<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to
Commission file number 000-22771
---------------------
CENTENNIAL HEALTHCARE CORPORATION
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1839701
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) (identification No.)
400 Perimeter Center Terrace, Suite 650, Atlanta, Georgia 30346
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 770-698-9040
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Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicated the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
There were 11,923,618 shares of Common Stock outstanding as of May 10, 1999
<PAGE>
CENTENNIAL HEALTHCARE CORPORATION AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 23
<PAGE>
ITEM I - FINANCIAL STATEMENTS
CENTENNIAL HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 2,991 $ 8,087
Patient accounts receivable and third-party payor settlements, net
of allowance for doubtful accounts of approximately
$4,900 and $5,000........................................................... 100,934 99,910
Other receivables............................................................ 4,011 4,382
Deferred income taxes........................................................ 3,738 3,738
Prepaid expenses and other current assets.................................... 3,393 2,250
---------- ------------
Total current assets..................................................... 115,067 118,367
Property and equipment, net.................................................. 74,802 74,813
Intangible assets, net....................................................... 39,604 40,104
Notes receivable and other assets............................................ 58,139 55,088
---------- ------------
Total assets............................................................. $ 287,612 $ 288,372
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities..................................... $ 41,292 $ 48,976
Other current liabilities.................................................... 18,297 12,816
---------- ------------
Total current liabilities................................................ 59,589 61,792
Long-term debt, less current maturities........................................ 113,579 112,849
Other long-term liabilities.................................................... 149 48
---------- ------------
173,317 174,689
Commitments and contingencies
Shareholders' equity:
Common stock with par value of $ 01; 50,000,000 shares
authorized; 11,923,618 shares issued
and outstanding......................................................... 119 119
Paid-in capital.............................................................. 102,015 102,015
Retained earnings............................................................ 12,511 11,899
---------- ------------
114,645 114,033
Note receivable from shareholder............................................... (350) (350)
---------- ------------
Net shareholders' equity................................................. 114,295 113,683
---------- ------------
Total liabilities and shareholders' equity............................... $ 287,612 $ 288,372
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
CENTENNIAL HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues:
Net patient service revenues ............................... $ 95,652 $ 83,379
Management fees and other revenues ......................... 2,393 3,693
-------- --------
Total revenues ........................................... 98,045 87,072
-------- --------
Expenses:
Facility operating expenses:
Salaries, wages and benefits ........................... 47,988 41,572
Other operating expenses ............................... 29,553 24,698
Lease expense .............................................. 7,845 5,409
Corporate administrative costs ............................. 5,946 4,943
Depreciation and amortization .............................. 2,917 2,283
Terminated merger transaction costs ........................ 600 --
-------- --------
Total operating expenses ................................ 94,849 78,905
-------- --------
3,196 8,167
-------- --------
Other income (expense):
Interest income ........................................... 473 121
Interest expense .......................................... (2,498) (1,913)
-------- --------
Total other expense .................................... (2,025) (1,792)
-------- --------
1,171 6,375
Provision for income taxes ................................... 480 2,486
-------- --------
Income before minority interest .............................. 691 3,889
Minority interest in net income of subsidiary,
net of income taxes ........................................ (79) (63)
-------- --------
Net income ................................................... $ 612 $ 3,826
======== ========
Net income per common stock and common stock equivalent share:
Basic ....................................................... $ 0.05 $ 0.32
======== ========
Diluted ..................................................... $ 0.05 $ 0.32
======== ========
Weighted average number of common stock and
common stock equivalents outstanding
Basic ....................................................... 11,924 11,866
======== ========
Diluted ..................................................... 11,956 12,202
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CENTENNIAL HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTE
COMMON STOCK RECEIVABLE
------------------------------ PAID-IN RETAINED FROM
SHARES AMOUNT CAPITAL EARNINGS SHAREHOLDER NET
-------------- ------------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998............ 11,923 $ 119 $ 102,015 $ 11,899 $ (350) $ 113,683
Net income.............................. - - - 612 - 612
-------------- ------------- ----------- ---------- ------------ ----------
Balance at March 31, 1999............... 11,923 $ 119 $ 102,015 $ 12,511 $ (350) $ 114,295
============== ============= =========== ========== ============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
CENTENNIAL HEALTHCARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Net income .................................................................. $ 612 $ 3,826
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization ........................................... 2,917 2,283
Deferred income taxes ................................................... -- --
Consulting expenses offset against note receivable ...................... 31 31
Minority interest ....................................................... 134 103
Provision for doubtful accounts ......................................... 362 152
Change in assets and liabilities:
Accounts receivable .................................................. (403) (7,303)
Prepaid expenses and other assets .................................... (1,008) (4,876)
Accounts payable, accrued liabilities and other current liabilities .. (7,868) (391)
Other ................................................................ 51 (11)
-------- --------
Cash used in operating activities ................................ (5,172) (6,186)
-------- --------
Investing Activities:
Purchases of property and equipment ......................................... (1,666) (2,553)
Notes receivable and other assets, net of repayments ........................ (2,664) (6,376)
Other ....................................................................... (1,208) (220)
-------- --------
Cash used in investing activities ................................ (5,538) (9,149)
-------- --------
Financing Activities:
Proceeds from the exercise of stock options ................................. -- 120
Proceeds from borrowings .................................................... 10,000 15,200
Distributions paid to minority partners ..................................... (74) (74)
Borrowings from related party, net of repayments ............................ (42) (75)
Principal payments on long-term debt ........................................ (4,270) (221)
-------- --------
Cash provided by financing activities ............................ 5,614 14,950
-------- --------
Net decrease in cash and cash equivalents ..................................... (5,096) (385)
Cash and cash equivalents, beginning of period ................................ 8,087 4,011
-------- --------
Cash and cash equivalents, end of period ...................................... $ 2,991 $ 3,626
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
CENTENNIAL HEALTHCARE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
NOTE 1 - BASIS OF PRESENTATION AND OTHER INFORMATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the financial
statements reflect all adjustments considered necessary for a fair statement of
the results of operations and financial position for the interim periods
presented. All such adjustments are of a normal recurring nature. These
unaudited interim financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 1998
and notes thereto contained in Centennial HealthCare Corporation's Annual Report
on Form 10-K filed with the Securities and Exchange Commission (Commission File
No. 000-22771).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999 or any interim period.
Certain amounts in the 1998 financial statements of Centennial HealthCare
Corporation ("Centennial" or the "Company") have been reclassified for
comparative purposes.
NOTE 2 - EARNINGS PER SHARE
The calculation of earnings per share is as follows (in thousands, except per
share amounts):
7
<PAGE>
Three Months Ended
March 31,
1999 1998
-------- --------
Net income................................................... $ 612 $ 3,826
Weighted average common shares outstanding................... 11,924 11,866
Basic Earnings Per Common Share.............................. $ 0.05 $ 0.32
======== ========
Net income................................................... $ 612 $ 3,826
Interest savings on convertible debt (net of tax)............ - 24
-------- --------
Income applicable to common stock............................ 612 3,850
Weighted average common shares outstanding................... 11,924 11,866
Dilutive effect of stock options............................. 32 336
-------- --------
Average diluted common shares outstanding.................... 11,956 12,202
Diluted Earnings Per Common Share............................ $ 0.05 $ 0.32
======== ========
Net income before nonrecurring charges of $600,000 ($354,000 net of tax)
approximated $966,000 or $0.08 per share (diluted) for the quarter ended March
31, 1999.
NOTE 3 - FACILITY ACQUISITIONS
Effective January 1999, Centennial acquired leasehold interests in six nursing
facilities, totaling 795 licensed available beds, located in Massachusetts.
Also effective January 1999, the Company acquired leasehold interests in two
facilities that were previously managed by the Company: Hunter Woods Nursing and
Rehabilitation Center ("Hunter Woods"), a 130-bed facility located in Charlotte,
North Carolina and Choctaw County Medical Center ("Choctaw"), a facility with 68
nursing home beds and 22 hospital beds, located in Ackerman, Mississippi.
NOTE 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
8
<PAGE>
In June 1998, Statement of Financial Accounting Standards ("SFAS") 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued.
This statement requires that all derivatives be recognized in the statement of
financial position as either assets or liabilities and measured at fair value.
In addition, all hedging relationships must be designated, reassessed and
documented pursuant to the provisions of SFAS 133. SFAS 133 is effective for
fiscal years beginning after June 15, 1999. The effect on the financial
statements upon adoption of SFAS 133 has not been determined.
NOTE 5 - SEGMENT INFORMATION
In 1998, Centennial adopted Statement of Financial Accounting Standards ("SFAS")
131, "Disclosures about Segments of an Enterprise and Related Information".
SFAS 131 supersedes FAS 14, "Financial Reporting for Segments of a Business
Enterprise", replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS 131 also requires
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS 131 did not affect results of operations or financial
position.
The Company has determined that its reportable segments are those that are based
on the Company's method of internal reporting, which disaggregates its business
by services provided. The Company's reportable segments are management
services/corporate, long-term care facilities and rehabilitative therapy
services. Management fee revenues and all corporate expenses and overhead are
recorded in the management services/corporate segment. The long-term care
facilities segment provides basic healthcare services to patients in a long-term
care setting, including skilled nursing and support, housekeeping, laundry,
dietary, recreational and social services. The rehabilitative therapy services
segment provides specialty healthcare services, including comprehensive
rehabilitation therapy, respiratory therapy and infusion therapy. The "All
Other" category represents the Company's hospital services, home health
services, and the Company's subsidiary providing intravenous therapy and other
services.
Centennial evaluates the performance of its segments and allocates resources to
them based on earnings before interest, taxes, depreciation, amortization and
rent (EBITDAR).
The tables below presents information about EBITDAR and total assets used by the
chief operating decision maker of Centennial as of and for the three months
ended March 31, 1999 and 1998:
9
<PAGE>
<TABLE>
<CAPTION>
March 31, 1999:
(in thousands) Management Long-Term Rehabilitative
Services/ Care Therapy All Reconciling
Corporate Facilities Services Other Items Total
---------------------------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues 2,544 77,393 10,038 15,443 (7,373)(1) 98,045
EBITDAR (2,390) 14,558 (382) 2,172 - 13,958
Total Assets 128,592 138,802 20,418 26,855 (27,055)(2) 287,612
March 31, 1998:
(in thousands) Management Long-Term Rehabilitative
Services/ Care Therapy All Reconciling
Corporate Facilities Services Other Items Total
---------------------------------------------------------------------------- ---------------
Revenues 3,784 60,116 17,717 10,942 (5,487)(1) 87,072
EBITDAR 675 11,749 2,190 1,245 - 15,859
Total Assets 122,706 128,296 18,798 19,571 (27,433)(2) 261,938
</TABLE>
(1) Represents elimination of intersegment revenues
(2) Represents elimination of intersegment receivables and unallocated
corporate purchase adjustments
Specified items included in segment profit/loss for the three months ended March
31, 1999 and 1998:
<TABLE>
<CAPTION>
March 31, 1999:
(in thousands) Management Long-Term Rehabilitative
Services/ Care Therapy All
Corporate Facilities Services Other Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest revenue 426 14 20 13 473
Interest expense (925) (1,241) (158) (174) (2,498)
Depreciation and amortization (1,105) (1,221) (465) (126) (2,917)
Income tax benefit/(expense) 1,799 (2,064) 459 (674) (480)
Minority interest (net of tax) (79) - - - (79)
Net income (expense) (2,668) 2,970 (661) 971 612
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
March 31, 1998:
(in thousands) Management Long-Term Rehabilitative
Services/ Care Therapy All
Corporate Facilities Services Other Total
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest revenue 79 3 38 1 121
Interest expense (269) (1,311) (158) (175) (1,913)
Depreciation and amortization (655) (1,059) (461) (108) (2,283)
Income tax benefit/(expense) 194 (1,751) (595) (334) (2,486)
Minority interest (net of tax) (63) - - - (63)
Net income (expense) (366) 2,738 931 523 3,826
</TABLE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
As of March 31, 1999, the Company had $80.0 million outstanding and
approximately $3.2 million available under its Senior Credit Facility with First
Union National Bank, NationsBank, N.A., as agents and lenders and the other
lenders named therein, (the "Senior Credit Facility"), net of issued standby
letters of credit of approximately $6.8 million.
By agreement dated May 14, 1999, the Company obtained a waiver of compliance
with the financial covenant in Section 5.16 (Adjusted Total Debt to Adjusted
EBITDAR) of the Senior Credit Facility. With this waiver, the Company is in full
compliance with all covenants of the Senior Credit Facility.
Under the provisions of the Senior Credit Facility, Centennial is required to
hedge a portion of its floating rate debt outstanding under the Senior Credit
Facility. Accordingly, the Company has entered into interest rate swap
agreements with certain lenders providing bank financing under the Senior Credit
Facility. Pursuant to the interest rate swap agreements, the Company has
exchanged its floating rate interest obligations on $38.0 million in principal
at an average fixed rate of 5.61% per annum for an average maturity of 4.25
years. The fixing of interest rates for this period reduces in part the
Company's exposure to the uncertainty of floating interest rates. The
differential paid or received on the interest rate swap agreements is recognized
as an adjustment to interest expense. The Company is exposed to credit loss in
the event of nonperformance by the counterparties to the interest rate swap
agreements. However, the Company does not anticipate nonperformance by these
counterparties, and no material loss would be expected from their
nonperformance. The fair value of the interest rate swap agreements was not
recognized in the condensed consolidated financial statements since they are
accounted for as hedges. At March 31, 1999, the estimated fair value of the
interest rate swap agreements based on current market rates, approximated a net
payable of $347,000.
On March 26, 1999 the Company received an investigatory subpoena from the
Department of Health and Human Services, Office of Inspector General, requesting
records in connection with an investigation of possible or otherwise improper
claims for payment under Title XVIII (Medicare) of the Social Security Act. The
request relates to records for the period January 1, 1994 to the present
concerning certain of the Company's internal policies and relates to four long-
term care facilities operated by the Company. The Company is cooperating in this
investigation and is currently providing the requested records.
NOTE 7 - SUBSEQUENT EVENTS
On October 22, 1998, Centennial announced that its Board of Directors had
approved the sale of the Company for $16.00 per share in cash to a new company,
(Centennial HealthCare Holdings Corporation), formed by Welsh, Carson, Anderson
& Stowe, whose affiliates currently hold approximately 23% of the Company's
common stock. The Company entered into an Agreement and Plan of Merger with
Centennial HealthCare Holdings Corporation (the "Merger Agreement") on October
22, 1998.
On April 2, 1999, Centennial HealthCare Holdings Corporation notified the
Company that it was terminating the Merger Agreement with the Company. Through
March 31, 1999, the Company had expensed approximately $4.2 million in
transaction costs associated with the terminated merger of which $600,000 were
expensed during the first quarter of 1999. The Company does not anticipate any
further accruals of merger costs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the accompanying
Unaudited Condensed Consolidated Statements of Operations for the three-month
period ended March 31, 1999 and 1998.
<PAGE>
Certain statements in this Form 10-Q, including information set forth under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations", constitute "Forward-Looking Statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements include
statements regarding the intent, belief or current expectations of Centennial
HealthCare Corporation and members of its management team. Management cautions
that a variety of factors could cause Centennial HealthCare's actual results to
differ materially from the anticipated results expressed in such forward-looking
statements. Important factors currently known to management that could cause
actual results to differ materially from those in forward-looking statements are
set forth in Centennial HealthCare's Cautionary Statements regarding Forward-
looking Statements (Exhibit 99.1 to this report), which statements are
incorporated herein by reference.
GENERAL
Centennial HealthCare Corporation ("Centennial" or the "Company") provides a
broad range of long-term healthcare services to meet the medical needs of
elderly and post-acute patients. The Company provides these services through
geographically concentrated networks located in metropolitan and secondary
markets throughout the United States. The Company was organized in 1989 as a
Georgia corporation and conducts business through its operating subsidiaries.
The Company currently operates 108 owned, leased and managed skilled nursing
facilities with approximately 11,695 licensed available beds in 21 states and
the District of Columbia. The Company provides basic and specialty healthcare
services. Basic services include skilled nursing and support, housekeeping,
laundry, dietary, recreational and social services. Specialty services include
comprehensive rehabilitation therapy, respiratory therapy, ventilator care,
infusion therapy, wound care, home health care and other subacute and specialty
services. As components of its specialty services, at March 31, 1999,
Centennial provided rehabilitation therapy services on a contract basis to
third-party owned and Company-operated skilled nursing facilities pursuant to
155 internal and external contracts and provided home health care services
through 24 licensed home health offices.
Effective January 1999, Centennial acquired leasehold interests in six nursing
facilities, totaling 795 licensed available beds, located in Massachusetts, (the
"Flatley Facility Leases").
Effective January 1999, the Company acquired leasehold interests in two
facilities that were previously managed by the Company: Hunter Woods Nursing and
Rehabilitation Center, a 130-bed facility located in Charlotte, North Carolina,
and Choctaw County Medical Center, a facility with 68 nursing home beds and 22
hospital beds, located in Ackerman, Mississippi. Together, these two facilities
are hereafter referred to as the "New Facility Leases".
<PAGE>
In August 1998, the Company began leasing four skilled nursing facilities
totaling 349 licensed available beds, located in Mississippi, North Carolina,
Arkansas and Wisconsin. One of these facilities was previously managed by the
Company. In October 1998, the Company began leasing six skilled nursing
facilities totaling 608 licensed available beds, located in Florida, Arkansas,
Kansas, and Wisconsin. In November 1998, the Company began leasing four skilled
nursing facilities totaling 675 licensed available beds, located in Florida and
Missouri. Together, these transactions are hereafter referred to as the "1998
Facility Leases".
In April 1998, the Company entered into management agreements for two skilled
nursing facilities, with a total of 174 licensed available beds, located in
Virginia.
In October 1998, the Company discontinued its operation of the Wellington
Nursing and Rehabilitation Center, ("Wellington"), a 100-bed facility located in
Charlotte, North Carolina, through a sub-lease agreement with another operator.
The terms of the sublease agreement are consistent with the Company's
obligations under its current lease agreement; however, the Company remains
obligated under that lease agreement.
In December 1995, as part of the Company's December 31, 1995 merger with
Transitional Health Services, Inc., the Company assumed operations of
THS of South Bend, ("South Bend"), a 191-bed skilled nursing facility located in
South Bend, Indiana. Prior to its acquisition by the Company, this facility had
a history of operating losses, had received negative state licensure surveys,
and was in jeopardy of losing its license. The Company was unable to recertify
this facility for Medicaid, and management determined that the best course of
action was to close the facility. The facility was closed in November 1998. The
Company continues to market the facility for sale.
On October 22, 1998 Centennial announced that its Board of Directors had
approved the sale of the Company for $16.00 per share in cash to a new company,
("Centennial HealthCare Holdings Corporation"), formed by Welsh, Carson,
Anderson and Stowe, whose affiliates currently hold approximately 23% if the
Company's common stock (the "Proposed Merger"). The Company entered into an
Agreement and Plan of Merger with Centennial HealthCare Holdings Corporation
(the "Merger Agreement") on October 22, 1998.
On April 2, 1999, Centennial HealthCare Holdings Corporation notified the
Company that it was terminating the Merger Agreement. Through March 31, 1999,
the Company had expensed approximately $4.2 million in transaction costs
associated with the terminated merger of which $600,000 were expensed during the
first quarter of 1999. The Company does not anticipate at this time any further
merger costs.
RESULTS OF OPERATIONS
GENERAL
During the third quarter of 1998 and into the first quarter of 1999, the Company
made its transition from the cost based Medicare system to the prospective
payment system ("PPS"). Under PPS, the Company will be paid a flat rate per
patient day adjusted for patient acuity levels and geographical disparities as
opposed to the previous cost reimbursed methodology. As anticipated, the advent
of PPS has had the effect of reducing Medicare revenue at the Company's nursing
facilities on a same store basis during the first quarter of 1999. Likewise, the
PPS system had reduced revenue at Paragon Rehabilitation, Inc. ("Paragon") the
Company's subsidiary providing rehabilitation therapy to nursing centers, as its
customers have sought to re-negotiate therapy contracts under the new Medicare
payment criteria. These losses were mitigated to a large degree through various
cost cutting measures, increases in efficiency and re-negotiation of nursing
center contracts to be more in line with PPS. A more thorough discussion of PPS
and other reimbursement changes affecting the Company's current and future
operations is included in Management's Discussion and Analysis of Financial
Condition and Results of Operations under "Health Care Reform; Reimbursement
Issues".
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
NET PATIENT SERVICE REVENUES. Net patient service revenues increased from $83.4
million in the first quarter of 1998 to $95.7 million in the same period in
1999, an increase of $12.3 million or 14.7%. The 1998 Facility Leases
contributed approximately $13.4 million to revenues during the first quarter of
1999. The New Facility Leases and the Flatley Facility Leases contributed
approximately $2.4 million and $9.9 million, respectively, to revenues during
the first quarter of 1999. Wellington and South Bend contributed approximately
$1.3 million and $1.5 million, respectively, to revenues for the quarter ended
March 31, 1998. Same store nursing facility revenues decreased by approximately
$5.6 million in the first quarter of 1999 compared to the prior year period due
primarily to decreases in Medicare revenues associated with the advent of the
Medicare prospective payment system ("PPS"), which went into effect for the
majority of the Company's owned and leased nursing facilities on January 1,
1999. Payor mix at the Company's nursing facilities remained consistent during
1999 as compared to 1998. The Company experienced a 20% decrease in its Medicare
part A rates and a slight decrease in census on a same store basis during the
first quarter of 1999 compared to the prior year period. Revenues from Paragon,
the Company's subsidiary providing therapy services, decreased by approximately
<PAGE>
$7.0 million in the first quarter of 1999 compared to the prior year period, due
in part to the loss of six rehabilitation contracts subsequent to the first
quarter of 1998 and a general decrease in average revenue per contract. The
decrease in revenue per contract is associated primarily with the pass through
effect of Medicare PPS rate decreases affecting Paragon's nursing center
customers. Revenues from PTS, the Company's subsidiary providing intravenous
therapy and other services, increased by approximately $1.5 million due to
increased volume from existing contracts and the expansion of services provided
to both the Company's managed nursing facilities and other third parties.
MANAGEMENT FEES AND OTHER REVENUES. Management fees and other revenues decreased
from $3.7 million in the first quarter of 1998 to $2.4 million in the first
quarter of 1999, a decrease of $1.3 million, or 35.2%. Approximately $330,000 of
this decrease was due to the loss of one management contract subsequent to the
first quarter of 1998, and approximately $700,000 of this decrease was due to
revenue recognized in the first quarter of 1998 for the performance of
additional services to certain third party owners during that period.
FACILITY OPERATING EXPENSES. Facility operating expenses increased from $66.3
million in the first quarter of 1998 to $77.5 million in the same period in
1999, an increase of $11.2 million or 17.0%. The 1998 Facility Leases
contributed approximately $11.1 million to operating expenses during the first
quarter of 1999. The New Facility Leases and the Flatley Facility Leases
contributed approximately $2.1 million and approximately $7.5 million,
respectively, to operating expenses during the first quarter of 1999. Wellington
and South Bend contributed approximately $1.5 million and $1.2 million,
respectively, to operating expenses for the prior year period ended March 31,
1998. Same store nursing facility operating expenses decreased by approximately
$3.6 million in the first quarter of 1999 compared to the prior year period,
primarily resulting from decreases in therapy and other ancillary costs
associated with the re-negotiation of the Company's ancillary contracts under
the PPS methodology, offset in part by additional costs incurred in 1999
associated with PPS training at the Company's nursing facilities. Operating
expenses from Paragon decreased by approximately $4.2 million in the first
quarter of 1999 compared to the prior year period, due to the cost-cutting
measures put in place by management in response to the anticipated loss of
revenue associated with PPS. Operating expenses from PTS increased by
approximately $1.1 million due to increased volume from existing contracts and
the expansion of services provided to both the Company's managed nursing
facilities and other third parties.
LEASE EXPENSE. Lease expense increased from $5.4 million in the first quarter of
1998 to $7.8 million in the first quarter of 1999, an increase of approximately
$2.4 million, or 45.0%. Lease expense from the 1998 Facility Leases approximated
$1.4 million during the first quarter of 1999, while lease expense from the New
Facility Leases and the Flatley Facility leases approximated $201,000 and $1.3
million, respectively, in the first quarter of 1999. Wellington and South Bend
contributed approximately $156,000 and $210,000, respectively, to lease expense
during the prior year period ended March 31, 1998.
CORPORATE ADMINISTRATIVE COSTS. Corporate administrative costs increased from
$4.9 million in the first quarter of 1998 to $5.9 million in the first quarter
of 1999, an increase of $1.0 million, or 20.3%, which was due primarily to
additional overhead incurred to accommodate the 1998 Facility Leases, the New
Facility Leases, the Flatley Facility Leases and training and transition to PPS.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
$2.3 million in the first quarter of 1998 to $2.9 million in the same period in
1999, an increase of approximately
<PAGE>
$634,000, or 27.8%, which was primarily attributable to additional depreciation
expense incurred as a result of fixed asset purchases and amortization of
management contract acquisition costs.
TERMINATED MERGER TRANSACTION COSTS. During the quarter ended March 31, 1999,
the Company recorded $600,000 in expenses associated with the termination of the
Proposed Merger.
INTEREST EXPENSE. Interest expense increased from $1.9 million in the first
quarter of 1998 to $2.5 million in the first quarter of 1999, an increase of
approximately $585,000, or 30.6%, which was primarily attributable to the
increase in debt of approximately $28.5 million subsequent to the first quarter
of 1998, related to borrowings for working capital.
PROVISION FOR INCOME TAXES. The Company's effective tax rate increased from
39.0% in the first quarter of 1998 to 41.0% in the first quarter of 1999, an
increase in the rate of 2.0%. This increase was primarily attributable to an
anticipated increase in the Company's average state tax rate due to the
Company's expansion into several new states resulting from the Flatley Facility
Leases and the 1998 Facility Leases.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash during the first quarter of 1999 was
borrowings under its Senior Credit Facility with First Union National Bank,
NationsBank, N.A., ("NationsBank"), as agents and lenders and the other lenders
named therein, (the "Senior Credit Facility"). Cash was used by the Company for
capital improvements at several existing facilities, notes receivable and other
assets and the day-to-day operations of the Company's business. The Company
anticipates utilizing cash from operations (through anticipated reductions of
accounts receivable) and anticipated borrowings under the Senior Credit Facility
to fund the growth in operations of its existing facilities, the expansion and
development of specialty services, and the acquisition or management of
additional long-term care facilities and related service providers.
Working capital decreased from $56.6 million at December 31, 1998, to $55.5
million at March 31, 1999, a decrease of $1.1 million. This decrease is
comprised primarily of (i) an increase in prepaid expenses of $1.0 million
associated with deposits on the Company's 1999 workers compensation premiums,
(ii) increases in accounts receivable of approximately $1.0 million, (iii)
increases in current borrowings under the Company's short term working capital
line of credit of $5.0 million and (iv) decreases in trade accounts payable (net
of decreases in outstanding checks) of approximately $1.9 million. The increase
in accounts receivable is comprised of a $8.6 million increase in trade
receivables at the Company's long term care facilities associated primarily with
1998 and 1999 facility acquisitions, a $4.0 million decrease in nursing facility
settlement receivables associated with the collection of prior year Medicare
cost report receivables and exception requests and a $3.6 million decrease in
Paragon receivables from third parties.
Notes receivable and other assets increased by approximately $2.7 million during
the first quarter of 1999, approximately $1.5 million of which relates to
advances to managed facilities. The Company continued to invest in its leased
and owned facilities through capital expenditures of approximately $1.7 million
or approximately $200 per bed for the three-month period. These expenditures
included the expansion of existing facilities and the selected rehabilitation of
certain facilities.
During the first quarter of 1999, the Company borrowed a net $1.0 million in
working capital loans under the Senior Credit Facility which were utilized
primarily to finance capital expenditures at existing facilities and to provide
working capital. As of March 31, 1999, the Company had $80.0 million outstanding
and approximately $3.2 million available under its Senior Credit Facility, net
of issued standby letters of credit of approximately $6.8 million. With a waiver
of one provision of the Company's Senior Credit Facility, the Company is in full
compliance with all covenants of the Senior Credit Facility.
As noted above, in January 1999, the Company obtained a $5.0 million line of
credit from NationsBank, which bears interest at NationsBank's Prime Rate or
2.75% over Libor for selected portions. The line of credit expires May 31,
1999, and has been included in "other current liabilities" in the Company's
accompanying Condensed Consolidated Balance Sheets at March 31, 1999. As of
March 31, 1999, the Company had $5.0 million outstanding under this agreement.
<PAGE>
The Company anticipates meeting its cash flow requirements in the remaining
three quarters of 1999 through continued collection of Medicare settlement
receivables (which approximated $12.0 million at March 31, 1999), collection of
past due trade receivables associated with the 1998 Facility Leases, the Flatley
Facility Leases, and the New Facility Leases, and borrowings under its Senior
Credit Facility. The Company is also evaluating the possible sale of its
interests in certain assets to provide additional liquidity for its day to day
operations and future acquisitions.
<PAGE>
HEALTH CARE REFORM; REIMBURSEMENT ISSUES
The Balanced Budget Act of 1997, (the "Act"), enacted in August 1997, has
targeted the Medicare program for reductions in spending growth of approximately
$9.5 billion for skilled nursing facilities ("SNF's") over the next five years,
primarily through the implementation of a Medicare prospective payment system
("PPS") for skilled services. Under the Act, PPS will be phased in over three
cost reporting periods beginning on or after July 1, 1998. Recent data from the
Congressional Budget Office indicates that the estimated reductions to SNF
payments resulting from the implementation of PPS actually approach $16.6
billion.
Generally, the PPS per diem, which covers routine service, ancillary and capital
related costs, has initially been a blended rate based on (i) a facility-
specific payment rate derived from each facility's 1995 cost report, adjusted by
an inflation factor and (ii) a federal per diem rate derived from all hospital-
based and freestanding SNF 1995 cost reports, adjusted for case mix and
geographic variations in labor costs. The blended rate will be further adjusted
by a facility-specific case mix (acuity) index.
Management previously indicated a belief that revenues would be lower under PPS,
but noted that reductions in ancillary service costs and proper Minimum Data Set
("MDS") documentation should offset the effect of rate reductions. The actual
impact of PPS on the Company is dependent on numerous variables, including
Medicare census, length of patient stay and patient acuity. The Company can give
no assurance that payments under the PPS program in the future will remain at a
level comparable to the present or increase, nor can the Company give assurance
that the trend in cost reductions or utilization will remain consistent with
current levels or improve.
Currently, there are legislative efforts underway to provide relief to SNF
providers and restore a portion of the savings estimated in excess of the
targeted $9.5 billion. The Company can give no assurance that any of these
legislative reforms will be implemented or that additional funds will be
provided to SNF providers under Medicare.
The Act has also targeted the Medicare home health program for reductions in
spending of approximately $16.2 billion over the next five years, also primarily
through the implementation of a prospective payment system. An interim payment
system ("IPS") will remain in effect until the new prospective payment system is
implemented for cost reporting periods beginning on or after October 1, 1999.
The interim payment system is effective for cost reporting periods beginning on
or after October 1, 1997. Under the IPS, home health agencies, in general, are
reimbursed at the lessor of (i) actual costs, (ii) per visit cost limits reduced
to 105% of the median per visit costs for freestanding home health agencies; or
(iii) a blended agency-specific per beneficiary annual limit ("PBL") applied to
the agency's unduplicated census count of Medicare patients.
The Act also provides that cost limits and PBL's must be reduced by 15% from the
amount that would otherwise be in effect on September 30, 1999, regardless of
whether the new prospective
<PAGE>
payment system is ready for implementation on October 1, 1999. Implementation of
these new limits will effectively reduce reimbursement 15-20% according to
industry experts.
Provisions of the Act also include limitations on coverage for outpatient
therapy services and the inclusion of inpatient therapy services in a per diem
payment rate based on an acuity measurement tool which classifies patients into
several intensity-based levels of care. The outpatient therapy limits are
$1,500 per year for the combination of physical and speech therapy and a
separate $1,500 for occupational therapy. For payment purposes, inpatient
services are based upon minutes of care delivered and range from 45 minutes per
week to a maximum of 720 minutes per week.
The Company continues to be adversely impacted by a lengthening of time between
the submission and payment of claims under the Medicare program. Further, the
complex statutory framework of Medicare and Medicaid gives rise to substantial
areas of administrative rulings and interpretations that may affect payments
received by the Company under these programs. The Company can give no assurance
that budget constraints and other factors may not also lead states to reduce
Medicaid reimbursement to SNF providers or to lengthen the time period between
submission of claims and payment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1998, Statement of Financial Accounting Standards ("SFAS") 133,
"Accounting for Derivative Instruments and Hedging Activities," was issued. This
statement requires that all derivatives be recognized in the statement of
financial position as either assets or liabilities and measured at fair value.
In addition, all hedging relationships must be designated, reassessed and
documented pursuant to the provisions of SFAS 133. SFAS 133 is effective for
fiscal years beginning after June 15, 1999. The effect on the financial
statements upon adoption of SFAS 133 has not been determined.
IMPACT OF THE YEAR 2000 ISSUE
Computer systems and other equipment, including biomedical equipment and
building controls, with embedded computer microchips or processors
(collectively, "Business Systems") may use only two digits to represent the
year, which could result in the inability to process accurately certain date
sensitive data or operations before, during or after the year 2000. Business
and governmental entities are at risk for possible miscalculations or systems
failures causing disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices or engage in similar
normal business activities. This is commonly known as the Year 2000 Issue.
Problems associated with the Year 2000 Issue could affect many of Centennial's
financial and administrative operations as well as its voice and data
communication systems.
The Company is in the process of implementing a Year 2000 compliance plan (the
"Plan") with the objective of having all of its significant internal Business
Systems fully compliant with respect to the Year 2000 Issue before June 30,
1999.
The first component of the Plan is to identify the internal Business Systems of
the Company that are susceptible to processing errors or system failures as a
result of the Year 2000 Issue. This effort is substantially complete, and
priorities for all Business Systems that may require remediation or replacement
have been established. Those Business Systems considered most critical to
continuing operations and resident care are being given the highest priority.
The second component of the Plan involves the actual remediation and replacement
of Business Systems. As of March 31, 1999, substantially all remediation and
replacement of internal Business Systems has been completed.
Significant governmental entities, service providers, vendors and suppliers that
are believed to be critical to business operations after January 1, 2000, have
been identified and steps are being undertaken in an attempt to reasonably
ascertain their stage of Year 2000 compliance through questionnaires,
interviews, and other available means.
It is currently estimated that the aggregate cost of the Company's Year 2000
efforts will be approximately $150,000 to $200,000, of which approximately
$180,000 has been spent to date. These costs are being expensed as they are
incurred and are being funded through operating cash
<PAGE>
flow. These amounts do not include any costs associated with the implementation
of contingency plans, which are in the process of being developed. The costs
associated with the replacement of computerized systems, hardware or equipment
(currently estimated to be approximately $350,000), substantially all of which
has been capitalized, are not included in the above estimates. The Company does
not expect the costs relating to Year 2000 remediation to have a material effect
on Centennial's results of operations or financial condition.
Because of the interdependent nature of Business Systems, the Company could be
materially adversely affected if federal and state agencies that administer
Medicare and/or Medicaid or private businesses with which the Company does
business or that provide essential services are not Year 2000 compliant. The
business and results of operations of the Company could be materially adversely
affected by a temporary inability of the Company to conduct its businesses in
the ordinary course for a period of time after January 1, 2000.
Concurrently with the Plan described above, the Company is developing a
contingency plan intended to mitigate the possible disruption in business
operations that may result from the Year 2000 Issue, and is developing cost
estimates for this plan. Once developed, the contingency plan and related cost
estimates will be continually refined as additional information becomes
available. Management expects that the contingency plan will be in place by the
end of the third quarter of 1999.
The Company's Plan is an ongoing process and the estimates of costs and
completion dates for various components of the Plan described above are subject
to change.
<PAGE>
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As of March 31, 1999, the Company did not have any pending legal
proceedings that, based on current information and beliefs, separately
or in the aggregate, would be likely to have a material adverse effect
on the business or the results of operations of the Company. The
Company is, and may be in the future, party to litigation or
administrative proceedings which arise in the normal course of its
business.
On March 26, 1999, the Company received an investigatory subpoena from
the Department of Health & Human Services, Office of Inspector General,
requesting records in connection with an investigation of possible or
otherwise improper claims for payment under Title XVIII (Medicare) of
the Social Security Act. The request relates to records for the period
January 1, 1994 to present and relates to four long-term care
facilities operated by the Company. The Company is cooperating in this
investigation and is currently providing the requested records.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description
- ------ -----------
3.1 Third Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement of Form S-1, Registration No. 333-24267, as amended).
<PAGE>
3.2 Amended and Restated Bylaws of the Company (incorporated by reference
to Exhibit 3.2 of the Company's Registration Statement on Form S-1,
Registration No. 333-24267, as amended).
4.1 Third Amended and Restated Articles of Incorporation of the Company,
included without limitation Article III and Article VII (incorporated
by reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-1, Registration No. 333-24267, as amended).
10.1 Lease Agreement dated as of December 1, 1998 among the Board of
Supervisors of Choctaw County, Mississippi and the Board of Trustees of
Choctaw County Medical Center, collectively as Lessor, and Centennial
HealthCare Investment Corporation, as Lessee
10.2 Lease Assignment Agreement dated as of December 1, 1998 by and between
Charlotte Health Investors, L.L.C., Centennial HealthCare Investment
Corporation, Elderberry Manor of Mecklenburg, Limited Partnership and
Centennial HealthCare Management Corporation
10.3 Promissory Note dated January 6, 1999 from Centennial HealthCare
Corporation to NaitonsBank, N.A. in the original principal amount of
$5,000,000.
27.1 Financial Data Schedule (for SEC use only)
99.1 Cautionary Statements
(b) Reports on Form 8-K
On March 18, 1999, the Company filed a Form 8-K/A, amending its previously filed
Form 8-K on January 15, 1999 concerning the acquisition of six skilled nursing
facilities located in the metropolitan Boston area from Thomas J. Flatley and
Charlotte Flatley d/b/a Flatley Rehabilitation & Nursing Centers. This Form 8-
K/A provided the required financial statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: May 14, 1999 CENTENNIAL HEALTHCARE CORPORATION
By: /s/ J. Stephen Eaton
------------------------------------------
J. Stephen Eaton, Chairman of the Board,
President and Chief Executive Officer
Date: May 14, 1999 By: /s/ Alan C. Dahl
------------------------------------------
Alan C. Dahl, Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3.1 Third Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement of Form S-1, Registration No. 333-24267, as amended).
3.2 Amended and Restated Bylaws of the Company (incorporated by reference
to Exhibit 3.2 of the Company's Registration Statement on Form S-1,
Registration No. 333-24267, as amended).
4.1 Third Amended and Restated Articles of Incorporation of the Company,
included without limitation Article III and Article VII (incorporated
by reference to Exhibit 3.1 of the Company's Registration Statement on
Form S-1, Registration No. 333-24267, as amended).
10.1 Lease Agreement dated as of December 1, 1998 among the Board of
Supervisors of Choctaw County, Mississippi and the Board of Trustees of
Choctaw County Medical Center, collectively as Lessor, and Centennial
HealthCare Investment Corporation, as Lessee
10.2 Lease Assignment Agreement dated as of December 1, 1998 by and between
Charlotte Health Investors, L.L.C., Centennial HealthCare Investment
Corporation, Elderberry Manor of Mecklenburg, Limited Partnership and
Centennial HealthCare Management Corporation
10.3 Promissory Note dated January 6, 1999 from Centennial HealthCare
Corporation to NationsBank, N.A. in the original principal amount of
$5,000,000.
27.1 Financial Data Schedule (for SEC use only)
99.1 Cautionary Statements
<PAGE>
EXHIBIT 10.1
LEASE AGREEMENT
EFFECTIVE AS OF DECEMBER 1, 1998
THE BOARD OF SUPERVISORS
OF
CHOCTAW COUNTY, MISSISSIPPI, AND
THE BOARD OF TRUSTEES OF CHOCTAW
COUNTY MEDICAL CENTER, COLLECTIVELY LESSOR
AND
CENTENNIAL HEALTHCARE INVESTMENT CORPORATION, LESSEE
<PAGE>
ii
INDEX TO LEASE AGREEMENT
1. Lease of Real and Chattel Property, Term...............................2
2. Title to Demised Premises..............................................3
3. Rent...................................................................3
4. Taxes..................................................................3
5. Repair and Replacement.................................................4
6. Compliance with Laws...................................................6
7. Alterations............................................................7
8. Use of Demised Premises................................................7
9. Protection Against Claims by Public....................................7
10. Independence of Demised Premises.......................................8
11. Mechanics' Liens.......................................................8
12. Liability Insurance....................................................8
13. Indemnity..............................................................10
14. Hazard Insurance.......................................................10
15. Fire and Other Casualty................................................12
16. Condemnation...........................................................12
17. Restoration after Fire or Condemnation.................................14
18. Environmental Matters..................................................15
19. Assignment and Subletting..............................................17
20. Bankruptcy.............................................................18
21. Access to Project; Books, Records, Accounts and Annual
Reports................................................................19
22. Default; Termination...................................................20
23. Waiver of Rights of Redemption.........................................22
24. Lessor's Right to Cure Lessee's Defaults...............................22
25. Lessor Default.........................................................22
26. Injunction.............................................................22
27. No Merger..............................................................23
28. Definition of "Lessor" and "Lessee"....................................23
29. Quiet Enjoyment........................................................23
30. Lessor's Right of Entry................................................23
31. Estoppel Certificates..................................................23
32. Rights Cumulative......................................................24
33. Payments of Money, Interest............................................24
34. Surrender, Obligations Upon Expiration or Termination..................24
35. No Waiver..............................................................25
36. Severability...........................................................26
37. Benefit................................................................26
38. Construction...........................................................26
39. Entire Agreement; Written Modifications................................26
40. Governing Law..........................................................26
41. Captions...............................................................26
42. Notices................................................................26
43. Counterparts...........................................................27
44. Costs of Enforcement...................................................27
45. Agreement Regarding Lease..............................................27
46. Cooperation............................................................28
47. Additional Stipulations................................................28
<PAGE>
LEASE AGREEMENT
THIS LEASE, effective as of the 1st day of December, 1998, by and between
THE BOARD OF COUNTY SUPERVISORS OF CHOCTAW COUNTY, MISSISSIPPI, a political
subdivision of the State of Mississippi authorized to acquire, own, lease and
dispose of properties for hospital and other healthcare purposes, having its
principal office and place of business, and its mailing address at Choctaw
County Courthouse, Ackerman, Mississippi 39735 (the "County") and THE BOARD OF
TRUSTEES OF CHOCTAW COUNTY MEDICAL CENTER, a political subdivision of the State
of Mississippi authorized on behalf of the County to administer its properties
for hospital and healthcare purposes, and to acquire, own, lease, and dispose of
same on behalf of the County (hereinafter referred to as the "Hospital
<PAGE>
Trustees") (the County and the Hospital Trustees are hereinafter referred to
collectively as the "Lessor," which term shall refer jointly and severally to
each of them), and CENTENNIAL HEALTHCARE INVESTMENT CORPORATION, a corporation
organized and existing under the laws of the State of Georgia, having its
principal office and place of business and its mailing address at 400 Perimeter
Center Terrace, Suite 650, Atlanta, Georgia 30346 (hereinafter referred to as
the "Lessee").
W I T N E S S E T H:
WHEREAS, Lessor owns that certain rural hospital having a licensed bed
capacity of twenty-two (22) beds for acute-care patients, inclusive of a nine
(9) bed allotment for geriatric psychiatric inpatients (collectively "Licensed
Hospital Bed Capacity") (herein the "Hospital Facility") identified in Item I of
Exhibit A attached hereto and made a part hereof; and
WHEREAS, Lessor also owns that certain skilled nursing facility which is
adjacent to the Hospital Facility and which has a licensed bed capacity of 68
beds for subacute and other nursing care patients (the "Licensed Nursing Home
Bed Capacity;" the Licensed Hospital Bed Capacity and the Licensed Nursing Home
Bed Capacity are herein collectively referred to as the "Licensed Bed Capacity")
(the "Nursing Home") identified in Item II of Exhibit A attached hereto and made
a part hereof (the Hospital Facility and the Nursing Home are herein referred to
collectively as the "Facility"); and
WHEREAS, Lessor also owns or operates three (3) rural health clinics, one
of which is located on-site at the Hospital Facility in Ackerman, Mississippi,
one of which is located in Ware, Mississippi, and one of which is located off-
site in Ackerman, Mississippi (collectively, the "Clinics"), all as identified
in Item III of Exhibit A;
WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease
from Lessor, the real and chattel property of the Facility and the Clinics;
WHEREAS, Lessor also desires that Lessee assume certain obligations and
arrangements made by Lessor to provide Choctaw County Residents with emergency
ambulance services (the "Ambulance Services Contract") as identified more
particularly in Item IV of Exhibit A attached hereto and made a part hereof;
NOW, THEREFORE, in consideration of the premises and of their mutual
undertakings, the parties hereto agree as follows:
1. Lease of Real and Chattel Property, Term. Lessor, in consideration of the
rents hereinafter reserved, and the terms, covenants, conditions and agreements
set forth herein to be kept and performed by Lessee, does hereby agree to demise
and let unto Lessee and Lessee, subject to and in reliance on the conditions,
terms, covenants, warranties and representations of Lessor contained herein,
does hereby agree to hire and take from Lessor, the following described assets,
rights, interests and other properties owned by Lessor and relating to the
Facility (herein the "Demised Premises"):
(a) Land: The parcel or parcels of land more particularly described in Item 2
of Exhibit B attached hereto and made a part hereof (herein the "Owned
Parcels") together with such tracts or parcels of improved or unimproved
land or portions
<PAGE>
thereof leased or rented by Lessor in connection with the ownership
operation, or use of the Facility or the Clinics (the "Leased Parcels"
pursuant to leases described in Exhibit C attached hereto and made a part
hereof (the Owned Parcels and Leased Parcels are collectively referred to
as the "Parcels");
(b) Improvements: All buildings, structures, fixtures and improvements erected
or located on the Parcels, or affixed thereto (herein the "Improvements");
(c) Appurtenances: All tenements, hereditaments, rights, privileges,
interests, easements and appurtenances belonging or in any wise pertaining
to the Parcels and/or the Improvements (the Parcels, the Improvements and
the aforesaid appurtenances thereto being herein referred to collectively
as the "Real Property"); and
(d) Tangible Personal Property: All machinery and equipment, building
materials, appliances, apparatus, motor vehicles, furniture, furnishings,
fixtures, tools, instruments, parts, and other tangible personal property
of every kind or nature whatsoever, owned, being purchased on contract or
being leased by Lessor as of the date hereof, and located at or relating
to the Facility, including inventories (collectively herein the "Personal
Property"); such tangible personal property on the effective date hereof
shall include, but not be limited to, any and all items identified in the
attached Exhibit D which is made a part hereof and incorporated herein by
reference.
TO HAVE AND TO HOLD the Demised Premises unto Lessee, its successors and
permitted assigns, upon and subject to all of the terms, covenants, conditions,
conditional limitations and agreements herein contained, for a term commencing
as of December 1, 1998 (herein the "Commencement Date") and expiring on the last
day of the sixtieth (60th) full calendar month following the Commencement Date,
to wit: November 30, 2003 (herein the "Term"), or until said term is sooner
terminated pursuant to any of the conditional limitations or other provisions
hereof; provided, however, that Lessee shall have the right to extend the Term
of this Lease for three (3) successive extension terms of five (5) years each
(the "Extension Terms") by giving Lessor written notice thereof not less than
ninety (90) days prior to the expiration of the Term (or any prior Extension
Term). Such Extension Terms shall be upon the same rental and other terms and
conditions as are set forth in this Lease as applicable to the Initial Term of
this Lease.
Notwithstanding the designation of December 1, 1998 as the Commencement
Date, the term shall not take effect as of such date unless and until all
conditions to Lessee's obligations as set forth herein and in that certain
"General Agreement" more particularly described in Paragraph 45 of this Lease
between Lessor and Lessee dated, providing contractually for the terms and
conditions upon which Lessor and Lessee have agreed to proceed in connection
with this Lease, have been satisfied or waived by Lessee.
For purposes of this Lease, the term "Lease Year" means a period of one
(1) year commencing on the Commencement Date or the annual anniversary date
<PAGE>
thereof.
2. Title to Demised Premises. The Demised Premises shall be demised and let by
Lessor unto Lessee free and clear of any and all liens, leases, mortgages,
pledges, security interests, conditional sale agreements, charges, claims,
options, and other encumbrances of any kind or nature whatsoever (collectively
"Encumbrances"), except the following (collectively the "Permitted
Encumbrances"):
(a) Zoning Laws: The provisions of all applicable zoning laws;
(b) Taxes: The liens of current real estate and personal property taxes not
delinquent.
Lessor warrants and will forever defend the right and title to the Demised
Premises unto Lessee against the claims of all persons whomsoever, except for
claims arising under and by virtue of the Permitted Encumbrances.
3. Rent. Lessee shall pay to Lessor rent for the Demised Premises (herein
"Rent") an annual amount of TWO HUNDRED FOUR THOUSAND FIVE HUNDRED FORTY AND
NO/100 DOLLARS ($204,540.00), in equal monthly installments of SEVENTEEN
THOUSAND FORTY-FIVE AND NO/100 DOLLARS ($17,045.00) in advance on the first
(1st) day of each calendar month during the term hereof; provided, however, that
if the term hereof commences on a day other than the first day of a calendar
month or is terminated on a day other than the last day of a calendar month,
then the Rent for such partial month shall be prorated on the basis of the
number of days included in the Term of this Lease.
4. Taxes. Lessee shall, at its cost and expense, bear, pay and discharge, on or
before the last day upon which the same may be paid without interest or penalty
for late payment thereof, all taxes, assessments, sewer rents, water rents and
charges, duties, impositions, license and permit fees, charges for public
utilities of any kind, payments and other charges of every kind or nature
whatsoever, ordinary or extraordinary, foreseen or unforeseen, general or
special (collectively herein "Impositions"), which shall, pursuant to present or
future law or otherwise, prior to or during the term hereof, have been or be
levied, charged, assessed or imposed upon, or grow or become due and payable out
of or for, or become or have become a lien on, the Demised Premises or any part
thereof, or the rents and income received by Lessor hereunder or received by
Lessee from any permitted subtenants of the Demised Premises or of any part
thereof, or any use or occupation of the Demised Premises. Lessee shall also
bear, pay and discharge any and all income taxes assessed against Lessee, any
franchise, estate, succession, inheritance or transfer taxes of Lessor, or any
tax or charge in replacement or substitution of the foregoing or of a similar
character.
Lessor shall cause the Demised Premises to be assessed and taxed separate
and apart from all other premises.
Lessee shall pay all interest and penalties imposed upon the late payment
of any Imposition which Lessee is obligated to pay hereunder.
Lessee may take the benefit of the provisions of any law or regulation
permitting any Imposition to be paid in installments.
If Lessee shall fail, for ten (10) days after notice and demand given to
Lessee, to pay any Imposition on or before the last day upon which the same may
<PAGE>
be paid without the imposition of interest or penalties for the late payment
thereof, then Lessor may pay the same with all interest and penalties lawfully
imposed upon the late payment thereof, and the amounts so paid by Lessor shall
thereupon be and become immediately due and payable by Lessee to Lessor
hereunder as additional Rent payable under this Lease.
So long as Lessee is not in default hereunder, Lessee, at its own cost and
expense may, if it shall in good faith so desire, contest the validity or amount
of any Imposition, in which event Lessee may, if permitted by applicable law,
defer the payment thereof for such period as such contest shall be prosecuted
actively and shall be pending undetermined; provided, however, that no provision
hereof shall be construed so as to require Lessee to allow any such item so
contested or intended to be contested to remain unpaid for such length of time
as shall permit the Demised Premises, or the lien thereon created by such item
to be contested, to be sold by federal, state, county or municipal authority for
the nonpayment thereof.
An official certificate or statement issued or given by any sovereign or
municipal authority, or any agency thereof, or any public utility, showing the
existence of any Imposition, or interest or penalties thereon, the payment of
which is the obligation of Lessee as herein provided, shall be prima facie
evidence for all purposes hereof of the existence, amount and validity of such
Imposition.
5. Repair and Replacement. Lessee acknowledges that Lessor has made no
representation whatsoever regarding the physical condition of the Demised
Premises except those contained in this Agreement, and that Lessee freely
accepts the Demised Premises in their present "as is" condition, subject,
however, to any "punchlist" repairs or replacement items identified by Lessee's
inspection of the Demised Premises, any latent or concealed conditions and any
respects in which the Demised Premises fails to comply with all laws, rules,
orders, ordinances, regulations, and requirements, including, without
limitation, applicable health, building, fire and life safety codes and
ordinances, now or hereafter enacted or promulgated by any government or
municipality having jurisdiction over the Demised Premises, or Lessee's
operations of the Facilities as licensed health care facilities (the
"Governmental Requirements"). Lessor shall provide Lessee with reasonable access
to the Demised Premises at all times prior to the Commencement Date to
facilitate Lessee's inspection and shall cooperate with and assist Lessee in the
testing and evaluation of the operating condition of building systems, equipment
and similar items. Lessor shall keep landscaped areas in good condition. Subject
to the terms of this Paragraph 5, Lessee shall at all times during the Term
(including any renewals or extensions thereof), at its own cost and expense,
make such ordinary, non-structural repairs to be Demised Premises as may be
required to keep the Demised Premises (other than the Personal Property) in good
and reasonable operating condition and repair. Notwithstanding the foregoing,
however, Lessee's liability and total aggregate expenditures for "Major Repairs"
to the Demised Premises (inclusion of repairs and replacements of Personal
Property) over the initial Term of the Lease shall not exceed the sum of Two
Hundred Thousand and No/100 Dollars ($200,000.00); provided further that Lessor
shall provide the next $200,000.00 needed for Major Repairs during the initial
Term and thereafter Lessor and Lessee shall share equally in the cost and
expenses of Major Repairs during the initial Term. As used herein the term
"Major Repairs" shall mean and refer to a repair or replacement which is not
covered by insurance and for which the total cost is greater than or equal to
$25,000.00. In the event Lessor fails to provide its share of costs for Major
Repairs during the initial Term, Lessee shall have the right (in addition to any
<PAGE>
other rights and remedies at law or in equity) to fund such Major Repairs and
offset such expenditures against rental amounts becoming due under this Lease,
until Lessee shall have been fully reimbursed for amounts advanced on Lessor's
behalf. Following the initial Term, each Renewal Term shall be subject to the
same threshold limitations and cost-sharing arrangements as are applicable
during the initial Term. Lessor shall make, at its sole cost and expense, all
other or additional repairs or replacements to the Demised Premises as may be
required to place, keep and maintain the Demised Premises (i) in good and
reasonable operating condition and repair and (ii) in compliance with applicable
Government Requirements.
Lessee acknowledges that the items of Personal Property listed on Exhibit
D attached hereto are the property of Lessor and that Lessee has only the right
to the exclusive possession and use thereof as provided herein. Notwithstanding
any contrary provision set forth herein, Lessee shall keep all of the aforesaid
items of Personal Property in as good working order and condition as existed on
the Commencement Date, and at the expiration of the Term of this Lease shall
return and deliver all of such Personal Property to Lessor in as good order and
condition as when received hereunder, reasonable wear and tear and damage by
Acts of God or insurable peril excepted; provided, that Lessee agrees, if
necessary for the proper operation of the Demised Premises, or to comply with or
maintain all pertinent licensure, certification, insurance policy or other legal
requirements and otherwise in accordance with customary practice in the
industry, that Lessee shall replace all items of Personal Property which may be
damaged or destroyed through no fault or neglect of Lessor or which may become
worn out or obsolete during the Term of this Lease with new items of Personal
Property (i.e., the "New Personal Property"), and such New Personal Property and
replacements thereof shall be the property of and owned by Lessor, subject to
the terms and provisions of this Lease. Upon expiration or termination of this
Lease, all Personal Property and New Personal Property shall become the property
of Lessor, if not already owned by Lessor, and Lessee shall execute all
documents and take any actions reasonably necessary to evidence such ownership.
All maintenance and repair work undertaken by Lessee shall be done in a
workmanlike manner, leaving the Demised Premises free of liens for labor and
materials. It is the intent of the parties hereto that the Demised Premises be
maintained at all times and returned upon the termination or expiration of this
Agreement in a condition equal to that at the time of execution of this
Agreement, reasonable wear and tear excepted. Lessee hereby grants to Lessor the
right to inspect and access to the Demised Premises at all reasonable times;
provided, however, that Lessor shall have no duty to conduct any inspections
unless requested to do so by Lessee.
6. Compliance with Laws. Lessor and Lessee mutually covenant and agree, Lessee
as to its manner of use of the Demised Premises and its repair obligations as
set forth in this Lease, and Lessor as to the condition of the Demised Premises,
its repair obligations and all other matters not related to the Lessee's
operation of the Facility, to substantially perform and comply with Governmental
Requirements now or hereafter enacted or promulgated, of every government or
municipality having jurisdiction over the Demised Premises, Lessee's operation
of the Facility as a licensed health care facility, and the franchises and
privileges connected therewith, whether or not such Governmental Requirements so
involved shall necessitate structural changes, improvements, interference with
use and enjoyment of the Demised Premises, replacements or repairs,
extraordinary or ordinary, and Lessor or Lessee, as the particular circumstances
may warrant, shall so perform and comply whether or not such Governmental
Requirements shall now exist or shall hereafter be enacted or promulgated, and
<PAGE>
whether or not such Governmental Requirements are within the present
contemplation of the parties hereto.
Each party shall have the right, provided it does so with due diligence
and dispatch, to contest by appropriate legal proceedings, without cost or
expense to the other party, the validity of any Governmental Requirements of the
nature referred to above. The party contesting such Governmental Requirement may
postpone compliance with such law, rule, order, ordinance, regulation or
requirement until the final determination of such proceedings so long as such
postponement of compliance will not subject the Demised Premises to an
encumbrance or the other party to any criminal prosecution. No provision hereof
shall be construed so as to permit a party to postpone compliance with any
Governmental Requirements if any sovereign, municipal or other governmental
authority shall threaten to carry out or comply with the same or to foreclose or
sell any lien affecting all or any part of the Demised Premises that shall have
arisen by reason of such postponement or failure of compliance. If requested by
the other party, the party contesting such Governmental Requirement shall post a
bond or other adequate security for the costs of compliance and any monetary
fines, penalties, damages or other liabilities which might be imposed, in
Lessor's sole judgment, in connection with such contest.
Notwithstanding any other provision of this Agreement to the contrary,
each party shall inform the other party immediately by telephone, telecopy or
telegraph of any action taken, commenced or instituted by any state or federal
authority having jurisdiction over the Demised Premises as a health care
facility to terminate or revoke any license certification of such party. Such
notice shall be given to Lessor at the address or telephone number set forth in
Paragraph 42 herein.
7. Alterations. Except as may be required of Lessee by Paragraphs 5 and 6 above,
Lessee shall not make any alterations or additions to the Demised Premises
without Lessor's written prior approval, which approval may not be unreasonably
withheld. Lessor shall not withhold written consent to minor alterations or
additions or alterations or additions necessary in the reasonable opinion of
Lessee to comply with applicable Governmental Requirements (including, without
limitation, any conditions to a certification of need or exemption therefrom
applicable to the Facility), to maintain or expand existing services to
patients, to maintain licensure, or to maintain certification under the Medicaid
or Medicare or any other public or private program now or hereafter applicable
to the Demised Premises. Nothing herein shall be deemed to obligate Lessee to
make alterations or additions constituting repairs or replacements required to
be made by Lessor pursuant to Paragraphs 5 and 6, provided, however, that if
Lessor fails to perform its repairs and replacement obligation, Lessee shall
have the right to do so at Lessor's expense and to offset the reasonable cost
thereof against Rental or other sums due under this Lease.
8. Use of Demised Premises. Lessee may use the Demised Premises for healthcare
and related purposes. Lessee shall not commit, or allow to be committed, any
waste upon the Demised Premises, or any public or private nuisance. Lessee shall
not use or keep or allow the Demised Premises or any portion thereof to be used
or occupied for any unlawful purpose and shall not suffer any act to be done or
any condition to exist within the Demised Premises or any portion thereof, or
knowingly permit any article to be brought therein, which may be dangerous,
unless safeguarded as required by law, or which may make void or voidable any
insurance in force with respect thereto.
9. Protection Against Claims by Public. During such period or periods of the
<PAGE>
term hereof as any portion of the Parcels shall be unenclosed by any walled
structure, fence or gate, such portion shall be subject to such reasonable
directions as Lessor may from time to time make or give to Lessee with respect
to the maintenance and use thereof, for the purpose of Lessor's protection
against possible claims of the public, as such. Lessee hereby acknowledges that
Lessor does not hereby consent, expressly or by implication, to the unrestricted
use or possession of the whole or any portion of the Demised Premises by the
public, as such, and Lessee covenants and agrees that all such reasonable
directions so given shall be deemed to be and become incorporated herein by
reference and shall be fully and promptly performed and enforced by Lessee at
its cost and expense. Lessor hereby warrants and represents to Lessee that the
Demised Premises complies with all zoning and land use requirements, including,
without limitation, parking, drainage, and utility requirements.
10. Independence of Demised Premises. Lessee shall not by act or omission permit
any building or other improvement on premises not demised hereunder to rely on
the Real Property or any part thereof or any interest therein to fulfill any
municipal or governmental requirement, including without limitation,
requirements for offsite parking, drainage and utilities, and Lessee shall not
take any action which shall cause an Improvement to rely on any premises not
demised hereunder or any interest therein to fulfill any governmental or
municipal requirement. Lessee shall not by act or omission impair the integrity
of the Demised Premises as units separate and apart from all other premises. Any
act or omission by Lessee which would result in a violation of any of the
provisions of this Paragraph shall be void.
11. Mechanics' Liens. Notice is hereby given that Lessor shall not be liable for
any work performed or to be performed on the Demised Premises for Lessee or any
subtenant, or for any materials furnished or to be furnished at the Demised
Premises for Lessee or any subtenant, and that no mechanic's or other lien for
such work or materials shall attach to the reversionary or other interest of
Lessor. If, in connection with any work being performed by Lessee or any
subtenant, or in connection with any materials being furnished to Lessee or any
subtenant, any mechanics or other lien or charge shall be filed or made against
the Demised Premises or any part thereof, or if any such lien or charge shall be
filed or made against Lessor as owner, then Lessee, at its cost and expense,
within thirty (30) days after such lien or charge shall have been filed or made,
shall cause the same to be canceled and discharged of record by payment thereof
or filing a bond or otherwise, and shall also defend any action, suit or
proceeding which may be brought for the enforcement of such lien or charge, and
shall pay any damages, costs and expenses, including reasonable attorneys' fees,
suffered or incurred thereby by Lessor, and shall satisfy and discharge any
judgment entered therein within thirty (30) days from the entering of such
judgment by payment thereof, or by filing of a bond, or by furnishing to Lessor
an unconditional letter of credit issued by a bank and in an amount reasonably
acceptable to Lessor, or otherwise. In the event of the failure of Lessee to
discharge within such thirty (30) day period any lien, charge or judgment herein
required to be paid or discharged by Lessee, Lessor may pay such item or
discharge such liability by payment or bond or both, and Lessee shall repay to
Lessor, upon demand, any and all amounts paid by Lessor therefor, or by reason
of any liability on any such bond, and also any and all incidental expenses,
including reasonable attorneys' fees, incurred by Lessor in connection
therewith.
12. Liability Insurance. At all times during the term hereof, Lessee shall, at
its own cost and expense, provide and keep in force policies as follows:
<PAGE>
(a) Comprehensive general public liability insurance including, without
limitation upon the generality of the provisions of this Paragraph,
elevator and boiler risks, protecting Lessor and Lessee against accident
or disaster in or about the Demised Premises with limits not less than
Three Million Dollars ($3,000,000.00) combined single limit for bodily
injury (including death) and One Million Dollars ($1,000,000.00) for
property damage;
(b) Comprehensive automobile liability insurance, with limits not less than
One Million Dollars ($1,000,000.00);
(c) Professional liability insurance, with limits not less than Three Million
Dollars ($3,000,000.00); and
(d) Workers' compensation insurance, with limits not less than those required
by law.
Certificates evidencing all such policies of insurance shall be delivered to
Lessor. Such policies of insurance, as well as any policies of insurance to be
obtained by Lessee pursuant to Paragraphs 13 and 14 hereof, shall be issued by
companies having a Best's rating of "A-1" or better. Such insurance coverage, as
well as any insurance to be obtained by Lessee pursuant to Paragraphs 13 and 14
hereof, may be effected pursuant to a combination of primary and excess coverage
insurance policies. Such insurance coverages may also be effected pursuant to
blanket coverage insurance policies which cover losses in addition to those
required to be insured against hereunder.
If at any time Lessee shall neglect or fail, for fifteen (15) days after
notice and demand given to Lessee, so to provide and keep in force insurance
policies as aforesaid, or indemnity insurance policies pursuant to Paragraph 13
hereof or fire or other casualty insurance policies pursuant to Paragraph 14
hereof, or so to deliver to Lessor certificates evidencing any of such policies
of insurance, as required by the provisions hereof, Lessor may effect such
insurance as the agent of Lessee, by taking out a policy or policies in a
company or companies satisfactory to Lessor, running for a period not exceeding
one (1) year under any one (1) policy; and the amount of premium paid for such
insurance by Lessor shall be paid by Lessee to Lessor upon demand; and Lessor
shall not be limited in the proof of any damages which Lessor may claim against
Lessee arising out of or by reason of Lessee's failure to provide and keep in
force general liability insurance policies as aforesaid to the amount of the
insurance premium not paid or incurred by Lessee which would have been payable
upon such insurance, but shall also be entitled to recover as damages for such
breach the uninsured amount of any loss, liability, damage, claim, costs and
expenses of suit, judgment and interest suffered or incurred by Lessor.
Lessee agrees that any insurance coverage required of it pursuant to this
Lease shall also be subject to the following terms and conditions:
(a) Insurance coverage shall be occurrence based. The Lessor, at its sole
discretion, may approve liability policies issued on a "claims made"
basis provided that, in Lessor's sole opinion, there is sufficient
"tail" coverage;
(b) The Lessee shall furnish to Lessor copies of all policies of
insurance required by this Lease which shall be delivered to the
Lessor no later than each such policy's renewal date;
<PAGE>
(c) The Lessor, or its successors and assigns, as their interest may
appear shall be listed as an additional insured on the liability and
indemnity policies required by Paragraph 12 and 13 of this Lease.
13. Indemnity. Lessor and Lessee mutually agree to the following indemnification
provisions. Lessor or Lessee, as the case may be (herein the "Indemnitor"),
hereby agrees to indemnify and save harmless the other party (herein the
"Indemnitee") from and against any and all liability, claims, loss, damages,
expenses, costs of action, suits, interest, fines, penalties, claims and
judgments (to the extent that the same are not paid out of the proceeds of any
policy of insurance furnished by the Indemnitor to the Indemnitee pursuant to
this Lease) arising out of Indemnitor's failure to perform, fully and promptly,
or Indemnitor's postponement of compliance with, each and every term, covenant,
condition and agreement herein provided to be performed by Indemnitor, or
arising out of Indemnitor's negligence or willful misconduct, excepting
liability of Indemnitee for Indemnitee's negligence and willful misconduct.
Except as hereinbefore provided, Indemnitor, at its own cost and expense, will
defend by counsel reasonably acceptable to Indemnitee, any and all suits that
may be brought, and claims which may be made, against Indemnitee, or in which
Indemnitee may be impleaded with others, whether Indemnitee shall be liable or
not, in respect of any such injury or claim of injury during the Term hereof
growing out of the occupation, possession, use, management, alteration, repair,
maintenance or control of the Demised Premises, and Indemnitor shall satisfy,
pay and discharge any and all judgments that may be recovered against Indemnitee
in any such action in which Indemnitee may be a party defendant, or that may be
filed against the Demised Premises or any interest therein, and in the event of
the failure of Indemnitor, for ten (10) days after notice and demand given to
Indemnitor, to pay any such sum for which Indemnitor shall become liable as
aforesaid, then Indemnitee may pay such sum, with all interest and charges which
may have accrued thereon, and the amount so paid by Indemnitee shall be payable
by Indemnitor to Indemnitee upon demand.
At all times during the term hereof, Indemnitor shall, at its own cost and
expense, provide and keep in force a policy or policies of insurance (which may
be effected by blanket coverage insurance as provided in Paragraph 12 hereof)
insuring Indemnitor against all liability of Indemnitor under this Paragraph 13.
Certificates evidencing all such policies of insurance shall be delivered to
Indemnitee. If at any time or times Indemnitor shall neglect or fail, for five
(5) days after notice and demand given to Indemnitor, so to provide and keep in
force insurance policies as aforesaid, or so to deliver to Indemnitee
certificates evidencing any of such policies of insurance, as required by the
provisions hereof, Indemnitee shall have all rights set forth in Paragraph 12
hereof.
14. Hazard Insurance. At all times during the term hereof, Lessee shall, at its
own cost and expense, keep:
(a) The Demised Premises (including, without limitation, the Personal
Property) insured against loss or damage by fire, lightning, windstorm,
hail, explosion, riot, damage from aircraft, smoke damage, sprinkler
leakage damage, war damage (when available) and such other insurance
risks, casualties and hazards as are insured against by owners of
comparable premises in an amount equal to one hundred percent (100%) of
the replacement cost thereof or $2,500,000.00, whichever is less, said
replacement cost to be determined, on Lessee's
<PAGE>
request not more frequently than at annual intervals, by one or more of
the insurers, or by an architect, contractor, appraiser or appraisal
company selected by Lessee. Any of the Demised Premises located in special
flood hazard areas shall be insured against loss or damage by flood, in an
amount equal to the maximum amount of insurance obtainable under the
federal flood insurance program; and
(b) The net rental value of the Demised Premises insured against loss or
damage by fire, lightning, windstorm, hail, explosion, riot, damage from
aircraft, smoke damage, war damage (when available) and such other
insurance risks, casualties and hazards as are insured against by owners
of comparable premises, in an amount equal to the sum of the following
amounts: (i) all Rent payable by Lessee under Paragraph 3 hereof for the
ensuing six (6) month period, plus (ii) all Impositions payable by Lessee
under Paragraph 4 hereof for the ensuing six (6) month period (if the
amount of any such Imposition shall not have been fixed, then the same may
be estimated based upon the tax rate for the preceding period and/or upon
such other factors as are relevant, plus (iii) the cost of obtaining, for
a one (1) year period, all insurance then required to be maintained by
Lessor hereunder.
All insurance to be furnished by Lessee under this Paragraph 14 shall be
by policies which shall name as insureds Lessee, Lessor and any fee or leasehold
mortgagee, as their interests may appear, shall provide a minimum cancellation
provision of sixty (60) days after notice to all parties, shall not contain a
deductible in excess of $________, and shall provide that the loss, if any,
shall be payable to Lessor and Lessee, as their interests may appear, subject to
the rights of any Fee Mortgage. Such policies may be blanket coverage insurance
policies as provided in Paragraph 12 hereof. Certificates evidencing all such
policies of insurance shall be delivered to Lessee.
If at any time Lessee shall, for fifteen (15) days after notice and demand
given by Lessor, neglect to insure the Demised Premises and rental value as
aforesaid, or to deliver such certificates of insurance as aforesaid, Lessor
shall have all of the rights conferred upon Lessor set forth in Paragraph 12
hereof, relating to Lessor's right to obtain liability insurance upon a failure
by Lessee to maintain such coverage.
Lessee shall comply with the terms of each insurance policy required by
the terms hereof to be furnished by Lessee.
Lessor and Lessee expressly waive any and all rights and claims as against
each other for losses and damages to the extent that such losses and damages are
covered by insurance, provided that such waiver is not prohibited by the terms
of the applicable insurance policies.
15. Fire and Other Casualty. If any Improvement or any Personal Property shall
be damaged or destroyed by fire or other casualty, then, irrespective of the
cause and whether or not such damage or destruction shall have been insured,
Lessee shall give prompt written notice thereof to Lessor, and Lessor shall
proceed with reasonable diligence to carry out any necessary demolition and to
restore, repair, replace and rebuild such Improvements or Personal Property at
Lessor's own cost and expense; provided, however, that insurance proceeds shall
<PAGE>
be made available for such restoration and rebuilding. If, as a result of the
actions of any Fee Mortgagee or otherwise, insurance proceeds are not made
available to the Lessor, and if the Lessor is unable after reasonable diligent
efforts to secure and provide replacement funds, the Lessee shall have the right
to terminate this Lease without further liability on the part of Lessee or
Lessor unless the unavailability of such insurance proceeds is the result of
Lessor's acts or omissions. If at any time Lessor shall fail or neglect to
supply sufficient workmen or sufficient materials of proper quality, or fail in
any other respect to prosecute such work of demolition, restoration, repair,
replacement or rebuilding with diligence and promptness, then Lessee may give
Lessor notice of such failure or neglect, and, if such failure or neglect
continues for twenty (20) days after such notice, then Lessee, in addition to
all other rights which Lessee may have, including, without limitation, the right
to cancel and terminate this Lease, may enter upon the Demised Premises, provide
labor and/or materials, cause the performance of any contract, and/or do such
other acts and things as Lessee may deem advisable to prosecute such work. All
costs and expenses incurred by Lessee in carrying out such work shall be borne
by Lessor and shall be payable by Lessor to Lessee upon demand, which demand may
be made by Lessee from time to time as such costs and expenses are incurred, in
addition to any and all damages to which Lessee shall be entitled hereunder.
Rent shall abate hereunder as of the date of damage or destruction in
proportion to the percentage of the Demised Premises thereby rendered unusable
(in Lessee's sole opinion). Lessor shall in such event look solely to proceeds
of its insurance (including its loss of rents coverage). Any proceeds of loss of
rents insurance received by Lessor by reason of such damage or destruction shall
be applied by Lessor to the payment of Rent which would otherwise be due from
Lessee under Paragraph 3 hereof, Impositions payable by Lessee under Paragraph 4
hereof and premiums for any insurance required to be maintained by Lessee
hereunder. In the event rent insurance proceeds received by Lessor are
insufficient to pay the same or for any reason such rent insurance proceeds are
not actually applied by Lessor to the payment of such amounts, Lessor shall
nevertheless have no claim against Lessee for Rental abated hereunder.
16. Condemnation.
(a) Entire Condemnation. If at any time during the Term (including renewals or
extensions of this Lease) all or substantially all of the Demised Premises
shall be taken in the exercise of the power of eminent domain by any
sovereign, municipality or other public or private authority, then this
Lease shall terminate on the date of taking of possession by such
authority. Substantially all of the Demised Premises shall be deemed to
have been taken if the remaining Improvements cannot feasibly be repaired
and restored so that they shall constitute a complete structural unit or
units which can be operated as a health care facility on an economically
feasible basis under the provisions hereof. The award or awards for any
such taking of all or substantially all of the Parcel and the Improvements
shall be paid to the Lessor and Lessee, as their interests may appear.
(b) Partial Condemnation. If less than all or substantially all of the Demised
Premises shall be taken in the exercise of
<PAGE>
the power of eminent domain by any sovereign, municipality or other public
or private authority, then this Lease shall continue in force and effect
and Lessor shall proceed with reasonable diligence to carry out any
necessary repair and restoration so that the remaining Improvements shall
constitute a complete structural unit or units which can be operated as a
health care facility on an economically feasible basis under the
provisions hereof. If Lessor shall fail or neglect to supply sufficient
workmen or sufficient materials of proper quality, or shall fail in any
other respect to prosecute such work of repair or restoration with
diligence and promptness, then Lessee may give Lessor written notice of
such failure or neglect, and, if such failure or neglect continues for
twenty (20) days after such notice, then Lessee, in addition to all rights
which Lessee may have, including, without limitation, the right to cancel
and terminate this Lease, may enter upon the Demised Premises, provide
labor and/or materials, cause the performance of any contract, and/or do
such other acts and things as Lessee may deem advisable to prosecute such
work. All costs and expenses incurred by Lessee in carrying out such work
shall be borne by Lessor and shall be payable by Lessor to Lessee upon
demand, which demand may be made by Lessee from time to time as such costs
and expenses are incurred, in addition to any and all damages to which
Lessee may be entitled hereunder.
The award(s) for any such partial taking shall be paid to Lessor or
Lessee, as their interests may appear; provided, however, that Lessor
shall be excused from obligation to repair and restore the Improvements if
Lessee shall fail to make any such award available to Lessor to pay the
cost of the repair and restoration work required of Lessor hereunder.
The Rent shall, as of the date of taking of possession by such
authority, be decreased by an amount equal to that proportion of such Rent
which the value of that portion so taken has to the value of the Demised
Premises immediately prior to such taking.
In the event that, by reason of subordination of this Lease to any
Fee Mortgage, any such award for any such taking is not paid or made
available for restoration of the Improvements as hereinbefore provided,
then Lessee, at Lessee's option, may elect to terminate this Lease by
giving ten (10) days notice in writing to Lessor, electing to terminate
this Lease, and the Term hereof shall expire by limitation at the
expiration of said ten (10) days notice as fully and completely as if said
date were the date herein originally fixed for the expiration of the term
hereof.
(c) Temporary Taking. If the temporary use of the whole or any part of the
Demised Premises shall be taken at any time during the Term hereof in the
exercise of the power of eminent domain by any sovereign, municipality or
other authority, the Term hereof shall not be reduced or affected in any
way and Lessee shall continue to pay in full the Rent and other sums of
money and charges herein reserved and provided to be paid by Lessee, and
the award for such taking
<PAGE>
shall be divided and paid out in the following order of priority: First,
there shall be paid to Lessee that portion of said award paid for use and
occupancy of the Demised Premises during the Term hereof, and second, the
remainder, if any, of said award shall be paid to Lessor.
(d) Interest. Interest upon any award paid for a taking of the type referred
to in Sections (a), (b) or (c) of this Paragraph 16 shall be divided and
paid out to those persons entitled to the award upon which such interest
shall have been paid, in proportion to the respective amounts received by
such persons.
(e) Personal Property and Moving Expenses. Any award or part of an award paid
as compensation for the taking of personal property owned by Lessee or a
subtenant or for moving expenses of Lessee or a subtenant, shall be
payable to Lessee or such subtenant, as the case may be.
17. Restoration after Fire or Condemnation. Whenever Lessee shall be required or
shall elect to carry out any work of demolition, restoration, repair,
replacement or rebuilding pursuant to Paragraph 15 hereof or Section (b) of
Paragraph 16 hereof, Lessee, prior to the commencement of such work (unless such
work is of a minor nature, as that term is hereinafter defined) shall:
(a) Furnish Lessor complete plans and specifications for such work bearing the
signed approval thereof by a licensed architect.
(b) Furnish Lessor certified or photostatic copies of all permits and
approvals required by law in connection with the commencement and conduct
of such work.
Lessee shall not commence any of said demolition, restoration, repair,
replacement or rebuilding work until Lessee shall have complied with the above
requirements, and thereafter Lessee shall carry out such work diligently and in
good faith in accordance with the plans and specifications referred to above.
If the above-mentioned work shall be of a minor nature, as that term is
hereinafter defined, then the requirements set forth above in this Paragraph 17
shall not be applicable, except that Lessee shall obtain and furnish to Lessor
all permits and approvals required by law in connection with the commencement
and carrying out of such work. Such work shall be deemed to be of a minor nature
only if in one continuous project the aggregate cost of such work is less than
Fifty Thousand Dollars ($50,000.00).
18. Environmental Matters.
(a) Lessor hereby warrants and represents to Lessee that: the Demised Premises
are in compliance with all Federal, state and local laws and ordinances
relating to clean air, water, waste disposal, toxic substances and other
environmental regulations. The Demised Premises are in compliance with all
laws and ordinances relating to occupational health and safety. During the
period of Lessor's ownership of the Demised Premises, Lessor has not
caused or permitted the Demised Premises to be used, to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer,
produce or process "Hazardous Material" (as hereinafter defined), or other
dangerous or toxic substances, or solid
<PAGE>
waste, except in compliance with all applicable federal, state, and local
laws or regulations. During the period of Lessors' ownership of the
Demised Premises, there has been no release of "Hazardous Material" (as
hereafter defined) on or off-site of the Demised Premises, nor have any
"Hazardous Materials Claims" (as hereinafter defined) been made against
Lessor to Lessor's knowledge in respect of the Demised Premises. There has
not been incorporated into the Demised Premises and the Demised Premises
do not contain, any asbestos products, urea-formaldehyde, and other known
building products which may be harmful or injurious to human health or
constitute Hazardous Materials. No underground storage tank ("UST's")
exist on the Demised Premises and if any UST's formerly existed on the
Demised Premises, such UST's have been removed and any contamination of
soils or ground water has been fully remediated in accordance with
applicable Governmental Requirements. All closure requirements for such
UST's have been fulfilled.
"Hazardous Material(s)" shall be defined as flammable, explosives,
radioactive materials, or hazardous, toxic or dangerous waste, substances
of related material including, but not limited to, substances defined as
such in (or for purposes of) the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended 42 U.S.C Sections 9601, et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; those substances defined as hazardous or toxic under any
other federal, state or local statute, relating to, or imposing liability
or standards of conduct concerning, any hazardous, toxic and dangerous
waste, substance or material, as now or at any time hereafter in effect.
(b) Lessee hereby indemnifies and agrees to defend, protect and hold the
Lessor, any successor or successors to Lessor's interest in and to the
Demised Premises, and any mortgagee on the Lessor's interest in and to the
Demised Premises harmless from and against any and all losses,
liabilities, fines, charges, damages, injuries, penalties, response cost,
expenses and claims of any and every kind whatsoever paid, incurred or
suffered by, or asserted against, the Lessor including, without
limitation, (i) all consequential damages; (ii) the costs of any required
or necessary repair, cleanup or detoxification of the Demised Premises,
and the preparation and implementation of any closure, remedial or other
required plans; and (iii) all reasonable costs and expenses incurred by
Lessor in connection with clauses (i) and (ii), including, but not limited
to, reasonable attorneys' fees for, with respect to, or as a direct or
indirect result of the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, or actual threatened release of
any Hazardous Material (as herein defined) from the Demised Premises by
the Lessee (including, without limitation, any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under any
federal or state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standard
of conduct concerning any Hazardous Material), to the extent caused by, or
within
<PAGE>
the control of, Lessee, or any employees, agents, contractors or
subcontractors of Lessee, or any third persons, occupying or present on
the Demised Premises, during the period of ownership, operation or control
of the Demised Premises by Lessee, unless such activities were or will be
undertaken in accordance with applicable laws, regulations, codes or
means. The warranties, representations and indemnities made by Lessee in
this section are expressly agreed by Lessor and Lessee to survive the
termination of this Lease Agreement.
Notwithstanding anything to the contrary herein, Lessee shall have no
liability or responsibility to remediate, except as may be expressly
provided herein, with respect to any Hazardous Material which Lessor fails
to prove has its origin on the Demised Premises after the Commencement
Date of this Lease and during Lessee's possession and control of the
Demised Premises (whether directly or through a subtenant's occupancy
thereof).
(c) Lessee shall keep and maintain the Demised Premises in compliance with,
and shall not cause or permit the Demised Premises to be in violation of,
any federal, state or local laws, ordinances, statutes or regulations
relating to industrial hygiene or to the environmental conditions on,
under or about the Demised Premises including, but not limited to, soil
and groundwater conditions. Lessee shall not use, generate, manufacture,
store or dispose of on, under or about the Demised Premises or transport
to or from the Demised Premises any Hazardous Material, except in
compliance with applicable "Hazardous Materials Laws" (as defined below).
Lessee hereby agrees at all times to comply fully and in a timely manner
with, and to cause all of its employees, agents, suppliers, contractors
and subcontractors and any other persons occupying or present on the
Demised Premises to so comply with, all applicable federal, state and
local laws, regulations, guidelines, codes, statutes, and ordinances
applicable to the use, generation, handling, storage, treatments,
transport and disposal of any Hazardous Material now or hereafter located
or present on or under the Demised Premises.
(d) Lessee shall immediately advise Lessor in writing of (i) any and all
enforcement, cleanup, removal or other governmental or regulatory actions
instituted, completed or threatened pursuant to any applicable federal
state or local laws, ordinances, or regulations relating to any Hazardous
Material affecting the Demised Premises ("Hazardous Material Laws"); (ii)
all claims made or threatened by any third party against Lessee relating
to damage, contribution, cost recovery compensation, loss or injury
resulting from any Hazardous Material affecting the Demised Premises (the
matters set forth in clauses (i) and (ii) above are hereinafter referred
to as "Hazardous Materials Claims"); and (iii) Lessee's discovery of any
occurrence or condition on the Demised Premises or any real property
adjoining or in the vicinity of the Demised Premises or to be otherwise
subject to any restrictions on the ownership, occupancy,
<PAGE>
transferability or use of the property under any Hazardous Materials Laws.
Lessor shall have the right, but not the obligation, to join and
participate in, as a party if it so elects, any legal proceedings or
actions initiated in connection with any Hazardous Materials Claims.
(e) Without Lessor's prior written consent, Lessee shall not take any remedial
action in response to the presence of any Hazardous Materials on, under,
or about the Demised Premises, nor enter into any settlement agreement,
consent decree, or other compromise in respect to any Hazardous Materials
Claims, which remedial action, settlement, consent or compromise might, in
Lessor's reasonable judgment, impair the value of Lessor's security
hereunder or of Lessor's interest in the reversion; provided, however,
that Lessor's prior consent shall not be necessary in the event that the
presence of any Hazardous Material on, under, or about the Demised
Premises either poses an immediate threat to the health, safety or welfare
of any individual or is of such a nature that an immediate remedial
response is necessary and it is not reasonably possible to obtain Lessor's
consent before taking such action, provided that in such event Lessee
shall notify Lessor as soon as practicable thereafter of any action so
taken. Lessor agrees not to withhold its consent, where such consent is
required hereunder, if either (i) a particular remedial action is ordered
by a court of competent jurisdiction, or (ii) Lessee establishes to the
reasonable satisfaction of Lessor that there is no reasonable alternative
to such remedial action which would result in less impairment of Lessor's
security hereunder or of Lessor's interest in the reversion.
19. Assignment and Subletting. Lessee may not assign this Lease or any interest
herein, or make any sublease of all or any part of the Demised Premises, without
Lessor's prior written consent, which consent may not be unreasonably withheld,
and any such attempted assignment or subletting without such prior written
consent shall be void; provided, however, that such prior written consent shall
not be required for (i) any assignment or sublease by Lessee to an affiliate of
Lessee, (ii) any residency agreement or admission agreement with respect to the
Facility made by Lessee in the ordinary course of its business, and/or (iii) any
sublease of space in the Facility for any accessory use made by Lessee in the
ordinary course of business. No consent by Lessor to any assignment or
subletting shall be deemed or construed to relieve Lessee from obtaining the
express written consent of Lessor to any further assignment or subletting.
For purposes hereof, the term "affiliate of Lessee" means a person
controlling, controlled by or under common control with Lessee, and shall be
deemed and construed to include, but not be limited to, a corporation, limited
liability company, or general, limited or limited liability partnership, of
which Lessee or an affiliate of Lessee is, respectively, a majority or
controlling shareholder, a managing or majority member, or a general or managing
partner, regardless of the percentage of Lessee or its affiliate's beneficial
interest in such person. In addition, an assignment or sublease pursuant to a
merger or consolidation of Lessee or pursuant to a sale of all or a substantial
portion of Lessee's assets shall be deemed an assignment (or, if applicable,
subletting) to an affiliate of Lessee and shall not require Lessor's prior
written consent.
<PAGE>
No acceptance by Lessor of any performance or rent herein provided to be
done or paid by Lessee from any person other than Lessee shall discharge Lessee
or any other person liable for performance of Lessee's obligations hereunder
(except to the extent of the performance and payments so accepted by Lessor)
from liability to pay all of the rent herein provided to be paid by Lessee or
from liability to perform any of the terms, covenants, conditions and agreements
set forth herein.
All references herein to a sublease shall be deemed to include all
arrangements for occupancy or other use by any person of all or any part of the
Demised Premises, and all references herein to a subtenant shall include any
occupant or other user of all or any part of the Demised Premises.
In the event of a termination hereof, each subtenant of space within the
Demised Premises shall attorn to the Lessor unless the Lessor shall, at the
Lessor's option, elect to dispossess such subtenant or otherwise terminate the
sublease held by such subtenant. Each subtenant who hereafter subleases space
within the Demised Premises shall be deemed to have agreed to the provisions of
this Paragraph.
Lessee hereby assigns to Lessor the right, following any default by Lessee
hereunder which is not cured by Lessee within any applicable cure period, to
collect from any and all subtenants all rents and other sums payable by them,
and to apply the same to the payment of Rent and all other amounts payable by
Lessee hereunder, and any balance shall be paid over to Lessee; but no exercise
by Lessor of rights under this Paragraph shall be deemed a waiver by Lessor of
any other rights hereunder or be deemed an acceptance by Lessor of such
subtenant or an acquiescence by Lessor to the occupancy of any part of the
Demised Premises by such subtenant or a release of Lessee from the performance
of any of the obligations of Lessee hereunder.
20. Bankruptcy. If at any time during the term hereof there shall be filed by or
against Lessee in any court or other tribunal pursuant to any statute or other
rule of law, either of the United States or of any state or of any other
authority now or hereafter exercising jurisdiction, a petition in bankruptcy or
insolvency proceedings or for reorganization or for the appointment of a
receiver or trustee of all or substantially all of Lessee's property or if
Lessee makes a general assignment for the benefit of creditors then, subject to
the provisions of this Paragraph 20, this Lease may, at the option of Lessor to
be exercised by thirty (30) days written notice to Lessee, be canceled and
terminated, and in that event neither Lessee nor any person claiming through or
under Lessee by virtue of any statute or other rule or of an order of any court
or other tribunal shall be entitled to possession or to remain in possession of
the Demised Premises or any part thereof but shall forthwith quit and surrender
the Demised Premises; provided however, that if any such petition shall be filed
against Lessee and if in good faith Lessee shall promptly thereafter commence
and diligently prosecute any and all proceedings appropriate to secure the
dismissal of such petition, Lessor's right to cancel and terminate this Lease by
reason of the filing of such petition shall be suspended during such period as
said proceedings for the dismissal of such petition shall continue. Any
provision of this Paragraph 20 providing for the suspension of Lessor's right to
cancel and terminate this Lease is intended only to suspend Lessor's right to
cancel and terminate pursuant to this Paragraph 20, and shall not be deemed to
suspend or otherwise restrict Lessor's right to cancel and terminate this Lease,
in the event of a default by Lessee under any other paragraph hereof pursuant to
Paragraph 22 hereof or otherwise.
<PAGE>
In the event of the termination hereof pursuant to Paragraph 22, Lessor
shall forthwith at Lessor's option, notwithstanding any other provision hereof
to the contrary, be entitled to recover from Lessee, in addition to any other
proper claims for rent and other sums of money payable hereunder, as and for
liquidated damages, a sum equal to the amount by which the Rent reserved under
Paragraphs 3 and 4 hereof for the unexpired portion of the term hereof exceeds
the net rental value of the Demised Premises at the time of such termination for
the said unexpired portion of the term hereof, both discounted at the rate of
eight percent (8%) per annum to their present worth. Nothing herein contained
shall limit or prejudice the right of Lessor to prove or obtain as liquidated
damages by reason of a termination hereof pursuant to Paragraph 22 an amount
equal to the maximum allowed by any statute or other rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater than, equal to or less than the
amount of the damages referred to above.
21. Access to Project; Books, Records, Accounts and Annual Reports. Lessee shall
keep and maintain or shall cause to be kept and maintained, at Lessee's cost and
expense and in accordance with sound accounting practice, proper and accurate
books, records and accounts reflecting all items of income and expense in
connection with the operation of the Facility or in connection with any
services, equipment or furnishings provided in connection with the operation
thereof. Lessor shall have the right, from time to time, to examine by Lessor's
agents, accountants and attorneys employed at Lessor's expense, such books,
records and accounts at the office either of Lessee or such other person or
entity maintaining said books, records and accounts and to make copies or
extracts thereof as Lessor shall desire and to discuss Lessee's affairs,
finances and accounts with Lessee and with the officers and principals of Lessee
at such reasonable times as may be requested by Lessor. Lessee will furnish to
Lessor on or before April 30th of each year, for the preceding calendar year, a
balance sheet, profit and loss statement, and all supporting schedules covering
operation of the Facility and the Lessee, all in reasonable detail, prepared in
accordance with sound accounting practices and certified by the principal
financial or accounting officer of Lessee; and Lessee will furnish to Lessor, at
any time within thirty (30) days after demand by Lessor, statements certified by
Lessee's principal financial or accounting officer covering such additional
financial matters respecting the Facility and the Lessee as Lessor may
reasonably request including, without limitation, quarterly operating statements
with respect to the Facilities and the Lessee.
22. Default; Termination. If at any time during the term hereof (i) Lessee shall
default in the payment of any Rent or of any other sum of money whatsoever which
Lessee shall be obligated to pay under the provisions hereof for ten (10) days
after written notice and demand, or (ii) Lessee shall default in the performance
or observance of any of the other terms, covenants, conditions or agreements
hereof for thirty (30) days after written notice and demand for cure, or if such
default shall be of such a nature that the same cannot practicably be cured
within said thirty (30) day period, Lessee shall not within said thirty (30) day
period commence with due diligence and dispatch to cure and perform such
defaulted term, covenant, condition or agreement, or Lessee shall within said
thirty (30) day period commence with due diligence and dispatch to cure and
perform such defaulted term, covenant, condition or agreement but shall
thereafter fail or neglect to prosecute and complete with due diligence and
dispatch the curing and performance of such defaulted term, covenant, condition
or agreement, or (iii) the taking, commencement or institution of any action or
proceeding, including fast track proceedings, by any state or federal authority
<PAGE>
having jurisdiction over the Demised Premises as a health care facility to
terminate or revoke any license certification of Lessee of which Lessor is not
immediately notified or which is not resolved within fifteen (15) days for fast
track proceedings or thirty (30) days for any other action or proceeding, or
(iv) the receipt by Lessee of a Level A or higher deficiency on any licensure
inspection or survey of the Demised Premises which (unless contested in good
faith) is not resolved by corrective action plan or otherwise within a period of
twenty (20) days (or such longer period as may be permitted by the applicable
regulatory agency); THEN AND IN ANY SUCH CASE, if such default shall be
continuing, Lessor, at Lessor's option, may elect to terminate this Lease at any
time by giving ten (10) days notice in writing to Lessee, electing to terminate
this Lease, and the term hereof shall expire by limitation at the expiration of
said ten (10) days notice as fully and completely as if said date were the date
herein originally fixed for the expiration of the term hereof, and Lessee shall
thereupon quit and peacefully surrender the Demised Premises to Lessor, without
any payment therefor by Lessor, and Lessor, upon the expiration of said ten (10)
days notice, or at any time thereafter may re-enter and remove all persons and
property therefrom, either by summary proceedings or by any suitable action or
proceeding at law, or by force or otherwise, without being liable to indictment,
prosecution or damages therefor, and may have, hold and enjoy the Demised
Premises.
If Lessor shall obtain possession of the Demised Premises by reason of or
following any default of Lessee, then Lessee shall pay to Lessor on demand all
reasonable expenses incurred by Lessor in obtaining possession and in altering,
repairing and putting the Demised Premises in good order and condition, and in
reletting the same, including reasonable fees of architects, attorneys and
agents, and any other reasonable expenses and commissions and Lessee further
agrees to pay to Lessor upon the rent days specified herein in each month
following any termination hereof by reason of a default of Lessee hereunder,
until the end of the period which would have constituted the Term hereof
(whether or not Lessor shall have terminated this Lease), the Rent and all other
sums of money whatsoever which would have been payable by Lessee during such
period, deducting only the net amount of rent, if any, which Lessor shall
actually receive (after deducting therefrom all reasonable expenses and costs of
operation and maintenance of the Demised Premises) from and by any reletting of
the Demised Premises, and Lessee hereby agrees to be and remain liable for all
sums aforesaid as well as for any deficiency therein. Lessor shall have the
right from time to time to bring and maintain successive actions or other legal
proceedings against Lessee for the recovery of such amounts, which liability it
is expressly covenanted shall survive the issuance of any warrant of dispossess
or other court process. Nothing herein contained shall be deemed to require
Lessor to wait to bring any such action or other legal proceedings until the
date when this Lease would have expired had there been no such default by
Lessee. In reletting the Demised Premises as aforesaid, Lessor may make leases
and lettings of the whole or less than the whole of the same, for a term or
terms greater or less than the term hereof, and for a rental or rentals and upon
such terms, covenants, conditions, agreements and provisions as Lessor may elect
in its sole discretion.
In addition to the right of Lessor to cancel the Agreement as provided in
this Section, and without waiver of such right, Lessor may sue Lessee for
damages for noncompliance with any covenant, agreement or warranty contained in
this Agreement or for nonpayment of any sum required to be paid by Lessee to
Lessor or for specific performance of any covenant of this Agreement. The waiver
of any one Event of Default shall not be construed as the waiver of any other
Event of Default.
<PAGE>
Upon the occurrence of a default by Lessee under this Agreement, Lessor
shall have the absolute right, at any time without notice to have a receiver
appointed to take possession of the Demised Premises, collect the rents, issues,
profits, patient contract accounts, Medicare and Medicaid payments, accounts
receivable and all other payments or obligations owing to Lessee with respect to
the Demised Premises, and apply the same against Lessee's obligations hereunder.
Neither the filing of a petition for the appointment of a receiver nor the
appointment itself shall constitute an election by Lessor to terminate this
Agreement.
No receipt of moneys by Lessor from Lessee after a termination hereof by
Lessor shall reinstate, continue or extend the Term hereof or affect any notice
theretofore given to Lessee, or operate as a waiver of the right of Lessor to
enforce the payment of rent when due or thereafter falling due, it being agreed
that after the commencement of suit for possession of the Demised Premises, or
after final order or judgment for possession of the Demised Premises, Lessor may
demand, receive and collect any moneys due or thereafter falling due without in
any manner affecting such suit, order or judgment; all such monies collected
being deemed payments on account of the use and occupation of the Demised
Premises or, at the election of Lessor, on account of Lessee's liability
hereunder. Lessor shall have, receive and enjoy, as Lessor's sole and absolute
property, any and all sums collected by Lessor as rent or otherwise upon
reletting the Demised Premises after Lessor shall resume possession thereof as
hereinbefore provided, including, without limitation upon the generality of the
foregoing, any amounts by which the sum or sums collected exceed the continuing
liability of Lessee hereunder.
23. Waiver of Rights of Redemption. If at any time hereafter Lessor shall obtain
possession of the Demised Premises under legal proceedings or pursuant to the
terms and conditions hereof or pursuant to present or future law, because of
default by Lessee in observing or performing any term, covenant, condition or
agreement hereof, all rights of redemption provided by any law, statute or
ordinance now in force or hereafter enacted shall be and are hereby waived by
Lessee to the extent permitted by law.
24. Lessor's Right to Cure Lessee's Defaults. Whenever and as often as Lessee
shall fail or neglect to comply with and perform any term, covenant, condition
or agreement to be complied with or performed by Lessee hereunder, then, upon
thirty (30) days prior written notice to Lessee (except where a shorter notice
period is provided herein, in which event such shorter period shall apply), if
such default shall be continuing, Lessor, at Lessor's option, in addition to all
other remedies available to Lessor, may perform, or cause to be performed, such
work, labor, services, acts or things, and take such other steps, including
entry onto the Demised Premises as Lessor may reasonably deem advisable, to
comply with and perform any such term, covenant, condition or agreement which is
in default, in which event Lessee shall reimburse Lessor upon demand, and from
time to time, for all reasonable costs and expenses suffered or incurred by
Lessor in so complying with or performing such term, covenants, condition or
agreement. The commencement of any work or the taking of any other steps or
performance of any other act by Lessor pursuant to this paragraph shall not be
deemed to obligate Lessor to complete the curing of any term, covenant,
condition or agreement which is in default. Lessee hereby waives any claim and
releases Lessor and Lessor's agents, contractors and employees from all
liability for damage occasioned by any action taken by Lessor pursuant to this
paragraph, excepting liability of Lessor for negligence and willful misconduct
of Lessor and Lessor's agents, contractors and employees.
<PAGE>
25. Lessor Default. In the event Lessor shall default in the performance of any
of the terms and provisions of this Lease and shall fail to cure such default
within thirty (30) days after written notice and demand from Lessee, Lessee
shall have the right, at its option, to exercise one or more of the following
remedies: (a) to terminate this Lease and recover against Lessor for all
damages, general, special and consequential, incurred as a proximate result of
Lessor's breach and termination; (b) to do and perform the act or action
required of Lessor under this Lease and to offset against Rental and other sums
payable by Lessee any and all costs of Lessee's performance; (c) to proceed with
an action, proceeding or suit at law or in equity, seeking damages or equitable
relief (including, in an appropriate case, an injunction, a decree of specific
performance, or a declaratory judgment). Such remedies are cumulative of any and
all other rights and remedies available to Lessee under this Lease or otherwise.
26. Injunction. Each party, at its option, in addition to any other rights
reserved to it, and notwithstanding the concurrent pendency of other proceeds
between Lessor and Lessee, shall have the right at all times during the Term
hereof to restrain by injunction any violation or attempted violation by the
other party of any of the terms, covenants, conditions or agreements hereof, and
to enforce by injunction any of the terms, covenants, conditions and agreements
thereof.
27. No Merger. In no event shall the leasehold in the Demised Premises created
hereby, or the rights of Lessee hereunder, merge with any interest, estate or
rights of Lessor in or to the Demised Premises, except by Lessor's written
declaration of such merger, it being understood that such leasehold and the
rights of Lessee hereunder shall be deemed to be separate and distinct from
Lessor's interest, estate and rights in and to the Demised Premises,
notwithstanding that any such interests, estates or rights shall at any time or
times be held by or vested in the same person.
28. Definition of "Lessor" and "Lessee". The terms "Lessor" and "Lessee" as used
herein shall at any given time mean the persons who are the owners of the
reversionary interest estate of Lessor in and to the Demised Premises, and the
leasehold of Lessee in and to the Demised Premises created herein, respectively.
Subject to and conditioned upon Lessee's obtaining Lessor's prior written
consent to any transfer or assignment of Lessee's leasehold interest under this
Lease, in the event of any conveyance or other divestiture of either Lessor or
Lessee's interest in and to the Demised Premises, the grantor or the person who
is divested of such interest (the "Grantor") shall be entirely freed and
relieved of all covenants and obligations thereafter accruing hereunder, and the
grantee or the person who otherwise succeeds to such interest shall be deemed
automatically and by operation of this Lease to have assumed the covenants and
obligations of the Grantor thereafter accruing hereunder, and until the next
conveyance or divestiture of such interest the other party shall look solely to
said grantee or successor for the observance and performance of the covenants
and obligations of the Grantor hereunder so assumed by said grantee or
successor. Lessee shall attorn to any such grantee or successor of Lessor. Any
provision hereof to the contrary notwithstanding, no assignment by Lessee of
this Lease or any interest herein shall relieve or release Lessee of or from any
of its liabilities or obligations hereunder.
29. Quiet Enjoyment. Lessor covenants that at all times during the term hereof,
so long as Lessee is not in default hereunder, Lessee's quiet enjoyment of the
Demised Premises or any part thereof shall not be disturbed by the act of any
person whomsoever.
<PAGE>
30. Lessor's Right of Entry. Lessor and its authorized agents and employees
shall have the right from time to time, at Lessor's option, and upon reasonable
prior notice to Lessee (except in an emergency), to enter and pass through the
Demised Premises to examine the same and to show them to prospective purchasers,
fee mortgagees and others.
31. Estoppel Certificates. Each party shall at any time and from time to time
during the term hereof, within ten (10) days after request by the other party,
execute, acknowledge and deliver to the other party or to any prospective
purchaser, assignee or mortgagee designated by the other party, a certificate
stating (i) that this Lease is unmodified and in force and effect (or, if there
have been any modifications that this Lease is in force and effect as modified
and identifying the modification agreements); (ii) the date to which Rent has
been paid; (iii) whether or not there is any existing default by Lessee in the
payment of Rent or any other sum of money hereunder, and whether or not there is
any other existing default by either party with respect to which a notice of
default has been served, and, if there is any such default, specifying the
nature and extent thereof; and (iv) whether or not there are any set offs,
defenses or counterclaims against enforcement of the obligations to be performed
hereunder existing in favor of the party executing such certificate.
32. Rights Cumulative. All the rights and remedies of each party hereunder or
pursuant to present or future law shall be deemed to be separate, distinct and
cumulative, and no one or more of them, whether exercised or not, nor any
mention of or reference to any one or more of them herein, shall be deemed to be
an exclusion or a waiver of any of the others, or of any of the rights or
remedies which such party may have, whether by present or future law or pursuant
hereto, and each party shall have, to the fullest extent permitted by law, the
right to enforce any rights or remedies separately and to take any lawful action
or proceedings to exercise or enforce any right or remedy without thereby
waiving or being barred or estopped from exercising and enforcing any other
rights and remedies by appropriate action or proceedings.
33. Payments of Money, Interest. All amounts whatsoever which Lessee shall be
obligated to pay pursuant hereto shall be deemed rent, and in the event of the
nonpayment by Lessee of any such of money whatsoever which Lessee from time to
time shall be obligated to pay to Lessor under any provision hereof, Lessor
shall have the same rights and remedies by reason of such nonpayment as if
Lessee had failed to pay an installment of Rent under Paragraph 3 hereof. Except
as herein specifically stated otherwise, in each instance when Lessee shall be
obligated to make any payment of any sum of money whatsoever hereunder, interest
shall accrue thereon and be payable hereunder at the rate of twelve percent
(12%) per annum computed from the date such payment first became due hereunder.
34. Surrender, Obligations Upon Expiration or Termination.
(a) Lessee shall, on the last day of the term hereof or upon any termination
hereof well and truly surrender and deliver up the Demised Premises into
the possession and use of Lessor, without fraud or delay and in good
order, condition and repair, ordinary wear and tear excepted, free and
clear of all lettings and occupancies and free and clear of all
encumbrances other than those existing on the date hereof and those, if
any, created by Lessor.
(b) Lessee represents and warrants to Lessor that (except
for changes in the ordinary course of business, and for all
<PAGE>
other changes unforeseen and/or uncontrollable by Lessee, occurring after
the date hereof), to the extent feasible and consistent with ordinary
business practices, Lessee will expend reasonable efforts to assure or
cause upon the expiration or termination of the Term hereof, the following
statements to be true statements of law and fact:
(1) All of the Inventories shall be at levels which are consistent with
operations in the ordinary course of business and, to the best of
Lessee's knowledge after diligent investigation, at levels consistent
with all applicable regulatory requirements and usable in the
ordinary course of business.
(2) There is no outstanding written notice of default, cancellation or
termination in connection with any instrument or document material to
the operation of the Demised Premises which could be construed,
directly or indirectly, to bind or in any way affect Lessor or
Lessor's assigns after the termination hereof.
(3) Lessee is not a party to any written employment or consulting
agreement, or written pension, profit-sharing, bonus, deferred
compensation, retirement, stock option, medical health, disability,
insurance, welfare or other employee benefit plan, arrangement,
contract agreement, program or policy relating to the Facilities
(collectively, the "Benefit Plans") which would be binding upon or
affect Lessor or any successor lessee after the date of expiration or
termination hereof.
(4) Lessee has paid all accounts payable and other liabilities on a
current basis.
(5) There is no disciplinary proceeding pending or, to the best of
Lessee's knowledge after diligent investigation, threatened against
any then current member of the medical staff.
(6) All costs, reimbursement and similar reports relating to the Facility
have been filed when due as required for Medicaid and any third-party
payor reimbursement.
(7) The Licensed Bed Capacity shall be equal to the Licensed Bed Capacity
as of the effective date of this Lease.
(c) Lessee shall use reasonable efforts to encourage such personnel of the
Facilities as Lessor may designate to become employees of Lessor or
Lessor's assigns after the expiration or termination of the term hereof.
(d) Following the expiration or termination of the term hereof, Lessee shall
pay all personnel of the Facility all benefits [specifically including,
but not limited to, compensation for accrued and vested (in accordance
with Lessee's personnel policies), but unpaid, vacation pay] normally
payable upon termination of employment. If Lessee fails to make any such
payment, Lessor shall have the right to cure such default and demand
immediate reimbursement from Lessee.
(e) Lessee shall have the duty to cooperate with Lessor in procuring the
<PAGE>
transfer of licenses and certifications as necessary to keep the Demised
Premises in operation following termination of this Lease.
35. No Waiver. No failure on the part of either party at any time to require the
performance by the other party of any term hereof shall be taken or held to be a
waiver of such term or in any way affect such party's right to enforce such
term, and no waiver on the part of either party of any term hereof shall be
taken or held to be a waiver of any other term hereof or the breach thereof
36. Severability. The invalidity or unenforceability of any particular provision
hereof shall not affect the other provisions, and this Lease shall be construed
in all respects as if such invalid or unenforceable provision had not been
contained herein.
37. Benefit. This Lease shall inure to the benefit of and be binding upon the
parties and their respective legal representatives, successors and assigns. The
provisions hereof are solely for the benefit of the parties and their respective
legal representatives, successors and assigns, and shall not be deemed or
construed to create any rights for the benefit of any other person.
38. Construction. Whenever a singular word is used herein, it shall also include
the plural wherever required by the context, and vice versa. The terms and
conditions hereof represent the results of bargaining and negotiations between
the parties, each of which has been represented by counsel of its selection, and
neither of which has acted under duress or compulsion, whether legal, economic
or otherwise, and represent the results of a combined draftsmanship effort.
Consequently, the terms and conditions hereof shall be interpreted and construed
in accordance with their usual and customary meanings, and the parties hereby
expressly waive and disclaim, in connection with the interpretation and
construction hereof, any rule of law or procedure requiring otherwise,
specifically including but not limited to, any rule of law to the effect that
ambiguous or conflicting terms or conditions contained herein shall be
interpreted or construed against the party whose counsel prepared this Lease or
any earlier draft hereof.
39. Entire Agreement; Written Modifications. This Lease contains the entire
understanding between the parties with respect to the subject matter hereof; all
representations, promises, and prior or contemporaneous understanding, between
the parties with respect to the subject matter hereof are merged into and
expressed in this Lease; and any other understandings between the parties with
respect to the subject matter hereof are hereby canceled. This Lease shall not
be amended, modified or supplemented without the written agreement of the
parties at the time of such amendment, modification or supplement.
40. Governing Law. This Lease shall be governed by and subject to the laws of
the State of Florida.
41. Captions. The captions herein are for convenience and identification
purposes only, are not an integral part hereof, and are not to be considered in
the interpretation of any part hereof.
42. Notices. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if sent by certified or registered
mail, return receipt request, postage prepaid, addressed as follows:
To Lessor: ..... Board of County Supervisors of Choctaw
..... County, Mississippi
<PAGE>
..... Choctaw County Courthouse
..... Ackerman, Mississippi 39735
..... Attention: Chairman
With copy to:...
.....
.....
To Lessee: ..... Centennial HealthCare Investment Corporation
..... 400 Perimeter Center Terrace
..... Suite 650
..... Atlanta, Georgia 30346
..... Attn: Michael C. Lake, Vice President
With copies to:. Daryl R. Griswold, Esq.
..... Centennial HealthCare Investment Corporation
400 Perimeter Center Terrace
..... Suite 650
..... Atlanta, Georgia 30346
Jeffrey N. Plowman, Esq.
..... NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
..... First Union Plaza, Suite 1400
..... 999 Peachtree Street, N.E.
..... Atlanta, Georgia 30309
or to such other address as shall be furnished in writing by either party to the
other party.
43. Counterparts. This Lease may be executed in separate counterparts, each of
which when so executed shall be an original, but all of such counterparts shall
together constitute but one and the same instrument.
44. Costs of Enforcement. If any action is instituted in connection with any
controversy arising out of this Lease, the prevailing party shall be entitled to
recover, in addition to costs, such sum as the court may adjudge reasonable as
attorneys fees in such action and on any appeal from any judgment or decree
entered therein.
45. Agreement Regarding Lease. This Lease Agreement is executed and delivered
pursuant to that certain Agreement Regarding Lease (the "General Agreement")
containing terms, covenants, conditions, warranties and representations on which
Lessee has and is hereby relying in entering into this Lease and the related
transactions described in the General Agreement. The General Agreement is hereby
incorporated into and made a part of this Lease as if fully set forth herein.
46. Cooperation. Lessor shall cooperate with Lessee in connection with any and
all efforts by Lessee to secure the lawful benefits of grants, governmental aid
or assistance payments or supplements or designation of the Facility as
preferred status or preferred provider or other beneficial designation for
purposes of enhanced reimbursement or otherwise.
47. Additional Stipulations. The following additional stipulations of Lessee
shall be deemed part of this Lease:
(a) Lessee and Lessor acknowledge that the primary use of the Hospital
Facility shall be for the operation of an acute
<PAGE>
care hospital facility, to include, unless otherwise agreed, laboratory,
x-ray, emergency room (on a 24-hour a day basis), and outpatient treatment
services. In addition, limited surgical services shall be furnished at or
from the Facility. Lessee shall also have the right to provide these and
other services from the Clinics and other locations operated by Lessee.
(b) Lessee shall have the right, subject to Governmental Requirements to
convert a portion of its Licensed Hospital Bed Capacity into Licensed
Nursing Home Bed Capacity and vice versa; provided, however, that Lessee
shall at all times furnish a minimum Licensed Hospital Bed Capacity of at
least ten (10) beds. Lessee shall also have the right, subject to
applicable Governmental Requirements, to expand, contract or discontinue
the services furnished at the Clinics.
(c) Lessee shall provide or arrange for the management of ambulance services
sufficient to establish Lessor's compliance with applicable Mississippi
statutes, if any, requiring counties to provide or arrange for such
services. Lessee shall enter into a supplemental agreement to this Lease
with the current provider of such ambulance services, and providing for
monthly payments by Lessee of approximately Five Thousand and No/100
Dollars ($5,000.00) per month, to continue for so long as the Ambulance
Service Contract and this Lease shall both remain in full force and
effect; provided, however, that Lessor shall pay all costs of such
ambulance service to the extent in excess of $7,500.00 per month, or, at
Lessee's option, Lessee shall have the right to cancel or terminate the
Ambulance Service Contract and either contract with another provider or
assume such duties and obligations to provide the required ambulance
services.
(d) Lessor and Lessee acknowledge that the effective date of this Lease has
been stipulated to be December 1, 1998, notwithstanding that the Lease has
been executed on the dates set forth beneath each party's signatures
below; and subject furthermore to the caveat that Lessee's obligations
under this Lease are subject to, and conditioned upon the satisfaction and
performance of the terms and conditions set forth in the General
Agreement.
(e) Notwithstanding any contrary provision herein, Lessee does not assume and
shall not be required to pay principal, interest or debt service relating
to any indebtedness, whether secured or unsecured, arising from the
issuance of bonds and the loan of the proceeds of such bond issue for the
acquisition, construction, or financing of the Facility (herein referred
to as the "Facility Debt"). Lessor shall pay the Facility Debt and all
principal, interest or other debt service payments thereon, as and when
such payments become due and payable.
(f) Pursuant to Section 18 of the General Agreement, the Lessee has acquired
<PAGE>
certain "Receivables" and has assumed certain "Payables" (as said terms
are defined therein). Nothing in this Lease shall affect the rights and
liabilities of Lessee and Lessor under Section 18 of the General
Agreement, which are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and
year first above written.
LESSOR: BOARD OF COUNTY SUPERVISORS OF
CHOCTAW COUNTY, MISSISSIPPI
BY:/s/ Mike King
Its: Chairman
ATTEST:
By:/s/ Don Threadgil
Secretary
(County Seal)
Date of Execution: 11/02/98
BOARD OF TRUSTEES OF CHOCTAW
COUNTY MEDICAL CENTER
BY: /s/ Samuel Kennedy
Its: Chairman
ATTEST:
By: /s/ Jerry Ruff
Its: Secretary
(Seal)
Date of Execution: 11/03/98
LESSEE: CENTENNIAL HEALTHCARE INVESTMENT
CORPORATION
By:/s/ Alan Dahl
Its: Executive Vice President
ATTEST:
By: /s/ Daryl R. Griswold
Its: Assistant Secretary
(Corporate Seal)
Date of Execution: 11/10/98
<PAGE>
EXHIBIT A
I. Hospital Facility
[Description of Hospital Facility]
II. Nursing Home
[Description of Nursing Home]
III. Clinics
[Description of Clinics]
IV. Ambulance Services Contract
[Description of Ambulance Services Contract]
<PAGE>
EXHIBIT B
[Legal Descriptions of Lessor-Owned Parcels]
<PAGE>
EXHIBIT C
[Description of Leases, Lessor-Leased Parcels]
<PAGE>
EXHIBIT D
[List of Personal Property]
<PAGE>
EXHHIBIT 10.2
LEASE ASSIGNMENT AGREEMENT
THIS LEASE ASSIGNMENT AGREEMENT, made this 1st day of December, 1999, by
and between CHARLOTTE HEALTH INVESTORS, L.L.C., a North Carolina Limited
Liability Company, ("Assignor") party of the first part; CENTENNIAL HEALTHCARE
INVESTMENT CORPORATION, a Georgia corporation ("Assignee") party of the second
part; ELDERBERRY MANOR OF MECKLENBURG, LIMITED PARTNERSHIP, a Virginia Limited
Partnership, ("Landlord") party of the third part; and CENTENNIAL HEALTHCARE
MANAGEMENT CORPORATION, a Georgia corporation ("Manager") party of the fourth
part.
WITNESSETH:
WHEREAS, by Lease Agreement dated June 3, 1991, (the "Lease") modified by
that certain Lease Assignment and Modification Agreement dated December 19,
1996, (the "Modification") copies thereof designated EXHIBIT "A" being hereto
attached, Elderberry Nursing Home, Inc., as Landlord, demised to Cardinal of
Kentucky, a Kentucky corporation, as Tenant, the premises located at 620 Tom
Hunter Road, City of Charlotte, County of Mecklenburg, North Carolina, including
the 130 bed nursing care facility located thereon, (the "Property") and more
particularly described on "EXHIBIT B" hereto attached; and
WHEREAS, by various mesne assignments and other transactions, Landlord has
become the owner of the Property and Assignor the Tenant under the leasehold
established by the Lease and Modification agreements; and
WHEREAS, Assignor and Assignee have agreed to the assignment of said
leasehold estate, including the assumption by Assignee of all obligations of the
Tenant thereunder (Assignor to continue to be secondarily liable to Landlord for
said obligations, including without limitation those set forth in the Lease and
the Modification agreements hereinabove mentioned) to which assignment Landlord
consents as required by the Lease and as hereinafter more particularly provided;
WHEREAS, Assignee shall be substituted for Assignor under the Long Term
Care Facility Management Agreement dated December 19, 1996, (the "Management
Agreement") and Manager agrees with Assignee and Landlord as third party
beneficiary to continue to manage the Nursing Home Facility under the provisions
of said Agreement as well as the Lease and Modification agreements;
NOW, THEREFORE, for good and valuable consideration, including without
limitation, certain security provided by Assignee to Landlord, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Assignment. Assignor transfers and assigns all of its
<PAGE>
right, title and interest to the Lease and the Property of Assignee as
of the Effective Date hereinafter defined and Landlord, as of the Effective
Date, consents to the transfer and assignment by Assignor to Assignee of
Assignor's right, title and interest in the Lease and the Property subject to
the provisions hereof. Assignor agrees to continue to be secondarily liable to
Landlord with respect to all obligations signed by it to Assignee, and to
guarantee to Landlord Assignee's performance of the same, said guarantee to
continue to be secured by collateral provided to the Landlord at the time of
execution of the Modification.
Assignor warrants to Assignee that as of the Effective Date the Lease is in
full force and effect and no default exists thereunder. Landlord warrants to
Assignee that rents due under the Lease have been paid and there is no default
thereunder known to Landlord as of its date of execution hereof. Assignor and
Landlord jointly and severally warrant to Assignee that a true and correct copy
of the Lease is attached hereto as EXHIBIT "A" and that no amendments or
modifications have been made to the Lease except as disclosed to Assignee in
writing.
Landlord and Assignor covenant and agree that after the date hereof the
Lease will not be amended, supplemented or modified in any way without the prior
written consent of Tenant/Assignee. Assignor and Assignee agree that they will
not encumber in any way their respective interests in the Lease after the date
of this Memorandum of Lease Assignment.
2. Effective Date. The Effective Date of this Assignment shall be January
1, 1999.
3. Term. The term of the Lease terminates June 30, 2011.
4. Existing Debt. The parties acknowledge that the Property is subject to
the lien of a Deed of Trust and that the Lease is subject to a collateral
assignment in favor of Wachovia Bank of North Carolina, N.A., to secure certain
financing associated with the facility.Landlord warrants that the financing
secured by deed of trust lien on the Property and collateral assignment of the
Lease in favor of Wachovia Bank of North Carolina, N.A., is not in default and
that Landlord has complied with its obligations to said Bank with respect to
this document.
5. Power and Authority. Each party hereto covenants and represents to the
other that it has the power and has taken all necessary action to authorize the
execution of this document which is enforceable as to such party according to
its terms. Except as herein specifically modified, the Lease shall remain in
full force and effect. The consent given by Landlord hereunder does not waive
the requirement for the Landlord's advance consent with respect to future
assignments, if any, and the release of Assignor hereunder does not constitute a
waiver of Landlord's right to hold any tenant under said Lease secondarily
liable after a permitted assignment thereof.
6. Payment of Rent. As an inducement for Landlord's execution hereof,
Assignee and Manager agree that Manager shall make timely payments of all rents
due under the Lease as hereby modified as a first priority from cash flows in
the manner set forth in ss.1.05 (b) of the Management Agreement; shall provide
promptly to Landlord copies of cost reports and surveys submitted to and/or
received from governmental or supervisory agencies, as well as copies of all
reports required to be provided to Assignee under ss. 1.04 of the Management
<PAGE>
Agreement; and shall give Landlord written notice of any default and/or
termination of the Management Agreement and otherwise comply with the Lease, the
Assignment and Modification Agreement, and this Assignment.
7. Notices. The parties agree that notices given under the Lease shall be
as follows:
If to Assignee (as Tenant of the Lease):
If to Landlord: Elderberry Manor of Mecklenburg,
Limited Partnership
P. 0. Box 638
Lynchburg, Virginia 24505
If to Tenant: Centennial HealthCare Investment Corporation
400 Perimeter Center Terrace, Suite 650
Atlanta, Georgia 30346
Attn: Alan C.Dahl, Executive Vice President
with a copy to: Centennial HealthCare Investment Corporation
400 Perimeter Center Terrace, Suite 650
Atlanta, Georgia 30346
Attn: Daryl R. Griswold, Senior Vice President
and General Counsel
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized agents as of this day and year first above written:
CHARLOTTE HEALTH INVESTORS, L.L.C.
By: /s/ Charles F. Trefzger
Its: Manager
ELDERBERRY MANOR OF MECKLENBURG,
LIMITED PARTNERSHIP,
By: Elderberry Nursing Home, Inc.
Its General Partner
By: /s/ C. Lynch Christian, Jr.
C. Lynch Christian, Jr.
President
CENTENNIAL HEALTHCARE INVESTMENT CORPORATION
By: /s/ Alan C. Dahl
Alan C. Dahl
Executive Vice President
CENTENNIAL HEALTH CARE MANAGEMENT CORPORATION
By: /s/ Alan C. Dahl
Alan C. Dahl
Executive Vice President
<PAGE>
EXHIBIT "A"
LEASE AGREEMENT
THIS LEASE, made this 3rd day of June, 1991, by and between ELDERBERRY
NURSING HOME, INC., a Virginia Corporation, its successors and assigns,
(hereinafter referred to as "Landlord") party of the first part; and CARDINAL OF
KENTUCKY, INC., a Kentucky Corporation, (hereinafter referred to as "Tenant"),
party of the second part;
W I T N E S S E T H :
In consideration of the mutual covenants and obligations herein contained,
IT IS AGREED:
1. PREMISES: Landlord does hereby demise and lease unto Tenant, and Tenant
does hereby take, hire and let from Landlord that certain tract or parcel of
real estate, together with the buildings and improvements (and including
furniture, fixtures and equipment belonging to or provided by Landlord) and
constituting a 130 bed (120 nursing home beds and 10 home for adult beds)
intermediate, skilled and home for the aged nursing home facility, and the
privileges and appurtenances thereunto appertaining, situate, lying and being on
Tom Hunter Road in Mecklenburg County, North Carolina, and being more
particularly described on "EXHIBIT A" hereto attached, hereafter referred to as
"Premises" or "Demised Premises".
2. COVENANT OF TITLE AND QUIET ENJOYMENT: Landlord covenants and warrants
that it alone has full right and lawful authority to enter into this Lease for
the full term hereof; that it is lawfully seized of the Premises in fee simple
and has good title thereto, free and clear of all tenancies, restrictions and
encumbrances, (with the exception of liens securing Lenders providing financing
for the facility which is the subject of this Lease, and other matters not
adversely affecting the intended use of the Premises or merchantability of
title, or other matters agreed to between the parties) and that at all times
during the term of this Lease and any extensions of said term, Tenant's quiet
and peaceful enjoyment of the Premises shall not be disturbed or interfered with
by anyone.
3. GOVERNMENTAL AUTHORIZATIONS, UTILITIES AND USE OF PREMISES: Landlord
hereby represents and warrants to Tenant, that the use of the Premises as an
intermediate, skilled and home for the aged nursing home facility is a permitted
use under all applicable zoning or other use restrictions or regulations.
Landlord further warrants that the character, materials, design, construction
and location of the improvements is in full compliance with all building codes,
zoning laws and all other laws and ordinances pertaining thereto.
The Tenant shall use the premises as an intermediate, skilled and home for
the aged nursing home facility which shall be operated in full compliance with
all laws, regulations and licenses applicable thereto. Tenant covenants that no
part of the Demised Premises shall be used for any unlawful purpose, nor will
any unlawful condition or nuisance be permitted to exist thereon.
Tenant further covenants and agrees that its operation of the nursing home
facility shall materially comply with the representations in the certificate of
need application for the facility on file with the North Carolina Department of
Human Resources, Division of Facility Services, shall materially
<PAGE>
comply with all conditions placed upon the certificate of need, and shall comply
with all licensure, certification, and other requirements of law applicable to
nursing home facilities.
4. TERM: The original term of this Lease shall be for Ten (10) years
commencing with the first day of the calendar month following the date that the
facility is licensed and becomes operational (the "Availability Date"). The
effectiveness of this Lease is specifically contingent upon prior licensure of
the facility.
5. RENT: A. Tenant shall pay to Landlord at its offices in Lynchburg,
Virginia, or at such other place as it may advise in writing, in advance, on the
1st day of each calendar month, without notice, demand, offset or deduction, in
lawful money of the United States of America, during and throughout the term of
this Lease, rent which shall be payable in monthly installments equal to the sum
of:
(1) For the first twenty-four (24) months of the term (Lease Years 1
and 2) the sum of Thirty-Six Thousand, Five Hundred Seventy-Six
Dollars ($36,576.00).
(2) For the next thirty-six (36) months of the term (Lease Years 3, 4
and 5) the sum of Thirty-Seven Thousand, Five Hundred Sixty-Five
Dollars ($37,565.00).
(3) For the next thirty-six (36) months of the term (Lease Years 6, 7
and 8) the sum of Forty-One Thousand, Five Hundred Nineteen Dollars
($41,519.00).
(4) For the next twenty-four (24) months of the term (Lease Years
9 and 10) the sum of Forty-Three Thousand, Four Hundred
Ninety-Six Dollars ($43,496.00).
Any rent adjustment resulting from a change in licensed beds becoming
effective on any day other than the first day of any month shall be prorated on
a per diem basis.
If the Landlord does not receive from Tenant any monthly rental payment
within ten (10) days after such payment is due, Landlord, at its option, may
charge Tenant a late charge and handling fee equal to Five Percent (5%) of the
monthly rental payment (such late charge and handling fee shall be deemed
additional rent) and such late charge and handling fee shall be due and payable
by Tenant to Landlord immediately upon delivery of written notice to Tenant. In
addition, if any check of Tenant's is returned to Landlord unpaid, Tenant shall
reimburse Landlord for all charges associated with such returned check and
Landlord, at its option, may thereafter require that Tenant pay the Rent and any
other charges payable hereunder by a certified or cashier's check.
B. If the Availability Date (as hereinabove defined) is not on the first
day of a month, a prorated monthly installment of Rent shall be paid by Tenant
to Landlord for the period of time from the Availability Date up to (but not
including) the first day of the next succeeding month, and thereafter the Rent
shall be paid on the first day of each and every month.
C. All additional sums payable by Tenant to Landlord under the provisions
of this Lease Agreement shall constitute additional rent.
6. REPORTS: Tenant agrees to provide Landlord with signed annual financial
statements accurately reflecting Tenant's financial condition and the results
for its business operations for the preceding year with respect to its
operations generally, as well as its business conducted on the Demised Premises.
Such statements shall be due ninety (90) days after the close of the Tenant's
fiscal year and shall be prepared in accordance with generally accepted
accounting principles consistently applied and further shall be in such form as
required by Landlord's mortgagee. In the event of any default hereunder or any
state of facts which upon the passage of time would constitute a default, Tenant
<PAGE>
shall provide audited statements prepared by certified public accountants
satisfactory to Landlord. Tenant agrees to provide Landlord with annual
financial statements of any Guarantor of this Lease, duly signed by such
Guarantor within ninety (90) days after the close of the Guarantor's fiscal
year.
Tenant further will provide Landlord, as the same are filed with the State
of North Carolina, copies of all Medicaid Cost Reports, reports submitted to the
Department of Human Resources and other State agencies, and further will provide
Landlord copies of all communications with the State of North Carolina regarding
violations or alleged violations of applicable laws, rules, codes or
regulations.
7. LEGAL FEES AND COSTS: Tenant agrees, in the event it becomes necessary
for Landlord to enforce any provision of this Lease by legal action, or to
engage attorneys for the collection of rent or other monies due under this
Lease, to pay to Landlord reasonable attorney's fees and all court costs and
other costs of such collection or enforcement proceedings incurred by Landlord
if a valid claim is established.
8. UTILITIES: Landlord covenants that all water, sewer, electric current
and telephone facilities are available, connected and working as of the
availability date. Tenant shall pay when due all charges for heat, air
conditioning, water, gas, electricity and other utilities furnished to the
Premises for occupants thereof during the term hereof when the same become due
and payable.
9. REPAIR AND MAINTENANCE OF IMPROVEMENTS: Landlord warrants that the
entire Premises and the building and improvements thereon shall be in good, safe
condition and repair on the Availability Date and for a period of One (1) year
thereafter. Landlord shall be responsible for the structural integrity of the
building and repair of the roof and exterior walls, excluding windows and glass
panels, and except for damages caused or suffered to be caused by Tenant during
the term of this Lease. Except for such responsibility undertaken by Landlord,
Tenant shall be responsible, during the term, for maintaining the Premises in
good repair, including without limitation all interior surfaces, electrical,
plumbing, heating, air conditioning, and other systems, as well as the exterior
grounds, and shall at the end of the term, return the same to Landlord in good
repair and condition, with the exception of casualties insured against (the
proceeds of such insurance having been paid to Landlord) and ordinary wear and
tear. If Tenant fails to make any repairs, and/or perform any maintenance for
which it is responsible, within thirty (30) days after written notice thereof,
Landlord may, at its sole option, make the repairs and/or perform the
maintenance and the reasonable expense thereof shall be paid by Tenant, together
with interest at a rate equal to One and One-Half Percent (1-1/2%) in excess of
the Prime Rate then in effect at the Bank financing the construction of the
facility if such expense is not paid within thirty (30) days. Tenant shall have
the right at any time and with the Landlord's prior consent, which consent shall
not be unreasonably withheld, to construct, alter, repair or maintain on any
part of the Premises such buildings, parking areas, driveways, structures,
sidewalks and other similar and dissimilar improvements as Tenant shall desire.
All improvements constructed by Tenant shall comply with all applicable building
codes and ordinances and shall be at Tenant's sole cost and expense and shall
become the property of Landlord at the termination of this Lease. Tenant agrees
to indemnify Landlord against all claims by laborers and materialmen for any
improvements constructed by Tenant.
Landlord, its agents and employees, shall have the right at all reasonable
times and upon reasonable notice to Tenant, to enter the Demised Premises or any
part thereof, to inspect and examine the same for the purpose of making any
repairs to or within the Demised Premises.
10. DAMAGE OR DESTRUCTION OF IMPROVEMENTS: If the improvements located
<PAGE>
upon the Premises shall be damaged or destroyed by any cause insured against,
Landlord shall, rebuild or restore the damaged or destroyed improvements, using
insurance proceeds for such purpose and this Lease shall continue in full force
and effect. In such event the rental reserved hereunder shall be paid by the
business interruption insurance hereinafter provided for. If the remaining term
is one (1) year or less, either party shall have the right to terminate this
Lease.
11. TAXES AND ASSESSMENTS: Tenant agrees to pay when due, all taxes (as
hereinafter defined) on or with respect to the Premises. Such payments shall be
made in accordance with the terms, and payable directly to the appropriate
authority or body. Landlord will promptly send Tenant copies of all bills for
taxes to be paid by Tenant and Tenant will pay the same to the appropriate
governmental authority. Tenant shall promptly send Landlord reasonable evidence
of payment of such bill after such payment.
In the event this Lease shall commence, or shall end (by reason of
expiration of the term or earlier termination pursuant to the provisions
hereof), on any date other than the first or last day of the year, or should the
year or period of assessment of real estate taxes be changed to more or less
than one year, as the case may be, then the amount of taxes which may be payable
by Tenant as provided hereunder shall be appropriately apportioned.
12. INSURANCE INDEMNITY:
(a) Tenant shall at all times during the original term and any
extension thereof, carry and maintain, for the mutual benefit of Landlord,
Tenant and Landlord's designated mortgagee, general public liability insurance
issued by a company or companies licensed to do business in North Carolina and
which are approved by Landlord (which approval shall not be unreasonably
withheld) against claims for personal injury, sickness, or disease, including
death and property damages in, on or about the Premises, such insurance to
afford protection to the limit of not less than $1,000,000.00 in respect to each
person, and to the limit of not less than $3,000,000.00 in respect to any one
occurrence causing bodily injury or death, and to the limit of not less than
$200,000.00 in respect to property damage. Tenant shall furnish Landlord with a
duplicate certificate or certificates of such insurance policy or policies, and
Tenant shall name Landlord and upon request, Landlord's mortgagee, as a party
insured in such policy or policies.
(b) During the term of this Lease or any extension thereof, Tenant
shall maintain for the benefit of Tenant, Landlord, and Landlord's designated
Mortgagee, business interruption insurance sufficient to pay the rent and
Tenant's other obligations hereunder for a period of six (6) months. Tenant
shall be entitled to all payments made under such business interruption
insurance to the extent such payments exceed sums necessary to pay the rent and
Tenant's other obligations hereunder.
(c) During the term, of this Lease or any extension thereof, Tenant
shall keep all buildings and improvements on the premises insured in the amount
of the full replacement cost for the benefit of Tenant, Landlord, and Landlord's
designated mortgagee against loss or damage by fire, with customary extended
coverage. All proceeds payable at any time and from time to time by an insurance
company under such policies (except contents belonging to Tenant and Tenant's
relocation allowance, if any) shall be payable to Landlord, or its designated
mortgagee. The proceeds shall be utilized by Landlord and Tenant for the
restoration of improvements in the event such restoration is required hereunder.
If no restoration is required, the proceeds shall belong to Landlord.
(d) The insurance policies herein mentioned shall provide thirty (30)
days notice of cancellation to all parties named therein as insured.
(e) Tenants shall fully indemnify, protect and save Landlord
<PAGE>
harmless from all expenses, claims, demands, counsel fees, costs, liabilities,
judgments and executions in any manner relating to or arising out of the use or
occupancy of the Premises for the term of this Lease or any extension thereof.
(f) Any provision in this Lease to the contrary notwithstanding, each
party, to the extent it is permitted so to do by the terms and provisions of any
such policy or policies, hereby waives any and all rights to recover from the
other, its agents, or employees, any loss or damage from risks ordinarily
insured against under such policies, but only to the extent that such loss or
damage is in fact covered by such insurance and is collectible by such insured
party. Each party further covenants and agrees that it will, upon request of the
other, request each such insurance company to attach to such policy or policies
issued by it a waiver of subrogation with respect to the other party, its agents
and employees.
13. ASSIGNMENT AND SUBLETTING: Tenant shall have the right to assign this
Lease or sublet all or any part of the Premises with the consent of Landlord,
such consent not to be unreasonably withheld, but Tenant shall in such event
remain liable to Landlord for Tenant's obligations hereunder. Any merger,
consolidation, reorganization, or liquidation of Tenant, or the mortgage by
Tenant of the leasehold estate hereby created, or the sale or other transfer of
a controlling interest of its capital stock, or of a majority of its assets,
shall, for purposes of this Lease, constitute an assignment thereof.
14. SIGNS: Tenant shall have the right to install, maintain and replace in,
on or over or in front of the Premises or in any part thereof such signs and
advertising matter as Tenant may desire, and Tenant shall comply with all
applicable requirements of governmental authorities having jurisdiction and
shall obtain any necessary permits for such purpose. As used in this paragraph,
the word "sign" shall be construed to include any placard, light or other
advertising symbol or object, irrespective of whether same be temporary or
permanent.
15. EMINENT DOMAIN: If the whole or substantially all of the Premises, or
all means of access thereto, be acquired by eminent domain, or by purchase in
lieu thereof, this lease shall terminate and the rent shall be abated during the
unexpired portion of the lease subsequent to the actual physical taking.
Separate awards for damages shall be made to the Landlord and the Tenant for the
taking to the extend permitted by applicable law. Should, however, only a
portion of the premises be so condemned or taken, this Lease shall continue in
full force and effect provided, however, that the rent payable under the
unexpired portion of this Lease shall be adjusted to such extent as may be fair
and reasonable under the circumstances. Landlord shall, in such event, promptly
restore the Demised Premises as nearly as feasible to the condition of such
premises immediately prior to the taking, but Landlord shall not be required, at
its option, to restore or rebuild the Demised Property during the last year of
the Lease term. Tenant shall not be entitled to any part of the condemnation
proceeds arising from any partial taking except that Tenant shall be entitled to
make a claim for any of Tenant's property condemned.
16. DEFAULT: Any one or more of the following events shall constitute
events of default.
(a) Tenant's failure to make payment of rent when the same is due and
payable and the continuance of such failure for a period of ten (10) days after
mailing by certified mail or delivery to Tenant of notice in writing from
Landlord specifying in detail the nature of such failure; or,
(b) Tenant's failure to perform any of the other covenants, conditions,
and agreements imposed by it under this Lease and the continuance of such
failure without the curing of same for a period of thirty (30) days after
mailing by certified mail or delivery to Tenant of notice in writing from
Landlord specifying in detail the nature of such failure and provided Tenant
shall not cure said failure as provided in paragraph (d) below, or,
<PAGE>
(c) The adjudication of Tenant as a bankrupt, or the appointment of a
receiver or trustee for Tenant's property and affairs, or the making by Tenant
of any assignment for the benefit of its creditors or the filing by or against
Tenant of a petition in bankruptcy not vacated or set aside within ten (10) days
of such filing.
In the event of default, the Landlord, in addition to any other right or
remedy it may have with respect to such default, may upon ten (10) days written
notice, terminate this Lease for cause and re-enter the Premises and take
possession of the same, or, at its option, in such event Landlord may, without
declaring this Lease terminated, re-enter the Premises and occupy or lease the
whole or any part thereof, for and on account of Tenant and on such terms and
conditions for such rental as Landlord may deem proper based on reasonable
business practices, and Landlord shall in such event collect such rent and apply
the same upon the rents due from Tenant and upon the expenses of such
subletting, and any and all other damages sustained by Landlord. In the event of
default, Landlord shall exercise reasonable efforts to mitigate damages
hereunder and to re-let the Premises, but Landlord's failure to re-let or sublet
the Premises shall not prevent or delay the exercise by Landlord, at its option,
of its right to recover as damages rents due and owing for the remainder of the
term, together with all costs and expenses of collecting the same, subject to
Landlord's obligation to repay or credit the Tenant with all recoveries made by
Landlord.
Upon the occurrence of any of the above events of default, Landlord may, at
its option, give Tenant written notice by certified mail of Landlord's election
to end the term of this Lease upon a date specified in such notice, which date
shall be not less than thirty (30) days after the date of delivery or certified
mailing by Landlord of such notice, and whereupon the term and estate hereby
vested in Tenant shall cease and any and all other right, title and interest of
Tenant hereunder shall likewise cease without further notice or lapse of time as
fully and with like effect as if the entire term of this Lease had elapsed, but
Tenant shall continue to be liable to Landlord as hereinafter set forth;
provided, that this Lease shall not terminate if Tenant shall cure such default
prior to the termination date specified in such notice.
(d) In the event Landlord gives notice of a default of such a nature
(other than a default which may be cured by a payment of money) that it cannot
be cured within such thirty (30) day period, then such default shall not be
deemed to continue so long as Tenant, after receiving such notice, proceeds
diligently and continuously to cure the default as soon as reasonably possible
and continues to take all steps necessary to complete the same within a period
of time which, under all prevailing circumstances shall be reasonable. No
default shall be deemed to continue if, and so long as, Tenant shall be so
proceeding to cure the same in good faith or be delayed in or prevented from
curing the same by Force Majeure.
17. HOLDING OVER: In the event Tenant remains in possession of the Premises
after the expiration of the term hereof, including any extensions of the term,
and without the execution of a new lease, Tenant shall occupy the Premises as a
Tenant from month to month, subject to all of the conditions of this Lease
insofar as consistent with such a tenancy and at the highest monthly rental
herein provided.
18. COMPLIANCE WITH GOVERNMENTAL PROGRAMS: Landlord covenants that the
Premises will, during the term hereof, meet all standards required for Federal
Medicare (Title 18) or Medicaid (Title 19) skilled care or intermediate care
nursing programs and that it will make any alterations necessary to maintain
compliance with same. Any alterations or changes or expansion will be negotiated
at the then current cost of construction, which cost, together with interest at
the rate of interest for which money is financed, shall be
<PAGE>
amortized in level monthly additional rent payments over the agreed upon
remaining lease period.
Tenant further covenants and agrees that its operation of the nursing home
facility shall materially comply with the representations in the certificate of
need application for the facility on file with the North Carolina Department of
Human Resources, Division of Facility Services, shall materially comply with all
conditions placed upon the certificate of need, and shall comply with all
licensure, certification, and other requirements of law applicable to nursing
home facilities.
19. WAIVERS: Failure of Landlord or Tenant to complain of any act or
omission on the part of the other party, no matter how long the same may
continue, shall not be deemed to be a waiver by said party of any of its rights
hereunder. No waiver by Landlord or Tenant at any time, expressed or implied of
any breach of any provisions of this Lease, shall be deemed a consent to any
subsequent breach of the same or any other provision. No acceptance by landlord
of any partial payment shall constitute an accord or satisfaction but shall only
be deemed a part payment in account.
20. SURRENDER OF PREMISES: Upon the expiration or other termination of this
Lease, Tenant covenants and agrees that it will peaceably leave and surrender
possession of the Premises to Landlord. Upon such surrender, all improvements on
the Premises shall be in good repair, damage or destruction by fire or other
casualty insured against and ordinary wear and tear, alterations, additions and
improvements herein permitted, excepted.
21. NOTICES: Until notice to the contrary to the other party has been
given, all notices and payments of money if made to Landlord shall be made or
given by delivery or by mail (postage prepaid) addressed to Landlord at P. 0.
Box 638, 1000 Church Street, Lynchburg, Virginia, 24505-0638, with a copy to
Joseph C. Knakal, Jr., Esq., Caskie & Frost, P. 0. Box 6360, 2306 Atherholt
Road, Lynchburg, Virginia, 24505, or if made to Tenant shall be made by delivery
or by certified mail (postage prepaid) addressed to Tenant at 9300 Shelbyville
Road, Suite 1300, Louisville, Kentucky 40222, Attention: Randall J. Bufford.
22. SHORT FORM LEASE: The parties hereto shall forthwith execute a
memorandum or short form lease agreement, in recordable form, including such
provisions hereof as either party may desire to incorporate therein.
23. NON-DISTURBANCE AND ATTORNMENT: Tenant agrees upon request of
Landlord's mortgagee to attorn to such mortgagee, subordinate this Lease to any
deed of trust constituting a lien on the premises, and to provide such other
reasonable assurances as such mortgagee may reasonably require in connection
with the financing of the Premises and the improvements thereon provided,
however, any such agreement or document shall provide, and such mortgagee shall
covenant, that Tenant's use and possession of the Premises shall not be
disturbed so long as Tenant shall not make or suffer any material default
hereunder, and further that in the event Landlord shall default in any payment
due to such mortgagee, Tenant shall have the right upon ten (10) days written
notice to pay such amount due and thereby cure such default.
24. PERFORMANCE BY LANDLORD: Landlord covenants to perform all of its
obligations to any mortgagee or other secured lender holding a lien on any
property subject to this lease and to make timely payments on all such secured
indebtedness. In the event payment is made by Tenant for Landlord's account as
hereinabove provided in Section 23 hereof, Tenant shall be entitled to recover
such payment from Landlord with interest from the date of such payment at the
same rate applicable with respect to the secured indebtedness upon which such
payment is made, but no such payment shall be offset or otherwise relieve Tenant
from making future rental payments as and when the same come due.
25. ENTIRE AGREEMENT: No oral statement or prior written matter shall have
any force or effect. Tenant agrees that it is not relying on any
<PAGE>
representations or agreements other than those contained in this Lease. This
Lease shall not be modified or cancelled except by writing subscribed to by all
parties.
26. BROKERAGE: Each of the parties covenants and represents to the other
that neither has incurred brokerage fees with respect to the transaction herein
set forth.
27. PARTIES: The covenants, conditions, obligations and agreements
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and their respective successors and assigns. Each member of the Cardinal
Group jointly and severally endorses this Lease for the purpose of guaranteeing
all of Tenant's obligations to Landlord during the first thirty-six (36) months
of the term, including without limitation, the obligation to make timely payment
of all installments of rent becoming due during such period.
28. RIGHT OF FIRST REFUSAL: In the event Landlord desires during the term
(including any optional term which becomes effective) to sell the premises or
any part thereof, Landlord shall notify Tenant of such desire to sell in writing
by certified mail setting forth the amount of the proposed sale price and all
other terms and conditions of such proposed sale and Tenant shall have the right
of first refusal to purchase said premises upon the same terms and conditions by
giving Landlord written notice of its election so to do within sixty (60) days
after receipt of Landlord's notice. In the event Tenant fails to notify Landlord
of its election within such sixty (60) day period, or notifies Landlord it does
not wish to exercise its right to purchase, Landlord shall have the right to
sell the premises upon terms and conditions no more favorable to a purchaser
than those contained in said notice to Tenant.
In the event Landlord desires to relet to any person or entity the Premises
upon the expiration of the original term, Landlord shall notify Tenant of such
desire to relet in writing by certified mail, setting forth the proposed terms
of such lease, and Tenant shall have the right of first refusal to relet said
premises upon the same Terms and conditions by giving Landlord written notice of
its election to do so within thirty (30) days after receipt of Landlord's
notice. In the event Tenant fails to notify Landlord of its election within the
thirty (30) day period or notifies Landlord it does not wish to exercise its
right to relet,Landlord shall have the right to relet the premises upon terms
and conditions no more favorable to a tenant than those contained in said notice
to Tenant.
Tenant's right to notice and/or exercise either of the rights of first
refusal hereinabove specified shall be subject to the condition that Tenant
shall not be in default hereunder. If Tenant shall have lost its right to
purchase by reason of default as hereinabove set forth, or if after receiving
notice Tenant shall not exercise its right to acquire the Premises and the
Premises shall be sold by Landlord to a third party, the rights of first refusal
herein granted shall be terminated as of the recordation of the deed conveying
the Premises.
IN WITNESS WHEREOF, the parties hereto have each, pursuant to due corporate
authority, caused this Lease to be executed in its name and on its behalf, each
by its duly authorized officer, all as of this day and year first above written.
LANDLORD:
ELDERBERRY NURSING HOME, INC.
By: /s/ J. Lynch Christian, Jr.
Its: President
TENANT:
CARDINAL OF KENTUCKY, INC.
By: /s/ Randal J. Bufford
Its: Vice President
<PAGE>
LEASE ASSIGNMENT AND MODIFICATION AGREEMENT
THIS LEASE ASSIGNMENT AND MODIFICATION AGREEMENT, made this 19th day of
December, 1996, by and between TRANSITIONAL HEALTH PARTNERS, a Delaware general
partnership, ("Assignor") party of the first part; CHARLOTTE HEALTH INVESTORS, a
North Carolina Limited Liability Company, ("Assignee") party of the second part;
ELDERBERRY MANOR OF MECKLENBURG, LIMITED PARTNERSHIP, a Virginia Limited
Partnership, ("Landlord") party of the third part; CENTENNIAL HEALTH CARE
MANAGEMENT CORPORATION, a Georgia corporation, ("Manager") party of the fourth
part;
W I T N E S S E T H:
WHEREAS, by Lease Agreement dated June 3, 1991, a copy thereof designated
"EXHIBIT A" being hereto attached, (the "Lease") Elderberry Nursing Home, Inc.,
as Landlord, demised to Cardinal of Kentucky, a Kentucky corporation, as Tenant,
the premises located at 620 Tom Hunter Road, City of Charlotte, County of
Mecklenburg, North Carolina, including the 130 bed nursing care facility located
thereon, (the "Property") and more particularly described on "EXHIBIT B" hereto
attached; and
WHEREAS, by various mesne assignments and other transactions, Landlord has
become the owner of the Property and Assignor the Tenant under the leasehold
established by the Lease; and
WHEREAS, Assignor and Assignee have agreed to the assignment of said
leasehold estate, including the assumption by Assignee of all obligations of the
Tenant thereunder and the release of Assignor from said obligations subject to
the extension and modifications herein set forth, to which Landlord consents as
required by the Lease and as hereinafter more particularly provided;
WHEREAS, Assignee, pursuant to contract dated December 19, 1996, designated
"Long Term Care Facility Management Agreement", has engaged Manager to manage
such facility and Assignee and Manager acknowledge that such engagement
constitutes an inducement for Landlord to enter into this Agreement and to such
extent Landlord becomes a beneficiary of the foregoing Management Agreement.
NOW, THEREFORE, for good and valuable consideration, including without
limitation, certain security provided by Assignee to Landlord, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Assignment. Assignor transfers and assigns all of its right, title and
interest to the Lease and the Property to Assignee as of the Effective Date
hereinafter defined and Landlord, as of the Effective Date releases Assignee
from all obligations as Tenant under the Lease arising after the Effective Date.
Assignor warrants to Assignee that as of the Effective Date the Lease
is in full force and effect and no default exists thereunder. Landlord warrants
to Assignee that rents due under the Lease have been paid and there is no
default thereunder known to Landlord as of its date of execution hereof.
2. Modification of Term. The original term of the Lease terminates June 30,
2001. The parties agree that such term shall be extended to June 30, 2011.
3. Modification of Rent. The rents payable in monthly installments pursuant
to Paragraph 5 A of the Lease shall, for the first six (6) months beginning
January 1, 1997, be Two Hundred Fifty-Five Thousand, Forty-Forty Dollars
($255,044.00) and thereafter annually on July 1st of each of the next
<PAGE>
six (6) years consecutively following, such annual rent shall increase by Eleven
Thousand, Eight Hundred Sixty-Three Dollars ($11,863.00) over the annual rent
for the preceding year and thereafter for the remaining eight (8) years of the
term (beginning July 1, 2003) such annual rent shall increase by Five Thousand
Nine Hundred and Thirty-One Dollars ($5,931.00) over the annual rent for the
preceding lease year, provided further, nevertheless, if in any year (from July
1 to June 30) such annual rent increase is less than an amount equal to Fifty
Percent (50%) of the most recent authorized increase in the Reimbursement Rate,
(applied to the number of beds in the facility for a period of 365 days) the
increased rental for such year shall be an amount equal to Fifty Percent (50%)
of such increase in the Reimbursement Rate. The Reimbursement Rate is the
"Indirect Reimbursement Rate for Nursing Homes" or any similar measure of
reimbursement hereafter adopted as the same shall be increased by the North
Carolina Department of Human Resources or any successor agency. The intention of
the parties is that the increase in rent for each year shall be the larger of
(1) the specified increase ($11,863.00 for each of the next six (6) years
beginning July 1, 1997, and $5,931.00 for each of the following eight (8] years)
or (2) the amount obtained by applying to the number of beds in the facility for
a 365 day period, Fifty Percent (50%) of the increase in the Reimbursement Rate.
4. The parties acknowledge that the Property is subject to the lien of a
Deed of Trust and that the Lease is subject to a collateral assignment in favor
of Wachovia Bank of North Carolina, N.A., to secure certain financing associated
with the facility. Landlord warrants that the financing secured by deed of trust
lien on the Property and collateral assignment of the Lease in favor of Wachovia
Bank of North Carolina, N.A., is not in default and that Landlord has complied
with its obligations to said Bank with respect to this document.
5. Each party hereto covenants and represents to the other that it has the
power and has taken all necessary action to authorize the execution of this
document which is enforceable as to such party according to its terms. Except as
herein specifically modified, the Lease shall remain in full force and effect.
The consent given by Landlord hereunder does not waive the requirement for the
Landlord's advance consent with respect to future assignments, if any, and the
release of Assignor hereunder does not constitute a waiver of Landlord's right
to hold any tenant under said Lease secondarily liable after a permitted
assignment thereof.
6. The parties covenant and agree that all monies due and payable by
Assignee under separate contractual arrangements between them or their
affiliates as well as any subsequent management agreement pertaining to the
operation of the Property shall be subordinate to the Landlord's claims for
rent.
7. As an inducement for Landlord's execution hereof, Assignee and Manager
agree that Manager shall make timely payments of all rents due under the Lease
as hereby modified as a first priority from cash flows in the manner set forth
in ss.1.05 (b) of the Management Agreement; shall provide promptly to Landlord
copies of cost reports and surveys submitted to and/or received from
governmental or supervisory agencies, as well as copies of all reports required
to be provided to Assignee under S1.04 of the Management Agreement; and shall
give Landlord written notice of any default and/or termination of the Management
Agreement.
8. The parties agree that notices given under the Lease shall be as
follows:
If to Assignee (as Tenant of the Lease):
Charlotte Health Investors
c/o Charles F. Trefzger
<PAGE>
56 Third Street N.W.
Hickory, North Carolina 28601
If to Landlord: Elderberry Manor of Mecklenburg,
Limited Partnership
P. 0. Box 638
Lynchburg, Virginia 24505
IN WITNESS WHEREOF, the party of the first part has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
___________________, the party of the second part has caused this Agreement to
be executed in its name and on its behalf by its Managing Partner, and the party
of the third part has caused this Agreement to be executed in its name and on
its behalf by its General Partner, all as of this day and year first above
written:
TRANSITIONAL HEALTH PARTNERS,
a Delaware general partnership
By THS Partners I, Inc.,
General Partner
By: /s/ Randall J. Bufford
Randall J. Bufford
Vice President
CHARLOTTE HEALTH INVESTORS,
By: /s/ Charles F. Trefzger
Its Manager Partner
ELDERBERRY MANOR OF MECKLENBURG,
LIMITED PARTNERSHIP,
by Elderberry Nursing Home, Inc.,
Its General Partner
By: /s/ C. Lynch Christian, Jr.
C. Lynch Christian, Jr.
President
CENTENNIAL HEALTH CARE MANAGEMENT CORPORATION,
a Georgia corporation,
By: /s/ Randall J. Bufford
Randall J. Bufford
Vice President
<PAGE>
EXHIBIT "B"
The subject tract of land is irregular in shape and contains a total area
of 8.13 acres. The legal description as shown on Page 138 of Deed Book 6273 of
the Mecklenburg County Registry is as follows:
BEGINNING at N.C. Grid Coordinate (NAD 1983) N = 561195.004, E =
1470446.435, at or near the northern right of way line of Tom Hunter Road
and runs thence North 84-02-54 West 108.33 feet; thence North 09-32-47 West
398.70 feet to an iron; thence North 09-13-01 West 519.56 feet to an iron;
thence South 77-15-03 East 625.61 feet to an iron; thence South 14-07-12
East 244.94 feet to an iron; thence South 08-02-08 West 247.78 feet to an
iron; thence North 78-51-49 West 345.45 feet to an iron; thence South
06-10-25 West 365.16 feet to the point of BEGINNING and containing 8.13
acres as surveyed by Hanover Design Services, P.A., February, 1990. For
reference see Deeds recorded in Book 6088, Page 620, Book 3434, Page 918,
and Book 5115, Page 0088, of the Mecklenburg County Registry.
RESERVED AND EXCEPTED from the above described property a utilities
easement 20 feet in width, the western boundary line of said easement being
the western boundary line of the above-described tract and the eastern
boundary of said easement being at all points 20 feet East of said western
boundary. Said easement is non-exclusive and for the benefit of the Grantor
and Grantee herein and their successors.
This tract is somewhat irregular in shape and the main body of the land
lies approximately 365 feet north of Tom Hunter Road. There is 108.33 feet of
street frontage which is more than adequate to provide for an attractive entry
road to buildings located on the main body of the tract. The 20 foot wide
utility easement adjacent to the western property line should have no affect
upon the utility of this tract. Topographically, the land is at street grade and
moderately rolling. The extreme eastern side of the tract has a downward slope
to a small drainageway but this has no adverse affect upon the utility of the
land. There are no known adverse surface or subsurface soil conditions that
would affect the utility of this tract. Drainage is considered adequate due to
the sloping topography and the street drainage system. This land is not in a
designated flood plain and there are no nearby streams or other bodies of water
which would adversely affect the property. Very good access is provided by the
frontage on Tom Hunter Road and the surrounding street system.
Subject to all easements, rights of way, and reservations and restrictions
and other matters of record.
<PAGE>
EXHIBIT 10.3
NationsBank, N.A.
Promissory Note
Date: January 6, 1999
New Amount: $5,000,000.00 Maturity Date: March 31, 1999
- ------------------------------------------======================================
Bank: Borrower:
NationsBank, N.A. Centennial Healthcare Corporation
Banking Center: High Tech/Healthcare 400 Perimeter Center Terr. #650
600 Peachtree Street N.E. Atlanta, Georgia 30346
Atlanta, GA 30308
County: Fulton County: Fulton
- ------------------------------------------======================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of Five Million and No/100 Dollars ($5,000,000.00), or so much
thereof as may be advanced in immediately available funds, together with
interest computed daily on the outstanding principal balance hereunder, at an
annual interest rate, and in accordance with the payment schedule, indicated
below.
[This Note contains some provisions preceded by boxes. If a box is marked, the
provision applies to this transaction; if it is not marked, the provision does
not apply to this transaction.]
1. Rate.
See "Exhibit A" Interest Rate Option Provisions
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the State of Georgia;
if any higher rate ceiling is lawful, then that higher rate ceiling shall apply.
Any payment in excess of such maximum shall be refunded to Borrower or credited
against principal, at the option of Bank.
2. Accrual Method. Unless otherwise indicated, interest at the Rate set forth
above will be calculated by the actual/360 day method (a daily amount of
interest is computed for a hypothetical year of 360 days; that amount is
multiplied by the actual number of days for which any principal is outstanding
hereunder). If interest is not to be computed using this method, the method
shall be: _______________________.
3. Rate Change Date, Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rate changes. If the Rate is to change on any other date or at any other
interval, the change shall be: In the event any index is discontinued, Bank
shall substitute an index determined by Bank to be comparable, in its sole
discretion.
<PAGE>
4. Payment Schedule. All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or under any other loan
documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
Single Principal Payment. Principal shall be paid in full in a single payment on
March 31, 1999. Interest thereon shall be paid monthly, commencing on January
31, 1999, and continuing on the last day of each successive month, quarter or
other period (as applicable) thereafter, with a final payment of all unpaid
interest at the stated maturity of this Note.
5. Revolving: Feature.
[XI] Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate amount outstanding at any one time equal to the principal
amount of this Note, provided, that Borrower is not in default under any
provision of this Note, any other documents executed in connection with this
Note, or any other note or other loan documents now or hereafter executed in
connection with any other obligation of Borrower to Bank, and provided that the
borrowings hereunder do not exceed any borrowing base or other limitation on
borrowings by Borrower. Bank shall incur no liability for its refusal to advance
funds based upon its determination that any conditions of such further advances
have not been met. Bank records of the amounts borrowed from time to time shall
be conclusive proof thereof.
Uncommitted Facility. Borrower acknowledges and agrees that, notwithstanding
any provisions of this Note or any other documents executed in connection with
this Note, Bank has no obligation to make any advance, and that all advances are
at the sole discretion of Bank.
Out-Of-Debt Period. For a period of at least ________ consecutive days during
each fiscal year, any consecutive 12-month period, Borrower shall fully pay down
the balance of this Note, so that no amount of principal or interest and no
other obligation under this Note remains outstanding.
6. Automatic Payment.
[X] Borrower has elected to authorize Bank to affect payment of sums due under
this Note by means of debiting Borrower's account number ____________. This
authorization shall not affect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
such payment in full on the due date thereof, or if Bank fails to debit the
account.
7. Loan Fee.
[X] Upon the maturity of this Note, whether by demand, acceleration, or
otherwise, an administrative fee in the amount of $______ shall be due and
payable.
8. Waivers, Consents and Covenants. Borrower, any endorser or guarantor
hereof, or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
<PAGE>
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any endorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of Bank, or any indulgence shown by Bank (without
notice to or further assent from any of Obligors), and agree that no such
action, failure to act or failure to exercise any right or remedy by Bank shall
in any way affect or impair the obligations of any Obligors or be construed as a
waiver by Bank of, or otherwise affect, any of Bank's rights under this Note,
under any endorsement or guaranty of this Note or under any of the Loan
Documents; and (c) agree to pay, on demand, all costs and expenses of collection
or defense of this Note or of any endorsement or guaranty hereof and/or the
enforcement or defense of Bank's rights with respect to, or the administration,
supervision, preservation, or protection of, or realization upon, any property
securing payment hereof, including, without limitation, reasonable attorney's
fees, including fees related to any suit, mediation or arbitration proceeding,
out of court payment agreement, trial, appeal, bankruptcy proceedings or other
proceeding, in such amount as may be determined reasonable by any arbitrator or
court, whichever is applicable.
9. "Interest" Limited. As used in this Note and for the purposes of Section
7-4-2 of the Official Code of Georgia Annotated, or any successor thereto, the
term "interest" does not include any fees (including, but not limited to, the
Loan Fee) or other charges imposed on Borrower in connection with the
indebtedness evidenced by this Note, other than the interest described above.
10. Prepayments. Prepayments may be made in whole or in part at any time on any
loan for which the Rate is based on the Prime Rate or any other fluctuating Rate
or index which may change daily.
11. Delinquency Charge. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed two percent (2%) over otherwise
applicable rate of any payment that is more than fifteen days late.
12. Events of Default. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) an Event of Default exists under
that Credit Agreement dated as of July 31, 1998, as amended, the "Credit
Agreement".
13. Remedies upon Default. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor to
Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to two percent (2%) over otherwise
applicable rate (the "Default Rate"). The provisions herein for a Default Rate
shall not be deemed to extend the time for any payment hereunder or to
constitute a "grace period" giving Obligors a right to cure any default. At
<PAGE>
Bank's option, any accrued and unpaid interest, fees or charges may, for
purposes of computing and accruing interest on a daily basis after the due date
of the Note or any installment thereof, be deemed to be a part of the principal
balance, and interest shall accrue on a daily compounded basis after such date
at the Default Rate provided in this Note until the entire outstanding balance
of principal and interest is paid in full. Upon a default under this Note, Bank
is hereby authorized at any time, at its option and without notice or demand, to
set off and charge against any deposit accounts of any Obligor (as well as any
money, instruments, securities, documents, chattel paper, credits, claims,
demands, income and any other property, rights and interests of any Obligor),
which at any time shall come into the possession or custody or under the control
of Bank or any of its agents, affiliates or correspondents, any and all
obligations due hereunder. Additionally, Bank shall have all rights and remedies
available under each of the Loan Documents, as well as all rights and remedies
available at law or in equity.
14. Non-Waiver. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligors to Bank
in any other respect at any other time.
15. Applicable Law, Venue and Jurisdiction. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of Georgia. In any litigation in connection
with or to enforce this Note or any endorsement or guaranty of this Note or any
Loan Documents, Obligors, and each of them, irrevocably consent to and confer
personal jurisdiction on the courts of the State of Georgia or the United States
located within the State of Georgia and expressly waive any objections as to
venue in any such courts. Nothing contained herein shall, however, prevent Bank
from bringing any action or exercising any rights within any other state or
jurisdiction or from obtaining personal jurisdiction by any other means
available under applicable law.
16. Partial Invalidity. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or invalidity of any other
provision herein and the invalidity or unenforceability of any provision of this
Note or of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
17. Binding Effect. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without prior written consent of Bank.
18. Controlling Document. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
<PAGE>
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
19. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATEI) INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
HE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR: IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO 11) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT: OR (11) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (111) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPCIN SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
Borrower represents to Bank that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Centennial Healthcare Corporation
By: /s/ Alan Dahl (Seal)
Name: Alan Dahl
Title: Executive Vice President
By: /s/ Daryl Griswold (Seal)
Name: Daryl Griswold
Title: Assistant Secretary
<PAGE>
EXHIBIT A
INTEREST RATE OPTION PROVISIONS
THIS EXHIBIT A is attached to and forms a part of that certain PROMISSORY
NOTE (the "Note"), dated January 6, 1999, executed by Centennial Healthcare
Corporation, a Corporation ("Borrower"), and made payable to the order of
NationsBanks, N.A. ("Bank").
1. Borrower's Rates. On the terms and subject to the conditions set forth
below, Borrower will be able to select, from one of the following Rate Options,
an interest rate which will be applicable to a particular dollar increment of
amounts outstanding, or to be disbursed, under the Note: [check the available
options]
[X] The Prime Rate plus (the "Prime Rate Option");
[ ] The Treasury Securities Rate plus (the "Treasury Securities
Rate Option"); or
[X] The Eurodollar Daily Floating Rate, plus 2.75 (the
"Eurodollar Daily Floating Rate Option");
[ ] The Eurodollar Fixed Period Rate, plus (the "Eurodollar Fixed
Period Rate Option");
[ ] The CD Rate plus (the "CD Rate Option"); or
[ ] The Quoted Rate, plus (the "Quoted Rate Option");
[ ] The Transaction Rate of (the "Transaction Rate Option").
Interest based on the Prime Rate Option is a floating rate and will change on
and as of the date of a change in the Prime Rate. The period of time during
which the Prime Rate shall be applicable shall be a Prime Rate Interest Period.
Interest based on the Eurodollar Daily Floating Rate Option is a floating rate
and will change on and as of the date of a change in the Eurodollar Daily
Floating Rate. The period of time during which the
<PAGE>
Eurodollar Daily Floating Rate shall be applicable shall be a Eurodollar Daily
Floating Rate Interest Period. Interest based on the Treasury Securities Rate
Option will be fixed for periods of _ year(s) (each a "Treasury Securities
Interest Period"). Interest based on the Eurodollar Fixed Period Rate Option
will be fixed for periods of (each a "Eurodollar Fixed Interest Period").
Interest based on the CD Rate Option will be fixed for periods of (each a "CD
Interest Period"). Interest based on the Quoted Rate Option will be fixed for
periods of (each a "Quoted Interest Period"). Interest based on the Transaction
Rate Option will be fixed for periods of (each a "Transaction Interest Period").
The Treasury Securities Rate, the Eurodollar Fixed Period Rate, the CD Rate, the
Quoted Rate, and the Transaction Rate each being hereafter from time to time
referred to as a "Fixed Rate Option"). [See note below]
2. Selection of Applicable Interest Rate.
(a) Request. Borrower may request (a "Rate Request") that a $1.00
increment or any amount in excess thereof (an "Increment") of the outstanding
principal of, or amounts to be disbursed under, the Note bear interest at the
Prime Rate Option, the Eurodollar Daily Floating Rate Option, the Treasury
Securities Rate Option, the Eurodollar Fixed Period Rate Option, the CD Rate
Option, the Quoted Rate Option or the Transaction Rate Option, as applicable, by
telephonic notice no later than 10:00 a.m. (Eastern time) a sufficient (in
Bank's sole discretion) number of Business Days prior to the effective date of
the Rate Request to permit Bank to quote the rate requested.
(b) Applicable Interest Rates. Borrower's Rate Request will become
effective, and interest on the Increment designated will be calculated at the
rate (the "Effective Rate") requested by Borrower for the applicable Interest
Period, subject to the following:
(i) Notwithstanding any Rate Request, interest shall be calculated on
the basis of the Prime Rate Option if (a) Bank, in good faith, is unable to
ascertain the requested Fixed Rate Option by reason of circumstances then
affecting the applicable money market or otherwise, (b) it becomes unlawful or
impracticable for the Bank to maintain loans based upon the requested Fixed Rate
Option, or (c) Bank, in good faith, determines that it is impracticable to
maintain loans based on the requested Fixed Rate Option because of increased
taxes, regulatory costs, reserve requirements, expenses or any other costs or
charges that affect such Interest Rate Options. Upon the occurrence of an of the
above events, any Increment to which a requested Fixed Rate Option applies,
shall be ________________________________.
(ii) Borrower may have no more than a total of One (1) Effective Rates
applicable to amounts outstanding under the Note at any given time.
(iii) A Rate Request shall be effective as to amounts to be disbursed
under the Note only if, on the effective date of the Rate Requests, such amounts
are in fact disbursed to or for the account of the Borrower in accordance with
the provisions of the Note and any related loan documents.
(iv) Any amounts of outstanding principal for which a Rate Request has
not been made, or is otherwise not effective, shall bear interest until paid in
full at the Prime Rate Option.
(v) Any amounts of outstanding principal bearing interest based upon a
Fixed Rate Option shall bear interest at such rate until the end of the Interest
Period therefor, and thereafter shall bear interest based upon the Prime Rate
Option unless a new Rate Request for a Fixed Rate Option complying with the
terms hereof has been made and has become effective.
<PAGE>
(vi) If Borrower shall be in default under the Note ("Default"), then
Bank shall no longer be obligated to honor any Rate Requests.
(vii) No Fixed Rate Interest Period shall extend beyond the maturity
date of the Note.
(c) Repayment. Principal and Interest shall be payable according to the terms
of the Promissory Note dated January 6, 1999 in the Principal amount of
$5,000,000.00.
[ ] For any Interest Period during which the Prime Rate is applicable to any of
the outstanding principal, interest thereon shall be payable and continuing on
the day of each successive month, quarter or other period (as applicable)
thereafter, with a final payment of all accrued and unpaid interest on the last
day of such Interest Period.
[ ] For any Interest Period during which the Quoted Rate is applicable to any
of the outstanding principal, interest thereon shall be payable and continuing
on the day of each successive month, quarter or other period (as applicable)
thereafter, with a final payment of all accrued and unpaid interest on the last
day of such Interest Period.
[ ] For any Interest Period during which the Transaction Rate is applicable to
any of the outstanding principal, interest thereon shall be payable and
continuing on the day of each successive month, quarter or other period (as
applicable) thereafter, with a final payment of all accrued and unpaid interest
on the last day of such Interest Period.
[ ] For any Interest Period during which the Eurodollar Daily Floating Rate is
applicable to any of the outstanding principal, interest thereon shall be
payable and continuing on the day of each successive month, quarter, or other
period (as applicable) thereafter, with a final payment of all accrued and
unpaid interest on the last day of such Interest Period.
[ ] For any Interest Period during which the Eurodollar Fixed Period Rate is
applicable to any of the outstanding principal, all accrued and unpaid interest
thereon shall be payable on the last day of each applicable Interest Period and,
in the case of an Interest Period greater than three months, at three month
intervals after the first day of such Interest Period.
[ ] For any Interest Period during which the CD Rate is applicable to any of
the outstanding principal, all accrued and unpaid interest thereon shall be
payable on the last day of each applicable Interest Period and, in the case of
an Interest Period greater than 90 days, at 90 day intervals after the first day
of such Interest Period.
[ ] For any Interest Period during which the Treasuries Securities Rate is
applicable to any outstanding principal, interest thereon shall be payable and
continuing on the day of each successive month, quarter or other period (as
applicable) thereafter, with a final payment of all accrued and unpaid interest
on the last day of such Interest Period.
3. Defined Terms. The following terms as used in this Exhibit A shall have
the following meanings:
"Business Day" shall mean a day on which Bank is open for business and
dealing in deposits in Atlanta, Georgia.
<PAGE>
"Treasury Securities Rate" shall mean the rate of interest per annum
determined by Bank, in accordance with its customary general practice from time
to time, to be the weekly average yield on all United States Treasury Securities
adjusted to a constant maturity for a term comparable to such Interest Period,
as most recently reported by the Federal Reserve System in the weekly Federal
Reserve Statistical Release No. H-15(519), entitled "Selected Interest Rates"
(or any succeeding publication)(the "Treasury Securities Rate") adjusted from
time to time in Bank's sole discretion for then applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs.
"CD Rate" shall mean the rate of interest per annum (rounded upwards, if
necessary, to the next higher 1/16 of 1%) determined by Bank, in accordance
with its customary general practice from time to time, paid from time to time by
major banks on negotiable certificates of deposit (secondary market) in amounts
of $100,000.00 or more for a term comparable to such Interest Period, as most
recently reported by the Federal Reserve System in the weekly Federal Reserve
Statistical Release No. H-15(519), entitled "Selected Interest Rates" (or an
succeeding publication (rounded upwards, if necessary to the nearest 1/100 of
1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate
for deposits in Dollars at approximately one 1:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, as adjusted from
time to time in Bank's sole discretion for then applicable reserve requirements,
deposit insurance assessment rates and other regulatory costs; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"Eurodollar Daily Floating Rate" shall mean the fluctuating rate of
interest equal to the One, Two, or Three Month rate of interest (rounded
upwards, if necessary to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the One, Two, or Three month London interbank
offered rate for deposits in Dollars at approximately one 1:00 a.m. (London
time) on the second preceding Business Day, as adjusted from time to time in
Bank's sole discretion for then applicable reserve requirements, deposit
insurance assessment rates and other regulatory costs. If for any reason such
rate is not available, the term "Eurodollar Daily Floating Rate" shall mean the
fluctuating rate of interest equal to the One, Two, or Three month rate of
interest (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing
on Reuters Screen LIBO Page as the One, Two, or Three month London interbank
offered rate for deposits in Dollars at approximately one 1:00 a.m. (London
time) on the second preceding Business Day, as adjusted from time to time in
Bank's sole discretion for then applicable reserve requirements, deposit
insurance assessment rates and other regulatory costs; provided, however, if
more than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates.
"Prime Rate" is the fluctuating rate of interest established by Bank from
time to time, at its discretion, whether or not such rate shall be otherwise
published. The Prime Rate is established by Bank as an index and may or may not
at any time be the best or lowest rate charged by Bank on any loan.
<PAGE>
"Quoted Rate" shall mean a fixed rate of interest per annum agreed upon by
the Bank and Borrower on or prior to the first day of the Interest Period for
which such rate shall be in effect.
"Transaction Rate" shall mean the fixed rate of __% per annum.
4. Notices; Authority to Act. Borrower acknowledges and agrees that the
agreement of Bank herein to receive certain notices by telephone is solely for
the convenience of Borrower. Bank shall be entitled to rely on the authority of
the person purporting to be a person authorized by Borrower to give such notice,
and Bank shall have no liability to Borrower on account of any action taken by
Bank in reliance upon such telephonic notice. The obligation of Borrower to
repay all sums owing under the Note shall not be affected in any way or to any
extent by any failure by Bank to receive written confirmation of any telephonic
notice or the receipt by Bank of a confirmation which is at variance with the
terms understood by Bank to be contained in the telephonic notice.
IN WITNESS WHEREOF, the parties hereto have executed this Exhibit A to Note as
of the ___ day of, 19__.
Borrower: Centennial Healthcare Corporation
By: /s/ Alan C. Dahl
By: Alan C. Dahl
Bank: NationsBanks, N.A.
By: /s/ Walter Bland
By: Walter Bland
Note: LIBOR and Eurodollar should be quoted in terms of months (i.e. one, two,
three or six months) and not days (i.e. 30, 60, 90 or 1 80 days). There is no
automatic way to accrue interest on Quoted rate or Transaction Rate,
calculations must be done manually.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
10Q PERIOD ENDING MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,991
<SECURITIES> 0
<RECEIVABLES> 109,845
<ALLOWANCES> (4,900)
<INVENTORY> 0
<CURRENT-ASSETS> 115,067
<PP&E> 96,140
<DEPRECIATION> (21,338)
<TOTAL-ASSETS> 287,612
<CURRENT-LIABILITIES> (59,589)
<BONDS> (113,579)
0
0
<COMMON> (119)
<OTHER-SE> (114,176)
<TOTAL-LIABILITY-AND-EQUITY> (287,612)
<SALES> 0
<TOTAL-REVENUES> (98,045)
<CGS> 0
<TOTAL-COSTS> 94,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 362
<INTEREST-EXPENSE> 2,498
<INCOME-PRETAX> (1,171)
<INCOME-TAX> 480
<INCOME-CONTINUING> (691)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (612)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
<PAGE>
EXHIBIT 99.1
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q, including information set forth under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations" constitute "Forward-Looking Statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "1933 Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act").
The Company desires to take advantage of certain "safe harbor" provisions of the
1933 Act and 1934 Act and is including this reference to enable the Company to
do so. Forward-looking statements included in this Form 10-Q or in documents
incorporated by reference, or hereafter included in other publicly available
documents filed with the Securities and Exchange Commission, reports to the
Company's stockholders and other publicly available statements issued or
released by the Company involve known and unknown risks, uncertainties, and
other factors which could cause the Company's actual results, performance
(financial or operating) or achievements to differ materially from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. The Company believes the following
risks, uncertainties and other factors could cause such material differences to
occur:
1. The Company's ability to continue to grow through the acquisition and
development of long-term care facilities or the acquisition of ancillary
businesses.
2. The Company's ability to identify suitable acquisition candidates or to
profitably operate or successfully integrate acquired operations into the
Company's other operations.
3. The occurrence of changes in the mix of payment sources utilized by the
Company's patients to pay for the Company's services.
4. The adoption of cost containment measures by private pay sources such as
commercial insurers and managed care organizations, as well as efforts by
governmental reimbursement sources to impose cost containment measures.
5. Changes in the United States health care system, including the Balanced
Budget Act of 1997, changes in reimbursement levels under Medicaid and Medicare,
and other changes in applicable government regulations that might affect the
profitability of the Company.
6. The Company's continued ability to operate in a heavily regulated
environment and to satisfy regulatory authorities, thereby avoiding a number of
potentially adverse consequences, such as the imposition of fines, temporary
suspension of admission of patients, restrictions on the ability to acquire new
facilities, suspension or decertification from Medicaid or Medicare programs,
and in extreme cases, revocation of a facility's license or the closure of a
facility, including as a result of unauthorized activities by employees.
<PAGE>
7. The Company's ability to secure the capital and the related cost of such
capital necessary to fund its future growth through acquisition and development,
as well as internal growth.
8. Changes in certificate of need laws that might increase competition in the
Company's industry, including, particularly, in the states in which the Company
currently operates or anticipates operating in the future.
9. Changes in federal or state legislation or budgetary controls that may
negatively impact the amount and method of Medicaid payments, especially in
North Carolina, Michigan and Indiana, in which states a majority of the
Company's facilities are located.
10. The Company's ability to staff its facilities appropriately with qualified
health care personnel (including administrators), including in times of
shortages of such personnel and to maintain a satisfactory relationship with
labor unions.
11. The level of competition in the Company's industry, including without
limitation, increased competition from acute care hospitals, providers of
assisted and independent living and providers of home health care and changes in
the regulatory system in the states in which the Company operates that
facilitate such competition.
12. The continued availability of insurance for the inherent risks of liability
of providing services in the health care industry.
13. Price increases in medical supplies, durable medical equipment and other
items.
14. The Company's reputation for delivering high-quality care and its ability
to attract and retain patients, including patients with relatively high acuity
levels.
15. Changes in general economic conditions, including changes that pressure
governmental reimbursement sources to reduce the amount and scope of health care
coverage.
16. The Company's ability to achieve required reductions in expenses or reach
required levels of revenue as PPS is fully implemented.
The foregoing review of significant factors should not be construed as
exhaustive or as an admission regarding the adequacy of disclosures previously
made by the Company.
