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FILE NO. 001-14057
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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AMENDMENT NO. 1
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
VENCOR HEALTHCARE, INC.
(which will change its name to Vencor, Inc. immediately prior to the
Distribution referred to herein)
(Exact Name of Registrant as it appears in its Charter)
DELAWARE 61-1323993
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3300 AEGON CENTER, 400 WEST MARKET STREET 40202
LOUISVILLE, KENTUCKY (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (502) 596-7300
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
COMMON STOCK, PAR VALUE $.25 PER SHARE NEW YORK STOCK EXCHANGE
Securities to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
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ITEM 1. BUSINESS.
The information required by this item is contained under the captions
"Summary--Business of Realty Company and Operating Company After the
Distribution," "Business of Operating Company After the Distribution,"
"Relationship Between Realty Company and Operating Company After the
Distribution" and "The Company and Operating Company Summary Selected
Financial Data" of the Proxy Statement on Schedule 14A of Vencor, Inc., a
Delaware corporation and sole stockholder of Vencor Healthcare, Inc., a
Delaware corporation (the "Registrant"), dated March 25, 1998 (the "Proxy
Statement"), included herewith as Exhibit 2.1, and such sections are
incorporated herein by reference. The references in the Proxy Statement to
Operating Company shall be deemed to refer to the Registrant.
ITEM 2. FINANCIAL INFORMATION.
The information required by this item is contained under the caption
"Summary--The Company and Operating Company Selected Historical Financial
Data," "Operating Company Selected Unaudited Pro Forma Consolidated Financial
Data and Comparative Per Share Data," "The Company and Operating Company
Summary Selected Historical Financial Data," "Distribution and Dividend
Policy," "Operating Company Unaudited Pro Forma Consolidated Financial
Statements," "Operating Company Unaudited Pro Forma Consolidated Statement of
Income for the Year Ended December 31, 1997," "Operating Company Unaudited Pro
Forma Consolidated Balance Sheet December 31, 1997," "Operating Company Notes
to Unaudited Pro Forma Consolidated Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Operating Company" and "Risk Factors" of the Proxy Statement, and such
sections are incorporated herein by reference.
ITEM 3. PROPERTIES.
The information required by this item is contained under the captions
"Relationship Between Realty Company and Operating Company After the
Distribution--Master Lease Agreement, --Development Agreement, and --
Participation Agreement," "Business of Operating Company After the
Distribution--Hospital Facilities and --Nursing Center Facilities" and
"Business of Realty Company After the Distribution--The Properties and --
Properties Under Development by Operating Company" of the Proxy Statement, and
such sections are incorporated herein by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is contained under the caption
"Security Ownership of Certain Beneficial Owners of Company Common Stock--
Operating Company" of the Proxy Statement, and such section is incorporated
herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this item is contained under the caption
"Management of the Company and Management of Realty Company and Operating
Company After the Distribution--Operating Company" of the Proxy Statement, and
such section is incorporated herein by reference.
ITEM 6. EXECUTIVE COMPENSATION.
The information required by this item is contained under the caption
"Management of the Company and Management of Realty Company and Operating
Company After the Distribution--The Company and--Operating Company" of the
Proxy Statement, and such sections are incorporated herein by reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is contained under the caption
"Management of the Company and Management of Realty Company and Operating
Company After the Distribution" of the Proxy Statement, and such section is
incorporated herein by reference.
2
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ITEM 8. LEGAL PROCEEDINGS.
The information required by this item is contained under the caption
"Relationship Between Realty Company and Operating Company After the
Distribution--Legal Proceedings" of the Proxy Statement, and such section is
incorporated herein by reference.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS.
The information required by this item is contained under the captions "Risk
Factors--Uncertainty of Trading Markets--Operating Company Common Stock and --
No Payment of Dividends by Operating Company," "Distribution and Dividend
Policy--Operating Company," "Management of the Company and Management of
Realty Company and Operating Company After the Distribution" and "Description
of Capital Stock--Operating Company" of the Proxy Statement, and such sections
are incorporated herein by reference; provided, however, that the disclosure
in the Proxy Statement under the caption "Management of the Company and
Management of Realty Company and Operating Company After the Distribution--
Operating Company--Operating Company Incentive and Benefit Plans--Operating
Company Management Equity Ownership Program" is not incorporated herein by
reference.
In connection with the Reorganization Transactions and the Distribution (as
such terms are defined and described in the Proxy Statement), the Registrant
will issue to Vencor, Inc. 17,700 shares of 6% Series A Non-Voting Convertible
Preferred Stock (the "Series A Preferred Stock") of the Registrant for $1,000
per share, for an aggregate purchase price of $17,700,000. Vencor, Inc. is
expected to sell all of the Series A Preferred Stock of the Registrant to
approximately 36 employees of the Registrant or its subsidiaries immediately
prior to the Distribution on the same terms as it purchased the Series A
Preferred Stock from the Registrant.
The Series A Preferred Stock will be convertible into that number of shares
of common stock, par value $.25 per share, of the Registrant (the "Common
Stock") equal to $1,000 (the principal amount per share), divided by 118% of
the Fair Market Value of the Common Stock on the Distribution Date. Fair
Market Value, for purposes of the Series A Preferred Stock, means the average
of the high and low price of Common Stock on the Distribution Date. The Series
A Preferred Stock is expected to be mandatorily redeemable on the tenth
anniversary of issuance and will not be callable prior to the third
anniversary of issuance. The dividend rate is expected to be 6%, payable
annually in arrears, and the Series A Preferred Stock will not be convertible
into Common Stock prior to the second anniversary of issuance. The Series A
Preferred Stock will have no voting rights, unless otherwise required by law.
In the event of certain changes in capitalization of the Registrant,
including stock dividends and splits, reclassifications, spin-offs, split-ups,
combinations or exchanges of shares, and certain distributions and repurchases
of shares, the number and kind of shares into which the Series A Preferred
Stock will be converted will be appropriately adjusted.
The Registrant is expected to loan eligible employees who purchase the
Series A Preferred Stock from Vencor, Inc., on a recourse basis, up to 90% of
the purchase price of the Series A Preferred Stock so purchased. The loan will
be for a term of five years, and shall bear interest, payable annually, at the
lowest rate required so that the eligible employee will not realize any
imputed income under Section 7872 of the Internal Revenue Code of 1986, as
amended. Each borrower will be required to pledge as collateral for the loan
the number of shares of Series A Preferred Stock with an initial fair market
value equal to the amount borrowed.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
On March 27, 1998, as part of its original incorporation, the Registrant
issued 100 shares of its Common Stock, for a total consideration of $1,000, to
Vencor, Inc., which is and will be the Registrant's sole stockholder until the
Distribution Date as defined and described in the Proxy Statement under the
caption "The Reorganization Proposal and the Distribution Proposal," and such
section is incorporated herein by reference. Subsequent to the Distribution,
Vencor, Inc. will hold no capital stock of the Registrant.
3
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ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The information required by this item is contained under the caption
"Description of Capital Stock--Operating Company" of the Proxy Statement and
such section is incorporated herein by reference.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The information required by this item is contained under the caption
"Liability and Indemnification of Officers and Directors of Operating Company"
of the Proxy Statement, and such section is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is identified in the section "Index to
Consolidated Financial Statements and Financial Statement Schedules" beginning
on page F-1 of the Proxy Statement (the Registrant will be the successor to
the financial statements of Vencor, Inc. following the Reorganization
Transactions and the Distribution), and such information is incorporated
herein by reference.
ITEM 14. DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The information required by this item is contained in the section "Index to
Consolidated Financial Statements and Financial Statement Schedules" beginning
on page F-1 of the Proxy Statement, and such information is incorporated
herein by reference.
(b) Exhibits
The following documents are filed as exhibits hereto:
<TABLE>
<C> <S>
EXHIBIT
NO. DESCRIPTION
2.1 Proxy Statement of Vencor, Inc., dated March 25, 1998*
Form of Restated Certificate of Incorporation of Vencor Healthcare,
3.1 Inc.*
3.2 Form of Amended and Restated By-laws of Vencor Healthcare, Inc.*
10.1 Form of Agreement and Plan of Reorganization between Vencor, Inc. and
Vencor Healthcare, Inc. (included as Appendix A to the Proxy Statement
filed as Exhibit 2.1)*
Form of Distribution Agreement between Vencor, Inc. and Vencor
10.2 Healthcare, Inc.*
Form of Master Lease Agreement between Vencor, Inc. and Vencor
10.3 Healthcare, Inc.
Form of Development Agreement between Vencor, Inc. and Vencor
10.4 Healthcare, Inc.
Form of Participation Agreement between Vencor, Inc. and Vencor
10.5 Healthcare, Inc.
21.1 List of Subsidiaries of Vencor Healthcare, Inc.*
</TABLE>
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* Previously filed
4
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
VENCOR HEALTHCARE, INC.
/s/ W. Bruce Lunsford
By: _________________________________
W. Bruce Lunsford
Chairman of the Board, President
and Chief Executive Officer
Date: April 27, 1998
5
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
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<C> <S> <C>
Proxy Statement of Vencor, Inc., dated as of March 25,
2.1 1998*
Form of Restated Certificate of Incorporation of Vencor
3.1 Healthcare, Inc.*
Form of Amended and Restated By-laws of Vencor Healthcare,
3.2 Inc.*
10.1 Form of Agreement and Plan of Reorganization between
Vencor, Inc. and Vencor Healthcare, Inc. (included as
Appendix A to the Proxy Statement filed as Exhibit 2.1)*
Form of Distribution Agreement between Vencor, Inc. and
10.2 Vencor Healthcare, Inc.*
Form of Master Lease Agreement between Vencor, Inc. and
10.3 Vencor Healthcare, Inc.
Form of Development Agreement between Vencor, Inc. and
10.4 Vencor Healthcare, Inc.
Form of Participation Agreement between Vencor, Inc. and
10.5 Vencor Healthcare, Inc.
21.1 List of Subsidiaries of Vencor Healthcare, Inc.*
</TABLE>
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* Previously filed.
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EXHIBIT 10.3
M A S T E R L E A S E A G R E E M E N T
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G E N E R A L T E R M S A N D C O N D I T I O N S
DATED AS OF APRIL 30, 1998
FOR LEASE EXECUTED BY
VENCOR, INC., FIRST HEALTHCARE CORPORATION,
NATIONWIDE CARE INC. and VENTAS REALTY LIMITED PARTNERSHIP
[and applicable FHC subs]
AS LESSOR
AND
VENCOR HEALTHCARE, INC.
AND
VENCOR OPERATING, INC.,
as TENANT
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TABLE OF CONTENTS
ARTICLE I
Section 1.1. Leased Property; Term..................................1
Section 1.2. Term...................................................2
ARTICLE II
Section 2.1. Definitions............................................2
ARTICLE III
Section 3.1. Rent..................................................10
Section 3.2. Net Lease.............................................12
ARTICLE IV
Section 4.1. Payment of Impositions................................13
Section 4.2. Notice of Impositions.................................13
Section 4.3. Adjustment of Impositions.............................14
ARTICLE V
Section 5.1. No Termination, Abatement, etc........................14
ARTICLE VI
Section 6.1. Ownership of the Leased Property......................14
Section 6.2. Tenant's Personal Property............................15
ARTICLE VII
USE OF THE APPLICABLE LEASED PROPERTY
Section 7.1. Condition of the Leased Property......................15
Section 7.2. Use of the Leased Property............................16
Section 7.3. Lessor to Grant Easements, etc........................17
Section 7.4. Lessor and Tenant to Execute Lease Supplement.........17
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ARTICLE VIII
Section 8.1. Compliance with Legal and Insurance Requirements,
Instruments, etc....................................18
Section 8.2. Legal Requirement Covenants..........................18
ARTICLE IX
Section 9.1. Maintenance and Repair...............................19
Section 9.2. Encroachments, Restrictions, etc.....................20
ARTICLE X
Section 10.1. Construction of Capital Additions to the Leased
Property............................................21
Section 10.2. Capital Additions Financed by Tenant.................21
Section 10.3. Capital Additions Financed by Lessor.................22
Section 10.4. Non-Capital Additions................................24
Section 10.5. Salvage..............................................25
Section 10.6. Requirements for all Capital Additions and
Non-Capital Additions...............................25
Section 10.7. Mortgagee's Consent..................................26
ARTICLE XI
Section 11.1. Liens................................................26
ARTICLE XII
Section 12.1. Permitted Contests...................................27
ARTICLE XIII
Section 13.1. General Insurance Requirements.......................27
Section 13.2. Replacement Cost.....................................29
Section 13.3. Additional Insurance.................................29
Section 13.4. Waiver of Subrogation................................30
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Section 13.5. Form Satisfactory, etc...............................30
Section 13.6. Increase in Limits...................................30
Section 13.7. Blanket Policy.......................................30
Section 13.8. No Separate Insurance................................31
ARTICLE XIV
Section 14.1. Insurance Proceeds...................................31
Section 14.2 Reconstruction in the Event of Damage or
Destruction Covered by Insurance....................31
Section 14.3. Reconstruction in the Event of Damage or Destruction
Not Covered by Insurance............................32
Section 14.4. Tenant's Property....................................32
Section 14.5. Restoration of Tenant's Property.....................33
Section 14.6. No Abatement of Rent.................................33
Section 14.7. Restoration..........................................33
Section 14.8. Termination of Rights of First Refusal...............34
Section 14.9. Waiver...............................................34
ARTICLE XV
CONDEMNATION
Section 15.1. Definitions..........................................34
Section 15.2. Parties' Rights and Obligations......................35
Section 15.3. Total Taking.........................................35
Section 15.4. Partial Taking.......................................35
Section 15.5. Restoration..........................................35
Section 15.6. Award-Distribution...................................35
Section 15.7. Temporary Taking.....................................36
ARTICLE XVI
Section 16.1. Events of Default....................................36
Section 16.2. Certain Remedies.....................................38
Section 16.3. Damages..............................................39
Section 16.4. Tenant's Obligation to Purchase......................40
Section 16.5. Waiver...............................................40
Section 16.6. Application of Funds.................................40
Section 16.7. Notice to Lessor.....................................41
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ARTICLE XVII
Section 17.1. Lessor's Right to Cure Tenant's Default..............41
ARTICLE XVIII
Section 18.1. Provisions Relating to Purchase of the Leased
Property............................................41
ARTICLE XIX
Section 19.1. Renewal Terms........................................42
ARTICLE XX
Section 20.1. Holding Over.........................................42
ARTICLE XXI
SUBORDINATION
Section 21.1. Subordination........................................43
Section 21.2. Attornment...........................................43
Section 21.3. Mortgagee Cure Rights................................44
Section 21.4. Modifications........................................44
ARTICLE XXII
Section 22.1. Notice to Lessor.....................................45
Section 22.2. Definitions..........................................45
Section 22.3. Consent of Leasehold Mortgagee Required..............45
Section 22.4. Default Notice.......................................45
Section 22.5. Procedure for Foreclosure on Default.................46
Section 22.6. Assignment or Transfer in Lieu of Foreclosure........46
Section 22.7. New Lease............................................47
Section 22.8. New Lease Properties.................................48
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Section 22.9. Legal Proceedings....................................49
Section 22.10. Future Amendments....................................49
Section 22.11. Estoppel Certificate.................................49
Section 22.12. Notices..............................................49
Section 22.13. Erroneous Payments...................................50
ARTICLE XXIII
Section 23.1. Risk of Loss.........................................50
ARTICLE XXIV
Section 24.1. Indemnification......................................50
ARTICLE XXV
Section 25.1. Subletting and Assignment............................51
Section 25.2. Attornment...........................................54
Section 25.3. Sublease Limitation..................................55
ARTICLE XXVI
Section 26.1. Officer's Certificates and Financial Statements......55
ARTICLE XXVII
Section 27.1. Lessor's Right to Inspect............................56
ARTICLE XXVIII
Section 28.1. No Waiver............................................56
ARTICLE XXIX
Section 29.1. Remedies Cumulative..................................56
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ARTICLE XXX
Section 30.1. Acceptance of Surrender..............................57
ARTICLE XXXI
Section 31.1. No Merger of Title...................................57
ARTICLE XXXII
Section 32.1. Conveyance by Lessor.................................57
ARTICLE XXXIII
Section 33.1. Quiet Enjoyment......................................57
ARTICLE XXXIV
Section 34.1. Notices..............................................58
ARTICLE XXXV
Section 35.1. Appraisers...........................................59
ARTICLE XXXVI
Section 36.1. General REIT Provisions..............................60
ARTICLE XXXVII
Section 37.1. First Refusal to Purchase............................61
Section 37.2. Lessor's Option to Purchase the Tenant's Personal
Property............................................62
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ARTICLE XXXVIII
Section 38.1. Lessor May Grant Liens.............................62
ARTICLE XXXIX
Section 39.1. Environmental Indemnity............................63
ARTICLE XL
MISCELLANEOUS
Section 40.1. _________..........................................63
Section 40.2. _________..........................................64
Section 40.3. _________..........................................64
Section 40.4. _________..........................................65
Section 40.5. _________..........................................65
Section 40.6. _________..........................................65
Section 40.7. _________..........................................65
Section 40.8. _________..........................................65
Section 40.9. __________.........................................66
Section 40.10. _________.........................................66
Section 40.11. _________.........................................66
Section 40.12. _________.........................................66
Section 40.13. Louisiana Provisions..............................66
Section 40.14. _________.........................................66
Section 40.15. _________.........................................66
Section 40.16. Lessor Consents...................................66
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ARTICLE XLI
Section 41.1.Memorandum of Lease..................................67
LIST OF EXHIBITS
Exhibit A - Legal Description of the Land
Exhibit B - Lessor/Term/Commencement Date/Expiration Date
Exhibit C - Minimum Rent
Exhibit D - Renewal Groups
Exhibit E - Minimum Repurchase Price
Exhibit F - Basis for Appraisal
Exhibit G - Form of Guaranty
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MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, GENERAL TERMS AND CONDITIONS (hereinafter
this "Lease" or this "Master Lease") is dated as of the 30/th/ day of April,
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1998, and is between VENCOR, INC. (which will change its name to "Ventas,
Inc."), a Delaware corporation, FIRST HEALTHCARE CORPORATION, NATIONWIDE CARE,
INC., VENTAS REALTY LIMITED PARTNERSHIP [and applicable subs of FHC]
(collectively, "Lessor"), each having its principal office at 400 West Market
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Street, Suite 3300, Aegon Center, Louisville, Kentucky 40202, and VENCOR
HEALTHCARE, INC (which will change its name to "Vencor, Inc.") together with its
permitted assigns, including VENCOR OPERATING, INC. ("Tenant"), a Delaware
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corporation, having its principal offices at 400 West Market Street, Suite 3300,
Aegon Center, Louisville, Kentucky 40202.
RECITALS
Lessor has agreed to lease to Tenant and Tenant has agreed to lease from
Lessor certain parcels of real property and improvements, each for use and
operation for the provision of healthcare services and related uses, which are
identified on Exhibit A hereto.
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NOW, THEREFORE, in consideration of the foregoing, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessor and Tenant hereby agree as follows:
ARTICLE I
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Section 1.1. Leased Property; Term
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Upon and subject to the terms and conditions hereinafter set forth,
Lessor leases to Tenant and Tenant leases from Lessor all of Lessor's rights and
interest in and to each of the parcels of real property described in Exhibit A
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attached hereto (each a "Leased Property" and, collectively, the "Leased
--------------- ------
Properties") and, for each Leased Property all of the following:
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(i) the tracts, pieces and parcels of land, as more
particularly described in Exhibit A (collectively, the "Land"),
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(ii) all buildings, structures, Fixtures (as hereinafter
defined) and other improvements of every kind including, but not
limited to, alleyways and connecting tunnels,
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sidewalks, utility pipes, conduits and lines (on-site and off-site),
parking areas and roadways appurtenant to such buildings and
structures presently situated upon the Land and Capital Additions
financed by Lessor (collectively, the "Leased Improvements"),
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(iii) all easements, rights and appurtenances relating to
the Land and the Leased Improvements, and
(iv) all permanently affixed equipment, machinery, fixtures,
and other items of real and/or personal property, including all
components thereof, now and hereafter located in, on or used in
connection with, and permanently affixed to or incorporated into the
Leased Improvements, including, without limitation, all furnaces,
boilers, heaters, electrical equipment, heating, plumbing, lighting,
ventilating, refrigerating, incineration, air and water pollution
control, waste disposal, air-cooling and air-conditioning systems and
apparatus, sprinkler systems and fire and theft protection equipment,
and built-in oxygen and vacuum systems, all of which to the greatest
extent permitted by law, are hereby deemed by the parties hereto to
constitute real estate, together with all replacements, modifications,
alterations and additions thereto, but specifically excluding all
items included within the category of Tenant's Personal Property as
defined in Article II below (collectively the "Fixtures"),
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SUBJECT, HOWEVER, to all covenants, conditions, restrictions, easements and
other matters affecting the applicable Leased Property, whether or not of
record, provided, however, that the foregoing will not interfere with the
Primary Intended Use of the applicable Leased Property ("Permitted
---------
Encumbrances").
Section 1.2. Term. To have and to hold for (1) a fixed term (the
----
"Fixed Term") commencing on the Commencement Date set forth in Exhibit B
- ----------- ---------
opposite the applicable Leased Property and ending at midnight on the Expiration
Date so set forth in Exhibit B, and (2) the Extended Terms provided for in
---------
Article XIX, unless this Master Lease is sooner terminated as hereinafter
provided.
ARTICLE II
----------
Section 2.1. Definitions. For all purposes of this Master Lease,
-----------
except as otherwise expressly provided or unless the context otherwise requires,
(i) the terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular, (ii) all accounting
terms not otherwise defined herein have
2
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the meanings assigned to them in accordance with generally accepted accounting
principles as at the time applicable, (iii) all references in this Master Lease
to designated "Articles," "Sections" and other subdivisions are to the
designated Articles, Sections and other subdivisions of this Master Lease and
(iv) the words "herein," hereof" and "hereunder" and other words of similar
import refer to this Master Lease as a whole and not to any particular Article,
Section or other subdivision:
Additional Charges: As defined in Article III.
------------------
Affiliate: means, with respect to any Person, any other Person directly
---------
or indirectly controlling (including, but not limited to, all partners,
directors, officers and members of such Person), controlled by or under direct
or indirect common control with any such Person. A Person shall be deemed to
control a corporation, a partnership, a trust, or a limited liability company if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such person, through the ownership
of voting securities, partnership interests or other equity interests.
Award: As defined in Article XV.
-----
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which
------------
is not a day on which national banks in the City of New York, New York are
authorized, or obligated, by law or executive order, to close.
Capital Additions: One or more new buildings, or one or more additional
-----------------
structures annexed to any portion of any of the Leased Improvements with respect
to the applicable Leased Property, or the material expansion of the existing
improvements, which are constructed on any parcel or portion of the Land, during
the Term, including the construction of a new wing or new story, or the repair,
replacement, restoration, remodeling or rebuilding of the existing improvements
on such Leased Property or any portion thereof where the purpose and effect of
such work is to provide a functionally new facility needed to provide services
not previously offered, or any expansion, construction, renovation or conversion
in order to increase the bed capacity of the Facility located at the applicable
Leased Property, to change the purpose for which such beds are utilized or to
materially improve the quality of such Facility.
Capital Additions Cost: The term "Capital Additions Cost" shall mean the
----------------------
cost of any Capital Addition proposed to be made by Tenant at the applicable
Leased Property whether or not paid for by Tenant or Lessor. Such cost shall
include (a) the cost of construction of the Capital Additions including site
preparation and improvement, materials, labor, supervision, and certain related
design, engineering and architectural services, the cost of any fixtures, the
cost of construction financing and miscellaneous costs approved by Lessor, (b)
if agreed to by Lessor in writing, in advance, the cost of
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any land contiguous to the Leased Property which is to become part of the Leased
Property purchased for the purpose of placing thereon the Capital Additions or
any portion thereof or for providing means of access thereto, or parking
facilities therefor, including the cost of surveying the same, (c) the cost of
insurance, real estate taxes, water and sewage charges and other carrying
charges for such Capital Additions during construction, (d) the cost of title
insurance, (e) reasonable fees and expenses of legal counsel, (f) filing,
registration and recording taxes and fees, (g) documentary stamp taxes, if any,
and (h) all reasonable costs and expenses of Lessor and Tenant and, if agreed to
in advance by Lessor, any Lending Institution which has committed to finance the
Capital Additions, including, but not limited to, (i) the reasonable fees and
expenses of their respective legal counsel, (ii) all printing expenses, (iii)
the amount of any filing, registration and recording taxes and fees, (iv)
documentary stamp or transfer taxes, if any, (v) title insurance charges,
appraisal fees, if any, (vi) rating agency fees, if any, and (vii) commitment
fees, if any, charged by any Lending Institution advancing or offering to
advance any portion of the financing for such Capital Additions.
Code: The Internal Revenue Code of 1986, as amended.
----
Commencement Date: As to the applicable Leased Property, the date set
-----------------
forth opposite such Leased Property in the column "Commencement Date" on Exhibit
-------
B attached hereto.
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Condemnation, Condemnor: As defined in Article XV.
-----------------------
Consolidated Financials: For any fiscal year or other accounting period
-----------------------
for Tenant or a Guarantor and its consolidated subsidiaries, statements of
earnings and retained earnings and of changes in financial position for such
period and for the period from the beginning of the respective fiscal year to
the end of such period and the related balance sheet as at the end of such
period, together with the notes thereto, all in reasonable detail and setting
forth in comparative form the corresponding figures for the corresponding period
in the preceding fiscal year, and prepared in accordance with generally accepted
accounting principles.
Consolidated Net Worth: At any time, the sum of the following for Tenant
----------------------
or a Guarantor and its consolidated subsidiaries, on a consolidated basis
determined in accordance with generally accepted accounting principles:
(1) the amount of capital or stated capital (after deducting the cost of
any shares held in its treasury), plus
4
<PAGE>
(2) the amount of capital surplus and retained earnings (or, in the case
of a capital surplus or retained earnings deficit, minus the amount of such
deficit), minus
(3) the sum of the following (without duplication of deductions in
respect of items already deducted in arriving at surplus and retained
earnings): (a) unamortized debt discount and expense; and (b) any write-up
in book value of assets resulting from a revaluation thereof subsequent to
the most recent Consolidated Financials prior to the date hereof, except
any net write-up in value of foreign currency in accordance with generally
accepted accounting principles; any write-up resulting from a reversal of a
reserve for bad debts or depreciation and any write-up resulting from a
change in methods of accounting for inventory.
Date of Taking: As defined in Article XV.
--------------
Deferred Properties: As defined in Section 7.4.
-------------------
Encumbrance: As defined in Article XXXVIII.
-----------
Escalation Amount: An amount equal to two percent (2%) of the Minimum
-----------------
Rent for the previous Lease Year.
Event of Default: As defined in Article XVI.
----------------
Extended Term: As defined in Article XIX.
-------------
Facility: The facility being operated or proposed to be operated on the
--------
applicable Leased Property.
Facility Mortgage: As defined in Article XIII.
-----------------
Facility Mortgagee: As defined in Article XIII.
------------------
Fair Market Added Value: The Fair Market Value (as hereinafter defined)
-----------------------
of the applicable Leased Property (including all Capital Additions) less the
Fair Market Value of such Leased Property determined as if no Capital Additions
financed by Tenant had been constructed.
Fair Market Rental: As defined in Article XIX.
------------------
5
<PAGE>
Fair Market Value: The price that a willing buyer not compelled to buy
-----------------
would pay a willing seller not compelled to sell for the applicable Leased
Property, including all Capital Additions, and (a) assuming the same is
unencumbered by this Lease, (b) determined in accordance with the appraisal
procedures set forth in Article XXXV or in such other manner as shall be
mutually acceptable to Lessor and Tenant, and (c) not taking into account any
reduction in value resulting from any indebtedness to which such Leased Property
is subject except as expressly provided hereinbelow. In determining such Fair
Market Value the positive or negative effect on the value of the Leased Property
attributable to the interest rate, amortization schedule, maturity date,
prepayment penalty and other terms and conditions of any encumbrance which is
not removed at or prior to the closing of the transaction as to which such Fair
Market Value determination is being made shall be taken into account.
Fair Market Value Purchase Price: The Fair Market Value of the Leased
--------------------------------
Property less the Fair Market Added Value.
Fiscal Year: The twelve (12) month period from January 1 to December 31.
-----------
Fixed Term: As defined in Article I.
----------
Fixtures: As defined in Article I.
--------
Guarantor: Vencor Operating, Inc., a Delaware corporation.
---------
Impositions: Shall mean for each applicable Leased Property collectively,
-----------
all taxes (including, without limitation, all taxes imposed under the laws of
the State, as such laws may be amended from time to time, and all ad valorem,
sales and use, single business, gross receipts, transaction privilege, rent or
similar taxes as the same relate to or are imposed upon Tenant or its business
conducted upon the applicable Leased Property), assessments (including, without
limitation, all assessments for public improvements or benefits, whether or not
commenced or completed prior to the date hereof and whether or not to be
completed within the Term), ground rents, water, sewer or other rents and
charges, excises, tax levies, fees (including, without limitation, license,
permit, inspection, authorization and similar fees), and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the applicable Leased
Property or the business conducted thereon by Tenant (including all interest and
penalties thereon due to any failure in payment by Tenant), which at any time
prior to, during or in respect of the Term hereof may be assessed or imposed on
or in respect of or be a lien upon (a) Lessor or Lessor's interest in such
Leased Property, (b) such Leased Property or any part thereof or any rent
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use
6
<PAGE>
or possession of , or sales from, an activity conducted on, or in connection
with such Leased Property or the leasing or use of such Leased Property or any
part thereof by Tenant; provided, however, nothing contained in this Lease shall
be construed to require Tenant to pay (1) any tax based on net income (whether
denominated as a franchise or capital stock or other tax) imposed on Lessor or
any other person or (2) any transfer, or net revenue tax of Lessor or any other
person or (3) any tax imposed with respect to the sale, exchange or other
disposition by Lessor of the applicable Leased Property or the proceeds thereof,
except to the extent that any tax, assessment, tax levy or charge, which Tenant
is obligated to pay pursuant to the first sentence of this definition and which
is in effect at any time during the term hereof is totally or partially
repealed, and a tax, assessment, tax levy or charge set forth in clause (1) or
(2) is levied, assessed or imposed expressly in lieu thereof.
Indemnity Agreement: That certain Indemnity Agreement, dated as of the
-------------------
date hereof, from Tenant, Guarantor and any assignee or sublessee of Tenant or a
Guarantor to Lessor.
Insurance Requirements: All terms of any insurance policy required by
----------------------
this Lease with respect to the applicable Leased Property and all requirements
of the issuer of any such policy.
Land: As defined in Article I with respect to the applicable Lease.
----
Lease: As defined in Section 1.1.
-----
Lease Guaranty: A guaranty of the obligations of Tenant under this Lease
--------------
executed and delivered by Guarantor substantially in the form of Exhibit G
---------
annexed hereto.
Lease Supplement: As defined in Section 7.4.
----------------
Lease Year: shall mean May 1 through April 30 of each year of the Term.
----------
Leased Improvements; Leased Property: Each as defined in Section 1.1.
------------------------------------
Leasehold Mortgage: As defined in Section 22.2(a).
------------------
Leasehold Mortgagee: As defined in Section 22.2(b).
-------------------
Legal Requirements: As to the applicable Leased Property, all federal,
------------------
state, county, parish, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions affecting
such Leased
7
<PAGE>
Property or the maintenance, construction, use, operation or alteration thereof,
whether now or hereafter enacted and in force, including (i) any licensure
requirements, certification requirements under applicable federal and/or state
cost reimbursement programs, including Medicare and Medicaid (provided the
applicable Facility participates in such reimbursement), building codes and
zoning regulations, (ii) any which may (x) require repairs, modifications or
alterations in or to such Leased Property or (y) in any way adversely affect the
use and enjoyment thereof, (iii) all permits, licenses, certificates of need,
authorizations and regulations necessary to operate such Leased Property for its
Primary Intended Use, and (iv) all covenants, agreements, restrictions and
encumbrances contained in any instruments, either of record or known to Tenant
(other than encumbrances created by Lessor without the consent of Tenant), at
any time in force affecting such Leased Property.
Lending Institution: Any insurance company, federally insured commercial
-------------------
or savings bank, national banking association, savings and loan association,
employees' welfare, pension or retirement fund or system, corporate profit
sharing or pension trust, college or university, or real estate investment
trust, including any corporation qualified to be treated for federal tax
purposes as a real estate investment trust, having a net worth of at least
$50,000,000 acting on its own behalf or as agent on behalf of other Lending
Institutions.
Lessor: Ventas, Inc., a Delaware corporation, and each of the other
------
Lessors listed on the cover page hereof and their successors and assigns.
Litigation Costs: All costs reasonably incurred by Lessor in connection
----------------
with the enforcement of any provision of this Lease, including without
limitation attorney's and legal assistant fees and expenses, court costs and
fees and consultant and witness fees and expenses.
Medicaid: A state program of medical aid established under Title XVIII
--------
of the Social Security Act of 1965, as amended, and any successor statute
thereto and any successor programs.
Medicare: The program of medical care benefits provided under Title
--------
XVIII of the Social Security Act of 1965, as amended, and any successor statute
thereto and any successor programs thereto.
Minimum Rent: As defined in Article III.
------------
Minimum Repurchase Price: As set forth on Exhibit E annexed hereto.
------------------------ ---------
8
<PAGE>
Net Patient Service Revenues: Revenues derived primarily from services
----------------------------
provided to patients that are reported net of contractual adjustments from
governmental and other third party payors and excluding miscellaneous revenues
earned from non-patient sources.
Officer's Certificate: A certificate of Tenant signed by the chairman of
---------------------
the board of directors or the president or any vice president or the secretary
or the treasurer, or a group controller or assistant group controller or another
officer authorized to so sign by the board of directors or by-laws of Tenant, or
the general partner of Tenant or the managing member of Tenant, as applicable,
or any other person whose power and authority to act has been authorized by
delegation in writing by any of the persons holding the foregoing offices.
Overdue Rate: On any date, a rate equal to 2% above the Prime Rate, but
------------
in no event greater than the maximum rate then permitted under applicable law.
Payment Date: Any due date for the payment of the installments of
------------
Minimum Rent, Percentage Rent or any other sums payable under this Lease.
Permitted Alteration: Any Capital Alteration or other alteration or
--------------------
improvement to the applicable Facility or Leased Property that is permitted
pursuant to the terms of this Lease.
Permitted Encumbrances: As defined in Section 1.1.
----------------------
Person: Any individual, sole proprietorship, corporation, general
------
partnership, limited partnership, limited liability company or partnership,
joint venture, association, joint stock company, bank, trust, estate,
unincorporated organization, any federal, state, county or municipal government
(or agency or political subdivision thereof), endowment fund or other form of
entity.
Primary Intended Use: As defined in Section 7.2.2.
--------------------
Prime Rate: On any date, a rate equal to the annual rate on such date
----------
announced by Citibank, N.A., or any successor thereof, to be its prime rate for
90-day unsecured loans to its corporate borrowers of the highest credit
standing.
Rent: Collectively, the Minimum Rent, and Additional Charges.
----
State: The State or Commonwealth in which the applicable Leased Property
-----
is located.
9
<PAGE>
Subsidiaries: the corporations or other entities of which securities or
------------
similar ownership interests representing (i) ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
or (ii) a majority of the economic interest therein, are at the time directly or
indirectly owned by Tenant or Guarantor (individually, a "Subsidiary").
----------
Superior Lessor: The lessor under any ground lease or other lease to
---------------
which the applicable Leased Property is subject.
Superior Mortgage: As defined in Section 21.1.
-----------------
Superior Mortgagee: As defined in Section 21.1.
------------------
Taking: A taking or voluntary conveyance during the Term of all or part
------
of the applicable Leased Property, or any interest therein or right accruing
thereto or use thereof, as the result of, or in settlement of any condemnation
or other eminent domain proceeding affecting such Leased Property whether or not
the same shall have actually been commenced.
Tenant's Personal Property: All motor vehicles, machinery, equipment,
--------------------------
furniture, furnishings, movable walls or partitions, computers or trade fixtures
or all other personal property, and consumable inventory and supplies, now owned
or hereafter acquired by Tenant and located on the applicable Leased Property or
used or useful in Tenant's business on such Leased Property, including without
limitation all modifications, replacements, alterations and additions to such
personal property installed at the expense of Tenant, except items, if any,
included within the definition of Fixtures.
Term: Collectively for each applicable Leased Property, the Fixed Term
----
and any Extended Terms, to the extent properly exercised pursuant to the
provisions of Article XIX, unless earlier terminated pursuant to the provisions
of this Lease.
Test Rate: The minimum interest rate necessary to avoid imputation of
---------
original issue discount income under Sections 483 or 1272 of the Code or any
similar provision.
Unsuitable for Its Primary Intended Use: A state or condition of the
---------------------------------------
Facility located at the applicable Leased Property such that by reason of damage
or destruction, or a partial taking by condemnation, in the good faith judgment
of Tenant, reasonably exercised, the Facility cannot by operated on a
commercially practicable basis for its Primary Intended Use taking into account,
among other relevant factors, the number of usable beds affected by such damage
or destruction or partial taking.
10
<PAGE>
Unavoidable Delays: Delays due to strikes, lockouts, inability to
------------------
procure materials, power failure, acts of God, governmental restrictions, enemy
action, civil commotion, fire, unavoidable casualty or other causes beyond the
control of the party responsible for performing an obligation hereunder,
provided that lack of funds shall not be deemed a cause beyond the control of
either party hereto unless such lack of funds is caused by the failure of the
other party hereto to perform any obligations of such party, under this Lease,
or any guaranty of this Lease, including any obligation to provide financing
undertaken by Lessor pursuant to Article X below.
ARTICLE III
-----------
Section 3.1. Rent. Tenant will pay to Lessor, in lawful money of the
----
United States of America which shall be legal tender for the payment of public
and private debts, at Lessor's address set forth above or at such other place or
to such other person, firms or corporations as Lessor from time to time may
designate in writing, Minimum Rent (as defined below) and Additional Charges (as
defined below) during the Term, as hereinafter provided.
(a) Minimum Rent: The annual sum of $_______, payable in advance in equal,
------------
consecutive monthly installments, on the first day of each calendar month of the
Fixed Term and each Extended Term; provided, however, that the first monthly
payment of Minimum Rent shall be payable on the Commencement Date and that the
first and last monthly payments of Minimum Rent shall be prorated as to any
partial month (subject to adjustment as provided in Sections 10.3(b)(iv) and
14.6 below). In the event that this Lease is terminated as to a particular
Leased Property, or a substitute master lease is entered into as to a particular
Leased Property pursuant to the provisions of this Lease, the Minimum Rent
payable hereunder shall be reduced by the amount opposite the applicable Leased
Property on Exhibit C annexed hereto. The amount of Minimum Rent payable
---------
hereunder shall increase on each anniversary of the date of this Lease by an
amount equal to the Escalation Amount, provided that the Net Patient Service
Revenues for the previous Lease Year shall be equal to or exceed 75% of the Net
Patient Service Revenues for the 1997 calendar year. In the event that a Lease
Supplement is delivered pursuant to Section 7.4, the Minimum Rent payable
hereunder shall increase by the amount set forth in such Lease Supplement.
(b) Additional Charges. In addition to the Minimum Rent payable with
------------------
respect to the applicable Leased Property, Tenant shall pay and discharge as and
when due and payable the following (collectively "Additional Charges"):
------------------
(1) Impositions. Tenant shall pay all Impositions before
-----------
any fine, penalty, interest or cost may be added for non-
payment, such payments to be made directly to the taxing
authorities where
11
<PAGE>
feasible, and shall promptly upon request, furnish to Lessor
copies of official receipts or other satisfactory proof
evidencing such payments. If any such Imposition may, at the
option of the taxpayer, lawfully be paid in installments
(whether or not interest shall accrue on the unpaid balance
of such Imposition), subject to the terms of any applicable
Facility Mortgage, Tenant may exercise the option to pay
same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay
such installments during the Term as the same may become due
and before any fine, penalty, premium, further interest or
cost may be added thereto.
(2) Utility Charges. Tenant shall pay all charges for
---------------
electricity, power, gas, oil, water, sanitary and storm
sewer, refuse collection, medical waste disposal and other
utilities used or consumed in connection with each Leased
Property during the Term.
(3) Insurance Premiums. Tenant shall pay all premiums for
------------------
the insurance coverage required to be maintained pursuant to
Article XIII hereof.
(4) Other Charges. Tenant shall pay all other amounts,
-------------
liabilities and obligations that Tenant assumes or agrees to
pay under this Lease, including, without limitation, all
agreements to indemnify Lessor under Sections 12.1 and 24.1
and any and all fees, costs and expenses incurred by Tenant
in the operation of its business at the Facility.
(5) Late Payment of Rent. If any installment of Minimum
--------------------
Rent, or Additional Charges (but only as to those Additional
Charges which are payable directly to Lessor or Lessor's
agent or assignee) shall not be paid within five (5)
Business Days after its due date, Tenant will pay to Lessor
on demand a late charge (to the extent permitted by law)
computed at the Overdue Rate (or at the maximum rate
permitted by law, whichever is the lesser) on the amount of
such installment, from the due date of such installment to
the date of payment thereof.
To the extent that Tenant pays any Additional Charges to Lessor pursuant to any
requirement of this Lease, Tenant shall be relieved of its obligation to pay
such Additional Charges to the entity to which they would otherwise be due. If
any Facility Mortgagee shall so require, or if any Additional Charges shall not
be paid to a third party
12
<PAGE>
payee within five (5) Business Days after its due date, Lessor may at any time
thereafter, at Lessor's option, require Tenant to deposit into an escrow account
under the sole dominion and control of Lessor (or the applicable Facility
Mortgagee), on the first day of each and every month, an amount sufficient to
insure that such escrow account shall contain an amount sufficient to make such
payment on its next due date, in which event Lessor shall make all future
payments for such expense from the escrow account. In the event of any failure
by Tenant to pay any Additional Charges when due, Tenant shall promptly pay and
discharge, as Additional Charges, every fine, penalty, interest and cost that
may be added for non-payment or late payment of such items. Lessor shall have
all legal, equitable and contractual rights, powers and remedies provided either
in this Lease or by statute or otherwise in the case of non-payment of the
Minimum Rent.
Section 3.2. Net Lease. The Rent shall be paid absolutely net to Lessor,
---------
without any rights of deduction, set-off or abatement, so that this Lease shall
yield to Lessor the full amount of the installments of Minimum Rent and
Additional Charges, throughout the Term, subject to any other provisions of this
Lease which expressly provide for termination of this Lease with respect to a
Leased Property.
ARTICLE IV
----------
Section 4.1. Payment of Impositions. Subject to Article XII relating to
----------------------
permitted contests, Tenant will pay all Impositions as set forth in Section
3.1(b)(1). Tenant's obligation to pay such Impositions shall be deemed
absolutely fixed upon the date such Impositions become a lien upon the Leased
Property or any part thereof. Lessor, at its expense, shall, to the extent
permitted by applicable law, prepare and file all tax returns and reports as may
be required by governmental authorities in respect of Lessor's net income, gross
receipts, franchise taxes and taxes on its capital stock, and Tenant, at its
expense, shall, to the extent permitted by applicable laws and regulations,
prepare and file all other tax returns and reports in respect of any Imposition
as may be required by governmental authorities. If any refund shall be due from
any taxing authority in respect of any Imposition paid by Tenant, the same shall
be paid over to or retained by Tenant if no Event of Default shall have occurred
hereunder and be continuing. Any such funds retained by Lessor due to an Event
of Default shall be applied as provided in Article XVI. Lessor and Tenant
shall, upon request of the other, provide such data as is maintained by the
party to whom the request is made with respect to the Leased Property as may be
necessary to prepare any required returns and reports. In the event governmental
authorities classify any property covered by this Master Lease as personal
property, Tenant shall file all personal property tax returns in such
jurisdictions where it may legally so file. Lessor, to the extent it possesses
the same, and Tenant, to the extent it possesses the same, will provide the
other party, upon request, with cost and depreciation records necessary for
filing returns for any property so classified as personal property. Where
Lessor is legally required to file personal property
13
<PAGE>
tax returns, Tenant will be provided with copies of assessment notices
indicating a value in excess of the reported value in sufficient time for Tenant
to file a protest. Tenant may, upon notice to Lessor, at Tenant's option and at
Tenant's sole cost and expense, protest, appeal, or institute such other
proceedings as Tenant may deem appropriate to effect a reduction of real estate
or personal property assessments and Lessor, at Tenant's expense as aforesaid,
shall fully cooperate with Tenant in such protest, appeal, or other action.
Billings for reimbursement by Tenant to Lessor of personal property taxes shall
be accompanied by copies of a bill therefor and payments thereof which identify
the personal property with respect to which such payments are made.
Section 4.2. Notice of Impositions. Lessor shall give prompt notice to
---------------------
Tenant of all Impositions payable by Tenant hereunder of which Lessor at any
time has knowledge, but Lessor's failure to give any such notice shall in no way
diminish Tenant's obligations hereunder to pay such Impositions.
Section 4.3. Adjustment of Impositions. Impositions imposed in respect
-------------------------
of the tax-fiscal period during which the Term terminates shall be adjusted and
prorated between Lessor and Tenant, whether or not such Imposition is imposed
before or after such termination, and Tenant's obligation to pay its prorated
share thereof shall survive such termination.
ARTICLE V
----------
Section 5.1. No Termination, Abatement, etc. Except as otherwise
-------------------------------
specifically provided in this Master Lease, Tenant, to the extent permitted by
law, shall remain bound by this Lease in accordance with its terms and shall
neither take any action without the consent of Lessor to modify, surrender or
terminate the same, nor seek nor be entitled to any abatement, deduction,
deferment or reduction of Rent, or set-off against the Rent, nor shall the
respective obligations of Lessor and Tenant be otherwise affected by reason of
(a) any damage to, or destruction of, any Leased Property or any portion thereof
from whatever cause or any Taking of any Leased Property or any portion thereof,
(b) the interruption or discontinuance of any service or utility servicing any
Leased Property (c) the lawful or unlawful prohibition of, or restriction upon,
Tenant's use of any Leased Property, or any portion thereof, the interference
with such use by any person, corporation, partnership or other entity, or by
reason of eviction by paramount title, (d) any claim which Tenant has or might
have against Lessor or by reason of any default or breach of any warranty by
Lessor under this Master Lease or any other agreement between Lessor and Tenant,
or to which Lessor and Tenant are parties, (e) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting Lessor or any assignee or transferee of Lessor,
or (f) for any other cause whether similar or dissimilar to any of the foregoing
other than a discharge of Tenant from any such obligations as a matter of law.
14
<PAGE>
Tenant hereby specifically waives all rights, arising from any occurrence
whatsoever, which may now or hereafter be conferred upon it by law to (i)
modify, surrender or terminate this Master Lease or quit or surrender the Leased
Property or any portion thereof, or (ii) entitle Tenant to any abatement,
reduction, suspension or deferment of the Rent or other sums payable by Tenant
hereunder. The obligations of Lessor and Tenant hereunder shall be separate and
independent covenants and agreements and the Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events unless the
obligations to pay the same shall be terminated by termination of this Lease as
to any Leased Property other than by reason of an Event of Default.
ARTICLE VI
-----------
Section 6.1. Ownership of the Leased Property. Tenant acknowledges that
--------------------------------
the Leased Property is the property of the Lessor listed on Exhibit B and that
Tenant has only the right to the exclusive possession and use of the Leased
Property upon the terms and conditions of this Master Lease.
Section 6.2. Tenant's Personal Property. Tenant may (and shall as
--------------------------
provided hereinbelow), at its expense, install, affix or assemble or place on
any parcels of the Land or in any of the Leased Improvements, any items of
Tenant's Personal Property and Tenant may, subject to the conditions set forth
below, remove the same upon the expiration or any prior termination of the Term.
Tenant shall provide and maintain during the entire Lease Term all such Tenant's
Personal Property as shall be necessary in order to operate each Facility in
compliance with all licensure and certification requirements in compliance with
all applicable Legal Requirements and Insurance Requirements and otherwise in
accordance with customary practice in the industry for the Primary Intended Use.
All of Tenant's Personal Property not removed by Tenant within twenty-one days
following the expiration or earlier termination of this Lease with respect to
the applicable Leased Property where such Tenant's Personal Property is located
shall be considered abandoned by Tenant and may be appropriated, sold, destroyed
or otherwise disposed of by Lessor without first giving notice thereof to Tenant
and without any payment to Tenant and without any obligation to account therefor
or otherwise disposed of in accordance with applicable law. Tenant will, at its
expense, restore such Leased Property to the condition required by Section
9.1(d), including repair of all damage to the Leased Property caused by the
removal of Tenant's Personal Property, whether effected by Tenant or Lessor.
15
<PAGE>
ARTICLE VII
-----------
USE OF THE APPLICABLE LEASED PROPERTY
Section 7.1. Condition of the Leased Property. Tenant acknowledges
--------------------------------
receipt and delivery of possession of each Leased Property and that Tenant has
examined and otherwise has knowledge of the condition of the Leased Property
prior to the execution and delivery of this Lease and has found the same to be
in good order and repair and satisfactory for its purposes hereunder. Tenant is
leasing the Leased Property "as is" in its present condition. Tenant waives any
claim or action against Lessor in respect of the condition of the Leased
Property. LESSOR MAKES NO WARRANTY OR REPRESENTATION EXPRESS OR IMPLIED, IN
RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, EITHER AS TO ITS FITNESS
-------
FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE. AS
- -------
TO QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT, IT BEING
AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT
THE LEASED PROPERTY HAS BEEN INSPECTED BY TENANT AND IS SATISFACTORY TO IT.
Section 7.2. Use of the Leased Property.
--------------------------
Section 7.2.1. [Tenant shall proceed with all due diligence and shall
exercise its best efforts to obtain and]/*/ [Tenant shall] maintain or cause
to be maintained all approvals needed to use and operate each Leased Property
and the Facility located at each Leased Property under applicable local, state
and federal law and all applicable state and federal programs including but not
limited to appropriate certifications for reimbursement and licensure, except
that with respect to the Leased Properties described in Exhibits A-__, A-__, A-
__, the certificate of need issued for the applicable Facility shall be the
property of Lessor.
Section 7.2.2. After the Commencement Date and during the entire
Term, Tenant shall use each Leased Property and the Leased Improvements thereof
as a hospital or a nursing home and each Facility that is being used as a
hospital on the Commencement Date shall continue to be used as a hospital during
the entire Term and each Facility being used as a nursing home on the
Commencement Date shall continue to be used as a nursing home during the entire
Term (such use being the applicable Leased Property's "Primary Intended Use").
--------------------
Tenant shall not use the applicable Leased Property or any portion thereof for
any other use without the prior written consent of Lessor, which
- ------------
/*/For Leases for Development Properties
16
<PAGE>
consent shall not be unreasonably withheld or delayed. No use shall be made or
permitted to be made of the applicable Leased Property, and no acts shall be
done, that will cause the cancellation of any insurance policy covering such
Leased Property or any part thereof, nor shall Tenant sell or otherwise provide
to residents or patients therein, or permit to be kept, used or sold in or about
such Leased Property any article which may be prohibited by law or by the
standard form of fire insurance policies, or any other insurance policies
required to be carried hereunder, or fire underwriters regulations. Tenant
shall, at its sole cost, comply with all of the requirements pertaining to the
applicable Leased Property or other improvements of any insurance board,
association, organization or company necessary for the maintenance of insurance,
as herein provided, covering the Leased Property and Tenant's Personal Property.
Section 7.2.3. Tenant shall during the Term operate continuously each
Leased Property as a provider of health care services in accordance with its
Primary Intended Use and maintain its certifications for reimbursement and
licensure and its accreditation, if compliance with accreditation standards is
required to maintain the operations of the Facility and if a failure to comply
would adversely affect operations of the Facility.
Section 7.2.4. Tenant shall not commit or suffer to be committed any
waste on any Leased Property, or in any Facility, nor shall Tenant cause or
permit any nuisance thereon. Tenant shall not take or omit to take any action,
the taking or omission of which may materially impair the value or the
usefulness of such Leased Property or any part thereof for its Primary Intended
Use.
Section 7.2.5. Tenant shall neither suffer nor permit any Leased
Property or any portion thereof, including any Capital Addition whether or not
financed by Lessor, or Tenant's Personal Property, to be used in such a manner
as (i) might reasonably tend to impair Lessor's (or Tenant's, as the case may
be) title thereto or to any portion thereof, or (ii) may reasonably make
possible a claim or claims of adverse usage or adverse possession by the public,
as such, or of implied dedication of the applicable Leased Property or any
portion thereof.
Section 7.2.6. Nothing contained in this Section 7.2 shall be deemed
to require Tenant to maintain Medicaid certification at any Facility.
Section 7.3. Lessor to Grant Easements, etc. Lessor and Tenant will,
-------------------------------
from time to time so long as no Event of Default has occurred and is continuing,
at the request of the other party and at such requesting party's cost and
expense (but subject to the approval of Lessor, which approval shall not be
unreasonably withheld or delayed, and provided, however, that if Lessor has not
-------- -------
responded to any such request of Tenant within 30 days after receipt thereof,
such request shall be deemed approved), (i) grant
17
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easements and other rights in the nature of easements, (ii) release existing
easements or other rights in the nature of easements which are for the benefit
of the applicable Leased Property, (iii) dedicate or transfer unimproved
portions of the applicable Leased Property for road, highway or other public
purposes, (iv) execute petitions to have the applicable Leased Property annexed
to any municipal corporation or utility district, (v) execute amendments to any
covenants and restrictions affecting the applicable Leased Property and (vi)
execute and deliver to any person any instrument appropriate to confirm or
effect such grants, releases, dedications and transfers (to the extent of its
interests in the applicable Leased Property), but only upon delivery of all
documentation such party reasonably shall deem necessary and an Officer's
Certificate stating that such grant, release, dedication, transfer, petition or
amendment is not detrimental to the proper conduct of the business of Tenant on
the applicable Leased Property and does not materially reduce the value of the
Leased Property.
Section 7.4. Lessor and Tenant to Execute Lease Supplement. Lessor and
----------------------------------------------
Tenant agree that, with respect to certain Leased Properties indicated on
Exhibit A to be "Deferred Leased Properties", from time to time, and as certain
--------------------------
regulatory issues with respect to such properties are resolved, Lessor and
Tenant shall execute a Lease Supplement ("Lease Supplement") to provide that
----------------
this Lease is effective as to such properties. Such Lease Supplement shall set
forth the term of this Lease with respect to each such Deferred Leased Property
(including the applicable Commencement Date for such property). The initial base
rent shall be increased by the amount set forth for such property on Exhibit A
hereto.
ARTICLE VIII
------------
Section 8.1. Compliance with Legal and Insurance Requirements,
-------------------------------------------------
Instruments, etc. Subject to Article XII relating to permitted contests,
- -----------------
Tenant, at its expense, will promptly (a) comply with all material Legal
Requirements and Insurance Requirements in respect of the use, operation,
maintenance, repair and restoration of the applicable Leased Property, whether
or not compliance therewith shall require structural changes in any of the
Leased Improvements or interfere with the use and enjoyment of such Leased
Property and (b) procure, maintain and comply with all licenses, certificates of
need and other authorizations required for any use of the applicable Leased
Property and Tenant's Personal Property then being made, and for the proper
erection, installation, operation and maintenance of the applicable Leased
Property or any part thereof, including without limitation any Capital
Additions. In the event that Tenant shall receive notice from any state
authority that Tenant is not in compliance with any license, permit, approval,
certificate of need or certification for reimbursement under medicare or
medicaid (with respect to any Facility that participates in such programs),
Tenant shall promptly send notice to Lessor and Tenant shall remedy any
condition causing such noncompliance no later than thirty (30) days after Tenant
shall have received such notice.
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In addition, Tenant shall promptly send to Lessor any material deficiency report
Tenant receives from any state or federal licensure board or certification
authority with respect to any Facility if Tenant has not cured such deficiency
within the applicable cure period.
Section 8.2. Legal Requirement Covenants. Tenant covenants and agrees
---------------------------
that none of the Leased Properties nor any of Tenant's Personal Property shall
be used for any unlawful purpose. Tenant shall acquire and maintain all
licenses, certificates, permits, provider agreements and other authorizations
and approvals needed to operate the applicable Leased Property in its customary
manner for the Primary Intended Use, and any other use conducted on such Leased
Property as may be permitted from time to time hereunder. Tenant further
covenants and agrees that Tenant's use of each Leased Property and maintenance,
alteration, and operation of the same, and all parts thereof, shall at all times
conform to all applicable local, state, and federal laws, ordinances, rules and
regulations unless the same are held by a court of competent jurisdiction to be
unlawful. Tenant may, however, upon prior written notice to Lessor, contest the
legality or applicability of any such law, ordinance, rule or regulation, or any
licensure or certification decision if Tenant maintains such action in good
faith, with due diligence, without prejudice to Lessor's rights hereunder, and
at Tenant's own expense. If by the terms of any such law, ordinance, rule or
regulation, compliance therewith pending the prosecution of any such proceeding
may legally be delayed without the occurrence of any lien, charge or liability
of any kind against the applicable Facility or Tenant's leasehold interest
therein and without subjecting Tenant or Lessor to any liability, civil or
criminal, for failure so to comply therewith, Tenant may delay compliance
therewith until the final determination of such proceeding. If any lien, charge
or civil or criminal liability would be incurred by reason of any such delay,
Tenant, on the prior written consent of Lessor, which consent shall not be
unreasonably withheld, may nonetheless contest as aforesaid and delay as
aforesaid provided that such delay would not subject Lessor to criminal
liability and Tenant both (a) furnishes to Lessor security reasonably
satisfactory to Lessor against any loss or injury by reason of such contest or
delay, and (b) prosecutes the contest with due diligence and in good faith.
ARTICLE IX
-----------
Section 9.1. Maintenance and Repair.
----------------------
(a) Tenant, at its expense, shall keep each Leased Property and all
private roadways, sidewalks and curbs appurtenant thereto and which are under
Tenant's control (and Tenant's Personal Property) in good order and repair,
reasonable wear and tear excepted (whether or not the need for such repairs
occurs as a result of Tenant's use, any prior use, the elements or the age of
such Leased Property, Tenant's Personal Property, or any portion thereof), and,
except as otherwise provided in Article XIV, shall promptly make all necessary
and appropriate repairs and replacements thereto,
19
<PAGE>
of every kind and nature, whether interior or exterior, structural or non-
structural, ordinary or extraordinary, foreseen or unforeseen or arising by
reason of a condition existing prior to the commencement of the Term (concealed
or otherwise). All repairs shall, to the extent reasonably achievable, be made
in good, workmanlike and first-class manner, in accordance with all applicable
federal, state and local statutes, ordinances, by-laws, codes, rules and
regulations relating to such work. Tenant will not take or omit to take any
action the taking or omission of which might materially impair the value or
usefulness of the applicable Leased Property or any part thereof for its Primary
Intended Use.
(b) Lessor shall not under any circumstances be required to build or
rebuild any improvements on any Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or description
to the applicable Leased Property, whether ordinary or extraordinary, structural
or non-structural, foreseen or unforeseen, or to make any expenditure whatsoever
with respect thereto, in connection with this Lease, or to maintain any Leased
Property in any way, except as expressly provided herein. Tenant hereby waives,
to the extent permitted by law, the right to make repairs at the expense of
Lessor pursuant to any law in effect at the time of the execution of this Lease
or thereafter enacted.
(c) Except as expressly set forth in this Lease, nothing contained in
this Lease and no action or inaction by Lessor shall be construed as (i)
constituting the consent or request of Lessor, express or implied, to any
contractor, subcontractor, laborer, materialman or vendor to or for the
performance of any labor or services or the furnishing of any materials or other
property for the construction, alteration, addition, repair or demolition of or
to any Leased Property or any part thereof, or (ii) giving Tenant any right,
power or permission to contract for or permit the performance of any labor or
services or the furnishing of any materials or other property in such fashion as
would permit the making of any claim against Lessor in respect thereof or to
make any agreement that may create, or in any way be the basis for, any right,
title, interest, lien, claim or other encumbrance upon the estate of Lessor in
any Leased Property, or any portion thereof.
(d) Tenant will, upon the expiration or prior termination of the Term,
vacate and surrender the applicable Leased Property to Lessor in the condition
in which such Leased Property was originally received from Lessor, except as
repaired, rebuilt, restored, altered or added to as permitted or required by the
provisions of this Lease and except for ordinary wear and tear (subject to the
obligation of Tenant to maintain the Leased Property in good order and repair
during the entire Term).
20
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(e) Tenant shall establish and maintain any reserve accounts
reasonably required by a Superior Mortgagee for deferred maintenance conditions
and for capital expenditures at the Leased Property.
Section 9.2. Encroachments, Restrictions, etc. If any of the Leased
---------------------------------
Improvements on any Leased Property shall, at any time, encroach upon any
property, street or right-of-way adjacent to such Leased Property, or shall
violate the agreements or conditions contained in any lawful restrictive
covenant or other agreement affecting such Leased Property, or any part thereof,
or shall impair the rights of others under any easement or right-of-way to which
the Leased Property is subject, then promptly upon the request of Lessor or at
the behest of any person affected by any such encroachment, violation or
impairment, Tenant shall, at its expense, subject to its right to contest the
existence of any encroachment, violation or impairment and in such case, in the
event of any adverse final determination, either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from
each such encroachment, violation or impairment, whether the same shall affect
Lessor or Tenant or (ii) make such changes in the Leased Improvements, and take
such other actions, as Tenant in good faith exercise of its judgment deems
reasonably practicable, to remove such encroachment, and to end such violation
or impairment, including, if necessary, the alteration of any of the Leased
Improvements, and in any event take all such actions as may be necessary in
order to be able to continue the operation of the Leased Improvements for the
Primary Intended Use substantially in the manner and to the extent the Leased
Improvements were operated prior to the assertion of such violation or
encroachment. Any such alteration shall be made in conformity with the
applicable requirements of Article X. Tenant's obligations under this Section
9.2 shall be in addition to and shall in no way discharge or diminish any
obligation of any insurer under any policy of title or other insurance and
Tenant shall be entitled to a credit for any sums recovered by Lessor under any
such policy of title or other insurance.
ARTICLE X
----------
Section 10.1. Construction of Capital Additions to the Leased Property.
--------------------------------------------------------
If no Event of Default shall have occurred and be continuing, Tenant shall have
the right, upon and subject to the terms and conditions set forth below, to
construct or install Capital Additions on any Leased Property. Prior to
commencing construction of any Capital Addition, Tenant shall submit to Lessor
in writing a proposal setting forth in reasonable detail any proposed Capital
Addition and shall provide to Lessor such plans and specifications, permits,
licenses, contracts, construction schedules, construction budgets and other
information concerning the proposed Capital Addition as Lessor may reasonably
request showing in reasonable detail the scope and nature of the Capital
Addition that Tenant desires to construct (collectively the "Plans and
---------
Specifications"). It is the intent of the parties hereto that the level of
- --------------
detail shall be comparable to that which
21
<PAGE>
is referred to in the architectural profession as "design development drawings"
as opposed to working or biddable drawings. Without limiting the generality of
the foregoing, such proposal shall indicate the approximate projected cost of
constructing such Capital Addition and the use or uses to which it will be put.
Prior to commencing construction of any Capital Addition, Tenant shall first
request Lessor to provide funds to pay for such Capital Addition in accordance
with the provisions of Section 10.3. If Lessor declines or is unable to provide
such financing on terms acceptable to Tenant, Tenant shall provide to Lessor,
prior to commencement of any construction, proof reasonably acceptable to Lessor
that Tenant has sufficient capital to complete the construction. Furthermore, no
Capital Addition shall be made which would tie in or connect any Leased
Improvements on the Leased Property with any other improvements on property
adjacent to the Leased Property (and not part of the land covered by this Master
Lease) including, without limitation, tie-ins of buildings or other structures
or utilities, unless Tenant shall have obtained the prior written approval of
Lessor, which approval in Lessor's sole discretion may be granted, withheld or
conditioned. Tenant shall reimburse Lessor for all costs and expenses incurred
by Lessor in reviewing the proposal and the Plans and Specifications for a
Capital Addition and for inspecting the applicable Leased Property and otherwise
monitoring the construction of the Capital Addition.
Section 10.2. Capital Additions Financed by Tenant. If Tenant provides
------------------------------------
or arranges such financing, there shall be no adjustment in the Minimum Rent by
reason of any such Capital Addition.
Section 10.3. Capital Additions Financed by Lessor.
------------------------------------
(a) Tenant shall request that Lessor provide or arrange financing for
a Capital Addition by providing to Lessor such information about the Capital
Addition as Lessor may request including without limitation all information
referred to in Section 10.1 above. Lessor may, but shall be under no obligation
to, obtain the funds necessary to meet the request. Within sixty (60) days
after receipt of a request, Lessor shall notify Tenant as to whether it will
finance the proposed Capital Addition and, if so, the terms and conditions upon
which it would do so, including the terms of any amendment to this Master Lease.
In no event shall the portion of the projected Capital Additions Cost comprised
of land, if any, materials, labor charges and fixtures be less than ninety
percent (90%) of the total amount of such cost. Tenant may withdraw its request
by notice to Lessor at any time before or after receipt of Lessor's terms and
conditions. If Tenant desires to accept Lessor's offer to finance the proposed
Capital Addition, Tenant shall notify Lessor within thirty (30) days after
Tenant's receipt of Lessor's offer.
22
<PAGE>
(b) If Lessor agrees to finance the proposed Capital Addition, Tenant
shall provide Lessor with the following prior to any advance of funds:
(i) all customary or other reasonably required loan
documentation;
(ii) any information, certificates, licenses, permits or
documents requested by either Lessor or any third party lender with whom
Lessor has agreed or may agree to provide financing which are necessary to
confirm that Tenant will be able to use the Capital Addition upon
completion thereof in accordance with the Primary Intended Use, including
all required federal, state or local government licenses and approvals;
(iii) an Officer's Certificate and, if requested, a certificate
from Tenant's architect, setting forth in reasonable detail the projected
(or actual, if available) cost of the proposed Capital Addition;
(iv) an amendment to this Master Lease, duly executed and
acknowledged, in form and substance satisfactory to Lessor, providing for
any change in the Rent, the legal description of the Land, and other
provisions as may be necessary or appropriate;
(v) a deed (in the customary form used to convey commercial
properties within the relevant jurisdiction) conveying title to Lessor to
any land acquired for the purpose of constructing the Capital Additions
free and clear of any liens or encumbrances except those approved by
Lessor, accompanied by a final as-built survey thereof satisfactory to
Lessor if reasonably required by Lessor;
23
<PAGE>
(vi) endorsements to any outstanding policy of title insurance
covering the applicable Leased Property or commitments therefore
satisfactory in form and substance to Lessor (A) updating the same without
any additional exception except as may be permitted by Lessor; and (B)
increasing the coverage thereof by an amount equal to the Fair Market Value
of the Capital Addition (except to the extent covered by the owner's policy
of title insurance referred to in subparagraph (vii) below);
(vii) if appropriate, (A) an owner's policy of title insurance
insuring fee simple title to any land conveyed to Lessor pursuant to
subparagraph (iv) free and clear of all liens and encumbrances except those
approved by Lessor and (B) a lender's policy of title insurance
satisfactory in form and substance to Lessor and the lending institution
advancing any portion of the Capital Additions Cost;
(viii) if deemed necessary by Lessor, an M.A.I. appraisal of the
Leased Property indicating that the value of the applicable Leased Property
upon completion of the Capital Addition exceeds the Fair Market Value
thereof prior thereto by an amount not less than 95% of the Capital
Additions Cost; and
(ix) such other certificates (including, but not limited to,
endorsements increasing the insurance coverage, if any, at the time
required by Section 13.1), documents, opinions of counsel, appraisals,
surveys, certified copies of duly adopted resolutions of the Board of
Directors of Tenant authorizing the execution and
24
<PAGE>
delivery of the lease amendment and any other instruments as may be
reasonably required by Lessor and any lending institution advancing or
reimbursing Tenant for any portion of the Capital Additions Cost.
(c) Upon making a Request to finance a Capital Addition, if and when
such financing is actually consummated, Tenant shall pay or agree to pay all
reasonable costs and expenses of Lessor and any Lending Institution which has
committed to finance such Capital Addition paid or incurred by them in
connection with the financing of the Capital Additions, including, but not
limited to, (i) the reasonable fees and expenses of their respective counsel,
(ii) all printing expenses, (iii) the amount of any filing, registration and
recording taxes and fees, (iv) documentary stamp taxes, if any, (v) title
insurance and survey charges, appraisal fees, if any, rating agency fees, if
any, (vi) any other applicable consulting fees (including without limitation
engineering and environmental), and (vii) commitment fees, if any.
Section 10.4. Non-Capital Additions. Tenant shall have the right to make
---------------------
additions, modifications or improvements to any Leased Property which are not
Capital Additions from time to time as it, in its discretion, may deem to be
desirable for its uses and purposes, provided that such action will not alter
the character or purpose or detract from the value or operating efficiency
thereof and will not impair the revenue producing capability of the Leased
Property or adversely affect the ability of the Tenant to comply with the
provisions of this Lease. The cost of such non-Capital Additions, modifications
or improvements to the Leased Property shall be paid by the Tenant, and all
such non-Capital Additions, modifications and improvements shall, without
payment by Lessor at any time, be included under the terms of this Lease and
upon expiration or earlier termination of this Lease shall pass to and become
the property of Lessor free and clear of all encumbrances, other than Permitted
Encumbrances. There shall be no adjustment in the Minimum Rent by reason of any
non-Capital Addition.
Section 10.5. Salvage. All materials which are scrapped or removed in
-------
connection with the making of either Capital Additions permitted by Section 10.1
or Non-Capital Additions permitted by Section 10.4 or repairs required by
Article IX shall be or become the property of Lessor or Tenant depending on
which party is paying for, or providing the financing for, such work.
Section 10.6. Requirements for all Capital Additions and Non-Capital
------------------------------------------------------
Additions. Tenant shall comply with all of the following requirements in
- ---------
connection with all Permitted Alterations:
25
<PAGE>
(a) The Permitted Alteration shall be made substantially in
accordance with the Plans and Specifications submitted to Lessor, to
the extent applicable.
(b) The Permitted Alterations and the installation thereof
shall comply with all applicable Legal Requirements and all Insurance
Requirements.
(c) The Permitted Alterations shall be performed in a good
and workmanlike manner, shall not impair the value or the structural
integrity of the applicable Leased Property, and shall be free and
clear of mechanic's liens.
(d) Intentionally omitted.
(e) Tenant shall, at Tenant's expense, obtain a builder's
completed value risk policy of insurance insuring against the risks of
physical loss, including collapse and transit coverage, in a
nonreporting form, covering the total value of the work performed, and
equipment, supplies and materials, and insuring initial occupancy.
Lessor and any Facility Mortgagee shall be additional named insureds
of such policy. Lessor shall have the right to approve the form and
substance of such policy.
(f) Tenant shall pay the premiums required to increase the
amount of insurance coverages required by Article XIII to reflect the
increased value of the applicable Leased Property resulting from the
Permitted Alterations, and shall deliver to Lessor a certificate
evidencing the increase in coverage.
(g) Tenant shall, not less than sixty (60) days after
completion of the Permitted Alterations, deliver to Lessor a revised
"as-built" set of Plans and Specifications for the Permitted
Alterations in form and substance reasonably satisfactory to Lessor.
(h) Tenant shall, not later than thirty (30) days after
Lessor sends an invoice, reimburse Lessor for any reasonable costs and
expenses, including attorney's fees and architects' and engineer's
fees, incurred in connection with reviewing proposed Permitted
Alterations and ensuring Tenant's compliance with the terms of this
Article X.
26
<PAGE>
Section 10.7. Mortgagee's Consent. Tenant shall not commence
-------------------
construction of any Permitted Alteration until Lessor shall have obtained the
consent of any applicable Facility Mortgagee or Superior Lessor, if such consent
is required. Lessor agrees to use commercially reasonable efforts to obtain
promptly any such consent, if such consent is necessary.
ARTICLE XI
-----------
Section 11.1. Liens. Subject to the provision of Article XII relating to
-----
permitted contests, Tenant will not directly or indirectly create or allow to
remain and will promptly discharge at its expense any lien, encumbrance,
attachment, title retention agreement or claim upon any Leased Property or any
attachment, levy, claim or encumbrance in respect of the Rent, not including,
however, (a) Permitted Encumbrances, (b) restrictions, liens and other
encumbrances which are consented to in writing by Lessor, or any easements
granted pursuant to the provisions of this Lease, (c) liens for those taxes of
Lessor which Tenant is not required to pay hereunder, (d) subleases permitted by
Article XXV, (e) liens for Impositions or for sums resulting from noncompliance
with Legal Requirements so long as (1) the same are not yet payable or are
payable without the addition of any fine or penalty or (2) such liens are in the
process of being contested as permitted by Article XII, (f) liens of mechanics,
laborers, materialmen, suppliers or vendors for sums either disputed in good
faith or not yet due, provided that (1) the payment of such sums shall not be
postponed under any related contract for more than sixty (60) days after the
completion of the action giving rise to such lien and such reserve or other
appropriate provisions as shall be required by law or generally accepted
accounting principles shall have been made therefor or (2) any such liens are in
the process of being contested as permitted by Article XII, and (g) any liens
which are the responsibility of Lessor pursuant to the provisions of Article
XXXVIII. Notwithstanding the foregoing, Tenant shall bond over any lien
affecting the applicable Leased Property if Lessor shall reasonably request, or
if any applicable Facility Mortgagee shall so require.
ARTICLE XII
-----------
Section 12.1. Permitted Contests. Tenant, on its own or on Lessor's
------------------
behalf (or in Lessor's name), but at Tenant's expense, may contest, by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any Imposition or
any Legal Requirement or any lien, attachment, levy, encumbrance, charge or
claim not otherwise permitted by Article XI, provided that (a) in the case of an
unpaid Imposition, lien, attachment, levy, encumbrance, charge, or claim, the
commencement and continuation of such proceedings shall suspend the collection
thereof from Lessor and from the applicable Leased Property, (b) neither the
applicable Leased Property nor any Rent therefrom nor any part thereof or
27
<PAGE>
interest therein would be reasonably likely to be in danger of being sold,
forfeited, attached or lost, (c) in the case of a Legal Requirement, Lessor
would not be in any immediate danger of civil or criminal liability for failure
to comply therewith pending the outcome of such proceedings, (d) Tenant shall
indemnify and hold harmless Lessor from and against any cost, claim, damage,
penalty or reasonable expense, including reasonable attorneys' fees, incurred by
Tenant in connection therewith or as a result thereof, (e) in the case of a
Legal Requirement and/or Imposition, lien, encumbrance or charge, Tenant shall
give such reasonable security as may be demanded by Lessor to insure ultimate
payment of the same and to prevent any sale or forfeiture of the affected Leased
Property or the Rent by reason of such non-payment or non-compliance, provided,
however, the provisions of this Article XII shall not be construed to permit
Tenant to contest the payment of Rent (except as to contests concerning the
method of computation or the basis of levy of any Imposition or the basis for
the assertion of any other claim) or any other sums payable by Tenant to Lessor
hereunder, (f) in the case of an Insurance Requirement, the coverage required by
Article XIII shall be maintained, and (g) if such contest be finally resolved
against Lessor or Tenant, Tenant shall, as Additional Charges due hereunder,
promptly pay the amount required to be paid, together with all interest and
penalties accrued thereon, or comply with the applicable Legal Requirement or
Insurance Requirement. Lessor, at Tenant's expense, shall execute and deliver
to Tenant such authorizations and other documents as may reasonably be required
in any such contest, and, if reasonably requested by Tenant or if Lessor so
desires, Lessor shall join as a party therein. Tenant shall indemnify and save
Lessor harmless against any liability, cost or expense of any kind that may be
imposed upon Lessor in connection with any such contest and any loss resulting
therefrom.
ARTICLE XIII
-------------
Section 13.1. General Insurance Requirements. Subject to the provisions
------------------------------
of Section 13.9, during the Term, Tenant shall at all times keep each Leased
Property, and all property located in or on any Leased Property, including
Tenant's Personal Property, insured with the kinds and amounts of insurance
described below. This insurance shall be written by companies authorized to do
insurance business in the State in which the applicable Leased Property is
located, which companies shall have a rating at least as high as the rating
required by any applicable Facility Mortgagee. The policies must name as loss
payee (i) the holder of any mortgage, deed of trust or other security agreement
("Facility Mortgagee") securing any Encumbrance placed on the applicable Leased
------------------
Property in accordance with the provisions of Article XXXVIII ("Facility
--------
Mortgage") by way of a standard form of mortgagee's loss payable endorsement or
- --------
(ii) if no such Facility Mortgage encumbers the applicable Leased Property, the
Lessor. Losses shall be payable to Lessor and/or Superior Mortgagee as provided
in Article XIV. Any loss adjustment shall require the written consent of Lessor,
Tenant, Leasehold Mortgagee and Facility Mortgagee whenever the loss exceeds
twenty percent (20%) of the Facility's
28
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Fair Market Value. Evidence of insurance shall be deposited with Lessor and, if
requested, with any Superior Lessor, Leasehold Mortgagee and Facility
Mortgagee(s). If any provision of any Facility Mortgage requires deposits of
insurance premiums to be made with such Facility Mortgagee, Tenant shall either
pay to Lessor monthly the amounts required and Lessor shall transfer such
amounts to each Facility Mortgagee, or, pursuant to written direction by Lessor,
Tenant shall make such deposits directly with such Facility Mortgagee. The
policies on each Leased Property, including the Leased Improvements, and
Fixtures and Tenant's Personal Property, shall insure against the following
risks:
Section 13.1.1. Loss or damage by fire, vandalism and malicious
mischief, extended coverage perils commonly known as "All Risk," earthquake and
all physical loss perils including but not limited to sprinkler leakage in an
amount not less than one hundred percent (100%) of the then full replacement
cost thereof (as defined below in Section 13.2);
Section 13.1.2. Loss or damage by explosion of steam boilers,
pressure vessels or similar apparatus, now or hereafter installed in the
Facility, in such limits with respect to any one accident as may be reasonably
requested by Lessor or any Superior Lessor or Facility Mortgagee from time to
time;
Section 13.1.3. Business Interruption and loss of rental income under
a rental income insurance policy covering risk of loss during the actual
restoration period plus an additional 365 days necessitated by the occurrence of
any of the hazards described in Sections 13.1.1 or 13.1.2 in such amounts as may
be customary for comparable properties in the area and in an amount sufficient
to prevent Lessor from becoming a co-insurer;
Section 13.1.4. Claims for personal injury or property damage under a
policy of comprehensive general accident and public liability insurance (in the
broadest form available, including, without limitation, broad form contractual
liability, independent contractor's hazard and completed operations coverage)
with amounts not less than Fifty Million and No/100 Dollars ($50,000,000.00) per
occurrence in respect of bodily injury and death and Fifty Million No/100
Dollars ($50,000,000.00) for property damage;
Section 13.1.5. Claims arising out of malpractice in an amount not
less than Twenty Five Million and No/100 Dollars ($25,000,000.00)* for each
person and for each occurrence; and
29
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Section 13.1.6. Flood (when the applicable Leased Property is located
in whole or in part within a designated flood _____ area) and such other hazards
and in such amounts as may be customary for comparable properties in the area.
Section 13.1.7. Loss or damage caused by breakage of plate glass, if
any, in commercially reasonable amounts acceptable to Lessor.
Section 13.1.8. Loss or damage commonly covered by blanket crime
insurance including employee dishonesty, loss of money orders or paper currency,
depositor's forgery, and loss of property of patients accepted by Tenant for
safekeeping, in commercially reasonable amounts acceptable to Lessor.
Section 13.2. Replacement Cost. The term "full replacement cost" as used
----------------
herein, shall mean the actual replacement cost of the property requiring
replacement from time to time including an increased cost of construction
endorsement, without reduction or deduction. Tenant shall have the full
replacement cost redetermined by an accredited appraiser approved by Lessor
(which approval shall not be unreasonably withheld or delayed), hereinafter
referred to as "impartial appraiser", every five years during the Term, and at
such other times that either party believes that full replacement cost has
increased or decreased. Tenant shall forthwith, on receipt of such
determination by such impartial appraiser, give written notice thereof to
Lessor. The determination of such impartial appraiser shall be final and
binding on the parties hereto, and Tenant shall forthwith increase, or may
decrease, the amount of the insurance carried pursuant to this Section, as the
case may be, to the amount so determined by the impartial appraiser. Each party
shall pay one-half ( 1/2) of the fee, if any, of the impartial appraiser.
Section 13.3. Additional Insurance. In addition to the insurance
--------------------
described above, Tenant shall maintain such additional insurance as may
reasonably be required from time to time by any Facility Mortgagee and, further,
shall at all times maintain adequate worker's compensation insurance coverage
for all persons employed by Tenant on each Leased Property. Such worker's
compensation insurance shall be in accordance with the requirements of
applicable local, state and federal law.
Section 13.4. Waiver of Subrogation. Lessor and Tenant agree that
---------------------
(insofar as and to the extent that such agreement may be effective without
invalidating or making it impossible to secure insurance coverage from
responsible insurance companies doing business in the State) with respect to any
property loss that is covered by insurance then being carried by Lessor or
Tenant, respectively, the party carrying such insurance and suffering said loss
releases the other of and from any and all claims with respect to such loss; and
they further agree that their respective insurance companies shall have no right
of subrogation against the other on account thereof, even though extra premium
may result therefrom.
30
<PAGE>
Section 13.5. Form Satisfactory, etc. All of the policies of insurance
-----------------------
referred to in this Section shall be written in form satisfactory to Lessor and
any Superior Lessor and Facility Mortgagee and by insurance companies
satisfactory to Lessor and any Superior Lessor and Facility Mortgagee. Lessor
agrees that it will not unreasonably withhold its approval as to the form of the
policies of insurance or as to the insurance companies selected by Tenant.
Tenant shall pay all of the premiums therefor, and deliver such policies or
certificates thereof to Lessor prior to their effective date (and, with respect
to any renewal policy, at least ten (10) days prior to the expiration of the
existing policy), and in the event of the failure of Tenant either to effect
such insurance in the names herein called for or to pay the premiums therefor,
or to deliver such policies or certificates thereof to Lessor and each Superior
Lessor and Facility Mortgagee at the times required, Lessor shall be entitled,
but shall have no obligation, to effect such insurance and pay the premiums
therefor, which premiums shall be repayable to Lessor upon written demand
therefor, and failure to repay the same shall constitute an Event of Default
within the meaning of Section 16.1(c). Each insurer mentioned in this Section
shall agree, by endorsement on the policy or policies issued by it, or by
independent instrument furnished to Lessor and any Superior Lessor and Facility
Mortgagee, that it will give to Lessor thirty (30) days' written notice before
the policy or policies in question shall be materially altered, allowed to
expire or canceled.
Section 13.6. Increase in Limits. In the event that either party shall
------------------
at any time deem the limits of the personal injury or property damage public
liability insurance then carried to be either excessive or insufficient, the
parties shall endeavor to agree on the proper and reasonable limits for such
insurance to be carried; and such insurance shall thereafter be carried with the
limits thus agreed on until further change pursuant to the provisions of this
Section. If the parties shall be unable to agree thereon, the proper and
reasonable limits for such insurance to be carried shall be determined by an
impartial third party selected by the parties. Nothing herein shall permit the
amount of insurance to be reduced below the amount or amounts required by any of
the Facility Mortgages or by any Superior Lessor.
Section 13.7. Blanket Policy. Notwithstanding anything to the contrary
--------------
contained in this Section but subject to any requirements of any applicable
Facility Mortgagee, Tenant's obligations to carry the insurance provided for
herein may be brought within the coverage of a so-called blanket policy or
policies of insurance carried and maintained by Tenant; provided, however, that
the coverage afforded Lessor will not be reduced or diminished or otherwise be
different from that which would exist under a separate policy meeting all other
requirements of this Lease by reason of the use of such blanket policy of
insurance, and provided further that the requirements of this Article XIII are
otherwise satisfied. Without limiting the foregoing, the amounts of insurance
that are required to be maintained pursuant to Section 13.1 shall be on a
Facility by Facility basis.
31
<PAGE>
Section 13.8. No Separate Insurance. Tenant shall not on Tenant's own
---------------------
initiative or pursuant to the request or requirement of any third party, take
out separate insurance concurrent in form of contributing in the event of loss
with that required in this Article, or increase the amounts of any then existing
insurance by securing an additional policy or additional policies, unless all
parties having an insurable interest in the subject matter of the insurance,
including in all cases Lessor and all Superior Lessors and Facility Mortgagees,
are included therein as additional insureds, and the loss is payable under said
insurance in the same manner as losses are payable under this Lease. Tenant
shall immediately notify Lessor of the taking out of any such separate insurance
or of the increasing of any of the amounts of the then existing insurance by
securing an additional policy or additional policies.
ARTICLE XIV
------------
Section 14.1. Insurance Proceeds. All proceeds payable by reason of any
------------------
loss or damage to the applicable Leased Property, or any portion thereof, and
insured under any policy of insurance required by Article XIII shall be paid to
Lessor or a third party designated by Lessor and held by Lessor or such third
party in trust and shall be made available for reconstruction or repair, as the
case may be, of any damage to or destruction of the Leased Property, or any
portion thereof, and shall be paid out by Lessor or such third party from time
to time for the reasonable costs of such reconstruction or repair. Any excess
proceeds of insurance remaining after the completion of the restoration or
reconstruction (or in the event neither Lessor nor Tenant is required or elects
to repair and restore, all such insurance proceeds) shall be retained by Lessor
free and clear upon completion of any such repair and restoration except as
otherwise specifically provided below in this Article XIV. All salvage
resulting from any risk covered by insurance shall belong to Lessor except that
any salvage relating to Tenant's Personal Property shall belong to Tenant.
Section 14.2. Reconstruction in the Event of Damage or Destruction
----------------------------------------------------
Covered by Insurance.
--------------------
Section 14.2.1. If during the Term, any Leased Property is totally
or partially destroyed from a risk covered by the insurance described in Article
XIII and the Facility located thereon is rendered Unsuitable for Its Primary
Intended Use, Tenant shall either (A) restore the Facility to substantially the
same condition as existed immediately before the damage or destruction, or (B)
offer to acquire the applicable Leased Property from Lessor for a purchase price
equal to the Fair Market Value Purchase Price of the Leased Property immediately
prior to such damage or destruction. In the event Lessor does not accept
Tenant's offer to so purchase, Tenant may either withdraw its offer to purchase
the Leased Property and proceed to restore the Facility to substantially the
same condition as existed immediately before the damage or destruction
32
<PAGE>
or terminate this Lease as to such Leased Property, in which event Lessor shall
be entitled to retain the insurance proceeds.
Section 14.2.2. If during the Term, any Leased Property is totally or
partially destroyed from a risk covered by the insurance described in Article
XIII, but the Facility located thereon is not thereby rendered Unsuitable for
its Primary Intended Use, Tenant shall restore such Facility to substantially
the same condition as existed immediately before the damage or destruction.
Such damage or destruction shall not terminate this Lease as to such Leased
Property.
Section 14.2.3. If the cost of the repair or restoration of any
Leased Property exceeds the amount of proceeds received by Lessor from the
insurance required under Article XIII, Tenant shall be obligated to contribute
any excess amounts needed to restore such Leased Property. Such difference
shall be paid by Tenant to Lessor prior to the commencement of construction and
shall be held in trust together with any other insurance proceeds for
application to the cost of repair and restoration.
Section 14.2.4. In the event Lessor accepts Tenant's offer to
purchase the applicable Leased Property as provided above, this Lease shall
terminate as to the applicable Leased Property upon payment of the purchase
price and Lessor shall remit to Tenant all insurance proceeds pertaining to such
Leased Property then held in trust by Lessor or any third party designated by
Lessor.
Section 14.3. Reconstruction in the Event of Damage or Destruction Not
--------------------------------------------------------
Covered by Insurance. If during the Term any Leased Property and the Facility
- --------------------
located thereon is totally or partially destroyed from a risk not covered by the
insurance described in Article XIII, whether or not such damage or destruction
renders the Facility Unsuitable for Its Primary Intended Use, Tenant shall
restore the Facility to substantially the same condition it was in immediately
before such damage or destruction and such damage or destruction shall not
terminate this Lease as to such Leased Property.
Section 14.4. Tenant's Property. All insurance proceeds payable by
-----------------
reason of any loss of or damage to any of the Tenant's Personal Property or
Capital Additions financed by Tenant shall be paid to Tenant and Tenant shall
hold such insurance proceeds in trust to pay the cost of repairing or replacing
damaged Tenant's Personal Property or Capital Additions financed by Tenant.
Section 14.5. Restoration of Tenant's Property. If Tenant is required or
--------------------------------
elects to restore the applicable Leased Property as provided in Section 14.2 or
14.3, Tenant shall also restore all alterations and improvements made by Tenant,
Tenant's Personal Property and all Capital Additions financed by Tenant.
33
<PAGE>
Section 14.6. No Abatement of Rent. This Lease shall remain in full
--------------------
force and effect and Tenant's obligation to make payments of Rent and to pay all
other charges required under this Lease shall remain unabated during the Term
notwithstanding any damage involving any Leased Property (provided that Lessor
shall credit against such payments any amounts paid to Lessor as a consequence
of such damage under any business interruption insurance obtained by Tenant);
provided, however, that, effective upon the purchase of any Leased Property or
- -------- -------
termination of this Lease as to the applicable Leased Property pursuant to and
in accordance with Section 14.2, this Lease shall terminate as to such Leased
Property. The provisions of this Article 14 shall be considered an express
agreement governing any cause of damage or destruction to the applicable Leased
Property and, to the maximum extent permitted by law, no local or state statute,
law, rule, regulation or ordinance in effect during the Term which provides for
such a contingency shall have any application in such case.
Section 14.7. Restoration. If Tenant is required or elects to restore
-----------
the applicable Leased Property as provided in Section 14.2 or 14.3, Tenant shall
promptly repair, rebuild, or restore the applicable Leased Property, so as to
make such Leased Property at least equal in value to such Leased Property as it
existed immediately prior to such occurrence and as nearly similar to it in
character as is practicable and reasonable. Prior to commencing such repairs or
rebuilding, Tenant shall submit to Lessor for Lessor's approval, which approval
shall not be unreasonably withheld or delayed, Plans and Specifications pursuant
to Section 10.1. Promptly after receiving Lessor's approval of the Plans and
Specifications, Tenant shall commence repairs and rebuilding and will prosecute
the repairs and rebuilding to completion with diligence, subject, however, to
strikes, lockouts, acts of God, embargoes, governmental restrictions, and other
causes beyond Tenant's reasonable control. Subject to the provisions of any
applicable Facility Mortgage, Lessor shall make available to Tenant the
insurance proceeds (net of all administrative and collection costs, including
reasonable attorneys' fees) paid to Lessor for such repair and rebuilding as it
progresses. Payments shall be made against certification of the architect
approved by Lessor (which approval shall not be unreasonably withheld)
responsible for the supervision of the repairs and rebuilding that the work had
been performed substantially in conformance with the Plans and Specifications
and the value of the work in place is equal to not less than 110% of the
aggregate amount advanced by Lessor for the payment of such work. Prior to the
commencing the repairing and rebuilding, Tenant shall deliver to Lessor for
Lessor's approval a schedule setting forth the estimated monthly draws for such
work. Subject to the provisions of any applicable Facility Mortgage, Lessor
shall contribute to such payments out of the insurance proceeds being held in
trust by Lessor an amount equal to the proportion that the total net amount so
held by Lessor bears to the total estimated cost of repairing and rebuilding,
multiplied by the payment by Tenant on account of such work. Lessor may,
however, withhold ten percent (10%) from each payment until the work has been
completed and proof has been furnished to Lessor that no lien or liability
34
<PAGE>
has attached or will attach to the applicable Leased Property or to Lessor in
connection with repairing and rebuilding.
Section 14.8. Termination of Rights of First Refusal. Any termination of
--------------------------------------
this Lease as to the applicable Leased Property pursuant to this Article XIV
shall cause any right of first refusal granted to Tenant under this Lease as to
the applicable Leased Property to be terminated and to be without further force
or effect.
Section 14.9. Waiver. Tenant hereby waives any statutory rights of
------
termination which may arise by reason of any damage or destruction of the
applicable Leased Property which Tenant is obligated to restore or may restore
under any of the provisions of this Lease.
ARTICLE XV
-----------
CONDEMNATION
Section 15.1. Definitions.
-----------
Section 15.1.1. "Condemnation" means, as to any Leased Property, (a)
------------
the exercise of any governmental power, whether by legal proceedings or
otherwise, by a Condemnor, (b) a voluntary sale or transfer by Lessor to any
Condemnor, either under threat of condemnation or while legal proceedings for
condemnation are pending and (c) a taking or voluntary conveyance of all or part
of such Leased Property, or any interest therein, or right accruing thereto or
use thereof, as the result or in settlement of any condemnation or other eminent
domain proceeding affecting such Leased Property.
Section 15.1.2. "Date of Taking" means, as to the applicable Leased
--------------
Property, the date the Condemnor has the right to possession of such Leased
Property, or any portion thereof, in connection with a Condemnation.
Section 15.1.3. "Award" means all compensation, sums or anything of
-----
value awarded, paid or received on a total or partial condemnation.
Section 15.1.4. "Condemnor" means any public or quasi-public
---------
authority, or private corporation or individual, having the power of
condemnation.
Section 15.2. Parties' Rights and Obligations. If during the Term
-------------------------------
there is any taking of all or any part of the applicable Leased Property by
Condemnation, the rights and obligations of the parties shall be determined by
this Article XV.
35
<PAGE>
Section 15.3. Total Taking. If any Leased Property is totally
------------
taken by condemnation, this Lease shall terminate as to such Leased Property on
the Date of Taking.
Section 15.4. Partial Taking. If a portion of any Leased Property
--------------
is taken by Condemnation, this Lease shall remain in effect as to such Leased
Property if the Facility located thereon is not thereby rendered Unsuitable for
Its Primary Intended Use, but if the Facility is thereby rendered Unsuitable for
its Primary Intended Use, this Lease shall terminate as to such Leased Property
on the Date of Taking.
If as a result of any such partial taking by Condemnation, this Lease is
not terminated as provided above, Tenant's obligation to make payments of Rent
and to pay all other charges required under this Lease shall remain unabated
during the Term notwithstanding such Condemnation (provided that Lessor shall
credit against such payments any amount of any Award attributable to Tenant's
business interruption).
Section 15.5. Restoration. If there is a partial taking of the
-----------
applicable Leased Property and this Lease remains in full force and effect
pursuant to Section 15.4, Tenant at its cost shall accomplish all necessary
restoration.
Section 15.6. Award-Distribution. (a) In the event of any partial
------------------
taking of any Leased Property, the entire Award shall belong to and be paid to
Lessor, except that, subject to the rights of the Facility Mortgagees, Tenant
shall be entitled to receive from the Award, if and to the extent such Award
specifically includes such item, the following:
Section 15.6.1. A sum attributable to the Capital Additions paid for
by Tenant; and
Section 15.6.2. A sum specifically attributable to Tenant's Personal
Property and any reasonable removal and relocation costs included in the Award.
(b) In the event of a total taking of any Leased Property, the Award shall
be divided between the Lessor and the Tenant in such proportions relative to the
appraised values of their relative estates determined in accordance with Section
35.1, taking into account the value of improvements owned by the Lessor and
Capital Additions paid for by the Tenant. Tenant shall also receive a sum
specifically attributable to Tenant's Personal Property and any reasonable
removal and relocation costs included in the Award.
36
<PAGE>
Section 15.7. Temporary Taking. The taking of any Leased Property,
----------------
or any part thereof, by military or other public authority shall constitute a
taking by condemnation only when the use and occupancy by the taking authority
has continued for longer than six (6) months. During any such six (6) month
period all the provisions of this Master Lease shall remain in full force and
effect except that the Minimum Rent shall not be abated or reduced during such
period of taking.
ARTICLE XVI
------------
Section 16.1. Events of Default. The occurrence of any one or more
-----------------
of the following events shall constitute an "Event of Default" under this Lease.
----------------
(a) an Event of Default shall occur under the Indemnity Agreement, or
(b) if Tenant shall fail to make payment of the Rent or any other sum
payable under or pursuant to the terms of this Lease when the same becomes due
and payable and such failure is not cured within a period of five (5) days after
receipt of notice from Lessor, or
(c) if Tenant shall fail to observe or perform any term, covenant or
condition of this Lease not specifically provided for in this Section 16.1 and
such failure is not cured within a period of thirty (30) days after receipt of
notice from Lessor, unless such failure cannot with due diligence be cured
within a period of thirty (30) days, in which case such period of time shall be
extended to such period of time (not to exceed 180 days) as may be necessary to
cure such default with all due diligence provided that such cure is completed
within 180 days, or
(d) if Tenant shall fail to observe or perform any term, covenant or
agreement on its part to be performed or observed pursuant to Section 11.1 or
Section 13.1, or
(e) A Guarantor shall fail to observe or perform any term, covenant or
agreement on its part to be performed or observed pursuant to any Guaranty; or
(f) there shall occur a final unappealable determination by applicable
state authorities of the revocation required for the lawful operation of the
Facility located on any Leased Property in accordance with its Primary Intended
Use or the loss under any other circumstances under which Tenant is required to
cease operations of such Facility in accordance with its Primary Intended Use as
currently operated, or
(g) any material representation or warranty made by or on behalf of Tenant
or any Guarantor under or in connection with this Lease or any document,
37
<PAGE>
certificate or agreement delivered in connection with this Lease shall prove to
have been false or misleading in any material respect on the day when made or
deemed made, or
(h) if Tenant or a Guarantor shall:
(i) admit in writing its inability to pay its debts generally as
they become due,
(ii) file a petition in bankruptcy or a petition to take
advantage of any insolvency act,
(iii) make an assignment for the benefit of its creditors,
(iv) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property, or
(v) file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any other applicable
law or statute of the United States of America or any State thereof,
or
(i) any petition shall be filed by or against Tenant or Guarantor or
any subsidiary of either under Federal bankruptcy laws, or any other proceeding
shall be instituted by or against Tenant or Guarantor or such subsidiary seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for Tenant or Guarantor
or such subsidiary, or for any substantial part of the property of Tenant or
Guarantor or such subsidiary, and such proceeding is not dismissed within ninety
(90) days after institution thereof, or Tenant or Guarantor or such subsidiary
shall take any action to authorize or effect any of the actions set forth above
in this paragraph (i), or
(j) if Tenant or Guarantor shall be liquidated or dissolved, or shall
begin proceedings toward such liquidation or dissolution, or
(k) if the estate or interest of Tenant in any Leased Property or any
part thereof shall be levied upon or attached in any proceeding and the same
shall not be vacated or discharged within the later of ninety (90) days after
commencement thereof or 30 days after receipt by Tenant of notice thereof from
Lessor, (unless Tenant shall be contesting such lien or attachment in good faith
in accordance with Article XII hereof), or
38
<PAGE>
(l) if, except pursuant to the terms hereof, Tenant voluntarily ceases
operations on any Leased Property for a period in excess of thirty (30) days,
or
(m) if any reduction occurs in the number of licensed beds in excess
of ten percent (10%) of the number of licensed beds in the applicable Facility
on the Commencement Date or there shall occur a revocation of certification for
reimbursement under Medicare with respect to any Facility that participates in
such programs, or
(n) if Tenant shall become subject to regulatory sanctions and the
Tenant has failed to cure or satisfy such regulatory sanctions within its
specified cure period in any material respect with respect to any Facility, and
in any such event,
Lessor may terminate this Lease by giving not less than ten (10) days' notice of
such termination and upon the expiration of the time fixed in such notice, if
any, the Term shall terminate and all rights of Tenant under this Lease shall
cease. Lessor shall have all rights at law and in equity available to Lessor as
a result of Tenant's breach of this Lease.
Tenant shall, to the maximum extent permitted by law, pay as
Additional Charges all Litigation Costs as a result of any Event of Default
hereunder.
Section 16.2. Certain Remedies. If an Event of Default shall have
----------------
occurred (and the event giving rise to such Event of Default has not been cured
within the curative period relating thereto as set forth in Section 16.1 above)
and be continuing, whether or not this Lease has been terminated pursuant to
Section 16.1, Tenant shall, to the extent permitted by law, if required by
Lessor so to do, immediately surrender to Lessor the Leased Property pursuant to
the provisions of Section 16.1 and quit the same, and Lessor may enter upon and
repossess the Leased Property by reasonable force, summary proceedings,
ejectment or otherwise, and may remove Tenant and all other persons and any and
all personal property from the Leased Property subject to rights of any
residents or patients and to any requirement of law. Lessor and Tenant hereby
agree that upon the occurrence of an Event of Default under Section 16.1 (f),
(m) or (n), Lessor may, if it so desires, terminate the lease with respect to
the Facility that is the subject of the Event of Default and collect liquidated
damages in an amount equal to the net present value at the time of the
occurrence of the Event of Default of the amount designated in Exhibit C as
attributable to such Facility multiplied by the number of years remaining on the
-------------
lease and discounted at a rate equal to the Prime Rate; provided that after the
--------
occurrence of four (4) Events of Default under Section 16.1 (f), (m) and/or (n),
determined on a cumulative basis (for example two Events of Default under (f)
and one each under (m) and (n)), Lessor shall be permitted, if it so desires, to
exercise all of the rights and remedies hereunder with respect to all Facilities
covered under this Lease, without regard to which Facility from which the Event
of Default emanated.
39
<PAGE>
Section 16.3. Damages. Neither (a) the termination of this Lease
-------
pursuant to Section 16.1, (b) the repossession of the Leased Property or any
portion thereof, (c) the failure of Lessor, notwithstanding reasonable good
faith efforts to relet the Leased Property or any portion thereof, (d) the
reletting of all or any portion thereof, nor (e) the failure of Lessor to
collect or receive any rentals due upon any such reletting, shall relieve Tenant
of its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In the event of any such termination,
Tenant shall forthwith pay to Lessor, at Lessor's option, as and for liquidated
and agreed current damages, either:
(A) the sum of:
(i) the net present value at the time of award of the unpaid Rent
which had been earned at the time of termination; and
(ii) the net present value at the time of award of the amount of
unpaid Rent for the balance of the Term without any obligation or
deemed obligation on the part of Lessor to mitigate damages.
In making the above determinations, the net present value at the
time of the award shall be determined by the court having
jurisdiction thereof using a discount rate equal to the Prime
Rate,
or (B)
without termination of Tenant's right to possession of the Leased
Property, each installment of Rent and other sums payable by
Tenant to Lessor under this Lease as the same becomes due and
payable, which Rent and other sums shall bear interest at the
maximum annual rate permitted by law from the date when due until
paid, and Lessor may enforce, by action or otherwise, any other
term or covenant of this Lease.
In case of any Event of Default, re-entry, expiration and
dispossession by summary proceedings or otherwise, Lessor may (a) relet any
Leased Property or any part or parts thereof, either in the name of Lessor or
otherwise, for a term or terms which may, at Lessor's option, be equal to, less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant concessions or free rent to the extent that Lessor
considers advisable and necessary to relet the same, and (b) make such
reasonable alterations, repairs and decorations in the applicable Leased
Property or any portion thereof as Lessor, in its sole judgment, considers
advisable and necessary for the
40
<PAGE>
purpose of reletting the applicable Leased Property; and the making of such
alterations, repairs and decorations shall not operate or be construed to
release Tenant from liability hereunder as aforesaid. Lessor shall in no event
be liable in any way whatsoever for failure to relet any Leased Property, or, in
the event that any Leased Property is relet, for failure to collect the rent
under such reletting. To the fullest extent permitted by law, Tenant hereby
expressly waives any and all rights of redemption granted under any present or
future laws in the event of Tenant's being evicted or dispossessed, or in the
event of Lessor's obtaining possession of the applicable Leased Property, by
reason of the violation by Tenant of any of the covenants and conditions of this
Lease.
Section 16.4. Tenant's Obligation to Purchase. If an Event of
-------------------------------
Default shall have occurred and be continuing, by including such requirement in
the ten (10) day notice of termination of this Lease given to Tenant by Lessor
pursuant to the provisions of Section 16.1 or by separate notice given by Lessor
to Tenant at any time thereafter prior to the time such Event of Default shall
be cured, Lessor may require Tenant to purchase the Facility that is the subject
of the Event of Default or all Leased Properties on the first Minimum Rent
payment date occurring not less than thirty (30) days after the date of receipt
of, or such later date that is specified in, said notice requiring such purchase
for an amount equal to the higher of the then current Fair Market Value Purchase
Price or the Minimum Repurchase Price of the applicable Leased Property plus all
Rent then due and payable (excluding the installment of Minimum Rent due on the
purchase date) as of the date of purchase. If Lessor exercises such right,
Lessor shall convey such Leased Property to Tenant on the date fixed therefor in
accordance with the provisions of Article XVIII upon receipt of the purchase
price therefor and this Lease shall thereupon terminate. Any purchase by Tenant
of any Leased Property pursuant to this Section shall be in lieu of the damages
specified in Sections 16.3 with respect to such Leased Property.
Section 16.5. Waiver. If this Lease is terminated pursuant to
------
Section 16.1, Tenant waives, to the maximum extent permitted by applicable law,
(a) any right of redemption, re-entry or repossession, (b) any right to a trial
by jury in the event of summary proceedings to enforce the remedies set forth in
this Article XVI, and (c) the benefit of any laws now or hereafter in force
exempting property from liability for rent or for debt.
Section 16.6. Application of Funds. Any payments received by Lessor
--------------------
under any of the provisions of this Lease during the existence or continuance of
any Event of Default (and such payment is made to Lessor rather than Tenant due
to the existence of an Event of Default) shall be applied to Tenant's
obligations in the order which Lessor may determine or as may be prescribed by
the laws of the State where the applicable Leased Property is located.
41
<PAGE>
Section 16.7. Notice to Lessor. If Tenant or any subtenant receives
----------------
a notice of any material regulatory deficiency from any regulatory agency,
Tenant shall deliver a copy of such notice to Lessor in accordance with Section
34.1.
ARTICLE XVII
-------------
Section 17.1. Lessor's Right to Cure Tenant's Default. If an Event
---------------------------------------
of Default shall have occurred and be continuing, Lessor, without waiving or
releasing any obligation or Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of Tenant, and may, to the extent permitted by
law, enter upon any or each Leased Property or any portion thereof for such
purpose and take all such action thereon as, in Lessor's opinion, may be
necessary or appropriate therefor. No such entry shall be deemed an eviction of
Tenant. All reasonable sums so paid by Lessor and all costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses, in each
case, to the maximum extent permitted by law) so incurred, together with
interest thereon (to the maximum extent permitted by law) at the Overdue Rate
from the date on which such sums or expenses are paid or incurred by Lessor,
shall be paid by Tenant to Lessor on demand. The obligations of Tenant and
rights of Lessor contained in this Article shall survive the expiration or
earlier termination of this Master Lease.
ARTICLE XVIII
--------------
Section 18.1. Provisions Relating to Purchase of the Leased Property.
------------------------------------------------------
In the event Tenant purchases any Leased Property from Lessor pursuant to any of
the terms of this Lease, Lessor shall, upon receipt from Tenant of the
applicable purchase price, together with full payment of all Rent due and
payable or other charges due and payable with respect to any period ending on or
before the date of the purchase, deliver to Tenant an appropriate deed or other
conveyance (in the customary form used to convey commercial properties within
the relevant jurisdiction) conveying the entire interest of Lessor in and to
such Leased Property to Tenant free and clear of all encumbrances other than (i)
those that Tenant has agreed hereunder to pay or discharge, (ii) those mortgage
liens, if any, which Tenant has agreed in writing to accept and to take title
subject to and (iii) Permitted Encumbrances. The difference between the
applicable purchase price and the total of the encumbrances assumed or taken
subject to shall be paid in cash to Lessor or as Lessor may direct, in federal
or other immediately available funds except as otherwise mutually agreed by
Lessor and Tenant other than as specifically provided above, such Leased
Property shall be conveyed to Tenant on an "as is" basis, and in its then
physical condition. Closing of any such sale shall be contingent upon and
subject to Tenant obtaining all required governmental consents and approvals for
such transfer and if such sale shall fail to be consummated by reason of the
inability of Tenant to obtain all such approvals and consents, any options to
extend the Term of this Master Lease which
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otherwise would have expired during the escrow period to such proposed sale
shall be deemed to remain in effect for 30 days after termination of the escrow
or other arrangement covering the closing of such proposed sale. All expenses of
such conveyance, including, without limitation, the cost of title examination or
standard coverage title insurance, if reasonably required under the
circumstances then existing, attorneys' fees incurred [by Lessor] in connection
with such conveyance and release, and transfer taxes, shall be paid by Lessor,
except that such charges shall be paid by Tenant in case of a sale pursuant to
Section 16.4. Recording fees shall be paid for by Tenant.
ARTICLE XIX
------------
Section 19.1. Renewal Terms. If no Event of Default shall have
-------------
occurred and be continuing at the time Tenant gives notice as set forth below or
at the time of the commencement of the applicable Extended Term, Tenant is
hereby granted the right to renew this Lease, with respect to all, but not less
than all, of the Leased Properties within the applicable group as shown on
Exhibit D annexed hereto, for three (3) 5-year optional renewal terms
- ---------
(collectively the "Extended Terms" and each an "Extended Term") upon giving
-------------- -------------
written notice to Lessor of each such renewal at least one hundred eighty (180)
days but not more than three hundred sixty (360) days prior to the termination
of the then current Term. Tenant may not exercise its option for more than one
Extended Term at a time. During the first such Extended Term, all of the terms
and conditions of this Lease shall continue in full force and effect, except
that the Minimum Rent for and during such Extended Term shall be equal to the
Minimum Rent in effect on the last day of the Fixed Term, plus the Escalation
Amount. During each of the second Extended Term and the third Extended Term,
all of the terms and conditions of this Lease shall continue in full force and
effect, except that the Rent for and during the Extended Terms shall be the then
current fair market rental ("Fair Market Rental") which unless otherwise
------------------
mutually agreed to by Lessor and Tenant shall be determined by the appraisal
procedure pursuant to the provisions of Article XXXV. If Tenant fails to notify
Lessor of the exercise of any extension option which Tenant has the right to
exercise hereunder prior to the required time, its option or options to extend
shall nevertheless remain in full force and effect for a period of thirty (30)
days after receipt of written notice from Lessor subsequent to the required time
setting forth the expiration date of this Lease and advising Tenant that notice
of extension has not been received.
ARTICLE XX
-----------
Section 20.1. Holding Over. If Tenant shall for any reason remain in
------------
possession of any Leased Property after the expiration of the Term or earlier
termination of the Term, such possession shall be as a month-to-month tenant
during which time Tenant shall pay as rental each month, one and one-half times
the aggregate of (i) one-twelfth of the aggregate Minimum Rent payable with
respect to the last Lease Year of the
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preceding Term; (ii) all Additional Charges accruing during the month and (iii)
all other sums, if any, payable by Tenant pursuant to the provisions of this
Lease with respect to the applicable Leased Property. During such period of
month-to-month tenancy, Tenant shall be obligated to perform and observe all of
the terms, covenants and conditions of this Master Lease, but shall have no
rights hereunder other than the right, to the extent given by law to month-to-
month tenancies to continue its occupancy and use of the applicable Leased
Property. Nothing contained herein shall constitute the consent, express or
implied, of Lessor to the holding over of Tenant after the expiration or earlier
termination of this Lease.
ARTICLE XXI
------------
SUBORDINATION
Section 21.1. Subordination. This Lease and all rights of Tenant
-------------
hereunder are subject and subordinate to all Facility Mortgages and all Superior
Leases which may now or hereafter affect Lessor's interest in the applicable
Leased Property and any interest of any Superior Lessor (all such leases and
mortgages, collectively, the "Superior Mortgages"), and to all renewals,
------------------
modifications, consolidations, replacements and extensions of the Superior
Mortgages so long as Tenant shall receive a so-called "non-disturbance"
agreement in favor of Tenant from any such Superior Lessor or Superior Mortgagee
on such Superior Lessor's or Superior Mortgagee's commercially reasonable
standard form. This Section shall be self-operative and no further instrument
of subordination shall be required. In confirmation of such subordination,
Tenant agrees to execute and deliver promptly any commercially reasonable form
of instrument (in recordable form, if requested) that Lessor, any Superior
Lessor or the holder of any Superior Mortgage (a "Superior Mortgagee") may
------------------
request to evidence such subordination. Lessor shall use its reasonable efforts
to obtain from each currently existing Superior Lessor and Superior Mortgagee a
so-called "non-disturbance" agreement in favor of Tenant on such Superior
Lessor's or Superior Mortgagee's standard form.
Section 21.2. Attornment. If the interests of Lessor under this
----------
Lease are transferred by reason of, or assigned in lieu of, foreclosure or other
proceedings for enforcement of any such Superior Mortgage, or if any Superior
Lease shall be terminated then Tenant shall, at the option of such purchaser,
assignee or any Superior Lessor, as the case may be, (x) attorn to such party
and perform for its benefit all the terms, covenants and conditions of this
Lease on Tenant's part to be performed with the same force and effect as if such
party were the landlord originally named in this Lease, or (y) enter into a new
lease with such party, as landlord, for the remaining Term and otherwise on the
same terms and conditions of this Lease except that such successor landlord
shall not be (i) liable for any previous act, omission or negligence of Lessor
under this Lease; (ii) subject
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to any counterclaim, defense or offset which theretofore shall have accrued to
Tenant against Lessor; (iii) bound by any previous modification or amendment of
this Lease or by any previous prepayment of more than one month's rent, unless
such modification, amendment or prepayment shall have been approved in writing
by the Superior Lessor or the Superior Mortgagee through or by reason of which
such successor landlord shall have succeeded to the rights of Lessor under this
Lease; (iv) liable for any security deposited pursuant to this Lease unless such
security has actually been delivered to such successor landlord. Nothing
contained in this Section shall be construed to impair any right otherwise
exercisable by any such owner, holder or lessee.
Section 21.3. Mortgagee Cure Rights. If any act or omission by
---------------------
Lessor would give Tenant the right, immediately or after lapse of time, to
cancel or terminate this Lease or to claim a partial or total eviction, or
abatement of rent, setoff or counterclaim not otherwise expressly permitted by
the terms of this Lease, Tenant will not exercise any such right until (i) it
has given written notice of such act or omission to each Superior Mortgagee and
each Superior Lessor whose name and address shall have previously been furnished
to Tenant, by delivering notice of such act or omission addressed to each such
party at its last address so furnished, (ii) Lessor shall have failed to cure
the same within the time limits set forth in this Lease, and (iii) following the
giving of such notice, no Superior Mortgagee and no Superior Lessor shall have
remedied such act or omission (x) in the case of an act or omission which is
capable of being remedied without possession of this Leased Property, within the
cure period available to Lessor under this Lease plus sixty (60) days and (y) in
the case of any act or omission which is incapable of being remedied without
possession of the applicable Leased Property, within sixty (60) days following
the date on which possession is obtained (either by such Superior Mortgagee or
Superior Lessor or by a receiver in an action commenced by such Superior
Mortgagee or Superior Lessor), provided a Superior Mortgagee or Superior Lessor
--------
has promptly commenced action to obtain possession and shall diligently pursue
such action to completion and provided further that such Superior Mortgagee or
-------- -------
Superior Lessor shall, with reasonable diligence, give Tenant notice of its
intention to, and commence and continue to, remedy such act or omission or cause
the same to be remedied.
[ Section 21.4. Modifications. Tenant shall execute any
-------------
modification of this Lease requested by any prospective Superior Mortgagee to
cause the terms of this Master Lease to conform with standard securitized
mortgage financing requirements, provided that such modifications do not
materially adversely increase the obligations of Tenant hereunder or materially
diminish Tenant's rights under this Lease or materially impair the right of a
Leasehold Mortgagee and provided further that such modifications do not increase
the Minimum Rent payable hereunder. In addition, if any Superior Mortgagee or
prospective Superior Mortgagee shall request modifications of this Lease as a
condition to the provision, continuance or renewal of any such financing, Tenant
will
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not unreasonably withhold, delay or defer its consent thereto, provided that
such modifications do not adversely increase the obligations of Tenant hereunder
or diminish Tenant's rights under this Lease or materially impair the rights of
a Leasehold Mortgagee and provided further that such modifications do not
increase the Minimum Rent payable hereunder.]/*/
ARTICLE XXII
-------------
Section 22.1. Notice to Lessor. (a) If Tenant shall mortgage
----------------
Tenant's interest in one or more Leased Properties to a Lending Institution in
accordance with the terms of this Lease, and if the holder of the Leasehold
Mortgage shall provide Lessor with a true copy of the Leasehold Mortgage and the
name and address of the Leasehold Mortgagee (as hereinafter defined) and Lessor
shall approve the Leasehold Mortgage, Lessor and Tenant agree that the
provisions of this Section shall apply in respect to each the Leasehold
Mortgage. Lessor hereby approves of the Leasehold Mortgages dated as of the
date hereof in favor of Morgan Guaranty Trust Company of New York, as agent;
provided, however, that such approval shall not constitute an agreement by
- -------- -------
Lessor to be bound by the terms of such Leasehold Mortgage. In the event of any
assignment of a leasehold or in the event of a change of address of a Leasehold
Mortgagee or of an assignee of the Leasehold Mortgage, notice of the new name
and address shall be provided to Lessor.
Section 22.2. Definitions. (a) The term "Leasehold Mortgage" as used
-----------
in this Section shall include a mortgage, a deed of trust, a deed to secure
debt, or other security instrument by which Tenant's leasehold estate is
mortgaged or otherwise transferred, to secure a debt. "Leasehold Mortgage"
shall be deemed to refer to all of the Leasehold Mortgages delivered to secure a
debt.
(b) The term "Leasehold Mortgagee" as used in this Section shall refer
to a holder of a Leasehold Mortgage approved by Lessor pursuant to the terms
hereof. Lessor hereby approves of Morgan Guaranty Trust Company of New York, as
collateral agent, as the initial Leasehold Mortgagee.
Section 22.3. Consent of Leasehold Mortgagee Required. No
---------------------------------------
cancellation or surrender (other than a termination following the occurrence of
an Event of Default) and no amendment to or modification of, this Lease shall be
effective as to the Leasehold Mortgagee without the prior written consent of
such Leasehold Mortgagee, unless an amendment or modification is not reasonably
likely to result in a material
- ---------------
/*/ To be included in CMBS lease only.
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adverse effect on the rights of the Leasehold Mortgagee, the lien of the
Leasehold Mortgages, or the value of the leasehold interest demised hereunder.
Section 22.4. Default Notice. Lessor, upon providing Tenant any
--------------
notice of: (a) default under this Lease or (b) a termination of this Lease,
shall at the same time provide a copy of such notice to the Leasehold Mortgagee.
From and after the time such notice has been given to a Leasehold Mortgagee, the
Leasehold Mortgagee shall have the same period, after the giving of such notice
upon it, for remedying any default or acts or omissions which are the subject
matter of such notice or causing the same to be remedied, as is given Tenant
after the giving of such notice to Tenant, plus 30 days to remedy, commence
remedying or cause to be remedied the defaults or acts or omissions which are
the subject matter of such notice specified in any such notice, provided that
such defaults are capable of being cured by the Leasehold Mortgagee or on behalf
of the Leasehold Mortgagee. Lessor shall accept such performance by or at the
instigation of the Leasehold Mortgagee as if the same had been done by Tenant.
Tenant authorizes each Leasehold Mortgagee to take any such action at the
Leasehold Mortgagee's option and does hereby authorize entry upon the Leased
Properties by the Leasehold Mortgagee for such purpose. If Leasehold Mortgagee
has failed to cure Tenant's default within the above-mentioned time period,
Lessor may exercise its remedies specified in Sections 16.2, 16.3, 16.4 and
17.1.
Section 22.5. Procedure for Foreclosure on Default. (a) If the
------------------------------------
Leasehold Mortgagee has commenced taking steps to acquire or sell Tenant's
interest in this Lease by foreclosure of the Leasehold Mortgage or other
appropriate means, the Leasehold Mortgagee shall provide Landlord notice of the
same and shall prosecute the same to completion with due diligence.
(b) During such period, this Lease shall not then terminate, and the
time for completion by such Leasehold Mortgagee of its proceedings shall
continue so long as such Leasehold Mortgagee is enjoined or stayed and
thereafter for so long as such Leasehold Mortgagee proceeds to complete steps to
acquire or sell Tenant's interest in this Lease by foreclosure of the Leasehold
Mortgage or by other appropriate means with reasonable diligence and continuity.
Nothing in this Section 22.5, however, shall be construed to extend this Lease
beyond the original term thereof as extended by any options to extend the term
of this Lease properly exercised by Tenant or a Leasehold Mortgagee in
accordance with Section 19.1, nor to require a Leasehold Mortgagee to continue
such foreclosure proceedings after the default has been cured. If the default
shall be cured and the Leasehold Mortgagee shall discontinue such foreclosure
proceedings, this Lease shall continue in full force and effect as if Tenant had
not defaulted under this Lease.
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(c) In addition, during such period, the Leasehold Mortgagee shall
pay or cause to be paid the rent, additional rent and other monetary obligations
of Tenant under this Lease as the same become due, and continue its good faith
efforts to perform, or cause to be performed, all of Tenant's other obligations
under this Lease.
Section 22.6. Assignment or Transfer in Lieu of Foreclosure. (a)
---------------------------------------------
For the purposes of this Section 22.6, the making of a Leasehold Mortgage shall
not be deemed to constitute an assignment or transfer of this Lease or of the
leasehold estate hereby created, nor shall any Leasehold Mortgagee, as such, be
deemed to be an assignee or transferee of this Lease or of the leasehold estate
hereby created so as to require the Leasehold Mortgagee, as such, to assume the
performance of any of the terms, covenants or conditions on the part of the
Tenant to be performed hereunder, but the purchaser at any sale of this Lease
and of the Leasehold Estate hereby created in any proceedings for the
foreclosure of any Leasehold Mortgage, or the assignee or transferee of this
Lease and of the leasehold estate hereby created under any instrument of
assignment or transfer in lieu of the foreclosure of any Leasehold Mortgage,
shall be deemed to be an assignee or transferee within the meaning of this
Section 2264, and shall be deemed to have agreed to perform all of the terms,
covenants and conditions on the part of the Tenant to be performed hereunder
from and after the date of such purchase and assignment.
(b) Prior to any such purchase or assignment pursuant to a foreclosure
or similar proceeding, the Leasehold Mortgagee shall notify Lessor of the
proposed transferee. Subject to any state or other governmental requirements,
Lessor shall not unreasonably withhold its consent to any sale or assignment,
provided that (a) the purchaser or assignee (1) shall be a creditworthy entity
with sufficient financial stability to satisfy its financial obligations under
the Lease, (2) shall have not less than four years experience in operating
health care facilities for the purpose of the applicable Facility's Primary
Intended Use, (3) has a favorable business and operational reputation and
character and (4) shall assume in writing and agree to keep and perform all of
the terms of this Lease on the part of Tenant to be performed hereunder from and
after the date of such purchase and assignment and (b) an original counterpart
of each such purchase and sale agreement or instrument of assignment or transfer
in lieu of foreclosure of any Leasehold Mortgage, duly executed by Tenant and
such purchaser or assignee, as the case may be, in the form and substance
satisfactory to Lessor, shall be delivered promptly to Lessor. Lessor's
obligation to consent to a sale or assignment is subject to any reasonable
approval rights of any Facility Mortgagee and/or the lenders under that certain
Credit Agreement, dated April 30, 1998, by and among the Lessor, NationsBank,
N.A., as administrative agent, Morgan Guaranty Trust Company of New York, as
documentation agent, JP Morgan Securities Inc. and NationsBank Montgomery
Securities LLC as co-arrangers and the banks parties thereto, as the same may be
amended and/or replaced from time to time.
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Section 22.7. New Lease. Lessor agrees to enter into a new lease
---------
("New Lease") of the Leased Properties with the Leasehold Mortgagee or its
- -----------
designee for the remainder of the term of this Lease, effective as of the date
of termination, at the rent and additional rent, and upon the terms, covenants
and conditions (including all options to renew but excluding requirements which
are not applicable or which have already been fulfilled) identical to this
Lease, provided:
(a) The Leasehold Mortgagee shall make written request upon Lessor for
such New Lease within sixty (60) days after the date the Leasehold
Mortgagee receives Lessor's Notice of Termination of this Lease given
pursuant to this Section 22.7.
(b) The Leasehold Mortgagee or its designee shall pay or cause to be
paid to Lessor at the time of the execution and delivery of such New Lease,
any and all sums which would at the time of execution and delivery thereof
be due pursuant to this Lease but for such termination and, in addition
thereto, all reasonable expenses, including reasonable attorney's fees,
which Lessor shall have incurred by reason of such termination and the
execution and delivery of the New Lease and which have not otherwise been
received by Lessor from Tenant or other party in interest under Tenant.
Upon the execution of such New Lease, Lessor shall allow to the Tenant
named therein as an offset against the sums otherwise due under this
Section 22.7(b) or under the New Lease, an amount equal to the net income
derived by Lessor from the Leased Properties during the period from the
date of termination of this Lease to the date of the beginning of the Lease
term of such New Lease. In the event of a controversy as to the amount to
be paid to Lessor pursuant to this Section 22.7(b), the payment obligation
shall be satisfied if Lessor shall be paid the amount not in controversy,
and the Leasehold Mortgagee or its designee shall agree to pay any
additional sum ultimately determined to be due plus interest at the Overdue
Rate and such obligation shall be adequately secured.
(c) The Leasehold Mortgagee or its designee shall agree to remedy any
of Tenant's defaults of which said Leasehold Mortgagee was notified by Lessor's
Notice of Termination and which are reasonably susceptible of being so cured by
Leasehold Mortgagee or its designee.
(d) The Tenant under such New Lease shall have the same right, title
and interest in and to the Leased Properties and the buildings and improvements
thereon as Tenant had under this Lease.
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(e) The Tenant under any such New Lease shall be liable to perform the
obligations imposed on the Tenant by such New Lease only during the period such
person has ownership of such leasehold estate.
Section 22.8. New Lease Properties. If more than one Leasehold
--------------------
Mortgagee shall request a New Lease pursuant to Section 22.7(a), Lessor shall
enter into such New Lease with the Leasehold Mortgagee whose mortgage is prior
in lien, or with the designee of the Leasehold Mortgagee. Lessor, without
liability to Tenant or any Leasehold Mortgagee with an adverse claim, may rely
upon a mortgagee title insurance policy or policies issued by a responsible
title insurance company as the basis for determining the appropriate Leasehold
Mortgagee who is entitled to such New Lease.
Section 22.9. Legal Proceedings. Lessor shall give each Leasehold
-----------------
Mortgagee prompt notice of any legal proceedings between Lessor and Tenant
involving obligations under this Lease. Each Leasehold Mortgagee shall have the
right to intervene in any such proceedings and be made a party to such
proceedings, and the parties hereto do hereby consent to such intervention. In
the event that any Leasehold Mortgagee shall not elect to intervene or become a
party to any such proceedings, Lessor shall give the Leasehold Mortgagee notice
of, and a copy of any decision made in any such proceedings, which shall be
binding on all Leasehold Mortgagees not intervening after receipt of notice of
such proceedings.
Section 22.10. Future Amendments. In the event on any occasions
-----------------
hereafter Tenant seeks to mortgage the leasehold estate created hereby, Lessor
agrees to amend this Lease from time to time to the extent reasonably requested
by a Lending Institution proposing to make Tenant a loan secured by a first lien
upon Tenant's leasehold estate, provided that such proposed amendments do not
adversely affect the rights of Lessor or its interest in the Leased Properties.
All reasonable expenses incurred by Lessor in connection with any such amendment
shall be paid by Tenant.
Section 22.11. Estoppel Certificate. Lessor and Tenant shall,
--------------------
without charge, at any time and from time to time hereafter, within then (10)
days after written request of the other party to do so, certify by written
instrument duly executed and acknowledged to any mortgagee or purchaser, or
proposed Leasehold Mortgagee or proposed purchaser, or any other person, firm or
corporation specified in such request: (a) as to whether this Lease has been
supplemented or amended, and if so, the substance and manner of such supplement
or amendment; (b) as to the validity and force and effect of this Lease; (c) as
to the existence of any Event of Default hereunder; (d) as to the existence of
any offsets, counterclaims or defenses hereto on the part of the either party;
(e) as to the commencement and expiration dates of the term of this Lease; and
(f) as to any other matters as may be reasonably so requested. Any such
certificate may be relied upon by the other party and any other person, firm or
corporation to whom the same may
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be exhibited or delivered, and the contents of such certificate shall be binding
on the party so certifying.
Section 22.12. Notices. Notices from Lessor to the Leasehold
-------
Mortgagee shall be mailed to the address furnished Lessor pursuant to Section
22.1 and those from the Leasehold Mortgagee to Lessor shall be mailed to the
address designated pursuant to the provisions of Section 34.1 hereof. Such
notices, demands and requests shall be given in the manner described in Section
34.1 and shall in all respects be governed by the provisions of that section.
Section 22.13. Erroneous Payments. No payment made to Lessor by a
------------------
Leasehold Mortgagee shall constitute agreement that such payment was, in fact,
due under the terms of this Lease; and a Leasehold Mortgagee having made any
payment to Lessor pursuant to Lessor's wrongful, improper or mistaken notice or
demand shall be entitled to the return of any such payment or portion thereof
provided he shall have made demand therefor not later than one year after the
date of its payment.
ARTICLE XXIII
--------------
Section 23.1. Risk of Loss. During the Term of this Lease, the risk
------------
of loss or of decrease in the enjoyment and beneficial use of each Leased
Property in consequence of the damage or destruction thereof by fire, the
elements, casualties, thefts, riots, wars or otherwise, or in consequence of
foreclosures, attachments, levies or executions (other than by Lessor and those
claiming from, through or under Lessor) is assumed by Tenant, and, in the
absence of gross negligence, willful misconduct or breach of this Lease by
Lessor pursuant to Section 38.3, Lessor shall in no event be answerable or
accountable therefor nor shall any of the events mentioned in this Section
entitle Tenant to any abatement of Rent.
ARTICLE XXIV
-------------
Section 24.1. Indemnification. Notwithstanding the existence of any
---------------
insurance provided for in Article XIII, and without regard to the policy limits
of any such insurance, Tenant will protect, indemnify, save harmless and defend
Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and reasonable expenses (including, without
limitation, Litigation Costs), to the maximum extent permitted by law, imposed
upon or incurred by or asserted against Lessor by reason of: (a) any accident,
injury to or death of persons or loss of or damage to property occurring on or
about any Leased Property or adjoining sidewalks, including without limitation
any claims of malpractice, (b) any use, misuse, non-use, condition, maintenance
or repair by Tenant or anyone claiming under Tenant, including agents,
contractors, invitees or visitors of any Leased Property or Tenant's Personal
Property, (c)
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any Impositions (which are the obligations of Tenant to pay pursuant to the
applicable provisions of this Lease), (d) any failure on the part of Tenant or
anyone claiming under Tenant to perform or comply with any of the terms of this
lease, and (e) the non-performance of any of the terms and provisions of any and
all existing and future subleases of any Leased Property to be performed by the
Tenant thereunder. Any amounts which become payable by Tenant under this Section
shall be paid within ten (10) days after liability therefor on the part of
Tenant is determined by litigation or otherwise, and if not timely paid, shall
bear interest (to the extent permitted by law) at the Overdue Rate from the date
of such determination to the date of payment. Tenant, at its expense, shall
contest, resist and defend any such claim, action or proceeding asserted or
instituted against Lessor or may compromise or otherwise dispose of the same as
Tenant sees fit. Nothing herein shall be construed as indemnifying Lessor
against its own negligent acts or omissions or willful misconduct. If at any
time Lessor shall have notice of a claim, Lessor shall give reasonably prompt
written notice of such claim to Tenant; provided that (i) Lessor shall have no
-------- ----
liability for a failure to give notice of any claim of which Tenant has
otherwise been notified or has knowledge and (ii) the failure of Lessor to give
such a notice to Tenant shall not limit the rights of Lessor or the obligations
of Tenant with respect to such claim except to the extent that Tenant incurs
actual expenses or suffers actual monetary loss as a result of such failure.
Tenant shall have the right to control the defense or settlement of any Claim,
provided that (A) Tenant shall first confirm in writing to the Lessor that such
claim is within the scope of this indemnity and that Tenant shall pay any and
all amounts required to be paid in respect of such claim and (B) if the
compromise or settlement of any such claim shall not result in the complete
release of Lessor from the claim so compromised or settled, the compromise or
settlement shall require the prior written approval of Lessor. Lessor shall have
the right to approve counsel engaged to defend such claim and, at its election
and sole cost and expense, shall have the right, but not the obligation, to
participate in the defense of any claim.
Lessor shall indemnify, save harmless and defend Tenant from and
against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses imposed upon or incurred by or asserted against
Tenant as a result of the gross negligence or wilful misconduct of Lessor.
Tenant's or Lessor's liability for a breach of the provisions of this
Article arising during the Term hereof shall survive any termination of this
Lease.
ARTICLE XXV
------------
Section 25.1. Subletting and Assignment.
-------------------------
Section 25.1.1. Except as expressly provided herein, Tenant shall
not, without the prior written consent of Lessor, which consent shall not be
unreasonably
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withheld or delayed, assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer any interest in this Lease or sublease all or any part of any
Leased Property or suffer or permit this Lease or the leasehold estate created
hereby or thereby or any other rights arising under this Lease to be assigned,
transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in
part, whether voluntarily or involuntarily or by operation of law, or permit the
use or occupancy of any Leased Property to be offered or advertised for
assignment or subletting except as hereinafter provided. For purposes of this
Section 25.1, an assignment of this Lease shall be deemed to include any change
in control of Tenant, as if such change in control or transaction were an
assignment of this Lease. Changes in control of Tenant shall include, without
limitation, (a) a change in the composition of the board of directors of Tenant
or a Guarantor such that at the end of any period of twelve (12) consecutive
months the persons constituting a majority of such board of directors are not
the same as the persons constituting a majority at the start of such period (or
persons appointed by such majority), (b) the sale or other disposition by a
Guarantor of (i) any part of its interest in Tenant or (ii) all or substantially
all of the assets of a Guarantor or Tenant (other than a bona fide pledge in
connection with a financing approved by Lessor), and (c) a merger or
consolidation involving a Guarantor or Tenant, which results in the stockholders
of a Guarantor or Tenant immediately prior to such event owning less than 50% of
the capital stock of the surviving entity or any public parent of the surviving
entity.
Section 25.1.2. Subject to the provisions of Section 25.3 below and
any other express conditions or limitations set forth herein, Tenant may,
without the consent of Lessor, (i) assign this Lease or sublet all or any part
of any Leased Property to any Affiliate of Tenant, or (ii) sublet up to an
aggregate of 20% of the rentable square footage of any Facility (a) in the
normal course of the Primary Intended Use such as but not limited to leasing of
space for major moveable equipment or functional departments such as pathology,
pharmacy and radiology, or (b) to concessionaires or other third party users or
operators of portions of the Leased Property. Lessor shall not unreasonably
withhold its consent to any other subletting or assignment, provided that (a) in
the case of a subletting, the subtenant shall comply with the provisions of
Section 25.2, (b) in the case of an assignment, the assignee (1) shall be a
creditworthy entity with sufficient financial stability to satisfy its
obligations under the Lease, (2) shall have not less than four years experience
in operating health care facilities for the purpose of the applicable Facility's
Primary Intended Use, (3) has a favorable business and operational reputation
and character and (4) shall assume in writing and agree to keep and perform all
of the terms of this Lease on the part of Tenant to be kept and performed and
shall be, and become, jointly and severally liable with Tenant for the
performance thereof, (c) an original counterpart of each such sublease and
assignment and assumption, duly executed by Tenant and such subtenant or
assignee, as the case may be, in the form and substance satisfactory to Lessor,
shall be delivered promptly to Lessor, and (d) in case of either an assignment
or subletting, Tenant shall remain primarily liable, as principal rather than as
53
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surety, for the prompt payment of the Rent and for the performance and
observance of all of the covenants and conditions to be performed by Tenant
hereunder. Lessor's obligation to consent to a subletting or assignment is
subject to any reasonable approval rights of any Facility Mortgagee and/or the
lenders under that certain Credit Agreement, dated April 30, 1998, by and among
the Lessor, NationsBank, N.A., as administrative agent, Morgan Guaranty Trust
Company of New York, as documentation agent, JP Morgan Securities Inc. and
NationsBank Montgomery Securities LLC as co-arrangers and the banks parties
thereto, as the same may be amended and/ or replaced from time to time..
Section 25.1.3. If this Lease is assigned or if any Leased Property
or any part thereof is sublet (or occupied by any entity other than Tenant and
its employees), Lessor, after an Event of Default occurs and so long as it is
continuing, may collect the rents from such assignee, subtenant or occupant, as
the case may be, and apply the net amount collected to the Rent herein reserved,
but no such collection shall be deemed a waiver of the provisions set forth in
Section 25.1.1, the acceptance by Lessor of such assignee, subtenant or
occupant, as the case may be, as a tenant or release of Tenant from the future
performance of its covenants, agreements or obligations contained in this Lease.
Section 25.1.4. No subletting or assignment shall in any way impair
the continuing primary liability of Tenant hereunder, and no consent to any
subletting or assignment in an particular instance shall be deemed a waiver of
the prohibition set forth in this Section 25.1. No assignment, subletting or
occupancy shall affect the Primary Intended Use. Any subletting, assignment or
other transfer of Tenant's interest in this Lease in contravention of this
Section 25.1 shall be void at Lessor's option.
Section 25.1.5. If Tenant shall desire to assign this Lease or sublet
all (but not a portion) of any Leased Property other than an assignment or
sublease to an Affiliate, it shall first submit in writing to Lessor a notice
("Tenant's Notice") indicating (a) the name of the proposed assignee or
- -----------------
subtenant, (b) the material terms of the proposed assignment or sublease, (c)
the nature and character of the business which the proposed assignee or
subtenant will conduct at the applicable Leased Property, (d) reasonable
financial data concerning the proposed assignee or subtenant, and (e) the
effective date of the proposed assignment or the commencement date and
expiration date of the proposed sublease. Tenant shall additionally submit to
Lessor any other information concerning the proposed sublease which Lessor may
reasonably request. If such notice is given, Lessor may, at its option
terminate this Lease in the case of an assignment or terminate this Lease as to
the applicable Leased Property in the case of a sublease. Lessor shall exercise
its option by notice to Tenant within 30 days after Tenant's Notice (or receipt
by Lessor of all information reasonably requested by Lessor pursuant to this
Section 21.1.5),
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<PAGE>
and during such 30-day period, Tenant shall not have the right to assign this
Lease or sublet such space.
Section 25.1.6. If Lessor exercises its option under Section 21.1.5
to terminate this Lease, this Lease shall terminate (either as to each Leased
Property or as to the applicable Leased Property, whichever is applicable) on
the date which is 60 days following Tenant's Notice or on such later date as may
be specified in Tenant's Notice, and all Rent shall be paid and apportioned to
the date of such termination. If Lessor shall exercise its options under
Section 21.1.5, Lessor may, and shall have no liability to Tenant if Lessor
shall, lease to Tenant's prospective subtenant or assignee.
Section 25.1.7. If Lessor shall give its consent to any assignment or
subletting, Tenant shall, in consideration therefor, pay to Lessor, as
Additional Charges as and when payable to Tenant, 20% of any consideration
received on account of the assignment and (ii) 20% of the excess of (x) any
rents, additional charges, or other consideration payable under the sublease by
the subtenant to Tenant, after deducting therefrom brokerage commissions, legal
fees incurred in connection with such subletting over (y) Rent accruing during
----
the term of the sublease pursuant to the terms hereof (such excess, the
"Sublease Profits").
----------------
Section 25.1.8. Any assignment and/or sublease must provide that (a)
it shall be subject and subordinate to all of the terms and conditions of this
Lease, (b) the use of the applicable Leased Property shall be restricted to the
applicable Primary Intended Use and shall not conflict with any Legal
Requirement, Insurance Requirement or any other provision of this Lease, (c) no
sublessee or assignee shall be permitted to further sublet all or any part of
the applicable Leased Property or assign this Lease or its sublease except as
expressly provided in this Lease and (d) in the event of cancellation or
termination of this Lease for any reason whatsoever or of the surrender of this
Lease whether voluntary, involuntary or by operation of law, prior to the
expiration date of such sublease, including extensions and renewals granted
thereunder, at Lessor's option, the subtenant shall make full and complete
attornment to Lessor for the balance of the term of the sublease, which
attornment shall be evidenced by an agreement in form and substance satisfactory
to Lessor and which the subtenant shall execute and deliver within 5 days after
request by Lessor, its successors or assigns and the subtenant shall waive the
provisions of any law now or hereafter in effect which may give the subtenant
any right of election to terminate the sublease or to surrender possession in
the event any proceeding is brought by Lessor to terminate this Lease.
Section 25.1.9. Any assignment of this Lease or sublease of the
applicable Leased Property in contravention of the express terms of this Article
XXI shall be voidable at Lessor's option and the acceptance of rent by Lessor
from any such
55
<PAGE>
unauthorized assignee or subtenant shall not constitute a recognition or
acceptance of the tenancy of such unauthorized assignee or subtenant.
Section 25.1.10. Tenant shall pay to Lessor, within ten (10) business
days after request therefor, all costs and expenses, including without
limitation reasonable attorney's fees, incurred by Lessor in connection with
any request by Tenant to assign this Lease or sublet the applicable Leased
Property.
Section 25.2. Attornment. Tenant shall insert in each sublease
----------
permitted under Section 25.1 provisions to the effect that (a) such sublease is
subject and subordinate to all of the terms and provisions of this Lease and to
the rights of Lessor hereunder, (b) in the event this Lease shall terminate
before the expiration of such sublease, the subtenant thereunder will, at
Lessor's option, attorn to Lessor and waive any right the subtenant may have to
terminate the sublease or to surrender possession thereunder, as a result of the
termination of this Lease, and (c) in the event the subtenant receives a written
notice from Lessor or Lessor's assignees, if any, stating that Tenant is in
Default under this Lease, the subtenant shall thereafter be obligated to pay all
rentals accruing under said sublease directly to the party giving such notice,
or as such party may direct. All rentals received from the subtenant by Lessor
or Lessor's assignees, if any, as the case may be, shall be credited against the
amounts owing by Tenant under this Lease.
Section 25.3. Sublease Limitation. Anything contained in this Lease
-------------------
to the contrary notwithstanding, Tenant shall not sublet the Leased Property on
any basis such that the rental to be paid by the subtenant thereunder would be
based, in whole or in part, on either (i) the income or profits derived by the
business activities of the subtenant, or (ii) any other formula such that any
portion of the sublease rental received by Lessor would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, or
any similar or successor provision thereto.
ARTICLE XXVI
-------------
Section 26.1. Officer's Certificates and Financial Statements.
-----------------------------------------------
(a) At any time and from time to time upon Tenant's receipt of not
less than twenty (20) days prior written request by Lessor, Tenant will furnish
to Lessor an Officer's Certificate certifying that this Lease is unmodified and
is in full force and effect (or that this Lease is in full force and effect as
modified and setting forth the modifica tions) and the dates to which the Rent
has been paid, that Tenant is not in default in the performance or observance of
any of the terms of this Lease and that no event exists which with the giving of
notice, lapse of time, or both would constitute an Event of Default, or if an
Event of Default exists, specifying in reasonable detail such Event of Default
and the steps being taken to remedy the same, and such additional information as
56
<PAGE>
Lessor may reasonably request. Any such certificate furnished pursuant to this
Section may be relied upon by Lessor and any prospective purchaser or mortgagee
of any Leased Property.
(b) Tenant will furnish or cause Guarantor to furnish the following
financial statements to Lessor:
(i) Annual audit of Tenant and its consolidated Subsidiaries;
(ii) All facility-specific information reasonably required or
requested by any Facility Mortgagee;
(iii) Such information regarding the operations at the applicable
Facility that is required by a Superior Mortgagee;
(iv) Such information as Lessor shall reasonably request following the
occurrence of an Event of Default.
(v) Such financial and other information as Lessor shall reasonably
request during the final year of the Term with respect to any Facility.
ARTICLE XXVII
--------------
Section 27.1. Lessor's Right to Inspect. Tenant shall permit Lessor
-------------------------
and its authorized representatives to inspect any Leased Property during usual
business hours upon not less than three (3) Business Days' notice, subject to
any security, health, safety or confidentiality requirements of Tenant or any
governmental agency or insurance requirement relating to the Leased Property, or
imposed by law or applicable regulations.
ARTICLE XXVIII
---------------
Section 28.1. No Waiver. No failure by Lessor or Tenant to insist
---------
upon the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon a breach thereof, and no acceptance of full or partial
payment of Rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. To the extent permitted by law,
no waiver of any breach shall affect or alter this Lease, which shall continue
in full force and effect with respect to any other then existing or subsequent
breach.
57
<PAGE>
ARTICLE XXIX
-------------
Section 29.1. Remedies Cumulative. To the extent permitted by law,
-------------------
each legal, equitable or contractual right, power and remedy of Lessor or Tenant
now or hereafter provided either in this Lease or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power and remedy and the exercise or beginning of the exercise by Lessor or
Tenant or any one or more of such rights, powers and remedies shall not preclude
the simultaneous or subsequent exercise by Lessor or Tenant of any or all of
such other rights, powers and remedies.
ARTICLE XXX
------------
Section 30.1. Acceptance of Surrender. No surrender to Lessor of
-----------------------
this Lease or of any Leased Property or any part of any thereof, or of any
interest herein or therein, shall be valid or effective unless agreed to and
accepted in writing by Lessor and no act by Lessor or any representative or
agent of Lessor, other than such a written acceptance by Lessor, shall
constitute an acceptance of any such surrender.
ARTICLE XXXI
-------------
Section 31.1. No Merger of Title. There shall be no merger of this
------------------
Lease or of the leasehold estate created thereby by reason of the fact that the
same person, firm, corporation or other entity may acquire, own or hold,
directly or indirectly, (a) this Lease or the leasehold estate created hereby or
any interest in this Lease or such leasehold estate and (b) the fee estate in
any Leased Property.
ARTICLE XXXII
--------------
Section 32.1. Conveyance by Lessor. If Lessor or any successor owner
--------------------
of any Leased Property shall convey such Leased Property in accordance with the
terms hereof other than as security for a debt, and the grantee or transferee of
the Leased Property shall expressly assume all obligations of Lessor hereunder
with respect to such Leased Property arising or accruing from and after the date
of such conveyance or transfer, and shall be reasonably capable of performing
the obligations of Lessor hereunder, Lessor or such successor owner, as the case
may be, shall thereupon be released from all future liabilities and obligations
of Lessor under this Lease with respect to such Leased Property arising or
accruing from and after the date of such conveyance or other transfer as to such
Leased Property and all such future liabilities and obligations with respect to
such Leased Property shall thereupon be binding upon the new owner.
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<PAGE>
ARTICLE XXXIII
---------------
Section 33.1. Quiet Enjoyment. So long as Tenant shall pay all Rent
---------------
as the same becomes due and shall fully comply with all of the terms of this
Lease and fully perform its obligations hereunder and thereunder, Tenant shall
peaceably and quietly have, hold and enjoy each Leased Property for the Term
hereof, free of any claim or other action by Lessor or anyone claiming by,
through or under Lessor, but subject to all liens and encumbrances of record as
of the date hereof or otherwise permitted to be created by Lessor hereunder,
liens as to the obligations of Lessor that are either not yet due or which are
being contested in good faith and by proper proceedings, and liens hereafter
consented to by Tenant. No failure by Lessor to comply with the foregoing
covenant shall give Tenant any right to cancel or terminate this Lease or abate,
reduce or make a deduction from or offset against the Rent or any other sum
payable under this Lease, or to fail to perform any other obligation of Tenant
hereunder. Notwithstanding the foregoing, Tenant shall have the right, by
separate and independent action, to pursue any claim it may have against Lessor
as a result of a breach by Lessor of the covenant of quiet enjoyment contained
in this Section.
ARTICLE XXXIV
--------------
Section 34.1. Notices. All notices, demands, requests, consents,
-------
approvals and other communications hereunder shall be in writing and delivered
or mailed (by registered or certified mail, return receipt requested or
reputable nationally recognized overnight courier service and postage prepaid),
addressed to the respective parties, as follows:
(a) if to Tenant:
400 West Market Street
Suite 3300
Aegon Center
Louisville, Kentucky 40202
Attention: Chief Financial Officer
with a copy to:
400 West Market Street
Suite 3300
Aegon Center
Louisville, Kentucky 40202
Attention: General Counsel
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<PAGE>
(b) if to Lessor:
400 West Market Street
Suite 3300
Aegon Center
Louisville, Kentucky 40202
Attention: President
with a copy to:
400 West Market Street
Suite 3300
Aegon Center
Louisville, Kentucky 40202
Attention: General Counsel
or to such other address as either party may hereunder designate, and shall be
effective upon receipt.
ARTICLE XXXV
-------------
Section 35.1. Appraisers. In the event that it becomes necessary to
----------
determine the Fair Market Value, Fair Market Value Purchase Price or Fair Market
Rental of any property for any purpose of this Lease, and the parties cannot
agree amongst themselves on such value, the party required or permitted to give
notice of such required determination shall include in the notice the name of a
person selected to act as appraiser on its behalf. Within 10 days after receipt
of any such notice, Lessor (or Tenant, as the case may be) shall by notice to
Tenant (or Lessor, as the case may be) appoint a second person as appraiser on
its behalf. The appraisers thus appointed, each of whom must be a member of the
American Institute of Real Estate Appraisers (or any successor organization
thereto), shall, within 45 days after the date of the notice appointing the
first appraiser, proceed to appraise the applicable Leased Property to determine
the Fair Market Value, Fair Market Value Purchase Price, Fair Market Rental,
thereof as of the relevant date (giving effect to the impact, if any, of
inflation from the date of their decision to the relevant date); provided,
--------
however, that if one appraiser shall have been so appointed, or if two
- -------
appraisers shall have been so appointed but only one such appraiser shall have
made such determination within 50 days after the making of Tenant's or Lessor's
request, then the determination of such appraiser shall be final and binding
upon the parties. To the extent consistent with sound appraisal practice as then
existing at the time of any such appraisal, such appraisal shall be made on a
basis consistent with the basis on which the applicable Leased Property was
appraised for
60
<PAGE>
purposes of determining its Fair Market Value at the time such Leased Property
was acquired by Lessor, which basis is described on Exhibit F annexed hereto.
---------
If two appraisers shall have been appointed and shall have made their
determinations within the respective requisite periods set forth above and if
the difference between the amounts so determined shall not exceed ten percent
(10%) of the lesser of such amounts, then the Fair Market Value, Fair Market
Value Purchase Price or Fair Market Rental shall be an amount equal to 50% of
the sum of the amounts so determined. If the difference between the amounts so
determined shall exceed ten percent (10%) of the lesser of such amounts, then
such two appraisers shall have 20 days to appoint a third appraiser, but if such
appraisers fail to do so, then either party may request the American Arbitration
Association or any successor organization thereto to appoint an appraiser within
20 days of such request, and both parties shall be bound by any appointment so
made within such 20 day period. If no such appraiser shall have been appointed
within such 20 days or within 90 days of the original request for a
determination of Fair Market Value, Fair Market Value Purchase Price or Fair
Market Rental, whichever is earlier, either Lessor or Tenant may apply to any
court having jurisdiction to have such appointment made by such court. Any
appraiser appointed by the original appraisers, by the American Arbitration
Association or by such court shall be instructed to determine the Fair Market
Value, Fair Market Value Purchase Price or Fair Market Rental within 30 days
after appointment of such Appraiser. The determination of the appraiser which
differs most in terms of dollar amount from the determination of the other two
appraisers shall be excluded, and 50% of the sum of the remaining two
determinations shall be final and binding upon Lessor and Tenant as the Fair
Market Value, Fair Market Value Purchase Price or Fair Market Rental for such
interest. This provision for determination by appraisal shall be specifically
enforceable to the extent such remedy is available under applicable law, and any
determination hereunder shall be final and binding upon the parties except as
otherwise provided by applicable law. Lessor and Tenant shall each pay the fees
and expenses of the appraiser appointed by it and each shall pay one-half of the
fees and expenses of the third appraiser and one-half of all other cost and
expenses incurred in connection with each appraisal.
ARTICLE XXXVI
--------------
Section 36.1. General REIT Provisions.
-----------------------
Section 36.1.1. Tenant understands that, in order for Lessor to
qualify as a real estate investment trust ("REIT"), the following requirements
----
(the "REIT Requirements") must be satisfied:
(i) The average of the adjusted tax bases of Lessor's personal
property that is leased to Tenant under a lease at the beginning and end
of a calendar year cannot exceed 15% of the average of the aggregate
adjusted tax
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<PAGE>
bases of all of Lessor's property that is leased to Tenant under such lease
at the beginning and end of such calendar year.
(ii) Tenant cannot sublet the property that is leased to it by
Lessor, or enter into any similar arrangement, on any basis such that the
rental or other amounts paid by the sublessee thereunder would be based, in
whole or in part, on either (i) the net income or profits derived by the
business activities of the sublessee or (ii) any other formula such that
any portion of the rent paid by Tenant to Lessor would fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the
Code.
(iii) Tenant cannot sublease the property leased to it by Lessor
to, or enter into any similar arrangement with, any person in which Lessor
owns, directly or indirectly, a 10% or more interest, within the meaning of
Section 856(d)(2)(B) of the Code.
(iv) Lessor cannot own, directly or indirectly, a 10% or more
interest in Tenant, within the meaning of Section 856(d)(2)(B) of the Code.
Section 36.1.2. Tenant agrees, and agrees to use reasonable efforts
to cause its Affiliates, to use their best efforts to permit the REIT
Requirements to be satisfied. Tenant agrees and agrees to use reasonable
efforts to cause its Affiliates, to cooperate in good faith with Lessor or to
ensure that the REIT Requirements are satisfied, including but not limited to,
providing Lessor with information about the ownership of Tenant, and its
Affiliates to the extent that such information is reasonably available. Tenant
agrees, and agrees to use reasonable efforts to cause its Affiliates, upon
request by to take reasonable action necessary to ensure compliance with the
REIT Requirements. Immediately after becoming aware that the REIT Requirements
are not, or will not be, satisfied, Tenant shall notify, or use reasonable
efforts to cause its Affiliates to notify Lessor of such noncompliance.
ARTICLE XXXVII
---------------
Section 37.1. First Refusal to Purchase. During the first three
-------------------------
years of the Initial Term, Tenant shall have a first refusal option to purchase
any and each Leased Property upon the same terms and conditions as Lessor shall
propose to sell the applicable Leased Property, or upon the same terms and
conditions of any offer from a third party to purchase the applicable Leased
Property which Lessor intends to accept (or has accepted subject to Tenant's
right of first refusal herein). If, during the first three years of the Initial
Term, Lessor reaches such agreement with a third party or proposes to offer any
Leased Property for sale, Lessor shall promptly notify Tenant of the purchase
price and all other material terms and conditions of such agreement or proposed
sale and
62
<PAGE>
Tenant shall have thirty (30) days after receipt of such notice from Lessor
within which time to exercise Tenant's option to purchase. If Tenant exercises
its option, then such transaction shall be consummated within sixty (60) days
after the date of receipt by Lessor of notice of such exercise in accordance
with the terms and conditions of such agreement, as to price and the other
conditions set forth therein and in accordance with the provisions of Article
XVIII hereof to the extent not inconsistent therewith, on the first day of the
first month after all permits for owning or operating the Facility on the Leased
Property have been obtained by Tenant, but in no event later than 120 days after
the date of receipt by Lessor of notice of the exercise by Tenant of this
option. If Tenant shall not exercise Tenant's option to purchase within said
thirty (30) day period after receipt of said notice from Lessor, Lessor shall be
free for a period of one year after the expiration of said 30 day period to sell
the applicable Leased Property to any third party at a price and upon terms no
less favorable to Lessor than those so offered to Tenant. Whether or not such
sale is consummated, Tenant shall be entitled to exercise its right of first
refusal as provided in this section, as to any subsequent sale of the applicable
Leased Property during the first three (3) years of the Term of this Lease. The
provisions of this Section 37.1 shall not apply to any transaction involving (i)
the sale of stock of Lessor, (ii) the sale of all or substantially all of
Lessor's assets, (iii) any transfer of the applicable Leased Property to a
Facility Mortgagee in connection with the financing of such Leased Property, or
(iv) the transfer of any Leased Property to an Affiliate of Lessor.
Section 37.2. Lessor's Option to Purchase the Tenant's Personal
-------------------------------------------------
Property. Effective on not less than ninety (90) days prior written notice
- --------
given at any time within one hundred eighty (180) days prior to the expiration
of the Term, but not later than ninety (90) days prior to such expiration, or
such shorter notice as shall be appropriate if this Lease is terminated prior to
the expiration of the Term, Lessor shall have the option to purchase all (but
not less than all) of Tenant's Personal Property located at any Leased Property,
if any, at the expiration or termination of the Term, for an amount equal to (i)
the book value thereof if such termination is due to an Event of Default or (ii)
the then net value thereof (current replacement cost less accumulated
depreciation on the books of Tenant pertaining thereto) if such termination is
not caused by an Event of Default, subject to, and with appropriate price
adjustments for, all equipment leases, conditional sale contracts, UCC-1
financing statements (including their financial statements filed in connection
with the Leasehold Mortgage) and other encumbrances to which such Personal
Property is subject.
ARTICLE XXXVIII
---------------
Section 38.1. Lessor May Grant Liens. Without the consent of Tenant,
----------------------
Lessor may, subject to the terms and conditions set forth below in this Section
38.1, from time to time, directly or indirectly, create or otherwise cause to
exist any lien, encumbrance or title retention agreement ("Encumbrance") upon
-----------
any Leased Property or
63
<PAGE>
any portion thereof or interest therein, whether to secure any borrowing or
other means of financing or refinancing. Any such Encumbrance may provide that
Tenant's right of first refusal to purchase the Leased Property shall not be
applicable upon a foreclosure sale or transfer in lieu thereof; provided,
--------
however, that any such purchaser or transferee shall take title subject to
- -------
Tenant's rights to acquire the applicable Leased Property. Any lender, which
takes an interest in the applicable Leased Property pursuant to this Article
XXXVIII, (a) shall agree to give Tenant the same notice, if any, given to Lessor
of any default or acceleration of any obligation underlying any such mortgage or
any sale in foreclosure under such mortgage, (b) shall agree to permit Tenant to
cure any such default on Lessor's behalf within any applicable cure period, and
Tenant shall be reimbursed by Lessor for any and all out-of-pocket costs
incurred to effect any such cure (including reasonable attorneys' fees), (c)
shall agree to permit Tenant to appear by its representative and to bid at any
sale in foreclosure made with respect to any such mortgage and (d) shall agree
not to disturb Tenant's possession so long as Tenant is not in default in
performing its obligations hereunder.
ARTICLE XXXIX
-------------
Section 39.1. Environmental Indemnity. Tenant hereby agrees to hold
-----------------------
harmless Lessor, any successors to Lessor's interest in this Lease and in any
Leased Property, and Lessor's and such successors' directors, officers,
partners, members, employees and agents from and against any losses, claims,
damages (including consequential damages), penalties, fines, liabilities
(including strict liability), costs (including cleanup and recovery costs), and
expenses (including expenses of litigation and reasonable attorneys' fees)
incurred by Lessor or any other indemnitee or assessed against the Leased
Property by virtue of any claim or lien by any governmental or quasi-
governmental unit, body, or agency, or any third party, for cleanup costs or
other costs pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, all as amended from time to time, and
all state laws and federal and state regulations pursuant to the foregoing
(collectively "Environmental Laws"). Tenant's indemnity shall survive the
termination of this Lease. Provided, however, Tenant shall have no indemnity
obligation with respect to (i) Hazardous Materials first introduced to the
Leased Property subsequent to the date that Tenant's occupancy of the applicable
Leased Property shall have fully terminated or (ii) Hazardous Material first
introduced to the Leased Property prior to the date hereof, except to the extent
arising from any deterioration after the date hereof in any condition existing
prior to the date hereof. "Hazardous Materials" means any substance the presence
of which poses a hazard to the health or safety of persons on or about the
Leased Property or which requires removal or remediation under any Environmental
Law, including without limitation, any substance which is toxic, explosive,
flammable, radioactive, or otherwise hazardous or is included within the meaning
of "hazardous substance", "hazardous waste", "toxic substance", or
64
<PAGE>
"pollutant" as defined in any Environmental Law. At any time during the Term of
this Lease, Lessor may require one or more environmental audits of the Leased
Premises, in such form, scope and substance as specified by Lessor, at Tenant's
expense. Tenant shall, within thirty (30) days after receipt of an invoice from
Lessor, reimburse Lessor for all costs and expenses incurred in reviewing any
environmental audit, including without limitation, reasonable attorneys' fees
and costs.
ARTICLE XL
-----------
MISCELLANEOUS
-------------
Section 40.1. _________. Anything contained in this Lease to the
contrary notwithstanding, all claims against, and liabilities of, the Tenant or
Lessor arising prior to any date of termination of this Lease shall survive such
termination. If any term or provision of this Lease or any application hereof
shall be invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any
late charges provided for in any provision of this Lease are based upon a rate
in excess of the maximum rate permitted by applicable law, the parties agree
that such charges shall be fixed at the maximum permissible rate. Neither this
Lease nor any provision hereof may be changed, waived, discharged or terminated
except by an instrument in writing and in recordable form signed by Lessor and
Tenant. All the terms and provisions of this Lease shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. The headings in this Lease are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
Section 40.2. ___________. Tenant specifically agrees to look solely
to Lessor's assets for recovery of any judgment from Lessor, it being
specifically agreed that no constituent partner in Lessor, shall ever be
personally liable for any such judgment or for the payment of any monetary
obligation to Tenant. The provision contained in the foregoing sentence is not
intended to, and shall not, limit any right that Tenant might otherwise have to
obtain injunctive relief against Lessor or Lessor's successors in interest, or
any action not involving the personal liability of Lessor (original or
successor).
Furthermore, except as otherwise expressly provided herein, in no
event shall Lessor (original or successor) ever be liable to Tenant for any
indirect or consequential damages suffered by Tenant from whatever cause.
Section 40.3. __________. Upon the expiration or earlier termination
of the Term, Tenant shall transfer, to the extent permitted by applicable law,
to Lessor or Lessor's nominee and cooperate with Lessor or Lessor's nominee in
connection with the
65
<PAGE>
processing by Lessor or Lessor's nominee of any applications for all licenses,
operating permits, certificates of need, certificates of exemption and other
governmental authorizations, including licenses, permits, certificates of need
and certificates of exemption with quasi-governmental entities any of which may
be necessary for the operation of the Leased Property and the Facility located
thereon for its Primary Intended Use; provided that the costs and expenses of
--------
any such transfer or the processing of any such application shall be paid by
Lessor or Lessor's nominee unless such termination results from an Event of
Default, in which event the costs and expenses of any such transfer or the
processing of any such application shall be paid by Tenant. It is the express
intention of the parties that at the expiration or earlier termination of the
Term, any and all certificates of need, certificates of exemption and similar
governmental authorizations (collectively, a "CON") needed to operate the
applicable Leased Property for its Primary Intended Use shall remain with the
Leased Property and shall be transferred into the name of Lessor or Lessor's
nominee, regardless of whether such CON is in the name of Tenant at any time
during the Term. Moreover, upon the expiration or earlier termination of this
Lease, Tenant shall cooperate with Lessor in the orderly transfer of operations
at the applicable Facility.
Section 40.4. __________. Lessor and Lessor's agent shall have the
right to enter the applicable Leased Property at all reasonable times for the
purpose of entering exhibiting the Leased Property to others (i) if Tenant has
not exercised its right with respect to any applicable Extended Term within the
time period set forth in this Lease, or (ii) during the last eighteen (18)
months of the final Extended Term.
Section 40.5. _________. This Lease contains the entire agreement
between Lessor and Tenant with respect to the subject matter hereof. No
representations, warranties or agreements have been made by Lessor except as set
forth in this Lease.
Section 40.6. ____________. If any term or provision of this Lease
is held or deemed by Lessor to be invalid or unenforceable, such term or
provision shall be modified as slightly as possible so as to render it valid and
enforceable; if such term or provision, as modified, shall be held or deemed
invalid or unenforceable, such holding shall not affect the remainder of this
Lease and same shall remain in full force and effect, unless such holding
substantially deprives Tenant of the use of the Leased Property or Lessor of the
rents herein reserved, in which event this Lease shall forthwith terminate as if
by expiration of the Term.
Section 40.7. ____________. (a) All rights, powers and remedies
provided herein may be exercised only to the extent that the exercise thereof,
including those which do not require the giving of notice, does not violate any
applicable law, and are intended to be limited to the extent necessary so that
they will not render this Lease invalid or unenforceable under any applicable
law. All waivers, consents, confessions
66
<PAGE>
and releases provided for in this Lease are effective only to the extent
permitted by applicable law.
(b) This Lease was negotiated in the State of New York, which State
the parties agree has a substantial relationship to the parties and to the
underlying transaction embodied hereby. In all respects, the law of the State
of New York shall govern the validity of and enforceability of the obligations
of the parties set forth herein, but all provisions hereof relating to the
creation of the leasehold estate and remedies set forth in Article XVI shall be
governed by the laws of the State in which each applicable Leased Property that
is the subject of dispute is located and the parties hereto will submit to
jurisdiction and the laying of venue for any suit on this Lease in the
Commonwealth of Kentucky.
Section 40.8. ____________. No waiver of any condition or covenant
herein contained, or of any breach of any such condition or covenant, shall be
held or taken to be a waiver of any subsequent breach of such covenant or
condition, or to permit or excuse its continuance or any future breach thereof
or of any condition or covenant herein construed as a waiver of such default, or
of Lessor's right to terminate this Lease or exercise any other remedy granted
herein on account of such existing default.
Section 40.9. ____________. This Lease shall be binding upon and
shall inure to the benefit of the heirs, successors, personal representatives,
and permitted assigns of Lessor and Tenant.
Section 40.10. ___________. This Lease may be only be modified by a
writing signed by both Lessor and Lessee.
Section 40.11. ____________. No delay or omission by either party
hereto to exercise any right or power accruing upon any noncompliance or default
by the other party with respect to any of the terms hereof shall impair any such
right or power or be construed to be a waiver thereof.
Section 40.12. _____________. In the event of an assignment of this
Lease or any sublease to an Affiliate of Vencor, Inc. pursuant to the terms of
this Lease, the payment of Minimum Rent and Additional Charges and the
performance of Tenant's obligations under this Lease are guaranteed by
Guarantor, pursuant to a Lease Guaranty.
Section 40.13. Louisiana Provisions. Notwithstanding anything to the
--------------------
contrary contained herein, with respect to any Leased Property located in
Louisiana, for all purposes of this Master Lease the word "servitude" shall be
substituted for the word "easement," the word "servitudes" shall be substituted
for the word "easements," the term "immovable property" shall be substituted for
the terms "real property" and "real estate"
67
<PAGE>
and the term "movable property" shall be substituted for the term "personal
property" wherever such terms appear in this Master Lease.
Section 40.14. ______________________________. Tenant hereby
acknowledges that Ventas, Inc. intends to transfer, after the date of this
Lease, its ownership interest in the Leased Properties to one or more limited
partnerships or limited liability companies, each of which will be a direct or
indirect Subsidiary of Ventas, Inc. Lessor will notify Tenant and Leasehold
Mortgagee of the identity of the transferee.
Section 40.15. ______________________________. Lessor shall have the
right, at any time and from time to time during the Term, to require Tenant to
execute an amendment to this Lease whereby this Lease is terminated as to one or
more Leased Properties and to simultaneously execute a substitute lease in the
same form as this Lease with respect to such Leased Properties.
Section 40.16. Lessor Consents. For all purposes of this Lease, the
---------------
term "Lessor" shall be deemed to mean the record owner of a Leased Property;
provided, however, the consent of Vencor, Inc. shall be sufficient for all
- -------- -------
Leased Properties.
ARTICLE XLI
------------
Section 41.1. Memorandum of Lease. Lessor and Tenant shall, promptly
-------------------
upon the request of either enter into a short form memorandum of this Lease, in
form suitable for recording under the laws of the state in which each Leased
Property is located, in which reference to this Lease, and all options contained
herein, shall be made. Tenant shall pay all costs and expenses of recording such
Memorandum of Lease.
68
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and their respective corporate seals to be hereunto affixed and attested by
their respective officers hereunto duly authorized.
Witness VENCOR, INC.
By:
- --------------------------------------- -----------------------------------
Name: Name:
Title:
- ---------------------------------------
Name:
FIRST HEALTHCARE CORPORATION
By:
- --------------------------------------- -----------------------------------
Name: Name:
Title:
- ---------------------------------------
Name:
NATIONWIDE CARE, INC.
By:
- --------------------------------------- -----------------------------------
Name: Name:
Title:
- ---------------------------------------
Name:
VENCOR HEALTHCARE, INC.
By:
- --------------------------------------- -----------------------------------
Name: Name:
Title:
- ---------------------------------------
Name:
69
<PAGE>
VENCOR OPERATING, INC.
By:
- --------------------------------------- -----------------------------------
Name: Name:
Title:
- ---------------------------------------
Name:
70
<PAGE>
ALL-PURPOSE ACKNOWLEDGMENT
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On April __, 1998 before me, a notary public, personally appeared ____________,
[_] personally known to me-OR-
[_] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged
to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
Witness my hand and official seal.
-----------------------
SIGNATURE OF NOTARY
CAPACITY CLAIMED BY SIGNER: SIGNER IS REPRESENTING
NAME OF PERSON(S) OR ENTITY(IES)
[_] INDIVIDUALS(S)
[_] CORPORATE OFFICER(S) (Company/Other Data)
--------------------
TITLE
--------------------
TITLE
[_] PARTNER(S)
[_] ATTORNEY-IN-FACT
[_] TRUSTEE(S)
[_] OTHER
----------------
---------------------
---------------------
71
<PAGE>
Exhibit A
---------
[Legal Descriptions]
72
<PAGE>
Exhibit B
---------
Term/Commencement Date/Expiration Date
73
<PAGE>
Exhibit C
---------
Minimum Rent
74
<PAGE>
Exhibit D
---------
Renewal Groups
75
<PAGE>
Exhibit E
---------
Minimum Repurchase Price
76
<PAGE>
Exhibit F
---------
Basis for Appraisal
77
<PAGE>
EXHIBIT 10.4
DEVELOPMENT AGREEMENT
---------------------
THIS DEVELOPMENT AGREEMENT (this "Agreement") is made and entered into
---------
as of the ___ day of ________, 1998, by and between Vencor, Inc., a Delaware
corporation ("Vencor") and Vencor Healthcare, Inc., a Delaware corporation
------
("Healthcare Company").
- --------------------
RECITALS
--------
WHEREAS, Healthcare Company and Vencor are parties to an Agreement and
Plan of Reorganization, dated as of the date hereof (the "Reorganization
--------------
Agreement"),which provides for certain reorganization transactions (the
- ---------
"Reorganization Transactions"), including but not limited to, (i) certain
- ----------------------------
internal mergers and stock and asset transfers that allocate the assets and
liabilities relating to substantially all of the Vencor-owned land, buildings
and other improvements and real estate related assets (the "Real Estate
-----------
Business") to Vencor, which will change its name immediately prior to the
Distribution (as defined herein) to "Ventas, Inc." and allocate the other assets
and liabilities relating to the historical operations of Vencor, including the
properties listed on Exhibit A which are properties under development or to be
---------
developed (the "Development Properties") by Healthcare Company (the "Healthcare
---------------------- ----------
Business"), to Healthcare Company, which will change its name immediately prior
- --------
to the Distribution to "Vencor, Inc.", (ii) Vencor leasing to Healthcare Company
pursuant to a master lease agreement (the "Master Lease Agreement") 46 long-term
----------------------
acute care hospitals and 210 nursing centers, and (iii) the completion by
Healthcare Company of the development of the Development Properties pursuant to
a development agreement and thereafter, at the option of Vencor, the sale to,
and lease back from, Vencor of the Development Properties;
WHEREAS, Healthcare Company and Vencor will be parties to a
Distribution Agreement, dated as of the date hereof (the "Distribution
------------
Agreement"), which provides for the distribution (the "Distribution") by Vencor
------------
to the holders of common stock, par value $.25 per share, of Vencor ("Vencor
------
Common Stock") of all the outstanding shares of common stock, par value $.25 per
- ------------
share, of Healthcare Company ("Healthcare Company Common Stock") on the basis of
-------------------------------
one share of Healthcare Company Common Stock for every share of Vencor Common
Stock;
WHEREAS, Healthcare Company desires to complete, or cause to be
completed, the development of the Development Properties and thereafter, at the
option of Vencor, sell to, and lease back from, or cause to be sold to and
leased back from, Vencor, the Development Properties on the terms set forth in
this Agreement; and
WHEREAS, upon completion of development of the Development Properties,
Vencor or a subsidiary of Vencor may at the option of Vencor purchase from,
<PAGE>
and lease to, Healthcare Company, or a consolidated subsidiary of Healthcare
Company, the Development Properties on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and subject to and on the terms and conditions
herein set forth, the parties hereto agree as follows:
Section 1. Development in Accordance with Development Plans.
------------------------------------------------
Healthcare Company agrees to use reasonable efforts to develop, or
cause its subsidiaries to develop, each Development Property (each, a "Project")
-------
substantially in accordance with the Development Plan (as defined below) for
such Project. For the Projects identified in Exhibit B which are currently
---------
under construction or renovation, Healthcare Company shall use reasonable
efforts to adhere to (i) the plans and specifications (each, a "Plan"), (ii)
----
the construction schedule (each, a "Schedule") and (iii) the construction
--------
budgets (each, a "Budget") for each applicable Project as such Plans, Schedules
------
and Budgets exist on the date hereof. As soon as reasonably practical after the
date hereof, and in any event within 60 days after the date hereof, Healthcare
Company shall deliver to Vencor the Plan, Schedule and Budget for each Project
under construction or renovation on the date hereof. For the Projects scheduled
for future construction or renovation, Healthcare Company agrees to submit
Plans, Schedules and Budgets for each Project to Vencor no later than 30 days
prior to commencement of construction of the Project. Each applicable Plan,
Schedule and Budget for each such Project together constitute the "Development
-----------
Plan" for such Project. Healthcare Company will not make any material
- ----
modifications to the Development Plan for any Project without providing prior
written notice to Vencor.
Section 2. Development Guidelines.
----------------------
Healthcare Company agrees that in connection with each Project
it will:
(a) (i) make all governmental filings and submissions
necessary to obtain those approvals, permits and authorizations which are
required in order for Healthcare Company to develop the Project and operate the
Project upon completion as a healthcare facility, and (ii) use its good faith
efforts to secure or cause to be secured all such necessary governmental
approvals, permits and authorizations;
(a) select and hire, where appropriate, reputable and (to the
extent applicable) licensed architects, engineers, designers, traffic
consultants, surveyors, attorneys and other consultants (the "Consultants") for
-----------
the development of the Project;
-2-
<PAGE>
(c) coordinate, monitor and inspect all phases of development of the
Project to ensure that the Project is being developed substantially in
accordance with its Development Plan;
(e) stablish administrative and control procedures and reporting for
the Project, including cost accounting, budgeting and scheduling, to
facilitate completion of the Project in accordance with its Development Plan
and promptly notify Vencor of any occurrence or circumstance that is
reasonably likely to materially delay or prevent completion of each Project
in accordance with its Development Plan;
(e) maintain accurate books and records, including operating
instructions, manuals, warranties, field record information, as-built
drawings, samples, shop-drawings and data with respect to the Project; and
(f) from the date hereof, permit Vencor to inspect the Project and the
books and records relating to the Project upon reasonable advance notice and
during reasonable business hours; and
(g) furnish to Vencor, when requested, but in no event more frequently
then on a quarterly basis, a detailed report which shall contain a statement
of costs incurred to date and any anticipated delay or material information
relating to each Project, or any significant phase of each Project, or any
significant deviation from the Development Plan for each Project for ensuing
periods.
Section 3. Option to Purchase and Lease-Back Development Properties.
--------------------------------------------------------
Section 3.1 Option to Purchase. Upon completion of development
-------------------
of a Project, Vencor shall have an option (the "Option") to purchase the
------
Project from Vencor and thereafter lease such Project back to Healthcare Company
in accordance with this Section 3.
Section 3.2 Purchase and Lease-Back of Development Properties.
--------------------------------------------------
(a) Upon substantial completion of development of a Project, Healthcare Company
shall deliver to Vencor notice of the costs for such Project (the "Cost
----
Schedule") which sets forth in reasonable detail the actual cost incurred by
- --------
Healthcare Company in acquiring and developing such Project (the "Actual Cost").
-----------
Healthcare Company shall provide Vencor with full access to any information,
including the books and records of Healthcare Company relating to such Project,
necessary for Vencor to review the costs reflected on the Cost Schedule. Within
30 days following the delivery by Healthcare Company of the Cost Schedule,
Vencor shall deliver a notice (the "Option Notice") to Healthcare Company,
-------------
stating whether Vencor will or will not exercise its
-3-
<PAGE>
Option to purchase such Development Property from Healthcare Company at Actual
Cost through the date of closing and lease such Development Property back to
Healthcare Company in accordance with this Agreement.
(b) If Vencor delivers an Option Notice stating that it will exercise
the option with respect to the Development Property, Healthcare Company and
Vencor shall execute and deliver a Purchase and Sale Agreement (the "Purchase
--------
Agreement") with respect to such Project substantially in the form of Exhibit C
- --------- ---------
hereto, which sets forth the terms and conditions for the sale by Healthcare
Company to Vencor of such Project.
(c) If Vencor delivers an Option Notice stating that it will not
exercise the Option with respect to a Development Property, Healthcare Company
shall be under no obligation to sell the completed Project to Vencor and may
solicit offers relating to the completed Project and may sell or retain the
same; provided, however, that Healthcare Company shall not sell the completed
Project to a third party for less than the Actual Cost.
Section 3.3 Lease of Development Properties. Simultaneously with the
-------------------------------
execution of the Purchase Agreement, Healthcare Company and Vencor shall execute
and deliver a Lease Agreement with respect to such Project substantially in the
form of Exhibit F hereto, which sets forth the terms and conditions for the
lease by Healthcare Company from Vencor of such Project. The commencement date
of such Lease Agreement shall be the date upon which the purchase and sale is
consummated pursuant to the Purchase Agreement. The initial annual base rent for
the lease of a Project will be 10% of the Actual Cost.
Section Third Party Developers.
----------------------
Upon completion of the Projects identified on Exhibit A as being
developed by a third party developer and leased to Healthcare Company by such
developer, the following procedure will apply:
If Healthcare Company exercises its right to purchase any such Project
from the third party developer, Healthcare Company must give notice to
Vencor that it has exercised such right. Vencor then shall have the
option to purchase such property on the same terms as Healthcare
Company.
Section 5. Healthcare Company's Obligation to Develop the Development
----------------------------------------------------------
Properties. Notwithstanding anything to the contrary in this Agreement,
- ----------
Healthcare Company is under no obligation to develop the Development Properties.
However, if Healthcare Company determines to develop the Development Properties,
each such Project shall be completed pursuant to the terms and conditions of
this Agreement.
-4-
<PAGE>
Section 6. Termination.
-----------
Section 6.1 Automatic Termination; Right to Terminate. (a) This
-----------------------------------------
greement shall terminate automatically with respect to a particular Project (i)
if Vencor does not exercise the Option for that Project, or (ii) if Vencor
exercises the Option for that Project, upon the completion of the sale of such
Project to Vencor and the lease by Vencor to Healthcare Company of such Project
in accordance with the terms of this Agreement.
(b) Either Healthcare Company or Vencor may terminate this Agreement
if (i) the other party materially breaches any of its covenants or obligations
contained in this Agreement and all of such breaches shall not have been cured
to the reasonable satisfaction of the nonbreaching party, within 30 days after
notice of such material breach shall have been given by the nonbreaching party
to the breaching party, (ii) there is a Change of Control (as defined below) of
the other party, or (iii) if a Bankruptcy Event (as defined below) has occurred
with respect to the other party; provided, however, that a party shall not be in
-------- -------
breach of this Agreement pursuant to clause (i) if its failure to perform or
fulfill its obligations under this Agreement is due to a Force Majeure event (as
defined herein).
(c) A "Change of Control" of a party shall include, without
-----------------
limitation, (i) a change in the composition of the board of directors of such
party such that at the end of any period of 12 consecutive months the persons
constituting a majority of such board of directors are not the same as the
persons constituting a majority at the start of such period (or persons
appointed by such majority), (ii) the sale or other disposition by such party of
(A) any part of its interest in such party or (B) all or substantially all of
the assets of such party (other than a bona fide pledge in connection with a
financing), or (iii) a merger, consolidation or other business combination
involving such party, which results in the stockholders of such party
immediately prior to such event owning less than 50% of the capital stock of the
surviving entity. A "Bankruptcy Event" with respect to a party shall occur upon
----------------
the filing of an involuntary petition in bankruptcy or similar proceeding
against such party seeking its reorganization, liquidation or the appointment of
a receiver, trustee or liquidator for it or for all or substantially all of its
assets, whereupon such petition shall not be dismissed within 90 days after the
filing thereof, or if such party shall (i) apply for or consent in writing to
the appointment of a receiver, trustee or liquidator of all or substantially all
of its assets, (ii) file a voluntary petition or admit in writing its
inability to pay its debts as they become due, (iii) make a general assignment
for the benefit of creditors, (iv) file a petition or an answer seeking
reorganization or an arrangement with creditors or take advantage of any
insolvency law, or (v) file an answer admitting the material allegations of a
petition filed against it in any bankruptcy, reorganization or insolvency
proceedings.
-5-
<PAGE>
Section 6.2 Effect of Termination. In the event of the termination
---------------------
of this Agreement in accordance with Section 6.1, (a) this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other party hereto or their respective affiliates, directors,
officers or employees; provided, however, that the termination of this Agreement
-------- -------
pursuant to Section 6.1 shall not (i) affect the liability of a party for breach
of this Agreement, (ii) discharge any of either party's obligations to pay any
amount owing on the date of termination, (iii) discharge or affect either
party's rights or obligations arising out of or in connection with any Purchase
Agreement or Lease Agreement entered into pursuant to this Agreement, or (iv)
affect this Section 6.2 or Sections 8.2, 8.3, 10.4, 10.10 and Article 9, which
shall survive, and (b) Vencor shall cease to have the Option with respect to any
of the Development Properties which are completed following such termination.
Section 7. Representations and Warranties.
------------------------------
(a) Healthcare Company hereby represents and warrants to
Vencor as of the date hereof, that:
(1) Healthcare Company is a corporation duly organized and
validly existing and in good standing under the laws
of its jurisdiction of incorporation;
(2) Healthcare Company has the requisite corporate power
and authority to execute and deliver this Agreement
and to consummate the transactions contemplated
hereby; and
(3) this Agreement constitutes a valid and legally binding
obligation of Healthcare Company, enforceable in
accordance with its terms, subject to bankruptcy,
insolvency, reorganization and similar laws of general
applicability relating to or affecting creditors'
rights and to general equity principles.
Vencor hereby represents and warrants to Healthcare Company
as of the date hereof, that:
(b) (1) Vencor is a corporation duly organized and validly
existing and in good standing under the laws of its
jurisdiction of incorporation;
-6-
<PAGE>
(2) Vencor has the requisite corporate power and authority
to execute and deliver this Agreement and to
consummate the transactions contemplated hereby; and
(3) this Agreement constitutes a valid and legally binding
obligation of Vencor, enforceable in accordance with
its terms, subject to bankruptcy, insolvency,
reorganization and similar laws of general
applicability relating to or affecting creditors'
rights and to general equity principles.
Section 8. Limitation of Liability.
-----------------------
Section 8.1 Force Majeure. (a) Healthcare Company shall
-------------
not be held responsible for failure of or delay in completion of development,
nor shall Vencor be held responsible for failure or delay in the purchasing and
leasing to Healthcare Company, of a Project hereunder, if such failure or delay
is due to an act of God or public enemy, war, government acts or regulations,
fire, flood, embargo, quarantine, epidemic, labor strike, inability to acquire
raw materials, accident, unusually sever weather or other cause similar to the
foregoing, beyond their control (each such event, a "Force Majeure").
-------------
(b) If the performance of this Agreement by either party or any
obligation hereunder is prevented, restricted or interfered with by reason of a
Force Majeure event, the party whose performance is so affected, upon giving
prompt notice to the other party, shall be excused from such performance to the
extent of such Force Majeure event; provided, however, that the party so
-------- -------
affected shall take all reasonable steps to avoid or remove such causes of
nonperformance and shall continue performance hereunder with dispatch whenever
such causes are removed.
Section 8.2 Concealed Conditions; Change in Law. Healthcare Company
-----------------------------------
shall have no liability hereunder resulting from failure of or a delay in
completion of development of a Project; provided, however, that Healthcare
-------- -------
Company shall not be permitted to delay or cancel a Project if the reason for
such delay or cancellation is the purchase or development of another facility by
Healthcare Company in the same market, in which event Vencor shall have the
option to purchase such substitute facility at Healthcare Company's cost. If
Vencor exercises such option to purchase a substitute facility, it shall lease
such facility to Healthcare Company in accordance with Section 3.3 hereof.
Section 8.3 Contractors. Neither Healthcare Company, any of its
-----------
affiliates nor any of their respective present or former directors, officers,
partners,
-7-
<PAGE>
employees or agents shall have any liability to Vencor or any person asserting
claims on behalf of or in right of Vencor in connection with or as a result of
any obligation of Healthcare Company under this Agreement except to the extent
that any Losses (as defined herein) incurred by Vencor result from the bad
faith, gross negligence or wilful misconduct of Healthcare Company in performing
its obligations under this Agreement. Healthcare Company shall not have any
liability for any failure of performance or refusal to perform by a Contractor,
and Healthcare Company shall not have any liability for any defects in the work
performed by a Contractor; provided, that Healthcare Company was not grossly
--------
negligent or acting in bad faith in selecting such Contractor or in monitoring
the performance of such Contractor.
Section 9. Indemnification.
---------------
(a) Healthcare Company hereby agrees that it shall indemnify,
defend and hold harmless Vencor, its affiliates, and, if applicable, their
respective present and former directors, officers, partners, employees and
agents (collectively, the "Vencor Indemnified Parties") from, against and in
--------------------------
respect of, any damages, claims, losses, actions, suits, proceedings,
liabilities, and reasonable costs and expenses (including reasonable attorney's
fees and expenses of investigation) (collectively, "Losses") directly relating
-----
to or arising from the bad faith, gross negligence or wilful misconduct of
Healthcare Company in the performance of its obligations under this Agreement.
(b) Vencor shall give prompt notice to Healthcare Company of a claim
under this Section 7, and shall provide to Healthcare Company as soon as
practicable thereafter all information and documentation necessary to support
and verify, any Losses that the Vencor Indemnified Parties shall have determined
to have given or give rise to a claim for indemnification under this Section 7.
Failure by Vencor to give prompt notice of a claim under this Section 7 shall
affect the rights of Vencor hereunder only to the extent that such failure has a
prejudicial effect on the defenses or other rights available to Healthcare
Company with respect to such claim. Vencor shall have a right to consult in the
defense of a claim and to employ counsel, at Vencor's expense, separate from the
counsel employed by Healthcare Company to the extent such claim involves
potential conflicts of interest between or different defenses for Healthcare
Company and Vencor and Vencor reasonably determines that separate representation
would be appropriate.
Section 10.1 Miscellaneous.
-------------
Section 10.1 Notices. All notices or other communications
-------
under this Agreement shall be in writing and shall be deemed duly given,
effective (a) three business days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (b) when sent, if sent by
telecopier or facsimile; provided, that the telecopy or facsimile is promptly
confirmed by telephone confirmation thereof, and (c) one business day later, if
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<PAGE>
sent by overnight delivery via a national courier service, in each case (a)
through (c), addressed to the intended recipient at the address set forth below.
If to Healthcare Company:
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: (502) 596-4075
If to Vencor:
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Attention: President
with a copy to General Counsel
Facsimile: (502) 596-4075
Any party shall have the right to change its address for purposes of notice by
giving notice to the other parties in accordance with the provisions hereof.
Section 10.2 Parties In Interest. This Agreement shall be binding
-------------------
upon and shall accrue to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any other person (except the Vencor Indemnified
Parties), any rights or remedies under or by reason of this Agreement.
Section 10.3 Amendments. This Agreement shall not be amended or
----------
changed except by changed except by written instrument signed by all undersigned
parties.
Section 10.4 Severability. If any term or provision of this
------------
Agreement, or the application thereof to any person or circumstance, shall to
any extent be held invalid or unenforceable by a court of competent
jurisdiction, such result shall not affect the other terms and provisions of
this Agreement or applications thereof which can be given effect without the
relevant term, provision or application, and to this end the parties agree that
the provisions of this Agreement are and shall be severable.
Section 10.5 Remedies. All rights, privileges and remedies afforded
--------
the parties by this Agreement shall be deemed cumulative and not exclusive. In
the event of a breach or other failure to perform as required under this
Agreement, the party not
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<PAGE>
breaching or defaulting shall, in addition to all rights and remedies herein
provided, have all rights and remedies available at law or in equity.
Section 10.6 Variance of Pronouns. The use herein of a singular
--------------------
number shall be deemed to mean the plural, the masculine gender shall be deemed
to mean the feminine or the neuter gender shall be deemed to mean the masculine
or feminine, whenever the sense of this Agreement so requires.
Section 10.7 GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS
-------------
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF KENTUCKY, WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
Section 10.8 No Implied Consent or Waiver. No consent or waiver,
----------------------------
express or implied, by either party to this Agreement to, of or for any breach
or default by the other party in performance of its obligations hereunder shall
be deemed or construed to be a consent or waiver to or for any other breach or
default in performance by such party of the same or any other obligation of such
party hereunder. Failure on the part of either party to complain of any act or
failure of the other party to this Agreement or to declare the other party in
default, irrespective of whether such failure continues, shall not constitute a
waiver by the non-defaulting party of its rights hereunder.
Section 10.9 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
Section 10.10 Confidentiality. From and after the date hereof,
---------------
Vencor shall keep, and shall make its respective officers, directors, employees,
agents and subsidiaries (each a "Related Party") to keep, confidential all
-------------
information proprietary to Healthcare Company that has been acquired by Vencor
or any Related Party through participation in the performance of this Agreement;
provided, that the foregoing restriction shall not apply to information that (i)
- --------
is or hereafter becomes generally available to the public other than by reason
of any default with respect to its confidentiality obligation under this
Agreement or any other agreement, (ii) is hereafter disclosed to Vencor or any
Related Party by a third party who is not in default of any
confidentiality obligation to Healthcare Company, or (iii) is required to be
disclosed in compliance with applicable laws or regulations or order by a court
or other governmental or regulatory agency or body having competent
jurisdiction; provided, that reasonable measures shall be taken to assure
--------
confidential treatment of such information.
Section 10.10 Entire Agreement. Except as provided in Article VI of
----------------
the Reorganization Agreement regarding dispute resolution, this Agreement and
the exhibit
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<PAGE>
hereto supersede all prior agreements among the parties with respect to the
subject matter hereof and contain the entire agreement among the parties with
respect to such subject matter. This instrument may not be amended, supplemented
or discharged, and no provisions hereof may be modified or waived, except
expressly by an instrument in writing signed by both Healthcare Company and
Vencor. No waiver of any provision hereof by any party hereto shall be deemed a
waiver by any other party nor shall any such waiver by any party be deemed a
continuing waiver of any matter by such party. No amendment, modification,
supplement, discharge or waiver hereof or hereunder shall require the consent of
any person not a party to this Agreement.
Section 10.11 Assignment. Each party hereby acknowledges and agrees
----------
that it will not without the prior written consent of the other party (which
consent shall not be unreasonably withheld) transfer any portion of its interest
in this Agreement. Notwithstanding the foregoing or anything else contained in
this Agreement, either party may, without any consent or approval, transfer its
interest in this Agreement to a consolidated subsidiary of such party; provided,
--------
that the transferring party guarantees the subsidiary's performance of such
transferring party's obligations hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement
as of the day and year first above written,
VENCOR, INC.
By: _________________________
Name:
Title:
VENCOR HEALTHCARE, INC.
By: _________________________
Name:
Title:
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<PAGE>
PARTICIPATION AGREEMENT
-----------------------
THIS PARTICIPATION AGREEMENT ("Agreement") is made and entered into as
---------
of the ___ day of ________, 1998, by and between Vencor, Inc. , a Delaware
corporation ("Vencor"), and Vencor Healthcare, Inc., a Delaware corporation
------
("Healthcare Company," and together with Vencor, the "Parties").
- -------------------- -------
RECITALS
--------
WHEREAS, Healthcare Company and Vencor are parties to an Agreement and
Plan of Reorganization, dated as of the date hereof (the "Reorganization
--------------
Agreement"), which provides for certain reorganization transactions (the
- ---------
"Reorganization Transactions"), including but not limited to, (i) certain
- ----------------------------
internal mergers and stock and asset transfers that allocate the assets and
liabilities relating to substantially all of the Vencor-owned land, buildings
and other improvements and real estate related assets (the "Real Estate
-----------
Business") to Vencor, which will change it's name immediately prior to the
Distribution (as defined herein) to "Ventas, Inc." and the other assets and
liabilities relating to the historical operations of Vencor, including the
properties listed on Exhibit A which are properties under development or to be
---------
developed (the "Development Properties") by Healthcare Company (the "Healthcare
---------------------- ----------
Business"), to Healthcare Company, which will change it's name immediately prior
- --------
to the Distribution to "Vencor, Inc.," (ii) Vencor leasing to Healthcare Company
pursuant to a master lease agreement (the "Master Lease Agreement") 46 long-term
----------------------
acute care hospitals and 210 nursing centers, and (iii) the completion by
Healthcare Company of the development of the Development Properties pursuant to
a development agreement (the "Development Agreement") and thereafter, at the
---------------------
option of Vencor, the sale to, and lease back from, Vencor of the Development
Properties;
WHEREAS, Healthcare Company and Vencor will be parties to a
Distribution Agreement, dated as of the date hereof (the "Distribution
------------
Agreement"), which provides for the distribution (the "Distribution") by Vencor
------------
to the holders of common stock, par value $.25 per share, of Vencor ("Vencor
------
Common Stock") of all the outstanding shares of common stock, par value $.25 per
- ------------
share, of Healthcare Company ("Healthcare Company Common Stock") on the basis of
-------------------------------
one share of Healthcare Company Common Stock for every share of Vencor Common
Stock;
WHEREAS, in addition to the Development Properties, Healthcare Company
has or may have an ownership interest in certain other existing healthcare
related facilities and may develop or acquire additional healthcare related
facilities in the future;
<PAGE>
WHEREAS, Healthcare Company desires to grant Vencor a right of first
offer to purchase or finance certain real properties that Healthcare Company
decides to sell or mortgage; and
WHEREAS, Vencor desires to grant Healthcare Company a right of first
offer to become the lessee of certain real property acquired or developed by
Vencor.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and subject to and on the terms and conditions herein set
forth, the parties hereto agree as follows:
Section 1. Vencor's Purchase Right of First Offer. (a) Vencor and any
--------------------------------------
Vencor subsidiary (including partnerships in which Vencor holds a majority
interest) (together with Vencor, the "Vencor Entities", and each, a "Vencor
--------------- ------
Entity") shall have a right of first offer (a "Purchase Right of First Offer")
- ------ -----------------------------
to purchase any healthcare related real property (a "Sale Property") currently
-------------
owned by Healthcare Company or its consolidated subsidiaries (together with
Healthcare Company, the "Healthcare Company Entities", and each, a "Healthcare
--------------------------- ----------
Company Entity") (other than the Development Properties) or acquired by a
- --------------
Healthcare Company Entity in the future when such Healthcare Company Entity
determines to sell the Sale Property to a third party subject to the terms and
conditions hereof. If a Healthcare Company Entity determines to sell a Sale
Property, it must provide written notice (the "Sale Opportunity Notice") to the
-----------------------
Vencor Entities of the purchase opportunity. A Vencor Entity shall exercise its
Purchase Right of First Offer, if at all, by sending written notice (the "Sale
----
Acceptance Notice") to the Healthcare Company Entity within thirty (30) days
- -----------------
following such Vencor Entity's receipt of the Sale Opportunity Notice. Upon the
Healthcare Company Entity's receipt of the Sale Acceptance Notice, the
Healthcare Company Entity and the Vencor Entity shall commence negotiating in
good faith, on an exclusive basis regarding the terms and conditions of such
purchase. During such negotiation period, the Healthcare Company Entity shall
permit the Vencor Entity to inspect the Sale Property and the books and records
relating to the Sale Property upon reasonable advance notice and during
reasonable business hours. If the Parties fail to reach a mutually satisfactory
agreement as to the terms for such purchase within the 30-day period (or such
longer period as may be mutually agreed upon by the Parties) the Vencor Entity's
Purchase Right of First Offer shall be deemed to extinguish. Thereafter, the
Healthcare Company Entity may offer the Sale Property to third parties and is
free to negotiate with such third parties for a period of one hundred eighty
(180) days with no further obligations hereunder; provided, however, that no
-------- -------
Healthcare Company Entity may sell a Sale Property to a third party for less
than the Vencor Entity's final offer for such property without such Vencor
Entity first being given an opportunity to match such third party offer. The
Vencor Entity's Purchase Right of First Offer shall revive in the event that
the Healthcare Company Entity fails to sell or otherwise transfer the Sale
Property to a third party within said 180-day period. If
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<PAGE>
a Vencor Entity elects to exercise its Purchase Right of First Offer, it shall
in all events have not less than thirty (30) days to close its acquisition of
the Sale Property.
Notwithstanding the foregoing provisions, the Purchase Right of First Offer
shall not be applicable to any property for which a Healthcare Company Entity
determines to (i) retain ownership or (ii) sell the operations of the facility
related to the real property.
(b) If the Healthcare Company Entities determine to sell a number of Sale
Properties as a group (a "Sale Group"), and a Vencor Entity elects to exercise
----------
its Purchase Right of First Offer with respect to such Sale Group, such Vencor
Entity must purchase all of the Sale Properties in the Sale Group.
Section 2. Vencor's Mortgage Right of First Offer. (a) The Vencor
--------------------------------------
Entities shall have a right of first offer (a "Mortgage Right of First Offer")
-----------------------------
to finance any healthcare related real property (a "Mortgage Property")
-----------------
currently owned by a Healthcare Company Entity (other than the Development
Properties) or acquired by a Healthcare Company Entity in the future when such
Healthcare Company Entity determines to mortgage the Mortgage Property to a
third party subject to the terms and conditions hereof. If a Healthcare Company
Entity determines to mortgage a Mortgage Property, it must provide written
notice (the "Mortgage Opportunity Notice") to the Vencor Entities of the
---------------------------
mortgage opportunity. A Vencor Entity shall exercise its Mortgage Right of
First Offer, if at all, by sending written notice (the "Mortgage Acceptance
-------------------
Notice") to such Healthcare Company Entity within thirty (30) days following
- ------
such Vencor Entity's receipt of the Mortgage Opportunity Notice. Upon the
Healthcare Company Entity's receipt of the Mortgage Acceptance Notice, the
Healthcare Company Entity and the Vencor Entity shall commence negotiating in
good faith, on an exclusive basis regarding the terms and conditions of such
mortgage financing. During such negotiation period, the Healthcare Company
Entity shall permit the Vencor Entity to inspect the Mortgage Property and the
books and records relating to the Mortgage Property upon reasonable advance
notice and during reasonable business hours. If the Parties fail to reach a
mutually satisfactory agreement as to the terms for such mortgage within the 30-
day period (or such longer period as may be mutually agreed upon by the Parties)
the Mortgage Right of First Offer shall be deemed to extinguish. Thereafter,
the Healthcare Company Entity may offer the Mortgage Property to third parties
and is free to negotiate with such third parties for a period of one hundred
eighty (180) days with no further obligations hereunder; provided, however, that
-------- -------
no Healthcare Company Entity may mortgage a Mortgage Property to a third party
for an interest rate higher than the Vencor Entity's final offer for such
property without the Vencor Entity first being given an opportunity to match
such third party interest rate. The Vencor Entities' Mortgage Right of First
Offer shall revive in the event that the Healthcare Company Entity fails obtain
a financing commitment for the Mortgage Property from a third party within said
180-day period. If a Vencor Entity elects to
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<PAGE>
exercise its Mortgage Right of First Offer, it shall in all events have not less
than thirty (30) days to close its financing of the Mortgage Property.
(b) If the Healthcare Company Entities determine to mortgage a number of
Mortgage Properties as a group (a "Mortgage Group"), and a Vencor Entity elects
--------------
to exercise its Mortgage Right of First Offer with respect to such Mortgage
Group, the Vencor Entity must finance all of the Mortgage Properties in the
Mortgage Group.
Section 3. Healthcare Company's Lease Right of First Offer. (a) Each
-----------------------------------------------
of the Healthcare Company Entities shall have a right of first offer ("Lease
-----
Right of First Offer") to lease any real property acquired or developed by a
- --------------------
Vencor Entity in the future which is to be operated as a hospital, nursing
center or other healthcare related facility (a "Lease Property") subject to the
--------------
terms and conditions hereof. If a Vencor Entity determines to lease a Lease
Property, it must provide written notice (the "Lease Opportunity Notice") to
------------------------
Healthcare Company of the lease opportunity. A Healthcare Company Entity shall
exercise its Lease Right of First Offer, if at all, by sending written notice
(the "Lease Acceptance Notice") to the Vencor Entity within thirty (30) days
-----------------------
following such Healthcare Company Entity's receipt of the Lease Opportunity
Notice. Upon receipt of the Lease Acceptance Notice, the Vencor Entity shall
commence negotiating in good faith, on an exclusive basis with such Healthcare
Company Entity regarding the terms and conditions of such lease. During such
negotiation period, the Vencor Entity shall permit the Healthcare Company Entity
to inspect the Lease Property and the books and records relating to the Lease
Property upon reasonable advance notice and during reasonable business hours.
If the Parties fail to reach a mutually satisfactory agreement as to the terms
for such lease within thirty (30) days following the Vencor Entity's receipt of
the Lease Opportunity Notice (or such longer period as may be mutually agreed
upon by the Parties), the Lease Right of First Offer shall be deemed to
extinguish. Thereafter, the Vencor Entity may offer the Lease Property to third
parties and is free to negotiate with such third parties for a period of one
hundred eighty (180) days with no further obligations hereunder. The Healthcare
Company Entities' Lease Right of First Offer shall revive in the event that the
Vencor Entity fails to lease the Lease Property to a third party within said
180-day period; provided, however, that the Vencor Entity may not lease a Lease
-------- -------
Property to a third party for less than the Healthcare Company Entity's final
offer for such property without such Healthcare Company Entity first being given
an opportunity to match such third party offer. If a Healthcare Company Entity
elects to exercise its Lease Right of First Offer, it shall in all events have
not less than thirty (30) days to finalize the terms of its lease of the Lease
Property.
Notwithstanding the foregoing provisions, the Lease Right of First Offer
shall not be applicable to any property which is being operated by a third party
on the date of acquisition or completion of development.
-4-
<PAGE>
(b) If the Vencor Entities determine to lease a number of Lease Properties
as a group (a "Lease Group"), and a Healthcare Company Entity elects to exercise
-----------
its Lease Right of First Offer with respect to such Lease Group, such Healthcare
Company Entity must lease all of the Lease Properties in the Lease Group.
Section 4. Exclusion of Development Properties. Notwithstanding
-----------------------------------
anything else contained herein, none of the Development Properties shall be
deemed to be a Sale Property or a Mortgage Property, and the sale of the
Development Properties (and any right of first offer in connection therewith)
shall be governed by the terms and conditions of the Development Agreement.
Section 5. Term of Agreement. This Agreement shall be effective as of
-----------------
the date hereof and shall continue in effect until the earlier of (i) three
years from the date hereof or (ii) the termination of this Agreement by either
Healthcare Company or Vencor upon the occurrence of a Change of Control of the
other party as defined in the Master Lease Agreement.
Section 6. Miscellaneous.
-------------
Section 6.1 Notices. All notices or other communications under
----------- -------
this Agreement shall be in writing and shall be deemed duly given, effective (a)
three business days later, if sent by registered or certified mail, return
receipt requested, postage prepaid, (b) when sent, if sent by telecopier or
facsimile; provided, that the telecopy or facsimile is promptly confirmed by
--------
telephone confirmation thereof, and (c) one business day later, if sent by
overnight delivery via a national courier service, in each case (a) through (c),
addressed to the intended recipient at the address set forth below.
If to Healthcare Company:
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Attention: General Counsel
Facsimile: (502) 596-4075
If to Vencor:
3300 Aegon Center
400 West Market Street
Louisville, Kentucky 40202
Attention: President
with a copy to General Counsel
-5-
<PAGE>
Facsimile: (502) 596-4075
Any party shall have the right to change its address for purposes of notice by
giving notice to the other parties in accordance with the provisions hereof.
Section 6.2 Parties In Interest. This Agreement shall be binding
-------------------
upon and shall accrue to the benefit of the parties hereto and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended to confer upon any other person, any rights or remedies under or by
reason of this Agreement.
Section 6.3 Severability. If any term or provision of this
------------
Agreement, or the application thereof to any person or circumstance, shall to
any extent be held invalid or unenforceable by a court of competent
jurisdiction, such result shall not affect the other terms and provisions of
this Agreement or applications thereof which can be given effect without the
relevant term, provision or application, and to this end the parties agree that
the provisions of this Agreement are and shall be severable.
Section 6.4 Remedies. All rights, privileges and remedies afforded
--------
the parties by this Agreement shall be deemed cumulative and not exclusive. In
the event of a breach or other failure to perform as required under this
Agreement, the party not breaching or defaulting shall, in addition to all
rights and remedies herein provided, have all rights and remedies available at
law or in equity.
Section 6.5 Variance of Pronouns. The use herein of a singular
--------------------
number shall be deemed to mean the plural, the masculine gender shall be deemed
to mean the feminine or the neuter gender shall be deemed to mean the masculine
or feminine, whenever the sense of this Agreement so requires.
Section 6.6 GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS
-------------
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF KENTUCKY, WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. ANY LEGAL SUIT, ACTION OR
PROCEEDING AGAINST ANY PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL
---
BE INSTITUTED IN ANY FEDERAL OR COMMONWEALTH COURT IN THE COMMONWEALTH OF
KENTUCKY. EACH PARTY HEREBY (I) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM, AND (II)
-6-
<PAGE>
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
Section 6.7 No Implied Consent or Waiver. No consent or waiver,
----------------------------
express or implied, by either party to this Agreement to, of or for any breach
or default by the other party in performance of its obligations hereunder shall
be deemed or construed to be a consent or waiver to or for any other breach or
default in performance by such party of the same or any other obligation of such
party hereunder. Failure on the part of either party to complain of any act or
failure of the other party to this Agreement or to declare the other party in
default, irrespective of whether such failure continues, shall not constitute a
waiver by the non-defaulting party of its rights hereunder.
Section 6.8 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
Section 6.9 Confidentiality. From and after the date hereof, each
---------------
Party shall keep, and shall make its respective officers, directors, employees,
agents and subsidiaries (each a "Related Party") to keep, confidential all
-------------
information proprietary to the other Party that has been acquired by such Party
or any Related Party through participation in the performance of this Agreement;
provided, that the foregoing restriction shall not apply to information that (i)
- --------
is or hereafter becomes generally available to the public other than by reason
of any default with respect to its confidentiality obligation under this
Agreement or any other agreement, (ii) is hereafter disclosed to a Party or any
Related Party by a third party who is not in default of any confidentiality
obligation to the other Party, or (iii) is required to be disclosed in
compliance with applicable laws or regulations or order by a court or other
governmental or regulatory agency or body having competent jurisdiction;
provided, that reasonable measures shall be taken to assure confidential
- --------
treatment of such information.
Section 6.10 Entire Agreement; Amendments. Except as provided in
----------------------------
Articles III, V and VI of the Reorganization Agreement regarding
indemnification, access to information and dispute resolution, this Agreement
and the exhibit hereto supersede all prior agreements among the Parties with
respect to the subject matter hereof and contain the entire agreement among the
Parties with respect to such subject matter. This instru ment may not be
amended, supplemented or discharged, and no provisions hereof may be modified or
waived, except expressly by an instrument in writing signed by both Healthcare
Company and Vencor. No waiver of any provision hereof by any Party hereto shall
be deemed a waiver by any other Party nor shall any such waiver by any Party be
deemed a continuing waiver of any matter by such Party. No amendment,
modification, supplement, discharge or waiver hereof or hereunder shall require
the consent of any person not a Party to this Agreement.
-7-
<PAGE>
Section 6.11 Assignment. Each Party hereby acknowledges and agrees
----------
that it will not without the prior written consent of the other Party (which
consent shall not be unreasonably withheld) transfer any portion of its interest
in this Agreement. Notwithstanding the foregoing or anything else contained in
this Agreement, either Party may, without any consent or approval, transfer its
interest in this Agreement to a consolidated subsidiary of such Party; provided,
--------
that the transferring Party guarantees the subsidiary's performance of such
transferring Party's obligations hereunder.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement
as of the day and year first above written,
VENCOR, INC.
By: __________________
Name:
Title:
VENCOR HEALTHCARE, INC.
By: __________________
Name:
Title:
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