UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
{x} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
For the Transition period from _________ to ___________
Commission file number 000-21263
INTEGRATED LIVING COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1967027
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Bernwood Centre
Suite 10
Bonita Springs, FL 34135
(Address of principal executive offices)
(941) 947-7200
(Registrant's telephone number, including area code)
Indicated by check mark whether registrant (1) has filed all reports to
be filed by Section 13 or 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X*
---- -----
Number of shares of Registrant's common stock, $.01 par value, outstanding at
November 14, 1996: 6,697,900
* The registrant became subject to the reporting requirements on October 3,
1996.
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC.
INDEX
Part 1. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1995 and
September 30, 1996 2
Consolidated Statements of Operations -
Three and Nine Months Ended September 30, 1995 and 1996 3
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1996 4
Consolidated Statement of Changes in Stockholder's Equity -
Nine Months Ended September 30, 1996 5
Notes to the Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Part II. Other Information 12
Item 6 Exhibits and Report on Form 8-K
Signature Page 13
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
Assets (Unaudited)
-------------------- ---------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 413,362 $ 143,644
Accounts receivable 525,555 279,892
Prepaid expenses and other current assets 187,294 247,757
-------------------- ---------------------
Total current assets 1,126,211 671,293
Assets limited as to use 658,726 707,243
Property, plant, and equipment 23,751,175 53,667,966
Other assets 237,650 5,917,962
-------------------- ---------------------
$ 25,773,762 $ 60,964,464
==================== =====================
Liabilities and stockholders equity
Current liabilities:
Accounts payable $ 510,353 $ 1,395,301
Accrued expenses 930,941 2,157,704
-------------------- ---------------------
Total current liabilities 1,441,294 3,553,005
Note payable to parent company - 8,416,176
Refundable deposits 5,243,332 5,075,241
Deferred income taxes - 324,106
Unearned entrance fees 4,316,391 3,895,883
-------------------- ---------------------
Total liabilities 11,001,017 21,264,411
Stockholder's equity:
Common stock 38,979 38,979
Additional paid in capital 17,840,414 41,692,311
Accumulated deficit (3,106,648) (2,031,237)
-------------------- ---------------------
Net stockholder's equity 14,772,745 39,700,053
-------------------- ---------------------
$ 25,773,762 $ 60,964,464
==================== =====================
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended,
September 30, September 30,
--------------------------------------- -------------------------------------
1995 1996 1995 1996
------------------ ------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Revenues:
Monthly service and entrance fees $ 3,820,180 $ 5,533,526 $ 11,291,261 $ 16,101,131
Management services and other 276,997 293,042 824,496 1,020,436
------------------ ------------------- ----------------- -------------------
Total revenues 4,097,177 5,826,568 12,115,757 17,121,567
Expenses:
Community operations 2,825,876 3,789,936 8,401,941 10,927,903
Corporate general and administrative 256,112 847,194 754,814 1,524,894
Facility rents 607,599 575,640 1,822,798 1,884,728
Depreciation and amortization 102,525 352,669 308,544 832,850
------------------ ------------------- ----------------- -------------------
Total expenses 3,792,112 5,565,439 11,288,097 15,170,375
Operating income 305,065 261,129 827,660 1,951,192
Interest expense - 202,557 - 202,557
------------------ ------------------- ----------------- -------------------
Earnings before income taxes and minority interest 305,065 58,572 827,660 1,748,635
Minority interest 9,812 - 32,484 -
------------------ ------------------- ----------------- -------------------
Earnings before income taxes 295,253 58,572 795,176 1,748,635
Federal and state income taxes 113,672 22,550 306,143 673,224
------------------ ------------------- ----------------- -------------------
Net earnings $ 181,581 $ 36,022 $ 489,033 $ 1,075,411
================== =================== ================= ===================
Shares outstanding 3,897,900 3,897,900 3,897,900 3,897,900
Earnings per share $ 0.05 $ 0.01 $ 0.13 $ 0.28
================== =================== ================= ===================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine month ended
September 30,
1995 1996
---------------- ----------------
<S> <C> <C>
Cash flow from operating activities
Net earnings $ 489,033 $ 1,075,411
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Deferred income taxes 30,614 324,106
Minority Interest 32,484 -
Depreciation and amortization 308,544 832,850
Decrease (increase) in accounts receivable (13,993) 245,663
Increase in prepaid expenses and
other current assets (100,628) (60,463)
Earned entrance fees (457,944) (695,033)
Entrance fees received 1,113,114 383,250
Increase in accounts payable and
accrued expenses 163,885 1,564,648
---------------- ----------------
Net cash provided by operating activities 1,565,109 3,670,432
---------------- ----------------
Cash flows from financing activities:
Net capital distribution to parent company (2,246,698) (3,318,103)
Refundable deposits received 1,210,112 242,250
Refunds of deposits and entrance fees (510,224) (519,066)
---------------- ----------------
Net cash used in financing activities (1,546,810) (3,594,919)
---------------- ----------------
Cash flows from investing activities:
Property, plant, and equipment additions (621,897) (767,450)
Decrease (increase) in other assets (104,677) 470,736
Decrease (increase) in assets limited as to use 43,167 (48,517)
---------------- ----------------
Net cash used in investing activities (683,407) (345,231)
---------------- ----------------
Decrease in cash (665,108) (269,718)
Cash, beginning of the period 786,552 413,362
---------------- ----------------
Cash, end of period $ 121,444 $ 143,644
================ ================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
INTEGRATED LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPTIAL DEFICIT TOTAL
------------ ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ 38,979 $ 17,840,414 $(3,106,648) $14,772,745
Net earnings (unaudited) - - 1,075,411 1,075,411
Net capital contributions from parent
company (unaudited) - 23,851,897 - 23,851,897
------------ ----------------- ---------------- ----------------
Balance at September 30, 1996 (unaudited) $ 38,979 $ 41,692,311 $(2,031,237) $39,700,053
============ ================= ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
INTEGRATED LIVING COMMUNITES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE UNAUDITED THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
1. BASIS OF PRESENTATION
Integrated Living Communities, Inc. ("ILC" or "the Company") was formed in
November 1995 through a corporate reorganization whereby the assets and
liabilities of the Integrated Living Communities Division of Integrated Health
Services, Inc. ("IHS") were transferred or leased from IHS subsidiaries to ILC
and its subsidiaries. At September 30, 1996, ILC was a wholly owned subsidiary
of IHS. In October 1996, the Company consummated an initial public offering of
4,200,000 shares of common stock (see note 2 below).
The consolidated financial statements included herein do not contain all
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles. For
further information, such as the significant accounting policies followed by
ILC, refer to the consolidated financial statements and footnotes thereto
included in the Company's Registration Statement on Form S-1 (No. 333-05877),
which was declared effective by the Securities and Exchange Commission on
October 3, 1996. In the opinion of management, the consolidated financial
statements include all necessary adjustments (consisting only of normal
recurring accruals) for a fair presentation of the financial position and
results of operations for the interim periods presented. The results of
operations for the interim periods presented are not necessarily indicative of
the results that may be achieved for the full year.
2. INITIAL PUBLIC OFFERING
On October 9, 1996, ILC completed an initial public offering of 4,200,000 shares
of common stock, of which 2,800,000 shares were sold by ILC and 1,400,000 shares
were sold by IHS. The initial public offering price was $8.00 per share. The
Company received net proceeds of approximately $19.0 million, which proceeds
were used to acquire the Terrace Gardens Healthcare and Retirement Center
("Terrace Gardens"), a 317 unit facility located in Wichita, Kansas ($12.2
million) and to repay outstanding indebtedness to IHS ($7.4 million). This
offering reduced IHS's ownership of the Company's common stock to 37%.
3. ACQUISITIONS
In January 1996, IHS acquired Vintage Healthcare Center ("Vintage") and leased
the 105 bed assisted living portion of the facility to the Company.
In June 1996, the Company acquired condominium interests in the 231 bed assisted
living portion of the Dallas at Treemont facility, the 105 bed assisted living
portion of Vintage, and the 34 bed assisted living portion of the West Palm
Beach Retirement facility. The acquisition of the condominium interests was
treated as a capital contribution by IHS of approximately $27.2 million to the
Company representing IHS's basis in the assisted living and congregate living
portion of these facilities. These communities had previously been leased from
IHS.
In July 1996, the Company acquired leasehold interests in two 35 bed assisted
living communities located in Garden City and Wichita, Kansas.
In August 1996, the Company purchased the Cabot Pointe facility, a 56 bed
dementia facility located in Bradenton, Florida, for $2.8 million. In October
1996, the Company sold this facility to and leased it back from a real estate
investment trust. See note 4.
6
<PAGE>
4. SUBSEQUENT EVENTS
In October, 1996, the Company completed a sale-leaseback of the Cabot Pointe
facility for $2.8 million with Health Care Property Investors. No gain or loss
was recorded on this transaction.
In October 1996, the Company completed its initial public offering (see note 2
above).
In October 1996, the company acquired Terrace Gardens, a 317 bed facility
located in Wichita, Kansas, for $12.2 million.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of results of operations and financial condition
contains forward-looking information that involves risks and uncertainties. The
Company's actual results could differ materially from those anticipated. Factors
that could cause or contribute to such differences include, but are not limited
to: business conditions, risks of downturns in economic conditions generally,
and in the health care industry specifically, development delays, cost overruns,
difficulty in integrating acquisitions and the other risks detailed in the
Company's Securities and Exchange Commission filings, including the Company's
Registration Statement on Form S-1.
OVERVIEW
As of November 14, 1996, the Company operates 19 facilities consisting of 2,147
beds. The Company also has 35 sites in various stages of development and
construction.
To achieve its growth objectives, the Company will need to obtain sufficient
financial resources to fund its development, construction, and acquisition
activities and anticipated operating losses. Accordingly, the company's future
growth will depend on its ability to obtain additional financing on acceptable
terms. The Company expects negative cash flow for at least the next several
years as it continues to develop and acquire assisted living facilities,
primarily as a result of the development and opening of 25 to 35 new assisted
living facilities in each of the next three years. There can be no assurance
that any newly developed facility will achieve a stabilized occupancy rate and
resident mix that meets the Company's expectations or generates positive cash
flow. The Company currently estimates that the net proceeds from its initial
public offering, together with financing commitments and sale/leaseback and
mortgage financing that it anticipates will be available, will be sufficient to
fund its acquisition and development program and its anticipated operating
losses for at least the next 12 months. There can be no assurance, however, that
the Company will not be required to seek additional capital earlier.
The Company intends to finance the development and acquisition of its assisted
living facilities through mortgage financing, operating leases (including
sale/leaseback financing) and lines of credit. As a result, the Company expects
to incur substantial indebtedness and debt related payments (including payments
on operating leases) as the Company pursues its growth strategy. Consequently,
the Company anticipates that a substantial portion of the Company's cash flow
will be devoted to debt service and lease payments. There can be no assurance
that the Company will generate sufficient cash flow from operations to cover
required interest, principal and lease payments.
From its inception in November 1995 through the present, the Company has been
operated as a wholly-owned subsidiary of Integrated Health Services, Inc. To
date, IHS has provided all required financial, legal, accounting, human
resources and information systems services to the Company, and has satisfied all
of the Company's capital requirements in excess of internally generated funds.
The Company derives its revenues from two primary sources: (i) resident fees for
the delivery of assisted living services and (ii) management services income for
the management of facilities that the Company does not own a controlling
interest.
The Company categorizes its operating expenses as follows: (i) community
operations, which includes labor, food, advertising, and other direct operating
expense; (ii) general and administrative expenses, consisting of corporate and
other support functions; (iii) rent, which includes facility and equipment
rentals, (iv) depreciation and amortization, and (v) interest. In anticipation
of its growth, the Company made significant investments in its corporate
infrastructure and staffing in the third quarter of 1996. Through October 9,
1996, the Company operated as a wholly owned subsidiary of IHS.
8
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
Total revenue increased $1.7 million or 42%, to $5.8 million in the third
quarter of 1996 from $4.1 million in the third quarter of 1995. Of this
increase, $1.5 million, or 88%, was due to revenue from communities acquired
after September 30, 1995. The remaining increase was due to increased revenue at
communities in operation in both periods and increased management fee revenue.
Community operations expense increased $964,000 or 34%, to $3.8 million in the
third quarter of 1996 from $2.8 million in the third quarter of 1995. Community
operations increased $1 million due to communities acquired after September 30,
1995. Community operating expense at communities in operation both periods
decreased due to increased efficiencies.
Corporate general and administrative expense increased $591,000, or 231%, to
$847,000 in the third quarter of 1996 from $256,000 in the third quarter of
1995. This increase was primarily due to the relocation of the Company's
corporate office from Owings, Mills, Maryland to Bonita Springs, Florida. In
addition, the Company increased corporate capacity in anticipation of future
growth.
Rent expense decreased $32,000, or 5%, to $576,000 in the third quarter of 1996
from $608,000 in the third quarter of 1995. This decrease was due to the
acquisition of condominium interests in the West Palm and Treemont communities
in June of 1996. These facilities had been leased in the third quarter of 1995.
This decrease was partially offset by rent expense at communities acquired after
September 30, 1995 and an increase in rent expense at the Shores and Cheyenne
communities effective June 1, 1996.
Depreciation and amortization increased $250,000, or 244%, to $353,000 in the
third quarter of 1996 from $103,000 in the third quarter of 1995. This increase
was primarily due to communities acquired subsequent to September 30, 1995.
Interest expense increased from $0 in 1995 to $203,000 in 1996. This is
attributable to interest on the Company's note payable to IHS.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1995
Total revenues increased $5.0 million, or 41%, to $17.1 million in 1996 from
$12.1 million in 1995. Of the increase, $4.0 million, or 80%, was due to revenue
from communities acquired after September 30, 1995. The remaining increase was
due to increased revenue at communities in operation in both periods and
increases in management fee revenue.
Community operations expense increased $2.5 million, or 30%, to $10.9 million in
1996 from $8.4 million in 1995. Of this increase, $2.9 million was due to
operating expenses from communities acquired after September 30, 1995. The
remaining net decrease was due to increased efficiencies at communities in
operation in both periods.
Corporate general and administrative expense increased $770,000, or 102%, to
$1.5 million in 1996 from $755,000 in 1995. This increase was primarily due to
the relocation of the Company's corporate office from Owings, Mills, Maryland to
Bonita Springs, Florida. In addition, the Company increased corporate capacity
in anticipation of future growth.
Rent expense increased $62,000, or 3%, to $1.9 million in 1996 from $1.8 million
in 1995. This increase was due to leasehold interests acquired after September
30, 1996, increase in rent expense at the Shores and Cheyenne communities,
partially offset by decreased rentals due to the acquisition of the West Palm
and Treemont communities which had been leased in 1995.
Depreciation and amortization increased $524,000, or 170%, to $833,000 in 1996
from $309,000 in 1995. This increase was primarily due to communities acquired
subsequent to September 30, 1995.
9
<PAGE>
Interest expense increased from $0 in 1995 to $203,000 in 1996. This is due to
interest on the Company's note payable to IHS.
LIQUIDITY AND CAPITAL RESOURCES
In October 1996, the Company completed an initial public offering of 4.2 million
shares. The net proceeds to the Company were approximately $19 million, after
deducting underwriting discounts and commissions and offering expenses. The
company used the net proceeds to acquire the Terrace Gardens community and to
repay certain amounts due to IHS.
During 1996, the Company secured a commitment with Health Care Property
Investors, Inc. ("HCPI"), a real estate investment trust to make available to
ILC up to $100 million to develop, construct and acquire facilities. No less
than $40 million is to be invested in existing facilities ("Existing
Facilities") through purchase and lease or sale/leaseback transactions.
Remaining funds (up to $60 million) may be invested in new development projects
("New facilities"). The company will develop each New Facility pursuant to a
separate development agreement with HCPI and will lease each New Facility and
financed Existing Facility from HCPI pursuant to a separate lease agreement.
Each acquisition, development, lease and ancillary agreement executed pursuant
to the Financing Commitment will contain representations and warranties,
indemnities, affirmative covenants and conditions precedent customary to real
estate investment trust transactions.
Each developer agreement executed pursuant to the Financing Commitment will
require the Company, as developer, to arrange, coordinate and carry out all
services necessary to develop each New Facility. HCPI will pay all development
costs up to a specified maximum and the Company will be required to pay any
costs in excess thereof. The Company will guarantee the completion of a New
Facility within 12 months. IHS has agreed to guaranty certain of the Company's
obligations to HCPI in connection with the development of facilities, except
that IHS is not required to guaranty such obligations as long as the Company
maintains stockholders' equity or net worth in excess of $55 million and the
Common Stock is traded on a national securities exchange or the NASDAQ National
Market.
HCPI will pay fair market value, based on appraisal, to purchase an Existing
Facility. All leases will be "triple net" (i.e., where the lessee is obligated
to pay, in addition to rent, all taxes, repairs and insurance in respect to the
facility) and HCPI will have the right to a higher lease rate on facilities
located in states that tax real estate investment trust income. The primary term
for each lease will be 15 years with two 10 year renewals at fair market value
lease rates. All leases covering facilities financed under the Financing
Commitment must be renewed together as a group and not individually. The base
lease rate for an existing facility will be 325 basis points over the 10-year
Treasury Note multiplied by the purchase price of the facility. The base lease
rate for New Facility leases will be 350 basis points over the 10-year Treasury
Note multiplied by the purchase price of the facility. Beginning in the second
year of the lease, annual rent will be increased by an amount equal to the
annual change in the consumer price index multiplied by the prior year's total
rent. In no event will the rent increase be less than the sum of (a) the
additional rent paid for the previous year plus (b) one hundred percent of the
facility's Gross Revenues (as defined) in excess of Base Revenue (as defined) up
to but not exceeding an amount equal to 2% of the prior year's total rent. In no
event will the rent increase represent more than a 5% increase over the prior
year's total rent.
The Company has also obtained a non-binding term sheet from Capstone Capital
Corporation ("Capstone") relating to the availability of up to $40 million in
financing through sale/leaseback transactions. As proposed, leases executed with
Capstone will have an initial term of 12 to 15 years and three separate five
year extension options. All leases funded under the proposed commitment,
however, will have the same initial term and no lease may be extended unless all
leases under the commitment are extended. Subject to a minimum rate of 10%, the
initial lease rate will be 350 basis points in excess of the yield on U.S.
Treasury bills with similar maturities/terms. Lease rates during the first year
of each extended period will be based upon fair market rental values. Lease
rates will be adjusted annually (except for the first year of each renewal
period) in an amount equal to the positive change in the consumer price index;
provided, however, in no event will the change be less than 2% or more than 5%
of the previous year's lease payment.
All leases under the proposed Capstone commitment will be cross-defaulted and
all leases between Capstone and a subsidiary of the company will be guaranteed
by the Company. Each facility lease will contain minimum rent coverage
requirements and will require the Company to maintain a minimum net worth of $55
million and minimum rent and interest coverage ratios. Each lease will be
"triple-net" and will grant the company a right of first refusal to purchase the
facility from Capstone. Dr. Elkins, the Chairman of the Board of Directors of
the Company, is a director of Capstone.
Following this offering, the Company will be dependent on third-party financing
for its acquisition and development program. Except for the financing
commitments discussed above, the Company has no other arrangements for
financing. there can be no assurance that financing for the Company's
acquisition and development program will be available to the company on
acceptable terms or at all. moreover, to the extent the Company acquires
facilities that do not generate positive cash flow (after rent expense and/or
interest), the Company may be required to seek additional capital for working
capital and liquidity purposes. See "Risk Factors - Need for Substantial
Additional Capital."
The Company presently anticipates that it will make capital expenditures of
approximately $3 million in 1996 relating to its existing facilities. In
addition, the Company used approximately $12.2 million of the net proceeds of
this offering to acquire the Terrace Gardens facility simultaneous with the
closing of this offering, and anticipate that it will make capital expenditures
of approximately $500,000 with respect to the Cabot Pointe and Terrace Gardens
facilities. The Company anticipates that it will spend approximately $9.0
million in 1996 to purchase land for the development of new assisted living
facilities. The Company has provided two of its third-party developers lines of
credit aggregating $2.0 million.
At September 30, 1996, the Company had $8.4 million outstanding under a $75
million credit line with IHS. In October, the $75 million credit line was
replaced with a new credit facility with IHS that is due on December 2, 1996.
The outstanding balance under this credit agreement is $3.4 million at November
14, 1996.
For the nine months ended September 30, 1995 and 1996, cash flows from operating
activities were $1.6 million and $3.7 million, respectively. Net cash used in
financing activities was $1.5 million and $3.6 million in 1995 and 1996,
respectively. Net cash used in investing activities was $700,000 and $300,000 in
1995 and 1996, respectively.
11
<PAGE>
Part II. Other Information
Items 1 - 5 are not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
- -------------- -----------
2 Asset Purchase Agreement with Health Care Property Investors
for Cabot Pointe, dated September 30, 1996.
10.1 Lease Agreement with Health Care Property Investors for Cabot
Pointe, dated September 30, 1996.
10.2 Credit agreement with Integrated Health Services, dated
October 10, 1996.
27 Financial Data Schedule
(b) Reports on Form 8-K
Current report on Form 8-K dated October 9, 1996, relating to the
acquisition of the Terrace Gardens facility.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
Integrated Living Communities, Inc.
(Registrant)
John B. Poole
-----------------------------------------------
John B. Poole
Dated November 14, 1996 Senior Vice President - Chief Financial Officer
13
CONTRACT OF ACQUISITION
between
HEALTH CARE PROPERTY INVESTORS, INC.,
as Buyer
and
INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
as Seller
Dated as of September 30, 1996
<PAGE>
CONTRACT OF ACQUISITION
This Contract of Acquisition (this "Agreement") is dated as of
September 30, 1996 between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland
corporation ("Buyer"), and INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller desires to transfer or cause to be transferred
to Buyer, and Buyer desires to acquire, the Property (as hereinafter defined),
which such transfer shall be effectuated by Seller executing and delivering a
deed to the Property, or one or more portions thereof, and a bill of sale and
assignment with respect to the Personal Property (as hereinafter defined); and
WHEREAS, simultaneously therewith, Buyer and Seller desire
that Buyer enter into a lease of the Property with Seller;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For all purposes of this Agreement, except as otherwise
expressly provided herein or unless the context otherwise requires, (i) the
terms defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular; (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles as at the time applicable; (iii) all
references in this Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
this Agreement; (iv) the word "including" shall have the same meaning as the
phrase "including, without limitation," and other phrases of similar import; and
(v) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision.
Affiliate: As defined in the Lease.
Allocated Expense Deposit: That portion of the Master Expense
Deposit allocated to the transactions contemplated hereby and the Exhibits
hereto as provided in Section 2.6.
Best Knowledge: With respect to any Person shall mean as to
any fact or other matter that (i) such Person is actually aware of such fact or
other matter, or (ii) a prudent Person could be expected to discover or
otherwise become aware of such fact or other matter in the
<PAGE>
course of conducting a reasonably diligent inquiry calculated to ascertain the
truth, accuracy or existence of such fact or other matter. A Person other than
an individual shall not be deemed to have knowledge or to be actually aware of a
particular fact or other matter unless such fact or other matter is actually
known or under reasonable circumstances should have been known by an officer or
director of such Person. In other words, in no event shall knowledge be imputed
to such Person simply because specific knowledge may have come to the attention
of such Person's agent, consultant or other employee, unless and to the extent
the same is actually known or under reasonable circumstances should have been
known by an officer or director of such Person.
Bill of Sale and Assignment: A bill of sale and general
assignment substantially in the form attached hereto as Exhibit B conveying the
Personal Property to Buyer.
Buyer's Legal Costs: Collectively, the reasonable legal fees,
expenses and disbursements to counsel incurred by Buyer in connection with the
preparation and negotiation of this Agreement, the other Transaction Documents
and the Exhibits hereto and thereto, the review of diligence materials,
documents and other information relating to the Property and the consummation of
the transactions contemplated hereunder and the Exhibits hereto. As used herein,
legal fees and expenses shall include both outside legal fees and expenses as
well as legal fees of Buyer's in-house counsel. For purposes of the foregoing,
outside legal fees for attorney time shall be billed at the normal hourly rate
charged by Buyer's counsel and legal fees for in-house attorney time shall not
be in excess of $125.00 per hour.
Buyer's Transaction Costs: Collectively, Buyer's Legal Costs
and the other reasonable and customary fees and expenses of and disbursements
incurred or made by Buyer in connection with the transactions contemplated
hereby and the Exhibits hereto, including appraisal costs, engineering fees,
accountants and other professional fees, environmental audits and travel
expenses. Upon the written request of Seller, Buyer shall provide to Seller
copies of invoices and other back-up information as may be reasonably requested
by Seller to substantiate Buyer's Transaction Costs.
Closing: The transactions taking place on the Closing Date.
Closing Date: The date on which Buyer receives conveyance of
good and marketable title to the Property, free and clear of all liens, claims
and encumbrances (except Permitted Encumbrances), which date is estimated to be
October 15, 1996.
Commencement Date: As defined in the Lease.
Commitment Letter: The master letter of intent and agreement
dated June 11, 1996 between Buyer and Seller's Affiliate, ILC, as amended by
letter dated August 23, 1996 and letter dated of even date herewith, setting
forth the terms and conditions of certain proposed transactions, including the
transaction contemplated herein, as the same may have been or may hereafter
further be amended or supplemented from time to time in writing. To the extent
of any conflict between the Commitment Letter and this Agreement or the Exhibits
hereto or any other document or instrument executed and delivered in connection
with the transactions
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contemplated hereby or thereby, this Agreement or such other documents or
instruments shall control over the Commitment Letter with respect to the
transactions contemplated hereby and the Exhibits hereto.
Commitment Letter Amendment: An amendment to the Commitment
Letter in the form of Exhibit E attached hereto, to be executed by Buyer and
Seller's Affiliate, ILC, on the Closing Date.
Condemnation: As defined in the Lease.
Consumables: All consumable goods and supplies, including
inventories of food, beverages, pharmaceuticals, medical supplies, linens,
clothing or similar items utilized in connection with the operation and/or
maintenance of the Facility.
Deed: The Special Warranty Deed in form reasonably acceptable
to Buyer, conveying the Property to Buyer.
Excluded Property: All (i) Resident and/or Patient Agreements,
(ii) Consumables, (iii) trade names relating to the Property, (iv) general
corporate trademarks, service marks, logos and insignia, goodwill, accounts
receivable, and books or records of Seller, (iv) any certificate of need or
similar certificate for the Property, (v) any third-party provider agreements
(including Medicare and Medicaid) relating to the Property, (vi) any health care
license or other operating license for the Property, (vii) any operating
agreement for the Property, (viii) any vehicles and (ix) the property, if any,
listed as "Excluded Property" on the Schedule 2 attached hereto.
Facility: The land and related improvements and fixtures of
the "Cabot Pointe Alzheimer's Care Facility" located in the County of Manatee,
State of Florida, comprised of the approximately 17,000 square foot, 54-bed
Alzheimer's assisted-living care facility and the approximately 1.69 gross acre
parcel of land, which land is more particularly described on Exhibit A attached
hereto.
Flood Hazard Area: An area designated by the Federal Emergency
Management Agency and/or Secretary of Housing and Urban Development as having
special flood hazards.
Governmental Authority: The United States, the state or
commonwealth, county, parish, city and political subdivisions in which the
Property is located or which have jurisdiction over the Property or use of the
Facility thereon for all uses contemplated by the Lease, and any court
administrator, agency, department, commission, board, bureau or instrumentality
or any of them which have jurisdiction over the Property or the construction or
use of the Property for all uses contemplated by the Lease.
Governmental Requirement: Any law, ordinance, order, rule,
regulation, decree or similar edict of a Governmental Authority.
Guarantor: ILC.
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Guaranty: The guaranty of Seller's obligations hereunder and
Lessee's obligations under the Lease in the form of Exhibit D, to be executed by
Guarantor on the Closing Date.
Hazardous Substances: As defined in the Lease.
ILC: Integrated Living Communities, Inc., a Delaware
corporation.
Intangible Property: All Permits and other intangible property
or any interest therein now or on the Closing Date owned or held by Seller in
connection with the Property, or any business or businesses now conducted by
Seller thereon or with the use thereof, including all rights of Seller in and to
all Plans and Specifications, leases, contract rights, agreements, water rights
and reservations, zoning rights, business licenses, warranties and guaranties
(including those relating to construction and/or fabrication) related to the
Property, or any part thereof; provided, however, that "Intangible Property"
shall not include any of the Excluded Property.
Lease: The lease of the Facility in the form of Exhibit C, to
be executed by Buyer, as Lessor, and Seller, as Lessee, on the Closing Date.
Lease Commitment Fee: An amount equal to One Percent (1%) of
the Purchase Price (i.e., $28,300.00), which amount is due and payable from
Seller to Buyer at the Closing as provided in Section 2.7 below.
Leased Property: As defined in the Lease.
Lessee: As defined in the Lease.
Lessor: As defined in the Lease.
Master Expense Deposit: As defined in Section 2.6 below.
Minimum Rent: As defined in the Lease.
Organizational Documents: Collectively, as applicable, the
articles or certificate of incorporation, certificate of limited partnership or
certificate of limited liability company, by-laws, partnership agreement,
operating company agreement, trust agreement, statement of partnership,
fictitious business name filings and all other organizational documents relating
to the creation, formation and/or existence of a business entity, together with
resolutions of the board of directors, partner or member consents, trustee
certificates, incumbency certificates and all other documents or instruments
approving or authorizing the transactions contemplated hereby and the Exhibits
hereto.
Permits: All permits, licenses, approvals, entitlements and
other authorizations issued by Governmental Authorities including certificates
of occupancy, those required in connection with the ownership, planning,
development, construction, use, operation and/or maintenance of the Facility for
its Primary Intended Use, and all amendments, modifications,
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supplements, general conditions and addenda thereto, other than any licenses,
certificates or permits included within the definition of Excluded Property.
Permitted Encumbrances: Collectively, (i) liens for taxes,
assessments and governmental charges not yet past due and payable or delinquent,
(ii) the title exceptions and other matters of record set forth on Schedule 1
hereto and (iii) such other title exceptions, if any, as Buyer shall have
approved in writing, in its sole and absolute discretion.
Personal Property: All Intangible Property and all tangible
personal property of every kind and nature owned by Seller and located at, upon
or about, or affixed or attached to, or installed in the Facility or used or to
be used in connection with or otherwise relating to the Facility or its
ownership, planning, development, construction, operation and/or maintenance,
including the following:
(i) All equipment, machinery, fixtures, furniture and
furnishings and other tangible personal property, including all components
thereof, now or on the Closing Date located in, on or used in connection with
the Facility, including 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, apparatus, sprinkler systems, fire and theft protection equipment,
built-in oxygen and vacuum systems, tools, repair parts, appliances and
communications equipment, to the extent any of the foregoing items are not
conveyed to Buyer as part of the Facility pursuant to the Deed; and
(ii) Those specific items of tangible personal property
described on Exhibit E attached hereto.
Notwithstanding the foregoing, "Personal Property" shall not include any of the
Excluded Property.
Plans and Specifications: All drawings (including final and
complete "as-builts"), plans, specifications, blueprints, maps, studies,
structural reviews, surveys (including "as-built") and engineering, soil,
seismic, geologic, architectural and other reports relating to the Property.
Primary Intended Use: As defined in the Lease.
Property: The Facility or, where applicable, the Facility
together with the Personal Property.
Purchase Price: Two Million Eight Hundred Thirty Thousand
Dollars ($2,830,000.00).
Resident and/or Patient Agreements: Any and all leases, rental
and occupancy agreements, lease commitments, admission and payment documents,
reservation agreements and concessions, all deposits made thereunder, and any
and all patient and/or resident trust accounts, in each case with respect to the
Property.
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State: The State or Commonwealth in which the Property is located.
Title Insurer: First American Title Insurance Company.
Title Policy: As defined in Section 3.5.
Transaction Documents: Collectively, this Agreement, the Deed,
the Bill of Sale and Assignment, the Lease, the Guaranty and the Commitment
Letter Amendment.
ARTICLE 2
TERMS OF THE SALE AND LEASEBACK
Section 2.1 Sale. On the Closing Date, subject to the
conditions of this Agreement, Seller agrees to convey or cause to be conveyed,
and Buyer agrees to acquire, the Property for the Purchase Price. The Purchase
Price shall be paid in cash on the Closing Date by wire transfer or such other
method as Buyer and Seller may agree upon. The Purchase Price shall be allocated
as follows:
Land & Improvements
(including permanent fixtures) $2,700,000.00
Personal Property (other than
permanent fixtures) 130,000.00
----------
Total $2,830,000.00
=============
Section 2.2 Closing. The Closing shall be held at the offices
of Latham & Watkins, 633 West Fifth Street, Los Angeles, California, or at such
other location as Buyer and Seller may agree upon or through an escrow or
sub-escrow with Title Insurer. In the event that the Closing is to take place
through an escrow or sub-escrow, the parties shall mutually execute and deliver
to Title Insurer, as escrow holder, joint escrow and/or recording instructions
consistent with this Agreement on or prior to the Closing Date. In the event of
any conflict between the provisions of this Agreement or any such escrow and/or
recording instructions or any general instructions required by Title Insurer to
be executed by Buyer and Seller in connection therewith, the provisions of this
Agreement shall control. If the Closing does not take place on or prior to
October 18, 1996, Buyer may terminate this Agreement in its sole and absolute
discretion.
Section 2.3 Conveyance. On the Closing Date, subject to the
terms and conditions of this Agreement, Seller shall deliver, or cause to be
delivered, the Deed and the Bill of Sale and Assignment and such other
instruments as shall be necessary to convey, assign or grant to Buyer good and
marketable title to the Property, free and clear of all liens, claims and
encumbrances (except for Permitted Encumbrances). Each party shall execute and
deliver such instruments and take such actions as either party may reasonably
request in order to effectuate the purposes of this Agreement.
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(a) The Deed shall be sufficient to convey good and
indefeasible fee simple title to the Property (other than the Personal
Property), shall be duly executed, acknowledged and in recordable form.
The Deed shall include (if applicable) the appropriate state and/or
county real estate transfer tax declaration of real estate value or
other affidavit as to the tax due on gross income derived from the
sale. The Deed shall be deemed to include all appurtenances to the
Property conveyed thereby, including all right, title and interest, if
any, of the grantor in and to any land lying in the bed of any street
adjoining the Property to the center line thereof, and any existing
improvements located on the Property.
(b) The Bill of Sale and Assignment shall be
sufficient to convey good and marketable title to the Personal Property
and shall be duly executed. In addition, Seller will execute or obtain
and deliver to Buyer on the Closing Date such other instruments and/or
documents as may be necessary to effectively convey title to the
Personal Property.
(c) On the Closing Date, Buyer, as Lessor, and
Seller, as Lessee, shall enter into the Lease and shall execute and
deliver to Title Insurer for recordation a short- form memorandum
thereof in form and substance satisfactory to Buyer and Seller, and if
applicable, as may be required by Title Insurer to issue to Lessee a
leasehold policy of title insurance on the Closing Date.
Notwithstanding the foregoing, however, in no event shall the issuance
of such leasehold policy of title insurance be deemed a condition to
Closing of Seller hereunder. In addition, Seller, as Lessee, shall
execute and deliver to Buyer, as Lessor, such Uniform Commercial Code
financing statements and/or fixture filings evidencing Lessor's
ownership of the Personal Property as shall be reasonably required by
Lessor. Such financing statements and/or fixture filings shall describe
with particularity the Personal Property, shall be in form sufficient
for recording or filing, as applicable, with the appropriate
Governmental Authority and shall be otherwise reasonably satisfactory
to Buyer, as Lessor.
(d) Seller shall deliver for itself (i) a "FIRPTA"
certificate in form and substance satisfactory to Buyer and in
conformance with Section 1445(b)(2) of the Internal Revenue Code, to
the effect that Seller is not a foreign person and (ii) such other
affidavits or certificates as may be reasonably required by Buyer to
the effect that Buyer is not required to withhold taxes from the
payment of sale proceeds to Seller under any other applicable state,
commonwealth or local tax laws.
Section 2.4 Prorations. There shall be no adjustment of taxes,
assessments, water charges, utilities, receivables or rents, if any, premiums on
existing insurance policies, if any, or any other items relating to the
Property, it being understood by the parties that Seller, as Lessee under the
Lease, shall be obligated to pay the same under the terms thereof from and after
the Closing Date.
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Section 2.5 Costs.
2.5.1 Seller's Costs. Seller shall pay:
(a) any and all state, municipal or other documentary,
transfer, stamp, sales, use or similar taxes payable in
connection with the delivery of any instrument or document
provided in or contemplated by this Agreement or the
Exhibits hereto, any agreement or commitment described or
referred to herein or the transactions contemplated herein
together with interest and penalties, if any, thereon;
(b) all expenses of or related to the issuance of the
title insurance commitment and policy (including the costs
of any survey required by Buyer and the Title Insurer),
chain of title reports, and all escrow fees and charges;
(c) the charges for or in connection with the recording
and/or filing of any instrument or document provided herein
or contemplated by this Agreement or any agreement or
document described or referred to herein;
(d) any and all broker's fees or similar fees claimed
by any party acting by or on behalf of Seller in connection
with the transactions contemplated herein;
(e) Seller's legal, accounting and other professional
fees and expenses and the cost of all instruments and
documents required to be delivered, or to be caused to be
delivered, by Seller hereunder;
(f) all of Buyer's Transaction Costs other than Buyer's
Legal Costs; and
(g) all of Buyer's Legal Costs up to $50,000.00 and
Fifty percent (50%) of Buyer's Legal Costs in excess
thereof;
(h) except as provided in Section 2.5.2, all other
costs and expenses incurred in connection with the
transactions contemplated hereunder and the Exhibits hereto.
2.5.2 Buyer's Costs. Buyer shall pay Fifty Percent (50%) of
the Buyer's Legal Costs in excess of $50,000.00.
Section 2.6 Reimbursement of Buyer's Transaction Costs.
Pursuant to the Commitment Letter, Seller or ILC on Seller's behalf has paid to
Buyer an expense reimbursement deposit of Two Hundred Thousand Dollars
($200,000) (the "Master Expense Deposit"). Of such Master Expense Deposit, the
sum of $25,000.00 (the "Allocated Expense Deposit") is allocated to the
transactions contemplated hereby and the Exhibits hereto. As
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provided in the Master Commitment Letter, if the transactions contemplated
hereunder and the Exhibits hereto do not close for any reason other than by
reason of (a) a breach or default by Seller hereunder, (b) Seller financing the
Property through another financing source or (c) Seller selling the Property to
another buyer in a transaction in which Seller or any Affiliate of Seller shall
continue to operate and/or manage the Facility following the consummation
thereof, then the Allocated Expense Deposit shall be applied against Buyer's
Transaction Costs and the balance shall be promptly refunded to Seller. If the
transactions hereunder and the Exhibits hereto (i) do not close for any of the
reasons described in clauses (a), (b) or (c) above or (ii) do close, the Buyer
shall be entitled to keep the entire Allocated Expense Deposit. If the
transactions hereunder and the Exhibits hereto do close and Buyer's Transaction
Costs are greater than the total amount of the Allocated Expense Deposit, Seller
shall reimburse Buyer for any excess costs so incurred, except as provided in
Sections 2.5.1(g) and 2.5.2 above. To the extent ascertainable on the Closing
Date, any amount due to Buyer shall be paid at the Closing. To the extent such
amounts are not so ascertainable, Seller shall thereafter reimburse Buyer
promptly following Buyer's written request therefor.
Section 2.7 Lease Commitment Fee. In addition to the Allocated
Expense Deposit which Buyer hereby acknowledges receipt of, on the Closing Date,
Seller shall pay to Buyer via wire transfer of immediately available funds (or
such other method as is acceptable to Buyer and Seller) the Lease Commitment Fee
and the same shall be deemed fully earned by Buyer and non-refundable so long as
the Closing has occurred.
Section 2.8 Nature of Buyer's Interest. Buyer is only
purchasing the Property and is acquiring no interest, other than as a lessor
pursuant to the Lease (and including any security interest granted pursuant
thereto), in the trade or business operated or to be operated by Seller with
respect to the Property.
ARTICLE 3
CONDITIONS TO THE OBLIGATION OF BUYER TO CLOSE
The obligations of Buyer hereunder are subject to the
satisfaction or waiver by Buyer of the following conditions. Should any
condition set forth in this Article 3 not be fulfilled or waived on the Closing
Date to the satisfaction of Buyer, Buyer shall, at its option, without waiving
any rights provided in this Agreement, be relieved of all obligations hereunder,
except for Buyer's obligations with respect to the Allocated Expense Deposit as
provided in Section 2.6 above.
Section 3.1 Performance. Seller shall have performed each and
all of the covenants and obligations required to be performed by them on or
prior to the Closing.
Section 3.2 Representations and Warranties. Each and all of
the representations and warranties of Seller hereunder shall be true and correct
on and as of the Closing Date, as though given as of the Closing Date, and
Seller shall have delivered to Buyer officers' certificates to that effect.
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Section 3.3 Default. No event shall have occurred that would
constitute a default by (a) Seller, as Lessee under the Lease, or (b) Guarantor
under the Guaranty, or which with notice or the lapse of time, or both, would
constitute such a default by either Seller under the Lease or Guarantor under
the Guaranty.
Section 3.4 Recordation and Costs. Seller shall (a) have made
arrangements for the Deed as well as the short-form memorandum of the Lease and
the Uniform Commercial Code financing statements and/or fixture filings, to be
recorded or filed for recordation in the manner required by the laws of the
State, and (b) pay, or arrange to be paid, all costs and fees to be paid by
Buyer pursuant to Section 2.5 and the Lease Commitment Fee pursuant to Section
2.7, and such arrangements shall be reasonably satisfactory to Buyer and its
counsel in all respects.
Section 3.5 Title Insurance. Buyer shall have received, at
Seller's expense, a commitment from Title Insurer satisfactory to Buyer and its
counsel for a policy of title insurance showing good and indefeasible title to
the Property in fee simple vested in Buyer as of the Closing, subject only to
the Permitted Encumbrances. Such policy (the "Title Policy"), when issued,
shall:
(a) be in current ALTA extended coverage owner's form
(but without a general exception for creditors' rights);
(b) be issued in an amount equal to the Purchase Price;
(c) include endorsements 100 (no violations, etc.,
modified for an owner), 103.7 (access), 116.1 (survey
accuracy), 123.2 (zoning-improved property), or the
equivalents thereof available, if at all, in the State, and
such other endorsements as Buyer may reasonably require; and
(d) insure (i) that any conditions, covenants and
restrictions affecting the Property have not been violated
and that a future violation thereof will not result in a
forfeiture or reversion of title; (ii) if obtainable, that
all streets adjoining the Property have been completed,
dedicated and accepted for public maintenance and use by the
appropriate governmental authorities and that the Property
has access to public streets; (iii) that local zoning
ordinances, general plans and all other applicable land use
regulations and all private covenants, conditions and
restrictions, if any, permit the transfer and use of the
Property (and reconstruction and resumption of use of the
Property in the event of damage or destruction thereof or
cessation of use thereof) for all uses contemplated by the
Lease as a matter of right for an unlimited time period, and
specifically not merely as a legal non-conforming use or any
other legal status which would by its terms or by operation
of law limit the duration of such use or the right to
rebuild and resume use of the Property for all uses
contemplated by the Lease in the event of damage,
destruction or cessation of use of the Property for any
reason; and (iv) over and against all parties in possession
except the current occupants thereof.
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Section 3.6 Survey. Buyer shall have received, at Seller's
expense, and approved either (a) a final "as-built" ALTA survey of the Property
completed in accordance with the Minimum Standard Detail requirements for
ALTA/ACSM Land Title Surveys, with additional Title A survey requirements,
jointly established and adopted by ALTA and ACSM in 1992 that meet the
requirements of a Class A Survey as defined therein, certified within thirty
(30) days of the Closing Date or (b) such other form of title survey which is in
form and substance satisfactory to Buyer in its sole discretion. Such survey
shall (i) be certified to Buyer and the Title Insurer as being true and
accurate, which such certification shall include the acreage of the Property and
a statement as to whether the Property is located in a Flood Hazard Area; (ii)
identify thereon all telephone, water, sewage, electricity, gas and other
utility facilities to the points of connection; and (iii) show no encroachments
onto or conflicts with any adjacent property other than pursuant to easements
appurtenant to the Property or such other agreements with the affected landowner
approved by Buyer and which are, in turn, insured under the Title Policy.
Section 3.7 Utilities and Access. Buyer shall have satisfied
itself that (a) all utilities serving the Property are adequate for the Primary
Intended Use of the Facility; and (b) all means of ingress and egress, parking,
access to public streets and drainage facilities are or will be available to the
Property and are adequate for the Primary Intended Use of the Facility.
Section 3.8 Site Visits. Buyer shall have completed
satisfactory site visits of the Property.
Section 3.9 Environmental Report. Buyer shall have received,
at Seller's expense, a written report issued to Buyer from a qualified
geotechnical or engineering firm reasonably acceptable to Buyer and in form and
substance reasonably satisfactory to Buyer, concerning the presence, handling,
treatment and disposal of Hazardous Substances on, in or under the Property and
disclosing (a) the results of a review of prior uses of the Property disclosed
by local public records, including a chain of title report from the Title
Insurer, in form and substance satisfactory to Buyer, showing all previous
owners and lessees of the Property from 1940 to the present; (b) contacts with
local officials to determine whether any records exist with respect to the
disposal of Hazardous Substances on the Property; (c) if recommended by such
engineering or geotechnical firm or required by Buyer, soil samples and
groundwater samples consistent with good engineering practice; and (d)
reasonable evaluations of the surrounding areas for sensitive environmental
receptors such as drinking water wells or aquifers, hospitals and schools, and
evidence regarding the use and/or historical use of such areas.
Section 3.10 Entitlements. Buyer shall have received and
approved with respect to the Property copies of (a) the applicable zoning
ordinances and map marked to show the location of such Property and, if
available, certified by an appropriate Governmental Authority to be complete and
accurate; (b) evidence that such zoning ordinances and the general
plans/specific plans and all other land use regulations of the applicable
municipal jurisdictions and all covenants, conditions and restrictions, if any,
affecting the Property permit the transfer of the Property and use thereof for
its Primary Intended Use and for all other uses (if any) contemplated under the
Lease (and reconstruction and resumption of use in the event of damage,
destruction, or cessation of use) as a matter of right for an unlimited time
period and not merely
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as a legal non-conforming use; (c) all licenses, certificates, approvals and
authorizations, including plot plan and subdivision approvals, zoning variances,
sewer, building, foundation, grading and other permits and all other
authorizations required by Governmental Authorities or by any applicable
covenants, conditions and restrictions for the use and operation of such
Property for its Primary Intended Use and for all other uses (if any)
contemplated under the Lease, in each instance in accordance with all applicable
Governmental Requirements; and (d) evidence satisfactory to it that (i) the
Property and/or Lessee holds all licenses, permits, accreditations,
authorizations and certifications required for the operation of the Property for
its Primary Intended Use and for all other uses (if any) contemplated under the
Lease, including from the State of Florida Agency for Health Care Administration
and any other applicable Governmental Authorities; (ii) the Property is not
subject to, or threatened with, any hold on admissions or other sanction and
there are no outstanding, or threatened, notices of deficiency resulting from
any survey of the Property which have not been fully responded to with an
acceptable plan of correction with which the Property is being operated in
compliance; (iii) to the extent necessary to operate the Property for its
Primary Intended Use and to receive governmental and/or private payor
reimbursements, the Property is fully and unconditionally accredited by the
Joint Commission on Accreditation of Health Care Organizations; and (iv) the
Property is, to the extent applicable, (A) duly certified as a provider under
the Medicare and Medicaid programs and (B) in compliance in all material
respects with all Governmental Requirements, including rules and regulations
relating to Medicare/Medicaid fraud and abuse practices, and all insurance
requirements.
Section 3.11 Physical Inspections. Buyer shall have received
and approved the physical condition of the Property including the improvements
and the HVAC, electrical, plumbing and other systems, and shall have received,
at Seller's expense, written reports in form and substance reasonably
satisfactory to Buyer from one or more qualified engineering firms reasonably
approved by Buyer or any engineer employed by Buyer to the effect that the
improvements on each Property have been constructed in compliance with, and
currently are in compliance with, all Governmental Requirements, including the
Americans With Disabilities Act, and with all restrictions of record applicable
thereto which affect the use of such Property for its Primary Intended Use and
for all other uses (if any) contemplated under the Lease.
Section 3.12 Condemnation; Casualty. Except as set forth on
Schedule 2, no Condemnation shall be pending or threatened with respect to the
Property and no casualty shall have occurred with respect to the Property or any
portion thereof.
Section 3.13 Financial Condition.
3.13.1 Buyer shall have received and approved (a) audited
financial statements for Seller for the period ended June 30, 1996; (b) audited
financial statements for ILC for the period ended December 31, 1995, and
unaudited financial statements for such entities for the period ended June 30,
1996; and (c) unaudited operating statements for the Facility for the period
ended July 31, 1996 (if any);
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3.13.2 Buyer shall have received evidence satisfactory to it
that no material adverse change in the financial condition, business, or
prospects of (a) Seller or ILC has occurred from June 30, 1996 through the
Closing or (b) the Facility has occurred from August 1, 1996 through the
Closing;
3.13.3 Buyer shall have received and approved UCC searches
against Seller showing no liens on the Property;
3.13.4 Buyer shall have received and approved all pending or
threatened litigation or governmental proceedings seeking to enjoin, challenge
or collect material damages in connection with Seller or the Property.
Section 3.14 Proceedings. Buyer shall have reviewed and
reasonably approved all corporate, partnership, limited liability company or
other proceedings necessary or required to be taken by Seller in connection with
the transactions contemplated hereunder and the Exhibits hereto and all
documents and certificates incident thereto, including the Organizational
Documents of Seller and such other documents and certificates as Buyer or its
counsel shall reasonably request.
Section 3.15 Records. Buyer shall have reviewed, to the extent
in the possession and control of Seller, originals (or copies thereof certified
to Buyer) of all documents or other instruments relating to the Intangible
Property, all operating reports and such other records pertaining to the
Property as Buyer shall reasonably request.
Section 3.16 Insurance. Buyer shall have received certificates
with respect to, and copies of the policies of, the insurance required to be
carried by Lessee under the Lease, together with evidence satisfactory to Buyer
that the premiums therefor due on or prior to the Closing Date have been paid in
full.
Section 3.17 Letter(s) of Credit. Buyer shall have received
the letter or letters of credit fulfilling the requirements set forth in the
Lease.
Section 3.18 Transaction Documents. Seller shall have executed
and delivered to Buyer the Deed and two (2) counterpart originals of the Lease,
Bill of Sale and Assignment and Commitment Letter Amendment, together with any
other documents or instruments required hereunder, and Guarantor shall have
executed and delivered to Buyer two (2) originals of the Guaranty.
Section 3.19 Opinion of Counsel. Buyer shall have received an
opinion or opinions of counsel to Seller and Guarantor, (a) dated as of the
Closing Date, (b) addressed to Buyer and any participants of Buyer, (c)
incorporating any necessary opinions from local counsel to Seller and Guarantor
and (d) subject only to such qualifications and limitations as may be reasonably
approved by Buyer and Buyer's counsel, to the effect that:
3.19.1 Each of Seller and Guarantor is duly organized, validly
existing and in good standing in its state of organization/formation and is
qualified to do
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business and in good standing in the State; the execution and delivery of this
Agreement, the other Transaction Documents and all other documents to be
executed by Seller and Guarantor, as applicable, hereunder or the Exhibits
hereto have been duly authorized; and this Agreement, the other Transaction
Documents and all other documents to be executed and delivered by Seller and/or
Guarantor, as applicable, to or for the benefit of Buyer hereunder are valid and
binding instruments, enforceable against Seller and Guarantor, as applicable, in
accordance with their respective terms;
3.19.2 the execution and delivery of this Agreement, the other
Transaction Documents and all other documents to be executed and delivered by
Seller and Guarantor, as applicable, hereunder and the consummation of the
transactions contemplated hereunder and the Exhibits hereto do not and will not
constitute an event of default under, or a violation of, any Organizational
Document of Seller and/or Guarantor, as applicable, or any Governmental
Requirement, contract or other agreement by which any of Seller and/or
Guarantor, as applicable, is or may be bound, including Governmental
Requirements applicable to the use of the Facility for its Primary Intended Use;
3.19.3 there are (a) no pending or, to the best knowledge of
such counsel, threatened, proceedings with respect to or in any manner affecting
Seller or the Property or in which Seller is or will be a party by reason of the
ownership or leasing of the Property; or (b) to the best knowledge of such
counsel, no present plans or studies by any Governmental Authority which in any
way challenge, affect or would challenge or affect in a material and adverse
manner such ownership or leasing;
3.19.4 Seller has obtained all consents, permits, licenses,
approvals or authorizations from Governmental Authorities or other third parties
which are necessary to permit the conveyance of the Property in accordance with
the provisions of this Agreement and the Exhibits hereto, all of which are in
full force and effect; current local zoning ordinances, general plans and other
applicable land use regulations and all private covenants, conditions and
restrictions, if any, affecting the Property, permit the transfer of the
Property and the use of the Facility for its Primary Intended Use (and
reconstruction and resumption of use in the event of damage, destruction, or
cessation of use) as a matter of right for an unlimited time period and not
merely as a legal non- continuing use; to the best knowledge of such counsel,
and to the extent necessary to operate the Property for its Primary Intended Use
and to receive governmental and/or private payor reimbursements, the Property is
fully and unconditionally accredited by the Joint Commission of Health Care
Organizations; and the Property is (i) duly certified as a provider under the
Medicare and Medicaid programs and (ii) in compliance in all material respects
with all Governmental Requirements, including rules and regulations relating to
Medicare/Medicaid fraud and abuse practices and all insurance requirements; and
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3.19.5 the Property is a legal lot or parcel which for all
purposes may be mortgaged, conveyed and otherwise dealt with as a separate
lot(s) or parcel(s) and is not taxed with any other property.
Section 3.20 Board of Directors Approval. All of the terms
contained in this Agreement and the Exhibits hereto shall have been ratified by
the Board of Directors or the Investment Committee of the Board of Directors of
Buyer. The Board of Directors or Investment Committee of the Board of Directors
of Buyer may require other terms and conditions when considering the financial
condition of Seller, the Facility, and other relevant matters.
Section 3.21 ACH Transfer. Buyer shall have received written
authorizations of Lessee under the Lease, in a form reasonably satisfactory to
Buyer authorizing Buyer to debit Lessee's account at an Electronic Automated
Clearing House Network ("ACH") member bank on the fifth (5th) day of each
calendar month following the Commencement Date in an amount equal to the Minimum
Rent then due under the Lease, and Buyer shall have received a voided blank
check of Lessee which shows Lessee's account number and the ACH member bank's
routing number.
Section 3.22 Tax Counsel Approval. Buyer's tax counsel for
"REIT" purposes shall have reviewed and approved the terms of this Agreement,
the other Transaction Documents and any other instrument, document or agreement
executed in connection herewith or therewith.
Section 3.23 Third-Party Transferor Agreements. If applicable,
Buyer shall have received and, to the extent any provisions thereof survived the
Closing thereunder, approved any agreement to purchase between Seller and/or its
Affiliates and any third-party transferor relating to the Property, or any
portion thereof, or the business conducted thereon.
Section 3.24 Appraisal. Buyer shall have received and approved
an appraisal of the Property from Valuation Counselors, Inc., in form and
substance reasonably satisfactory to Buyer and setting forth a value of not less
than the Purchase Price.
Section 3.25 Market Feasibility and Other Due Diligence. Buyer
shall have received and approved such market and feasibility studies with
respect to the Property as Buyer shall reasonably desire and Buyer shall be
reasonably satisfied with the completion of such other due diligence items as
are customary in a transaction of this type.
Upon the mutual execution and delivery of this Agreement by Seller and Buyer and
the payment and authorized release by Buyer of the Purchase Price to Seller, the
conditions set forth in Sections 3.1 through 3.25 above shall be deemed
satisfied.
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ARTICLE 4
CONDITIONS TO THE OBLIGATION OF SELLER TO CLOSE
The obligations of Seller hereunder are subject to the
satisfaction or waiver by Seller of the following conditions:
Section 4.1 Performance. Buyer shall have performed each and
all of the covenants and obligations required to be performed by it on or prior
to the Closing;
Section 4.2 Representations and Warranties. Each and all of
the representations and warranties of Buyer hereunder shall be true and correct
on and as of the Closing Date, as though given as of the Closing Date; and
Section 4.3 Transaction Documents. Buyer shall have executed
and delivered to Seller two (2) counterpart originals of the Lease, Bill of Sale
and Assignment and Commitment Letter Amendment, together with any other
documents or instruments required hereunder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1 By Seller. Seller represents and warrants on the
Closing Date as follows:
5.1.1 Seller is duly organized, validly existing and, to the
extent applicable, in good standing under the laws of its state of
organization/formation, is qualified to do business and, to the extent
applicable, in good standing in the State and has full corporate power,
authority and legal right to execute and deliver and to perform and observe the
provisions of this Agreement, the other Transaction Documents and all other
instruments provided for herein and the Exhibits hereto to which it is a party,
and otherwise carry out the transactions contemplated hereunder and thereunder;
5.1.2 this Agreement and the other Transaction Documents and
all other documents to be executed by Seller hereunder have been duly
authorized, executed and delivered by Seller, and constitute and will constitute
the valid and binding obligations of Seller enforceable against it in accordance
with their respective terms;
5.1.3 Seller is solvent, and to the Best Knowledge of Seller,
Seller (i) has timely and accurately filed all tax returns required to be filed
by it, and (ii) is not in default in the payment of any taxes levied or assessed
against it or any of its assets, or subject to any judgment, order, decree, rule
or regulation of any Governmental Authority which would, in each case or in the
aggregate, adversely
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affect the financial condition or operations of Seller or the condition,
ownership or use for the Primary Intended Use of the Property, or the ability of
the Seller to carry out the transactions contemplated hereunder or under the
Exhibits hereto;
5.1.4 no consent, approval or other authorization of, or
registration, declaration or filing with, any Governmental Authority is required
for the due execution and delivery of this Agreement, any of the other
Transaction Documents or any other documents to be executed by Seller hereunder,
or for the performance by or the validity or enforceability thereof against
Seller, other than the recording or filing for recordation of the Deed;
5.1.5 Except as set forth on Schedule 2 hereto, there are no
actions, proceedings or investigations, including Condemnation proceedings or
tax audits, pending (as to which Seller has been served with notice), or to the
Best Knowledge of Seller, pending (as to which Seller has not been served with
notice) or threatened against or affecting Seller or the Property, seeking to
enjoin, challenge or collect damages in connection with the transactions
contemplated hereunder or under any of the other Transaction Documents or which
could reasonably be expected to materially and adversely affect the financial
condition or operations of Seller or the condition, ownership or use for the
Primary Intended Use of the Property or the ability of Seller to carry out the
transactions contemplated hereunder or thereunder, or which in any way
challenge, affect or would challenge or affect the ownership of the Property or
lease of the Facility pursuant to this Agreement or the Lease;
5.1.6 the execution and delivery of this Agreement, the other
Transaction Documents and all other documents to be executed by Seller
hereunder, compliance with the provisions hereof and thereof and the
consummation of the transactions contemplated hereunder and thereunder will not
result in (a) a breach or violation of (i) to the Best Knowledge of Seller, any
Governmental Requirement applicable to Seller or the Property now in effect;
(ii) the Organizational Documents of Seller; (iii) any judgment, order or decree
of any Governmental Authority binding upon Seller; or (iv) any agreement or
instrument to which Seller is a party or by which it is bound; (b) the
acceleration of any obligation of Seller; or (c) to the Best Knowledge of
Seller, the creation of any lien, encumbrance or other matter affecting title
(other than the Lease and the Permitted Encumbrances) to the Property;
5.1.7 to the Best Knowledge of Seller, current local zoning
ordinances, general plans and other applicable land use regulations and all
private covenants, conditions and restrictions, if any, affecting the Property,
permit the transfer of the Property and the use of the Facility for its Primary
Intended Use (and reconstruction and resumption of use in the event of damage,
destruction, or cessation of use) as a matter of right for an unlimited time
period and not merely as a legal non-conforming use;
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5.1.8 Seller has obtained all consents, permits, licenses
approvals or authorizations from Governmental Authorities or other third parties
which are necessary to permit the conveyance of the Property in accordance with
the provisions of this Agreement and the use of the Property by Lessee for its
Primary Intended Use, all of which are in full force and effect, and to the Best
Knowledge of Seller, the Property is in compliance with all applicable zoning
ordinances and the Permitted Exceptions;
5.1.9 to the Best Knowledge of Seller, the Facility is in
compliance in all material respects with all Governmental Requirements and all
insurance requirements;
5.1.10 except as set forth on Schedule 2, no casualty has
occurred with respect to the Property or any portion thereof;
5.1.11 to the Best Knowledge of Seller, (a) there are no
underground tanks or Hazardous Substances currently located on the Property and
no such tanks have ever been located on the Property and no Hazardous Substances
have ever been present, used, stored, treated, released from or disposed of or
on the Property; (b) no enforcement, cleanup, removal or other governmental or
regulatory actions have, at any time, been instituted or threatened with respect
to the Property; (c) there is no current or prior violation or state of
noncompliance with any environmental law relating to Hazardous Substances with
respect to the Property; (d) no claims have been made or threatened by any third
party with respect to the Property relating to damage, contribution, cost
recovery, compensation, loss or injury resulting from or related to any
Hazardous Substance; and (e) there are no current and there have been no prior
businesses engaged in the storage, treatment or disposal of Hazardous Substances
on any property adjacent to the Property;
5.1.12 to the Best Knowledge of Seller, the Property is not
located within an area of special risk with respect to natural or man-made
disasters or hazards, including any Flood Hazard Area;
5.1.13 to the Best Knowledge of Seller, there are no adverse
geological or soil conditions affecting the Property;
5.1.14 to the Best Knowledge of Seller, (a) all public
utilities, including telephone, gas, electric power, sanitary and storm sewer
and water, are available for connection at the boundaries of the Property; (b)
such utilities are adequate for the Primary Intended Use of the Facility; and
(c) the means of ingress and egress, parking, access to public streets and
drainage facilities are adequate for the Primary Intended Use of the Facility;
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5.1.15 to the Best Knowledge of Seller, the Property is a
legal lot(s) or parcel(s) which for all purposes may be mortgaged, conveyed and
otherwise dealt with as a separate legal lot(s) or parcel(s) and is not taxed
with any other property;
5.1.16 no exception to title to and no interest in the
Property known to Seller will materially interfere with the use of the Leased
Property for its Primary Intended Use in accordance with the Lease;
5.1.17 Seller has delivered to Buyer copies of (a) the
unaudited financial statements for Seller for the period ended June 30, 1996,
(b) the audited financial statements for each of ILC for the period ended
December 31, 1995 and the unaudited financial statements for such entities for
the period ended June 30, 1996 and (c) the operating statements for the Facility
for the period ended July 31, 1996, and such financial and/or operating
statements are true, correct and complete in all material respects, have been
prepared from and in accordance with the books and records of Seller, ILC and
the Facility, as applicable, and fairly present the financial position and
results of operations of Seller, ILC and the Facility, respectively, at the
date(s) and for the period(s) indicated;
5.1.18 since June 30, 1996, there has been no material adverse
change in the financial condition of Seller or ILC and since August 1, 1996,
there has been no material adverse change in the financial condition of the
Facility from that disclosed in the operating statements;
5.1.19 Seller has delivered to Buyer copies of all of the
Organizational Documents of Seller and ILC. Such Organizational Documents are
true, correct and complete in all material respects;
5.1.20 to the Best Knowledge of Seller, neither this Agreement
nor any certificate, statement or other document furnished or to be furnished to
Buyer by Seller in connection with the transactions contemplated hereunder and
under the Exhibits hereto 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 make the statements contained herein or therein not misleading;
5.1.21 Buyer is not required to withhold taxes from the
payment of sale proceeds to Seller under the Internal Revenue Code or any
applicable state, commonwealth or local tax laws;
5.1.22 Seller is not a foreign person for purposes of Section
1445 of the Internal Revenue Code;
5.1.23 [Reserved];
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5.1.24 Neither Seller nor any Affiliate of Seller or ILC is
retaining any contiguous or adjacent property to the Property; and
5.1.25 to the Best Knowledge of Seller, the real property tax
accessors' parcel number for the Facility is 60544.001512.
Section 5.2 By Buyer. Buyer represents and warrants on the
Closing Date as follows:
5.2.1 Buyer is duly organized, validly existing and, to the
extent applicable, in good standing under the laws of the state of its
organization/formation; is, or will be on the Closing Date, duly qualified and
authorized to do business in the State, to the extent such qualification is
required to perform its obligations hereunder or under any Transaction Document;
and has full corporate power, authority and legal right to execute and deliver
and to perform and observe the provisions of this Agreement, the Lease and all
other instruments provided for herein to which it is a party, and otherwise
carry out the transactions contemplated hereunder and the Exhibits hereto;
5.2.2 this Agreement and all other documents to be delivered
by Buyer pursuant to this Agreement have been duly authorized, executed and
delivered by Buyer and constitute, and will constitute, the valid and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms;
5.2.3 no consent, approval or other authorization of, or
registration, declaration or filing with, any Governmental Authority is required
for the due execution and delivery of this Agreement, any of the other
Transaction Documents or any other documents to be executed by Buyer hereunder,
or for the performance by or the validity or enforceability thereof against
Buyer, other than the recording or filing for recordation of the Deed; and
5.2.4 the execution and delivery of this Agreement and any
other Transaction Documents by Buyer and the execution and delivery of all other
documents to be executed by Buyer hereunder, compliance with the provisions
hereof and thereof and the consummation of the transactions contemplated
hereunder and thereunder will not result in (a) to the Best Knowledge of Buyer,
a breach or violation of (i) any Governmental Requirement applicable to Buyer
now in effect; (ii) the Organizational Documents of Buyer; (iii) any judgment,
order or decree of any Governmental Authority binding upon Buyer; or (iv) any
agreement or instrument to which Buyer is a party or by which it is bound; (b)
the acceleration of any obligation of Buyer; or (c) to the Best Knowledge of
Buyer, the creation of any lien, encumbrance or other matter affecting title
(other than the Lease and the Permitted Encumbrances) to the Property.
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ARTICLE 6
COVENANTS OF THE PARTIES AND OTHER MATTERS
Section 6.1 Covenants of Seller. For the period from June 1,
1996 through and including the Closing Date, Seller shall (and, as applicable,
Seller represents and warrants that it has):
(a) not dispose(d) of or encumber(ed) or permit(ted) the
disposition or encumbrance of the Property or any portion thereof
except as would be permitted (if at all) under the Lease if the same
were in effect;
(b) not enter(ed) into or assume(d) or permit(ted) to be entered
into or assumed any contract, agreement, obligation, lease, license or
commitment related to the Property except in the ordinary course of
business or as contemplated herein or in the other Transaction
Documents;
(c) not do (done) any act or omit(ted to do) any act which would
cause a breach of any contract, commitment or obligation which would
have a materially adverse effect on the ownership of the Property or
the use thereof for the Primary Intended Use; and
(d) not make (made) or permit(ted) to be made any Capital
Additions (as defined in the Lease) to the Property without the
written approval of Buyer, other than renovations to the Facility
which have been disclosed to Buyer and which are to be completed prior
to the Closing Date.
Section 6.2 Indemnification.
(a) In addition to, and without limiting any indemnification
obligation of Seller, as Lessee, under the Lease, Seller
unconditionally and irrevocably indemnifies, protects and agrees to
defend and hold harmless Buyer and Buyer's officers, directors,
employees, agents and contractors from and against any and all loss,
cost or expense, including reasonable attorneys' fees and costs,
arising from (i) the breach or violation of any representation or
warranty of Seller contained herein; or (ii) the failure of Seller to
satisfy or perform any covenant or other provision contained herein on
its part to be satisfied or performed. Payment shall not be a
condition precedent to recovery under the foregoing indemnification
provision.
(b) Buyer hereby unconditionally and irrevocably indemnifies,
protects and agrees to defend and hold harmless Seller and Seller's
members, officers, directors, employees, agents and contractors from
and against any and all loss, cost or expense, including reasonable
attorneys' fees and costs, arising from (i) the breach or violation of
any representation or warranty of Buyer contained herein; or (ii) the
failure of Buyer to satisfy or perform any covenant or other provision
contained herein on its part to be
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satisfied or performed. Payment shall not be a condition precedent to
recovery under the foregoing indemnification provision.
(c) Notwithstanding anything to the contrary in this Agreement,
if any specific knowledge actually comes to the attention of either
Seller or Buyer prior to the Closing, whether through the other party
hereto or due to such party's own investigations, which knowledge
would negate or make untrue any express representations and warranties
of the other party hereunder, then such specific knowledge shall be
deemed to limit such representations and warranties so as to reduce or
eliminate any liability which such other party may otherwise have had
as a result of the specific breach thereof. For purposes of the
foregoing, no information, matter or item shall be deemed to have
"come to the attention" of a party hereto, unless such information,
matter or item is actually known or under reasonable circumstances
should have been known by an officer or director of such party. In
other words, in no event shall knowledge be imputed to a party simply
because specific knowledge may have "come to the attention" of a
party's agent, consultant or other employee, unless and to the extent
the same is actually known or under reasonable circumstances should
have been known by an officer or director of such party.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Survival; Breach of Representations and
Warranties. The covenants, representations and warranties made by Seller and
Buyer hereunder or in any certificates or other instruments delivered pursuant
to this Agreement shall survive the execution and delivery of this Agreement and
recordation of the Deed provided that (a) with respect to the representations
and warranties of Seller pursuant to Sections 5.1.1, 5.1.2 and 5.1.3 and Buyer
pursuant to Sections 5.2.1 and 5.2.2, for the applicable statute of limitations,
(b) with respect to the representations and warranties of Seller set forth in
Section 5.1.11, for a period of forty-eight (48) months following the date of
Closing, and (c) with respect to any other representation, warranty or covenant
of either Seller or Buyer hereunder or in any certificates or other instruments
delivered pursuant to this Agreement (other than the Transaction Documents), for
a period of twenty-four (24) months from the date of Closing. The foregoing
limitation on the survival of the representations, warranties and covenants of
Seller hereunder shall in no way be deemed to affect or limit Seller's
obligations as Lessee under the Lease or the obligations of Seller and/or
Guarantor under the other Transaction Documents. Neither Seller nor Buyer shall
be in breach or default of any covenant, representation or warranty of such
party hereunder unless such covenant remains unperformed or such representation
or warranty remains untrue and uncured for thirty (30) days after written notice
thereof from the other party; provided, however, that if the nature of such
covenant or representation or warranty is such that the same cannot be performed
and/or cured with due diligence in such thirty (30) day period, then the party
obligated to perform such covenant or to cure such representation or warranty
shall not be in breach or default hereunder if such party proceeds promptly and
with due diligence to cure the same and diligently completes the cure thereof.
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Section 7.2 Brokers. Buyer and Seller each represents and
warrants to the other that it has not dealt with any broker, finder or similar
agent on account of any of the transactions contemplated hereunder and under the
Exhibits hereto and each agrees to indemnify, defend, protect and hold harmless
the other from and against any claims, causes of action or the like brought
against the other, by any broker, finder or similar agent for a commission or
fee on account of the transactions contemplated hereunder and under the Exhibits
hereto resulting from their respective acts.
Section 7.3 Notices. Any notice, consent, approval, demand or
other communication required or permitted to be given hereunder (a "notice")
must be in writing and may be served personally or by U.S. Mail. If served by
U.S. Mail, it shall be addressed as follows:
If to Buyer: Health Care Property Investors, Inc.
10990 Wilshire Boulevard
Suite 1200
Los Angeles, California 90024
Phone: (310) 473-1990
Fax: (310) 444-7817
Attn: Legal Department
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Phone: (213) 485-1234
Fax: (213) 891-8763
Attn: David H. Vena, Esq.
If to Seller: Integrated Living Communities at Cabot Pointe, Inc.
2431 Old 41 Road
Bonita Springs, Florida 34135
Phone: (941) 947-7200
Fax: (941) 495-0711
Attn: President and CEO
with copies to: Integrated Living Communities at Cabot Pointe, Inc.
2431 Old 41 Road
Bonita Springs, Florida 34135
Phone: (941) 947-7200
Fax: (941) 495-0711
Attn: General Counsel
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and Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Phone: (212) 704-6000
Fax: (212) 704-6288
Attn: Andrea Paretts Ascher, Esq.
Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return receipt. In addition,
either party may send notices by a nationally recognized overnight courier
service which provides written proof of delivery (such as U.P.S. or Federal
Express). Any notice sent by a nationally recognized overnight courier shall be
effective on the date of delivery to the party at its address specified above as
set forth in the courier's delivery receipt. Either party may, by notice to the
other from time to time in the manner herein provided, specify a different
address for notice purposes. The foregoing facsimile numbers are for convenience
only. Notice by facsimile shall not be deemed an effective manner of giving
notice for purposes of this Agreement.
Section 7.4 Attorneys' Fees. If Buyer or Seller brings an
action at law or other proceeding against the others to enforce any of the
terms, covenants or conditions hereof or any instrument executed pursuant to
this Agreement, or by reason of any breach or default hereunder or thereunder,
the party prevailing in any such action or proceeding and any appeal thereupon
shall be paid all of its costs and reasonable attorneys' fees.
Section 7.5 Successors. This Agreement shall be binding upon
Buyer, Seller and their respective successors and assigns. Notwithstanding the
foregoing, the rights and obligations of Seller and Buyer under this Agreement
may not be assigned without the prior written consent of the other party, which
consent may be given or withheld in the sole and absolute discretion of such
other party; provided, however, that Buyer may, however, upon written notice to
Seller, assign its rights and obligations hereunder to any transferee of Buyer's
interest in the Property following the Closing without the consent of Seller
upon written notice to Seller.
Section 7.6 Waiver. No delay in exercising any right or remedy
shall constitute a waiver thereof, and no waiver by Buyer or Seller of a breach
of any covenant of this Agreement shall be construed as a waiver of any
preceding or succeeding breach of the same or any other covenant or condition of
this Agreement.
Section 7.7 Invalidity. In the event any one or more of the
provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement.
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Section 7.8 Governing Law. EXCEPT WHERE FEDERAL LAW IS
APPLICABLE AND UNLESS OTHERWISE EXPRESSLY PROVIDED HEREIN, THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE.
Section 7.9 Bulk Sales. Buyer and Seller hereby waive
compliance with the notice provisions of any bulk sales statute in effect in the
State. Seller shall indemnify, defend, protect and hold harmless Buyer from and
against any and all claims, losses, damages, liabilities, costs and expenses
(including reasonable legal fees and expenses) paid or incurred by Buyer and
arising directly or indirectly out of noncompliance with bulk sales statutes.
Section 7.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be a valid and binding original,
but all of which together shall constitute one and the same instrument.
Section 7.11 Entire Agreement. This Agreement, together with
the other Transaction Documents, the Exhibits hereto and thereto and such other
documents as are contemplated hereunder or thereunder, constitute the entire
agreement of the parties in respect of the subject matter hereof, and may not be
changed or modified except by an agreement in writing signed by the parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed effective as of the day and year first above written.
"Buyer"
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation
By:_________________________________
Its:________________________________
"Seller"
INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
a Delaware corporation
By:_________________________________
Its:________________________________
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EXHIBIT A
Legal Description of the Land
The Land referred to is situate in the unincorporated area of the
County of Manatee, State of Florida and is described as follows:
Begin 60 feet South of the northeast corner of Section 15,
Township 35 South, Range 17 East, and run thence West along the South line of
Road Right of Way a distance of 2310 feet; thence run South parallel to the East
line of 26th Street a distance of 417 feet for Point of Beginning; thence
continue in the same direction a distance of 238.91 feet; thence West 308.12
feet more or less to the East line of 26th Street; thence North along the East
line of 26th Street distance of 239.41 feet; thence East Parallel to the South
line of the property hereby conveyed a distance of 308.12 feet more or less to
the Point of beginning, said property lying in and being in Manatee County,
Florida; LESS AND EXCEPT the Westerly 17.00 feet thereof as disclosed in the
Warranty Deed dated June 12, 1996, recorded July 3, 1996 in O.R. Book 1491, Page
6630, Manatee County, Records.
<PAGE>
EXHIBIT B
Form of Bill of Sale and Assignment
[See Attached]
<PAGE>
EXHIBIT C
Form of Lease
[See Attached]
<PAGE>
EXHIBIT D
Form of Guaranty
[See Attached]
<PAGE>
EXHIBIT E
Itemized List of Personal Property
1. BEDROOM
QUAN UNIT DESCRIPTION
---- ---- -----------
54 ea Table Lamp
54 ea 3/3 Headboard, Wood
54 ea 3/3 Bedframe
54 ea 3/3x76 Health Care Mattress & Box Spring
54 ea 3-Dr. Chest
54 ea Nightstand
54 ea Upholstered Wing Chair
2. DINING AREAS
QUAN UNIT DESCRIPTION
---- ---- -----------
11 ea Dining Table Top, 36x36, bullnose wood edge and Black
Wrinkle Tilt Top Table Base
1 ea Conference/Dining table 48x86, with two bases
1 ea 60" Diameter Table and table base, same finish
30 ea Dining chair, finish Valley Oak, Brittany upholstery
30 ea Dining chair, finish Valley Oak, Wisteria upholstery
1 ea Framed Ricks Print at Waitress Station
2 ea Framed Lea Prints at Water Fountain
2 ea Framed Monet Prints in Private Dining Room
1 ea Potted Silk Plant in Private Dining Room
1 lot Drapery & hardware in Private Dining Room
E-1
<PAGE>
3. PUBLIC AREAS
QUAN UNIT DESCRIPTION
---- ---- -----------
3 ea Planter Divider 72x18x60H, with Silk Plants in Tray
3 ea Column Pedestal 12x12x38H with silk floral arrangements on top
of columns
1 ea Trough Planter at entrance, 6' long, laminated with Floral
Arrangements in pots
7 ea Tub Chair, Blue
7 ea Tub Chair, Lilac
3 ea Chippendale Sofa, Print Fabric
3 ea Chippendale Sofa, Blue Fabric
4 ea Wing Chair, Brittany Upholstery
6 ea Upholstered Chair, Upholster Radical Blue
6 ea Lamp Table, medium oak
3 ea Cocktail Table, medium oak
1 ea Sofa Table 48x20x28H, medium oak
1 ea Framed Angel Irises at Entrance
2 ea Framed Graves Prints on South Wall
2 ea Potted silk plants
4. OFFICES
QUAN UNIT DESCRIPTION
---- ---- -----------
1 ea Wood Exec Desk 72x36, double ped, medium oak
1 ea Console with double ped and keyboard drawer
1 ea Desk chair with arms
E-2
<PAGE>
4. OFFICES (CONTINUED)
QUAN UNIT DESCRIPTION
---- ---- -----------
2 ea Framed Walter Prints on wall
3 ea Lounge Chair
1 ea Lamp Table, Medium Oak
1 ea Table Lamp
1 ea Brass desk lamp
1 lot Drapery and Hardware
1 ea Office chair at Nurse Station
1 ea Office Chair at Control Station
1 ea Desk, 30x60 with LH return, medium oak, in
Staff Lounge
1 ea Office Chair, in Staff lounge
1 ea Lamp Table in Staff Lounge
1 ea Table Lamp
1 ea Desk Lamp
2 ea Lounge Chair in Staff lounge
5. LANAI
QUAN UNIT DESCRIPTION
---- ---- -----------
24 ea Lounge Chair, beige with Teal upholstery
3 ea 48" Patio Table with cast stone tops
6. STAFF LOUNGE
QUAN UNIT DESCRIPTION
---- ---- -----------
15 ea Metal lockers in one unit
4 ea Staff dining chairs
4 ea Staff lounge chairs
E-3
<PAGE>
6. STAFF LOUNGE (CONTINUED)
QUAN UNIT DESCRIPTION
---- ---- -----------
1 ea 42" laminate dining table and base
7. OFFICES
QUAN UNIT DESCRIPTION
---- ---- -----------
1 ea Office chair
1 ea L-shaped workstation with acoustic panels,
task lighting, overhead cabinet storage,
laminate worksurfaces, and two pedestals
8. ACTIVITIES DIRECTOR
QUAN UNIT DESCRIPTION
---- ---- -----------
2 ea Visitor chairs, upholstered
1 ea Table lamp
2 ea Desk lamp
9. GENERAL EQUIPMENT ASSETS
3 Vacuum Cleaners
1 Carpet Extractor
1 Wet and Dry Vac
Electric Drill
Alumin Shed
Clocks
Lock A/C Covers
TV and Stand
Window Tint
70 Soap Dispensers
35 Paper Dispensers
E-4
<PAGE>
9. GENERAL EQUIPMENT ASSETS (CONTINUED)
Waste Baskets
Handbars
Time Clock
Laundry Cart
2 Folding Carts
Linen Cart
34 Memory Boxes
Parking Signs
Overhead Table
5 Framed Evacuation Maps
2 Housekeeping Carts
Inside Signs
Outside Signs
Outside Fence
Tape Printer
2 Electric Floor Blowers
19" TV and Stand
10. STAFF LOUNGE ASSETS
20 Metal Lockers
4 Staff Dining Chairs
1 Small Dining Table
2 Lounge Chairs
1 Table Lamp
E-5
<PAGE>
10. STAFF LOUNGE ASSETS (CONTINUED)
1 Lamp Table
Refrigerator
11. OFFICE ASSETS
A. First Office
1 Wood Exec Desk 76/36
1 Console/Drawers
1 Desk Chair
2 Lounge Chairs
Table w/Lamp
Painting/Artwork
Window Treatment
Office chair
L-shaped Work Station
Stamp Machine
Fax Machine
B. Second Office
1 30x60 Desk
Desk Chair
Desk Lamp
2 Side Chairs
l Lamp Table
1 Table Lamp
1 Canon Xerox Copier
E-6
<PAGE>
11. OFFICE ASSETS (CONTINUED)
1 Dell Computer
1 Laser Jet Printer
Computer Stand
Filing Cabinet
12. DIETARY ASSETS
Bus Cart
4 Doz. Corning Cup 8 oz.
6 Doz. Corning 9" Plate
4 Doz. 8 oz. Bowl
4 Doz. 5 oz. Dish
4 Doz. 6" Saucer
1 Chef Knife Kit
Robot Coupe Food Processor
Microwave
Meat Slicer
Mixer
Toaster
Light Board
Oak Serving Cart
FVT Dining Room Dishware
E-7
<PAGE>
EXHIBIT F
Commitment Letter Amendment
[See Attached]
<PAGE>
SCHEDULE 1
Permitted Encumbrances
1. Easement granted to Florida Power & Light Company, from William D. Niven,
dated March 21, 1996, recorded March 21, 1996 in O.R. Book 1462, Page 7583,
Manatee County Records.
<PAGE>
SCHEDULE 2
Disclosure Schedule
None.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS............................................................................... 1
ARTICLE 2 TERMS OF THE SALE AND LEASEBACK........................................................... 6
Section 2.1 Sale...................................................................................... 6
Section 2.2 Closing................................................................................... 6
Section 2.3 Conveyance................................................................................ 6
Section 2.4 Prorations................................................................................ 7
Section 2.5 Costs..................................................................................... 8
Section 2.6 Reimbursement of Buyer's Transaction Costs................................................ 8
Section 2.7 Lease Commitment Fee...................................................................... 9
Section 2.8 Nature of Buyer's Interest................................................................ 9
ARTICLE 3 CONDITIONS TO THE OBLIGATION OF BUYER TO CLOSE............................................ 9
Section 3.1 Performance............................................................................... 9
Section 3.2 Representations and Warranties............................................................ 9
Section 3.3 Default................................................................................... 10
Section 3.4 Recordation and Costs..................................................................... 10
Section 3.5 Title Insurance........................................................................... 10
Section 3.6 Survey.................................................................................... 11
Section 3.7 Utilities and Access...................................................................... 11
Section 3.8 Site Visits............................................................................... 11
Section 3.9 Environmental Report...................................................................... 11
Section 3.10 Entitlements.............................................................................. 11
Section 3.11 Physical Inspections...................................................................... 12
Section 3.12 Condemnation; Casualty.................................................................... 12
Section 3.13 Financial Condition....................................................................... 12
Section 3.14 Proceedings............................................................................... 13
Section 3.15 Records................................................................................... 13
Section 3.16 Insurance................................................................................. 13
Section 3.17 Letter(s) of Credit....................................................................... 13
Section 3.18 Transaction Documents..................................................................... 13
Section 3.19 Opinion of Counsel........................................................................ 13
Section 3.20 Board of Directors Approval............................................................... 15
Section 3.21 ACH Transfer.............................................................................. 15
Section 3.22 Tax Counsel Approval...................................................................... 15
Section 3.24 Appraisal................................................................................. 15
Section 3.25 Market Feasibility and Other Due Diligence................................................ 15
ARTICLE 4 CONDITIONS TO THE OBLIGATION OF SELLER TO CLOSE........................................... 16
Section 4.1 Performance............................................................................... 16
Section 4.2 Representations and Warranties............................................................ 16
i
<PAGE>
Page
Section 4.3 Transaction Documents..................................................................... 16
ARTICLE 5 REPRESENTATIONS AND WARRANTIES............................................................ 16
Section 5.1 By Seller................................................................................. 16
Section 5.2 By Buyer.................................................................................. 20
ARTICLE 6 COVENANTS OF THE PARTIES AND OTHER MATTERS................................................ 21
Section 6.1 Covenants of Seller....................................................................... 21
Section 6.2 Indemnification........................................................................... 21
ARTICLE 7 MISCELLANEOUS............................................................................. 22
Section 7.1 Survival; Breach of Representations and Warranties........................................ 22
Section 7.2 Brokers................................................................................... 23
Section 7.3 Notices................................................................................... 23
Section 7.4 Attorneys' Fees........................................................................... 24
Section 7.5 Successors................................................................................ 24
Section 7.6 Waiver.................................................................................... 24
Section 7.7 Invalidity................................................................................ 24
Section 7.8 Governing Law............................................................................. 25
Section 7.9 Bulk Sales................................................................................ 25
Section 7.10 Counterparts.............................................................................. 25
Section 7.11 Entire Agreement.......................................................................... 25
</TABLE>
EXHIBITS
Exhibit A - Legal Description of the Land Exhibit B - Form of Bill of Sale and
Assignment Exhibit C - Lease Exhibit D - Guaranty Exhibit E - Itemized List of
Personal Property Exhibit F - Commitment Letter Amendment
SCHEDULES
Schedule 1 - List of Permitted Encumbrances
Schedule 2 - Disclosure Schedule
ii
L E A S E
HEALTH CARE PROPERTY INVESTORS, INC.,
as Lessor
AND
INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
as Lessee
Dated as of September 30, 1996
<PAGE>
LEASE
THIS LEASE ("Lease") is dated as of the 30th day of September,
1996, and is between HEALTH CARE PROPERTY INVESTORS, INC., a Maryland
corporation ("Lessor") and INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
a Delaware corporation ("Lessee").
ARTICLE I.
1. Leased Property; Term
Upon and subject to the terms and conditions hereinafter set forth,
Lessor leases to Lessee and Lessee leases from Lessor all of Lessor's
rights and interest in and to the following (collectively the "Leased
Property"):
(a) the real property described in Exhibit A attached hereto
(collectively, the "Land");
(b) all buildings, structures, Fixtures and other improvements of
every kind now or hereafter located on the Land including, alleyways
and connecting tunnels, sidewalks, utility pipes, conduits and lines
(on-site and off-site to the extent Lessor has obtained any interest
in the same), parking areas and roadways appurtenant to such buildings
and structures and Capital Additions funded by Lessor (collectively,
the "Leased Improvements");
(c) all easements, rights and appurtenances relating to the Land
and the Leased Improvements (collectively, the "Related Rights"); and
(d) all equipment, machinery, fixtures, and other items of real
and/or personal property, including all components thereof, now and
hereafter located in, on or used in connection with and permanently
affixed to or incorporated into the Leased Improvements, including 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, apparatus, sprinkler systems, 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 to constitute
real estate, together with all replacements, modifications,
alterations and additions thereto (collectively, the "Fixtures"); and
(e) the machinery, equipment, furniture and other personal
property described on Exhibit B attached hereto, together with all
replacements and substitutes therefor (collectively, "Lessor's
Personal Property").
1
<PAGE>
SUBJECT, HOWEVER, to the easements, encumbrances, covenants,
conditions and restrictions and other matters which affect the Leased Property
as of the date hereof or the Commencement Date or created thereafter as
permitted hereunder to have and to hold for (1) a fixed term (the "Fixed Term")
commencing on the Commencement Date, as defined below, and ending at 11:59 p.m.
Los Angeles time on the later of (A) the expiration of the fifteenth (15th)
Lease Year and (B) the expiration of the "Fixed Term" of the Newest Facility
Group Lease (as defined below), but in no event later than the expiration of the
20th Lease Year and (2) the Extended Terms provided for in Article XIX unless
this Lease is earlier terminated as hereinafter provided. Following the
Commencement Date, the parties shall execute an amendment to this Lease in
substantially the form attached hereto as Exhibit C to confirm certain matters,
including the Commencement Date of this Lease and the Minimum Rent determined
pursuant to Section 3.1 below. Upon any change in the Minimum Rent in accordance
with the provisions of Section 3.1 below or otherwise pursuant to this Lease, at
Lessor's request, the parties shall similarly execute an amendment to this Lease
confirming such matters. In addition, upon the "Commencement Date" of any
Facility Group Lease (as defined below) following the Commencement Date of this
Lease (if any), including the Newest Facility Group Lease, Lessor may prepare
and, if prepared, Lessor and Lessee shall execute and deliver an amendment to
this Lease confirming that (x) such Facility Group Lease is a "Facility Group
Lease" for purposes of this Lease, and (y) the extension of the Fixed Term of
this Lease to be coterminous with the "Fixed Term" of the Newest Facility Group
Lease, as applicable. Notwithstanding the foregoing, the failure of Lessor to
prepare and/or the failure of Lessee to so execute and deliver any such
amendment shall not, absent manifest error, affect Lessor's determination of the
matters to be confirmed thereby.
ARTICLE II.
2. Definitions. For all purposes of this Lease, except as
otherwise expressly provided or unless the context otherwise requires, (i) the
terms defined in this Article have the meanings assigned to them in this Article
and include the plural as well as the singular; (ii) all accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
GAAP as at the time applicable; (iii) all references in this Lease to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of this Lease; (iv) the word "including" shall
have the same meaning as the phrase "including, without limitation," and other
similar phrases; and (v) the words "herein," "hereof" and "hereunder" and other
similar words refer to this Lease as a whole and not to any particular Article,
Section or other subdivision:
ACH: As defined in Section 3.1.
Additional Charges: As defined in Article III.
Additional Rent: As defined in Article III.
2
<PAGE>
Affiliate: Any Person which, directly or indirectly, controls
or is controlled by or is under common control with any other Person. For
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 fifty percent (50%) or more of the voting securities,
partnership interests or other equity interests, including any Subsidiary of a
Person. Notwithstanding the foregoing, when used with respect to any
corporation, the term "Affiliate" shall mean (i) any Person which owns, directly
or indirectly (including through one or more intermediaries), fifty percent
(50%) or more of any class of voting security of such corporation, which class
has the power to elect a majority of the Board of Directors, (ii) any Subsidiary
of such corporation and (iii) any Subsidiary of a Person described in clause
(i).
Appraiser: As defined in Article XXXIV.
Award: All compensation, sums or anything of value awarded,
paid or received on a total or partial Condemnation.
Bankruptcy Code: The United Stated Bankruptcy Code (11 U.S.C.
ss. 101 et seq.), and any successor statute or legislation thereto.
Base Gross Revenues: (i) For the Fixed Term, Fifty Percent
(50%) of the Gross Revenues for the second Lease Year of the Fixed Term and (ii)
for each Extended Term, if any, Fifty Percent (50%) of the Gross Revenues for
the first Lease Year of such Extended Term. In determining Additional Rent for
any partial Lease Year, Base Gross Revenues for such partial Lease Year shall be
determined by multiplying the applicable Base Gross Revenues by a fraction, the
numerator of which is the number of days in the partial Lease Year and the
denominator of which is 365.
BLS: Bureau of Labor Statistics, U.S. Department of Labor.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which national banks in the City of New York, New
York are authorized, or obligated, by law or executive order, to close.
Capital Additions: One or more new buildings, or one or more
additional structures annexed to any portion of any of the Leased Improvements,
or the material expansion of existing improvements, which are constructed on any
parcel or portion of the Land, during the Term, including construction of a new
wing or new story, or the renovation of existing improvements on the Leased
Property in order to provide a functionally new facility needed to provide
services not previously offered.
3
<PAGE>
Capital Addition Costs: The costs of any Capital Addition made
to the Leased Property whether paid for by Lessee or Lessor, including (i) all
permit fees and other costs imposed by any governmental authority, the cost of
site preparation, the cost of construction including materials and labor, the
cost of supervision and related design, engineering and architectural services,
the cost of any fixtures, and if and to the extent approved by Lessor, the cost
of construction financing; (ii) fees paid to obtain necessary licenses and
certificates; (iii) if and to the extent approved by Lessor in writing and in
advance, the cost of any land contiguous to the Leased Property which is to
become a part of the Leased Property purchased for the purpose of placing
thereon the Capital Addition or any portion thereof or for providing means of
access thereto, or parking facilities therefor, including the cost of surveying
the same; (iv) the cost of insurance, real estate taxes, water and sewage
charges and other carrying charges for such Capital Addition during
construction; (v) the cost of title insurance; (vi) reasonable fees and expenses
of legal counsel; (vii) filing, registration and recording taxes and fees;
(viii) documentary stamp and similar taxes; and (ix) all reasonable costs and
expenses of Lessor and any Person which has committed to finance the Capital
Addition, including (a) the reasonable fees and expenses of their respective
legal counsel; (b) printing expenses; (c) filing, registration and recording
taxes and fees; (d) documentary stamp and similar taxes; (e) title insurance
charges and appraisal fees; (f) rating agency fees; and (g) commitment fees
charged by any Person advancing or offering to advance any portion of the
financing for such Capital Addition.
Cash Flow: The net income from the Facility, determined on the
basis of GAAP applied on a consistent basis, plus the sum of (i) depreciation
and amortization expense; (ii) Rent and other expenses payable hereunder,
excluding, however, Impositions; (iii) management fees; and (iv) income taxes
paid by Lessee; less the sum of (x) a management fee allowance of five percent
(5%) of Gross Revenues for the corresponding period plus (y) an annual Two
Hundred Dollar ($200) per unit reserve, pro-rated for the corresponding period.
Cash Flow Coverage: For any period, calculated as of the last
day of the period, the ratio of Cash Flow attributable to such period to total
Rent payable for such period under the Lease.
Closing Date: As defined in the Contract of Acquisition.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: The Closing Date.
Commercial Occupancy Arrangement: Any commercial (as opposed
to resident or patient) Occupancy Arrangement.
Competing Facility. Any facility or institution providing
services or goods similar to those provided at the time in question in
connection with the Facility and the
4
<PAGE>
Primary Intended Use or similar to those provided in connection with any other
Permitted Use hereunder as to which Lessee then desires to change the Facility's
Primary Intended Use.
Condemnation: The exercise of any governmental power, whether
by legal proceedings or otherwise, by a Condemnor or a voluntary sale or
transfer by Lessor to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending.
Condemnor: Any public or quasi-public authority, or private
corporation or individual, having the power of Condemnation.
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 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.
Consolidated Net Worth: At any time, with respect to a Person,
the sum of the following for such Person and its consolidated Subsidiaries, as
the case may be, on a consolidated basis determined in accordance with GAAP:
(i) the amount of capital or stated capital (after deducting the
cost of any shares held in its treasury), plus
(ii) the amount of capital surplus and retained earnings (or, in
the case of a capital surplus or retained earnings deficit, minus the
amount of such deficit), minus
(iii) the sum of the following (without duplication of deductions
in respect of items already deducted in arriving at surplus and
retained earnings): (a) unamortized debt discount and expense; and (b)
any write-up in book value of assets resulting from a revaluation
thereof subsequent to the most recent Consolidated Financials prior to
the date hereof, excluding, however, any (i) net write-up in value of
foreign currency in accordance with GAAP, (ii) write-up resulting from
a reversal of a reserve for bad debts or depreciation, and (iii)
write-up resulting from a change in methods of accounting for
inventory.
Contract of Acquisition: The agreement of even date herewith
by and among Lessor and Lessee relative to the acquisition by Lessor of the
Leased Property.
5
<PAGE>
Cost of Living Index: The Consumer Price Index for All Urban
Consumers, U.S. City Average (1982-1984 = 100), published by the BLS, or such
other renamed index. If the BLS changes the publication frequency of the Cost of
Living Index so that a Cost of Living Index is not available to make a
cost-of-living adjustment as specified herein, the cost-of-living adjustment
shall be based on the percentage difference between the Cost of Living Index for
the closest preceding month for which a Cost of Living Index is available and
the Cost of Living Index for the comparison month as required by this Lease. If
the BLS changes the base reference period for the Cost of Living Index from
1982-84 = 100, the cost-of-living adjustment shall be determined with the use of
such conversion formula or table as may be published by the BLS. If the BLS
otherwise substantially revises, or ceases publication of the Cost of Living
Index, then a substitute index for determining cost-of-living adjustments,
issued by the BLS or by a reliable governmental or other nonpartisan
publication, shall be reasonably selected by Lessor.
County: The County or Township in which the Leased Property is
located.
CPI Increase: The percentage increase (but not decrease) in
(i) the Cost of Living Index published for the beginning of the first Quarter of
each Lease Year, over (ii) the Cost of Living Index published for the beginning
of the first Quarter of the immediately prior Lease Year.
CPI Rent: An amount equal to the sum of (i) the product of (y)
the sum of the prior Lease Year's Minimum Rent and Additional Rent, times (z)
the current CPI Increase and (ii) the prior Lease Year's Additional Rent.
Date of Taking: The date the Condemnor has the right to
possession of the property being condemned.
Environmental Costs: As defined in Article XXXVI.
Environmental Laws: Environmental Laws shall mean any and all
federal, state, municipal and local laws, statutes, ordinances, rules,
regulations, guidances, policies, orders, decrees, judgments, whether statutory
or common law, as amended from time to time, now or hereafter in effect, or
promulgated, pertaining to the environment, public health and safety and
industrial hygiene, including the use, generation, manufacture, production,
storage, release, discharge, disposal, handling, treatment, removal,
decontamination, clean-up, transportation or regulation of any Hazardous
Substance, including the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Comprehensive Environmental Response Compensation
and Liability Act, the Resource Conservation and Recovery Act, the Federal
Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and the
Occupational Safety and Health Act.
Event of Default: As defined in Article XVI.
6
<PAGE>
Extended Term(s): As defined in Article XIX.
Facility: The current 54-bed, 17,000 square foot Alzheimer's
assisted-living care facility being operated or proposed to be operated on the
Leased Property.
Facility Group Leases: Those certain other leases described on
Exhibit E attached hereto and incorporated herein by this reference, together
with all other leases hereinafter entered into between Lessor or an Affiliate of
Lessor and Lessee or an Affiliate of Lessee which recite that they are "Facility
Group Leases". This Lease shall be deemed a "Facility Group Lease" for purposes
of each other Facility Group Lease. Notwithstanding the foregoing, the following
shall apply:
(i) If the Leased Property is transferred or conveyed
by Lessor to any Person (other than an Affiliate of Lessor) this Lease
shall be deemed a "Facility Group Lease" only with respect to each
other Facility Group Lease which is also transferred or conveyed by
Lessor or an Affiliate of Lessor to the same Person and/or its
Affiliate(s); and
(ii) If the "Leased Property" of any other Facility
Group Lease is transferred or conveyed by Lessor or any Affiliate of
Lessor to any Person (other than Lessor or an Affiliate of Lessor),
such Facility Group Lease shall be deemed a "Facility Group Lease" with
respect to this Lease only to the extent that the Leased Property is
also transferred or conveyed to the same Person and/or its
Affiliate(s).
Facility Mortgage: As defined in Article XIII.
Facility Mortgagee: As defined in Article XIII.
Facility Operating Deficiency: A deficiency in the conduct of
the operation of the Facility which, in the reasonable determination of Lessor,
if not corrected within a reasonable time, would jeopardize the Facility's
licensure or certification under government reimbursement programs, to the
extent applicable.
Fair Market Rental: The fair market rental value of the Leased
Property, or applicable portion thereof, including any periodic increases
therein, determined in accordance with the appraisal procedures set forth in
Articles XXXIV. Notwithstanding the foregoing, if Lessee shall enter into a
Master Sublease in accordance with the applicable provisions of Article XXIV in
a bona fide, arms-length transaction with any Person (other than an Affiliate of
Lessee), then the Fair Market Rental of the Leased Property, or the applicable
portion thereof, for purposes of Section 24.2(b) shall be the rent (however
denominated and paid) payable under such Master Sublease, unless in connection
with the transaction(s) as to which such Master Sublease is a part (including
any step, tiered or indirect transactions), additional or other rent or
consideration is payable to Lessee or any Affiliate of Lessee in addition to the
rent payable under the Master Sublease, in which event the appraisers appointed
pursuant
7
<PAGE>
to the appraisal procedures set forth in Article XXXIV shall determine whether
the rent payable to Lessee or any Affiliate of Lessee under the Master Sublease
is reasonably related to the Fair Market Rental of the Leased Property, or
applicable portion thereof, as also determined pursuant to this definition and
the appraisal procedures set forth in Article XXXIV. If so reasonably related,
the Fair Market Rental of the Leased Property for purposes of Section 24.2(b)
shall be deemed the rent payable under such Master Sublease. Otherwise, the Fair
Market Rental of the Leased Property, or applicable portion thereof, for
purposes of such Section 24.2(b) shall be determined pursuant to this definition
and the appraisal procedures set forth in Article XXXIV, but in no event greater
than the total rent and other consideration payable to Lessee or any Affiliate
of Lessee in connection with such Master Sublease and the other transaction(s)
as to which such Master Sublease is a part. As used in this definition, the term
"rent" shall mean all consideration paid or given, directly or indirectly, to
Lessee or any Affiliate of Lessee under the Master Sublease and/or in connection
with the transaction(s) or to which such Master Sublease is a part. For purposes
of this definition, the definition of "Fair Market Value" below and the
provisions of Section 24.8 below, the term "consideration" shall mean and
include money, services, property and other things of value, including payment
of costs, cancellation of indebtedness, discounts, rebates, barter and the like.
For purposes of Section 24.2 below and the payment of "Transfer Consideration"
to Lessor as provided therein, if any rent or other consideration is payable to
Lessee or any Affiliate of Lessee in a form other than cash, Lessor shall be
entitled to receive the applicable "Transfer Consideration" on account thereof
in cash based upon the fair market value of such consideration.
Fair Market Value: The fair market value of the Leased
Property, and all Capital Additions, determined in accordance with the appraisal
procedures set forth in Article XXXIV or Section 35.1, as applicable. Fair
Market Value shall be the higher value obtained by assuming that the Leased
Property is unencumbered by this Lease or encumbered by this Lease. Further, in
determining Fair Market Value the positive or negative effect on the value of
the Leased Property attributable to the interest rate, amortization schedule,
maturity date, prepayment penalty and other terms and conditions of any
encumbrance which will not be removed at or prior to the date as of which such
Fair Market Value determination is being made shall be taken into account. The
Leased Property shall be valued at its highest and best use which shall be
presumed to be as a fully-permitted Facility operated in accordance with the
provisions of this Lease. Fair market value of the Leased Property shall not
include "going concern" or "business enterprise" value attributable to factors
other than the highest and best use of the Leased Property. In addition, in
determining Fair Market Value, the negative value of (a) any deferred
maintenance or other items of repair or replacement of the Leased Property, (b)
any then current or prior licensure or certification violations and/or
admissions holds and (c) any other breach or failure of Lessee to perform or
observe its obligations hereunder shall not be taken into account; rather, the
Leased Property, and every part thereof, shall be deemed to be in the condition
required by this Lease (i.e., good order and repair) and Lessee shall at all
times be deemed to have operated the Facility in compliance with and to have
performed all obligations of the Lessee under this Lease. Notwithstanding the
foregoing, in the event of a bona fide, arms-length Transfer with any
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Person (other than an Affiliate of Lessee and other than pursuant to a Master
Sublease), the Fair Market Value of the Leased Property for purposes of Section
24.2(c) below shall be the gross consideration (as defined above) payable to
Lessee or any Affiliate of Lessee in connection with such Transfer for Lessee's
leasehold interest in the Leased Property created under this Lease, unless in
connection with the transaction(s) as to which such Transfer is a part
(including any step, tiered or indirect transactions), additional or other gross
consideration is payable to Lessee or any Affiliate of Lessee in addition to the
gross consideration allocated by the parties thereto to the leasehold interest
created hereby, in which event the appraisers appointed pursuant to the
appraisal procedures set forth in Article XXXIV shall determine whether the
portion of such gross consideration payable to Lessee or any Affiliate of Lessee
in such transaction(s) and allocated for the leasehold estate created hereby as
initially determined by the parties thereto is reasonably related to the Fair
Market Value of the Leased Property, as also determined pursuant to this
definition and the appraisal procedures set forth in such Article XXXIV. If so
reasonably related, the Fair Market Value of the Leased Property for purposes of
such Section 24.2(c) shall be deemed the portion of the gross consideration so
allocated by the parties. Otherwise, the Fair Market Value of the Leased
Property for purposes of such Section 24.2(c) shall be determined pursuant to
this definition and the appraisal procedures set forth in such Article XXXIV,
but in no event greater than the gross consideration payable to Lessee or any
Affiliate of Lessee in connection with such Transfer and the other
transaction(s) as to which such Transfer is a part.
Fixed Term: As defined in Article I.
Fixtures: As defined in Article I.
GAAP: Generally accepted accounting principles.
Gross Revenues: All revenues received or receivable from or by
reason of the operation of the Facility or any other use of the Leased Property,
Lessee's Personal Property and all Capital Additions including all revenues
received or receivable for the use of or otherwise attributable to units, rooms,
beds and other facilities provided, meals served, services performed (including
ancillary services), space or facilities subleased or goods sold on or from the
Leased Property and all Capital Additions; provided, however, that Gross
Revenues shall not include:
(i) non-operating revenues such as interest income (including
interest earned on sinking funds, Special Security Accounts or any bond
funds originally and specifically formulated as a requirement of any
bond issue utilized to finance Lessee's business operations) or income
from the sale of assets not sold in the ordinary course of business;
(ii) bad debt in accordance with GAAP;
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(iii) refunds made to patients, customers or clients;
(iv) federal, state or local excise or sales taxes and any tax
based upon or measured by such revenues which is added to or made a
part of the amount billed to the patient or other recipient of such
services or goods, whether included in the billing or stated
separately; and
(v) refunds or credits on account of taxes paid by Lessee.
Gross Revenues for each Lease Year shall include all cost report
settlement amounts received in or payable during such Lease Year in accordance
with GAAP relating to health care accounting, regardless of the year that such
settlement amounts are applicable to; provided, however, that to the extent
settlement amounts are applicable to years, or portions thereof, prior to the
Commencement Date, such settlement amounts shall not be included in Gross
Revenues for the Lease Year in which such settlement amounts are received or
paid. Gross Revenues shall also include the Gross Revenues of any Occupant under
a Commercial Occupancy Arrangement, i.e., the Gross Revenues generated from the
operations conducted on or from such subleased, licensed or other used or
occupied portion of the Leased Property shall be included directly in the Gross
Revenues; provided, however, that the rent received or receivable by Lessee from
or under such Commercial Occupancy Arrangement shall be excluded from Gross
Revenues for such purpose.
Guarantor: ILC.
Guaranty: The Guaranty of even date herewith executed by
Guarantor.
Handling: As defined in Article XXXVII.
Hazardous Substances: Collectively, any petroleum, petroleum
product or byproduct or any substance, material or waste regulated or listed
pursuant to any Environmental Law.
HCPI: Health Care Property Investors, Inc., a Maryland
corporation.
ILC: Integrated Living Communities, Inc., a Delaware
corporation.
Impositions: Collectively, all taxes, including capital stock,
franchise and other state taxes of Lessor (or, if Lessor is not HCPI, of HCPI as
a result of its investment in Lessor), ad valorem, sales, use, single business,
gross receipts, transaction privilege, rent or similar taxes; assessments
including 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, sewer and other utility levies
and charges; excise tax levies; fees including license, permit, inspection,
authorization and similar fees; and all other governmental charges, in each case
whether general or special, ordinary or
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extraordinary, or foreseen or unforeseen, of every character in respect of the
Leased Property and/or the Rent and all interest and penalties thereon
attributable to any failure in payment by Lessee which at any time prior to,
during or in respect of the Term hereof may be assessed or imposed on or in
respect of or be a lien upon (i) Lessor or Lessor's interest in the Leased
Property, (ii) the Leased Property or any part thereof or any rent therefrom or
any estate, right, title or interest therein, or (iii) any occupancy, operation,
use or possession of, or sales from or activity conducted on or in connection
with the Leased Property or the leasing or use of the Leased Property or any
part thereof; provided, however, that nothing contained in this Lease shall be
construed to require Lessee to pay (a) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or
any other Person, (b) any transfer, or net revenue tax of Lessor or any other
Person except Lessee and its successors, (c) any tax imposed with respect to the
sale, exchange or other disposition by Lessor of any Leased Property or the
proceeds thereof, or (d) except as expressly provided elsewhere in this Lease,
any principal or interest on any indebtedness on the Leased Property for which
Lessor is the obligor, except to the extent that any such tax, assessment, tax
levy or charge of the type described in clause (a), (b) or (c) above is levied,
assessed or imposed in lieu thereof or as a substitute for any tax which is
otherwise included in this definition.
Incremental Gross Revenues: The positive amount, if any, by
which the Gross Revenues for the current Lease Year or partial Lease Year
exceeds the Base Gross Revenues.
Insurance Requirements: The terms of any insurance policy
required by this Lease and all requirements of the issuer of any such policy and
of any insurance board, association, organization or company necessary for the
maintenance of any such policy.
Intangible Property: All accounts, proceeds of accounts,
rents, profits, income or revenues derived from the use of rooms or other space
within the Leased Property or the providing of services in or from the Leased
Property; documents, chattel paper, instruments, contract rights, deposit
accounts, general intangibles, causes of action, now owned or hereafter acquired
by Lessee (including any right to any refund of any Impositions) arising from or
in connection with Lessee's operation or use of the Leased Property; all
licenses and permits now owned or hereinafter acquired by Lessee, which are
necessary or desirable for Lessee's use of the Leased Property for its Primary
Intended Use or any other Permitted Use, including, if applicable, any
certificate of need or similar certificate; the right to use any trade name or
other name associated with the Facility; and any and all third-party provider
agreements (including Medicare and Medicaid).
Land: As defined in Article I.
Lease: As defined in the preamble.
Lease Rate: Nine and Eight-Tenths Percent (9.8%).
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Lease Year: Each period of twelve (12) full calendar months
from and after the Commencement Date, unless the Commencement Date is a day
other than the first (1st) day of a calendar month, in which case the first
Lease Year shall be the period commencing on the Commencement Date and ending on
the last day of the twelfth (12th) full month following the month in which the
Commencement Date occurs and each subsequent Lease Year shall be each period of
twelve (12) full calendar months after the last day of the prior Lease Year;
provided, however, that the last Lease Year during the Term may be a period of
less than twelve (12) full calendar months and shall end on the last day of the
Term.
Leased Improvements; Leased Property: Each as defined in
Article I.
Leasehold FMV: As defined in Article XXIV.
Legal Requirements: All federal, state, county, municipal and
other governmental statutes, laws (including common law and Environmental Laws),
rules, policies, guidance, codes, orders, regulations, ordinances, permits,
licenses, covenants, conditions, restrictions, judgments, decrees and
injunctions affecting either the Leased Property, Lessee's Personal Property and
all Capital Additions 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, Lessee's
Personal Property and all Capital Additions, (ii) in any way adversely affect
the use and enjoyment thereof, or (iii) regulate the transport, handling, use,
storage or disposal or require the cleanup or other treatment of any Hazardous
Substance.
Lessee: As defined in the preamble.
Lessee's Personal Property: The Personal Property other than
Lessor's Personal Property.
Lessor: As defined in the preamble.
Lessor's Personal Property: As defined in Article I.
Letter of Credit Date: As defined in Section 21.2.
Master Sublease: As defined in Article XXIV.
Minimum Rent: As defined in Article III.
Minimum Repurchase Price: At any given time, the sum of (i)
the "Purchase Price" of the Leased Property at the time of acquisition of the
Leased Property by Lessor, together with any closing costs incurred by Lessor in
connection therewith in excess of the amount reimbursed to Lessor, all as more
particularly provided in the Contract of Acquisition plus (ii) any Capital
Addition Costs funded by Lessor.
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Newest Facility Group Lease. At any given time, that certain
Facility Group Lease the "Commencement Date" of which has occurred later than
the "Commencement Date" of any other Facility Group Lease.
Occupancy Arrangement: Any sublease, license or other
arrangement with a Person for the right to use, occupy or possess any portion of
the Leased Property and/or any Capital Additions.
Occupant: Any Person under an Occupancy Arrangement.
Offer: As defined in Article XXXV.
Officer's Certificate: A certificate of Lessee signed by an
officer authorized to so sign by its board of directors or by-laws.
One-Five Mile Area: As defined in Section 7.4.1.
One Mile Area: As defined in Section 7.4.1.
Overdue Rate: On any date, a rate equal to 2% above the Prime
Rate, but in no event greater than the maximum rate then permitted under
applicable law.
Payment Date: Any due date for the payment of the installments
of Minimum Rent, Additional Rent or any other sums payable under this Lease.
Permitted Use: Alzheimer care, congregate care,
assisted-living, or skilled nursing facility and such other uses necessary or
incidental to such use. Without limiting the specificity of the foregoing
"Permitted Use(s)," in no event shall Lessee use the Facility, or any portion
thereof, as independent apartments for seniors.
Person: Any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other form of
entity.
Personal Property: All machinery, furniture and equipment,
including phone systems and computers, trade fixtures, inventory, supplies and
other personal property used in connection with the operation of the Leased
Property for its Primary Intended Use, other than Fixtures.
Primary Intended Use: The specific Permitted Use for which the
Facility is being operated at any time during the Term in accordance with this
definition. Initially, the Primary Intended Use shall be an Alzheimer's
assisted-living care facility. Lessee shall give to Lessor not less than thirty
(30) days prior written notice of any change in the Primary Intended Use to any
other Permitted Use hereunder. Lessee shall not be entitled to change
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the Primary Intended Use to any other Permitted Use (i) without first providing
such notice to Lessor or (ii) at any time after the occurrence of an Event of
Default hereunder which remains uncured (if applicable). In addition, without
Lessor's prior written consent, which consent may be given or withheld in
Lessor's sole and absolute discretion, Lessee shall not be entitled to change
the Primary Intended Use to any other Permitted Use if Lessee or any Affiliate
of Lessee then owns, operates or manages or has a material interest (including a
controlling interest) in a Competing Facility within the One Mile Area or, if
such change in use is to occur after the eighth (8th) Lease Year of the Fixed
Term or after the Third (3rd) Lease Year of either Extended Term, as applicable,
within the One-Five Mile Area.
Prime Rate: On any date, a rate equal to the annual rate on
such date announced by the Bank of New York to be its prime, base or reference
rate for 90-day unsecured loans to its corporate borrowers of the highest credit
standing but in no event greater than the maximum rate then permitted under
applicable law. If the Bank of New York discontinues its use of such prime, base
or reference rate or ceases to exist, Lessor shall designate the prime, base or
reference rate of another state or federally chartered bank based in New York to
be used for the purpose of calculating the Prime Rate hereunder.
Put Event: An Event of Default hereunder which results in a
material reduction (i.e., 5% or more) in the Fair Market Value of the Leased
Property, provided that the Fair Market Value of the Leased Property taking into
account the occurrence of such Event of Default is less than the Minimum
Repurchase Price. In determining the Fair Market Value of the Leased Property
following an Event of Default, the appraisers appointed pursuant to Article
XXXIV shall determine such Fair Market Value for the Leased Property (i) taking
into account such Event of Default and (ii) as though such Event of Default had
not occurred. Notwithstanding that Lessor and Lessee have specifically defined a
"Put Event," in no event shall the same be deemed to derogate the materiality of
an Event of Default as provided in Section 16.1 below (including an Event of
Default which does not constitute a Put Event) or otherwise limit Lessor's
rights and remedies upon the occurrence of an Event of Default, including those
rights and remedies set forth in Sections 16.2, 16.3 and 16.4 below.
Quarter: During each Lease Year, the first three (3) calendar
month period commencing on the first (1st) day of such Lease Year and each
subsequent three (3) calendar month period within such Lease Year; provided,
however, that (i) the first Quarter during the Term may be a period of more than
three (3) months and shall commence on the Commencement Date and end upon the
expiration of the third (3rd) full calendar month following the Commencement
Date and (ii) the last Quarter during the Term may be a period of less than
three (3) calendar months and shall end on the last day of the Term.
Related Lessee Persons: Any Person(s) which controls Lessee
and would be deemed an Affiliate of Lessee, including any partners,
shareholders, principals or trustees of Lessee or any partners, shareholders,
principals or trustees of any such Person(s) to the extent the same control
Lessee and would be deemed an Affiliate of Lessee.
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Removable Personal Property: Any item of Lessee's Personal
Property which (i) does not constitute a replacement (whether or not an upgrade
thereof), modification, alteration or substitution of or to any of Lessor's
Personal Property or (ii) is not required in order to operate the Facility in
compliance with all licensure and certification requirements and all other Legal
Requirements and Insurance Requirements for the Primary Intended Use.
Rent: Collectively, the Minimum Rent, Additional Rent and
Additional Charges.
SEC: Securities and Exchange Commission.
State: The State or Commonwealth in which the Leased Property
is located.
Subsidiaries: Corporations, partnerships, limited liability
companies, business trusts or other legal entities with respect to which a
Person owns, directly or indirectly, 50% or more of the voting stock or
partnership, membership or other equity interest, respectively.
Term: Collectively, the Fixed Term and any Extended Term(s),
as the context may require, unless earlier terminated.
Transfer: As defined in Article XXIV.
Transfer Consideration: As defined in Article XXIV.
Unavoidable Delays: To the extent specifically applicable to
any provision of this Lease, delays resulting from a cause beyond the reasonable
control of a party responsible for performing an obligation hereunder. For
purposes of this definition, cause shall be beyond the reasonable control of a
party when such cause would affect any person similarly situated (such as
strike, lockout, power failure, act of God, governmental restriction, enemy
action, civil commotion, fire or unavoidable casualty) but shall not be beyond
the reasonable control of such party when peculiar to such party (such as
financial inability, lack of funds or failure to order long lead time materials
sufficiently in advance). To the extent applicable to a particular provision
herein, in the event of any occurrence which a party believes constitutes a
cause beyond the reasonable control of such party and which will delay any
performance by such party hereunder, such party shall promptly in writing notify
the other party of the occurrence and nature of such cause, the anticipated
period of delay and the steps being taken by such party to mitigate the effects
of such delay.
Unsuitable for Its Primary Intended Use: A state or condition
of the Facility such that by reason of damage or destruction or Condemnation, in
the good faith judgment of Lessor and Lessee, the Facility cannot be operated on
a commercially practicable basis for its Primary Intended Use.
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ARTICLE III.
3.1 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, without offset or deduction, the amounts set forth
hereinafter as Minimum Rent and Additional Rent during the Term. Payments of
Minimum Rent shall be made by a prearranged payment deposit through the
Electronic Automated Clearing House Network ("ACH") initiated by Lessee to
Lessor's account at an ACH member bank on or before the fifth (5th) day of each
calendar month. Payments of Additional Rent shall be made at Lessor's address
set forth in Article XXXIII or at such other place or to such other Person as
Lessor from time to time may designate in writing.
3.1.1 Minimum Rent. For the period from the Commencement Date
through the expiration of the Fixed Term, Lessee shall pay to Lessor "Minimum
Rent" monthly, in advance on or before the first day of each calendar month, an
amount equal to $23,111.67 (i.e., one-twelfth (1/12) of the product of (i) the
Lease Rate times (ii) the Minimum Repurchase Price as of the Commencement Date).
The first monthly payment of Minimum Rent shall be payable on the Commencement
Date (prorated as to any partial calendar month at the beginning of the Term).
Minimum Rent for the Extended Terms, if any, shall be determined in accordance
with the provisions of Article XIX.
3.1.2 Additional Rent. In addition to the Minimum Rent, Lessee
shall, commencing with (x) the first (1st) Quarter of the second (2nd) Lease
Year of the Fixed Term and continuing through the expiration of the Fixed Term
and (y) the first (1st) Quarter of the second (2nd) Lease Year of each Extended
Term, if any, and continuing through the expiration of the applicable Extended
Term, pay to Lessor annual "Additional Rent" in an amount equal to the CPI Rent;
provided, however, that in no event shall the sum of the Minimum Rent and
Additional Rent paid or payable by Lessee for (1) any Lease Year during the
Fixed Term commencing with the second (2nd) Lease year of the Fixed Term or (2)
any Lease Year during the applicable Extended Term, if any, commencing with any
second (2nd) Lease Year of such Extended Term, be:
(a) less than the lesser of (i) One Hundred Two Percent (102%)
of the sum of the Minimum Rent and Additional Rent paid or payable by Lessee for
the immediately prior Lease Year of the applicable Term and (ii) the sum of (A)
the Minimum Rent and Additional Rent paid or payable for the immediately prior
Lease Year, plus (B) One Hundred Percent (100%) of Incremental Gross Revenues;
nor
(b) more than One Hundred Five Percent (105%) of the sum of
Minimum Rent and Additional Rent paid or payable by Lessee for the immediately
prior Lease Year of the applicable Term.
3.2 Quarterly Calculation and Payment of Additional Rent;
Annual Reconciliation.
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3.2.1 Lessee shall calculate and pay Additional Rent
quarterly, in arrears, for the portion of the entire Lease Year, on a cumulative
basis, up to the end of the Quarter then most recently ended, less the
Additional Rent already paid and attributable to such Lease Year. If at the time
any calculation on account of Additional Rent is to be made the applicable Gross
Revenues are not yet available (if applicable) Lessee shall use its best
estimate of the applicable Gross Revenues. Each quarterly payment of Additional
Rent shall be delivered to Lessor, together with an Officer's Certificate
setting forth the calculation thereof, on or before the last Business Day of the
calendar month immediately following the end of the corresponding Quarter.
3.2.2 Within ninety (90) days after the end of each Lease
Year, Lessee shall deliver to Lessor either (a) an Officer's Certificate setting
forth the Gross Revenues for such Lease Year or (b) an Officer's Certificate
stating that Incremental Gross Revenues for such Lease Year exceed Two Percent
(2%) of the sum of Minimum Rent and Additional Rent paid or payable by Lessee
for the immediately prior Lease Year. Following receipt by Lessor of such
Certificate, Lessor shall, if applicable, determine the Additional Rent for such
Lease Year based upon Gross Revenues and give Lessee notice of the same together
with the calculations upon which the Additional Rent was based. If such
Additional Rent based upon Gross Revenues exceeds the sum of the quarterly
payments of Additional Rent previously paid by Lessee with respect to such Lease
Year, Lessee shall forthwith pay such deficiency to Lessor. If such Additional
Rent based upon Gross Revenues for such Lease Year is less than the amount
previously paid by Lessee with respect thereto, Lessor shall, at Lessee's
option, either (i) remit to Lessee its check in an amount equal to such
difference, or (ii) credit such difference against the quarterly payments of
Additional Rent next coming due.
3.2.3 Any difference between the annual Additional Rent for
any Lease Year as shown in said Officer's Certificate and the total amount of
quarterly payments for such Lease Year previously paid by Lessee, whether in
favor of Lessor or Lessee, shall bear interest at a rate equal to the rate
payable on 90-day U.S. Treasury Bills as of the last Business Day of such Lease
Year until the amount of such difference shall be paid or otherwise discharged.
3.2.4 If the expiration or earlier termination of the Term is
a day other than the last day of a Lease Year, then the amount of the last
quarterly installment of Additional Rent shall be paid pro rata on the basis of
the actual number of days in such Lease Year.
3.2.5 As soon as practicable after the expiration or earlier
termination of the Term, a final reconciliation of Additional Rent shall be made
taking into account, among other relevant adjustments, any unresolved
contractual allowances which relate to Gross Revenues accrued prior to such
expiration or termination; provided that if the final reconciliation has not
been made within six (6) months of such expiration or termination, then a final
reconciliation shall be made at that time based on all available relevant
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information, including Lessee's good faith best estimate of the amount of any
unresolved contractual allowances.
3.3 Confirmation of Gross Revenues. Lessee shall utilize, or
cause to be utilized, an accounting system for the Leased Property in accordance
with its usual and customary practices and in accordance with GAAP which will
accurately record all Gross Revenues and Lessee shall retain for at least five
(5) years after the expiration of each Lease Year reasonably adequate records
conforming to such accounting system showing all Gross Revenues for such Lease
Year. Lessor, at its own expense except as provided hereinbelow, shall have the
right from time to time (but in no event more than one time per Lease Year or
partial Lease Year) by its accountants or representatives, to review and/or
audit the information set forth in the Officer's Certificate referred to in
Section 3.2(a) and in connection with such review and/or audit to examine
Lessee's records with respect thereto (including supporting data and sales tax
returns) subject to any prohibitions or limitations on disclosure of any such
data under applicable law or regulations including any duly enacted "Patients'
Bill of Rights" or similar legislation, or as may be necessary to preserve the
confidentiality of the Facility-patient relationship and the physician-patient
privilege. If any such review and/or audit discloses a deficiency in the payment
of Additional Rent on account thereof (if applicable), Lessee shall forthwith
pay to Lessor the amount of the deficiency together with interest thereon at the
Overdue Rate compounded monthly from the date when said payment should have been
made to the date of payment thereof. If any such review and/or audit discloses
that the Gross Revenues actually received by Lessee for any Lease Year exceed
those reported by Lessee by more than Two Percent (2%), Lessee shall pay the
costs of such review and/or audit (whether or not Additional Rent is based upon
Gross Revenues). Any proprietary information obtained by Lessor pursuant to such
review and/or audit shall be treated as confidential, except that such
information may, subject to appropriate confidentiality safeguards, be used in
any litigation or arbitration proceedings between the parties or disclosed to
prospective lenders or purchasers.
3.4 Additional Charges. In addition to the Minimum Rent and
Additional Rent, (i) Lessee shall, subject to the provisions of Article XII of
this Lease, 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 prior to the date on which such items may be paid
without interest, fine, penalty or forfeiture or such other date as may be
specified in this Lease; and (ii) in the event of any failure on the part of
Lessee to pay any of those items referred to in clause (i) above, Lessee shall
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 (i) and (ii) above being referred to herein collectively as the
"Additional Charges").
3.5 Late Payment of Rent. LESSEE HEREBY ACKNOWLEDGES THAT LATE
PAYMENT BY LESSEE TO LESSOR OF RENT WILL CAUSE LESSOR TO INCUR COSTS NOT
CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF WHICH IS PRESENTLY ANTICIPATED TO BE
EXTREMELY DIFFICULT TO
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ASCERTAIN. SUCH COSTS MAY INCLUDE PROCESSING AND ACCOUNTING CHARGES AND LATE
CHARGES WHICH MAY BE IMPOSED ON LESSOR BY THE TERMS OF ANY LOAN AGREEMENT AND
OTHER EXPENSES OF A SIMILAR OR DISSIMILAR NATURE. ACCORDINGLY, IF ANY
INSTALLMENT OF RENT OTHER THAN ADDITIONAL CHARGES PAYABLE TO A PERSON OTHER THAN
LESSOR SHALL NOT BE PAID WITHIN FIVE (5) BUSINESS DAYS AFTER ITS DUE DATE,
LESSEE WILL PAY LESSOR ON DEMAND A LATE CHARGE EQUAL TO THE LESSER OF (I) THREE
PERCENT (3%) OF THE AMOUNT OF SUCH INSTALLMENT OR (II) THE MAXIMUM AMOUNT
PERMITTED BY LAW. THE PARTIES AGREE THAT THIS LATE CHARGE REPRESENTS A FAIR AND
REASONABLE ESTIMATE OF THE COSTS THAT LESSOR WILL INCUR BY REASON OF LATE
PAYMENT BY LESSEE. THE PARTIES FURTHER AGREE THAT SUCH LATE CHARGE IS RENT AND
NOT INTEREST AND SUCH ASSESSMENT DOES NOT CONSTITUTE A LENDER OR
BORROWER/CREDITOR RELATIONSHIP BETWEEN LESSOR AND LESSEE. IN ADDITION, THE
AMOUNT UNPAID, INCLUDING ANY LATE CHARGES, SHALL BEAR INTEREST AT THE OVERDUE
RATE COMPOUNDED MONTHLY FROM THE DUE DATE OF SUCH INSTALLMENT TO THE DATE OF
PAYMENT THEREOF, AND LESSEE SHALL PAY SUCH INTEREST TO LESSOR ON DEMAND. THE
PAYMENT OF SUCH LATE CHARGE OR SUCH INTEREST SHALL NOT CONSTITUTE WAIVER OF, NOR
EXCUSE OR CURE, ANY DEFAULT UNDER THIS LEASE, NOR PREVENT LESSOR FROM EXERCISING
ANY OTHER RIGHTS AND REMEDIES AVAILABLE TO LESSOR.
Lessor's Initials:
Lessee's Initials:
3.6 Net Lease. This Lease is and is intended to be what is
commonly referred to as a "net, net, net" or "triple 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 Minimum Rent, Additional Rent and Additional
Charges throughout the Term.
ARTICLE IV.
4.1 Impositions.
4.1.1. Subject to Article XII relating to permitted contests,
Lessee shall pay, or cause to be paid, all Impositions before any fine, penalty,
interest or cost may be added for non-payment. Lessee shall make such payments
directly to the taxing authorities where feasible, and promptly furnish to
Lessor copies of official receipts or other satisfactory proof evidencing such
payments. Except as provided in the last sentence of this Section 4.1.1 and in
Section 4.1.7 below, Lessee's obligation to pay Impositions shall be 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
be paid in
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installments, whether or not interest shall accrue on the unpaid balance of such
Imposition, Lessee may pay the same, and any accrued interest on the unpaid
balance of such Imposition, in installments as the same respectively become due
and before any fine, penalty, premium, further interest or cost may be added
thereto. In such event, Lessee shall only be responsible for those installments
on account of such Impositions which are assessed during the Term.
4.1.2 Lessor shall prepare and file all tax returns and
reports as may be required by Legal Requirements with respect to Lessor's net
income, gross receipts, franchise taxes and taxes on its capital stock. Lessee
shall prepare and file all tax returns and reports as may be required by Legal
Requirements with respect to Lessee or the Leased Property.
4.1.3 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 no
Event of Default shall have occurred hereunder and be continuing. Any other
refund shall be paid over to or retained by Lessor to offset any amounts payable
by Lessee to Lessor hereunder.
4.1.4 Lessor and Lessee shall, upon the reasonable 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 reasonably necessary to
prepare any required returns and reports. If any property covered by this Lease
is classified as personal property for tax purposes, 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, shall 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 and to the extent practicable, Lessee shall be provided with copies
of assessment notices indicating a value in excess of the reported value in
sufficient time for Lessee to file a protest.
4.1.5 Lessee may, upon notice to Lessor, at Lessee's option
and at Lessee's sole cost and expense, protest, appeal, or institute such other
proceedings as Lessee may deem appropriate to effect a reduction of real estate
or personal property assessments and Lessor, at Lessee's expense as aforesaid,
shall reasonably cooperate with Lessee in such protest, appeal, or other action
but at no cost or expense to Lessor. Billings for reimbursement by Lessee to
Lessor of personal property or real property taxes shall be accompanied by
copies of a bill therefor and payments thereof which identify the personal
property or real property with respect to which such payments are made.
4.1.6 Lessor shall give prompt notice to Lessee of 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.
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4.1.7 Impositions imposed in respect of the tax-fiscal period
during which the Term terminates shall be adjusted and prorated between Lessor
and Lessee, whether or not such Imposition is imposed before or after such
termination.
4.2 Utilities. Lessee shall pay or cause to be paid all
charges for electricity, power, gas, oil, water and other utilities used in the
Leased Property and all Capital Additions thereto. Lessee shall also pay or
reimburse Lessor for all costs and expenses of any kind whatsoever which at any
time with respect to the Term hereof may be imposed against Lessor by reason of
any of the covenants, conditions and/or restrictions affecting the Leased
Property or any portion thereof, or with respect to easements, licenses or other
rights over, across or with respect to any adjacent or other property which
benefits the Leased Property, including any and all costs and expenses
associated with any utility, drainage and parking easements which were (a) in
effect as of the Commencement Date, (ii) imposed upon the Land after the
Commencement Date in accordance with the terms of this Lease or (iii) otherwise
consented to in writing by Lessee.
4.3 Insurance. Lessee shall pay or cause to be paid all
premiums for the insurance coverage required to be maintained by Lessee
hereunder.
4.4 Impound Account. If Lessee, at any time during the Term,
does not timely make payment of any Impositions or insurance premiums required
pursuant to Section 4.1 or Section 4.3, Lessor may, at any time thereafter, at
its option to be exercised by thirty (30) days' written notice to Lessee,
require Lessee to deposit, at the time of any payment of Minimum Rent, an amount
equal to one-twelfth of Lessee's estimated annual taxes, of every kind and
nature, required pursuant to Section 4.1 plus one-twelfth of Lessee's estimated
annual insurance premiums required pursuant to Section 4.3 into an impound
account as directed by Lessor. Such amounts shall be applied to the payment of
the obligations in respect of which said amounts were deposited in such order of
priority as Lessor shall determine, on or before the respective dates on which
the same or any of them would become delinquent. The cost of administering such
impound account shall be paid by Lessee. Nothing in this Section 4.4 shall be
deemed to affect any right or remedy of Lessor hereunder.
4.5 Tax Service. If, on two (2) or more occasions during the
Term, Lessee fails to provide Lessor with reasonable documentation demonstrating
that Impositions imposed upon the Leased Property have been paid within ten (10)
days after written request therefor by Lessor, then if requested by Lessor,
Lessee shall, at its sole cost and expense, engage the services of a tax
reporting company, to be designated by Lessor, and cause such company to issue
to Lessor reports covering the Leased Property.
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ARTICLE V.
5. No Termination, Abatement, etc. Except as otherwise
specifically provided in this Lease, Lessee shall remain bound by this Lease in
accordance with its terms and shall not seek or be entitled to any abatement,
deduction, deferment or reduction of Rent, or set-off against the Rent. The
respective obligations of Lessor and Lessee shall not be affected by reason of
(i) any damage to or destruction of the Leased Property or any portion thereof
from whatever cause or any Condemnation of the Leased Property or any portion
thereof; (ii) 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 or by reason of eviction by paramount title; (iii)
any claim that Lessee has or might have against Lessor by reason of any default
or breach of any warranty by Lessor hereunder or under any other agreement
between Lessor and Lessee or to which Lessor and Lessee are parties; (iv) any
bankruptcy, insolvency, reorganization, composition, readjustment, liquidation,
dissolution, winding up or other proceedings affecting Lessor or any assignee or
transferee of Lessor; or (v) 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 (a) to modify, surrender or terminate this Lease or quit or
surrender the Leased Property or any portion thereof; or (b) which may entitle
Lessee to any abatement, reduction, suspension or deferment of the Rent or other
sums payable by Lessee hereunder, except as otherwise specifically provided in
this Lease. 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 by termination of this Lease other than by reason of
an Event of Default.
ARTICLE VI.
6.1 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. Lessee shall, at its expense, restore the Leased
Property to the condition required by Section 9.1.4.
6.2 Personal Property. During the Term, Lessee shall, as
necessary and at its expense, install, affix or assemble or place on any parcels
of the Land or in any of the Leased Improvements, any items of Lessee's Personal
Property and replacements thereof which shall be the property of and owned by
Lessee. Except as provided in Sections 6.3 and 16.10, Lessor shall have no
rights to Lessee's Personal Property. Lessee shall provide and maintain during
the entire Term all Personal Property necessary in order to operate the Facility
in compliance with all licensure and certification requirements, all Legal
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Requirements and all Insurance Requirements and otherwise in accordance with
customary practice in the industry for the Primary Intended Use.
6.3 Transfer of Personal Property and Capital Additions to
Lessor. Upon the expiration or earlier termination of this Lease, all Capital
Additions not owned by Lessor and Lessee's Personal Property shall become the
property of Lessor, free of any encumbrance and Lessee shall execute all
documents and take any other actions reasonably necessary to evidence such
ownership and discharge any encumbrance thereon; provided, however, that subject
to Section 6.4 below, Lessee shall be entitled to remove all Removable Personal
Property from the Leased Property at the end of the Term so long as Lessee
repairs any damage to the Leased Property caused by such removal.
6.4 Option to Purchase Removable Personal Property.
Notwithstanding anything to the contrary in this Lease, Lessor shall have the
option, exercisable by written notice to the Lessee, not less than thirty (30)
days prior to the end of the Term or within thirty (30) days after the earlier
termination of this Lease, to purchase all or any portion of the Removable
Personal Property at the then book value of each item of Removable Property as
reflected on Lessee's books and records maintained in accordance with GAAP, or
if no book value, then for an amount equal to the then unamortized original cost
thereof. Such amortization rate, if applicable, shall be in accordance with the
useful life of the particular item of Removable Personal Property as reasonably
determined by Lessee in accordance with GAAP. Upon payment of the purchase price
therefor, Lessee shall convey the Removable Personal Property free of any
encumbrance and shall execute all documents and take any other actions
reasonably necessary to evidence the transfer and conveyance of ownership of the
Removable Personal Property to Lessor and the discharge of any encumbrance
thereon.
ARTICLE VII.
7.1 Condition of the Leased Property. Lessee acknowledges
receipt and delivery of possession of the Leased Property and 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, free from Hazardous Substances not in compliance with
Legal Requirements, and satisfactory for its purposes hereunder. Regardless,
however, of any examination or inspection made by Lessee and whether or not any
patent or latent defect or condition was revealed or discovered thereby, 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 including any defects or adverse conditions not discovered or otherwise
known by Lessee as of the date hereof. LESSOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY
PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE NATURE OR QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT
BEING AGREED THAT ALL SUCH RISKS,
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LATENT OR PATENT, ARISING FROM EVENTS, CONDITIONS OR CIRCUMSTANCES OCCURRING
PRIOR TO OR DURING THE TERM ARE TO BE BORNE SOLELY BY LESSEE INCLUDING ALL
RESPONSIBILITY AND LIABILITY FOR ANY ENVIRONMENTAL REMEDIATION AND COMPLIANCE
WITH ALL ENVIRONMENTAL LAWS.
7.2 Use of the Leased Property
7.2.1 Lessee covenants that it will obtain and maintain all
authorizations and approvals needed to use and operate the Leased Property and
the Facility for the Primary Intended Use in accordance with Legal Requirements
including applicable licenses, provider agreements, permits, and Medicare and/or
Medicaid certification.
7.2.2 Lessee shall use or cause to be used the Leased Property
and the improvements thereon for its Primary Intended Use. Except as otherwise
set forth in the definition of Primary Intended Use, Lessee shall not use the
Leased Property or any portion thereof or any Capital Addition thereto for any
other use without the prior written consent of Lessor, which consent Lessor may
withhold in its sole discretion.
7.2.3 Except as a result of (a) damage, destruction or
Condemnation and such reasonable period of time to effect repairs necessitated
thereby, or (b) any other occurrence of the nature and type of an Unavoidable
Delay, Lessee shall operate continuously the entire Leased Property and all
Capital Additions thereto in accordance with its Primary Intended Use. Lessee
shall devote the entire Facility and all Capital Additions thereto to the
Primary Intended Use, except for areas reasonably required for office or storage
space uses incidental to the Primary Intended Use. Lessee shall be deemed in
violation of the foregoing provision if, except for medically appropriate
reasons or as a result of (i) damage, destruction or Condemnation, or (ii) any
other occurrence of the nature and type of an Unavoidable Delay, Lessee
voluntarily transfers, in the aggregate during any twelve (12) month period, ten
percent (10%) or more of the patients or residents located in the Facility
without replacing such patients or residents within such 12-month period.
7.2.4 Subject to Legal Requirements and Insurance
Requirements, Lessee shall conduct its business at the Facility in conformity
with the standards of patient and/or resident care practice currently provided
in similar facilities in the State which are owned, operated or managed by
Lessee or any Affiliate of Lessee, or if no such other similar facilities are so
owned, operated or managed by Lessee or any Affiliate of Lessee in the State
then consistent with the current standards provided in similar facilities in
other states (such standards to be adjusted to take into account the effect of
any Legal Requirements and/or Insurance Requirements applicable in such other
states compared to those applicable in the State) which are owned, operated or
managed by Lessee or any Affiliate of Lessee.
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7.2.5 Lessee shall not commit or suffer to be committed any
waste to the Leased Property or any Capital Addition thereto or cause or permit
any nuisance to be maintained thereon.
7.2.6 Lessee shall neither suffer nor permit the Leased
Property or any portion thereof or any Capital Addition thereto, or Lessee's
Personal Property, to be used in such a manner that (a) impairs Lessor's title
thereto or to any portion thereof or (b) results in a claim of adverse use or
possession, or an implied dedication of the Leased Property or any portion
thereof or any Capital Addition thereto.
7.2.7 To the extent applicable for purposes of determining the
Additional Rent payable by Lessee hereunder, for purposes of computing
Incremental Gross Revenues for any Lease Year or other period during which
Lessee is in breach or violation of any of the covenants set forth in Sections
7.2.1 through 7.2.4 shall be deemed to be the greater of Lessee's Gross Revenues
for (i) such Lease Year or other period, or (ii) 100% of the highest Gross
Revenues for any prior Lease Year or any corresponding period of any prior Lease
Year, as applicable, as determined by Lessor.
7.3 Lessor to Grant Easements, etc. Lessor shall, from time to
time so long as no Event of Default has occurred and is continuing, at the
request of Lessee and at Lessee's cost and expense, but subject to the approval
of Lessor, which approval shall not be unreasonably withheld or delayed (i)
grant easements and other rights in the nature of easements; (ii) release
existing easements or other rights in the nature of easements which are for the
benefit of the Leased Property; (iii) dedicate or transfer unimproved portions
of the Leased Property for road, highway or other public purposes; (iv) execute
petitions to have the Leased Property annexed to any municipal corporation or
utility district; (v) execute amendments to any covenants, conditions and
restrictions affecting the Leased Property; and (vi) execute and deliver to any
Person any instrument appropriate to confirm or effect such grants, releases,
dedications and transfers to the extent of its interest in the Leased Property,
but only upon delivery to Lessor of an Officer's Certificate stating that such
grant release, dedication, transfer, petition or amendment is not detrimental to
the proper conduct of the business of Lessee on the Leased Property and does
not, in Lessee's reasonable business judgment, materially reduce the value of
the Leased Property.
7.4 Preservation of Value and Utility of Leased Property.
Lessee acknowledges that a fair return to Lessor on its investment in the Leased
Property is dependent, in part, on the concentration on the Leased Property
during the Term of the business of Lessee and its Affiliates (i.e., the
operation of the Facility for its Primary Intended Use) in the geographical area
of the Leased Property. Lessee further acknowledges that diversion of residents
and/or patients, as applicable, from the Facility to other facilities or
institutions owned, operated or managed, whether directly or indirectly, by
Lessee or its Affiliates could have a material adverse impact on the value and
utility of the Leased Property. Accordingly, Lessor and Lessee agree as follows:
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7.4.1 During the Term and for a period of two (2) years
thereafter, neither Lessee nor any of its Affiliates, directly or indirectly,
shall operate, own, manage or have any interest in or otherwise participate in
or receive revenues from any Competing Facility (whether now or hereafter in
operation), within a one (1) mile radius from the outside boundary of the Leased
Property (the "One Mile Area"). By its signature hereto, Lessee represents and
warrants to Lessor that neither Lessee nor any of its Affiliates currently has
any such interest in any such Competing Facility within such One Mile Area. In
addition, the following shall apply:
(a) Lessee or any of its Affiliates may at anytime directly or
indirectly, operate, own, manage or have any interest in or otherwise
participate in or receive revenues from any Competing Facility outside of a
radius of five (5) miles from the outside boundary of the Leased Property.
(b) Prior to the expiration of the eighth (8th) Lease Year of
the Fixed Term, and prior to the expiration of the third (3rd) Lease Year of
each Extended Term, if any, Lessee or any of its Affiliates may acquire and may
directly or indirectly, operate, own, manage or have an interest in or otherwise
participate in or receive revenues from any Competing Facility (whether now or
hereafter in operation) within a radius from one (1) to five (5) miles from the
outside boundary of the Leased Property (the "One-Five Mile Area").
(c) From and after the expiration of the eighth (8th) Lease
Year of the Fixed Term, and from and after the expiration of the third (3rd)
Lease Year of each Extended Term, if any, if Lessee or any of its Affiliates
shall acquire, directly or indirectly, any material interest (including any
controlling interest) in any Competing Facility, including in the operation or
management thereof, within the One-Five Mile Area, then Lessor may by written
notice to Lessee given at anytime after the date Lessee or any Affiliate of
Lessee acquires the same, extend the then Term of this Lease for the next
subsequent Extended Term (i.e., ten (10) Lease Years). In such event, the
applicable Extended Term shall be upon all the terms and conditions as provided
for in Article XIX as though Lessee was entitled to and had exercised the same;
provided, however, that in no event shall (i) the Term of this Lease be extended
beyond the second Extended Term pursuant to this subsection (c) or (ii) an
extension of the Term of this Lease for any such Extended Term pursuant to this
subsection (c) extend the "Term" of any other Facility Group Lease. The
provisions of this subsection (c) (i.e., Lessor's right to extend the Term)
shall not apply with respect to any Competing Facility which is operated,
managed or owned by Lessee or any Affiliate of Lessee prior to the expiration of
the eighth (8th) Lease Year of the Fixed Term, or the third (3rd) Lease Year of
any Extended Term, as applicable.
(d) Without limiting Lessor's rights as provided in subsection
(c) above, during the Term (including the Extended Terms, if any) Lessor
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shall have a first refusal to finance (and/or refinance) any Competing Facility
now or hereafter owned or proposed to be owned, directly or indirectly, by
Lessee or any Affiliate of Lessee within the One-Five Mile Area upon the same
terms and conditions of any financing (or refinancing) from any third party
which Lessee or any Affiliate of Lessee intends to accept (or has accepted
subject to Lessor's right of first refusal herein), including any financing
(and/or refinancing) of such Competing Facility together with any other
facilities owned or proposed to be owned, directly or indirectly, by Lessee or
any Affiliate of Lessee (whether or not such other facilities are located within
the One-Five Mile Area). If, during the Term (including the Extended Terms, if
any), Lessee or any Affiliate of Lessee reaches such agreement or a tentative
agreement with respect to the terms and conditions of any such third party
financing (or refinancing) for any such Competing Facility within the One-Five
Mile Area (whether by itself or with one or more other facilities), Lessee shall
promptly notify Lessor of the material terms thereof, including the principal
balance, purchase price, interest, lease rate, amortization rate or term, as
applicable. Lessor shall have fifteen (15) days after receipt of such notice
from Lessee within which to exercise Lessor's right of first refusal and agree
to provide such financing (or refinancing) upon the same material terms as
described in the notice to Lessor, which agreement shall include, if applicable,
Lessor's agreement to provide such financing or refinancing with respect to any
such other facilities which are included in the same financing (or refinancing)
package with such Competing Facility within the One-Five Mile Area. If Lessor
shall not exercise Lessor's right of first refusal within said fifteen (15) day
period and within the manner herein provided, Lessee shall be free for a period
of one (1) year after the expiration of said fifteen (15) day period to obtain
financing (or refinancing) with respect to such Competing Facility within the
One-Five Mile Area (and any such other facilities described in such notice to
Lessor) from any third party upon terms no less favorable than those so offered
to Lessor. If such financing (or refinancing) is not consummated, Lessor's right
of first refusal as provided in this subsection (d) with respect to any such
Competing Facility shall be re-instituted, as to any subsequent proposed
financing (or refinancing) of the same by Lessee or any Affiliate of Lessee. As
used in this subsection (d), "financing (or refinancing)" shall mean and include
a loan (including a loan secured by the real estate and other collateral of a
Competing Facility) and any sale-leaseback or similar transaction.
Notwithstanding anything to the contrary in this subsection (d), Lessor shall
not have a right of first refusal with respect to (i) any seller/transferor
take-back financing provided to Lessee or an Affiliate of Lessee in connection
with the acquisition of a Competing Facility within the One-Five Mile Area, so
long as such take-back financing was required by such seller/transferor as a
condition to such acquisition, (ii) the assumption by Lessee or any Affiliate of
Lessee of any financing encumbering a Competing Facility within the One-Five
Mile Area which financing existed prior to the date of acquisition of such
Competing Facility by Lessee or any Affiliate of Lessee or (iii) any financing
(or refinancing) of any non-competing facilities or Competing Facilities located
outside of the One-Five Mile Area which are owned or proposed to be owned by
Lessee or an Affiliate of Lessee, unless such
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facilities (or some of them) are included in a proposed financing (and/or
refinancing) package with a Competing Facility within the One-Five Mile Area as
to which Lessor has a right of first refusal hereunder.
All distances provided for in this Section 7.4.1 shall be measured on a straight
line rather than driving distance basis. In the event that any portion of a
Competing Facility is located within the One Mile Area or the One-Five Mile
Area, as the case may be, then the entire Competing Facility shall be deemed
located within such area.
7.4.2 For a period of one (1) year following the Term, neither
Lessee nor any of its Affiliates shall, without the prior written consent of
Lessor, which consent may be given or withheld in Lessor's sole discretion,
hire, engage or otherwise employ any management or supervisory personnel working
on or in connection with the Leased Property.
7.4.3 Except for medically appropriate reasons or as a result
of damage, destruction or Condemnation, prior to and for a period of two (2)
years after the expiration or earlier termination of this Lease, Lessee shall
not recommend or actively solicit (e.g., through direct mailers, telephone
solicitation or other forms of communication directed at patients or residents
of the Facility or their relatives) the removal or transfer of any resident or
patient from the Leased Property to any other Competing Facility owned, operated
or managed by Lessee or any Affiliate of Lessee or in which Lessee or any
Affiliate of Lessee has an interest (financial or otherwise).
ARTICLE VIII.
8. Compliance with Legal and Insurance Requirements,
Instruments, etc. Subject to Article XII regarding permitted contests, and
without limiting the specific provisions of Article XXXVII below, Lessee, at its
expense, shall promptly (i) comply with all Legal Requirements and Insurance
Requirements regarding the use, operation, maintenance, repair and restoration
of the Leased Property, Lessee's Personal Property and all Capital Additions
whether or not compliance therewith may require structural changes in any of the
Leased Improvements or Capital Additions thereto or interfere with the use and
enjoyment of the Leased Property and (ii) procure, maintain and comply with all
licenses, certificates of need, provider agreements and other authorizations
required for the use of the Leased Property, Lessee's Personal Property and all
Capital Additions for the Primary Intended Use and any other use of the Leased
Property, Lessee's Personal Property and all Capital Additions then being made,
and for the proper erection, installation, operation and maintenance of the
Leased Property, Lessee's Personal Property and all Capital Additions. Lessor
may, but shall not be obligated to, enter upon the Leased Property and all
Capital Additions thereto and take such actions and incur such costs and
expenses to effect such compliance as it deems advisable to protect its interest
in the Leased Property and Capital Additions thereto, and Lessee shall reimburse
Lessor for all costs and expenses incurred by Lessor in connection with such
actions. Lessee covenants and agrees that the Leased
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Property, Lessee's Personal Property and all Capital Additions shall not be used
for any unlawful purpose.
ARTICLE IX.
9.1 Maintenance and Repair
9.1.1 Lessee, at its expense, shall maintain the Leased
Property, and every portion thereof, Lessee's Personal Property (other than the
Removable Personal Property) and all Capital Additions, and all private
roadways, sidewalks and curbs appurtenant to the Leased Property, 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, Lessee's Personal Property and all Capital
Additions, and, with reasonable promptness, make all necessary and appropriate
repairs thereto of every kind and nature, including those necessary to comply
with changes in any Legal Requirements, 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. Lessee, at its
expense, shall maintain all Removable Personal Property in a safe condition. All
repairs shall 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 might
materially impair the value of the Leased Property or the ability to use the
Leased Property or any part thereof or any Capital Addition thereto for its
Primary Intended Use.
9.1.2 Lessor shall not under any circumstances be required to
(i) build or rebuild any improvements on the Leased Property; (ii) make any
repairs, replacements, alterations, restorations or renewals of any nature to
the Leased Property, whether ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto, unless the need therefor was caused by the gross
negligence or willful misconduct of Lessor, its employees, agents or
contractors; or (iii) 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.
9.1.3 Nothing contained in this Lease and no action or
inaction by Lessor shall be construed as (i) constituting the consent or request
of Lessor, expressed or implied, to any contractor, subcontractor, 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 any Capital Addition thereto; 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 therefor or create any
right, title, interest, lien, claim or other encumbrance upon the estate of
Lessor in the Leased Property, or any portion thereof or any Capital Addition
thereto.
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9.1.4 Unless Lessor shall convey any of the Leased Property to
Lessee pursuant to the provisions of this Lease, Lessee shall, upon the
expiration or earlier termination of the Term, vacate and surrender the Leased
Property, Lessee's Personal Property (other than the Removable Personal
Property) and all Capital Additions to Lessor in the condition in which the
Leased Property was originally received from Lessor and Lessee's Personal
Property and Capital Additions were originally introduced to the Facility,
except as repaired, rebuilt, restored, altered or added to as permitted or
required by the provisions of this Lease and except for ordinary wear and tear.
9.2 Encroachments, Restrictions, Mineral Leases, etc. If any
of the Leased Improvements or Capital Additions shall, at any time, encroach
upon any property, street or right-of-way, or shall violate any restrictive
covenant or other agreement affecting the Leased Property, or any part thereof
or any Capital Addition thereto, or shall impair the rights of others under any
easement or right-of-way to which the Leased Property is subject, or the use of
the Leased Property or any Capital Addition thereto is impaired, limited or
interfered with by reason of the exercise of the right of surface entry or any
other provision of a lease or reservation of any oil, gas, water or other
minerals, then promptly upon the request of Lessor or any Person affected by any
such encroachment, violation or impairment, Lessee, at its sole cost and
expense, but subject to its right to contest the existence of any such
encroachment, violation or impairment, shall protect, indemnify, save harmless
and defend Lessor from and against all losses, liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses (including reasonable
attorneys', consultants' and experts' fees and expenses) based on or arising by
reason of any such encroachment, violation or impairment. In the event of an
adverse final determination with respect to any such encroachment, violation or
impairment, Lessee shall 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
Lessee; or (ii) make such changes in the Leased Improvements and any Capital
Addition thereto, 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 or any Capital Addition
thereto, 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 and any Capital
Addition thereto for the Primary Intended Use substantially in the manner and to
the extent the Leased Improvements and Capital Additions were operated prior to
the assertion of such encroachment, violation or impairment. Lessee's
obligations under this Section 9.2 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 and, to the extent the recovery thereof is not necessary to
compensate Lessor for any damages incurred by any such encroachment, violation
or impairment, Lessee shall be entitled to a credit for any sums recovered by
Lessor under any such policy of title or other insurance.
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ARTICLE X.
10. Construction of Capital Additions to the Leased Property.
Without the prior written consent of Lessor which consent may be withheld or
granted by Lessor in its sole and absolute discretion, Lessee shall (a) make no
Capital Additions on or structural alterations to the Leased Property and (b)
not enlarge or reduce the size of the Facility or otherwise alter or affect any
main Facility systems, including any main plumbing, electrical or heating,
ventilating and air conditioning systems of the Facility; provided, however,
that Lessor hereby agrees not to unreasonably withhold its consent to any
Capital Additions or structural alterations to the Leased Property which, for
any single project, costs less than $100,000, or when aggregated with all other
projects during the Term, costs less than $200,000.
ARTICLE XI.
11. Liens. Subject to the provisions of Article XII relating
to permitted contests, Lessee will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon the Leased Property or any
Capital Addition thereto or any attachment, levy, claim or encumbrance in
respect of the Rent, excluding, however, (i) this Lease; (ii) the matters that
existed as of the Commencement Date; (iii) restrictions, liens and other
encumbrances which are consented to in writing by Lessor, or any easements
granted pursuant to the provisions of Section 7.3; (iv) liens for Impositions
which Lessee is not required to pay hereunder; (v) subleases permitted by
Article XXIV; (vi) liens for Impositions not yet delinquent; (vii) liens of
mechanics, laborers, materialmen, suppliers or vendors for amounts not yet due;
and (viii) any liens which are the responsibility of Lessor pursuant to the
provisions of Article XXXVI.
ARTICLE XII.
12. Permitted Contests. Lessee, upon prior written notice to
Lessor, on its own or in Lessor's name, at Lessee's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any licensure or
certification decision, Imposition, Legal Requirement, Insurance Requirement,
lien, attachment, levy, encumbrance, charge or claim; provided, however, that
(i) in the case of an unpaid Imposition, lien, attachment, levy,
encumbrance, charge or claim, the commencement and continuation of such
proceedings shall suspend the collection thereof from Lessor and from the Leased
Property or any Capital Addition thereto;
(ii) neither the Leased Property or any Capital Addition thereto, the Rent
therefrom nor any part or interest in either thereof would be in any danger of
being sold, forfeited, attached or lost pending the outcome of such proceedings;
(iii) in the case of a Legal Requirement, neither Lessor nor Lessee would
be in any danger of civil or criminal liability for failure to comply therewith
pending the outcome of such proceedings; (iv) if any such contest shall involve
a sum of money or potential loss in excess of Fifty Thousand Dollars ($50,000),
Lessee shall deliver to Lessor and its counsel an opinion of legal counsel
reasonably
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acceptable to Lessor to the effect set forth in clauses (i), (ii) and (iii)
above, to the extent applicable; (v) in the case of a Legal Requirement,
Imposition, lien, encumbrance or charge, Lessee shall give such reasonable
security as may be reasonably required by Lessor to insure ultimate payment of
the same and to prevent any sale or forfeiture of the Leased Property or any
Capital Addition thereto or the Rent by reason of such non-payment or
noncompliance; (vi) in the case of an Insurance Requirement, the coverage
required by Article XIII shall be maintained; and (vii) if such contest be
finally resolved against Lessor or Lessee, Lessee shall promptly pay the amount
required to be paid, together with all interest and penalties accrued thereon,
or comply with the applicable Legal Requirement or Insurance Requirement.
Lessor, at Lessee's expense, shall execute and deliver to Lessee such
authorizations and other documents as may reasonably be required in any such
contest, and, if reasonably requested by Lessee or if Lessor so desires, Lessor
shall join as a party therein. The provisions of this Article XII shall not be
construed to permit Lessee to contest the payment of Rent or any other amount
payable by Lessee to Lessor hereunder. Lessee shall indemnify, defend, protect
and save Lessor harmless from and against any liability, cost or expense of any
kind that may be imposed upon Lessor in connection with any such contest and any
loss resulting therefrom.
ARTICLE XIII.
13.1 General Insurance Requirements. During the Term, Lessee
shall at all times keep the Leased Property, and all property located in or on
the Leased Property, including Capital Additions, the Fixtures and the 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. All liability type policies
must name Lessor as an "additional insured." All property, loss of rental and
business interruption type policies shall name Lessor as "loss payee." Losses
shall be payable to Lessor and/or Lessee as provided in Article XIV. In
addition, the policies, as appropriate, shall name as an "additional insured" or
"loss payee" the holder of any mortgage, deed of trust or other security
agreement ("Facility Mortgagee") securing any indebtedness or any other
Encumbrance placed on the Leased Property in accordance with the provisions of
Article XXXVI ("Facility Mortgage") by way of a standard form of mortgagee's
loss payable endorsement. Any loss adjustment shall require the written consent
of Lessor, Lessee, and each Facility Mortgagee. Evidence of insurance shall be
deposited with Lessor and, if requested, with any Facility Mortgagee(s). The
policies shall insure against the following risks:
13.1.1 Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils commonly known as special form perils,
earthquake (including earth movement), sinkhole and windstorm in an amount not
less than the insurable value on a replacement cost basis (as defined below in
Section 13.2) and including a building ordinance coverage endorsement;
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13.1.2 Loss or damage by explosion of steam boilers, pressure
vessels or similar apparatus, now or hereafter installed in the Facility, in
such limits with respect to any one accident as may be reasonably requested by
Lessor from time to time;
13.1.3 Flood (when the Leased Property is located in whole or
in part within a designated 100-year flood plain area) and such other hazards
and in such amounts as may be customary for comparable properties in the area;
13.1.4 Loss of rental value in an amount not less than twelve
(12) months' Rent payable hereunder or business interruption in an amount not
less than twelve (12) months of income and normal operating expenses including
payroll and Rent payable hereunder with an endorsement extending the period of
indemnity by at least ninety (90) days (Building Ordinance - Increased Period of
Restoration Endorsement) necessitated by the occurrence of any of the hazards
described in Sections 13.1.1, 13.1.2 or 13.1.3;
13.1.5 Claims for bodily injury or property damage under a
policy of commercial general liability insurance with amounts not less than One
Million and No/100 Dollars ($1,000,000.00) combined single limit and Three
Million No/100 Dollars ($3,000,000.00) in the annual aggregate; and
13.1.6 Medical professional liability with amounts not less
than One Million Dollars ($1,000,000) combined single limit and Three Million
Dollars ($3,000,000) in the annual aggregate.
13.2 Replacement Cost. The term "replacement cost" shall mean
the actual replacement cost of the insured property from time to time with new
materials and workmanship of like kind and quality. If either party believes
that the replacement cost has increased or decreased at any time during the
Term, it shall have the right to have such replacement cost redetermined by an
impartial national insurance company reasonably acceptable to both parties (the
"impartial appraiser"); provided, however, that in no event shall such
redetermination occur more frequently than one time every three (3) Lease Years
without the mutual consent of the parties. The party desiring to have the
replacement cost so redetermined shall forthwith, on receipt of such
determination by the impartial appraiser, give written notice thereof to the
other party hereto. The determination of the impartial appraiser shall be final
and binding on the parties hereto, and Lessee shall forthwith increase or
decrease the amount of the insurance carried pursuant to this Article to the
amount so determined by the impartial appraiser. Each party shall pay one-half
(1/2) of the fee, if any, of the impartial appraiser. If Lessee has made
improvements to the Leased Property, Lessor may at Lessee's expense have the
replacement cost redetermined at any time after such improvements are made,
regardless of when the replacement cost was last determined.
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 any Facility Mortgagee and shall
further at all times maintain adequate workers'
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compensation coverage and any other coverage required by Legal Requirements for
all Persons employed by Lessee on the Leased Property and any Capital Addition
thereto in accordance with Legal Requirements.
13.4 Waiver of Subrogation. All insurance policies carried by
either party covering the Leased Property and any Capital Addition thereto and
Lessee's Personal Property including contents, fire and casualty insurance,
shall expressly waive any right of subrogation on the part of the insurer
against the other party. Each party waives any claims it has against the other
party to the extent such claim is covered by insurance.
13.5 Policy Requirements. All of the policies of insurance
referred to in this Article shall be written in form reasonably satisfactory to
Lessor and by insurance companies with a policyholder rating of "A" and a
financial rating of "X" in the most recent version of Best's Key Rating Guide.
Lessee shall pay all of the premiums therefor as and when due (whether in
installments or otherwise), and deliver such policies or certificates thereof to
Lessor prior to their effective date (and with respect to any renewal policy, at
least thirty (30) days prior to the expiration of the existing policy), and in
the event of the failure of Lessee either to effect such insurance in the names
herein called for or to pay the premiums therefor as and when due, or to deliver
such policies or certificates 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, in which event the cost thereof, together with
interest thereon at the Overdue Rate, shall be repayable to Lessor upon demand
therefor. Each insurer shall agree, by endorsement on the policy or policies
issued by it, or by independent instrument furnished to Lessor, that it will
give to Lessor thirty (30) days' written notice before the policy or policies in
question shall be altered, allowed to expire or cancelled. Each policy shall
have a deductible or deductibles, if any, which are no greater than those
normally maintained for similar facilities in the State.
13.6 Increase in Limits. If either party shall at any time
believe the limits of the insurance required hereunder to be either excessive or
insufficient, the parties shall endeavor to agree in writing on the proper and
reasonable limits for such insurance to be carried and such insurance shall
thereafter be carried with the limits thus agreed on until further change
pursuant to the provisions of this Section; provided, however, that such changes
shall not occur more frequently than one time per Lease Year without the mutual
consent of the parties. If the parties shall be unable to agree thereon, the
proper and reasonable limits for such insurance to be carried shall be
determined by an impartial third party reasonably selected by Lessor. Nothing
herein shall permit the amount of insurance to be reduced below the amount or
amounts required by any of the Facility Mortgagee.
13.7 Blanket Policies and Policies Covering Multiple
Locations. Notwithstanding anything to the contrary contained in this Article,
Lessee's obligations to carry the casualty insurance provided for herein may be
brought within the coverage of a blanket policy or policies of insurance carried
and maintained by Lessee or its Affiliate; provided, however, that the coverage
afforded Lessor will not be reduced or diminished or
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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. For any liability policies covering
facilities in addition to the Leased Property, Lessor may require excess limits
as Lessor reasonably determines.
13.8 No Separate Insurance. Lessee shall not, on Lessee's own
initiative or pursuant to the request or requirement of any third party, (i)
take out separate insurance concurrent in form or contributing in the event of
loss with that required in this Article to be furnished by, or which may
reasonably be required to be furnished by, Lessee or (ii) increase the amounts
of any then existing insurance by securing an additional policy or additional
policies, unless all parties having an insurable interest in the subject matter
of the insurance as to which Lessee has notice or actual knowledge, including in
all cases Lessor and all Facility Mortgagees, are included therein as additional
insured and the loss is payable under such insurance in the same manner as
losses are payable under this Lease. Lessee 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 policy or
additional policies.
ARTICLE XIV.
14.1 Insurance Proceeds. All proceeds payable by reason of any
loss or damage to the Leased Property, or any portion thereof, under any policy
of insurance required to be carried hereunder shall be paid to Lessor and made
available, subject to reasonable conditions and requirements, by Lessor to
Lessee from time to time upon request of Lessee as work progresses, for the
reasonable costs of reconstruction or repair, as the case may be, of any damage
to or destruction of the Leased Property, or any portion thereof; provided,
however, that so long as no Event of Default has occurred hereunder, if the
proceeds of any such insurance are less than $50,000.00, then Lessee shall be
entitled to receive such proceeds directly from the insurer. Any excess proceeds
of insurance remaining after the completion of the restoration or reconstruction
of the Leased Property (or in the event neither Lessor nor Lessee is required or
elects to repair and restore, all such insurance proceeds) shall be retained by
or paid over to Lessor, as the case may be, except as otherwise specifically
provided below in this Article XIV. All salvage resulting from any risk covered
by insurance shall belong to Lessor. In the event of any insured casualty,
Lessee's obligation to commence reconstruction or repair of the Leased Property
as provided herein, if applicable, shall accrue upon the earlier of (i) the date
of settlement of any insurance claim with respect to such casualty and (ii) one
hundred twenty (120) days following the date of such casualty. In the event of
an uninsured casualty, Lessee's obligation to commence restoration or repair of
the Leased Property as provided herein, if applicable, shall accrue ten (10)
days following the date of such casualty. Lessee shall commence any such
restoration or repair work which Lessee is required to perform hereunder
promptly after its obligation hereunder first accrues and thereafter shall
diligently prosecute such work to completion.
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14.2 Insured Casualty.
14.2.1 If the Leased Property is damaged or destroyed from a
risk covered by insurance carried by Lessee such that the Facility thereby is
rendered Unsuitable for its Primary Intended Use, Lessee shall either (i)
restore the Leased Property to substantially the same condition as existed
immediately before such damage or destruction in accordance with the provisions
of Section 14.1, or (ii) offer to acquire the Leased Property from Lessor for a
purchase price equal to the greater of (y) the Minimum Repurchase Price or (z)
the Fair Market Value immediately prior to such damage or destruction. If Lessor
does not accept Lessee's offer to so purchase the Leased Property, Lessee may
either withdraw such offer and proceed to restore the Leased Property in
accordance with the provisions of Section 14.1 to substantially the same
condition as existed immediately before such damage or destruction or terminate
the Lease in which event Lessor shall be entitled to retain the insurance
proceeds.
14.2.2 If the Leased Property is damaged from a risk covered
by insurance carried by Lessee, but the Facility is not thereby rendered
Unsuitable for its Primary Intended Use, Lessee shall restore the Leased
Property to substantially the same condition as existed immediately before such
damage in accordance with the provisions of Section 14.1. Such damage shall not
terminate this Lease; provided, however, that if Lessee cannot within a
reasonable time after diligent efforts obtain the necessary government approvals
needed to restore and operate the Facility for its Primary Intended Use, Lessee
may offer to purchase the Leased Property for a purchase price equal to the
greater of the Minimum Repurchase Price or the Fair Market Value immediately
prior to such damage. If Lessee shall make such offer and Lessor does not accept
the same, Lessee may either withdraw such offer and proceed to restore the
Leased Property to substantially the same condition as existed immediately
before such damage or destruction in accordance with the provisions of Section
14.1, or terminate the Lease, in which event Lessor shall be entitled to retain
the insurance proceeds.
14.2.3 If the cost of the repair or restoration exceeds the
amount of proceeds received by Lessor from the insurance required to be carried
hereunder, Lessee shall contribute any excess amounts needed to restore the
Facility. Such difference shall be paid by Lessee to Lessor together with any
other insurance proceeds, for application to the cost of repair and restoration.
14.2.4 If Lessor accepts Lessee's offer to purchase the Leased
Property, this Lease shall terminate as to the Leased Property upon payment of
the purchase price and Lessor shall remit to Lessee all insurance proceeds
pertaining to the Leased Property then held by Lessor. The provisions of Section
44.6 below shall apply with respect to any such termination of the Lease
pursuant to this Section 14.2.4.
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14.3 Uninsured Casualty.
(a) If the Leased Property is damaged or destroyed from a risk
not covered by insurance carried by Lessee, such that the Facility is thereby
rendered Unsuitable for its Primary Intended Use, Lessee shall either (i)
restore the Leased Property to substantially the same condition as existed
immediately prior to such damage or destruction in accordance with the
provisions of Section 14.1, or (ii) offer to acquire the Leased Property from
Lessor for a purchase price equal to the greater of (y) the Minimum Repurchase
Price or (z) the Fair Market Value immediately prior to such damage or
destruction. If Lessor does not accept Lessee's offer to so purchase the Leased
Property, which Lessor shall have the right to accept or reject in its sole and
absolute discretion, Lessee shall immediately proceed to restore the Leased
Property to substantially the same condition as existed immediately prior to
such damage or destruction in accordance with the provisions of Section 14.1.
(b) If the Leased Property is damaged from a risk not covered
by insurance carried by Lessee, but the Facility is not thereby rendered
Unsuitable for its Primary Intended Use, Lessee shall restore the Leased
Property to substantially the same condition that existed before such damage in
accordance with the provisions of Section 14.1. Such damage shall not terminate
this Lease; provided, however, that if Lessee cannot within a reasonable time
after diligent efforts obtain the necessary government approvals needed to
restore and operate the Facility for its Primary Intended Use, Lessee may offer
to purchase the Leased Property for a purchase price equal to the greater of (y)
the Minimum Repurchase Price or (z) the Fair Market Value immediately prior to
such damage. If Lessor does not accept Lessee's offer to so purchase the Leased
Property, which Lessor shall have the right to accept or reject in its sole and
absolute discretion, Lessee shall immediately proceed to restore the Leased
Property to substantially the same condition that existed immediately before
such damage or destruction in accordance with the provisions of Section 14.1.
(c) If Lessor accepts Lessee's offer to purchase the Leased
Property pursuant to either of Sections 14.3.1 or 14.3.2, as applicable, this
Lease shall terminate as to the Leased Property upon payment of the applicable
purchase price.
14.4 No Abatement of Rent. This Lease shall remain in full
force and effect and Lessee's obligation to pay the Rent and all other charges
required by this Lease shall remain unabated during the period required for
adjusting insurance, satisfying Legal Requirements, repair and restoration.
14.5 Waiver. Lessee waives any statutory rights of termination
which may arise by reason of any damage or destruction of the Leased Property.
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ARTICLE XV.
15. Condemnation
15.1 Total Taking. If the Leased Property is totally and
permanently taken by Condemnation, this Lease shall terminate as of the day
before the Date of Taking, and the provisions of Section 44.6 below shall apply.
15.2 Partial Taking. If a portion of the Leased Property is
taken by Condemnation, this Lease shall remain in effect if the Facility is not
thereby rendered Unsuitable for Its Primary Intended Use, but if the Facility is
thereby rendered Unsuitable for its Primary Intended Use, this Lease shall
terminate as of the day before the Date of Taking.
15.3 Restoration. If there is a partial taking of the Leased
Property and this Lease remains in full force and effect pursuant to Section
15.2, Lessor shall make available to Lessee the portion of the Award necessary
and specifically identified for restoration of the Leased Property and Lessee
shall accomplish all necessary restoration whether or not the amount provided by
the condemnor for restoration is sufficient.
15.4 Award-Distribution. The entire Award shall belong to and
be paid to Lessor, except that, subject to the rights of the Facility
Mortgagees, Lessee shall be entitled to receive from the Award the value of
Lessee's Personal Property and any Capital Additions not funded or accrued by
Lessor and, if and to the extent such Award specifically includes such items,
lost profits value and moving expenses; provided, however, that in any event
Lessor shall receive from the Award, subject to the rights of the Facility
Mortgagees, no less than the greater of (a) the Fair Market Value prior to the
institution of the Condemnation and (b) the Minimum Repurchase Price.
15.5 Temporary Taking. The taking of the Leased Property, or
any part thereof, shall constitute a taking by Condemnation only when the use
and occupancy by the taking authority has continued for longer than 180
consecutive days. During any shorter period, which shall be a temporary taking,
all the provisions of this Lease shall remain in full force and effect and the
Award allocable to the Term shall be paid to Lessee.
15.6 Sale Under Threat of Condemnation. A sale by Lessor to
any Condemnor, either under threat of Condemnation or while Condemnation
proceedings are pending, shall be deemed a Condemnation for purposes of this
Lease. Lessor may, without any obligation to Lessee, agree to sell and/or convey
to any Condemnor all or any portion of the Leased Property free from this Lease
and the rights of Lessee hereunder without first requiring that any action or
proceeding be instituted or pursued to judgment; provided, however, that no such
agreement to sell and/or convey shall affect Lessee's rights pursuant to Section
15.4 above.
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ARTICLE XVI.
16.1 Events of Default. Any one or more of the following shall
constitute an "Event of Default":
(a) a default shall occur under any other lease or other
agreement or instrument, including the Contract of Acquisition and any other
Facility Group Lease, with or in favor of Lessor or any Affiliate of Lessor and
made by or with Lessee or any Affiliate of Lessee where the default is not cured
within any applicable grace period set forth therein;
(b) Lessee shall fail to pay any installment of Rent when the
same becomes due and payable and such failure is not cured by Lessee within a
period of five (5) business days after notice thereof from Lessor; provided,
however, that such notice shall be in lieu of and not in addition to any notice
which under applicable law may be required in order to declare an Event of
Default;
(c) Lessee shall fail to obtain a letter of credit as required
by Article XXI;
(d) if Lessee shall fail to observe or perform any other term,
covenant or condition of this Lease and such failure is not cured by Lessee
within 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 to be an Event of Default if Lessee
proceeds promptly and with due diligence to cure the failure and diligently
completes the curing thereof; provided, however, that such notice shall be in
lieu of and not in addition to any notice which under applicable law may be
required in order to declare an Event of Default;
(e) Lessee or any Guarantor shall:
(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 act,
(iii) make an assignment for the benefit of its 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;
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(f) Lessee or any Guarantor shall be adjudicated as bankrupt
or a court of competent jurisdiction shall enter an order or decree appointing,
without the consent of Lessee, a receiver of Lessee or of the whole or
substantially all of its property, or approving a petition filed against it
seeking reorganization or arrangement of Lessee under the Federal bankruptcy
laws or any other applicable law or statute of the United States of America or
any state thereof, and such judgment, order or decree shall not be vacated or
set aside or stayed within ninety (90) days from the date of the entry thereof;
(g) Lessee or any Guarantor 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 its assets;
(h) the estate or interest of Lessee in the Leased Property or
any part thereof shall be levied upon or attached in any 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 receipt by Lessee of notice
thereof from Lessor; provided, however, that such notice shall be in lieu of and
not in addition to any notice which under applicable law may be required in
order to declare an Event of Default;
(i) any Transfer which requires Lessor's consent occurs
without Lessor's consent in accordance with the provisions of Article XXIV and
such Transfer remains in effect and is not cancelled or unwound within thirty
(30) days after written notice thereof from Lessor; provided, however, that such
notice shall be in lieu of and not in addition to any notice which under
applicable law may be required in order to declare an Event of Default;
(j) any of the representations or warranties made by Lessee in
the Contract of Acquisition during any applicable survival period therefor or by
any Guarantor in the Guaranty proves to be untrue when made in any material
respect which materially and adversely affects Lessor and which remains uncured
for thirty (30) days after written notice thereof from Lessor; provided,
however, that such notice shall be in lieu of and not in addition to any notice
which under applicable law may be required in order to declare an Event of
Default;
(k) except for medically appropriate reasons or as a result of
(i) damage, destruction or Condemnation or (ii) any other occurrence of the
nature and type of an Unavoidable Delay, any local, state or federal agency
having jurisdiction over the operation of the Facility removes, in the aggregate
during any twelve (12) month period, ten percent (10%) or more of the patients
or residents located in the Facility, unless within thirty (30) days after
notice from Lessor, Lessee shall have cured or corrected the cause or condition
which resulted in such removal and within forty-five (45) days after such cure
shall have replaced such patients or residents so removed;
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(l) Lessee fails to give notice to Lessor not later than
fifteen (15) Business Days after Lessee's receipt thereof of any Class A or
equivalent fine notice from any governmental authority or officer acting on
behalf thereof relating to the Facility;
(m) Lessee fails to notify Lessor within fifteen (15) Business
Days after receipt of any notice from any governmental agency terminating or
suspending or threatening termination or suspension, of any material license or
certification relating to the Facility;
(n) Lessee fails to give notice to Lessor not later than
fifteen (15) Business Days after any notice, claim or demand from any
governmental authority or any officer acting on behalf thereof, of any violation
of any law, order, ordinance, rule or regulation with respect to the operation
of the Facility, which violation would have a material adverse effect on Lessor,
the Facility or the operation thereof for its Primary Intended Use;
(o) Lessee fails to cure or abate any Class A or equivalent
violation occurring during the Term that is claimed by any governmental
authority, or any officer acting on behalf thereof, of any law, order,
ordinance, rule or regulation pertaining to the operation of the Facility, and
within the time permitted by such authority for such cure or abatement, unless
(i) said violation has no material effect on Lessor, the Facility or the
operation thereof for its Primary Intended Use and Lessee thereafter diligently
and in good faith proceeds to cure such violation or (ii) Lessee is reasonably
and in good faith contesting such violation;
(p) any proceedings are instituted against Lessee by any
governmental authority which are reasonably likely to result in (i) the
revocation of any material license granted to Lessee which is necessary for the
operation of the Facility for the Primary Intended Use, or (ii) to the extent
applicable, the decertification of the Facility from participation in the
Medicare or Medicaid reimbursement program or the issuance of a stop placement
order against Lessee, and such proceedings are not vacated, set aside or stayed
within sixty (60) days after the institution thereof, but in any event prior to
the revocation of any such license and/or decertification of the Facility, as
applicable;
(q) any acceleration of any indebtedness or other monetary
obligations of (i) Lessee in the sum of $1 Million or more has occurred or (ii)
any Guarantor has occurred where the amount of such indebtedness or obligation
is in excess of the lesser of (A) $10 Million (as adjusted by the Consumer Price
Index to equate to constant 1996 dollars) and (B) Twenty-Five Percent (25%) of
the Consolidated Net Worth of such Guarantor; or
(r) any default shall occur under any guaranty of Lessee's
obligations under this Lease (including the Guaranty) where such default is not
cured within any applicable grace period set forth therein.
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16.2 Certain Remedies. If an Event of Default shall have
occurred, Lessor may terminate this Lease by giving Lessee notice of such
termination and the Term shall terminate and all rights of Lessee under this
Lease shall cease. Lessor shall have all rights at law and in equity available
to Lessor as a result of any Event of Default. Lessee shall pay as Additional
Charges all costs and expenses incurred by or on behalf of Lessor, including
reasonable attorneys' fees and expenses, as a result of any Event of Default
hereunder. If an Event of Default shall have occurred and be continuing, whether
or not this Lease has been terminated pursuant to Section 16.1, Lessee shall, to
the extent permitted by law, if required by Lessor so to do, immediately
surrender to Lessor possession of the Leased Property and any Capital Additions
thereto and quit the same and Lessor may enter upon and repossess the Leased
Property and any Capital Addition thereto by reasonable force, summary
proceedings, ejectment or otherwise, and may remove Lessee and all other Persons
and any of Lessee's Personal Property from the Leased Property and any Capital
Addition thereto.
16.3 Damages. (i) The termination of this Lease; (ii) the
repossession of the Leased Property and any Capital Addition thereto; (iii) the
failure of Lessor, notwithstanding reasonable good faith efforts, to relet the
Leased Property; (iv) the reletting of all or any portion of the Leased
Property; or (v) the failure or inability of Lessor to collect or receive any
rentals due upon any such reletting, shall not relieve Lessee of its liabilities
and obligations hereunder, all of which shall survive any such termination,
repossession or reletting. If any such termination occurs, 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. Thereafter:
Lessee shall forthwith pay to Lessor, at Lessor's option, as and for liquidated
and agreed current damages for an Event of Default by Lessee, either:
(A) 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, plus
(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.
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As used in clauses (i) and (ii) above, the "worth at the time of award"
shall be computed by allowing interest at the Overdue Rate. As used in
clause (iii) above, the "worth at the time of award" shall be computed
by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus two percent (2%). For
purposes of determining the worth at the time of the award, Additional
Rent that would have been payable for the remainder of the Term shall
be deemed to be the greater of (y) the same as the Additional Rent for
the then current Lease Year or, if not determinable, the immediately
preceding Lease Year; and (z) such other amount as Lessor shall
demonstrate could reasonably have been earned.
or (B) alternatively, if Lessor does not elect to terminate this
Lease, then:
without termination of Lessee's right to possession of the Leased
Property, each installment of said Rent and other sums payable by
Lessee to Lessor under the Lease as the same becomes due and payable,
together with 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.
16.4 Receiver. Upon the occurrence of an Event of Default, and
upon commencement of proceedings to enforce the rights of Lessor hereunder,
Lessor shall be entitled, as a matter of right, to the appointment of a receiver
or receivers acceptable to Lessor of the Leased Property and any Capital
Addition thereto of the revenues, earnings, income, products and profits
thereof, pending the outcome of such proceedings, with such powers as the court
making such appointment shall confer.
16.5 Lessee's Obligation to Purchase. If a Put Event shall
have occurred, then Lessor may require Lessee to purchase the Leased Property on
the first Minimum Rent Payment Date occurring not less than thirty (30) days
after the date specified in a notice from Lessor requiring such purchase for an
amount equal to the greater of (i) the Fair Market Value, or (ii) the Minimum
Repurchase Price, plus, in either event, all Rent then due and payable
(excluding the installment of Minimum Rent due on the purchase date). If Lessor
exercises such right, Lessor shall convey the Leased Property to Lessee on the
date fixed therefor in accordance with the provisions of Article XVIII upon
receipt of the purchase price therefor and this Lease shall thereupon terminate.
Any purchase by Lessee of the Leased Property pursuant to this Section shall be
in lieu of the damages specified in Section 16.3 and in lieu of any right to
recover actual damages under the Contract of Acquisition for breach of any
covenant, representation or warranty thereunder.
16.6 Waiver. If Lessor initiates judicial proceedings or if
this Lease is terminated by Lessor pursuant to this Article, Lessee waives, to
the extent permitted by applicable law, (i) any right of redemption, re-entry or
repossession; and (ii) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
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16.7 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 which are made to Lessor rather than Lessee due to the
existence of an 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.
16.8 Facility Operating Deficiencies. On notice or request
therefor by Lessor to Lessee, upon the occurrence of a Facility Operating
Deficiency specified with particularity in Lessor's notice, and for a period
equal to the greater of six (6) months or the time necessary fully to remedy the
Facility Operating Deficiency, Lessee shall engage the services of a management
consultant, unaffiliated with Lessee and approved by Lessor, to review the
management of the Facility for the purpose of making recommendations to remedy
the Facility Operating Deficiency(ies). The management consultant shall have
complete access to the Facility, its records, offices and facilities, in order
that it may carry out its duties. Lessee shall cause such management consultant
to prepare and deliver to Lessor and Lessee a written report of its
recommendations within thirty (30) days after its engagement. If Lessee shall
fail to designate a management consultant acceptable to Lessor within five (5)
days after receipt of the notice of request therefor, Lessor may designate such
management consultant by further notice to Lessee. Lessee shall be responsible
for payment of all fees and expenses reasonably charged and incurred by the
management consultant in carrying out its duties. Lessee shall promptly
implement any and all reasonable recommendations made by such management
consultant in order to promptly correct or cure such Facility Operating
Deficiency; provided, however, that in no event shall Lessee implement any such
recommendations if the same would otherwise cause an Event of Default hereunder
(e.g., a Transfer or change in use of the Leased Property), without Lessor's
prior written consent, which consent may be given or withheld in Lessor's sole
and absolute discretion.
16.9 [Reserved]
16.10 Lessor's Security Interest. The parties intend that if
an Event of Default occurs under this Lease and this Lease is terminated by
Lessor pursuant to Section 16.2, Lessor will control Lessee's Personal Property
and the Intangible Property so that Lessor or its designee or nominee can
operate or re-let the Leased Property intact for its Primary Intended Use.
Accordingly, to implement such intention, and for the purpose of securing the
payment and performance obligations of Lessee hereunder, Lessor and Lessee agree
as follows:
16.10.1 Lessee, as debtor, hereby grants to Lessor, as secured
party, a security interest and an express contractual lien upon all of Lessee's
right, title and interest in and to Lessee's Personal Property and in and to the
Intangible Property and any and all products, rents, proceeds and profits
thereof in which Lessee now owns or hereafter acquires an interest or right,
including any leased Lessee's Personal Property. This Lease constitutes a
security agreement covering all such Lessee's Personal Property and the
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Intangible Property. The security interest granted to Lessor with respect to
Lessee's Personal Property in this Section 16.10 is intended by Lessor and
Lessee to be subordinate to any security interest granted in connection with the
financing or leasing of all or any portion of the Lessee's Personal Property so
long as the lessor or financier of such Lessee's Personal Property agrees to
give Lessor written notice of any default by Lessee under the terms of such
lease or financing arrangement, to give Lessor a reasonable time following such
notice to cure any such default and consents to Lessor's written assumption of
such lease or financing arrangement upon Lessor's curing of any such defaults.
This security agreement and the security interest created herein shall survive
the expiration or earlier termination of this Lease.
16.10.2 If required by Lessor at any time during the Term,
Lessee shall execute and deliver to Lessor, in form reasonably satisfactory to
Lessor, additional security agreements, financing statements, fixture filings
and such other documents as Lessor may reasonably require to perfect or continue
the perfection of Lessor's security interest in Lessee's Personal Property and
the Intangible Property and any and all products and proceeds thereof now owned
or acquired by Lessee. In the event Lessee fails to execute any financing
statement or other documents for the perfection or continuation of Lessor's
security interest, such failure shall, after any applicable notice and cure
period set forth in Section 16.1 above, be deemed an Event of Default hereunder.
16.10.3 Upon the occurrence of an Event of Default, Lessor
shall be entitled to exercise any and all rights or remedies available to a
secured party under the Uniform Commercial Code, or available to a lessor under
the laws of the State, with respect to Lessee's Personal Property and the
Intangible Property, including the right to sell the same at public or private
sale.
ARTICLE XVII.
17. Lessor's Right to Cure Lessee's Default. If Lessee shall
fail to make any payment or to perform any act required to be made or performed
hereunder, Lessor, without waiving or releasing any obligation or default, may
after written notice to Lessee, but shall be under no obligation to, 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 and any
Capital Addition thereto 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 deemed an eviction of Lessee. All sums so paid by Lessor and all costs
and expenses, including reasonable attorneys' fees and expenses, so incurred,
together with interest thereon at the Overdue Rate from the date on which such
sums or expenses are paid or incurred by Lessor, shall be paid by Lessee to
Lessor on demand.
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ARTICLE XVIII.
18. Purchase of the Leased Property. If Lessee purchases the
Leased Property from Lessor, 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 deed or other conveyance conveying the entire
interest of Lessor in and to the Leased Property to Lessee free and clear of all
encumbrances other than (i) those that Lessee has agreed hereunder to pay or
discharge; (ii) those mortgage liens, if any, which Lessee has agreed in writing
to accept and to take title subject to; (iii) those liens and encumbrances which
were in effect on the date of conveyance of the Leased Property to Lessor; and
(iv) any other encumbrances permitted hereunder to be imposed on the Leased
Property which are assumable at no cost to Lessee or to which Lessee may take
subject without cost to Lessee. Lessee shall receive a credit against the
applicable purchase price for the total of the encumbrances assumed or taken
subject to and the difference between the applicable purchase price and the
total of such encumbrances assumed or taken subject to shall be paid to Lessor
or as Lessor may direct in immediately available funds. All expenses of such
conveyance, including the cost of title insurance, reasonable attorneys' fees
incurred by Lessor in connection with such conveyance and release, transfer
taxes and recording and escrow fees, shall be paid by Lessee.
ARTICLE XIX.
19.1 Renewal Terms. Provided that no Event of Default, or
event which, with notice or lapse of time or both, would constitute an Event of
Default, has occurred and is continuing, either at the date of exercise or upon
the commencement of an Extended Term (as hereunder defined), then Lessee shall
have the right to renew this Lease for two (2) ten-year renewal terms (each, an
"Extended Term), upon (i) giving written notice to Lessor of such renewal not
less than eighteen (18) months and not more than twenty-one (21) months prior to
the expiration of the then current Term and (ii) the Lessee under each other
Facility Group Lease concurrently therewith exercises its right to renew such
Facility Group Lease for the corresponding Extended Term in the manner and
within the time provided in Article XIX of such Facility Group Lease. During
each Extended Term, all of the terms and conditions of this Lease shall continue
in full force and effect except that the annual Minimum Rent for and during such
Extended Term shall be the greater of (a) the then current annual Fair Market
Rental for the Leased Property and (b) the annual Minimum Rent and Additional
Rent payable for the last Lease Year of the immediately preceding Term.
Notwithstanding anything to the contrary in this Section 19.1,
Lessor, in its sole discretion, may waive the condition to Lessee's right to
renew this Lease that no Event of Default, or event which, with notice or lapse
of time or both, would constitute an Event of Default, have occurred or be
continuing, and the same may not be used by Lessee as a means to negate the
effectiveness of Lessee's exercise of its renewal right for such Extended Term.
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19.2 Lessor's Rights of Renewal and Early Termination. In
order to facilitate the transfer of the operations of the Facility to a third
party and/or to locate a replacement lessee, Lessor shall have the one time
right to either (i) terminate this Lease up to four (4) months early or (ii)
extend the Term of this Lease for up to four (4) months. Such right of early
termination shall be exercised by Lessor, if at all, by written notice from
Lessor to Lessee given not less than ninety (90) days prior to the date Lessor
desires to terminate this Lease and stating the date of such termination (which
date shall not be earlier than four (4) months prior to the expiration of the
Term). In the event that Lessor shall exercise such right of early termination
within the time and in the manner herein provided, this Lease shall terminate on
the date of termination specified in Lessor's notice. Such right of extension
shall be exercised by Lessor, if at all, by written notice from Lessor to Lessee
given not less than four (4) months prior to the expiration of the Term and
stating the date through which Lessor is extending the Term of this Lease (which
date shall not be later than four (4) months after the originally scheduled
expiration date). In the event that Lessor shall exercise such right of
extension, all of the terms and conditions of this Lease shall continue in full
force and effect and Lessee shall continue to pay Rent for and during such
extension period at the same Minimum Rent and Additional Rent rates as were in
effect upon the expiration of the originally scheduled Term; provided, however,
that Lessor shall have the right to terminate this Lease during any such
extension period upon not less than thirty (30) days prior written notice to
Lessee. In such event, this Lease, as previously extended, shall terminate upon
the date specified in Lessor's notice of termination.
ARTICLE XX.
20. Holding Over. Except as provided in Section 19.2, if
Lessee shall for any reason remain in possession of the Leased Property after
the expiration or earlier termination of the Term, such possession shall be as a
month-to-month tenant during which time Lessee shall pay as Minimum Rent each
month twice the sum of (i) monthly Minimum Rent applicable to the prior Lease
Year, plus (ii) one-twelfth of the aggregate Additional Rent payable applicable
to the prior Lease Year, together with all Additional Charges and all other sums
payable by Lessee pursuant to this Lease. During such period of month-to-month
tenancy, Lessee shall be obligated to perform and observe all of the terms,
covenants and conditions of this Lease, but shall have no rights hereunder other
than the right, to the extent given by 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.
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ARTICLE XXI.
21.1 Letters of Credit. During the entire Term and for sixty
(60) days after the expiration or earlier termination of this Lease, Lessee
shall have obtained letters of credit from a financial institution satisfactory
to Lessor but in any event with (a) not less than $100 Million in net assets,
(b) a financial rating of not less than 60 as rated by Sheshonoff Information
Services, Inc. (or any equivalent rating thereto from any successor or
substitute rating service selected by Lessor) and (c) an investment grade rating
from each of Standard and Poors Corporation and Moody's Investors Service,
naming Lessor as beneficiary to secure Lessee's obligations hereunder and
Lessee's and any Affiliate of Lessee's obligations under any other lease or
other agreement or instrument with or in favor of Lessor or any Affiliate of
Lessor (including any other Facility Group Lease), at the times, in the amounts
and for the purposes set forth below. Each letter of credit shall be in
substantially the form of Exhibit D hereto. Each letter of credit shall be for a
term of not less than one (1) year and irrevocable during that term. Each letter
of credit shall provide that it will be honored upon a signed statement by
Lessor that Lessor is entitled to draw upon the letter of credit under this
Lease, and shall require no signature or statement from any party other than
Lessor. No notice to Lessee shall be required to enable Lessor to draw upon the
letter of credit. Each letter of credit shall also provide that following the
honor of any drafts in an amount less than the aggregate amount of the letter of
credit, the financial institution shall return the original letter of credit to
Lessor and Lessor's rights as to the remaining amount of the letter of credit
will not be extinguished. In the event of a transfer of Lessor's interest in the
Leased Property, Lessor shall have the right to transfer the letter of credit to
the transferee and thereupon shall, without any further agreement between the
parties, be released by Lessee from all liability therefor, and it is agreed
that the provisions hereof shall apply to every transfer or assignment of the
letter of credit to a new Lessor. The letter of credit may be assigned as
security in connection with a Facility Mortgage. If the financial institution
from which Lessee has obtained a letter of credit shall admit in writing its
inability to pay its debts generally as they become due, file a petition in
bankruptcy or a petition to take advantage of any insolvency act, make an
assignment for the benefit of its creditors consent to the appointment of a
receiver of itself or of the whole or any substantial part of its property, or
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, then Lessee shall obtain a replacement
letter of credit within thirty (30) days of such act from another financial
institution satisfactory to Lessor.
21.2 Times for Obtaining Letters of Credit. The initial letter
of credit shall be obtained and delivered to Lessor prior to or contemporaneous
with the Commencement Date. The letters of credit covering subsequent periods
shall be obtained and delivered to Lessor not less than thirty (30) days prior
to the expiration of the then existing letter of credit ("Letter of Credit
Date"). The term for each such letter of credit shall begin no later than the
expiration date of the previous letter of credit.
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21.3 Amounts for Letters of Credit. Letters of credit covering
the first Lease Year shall be in an amount equal to one-third (1/3) of the
annual Minimum Rent payable by Lessee under this Lease for the applicable Lease
Year. The letters of credit covering subsequent Lease Years shall be in an
amount equal to one-third (1/3) of the sum of the annual Minimum Rent plus
Lessor's reasonable estimate of the Additional Rent to be payable by Lessee for
the applicable Lease Year.
21.4 Uses of Letters of Credit. Lessor shall have the right to
draw upon a letter of credit up to its full amount whenever an Event of Default
has occurred or an event of default under any other lease or agreement between
Lessor or an Affiliate of Lessor and Lessee or an Affiliate of Lessee (including
under any other Facility Group Lease) or under any other letter of credit,
guaranty, mortgage, deed of trust, or other instrument executed by Lessee or an
Affiliate of Lessee in favor of Lessor or an Affiliate of Lessor has occurred;
provided further, if Lessee fails to obtain a satisfactory letter of credit
prior to the applicable Letter of Credit Date, Lessor may draw upon the full
amount of the then existing letter of credit without giving any notice or time
to cure to Lessee. No such draw shall (i) cure or constitute a waiver of an
Event of Default, (ii) be deemed to fix or determine the amounts to which Lessor
is entitled to recover under this Lease or otherwise, or (iii) be deemed to
limit or waive Lessor's right to pursue any remedies provided for in this Lease.
If all or any portion of a letter of credit is drawn against by Lessor, Lessee
shall, within two (2) business days after demand by Lessor, cause the issuer of
such letter of credit to issue Lessor, at Lessee's expense, a replacement or
supplementary letter of credit in substantially the form attached hereto as
Exhibit D such that at all times during the Term, Lessor shall have the ability
to draw on one or more letters of credit totalling, in the aggregate, the amount
required pursuant to Section 21.3.
ARTICLE XXII.
22. Risk of Loss. The risk of loss or of decrease in the
enjoyment and beneficial use of the Leased Property as a consequence of the
damage or destruction thereof by fire, the elements, casualties, thefts, riots,
wars or otherwise, or in consequence of foreclosures, attachments, levies or
executions (other than by Lessor and Persons claiming from, through or under
Lessor) is assumed by Lessee, and no such event shall entitle Lessee to any
abatement of Rent.
ARTICLE XXIII.
23. General Indemnification. In addition to the other
indemnities contained herein, and notwithstanding the existence of any insurance
carried by or for the benefit of Lessor or Lessee, and without regard to the
policy limits of any such insurance, Lessee shall protect, indemnify, save
harmless and defend Lessor from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses, including
reasonable attorneys', consultants' and experts' fees and expenses, imposed upon
or incurred by or asserted against Lessor by reason of: (i) any accident, injury
to or death of Persons or
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loss of or damage to property occurring on or about the Leased Property or
adjoining sidewalks; (ii) any use, misuse, non-use, condition, maintenance or
repair by Lessee of the Leased Property; (iii) any failure on the part of Lessee
to perform or comply with any of the terms of this Lease; (iv) the
non-performance of any of the terms and provisions of any and all existing and
future subleases of the Leased Property entered into during the Term to be
performed by any party thereunder; (v) any claim for malpractice, negligence or
misconduct committed by any Person on or working from the Leased Property; and
(vi) the violation of any Legal Requirement.
Notwithstanding the existence of any insurance carried by or
for the benefit of Lessor or Lessee, and without regard to the policy limits of
any such insurance, Lessor shall protect, indemnify, save harmless and defend
Lessee from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses, including reasonable
attorneys', consultants' and experts' fees and expenses imposed upon or incurred
by or asserted against Lessee as a result of the gross negligence or willful
misconduct of Lessor, its employees, agents or contractors.
Any amounts which become payable by Lessee or Lessor under
this Article shall be paid within ten (10) days after liability therefor is
determined by litigation or otherwise, and if not timely paid shall bear
interest at the Overdue Rate from the date of such determination to the date of
payment. Lessee, at its sole cost and expense, shall contest, resist and defend
any such claim, action or proceeding asserted or instituted against Lessor for
which Lessee is obligated to indemnity Lessor hereunder or may compromise or
otherwise dispose of the same as Lessee sees fit; provided, however, that any
legal counsel selected by Lessee to defend Lessor shall be reasonably
satisfactory to Lessor. Lessor, at its sole cost and expense, shall contest,
resist and defend any such claim, action or proceeding asserted or instituted
against Lessee for which Lessor is obligated to indemnify Lessee hereunder or
may compromise or otherwise dispose of the same as Lessor sees fit; provided,
however, that any legal counsel selected by Lessor to defend Lessee shall be
reasonably satisfactory to Lessee. All indemnification covenants are intended to
apply to losses, damages, injuries, claims, etc. incurred directly by the
indemnified parties and their property, as well as by the indemnifying party or
third party, and their property. For purposes of this Article XXIII, any acts or
omissions of Lessee, or by employees, agents, assignees, contractors,
subcontractors or others acting for or on behalf of Lessee (whether or not they
are negligent, intentional, willful or unlawful), shall be strictly attributable
to Lessee. It is understood and agreed that payment shall not be a condition
precedent to enforcement of the foregoing indemnification obligations.
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ARTICLE XXIV.
24. Transfers.
24.1 Prohibition. Except as provided in Section 24.9 below,
Lessee shall not, without Lessor's prior written consent, which may be withheld
in Lessor's sole and absolute discretion, either directly or indirectly or
through one or more step transactions or tiered transactions, voluntarily or by
operation of law, (i) assign, convey, sell, pledge, mortgage, hypothecate or
otherwise encumber, transfer or dispose of all or any part of this Lease or
Lessee's leasehold estate hereunder, (ii) Master Sublease all or any part of the
Leased Property and/or any Capital Additions, (iii) engage the services of any
Person for the management or operation of all or any part of the Leased Property
and/or any Capital Additions, (iv) convey, sell, assign, transfer or dispose of
any stock or partnership, membership or other interests (whether equity or
otherwise) in Lessee (which shall include any conveyance, sale, assignment,
transfer or disposition of any stock or partnership, membership or other
interests (whether equity or otherwise) in any Related Lessee Persons), if such
conveyance, sale, assignment, transfer or other disposition results in a change
in control of Lessee (or any Related Lessee Person) from the Person(s) owning
fifty percent (50%) or more of the voting securities, partnership interests or
other equity interests in Lessee (or any Related Lessee Person) prior thereto,
(v) dissolve, merge or consolidate Lessee (which shall include any dissolution,
merger or consolidation of any Related Lessee Person) with any other Person, if
such dissolution, merger or consolidation, directly or indirectly or through one
or more step transactions or tiered transactions, results in a change in control
of Lessee (or in any Related Lessee Person) from the Person(s) owning fifty
percent (50%) or more of the voting securities, partnership interests or other
equity interests in Lessee (or any Related Lessee Person) prior thereto, or (vi)
sell, convey, assign or otherwise transfer all or substantially all of the
assets of Lessee (which shall include any sale, conveyance, assignment or other
transfer of all or substantially all of the assets of any Related Lessee Person)
(each of the aforesaid acts referred to in clauses (i) through (vi) being
referred to herein as a "Transfer"). Any Occupancy Arrangement with respect to
more than fifteen percent (15%) of the Facility to any Person or its Affiliates,
directly or indirectly, or through one or more step transactions or tiered
transactions, shall be deemed to be a "Master Sublease" hereunder. For any
Occupancy Arrangement transaction not requiring the consent of Lessor hereunder
(i.e., an Occupancy Arrangement not constituting a Master Sublease), Lessee
shall, within ten (10) days of entering into any such Occupancy Arrangement,
notify Lessor of the existence of such Occupancy Arrangement and the identity of
the Occupant and supply Lessor with a copy of the agreement relating to such
Occupancy Arrangement and any other related documentation, materials or
information reasonably requested by Lessor.
24.2 Consent. Prior to any Transfer, Lessee shall first notify
Lessor of its desire to do so and shall submit in writing to Lessor: (i) the
name of the proposed Occupant, assignee, manager or other transferee; (ii) the
terms and provisions of the Transfer, including any agreements in connection
therewith; and (iii) such financial information as Lessor reasonably may request
concerning the proposed Occupant, assignee,
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manager or other transferee. Without limiting Lessor's absolute and unequivocal
right to impose any other conditions to granting its consent to a Transfer
hereunder, Lessor may:
(a) require that the obligations of any Occupant, assignee,
manager or other transferee which is an Affiliate of another Person be
guaranteed by its parent or controlling Person and that any Guaranty of this
Lease be reaffirmed by any Guarantor notwithstanding such Transfer.
(b) with respect to any such Transfer constituting a Master
Sublease, require Lessee to pay to Lessor one hundred percent (100%) of all
Transfer Consideration (defined below). "Transfer Consideration" shall mean the
positive difference, if any, between the Fair Market Rental and the Rent payable
by Lessee determined on a monthly basis, prorating the Rent, as appropriate, if
less than all of the Facility is Master Subleased. The difference for each month
shall be paid by Lessee to Lessor monthly when the Minimum Rent is due.
(c) with respect to any other Transfer (i.e., a Transfer other
than pursuant to a Master Sublease), require Lessee to pay to Lessor one hundred
percent (100%) of the gross fair market value of Lessee's leasehold interest
(the "Leasehold FMV"), determined by appraisal in accordance with the appraisal
procedures set forth in Article XXXIV, excluding any business value in excess of
real estate value.
The consent by Lessor to any Transfer shall not constitute a consent to any
subsequent Transfer or to any subsequent or successive Transfer. Any purported
or attempted Transfer contrary to the provisions of this Article shall be void.
24.3 Attornment and Related Matters. Any Occupancy Arrangement
(whether or not the same constitutes a Master Sublease) shall be expressly
subject and subordinate to all applicable terms and conditions of this Lease and
provide that Lessor, at its option and without any obligation to do so, may
require any Occupant to attorn to Lessor, in which event Lessor shall undertake
the obligations of Lessee, as sublessor, licensor or otherwise under such
Occupancy Arrangement from the time of the exercise of such option to the
termination of such Occupancy Arrangement and in such case Lessor shall not be
liable for any prepaid rents, fees or other charges or for any prepaid security
deposits paid by such Occupant to Lessee or for any other prior defaults of
Lessee under such Occupancy Arrangement. In the event that Lessor shall not
require such attornment with respect to any Occupancy Arrangement, then such
Occupancy Arrangement shall automatically terminate upon the expiration or
earlier termination of this Lease, including any early termination by mutual
agreement of Lessor and Lessee. Furthermore, any Occupancy Arrangement or other
agreement regarding a Transfer shall expressly provide that the Occupant,
assignee, manager or other transferee shall furnish Lessor with such financial
and operational information and information about the physical condition of the
Facility, including the information required by Section 25.2 herein, as Lessor
may request from time to time.
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24.4 [Reserved]
24.5 Costs. Lessee shall reimburse Lessor for Lessor's
reasonable costs and expenses incurred in conjunction with the processing and
documentation of any request to Transfer, including attorneys', architects',
engineers' or other consultants' fees whether or not such Transfer is actually
consummated.
24.6 No Release of Lessee's Obligations. No Transfer shall
relieve Lessee of its obligation to pay the Rent and to perform all of the other
obligations to be performed by Lessee hereunder. The liability of Lessee named
herein and any immediate and remote successor in interest of Lessee (i.e., by
means of any Transfer), and the due performance of the obligations of this Lease
on Lessee's part to be performed or observed, shall not in any way be
discharged, released or impaired by any (i) agreement which modifies any of the
rights or obligations of the parties under this Lease (provided, however, that
the same shall not be binding upon Lessee unless agreed or consented to in
writing by Lessee) (ii) stipulation which extends the time within which an
obligation under this Lease is to be performed, (iii) waiver of the performance
of an obligation required under this Lease, or (iv) failure to enforce any of
the obligations set forth in this Lease. If any Occupant, assignee, manager or
other transferee defaults in any performance due hereunder, Lessor may proceed
directly against the Lessee named herein and/or any immediate and remote
successor in interest of Lessee without exhausting its remedies against such
Occupant, assignee, manager or other transferee.
24.7 REIT Protection. Anything contained in this Lease to the
contrary notwithstanding, (i) no Transfer shall be consummated on any basis such
that the rental or other amounts to be paid by the Occupant, assignee, manager
or other transferee thereunder would be based, in whole or in part, on the
income or profits derived by the business activities of the Occupant, assignee,
manager or other transferee; (ii) Lessee shall not furnish or render any
services to the Occupant, assignee, manager or other transferee or manage or
operate the Leased Property so Transferred; (iii) Lessee shall not Transfer to
any Person in which Lessor owns an interest, directly or indirectly (by applying
constructive ownership rules set forth in Section 856(d)(5) of the Code); or
(iv) Lessee shall not Transfer in any other manner which could cause any portion
of the amounts received by Lessor pursuant to this Lease or any Occupancy
Arrangement to fail to qualify as "rents from real property" within the meaning
of Section 856(d) of the Code, or any similar or successor provision thereto or
which could cause any other income of Lessor to fail to qualify as income
described in Section 856(c)(2) of the Code.
24.8 Transfers In Bankruptcy. In the event of a Transfer
pursuant to the provisions of the Bankruptcy Code, all consideration payable or
otherwise to be delivered in connection with such Transfer shall be paid or
delivered to Lessor, shall be and remain the exclusive property of Lessor and
shall not constitute property of Lessee or of the estate of Lessee within the
meaning of the Bankruptcy Code. Any consideration constituting Lessor's property
pursuant to the immediately preceding sentence and not paid or delivered
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to Lessor shall be held in trust for the benefit of Lessor and be promptly paid
or delivered to Lessor. For purposes of this Section 24.8, the term
"consideration" shall have the same meaning given to such term in the definition
of Fair Market Rental as provided in Article I above. In the event any such
consideration is other than cash, the fair market value of such consideration
shall be paid or delivered to Lessor in cash.
24.9 Special Transactions.
24.9.1 Transfer to Affiliate. Notwithstanding anything to the
contrary in Section 24.1, but subject to the provisions of Section 24.7 above,
Lessor's consent shall not be required in connection with and the provisions of
Section 24.2 above shall not apply to, any Transfer to an Affiliate of Lessee,
including any assignment of this Lease or any Master Sublease of the Leased
Property to any Affiliate of Lessee, so long as in connection therewith, each of
the following conditions is met:
(a) In connection with such Transfer, there is no change in
the use of the Leased Property from the Primary Intended Use except for a change
in use to another Permitted Use as herein provided;
(b) Except in the case of a Transfer resulting from merger or
consolidation as to which Lessee is not the surviving party and in which the
transferee assumes the obligations of Lessee hereunder as a matter of law, any
Affiliate-transferee shall assume all of the obligations of Lessee hereunder
accruing subsequent to the effective date of such Transfer and by an instrument
in writing in form and substance reasonably satisfactory to Lessor. A copy of
such executed assumption shall be delivered to Lessor along with the notice
specified in clause (e) below;
(c) Any Master Subletting shall be subject to the provisions
of Section 24.3 above.
(d) Neither the original Lessee nor any Guarantor shall be
released from any of the obligations of the Lessee hereunder or Guarantor under
the Guaranty (or any other guaranty), as applicable, whether occurring prior to
or after the effective date of such Transfer;
(e) Within ten (10) days after the effectiveness of such
Transfer, Lessee shall notify Lessor in writing of the occurrence of such event,
the effective date thereof, the facts placing the same within the provisions of
this Section 24.9.1 (including the relationship between Lessee and such
Affiliate-transferee) and any other change in the address for billings and
notices to Lessee pursuant to this Lease, accompanied by an executed copy of the
assumption or Master Sublease (if any) required pursuant to this Lease.
24.9.2 Public Offering; Public Trading. Notwithstanding
anything to the contrary in Section 24.1, Lessor's consent shall not be required
in connection
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with and the provisions of Section 24.2 shall not apply to any transfer of any
stock of Lessee or ILC as a result of a public offering of Lessee's or ILC's
stock which (a) constitutes a bona fide public distribution of such stock
pursuant to a firm commitment underwriting or a plan of distribution registered
under the Securities Act of 1933 and (b) results in such stock being listed for
trading on the American Stock Exchange or the New York Stock Exchange or
authorized for quotation on the NASDAQ National Market immediately upon the
completion of such public offering. In addition, so long as such stock is listed
for trading on any such exchange or authorized for quotation on such market, the
transfer or exchange of such stock over such exchange or market shall not be
deemed a Transfer hereunder unless the same (whether in one transaction or in
any step or series of transactions) results in a change in control of Lessee or
ILC (including pursuant to a tender or similar offer to acquire the outstanding
and issued securities of such entity).
24.9.3 ILC. Notwithstanding anything to the contrary in
Section 24.1, but subject to the provisions of Section 24.7 above, Lessor shall
consent to any Transfer resulting from (a) a sale or transfer of all or
substantially all of the outstanding capital stock of ILC or a sale or transfer
of all or substantially all of the assets of ILC, in each case to a single
purchaser or transferee in a single transaction or (b) a merger, consolidation
or stock exchange to which ILC is a party, so long as each of the following
conditions is met:
(i) The Consolidated Net Worth of the purchaser or transferee
resulting from a Transfer pursuant to clause (a) above or the surviving party
resulting from a Transfer pursuant to clause (b) above, as the case may be,
immediately following the effectiveness of such event shall be equal to or
greater than the greater of (A) $55 Million (as adjusted pursuant to the Cost of
Living Index to equate to constant 1996 dollars) and (B) the lesser of (1) the
Consolidated Net Worth of ILC immediately prior to the effectiveness of such
event and (2) $100 Million (as adjusted pursuant to the Cost of Living Index to
equate to constant 1996 dollars).
(ii) The debt to equity ratio of the purchaser or transferee
resulting from a Transfer pursuant to clause (a) above or the surviving party
resulting from a Transfer pursuant to clause (b) above, as the case may be,
immediately following the effectiveness of such event shall not be greater than
the debt to equity ratio of ILC immediately prior to the effectiveness of such
event. For purposes of this clause (ii), "debt" shall include the capitalized
value of any operating leases to which ILC and/or such transferee or surviving
entity (and/or their consolidated Subsidiaries) are parties and the same shall
be demonstrated by financial statements prepared in accordance with GAAP and
reasonably satisfactory to Lessor.
(iii) The purchaser or transferee resulting from a Transfer
pursuant to clause (a) above or the other party(s) to the Transfer pursuant to
clause (b) above, as the case may be, shall have sufficient operating experience
and history with respect to a business of the nature, type and size of the
business of ILC as the same
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exists immediately prior to the effectiveness of such event, as reasonably
determined by Lessor. Such purchaser or transferee or other party to such
Transfer, as the case may be, shall be deemed to have "sufficient operating
experience and history" if, (A) immediately prior to the effectiveness of such
Transfer, such purchaser or transferee or other party, as the case may be,
operated or managed (whether directly or through its operating Subsidiary(ies)),
facilities of the type and of a number equal to or greater than the number of
the facilities operated and/or managed by ILC and its Subsidiary(ies), or fifty
(50) whichever is less and has been in the business of operating or managing
such facilities for a period not less than the period in which ILC has been in
business, or three (3) years whichever is less, or (B) such transferee or
purchaser or surviving entity, as the case may be, shall immediately following
the effectiveness of such Transfer, and for a period of not less than one (1)
year thereafter, retain and/or hire in a full-time management or consulting
capacity at least one-half (1/2) of the principal officers of ILC who were in
the employment of ILC prior to the effectiveness of Transfer. For purposes of
this clause (iii), ILC shall be deemed to have been in business since June 30,
1996.
(iv) Except in the case of a Transfer as to which such
transferee or purchaser or surviving party, as the case may be, assumes the
obligations of ILC under the Guaranty as a matter of law, such transferee or
purchaser or surviving party shall execute a new guaranty for this Lease
consistent in form and substance with the Guaranty, in which event ILC shall
automatically be relieved of any of its obligations under the Guaranty accruing
after the effective date of such Transfer.
(v) No Event of Default shall have occurred and be continuing
hereunder.
ARTICLE XXV.
25. Officer's Certificates and Financial Statements
25.1 Officer's Certificate. At any time and from time to time
upon Lessee's receipt of not less than twenty (20) days' prior written request
by Lessor, Lessee shall furnish to Lessor an Officer's Certificate certifying
(i) 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; (ii) the dates to which the Rent has been paid; (iii) whether or
not, to the best knowledge of Lessee, Lessor is in default in the performance of
any covenant, agreement or condition contained in this Lease and, if so,
specifying each such default of which Lessee may have knowledge; and (iv)
responses to such other questions or statements of fact as Lessor, any ground or
underlying lessor, any purchaser or any current or prospective Facility
Mortgagee shall reasonably request. Lessee's failure to deliver such statement
within such time shall constitute an acknowledgement by Lessee that (x) this
Lease is unmodified and in full force and effect except as may be represented to
the contrary by Lessor; (y) Lessor is not in default in the performance of any
covenant, agreement or
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condition contained in this Lease; and (z) the other matters set forth in such
request, if any, are true and correct. Any such certificate furnished pursuant
to this Article may be relied upon by Lessor and any current or prospective
Facility Mortgagee, ground or underlying lessor or purchaser of the Leased
Property. Lessee shall not be required to deliver such certificate more than
four (4) times per Lease Year.
25.2 Statements. Lessee shall furnish the following statements
to Lessor:
(a) within 150 days after the end of each of Lessee's and
Guarantor's fiscal years, a copy of the audited consolidated balance
sheets of Lessee, its consolidated Subsidiaries and Guarantor as of
the end of such fiscal year, and related audited consolidated
statements of income, changes in common stock and other stockholders'
equity and changes in the financial position of Lessee, its
consolidated Subsidiaries and Guarantor for such fiscal year, prepared
in accordance with GAAP applied on a basis consistently maintained
throughout the period involved, such consolidated financial statements
to be certified by nationally recognized certified public accountants;
(b) within 150 days after the end of each of Lessee's and
Guarantor's fiscal years, and together with the annual audit report
furnished in accordance with clause (a) above, an Officer's
Certificate stating that to the best of the signer's knowledge and
belief after making due 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, specifying all such defaults, the nature
thereof, and the steps being taken to remedy the same;
(c) within forty-five (45) days after the end of each month for
those months occurring from the Commencement Date to three months
after the first month in which the average Cash Flow Coverage for the
Facility equals or exceeds 1.3 for such month, all consolidated
financial reports Lessee produces for reporting purposes and detailed
statements of income and detailed operational statistics regarding
occupancy rates, patient and resident mix and patient and resident
rates by type for the Facility; and thereafter within ninety (90) days
after the end of each of Lessee's quarters, all quarterly consolidated
financial reports Lessee produces for reporting purposes and detailed
statements of income and detailed operational statistics regarding
occupancy rates, patient and resident mix and patient and resident
rates by type for the Facility;
(d) within 150 days after the end of each of Lessee's fiscal
years, a copy of each cost report filed with the appropriate
governmental agency for the Facility;
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(e) within thirty (30) days after they are required to be filed
with the SEC, copies of any annual reports and of information,
documents and other reports, or copies of such portions of any of the
foregoing as the SEC may prescribe, which Lessee or any Guarantor is
required to file with the SEC pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934;
(f) within five (5) Business Days after Lessee's receipt thereof,
copies of all written communications received by Lessee from any
regulatory agency relating to (i) surveys of the Facility for purposes
of licensure, Medicare and Medicaid certification and accreditation
and (ii) any proceeding, formal or informal, with respect to cited
deficiencies with respect to services and activities provided and
performed at the Facility, including patient and resident care,
patient and resident activities, patient and resident therapy,
dietary, medical records, drugs and medicines, supplies, housekeeping
and maintenance, or the condition of the Facility, and involving an
actual or threatened warning, imposition of a fine or a penalty, or
suspension, termination or revocation of the Facility's license to be
operated in accordance with its Primary Intended Use;
(g) to the extent available to customers, depositors,
shareholders or the public, within 150 days after the end of each
fiscal year of the financial institution issuing the letter of credit
required under Article XXI, a copy of the audited consolidated balance
sheets of such financial institution as of the end of such fiscal
year, and related unaudited consolidated statements of income, changes
in common stock and other stockholders equity and changes in the
financial position of such financial institution and its consolidated
subsidiaries for each such fiscal year, prepared in accordance with
generally accepted accounting principles applied on a basis
consistently maintained throughout the period involved, such
consolidated financial statements to be certified by nationally
recognized certified public accountants. Lessee shall be deemed to
have satisfied its obligations under this clause (g) if Lessee shall
request in writing to such financial institution that Lessor be placed
on the distribution list of such financial institution for delivery of
such financial statements;
(h) within five (5) Business Days after Lessee's receipt thereof,
copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to the Leased Property or
Lessee's use thereof; and
(i) with reasonable promptness, such other information respecting
(i) the financial and operational condition and affairs of Lessee and
the Facility, (ii) the physical condition of the Leased Property and
any Capital Addition thereto and (iii) any suspected Transfer,
including the then equity or voting ownership in Lessee or in any
Related Lessee Person (as defined in Article XXIV), in each case as
Lessor may reasonably request, in the form of a questionnaire or
otherwise, from time to time.
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25.3 Charges. Lessee acknowledges that the failure to furnish
Lessor with any of the certificates or statements required by this Article XXV
will cause Lessor to incur costs and expenses not contemplated hereunder, the
exact amount of which is presently anticipated to be extremely difficult to
ascertain. Accordingly, if Lessee fails to furnish Lessor with any of the
certificates or statements required by this Article XXV, Lessee shall pay to
Lessor upon demand $1,000 for each such failure as Additional Charges. The
parties agree that this charge represents a fair and reasonable estimate of the
costs that Lessor will incur by reason of Lessee's failure to furnish Lessor
with such certificates and statements; provided, however, that with respect to
the first (only) occurrence when Lessee fails to furnish Lessor with any such
certificate or statement required by Article XXV during any Lease Year, Lessee
shall not be required to pay such $1,000 additional charge thereon if Lessee
delivers the certificate or statement required within five (5) Business Days
after receipt of written notice from Lessor of Lessee's failure to deliver the
same.
ARTICLE XXVI.
26. Lessor's Right to Inspect and Show the Leased Property.
Upon not less than twenty-four (24) hours' prior written notice to Lessee,
Lessee shall permit Lessor and its authorized representatives to (i) inspect the
Leased Property and any Capital Addition thereto and (ii) exhibit the same to
prospective purchasers and lenders, and during the last twelve (12) months of
the Term, to prospective lessees or managers, in each instance during usual
business hours and subject to any reasonable security, health, safety or
confidentiality requirements of Lessee or any Legal Requirement or Insurance
Requirement. Lessee shall reasonably cooperate with Lessor in exhibiting the
Leased Property and any Capital Additions thereto to prospective purchasers,
lenders, lessees and managers. Any such access to the Leased Property by Lessor
pursuant to this Article shall be conducted by Lessor in a manner that shall
interfere with Lessee's business at the Leased Property as little as
practicable.
ARTICLE XXVII.
27. No Waiver. No failure by Lessor to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
hereunder and no acceptance of full or partial payment of Rent during the
continuance of any default or Event of Default shall constitute a waiver of any
such breach or of any such term. No waiver of any breach shall affect or alter
this Lease, which shall continue in full force and effect with respect to any
other then existing or subsequent breach.
ARTICLE XXVIII.
28. Remedies Cumulative. Each legal, equitable or contractual
right, power and remedy of Lessor now or hereafter provided either in this Lease
or by statute or otherwise shall be cumulative and concurrent and shall be in
addition to every other right, power and remedy and the exercise or beginning of
the exercise by Lessor of any one or
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more of such rights, powers and remedies shall not preclude the simultaneous or
subsequent exercise by Lessor of any or all of such other rights, powers and
remedies.
ARTICLE XXIX.
29. 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 XXX.
30. No Merger. There shall be no merger of this Lease or of
the leasehold estate created hereby by reason of the fact that the same Person
may acquire, own or hold, directly or indirectly, (i) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate and (ii) the fee estate in the Leased Property.
ARTICLE XXXI.
31. Conveyance by Lessor. If Lessor or any successor owner of
the Leased Property shall convey the Leased Property other than as security for
a debt, Lessor or such successor owner, as the case may be, shall thereupon be
released from all future liabilities and obligations of the Lessor under this
Lease arising or accruing from and after the date of such conveyance or other
transfer and all such future liabilities and obligations shall thereupon be
binding upon the new owner.
ARTICLE XXXII.
32. Quiet Enjoyment. So long as Lessee shall pay the Rent as
the same becomes due and shall comply with all of the terms of this Lease and
perform its obligations hereunder, Lessee shall peaceably and quietly have, hold
and enjoy the Leased Property for the Term, 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 the Commencement Date or
created thereafter as permitted hereunder or thereafter 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 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. 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.
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ARTICLE XXXIII.
33. Notices. Any notice, consent, approval, demand or other
communication required or permitted to be given hereunder (a "notice") must be
in writing and may be served personally or by U.S. Mail. If served by U.S. Mail,
it shall be addressed as follows:
If to Lessor: Health Care Property Investors, Inc.
10990 Wilshire Boulevard
Suite 1200
Los Angeles, California 90024
Phone: (310) 473-1990
Fax: (310) 444-7817
Attn: Legal Department
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Phone: (213) 485-1234
Fax: (213) 891-8763
Attn: David H. Vena, Esq.
If to Lessee: Integrated Living Communities at Cabot Pointe, Inc.
2431 Old 41 Road
Bonita Springs, Florida 34135
Phone: (941) 947-7200
Fax: (941) 495-0711
Attn: President and CEO
with copies to: Integrated Living Communities at Cabot Pointe, Inc.
2431 Old 41 Road
Bonita Springs, Florida 34135
Phone: (941) 947-7200
Fax: (941) 495-0711
Attn: General Counsel
and Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Phone: (212) 704-6000
Fax: (212) 704-6288
Attn: Andrea Paretts Ascher, Esq.
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Any notice which is personally served shall be effective upon the date of
service; any notice given by U.S. Mail shall be deemed effectively given, if
deposited in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return receipt. In addition,
either party may send notices by a nationally recognized overnight courier
service provides written proof of delivery (such as U.P.S. or Federal Express).
Any notice sent by a nationally recognized overnight courier shall be effective
on the date of delivery to the party at its address specified above as set forth
in the courier's delivery receipt. Either party may, by notice to the other from
time to time in the manner herein provided, specify a different address for
notice purposes. The foregoing facsimile numbers are for convenience only.
Notice by facsimile shall not be considered an effective manner of giving notice
for purposes of this Lease.
ARTICLE XXXIV.
34. Appraiser. If it becomes necessary to determine the Fair
Market Value, Fair Market Rental or Leasehold FMV 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, Lessor (or
Lessee, as the case may be) shall by notice to Lessee (or Lessor, as the case
may be) appoint a second Person as appraiser on its behalf. 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 determine the Fair Market Value, Fair Market Rental or
Leasehold FMV 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 Lessee's or
Lessor's request, then the determination of such appraiser shall be final and
binding upon the parties. If the Facility had reached stabilized operations
prior to the Commencement Date, to the extent consistent with sound appraisal
practice as then existing at the time of any such appraisal, an appraisal for
Fair Market Value shall be made on a basis consistent with the basis on which
the Leased Property was appraised for purposes of determining its fair market
value at the time the Leased Property was acquired by Lessor. 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 percent (10%) of the lesser of such
amounts then the Fair Market Value, Fair Market Rental or Leasehold FMV 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
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appointment so made within such twenty (20) day period. If no such appraiser
shall have been appointed within such twenty (20) days or within ninety (90)
days of the original request for a determination of Fair Market Value, Fair
Market Rental or Leasehold FMV, 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, Fair Market Rental or Leasehold FMV 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, Fair Market Rental or Leasehold FMV. 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.
ARTICLE XXXV.
35.1 First Refusal to Purchase. Provided no Event of Default
has occurred and is continuing hereunder, Lessee shall have a right of first
refusal to purchase the Leased Property upon the same terms and conditions of
any offer or counter offer from a third party to purchase the Leased Property
which Lessor intends to accept (or has accepted subject to Lessee's right of
first refusal herein) (the "Offer"); provided, however that such right of first
refusal shall not apply to (a) any sale, transfer or other conveyance of the
Leased Property or any interest therein by Lessor to an Affiliate of Lessor, (b)
a sale or transfer of all or substantially all of the outstanding capital stock
of Lessor or a sale or transfer of all or substantially all of the assets of
Lessor, in each case to a single purchaser or transferee in a single transaction
or (c) a merger, consolidation or stock exchange to which Lessor is a party; and
provided further that in no event shall Lessor be required to make or provide to
Lessee any representations or warranties with respect to the Leased Property,
notwithstanding the terms of any such Offer. If, during the Term, Lessor desires
to accept (or has accepted subject to Lessee's right of first refusal herein) an
Offer, Lessor shall promptly notify Lessee of the same, which notice shall set
forth all of the material terms and conditions of such Offer, including the
purchase price for the Leased Property. Lessee shall have fifteen (15) days
after receipt of such notice from Lessor within which time to exercise Lessee's
right of first refusal. Lessee may exercise such right of first refusal by (i)
delivering written notice to Lessor stating that Lessee unequivocally accepts
the terms and conditions of the Offer applicable to Lessee as herein provided
within such fifteen (15) day period and (ii) delivering to Lessor concurrent
with such notice a reaffirmation of the Guaranty executed by Guarantor. If
Lessee exercises its right of first refusal within the time and in the manner
herein provided, then such transaction shall be consummated on or before the
date specified for
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closing in the terms of the Offer at the price and otherwise in accordance with
(A) the terms and conditions of such Offer applicable to Lessee as herein
provided and (B) the provisions of Article XVIII and Section 35.2 to the extent
not inconsistent therewith. If Lessee shall not exercise Lessee's right of first
refusal in the manner and within the time period herein provided, Lessor shall
be free for a period of one (1) year after the expiration of said fifteen (15)
day period to sell the Leased Property to any third party at a price and upon
terms no less favorable to Lessor than those so offered to Lessee pursuant to
the Offer. If such sale is consummated, Lessee's right of first refusal
hereunder shall automatically terminate and the same shall not apply to any
subsequent sale of the Leased Property or any interest therein to any subsequent
purchaser or transferee. If such sale is not consummated, Lessee's right of
first refusal as provided in this Section shall be reinstituted as to any
subsequent sale of the Leased Property during the Term of this Lease.
Notwithstanding anything to the contrary herein in this
Section 35.1, except with respect to transactions of the type described in
clauses (a) through (c) above as to which Lessee shall not have a right of first
refusal, if and only if, (1) the Offer includes property in addition to the
Leased Property or (2) in connection with the proposed sale of the Leased
Property as set forth in the Offer, Lessor or an Affiliate of Lessor is also
proposing to sell concurrent or substantially concurrent with the sale of the
Leased Property other property of Lessor or an Affiliate of Lessor to the same
third-party and/or its Affiliates, then the following shall apply:
(x) Lessee's right of first refusal as herein provided, shall
apply only with respect to the Leased Property.
(y) With respect to the circumstances described in clause (1),
if the Offer does not specifically allocate a purchase price to the Leased
Property, Lessor shall reasonably determine the same and include such allocation
in Lessor's written notice to Lessee of the Offer.
(z) If Lessee shall timely and properly exercise its right of
first refusal to purchase the Leased Property as provided in this Section 35.1,
the purchase price payable by Lessee shall be the price set forth in the Offer
(or the amount allocated to the Leased Property as provided in clause (y) above,
as the case may be), unless concurrent with Lessee's exercise of such Offer,
Lessee shall deliver written notice to Lessor that Lessee objects to the
purchase price for the Leased Property as set forth in the Offer (or the amount
so allocated to the Leased Property as provided in clause (y)), then the
purchase price payable by Lessee for the Leased Property shall be the lesser of
(aa) the purchase price for the Leased Property set forth in the Offer (or the
amount so allocated to the Leased Property as provided in clause (y)) and (bb)
the Fair Market Value of the Leased Property determined in accordance with the
appraisal procedures set forth in this clause (z). Within forty-five (45) days
after Lessee's timely exercise of its right of first refusal and objection to
the purchase price for the Leased Property, Lessor shall cause a nationally
recognized appraisal firm selected by Lessor, in which one or more of the
members, officers or principals of such
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firm are members of the American Institute of Real Estate Appraisers (or any
successor organization thereto), 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 such appraiser's decision to the relevant date) and
to deliver to Lessor and Lessee a written report of the same. The determination
of such appraiser shall be final and binding upon the parties. 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 one-half of the fees and
expenses of such appraiser and one-half of all other costs and expenses incurred
in connection with such appraisal, unless the Fair Market Value of the Leased
Property as determined by such appraisal is greater than the purchase price for
the Leased Property as set forth in the Offer (or so allocated to the Leased
Property as provided in clause (y)), in which case Lessee shall pay all of the
fees and expenses of such appraiser and any other costs and expenses incurred in
connection with such appraisal.
35.2 Other Defaults. A default under any other lease or other
agreement or instrument, including any purchase contract formed upon exercise of
any other right of first refusal or option to purchase, with or in favor of
Lessor or any Affiliate of Lessor and made by or with Lessee or any Affiliate of
Lessee where such default is not cured within the applicable time period, if
any, shall be deemed a default under this Article XXXV and the purchase contract
formed upon proper exercise by Lessee of the right of first refusal contained
herein, entitling Lessor, as seller, at its option, to terminate such purchase
contract and any escrow established thereby.
ARTICLE XXXVI.
36.1 Lessor May Grant Liens. Without the consent of Lessee,
Lessor may, from time to time, directly or indirectly, create or otherwise cause
to exist any ground lease, mortgage, trust deed, lien, encumbrance or title
retention agreement (collectively, an "encumbrance") upon the Leased Property
and any Capital Addition thereto, or any portion thereof or interest therein.
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 instrument of subordination
shall be required; provided, however, that in confirmation of such
subordination, Lessee shall execute promptly any certificate or document that
Lessor or any ground or underlying lessor, mortgagee or beneficiary may request
for such purposes; provided further, however, that any such subjection and
subordination of this Lease or Lessee's leasehold interest hereunder to any such
encumbrance imposed after the Commencement Date shall be conditioned upon the
execution by the holder of such encumbrance and delivery to Lessee of a
non-disturbance and attornment agreement which provides, in substance, that so
long as no Event of Default has occurred, the holder of such encumbrance shall
not disturb either Lessee's leasehold interest or possession of the Leased
Property in accordance with the terms thereof or other rights under this Lease.
If, in connection with obtaining financing or refinancing for the Leased
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Property, a Facility Mortgagee or prospective Facility Mortgagee shall request
reasonable modifications to this Lease as a condition to such financing or
refinancing, Lessee shall not withhold or delay its consent thereto, so long as
such modifications do not increase Lessee's monetary obligations hereunder or
adversely affect Lessee's rights or non-monetary obligations under this Lease.
36.2 Attornment. If Lessor's interest in the Leased Property
is sold or conveyed upon the exercise of any remedy provided for in any Facility
Mortgage, 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 or enter into a new lease substantially in the form of this Lease with the
new owner, and Lessee shall take such actions to confirm the foregoing within
ten (10) days after request; and (ii) the new owner 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.
ARTICLE XXXVII.
37.1 Hazardous Substances. Lessee shall not allow any
Hazardous Substance to be located in, on, under or about the Leased Property or
incorporated in the Facility; provided, however, that Hazardous Substances may
be brought, kept, used or disposed of in, on or about the Leased Property in
quantities and for purposes similar to those brought, kept, used or disposed of
in, on or about similar facilities used for purposes similar to the Primary
Intended Use and which are brought, kept, used and disposed of in strict
compliance with Legal Requirements. Lessee shall not allow the Leased Property
to be used as a waste disposal site or, except as permitted in the immediately
preceding sentence, for the manufacturing, handling, storage, distribution or
disposal of any Hazardous Substance.
37.2 Notices. Lessee shall provide to Lessor promptly, and in
any event within seventy-two (72) hours after Lessee's receipt thereof, a copy
of any notice, or notification with respect to, (i) any violation of a Legal
Requirement relating to Hazardous Substances located in, on, or under the Leased
Property or any adjacent property; (ii) any enforcement, cleanup, removal, or
other governmental or regulatory action instituted, completed or threatened with
respect to the Leased property; (iii) any claim made or threatened by any Person
against Lessee or the Leased Property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from or claimed to result from
any Hazardous Substance; and (iv) any reports made to any federal, state or
local environmental agency arising out of or in connection with any Hazardous
Substance in, on, under or removed from the Leased Property, including any
complaints, notices, warnings or asserted violations in connection therewith.
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37.3 Remediation. If Lessee becomes aware of a violation of
any Legal Requirement relating to any Hazardous Substance in, on, under or about
the Leased Property or any adjacent property, or if Lessee, Lessor or the Leased
Property becomes subject to any order of any federal, state or local agency to
repair, close, detoxify, decontaminate or otherwise remediate the Leased
Property, Lessee shall immediately notify Lessor of such event and, at its sole
cost and expense, cure such violation or effect such repair, closure,
detoxification, decontamination or other remediation. If Lessee fails to
implement and diligently pursue any such cure, repair, closure, detoxification,
decontamination or other remediation, Lessor shall have the right, but not the
obligation, to carry out such action and to recover from Lessee all of Lessor's
costs and expenses incurred in connection therewith.
37.4 Indemnity. Lessee shall indemnify, defend, protect, save,
hold harmless, and reimburse Lessor for, from and against any and all costs,
losses (including, losses of use or economic benefit or diminution in value),
liabilities, damages, assessments, lawsuits, deficiencies, demands, claims and
expenses (collectively, "Environmental Costs") (whether or not arising out of
third-party claims and regardless of whether liability without fault is imposed,
or sought to be imposed, on Lessor) incurred in connection with, arising out of,
resulting from or incident to, directly or indirectly, before or during the Term
(i) the production, use, generation, storage, treatment, transporting, disposal,
discharge, release or other handling or disposition of any Hazardous Substances
from, in, on or about the Leased Property (collectively, "Handling"), including
the effects of such Handling of any Hazardous Substances on any Person or
property within or outside the boundaries of the Leased Property, (ii) the
presence or release of any Hazardous Substances in, on, under or about the
Leased Property and (iii) the violation of any Legal Requirements (including
Environmental Laws). "Environmental Costs" include interest, costs of response,
removal, remedial action, containment, cleanup, investigation, design,
engineering and construction, damages (including actual, consequential and
punitive damages) for personal injuries and for injury to, destruction of or
loss of property or natural resources, relocation or replacement costs,
penalties, fines, charges or expenses, attorney's fees, expert fees,
consultation fees, and court costs, and all amounts paid in investigating,
defending or settling any of the foregoing.
Without limiting the scope or generality of the foregoing,
Lessee expressly agrees to reimburse Lessor for any and all costs and expenses
incurred by Lessor:
(a) In investigating any and all matters relating to the Handling
of any Hazardous Substances, in, on, from, under or about the Leased
Property;
(b) In bringing the Leased Property into compliance with all
Legal Requirements; and
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(c) Removing, treating, storing, transporting, cleaning-up and/or
disposing of any Hazardous Substances used, stored, generated,
released or disposed of in, on, from, under or about the Leased
Property or offsite.
If any claim is made hereunder, Lessee agrees to pay such
claim promptly, and in any event to pay such claim within sixty (60) calendar
days after receipt by Lessee of notice thereof. If any such claim is not so paid
and Lessor is ultimately found or agrees to be responsible therefore, Lessee
agrees also to pay interest on the amount paid from the date of the first notice
of such claim, at the Overdue Rate.
37.5 Environmental Inspection. Lessor shall have the right,
from time to time, and upon not less than five (5) days written notice to
Lessee, except in the case of an emergency in which event no notice shall be
required, to conduct an inspection of the Leased Property to determine the
existence or presence of Hazardous Substances on or about the Leased Property.
Upon prior written notice to Lessee, Lessor shall have the right to enter and
inspect the Leased Property, conduct any testing, sampling and analyses it deems
reasonably necessary and shall have the right to inspect materials brought into
the Leased Property. Lessor may, in its discretion, retain such experts to
conduct the inspection, perform the tests referred to herein, and to prepare a
written report in connection therewith. If any such inspections or tests
indicate the presence or existence of Hazardous Substances not previously
disclosed to Lessor, then all reasonable costs and expenses incurred by Lessor
under this Section shall be paid on demand as Additional Charges by Lessee to
Lessor. Failure to conduct an environmental inspection or to detect unfavorable
conditions if such inspection is conducted shall in no fashion be intended as a
release of any liability for environmental conditions subsequently determined to
be associated with or to have occurred during Lessee's tenancy. Lessee shall
remain liable for any environmental condition related to or having occurred
during its tenancy regardless of when such conditions are discovered and
regardless of whether or not Lessor conducts an environmental inspection at the
termination of the Lease. The obligations set forth in this Article shall
survive the expiration or earlier termination of the Lease.
ARTICLE XXXVIII.
38. 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. Lessee shall pay all
costs and expenses of recording any such memorandum and shall fully cooperate
with Lessor in removing from record any such memorandum upon the expiration or
earlier termination of the Term.
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ARTICLE XXXIX.
39. Sale of Assets. Notwithstanding any other provision of
this Lease, Lessor shall not be required to (i) sell or transfer the Leased
Property, or any portion thereof, which is a real estate asset as defined in
Section 856(c)(6)(B), or functionally equivalent successor provision, of the
Code, to Lessee if Lessor's counsel advises Lessor that such sale or transfer
may not be a sale of property described in Section 857(b)(6)(C), or functionally
equivalent successor provision, of the Code or (ii) sell or transfer the Leased
Property, or any portion thereof, to Lessee if Lessor's counsel advises Lessor
that such sale or transfer could result in an unacceptable amount of gross
income for purposes of the ninety five percent (95%) gross income test contained
in Section 856(c)(2), or functionally equivalent successor provision, of the
Code. If Lessee has the right or obligation to purchase the property pursuant to
the terms herein, and if Lessor determines not to sell such property pursuant to
the above sentence, then Lessee shall purchase such property, upon and subject
to all applicable terms and conditions set forth in this Lease, including the
provisions of Article XXXV, at such time as the transaction, upon the advice of
Lessor's counsel, would be a sale of property (to the extent the Leased Property
is a real estate asset) described in Section 857(b)(6)(C), or functionally
equivalent successor provision, of the Code, and would not result in an
unacceptable amount of gross income for purposes of the ninety five percent
(95%) gross income test contained in Section 856(c)(2), or functionally
equivalent successor provision of the Code and until such time Lessee shall
lease the Leased Property from Lessor at the Fair Market Rental determined in
accordance with Article XXXIV.
ARTICLE XL.
[INTENTIONALLY OMITTED]
ARTICLE XLI.
41. Authority. If Lessee is a corporation, trust, or
partnership, Lessee, and each individual executing this Lease on behalf of
Lessee, represent and warrant that each is duly authorized to execute and
deliver this Lease on behalf of Lessee and shall within thirty (30) days after
execution of this Lease deliver to Lessor evidence of such authority
satisfactory to Lessor.
ARTICLE XLII.
42. Attorneys' Fees. If Lessor or Lessee brings an action or
other proceeding against the other to enforce any of the terms, covenants or
conditions hereof or any instrument executed pursuant to this Lease, or by
reason of any breach or default hereunder or thereunder, the party prevailing in
any such action or proceeding and any appeal thereupon shall be paid all of its
costs and reasonable attorneys' fees incurred therein.
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In addition to the foregoing and other provisions of this Lease that
specifically require Lessee to reimburse, pay or indemnify against Lessor's
attorneys' fees, Lessee shall pay, as Additional Charges, all of Lessor's
reasonable attorneys' fees incurred in connection with the enforcement of this
Lease, including attorneys' fees incurred in connection with Lessee's exercise
of its right to renew this Lease for any Extended Term, the review of any
letters of credit, the review, negotiation or documentation of any subletting,
assignment, or management arrangement or any consent requested in connection
therewith, and the collection of past due Rent.
ARTICLE XLIII.
43. Brokers. Lessee warrants that it has not had any contact
or dealings with any Person or real estate broker which would give rise to the
payment of any fee or brokerage commission in connection with this Lease, and
Lessee shall indemnify, protect, hold harmless and defend Lessor from and
against any liability with respect to any fee or brokerage commission arising
out of any act or omission of Lessee. Lessor warrants that it has not had any
contact or dealings with any Person or real estate broker which would give rise
to the payment of any fee or brokerage commission in connection with this Lease,
and Lessor shall indemnify, protect, hold harmless and defend Lessee from and
against any liability with respect to any fee or brokerage commission arising
out of any act or omission of Lessor.
ARTICLE XLIV.
44. Miscellaneous
44.1 Survival. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities and indemnities
of, Lessee or Lessor arising prior to the expiration or earlier termination of
the Term shall survive such expiration or termination. In addition, all claims
against, and all liabilities and indemnities hereunder of Lessee shall continue
in full force and effect and in favor of the Lessor named herein and its
successors and assigns, notwithstanding any conveyance of the Leased Property to
Lessee.
44.2 Severability. If any term or provision of this Lease or
any application thereof shall be held invalid or unenforceable, the remainder of
this Lease and any other application of such term or provision shall not be
affected thereby.
44.3 Non-Recourse. Lessee specifically agrees to look solely
to the Leased Property for recovery of any judgment from Lessor; provided,
however, that if Lessor's equity in the Leased Property is less than $1 Million,
then other assets of Lessor shall be available to satisfy any judgment against
Lessor as provided herein, but only to the extent of the difference between the
then amount of Lessor's equity in the Leased Property
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and such $1 Million. It is specifically agreed that no constituent partner in
Lessor or officer, director or employee of Lessor shall ever be personally
liable for any such judgment or for 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 any other action not involving the personal
liability of Lessor. Furthermore, except as otherwise expressly provided herein,
in no event shall Lessor ever be liable to Lessee for any indirect or
consequential damages suffered by Lessee from whatever cause.
44.4 Licenses. Upon the expiration or earlier termination of
the Term, Lessee shall transfer to Lessor or Lessor's nominee a fully
operational Facility and shall cooperate with Lessor or Lessor's designee or
nominee in connection with the processing by Lessor or Lessor's designee or
nominee of any applications for all licenses, operating permits and other
governmental authorization, all contracts, including contracts with governmental
or quasi-governmental entities, business records, data, patient and resident
records, and patient and resident trust accounts, which may be necessary or
useful 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 designee or nominee. Lessee shall not commit any 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 reasonable
requests for an orderly transfer of the same upon the expiration or early
termination of the Term. In addition, upon request, Lessee shall promptly
deliver copies of all non-confidential books and records relating to the Leased
Property and its operation to Lessor or Lessor's designee or nominee.
44.5 Successors and Assigns. Subject to the provisions of
Article XXIV, this Lease shall be binding upon Lessor and its successors and
assigns and upon Lessee and its successors and assigns.
44.6 Termination Date. If this Lease is terminated by Lessor
or Lessee under any provision hereof, and upon the expiration of the Term
(collectively, the "termination date"), the following shall pertain:
(i) Lessee shall vacate and surrender the Leased Property, Lessee's
Personal Property (other than the Removable Personal Property, which is
subject to the option granted to Lessor pursuant to Section 6.4) and all
Capital Additions to Lessor in the condition required by Section 9.1.4.
Prior to such vacation and surrender, Lessee shall remove any items which
Lessee is permitted or required to remove hereunder. Lessee shall, at
Lessee's cost, repair any damage to the Leased Property, Lessee's Personal
Property and any Capital Additions caused by such vacation and/or removal
of any items which Lessee is required or permitted hereunder to remove. Any
items which Lessee is permitted to remove but fails to remove prior to the
surrender to Lessor of the Leased Property, Lessee's
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Personal Property and any Capital Additions shall be deemed abandoned by
Lessee, and Lessor may retain or dispose of the same as Lessor sees fit
without claim by Lessee thereto or to any proceeds thereof. If, after
written notice to Lessee, Lessor elects to remove and dispose of any such
items abandoned by Lessee, the cost of such removal and disposal shall be
an Additional Charge payable by Lessee to Lessor upon demand. Lessee shall
pay all amounts payable by it through the termination date and any costs
charged pursuant to the immediately preceding sentence, each of the parties
shall bear their own costs and fees incurred (including all costs incurred
in performing their respective obligations hereunder) through the
termination date and from and after the termination date neither party
shall have any further obligations to the other, except for those
obligations set forth in this clause (i), those obligations hereunder which
are intended to survive the expiration or earlier termination of this Lease
and those specific obligations set forth in clause (ii) below.
(ii) Notwithstanding the provisions of clause (i), upon any such
termination or expiration of this Lease, the following shall pertain:
(a) Lessee agrees to defend, protect, indemnify, defend and hold
harmless Lessor from and against any and all claims, costs, losses,
expenses, damages, actions, and causes of action for which Lessee is
responsible under this Lease (including Lessee's indemnification
obligations under Articles XXIII and XXXVII) and which accrue or have
accrued on or before the termination date. Lessor agrees to use
reasonable efforts to give Lessee prompt written notice of any such
claim, cost, loss, etc.; provided, however, that failure to give such
notice shall not relieve Lessee of the foregoing indemnification of
obligations unless Lessor's failure to give such notice and/or to take
action with respect thereto results in any default judgment against
Lessor or Lessee.
(b) Lessee shall remain liable for the cost of all utilities used
in or at the Leased Property and any Capital Additions through the
termination date and accrued and unpaid, whether or not then billed,
as of the termination date until full payment thereof by Lessee.
Lessee shall obtain directly from the companies providing such
services closing statements for all services rendered through the
termination date and shall promptly pay the same. If any utility
statement with respect to the Leased Property and any Capital
Additions includes charges for a period partially prior to and
partially subsequent to the termination date, such charges shall be
prorated as between Lessor and Lessee, with Lessee responsible for the
portion thereof (based upon a fraction the numerator of which is the
number of days of service on such statement through the termination
date and the denominator of which is the total number of days of
service on such statement) through the termination date and Lessor
shall be responsible for the balance. The party receiving any such
statement which requires proration hereunder shall promptly pay such
statement and the other party shall, within ten (10) days after
receipt of a copy of such statement, remit to the party paying the
statement any amount for which such other party is responsible
hereunder.
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(c) Subject to the provisions of Sections 4.1.1, Lessee shall
remain responsible for any and all Impositions imposed against the
Leased Property, the Personal Property and any Capital Additions with
a lien date prior to the termination date (irrespective of the date of
billing therefor) and for its pro rata share of any Impositions
imposed in respect of the tax-fiscal period during which the Term
terminates as provided in Section 4.1.7, and Lessee shall indemnify
and hold Lessor harmless with respect to any claims for such
Impositions or resulting from non-payment thereof.
(d) Lessee shall (y) execute all documents and take any actions
reasonably necessary to (1) cause the transfer of all of Lessee's
Personal Property (other than the Removable Personal Property which is
subject to the option granted to Lessor pursuant to Section 6.4) and
any Capital Additions not owned by Lessor to Lessor, in each case free
of any encumbrance, as provided in Section 6.3 and (2) remove this
Lease and/or any memorandum hereof as a matter affecting title to the
Leased Property as provided in Article XXVIII and (z) comply with its
covenants set forth in Section 44.4.
(e) Lessee shall continue to observe the covenants of Lessee set
forth in Sections 7.4.2 and 7.4.3.
44.7 Governing Law. THIS LEASE (AND ANY AGREEMENT FORMED
PURSUANT TO THE TERMS HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE (WITHOUT REGARD OF PRINCIPLES
OR CONFLICTS OF LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
44.8 Waiver of Trial by Jury. EACH OF LESSOR AND LESSEE
ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO
ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES AND THE
STATE. EACH OF LESSOR AND LESSEE HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR (ii) IN ANY
MANNER CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF LESSOR AND
LESSEE WITH RESPECT TO THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS
HEREOF) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; EACH OF LESSOR AND LESSEE HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL
WITHOUT A JURY, AND THAT EITHER PARTY MAY FILE A COPY OF THIS
73
<PAGE>
SECTION WITH ANY COURT AS CONCLUSIVE EVIDENCE OF THE CONSENT OF EACH SUCH PARTY
TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
LESSOR'S INITIALS: _______
LESSEE'S INITIALS: _______
44.9 Lessee's Equitable Remedies. In the event that Lessee
claims or asserts that Lessor has violated or failed to perform a covenant of
Lessor not to unreasonably withhold or delay Lessor's consent or approval
hereunder, or in any case where Lessor's reasonableness in exercising its
judgment is in issue, Lessee's sole remedy shall be an action for specific
performance, declaratory judgment or injunction, and (a) in no event shall
Lessee be entitled to any monetary damages for a breach of such covenant and (b)
Lessee hereby specifically waives the right to any monetary damages or other
remedies in connection with any such claim or assertion; provided, however, that
if Lessee establishes in a court of competent jurisdiction that Lessor has acted
maliciously or in bad faith in withholding its consent in any instance where
Lessor has agreed hereunder not to unreasonably withhold or delay its consent,
then the foregoing limitations shall not apply and Lessee shall be entitled to
seek any remedies available at law or in equity by reason of Lessor's actions.
44.10 Entire Agreement. This Lease, together with the other
Lessee Documents, as defined in the Contract of Acquisition, the Exhibits hereto
and thereto and such other documents as are contemplated hereunder or
thereunder, constitutes the entire agreement of the parties with respect to the
subject matter hereof, and may not be changed or modified except by an agreement
in writing signed by the parties. Lessor and Lessee hereby agree that all prior
or contemporaneous oral understandings, agreements or negotiations relative to
the leasing of the Leased Property are merged into and revoked by this Lease.
44.11 Headings. All titles and headings to sections,
subsections, paragraphs or other divisions of this Lease are only for the
convenience of the parties and shall not be construed to have any effect or
meaning with respect to the other contents of such sections, subsections,
paragraphs or other divisions, such other content being controlling as to the
agreement among the parties hereto.
44.12 Counterparts. This Lease may be executed in any number
of counterparts, each of which shall be a valid and binding original, but all of
which together shall constitute one and the same instrument.
44.13 Joint and Several. If more than one Person is the Lessee
under this Lease, the liability of such Persons under this Lease shall be joint
and several.
74
<PAGE>
44.14 Interpretation. Both Lessor and Lessee have been
represented by counsel and this Lease and every provision hereof has been freely
and fairly negotiated. Consequently, all provisions of this Lease shall be
interpreted according to their fair meaning and shall not be strictly construed
against any party.
44.15 Further Assurances. The parties agree to promptly sign
all documents reasonably requested to give effect to the provisions of this
Lease.
IN WITNESS WHEREOF, the parties have caused this Lease to be
executed and attested by their respective officers thereunto duly authorized.
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation
By:___________________________________
Its:__________________________________
INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
a Delaware corporation
By:___________________________________
Its:__________________________________
75
<PAGE>
EXHIBIT A
Legal Description of the Land
The Land referred to is situate in the unincorporated area of the
County of Manatee, State of Florida and is described as follows:
Begin 60 feet South of the northeast corner of Section 15,
Township 35 South, Range 17 East, and run thence West along the South line of
Road Right of Way a distance of 2310 feet; thence run South parallel to the East
line of 26th Street a distance of 417 feet for Point of Beginning; thence
continue in the same direction a distance of 238.91 feet; thence West 308.12
feet more or less to the East line of 26th Street; thence North along the East
line of 26th Street distance of 239.41 feet; thence East Parallel to the South
line of the property hereby conveyed a distance of 308.12 feet more or less to
the Point of beginning, said property lying in and being in Manatee County,
Florida; LESS AND EXCEPT the Westerly 17.00 feet thereof as disclosed in the
Warranty Deed dated June 12, 1996, recorded July 3, 1996 in O.R. Book 1491, Page
6630, Manatee County, Records.
A-1
<PAGE>
EXHIBIT B
List of Lessor's Personal Property
All machinery, equipment, furniture, furnishings, moveable walls or
partitions, computers or trade fixtures or other tangible personal property
used or useful in Lessee's business on the Leased Property, excluding
items, if any, included within the definition of Fixtures, but specifically
including those items described in Schedule 1 hereto.
B-1
<PAGE>
Schedule 1
Itemization of Lessor's Personal Property
1. BEDROOM
QUAN UNIT DESCRIPTION
---- ---- -----------
54 ea Table Lamp
54 ea 3/3 Headboard, Wood
54 ea 3/3 Bedframe
54 ea 3/3x76 Health Care Mattress & Box Spring
54 ea 3-Dr. Chest
54 ea Nightstand
54 ea Upholstered Wing Chair
2. DINING AREAS
QUAN UNIT DESCRIPTION
---- ---- -----------
11 ea Dining Table Top, 36x36, bullnose wood edge and Black
Wrinkle Tilt Top Table Base
1 ea Conference/Dining table 48x86, with two bases
1 ea 60" Diameter Table and table base, same finish
30 ea Dining chair, finish Valley Oak, Brittany upholstery
30 ea Dining chair, finish Valley Oak, Wisteria upholstery
1 ea Framed Ricks Print at Waitress Station
2 ea Framed Lea Prints at Water Fountain
2 ea Framed Monet Prints in Private Dining Room
1-1
<PAGE>
2. DINING AREAS (CONTINUED)
QUAN UNIT DESCRIPTION
---- ---- -----------
1 ea Potted Silk Plant in Private Dining Room
1 lot Drapery & hardware in Private Dining Room
3. PUBLIC AREAS
QUAN UNIT DESCRIPTION
---- ---- -----------
3 ea Planter Divider 72x18x60H, with Silk Plants in Tray
3 ea Column Pedestal 12x12x38H with silk floral arrangements on
top of columns
1 ea Trough Planter at entrance, 6' long, laminated with Floral
Arrangements in pots
7 ea Tub Chair, Blue
7 ea Tub Chair, Lilac
3 ea Chippendale Sofa, Print Fabric
3 ea Chippendale Sofa, Blue Fabric
4 ea Wing Chair, Brittany Upholstery
6 ea Upholstered Chair, Upholster Radical Blue
6 ea Lamp Table, medium oak
3 ea Cocktail Table, medium oak
1 ea Sofa Table 48x20x28H, medium oak
1 ea Framed Angel Irises at Entrance
2 ea Framed Graves Prints on South Wall
2 ea Potted silk plants
1-2
<PAGE>
4. OFFICES
QUAN UNIT DESCRIPTION
---- ---- -----------
1 ea Wood Exec Desk 72x36, double ped, medium oak
1 ea Console with double ped and keyboard drawer
1 ea Desk chair with arms
2 ea Framed Walter Prints on wall
3 ea Lounge Chair
1 ea Lamp Table, Medium Oak
1 ea Table Lamp
1 ea Brass desk lamp
1 lot Drapery and Hardware
1 ea Office chair at Nurse Station
1 ea Office Chair at Control Station
1 ea Desk, 30x60 with LH return, medium oak, in Staff Lounge
1 ea Office Chair, in Staff lounge
1 ea Lamp Table in Staff Lounge
1 ea Table Lamp
1 ea Desk Lamp
2 ea Lounge Chair in Staff lounge
1-3
<PAGE>
5. LANAI
QUAN UNIT DESCRIPTION
---- ---- -----------
24 ea Lounge Chair, beige with Teal upholstery
3 ea 48" Patio Table with cast stone tops
6. STAFF LOUNGE
QUAN UNIT DESCRIPTION
---- ---- -----------
15 ea Metal lockers in one unit
4 ea Staff dining chairs
4 ea Staff lounge chairs
1 ea 42" laminate dining table and base
7. OFFICES
QUAN UNIT DESCRIPTION
---- ---- -----------
1 ea Office chair
1 ea L-shaped workstation with acoustic panels,
task lighting, overhead cabinet storage,
laminate worksurfaces, and two pedestals
8. ACTIVITIES DIRECTOR
QUAN UNIT DESCRIPTION
---- ---- -----------
2 ea Visitor chairs, upholstered
1 ea Table lamp
2 ea Desk lamp
9. GENERAL EQUIPMENT ASSETS
3 Vacuum Cleaners
1 Carpet Extractor
1-4
<PAGE>
9. GENERAL EQUIPMENT ASSETS (CONTINUED)
1 Wet and Dry Vac
Electric Drill
Alumin Shed
Clocks
Lock A/C Covers
TV and Stand
Window Tint
70 Soap Dispensers
35 Paper Dispensers
Waste Baskets
Handbars
Time Clock
Laundry Cart
2 Folding Carts
Linen Cart
34 Memory Boxes
Parking Signs
Overhead Table
5 Framed Evacuation Maps
2 Housekeeping Carts
Inside Signs
1-5
<PAGE>
9. GENERAL EQUIPMENT ASSETS (CONTINUED)
Outside Signs
Outside Fence
Tape Printer
2 Electric Floor Blowers
19" TV and Stand
10. STAFF LOUNGE ASSETS
20 Metal Lockers
4 Staff Dining Chairs
1 Small Dining Table
2 Lounge Chairs
1 Table Lamp
1 Lamp Table
Refrigerator
11. OFFICE ASSETS
A. First Office
1 Wood Exec Desk 76/36
1 Console/Drawers
1 Desk Chair
2 Lounge Chairs
Table w/Lamp
Painting/Artwork
1-6
<PAGE>
11. OFFICE ASSETS
Window Treatment
Office chair
L-shaped Work Station
Stamp Machine
Fax Machine
B. Second Office
1 30x60 Desk
Desk Chair
Desk Lamp
2 Side Chairs
l Lamp Table
1 Table Lamp
1 Canon Xerox Copier
1 Dell Computer
1 Laser Jet Printer
Computer Stand
Filing Cabinet
12. DIETARY ASSETS
Bus Cart
4 Doz. Corning Cup 8 oz.
6 Doz. Corning 9" Plate
1-7
<PAGE>
12. DIETARY ASSETS
4 Doz. 8 oz. Bowl
4 Doz. 5 oz. Dish
4 Doz. 6" Saucer
1 Chef Knife Kit
Robot Coupe Food Processor
Microwave
Meat Slicer
Mixer
Toaster
Light Board
Oak Serving Cart
FVT Dining Room Dishware
1-8
<PAGE>
EXHIBIT C
Form of Amendment to Lease
This First Amendment to Lease ("Amendment") is dated as of
_________________, 199__ by and between HEALTH CARE PROPERTY INVESTORS, INC., a
Maryland corporation ("Lessor"), and INTEGRATED LIVING COMMUNITIES AT CABOT
POINTE, INC., a Delaware corporation ("Lessee").
RECITALS
A. Lessor and Lessee entered into a Lease dated as of _______
__, 199_ (the "Lease") for the _________________ facility located in
- ----------------------------------------.
B. Lessor and Lessee desire to memorialize their understanding
regarding certain provisions of the Lease.
AGREEMENT
Capitalized terms not otherwise defined herein shall have the
meaning ascribed to them in the Lease. Lessor and Lessee hereby agree as
follows:
1. The Commencement Date of the Lease is_____________;
2. Subject to extension to be co-terminous with the Facility
Group Leases, the Fixed Term of the Lease shall end on _______________;
3. The first Lease Year for the Lease commences on
____________, 199__ and ends on ____________, 199__;
4. The first Quarter for which Additional Rent shall be due
shall be.
Except as amended above, the Lease between Lessor and Lessee
shall remain in full force and effect. This Amendment may be executed in any
number of counterparts, all of which together shall constitute one and the same
instrument.
C-1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed as of the day and year first above written.
HEALTH CARE PROPERTY INVESTORS, INC.,
a Maryland corporation
By:___________________________________
Its:__________________________________
INTEGRATED LIVING COMMUNITIES AT CABOT POINTE, INC.,
a Delaware corporation
By:___________________________________
Its:__________________________________
C-2
<PAGE>
EXHIBIT D
FORM OF
IRREVOCABLE STANDBY LETTER OF CREDIT
Health Care Property Investors, Inc.
10990 Wilshire Boulevard, Suite 1200
Los Angeles, California 90024
Date: _______________ Letter of Credit No.: ___________
Expiration Date: ________________
GENTLEMEN:
We hereby establish our irrevocable letter of credit in your favor for the
account of __________________________ available by your draft(s) on us payable
at sight not to exceed a total of
- ------------------------------------------------------------------------------
_____________________________(_____________________) when accompanied by this
letter of credit and the following documents.
1) A certificate purported to be executed by a representative of Health
Care Property Investors, Inc. ("HCPI") stating that Integrated Living
Communities at Cabot Pointe, Inc., (Lessee"), as lessee, has committed
an Event of Default under the lease dated September __, 1996, between
HCPI, as lessor, and Lessee, as lessee, or that Lessee or an affiliate
of Lessee has committed an event of default under any other lease or
agreement or other instrument with or in favor of HCPI or an affiliate
of HCPI and stating the amount for which a draw under this letter of
credit is made; (or) a certificate purported to be executed by a
representative of HCPI stating that a replacement letter of credit for
this instrument has not been supplied prior to thirty (30) days in
advance of the expiration of this instrument for the account of HCPI.
2) The original letter of credit must accompany all drafts unless a
partial draw is presented, in which case the original must accompany
the final draft.
Partial drawings are permitted, with the letter of credit being reduced,
without amendment, by the amount(s) drawn hereunder.
D-1
<PAGE>
This letter of credit shall expire at 2:00 p.m. at the office of
________________________________________ on the expiration date.
This letter of credit may be transferred or assigned by the beneficiary hereof
to any successor or assign of such beneficiary's interest in any such lease or
other agreement or to any lender obtaining a lien or security interest in the
property covered by any such lease. Each draft hereunder by any assignee or
successor shall be accompanied by a copy of the fully executed documents or
judicial orders evidencing such encumbrance, assignment or transfer.
Any draft drawn hereunder must bear the legend "Drawn under
______________________________ Letter of Credit Number __________ dated
____________________. Except so far as otherwise expressly stated, this letter
of credit is subject to the "Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Brochure No. 500." We
hereby agree with you and all persons negotiating such drafts that all drafts
drawn and negotiated in compliance with the terms of this letter of credit will
be duly honored upon presentment and delivery of the documents specified above
by certified or registered mail to _________________________________ located at
________________________________________________________________________________
______________________________________________ if negotiated not later that 2:00
pm on or before the expiration date shown above.
Very truly yours,
By:___________________________________
Its:__________________________________
D-2
<PAGE>
EXHIBIT E
FACILITY GROUP LEASES
The following leases between Lessor, or an Affiliate of Lessor, and Lessee, or
an Affiliate of Lessee, shall be deemed "Facility Group Leases" for purposes of
this Lease:
Any lease entered into after the date hereof between Lessor or an
Affiliate of Lessor and Lessee or an Affiliate of Lessee which recites
that it is a "Facility Group Lease."
E-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I.......................................................................... 1
1. Leased Property; Term............................................ 1
ARTICLE II......................................................................... 2
2. Definitions...................................................... 2
ARTICLE III........................................................................ 16
3.1 Rent............................................................. 16
3.2 Quarterly Calculation and Payment of Additional Rent; Annual
Reconciliation................................................... 16
3.3 Confirmation of Gross Revenues................................... 18
3.4 Additional Charges............................................... 18
3.5 Late Payment of Rent............................................. 18
3.6 Net Lease........................................................ 19
ARTICLE IV......................................................................... 19
4.1 Impositions...................................................... 19
4.2 Utilities........................................................ 21
4.3 Insurance........................................................ 21
4.4 Impound Account.................................................. 21
4.5 Tax Service...................................................... 21
ARTICLE V.......................................................................... 22
5. No Termination, Abatement, etc................................... 22
ARTICLE VI......................................................................... 22
6.1 Ownership of the Leased Property................................. 22
6.2 Personal Property................................................ 22
6.3 Transfer of Personal Property and Capital Additions to Lessor.... 23
6.4 Option to Purchase Removable Personal Property................... 23
ARTICLE VII........................................................................ 23
7.1 Condition of the Leased Property................................. 23
7.2 Use of the Leased Property....................................... 24
7.3 Lessor to Grant Easements, etc................................... 25
7.4 Preservation of Value and Utility of Leased Property............. 25
ARTICLE VIII....................................................................... 28
8. Compliance with Legal and Insurance Requirements,
Instruments, etc................................................. 28
ARTICLE IX......................................................................... 29
9.1 Maintenance and Repair........................................... 29
i
<PAGE>
Page
9.2 Encroachments, Restrictions, Mineral Leases, etc................. 30
ARTICLE X.......................................................................... 31
10. Construction of Capital Additions to the Leased Property......... 31
ARTICLE XI......................................................................... 31
11. Liens............................................................ 31
ARTICLE XII........................................................................ 31
12. Permitted Contests............................................... 31
ARTICLE XIII....................................................................... 32
13.1 General Insurance Requirements................................... 32
13.2 Replacement Cost................................................. 33
13.3 Additional Insurance............................................. 33
13.4 Waiver of Subrogation............................................ 34
13.5 Policy Requirements.............................................. 34
13.6 Increase in Limits............................................... 34
13.7 Blanket Policies and Policies Covering Multiple Locations........ 34
13.8 No Separate Insurance............................................ 35
ARTICLE XIV........................................................................ 35
14.1 Insurance Proceeds............................................... 35
14.2 Insured Casualty................................................. 36
14.3 Uninsured Casualty............................................... 37
14.4 No Abatement of Rent............................................. 37
14.5 Waiver........................................................... 37
ARTICLE XV......................................................................... 38
15. Condemnation..................................................... 38
15.1 Total Taking..................................................... 38
15.2 Partial Taking................................................... 38
15.3 Restoration...................................................... 38
15.4 Award-Distribution............................................... 38
15.5 Temporary Taking................................................. 38
15.6 Sale Under Threat of Condemnation................................ 38
ARTICLE XVI......................................................................... 39
16.1 Events of Default................................................. 39
16.2 Certain Remedies.................................................. 42
16.3 Damages........................................................... 42
16.4 Receiver.......................................................... 43
16.5 Lessee's Obligation to Purchase................................... 43
16.6 Waiver............................................................ 43
16.7 Application of Funds.............................................. 44
16.8 Facility Operating Deficiencies................................... 44
ii
<PAGE>
Page
ARTICLE XVII....................................................................... 45
17. Lessor's Right to Cure Lessee's Default.......................... 45
ARTICLE XVIII...................................................................... 46
18. Purchase of the Leased Property.................................. 46
ARTICLE XIX........................................................................ 46
19.1 Renewal Terms.................................................... 46
19.2 Lessor's Rights of Renewal and Early Termination................. 47
ARTICLE XX......................................................................... 47
20. Holding Over..................................................... 47
ARTICLE XXI........................................................................ 48
21.1 Letters of Credit................................................ 48
21.2 Times for Obtaining Letters of Credit............................ 48
21.3 Amounts for Letters of Credit.................................... 49
21.4 Uses of Letters of Credit........................................ 49
ARTICLE XXII....................................................................... 49
22. Risk of Loss..................................................... 49
ARTICLE XXIII...................................................................... 49
23. General Indemnification.......................................... 49
ARTICLE XXIV....................................................................... 51
24. Transfers........................................................ 51
24.1 Prohibition...................................................... 51
24.2 Consent.......................................................... 51
24.3 Attornment and Related Matters................................... 52
24.4 [Reserved]....................................................... 53
24.5 Costs............................................................ 53
24.6 No Release of Lessee's Obligations............................... 53
24.7 REIT Protection.................................................. 53
24.8 Transfers In Bankruptcy.......................................... 53
24.9 Special Transactions............................................. 54
24.9.1 Transfer to Affiliate............................................ 54
24.9.2 Public Offering; Public Trading.................................. 54
24.9.3 ILC.............................................................. 55
ARTICLE XXV........................................................................ 56
25. Officer's Certificates and Financial Statements.................. 56
25.1 Officer's Certificate............................................ 56
25.2 Statements....................................................... 57
25.3 Charges.......................................................... 59
iii
<PAGE>
Page
ARTICLE XXVI....................................................................... 59
26. Lessor's Right to Inspect and Show the Leased Property........... 59
ARTICLE XXVII...................................................................... 59
27. No Waiver........................................................ 59
ARTICLE XXVIII..................................................................... 59
28. Remedies Cumulative.............................................. 59
ARTICLE XXIX....................................................................... 60
29. Acceptance of Surrender.......................................... 60
ARTICLE XXX........................................................................ 60
30. No Merger........................................................ 60
ARTICLE XXXI....................................................................... 60
31. Conveyance by Lessor............................................. 60
ARTICLE XXXII...................................................................... 60
32. Quiet Enjoyment.................................................. 60
ARTICLE XXXIII..................................................................... 61
33. Notices.......................................................... 61
ARTICLE XXXIV...................................................................... 62
34. Appraiser........................................................ 62
ARTICLE XXXV....................................................................... 63
35.1 First Refusal to Purchase........................................ 63
35.2 Other Defaults................................................... 65
ARTICLE XXXVI...................................................................... 65
36.1 Lessor May Grant Liens........................................... 65
36.2 Attornment....................................................... 66
ARTICLE XXXVII..................................................................... 66
37.1 Hazardous Substances............................................. 66
37.2 Notices.......................................................... 66
37.3 Remediation...................................................... 67
37.4 Indemnity........................................................ 67
37.5 Environmental Inspection......................................... 68
ARTICLE XXXVIII.................................................................... 68
38. Memorandum of Lease.............................................. 68
iv
<PAGE>
Page
ARTICLE XXXIX...................................................................... 69
39. Sale of Assets................................................... 69
ARTICLE XL. [INTENTIONALLY OMITTED].................................. 69
ARTICLE XLI........................................................................ 69
41. Authority........................................................ 69
ARTICLE XLII....................................................................... 69
42. Attorneys' Fees.................................................. 69
ARTICLE XLIII...................................................................... 70
43. Brokers.......................................................... 70
ARTICLE XLIV....................................................................... 70
44. Miscellaneous.................................................... 70
44.1 Survival......................................................... 70
44.2 Severability..................................................... 70
44.3 Non-Recourse..................................................... 70
44.4 Licenses......................................................... 71
44.5 Successors and Assigns........................................... 71
44.6 Termination Date................................................. 71
44.7 Governing Law.................................................... 73
44.8 Waiver of Trial by Jury.......................................... 73
44.9 Lessee's Equitable Remedies...................................... 74
44.10 Entire Agreement................................................. 74
44.11 Headings......................................................... 74
44.12 Counterparts..................................................... 74
44.13 Joint and Several................................................ 74
44.14 Interpretation................................................... 75
44.15 Further Assurances............................................... 75
</TABLE>
EXHIBITS
Exhibit A Legal Description of the Land
Exhibit B List of Lessor's Personal Property
Exhibit C Form of Amendment
Exhibit D Form of Letter of Credit
Exhibit E Facility Group Leases
v
REVOLVING CREDIT NOTE
---------------------
$2,400,000.00 DATED: OCTOBER 10, 1996
FOR VALUE RECEIVED, the undersigned, INTEGRATED LIVING COMMUNITIES, INC., a
Delaware corporation (the "Maker") hereby unconditionally promises to pay to the
order of INTEGRATED HEALTH SERVICES, INC., a Delaware corporation (the
"Lender"), the sum of TWO MILLION FOUR HUNDRED THOUSAND ($2,400,000.00) DOLLARS,
and all accrued and unpaid interest thereon, shall be fully due and payable on
December 2, 1996.
This Note shall bear interest from its date until maturity on the principal
amount outstanding from time to time hereunder (calculated on the basis of a
360-day year of twelve 30-day months) at a rate per annum equal to fourteen
(14%) percent. Each installment when paid shall be applied first to the payment
of all accrued interest and the balance shall be applied to principal.
Notwithstanding any provision contained herein, the total liability of
Maker for payment of interest pursuant hereto shall not exceed the maximum
amount of such interest permitted by law to be charged, collected, or received
from Maker and if any payments by Maker includes interest in excess of such a
maximum amount, Lender shall apply such excess to the reduction of the unpaid
principal amount due pursuant hereto, or if none is due, such excess shall be
refunded to Maker.
The Lender will record the date and amount of each loan made to Maker, the
date and amount of any principal and interest payment, and the principal balance
hereof of any schedule which may be attached hereto and made a part hereof, and
any such recordation shall, in the absence of manifest error, constitute prima
facie evidence of the accuracy of the information so recorded; provided however,
that the Lender's failure to so record shall not limit the obligations of the
Maker hereunder to pay the principal of and interest on the loans advanced to
Maker.
The Maker may prepay all or any part of the remaining balance of this Note
at any time without penalty or premium.
Maker waives presentment for payment, demand, notice of non-payment,
notice of protest and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor, or enforcement of
the repayment of this Note. Upon the occurrence of a default under this Note,
the lender may proceed to protect and enforce its rights hereunder in any manner
or order it deems expedient without regard to any equitable principles of
marshalling or otherwise. All rights and remedies given by this Note are
cumulative and not exclusive of any thereof or of any other rights or remedies
available to the Lender and no course of dealing between Maker and the Lender or
any delay or omission in exercising any right or remedy shall operate as a
waiver of
<PAGE>
any right or remedy, and every right and remedy may be exercised from time to
time and as often as shall be deemed appropriate by Lender.
This Note shall be governed, interpreted, and enforceable in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Note on the date
first above written.
INTEGRATED LIVING COMMUNITIES, INC.
BY: /s/John B. Poole
--------------------------------
John B. Poole
TITLE: CFO
-----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CON-
SOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 143,644
<SECURITIES> 0
<RECEIVABLES> 279,892
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 671,293
<PP&E> 53,667,996
<DEPRECIATION> 0
<TOTAL-ASSETS> 60,964,464
<CURRENT-LIABILITIES> 3,553,005
<BONDS> 0
38,979
0
<COMMON> 0
<OTHER-SE> 39,661,074
<TOTAL-LIABILITY-AND-EQUITY> 60,964,464
<SALES> 17,121,567
<TOTAL-REVENUES> 17,121,567
<CGS> 0
<TOTAL-COSTS> 15,170,375
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 202,557
<INCOME-PRETAX> 1,748,635
<INCOME-TAX> 673,224
<INCOME-CONTINUING> 1,075,411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,075,411
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
