insurance is provided shall contain a mortgagee clause, in form and
substance satisfactory to the Mortgagee, (a) naming the Mortgagee as mortgagee
and (b) providing that (i) all moneys payable pursuant to such insurance shall
be payable to the Mortgagee, (ii) such insurance shall not be affected by any
act or neglect of any Mortgagor or the Mortgagee, any occupancy, operation or
use of the Premises or any portion thereof for purposes more hazardous than
permitted by the terms of such policy, any foreclosure or other proceeding or
notice of sale relating to the Premises or any portion thereof or any change in
the title to or
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<PAGE> 18
ownership of the Premises or any portion thereof and (iii) such policy and such
mortgagee clause may not be canceled or amended except upon thirty (30) days'
prior written notice to the Mortgagee. Each Mortgagor hereby assigns and shall
deliver each policy pursuant to which any such insurance is provided to the
Mortgagee. The acceptance by the Mortgagee of such policies from any Mortgagor
shall not be deemed or construed as an approval by the Mortgagee of the form,
sufficiency or amount of such insurance. The Mortgagee does not in any way
represent that such insurance, whether in scope or coverage or limits of
coverage, is adequate or sufficient to protect the business or interest of any
Mortgagor. In the event of the foreclosure of this Mortgage, or a transfer of
title to the Premises in extinguishment of the Indebtedness, all right, title
and interest of each Mortgagor in and to any such policies then in force shall
pass to the purchaser or grantee of the Premises. All the provisions of this
Section 2 and any other provisions of this Mortgage pertaining to insurance
which may be required under this Mortgage shall be construed with Section 254,
Subdivision 4 of the New York Real Property Law, but, said Section 254 to the
contrary notwithstanding, each Mortgagor consents that the Mortgagee may,
without qualification or limitation by virtue of said Section 254, retain and
apply the proceeds of any such insurance in satisfaction or reduction of the
Indebtedness, whether or not then due and payable, or it may pay the same,
wholly or in part, to any Mortgagor for the repair or replacement of the
Premises or for any other purpose satisfactory to the Mortgagee, without
affecting the lien of this Mortgage for the full amount of the Indebtedness
before the making of such payment. However, if upon the receipt of insurance
proceeds (and provided that an Event of Default [as hereafter defined] shall not
have occurred and is then continuing), Mortgagee is reasonably assured that
sufficient proceeds are available to complete the repairs or replacements for
which such proceeds are received, such proceeds shall be provided to Borrower
for such repair or replacements and if such insurance proceeds are not used, for
any reason, to repair or replace the Premises, such proceeds shall be used to
pay down the outstanding Indebtedness.
Notwithstanding anything to the contrary contained herein, the
Improvements now erected or hereafter to be erected on the Premises and all
personal property and fixtures covered by the Mortgage shall be insured, with
the Mortgagee being named as an additional insured, against loss of
rents/business interruption by reason of fire or other casualties, in such
amounts as may from time to time be reasonably requested by the Mortgagee (but
not in an amount greater than twelve (12) months projected net income from
operation at the Premises which consists of an amount which can, pay the
following annual expenses: real estate taxes, insurance, and any other fixed
expenses).
Paragraph 4 of the Mortgage shall be deleted in its entirety and replaced with
the following:
4. WASTE AND CHANGE IN USE. No Mortgagor shall commit any physical
waste on the Premises, or make any change in the use of the Premises which may
in any way increase any ordinary fire, environmental or other risk arising out
of construction or operation.
Paragraph 7 of the Mortgage shall be deleted in its entirety and replaced with
the following:
7. TAXES AND ASSESSMENTS. Unless paid from an escrow established
pursuant to Section 8 of this Mortgage, each Mortgagor shall pay, or cause to be
paid, all taxes,
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general and special assessments and other governmental impositions with respect
to the Premises before the end of any applicable grace period. Upon request by
the Mortgagee, each Mortgagor shall promptly deliver to the Mortgagee receipted
bills showing payment of all such taxes, assessments and impositions within the
applicable grace period. Paragraph 8 of the Mortgage shall be deleted in its
entirety and replaced with the following:
8. ESCROW FOR TAXES, ASSESSMENTS AND INSURANCE. If an Event of Default
shall have occurred (notwithstanding that it may have been cured), upon request
by the Mortgagee, each Mortgagor shall pay (a) monthly to the Mortgagee on or
before the first day of each and every calendar month, until the Indebtedness is
fully paid, a sum equal to one-twelfth (1/12th) of the yearly taxes, general and
special assessments, other governmental impositions and other liens and changes
with respect to the Premises to be imposed for the ensuing year, as estimated by
the Mortgagee in good faith, and annual premiums for insurance on the Premises
and (b) an initial payment such that, when such monthly payments are added
thereto, the total of such payments will be sufficient to pay such taxes,
assessments, impositions and other liens and charges and such insurance premiums
on or before the date when they become due. So long as no Event of Default
exists, the Mortgagee shall hold such payments in trust, in an interest bearing
account maintained with Manufacturers and Traders Trust Company, and shall pay,
to the extent funds are available, such taxes, assessments, impositions and
other liens and charges and such insurance premiums within a reasonable time
after they become due (with the Mortgagee being responsible for any penalties
for late payment); provided, however, that upon the occurrence or existence of
any subsequent Event of Default, the Mortgagee may apply the balance of any such
payments held to the Indebtedness. If the total of such payments made by any
Mortgagor shall exceed the amount of such payments made by the Mortgagee, such
excess shall be held or credited by the Mortgagee for the benefit of each
Mortgagor. If the total of such payments made by any Mortgagor shall be less
than the amount of such taxes, assessments, impositions and other liens and
charges and such insurance premiums, then each Mortgagor shall pay to the
Mortgagee any amount necessary to make up the deficiency on or before the date
when any such amount shall be due.
Paragraph 9 of the Mortgage shall be deleted in its entirety and replaced with
the following:
9. LEASES. Pursuant to the provisions of Section 291-f of the New York
Real Property Law, no Mortgagor shall (a) amend, cancel, abridge, terminate, or
otherwise modify any lease of the Premises or of any portion thereof or (b)
accept any prepayment of installments of rent to become due thereunder for more
than one (1) month in advance, without the prior written consent of the
Mortgagee. Other than with respect to leases for residential purposes entered
into in the ordinary course of business (for which Mortgagee's consent would not
be required), Mortgagor shall not make any new lease in place of or any lease
renewal or extension of any lease of the Premises or any portion thereof (other
than those such Mortgagor as landlord may be required to grant by the terms of
an existing lease) without the prior written consent of the Mortgagee. Upon
request by the Mortgagee, each Mortgagor shall promptly furnish to the Mortgagee
a written statement containing the names and mailing addresses of all lessees of
the Premises or of any portion thereof, the terms of their respective leases,
the space occupied and
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<PAGE> 20
the rentals payable thereunder and copies of their respective leases and shall
cooperate in effecting delivery of notice of this covenant to each affected
lessee.
Paragraph 10 of the Mortgage shall be deleted in its entirety and replaced with
the following:
10. ASSIGNMENT OF LEASES AND RENTS. Each Mortgagor hereby assigns to
the Mortgagee all existing and future leases of the Premises or any portion
thereof (including, but not limited to, any amendments, renewals, extensions or
modifications thereof) and the rents, issues and profits of the Premises
including without limitation accounts receivable for use of the Premises for
hotel or lodging services ("Accounts"), as further security for the payment of
the Indebtedness, and each Mortgagor grants to the Mortgagee the right to enter
upon and to take possession of the Premises for the purpose of collecting the
same and to let the Premises or any portion thereof, and, after payment of each
cost and expense (including, but not limited to, each fee and disbursement of
counsel to the Mortgagee) incurred by the Mortgagee in such entry and
collection, to apply the remainder of the same to the Indebtedness, without
affecting its right to maintain any action theretofore instituted, or to bring
any action thereafter, to enforce the payment of the Indebtedness. In the event
the Mortgagee exercises such rights, it shall not thereby be deemed a mortgagee
in possession, and it shall not in any way be made liable for any act or
omission, other than gross negligence or willful misconduct. This assignment and
grant shall continue in effect until the Indebtedness is fully paid. No
Mortgagor shall assign such leases, rents, issues or profits or any interest
therein or grant any similar rights to any other person without the Mortgagee's
prior written consent. The Mortgagee hereby waives the right to enter upon and
to take possession of the Premises for the purpose of collecting said rents,
issues and profits, and each Mortgagor shall be entitled to collect the same,
until the occurrence or existence of any Event of Default, but such right of
each Mortgagor may be revoked by the Mortgagee upon the occurrence or existence
of any Event of Default. Upon the occurrence or existence of any Event of
Default, each Mortgagor shall pay monthly in advance to the Mortgagee, or to any
receiver appointed to collect said rents, issues and profits, a fair and
reasonable monthly rental value for the use and occupation of the Premises, and
upon default in any such payment shall vacate and surrender the possession of
the Premises to the Mortgagee or to such receiver, and in default thereof may be
evicted by summary proceedings pursuant to Article 7 of the New York Real
Property Actions and Proceedings Law.
Paragraph 11 of the Mortgage shall be deleted in its entirety and replaced with
the following:
11. SECURITY AGREEMENT. This Mortgage constitutes a security agreement
under the New York Uniform Commercial Code and each Mortgagor hereby grants to
the Mortgagee a security interest in all fixtures and equipment and other
personal property now or hereafter constituting any portion of the Premises and
in the proceeds, rents, issues, profits and Accounts arising therefrom, to
secure the Indebtedness. The Mortgagee shall have the right to file in any
public office, without the signature of any Mortgagor, each financing statement
relating to such fixtures and equipment and other personal property and
proceeds, rents, issues, profits and Accounts arising therefrom that the
Mortgagee shall deem necessary or desirable at the sole option of the Mortgagee
if the Mortgagor fails to sign such statement within three (3) business days of
Mortgagee's request. With respect to such fixtures and equipment and other
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<PAGE> 21
personal property and proceeds, the Mortgagee shall have each applicable right
and remedy of a secured party under the New York Uniform Commercial Code and
each applicable right and remedy pursuant to any other statute, regulation or
other law or pursuant to this Mortgage.
Paragraph 12 of the Mortgage shall be deleted in its entirety and replaced with
the following:
12. NO TRANSFER. No Mortgagor shall, without the Mortgagee's prior
written consent, sell, convey or transfer the Premises or any portion thereof or
any interest therein or contract to do so. If any Mortgagor or Guarantor or any
general partner of any Mortgagor or any Guarantor is a non-public corporation,
any direct or indirect change in the beneficial ownership or number of issued
and outstanding shares of any class of stock of such Mortgagor, such Guarantor
or such general partner, whether by operation of law or otherwise, after which
the percentage of such shares beneficially owned by any person or group of
persons having beneficial ownership of any such shares on the date of this
Mortgage is at least ten percent (10%) more or less than is the case on the date
of this Mortgage shall be deemed a sale, conveyance or transfer of the Premises
within the meaning of this Section 12. If any Mortgagor or any Guarantor is a
partnership, any change in the partnership interests of the general partners of
such Mortgagor or such Guarantor or in the composition of the general partners
of such Mortgagor or such Guarantor, whether by operation of law or otherwise,
shall be deemed a sale, conveyance or transfer of the Premises within the
meaning of this Section 12.
The preceding paragraph shall not apply to transfers amongst members of
the Mortgagor or ALE, provided that, following such transfers, in the case of
Mortgagor, either ALE or Alterra shall hold the majority and controlling
interest in Mortgagor, and in the case of ALE, the majority and controlling
interest shall be held by one or more of any of its present members or any
present partner or member of any such members.
Paragraph 14 of the Mortgage shall be deleted in its entirety and replaced with
the following:
14. COMPLIANCE WITH LAWS. Each Mortgagor represents and warrants to the
Mortgagee, and continues to represent and warrant as long as this Mortgage is in
effect, as follows: (a) the buildings, structures and other improvements now
constituting any portion of the Premises are, in all material respects, in full
compliance with all applicable statutes, regulations and other laws (including,
without limitation, all applicable zoning, building, fire and health codes and
ordinances and the Americans With Disabilities Act of 1990) and all applicable
deed restrictions, if any. Each Mortgagor shall, in all material respects,
comply with or cause compliance with all statutes, regulations and other laws
(including, without limitation, all applicable zoning, building, fire and health
codes and ordinances and the Americans With Disabilities Acts of 1990), all
other requirements of all governmental authorities whatsoever having
jurisdiction over or with respect to the Premises or any portion thereof or the
use or occupation thereof and with all applicable deed restrictions, if any;
provided, however, that any Mortgagor may postpone such compliance if and so
long as the validity or legality of any such requirement or restriction shall be
contested by such Mortgagor, with diligence and in good faith, by appropriate
legal proceedings and the Mortgagee is satisfied that such non-compliance will
not impair or adversely affect the value of its security.
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Paragraph 16 of the Mortgage, subsections (a), (b), (c) and (e) shall be deleted
in their entirety and replaced with the following:
16. CERTAIN RIGHTS AND OBLIGATIONS.
(a) Upon the existence of an Event of Default, Mortgagee or its
agents may take such action a Mortgagee or its agents deem appropriate
to protect the Premises or the status or priority of the lien of this
Mortgage, including, but not limited to: entry upon the Premises to
protect the Premises from deterioration or damage, or cause the
Premises to be put in compliance with any governmental, insurance
rating or contract requirements; payment of amounts due on liens having
priority over this Mortgage; payment of any tax or charge for purposes
of assuring the priority or enforceability of this Mortgage; obtaining
insurance on the Premises; or commencement or defense of any legal
action or proceeding to assess or protect the validity or priority of
the lien of this Mortgage. On demand, Mortgagor shall reimburse
Mortgagee or its agents for all expenses in taking any such action,
with interest, and the amount thereof shall be secured by this Mortgage
and shall, to the extent permitted by law, be in addition to the
maximum amount of the indebtedness evidenced by the Note.
(b) Mortgagor authorizes Mortgagee, without notice, demand or any
reservation of rights and without affecting this Mortgage, from time to
time: (i) (Intentionally omitted); (ii) to accept from any person or
entity and hold additional collateral for the payment of the
Indebtedness or any part thereof, and to exchange, enforce or refrain
from enforcing, or release such collateral or any part thereof; (iii)
to accept and hold any indorsement or guaranty of payment of the
Indebtedness or any part thereof, and to release or substitute any such
obligation of any such indorser or guarantor, or any other person or
entity who has given any collateral as security for the payment of the
Indebtedness or any part thereof, or any other person or entity in any
way obligated to pay the Indebtedness or any part thereof, and to
enforce or refrain from enforcing or compromise or modify, the terms of
any obligation of any such indorser, guarantor, person or entity; (iv)
upon an Event of Default, to direct the order or manner of the
disposition of any and all collateral and the enforcement of any and
all indorsements and guaranties relating to the Indebtedness or any
part thereof as Mortgagee, in its sole discretion, may determine; and
(v) upon an Event of Default to determine the manner, amount and time
of application of payments and credits, if any, to be made on all or
any part of any component or components of the Indebtedness (whether
principal, interest, costs and expenses, or otherwise).
(c) Upon the existence of an Event of Default with respect to the
payment of any Indebtedness, this Mortgage shall remain valid, binding
and enforceable: (i) without deduction by reason of any setoff, defense
or counterclaim of Mortgagor or Guarantor; (ii) without requiring
protest or notice of nonpayment or notice of default to Mortgagor, to
Guarantor or to any other person; (iii) without demand for payment or
proof of such demand; (iv) without requiring Mortgagee to resort first
to Mortgagor or to any other
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<PAGE> 23
guaranty or any collateral which Mortgagee may hold; (v) without
requiring notice of acceptance hereof or assent hereto by Mortgagee;
and (vi) without requiring notice that any indebtedness has been
incurred or of the reliance by Mortgagee upon this Mortgage; all of
which Mortgagor hereby waives.
(d) If Mortgagee shall receive from or on behalf of Mortgagor any
sum less than the full amount due and payable, Mortgagee may, but shall
not be obligated to, accept the same and, if it elects to accept any
such payment, it may without waiving any Event of Default: (i) apply
such payment on account of the Indebtedness or any amount payable
hereunder, or (ii) hold same or any part thereof, without liability for
interest, in a special account and from time to time apply same or any
part thereof as specified in Subsection (i) of this subsection.
Paragraph 18 of the Mortgage shall be deleted in its entirety and replaced with
the following:
18. APPLICATION OF AND INTEREST ON CONDEMNATION AWARD. Each Mortgagor
consents that the Mortgagee may retain and apply the proceeds of any award by a
condemning authority in satisfaction or reduction of the Indebtedness, whether
or not then due and payable, or it may pay the same, wholly or in part, to any
Mortgagor for the restoration or alteration of the Premises or for any other
purpose satisfactory to the Mortgagee, without affecting the lien of this
Mortgage for the full amount of the Indebtedness before the making of such
payment provided that if there is a partial, not substantial taking, the
proceeds of any award from a condemning authority shall be given to or retained
by the Mortgagor unless the security of Mortgagee is substantially impaired, in
which event it shall be partially or totally paid to Mortgagee in satisfaction
or reduction of the Indebtedness. In the event of the condemnation or taking by
eminent domain of the Premises or any portion thereof, the Mortgagee shall not
be limited to the interest paid on the award by the condemning authority, but
shall be entitled to receive out of the award interest on the Indebtedness in
accordance with its terms.
Paragraph 19 of the Mortgage shall be deleted in its entirety and replaced with
the following:
19. APPOINTMENT OF RECEIVER. In addition to any other remedy, upon the
occurrence of any Event of Default, the Mortgagee, in any action to foreclose
this Mortgage, shall be entitled, without notice or demand and without regard to
the adequacy of any security for the Indebtedness or the solvency or insolvency
of any person liable for the payment thereof, to the appointment of a receiver
of the rents, issues and profits of the Premises. Appointment of a receiver may
be subject to any necessary governmental authorizations or approvals.
Paragraph 22 of the Mortgage shall be deleted in its entirety and replaced with
the following:
22. RIGHT TO INSPECT AND EXAMINE. Upon reasonable request by the
Mortgagee, each Mortgagor shall as soon as reasonable permit the Mortgagee and
each officer, employee, accountant, attorney and other agent of the Mortgagee to
enter and inspect the Premises and to examine, audit, copy and extract each
record of any Mortgagor relating to the Premises or any portion thereof.
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<PAGE> 24
Paragraph 23 of the Mortgage shall be deleted in its entirety and replaced with
the following:
23. FINANCIAL INFORMATION. Mortgagor will advise Mortgagee in writing
if it operates on other than a calendar year basis. Mortgagor will at all times
keep proper books of record and account in which full, true and correct entries
shall be made in accordance with sound accounting principles and will deliver to
Mortgagee, within one hundred-fifty (150) days after the end of its fiscal year,
a copy of the internally prepared or, if available, compiled financial
statements of Mortgagor relating to such fiscal year, such statements to include
(i) the balance sheet of Mortgagor, at the end of such fiscal year and (ii) the
related income statement and statement of changes in the financial position of
Mortgagor, for such fiscal year. Mortgagor will also provide Mortgagee with
copies of quarterly internally prepared financial statements and if requested by
Mortgagee, a covenant compliance certificate within thirty (30) days of the
conclusion of the last day of each quarter. Mortgagor will also provide
Mortgagee during the period that the occupancy rate for the Project (based upon
its number of units) has not reached seventy-five percent (75%) with such
monthly lease-up information as Mortgagee shall reasonably request, and also,
from time to time, such other financial information with respect to Mortgagor as
Mortgagee may reasonably request.
Mortgagor will cause ALE to keep proper books of record and account in
which full, true and correct entries shall be made in accordance with sound
accounting principles and will cause ALE to deliver to Mortgagee within one
hundred fifty (150) days after the end of its fiscal year, a copy of the annual
compiled or, if available, reviewed financial statements of ALE relating to such
fiscal year, such statements to include (a) the balance sheet of ALE, at the end
of such fiscal year and (b) the related income statement and statement of
changes in the financial position of ALE, for such fiscal year, prepared by such
certified public accounts as may be reasonably satisfactory to Mortgagee.
Mortgagor will cause Alterra to deliver to Mortgagee, within one
hundred twenty (120) days after the end of its fiscal year, a copy of the annual
audited financial statements of Alterra relating to such fiscal year, such
statements to include (i) the balance sheet of Alterra at the end of such fiscal
year and (ii) the related income statement and statement of changes in the
financial position of Alterra, for such fiscal year, prepared by Alterra's
certified public accountants. Mortgagor will also cause Alterra to provide
Mortgagee with copies of quarterly internally prepared financial statements and
covenant compliance certificates in form satisfactory to Mortgagee within sixty
(60) days of the conclusion of the last day of each of Alterra's financial
quarters.
Paragraph 24 of the Mortgage shall be deleted in its entirety and replaced with
the following:
24. AUTHORIZATION AND POWER OF ATTORNEY. Upon the existence of an Event
of Default, the Mortgagee is irrevocably and unconditionally authorized to take,
and each Mortgagor irrevocably and unconditionally appoints the Mortgagee as the
attorney-in-fact of such Mortgagor, with full power of substitution and of
revocation, to take, in the name of such Mortgagor or otherwise at the sole
option of the Mortgagee, each action relating to the Premises
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or any portion thereof that, subject to this Mortgage, such Mortgagor could take
in the same manner, to the same extent and with the same effect as if such
Mortgagor were to take such action; provided, however, that the Mortgagee shall
not have the right, pursuant to such authorization or as such attorney-in-fact,
to sell or otherwise dispose of the Premises or any portion thereof. Such power
of attorney is coupled with an interest in favor of the Mortgagee, and shall not
be terminated or otherwise affected by the death, disability or incompetence of
any Mortgagor.
Paragraph 27, Subsections (a) and (b) of the Mortgage shall be deleted in their
entirety and replaced with the following:
27. EVENTS OF DEFAULT.
(a) An event of default ("Event of Default") will have occurred
if: (i) any Mortgagor fails to pay within five (5) days of the date
when due whether, by acceleration or otherwise, the Indebtedness or any
portion thereof; (ii) intentionally omitted; (iii) any Mortgagor, or
Guarantor, under its guaranty of this Mortgage, breaches or is in
default under the terms of the Note or this Mortgage (including, but
not limited to, any default in the payment of any amount any Mortgagor
is obligated to pay pursuant to Sections 2, 6, 8 or 16 of this Mortgage
or in the performance of any obligation of any Mortgagor pursuant to
Sections 23 or 26 of this Mortgage) and Mortgagor does not cure such
breach or default within ten (10) days of written notice of such breach
or default; (iv) any Mortgagor or Guarantor (not an individual) is
dissolved, suspends his, her or its present business, agrees to a
merger or other absorption or to transfer or otherwise dispose of
substantially all of his, her or its assets, makes or sends notice of a
bulk sale (except in the case of Alterra, such a merger, other
absorption, transfer or other such disposition referred to herein shall
not be an Event of Default unless such act[s] would cause a violation
of Subsection 4[e] of the Consolidated Mortgage Note), or any Mortgagor
or any Guarantor dies, becomes incompetent or insolvent (however, such
insolvency is evidenced), admits in writing his, her or its inability
to pay his, her or its debts as they become due, fails to pay, withhold
or collect any tax as required by law unless such tax is being
contested in good faith. However, the death of a Guarantor shall not
constitute an Event of Default if the Mortgagee is reasonably satisfied
that the estate of such Guarantor is bound by the obligations of the
Guaranty executed by such Guarantor and that the estate has adequate
liquidity in the reasonable judgment of Mortgagee; (v) a receiver or
similar trustee is appointed for any Mortgagor or Guarantor or his, her
or its assets (with or without his, her or its consent), or any
Mortgagor or Guarantor makes an assignment for the benefit of creditors
or commences or has commenced against him, her or it a proceeding
pursuant to any bankruptcy, insolvency, reorganization arrangement,
readjustment of debt, provided, that if any such receiver is appointed,
or any such proceeding is commenced, involuntary with respect to the
Mortgagor, then such appointment or commencement shall not constitute
an Event of Default until the lapse of sixty (60) days without
dismissal; (vi) any representation or warranty made in
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<PAGE> 26
this Mortgage or related documents or other statements provided by
any Mortgagor or Guarantor proves to have been incorrect or misleading
in any material respect; (vii) any pension plan of any Mortgagor fails
to comply with applicable law or has vested unfunded liabilities that,
in the opinion of the Mortgagee, might have a material adverse effect
on any Mortgagor's ability to repay his, her or its debts; (viii) any
Mortgagor or Guarantor fails to pay when due whether by acceleration or
otherwise any amount due to any person other than the Mortgagee; (ix)
any Mortgagor is convicted of a felony, or (x) Alterra is removed as
Manager of the Project (in which Alterra was appointed pursuant to a
Property Management Services Agreement dated December, 1998) for any
reason other than in accordance with the terms of such Agreement.
Automatically upon the occurrence or existence of any Event of Default,
the annual interest rate applicable to the Indebtedness shall be
increased to the Default Rate. In the event of an occurrence described
in Subsections (iv) or (v) of this Section 27(a) with respect to a
Guarantor, Mortgagor may within sixty (60) days after such occurrence
(A) offer a replacement guarantor of similar net worth and liquidity
subject to the reasonable discretion of the Mortgagee and if such
accepted replacement guarantor executes a guaranty within such sixty
(60) day period such occurrence shall not constitute an Event of
Default or (B) satisfy the Mortgagee in Mortgagee's reasonable
discretion that the net worth and liquidity of the remaining Guarantors
in the aggregate is not materially less than the net worth and
liquidity of the Guarantors in the aggregate as of the date hereof.
In addition to the Events of Default set forth in the preceding
paragraph and subject to the limitations of the following sentence, an
Event of Default in any Other Note shall be an Event of Default herein.
However, notwithstanding anything to the contrary set forth in the
preceding sentence, an Event of Default shall not have occurred (x) due
to the acceleration of any other loan made by Mortgagee pursuant to the
Commitment in which the borrower thereto is at the time sustaining a
Debt Service Coverage Ratio of less than 1.0 to 1.0, or (y) if, at the
time of an Event of Default under any other loan made under the
Commitment, the interest in the borrower under that loan should be held
solely by Alterra, and the interest in Mortgagor at that time is not
wholly owned by Alterra.
(b) Mortgagee, at its sole election, may declare all or any part
of any Indebtedness not payable on demand to be immediately due and
payable without demand or notice of any kind upon the happening of any
Event of Default. All or any part of any Indebtedness not payable on
demand shall be immediately due and payable, without demand or notice
of any kind, upon the commencement of any Mortgagor's bankruptcy if
voluntary and upon the lapse of sixty (60) days without dismissal if
involuntary. The provisions of this paragraph are not intended in any
way to affect any rights of Mortgagee with respect to any Indebtedness
which may now or hereafter be payable on demand.
Paragraph 28 of the Mortgage shall be deleted in its entirety and replaced with
the following:
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<PAGE> 27
28. EXPENSES. Each Mortgagor shall pay to the Mortgagee or its agents
on demand all costs and expenses (including but not limited to attorneys' fees
and disbursements whether for internal or outside counsel) incurred by the
Mortgagee or its agents in connection with the collection or preservation of
rights with respect to the Indebtedness (but not normal costs of administration)
including, without limitation, costs of collection, of preserving or exercising
any right or remedy of the Mortgagee or its agents under this Mortgage or any
related security agreement or guaranty, of workout or bankruptcy proceedings by
or against any Mortgagor, of defending against any claim asserted as a direct or
indirect result of the Indebtedness or of performing any obligation of any
Mortgagor pursuant to this Mortgage or otherwise (including, but not limited to,
payment of any amount any Mortgagor is obligated to pay pursuant to Sections 2,
6, 8 or 16 of this Mortgage and performance of any obligation of any Mortgagor
pursuant to Section 23 or 26 of this Mortgage). Costs and expenses shall accrue
interest at the Default Rate from three (3) days after the date of demand until
payment is actually received by the Mortgagee. Each such cost and expense and
any interest thereon shall constitute part of the Indebtedness and be secured by
this Mortgage and may be added to the judgment in any suit brought by the
Mortgagee or its agents against any Mortgagor on this Mortgage.
Paragraph 29 of the Mortgage shall be deleted in its entirety and replaced with
the following:
29. NOTICES. Each notice to, and each demand upon, any Mortgagor by the
Mortgagee relating to this Mortgage must be in writing and, if in writing, may
be served in person or by mail which shall be deemed delivered three (3) days
after proper posting.
Paragraph 31 of the Mortgage shall be deleted in its entirety and replaced with
the following:
31. NOTICE OF NON-COMPLIANCE. Mortgagor shall notify Mortgagee in
writing or any failure by Mortgagor to comply with any provision of the Note,
the Mortgage or any document executed in connection therewith immediately upon
learning of such non-compliance, or if any representation, warranty or covenant
contained in such document is no longer true in any material respect, Mortgagor
shall also immediately notify Mortgagee in writing if there is any material
adverse change in any of the information or financial statements supplied to
Mortgagee or its agents to induce Mortgagee to extend credit to Mortgagor or if
such information or financial statement is required under this Mortgage or any
other document executed in connection therewith.
Paragraph 34 of the Mortgage shall be deleted in its entirety and replaced with
the following:
34. RIGHT OF SETOFF. If an Event of Default occurs, the Mortgagee and
its agents and affiliates shall also have the right to set off against the
Indebtedness any property held in a deposit or other account or otherwise owing
by the Mortgagee or its agents or affiliates, in any non-trust capacity to any
Mortgagor, in any capacity whether or not the Indebtedness or the obligation to
pay such moneys owed by Mortgagee is then due, and Mortgagee shall be deemed to
have exercised such right of setoff immediately at the time of such election.
The following Paragraph 39 shall be appended to and made a part of the Mortgage:
27
<PAGE> 28
39. NOTICE TO THE DEPARTMENT OF HEALTH. Notwithstanding anything in
this Mortgage to the contrary, the Mortgagee acknowledges that its right to
enter, take possession of, and foreclose on, the Premises does not confer upon
it the authority to operate an adult care facility, as defined in the Social
Services Law, on the Premises and agrees that it will give the Department of
Health ("DOH"), Corning Tower, Empire State Plaza, Albany, New York 12223,
notification by certified mail of its intent to re-enter the Premises or to
initiate dispossession or foreclosure proceedings at least sixty (60) days prior
to the date on which the Mortgagee intends to exercise its right to entry or to
initiate such proceedings.
Upon receipt of any notice from Mortgagee of its intent to exercise its
right of entry or upon the service of process and dispossession or foreclosure
proceedings, Mortgagor agrees to immediately notify DOH by certified mail of the
receipt of such notice or service of such notice and shall further notify DOH of
its anticipated response to said notice.
Each party further agrees to comply with all additional regulations of
the New York State Department of Health or any other agency having regulatory
control over either party.
A copy of all such notices shall also be sent to the departments
regional office at Corning Tower, Empire State Plaza, Albany, New York 12223.
The following paragraph 40 shall be appended to and made a part of the Mortgage:
40. REGULATORY COMPLIANCE.
(a) The Mortgagor hereby covenants and agrees to comply with all
lawful orders, directives, requirements and specifications set forth in
the New York Social Services Law and/or New York Public Health Law,
whichever applies, and in rules and regulations and published
interpretations promulgated by the New York State Department of Health
or any other state or federal law or agency relating to ownership, use
and operation of the Mortgaged Property as an adult home facility or
other use to which the Mortgaged Properties are then devoted.
(b) The Mortgagor hereby covenants and agrees that the Mortgagor
shall furnish the Mortgagee with: (i) a copy of such annual reports,
together with any schedules or other attachments thereto, and such
annual financial statements as may be required to be filed with the
Commissioner of Social Services or Health or the New York State
Department of Health or any other government official or regulatory
body pursuant to Sections 460 and 461 of the New York Social Services
Law or, where applicable, all other laws and regulations; (ii) written
notification of the institution of any proceeding, suit or
investigation by the Department of Health or Department of Health,
Commissioner of Social Services or any other administrative or
investigative body which may result in the imposition of a material
fine, a substantially lower rate certification, a substantially lower
reimbursement rate for services rendered to eligible patients (other
than due to normal operation of the adult home facility), an
appointment of a receiver or a
28
<PAGE> 29
revocation or surrender of the operating certificate of the adult home facility
or otherwise materially interfere with the operations of the adult home
facility.
(c) The Mortgagor covenants and agrees that it shall constitute an
Event of Default under this Mortgage if: (i) any representation
warranty or written statement made herein or in any report, certificate
or financial statement delivered to the Mortgagee or to the New York
Department of Health or other regulatory, investigative or
administrative body, or required to be so delivered pursuant to
Sections 460 and 461 of the New York Social Services Law shall prove to
be false or misleading, in any material respect; or (ii) the Mortgagor
or the licensed adult home shall fail to perform any covenant,
condition or agreement required to be observed or performed by the
Mortgagor or the licensed adult home operator pursuant to Paragraphs
(a) and (b) hereof; and such default continues on fifteen (15) days
following notice of such default by the Mortgagee to the Mortgagor;
unless such default or event of such default is incapable of being
performed within such fifteen (15) day period, or the Mortgagor or the
licensed adult home operator has failed to commence performance or has
failed to perform diligently during such period the period immediately
prior thereto, in which event the fifteen (15) day cure period will not
apply. Anything to the contrary contained herein notwithstanding, the
Mortgagee shall not declare a default resulting from any violation by
the licensed adult home operator of a rule, order or directive of the
New York State Department of Health or other agency having jurisdiction
over it so long as such violation is being actively contested or
negotiated by the licensed adult home operator, in good faith, before
the agency issuing such violation or a court or administrative body
having jurisdiction over such disputes and authority to overturn the
violation.
(d) If an Event of Default shall have occurred hereunder the
Mortgagee, in addition to all other remedies available to it, at its
option, may request that the appointment of a voluntary receiver
approved as a potential receiver by the New York State Department of
Health or such other state agency or administrative body that then
approves potential receivers.
CLIFTON PARK ROUTE 146, LLC
By: Assisted Living Equities, LLC
By: /S/ Neil A. Rule
-----------------------------
Neil A. Rube
Its: Executive Committee Member
29
<PAGE> 1
EXHIBIT 10.133
CONTINUING GUARANTY
(Corporation or Partnership)
GUARANTOR: ALTERRA HEALTHCARE CORPORATION
Name
450 NORTH SUNNYSLOPE ROAD, SUITE 300, BROOKFIELD, WI 53005
Address of Chief Executive Office
a [X] corporation [ ] general partnership [ ] limited
partnership [ ] organized under the laws of
----------
the State of New York
BORROWER: CLIFTON PARK ROUTE 146, LLC
Name
250 South Clinton Street, Syracuse, New York 13202
Address
BANK: Manufacturers and Traders Trust Company, One M&T Plaza, Buffalo,
New York 14240 Attention: Office of General Counsel
1. GUARANTY. (a) Guarantor guarantees to the Bank the full and immediate
payment and performance of all of Borrower's obligations to the Bank from time
to time of every kind and nature, now existing and hereafter incurred, direct
and contingent, liquidated and unliquidated, secured and unsecured, matured and
unmatured, including all accrued and unpaid interest and all Expenses (defined
below) even if such obligations were originally contracted with another lender
or jointly with other borrowers, even if not evidenced by a writing, and even if
periodically extinguished and reincurred (the "Obligations"). Guarantor will pay
or perform is obligations under this Guaranty upon demand. This is a guaranty of
payment, not collection.
(b) Guarantor acknowledges the receipt of valuable consideration for
this Guaranty and acknowledges that the Bank is relying on this Guaranty in
making a financial accommodation to Borrower, whether a commitment to lend,
extension, modification or replacement of, or forbearance with respect to, any
Obligation, cancellation of another guaranty, purchase of Borrower's assets, or
other valuable consideration.
2. CONTINUING, UNCONDITIONAL AND UNLIMITED GUARANTY. This Guaranty is
irrevocable, continuing, unconditional and general without any limitation unless
specified in the following blank: The Guarantor's obligation shall not in any
event
<PAGE> 2
exceed $4,720,000.00 plus interest, premiums and Expenses (as defined below).
2. GUARANTOR'S WAIVERS. (a) Guarantor's obligations shall not be
released, impaired or affected in any way by (i) Borrower's bankruptcy,
reorganization or insolvency under any law or that of any other party, or by any
action of a trustee in any such proceeding; (ii) failure of any other party to
perform its obligations to the Bank; or (iii) any other circumstance that might
constitute a legal or equitable defense to Guarantor's or Borrower's obligations
under this Guaranty, including without limitation: (A) any new agreements or
obligations of Borrower with or to the Bank, amendments, changes in rate of
interest, extensions of time for payments, modifications, renewals or the
existence of or waivers of default as to any existing or future agreements of
Borrower or any other party with the Bank; (B) any adjustment, compromise or
release of any Obligations of Borrower, by the Bank or any other party; the
existence or nonexistence or order of any filings, exchanges, releases,
impairment or sale of, or failure to perfect a security interest in, any
security for the Obligations, or the order in which payments and proceeds of
collateral are applied; or acceptance by the Bank of any writing intended by any
other party to create an accord and satisfaction with respect to any of the
Obligations; (C) any fictitiousness, incorrectness, invalidity or
unenforceability for any reason, of any instrument or other agreement, or act of
commission or omission by the Bank or Borrower; (D) any composition, extension,
moratoria or other statutory relief granted to Borrower; or (E) any interruption
in the business relations between the Bank and Borrower; or any dissolution or
change in form of organization, name or ownership of Borrower or Guarantor.
(b) WAIVERS OF NOTICE, ETC. The Guarantor waives acceptance, assent
and all rights of notice or demand including without limitation (i) notice of
acceptance of this Guaranty, of Borrower's default or nonpayment of any
Obligation, and of changes in Borrower's financial condition; (ii) presentment,
protest, notice of protest and demand for payment; and (iii) any other notice,
demand or condition to which Guarantor might otherwise be entitled prior to the
Bank's reliance on or enforcement of this Guaranty.
(c) WAIVER OF SUBROGATION. Notwithstanding any other provision in this
Guaranty, Guarantor irrevocably waives, without notice, any right it may have at
law or in equity (including without limitation any law subrogating Guarantor to
the rights of the Bank) to seek contribution, indemnification or any other form
of reimbursement from Borrower or any other obligor or guarantor of the
Obligations for any disbursement made under this Guaranty or otherwise.
3. TERMINATION; REINSTATEMENT. This Guaranty can be terminated (a) only
with respect to Obligations not yet incurred, and (b) only by actual receipt by
the Bank officer named above of written notice of Guarantor's intent to
terminate (or Guarantor's dissolution) plus (c) the lapse of a reasonable time
for Bank to act on such notice. This Guaranty cannot be terminated with respect
to any Obligations committed or contracted for or outstanding at the time the
Bank acts on such notice, or any prior or subsequent modifications, renewals,
extensions or replacements of or interest on such
<PAGE> 3
Obligations, or related expenses. If any payment the Bank has received prior to
termination subsequently is declared fraudulent or preferential or for any other
reason required to be surrendered, Guarantor's obligations under this Guaranty
and any related security agreements shall be reinstated and remain in effect
until the Bank has actually received payment in full of the Obligations.
3. EXPENSES. Guarantor agrees to reimburse the Bank on demand for all the
Bank's expenses, costs, damages and losses of any kind or nature, including
without limitation actual attorneys' fees and disbursements whether for internal
or external counsel incurred by the Bank in attempting to enforce this Guaranty,
collect or restructure any of the Obligations, realize on any collateral, or for
any other purpose related to the Obligations including but not limited to costs
of workout, negotiations, redocumentation or bankruptcy or other legal
proceedings or appeal (collectively, "Expenses"). Expenses will accrue interest
at the highest legal rate until payment is actually received by the Bank.
4. FINANCIAL AND OTHER INFORMATION. Guarantor shall promptly deliver to
the Bank copies of all annual reports, proxy statements and similar information
distributed to shareholders or partners and of all filings with the Securities
and Exchange Commission and the Pension Benefit Guaranty Corporation and shall
provide in form satisfactory to the Bank: (i) within sixty days after the end of
each of its first three fiscal quarters, consolidating and consolidated
statements of income and cash flows for the quarter, for the corresponding
quarter in the previous fiscal year and for the period from the end of the
previous fiscal year, with a consolidating and consolidated balance sheet as of
the quarter end; and (ii) within ninety days after the end of each fiscal year,
consolidating and consolidated statements of Guarantor's income and cash flows
and its consolidating and consolidated balance sheet as of the end of such
fiscal year, setting forth comparative figures for the preceding fiscal year and
to be: |_| AUDITED |_| REVIEWED |X| COMPILED by an independent certified public
accountant acceptable to the Bank; all such statements shall be certified by
Guarantor's chief financial officer or partner to be correct, not misleading and
in accordance with Guarantor's records and to present fairly the results of
Guarantor's operations and cash flows and if annual its financial position at
year end in conformity with generally accepted accounting principles. If no box
is checked, Guarantor shall deliver financial statements and information in the
form and at the times satisfactory to the Bank. Guarantor represents that its
assets are not subject to any liens, encumbrances or contingent liabilities
except as fully disclosed to the Bank in such statements.
5. SECURITY; RIGHT OF SETOFF. As further security for payment of the
Obligations, Expenses and any other obligations of Guarantor to the Bank,
Guarantor hereby grants to the Bank a security interest in all money, securities
and other property of Guarantor in the actual or constructive possession or
control of the Bank including without limitation all deposits and other accounts
owing at any time by the Bank in any capacity to Guarantor in any capacity
(collectively, "Property"). The Bank shall have the right to set off Guarantor's
Property against any of Guarantor's obligations to the Bank
<PAGE> 4
and shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code in addition to those under this Guaranty and other
agreements and applicable law
5. NO TRANSFER OF ASSETS. Guarantor shall not transfer, reinvest or
otherwise dispose of its assets in a manner or to an extent that would or might
impair Guarantor's ability to perform its obligations under this Guaranty.
6. NONWAIVER BY THE BANK; MISCELLANEOUS. This is the entire agreement
between Guarantor and the Bank with respect to the Guaranty. This Guaranty may
be assigned by the Bank, shall inure to the benefit of the Bank and its
successors and assigns, and shall be binding upon Guarantor and its successors
and assigns. All rights and remedies of the Bank are cumulative and no such
right or remedy shall be exclusive of any other right or remedy. This Guaranty
does not supersede any other guaranty or security granted to the Bank by
Guarantor or others (except as to Guarantor's Waiver of Subrogation rights
above). No single, partial or delayed exercise by the Bank of any right or
remedy shall preclude exercise by the Bank at any time at its sole option of the
same or any other right or remedy of the Bank without notice. No course of
dealing or other conduct, no oral agreement or representation made by the Bank
or usage of trade shall operate as a waiver of any right or remedy of the Bank.
No waiver or amendment of any right or remedy of the Bank or release by the Bank
shall be effective unless made specifically in writing by the Bank. This
Guaranty shall be governed by the laws of the State of New York, without regard
to its principles of conflict of laws. Each provision of this Guaranty shall be
interpreted as consistent with existing law and shall be deemed amended to the
extent necessary to comply with any conflicting law. If any provision is
nevertheless held invalid the other provisions shall remain in effect. Captions
are solely for convenience and are not part of the substance of this Guaranty.
7. JOINT AND SEVERAL; PRIMARY OBLIGATION. If there is more than one
Guarantor, each Guarantor jointly and severally guarantees the payment and
performance in full of all obligations under this Guaranty and agrees that the
Bank need not seek payment from any source other than the undersigned Guarantor.
This Guaranty is a primary obligation. Guarantor's obligations hereunder are
separate and independent of Borrower's, and a separate action may be brought
against Guarantor whether or not action is brought or joined against or with
Borrower or any other party.
8. AUTHORIZATION. Guarantor certifies that it is an entity in the form
described above duly organized and in good standing under the laws of the State
of its organization and duly authorized to do business in each State material to
the conduct of its business. Guarantor has determined that the execution of this
Guaranty will be in its best interests, to its direct benefit, incidental to its
powers, and in furtherance of its duly acknowledged purposes and objectives.
Execution of this Guaranty by the persons signing below has been authorized by
all necessary corporate action, including directors' and shareholder consent, as
evidenced by the attached certificates, or (as
<PAGE> 5
appropriate) is authorized by its partnership agreement or governing instrument,
a certified copy of which is attached. Guarantor's chief executive office is
located at the above address.
8. GUARANTOR'S CONSENTS TO JURISDICTION. In any action or other legal
proceeding relating to this Guaranty, Guarantor (a) consents to the personal
jurisdiction of any State or federal court located in the State of New York, (b)
waives objection to the laying of venue, (c) waives personal service of process
and subpoenas, (d) consents to service of process and subpoenas by registered or
certified mail directed to Guarantor at the last address shown in the Bank's
records relating to this Guaranty, with such service to be deemed completed five
days after mailing, (e) waives any right to assert any counterclaim or setoff or
any defense based upon a statute of limitations or upon a claim of laches, (f)
waives any right to attack a final judgment that is obtained as a direct or
indirect result of any such action and (g) consents to each such final judgment
being sued upon in any court having jurisdiction. A separate action may be
brought against Guarantor whether or not action is brought against or joined
with Borrower or any other party.
9. WAIVER OF JURY TRIAL. Guarantor and the Bank each waive any right to
trial by jury in any action with respect to this Guaranty.
GUARANTOR:
TIN # 39-1771281 ALTERRA HEALTHCARE CORPORATION
------------ ------------------------------
By: [S] Mark Ohlendorf
------------------
Mark Ohlendorf, Sr. VP
-----------------------
NOTICE: FOR PURPOSES OF THIS Typed Name and title
GUARANTY "OBLIGATIONS" IS NOT
LIMITED TO PRESENTLY EXISTING By:
INDEBTEDNESS, LIABILITIES AND
OBLIGATIONS.
Typed Name and Title
Dated: December 22, 1999
ACKNOWLEDGMENT
STATE OF WISCONSIN )
---------
: SS.
COUNTY OF WAUKESHA )
---------
On the 20th day of December in the year 1999 , before me personally came Mark
---- -------- -- ----
<PAGE> 6
Ohlendorf
- ---------
[ ] Partnership to me known and known to me to be a general partner of the
partnership described in and which executed the above
instrument, and __he duty acknowledged to me that __he
executed the above instrument for and on the behalf of said
partnership.
[X] Corporation to me known, who, being by me duly sworn, did depose and say
that __he resides in
Pewaukee, Wis.
--------------
;
that __he is the Sr. VP of ALTERRA HEALTHCARE CORPORATION,
the corporation described in and which executed the above
instrument; and that __he signed his (her) name thereto by
order of the board of directors of said corporation.
[S] J. C. Hansen
-----------------
Notary Public
FOR BANK USE ONLY
Authorization Confirmed:
SIGNATURE
<PAGE> 7
RIDER A TO CONTINUING GUARANTY
Rider A to Continuing Guaranty dated December 22, 1999
GIVEN TO BANK BY
ALTERRA HEALTHCARE CORPORATION
This Rider A to Continuing Guaranty shall be attached to and become a part of a
certain Continuing Guaranty, given to Bank by ALTERRA HEALTHCARE CORPORATION,
dated the date hereof.
In the event of any inconsistency between this Rider A to Continuing Guaranty
and the terms of the pre-printed Continuing Guaranty (to which this Rider A is
attached), this Rider A to Continuing Guaranty shall prevail. Otherwise, the
terms of the Continuing Guaranty shall remain in full force and effect.
Section 1, GUARANTY, Subsection (a) shall be deleted in its entirety and
replaced with the following:
(a) Guarantor guarantees to the Bank the full and immediate payment and
performance of all of Borrower's obligations to the Bank due in connection with
a certain Consolidated Mortgage Note (the "Note"), executed and delivered to
Bank by Borrower, in the maximum principal amount of Four Million Seven Hundred
Twenty Thousand and 00/100 Dollars ($4,720,000.00), plus interest and Expenses
(the "Obligations"). Upon ten (10) days written notice of a demand by Bank,
Guarantor will pay or perform its obligations under this Guaranty. This is a
guaranty of payment, not collection. Guarantor understands that the Bank can
bring an action under this Guaranty without being required to exhaust other
remedies or demand payment first from other parties.
Section 2, CONTINUING, UNCONDITIONAL AND UNLIMITED GUARANTY, shall be deleted in
its entirety and replaced with the following:
This Guaranty is irrevocable, continuing and unconditional. The
Guarantor's obligation shall not in any way exceed Four Million Seven
Hundred Twenty Thousand and 00/100 Dollars ($4,720,000.00), plus
interest, Expenses, and all other amounts owed pursuant to the Note or
any documentation given in connection therewith (collectively, the
"Loan Documents").
Section 3, GUARANTOR'S WAIVERS, Subsection (b), WAIVERS OF NOTICE, ETC., shall
be deleted in its entirety and replaced with the following:
(b) WAIVERS OF NOTICE, ETC. Unless notice or demand is required
hereunder
<PAGE> 8
and by any other Loan Document, the Guarantor waives acceptance, assent and all
rights of notice or demand including without limitation (i) notice of acceptance
of this Guaranty, of Borrower's default or nonpayment of any Obligation, and of
changes in Borrower's financial condition; (ii) presentment, protest, notice of
protest and demand for payment; and (iii) any other notice, demand or condition
to which Guarantor might otherwise be entitled prior to the Bank's reliance on
or enforcement of this Guaranty.
Section 3, GUARANTOR'S WAIVERS, Subsection (c), WAIVER OF SUBROGATION, shall be
deleted in its entirety and replaced with the following:
(c) WAIVER OF SUBROGATION. Notwithstanding any other provision in this
Guaranty, for so long as an Event of Default (as defined in the Loan Documents)
continues, Guarantor irrevocably waives, without notice, any right he may have
at law or in equity (including, without limitation, any law subrogating
Guarantor to the rights of the Bank) to seek contribution, indemnification or
any other form of reimbursement from any other obligor or guarantor of the
Obligations for any disbursement made under this Guaranty beginning three (3)
days after demand for payment upon Borrower.
The last sentence in Section 5, Expenses, shall be deleted in its entirety and
replaced with the following:
Expenses will accrue interest at a rate no greater than the Default
Rate as defined in the Note until payment is actually received by the
Bank.
Section 6, FINANCIAL AND OTHER INFORMATION, shall be deleted in its entirety and
replaced with the following:
FINANCIAL STATEMENt. Guarantor will advise Bank in writing if Guarantor
operates on other than a calendar-year basis. Guarantor will at all
times keep proper books of record and account in which full, true and
correct entries shall be made in accordance with generally accepted
accounting principles and will deliver to Bank, within one hundred
twenty (120) days after the end of each fiscal year of Guarantor, a
copy of the annual audited financial statements of Guarantor relating
to such fiscal year, such statements to include (a) the balance sheet
of Guarantor as at the end of such fiscal year and (b) the related
income statement and statement of changes in the financial position of
Guarantor for such fiscal year, prepared by such certified public
accountants as may be reasonably satisfactory to Bank. Guarantor will
also provide Bank with copies of internally prepared financial
statements and covenant compliance certificates in form satisfactory to
Bank within sixty (60) days of the conclusion of the last day of each
Guarantor's financial quarters.
Section 8, NO TRANSFER OF ASSETS, shall be intentionally deleted.
<PAGE> 9
Section 11, GUARANTOR'S CONSENTS TO JURISDICTION, Subsection (e) shall be
deleted in its entirety and replaced with the following:
(e) Guarantor waives any rights to assert any counterclaim or setoff or
any defense based upon a statute of limitations or upon a claim of laches,
excluding however, any rights to assert any counterclaim or setoff or any
defense with respect to (i) payment, (ii) the intentional or willful misconduct
or gross negligence of the Bank, or (iii) any counter-claim, setoff or defense
which would otherwise be permanently barred if not introduced therein.
Section 13, VOLUNTARY, shall be deleted in its entirety and replaced with the
following:
Guarantor certifies that this Guaranty is voluntary.
ALTERRA HEALTHCARE CORPORATION
By: /s/ Mark W. Ohlendorf
---------------------
<PAGE> 1
EXHIBIT 10.134
SCHEDULE OF M&T MORTGAGES
WHICH ARE SUBSTANTIALLY THE FORM OF M&T MORTGAGE
ATTACHED AS EXHIBIT 10.132 SIMILAR TO THE COMPANY'S FORM
10-K FOR THE PERIOD ENDING 12/31/99
<TABLE>
<CAPTION>
MORTGAGOR FACILITY NAME LOCATION MORTGAGE DATE OF
- --------- ------------- -------- AMOUNT MORTGAGE
-------- --------
<S> <C> <C> <C> <C>
Clifton Park Route 146, LLC Alterra Clare Bridge of Clifton Park 1 Emma Lane $4,720,000 12/22/99
Clifton Park, NY 12065-3762
Greece Treeline Drive, LLC Alterra Sterling House of Greece 3 Treeline Drive $3,575,000 12/22/99
Rochester, NY 14612-3446
Orchard Park Sterling Drive, LLC Alterra Clare Bridge of Orchard Park 101 Sterling Drive $4,750,000 12/22/99
Orchard Park, NY 14127
Saratoga Kirby Road, LLC Alterra Sterling House of Saratoga Springs 390 Church Street $3,395,000 12/22/99
Saratoga, NY 12866
</TABLE>
<PAGE> 1
EXHIBIT 11.1 COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Basic:
<S> <C> <C> <C>
Net (loss) income attributable to common shares $(27,806) $ 20,552 $ (8,263)
======== ======== ========
Weighted average common shares outstanding 22,088 21,905 18,651
======== ======== ========
Per share amount $ (1.26) $ 0.94 $ (0.44)
======== ======== ========
Diluted:
Net (loss) income $(27,806) $ 20,552 $ (8,263)
Net effect of convertible debentures based
on the if-converted method, assuming
100% conversion:
$35,000,000, 6.75%, due 2006 1,563 1,563 2,363
$50,000,000, 7.0%, due 2004 2,349 2,349 2,178
$125,000,000, 5.25%, due 2002 5,180 5,180 219
-------- -------- --------
Net (loss) income attributable to common shares $(18,714) $ 29,644 $ (3,504)
======== ======== ========
Weighted average common shares outstanding 22,088 21,905 18,651
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 1,561
$50,000,000, 7.0%, due 2004 2,469 2,469 1,515
$125,000,000, 5.25%, due 2002 5,000 5,000 143
Net effect of dilutive stock options based
on the treasury stock method, using
average market price 236 523 380
-------- -------- --------
Totals $ 31,510 $ 31,614 $ 22,250
======== ======== ========
Per share amount $ (0.59) $ 0.94 $ (0.16)
======== ======== ========
</TABLE>
62
<PAGE> 1
EXHIBIT 21.1 SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES OF ALTERRA HEALTHCARE CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
2010 Union L.P. Washington
- ------------------------------------------------------------------------------------------------------------
AHC Properties, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
AHC Purchaser Holding, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
AHC Purchaser, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
AHC Tenant, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALI Palmer Ranch East, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS Canada, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS Financing II, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS Financing, Inc. Kansas
- ------------------------------------------------------------------------------------------------------------
ALS Holdings, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS Kansas, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS Kenosha, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS Leasing, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS National SPE I, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS National, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS North America, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS West, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS Wisconsin Holdings, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Clare Bridge, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Crossings, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Indiana (PA) Partners Pennsylvania
- ------------------------------------------------------------------------------------------------------------
ALS-Jacksonville, L.P. Florida
- ------------------------------------------------------------------------------------------------------------
ALS-Northeast, LLC New York
- ------------------------------------------------------------------------------------------------------------
ALS-Olathe I, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Silverwood, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Sparks Holding, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Stonefield, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Tallahassee, L.P. Florida
- ------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
ALS-Venture I, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Venture II, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Westwood, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Wovenhearts Minnesota, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Wovenhearts, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS-Wynwood, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
ALS/Wovenhearts Brown Deer, LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Alternative Living Services - Midwest, Inc. Michigan
- ------------------------------------------------------------------------------------------------------------
Alternative Living Services - New York, Inc. Delaware
- ------------------------------------------------------------------------------------------------------------
Alternative Living Services Home Care, Inc. New York
- ------------------------------------------------------------------------------------------------------------
Assisted Living Properties, Inc. Kansas
- ------------------------------------------------------------------------------------------------------------
BCI Construction, Inc. Kansas
- ------------------------------------------------------------------------------------------------------------
BCINC, Inc. Kansas
- ------------------------------------------------------------------------------------------------------------
CCCI/Northampton Limited Partnership Pennsylvania
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Bowling Green LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Florence L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Greenwood LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Lakeland L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Lebanon L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Lynchburg L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Raritan LLC Delaware
- ------------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE> 3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Clare Bridge Cottage of Topeka L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge Cottage of Valley Station LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Adams II L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Akron L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Anderson LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Arlington L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Austin LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Bainbridge L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Beaverton L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Bingham Farms L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Carrollwood L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Cheswick L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Citrus Heights L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Cobb County L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Colorado Springs L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Corona L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Decatur L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Denver L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of East Mesa L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Everett L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Fort Wayne LLC Delaware
- ------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE> 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Clare Bridge of Ft. Myers L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Fulton County L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Gainesville LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Galloway L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Geneva LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Glendale L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Hamilton, LLC New Jersey
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Hanover LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Houston L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Irving Valley LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Jefferson Township L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Kenosha LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Kenwood LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Leawood L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Livonia L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Lower Makefield GP Pennsylvania
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Lynnwood L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Montgomery GP Pennsylvania
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of New Castle LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Oklahoma City LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Overland Park L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Palos Heights L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Parma L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Peoria L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
</TABLE>
66
<PAGE> 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Clare Bridge of Reno L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Richardson L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Roanoke L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Salem LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of San Antonio LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Silverdale L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of South Park L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Southern Pines L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Sun City West Deer Valley L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Susquehanna LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Tanque Verde L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Tequesta L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Tequesta LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Troutdale L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Tuscawilla L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Warminster LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of West Melbourne LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Westampton, LLC New Jersey
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Westchase L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Wichita L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clare Bridge of Wilmington L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Clifton Park Route 146, LLC New York
- ------------------------------------------------------------------------------------------------------------
Clinton Brookside Drive, LLC New York
- ------------------------------------------------------------------------------------------------------------
Cortland House Limited Partnership Massachusetts
- ------------------------------------------------------------------------------------------------------------
Coventry Corporation, Inc. Kansas
- ------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE> 6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Crossings International Corporation Washington
- ------------------------------------------------------------------------------------------------------------
Crossings Management, Inc. Washington
- ------------------------------------------------------------------------------------------------------------
Crystal Health Services, LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Eisenhower/State Limited Partnership Michigan
- ------------------------------------------------------------------------------------------------------------
Farmington Devonwood Drive, LLC New York
- ------------------------------------------------------------------------------------------------------------
Glastonbury Fairway Crossing, LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Glastonbury Mountain Road, LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Greece Latta Road, LLC New York
- ------------------------------------------------------------------------------------------------------------
Greece Treeline Drive, LLC New York
- ------------------------------------------------------------------------------------------------------------
Hamilton House Limited Partnership Delaware
- ------------------------------------------------------------------------------------------------------------
Hampton Development, LLC Kansas
- ------------------------------------------------------------------------------------------------------------
HCR/Alterra Development II, LLC Delaware
- ------------------------------------------------------------------------------------------------------------
HCR/Alterra Development, LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Heartland - Edgerton Group, LLC Wisconsin
- ------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE> 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Heartland Retirement Services, Inc. Wisconsin
- ------------------------------------------------------------------------------------------------------------
Ithaca Bundy Road, LLC New York
- ------------------------------------------------------------------------------------------------------------
Ithaca Trumansburg Road, LLC New York
- ------------------------------------------------------------------------------------------------------------
Marsh/Tihart Limited Partnership Michigan
- ------------------------------------------------------------------------------------------------------------
Niagara Nash Road, LLC New York
- ------------------------------------------------------------------------------------------------------------
Niagara SC Wheatfield, LLC New York
- ------------------------------------------------------------------------------------------------------------
Niskayuna Wynwood Commons Operator, Inc. New York
- ------------------------------------------------------------------------------------------------------------
North Schoenherr L.P. Michigan
- ------------------------------------------------------------------------------------------------------------
Orchard Park Sterling Drive, LLC New York
- ------------------------------------------------------------------------------------------------------------
Poughkeepsie Boardman Road, LLC New York
- ------------------------------------------------------------------------------------------------------------
Poughkeepsie Spackenkill Road, LLC New York
- ------------------------------------------------------------------------------------------------------------
Rockland Veterans Memorial Drive, LLC New York
- ------------------------------------------------------------------------------------------------------------
Saratoga Kirby Road, LLC New York
- ------------------------------------------------------------------------------------------------------------
Silverstone Development, L.P. Florida
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Austintown LLC Delaware
- ------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE> 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Sterling Cottage of Fort Collins LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Goodlettsville LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Hagerstown I L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Jeffersonville I L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Lady Lake I LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Leesburg I LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Michigan City I L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Middletown LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Muncie I L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of New Philadelphia I L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Oklahoma City LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Richland Hills LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Valparaiso I L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Vero Beach LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling Cottage of Winter Haven LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Bloomington II L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Columbia LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Florence LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Frederick LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Gloucester LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Hagerstown II L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Jeffersonville LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Kokomo L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Merrillville LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Muncie LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Portage LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Raleigh LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Raritan LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Richmond LLC Delaware
- ------------------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE> 9
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Sterling House of Tullahoma LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling House of Valley Station LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling of Chattanooga LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling of Columbus LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling of Gallatin LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Sterling of Lebanon II LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Summerfield-Clinton LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Tequesta Villas LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Twelve/Drake L.P. Michigan
- ------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE> 10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Wovencare Systems, Inc. Wisconsin
- ------------------------------------------------------------------------------------------------------------
Wovenhearts - Wisconsin Associates, LLC Wisconsin
- ------------------------------------------------------------------------------------------------------------
WovenHearts of Bristol L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Adams L,P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Appleton L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Boynton Beach Congress L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Boynton Beach West L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Brea L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Chapel Hill, LLC North Carolina
- ------------------------------------------------------------------------------------------------------------
Wynwood of Dunedin L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Emerson L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Fulton County L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
</TABLE>
72
<PAGE> 11
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARY STATE OF FORMATION
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Wynwood of Galloway L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Harden Ranch L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Palmer Ranch East L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Pin Oak II L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Rochester LLC Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Sarasota L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Tucson L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Wayne L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of West Orange L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Westlake L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
Wynwood of Whittier L.P. Delaware
- ------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE> 1
EXHIBIT 23.1
The Board of Directors
Alterra Healthcare Corporation:
We agree to incorporation by reference in the registration
statements (No. 333-32907) on Form S-8, (No. 333-37737) on Form S-3, (No.
333-38595) on Form S-8, and (No. 333-45433) on Form S-3 of Alterra Healthcare
Corporation of its report dated March 22, 2000, relating to the consolidated
balance sheets of Alterra Healthcare Corporation and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1999, which report appears in the December
31, 1999, annual report on Form 10-K of Alterra Healthcare Corporation.
KPMG LLP
Chicago, Illinois
March 29, 2000
74
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
consolidated balance sheet and consolidated statement of operations of Alterra
Healthcare Corporation, filed with its Form 10-K for the period ended December
31, 1999 and is qualified in its entirety by reference to such financial
statements and related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 18,728
<SECURITIES> 0
<RECEIVABLES> 7,150
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 109,229
<PP&E> 904,865
<DEPRECIATION> (41,702)
<TOTAL-ASSETS> 1,061,397
<CURRENT-LIABILITIES> 103,777
<BONDS> 791,672
0
0
<COMMON> 179,420
<OTHER-SE> (24,423)
<TOTAL-LIABILITY-AND-EQUITY> 1,061,397
<SALES> 376,181
<TOTAL-REVENUES> 376,181
<CGS> 0
<TOTAL-COSTS> 381,437
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,938
<INCOME-PRETAX> (38,638)
<INCOME-TAX> 14,669
<INCOME-CONTINUING> (25,969)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (3,837)
<NET-INCOME> (27,806)
<EPS-BASIC> (1.26)
<EPS-DILUTED> (1.26)
</TABLE>
